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THE COURT OF FIRST INSTANCE ANNULS THE COMMISSION DECISION DECLARING THAT THE UNITED KINGDOM'S PROPOSED AMENDMENT OF ITS PLAN FOR THE ALLOCATION OF GREENHOUSE GAS EMISSION ALLOWANCES WAS INADMISSIBLE | United Kingdom of Great Britain and Northern IrelandvCommission of the European Communities(Environment – Directive 2003/87/EC – Scheme for greenhouse gas emission allowance trading – Proposed amendment to national allocation plan – Refusal by the Commission – Action for annulment)Judgment of the Court of First Instance (First Chamber), 23 November 2005 Summary of the JudgmentEnvironment – Protection of the ozone layer – Directive 2003/87 – National allocation plan for the allocation of greenhouse gas emission allowances (NAP) – NAP Notification procedure – Right of the relevant Member State to propose amendments to the NAP after its notification – Lawfulness – Conditions (European Parliament and Council Directive 2003/87, Arts 9(3) and 11(1))The purpose of Directive 2003/87 – establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61 – is to establish an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment. Therefore, even though Directive 2003/87 aims to reduce greenhouse gas emissions in accordance with the commitments of the Community and its Member States under the Kyoto Protocol, that aim must be achieved, in so far as possible, while respecting the needs of the European economy. It follows that the national allocation plans for the allocation of greenhouse gas emission allowances (NAP) developed under that directive must take due account of accurate data and information relating to emission forecasts for the installations and sectors which the directive covers. In the context of the NAP notification procedure to the Commission, if a NAP is based in part on incorrect information or erroneous evaluations relating to the level of emissions in certain sectors or certain installations, the Member State in question must be entitled to propose amendments to the NAP. It follows both from the wording of Directive 2003/87, and from the general structure and objectives of the system which it establishes, that a Member State is entitled to propose amendments to its NAP after it has been notified to the Commission, and until its adoption of its decision under Article 11(1), and that the Commission cannot, when adopting a rejection decision in accordance with Article 9(3) of the Directive, constrain the Member State in the exercise of its right. That institution must therefore only establish whether the amendments in question were compatible with the criteria listed in Annex III to, or with Article 10 of, that directive. Moreover, in the context of that same notification procedure, it is immaterial that the NAP was characterised as ‘provisional’ when originally notified. However, if the NAP is incomplete or ‘provisional’, the Commission is entitled to reject it either because it fails to comply with the criteria laid down by Directive 2003/87 or because the Commission is unable to assess its conformity with those criteria. In that situation, the Commission is entitled, by rejecting the NAP, to oblige the Member State to notify a new and complete NAP before it takes its definitive decision under Article 11(1) of that directive. (see paras 60, 63, 73)JUDGMENT OF THE COURT OF FIRST INSTANCE (First Chamber)23 November 2005 (*) In Case T-178/05,United Kingdom of Great Britain and Northern Ireland, represented initially by C. Jackson, acting as Agent, and M. Hoskins, Barrister, and, subsequently, by R. Caudwell, acting as Agent, and M. Hoskins, applicant,Commission of the European Communities, represented by U. Wölker and X. Lewis, acting as Agents, with an address for service in Luxembourg, defendant,APPLICATION for annulment of Commission Decision C(2005) 1081 final of 12 April 2005 concerning the proposed amendment to the national allocation plan for the allocation of greenhouse gas emission allowances notified by the United Kingdom in accordance with Directive 2003/87/EC of the European Parliament and of the Council, THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (First Chamber), composed of J.D. Cooke, President, R. García-Valdecasas and I. Labucka, Judges,Registrar: K. Andová, Administrator,having regard to the written procedure and further to the hearing on 18 October 2005,gives the followingJudgment Legal framework1 Article 1 of Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC (OJ 2003 L 275, p. 32) (hereinafter ‘the Directive’) provides: ‘This Directive establishes a scheme for greenhouse gas emission allowance trading within the Community … in order to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner.’ 2 Article 9(1) of the Directive provides that each Member State is to develop, for each period referred to in Article 11 of the Directive, a national plan stating the total quantity of allowances that it intends to allocate for that period and how it proposes to allocate them. For the three-year period beginning on 1 January 2005, the national plan had to be published and notified to the Commission and to the other Member States by 31 March 2004 at the latest. 3 Article 9(3) of the Directive reads as follows:‘Within three months of notification of a national allocation plan by a Member State under paragraph 1, the Commission may reject that plan, or any aspect thereof, on the basis that it is incompatible with the criteria listed in Annex III or with Article 10. The Member State shall only take a decision under Article 11(1) or (2) if proposed amendments are accepted by the Commission. Reasons shall be given for any rejection decision by the Commission.’ 4 According to Article 11(1) of the Directive:‘For the three-year period beginning 1 January 2005, each Member State shall decide upon the total quantity of allowances it will allocate for that period and the allocation of those allowances to the operator of each installation. This decision shall be taken at least three months before the beginning of the period and be based on its national allocation plan developed pursuant to Article 9 and in accordance with Article 10, taking due account of comments from the public.’ 5 The criteria listed in paragraphs 9 and 10 of Annex III to the Directive read as follows:‘9. The plan shall include provisions for comments to be expressed by the public, and contain information on the arrangements by which due account will be taken of these comments before a decision on the allocation of allowances is taken. 10. The plan shall contain a list of the installations covered by this Directive with the quantities of allowances intended to be allocated to each.’ Facts6 On 30 April 2004, following public consultation and the publication of a draft national allocation plan for the allocation of greenhouse gas emission allowances (hereinafter ‘NAP’), the United Kingdom of Great Britain and Northern Ireland (hereinafter ‘the United Kingdom’) notified a NAP to the Commission, expressly stating it was provisional. According to paragraph 1.13 of that plan: ‘the total quantity of allowances to be issued to EU ETS [European Union emissions trading scheme] installations for 2005 to 2007 will be 736 [million tonnes of carbon dioxide]. This figure is subject to further revision in the light of ongoing work.’ 7 On 9 June 2004, the Commission sent a letter to the United Kingdom which was worded as follows:‘…After an initial examination, the Commission has found the notification to be incomplete in that the information detailed in the Annex [to the letter] is missing. This information is requested in order to facilitate the definition of the Commission’s position on the proposed plan. The Commission reserves the right to define its position only after the additional information is received, and in any case no later than three months after the receipt of this information. This should reach the Commission within 10 working days of the date of this letter.’ 8 Annex I to the letter of 9 June 2004 identifies the missing information. Paragraph 1 of this annex reads as follows:‘The Commission notes that work on energy and emissions projections is continuing and could lead to further revision of projected emissions overall and of the contribution within that from sectors and installations covered by the EU ETS (paragraph 1.9 of the plan). The UK authorities are invited to notify the Commission of the revised projections and any consequential amendments made to the plan, including as regards the issues listed in paragraphs 1.9(a)-(f), 1.10 (emission projections for non-CO2 gases) and 1.13 (total quantity of allowances intended to be allocated) of the plan.’ 9 By letter of 14 June 2004, the United Kingdom replied to the Commission’s letter of 9 June 2004. The United Kingdom stated in paragraph 1 of its response: ‘In relation to projections of CO2 emissions, the UK published a working paper at the end of May setting out the background assumptions and … the latest energy and emissions projections (copy attached). Stakeholders will have an opportunity to comment on the working paper until 17 June 2004. We will finalise the projections after taking into account any relevant comments and resolving the outstanding issues referred to in paragraph 1.9(a)-(f) of the plan. We will notify the Commission of the finalised projections and any consequential changes made to the plan as soon as possible.’ 10 On 7 July 2004, the Commission adopted Decision C(2004) 2515/4 final concerning the national allocation plan for the allocation of greenhouse gas emission allowances notified by the United Kingdom in accordance with the Directive (hereinafter ‘the Decision of 7 July 2004’). The operative part of that decision, which was adopted on the basis of Article 9(3) of the Directive, reads as follows: ‘Article 1The following aspects of the [NAP] of the United Kingdom are incompatible with criteria 6 and 10 of Annex III to Directive 2003/87/EC respectively: (a) the information on the manner in which new entrants will be able to begin participating in the Community scheme;(b) the list of the installations fails to specify installations situated within the territory of Gibraltar, and the quantities of allowances intended to be allocated to each such installation. Article 2Provided that the following amendments to the [NAP] are made and notified to the Commission by 30 September 2004 at the latest, no objections shall be raised to the national allocation plan: (a) information is provided on the manner in which new entrants will be able to begin participating in the Community scheme, in a way that complies with the criteria of Annex III to Directive 2003/87/EC and Article 10 thereof; (b) the list of installations is amended to include the installations situated within the territory of Gibraltar and the quantities of allowances intended to be allocated to them; those quantities being determined in accordance with the general methodologies stated in the [NAP]. Article 31. The total quantity of allowances to be allocated by the United Kingdom according to its [NAP] to installations listed therein and to new entrants, taking into account amendments referred to in Article 2, shall not be exceeded. 2. The [NAP] may be amended without prior acceptance by the Commission if the amendment consists in modifications of the allocation of allowances to individual installations within the total quantity resulting from improvements to data quality. 3. Any amendments to the [NAP] other than those referred to in paragraph 2 of this Article and in Article 2 shall be notified to the Commission and accepted in accordance with Article 9(3) of Directive 2003/87/EC. …’11 On 30 September 2004, the United Kingdom gave the Commission the reasons why it was not able to meet the deadline set in Article 2 of the Decision of 7 July 2004. 12 On 10 November 2004, the United Kingdom notified the Commission that it wished to amend its NAP to take account of the results of the work identified therein. The United Kingdom proposed, in particular, to increase the total quantity of allowances to 756.1 million tonnes of carbon dioxide (hereinafter ‘Mt CO2’). 13 At a meeting held on 2 December 2004, the Commission indicated that it considered that the proposed amendments were inadmissible.14 On 23 December 2004, the United Kingdom sent the Commission the information referred to in Article 2 of the Decision of 7 July 2004 and additional information on the proposed amendments to the NAP. 15 On the same day, the United Kingdom authorities sent the Commission a letter calling upon it to consider the amended NAP.16 The Commission replied by a letter dated 1 February 2005 stating that it was of the opinion that the UK request to amend its [NAP] would not be admissible. 17 On 12 April 2005, the Commission adopted Decision C(2005) 1081 final concerning the proposed amendment to the NAP notified by the United Kingdom in accordance with the Directive (hereinafter ‘the contested decision’). In that decision, the Commission concluded that the United Kingdom was not entitled to submit a provisional plan under Article 9(1) of the Directive (third recital in the preamble). The Commission added that, in accordance with Article 9(3) of the Directive, the United Kingdom is only entitled to amend its NAP in order to address the incompatibilities identified in the decision of 7 July 2004 and that Article 3(1) of that decision excludes any increases in the total quantity of allowances to be allocated (fourth to ninth recitals). Thus Article 1 of the contested decision reads as follows: ‘The proposed amendment to the [NAP] notified by the United Kingdom to the Commission on 10 November 2004 and last updated on 18 February 2005 implying an increase of the emission allowance allocations by 19.8 [million tonnes of carbon dioxide equivalent] is inadmissible.’ Procedure and forms of order sought by the parties18 The United Kingdom brought the present action by application lodged at the Registry of the Court of First Instance on 5 May 2005. By means of a separate document lodged on the same day, the United Kingdom requested that the action be decided under an expedited procedure in accordance with Article 76a of the Rules of Procedure of the Court of First Instance. On 27 May 2005, the Commission lodged its observations regarding that request. 19 By decision of 14 June 2005, the Court of First Instance (First Chamber) granted the request to expedite the proceedings.20 Upon hearing the report of the Judge-Rapporteur, the Court decided to open the oral procedure. 21 The parties presented oral argument and answered questions put to them by the Court at the hearing on 18 October 2005.22 The United Kingdom claims that the Court should:– annul the contested decision;– order the Commission to pay the costs.23 The Commission claims that the Court should:– dismiss the application as unfounded;– order the applicant to pay the costs. Law24 The United Kingdom puts forward a single plea in law regarding infringement of the Directive and of the Decision of 7 July 2004. Arguments of the parties25 First, the United Kingdom submits that the position adopted by the Commission in the contested decision, according to which the provisional NAP which it submitted on 30 April 2004 has to be regarded as definitive since it is not permissible to submit a provisional NAP, is legally incorrect. 26 It states that the NAP in question was expressly provisional and that this was acknowledged by the Commission in its letter of 9 June 2004 in which it expressly envisaged the possibility of amending the total quantity of allowances the United Kingdom intended to allocate. In light of the fact that the Commission accepted the submission of a provisional plan, it was not entitled to adopt a different position in the contested decision. 27 The United Kingdom maintains that, under Article 9 of the Directive, the Commission does not have any power of its own motion to fix the total quantity of allowances that a Member State may allocate and that the Commission therefore cannot claim that the total quantity of allowances is fixed at the provisional level. 28 Furthermore, according to the United Kingdom, the Commission’s decision to treat the provisional NAP as if it were definitive creates an inherent incompatibility between the total quantity of allowances and the allocation methodology stated in the provisional NAP, both of which are essential parts of a NAP (see Article 9(1) of the Directive). The provisional NAP was not intended to be definitive and cannot be treated as such. 29 Second, the contested decision is legally incorrect in that it suggests that a Member State may not make any amendments that are not permitted by a Commission decision adopted pursuant to Article 9(3) of the Directive (eighth recital in the preamble). 30 Under Article 9(1) of the Directive, the initial NAP submitted by a Member State to the Commission need only state the total quantity of allowances that it ‘intends’ to allocate. It is this ‘intention’ that the Commission considers under Article 9(3) of the Directive. However, it is only following the Commission decision and public consultation (see paragraph 9 of Annex III to the Directive) that the Member State is required to decide upon the total quantity of allowances that it ‘will’ allocate. Thus it is apparent from the Directive that a NAP, including the total quantity of allowances to be allocated, may be amended after the adoption of a decision by the Commission under Article 9(3). 31 The United Kingdom adds, firstly, that the public must be consulted on the NAP submitted to the Commission pursuant to Article 9(1) of the Directive and, secondly, that due account must be taken of the public’s comments before a decision on the allocation of allowances is taken pursuant to Article 11(1) of the Directive (see paragraph 9 of Annex III to the Directive). The broad scope and importance of public consultation are confirmed by Section 2.1.9 (paragraphs 93 to 96) of the communication from the Commission of 7 January 2004 on guidance to assist Member States in the implementation of the criteria listed in Annex III to the Directive and on the circumstances under which force majeure is demonstrated (COM(2003) 830 final) (hereinafter ‘the communication of 7 January 2004’). 32 The United Kingdom puts forward the view that it follows from the foregoing that a decision adopted by the Commission pursuant to Article 9(3) of the Directive cannot prevent or restrict the consideration of the comments of the public required by Article 11(1) of the Directive and paragraph 9 of Annex III thereto. 33 Furthermore, the statement in the contested decision that, when there has been a decision under Article 9(3) of the Directive, the Member States concerned can only repair deficiencies in their NAPs is inconsistent with the approach that the Commission has adopted in relation to other Member States (see the decisions of 7 July 2004 in relation to the Kingdom of Denmark, Ireland, the Kingdom of the Netherlands, the Republic of Slovenia and the Kingdom of Sweden). Although the Commission did not identify any deficiencies in the NAPs submitted by those Member States, each of the decisions which the Commission adopted expressly permitted them to notify subsequent amendments to it. The amendments envisaged cannot have related solely to deficiencies identified by the Commission because there were no such deficiencies. 34 Third, the United Kingdom claims that, in contrast to the suggestion in the contested decision (ninth recital in the preamble), Article 3(3) of the Decision of 7 July 2004 permits it to notify any amendment to the Commission, including those which would result in an increase to the total quantity of the allowances allocated. The United Kingdom states that the wording of Article 3 of the Decision of 7 July 2004 is consistent with its interpretation: Article 3(1) does not prevent any amendments being notified that might increase the total quantity of allowances. It indicates that, in the absence of any such other amendments, the United Kingdom may not exceed the total quantity of allowances set out in its NAP; Article 3(2) indicates that certain amendments to the NAP which would not increase the total quantity of allowances may be made without requiring further acceptance by the Commission; and Article 3(3), which is drafted in general terms, provides that any amendments other than those referred to in Article 2 and Article 3(2) must be notified to the Commission and accepted in accordance with Article 9(3) of the Directive. This wording is sufficiently wide to include amendments that might increase the total quantity of allowances to be allocated. 35 The Commission admits, first of all, that the United Kingdom indicated that the NAP which it initially submitted was provisional. It puts forward the argument that, following its request of 9 June 2004, the United Kingdom did provide the further information sought in a letter dated 14 June 2004. It therefore concluded from this that the NAP, including the figures relating to the total quantity of allowances, was complete (see the first recital in the preamble to the Decision of 7 July 2004). 36 The Commission submits that, in contrast to the submission made by the United Kingdom (see paragraph 25 above), where a Member State submits a NAP in respect of which the Commission requests additional information, such a NAP is considered incomplete pending receipt of the information. It is only once the Member State has provided all information which the Commission deems necessary to regard the plan as complete that the three-month period commences. 37 According to the Commission, the United Kingdom was aware that, following the letter from the United Kingdom of 14 June 2004, the Commission considered its NAP to be complete and would take a final decision on 7 July 2004. The United Kingdom had expressed the wish to be part of the first wave of decisions on NAPs in order to indicate its commitment to greenhouse gas emission allowance trading, as well as combating climate change in general, and to act as an example for other Member States (see the letter of 14 June 2004 and certain web pages of the Department for Environment, Food and Rural Affairs, hereinafter ‘DEFRA’). Having regard to this wish, the United Kingdom cannot have formed a legitimate expectation that the Commission would take a further ‘final’ decision on its NAP to take into account any new information subsequently provided. 38 The Commission adds that the only acceptable amendments, following the adoption of the Decision of 7 July 2004, are those defined in Article 3 thereof. Any amendment exceeding the total quantity of allowances is expressly excluded as Commission decisions on NAPs must provide certainty, both for the coherence of the emissions trading system overall and in order for the allowance market to function properly, as market price building depends strongly on the utmost stability of the total quantity of allowances. The Commission observes that how central the stability of the total quantity of allowances obtained by the United Kingdom is to the proper functioning of the whole scheme can be inferred from its relative importance compared with other Member States. 39 Second, the Commission states that the purpose of the Directive is to establish a system for emission allowance trading which can function as from 1 January 2005 (see Articles 4, 9(1) and 11(1)). It is in the light of that objective that the term ‘amendments’ found in Article 9(3) of the Directive and in Articles 2 and 3(3) of the Decision of 7 July 2004 should be interpreted. According to the Commission, Member States cannot, as the deadline of 1 January 2005 draws near, present ‘amendments’ which are outside the scope of the decision addressed to them pursuant to Article 9(3) of the Directive. The term ‘amendments’ in Article 9(3) is restricted to those intended to correct incompatibilities identified by the Commission in its decision pursuant to Article 9(3), that is, in the present case, the Decision of 7 July 2004. 40 The Commission also observes that information obtained during a public consultation before the submission of the NAP is vital for determining the total quantity of allowances as well as the other elements in the NAP to be submitted. However, once the Commission has taken its decision, the second public consultation is intended to serve the purposes of data variation and possibly reallocation of allowances within that total quantity, not to serve as a means to increase the overall amount (see paragraph 9 of Annex III to the Directive and the communication of 7 January 2004, paragraphs 94 to 96). That second consultation is limited to how the Commission decision on the NAP should be implemented within the context of its scope and to aspects with regard to which the Member State may exercise its discretion. 41 If it were otherwise, the risk of having a series of consultations and new Commission decisions would arise. The market for allowances, being reliant on the stability of the total quantity of allowances, would be undermined and unable to function properly with such a degree of uncertainty. 42 The Commission observes that the United Kingdom is the only Member State that requested an increase in the total quantity of allowances as a result of the second consultation. Furthermore, the United Kingdom’s line of argument in the present case is not consistent with the statement which appeared on DEFRA’s website regarding the submission of the list of installations to the Commission on 14 June 2004 according to which the numbers in question may be subject to technical revision, and thus of a strictly limited nature, following the outcome of our final consultation exercises. 43 Moreover, the Commission maintains that a Member State cannot depart from its stated intention, even after the Commission has made its decision, just because it was only an ‘intention’. According to the Commission, the Directive uses the words ‘intends to allocate’ because it is only following a decision by the Commission that the Member State is in a position to translate its intention into a final decision. 44 Third, the Commission observes that a strict interpretation of Article 3 of the Decision of 7 July 2004 is necessary in order to ensure that the Community emissions trading system contributes towards combating climate change. 45 Article 3(1) of the Decision of 7 July 2004 clearly states that the total quantity allocated may not be exceeded and Article 3(3) cannot be used as a basis for modifying this total quantity. The economic justification for this is that the stability of the total quantity of allowances is of crucial importance for the correct functioning of the emissions trading system. Article 3(3) grants the United Kingdom discretion in dealing with identified incompatibilities in ways other than those already conditionally approved by the Commission under Article 2 but only in order to make any necessary reallocation of allowances. 46 The Commission submits that Article 3(3) of the Decision of 7 July 2004 is to be read in the context of the overall figures fixed under Article 3(1). It is apparent from Article 3 of the Decision of 7 July 2004 that the United Kingdom had clearly defined leeway to reallocate its allowances to installations listed in the NAP and to new entrants. Therefore, according to the Commission, the United Kingdom was not required to seek an increase in the overall amount of allowances. Of those Member States to which a decision including the wording of Article 3(3) was addressed, the United Kingdom was the only one to conclude that that provision could be used to increase the total quantity of allowances. 47 The Commission adds that in the case of NAPs in which it has identified no incompatibilities in the final version of its decision, Article 3(3) (or its equivalent) is to be regarded as being effectively redundant. This provision was not removed from the text on account of the fact that a solution for eliminating all incompatibilities was found only at a very late stage of the decision-making procedure. After this redundancy had been recognised, the provision was systematically deleted from later decisions that were adopted from December 2004 onwards. 48 Furthermore, the Commission claims that it did not raise objections to the creation in the United Kingdom NAP of a new entrants reserve pool which is considerably larger than for other Member States. The total quantity of allowances approved, comprising allocations for both existing installations and new entrants, gave the United Kingdom considerable flexibility in providing, pursuant to Article 3(2) of the Decision of 7 July 2004, allowances to existing installations from the new entrants pool should that have proved necessary as a result of improvements to data quality. 49 Finally, the Commission stresses the fact that the letter of 9 June 2004 cannot be used as a justification for increasing the total quantity of allowances. That letter predates the Decision of 7 July 2004 and therefore cannot be advanced as justifying the amendments which took place after that decision. The United Kingdom cannot therefore claim to have any sort of legitimate expectation with respect to a different interpretation of the Decision of 7 July 2004. Findings of the Court50 In the contested decision, the Commission rejected as inadmissible the amendments of the NAP proposed by the United Kingdom on 10 November 2004 because they would have resulted in the total quantity of allocated quotas exceeding the quantity authorised by the Commission in its Decision of 7 July 2004. Therefore, as the Commission confirmed during the hearing, it did not consider itself obliged to carry out any examination of the proposed amendments on their merits and particularly of their compatibility with the criteria set out in Annex III to or with Article 10 of the Directive. 51 In order to decide whether the Commission was entitled to reject those amendments as inadmissible, it is necessary to examine the roles and powers allocated to the Commission and the Member States respectively under the Directive, particularly those in Articles 9, 10 and 11. 52 The essential purpose of the Directive is to put in place, as from 1 January 2005, a scheme for greenhouse gas emission allowance trading within the Community. This system is based upon NAPs developed by the Member States in accordance with the criteria laid down by the Directive. Each Member State was required to develop a first NAP for the three-year period beginning 1 January 2005. This NAP was to be published and notified to the Commission and to the other Member States by 31 March 2004 at the latest in accordance with Article 9(1) of the Directive. The NAP was required to state the total quantity of allowances which the Member State ‘intends to allocate for that period and how it proposes to allocate them’ (see paragraph 2 above). 53 Each Member State was then obliged to make a definitive decision as to the total quantities of the allowances to be allocated and the allocation of those allowances to the installations in question under Article 11(1) of the Directive at least three months before the beginning of the period, that is to say, prior to 1 October 2004. According to that same provision, the Member States were required to base their definitive decisions on the NAPs which they had developed under Article 9 of the Directive (see paragraph 4 above). 54 Pursuant to Article 9(3) of the Directive, the Commission is empowered to reject a NAP, either in whole or in part, within three months of its notification (see paragraph 3 above). This provision stipulates that any such rejection is to be based on the NAP’s incompatibility with the criteria of Annex III to or with Article 10 of the Directive. It is to be noted that no other ground for rejection of a NAP is provided for in the Directive. 55 Furthermore, as the Commission acknowledged at the hearing, Article 9(3) does not expressly require the adoption of a positive decision of approval of a NAP by the Commission in any case where it has no ground for rejecting that NAP either in whole or in part. If the Commission does not react to the NAP in the three months following notification, the plan must be considered as approved by the Commission and may not then be amended unless the proposed amendments are accepted by the Commission in accordance with Article 9(3) of the Directive. 56 Thus, the adoption by a Member State of its definitive decision concerning the total quantity of allowances that it will allocate and the allocation of those allowances to the installations in question, under Article 11(1) of the Directive, is subject to the condition contained in Article 9(3) of the Directive that any amendment proposed to the NAP must be accepted by the Commission. However, the second sentence of Article 9(3) of the Directive does not lay down any limit to the permissible amendments (see paragraph 3 above). Therefore, contrary to the Commission’s submission, any amendments, whether proposed by the Member State of its own initiative or rendered necessary to overcome any incompatibility in the NAP raised by the Commission, must be notified to the latter and accepted by it before the NAP as amended can form a valid basis for the decision taken by the Member State under Article 11(1) of the Directive. 57 That the amendments of the NAP are not limited to those intended to address the incompatibilities raised by the Commission follows necessarily from the fact that the Member State is obliged, in accordance with Article 11(1) of and paragraph 9 of Annex III to the Directive, to take account of comments received from the public after the initial notification of the NAP and before the adoption of the definitive decision under Article 11(1) of the Directive. If permissible amendments to the NAPs, made after the expiry of the three-month period mentioned in Article 9(3) of the Directive or after a decision of the Commission under that provision, were limited to those envisaged by the Commission, then that public consultation would be deprived of its effectiveness and the comments of the public would be rendered purely academic. 58 The Commission claims that comments obtained during the second round of public consultation are only intended to serve the purposes of data variation and possibly the reallocation of allowances within the total quantity, and not to serve as a means to increase the overall amount (see paragraph 40 above). That argument is supported neither by the wording of Article 11(1) of the Directive nor by paragraph 9 of Annex III. Furthermore, in its communication of 7 January 2004, the Commission did not lay down any limitation on the purpose of the second public consultation. In fact, according to paragraph 95 of that communication (repeated in paragraph 96), a ‘Member State should inform the Commission of any intended modifications following public participation subsequent to the publication and notification of the [NAP] and before taking its final decision pursuant to Article 11’. The Court considers that such public consultation might well identify material errors in the calculations underlying the plan or disclose new information such that, as a result, it may be necessary to increase the total quantity of allowances to be allocated. There is nothing either in the wording of the Directive, nor in the general structure and objectives of the regime which it establishes, which requires the exclusion of such possible increases. 59 Even if the Commission was correct in arguing that the second public consultation concerned only the allocations to individual installations, the Court considers that the Commission has not shown why consequential amendments to the individual allocations might not necessitate making changes to the total quantity of allowances to be allocated. If, for example, there was an underestimation of the allowances to be allocated to an individual installation, while a competing installation of equivalent size received the correct allocation, it cannot be excluded that the allocation to the first installation, and consequentially, the total allocation of allowances, would have to be amended. 60 It must also be pointed out that the purpose of the Directive is to establish an efficient European market in greenhouse gas emission allowances, with the least possible diminution of economic development and employment (see Article 1 of and the fifth recital in the preamble to the Directive). Therefore, even though the Directive aims to reduce greenhouse gas emissions in accordance with the commitments of the Community and its Member States under the Kyoto Protocol, that aim must be achieved, in so far as possible, while respecting the needs of the European economy. It follows that the NAPs developed under the Directive must take due account of accurate data and information relating to emission forecasts for the installations and sectors covered by the Directive. If a NAP was based in part on incorrect information or erroneous evaluations relating to the level of emissions in certain sectors or certain installations, the Member State in question would have to be entitled to propose amendments to the NAP, including increases to the total quantity of allowances to be allocated, in order to address those problems before the market began functioning. That notwithstanding, in order to ensure that the environmental objectives of the Directive are respected, the Commission must still assess whether the amendments proposed by the Member State are compatible with the criteria listed in Annex III to or with Article 10 of the Directive. 61 The Court therefore considers that it follows both from the wording of the Directive, and from the general structure and objectives of the system which it establishes, that the Commission could not restrict a Member State’s right to propose amendments, or categories of amendment. That question is different from the question whether the amendments in question were compatible with the criteria listed in Annex III to or with Article 10 of the Directive. 62 The Commission claims that its Decision of 7 July 2004 supports its argument that the scope of possible amendments was limited and, in particular, that it was not permissible to amend the total quantity of allowances which the Member State would decide to allocate. It adds that Article 3(1) of the Decision of 7 July 2004 clearly states that the total quantity to be allocated may not be exceeded. 63 That argument cannot be accepted. It follows from the express terms of the Directive, as well as from the general structure and objectives of the system which it establishes, that the United Kingdom was entitled to propose amendments to its NAP after it had been notified to the Commission and until its adoption of its decision under Article 11(1), and that the Commission is not entitled, when adopting a rejection decision in accordance with Article 9(3) of the Directive, to constrain the Member State in the exercise of its right (see paragraphs 54 to 61 above). 64 Furthermore, that argument of the Commission is inconsistent with the wording of its Decision of 7 July 2004. Firstly, it is clear from Article 2, subsection (b) of that decision that, as the Commission admitted during the hearing, amendments of the NAP made necessary in order to deal with the situation of installations in Gibraltar could lead to an increase in the total quantity of allowances to be allocated. In fact, Article 3(1) of that decision expressly contemplates the possibility that the total quantity of allowances to be allocated could be increased as a result of the amendments mentioned in Article 2, that is to say, without prior authorisation of the Commission (see paragraph 10 above). The Commission has thus recognised, at least implicitly, that such an amendment could be made without infringing the criteria laid down by Annex III to the Directive. It follows that there is a contradiction in principle in the position of the Commission in that, on the one hand, it permits increases in the total quantity of allowances to be allocated in order to address gaps which it has identified in the NAP while, on the other hand, it refuses to consider such amendments when proposed by the Member State in question. 65 Secondly, Article 3(3) of the Decision of 7 July 2004, which reflects Article 9(3) of the Directive, does not in fact limit the scope of permissible amendments before the adoption of a definitive decision under Article 11(1) of the Directive. While Article 2 and Article 3(2) of the Decision of 7 July 2004 deal with amendments which are permissible without requiring prior acceptance by the Commission, Article 3(3) of that decision deals with ‘all’ other amendments, including, conceivably, amendments to the total quantity of allowances to be allocated. Furthermore, contrary to the Commission’s submission, Article 3(1) of the Decision of 7 July 2004 simply provides that, in the absence of such an amendment, the United Kingdom may not exceed the total quantity of allowances to be allocated as laid down by its NAP. 66 According to the Commission, Article 3(3) of the Decision of 7 July 2004 grants the United Kingdom the power to eliminate incompatibilities contained in its NAP in ways other than those envisaged by Article 2. However, as the United Kingdom submits, the Commission approved NAPs submitted by other Member States and, although it did not identify any deficiencies in those NAPs, its decisions included a provision similar to that of Article 3(3). It follows that, contrary to the Commission’s submission, it was permissible, in accordance with that provision, to propose amendments other than those designed to address the incompatibilities identified by the Commission. 67 The Commission also maintains that any amendment increasing the total quantity of allowances must be excluded because it could have an adverse effect on the stability of the market (see paragraphs 38 and 45 above). The Court considers that this argument has not been substantiated by the Commission. 68 Indeed, the argument of the Commission that the proposed amendments would have serious repercussions on scarcity and would therefore be likely to have a significant impact on the market price is, at the very least, exaggerated. It is common ground between the parties that the United Kingdom notified its NAP on 30 April 2004, expressly stating its provisional intention to allocate a total quantity of allowances of 736 Mt CO2 for the period from 2005 to 2007 (see paragraph 6 above). Subsequently, on 10 November 2004, the United Kingdom informed the Commission of its proposal to increase the total quantity of allowances from 736 to 756.1 Mt CO2 (see paragraph 12 above), that is to say, an increase of 2.7%. In light of the fact that this amendment was simultaneously published by the United Kingdom with a view to obtaining comments of the public, the Court considers that the operators concerned would have been aware of that increase seven weeks before the opening of the market. 69 Moreover, in its Decision of 7 July 2004, the Commission recognised that changes in the total quantity allocated might be necessary even after the market had commenced operation, independently of the possibility laid down by Article 29 of the Directive to amend the NAP in the case of force majeure. In particular, the Commission envisaged, in the eighth recital in the preamble to the Decision of 7 July 2004, that it might be necessary to adjust the total quantity of allowances to be allocated in respect of installations temporarily excluded from the Community scheme until 31 December 2006 under Article 27 of the Directive. Therefore, the argument of the Commission, based on the idea that the stability of the market amounts to an imperative rule, is exaggerated, especially with regard to amendments proposed before the opening of the market and thus it cannot be accepted. 70 In any case, in the context of a market where the Member States had, according to a press release of the Commission of 20 June 2005, allocated a total quantity of 6 572 Mt CO2, the Commission has failed to explain how an increase of 20.1 Mt CO2, announced seven weeks before the opening of the market, could ‘destabilise’ the market. The Court notes that on 10 November 2004, when the United Kingdom proposed the amendments in question, the Commission had still not taken a decision in accordance with Article 9(3) of the Directive on the NAPs of nine Member States. 71 The Commission implicitly relies on the fact that the United Kingdom should have taken its decision under Article 11(1) of the Directive by 30 September 2004 and that it was not entitled to propose any amendments after that date. It is worth mentioning in that regard that, even though this fact was referred to in the sixth recital in the preamble to the contested decision, it was not the basis for that decision. The amendments were rejected as inadmissible because they exceeded the total quantity fixed by the Decision of 7 July 2004. 72 Furthermore, it is not contested that the United Kingdom was acting in good faith in continuing its work on its NAP after notification and in continuing its efforts to obtain more exact data regarding emission forecasts by the sectors affected by the Directive. In a letter to the United Kingdom’s Permanent Representation of 11 October 2004, the Commission, after noting that the United Kingdom had not respected the 30 September 2004 deadline, mentioned ‘the progress that your authorities are making towards fulfilling the requirements of the decision’ and urged those authorities to notify the necessary information to the Commission as soon as possible. In view of the approach of the Commission at that time, it is not now entitled to claim that the date of 30 September 2004 was of the essence with regard to the entitlement of the Member States to propose amendments to their NAPs under Article 9(3) of the Directive. 73 As regards the arguments of the United Kingdom to the effect that the NAP as notified was provisional, it is sufficient to point out that, once it is clear that the Member State in question was entitled to propose amendments to the Commission after the expiry of the three-month period laid down by Article 9(3) of the Directive or after a rejection decision in accordance with that article, it is immaterial that the NAP was characterised as ‘provisional’ when originally notified. As the Commission correctly submits, a Member State cannot, by submitting an incomplete NAP, postpone indefinitely the adoption of a decision by the Commission under Article 9(3) of the Directive. However, if the NAP is incomplete or ‘provisional’, the Commission is entitled to reject it either because it fails to comply with the criteria laid down by the Directive or because the Commission is unable to assess its conformity with those criteria. In that situation, the Commission is entitled, by rejecting the NAP, to oblige the Member State to notify a new and complete NAP before it takes its definitive decision under Article 11(1) of the Directive. Contrary to the Commission’s submission, there is no need to suppose that the notification of an incomplete NAP has the effect of stopping the three-month period laid down by Article 9(3) of the Directive from running. 74 It follows from all of the foregoing that the Commission made an error of law in rejecting the amendments proposed by the United Kingdom as inadmissible. Therefore, the single plea raised by the United Kingdom must be declared to be well founded and the contested decision must be annulled. Costs75 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has been unsuccessful, it must be ordered to pay the costs borne by the United Kingdom in accordance with the form of order sought by the latter. On those grounds,THE COURT OF FIRST INSTANCE (First Chamber)hereby:1) Annuls Commission Decision C(2005) 1081 final of 12 April 2005 concerning the proposed amendment to the national allocation plan for the allocation of greenhouse gas emission allowances notified by the United Kingdom of Great Britain and Northern Ireland;2) Orders the Commission to pay the costs.CookeGarcía-ValdecasasLabuckaDelivered in open court in Luxembourg on 23 November 2005.Registrar PresidentE. Coulon R. Garciá-Valdecasas* Language of the case: English | a1c13-42aa4c2-4d20 | EN |
THE COURT OF JUSTICE CONSOLIDATES PROTECTION FOR WORKERS WITH REGARD TO DIFFERENT TREATMENT ON GROUNDS OF AGE | Werner MangoldvRüdiger Helm(Reference for a preliminary ruling from the Arbeitsgericht München)(Directive 1999/70/EC – Clauses 2, 5 and 8 of the Framework Agreement on fixed-term work – Directive 2000/78/EC – Article 6 – Equal treatment as regards employment and occupation – Age discrimination)Opinion of Advocate General Tizzano delivered on 30 June 2005 Judgment of the Court (Grand Chamber), 22 November 2005 Summary of the Judgment1. Preliminary rulings – Jurisdiction of the Court – Limits – General or hypothetical questions – Determination by the Court of its own jurisdiction(Art. 234 EC)2. Social policy – Access to employment and working conditions – Equal treatment – Directive 1999/70 concerning the framework agreement on fixed-term work – National legislation reducing the general level of the previously guaranteed protection afforded to workers – Justification based on reasons not connected with the implementation of the framework agreement – Whether permissible(Council Directive 1999/70, Annex, Clause 8(3))3. Social policy – Male and female workers – Access to employment and working conditions – Equal treatment – Directive 2000/78 establishing a general framework for equal treatment in employment and occupation – National legislation providing for differences in treatment on grounds of age – Not permissible unless objectively justified – Contracts of employment concluded before the expiry of the period fixed for the transposition of the directive also not permissible(Council Directive 2000/78, Art. 6(1))4. Community law – Principles – Equal treatment – Discrimination on grounds of age – Prohibited – Duty of national courts 1. In the context of the procedure for making a reference provided for by Article 234 EC, the national court, which alone has direct knowledge of the facts of the case, is in the best position to assess, with full knowledge of the matter before it, the need for a preliminary ruling to enable it to give judgment. Consequently, where the question submitted by the national court concerns the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling. Nevertheless, the Court considers that that it may, if need be, examine the circumstances in which the case was referred to it by the national court, in order to assess whether it has jurisdiction. The spirit of cooperation which must prevail in preliminary ruling proceedings requires the national court for its part to have regard to the function entrusted to the Court of Justice, which is to contribute to the administration of justice in the Member States and not to give opinions on general or hypothetical questions. (see paras 34-36)2. On a proper construction of Clause 8(3) of the Framework Agreement on fixed-term contracts concluded on 18 March 1999, put into effect by Directive 1999/70 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP, which provides that implementation of that agreement does not constitute valid grounds for reducing the general level of protection afforded to workers in the field of the agreement, domestic legislation which, for reasons connected with the need to encourage employment and irrespective of the implementation of that agreement, has lowered the age above which fixed-term contracts of employment may be concluded without restrictions, is not contrary to that provision. (see para. 54, operative part 1)3. Community law and, more particularly, Article 6(1) of Directive 2000/78 establishing a general framework for equal treatment in employment and occupation must be interpreted as precluding a provision of domestic law such as that at issue in the main proceedings which authorises, without restriction, unless there is a close connection with an earlier contract of employment of indefinite duration concluded with the same employer, the conclusion of fixed-term contracts of employment once the worker has reached the age of 52. Such legislation is not justified pursuant to Article 6(1) of that directive, inasmuch as it has not been shown that fixing an age threshold, as such, regardless of any other consideration linked to the structure of the labour market in question or the personal situation of the person concerned, is objectively necessary to the attainment of the objective which is the vocational integration of unemployed older workers, and as that legislation therefore goes beyond what is appropriate and necessary in order to attain the objective pursued. That interpretation cannot be affected by the fact that, when the contract in question was concluded, the period prescribed for transposition into domestic law of Directive 2000/78 had not yet expired. During the period prescribed for transposition of a directive, the Member States must refrain from taking any measures liable seriously to compromise the attainment of the result prescribed by that directive. In this connection it is immaterial whether or not the rule of domestic law in question, adopted after the directive entered into force, is concerned with the transposition of the directive. (see paras 65-68, 78, operative part 2)4. It is the responsibility of the national court, hearing a dispute involving the principle of non-discrimination in respect of age, which is a general principle of Community law, to provide, in a case within its jurisdiction, the legal protection which individuals derive from the rules of Community law and to ensure that those rules are fully effective, setting aside any provision of national law which may conflict with that law, even where the period prescribed for transposition of a directive based on that general principle, such as Directive 2000/78 establishing a general framework for equal treatment in employment and occupation, has not yet expired. (see paras 75, 77, operative part 2)JUDGMENT OF THE COURT (Grand Chamber)22 November 2005 (*) In Case C-144/04,REFERENCE for a preliminary ruling under Article 234 EC from the Arbeitsgericht München (Germany), made by decision of 26 February 2004, registered at the Court on 17 March 2004, in the proceedings Rüdiger Helm, THE COURT (Grand Chamber),composed of P. Jann, President of the First Chamber, acting as President, C.W.A. Timmermans, A. Rosas and K. Schiemann, Presidents of Chambers, R. Schintgen (Rapporteur), S. von Bahr, J.N. Cunha Rodrigues, R. Silva de Lapuerta, K. Lenaerts, E. Juhász, G. Arestis, A. Borg Barthet and M. Ilešič, Judges, Advocate General: A. Tizzano,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 26 April 2005,after considering the observations submitted on behalf of:– Mr Mangold, by D. Hummel and B. Karthaus, Rechtsanwälte,– Mr Helm, by himself, Rechtsanwalt,– the German Government, by M. Lumma, acting as Agent,– the Commission of the European Communities, by N. Yerrell and S. Grünheid and by D. Martin and H. Kreppel, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 30 June 2005,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Clauses 2, 5 and 8 of the Framework Agreement on fixed-term contracts concluded on 18 March 1999 (‘the Framework Agreement’), put into effect by Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP (OJ 1999 L 175, p. 43), and of Article 6 of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (OJ 2000 L 303, p. 16). 2 The reference has been made in the course of proceedings brought by Mr Mangold against Mr Helm concerning a fixed-term contract by which the former was employed by the latter (‘the contract’). Legal context The relevant provisions of Community law The Framework Agreement3 According to Clause 1, ‘[t]he purpose of this Framework Agreement is to:(a) improve the quality of fixed-term work by ensuring the application of the principle of non-discrimination;(b) establish a framework to prevent abuse arising from the use of successive fixed-term employment contracts or relationships’.4 Clause 2(1) of the Framework Agreement provides:‘This agreement applies to fixed-term workers who have an employment contract or employment relationship as defined in law, collective agreements or practice in each Member State.’ 5 Under Clause 5(1) of the Framework Agreement:‘To prevent abuse arising from the use of successive fixed-term employment contracts or relationships, Member States, after consultation with social partners in accordance with national law, collective agreements or practice, and/or the social partners, shall, where there are no equivalent legal measures to prevent abuse, introduce in a manner which takes account of the needs of specific sectors and/or categories of workers, one or more of the following measures: (a) objective reasons justifying the renewal of such contracts or relationships;(b) the maximum total duration of successive fixed-term employment contracts or relationships;(c) the number of renewals of such contracts or relationships.’6 Clause 8(3) of the Framework Agreement provides that:‘Implementation of this agreement shall not constitute valid grounds for reducing the general level of protection afforded to workers in the field of the agreement.’ Directive 2000/787 Directive 2000/78 was adopted on the basis of Article 13 EC. The 1st, 4th, 8th and 25th recitals in the preamble to that directive are worded as follows: ‘(1) In accordance with Article 6 of the Treaty on European Union, the European Union is founded on the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law, principles which are common to all Member States and it respects fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms and as they result from the constitutional traditions common to the Member States, as general principles of Community law. …(4) The right of all persons to equality before the law and protection against discrimination constitutes a universal right recognised by the Universal Declaration of Human Rights, the United Nations Convention on the Elimination of All Forms of Discrimination against Women, United Nations Covenants on Civil and Political Rights and on Economic, Social and Cultural Rights and by the European Convention for the Protection of Human Rights and Fundamental Freedoms, to which all Member States are signatories. Convention No 111 of the International Labour Organisation (ILO) prohibits discrimination in the field of employment and occupation. (8) The Employment Guidelines for 2000 agreed by the European Council at Helsinki on 10 and 11 December 1999 stress the need to foster a labour market favourable to social integration by formulating a coherent set of policies aimed at combating discrimination against groups such as persons with disability. They also emphasise the need to pay particular attention to supporting older workers, in order to increase their participation in the labour force. (25) The prohibition of age discrimination is an essential part of meeting the aims set out in the Employment Guidelines and encouraging diversity in the workforce. However, differences in treatment in connection with age may be justified under certain circumstances and therefore require specific provisions which may vary in accordance with the situation in Member States. It is therefore essential to distinguish between differences in treatment which are justified, in particular by legitimate employment policy, labour market and vocational training objectives, and discrimination which must be prohibited.’ 8 According to Article 1, ‘the purpose of … Directive [2000/78] is to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation as regards employment and occupation, with a view to putting into effect in the Member States the principle of equal treatment’. 9 Article 2 of Directive 2000/78, headed ‘Concept of discrimination’, states in subparagraphs 1 and 2(a) that:‘(1) For the purposes of this Directive, the “principle of equal treatment” shall mean that there shall be no direct or indirect discrimination whatsoever on any of the grounds referred to in Article 1. (2) For the purposes of paragraph 1:(a) direct discrimination shall be taken to occur where one person is treated less favourably than another is, has been or would be treated in a comparable situation, on any of the grounds referred to in Article 1.’ 10 Article 3 of Directive 2000/78, headed ‘Scope’, provides in subparagraph 1:‘Within the limits of the areas of competence conferred on the Community, this Directive shall apply to all persons, as regards both the public and private sectors, including public bodies, in relation to: (a) conditions for access to employment, to self-employment or to occupation, including selection criteria and recruitment conditions, whatever the branch of activity and at all levels of the professional hierarchy, including promotion; (c) employment and working conditions, including dismissals and pay;…’.11 Article 6(1) of Directive 2000/78 provides:‘Notwithstanding Article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary. Such differences of treatment may include, among others:(a) the setting of special conditions on access to employment and vocational training, employment and occupation, including dismissal and remuneration conditions, for young people, older workers and persons with caring responsibilities in order to promote their vocational integration or ensure their protection; (b) the fixing of minimum conditions of age, professional experience or seniority in service for access to employment or to certain advantages linked to employment; (c) the fixing of a maximum age for recruitment which is based on the training requirements of the post in question or the need for a reasonable period of employment before retirement.’ 12 In accordance with the first paragraph of Article 18 of Directive 2000/78, the Member States were to adopt the laws, regulations and administrative provisions necessary to comply with that directive by 2 December 2003 at the latest. However, under the second paragraph of that article: ‘In order to take account of particular conditions, Member States may, if necessary, have an additional period of three years from 2 December 2003, that is to say a total of six years, to implement the provisions of this Directive on age and disability discrimination. In that event they shall inform the Commission forthwith. Any Member State which chooses to use this additional period shall report annually to the Commission on the steps it is taking to tackle age and disability discrimination and on the progress it is making towards implementation. The Commission shall report annually to the Council.’ 13 The Federal Republic of Germany having requested such an additional period for the implementation of the directive, so far as that Member State is concerned the period allowed will not expire until 2 December 2006. The relevant provisions of national law14 Paragraph 1 of the Beschäftigungsförderungsgesetz (Law to promote employment), as amended by the law of 25 September 1996 (BGBl. 1996 I, p. 1476) (‘the BeschFG 1996’), provided: ‘(1) Fixed-term employment contracts shall be authorised for a maximum term of two years. Within that maximum limit of two years a fixed-term contract may be renewed three times at most. (2) Fixed-term employment contracts shall be authorised exempt from the condition set out in paragraph 1 if the employee has reached the age of 60 when the fixed-term employment contract begins. (3) Employment contracts within the meaning of paragraphs 1 and 2 shall not be authorised where there is a close connection with a previous employment contract of indefinite duration or with a previous fixed-term employment contract within the meaning of paragraph 1 concluded with the same employer. Such close connection shall be presumed to exist where the interval between two employment contracts is less than four months. (4) The possibility of limiting the term of employment contracts for other reasons shall remain unaltered.15 By virtue of Paragraph 1(6) of the BeschFG 1996, those rules were applicable until 31 December 2000.16 Directive 1999/70 implementing the Framework Agreement was transposed into German law by the Law on part-time working and fixed-term contracts amending and repealing provisions of employment law (Gesetz über Teilzeitarbeit und befristete Arbeitsverträge und zur Änderung und Aufhebung arbeitsrechtlicher Bestimmungen) of 21 December 2000 (BGBl. 2000, p. 1966, ‘the TzBfG’). That law entered into force on 1 January 2001. 17 Paragraph 1 of the TzBfG, headed ‘Objective’, provides that:‘This law is intended to encourage part-time working, to fix the conditions in which fixed-term contracts may be concluded and to prevent discrimination against workers employed part-time and workers employed under a fixed-term contract.’ 18 Paragraph 14 of the TzBfG, which regulates fixed-term contracts, provides that:‘(1) A fixed-term employment contract may be concluded if there are objective grounds for doing so. Objective grounds exist in particular where: 1. the operational manpower requirements are only temporary,2. the fixed term follows a period of training or study in order to facilitate the employee’s entry into subsequent employment,3. one employee replaces another,4. the particular nature of the work justifies the fixed term,5. the fixed term is a probationary period,6. reasons relating to the employee personally justify the fixed term,7. the employee is paid out of budgetary funds provided for fixed-term employment and he is employed on that basis, or8. the term is fixed by common agreement before a court.(2) The term of an employment contract may be limited in the absence of objective reasons for a maximum period of two years. Within that maximum period a fixed-term contract may be renewed three times at most. The conclusion of a fixed-term employment contract within the meaning of the first sentence shall not be authorised if that contract is immediately preceded by an employment relationship of fixed or indefinite duration with the same employer. A collective agreement may fix the number or renewals or the maximum duration of the fixed term in derogation from the first sentence. (3) The conclusion of a fixed-term employment contract shall not require objective justification if the worker has reached the age of 58 by the time the fixed-term employment relationship begins. A fixed term shall not be permitted where there is a close connection with a previous employment contract of indefinite duration concluded with the same employer. Such close connection shall be presumed to exist where the interval between two employment contracts is less than six months. (4) The limitation of the term of an employment contract must be fixed in writing in order to be enforceable.’19 Paragraph 14(3) of the TzBfG has been amended by the First Law for the provision of modern services on the labour market of 23 December 2002 (BGBl. 2002 I, p. 14607, ‘the Law of 2002’). The new version of that provision, which took effect on 1 January 2003, is henceforth worded as follows: ‘A fixed-term employment contract shall not require objective justification if when starting the fixed-term employment relationship the employee has reached the age of 58. It shall not be permissible to set a fixed term where there is a close connection with a previous employment contract of indefinite duration concluded with the same employer. Such close connection shall be presumed to exist where the interval between two employment contracts is less than six months. Until 31 December 2006 the first sentence shall be read as referring to the age of 52 instead of 58.’ The main proceedings and the questions referred for a preliminary ruling20 On 26 June 2003 Mr Mangold, then 56 years old, concluded with Mr Helm, who practises as a lawyer, a contract that took effect on 1 July 2003. 21 Article 5 of that contract provided that:‘1. The employment relationship shall start on 1 July 2003 and last until 28 February 2004.2. The duration of the contract shall be based on the statutory provision which is intended to make it easier to conclude fixed-term contracts of employment with older workers (the provisions of the fourth sentence, in conjunction with those of the fourth sentence, of Paragraph 14(3) of the TzBfG …), since the employee is more than 52 years old. 3. The parties have agreed that there is no reason for the fixed term of this contract other than that set out in paragraph 2 above. All other grounds for limiting the term of employment accepted in principle by the legislature are expressly excluded from this agreement.’ 22 According to Mr Mangold, paragraph 5, inasmuch as it limits the term of his contract, is, although such a limitation is in keeping with Paragraph 14(3) of the TzBfG, incompatible with the Framework Agreement and with Directive 2000/78. 23 Mr Helm argues that Clause 5 of the Framework Agreement requires the Member States to introduce measures to prevent abuse arising from the use of successive fixed-term contracts of employment, in particular, by requiring objective reasons justifying the renewal of such contracts, or by fixing the maximum total duration of such fixed-term employment relationships or contracts, or by limiting the number of renewals of such contracts or relationships. 24 He takes the view that even if the fourth sentence of Paragraph 14(3) of the TzBfG does not expressly lay down such restrictions in respect of older workers, there is in fact an objective reason, within the meaning of Clause 5(1)(a) of the Framework Agreement, that justifies the conclusion of a fixed-term contract of employment, which is the difficulty those workers have in finding work having regard to the features of the labour market. 25 The Arbeitsgericht München is doubtful whether the first sentence of Paragraph 14(3) of the TzBfG is compatible with Community law. 26 First, that court considers that that provision is contrary to the prohibition of ‘regression’ (reduction of protection) laid down in Clause 8(3) of the Framework Agreement in that, on the transposition into national law of Directive 1999/70, that provision lowered from 60 to 58 the age of persons excluded from protection against the use of fixed-term contracts of employment where that use is not justified by an objective reason and, in consequence, the general level of protection enjoyed by that class of workers. Such a provision is also, in its opinion, contrary to Clause 5 of the Framework Agreement which seeks to prevent abuse of such contracts, in that it lays down no restriction on the conclusion of such contracts by many workers falling into a class categorised by age only. 27 Second, the national court is uncertain whether rules such as those contained in Paragraph 14(3) of the TzBfG are compatible with Article 6 of Directive 2000/78, in that the lowering, by the Law of 2002, from 58 to 52 of the age at which it is authorised to conclude fixed-term contracts, with no objective justification, does not guarantee the protection of older persons in work. Nor is the principle of proportionality observed. 28 It is true that the national court finds that, on the date of the conclusion of the contract, namely, 26 June 2003, the period prescribed for transposition of Directive 2000/78 into national law had not yet expired. None the less, it notes that, in accordance with paragraph 45 of the judgment in Case C-129/96 Inter‑Environnement Wallonie [1997] ECR I-7411, a Member State to which a directive is addressed may not, during the period prescribed for transposition, adopt measures that may seriously compromise the attainment of the result prescribed by the directive. 29 Now, in the case in the main proceedings, the Law of 2002’s amendment of Paragraph 14(3) of the TzBfG came into force on 1 January 2003, that is to say, after Directive 2000/78 was published in the Official Journal of the European Communities, but before the period allowed by Article 18 of that directive for its transposition had expired. 30 Third, the Arbeitsgericht München raises the question whether the national court is bound, in proceedings between individuals, to set aside rules of domestic law incompatible with Community law. In this respect it considers that the primacy of Community law must lead the court to find that Paragraph 14(3) of the TzBfG is inapplicable in its entirety and that, therefore, it is necessary to apply the fundamental rule laid down in Paragraph 14(1), in accordance with which there must be some objective reason for the conclusion of a fixed-term contract of employment. 31 Those were the circumstances in which the Arbeitsgericht München decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘1(a) Is Clause 8(3) of the Framework Agreement … to be interpreted, when transposed into domestic law, as prohibiting a reduction of protection following from the lowering of the age limit from 60 to 58? 1(b) Is Clause 5(1) of the Framework Agreement … to be interpreted as precluding a provision of national law which – like the provision at issue in this case – does not contain any of the three restrictions set out in paragraph 1 of that clause? 2. Is Article 6 of … Directive 2000/78 … to be interpreted as precluding a provision of national law which, like the provision at issue in this case, authorises the conclusion of fixed-term employment contracts, without any objective reason, with workers aged 52 and over, contrary to the principle requiring justification on objective grounds? 3. If one of those three questions is answered in the affirmative: must the national court refuse to apply the provision of domestic law which is contrary to Community law and apply the general principle of internal law, under which fixed terms of employment are permissible only if they are justified on objective grounds?’ Admissibility of the reference for a preliminary ruling32 At the hearing the admissibility of the reference for a preliminary ruling was challenged by the Federal Republic of Germany, on the grounds that the dispute in the main proceedings was fictitious or contrived. Indeed, in the past Mr Helm has publicly argued a case identical to Mr Mangold’s, to the effect that Paragraph 14(3) of the TzBfG is unlawful. 33 It is first of all to be noted in that respect that, pursuant to Article 234 EC, where a question on the interpretation of the Treaty or of subordinate acts of the institutions of the Community is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court of Justice to give a ruling thereon (see, inter alia, Case C-451/99 Cura Anlagen [2002] ECR I-3193, paragraph 22). 34 In the context of that procedure for making a reference, the national court, which alone has direct knowledge of the facts of the case, is in the best position to assess, with full knowledge of the matter before it, the need for a preliminary ruling to enable it to give judgment (Case C-83/91 Meilicke [1992] ECR I-4871, paragraph 23; C-146/93 McLachlan [1994] ECR I-3229, paragraph 20; Case C-412/93 Leclerc-Siplec [1995] ECR I-179, paragraph 10; and C-167/01 Inspire Art [2003] ECR I-10155, paragraph 43. 35 Consequently, where the question submitted by the national court concerns the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (Case C-231/89 Gmurzynska-Bscher [1990] ECR I-4003, paragraph 20; Leclerc‑Siplec, paragraph 11; Joined Cases C-358/93 and C-416/93 Bordessa and Others [1995] ECR I-361, paragraph 10; and Inspire Art, paragraph 44). 36 Nevertheless, the Court considers that it may, if need be, examine the circumstances in which the case was referred to it by the national court, in order to assess whether it has jurisdiction. The spirit of cooperation which must prevail in preliminary ruling proceedings requires the national court for its part to have regard to the function entrusted to the Court of Justice, which is to contribute to the administration of justice in the Member States and not to give opinions on general or hypothetical questions (Case 149/82 Robards [1983] ECR 171, paragraph 19; Meilicke, paragraph 25; and Inspire Art, paragraph 45). 37 It is in the light of that function that the Court has considered that it has no jurisdiction to give a preliminary ruling on a question raised before a national court where the interpretation of Community law has no connection whatever with the circumstances or purpose of the main proceedings. 38 However, in the case in the main proceedings, it hardly seems arguable that the interpretation of Community law sought by the national court does actually respond to an objective need inherent in the outcome of a case pending before it. In fact, it is common ground that the contract has actually been performed and that its application raises a question of interpretation of Community law. The fact that the parties to the dispute in the main proceedings are at one in their interpretation of Paragraph 14(3) of the TzBfG cannot affect the reality of that dispute. 39 The order for reference must, therefore, be regarded as admissible. Concerning the questions referred for a preliminary ruling On Question 1(b)40 In Question 1(b), which it is appropriate to consider first, the national court asks whether, on a proper construction of Clause 5 of the Framework Agreement, it is contrary to that provision for rules of domestic law such as those at issue in the main proceedings to contain none of the restrictions provided for by that clause in respect of the use of fixed-term contracts of employment. 41 Here it is to be noted that Clause 5(1) of the Framework Agreement is supposed to ‘prevent abuse arising from the use of successive fixed-term employment contracts or relationships’. 42 Now, as the parties to the main proceedings confirmed at the hearing, the contract is the one and only contract concluded between them. 43 In those circumstances, interpretation of Clause 5(1) of the Framework Agreement is obviously irrelevant to the outcome of the dispute before the national court and, accordingly, there is no need to answer Question 1(b). On Question 1(a)44 By Question 1(a), the national court seeks to ascertain whether on a proper construction of Clause 8(3) of the Framework Agreement, domestic legislation such as that at issue in the main proceedings which, on transposing Directive 1999/70, lowered from 60 to 58 the age above which fixed-term contracts of employment may be concluded without restrictions, is contrary to that provision. 45 As a preliminary point, it is to be noted that, in the case in the main proceedings, the contract was concluded on 26 June 2003, that is to say, when the TzBfG, as amended by the Law of 2002 which lowered the age above which it is permissible to conclude fixed-term contracts of employment from 58 to 52, was in force. In the instant case, it is common ground that Mr Mangold was engaged by Mr Helm at the age of 56. 46 Nevertheless, the national court considers that an interpretation of Clause 8(3) would be helpful to it in assessing the validity of the lawfulness of Paragraph 14(3) of the TzBfG, in its original version, in so far as, if that latter provision should not be in keeping with Community law, the result would be that its amendment by the Law of 2002 would be invalid. 47 In any case, it is to be declared that the German legislature had already, when Directive 1999/70 was transposed into domestic law, lowered from 60 to 58 the age at which fixed-term contracts of employment might be concluded. 48 According to Mr Mangold, that reduction of protection, like that under the Law of 2002, is contrary to Clause 8(3) of the Framework Agreement. 49 In contrast, the German Government takes the view that that lowering of the relevant age was offset by giving workers bound by a fixed-term contract new social guarantees, such as the laying down of a general prohibition of discrimination and the extending to small businesses, and to short-term employment relationships, of the restrictions provided for in respect of recourse to that kind of contract. 50 In this connection, it appears from the very wording of Clause 8(3) of the Framework Agreement that implementation of the agreement cannot provide the Member States with valid grounds for reducing the general level of protection for workers previously guaranteed in the domestic legal order in the sphere covered by that agreement. 51 The term ‘implementation’, used without any further precision in Clause 8(3) of the Framework Agreement, does not refer only to the original transposition of Directive 1999/70 and especially of the Annex thereto containing the Framework Agreement, but must also cover all domestic measures intended to ensure that the objective pursued by the directive may be attained, including those which, after transposition in the strict sense, add to or amend domestic rules previously adopted. 52 In contrast, reduction of the protection which workers are guaranteed in the sphere of fixed-term contracts is not prohibited as such by the Framework Agreement where it is in no way connected to the implementation of that agreement. 53 Now, it is clear from both the order for reference and the observations submitted by the German Government at the hearing that, as the Advocate General has noted in paragraphs 75 to 77 of his Opinion, the successive reductions of the age above which the conclusion of a fixed-term contract is permissible without restrictions are justified, not by the need to put the Framework Agreement into effect but by the need to encourage the employment of older persons in Germany. 54 In those circumstances, the reply to be given to Question 1(a) is that on a proper construction of Clause 8(3) of the Framework Agreement, domestic legislation such as that at issue in the main proceedings which, for reasons connected with the need to encourage employment and irrespective of the implementation of that agreement, has lowered the age above which fixed-term contracts of employment may be concluded without restrictions, is not contrary to that provision. On the second and third questions55 By its second and third questions, which may appropriately be considered together, the national court seeks in essence to ascertain whether Article 6(1) of Directive 2000/78 must be interpreted as precluding a provision of domestic law such as that at issue in the main proceedings which authorises, without restriction, unless there is a close connection with an earlier contract of employment of indefinite duration concluded with the same employer, the conclusion of fixed-term contracts of employment once the worker has reached the age of 52. If so, the national court asks what conclusions it must draw from that interpretation. 56 In this regard, it is to be noted that, in accordance with Article 1, the purpose of Directive 2000/78 is to lay down a general framework for combating discrimination on any of the grounds referred to in that article, which include age, as regards employment and occupation. 57 Paragraph 14(3) of the TzBfG, however, by permitting employers to conclude without restriction fixed-term contracts of employment with workers over the age of 52, introduces a difference of treatment on the grounds directly of age. 58 Specifically with regard to differences of treatment on grounds of age, Article 6(1) of Directive 2000/78 provides that the Member States may provide that such differences of treatment ‘shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary’. According to subparagraph (a) of the second paragraph of Article 6(1), those differences may include inter alia ‘the setting of special conditions on access to employment and vocational training, employment and occupation … for young people, older workers and persons with caring responsibilities in order to promote their vocational integration or ensure their protection’ and, under subparagraphs (b) and (c), the fixing of conditions of age in certain special circumstances. 59 As is clear from the documents sent to the Court by the national court, the purpose of that legislation is plainly to promote the vocational integration of unemployed older workers, in so far as they encounter considerable difficulties in finding work. 60 The legitimacy of such a public-interest objective cannot reasonably be thrown in doubt, as indeed the Commission itself has admitted. 61 An objective of that kind must as a rule, therefore, be regarded as justifying, ‘objectively and reasonably’, as provided for by the first subparagraph of Article 6(1) of Directive 2000/78, a difference of treatment on grounds of age laid down by Member States. 62 It still remains to be established whether, according to the actual wording of that provision, the means used to achieve that legitimate objective are ‘appropriate and necessary’. 63 In this respect the Member States unarguably enjoy broad discretion in their choice of the measures capable of attaining their objectives in the field of social and employment policy. 64 However, as the national court has pointed out, application of national legislation such as that at issue in the main proceedings leads to a situation in which all workers who have reached the age of 52, without distinction, whether or not they were unemployed before the contract was concluded and whatever the duration of any period of unemployment, may lawfully, until the age at which they may claim their entitlement to a retirement pension, be offered fixed-term contracts of employment which may be renewed an indefinite number of times. This significant body of workers, determined solely on the basis of age, is thus in danger, during a substantial part of its members’ working life, of being excluded from the benefit of stable employment which, however, as the Framework Agreement makes clear, constitutes a major element in the protection of workers. 65 In so far as such legislation takes the age of the worker concerned as the only criterion for the application of a fixed-term contract of employment, when it has not been shown that fixing an age threshold, as such, regardless of any other consideration linked to the structure of the labour market in question or the personal situation of the person concerned, is objectively necessary to the attainment of the objective which is the vocational integration of unemployed older workers, it must be considered to go beyond what is appropriate and necessary in order to attain the objective pursued. Observance of the principle of proportionality requires every derogation from an individual right to reconcile, so far as is possible, the requirements of the principle of equal treatment with those of the aim pursued (see, to that effect, Case C-476/99 Lommers [2002] ECR I‑2891, paragraph 39). Such national legislation cannot, therefore, be justified under Article 6(1) of Directive 2000/78. 66 The fact that, when the contract was concluded, the period prescribed for the transposition into domestic law of Directive 2000/78 had not yet expired cannot call that finding into question. 67 First, the Court has already held that, during the period prescribed for transposition of a directive, the Member States must refrain from taking any measures liable seriously to compromise the attainment of the result prescribed by that directive (Inter-Environnement Wallonie, paragraph 45). 68 In this connection it is immaterial whether or not the rule of domestic law in question, adopted after the directive entered into force, is concerned with the transposition of the directive (see, to that effect, Case C-14/02 ATRAL [2003] ECR I‑4431, paragraphs 58 and 59). 69 In the case in the main proceedings the lowering, pursuant to Paragraph 14(3) of the TzBfG, of the age above which it is permissible to conclude fixed-term contracts from 58 to 52 took place in December 2002 and that measure was to apply until 31 December 2006. 70 The mere fact that, in the circumstances of the case, that provision is to expire on 31 December 2006, just a few weeks after the date by which the Member State must have transposed the directive, is not in itself decisive. 71 On the one hand, it is apparent from the very wording of the second subparagraph of Article 18 of Directive 2000/78 that where a Member State, like the Federal Republic of Germany in this case, chooses to have recourse to an additional period of three years from 2 December 2003 in order to transpose the directive, that Member State ‘shall report annually to the Commission on the steps it is taking to tackle age … discrimination and on the progress it is making towards implementation’. 72 That provision implies, therefore, that the Member State, which thus exceptionally enjoys an extended period for transposition, is progressively to take concrete measures for the purpose of there and then approximating its legislation to the result prescribed by that directive. Now, that obligation would be rendered redundant if the Member State were to be permitted, during the period allowed for implementation of the directive, to adopt measures incompatible with the objectives pursued by that act. 73 On the other hand, as the Advocate General has observed in point 96 of his Opinion, on 31 December 2006 a significant proportion of the workers covered by the legislation at issue in the main proceedings, including Mr Mangold, will already have reached the age of 58 and will therefore still fall within the specific rules laid down by Paragraph 14(3) of the TzBfG, with the result that that class of persons becomes definitively liable to be excluded from the safeguard of stable employment by the use of a fixed-term contract of employment, regardless of the fact that the age condition fixed at 52 will cease to apply at the end of 2006. 74 In the second place and above all, Directive 2000/78 does not itself lay down the principle of equal treatment in the field of employment and occupation. Indeed, in accordance with Article 1 thereof, the sole purpose of the directive is ‘to lay down a general framework for combating discrimination on the grounds of religion or belief, disability, age or sexual orientation’, the source of the actual principle underlying the prohibition of those forms of discrimination being found, as is clear from the third and fourth recitals in the preamble to the directive, in various international instruments and in the constitutional traditions common to the Member States. 75 The principle of non-discrimination on grounds of age must thus be regarded as a general principle of Community law. Where national rules fall within the scope of Community law, which is the case with Paragraph 14(3) of the TzBfG, as amended by the Law of 2002, as being a measure implementing Directive 1999/70 (see also, in this respect, paragraphs 51 and 64 above), and reference is made to the Court for a preliminary ruling, the Court must provide all the criteria of interpretation needed by the national court to determine whether those rules are compatible with such a principle (Case C-442/00 Rodríguez Caballero [2002] ECR I-11915, paragraphs 30 to 32). 76 Consequently, observance of the general principle of equal treatment, in particular in respect of age, cannot as such be conditional upon the expiry of the period allowed the Member States for the transposition of a directive intended to lay down a general framework for combating discrimination on the grounds of age, in particular so far as the organisation of appropriate legal remedies, the burden of proof, protection against victimisation, social dialogue, affirmative action and other specific measures to implement such a directive are concerned. 77 In those circumstances it is the responsibility of the national court, hearing a dispute involving the principle of non-discrimination in respect of age, to provide, in a case within its jurisdiction, the legal protection which individuals derive from the rules of Community law and to ensure that those rules are fully effective, setting aside any provision of national law which may conflict with that law (see, to that effect, Case 106/77 Simmenthal [1978] ECR 629, paragraph 21, and Case C-347/96 Solred [1998] ECR I-937, paragraph 30). 78 Having regard to all the foregoing, the reply to be given to the second and third questions must be that Community law and, more particularly, Article 6(1) of Directive 2000/78, must be interpreted as precluding a provision of domestic law such as that at issue in the main proceedings which authorises, without restriction, unless there is a close connection with an earlier contract of employment of indefinite duration concluded with the same employer, the conclusion of fixed-term contracts of employment once the worker has reached the age of 52. It is the responsibility of the national court to guarantee the full effectiveness of the general principle of non-discrimination in respect of age, setting aside any provision of national law which may conflict with Community law, even where the period prescribed for transposition of that directive has not yet expired. Costs79 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. On a proper construction of Clause 8(3) of the Framework Agreement on fixed-term contracts concluded on 18 March 1999, put into effect by Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP, domestic legislation such as that at issue in the main proceedings, which for reasons connected with the need to encourage employment and irrespective of the implementation of that agreement, has lowered the age above which fixed-term contracts of employment may be concluded without restrictions, is not contrary to that provision.2. Community law and, more particularly, Article 6(1) of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation must be interpreted as precluding a provision of domestic law such as that at issue in the main proceedings which authorises, without restriction, unless there is a close connection with an earlier contract of employment of indefinite duration concluded with the same employer, the conclusion of fixed-term contracts of employment once the worker has reached the age of 52.It is the responsibility of the national court to guarantee the full effectiveness of the general principle of non-discrimination in respect of age, setting aside any provision of national law which may conflict with Community law, even where the period prescribed for transposition of that directive has not yet expired.[Signatures]* Language of the case: German. | 1daed-b296830-4e92 | EN |
ADVOCATE GENERAL LÉGER PROPOSES ANNULMENT OF THE COMMISSION AND COUNCIL DECISIONS ON TRANSFER TO THE AMERICAN AUTHORITIES OF PERSONAL INFORMATION CONCERNING AIR PASSENGERS | European ParliamentvCouncil of the European UnionandCommission of the European Communities (Protection of individuals with regard to the processing of personal data – Air transport – Decision 2004/496/EC – Agreement between the European Community and the United States of America – Passenger Name Records of air passengers transferred to the United States Bureau of Customs and Border Protection – Directive 95/46/EC – Article 25 – Third countries – Decision 2004/535/EC – Adequate level of protection)Summary of the Judgment1. Approximation of laws – Directive 95/46 – Scope (European Parliament and Council Directive 95/46, Art. 3(2); Commission Decision 2004/535)2. International agreements – Conclusion – EEC-United States Agreement on the processing and transfer of Passenger Name Records of air passengers to the United States Bureau of Customs and Border Protection(Art. 95 EC; European Parliament and Council Directive 95/46, Arts 3(2) and 25; Council Decision 2004/496)1. Decision 2004/535 on the adequate protection of personal data contained in the Passenger Name Record of air passengers transferred to the United States Bureau of Customs and Border Protection relates to personal-data processing operations concerning public security and the activities of the State in areas of criminal law, operations which are excluded from the scope of Directive 95/46 on the protection of individuals with regard to the processing of personal data and on the free movement of such data, by virtue of the first indent of Article 3(2) of that directive. The fact that the personal data are collected by private operators for commercial purposes and it is they who arrange for their transfer to a third country does not alter such a conclusion, inasmuch as their transfer falls within a framework established by the public authorities that relates to public security, and is not necessary for the supply of services by those operators. (see paras 56-59)2. Decision 2004/496 on the conclusion of an Agreement between the European Community and the United States of America on the processing and transfer of PNR (Passenger Name Record) data by Air Carriers to the United States Department of Homeland Security, Bureau of Customs and Border Protection, cannot have been validly adopted on the basis of Article 95 EC, read in conjunction with Article 25 of Directive 95/46 on the protection of individuals with regard to the processing of personal data and on the free movement of such data. The agreement relates to data processing operations which, since they concern public security and the activities of the State in areas of criminal law, are excluded from the scope of Directive 95/46 by virtue of the first indent of Article 3(2) of that directive. (see paras 67-69)JUDGMENT OF THE COURT (Grand Chamber)30 May 2006 (*) In Joined Cases C-317/04 and C-318/04,ACTIONS for annulment under Article 230 EC, brought on 27 July 2004,European Parliament, represented by R. Passos, N. Lorenz, H. Duintjer Tebbens and A. Caiola, acting as Agents, with an address for service in Luxembourg, applicant,supported byEuropean Data Protection Supervisor (EDPS), represented by H. Hijmans and V. Perez Asinari, acting as Agents, intervener,Council of the European Union, represented by M.C. Giorgi Fort and M. Bishop, acting as Agents, defendant in Case C-317/04,Commission of the European Communities, represented by P.J. Kuijper, A. van Solinge and C. Docksey, acting as Agents, with an address for service in Luxembourg, United Kingdom of Great Britain and Northern Ireland, represented by M. Bethell, C. White and T. Harris, acting as Agents, and by T. Ward, Barrister, with an address for service in Luxembourg, interveners,and vCommission of the European Communities, represented by P.J. Kuijper, A. van Solinge, C. Docksey and F. Benyon, acting as Agents, with an address for service in Luxembourg, defendant in Case C-318/04,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and J. Malenovský, Presidents of Chambers, N. Colneric (Rapporteur), S. von Bahr, J.N. Cunha Rodrigues, R. Silva de Lapuerta, G. Arestis, A. Borg Barthet, M. Ilešič and J. Klučka, Judges, Advocate General: P. Léger,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 18 October 2005,after hearing the Opinion of the Advocate General at the sitting on 22 November 2005,gives the followingJudgment1 By its application in Case C-317/04, the European Parliament seeks the annulment of Council Decision 2004/496/EC of 17 May 2004 on the conclusion of an Agreement between the European Community and the United States of America on the processing and transfer of PNR data by Air Carriers to the United States Department of Homeland Security, Bureau of Customs and Border Protection (OJ 2004 L 183, p. 83, and corrigendum at OJ 2005 L 255, p. 168). 2 By its application in Case C-318/04, the Parliament seeks the annulment of Commission Decision 2004/535/EC of 14 May 2004 on the adequate protection of personal data contained in the Passenger Name Record of air passengers transferred to the United States Bureau of Customs and Border Protection (OJ 2004 L 235, p. 11; ‘the decision on adequacy’). Legal context 3 Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 (‘the ECHR’), provides: ‘1. Everyone has the right to respect for his private and family life, his home and his correspondence.2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.’ 4 The second sentence of Article 95(1) EC is worded as follows: ‘The Council shall, acting in accordance with the procedure referred to in Article 251 and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.’ 5 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ 1995 L 281, p. 31), as amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council of 29 September 2003 adapting to Council Decision 1999/468/EC the provisions relating to committees which assist the Commission in the exercise of its implementing powers laid down in instruments subject to the procedure referred to in Article 251 of the EC Treaty (OJ 2003 L 284, p. 1) (‘the Directive’), was adopted on the basis of Article 100a of the EC Treaty (now, after amendment, Article 95 EC). 6 The 11th recital in the preamble to the Directive states that ‘the principles of the protection of the rights and freedoms of individuals, notably the right to privacy, which are contained in this Directive, give substance to and amplify those contained in the Council of Europe Convention of 28 January 1981 for the Protection of Individuals with regard to Automatic Processing of Personal Data’. 7 The 13th recital in the preamble reads as follows: ‘… the activities referred to in Titles V and VI of the Treaty on European Union regarding public safety, defence, State security or the activities of the State in the area of criminal laws fall outside the scope of Community law, without prejudice to the obligations incumbent upon Member States under Article 56(2), Article 57 or Article 100a of the Treaty establishing the European Community ...’. 8 The 57th recital states: ‘... the transfer of personal data to a third country which does not ensure an adequate level of protection must be prohibited’. 9 Article 2 of the Directive provides: ‘For the purposes of this Directive: (a) “personal data” shall mean any information relating to an identified or identifiable natural person (“data subject”); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity; (b) “processing of personal data” (“processing”) shall mean any operation or set of operations which is performed upon personal data, whether or not by automatic means, such as collection, recording, organisation, storage, adaptation or alteration, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction; …’10 Article 3 of the Directive is worded as follows: ‘Scope1. This Directive shall apply to the processing of personal data wholly or partly by automatic means, and to the processing otherwise than by automatic means of personal data which form part of a filing system or are intended to form part of a filing system. 2. This Directive shall not apply to the processing of personal data:– in the course of an activity which falls outside the scope of Community law, such as those provided for by Titles V and VI of the Treaty on European Union and in any case to processing operations concerning public security, defence, State security (including the economic well-being of the State when the processing operation relates to State security matters) and the activities of the State in areas of criminal law, 11 Article 6(1) of the Directive states: ‘Member States shall provide that personal data must be:…(b) collected for specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes. Further processing of data for historical, statistical or scientific purposes shall not be considered as incompatible provided that Member States provide appropriate safeguards; (c) adequate, relevant and not excessive in relation to the purposes for which they are collected and/or further processed;(e) kept in a form which permits identification of data subjects for no longer than is necessary for the purposes for which the data were collected or for which they are further processed. ...’ 12 Article 7 of the Directive provides: ‘Member States shall provide that personal data may be processed only if:(c) processing is necessary for compliance with a legal obligation to which the controller is subject; or… (e) processing is necessary for the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller or in a third party to whom the data are disclosed; or (f) processing is necessary for the purposes of the legitimate interests pursued by the controller or by the third party or parties to whom the data are disclosed, except where such interests are overridden by the interests [or] fundamental rights and freedoms of the data subject which require protection under Article 1(1).’ 13 The first subparagraph of Article 8(5) of the Directive is worded as follows: ‘Processing of data relating to offences, criminal convictions or security measures may be carried out only under the control of official authority, or if suitable specific safeguards are provided under national law, subject to derogations which may be granted by the Member State under national provisions providing suitable specific safeguards. However, a complete register of criminal convictions may be kept only under the control of official authority.’ 14 Article 12 of the Directive provides: ‘Member States shall guarantee every data subject the right to obtain from the controller:(a) without constraint at reasonable intervals and without excessive delay or expense:– confirmation as to whether or not data relating to him are being processed and information at least as to the purposes of the processing, the categories of data concerned, and the recipients or categories of recipients to whom the data are disclosed, – communication to him in an intelligible form of the data undergoing processing and of any available information as to their source, – knowledge of the logic involved in any automatic processing of data concerning him at least in the case of the automated decisions referred to in Article 15(1); (b) as appropriate the rectification, erasure or blocking of data the processing of which does not comply with the provisions of this Directive, in particular because of the incomplete or inaccurate nature of the data; (c) notification to third parties to whom the data have been disclosed of any rectification, erasure or blocking carried out in compliance with (b), unless this proves impossible or involves a disproportionate effort.’ 15 Article 13(1) of the Directive is worded as follows: ‘Member States may adopt legislative measures to restrict the scope of the obligations and rights provided for in Articles 6(1), 10, 11(1), 12 and 21 when such a restriction constitutes a necessary [measure] to safeguard: (a) national security;(b) defence;(c) public security;(d) the prevention, investigation, detection and prosecution of criminal offences, or of breaches of ethics for regulated professions;(e) an important economic or financial interest of a Member State or of the European Union, including monetary, budgetary and taxation matters; (f) a monitoring, inspection or regulatory function connected, even occasionally, with the exercise of official authority in cases referred to in (c), (d) and (e); (g) the protection of the data subject or of the rights and freedoms of others.’16 Article 22 of the Directive provides: ‘RemediesWithout prejudice to any administrative remedy for which provision may be made, inter alia before the supervisory authority referred to in Article 28, prior to referral to the judicial authority, Member States shall provide for the right of every person to a judicial remedy for any breach of the rights guaranteed him by the national law applicable to the processing in question.’ 17 Articles 25 and 26 of the Directive constitute Chapter IV, on the transfer of personal data to third countries. 18 Article 25, headed ‘Principles’, provides: ‘1. The Member States shall provide that the transfer to a third country of personal data which are undergoing processing or are intended for processing after transfer may take place only if, without prejudice to compliance with the national provisions adopted pursuant to the other provisions of this Directive, the third country in question ensures an adequate level of protection. 2. The adequacy of the level of protection afforded by a third country shall be assessed in the light of all the circumstances surrounding a data transfer operation or set of data transfer operations; particular consideration shall be given to the nature of the data, the purpose and duration of the proposed processing operation or operations, the country of origin and country of final destination, the rules of law, both general and sectoral, in force in the third country in question and the professional rules and security measures which are complied with in that country. 3. The Member States and the Commission shall inform each other of cases where they consider that a third country does not ensure an adequate level of protection within the meaning of paragraph 2. 4. Where the Commission finds, under the procedure provided for in Article 31(2), that a third country does not ensure an adequate level of protection within the meaning of paragraph 2 of this Article, Member States shall take the measures necessary to prevent any transfer of data of the same type to the third country in question. 5. At the appropriate time, the Commission shall enter into negotiations with a view to remedying the situation resulting from the finding made pursuant to paragraph 4. 6. The Commission may find, in accordance with the procedure referred to in Article 31(2), that a third country ensures an adequate level of protection within the meaning of paragraph 2 of this Article, by reason of its domestic law or of the international commitments it has entered into, particularly upon conclusion of the negotiations referred to in paragraph 5, for the protection of the private lives and basic freedoms and rights of individuals. Member States shall take the measures necessary to comply with the Commission’s decision.’19 Article 26(1) of the Directive, under the heading ‘Derogations’, is worded as follows: ‘By way of derogation from Article 25 and save where otherwise provided by domestic law governing particular cases, Member States shall provide that a transfer or a set of transfers of personal data to a third country which does not ensure an adequate level of protection within the meaning of Article 25(2) may take place on condition that: (a) the data subject has given his consent unambiguously to the proposed transfer; or (b) the transfer is necessary for the performance of a contract between the data subject and the controller or the implementation of precontractual measures taken in response to the data subject’s request; or (c) the transfer is necessary for the conclusion or performance of a contract concluded in the interest of the data subject between the controller and a third party; or (d) the transfer is necessary or legally required on important public interest grounds, or for the establishment, exercise or defence of legal claims; or (e) the transfer is necessary in order to protect the vital interests of the data subject; or(f) the transfer is made from a register which according to laws or regulations is intended to provide information to the public and which is open to consultation either by the public in general or by any person who can demonstrate legitimate interest, to the extent that the conditions laid down in law for consultation are fulfilled in the particular case.’ 20 It was on the basis of the Directive, in particular Article 25(6) thereof, that the Commission of the European Communities adopted the decision on adequacy. 21 The 11th recital in the preamble to that decision states: ‘The processing by CBP [the Bureau of Customs and Border Protection] of personal data contained in the PNR [Passenger Name Record] of air passengers transferred to it is governed by conditions set out in the Undertakings of the Department of Homeland Security Bureau of Customs and Border Protection (CBP) of 11 May 2004 (hereinafter referred to as the Undertakings) and in United States domestic legislation to the extent indicated in the Undertakings.’ 22 The 15th recital in the preamble to the decision states that PNR data will be used strictly for purposes of preventing and combating terrorism and related crimes, other serious crimes, including organised crime, that are transnational in nature, and flight from warrants or custody for those crimes. 23 Articles 1 to 4 of the decision on adequacy provide: ‘Article 1For the purposes of Article 25(2) of Directive 95/46/EC, the United States Bureau of Customs and Border Protection (hereinafter referred to as CBP) is considered to ensure an adequate level of protection for PNR data transferred from the Community concerning flights to or from the United States, in accordance with the Undertakings set out in the Annex. Article 2This Decision concerns the adequacy of protection provided by CBP with a view to meeting the requirements of Article 25(1) of Directive 95/46/EC and shall not affect other conditions or restrictions implementing other provisions of that Directive that pertain to the processing of personal data within the Member States. Article 31. Without prejudice to their powers to take action to ensure compliance with national provisions adopted pursuant to provisions other than Article 25 of Directive 95/46/EC, the competent authorities in Member States may exercise their existing powers to suspend data flows to CBP in order to protect individuals with regard to the processing of their personal data in the following cases: (a) where a competent United States authority has determined that CBP is in breach of the applicable standards of protection; or (b) where there is a substantial likelihood that the standards of protection set out in the Annex are being infringed, there are reasonable grounds for believing that CBP is not taking or will not take adequate and timely steps to settle the case at issue, the continuing transfer would create an imminent risk of grave harm to data subjects, and the competent authorities in the Member State have made reasonable efforts in the circumstances to provide CBP with notice and an opportunity to respond. 2. Suspension shall cease as soon as the standards of protection are assured and the competent authorities of the Member States concerned are notified thereof. Article 41. Member States shall inform the Commission without delay when measures are adopted pursuant to Article 3.2. The Member States and the Commission shall inform each other of any changes in the standards of protection and of cases where the action of bodies responsible for ensuring compliance with the standards of protection by CBP as set out in the Annex fails to secure such compliance. 3. If the information collected pursuant to Article 3 and pursuant to paragraphs 1 and 2 of this Article provides evidence that the basic principles necessary for an adequate level of protection for natural persons are no longer being complied with, or that any body responsible for ensuring compliance with the standards of protection by CBP as set out in the Annex is not effectively fulfilling its role, CBP shall be informed and, if necessary, the procedure referred to in Article 31(2) of Directive 95/46/EC shall apply with a view to repealing or suspending this Decision.’ 24 The ‘Undertakings of the Department of Homeland Security Bureau of Customs and Border Protection (CBP)’ annexed to the decision on adequacy state: ‘In support of the plan of the European Commission (Commission) to exercise the powers conferred on it by Article 25(6) of Directive 95/46/EC … and to adopt a decision recognising the Department of Homeland Security Bureau of Customs and Border Protection (CBP) as providing adequate protection for the purposes of air carrier transfers of [PNR] data which may fall within the scope of the Directive, CBP undertakes as follows ...’ 25 The Undertakings comprise 48 paragraphs, arranged under the following headings: ‘Legal authority to obtain PNR’; ‘Use of PNR data by CBP’; ‘Data requirements’; ‘Treatment of “sensitive” data’; ‘Method of accessing PNR data’; ‘Storage of PNR data’; ‘CBP computer system security’; ‘CBP treatment and protection of PNR data’; ‘Transfer of PNR data to other government authorities’; ‘Notice, access and opportunities for redress for PNR data subjects’; ‘Compliance issues’; ‘Reciprocity’; ‘Review and termination of Undertakings’; and ‘No private right or precedent created’. 26 The Undertakings include the following: ‘1. By legal statute (title 49, United States Code, section 44909(c)(3)) and its implementing (interim) regulations (title 19, Code of Federal Regulations, section 122.49b), each air carrier operating passenger flights in foreign air transportation to or from the United States must provide CBP (formerly, the US Customs Service) with electronic access to PNR data to the extent it is collected and contained in the air carrier’s automated reservation/departure control systems (reservation systems). 3. PNR data are used by CBP strictly for purposes of preventing and combating: 1. terrorism and related crimes; 2. other serious crimes, including organised crime, that are transnational in nature; and 3. flight from warrants or custody for the crimes described above. Use of PNR data for these purposes permits CBP to focus its resources on high-risk concerns, thereby facilitating and safeguarding bona fide travel. 4. Data elements which CBP requires are listed herein at Attachment A. … 27. CBP will take the position in connection with any administrative or judicial proceeding arising out of a FOIA [Freedom of Information Act] request for PNR information accessed from air carriers, that such records are exempt from disclosure under the FOIA. 29. CBP, in its discretion, will only provide PNR data to other government authorities, including foreign government authorities, with counter-terrorism or law-enforcement functions, on a case-by-case basis, for purposes of preventing and combating offences identified in paragraph 3 herein. (Authorities with whom CBP may share such data shall hereinafter be referred to as the Designated Authorities). 30. CBP will judiciously exercise its discretion to transfer PNR data for the stated purposes. CBP will first determine if the reason for disclosing the PNR data to another Designated Authority fits within the stated purpose (see paragraph 29 herein). If so, CBP will determine whether that Designated Authority is responsible for preventing, investigating or prosecuting the violations of, or enforcing or implementing, a statute or regulation related to that purpose, where CBP is aware of an indication of a violation or potential violation of law. The merits of disclosure will need to be reviewed in light of all the circumstances presented. 35. No statement in these Undertakings shall impede the use or disclosure of PNR data in any criminal judicial proceedings or as otherwise required by law. CBP will advise the European Commission regarding the passage of any US legislation which materially affects the statements made in these Undertakings. 46. These Undertakings shall apply for a term of three years and six months (3.5 years), beginning on the date upon which an agreement enters into force between the United States and the European Community, authorising the processing of PNR data by air carriers for purposes of transferring such data to CBP, in accordance with the Directive. … 47. These Undertakings do not create or confer any right or benefit on any person or party, private or public.27 Attachment A to the Undertakings contains the ‘PNR data elements’ required by CBP from air carriers. The PNR data elements include the ‘PNR record locator code’, date of reservation, name, address, all forms of payment information, contact telephone numbers, travel agency, travel status of the passenger, e-mail address, general remarks, seat number, no-show history and any collected APIS (Advanced Passenger Information System) information. 28 The Council adopted Decision 2004/496 on the basis, in particular, of Article 95 EC in conjunction with the first sentence of the first subparagraph of Article 300(2) EC. 29 The three recitals in the preamble to that decision state: ‘(1) On 23 February 2004 the Council authorised the Commission to negotiate, on behalf of the Community, an Agreement with the United States of America on the processing and transfer of PNR data by Air Carriers to the United States Department of Homeland Security, Bureau of Customs and Border Protection. (2) The European Parliament has not given an Opinion within the time-limit which, pursuant to the first subparagraph of Article 300(3) of the Treaty, the Council laid down in view of the urgent need to remedy the situation of uncertainty in which airlines and passengers found themselves, as well as to protect the financial interests of those concerned. (3) This Agreement should be approved’.30 Article 1 of Decision 2004/496 provides: ‘The Agreement between the European Community and the United States of America on the processing and transfer of PNR data by Air Carriers to the United States Department of Homeland Security, Bureau of Customs and Border Protection is hereby approved on behalf of the Community. The text of the Agreement is attached to this Decision.’31 That agreement (‘the Agreement’) is worded as follows: ‘The European Community and the United States of America,Recognising the importance of respecting fundamental rights and freedoms, notably privacy, and the importance of respecting these values, while preventing and combating terrorism and related crimes and other serious crimes that are transnational in nature, including organised crime, Having regard to US statutes and regulations requiring each air carrier operating passenger flights in foreign air transportation to or from the United States to provide the Department of Homeland Security (hereinafter “DHS”), Bureau of Customs and Border Protection (hereinafter “CBP”) with electronic access to Passenger Name Record (hereinafter “PNR”) data to the extent it is collected and contained in the air carrier’s automated reservation/departure control systems, Having regard to Directive 95/46/EC …, and in particular Article 7(c) thereof,Having regard to the Undertakings of CBP issued on 11 May 2004, which will be published in the Federal Register (hereinafter “the Undertakings”), Having regard to Commission Decision 2004/535/EC adopted on 14 May 2004, pursuant to Article 25(6) of Directive 95/46/EC, whereby CBP is considered as providing an adequate level of protection for PNR data transferred from the European Community (hereinafter “Community”) concerning flights to or from the US in accordance with the Undertakings, which are annexed thereto (hereinafter “the Decision”), Noting that air carriers with reservation/departure control systems located within the territory of the Member States of the European Community should arrange for transmission of PNR data to CBP as soon as this is technically feasible but that, until then, the US authorities should be allowed to access the data directly, in accordance with the provisions of this Agreement, Have agreed as follows:(1) CBP may electronically access the PNR data from air carriers’ reservation/departure control systems (“reservation systems”) located within the territory of the Member States of the European Community strictly in accordance with the Decision and for so long as the Decision is applicable and only until there is a satisfactory system in place allowing for transmission of such data by the air carriers. (2) Air carriers operating passenger flights in foreign air transportation to or from the United States shall process PNR data contained in their automated reservation systems as required by CBP pursuant to US law and strictly in accordance with the Decision and for so long as the Decision is applicable. (3) CBP takes note of the Decision and states that it is implementing the Undertakings annexed thereto.(4) CBP shall process PNR data received and treat data subjects concerned by such processing in accordance with applicable US laws and constitutional requirements, without unlawful discrimination, in particular on the basis of nationality and country of residence. (7) This Agreement shall enter into force upon signature. Either Party may terminate this Agreement at any time by notification through diplomatic channels. The termination shall take effect ninety (90) days from the date of notification of termination to the other Party. This Agreement may be amended at any time by mutual written agreement. (8) This Agreement is not intended to derogate from or amend legislation of the Parties; nor does this Agreement create or confer any right or benefit on any other person or entity, private or public.’ 32 According to Council information concerning the date of its entry into force (OJ 2004 C 158, p. 1), the Agreement, signed in Washington on 28 May 2004 by a representative of the Presidency-in-Office of the Council and the Secretary of the United States Department of Homeland Security, entered into force on the date of its signature, as provided by paragraph 7 of the Agreement. Background33 Following the terrorist attacks of 11 September 2001, the United States passed legislation in November 2001 providing that air carriers operating flights to or from the United States or across United States territory had to provide the United States customs authorities with electronic access to the data contained in their automated reservation and departure control systems, referred to as ‘Passenger Name Records’ (‘PNR data’). While acknowledging the legitimacy of the security interests at stake, the Commission informed the United States authorities, in June 2002, that those provisions could come into conflict with Community and Member State legislation on data protection and with certain provisions of Council Regulation (EEC) No 2299/89 of 24 July 1989 on a code of conduct for computerised reservation systems (OJ 1989 L 220, p. 1), as amended by Council Regulation (EC) No 323/1999 of 8 February 1999 (OJ 1999 L 40, p. 1). The United States authorities postponed the entry into force of the new provisions but, ultimately, refused to waive the right to impose penalties on airlines failing to comply with the legislation on electronic access to PNR data after 5 March 2003. Since then, a number of large airlines in the European Union have granted the United States authorities access to their PNR data. 34 The Commission entered into negotiations with the United States authorities, which gave rise to a document containing undertakings on the part of CBP, with a view to the adoption by the Commission of a decision on adequacy pursuant to Article 25(6) of the Directive. 35 On 13 June 2003 the Working Party on the Protection of Individuals with regard to the Processing of Personal Data, set up by Article 29 of the Directive, delivered an opinion in which it expressed doubts regarding the level of data protection guaranteed by those undertakings for the processing operations envisaged. It reiterated those doubts in an opinion of 29 January 2004. 36 On 1 March 2004 the Commission placed before the Parliament the draft decision on adequacy under Article 25(6) of the Directive, together with the draft undertakings of CBP. 37 On 17 March 2004 the Commission submitted to the Parliament, with a view to its consultation in accordance with the first subparagraph of Article 300(3) EC, a proposal for a Council decision concerning the conclusion of an agreement with the United States. By letter of 25 March 2004, the Council, referring to the urgent procedure, requested the Parliament to deliver an opinion on that proposal by 22 April 2004 at the latest. In that letter, the Council stated: ‘The fight against terrorism, which justifies the proposed measures, is a key priority of the European Union. Air carriers and passengers are at present in a situation of uncertainty which urgently needs to be remedied. In addition, it is essential to protect the financial interests of the parties concerned.’ 38 On 31 March 2004 the Parliament, acting pursuant to Article 8 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (OJ 1999 L 184, p. 23), adopted a resolution setting out a number of reservations of a legal nature regarding the proposal which had been submitted to it. In particular, the Parliament considered that the draft decision on adequacy exceeded the powers conferred on the Commission by Article 25 of the Directive. It called for the conclusion of an appropriate international agreement respecting fundamental rights that would cover a number of points set out in detail in the resolution, and asked the Commission to submit a new draft decision to it. It also reserved the right to refer the matter to the Court for review of the legality of the projected international agreement and, in particular, of its compatibility with protection of the right to privacy. 39 On 21 April 2004 the Parliament, at the request of its President, approved a recommendation from the Committee on Legal Affairs and the Internal Market that, in accordance with Article 300(6) EC, an Opinion be obtained from the Court on the compatibility of the agreement envisaged with the Treaty. That procedure was initiated on that very day. 40 The Parliament also decided, on the same day, to refer to committee the report on the proposal for a Council decision, thus implicitly rejecting, at that stage, the Council’s request of 25 March 2004 for urgent consideration of the proposal. 41 On 28 April 2004 the Council, acting on the basis of the first subparagraph of Article 300(3) EC, sent a letter to the Parliament asking it to deliver its opinion on the proposal for a decision relating to the conclusion of the Agreement by 5 May 2004. To justify the urgency of that request, the Council restated the reasons set out in its letter of 25 March 2004. 42 After taking note of the continuing lack of all the language versions of the proposal for a Council decision, on 4 May 2004 the Parliament rejected the Council’s request to it of 28 April for urgent consideration of that proposal. 43 On 14 May 2004 the Commission adopted the decision on adequacy, which is the subject of Case C-318/04. On 17 May 2004 the Council adopted Decision 2004/496, which is the subject of Case C-317/04. 44 By letter of 4 June 2004, the Presidency-in-Office of the Council informed the Parliament that Decision 2004/496 took into account the fight against terrorism – a priority of the Union – but also the need to address the uncertain legal situation of air carriers as well as their financial interests. 45 By letter of 9 July 2004, the Parliament informed the Court of the withdrawal of its request for an Opinion, which had been registered under No 1/04. 46 In Case C-317/04, the Commission and the United Kingdom of Great Britain and Northern Ireland were granted leave to intervene in support of the form of order sought by the Council, by orders of the President of the Court of 18 November 2004 and 18 January 2005. 47 In Case C-318/04, the United Kingdom was granted leave to intervene in support of the form of order sought by the Commission, by order of the President of the Court of 17 December 2004. 48 By orders of the Court of 17 March 2005, the European Data Protection Supervisor was granted leave to intervene in support of the form of order sought by the Parliament in both cases. 49 Given the connection, confirmed at the hearing, between the cases, it is appropriate to join them under Article 43 of the Rules of Procedure for the purposes of the judgment. The application in Case C-318/0450 The Parliament advances four pleas for annulment, alleging, respectively, ultravires action, breach of the fundamental principles of the Directive, breach of fundamental rights and breach of the principle of proportionality. The first limb of the first plea: breach of the first indent of Article 3(2) of the Directive Arguments of the parties51 The Parliament contends that adoption of the Commission decision was ultra vires because the provisions laid down in the Directive were not complied with; in particular, the first indent of Article 3(2) of the Directive, relating to the exclusion of activities which fall outside the scope of Community law, was infringed. 52 In the Parliament’s submission, there is no doubt that the processing of PNR data after transfer to the United States authority covered by the decision on adequacy is, and will be, carried out in the course of activities of the State as referred to in paragraph 43 of the judgment in Case C-101/01 Lindqvist [2003] ECR I‑12971. 53 The Commission, supported by the United Kingdom, considers that the air carriers’ activities clearly fall within the scope of Community law. It submits that those private operators process the PNR data within the Community and arrange for their transfer to a third country. Activities of private parties are therefore involved, and not activities of the Member State in which the carriers concerned operate, or of its public authorities, as defined by the Court in paragraph 43 of Lindqvist. The aim pursued by the air carriers in processing PNR data is simply to comply with the requirements of Community law, including the obligation laid down in paragraph 2 of the Agreement. Article 3(2) of the Directive refers to activities of public authorities which fall outside the scope of Community law. Findings of the Court54 The first indent of Article 3(2) of the Directive excludes from the Directive’s scope the processing of personal data in the course of an activity which falls outside the scope of Community law, such as activities provided for by Titles V and VI of the Treaty on European Union, and in any case processing operations concerning public security, defence, State security and the activities of the State in areas of criminal law. 55 The decision on adequacy concerns only PNR data transferred to CBP. It is apparent from the sixth recital in the preamble to the decision that the requirements for that transfer are based on a statute enacted by the United States in November 2001 and on implementing regulations adopted by CBP under that statute. According to the seventh recital in the preamble, the United States legislation in question concerns the enhancement of security and the conditions under which persons may enter and leave the country. The eighth recital states that the Community is fully committed to supporting the United States in the fight against terrorism within the limits imposed by Community law. The 15th recital states that PNR data will be used strictly for purposes of preventing and combating terrorism and related crimes, other serious crimes, including organised crime, that are transnational in nature, and flight from warrants or custody for those crimes. 56 It follows that the transfer of PNR data to CBP constitutes processing operations concerning public security and the activities of the State in areas of criminal law. 57 While the view may rightly be taken that PNR data are initially collected by airlines in the course of an activity which falls within the scope of Community law, namely sale of an aeroplane ticket which provides entitlement to a supply of services, the data processing which is taken into account in the decision on adequacy is, however, quite different in nature. As pointed out in paragraph 55 of the present judgment, that decision concerns not data processing necessary for a supply of services, but data processing regarded as necessary for safeguarding public security and for law-enforcement purposes. 58 The Court held in paragraph 43 of Lindqvist, which was relied upon by the Commission in its defence, that the activities mentioned by way of example in the first indent of Article 3(2) of the Directive are, in any event, activities of the State or of State authorities and unrelated to the fields of activity of individuals. However, this does not mean that, because the PNR data have been collected by private operators for commercial purposes and it is they who arrange for their transfer to a third country, the transfer in question is not covered by that provision. The transfer falls within a framework established by the public authorities that relates to public security. 59 It follows from the foregoing considerations that the decision on adequacy concerns processing of personal data as referred to in the first indent of Article 3(2) of the Directive. That decision therefore does not fall within the scope of the Directive. 60 Accordingly, the first limb of the first plea, alleging that the first indent of Article 3(2) of the Directive was infringed, is well founded. 61 The decision on adequacy must consequently be annulled and it is not necessary to consider the other limbs of the first plea or the other pleas relied upon by the Parliament. The application in Case C-317/04 62 The Parliament advances six pleas for annulment, concerning the incorrect choice of Article 95 EC as legal basis for Decision 2004/496 and breach of, respectively, the second subparagraph of Article 300(3) EC, Article 8 of the ECHR, the principle of proportionality, the requirement to state reasons and the principle of cooperation in good faith. The first plea: incorrect choice of Article 95 EC as legal basis for Decision 2004/496 63 The Parliament submits that Article 95 EC does not constitute an appropriate legal basis for Decision 2004/496. The decision does not have as its objective and subject-matter the establishment and functioning of the internal market by contributing to the removal of obstacles to the freedom to provide services and it does not contain provisions designed to achieve such an objective. Its purpose is to make lawful the processing of personal data that is required by United States legislation. Nor can Article 95 EC justify Community competence to conclude the Agreement, because the Agreement relates to data processing operations which are excluded from the scope of the Directive. 64 The Council contends that the Directive, validly adopted on the basis of Article 100a of the Treaty, contains in Article 25 provisions enabling personal data to be transferred to a third country which ensures an adequate level of protection, including the possibility of entering, if need be, into negotiations leading to the conclusion by the Community of an agreement with that country. The Agreement concerns the free movement of PNR data between the Community and the United States under conditions which respect the fundamental freedoms and rights of individuals, in particular privacy. It is intended to eliminate any distortion of competition, between the Member States’ airlines and between the latter and the airlines of third countries, which may result from the requirements imposed by the United States, for reasons relating to the protection of individual rights and freedoms. The conditions of competition between Member States’ airlines operating international passenger flights to and from the United States could have been distorted because only some of them granted the United States authorities access to their databases. The Agreement is designed to impose harmonised obligations on all the airlines concerned. 65 The Commission observes that there is a ‘conflict of laws’, within the meaning of public international law, between the United States legislation and the Community rules and that it is necessary to reconcile them. It complains that the Parliament, which disputes that Article 95 EC can constitute the legal basis for Decision 2004/496, has not suggested an appropriate legal basis. According to the Commission, that article is ‘the natural legal basis’ for the decision because the Agreement concerns the external dimension of the protection of personal data when transferred within the Community. Articles 25 and 26 of the Directive justify exclusive Community external competence. 66 In addition, the Commission submits that the initial processing of the data by the airlines is carried out for commercial purposes. The use which the United States authorities make of the data does not remove them from the effect of the Directive. 67 Article 95 EC, read in conjunction with Article 25 of the Directive, cannot justify Community competence to conclude the Agreement. 68 The Agreement relates to the same transfer of data as the decision on adequacy and therefore to data processing operations which, as has been stated above, are excluded from the scope of the Directive. 69 Consequently, Decision 2004/496 cannot have been validly adopted on the basis of Article 95 EC. 70 That decision must therefore be annulled and it is not necessary to consider the other pleas relied upon by the Parliament. Limitation of the effects of the judgment 71 Under paragraph 7 of the Agreement, either party may terminate the Agreement at any time and the termination takes effect 90 days from the date of notification of termination to the other party. 72 However, in accordance with paragraphs 1 and 2 of the Agreement, CBP’s right of access to PNR data and the obligation imposed on air carriers to process them as required by CBP exist only for so long as the decision on adequacy is applicable. In paragraph 3 of the Agreement, CBP stated that it was implementing the Undertakings annexed to that decision. 73 Given, first, the fact that the Community cannot rely on its own law as justification for not fulfilling the Agreement which remains applicable during the period of 90 days from termination thereof and, second, the close link that exists between the Agreement and the decision on adequacy, it appears justified, for reasons of legal certainty and in order to protect the persons concerned, to preserve the effect of the decision on adequacy during that same period. In addition, account should be taken of the period needed for the adoption of the measures necessary to comply with this judgment. 74 It is therefore appropriate to preserve the effect of the decision on adequacy until 30 September 2006, but its effect shall not be preserved beyond the date upon which the Agreement comes to an end. Costs75 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Parliament has applied for costs and the Council and the Commission have been unsuccessful, the Council and the Commission must be ordered to pay the costs. Pursuant to the first subparagraph of Article 69(4), the interveners in the present cases must bear their own costs. On those grounds, the Court (Grand Chamber) hereby:1. Annuls Council Decision 2004/496/EC of 17 May 2004 on the conclusion of an Agreement between the European Community and the United States of America on the processing and transfer of PNR data by Air Carriers to the United States Department of Homeland Security, Bureau of Customs and Border Protection, and Commission Decision 2004/535/EC of 14 May 2004 on the adequate protection of personal data contained in the Passenger Name Record of air passengers transferred to the United States Bureau of Customs and Border Protection;2. Preserves the effect of Decision 2004/535 until 30 September 2006, but not beyond the date upon which that Agreement comes to an end;3. Orders the Council of the European Union to pay the costs in Case C‑317/04;4. Orders the Commission of the European Communities to pay the costs in Case C‑318/04;5. Orders the Commission of the European Communities to bear its own costs in Case C-317/04;6. Orders the United Kingdom of Great Britain and Northern Ireland and the European Data Protection Supervisor to bear their own costs.[Signatures]* Language of the case: French. | e1bbc-d92992a-4961 | EN |
THE TRAFFIC BAN ON SOME LORRIES ON THE INN VALLEY MOTORWAY IS INCOMPATIBLE WITH THE FREE MOVEMENT OF GOODS | Commission of the European CommunitiesvRepublic of Austria(Failure by a Member State to fulfil its obligations – Articles 28 EC to 30 EC – Free movement of goods – Articles 1 and 3 of Regulation (EEC) No 881/92 – Articles 1 and 6 of Regulation (EEC) No 3118/93 – Transport – Sectoral prohibition on the movement of lorries of more than 7.5 tonnes carrying certain goods – Air quality – Protection of health and the environment – Proportionality principle)Opinion of Advocate General Geelhoed delivered on 14 July 2005 Judgment of the Court (Grand Chamber), 15 November 2005 Summary of the JudgmentFree movement of goods – Quantitative restrictions – Measures having equivalent effect – Sectoral prohibition on the movement of lorries of more than 7.5 tonnes carrying certain goods – Not permissible – Justification – Protection of the environment (Arts 28 EC and 29 EC)A Member State which, in order to ensure the quality of ambient air in the zone concerned, adopts legislation prohibiting lorries of over 7.5 tonnes, carrying certain goods, from driving on a road section of paramount importance, constituting one of the main routes of land communication between certain Member States fails to fulfil its obligations under Articles 28 EC and 29 EC. Such a prohibition obstructs the free movement of goods and, in particular, their free transit, and must be regarded as constituting a measure having equivalent effect to quantitative restrictions, incompatible with Community law obligations under Articles 28 EC and 29 EC, unless that measure can be objectively justified. Such legislation cannot be justified by imperative requirements in the interests of environmental protection where it has not been demonstrated that the aim pursued could not be achieved by other means less restrictive of freedom of movement. (see paras 66, 69, 71, 87, 89, 95, operative part)JUDGMENT OF THE COURT (Grand Chamber)15 November 2005 (*) In Case C-320/03,Action under Article 226 EC for failure to fulfil obligations, brought on 24 July 2003,Commission of the European Communities, represented by C. Schmidt, W. Wils and G. Braun, acting as Agents, with an address for service in Luxembourg, applicant,supported by:Federal Republic of Germany, represented by W.-D. Plessing and A. Tiemann, acting as Agents, assisted by T. Lübbig, lawyer, Italian Republic, represented by I.M. Braguglia, acting as Agent, assisted by G. De Bellis, Avvocato dello Stato, with an address for service in Luxembourg, Kingdom of the Netherlands, represented by H.G. Sevenster, acting as Agent, interveners,Republic of Austria, represented by E. Riedl and H. Dossi, acting as Agents, with an address for service in Luxembourg, defendant,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and K. Schiemann, Presidents of Chambers, R. Schintgen (Rapporteur), J.N. Cunha Rodrigues, R. Silva de Lapuerta, K. Lenaerts, P. Kūris, E. Juhász, G. Arestis and A. Borg Barthet, Judges, Advocate General: L.A. Geelhoed,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 24 May 2005,having heard the Opinion of the Advocate General at the sitting on 14 July 2005,gives the followingJudgment1 By its application, the Commission of the European Communities is asking the Court to hold that, by prohibiting lorries of more than 7.5 tonnes, carrying certain goods, from being driven on a section of the A 12 motorway in the Inn valley (Austria), following the adoption of a regulation by the Landeshauptmann (First Minister) of the Tyrol limiting transport on the A 12 motorway in the Inn valley (sectoral prohibition on road transport) [Verordnung des Landeshauptmanns von Tirol, mit der auf der A 12 Inntalautobahn verkehrsbeschränkende Maßnahmen erlassen werden (sektorales Fahrverbot)], of 27 May 2003 (BGBl. II, 279/2003; ‘the contested regulation’), the Republic of Austria has failed to fulfil its obligations under Articles 1 and 3 of Council Regulation (EEC) No 881/92 of 26 March 1992 on access to the market in the carriage of goods by road within the Community to or from the territory of a Member State or passing across the territory of one or more Member States (OJ 1992 L 95, p. 1), as amended by Regulation (EC) No 484/2002 of the European Parliament and of the Council of 1 March 2002 (OJ 2002 L 76, p. 1; ‘Regulation No 881/92’), under Articles 1 and 6 of Council Regulation (EEC) No 3118/93 of 25 October 1993 laying down the conditions under which non-resident carriers may operate national road haulage services within a Member State (OJ 1993 L 279, p. 1), as amended by Regulation No 484/2002 (‘Regulation No 3118/93’), and under Articles 28 EC to 30 EC. Legal and factual background Community legislation on the internal road transport market2 Regulations Nos 881/92 and 3118/93 govern the transport of goods by road in Community territory.3 Regulation No 881/92, which, in accordance with Article 1(1) thereof, applies to the international carriage of goods by road for hire or reward for journeys carried out within the territory of the Community, provides in Article 3 that Member States are to issue Community authorisation to hauliers established in their territory and entitled to carry out the international carriage of goods by road. 4 Under Article 1(1) of Regulation No 3118/93::‘1. Any road haulage carrier for hire or reward who is a holder of the Community authorisation provided for in Regulation (EEC) No 881/92 and whose driver, if he is a national of a non-member country, holds a driver attestation in accordance with the conditions laid down in the said Regulation, shall be entitled, under the conditions laid down in this Regulation, to operate on a temporary basis national road haulage services for hire or reward in another Member State, hereinafter referred to respectively as “cabotage” and as the “host Member State”, without having a registered office or other establishment therein.’ 5 Under Article 6 of Regulation No 3118/93, the performance of cabotage transport operations is to be subject, save as otherwise provided in Community Regulations, to the laws, regulations and administrative provisions in force in the host Member State in the zones referred to in Article 6(1) and those provisions are to be applied to non-resident transport operators on the same conditions as those which that Member State imposes on its own nationals, so as to prevent any open or hidden discrimination on grounds of nationality or place of establishment. Community directives on the protection of ambient air quality6 Community legislation on the protection of ambient air quality consists in particular of Council Directive 96/62/EC of 27 September 1996 on ambient air quality assessment and management (OJ 1996 L 296, p. 55) and Council Directive 1999/30/EC of 22 April 1999 relating to limit values for sulphur dioxide, nitrogen dioxide and oxides of nitrogen, particulate matter and lead in ambient air (OJ 1999 L 163, p. 41), as amended by Commission Decision 2001/744/EC of 17 October 2001 (OJ 2001 L 278, p. 35; ‘Directive 1999/30’). 7 According to Article 1 of Directive 96/62, the aim of that directive is to define the basic principles of a common strategy to: – define and establish objectives for ambient air quality in the Community designed to avoid, prevent or reduce harmful effects on human health and the environment as a whole, – assess the ambient air quality in Member States on the basis of common methods and criteria,– obtain adequate information on ambient air quality and ensure that it is made available to the public, inter alia by means of alert thresholds, – maintain ambient air quality where it is good and improve it in other cases.8 Article 4 of Directive 96/62 provides that the Council of the European Union, on a proposal by the Commission, is responsible for setting limit values for the pollutants listed in Annex I to that directive. 9 Article 7 of Directive 96/62 provides: ‘Improvement of ambient air qualityGeneral requirements1. Member States shall take the necessary measures to ensure compliance with the limit values.…3. Member States shall draw up action plans indicating the measures to be taken in the short term where there is a risk of the limit values and/or alert thresholds being exceeded, in order to reduce that risk and to limit the duration of such an occurrence. Such plans may, depending on the individual case, provide for measures to control and, where necessary, suspend activities, including motor-vehicle traffic, which contribute to the limit values being exceeded.’ 10 Article 8(3) of Directive 96/62 goes on to provide: ‘In the zones and agglomerations [in which the levels of one or more pollutants are higher than the limit value plus the margin of tolerance], Member States shall take measures to ensure that a plan or programme is prepared or implemented for attaining the limit value within the specific time limit. The said plan or programme, which must be made available to the public, shall incorporate at least the information listed in Annex IV.’ 11 Limit values for nitrogen dioxide (NO2) are laid down in Directive 1999/30. 12 According to Article 4 of Directive 1999/30: ‘Nitrogen dioxide and oxides of nitrogen1. Member States shall take the measures necessary to ensure that concentrations of nitrogen dioxide and, where applicable, of oxides of nitrogen, in ambient air, as assessed in accordance with Article 7, do not exceed the limit values laid down in Section I of Annex II as from the dates specified therein. The margins of tolerance laid down in Section I of Annex II shall apply in accordance with Article 8 of Directive 96/62/EC.2. The alert threshold for concentrations of nitrogen dioxide in ambient air shall be that laid down in Section II of Annex II.’13 Section I of Annex II to Directive 1999/30 shows that, in relation to nitrogen dioxide:– the hourly limit value is fixed at 200 μg/m3 ‘not to be exceeded more than 18 times per calendar year’, increased by a degressive percentage tolerance until 1 January 2010; – the annual limit value is fixed at 40 μg/m3, likewise increased by the same degressive percentage tolerance until 1 January 2010, giving 56 μg/m3 for the year 2002. 14 Section I also provides that the abovementioned limit values must be complied with on 1 January 2010.15 According to the fourth recital of Directive 1999/30, the limit values laid down in that directive are minimum requirements and, in accordance with Article 176 EC, Member States may maintain or introduce more stringent protective measures and in particular introduce stricter limit values. National law and the facts of the dispute16 Directives 96/62 and 1999/30 were transposed into Austrian law by means of amendments to the Law on Air Pollution (Immissionsschutzgesetz-Luft BGBl. I, 115/1997; ‘the IG-L’). 17 Article 10 of the IG-L provides that a catalogue is to be published of measures to be taken in the event of a limit value being exceeded. Article 11 of that law sets out the principles to be observed in that event, such as the principle that the polluter pays and the principle of proportionality. Article 14 of the law contains provisions particularly applicable to the transport industry. 18 On 1 October 2002, having noted that the limit value for nitrogen dioxide, as defined in Section I of Annex II to Directive 1999/30, had been exceeded, the Tyrol authorities imposed a temporary night traffic ban on lorries on a section of the A 12 motorway in the Inn valley. 19 During 2002, the annual limit value fixed at 56 μg/m3 by Annex II was again exceeded at the Vomp/Raststätte measuring point on that section of motorway, the annual average registered being 61 μg/m3. 20 The temporary night traffic ban was then extended and subsequently replaced, from 1 June 2003, by a permanent night traffic ban on the transportation of goods by lorries over 7.5 tonnes, that prohibition being applicable for the whole year. 21 On 27 May 2003, on the basis of the IG-L, the Landeshauptmann of the Tirol adopted the contested regulation, prohibiting a category of lorries carrying certain goods from using the relevant section of the A 12 motorway for an indeterminate period from 1 August 2003. 22 According to Article 1 of the contested regulation, its aim is to reduce emissions of pollutants linked to human activities, thereby improving air quality so as to ensure lasting protection of human, animal and plant health. 23 Article 2 of the contested regulation defines a ‘sanitary zone’, consisting of a 46 km section of the A 12 motorway, between the municipalities of Kundl and Ampass. 24 Article 3 of the contested regulation prohibits lorries or semi-trailers with a maximum authorised weight of over 7.5 tonnes, and lorries with trailers whose combined maximum authorised weights exceed 7.5 tonnes, from driving on that section while transporting the following goods: all types of waste listed in the European Waste Catalogue [appearing in Commission Decision 2000/532/EC of 3 May 2000 replacing Decision 94/3/EC establishing a list of wastes pursuant to Article 1(a) of Council Directive 75/442/EEC on waste and Council Decision 94/904/EC establishing a list of hazardous waste pursuant to Article 1(4) of Council Directive 91/689/EEC on hazardous waste (OJ 2000 L 226, p. 3), as amended by Council Decision 2001/573/EC of 23 July 2001 amending Commission Decision 2000/532/EC as regards the list of wastes (OJ 2001 L 203, p. 18)], cereals, timber and cork, ferrous and non-ferrous minerals, stone, soil, rubble, motor vehicles and trailers or building steel. The prohibition was to apply immediately, as from 1 August 2003, without the need for any further action by the competent authorities. 25 Article 4 of the regulation exempts from the prohibition under Article 3 lorries beginning or ending their journey on the territory of the city of Innsbruck or in the districts of Kufstein, Schwaz or Innsbruck-Land. In addition, the IG-L itself includes other derogations: it excludes various categories of vehicle from the traffic ban, including highway maintenance vehicles, refuse vehicles and agricultural and forestry vehicles. Special derogation may, in addition, be sought for other categories of vehicles when justified in the public interest or for important private reasons. Pre-litigation procedure26 Following an initial exchange of letters with the Republic of Austria, the Commission sent that Member State a letter of formal notice on 25 June 2003, requesting a reply within one week. The Austrian Government replied by letter of 3 July 2003. 27 On 9 July 2003, the Commission sent the Republic of Austria a reasoned opinion under Article 226 EC, likewise laying down a period of one week for compliance. The Republic of Austria replied to the reasoned opinion by letter of 18 July 2003. 28 The Commission, finding the explanations given by the Republic of Austria in its reply to the reasoned opinion unsatisfactory, decided to bring this action. Suspension of operation of the sectoral traffic ban29 By order of 30 July 2003, Commission v Austria (C-320/03 R [2003] ECR I‑7929), as an interim measure, the President of the Court of Justice ordered the Republic of Austria to suspend operation of the traffic ban in the contested regulation until pronouncement of the order terminating the interim measure proceedings. 30 By order of 2 October 2003, Commission v Austria (C-320/03 R [2003] ECR I‑11665), the measure suspending operation of the traffic ban was extended until 30 April 2004, and, by order of 27 April 2004 (C‑320/03 R [2004] ECR I‑3593), that extension was maintained until the Court’s judgment in the main proceedings. Admissibility of the action31 The Republic of Austria challenges the admissibility of the action by reason of the extremely short time-limits it was set during the pre-litigation procedure for preparing its replies to the letter of formal notice and the reasoned opinion which it was sent by the Commission. It considers that its defence rights and the right to a fair procedure have been infringed, and questions whether the Commission’s officials seriously examined the observations of the Austrian authorities at that stage of the procedure. 32 The Republic of Austria adds that the Commission should have used the procedure under Council Regulation (EC) No 2679/98 of 7 December 1998 on the functioning of the internal market in relation to the free movement of goods among the Member States (OJ 1998 L 337, p. 8). 33 In that respect, this Court finds that the very short deadlines which the Commission set the Republic of Austria for replying to the letter of formal notice and complying with the reasoned opinion were made necessary by the date, fixed by the Austrian authorities themselves, on which the contested regulation was to take effect. Moreover, it is undisputed that those authorities knew the Commission’s position before the opening of the pre-litigation procedure and even before the contested regulation was adopted, since, as the documents before the Court show, the Commission, having received a complaint, had asked those authorities by letter of 6 May 2003 for information on the text which was in the course of being drafted. 34 In those circumstances, the Commission, which has the responsibility under Article 211 EC for ensuring that Member States comply with their obligations under Community law, cannot be blamed for fixing deadlines which took account of the specific circumstances of the case, and particularly its urgency (see, to that effect, Case 293/85 Commission v Belgium [1988] ECR 305, paragraph 14; Case C‑328/96 Commission v Austria [1999] ECR I-7479, paragraphs 34 and 51, and Case C-1/00 Commission v France [2001] ECR I-9989, paragraphs 64 and 65). 35 As for the procedure under Regulation No 2679/98, which is designed to bring as speedy an end as possible to obstacles to the free movement of goods between Member States, as defined in Article 1 of that regulation, the Court finds, as the Advocate General has pointed out in paragraph 35 of his Opinion, that engaging such a procedure is in no way a precondition which the Commission must satisfy before commencing the pre-litigation procedure under Article 226 EC, and that that regulation does not in any way restrict the Commission’s powers under Article 226 EC (see, to that effect, Case C‑394/02 Commission v Greece [2005] ECR I-0000, paragraphs 27 and 28, and the case-law cited therein). 36 This action must therefore be declared admissible. Substance Arguments of the Commission and the intervening Member States37 The Commission argues that the contested regulation infringes the Community provisions on the freedom to provide transport services, contained in Regulations Nos 881/92 and 3118/93, and obstructs the free movement of goods, guaranteed by Articles 28 EC to 30 EC. 38 De facto, the prohibition imposed by the contested regulation mainly affects the international transit of goods. Transit traffic, affected by such a measure, is carried out as to more than 80% by non-Austrian undertakings, whereas over 80% of the transport not affected by that measure is carried out by Austrian undertakings. The regulation is therefore, at least indirectly, discriminatory, contrary to Regulations Nos 881/92 and 3118/93 and Articles 28 EC to 30 EC. 39 Being discriminatory in its application, such a measure cannot be justified on environmental protection grounds. Although the Republic of Austria seeks to justify the contested regulation on grounds relating both to public health and environmental protection, it is obvious, the Commission and the intervening Member States argue, that the latter is the primary objective. Justification on public health grounds under Article 30 EC is possible, they argue, only where the goods concerned present a direct and demonstrable threat to human health. That is clearly not the case here. 40 Should the Court take the view that, although applying in a discriminatory way, the contested regulation might validly be based on considerations of environmental protection, the Commission considers, in the alternative, that that regulation cannot be justified on the basis of Directives 96/62 and 1999/30. In the first place, a sectoral ban on traffic for an unlimited duration cannot be based on Article 7(3) of Directive 96/62, which concerns only urgent and temporary measures. Moreover, even if the limit value under that directive for nitrogen dioxide, increased by the margin of tolerance, was clearly exceeded in 2002, the catalogue of measures contained in Article 10 of the IG-L does not contain the elements required by Article 8(3) and by Annex IV to Directive 96/62. 41 The intervening Member States also criticise the method used in Austria for measuring pollution levels and in reaching the conclusion that nitrogen dioxide emissions must particularly be ascribed to one category of heavy vehicles. The German Government in particular argues that, according to Section I of Annex II to Directive 1999/30, the annual limit value for the protection of human health does not become binding until after 1 January 2010. Before that date, it argues, an exceeding of the limit values fixed for the various years does not justify Member States taking immediate measures. They are authorised to do so only if the ‘alert threshold’ referred to in Article 2(6) of, and Section II of Annex II to, Directive 1999/30 is exceeded, which the Republic of Austria has not argued or even alleged. Moreover, the German and Italian Governments argue, the exceeding of the limit value for nitrogen dioxide on which the contested regulation is based has not been established in accordance with the requirements under Annexes V and VI to Directive 1999/30. The German Government further points to a number of methodological weaknesses in the Austrian authorities’ sampling. The use of longer detours, it adds, would cause more air pollution and only displace the problem. 42 In any event, the interveners argue, the contested regulation does not comply with the principle of proportionality.43 In that respect, the Commission states that in 2002, according to the statistics of the Tyrol authorities, an average of 5 200 heavy goods vehicles used the A 12 motorway between the agglomerations of Wörgl (close to the German border) and Hall (10 km from Innsbruck) daily. The effect of the contested regulation is to deny international transit to all heavy vehicles carrying the goods specified in the regulation, other possible itineraries involving large detours for the operators concerned. 44 The Commission and the intervening Member States further stress that rail transport does not constitute a realistic alternative solution in the short term for the undertakings concerned, given the restricted capacity of the Brenner rail route and also having regard to the technical limitations, delays and lack of reliability of rail transport in general, whichever possibility of transferring the goods concerned to rail were used. 45 The Commission further points to the considerable economic consequences which would result from implementation of the prohibition laid down by the contested regulation, not only for the transport industry but also for the manufacturers of the goods concerned, who would be confronted with higher transport costs, German and Italian undertakings being the first affected. The Commission and the intervening Member States indicate that small and medium-sized transport companies in particular, many of which specialise in carrying some of the goods concerned, are threatened. 46 The Commission, supported by the intervening Member States, mentions various measures which, according to those parties, would be likely to hinder the free movement of goods and the freedom to provide transport services to a lesser degree, while still being suitable for attaining the objective envisaged by the contested regulation, namely: – the possibility of gradually introducing the traffic ban for the various EURO classes of heavy goods vehicles;– the system of ecopoints laid down in Protocol No 9 on road, rail and combined transport in Austria (‘Protocol No 9’) to the Act concerning the conditions of Accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden to the European Union and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1), that protocol having already contributed significantly to reconciling heavy vehicle traffic with requirements of environmental protection; – restriction of heavy vehicle traffic at peak hours;– a night ban of heavy vehicle traffic;– the introduction of toll systems based on the quantity of pollutants emitted, or – speed limits. 47 Those various measures, which would be more in line with the principle of rectifying environmental damage at source and the polluter pays principle, would include local traffic and reduce pollution from vehicles not targeted by the contested regulation. In any event, these parties submit that, without an assessment of the effects on the nitrogen dioxide concentration of the night traffic ban imposed some months before the adoption of the contested regulation, the contested regulation is premature. 48 The German Government adds that the choice of goods covered is arbitrary and unfair. The Netherlands Government adds that the measure applies only to one of the various sources of pollution in the zone concerned and even restricts the use of heavy goods vehicles that are relatively clean, falling into class EURO-3. The Italian Government argues that the regulation also infringes the right of transit conferred by Community law to vehicles to which ecopoints have been allocated. 49 Finally, the German Government argues that Article 10 EC required the Republic of Austria to consult with the Member States concerned and the Commission before adopting such a drastic measure as the sectoral traffic ban. According to the Commission, such a measure should, at the very least, have been introduced gradually so as to allow the industries concerned to prepare for the change in circumstances resulting from its implementation. Arguments of the Republic of Austria50 The Republic of Austria considers that the contested regulation complies with Community law. It was adopted in compliance with the directives on the protection of ambient air quality and, in particular, with Articles 7 and 8 of Directive 96/62, as transposed into the Austrian legal system. 51 That latter directive, combined with Directive 1999/30, placed an obligation on the Member State concerned to act where the annual limit value for nitrogen dioxide was exceeded. In this case, the Commission does not deny that in 2002 the limit value, increased by the margin of tolerance, of 56 μg/m3 was exceeded at the measuring point of Vomp/Raststätte, and that in 2003 it was again exceeded by a large margin with nitrogen dioxide concentrations in ambient air reaching 68 μg/m3. It was in that situation that the contested regulation was adopted. 52 The Republic of Austria recognises that Protocol No 9, which lays down the rules on ecopoints, explicitly provides for derogations from secondary Community law. It argues, however, that those derogations are exhaustively listed and do not include Directives 96/62 and 1999/30. 53 Since scientific studies clearly demonstrate that emissions of nitrogen dioxyde by heavy vehicle traffic are a major source of air pollution in the zone covered by the contested measure, the Government argues that there is an obvious need to limit the number of transports carried out by those vehicles. For that purpose, the Austrian authorities selected goods for which transport by rail was a feasible alternative from a technical and economic point of view. The Republic of Austria refers in that regard to documents emanating from various public and private rail companies, both from inside and outside Austria, demonstrating that there is sufficient capacity to deal with the increased demand as a result of the introduction of the contested regulation. It also argues that there are alternative routes by road, almost half the heavy vehicle traffic in transit through the Brenner corridor having a shorter, or at least equivalent, route at its disposal. 54 Given those alternative solutions, the Commission’s alarmist concerns, based on the assumption that all the foreign heavy vehicle transit traffic concerned would have to be diverted either through Switzerland or via the Tauern route in Austria, are, it maintains, unfounded. 55 The Republic of Austria also challenges the arguments based on the economic effects of the contested regulation on the transport industry, which, it maintains, is characterised by structural overcapacity and extremely low profit margins. The fact that the regulation might exacerbate those problems is not, the Government submits, a reason for regarding it as illegal. 56 As for the allegedly discriminatory character of the contested regulation, the Republic of Austria argues that the traffic ban also affects Austrian vehicles and that the choice of goods made in the regulation was based on the possibility of their transportation being easily transferred to rail. 57 The fact that transport operations having their origin or destination in the designated zone are excluded from the ban is, the Government argues, not sufficient to establish the existence of discrimination against non-Austrian operators. The derogation in favour of local traffic is inherent in the system established, since transferring that type of traffic to rail, ex hypothesi within the zone itself, would involve longer trips to rail terminals, which would have an effect contrary to the objective sought by the contested regulation. 58 In any event, even if the Court were to hold the contested regulation indirectly discriminatory, the Republic of Austria argues that the traffic ban is justified on grounds of protecting both human health and the environment. The limit values in Directives 96/62 and 1999/30 were fixed on the basis of scientific criteria at a level presumed to be necessary for the durable protection of human health and the protection of ecosystems and vegetation. It is therefore unnecessary, it submits, to prove that every instance of the limit values being exceeded threatens public health or the environment as a whole. 59 The ban contained in the contested regulation is, the Government argues, appropriate, necessary and proportionate for attaining its objective. The Commission did not challenge the appropriateness of the measure, at least until the reply stage of the proceedings, or its necessity, having regard to the fact that the annual limit values were exceeded. By contrast, the Republic of Austria challenges the appropriateness of the alternative solutions proposed by the Commission and the intervening Member States. Banning certain classes of EURO vehicles would be either insufficient (banning classes 0 and 1), or disproportionate (banning classes 0, 1 and 2). The latter prohibition would affect 50% of heavy goods traffic and does not take its transferability to rail into account. The Republic of Austria further points out that the limit values were exceeded despite the operation of the ecopoints system and that, in preparing the regulation, the ban on night traffic of heavy goods vehicles was taken into account. 60 Moreover, the sectoral traffic ban on heavy vehicles was not an isolated measure, other structural measures having also been undertaken, such as extension of the rail infrastructure and improvement in the public transportation of local and regional passengers. 61 Finally, the Republic of Austria considers that the Commission’s argument in support of its plea of infringement of Regulations Nos 881/92 and 3118/93 is unclear and excessively brief. More particularly, the Commission did not explain in what way those regulations were infringed, with the result that the conditions under Article 38(1)(c) of the Rules of Procedure of the Court of Justice have not been fulfilled. Findings of the Court62 The action by the Commission is, in a general way, seeking a declaration by the Court that, by prohibiting lorries of more than 7.5 tonnes, carrying certain goods, from driving on a section of the A 12 motorway in the Inn valley, the contested regulation introduces an obstacle that is incompatible with the free movement of goods guaranteed by the EC treaty and infringes Regulations Nos 881/92 and 3118/93. Those two complaints should therefore be examined in order. The alleged infringement of the Treaty rules on the free movement of goods– The existence of an obstacle to the free movement of goods63 It should be stated at the outset that the free movement of goods is one of the fundamental principles of the Treaty (Case C-265/95 Commission v France [1997] ECR I-6959, paragraph 24). 64 Thus, Article 3 EC, inserted in the first part of the Treaty, headed ‘Principles’, provides in paragraph 1(c) that, for the purposes set out in Article 2 of the Treaty, the activities of the Community are to include an internal market characterised by the abolition, as between Member States, of obstacles to, inter alia, the free movement of goods. Similarly, Article 14(2) EC provides that ‘the internal market is to comprise an area without internal frontiers in which the free movement of goods is ensured in accordance with the provisions of the Treaty’, such provisions being found primarily in Articles 28 EC and 29 EC. 65 Such freedom of movement entails the existence of a general principle of free transit of goods within the Community (see Case 266/81 SIOT [1983] ECR 731, paragraph 16). 66 Clearly, by prohibiting heavy vehicles of more than 7.5 tonnes carrying certain categories of goods from travelling along a road section of paramount importance, constituting one of the main routes of land communication between southern Germany and northern Italy, the contested regulation obstructs the free movement of goods and, in particular, their free transit. 67 The fact that, as the Republic of Austria argues, there are alternative routes or other means of transport capable of allowing the goods in question to be transported does not negate the existence of an obstacle. It has been established in the case-law since the judgment of 11 July 1974 in Case 8/74 Dassonville [1974] ECR 837, paragraph 5, that Articles 28 EC and 29 EC, taken in their context, must be understood as being intended to eliminate all barriers, whether direct or indirect, actual or potential, to trade flows in intra-Community trade (see Case C‑112/00 Schmidberger [2003] ECR I-5659, paragraph 56). 68 In this case, it cannot be denied that the prohibition on traffic laid down by the contested regulation, by forcing the undertakings concerned, at very short notice moreover, to seek viable alternative solutions for the transport of goods covered by that regulation, is capable of limiting trading opportunities between northern Europe and the north of Italy. 69 The contested regulation must therefore be regarded as constituting a measure having equivalent effect to quantitative restrictions, which in principle are incompatible with the Community law obligations under Articles 28 EC and 29 EC, unless that measure can be objectively justified. – Possible justification of the obstacle70 It is settled case-law that national measures capable of obstructing intra-Community trade may be justified by overriding requirements relating to protection of the environment provided that the measures in question are proportionate to the aim pursued (see, in particular, Case C-463/01 Commission v Germany [2004] ECR I-11705, paragraph 75, and Case C-309/02 Radberger Getränkegesellschaft and S. Spitz [2004] ECR I-11763, paragraph 75). 71 In this case, it is undisputed that the contested regulation was adopted in order to ensure the quality of ambient air in the zone concerned and is therefore justified on environmental protection grounds. 72 In the first place, protection of the environment constitutes one of the essential objectives of the Community (Case 240/83 ADBHU [1985] ECR 531, paragraph 13; Case 302/86 Commission v Denmark [1988] ECR 4607, paragraph 8; Case C‑213/96 Outokumpu [1998] ECR I-1777, paragraph 32; and Case C‑176/03 Commission v Council [2005] ECR I-0000, paragraph 41). With that objective in mind, Article 2 EC states that the Community shall have as its task to promote a ‘high level of protection and improvement of the quality of the environment’, and, for that purpose, Article 3(1)(l) EC provides for the establishment of a ‘policy in the sphere of the environment’. 73 Furthermore, in the words of Article 6 EC ‘[e]nvironmental protection requirements must be integrated into the definition and implementation of the Community policies and activities’, a provision which emphasises the fundamental nature of that objective and its extension across the range of those policies and activities (Commission v Council, cited above, paragraph 42). 74 Secondly, more particularly concerning the protection of ambient air quality, it should be noted that, in Annex II, Directive 1999/30 lays down limit values for nitrogen dioxide and oxides of nitrogen for the purpose of assessing that quality and determining at what point a preventive or corrective measure must be taken. 75 In that context, Directive 96/62 makes a distinction between the situation where there is a ‘risk of the limit values being exceeded’ and that where they have in fact been exceeded. 76 In respect of the first situation, Article 7(3) of that directive provides that Member States ‘shall draw up action plans … in order to reduce that risk’. Those plans, the provision continues, may ‘provide for measures to … suspend activities, including motor-vehicle traffic, which contribute to the limit values being exceeded’. 77 In the second situation, namely where it has been established that the levels of one or more pollutants exceed the limit values, increased by the margin of tolerance, Article 8(3) of Directive 96/62 provides that Member States ‘shall take measures to ensure that a plan or programme is prepared or implemented for attaining the limit value within the specific time limit’. Those plans or programmes are to be made available to the public and contain the information listed in Annex IV to that directive. 78 In so far as the Republic of Austria is arguing that the contested regulation, based on the IG-L which transposes Directives 96/62 and 1999/30 into national law, is designed precisely to implement the provisions of Articles 7 and 8 of Directive 96/62, the Court must as a preliminary step examine whether that regulation does indeed have such a purpose. 79 In that regard, although the method used for measuring the level of nitrogen dioxide in ambiant air has been criticised by the Federal Republic of Germany and the Italian Republic, the Commission itself does not deny that, in 2002 and 2003, the annual limit value fixed for that pollutant, increased by the margin of tolerance, was exceeded at the Vomp/Raststätte measuring point. 80 In those circumstances, having regard to the provisions of Article 8(3) of Directive 96/62, the Republic of Austria was under a duty to act. It is true that, in accordance with Section I of Annex II to Directive 1999/30, the limit values established for nitrogen dioxide do not have to be complied with until after 1 January 2010. The fact remains, however, that, where limit values are exceeded, a Member State cannot be censured for acting in accordance with Article 8(3), before the deadline, in order progressively to bring about the result prescribed by the latter directive and thereby attain the objective it sets within the prescribed period. 81 Article 8(3) of Directive 96/62 requires more particularly that, where limit values are exceeded, the Member State concerned must prepare or implement a plan or programme, which must contain the information listed in Annex IV to that directive, concerning such matters as the place where the values were exceeded, the principal sources of emissions responsible for the pollution and measures existing or envisaged. By definition, such a plan or programme must contain a series of appropriate and coherent measures designed to reduce the pollution level in the specific circumstances of the zone concerned. 82 However, the measures under Article 10 of the IG‑L, the principles set out in Article 11 of that law and the specific provisions concerning the transport industry, contained in Article 14 of the IG-L, cannot be described as a ‘plan’ or ‘programme’ within the meaning of Article 8(3) of Directive 96/62, since they are not in any way connected to a specific situation in which limit values have been exceeded. As for the contested regulation itself, adopted on the basis of the abovementioned provisions of the IG-L, even if it could be described as a plan or programme, it does not, as the Commission has pointed out, contain all the information listed in Annex IV to Directive 96/62 and, in particular, that referred to in points 7 to 10 of that annex. 83 In those circumstances, even if one were to concede that the contested regulation is based on Article 8(3) of Directive 92/62, it cannot be regarded as constituting a correct and full implementation of that provision. 84 The above finding does not, however, preclude the possibility that the obstacle to the free movement of goods arising from the traffic ban laid down by the contested regulation might be justified by one of the imperative requirements in the public interest endorsed by the case-law of the Court of Justice. 85 In order to establish whether such a restriction is proportionate having regard to the legitimate aim pursued in this case, namely the protection of the environment, it needs to be determined whether it is necessary and appropriate in order to secure the authorised objective. 86 On that point, the Commission and the intervening Member States stress both the lack of any genuine alternative means of transporting the goods in question and the existence of many other measures, such as speed limits, or toll systems linked to different classes of heavy vehicles, or the ecopoints system, which would have been capable of reducing nitrogen dioxide emissions to acceptable levels. 87 Without the need for the Court itself to give a ruling on the existence of alternative means, by rail or road, of transporting the goods covered by the contested regulation under economically acceptable conditions, or to determine whether other measures, combined or not, could have been adopted in order to attain the objective of reducing emissions of pollutants in the zone concerned, it suffices to say in this respect that, before adopting a measure so radical as a total traffic ban on a section of motorway constituting a vital route of communication between certain Member States, the Austrian authorities were under a duty to examine carefully the possibility of using measures less restrictive of freedom of movement, and discount them only if their inadequacy, in relation to the objective pursued, was clearly established. 88 More particularly, given the declared objective of transferring transportation of the goods concerned from road to rail, those authorities were required to ensure that there was sufficient and appropriate rail capacity to allow such a transfer before deciding to implement a measure such as that laid down by the contested regulation. 89 As the Advocate General has pointed out in paragraph 113 of his Opinion, it has not been conclusively established in this case that the Austrian authorities, in preparing the contested regulation, sufficiently studied the question whether the aim of reducing pollutant emissions could be achieved by other means less restrictive of the freedom of movement and whether there actually was a realistic alternative for the transportation of the affected goods by other means of transport or via other road routes. 90 Moreover, a transition period of only two months between the date on which the contested regulation was adopted and the date fixed by the Austrian authorities for implementation of the sectoral traffic ban was clearly insufficient reasonably to allow the operators concerned to adapt to the new circumstances (see, to that effect, the judgments referred to above in Commission v Germany, paragraphs 79 and 80, and Radlberger Getränkegesellschaft and S. Spitz, paragraphs 80 and 81). 91 In the light of the above, it must be concluded that, because it infringes the principle of proportionality, the contested regulation cannot validly be justified by reasons concerning the protection of air quality. Therefore, that regulation is incompatible with Articles 28 EC and 29 EC. Infringement of Regulations Nos 881/92 and 3118/9392 According to the Commission, the contested regulation also infringes Articles 1 and 3 of Regulation No 881/92 and Articles 1 and 6 of Regulation No 3118/93. 93 Suffice it to say in that respect that the Commission has not, in its application, in its reply or at the hearing, put forward any specific argument in support of such a plea. 94 That plea must therefore be dismissed.95 In view of the above considerations as a whole, the Court holds that, by prohibiting lorries of over 7.5 tonnes, carrying certain goods, from driving on a section of the A 12 motorway in the Inn valley, following the adoption of the constested regulation, the Republic of Austria has failed to fulfil its obligations under Articles 28 EC and 29 EC. Costs96 Under Article 69(2) of the Rules of Procedure, an unsuccessful party is to be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Commission has applied for costs against the Republic of Austria, and the latter has been essentially unsuccessful in its pleadings, it must be ordered to pay the costs. Under Article 69(4) of the Rules of Procedure, Member States who intervene in support of the Commission are to bear their own costs. On those grounds, the Court (Grand Chamber) hereby rules:1. By prohibiting lorries of over 7.5 tonnes, carrying certain goods, from driving on a section of the A 12 motorway in the Inn valley, following the adoption of the Regulation of the First Minister of the Tyrol limiting transport on the A 12 motorway in the Inn valley (sectoral prohibition on road transport) [Verordnung des Landeshauptmanns von Tirol, mit der auf der A 12 Inntalautobahn verkehrsbeschränkende Maßnahmen erlassen werden (sektorales Fahrverbot)], of 27 May 2003, the Republic of Austria has failed to fulfil its obligations under Articles 28 EC and 29 EC.2. The remainder of the application is dismissed.3. The Republic of Austria is ordered to pay the costs.4. The Federal Republic of Germany, the Italian Republic and the Kingdom of the Netherlands are ordered to bear their own costs.[Signatures]* Language of the case: German. | 14da0-e0899bc-4cad | EN |
ADVOCATE GENERAL TIZZANO PROPOSES THAT THE GERMAN TAX LEGISLATION SHOULD BE DECLARED INCOMPATIBLE WITH COMMUNITY LAW, BUT THAT THE EFFECT OF SUCH INCOMPATIBILITY SHOULD BE LIMITED IN TIME | Wienand Meilicke and OthersvFinanzamt Bonn-Innenstadt(Reference for a preliminary ruling from the Finanzgericht Köln)(Income tax – Tax credit for dividends paid by resident companies – Articles 56 EC and 58 EC – Limitation of the temporal effects of the judgment)Opinion of Advocate General Tizzano delivered on 10 November 2005 Opinion of Advocate General Stix-Hackl delivered on 5 October 2006 Judgment of the Court (Grand Chamber), 6 March 2007 Summary of the Judgment1. Free movement of capital – Restrictions (Arts 56 EC and 58 EC)2. Preliminary rulings – Interpretation – Effect of interpretative judgments ratione temporis(Art. 234 EC)1. Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State. Such tax legislation constitutes a restriction on the free movement of capital in that it could deter persons who are fully taxable in the Member State concerned for income tax purposes from investing their capital in companies established in other Member States; it is also liable to have a restrictive effect as regards those companies, in that it constitutes an obstacle to their raising capital in the Member State concerned. Even if that tax legislation is based on a link between the tax advantage and the offsetting tax levy, in providing that the tax credit granted to the shareholder who is fully taxable in the Member State concerned for income tax purposes is to be calculated by reference to the corporation tax due from the company established in that Member State on the profits which it distributes, such legislation does not appear to be necessary in order to preserve the coherence of the national tax system. Having regard to the objective of preventing the double taxation of company profits distributed in the form of dividends, the granting to a shareholder, who is fully taxable in the Member State concerned for income tax purposes and who holds shares in a company established in another Member State, of a tax credit calculated by reference to the corporation tax payable by that company in that latter Member State would not threaten the coherence of the national tax system and would constitute a measure less restrictive of the free movement of capital. Reduction in tax revenue in relation to dividends paid by companies established in other Member States cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is, in principle, contrary to a fundamental freedom. (see paras 20, 23-24, 28-29, 30-31, operative part)2. In the exercise of the jurisdiction conferred on it by Article 234 EC, it is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision, which it has interpreted, with a view to calling in question legal relations established in good faith. Such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought. There must necessarily be a single occasion when a decision is made on the temporal effects of the requested interpretation, which the Court gives of a provision of Community law. In that regard, the principle that a restriction may be allowed only in the actual judgment ruling upon that interpretation guarantees the equal treatment of the Member States and of other persons subject to Community law, under that law, fulfilling, at the same time, the requirements arising from the principle of legal certainty. (see paras 34-37)JUDGMENT OF THE COURT (Grand Chamber)6 March 2007 (*) In Case C-292/04,REFERENCE for a preliminary ruling under Article 234 EC from the Finanzgericht Köln (Germany), made by decision of 24 June 2004, received at the Court on 9 July 2004, in the proceedings Wienand Meilicke,Heidi Christa Weyde,Marina StöfflerFinanzamt Bonn-Innenstadt,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K Lenaerts, R. Schintgen and J. Klučka, Presidents of Chambers, J.N. Cunha Rodrigues, R. Silva de Lapuerta, M. Ilešič, J. Malenovský, U. Lŏhmus and E Levits (Rapporteur), Judges, Advocate General: A. Tizzano and, subsequently, C. Stix-Hackl,Registrar: B. Fülöp and K. Sztranc-Slawiczek, Administrators,having regard to the written procedure and further to the hearing on 8 September 2005,after considering the observations submitted on behalf of:– Mr Meilicke, Ms Weyde and Ms Stöffler, by W. Meilicke and R. Portner, Rechtsanwälte,– the German Government, by C. Quassowski, A. Tiemann and R. Stotz, acting as Agents, assisted by K.-T. Stopp, Rechtsanwältin,– the United Kingdom Government, by T. Ward, barrister,– the Commission of the European Communities, by K. Gross and R. Lyal, acting as Agents,after hearing the Opinion of Advocate General Tizzano at the sitting on 10 November 2005,having regard to the order of 7 April 2006 reopening the oral procedure and further to the hearing on 30 May 2006,– Mr Meilicke, Ms Weyde and Ms Stöffler, by W. Meilicke and D. Habback, Rechtsanwälte,– the German Government, by M. Lumma, R. Stotz and V. Rietmeyer, acting as Agents,– the Czech Government, by T. Boček, acting as Agent,– the Danish Government, by J. Molde, acting as Agent,– the Greek Government, by K. Georgiadi, acting as Agent,– the Spanish Government, by J.M. Rodríguez Cárcamo, acting as Agent, – the French Government, by J.‑Ch. Gracia, acting as Agent,– the Hungarian Government, by R. Somssich and A. Müller, acting as Agents, – the Netherlands Government, by J.M. de Grave, acting as Agent,– the Austrian Government, by H. Dossi, acting as Agent,– the Swedish Government, by K. Wistrand and A. Falk, acting as Agents,– the United Kingdom Government, by P. Baker QC,after hearing the Opinion of Advocate General Stix-Hackl at the sitting on 5 October 2006,gives the followingJudgment1 The reference for a preliminary ruling concerns Articles 56 EC and 58 EC.2 It was made in the course of proceedings between Mr W. Meilicke, Ms H.C. Weyde and Ms M. Stöffler, in their capacity as heirs of Heinz Meilicke, who died on 3 May 1997, and Finanzamt (Tax Office) Bonn-Innenstadt (Germany) (hereinafter ‘the Finanzamt’), regarding the taxation of dividends paid to the deceased in the course of the years 1995 to 1997 by companies established in Denmark and in the Netherlands. Legal background Community law3 In Chapter 4, entitled ‘Capital and payments’, of Title III, itself entitled ‘Free movement of persons, services and capital,’ in Part Three of the EC Treaty, dealing with the policies of the Community, Article 56(1) EC states: ‘Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between the Member States and between Member States and third countries shall be prohibited.’ 4 Article 58(1) EC provides:‘The provisions of Article 56 shall be without prejudice to the right of Member States:(a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested; ...’.5 Article 58(3) EC provides:‘The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 56.’ The German law applicable during the years 1995 to 19976 Under Paragraphs 1, 2 and 20 of the Einkommensteuergesetz (German Income Tax Law) of 7 September 1990 (BGBl. I 1990, p. 1898), as amended by the Law of 13 September 1993 (BGBl. I 1993, p. 1569, hereinafter ‘the EStG’), dividends payable to a person resident in Germany and therefore fully taxable there for income tax purposes, are taxed there as income from capital. 7 Under Paragraph 27(1) of the Körperschaftsteuergesetz (German Corporation Tax Law) of 11 March 1991 (BGBl. I 1991, p. 638), as amended by the Law of 13 September 1993 (BGBl. I 1993, p. 1569), dividends distributed by capital companies fully taxable for corporation tax purposes in Germany, are subject to that tax at 30%. That results in a distribution of 70% of the pre-tax profits with a tax credit of 30/70, that is 3/7 of the dividends received. 8 Under Paragraph 36(2)(3) of the EStG, that tax credit applies only to dividends received from capital companies fully taxable for corporation tax purposes in Germany. Consequently, persons fully taxable for income tax purposes in Germany are entitled to that tax credit when they receive dividends from German companies, but not when they receive dividends from foreign companies. The main proceedings and the question referred for a preliminary ruling9 The late Heinz Meilicke, who was resident in Germany, held shares in companies established in the Netherlands and in Denmark. In the course of the years 1995 to 1997, he received dividends from those shares totalling DEM 39 631.32, that is EUR 20 263.17. 10 By letter of 30 October 2000, the applicants in the main proceedings applied to the Finanzamt for a tax credit equal to 3/7 of those dividends, to be deducted from the income tax payable on behalf of Heinz Meilicke. 11 The Finanzamt rejected that application, on the ground that only corporation tax on companies fully taxable for corporation tax purposes in Germany could be set off against income tax. 12 The applicants brought an action against that decision before the Finanzgericht Köln (Finance Court, Cologne) (Germany).13 Against that background, the Finanzgericht Köln decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘Is Paragraph 36(2)(3) of the [EStG], whereby only corporation tax payable by a fully-taxable corporation or association amounting to 3/7 of the income within the meaning of Paragraph 20(1)(1) or (2) of the [EStG] is set off against income tax, compatible with Articles 56(1) EC and 58(1)(a) and (3) EC?’ The question referred Substance14 As pointed out by the applicants in the main proceedings, the Finanzgericht Köln made its reference for a preliminary ruling prior to the delivery of the judgment of 7 September 2004 in Case C-319/02 Manninen [2004] ECR I‑7477. 15 In paragraph 54 of that judgment, the Court concluded that the calculation of a tax credit granted to a shareholder fully taxable in Finland, who has received dividends from a company established in another Member State, must take account of the tax actually paid by the company established in that other Member State, as such tax arises from the general rules on calculating the basis of assessment and from the rate of corporation tax in that latter Member State. 16 It is clear from the Court file that, during the relevant years, the rate of corporation tax was 34% in Denmark and 35% in the Netherlands. In its observations before the Court, the applicants in the main proceedings maintained that the application to the German tax authorities should have been understood as being a claim for a tax credit not of 3/7 of the income within the meaning of Paragraph 20(1)(1) or (2) of the EStG, but of 34/66 of that income for the dividends of Danish origin and of 35/65 for those originating from the Netherlands. 17 For its part, the German Government, whilst asserting that the judgement in Manninen is not applicable to the main proceedings, states that, within the framework of the system of full set-off under the German legislation on distributions of dividends arising internally, the fraction of 3/7 of the dividends under the German legislation does not constitute a flat-rate set-off but is linked to the corporation tax rate of 30% on the distribution of dividends. In the case of a distribution of dividends of foreign origin, one could not therefore grant a tax credit of 3/7 of the dividends received because it would not be linked to the tax rate applicable to the profits distributed for the purposes of the foreign corporation tax. 18 In those circumstances, it is appropriate to conclude that, by the question it referred, the national court wishes to ascertain, in essence, whether Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State. 19 It is settled case-law that, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651, paragraph 19, and Manninen, paragraph 19). 20 However, tax legislation such as that at issue in the main proceedings constitutes a restriction within the meaning of Article 56 EC. 21 Indeed, it should be noted that the tax credit under the German tax legislation at issue in the main proceedings, like that under the Finnish tax legislation detailed in Manninen, is designed to prevent the double taxation of German companies’ profits distributed to shareholders by setting off the corporation tax due from the company distributing dividends against the tax due from the shareholder by way of income tax on revenue from capital. The end result of such a system is that dividends are taxed in the hands of the shareholder only to the extent that they have not already been taxed as distributed profits in the hands of the company (see, to that effect, Manninen, paragraph 20). 22 Since the tax credit applies solely in respect of dividends paid by companies established in Germany, that legislation disadvantages persons who are fully taxable in that Member State for income tax purposes and receive dividends from companies established in other Member States. Such persons, for their part, are taxed without being entitled to set off the corporation tax payable by those companies in their State of establishment against the tax on the income from capital (see, to that effect, Manninen, paragraph 20). 23 It follows that the tax legislation at issue in the main proceedings could deter persons who are fully taxable in Germany for income tax purposes from investing their capital in companies established in other Member States. 24 Conversely, that legislation is liable to have a restrictive effect as regards those companies, in that it constitutes an obstacle to their raising capital in Germany. Since dividends of non-German origin receive less favourable tax treatment than dividends distributed by companies established in Germany, the shares of companies established in other Member States are less attractive to investors residing in Germany than shares in companies which have their seat in that Member State (see Case C‑35/98 Verkooijen [2000] ECR I-4071, paragraph 35, Manninen, paragraph 23, and Case C-446/04 Test Claimants in the FII Group Litigation [2006] ECR I-0000, paragraph 64). 25 Relying on Case C‑204/90 Bachmann [1992] ECR I‑249 and Case C‑300/90 Commission v Belgium [1992] ECR I‑305, the German Government maintains that the legislation at issue in the main proceedings is justified by the need to safeguard the cohesion of the national tax system. 26 In that respect, it should be noted that, according to settled case-law, first, for an argument based on such justification to succeed, a direct link has to be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy (see Manninen, paragraph 42). 27 Second, an argument based on the need to safeguard the cohesion of a tax system must be examined in the light of the objective pursued by the tax legislation in question (Manninen, paragraph 43). 28 Even if the German tax legislation is based on a link between the tax advantage and the offsetting tax levy, in providing that the tax credit granted to the shareholder who is fully taxable in Germany for income tax purposes is to be calculated by reference to the corporation tax due from the company established in that Member State on the profits which it distributes, such legislation does not appear to be necessary in order to preserve the cohesion of the German tax system (see, to that effect, Manninen, paragraph 45). 29 The objective pursued by the German tax legislation is to prevent the double taxation of company profits distributed in the form of dividends. Having regard to that objective, the cohesion of that tax system is assured as long as the correlation between the tax advantage granted in favour of the shareholder and the tax payable by way of corporation tax is maintained. Therefore, in a case such as that in the main proceedings, the granting to a shareholder, who is fully taxable in Germany for income tax purposes and who holds shares in a company established in another Member State, of a tax credit calculated by reference to the corporation tax payable by that company in that latter Member State would not threaten the cohesion of the German tax system and would constitute a measure less restrictive of the free movement of capital than that laid down by the German tax legislation (see, by analogy, Manninen, paragraph 46). 30 It is true that the granting of a tax credit in relation to corporation tax due in another Member State would entail, for the Federal Republic of Germany, a reduction in its tax receipts in relation to dividends paid by companies established in other Member States. However, it has been consistently held in the case-law that reduction in tax revenue cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is, in principle, contrary to a fundamental freedom (Verkooijen, cited above, paragraph 59, and Manninen, paragraph 49). 31 In the light of the above matters, the reply to the question referred must be that Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State. The temporal effects of this judgment32 In its observations, the German Government made the point that it was possible for the Court, if it declared national legislation such as that at issue in the main proceedings to be incompatible with Articles 56 EC and 58 EC, to limit the temporal effects of this judgment. 33 In support of its argument, that Government, first, drew the Court’s attention to the grave financial consequences which a judgment making such a declaration would have. Second, it argued that prior to the judgment in Verkooijen, the Federal Republic of Germany was entitled to believe that the legislation at issue was compatible with Community law. 34 In that connection, regard must be had to the settled case-law of the Court to the effect that the interpretation which, in the exercise of the jurisdiction conferred on it by Article 234 EC, the Court gives to a rule of Community law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the competent courts are satisfied (see, in particular, Case C-347/00 Barreira Pérez [2002] ECR I-8191, paragraph 44, and Joined Cases C‑453/02 and C‑462/02 Linneweber and Akritidis [2005] ECR I‑1131, paragraph 41). 35 It is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision, which it has interpreted, with a view to calling in question legal relations established in good faith (see, in particular, Case C-104/98 Buchner and Others [2000] ECR I-3625, paragraph 39, and Linneweber and Akritidis, cited above, paragraph 42). 36 In addition, as the Court has consistently held, such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought (Case 309/85 Barra [1988] ECR 355, paragraph 13; Case 24/86 Blaizot [1988] ECR 379, paragraph 28; Case C-163/90 Legros and Others [1992] ECR I-4625, paragraph 30; Case C-415/93 Bosman and Others [1995] ECR I-4921, paragraph 142; and Case C-437/97 EKW and Wein & Co. [2000] ECR I-1157, paragraph 57). 37 Indeed, there must necessarily be a single occasion when a decision is made on the temporal effects of the requested interpretation, which the Court gives of a provision of Community law. In that regard, the principle that a restriction may be allowed only in the actual judgment ruling upon that interpretation guarantees the equal treatment of the Member States and of other persons subject to Community law, under that law, fulfilling, at the same time, the requirements arising from the principle of legal certainty. 38 The interpretation sought by the present reference for a preliminary ruling concerns the tax treatment which a Member State must, within the framework of a national system designed to prevent or lessen double taxation, accord to dividends distributed by a company established in another Member State. In that regard, it is clear from Verkooijen that Community law precludes a legislative provision of a Member State, which makes the grant of exemption from income tax payable on dividends paid to natural persons who are shareholders subject to the condition that those dividends are paid by a company whose seat is in that Member State (paragraph 62). 39 The Court did not limit the temporal effects of that judgment.40 In addition, the principles adopted in Verkooijen, which thus clarified the requirements arising from the principle of free movement of capital in respect of dividends received by residents from non-resident companies, were confirmed by the judgments in Case C-315/02 Lenz [2004] ECR I-7063 and in Manninen (see Test Claimants in the FII Group Litigation, cited above, paragraph 215). 41 It is therefore not appropriate to limit the temporal effects of the present judgment. Costs 42 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State.[Signatures]* Language of the case: German. | f7db3-c4a0a9d-4fab | EN |
THE COURT OF FIRST INSTANCE DISMISSES THE ACTION BROUGHT AGAINST OHIM'S DECISION TO REGISTER THE TRADE MARK "MOBILIX" | Les Éditions Albert RenévOffice for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM)(Community trade mark – Opposition proceedings – Earlier Community and national word mark OBELIX – Application for Community word mark MOBILIX – Article 8(1)(b) and (2) of Regulation (EC) No 40/94)Judgment of the Court of First Instance (Third Chamber), 27 October 2005 Summary of the Judgment1. Community trade mark – Appeals procedure – Appeals before the Community judicature – Jurisdiction of the Court of First Instance – Re-evaluation of the facts in the light of evidence adduced for the first time before it – Not possible(Rules of Procedure of the Court of First Instance, Art. 135(4); Council Regulation No 40/94, Art. 63)2. Procedure – Application initiating proceedings – Subject-matter of the dispute – Delimitation – Alteration once proceedings have been started – Not allowed (Rules of Procedure of the Court of First Instance, Arts 44(1) and 48(2))3. Community trade mark – Procedural provisions – Examination of the facts of OHIM’s own motion – Opposition proceedings – Examination restricted to the submissions of the parties – Obligation on OHIM to accept points put forward by a party which have not been challenged by the other party – No obligation (Council Regulation No 40/94, Art. 74(1))4. Community trade mark – Definition and acquisition of the Community trade mark – Relative grounds for refusal – Opposition by the proprietor of an earlier identical or similar mark registered for identical or similar goods or services – Likelihood of confusion with the earlier mark – Word marks MOBILIX and OBELIX(Council Regulation No 40/94, Art. 8(1)(b))5. Community trade mark – Definition and acquisition of the Community trade mark – Relative grounds for refusal – Opposition by the proprietor of an earlier identical or similar mark registered for identical or similar goods or services – Likelihood of confusion with the earlier mark – Similarity of the marks concerned – Whether conceptual differences may neutralise visual or aural similarities – Conditions 6. Community trade mark – Definition and acquisition of the Community trade mark – Relative grounds for refusal – Opposition by the proprietor of an earlier identical or similar mark registered for identical or similar goods or services – Likelihood of confusion with the earlier mark – Repute of the earlier mark – Effect 1. The purpose of an action before the Court of First Instance is to review the legality of a decision of a Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) within the meaning of Article 63 of Regulation No 40/94 on the Community trade mark. In proceedings for annulment, the legality of the contested measure must be assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted. It is thus not the Court’s function to re-evaluate the factual circumstances in the light of evidence adduced for the first time before it. To admit such evidence is contrary to Article 135(4) of the Rules of Procedure of the Court of First Instance, which prohibits the parties from changing the subject-matter of the proceedings before the Board of Appeal. Accordingly the documents produced for the first time before the Court of First Instance are inadmissible. (see para. 16)2. Under Article 44(1) of the Rules of Procedure of the Court of First Instance an applicant is required to state in the application the subject-matter of the proceedings and the form of order sought. Although Article 48(2) of those rules authorises, in certain circumstances, new pleas in law to be introduced in the course of proceedings, the provision cannot in any circumstances be interpreted as authorising the applicant to bring new claims before the Court and thereby to modify the subject-matter of the proceedings. (see para. 28)3. According to Article 74(1) of Regulation No 40/94 on the Community trade mark, in proceedings relating to relative grounds for refusal of registration, the Office for Harmonisation in the Internal Market (Trade Marks and Designs) is to be restricted in this examination to the facts, evidence and arguments provided by the parties and the relief sought. That provision restricts the examination carried out by OHIM in two ways. It relates, first, to the factual basis of decisions of OHIM, that is, the facts and evidence on which those decisions may be validly based, and, second, to the legal basis of those decisions, that is, the provisions which the jurisdiction hearing the case is obliged to apply. Thus the Board of Appeal, when hearing an appeal against a decision terminating opposition proceedings, may base its decision only on the relative grounds for refusal which the party concerned has relied on and the related facts and evidence it has presented. In that respect, whilst it is apparent from Article 74(1) of Regulation No 40/94 that, in the course of opposition proceedings, OHIM cannot examine the facts of its own motion, that does not mean however that it is required to accept that points put forward by one party and not challenged by the other party to the proceedings are established. That provision only binds OHIM with regard to the facts, evidence and observations on which that decision is based. (see paras 32-34)4. For the average consumer in the European Union there is no likelihood of confusion between the word mark MOBILIX, whose registration as a Community trade mark is sought for products and services relating almost exclusively to the telecommunications sector in all its forms falling within Classes 9, 16, 35, 37, 38 and 42 of the Nice Agreement, and the word mark OBELIX, registered earlier as a Community trade mark for products and services in Classes 9, 16, 28, 35, 41 and 42. As regards the conceptual comparison, the words ‘mobilix’ and ‘obelix’ have no meaning in any of the official languages of the European Union. However, whilst the term ‘mobilix’ may readily be perceived as referring to something mobile or to mobility, the term ‘obelix’, even if the name has been registered as a word mark, that is to say with no visual reference to the comic strip character, will readily be associated by the average member of the public with the corpulent character from the comic strip series, widely known throughout the European Union, which tells of his adventures together with Asterix. This specific representation of a popular character makes it extremely unlikely that there could be any confusion in the public mind between words which are more or less similar. Since the sign OBELIX has a clear and specific meaning, the conceptual differences between the signs at issue are capable of counteracting the phonetic similarities and any possible visual similarities. Thus, even if there is a similarity between the goods and services covered by the marks, one of the indispensable conditions for the application of Article 8(1)(b) of Regulation No 40/94 on the Community trade mark is not fulfilled. (see paras 57, 62, 79-81, 86-87)5. When the likelihood of confusion is being assessed for the purposes of Article 8(1)(b) of Regulation No 40/94 on the Community trade mark, conceptual differences between the signs at issue can in certain circumstances counteract the visual and aural similarities between two word marks. For there to be such a counteraction, at least one of the signs at issue must have, from the point of view of the relevant public, a clear and specific meaning so that the public is capable of grasping it immediately. (see para. 80)6. A likelihood of confusion within the meaning of Article 8(1)(b) of Regulation No 40/94 on the Community trade mark presupposes that the signs as well as the goods and services designated are identical or similar, and the reputation of a mark is one factor which must be taken into account when determining whether the similarity between the signs or between the goods and services is sufficient to give rise to a likelihood of confusion. Where, however, the signs at issue cannot be regarded as identical or similar, the fact that the earlier mark is widely known or enjoys a reputation in the European Union cannot alter the overall assessment of the likelihood of confusion. (see para. 84)JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber)27 October 2005 (*) In Case T-336/03,Les Éditions Albert René, established in Paris (France), represented by J. Pagenberg, lawyer, applicant,Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by S. Laitinen, acting as Agent, defendant,the other party to the proceedings before the Board of Appeal of OHIM, intervener before the Court of First Instance, being Orange A/S, established in Copenhagen (Denmark), represented by J. Balling, lawyer, ACTION against the decision of the Fourth Board of Appeal of OHIM of 14 July 2003 (Case R 0559/2002-4) in opposition proceedings between Les Éditions Albert René and Orange A/S, THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Third Chamber), composed of M. Jaeger, President, V. Tiili and O. Czúcz, Judges,Registrar: I. Natsinas, Administrator,having regard to the application lodged at the Court Registry on 1 October 2003,having regard to the response lodged at the Court Registry on 30 July 2004,further to the hearing on 2 June 2005,gives the followingJudgment Background to the dispute1 On 7 November 1997, Orange A/S (‘the trade mark applicant’) filed an application under Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1), as amended, for registration of a Community trade mark at the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (‘OHIM’). 2 The trade mark which it sought to register is the word mark MOBILIX. 3 The goods and services in respect of which registration was sought are, for the purposes of the present action, in Classes 9, 16, 35, 37, 38 and 42 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended, and correspond, for each of those classes, to the following description: – ‘apparatus, instruments and installation for telecommunication, including for telephony, telephones and cellular telephones, including antennae, aerials and parabolic reflectors, accumulators and batteries, transformers and convertors, coders and decoders, coded cards and card for coding, telephone calling cards, signalling and teaching apparatus and instruments, electronic telephone books, parts and accessories (not included in other classes) for the aforementioned goods’, within Class 9; – ‘telephone calling cards’, within Class 16;– ‘telephone-answering service (for temporarily absent subscribers), business management and organisation consulting and assistance, consulting and assistance in connection with attending to business duties’, within Class 35; – ‘telephone installation and repairs, construction, repairs, installation’, within Class 37; – ‘telecommunications, including telecommunications information, telephone and telegraph communications, communications through computer screens and cellular telephones, facsimile transmission, radio and television broadcasting, including through cable television and the Internet, message sending, leasing of message sending apparatus, leasing of telecommunications apparatus, including of telephony apparatus’, within Class 38; – ‘scientific and industrial research, engineering, including projecting facilities and telecommunications installations, particularly for telephony, and computer programming, design, maintenance and updating of software, leasing of computers and computer programs’, within Class 42; 4 The Community trade mark application was published in the Community Trade Marks Bulletin No 1/1999 of 4 January 1999. 5 It was the subject of an opposition filed by Les Éditions Albert René (‘the applicant’) based on the following earlier rights relating to the term ‘obelix’: (a) earlier registered trade mark, protected by registration of Community trade mark No 16 154 of 1 April 1996 in respect of the following goods and services in so far as they are relevant to the present proceedings: – ‘electrical and electronic photographic, cinematographic and optical teaching apparatus and instruments (except projection apparatus) so far as included in Class 9, electronic apparatus for games, with and without screens, computers, program modules and computer programs recorded on data carriers, especially video games’, within Class 9; – ‘paper, cardboard; goods made from paper and cardboard, printed goods (so far as included in Class 16) newspapers and magazines, books, book binding material, namely bookbinding cords, cloth and other materials for bookbinding; photographs; stationery; adhesives (for paper and stationery); artists’ materials, namely goods for drawing, painting and modelling; paint brushes; typewriters and office requisites, (except furniture) and machines for office use (so far as included in Class 16); instructional and teaching material (except apparatus); plastic materials for packaging not included in other classes; playing cards; printers’ type; printing blocks’, within Class 16; – ‘games and playthings; gymnastic and sporting articles (so far as included in Class 28); decorations for Christmas trees’, within Class 28; – ‘marketing and publicity’, within Class 35;– ‘film presentation, film production, film rental; publication of books and magazines; education and entertainment; organisation and presentation of displays and exhibitions; public entertainment, amusement parks, production of live orchestral and spoken-word performances; presentation of reconstructions of historico-cultural and ethnological characters’, within Class 41; – ‘accommodation and catering; p;; hotography; translations; copyright management and exploitation; exploitation of industrial property rights’, within Class 42; (b) earlier well-known mark in all the Member States in respect of goods and services falling within Classes 9, 16, 28, 35, 41 and 42. 6 In support of its opposition, the applicant claimed that there was a likelihood of confusion within the meaning of Article 8(1)(b) and (2) of Regulation No 40/94. 7 By decision of 30 May 2002, the Opposition Division rejected the opposition and authorised the continuation of the procedure for the registration of the application for a Community trade mark. After finding that it had not been conclusively demonstrated that the earlier trade mark was well known, the Opposition Division found that the trade marks were not similar overall, that there was a certain aural similarity but that that was offset by the visual appearance of the trade marks and, more particularly, by the very different concepts which they express: mobile phones in the case of MOBILIX and obelisks in the case of OBELIX. Moreover, the earlier registration is more associated with the famous comic strip, which distinguishes it even more, from the conceptual point of view, from the trade mark applied for. 8 In response to the application filed by the applicant on 1 July 2002, the Fourth Board of Appeal delivered its decision on 14 July 2003 (‘the contested decision’). It partially annulled the decision of the Opposition Division. The Board of Appeal, first of all, stated that the opposition should be regarded as being based exclusively on the likelihood of confusion. It then stated that it was possible to detect a certain similarity between the trade marks. In comparing the goods and services the Board found that ‘the signalling and teaching apparatus and instruments’ of the application for a Community trade mark and ‘the optical and teaching apparatus and instruments’ of the earlier registration falling within Class 9 were similar. It reached the same conclusion in respect of the Class 35 services referred to as ‘business management and organisation consulting and assistance, consulting and assistance in connection with attending to business duties’ in the Community trade mark application and ‘marketing and publicity’ in respect of the earlier registration. The Board found that, given the degree of similarity between the signs in question and between those particular goods and services, there was a likelihood of confusion in the mind of the relevant public. It therefore refused the application for a Community trade mark in respect of ‘signalling and teaching apparatus and instruments’ and services known as ‘business management and organisation consulting and assistance, consulting and assistance in connection with attending to business duties’, and granted it in respect of the remaining goods and services. Forms of order sought by the parties9 The applicant claims that the Court should:– annul the contested decision;– order OHIM to pay the costs.10 At the hearing, the applicant further claimed that the Court should remit the case for hearing by the Board of Appeal. 11 The defendant contends that the Court should:– dismiss the application;– order the applicant to pay the costs. Law12 In support of its action the applicant advances three pleas in law alleging, first, infringement of Article 8(1)(b) and 8(2) of Regulation No 40/94, second, infringement of Article 8(5) of Regulation No 40/94 and, third, infringement of Article 74 of Regulation No 40/94. 1. Admissibility Admissibility of new evidence Arguments of the parties13 The defendant submits that the five documents which the applicant appends to its application to prove that the OBELIX sign is well known were not previously disclosed in the proceedings before OHIM and therefore they should not be taken into account. 14 When questioned by the Court at the hearing, the applicant claimed that the documents in question were admissible. Findings of the Court15 Appended to its application are some documents with which the applicant intends to prove that the sign OBELIX is well known. It is not in dispute that those documents were not disclosed in the course of the earlier proceedings before OHIM. 16 It should be noted that the purpose of an action before the Court of First Instance is to review the legality of decisions of the Boards of Appeal of OHIM within the meaning of Article 63 of Regulation No 40/94 and, in proceedings for annulment, the legality of the contested measure must be assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted (Case T-164/03 Ampafrance v OHIM – Johnson & Johnson (monBéBé) [2005] ECR II-0000, paragraph 29). It is thus not the Court’s function to re-evaluate the factual circumstances in the light of evidence adduced for the first time before it. To admit such evidence is contrary to Article 135(4) of the Rules of Procedure of the Court of First Instance, which prohibits the parties from changing the subject-matter of the proceedings before the Board of Appeal. Accordingly the documents produced for the first time before the Court of First Instance are inadmissible. The admissibility of the plea based on Article 8(5) of Regulation No 40/94 17 The applicant submits that, since OBELIX is a well-known mark, and even a famous one, it is clear from Article 8(5) of Regulation No 40/94 that it is protected, even outside the area of similarity of the goods and services, against use of the distinctive character or the repute or against impairment of the distinctive character or repute, given that it suffices that the applicant’s trade mark has a reputation in respect of some of the goods or services registered. 18 The defendant claims that the applicant errs in alleging that the Board of Appeal infringed Article 8(5) of Regulation No 40/94, and in requesting the Court to make a ruling in an action concerning the application of that provision when that request was not duly submitted during the administrative phase of the proceedings before OHIM. 19 Article 8(5) of Regulation No 40/94 provides that, ‘upon opposition by the proprietor of an earlier trade mark within the meaning of paragraph 2, the trade mark applied for shall not be registered where it is identical with or similar to the earlier trade mark and is to be registered for goods or services which are not similar to those for which the earlier trade mark is registered, where in the case of an earlier Community trade mark the trade mark has a reputation in the Community … and where the use without due cause of the trade mark applied for would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark’. 20 It is common ground in this case that at no time did the applicant request the Board of Appeal to apply that provision and that it therefore did not examine it. The applicant expressly stated before the Board of Appeal that its action was founded on Article 8(1)(b) and 8(2) of Regulation No 40/94. More specifically, although the applicant did invoke the reputation of its earlier trade mark in its opposition to the trade mark application and before the Board of Appeal, this was exclusively within the context of the application of Article 8(1)(b) of that regulation, that is to say, for the purpose of substantiating the likelihood of confusion in the mind of the relevant public. 21 It should also be pointed out, first, that, under Article 74 of Regulation No 40/94, ‘in proceedings relating to relative grounds for refusal of registration, [OHIM] shall be restricted in this examination to the facts, evidence and arguments provided by the parties and the relief sought’. 22 It should, second, be noted that, as stated at paragraph 16 above, the purpose of actions brought before the Court of First Instance is to review the legality of the decisions of the Boards of Appeal within the meaning of Article 63 of Regulation No 40/94 (Case T-237/01 Alcon v OHIM – Dr. Robert Winzer Pharma (BSS) [2003] ECR II-411, paragraph 61; Case T-128/01 DaimlerChrysler v OHIM(Grille) [2003] ECR II-701, paragraph 18; and Case T-129/01 Alejandro v OHIM – Anheuser-Busch (BUDMEN) [2003] ECR II-2251, paragraph 67). The Court’s review of the legality of a decision by a Board of Appeal must therefore be carried out with regard to the issues of law raised before the Board of Appeal (see, to that effect, Case T-194/01 Unilever v OHIM(Ovoid tablet) [2003] ECR II-383, paragraph 16, and Case T-311/01 Éditions Albert René v OHIM – Trucco (Starix) [2003] ECR II-4625, paragraph 70). 23 Furthermore, Article 135(4) of the Rules of Procedure, also referred to at paragraph 16 above, expressly states that ‘[t]he parties’ pleadings may not change the subject-matter of the proceedings before the Board of Appeal’. 24 The applicant cannot therefore argue that the Board of Appeal breached Article 8(5) of Regulation No 40/94 or call on the Court to rule on a request for application of that provision. 25 The present plea must therefore be rejected as inadmissible. The new claim for relief submitted at the hearing26 At the hearing, the applicant claimed in the alternative that the Court should remit the case to the Board of Appeal so that it might demonstrate to the Board that its trade mark had a reputation within the meaning of Article 8(5) of Regulation No 40/94. 27 The defendant contends that that claim is inadmissible. 28 Under Article 44(1) of the Rules of Procedure an applicant is required to state in the application the subject-matter of the proceedings and the form of order sought. Although Article 48(2) of those rules authorises, in certain circumstances, new pleas in law to be introduced in the course of proceedings, the provision cannot in any circumstances be interpreted as authorising the applicant to bring new claims before the Court and thereby to modify the subject-matter of the proceedings (Case 232/78 Commission v France [1979] ECR 2729, paragraph 3, and Case T-3/99 Banatrading v Council [2001] ECR II-2123, paragraph 28). 29 It follows that the applicant is not entitled to bring new claims before the Court thereby modifying the subject-matter of the proceedings. The claim to the relief in question can therefore only be rejected as inadmissible. 2. Merits The breach of Article 74 of Regulation No 40/9430 The applicant submits that the trade mark applicant did not challenge its assertion made during the opposition proceedings that its OBELIX trade mark is distinctive. According to the applicant, in the absence of a challenge, the Board of Appeal should have started from the principle that OBELIX – the trade mark of the opposing party – has a reputation. It concludes from this that the Board of Appeal breached Article 74(1) of Regulation No 40/94. 31 The defendant submits that the Opposition Division of OHIM thoroughly evaluated the evidence adduced and arrived at the conclusion that it did not suffice to show either that the unregistered sign was well known or that the registered one enjoyed enhanced distinctiveness. Accordingly, the applicant’s first plea in law must be declared manifestly unfounded. 32 As noted in paragraph 22 above, according to Article 74(1) of Regulation No 40/94, in proceedings relating to relative grounds for refusal of registration, OHIM is to be restricted in this examination to the facts, evidence and arguments provided by the parties and the relief sought. 33 That provision restricts the examination carried out by OHIM in two ways. It relates, first, to the factual basis of decisions of OHIM, that is, the facts and evidence on which those decisions may be validly based (see, to that effect, Case T-232/00 Chef Revival USA v OHIM – Massagué Marín (Chef) [2002] ECR II-2749, paragraph 45), and, second, to the legal basis of those decisions, that is, the provisions which the jurisdiction hearing the case is obliged to apply. Thus the Board of Appeal, when hearing an appeal against a decision terminating opposition proceedings, may base its decision only on the relative grounds for refusal which the party concerned has relied on and the related facts and evidence it has presented (Case T-308/01 Henkel v OHIM – LHS (UK) (KLEENCARE) [2003] ECR II-3253, paragraph 32, and Case T-185/02 Ruiz-Picasso and Others v OHIM – DaimlerChrysler (PICARO) [2004] ECR II-0000, paragraph 28). 34 In that respect, whilst it is apparent from Article 74(1) of Regulation No 40/94 that, in the course of opposition proceedings, OHIM cannot examine the facts of its own motion, that does not mean however that it is required to accept that points put forward by one party and not challenged by the other party to the proceedings are established. That provision only binds OHIM with regard to the facts, evidence and observations on which that decision is based. 35 In the present case the applicant put forward before OHIM a particular legal assessment but neither the Opposition Division nor the Board of Appeal found that the applicant had substantiated that assessment conclusively by facts or evidence. They concluded from this that the facts and evidence were not sufficient to prove the legal assessment in question, namely that the unregistered sign was well known and that the registered sign was highly distinctive. 36 Consequently, the applicant’s plea in law alleging infringement of Article 74 of Regulation No 40/94 must be declared unfounded. Article 8(1)(b) and (2) of Regulation No 40/9437 First, as regards the comparison of the goods and services, the applicant submits that the goods covered by the trade mark applied for and falling within Class 9, other than ‘signalling and teaching apparatus’ are also largely similar at least to those covered by the applicant’s opposing trade mark which fall within Class 9. 38 It submits that all of the remaining goods covered by the trade mark applied for which fall within Class 9, like ‘apparatus, instruments and installation for telecommunication, including for telephony, telephones and cellular telephones, including antennae, aerials and parabolic reflectors, accumulators and batteries, transformers and convertors, coders and decoders, coded cards and card for coding, telephone calling cards, electronic telephone books, parts and accessories (not included in other classes) for the aforementioned goods’ include essential constituent parts of the applicant’s goods. Thus, the trade mark applicant’s digital cellular telephones and telephones appear in the applicant’s program modules. As the list of the trade mark applicant’s goods also includes parts and accessories for its main products, the trade mark applicant’s program modules and parts are even identical. 39 According to the applicant, the same applies to the trade mark applicant’s other goods such as ‘apparatus, instruments and installation for telecommunication, including for telephony, coders and decoders’, because they too contain program modules. Added to that is the fact that those goods covered by the trade mark application which fall within Class 9 are essentially controlled by a processor and so could be controlled by software. The list of its goods includes software programs. It concludes from this that the Class 9 goods referred to in the trade mark application and its own goods falling within that class are not remotely similar but averagely so. 40 Next, the applicant submits that the trade mark applicant’s telephone calling cards, which fall within Class 16, are coded telephone calling cards. According to a judgment of the German Federal Patents Court of 7 July 1997, they are similar to the applicant’s goods known as ‘computer programs recorded on data carriers’. 41 The applicant further points out that the Board of Appeal found that the other services of the trade mark applicant were not similar to its goods, namely: – ‘telephone-answering service (for temporarily absent subscribers)’, within Class 35;– ‘telephone installation and repairs, construction, repairs, installation’, within Class 37;– ‘scientific and industrial research, engineering, including projecting facilities and telecommunications installations, particularly for telephony, and computer programming, design, maintenance and updating of software, leasing of computers and computer programs’, within Class 42. 42 It submits that the principles developed by case-law applicable to the similarity between goods apply by analogy to the relationship between goods and services and vice versa. The decisive point is to determine whether, where similar signs are used, the persons concerned are likely to be misled as to the place of origin of the goods and services. 43 Applying those principles, it must be accepted that there is a similarity between the trade mark applicant’s services referred to above and the applicant’s goods because manufacturers of goods such as ‘computers, program modules and computer programs recorded on data carriers’ also cover the trade mark applicant’s corresponding services. Citing a decision of the German Federal Patents Court, the applicant concludes that the trade mark applicant’s services falling within Class 38 and its own goods falling within Class 9 are similar since a significant part of the public concerned might believe that the manufacturers and distributors of data-processing equipment also supply the corresponding telecommunications services if the trade mark is the same. 44 The applicant submits that it must be accepted, for the same reasons, that the trade mark applicant’s services within Classes 35, 37 and 42 and its own goods within Class 9 are similar. Those services, such as ‘telephone-answering service (for temporarily absent subscribers)’ and ‘telephone installation and repairs, construction, repairs, installation’, are also, it submits, provided by manufacturers of computer hardware and operated by software. 45 The same applies by analogy in respect of the following services of the trade mark applicant: ‘Scientific and industrial research, engineering, including projecting facilities and telecommunications installations, particularly for telephony, and computer programming, design, maintenance and updating of software, leasing of computers and computer programs’. According to the applicant, scientific and industrial research, engineering, including projecting facilities and telecommunications installations is an area which in technical as well as economic terms is so close to computer hardware and software that the idea has become accepted by the trade or at least by some of the key players that the manufacturers or distributors of data processing equipment also operate, for example, in the area of projecting the corresponding telecommunications service, provided that the same trade mark is used. 46 The applicant states that it does not understand the Board of Appeal’s argument that there is no similarity between the trade mark applicant’s services consisting of ‘the leasing of computers and computer programs’ and its own goods called ‘computers and computer programs recorded on data carriers’. A quick search on the internet suffices to show that the distributors of computers also provide facilities for leasing them. The same applies to software. 47 Second, as regards comparison of the signs, the applicant submits that the two signs OBELIX and MOBILIX are very similar. Since OBELIX is protected for the whole of the internal market, it is necessary in particular to have regard to the way in which the trade marks are understood in that market on the basis of their aural and conceptual impression and to take account of market conditions and consumer habits in that market. 48 The applicant submits that it is above all necessary to take account of the fact that consumers consider the two signs to be trisyllabic trade marks with the accent on the same syllables and in which the sequence of consonants is the same and the sequence of vowels almost so, since the ‘e’ and ‘i’ sounds are very similar. The sole difference is the initial ‘m’ of the trade mark applicant’s mark which, by reason of its weak sound, could however easily be missed by the listener in circumstances where the noise level is quite high. 49 The applicant submits that it is the overall impression which matters and that it is the visual memory which is most often decisive. A purchaser who only vaguely recollects the trade mark OBELIX would believe that he recognises in the similar sign MOBILIX the trade mark which he already knows, and would confuse the companies which make the goods. 50 Third, as regards the likelihood of confusion, the applicant submits that if account is taken of the interdependence between the similarity between the goods, the similarity between the trade marks and the distinctiveness of the applicant’s opposing trade mark, the differences between the trade marks in the case of identical goods and services and, to a large extent, of similar goods and services are not enough to prevent, in particular, auditory confusion given that the opposing party’s trade mark is well known. 51 The applicant submits that the trade mark OBELIX forms part of a family of trade marks which also comprises the trade marks inspired by other characters from the ‘Asterix’ series and which is protected in 50 countries throughout the world. The harm to the distinctive character arises from the fact, first, that an attempt has been made to refer to the model of repute by an accumulation of auditory, visual and conceptual factors and that, second, use has knowingly been made in the present case, without any plausible linguistic reason, of a characteristic feature which exists for the series of trade marks arising from the ‘Asterix’ family: the ‘ix’ suffix. It is entirely conceivable that the term ‘mobilix’ would insinuate itself into that family of trade marks and that it would be understood as a derivation of the term ‘obelix’. 52 The defendant submits that there is no likelihood of confusion in the mind of the relevant public. The clear visual difference and the particularly marked conceptual difference between the signs makes up for any auditory resemblance, even for the goods and services which are slightly similar. 53 Under Article 8(1)(b) of Regulation No 40/94, upon opposition by the proprietor of an earlier trade mark, the trade mark applied for is not to be registered if because of its identity with or similarity to the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected. The likelihood of confusion includes the likelihood of association with the earlier trade mark. In addition, ‘earlier trade marks’ include Community trade marks with a date of application for registration which is earlier than the date of application for registration of the Community trade mark (Article 8(2)(a)(i) of Regulation No 40/94). 54 According to settled case-law, the risk that the public might believe that the goods or services in question come from the same undertaking or from economically-linked undertakings constitutes a likelihood of confusion. 55 According to the same line of case-law, the likelihood of confusion must be assessed globally by reference to the perception which the relevant public has of the signs and of the goods or services in question, taking into account all factors relevant to the circumstances of the case, in particular the interdependence between the similarity of the signs and that of the goods or services designated (see Case T-162/01 Laboratorios RTB v OHIM – Giorgio Beverly Hills (GIORGIO BEVERLY HILLS) [2003] ECR II-2821, paragraphs 31 to 33, and the case-law cited). 56 In the present case, the earlier rights were invoked relating to the term ‘obelix’, corresponding to a Community trade mark and a well known trade mark in all the Member States. 57 Furthermore, the large majority of the goods and services in question are everyday consumer goods and services. In the trade mark application, it is only the services falling within Class 42 (scientific and industrial research etc.) which are intended for a specialist public. Consequently, the target public in relation to which the likelihood of confusion should be assessed is the average consumer of those goods and services in the European Union who is reasonably well informed and reasonably observant and circumspect. 58 It is in the light of those considerations that an examination should be made of the comparison by the Board of Appeal of the goods in question and of the opposing signs. – The comparison of the goods59 In assessing the similarity of the goods or services in question, all the relevant factors relating to the link between those goods or services should be taken into account. Those factors include, inter alia, their nature, their intended purpose, their method of use and whether they are in competition with each other or are complementary (see, by analogy, Case C-39/97 Canon [1998] ECR I-5507, paragraph 23). 60 As to the goods in Classes 9 and 16 in respect of which registration is sought, such as ‘apparatus, instruments and installation for telecommunication’, ‘cellular telephones’, ‘coders and decoders’, etc., the applicant essentially submits that they all contain essential components of the goods covered by the trade mark. 61 The applicant’s arguments can only be rejected. It is true that computers in different forms are necessary for the proper operation of ‘instruments and installations for telecommunication’ and ‘telephone-answering service (for temporarily absent subscribers)’ may occasionally be supplied by the body which manufactures the necessary equipment, but that is not enough to conclude that those goods and services are similar, still less ‘very similar’. The mere fact that a particular good is used as a part, element or component of another does not suffice in itself to show that the finished goods containing those components are similar since, in particular, their nature, intended purpose and the customers for those goods may be completely different. 62 Furthermore, it is clear from the list of goods and services falling within Class 9 covered by the earlier registration that the sectors covered by that right are photography, cinema, optics, teaching and video games. That list of goods and services is close to that which is claimed in the Community trade mark application, which shows that the sector in question is, almost exclusively, telecommunications of all forms. Telecommunications equipment falls within the category of ‘apparatus for recording, transmission or reproduction of sound and/or images’, which forms part of the official title of Class 9 of the Nice Agreement. However, that part of the class title (‘telecommunications’) was not claimed in the earlier right, which implies that telecommunications equipment was not intended to be covered. The applicant registered its trade mark in respect of a large number of classes, but it did not refer to ‘telecommunications’ in the specification and it even excluded the whole of Class 38 from the registration. Class 38 concerns precisely ‘telecommunications’ services. 63 The Court shares the view of the Board of Appeal that the earlier registration protects ‘electrotechnical apparatus and instruments, electronics’, but that that wide formulation cannot be used by the applicant as an argument for finding that the goods are very similar, still less that they are identical to the goods referred to in the application, when specific protection of telecommunications apparatus and instruments could have been easily obtained. 64 Consequently, the Board of Appeal did not err in finding that the goods referred to in the Community trade mark application falling within Classes 9 and 16 should not be regarded as included in the list of goods and services, drafted in wide terms, in the earlier registration. 65 Next, the applicant submits in respect of the services covered by the Community trade mark application and included in Classes 35, 37, 38 and 42 that, contrary to the findings of the Board of Appeal, those goods are also similar to its own because the manufacturers of goods such as ‘computers, program modules and computer programs recorded on data carriers’ also provide the services for which registration was sought. Citing a decision of the German Federal Patents Court, the applicant concludes that the trade mark applicant’s services falling within Class 38 and its own goods falling within Class 9 are similar since a significant part of the public concerned might believe that the manufacturer and distributors of data-processing equipment also supply the corresponding telecommunications services if the trade mark used is the same. Furthermore, the applicant submits that that observation also applies in respect of the services included in Classes 35 and 37, as services such as ‘telephone-answering service’ (Class 35) and ‘telephone installation and repairs’ (Class 37) are sometimes provided by the manufacturers of the computer hardware used and sometimes operated by means of software. In the case of services entitled ‘scientific and industrial research, engineering, including projecting facilities and telecommunications installations’ within Class 42, the applicant submits that they are so closely linked to the computer hardware and software sector that the public might believe that they come from the same manufacturers or distributors. Lastly, as regards the ‘leasing of computers and computer programs’ (Class 42), included in the Community trade mark application, the applicant disputes the finding of the Board that such services differ from ‘computers’ and ‘computer programs recorded on data carriers’. 66 As a preliminary point, it should be noted that the principles applicable to the comparison of the goods also apply to the comparison between the services and between the goods and services. It is true as the defendant points out that, by reason of their very nature, goods are generally different from services, but it nevertheless remains the case that they can be complementary, in the sense that, for example, the maintenance of the goods complements the goods themselves, or that services may have the same purpose or use as the goods, and thus compete with each other. It follows that, in certain circumstances, even goods and services may be found to be similar. 67 In the present case, as regards, first, the services referred to in the trade mark application within Classes 37 and 42, the Board of Appeal’s position that they cannot be regarded as similar to the services covered by the earlier registration cannot be criticised. The applicant’s services included in Class 42 (‘accommodation and catering; photography; translations; copyright management and exploitation; exploitation of industrial property rights’) are unrelated to the services entitled ‘scientific and industrial research, engineering, including projecting facilities and telecommunications installations, particularly for telephony, and computer programming, design, maintenance and updating of software, leasing of computers and computer programs’, also included in Class 42, in respect of which protection is sought. That conclusion also applies to the services covered by the trade mark application included in Class 37, namely ‘telephone installation and repairs, construction, repairs, installation’. 68 Second, the Board of Appeal did not err when it asserted that the services listed in the Community trade mark application under Class 38 (as described in paragraph 3 above) are sufficiently different from those covered by the earlier registration and included in Class 41 (as described in paragraph 5 above), given their technical nature, the skills required to offer them and the needs of the consumers which they are intended to satisfy. Consequently, the services appearing in the trade mark application included in Class 38 are at most slightly similar to the services falling within Class 41 protected by the earlier right. 69 Next, the Court must reject the applicant’s argument that all the goods and services covered by the Community trade mark application are linked, in one way or another, to ‘computers’ and ‘computer programs’ (Class 9) covered by the earlier trade mark. As the defendant rightly points out, in today’s high-tech society, almost no electronic or digital equipment functions without the use of computers in one form or another. To acknowledge similarity in all cases in which the earlier right covers computers and where the goods or services covered by the mark applied for may use computers clearly exceeds the scope of the protection granted by the legislature to the proprietor of a trade mark. Such a position would lead to a situation in which the registration of computer hardware or software would in practice exclude subsequent registration of any type of electronic or digital process or service exploiting that hardware or software. That exclusion is not in any event legitimate in the present case, since the Community trade mark application is exclusively for telecommunications in their various forms, whereas the earlier registration makes no reference to any activity in that sector. Furthermore, as the Board of Appeal rightly pointed out, there is nothing to stop the applicant from also registering its trade mark in respect of telephony. 70 Consequently, it must be found that the goods and services in question are not similar. There is however one exception. The ‘leasing of computers and computer programs’ which appears in the Community trade mark application (Class 42) and the applicant’s ‘computers’ and ‘computer programs recorded on data carriers’ (Class 9) are similar by reason of their complementarity. 71 It follows from the foregoing that the Court must reject the applicant’s arguments in respect of the comparison of the goods and services, with the exception of that in respect of the similarity between the ‘leasing of computers and computer programs’ which appears in the Community trade mark application (Class 42) and the applicant’s ‘computers’ and ‘computer programs recorded on data carriers’ (Class 9). – The comparison of the signs72 It is clear from established case-law that the global assessment of the likelihood of confusion, as far as concerns the visual, aural or conceptual similarity of the marks at issue, must be based on the overall impression given by the marks, bearing in mind, inter alia, their distinctive and dominant components (see Case T-292/01 Phillips-Van Heusen v OHIM – Pash Textilvertrieb und Einzelhandel (BASS) [2003] ECR II-4335, paragraph 47, and the case-law cited). 73 The applicant considers that the two signs OBELIX and MOBILIX are very similar. Visually, they are almost the same length and have a similar sequence of letters and, aurally, they sound very similar. Given that the initial letter ‘m’ of the mark applied for produces a weak sound, it is moreover likely that it would be misheard in a noisy environment. 74 In the contested decision, the Board of Appeal found that the signs in question were similar. It stated that the two signs were composed of the same number of syllables, the same sequence of consonants B-L-X, a similar sequence of vowels O-I (or E)-I and were of the same length. Those common characteristics give the general impression of similarity. That impression is stronger aurally but is also appreciable visually, particularly given the ‘ix’ suffix. Lastly, it concluded that whilst the conceptual differences between the two trade marks were not negligible, they did not offset the visual and aural similarities. 75 First, as regards the visual comparison it should be found at the outset that the trade marks in question are both word marks. MOBILIX is made up of seven letters and the earlier trade mark OBELIX of six letters. Although they have in common the ‘OB’ combination of letters and the ‘LIX’ ending, they have a number of significant visual differences, such as the letters following ‘OB’ (‘E’ in the first case and ‘I’ in the second), the beginning of the words (the Community trade mark applied for begins with ‘M’ and the earlier trade mark with ‘O’) and their length. It should be noted in this regard that the attention of the consumer is usually directed to the beginning of the word (Joined Cases T-183/02 and T-184/02 El Corte Inglés v OHIM – González Cabelloand Iberia Líneas Aéreas de España(MUNDICOR) [2004] ECR II-0000, paragraph 83). 76 Consequently, it must be concluded that the signs in question are not visually similar or that, at most, they are visually very slightly similar. 77 Second, as regards the aural comparison, it should be noted that the two trade marks are pronounced with three syllables, O-BE-LIX and MO-BIL-IX or MO-BI-LIX. It is true that the first syllable of the Community trade mark applied for, ‘MO’, is clearly pronounced, which helps to distinguish the marks in question, but it should not be forgotten that the initial ‘M’, because weakly voiced, may nevertheless sometimes be missed by the listener. Furthermore, the second and third syllables are pronounced in a very similar way, and indeed identically in the case of the third syllable. 78 Given those factors, it must be found that the signs in question have a certain aural similarity. 79 Third, as regards the conceptual comparison, it should be noted that the words ‘mobilix’ and ‘obelix’ have no meaning in any of the official languages of the European Union. However, whilst the term ‘mobilix’ may readily be perceived as referring to something mobile or to mobility, the term ‘obelix’, even if the name has been registered as a word mark, that is to say with no visual reference to the comic strip character, will readily be identified by the average member of the public with the corpulent character from the comic strip series, widely known throughout the European Union, which tells of his adventures together with Asterix. This specific representation of a popular character makes it extremely unlikely that there could be any confusion in the public mind between words which are more or less similar (Starix, paragraph 22 above, paragraph 58). 80 Such conceptual differences can in certain circumstances counteract the visual and aural similarities between the signs concerned. For there to be such a counteraction, at least one of the signs at issue must have, from the point of view of the relevant public, a clear and specific meaning so that the public is capable of grasping it immediately (BASS, paragraph 72 above, paragraph 54, and PICARO, paragraph 33 above, paragraph 56). In the present case, this is so for the word sign OBELIX, as has just been pointed out in the previous paragraph. 81 It follows that the conceptual differences separating the signs at issue are, in the present case, such as to counteract the aural similarities and any visual similarities noted above. 82 With regard to the assessment of the likelihood of confusion, it should be observed that the differences between the signs in question are sufficient to rule out any likelihood of confusion in the perception of the target public. Such a likelihood would presuppose that both the degree of similarity of the trade marks in question and that of the goods or services designated by those marks were sufficiently high (Starix, paragraph 22 above, paragraph 59). 83 In those circumstances, the Board of Appeal’s assessment of the distinctiveness of the earlier trade mark and the applicant’s claims as to the reputation of that trade mark have no bearing on the application of Article 8(1)(b) of Regulation No 40/94 in the present case (see, to that effect, Starix, paragraph 22 above, paragraph 60). 84 A likelihood of confusion presupposes that the signs as well as the goods and services designated are identical or similar, and the reputation of a mark is one factor which must be taken into account when determining whether the similarity between the signs or between the goods and services is sufficient to give rise to a risk of confusion (see, to that effect and by analogy, Canon, paragraph 59 above, paragraph 22 and 24). Since, however, in the present case, the signs in dispute cannot be regarded as identical or similar, the fact that the earlier mark is widely known or enjoys a reputation in the European Union cannot alter the overall assessment of the likelihood of confusion (see to that effect, Starix, paragraph 22 above, paragraph 61). 85 Lastly, the Court must reject the applicant’s argument that, because of the ‘ix’ suffix, it is entirely conceivable that the term ‘mobilix’ would insinuate itself into the family of trade marks made up of the characters from the ‘Asterix’ series and that it would be understood as a derivation of the term ‘obelix’. It suffices to note in that regard that the applicant cannot claim an exclusive right to the use of the ‘ix’ suffix. 86 It is clear from the foregoing that one of the essential conditions for applying Article 8(1)(b) of Regulation No 40/94 has not been satisfied. It therefore follows that the Board of Appeal was right in finding that there is no likelihood of confusion between the mark claimed and the earlier mark. 87 In those circumstances, the plea alleging an infringement of that provision must be rejected and it is not necessary to examine the applicant’s arguments under that plea regarding the alleged reputation of the earlier trade mark. Similarly, there is no need to accede to the applicant’s request for witnesses to be heard in order to demonstrate that reputation. Lastly, it is also apparent that the finding that the ‘leasing of computers and computer programs’ which appears in the Community trade mark application (Class 42) and the applicant’s ‘computers’ and ‘computer programs recorded on data carriers’ (Class 9) (see paragraph 71 above) is irrelevant. 88 Accordingly, the action brought by the applicant must be dismissed. Costs89 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, as applied for by OHIM. On those grounds,THE COURT OF FIRST INSTANCE (Third Chamber)hereby:1. Dismisses the action;2. Orders the applicant to pay the costs. JaegerTiiliCzúczDelivered in open court in Luxembourg on 27 October 2005.E. Coulon M. JaegerRegistrar President* Language of the case: English. | 8ef85-ecf7afe-4db0 | EN |
THE COURT OF FIRST INSTANCE CONFIRMS THE COMMISSION'S DECISION THAT THERE WAS A CARTEL CONTRARY TO COMMUNITY LAW IN THE BELGIAN BEER MARKET | Groupe DanonevCommission of the European Communities(Competition – Cartels – Fines – Guidelines on the method of setting fines – Leniency Notice)Judgment of the Court of First Instance (Fifth Chamber), 25 October 2005 Summary of the Judgment1. Competition – Administrative procedure – Access to the file – Purpose – Observance of the rights of the defence – Scope – Inculpatory evidence – Exclusion of evidence that was not disclosed (Art. 81(1) EC)2. Competition – Administrative procedure – Access to the file – Documents not included in the investigation file – Documents capable of assisting the defence of the parties – Obligation of the parties to ask for them to be made available 3. Competition – Administrative procedure – Observance of the rights of the defence – Statement of objections – Necessary content (Council Regulation No 17)4. Competition – Fines – Amount – Determination – Rights of the defence – Judicial review – Unlimited jurisdiction of the Community judicature (Art. 229 EC; Council Regulation No 17, Art. 17)5. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Aggravating circumstances – Obligation of the Commission to adhere to its previous decision-making practice – None (Council Regulation No 17, Art. 15(2))6. Competition – Administrative procedure – Observance of the rights of the defence – Access to the file – Scope – Inculpatory evidence provided orally by a third party – Obligation to make it available to the undertaking concerned, if necessary by creating a written document 7. Competition – Fines – Amount – Whether appropriate – Judicial review – Information which may be taken into account by the Community judicature – Information not contained in the decision imposing the fine and not required by the duty to state reasons – Included (Arts 229 EC, 230 EC and 253 EC; Council Regulation No 17, Art. 17)8. Acts of the institutions – Statement of reasons – Obligation – Scope – Decision imposing fines – Indication of the factors which led the Commission to assess the gravity and the duration of the infringement – Sufficient indication(Art. 253 EC; Council Regulation No 17, Art. 15(2), second para.; Commission Communications 96/C 207/04 and 98/C 9/03)9. Competition – Agreements, decisions and concerted practices – Definition of the market – Object – Determination of the effect on trade between Member States10. Competition – Community rules – Infringements – Fines – Determination – Criteria – Raising of the general level of fines – Whether permissible – Conditions 11. Competition – Fines – Amount – Determination – Method of calculation laid down by the guidelines drawn up by the Commission – Obligation of the Commission to comply with them – Consequences – Obligation to state reasons in respect of each infringement(Council Regulation No 17, Art. 15(2); Commission Communication 98/C 9/03)12. Competition – Fines – Amount – Determination – Infringements classified as very serious on the basis of their nature alone – No requirement to determine their impact and their geographical extent 13. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Taking into account of the overall turnover of the undertaking concerned and the turnover achieved from sales of the goods in respect of which the infringement was committed – Limits 14. Competition – Agreements, decisions and concerted practices – Participation in meetings of undertakings having an anti-competitive object – Evidence from which, where the undertaking concerned has not distanced itself from the decisions adopted, it may be concluded that it participated in the ensuing cartel – Participation allegedly under pressure – Matter not providing a justification for an undertaking which did not make use of the possibility of lodging a complaint with the competent authorities (Art. 81(1) EC; Council Regulation No 17, Art. 3)15. Competition – Fines – Amount – Determination – Criteria – Gravity of infringements coupled with the taking into account of a deterrent effect 16. Competition – Administrative procedure – Commission decision finding an infringement adopted after another Commission decision referring to the same undertaking – No identity of the infringements forming the subject-matter of the two decisions – Breach of the principle ‘ non bis in idem’ – None 17. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Assessment in the light of the absolute value of the sales concerned – Whether permissible18. Competition – Administrative procedure – Commission decision finding an infringement – Evidence which must be gathered – Degree of evidential value required19. Community law – Principles – Fundamental rights – Presumption of innocence – Procedure in competition matters – Whether applicable20. Competition – Fines – Amount – Determination – Criteria – Gravity and duration of the infringement – Infringement committed by several undertakings – Gravity to be assessed individually 21. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Aggravating circumstances – Threat of reprisals by one undertaking against another 22. Competition – Administrative procedure – Commission decision finding an infringement – Use as evidence of statements of other undertakings which participated in the infringement – Whether permissible – Conditions (Arts 81 EC and 82 EC)23. Competition – Fines – Amount – Determination – Introduction of guidelines by the Commission – Method of calculation based on the inherent gravity and the duration of the infringement and complying with the maximum limit based on the turnover of each undertaking – Whether lawful24. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Aggravating circumstances – Recidivism – Meaning 25. Competition – Fines – No infringement of the principle of legal certainty where a limitation period has not been laid down (Council Regulation No 17, Art. 15; Commission Communication 98/C 9/03)26. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Attenuating circumstances – Agreement not implemented in practice – Assessment at the level of the individual conduct of each undertaking (Council Regulation No 17, Art. 15)27. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Attenuating circumstances – Absence of measures to monitor the implementation of the cartel – Not included 28. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Attenuating circumstances – Financial situation of the undertaking concerned – Not included 29. Competition – Fines – Amount – Determination – Non-imposition or reduction of the fine in return for the cooperation of the undertaking concerned – Need for conduct which assisted the Commission to ascertain the infringement – Information concerning acts which could not give rise to fines under Regulation No 17 – Not to be taken into account(Council Regulation No 17, Arts 11(4), (5), and 15; Commission Communication 96/C 207/04)30. Competition – Fines – Amount – Determination – Criteria – Attitude of the undertaking during the administrative procedure – Appraisal of the extent of the cooperation shown by each of the undertakings participating in the cartel – Respect for the principle of equal treatment – Different degrees of cooperation justifying different treatment (Council Regulation No 17, Art. 15(2); Commission Communication 96/C 207/04)31. Competition – Fines – Amount – Determination – Non-imposition or reduction of the fine in return for the cooperation of the undertaking concerned – Reduction for not disputing the facts – Conditions (Council Regulation No 17, Art. 15(2); Commission Communication 96/C 207/04, Section D 2)1. The right of access to the file in competition cases is intended, in particular, to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission’s file so that, on the basis of that evidence, they can express their views effectively on the conclusions reached by the Commission in its statement of objections. Access to the file is thus one of the procedural safeguards intended to protect the rights of the defence and to ensure, in particular, that the right to be heard can be exercised effectively. The Commission is thus under a duty to make available to the undertakings involved in proceedings under Article 81(1) EC all documents, whether in their favour or otherwise, which it has obtained during the course of the investigation, save where the business secrets of other undertakings, the internal documents of the institution or other confidential information are involved If the Commission is found to have relied in the contested decision on inculpatory documents that were not in the investigation file and were not disclosed to the applicant, those documents should be excluded as evidence. (see paras 33-35, 65)2. In the administrative procedure in competition matters, where documents which might have contained exculpatory evidence are contained in the Commission’s investigation file, any finding of an infringement of the rights of the defence is unconnected with the manner in which the undertaking concerned conducted itself during the administrative procedure and with the question whether that undertaking was obliged to ask the Commission for access to its file or have it send particular documents to it. By contrast, where documents which might have contained exculpatory evidence are not in the Commission’s investigation file, the undertaking concerned must expressly ask the institution for access to those documents, and failure to do so during the administrative procedure will mean that its right in that respect is barred in any action for annulment which may be brought against the final decision. (see paras 36-37, 42, 79)3. Where the Commission expressly states in its statement of objections that it will consider whether it is appropriate to impose fines on the undertakings concerned and it also indicates the main factual and legal criteria capable of giving rise to the imposition of a fine, such as the gravity and the duration of the alleged infringement and whether that infringement was committed intentionally or negligently, it fulfils its obligation to respect the undertakings’ right to be heard. In doing so, it provides them with the necessary means to defend themselves not only against the finding of an infringement but also against the imposition of fines. (see para. 50)4. So far as the setting of the amount of the fines imposed for infringement of the competition rules is concerned, the rights of defence of the undertakings in question are guaranteed before the Commission by virtue of the fact that they have the opportunity to make submissions on the duration, the gravity and the foreseeability of the anti-competitive nature of the infringement. Moreover, undertakings have an additional guarantee, as regards the setting of the amount of the fine, in that the Court of First Instance has, pursuant to Article 17 of Regulation No 17, unlimited jurisdiction within the meaning of Article 229 EC in proceedings brought against decisions in which the Commission has fixed the amount of a fine and may, accordingly, cancel, reduce or increase the fine imposed. In the exercise of its unlimited jurisdiction, the Court must consider whether the amount of the fine imposed is proportionate to the gravity and duration of the infringement and must weigh the seriousness of the infringement with the circumstances invoked by the undertaking. (see paras 51, 136)5. The mere fact that the Commission has found in its previous decisions that certain factors did not constitute an aggravating circumstance for the purpose of determining the amount of the fine does not mean that it is obliged to do so also in a subsequent decision. Moreover, the opportunity afforded to an undertaking in another case to make known its views on the intention to make a finding of repeated infringement on its part does not mean that the Commission is obliged to do the same in all cases, or that, where such an opportunity is not afforded, the undertaking concerned is prevented from fully exercising its right to be heard. (see paras 57, 153, 395)6. There is no general duty on the part of the Commission to draw up minutes of discussions which it has had, in the course of the application of the Treaty’s competition rules, with some only of the participants in an infringement in meetings held with them. However, the absence of such an obligation does not mean that the Commission is relieved of the obligations incumbent on it as regards access to the file. The practice of using information provided orally by third parties cannot be permitted to infringe the rights of the defence. Thus, if the Commission intends to use in its decision inculpatory evidence provided orally by another party it must make it available to the undertaking concerned so as to enable the latter to comment effectively on the conclusions reached by the Commission on the basis of that evidence. Where necessary, it must create a written document to be placed in the file. (see paras 66-67)7. The Court of First Instance has jurisdiction in two respects over actions contesting Commission decisions imposing fines on undertakings for infringement of the competition rules. First, under Article 230 EC, it has the task of reviewing their legality. In that context, it must in particular review compliance with the duty to state reasons laid down in Article 253 EC, infringement of which renders a decision liable to annulment. Secondly, the Court has power to assess, in the exercise of the unlimited jurisdiction accorded to it by Article 229 EC and Article 17 of Regulation No 17, the appropriateness of the amounts of fines. That assessment may justify the production and taking into account of additional information which the duty to state reasons laid down under Article 253 EC does not as such require to be set out in the contested decision. (see para. 95)8. The scope of the duty to state reasons as it applies to the setting of a fine imposed for infringement of the Community competition rules falls to be fixed having regard to the terms of the second subparagraph of Article 15(2) of Regulation No 17, which states that ‘in fixing the amount of the fine, regard shall be had both to the gravity and the duration of the infringement’. The essential procedural requirement to state reasons is satisfied where the Commission indicates in its decision the factors which enabled it to determine the gravity of the infringement and its duration. Furthermore, the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, and the Notice on cooperation in cartel cases, indicate what factors the Commission is to take into consideration in measuring the gravity and duration of an infringement. That being so, the essential procedural requirement to state reasons is satisfied where the Commission indicates in its decision the factors which it took into account in accordance with the Guidelines and, where appropriate, the Leniency Notice and which enabled it to determine the gravity of the infringement and its duration for the purpose of calculating the amount of the fine. (see para. 97)9. For the purposes of applying Article 81(1) EC, the reason for defining the relevant market is to determine whether an agreement is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market. Consequently, there is an obligation on the Commission to define the market in a decision applying Article 81(1) EC only where it is impossible, without such a definition, to determine whether the agreement, decision by an association of undertakings or concerted practice at issue is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market. (see para. 99)10. In the context of Regulation No 17, the Commission possesses a wide margin of discretion when setting fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules. The fact that in the past the Commission applied fines of a certain level to certain types of infringement does not mean that it is estopped from raising that level, within the limits set out in Regulation No 17, if that is necessary in order to ensure the implementation of Community competition policy. On the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy. (see paras 134-135, 154, 395, 407, 415)11. Given that the Commission has adopted the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, which are consistent with the Treaty and are designed to specify the criteria which it intends to apply in the exercise of its discretion, it has limited that discretion in that it must comply with the guidelines which it has imposed upon itself. In determining the gravity of infringements once guidelines are adopted, the Commission is thus obliged to take into account, amongst other factors, the matters referred to in those guidelines, save where it specifically sets out the reasons justifying, should the case arise, its departure from them in a specific area. (see para. 138)12. The Commission indicated in the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty that horizontal restrictions such as price cartels and market-sharing quotas or other practices which jeopardise the proper functioning of the single market will more often than not be classified as very serious infringements. It follows from that indicative description that agreements or concerted practices involving in particular price-fixing and customer-sharing may be classified in that way on the basis of their nature alone, without it being necessary for such conduct to have a particular impact or cover a particular geographic area. That conclusion is supported by the fact that, while the indicative description of the types of infringement liable to be considered as serious mentions that they comprise infringements of the same type as those defined as minor ‘but more rigorously applied, with a wider market impact, and with effects in extensive areas of the common market’, the description of very serious infringements makes, by contrast, no mention of a requirement that there be an impact or that there be effects in a particular geographic area. (see paras 150-151)13. The criteria for assessing the gravity of an infringement may, depending on the circumstances, include the volume and value of the goods in respect of which the infringement was committed, the size and economic power of the undertaking and, consequently, the influence which it was able to exert on the market. It follows that, on the one hand, it is permissible, for the purpose of fixing a fine, to have regard both to the overall turnover of the undertaking, which gives an indication, albeit approximate and imperfect, of the size of the undertaking and of its economic power, and to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, which gives an indication of the scale of the infringement. On the other hand, it is important not to confer on one or other of those figures an importance which is disproportionate in relation to other factors and the fixing of an appropriate fine cannot be the result of a simple calculation based on overall turnover. (see paras 158, 367)14. Once it has been established that an undertaking has taken part in meetings between undertakings having a manifestly anti-competitive nature, it is for that undertaking to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs. Failing such evidence of distancing, it may be concluded from participation in those meetings that the undertaking is participating in the cartel which results from them, even if it does not actively do so. In addition, the fact that an undertaking does not abide by the outcome of those meetings is not such as to relieve it of full responsibility for the fact that it participated in the cartel. Lastly, an undertaking which has participated in such meetings cannot rely on the fact that it did so under pressure from other participants which may have had greater economic power. It could have complained to the competent authorities about the pressure brought to bear on it and lodged a complaint with the Commission under Article 3 of Regulation No 17 rather than participating in the activities in question. (see paras 164, 245, 423)15. The taking into account of the deterrent effect of fines imposed for infringements of the competition rules forms an integral part of the weighting of fines to reflect the gravity of the infringement, since the purpose of doing so is to ensure that a calculation method does not lead to fines which, for certain undertakings, would not be sufficiently high to ensure that the fine had a sufficiently deterrent effect. (see para. 170)16. The principle non bis in idem, enshrined also in Article 4 of Protocol No 7 to the European Convention on Human Rights, is a general principle of Community law which will be upheld by the Community judicature. In the field of Community competition law, that principle prohibits an undertaking being punished or having proceedings brought against it by the Commission on a second occasion in relation to anti-competitive conduct in respect of which a penalty has been imposed on it or for which it has been declared not to be liable by an earlier decision of the Commission which is no longer capable of being appealed against. The application of the principle non bis in idem is subject to the threefold condition of identity of the facts, unity of offender and unity of the legal interest protected. (see paras 184-185)17. The gravity of an infringement of the competition rules does not depend only on its geographic extent and on the proportion which the sales covered by the infringement bears to sales made in the whole of the European Union. Irrespective of those criteria, the absolute value of the sales in question is also a relevant indication of the gravity of the infringement, since it is an accurate reflection of the economic importance of the transactions which the infringement seeks to remove from the normal interplay of competition. (see para. 191)18. As regards proof of an infringement of Article 81(1) EC, the Commission must prove the infringements which it has found and adduce evidence capable of demonstrating to the requisite legal standard the existence of circumstances constituting an infringement. Any doubt in the mind of the Court must operate to the advantage of the undertaking to which the decision finding an infringement was addressed. The Court cannot therefore conclude that the Commission has established the infringement at issue to the requisite legal standard if it still entertains any doubts on that point, in particular in proceedings for annulment of a decision imposing a fine. It is necessary for the Commission to produce sufficiently precise and consistent evidence to support the firm conviction that the alleged infringement took place. However, it is important to emphasise that it is not necessary for every item of evidence produced by the Commission to satisfy those criteria in relation to every aspect of the infringement. It is sufficient if the body of evidence relied on by the institution, viewed as a whole, meets that requirement. (see paras 215, 217-218)19. The principle of the presumption of innocence resulting in particular from Article 6(2) of the European Convention on Human Rights is one of the fundamental rights which, according to the settled case-law of the Court of Justice, reaffirmed in the Preamble to the Single European Act, by Article 6(2) of the Treaty on European Union and by Article 47 of the Charter of Fundamental Rights of the European Union, are protected in the Community legal order. Given the nature of the infringements in question and the nature and degree of severity of the ensuing penalties, the principle of the presumption of innocence applies in particular to the procedures relating to infringements of the competition rules applicable to undertakings that may result in the imposition of fines or periodic penalty payments. (see para. 216)20. Where an infringement has been committed by several undertakings, it is appropriate, when setting the amount of the fines, to consider the relative gravity of the participation of each of them, which implies in particular that the roles played by each of them in the infringement for the duration of their participation in it should be established. That conclusion follows logically from the principle that penalties must fit the offence, according to which an undertaking may be penalised only for acts imputed to it individually. That principle applies in any administrative procedure that may lead to the imposition of sanctions under Community competition law. (see paras 277-278)21. The fact that an undertaking which is a member of a cartel forces another member of that cartel to extend its scope by threatening that member with reprisals if it does not cooperate may represent an aggravating circumstance. Such conduct has the direct effect of aggravating the damage caused by the cartel and an undertaking which conducts itself in that way must bear a special responsibility. (see para. 281)22. There is no provision or any general principle of Community law which prevents the Commission from relying, as against an undertaking, on statements made by other accused undertakings. If that were not the case, the burden of proving conduct contrary to Article 81 EC and Article 82 EC, which is borne by the Commission, would be unsustainable and incompatible with the task of supervising the proper application of those provisions which is entrusted to it by the EC Treaty. However, an admission by one undertaking accused of having participated in a cartel, the accuracy of which is contested by several other undertakings similarly accused, cannot be regarded as constituting adequate proof of an infringement committed by the latter unless it is supported by other evidence. Where the cartel comprises only two parties, it is sufficient for one of them to challenge the material contained in the statement of the other for other evidence to be required in support of it. That applies particularly to a statement which seeks to attenuate the responsibility of the undertaking in whose name it was made by emphasising the responsibility of another undertaking. Furthermore, as regards a document which establishes that a threat was made by one undertaking to another and the probative value of which is contested by the former, it is necessary, in order to assess the probative value of such a document, to have regard first and foremost to the credibility of the account it contains. Regard should be had in particular to the person from whom the document originates, the circumstances in which it came into being, the person to whom it was addressed and whether, on its face, the document appears sound and reliable. (see paras 285-286)23. Under the method laid down in the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, fines continue to be set according to the two criteria referred to in Article 15(2) of Regulation No 17, namely the gravity of the infringement and its duration, and the maximum percentage of turnover of each undertaking as laid down in that provision is observed. Consequently, the Guidelines cannot be regarded as going beyond the legal framework relating to penalties set out in that provision. (see paras 343-344)24. In assessing the seriousness of an infringement for the purpose of setting the fine, the Commission must take into consideration not only the particular circumstances of the case but also the context in which the infringement occurred and must ensure that its action has the necessary deterrent effect, especially as regards those types of infringement which are particularly harmful to the attainment of the objectives of the Community. In that respect, the analysis of the gravity of the infringement must take account of any repeated infringements. In the context of deterrence, repeated infringements are a matter which justifies a significant increase in the basic amount of the fine. It is evidence that the sanction previously imposed was not sufficiently deterrent. Furthermore, although repeated infringement relates to a characteristic specific to the perpetrator of the infringement, namely its propensity to commit such infringements, it is precisely, for that very reason, a very significant indication of the gravity of the conduct in question and, accordingly, of the need to increase the level of the penalty in order to achieve effective deterrence. The concept of repeated infringement, as understood in certain national legal systems, implies that a person has committed new infringements after having been penalised for similar infringements. However, bearing in mind the objective it pursues, the concept of repeated infringement does not necessarily imply that a fine has been imposed in the past, but merely that a finding of infringement has been made in the past. Repeated infringement is taken into account, for a particular infringement, so that a more severe penalty may be imposed on the undertaking responsible for the relevant facts when it transpires that a previous finding of infringement on its part has not been sufficient to prevent the repetition of unlawful conduct. It is not the previous imposition of a fine that determines that conduct constitutes repeated infringement, which is determinative of recidivism, but the fact that a previous finding of infringement has been made against the person concerned. (see paras 347-349, 362-363)25. A limitation period can fulfil its function of ensuring legal certainty, and its infringement can constitute a breach of the principle of legal certainty, only if the period has been fixed in advance. Such a period is not specified, as regards a finding that an undertaking has committed repeated offences, under either Article 15 of Regulation No 17, which constitutes the legal framework for the penalties which may be imposed by the Commission for an infringement of the Community competition rules, or by the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty. (see paras 352-353)26. The attenuating circumstances referred to in Section 3 of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty are based on the individual conduct of each undertaking. It follows that in order to assess any attenuating circumstances, including that relating to the non-implementation of agreements, it is necessary to take into account not the effects arising from the infringement as a whole, which must be taken into consideration in assessing the actual impact of an infringement on the market for the purposes of determining its gravity (first paragraph of Section 1.A of the Guidelines), but the individual conduct of each undertaking, for the purposes of examining the relative gravity of the participation of each undertaking in the infringement. (see paras 383-384)27. The absence of measures to monitor the implementation of a cartel does not, of itself, constitute a mitigating factor.(see para. 393)28. The Commission is not required, when determining the amount of the fine for infringement of the Community competition rules, to take account of an undertaking’s financial losses, since recognition of such an obligation would have the effect of conferring an unfair competitive advantage on the undertakings least well adapted to the conditions of the market. (see para. 413)29. A reduction of the fine on grounds of cooperation during the administrative procedure is justified only if the conduct of the undertaking concerned enabled the Commission to ascertain the infringement more easily and, if appropriate, to put an end to it. In that regard, the cooperation of an undertaking in the investigation gives no entitlement to a reduction in a fine when that cooperation did not go further than that which it was required to provide under Article 11(4) and (5) of Regulation No 17. By contrast, where the undertaking provides information in response to a request for information under Article 11 of Regulation No 17 which is well in excess of that which the Commission may require it to provide under that article, the undertaking concerned may benefit from a reduction in the fine. Similarly, where, in the course of the Commission’s investigation of a cartel, an undertaking makes available to it information concerning acts for which it could not in any event have been required to pay a fine under Regulation No 17, that does not amount to cooperation falling within the scope of the Notice on cooperation in cartel cases or, a fortiori, Section D thereof. (see paras 449, 451-452, 471)30. In appraising the cooperation shown by undertakings during the administrative procedure initiated in respect of a prohibited cartel, the Commission is not entitled to disregard the principle of equal treatment, a general principle of Community law which is infringed only where comparable situations are treated differently or different situations are treated in the same way, unless such difference of treatment is objectively justified. In that regard, the appraisal of the extent of the cooperation shown by undertakings cannot depend on purely random factors. A difference in the treatment of the undertakings concerned must therefore be capable of being ascribed to differences in the degree of cooperation provided, particularly where different information was provided or that information was supplied at different stages in the administrative procedure or in dissimilar circumstances. It is also the case that where an undertaking providing cooperation does no more than confirm, in a less precise and explicit manner, certain information already provided by another undertaking by way of cooperation, the extent of the cooperation provided by the former undertaking, while possibly of some benefit to the Commission, cannot be treated as comparable to that provided by the undertaking which was the first to supply that information. A statement which merely corroborates to a certain degree a statement which the Commission already had at its disposal does not facilitate the Commission’s task significantly and therefore sufficiently to justify a reduction in the fine for cooperation. (see paras 453-455)31. If it is to benefit from a reduction of the fine by reason of the absence of a challenge to the facts, pursuant to the second indent of Section D.2 of the Notice, on cooperation in cartel cases, an undertaking must expressly inform the Commission that it has no intention of substantially contesting the facts, after perusing the statement of objections. However, it is not sufficient for an undertaking to state in general terms that it does not contest the facts alleged for the purposes of the Leniency Notice if, in the circumstances of the case, that statement is not of any help to the Commission at all. In order for an undertaking to benefit from a reduction of the fine for its cooperation during the administrative procedure, its conduct must facilitate the Commission’s task of identifying and penalising infringements of the Community competition rules. (see paras 504-505)JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)25 October 2005(*) In Case T‑38/02,Groupe Danone, established in Paris (France), represented by A. Winckler and M. Waha, lawyers, applicant,Commission of the European Communities, represented by A. Bouquet and W. Wils, acting as Agents, with an address for service in Luxembourg, defendant,APPLICATION for annulment of Commission Decision 2003/569/EC of 5 December 2001 relating to a proceeding under Article 81 of the EC Treaty (Case IV/37.614/F3 PO/Interbrew and Alken-Maes) (OJ 2003 L 200, p. 1), and, in the alternative, for a reduction in the fine imposed on the applicant by Article 2 of that decision, THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Fifth Chamber), composed of M. Vilaras, President, E. Martins Ribeiro and K. Jürimäe, Judges,Registrar: J. Plingers, Administrator,having regard to the written procedure and further to the hearing on 8 December 2004,gives the followingJudgment Legal framework1 Article 15(2) of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81 EC] and [82 EC] (OJ, English Special Edition 1959-62, p. 87), provides: ‘The Commission may by decision impose on undertakings or associations of undertakings fines of from [EUR] 1 000 to [EUR] 1 000 000, or a sum in excess thereof but not exceeding 10% of the turnover in the preceding business year of each of the undertakings participating in the infringement where, either intentionally or negligently: a) they infringe Article [81](1) or Article [82] of the Treaty; or b) they commit a breach of any of the obligations imposed pursuant to Article 8(1) [of the regulation].In fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement.’2 The Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3) (‘the Guidelines’) lay down a method for determining the amount of such fines, ‘which start[s] from a basic amount that will be increased to take account of aggravating circumstances or reduced to take account of attenuating circumstances’ (second introductory paragraph of the Guidelines). According to the Guidelines, ‘the basic amount will be determined according to the gravity and duration of the infringement, which are the only criteria referred to in Article 15(2) of Regulation No 17’ (Section 1 of the Guidelines). 3 The Commission Notice on the non-imposition or reduction of fines in cartel cases (OJ 1996 C 207, p. 4) (‘the Leniency Notice’) ‘sets out the conditions under which [undertakings] cooperating with the Commission during its investigation into a cartel may be exempted from fines, or may be granted reductions in the fine which would otherwise have been imposed upon them’ (Section A.3 of the notice). 4 Section D of the Leniency Notice is worded as follows:‘D. Significant reduction in a fine1. Where an [undertaking] cooperates without having met all the conditions set out in Sections B or C, it will benefit from a reduction of 10% to 50% of the fine that would have been imposed if it had not cooperated. 2. Such cases may include the following:– before a statement of objections is sent, an [undertaking] provides the Commission with information, documents or other evidence which materially contribute to establishing the existence of the infringement; – after receiving a statement of objections, an [undertaking] informs the Commission that it does not substantially contest the facts on which the Commission bases its allegations.’ Facts5 At the time when the facts took place, Interbrew NV (‘Interbrew’) and Brouwerijen Alken-Maes NV (‘Alken-Maes’) were the largest and the second-largest suppliers on the Belgian beer market. Alken-Maes was a subsidiary of Group Danone SA (‘the applicant’), which also operated on the French beer market through another subsidiary, Brasseries Kronenbourg SA (‘Kronenbourg’). In 2000, the applicant ceased its activities on the beer market. 6 In 1999, the Commission initiated an investigation under Case IV/37.614/F3 into possible infringements of the Community competition rules in the Belgian brewing sector. 7 On 29 September 2000, in the context of that investigation, the Commission initiated the procedure and adopted a statement of objections against the applicant and also Interbrew, Alken-Maes, NV Brouwerij Haacht (‘Haacht’) and NV Brouwerij Martens (‘Martens’). The procedure initiated against the applicant and the statement of objections addressed to it related solely to its alleged involvement in the cartel referred to as ‘Interbrew/Alken-Maes’ concerning the Belgian beer market. 8 On 5 December 2001, the Commission adopted Decision 2003/569/EC relating to a proceeding under Article 81 of the EC Treaty (Case IV/37.614/F3 PO/Interbrew and Alken-Maes) (OJ 2003 L 200, p. 1), addressed to the applicant and also to Interbrew, Alken-Maes, Haacht and Martens (‘the contested decision’). 9 The contested decision finds two separate infringements of the competition rules, namely, first, a complex set of agreements and/or concerted practices in respect of beer sold in Belgium (‘the Interbrew/Alken-Maes Cartel’) and, secondly, concerted practices in respect of private-label beer. The contested decision finds that Interbrew and Alken-Maes participated in the first infringement, while Interbrew, Alken-Maes, Haacht and Martens participated in the second. 10 Although the applicant was, at the material time, the parent company of Alken-Maes, the contested decision makes only one finding of infringement on its part. In the light of its active involvement in the Interbrew/Alken-Maes Cartel, the applicant was held responsible both for its own involvement in the cartel and for that of Alken-Maes. By contrast, the Commission considered that there was no reason to attribute responsibility to the applicant for the participation of its subsidiary in the concerted practice relating to private-label beer, since the applicant was not itself involved in that cartel. 11 The infringement found to have been committed by the applicant consists in its participation, both directly and through its subsidiary Alken-Maes, in a complex set of agreements and/or concerted practices relating to a general non-aggression pact, prices and promotions in the off-trade, customer sharing in the on-trade, including ‘national’ customers, the restriction of investment and advertising in the on-trade, a new pricing structure for the on-trade and the off-trade, and the exchange of information about sales in both the on-trade and the off‑trade. 12 The contested decision finds that the infringement took place over the period from 28 January 1993 to 28 January 1998.13 Being of the view that a series of factors enabled it to conclude that the infringement had ceased, the Commission did not deem it necessary to require the undertakings concerned to bring the infringement to an end pursuant to Article 3 of Regulation No 17. 14 However, the Commission considered it appropriate, pursuant to Article 15(2) of Regulation No 17, to impose a fine on Interbrew and the applicant for their participation in the Interbrew/Alken-Maes Cartel. 15 In that regard, the Commission held in the contested decision that all the participants in the Interbrew/Alken-Maes Cartel had committed the infringement intentionally. 16 For the purpose of setting the fines to be imposed, the Commission applied in the contested decision the method laid down in the Guidelines and the Leniency Notice decision. 17 The operative part of the contested decision is worded as follows:‘Article 1[Interbrew], [Alken-Maes] and [the applicant] have infringed Article 81(1) [EC] by taking part in a complex set of agreements and/or concerted practices relating to a general non-aggression pact, prices and promotions in the off-trade, customer sharing in the on-trade (both the “traditional” sector and national customers), the restriction of investment and advertising in the on-trade, a new pricing structure for the on-trade and the off-trade, and the exchange of information about sales in both the on-trade and the off‑trade during the period from 28 January 1993 to 28 January 1998. Article 2The following fines are hereby imposed on [Interbrew] and [the applicant] in respect of the infringements found in Article 1: a) on [Interbrew]: a fine of EUR 45.675 million;b) on [the applicant]: a fine of EUR 44.043 million.…’ Procedure and forms of order sought 18 By application lodged at the Registry of the Court of First Instance on 22 February 2002, the applicant brought the present action. 19 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Fifth Chamber) decided to open the oral procedure. Pursuant to Article 64 of its Rules of Procedure, the Court requested the parties to produce certain documents and to answer a number of written questions. The parties complied with those requests within the prescribed period. 20 By letter of 30 November 2004, the applicant requested the Court, first, to place on the file the Commission Decision of 29 September 2004 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/C.37750/B2 – Brasseries Kronenbourg, Brasseries Heineken), notified under number C (2004) 3597 final (‘the Kronenbourg/Heineken Decision’), and, secondly, by way of measures of organisation of procedure under Article 64(4) of the Rules of Procedure, to invite the Commission to indicate, before or at the hearing, the results of its investigation into possible abuses of Interbrew’s dominant position on the Belgian beer market. 21 By decision of 3 December 2004, the Court, first, added to the file the letter referred to above and informed the Commission that it would be invited at the hearing to put forward its observations on the applicant’s request that the Kronenbourg/Heineken Decision be added to the file. Secondly, it rejected the application for a measure of organisation of procedure directing the Commission to indicate the results of its investigation into possible abuses of Interbrew’s dominant position on the Belgian beer market. 22 The parties presented oral argument and their answers to the questions put by the Court at the hearing on 8 December 2004. The Commission stated at the hearing that it did not object to the applicant’s request that the Kronenbourg/Heineken Decision be added to the file, which was done by decision of the Court. 23 The applicant claims that the Court should: – annul the contested decision in accordance with Article 230 EC or, in the alternative, reduce the fine imposed by Article 2 of that decision in accordance with Article 229 EC; – order the Commission to pay the costs.24 The Commission contends that the Court should:– dismiss the action; – order the applicant to pay the costs. Law 25 In support of its application, the applicant raises eight pleas in law. Two pleas, which are raised as primary pleas, seek annulment of the contested decision and allege infringement of the rights of the defence and the principle of sound administration (first plea) and infringement of the obligation to state reasons (second plea). Six other pleas, raised in the alternative, seek a reduction in the amount of the fine. They allege: incorrect assessment of the gravity of the infringement for the purpose of setting the starting amount of the fine, in breach of the principles of proportionality, equal treatment and non bis in idem (third plea); incorrect assessment of the duration of the infringement (fourth plea); lack of basis for the finding that the pressure put on Interbrew constituted an aggravating circumstance (fifth plea); lack of basis for the taking account of the applicant’s repeated infringements as an aggravating circumstance against it (sixth plea), failure to take sufficient account of the applicable attenuating circumstances (seventh plea) and an incorrect assessment of the extent of the cooperation provided by the applicant, in breach of the principle of equal treatment and the Leniency Notice (eighth plea). A – The heads of claim seeking annulment of the contested decision1. The plea alleging infringement of the rights of the defence and the principle of sound administration 26 The plea is divided into three parts. In the first part, the applicant submits that it was not given an opportunity to enquire into the circumstances in which a document used against it by the Commission was drawn up. In the second part, it states that, prior to the adoption of the contested decision, the Commission refused to inform it of the matters taken into account in setting the amount of the fine. Lastly, in the third part, the applicant submits that the fact that no records were kept of meetings between the Commission and Interbrew and the Commission’s refusal to send it Interbrew’s response to the statement of objections constitute not only an infringement of the rights of the defence but also an infringement of the principle of sound administration. a) The first part, alleging that the applicant was not given an opportunity to enquire into the circumstances in which a document used against it by the Commission was drawn up Arguments of the parties27 The applicant maintains that the contested decision should be annulled on the ground that it was not given the opportunity to comment on and challenge a passage in a document a copy of which was originally taken by the Commission at the premises of Heineken NV (‘Heineken’) in the context of an investigation into a related matter in the Netherlands (‘the Heineken Document’). The Commission invoked that document in recital 55 to the contested decision in support of its finding that the applicant had put pressure on Interbrew by threatening it with reprisals on the French market in order to force it to widen the scope of the cartel. The other items taken into account in support of that finding, which are referred to in recital 54 to the contested decision, consist solely of unilateral statements by Interbrew. 28 The applicant acknowledges that the Heineken Document is referred to in the statement of objections and that it read that document when it was given access to the file. In the contested decision, however, the Commission merely referred to the place where and the circumstances in which the Heineken Document was obtained, treating that document as reliable without further formalities, and failed to give the applicant an opportunity to investigate the circumstances in which it had been prepared. 29 Thus, since they are not included in the file, the applicant did not have access to the letters or internal memoranda which preceded or followed that document. No material connected with that document which might have been obtained during the investigation in the Netherlands was placed on the file, despite the applicant having requested that this be done. Nor were any observations made by Heineken and Interbrew regarding the implications of the document placed on the file. Furthermore, the correspondence between the Commission and Heineken regarding the confidential nature of the Heineken Document, which the Commission did disclose, provided no new information and did not demonstrate that the Commission itself had the material which it needed in order to interpret the document. 30 The applicant puts forward two alternative complaints in that regard. Either the material needed to interpret the document existed and was not on the file, in which case the applicant was not given proper access to the file, in breach of the rights of the defence, or that material did not exist, in which case it was for the Commission, under its duty to investigate all matters favourable to the applicant too, to ascertain the credibility of the information contained in the Heineken Document by seeking to determine the circumstances in which it had been drawn up. 31 The applicant submits that, in any event, if it had been aware of the identity of the author of the Heineken Document and of the circumstances in which it was drawn up, the outcome of the administrative procedure might well have been different, as it might have been in a position to establish that the document was not authentic or that it was inaccurate. Were that to have been the case, Interbrew’s individual statements would not have been sufficient to prove the alleged pressure put on that company. There was therefore an infringement of the rights of the defence, according to the case-law of the Court of First Instance (Joined Cases T‑25/95, T‑26/95, T-30/95, T-31/95, T-32/95, T‑34/95, T-35/95, T-36/95, T‑37/95, T-38/95, T-39/95, T-42/95, T‑43/95, T-44/95, T-45/95, T‑46/95, T-48/95, T-50/95, T-51/95, T‑52/95, T‑53/95, T-54/95, T‑55/95, T-56/95, T-57/95, T-58/95, T‑59/95, T‑60/95, T-61/95, T‑62/95, T-63/95, T-64/95, T-65/95, T‑68/95, T‑69/95, T-70/95, T‑71/95, T-87/95, T-88/95, T-103/95 and T‑104/95 Cimenteries CBR and Others v Commission [2000] ECR II‑491 (‘Cement’), paragraph 247). 32 The Commission observes that the applicant had access to the Heineken Document and was fully able to assess the ‘circumstances’ in which it was drawn up and that it never claimed during that administrative procedure that there had been an infringement of the rights of the defence. In any event, the Heineken Document is not the only evidence of the threat made by the applicant against Interbrew. B – Findings of the Court33 According to settled case-law, the right of access to the file in competition cases is intended, in particular, to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission’s file so that, on the basis of that evidence, they can express their views effectively on the conclusions reached by the Commission in its statement of objections (see Joined Cases T‑191/98 and T-212/98 to T-214/98 Atlantic Container Line and Others v Commission [2003] ECR II-3275, paragraph 334 and the case-law cited). Access to the file is thus one of the procedural safeguards intended to protect the rights of the defence and to ensure, in particular, that the right to be heard can be exercised effectively (see Atlantic Container Line and Others, paragraph 334 and the case-law cited). 34 The Commission is thus under a duty to make available to the undertakings involved in proceedings under Article 81(1) EC all documents, whether in their favour or otherwise, which it has obtained during the course of the investigation, save where the business secrets of other undertakings, the internal documents of the institution or other confidential information are involved (see Atlantic Container Line v Commission, paragraph 33 above, paragraph 335 and the case-law cited). 35 If the Commission is found to have relied in the contested decision on inculpatory documents that were not in the investigation file and were not disclosed to the applicant, those documents should be excluded as evidence (see, to that effect, Case 107/82 AEG v Commission [1983] ECR 3151, paragraphs 24 to 30; Cement, paragraph 31 above, paragraph 382; and Atlantic Container Line and Others v Commission, paragraph 33 above, paragraph 338). 36 As regards the documents which might have contained exculpatory evidence, where those documents are contained in the Commission’s investigation file, any finding of an infringement of the rights of the defence is unconnected with the manner in which the undertaking concerned conducted itself during the administrative procedure and with the question whether that undertaking was obliged to ask the Commission for access to its file or have it send particular documents to it (Case T-30/91 Solvay v Commission [1995] ECR II-1775, paragraph 96, and Atlantic Container Line and Others v Commission, paragraph 33 above, paragraph 340). 37 By contrast, where the documents which might have contained exculpatory evidence are not in the Commission’s investigation file, the applicant must expressly ask the institution for access to those documents, and failure to do so during the administrative procedure will mean that its right in that respect is barred in any action for annulment which may be brought against the final decision (Cement, paragraph 31 above, paragraph 383, and Atlantic Container Line and Others v Commission, paragraph 33 above, paragraph 340). 38 It is in the light of those principles that the Court must determine whether the applicant’s claims are well founded.39 The first point to note is that there is no dispute that the Heineken Document originally came into the Commission’s possession in the course of an investigation carried out by it under Article 14(3) of Regulation No 17 in the premises of Heineken in the Netherlands on 22 and 23 March 2000, in a different case from the present one. The Commission subsequently demanded, on 14 April 2000, in the administrative procedure relating to the present case and by means of a request for information under Article 11 of Regulation No 17, that Heineken send it a fresh copy of the document, which was placed on the file. 40 It should also be noted that the applicant acknowledges that the Heineken Document is referred to in the statement of objections and that it read it when it had access to the file during the administrative procedure. As regards that particular document, the applicant was therefore actually able to exercise its right to be heard. 41 However, the applicant maintains that it was not given access to any letters or internal memoranda which might have preceded or followed the drawing-up of the Heineken Document and which might have contained exculpatory evidence. 42 The applicant’s claim that the Commission failed to disclose such letters or internal memoranda in its possession cannot be accepted. According to settled case-law, the applicant may rely on an infringement of the rights of the defence only if it submitted to the Commission during the administrative procedure an express request for access to the documents in question (see paragraph 37 above). 43 The applicant made no such request. First, in its response to the statement of objections, the applicant merely asserted in relation to the Heineken Document that ‘the probative value of that document appears doubtful [and that] there is nothing in the [statement of objections] or in the document which allows the applicant to establish the author or to examine the circumstances in which it was written’. That assertion cannot be regarded as an express request for access to the letters or internal memoranda in question. Moreover, when questioned on that point by the Court at the hearing, the applicant confirmed that its request for access to the file during the administrative procedure was a general one. Secondly, in its letters of 24 and 28 January 2002, the applicant merely makes, in very general terms and without any express reference to the documents in question, a second request for access to the file, which in any event was made after the administrative procedure had been closed. 44 As regards the applicant’s claim that, if the Commission was not in possession of any letter or internal memorandum which preceded or followed the drawing-up of the Heineken Document, it was in breach of its duty of impartiality since it failed to investigate whether the contents of that document were true, it is sufficient to observe that that claim has no bearing on the problematic of the rights of the defence. The applicant is in effect asking the Court to determine whether the Commission established to the requisite standard what it intended to prove by means, inter alia, of the Heineken Document and whether, to the extent that that document was essential for such proof, the truth of the words reported in it is sufficiently established. The applicant is thus calling into question the probative value of the Heineken Document, an issue which is irrelevant to the consideration of the present plea alleging infringement of the rights of the defence (see, to that effect, Case T-37/91 ICI v Commission [1995] II-1901, paragraph 72) and which will be analysed in paragraphs 260, 261, 271 to 273 and 284 to 290 below. 45 The first part of the plea must accordingly be rejected. b)The second part, alleging that, prior to the adoption of the contested decision, the Commission refused to inform the applicant of the matters taken into account in setting the amount of the fine 46 The applicant alleges an infringement of the rights of the defence on the ground that at no time did the Commission give it the opportunity to be aware of or to express views on the matters the latter proposed to take into account in setting the amount of the fine. In the statement of objections, the Commission simply summarised in a few lines the method set out in the Guidelines and the statement of objections contained nothing to enable the applicant to foresee the particularly unfavourable treatment which the Commission had in store for it and that it would consequently receive unequal treatment by comparison with Interbrew. 47 In particular, there was nothing in the statement of objections to indicate to the applicant that the Commission intended to rely on the fact that this constituted a repeated infringement by the applicant, while that aggravating circumstance has been applied only intermittently in the Commission’s decision-taking practice. Thus, in 2001, the Commission made findings of re-infringement against a number of undertakings but did not invoke that aggravating circumstance when setting the amount of the fine. That was the case with F. Hoffmann-La Roche AG (‘Hoffmann‑La Roche’) in Commission Decision 2003/2/EC of 21 November 2001 relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/E‑1/37.512 – Vitamins) (OJ 2003 L 6, p. 1) (‘the Vitamins Decision’), and Commission Decision 2002/742/EC of 5 December 2001 relating to a proceeding pursuant to Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/E‑1/36.604 – Citric acid) (OJ 2002 L 239, p. 18) (‘the Citric Acid Decision’), and, although it was the addressee of the decision under another name, with Stora Kopparbergs Bergslags AB (‘Stora’) in the case which gave rise to Commission Decision 2004/337/EC of 20 December 2001 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case COMP/E‑1/36.212 – Carbonless paper) (OJ 2004 L 115, p. 1) (‘the Carbonless Paper Decision’), or again with Volkswagen AG (‘Volkswagen’) in Commission Decision 2001/711/EC of 29 June 2001 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/F‑2/36.693 – Volkswagen) (OJ 2001 L 262 p. 14) (‘the Volkswagen II Decision’). The applicant maintains that there is no justification for such a difference in treatment. 48 The failure to give such an indication was all the more damaging since, in the case which culminated in Commission Decision 2002/405/EC of 20 June 2001 relating to a proceeding under Article 82 of the EC Treaty (COMP/E-2/36.041/PO – Michelin) (OJ 2002 L 143, p. 1) (‘the Michelin II Decision’), where the Commission also established a repeated infringement as an aggravating circumstance, the undertaking concerned was given an opportunity to submit arguments on that point prior to the adoption of the decision. 49 The Commission contends that it has a discretion in setting the amount of a fine and that it set out in the statement of objections all the matters which it proposed to take into account for that purpose, including those necessary to comply with the requirement to state reasons. Furthermore, it was not required to indicate its intention to take into account the aggravating circumstance of a repeated infringement. In any event, the applicant could not fail to be aware that the Guidelines expressly refer to repeated infringement as an aggravating circumstance or that it had already been held to have committed an infringement on two previous occasions. Findings of the Court50 It is settled case-law that where the Commission expressly states in its statement of objections that it will consider whether it is appropriate to impose fines on the undertakings concerned and it also indicates the main factual and legal criteria capable of giving rise to the imposition of a fine, such as the gravity and the duration of the alleged infringement and whether that infringement was committed intentionally or negligently, it fulfils its obligation to respect the undertakings’ right to be heard. In doing so, it provides them with the necessary means to defend themselves not only against the finding of an infringement but also against the imposition of fines (Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983] ECR 1825, paragraph 21, and Case T-31/99 ABB Asea Brown Boveri v Commission [2002] ECR II-1881, paragraph 78). 51 So far as the setting of the amount of the fines is concerned, the rights of defence of the undertakings in question are guaranteed before the Commission by virtue of the fact that they have the opportunity to make submissions on the duration, the gravity and the foreseeability of the anti-competitive nature of the infringement. Moreover, undertakings have an additional guarantee, as regards the setting of the amount of the fine, in that the Court of First Instance has unlimited jurisdiction and may in particular cancel or reduce the fine pursuant to Article 17 of Regulation No 17 (Case T‑83/91 Tetra Pak v Commission [1994] ECR II-755, paragraph 235, and, to that effect, ABB Asea Brown Boveri v Commission, paragraph 50 above, paragraph 79). 52 In the present case, it must be held, in the first place, that the Commission stated in point 213 of the statement of objections that its intention, in the light of the facts, was to impose fines on the undertakings to which the statement was addressed, including the applicant. In point 214 of the statement of objections, the Commission added that, in determining the amount of the fines to be imposed, it was required to take into account all the circumstances of the case and, in particular, the gravity and the duration of the infringement. Furthermore, the Commission stated in point 216 of the statement that, among the facts set out in the statement of objections, it would pay particular attention to the fact that the agreements in question constituted a deliberate infringement of Article 81(1) EC. 53 The Commission also indicated in point 216 that the market-sharing and price-fixing agreements described in the statement of objections constituted by their very nature the most serious type of infringement of Article 81(1) EC. In point 215 of the statement of objections, it stated that in assessing the gravity of the infringement it would take account of its nature, its actual impact on the market, where that could be measured, and the size of the relevant geographic market. It also indicated in point 216 of the statement of objections that it would determine the role of each undertaking in the infringement by taking account, inter alia, of the role played by each of them in the secret agreements in question and the duration of their participation in the infringement. 54 The Commission also stated in point 217 of the statement of objections that the amount of the fine to be imposed on each undertaking would reflect any aggravating or attenuating circumstances, and that it would apply, where relevant, the Leniency Notice. Lastly, the Commission indicated in point 218 that it proposed to set the amount of the fines at a sufficiently high level to ensure that they had a deterrent effect. 55 It follows from the foregoing that, in accordance with the case-law referred to above, the Commission expressly indicated in the statement of objections (points 213 to 218) that it intended to impose fines on the undertakings to which the statement was addressed and the factual and legal matters which it would take into account in setting the fine that would be imposed on the applicant, so that its right to be heard was therefore observed in that regard. 56 In the second place, with more particular regard to the aggravating circumstance of repeated infringement that was found in the applicant’s case, it must be observed that the Guidelines cite repeated infringement of the same type by the same undertaking as an example of an aggravating circumstance and also that the Commission indicated in the statement of objections that it would take account of the individual role played by each undertaking in the secret agreements in question and that the amount of the fine would reflect any aggravating or attenuating circumstances. The applicant could not therefore fail to be aware that the Commission would take that aggravating circumstance into account if it were to conclude that conditions for its application were satisfied. 57 In the third place, as regards more specifically the argument that the applicant suffered discriminatory treatment by comparison with other undertakings which had committed repeated infringements and which had not had that aggravating circumstance taken into account against them, it must be pointed out that the mere fact that the Commission has found in its previous decisions that certain factors did not constitute an aggravating circumstance for the purpose of determining the amount of the fine does not mean that it is obliged to do so also in a subsequent decision (see, inter alia, by way of analogy, Case T-7/89 Hercules Chemicals v Commission [1991] ECR II-1711, paragraph 357; Case T‑347/94 Mayr-Melnhof v Commission [1998] ECR II-1751, paragraph 368; and Case T-23/99 LR AF 1998 v Commission [2002] ECR II-1705, paragraphs 234 and 337). Moreover, as the considerations set out in paragraph 56 above make clear, the opportunity afforded to an undertaking in another case to make known its views on the intention to make a finding of repeated infringement on its part does not mean that the Commission is obliged to do the same in all cases, or that, where such an opportunity is not afforded, the applicant is prevented from fully exercising its right to be heard. 58 In those circumstances, the second part of the plea must be rejected.b) The third part, based on the fact that no record was kept of meetings between the Commission and Interbrew and the Commission’s refusal to send the applicant a copy of Interbrew’s response to the statement of objections 59 The applicant claims, first, that neither the statement of objections nor the contested decision contains detailed information which would enable it to determine what was discussed at and the scope of the meetings between the Commission’s staff and representatives of Interbrew referred to in recital 34 of the contested decision. Nor was any minute of those meetings, which were not drawn to the applicant’s attention before the adoption of the contested decision in this case, placed on the Commission’s file. Secondly, in refusing, by letter of 7 February 2002, to grant the applicant access to Interbrew’s response to the statement of objections, the Commission infringed its rights of defence and the principle of sound administration. 60 The applicant maintains, in the first place, that it was not given the opportunity of checking and, if appropriate, challenging any statements made by Interbrew at those meetings, which may nevertheless have had a significant influence on the Commission’s assessment of the facts at issue and of the cooperation provided by the undertakings under investigation. 61 In that regard, the applicant submits in particular that the Commission displayed a generally favourable attitude towards Interbrew, in contrast to the severity shown to the applicant. Thus, the absence of any reference during the procedure to the dominant position held by Interbrew, which was none the less at the origin of the investigation, may be explained in the light of the matters discussed at the informal meetings in question. Furthermore, there is no support in the file for the reference in the contested decision to a telephone conversation between Mr L.B. (Alken-Maes) and Mr A.B. (Interbrew) on 9 December 1996. The same is true of the summary of an internal meeting at Interbrew on 5 May 1994, where the Chief Executive Officer (‘CEO’) of Interbrew (Mr M.) described a scenario allegedly demanded by the applicant, under which Interbrew was to transfer 500 000 hectolitres of beer to Alken-Maes. 62 The applicant claims, in the second place, that it did not have access to Interbrew’s response to the statement of objections, as access was refused by the Commission. By letters of 24 and 28 January 2002, the applicant again expressly requested the Commission to provide it with fresh access to the file, in particular access to Interbrew’s response to the statement of objections, which the Commission refused by letter of 7 February 2002. 63 The Commission contends that the applicant was aware that the informal meetings had taken place and that during the administrative procedure it never requested access to any minutes of those meetings, which, moreover, do not exist and which in any event would have served no purpose. All the factual information contained in the contested decision is based on the documents in the file, to which the applicant has never denied having had access. As regards the request for access to documents made under Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents (OJ 2001 L 145, p. 43), it was withdrawn. 64 With respect, in the first place, to the informal meetings with the parties, it should be noted that neither the applicant nor the Commission denies in its written pleadings that no minutes were taken of those meetings. This part of the first plea relating to those meetings thus amounts to a contention that observance by the Commission of the right of access to the file in competition cases requires that it draw up minutes of such meetings and make them available to the parties. 65 It should be borne in mind in that regard that the case-law paragraphs 33 and 34 above establishes that the right of access to the file in competition cases is intended to enable the addressees of statements of objections to acquaint themselves with the evidence in the Commission’s file so that the right to be heard can be effectively exercised. Thus, the Commission has an obligation to make available to the undertakings involved all documents, whether in their favour or otherwise, which it has obtained during the investigation, with the exception of the business secrets of other undertakings, the internal documents of the Commission or other confidential information. 66 It is also clear from case-law that there is by contrast no general duty on the part of the Commission to draw up minutes of discussions in meetings with the other parties which take place in the course of the application of the Treaty’s competition rules (see, to that effect, Atlantic Container Line and Others v Commission, paragraph 33 above, paragraph 351). 67 However, the absence of such an obligation does not mean that the Commission is relieved of the obligations incumbent on it as regards access to the file. The practice of using information provided orally by third parties cannot be permitted to infringe the rights of the defence. Thus, if the Commission intends to use in its decision inculpatory evidence provided orally by another party it must make it available to the undertaking concerned so as to enable the latter to comment effectively on the conclusions reached by the Commission on the basis of that evidence. Where necessary, it must create a written document to be placed in the file (see, to that effect, Atlantic Container Line and Others v Commission, paragraph 33 above, paragraph 352). 68 In the present case, with the exception of two specific allegations, the applicant’s arguments merely consist in generally asserting, first, that the informal meetings may have had a significant influence on the assessment of the facts and of the cooperation provided by the undertakings under investigation, secondly, that the Commission adopted a generally favourable attitude towards Interbrew during the procedure, in contrast to the severity with which the contested decision treats the applicant and, lastly, that if the information provided at the informal meetings was helpful to Interbrew, it could not fail to affect the applicant’s position. 69 Those general arguments, which do not explain how the inculpatory evidence relied on by the Commission in the contested decision is based on information provided at the informal meetings, are not of such a kind as to establish that there was, in fact, an infringement of the rights of the defence, which is a question to be examined in the light of the circumstances of each particular case (see, to that effect, Solvay v Commission, paragraph 36 above, paragraph 60). As was stated in paragraph 33 above, the right of access to the file in competition cases is recognised solely so that the undertakings concerned can express their views effectively on the conclusions reached by the Commission in its statement of objections. Since the applicant has not, apart from the two specific allegations considered below, identified any objection taken into account in the statement of objections and subsequently in the contested decision which was based on evidence provided orally at the informal meetings and to which it did not have access, it cannot maintain that the Commission infringed the rights of the defence on that point (see, to that effect, Atlantic Container Line and Others v Commission, paragraph 33 above, paragraphs 353 and 354). 70 As regards the two specific allegations mentioned above, according to which the references in the contested decision to a telephone conversation of 9 December 1996 and the discussions that took place at an internal meeting of 5 May 1994 could only be based on discussions that took place during informal meetings, it is necessary to consider whether the facts in question are based on specific information in the file. 71 With respect, first of all, to the telephone conversation of 9 December 1996, referred to in recital 91 of the contested decision, it must be noted that point 93 of the statement of objections states that ‘following a meeting which [took place] on 19 September, Mr L.B. (Alken-Maes) [had] a telephone conversation on 9 December 1996 with Mr A.B. (Interbrew)’. Those words are accompanied by footnote 116, which indicates: ‘Letter from Alken-Maes of 7 March 2000, and especially Annexes 42 and 44 to that letter ([pp.] 7884, 8513 and 8528 to 8530 [of the Commission’s file]), with references to the following documents: inspection at the offices of Alken-Maes, document AvW19 ([pp.] 150 to 153 [of the Commission’s file]) and document MV17 ([pp.] 532 to 541 [of the Commission’s file])’. The same references appear in the contested decision, in footnote 123, corresponding to recital 91. 72 In answer to a written question from the Court asking it to specify the factors which led it to conclude that a telephone conversation took place on 9 December 1996 relating to Interbrew’s prices between Mr L.B. (Alken-Maes) and Mr A.B. (Interbrew), the Commission stated that it reached that conclusion on the basis of p. 8513 of the Commission’s file, which comprises the last page of Annex 42 to Alken-Maes’s letter to the Commission of 7 March 2000. 73 Examination of that document, which consists of handwritten notes by Mr L.B. (Alken-Maes), shows that, although no telephone conversation of 9 December 1996 is referred to in it, it does however include several annotations, plainly added after it was originally prepared, which appear to represent replies to questions, drawn up at the outset, relating to Interbrew’s pricing conditions. Three of those annotations include the date ‘(9/12/96)’ and two of them the abbreviation ‘IB’ (Interbrew), one also including the initials of Mr A.B. (Interbrew). 74 Accordingly, it must first be held that the statement of objections does indeed refer to there having been contact on 9 December 1996 between Interbrew and Alken-Maes relating to Alken-Maes’s pricing conditions and that the contact to which the Commission refers is supported by a document which, as it was included in the file, was accessible to the applicant, since its former subsidiary Alken-Maes itself supplied it to the Commission. Whether or not the contact took place by telephone is irrelevant as regards the right to be heard, since, although it is unfortunate that the Commission’s assertion on that point is not supported, the applicant’s right to be heard arises in relation to the question whether contact took place and not whether or not such contact took the form of a telephone conversation, a matter which is of no relevance to the determination of whether or not it constituted an infringement. 75 As regards, next, the statement in recital 53 of the contested decision that the ‘scenario’ described by Interbrew’s CEO at an internal meeting of 5 May 1994 was ‘requested by Danone/Kronenbourg’, that is to say that ‘Interbrew was to transfer 500 000 hectolitres to Alken-Maes, essentially in the off-trade’, it must be held that point 55 of the statement of objections states that ‘at an internal discussion within Interbrew, [Mr M.] described the following scenario, corresponding to Danone/Kronenbourg’s request. Interbrew was to transfer 500 000 hectolitres to Alken-Maes (essentially in the off-trade)’ and that if ‘Interbrew did not comply with that request, Interbrew France would be annihilated in France with Heineken’s assistance, and an attack would be mounted on Interbrew in Belgium by means of very low prices’. Point 56, which follows, states that ‘the scenario put forward by Kronenbourg [was] examined at an internal meeting of Interbrew on 5 May 1994’. Point 55 of the statement of objections is accompanied by footnotes 35 and 36, which refer to a letter from Interbrew of 28 February 2000 and Annex 18 to that letter (p. 7683 of the Commission’s file). The same document references are given in the contested decision, in recital 53. 76 It must be noted in that regard that Annex 18 to Interbrew’s letter of 28 February 2000, which consists in a statement by Mr C. of Interbrew, contains, on p. 2 of that statement, the following comment: ‘During an internal meeting (held on 5 May 1994), [Mr M.] described to us the scenario requested by Kronenbourg. Essentially, KRO was using blackmail to persuade ITW to transfer 500 000 [hectolitres] to AM (especially in the off-sales sector). Otherwise, they would annihilate ITW-France with Heineken’s assistance and an attack would be mounted on ITW-Belgium by means of very low prices.’ 77 It is therefore plain that the statement set out in recital 53 of the contested decision and points 55 and 56 of the statement of objections essentially amounts to a repetition of information provided by Interbrew in writing, which is contained in the file and was, accordingly, available to the applicant. The applicant cannot therefore claim with respect to the statement referred to in recital 53 of the contested decision that it was unable effectively to exercise its right to be heard. 78 It follows from the foregoing, first, that the statements allegedly made at informal meetings with Interbrew were set out in the statement of objections and, secondly, that, in so far as they were necessary for the purpose of establishing an infringement of Article 81(1) EC, they had their basis in documents to which the applicant had access. It must therefore be held that the applicant had the opportunity of stating its position in relation to those statements and that its right to be heard was observed. 79 With respect, in the second place, to the argument that, in breach of its rights of defence, the applicant was refused access to documents placed on the file after it had access to the file on 5 October 2002, including, in particular, Interbrew’s response to the statement of objections in so far as it might have contained evidence favourable to the applicant, it is sufficient to observe that the request for access to documents added to the file was made by letters of 24 and 28 January 2002, after the administrative procedure had been closed. A failure to make such a request during the administrative procedure will mean that an applicant’s right to do so in any subsequent action for annulment is barred (see, to that effect, Cement, paragraph 31 above, paragraph 383). That argument must accordingly be rejected. 80 As regards the application for access made on 4 March 2002 under Regulation No 1049/2001, it is sufficient to observe that Article 7(2) of that regulation states that ‘in the event of a total or partial refusal, the applicant may, within 15 working days of receiving the institution’s reply, make a confirmatory application asking the institution to reconsider its position’. Following the Commission’s refusal of 26 March 2002 to consent to the applicant’s request for access, it must be held that, by failing to make a confirmatory application within the prescribed period, the applicant withdrew its request of 4 March 2002, as it accepted at the hearing in answer to a question from the Court. 81 It follows that the third part of the plea must be rejected, as, accordingly, must the plea in its entirety.2. The plea alleging infringement of the obligation to state reasonsa) Arguments of the parties82 The applicant argues that the contested decision is inadequately reasoned in that, first, it contains no definition of the relevant markets, which is a necessary precondition for any assessment of anti-competitive conduct and, secondly, that, in setting the amount of the fine, it does no more than refer to the Guidelines, without indicating the precise impact of the criteria used in determining the amount of the fine imposed on it. 83 Thus, in the first place, the contested decision is inadequately reasoned in that, contrary to what the Court’s case-law requires (Joined Cases T‑68/89, T‑77/89 and T-78/89 SIV and Others v Commission [1992] ECR II-1403 ‘Flat Glass’, paragraph 159), it is not founded on an adequate definition of the market relevant to the case, but only on a finding that a ‘Belgian beer market’ existed. The Commission erred in failing to carry out an analysis of the precise geographic extent of the market or markets in question and of the potential substitutability of the various beer products. The use by the Commission in its defence of the expression ‘Belgian brewing industry’ in place of that of ‘Belgian beer market’ does not address the applicant’s complaint that in the present case the definition of the market was one and the same as the definition of the infringement. The geographic markets referred to, namely the Belgian and French markets, are defined in an insufficiently documented manner in the contested decision. 84 Furthermore, the Commission took into account factual information relating to the French market without considering it necessary to analyse its significance against the yardstick of the actual characteristics of that market. In particular, the Commission relied on the argument of a threat of reprisals on the French market, allegedly made by the applicant to Interbrew, whereas the existence of such anti-competitive conduct can be established only when a certain power on a properly-defined market has been found. 85 In the present case, the Commission took the view that the relevance of some of the material used in support of the finding of infringement in the contested decision, including the meeting of 11 May 1994, the telephone conversation of 6 July 1994 and the meeting of 17 April 1997 was not limited to Belgium. Furthermore, the interrelationship between France and Belgium and the similarity of the conduct in both countries were, in the Commission’s view, important elements of the infringement, particularly as regards the alleged threat. 86 In that regard, the Commission’s decision to deal separately with conduct which displays similarities differs from its customary practice of making findings of more than one infringement in a single decision where there is a connection between them owing to the identity of the parties to the cartel, the similarity of the mechanisms used by the cartel in different countries or the interrelationship between different territories or products (see, for example, Commission Decision 96/478/EC of 10 January 1996 relating to a proceeding under Article 85 of the EC Treaty (IV/34.279/F3 – ADALAT) (OJ 1996 L 201 p. 1) (‘the ADALAT Decision’), and the Vitamins and Carbonless Paper Decisions). 87 The adoption of several decisions places the applicant in a position of legal uncertainty and has the effect that the Commission, by the repeated application of starting amounts and possibly weightings, can artificially inflate the total amount of the fines imposed in respect of a given set of facts, without the undertakings in question having had the opportunity of knowing why the activities were treated separately and why they constituted separate infringements. 88 In the second place, the contested decision is also inadequately reasoned as regards the calculation of the fine. In referring, in recital 294 of the contested decision, simply to the method set out in the Guidelines, when their purpose is to ‘ensure the transparency and impartiality of the Commission’s decisions, in the eyes of the undertakings and of the Court of Justice alike’, the Commission failed to fulfil its obligation to state adequate reasons and infringed the principle of legal certainty. 89 As the basis of determining the amount of the fine consists in taking a figure as a starting point and applying adjustments to it, it is essential that the Commission sets out in sufficient detail the full significance of the criteria used in setting the fine in order to satisfy the objective of the obligation to state reasons, namely to allow the applicant to assess whether the fine has been set in a manner which is both consistent and lawful in order to defend its rights, to allow the Court of First Instance and the Court of Justice to exercise their power of review and to allow any party concerned to be aware of the manner in which the Commission applied the EC Treaty. 90 In the present case, notwithstanding the fact that the Commission is not tied to an arithmetical formula, the contested decision sets out neither the detail of the calculation of the fine imposed nor the precise significance of each of the criteria used in determining its amount. Thus, contrary to the procedure followed in other cartel decisions, such as the Vitamins and Carbonless Paper Decisions, the arbitrary selection of a fixed amount of EUR 25 million and the reasons underlying the attempt to ensure that the fine had a deterrent effect, invoked in recital 305 of the contested decision, are not supported by quantified criteria. The absence of an adequate definition of the relevant market also demonstrates the lack of sufficient reasoning in the calculation of the fine, as the Guidelines provide that the starting amount is to be fixed having regard to the size of the relevant geographic market, the impact of the cartel on that market and the turnover achieved there. 91 In particular, in respect of the two aggravating circumstances found against the applicant, namely the fact that it put pressure on Interbrew and the fact that its conduct constituted a repeated infringement, the Commission applied only a single percentage increase of 50%, without indicating the extent to which each relevant aggravating circumstance gave rise to it. The absence of detailed information regarding the respective importance of the criteria used in setting the amount of the fine did not allow the applicant to assess the proportions in which the fine imposed should be reduced. 92 Furthermore, that absence of clear and relevant information is all the more inexcusable since the Commission acknowledges the existence of documents prepared by its staff for internal consultation and discussion regarding the calculation of the fine and no access to those documents was provided. That suggests that the Commission took account in the contested decision of information other than that which was available to the applicant, but made no reference to it in the decision. 93 More specifically, the applicant maintains that the Commission failed to provide adequate reasons for applying the aggravating circumstance of repeated infringement to the applicant. That failure to state proper reasons is particularly prejudicial to the applicant inasmuch as the Commission does not systematically increase the amount of the fine on that ground, but has shown evidence in its past decisions of some hesitation as to the role and importance to be attributed to it in the determination of the fine, and the adoption of the Guidelines has not been sufficient to remove the consequent uncertainty. 94 The Commission disputes the applicant’s arguments.b) Findings of the Court95 The Court of First Instance has jurisdiction in two respects over actions contesting Commission decisions imposing fines on undertakings for infringement of the competition rules. First, under Article 230 EC, it has the task of reviewing their legality. In that context, it must in particular review compliance with the duty to state reasons laid down in Article 253 EC, infringement of which renders a decision liable to annulment. Secondly, the Court has power to assess, in the exercise of the unlimited jurisdiction accorded to it by Article 229 EC and Article 17 of Regulation No 17, the appropriateness of the amounts of fines. That assessment may justify the production and taking into account of additional information which the duty to state reasons laid down under Article 253 EC does not as such require to be set out in the contested decision (Case C‑248/98 P KNP BT v Commission [2000] ECR I-9641, paragraphs 38 to 40, and Case T‑220/00 Cheil Jedang v Commission [2003] ECR II-2473, paragraph 215). 96 As regards the review of compliance with the duty to state reasons, it is settled case-law that the statement of reasons required by Article 253 EC must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Community Court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809, paragraph 19; Case C-56/93 Commission v Belgium [1996] ECR I-723, paragraph 86; Case C-367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63; and Cheil Jedang v Commission, paragraph 95 above, paragraph 216). 97 As regards the scope of the duty to state reasons as it applies to the setting of a fine imposed for infringement of the Community competition rules, it should be noted, first, that such a fine falls to be fixed having regard to the terms of the second subparagraph of Article 15(2) of Regulation No 17, which states that ‘in fixing the amount of the fine, regard shall be had both to the gravity and the duration of the infringement’. The essential procedural requirement to state reasons is satisfied where the Commission indicates in its decision the factors which enabled it to determine the gravity of the infringement and its duration (Case C-291/98 P Sarrió v Commission [2000] ECR I‑9991, paragraph 73, and Joined Cases C-238/99 P, C-244/99 P, C‑245/99 P, C-247/99 P, C-250/99 P to C‑252/99 P and C-254/99 P Limburgse Vinyl Maatschappij and Others v Commission [2002] ECR I‑8375, paragraph 463). Secondly, the Guidelines and the Leniency Notice indicate what factors the Commission is to take into consideration in measuring the gravity and duration of an infringement (Cheil Jedang v Commission, paragraph 95 above, paragraph 217). That being so, the essential procedural requirement to state reasons is satisfied where the Commission indicates in its decision the factors which it took into account in accordance with the Guidelines and, where appropriate, the Leniency Notice and which enabled it to determine the gravity of the infringement and its duration for the purpose of calculating the amount of the fine (Cheil Jedang v Commission, paragraph 95 above, paragraph 218). 98 In the present case, the Commission has satisfied those requirements.99 As regards, in the first place, the complaint alleging the absence of a prior definition of the relevant market by the Commission, it must be held that the Commission was, in the circumstances, under no duty to define the relevant market. It is clear from case-law that, for the purposes of applying Article 81 EC, the reason for defining the relevant market is to determine whether an agreement is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market (Case T-29/92 SPO and Others v Commission [1995] ECR II-289, paragraph 74; Cement, paragraph 31 above, paragraph 1093; and Case T-62/98 Volkswagen v Commission [2000] ECR II-2707, paragraph 230). Consequently, there is an obligation on the Commission to define the market in a decision applying Article 81(1) EC only where it is impossible, without such a definition, to determine whether the agreement, decision by an association of undertakings or concerted practice at issue is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market (Joined Cases T-374/94, T‑375/94, T-384/94 and T-388/94 European Night Services and Others v Commission [1998] ECR II-3141, paragraphs 93 to 95 and 105, and Volkswagen v Commission, paragraph 230). The applicant does not deny that the agreements or concerted practices in question were liable to affect trade between Member States and had as their object the restriction and distortion of competition within the common market. Accordingly, since the application by the Commission of Article 81 EC did not, in the present case, require a prior definition of the relevant market, it cannot be held that the duty to state reasons was infringed in that regard. 100 For the same reasons, while the Commission’s finding, for the purposes of the application of the Guidelines, that a threat had been made by the applicant must disclose in a clear and unequivocal fashion the reasoning followed if it is to satisfy the requirements of Article 253 EC, by contrast, it is not an essential precondition that the reasoning followed define the market in question. The applicant’s argument to the contrary must therefore be rejected. 101 The same applies to the reasoning regarding the taking account of the size of the geographic market. In so far as the applicant maintains that the inadequate reasoning relating to the national nature of the market allowed the Commission to find, without any basis for doing so, that there had been separate infringements and hence artificially to increase the fines imposed on the applicant, it is sufficient to observe that the basis on which such an intention is ascribed to the Commission is entirely hypothetical as the allegation is founded on pure conjecture, without any prima facie evidence to support it. The argument founded on it must therefore be rejected. 102 As regards, in the second place, the allegation that the reasons given for the calculation of the amount of the fine are inadequate, it must be noted that in recitals 296 to 328 of the contested decision the Commission set out the factors which it took into account in calculating the fines imposed on each of the undertakings concerned. Those recitals of the contested decision plainly set out the reasoning followed by the Commission in a clear and detailed manner, thereby allowing the applicant to ascertain the factors taken into account in order to measure the gravity and duration of the infringement for the purposes of calculating the amount of the fine and the Court to exercise its power of review. It must therefore be held that the contested decision satisfies the duty to state reasons imposed on the Commission under Article 253 EC. 103 This plea must therefore be rejected, as, accordingly, must all of the submissions seeking annulment of the contested decision.3. The heads of claim raised in the alternative seeking a reduction in the amount of the fine imposed 104 The applicant raises six pleas in law seeking a reduction in the amount of the fine. They allege, respectively, incorrect assessment of the gravity of the infringement for the purposes of setting the starting amount of the fine, in breach of the principles of proportionality, equal treatment and non bis in idem; incorrect assessment of the duration of the infringement; lack of basis for the finding that the pressure put on Interbrew constituted an aggravating circumstance; lack of basis for the taking account of the applicant’s repeated infringements as an aggravating circumstance; failure to take sufficient account of the applicable attenuating circumstances; and, lastly, incorrect assessment of the scope of the cooperation provided by the applicant, in breach of the principle of equal treatment and the Leniency Notice. 4. The plea alleging incorrect assessment of the gravity of the infringement for the purposes of setting the starting amount of the fine, in breach of the principles of proportionality, equal treatment and non bis in idem Arguments of the applicant105 The applicant submits that there is no basis for the specific starting amount set by the Commission for the gravity of the infringement on the basis of four successive complaints, namely incorrect assessment, in breach of the Guidelines and a number of general principles of Community law, first, of the gravity of the infringement; secondly, of the applicant’s effective economic capacity to cause significant damage to other operators, in particular consumers; thirdly, of the level which ensures that the fine has a sufficiently deterrent effect; and, fourthly, of the requirement to take account of the fact that the applicant had legal and economic knowledge and infrastructures which enabled it more easily to recognise that its conduct constituted an infringement and to be aware of the consequences stemming from it under competition law. 106 The applicant contends that, in the light, in particular, of the very limited quantitative significance of the product covered by the cartel compared with total consumption of beer in the European Union, the very limited size of the geographic area covered by the cartel and the extremely modest level of turnover it achieved for the product concerned, the starting amount should not in any event have exceeded EUR 8 million. – The assessment of the gravity of the infringement: infringement of the principles of equal treatment and proportionality107 As regards the Commission’s assessment of the gravity of the infringement for the purposes of the first subparagraph of Section 1.A of the Guidelines, the applicant does not contest the characteristics of the infringement set out in recital 297 of the contested decision, which it asserts that it and Alken-Maes acknowledged and communicated to the Commission, but only the significance attributed by the Commission to the evidence, seen as a whole, set out in the part of the contested decision which deals with the gravity of the infringement and the ultimate classification of the infringement, on the basis of that evidence, as very serious. The applicant contends that by adopting such a classification, when it had never classified similar infringements as very serious, the Commission infringed the principle of equal treatment by treating comparable situations differently (Hercules Chemicals v Commission, paragraph 57 above, paragraph 295). 108 The applicant maintains, first, that although it referred to the method for determining the gravity of infringements set out in the Guidelines, the Commission did not investigate the question of the actual impact of the cartel in question on the market. 109 It next submits that the Commission’s finding that the infringement was very serious is inconsistent both with the examples it gives in the Guidelines and with the decision-making practice which followed their publication. A cartel is normally to be classified as very serious only when it is organised, or indeed institutionalised, which implies sophisticated systems of monitoring, organisation and surveillance which bear no relation to the conduct complained of in the present case, and operates worldwide or in a number of large Member States; the smallest territory covered by infringements classified as very serious comprised four of the largest Member States of the Community (Commission Decision 2003/382/EC of 8 December 1999 relating to a proceeding under Article 81 of the EC Treaty (Case IV/E‑1/35.860‑B – Seamless Steel Tubes) (OJ 2003 L 140, p. 1) (the ‘Seamless Steel Tubes Decision’). 110 The applicant contends, first, that having regard to its unstructured nature, the infringement should have been classified as serious and not as very serious, particularly as the Commission has classified as serious infringements of a degree of sophistication at least equivalent to that of the infringement in the present case (Commission Decision 2003/25/EC of 11 December 2001 relating to a procedure under Article 81 of the EC Treaty (Case COMP/E‑1/37.919 (ex 37.391) – Bank charges for exchanging euro‑zone currencies – Germany) (OJ 2003 L 15, p. 1) (‘the German Banks Decision’), Commission Decision 1999/271/EC of 9 December 1998 relating to a proceeding under Article 85 of the EC Treaty (IV/34.466 – Greek Ferries) (OJ 1999 L 109 p. 24) (‘the Greek Ferries Decision’) and Commission Decision 1999/210/EC of 14 October 1998 relating to a proceeding under Article 85 of the EC Treaty (Case IV/F‑3/33.708 – British Sugar plc, Case IV/F‑3/33.709 – Tate & Lyle plc, Case IV/F‑3/33.710 – Napier Brown & Company Ltd and Case IV/F‑3/33.711 – James Budgett Sugars Ltd) (OJ 1999 L 76, p. 1) (‘the British Sugar Decision’)). 111 Secondly, in the light of Belgium’s small size, the Commission displayed undue severity in the present case, in breach of the principles of proportionality and equal treatment, as its decision-making practice shows that has held on several occasions that an infringement fell to be classified as serious and not as very serious when it involved only a small or geographically-limited market (the Greek Ferries Decision, the British Sugar Decision and the German Banks Decision). 112 Thirdly, the Commission’s argument that one of the criteria applied in assessing the gravity of the infringement was its direct impact on consumers lacks force. First, the cartels referred to in the German Banks Decision and the British Sugar Decision had the same characteristics, but were not classified by the Commission as very serious on that ground and, secondly, in the present case the distribution structure for the products concerned, both as regards supermarkets and the on-sales sector, represented, in view of the size of the warehouses, a powerful counterweight to the cartel, which allowed its negative effects on consumers to be mitigated in part. 113 The applicant concludes that the Commission could not, without infringing the principle of equal treatment, classify the infringement established in the contested decision as very serious when it did not take the form of an organised cartel having sophisticated structures and systems to ensure compliance with commitments between undertakings and when it concerned only a limited area and a small proportion of beer production in the European Union. The fine should therefore be substantially reduced. 114 In any event, even if the Commission did not infringe the principle of equal treatment in classifying the infringement as very serious, the starting amount of the fine should nevertheless be reduced so as to take account of the minimal impact of the infringement on the Community market and the low volume of sales of the products covered by the cartel, as the Commission did in the Seamless Steel Tubes Decision. In that decision, without changing the classification of the infringement, the Commission applied a starting amount of less than half that provided for in the Guidelines for very serious infringements, on the ground that the sales of the products concerned by the members of the cartel in the four Member States concerned represented only approximately 19% of Community consumption. In the present case, the products covered by the cartel represented less than 2.5% of total consumption in the European Union. The specific starting amount applied by the Commission is thus disproportionate in relation to the volume and the value of those products and must therefore be reduced. – The assessment of the applicant’s effective economic capacity to cause significant damage to other operators: infringement of the principle of proportionality 115 As regards the Commission’s assessment of its economic capacity to restrict competition, the applicant maintains that the Commission’s point of reference should be the market on which the infringement occurred, and that the amount of fine must be reasonably commensurate with the turnover achieved on that market (Case T-77/92 Parker Pen v Commission [1994] ECR II-549, paragraph 94). 116 Moreover, it is necessary to take account of the position of the undertakings concerned on the reference market in order to assess their capacity to influence competition. 117 Although those two principles are referred to in the contested decision, the Commission did not observe them. While Interbrew’s turnover for sales on the market during the period in question was four times higher than the applicant’s, the specific starting amount determined for Interbrew was less than twice as high as that applied to the applicant. Such a lack of proportionality is contrary to the Commission’s recent practice, as illustrated by its Decision 2003/674/EC of 2 July 2002 relating to a proceeding under Article 81 of the EC Treaty and Article 53 of the EEA Agreement (Case C.37.519 - Methionine) (OJ 2003 L 255, p. 1) (‘the Methionine Decision’), in which it took the view that the difference between the fines imposed should reflect the imbalance between the market share of the leading producer on the market worldwide and one of its competitors having a market share that was five times smaller. 118 In addition, the Commission failed to take account of Interbrew’s dominant position on the Belgian beer market, which of necessity severely restricted the applicant’s effective economic capacity to influence the market or indeed to cause significant damage to other operators. Moreover, the applicant was seeking merely to put an end to its gradual marginalisation. 119 In considering that it was entitled to determine the starting amount of the fine on the basis of the applicant’s overall turnover, which constituted an indication of its ‘capacity to cause harm’, rather than on the basis of the turnover achieved on the market in question, the Commission lost sight of the criterion of the ‘capacity to cause significant damage to other operators’ referred to in the contested decision. If it wished to take account of a higher turnover figure than that achieved on the Belgian market for beer, the Commission should both have defined the relevant markets and shown how the applicant’s activities on those other markets allowed it to cause damage on the beer market. 120 Far from reflecting the glaring imbalance between their respective situations, the amounts of the fines imposed on Interbrew and the applicant are on the contrary evidence of the manifestly disproportionate nature of the specific starting point applied to the applicant by reference to its actual capacity to influence the market. 121 Thus, while the fine of EUR 45 million imposed on Interbrew corresponds to less than 6.6% of its turnover for 1998, by imposing a fine of EUR 25 million on the applicant, the Commission set an amount which exceeded 20% of the turnover in 2000 of the undertaking which was really involved in the cartel, Alken-Maes, with the result that, if that company had been penalised for its own conduct, the limit of 10% of total turnover laid down under Regulation No 17 would have been greatly exceeded. – The setting of the amount of the fine at a level which ensures that it has a sufficiently deterrent effect: infringement of the principle of proportionality 122 The applicant maintains, first, that the Commission failed to provide details of the element of deterrence involved in the calculation of the fine and that, although it stated in the contested decision that the applicant and Interbrew are large international undertakings and that the former is also a multi-product undertaking, the Commission did not specify the principles adopted in applying the criterion of deterrence. 123 Secondly, the increase by the Commission of the amount of the fine to reflect the deterrent purpose of the penalty is based on reasoning which is irrelevant and disproportionate. 124 The determination of the deterrent level of the fine should thus have a competitive object and, according to the applicant, that level should be assessed solely by reference to the size of the undertaking on the relevant market and its prospects of gaining from the offending conduct on that market. Factors such as the international dimension of the undertaking or the fact that this was a repeated infringement are irrelevant. Contrary to what the Commission found in relation to ABB Asea Brown Boveri in Decision 1999/60/EC of 21 October 1998 relating to a proceeding under Article 85 of the EC Treaty (Case No IV/35.691/E-4 – Pre-insulated Pipe Cartel) (OJ 1999 L 24, p. 1) (‘the Pre-insulated Pipe Cartel Decision’), it was not even suggested in the present case that the applicant’s structure and the existence of foreign subsidiaries outside the beer sector facilitated the impugned conduct. 125 Furthermore, economic theory shows that the amount of a fine is adequate when it exceeds the benefits which the parties to the cartel expected to achieve. In the present case, a significantly lower fine would have satisfied that condition, as the applicant’s profitability on the market concerned was negative throughout the infringement period. 126 In addition, even if, as the Commission claims, the object of deterrence meant that the lower the probability of detection of an infringement, as is the case with secret cartels, the higher the fine should be, the applicant submits that its amount ought to have remained very significantly lower than the sum imposed by the Commission. Moreover, the cartel in question was not a secret one, as a number of meetings relating to it were held in the presence of competitors, such as the meetings of the working party known as ‘Vision 2000’, or of distributors, such as the meeting of 28 January 1993, the distributors having followed the activities of the parties to the cartel very closely, as is shown by a letter to the brewers from the wholesalers’ federation. 127 Lastly, the taking into account of any object of deterrence whatsoever served no purpose, as the effect of deterrence – illustrated by the fact that the exchange of sales information ceased immediately – was achieved in the present case as soon as the investigation started and the applicant began to cooperate, as is evidenced by the immediate exchange of sales information. – The taking into account of the legal and economic knowledge and infrastructures that large undertakings usually possess: infringement of the principle non bis in idem 128 The applicant submits that, in taking account of the fact that it had legal and economic knowledge and infrastructures which enabled it more easily to recognise that its conduct constituted an infringement and be aware of the consequences stemming from it under competition law, the Commission infringed the principle non bis in idem in that it also increased the amount of the fine in the contested decision on the ground of repeated infringement. Arguments of the Commission129 With respect to the assessment of the gravity of the infringement, the Commission refers to the gravity of the facts at issue and maintains that the classification of infringements limited to a single Member State as very serious is not inconsistent with its decision-making practice. Furthermore, the size of a sector should not be measured by reference only to its geographical extent, but must also be gauged in terms of economic importance. As the beer sector in Belgium accounts for some EUR 1 200 million, the infringement was committed in a very important sector. Lastly, the infringement had a direct impact on consumers, which the characteristics of beer distribution did not mitigate in any way. 130 As regards the criterion of the effective economic capacity to cause significant damage to other operators, in particular consumers, the Commission claims that the applicant’s overall turnover is much higher than Interbrew’s. Furthermore, the Commission is free to determine the type of turnover to be taken into account, namely overall turnover or that achieved in the relevant sector, and indeed to combine the two, where appropriate. Lastly, the fact that the specific starting amount represents 20% of Alken-Maes’s total annual turnover of is of no relevance, since the limit set by Regulation No 17 applies in the present case to the applicant’s turnover. 131 As regards the identification of a sufficiently deterrent level of fine, the Commission observes that in the case of a secret infringement, the fine must be set at a much higher level than the expected benefit, size and the multi-product nature of the applicant’s activities being relevant criteria for the purpose of determining deterrence. Moreover, neither the cessation of the infringement nor the cooperation provided by the applicant permits the conclusion that an appropriate level of deterrence was achieved. 132 Lastly, as regards the taking into account of the legal and economic knowledge and infrastructures which large undertakings usually have, the argument alleging infringement of the principle non bis in idem has no factual basis. In determining the specific starting amount, the Commission based itself on the applicant’s recognition that its conduct constituted an infringement, while the fact that this was a repeat infringement was taken into account because the applicant had committed infringements in the past. b) Findings of the Court133 It should be borne in mind at the outset that Article 15(2) of Regulation No 17 states that ‘the Commission may by decision impose on undertakings or associations of undertakings fines of from [EUR] 1 000 to [EUR] 1 000 000, or a sum in excess thereof, but not exceeding 10% of the turnover in the preceding business year of each of the undertakings participating in the infringement where, either intentionally or negligently … they infringe Article [81](1) … of the Treaty’. The same provision states that ‘in fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement’ (LR AF 1998 v Commission, paragraph 57 above, paragraph 223). 134 It is, moreover, settled case-law that, in the context of Regulation No 17, the Commission possesses a wide margin of discretion when setting fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules (Case T‑150/89 Martinelli v Commission [1995] ECR II‑1165, paragraph 59; Case T‑49/95 Van Megen Sports v Commission [1996] ECR II‑1799, paragraph 53; and Case T-229/94 Deutsche Bahn v Commission [1997] ECR II‑1689, paragraph 127). 135 Moreover, the fact that in the past the Commission applied fines of a certain level to certain types of infringement does not mean that it is estopped from raising that level, within the limits set out in Regulation No 17, if that is necessary in order to ensure the implementation of Community competition policy (Musique diffusion française and Others v Commission, paragraph 50 above, paragraph 109; Case T‑12/89 Solvay v Commission [1992] ECR II-907, paragraph 309; and Case T‑304/94 Europa Carton v Commission [1998] ECR II-869, paragraph 89). On the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy (Musique diffusion française and Others v Commission, paragraph 50 above, paragraph 109, and LR AF 1998 v Commission, paragraph 57 above, paragraphs 236 and 237). 136 However, Article 17 of Regulation No 17 gives the Court unlimited jurisdiction within the meaning of Article 229 EC in proceedings brought against decisions in which the Commission has fixed the amount of a fine and may, accordingly, cancel, reduce or increase the fine imposed. In the exercise of its unlimited jurisdiction, the Court must consider whether the amount of the fine imposed is proportionate to the gravity and duration of the infringement (see, to that effect Deutsche Bahn v Commission, paragraph 134 above, paragraphs 125 and 127, and Cheil Jedang v Commission, paragraph 95 above, paragraph 93) and must weigh the seriousness of the infringement with the circumstances invoked by the applicant (see, to that effect, Case C-333/94 P Tetra Pak v Commission [1996] ECR I‑5951, paragraph 48). 137 It should next be noted that it is settled case-law that the gravity of infringements has to be determined by reference to numerous factors, such as, in particular, the actual circumstances of the case, its context and the deterrent effect of fines; moreover, no binding or exhaustive list of the criteria which must be applied has been drawn up (order of the Court of Justice of 25 March 1996 in Case C‑137/95 P SPO and Others v Commission [1996] ECR I-1611, paragraph 54; Case C‑219/95 P Ferriere Nord v Commission [1997] ECR I‑4411, paragraph 33; Case T‑334/94 Sarrió v Commission [1998] ECR II‑1439, paragraph 328; and LR AF 1998 v Commission, paragraph 57 above, paragraph 236). In particular, the gravity of the infringement is to be appraised by taking into account the nature of the restrictions on competition (Case 45/69 Boehringer v Commission [1970] ECR 769, paragraph 53; and Joined Cases T-213/95 and T-18/96 SCK and FNK v Commission [1997] ECR II-1739, paragraph 246). The Commission must also have regard to the deterrent effect of its action, especially as regards those types of infringement which are particularly harmful to the attainment of the objectives of the Community (Musique diffusion française and Others v Commission, paragraph 50 above, paragraphs 105 and 106, and ABB Asea Brown Boveri v Commission, paragraph 50 above, paragraph 166). 138 However, the case-law provides that, where the Commission adopts guidelines which are consistent with the Treaty and are designed to specify the criteria which it intends to apply in the exercise of its discretion, the Commission itself then limits that discretion in that it must comply with the guidelines which it has imposed upon itself (Hercules Chemicals v Commission, paragraph 57 above, paragraph 53, upheld on appeal in Case C-51/92 P Hercules Chemicals v Commission [1999] ECR I-4235, paragraph 75). In determining the gravity of infringements once guidelines are adopted, the Commission is thus obliged to take into account, amongst other factors, the matters referred to in those guidelines, save where it specifically sets out the reasons justifying, should the case arise, its departure from them in a specific area (Case T-213/00 CMA CGM and Others v Commission [2003] ECR II-913 ‘FETTCSA’, paragraph 271). 139 The Guidelines provide that the Commission is to take as its basis in setting the amount of the fine a general starting amount determined according to the gravity of the infringement. In assessing the gravity of the infringement, account must be taken of its nature, its actual impact on the market, where that can be measured, and the size of the relevant geographic market (first paragraph of Section 1.A). Within that framework infringements are put into one of three categories, namely ‘minor infringements’, where fines are likely to fall within the band EUR 1 000 and EUR 1 million, ‘serious infringements’, where fines are likely to fall within the band EUR 1 million to EUR 20 million, and ‘very serious infringements’, where fines are likely to exceed EUR 20 million (first to the third indents of the second paragraph of Section 1.A). 140 The Commission states in that regard that minor infringements might for example be trade restrictions, usually of a vertical nature, but with a limited market impact and affecting only a substantial but relatively limited part of the Community market (first indent of the second paragraph of Section 1.A). Serious infringements will more often than not be horizontal or vertical restrictions of the same type as minor infringements, but more rigorously applied, with a wider market impact, and with effects in extensive areas of the common market. There might also be an abuse of a dominant position (second indent of the second paragraph of Section 1.A). Lastly, very serious infringements will generally be horizontal restrictions such as price cartels and market‑sharing quotas, or other practices which jeopardise the proper functioning of the single market, such as the partitioning of national markets and clear-cut abuse of a dominant position by undertakings holding a virtual monopoly (third indent of the second paragraph of Section 1.A). 141 The Guidelines state that within each of those categories of infringement, and in particular as far as ‘serious’ and ‘very serious’ infringements are concerned, the proposed scale of fines will make it possible to apply differential treatment to undertakings according to the nature of the infringement committed (third paragraph of Section 1.A). It is also necessary to take account of the effective economic capacity of offenders to cause significant damage to other operators, in particular consumers, and to set the fine at a level which ensures that it has a sufficiently deterrent effect (fourth paragraph of Section 1.A). In addition, account may also be taken of the fact that large undertakings usually have legal and economic knowledge and infrastructures which enable them more easily to recognise that their conduct constitutes an infringement and be aware of the consequences stemming from it under competition law (fifth paragraph of Section 1.A). 142 Within each of those three categories defined above, it may be necessary in cases involving several undertakings, such as cartels, to apply weightings to the amount determined in order to take account of the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition, particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same type. Consequently, it may be necessary to adopt the general starting amount according to the specific nature of each undertaking (sixth paragraph of Section 1.A). 143 The Guidelines also state that the principle of equal punishment for the same conduct may, if the circumstances so warrant, lead to different fines being imposed on the undertakings concerned without that differentiation being governed by arithmetic calculation (seventh paragraph of Section 1.A). 144 It is in the light of those principles that it is necessary to consider, first, whether in its application in the present case of the method laid down in the Guidelines for the purposes of determining the gravity of the infringement, the Commission infringed the principles invoked by the applicant. It should next be determined whether – on the assumption that, as the applicant claims in the alternative, the infringement must classified as very serious – the specific starting amount of EUR 25 million ultimately applied in the applicant’s case is itself appropriate having regard to the circumstances invoked by the latter, namely the very limited impact of the infringement on the Community market and the low volume of sales of the products covered by the cartel. The assessment of the gravity of the infringement145 In the present case, the contested decision shows that the Commission assessed the gravity of the fine on the basis of the following factors: the actual nature of the infringement; the fact that the cartel concerned all segments of the beer market, that the discussions in question were conducted at the highest management level and that the agreements and consultations concerned a wide variety of competition parameters; the fact that it could not be concluded that the cartel had no, or only a limited effect on the market; and the fact that the geographic market was the whole territory of Belgium. 146 In the first place, as regards the question whether the assessment of the gravity of the infringement complied with the Guidelines and the principle of proportionality, it is necessary to consider the manner in which the Commission assessed that gravity in the light of the three relevant criteria, namely the nature of the infringement, its actual impact on the market, where that can be measured, and the size of the relevant geographic market (see paragraph 139 above). 147 With respect, first, to the actual nature of the infringement, it should be noted that the applicant does not challenge the points mentioned in recital 297 of the contested decision, namely that the agreement comprised a general non-aggression pact, the exchange of information about sales, the direct and indirect agreement of and consultation on prices and promotions in the off-trade, the sharing of customers on the on-trade market and the restriction of investment and advertising on that market. It is settled case-law that horizontal price agreements are particularly injurious under Community competition law and may, by reason of that fact alone, be classified as very serious (Joined Cases T-202/98, T‑204/98 and T-207/98 Tate & Lyle and Others v Commission [2001] ECR II-2035, paragraph 103, and FETTCSA, paragraph 138 above, paragraph 262). As well as representing a price-fixing agreement, the arrangements described by the Commission in recital 297 of the contested decision constitute one of the most serious forms of damage to competition, in that their aim is quite simply to eliminate competition between the undertakings which implement them. The Commission’s conclusion that the agreements and consultations at issue constitute, by their nature, a very serious infringement, cannot be disputed. Nor can that conclusion be called into question by the fact that the Commission also found that the agreements and consultations concerned a wide variety of competition parameters and related to all segments of the beer market, as those findings flow directly and logically from the points mentioned in recital 297 of the contested decision, which are not disputed by the applicant. Nor can the holding of meetings relating to the cartel at the highest level of responsibility, namely the senior managers of the applicant and its subsidiary, which, again, are not disputed, mitigate the extreme gravity of the actual nature of the infringement. 148 As regards, next, the criterion of the impact of the cartel, it must be held that, although the Commission found in the contested decision that certain parts of the agreement were not, or were not fully, implemented, it held, by contrast, that it could not be concluded that there was no effect, or only a limited effect, on the market. In support of that finding, the Commission relied not only on the written evidence represented by the notes taken by a representative of Interbrew at the meeting of 28 January 1998, which record a number of achievements, but also on the fact, determined by the Commission, that the arrangements for the exchange of information about sales between Alken-Maes and Interbrew were actually implemented. The fact that an agreement having an anti-competitive object is implemented, even if only in part, is sufficient to preclude the possibility that the agreement had no effect on the market. 149 The applicant’s argument that the agreement was unstructured and informal, which is evidence of a low degree of intention to infringe, is disproved by the facts. The multiplicity and the simultaneity of the objectives pursued by the cartel, which are not disputed by the applicant, go to prove the existence of an anti-competitive plan, which is evidence, not of a low, but of a high degree of intention to infringe. Even if the cartel was relatively informal, it was none the less highly structured. 150 As regards, lastly, the criterion of the size of the relevant geographic market, the Commission found in the contested decision that the agreement extended to the whole of Belgium, which the applicant does not dispute. It is clear from case-law that where a geographic market extends to the whole of a country, that market represents a substantial part of the common market (Case 322/81 Michelin v Commission [1983] ECR 3461, paragraph 28). Moreover, the Commission indicated in the Guidelines that horizontal restrictions such as price cartels and market-sharing quotas or other practices which jeopardise the proper functioning of the single market will more often than not be classified as very serious infringements (see paragraph 140 above). It follows from that indicative description that agreements or concerted practices involving in particular, as in the present case, the price-fixing and customer-sharing may be classified in that way on the basis of their nature alone, without it being necessary for such conduct to have a particular impact or cover a particular geographic area. That conclusion is supported by the fact that, while the indicative description of the types of infringement liable to be considered as serious mentions that they comprise infringements of the same type as those defined as minor ‘but more rigorously applied, with a wider market impact, and with effects in extensive areas of the common market’, the description of very serious infringements makes, by contrast, no mention of a requirement that there be an impact or that there be effects in a particular geographic area. 151 It follows from the foregoing that in classifying the infringement as very serious within the meaning of Section 1.A of the Guidelines, the Commission did not infringe the principle of proportionality. 152 It should be noted in that regard that the Court has held in relation to a price cartel operated on a limited geographic market that the classification of the agreement as serious by reason of its limited impact on the market already represented an attenuated classification having regard to the criteria generally applied when fixing fines in price cartel cases, which should have led the Commission to classify the agreement as very serious (Tate & Lyle and Others v Commission, paragraph 147 above, paragraph 103). 153 With respect, in the second place, to the argument that the Commission failed to have regard in this case to its decision-making practice, in breach of the principle of equal treatment, it should be pointed out, first, that the Commission’s practice in previous decisions does not itself serve as a legal framework for the fines imposed in competition matters, (LR AF 1998 v Commission, paragraph 57 above, paragraph 234) and, secondly, that it is settled case-law (see paragraph 134 above) that the Commission possesses a wide margin of discretion under Regulation No 17 when setting fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules. It is accordingly for the Commission, in the exercise of its discretion and in the light of the matters referred to in the third indent of the second paragraph of Section 1.A of the Guidelines, to determine whether the individual circumstances of the case under consideration call for the infringement to be classified as very serious. It is clear from paragraphs 146 to 152 above that that was the case. 154 As has already been mentioned in paragraphs 134 and 135 above, the fact that in the past the Commission has applied fines of a certain level to certain types of infringement does not mean that it is estopped from raising that level, within the limits set out in Regulation No 17, if that is necessary in order to ensure the implementation of Community competition policy. On the contrary, the effective application of the Community competition rules means that the Commission must be able, at any time, to adapt the level of fines to the requirements of that policy. Such conduct does not constitute an infringement by the Commission of the principle of equal treatment by reference to its earlier practice (see, to that effect, Joined Cases T-305/94, T-306/94, T-307/94, T-313/94 to T-316/94, T-318/94, T‑325/94, T-328/94, T‑329/94 and T-335/94 Limburgse Vinyl Maatschappij and Others v Commission [1999] ECR II-931 (‘PVC II)’, paragraph 1232). 155 It must therefore be held that in categorising the infringement in question as very serious within the meaning of Section 1.A of the Guidelines, the Commission complied with its guidelines and did not infringe either the principle of proportionality or the principle of equal treatment. The appraisal of the effective economic capacity of the applicant to cause significant damage to other operators 156 The Guidelines provide that, where an infringement is sufficiently serious, it may be necessary in cases involving several undertakings, such as cartels, to apply weightings to the general starting amount in order to establish a specific starting amount taking account of the weight and, therefore, the real impact of the offending conduct of each undertaking on competition, particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same type (sixth paragraph of Section 1.A, see paragraph 142 above). In particular, it is necessary to take account of the effective economic capacity of offenders to cause significant damage to other operators, in particular consumers (fourth paragraph of Section 1.A, see paragraph 141 above). 157 It is also evident from case-law that the Guidelines do not provide that fines are to be calculated according to the overall turnover of the undertakings concerned or their turnover in the relevant market. Nor, however, do they preclude the Commission from taking either figure into account in determining the amount of the fine in order to ensure compliance with the general principles of Community law and where circumstances demand it. In particular, turnover may be relevant when considering the various factors mentioned in paragraphs 141 to 143 above (LR AF 1998 v Commission, paragraph 57 above, paragraphs 283 and 284, and Cheil Jedang v Commission, paragraph 95 above, paragraph 82). 158 It is in addition settled case-law that the criteria for assessing the gravity of an infringement may, depending on the circumstances, include the volume and value of the goods in respect of which the infringement was committed, the size and economic power of the undertaking and, consequently, the influence which it was able to exert on the market. It follows that, on the one hand, it is permissible, for the purpose of fixing a fine, to have regard both to the overall turnover of the undertaking, which gives an indication, albeit approximate and imperfect, of the size of the undertaking and of its economic power, and to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, which gives an indication of the scale of the infringement. On the other hand, it is important not to confer on one or other of those figures an importance which is disproportionate in relation to other factors and that the fixing of an appropriate fine cannot be the result of a simple calculation based on overall turnover (Musique diffusion française and Others v Commission, paragraph 50 above, paragraphs 120 and 121; Parker Pen v Commission, paragraph 115 above, paragraph 94; Case T-327/94 SCA Holding v Commission [1998] ECR II-1373, paragraph 176; and Cheil Jedang v Commission, paragraph 95 above, paragraph 83). 159 In this case, the first point to note is the limited scope of the applicant’s argument that the difference in the proportion which the starting amounts applied to each undertaking bore to the market share of those undertakings on the Belgian beer market shows that the Commission disregarded the principle that the effective capacity to cause damage is adequately reflected by the volume and value of the goods sold by each party. It must be held that the starting amounts referred to by the applicant incorporate not only the adjustment applied to take account of the effective capacity to cause damage to competitors on the market, but also the adjustment applied to reflect the objective of a deterrent effect. 160 In that regard, recital 305 of the contested decision shows that the adjustment of the amount of the fines with a view to ensuring their deterrent effect was made by the Commission in two stages. First, the applicant and Interbrew were placed on equal footing in that in setting the starting amounts in each case the Commission took account of the fact that they ‘[were] large international undertakings’. Secondly, the Commission indicated that it was ‘important that [the applicant was] a multi-product company’, thereby indicating that there was a need for a higher level of deterrence in its case. It is therefore clear that, as regards the objective of deterrence and without addressing at this point the validity of the conclusions reached by the Commission in that respect, the specific starting amount of the fine imposed on the applicant took account of a greater need to ensure deterrence than in Interbrew’s case. 161 It must none the less be noted that the specific starting amount applied to the applicant is approximately 45% lower than that applied to Interbrew. Moreover, the Commission stated, in recital 303 of the contested decision, that it had taken account of the effective economic capacity of the offenders to cause significant damage to other economic operators and, in recital 304, that there was a considerable difference in size between Interbrew, the market leader in Belgium with a market share of approximately 55%, and Alken-Maes, the number two on that market, with approximately 15%. 162 It therefore appears that the Commission took account, in accordance with the Guidelines, of the relative economic capacity of the two undertakings to cause damage to other operators when, in setting the specific starting point for the applicant, it applied a significant discount to the general starting amount corresponding to the gravity of the infringement, for the purposes of the first paragraph of Section 1.A of the Guidelines. The fact that recital 303 refers to the capacity to ‘cause material harm to competitors’, (1) rather than repeating verbatim the expression used in the Guidelines, is of no relevance. Likewise, the fact that the ratio of the starting amounts applied to each undertaking differs from the precise ratio of their respective market shares has no bearing on the validity of the Commission’s approach. The Commission has indicated in the seventh paragraph of Section 1.A of the Guidelines that the imposition of different fines need not be governed by arithmetical calculation. 163 As regards, in the second place, the applicant’s arguments that the specific starting amounts imposed do not reflect the glaring imbalance resulting from Interbrew’s dominant position on the Belgian beer market, which led Alken-Maes to seek to put an end to its gradual marginalisation and is, in any event evidence of the applicant’s inability to restrict competition, it must be borne in mind that the infringement established in the contested decision is not denied by the applicant. That infringement, which consists in a set of agreements and/or concerted practices, implies both an agreement of wills between the parties and that the damage done to competition resulted from that agreement and, accordingly, from the will of each of the parties. Accordingly, the applicant cannot invoke pressure which it claims was on it and thereby avoid liability for the damage done to competition. 164 For the sake of completeness, it should also be noted that it is settled case-law that an undertaking which participates with others in anti-competitive behaviour cannot rely on the fact that it did so under pressure from the other participants. It could have complained to the competent authorities about the pressure brought to bear on it and have lodged a complaint with the Commission under Article 3 of Regulation No 17 rather than participating in the activities in question (Case T‑9/89 Hüls v Commission [1992] ECR II-499, paragraphs 123 and 128; Case T‑141/89 Tréfileurope v Commission [1995] ECR II-791, paragraph 58; and LR AF 1998 v Commission, paragraph 57 above, paragraph 142). 165 As regards, lastly, the argument that the specific starting amount applied to the applicant represents a much higher percentage of Alken-Maes’s turnover than the amount applied to Interbrew represents of the latter’s turnover, it should first be noted that those amounts, as already mentioned in paragraphs 159 and 160 above, reflect not only the actual damage caused by each of the parties to competition but also the objective of deterrence referred to in the Guidelines. The argument that the starting amount applied to Alken-Maes is higher than the limit laid down in Regulation No 17 in terms of percentage of turnover is, in any event, wholly irrelevant, as the contested decision was addressed to the applicant. 166 The arguments alleging incorrect appraisal by the Commission, in breach of the principle of proportionality, of the effective capacity of the participants to cause significant damage to other operators, in particular consumers, must accordingly be rejected in their entirety. The setting of the fine at a level which ensures that it has a sufficiently deterrent effect 167 The Guidelines provide that where an infringement involves several undertakings, such as cartels, a weighting may be applied to the general starting amount in order to establish a specific starting amount which takes account of the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition, particularly where there is considerable disparity between undertakings committing infringements of the same type (see paragraph 142 above). In particular, it is necessary to set the fine at a level which ensures that it has a sufficiently deterrent effect (see paragraph 141 above). 168 The taking into account, for the purposes of determining the amount of the fine imposed in respect of the gravity of the infringement, of that objective of deterrence reflects settled case-law according to which the deterrent effect of fines constitutes one of the factors which the Commission is entitled to take into account in assessing the gravity of the infringement and, accordingly, in setting the level of the fine, as the gravity of infringements has to be determined by reference to numerous factors, such as the particular circumstances of the case, its context and the deterrent effect of fines; moreover, no binding or exhaustive list of the criteria which must be applied has been drawn up (order in SPO and Others v Commission, paragraph 137 above, paragraph 54; Ferriere Nord v Commission, paragraph 137 above, paragraph 33; and Sarrió v Commission, paragraph 137 above, paragraph 328). 169 Similarly, the case-law provides that the Commission’s power to impose fines on undertakings which, intentionally or negligently, commit an infringement of Article 81(1) EC is one of the means conferred on the Commission in order to enable it to carry out the task of supervision conferred on it by Community law. That task encompasses the duty to pursue a general policy designed to apply, in competition matters, the principles laid down by the Treaty and to guide the conduct of undertakings in the light of those principles. It follows that, in assessing the gravity of an infringement for the purpose of fixing the amount of the fine, the Commission must ensure that its action has the necessary deterrent effect, especially as regards those types of infringement which are particularly harmful to the attainment of the objectives of the Community (Musique diffusion française and Others v Commission, paragraph 50 above, paragraphs 105 and 106, and ABB Asea Brown Boveri v Commission, paragraph 50 above, paragraph 166). 170 In the light of the foregoing, the Commission was justified in taking account of the objective of deterrence in setting the specific starting amount of its fine, which precisely reflects the gravity of the infringement committed. The taking into account of the deterrent effect of fines forms an integral part of the weighting of fines to reflect the gravity of the infringement, since the purpose of doing so is to ensure that a calculation method does not lead to fines which, for certain undertakings, would not be sufficiently high to ensure that the fine had a sufficiently deterrent effect (ABB Asea Brown Boveri v Commission, paragraph 50 above, paragraph 167). 171 With respect to the applicant’s argument that there was a failure to specify the part played by the need to ensure a deterrent effect in the calculation of the fine, it must be pointed out that the Commission did not lay down in the Guidelines any method or specific criteria as to the manner in which the objective of deterrence was to be taken into account and which, had they been set out expressly, would have been capable of having binding effect. That argument must accordingly be rejected. 172 The same is true of the argument that the principles adopted in the present case for the purposes of assessing the need to ensure a deterrent effect were not made explicit. The applicant itself accepts that the Commission stated in recital 305 of the contested decision that the applicant and Interbrew are large international undertakings and that the applicant is also a multi-product company. The Commission added in recital 306 that it took into account the fact that the applicant had legal and economic knowledge and infrastructures which enabled it more easily to recognise that its conduct constituted an infringement and be aware of the consequences stemming from it under competition law. It is therefore clear that, contrary to the applicant’s contention, the principles applied in assessing the need to have a deterrent effect were made explicit. 173 It is necessary, lastly, to consider the various arguments whereby the applicant seeks to show that the Commission’s reasoning in support of its finding that there was a need for a specific deterrent effect is irrelevant and disproportionate. 174 The argument that the fact that this constituted a repeat infringement cannot be deemed relevant must be rejected at the outset, since the Commission’s reasoning relating to the deterrence was not based on such an objection. 175 With respect to the argument that the overall size of the undertaking and its international dimension are irrelevant as regards the object of competition which the Commission should pursue, it should first of all be noted that the fact that the applicant had legal and economic knowledge and infrastructures which enabled it more easily to recognise that its conduct constituted an infringement and be aware of the consequences stemming from it under competition law may be considered to reflect the overall resources of the undertaking and thus its size, of which its international dimension is one item of evidence amongst others. The Commission was therefore fully entitled to take account of it. The fact that the applicant participated in the cartel despite the fact that it had the resources to recognise that it constituted an infringement and to be aware of its consequences objectively indicates an additional need for deterrence by comparison with an undertaking without such resources. 176 The argument that the taking account, for the purposes of determining the necessary level of deterrence, of the secret nature of the cartel is irrelevant, as the cartel was not kept secret, or, at least, not kept secret due to the applicant, is based on the claim that, in the context of the cartel, a number of meetings took place in the presence of competitors, for example the meetings of the working party known as ‘Vision 2000’, or distributors, such as the meeting of 28 January 1993, which included beer wholesalers. In addition, a letter of 4 August 1997 sent to the brewers by the federation of beer wholesalers shows that the latter followed the activities of the members of the cartel very closely. 177 As regards, first, the meetings of the ‘Vision 2000’ working party, it should be pointed out that in recitals 128 to 155 of the contested decision the Commission does not contend that those meetings, which were official since they were held under the auspices of the Confédération des brasseries de Belgique (‘the CBB’) and included a large part of the trade, were, as such, constitutive of the infringement. The Commission found that Interbrew and Alken-Maes, in the context of their bilateral contacts, acted together in the CBB and saw the advantages of taking certain initiatives through the organisation and that Interbrew and Alken-Maes had agreed that part of the cartel, namely that which related to investment and advertising in the on‑trade and the new pricing system, could be implemented within the CBB. The Commission thus refers to the use of the CBB as a means of implementing, without the knowledge of the other participants in the meetings in question, an agreement between Interbrew and the applicant to influence certain pricing discussions conducted within that body to reflect the objects of their cartel, without suggesting that the other participants were informed of its existence. It must further be held that the objectives pursued by Interbrew and the applicant through the auspices of the CBB and the meetings of the ‘Vision 2000’ working party, namely a restriction of investment and advertising in the on-trade and the development of a new pricing structure, represented in any event only a limited aspect of the cartel, which comprised other secret elements, such as a general non‑aggression pact, an agreement on prices and promotions in the off‑trade, customer-sharing on the on-trade market and also an exchange of sales information. The fact that the meetings of the ‘Vision 2000’ working party were held cannot therefore lead to the conclusion that the agreement was not secret. 178 As regards, next, the meeting of 28 January 1993 (see paragraphs 126 and 131 above), it must be held that, although the minute of that meeting, prepared by a representative of Interbrew, refers to a ‘meeting of beer wholesalers’ and records the terms of an agreement to raise prices and impose minimum prices in respect of beer sold through certain distribution channels, it cannot in any way be inferred from that minute that full details of the anti-competitive arrangements included in the agreement were given to the beer wholesalers at the meeting of 28 January 1993. While those arrangements confirm that the trading policy of Alken-Maes and Interbrew were closely coordinated, they do not, by contrast, imply that the beer wholesalers were informed of the cartel. 179 As regards the letter of 4 August 1997 sent by the federation of beer wholesalers to Alken-Maes, it is clear that it does no more than criticise the distribution policy of Alken-Maes for jeopardising the future of independent distributors. Accordingly, it does not imply in any way that the beer wholesalers were aware of the cartel. 180 The argument that the cartel which the contested decision found to exist was not secret must therefore be rejected.181 The Commission was accordingly entitled, in carrying out the tasks set out in the case-law in paragraphs 134 and 135 above and in complying with the legal framework laid down in Article 15(2) of Regulation No 17, to take account of those matters in assessing the need to ensure a deterrent effect. 182 The applicant’s argument that it is unnecessary to take an objective of deterrence into account since the Commission’s intervention put an end to the infringement must be rejected and it should be emphasised that the purpose of establishing a deterrent effect is to guide the future conduct of the undertaking and that the fact that an undertaking ceases its offending conduct immediately that conduct is exposed by the Commission, an initiative which the undertaking is objectively bound to take, does not constitute sufficient grounds for concluding that it will be effectively deterred from repeating such conduct in the future. 183 All of the arguments alleging incorrect determination of the deterrent level of the fine, in breach of the principle of proportionality, must therefore be rejected. The taking account of the legal and economic knowledge and infrastructures which large undertakings usually have184 It is clear from case-law that the principle non bis in idem, enshrined also in Article 4 of Protocol No 7 to the European Convention on Human Rights and Fundamental Freedoms (‘the ECHR’) signed in Rome on 4 November 1950, is a general principle of Community law which will be upheld by the Community judicature (Joined Cases 18/65 and 35/65 Gutmann v Commission [1966] ECR 103, 119; Case 7/72 Boehringer v Commission [1972] ECR 1281, paragraph 3; and PVC II, paragraph 154 above, paragraph 96, upheld on appeal in Limburgse Vinyl Maatschappij and Others v Commission, paragraph 97 above, paragraph 59). 185 In the field of Community competition law, that principle prohibits an undertaking being punished or having proceedings brought against it by the Commission on a second occasion in relation to anti-competitive conduct in respect of which a penalty has been imposed on it or for which it has been declared not to be liable by an earlier decision of the Commission which is no longer capable of being appealed against. The application of the principle non bis in idem is subject to the threefold condition of identity of the facts, unity of offender and unity of the legal interest protected (Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P Aalborg Portland and Others v Commission [2004] ECR I‑123, paragraph 338). 186 In the present case, it must be pointed out that in recital 306 of the contested decision, the Commission took as grounds for increasing the level of the fine to be imposed on the applicant the fact that it had legal and economic knowledge and infrastructures which enabled it more easily to recognise that its conduct constituted an infringement and be aware of the consequences stemming from it under competition law. In addition, in recital 314 of the contested decision, the Commission took as grounds for increasing the level of the fine to be imposed on the applicant the fact that it had already been found to have infringed Article 81 EC on two previous occasions. 187 In that regard, it is clear, first, that the conditions governing the application of the principle non bis in idem, as laid down by the case‑law in the field of competition (see paragraph 185 above), are not satisfied in the present case, as, in setting the amount of the fine, the Commission did no more than take into account factual considerations, namely, first, that by reason of its economic and legal knowledge and infrastructures the applicant was in a position to recognise that its conduct constituted an infringement and be aware of its consequences and, secondly, that it had already been found to have infringed Article 81 EC on two previous occasions. In any event, it was on other grounds that the Commission increased the level of the fine in recitals 306 and 314 of the contested decision. The fourth part of the plea must accordingly be rejected. The appropriateness of the specific starting amount in the light of the circumstances invoked by the applicant 188 The applicant submits in the alternative that, even if it is accepted that the Commission did not contravene the principle of equal treatment in classifying the infringement as very serious, the starting amount of the fine should nevertheless be reduced in order to take account of the minimal impact of the infringement on the Community market and the low volume of sales of the products covered by the cartel. 189 It should be borne in mind that, as required by the method set out in the Guidelines (see paragraphs 139 to 143 above), the Commission took as its starting-point in setting the fines a general starting amount determined according to the gravity of the infringement, that it next applied a weighting to that general starting amount by reference, first, to the effective capacity of the undertakings in question to cause significant damage to other operators, in particular consumers, secondly, to the requirement to set the fine at a level which ensures that it has a sufficiently deterrent effect and, thirdly, the requirement to take account of the fact that large undertakings usually have legal and economic knowledge and infrastructures which enable them more easily to recognise that their conduct constitutes an infringement and be aware of the consequences stemming from it under competition law. 190 It was held in paragraphs 133 to 187 above that in classifying the infringement as very serious and in making the series of adjustments referred to above the Commission did not contravene any of the principles invoked by the applicant. Moreover, it should be borne in mind that the Guidelines contemplate that fines will be imposed in excess of EUR 20 million in cases of very serious infringements. 191 As regards the applicant’s argument that the specific starting amount applied was in any event disproportionate having regard to the fact that the products covered by the cartel represented less than 2.5% of the total consumption of those products in the European Union, it must be held that the gravity of an infringement does not depend only on its geographic extent and on the proportion which the sales covered by the infringement bears to sales made in the whole of the European Union. Irrespective of those criteria, the absolute value of the sales in question is also a relevant indication of the gravity of the infringement, since it is an accurate reflection of the economic importance of the transactions which the infringement seeks to remove from the normal interplay of competition. It is not disputed in the present case that the approximate value of the sales concerned could be assessed at approximately EUR 1 200 million, which signifies that the sector is of considerable economic importance. In that context, the specific starting amount of EUR 25 million applied to the applicant cannot be regarded as excessive. 192 As regards the reference to the Commission’s practice in the Seamless Steel Tubes decision, it is sufficient to note that it is irrelevant in the light of the case-law referred to in paragraph 153 above. 193 It should, moreover, be pointed out that the Commission took account in that decision of the fact that the type of seamless steel pipes and tubes that were the subject of the infringement represented only 19% of all the seamless steel pipes and tubes which were capable of being used by the oil and gas industry, with the result that the impact of the infringement was limited since the industry could turn to other products that were unaffected by the cartel. In the present case, the infringement covered a much more significant share of the beer available in Belgium, since the Commission stated in recital 4 of the contested decision, without being challenged on the point, that the parties to the agreement brewed about 70% of the total beer sold in Belgium in 1998. 194 In the light of all the foregoing considerations, the applicant’s argument that the amount of the fine imposed was inappropriate must be rejected. 195 The plea must therefore be rejected in its entirety.5. The plea alleging incorrect assessment of the duration of the infringement 196 While it states that it does not deny the substantive truth of the facts established against it, the applicant submits that the Commission incorrectly assessed the significance of certain facts in determining the duration of the infringement. In particular, reference was made by the Commission to a telephone conversation and two meetings between the applicant and Interbrew, which took place after July 1996 and several months apart and on which it relied in support of the conclusion that the infringement continued until 28 January 1998. However, the Commission failed to establish that the infringement continued after July 1996. It should therefore be accepted that the duration of the offending conduct did not exceed three years and six months, which justifies an increase in the specific starting amount of the fine considerably lower than 45%. In accordance with its case-law, the Court must accordingly reduce the fine imposed on the applicant, having regard to the actual duration of the infringement. 197 As regards, in the first place, the telephone conversation of 9 December 1996 between Interbrew and the applicant, the applicant states that, contrary to what the Commission’s reference to other documents in the file implies, the handwritten and annotated notes of Alken-Maes’s management controller Mr L.B. dated 27 November 1996 were the only document on which the Commission based its findings. 198 The applicant does not deny that those handwritten notes were drawn up at an internal meeting which took place in November 1996, the purpose of which, according to the applicant, was to consider Interbrew’s new prices, as a result of Alken-Maes having been given Interbrew’s new conditions of sale by its customers. By contrast, the applicant does challenge the Commission’s interpretation of the three sets of annotations subsequently added to those notes, each of which includes the date ‘9/12/96’ and plainly represents a reply to three questions put in the original notes, regarding aspects of Interbrew’s pricing policy which were unclear at the time the original notes were drawn up. The Commission was wrong to hold that Mr A.B. of Interbrew should be asked for his opinion regarding them, which was done on 9 December 1996, when Interbrew gave one positive answer and two negative ones. According to the applicant, the other documents in the file which the contested decision refers to provide no support for that interpretation. The annotations made to the notes of 27 November 1996 could have been the result of enquiries made quite independently of any direct contact with Interbrew, made, for example, of distributors, who would only have echoed the interpretation given to them by Mr A.B. As one of the distributors of Interbrew’s products, it was natural for Alken-Maes to seek to understand Interbrew’s new prices for logistical reasons. The document in question accordingly is not sufficient to establish the truth of the Commission’s case. 199 As regards, secondly, the meeting of 17 April 1997, the applicant submits that that meeting is not evidence of the cartel relating to the Belgian market, since its purpose, according to the statement of Mr J.D. of Interbrew referred to in recital 96 of the contested decision, was to establish potential synergies between the two groups and an increase in the profitability of the two undertakings, in the event that Interbrew were to reacquire the applicant’s subsidiary Alken-Maes. 200 The applicant contests the Commission’s conclusion that Mr J.D.’s statement demonstrates the anti-competitive nature of that meeting. That statement contains a summary of all the contacts between Interbrew and Alken-Maes. As regards, specifically, the meeting of 17 April 1997, Mr J.D. states only that those taking part in the meeting undertook a line-by-line analysis of Alken-Maes’s profit and loss account, that being a necessary part of any negotiations on the possible transfer of an undertaking. The five points referred to in the document are all matters having a bearing on Alken-Maes’s operating results or the method used to calculate them. 201 The applicant also challenges the Commission’s finding that it is unlikely that Mr R.V., the head of Alken-Maes, would have been present at the meeting in question if the discussion had related to the disposal of Alken-Maes, since such a disposal might not have been to his benefit. According to the applicant, there was nothing out of the ordinary about his presence, particularly if the person concerned wished to retain a role in the company. Moreover, there was all the more reason for him to be present, as Interbrew envisaged an acquisition by way of a management buy-out, which implied an important role for the existing management, as is evidenced by two statements placed in the file, namely those of Mr C. and Mr T. 202 As regards, in the third place, the meeting of 28 January 1998 involving inter alia Mr A.D. of Interbrew and Mr N.V. of Alken-Maes, the applicant contends that the discussion essentially involved a summary of past relationships. It also observes that, according to Interbrew’s representative, the representative of Alken-Maes was wholly unaware of those events. 203 The applicant maintains that there is nothing to support the Commission’s contention that Mr A.D.’s handwritten notes of 28 January 1998 proves that the cartel existed at that date. In particular, there is nothing which leads to the conclusion that the content of those notes may be attributed to both parties, which the Commission wrongly does in identifying the material contained in Mr A.D.’s notes as representing an alleged conversation, when it is possible that the material contained in the notes reflects the views of Interbrew alone. It would be surprising in the circumstances if the representative of Alken-Maes, who had no knowledge of the matter, could have given a detailed description of the agreements concluded in 1994. Moreover, the contested decision does not deny that the meeting of 28 January 1998 was not followed up. It therefore follows that the notes in question do not prove the existence or the implementation of an agreement or a concerted practice at that date, but go simply to show a positive assessment by Interbrew of the agreement concluded in 1994 and its desire to renew it. 204 The applicant accordingly argues that the period of the offending conduct did not exceed three years and six months and that the increase in the fine for duration should be reduced. 205 The Commission points out first that, in contending that the agreement ended in July 1996, the applicant is disputing its duration, whereas it claims that it does not substantially contest the facts. Next, the Commission established to the requisite legal standard that anti-competitive contacts between the applicant and Interbrew were in place until 28 January 1998. Lastly, as the applicant did not publicly distance itself from meetings which were shown to have an anti-competitive object and which it accepts that it participated in, its responsibility until 28 January 1998 is substantiated in any event. 206 Article 15(2) of Regulation No 17 provides that the duration of the infringement is one of the factors that must be taken into account in determining the amount of the fine to be imposed on undertakings which infringe the competition rules. 207 The Guidelines distinguish between infringements of short duration (in general, less than one year), where no increase should be made to the starting amount determined for gravity, infringements of medium duration (in general, one to five years), where that amount may be increased by up to 50%, and infringements of long duration (in general, more than five years), where that amount may be increased by up to 10% per year (first to the third indents of the first paragraph of Section 1.B). 208 In recital 281 of the contested decision, the Commission stated that it had evidence concerning the Interbrew/Alken-Maes Cartel from at least 28 January 1993 to 28 January 1998. It stated that ‘on 28 January 1993 a report was made of a first meeting with a clearly anti-competitive aim’ and that ‘on 28 January 1998 the last meeting within the framework of the cartel took place in respect of which the Commission has documentation’. The Commission concluded that ‘the duration of the infringement is thus five years and one day’. That finding was repeated in the operative part of the contested decision, in which the Commission stated that the infringement took place ‘during the period from 28 January 1993 to 28 January 1998’. 209 In recital 282 of the contested decision, the Commission stated that the applicant disputed that the infringement had lasted as long as that and that it maintained that the discussions between Alken-Maes and Interbrew started only on 12 October 1994 and ended in July 1996. However, the Commission rejected those arguments and found that the duration of the infringement had been established to the requisite legal standard. 210 In this plea, the applicant’s arguments refer again to the fact that the Commission did no properly determine the duration of the infringement. The applicant disputes the increase in the fine solely in so far as, in its contention, the infringement did not continue beyond July 1996. 211 Nor does the applicant expressly seek annulment of Article 1 of the contested decision, which defines the duration of its participation in the cartel. It invoked the plea relating to the duration of the infringement only in the alternative, in support of a request for a reduction in the amount of the fine imposed on it. 212 Nevertheless, the applicant’s written pleadings in the present case show that it is essentially contesting the validity of the contested decision inasmuch as the decision finds, as Article 1 of its operative part states, that the infringement took place over the period from 28 January 1993 until 28 January 1998. Thus, the applicant stated in its application that ‘the [contested] decision is invalid, since it finds that the period of the infringement was from 28 January 1993 to 28 January 1998’ and that the Commission ‘[has failed] to establish … to the requisite legal standard that the infringement continued beyond July 1996’. The applicant went on to state in its reply that ‘a correct reading of the file should have … led [the Commission] to find that the infringement was of a lesser duration and to draw the appropriate consequences as regards the level of the fine’. Moreover, it is common ground that the applicant disputed the duration of the infringement in the course of the administrative procedure, in particular in its response to the statement of objections, as is mentioned in paragraph 512 below. 213 In the light of the foregoing, it should therefore be held that by the present plea relating to the duration of the infringement, the applicant seeks not only a reduction in the fine but also the partial annulment of the contested decision, in particular Article 1 of its operative part, in that the Commission wrongly held that the infringement continued until 28 January 1998. 214 It is accordingly necessary to determine, in the context of the present plea, whether the Commission established to the requisite legal standard, on the basis of the recorded facts, that the infringement continued until 28 January 1998. 215 It should be noted in that regard that as regards proof of an infringement of Article 81(1) EC, the Commission must prove the infringements which it has found and adduce evidence capable of demonstrating to the requisite legal standard the existence of circumstances constituting an infringement (Case C-185/95 P Baustahlgewebe v Commission [1998] ECR I-8417, paragraph 58, and Case C‑49/92 P Commission v Anic Partecipazioni [1999] ECR I-4125, paragraph 86). Any doubt in the mind of the Court must operate to the advantage of the undertaking to which the decision finding an infringement was addressed. The Court cannot therefore conclude that the Commission has established the infringement at issue to the requisite legal standard if it still entertains any doubts on that point, in particular in proceedings for annulment of a decision imposing a fine. 216 In the latter situation, it is necessary to take account of the principle of the presumption of innocence resulting in particular from Article 6(2) of the ECHR, which is one of the fundamental rights which, according to the settled case-law of the Court of Justice, reaffirmed in the Preamble to the Single European Act, by Article 6(2) of the Treaty on European Union and by Article 47 of the Charter of Fundamental Rights of the European Union (OJ 2000 C 364, p. 1), are protected in the Community legal order. Given the nature of the infringements in question and the nature and degree of severity of the ensuing penalties, the principle of the presumption of innocence applies in particular to the procedures relating to infringements of the competition rules applicable to undertakings that may result in the imposition of fines or periodic penalty payments (see Case C-199/92 P Hüls v Commission [1999] ECR I-4287, paragraphs 149 and 150, and Case C-235/92 P Montecatini v Commission [1999] ECR I-4539, paragraphs 175 and 176). 217 It is accordingly necessary for the Commission to produce sufficiently precise and consistent evidence to support the firm conviction that the alleged infringement took place (see Volkswagen v Commission, paragraph 99 above, paragraphs 43 and 72 and the case-law cited). 218 However, it is important to emphasise that it is not necessary for every item of evidence produced by the Commission to satisfy those criteria in relation to every aspect of the infringement. It is sufficient if the body of evidence relied on by the institution, viewed as a whole, meets that requirement (see, to that effect, PVC II, paragraph 154 above, paragraphs 768 to 778, and in particular paragraph 777, confirmed on the relevant point by the Court of Justice, on appeal, in its judgment in Limburgse Vinyl Maatschaapij and Others v Commission, paragraph 97 above, paragraphs 513 to 523). The telephone conversation of 9 December 1996 219 As regards the alleged unlawful contact which took place on 9 December 1996, it should first be noted that the Commission stated in recital 91 of the contested decision that ‘following on from the meeting of 19 September, Alken-Maes’s management controller contacted Interbrew’s off-trade manager, on 9 December, to ask a number of questions Alken-Maes had with regard to the pricing study’. The Commission relies in support of that finding on the final page of a document which comprises Annex 42 to the letter from Alken-Maes to the Commission of 7 March 2000 (see paragraph 72 above), a copy of which appears at page 8513 of its file. The parties are agreed that that document contains handwritten notes taken by Mr L.B. of Alken-Maes at an internal meeting held to discuss Interbrew’s new prices and that annotations which represent replies to the questions the author had originally set out in his notes were subsequently added to the document by him. 220 On being invited by the Court, by means of a written question, to specify the factors leading it to find in recital 91 of the contested decision that a telephone conversation had taken place on 9 December 1996 in relation to Interbrew’s prices between Mr L.B. (Alken-Maes) and Mr A.B. (Interbrew), the Commission first indicated that the background to the internal meeting of 27 November 1996, at which the handwritten notes were taken, was a meeting held on 29 July 1996 between Interbrew and Alken-Maes at which Interbrew’s intentions regarding the logistical element of its trading policy, as it was to be amended and implemented by the entry into force of the new prices from 1 January 1997, were discussed in detail. 221 The Commission stated that the conclusion resulting from its consideration of the notes taken on 27 November 1996, which contain six dashes followed by handwritten text of one or two lines each containing a question mark, was that those notes contained questions which Mr L.B. (Alken-Maes) put to himself on that day regarding Interbrew’s prices and that the annotations subsequently made to the document gave either the place where the answer was to be found or the answer to those questions. In this instance, the annotations representing an answer to some of the questions go to establish that the replies to the questions were obtained from Interbrew on 9 December 1996. 222 As the applicant has formally contested that interpretation, it is necessary to consider to what extent those additions result from, and accordingly represent evidence of, an anti-competitive contact between Alken-Maes and Interbrew. 223 It should be noted in that regard that final page of the document dated 27 November 1996 and headed ‘Tariefstudie’ is presented as a list of six questions relating to Alken-Maes’s prices. 224 It seems that each of the six questions called, in the mind of the author of the initial notes, for an answer that had not yet been given at the date they were framed. The document effectively suggests that steps had been taken in relation to each of the six questions with a view to finding an answer to them. Thus, the first and sixth questions, which refer to legal matters, expressly mention a person called ‘[P.V.D.]’ and refer in all probability to the then legal adviser of Alken-Maes. Similarly, the third question asks for a check to be carried out with customers through the distribution department (checken bij klanten via distributie). 225 As regards the second, fourth and fifth questions, against which the three annotations under discussion were subsequently made, it is important to note that the second question begins with the words ‘check IB’, where ‘IB’ plainly signifies Interbrew. It was specifically against that second question that the subsequent handwritten note ‘Ja, volgen [Mr A. B.] (IB) 9/12/96’ was made. That annotation suggests that Mr A.B. (Alken‑Maes) adopted that proposed method of dealing with the question and contacted Interbrew on 9 December 1996, speaking to Mr A.B., who replied in the affirmative. The two other handwritten additions dated 9 December 1996 should therefore be interpreted in the same way. 226 As regards the applicant’s argument that it is possible that the replies referred to were obtained from distributors, it must be held that that suggestion is contradicted by the fact that the notes relating to the third question specifically seek an answer from customers and the distribution department and that no annotation of the kind made to the second, fourth and fifth questions was made to the third question. 227 It thus appears to be established that the answers to the third question, on the one hand, and the second, fourth and fifth questions, on the other, came from the sources referred to. In those circumstances, the fact that the third question specifically sought clarification from customers and that the second question expressly called for a check to be made with Interbrew confirms that it was intended to contact the latter for the purposes of obtaining the answer to certain questions. Furthermore, the fact that the three notes setting out replies to the questions carry the same date of 9 December 1996 confirms beyond reasonable doubt that an anti-competitive contact did indeed take place on 9 December 1996, whether by telephone or otherwise. 228 It must therefore be held that evidence of unlawful contact on 9 December 1996 has been adduced. The meeting of 17 April 1997229 As regards the allegedly unlawful meeting of 17 April 1997, the Commission states in recital 95 of the contested decision that managers of Interbrew, the applicant and Alken-Maes met in Paris on 17 April 1997. The applicant does not deny that such a meeting took place. 230 In addition, the Commission mentions in recital 96 of the contested decision the statement of the general manager of Interbrew at the time, Mr J.D., relating to the matters addressed at that meeting and concludes that the subject of that meeting was the coordination of the market behaviour of Interbrew and the applicant, which the applicant categorically denies. 231 In that regard, it should be noted at the outset that the applicant does not dispute the probative nature of Interbrew’s statement in so far as it consists solely of the unilateral statement of an undertaking, but only to the extent that the minute of the meeting does not establish that it had an anti-competitive object. 232 The passage from Interbrew’s statement relating to the meeting of 17 April 1997 is worded as follows: ‘There were top-level meetings ... which I did not attend. After the top‑level meetings we had “instructions meetings” which we all attended (general managers and managers for the off-trade and the on‑trade) ... The meeting of [17 April 1997] was just one of these instructions meetings with [the applicant] ([the applicant] was represented by Mr K.). We (“Belgium” and “France”, but each separately) were to report on synergies. At that meeting we went through profit and loss line by line, and systematically examined how costs could be lowered and profitability improved. Subjects discussed were: (1) production; (2) joint distribution platforms; (3) discounts on price to be given before or after excise duties (this was also a CBB subject); (4) marketing and investment in advertising (“share of voice”); (5) growth of the beer market, and methods of increasing volume, based on the success achieved by the water business in France. In the off-trade we achieved a number of things, far more than in the on‑trade, where little or nothing happened.In the off-trade there were agreements on:– rebates on promotions aimed at the consumer (e.g. 5 + 1 free)– marketing issues (e.g. value of coupon at promotional events)– advertising brochure frequencies (e.g. maximum 10 brochures for crates of beer at GIB).233 The reference in the statement to a ‘line-by-line’ review of the profit and loss account does not allow it to be determined with certainty whether it refers to a scrutiny of the combined profit and loss account of Kronenbourg and Alken-Maes or to a scrutiny of the latter’s profit and loss account and that of Interbrew in parallel. 234 It should also be pointed out that, irrespective of the discrepancies in the written explanations provided by the parties to a written question put by the Court, the passage from the statement regarding the meeting of 17 April 1997 shows beyond reasonable doubt that the meeting was unlawful. 235 The anti-competitive object of the meeting is clear, in the first place, from the particular points discussed. The mere fact that issues such as ‘production’, ‘discounts on price’ and ‘marketing and investment in advertising’ were the subject of consultation between the most senior managers of the two principal competitors on the beer market permits the conclusion that the meeting had an anti-competitive object. 236 In the second place, it is clear from the passage from Interbrew’s statement set out in recital 96 of the contested decision that the meeting of 17 April 1997 is given as an example of the ‘instructions meetings’ intended to give effect to other higher-level cartel meetings, with the result that its anti-competitive nature is not in doubt. 237 In the third place, and in that context, the use of the term ‘synergy’ in the passage from the statement set out in recital 96 suggests that it refers generically to the results that those in authority at the highest level of the cartel expected of the ‘instructions meetings’, of which the meeting of 17 April 1997 is given as an example, and not to the specific question of the reacquisition of Kronenbourg/Alken-Maes. Furthermore, as the Commission rightly points out in its rejoinder, that term was previously used by the author of the statement to designate not the discussions on the possible reacquisition of Kronenbourg/Alken-Maes, but certain elements of the collaboration between Interbrew and Alken-Maes in France. Those points also go to support the finding that the meeting of 17 April 1997 was anti-competitive. 238 In the fourth place, as the Commission points out, all of the points referred to above should be examined in the light of other statements made by Alken-Maes during the administrative procedure. In its reply of 27 December 1999 to the Commission’s request for information of 11 November 1999, Alken-Maes indicated, while seeking at the same time the benefit of the Leniency Notice, that ‘numerous meetings [had taken] place between executives of Alken-Maes, notably Mr R.V., who was managing director between 1992 and 1998, and executives of Interbrew, especially Mr T. and Mr J.D., at which there [had been] consultation about the distribution and sale of beer in Belgium’. 239 With respect to the argument based on the presence of Mr R.V. at the meeting of 17 April, it must be held that his presence gives rise to no presumption in either direction, and that it should accordingly be disregarded. 240 In the light of all of the foregoing considerations, it must be held that the unlawful nature of the meeting of 17 April 1997 was established by the Commission to the requisite legal standard. The meeting of 28 January 1998. 241 With reference to the matters discussed at the meeting of 28 January 1998, which the applicant does not dispute took place, the significance to be ascribed to the handwritten notes of Interbrew’s Belgian marketing manager, Mr A.D., depends on the conclusions to be drawn from two points, namely the nature of their contents and the extent to which they were up-to-date. 242 As regards, first, their contents, the coherent and structured nature of the notes made by Interbrew’s representative, Mr A.D., which contain no crossings-out, leads to the conclusion that they do not constitute a record of a conversation but an aide-mémoire. 243 As regards, next, the extent to which the content of the notes was up‑to‑date, it appears that their originator regarded a number of issues as being current. That is the case, for example, with the first two points, headed respectively ‘organisation of consultations’ and ‘current issues’ in the first section, headed ‘Subjects’. In the same way, the third section, headed ‘consultation on on-trade’ appears to refer to the future arrangements relating to such consultations. Furthermore, the second section, headed ‘Points decided on 1.1.1994’ mentions ‘achievements’ and does not go to disprove the fact that, as far as the author was concerned, those achievements continued to have an effect. 244 As there is no dispute that the meeting of 28 January 1998 between Interbrew and the applicant took place, the Court must examine, as it did in the case of the meeting of 17 April 1997 (see paragraph 237 above), the significance to be attributed to those notes in the light of Alken-Maes’s reply of 27 December 1999 to the Commission’s request for information of 11 November 1999, in which it was stated that ‘numerous meetings took place between executives of Alken-Maes, notably Mr R.V., who was managing director between 1992 and 1998, and executives of Interbrew, especially Mr T. and Mr J.D., at which there was consultation about the distribution and sale of beer in Belgium’. That statement on its own constitutes an acknowledgement by the applicant that anti-competitive meetings in which it took part continued until 1998. Its content therefore means that Mr A.D.’s handwritten notes can be treated as establishing the anti-competitive nature of the meeting of 28 January 1998. 245 In addition, it is clear from case-law that, once it has been established that an undertaking has taken part in meetings between undertakings having a manifestly anti-competitive nature, it is for that undertaking to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs (Hüls v Commission, paragraph 216 above, paragraph 155; Montecatini v Commission, paragraph 216 above, paragraph 96; and Aalborg Portland and Others v Commission¸ paragraph 185 above, paragraph 81). Failing such evidence of distancing, it may be concluded from participation in those meetings that the undertaking is participating in the cartel which results from them, even if it does not actively do so (Aalborg Portland and Others v Commission¸ paragraph 185 above, paragraph 81, and Case T-9/99 HFB and Others v Commission [2002] ECR II‑1487, paragraph 223). In addition, the fact that an undertaking does not abide by the outcome of those meetings is not such as to relieve it of full responsibility for the fact that it participated in the cartel (Aalborg Portland and Others v Commission, paragraph 185 above, paragraph 85; Mayr-Melnhof vCommission, paragraph 57 above, paragraph 135; and Cement, paragraph 31 above, paragraph 1389). 246 It is clear in the present case that the applicant has produced no evidence to establish that its participation in the meeting of 28 January 1998, which is not in dispute, had no anti-competitive intention by demonstrating in particular that it indicated to Interbrew’s representative that it was participating in those meetings in a spirit that was different from his. 247 It follows from the foregoing that the Commission has established to the requisite legal standard that the infringement in question continued until 28 January 1998. 248 In those circumstances, the plea must be rejected.6. The plea alleging that there was no basis for the finding that the pressure put on Interbrew constituted an aggravating circumstance 249 The applicant maintains that, in finding that it put pressure on Interbrew at the meeting of 11 May 1994 which, in the form of a threat to force it off the French market if it refused to grant it a sales quota of 500 000 hectolitres on the Belgian market, led to an extension of the cartel after that date, the Commission is mistaken as to the impact of the facts in issue. 250 In the first place, while it is true that, during the period prior to the meeting of 11 May 1994, discussions related essentially to prices, the introduction of additional factors after that period, namely respect for each party’s customer base together with new prices, could not be interpreted as a significant extension of the scope of the infringement. In particular, the concern that the mutual customer bases be respected arose only from the problems created by Interbrew’s failure to respect the exclusive agreements between Alken-Maes and a number of its customers. In addition, other topics were put on the agenda for the meetings, both before and after the meeting of 11 May 1994, so that it would be unreasonable to categorise the topics discussed by the parties as an extension of the cooperation in May 1994. 251 In the second place, while relations between the parties did indeed move towards a more structured cartel after 1994, that development was in the interests of both parties and indeed, as regards pricing, those of Interbrew in particular, and no aspect of the cartel was in the exclusive interest of the applicant. 252 Accordingly, Interbrew’s interest in concluding, prior to May 1994, a non-aggression pact is shown by its concern that prices would tumble on the Belgian market. As the Commission acknowledges in the contested decision, Interbrew was very keen that there be consultations on prices in Belgium so as to protect itself against the aggressive policy of the applicant in that field, although at the same time it pursued an aggressive policy towards the exclusive agreements between Alken-Maes and a number of its customers, and so as to avoid low-priced parallel imports from France. Although its strong position would have allowed it to eliminate Alken-Maes from the market by means of a price war, Interbrew set itself the objective of restoring calm to a Belgian market which it dominated in order to be able to fund its international expansion through profits made in Belgium, where prices were higher. Alken-Maes stood in the way of that that desire to restore calm, at least initially, by conducting itself in a fiercely competitive manner with the admitted aim of achieving break-even. Interbrew thus had an immediate interest in concluding a non-aggression pact. 253 Interbrew also had an interest in reaching agreement with the applicant in relation to the reacquisition of its ‘beer’ division. Its cartel with Alken-Maes can also be explained by its desire to have a partner in imposing a new pricing structure on the market. Furthermore, as it risked a finding of infringement for the abuse of its dominant position, Interbrew might have had an interest in reaching agreement with Alken-Maes rather than eliminating it from the market. 254 Moreover, the alleged reluctance on Interbrew’s part prior to 1994, on which the Commission relied in the contested decision and in its defence, with particular reference to an Interbrew internal memorandum of March 1993, results in the Commission misinterpreting the scope of that document. While the passage quoted by the Commission does indeed refer to reluctance, its use is however misleading inasmuch as that document shows not only that that reluctance related to a finding of infringement under Article 82 EC, but also that Interbrew’s CEO at the time had instructed the author of the memorandum to enter into discussions with Alken-Maes, thereby on the contrary demonstrating a willing and unhesitating participation in the cartel, decided upon at the time by Interbrew’s most senior manager. Lastly, the Commission failed to point out that the author of the memorandum mentioning reluctance in 1993 is the same person who, six months later, having become CEO of Interbrew, took steps which forced Alken-Maes to cooperate in achieving the price sought by Interbrew. 255 The Commission also overlooked the fact that Interbrew set clear objectives for the cartel in 1994, as is evidenced by a number of recitals of the contested decision, thereby demonstrating that it played a leading role in the cartel prior to 1994, as the contested decision also mentions. The fact that Interbrew used a code name to refer to the cartel also confirms its structured approach to the practices in question. Lastly, the statement of the former managing director of Alken-Maes that the great majority of Interbrew’s managers wanted a cartel even before 1994 also shows that the alleged reluctance on Interbrew’s part did not exist. 256 In the third place, while the applicant acknowledges that it did indeed warn Interbrew at the meeting of 11 May 1994 that the latter was involved in the breach of its distribution agreements in France, it none the less failed to ensure that those agreements were fully complied with, and thus did not, in fact, exert any pressure. Furthermore, the contention that threats were made against Interbrew is contradicted in the contested decision by the finding that Interbrew did not accept the applicant’s demand that it transfer 500 000 hectolitres to Alken-Maes. 257 In addition, the imbalance between the relative strengths of the applicant and Interbrew in France and Belgium was extremely strong. As the applicant did not have a dominant position in France, it would in any event not have been capable of forcing Interbrew out of that country. Because sales outlets with distribution agreements with the applicant represented only 16% of the total outlets in France, there is plainly no basis for the view that Interbrew might take any threat of being forced out of the market seriously. Moreover, the possible consequences of a strict application by the applicant of its distribution agreements in France were out of all proportion to the risk incurred by the applicant’s subsidiary in Belgium, having regard to the real influence of Interbrew’s strength in Belgium. There is thus a manifest lack of proportionality between the alleged existence of a threat which would not have been implemented and the increase in the fine applied for that circumstance. 258 Furthermore, although the Commission ascribed importance to the warning given to Interbrew, which, according to the applicant, contemplated only the use of lawful means (which in the event were not implemented) to put an end to Interbrew’s involvement in the breach of its agreements in France, the Commission ignored the threats and reprisals made by Interbrew against Alken-Maes during the whole of the period. Thus, Interbrew’s disproportionate reaction to the aggressive marketing policy of Alken-Maes in 1994, the reckless manner in which Interbrew sought to persuade Alken-Maes to follow its policy of raising prices in 1993 and the attacks made by Interbrew on cafés tied to Alken-Maes are all evidence of the constant aggression shown to the applicant by Interbrew, a dominant undertaking which ‘terrorised the market’, thus threatening to exclude Alken-Maes. 259 The satisfaction expressed by Interbrew in January 1998 regarding the cartel’s achievements, which is evidenced by the notes taken by its marketing manager for Belgium, is not consistent with the argument that Alken-Maes exerted pressure on Interbrew. 260 Fourthly, and lastly, the applicant submits that in any event proof of the threat made by it has not been adduced. All of Interbrew’s statements were made in 2000 and supplied to the Commission at an advanced stage in the investigation procedure. They reflected Interbrew’s defence strategy and cannot accordingly be held by the Commission to be probative evidence. The only document from a third party which supports the Commission’s argument, namely the Heineken Document, also has no probative value. 261 Inasmuch as that document records statements made by Interbrew, it does not constitute independent confirmation of the alleged pressure. As neither its author nor its date are known, the authenticity of the allegations made must also be in doubt, particularly as it is impossible to establish whether the document was framed by an employee of Heineken or Interbrew. Furthermore, its nature is difficult to determine and its content is obscure. The document is neither a letter nor a note, but rather a passage from a list which includes the misspelt name of a director of Interbrew who held office during the 1990s (Mr C.) and which appears to consist of three phrases linked by dashes, which give the impression of forming part of a list. The second dash is followed by the following words written in Dutch ‘Three years ago [Mr K.] left Interbrew a choice: either they gave [Maes] an extra 500 000 [hectolitres] or he would drive them out of France’. The word ‘gave’ is not used in the Dutch text and the words ‘Alken-Maes’ were added in manuscript. It is therefore impossible to give a clear meaning to the four lines, isolated from their proper context in the Heineken Document. As the Commission did not attempt to obtain further information about the Heineken Document and the meaning of its content, its content has no probative value whatsoever. 262 According to the Commission, it is clear from recitals 45 and 46 of the contested decision, which are not contested by the applicant, first, that before the meeting of 11 May 1994 Interbrew was reluctant to extend its cooperation with the applicant in Belgium and that it decided that its approach should be one ‘of not starting a war’ and, secondly, that after that date a non-aggression pact was entered into. The applicant’s contention that, prior to 1994, Interbrew had wanted to reach agreement with Alken-Maes in order to put an end to the latter’s aggressive marketing policy is only speculation, whereas the aggressive nature of Alken-Maes’s policy towards Interbrew is established. Given the significant change in Interbrew’s attitude, a causal link can be inferred between the threat made by the applicant, which, moreover, admits that the cooperation was in fact extended after 11 May 1994, and the change in Interbrew’s attitude. 263 The fact that Interbrew is the most important player on the Belgian beer market does not mean that it was not reluctant to see the cartel extended, or that it was not subject to threats of a trade war from an economic actor that was larger than it in overall terms and especially powerful in France, a country in which Interbrew was, by contrast, in a weak position. Such a scenario is all the more credible, given that the threat in question consisted of concerted action on the part of the applicant and Heineken and that Alken-Maes was not an independent undertaking but a subsidiary of the applicant and thus of an international group. Lastly, the fact that Interbrew was able to declare itself satisfied, towards the end of the cartel, with the results achieved does not mean that there was no initial reluctance. 264 As regards the applicant’s argument that the passage quoted from Mr M.’s note of 12 March 1993 is a misleading representation of the true position, the Commission maintains, first of all, that the use of that quotation in recital 45 of the contested decision does not in any way conceal the pressure applied by Interbrew’s management. In addition, it is clear from that passage that the applicant wished to strengthen that cooperation and that it had more to gain from doing so than Interbrew, a point which the applicant was careful not to mention. The fact that Interbrew’s reluctance could be based on a fear that proceedings might be taken against it for infringement of competition law does not mean that no such reluctance existed. The same is true of the initiative of which person who originally expressed Interbrew’s reluctance (Mr M.) undertook when he sought to force Alken-Maes to achieve the price levels desired by Interbrew. The statement by the former managing director of Alken-Maes that the great majority of Interbrew’s managers wanted a cartel to be entered into before 1994, was made after the facts and the use made of it was highly selective, there being no reference to some of its passages referring to the threat made against Interbrew. 265 The Commission repeats that it never cast doubt on Interbrew’s interest in entering into a cartel, but simply established that the extension of the cartel was the result of the threat made by the applicant. 266 There is no evidence to support the applicant’s argument that, prior to 1994, Interbrew wished to reach agreement on prices in order to put an end to Alken-Maes’s aggressive marketing policy and to prevent low‑priced parallel imports from France. The documents which are alleged to prove Alken-Maes’s aggressive marketing policy refer to a meeting between representatives of Alken-Maes and Interbrew after May 1994, from which it cannot be inferred that the extension of the cartel at that date was the result of Interbrew’s intention. The documents relating to parallel imports are not conclusive, nor are those which are alleged to show Interbrew’s desire to finance its international expansion through profits made in Belgium. The discussions relating to a possible reacquisition of Kronenbourg by Interbrew do not demonstrate a spontaneous interest on the latter’s part in the cartel, any more than the fear of proceedings relating to abuse of its dominant position was likely to encourage Interbrew to extend a cartel, which was equally illegal under competition law. 267 The Commission contends next that the applicant’s explanation regarding the meeting of 11 May 1994 and the applicant’s reference to the 500 000 hectolitres is not credible, and points out at the same time that the applicant does not deny that it did indeed refer to that quantity and to a particular type of threat. 268 As regards the applicant’s challenge to the evidence of that threat, the Commission argues first of all that the applicant mentioned in its response to the statement of objections that a representative of Alken-Maes (Mr R.V.) informed Interbrew, ‘which was annoyed by its aggressive policy, that he did not expect to get more than 500 000 hectolitres, which represented his break-even point’. In addition, Interbrew was informed that predatory practices in the on-trade in Belgium meant that the applicant ‘might adopt a tougher policy towards Interbrew in France if Interbrew did not put an end to its abuses in Belgium’. Those two statements reveal a certain threat, as asking a competitor to put an end to certain practices at the same time as informing it of the need to achieve a particular volume of sales in order to break even is tantamount to demanding the transfer of such a volume under threat of reprisals. 269 The Commission also notes that a representative of Interbrew (Mr C.) stated that a representative of Alken-Maes (Mr K.) ‘repeated his demand that 500 000 [hectolitres] be transferred to Alken-Maes and threatened that otherwise Interbrew would be destroyed in France’. He also ‘wanted [Interbrew]/[Alken-Maes] to conduct themselves on the Belgian market in line with “the agreements in France”’, noting that the ‘French mechanism can be summarised as follows: Heineken’s and Kronenbourg’s off-trade sales managers consult together very often in order to check their respective market shares and to manipulate promotions, prices and conditions’. 270 The Commission also produces in its rejoinder, in response to the applicant’s contention that it relied solely on the Heineken Document in order to demonstrate that a threat was made, a statement from Interbrew of 14 January 2000 in which the author of the statement wrote: ‘[the applicant’s] position was that the position of [Alken-Maes] was very difficult and that [Interbrew] should help it. The big stick they used to persuade us with was that Kronenbourg could make life very difficult for us in France’. 271 Furthermore, the threat is demonstrated independently by the Heineken Document, which is referred to in the statement of objections and in the contested decision. That document, which is undated and unsigned but was discovered in a drawer in the desk of a member of Heineken’s board of directors, records that, three years earlier, a representative of Alken-Maes, a Mr K., ‘left Interbrew a choice: either they gave Alken-Maes an extra 500 000 hectolitres or they would be ejected from France. He referred to the details of the cooperation between Heineken and Kronenbourg in France’. 272 The Commission contends that the probative value of that document, to which the applicant had access in its non-confidential version, is not affected by the lack of a date and identification of its author and the people who were aware of it. Given the place where it was found, there is every reason to believe that the document was drawn up for or by a member of Heineken’s board of directors. Moreover, Heineken’s lawyer confirmed that his client was indeed behind the document. 273 According to the Commission, the consistency between the applicant’s admissions, Interbrew’s statements and the contents of the Heineken Document demonstrate that a threat was indeed made against Interbrew. 274 As regards the arguments which the applicant puts forward in its reply in support of its contention that the threat produced no effects, the Commission observes first of all that they implicitly accept that a threat was made. Moreover, the statements of one of its managers at the material time, on which the applicant relies, are inconsistent. Although the person concerned indicated that ‘Kronenbourg was in no position to eject Interbrew’, that is inconsistent with his statement that ‘Danone could adopt a tougher policy towards Interbrew in France if Interbrew did not put an end to its abuses in Belgium’. It is not likely that a threat would be made in the full knowledge that it would be impossible to put it into effect. As regards the allegation that Interbrew paid no heed to the threat, the applicant is not in a position to establish it, whereas the file shows that, by contrast, Interbrew took the threats seriously. 275 Furthermore, the possibility of a counter-attack by Interbrew as a result of the initiatives taken by Alken-Maes in relation to drinks outlets does not mean that Interbrew did not take seriously what it perceived to be a threat. The documents relied on to show Interbrew’s ‘reign of terror’ on the market are not decisive. None of them shows that Interbrew systematically attacked Alken-Maes’s sales outlets. 276 Lastly, the Commission notes that, while the applicant denies having made a threat, it does not appear to dispute that a threat, even if it is not followed up, constitutes an aggravating circumstance. 277 As is clear from the case-law, where an infringement has been committed by several undertakings, it is appropriate, when setting the amount of the fines, to consider the relative gravity of the participation of each of them (Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraph 623), which implies in particular that the roles played by each of them in the infringement for the duration of their participation in it should be established (Commission v Anic Partecipazioni, paragraph 215 above, paragraph 150, and Case T‑6/89 Enichem Anic v Commission [1991] ECR II‑1623, paragraph 264). 278 That conclusion follows logically from the principle that penalties must fit the offence, according to which an undertaking may be penalised only for acts imputed to it individually. That principle applies in any administrative procedure that may lead to the imposition of sanctions under Community competition law (see, as regards fines, Joined Cases T-45/98 and T-47/98 Krupp Thyssen Stainless et Acciai speciali Terni v Commission [2001] ECR II‑3757, paragraph 63). 279 In accordance with those principles, Sections 2 and 3 of the Guidelines provide for the basic amount of the fine to be varied by reference to a number of aggravating and attenuating circumstances, which are specific to each undertaking involved. Section 2 sets out, in particular, a non‑exhaustive list of aggravating circumstances which may be taken into account. 280 In the present case, the Commission found in recital 315 of the contested decision that Alken-Maes ‘compelled Interbrew to extend the cooperation, by threatening to take measures against Interbrew if the latter did not cooperate’. 281 It should be noted at the outset that the Commission was correct to hold that the fact that an undertaking which is a member of a cartel forces another member of that cartel to extend its scope by threatening that member with reprisals if it does not cooperate may represent an aggravating circumstance. Such conduct has the direct effect of aggravating the damage caused by the cartel and an undertaking which conducts itself in that way must bear a special responsibility (see, by analogy with the assessment of the role of ‘ringleader’ of a cartel, Joined Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82 IAZ and Others v Commission [1983] ECR 3369, paragraphs 57 and 58; Case C-298/98 P Finnboard v Commission [2001] ECR I‑10157, paragraph 45; and Mayr-Melnhof v Commission, paragraph 57 above, paragraph 291). 282 In support of the finding that such an aggravating circumstance existed, the Commission established that there was a causal link between the extension of the cooperation, summarised in particular in recitals 236, 239, 243 and 244 of the contested decision, which are based in turn on the facts relating to 1994 described in recitals 51 to 68, and the threat, made by the applicant, of reprisals against Interbrew if it refused to extend the cooperation. 283 In order to determine whether the Commission’s finding of an aggravating circumstance against the applicant was well founded, it is necessary to consider in turn whether a threat of reprisals was actually made, whether the cooperation was extended and, if both of those points are confirmed, whether the threat made in fact resulted in the cooperation being extended. 284 As regards, in the first place, the evidence that a threat was made, the Commission reached its conclusion in that regard on the basis, first, of the statement of Mr C. of Interbrew of 12 January 2000 which is set out in Annex 18 to Interbrew’s letter to the Commission of 28 February 2000 and, secondly, the terms of the Heineken Document (see paragraph 271 above). According to the Commission, the accuracy of Interbrew’s statement that a threat was made at the meeting of 11 May 1994 is confirmed by the Heineken Document, which records that such a threat was made. 285 As regards the applicant’s argument that Interbrew’s statement should not be regarded as probative, it should be noted that settled case-law provides that there is no provision or any general principle of Community law which prohibits the Commission from relying, as against an undertaking, on statements made by other accused undertakings. If that were not the case, the burden of proving conduct contrary to Article 81 EC and Article 82 EC, which is borne by the Commission, would be unsustainable and incompatible with the task of supervising the proper application of those provisions which is entrusted to it by the EC Treaty (PVC II, paragraph 154 above, paragraph 512). However, an admission by one undertaking accused of having participated in a cartel, the accuracy of which is contested by several other undertakings similarly accused, cannot be regarded as constituting adequate proof of an infringement committed by the latter unless it is supported by other evidence (see, to that effect, Case T-337/94 Enso-Gutzeit v Commission [1998] ECR II‑1571, paragraph 91). As, in the present case, the cartel comprised only two parties, it is sufficient for the applicant to challenge the material contained in Interbrew’s statement for other evidence to be required in support of it. That applies particularly to a statement which seeks to attenuate the responsibility of the undertaking in whose name it was made by emphasising the responsibility of another undertaking. It must therefore be determined whether Interbrew’s statement is supported by other evidence. 286 As the Commission also based its finding that Interbrew’s statement was accurate on the Heineken Document, which establishes that the threat was made and the probative value of which is also contested by the applicant, it is necessary to determine whether that document establishes, in a sufficiently probative manner, that a threat was made so that, on the basis of that document and Interbrew’s statement, the making of a threat can be considered to be established. In that regard, it should be borne in mind that in order to assess the probative value of a document, regard should be had first and foremost to the credibility of the account it contains. Regard should be had in particular to the person from whom the document originates, the circumstances in which it came into being, the person to whom it was addressed and whether, on its face, the document appears sound and reliable (opinion of Judge Vesterdorf acting as Advocate General in Case T-1/89 Rhône-Poulenc v Commission [1991] ECR II‑867, II‑869 at II‑956; Cement, paragraph 31 above, paragraph 1838). 287 In the present case, it should be held first of all that, according to the Heineken Document, the general manager of the applicant’s beer division at the time of the relevant facts ‘left Interbrew a choice: either they gave Maes an extra 500 000 [hectolitres] or he would drive them out of France [and] …the form of cooperation that existed between Heineken and Kronenbourg in France was referred to’. In that regard, inasmuch as it refers to the making of a demand coupled with possible reprisals, it is a record of a threat. 288 As regards, next, the degree of reliability of the document, it must be held, first, that, although undated, the Heineken Document must necessarily have come into being prior to 22 March 2000, since a copy of it was originally taken from Heineken’s premises in the course of an investigation carried out under Article 14(3) of Regulation No 17 on that date (see paragraph 39 above) and it therefore precedes the initiation of the procedure and the sending of the statement of objections to the undertakings concerned. Secondly, it must be held that, although the Heineken Document is unsigned, its discovery in the drawer of a member of Heineken’s board of directors, namely in the office of a senior director of an unconnected undertaking, leads to the conclusion that the content of the document is reliable. Thirdly, the fact that the information in question may have been furnished to Heineken by Interbrew, as the applicant suggests, does not call the accuracy of that information into question. It is impossible to accept the only argument which could support such a challenge to the accuracy of the information contained in the document, namely that Interbrew might have intentionally passed on false information to Heineken for the sole purpose of providing a basis, in view of the possibility that the Commission might decide to impose a fine, for an argument that pressure had been put on it, thereby enabling it to minimise its role in the cartel. 289 Lastly, it must be noted that, while the applicant denies that the meeting of 11 May 1994 gave rise to the making of a threat, it does not, however, dispute that a warning was given on that occasion (see paragraph 256 above), or that a volume of 500 000 hectolitres was mentioned at the meeting, or, finally, that the Heineken Document refers to the meeting of 11 May 1994. 290 It follows from the foregoing that the Heineken Document has a high degree of probative value and that, having regard to the factual background which the applicant does not dispute, the combination of the statement of Mr C. of Interbrew of 12 January 2000 and the Heineken Document establishes that the applicant did indeed make a threat against Interbrew on 11 May 1994. 291 As regards, in the second place, the question of whether the cooperation was in fact extended, it must first of all be pointed out that, while the applicant takes the view that it is unreasonable to categorise alterations to the subject-matter of discussions between the parties as an extension of the cooperation, it none the less acknowledges that the discussions after May 1994 took a different course, even if those changes related, according to it, initially only to the ‘respect for each other’s customer base’ where those customers were tied by exclusive arrangements. 292 It must also be pointed out that the applicant does not contest the findings in the contested decision that the cartel included a market‑sharing agreement in the form of a non-aggression pact. The applicant itself told the Commission that a non-aggression pact existed, as may be seen from the letter of 7 March 2000 from Alken-Maes to the Commission, which states: ‘It appears in particular that at the end of 1994 an agreement was entered into between the two companies covering all the distribution channels in Belgium, but with particular attention being paid to the on‑trade channels. The agreement included … a non-aggression pact …’ 293 Lastly, it is clear that, in particular in recitals 56, 59 to 65, 73 and 104 of the contested decision, the Commission established to the requisite legal standard that from the second half of 1994 the cartel included a market‑sharing component. Furthermore, recitals 53 to 58 of the contested decision show that the process leading to that inclusion was under way in May 1994. 294 It must therefore be concluded that the cooperation was extended to a sharing of the beer market by means of a non‑aggression pact from May 1994. 295 It is necessary, in the third place, to consider whether the threat made by the applicant on 11 May 1994 was decisive in compelling Interbrew to agree to an extension of the cartel to a non-aggression pact. The Court’s examination must be based on a comparative analysis of the attitude adopted by the applicant and its subsidiary Alken-Maes, on the one hand, and by Interbrew, on the other, before, during and after the second half of 1994, when the extension of the cartel led to the non‑aggression pact concluded on 12 October 1994. In that regard, the examination of Interbrew’s attitude is particularly important. 296 As a preliminary point, it should be noted that the Commission stated in recital 313 of the contested decision that both the applicant and Interbrew took initiatives concerning various parts of the cartel, with the result that none of the parties concerned took a leading role in the cartel as a whole. 297 As regards, first of all, the attitude of each of the parties to the cartel before and during the second half of 1994, it should first be held that the contested decision shows that the applicant and its subsidiary Alken-Maes were indeed the originators of the extension of the cartel to include a non-aggression pact involving consultation on market shares or, at the very least, on customer-sharing. 298 While the cartel extended originally to prices and a reduction of marketing investments, the applicant’s approach, as expressed, according to Interbrew’s statements, at an internal meeting of Interbrew on 5 May and repeated at the meeting of 11 May 1994, with the latter point being supported by the Heineken Document, was to demand for the first time that sales volumes be taken into account as a criterion, which may be assimilated to a proposal to extend the cartel to market‑sharing. Furthermore, the Interbrew statement referred to in recitals 54 and 57 of the contested decision is supported by an internal memorandum from the author of that statement of 5 October 1994, which is referred to in recital 58 in the decision, that the proposal to share the market was put forward by Alken-Maes and understood by Interbrew as a desire to transpose to Belgium certain consultation mechanisms in which the applicant was participating in France. Those documents also show that Interbrew was reluctant to accept such a proposal. 299 It must however be pointed out that Interbrew’s attitude is evidence of its active conduct in the cartel until May 1994. Thus, the Commission states in recital 310 of the contested decision that Interbrew took the initiative concerning the exchange of information in 1992 and that it is clear from the written evidence that in August and November 1993 Interbrew played a leading role concerning the pricing agreements in the off-trade. It must also be held from Interbrew’s internal memorandum of 12 March 1993 that the most senior manager of that undertaking had played an active part in the first phase of the cartel by requiring his subordinates to participate in the consultation process. The memorandum contains the following passage: ‘they probably want to increase “cooperation” in Belgium. [The former CEO of Interbrew] forced us to talk as “we needed some money”, but we are most reluctant to do this as we want to avoid any problems under Articles [81 EC] and [82 EC]’. 300 It also appears that, five months later, the author of the memorandum, who had become Interbrew’s CEO, endorsed that positive attitude towards the cartel. In an Interbrew internal memorandum of 19 August 1993, Mr M. indicated his readiness to help to convince Alken-Maes to undertake a price increase of 4%. Moreover, in a memorandum of 3 November 1993, he recorded the contacts he had had with large distributors in the following terms: ‘… would appreciate an initiative on the part of Interbrew to make contact with … and … (… are the three largest Belgian supermarket chains) in order to arrive at a gradual increase in the price of beer … to the level desired by [Interbrew]. … If a consensus begins to emerge, consideration will be given to the possibility of a three-way meeting … I think it would be no bad idea if I was invited along to the top-level meeting with … and … . … The initiative taken by Maes last year did not prove feasible: (a) there was a lack of trust, but certainly also (b) Maes was too small. This is something only [Interbrew] can do’. 301 It follows from the foregoing that, although the conduct of the applicant and its subsidiary Alken-Maes in the second half of 1994 shows their willingness to extend the cooperation to market-sharing, Interbrew’s conduct during the first phase of the infringement was active, as is evidenced by the taking of initiatives the restrictive object of which cannot be disputed. 302 As regards, secondly, the attitude of the parties to the cartel between 11 May 1994, when the threat was made, and 24 November 1994, when the non-aggression pact concluded on 12 October 1994 was again discussed between the parties, it should first be held that, notwithstanding the threat made by the applicant, Interbrew’s attitude was not that of an undertaking compelled to accept, under pressure, the extension of the restrictive agreement to which it was a party. 303 Thus, it should be noted that the CEO of Interbrew stated on 7 July 1994 that he had agreed with the chairman of the applicant that ‘we would not launch a war but instead try to gain time’ (recital 56 of the contested decision). The approach adopted by the applicant and Alken-Maes during the first phase of the cartel, which lasted from the beginning of 1993 to the end of the first half of 1994, was aggressive towards Interbrew, and the applicant’s position on 11 May 1994, although coupled with a threat, was adopted against a background of the possibility of the onset of commercial hostilities in France. Interbrew’s attitude can therefore be understood not only as one of compliance with the threat made by the applicant, but also as a refusal to enter into a price war, that is to say to act competitively. It should also be pointed out in that regard that the Commission stated in recital 51 of the contested decision, after referring to the making of the threat, that ‘Interbrew did not accept [the applicant’s] demand that it transfer 500 000 [hectolitres] of beer to Alken-Maes, but it did not want war either, and the parties stayed in close contact with one another’. 304 It therefore appears, first, that Interbrew paid only moderate attention to the threat and, secondly, that Interbrew’s conduct resulted from its desire not to enter into conflict with the applicant, which suggests that the extension of the cartel may have been the result not of pressure but rather of a choice on Interbrew’s part. Moreover, the Commission indicated in recital 235 of the contested decision that no effect was given to the requirement to transfer 500 000 hectolitres to Alken-Maes, although it immediately qualified that finding by stating that Interbrew was nevertheless quite ready from that moment on to extend the agreements with Alken-Maes and no longer to limit them to the exchange of information and agreements on off-trade prices. 305 Furthermore, the memorandum prepared by Interbrew’s marketing manager for the on-trade in Belgium for the meeting of 12 October 1994 at which the non-aggression pact was concluded does not show that he was reluctant in principle to enter into such a market-sharing agreement or felt under the type of pressure which would lead to such an attitude. Rather, it reflects a reasoned assessment by its originator of the advantages and disadvantages of such an agreement for Interbrew, including a comparative assessment of the advantages that Alken-Maes might draw from it. It thus states that ‘because of its dominant position and the Law of April 1993 relating to that subject, [Interbrew] is incurring an additional risk’ and that ‘such agreements offer more advantages to the challenger than to the market leader’. The memorandum does not present the possibility of an agreement with Alken-Maes in a positive light, as its originator wrote: ‘Personal view: I do not believe in these agreements because they can never be put into practice and because they are fundamentally not to [Interbrew’s] benefit’. However, it is not necessarily evidence of pressure being put on Interbrew, since the points recorded can also be interpreted as being the outcome of a process of reflection within Interbrew as to the manner in which the anti-competitive agreements could be implemented effectively. 306 It should also be noted that Interbrew’s internal memorandum of 14 October 1994, which records the outcome of the meeting of 12 October 1994, does not suggest that the non-aggression pact was imposed on Interbrew under pressure, but rather that Interbrew participated fully in the discussion, going so far as to impose its approach on Alken-Maes. Interbrew’s general manager for Belgium stated in the memorandum: ‘enclosed you will find a document from our friends as well as the one-page approach which I proposed. This was accepted by our friends in terms of principle’. The ‘one-page approach’ proposed by Interbrew, which is set out by the Commission in recital 60 of the contested decision, specifically refers to a ‘gentlemen[‘s] agreement’, including in particular the following points: ‘[n]o attack of obligations’ (that is to say, on-trade outlets with an exclusive purchasing agreement) and ‘[n]o systematic attack of brands in each other’s obligations’. 307 As regards, thirdly, the attitude of the parties after the second half of 1994, it should first of all be pointed out that the Commission stated in recital 77 of the contested decision, on the basis of certain documents of July 1995 which were internal to Interbrew, that its managers believed that they had complied with the agreement in Belgium. The Commission also notes in recital 310 of the contested decision that Interbrew took the initiative in 1995 concerning price discussions. The description in recitals 83 to 92 of the discussions held by the two parties in 1996 regarding their proposed new pricing systems confirms that a spirit of spontaneous cooperation prevailed. In recital 92, the Commission quotes, for example, from a fax of 11 October 1996 from a manager of Interbrew to a shareholder in the company, which states: ‘we have been talking about … constructive competition in Belgium [for] one year now. Fundamentally, nothing has happened. And most probably the responsibility for this is shared. We will try to restart this process in the following week’. 308 Lastly, it is clear that the notes of Interbrew’s marketing manager for the Belgian on-trade drawn up at the meeting of 28 January 1998 show a positive attitude towards the cartel and include amongst the objectives of the cartel in relation to the on-trade a reference to ‘respect for ties and supply rights’. The notes also refer, as regards consultation relating to the on-trade, to ‘direct contact over difficult issues and competition for national customers’ (recital 104 of the contested decision). 309 It follows from the foregoing that, over the whole of the infringement period, the parties to the cartel each took initiatives having an anti-competitive object and, in particular, that it cannot be concluded from the material in the file that it was only as the result of pressure that Interbrew agreed to the extension of the cartel to include a non-aggression pact. Although the Commission states in its written pleadings that the aggravating circumstance imputed to the applicant does not relieve Interbrew of its responsibility in relation to the cartel, Interbrew’s attitude over the whole of the infringement period does not permit the conclusion that there was a direct causal link between the threat made by the applicant on 11 May 1994 and the extension of the cartel. 310 It follows that, having regard to the attitude of the parties to the cartel before and after the second half of 1994, and also to the impact which the threat may have had in the light of the context in which it was made, the Commission has failed to establish to an adequate standard the causal link between the threat and the extension of the cartel, as the causes of its extension may not have been confined to a threat but have resulted more generally from the objective of eliminating competition pursued in concert by the two parties to the cartel. 311 It therefore follows from the foregoing that the Commission was wrong to find as against the applicant the aggravating circumstance consisting in forcing Interbrew to extend their cooperation by threatening it with reprisals if it were to refuse. 312 Questioned at the hearing as to the percentage increases applied by it in relation to each of the two aggravating circumstances found as against the applicant, given that an overall increase of 50% of the basic amount had been applied, the Commission stated that having regard, first, to the relative importance ascribed to each of the two aggravating circumstances in the reasons for the contested decision and, secondly, to its decision-making practice in the matter, it should be considered that the aggravating circumstance of repeated infringement played a predominant role and that the aggravating circumstance found in respect of the pressure put on Interbrew therefore played a lesser role. 313 In those circumstances, the Court considers that it should exercise its unlimited jurisdiction under Article 17 of Regulation No 17 and fix the overall increase of the basic amount of the fine in respect of aggravating circumstances at 40%. 7. The plea that alleging there was no basis for the taking into account the aggravating circumstance of repeated infringement in the applicant’s case314 The applicant submits in the first place that by taking into account an alleged repeated infringement on its part the Commission infringed the delegation of power conferred by Article 15 of Regulation No 17, inasmuch as the Commission has the power to determine the amount of the fines which it imposes only by reference to the intrinsic gravity of the infringement and its duration. 315 Under the national laws of the Member States, a repeated infringement does not belong to the circumstances what aggravate an infringement, that is to say, to the objective assessment of the gravity of the facts, but to recognition of a fact specific to the perpetrator of the infringement, namely its tendency to commit such infringements. 316 In reply to the Commission’s argument that repeated infringement features in the Guidelines as an aggravating circumstance, the applicant states that it does not seek to challenge the Commission’s entitlement to publicise its methodology in setting fines by way of an interpretative communication. However, it does challenge what it considers to be an abuse of power, namely the Commission’s arrogation of the power to increase the level of a penalty for repeated infringement, without having any authority at law to do so, and to assume a discretion as to the manner in which that concept is to be applied. 317 As regards the Commission’s observation that the applicant did not raise a plea of illegality under Article 241 EC, the applicant argues that the existence of such a remedy does not prevent it from invoking the unlawfulness of the contested decision under Regulation 17, even where the decision applies the Guidelines. With respect to the rejection by the Court of the plea of illegality raised in HFB and Others v Commission, paragraph 245 above, on which the Commission also relies, the applicant states that the plea was rejected in that case purely on the basis of a particular point in the Guidelines and accordingly does not have the wide significance which the Commission would ascribe to it. 318 With respect to the Commission’s argument that the Court has accepted the concept of repeat infringement in several cases, the applicant replies that in none of them did the Court rule expressly on the lawfulness of the application of the concept of repeat infringement under Regulation No 17, or indeed under the general principles of Community law. Thus, in PVC II, paragraph 154 above, the Court relied on the fact that an undertaking had previously committed a similar infringement, not in order to increase the fine imposed, but only for the purposes of holding that the Commission was correct to reject the application of an attenuating circumstance. The Court has accordingly never affirmed the principle of repeat infringement. 319 While the applicant acknowledges that the Commission may, in determining the starting amount of the fine, take previous infringements into consideration in support of a finding that the new infringement was knowingly committed by it, that does not mean that the fact that a previous infringement was committed may lead to a more onerous penalty being imposed for repeated infringement without an express power to do so being conferred by law. Such an increase would be tantamount to creating a new form of penalty, falling to be added to the main penalty, a point which goes to show that the concept of repeat infringement is considered in the national legal orders to being a matter for statute and as being of strict interpretation. Regulation 17 contains no express power which would allow the Commission to increase a fine on the ground of repeated infringement. 320 With respect to the judgments in Case T-141/94 Thyssen Stahl v Commission [1999] ECR II-347 and Enichem Anic v Commission, paragraph 277 above, the applicant maintains that while the Court did indeed refer to repeated infringement as an aggravating circumstance, the unlawfulness of the application of the concept under Regulation No 17 was not raised by the applicants. 321 The applicant submits in the second place that the Commission infringed the principle nulla poena sine lege, since there is no legal basis in the Community legal order for taking the aggravating circumstance of repeated infringement into consideration. The Court of Justice has held that the general legal principle nulla poena sine lege imposes a limit on the discretionary power of the institutions inasmuch as a penalty, even of a non‑criminal nature, cannot be imposed unless it rests on a clear and unambiguous legal basis (Case 117/83 Könecke [1984] ECR 3291, paragraph 11). Furthermore, the European Court of Human Rights has also held that the general principles and the guarantees attached to the rights of the defence apply to every penalty having both a deterrent and punitive purpose, whatever the classification of the infringement under national law (see Eur. Court H.R., the Öztürk v Germany judgment of 21 February 1984, Series A No 73). Only the Council and the Parliament are empowered, by virtue of their legislative power, to confer on the concept of repeated infringement the legal basis necessary for its application as an aggravating circumstance by the Commission. 322 The applicant also submits that the Court of Justice never had the opportunity to rule on the lawfulness of the principle of repeated infringement in the light of the principle nulla poena sine lege in the cases cited by the Commission in its defence, namely PVC II, paragraph 154 above, Thyssen Stahl v Commission, paragraph 320 above, and Enichem Anic v Commission, paragraph 277 above. 323 An analysis of the national legal rules also highlights the very strict application of the concept of repeated offending in the Member States and the requirement that the acts establishing it are of a legislative nature. 324 In the third place, the applicant submits that the Commission infringed the principle of legal certainty and the principles nulla poena sine lege and of respect for the rights of the defence (Joined Cases 42/59 and 49/59 SNUPAT v High Authority [1961] ECR 53, 87), as, in the absence of any provision specifying in particular the maximum period between two findings of infringement which allow the concept of recidivism to be applied, it took into account infringements penalised in 1984 and 1974, respectively. 325 An analysis of the national laws shows that one of the strict conditions for the taking of the concept of repeated offending into account is that of a maximum period, normally not exceeding 10 years, between the infringement under consideration and an earlier finding of infringement. The situation of which the applicant complains is untenable precisely because the Guidelines fail to specify any limitation period for the application of the concept of repeated infringement, on which the Commission relies in its defence, and in the applicant’s contention the Commission ought to have laid down such a limit in its Guidelines. It is unacceptable that the Commission should take account of infringements committed 40 years previously, or committed by a different legal entity. 326 In the fourth place, the applicant submits that the contested decision infringes the general principle of Community law non bis in idem on two occasions. The application of a higher penalty in the case of repeated infringement relies on two fundamental grounds, namely the need to deter the party committing a repeated infringement from infringing again in the future and the fact that that party was aware of the unlawfulness of its acts by reason of the previous finding of infringement against it. While acknowledging that those two grounds constitute the basis for its finding of repeated infringement, the Commission commits the error of invoking each of them for the second time in the contested decision and thus increasing the amount of the fine twice on the same grounds. 327 Thus, the Commission had already taken account in the contested decision both of the need to have a deterrent effect, when it assessed the gravity of the infringement, and of the fact that the applicant was aware that its conduct constituted an infringement, when the Commission stated that it was taking into account the fact that the applicant had legal and economic knowledge and infrastructures which enabled it more easily to recognise that its conduct constituted an infringement and be aware of the consequences stemming from it under competition law. In going on to increase the amount of the fine for repeated infringement for the same reasons as those which formed the basis for setting the level of the fine in the light of the gravity of the infringement, the Commission accordingly contravened the principle non bis in idem. 328 In the fifth place, the applicant argues that, in taking repeated infringement into consideration on the basis of facts going back almost 40 years, and therefore outside the period of five years laid down under Article 1 of Council Regulation (EEC) No 2988/74 of 26 November 1974 concerning limitation periods in proceedings and the enforcement of sanctions under the rules of the European Economic Community relating to transport and competition (OJ 1974 L 319, p. 1), the Commission contravened the limitation rules applying to proceedings and the enforcement of sanctions relating to competition. 329 In the sixth, and last, place, the applicant submits in the alternative that the Commission adopted a manifestly excessive interpretation of the concept of repeated infringement. 330 First, the Commission’s reasoning is, in part, incorrect inasmuch as Commission Decision 74/292/EEC of 15 May 1974 relating to proceedings under Article 85 of the EEC Treaty (IV/400 – Agreements between manufacturers of glass containers) (OJ 1974 L 160, p. 1) (‘the Glass Containers Decision’) did not constitute a finding of infringement against Boussois-Souchon-Neuvesel (BSN) SA (the applicant’s predecessor), but merely a refusal, following the notification of agreements, to exempt the agreements under Article 81(3) EC. Moreover, the Commission implicitly accepted the point, by stating in its defence that even if that decision ought not to be taken into account, the Benelux Flat Glass Decision provided adequate grounds for a finding of repeated infringement. 331 The taking into account, for the purposes of making a finding of repeated infringement, of a decision taken on the basis of a notification is of itself evidence of unreasonable severity towards the applicant, as such a procedure is intended to provide legal certainty to undertakings until such time as the Commission has resolved the matter. It is therefore wrong to classify that decision as a ‘finding of infringement’ in order to justify increasing the fine imposed on the applicant. 332 Secondly, even if there were to be no limitation period for the power of the Commission to make a finding of repeated infringement, the increase in the fine on the basis of very old facts, going back in the present case almost 40 years, not only gives rise to legal uncertainty, but is also manifestly unreasonable. It has the effect of imposing on the smaller of the two undertakings on the market a fine equivalent to that imposed on the undertaking which was the dominant player. It also gives the impression that the applicant is an undertaking which has committed infringements on a regular basis and has been contravening Community law for 40 years. 333 The Commission submits that repeated infringement is mentioned in the Guidelines as an aggravating circumstance and that it could be properly taken into account. The Commission has found that aggravating circumstance on a number of occasions without being contradicted by the Court. 334 The principle nulla poena sine lege is a matter for criminal law and does not apply in the present case. The applicant also overlooks the fact that the legal basis of penalties imposed in competition law is Article 15 of Regulation No 17 and that the Commission possesses a wide margin of discretion in setting fines in order to direct the conduct of undertakings. In making repeated infringement an aggravating circumstance, the Guidelines did not create an additional penalty which lacks any legal basis. 335 As regards the alleged infringement of the principle of legal certainty, the examples of national legal rules given by the applicant are restricted to the field of criminal law, and there is no limitation in Guidelines on the maximum period which may elapse between a previous finding of infringement and the taking into account of repeated infringement. Lastly, the applicant is wrong to refer to a finding of repeated infringement relating to 40-year-old facts, when the two findings of infringement concerned were made 19 and nine years respectively before the start of the infringement in question, and attempts to suggest that the findings related to legal entities other than the applicant, when it is only its name which has been changed. 336 As regards the alleged infringement of the principle non bis in idem, the Commission contends that the taking into account of repeated infringement is not duplicated with the taking into account of the fact, relating to gravity, that the applicant could, given its legal and economic knowledge, be aware that its conduct constituted an infringement. 337 As regards the alleged infringement of Regulation No 2988/74, the facts in question do not fall within the scope of the rules relating to limitation periods for the imposition of fines and it would be absurd to apply limitation on the basis of the date of the facts which were the subject of a previous finding of infringement. To take the facts underlying previous infringements as a starting point would in any event be irrelevant, as in a case of repeated infringement it is the finding of infringement resulting from the facts at issue that is decisive. 338 Lastly, the Commission denies having interpreted the concept of repeat infringement in a manifestly unreasonable way and observes that repeat infringement is, in any event, established, having regard to the Benelux Flat Glass Decision. 339 As regards the alleged infringement of Regulation No 17, it should first be noted that Article 15(2) of Regulation No 17 provides that ‘the Commission may by decision impose on undertakings or associations of undertakings fines of from [EUR] 1 000 to [EUR] 1 000 000, or a sum in excess thereof, but not exceeding 10% of the turnover in the preceding business year of each of the undertakings participating in the infringement where, either intentionally or negligently … they infringe Article [81](1) … of the Treaty’. The same provision states that ‘in fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement’ (LR AF 1998 v Commission, paragraph 57 above, paragraph 223). 340 The first paragraph of point 1 of the Guidelines states that in calculating the amount of fines, the basic amount is to be determined according to the gravity and the duration of the infringement, which are the only criteria referred to in Article 15(2) of Regulation No 17 (LR AF 1998 v Commission, paragraph 57 above, paragraph 224). 341 The Guidelines then set out, by way of example, a list of aggravating and attenuating circumstances which may be taken into consideration in order to increase or reduce the basic amount and refer to the Leniency Notice (LR AF 1998 v Commission, paragraph 57 above, paragraph 229). 342 By way of general comment, the Guidelines state that the final amount calculated according to this method (basic amount increased or reduced on a percentage basis) may not in any case exceed 10% of the worldwide turnover of the undertakings, as laid down by Article 15(2) of Regulation No 17 (Section 5(a)). The Guidelines further provide that, depending on the circumstances, account should be taken, once the above calculations have been made, of certain objective factors such as the specific economic context, any economic or financial benefit derived by the offenders, the specific characteristics of the undertakings in question and their real ability to pay in a specific social context, and that the fines should be adjusted accordingly (Section 5(b)) (LR AF 1998 v Commission, paragraph 57 above, paragraph 230). 343 It follows that, under the method laid down in the Guidelines, fines continue to be set according to the two criteria referred to in Article 15(2) of Regulation No 17, namely the gravity of the infringement and its duration, and the maximum percentage of turnover of each undertaking as laid down in that provision is observed (LR AF 1998 v Commission, paragraph 57 above, paragraph 231). 344 Consequently, the Guidelines cannot be regarded as going beyond the legal framework relating to penalties set out in that provision (LR AF 1998 v Commission, paragraph 57 above, paragraph 232). 345 In the first indent of Section 2 of the Guidelines, the Commission referred to the possibility of increasing the basic amount of the fine in cases involving an aggravating circumstance such as repeated infringement of the same type by the same undertaking or undertakings. 346 It is settled case-law that the deterrent effect of fines constitutes one of the factors which the Commission is entitled to take into account in assessing the gravity of the infringement and, accordingly, in setting the level of the fine, as the gravity of infringements has to be determined by reference to numerous factors, such as the particular circumstances of the case, its context and the deterrent effect of fines; moreover, no binding or exhaustive list of the criteria which must be applied has been drawn up (see, to that effect, order in SPO and Others v Commission, paragraph 137 above, paragraph 54; Ferriere Nord v Commission, paragraph 137 above, paragraph 33; Sarrió v Commission, paragraph 137 above, paragraph 328; and HFB and Others v Commission, paragraph 245 above, paragraph 443 ). 347 It is also clear from case-law that, in assessing the seriousness of an infringement for the purpose of setting the fine, the Commission must take into consideration not only the particular circumstances of the case but also the context in which the infringement occurred and must ensure that its action has the necessary deterrent effect, especially as regards those types of infringement which are particularly harmful to the attainment of the objectives of the Community (Musique Diffusion Française and Others v Commission, paragraph 50 above, paragraphs 105 and 106, and ABB Asea Brown Boveri v Commission, paragraph 50 above, paragraph 166). 348 In that respect, the analysis of the gravity of the infringement must take account of any repeated infringements (Aalborg Portland and Others v Commission, paragraph 185 above, paragraph 91). In the context of deterrence, repeated infringements are a matter which justifies a significant increase in the basic amount of the fine. It is evidence that the sanction previously imposed was not sufficiently deterrent (Case T‑203/01 Michelin v Commission [2003] ECR II-4071, paragraph 293). 349 Furthermore, contrary to the applicant’s contention, although repeated infringement relates to a characteristic specific to the perpetrator of the infringement, namely its propensity to commit such infringements, it is precisely, for that very reason, a very significant indication of the gravity of the conduct in question and, accordingly, of the need to increase the level of the penalty in order to achieve effective deterrence. 350 It must therefore be held that, since it is for the Commission to ensure that the fine has a sufficiently deterrent effect, particularly in cases involving the most harmful infringements and inasmuch as the objective of deterrence falls within the scope of the assessment by the Commission of the gravity of the infringement under Article 15 of Regulation No 17, the Commission did not infringe that article in applying the aggravating circumstance of repeated infringement in respect of the applicant. 351 Nor did the Commission infringe the principle nulla poena sine lege in finding that the applicant had committed a repeated infringement, since it is not disputed that it is entitled to do so by virtue of the first indent of Section 2 of the Guidelines and they cannot be regarded as going beyond the legal framework relating to penalties set out in Article 15(2) of Regulation No 17 (LR AF 1998 v Commission, paragraph 57 above, paragraphs 231 and 232). 352 As regards the alleged infringement of the principle of legal certainty, it must be borne in mind that a limitation period can only fulfil its function of ensuring legal certainty, and the infringement of the rules relating to limitation can only constitute a breach of that principle, if the period has been fixed in advance (see, to that effect, Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 19). 353 Neither Article 15 of Regulation No 17, which constitutes the legal framework for the penalties which may be imposed by the Commission for an infringement of the Community competition rules (see paragraphs 133 to 135 above), nor the Guidelines, specify a maximum period in relation to the finding that an undertaking has committed repeated offences. It accordingly cannot be held that there has been an infringement of the principle of legal certainty in the present case. 354 In any event, in order to establish infringement, the Commission at least relied on the fact that the applicant had previously been found to have committed an infringement on 23 July 1984 in the Benelux Flat Glass Decision. Having regard to the objective pursued by the Commission in increasing the fine to take account of repeated infringement, namely to deter the offender from committing a similar infringement, the fact that a finding of infringement made 17 years earlier was taken into account to that end cannot infringe the principle of legal certainty. That is all the more the case since in the present case the infringement began on 28 January 1993, that is to say only eight years and six months after the adoption of the Benelux Flat Glass Decision. A policy of penalising repeated infringement can have no practical effect on a person who has committed a first infringement unless the threat of a more severe penalty for a new infringement can be effective over time and thus influence that person’s conduct. 355 The validity of that reasoning cannot be called into question by the fact that the Commission also mentioned in the contested decision that the first infringement of the same type had been found in respect of the applicant on 15 May 1974 in the Glass Containers Decision, that is to say 27 years before the finding of infringement in the present case. That is all the more so since, as the Commission rightly observed at the hearing, the fact that on two occasions less than ten years have elapsed between the findings of infringement made on 15 May 1974 and 23 July 1984 and the applicant’s repetition of unlawful conduct shows its propensity not to draw the appropriate consequences from a finding that it has infringed the Community competition rules. 356 As regards the alleged infringement of the principle non bis in idem, it should be pointed out that the Commission indicated, in the fourth paragraph of Section 1.A of the Guidelines, its intention to take account, in setting the starting amount of the fine on grounds of gravity, of the effective economic capacity of offenders to cause significant damage to other operators, in particular consumers, and to set the fine at a level which ensures that it has a sufficiently deterrent effect. Moreover, the Commission added in the fifth paragraph of the same section of the Guidelines that account may also be taken of the fact that large undertakings usually have legal and economic knowledge and infrastructures which enable them more easily to recognise that their conduct constitutes an infringement and be aware of the consequences stemming from it under competition law. Lastly, the Commission gave in Section 2 of the Guidelines, as an example of aggravating circumstances which may increase the starting amount, repeated infringement of the same type by the same undertaking. 357 In the present case, the Commission indicated in recital 305 of the contested decision that, having regard to the need to ensure that fines are set at a level which ensures that they have a sufficiently deterrent effect, it was taking into account the fact that the applicant is a large international undertaking and, in addition, a multi-product company. The Commission went on to indicate in recital 306 that it was also taking into account the fact that the applicant and, on the date of adoption of the decision, its subsidiary Alken-Maes had legal and economic knowledge and infrastructures which enabled them more easily to recognise that their conduct constituted an infringement and be aware of the consequences stemming from it under competition law. Lastly, in recital 314 of the contested decision, the Commission stated, when developing its reasoning relating to the increase in the fine for aggravating circumstances, that the applicant had already been found to have committed similar infringements of Article 81 EC twice before. 358 In that regard, it must be held, first, that the conditions governing the application of the principle non bis in idem, as laid down by the case-law on competition (see paragraph 185 above), are not satisfied in the present case, as, in setting the fine, the Commission did no more than take into account a number of factual considerations which were considered to be relevant for the purposes of setting the fine at a level which would ensure that it would have a sufficiently deterrent effect. 359 In any event, it appears that each of those criteria for assessing gravity was taken into account for different reasons. Thus, in the first place, the fact that the applicant is an international and multi-product organisation was taken into account in order to reflect the need to set the fine at a level which has a sufficiently deterrent effect having regard to its economic and financial strength (see paragraphs 167 to 182 above). Next, the applicant’s possession of legal and economic knowledge and infrastructures which enabled it more easily to recognise that its conduct constituted an infringement and be aware of its consequences was taken into account because of the need for a higher level of deterrence having regard to the fact that the applicant committed the infringement notwithstanding the fact that it had resources at its disposal which enabled it to recognise that its conduct constituted an infringement and the consequences of that conduct (see paragraph 175 above). Lastly, the fact that this was a repeat infringement was taken into account owing to the need to ensure a higher level of deterrence, as demonstrated by the fact that two previous findings of infringement had not been sufficient to prevent the commission of a third. 360 As regards the alleged infringement of Regulation No 2988/74, it is sufficient to hold that that regulation governs the limitation period which applies to the Commission’s power to impose fines in respect of an infringement of the competition rules, but that, by contrast, it contains no provision limiting the Commission’s power to take into account, as an aggravating circumstance and for the purpose of determining the amount of a fine for infringement of the competition rules, the fact that an undertaking has already been found to have infringed those rules. There can thus be no infringement of Regulation No 2988/74 by reason of the Commission’s finding of such an aggravating circumstance the applicant’s case. 361 As regards the argument that the Commission adopted a manifestly unreasonable interpretation of the concept of repeated infringement, it must be noted that in Section 2 of the Guidelines the Commission defined the aggravating circumstance concerned as ‘repeated infringement of the same type by the same undertaking(s)’. 362 It should also be noted that the concept of repeated infringement, as understood in certain national legal systems, implies that a person has committed new infringements after having been penalised for similar infringements (Thyssen Stahl v Commission, paragraph 320 above, paragraph 617, and Michelin v Commission, paragraph 348 above, paragraph 284). 363 However, it is important to state that, bearing in mind the objective it pursues, the concept of repeated infringement does not necessarily imply that a fine has been imposed in the past, but merely that a finding of infringement has been made in the past. Repeated infringement is taken into account, for a particular infringement, so that a more severe penalty may be imposed on the undertaking responsible for the relevant facts when it transpires that a previous finding of infringement on its part has not been sufficient to prevent the repetition of unlawful conduct. It is not the previous imposition of a fine that determines that conduct constitutes repeated infringement, which is determinative of recidivism, but the fact that a previous finding of infringement has been made against the person concerned. 364 As regards the applicant’s argument that the Glass Containers Decision addressed to it in 1974 should not be taken into account for the purpose of determining repeated infringement in this case, on the ground that that decision originated in a notification and did not impose any fines, it must be observed that Article 3 of that decision states that ‘those undertakings which are party to the agreements referred to in Article 1 are required to bring the infringements established to an immediate end’. 365 The applicant has therefore already been found to have committed an infringement on the basis of facts similar to those in the present case. That has not prevented the applicant from repeating its unlawful conduct. The Commission was therefore entitled to establish repeated infringement on the applicant’s part. 366 In any event, it is plain that the Benelux Flat Glass Decision of 1984 imposed a pecuniary sanction and that repeated infringement is established in that regard. There is nothing in the contested decision to indicate that the Commission’s finding that repeated infringement followed on from two previous incidents led to a greater increase in the fine for an aggravating circumstance than that which would have been applied had only one previous incident been identified. 367 As regards, lastly, the argument that the increase in the fine for repeated infringement is unreasonable in that it resulted in the fine imposed on the applicant being equivalent to that imposed on Interbrew, notwithstanding its smaller size on the market, it should be borne in mind that it is settled case-law that the criteria for assessing the gravity of an infringement may include the volume and value of the goods in respect of which the infringement was committed, the size and economic power of the undertaking and, consequently, the influence which it was able to exert on the market. It follows that it is permissible, for the purpose of fixing a fine, to have regard both to the overall turnover of the undertaking and to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, but that it is important not to confer on one or other of those figures an importance which is disproportionate in relation to other factors (see, to that effect, Musique diffusion française and Others v Commission, paragraph 50 above, paragraphs 120 and 121; Parker Pen v Commission, paragraph 115 above, paragraph 94; and SCA Holding v Commission, paragraph 158 above, paragraph 176). 368 Furthermore, the deterrent effect of fines constitutes one of the factors which the Commission is entitled to take into account in assessing the gravity of the infringement and, accordingly, in setting the level of the fine, as the gravity of infringements has to be determined by reference to numerous factors, such as the particular circumstances of the case, its context and the deterrent effect of fines; moreover, no binding or exhaustive list of the criteria which must be applied has been drawn up (order in SPO and Others v Commission, paragraph 137 above, paragraph 54; Ferriere Nord v Commission, paragraph 137 above, paragraph 33; and Sarrió v Commission, paragraph 137 above, paragraph 328). 369 It follows that the fact that a fine may have been imposed on the applicant which was not proportionate to its size on the market in question does not arise from a manifestly unreasonable conception of the context of repeated infringement, but from all of the factors which the Commission rightly took into account in setting the amount of the fine to be imposed on the applicant. 370 As all of the objections raised by the applicant under the present plea have been rejected, the plea must be rejected in its entirety. 8. The plea alleging failure to take proper account of the applicable attenuating circumstances 371 This plea is divided into four parts. In the first part, the applicant invokes the Commission’s refusal to take into account the fact that the infringement did not have any effects on the market. In the second part, it submits that the Commission erred in failing to take into account the influence which the price-control system and the long-standing tradition of collective action in the beer sector had on the relevant conduct. In the third part, the applicant invokes the crisis which prevailed at the relevant time. Lastly, in the fourth part, it invokes the threatening attitude adopted by Interbrew. a) The first part, based on the Commission’s refusal to take into account the fact that the infringement did not have any effects on the market 372 The applicant maintains that the Guidelines, which reflect the Commission’s current practice in that regard, require the Commission to take into account, as an attenuating circumstance, the fact that the cartel had only a limited effect on competition. There are numerous cases in which the Commission took account, as an attenuating circumstance, of the absence of any effect on the market on the part of the agreements at issue and the fact that those agreements had not been implemented or had only been implemented in part. The fact that the Commission is not bound by its previous practice cannot justify its failure to follow that practice when faced with similar facts. 373 Furthermore, the Commission failed to distinguish between the assessment of the gravity of the cartel and the taking into consideration of attenuating circumstances. Notwithstanding the requirement that the Commission was required to take the effects of the infringement on the market into consideration for the purposes of assessing its gravity, it was under a duty to take account, as an attenuating circumstance, of the fact that the unlawful agreements or practices in question were not in fact implemented. 374 In concluding that the fact that the parties did not implement every aspect of the cartel did not mean that the cartel, as such, was not actually given effect to and that the fact that some elements of the offending conduct were not put into practice was not in itself equivalent to a finding of an attenuating circumstance, the Commission failed to have regard to the reality of the situation. 375 In fact, only a small part of the agreements reached between Interbrew and the applicant relating to pricing structure and product promotion were put into practice and the effect on the market was accordingly extremely limited. 376 Next, Alken-Maes and Interbrew indicated on numerous occasions, including in the internal documents drawn up at the time of the consultations, that the discussions remained tentative and had no effect on competition. A number of the documents and statements cited by the Commission in the contested decision prove the lack of practical effect given to the discussions. Numerous aspects of the competitive situation remained intact, as may be seen in particular from the fierce struggle between the parties to the cartel to enter into contracts with tied cafés. In addition, the Commission’s file contains a number of other documents which show the absence of any effect on competition. 377 Moreover, the sales statistics sufficiently demonstrate the lack of actual effect, or, at the very least, the low level of impact on the market, of the discussions between Interbrew and Alken-Maes. The parties continued to engage in fierce competition in all market sectors. In particular, it is clear from the file that Alken-Maes had an aggressive policy of commercial rebates in the food distribution sector in 1992 and 1993. Furthermore, Alken-Maes continued to lose market share between 1993 and 1998 and was the main loser during the relevant period in both the Pils and the alcohol-free beer sectors. 378 In addition, Alken-Maes continued during 1994 to carry out surveys on price elasticity for the purposes of its marketing policy, which established that Interbrew would have been the main loser if prices were to be reduced. Alken-Maes thus pursued a competitive policy, the primary object of which was to acquire sales from Interbrew, notwithstanding the discussions that took place in relation to prices, which were initiated by Interbrew. 379 The applicant maintains, lastly, that there were no enforcement mechanisms that might have ensured that the agreement was complied with and implemented in practice, a circumstance which was taken into account by the Commission as an attenuating factor in the Polypropylene Decision. 380 The Commission submits that the precedents cited by the applicant are irrelevant as they preceded the publication of the Guidelines and related to circumstances which are not always comparable to those of the present case. In this case, the anti-competitive arrangements were implemented and the fact that certain aspects were only partially put into practice was duly taken into account in assessing the gravity of the cartel. 381 The argument that the fierce struggle between the parties to enter into contracts with licensed cafés shows that a situation of open competition continued to exist is irrelevant. The doubts expressed by a manager of Interbrew as to the effectiveness of the cartel are not sufficient to minimise the significance of the statement by the parties to the cartel at their meeting of 28 January 1998 that certain objectives had been achieved. Lastly, the reduction in Alken-Maes’s market share does not establish a lack of effects since that reduction would have been even greater had the cartel not existed. The surveys of price elasticity carried out by Alken-Maes were only of a preliminary nature and cast no doubt on the unlawful nature of the collusion. 382 As is clear from the case-law cited in paragraphs 277 and 278 above, where an infringement has been committed by a number of undertakings, the Court must examine the relative gravity of the participation in the infringement of each of them, which implies in particular that the role played by each of them in the infringement throughout the period of its participation must be established. 383 Section 3 of the Guidelines lays down, under the heading attenuating circumstances, a non-exhaustive list of circumstances which may lead to a reduction in the basic amount of a fine. Reference is made to the exclusively passive or ‘follow-my-leader’ role of undertakings in the infringement, to the non-implementation in practice of agreements or offending practices, to termination of the infringement as soon as the Commission intervenes, to the existence of reasonable doubt on the part of the undertaking as to whether the restrictive conduct does indeed constitute an infringement, to infringements committed by negligence and not intentionally and to effective cooperation by the undertaking in the proceedings, outside the scope of the Leniency Notice. Those circumstances are therefore based on the individual conduct of each undertaking. 384 It follows that in order to assess any attenuating circumstances, including that relating to the non-implementation of agreements, it is necessary to take into account not the effects arising from the infringement as a whole, which must be taken into consideration in assessing the actual impact of an infringement on the market for the purposes of determining its gravity (first paragraph of Section 1.A of the Guidelines), but the individual conduct of each undertaking, for the purposes of examining the relative gravity of the participation of each undertaking in the infringement. 385 In the present case, it is accordingly necessary to ascertain whether the arguments put forward by the applicant are capable of showing that during the period in which it adhered to the unlawful agreements it actually avoided applying them by adopting competitive conduct in the market (see, to that effect, Cement, paragraph 31 above, paragraphs 4872 to 4874). 386 The applicant essentially puts forward five arguments in support of its reliance on the attenuating circumstance of non-implementation in practice of the agreements. 387 With respect to the first argument, alleging that only a small part of the discussions between Interbrew and the applicant were put into practice, it must be held that the applicant does not contend that the consultations on pricing structure and product promotion were not applied to, but simply that they were implemented only in part. It should, moreover, be noted that that consultation represents only a part of the infringement established, which included in particular a general non-aggression pact, an agreement on prices in the off‑trade, customer‑sharing in the on-trade sector, the restriction of investment and advertising on the on-trade market and an exchange of sales information in the on-trade and the off‑trade. 388 As regards the second argument, which alleges that the discussions remained tentative and had no effect on competition, it is sufficient to observe that, even if that were so, such a matter would show not the non-implementation in practice of the agreements, but rather a desire, albeit unrealised in practice, to implement them. The same is true of the significance to be attributed to the correspondence between Interbrew and Alken-Maes relating to tied cafés. The mutual recriminations made in that regard must be seen in the light of the general non-aggression pact between those two undertakings (see paragraph 147 above) and goes more to show a desire to ensure that that agreement was complied with than that it was not implemented in practice. In any event, the correspondence which is supposed to illustrate a fierce struggle over the contracts entered into with tied cafés covers a period of only six months, that is to say from August 1996 to January 1997. 389 As regards the third argument, namely that statistics show that there were no effects on the market, it must be held that, even if that were shown, it would be irrelevant, as it would not prove that the agreements had not been implemented in practice. The same is true of the aggressive rebate policy alleged to have been pursued, as the applicant has failed to establish that such a policy represents an attempt on its part to avoid the agreements to which it was a party. In any event, it is clear that such conduct affected the implementation of the agreements to only a limited degree, as the scale of those agreements exceeds, both in substance and duration, the episodes of competitive struggle referred to. Thus, what is alleged to have been the aggressive commercial rebate policy pursued Alken-Maes in the food distribution sector was limited, as the applicant itself states, to 1992 and 1993. 390 As regards the fourth argument, it should be observed that the fact that Alken‑Maes continued in 1994 to carry out surveys on price elasticity, even if those surveys showed that Interbrew had more to lose from a reduction in the price of Maes beer, does not show in any way that the applicant and its subsidiary actually avoided applying the agreements by adopting competitive conduct in the market. 391 Accordingly, none of the first four arguments put forward by the applicant permits the conclusion that during the period in which it was a party to the offending agreements, it actually avoided applying them by adopting competitive conduct in the market. 392 Moreover, the conclusion drawn by the applicant itself from its arguments, namely that the consultations had a limited impact on the market, shows in itself that those arguments do not relate to the problematics of attenuating circumstances but to the gravity of the infringement as a whole, which is not the subject of the present plea. 393 The same is true of the fifth argument put forward by the applicant, namely that there were no enforcement mechanisms that might have ensured that the cartel was complied with in practice, since that characteristic, should it be proved, would have to be taken into account under the Guidelines in relation to the gravity of the infringement and could not constitute an attenuating circumstance based on the individual conduct of the applicant. It is settled case-law that the absence of measures to monitor the implementation of a cartel does not, of itself, constitute a mitigating factor (Case T-348/94 Enso Española v Commission [1998] ECR II‑1875, paragraph 318). 394 It should also be pointed out that in the Polypropylene Decision, on which the applicant relies, the Commission did not consider the absence of enforcement mechanisms to be an attenuating circumstance, capable of being applied separately to the undertakings to which the decision was addressed, but on the contrary as a factor to be taken into account in assessing the gravity of the infringement taken as a whole. 395 Lastly, with respect to the argument that both the absence of effects on the market and the absence of enforcement mechanisms have been taken into account by the Commission in the past as a mitigating factor, it must be stated that the mere fact that the Commission has found in its previous decisions that certain factors constituted attenuating circumstances for the purpose of setting the fine does not mean that it is obliged to do so also in a subsequent decision (see paragraph 57 above). The Commission’s previous decision-making practice does not constitute part of the legal framework relating to fines in competition matters (see the case- law cited in paragraph 153 above). It is clear from the case-law paragraphs 134 and 135 above that, in the context of Regulation No 17, the Commission possesses a wide margin of discretion when setting fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules, and that the fact that the Commission may have applied fines of a certain level in the past to certain types of infringement does not mean that it is estopped from raising that level, within the limits set out in Regulation No 17, if that is necessary in order to ensure the implementation of Community competition policy. On the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy. 396 The first part of the plea should accordingly be rejected.b) The second part, alleging that the Commission failed to take into account the influence of the system for controlling prices and the long-standing tradition of collective action in the beer sector 397 The applicant maintains that, following its practice in the Greek Ferries Decision, which, contrary to what it stated in recital 320 of the contested decision, is comparable to the present case, the Commission should have taken the influence of long-standing practices in setting prices on the beer market into account as an attenuating circumstance. 398 Thus, the Commission failed to take into account the fact that the Law on prices, which was in force from 1945 to 1993, required every undertaking subject to the legislation, including the applicant and the other brewers, to apply for authorisation to increase prices, either individually or collectively. That Law applied until May 1993 and thus forms part of a long-standing tradition of consultation and exchanges of information among brewers. The applicant also states that although two separate procedures existed, applications for price increases were brought collectively by the CBB, as that procedure was expressly preferred by the Minister of Economic Affairs for reasons of ease of administration. Furthermore, by requiring that the collective application brought by the CBB regarding prices and other conditions of sale be very detailed, the system of price controls necessarily favoured consultation on prices between brewers. 399 The continuation of the offending conduct after May 1993 shows the continuing influence of a set of rules which served only to reinforce a long‑standing tradition of consultation among brewers. That tradition explains the difficulties faced by the parties in immediately departing from those traditional arrangements. That is why the price control system, which had encouraged an attitude of inertia, should be taken into account as an attenuating circumstance, as the Commission did in Decision 82/896/EEC of 15 December 1982 relating to a proceeding under Article 85 of the EEC Treaty (IV/29.883 – AROW/BNIC) (OJ 1982 L 379, p. 1; ‘the BNIC Decision’, recital 77) and in Decision 86/596/EEC of 26 November 1986 relating to a proceeding under Article 85 of the EEC Treaty (IV/31.204 – MELDOC, OJ 1986 L 348; p. 50; ‘the MELDOC Decision’, recital 77). 400 Furthermore, the Commission was wrong to consider that, if it were to accept that the price control system influenced the consultations, that influence continued only until 23 December 1992, which was the date of the final application for a collective price increase brought by the CBB, whereas brewers were in fact and in law encouraged until 1 May 1993, the date on which the ministerial decree repealing the price control system entered into force, to consult on the prices of a number of beers. The Commission was accordingly wrong to conclude in recital 247 of the contested decision that, since the meeting of 28 January 1993 took place after 23 December 1992, it could not be considered to be a meeting among brewers within the framework of the CBB regarding a collective application for a price increase. 401 Lastly, in referring in recital 247 of the contested decision to the fact that a meeting was held with beer wholesalers as a ground for its refusal to take price controls into account as an attenuating circumstance, the Commission failed to have regard to the fact that the price control system applied not only to brewers but also to importers of beer. 402 The Commission contends that it stated in the contested decision that, contrary to the facts underlying the Greek Ferries Decision, collective action by the brewers in order to notify a price increase was only a right and not an obligation. It is irrelevant in that regard that the Minister of Economic Affairs expressed a preference for collective measures. The Commission adds that, if the legislation on prices had had the impact which the applicant ascribes to it, all of the brewers would have been involved in the consultation, whereas it was only the two leading brewers that were involved. 403 The Commission adds that, although the price controls ended on 1 May 1993, the last collective application for a price increase was in any event presented on 23 December 1992 and that the first incidences of consultation taken into account, which took place on 28 January 1993, came after that date. Even on the assumption that it is established, the ‘tradition of collective action’ cannot constitute a perpetual attenuating circumstance. As regards the BNIC and MELDOC Decisions, they preceded the publication of the Guidelines and did not find that the existence of a system of price controls constituted an attenuating circumstance. 404 As a preliminary point, it should be noted, first, that the applicant does not challenge the Commission’s finding as to the existence of an infringement from 28 January 1993. Next, it is apparent from the contested decision, and is not contested by the applicant, either that a price control mechanism applied to the brewery sector in Belgium until 1 May 1993, the date on which it ceased. It is accordingly necessary to determine whether the existence of that mechanism until that date constituted an attenuating circumstance which the Commission ought to have taken into consideration. In that regard, the applicant’s reasoning essentially amounts to invoking the applicability of the attenuating circumstance referred to in the fourth indent of Section 3 of the Guidelines, namely the ‘existence of a reasonable doubt on the part of the undertaking as to whether the restrictive conduct does indeed constitute an infringement’. 405 In the first place, it should be pointed out that, in reply to questions put by the Court at the hearing as to the exact scope of the price control system in place until 1 May 1993, the applicant stated that it is clear from the legislation relating to price controls that brewers could submit for approval by the Ministry of Economic Affairs either a collective application, preserving, if appropriate, price confidentiality, through the CBB, or separate applications. 406 In the second place, it should be held that, having regard both to the very high degree of gravity which the facts in question inherently involve (see paragraphs 145 to 155 above) and to the material and intellectual resources available to the applicant and its subsidiary Alken-Maes, which enabled them to recognise the nature of their legislative environment and the consequences which might, as a consequence, stem from their conduct under Community competition law, it cannot validly be argued that the price control system in place until 1 May 1993 gave rise to a reasonable doubt on the applicant’s part as to whether the restrictive conduct did indeed constitute an infringement. That is all the more the case as previous findings were made against the applicant in relation to similar infringements of Community competition law. 407 In the third place, as regards the decisions which the applicant claims constitute precedents for the taking into account by the Commission of the existence of a price control system as an attenuating circumstance, it must be held that, having regard to the case-law paragraph 395 above, the mere fact that the Commission has found in its previous decisions that certain factors constituted attenuating circumstances for the purpose of setting the fine does not mean that it is obliged to do so also in a subsequent decision (see paragraph 57 above). The Commission’s previous decision-making practice does not constitute part of the legal framework relating to fines in competition matters (see the case-law paragraph 153 above). It is clear from the case-law referred to in paragraphs 134 and 135 above that, in the context of Regulation No 17, the Commission possesses a wide margin of discretion when setting fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules and that the fact that the Commission may have applied fines of a certain level in the past to certain types of infringement does not mean that it is estopped from raising that level, within the limits set out in Regulation No 17, if that is necessary in order to ensure the implementation of Community competition policy On the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy. 408 As the existence of a price control mechanism is not capable in the present case of constituting an attenuating circumstance in respect of the period from 28 January to 1 May 1993, it must be concluded that such a circumstance cannot a fortiori be held to apply to the applicant for the period after 1 May 1993. 409 The second part of the plea must therefore be rejected.c) The third part, based on the Commission’s refusal to take account of the crisis in the sector 410 The applicant maintains that the Commission ought, in accordance with its practice until 1998 and the case-law of the Court of Justice, to have taken account of the fact that the cartel evolved when the market was in crisis and to have treated that situation as an attenuating circumstance. In fact, the Commission merely held that the position in the present case was not comparable to the situation in decisions where a crisis was taken into account and referred, without more, to the Cement, PVC II and Seamless Steel Tubes Decisions. 411 However, the Belgian brewers were faced with a continuing decline in demand and overcapacity as well as with pressure from distributors in the off-trade on the price of Pils. Furthermore, the Commission itself recognised in the contested decision the difficulties arising on the market during the 1990s. In the event, the business of the applicant’s subsidiary in Belgium was in a very weak state financially in 1993. The applicant adds that, while it is true that it is a crisis in the sector and not in an individual undertaking which falls to be taken into account, it none the less wished to emphasise that the difficult financial situation in which Alken-Maes found itself was the direct result of the decline in the beer market, where, far from being ‘slight’, as the Commission asserts, the reduction in consumption came to 15% over the period from 1993 to 1998, generating excess capacity which should also have been taken into account by the Commission, following the example which it set in the PVC II and Cement Decisions. 412 The Commission contends first of all that the financial situation of an undertaking is not evidence of a crisis in the economic sector concerned, which might be taken into account as an attenuating circumstance, and that the case-law of the Court of Justice has always refused to take into account the fact that an undertaking is making a loss. Furthermore, the decisions relied on by the applicant precede, for the most part, the publication of the Guidelines and are accordingly irrelevant. In any event, the crisis referred to is not in any way comparable to those which the Commission has hitherto taken into account. 413 It must first of all be noted that it is settled case-law that the Commission is not required, when determining the amount of the fine, to take account of an undertaking’s financial losses, since recognition of such an obligation would have the effect of conferring an unfair competitive advantage on the undertakings least well adapted to the conditions of the market (see, to that effect, IAZ and Others v Commission, paragraph 281 above, paragraphs 54 and 55; Case T-319/94 Fiskeby Board v Commission [1998] ECR II-1331, paragraphs 75 and 76; and Enso Española v Commission, paragraph 393 above, paragraph 316). The arguments based on Alken-Maes’s financial difficulties in 1993 cannot therefore be taken into account in the context of the assessment of the existence of an attenuating circumstance. 414 Moreover, even if factors such as a continuing decline in demand – which, in any event, as the Commission stated, was originally assessed by the applicant in its response to the statement of objections at 15% over ten years and not over five years –, the resulting overcapacity and the pressure on prices from distributors in the off-trade were to be established, they would represent risks inherent in any economic activity which, as such, do not denote an exceptional structural or economic situation capable of being taken into account in determining the amount of the fine. 415 As regards, lastly, the argument that the Commission is bound by its previous practice, it should be pointed out that, according to the case-law cited in paragraph 395 above, the mere fact that the Commission has found in its previous decisions that certain factors constituted attenuating circumstances for the purpose of setting the fine does not mean that it is obliged to do so also in a subsequent decision. The Commission’s previous decision-making practice does not constitute part of the legal framework relating to fines in competition matters. In the context of Regulation No 17, the Commission possesses a wide margin of discretion when setting fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules and the fact that the Commission may have applied fines of a certain level in the past to certain types of infringement does not mean that it is estopped from raising that level, within the limits set out in Regulation No 17, if that is necessary in order to ensure the implementation of Community competition policy. On the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy. 416 The third part of the plea should therefore be rejected.d) The fourth part, based on the aggressive attitude adopted by Interbrew417 The applicant contends that the Commission ought, in accordance with its decision-making practice and the case-law of the Court of Justice, to have taken into account as an attenuating circumstance the weak and dependent position of Alken-Maes in relation to Interbrew at the time of the cartel, as Interbrew had occupied a dominant position on the market since 1987. 418 The aggressive attitude adopted by Interbrew is clearly demonstrated by the file. Thus in a memorandum of 19 August 1993 to Mr C., Mr M., then Interbrew’s CEO, stated that he was prepared to ‘convince’ Alken-Maes to follow Interbrew after Interbrew had unilaterally decided to increase prices. Furthermore, the correspondence between Interbrew and Alken-Maes following the latter’s protest against Interbrew’s canvassing of drinks outlets that were contractually tied to Alken-Maes, where Interbrew proposed to reimburse the costs of breeching the contracts in exchange for signing a new contract with it, shows Interbrew’s strategy of exclusion, which its increasing vertical integration served to fortify. Moreover, Interbrew’s disproportionate reaction to Alken-Maes’s new policy in 1994 showed that it had the ability to inflict harm, to such a degree that Alken-Maes feared for its survival. 419 The applicant also maintains that the Commission is wrong to contend that the aggressive attitude allegedly adopted by Interbrew towards Alken-Maes is illogical and contrary to the nature of the infringement. The Commission is forgetting the interest which Interbrew had in setting up and proceeding with the cartel. Furthermore, it is astonishing that the Commission sees no inconsistency between submitting, on the one hand, that the applicant posed a threat to Interbrew and, on the other, that it entered into an agreement with Interbrew at the same time. 420 Lastly, in accusing the applicant of overlooking its own participation in the cartel in alleging that Interbrew had adopted an aggressive position in relation to it, the Commission wrongly exaggerates its influence over Alken-Maes, whereas, far from playing an active role within Alken-Maes, the applicant sought, on the contrary to disengage itself from its ‘beer’ activities with as little damage as possible. 421 The Commission contends that, in invoking the aggressive position adopted by Interbrew, the applicant forgets not only its own size and its strong position on the French beer market, but also the fact that an agreement would have served no purpose if the applicant or its subsidiary had been wholly dependent on Interbrew. Moreover, there is a difference in kind between the threat made by the applicant, which sought to have the cartel extended to the Belgian market, and the alleged threat made by Interbrew, which is supposed to have concerned the same market as that covered by the cartel. While it would be logical to accept that a threat in France should lead Interbrew to agree to extend the cartel to Belgium, it would be illogical, on the other hand, for Interbrew to have agreed to collude with an undertaking which was under its influence. 422 It should first of all be noted that, in the present case, the applicant does not deny having participated in an infringement of Article 81 EC, comprising in particular a set of agreements having an anti-competitive object. It is settled case-law that there will be an agreement within the meaning of Article 81(1) EC when the undertakings in question have expressed their joint intention to conduct themselves on the market in a specific way (see, to that effect, ACF Chemiefarma v Commission, paragraph 352 above, paragraph 112; Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 86; Hercules Chemicals v Commission, paragraph 57 above, paragraph 256; Case T-41/96 Bayer v Commission [2000] ECR II-3383, paragraph 67; and Case T-56/02 Bayerische Hypo- und Vereinsbank v Commission [2004] ECR II-0000, paragraph 59). It follows that the concept of an agreement within the meaning of Article 81(1) EC, as interpreted by the case-law, centres around the existence of a concurrence of wills between at least two parties (Bayerische Hypo-und Vereinsbank v Commission, paragraph 61, and Bayer v Commission, paragraph 69 and the case-law cited). The applicant therefore cannot claim that it acted exclusively under pressure from Interbrew. 423 It is also settled case-law that an undertaking which participates in meetings with an anti-competitive object, even under constraint from other participants with greater economic power, can always report the anti-competitive activities in question to the Commission rather than continue to participate in the meetings (HFB and Others v Commission, paragraph 245 above, paragraph 226). 424 It follows from the foregoing that neither the applicant’s alleged dependence on Interbrew nor the aggressive position purportedly adopted by Interbrew in relation to the applicant can denote a situation capable of being taken into account by the Commission as an attenuating circumstance. 425 The fourth part of the plea must therefore be rejected and, accordingly, the plea must be rejected in its entirety.9. The plea based on an incorrect assessment of the extent of the cooperation provided by the applicant, in breach of the principle of equal treatment and the Leniency Notice 426 The applicant maintains that it ought to have been given, in application of Section D of the Leniency Notice, a reduction of 50% in the fine imposed on it. The plea is divided into two parts. In the first part, the applicant submits that the Commission incorrectly assessed its cooperation for the purposes of the first indent of Section D.2 of the Leniency Notice, by underestimating its extent by reference to its decision-making practice and in breach of the principle of equal treatment. In the second part, the applicant contends that, after receiving the statement of objections, it did not substantially contest the facts on which the Commission based its allegations and claims infringement of the Leniency Notice in that the Commission took the view that the applicant was not eligible for a reduction in the fine under the second indent of Section D.2 of the notice. a) The first part, alleging an incorrect assessment by the Commission of the extent of the applicant’s cooperation, by reference in particular to its decision-making practice and in breach of the principle of equal treatment 427 The applicant submits in the first place that the Commission underestimated the extent of its cooperation before the statement of objections was sent. The Commission itself recognised that Alken-Maes had supplied information which went beyond answering the request for information concerning it. In addition, the applicant claims that, in order to give guidance to the Commission on the background to and the machinery of the cooperation between Alken-Maes and Interbrew, on 7 March 2000, its subsidiary supplied a summary of the facts involved based on the records held by the company at the time, including a chronological history of the meetings and contacts between it and Interbrew from 1990, referring to all relevant documents and included documents supplied by it. Information was also provided in the letters of 10 and 27 December 1999, on which the Commission does not comment. 428 In reply to the Commission’s argument that that it was already aware of most of the information supplied, the applicant contends not only that that point is not referred to in the contested decision, but also that it reflects an incorrect application of the first indent of Section D.2 of the Leniency Notice. That provision is not intended to limit the benefit of leniency only to undertakings which have supplied evidence to the Commission of which it was unaware, but is also meant to provide favourable treatment to those which, in facilitating the Commission’s investigation, have allowed it to use its resources more effectively and, accordingly, to be more active in challenging infringements. Under the first indent of Section D.2 of the Leniency Notice, an undertaking is entitled to a reduction in a fine where it has supplied not only evidence of which the Commission was not aware, but also evidence which ‘materially contribute[s] to establishing the existence of the infringement’. In the event, the documents and information supplied by Alken-Maes were of considerable assistance to the Commission in establishing or confirming the existence of the infringement. 429 The applicant maintains that the reduction granted to it is manifestly lower than the reductions normally granted by the Commission, as an analysis of a number of decisions taken by the Commission since 1998 shows. 430 Thus, the Commission has awarded reductions in fines of between 40 and 50% to undertakings which, like the applicant, have been the first to accept that an infringement had taken place, which have provided the statements of former employees and have supplied their files for review. The Commission has awarded reductions of between 20 and 50% to undertakings which have supplied it with evidence allowing it to confirm that an infringement had taken place or to add to its knowledge of it, going so far, in the Pre-insulated Pipes Decision, as to grant a reduction of 20% to two undertakings merely because they had not challenged the substantive truth of the facts – and even a reduction of 50% to an undertaking which had clarified the meaning of documents already in the Commission’s possession in order to give it a clearer picture of the facts at issue. 431 Not only was Alken-Maes the first to acknowledge formally that an infringement had taken place in its memorandum of 27 December 1999, but it also undertook a detailed examination of its records, which enabled it to produce a number of new documents. Moreover, while the Commission wrongly denies that the applicant provided new information, it has, by contrast, never disputed that the information supplied in the letter of 10 December 1999 and, in particular, in the letter of 7 March 2000, which comprised a full chronological summary of the facts, on which the contested decision was based, provided detailed confirmation of the facts at issue. 432 The applicant contends in the second place that, in granting it a smaller reduction in its fine than that received by Interbrew, the Commission contravened the principle of equal treatment. 433 It notes that immediately after the investigations took place on 26 and 27 October 1999, its subsidiary Alken-Maes, with a view to assisting the Commission in its work, set up an internal inquiry, questioned each of the members of its management committee on possible contacts with Interbrew and initiated a survey of its records. While that work was made particularly difficult because of the complete replacement of its management team shortly before the start of the investigation, the reply of 10 December 1999 was provided within the period prescribed by the Commission and Alken-Maes provided the Commission with statements from all current and former members of staff referred to in the request. 434 Thus, in the covering letter to its reply of 10 December 1999 to the request for information of 11 November 1999, which expressly referred to the investigation of its records, Alken-Maes provided detailed confirmation of the facts to which the request related, and included an annex setting out tables and notes regarding the meetings referred to in the request. Interbrew’s reply to the same request, 13 days later, on 23 December 1999, also confirmed material of which the Commission was already aware. 435 By contrast, Interbrew, whose management team was nonetheless in place at the time of the facts at issue, did not reply to the Commission until 23 December 1999, following the latter’s refusal to allow it an extension of time until 10 January 2000. Interbrew’s reply did not, at the time, include any statement from the members of staff referred to in the Commission’s request, and it was only by letter of 14 January 2000 that Interbrew supplied the statements of seven of the 16 persons referred to in the request. 436 Furthermore, Alken-Maes was the first to supply, on 27 December 1999, a memorandum containing an official statement of its former managing director formally acknowledging the existence and nature of the infringement which was the subject of the Commission’s investigation and more particularly: (a) the fact that the cartel originated in the ‘Vision 2000’ discussions instituted by the CBB; (b) the fact that an agreement was concluded at the end of 1994 between Alken-Maes and Interbrew covering all distribution channels in Belgium; (c) the fact that that agreement included a non-aggression pact, the restriction of marketing investments in the on-trade and in publicity and consultation on prices and (d) the fact that the proper implementation of the agreement required regular consultation between managers of Alken-Maes and Interbrew. While the Commission was already aware of point (d), the documents obtained at the time of the investigations and requests for information did not yet allow it to establish points (a) to (c) to the requisite legal standard. 437 The applicant observes in that regard that although Interbrew also provided additional statements and documents in January and February 2000, it was unable, notwithstanding the alleged quality of its cooperation, to supply a statement to support the suggestion of threats made by the applicant, despite the participation at the meeting of 11 May 1994 of its CEO. 438 In addition, on 7 March 2000, the applicant supplied a statement supplementing the information given on 10 December 1999, relating specifically, in accordance with the meeting with the Commission on 14 January 2000, to the context in which the documents communicated by Alken-Maes in reply to the request for information of 11 November 1999 had been drawn up and also to the CBB’s ‘Vision 2000’ project. Further documents, which had been found in the meantime in the files of the company’s former marketing manager, were also supplied. 439 Those points demonstrate, first, that although the applicant and Alken-Maes cooperated quickly and fully, that cooperation was given unreasonably little credit by the Commission by reference to the treatment given to Interbrew and, secondly, that the Commission completely failed to take account of the fact that the applicant and its subsidiary were, despite their best efforts, handicapped by the presence of a new management team at the time of the investigation, whereas Interbrew had the advantage that those responsible for the anti-competitive practices in question remained in office. Such an attitude is characteristic of an infringement of the principle of equal treatment. 440 Lastly, and in the third place, although in the contested decision the Commission justified the different reductions in the amount of the fines for cooperation on the ground of the alleged challenges to the facts by the applicant after receipt of the statement of objections and not on the ground of a qualitative difference in the cooperation of the parties before the statement of objections was sent out, it relies on such a difference in its defence, thereby seeking to compensate for the lack of reasoning in the contested decision. In so doing, it impliedly acknowledged that the applicant had been the victim of unequal treatment. 441 The Commission cannot, without contradicting itself, state in its defence that Interbrew supplied it with material information before the applicant did, by reference in particular to Interbrew’s letters of 14 and 19 January, and 2, 8 and 28 February 2000, when those letters were written after Alken-Maes’s letter of 27 December 1999 containing a statement from its former managing director which expressly confirmed the essential points of the infringement. 442 Furthermore, the Commission is wrong to claim that part of the information supplied related to a period prior to 28 January 1993, which was not covered by the infringement, when the documents supplied as Annexes 3 to 23 and 26 to 29 to its letter of 10 December 1999 related to a period after 28 January 1993. 443 In any event, the Commission errs in taking the view that the information relating to the period prior to 28 January 1993 is not eligible to be taken into account under the Leniency Notice, when the request for information of 11 November 1999 related to the period between September 1992 and December 1999. In so doing, the Commission is confusing the period in relation to which it made a finding of infringement with the period covered by its investigation. According to the applicant, it is the latter period which should have been considered relevant for the purposes of assessing cooperation. In fact, the applicant provided information relative to the period from September 1992 to January 1993, which clarified the leading role played by Interbrew and the influence of the price control system. 444 The Commission contends that the extent of the applicant’s cooperation was not underestimated and denies that the reduction awarded to it is manifestly smaller than the reductions it normally grants. The degree of cooperation afforded by the applicant cannot be compared to those referred to in the cases invoked by the applicant in support of its arguments. With respect to the alleged infringement of the principle of equal treatment, the Commission argues that Interbrew’s cooperation was quantitatively and qualitatively greater than that provided by the applicant, as is shown by a comparison between the documents supplied by each of the parties which are relied upon in support of the contested decision. The differentiation in the percentage reductions granted for cooperation is therefore fully justified and is by no means to be explained solely by the Commission’s finding that the applicant contested the facts. 445 It should be noted at the outset that the Commission set out in the Leniency Notice the circumstances in which undertakings cooperating with it during its investigation into a cartel may be exempted from a fine or be granted a reduction in the fine which would otherwise have been imposed on them (Section A.3 of the Leniency Notice). 446 As regards the application of the Leniency Notice to the applicant, it is not disputed that its conduct falls to be appraised by reference to Section D of the notice, headed ‘Significant reduction in a fine’. 447 Section D.1 of the notice states that ‘where an [undertaking] cooperates without having met all the conditions set out in Sections B or C, it will benefit from a reduction of 10% to 50% of the fine that would have been imposed if it had not cooperated’. 448 Section D.2 of the Leniency Notice provides:‘Such cases may include the following:449 It should be pointed out that, according to settled case-law, a reduction of the fine on grounds of cooperation during the administrative procedure is justified only if the conduct of the undertaking concerned enabled the Commission to ascertain the infringement more easily and, if appropriate, to put an end to it (SCA Holding v Commission, paragraph 158 above, paragraph 156, and Krupp Thyssen Stainless and Acciai speciali Terni v Commission, paragraph 278 above, paragraph 270). 450 It must also be noted that Article 11(1) of Regulation No 17 allows the Commission, inter alia, in carrying out the duties assigned to it by Article 85 EC and by provisions adopted under Article 83 EC, to obtain all necessary information from undertakings and associations of undertakings, which are required by Article 11(4) to supply the information requested. Where an undertaking or association of undertakings does not supply the information requested within the period specified by the Commission, or supplies incomplete information, Article 11(5) of Regulation No 17 provides that the Commission may, by way of decision, require the information to be supplied; should the undertaking or association of undertakings persist in its refusal, it will be liable to a fine or periodic penalty payments. 451 In that regard, the case-law provides that the cooperation of an undertaking in the investigation gives no entitlement to a reduction in a fine when that cooperation did not go further than that which it was required to provide under Article 11(4) and (5) of Regulation No 17 (Solvay v Commission, paragraph 135 above, paragraphs 341 and 342). By contrast, where the undertaking provides information in response to a request for information under Article 11 of Regulation No 17 which is well in excess of that which the Commission may require it to provide under that article, the undertaking concerned may benefit from a reduction in the fine (see, to that effect, judgment of 14 May 1998 in Case T-308/94 Cascades v Commission [1998] ECR II‑925, paragraph 262). 452 It must also be noted that where, in the course of the Commission’s investigation of a cartel, an undertaking makes available to it information concerning acts for which it could not in any event have been required to pay a fine under Regulation No 17, that does not amount to cooperation falling within the scope of the Leniency Notice or, a fortiori, Section D thereof. 453 It should also be noted that it is clear from the case-law that in appraising the cooperation shown by undertakings the Commission is not entitled to disregard the principle of equal treatment, a general principle of Community law which, according to settled case-law, is infringed only where comparable situations are treated differently or different situations are treated in the same way, unless such difference of treatment is objectively justified (Krupp Thyssen Stainless and Acciai speciali Terni v Commission paragraph 278 above, paragraph 237). 454 It is clear in that regard that the appraisal of the extent of the cooperation shown by undertakings cannot depend on purely random factors. A difference in the treatment of the undertakings concerned must therefore be capable of being ascribed to differences in the degree of cooperation provided, particularly where different information was provided or that information was supplied at different stages in the administrative procedure or in dissimilar circumstances (see, to that effect, Krupp Thyssen Stainless and Acciai speciali Terni v Commission, paragraph 278 above, paragraphs 245 and 246). 455 It is also the case that where an undertaking providing cooperation does no more than confirm, in a less precise and explicit manner, certain information already provided by another undertaking by way of cooperation, the extent of the cooperation provided by the former undertaking, while possibly of some benefit to the Commission, cannot be treated as comparable to that provided by the undertaking which was the first to supply that information. A statement which merely corroborates to a certain degree a statement which the Commission already had at its disposal does not facilitate the Commission’s task significantly and therefore sufficiently to justify a reduction in the fine for cooperation. 456 It is in the light of those principles that it should be determined in the present case whether the reduction in the fine which the Commission granted to the applicant under the first indent of Section D.2 of the Leniency Notice is the consequence of an incorrect assessment of the extent of the applicant’s cooperation, in particular in the light of the Commission’s decision-making practice, and infringes the principle of equal treatment. 457 In the first place, it should be noted both that the Commission stated in the Leniency Notice that where an undertaking cooperates pursuant to Section D of the notice, it is to benefit from a reduction of 10 to 50% of the fine that would have been imposed if it had not cooperated and, secondly, that the applicant does not dispute that the extent of its cooperation had to be assessed by reference to Section D of the notice. The Commission has indicated with respect to the applicant that a reduction of 10% of the fine under the first indent of Section D.2 of the Leniency Notice was appropriate, having regard to the fact that the applicant’s subsidiary provided information relating to the existence and nature of the infringement which went beyond merely replying to the request for information under Article 11 of Regulation No 17. It must therefore be held that, in granting the applicant a reduction of 10% of the fine under the first indent of Section D.2 of the Leniency Notice, the Commission did not depart from the bracket of reductions of fines applicable to the type of cooperation provided by the applicant. 458 As regards, in the second place, the argument based on the previous decision-taking practice of the Commission, it is sufficient to note that the mere fact that the Commission, in its previous practice when taking decisions, granted a certain rate of reduction for specific conduct does not mean that it is required to grant the same proportionate reduction when assessing similar conduct in a subsequent administrative procedure (Mayr-Melnhof v Commission, paragraph 57 above, paragraph 368, and ABB Asea Brown Boveri v Commission, paragraph 50 above, paragraph 239). That argument must accordingly be rejected. 459 In the third place, it is necessary to determine whether the reduction in the fine granted by the Commission to the applicant under the first indent of Section D.2 of the Leniency Notice infringes the principle of equal treatment. 460 It must be held in that regard that recital 324 of the contested decision, read together with recital 325, shows that the Commission granted a reduction of 30% of the fine imposed on Interbrew on two cumulative grounds, namely, first, that its cooperation in proving the relevant facts went beyond its obligations under Article 11 of Regulation No 17 (the first indent of Section D.2 of the Leniency Notice) and, secondly, that it did not substantially contest the facts which constituted the infringement (the second indent of Section D.2 of the Leniency Notice). 461 By contrast, recital 326, read together with recital 327, leads to the conclusion that the Commission granted the applicant a reduction of 10% only on the ground that its cooperation in establishing the facts went further than its obligations under Article 11 of Regulation No 17 (the first indent of Section D.2 of the Leniency Notice). In effect, the Commission took the view that the applicant substantially contested the facts on which it had based its allegations and was accordingly not entitled to any reduction under the second indent of Section D.2 of the Leniency Notice. 462 The difference between the reduction of fine granted to Interbrew and that granted to the applicant under the first indent of Section D.2 of the Leniency Notice is accordingly less than the final percentage reductions awarded of 30 and 10% suggest, as the reduction of 30% granted to Interbrew includes the reduction given to it under the second indent of Section D.2 of the Leniency Notice. 463 As regards the reductions granted to the applicant and Interbrew in respect of their cooperation under the first indent of Section D.2 of the Leniency Notice, it must be pointed out that the Commission refers implicitly in the contested decision to a qualitative difference between the cooperation provided by Interbrew and that provided by the applicant. While the Commission acknowledged that both undertakings provided material in response to the request for information of 11 November 1999 which went further than simply replying to it, the Commission none the less found that Interbrew ‘contributed significantly to establishing the relevant facts’, whereas it mentioned that the applicant merely ‘[supplied] information about the existence and substance of the infringement which went further than answering the request for information under Article 11 of Regulation No 17’. 464 In order to determine whether there was a material difference between the degree of cooperation provided by Interbrew and that provided by the applicant, it is necessary to compare the extent of their cooperation from both a chronological and a qualitative point of view. 465 As regards, in the first place, a comparison between the cooperation provided by the undertakings concerned from a chronological perspective, it must be pointed out, with respect to the applicant and its subsidiary Alken-Maes, that the latter replied to the request for information of 11 November 1999 by letter of 10 December 1999. Next, Alken-Maes provided the Commission with a statement in which it invoked the Leniency Notice on 27 December 1999, which it supplemented and clarified on 7 March 2000. Alken-Maes also replied on 5 April 2000 to a supplementary request for information by the Commission under Article 11 of Regulation No 17 of 22 March 2000. Lastly, the applicant replied on 10 May 2000 to a supplementary request for information which had been sent to it on 14 April 2000. 466 As regards the cooperation provided by Interbrew, it should first be pointed out that Interbrew replied to the request for information of 11 November 1999 on 23 December 1999. Next, by letters of 14 and 19 January 2000, Interbrew provided information supplementing the information contained in its letter of 23 December 1999. In the light of that information, the Commission sent a fax to Interbrew on 21 January 2000 containing an informal supplementary request for information. Interbrew replied to it by letter of 2 February 2000 and sent additional information on 8 and 28 February 2000. In addition, on 29 February 2000, Interbrew submitted a statement to the Commission relating to the Belgian market and invoked the Leniency Notice at the same time. Lastly, Interbrew also sent to the Commission on 21 December 2000, that is to say after the initiation of the procedure and the sending of the statement of objections adopted on 20 September 2000, two documents relating to two meetings held with Alken-Maes in connection with the bilateral agreements between them. 467 It follows from the foregoing that the Commission’s argument that the information submitted by the applicant was of less value than that submitted by Interbrew, as it was provided at a later time, cannot be accepted. All the information submitted by the parties was supplied in a relatively short period of time, at substantially the same stage of the administrative procedure. There is thus nothing from a chronological point of view which can be held to be determinative for the purpose of a comparative assessment of the applicant’s cooperation and Interbrew’s. 468 As regards, in the second place, the comparative analysis of the cooperation provided by the parties from a qualitative perspective, it must be held with respect to the applicant and its subsidiary Alken-Maes, that in its reply of 10 December 1999 to the request for information of 11 November 1999, Alken-Maes did not explicitly invoke the Leniency Notice. However, Alken-Maes stated that ‘the reply reflects the intention of the company to cooperate fully with the Commission on the basis of the documents kept at that date and the information available from the staff concerned who are still with the company’. It also stated that ‘Alken-Maes has also attempted to contact former employees of the company and the replies obtained are annexed’, and that ‘despite its best efforts, Alken-Maes is not in a position to guarantee the exhaustiveness of its reply and reserves the right to supplement or amend it’. The reference to the attempts made to gather information from former employees of the company provides initial support for the suggestion that the cooperation provided by Alken-Maes went beyond the obligations imposed on it by Article 11 of Regulation No 17. However, it is clear that the information and the documents provided by Alken-Maes cannot be regarded as falling outside the scope of those obligations. With the possible exception of that relating to the exchange of information between Alken-Maes and Interbrew, the material provided does not in any way reveal conduct having a manifestly anti‑competitive object, disclosure of which to the Commission is incriminating and therefore not covered by the obligations laid down in Article 11 of Regulation No 17. 469 In its letter of 27 December 1999, Alken-Maes for the first time explicitly states that its cooperation is being provided in the context of the Leniency Notice. In that letter it also acknowledges the existence of unlawful practices, as the managing director of Alken-Maes states that it does not substantially contest the facts as described by the Commission in its request for information of 11 November 1999 and that, in particular, there was a concerted practice between Interbrew and Alken-Maes by virtue of which, first, information was exchanged each month regarding their respective sales of beer in Belgium and, secondly, numerous meetings took place between representatives of Alken-Maes and Interbrew, during which there was consultation concerning the distribution and sale of beer in Belgium. Lastly, Alken-Maes attaches a note as an annex to that letter in which it stated that it appeared that at the end of 1994 ‘an agreement was entered into between the two companies covering all of the distribution channels in Belgium but with particular emphasis on the on-trade channels’. That agreement ‘included in particular … a pact providing for non-aggression, the reduction of marketing investment in the on-trade and in outside advertising, and concerted pricing’ and ‘there were regular meetings between the senior managers of the two companies with a view to ensuring that the agreements were properly implemented’. 470 In the statement of 7 March 2000 Alken-Maes acknowledged the existence of matters that could be analysed as anti-competitive practices and which as such substantially contributed to establishing the existence of the infringement, as the Commission itself accepts. However, it is clear that the statement is essentially based on documents and information that was already in the possession of the Commission. Thus, while the document provided by Alken-Maes in Annex 42 to the statement of 7 March 2000 proved extremely useful to the Commission, since it was on the basis of that document in particular that the Commission was able to establish that the cartel, contrary to the applicant’s contention, continued after July 1996, that document had already been provided to the Commission in Annex 37 to Alken-Maes’s reply of 10 December 1999 to the request for information of 11 November 1999, which reduces the value, from the aspect of cooperation, as its submission was covered by the obligations placed on that undertaking by Article 11 of Regulation No 17 (see paragraph 451 above). 471 It is also clear that a substantial part of the information submitted by Alken-Maes in its statement of 7 March 2000 relates to a period before that in respect of which the infringement was found to have occurred. Contrary to the applicant’s contention, therefore, that information cannot be regarded as having made it easier for the Commission to establish the infringement referred to in the contested decision. In that regard, the fact that an undertaking makes information available to the Commission in the course of its investigation concerning acts for which it could not in any event have been required to pay a fine under Regulation No 17, does not amount to cooperation for the purposes of the Leniency Notice (see, to that effect, the case-law cited in paragraph 451 above). 472 With respect to the replies of 5 April and 10 May 2000 to the requests for information of 22 March and 14 April 2000, it should be held, as regards the former, that it plainly concerned the private-label beer cartel and, as regards the latter, that while it is referred to on six occasions in the contested decision, it is not possible, since the parties to the proceedings have not adopted a position on the subject, to identify any contribution which went beyond the obligations arising under Article 11 of Regulation No 17. 473 As regards the cooperation provided by Interbrew, it must be held that while its reply of 23 December 1999 to the request for information of 11 November 1999 comes in part within its obligations under Article 11 of Regulation No 17, the reply none the less goes significantly further and plainly contributes to establishing the reality of facts constituting an infringement of Article 81 EC. In its reply, Interbrew described and explained the cartel to an extent which significantly exceeds its obligation under Article 11 of Regulation No 17. 474 As regards the letters from Interbrew of 14 and 19 January 2000, the letters sent on 2, 8 and 28 February 2000 in reply to the informal request for information of 21 January 2000, the statement of 29 February 2000 and, lastly, the two final documents submitted on 21 December 2000, it must be held that those letters and the annexes to them provide detailed information of the contacts between Interbrew, Alken-Maes and the applicant, which clearly falls within the scope of the Leniency Notice. 475 It follows from the foregoing that, from a qualitative point of view, Interbrew made a more decisive contribution to the establishment and the confirmation of the existence of the infringement. 476 In the light of the foregoing, it must be held that the difference between the percentage reductions of fines granted by the Commission under the first indent of Section D.2 of the Leniency Notice does not constitute an infringement of the principle of equal treatment. 477 The first part of the plea must accordingly be rejected.c) The second part, alleging that the Commission erred in concluding that the applicant had substantially contested the facts on which the Commission based its allegations 478 The applicant maintains that the Commission’s interpretation of the purpose and nature of the response to the statement of objections was manifestly incorrect, in so far as the Commission considered that the reply cast doubt on the existence of the infringement as described in the statement of objections. In its reply to the statement, the applicant merely raised points which it felt were necessary for a proper appraisal of the facts by the Commission and did not substantially contest the facts, but simply the significance or the classification ascribed to them by the Commission. The applicant indicated that, without substantially contesting the facts established by the Commission, it wished to clarify a number of points and to put the facts at issue into perspective, in order to show that they did not have the significance ascribed to them by the Commission. The applicant submits that it would be contrary to the most fundamental rights of the defence for the Commission to be entitled to require that undertakings seeking the benefit of the Leniency Notice waive the right to challenge not only the facts but also their classification, the level of the fine or legal reasoning employed by the Commission. The Commission had itself accepted the validity of that distinction in the Pre-insulated Pipe Cartel Decision, in which it did not penalise an undertaking which, while not denying the essential factual allegations made against it, had contested the significance given to them by the Commission, which had found that they constituted an infringement. As the applicant had done no more than provide a different classification of the facts, the Commission’s finding that its cooperation was not continuous and complete is therefore incorrect (Tate & Lyle and Others v Commission, paragraph 147 above, paragraph 162). 479 Thus, in the first place, the applicant emphasises in its application the five points which it raised in its response to the statement of objections, and that does not require to be interpreted as casting doubt on the existence of the infringement as described by the Commission in the statement of objections. 480 First, the applicant stressed the failure of the Commission to take account of Interbrew’s abuses of its dominant position in Belgium, when there was a link between those abuses and the cooperation which had evolved between the applicant and Interbrew and which, had they been taken into account, would have clarified the background to the infringement and the relative strengths of the parties concerned. 481 Secondly, it drew attention to the special nature of the Belgian regulatory system at the time, which, far from casting doubt on the reality of the infringement, permitted a better assessment of the gravity of the facts and the existence of attenuating circumstances. 482 Thirdly, it claimed that Interbrew had acted as the instigator, as it was the latter that had taken the initiative in relation to the various discussions and agreements with Alken-Maes. 483 Fourthly, it contested the significance given to the discussions with Interbrew, which were not binding on it in any way.484 Fifthly, the applicant specified the significance and classification which it considered fell to be given to the facts complained of, which, although constituting an infringement of Article 81 EC, did not fall to be categorised as a bilateral agreement on prices and market sharing, but only as a non-aggression pact and a restriction of investment and advertising. 485 Next, in its reply, the applicant provides a point-by-point response to the Commission’s reasoning in its defence relating to the facts which the Commission considered it to have challenged in the administrative procedure. Among those facts, the Commission maintains that two are still being challenged before the Court, while five others no longer appear to be challenged. Having regard to each of those points, the applicant repeats that it did not substantially contest the facts in question, but merely the significance or the classification ascribed to them by the Commission. 486 In the first place, as regards the two facts challenged before the Court, namely the threat made against Interbrew and the duration of the infringement, the applicant asserts, in relation to the former, that while it does not deny that in discussions between the parties to the cartel regarding their respective policies in France it sent a lawful and commercially legitimate warning to Interbrew following the abuses the latter was found to have committed in Belgium, it continues, by contrast, to deny that those discussions, although referring to the figure of 500 000 hectolitres, may be taken as constituting pressure in the sense understood by the Commission, since, in particular, the warning had no coercive effect. 487 As regards the duration of the infringement, the applicant confirms that it continues to deny that the cartel continued beyond July 1996. However, that does not represent the vigorous denial of a number of established facts, as the Commission wrongly maintains, but a challenge to the significance which the Commission ascribes to the contacts between the parties after July 1996, which cannot be reconciled with the context and effects of those contacts, as after that date they no longer had an anti-competitive object. As Interbrew notified its customers of its pricing system during 1996 and applied it from 1 January 1997, there was no longer any reason for such discussions to take place. 488 In the second place, with respect to the five other facts which the Commission considered were being challenged in the response to the statement of objections but are no longer challenged in the application, the applicant makes the following observations. 489 First, as regards its alleged challenge to the fact that the cartel also covered customer sharing and in particular price setting, the applicant confirms that it acknowledges the existence of the facts and does not deny that they constitute an infringement of Article 81 EC, but asserts that they cannot be classified as a bilateral agreement on prices, which affects not the existence of the infringement but its gravity. In particular, while it does not contest that prices were discussed at the meeting of 9 November 1994, the applicant still maintains that in deeming that those discussion constituted an effective agreement on prices, the Commission’s characterisation of the facts was particularly harsh. The applicant wished in particular to contest the significance attributed by the Commission to the handwritten formula ‘J=SA=A‑M=275,-’. 490 Secondly, with regard to the time when the cartel began, the applicant acknowledges that it is true that in its response to the statement of objections it maintained that the cartel did not begin until October 1994. However, the Commission fails to point out that that response covered the discussions between the parties that had taken place since the end of 1992. Without denying that contacts and exchanges of information with its competitors regarding its pricing structure had taken place from the end of 1992, the applicant submits that they must be placed in context and taken for what they really are, in particular against the background of the role of the CBB in the regulation of price increases. 491 Thirdly, as regards the argument that the object of the meeting of 11 May 1994 was not restricted to the introduction of the applicant’s new general manager of its beer division, the applicant maintains that it did indeed state that the primary purpose of the meeting was to allow that introduction to take place, but it also stated that the broader purpose of that meeting related to Interbrew’s proposal to enter into a non-aggression pact which included France. 492 Fourthly, as regards the discussions of 6 July 1994, the applicant submits that, contrary to the Commission’s contention, it did not deny that those discussions concerned the cooperation between Interbrew and Alken-Maes. It indicated that the discussions related primarily to Interbrew’s market position in France, but nevertheless immediately went on to state that the conclusion of a non-aggression pact concerning France and Belgium was proposed by Interbrew in those discussions. 493 Fifthly, as regards the question of Interbrew’s influence within the CBB, the applicant did not contest the fact established by the Commission that Interbrew did not determine the policy of the CBB. Furthermore, even if it had contested that fact, it would have contested the Commission’s interpretation of the influence exercised by Interbrew and not contested an established fact. 494 Lastly, as regards the Commission’s contention that the applicant declared that it was refraining from contesting only the facts set out in the statement of objections that the applicant itself had acknowledged, the applicant claims that the Commission distorted its statements and thus misinterpreted their actual meaning. 495 Thus, the Commission distorted the applicant’s words by adding the word ‘only’ to its statement, that is to say that by writing that the applicant had declared that ‘the facts [set out in the statement of objections] were not in dispute only in so far as they were based in part on information supplied to the Commission by Alken-Maes’. The applicant had in fact indicated that it did not deny ‘the existence of the events that occurred during the period in question, in so far as they [were] in part based on the information provided by representatives of Alken-Maes to the Commission’. 496 Moreover, the Commission misconstrued the significance of the expression ‘in so far as’. The use of those words did not reflect an intention to restrict, even in part, the extent to which the essential factual allegations were accepted, but on the contrary to emphasise that it would have been particularly inappropriate for the applicant to have contested the accuracy of the facts established by the Commission where they were established in part on the basis of material provided by the applicant. That misunderstanding led the Commission to conclude, incorrectly, that the applicant had cast doubt on the existence of the infringement. 497 The applicant submits in its reply that the Commission continues in its defence to adopt an incorrect, or even misleading, interpretation of the terms of the applicant’s response to the statement of objections, in indicating that the applicant ‘confined itself to acknowledging the facts “in so far as they are based in part on information provided by representatives of Alken-Maes itself to the Commission”’. In using the expression ‘confined itself’, the Commission introduced a qualification where the original text contained none. While the expression ‘in so far as’ may have a restrictive connotation when it is accompanied by a negation or a restrictive verb, it should by contrast be construed as having an explanatory connotation where it is used without any negation or restrictive verb. 498 The applicant also contends that a finding that it had sought to contest the facts is all the more damaging in that it is clear from the Commission’s decision-making practice that the a mere failure to contest the facts, without submitting any new information, may lead to a reduction of almost 20% of the fine, as illustrated by the Greek Ferries and Pre-insulated Pipe Cartel Decisions. The Commission has even granted in the past a reduction equivalent to that granted to the applicant in the present case to an undertaking which did not cooperate (recital 98 of Commission Decision 98/247/ECSC of 21 January 1998 relating to a proceeding pursuant to Article 65 of the ECSC Treaty (Case IV/35.814 – Alloy surcharge) (OJ 1998 L 100, p. 55)). 499 The Commission first notes that it is settled case-law that a reduction of a fine for not substantially contesting the facts assumes that the facts established in the statement of objections have been expressly accepted. It is clear from both the applicant’s response to the statement of objections and the application that the latter sought vigorously to deny, and continues to deny, that a threat was made against Interbrew and that the cartel continued beyond July 1996. Moreover, in its response to the statement of objections the applicant originally contested certain essential facts which it did not persist in denying in the application. 500 With respect to the argument that the Commission interpreted as a challenge to the facts what had in fact been a challenge to the significance attributed by it to those facts and its legal classification of them, the Commission observes that on the contrary the challenge related to the substance of a number of the facts. 501 It is in any event incorrect to claim that the absence of a challenge to the facts justifies generally a reduction of the fine of 20%, as the reduction normally granted on that ground is of the order of 10%. As regards the allegation that parties which did not cooperate with the Commission have benefited from a reduction equivalent to that granted to the applicant, it is unfounded. 502 Lastly, the Commission claims that, unless the rules of grammar are ignored, the purported acceptance of the facts by the applicant was only conditional. In the response to the statement of objections, the applicant confined itself to accepting the facts ‘in so far as they are based in part on information provided by representatives of Alken-Maes itself to members of the Commission’s staff’. 503 The second indent of Section D.2 of the Leniency Notice (see paragraph 448 above) states that where an undertaking cooperates in terms of Section D it is to benefit from a reduction of 10% to 50% of the fine that would have been imposed if it had not cooperated if, after receiving a statement of objections, it informs the Commission that it does not substantially contest the facts on which the Commission bases its allegations. 504 If it is to benefit from a reduction of the fine by reason of the absence of a challenge to the facts, pursuant to the second indent of Section D.2 of the Leniency Notice, an undertaking must expressly inform the Commission that it has no intention of substantially contesting the facts, after perusing the statement of objections (Mayr-Melnhof v Commission, paragraph 57 above, paragraph 309). 505 However, it is not sufficient for an undertaking to state in general terms that it does not contest the facts alleged for the purposes of the Leniency Notice if, in the circumstances of the case, that statement is not of any help to the Commission at all (Case T-48/00 Corus UK v Commission [2004] ECR II-0000, paragraph 193). In order for an undertaking to benefit from a reduction of the fine for its cooperation during the administrative procedure, its conduct must facilitate the Commission’s task of identifying and penalising infringements of the Community competition rules (see, to that effect, Mayr-Melnhof v Commission, paragraph 57 above, paragraph 309). 506 In the light of those principles, it is necessary to determine whether, as the applicant claims, the Commission erred in finding in recital 326 of the contested decision that the terms of the applicant’s declaration that it did not contest the facts and the doubt cast by it on the existence of the infringement as described in the statement of objections did not warrant a reduction in the fine under the second indent of Section D.2 of the Leniency Notice. 507 In that regard, it must be observed, with respect, in the first place, to the applicant’s general statements that it did not substantially contest the facts, that prior to the sending of the statement of objections, in its letter to the Commission of 27 December 1999, Alken-Maes stated that ‘it [did] not substantially contest the facts as described by the Commission in its request for information sent on 11 November 1999 and that, in particular, … there [had] been a concerted practice between Interbrew and Alken-Maes by virtue of which, first, information [had] been exchanged each month regarding their respective sales of beer in Belgium; … between 1992 and 1998 there had been numerous meetings between executives of Alken-Maes, and notably Mr R.V., the then managing director, and executives of Interbrew, especially Mr T. and Mr J.D., at which there [had been] consultation about the distribution and sale of beer in Belgium’. It added that ‘without prejudice to the mitigating circumstances which have been notified to the [Commission’s] staff, Alken-Maes acknowledges and will not deny that those facts represent an infringement of Article 81 … EC’. 508 It must also be observed that in its response to the statement of objections the applicant stated that ‘without denying the existence of contacts and concerted practices between Interbrew and Alken-Maes in so far as they are in part based on the information provided by representatives of Alken-Maes itself to members of the Commission’s staff, [it wished] to … clarify a number of points and put the facts concerned into perspective in order to show that they do not have the significance ascribed to them by the Commission’. In p. 1 of its response to the statement of objections, the applicant rephrased its words slightly in stating that ‘without denying the existence of the events that occurred during the period in question, in so far as they are in part based on the information provided by representatives of Alken-Maes to members of the Commission’s staff on [the applicant’s] instructions, [the applicant] wishes in this reply to clarify a number of points and to put the facts concerned into perspective, in order to show that they did not have the significance ascribed to them by the Commission, or even, in some cases, that the Commission’s findings in law result from an incorrect classification of the relevant circumstances’. 509 It is therefore clear from the applicant’s response to the statement of objections that, although it maintains that it did not contest the existence of ‘contacts and concerted practices between Interbrew and Alken-Maes’ or of ‘facts that occurred during the period in question’, it did not assert expressly and in a clear and precise manner that it did not substantially contest the facts on which the Commission had based its allegations. On the contrary, that assertion was accompanied by reservations relating to its intention to ‘clarify a number of points’, to ‘put the facts concerned into perspective’ in order to show that they ‘do not have the significance ascribed to them by the Commission’ and that the Commission’s legal findings ‘result from an incorrect classification of the relevant circumstances’. 510 As regards, in the second place, the applicant’s observations relating to the specific facts recorded by the Commission in its statement of objections (see paragraphs 486 to 493 above), it is evident that the applicant did not confine itself to clarifying the significance attributed to them by Commission, but contested the content or the existence of a number of them. 511 Thus, as regards the duration of the infringement, the Commission indicated in the statement of objections that it had evidence relating to the cartel for the period from at least 28 January 1993 to 28 January 1998 and that the cartel had accordingly continued until 28 January 1998. For the period after July 1996, the Commission relied, in reaching that conclusion, on three facts, namely, first, that a telephone conversation took place on 9 December 1996 between Alken-Maes (Mr L.B.) and Interbrew (Mr A.B.); secondly, that the meeting between Interbrew, the applicant and Alken-Maes held in Paris on 17 April 1997 had an anti-competitive object and, thirdly, that the meeting of 28 January 1998 between Interbrew and Alken-Maes concerned the cartel. 512 In its response to the statement of objections, the applicant stated that it ‘[was] astonished that the Commission should take [28 January 1998] as marking the end of the unlawful practices, when all the material contained in the investigation file shows that all bilateral discussions had ceased by the second half of 1996’. In particular, the applicant maintained that ‘the discussions on pricing structure ended with Interbrew’s decision in July 1996 to introduce its new prices on 1 January 1997’ and that ‘the lack of any discussions after July 1996’ could be seen, for example, from a note from a consultant with Alken-Maes comparing Interbrew’s new general terms with Alken-Maes’s draft terms, which would have been unnecessary ‘if there had been contacts between the two undertakings in relation to that matter’, that ‘the meeting [of 17 April 1997] did not form part of the discussions covered by the [statement of objections]’ and that the purpose of the meeting of 28 January 1998 was not to ‘reintroduce the former practices’. 513 In the light of the foregoing, and in particular of the applicant’s observations regarding the duration of the infringement, it must be held that its statements that it does not substantially contest the facts do not justify a reduction of the fine under the second indent of Section D.2 of the Leniency Notice. 514 First, as regards an agreement having an anti-competitive object, it must be pointed out that the establishment of the facts alone is sufficient, in principle, to establish two of the essential elements of an infringement of Article 81(1) EC, namely the existence of an agreement and its anti-competitive object. It is therefore clear that the applicant could not, in its response to the statement of objections, contest the significance of the relevant facts in July 1996, which the Commission has validly established and which themselves constitute the infringement in question, without substantially contesting the facts within the meaning of the second indent of Section D.2 of the Leniency Notice (see, by analogy, Corus UK v Commission, paragraph 505 above, paragraphs 195 and 197). 515 In the second place, a declaration that a person does not substantially contest the facts, accompanied, as in the present case, by a series of observations by which the applicant allegedly seeks to clarify the significance of certain facts but which, in reality, amount to contesting those facts, cannot be considered to facilitate the Commission’s task of identifying and penalising the relevant infringement of the competition rules. 516 It is plain that, contrary to what the applicant maintains, it is not the incorrect significance attributed by the Commission to certain facts, namely the contacts which took place on 9 December 1996, 17 April 1997 and 28 January 1998, that the applicant contests, but the very nature of those facts. Thus, in its response to the statement of objections (see paragraph 512 above), the applicant did not merely contest the significance of the contact which took place on 9 December 1996 between Alken-Maes and Interbrew, but contested the very fact that there had been contact between the two competitors on that date. Similarly, the applicant denied the very fact that the meeting of 17 April 1997 had an anti‑competitive object and not the significance ascribed to that fact by the Commission or its legal analysis of it. Lastly, with respect to the meeting of 28 January 1998, the applicant did not merely submit that the fact that the cartel was perceived still to be in existence, as has been validly established by the Commission, did not have the significance or the legal classification attributed to it by the Commission, namely that of an infringement, but contested the very fact that the terms of the discussion relating to the cartel showed that it was still in existence. 517 It must therefore be held, without there being any need to consider the other arguments developed by the applicant, that the Commission was correct to find in recital 326 of the contested decision that the applicant had cast doubt on the existence of the infringement as described in the statement of objections and that it considered that that did not justify a reduction of the fine within the meaning of the second indent of Section D.2 of the Leniency Notice. 518 It is therefore necessary to reject the second part and accordingly the plea in its entirety. The method of calculation and the final amount of the fine519 As established in paragraph 313 above, the increase in the basic amount of the fine in respect of aggravating circumstances must be reduced from 50 to 40%. 520 As regards the calculation of the final amount of the fine resulting from that amendment, it should be pointed out that in calculating the fine imposed on the applicant the Commission departed from the method laid down in the Guidelines. 521 Given the wording of the Guidelines, the percentages corresponding to increases or reductions applied to reflect aggravating or attenuating circumstances must be applied to the basic amount of the fine set by reference to the gravity and duration of the infringement, and not to the figure resulting from any initial increase or reduction to reflect an aggravating or attenuating circumstance (see, to that effect, Cheil Jedang v Commission, paragraph 95 above, paragraph 229). 522 In the present case, it is clear that while the Commission adjusted the amount of the fine to take account of two aggravating circumstances and then of one attenuating circumstance, the final amount of the fine imposed shows that the Commission applied one of those two adjustments to the amount which resulted from the application of an initial increase of reduction. Such a method of calculation has the consequence that the final amount of the fine is altered by reference to the amount which would result from the application of the method laid down in the Guidelines. 523 In that regard, while the method of calculating the amount of fines contained in the Guidelines is, admittedly, not the only permissible method, it is capable of ensuring a coherent decision-making practice in relation to the imposition of fines, which in turn guarantees equality of treatment for undertakings which are penalised for infringements of the rules of competition law. In the present case, the Court finds that the Commission has departed from the Guidelines with regard to the method of calculating the final amount of the fines, without providing any justification for doing so. 524 It is therefore appropriate, in the exercise of the full jurisdiction conferred on the Court by Article 17 of Regulation No 17, to apply the increase of 40% for the aggravating circumstance of repeated infringements to the basic amount of the fine imposed on the applicant. 525 The final amount of the fine imposed on the applicant is therefore calculated as follows: the basic amount of the fine (EUR 36.25 million) must first be increased by 40% of that basic amount (EUR 14.5 million) and then reduced by 10% of that amount (EUR 3.25 million), which gives an amount of EUR 47.125 million. Next, that figure is reduced by 10% for cooperation, which gives a final amount of the fine of EUR 42.4125 million. Costs526 Under Article 87(3) of the Rules of Procedure, the Court of First Instance may order that the costs be shared or that each party bear its own costs where each party succeeds on some and fails on other heads. In the present case, it must be held that the applicant is to bear its own costs and pay three quarters of those incurred by the Commission. On those grounds,THE COURT OF FIRST INSTANCE (Fifth Chamber)hereby:1. Sets the amount of the fine imposed on the applicant at EUR 42.4125 million;2. Dismisses the remainder of the application;3. Orders the applicant to bear its own costs and to pay three quarters of those incurred by the Commission and the Commission to bear one quarter of its own costs.Vilaras Martins RibeiroJürimäeDelivered in open court in Luxembourg on 25 October 2005E. Coulon M. VilarasRegistrar PresidentTable of contentsLegal frameworkFactsProcedure and forms of order soughtLawA – The heads of claim seeking annulment of the contested decision1. The plea alleging infringement of the rights of the defence and the principle of sound administrationa) The first part, alleging that the applicant was not given an opportunity to enquire into the circumstances in which a document used against it by the Commission was drawn up Arguments of the partiesB – Findings of the Courtb)The second part, alleging that, prior to the adoption of the contested decision, the Commission refused to inform the applicant of the matters taken into account in setting the amount of the fine Findings of the Courtb) The third part, based on the fact that no record was kept of meetings between the Commission and Interbrew and the Commission’s refusal to send the applicant a copy of Interbrew’s response to the statement of objections 2. The plea alleging infringement of the obligation to state reasonsa) Arguments of the partiesb) Findings of the Court3. The heads of claim raised in the alternative seeking a reduction in the amount of the fine imposed4. The plea alleging incorrect assessment of the gravity of the infringement for the purposes of setting the starting amount of the fine, in breach of the principles of proportionality, equal treatment and non bis in idem Arguments of the applicant– The assessment of the gravity of the infringement: infringement of the principles of equal treatment and proportionality– The assessment of the applicant’s effective economic capacity to cause significant damage to other operators: infringement of the principle of proportionality – The setting of the amount of the fine at a level which ensures that it has a sufficiently deterrent effect: infringement of the principle of proportionality – The taking into account of the legal and economic knowledge and infrastructures that large undertakings usually possess: infringement of the principle non bis in idem Arguments of the CommissionThe assessment of the gravity of the infringementThe appraisal of the effective economic capacity of the applicant to cause significant damage to other operatorsThe setting of the fine at a level which ensures that it has a sufficiently deterrent effectThe taking account of the legal and economic knowledge and infrastructures which large undertakings usually haveThe appropriateness of the specific starting amount in the light of the circumstances invoked by the applicant5. The plea alleging incorrect assessment of the duration of the infringementThe telephone conversation of 9 December 1996The meeting of 17 April 1997The meeting of 28 January 1998.6. The plea alleging that there was no basis for the finding that the pressure put on Interbrew constituted an aggravating circumstance 7. The plea that alleging there was no basis for the taking into account the aggravating circumstance of repeated infringement in the applicant’s case 8. The plea alleging failure to take proper account of the applicable attenuating circumstancesa) The first part, based on the Commission’s refusal to take into account the fact that the infringement did not have any effects on the market b) The second part, alleging that the Commission failed to take into account the influence of the system for controlling prices and the long-standing tradition of collective action in the beer sector c) The third part, based on the Commission’s refusal to take account of the crisis in the sectord) The fourth part, based on the aggressive attitude adopted by Interbrew9. The plea based on an incorrect assessment of the extent of the cooperation provided by the applicant, in breach of the principle of equal treatment and the Leniency Notice a) The first part, alleging an incorrect assessment by the Commission of the extent of the applicant’s cooperation, by reference in particular to its decision-making practice and in breach of the principle of equal treatment c) The second part, alleging that the Commission erred in concluding that the applicant had substantially contested the facts on which the Commission based its allegations The method of calculation and the final amount of the fineCosts* Language of the case: French. 1 – Translator’s note: the French text of recital 303 of the contested decision refers to the capacity of offenders ‘to cause material harm to competition’ (‘porter gravement atteinte à la concurrence’), whereas the wording used in the Guidelines is ‘cause significant damage to other operators’ (‘créer un dommage important aux autres opérateurs’). The English text of the recital adopts the same wording as that used in the Guidelines. | 36960-0824c8c-483e | EN |
THE COURT OF JUSTICE UPHOLDS THE NAME "FETA' AS A PROTECTED DESIGNATION OF ORIGIN FOR GREECE | Federal Republic of GermanyandKingdom of Denmark vCommission of the European Communities(Agriculture – Geographical indications and designations of origin for agricultural products and foodstuffs – The name ‘feta’ – Regulation (EC) No 1829/2002 – Validity)Opinion of Advocate General Ruiz-Jarabo Colomer delivered on 10 May 2005 Judgment of the Court (Grand Chamber), 25 October 2005 Summary of the Judgment1. Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Regulation No 2081/92 – Protection of a non-geographical traditional name as a designation of origin – Requirement of a link between the characteristics of a product and its geographical origin – Place or region of origin – Definition according to natural factors distinguishing it from the areas adjoining it(Council Regulation No 2081/92, Art. 2(2)(a) and (3))2. Agriculture – Uniform laws – Protection of geographical indications and designations of origin for agricultural products and foodstuffs – Regulation No 2081/92 – Names that have become generic – Criteria for assessment – Taking into account of the marketing of a product under a name in some Member States – Lawfulness(Council Regulation No 2081/92, Art. 3(1))3. Acts of the Community institutions – Statement of reasons – Obligation – Scope – Regulation including the entry of the name ‘feta’ in the register of protected designations of origin(Art. 253 EC; Commission Regulation No 1829/2002)1. In order to be protected as an ‘appellation of origin’ under Article 2(3) of Regulation No 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs, a traditional non-geographical name must, inter alia, designate an agricultural product or a foodstuff ‘originating in a region or a specific place’. That provision, moreover, in referring to the second indent of Article 2(2)(a) of the same regulation, requires that the quality or characteristics of the agricultural product or foodstuff be essentially or exclusively due to a particular geographical environment with its inherent natural and human factors, and that the production, processing and preparation of that product take place in the defined geographical area. It follows from a combined reading of those two provisions that the place or region referred to in Article 2(3) must be defined as a geographical environment with specific natural and human factors and which is capable of giving an agricultural product or foodstuff its specific characteristics. The area of origin referred to must, therefore, present homogenous natural factors which distinguish it from the areas adjoining it. (see paras 48-50)2. The fact that a product has been lawfully marketed under a name in some Member States may constitute a factor which must be taken into account in the assessment of whether that name has become generic within the meaning of Article 3(1) of Regulation No 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs. (see para. 79)3. The statement of reasons required by Article 253 EC must be appropriate to the nature of the measure in question and must show clearly and unequivocally the reasoning of the institution which enacted the measure, so as to inform the persons concerned of the justification for the measure adopted and to enable the Court to exercise its powers of review. The institution which adopted the act is not required, however, to define its position on matters which are plainly of secondary importance or to anticipate potential objections. The Commission’s discussion, in the 11th to the 33rd recitals in the preamble to Regulation No 1829/2002 including the name ‘feta’ in the register of protected designations of origin, constitutes a sufficient statement of reasons for the purposes of Article 253 EC of the essential factors which led it to the conclusion that the name ‘feta’ was not generic within the meaning of Article 3 of Regulation No 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs. (see paras 106-107)JUDGMENT OF THE COURT (Grand Chamber)25 October 2005 (*) In Joined Cases C-465/02 and C-466/02,APPLICATIONS for annulment pursuant to Article 230 EC, brought on 30 December 2002,Federal Republic of Germany, represented by W.‑D. Plessing, acting as Agent, assisted by M. Loschelder, Rechtsanwalt, applicant in Case C-465/02,Kingdom of Denmark, represented by J. Molde and J. Bering Liisberg, acting as Agents, with an address for service in Luxembourg, applicant in Case C-466/02,supported by:French Republic, represented by G. de Bergues and A. Colomb, acting as Agents, with an address for service in Luxembourg, United Kingdom of Great Britain and Northern Ireland, represented by C. Jackson, acting as Agent, with an address for service in Luxembourg, interveners,Commission of the European Communities, represented by J. L. Iglesias Buhigues and H. C. Støvlbæk, and A.‑M. Rouchaud-Joët and S. Grünheid, acting as Agents, with an address for service in Luxembourg, defendant,Hellenic Republic, represented by V. Kontolaimos and I.‑K. Chalkias, acting as Agents, with an address for service in Luxembourg, intervener,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and J. Malenovský, Presidents of Chambers, J.‑P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues (Rapporteur), J. Klučka, U. Lõhmus and E. Levits, Judges, Advocate General: D. Ruiz-Jarabo Colomer,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 15 February 2005,after hearing the Opinion of the Advocate General at the sitting on 10 May 2005,gives the followingJudgment1 The Federal Republic of Germany and the Kingdom of Denmark have applied for annulment of Commission Regulation (EC) No 1829/2002 of 14 October 2002 amending the Annex to Regulation (EC) No 1107/96 with regard to the name ‘Feta’ (OJ 2002 L 277, p. 10) (‘the contested regulation’). Legal framework2 Article 2(1) to (3) of Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (OJ 1992 L 208, p. 1) (‘the basic regulation’) provides: ‘1. Community protection of designations of origin and of geographical indications of agricultural products and foodstuffs shall be obtained in accordance with this Regulation. 2. For the purposes of this Regulation:(a) designation of origin: means the name of a region, a specific place or, in exceptional cases, a country, used to describe an agricultural product or a foodstuff: – originating in that region, specific place or country, and– the quality or characteristics of which are essentially or exclusively due to a particular geographical environment with its inherent natural and human factors, and the production, processing and preparation of which take place in the defined geographical area; (b) geographical indication: means the name of a region, a specific place or, in exceptional cases, a country, used to describe an agricultural product or a foodstuff: – originating in that region, specific place or country, and– which possesses a specific quality, reputation or other characteristics attributable to that geographical origin and the production and/or processing and/or preparation of which take place in the defined geographical area. 3. Certain traditional geographical or non-geographical names designating an agricultural product or a foodstuff originating in a region or a specific place, which fulfil the conditions referred to in the second indent of paragraph 2(a) shall also be considered as designations of origin.’ 3 Article 3(1) of the same regulation provides:‘Names that have become generic may not be registered.For the purposes of this Regulation, a “name that has become generic” means the name of an agricultural product or a foodstuff which, although it relates to the place or the region where this product or foodstuff was originally produced or marketed, has become the common name of an agricultural product or a foodstuff. To establish whether or not a name has become generic, account shall be taken of all factors, in particular:– the existing situation in the Member State in which the name originates and in areas of consumption,– the existing situation in other Member States,– the relevant national or Community laws.Where, following the procedure laid down in Articles 6 and 7, an application of registration is rejected because a name has become generic, the Commission shall publish that decision in the Official Journal of the European Communities.’ 4 Articles 5 to 7 of the basic regulation provide for a procedure for registering a name, known as the ‘ordinary procedure’. Article 7 thereof provides for a procedure for objecting to a registration application. 5 Article 6(3) of the same regulation provides:‘If no statement of objections is notified to the Commission in accordance with Article 7, the name shall be entered in a register kept by the Commission entitled “Register of protected designations of origin and protected geographical indications”, which shall contain the names of the groups and the inspection bodies concerned.’ 6 For the adoption of the measures provided for in the basic regulation, Article 15 thereof provides:‘The Commission shall be assisted by a committee composed of the representatives of the Member States and chaired by the representative of the Commission. The representative of the Commission shall submit to the committee a draft of the measures to be taken. The committee shall deliver its opinion on the draft within a time limit which the chairman may lay down according to the urgency of the matter. The opinion shall be delivered by the majority laid down in Article 148(2) of the Treaty in the case of decisions which the Council is required to adopt on a proposal from the Commission. The votes of the representatives of the Member States within the committee shall be weighted in the manner set out in that Article. The chairman shall not vote. The Commission shall adopt the measures envisaged if they are in accordance with the opinion of the committee.If the measures envisaged are not in accordance with the opinion of the committee, or if no opinion is delivered, the Commission shall, without delay, submit to the Council a proposal relating to the measures to be taken. The Council shall act by a qualified majority. If, on the expiry of a period of three months from the date of referral to the Council, the Council has not acted, the proposed measures shall be adopted by the Commission.’ 7 Article 17 of the basic regulation establishes a registration procedure, known as the ‘simplified procedure’, as follows:‘1. Within six months of the entry into force of the Regulation, Member States shall inform the Commission which of their legally protected names or, in those Member States where there is no protection system, which of their names established by usage they wish to register pursuant to this Regulation. 2. In accordance with the procedure laid down in Article 15, the Commission shall register the names referred to in paragraph 1 which comply with Articles 2 and 4. Article 7 shall not apply. However, generic names shall not be added. 3. Member States may maintain national protection of the names communicated in accordance with paragraph 1 until such time as a decision on registration has been taken.’ 8 Article 1(15) of Council Regulation (EC) No 692/2003 of 8 April 2003 amending Regulation (EEC) No 2081/92 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (OJ 2003 L 99, p. 1) repealed Article 17, although it continues to apply to names registered or names for which registration was sought under the procedure provided for by Article 17 prior to the entry into force of Regulation No 692/2003, that is, 24 April 2003. 9 By Commission Decision 93/53/EEC of 21 December 1992 setting up a scientific committee for designations of origin, geographical indications and certificates of specific character (OJ 1993 L 13, p. 16), the Commission set up a ‘scientific committee’ for the purpose of examining, at the Commission’s request, the technical problems relating to inter alia the application of the basic regulation. 10 According to Article 3 of that decision, the members of the scientific committee are appointed by the Commission from among highly-qualified experts with competence in the fields referred to in Article 2 thereof. Under Articles 7(1) and 8(1) thereof, the committee is to meet at the request of a representative of the Commission and its proceedings are to relate to matters on which the Commission has requested an opinion. Facts11 By letter of 21 January 1994, the Greek Government applied under Article 17(1) of the basic regulation for registration of the word ‘feta’ as a designation of origin. 12 On 12 June 1996, the Commission adopted Commission Regulation (EC) No 1107/96 of 12 June 1996 on the registration of geographical indications and designations of origin under the procedure laid down in Article 17 of Regulation No 2081/92 (OJ 1996 L 148, p. 1). Under the first paragraph of Article 1 of that regulation, the name ‘feta’ in the Annex thereto in Part A, under the heading ‘cheeses’ and the country ‘Greece’, was registered as a protected designation of origin (‘PDO’). 13 By judgment of 16 March 1999 in Joined Cases C-289/96, C‑293/96 and C‑299/96 Denmark and Others v Commission [1999] ECR I-1541, the Court of Justice annulled Regulation No 1107/96 in so far as it registered the name ‘feta’ as a protected designation of origin. 14 In paragraph 101 of that judgment, the Court held that, when registering the name ‘feta’, the Commission had not taken any account whatsoever of the fact that that name had been used for a considerable time in certain Member States other than the Hellenic Republic. 15 In paragraph 102 of the judgment, the Court found that the Commission, in considering the question of whether ‘feta’ was a generic name, had not taken due account of all the factors which the third indent of Article 3(1) of the basic regulation required it to take into consideration. 16 Following that judgment, on 25 May 1999 the Commission adopted Commission Regulation (EC) No 1070/1999 of 25 May 1999 amending the Annex to Regulation (EC) No 1107/96 (OJ 1999 L 130, p. 18), which deleted the name ‘feta’ from the Register of protected designations of origin and geographical indications and from the Annex to Regulation No 1107/96. 17 By letter of 15 October 1999, the Commission sent the Member States a questionnaire on the manufacture and consumption of cheeses known as ‘feta’ and on how well known that name was amongst consumers in each of the States. 18 The information received in response to that questionnaire was presented to the scientific committee, which gave its opinion on 24 April 2001 (‘the scientific committee’s opinion’). In that opinion, the committee concluded unanimously that the name ‘feta’ was not generic in nature. 19 On 14 October 2002, the Commission adopted the contested regulation. Under that regulation, the name ‘feta’ was once again registered as a protected designation of origin. 20 Article 1 of that regulation provides:‘1. The name “Φέτα” (Feta) shall be included in the register of protected designations of origin and geographical indications provided for in Article 6(3) of Regulation (EEC) No 2081/92 as a protected designation of origin (PDO). 2. The name “Φέτα” shall be added to part A of the Annex to Regulation (EC) No 1107/96 under the heading “Cheeses”, “Greece”.’21 According to the 20th recital in the preamble to the contested regulation:‘(20) According to the information sent by the Member States, those cheeses actually bearing the name “Feta” on Community territory generally make explicit or implicit reference to Greek territory, culture or tradition, even when produced in Member States other than Greece, by adding text or drawings with a marked Greek connotation. The link between the name “Feta” and Greece is thus deliberately suggested and sought as part of a sales strategy that capitalises on the reputation of the original product, and this creates a real risk of consumer confusion. Labels for “Feta” cheese not originating in Greece but actually marketed in the Community under that name without making any direct or indirect allusion to Greece are in the minority and the quantities of cheese actually marketed in this way account for a very small proportion of the Community market.’ 22 According to the 33rd to 37th recitals in the preamble to that regulation:‘(33) The Commission has taken note of the advisory opinion of the Scientific Committee. It takes the view that the exhaustive overall analysis of the legal, historical, cultural, political, social, economic, scientific and technical information notified by the Member States or resulting from investigations undertaken or sponsored by the Commission leads to the conclusion that in particular none of the criteria required under Article 3 of Regulation (EEC) No 2081/92 to show that a name is generic have been met, and that consequently the name “Feta” has not become “the name of an agricultural product or a foodstuff which, although it relates to the place or the region where this product or foodstuff was originally produced or marketed, has become the common name of an agricultural product or a foodstuff”. (34) Since the term “Feta” has not been established as generic, the Commission has verified, in accordance with Article 17(2) of Regulation (EEC) No 2081/92, that the application by the Greek authorities for the name “Feta” to be registered as a protected designation of origin complies with Articles 2 and 4 thereof. (35) The name “Feta” is a traditional non-geographical name within the meaning of Article 2(3) of Regulation (EEC) No 2081/92. The terms “region” and “place” mentioned in that provision may be interpreted only from a geomorphological and non-administrative viewpoint, in so far as the natural and human factors inherent in a given product are likely to transcend administrative borders. Under the above Article 2(3), however, the geographical area inherent in a designation may not cover an entire country. In the case of the name “Feta”, it has therefore been noted that the defined geographical area referred to in the second indent of Article 2(2)(a) of Regulation (EEC) No 2081/92 covers only the territory of mainland Greece and the department of Lesbos; all other islands and archipelagos are excluded because the necessary natural and/or human factors do not apply there. Moreover, the administrative definition of the geographical area has been refined and developed, since the product specification submitted by the Greek authorities contains mandatory cumulative requirements: in particular, the area of origin of the raw material has been substantially limited since the milk used to produce “Feta” cheese must come from ewes and goats of local breeds reared traditionally, whose feed must be based on the flora present in the pastures of eligible regions. (36) The geographical area covered by the administrative definition and meeting the requirements of the product specification is sufficiently uniform to meet the requirements of Articles 2(2)(a) and 4(2)(f) of Regulation (EEC) No 2081/92. Extensive grazing and transhumance, central to the method of keeping the ewes and goats used to provide the raw material for making “Feta” cheese, are the result of an ancestral tradition allowing adaptation to climate changes and their impact on the available vegetation. This has led to the development of small native breeds of sheep and goats which are extremely tough and resistant, fitted for survival in an environment that offers little food in quantitative terms but, in terms of quality, is endowed with an extremely diversified flora, thus giving the finished product its own specific aroma and flavour. The interplay between the above natural factors and the specific human factors, in particular the traditional production method, which requires straining without pressure, has thus given “Feta” cheese its remarkable international reputation. (37) Since the product specification submitted by the Greek authorities includes all the information required under Article 4 of Regulation (EEC) No 2081/92, and the formal analysis of that specification has not revealed any obvious error of assessment, the name “Feta” should be registered as a protected designation of origin.’ Forms of order sought and the proceedings before the Court23 In Case C-465/02, the Federal Republic of Germany claims that the Court should:– annul the contested regulation;– order the Commission to pay the costs.24 In Case C-466/02, the Kingdom of Denmark claims that the Court should:25 The Commission contends, in each of the cases, that the Court should:– dismiss the action;– order the applicant to pay the costs.26 By orders of the President of the Court of 13 May and 3 June 2003, the French Republic and the United Kingdom of Great Britain and Northern Ireland were granted leave to intervene in support of the forms of order sought by the applicants, and the Hellenic Republic was granted leave to intervene in support of the forms of order sought by the Commission. 27 By order of the President of the Court of 13 January 2005, Cases C-465/02 and C-466/02 were joined for the purposes of the oral procedure and judgment. Admissibility28 The Greek Government submits that the actions of the Federal Republic of Germany and the Kingdom of Denmark were brought after the time-limit. The contested regulation was published on 15 October 2002. Since the actions were lodged only on 30 December 2002, the two-month time-limit provided for in the fifth paragraph of Article 230 EC had been exceeded. 29 That argument cannot be accepted. Pursuant to Article 81(1) of the Rules of Procedure, the time-limit starts to run only at the end of the 14th day following the date of publication of the measure in question. This is supplemented by the extension on account of distance provided for in Article 81(2) of the Rules of Procedure, in this case 10 extra days. In the light of those provisions, the present actions were lodged within the prescribed period. Substance The first plea30 The German Government submits that there has been infringement of the rules of procedure of the committee provided for in Article 15 of the basic regulation (‘the regulatory committee’) and infringement of Regulation No 1 of the Council of 15 April 1958 determining the languages to be used by the European Economic Community (OJ, English Special Edition, Series I, Chapter 1952-1958, p. 59). The documents which were to be examined at the meeting of the regulatory committee on 20 November 2001 were not notified to the German Government 14 days prior to that meeting; nor were they notified in German. 31 According to the information submitted to the Court, the regulatory committee did not yet have rules of procedure at the time of that meeting. It is therefore appropriate to refer to the standard rules of procedure – Council Decision 1999/468/EC (OJ 2001 C 38, p. 3). 32 According to Article 3(1) and (2) thereof:‘1. The Chairman shall send the invitation to the meeting, the agenda and proposed measures about which the committee’s opinion is required and any other working documents to the committee members in accordance with Article 13(2), as a general rule, no later than 14 calendar days before the date of the meeting … . 2. In urgent cases, and where the measures to be adopted must be applied immediately, the Chairman may, at the request of a committee member or on his or her own initiative, shorten the period laid down in the above paragraph to five calendar days before the date of the meeting … .’ 33 Article 3 of Regulation No 1 of 15 April 1958 provides:‘Documents which an institution of the Community sends to a Member State or to a person subject to the jurisdiction of a Member State shall be drafted in the language of such State.’ 34 It is common ground that, by e-mail of 9 November 2001, the Commission sent the German Government an invitation to a meeting of the regulatory committee, to be held on 20 November 2001. The first item on the agenda of that meeting was an exchange of viewpoints on the ‘feta’ file. The Commission attached to that e-mail two annexes, both drawn up in English and in French. One of those annexes summarised the responses of the Member States to the Commission’s questionnaire of 15 October 1999 pertaining to the manufacture, consumption and reputation of feta. The other annex contained a draft opinion on the file from the scientific committee. 35 At the meeting of the regulatory committee on 20 November 2001, the German delegation requested a German-language version of those two annexes. It is common ground that it never received them. 36 Even if the lack of a German-language version of the two annexes in question were not to comply with Article 3 of Regulation No 1 of 15 April 1958, such an irregularity would not lead to annulment of the contested regulation. 37 A procedural irregularity of this nature could entail annulment of the act ultimately adopted only if, were it not for that irregularity, the procedure could have led to a different result (see, to that effect, Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 47; Case 128/86 Spain v Commission [1987] ECR 4171, paragraph 25; and Case C‑142/87 Belgium v Commission (‘Tubemeuse’) [1990] ECR I-959, paragraph 48). 38 At the meeting in question, the members of the regulatory committee were only invited in turn to put forward any comments in regard to the ‘feta’ file and the results of the Commission’s questionnaire. The committee examined a draft regulation only subsequently, at its meeting of 16 May 2002. On that occasion, however, the committee did not manage to obtain a qualified majority of the votes enabling adoption of the draft. The Council, in turn, at its meeting of 27 June 2002, did not manage to adopt the draft regulation on the same topic, also due to lack of qualified majority. At each of those meetings, the Federal Republic of Germany voted against the draft tabled. Even if the Federal Republic of Germany had had the German-language version of the two documents in question at the meeting of 20 November 2001, it would not have been able to object more effectively to that draft. 39 As the Council had not adopted a regulation, the Commission adopted the contested regulation itself, pursuant to the fifth subparagraph of Article 15 of the basic regulation. The Commission therefore had the power to adopt, of its own motion, the measures envisaged. 40 In those circumstances, the fact that the invitation to the meeting of the regulatory committee of 20 November 2001 was sent less than 14 days prior to the meeting and that there was no German-language version of the two documents in question at that meeting could not have had any effect on the measure ultimately adopted. 41 Accordingly, the first plea must be rejected. The second plea42 The German Government submits that there has been infringement of Article 2(3) of the basic regulation. The word ‘feta’ comes from Italian and means ‘slice’. It entered the Greek language in the seventeenth century. The name ‘feta’ is used not only in Greece but also in other countries in the Balkans and the Middle East to refer to a cheese in brine. The Commission was wrong to consider, in the recitals in the preamble to the contested regulation, whether ‘feta’ had become a generic name. Since the word is, first of all, a non-geographical term, the Commission should have established that it has acquired a geographic meaning and has done so in a way which does not extend to the whole of the territory of a Member State. Next, the sub-region indicated by the Greek Government in its application for registration is artificially created; it is not based on tradition or on generally-accepted views. Moreover, feta does not owe its quality and characteristics essentially or exclusively to a geographical environment; the statements in the 36th recital in the preamble to the contested regulation are not supported by either the Greek Government’s application for registration or by the scientific committee’s findings. Lastly, there is no correlation between the geographical area of production and the area of preparation, as is shown by the Greek legal provisions and the fact that the Community grants aid for the production of feta in the Aegean Islands. 43 The Danish Government submits that the name ‘feta’ does not fulfil the conditions required for registration as a traditional non-geographical name pursuant to Article 2(3) of the basic regulation. The Danish Government states that it is first for the applicant State, and then for the Commission, to establish that the conditions for registration of a designation of origin as a traditional non-geographical name are fulfilled. It states that the geographical area indicated for the purposes of registration in the present case, namely mainland Greece and the department of Lesbos, covers almost all Greece and that no objective reason has been put forward to explain in what respect the regions which have been excluded are any different. The Danish Government states that the exclusive link required between feta cheese and the geographical area indicated in the application does not exist, quite simply because feta comes from throughout the Balkans and not just Greece. The designated geographical area displays considerable climatic and morphological differences and there are many different varieties of Greek fetas, all with different tastes. The international reputation of feta cannot be clearly and directly attributed to the designated geographical area, but rather is largely due to the considerable production and exports of other States, including the Kingdom of Denmark, during the second half of the twentieth century. 44 The French government, intervening in support of the German and Danish governments, states that the word ‘feta’, which means ‘slice’ in Italian, is not a geographical name. Accordingly, Article 2(3) of the basic regulation is applicable. Since that provision refers to the second indent of Article 2(2)(a) of the same regulation, it follows that the name ‘feta’ can be registered as a protected designation of origin only if the quality or characteristics of the product are essentially or exclusively due to a particular geographical environment with its inherent natural and human factors, and the production, processing and preparation of the product take place in the defined geographical area. Yet, contrary to Article 2(2) of that regulation, the geographical area of production of feta in Greece covers almost the entire territory of the Hellenic Republic and, moreover, feta is produced outside Greece, inter alia in France, in conditions comparable to those in Greece. In fact, with the aid of Community subsidies, French cheese producers have managed to adapt traditional methods to industrial production and they currently produce between 10 000 and 12 000 tonnes of feta cheese per year. These two findings preclude registration of the name ‘feta’ as a protected designation of origin for the Hellenic Republic. 45 The United Kingdom Government has also intervened in support of the German and Danish Governments, although without submitting observations. 46 It is common ground in the present proceedings that the term ‘feta’ is derived from the Italian word ‘fetta’, meaning ‘slice’, which entered the Greek language in the seventeenth century. It is also common ground that ‘feta’ is not the name of a region, place or country within the meaning of Article 2(2)(a) of the basic regulation. Accordingly, the term cannot be registered as a designation of origin pursuant to that provision. At most, it may be registered under Article 2(3) of the basic regulation, which extends the definition of designation of origin, in particular, to certain traditional non-geographical names. 47 It was on that basis that the term ‘feta’ was registered as a designation of origin by the contested regulation. According to the 35th recital in the preamble thereto, ‘the name “Feta” is a traditional non-geographical name within the meaning of Article 2(3) of [the basic regulation]’. 48 In order to be protected under that provision, a traditional non-geographical name must, inter alia, designate an agricultural product or a foodstuff ‘originating in a region or a specific place’. 49 Article 2(3) of the basic regulation, moreover, in referring to the second indent of Article 2(2)(a) of the same regulation, requires that the quality or characteristics of the agricultural product or foodstuff be essentially or exclusively due to a particular geographical environment with its inherent natural and human factors, and that the production, processing and preparation of that product take place in the defined geographical area. 50 It follows from a combined reading of those two provisions that the place or region referred to in Article 2(3) must be defined as a geographical environment with specific natural and human factors and which is capable of giving an agricultural product or foodstuff its specific characteristics. The area of origin referred to must, therefore, present homogenous natural factors which distinguish it from the areas adjoining it (see, to that effect, Case 12/74 Commission v Germany [1975] ECR 181, paragraph 8). 51 The issue of whether the definition of the region of origin used in the contested regulation complies with the requirements of Article 2(3) of the basic regulation falls to be examined in the light of those various criteria. 52 As the Commission based itself on the Greek legislation governing the matter, it is appropriate to consider Article 1 of Ministerial Order No 313025/1994 of 11 January 1994 recognising the protected designation of origin (PDO) of feta cheese, which provides: ‘1. The name “feta” is recognised as a protected designation of origin (PDO) for white cheese soaked in brine traditionally produced in Greece, more specifically (“syngekrimena”) in the regions mentioned in paragraph 2 of this article, from ewes’ milk or a mixture of ewes’ milk and goats’ milk. 2. The milk used for the manufacture of “feta” must come exclusively from the regions of Macedonia, Thrace, Epirus, Thessaly, Central Greece, Peloponnese and the department (Nomos) of Lesbos.’ 53 The geographical area thus defined for the production of feta covers only mainland Greece and the department of Lesbos. It does not include the island of Crete or certain Greek archipelagos, namely the Sporades, the Cyclades, the Dodecanese Islands and the Ionian Islands. 54 These areas which have been excluded from this geographical area cannot be considered as negligible. Thus the area defined by the national legislation for the production of cheese bearing the name ‘feta’ does not cover the entire territory of the Hellenic Republic. It is therefore not necessary to consider whether Article 2(3) of the basic regulation allows the geographical area connected with a name to cover the entire territory of a country. 55 It is nevertheless appropriate to consider whether the area in question was determined in an artificial manner.56 Article 2(1)(e) of Ministerial Order No 313025 states: ‘the milk used for the manufacture of feta must come from breeds of ewes and goats raised using traditional methods and adapted to the region of manufacture of the feta and the flora of that region must be the basis of their feed’. 57 According to the information submitted to the Court, and particularly to the specifications sent by the Greek Government to the Commission on 21 January 1994 with a view to registering the name ‘feta’ as a designation of origin, the effect of that provision, read together with Article 1 of the same Ministerial Order, is to define the geographical area covered by reference, inter alia, to geomorphology, that is, the mountainous or semi-mountainous nature of the terrain; to the climate, that is, mild winters, hot summers and a great deal of sunshine; and to the botanical characteristics, namely the typical vegetation of the Balkan medium mountain range. 58 Those factors adequately indicate that the area has homogenous natural features which distinguish it from the adjoining areas. The case-file indicates that the areas of Greece which are excluded from the defined area do not display the same natural features as the area in question. It is thus apparent that the area in question in the present case was not determined in an artificial manner. 59 As regards the Community rules on aid for the production of feta in the Aegean Islands, it is true that Article 6(2) of Council Regulation (EEC) No 2019/93 of 19 July 1993 introducing specific measures for the smaller Aegean islands concerning certain agricultural products (OJ 1993 L 184, p. 1), before being amended by Article 1(4) of Council Regulation (EC) No 442/2002 of 18 February 2002 (OJ 2002 L 68, p. 4), provided for aid for ‘the private storage of locally manufactured cheeses: Feta, at least two months old …’. 60 That provision shows that feta is also produced in the smaller Aegean islands.61 The Commission, moreover, confirmed in its observations before the Court that feta does in fact come from local production on some of the smaller Aegean islands. 62 It also stated, however, that those islands are part of the department of Lesbos for administrative purposes.63 That department is part of the geographical area defined by the national legislation as being part of the area where feta is produced. 64 It follows that Article 6(2) of Regulation No 2019/93 is consistent with the definition of the geographical area for the manufacture of feta laid down by the national legislation and included in the application for registration of that name, and that the argument to the contrary put forward by the German Government is unfounded. 65 The applicants submit that the quality and characteristics of feta are not essentially or exclusively due to a particular geographical environment, as required by the second indent of Article 2(2)(a) of the basic regulation. 66 However, the 36th recital in the preamble to the contested regulation refers to a series of factors which indicate that the characteristics of feta are essentially or exclusively due to a particular geographical environment. Contrary to the submissions of the German Government, that statement is supported by the specifications submitted by the Greek Government, which list in detail the natural and human factors which give feta its specific characteristics. 67 Those factors include the amount of sunshine, temperature changes, the practice of transhumance, extensive grazing and vegetation.68 The applicants have not demonstrated that the Commission’s assessment on this point is unfounded.69 The plea alleging infringement of Article 2(3) of the basic regulation must therefore be dismissed as unfounded. The third plea70 The German Government submits that the contested regulation infringes Article 3(1) of the basic regulation. ‘Feta’ is a generic name within the meaning of Article 3(1). The Commission did not take due account of all the factors, such as the manufacture of feta in Member States other than Greece, the consumption of feta outside Greece, consumer perception, national and Community legislation and previous assessments by the Commission. The likelihood of consumer confusion referred to in the 20th recital in the preamble to the contested regulation cannot serve as a basis for the protection of the name ‘feta’, because the misleading presentation of a product has no bearing on the issue of whether a name is generic or whether it is a designation of origin. 71 The German Government adds that the finding that the name ‘feta’ has not become generic is not supported by a sufficient statement of reasons for the purposes of Article 253 EC; the reference to the advisory opinion of a committee is inadequate for this purpose. 72 The Danish Government submits that the Commission adopted the contested regulation in violation of Article 3(1) and Article 17(2) of the basic regulation, since the term ‘feta’ is a generic name. In its view, when a name is generic in nature from the beginning, or has subsequently become so, it remains so permanently and irrevocably. It is for the applicant State, and secondly for the Commission, to prove that a name other than a geographical one is not generic. 73 The Danish Government further submits that feta does not specifically originate from Greece, either as a name or as a product. The traditional area of consumption and production is spread over several Balkan countries. The Hellenic Republic itself has imported, produced, consumed and exported cheese under the name ‘feta’, including feta produced using cow’s milk. It is probable that Greek consumers, after a number of years, also consider it to be a generic name. Likewise, in other States where feta is consumed and produced in large quantities, whether within the Community or not, consumers consider feta to be a generic name. Outside its area of origin, feta has been lawfully produced and marketed in many Member States and non-member countries. 74 The Danish Government also submits that Danish production and marketing of feta is in no way contrary to long-standing practices and traditions and does not give rise to any real likelihood of confusion because, since as early as 1963, the Danish legislation has required the name ‘Danish feta’ to be on the product. The fact that feta is a generic name is evident from a series of provisions and measures emanating from the Community legislature, which includes the Commission. The generic nature of the name75 It must be recalled that the third subparagraph of Article 3(1) of the basic regulation provides:‘To establish whether or not a name has become generic, account shall be taken of all factors, in particular:– the relevant national or Community laws.’76 As to the argument put forward by the Danish Government to the effect that the term ‘feta’ refers to a type of cheese originating from the Balkans, it is common ground that white cheeses soaked in brine have been produced for a long time, not only in Greece but in various countries in the Balkans and the southeast of the Mediterranean basin. However, as noted in point B(a) of the scientific committee’s opinion, those cheeses are known in those countries under other names than ‘feta’. 77 As regards the production situation in the Hellenic Republic itself, the Danish Government submits, without being contradicted on this point, that, until 1988, cheese produced from cow’s milk according to methods other than the traditional Greek methods was imported into Greece under the name ‘feta’ and that, until 1987, feta cheese was produced in Greece using non-traditional methods, in particular from cow’s milk. 78 It must be recognised that, if such operations were to persist, they would tend to confer a generic nature on the name ‘feta’. The Court nevertheless notes that, by Ministerial Order No 2109/88 of 5 December 1988 approving the replacement of Article 83 ‘Cheese products’ in the Food Code, the definition of the geographical area of production based on traditional practices was established. In 1994, Ministerial Order No 313025 codified all of the rules applicable to feta cheese. Furthermore, all of that legislation created a new situation in which such operations should no longer take place. 79 As to the production situation in the other Member States, the Court notes that it held in paragraph 99 of the judgment in Denmark and Others v Commission, cited above, that the fact that a product has been lawfully marketed under a name in some Member States may constitute a factor which must be taken into account in the assessment of whether that name has become generic within the meaning of Article 3(1) of the basic regulation. 80 The Commission acknowledges, moreover, that feta is produced in Member States other than the Hellenic Republic, namely the Kingdom of Denmark, the Federal Republic of Germany and the French Republic. According to the 13th to the 17th recitals in the preamble to the contested regulation, the Hellenic Republic produces approximately 115 000 tonnes annually. In 1998, almost 27 640 tonnes were produced in Denmark. From 1988 to 1998, production in France varied between 7 960 tonnes and 19 964 tonnes. Production in Germany has varied between 19 757 and 39 201 tonnes since 1985. 81 According to those same recitals, the production of feta commenced in 1972 in Germany, in 1931 in France and in the 1930s in Denmark. 82 Moreover, it is common ground that the cheese thus produced could be lawfully marketed, even in Greece, at least until 1988.83 Although the production in the other countries has been relatively large and of substantial duration, the Court notes, as pointed out by the scientific committee in the first indent of the conclusion in its opinion, that the production of feta has remained concentrated in Greece. 84 The fact that the product has been lawfully produced in Member States other than the Hellenic Republic is only one factor of several which must be taken into account pursuant to Article 3(1) of the basic regulation. 85 As regards the consumption of feta in the various Member States, as opposed to its production, the Court notes that the 19th recital in the preamble to the contested regulation indicates that more than 85% of Community consumption of feta, per capita and per year, takes place in Greece. As noted by the scientific committee, the consumption of feta is therefore concentrated in Greece. 86 The information provided to the Court indicates that the majority of consumers in Greece consider that the name ‘feta’ carries a geographical and not a generic connotation. In Denmark, by contrast, the majority of consumers believe that the name is generic. The Court does not have any conclusive evidence regarding the other Member States. 87 The evidence adduced to the Court also shows that, in Member States other than Greece, feta is commonly marketed with labels referring to Greek cultural traditions and civilisation. It is legitimate to infer therefrom that consumers in those Member States perceive feta as a cheese associated with the Hellenic Republic, even if in reality it has been produced in another Member State. 88 Those various factors relating to the consumption of feta in the Member States tend to indicate that the name ‘feta’ is not generic in nature. 89 As to the German Government’s argument referring to the second sentence of the 20th recital in the preamble to the contested regulation, it follows from paragraph 87 of this judgment that it is not incorrect to state, with respect to consumers in Member States other than the Hellenic Republic, that ‘the link between the name “Feta” and Greece is thus deliberately suggested and sought as part of a sales strategy that capitalises on the reputation of the original product, and this creates a real risk of consumer confusion’. 90 The argument put forward by the German Government maintaining the contrary is, therefore, unfounded.91 As to the national legislation, it must be borne in mind that, according to the 18th and 31st recitals in the preamble to the contested regulation, the Kingdom of Denmark and the Hellenic Republic were the only Member States at the time which had legislation specifically relating to feta. 92 The Danish legislation does not refer to ‘feta’ but to ‘Danish feta’, which would tend to suggest that in Denmark the name ‘feta’, by itself, has retained a Greek connotation. 93 Furthermore, as the Court noted in paragraph 27 of Denmark and Others v Commission, cited above, the name ‘feta’ was protected by a convention between the Republic of Austria and the Kingdom of Greece, concluded on 20 June 1972 pursuant to the agreement of 5 June 1970 between those two States relating to the protection of indications of provenance, designations of origin and names of agricultural, craft and industrial products (BGBl. Nos 378/1972 and 379/1972). Since then, the use of the name in Austria has been reserved exclusively for Greek products. 94 It follows that, as a whole, the relevant national legislation tends to indicate that the name ‘feta’ is not generic.95 As to the Community legislation, it is true that the name ‘feta’ is used without further specification as to the Member State of origin in the combined customs nomenclature and in the Community legislation relating to export refunds. 96 However, the latter legislation and the customs nomenclature apply to customs matters and are not intended to regulate industrial property rights. Their provisions are, therefore, not conclusive in this context. 97 As to earlier assessments made by the Commission, it is true that, on 21 June 1985, it responded to written question No 13/85 from an MEP as follows: ‘feta describes a type of cheese and is not a designation of origin’ (OJ 1985 C 248, p. 13). 98 It should be borne in mind, however, that, at that time, there was not yet Community protection in place for designations of origin and geographical indications, which was established for the first time in the basic regulation. At the date of that response, the name ‘feta’ was protected in Greece only by traditional custom. 99 It follows from the foregoing that several relevant and important factors indicate that the term has not become generic.100 In the light of the foregoing, the Court finds that the Commission could lawfully decide, in the contested regulation, that the term ‘feta’ had not become generic within the meaning of Article 3 of the basic regulation. The statement of reasons101 Turning lastly to the argument that the statement of reasons in the contested regulation is insufficient for a finding that the name ‘feta’ is not generic, it is appropriate to consider, first, the scope of the scientific committee’s opinion and, second, how much detail was provided in the statement of reasons given. 102 In the 11th to the 21st and in the 33rd recitals in the preamble to the contested regulation, the Commission puts forward its own analysis of the issue of whether the term ‘feta’ is generic. It is only in the 22nd to the 32nd recitals that the Commission refers to the scientific committee’s opinion. It is therefore inaccurate to state that the statement of reasons given in the regulation on the question of whether the term ‘feta’ is generic in nature consists merely of a repetition of that opinion. 103 Decision 93/53 indicates that the scientific committee was set up by the Commission, who also appointed its members. The committee is to meet at the request of a representative of the Commission and the proceedings of the committee are to relate to matters on which the Commission has requested an opinion. 104 In accordance with those provisions, the Commission was free, as it determined, to refer questions relating to designation of origin to the experts appointed to the committee in order to help elucidate the problem, as it did in the present case. Likewise, it was for the Commission to decide to what extent it would follow the opinion provided by the committee. 105 It follows from the 33rd recital in the preamble to the contested regulation that, in the present case, the Commission chose to adopt the conclusions reached by the committee. This manner of proceeding is in accordance with the provisions of both Decision 93/53 and Article 253 EC. 106 As to the degree of detail in the statement of reasons provided in the contested regulation on the question of the generic nature of the term ‘feta’, it is settled case-law that the statement of reasons required by Article 253 EC must be appropriate to the nature of the measure in question and must show clearly and unequivocally the reasoning of the institution which enacted the measure, so as to inform the persons concerned of the justification for the measure adopted and to enable the Court to exercise its powers of review (see Case C-328/00 Weber [2002] ECR I‑1461, paragraph 42 and the case-law cited therein). The institution which adopted the act is not required, however, to define its position on matters which are plainly of secondary importance or to anticipate potential objections (see, to that effect, Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I-1719, paragraph 64). 107 The Commission clearly set out, in the 11th to the 33rd recitals in the preamble to the contested regulation, the essential factors which led it to the conclusion that the name ‘feta’ was not generic within the meaning of Article 3 of the basic regulation. That discussion constitutes a sufficient statement of reasons for the purposes of Article 253 EC. 108 It follows that the argument that the statement of reasons contained in the contested regulation is insufficient for a finding that the name ‘feta’ is not generic lacks foundation. 109 It follows that the plea alleging infringement of Article 3(1) of the basic regulation and of Article 253 EC must be dismissed as unfounded. 110 In the light of all of the foregoing considerations, the present action must be dismissed. Costs111 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Federal Republic of Germany and the Kingdom of Denmark have been unsuccessful in their pleas, they must be ordered to pay the costs. Under the first subparagraph of Article 69(4) of those same Rules of Procedure, the Hellenic Republic, the French Republic and the United Kingdom, as interveners, are to bear their own costs. On those grounds, the Court (Grand Chamber) hereby:1. Dismisses the actions;2. Orders the Federal Republic of Germany to pay the costs in relation to Case C-465/02 and the Kingdom of Denmark to pay the costs in relation to Case C‑466/02;3. Orders the Hellenic Republic, the French Republic and the United Kingdom of Great Britain and Northern Ireland to bear their own costs.[Signatures]* Languages of the case: German and Danish. | 8016f-6c52b81-4f39 | EN |
THE MEMBER STATES MUST ENSURE THAT A BANK WHICH FAILS TO INFORM AN INVESTOR IN PROPERTY OF HIS RIGHT TO CANCEL A CREDIT AGREEMENT INTENDED TO FINANCE THE PURCHASE OF THE PROPERTY BEARS THE RISKS INHERENT IN AN INVESTMENT SCHEME NEGOTIATED IN A DOORSTEP-SELLING SITUATION | Elisabeth Schulte and Wolfgang SchultevDeutsche Bausparkasse Badenia AG(Reference for a preliminary ruling from the Landgericht Bochum)(Consumer protection – Doorstep selling – Purchase of immovable property – Investment financed by a secured loan – Right of cancellation – Effects of cancellation)Opinion of Advocate General Léger delivered on 28 September 2004 Judgment of the Court (Grand Chamber), 25 October 2005 Summary of the Judgment1. Approximation of laws – Consumer protection – Article 95(3) EC – Provision which cannot be relied on directly as a basis for obligations which are binding on a Member State (Art. 95(3) EC)2. Approximation of laws – Consumer protection in the case of contracts negotiated away from business premises – Directive 85/577 – Scope – Contracts for the sale of immovable property which are a component of an investment scheme financed by a loan – Not included (Council Directive 85/577, Art. 3(2)(a))3. Approximation of laws – Consumer protection in the case of contracts negotiated away from business premises – Directive 85/577 – Loan agreement serving to finance the purchase of immovable property – Cancellation – Effects – Obligation to repay immediately with interest – Whether permissible (Council Directive 85/577, Arts 4, 5 and 7)1. Article 95(3) EC, which provides that the Commission, in its proposals envisaged in paragraph 1 of that article concerning consumer protection, is to take as a base a high level of protection, and that, within their respective powers, the European Parliament and the Council of the European Union are also to seek to achieve that objective, is directed at the various institutions, which each have their role in the legislative process. That provision cannot, therefore, be relied on directly as a basis for obligations which are binding on a Member State. At the most the provision could be used as an aid to interpretation of the Directive. (see paras 59, 61)2. Article 3(2)(a) of Council Directive 85/577 to protect the consumer in respect of contracts negotiated away from business premises must be interpreted as excluding from the scope of the Directive contracts for the sale of immovable property even where they are merely a component of an investment scheme financed by a loan for which the negotiations prior to the conclusion of the contract were held in a doorstep-selling situation, both as regards the contract for the purchase of the immovable property and the loan agreement serving solely to finance that purchase. (see para. 81, operative part 1)3. Although, under Article 7 of Directive 85/577 to protect the consumer in respect of contracts negotiated away from business premises, it is for the Member States to legislate as regards the legal effects of cancellation of the contract by the consumer, that power must be exercised in accordance with Community law and, in particular, the rules of the Directive interpreted in the light of its objective and in such a way as to ensure that it is fully effective. In that regard, in the case of a loan agreement serving to finance the purchase of immovable property, the Directive does not preclude: - national rules which limit the effect of cancellation of the loan agreement to the avoidance of that agreement, even in the case of investment schemes in which the loan would not have been granted at all without the acquisition of the immovable property; - a requirement that a consumer who has exercised his right to cancel under the Directive must pay back the loan proceeds to the lender, even though according to the scheme drawn up for the investment the loan serves solely to finance the purchase of the immovable property and is paid directly to the vendor thereof; - a requirement that the amount of the loan must be paid back immediately;- national legislation which provides for an obligation on the consumer, in the event of cancellation of a secured credit agreement, not only to repay the amounts received under the agreement but also to pay to the lender interest at the market rate. However, in a situation where, if the bank had complied with its obligation to inform the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the risks inherent in investments, Article 4 of the Directive requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks. (see paras 69, 81, 88-89, 93, 103, operative part 2-3)JUDGMENT OF THE COURT (Grand Chamber)25 October 2005 (*) In Case C-350/03,REFERENCE for a preliminary ruling under Article 234 EC, from the Landgericht Bochum (Germany), made by decision of 29 July 2003, received at the Court on 8 August 2003, in the proceedings Elisabeth Schulte,Wolfgang SchulteDeutsche Bausparkasse Badenia AG,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann and A. Rosas, Presidents of Chambers, C. Gulmann (Rapporteur), R. Schintgen, N. Colneric, S. von Bahr, R. Silva de Lapuerta and K. Lenaerts, Judges, Advocate General: P. Léger,Registrar: M.-F. Contet, Principal Administrator,having regard to the written procedure and further to the hearing on 15 June 2004,after considering the observations submitted on behalf of:– Mr and Mrs Schulte, by M. Koch and M. Beckmann, Rechtsanwälte,– Deutsche Bausparkasse Badenia AG, by M. Pap and N. Gross, Rechtsanwälte,– the German Government, by W.-D. Plessing, A. Dittrich and P.-C. Müller-Graff, acting as Agents,– the French Government, by R. Loosli-Surrans, acting as Agent,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by A. Cingolo, avvocato dello Stato,– the Commission of the European Communities, by J. Sack and J.-P. Keppenne, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 28 September 2004,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Article 95(3) EC and Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ 1985 L 372, p. 31, ‘the Directive’), in particular Articles 3(2), 4, 5 and 7 thereof. 2 The reference was made in proceedings brought by Mr and Mrs Schulte against Deutsche Bausparkasse Badenia AG (‘the Bank’), concerning the effects of the cancellation, under the applicable national law on doorstep selling, of the secured credit agreement concluded between the Bank and Mr and Mrs Schulte. Legal context The Community legislation3 The Directive is intended to provide consumers in the Member States with a minimum of protection in the area of doorstep selling, in order to protect them from the risks arising on the conclusion of a contract away from the business premises of the trader. The fourth and fifth recitals of the preamble to the Directive read: ‘… the special feature of contracts concluded away from the business premises of the trader is that as a rule it is the trader who initiates the contract negotiations, for which the consumer is unprepared or which he does not expect; … the consumer is often unable to compare the quality and price of the offer with other offers; … … the consumer should be given a right of cancellation over a period of at least seven days in order to enable him to assess the obligations arising under the contract’. 4 Article 1(1) of the Directive provides:‘This Directive shall apply to contracts under which a trader supplies goods or services to a consumer and which are concluded:…– during a visit by a trader:to the consumer’s home or to that of another consumer;where the visit does not take place at the express request of the consumer’.5 Article 3(2) of the Directive provides:‘This Directive shall not apply to:(a) contracts for the construction, sale and rental of immovable property or contracts concerning other rights relating to immovable property. …’6 Article 4 of the Directive provides:‘In the case of transactions within the scope of Article 1, traders shall be required to give consumers written notice of their right of cancellation within the period laid down in Article 5, together with the name and address of a person against whom that right may be exercised. Such notice shall be dated and shall state particulars enabling the contract to be identified. It shall be given to the consumer:(a) in the case of Article 1, at the time of conclusion of the contract;...Member States shall ensure that their national legislation lays down appropriate consumer protection measures in cases where the information referred to in this Article is not supplied.’ 7 Article 5 of the Directive provides:‘1. The consumer shall have the right to renounce the effects of his undertaking by sending notice within a period of not less than seven days from receipt by the consumer of the notice referred to in Article 4, in accordance with the procedure laid down by national law. 2. The giving of the notice shall have the effect of releasing the consumer from any obligations under the cancelled contract.’8 Article 7 of the Directive provides: ‘If the consumer exercises his right of renunciation, the legal effects of such renunciation shall be governed by national laws, particularly regarding the reimbursement of payments for goods or services provided and the return of goods received.’ 9 Article 8 of the Directive provides that it ‘shall not prevent Member States from adopting or maintaining more favourable provisions to protect consumers in the field which it covers’. The case-law of the Court10 In its judgment in Case C-481/99 Heininger [2001] ECR I-9945, the Court interpreted three aspects of the Directive. 11 First, it held that the Directive applied to secured credit agreements, that is to say, credit agreements for financing the purchase of immovable property. In paragraph 32 of that judgment, it held that, whilst an agreement of the type in question is linked to a right relating to immovable property, in that the loan must be secured by a charge on immovable property, that feature is not sufficient for the agreement to be regarded as concerning a right relating to immovable property for the purposes of Article 3(2)(a) of the Directive. 12 It concluded that a consumer who has entered into a secured credit agreement in a doorstep-selling situation has a right of cancellation under Article 5 of the Directive. It pointed out, in paragraph 35 of that judgment, that the effects of a cancellation of that agreement in accordance with the Directive on the contract for the purchase of the immovable property and on the provision of security in the form of a charge on it fall to be governed by national law. 13 Finally, the Court observed that the minimum period of seven days allowed for cancellation must be calculated from the time the consumer receives the notice concerning his right of cancellation from the trader. In paragraph 48 of the judgment in Heininger it held that the doorstep-selling directive precludes the national legislature from imposing a time-limit of one year from the conclusion of the contract within which the right of cancellation provided for in Article 5 of that Directive may be exercised, where the consumer has not received the information specified in Article 4. The national legislation14 The Directive was transposed into German law by the Gesetz über den Widerruf von Haustürgeschäften und ähnlichen Geschäften (Law on the cancellation of doorstep transactions and analogous transactions) of 16 January 1986 (BGBl. 1986 I, p. 122, the ‘HWiG’). 15 In the version applicable at the material time, Paragraph 1(1) of the HWiG provides:‘Where the customer was induced to make a declaration of intention to conclude a contract for a service for valuable consideration:1. by oral negotiations at his place of work or in a private home,that declaration of intention takes effect only if the customer does not give written notice revoking it within a period of one week’. 16 Paragraph 3 of the HWiG provides:‘(1) In the event of cancellation, each contracting party shall return to the other whatever it has received. Damage to or loss of the object or any other matter preventing the return of the object shall not preclude cancellation. If the customer is liable for the damage, loss or other matter preventing return, he shall pay the difference in value or the value of the object to the other contracting party. (2) Where the customer has not been informed pursuant to Article 2 and has not otherwise been made aware of his right of cancellation, he shall be held liable for the damage, loss or other matter preventing return only if he has not exercised the care he usually exercises with his own possessions. (3) For the right to use or apply goods and for the other services supplied up to the date of cancellation, the value of such right or services must be paid; loss of value as a result of normal use of goods or other services shall be disregarded. (4) The customer may demand compensation from the other party for necessary expenditure on the goods.’17 The German legislature transposed Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit (OJ 1987 L 42, p. 48) by adopting the Verbraucherkreditgesetz (law on consumer credit) of 17 December 1990 (BGBl. 1990 I, p. 2840, the ‘VerbrKrG’). That law, in its original version, was in force at the material time and until 30 September 2000. 18 Paragraph 9 of the VerbrKrG provides:‘1. A purchase agreement constitutes a transaction linked with the credit agreement if the credit serves to finance the purchase price and both agreements are to be regarded as a single economic unit. In particular, a single economic unit shall be presumed where the lender relies on the seller’s cooperation in the preparation or conclusion of the credit agreement. 2. The consumer’s declaration of intention to conclude the linked purchase agreement shall be valid only if the consumer does not revoke … his declaration of intention to conclude the credit agreement. The notice concerning the right of cancellation … must state that, in the event of cancellation, the purchase agreement linked with the credit agreement will not be valid either … If the net amount of the credit has already been paid to the seller, the lender shall, in relation to the consumer and with regard to the legal effects of cancellation, be subrogated to the seller’s rights and obligations arising from the purchase agreement … …’.19 Paragraph 3(2) of the VerbrKrG provides:‘Nor shall: …2. Paragraphs 4(1)(3)(1)(b), 7, 9 and 11 to 13 apply to credit agreements in which credit is subject to the giving of security by way of a charge on immovable property and is granted on the usual terms for credits secured by a charge on immovable property and the intermediate financing of the same …’. The main proceedings20 According to the order for reference, since the end of the 1980s, the Bank has financed the purchase of old apartments. These properties are generally blocks of flats constructed as social housing in the 1960s and 1970s which were purchased by Allgemeine Wohnungsvermögens AG, partly renovated and then offered for sale. Heinen & Biege GmbH (‘Heinen & Biege’), which acts as an intermediary in providing property and financial services, handled the marketing of the properties and arranged finance. 21 In the context of this marketing scheme, Mr and Mrs Schulte were contacted in February 1992 by a representative of Heinen & Biege who offered them an investment involving the purchase of property financed by a loan. The property was to be occupied by third parties and, for tax reasons, the purchase was to be financed entirely by a loan. 22 On 28 April 1992 Mr and Mrs Schulte purchased an apartment for DEM 90 519. The purchase agreement was signed before a notary, in accordance with the relevant German legislation. 23 Solely in order to finance the purchase, on 7 April 1992 Mr and Mrs Schulte took out a loan of DEM 105 000 from the Bank, secured by a charge on the property for the same amount which was created by a notarised deed of 8 May 1992. In the deed the Mr and Mrs Schulte also undertook personal liability for the payment of the amount of the charge and agreed to the possibility of the immediate enforcement of the loan agreement against their entire assets. At the Bank’s request, they also had to join a pool for rental income, which was supposed to ensure the equal distribution of all the rental income from the whole of the property complex. 24 Finally, the purchasers entered into two ‘real estate savings’ agreements with the Bank, each covering half of the amount borrowed. It was agreed that the loan would be redeemed only with the maturity of the first real estate savings agreement. The loan agreement contained no information regarding the right of cancellation within the meaning of the HWiG. 25 Once all the agreements had been concluded and the securities required by the loan agreement had been provided, the Bank paid the amount of DEM 101 850.00 directly to the company selling the immovable property, in accordance with written instructions from Mr and Mrs Schulte. 26 As Mr and Mrs Schulte failed to meet their monthly repayment obligations under the loan agreement, the Bank terminated the agreement, demanded immediate repayment of the loan and, in the absence of any payment, sought to enforce payment on the basis of the notarised deed of 8 May 1992. 27 In November 2002 Mr and Mrs Schulte cancelled the loan agreement on the basis of Paragraph 1 of the HWiG and instituted proceedings against the enforcement before the Landgericht Bochum. 28 They submitted before that court that in February 1992 they were contacted at home by a representative of Heinen & Biege who presented a tax-saving scheme to them and that subsequently three consultations were held within a short period, also at their home, during which, in addition to the property, they were offered complete financing, which was in the event solely that provided by the Bank. They were specifically informed that, under the chosen financing scheme, the property would be financed by the associated tax advantages and the rental income. Both the loan agreement and the real estate savings agreement were then signed at their home. 29 They consider that the Bank must take responsibility for the doorstep-selling situation, since it has worked closely with the company acting as intermediary for many years, and the entire negotiation phase of the contracts was conducted on behalf of the Bank. 30 Mr and Mrs Schulte also submitted that the purchase contract and the loan agreement must be regarded as a single economic unit and that they are therefore merely required to retransfer ownership of the property pursuant to the fourth sentence of Paragraph 9(2) of the VerbrKrG which applies in any event by analogy. 31 The Bank disputed that the loan agreement was negotiated in a doorstep-selling situation. Even if that were the case, it could not be held liable in law for this situation since the sales representative was an employee of the intermediary sales company whose role in the conclusion of the loan agreement was restricted to filling in the forms and the transmission of information. 32 Moreover, the Bank took the view that it is irrelevant whether or not Mr and Mrs Schulte have a right of cancellation under the HWiG since, even if it is assumed that the cancellation declared pursuant to Paragraph 1 of the HWiG is effective, they are required to repay the amount of the loan paid out, or the net amount of credit and compensation for use of the funds at the contractually agreed rates of interest or at least the normal market rates. In the alternative, the Bank counterclaimed that the plaintiffs should be ordered to repay the loan proceeds paid out in the sum of DEM 101 850.00 with interest at the statutory rate. The questions referred for a preliminary ruling33 The Landgericht Bochum observes that, in national law, the cancellation of a secured credit agreement results in the avoidance of the contract, so that, under Paragraph 3 of the HWiG, each party must return to the other whatever it has received and must pay for the use of what was supplied up to the date of cancellation. It adds that the Bundesgerichtshof has consistently held that a loan is deemed to have been ‘received’ by a borrower even if the amount of the loan has not been paid to that borrower but directly to a third party on his instructions. 34 It follows that, in the event of the cancellation of a secured credit agreement, Paragraph 3(1) and (3) of the HWiG gives the lending Bank a right to repayment of the net amount of credit paid with interest at the market rate. 35 The Landgericht Bochum explains that the dispute in the main proceedings turns essentially on the question whether, once Mr and Mrs Schulte have exercised their right to cancel the secured credit agreement, the Bank can invoke an entitlement to immediate repayment of the loan in full under Paragraph 3(1) of the HWiG, as interpreted by the Bundesgerichtshof. It considers that this consequence is harsh for the consumer and that other interpretations could be envisaged in national law. 36 In particular, the secured credit agreement and the property purchase contract could be regarded as a single economic unit within the meaning of Paragraph 9(2) of the VerbrKrG so that, once the secured credit agreement was cancelled, the borrower would no longer be bound by the property purchase contract and the Bank would be subrogated to the seller’s rights and obligations under the fourth sentence of that provision. Therefore the consumer would no longer have to repay the amount of the loan to the Bank, but only to transfer ownership of the property financed by the loan and pay for the use made of it to date. Another approach, which would not even require recourse to Paragraph 9(2) of the VerbrKrG, would be to recognise the loan agreement and the purchase contract as constituting a single economic unit, in which case, the cancellation of one agreement would entail the avoidance of the other, given that the protective purpose of the cancellation provisions requires that the borrower should not have to bear the burden of repaying the loan. 37 However, the Landgericht Bochum points out that, according to the settled case-law of the Bundesgerichtshof, upheld by the judgment in Heininger, Paragraph 9 of the VerbrKrG does not apply to secured credit agreements by virtue of Paragraph 3(2) of the VerbrKrG. Under that case-law, the secured credit agreement and the purchase of immovable property financed by the loan are not deemed to be linked agreements constituting a single economic unit. Consequently, the cancellation of the secured credit agreement does not affect the validity of the purchase contract for immovable property financed by that credit agreement. 38 The Landgericht Bochum raises the question whether a national provision such as Paragraph 3 of the HWiG, as interpreted by the Bundesgerichtshof, is compatible with Community law, as the legal consequences of that interpretation of the provision do not seem consistent with the protective purpose of the right of cancellation. 39 It observes in that regard that the repayment obligation resulting from that interpretation entails that a consumer who concluded a loan agreement without being notified of his right of cancellation and now exercises that right — which, according to the judgment in Heininger, is temporally unlimited — is in a worse economic position than if the loan agreement subsisted. As its enforcement could result in the bankruptcy of the consumer, the obligation to repay immediately and in full might deter consumers from exercising their right of cancellation under Article 5 of the Directive. 40 Against that background, the Landgericht Bochum decided to stay proceedings and refer the following questions to the Court for a preliminary ruling: ‘1. Does Article 3(2)(a) of [the Directive] also apply to contracts for the purchase of immovable property which must be regarded as merely a component of a credit-financed capital investment scheme and where the contract negotiations conducted up to the conclusion of the contract were held in a doorstep-selling situation, as defined in Paragraph 1 of the [HGWiG], both as regards the contract for the purchase of the immovable property and the loan agreement serving solely to finance that purchase? 2. Are the requirements of a high level of protection in the field of consumer protection (Article 95(3) EC) and the effectiveness of consumer protection safeguarded by [the Directive] satisfied by a national legal system or the interpretation thereof which limits merely to the reversal of the loan agreement the legal effects of the revocation of the declaration of intent to enter into a loan agreement, even in connection with such capital investment schemes in which the loan would not have been granted at all without the acquisition of the immovable property? 3. Does a national rule on the legal effects of cancelling a loan agreement to the effect that the cancelling consumer must pay back the loan proceeds to the financing bank, even though according to the scheme drawn up for the capital investment the loan serves solely to finance the immovable property and is paid directly to the vendor of the immovable property, go far enough to fulfil the protective purpose of the rule on cancellation laid down in Article 5(2) of [the Directive]? 4. Where legal effect of cancellation, under national law, results in the consumer being required, after declaring cancellation, immediately to pay back the loan proceeds which, in accordance with the scheme drawn up for the capital investment, have thus far not been redeemed at all, plus interest thereon at the normal market rate, is this effect contrary to the requirement of a high level of protection in the field of consumer protection (Article 95(3) EC) and to the principle of the effectiveness of consumer protection enshrined in [the Directive]’? The questions Admissibility41 The questions referred are based on the premiss that the credit contract at issue in the main proceedings was concluded in a doorstep-selling situation. 42 The Bank has doubts about the admissibility of the questions referred, as the Langericht Bochum has not, it argues, ruled as to whether the credit agreement was concluded in a doorstep-selling situation. The Bank submits that, until that question is resolved, the questions referred are of a hypothetical nature. 43 As to those submissions, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. However, the Court has held that it has no jurisdiction to give a preliminary ruling on a question submitted by a national court where it is quite obvious that the interpretation of Community law sought by that court bears no relation to the actual facts of the main action or its purpose or where the problem is hypothetical (Case C-415/93 Bosman [1995] ECR I-4921, paragraphs 59 and 61). 44 The referring court observes that, if Mr and Mrs Schulte were to be required to repay immediately and in full the amount of the loan with interest, it might not have to tackle the question whether the Bank had validly terminated the loan agreement or whether Mr and Mrs Schulte had validly cancelled their declaration of intention to conclude the loan agreement pursuant to the HWiG. In both cases, Mr and Mrs Schulte were bound to repay the amount of the loan immediately and in full. 45 Accordingly, it is not possible to assert that the questions referred are manifestly hypothetical or bear no relation to the actual facts of the main action or its purpose. Merits Preliminary observations – The investment at issue in the main proceedings46 The investment which Mr and Mrs Schulte made has the following characteristics in particular.47 An intermediary put forward a proposal that the couple purchase an apartment which was offered for sale by a company which had purchased and renovated a large number of apartments in order to resell them. 48 For tax reasons, the purchase of that apartment was to be fully financed by a loan.49 The intermediary’s proposal was that the purchase price and the transaction costs would be financed by a loan from the bank secured by means of a charge, and Mr and Mrs Schulte were to be personally liable for the debt. 50 Mr and Mrs Schulte undertook to join a pool for rental receipts from the apartments in the residential complex which was intended to ensure an even distribution of the rental receipts. 51 The investment in the apartment, financed entirely by the loan, was supposed not to require any expenditure by Mr and Mrs Schulte, as the loan was supposed to be repaid by means of the rental receipts in conjunction with certain tax advantages. 52 It was not disputed before the Court that such investments entail not only the risk of an over valuation of the apartment at the time of purchase, but also the risks that the anticipated rental receipts fail to materialise and that expectations concerning the development of property prices prove mistaken. 53 It appears that, in the case of Mr and Mrs Schulte, those two risks materialised.54 In the case in the main proceedings, following the judgment in Heininger, Mr and Mrs Schulte cancelled the loan agreement pursuant to the HWiG, believing that that would release them from all their obligations towards the Bank. – The scope of the questions referred for a preliminary ruling55 The referring court states that, under the national legislation applicable at the material time, although, on cancellation, a borrower is released from all his obligations arising from the loan agreement, he must repay the loan immediately and in full with interest. That court points out that, under the applicable national legislation, as interpreted by the Bundesgerichtshof, it is irrelevant that the loan was paid directly to the vendor of the apartment by the Bank and it is not possible, in circumstances such as those of this case, to regard the loan agreement and the purchase contract as contracts forming a single economic unit. 56 It is not really in dispute before the Court – and the Bundesgerichtshof has confirmed in its case-law (judgment of 12 November 2002, BGHZ 152, 331) – that, in those circumstances, in German law, there is generally little or no financial advantage to be gained from cancellation of a loan agreement. The consumer would be in the same position as he would have been if it had not been cancelled, or even in a worse position in that he would have to pay what was owed immediately rather than in instalments as provided for by the contract. 57 It is in the light of that finding that the referring court raises the question whether, in providing that cancellation of a loan agreement concluded in a doorstep-selling situation has such legal effects, German law is consistent with Community law. 58 The first two questions referred concern the effect of cancellation on the purchase contract and the last two questions concern the effect of cancellation on the loan agreement. – The applicable Community law59 In the second and fourth questions, the referring court refers to Article 95(3) EC which provides that the Commission, in its proposals envisaged in paragraph 1 of that Article concerning consumer protection, is to take as a base a high level of protection, and that, within their respective powers, the European Parliament and the Council of the European Union are also to seek to achieve that objective. 60 It must be observed, first of all, that that provision, which was inserted in the EC Treaty in 1986 by the Single European Act, was not applicable at the time the Directive was adopted in 1985. 61 Moreover, even if it were applicable, that provision is directed at the various institutions, which each have their role in the legislative process, and cannot, therefore, be relied on directly as a basis for obligations which are binding on a Member State. At the most the provision could be used as an aid to interpretation of the Directive. 62 Accordingly, the relevant rules of Community law for answering the questions referred are those of the Directive.63 First, it must be borne in mind that, according to its Article 8, the Directive is not to prevent Member States from adopting or maintaining more favourable provisions to protect consumers in the field which it covers. 64 Next, according to its Article 1, the Directive applies to any contract concluded between traders and consumers, apart from certain contracts exhaustively listed in Article 3(2) of the Directive, notably contracts for the sale of immovable property. 65 Finally, the protection conferred on a consumer who has concluded a contract in a doorstep-selling situation consists, specifically, under Article 5(1) of the Directive, in the option the consumer has to cancel the contract within seven days of being informed by the trader of his right to cancel, the trader being bound by an obligation to provide that information under the first paragraph of Article 4 of the Directive. 66 That is what the Court observed in paragraph 38 of its judgment in Heininger, pointing out, first, that the Directive is designed to protect consumers against the risks arising from the conclusion of contracts away from the trader’s premises and, second, that the protection of the consumer is assured by the introduction of a right of cancellation. 67 As regards the effects of cancellation, Article 5(2) of the Directive provides that the cancellation is to release the consumer from any obligations under the cancelled contract and Article 7 of the Directive provides that the legal effects of such cancellation are to be governed by national laws. 68 In paragraph 35 of the judgment in Heininger the Court referred to the latter of those provisions, adding that although a credit agreement falls within the scope of the doorstep-selling directive, the effects of a cancellation of that agreement in accordance with the directive on the contract for the purchase of the immovable property and on the provision of security in the form of a charge on it fall to be governed by national law. 69 Although it is thus for the Member States to legislate as regards the legal effects of cancellation, that power must be exercised in accordance with Community law and, in particular, the rules of the Directive interpreted in the light of its objective and in such a way as to ensure that it is fully effective. In fulfilling their obligations under a Directive the Member States are to take all the measures necessary to ensure that the directive is fully effective, in accordance with the objective it pursues (Case C-336/97 Commission v Italy [1999] ECR I-3771, paragraph 19, and Case C-324/01 Commission v Belgium [2002] ECR I-11197, paragraph 18). 70 It must be added that the Court has held that a directive cannot of itself impose obligations on an individual and cannot therefore be relied upon as such against an individual (Case C‑91/92 Faccini Dori [1994] ECR I-3325, paragraph 20, and Joined Cases C‑397/01 to C‑403/01 Pfeiffer and Others [2004] ECR I-8835, paragraph 108). 71 However, when hearing a case between individuals, the national court is required, when applying the provisions of domestic law adopted for the purpose of transposing obligations laid down by a directive, to consider the whole body of rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the directive in order to achieve an outcome consistent with the objective pursued by the directive (see Pfeiffer and Others, cited above, paragraph 120). The first and second questions, concerning the effect of cancellation of the loan agreement on the purchase contract 72 By its first question, the referring court seeks an interpretation of Article 3(2) of the Directive, which excludes from the scope of the Directive, inter alia, contracts for the sale of immovable property. It asks whether that exclusion also covers contracts for the purchase of immovable property which must be regarded as merely a component of an investment scheme financed by a loan for which the negotiations prior to the conclusion of the contract were held in a doorstep-selling situation, both as regards the contract for the purchase of the immovable property and the loan agreement serving solely to finance that purchase. 73 By its second question, the referring court asks essentially whether the Directive precludes national rules which limit the effect of cancellation of the loan agreement to the avoidance of that agreement, even in the case of investment schemes in which the loan would not have been granted at all without the acquisition of the immovable property. 74 According to the order for reference, that court referred those two questions on the basis of its view that in circumstances such as those of the main proceedings, the two contracts could constitute contracts forming a single economic unit, so that the cancellation of the loan agreement could affect the validity of the purchase contract and, as a result of his cancellation of the first contract, the borrower could no longer be bound by the second. 75 In that connection, it must first be found that the Directive expressly and unequivocally excludes contracts for the sale of immovable property from its scope. 76 While other Community directives intended to protect the interests of consumers, inter alia Directive 87/102, contain rules concerning connected contracts, the Directive contains no rule of that type and provides no basis for an assumption that such rules are implied. 77 In some of the observations submitted to the Court, inter alia those of the French Government, it is stated that it follows from the judgment in Case C-423/97 Travel Vac [1999] ECR I-2195 that the Directive applies to a doorstep-selling situation which results in the conclusion of a contract for sale of immovable property, which is an integral part of a larger group of contracts also including a loan agreement secured by a charge, a real estate savings agreement and a contract for the administration of the property, where those contracts must be construed as a contract for the provision of services whose value is higher than that of the immovable property. 78 That view cannot be upheld. The timeshare contract at issue in Travel Vac, which was held not to fall within the exclusion provided for by Article 3(2) of the Directive, is not comparable to the contracts at issue in the main proceedings, if only because that judgment concerned a single contract for property rights and services in which the latter were predominant, whereas, in the case in the main proceedings, there were two legally separate transactions with different purposes. 79 Moreover, the Court has already pointed out, in paragraph 35 of its judgment in Heininger, that the effects of a cancellation of a secured credit agreement in accordance with the directive on the contract for the purchase of the immovable property and on the provision of security in the form of a charge on it fall to be governed by national law. 80 Accordingly, while the Directive does not preclude national law from providing, where the two contracts form a single economic unit, that the cancellation of the secured credit agreement has an effect on the validity of the contract for sale of the immovable property, it does not require such an effect in a case such as that described by the referring court. 81 The answer to the first two questions should therefore be that:– Article 3(2)(a) of the Directive must be interpreted as excluding from the scope of the Directive contracts for the sale of immovable property even where they are merely a component of an investment scheme financed by a loan for which the negotiations prior to the conclusion of the contract were held in a doorstep-selling situation, both as regards the contract for the purchase of the immovable property and the loan agreement serving solely to finance that purchase; – the Directive does not preclude national rules which limit the effect of cancellation of the loan contract to the avoidance of that agreement, even in the case of investment schemes in which the loan would not have been granted at all without the acquisition of the immovable property. The third and fourth questions, on the effect of cancellation on the loan contract 82 First, the referring court asks whether the Directive, and Article 5(2) thereof in particular, precludes a national rule to the effect that a consumer who has exercised his right to cancel under the Directive must pay back the loan proceeds to the lender, even though according to the scheme drawn up for the investment the loan serves solely to finance the purchase of the immovable property and is paid directly to the vendor thereof. 83 In the view of Mr and Mrs Schulte and the Italian Government, such an obligation is not consistent with the protective purpose of Article 5(2) of the Directive. Mr and Mrs Schulte submit that, in the case of a transaction forming a single economic unit which was artificially split into a purchase transaction and a financing transaction, the right of cancellation conferred by the Directive is ineffective if the cancellation of the transaction is restricted to only one of the transactions, that is to say the loan agreement. In their view, because of the overall nature of the transaction, the consumer never received the money loaned himself nor did he have any influence over the payment of the money. In such a case, it would be contrary to the principle of effectiveness if the consumer had to repay to the Bank the amount of a loan of which he had never received payment himself. 84 In that regard, suffice it to observe, as the Bank, the German Government and the Commission did, that the two facts mentioned in this question – that is that the loan was solely for the purpose of purchasing immovable property and was paid directly to the seller – reflect a widely followed practice. 85 Moreover, contrary to the contentions of Mr and Mrs Schulte, the amount borrowed cannot be considered not to have been received by the borrower when it was paid directly by the lending Bank to the seller of the immovable property, where, as in the case in the main proceedings, the Bank acted on the instructions of the consumers, who, in consideration of the payment of the amount borrowed, were able to acquire title to immovable property. 86 Accordingly, even if the loan serves solely to finance the purchase of immovable property and is paid directly to the seller, the Directive does not preclude a requirement that the consumer repay the amount of the loan. 87 Second, the referring court asks whether, in a situation such as that in the main proceedings, the Directive precludes a requirement that the amount of the loan be repaid immediately. 88 In that regard, it must be borne in mind that, as the Bank, the German Government and the Commission pointed out, under Article 5(2) of the Directive, the giving of notice of cancellation has the effect of releasing the consumer from any obligations under the cancelled contract. Such cancellation of the obligations of the consumer entails, for the consumer and for the lender, the restoration of the status quo ante. 89 Accordingly, the Directive does not preclude an obligation on the consumer to repay to the lender immediately the amount he borrowed, in the event of cancellation of a secured credit agreement. 90 Third, the referring court seeks to know whether, in a situation such as that in the main proceedings, the Directive precludes national legislation which provides for an obligation on the consumer, in the event of cancellation of the contract, not only to repay the amounts received under the contract but also to pay to the lender interest at the market rate. 91 In the view of Mr and Mrs Schulte, such legislation is contrary to the principle of effective consumer protection laid down by the Directive. In the view of the Bank and the German Government, even when account is taken of the effectiveness of the consumer protection which it guarantees, the Directive contains no requirement which would preclude such national legislation. 92 In that regard, it must be observed that the exercise of the right of cancellation provided for by Article 5(1) of the Directive, in the case of a loan agreement, has the effect under Article 5(2) of releasing the consumer from any obligations under the cancelled agreement, which implies the restoration of the status quo ante. 93 Accordingly, the Directive does not preclude national legislation which provides for an obligation on the consumer, in the event of cancellation of a secured credit agreement, not only to repay the amounts received under the contract but also to pay to the lender interest at the market rate. The requirements under the Directive in the event of failure to comply with the obligation to inform the consumer of his right of cancellation 94 Although the Directive does not generally preclude the application of national rules under which a consumer who cancels a credit agreement must immediately repay the loan in full with interest at the market rate in circumstances in which the trader has complied with the obligation to inform the consumer incumbent on him under Article 4 of the Directive, the same is not necessarily true where the trader has not complied with that obligation. 95 In that connection, it must be observed that under the third paragraph of Article 4 of the Directive, Member States are to ensure that their national legislation lays down appropriate consumer protection measures in cases where the information referred to in this article is not supplied 96 It must be observed that, if the referring court takes the view that the cancellation was valid, the fact that the Bank did not inform Mr and Mrs Schulte of their right of cancellation and that they cancelled the credit agreement after several years is relevant for the assessment of the dispute in the main proceedings. 97 If the Bank had informed Mr and Mrs Schulte of their right of cancellation under the HWiG at the correct time, they would have had seven days to change their minds about concluding the loan agreement. If they had chosen then to cancel it, it is common ground that, given the link between the loan agreement and the purchase contract, the latter would not have been concluded. 98 In a situation where the Bank has not complied with the obligation to inform the consumer incumbent on it under Article 4 of the Directive, if the consumer must repay the loan under German law as construed in the case-law of the Bundesgerichtshof, he bears the risks entailed by financial investments such as those at issue in the main proceedings, as described in paragraph 52 of this judgment. 99 However, in a situation such as that in the main proceedings, the consumer could have avoided exposure to those risks if he had been informed in time of his right of cancellation. 100 In those circumstances, the Directive requires Member States to adopt appropriate measures so that the consumer does not have to bear the consequences of the materialisation of those risks. The Member States must therefore ensure that, in those circumstances, a bank which has not complied with its obligation to inform the consumer bears the consequences of the materialisation of those risks so that the obligation to protect consumers is safeguarded. 101 Accordingly, in a situation where, if the Bank had informed the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the risks inherent in investments such as those at issue in the main proceedings, Article 4 requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks. 102 As observed in paragraph 71 of this judgment, the national courts are required to interpret national legislation, so far as possible, in order to achieve the outcome described in paragraph 101 of this judgment. 103 In the light of the foregoing, the answer to the third and fourth questions must be that the Directive does not preclude:– a requirement that a consumer who has exercised his right to cancel under the Directive must pay back the loan proceeds to the lender, even though according to the scheme drawn up for the investment the loan serves solely to finance the purchase of the immovable property and is paid directly to the vendor thereof; – a requirement that the amount of the loan must be paid back immediately;– national legislation which provides for an obligation on the consumer, in the event of cancellation of a secured credit agreement, not only to repay the amounts received under the agreement but also to pay to the lender interest at the market rate. However, in a situation where, if the Bank had complied with it obligation to inform the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the risks inherent in investments such as those at issue in the main proceedings, Article 4 of the Directive requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks. Costs104 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. Article 3(2)(a) of Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises must be interpreted as excluding from the scope of the Directive contracts for the sale of immovable property even where they are merely a component of an investment scheme financed by a loan for which the negotiations prior to the conclusion of the contract were held in a doorstep-selling situation, both as regards the contract for the purchase of the immovable property and the loan agreement serving solely to finance that purchase.2. Directive 85/577 does not preclude national rules which limit the effect of cancellation of the loan agreement to the avoidance of that agreement, even in the case of investment schemes in which the loan would not have been granted at all without the acquisition of the immovable property.3. Directive 85/577 does not preclude:– a requirement that a consumer who has exercised his right to cancel under the Directive must pay back the loan proceeds to the lender, even though according to the scheme drawn up for the investment the loan serves solely to finance the purchase of the immovable property and is paid directly to the vendor thereof;However, in a situation where, if the Bank had complied with it obligation to inform the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the risks inherent in investments such as those at issue in the main proceedings, Article 4 of Directive 85/577 requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks. [Signatures]* Language of the case: German. | d0c61-5842d7f-45d5 | EN |
A PUBLIC AUTHORITY CANNOT AWARD A PUBLIC SERVICE CONCESSION TO A COMPANY WITHOUT PUTTING IT OUT TO TENDER IF THE TRANSACTION IS NOT "IN-HOUSE' | Parking Brixen GmbHvGemeinde Brixen and Stadtwerke Brixen AG(Reference for a preliminary ruling from the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen (Italy))(Public procurement — Procedures for the award of public contracts — Service concession — Management of public pay car parks)Opinion of Advocate General Kokott delivered on 1 March 2005 Judgment of the Court (First Chamber), 13 October 2005 Summary of the Judgment1. Approximation of laws — Procedures for the award of public service contracts — Directive 92/50 — Scope — Public service concession covering the management of a public pay car park — Excluded(Council Directive 92/50)2. Community law — Principles — Equal treatment — Discrimination on the ground of nationality — Freedom of establishment — Freedom to provide services — Treaty provisions — Scope — Public service concession contracts — Included — Limits — Specific case(Arts 12 EC, 43 EC and 49 EC)1. The award, by a public authority to a service provider, of the management of a public pay car park, in consideration for which that provider is remunerated by sums paid by third parties for the use of that car park, is a public service concession to which Directive 92/50 relating to the coordination of procedures for the award of public service contracts does not apply. (see para. 43, operative part 1)2. Public authorities concluding public service concession contracts are bound to comply with the fundamental rules of the EC Treaty, in general, particularly Articles 43 EC and 49 EC, and the principle of non-discrimination on the ground of nationality set out in Article 12 EC, which are specific expressions of the general principle of equal treatment. The principles of equal treatment and non-discrimination on grounds of nationality imply, in particular, a duty of transparency which consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the service concession to be opened up to competition and the impartiality of procurement procedures to be reviewed. However, the application of the rules set out in Articles 12 EC, 43 EC and 49 EC, as well as the general principles of which they are the specific expression, is precluded if the control exercised over the concessionaire by the concession-granting public authority is similar to that which the authority exercises over its own departments and if, at the same time, that entity carries out the essential part of its activities with the controlling authority. The aforementioned provisions and principles preclude, in that regard, a public authority from awarding, without putting it out to competition, a public service concession to a company limited by shares resulting from the conversion of a special undertaking of that public authority, a company whose objects have been extended to significant new areas, whose capital must obligatorily be opened in the short term to other capital, the geographical area of whose activities has been extended to the entire country and abroad, and whose Administrative Board possesses very broad management powers which it can exercise independently. (see paras 46-49, 62, 72, operative part 2)JUDGMENT OF THE COURT (First Chamber)13 October 2005 (*) (Public procurement – Procedures for the award of public contracts –Service concession – Management of public pay car parks)In Case C-458/03,REFERENCE under Article 234 EC for a preliminary ruling from the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen (Italy), made by decision of 23 July 2003, received at the Court on 30 October 2003, in the proceedings Gemeinde Brixen,Stadtwerke Brixen AG,THE COURT (First Chamber),composed of P. Jann, President of the Chamber, K. Schiemann, K. Lenaerts, J.N. Cunha Rodrigues (Rapporteur) and E. Juhász, Judges, Advocate General: J. Kokott,Registrar: M.-F. Contet, Principal Administrator,having regard to the written procedure and further to the hearing on 13 January 2005,after considering the observations submitted on behalf of:– Parking Brixen GmbH, by K. Zeller and S. Thurin, avvocati,– the Gemeinde Brixen, by N. De Nigro, Rechtsanwalt,– Stadtwerke Brixen AG, by A. Mulser, Rechtsanwalt,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by G. Fiengo, avvocato dello Stato,– the Netherlands Government, by C. Wissels, acting as Agent,– the Austrian Government, by M. Fruhmann, acting as Agent,– the Commission of the European Communities, by K. Wiedner, acting as Agent,after hearing the Opinion of the Advocate General at the sitting on 1 March 2005,gives the followingJudgment1 The request for a preliminary ruling concerns the interpretation of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1) Articles 43 EC, 49 EC and 86 EC, and the principles of non-discrimination, transparency and equal treatment. 2 That request was made in the course of a dispute between, on the one hand, Parking Brixen GmbH (hereinafter ‘Parking Brixen’) and, on the other hand, the Gemeinde Brixen (Municipality of Brixen) and Stadtwerke Brixen AG concerning the award to that company of the management of two car parks within that municipality. Law Community law3 Article 43 EC provides:‘Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. … Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.’ 4 The first paragraph of Article 49 EC provides:‘Within the framework of the provisions set out below, restrictions on freedom to provide services within the Community shall be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended.’ 5 The eighth recital in the preamble to Directive 92/50 states:‘… the provision of services is covered by this Directive only in so far as it is based on contracts; … the provision of services on other bases, such as law or regulations, or employment contracts, is not covered.’ 6 Article 1 of that Directive provides:‘For the purposes of this Directive:(a) “public service contracts” shall mean contracts for pecuniary interest concluded in writing between a service provider and a contracting authority … …(b) “contracting authorities” shall mean the State, regional or local authorities, bodies governed by public law, associations formed by one or more of such authorities or bodies governed by public law. …’ National law7 Article 22(3) of Italian Law No 142 of 8 June 1990 on the government of autonomous areas (Ordinary Supplement to the GURI No 135 of 12 June 1990; hereinafter ‘Law No 142/1990’) provides that municipalities and provinces may use the following management structures for local public services for which they are responsible under the law: ‘(a) direct management, where, owing to the small size or the characteristics of the service, it would not be expedient to create an institution or an undertaking; (b) concessions to third parties, where there are technical or economic reasons or reasons of social expediency;(c) by special undertakings, also for the management of a number of services of economic and commercial importance;(d) by institutions, for the provision of social services without commercial importance;(e) by companies limited by shares with a majority local public shareholding, where participation by other public or private persons appears expedient owing to the nature of the service to be provided.’ 8 Article 44 of Regional Law No 1 of 4 January 1993, in its original version, largely reproduced Article 22 of Law No 142/1990. Subsequently, Article 44 was amended by Regional Law No 10 of 23 October 1998. 9 Article 44 of Regional Law No 1, as amended by Regional Law No 10, provides:‘…6. Municipalities shall by regulations establish the procedures and selection criteria for the forms of organisation set forth hereunder for the management of public services of economic and commercial importance: (a) formation of special undertakings;(b) formation of, or participation in, public or private limited companies, under predominantly public local influence;(c) entrusting the management of public services to third parties, in which case suitable procedures for their being put out to competition must be laid down for their selection. Without prejudice to other legal provisions, such relationships may not endure more than 20 years and may be renewed with the same subject-matter only in accordance with the rules referred to in this subparagraph. Cooperatives, associations representing, by virtue of the law, the sick or handicapped, as well as voluntary associations and non-profit-making organisations are to be accorded preference on equal conditions. 18. The associated local authorities may, at any time, entrust to companies formed as referred to in paragraph 6 and to companies referred to in paragraph 17 the performance of other public services compatible with the company’s objects, by resolution of the board simultaneously approving the service contract relating thereto.’ 10 The provisions of Article 44(6) and (18) of Regional Law No 1, as amended by Regional Law No 10, are reproduced word for word as Article 88(6) and (18) of the consolidated text of the provisions concerning local government in the Trentino-Südtirol Autonomous Region. 11 Article 115 of Decree-Law No 267 of 18 August 2000, the single text of the laws on the organisation of local authorities (Ordinary Supplement to the GURI No 227 of 28 September 2000, hereinafter ‘Decree-Law No 267/2000’), authorises municipalities to convert their special undertakings into limited companies and to be their sole shareholder for a period not exceeding two years from the date of such conversion. The main proceedings and the questions referred for a preliminary ruling 12 Under Article 22 of Law No 142/1990, the Gemeinde Brixen had had recourse, for the management of certain local public services for which it was responsible, to Stadtwerke Brixen, a special undertaking owned by that municipality. 13 Under Article 1 of its statutes, Stadtwerke Brixen was endowed, from 1 January 1999, with legal personality and corporate autonomy and it constituted a municipal body, the specific function of which is the uniform and integrated provision of local public services. 14 Under Article 2 of its statutes, Stadtwerke Brixen’s objective was, in particular:‘(f) the management of car parks and multi-storey car parks including the carrying out of any related activity’.15 Under Article 115 of Decree-Law No 267/2000, the Gemeinde Brixen, by Decision No 97 of 25 October 2001, converted the special undertaking Stadtwerke Brixen into a limited company called ‘Stadtwerke Brixen AG’. 16 Under Article 1(3) of that company’s statutes, ‘all existing rights and obligations of the special undertaking [Stadtwerke Brixen] shall continue after the conversion and the company [Stadtwerke Brixen AG] shall, as a result, succeed to all the rights and obligations of the [special] undertaking Stadtwerke Brixen’. 17 Under Article 4 of its statutes, Stadtwerke Brixen AG may carry on, among others, the following activities at local, national and international level: ‘(g) the management of car parks and garages and related activities’.18 Article 18 of Stadtwerke Brixen AG’s statutes provides that the following powers are conferred on its Administrative Board:‘(1) The Administrative Board shall have the broadest possible powers relating to the company’s routine administration with the authority to carry out all acts which it deems appropriate or necessary to attain the objective of the company. (2) Unless authorised by the shareholders’ meeting, the Administrative Board is prohibited from providing guarantees with a value of over EUR 5 (five) million and from signing promissory notes and accepting drafts which exceed this amount. (3) The purchase and sale of holdings in other companies, the purchase, sale and leasing of businesses or branches of businesses, and the purchase and sale of vehicles up to a value of EUR 5 (five) million per transaction shall be regarded as acts of routine administration. (4) Those decisions which relate to the fixing and/or amendment of remuneration for special tasks in accordance with Article 2389(2) of the Italian Civil Code shall fall within the exclusive competence of the Administrative Board.’ 19 Under Article 5(2) of Stadtwerke Brixen AG’s statutes, ‘the Gemeinde Brixen’s holding in the nominal capital shall, in no circumstances, be below the absolute majority of nominal shares’. In addition, the Gemeinde Brixen shall have the right to appoint a majority of the members of the company’s Administrative Board. Since the supervisory board of the company is to be composed of three full members and two alternates, that municipality shall appoint at least two full members and one alternate of that board. 20 According to the referring court, the conversion of a special undertaking into a company limited by shares entails an obvious increase in its independence. Indeed, Stadtwerke Brixen AG’s area of operation has been considerably extended compared with that of Stadtwerke Brixen since it can pursue activities at local, national and international level, whereas the activities of the special undertaking Stadtwerke Brixen were limited to the territory of the Gemeinde Brixen. In addition, the special undertaking Stadtwerke Brixen was subject to the direct control and influence of the municipal council, whereas, as regards Stadtwerke Brixen AG, the control exercised by the municipality is limited to those measures which company law assigns to the majority of shareholders. 21 By Decision No 37 of 23 March 2000, the municipal council of Brixen entrusted the construction and management of a public swimming pool to Stadtwerke Brixen. When it was converted, on 25 October 2001, into a company limited by shares, Stadtwerke Brixen AG succeeded to the rights and obligations resulting from that decision. 22 By Decision No 118 of 18 December 2001, the municipal council of Brixen granted Stadtwerke Brixen AG building rights over the soil and sub-soil of the site intended for the swimming pool, among others over registered plot 491/11 in the Gemeinde Brixen, for the construction of underground parking spaces. 23 Until the planned underground car park was built, provision was made for a temporary car park on the surface. For that purpose, plot 491/11, which had until then been used as a football pitch, was given a temporary tarmac surfacing to become an above-ground car park with about 200 spaces. According to the referring court, no agreement was made for the operation of plot 491/11 as an above-ground car park. 24 In order to provide additional parking spaces, the above-ground car park on the adjacent plot, namely registered plot 491/6, also in the Gemeinde Brixen, which had about 200 spaces and had been directly managed by the Gemeinde for more than 10 years, was awarded, for the purposes of its management, to Stadtwerke Brixen AG, by Decision No 107 of 28 November 2002 of the municipal council of Brixen. That decision states that, ‘for the activity of the baths, a temporary car park has already been built by Stadtwerke Brixen AG in close proximity to municipal land’ and that ‘it seems therefore necessary and expedient to entrust also to Stadtwerke Brixen AG the management of the adjacent land, consisting of plot 491/6 ... covering 5 137 m2, which is currently managed directly by the municipality’. 25 On 19 December 2002, the Gemeinde Brixen, in order to implement Decision No 107, concluded with Stadtwerke Brixen AG an agreement which entrusted to it, for a nine-year term, the management of the car park on plot 491/6. 26 In consideration of the management of that car park, Stadtwerke Brixen AG collects the parking charges. However, it pays to the Gemeinde Brixen an annual fee of EUR 151 700, which is indexed on the parking charges, so that an increase in those charges leads to an increase in the fee paid to the municipality. Apart from the management of the car park, Stadtwerke Brixen AG takes responsibility for the free bicycle hiring service and accepts that the weekly market continues to be held on the area in question. Stadtwerke Brixen AG also took over the staff who were previously employed there by the Gemeinde Brixen. Finally, the routine and non-routine maintenance of the area is the task of that company which takes full responsibility in that regard. 27 Under a concession contract made on 19 June 1992 with the Gemeinde Brixen, Parking Brixen had undertaken to build and manage a car park, which is distinct from those which are the subject‑matter of the main proceedings, but also situated within that municipality. Parking Brixen challenged, before the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen (Administrative Court, Autonomous Division for the Province of Bolzen), the award to Stadtwerke Brixen AG of the management of the car parks on plots 491/6 and 491/11. In its submission, the Gemeinde Brixen should have applied the provisions on public procurement. 28 The defendants in the main proceedings, namely Stadtwerke Brixen AG and the Gemeinde Brixen, denied that there was any obligation to proceed by way of a public call for tenders. The Gemeinde maintained in that regard that it completely controls Stadtwerke Brixen AG and that there was therefore no award of a contract to a third party. 29 In those circumstances, the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen, decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Does the award of the management of the public pay car parks in question constitute a public service contract within the meaning of Directive 92/50/EEC or a public service concession to which the competition rules of the European Community, in particular the obligation to ensure equal treatment and transparency, must be applied? 2. If that award does constitute a service concession relating to the management of a local public service, is the award of the management of public pay car parks which, under Article 44(6)(b) of Regional Law No 1 of 4 January 1993, as amended by Article 10 of Regional Law No 10 of 23 January 1998 and under Article 88(6)(a) and (b) of the consolidated text of the provisions concerning local government, can be effected without a public call for tenders, compatible with Community law, in particular with the principles of freedom to provide services and freedom of competition, the prohibition of discrimination, and the resultant obligations to ensure equal treatment, transparency and proportionality, where a company limited by shares is involved which was set up pursuant to Article 115 of Legislative Decree No 267/2000 by the conversion of a special undertaking of a municipality, whose share capital at the time of the award was held 100% by the municipality itself but whose administrative board enjoys all extensive powers of routine administration up to a value of EUR 5 million per transaction?’ 30 By order of the President of the Court of 25 May 2004, an application by Energy Service Srl for leave to intervene was rejected as inadmissible. The first question31 By its first question, the referring court is asking whether the award of the management of the public pay car parks in question in the main proceedings involves a public service contract within the meaning of Directive 92/50, or a public service concession. 32 It is appropriate to state at the outset that it is not for the Court to classify specifically the transactions at issue in the main proceedings. That is within the jurisdiction of the national court alone. The Court’s role is confined to providing the national court with an interpretation of Community law which will be useful for the decision which it has to take in the dispute before it. 33 For that purpose the Court may deduce from the case-file of the main proceedings the matters which are relevant to the interpretation of Community law. 34 In that context it is appropriate to note that the main proceedings concern the award of the management of two distinct car parks: first, that on plot 491/11 and, second, that on plot 491/6. 35 As regards the above-ground car park on plot 491/11, the order for reference states only that no agreement was concluded for its operation. In particular, that decision contains no information about the conditions for remunerating the car park operator. 36 In those circumstances, the Court can state only that it does not have sufficient information to give a useful interpretation of Community law in reply to that part of the question. 37 As regards the car park on plot 491/6, it is clear from the order for reference, as noted in paragraphs 24 to 26 of this judgment, that the car park had been managed directly by the Gemeinde Brixen for more than 10 years when its management was entrusted, for a term of nine years, to Stadtwerke Brixen AG by a contract which it concluded with the municipality on 19 December 2002. In consideration for managing the car park, parking charges are collected from its users by Stadtwerke Brixen AG, which pays the Gemeinde Brixen an annual fee. In addition, Stadtwerke Brixen AG accepts that the weekly market will continue to be held on the area in question, provides the free bicycle hiring service and takes responsibility for the maintenance of that area. 38 In view of that information, it must be understood that, by its first question, the referring court is asking, in essence, whether the award, by a public authority to a service provider, of the management of a public pay car park, in consideration for which that provider is remunerated by amounts paid by third parties for the use of the car park, is a public service contract within the meaning of Directive 92/50, or a public service concession to which that directive does not apply. 39 As stated in the eighth recital in its preamble, Directive 92/50 applies to ‘public service contracts’, which are defined in Article 1(a) thereof as ‘contracts for pecuniary interest concluded in writing between a service provider and a contracting authority’. It follows from that definition that a public service contract within the meaning of that directive involves consideration which is paid directly by the contracting authority to the service provider. 40 In the situation referred to in the first question, on the other hand, the service provider’s remuneration comes not from the public authority concerned, but from sums paid by third parties for the use of the car park in question. That method of remuneration means that the provider takes the risk of operating the services in question and is thus characteristic of a public service concession. Therefore, in a situation such as that in the main proceedings, it is not a case of a public service contract, but of a public service concession. 41 In that regard, it is relevant to point out that that interpretation is confirmed by Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114), even though it was not applicable at the date of the facts in the main proceedings. Under Article 1(4) of that directive, ‘“service concession” is a contract of the same type as a public service contract except for the fact that the consideration for the provision of services consists either solely in the right to exploit the service or in this right together with payment’. 42 It is common ground that public service concessions are excluded from the scope of Directive 92/50 (see order in Case C-358/00 Buchhändler‑Vereinigung [2002] ECR I-4685, paragraph 28). 43 The reply therefore to the first question must be that the award, by a public authority to a service provider, of the management of a public pay car park, in consideration for which that provider is remunerated by sums paid by third parties for the use of that car park, is a public service concession to which Directive 92/50 does not apply. The second question44 By its second question, the referring court is asking, in essence, whether the award of a public service concession without it being put out to competition is compatible with Community law, if the concessionaire is a company limited by shares resulting from the conversion of a special undertaking of a public authority, a company whose share capital is at the time of the award 100% owned by the concession-granting public authority, but whose administrative board enjoys all extensive powers of routine administration and can effect independently, without the agreement of the shareholders’ meeting, certain transactions up to a value of EUR 5 million. 45 That question refers, first, to the conduct of the concession-granting authority in relation to the award of a specific concession and, second, to the national legislation which permits the award of such a concession without a call for tenders. 46 Notwithstanding the fact that public service concession contracts are, as Community law stands at present, excluded from the scope of Directive 92/50, the public authorities concluding them are, none the less, bound to comply with the fundamental rules of the EC Treaty, in general, and the principle of non-discrimination on the ground of nationality, in particular (see, to that effect, Case C-324/98 Telaustria and Telefonadress [2000] ECR I-10745, paragraph 60, and Case C-231/03 Coname [2005] ECR I-0000, paragraph 16). 47 The prohibition on any discrimination on grounds of nationality is set out in Article 12 EC. The provisions of the Treaty which are more specifically applicable to public service concessions include, in particular, Article 43 EC, the first paragraph of which states that restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State are to be prohibited, and Article 49 EC, the first paragraph of which provides that restrictions on freedom to provide services within the Community are to be prohibited in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended. 48 According to the Court’s case-law, Articles 43 EC and 49 EC are specific expressions of the principle of equal treatment (see Case C-3/88 Commission v Italy [1989] ECR 4035, paragraph 8). The prohibition on discrimination on grounds of nationality is also a specific expression of the general principle of equal treatment (see Case 810/79 Überschär [1980] ECR 2747, paragraph 16). In its case-law relating to the Community directives on public procurement, the Court has stated that the principle of equal treatment of tenderers is intended to afford equality of opportunity to all tenderers when formulating their tenders, regardless of their nationality (see, to that effect, Case C-87/94 Commission v Belgium [1996] ECR I-2043, paragraphs 33 and 54). As a result, the principle of equal treatment of tenderers is to be applied to public service concessions even in the absence of discrimination on grounds of nationality. 49 The principles of equal treatment and non-discrimination on grounds of nationality imply, in particular, a duty of transparency which enables the concession-granting public authority to ensure that those principles are complied with. That obligation of transparency which is imposed on the public authority consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the service concession to be opened up to competition and the impartiality of procurement procedures to be reviewed (see, to that effect, Telaustria and Telefonadress, cited above, paragraphs 61 and 62). 50 It is for the concession-granting public authority to evaluate, subject to review by the competent courts, the appropriateness of the detailed arrangements of the call for competition to the particularities of the public service concession in question. However, a complete lack of any call for competition in the case of the award of a public service concession such as that at issue in the main proceedings does not comply with the requirements of Articles 43 EC and 49 EC any more than with the principles of equal treatment, non-discrimination and transparency. 51 Furthermore, Article 86(1) EC provides that, in the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in the Treaty, in particular to those laid down in Articles 12 EC and 81 EC to 89 EC. 52 It follows therefrom that the Member States must not maintain in force national legislation which permits the award of public service concessions without their being put out to competition since such an award infringes Article 43 EC or 49 EC or the principles of equal treatment, non-discrimination and transparency. 53 Two arguments are deployed to maintain that the provisions of the Treaty and the general principles mentioned in paragraphs 46 to 52 of this judgment do not apply to a public service concession awarded in circumstances such as those of the main proceedings. 54 First, Stadtwerke Brixen AG argues that Articles 43 EC to 55 EC do not apply to a situation such as that in the main proceedings, because it is a situation purely internal to a single Member State, given that Parking Brixen, Stadtwerke Brixen AG and the Gemeinde Brixen all have their seats in Italy. 55 That argument cannot be accepted. It is possible that, in the main proceedings, undertakings established in Member States other than the Italian Republic might have been interested in providing the services concerned (see, to that effect, Commission v Belgium, cited above, paragraph 33). In the absence of advertising and the opening to competition of the award of a public service concession such as that at issue in the main proceedings, there is discrimination, at least potentially, against undertakings of the other Member States which are prevented from making use of the freedom to provide services and of the freedom of establishment provided for by the Treaty (see, to that effect, Coname, cited above, paragraph 17). 56 Secondly, the Italian Republic, Stadtwerke Brixen AG and the Gemeinde Brixen contend that the application of the rules of the Treaty and of the general principles of Community law to a situation such as that in the main proceedings is precluded by the fact that Stadtwerke Brixen AG is not an entity independent of that municipality. In support of that argument, they rely on the judgment in Case C-107/98 Teckal [1999] ECR I-8121, paragraphs 49 to 51. 57 In that regard, it is important to recall that, in Teckal, cited above, the Court held that Council Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts (OJ 1993 L 199, p. 1) is applicable where a contracting authority, such as a local authority, plans to conclude in writing, with an entity which is formally distinct from it and independent of it in regard to decision-making, a contract for pecuniary interest for the supply of goods. 58 As regards the existence of such a contract, the Court stated, in paragraph 50 of the judgment in Teckal, that, in accordance with Article 1(a) of Directive 93/36, it is in principle sufficient if the contract was concluded between, on the one hand, a local authority and, on the other, a person legally distinct from that local authority. The position can be otherwise only in the case where the local authority exercises over the person concerned a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activities with the controlling local authority or authorities. 59 The Court has confirmed that the same considerations apply to Directive 92/50 on public service contracts and Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54) (see, respectively, Case C-26/03 Stadt Halle and RPL Lochau [2005] ECR I-1, paragraphs 48, 49 and 52, and Case C-84/03 Commission v Spain [2005] ECR I-139, paragraph 39). 60 Those considerations are based on the premiss that the application of Directives 92/50, 93/36 and 93/37 depends on the existence of a contract concluded between two distinct persons (see Teckal, paragraphs 46 and 49). Yet the application of Articles 12 EC, 43 EC and 49 EC, as well as the principles of equal treatment, non-discrimination and transparency associated with them, does not depend on the existence of a contract. As a result, the considerations developed in the case-law cited in paragraphs 56 to 59 of this judgment do not apply automatically either to those provisions of the Treaty or to those principles. 61 Nevertheless, it must be held that those considerations may be transposed to the Treaty provisions and to the principles which relate to public service concessions excluded from the scope of the directives on public procurement. Indeed, in the field of public procurement and public service concessions, the principle of equal treatment and the specific expressions of that principle, namely the prohibition on discrimination on grounds of nationality and Articles 43 EC and 49 EC, are to be applied in cases where a public authority entrusts the supply of economic activities to a third party. By contrast, it is not appropriate to apply the Community rules on public procurement or public service concessions in cases where a public authority performs tasks in the public interest for which it is responsible by its own administrative, technical and other means, without calling upon external entities (see, to that effect, Stadt Halle and RPL Lochau, paragraph 48). 62 Consequently, in the field of public service concessions, the application of the rules set out in Articles 12 EC, 43 EC and 49 EC, as well as the general principles of which they are the specific expression, is precluded if the control exercised over the concessionaire by the concession-granting public authority is similar to that which the authority exercises over its own departments and if, at the same time, that entity carries out the essential part of its activities with the controlling authority. 63 Since it is a matter of a derogation from the general rules of Community law, the two conditions stated in the preceding paragraph must be interpreted strictly and the burden of proving the existence of exceptional circumstances justifying the derogation to those rules lies on the person seeking to rely on those circumstances (see Stadt Halle and RPL Lochau, paragraph 46). 64 It is appropriate to examine, first, whether the concession-granting public authority exercises a control over the concessionaire which is similar to that which it exercises over its own departments. 65 That assessment must take account of all the legislative provisions and relevant circumstances. It must follow from that examination that the concessionaire in question is subject to a control enabling the concession-granting public authority to influence the concessionaire’s decisions. It must be a case of a power of decisive influence over both strategic objectives and significant decisions. 66 It is clear from the order for reference that under Article 1 of the statutes of the special undertaking, Stadtwerke Brixen, it was a municipal body whose specific function was the uniform and integrated provision of local public services. The municipal council laid down the general guidelines, allocated the start-up capital, ensured that any social costs were covered, monitored the operating results and exercised strategic supervision, the undertaking being guaranteed the necessary independence. 67 By contrast, Stadtwerke Brixen AG became market-oriented, which renders the municipality’s control tenuous. Militating in that direction are: (a) the conversion of Stadtwerke Brixen – a special undertaking of the Gemeinde Brixen – into a company limited by shares (Stadtwerke Brixen AG) and the nature of that type of company; (b) the broadening of its objects, the company having started to work in significant new fields, particularly those of the carriage of persons and goods, as well as information technology and telecommunications. It must be noted that the company retained the wide range of activities previously carried on by the special undertaking, particularly those of water supply and waste water treatment, the supply of heating and energy, waste disposal and road building; (c) the obligatory opening of the company, in the short term, to other capital;(d) the expansion of the geographical area of the company’s activities, to the whole of Italy and abroad;(e) the considerable powers conferred on its Administrative Board, with in practice no management control by the municipality.68 In fact, as regards the powers conferred on the Administrative Board, it is clear from the decision of reference that the statutes of Stadtwerke Brixen AG, particularly Article 18 thereof, give the board very broad powers to manage the company, since it has the power to carry out all acts which it considers necessary for the attainment of the company’s objective. In addition, the power, under the said Article 18, to provide guarantees up to EUR 5 million or to effect other transactions without the prior authority of the shareholders’ meeting shows that the company has broad independence vis-à-vis its shareholders. 69 The decision of reference also states that the Gemeinde Brixen has the right to appoint the majority of the members of Stadtwerke Brixen AG’s Administrative Board. However, the referring court notes that the control exercised by the municipality over Stadtwerke Brixen AG is limited, essentially, to those measures which company law assigns to the majority of shareholders, which considerably attenuates the relationship of dependence which existed between the municipality and the special undertaking Stadtwerke Brixen, in the light, above all, of the broad powers possessed by Stadtwerke Brixen AG’s Administrative Board. 70 Where a concessionaire enjoys a degree of independence characterised by elements such as those noted in paragraphs 67 to 69 of this judgment, it is not possible for the concession-granting public authority to exercise over the concessionaire control similar to that which it exercises over its own departments. 71 In those circumstances, and without it being necessary to consider the question whether the concessionaire carries out the essential part of its activities with the concession-granting public authority, the award of a public service concession by a public authority to such a body cannot be regarded as a transaction internal to that authority, to which the rules of Community law do not apply. 72 It follows that the reply to the second question referred for a preliminary ruling must be as follows:Articles 43 EC and 49 EC, and the principles of equal treatment, non-discrimination and transparency, are to be interpreted as precluding a public authority from awarding, without putting it out to competition, a public service concession to a company limited by shares resulting from the conversion of a special undertaking of that public authority, a company whose objects have been extended to significant new areas, whose capital must obligatorily be opened in the short term to other capital, the geographical area of whose activities has been extended to the entire country and abroad, and whose Administrative Board possesses very broad management powers which it can exercise independently. Costs73 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (First Chamber) hereby rules:1. The award, by a public authority to a service provider, of the management of a public pay car park, in consideration for which that provider is remunerated by sums paid by third parties for the use of that car park, is a public service concession to which Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts does not apply.2. Articles 43 EC and 49 EC, and the principles of equal treatment, non-discrimination and transparency, are to be interpreted as precluding a public authority from awarding, without putting it out to competition, a public service concession to a company limited by shares resulting from the conversion of a special undertaking of that public authority, a company whose objects have been extended to significant new areas, whose capital must obligatorily be opened in the short term to other capital, the geographical area of whose activities has been extended to the entire country and abroad, and whose Administrative Board possesses very broad management powers which it can exercise independently.[Signatures]* Language of the case: German. | 005cf-5d1ad6f-419c | EN |
THE PROVISIONS OF SPANISH LAW LIMITING THE RIGHT TO DEDUCT VAT OF TAXABLE PRSONS RECEIVING SUBSIDIES FOR THE PURPOSE OF FINANCING THEIR ACTIVITIES ARE CONTRARY TO COMMUNITY LAW | Commission of the European CommunitiesvKingdom of Spain(Failure of a Member State to fulfil obligations –– Articles 17 and 19 of the Sixth VAT Directive –– Subsidies –– Limitation of the right to deduct)Opinion of Advocate General Poiares Maduro delivered on 10 March 2005 Judgment of the Court (Third Chamber), 6 October 2005 Summary of the JudgmentTax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax – Limitations on the right to deduct – Subsidies – National legislation providing for a deductible proportion of tax for taxable persons who carry out only taxable transactions, and limiting the right to deduct tax on the purchase of goods and services which are subsidised – Not permissible (Council Directive 77/388, Arts 17(2) and (5), and 19)A Member State which, in the context of subsidised activities, provides for a deductible proportion of value added tax for taxable persons who carry out only taxable transactions, and which lays down a special rule which limits the right to deduct value added tax on the purchase of goods and services which are subsidised, fails to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes. (see para. 31, operative part)JUDGMENT OF THE COURT (Third Chamber)6 October 2005 (*) (Failure of a Member State to fulfil its obligations – Articles 17 and 19 of the Sixth VAT Directive – Subsidies – Limitation of the right to deduct)In Case C-204/03,ACTION under Article 226 EC for failure to fulfil obligations, brought on 14 May 2003,Commission of the European Communities, represented by E. Traversa and L. Lozano Palacios, acting as Agents, with an address for service in Luxembourg, applicant,Kingdom of Spain, represented by N. Díaz Abad, acting as Agent, with an address for service in Luxembourg, defendant,THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, J.-P. Puissochet, S. von Bahr (Rapporteur), J. Malenovský and U. Lõhmus, Judges, Advocate General: M. Poiares Maduro,Registrar: R. Grass,having regard to the written procedure, after hearing the Opinion of the Advocate General at the sitting on 10 March 2005,gives the followingJudgment1 By its application, the Commission of the European Communities seeks a declaration from the Court that, by providing for a deductible proportion of value added tax (‘VAT’) for taxable persons who carry out only taxable transactions, and by laying down a special rule which limits the right to deduct VAT on the purchase of goods and services which are subsidised, the Kingdom of Spain has failed to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), as amended by Council Directive 95/7/EC of 10 April 1995 (OJ 1995 L 102, p. 18; ‘the Sixth Directive’). Legal framework Community legislation 2 Article 11A(1)(a) of the Sixth Directive provides that the taxable amount shall be:‘in respect of supplies of goods and services … everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies including subsidies directly linked to the price of such supplies’. 3 Article 17(2)(a) of the directive, in the version resulting from Article 28f thereof, provides that, ‘[i]n so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay … value added tax due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person’. 4 Article 17(5) provides that: ‘As regards goods and services to be used by a taxable person both for transactions covered by paragraphs 2 and 3, in respect of which value added tax is deductible, and for transactions in respect of which value added tax is not deductible, only such proportion of the value added tax shall be deductible as is attributable to the former transactions. This proportion shall be determined, in accordance with Article 19, for all the transactions carried out by the taxable person.…’5 Article 19(1) of the Sixth Directive, entitled ‘Calculation of the deductible proportion’, states that: ‘The proportion deductible under the first subparagraph of Article 17(5) shall be made up of a fraction having: – as numerator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions in respect of which value added tax is deductible under Article 17(2) and (3); – as denominator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions included in the numerator and to transactions in respect of which value added tax is not deductible. The Member States may also include in the denominator the amount of subsidies, other than those specified in Article 11A(1)(a). National legislation 6 Article 102 of Law No 37/1992 of 28 December 1992 on value added tax (BOE No 312 of 29 December 1992, p. 44247), as amended by Law No 66/1997 of 30 December 1997 (BOE No 313 of 31 December 1997, p. 38517; ‘Law No 37/1992’), is devoted to the proportion rule governing deduction of that tax. The first paragraph of that article states that: ‘The proportion rule shall apply where the taxable person in the course of his trade or business carries out both supplies of goods or services in respect of which value added tax is deductible and other transactions of a similar nature in respect of which it is not. The proportion rule shall also apply where the taxable person receives subsidies which, in accordance with Article 78(2)(3) of this Law, do not form part of the taxable amount, inasmuch as they are intended to fund the taxable person’s trade or business activities.’ 7 Article 104 of Law No 37/1992 refers to the general proportion. The second paragraph of Article 104(2)(2) states that: ‘Capital subsidies shall be included in the denominator of the proportion, but they may be imputed in fifths to the tax year during which they were received and to the four following tax years. Nevertheless, capital subsidies granted in order to fund the purchase of certain goods or services, acquired in connection with transactions that are taxable and not exempted from VAT, will reduce exclusively the amount of the deduction of VAT borne or paid in respect of those transactions, to the precise extent to which they have contributed to their funding.’ Pre-litigation procedure 8 The Commission initiated the infringement procedure under Article 226 EC by a letter of formal notice sent to the Spanish Government on 20 April 2001, in which it maintained that Article 102 and the second paragraph of Article 104(2)(2) of Law No 37/1992 restrict, contrary to Articles 17(2) and (5) and 19 of the Sixth Directive, the right to deduct VAT. 9 The Kingdom of Spain submitted its observations in response to that letter of formal notice by letter of 28 May 2001. 10 Unsatisfied with that response, the Commission sent a reasoned opinion on 27 June 2002 requesting that Member State to adopt the measures necessary to comply with the opinion within two months of its notification. 11 By letter of 20 September 2002, the Kingdom of Spain replied to the reasoned opinion, reiterating its disagreement with the position adopted by the Commission. The action Preliminary considerations 12 It should be noted that the provisions of Law No 37/1992, referred to in paragraphs 6 and 7 of the present judgment, contain a general rule and a special rule. 13 Under the general rule, laid down in Article 102 of the Law read in conjunction with the first sentence of the provisions of Article 104 of that same law, cited in paragraph 7 of the present judgment, subsidies to finance the trade or business of a taxable person, which do not form part of the basis of VAT assessment, are taken into account in the calculation of the deductible proportion in so far as they are part of the denominator of the portion which that proportion results from. Those subsidies thus generally diminish the right to deduct enjoyed by taxable persons. The latter consist not only of taxable persons who use the goods and services obtained as inputs to carry out, at the same time, transactions in respect of which VAT is deductible and other transactions of a similar nature in respect of which it is not (‘mixed taxable persons’), but also taxable persons who use goods and services exclusively to carry out transactions in respect of which VAT is deductible (‘fully taxable persons’). 14 The special rule is contained in the second sentence of the provisions of Article 104 of Law No 37/1992, cited in paragraph 7 of the present judgment. Under that rule, subsidies granted specifically to fund the purchase of certain goods or services acquired in connection with transactions that are taxable and not exempted from VAT reduce exclusively the amount of the deduction of VAT borne or paid in respect of those transactions, to the precise extent to which they have contributed to their funding. Consequently, in the case of a subsidy amounting, for example, to 20% of the purchase price of a good or service, the right to deduct the VAT specifically imposed on that good or service is reduced by 20%. Arguments of the parties15 The Commission submits that the general rule laid down by Law No 37/1992 unlawfully extends the restriction of the right to deduct laid down in Article 17(5), read in conjunction with Article 19 of the Sixth Directive, by applying that restriction not only to mixed taxable persons but also to fully taxable persons. In addition, the special rule set out in that Law introduces a mechanism of deduction which is not provided for in the Sixth Directive and is thus contrary to it. 16 The Spanish Government considers, for its part, that the Commission gives the Sixth Directive a literal interpretation which fails to take account of the objectives of the text and, in particular, the principle that VAT should be neutral. 17 According to that government, Article 19 of the Sixth Directive does not simply constitute a rule for calculating the proportion mentioned in Article 17(5) of that directive aimed at calculating, in the case of mixed taxable persons, the proportion of taxed activities in respect of which VAT is deductible in relation to the total amount of the taxable person’s taxed and exempted activities. By providing in Article 19 that Member States may include in the denominator of the proportion subsidies which are not directly linked to the price of the transactions and which are therefore not included in the taxable amount as defined in Article 11A(1)(a) of that directive, the legislature introduced an exception to the rule laid down in Article 17(5) as regards mixed taxable persons by allowing restrictions of the right to deduct of fully taxable persons. 18 The Spanish Government submits that the purpose of Article 19 of the Sixth Directive is to allow Member States to re-establish the balance as regards competition and, in doing that, to observe the principle that tax should be neutral. In support of that view it cites the example of a transporter who obtains a subsidy to purchase a vehicle. The subsidy allows him to reduce the cost of his service and, thus, the amount of VAT applicable to it. Furthermore, if, with the help of that subsidy, the transporter can deduct the whole VAT on the amount spent on inputs, he gains a further advantage over his competitors who have not received subsidies. 19 The Spanish Government adds that the special rule laid down in Law No 37/1992 provides for a restriction of the right to deduct which is more limited than that which results from the application of Article 19 of the Sixth Directive, since it concerns the deduction of VAT relating only to the goods or services obtained with the help of the subsidy and it has no impact on the deduction of tax as regards other goods or services obtained by the taxable person. 20 As an ancillary point, the Spanish Government requests the Court, should it not agree with the interpretation which that government puts forward, to limit the effects in time of its judgment. The non-retroactive application of the effects of the judgment is justified, first, by the fact that the Spanish authorities acted in good faith in adopting the legislation at issue and, second, by the problems which the Court’s judgment could give rise to. Findings of the Court 21 Article 17(2) of the Sixth Directive sets out the principle of the right to deduct VAT. The latter concerns input tax on the goods and services used by taxable persons for the needs of their taxed transactions. 22 Where the taxable person carries out, at the same time, transactions in respect of which VAT is deductible and exempted transactions in respect of which it is not, Article 17(5) of the directive states that only such proportion of the VAT shall be deductible as is attributable to the taxed transactions. That proportion is calculated according to the method laid down in Article 19 of the directive. 23 As the Court has repeatedly pointed out, any limitation of the right to deduct VAT affects the level of the tax burden and must be applied in a similar manner in all the Member States. Consequently, derogations are permitted only in the cases expressly provided for in the Sixth Directive (see, in particular, Case 50/87 Commission v France [1988] ECR 4797, paragraph 17, Case C-62/93 BP Supergas [1995] ECR I-1883, paragraph 18, and Case C-409/99 Metropol and Stadler [2002] ECR I-81, paragraph 42). 24 In that regard, it must be noted that Article 19 of the Sixth Directive, entitled ‘Calculation of the deductible proportion’, refers expressly to Article 17(5) of that directive, to which it is wholly related. 25 The provisions of the second indent of Article 19(1) on subsidies other than those specified in Article 11A(1)(a) of the Sixth Directive, that is to say subsidies which are not included in the price of the good or service provided and which do not form part of the taxable amount, must be read in the light of Article 17(5). However, as is clear from its wording, Article 17(5) only applies to mixed taxable persons. It follows that, given that it is not an exception applicable to both mixed and fully taxable persons, the second indent of Article 19(1) permits limitations of the right to deduct, taking account of the subsidies thus defined, only in the case of mixed taxable persons. 26 Consequently, by extending the restriction of the right to deduct to fully taxable persons, the general rule laid down in Law No 37/1992 introduces a restriction which goes beyond the one expressly provided for in Articles 17(5) and 19 of the Sixth Directive and infringes the provisions of the directive. 27 In relation to the special rule set out in the Law, it is sufficient to point out that it introduces a mechanism for limiting the right to deduct which is not provided for in Articles 17(5) and 19 of the Sixth Directive or in any other provision of the directive. Consequently, such a mechanism is not authorised by the directive. 28 The Spanish Government’s argument that its interpretation of Article 19 of the Sixth Directive enables balance in terms of competition, and hence the principle that VAT should be neutral, to be observed must be rejected. The Member States are required to apply the Sixth Directive even if they consider it to be less than perfect. As indicated in Case C-388/98 Commission v Netherlands [2001] ECR I-8265, paragraphs 55 and 56, even if the interpretation put forward by certain Member States better served certain aims of the Sixth Directive, such as fiscal neutrality, the Member States may not disregard the provisions expressly laid down in that directive by introducing, in this case, limitations of the right to deduct other than those laid down in Articles 17 and 19 of that directive. 29 As regards the restriction of the effects in time of the Court’s judgment requested by the Spanish Government, it must be noted that it is only exceptionally that the Court may, in application of the general principle of legal certainty inherent in the Community legal order, be moved to decide on such a restriction. 30 In that regard, and as pointed out by the Advocate General in paragraph 24 of his Opinion, it must be established that the State authorities were prompted to adopt legislation or conduct contrary to Community law because of objective and significant uncertainty regarding the implications of the Community provisions concerned (see, to that effect, Case C-359/97 Commission v United Kingdom [2000] ECR I-6355, paragraph 92). However, there was no such uncertainty in this instance. It is thus not necessary to restrict the effects in time of the present judgment. 31 In the light of those considerations, it must be held that, by providing for a deductible proportion of VAT for taxable persons who carry out only taxable transactions, and by laying down a special rule which limits the right to deduct VAT on the purchase of goods and services which are subsidised, the Kingdom of Spain has failed to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of the Sixth Directive. Costs32 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Kingdom of Spain has been unsuccessful in its pleas, the latter must be ordered to pay the costs. On those grounds, the Court (Third Chamber) hereby:1. Declares that, by providing for a deductible proportion of value added tax for taxable persons who carry out only taxable transactions, and by laying down a special rule which limits the right to deduct VAT on the purchase of goods and services which are subsidised, the Kingdom of Spain has failed to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 95/7/EC of 10 April 1995; 2. Orders the Kingdom of Spain to pay the costs. [Signatures]* Language of the case: Spanish. | ce96d-2bcc016-4723 | EN |
THE COURT OF FIRST INSTANCE GIVES ITS FIRST JUDGMENTS CONCERNING ACTS ADOPTED IN THE FIGHT AGAINST TERRORISM | Ahmed Ali Yusuf and Al Barakaat International FoundationvCouncil of the European Union and Commission of the European Communities(Common foreign and security policy – Restrictive measures taken against persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Competence of the Community – Freezing of funds – Fundamental rights – Jus cogens – Review by the Court – Action for annulment) Summary of the Judgment1. Procedure – Regulation replacing the contested regulation during the proceedings – New factor – Extension of the original claims and pleas in law2. Acts of the institutions – Choice of legal basis – Regulation imposing on certain persons and entities sanctions intended to interrupt or reduce economic relations with a third country – Articles 60 EC and 301 EC – Whether permissible(Arts 60 EC and 301 EC; Council Regulation No 467/2001)3. Acts of the institutions – Choice of legal basis – Regulation imposing sanctions on certain persons and entities in no way connected with a third State – Articles 60 EC, 301 EC and 308 EC in combination – Whether permissible(Arts 60 EC, 301 EC and 308 EC; Art. 3 EU; Council Regulation No 881/2002)4. Free movement of capital and freedom to make payments – Restrictions – National measures relating to the fight against international terrorism and the imposition for that purpose of economic and financial sanctions on individuals in no way connected with a third State –Whether permissible – Conditions (Art. 58 EC)5. Acts of the institutions – Legal nature – Regulation or decision – Distinction – Criteria – Concept of addressee of an act – Object of an act – Immaterial criterion (Art. 230 EC, fourth para., and Art. 249 EC; Council Regulation No 881/2002)6. Public international law – Charter of the United Nations – Decisions of the Security Council – Obligations resulting therefrom for the Member States – Primacy over domestic law and Community law – Obligations under that Charter – Binding on the Community7. European Communities – Judicial review of the lawfulness of the acts of the institutions – Act implementing resolutions of the United Nations Security Council – Indirect review of the lawfulness of decisions of the Security Council – Review in light of Community law – Excluded – Review in light of jus cogens – Whether permissible(Arts 5 EC, 10 EC, 230 EC, 297 EC, 307, first para., EC; Art. 5 EU; Council Regulation No 881/2002)8. European Communities – Judicial review of the lawfulness of the acts of the institutions – Act implementing resolutions of the United Nations Security Council – Regulation No 881/2002 – Specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Fundamental rights of the persons concerned – Freezing of funds – Review in light of jus cogens – Right to property of the persons concerned – Principle of proportionality – No breach (Council Regulation No 881/2002, as amended by Council Regulation No 561/2003)9. European Communities – Judicial review of the lawfulness of the acts of the institutions – Act implementing resolutions of the United Nations Security Council – Regulation No 881/2002 – Specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Right of the persons concerned to be heard – No breach (Council Regulation No 881/2002)10. Actions for annulment – Community act implementing resolutions of the United Nations Security Council – Regulation No 881/2002 – Specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Judicial review – Limits – Lacuna in the judicial protection of the applicants – Review in light of jus cogens – Right to an effective judicial remedy – No breach (Art. 226 EC; Council Regulation No 881/2002)1. In an action for annulment, when a regulation of direct and individual concern to a person is replaced, during the proceedings, by another regulation having the same subject-matter, the latter must be considered a new factor allowing the applicant to adapt its pleas in law and claims for relief. It would indeed be contrary to the due administration of justice and the requirements of procedural economy to oblige the applicant to make a fresh application. Moreover, it would be inequitable if the Commission were able, in order to counter criticisms of a regulation contained in an application made to the Community judicature, to amend the contested regulation or to substitute another for it and to rely in the proceedings on such an amendment or substitution in order to deprive the other party of the opportunity of extending his original claims and pleas in law to the later regulation or of submitting supplementary claims and pleas in law directed against that regulation. (see paras 72-73)2. The Council was competent to adopt Regulation No 467/2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, on the basis of Articles 60 EC and 301 EC. Nothing in the wording of those provisions makes it possible to exclude the adoption of restrictive measures affecting specifically the rulers of a third country, rather than the country as such, and also the individuals and entities associated with those rulers or directly or indirectly controlled by them, wherever they may be, in so far as such measures actually seek to reduce, in part or completely, economic relations with one or more third countries. That interpretation, which is not contrary to the letter of Article 60 EC or 301 EC, is justified both by considerations of effectiveness and by humanitarian concerns. The measures laid down by Regulation No 467/2001 were intended to interrupt or reduce economic relations with Afghanistan, in connection with the international community’s fight against international terrorism and, more specifically, against Usama bin Laden and the Al-Qaeda network. What is more, those measures, intended to exert effective pressure on the rulers of the country concerned, while restricting as far as possible the impact of those measures on the population of that country, in particular by confining their personal ambit to a certain number of individuals referred to by name, were in keeping with the principle of proportionality, according to which sanctions may not go beyond what is appropriate and necessary to the attainment of the objective pursued by the Community legislation imposing them. (see paras 108, 112, 115-116, 121-122, 124)3. Articles 60 EC and 301 EC do not constitute in themselves a sufficient legal basis on which to adopt a Community regulation concerning the fight against international terrorism and the imposition to that end of economic and financial sanctions, such as the freezing of funds, on individuals, when there is no link whatsoever between those individuals and a non-member country. Likewise, Article 308 EC does not, taken in isolation, constitute of itself a sufficient legal basis for adoption of such a regulation. Although no provision of the Treaty gives the Community institutions the necessary power to impose sanctions on individuals or entities in no way linked to a non-member country, the fight against international terrorism, more particularly the imposition of economic and financial sanctions, in respect of individuals and entities suspected of contributing to the funding of terrorism, cannot be made to refer to one of the objects which Articles 2 EC and 3 EC expressly entrust to the Community. Furthermore, nowhere in the preamble to the EC Treaty is it stated that that act pursues a wider object of safeguarding international peace and security. The latter falls exclusively within the objects of the Treaty on European Union. While, admittedly, it may be asserted that that objective of the Union must inspire action by the Community in the sphere of its own competence, it is not however a sufficient basis for the adoption of measures under Article 308 EC. It appears impossible to interpret Article 308 EC as giving the institutions general authority to use that provision as a basis with a view to attaining one of the objectives of the EU Treaty. Nevertheless, the Council was competent to adopt Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, which sets in motion in the Community the economic and financial sanctions provided for by Common Position 2002/402, in the absence of any link with the territory or rulers of a non-member country, on the joint basis of Articles 60 EC, 301 EC and 308 EC. In the circumstances, account has to be taken of the bridge explicitly established at the time of the Maastricht revision between Community actions imposing economic sanctions under Articles 60 EC and 301 EC and the objectives of the Treaty on European Union in the sphere of external relations. On this score, it must be held that Articles 60 EC and 301 EC are quite special provisions of the EC Treaty, in that they expressly contemplate situations in which action by the Community may be proved to be necessary in order to achieve not one of the objects of the Community as fixed by the EC Treaty but rather one of the objectives specifically assigned to the Union by Article 2 of the Treaty on European Union, viz., the implementation of a common foreign and security policy. So, when the powers to impose economic and financial sanctions provided for by Articles 60 EC and 301 EC, namely, the interruption or reduction of economic relations with one or more third countries, especially in respect of movements of capital and payments, may be proved insufficient to allow the institutions to attain the objective of the CFSP, recourse to the additional legal basis of Article 308 EC is justified in the specific context of those two articles for the sake of the requirement of consistency laid down in Article 3 EU. Thus, recourse to the cumulative legal bases of Articles 60 EC, 301 EC and 308 EC makes it possible to attain, in the sphere of economic and financial sanctions, the objective pursued under the CFSP by the Union and its Member States, as it is expressed in a common position or joint action, despite the lack of any express attribution to the Community of powers to impose economic and financial sanctions on individuals or entities with no sufficient connection to a given third country. (see paras 132-133, 136, 152, 154-157, 159-160, 163-166, 170)4. The Community has no express power to impose restrictions on the movement of capital and payments. On the other hand, Article 58 EC allows the Member States to adopt measures having such an effect to the extent to which this is, and remains, justified in order to achieve the objectives set out in the article, in particular, on grounds of public policy or public security. The concept of public security covering both the State’s internal and external security, the Member States are therefore as a rule entitled to adopt under Article 58(1)(b) EC measures relating to the fight against international terrorism and the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals where no connection whatsoever has been established with the territory or the governing regime of a third State. In so far as those measures are in keeping with Article 58(3) EC and do not go beyond what is necessary in order to attain the objective pursued, they are compatible with the rules on free movement of capital and payments and with the rules on free competition laid down by the Treaty. (see para. 146)5. Article 249 EC, in that it provides that a regulation has general application, whereas a decision is binding only upon those to whom it is addressed, contemplates only the concept of the addressee of an act. By contrast, the object of an act is immaterial as a criterion for its classification as a regulation or a decision. Consequently, Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban has general application, since it prohibits anyone to make available funds or economic resources to certain persons. The fact that those persons are expressly named in Annex I to the regulation, so that they appear to be directly and individually concerned by it, within the meaning of the fourth paragraph of Article 230 EC, in no way affects the general nature of that prohibition. (see paras 186-187)6. From the standpoint of international law, the obligations of the Member States of the United Nations under the Charter of the United Nations clearly prevail over every other obligation of domestic law or of international treaty law including, for those of them that are members of the Council of Europe, their obligations under the European Convention for the Protection of Human Rights and Fundamental Freedoms and, for those that are also members of the Community, their obligations under the EC Treaty. That primacy extends to decisions contained in a resolution of the Security Council, in accordance with Article 25 of the Charter of the United Nations, under which the Members of the United Nations are bound to accept and carry out the decisions of the Security Council. Although it is not a member of the United Nations, the Community must be considered to be bound by the obligations under the Charter of the United Nations in the same way as its Member States, by virtue of the Treaty establishing it. First, it may not infringe the obligations imposed on its Member States by that charter or impede their performance. Second, in the exercise of its powers it is bound, by the very Treaty by which it was established, to adopt all the measures necessary to enable its Member States to fulfil those obligations. (see paras 231, 234, 242-243, 254)7. Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, adopted in the light of Common Position 2002/402, constitutes the implementation at Community level of the obligation placed on the Member States of the Community, as Members of the United Nations, to give effect, if appropriate by means of a Community act, to the sanctions against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities, which have been decided and later strengthened by several resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations. In that situation, the institutions acted under circumscribed powers, with the result that they had no autonomous discretion. In particular, they could neither directly alter the content of the resolutions at issue nor set up any mechanism capable of giving rise to such alteration. Any review of the internal lawfulness of Regulation 881/2002 would therefore imply that the Court is to consider, indirectly, the lawfulness of those resolutions. In light of the principle of the primacy of UN law over Community law, the claim that the Court of First Instance has jurisdiction to review indirectly the lawfulness of decisions of the Security Council according to the standard of protection of fundamental rights as recognised by the Community legal order, cannot be justified either on the basis of international law or on the basis of Community law. First, such jurisdiction would be incompatible with the undertakings of the Member States under the Charter of the United Nations, especially Articles 25, 48 and 103 thereof, and also with Article 27 of the Vienna Convention on the Law of Treaties. Second, it would be contrary to provisions both of the EC Treaty, especially Articles 5 EC, 10 EC, 297 EC and the first paragraph of Article 307 EC, and of the Treaty on European Union, in particular Article 5 EU. It would, what is more, be incompatible with the principle that the Community’s powers and, therefore, those of the Court of First Instance, must be exercised in compliance with international law. Resolutions of the Security Council, adopted under Chapter VII of the Charter of the United Nations, therefore fall, in principle, outside the ambit of the Court’s judicial review and the Court has no authority to call in question, even indirectly, their lawfulness in the light of Community law. On the contrary, the Court is bound, so far as possible, to interpret and apply that law in a manner compatible with the obligations of the Member States under the Charter of the United Nations. None the less, the Court is empowered to check, indirectly, the lawfulness of such resolutions with regard to jus cogens, understood as a body of higher rules of public international law binding on all subjects of international law, including the bodies of the United Nations, and from which no derogation is possible. (see paras 264-266, 272-274, 276-277)8. The freezing of funds provided for by Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, as amended by Regulation No 561/2003, and, indirectly, by the resolutions of the Security Council put into effect by those regulations, does not infringe the fundamental rights of the persons concerned, measured by the standard of universal protection of the fundamental rights of the human person covered by jus cogens. In that regard, the express provision of possible exemptions and derogations attaching to the freezing of the funds of the persons in the Sanctions Committee’s list clearly shows that it is neither the purpose nor the effect of that measure to submit those persons to inhuman or degrading treatment. In addition, in so far as respect for the right to property must be regarded as forming part of the mandatory rules of general international law, it is only an arbitrary deprivation of that right that might, in any case, be regarded as contrary to jus cogens. Such is not the case here. In the first place, the freezing of their funds constitutes an aspect of the sanctions decided by the Security Council against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities, having regard to the importance of the fight against international terrorism and the legitimacy of the protection of the United Nations against the actions of terrorist organisations. In the second place, freezing of funds is a precautionary measure which, unlike confiscation, does not affect the very substance of the right of the persons concerned to property in their financial assets but only the use thereof. In the third place, the resolutions of the Security Council provide for a means of reviewing, after certain periods, the overall system of sanctions. Finally, the legislation at issue settles a procedure enabling the persons concerned to present their case at any time to the Sanctions Committee for review, through the Member State of their nationality or that of their residence. Having regard to those facts, the freezing of the funds of persons and entities suspected, on the basis of information communicated by the Member States of the United Nations and checked by the Security Council, of being linked to Usama bin Laden, the Al-Qaeda network or the Taliban and of having participated in the financing, planning, preparation or perpetration of terrorist acts cannot be held to constitute an arbitrary, inappropriate or disproportionate interference with the fundamental rights of the persons concerned. (see paras 289, 291, 293-296, 299-302)9. The right of the persons concerned to be heard has been infringed neither by the Sanctions Committee before their inclusion in the list of persons whose funds must be frozen pursuant to the Security Council’s resolutions at issue nor by the Community institutions before the adoption of Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban. First, the right of the persons concerned to be heard by the Sanctions Committee before their inclusion in the list of persons suspected of contributing to the funding of terrorism whose funds must be frozen pursuant to the resolutions of the Security Council in question is not provided for by those resolutions, and it appears that no mandatory rule of public law requires such a prior hearing. In particular, when what is at issue is a temporary precautionary measure restricting the availability of the property of the persons concerned, observance of their fundamental rights does not require the facts and evidence adduced against them to be communicated to them, once the Security Council or its Sanctions Committee is of the view that there are grounds concerning the international community’s security that militate against it. Second, the Community institutions were not obliged to hear the persons concerned before the contested regulation was adopted either, because they had no discretion in the transposition into the Community legal order of resolutions of the Security Council or decisions of the Sanctions Committee, with the result that to hear the person concerned could not in any case lead the institution to review its position. (see paras 306-307, 320, 328-329, 331)10. In dealing with an action for annulment directed at Regulation No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, the Court carries out a complete review of the lawfulness of that regulation with regard to observance by the Community institutions of the rules of jurisdiction and the rules of external lawfulness and the essential procedural requirements which bind their actions. The Court also reviews the lawfulness of that regulation having regard to the Security Council’s regulations which that act is supposed to put into effect, in particular from the viewpoints of procedural and substantive appropriateness, internal consistency and whether the regulation is proportionate to the resolutions. What is more, it reviews the lawfulness of that regulation and, indirectly, the lawfulness of the resolutions of the Security Council at issue, in the light of the higher rules of international law falling within the ambit of jus cogens, in particular the mandatory prescriptions concerning the universal protection of the rights of the human person. On the other hand, it is not for the Court to review indirectly whether the Security Council’s resolutions in question are themselves compatible with fundamental rights as protected by the Community legal order. Nor does it fall to the Court to verify that there has been no error of assessment of the facts and evidence relied on by the Security Council in support of the measures it has taken or, subject to the limited extent of the review carried out in light of jus cogens, to check indirectly the appropriateness and proportionality of those measures. To that extent, there is no judicial remedy available to the applicants, the Security Council not having thought it advisable to establish an independent international court responsible for ruling, in law and on the facts, in actions brought against individual decisions taken by the Sanctions Committee. However, that lacuna in the judicial protection available to the applicants is not in itself contrary to jus cogens. As a matter of fact, the right of access to the courts is not absolute. The limitation of the applicants’ right of access to a court, as a result of the immunity from jurisdiction enjoyed as a rule by resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations, is inherent in that right as it is guaranteed by jus cogens. The applicants’ interest in having a court hear their case on its merits is not enough to outweigh the essential public interest in the maintenance of international peace and security in the face of a threat clearly identified by the Security Council in accordance with the Charter of the United Nations. Consequently, there has been no breach of the applicants’ right to an effective judicial remedy. (see paras 334-335, 337-344, 346)JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber, Extended Composition)21 September 2005(*) (Common foreign and security policy – Restrictive measures taken against persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban – Competence of the Community – Freezing of funds –Fundamental rights – Jus cogens – Review by the Court – Action for annulment) In Case T-306/01,Ahmed Ali Yusuf, residing at Spånga (Sweden), Al Barakaat International Foundation, established at Spånga, represented by L. Silbersky and T. Olsson, lawyers,applicants,Council of the European Union, represented by M. Vitsentzatos, I. Rådestad, E. Karlsson and M. Bishop, acting as Agents, andCommission of the European Communities, represented by A. Van Solinge, J. Enegren and C. Brown, acting as Agents, with an address for service in Luxembourg, defendants,supported byUnited Kingdom of Great Britain and Northern Ireland, originally represented by J. Collins, and then by R. Caudwell, acting as Agents, and by S. Moore, Barrister, with an address for service in Luxembourg, intervener,APPLICATION, originally, for annulment of, first, Council Regulation (EC) No 467/2001 of 6 March 2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, and repealing Regulation (EC) No 337/2000 (OJ 2001 L 67, p. 1) and, second, Commission Regulation (EC) No 2199/2001 of 12 November 2001 amending, for the fourth time, Regulation No 467/2001 (OJ 2001 L 295, p. 16) and, subsequently, an application for annulment of Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, and repealing Regulation No 467/2001 (OJ 2002 L 139, p. 9), THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber, Extended Composition),composed of N.J. Forwood, President, J. Pirrung, P. Mengozzi, A.W.H. Meij and M. Vilaras, Judges,Registrar: H. Jung,having regard to the written procedure and further to the hearing on 14 October 2003,gives the followingJudgment Legal framework1 Under Article 24(1) of the Charter of the United Nations, signed at San Francisco (United States of America) on 26 June 1945, the members of the United Nations ‘confer on the Security Council primary responsibility for the maintenance of international peace and security, and agree that in carrying out its duties under this responsibility the Security Council acts on their behalf’. 2 Under Article 25 of the Charter of the United Nations, ‘[t]he Members of the [UN] agree to accept and carry out the decisions of the Security Council in accordance with the present Charter’. 3 In accordance with Article 48(2) of the Charter of the United Nations, the decisions of the Security Council for the maintenance of international peace and security ‘shall be carried out by the Members of the United Nations directly and through their action in the appropriate international agencies of which they are members’. 4 According to Article 103 of the Charter of the United Nations, ‘[i]n the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail.’ 5 In accordance with Article 11(1) EU: ‘The Union shall define and implement a common foreign and security policy covering all areas of foreign and security policy, the objectives of which shall be: – to safeguard the common values, fundamental interests, independence and integrity of the Union in conformity with the principles of the United Nations Charter, – to strengthen the security of the Union in all ways,– to preserve peace and strengthen international security, in accordance with the principles of the United Nations Charter …– …’6 Under Article 301 EC: ‘Where it is provided, in a common position or in a joint action adopted according to the provisions of the Treaty on European Union relating to the common foreign and security policy, for an action by the Community to interrupt or to reduce, in part or completely, economic relations with one or more third countries, the Council shall take the necessary urgent measures. The Council shall act by a qualified majority on a proposal from the Commission.’ 7 Article 60(1) EC provides: ‘If, in the cases envisaged in Article 301, action by the Community is deemed necessary, the Council may, in accordance with the procedure provided for in Article 301, take the necessary urgent measures on the movement of capital and on payments as regards the third countries concerned.’ 8 In accordance with the first paragraph of Article 307 EC: ‘The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of this Treaty.’ 9 Lastly, Article 308 EC provides: ‘If action by the Community should prove necessary to attain, in the course of the operation of the common market, one of the objectives of the Community, and this Treaty has not provided the necessary powers, the Council shall, acting unanimously on a proposal from the Commission and after consulting the European Parliament, take the appropriate measures.’ Background to the dispute10 On 15 October 1999 the Security Council of the United Nations (‘the Security Council’) adopted Resolution 1267 (1999), in which it inter alia condemned the fact that Afghan territory continued to be used for the sheltering and training of terrorists and planning of terrorist acts, reaffirmed its conviction that the suppression of international terrorism was essential for the maintenance of international peace and security, deplored the fact that the Taliban continued to provide safe haven to Usama bin Laden and to allow him and others associated with him to operate a network of terrorist training camps from territory held by the Taliban and to use Afghanistan as a base from which to sponsor international terrorist operations. In the second paragraph of the resolution the Security Council demanded that the Taliban should without further delay turn Usama bin Laden over to the appropriate authorities. In order to ensure compliance with that demand, paragraph 4(b) of Resolution 1267 (1999) provides that all the States must, in particular, ‘freeze funds and other financial resources, including funds derived or generated from property owned or controlled directly or indirectly by the Taliban, or by any undertaking owned or controlled by the Taliban, as designated by the Committee established by paragraph 6 below, and ensure that neither they nor any other funds or financial resources so designated are made available, by their nationals or by any persons within their territory, to or for the benefit of the Taliban or any undertaking owned or controlled, directly or indirectly, by the Taliban, except as may be authorised by the Committee on a case-by-case basis on the grounds of humanitarian need.’ 11 In paragraph 6 of Resolution 1267 (1999) the Security Council decided to establish, in accordance with rule 28 of its provisional rules of procedure, a committee of the Security Council composed of all its members (‘the Sanctions Committee’), responsible in particular for ensuring that the States implement the measures imposed by paragraph 4, designating the funds or other financial resources referred to in paragraph 4 and considering requests for exemptions from the measures imposed by paragraph 4. 12 Taking the view that action by the Community was necessary in order to implement that resolution, on 15 November 1999 the Council adopted Common Position 1999/727/CFSP concerning restrictive measures against the Taliban (OJ 1999 L 294, p. 1). Article 2 of that Common Position prescribes the freezing of funds and other financial resources held abroad by the Taliban under the conditions set out in Security Council Resolution 1267 (1999). 13 On 14 February 2000, on the basis of Articles 60 EC and 301 EC, the Council adopted Regulation (EC) No 337/2000 concerning a flight ban and a freeze of funds and other financial resources in respect of the Taliban of Afghanistan (OJ 2000 L 43, p. 1). 14 On 19 December 2000 the Security Council adopted Resolution 1333 (2000), demanding, inter alia, that the Taliban should comply with Resolution 1267 (1999), and, in particular, that they should cease to provide sanctuary and training for international terrorists and their organisations and turn Usama bin Laden over to appropriate authorities to be brought to justice. The Security Council decided in particular to strengthen the flight ban and freezing of funds imposed under Resolution 1267 (1999). Accordingly paragraph 8(c) of Resolution 1333 (2000) provides that the States are, inter alia, ‘[t]o freeze without delay funds and other financial assets of Usama bin Laden and individuals and entities associated with him as designated by the [Sanctions Committee], including those in the Al-Qaeda organisation, and including funds derived or generated from property owned or controlled directly or indirectly by Usama bin Laden and individuals and entities associated with him, and to ensure that neither they nor any other funds or financial resources are made available, by their nationals or by any persons within their territory, directly or indirectly for the benefit of Usama bin Laden, his associates or any entities owned or controlled, directly or indirectly, by Usama bin Laden or individuals and entities associated with him including the Al-Qaeda organisation.’ 15 In the same provision, the Security Council instructed the Sanctions Committee to maintain an updated list, based on information provided by the States and regional organisations, of the individuals and entities designated as associated with Usama bin Laden, including those in the Al-Qaeda organisation. 16 In paragraph 23 of Resolution 1333 (2000), the Security Council decided that the measures imposed inter alia by paragraph 8 were to be established for 12 months and that, at the end of that period, it would decide whether to extend them for a further period on the same conditions. 17 Taking the view that action by the Community was necessary in order to implement that resolution, on 26 February 2001 the Council adopted Common Position 2001/154/CFSP concerning additional restrictive measures against the Taliban and amending Common Position 96/746/CFSP (OJ 2001 L 57, p. 1). Article 4 of that Common Position provides: ‘Funds and other financial assets of Usama bin Laden and individuals and entities associated with him, as designated by the Sanctions Committee, will be frozen, and funds or other financial resources will not be made available to Usama bin Laden and individuals or entities associated with him as designated by the Sanctions Committee, under the conditions set out in [Resolution 1333 (2000)]. 18 On 6 March 2001, on the basis of Articles 60 EC and 301 EC, the Council adopted Regulation (EC) No 467/2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, and repealing Regulation No 337/2000 (OJ 2001 L 67, p. 1). 19 The third recital in the preamble to that regulation states that the measures provided for by Resolution 1333 (2000) ‘fall under the scope of the Treaty and, therefore, notably with a view to avoiding distortion of competition, Community legislation is necessary to implement the relevant decisions of the Security Council as far as the territory of the Community is concerned.’ 20 Article 1 of Regulation No 467/2001 defines what is meant by ‘funds’ and ‘freezing of funds’. 21 Under Article 2 of Regulation No 467/2001: ‘All funds and other financial resources belonging to any natural or legal person, entity or body designated by the … Sanctions Committee and listed in Annex I shall be frozen. No funds or other financial resources shall be made available, directly or indirectly, to or for the benefit of, persons, entities or bodies designated by the Taliban Sanctions Committee and listed in Annex I. Paragraphs 1 and 2 shall not apply to funds and financial resources for which the Taliban Sanctions Committee has granted an exemption. Such exemptions shall be obtained through the competent authorities of the Member States listed in Annex II.’ 22 Annex I to Regulation No 467/2001 contains the list of persons, entities and bodies affected by the freezing of funds imposed by Article 2. Under Article 10(1) of Regulation No 467/2001, the Commission is empowered to amend or supplement Annex I on the basis of determinations made by either the Security Council or the Sanctions Committee. 23 On 8 March 2001 the Sanctions Committee published a first consolidated list of the entities which and the persons who must be subjected to the freezing of funds pursuant to Security Council Resolutions 1267 (1999) and 1333 (2000). That list has since been amended and supplemented several times. The Commission has therefore adopted various regulations pursuant to Article 10 of Regulation No 467/2001, in which it has amended or supplemented Annex I to that regulation. 24 On 9 November 2001 the Sanctions Committee published a new addendum to its list of 8 March 2001, including in particular the names of the following body and three individuals: – ‘Barakaat International Foundation, Box 4036, Spånga, Stockholm, Sweden; Rinkebytorget 1, 04 Spånga, Sweden’;– ‘Aden, Abdirisak; Akaftingebacken 8, 16367 Spånga, Sweden; DOB 01 June 1968;– ‘Ali, Abdi Abdulaziz, Drabantvagen 21, 17750 Spånga, Sweden; DOB 01 January 1955’;– ‘Ali, Yusaf Ahmed, Hallbybybacken 15, 70 Spånga, Sweden; DOB: 20 November 1974’.25 By Commission Regulation (EC) No 2199/2001 of 12 November 2001 amending, for the fourth time, Regulation No 467/2001 (OJ 2001 L 295, p. 16), the names of the entity and the three natural persons in question were added, with others, to Annex I to that regulation. 26 On 16 January 2002 the Security Council adopted Resolution 1390 (2002), which lays down the measures to be directed against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities. Articles 1 and 2 of that resolution provide, in essence, that the measures, in particular the freezing of funds, imposed by Article 4(b) of Resolution 1267 (1999) and by Article 8(c) of Resolution 1333 (2000) are to be maintained. In accordance with paragraph 3 of Resolution 1390 (2002), those measures are to be reviewed by the Security Council 12 months after their adoption, at the end of which period the Council will either allow those measures to continue or decide to improve them. 27 Considering that action by the Community was necessary in order to implement that resolution, on 27 May 2002 the Council adopted Common Position 2002/402/CFSP concerning restrictive measures against Usama bin Laden, members of the Al-Qaeda organisation and the Taliban and other individuals, groups, undertakings and entities associated with them and repealing Common Positions 96/746, 1999/727, 2001/154 and 2001/771/CFSP (OJ 2002 L 139, p. 4). Article 3 of that Common Position prescribes, inter alia, the continuation of the freezing of the funds and other financial assets or economic resources of the individuals, groups, undertakings and entities referred to in the list drawn up by the Sanctions Committee in accordance with Security Council Resolutions 1267 (1999) and 1333 (2000). 28 On 27 May 2002, on the basis of Articles 60 EC, 301 EC and 308 EC, the Council adopted Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, and repealing Council Regulation (EC) No 467/2001 (OJ 2002 L 139, p. 9). 29 According to the fourth recital in the preamble to that regulation, the measures laid down by, inter alia, Security Council Resolution 1390 (2002) fall within the scope of the Treaty and, ‘therefore, notably with a view to avoiding distortion of competition, Community legislation is necessary to implement the relevant decisions of the Security Council as far as the territory of the Community is concerned.’ 30 Article 1 of Regulation No 881/2002 defines ‘funds’ and ‘freezing of funds’ in terms which are essentially identical to those used in Article 1 of Regulation No 467/2001. 31 Under Article 2 of Regulation No 881/2002: ‘All funds and economic resources belonging to, or owned or held by, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I shall be frozen. No funds shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I. No economic resources shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity designated by the Sanctions Committee and listed in Annex I, so as to enable that person, group or entity to obtain funds, goods or services.’ 32 Annex I to Regulation No 881/2002 contains the list of persons, groups and entities affected by the freezing of funds imposed by Article 2. That list includes, inter alia, the name of the following entity and persons: – ‘Al Barakaat International Foundation; Box 4036, Spånga, Stockholm, Sweden; Rinkebytorget 1, 04, Spånga, Sweden’;– ‘Aden, Adirisak; Skaftingebacken 8, 16367 Spånga, Sweden, DOB 1.6.1968’;– ‘Ali, Abdi Abdulaziz, Drabantvagen 21, 17750 Spånga, Sweden, DOB 1.1.1955’;– ‘Ali, Yusaf Ahmed, Hallbybybacken 15, 70 Spånga, Sweden, DOB 20.11.1974’.33 On 26 August 2002 the Sanctions Committee decided to remove the persons known as ‘Abdi Abdulaziz Ali’ and ‘Abdirisak Aden’ from the list of persons to whom and groups and entities to which the freezing of funds and other economic resources must apply. 34 In consequence, on 4 September 2002 the Commission adopted Regulation (EC) No 1580/2002 amending for the second time Council Regulation (EC) No 881/2002 (OJ 2002 L 237, p. 3). 35 In accordance with Article 1(2) of Regulation No 1580/2002, the following persons are removed from the list at Annex I to Regulation No 881/2002: – ‘Ali, Abdi Abdulaziz, Drabantvägen 21, 17750 Spånga, Sweden, date of birth 1 January 1955’;– ‘Aden, Adirisak, Skäftingebacken 8, 16367 Spånga, Sweden, date of birth 1 June 1968’. 36 On 20 December 2002 the Security Council adopted Resolution 1452 (2002), intended to facilitate the implementation of counter-terrorism obligations. Paragraph 1 of that resolution provides for a number of derogations from and exceptions to the freezing of funds and economic resources imposed by Resolutions 1267 (1999), 1333 (2000) and 1390 (2002) which may be granted by the Member States on humanitarian grounds, on condition that the Sanctions Committee gives its consent. 37 On 17 January 2003 the Security Council adopted Resolution 1455 (2003), intended to improve the implementation of the measures imposed in paragraph 4(b) of Resolution 1267 (1999), paragraph 8(c) of Resolution 1333 (2000) and paragraphs 1 and 2 of Resolution 1390 (2002). In accordance with paragraph 2 of Resolution 1455 (2003), those measures are again to be improved after 12 months or earlier if necessary. 38 Taking the view that action by the Community was necessary in order to implement Security Council Resolution 1452 (2002), on 27 February 2003 the Council adopted Common Position 2003/140/CFSP concerning exceptions to the restrictive measures imposed by Common Position 2002/402/CFSP (OJ 2003 L 53, p. 62). Article 1 of that Common Position provides that, when implementing the measures set out in Article 3 of Common Position 2002/402/CFSP, the European Community is to provide for the exceptions permitted by United Nations Security Council Resolution 1452 (2002). 39 On 27 March 2003 the Council adopted Regulation (EC) No 561/2003 amending, as regards exceptions to the freezing of funds and economic resources, Regulation (EC) No 881/2002 (OJ 2003 L 82, p. 1). In the fourth recital in the preamble to that regulation, the Council states that it is necessary, in view of the Security Council’s Resolution 1452 (2002), to adjust the measures imposed by the Community. 40 Under Article 1 of Regulation No 561/2003: ‘The following Article shall be inserted in Regulation (EC) No 881/2002:“Article 2a1. Article 2 shall not apply to funds or economic resources where:(a) any of the competent authorities of the Member States, as listed in Annex II, has determined, upon a request made by an interested natural or legal person, that these funds or economic resources are: (i) necessary to cover basic expenses, including payments for foodstuffs, rent or mortgage, medicines and medical treatment, taxes, insurance premiums, and public utility charges; (ii) intended exclusively for payment of reasonable professional fees and reimbursement of incurred expenses associated with the provision of legal services; (iii) intended exclusively for payment of fees or service charges for the routine holding or maintenance of frozen funds or frozen economic resources; or (iv) necessary for extraordinary expenses; and(b) such determination has been notified to the Sanctions Committee; and (c) (i) in the case of a determination under point (a)(i), (ii) or (iii), the Sanctions Committee has not objected to the determination within 48 hours of notification; or (ii) in the case of a determination under point (a)(iv), the Sanctions Committee has approved the determination.2. Any person wishing to benefit from the provisions referred to in paragraph 1 shall address its request to the relevant competent authority of the Member State as listed in Annex II. The competent authority listed in Annex II shall promptly notify both the person that made the request, and any other person, body or entity known to be directly concerned, in writing, whether the request has been granted. The competent authority shall also inform other Member States whether the request for such an exception has been granted.3. Funds released and transferred within the Community in order to meet expenses or recognised by virtue of this Article shall not be subject to further restrictive measures pursuant to Article 2. …”’.41 On 19 May 2003 the Commission adopted Regulation (EC) No 866/2003 of 19 May 2003 amending for the 18th time Council Regulation (EC) No 881/2002 (OJ 2003 L 124, p. 19). Under Article 1 of, and paragraph 1 of the Annex to, that regulation, Annex I to Regulation No 881/2002 are amended to the effect that the entry ‘Ali, Yusaf Ahmed, Hallbybybacken 15, 70 Spanga, Sweden, date of birth 20 November 1974’ under the heading ‘natural persons’ is replaced with the following: ‘Ali Ahmed Yusaf (alias Ali Galoul), Krälingegränd 33, S-16362 Spånga, Sweden; date of birth 20 November 1974; place of birth: Garbaharey, Somalia; nationality: Swedish; passport No: Swedish passport 1041635; national identification No: 741120-1093’. Procedure and forms of order sought by the parties42 By application lodged at the Registry of the Court of First Instance on 10 December 2001, registered under number T-306/01, Messrs Abdirisak Aden, Abdulaziz Ali and Ahmed Yusuf, and the Al Barakaat International Foundation (‘Al Barakaat’), brought an action against the Council and the Commission under Article 230 EC, claiming that the Court should: – annul Regulation No 2199/2001;– annul Regulation No 467/2001 and, as a subsidiary claim, declare it inapplicable pursuant to Article 241 EC;– make an order as to costs in an amount to be specified later.43 The applicants also applied in that document for suspension of the operation of Regulation No 2199/2001 pursuant to Article 243 EC. 44 By separate document lodged at the Court Registry on 10 December 2001, the applicants applied for adjudication under an expedited procedure, in accordance with Article 76a of the Court of First Instance’s Rules of Procedure. Having heard the defendants, the Court of First Instance (First Chamber) rejected that application by decision of 22 January 2002, on the grounds of the complicated and delicate legal issues raised by the case. 45 By letter of the Court Registry of 24 January 2002, the applicants were told that the Court could not rule on the application for suspension of operation of Regulation No 2199/2001, because it had not been made by separate document in accordance with the Rules of Procedure. It was, however, stated in that letter that it remained possible to make a subsequent application for interim measures in compliance with the provisions of those Rules. 46 In their defences, lodged at the Registry of the Court of First Instance on 19 February 2002, the Council and the Commission contend that the Court should: – dismiss the application;– order the applicant to pay the costs.47 By document lodged at the Registry of the Court of First Instance on 8 March 2002, the applicants requested suspension of the operation of Regulations Nos 467/2001 and 2199/2001, in so far as the regulations concerned them, until judgment should have been given in the main proceedings. 48 The President of the Court of First Instance heard the parties’ oral arguments on 22 March 2002, the Kingdom of Sweden being represented at the hearing. 49 By order of 7 May 2002 (Case T-306/01 R Aden and Others v Council and Commission [2002] ECR II‑2387), the President of the Court of First Instance rejected the application for interim relief on the ground that the condition of urgency had not been satisfied, reserving costs. 50 By letter from the Court Registry of 27 June 2002 the parties were invited to submit their observations on the consequences of repeal of Regulation No 467/2001 and of its replacement by Regulation No 881/2002. 51 In their observations, lodged at the Court Registry on 29 July 2002, the applicants declared that they adapted the forms of order they sought, their pleas in law and arguments so that those were thenceforth directed to the annulment of Regulation No 881/2002 (‘the contested regulation’), adopted in the light of the resolution of the Security Council 1390 (2002) maintaining the sanctions against them. They pointed out that the original action brought against Regulation No 467/2001 must be regarded as having become devoid of purpose, because of its repeal by the contested regulation. 52 In its observations, lodged at the Registry on 12 July 2002, the Council acknowledged that the applicants were entitled to extend or adapt the original claims in their action so that those claims henceforth sought the annulment of the contested regulation. 53 In its observations, lodged at the Court Registry on 10 July 2002, the Commission, in view of the fact that the legal effects of Regulation No 2199/2001 are continued in the contested regulation, stated that it had no objection to the applicants’ amending their original claims so that the latter referred to the contested regulation. 54 Furthermore, the Commission asks the Court to declare, in accordance with Article 113 of its Rules of Procedure, that the action has become devoid of purpose in so far as it is directed against Regulation No 2199/2001 and that there is no need to adjudicate on it so far as that institution is concerned. 55 In addition, the Commission requests, pursuant to Articles 115(1) and 116(6) of the Rules of Procedure, that it should be granted the status of intervener in support of the forms of order sought by the Council. None the less, it states that it maintains its contention that the applicants should pay the costs incurred by the Commission in the period during which they challenged Regulation No 2199/2001. 56 By order of the President of the First Chamber of the Court of First Instance of 12 July 2002, the United Kingdom of Great Britain and Northern Ireland was given leave to intervene in support of the forms of order sought by the defendants. 57 By letter from the Court Registry of 11 September 2002, the applicants were requested to submit their observations on the possible consequences of the adoption of Regulation No 1580/2002 for the continued conduct of the action. 58 As a result of the changes to the composition of the chambers of the Court of First Instance in the new judicial year beginning 1 October 2002, the Judge-Rapporteur was attached to the Second Chamber to which this case has, in consequence, been assigned. 59 In their observations on the consequences of the adoption of Regulation No 1580/2002, lodged at the Court Registry on 11 November 2002, the applicants state, first, that their action is no longer directed against the Commission and, second, that Messrs Abdirisak Aden and Abdulaziz Ali no longer have any particular and individual interest in pursuing their action, except so far as the payment of costs is concerned. 60 By decision of 20 November 2002 the Registrar of the Court refused to add to the file the comments made by the applicants in those observations on the Council and Commission’s rejoinders, on the ground that no provision is made in the Rules of Procedure for such comments. 61 In its statement in intervention, lodged at the Court Registry on 27 February 2003, the United Kingdom contended that the Court should dismiss the application. 62 By letter from the Court Registry of 13 June 2003, Mr Yusuf was requested to submit his observations on the possible consequences of the adoption of Regulation No 866/2003 for the continued conduct of the action. 63 In his observations, lodged at the Registry on 7 July 2003, Mr Yusuf indicated, essentially, that the amendments made by Regulation No 866/2003 were merely of a drafting nature and that they would have no effect on the future conduct of the proceedings. 64 After hearing the parties the Court referred the case to a Chamber composed of five Judges, in accordance with Article 51 of its Rules of Procedure. 65 Upon hearing the Report of the Judge-Rapporteur, the Court of First Instance (Second Chamber, Extended Composition) decided to open the oral procedure and, in respect of the measures of organisation of procedure provided for in Article 64 of the Rules of Procedure, put a written question to the Council and the Commission, which answered it within the period prescribed. 66 By order of the President of the Second Chamber (Extended Composition) of 18 September 2003, this case and Case T-315/01 Kadi v Council and Commission were joined for the purposes of the oral procedure, in accordance with Article 50 of the Rules of Procedure. 67 By letter of 8 October 2003 the Commission asked the Court of First Instance to add to the file the ‘Guidelines of the [Sanctions] Committee for the conduct of its work’, as adopted by that Committee on 7 November 2002 and amended on 10 April 2003. That request was granted by the President of the Second Chamber (Extended Composition) of the Court of First Instance on 9 October 2003. 68 Messrs Aden and Ali having informed the Court, in accordance with Article 99 of the Rules of Procedure, that they wished to discontinue their action and that they had concluded an agreement with the defendants as to costs, the President of the Second Chamber (Extended Composition) of the Court of First Instance, by order of 9 October 2003, ordered the names of those two applicants to be removed from the register in Case T-306/01 and ruled on the costs in accordance with the agreement reached by the parties. 69 By separate documents lodged at the Registry on 13 October 2003, Mr Yusuf and Al Barakaat applied for legal aid. Those applications were dismissed by two orders of the President of the Second Chamber (Extended Composition) of the Court of First Instance of 3 May 2004. 70 The oral arguments of the parties were heard, and their replies to the questions asked by the Court of First Instance were given, at the hearing of 14 October 2003. On the procedural consequences of the adoption of the contested regulation71 The main parties in the proceedings are at one in acknowledging that the applicants are entitled to alter their claims, pleas in law and arguments so as to seek annulment of the contested regulation that repeals and replaces Regulation No 467/2001, as amended by Regulation No 2199/2001. In their observations lodged at the Registry on 29 July 2002, the applicants announced the alteration of the original claims and pleas in law in their action to that effect. 72 On this point, it must be borne in mind that where, during the proceedings, one decision is replaced by another having the same subject-matter, this must be considered a new factor allowing the applicant to adapt its pleas in law and claims for relief. It would indeed be contrary to the due administration of justice and the requirements of procedural economy to oblige the applicant to make a fresh application. Moreover, it would be inequitable if the Commission were able, in order to counter criticisms of a decision contained in an application made to the Community judicature, to amend the contested decision or to substitute another for it and to rely in the proceedings on such an amendment or substitution in order to deprive the other party of the opportunity of extending his original pleadings to the later decision or of submitting supplementary pleadings directed against that decision (Case 14/81 Alpha Steel v Commission [1982] ECR 749, paragraph 8; Joined Cases 351/85 and 360/85 Fabrique de Fer de Charleroi and Dillinger Huttenwerke v Commission [1987] ECR 3639, paragraph 11; Case 103/85 Stahlwerke Peine-Salzgitter v Commission [1988] ECR 4131, paragraphs 11 and 12, and Joined Cases T-46/98 and T-151/98 CEMR v Commission [2000] ECR II-167, paragraph 33). 73 That case-law may be applied to a situation in which a regulation of direct and individual concern to a person is replaced, during the proceedings, by another regulation having the same subject-matter. 74 That hypothesis corresponding on all points to that at issue in this case, the applicants’ request that their action should be regarded as seeking annulment of the contested regulation, in so far as it concerns them, must be allowed, and the parties must be permitted to redraft their claims for relief, pleas in law and arguments in the light of that new factor. 75 Furthermore, the applicants argue that their application for annulment of Regulation No 467/2001 must be considered to have become devoid of purpose on account of the repeal of that act by the contested regulation (see paragraph 51 above). In those circumstances, there is no longer any need to give a decision on that application or, consequently, on the application for annulment of Regulation No 2199/2001, that too having been rendered devoid of purpose. 76 It follows from the foregoing that there are no longer any grounds for ruling on the action in so far as it is directed against the Commission. In the circumstances of the case, however, the principle of proper administration of justice and the requirements of procedural economy on which the decisions cited in paragraph 72 above are based provide justification for account to be taken also of the Commission’s claims, pleas in law and arguments, redrafted as mentioned in paragraph 74 above, but without its being necessary formally to readmit that institution to the proceedings under Articles 115(1) and 116(6) of the Rules of Procedure, as intervening in support of the forms of order sought by the Council. 77 Having regard to the foregoing, this action must be regarded as being directed henceforth against the Council alone, supported by the Commission and the United Kingdom, and its sole object must be considered to be a claim for annulment of the contested regulation, in so far as it concerns Mr Yusuf and Al Barakaat. On the substance78 In support of their claims, the applicants have put forward three grounds of annulment: the first alleges that the Council was incompetent to adopt the contested regulation, the second alleges infringement of Article 249 EC and the third alleges breach of their fundamental rights. 1. Concerning the first ground, alleging that the Council was incompetent to adopt the contested regulation79 This ground may be broken down into three parts. The first part Arguments of the parties80 In their application originally directed against Regulation No 467/2001, the applicants argued that Articles 60 EC and 301 EC, on the basis of which that regulation had been adopted, authorise the Council solely to take measures against third countries and not, as it did in this case, against nationals of a Member State residing in that Member State. 81 On this point, the applicants denied the allegation that sanctions were imposed on them on account of their association with the regime of the Taliban in Afghanistan. In their view, the sanctions were not imposed on them because there existed any link with that regime but because of the Security Council’s desire to combat international terrorism, regarded as a threat to international peace and security. The applicants also argued that the list mentioned in Paragraph 8(c) of Security Council Resolution 1333 (2000), in which they were included by decision of the Sanctions Committee of 9 November 2001 (see paragraph 24 above), referred to Usama bin Laden and the entities and individuals associated with him, rather than the Taliban. 82 Since the sanctions adopted by the Community institutions must correspond on all points to those adopted by the Security Council, the applicants argued that Regulation No 467/2001 was no longer aimed at a third country but at individuals, with the object of combating international terrorism. In their view, such measures did not fall within the competence of the Community, unlike the trade embargo measures against Iraq examined by the Court of First Instance in Case T-184/95 Dorsch Consult v Council and Commission [1998] ECR II-667. 83 The applicants also maintained that an interpretation of Articles 60 EC and 301 EC that amounted to treating Community nationals like third countries is contrary to the principle of lawfulness as expressed in Articles 5 EC and 7 EC, and to the principle that Community legislation must be certain and its application foreseeable by those subject to it (Case 348/85 Denmark v Commission [1987] ECR 5225). 84 In their observations on the consequences of repeal of Regulation No 467/2001, and its replacement by the contested regulation, adopted on the basis of Articles 60 EC, 301 EC and 308 EC, the applicants add that Article 308 EC, taken alone or together with Articles 60 EC and 301 EC, does not confer on the Council the power to impose sanctions, direct or indirect, on citizens of the Union. Indeed, such a power could not be considered as either implied or necessary in order to attain one of the objectives of the Community for the purposes of Article 308 EC. In particular, the freezing of the applicants’ funds has nothing to do with ‘notably … avoiding distortion of competition’ as referred to in the fourth recital in the preamble to the contested regulation. 85 In their defences and statement in intervention, the institutions and the United Kingdom have maintained, first, that nothing in the wording of Articles 60 EC and 301 EC gives grounds for excluding the adoption of economic sanctions directed at individuals or organisations established in the Community, provided that such measures are intended to interrupt or to reduce, in part or completely, economic relations with one or more third countries. It must be recognised, as a matter of fact, that citizens of the Member States may, individually or jointly, supply funds and resources to third countries or to factions within them, so that measures intended to control those citizens’ economic resources will have the effect of interrupting or reducing economic relations with those countries. The Community judicature has moreover implicitly recognised the lawfulness of that practice (order of the President of the Second Chamber of the Court of First Instance of 2 August 2000 in Case T-189/00 R ‘Invest’ Import und Export and Invest Commerce v Commission [2000] ECR II-2993, paragraph 34, upheld on appeal by order of the President of the Court of Justice in Case C-317/00 P(R) ‘Invest’ Import und Export and Invest Commerce v Commission [2000] ECR I-9541, paragraphs 26 and 27). 86 Second, those parties have disproved the applicants’ argument that there was no link between the measures laid down by Regulation No 467/2001 and Afghanistan, by pointing to the links that existed at the time between Usama bin Laden, Al-Qaeda and the Taliban regime. 87 In its rejoinder and its observations on the consequences of repeal of Regulation No 467/2001 and its replacement by the contested regulation, the Council has however noted that the latter regulation applied to terrorists or terrorist groups in general, without further establishing a connection with a particular country or territory. That reflects the difference between Security Council Resolution 1333 (2000), which referred to the Taliban and the individuals and entities associated with them, and Resolution 1390 (2002) which, because of the disappearance of the ‘Islamic Emirate of Afghanistan’, no longer confines the sanctions it imposes to a country or specific territory, but refers also to terrorist groups and individuals generally. 88 In the first case, the Council considered that Regulation No 467/2001 did in fact fall within the ambit of Articles 60 EC and 301 EC, since there was an obvious link to Afghanistan. No such link existing any longer in the case of the contested regulation, the Council considered it necessary to supplement its legal basis by adding Article 308 EC. The Council argued that that alteration of the contested regulation’s legal basis made the first part of the first ground of annulment irrelevant. 89 On being requested, in a written question asked by the Court of First Instance, to express a view, in the light of Opinion 2/94 of the Court of Justice of 28 March 1996 (ECR I-1759, paragraphs 29 and 30), on the applicants’ argument set out in paragraph 84 above and, more particularly, to state what Community objectives under the EC Treaty it sought to attain by means of the provisions laid down in the contested regulation, the Council answered, in essence, that those provisions pursue an objective of economic and financial coercion which is, in its view, an objective of the EC Treaty. 90 On this point, the Council argues that the Community’s objectives are not only those defined in Article 3 EC, but that they may also flow from more specific provisions. 91 Since the revision under the Maastricht Treaty, Articles 60 EC and 301 EC have defined the tasks and activities of the Community in the domain of economic and financial sanctions and have offered a legal basis for an express transfer of powers to the Community in order to attain them. Those powers are expressly linked to and actually depend on the adoption of an act pursuant to the provisions of the Treaty on European Union in the field of the common foreign and security policy (CFSP). Now, one of the objectives of the CFSP is, under the third indent of Article 11(1), ‘to preserve peace and strengthen international security, in accordance with the principles of the United Nations Charter’. 92 It has therefore to be admitted that economic and financial coercion for reasons of policy, especially in the implementing of a binding decision of the Security Council, constitutes an express and legitimate objective of the EC Treaty, even if that objective is marginal, linked only indirectly to the chief objectives of that Treaty, in particular those concerned with the free movement of capital (Article 3(1)(c) EC) and the establishment of a system ensuring that competition in the internal market is not distorted (Article 3(1)(g) EC), and linked to the Treaty on European Union. 93 The Council submits that, in the circumstances of this case, Article 308 EC was included as a legal basis for the contested regulation in order to supplement the base supplied by Articles 60 EC and 301 EC, so as to make it possible to adopt measures not only in respect of third countries but also in respect of individuals who and non-State bodies which are not necessarily linked to the governments or regimes of those countries, in cases where the EC Treaty does not provide the powers of action necessary to that end. 94 By so doing, the Community has been able, continues the Council, to keep up with the development of international practice, which has been to adopt ‘smart sanctions’ aimed at individuals who pose a threat to international security rather than at innocent populations. 95 The Council maintains that the conditions in which it had recourse to Article 308 EC are no different from those in which that provision has been used in the past in order to attain one of the objects of the EC Treaty in the course of the operation of the common market, where the Treaty has not provided the powers of action necessary to that end. To that effect it refers: – in the sphere of social policy, to the various directives which, on the basis of Article 235 of the EC Treaty (now Article 308 EC), sometimes supplemented by Article 100 of the EC Treaty (now Article 94 EC), have extended the principle of equal pay for male and female workers, as laid down in Article 119 of the EC Treaty (Articles 117 to 120 of the EC Treaty have been replaced by Articles 136 EC to 143 EC), to convert it into a general principle of equal treatment in all areas in which potential discrimination might subsist and to allow self-employed workers, including those in the agricultural sector, to benefit from it too, in particular Council Directive 76/207/EEC of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions (OJ 1976 L 39, p. 40); Council Directive 79/7/EEC of 19 December 1978 on the progressive implementation of the principle of equal treatment for men and women in matters of social security (OJ 1979 L 6, p. 24); Council Directive 86/378/EEC of 24 July 1986 on the implementation of the principle of equal treatment for men and women in occupational social security schemes (OJ 1986 L 225, p. 40) and Council Directive 86/613/EEC of 11 December 1986 on the application of the principle of equal treatment between men and women engaged in an activity, including agriculture, in a self-employed capacity, and on the protection of self-employed women during pregnancy and motherhood (OJ 1986 L 359, p. 56); – in the sphere of free movement of persons, the several acts which, on the basis of Article 235 of the EC Treaty and Article 51 of the EC Treaty (now, after amendment, Article 42 EC), have extended to self-employed persons, to members of their families and to students the rights enjoyed by employed persons moving within the Community, in particular Council Regulation (EEC) No 1390/81 of 12 May 1981 extending to self-employed persons and members of their families Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons and their families moving within the Community (OJ 1981 L 143, p. 1); – and, more recently, Council Regulation (EC) No 1035/97 of 2 June 1997 establishing a European Monitoring Centre on Racism and Xenophobia (OJ 1997 L 151, p. 1), adopted on the basis of Article 213 of the EC Treaty (now Article 284 EC) and Article 235 of the EC Treaty. 96 The Court of Justice itself has confirmed that this practice is lawful (Case C‑114/88 Delbar [1989] ECR 4067). 97 What is more, the Community legislature has in the past resorted to the legal basis of Article 235 of the EC Treaty in the field of sanctions. On this point, the Council explains that before Articles 301 EC and 60 EC were added to the EC Treaty various Council regulations imposing commercial sanctions were based on Article 113 of the EC Treaty (now, after amendment, Article 133 EC) (see, for example, Council Regulation (EEC) No 596/82 of 15 March 1982 amending the import arrangements for certain products originating in the USSR (OJ 1982 L 72, p. 15); Council Regulation (EEC) No 877/82 of 16 April 1982 suspending imports of all products originating in Argentina (OJ 1982 L 102, p. 1) and Council Regulation (EEC) No 3302/86 of 27 October 1986 suspending imports of gold coins from the Republic of South Africa (OJ 1986 L 305, p. 11)). However, when those measures went beyond the ambit of the common commercial policy or concerned natural or legal persons within the Community, they were also based on Article 235 of the EC Treaty. Such was the case in particular of Council Regulation (EEC) No 3541/92 of 7 December 1992 prohibiting the satisfying of Iraqi claims with regard to contracts and transactions, the performance of which was affected by United Nations Security Council Resolution 661 (1990) and related resolutions (OJ 1992 L 361, p. 1), Article 2 of which provides that ‘[i]t shall be prohibited to satisfy or to take any step to satisfy a claim made by … any person or body acting, directly or indirectly, on behalf of or for the benefit of one or more persons or bodies in Iraq’. 98 In answer to that same written question asked by the Court of First Instance, the Commission has argued that implementation of sanctions imposed by the Security Council could fall, in whole or in part, within the scope of the EC Treaty, either under the common commercial policy or in connection with the internal market. 99 In this instance, the Commission maintains, referring to the fourth recital in the preamble to the contested regulation, that the measures at issue were necessary to ensure uniform implementation and application of the restrictions on the movement of capital introduced in accordance with the resolutions concerned of the Security Council, so as to preserve the free movement of capital within the Community and to avoid distortions of competition. 100 Furthermore, the Commission considers that the promotion of international security, both within the Union and without, must be regarded as forming part of the general framework of the provisions of the EC Treaty. In that regard, it refers first to Articles 3 EU and 11 EU and second to the preamble to the EC Treaty, in which the Contracting Parties confirmed ‘the solidarity which binds Europe and the overseas countries … in accordance with the principles of the Charter of the United Nations’ and declared themselves resolved to ‘strengthen peace and liberty’. The Commission infers therefrom a ‘general objective which the Community has to ensure peace and security’, of which Articles 60 EC and 301 EC are specific emanations, while at the same time they are also specific emanations of the Community’s competence in regulating the movement of capital, internally and externally. 101 Title III, Chapter 4, of the EC Treaty on the movement of capital not conferring any specific powers on the Community, Article 308 EC has been used, in this instance, as an additional legal basis in order to ensure that the Community should be able to impose the restrictions in question, especially those vis-à-vis individuals, in accordance with the common position adopted by the Council. 102 At the hearing the United Kingdom described the Community objective sought by adoption of the contested regulation as being the uniform implementation across the Community of obligations as regards restrictions on capital movement imposed on Member States by the Security Council. 103 The United Kingdom emphasises that the creation of an internal market in the sphere of capital movements is one of the objectives of the Community identified in Article 3 EC. It submits that it is an essential part of the creation of an internal market that any restrictions on the free movement of capital on the market should be applied uniformly. 104 If, however, action at Community level had not been taken to implement the resolutions of the Security Council concerned, that would, according to the United Kingdom, have created a danger of differences in the application of the freezing of assets from one Member State to another. Had the Member States implemented those resolutions individually, then differences of interpretation as regards the scope of the obligation imposed upon them would have been inevitable and would have created disparities in the sphere of free movement of capital between Member States, thus creating a risk of distortion of competition. 105 Furthermore, the United Kingdom submits that action freezing the funds of individuals with a view to interrupting economic relations with international terrorist organisations, rather than with third countries, cannot be regarded as widening ‘the scope of Community powers beyond the general framework created by the Treaty’, as stated in Opinion 2/94 (paragraph 89 above). Under the general framework of the Treaty the Community has competence to take action to regulate capital movements and, moreover, to do this by taking action against individuals. It follows that whilst action regulating capital movements by individuals with a view to interrupting economic relations with international terrorist organisations is a matter for which the EC Treaty has not provided specific powers and whilst such action requires resort to Article 308 EC, it cannot be considered to go beyond the general framework of the Treaty. 106 The United Kingdom maintains that the use of Article 308 EC in the circumstances of the present case is no different from its use in situations, especially in the sphere of social policy, in which that article has been relied upon in order to attain other Community objectives, where the Treaty had not provided a specific legal basis (see paragraph 95 above). Findings of the Court107 Regulation No 467/2001 and the contested regulation were adopted on partly different legal bases: Articles 60 EC and 301 EC for the former, and Articles 60 EC, 301 EC and 308 EC for the latter. Although the applicants’ original arguments alleging the lack of a legal basis for Regulation No 467/2001 have become devoid of purpose because of the repeal of that act by the contested regulation, the Court considers it appropriate to set out first the grounds on which it judges them to be unfounded on any view, since those grounds constitute one of the premisses of its reasoning applied to the examination of the legal basis of the contested regulation. – Concerning the legal basis of Regulation No 467/2001108 Regulation No 467/2001 was adopted on the basis of Articles 60 EC and 301 EC, provisions which empower the Council to take the necessary urgent measures, particularly with regard to movements of capital and payments, where it is provided, in a common position or a joint action adopted according to the provisions of the Treaty on European Union relating to the CFSP, for an action by the Community to interrupt or to reduce, in part or completely, economic relations with one or more third countries. 109 Now, as is clear from the preamble thereto, Regulation No 467/2001 orchestrated the action by the Community provided for by common position 2001/154, which had been adopted under the CFSP and demonstrated the intention of the Union and of its Member States to implement certain facets of the sanctions taken by the Security Council against the Taliban of Afghanistan. 110 Nevertheless, the applicants maintained, first, that the measures at issue in this case affected individuals who were, moreover, nationals of a Member State, whereas Articles 60 EC and 301 EC authorise the Council to take measures against third countries only; second, that the measures at issue were not intended to interrupt or reduce economic relations with a third country but to combat international terrorism and, more particularly, Usama bin Laden and, third, that those measures were on any view disproportionate to the objective pursued by Articles 60 EC and 301 EC. 111 None of those arguments could have succeeded. 112 With regard, first, to the kind of measures that the Council is empowered to take under Articles 60 EC and 301 EC, the Court considers that nothing in the wording of those provisions makes it possible to exclude the adoption of restrictive measures directly affecting individuals or organisations, whether or not established in the Community, in so far as such measures actually seek to reduce, in part or completely, economic relations with one or more third countries. 113 As the Council has correctly observed, the measures at issue in this case were among what are conventionally known as ‘smart sanctions’, which appeared in United Nations practice during the 1990s. Those sanctions replace classic general trade embargos aimed at a country with more targeted and selective measures, such as economic and financial sanctions, prohibition of travel, embargos on arms or specific goods, so as to reduce the suffering endured by the civilian population of the country concerned, while none the less imposing genuine sanctions on the targeted regime and those in charge of it. 114 The practice of the institutions has developed in the same way, the Council having successively considered that Articles 60 EC and 301 EC allowed it to take restrictive measures against entities which or persons who physically controlled part of the territory of a third country (see, for example, Council Regulation (EC) No 1705/98 of 28 July 1998 concerning the interruption of certain economic relations with Angola in order to induce the ‘União Nacional para a Independência Total de Angola’ (UNITA) to fulfil its obligations in the peace process, and repealing Council Regulation (EC) No 2229/97 (OJ 1998 L 215, p. 1)) and against entities which or persons who effectively controlled the government apparatus of a third country and also against persons and entities associated with them and who or which provided them with financial support (see, for example, Council Regulation (EC) No 1294/1999 of 15 June 1999 concerning a freeze of funds and a ban on investment in relation to the Federal Republic of Yugoslavia (FRY) and repealing Regulations (EC) No 1295/98 and (EC) No 1607/98 (OJ 1999 L 153, p. 63), and Council Regulation (EC) No 2488/2000 of 10 November 2000 maintaining a freeze of funds in relation to Mr Milosevic and those persons associated with him and repealing Regulations (EC) Nos 1294/1999 and 607/2000 and Article 2 of Regulation (EC) No 926/98 (OJ 2000 L 287, p. 19)). That development is fully compatible with the measures provided for in Articles 60 EC and 301 EC. 115 In fact, just as economic or financial sanctions may legitimately be directed specifically at the rulers of a third country, rather than at the country as such, they may be directed at the persons or entities associated with those rulers or directly or indirectly controlled by them, wherever they may be. As the Commission has rightly pointed out, Articles 60 EC and 301 EC would not provide an efficient means of applying pressure to the rulers with influence over the policy of a third country if the Community could not, on the basis of those provisions, adopt measures against individuals who, although not resident in the third country in question, are sufficiently connected to the regime against which the sanctions are directed. Furthermore, as the Council has emphasised, the fact that some of those individuals so targeted happen to be nationals of a Member State is irrelevant, for, if they are to be effective in the context of the free movement of capital, financial sanctions cannot be confined solely to nationals of the third country concerned. 116 That interpretation, which is not contrary to the letter of Article 60 EC or Article 301 EC, is justified both by considerations of effectiveness and by humanitarian concerns. 117 With regard, second, to the objective pursued by Regulation No 467/2001, the Council has argued, referring to Security Council Resolutions 1267 (1999) and 1333 (2000), Common Position 2001/154 and to the first and second recitals in the preamble to that regulation and to its actual title, that the measures at issue were directed essentially against the Taliban regime which, at the time, effectively controlled 80% of Afghan territory and called itself the ‘Islamic Emirate of Afghanistan’ and, incidentally, against persons who and entities which, by means of economic or financial transactions, assisted that regime by providing sanctuary and training for international terrorists and their organisations, thus in fact acting as agents of that regime or being closely connected to it. 118 In so far as the applicants complained that Regulation No 467/2001 was directed at Usama bin Laden and not the Taliban regime, the Council has added that Usama bin Laden was in fact the head and ‘éminence grise’ of the Taliban and that he wielded the real power in Afghanistan. His temporal and spiritual titles of ‘Sheikh’ (head) and ‘Emir’ (prince, governor or commander) and the rank he held beside the other Taliban religious dignitaries can leave little doubt on that score. Moreover, even before 11 September 2001, Usama bin Laden had sworn an oath of allegiance (‘Bay’a’) making a formal religious bond between him and the Taliban theocracy. He was thus in a situation comparable to that of Mr Milosevic and the members of the Yugoslav Government at the time of the economic and financial sanctions taken by the Council against the Federal Republic of Yugoslavia (see paragraph 114 above). With regard to Al-Qaeda, the Council has observed that it was common knowledge that it had many military training camps in Afghanistan and that thousands of its members had fought beside the Taliban between October 2001 and January 2002, during the intervention of the international coalition. 119 There are no grounds for challenging the validity of those considerations as to which there exists, within the international community, a broad consensus expressed, inter alia, by the several resolutions adopted unanimously by the Security Council and which have not been specifically rebutted or even challenged by the applicants. 120 More particularly, the chief object of the sanctions at issue in this case was to prevent the Taliban regime from obtaining financial support from any source whatsoever, as is apparent from Paragraph 4(b) of Resolution 1287 (1999). The sanctions might have been circumvented if the individuals who were thought to maintain that regime had not been affected by them. As regards the relations between the former Taliban regime and Usama bin Laden, the Security Council considered that the latter, during the period in question, received assistance, at this point crucial, from the regime of which he could be regarded as forming part. Thus it is that, in the 10th recital in the preamble to Resolution 1333 (2000), the Security Council deplored the fact that the Taliban continued to provide safe haven to Usama bin Laden and to allow him and others associated with him to operate a network of terrorist training camps from Taliban-controlled territory and to use Afghanistan as a base from which to sponsor international terrorist operations. Furthermore, in the seventh recital in the preamble to Resolution 1333 (2000), the Security Council reaffirmed its conviction that the suppression of international terrorism was essential for the maintenance of international peace and security. 121 Thus, contrary to what the applicants maintained, the measures at issue were indeed intended to interrupt or reduce economic relations with a third country, in connection with the international community’s fight against international terrorism and, more specifically, against Usama bin Laden and the Al-Qaeda network. 122 With regard, third, to the proportionality of the measures at issue, that must be assessed in the light of the purpose of Regulation No 467/2001. As has been explained above, the imposing of ‘smart’ sanctions is intended precisely to exert effective pressure on the rulers of the country concerned, while restricting as far as possible the impact of those measures on the population of that country, in particular by confining their personal ambit to a certain number of individuals referred to by name. Now, in the circumstances of this case, Regulation No 467/2001 tended to increase the pressure on the Taliban regime, inter alia by freezing the funds and other financial assets of Usama bin Laden and the individuals and entities associated with him, as identified by the Sanctions Committee. Such measures are in keeping with the principle of proportionality, according to which sanctions may not go beyond what is appropriate and necessary to the attainment of the objective pursued by the Community legislation imposing them. 123 By contrast, the fact that the measures at issue also affected transactions having no cross-border element is not relevant. If it was the legitimate object of those measures to cause the sources of funding for the Taliban and international terrorism operating out of Afghanistan to dry up, they necessarily had to affect both international and purely internal transactions, given that the latter were just as likely as the former to supply such funding, having regard in particular to the free movement of persons and capital and the lack of transparency in international financial channels. 124 It follows from the foregoing that, contrary to what the applicants claimed, the Council was indeed competent to adopt Regulation No 467/2001 on the basis of Articles 60 EC and 301 EC. – Concerning the legal basis of the contested regulation125 Unlike Regulation No 467/2001, the contested regulation has for its legal basis not only Articles 60 EC and 301 EC but also Article 308 EC. That reflects the development of the international situation of which the sanctions decreed by the Security Council and implemented by the Community successively form part. 126 Adopted in connection with the actions taken for the purpose of suppressing international terrorism, considered essential for the maintenance of international peace and security (see the seventh recital in the preamble), Resolution 1333 (2000) of the Security Council none the less specifically referred to the Taliban regime which at the time controlled the greater part of Afghan territory and offered refuge and assistance to Usama bin Laden and his associates. 127 As has been stated above, it is just that expressly established link with the territory and governing regime of a third country which made it possible for the Council to base Regulation No 467/2001 on Articles 60 EC and 301 EC. 128 On the other hand, Security Council Resolution 1390 (2002) was adopted on 16 January 2002 after the collapse of the Taliban regime following the armed intervention of the international coalition in Afghanistan, launched in October 2001. As a result, and although it still expressly refers to the Taliban, the resolution is no longer aimed at their fallen regime, but rather directly at Usama bin Laden, the Al-Qaeda network and the persons and entities associated with them. 129 The fact that there is nothing to link the sanctions to be taken under that resolution with the territory or governing regime of a third country, as pointed out in paragraph 2 of the statement of reasons for the proposal for a Council regulation presented by the Commission on 6 March 2002, which is the source of the contested regulation [document COM (2002) 117 final], was explicitly acknowledged by the Council in paragraphs 4 and 5 of its rejoinder. 130 In the absence of such a connection, the Council and the Commission considered that Articles 60 EC and 301 EC did not, in themselves, constitute an adequate legal basis allowing for the adoption of the contested regulation. Those considerations must be upheld. 131 Indeed, Article 60(1) EC provides that the Council, in accordance with the procedure provided for in Article 301 EC, may ‘as regards the third countries concerned’ take the necessary urgent measures on the movement of capital and payments. Article 301 EC expressly permits action by the Community to interrupt or reduce, in part or completely, economic relations ‘with one or more third countries’. 132 Furthermore, the fact that those provisions authorise the adoption of ‘smart sanctions’ against individuals and entities associated with the rulers of a third country or controlled by them, directly or indirectly (see paragraphs 115 and 116 above) does not give grounds for considering that those individuals and entities may still be targeted when the governing regime of the third country in question has disappeared. In such circumstances, there in fact exists no sufficient link between those individuals or entities and a third country. 133 It follows that on any view Articles 60 EC and 301 EC did not constitute in themselves a sufficient legal basis for the contested regulation. 134 Moreover, contrary to the view expressed by the Commission in the proposal for a Council regulation which is the source of the contested regulation (see paragraph 129 above), the Council considered that Article 308 EC did not on its own constitute an adequate legal basis for the adoption of the regulation either. Those considerations must also be approved. 135 On this point, according to the case-law (Case 45/86 Commission v Council [1987] ECR 1493, paragraph 13), it follows from the very wording of Article 308 EC that recourse to that provision as the legal basis for a measure is justified only where no other provision of the Treaty gives the Community institutions the necessary power to adopt the measure in question. In such a situation, Article 308 EC allows the institutions to act with a view to attaining one of the objectives of the Community, despite the lack of a provision conferring on them the necessary power to do so. 136 As regards the first condition for the applicability of Article 308 EC, it is not disputed that no provision of the EC Treaty provides for the adoption of measures of the kind laid down in the contested regulation relating to the fight against international terrorism and, more particularly, to the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals and entities suspected of contributing to the funding of terrorism, where no connection whatsoever has been established with the territory or governing regime of a third state. The first condition is therefore satisfied in the instant case. 137 In order for the second condition of the applicability of Article 308 EC to be satisfied in the instant case, it is necessary, in accordance with the case-law cited in paragraph 135 above, that it should be possible to connect the fight against international terrorism and, more particularly, the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals and entities suspected of contributing to the funding of terrorism, to one of the objects which the Treaty entrusts to the Community. 138 In this instance, the preamble to the contested regulation wastes very few words on that point. At the very most, the Council has stated in the fourth recital of the preamble to that regulation that the measures necessary under Resolution 1390 (2002) and Common Position 2002/402 fell ‘under [sic] the scope of the Treaty’ and that Community legislation had therefore to be adopted, ‘notably with a view to avoiding distortion of competition’. 139 With regard to the statement that the measures at issue fall within the scope of the Treaty, which begs the question, it must on the contrary be held straight away that none of the objectives of the Treaty, as expressly set out in Articles 2 EC and 3 EC, appears capable of being attained by the measures at issue. 140 In particular, unlike the measures provided for by Regulation No 3541/92 against certain natural or legal persons established in the Community, relied on by the Council in support of its arguments (see paragraph 97 above), the measures provided for by the contested regulation could not be authorised by the object of establishing a common commercial policy (Article 3(1)(b) EC), in connection with which it has been held that the Community has the power to adopt trade embargo measures under Article 133 EC, since the Community’s commercial relations with a third country are not at issue in this case. 141 As regards the objective of creating a system ensuring that competition in the internal market is not distorted (Article 3(1)(g) EC), the assertion that there is a risk of competition’s being distorted, which according to its preamble the contested regulation seeks to prevent, fails to persuade. 142 The competition rules of the EC Treaty are addressed to undertakings and Member States when they disturb equal competition between undertakings (see, with regard to Article 87 EC, Case 173/73 Italy v Commission [1974] ECR 709, paragraph 13, and with regard to Article 81 EC, Case 170/83 Hydrotherm [1984] ECR 2999, paragraph 11). 143 Now, in this case, it has not been alleged that the reference to individuals or entities by the contested regulation is made to them as undertakings for the purposes of the EC Treaty rules on competition. 144 Nor has any explanation been put forward that might make it possible to understand how competition between undertakings could be affected by the implementation, whether at Community level or at the level of its Member States, of the specific restrictive measures against certain persons and entities prescribed by Security Council Resolution 1390 (2002). 145 The foregoing considerations are not called in question by the connection made by the United Kingdom and the Commission in their written pleadings between the objective sought in Article 3(1)(g) EC and the objective seeking to create an internal market characterised by the abolition, as between Member States, of obstacles to the free movement of capital (Article 3(1)(c) EC) (see, inter alia, paragraphs 99 and 102 to 104 above). 146 In this regard, it must be pointed out that the Community has no express power to impose restrictions on the movement of capital and payments. On the other hand, Article 58 EC allows the Member States to adopt measures having such an effect to the extent to which this is, and remains, justified in order to achieve the objectives set out in the article, in particular, on grounds of public policy or public security (see, by analogy with Article 30 EC, Case C-367/89 Richardt [1991] ECR I-4621, paragraph 19, and the decision cited therein). The concept of public security covering both the State’s internal and external security, the Member States are therefore as a rule entitled to adopt under Article 58(1)(b) EC measures of the kind laid down by the contested regulation. In so far as those measures are in keeping with Article 58(3) EC and do not go beyond what is necessary in order to attain the objective pursued, they are compatible with the rules on free movement of capital and payments and with the rules on free competition laid down by the EC Treaty. 147 It has to be added that, if a mere finding that there was a danger of disparities between the various national rules and an abstract risk of obstacles to the free movement of capital or payments or of distortions of competition liable to result therefrom were sufficient to justify the choice of Article 308 EC as a legal basis for a regulation together with Article 3(1)(c) and (g) EC, not only would the provisions of Chapter 3 of Title VI of the EC Treaty be rendered ineffective, but also review by the court of compliance with the proper legal basis might be rendered quite nugatory. The Community judicature would then be prevented from discharging the function entrusted to it by Article 220 EC of ensuring that the law is observed in the interpretation and application of the Treaty (see, to that effect, with regard to Article 100a of the EC Treaty, now, after amendment, Article 95 EC, Case C-376/98 Germany v Parliament and Council [2000] ECR I‑8419, paragraphs 84, 85 and 106 to 108, and the case-law cited therein). 148 In any case, the criteria put before the Court do not give grounds for considering that the contested regulation actually helps to avoid the danger of impediments to the free movement of capital or of appreciable distortion of competition. 149 The Court considers in particular that, contrary to what the Commission and the United Kingdom maintain, the implementation of the Security Council resolutions in question by the Member States rather than by the Community is not capable of giving rise to a likely and serious danger of discrepancies in the application of the freezing of funds from one Member State to another. First, those resolutions in fact contain clear, precise, detailed definitions and obligations that leave scarcely any room for interpretation. Second, the importance of the measures they call for, with a view to their implementation, does not appear to be such that there is reason to fear such a danger. 150 In those circumstances, the measures at issue in this case cannot find authorisation in the objective referred to in Article 3(1)(c) and (g) EC. 151 Moreover, the various examples of recourse to the additional legal basis of Article 308 EC adduced by the Council (see paragraphs 95 and 97 above) are irrelevant in this instance. First, it is not apparent from those examples that the conditions for the application of Article 308 EC, particularly the condition relating to the attainment of a Community objective, were not satisfied in the circumstances of the cases concerned. Second, the legal acts at issue in those cases were not challenged on that ground before the Court of Justice, particularly in the case giving rise to the judgment in Delbar, paragraph 96 above. In any event, it is settled case-law that what is merely Council practice cannot derogate from the rules laid down in the Treaty, and cannot therefore create a precedent binding on the Community institutions with regard to the choice of the correct legal basis (see, in particular, Case 68/86 United Kingdom v Council [1988] ECR 855, paragraph 24, and the Opinion of the Court 1/94 of 15 November 1994, ECR I‑5267, paragraph 52). 152 It follows from all the foregoing that the fight against international terrorism, more particularly the imposition of economic and financial sanctions, such as the freezing of funds, in respect of individuals and entities suspected of contributing to the funding of terrorism, cannot be made to refer to one of the objects which Articles 2 EC and 3 EC expressly entrust to the Community. 153 In addition to the Treaty objectives expressly set out in Articles 2 EC and 3 EC, the Commission has also put forward in its written pleadings a more general object of the Community which in the circumstances, it claimed, justified recourse to the legal basis of Article 308 EC. The Commission thus infers from the preamble to the EC Treaty a ‘general objective which the Community has to ensure [international] peace and security’ (see paragraph 100 above). That argument cannot be accepted. 154 Contrary to what the Commission maintains, indeed, nowhere in the preamble to the EC Treaty is it stated that that act pursues a wider object of safeguarding international peace and security. Although it is unarguably a principal aim of that treaty to put an end to the conflicts of the past between the peoples of Europe by creating ‘an ever closer union’ among them, that is without any reference whatsoever to the implementation of a common foreign and security policy. The latter falls exclusively within the objects of the Treaty on European Union which, as emphasised in the preamble thereto, seeks to ‘mark a new stage in the process of European integration undertaken with the establishment of the European Communities’. 155 While, admittedly, it may be asserted that that objective of the Union must inspire action by the Community in the sphere of its own competence, such as the common commercial policy, it is not however a sufficient basis for the adoption of measures under Article 308 EC, above all in spheres in which Community competence is marginal and exhaustively defined in the Treaty. 156 Last, it appears impossible to interpret Article 308 EC as giving the institutions general authority to use that provision as a basis with a view to attaining one of the objectives of the Treaty on European Union. In particular, the Court considers that the coexistence of Union and Community as integrated but separate legal orders, and the constitutional architecture of the pillars, as intended by the framers of the Treaties now in force, authorise neither the institutions nor the Member States to rely on the ‘flexibility clause’ of Article 308 EC in order to mitigate the fact that the Community lacks the competence necessary for achievement of one of the Union’s objectives. To decide otherwise would amount, in the end, to making that provision applicable to all measures falling within the CFSP and police and judicial cooperation in criminal matters (PJC), so that the Community could always take action to attain the objectives of those policies. Such an outcome would deprive many provisions of the Treaty on European Union of their ambit and would be inconsistent with the introduction of instruments specific to the CFSP (common strategies, joint actions, common positions) and to the PJC (common positions, decisions, framework decisions). 157 It must therefore be concluded that Article 308 EC does not, any more than Article 60 EC or Article 301 EC taken in isolation, constitute of itself a sufficient legal basis for the contested regulation. 158 However, both in the recitals in the preamble to the contested regulation and in its pleadings, the Council has argued that Article 308 EC, in conjunction with Articles 60 EC and 301 EC, gives it the power to adopt a Community regulation relating to the battle against the financing of international terrorism conducted by the Union and its Member States under the CFSP and imposing, to that end, economic and financial sanctions on individuals, without establishing any connection whatsoever with the territory or governing regime of a third country. Those considerations must be accepted. 159 In the circumstances, account has to be taken of the bridge explicitly established at the time of the Maastricht revision between Community actions imposing economic sanctions under Articles 60 EC and 301 EC and the objectives of the Treaty on European Union in the sphere of external relations. 160 It must be held that Articles 60 EC and 301 EC are quite special provisions of the EC Treaty, in that they expressly contemplate situations in which action by the Community may be proved to be necessary in order to achieve, not one of the objects of the Community as fixed by the EC Treaty but rather one of the objectives specifically assigned to the Union by Article 2 of the Treaty on European Union, viz., the implementation of a common foreign and security policy. 161 Under Articles 60 EC and 301 EC, action by the Community is therefore in actual fact action by the Union, the implementation of which finds its footing on the Community pillar after the Council has adopted a common position or a joint action under the CFSP. 162 According to Article 3 EU, the Union is to be served by a single institutional framework which is to ensure the consistency and the continuity of the activities carried out in order to attain its objectives while respecting and building upon the acquis communautaire. The Union is in particular to ensure the consistency of its external activities as a whole in the context of its external relations, security, economic and development policies. The Council and the Commission are to be responsible for ensuring such consistency and are to cooperate to this end. They are to ensure the implementation of these policies, each in accordance with its respective powers. 163 Now, just as the powers provided for by the EC Treaty may be proved to be insufficient to allow the institutions to act in order to attain, in the operation of the common market, one of the objectives of the Community, so the powers to impose economic and financial sanctions provided for by Articles 60 EC and 301 EC, namely, the interruption or reduction of economic relations with one or more third countries, especially in respect of movements of capital and payments, may be proved insufficient to allow the institutions to attain the objective of the CFSP, under the Treaty on European Union, in view of which those provisions were specifically introduced into the EC Treaty. 164 There are therefore good grounds for accepting that, in the specific context contemplated by Articles 60 EC and 301 EC, recourse to the additional legal basis of Article 308 EC is justified for the sake of the requirement of consistency laid down in Article 3 of the Treaty on European Union, when those provisions do not give the Community institutions the power necessary, in the field of economic and financial sanctions, to act for the purpose of attaining the objective pursued by the Union and its Member States under the CFSP. 165 Thus it is possible that a common position or joint action, adopted under the CFSP, should demand of the Community measures for economic and financial sanctions going beyond those expressly provided for by Articles 60 EC and 301 EC, which consist of the interruption or reduction of economic relations with one or more third countries, especially with regard to movements of capital and payments. 166 In such a situation, recourse to the cumulative legal bases of Articles 60 EC, 301 EC and 308 EC makes it possible to attain, in the sphere of economic and financial sanctions, the objective pursued under the CFSP by the Union and its Member States, as it is expressed in a common position or joint action, despite the lack of any express attribution to the Community of powers to impose economic and financial sanctions on individuals or entities with no sufficient connection to a given third country. 167 In this instance, the fight against international terrorism and its funding is unarguably one of the Union’s objectives under the CFSP, as they are defined in Article 11 EU, even where it does not apply specifically to third countries or their rulers. 168 Furthermore, it is not disputed that Common Position 2002/402 was adopted by the Council acting unanimously in relation to that fight and that it prescribes the imposition by the Community of economic and financial sanctions in respect of individuals suspected of contributing to the funding of terrorism, where no connection whatsoever has been established with the territory or governing regime of a third country. 169 Against that background, recourse to Article 308 EC, in order to supplement the powers to impose economic and financial sanctions conferred on the Community by Articles 60 EC and 301 EC, is justified by the consideration that, as the world now stands, States can no longer be regarded as the only source of threats to international peace and security. Like the international community, the Union and its Community pillar are not to be prevented from adapting to those new threats by imposing economic and financial sanctions not only on third countries, but also on associated persons, groups, undertakings or entities developing international terrorist activity or in any other way striking a blow at international peace and security. 170 The institutions and the United Kingdom are therefore right to maintain that the Council was competent to adopt the contested regulation which sets in motion the economic and financial sanctions provided for by Common Position 2002/402, on the joint basis of Articles 60 EC, 301 EC and 308 EC. 171 The first part of the first ground of annulment must in consequence be rejected. Concerning the second part172 In the second part of the first ground of annulment, the applicants argue that the ambit of the powers granted to the Commission, first pursuant to Article 10(1) of Regulation No 467/2001 and subsequently pursuant to Article 7(1) of the contested regulation, is far wider than that of mere power to implement a Council regulation and that it therefore infringes Article 202 EC. In their view, in fact, a decision by the Commission to add a person to the list in Annex I to the contested regulation is in fact tantamount to altering Article 2 thereof. 173 The Council and the Commission maintain that the delegation of implementing powers conferred in this instance on the Commission is consonant with Article 202 EC. 174 The second part of the first ground has become inconsequential as a result of the repeal of Regulation No 467/2001 and its replacement by the contested regulation. As a matter of fact, while it is true that the applicants had originally been included in Annex I to Regulation No 467/2001 by Commission Regulation No 2199/2001, adopted on authority given by the Council under Article 10(1) of the former of those regulations, their inclusion in Annex I to the contested regulation is now due to that regulation itself, as adopted by the Council without any further action by the Commission. 175 The amendments made by Regulation No 866/2003 (paragraph 41 above) are matters of a formal drafting nature only, as Mr Yusuf has acknowledged (paragraph 63 above), and they must therefore be regarded as falling within the ambit of a mere implementing power, which it is in keeping with Article 202 EC to delegate to the Commission. 176 It follows that the second part of the plea must be rejected. Concerning the third part177 In the third part of the first ground, the applicants claim that it was not within the purview of the Council’s powers to delegate to a body outside the Community – in this instance, the Sanctions Committee – decision-making power in the sphere of the civil and economic rights of the Member States and their nationals. 178 The United Kingdom counters that there has in the circumstances been no delegation of Community powers to the bodies of the United Nations. Quite on the contrary, the institutions acted solely for the purpose of ensuring that the Member States of the Community complied with their obligations under the Charter of the United Nations, which prevail over every other obligation, in accordance with Article 103 of that Charter. 179 The decisions affecting the applicants were taken in this case by the Sanctions Committee on the authority of the Security Council, using information gathered on its own responsibility. Furthermore, the resolutions of the Security Council at issue do not constitute the exercise of powers delegated by the Community but the exercise by the Security Council of its own powers under the Charter of the United Nations. The fact that the Community institutions, following the adoption of Common Position 2002/402, deemed themselves bound to abide by those decisions and resolutions in the exercise of their own powers is, in this respect, irrelevant. 180 The third part of the ground would seem to be based on a misapprehension and must, accordingly, be rejected. 2. Concerning the second ground of annulment, alleging infringement of Article 249 EC181 The applicants maintain that, in so far as the contested regulation directly prejudices the rights of individuals and prescribes the imposition of individual sanctions, it has no general application and therefore contravenes Article 249 EC. It is contrary to the condition of general application, laid down by that provision, for individual cases to be governed, as in this instance, by means of a regulation. That condition derives from the general principle of equality under the law and is an essential precondition if Community law is not to run foul of the Member States’ constitutional laws or the general principles relating to human rights and fundamental freedoms. They submit that the method of action consisting of laying down a legislative provision by means of a list is also contrary to the principles of lawfulness and legal certainty. 182 In their reply, the applicants emphasise that the individuals and entities referred to by the contested regulation do not come from some circle of persons designated in the abstract, but rather correspond name by name to the persons in the Sanctions Committee’s list. Nor is there any objectively determined situation, described by conditions formulated in a general manner, that might explain why the applicants’ names appear precisely in Annex I to the contested regulation. In those circumstances, the contested regulation cannot be understood to be a regulation, but rather a bundle of individual decisions, within the meaning of Joined Cases 41/70 to 44/70 International Fruit and Others v Commission [1971] ECR 411. 183 The institutions and the United Kingdom argue that the contested regulation is indeed of general application. 184 In accordance with the second paragraph of Article 249 EC, a regulation has general application and is directly applicable in all Member States, whereas a decision is binding only on those to whom it is addressed. 185 According to established case-law, the criterion for distinguishing between a regulation and a decision must be sought in the general application or otherwise of the measure in question. The essential characteristics of a decision arise from the limitation of the persons to whom it is addressed, whereas a regulation, being essentially of a legislative nature, is applicable to objectively determined situations and entails legal effects for categories of persons regarded generally and in the abstract. Furthermore, the legislative nature of a measure is not called in question by the fact that it is possible to determine more or less precisely the number or even the identity of the persons to whom it applies at any given time, as long as it is established that such application takes effect by virtue of an objective legal or factual situation defined by the measure in question in relation to its purpose (see judgments in Joined Cases 19/62 to 22/62 Fédération nationale de la Boucherie v Council [1962] ECR 491, paragraph 2; Case 6/68 Zuckerfabrik Watenstedt v Council [1968] ECR 409, at p. 415; Case 242/81 Roquette Frères v Council [1982] ECR 3213, paragraphs 6 and 7; Case C-298/89 Gibraltar v Council [1993] ECR I-3605, paragraph 17; Case C-41/99 P Sadam Zuccherifici and Others v Council [2001] ECR I-4239, paragraph 24, and orders in Case C‑87/95 P CNPAAP v Council [1996] ECR I-2003, paragraph 33, and Case T‑45/02 DOW AgroSciences v Parliament and Council [2003] ECR II-1973, paragraph 31). 186 In the circumstances of the case, the contested regulation unarguably has general application, since it prohibits anyone to make available funds or economic resources to certain persons. The fact that those persons are expressly named in Annex I to the regulation, so that they appear to be directly and individually concerned by it, within the meaning of the fourth paragraph of Article 230 EC, in no way affects the general nature of that prohibition which is effective erga omnes, as is made clear in particular by Article 11, by virtue of which the contested regulation applies: – within the territory of the Community, including its airspace,– on board any aircraft or any vessel under the jurisdiction of a Member State,– to any person elsewhere who is a national of a Member State,– to any legal person, group or entity which is incorporated or constituted under the law of a Member State,– to any legal person, group or entity doing business within the Community.187 In actual fact, the applicants’ line of argument stems from a confusion of the concept of the addressee of an act with the concept of the object of that act. Article 249 EC contemplates only the former, in that it provides that a regulation has general application, whereas a decision is binding only upon those to whom it is addressed. By contrast, the object of an act is immaterial as a criterion for its classification as a regulation or a decision. 188 Thus, an act the object of which is to freeze the funds of the perpetrators of terrorist acts, viewed as a general and abstract category, would be a decision if the persons to whom it was addressed were one or more persons expressly named. On the other hand, an act the object of which is to freeze the funds of one or more persons expressly named is in fact a regulation if it is addressed in a general and abstract manner to all persons who might actually hold the funds in question. That is precisely the situation in this case. 189 The second ground must accordingly be rejected. 3. Concerning the third ground of annulment, alleging breach of the applicants’ fundamental rights190 The applicants, referring both to Article 6(2) of the Treaty on European Union and to the Court’s case-law (Case 29/69 Stauder [1969] ECR 419; Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125 and Case 4/73 Nold v Commission [1974] ECR 491, paragraph 13), maintain that the contested regulation infringes their fundamental rights, in particular their right to the use of their property and the right to a fair hearing, as guaranteed by Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR), inasmuch as that regulation imposes on them heavy sanctions, both civil and criminal, although they had not first been heard or given the opportunity to defend themselves, nor had that act been subjected to any judicial review whatsoever. 191 With more particular regard to the alleged breach of the right to a fair hearing, the applicants stress that they were not told why the sanctions were imposed on them, that the evidence and facts relied on against them were not communicated to them and that they had no opportunity to explain themselves (Case 17/74 Transocean Marine Paint v Commission [1974] ECR 1063; Joined Cases 100/80 to 103/80 Musique Diffusion française and Others v Commission [1983] ECR 1825, paragraph 14; Case 40/85 Belgium v Commission [1986] ECR 2321, and Case C‑49/88 Al-Jubail Fertilizer and Another v Council [1991] ECR I-3187). The only reason for their names being entered in the list in Annex I to the contested regulation is the fact that they were entered in the list drawn up by the Sanctions Committee on the basis of information provided by the States and international or regional organisations. Neither the Council nor the Commission examined the reasons for which that committee included the applicants in that list. The source of the information received by that committee is especially obscure and the reasons why certain individuals have been included in the list, without first being heard, are not mentioned. The entire procedure leading to the addition of the applicants to the list in Annex I to the contested regulation is thus stamped with the seal of secrecy. Such infringements of their rights cannot be remedied after the event (Case C‑51/92 P Hercules Chemicals v Commission [1999] ECR I‑4235). 192 With more particular regard to the alleged breach of the right to judicial review, the applicants note that in Case C-424/99 Commission v Austria [2001] ECR I‑9285, paragraph 45, the Court of Justice held that, according to settled case-law, the requirement of such review reflects a general principle of Community law stemming from the constitutional traditions common to the Member States and enshrined in Articles 6 and 13 of the ECHR. That right implies the existence of effective legal proceedings before a judicial body that satisfies certain conditions such as independence and neutrality. 193 They argue that in this case neither the Commission nor the Council satisfied those conditions. 194 The same is true of the Security Council and its Sanctions Committee, which are political bodies before which only States are authorised to appear. In this case, the Sanctions Committee informed the Swedish Government that it was not possible to undertake an in-depth examination of the applicants’ request to have their names removed from the list drawn up by that committee. The request was, however, communicated to the 15 members of the Sanctions Committee as a proposal for a decision. Only three members of the Committee, namely, the United States of America, the United Kingdom and Russia, opposed the request. However, on account of the rule of unanimity which governs the work of the Sanctions Committee, the applicants’ names remained in the list at issue. 195 With regard to the review carried out by the Court of First Instance in this action, the applicants object that an action for annulment, which concerns only the lawfulness of the contested regulation as such, does not allow of an in-depth examination of the lawfulness of the sanctions in the light of the fundamental rights allegedly infringed. In addition, having regard to the legislative technique used, which consisted of drawing up lists of persons and entities covered by those sanctions, such an in-depth examination would be pointless, since it would be limited to ascertaining whether the names in those lists corresponded to those in the Sanctions Committee’s lists. 196 None the less, the applicants point out various errors or irregularities that vitiate the contested regulation. Thus, the entity ‘Barakaat International, Hallbybacken 15, 70 Spånga, Sweden’, mentioned in Annex I to that regulation, under the heading ‘Legal persons, groups and entities’, is the same entity as the applicant Al Barakaat, mentioned in the same section. The applicants explain that Al Barakaat has transferred its principal office. Moreover, the address given is incorrect. 197 Similarly, the entity ‘Somali Network AB, Hallbybacken 15, 70 Spånga, Sweden’, mentioned in the same section of Annex I to the contested regulation, previously held by three of the original applicants, Messrs Aden, Ali and Yusuf, whose activity consisted of the sale of telephone cards, stopped trading at the end of the year 2000 and was transferred in the summer of 2001, its company name being changed to ‘Trä & Inredningsmontage I Kärrtorp’ on 4 October 2001. The new shareholders have nothing to do with the applicants and seem to carry on business in the building sector. The Sanctions Committee having nevertheless placed that entity on its list on 9 November 2001, it is clear that its documentation was patchy and that there was no checking case-by-case. 198 The applicants add that, on its own initiative, Al Barakaat handed its account books to the Swedish police department responsible for combating terrorism, the SÄPO. After analysis, the SÄPO returned the documents to the applicants, informing them that they were in order, which goes to show that the sanctions imposed on Al Barakaat were unwarranted. 199 In order to produce his evidence, the first applicant, Mr Yusuf, has sought to be heard by the Court. He has requested that Sir Jeremy Greenstock, Chairman of the Sanctions Committee at the time when the sanctions against him were adopted, should also be heard. 200 In their reply, in addition, the applicants challenge the argument that the Council was obliged to implement the sanctions decided on by the Security Council on the ground that they were binding on the Member States of the Community by virtue of the Charter of the United Nations. 201 According to the applicants, there is no absolute obligation under Article 25 of the Charter of the United Nations and Article 103 of that Charter is not binding except in public international law and does not on any view mean that the members of the United Nations must fail to have regard to their own laws. 202 They submit that resolutions of the Security Council are not directly applicable in the Member States of the United Nations, but must be transposed into their internal law, in accordance with their constitutional provisions and the fundamental principles of law. If those provisions preclude such transposition, they must be amended in order to make transposition possible. 203 Thus, in Sweden, a draft law intended to put into effect Security Council Resolution 1373 (2001) of 28 September 2001, which provides inter alia for the freezing of the assets of persons who and entities which commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts, was withdrawn by the Government after the Lagrådet (Legislation Council) observed that every decision to freeze assets must be taken by the State Prosecutor’s Office and could be the subject of judicial review. 204 In addition, the applicants maintain that it is clear from Article 24(2) of the Charter of the United Nations that the Security Council must always act in accordance with the purposes and principles of the United Nations. One condition set on the obligation of the members of the United Nations under Article 25 of the Charter is that the Security Council’s powers to adopt binding decisions are derived from other provisions of that Charter. The Charter of the United Nations being addressed to the States alone and creating neither rights nor duties for individuals, it may be wondered whether the Member States of the United Nations are bound by the Security Council’s decisions imposing sanctions on Usama bin Laden and persons associated with him. It might even be asked whether those decisions are not contrary to the express objective of the United Nations, which is to promote respect for human rights and for fundamental freedoms in accordance with Article 1(3) of the Charter of the United Nations. 205 The Council primarily maintains that the circumstances in which the contested regulation was adopted preclude any unlawful conduct on its part. 206 In this regard, the Council and the Commission, referring in particular to Articles 24(1), 25, 41, 48 and 103 of the Charter of the United Nations, submit, first, that the Community, like the Member States of the United Nations, is bound by international law to give effect, within its spheres of competence, to resolutions of the Security Council, especially those adopted under Chapter VII of the Charter of the United Nations; second, that the powers of the Community institutions in this area are limited and that they have no autonomous discretion in any form; third, that they cannot therefore alter the content of those resolutions or set up mechanisms capable of giving rise to any alteration in their content and, fourth, that any other international agreement or rule of domestic law liable to hinder such implementation must be disregarded. 207 The Council and the Commission also observe that the Security Council, acting in the name of the Members of the United Nations, exercises the chief responsibility for maintaining international peace and security. They claim that the resolutions adopted by the Security Council under Chapter VII of the Charter are universally applicable and wholly binding without any reservation for the members of the United Nations, who must recognise that those resolutions prevail over every other international obligation. In that way Article 103 of the Charter of the United Nations makes it possible to disregard any other provision of international law, whether customary or laid down by convention, in order to apply the resolutions of the Security Council, thus creating an ‘effect of legality’. 208 Nor, according to the institutions, can national law stand in the way of implementing measures adopted pursuant to the Charter of the United Nations. If a member of the United Nations were able to alter the contents of Security Council resolutions the uniformity of their application, essential to their effectiveness, could not be maintained. 209 The Commission adds that, in accordance with Article 27 of the Vienna Convention on the Law of Treaties concluded at Vienna on 23 May 1969, a State may not invoke the provisions of its internal law as justification for its failure to perform a treaty. If a provision of national law is inconsistent with an obligation under international law, it is for the State concerned to interpret that provision in the spirit of the Treaty or amend its national legislation so as to make it compatible with the obligation under international law. 210 Although the Community itself is not a member of the United Nations, it is required to act, in its spheres of competence, in such a way as to fulfil the obligations imposed on its Member States as a result of their belonging to the United Nations. On that point the Commission notes that the Community’s powers must be exercised in compliance with international law (Case C-286/90 Poulsen and Diva Navigation [1992] ECR I-6019, paragraph 9, and Case C‑162/96 Racke [1998] ECR I-3655, paragraph 45). The Council and the Commission also cite Dorsch Consult v Council and Commission, paragraph 82 above. Although that judgment concerned the imposition of a trade embargo, a measure of common commercial policy falling, in accordance with Article 133 EC, within the exclusive competence of the Community, the Council and the Commission consider that the principle laid down in that judgment applies equally to restrictions on the movement of capital and payments adopted, as in this case, pursuant to Articles 60 EC and 301 EC, having regard to the development of the Community’s powers in the field of sanctions against third countries. 211 The Council puts that proposition in general terms, arguing that when the Community acts to discharge obligations imposed on its Member States as a result of their belonging to the United Nations, either because they have transferred to it the necessary powers or because they consider it politically opportune, the Community must be regarded for all practical purposes as being in the same position as the members of the United Nations, having regard to Article 48(2) of the Charter of the United Nations. 212 It follows, according to the Council, that when the Community takes measures for purposes reflecting the desire of its Member States to perform their obligations under the Charter of the United Nations, it necessarily enjoys the protection conferred by the Charter and, in particular, the ‘effect of legality’. 213 The Council emphasises, in addition, that when the Community acts in that context, its powers are bound by the decisions of common foreign and security policy putting into effect Security Council resolutions, in particular those taken under Chapter VII of the Charter of the United Nations, which must be introduced into the Community legal order. 214 In this instance, the contested regulation was adopted with a view to implementing in the Community legal order Security Council Resolutions 1267 (1999), 1333 (2000) and 1390 (2002) through the automatic transposition of any list of persons or entities drawn up by the Sanctions Committee in accordance with the applicable procedures, without any autonomous discretion whatsoever being exercised, as is clearly apparent from both the preamble to the contested regulation and Article 7(1) thereof. 215 In the view of the Council and the Commission, such circumstances exclude a priori any illegality on the part of the institutions. Once the Community had decided to act by virtue of Common Position 2002/402, it was not open to it, without infringing its own international obligations, the international obligations of its Member States and the duty of cooperation between the Member States and the Community, laid down in Article 10 EC, to exclude given persons from the list or to inform them beforehand or, failing that, to provide the means by which to bring proceedings making it possible to check whether the measures at issue were justified. 216 The same would hold, according to the Council, even if the contested regulation were to be regarded as violating the applicants’ fundamental rights. The Council submits that the ‘effect of legality’ applies also with regard to fundamental rights which may, as provided for by international legal instruments, be temporarily suspended in time of emergency. 217 The applicants having in their reply called into question whether the Security Council resolutions at issue are compatible with Article 1(3) of the Charter of the United Nations, the Council responds that there are grounds for supposing that, under the special powers conferred on it by Chapter VII of the Charter, the Security Council weighed up the fundamental rights of the victims of the sanctions against those of the victims of terrorism, in particular the right of the latter to life. 218 Moreover, the Council and the Commission take the view that there is no connection between this case and the applicants’ arguments concerning the legislative process by which Security Council Resolution 1373 (2001) was put into effect in Sweden, the context of which is radically different from that of the implementation of Resolution 1390 (2002). When putting Resolution 1373 (2001) into effect, the Member States and the Community did in fact enjoy broad discretion. 219 In any event, the Council and the Commission are of the opinion that in this case the Court’s jurisdiction must be limited to considering whether the institutions committed a manifest error in implementing the obligations laid down by Security Council Resolution 1390 (2002). Beyond that limit, any claim of jurisdiction, which would be tantamount to indirect and selective judicial review of the mandatory measures decided upon by the Security Council in carrying out its function of maintaining international peace and security, would risk undermining one of the foundations of the world order established in 1945, would cause serious disruption to the international relations of the Community and its Member States, would be open to challenge in the light of Article 10 EC and would conflict with the obligation on the Community to comply with international law, of which resolutions adopted by the Security Council under Chapter VII of the Charter of the United Nations from part. The institutions and the United Kingdom submit that such measures may not be challenged at national or Community level, but only before the Security Council itself, through the Government of the State of which the applicants are nationals or in the territory of which they reside (order in ‘Invest’ Import und Export and Invest Commerce v Commission, cited in paragraph 85 above, paragraph 40). 220 As their secondary argument, if the Court should decide to proceed to a full examination of the merits of the various arguments put forward by the applicants, the Council and the Commission contend that the contested regulation does not violate fundamental rights or freedoms as alleged. 221 First, the measures implemented by the contested regulation do not interfere with the applicants’ right to possess their property, since that right does not enjoy absolute protection and its exercise may be made the subject of restrictions justified by public interest objectives. 222 Second, the contested regulation does not prejudice the right to a fair hearing either. 223 Third, with regard to the right to an effective judicial remedy, the institutions and the United Kingdom observe that the applicants were in a position to make their views known to the Security Council and that they have been able to bring this action before the Court of First Instance pursuant to Article 230 EC, in connection with which they may plead, inter alia, that the Community institutions lacked competence to adopt the contested regulation and that the interference with their property rights was unlawful. 224 According to the Council, the dispute between the parties does not relate to the actual existence of a right to an effective judicial remedy but to the scope of the judicial review that would appear to be justified or appropriate in the circumstances of the case. 225 On this point, the Council acknowledges that, where the Community decides on its own initiative to take unilateral measures of economic and financial coercion, the judicial review must extend to examination of the evidence against the persons on whom the sanctions are imposed. However, according to the Council and the United Kingdom, where the Community acts without exercising any discretionary power, on the basis of a decision taken by the body on which the international community has conferred considerable powers with a view to preserving international peace and security, full judicial review would risk undermining the system of the United Nations as established in 1945, might seriously damage the international relations of the Community and its Member States and would conflict with the obligation on the Community to comply with international law. The Council considers that, in the circumstances, review by the Community judicature cannot go beyond the review recognised in the Member States so far as concerns the transposition into the internal legal order of decisions taken by the bodies of the international community acting with the object of preserving international peace and security. In this connection, the Council observes that in several Member States acts implementing Security Council resolutions are called ‘acts of State’ and escape the jurisdiction of the courts entirely. In other Member State, the scope of judicial review is very limited. Preliminary observations226 The Court can properly rule on the plea alleging breach of the applicants’ fundamental rights only in so far as it falls within the scope of its judicial review and as it is capable, if proved, of leading to annulment of the contested regulation. 227 In this instance, the institutions and the United Kingdom maintain, in essence, that neither of those two conditions is satisfied, because the obligations imposed on the Community and its Member States by the Charter of the United Nations prevail over every other obligation of international, Community or domestic law. Consideration of those parties’ arguments thus appears to be a precondition to any discussion of the applicants’ arguments. 228 The Court considers it appropriate to consider, in the first place, the relationship between the international legal order under the United Nations and the domestic or Community legal order, and also the extent to which the exercise by the Community and its Member States of their powers is bound by resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations. 229 This consideration will effectively determine the scope of the review of lawfulness, particularly having regard to fundamental rights, which the Court will carry out in the second place in respect of the Community acts giving effect to such resolutions. 230 Thirdly and finally, if it should find that it falls within the scope of its judicial review and that it is capable of leading to annulment of the contested regulation, the Court will rule on the alleged breach of the applicants’ fundamental rights. Concerning the relationship between the international legal order under the United Nations and the domestic or Community legal order 231 From the standpoint of international law, the obligations of the Member States of the United Nations under the Charter of the United Nations clearly prevail over every other obligation of domestic law or of international treaty law including, for those of them that are members of the Council of Europe, their obligations under the ECHR and, for those that are also members of the Community, their obligations under the EC Treaty. 232 As regards, first, the relationship between the Charter of the United Nations and the domestic law of the Member States of the United Nations, that rule of primacy is derived from the principles of customary international law. Under Article 27 of the Vienna Convention on the Law of Treaties, which consolidates those principles (and Article 5 of which provides that it is to apply to ‘any treaty which is the constituent instrument of an international organisation and to any treaty adopted within an international organisation’), a party may not invoke the provisions of its internal law as justification for its failure to perform a treaty. 233 As regards, second, the relationship between the Charter of the United Nations and international treaty law, that rule of primacy is expressly laid down in Article 103 of the Charter which provides that, ‘[i]n the event of a conflict between the obligations of the Members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail’. In accordance with Article 30 of the Vienna Convention on the Law of Treaties, and contrary to the rules usually applicable to successive treaties, that rule holds good in respect of Treaties made earlier as well as later than the Charter of the United Nations. According to the International Court of Justice, all regional, bilateral, and even multilateral, arrangements that the parties may have made must be made always subject to the provisions of Article 103 of the Charter of the United Nations (judgment of 26 November 1984, delivered in the case concerning military and paramilitary activities in and against Nicaragua (Nicaragua v. United States of America), ICJ Reports, 1984, p. 392, paragraph 107). 234 That primacy extends to decisions contained in a resolution of the Security Council, in accordance with Article 25 of the Charter of the United Nations, under which the Members of the United Nations agree to accept and carry out the decisions of the Security Council. According to the International Court of Justice, in accordance with Article 103 of the Charter, the obligations of the Parties in that respect prevail over their obligations under any other international agreement (Order of 14 April 1992 (provisional measures), Questions of Interpretation and Application of the 1971 Montreal Convention arising from the Aerial Incident at Lockerbie (Libyan Arab Jamahiriya v United States of America), ICJ Reports, 1992, p. 16, paragraph 42, and Order of 14 April 1992 (provisional measures), Questions of Interpretation and Application of the 1971 Montreal Convention arising from the Aerial Incident at Lockerbie (Libyan Arab Jamahiriya v United Kingdom), ICJ Reports, 1992, p. 113, paragraph 39). 235 With more particular regard to the relations between the obligations of the Member States of the Community by virtue of the Charter of the United Nations and their obligations under Community law, it may be added that, in accordance with the first paragraph of Article 307 EC, ‘The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, shall not be affected by the provisions of this Treaty.’ 236 According to the Court of Justice’s settled case-law, the purpose of that provision is to make it clear, in accordance with the principles of international law, that application of the EC Treaty does not affect the duty of the Member State concerned to respect the rights of third countries under a prior agreement and to perform its obligations thereunder (Case C-324/93 Evans Medical and Macfarlan Smith [1995] ECR I-563, paragraph 27; Case 10/61 Commission v Italy [1962] ECR 1; Case C-158/91 Levy [1993] ECR I-4287, and Case C-124/95 Centro-Com [1997] ECR I-81, paragraph 56). 237 Now, five of the six signatory States to the Treaty establishing the European Economic Community, signed at Rome on 25 March 1957, were already members of the United Nations on 1 January 1958. While it is true that the Federal Republic of Germany was not formally admitted as a member of the United Nations until 18 September 1973, its duty to perform its obligations under the Charter of the United Nations also predates 1 January 1958, as is apparent from the Final Act of the Conference held in London from 28 September to 3 October 1954 (known as ‘The Conference of the Nine Powers’) and the Paris Agreements signed on 23 October 1954. Furthermore, all the States that subsequently acceded to the Community were members of the United Nations before accession. 238 What is more, Article 224 of the Treaty establishing the European Economic Community (now Article 297 EC) was specifically introduced into the Treaty in order to observe the rule of primacy defined above. Under that provision, ‘Member States shall consult each other with a view to taking together the steps needed to prevent the functioning of the common market being affected by measures which a Member State may be called upon to take … in order to carry out obligations it has accepted for the purpose of maintaining peace and international security’. 239 Resolutions adopted by the Security Council under Chapter VII of the Charter of the United Nations are thus binding on all the Member States of the Community which must therefore, in that capacity, take all measures necessary to ensure that those resolutions are put into effect (Opinions of Advocate General Jacobs in Case C-84/95 Bosphorus [1996] ECR I-3953, at I-3956, paragraph 2, and Case C-177/95 Ebony Maritime and Loten Navigation [1997] ECR I-1111, at I-1115, paragraph 27). 240 It also follows from the foregoing that, pursuant both to the rules of general international law and to the specific provisions of the Treaty, Member States may, and indeed must, leave unapplied any provision of Community law, whether a provision of primary law or a general principle of that law, that raises any impediment to the proper performance of their obligations under the Charter of the United Nations. 241 Thus, in Centro-Com, cited in paragraph 236 above, the Court of Justice specifically held that national measures contrary to Article 113 of the EC Treaty could be justified under Article 234 of the EC Treaty (now, after amendment, Article 307 EC) if they were necessary to ensure that the Member State concerned performed its obligations under the Charter of the United Nations and a resolution of the Security Council. 242 However, it follows from the case-law (Dorsch Consult v Council and Commission, paragraph 82 above, paragraph 74) that, unlike its Member States, the Community as such is not directly bound by the Charter of the United Nations and that it is not therefore required, as an obligation of general public international law, to accept and carry out the decisions of the Security Council in accordance with Article 25 of that Charter. The reason is that the Community is not a member of the United Nations, or an addressee of the resolutions of the Security Council, or the successor to the rights and obligations of the Member States for the purposes of public international law. 243 Nevertheless, the Community must be considered to be bound by the obligations under the Charter of the United Nations in the same way as its Member States, by virtue of the Treaty establishing it. 244 In that regard, it is not in dispute that at the time when they concluded the Treaty establishing the European Economic Community the Member States were bound by their obligations under the Charter of the United Nations. 245 By concluding a treaty between them they could not transfer to the Community more powers than they possessed or withdraw from their obligations to third countries under that Charter (see, by analogy, Joined Cases 21/72 to 24/72 International Fruit Company and Others (‘International Fruit’) [1972] ECR 1219, paragraph 11). 246 On the contrary, their desire to fulfil their obligations under that Charter follows from the very provisions of the Treaty establishing the European Economic Community and is made clear in particular by Article 224 and the first paragraph of Article 234 (see, by analogy, International Fruit, paragraphs 12 and 13, and the Opinion of Advocate General Mayras in those cases, ECR 1231, at page 1237). 247 Although that latter provision makes mention only of the obligations of the Member States, it implies a duty on the part of the institutions of the Community not to impede the performance of the obligations of Member States which stem from that Charter (Case 812/79 Burgoa [1980] ECR 2787, paragraph 9). 248 It is also to be observed that, in so far as the powers necessary for the performance of the Member States’ obligations under the Charter of the United Nations have been transferred to the Community, the Member States have undertaken, pursuant to public international law, to ensure that the Community itself should exercise those powers to that end. 249 In this context it is to be borne in mind, first, that in accordance with Article 48(2) of the Charter of the United Nations, the decisions of the Security Council ‘shall be carried out by the Members of the United Nations directly and through their action in the appropriate international agencies of which they are members’ and, second, that according to the case-law (Poulsen and Diva Navigation, paragraph 210 above, paragraph 9, and Racke, paragraph 210 above, paragraph 45, and Case 41/74 Van Duyn [1974] ECR 1337, paragraph 22), the Community must respect international law in the exercise of its powers and, consequently, Community law must be interpreted, and its scope limited, in the light of the relevant rules of international law. 250 By conferring those powers on the Community, the Member States demonstrated their will to bind it by the obligations entered into by them under the Charter of the United Nations (see, by analogy, International Fruit, paragraph 15). 251 Since the entry into force of the Treaty establishing the European Economic Community, the transfer of powers which has occurred in the relations between Member States and the Community has been put into concrete form in different ways within the framework of the performance of their obligations under the Charter of the United Nations (see, by analogy, International Fruit, paragraph 16). 252 Thus it is, in particular, that Article 228a of the EC Treaty (now Article 301 EC) was added to the Treaty by the Treaty on European Union in order to provide a specific basis for the economic sanctions that the Community, which has exclusive competence in the sphere of the common commercial policy, may need to impose in respect of third countries for political reasons defined by its Member States in connection with the CFSP, most commonly pursuant to a resolution of the Security Council requiring the adoption of such sanctions. 253 It therefore appears that, in so far as under the EC Treaty the Community has assumed powers previously exercised by Member States in the area governed by the Charter of the United Nations, the provisions of that Charter have the effect of binding the Community (see, by analogy, on the question whether the Community is bound by the General Agreement on Tariffs and Trade (GATT) of 1947, International Fruit, paragraph 18; see also, in that it recognises that the Community exercises circumscribed powers when giving effect to a trade embargo imposed by a resolution of the Security Council Dorsch Consult v Council and Commission, paragraph 82 above, paragraph 74). 254 Following that reasoning, it must be held, first, that the Community may not infringe the obligations imposed on its Member States by the Charter of the United Nations or impede their performance and, second, that in the exercise of its powers it is bound, by the very Treaty by which it was established, to adopt all the measures necessary to enable its Member States to fulfil those obligations. 255 In this instance, the Council found in Common Position 2002/402, adopted pursuant to the provisions of Title V of the Treaty on European Union, that action by the Community within the confines of the powers conferred on it by the EC Treaty was necessary in order to put into effect certain restrictive measures against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities, in accordance with Security Council Resolutions 1267 (1999), 1333 (2000) and 1390 (2002). 256 The Community put those measures into effect by adopting the contested regulation. As has been held at paragraph 170 above, it was competent to adopt that act on the basis of Articles 60 EC, 301 EC and 308 EC. 257 It must therefore be held that the arguments put forward by the institutions, as summarised in paragraph 206 above, are valid, subject to this reservation that it is not under general international law, as those parties would have it, but by virtue of the EC Treaty itself, that the Community was required to give effect to the Security Council resolutions concerned, within the sphere of its powers. 258 However, the applicants’ arguments based, on the one hand, on the autonomy of the Community legal order vis-à-vis the legal order under the United Nations and, on the other, on the necessity of transposing Security Council resolutions into the domestic law of the Member States, in accordance with the constitutional provisions and fundamental principles of that law, must be rejected. 259 The applicants’ argument alleging that the Security Council resolutions at issue are incompatible with the provisions of the Charter of the United Nations itself is inseparable from their arguments relating, first, to the judicial review that the Court of First Instance must carry out in respect of Community acts giving effect to those resolutions and, second, to the alleged breach of the fundamental rights of the persons concerned. It will, therefore, be examined with those other arguments. Concerning the scope of the review of legality that the Court must carry out260 As a preliminary point, it is to be borne in mind that the European Community is based on the rule of law, inasmuch as neither its Member States nor its institutions can avoid review of the question whether their acts are in conformity with the basic constitutional charter, the Treaty, which established a complete system of legal remedies and procedures designed to enable the Court of Justice to review the legality of acts of the institutions (Case 294/83 Les Verts v Parliament [1986] ECR 1339, paragraph 23; Case 314/85 Foto-Frost [1987] ECR 4199, paragraph 16; Case C-314/91 Weber v Parliament [1993] ECR I-1093, paragraph 8; Joined Cases T-222/99, T-327/99 and T-329/99 Martinez and Others v Parliament [2001] ECR II-2823, paragraph 48; see also Opinion 1/91 of the Court of Justice of 14 December 1991, ECR I-6079, paragraph 21). 261 As the Court has repeatedly held (Case 222/84 Johnston [1986] ECR 1651, paragraph 18; Case C-97/91 Oleificio Borelli v Commission [1992] ECR I-6313, paragraph 14, Case C-1/99 Kofisa Italia [2001] ECR I-207, paragraph 46; Case C‑424/99 Commission v Austria [2001] ECR I-9285, paragraph 45, and Case C‑50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I-6677, paragraph 39), ‘judicial control … reflects a general principle of law which underlies the constitutional traditions common to the Member States … and which is also laid down in Articles 6 and 13 of the [ECHR]’. 262 In the case in point, that principle finds expression in the right, conferred on the applicants by the fourth paragraph of Article 230 EC, to submit the lawfulness of the contested regulation to the Court of First Instance, provided that the act is of direct and individual concern to him, and to rely in support of his action on any plea alleging lack of competence, infringement of an essential procedural requirement, infringement of the EC Treaty or of any rule of law relating to its application, or misuse of powers. 263 The question that arises in this instance is, however, whether there exist any structural limits, imposed by general international law or by the EC Treaty itself, on the judicial review which it falls to the Court of First Instance to carry out with regard to that regulation. 264 It must be recalled that the contested regulation, adopted in the light of Common Position 2002/402, constitutes the implementation at Community level of the obligation placed on the Member States of the Community, as Members of the United Nations, to give effect, if appropriate by means of a Community act, to the sanctions against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities, which have been decided and later strengthened by several resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations. The recitals of the preamble to that regulation refer expressly to Resolutions 1267 (1999), 1333 (2000) and 1390 (2002). 265 In that situation, as the institutions have rightly claimed, they acted under circumscribed powers, with the result that they had no autonomous discretion. In particular, they could neither directly alter the content of the resolutions at issue nor set up any mechanism capable of giving rise to such alteration. 266 Any review of the internal lawfulness of the contested regulation, especially having regard to the provisions or general principles of Community law relating to the protection of fundamental rights, would therefore imply that the Court is to consider, indirectly, the lawfulness of those resolutions. In that hypothetical situation, in fact, the origin of the illegality alleged by the applicant would have to be sought, not in the adoption of the contested regulation but in the resolutions of the Security Council which imposed the sanctions (see, by analogy, Dorsch Consult v Council and Commission, paragraph 82 above, paragraph 74). 267 In particular, if the Court were to annul the contested regulation, as the applicants claim it should, although that regulation seems to be imposed by international law, on the ground that that act infringes their fundamental rights which are protected by the Community legal order, such annulment would indirectly mean that the resolutions of the Security Council concerned themselves infringe those fundamental rights. In other words, the applicants ask the Court to declare by implication that the provision of international law at issue infringes the fundamental rights of individuals, as protected by the Community legal order. 268 The institutions and the United Kingdom ask the Court as a matter of principle to decline all jurisdiction to undertake such indirect review of the lawfulness of those resolutions which, as rules of international law binding on the Member States of the Community, are mandatory for the Court as they are for all the Community institutions. Those parties are of the view, essentially, that the Court’s review ought to be confined, on the one hand, to ascertaining whether the rules on formal and procedural requirements and jurisdiction imposed in this case on the Community institutions were observed and, on the other hand, to ascertaining whether the Community measures at issue were appropriate and proportionate in relation to the resolutions of the Security Council which they put into effect. 269 It must be recognised that such a limitation of jurisdiction is necessary as a corollary to the principles identified above, in the Court’s examination of the relationship between the international legal order under the United Nations and the Community legal order. 270 As has already been explained, the resolutions of the Security Council at issue were adopted under Chapter VII of the Charter of the United Nations. In these circumstances, determining what constitutes a threat to international peace and security and the measures required to maintain or re-establish them is the responsibility of the Security Council alone and, as such, escapes the jurisdiction of national or Community authorities and courts, subject only to the inherent right of individual or collective self-defence mentioned in Article 51 of the Charter. 271 Where, acting pursuant to Chapter VII of the Charter of the United Nations, the Security Council, through its Sanctions Committee, decides that the funds of certain individuals or entities must be frozen, its decision is binding on the members of the United Nations, in accordance with Article 48 of the Charter. 272 In light of the considerations set out in paragraphs 243 to 254 above, the claim that the Court of First Instance has jurisdiction to review indirectly the lawfulness of such a decision according to the standard of protection of fundamental rights as recognised by the Community legal order, cannot be justified either on the basis of international law or on the basis of Community law 273 First, such jurisdiction would be incompatible with the undertakings of the Member States under the Charter of the United Nations, especially Articles 25, 48 and 103 thereof, and also with Article 27 of the Vienna Convention on the Law of Treaties. 274 Second, such jurisdiction would be contrary to provisions both of the EC Treaty, especially Articles 5 EC, 10 EC, 297 EC and the first paragraph of Article 307 EC, and of the Treaty on European Union, in particular Article 5 EU, in accordance with which the Community judicature is to exercise its powers on the conditions and for the purposes provided for by the provisions of the EC Treaty and the Treaty on European Union. It would, what is more, be incompatible with the principle that the Community’s powers and, therefore, those of the Court of First Instance, must be exercised in compliance with international law (Poulsen and Diva Navigation, paragraph 210 above, paragraph 9, and Racke, paragraph 210 above, paragraph 45). 275 It has to be added that, with particular regard to Article 307 EC and to Article 103 of the Charter of the United Nations, reference to infringements either of fundamental rights as protected by the Community legal order or of the principles of that legal order cannot affect the validity of a Security Council measure or its effect in the territory of the Community (see by analogy, Internationale Handelsgesellschaft, paragraph 190 above, paragraph 3; Case 234/85 Keller [1986] ECR 2897, paragraph 7, and Joined Cases 97/87 to 99/87 Dow Chemical Ibérica and Others v Commission [1989] ECR 3165, paragraph 38). 276 It must therefore be considered that the resolutions of the Security Council at issue fall, in principle, outside the ambit of the Court’s judicial review and that the Court has no authority to call in question, even indirectly, their lawfulness in the light of Community law. On the contrary, the Court is bound, so far as possible, to interpret and apply that law in a manner compatible with the obligations of the Member States under the Charter of the United Nations. 277 None the less, the Court is empowered to check, indirectly, the lawfulness of the resolutions of the Security Council in question with regard to jus cogens, understood as a body of higher rules of public international law binding on all subjects of international law, including the bodies of the United Nations, and from which no derogation is possible. 278 In this connection, it must be noted that the Vienna Convention on the Law of Treaties, which consolidates the customary international law and Article 5 of which provides that it is to apply ‘to any treaty which is the constituent instrument of an international organisation and to any treaty adopted within an international organisation’, provides in Article 53 for a treaty to be void if it conflicts with a peremptory norm of general international law (jus cogens), defined as ‘a norm accepted and recognised by the international community of States as a whole as a norm from which no derogation is permitted and which can be modified only by a subsequent norm of general international law having the same character’. Similarly, Article 64 of the Vienna Convention provides that: ‘If a new peremptory norm of general international law emerges, any existing treaty which is in conflict with that norm becomes void and terminates’. 279 Furthermore, the Charter of the United Nations itself presupposes the existence of mandatory principles of international law, in particular, the protection of the fundamental rights of the human person. In the preamble to the Charter, the peoples of the United Nations declared themselves determined to ‘reaffirm faith in fundamental human rights, in the dignity and worth of the human person’. In addition, it is apparent from Chapter I of the Charter, headed ‘Purposes and Principles’, that one of the purposes of the United Nations is to encourage respect for human rights and for fundamental freedoms. 280 Those principles are binding on the Members of the United Nations as well as on its bodies. Thus, under Article 24(2) of the Charter of the United Nations, the Security Council, in discharging its duties under its primary responsibility for the maintenance of international peace and security, is to act ‘in accordance with the Purposes and Principles of the United Nations’. The Security Council’s powers of sanction in the exercise of that responsibility must therefore be wielded in compliance with international law, particularly with the purposes and principles of the United Nations. 281 International law thus permits the inference that there exists one limit to the principle that resolutions of the Security Council have binding effect: namely, that they must observe the fundamental peremptory provisions of jus cogens. If they fail to do so, however improbable that may be, they would bind neither the Member States of the United Nations nor, in consequence, the Community. 282 The indirect judicial review carried out by the Court in connection with an action for annulment of a Community act adopted, where no discretion whatsoever may be exercised, with a view to putting into effect a resolution of the Security Council may therefore, in some circumstances, extend to determining whether the superior rules of international law falling within the ambit of jus cogens have been observed, in particular, the mandatory provisions concerning the universal protection of human rights, from which neither the Member States nor the bodies of the United Nations may derogate because they constitute ‘intransgressible principles of international customary law’ (Advisory Opinion of the International Court of Justice of 8 July 1996, The Legality of the Threat or Use of Nuclear Weapons, Reports 1996, p. 226, paragraph 79; see also, to that effect, Advocate General Jacobs’s Opinion in Bosphorus, paragraph 239 above, paragraph 65). 283 It is in the light of those considerations that the pleas alleging breach of the applicants’ fundamental rights must be examined. Concerning the alleged breach of the applicants’ fundamental rights284 The arguments put forward by the applicants in relation to the alleged breach of their fundamental rights may be grouped under three headings: breach of their right to make use of their property, breach of the right to a fair hearing and breach of their right to an effective judicial remedy. – Concerning the alleged breach of the applicants’ right to make use of their property285 The applicants plead breach of their right to make use of their property, as protected by the Community legal order. 286 Nevertheless, in so far as the alleged infringement arises exclusively from the freezing of the applicants’ funds, as decided by the Security Council, through its Sanctions Committee, and put into effect by the contested regulation, without the exercise of any discretion whatsoever, it is in principle by the sole criterion of the standard of universal protection of the fundamental rights of the human person falling within the ambit of jus cogens that the applicants’ claims may appropriately be examined, in accordance with the principles set out above. 287 The extent and severity of the freezing of the applicants’ funds having altered with the passage of time (see, successively, Article 2 of Regulation No 467/2001, Article 2 of Regulation No 881/2002 in its original version and, finally, Article 2a of the contested regulation, as inserted by Article 1 of Regulation No 561/2003), it is moreover appropriate to point out that, in the context of the present action for annulment, the Court’s judicial review must relate solely to the state of the legislation as it is currently in force. In proceedings for annulment, the Community judicature usually takes account of events that affect the actual substance of the dispute during the course of the proceedings, such as the repeal, extension, replacement or amendment of the contested act (see, in addition to Alpha Steel v Commission, Fabrique de Fer de Charleroi and Dillinger Huttenwerke v Commission and CEMR v Commission, paragraph 72 above, the order of the Court of Justice of 8 March 1993 in Case C-123/92 Lezzi Pietro v Commission [1993] ECR I-809, paragraphs 8 to 11). All the parties signified their agreement on this point at the hearing. 288 It falls therefore to be assessed whether the freezing of funds provided for by the contested regulation, as amended by Regulation No 561/2003, and, indirectly, by the resolutions of the Security Council put into effect by those regulations, infringes the applicants’ fundamental rights. 289 The Court considers that such is not the case, measured by the standard of universal protection of the fundamental rights of the human person covered by jus cogens, and that there is no need here to distinguish the situation of the entity Al Barakaat, as a legal person, from that of Mr Yusuf, as a natural person. 290 On this point, it is to be emphasised straight away that the contested regulation, in the version amended by Regulation No 561/2003, adopted following Resolution 1452 (2002) of the Security Council, provides, among other derogations and exemptions, that on a request made by an interested person, and unless the Sanctions Committee expressly objects, the competent national authorities may declare the freezing of funds to be inapplicable to the funds necessary to cover basic expenses, including payments for foodstuffs, rent, medicines and medical treatment, taxes or public utility charges (see paragraph 40 above). In addition, funds necessary for any ‘extraordinary expense’ whatsoever may henceforth be unfrozen, on the express authorisation of the Sanctions Committee. 291 The express provision of possible exemptions and derogations thus attaching to the freezing of the funds of the persons in the Sanctions Committee’s list clearly shows that it is neither the purpose nor the effect of that measure to submit those persons to inhuman or degrading treatment. 292 Moreover, it must be noted that while Article 17(1) of the Universal Declaration of Human Rights, adopted by the General Assembly of the United Nations on 10 December 1948, provides that ‘[e]veryone has the right to own property alone as well as in association with others’, Article 17(2) of that Universal Declaration specifies that ‘[n]o one shall be arbitrarily deprived of his property’. 293 Thus, in so far as respect for the right to property must be regarded as forming part of the mandatory rules of general international law, it is only an arbitrary deprivation of that right that might, in any case, be regarded as contrary to jus cogens. 294 Here, however, it is clear that the applicants have not been arbitrarily deprived of that right. 295 In fact, in the first place, the freezing of their funds constitutes an aspect of the sanctions decided by the Security Council against Usama bin Laden, members of the Al-Qaeda network and the Taliban and other associated individuals, groups, undertakings and entities. 296 In that regard, it is appropriate to stress the importance of the fight against international terrorism and the legitimacy of the protection of the United Nations against the actions of terrorist organisations. 297 In the preamble to Resolution 1390 (2002), the Security Council formally condemned, inter alia, the terrorist attacks of 11 September 2001, expressing its determination to prevent all such acts; noted that Usama bin Laden and the Al‑Qaeda network continued to support international terrorism; condemned the Al‑Qaeda network and associated terrorist groups for the multiple criminal terrorist acts they had committed, aimed at causing the deaths of numerous innocent civilians and the destruction of property, and reaffirmed further that acts of international terrorism constituted a threat to international peace and security. 298 It is in the light of those circumstances that the objective pursued by the sanctions assumes considerable importance, which is, in particular, under Resolution 1373 (2001) of the Security Council, referred to by the third recital in the preamble to the contested regulation, to combat by all means, in accordance with the Charter of the United Nations, threats to international peace and security caused by terrorist acts. The measures in question pursue therefore an objective of fundamental public interest for the international community. 299 In the second place, freezing of funds is a precautionary measure which, unlike confiscation, does not affect the very substance of the right of the persons concerned to property in their financial assets but only the use thereof. 300 In the third place, the resolutions of the Security Council at issue provide for a means of reviewing, after certain periods, the overall system of sanctions (see paragraphs 16, 26 and 37 above, and paragraph 313 below). 301 In the fourth place, as will be explained below, the legislation at issue settles a procedure enabling the persons concerned to present their case at any time to the Sanctions Committee for review, through the Member State of their nationality or that of their residence. 302 Having regard to those facts, the freezing of the funds of persons and entities suspected, on the basis of information communicated by the Member States of the United Nations and checked by the Security Council, of being linked to Usama bin Laden, the Al-Qaeda network or the Taliban and of having participated in the financing, planning, preparation or perpetration of terrorist acts cannot be held to constitute an arbitrary, inappropriate or disproportionate interference with the fundamental rights of the persons concerned. 303 It follows from the foregoing that the applicants’ arguments alleging breach of their right to make use of their property must be rejected. – The alleged breach of the right to a fair hearing304 The applicants’ arguments alleging breach of the right to a fair hearing amount, in essence, to the claim that their views were not heard and they were not given the opportunity to defend themselves before the adoption of the sanctions imposed on them. In that context, the applicants emphasise that they were not informed of the reasons for or justification of those sanctions. 305 In this regard, a distinction must be drawn between the applicants’ alleged right to be heard by the Sanctions Committee before their inclusion in the list of persons whose funds must be frozen pursuant to the Security Council’s resolutions at issue and their alleged right to be heard by the Community institutions before the adoption of the contested regulation. 306 With regard, first, to the applicants’ alleged right to be heard by the Sanctions Committee before their inclusion in the list of persons whose funds must be frozen pursuant to the Security Council’s resolutions at issue, clearly no such right is provided for by the resolutions in question. 307 Moreover, it appears that no mandatory rule of public international law requires a prior hearing for the persons concerned in circumstances such as those of this case, in which the Security Council, acting under Title VII of the Charter of the United Nations, decides, through its Sanctions Committee, that the funds of certain individuals or entities suspected of contributing to the funding of terrorism must be frozen. 308 Furthermore, it is unarguable that to have heard the applicants before they were included in that list would have been liable to jeopardise the effectiveness of the sanctions and would have been incompatible with the public interest objective pursued. A measure freezing funds must, by its very nature, be able to take advantage of a surprise effect and to be applied with immediate effect. Such a measure cannot, therefore, be the subject-matter of notification before it is implemented. 309 Nevertheless, although the resolutions of the Security Council concerned and the subsequent regulations that put them into effect in the Community do not provide for any right of audience for individual persons, they set up a mechanism for the re-examination of individual cases, by providing that the persons concerned may address a request to the Sanctions Committee, through their national authorities, in order either to be removed from the list of persons affected by the sanctions or to obtain exemption from the freezing of funds (see, inter alia, paragraphs 11, 21, 36 and 38 to 40 above). 310 The Sanctions Committee is a subsidiary body of the Security Council, composed of representatives of States which are members of the Security Council. It has developed into an important standing body responsible for the day-to-day supervision of the enforcement of the sanctions and can promote the consistent interpretation and application of the resolutions by the international community (Advocate General Jacobs’s Opinion in Bosphorus, paragraph 239 above, paragraph 46). 311 With particular regard to an application for re-examination of an individual case, for the purpose of having the person concerned removed from the list of persons affected by the sanctions, section 7 of the ‘Guidelines of the [Sanctions] Committee for the conduct of its work’, adopted on 7 November 2002 and amended on 10 April 2003 (see paragraph 67 above), provides as follows: ‘(a) Without prejudice to available procedures, a petitioner (individual(s), groups, undertakings, and/or entities on the 1267 Committee’s consolidated list) may petition the government of residence and/or citizenship to request review of the case. In this regard, the petitioner should provide justification for the de-listing request, offer relevant information and request support for de-listing; (b) The government to which a petition is submitted (the petitioned government) should review all relevant information and then approach bilaterally the government(s) originally proposing designation (the designating government(s)) to seek additional information and to hold consultations on the de-listing request; (c) The original designating government(s) may also request additional information from the petitioner’s country of citizenship or residency. The petitioned and the designating government(s) may, as appropriate, consult with the Chairman of the Committee during the course of any such bilateral consultations; (d) If, after reviewing any additional information, the petitioned government wishes to pursue a de-listing request, it should seek to persuade the designating government(s) to submit jointly or separately a request for de-listing to the Committee. The petitioned government may, without an accompanying request from the original designating government(s), submit a request for de-listing to the Committee, pursuant to the no-objection procedure; (e) The Committee will reach decisions by consensus of its members. If consensus cannot be reached on a particular issue, the Chairman will undertake such further consultations as may facilitate agreement. If, after these consultations, consensus still cannot be reached, the matter may be submitted to the Security Council. Given the specific nature of the information, the Chairman may encourage bilateral exchanges between interested Member States in order to clarify the issue prior to a decision.’ 312 The Court finds that, by adopting those Guidelines, the Security Council intended to take account, so far as possible, of the fundamental rights of the persons entered in the Sanctions Committee’s list, and in particular their right to be heard. 313 The importance attached by the Security Council to observance of those rights is, moreover, clearly apparent from its resolution 1526 (2004) of 30 January 2004 which is intended, on the one hand, to improve the implementation of the measures imposed by paragraph 4(b) of Resolution 1267 (1999), paragraph 8(c) of Resolution 1333 (2000), and paragraphs 1 and 2 of Resolution 1390 (2002) and, on the other, to strengthen the mandate of the Sanctions Committee. In accordance with paragraph 18 of Resolution 1526 (2004), the Security Council ‘[s]trongly encourages all States to inform, to the extent possible, individuals and entities included in the Committee’s list of the measures imposed on them, and of the Committee’s guidelines and resolution 1452 (2002)’. Paragraph 3 of Resolution 1526 (2004) states that those measures are to be further improved in 18 months, or sooner if necessary. 314 Admittedly, the procedure described above confers no right directly on the persons concerned themselves to be heard by the Sanctions Committee, the only authority competent to give a decision, on a State’s petition, on the re-examination of their case. Those persons are thus dependent, essentially, on the diplomatic protection afforded by the States to their nationals. 315 Such a restriction of the right to be heard, directly and in person, by the competent authority is not, however, to be deemed improper in the light of the mandatory prescriptions of international law. On the contrary, with regard to the challenge to the validity of decisions adopted by the Security Council through its Sanctions Committee under Chapter VII of the Charter of the United Nations on the basis of information communicated by the States and regional organisations, it is normal that the right of the persons involved to be heard should be adapted to an administrative procedure on several levels, in which the national authorities referred to in Annex II of the contested regulation play an indispensable part. 316 Further, Community law itself recognises the lawfulness of such procedural adaptations in the context of economic sanctions against individuals (see, by analogy, the order in ‘Invest’ Import und Export and Invest Commerce v Commission, paragraph 85 above). 317 It may be added that, as the United Kingdom has rightly pointed out at the hearing, it is open to the persons involved to bring an action for judicial review based on domestic law, indeed even directly on the contested regulation and the relevant resolutions of the Security Council which it puts into effect, against any wrongful refusal by the competent national authority to submit their cases to the Sanctions Committee for re-examination (see, by analogy, the order of the President of the Court of First Instance in Case T-47/03 R Sison v Council [2003] ECR II-2047, paragraph 39). 318 In this instance, moreover, the applicants were in fact heard by the Sanctions Committee, through the Swedish Government, and their hearing was so effective that two of the original applicants, Messrs Aden and Ali, were removed from the list of persons to whom the freezing of funds applies and, in consequence, were also removed from the list in Annex I to the contested regulation (see points 33 to 35 above). In this respect, it is appropriate to refer to paragraph 11 of the Sanctions Committee’s 2002 report: ‘At its 11th meeting, on 11 February 2002, the Committee considered two “notes verbales” from Sweden requesting the removal of three individuals of Swedish nationality and one entity from the Committee’s list and decided to undertake a substantial examination of that request. Sweden was invited to participate in the meeting and was represented by the Director-General for Legal Affairs of the Swedish Ministry of Foreign Affairs. Committee members recognised the importance of striking a balance between speed and effectiveness in the fight against terror, on the one hand, and the human rights of individuals protected on the international and national levels on the other. Following the meeting, the Chairman gave a briefing to the press and interested Member States. The briefing was attended by a large audience, suggesting that the issue raised by Sweden was of importance to other countries also’. 319 The fact remains that any opportunity for the applicants effectively to make known their views on the correctness and relevance of the facts in consideration of which their funds have been frozen and on the evidence adduced against them appears to be definitively excluded. Those facts and that evidence, once classified as confidential or secret by the State which made the Sanctions Committee aware of them, are not, obviously, communicated to them, any more than they are to the Member States of the United Nations to which the Security Council’s resolutions are addressed. 320 None the less, in circumstances such as those of this case, in which what is at issue is a temporary precautionary measure restricting the availability of the applicants’ property, the Court of First Instance considers that observance of the fundamental rights of the persons concerned does not require the facts and evidence adduced against them to be communicated to them, once the Security Council or its Sanctions Committee is of the view that there are grounds concerning the international community’s security that militate against it. 321 It follows that the applicants’ arguments alleging breach of their right to be heard by the Sanctions Committee in connection with their inclusion in the list of persons whose funds must be frozen pursuant to the resolutions of the Security Council in question must be rejected. 322 Second, the applicants cannot be denied their alleged right to be heard before the contested regulation was adopted on the sole ground, advanced by the Council and the United Kingdom, that neither the ECHR nor the general principles of Community law confer on individuals any right whatsoever to be heard before the adoption of an act of a legislative nature. 323 It is true that the case‑law on the right to be heard cannot be extended to the context of a Community legislative process culminating in the enactment of legislation involving a choice of economic policy and applying to the generality of the traders concerned (Case T-521/93 Atlanta and Others v EC [1996] ECR II‑1707, paragraph 70, upheld on appeal by the Court of Justice in Case C‑104/97 P Atlanta v European Community [1999] ECR I-6983, paragraphs 31 to 38). 324 In the instant case, however, the contested regulation is not of an exclusively legislative nature. While applying to the generality of economic operators concerned (see paragraph 186 above), it is of direct and individual concern to the applicants, to whom it refers by name, indicating that sanctions must be imposed on them. The case-law cited in the previous paragraph is therefore irrelevant. 325 It must therefore be borne in mind that, according to settled case-law, observance of the right to a fair hearing is, in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, a fundamental principle of Community law which must be guaranteed even in the absence of any rules governing the proceedings at issue. That principle requires that any person on whom a penalty may be imposed must be placed in a position in which he can effectively make known his views on the evidence on the basis of which the sanction is imposed (see, to that effect, Case C-135/92 Fiskano v Commission [1994] ECR I-2885, paragraphs 39 and 40; Case C-32/95 P Commission v Lisrestal and Others [1996] ECR I-5373, paragraph 21, and Case C-462/98 P Mediocurso v Commission [2000] ECR I-7183, paragraph 36). 326 The Council and the Commission were, however, right in observing that this case-law was developed in areas such as competition law, anti-dumping action and State aid, but also disciplinary law and the reduction of financial assistance, in which the Community institutions enjoy extensive powers of investigation and inquiry and wide discretion. 327 As a matter of fact, according to case‑law, respect for the procedural rights guaranteed by the Community legal order, especially the right of the person concerned to make his point of view known, is correlated to the exercise of discretion by the authority which is the author of the act at issue (Case C-269/90 Technische Universität München [1991] ECR I‑5469, paragraph 14). 328 In this instance, as is apparent from the preliminary observations above on the relationship between the international legal order under the United Nations and the Community legal order, the Community institutions were required to transpose into the Community legal order resolutions of the Security Council and decisions of the Sanctions Committee that in no way authorised them, at the time of actual implementation, to provide for any Community mechanism whatsoever for the examination or re-examination of individual situations, since both the substance of the measures in question and the mechanisms for re-examination (see paragraphs 309 et seq. above) fell wholly within the purview of the Security Council and its Sanctions Committee. As a result, the Community institutions had no power of investigation, no opportunity to check the matters taken to be facts by the Security Council and the Sanctions Committee, no discretion with regard to those matters and no discretion either as to whether it was appropriate to adopt sanctions vis‑à‑vis the applicants. The principle of Community law relating to the right to be heard cannot apply in such circumstances, where to hear the person concerned could not in any case lead the institution to review its position. 329 It follows that the Community institutions were not obliged to hear the applicants before the contested regulation was adopted. 330 The applicants’ arguments based on the alleged infringement of their right to be heard by the Community institutions before the contested regulation was adopted must therefore be rejected. 331 It follows that the applicants’ arguments alleging breach of the right to a fair hearing must be rejected. – Concerning the alleged breach of the right to an effective judicial remedy332 Examination of the applicants’ arguments relating to the alleged breach of their right to an effective judicial remedy must take into account the considerations of a general nature already given to them in connection with the examination of the extent of the review of lawfulness, in particular with regard to fundamental rights, which it falls to the Court to carry out in respect of Community acts giving effect to resolutions of the Security Council adopted pursuant to Chapter VII of the Charter of the United Nations. 333 In the circumstances of this case, the applicants have been able to bring an action for annulment before the Court of First Instance under Article 230 EC. 334 In dealing with that action, the Court carries out a complete review of the lawfulness of the contested regulation with regard to observance by the institutions of the rules of jurisdiction and the rules of external lawfulness and the essential procedural requirements which bind their actions. 335 The Court also reviews the lawfulness of the contested regulation having regard to the Security Council’s regulations which that act is supposed to put into effect, in particular from the viewpoints of procedural and substantive appropriateness, internal consistency and whether the regulation is proportionate to the resolutions. 336 Giving a decision pursuant to that review, the Court finds that the alleged errors in the identification of the applicants and two other entities that vitiate the contested regulation (see paragraphs 196 and 197 above), are without relevance for the purposes of these proceedings, since it is not disputed that the applicants are indeed one of the natural persons and one of the entities respectively entered in the Sanctions Committee’s list on 9 November 2001 (see paragraph 24 above). The same applies to the fact that according to the Swedish police authorities considered, after checking, that the second applicant’s accounts were in order (see paragraph 198 above). 337 In this action for annulment, the Court has moreover held that it has jurisdiction to review the lawfulness of the contested regulation and, indirectly, the lawfulness of the resolutions of the Security Council at issue, in the light of the higher rules of international law falling within the ambit of jus cogens, in particular the mandatory prescriptions concerning the universal protection of the rights of the human person. 338 On the other hand, as has already been observed in paragraph 276 above, it is not for the Court to review indirectly whether the Security Council’s resolutions in question are themselves compatible with fundamental rights as protected by the Community legal order. 339 Nor does it fall to the Court to verify that there has been no error of assessment of the facts and evidence relied on by the Security Council in support of the measures it has taken or, subject to the limited extent defined in paragraph 337 above, to check indirectly the appropriateness and proportionality of those measures. It would be impossible to carry out such a check without trespassing on the Security Council’s prerogatives under Chapter VII of the Charter of the United Nations in relation to determining, first, whether there exists a threat to international peace and security and, second, the appropriate measures for confronting or settling such a threat. Moreover, the question whether an individual or organisation poses a threat to international peace and security, like the question of what measures must be adopted vis-à-vis the persons concerned in order to frustrate that threat, entails a political assessment and value judgments which in principle fall within the exclusive competence of the authority to which the international community has entrusted primary responsibility for the maintenance of international peace and security. 340 It must thus be concluded that, to the extent set out in paragraph 339 above, there is no judicial remedy available to the applicant, the Security Council not having thought it advisable to establish an independent international court responsible for ruling, in law and on the facts, in actions brought against individual decisions taken by the Sanctions Committee. 341 However, it is also to be acknowledged that any such lacuna in the judicial protection available to the applicants is not in itself contrary to jus cogens. 342 Here the Court would point out that the right of access to the courts, a principle recognised by both Article 8 of the Universal Declaration of Human Rights and Article 14 of the International Covenant on Civil and Political Rights, adopted by the United Nations General Assembly on 16 December 1966, is not absolute. On the one hand, at a time of public emergency which threatens the life of the nation, measures may be taken derogating from that right, as provided for on certain conditions by Article 4(1) of that Covenant. On the other hand, even where those exceptional circumstances do not obtain, certain restrictions must be held to be inherent in that right, such as the limitations generally recognised by the community of nations to fall within the doctrine of State immunity (see, to that effect, the judgments of the European Court of Human Rights in Prince Hans‑Adam II of Liechtenstein v Germany of 12 July 2001, Reports of Judgments and Decisions 2001-VIII, paragraphs 52, 55, 59 and 68, and in McElhinney v Ireland of 21 November 2001, Reports of Judgments and Decisions 2001-XI, in particular paragraphs 34 to 37) and of the immunity of international organisations (see, to that effect, the judgment of the European Court of Human Rights in Waite and Kennedy v Germany of 18 February 1999, Reports of Judgments and Decisions, 1999‑I, paragraphs 63 and 68 to 73). 343 In this instance, the Court considers that the limitation of the applicants’ right of access to a court, as a result of the immunity from jurisdiction enjoyed as a rule, in the domestic legal order of the Member States of the United Nations, by resolutions of the Security Council adopted under Chapter VII of the Charter of the United Nations, in accordance with the relevant principles of international law (in particular Articles 25 and 103 of the Charter), is inherent in that right as it is guaranteed by jus cogens.344 Such a limitation is justified both by the nature of the decisions that the Security Council is led to take under Chapter VII of the Charter of the United Nations and by the legitimate objective pursued. In the circumstances of this case, the applicants’ interest in having a court hear their case on its merits is not enough to outweigh the essential public interest in the maintenance of international peace and security in the face of a threat clearly identified by the Security Council in accordance with the Charter of the United Nations. In this regard, special significance must attach to the fact that, far from providing for measures for an unlimited period of application, the resolutions successively adopted by the Security Council have always provided a mechanism for re-examining whether it is appropriate to maintain those measures after 12 or 18 months at most have elapsed (see paragraphs 16, 26, 37 and 313 above). 345 Last, the Court considers that, in the absence of an international court having jurisdiction to ascertain whether acts of the Security Council are lawful, the setting-up of a body such as the Sanctions Committee and the opportunity, provided for by the legislation, of applying at any time to that committee in order to have any individual case re-examined, by means of a procedure involving both the ‘petitioned government’ and the ‘designating government’ (see paragraphs 310 and 311 above), constitute another reasonable method of affording adequate protection of the applicants’ fundamental rights as recognised by jus cogens. 346 It follows that the applicants’ arguments alleging breach of their right to an effective judicial remedy must be rejected. 347 None of the applicants’ pleas in law or arguments having been successful, and the Court considering that it has sufficient information available to it from the documents in the file and the statements made by the parties at the hearing, the action must be dismissed, and there is no need to allow the application for the first applicant and Sir Jeremy Greenstock, former Chairman of the Sanctions Committee, to be heard. Costs348 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been asked for in the other party’s pleadings. Under the first subparagraph of Article 87(4), the Member States and institutions which have intervened in the proceedings are to bear their own costs. Under Article 87(6), where a case does not proceed to judgment, costs are to be in the Court’s discretion. 349 Having regard to the circumstances of the case and the forms of order sought by the parties, those provisions will find equitable application in a decision that the applicants will bear, in addition to their own costs, those of the Council and those incurred by the Commission up until 10 July 2002, including the costs of the interlocutory proceedings. The United Kingdom, and the Commission for the period after 10 July 2002, must bear their own costs. On those grounds,THE COURT OF FIRST INSTANCE (Second Chamber, Extended Composition)hereby:1. Declares that there is no longer any need to adjudicate on the application for annulment of Council Regulation (EC) No 467/2001 of 6 March 2001 prohibiting the export of certain goods and services to Afghanistan, strengthening the flight ban and extending the freeze of funds and other financial resources in respect of the Taliban of Afghanistan, and repealing Regulation (EC) No 337/2000 and for annulment of Commission Regulation (EC) No 2199/2001 of 12 November 2001 amending, for the fourth time, Regulation No 467/2001;2. Dismisses the action in so far as it is brought against Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaeda network and the Taliban, and repealing Regulation No 467/2001;3. Orders the applicants to bear, in addition to their own costs, those of the Council and those incurred by the Commission until 10 July 2002, including the costs of the interlocutory proceedings;4. Orders the United Kingdom of Great Britain and Northern Ireland, and the Commission for the period after 10 July 2002, to bear their own costs.Forwood Pirrung MengozziMeij VilarasDelivered in open court in Luxembourg on 21 September 2005.Registrar PresidentH. Jung J. PirrungTable of contentsLegal frameworkBackground to the disputeProcedure and forms of order sought by the partiesOn the procedural consequences of the adoption of the contested regulationOn the substance1. Concerning the first ground, alleging that the Council was incompetent to adopt the contested regulationThe first partArguments of the partiesFindings of the Court– Concerning the legal basis of Regulation No 467/2001– Concerning the legal basis of the contested regulationConcerning the second partConcerning the third part2. Concerning the second ground of annulment, alleging infringement of Article 249 EC3. Concerning the third ground of annulment, alleging breach of the applicants’ fundamental rightsPreliminary observationsConcerning the relationship between the international legal order under the United Nations and the domestic or Community legal order Concerning the scope of the review of legality that the Court must carry outConcerning the alleged breach of the applicants’ fundamental rights– Concerning the alleged breach of the applicants’ right to make use of their property– The alleged breach of the right to a fair hearing– Concerning the alleged breach of the right to an effective judicial remedyCosts* Language of the case: Swedish. | 7209a-5ffc972-494a | EN |
BELGIAN LEGISLATION REFUSING THE GRANT OF A TIDEOVER ALLOWANCE TO A NATIONAL OF ANOTHER MEMBER STATE WHO HAS COMPLETED HIS SECONDARY EDUCATION IN THAT OTHER STATE IS CONTRARY TO COMMUNITY LAW | Office national de l’emploivIoannis Ioannidis(Reference for a preliminary ruling from the Cour du travail de Liège)(Job-seekers ― European citizenship ― Principle of non-discrimination ― Article 39 EC –– Tideover allowances for young people seeking their first employment ― Grant conditional on completion of secondary education in the Member State concerned)Opinion of Advocate General Ruiz-Jarabo Colomer delivered on 9 June 2005 Judgment of the Court (First Chamber), 15 September 2005 Summary of the JudgmentFreedom of movement for persons — Workers — Equal treatment — Tideover allowances for young people seeking their first employment — Grant conditional on completion of secondary education in the Member State concerned — Not permissible — Justification – None(Art. 39 EC)It is contrary to Article 39 EC for a Member State to refuse to grant a tideover allowance to a national of another Member State seeking his first employment who is not the dependent child of a migrant worker residing in the Member State granting the allowance, on the sole ground that he completed his secondary education in another Member State. Inasmuch as it links the grant of the allowance to the requirement that the applicant has obtained the required diploma in that Member State, this condition is likely to be met more easily by national citizens and therefore risks placing nationals of other Member States at a disadvantage. Such a difference in treatment can be justified only if it is based on objective considerations which are independent of the nationality of the persons concerned and proportionate to the aim legitimately pursued by the national law. In this regard, while it is legitimate for the national legislature to wish to ensure that there is a real link between the applicant for that allowance and the geographic employment market concerned, a single condition concerning the place where the diploma of completion of secondary education was obtained is too general and exclusive in nature and goes beyond what is necessary to attain the objective pursued. (see paras 28-31, 38, operative part)JUDGMENT OF THE COURT (First Chamber)15 September 2005 (*) (Job-seekers – European citizenship – Principle of non-discrimination – Article 39 EC – Tideover allowances for young people seeking their first employment – Grant conditional on completion of secondary education in the Member State concerned)In Case C-258/04,REFERENCE for a preliminary ruling under Article 234 EC from the Cour du travail de Liège (Belgium), made by decision of 7 June 2004, received at the Court on 17 June 2004, in the proceedings Ioannis Ioannidis, THE COURT (First Chamber),composed of P. Jann, President of the Chamber, N. Colneric, J.N. Cunha Rodrigues (Rapporteur), M. Ilešič and E. Levits Judges, Advocate General: D. Ruiz-Jarabo Colomer, Registrar: R. Grass,having regard to the written procedure,after considering the observations submitted on behalf of:– the Office national de l’emploi, by Y. Denoiseux and G. Lewalle, avocats,– the Belgian Government, by Y. Denoiseux and G. Lewalle, avocats,– the Greek Government, by S. Bodina, Z. Chatzipavlou and M. Apessos, acting as Agents,– the Commission of the European Communities, by M. Condou and D. Martin, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 9 June 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Articles 12 EC, 17 EC and 18 EC.2 This reference has been made in the course of proceedings between Mr Ioannidis and the Office national de l’emploi (National Employment Office, hereinafter ‘ONEM’) regarding the latter’s decision to refuse to grant the respondent the tideover allowance provided for under Belgian law. Law Community law3 The first paragraph of Article 12 EC provides:‘Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.’ 4 Article 17 EC states:‘1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union … 2. Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby.’5 Article 18(1) EC provides that every citizen of the Union has the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in the Treaty and by the measures adopted to give it effect. 6 Under Article 39(2) EC freedom of movement for workers entails the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment. 7 Under Article 39(3) freedom of movement for workers ‘... shall entail the right, subject to limitations justified on grounds of public policy, public security or public health: (a) to accept offers of employment actually made;…’8 According to Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475), as amended by Council Regulation (EEC) No 2434/92 of 27 July 1992 (OJ 1992 L 245, p. 1), (hereinafter ‘Regulation No 1612/68’), a worker who is a national of a Member State shall enjoy, in the territory of another Member State, the same social and tax advantages as national workers. National law9 Belgian legislation provides for the grant of unemployment benefits, known as ‘tideover allowances’, to young people who have just completed their studies and are seeking their first employment 10 Article 36(1), first subparagraph, of the Royal Decree of 25 November 1991 on unemployment (Moniteur belge of 31 December 1991, p. 29888), as amended by the Royal Decree of 13 December 1996 (Moniteur belge of 31 December 1996, p. 32265), (hereinafter ‘the Royal Decree’), provides: ‘To qualify for a tideover allowance, the young worker must have:(1) completed his compulsory education;(2)(a) completed full-time higher secondary education or technical or vocational training at an educational establishment run, subsidised or approved by a [Belgian] community; …(h) pursued education or training in another Member State of the European Union provided that both the following conditions are fulfilled: – the young person provides documentation which shows that the education or training is of the same level as, and equivalent to, that mentioned under the previous headings of this point; – at the time of the application for the allowance the young person is the dependent child of migrant workers for the purposes of Article 48 of the EC Treaty who are residing in Belgium. The main proceedings and the question submitted for a preliminary ruling11 After completing his secondary education in Greece, Mr Ioannidis, who is of Greek nationality, arrived in Belgium in 1994. The certificate of education issued to him in Greece was recognised as being equivalent to the approved certificate of higher secondary education giving access to vocational higher education in Belgium. 12 After a three-year period of study, Mr Ioannidis obtained a graduate diploma in physiotherapy from the Haute école de la province de Liège André Vésale on 29 June 2000 and then registered as a job-seeker looking for full-time employment at the Office communautaire et régional de la formation professionnelle et de l’emploi (Community and Regional Office for Vocational Training and Employment). 13 From 10 October 2000 to 29 June 2001 Mr Ioannidis followed, in France, a paid training course in vestibular rehabilitation under an employment contract as a technician with a professional partnership of doctors specialising in oto-rhino-laryngology. 14 On 7 August 2001, after having returned to Belgium, Mr Ioannidis submitted an application for a tideover allowance to ONEM.15 By decision of 5 October 2001, ONEM rejected that application on the ground that Mr Ioannidis had not completed his secondary education at an educational establishment run, subsidised or approved by one of the three communities in Belgium, as required by heading 2(a) of the first subparagraph of Article 36(1) of the Royal Decree. 16 Mr Ioannidis contested that decision before the Tribunal du travail (Labour Court), Liège. In its decision of 7 October 2002, that court annulled the decision, declaring that ‘at the time of his application for the allowance, the applicant (was) himself a migrant worker, having worked in France’ and that ‘Article 36 of the Royal Decree … as interpreted by the administration, is clearly contrary to Article [39 EC]’. 17 Hearing the appeal brought by ONEM against that decision, the Cour du travail (Higher Labour Court), Liège, found that Mr Ioannidis did not fulfil any of the alternative conditions laid down by the national rules. In particular, he did not satisfy either the requirements of heading 2(a) of the first subparagraph of Article 36(1) of the Royal Decree, as he had not completed his secondary education in Belgium, or the requirements of heading (h) of that provision. The referring court observes that the respondent completed his upper secondary education in another Member State, which the documents produced show to be equivalent to and of the same level as that mentioned in heading (a) of the same provision in the Royal Decree. On the other hand, according to that court, no document or item in the file establishes that, on the date of lodging the application for a tideover allowance, Mr Ioannidis’ parents were migrant workers residing in Belgium. 18 As it was unsure as to the existence of possible indirect discrimination against Mr Ioannidis due to the fact that he was refused a tideover allowance on the sole ground that he had not completed his higher secondary education at an educational establishment run, subsidised or approved by the Belgian State although he had successfully completed equivalent education in his country of origin, the Cour du travail de Liège decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘Is it contrary to Community law (in particular Articles 12 [EC], 17 [EC] and 18 … [EC] for rules of a Member State (such as, in Belgium, the Royal Decree of 25 November 1991 on unemployment) which provide for a tideover allowance to be given to job-seekers who are (in principle) less than 30 years old on the basis of the secondary education they have completed to apply to job-seekers who are nationals of another Member State the condition, applicable equally to its own nationals, that the allowance is granted only if the required education has been completed in an educational establishment run, subsidised or recognised by one of the three national Communities (as laid down in the Royal Decree by heading 2(a) of the first subparagraph of Article 36(1)), with the result that the tideover allowance is refused in the case of a young job-seeker who is not a member of the family of a migrant worker, but who is a national of another Member State in which, before moving within the Union, he had pursued and completed secondary education, recognised as equivalent to the education required by the authorities of the State in which the application for the tideover allowance has been made?’ The question referred for a preliminary ruling19 By its question the national court is asking essentially whether it is contrary to Community law for a Member State to refuse a tideover allowance to a national of another Member State who is seeking his first employment on the sole ground that he completed his secondary education in another Member State. 20 It should be noted at the outset that the fact that the national court has formulated the question referred for a preliminary ruling with reference to certain provisions of Community law does not preclude the Court from providing to the national court all the elements of interpretation which may be of assistance in adjudicating on the case pending before it, whether or not that court has referred to them in its questions (see, in particular, Case C-241/89 SARPP [1990] ECR I-4695, paragraph 8, and Case C-456/02 Trojani [2004] ECR I-7573, paragraph 38). 21 In this case, it must be borne in mind that nationals of a Member State seeking employment in another Member State fall within the scope of Article 39 EC and therefore enjoy the right to equal treatment laid down in paragraph 2 of that provision. 22 The Court has already held that, in view of the establishment of citizenship of the Union and the interpretation of the right to equal treatment enjoyed by citizens of the Union, it is no longer possible to exclude from the scope of Article 39(2) EC a benefit of a financial nature intended to facilitate access to employment in the labour market of a Member State (Case C-138/02 Collins [2004] ECR I-2703, paragraph 63). 23 It is common ground that the tideover allowances provided for by the national legislation at issue in the main proceedings are social benefits, the aim of which is to facilitate, for young people, the transition from education to the employment market (Case C-224/98 D’Hoop [2002] ECR I-6191, paragraph 38). 24 It is also common ground that, on the date of lodging the application for the allowance, Mr Ioannidis was a national of a Member State who, having completed his education, was seeking employment in another Member State. 25 In those circumstances the defendant is justified in relying on Article 39 EC to claim that he cannot be discriminated against on the basis of nationality as far as the grant of a tideover allowance is concerned. 26 According to settled case-law, the principle of equal treatment prohibits not only overt discrimination based on nationality but also all covert forms of discrimination which, by applying other distinguishing criteria, lead in fact to the same result (see, inter alia, Case 152/73 Sotgiu [1974] ECR 153, paragraph 11, and Case C-209/03 Bidar [2005] ECR I-0000, paragraph 51). 27 The national legislation at issue in the main proceedings introduces a difference in treatment between citizens who have completed their secondary education in Belgium and those who have completed it in another Member State with only the former having a right to a tideover allowance. 28 That condition could place, above all, nationals of other Member States at a disadvantage. Inasmuch as it links the grant of that allowance to the requirement that the applicant has obtained the required diploma in Belgium, that condition can be met more easily by Belgian nationals. 29 Such a difference in treatment can be justified only if it is based on objective considerations which are independent of the nationality of the persons concerned and proportionate to the aim legitimately pursued by the national law (Case C-237/94 O’Flynn [1996] ECR I-2617, paragraph 19, and Collins, paragraph 66). 30 As the Court has already held, it is legitimate for the national legislature to wish to ensure that there is a real link between the applicant for that allowance and the geographic employment market concerned (D’Hoop, paragraph 38). 31 However, a single condition concerning the place where the diploma of completion of secondary education was obtained is too general and exclusive in nature. It unduly favours an element which is not necessarily representative of the real and effective degree of connection between the applicant for the tideover allowance and the geographic employment market, to the exclusion of all other representative elements. It therefore goes beyond what is necessary to attain the objective pursued (D’Hoop, paragraph 39). 32 Moreover, it is apparent from heading 2(h) of the first subparagraph of Article 36(1) of the Royal Decree that a job-seeker who has not completed his secondary education in Belgium nevertheless has a right to a tideover allowance if he has pursued education or training of the same level and equivalent thereto in another Member State and if he is the dependent child of migrant workers for the purposes of Article 39 EC who are residing in Belgium. 33 The fact that Mr Ioannidis’ parents are not migrant workers residing in Belgium cannot in any event provide a reason for refusing to grant the allowance applied for. That condition cannot be justified by the wish to ensure that there is a real link between the applicant and the geographic employment market concerned. Admittedly it is based on an element which can be considered as representative of a real and effective degree of connection. However, it is not inconceivable that a person, like Mr Ioannidis, who, after completing secondary education in a Member State, pursues higher education in another Member State and obtains a diploma there, may be in a position to establish a real link with the employment market of that State, even if he is not the dependent child of migrant workers residing in that State. Therefore, such a condition also goes beyond what is necessary to attain the objective pursued. 34 It must be added that the tideover allowance constitutes a social advantage within the meaning of Article 7(2) of Regulation No 1612/68 (D’Hoop, paragraph 17). 35 According to settled case-law, the principle of equal treatment laid down in Article 7 of Regulation No 1612/68, which extends to all the advantages which, whether or not linked to a contract of employment, are generally granted to national workers primarily because of their objective status as workers or by virtue of the mere fact of their residence on the national territory, is also intended to prevent discrimination to the detriment of descendants dependent on the worker (see, in particular, Case 32/75 Cristini [1975] ECR 1085, paragraph 19, Case 94/84 Deak [1985] ECR 1873, paragraph 22, and Case C-337/97 Meeusen [1999] ECR I-3289, paragraph 22). 36 It follows that dependent children of migrant workers who are residing in Belgium derive their right to a tideover allowance from Article 7(2) of Regulation No 1612/68 regardless of whether in that situation there is a real link with the geographic employment market concerned. 37 Having regard to the aforementioned considerations, it is not necessary to rule on the interpretation of Articles 12 EC, 17 EC and 18 EC. 38 Therefore, the answer to the question referred to the Court must be that it is contrary to Article 39 EC for a Member State to refuse to grant a tideover allowance to a national of another Member State seeking his first employment who is not the dependent child of a migrant worker residing in the Member State granting the allowance, on the sole ground that he completed his secondary education in another Member State. Costs39 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (First Chamber) hereby rules:It is contrary to Article 39 EC for a Member State to refuse to grant a tideover allowance to a national of another Member State seeking his first employment, who is not the dependent child of a migrant worker residing in the Member State granting the allowance, on the sole ground that he completed his secondary education in another Member State.[Signatures]* Language of the case: French. | ebcb3-586f212-4915 | EN |
THE COURT OF FIRST INSTANCE REDUCES THE FINE IMPOSED BY THE COMMISSION ON DAIMLERCHRYSLER FOR RESTRICTING PARALLEL TRADE IN MERCEDES-BENZ VEHICLES FROM €71 825 000 TO €9 800 000 | DaimlerChrysler AGvCommission of the European Communities(Competition – Article 81 EC – Agreements, decisions and concerted practices – Agency agreements – Distribution of motor vehicles – Economic unit – Measures seeking to obstruct parallel trade in motor vehicles – Price fixing – Regulation (EC) No 1475/95 – Fine)Summary of the Judgment1. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Meaning – Bilateral or multilateral conduct – Included – Unilateral conduct – Not included (Art. 81(1) EC)2. Competition – Community rules – Undertaking – Meaning – Economic unit – Legal persons with a distinct identity linked by an agency agreement – Rules as to whether an economic unit exists3. Competition – Agreements, decisions and concerted practices – Not allowed – Group exemption – Regulation No 1475/95 – Concept of ‘resale’(Commission Regulation No 1475/95, Art. 10(12))4. Competition – Administrative procedure – Statement of objections – Necessary content – Observance of the rights of the defence (Council Regulation No 17, Art. 19(1); Commission Regulation No 99/63, Arts 2 and 4)5. Competition – Agreements, decisions and concerted practices – Concerted practice – Meaning – Coordination and cooperation incompatible with the obligation on each undertaking to determine independently its conduct on the market 6. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Burden of proving the infringement on the Commission – Evidence adduced of participation in meetings having an anti-competitive object – Burden of proof on the undertaking as regards distancing in relation to decisions taken 7. Competition – Agreements, decisions and concerted practices – Decisions of associations of undertakings – Non-binding decision of an association applied by its members – Included 8. Competition – Agreements, decisions and concerted practices – Effect on trade between Member States – Concerted practice producing its effects in the whole of the territory of a Member State – Automatic effect9. Competition – Community rules – Infringement committed by a subsidiary – Imputation to the parent company – Conditions – Separate legal personality of the subsidiary not relevant – Relevance of the fact that the subsidiary is wholly owned – Obligation of the parent company to rebut the presumption that management power was actually exercised over its subsidiary (Art. 81(1) EC)1. The prohibition laid down in Article 81(1) EC concerns exclusively conduct that is coordinated bilaterally or multilaterally, in the form of agreements between undertakings, decisions by associations of undertakings and concerted practices. Accordingly, the concept of an agreement within the meaning of that provision centres around the existence of a joint intention between at least two parties. It follows that, where a decision by an undertaking constitutes unilateral conduct on its part, such a decision escapes the prohibition laid down in that article. (see paras 83-84)2. For the purposes of applying the competition rules, formal separation of two companies resulting from their having distinct legal identity, is not decisive. The test is whether or not there is unity in their conduct on the market. Thus, it may be necessary to establish whether two companies that have distinct legal identities form, or fall within, one and the same undertaking or economic entity adopting the same course of conduct on the market. Such a situation arises not only in cases where the relationship between the companies in question is that of parent and subsidiary. It may also occur, in certain circumstances, in relationships between a company and its commercial representative or between a principal and its agent. In so far as application of Article 81 EC is concerned, the question whether a principal and its agent or ‘commercial representative’ form a single economic unit, the agent being an auxiliary body forming part of the principal’s undertaking, is an important one for the purposes of establishing whether given conduct falls within the scope of that article. Thus, if an agent works for the benefit of his principal he may in principle be treated as an auxiliary organ forming an integral part of the latter’s undertaking, who must carry out his principal’s instructions and thus, like a commercial employee, forms an economic unit with this undertaking. The position is otherwise if the agreements entered into between the principal and its agents confer upon the agent or allow him to perform duties which from an economic point of view are approximately the same as those carried out by an independent dealer, because they provide for the agent accepting the financial risks of selling or of the performance of the contracts entered into with third parties. Therefore, an agent can lose his character as independent economic operator only if he does not bear any of the risks resulting from the contracts negotiated on behalf of the principal and he operates as an auxiliary organ forming an integral part of the principal’s undertaking. Accordingly, where an agent, although having separate legal personality, does not independently determine his own conduct on the market, but carries out the instructions given to him by his principal, the prohibitions laid down under Article 81(1) EC do not apply to the relationship between the agent and the principal with which he forms an economic unit. (see paras 85-88)3. The definition of the term ‘resale’ in Article 10(12) of Regulation No 1475/95 on the application of Article [81](3) [EC] to certain categories of motor vehicle distribution and servicing agreements shows that a supplier may prohibit dealers from supplying natural or legal persons deemed to be ‘resellers’ only where the latter dispose of motor vehicles in a new condition. The purpose of putting leasing contracts which include a transfer of ownership or an option to purchase before the expiry of the contract on the same footing as resales is to allow the supplier to guarantee the integrity of the distribution network by avoiding a leasing contract being used to facilitate the acquisition outside the exclusive distribution network of the ownership of a vehicle when it is still in a new condition. (see para. 153)4. The Commission must communicate objections which it raises against undertakings or associations concerned by them and is to deal in its decisions only with those objections in respect of which those undertakings or associations have been afforded the opportunity of making known their views as to the accuracy and the relevance of the facts, objections and surrounding circumstances on which the Commission relies. The statement of objections must be couched in terms that, albeit succinct, are sufficiently clear to enable the parties concerned properly to identify the conduct complained of by the Commission. It is only on that condition that the statement of objections can fulfil its function under the Community regulations of giving undertakings all the information necessary to enable them to defend themselves properly before the Commission adopts a final decision That requirement is observed where the decision does not allege that the persons concerned have committed infringements other than those referred to in the statement of objections and takes into consideration only facts on which the persons concerned have had the opportunity of making known their views. However, the Commission’s final decision is not necessarily required to be a replica of the statement of objections. Where the statement of objections provides a clear indication of the nature of the infringement of competition law which the undertaking in question is alleged to have committed and the material facts relied on in that regard, that undertaking is in a position to reply to those allegations and to defend its rights. For the decision adopted by the Commission subsequently to categorise an economic agreement as ‘vertical’ or ‘horizontal’ does not constitute a fundamental alteration to the complaints set out in the statement of objections. (see paras 188-189, 192)5. For there to be an agreement within the meaning of Article 81(1) EC, it is sufficient for the undertakings concerned to have expressed their joint intention to behave on the market in a certain way. Far from requiring that an actual ‘plan’ be drawn up, the criteria of coordination and cooperation must be understood in the light of the concept inherent in the provisions of the Treaty relating to competition that every economic operator must determine independently the policy which he intends to adopt in the common market. Although this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such operators, the object or effect of which is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market. (see paras 199-200)6. Where there is a dispute as to the existence of an infringement of the competition rules, it is for the Commission to prove the infringements found by it and to adduce evidence capable of demonstrating to the requisite legal standard the existence of the circumstances constituting an infringement. However, where it has been established that an undertaking has participated in meetings between undertakings of a manifestly anti‑competitive nature, it is for that undertaking to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention, by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs. In the absence of evidence of that distancing, the fact that an undertaking does not abide by the outcome of those meetings is not such as to relieve it of full responsibility for the fact that it participated in the concerted practice. (see paras 201-202)7. A measure may be categorised as a decision of an association of undertakings for the purposes of Article 81(1) EC even if it is not binding on the members concerned, at least to the extent that the members to whom the decision applies comply with its terms. (see para. 210)8. Where a concerted practice extends over the whole of the territory of a Member State it has, by its very nature, the effect of reinforcing the partitioning of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about. (see para. 212)9. The fact that a subsidiary undertaking has separate legal personality from its parent company is not sufficient to exclude the possibility of imputing its conduct to the latter, in particular where the subsidiary does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company. In that regard, while a 100 per cent shareholding of the capital of the subsidiary by the parent company does not in itself suffice for a finding that the latter actually exercised management power, which is a pre-condition for the imputation of the conduct of the former to the latter, the Commission is entitled to base its decision on such imputation on the fact that the parent company does not dispute that it was in a position to exert a decisive influence on its subsidiary’s commercial policy and produced no evidence to support its claim that the subsidiary was autonomous. Where the whole of the share capital of the subsidiary is held, the Commission is entitled to assume that the parent company exerts a decisive influence on the conduct of its subsidiary, particularly where the parent company had put itself forward in the administrative procedure as being the sole representative of the companies in the group. In those circumstances, it is for the parent company to rebut that presumption by sufficient evidence.(see paras 218-220)JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)15 September 2005 (*) In Case T-325/01,DaimlerChrysler AG, established in Stuttgart (Germany), represented by R. Bechtold and W. Bosch, lawyers, applicant,Commission of the European Communities, represented by W. Mölls, acting as Agent, and H.-J. Freund, lawyer, with an address for service in Luxembourg, defendant,APPLICATION primarily for annulment of Commission Decision 2002/758/EC of 10 October 2001 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.264 – Mercedes‑Benz) (OJ 2002 L 257, p. 1), and, in the alternative, for a reduction in the fine imposed by that decision, THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Fifth Chamber), composed of P. Lindh, President, R. García-Valdecasas and J.D. Cooke, Judges,Registrar: I. Natsinas, Administrator,having regard to the written procedure and further to the hearing on 25 May 2004,gives the followingJudgment Facts1 This action seeks the annulment of Commission Decision 2002/758/EC of 10 October 2001 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.264 – Mercedes-Benz) (OJ 2002 L 257, p. 1) (‘the contested decision’). 2 DaimlerChrysler AG (‘the applicant’) is a German group which carries on business in particular in the manufacture and marketing of motor vehicles. 3 On 21 December 1998, Daimler-Benz AG merged with the applicant under a business combination agreement of 7 May 1998. The applicant then became the legal successor to Daimler-Benz AG and all of the latter’s rights, assets, liabilities and obligations were transferred to it. 4 Before the merger, Daimler-Benz AG was the umbrella company of the Daimler-Benz group, which was active worldwide through its subsidiaries. In addition, on 26 May 1997, Mercedes-Benz AG, a subsidiary of Daimler-Benz AG, merged with the latter company. Since that date, it has been the motor vehicle division within Daimler‑Benz AG. As in the contested decision, the name ‘Mercedes‑Benz’ is used in this judgment to refer, as the context requires, to Daimler-Benz AG (until 1989), to Mercedes-Benz AG (until 1997), to Daimler-Benz AG (1997 and 1998) and to the applicant (from 1998). 5 From the beginning of 1995, the Commission received a number of complaints from consumers concerning restrictions on the export of new Mercedes-Benz motor vehicles imposed by companies in the Daimler‑Benz group in various Member States. 6 The Commission had information that companies belonging to that group were partitioning the market contrary to Article 81(1) EC. On 4 December 1996, the Commission adopted a number of decisions ordering investigations pursuant to Article 14 of Council Regulation No 17 of 6 February 1962: First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87). Those investigations took place on 11 and 12 December 1996 at the premises of Daimler-Benz AG in Stuttgart (Germany), Mercedes-Benz Belgium SA/NV in Belgium, Mercedes-Benz Nederland NV in Utrecht (Netherlands) and Mercedes-Benz España, SA, in Spain. 7 On 21 October 1998, the Commission sent a request for information to Daimler-Benz AG under Article 11 of Regulation No 17, to which the latter replied on 10 November 1998. On 15 June 2001, the Commission sent a further request for information to the applicant, to which the latter replied on 9 July 2001. In the course of carrying out the investigations on 11 and 12 December 1996, the Commission found and seized a large number of documents which, together with the requests for information sent to the applicant and the latter’s observations, constitute the basis of the contested decision. 8 On 10 October 2001, the Commission adopted the contested decision. Contested decision9 In the contested decision, the Commission held that Mercedes-Benz had itself or through its subsidiaries Mercedes-Benz España, SA (‘MBE’), and Mercedes-Benz Belgium SA (‘MBBel’) infringed Article 81(1) EC. According to the Commission, the measures established in the contested decision related to the retailing of Mercedes-Benz passenger cars (recitals 143 to 149). 10 In the contested decision, the Commission described the companies concerned and their distribution network. It stated that the distribution of Mercedes-Benz passenger cars in Germany is essentially carried out through a network comprising branches belonging to the group, agents having the status of commercial agents (as defined in Paragraph 84(1) of the German Commercial Code), who have the authority to negotiate business transactions, and commission agents (recital 15). The distribution network in Belgium comprises an importer, MBBel, which, from an unspecified date, was a wholly owned subsidiary of Daimler‑Benz AG, which has in turn been a wholly owned subsidiary of the applicant since 21 December 1998, and which sells new vehicles through two branches, dealers and agents/workshops, which also negotiate new-vehicle sales contracts (recitals 17 and 19). Passenger cars are distributed in Spain through a network comprising three branches of MBE and dealers. Some of the agents/workshops do not sell vehicles, but only negotiate sales contracts. MBE is a wholly owned subsidiary of the national holding company Daimler-Benz España, SA, which is in turn a 99.88 per cent subsidiary of Daimler-Benz AG. Since 21 December 1998, that holding company has been a wholly owned subsidiary of the applicant (recital 20). 11 The Commission held that, contrary to what the applicant had maintained during the administrative procedure, Article 81(1) EC applies to the agreements between Mercedes-Benz and its German agents in the same way as it would apply to an agreement with an authorised dealer. It stated that ‘the restrictions imposed on an agent must therefore be assessed in the same way as for a dealer’ (recital 168). 12 The Commission held in that regard, first, that the German Mercedes‑Benz agents have to bear a number of commercial risks inextricably linked to their function as agent for Mercedes-Benz and which result in Article 81 EC being applicable to the agreements between them and Mercedes-Benz (recitals 153 to 160). 13 In particular, a German Mercedes-Benz agent bears a considerable share of the price risk where he negotiates the sale of vehicles. If an agent offers discounts on the sale of new vehicles which are accepted by Mercedes-Benz, these are deducted in their entirety from his commission (recitals 155 and 156). 14 A German agent also bears the risk of transport costs for new vehicles under Clause 4(4) of the German agency agreement. In the same way as a dealer, the agent is required to pass on the costs of transport and the transport risk contractually to the customer (recital 157). 15 The agent must also use a considerable part of his own financial resources for sales promotion purposes. He must, in particular, acquire demonstration vehicles at his own expense (Clause 4(7) of the German agency agreement). Mercedes-Benz grants special terms for the purchase of demonstration and business cars. Those cars are subject to a minimum retention period of three to six months and a minimum running distance of 3 000 kilometres. Thereafter, the agent may resell them on the second-hand market, also bearing the sales risk for this not insignificant number of vehicles (recital 158). 16 In carrying out his activities, a German Mercedes‑Benz agent is exposed to a number of other commercial risks, acceptance of which is a precondition for becoming a Mercedes‑Benz agent. Clause 13 of the agency agreement requires the agent to carry out guarantee work on vehicles which are subject to a manufacturer’s guarantee. German agents are required, at their own expense, to set up a workshop and carry out after-sales service and guarantee work there and, on request, must provide standby and emergency cover (Clause 12 of the agency agreement). In addition, a German agent is required to maintain, at his own expense, a stock of spare parts to carry out repairs to vehicles in his workshop (Clause 14 of the agency agreement) (recital 159). 17 Secondly, the Commission indicated that, financially speaking, a German agent’s income from activities pursued on a self-employed basis exceeds many times over his income from negotiating the sale of new vehicles. It stated: ‘For his activity as an intermediary the agent receives a commission which in the case of passenger cars is made up of a basic commission of 12.2 per cent and a service commission of up to 3.6 per cent. This commission income of at most 15.8 per cent constitutes the revenue from the agency activity. Out of this revenue the agent has to finance the discounts he grants to car buyers. The revenue actually earned from agency business is therefore lower than the abovementioned 15.8 per cent.’ It goes on to say (recital 159): ‘the revenue from acting as an intermediary amounts, if vehicle prices are regarded as part of this revenue, to approximately 50 per cent of the total revenue of an agent. But the agent’s actual revenue from acting as an intermediary per se is the [above]mentioned commission. If this is compared with the agent’s revenue from activities contractually linked to dealing in new vehicles in respect of which the agent bears the entire risk, it becomes apparent that only about one-sixth of total revenue is derived from acting as an agent proper.’ 18 The Commission held that in view of the number and quantitative scope of the risks that the agents have to bear, the applicant’s argument that those risks are typical of those borne by a true commercial agent could not be accepted. It stated that: ‘the position would be different only if the agent could choose whether to assume in particular the considerable risks connected with demonstration and business vehicles, carrying out guarantee work, setting up maintenance and repair facilities and supplying spare parts, or simply to negotiate new-vehicle sales contracts’. That is, however, not the case (recital 160). 19 It rejected as irrelevant the applicant’s argument that the German agents form an integral part of its business. The applicant relied in that regard on ‘the requirements which the agent has to meet personally and commercially (his business activity generally involves selling exclusively Mercedes-Benz vehicles, acting as a “Mercedes-Benz agent”, setting up, equipping and staffing his business, advertising, maintaining a certain image, representing the interests of [the applicant], and complying with the Mercedes-Benz identification guidelines)’ and on the fact that the agents are ‘agents of a single company’ and may sell only Mercedes-Benz vehicles (recital 162). However, the Commission held in the contested decision that the criterion of ‘integration’ is, unlike risk allocation, not a separate criterion for distinguishing a commercial agent from a dealer (recital 163). The Commission compared the provisions of the German agency contracts referred to by the applicant with those of the agreements relating to dealerships abroad in order to show that German agents formed an ‘integral part’ of the undertaking (recital 164). It held that that comparison revealed that the requirements imposed on German agents were identical to those placed on dealers and that both forms of distributor formed an equally ‘integral’ part of the Mercedes-Benz distribution system (recital 165). 20 The Commission contends that Mercedes-Benz impeded competition by means of four separate measures. 21 In the first place, it claims that on the introduction of the new W 210 series (new E-Class) very clear instructions were issued, in particular in a document of 6 February 1996, to all members of the German distribution network, including agents, ‘to concentrate on their own territory’. The instructions applied not only to the new model but to sales of new vehicles more generally. At the end of the document, Mercedes-Benz threatened that it would: ‘not hesitate to withhold vehicles in the W 210 series, should [it] discover that an allocation is not warranted by the absorption capacity of a specific territory’. That lent particular emphasis to the instructions. 22 According to the Commission, the purpose of those instructions was to ensure that the dealers sold the W 210 and other models allocated to them within their contract territory alone and did not supply customers from outside the contract territory who did not belong to the customer base within that territory. That was intended, as the document put it, to limit ‘internal competition’, that is to say ‘intra-brand’ competition between German agents, and between those agents and German and foreign dealers. The aim of the document of 6 February 1996 was thus to restrict ‘intra‑brand’ competition. 23 The Commission held, secondly, that in nearly all cases customers from other Member States outside the contract territory were required to pay a deposit of 15 per cent of the purchase price. That practice made parallel trading even more difficult, as it restricted the freedom of agents to pursue their own marketing policy and, for example, to waive those deposits when they knew the identity of the customer from outside the contract territory. Even if such deposits might sometimes be advisable from a commercial point of view, no deposits were required for sales in Germany despite the fact that, there too, there might in some cases be similar concerns as to creditworthiness. That rule accordingly discriminated against parallel trading and favoured sales of vehicles in Germany (recital 174). 24 Thirdly, the Commission held that the purpose of the ban on supplying foreign leasing companies where no lessee was specified, which was incorporated into the German agency agreements (see Clause 2(1)(d)) and the Spanish dealership agreements (see Clause 4(d)), was to restrict competition between the leasing companies within the Mercedes-Benz group and outside leasing companies in Germany and Spain. The latter could acquire Mercedes vehicles only on a case‑by‑case basis, that is to say when they already had a specific customer available, but not for stock purposes. That made it impossible for them to supply a vehicle quickly. The rules governing the sale of vehicles to leasing companies also led to outside leasing companies not receiving the same discounts on purchases of vehicles for lease as those received by other operators of vehicle fleets. Taken as a whole, the provisions in question had a negative impact on the conditions under which the outside leasing companies could obtain Mercedes vehicles and hence could enter the downstream leasing market in competition with companies in the Mercedes-Benz group. The object of the rules governing the leasing activities of agents and dealers was to restrict competition on price and delivery terms for leased vehicles (recital 176). 25 Fourthly, the Commission held that the agreement of 20 April 1995 between MBBel and the Belgian Mercedes-Benz dealers’ association, which limited discounts to three per cent and provided for an outside agency to monitor the level of discounts agreed on E-Class vehicles, with larger discounts leading to reductions in allocations of new E-Class vehicles, had as its object the restriction of price competition in Belgium. 26 Having determined that the measures in question had an appreciable effect on trade between Member States and that they could not be exempted from the application of Article 81(1) EC, the Commission held that a fine should be imposed on the applicant as the party responsible for all the infringements of competition law committed by Daimler-Benz AG and Mercedes‑Benz AG and by the Daimler-Benz subsidiaries MBBel and MBE. 27 The Commission took the view that the measures aimed at restricting exports constituted a single infringement consisting of two elements (the instructions not to sell outside the contract territory and the 15 per cent deposit rule), which for a time had a cumulative effect. That infringement was particularly serious, so that a fine of a basic amount of EUR 33 million was appropriate. As regards the duration of the infringement, the Commission stated that, if both elements of the infringement were taken together, it began on 12 September 1985 and had not yet ended. It was therefore an infringement of long duration. However, the potential impact of the deposit rule was much smaller than that of the instructions aimed directly against exports. The latter had been in force only from 6 February 1996 to 10 June 1999, that is to say for three years and four months. The Commission therefore considered that it was appropriate to increase the basic amount by only 42.5 per cent, that is to say by EUR 14.025 million. The basic amount accordingly stood at EUR 47.025 million. 28 The Commission considered that the prohibition on selling vehicles to leasing companies for stock laid down in the German agency agreement and the Spanish dealership agreement should be classified as serious. The basic amount of the fine should be set at EUR 10 million. The infringement began on 1 October 1996 and had not yet ended. Its duration therefore amounted to five years, which represented a period of medium duration. It considered that the basic amount should be increased by 50 per cent on the basis of the duration of the infringement. The increase was accordingly EUR 5 million, thereby bringing the basic amount to EUR 15 million. 29 The Commission held that the measures adopted with the active participation of MBBel for fixing selling prices in Belgium were by their nature a very serious infringement of the competition rules. Overall, it considered that that infringement was serious and held that a basic amount of EUR 7 million was appropriate. Those measures were in force from 20 April 1995 to 10 June 1999, that is to say for a period of medium duration, and it was appropriate to increase the basic amount by 40 per cent, that is to say by EUR 2.8 million, to EUR 9.8 million. 30 There were no aggravating or mitigating circumstances recorded by the Commission in the contested decision. Therefore, the sum of the above amounts gives a total fine of EUR 71.825 million. 31 In the light of those considerations, the Commission adopted the contested decision, the operative part of which reads as follows: ‘Article 1[Mercedes-Benz has itself] or through [its] subsidiaries [MBE] and [MBBel] infringed Article 81(1) of the EC Treaty by taking the following measures to restrict parallel trade: – as of 6 February 1996 all agents in Germany were instructed as far as possible to supply new vehicles supplied to them, and in particular those in the W 210 series, only to customers in their own contract territory and to avoid internal competition; these measures were in force until 10 June 1999, – as of 12 September 1985 their agents in Germany were instructed to require a deposit of 15% of the vehicle price for orders for new vehicles placed by [customers from outside the contract territory]; this measure has not yet been terminated, – restricting, from 1 October 1996 until the present time, the supply of passenger cars to leasing companies for stock,– participating in agreements to restrict the granting of discounts in Belgium, these agreements having been concluded on 20 April 1995 and terminated on 10 July 1999. Article 2[Mercedes-Benz] shall, immediately after this Decision is notified, bring to an end the infringements established in Article 1 to the extent that they are still continuing and shall not replace them with restrictions having the same object or effect; in particular, it shall at the latest within two months of notification of this Decision: – withdraw circular No 52/85 of 12 September 1985 by sending a circular to the German agents and principal agents, in so far as it instructs them to require [customers from outside the contract territory] to pay a deposit of 15% when ordering a passenger car, – remove from the German agency agreements and the Spanish dealer agreements the rules prohibiting the sale of new vehicles to leasing companies for stock ... Article 3A fine of EUR 71.825 million is imposed on [Mercedes-Benz] in respect of the infringements referred to in Article 1.…’32 The contested decision shows that the Commission considered in essence that the expression ‘customer from outside the contract territory’ was used by the Mercedes-Benz group in the documents found in the course of the investigations (see paragraph 7 above) to denote, in cross-border sales, final consumers from another State within the European Economic Area. Procedure and forms of order sought33 By application lodged at the Registry of the Court of First Instance on 20 December 2001, the applicant brought the present action. 34 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Fifth Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure, requested the parties to answer a number of written questions before the hearing. The parties complied with that request. 35 The parties presented oral argument and answered the questions put by the Court at the hearing held in open court on 25 May 2004. 36 The applicant claims that the Court should: – annul the contested decision;– in the alternative, reduce the amount of the fine imposed in Article 3 of the contested decision;– order the Commission to pay the costs.37 The Commission contends that the Court should: – dismiss the action;– order the applicant to pay the costs. Law38 The applicant puts forward four pleas in law in support of its application. The first is based on an infringement of Article 81(1) EC and a manifest error in the assessment of the agreements entered into with the Mercedes-Benz agents in Germany. The second plea, regarding the first and third measures established by the Commission in the contested decision, is based on an infringement of Article 81 EC and of Commission Regulation (EC) No 1475/95 of 28 June 1995 on the application of Article [81](3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements (OJ 1995 L 145, p. 25). The third plea is based on an infringement of Article 81(1) EC and a manifest error in the assessment of the second and fourth measures established by the Commission in the contested decision. The fourth plea contends that the amount of the fine imposed by Article 3 of the contested decision is incorrect. The first plea, based on an infringement of Article 81(1) EC and a manifest error in the assessment of the agreements entered into with Mercedes-Benz agents in Germany Arguments of the parties39 The applicant challenges the Commission’s conclusions in the contested decision as to the legal status of the German agents. It argues that its German commercial agency agreements are not subject to the prohibition on concerted practices under Article 81(1) EC in so far as they relate to the activities of its agents in selling new Mercedes-Benz vehicles. The agents do not bear any of the risks involved in the sale of vehicles. Furthermore, they are wholly integrated into the Mercedes‑Benz organisation and have the same legal relationship with it as do its employees. They therefore satisfy the conditions laid down by the Court of Justice in settled case-law relating to the inapplicability of the prohibition on concerted practices to commercial agency agreements. 40 The applicant submits first of all that it maintains its own distribution network in Germany, both through branches and through commercial agents who act in the name and for the account of Mercedes‑Benz and dealers who act in their own name but for the account of Mercedes‑Benz. It states that agents in the Mercedes-Benz German sales network are not, either legally or economically, dealers in new vehicles. They negotiate purchase contracts for new vehicles on behalf of Mercedes-Benz in accordance with requirements laid down by the latter. The fact that the agents do not buy new vehicles from Mercedes‑Benz and thus hold no stock is of considerable importance from an economic point of view. The burden of risk associated with the sale of new vehicles, including those related to the holding of stock and the corresponding illiquidity of capital, lies entirely on Mercedes-Benz. The agents bear only the risk arising from their activities as intermediaries. The applicant is thus legally free to decide whether, and on what terms, it will enter into contracts for sale. The instructions given to agents and their contractual obligations as regards the entering into of contracts of sale and the terms on which they are written do not fall within the scope of the law relating to concerted practices. 41 The case-law of the Court of Justice provides that Article 81(1) EC does not apply to agency contracts when two cumulative conditions are satisfied, namely, first, that the agent is integrated in the sales network of the manufacturer and, secondly, that he carries out his activities as intermediary and representative for the exclusive benefit of the principal (Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663 and Case C-266/93 Volkswagen and VAG Leasing [1995] ECR I-3477). 42 As regards the requirement for ‘integration’, the approach followed by the Commission in the contested decision is illogical and incompatible with the case-law, in particular when the latter states that ‘the criterion of integration is, unlike risk allocation, not a separate criterion for distinguishing a commercial agent from a dealer’ (recital 163 in the contested decision). 43 By disregarding issues of ‘integration’ and by giving additional weight to the criterion of ‘risk allocation’, the Commission extended the scope of the prohibition on concerted practices to the commercial agency further than has ever been done before. However, it is clear from Suiker Unie and Others v Commission, cited in paragraph 41 above, that the Court of Justice takes the view that ‘integration’ means not only that the agent should not share in any risks, but also that his interests should be the same as those of his principal. 44 The applicant also argues that, contrary to what the Commission stated in the contested decision (see recitals 164 and 165 in the contested decision), the fact that foreign dealers who are not commercial agents transact with third parties in the same way as the German Mercedes‑Benz agents is of no significance. It must also be established that the corresponding risks are shared. Furthermore, the analogy cannot be sustained, as the case-law of the Court of Justice provides that ‘integration’ is dependent not only on external characteristics relating to the way in which the dealer transacts with third parties generally and customers in particular, but also on ‘internal’ factors associated with risk sharing and the requirement that the agent act wholly in the interests of his principal. 45 It also criticises the Commission for taking the view in the contested decision that, in assessing contracts entered into between a manufacturer and an agent from the point of view of the law relating to concerted practices, it is sufficient to determine whether or not the commercial agent has to bear the risks ‘inextricably’ linked to his function as intermediary (see, to that effect, recital 153 in the contested decision). That approach, which was adopted by the Commission in the contested decision and in its guidelines on vertical restraints (OJ 2000 C 291, p. 1) (‘the guidelines’) represents a departure from its approach to the applicability of Article 81 EC for which there is no objective justification. Furthermore, it is incompatible with the case-law of the Court of Justice on the matter. 46 The applicant accepts that Mercedes-Benz agents bear certain costs and risks. 47 First, an agent must assume in every case a ‘commission’ risk. The commission is usually fixed as a percentage of the volume of sales made by the agent. The agent’s ability to earn commission is therefore increased when the volume of sales is high and reduced when the volume of sales is low. When the principal, which is ultimately responsible for deciding whether a contract is to be concluded on the terms specified by the buyer, grants discounts, it is reducing not only its own revenue but also the commercial agent’s commission. However, the Mercedes-Benz agents do not share price risks and it is wrong to hold that the deduction of ‘price concessions’ from the agent’s commission is a ‘price risk’. 48 The true position is that the amount of the commission obtained by the agent is determined by the commercial agency agreement. It varies according to whether the sale represents a single transaction or was concluded with a major customer or a ‘user’. The agent is paid a lower commission for sales to major customers and certain users, since sales to customers which have a special contractual relationship with Mercedes-Benz (and not with the agent) in the form of volume or category discounts do not, generally speaking, require the same level of commitment as other kinds of sale, especially those to new customers. Payment to the agent of a lower commission is thus objectively justified. There is no rule of law which requires that commercial agents are always to be entitled to the same level of commission irrespective of the type of sale. 49 As regards new cars, a considerably higher level of commitment is required of dealers than of Mercedes-Benz agents, especially concerning forward funding of vehicles and the risk of sale. In the case of a dealer, the latter amounts to the whole of the sale price of the motor vehicle, whereas a Mercedes-Benz agent bears only the risk of not achieving his targeted commission. Furthermore, the exposure of commercial agents to ‘commission risk’ is limited to the amount of the commission. The risk of selling a motor vehicle at a loss is borne by the dealer but does not arise in the case of an agent. The fact that an agent may grant a discount under a special agreement concluded with the customer, to the detriment of his commission, does not mean that there is a commercial agency agreement for the purposes of the law relating to concerted practices. It should instead be seen as an element of leeway granted by Mercedes‑Benz to the agent. 50 Secondly, a Mercedes-Benz agent has to meet business expenses arising mainly out of the sales promotion activities which he undertakes with a view to successfully concluding the maximum possible number of sales. Thirdly, an agent undertakes, in his own name, for his own account and at his own risk, workshop repairs and the sale of spare parts. 51 The applicant challenges the Commission’s finding in the contested decision that the preferential treatment attaching to the activities of commercial agents cannot apply to the Mercedes-Benz agents since, in particular, they are contractually required to provide after-sales services in their own garages, to undertake guarantee work and to have spare parts in stock at all times (see paragraph 16 above). 52 In Volkswagen and VAG Leasing, cited in paragraph 41 above, the Court of Justice held that dealers participated in the risks linked to contracts entered into by them with VAG Leasing as commercial agents, by reason of the obligation to repurchase vehicles on the expiry of the leasing contracts at a price which had been agreed in advance. Moreover, the Court of Justice did not accept that selling vehicles to customers and negotiating the sale of vehicles as agents constituted parallel activities and referred to the after-sales servicing activities undertaken by the dealers in their own name and for their own account. However, that does not mean that the Court of Justice regarded after‑sales servicing as an independent activity, as it can exist only as an adjunct to the activity of selling. There is nothing in the judgment to suggest that the carrying-on of business as a commercial agent and the provision of after‑sales services lead to a double-sided relationship, thereby excluding any right to preferential treatment under the law relating to concerted practices. 53 The obligation imposed on agents under Clause 13(1) of the agency agreement ‘to carry out guarantee work on vehicles supplied by Daimler-Benz irrespective of where and through whom they were sold’ is a condition precedent to the application of the exemption under Article 5(1)(a) of Regulation No 1475/95. If Mercedes-Benz were not to have imposed the corresponding obligation to undertake guarantee work on its agents, the Commission would probably have argued that the agency agreements did not satisfy the conditions laid down under Regulation No 1475/95. 54 The Commission’s assumption that the only compensation an agent receives for guarantee work he carries out is a ‘guarantee payment’, calculated on the basis of the average customer cost rate and which therefore is ‘not necessarily’ the same as the rates which he might freely negotiate with and recover from third parties, is without foundation. By undertaking guarantee work, agents recover more than merely the reimbursement of their expenses; in other words, they recover the same payment they would have charged a third party for the same repair. Prices for this work cover the agent’s costs together with an element for profit. The agent carries out the guarantee work as part of his normal servicing activities and acts to that extent in his own name and for his own account. The difference from ‘ordinary’ repairs is ‘simply the fact that the owner of the vehicle is not the customer but Mercedes-Benz, which calls upon the agent to carry out the guarantee obligation, the latter being a matter for Mercedes-Benz alone’. 55 The same applies to the setting-up of the workshop and the maintenance of the stock of spare parts which the agent is required to undertake. Those activities are carried out by the agent in his own name and for his own account. It is accordingly appropriate for him to fund those investments. 56 The agents do not contribute towards transport costs (see, to that effect, recital 157 in the contested decision). It is true that Clause 4(4) of the agency agreement requires the agent to enter into an arrangement with the customer as to transport costs. However, that should be construed not as a risk but rather as an additional opportunity for the commercial agent to make a profit. The agent participates in transport arrangements organised by Mercedes-Benz with contractual forwarding agents, under which he can arrange for the transport of motor vehicles at a fixed price which is recharged, together with a supplement, to customers at the same time as they are invoiced for his services relating to the preparation and registration of the vehicle. Furthermore, even if it were the case that German commercial agents in the Mercedes-Benz distribution network are not entirely free of the transport cost risk, the risk involved is only an ‘insignificant’ one, whether seen as part of the wider whole or in isolation. 57 Agents’ participation in sales promotion does not entail participation in the risks linked to the different forms of selling, but arises from the obligation imposed on them to organise and fund the staffing and equipping of the commercial agency activities which they undertake. Agents do not take part in national or regional advertising, but only in promotional activities connected with their own business. Commercial agents bear the costs of those activities and the risks arising from them through their commission. The Commission’s argument that demonstration vehicles are specimens or documentation for the purposes of Article 4(2)(a) of Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents (OJ 1986 L 382, p. 17) is without foundation. That directive makes no reference to specimens but only to documentation, in other words material specifically produced for marketing purposes and not vehicles used for demonstration purposes and then sold by the agent on terms which give rise to no loss on his part. 58 The fact that a Mercedes-Benz agent may service a large number of demonstration vehicles does not mean that he participates in the risks relating to the sale of new vehicles, but only that his activities as agent require considerable investment in terms of marketing to customers. In that regard, the applicant contests the Commission’s finding in the contested decision that ‘an average of 21.66 per cent of the turnover of branches and agencies was accounted for by demonstration and business vehicles’. That rate reflects ‘the national turnover of Mercedes-Benz passenger cars’. It is not a figure which relates solely to agents. 59 By contrast, ‘if the rate is applied to agents, using as a denominator not … only the commissions earned by them but also the turnover of Mercedes-Benz in relation to sales effected through their agents, it falls to only eight per cent for new vehicles and 9.8 per cent if utility vehicles are included’. Furthermore, ‘if the share of demonstration and business vehicles is added to the agent’s actual turnover …, the rate for passenger cars alone is 15.8 per cent, or 19.3 per cent if utility vehicles are included’. 60 The Commission cannot treat the sale of demonstration vehicles, where the agent benefits from preferential terms, as a risk borne by the latter (recital 158 in the contested decision). Such a risk generally does not arise. On the contrary, activities involving demonstration vehicles provide additional revenue to the agent. However, even if the commercial agent was unable to dispose of demonstration vehicles at prices higher than his purchase price and thus incurred higher costs, that would not be a relevant argument. The commercial agent funds through his own resources only activities linked to the negotiation of sales which he is required to undertake under the commercial agency agreement and it is only the risks directly connected with those activities which fall to his account. 61 The Commission’s assertion in the contested decision that in total revenue figures for a typical commercial agency ‘only about one sixth of total revenue is derived from acting as an agent proper’ is legally irrelevant. The method of calculation used by the Commission in the contested decision is also incorrect and it is necessary to take account of ‘[the agent’s] revenue from external sources and not to take account only of the amount of commission received’. Agency business represents ‘approximately 55 per cent of the total turnover of a commercial agent according to the calculations made by Mercedes‑Benz’. 62 The Commission argues that given the nature and the extent of the costs and risks imposed by the applicant on its agents and the size of the revenue achieved by the agent through his independent activities in comparison with the revenue he achieves as an agent in selling new cars, Article 81(1) EC applies to the agreements entered into between the applicant and its German agents in the same way as it applies to an agreement entered into with a dealer. 63 The agreement between an agent and his principal is a contract entered into between two separate undertakings and accordingly it must, as a matter of principle, satisfy the requirements of competition law. The provisions of those agreements thus avoid the application of those rules only in so far as their object or effect is not anti‑competitive. 64 The applicant fails to have regard both to the nature of the risks which agents are required to bear and to the legal consequences of the transferring of those risks to its agents. 65 The Commission notes that, according to the applicant, case-law provides that in order for Article 81(1) EC not to apply to agency agreements two cumulative conditions must be satisfied: first, the risks inherent in such a relationship must be shared and, secondly, there must be ‘integration’ of the agent in the undertaking of the principal. The applicant is thus giving a wider scope to the prohibition on concerted practices in the context of agency relationships than the Commission does, because the latter refuses to recognise an agent’s preferential status under competition law only if he is required to bear significant financial and commercial risks without requiring, in addition, that he be integrated (however that expression may be defined) in the undertaking of his principal. Volkswagen and VAG Leasing, cited in paragraph 41 above, is to be interpreted as meaning that the Court of Justice no longer treats the criterion of ‘integration’ as being a separate concept from that of risk sharing. In Suiker Unie and Others v Commission, cited in paragraph 41 above, and in particular paragraphs 538 to 542 of that judgment, the Court of Justice held that an agent cannot be treated as being ‘integrated’ in the undertaking of his principal if he bears certain risks. 66 Moreover, the application to the present case of the reasoning of the Court of Justice in Suiker Unie and Others v Commission, cited in paragraph 41 above, shows that where relationships are ‘double-sided’, that is to say where the intermediary is both an agent and an independent trader, the prohibition of concerted practices applies not only to the activities which he carries on in his own name and for his own account but also to the activities he carries on in the name and for the account of the principal. In the present case, the applicant’s German agents carry out significant independent activities and even though the applicant and the agents do not market the same goods in carrying out their activities, contrary to the situation which arose in Suiker Unie and Others v Commission, cited in paragraph 41 above, the sale of new cars, the operation of a workshop and after-sales servicing are objectively closely connected. The agent is required to perform guarantee work on vehicles and to provide an after-sales service together with the sale of spare parts precisely in order that new cars may be sold, and the same applies to the other risks that he has to bear. That connection suggests that a uniform approach to the contractual relationship should be adopted, and that that approach should extend to the applicability of competition law. 67 The judgment of the Court of Justice in Case 311/85 Vlaamse Reisbureaus [1987] ECR 3801 bears no relevance to the resolution of these proceedings, as the facts which arose in that case differ from those which arise in the present dispute. 68 The Commission also refers to Volkswagen and VAG Leasing, cited in paragraph 41 above, where the Court of Justice confirmed that a commercial agent loses his preferential status under competition law when he bears even one of the risks arising from the contracts negotiated for his principal. Accordingly, the fact that the applicant’s German agents do not bear the whole, but only a significant share, of the risks arising from the transactions in which they act as intermediaries does not call into question the applicability of the prohibition on concerted practices to the measures restricting parallel trade which form part of the arrangements with them. 69 The applicant’s interpretation of Volkswagen and VAG Leasing, cited in paragraph 41 above (see paragraph 52 above) is incorrect. The applicant is attempting to give the impression that the contested decision goes beyond that case-law, whereas, on the contrary, the Commission interpreted it restrictively. It took into consideration the fact that the agents undertake separate activities involving commercial risks, namely services provided in relation to the manufacturer’s guarantee, after-sales servicing and the sale of spare parts only because they are an adjunct, thought by the manufacturer to be indispensable, to that part of the agent’s activities under which the agent acts as an intermediary. It is impossible to make sense of the applicant’s position that after-sales servicing should play no part in the present case for the purposes of assessing the measures restricting competition entered into as part of the agency relationship. 70 Some of the obligations imposed by a principal on its agent may go beyond the obligation of mutual defence of interests and thus be disproportionate. It is thus appropriate to investigate whether, in each individual case, the relevant obligation restricting competition is truly required by virtue of the nature of the relationship and whether it is necessary in order to protect the ‘legal status’ of the agent. 71 The Commission takes the view that the obligations which aim to limit ‘intra-brand’ competition on the market for goods and to restrict competition through price and conditions of supply for leased cars were not required by the nature of the relationship between the parties nor did they form an integral part of the arrangements for selling cars through commercial agents. That applies to the conditions under which the applicant restricted the agents’ commercial freedom by obliging them to require a deposit of 15 per cent from customers from the Community and by instructing them to sell, where possible, new vehicles only to customers within their contract territory and to avoid internal competition. It is wrong to argue, as the applicant does, that the prohibition on concerted practices applies to agency agreements only where the agent bears the risks and the costs arising from the conclusion or implementation of sales contracts entered into or negotiated by him on behalf of the undertaking and not where he carries on an independent economic activity as regards the activities which the principal has appointed him to carry out. That argument fails to have regard to the nature of the conduct complained of by the Commission. It also fails to take sufficient account of economic realities in that it has regard only to the upstream risks assumed by the agent by virtue of the fact that he purchases the goods in order to resell them. First, the extent of the risks which are removed from the applicant and taken on by the agent by virtue of that assumption will depend on the circumstances of each particular case. Secondly, the risks linked to upstream sales often arise from the fact that those sales require a market-specific infrastructure, irrespective of the acquisition of the goods by the agent. The Commission refers in that regard to the activities involving the performance of obligations under the manufacturer’s guarantee, which largely takes precedence over the guarantee provided by the reseller itself, and to after-sales servicing and the purchase, presentation and resale of demonstration vehicles. Mercedes dealers relieve the applicant of the sales risk, as such, only to a limited extent, as the latter manufactures its cars ‘to order’ and not for stock purposes. An undertaking which uses commercial agents to distribute its products and which transfers to them risks which are particular to the contracts or to the market must expect to see the prohibition on concerted practices apply to its relations with its agents. The obligatory assumption of economic risks by the agent should go hand in hand with the agent’s commercial freedom to face those risks and to restrict that commercial freedom is contrary to competition law where competition is appreciably restricted by doing so. 72 The applicant’s arguments regarding the analysis of the sharing of the various risks in the contested decision should be rejected apart from its observations relating to the place where the agreement was executed. 73 As regards price risk, the applicant transfers part of the marketing risk in its vehicles to its agents. The full amount of any discount offered by the agent is deducted from his commission. The commercial agents thus participate in the applicant’s sales risk and the prohibition on concerted practices accordingly applies (see, to that effect, Suiker Unie and Others v Commission, cited in paragraph 41 above), whether the agent forgoes his commission under a particular agreement on prices or under standard agreements as to terms and conditions which the applicant enters into with its major customers. In each case, the applicant uses the agent’s commission as a marketing incentive and thereby obliges the latter to share the costs and risks associated with the sale of vehicles. The agent’s commission is reduced by an amount which can be as high as six per cent when he sells a car to a customer with which the applicant has entered into an agreement as to terms and conditions. Moreover, the cost of discounts given to major customers is borne by the applicant only to the extent that they exceed six per cent. The position of dealers and agents is economically similar. Under Directive 86/653, an agent’s remuneration is generally calculated as a percentage of the volume of the contracts he has negotiated. 74 Where that volume differs from what had originally been anticipated, a commercial agent normally assumes only the risk that the agreed commission rates will be applied to that reduced volume. An agent is not required as a matter of course to take the steps necessary to ensure that his principal does not suffer the consequences of variations in volume by, for example, forgoing his commission to the extent of any discount. It is therefore impossible to interpret the fact that the agent assumes to a greater or lesser degree the applicant’s marketing risk in all types of contract as meaning simply that there is no agreement which prevents agents from forgoing their commission. 75 Agents also bear the risk associated with transport costs. Under the agency agreement, the agent is obliged to deliver the new car purchased by the customer to him and to agree the amount of the payment for that service with him. The opportunity to make a higher profit by virtue of the difference between the amount to be paid to the carrier and the payment agreed with the customer in no way affects the fact that the agent runs the risk of not receiving payment from the customer. If the vehicle is not delivered to the customer, transport costs already paid will none the less remain the responsibility of the agent. Inasmuch as the applicant relies on the obligations normally imposed on commercial agents and which form an integral part of the system, the answer should be that German law applicable to commercial agents provides that the delivery of the goods is a matter for the principal and not the agent. Lastly, it is unnecessary to consider whether the risks associated with transport costs are ‘insignificant’, as the agents must also bear many other commercial risks. 76 Under the agency agreement, the agent is required to devote a considerable part of his financial resources to sales promotion and he bears the sales risk for a large number of vehicles (see paragraph 58 above). With reference to the figure of 15.8 per cent to which the applicant refers (see paragraph 59 above), the revenue from resales of demonstration cars and business cars is considerable compared to the commission received by the agents as a result of acting as an intermediary in new-car sales. Contrary to what the applicant maintains, the financial commitment which the latter requires of its agents and the risk imposed on them cannot be considered separately from their activities as intermediaries, as demonstration cars are market-specific investments which the applicant requires the agents to make and which are directly relevant to marketing to the final customer. Article 4(2)(a) of Directive 86/653 requires the principal to make demonstration cars available free of charge to a commercial agent, as these represent the ‘specimens’ or the ‘documents’ necessary for him to carry on his activity. The applicant’s duties are thus passed on to the agents. It follows that the applicant requires its agents to assume the duties, risks and financial overheads linked to the marketing of its products which are imposed on it by the legislature. By requiring its agents to conduct themselves to a large degree as independent dealers in (demonstration) vehicles, the applicant is turning them into ‘false’ commercial agents, with the result that competition law applies. 77 The agents have to meet the manufacturer’s guarantee offered by the applicant for new cars, set up a workshop, maintain a stock of spare parts and offer after-sales and guarantee services at their own expense and at their own risk (recital 159 in the contested decision). Those market-specific investments required of the commercial agents mean that the latter share the costs and risks associated with the marketing of the applicant’s new cars. 78 The Commission challenges the distinction made by the applicant between the activities of the agent and after-sales services, stating that it is artificial and does not reflect economic reality. The purpose of after‑sales service is to promote the applicant’s sales in the light of the final customer’s expectation that there will be a maintenance network for the vehicle he is buying. Furthermore, the applicant itself treats commercial agency activities and after-sales servicing as an economic unit. Clause 6 of the agency agreement provides that, if the car is transferred to the contract territory of another agent within a specified period, part of the first agent’s commission is to be transferred to the second. The agent’s activity as an intermediary cannot therefore be considered in isolation from the costs and risks which the agent has to bear in providing guarantee services, after-sales service and spare parts. The Commission refers once again to the similarity between the present case and the facts which gave rise to the judgments in Volkswagen and VAG Leasing, cited in paragraph 41 above, and Suiker Unie and Others v Commission, cited in paragraph 41 above. The agent’s right to remuneration for providing guarantee and after-sales services is of no relevance, since he must none the less bear the costs and risks associated with carrying on his activity. Regulation No 1475/95, which the applicant refers to, does not apply where all that is involved is mere ‘intermediation’ in relation to the sale of new cars, since the element of ‘resale’, as defined in Article 10(12) thereof, is lacking. The agent could therefore perfectly well allow true agents the choice of whether or not to provide guarantee and after-sales services. Lastly, the risks assumed by the agent in relation to defective goods should be attributed primarily to his membership of the applicant’s guarantee network, and the same applies to after-sales servicing. 79 As regards the applicant’s objection that the Commission compared the agent’s revenue in terms of commission with the revenue which he realises in his own name and for his own account, the Commission argues that, even using the applicant’s benchmark as a basis, a large part of the agent’s economic activity falls within the independent activities required of him by the applicant and that that part must not be left out of account in assessing the contractual relationships between the applicant and its agents for the purposes of competition law. 80 The Commission rejects the applicant’s argument that the agents should be treated as branches. Whether an agent is an independent commercial agent does not depend on whether he acts in the interests of his principal or those of third parties as well. The prohibition on concerted practices applies if the agent has to bear contract- or market-specific risks, as is the case in these proceedings. Findings of the Court81 According to settled case-law, where the Court is faced with an application for the annulment of a decision pursuant to Article 81(1) EC, as a general rule it undertakes a comprehensive review of the question whether or not the conditions for the application of Article 81(1) EC are met (see, to that effect, Case 42/84 Remia and Others v Commission [1985] ECR 2545, paragraph 34, and Joined Cases 142/84 and 156/84 BAT and Reynolds v Commission [1987] ECR 4487, paragraph 62). 82 Article 81(1) EC provides: ‘The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market …’ 83 It is clear from the wording of that article that the prohibition thus laid down concerns exclusively conduct that is coordinated bilaterally or multilaterally, in the form of agreements between undertakings, decisions by associations of undertakings and concerted practices. It follows that the concept of an agreement within the meaning of Article 81(1) EC, as interpreted in case-law, centres around the existence of a joint intention between at least two parties (Case T‑41/96 Bayer v Commission [2000] ECR II‑3383, paragraphs 64 and 69, upheld by the Court of Justice in Joined Cases C‑2/01 P and C-3/01 P BAI and Commission v Bayer [2004] ECR I‑23). 84 It follows that, where a decision by a manufacturer constitutes unilateral conduct of the undertaking, that decision escapes the prohibition laid down in Article 81(1) EC (see, to that effect, Case 107/82 AEG v Commission [1983] ECR 3151, paragraph 38; Joined Cases 25/84 and 26/84 Ford and Ford of Europe v Commission [1985] ECR 2725, paragraph 21; and Case T-43/92 Dunlop Slazenger v Commission [1994] ECR II-441, paragraph 56). 85 It is also settled case-law that in competition law the term ‘undertaking’ must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question, even if in law that unit consists of several persons, natural or legal (Case 170/83 Hydrotherm [1984] ECR 2999, paragraph 11, and Case T-234/95 DSG v Commission [2000] ECR II-2603, paragraph 124). The Court of Justice has emphasised that, for the purposes of applying the competition rules, formal separation of two companies resulting from their having distinct legal identity, is not decisive. The test is whether or not there is unity in their conduct on the market. Thus, it may be necessary to establish whether two companies that have distinct legal identities form, or fall within, one and the same undertaking or economic entity adopting the same course of conduct on the market (see, to that effect, Case 48/69 ICI v Commission [1972] ECR 619, paragraph 140). 86 The case-law shows that this sort of situation arises not only in cases where the relationship between the companies in question is that of parent and subsidiary. It may also occur, in certain circumstances, in relationships between a company and its commercial representative or between a principal and its agent. In so far as application of Article 81 EC is concerned, the question whether a principal and its agent or ‘commercial representative’ form a single economic unit, the agent being an auxiliary body forming part of the principal’s undertaking, is an important one for the purposes of establishing whether given conduct falls within the scope of that article. Thus, it has been held that ‘if ... an agent works for the benefit of his principal he may in principle be treated as an auxiliary organ forming an integral part of the latter’s undertaking, who must carry out his principal’s instructions and thus, like a commercial employee, forms an economic unit with this undertaking’ (Suiker Unie and Others v Commission, cited in paragraph 41 above, at paragraph 480). 87 The position is otherwise if the agreements entered into between the principal and its agents confer upon the agent or allow him to perform duties which from an economic point of view are approximately the same as those carried out by an independent dealer, because they provide for the agent accepting the financial risks of selling or of the performance of the contracts entered into with third parties (see, to that effect, Suiker Unie and Others v Commission, cited in paragraph 41 above, at paragraph 541). It has therefore been held that an agent can lose his character as independent economic operator only if he does not bear any of the risks resulting from the contracts negotiated on behalf of the principal and he operates as an auxiliary organ forming an integral part of the principal’s undertaking (see, to that effect, Volkswagen and VAG Leasing, cited in paragraph 41 above, at paragraph 19). 88 Accordingly, where an agent, although having separate legal personality, does not independently determine his own conduct on the market, but carries out the instructions given to him by his principal, the prohibitions laid down under Article 81(1) EC do not apply to the relationship between the agent and the principal with which he forms an economic unit. 89 Under this plea in law, the parties are in disagreement as to the Commission’s analysis in the contested decision of the legal status of the German Mercedes-Benz agents for the purposes of Article 81(1) EC and in particular as to the degree of risk borne by those agents under the agency agreement and the question of their integration into Mercedes‑Benz. 90 It is accordingly for the Court to consider, in the light of the above, whether, in the contested decision, the Commission correctly assessed the legal relationship between the applicant and its commercial agents in Germany. 91 It should be noted that that relationship is governed, in particular, by the terms of a standard-form agreement entered into between Mercedes‑Benz and its agents and by the German Commercial Code. In its replies to the written questions put by the Court (see paragraph 34 above), the applicant stated that the version of the standard-form agency agreement considered in the contested decision was that of June 1997. It also confirmed that that version was essentially identical to the versions in force during the whole of the period to which the contested decision relates. The documents before the Court show that the terms and conditions of the standard-form agreement are unilaterally determined by Mercedes-Benz. It is also not in dispute that the agreement entered into between Mercedes-Benz and its German agents is an agency contract under German commercial law. The Commission has not argued in these proceedings that the agency agreements entered into by Mercedes-Benz with individual agents differ materially in any way. 92 The parties do not dispute that the duties formally conferred on the agent under the agency agreement reflect the way in which the agreement is performed in practice. Thus, it is agreed that, both under the terms of the agency agreement and in practice, it is Mercedes-Benz, and not its German agents, which is responsible for selling new Mercedes-Benz cars in the Federal Republic of Germany directly to customers, and that agents are prohibited from selling them in their own name and for their own account. 93 The agency agreement is worded in such a way that the German agent has no authority or power to sell Mercedes-Benz vehicles. The role of the German agent is limited to seeking orders from potential customers, which it passes on to Mercedes-Benz for approval and implementation. In that regard, Clause 4(1) and (3) of the agency agreement states that the agent is to negotiate vehicle sales at prices fixed by Mercedes-Benz and that the contract of sale is to enter into force only from the time when Mercedes-Benz has accepted the order which the agent has passed on. 94 It is also clear from the documents before the Court that when he negotiates a contract for sale with a customer, the agent has no authority with regard to the price of the vehicle to be received by Mercedes-Benz. In its replies to the written questions put by the Court, the applicant confirmed that the agent has no authority to grant discounts at the expense of Mercedes‑Benz without the latter’s agreement. It added, however, that the agent was authorised to grant discounts which would be deducted from its own commission without that agreement and confirmed that the agency agreement did not contain any provision which prohibited such a partial waiver of commission. The applicant stated that, if the agent grants discounts to customers when selling new cars, he has to deduct them from his commission. 95 It should now be considered whether the Commission was correct to state in the contested decision that when the German agent negotiates the sale of vehicles he bears a considerable share of the price risk associated with those vehicles when he grants discounts which fall to be deducted in their entirety from his commission (see recital 155). 96 The documents before the Court show that German agents, unlike Mercedes-Benz dealers in other countries, do not buy new vehicles from Mercedes-Benz for resale to customers and it is a matter of agreement that the agent is not required to hold a stock of new vehicles (see recital 156 in the contested decision). The agency agreement provides that the agent may buy new Mercedes-Benz vehicles only for his own requirements or for demonstration purposes (Clause 9(2)). 97 As the German Mercedes-Benz agent is not required to hold a stock of cars, it is wrong to treat him, for economic purposes, as being in the same position as a dealer in cars who receives from the manufacturer, by way of remuneration, a margin which he uses not only to fund his new-car sales business in general, but also, and above all, to grant discounts to car buyers (see recital 156 in the contested decision). It should be observed in that regard that a Mercedes-Benz agent is not obliged, either under the agency agreement or in practice, to give up part of his commission in order to sell a car which he has in stock. That would represent a real price risk, as he would already have had to bear the costs associated with the purchase of the car and of holding it in stock. Unlike a dealer, the agent does not bear the risk of cars which he holds in stock remaining unsold. Therefore, if the agent does not wish to forgo a part of his commission, he does not take an order for a car. 98 The terms of the Mercedes-Benz dealership agreements entered into in Belgium and Spain show that the dealers are required to hold a stock of vehicles at all times. The volume of that stock is to be determined in particular by agreement between the parties (see Clause 8 of the Belgian dealership agreement and Clause 15(a) of the Spanish dealership agreement). It follows that, as regards the sale of vehicles, the position of the Mercedes-Benz agent in Germany differs considerably from that of Mercedes-Benz dealers in Belgium and Spain. The latter bear a substantial share of the risk associated with vehicle sales, whereas in Germany that risk is essentially borne by Mercedes-Benz. The Commission was therefore wrong to treat the agent as being in the same economic position as a dealer with respect to price risk (recital 156 in the contested decision). 99 In the circumstances of the present case, the fact that a German Mercedes-Benz agent is authorised, without, however, being obliged, to grant discounts which are deducted from his commission and exercises his commercial freedom in forgoing a part of his commission on individual sales in order, if possible, to maximise his overall commission by selling more cars cannot be classified as ‘price risk’. 100 It follows from the above that it is Mercedes-Benz which sells the vehicles and which takes, on a case-by-case basis, the decision to accept or to reject the orders negotiated by the agent. It seems that the commercial freedom of a German agent in relation to the sale of Mercedes-Benz vehicles is extremely limited, so that he is not in a position to influence competition on the market in question, namely the retail market for Mercedes passenger cars (see recital 143 in the contested decision). 101 Thus, when a customer orders a vehicle but the sale does not proceed, the financial implications, and hence the risks associated with that transaction, remain with the applicant. Indeed, the latter confirmed at the hearing that it was solely responsible for all risks associated inter alia with non-delivery, defective delivery and customer insolvency. 102 In summary, it is clear from the points set out above that, as regards the market in question, it is Mercedes-Benz, and not its German agents, which determines the conditions applying to all car sales, in particular the sale price, and which bears the principal risks associated with that activity, as the German agent is prevented by the terms of the agency agreement from purchasing and holding stocks of vehicles for sale. In those circumstances, it must be held that the relationship between the agents and the applicant is such that the former sell Mercedes-Benz vehicles in all material respects under the direction of the applicant, with the result that they should be treated in the same way as employees and considered as integrated in that undertaking and thus forming an economic unit with it. It follows that, in carrying on business on the market in question, the German Mercedes-Benz agent does not himself constitute an ‘undertaking’ for the purposes of Article 81(1) EC. 103 It is necessary to consider whether that conclusion is undermined by the Commission’s claim in the contested decision that, under the agency agreement, the applicant requires its agents to bear other costs and risks, without giving them any choice in the matter. 104 In that regard, the Commission held in the contested decision that under the agency agreement Mercedes-Benz does not bear the risk associated with transport costs, but imposes it on the agent (see recital 157). The latter, like an independent dealer, must bear the transport cost risk of new vehicles and pass on those costs to the customer through the contract entered into with him. 105 The Court notes in that regard that Clause 4(4) of the agency agreement provides that ‘if the customer does not himself collect the vehicle at the factory gate, the agent is to deliver it in return for a payment to be agreed with the customer’. In its replies to questions put by the Court, the applicant confirmed that in Germany 35 per cent of cars had been handed over to customers at the factory in 2003. Although that information does not relate to the period covered by the contested decision, it none the less shows that the possibility under the agency agreement of the customer taking delivery of a car at the factory is far from a purely theoretical one which is relevant only when the agent and the customer cannot agree on the costs or terms of delivery. Moreover, the Commission confirmed at the hearing that it was unlikely that the transport cost risk would apply in reality. In practice, the customer is informed of the date of delivery of the vehicle before arrangements for transport are put in place and if he cannot be contacted the vehicle does not leave the factory. 106 It is clear from the above that the Commission has significantly overstated the degree of risk borne by the agent in relation to transport costs. 107 The Commission also stated in the contested decision that under the agency agreement the agent must acquire demonstration vehicles for his own account (recital 158), carry out repair work under the manufacturer’s guarantee (subparagraph (a) of recital 159), set up a workshop for his own account and provide after-sales service and guarantee work and, on request, standby and emergency cover and keep a stock of spare parts for his own account (subparagraphs (b) and (c) of recital 159). The Commission held in the contested decision that, if only in view of the number and quantitative scope of the risks that Mercedes-Benz agents have to bear, the latter’s argument that the risks assumed by its German agents are typical of those borne by a genuine commercial agent cannot be accepted (recital 160). 108 It should be observed in that regard that Clause 4(7) of the agency agreement requires the agent to bear the costs of demonstration vehicles himself and that Mercedes-Benz has the right, if necessary, to specify the number of such vehicles it considers are needed. It thus appears that when those demonstration vehicles are purchased by the agent, the latter runs a certain risk. It is possible, for example, that those vehicles may be difficult to resell at a profit. However, even if it is accepted that such a risk exists, it none the less remains the case, as the Commission itself found in recital 158 in the contested decision, that the vehicles were purchased on preferential terms and may be resold three to six months later if they have accumulated a minimum of 3 000 kilometres. That point significantly undermines the importance which the Commission attaches to the obligation regarding demonstration vehicles in the contested decision and, accordingly, to the extent of the risk in question. 109 It follows that the Commission’s analysis in recital 158 in the contested decision materially overstates the importance of the risks associated with the obligation on agents to purchase demonstration vehicles. 110 As regards the Commission’s observations on the agents’ obligation to carry out repair work under the guarantee, the documents before the Court show that the agent receives a guarantee payment from Mercedes‑Benz for the approved guarantee work and that that payment is calculated, as regards the cost of labour, on the basis of the average customer cost rate weighted by reference to turnover, with the agent notifying the rate to Mercedes‑Benz in advance at the start of each quarter, and, as regards the cost of materials, on the basis of the cost price to the agent plus a premium in respect of Mercedes-Benz products (see Clause 13(3) of the agency agreement). 111 The Commission has failed to show that the guarantee payment is commercially inadequate and that the agent accordingly bears a genuine financial risk as regards the obligation to carry out repair work under guarantee. The contested decision does not show that those activities associated with the sale of Mercedes-Benz cars in fact give rise to exceptional risks, even if it is true that if they are not properly and efficiently managed they may be loss-making and reduce, or even eliminate, the profits made by the agent in selling cars. The Commission has also failed to prove that the obligations imposed on the agent to set up a workshop, to provide after‑sales servicing and to acquire and stock spare parts give rise to meaningful economic risks. 112 The true position is that the Commission merely lists the obligations imposed under the agency agreement that are linked to the sale of vehicles and mentions the alleged significance of the revenue obtained by the agent from those activities which are contractually linked to the sale of vehicles compared with the revenue he obtains from the sale of cars themselves, without showing how those obligations represent material risks for which the agent is responsible. The Commission did not carry out a correct assessment of the extent of those obligations in practical terms. In the view of the Court, those obligations do not represent a commercial risk which would justify a Mercedes-Benz agent being categorised as an independent operator. 113 It follows that the categorisation of the status of the German Mercedes‑Benz agent under Article 81(1) EC set out in paragraph 102 above is not undermined by the fact that the German Mercedes-Benz agents are required to undertake certain activities and assume certain financial obligations under the agency agreement. It should also be noted that the activities are carried out on markets other than the market at issue in the present case. Even if it must be recognised that those obligations expose the agent to certain limited risks, they do not of themselves operate to affect the relationship between the applicant and its agents under competition law as regards the market at issue in these proceedings. 114 The Commission also states in the contested decision that a number of the provisions of the German agency agreement are the same as those of the Mercedes-Benz dealership agreements entered into in Belgium and Spain and concludes from that ‘that the requirements placed on agents are identical to those placed on dealers and that both forms of distributor form an equally integral part of the Mercedes-Benz sales organisation’ and that that ‘aspect is thus not a suitable basis for distinguishing between commercial agents and dealers’ (recital 165). 115 The provisions in question concern in particular the obligations to do all that is necessary to distribute the products, to protect the applicant’s interests as regards the use of the Mercedes-Benz name and trade mark and the rules relating to the setting-up of branches and showrooms away from the main premises. Those provisions essentially concern ancillary matters which are common to all types of distribution agreement and, as the Commission itself argues, do not serve to distinguish a commercial agent from an independent dealer. 116 Contrary to what the Commission claims in recital 165 in the contested decision, those provisions do not show that the Mercedes-Benz dealers in Belgium and Spain are as strongly integrated in the Mercedes-Benz distribution system as its German agents. The Court considers that that conclusion by the Commission is manifestly incorrect and fails to take account of the fundamental differences between the German agents and the Belgian and Spanish dealers as regards the sale of Mercedes‑Benz vehicles. 117 Unlike the German agency agreement, the standard-form Mercedes‑Benz dealership agreements in Belgium and Spain provide in particular that the dealer is responsible for the marketing of vehicles and the negotiation of sales. The dealer buys his goods and sells them to his customers for his own account, in his own name and at his own risk (see Clause 2 of the Belgian agreement and Clause 6 of the Spanish agreement). Similarly, the standard-form Mercedes-Benz dealership agreements in Belgium and Spain provide that Mercedes-Benz and its dealers are to remain independent. The dealer is not an agent or a representative of Mercedes-Benz and neither of the parties can bind the other (see Clause 2 of the Belgian agreement and Clause 6 of the Spanish agreement). In addition, the Belgian and Spanish dealers have to maintain at all times a stock of new vehicles, over and above vehicles designated as demonstration vehicles, which are to be displayed at their premises and delivered to their customers (Clause 8 of the Belgian agreement and Clause 15(a) of the Spanish agreement). Like the German agency agreement, conditions of sale are annexed to the Belgian and Spanish agreements but, in the case of the latter, the conditions relate to the sale of cars by the Mercedes-Benz group to the dealer (Clause 12 of the Belgian agreement and Clause 8 of the Spanish agreement). 118 The Court is therefore of the opinion that, contrary to the view taken by the Commission, those matters emphasise the material difference between, on the one hand, the role of the German agent, who forms an integral part of the undertaking of his principal, Mercedes-Benz, and, on the other hand, that of the independent dealer in Belgium and Spain. The market at issue in these proceedings is that of the retail sale of Mercedes-Benz passenger cars. An independent dealer is in a position to determine, or at the very least to influence, the terms on which the sales are made, as he is the seller, who bears the main share of the price risk in the vehicle and who maintains a stock of the vehicles. It is that negotiating margin of the dealer, which comes between the manufacturer and the customer, which exposes the dealer to a risk that Article 81 EC may apply to his relationship with the manufacturer. The role and the status of the German Mercedes-Benz agent in the present case are very different. 119 It follows that the existence of an agreement between undertakings for the purposes of Article 81(1) EC has not been established to the requisite legal standard. 120 The first plea in law must therefore be accepted as being well founded. The second plea in law, based on an infringement of Article 81 EC and of Regulation No 1475/95 as regards the first and third measures established by the Commission in the contested decision 121 The second plea is divided into two parts. In the first place, the applicant submits that the Commission has failed to prove in the contested decision that Mercedes-Benz entered into agreements with its commercial agents in Germany which prevented, within the meaning of Article 81(1) EC, the latter from selling vehicles to final customers abroad. It states that the instructions given to the agents related only to sales to unauthorised resellers, and they are accordingly exempt under Article 3(10) of Regulation No 1475/95. In the second place, the applicant argues that the restrictions on supplies to leasing companies in Spain and Germany do not constitute restrictions on competition for the purposes of Article 81(1) EC and are, in any event, exempt under Regulation No 1475/95. 122 It follows from the findings of the Court in relation to the first plea that the commercial agency agreements entered into by Mercedes-Benz with its agents in Germany are not subject to the prohibition on concerted practices under Article 81(1) EC. Accordingly, any instructions that Mercedes-Benz may have given to its agents in Germany not to sell to customers outside their contract territory and the alleged restrictions on supplying leasing companies in Germany do not fall within the scope of Article 81(1) EC. It is therefore unnecessary to consider the first part of this plea nor is it necessary to consider the second part of it in so far as it concerns obligations imposed on the German agents regarding the sale of new cars to leasing companies. 123 The applicant claims that the Commission was wrong to contend in the contested decision that the aim of the restrictions on supplying leasing companies in Spain ‘for stock’ is to restrict competition. There are a number of reasons why the Spanish dealership agreements do not infringe Article 81(1) EC. First, as regards price advantages and discounts, the leasing companies in the Mercedes-Benz group and those outside the group are treated in exactly the same way. The conditions of purchase which apply to leasing companies in the Mercedes-Benz group are no different from those applying to final customers. Moreover, it is wrong to say that major customers are automatically entitled to price discounts. It is for Mercedes-Benz to decide whether major customers are to be granted discounts and such differences as there may be in treatment between the leasing companies and ‘major accounts’ are not the result of agreements restricting competition. Furthermore, the decision to grant or refuse price discounts to a particular category of customers is a unilateral act and not an agreement subject to Article 81(1) EC. Secondly, contrary to what the Commission states in the contested decision, the purpose of the prohibition on supplying external leasing companies ‘for stock’ is not to limit competition. The true position is that the supply of a car to a lessee is no quicker, as Mercedes-Benz customers generally desire a model of their choice and equipped to their own specification. The applicant adds that the tables set out in recitals 14 and 22 in the contested decision show that the outside leasing companies are in competition with its own companies. The proportion of the leasing market for Mercedes-Benz vehicles held by outside leasing companies increased from 28 per cent in 1996 to 36 per cent in 2000. 124 Even if Article 81(1) EC were to have been infringed, that infringement would in any event be exempt. Until 30 September 1996, the prohibition in question was exempt under Commission Regulation (EEC) No 123/85 of 12 December 1984 on the application of Article [81](3) [EC] to certain categories of motor vehicle distribution and servicing agreements (OJ 1985 L 15, p. 16). 125 The applicant also submits that the prohibition on supplying leasing companies for stock purposes was exempt under Regulation No 1475/95 from 1 October 1996, which is the date on which that regulation entered into force. Leasing companies which order motor vehicles separately from leasing contracts which have already been entered into, or which are actually in the course of being entered into, for stock purposes act in practice as resellers when they enter into leasing arrangements for those vehicles. 126 By virtue of Article 1 of Regulation No 1475/95, that regulation applies to motor vehicle dealership agreements where the role of the dealer can be described as one of ‘resale’. Article 10(12) of the regulation defines ‘resale’ so as to mean the disposal of a motor vehicle which the reseller has acquired in his own name and on his own behalf. Regulation No 1475/95 distinguishes between resellers and final customers. Under Article 3(10) of the regulation, a distributor may be expressly prohibited from supplying resellers. Such a prohibition has the effect of protecting the system of selective distribution. 127 The applicant claims that, although Article 10(12) of Regulation No 1475/95 ‘provides that the term “resale” is to include a leasing contract entered into by the acquirer from the dealer and a lessee which provides for a transfer of ownership or an option to purchase’, there is nothing in that regulation to indicate whether leasing companies which have not yet entered into an actual agreement with a third party relating to the motor vehicle in question are a ‘reseller’ or a ‘final customer’. However, contrary to what the Commission maintains, it would be absurd to interpret Article 10(12) of Regulation No 1475/95 as meaning that the expression ‘resale’ could apply only to a leasing contract which includes an option to purchase by virtue of which the lessee would become an owner prior to the expiry of the contract. The aim of the provision is instead to place a leasing contract on the same footing as a resale where the lessee obtains an option to purchase at the time the contract is concluded or while it is in force. Article 10(12) of the regulation covers all leasing contracts which provide for a transfer of ownership or an option to purchase. 128 Furthermore, that provision has very different consequences in the Member States depending on the contractual form of leasing contract that is customary in each country. Under Spanish law, leasing contracts cannot be entered into without an option to purchase at the end of the contract. Accordingly, a Spanish leasing company is always a ‘reseller’. 129 Under Spanish Law No 26/1988 of 29 July 1988 on the supervision and control of credit institutions (‘Law 26/1988’), the concept of a leasing contract requires by definition that there be an option to purchase for the benefit of the lessee. If there is no such purchase option, the contract falls to be categorised as a contract of hire. Leasing companies are forbidden to enter into such contracts of hire for reasons of administrative supervision. As a result, leasing companies in Spain are restricted to entering into true leasing transactions which incorporate an option to purchase in favour of the lessee. Accordingly, all leasing contracts entered into in that country satisfy the conditions laid down under the second sentence of Article 10(12) of Regulation No 1475/95 and fall to be categorised as resale transactions. 130 Where the actual destination of the motor vehicle is not known, the applicant should ‘at least have the opportunity of protecting the selective distribution system against unauthorised resales which then can no longer be monitored or traced’. 131 If, over and above their role of providing funding, leasing companies were able to act as independent traders on the market, they would be in a position to dispose of cars quickly and to offer significant price discounts by reason of the volume of their purchases, without being under a duty to undertake the significant investment and expenditure needed to meet the requirements of after-sales servicing and to perform maintenance and guarantee work on cars sold. The acquisition of stock by leasing companies would not ensure the level of quality of the selective distribution system, which allows new cars to be stocked in conditions which are impeccable from a technical point of view and means that they are delivered to customers only after being inspected by specialists. It is essential that that level of quality be provided if the reputation of the Mercedes-Benz trade mark is to be guaranteed. 132 The restrictions on supplies for stock to leasing companies are intended to prevent circumvention of the prohibition on supplying to resellers which, moreover, reflects the Commission’s definition of the aim of Regulation No 1475/95. In taking the view that the restrictions on those supplies were not exempt under Regulation No 1475/95, the Commission fails to have regard to the principles laid down by the Court of Justice in relation to Regulation No 123/85 in Volkswagen and VAG Leasing, cited in paragraph 41 above, and in Case C-70/93 Bayerische Motorenwerke [1995] ECR I-3439. That case-law provides that leasing companies are to be classified as resellers where they do not confine themselves to purchasing vehicles in order to satisfy requests from their customers but build up stock ‘which they offer to customers attracted in that way’. 133 The Commission disputes the applicant’s argument that the measures in question do not restrict competition. 134 It considers that the applicant was seeking to prevent the intermediaries from achieving a higher volume of sales, corresponding to the volume of the demand from leasing companies, and thus from systematically passing on the economies of scale which normally accompany high‑volume purchases to the companies in question, which are in competition with the Mercedes-Benz leasing companies. 135 The Commission questions the applicant’s interpretation of Regulation No 1475/95, which, in its view, does not exempt a prohibition on supplying leasing companies for stock or reserve purposes. The Commission is of the opinion that that regulation allows a manufacturer to prohibit its dealers from selling new vehicles to resellers who do not form part of its distribution network, without losing the benefit of the exemption. Article 10(12) of the regulation lays down the circumstances in which the entering into of a leasing contract falls to be treated as a resale. That applies when the contract ‘provides for a transfer of ownership or an option to purchase prior to the expiry of the contract’. In all other cases, the leasing company falls to be treated as a final customer and it would be unlawful to prohibit or to restrict sales to those companies. The applicant’s interpretation of Article 10(12) of Regulation No 1475/95 is therefore too wide. The disputed provisions in the Spanish dealership agreements make no distinction between cases where the contract used by the leasing company provides an opportunity to purchase the vehicle before or after the expiry of the contract (recital 110 in the contested decision), but prohibit supplies to leasing companies irrespective of that issue whenever the order is intended for stock purposes. Such an order does not turn the leasing company into a reseller. 136 The risk of leasing companies selling cars to interested customers directly from their reserves or before the expiry of the contract could be covered by appropriate contractual provisions and does not entitle the applicant to prohibit supplies to those companies when those cars are intended for stock purposes. 137 The aim of Article 10(12) of Regulation No 1475/95 is to prevent the prohibition on supplies to resellers who dispose of vehicles which are in a new condition being circumvented. Under that provision, such a circumvention will occur whenever the lessee under a leasing contract obtains the right to acquire ownership of the leased vehicle before the expiry of the contract. Whether or not there has been a circumvention will depend on the time when ownership of the vehicle is stated to pass to the lessee or may pass to him, and not on the date on which the lessee is granted the option to purchase on the termination of the contract. Volkswagen and VAG Leasing, cited in paragraph 41 above, and Bayerische Motorenwerke, cited in paragraph 132 above, relate to the legal position under Regulation No 123/85, which contains no provision expressly applying to leasing contracts. That gap was filled by Regulation No 1475/95, which provided that there is a resale only when the lessee may, by virtue of the option to purchase, acquire ownership of the vehicle prior to the expiry of the leasing contract. 138 In the contested decision, the Commission held inter alia that the applicant had, either itself or through MBE, restricted, from 1 October 1996 until the adoption of the decision, the supply of cars to leasing companies in Spain for stock and that that restriction was not exempt by virtue of Regulation No 1475/95. 139 Under the second part of this plea, the applicant submits, first, that Clause 4(d) of the Spanish dealership agreement does not infringe Article 81(1) EC and, secondly, that the prohibition on supplying cars to leasing companies in Spain for stock is in any event exempt under Regulation No 1475/95. 140 The Commission stated in recital 196 in the contested decision that ‘the restrictions on supplies to outside leasing companies are deliberately aimed at leasing companies which wish to acquire a larger number of vehicles or whole leasing fleets for which they have not yet found any identifiable customers’. In recital 176, it stated inter alia that the rules governing the leasing business of dealers and agents have as their object a restriction of competition on prices and delivery conditions for leasing vehicles. Relying on established case-law, it held that it was not necessary to consider the effects of the measures at issue, as it is sufficient for the purposes of Article 81(1) EC that those measures have the object of restricting competition (recital 178). 141 The Court observes first of all that the Commission did not distinguish in the contested decision between the German market and the Spanish market as regards the alleged restrictions on supplies to leasing companies. It assumed that Clause 4(d) of the Spanish dealership agreement gave rise to the same restrictions on competition as Clause 2(1)(d) of the agreement with the German agents (see, in particular, recitals 105 to 111 and 176). 142 The arguments put forward by the applicant under the second part of this plea show that, unlike the position in Germany, the contractual relationship between the parties to leasing contracts in Spain is governed by a specific law, namely Law 26/1988. 143 Additional provision No 7 to Law 26/1988 provides in particular: ‘1. “Leasing activities” means contracts having as their sole object the transfer of the right to use movable or immovable property, purchased for that purpose in accordance with the specifications of the future user, in consideration of periodic payments of the leasing charges referred to in paragraph 2 of this provision. The user may employ the goods so transferred only for the purposes of carrying out agricultural, fishing or industrial activities, activities of craftsmen, or services or vocational activities. The leasing contract must grant the user an option to purchase on its expiry. Where, for any reason whatsoever, the user does not acquire the goods which form the subject-matter of the contract, the lessor may dispose of them to a new user, and the fact that the goods were not purchased in accordance with the specifications of the new user shall not be deemed to infringe the principle laid down in the preceding subparagraph. 2. This provision applies to contracts having a minimum duration of two years when they relate to movable property and of ten years when they relate to immovable property or industrial establishments. However, in order to avoid abuse, the Government may lay down other minimum periods for the duration of the contracts having regard to the different types of property to which those contracts may relate.’ 144 With effect from 1 January 1996, paragraph 2 of additional provision No 7 to Law 26/1988 was replaced by Article 128(2) of Law 43/1995 of 27 December 1995 on corporation tax (BOE No 310 of 28 December 1995, p. 37072), which provides: ‘The preceding paragraph applies to contracts having a minimum duration of two years when they relate to movable property and of ten years when they relate to immovable property or industrial establishments. However, in order to avoid abuse, other minimum periods may be laid down by regulation for the duration of the contracts having regard to the different types of property to which those contracts may relate.’ 145 It follows from those provisions that leasing contracts entered into in Spain are subject to a number of specific conditions and, in particular: – they must have a minimum duration of two years when they relate to movable property, including motor vehicles;– they must grant the lessee an option to purchase on their expiry;– movable assets, including motor vehicles, which are the subject‑matter of leasing contracts must be purchased for that purpose in accordance with the specifications laid down by the lessee. 146 It follows that the Spanish Law governing leasing contracts requires that every Spanish leasing company must already have identified a lessee under the leasing contract when it acquires the vehicle. 147 Therefore, the Commission’s implicit assumption that the clauses in the German and Spanish dealership agreements are identical in their effect is not well founded. That has two consequences as regards this plea. 148 In the first place, every leasing contract entered into in Spain must have a minimum duration of two years and the option to purchase may be exercised only on expiry of the contract. Therefore, the option to purchase cannot be exercised before the expiry of a minimum period of two years. It follows that the lessee under a leasing contract in Spain cannot, by exercising the option to purchase, procure the disposal of a vehicle which is in a new condition. 149 In that regard, it should be noted that Regulation No 1475/95 exempted from the application of Article 81(1) EC agreements whereby one party (the supplier) undertook in favour of another (the dealer), within a defined territory of the common market, to supply only to the other party, or only to the other party and to a specified number of other undertakings within the distribution system for the purpose of resale, certain new motor vehicles, together with spare parts therefor (Article 1). 150 Under Article 3(10) of Regulation No 1475/95, the exemption also applied where the undertaking referred to above was combined with an obligation on the dealer not to supply to a reseller contract goods unless the reseller was an undertaking within the distribution system. The term ‘resale’ was defined in Article 10(12) of the regulation as meaning ‘all transactions by which a physical or legal person – “the reseller” – disposes of a motor vehicle which is still in a new condition and which he had previously acquired in his own name and on his own behalf, irrespective of the legal description applied under civil law or the format of the transaction which effects such resale’. The same subparagraph stated that the term ‘resale’ was to include ‘all leasing contracts which provide for a transfer of ownership or an option to purchase prior to the expiry of the contract’. 151 Amongst other things, that regulation allowed a supplier, under agreements regulating its exclusive distribution network, to prohibit dealers from making supplies to a purchaser who is a reseller within the meaning of Article 10(12), including a purchaser who is deemed to be a reseller by reason of the fact that he disposes of new vehicles under the type of leasing contracts referred to in that provision. 152 In that regard, it is clear from Clause 4(d) of the Spanish dealership agreement that the prohibition imposed on dealers did not cover all supplies to leasing companies outside the Mercedes-Benz group, but only those where the companies had not identified a customer. 153 The definition of the term ‘resale’ in Article 10(12) of Regulation No 1475/95 shows that a supplier may prohibit dealers from supplying natural or legal persons deemed to be ‘resellers’ only where the latter dispose of motor vehicles in a new condition. The purpose of putting leasing contracts on the same footing as resales is to allow the supplier to guarantee the integrity of the distribution network by avoiding a leasing contract which includes a transfer of ownership or an option to purchase before the expiry of the contract being used to facilitate the acquisition outside the distribution network of the ownership of a vehicle when it is still in a new condition. 154 Therefore, contrary to what the applicant maintains, Law 26/1988 does not have the effect that all Spanish leasing contracts automatically satisfy the conditions for exemption laid down under Article 2(10) of Regulation No 1475/95. 155 It follows from the above that the applicant’s argument as regards the application of the exemption provisions under Regulation No 1475/95 is unfounded. 156 In the second place, since Spanish law requires that every leasing company must already have identified a lessee at the time when the vehicle is acquired, the restrictions identified by the Commission in recital 176 in the contested decision have already been imposed by the applicable legislation, regardless of Clause 4(d) of the Spanish dealership agreement. In other words, by virtue of that legislation alone, companies outside the Mercedes-Benz group find themselves in the same position as those which form part of that group. It follows that the applicant’s argument that the restrictions on supplying leasing companies in Spain are not restrictions on competition within the meaning of Article 81(1) EC is well founded. 157 Inasmuch as it extends to the alleged infringement committed in Spain, the third indent of Article 1 of the contested decision should accordingly be annulled. The third plea, based on an infringement of Article 81(1) EC and a manifest error of assessment of the second and fourth measures established by the Commission in the contested decision 158 The third plea is divided into two parts. First, the applicant submits that the Commission has not proved the existence of an agreement with its German agents under which the latter must require a deposit of 15 per cent of the sale price of the vehicle from customers outside the contract territory. It also argues that, in any event, that deposit was objectively justified and that it was entitled to instruct its agents to require payment of it. Secondly, the applicant contends that the Commission was wrong to hold in the contested decision that the meeting of 20 April 1995 of the nine members of the Belgian Mercedes-Benz dealers’ association with the MBBel management demonstrated the existence of an agreement between them to restrict price competition in Belgium. 159 It follows from the Court’s findings in relation to the first plea that Article 81(1) EC does not apply to the instruction given by Mercedes‑Benz to its German agents by circular letter No 52/85 of 12 September 1985 to require payment from customers outside their contract territory of a deposit of 15 per cent of the price of the vehicle. It is accordingly unnecessary to consider the first part of this plea. 160 The applicant argues that the Commission was wrong to hold in the contested decision that the meeting of 20 April 1995 of the nine members of the Belgian Mercedes-Benz dealers’ association with the management of MBBel demonstrated the existence of an agreement between that association and MBBel to restrict price competition in Belgium. The Belgian dealers’ association had no power to take a decision which would bind its members, but merely formulated recommendations. Furthermore, the statement by one of the dealers, Mr Kalscheuer, at that meeting that ‘relations between dealers were improved as a result of the action against price slashing’ shows that the measure in question had already been decided upon by the dealers. 161 The applicant does not deny that MBBel took part in the meeting of 20 April 1995 and that, on its own initiative, the Belgian dealers’ association proposed to reduce the rate of discounts to a maximum of three per cent for the new W 210 series. However, it argues that MBBel did not participate either vertically or horizontally in an agreement to fix selling prices and that MBBel took no steps to implement that proposal, which, moreover, it did not agree to. On the contrary, MBBel had always opposed such proposals. It had been present only as observer and importer. No representative of MBBel had spoken at the meeting. The fact that only MBBel was in a position to implement reductions in vehicle supplies does not prove that it had in fact adopted such a strategy. 162 It was not the case that MBBel represented the interests of the branches at the meeting and the latter were not yet active members of the association at the time. However, it is not clear that it would have been in the interests of the branches to limit the rate of discounts. That is demonstrated by the fact that the dealer Goossens, as is recorded in the minutes of the association, criticised the branches for having practised ‘price slashing’. Furthermore, as the allegation made in the contested decision regarding a horizontal restriction (see recital 141) is not set out in the statement of objections, it should not have been taken into account. As regards the Commission’s argument referred to in paragraph 177 below, the applicant maintains that it is based on a selective reading of the statement of objections (see point 186 of the statement). In addition, the action against ‘price slashing’ put into practice before 20 April 1995 could be categorised as a ‘horizontal’ agreement only to the extent that it had been decided upon among dealers. While the Commission stated in point 168 of the statement of objections that MBBel had taken part in that action against price slashing, there was nothing to prove that MBBel had participated in it as a competitor of the dealers. 163 The applicant also denies that the letter of 17 October 1995 sent by MBBel to Mercedes-Benz AG (recital 119 in the contested decision) establishes the interest of MBBel in seeing a reduction in the level of discounts offered by the Belgian dealers. MBBel had referred to the average list prices and not the sales prices actually invoiced by the dealers. In addition, it denies that the letter from MBBel of 14 March 1996 criticising a Belgian dealer from Charleroi who had wrongly introduced himself to a customer as representing a dealer in Namur demonstrated MBBel’s disapproval of the discount given for a W 210 series car ‘of six per cent’. 164 The applicant finds the Commission’s allegations with regard to MBBel’s participation contradictory in that they allege both that MBBel was ‘ready to give its active support’ to restricting discounts (recital 115 in the contested decision) and that MBBel ‘took part in’ those restrictions (recital 120). Subsequently, the Commission acknowledged that the meeting of 20 April 1995 resulted from an initiative on the dealers’ part, but it nevertheless stated that MBBel clearly took the lead at that meeting (recital 233 in the contested decision). 165 The fact that Mercedes-Benz occasionally checked that dealers were performing all their duties as intermediaries by sending ghost purchasers to them has no connection with the alleged fixing of selling prices. Such visits, which other motor manufacturers also carry out, were perfectly lawful, as the dealers undertake in their commercial dealership agreement to adopt a high-quality market position. Moreover, the dealers’ pricing policies were only one factor out of many others that were taken into account in that assessment. 166 There was no connection between the meeting of 20 April 1995 and the meeting at Antwerp on 27 March 1996 (see recital 117 in the contested decision). The minutes of the meeting of 20 April 1995 refer to monitoring sales until the ‘end [of] 1995’ and the visits referred to in the minutes of the meeting of 27 March 1996 plainly took place until 1996. 167 The applicant denies that the fax from MBBel of 26 November 1996, in which it commissioned the company Tokata to send representatives to visit dealers and certain agencies, provided a means for MBBel to monitor discounts offered on the C-Class Estate 220 D and 250 TD models. The information recovered was anonymous and it was not possible to take action against specific dealers. The measures involved a full examination of all services offered to customers and not merely price discounts. Visits were made not only to dealers but also to 13 parallel importers. The way in which those investigations were carried out gives no grounds for suggesting that the purpose was to force the dealers to sell at list price. Moreover, there was nothing in the fax to show that those involved would have preferred a maximum discount of three per cent. The minutes of the meeting of 20 April 1995 concerned vehicles of different series from those referred to in the fax from MBBel of 26 November 1996 to Tokata. 168 The applicant denies that the purported fixing of selling prices in Belgium had a material influence on inter-State trade. If an agreement on discounts did exist, that agreement concerned only sales made in Belgium. The volume of cross-border sales was not affected by it. The applicant also denies that the purported infringement lasted from 20 April 1995 until the circular of 10 June 1999. The Commission has not stated whether the infringement was always perpetrated with the same intensity. The action against ‘price slashing’ referred to in the minutes of the meeting of 20 April 1995 was temporary, concerned only the W 210 model and was intended only to apply during the introductory phase of the new model, that is to say until the end of 1995. The minutes of the meeting of 27 March 1996 show that the dealers in Antwerp found that there was no consensus as regards price discounting. Furthermore, the other documents relied on by the Commission do not show that the proposed action continued beyond 1995. They relate only to visits which were standard practice and the results of which were not recorded on an individual basis, so that it would have been impossible to take any sanctions against one of the dealers. 169 The applicant considers that there is no justification for imputing the fixing of selling prices in Belgium to it. 170 As a preliminary point, it argues that in the present case the Commission disregarded its practice relating to the imposition of fines on a company or the group to which it belongs. The Commission ought to have taken into account a number of factors, namely the extent of the subsidiary’s decision-making autonomy, the degree to which the parent company was aware of the activities of the subsidiary that contravened the law relating to concerted practices, the participation of that company in the infringement, the actual influence of the parent company on the subsidiary’s trading policy and the extent to which membership of the company organs of the parent company and its subsidiary overlapped (see Commission Decision 87/1/EEC of 2 December 1986 relating to a proceeding under Article [81] of the EEC Treaty (IV/31.128 – Fatty acids) (OJ 1987 L 3, p. 17); Commission Decision 86/398/EEC of 23 April 1986 relating to a proceeding under Article [81] of the EEC Treaty (IV/31.149 – Polypropylene) (OJ 1986 L 230, p. 1); Commission Decision 85/617/EEC of 16 December 1985 relating to a proceeding pursuant to Article [81] of the EEC Treaty (IV/30.839 – Sperry New Holland) (OJ 1985 L 376, p. 21); Commission Decision 84/388/EEC of 23 July 1984 relating to a proceeding under Article [81] of the EEC Treaty (IV/30.988 – Agreements and concerted practices in the flat-glass sector in the Benelux countries) (OJ 1984 L 212, p. 13); and Commission Decision 78/155/EEC of 23 December 1977 relating to a proceeding under Article [81] of the EEC Treaty (IV/29.146 – BMW Belgium NV and Belgian BMW dealers) (OJ 1978 L 46, p. 33)). In the motor vehicle sector, the national sales subsidiaries concerned were treated as being responsible where the infringement could be localised in the corresponding Member State (Commission Decision 2001/146/EC of 20 September 2000 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.653 – Opel) (OJ 2001 L 59, p. 1)). 171 The Commission’s assertion that the applicant is responsible for the conduct of MBBel since it is almost a 100 per cent shareholder in it is unfounded. The judgment of the Court of Justice in Case C-286/98 P Stora Kopparbergs Bergslags v Commission [2000] ECR I-9925, paragraph 28 et seq., shows that a 100 per cent shareholding is not on its own sufficient to establish the responsibility of a parent company under the law relating to concerted practices. The Commission would have to adduce other evidence to show that the applicant had also, in practice, influenced the conduct of MBBel. The applicant denies having been aware of the activities of MBBel and having actively supported them. It submits that the Commission failed to prove that it had been informed of the meeting of the dealers’ association of 20 April 1995. It contends that even if MBBel had taken part in the action against ‘price slashing’, that had been done without the applicant’s agreement. It adds in its reply that the Commission was wrong to claim that the onus is on the applicant to prove that that infringement was not its responsibility, since Mercedes-Benz had put itself forward in the administrative procedure as being the sole interlocutor of the Commission in relation to the infringement in Belgium. It maintains that the onus is on the Commission to prove that Mercedes-Benz was informed of the alleged price-fixing measures and that it had ‘actively encouraged’ them. 172 The Commission submits that MBBel was a party, on 20 April 2005, to an agreement with the Belgian dealers to limit permitted discounts to three per cent and that failure to comply with that agreement had to lead to cuts in vehicle supplies. It contends that the applicant is responsible for that infringement of competition rules, since it constituted an economic unit with MBBel. 173 There can be no doubt whatsoever that those who took part in the meeting of 20 April 1995 adopted the measures against ‘price slashing’, since Mr Rauw, who drafted the minutes, made a clear distinction in it between points which the speaker wished to stress, more or less firm demands, advice and recommendations, and assessments, criticisms and declarations of intention made by those present. Furthermore, the paragraph relating to the use of ghost shopping, the conduct of the Brussels branch of MBBel as regards prices and the use of cuts in vehicle supplies where discounts in excess of three per cent had been granted shows that the discussions indeed related to the adoption of those measures and that MBBel took part in them. 174 Moreover, the applicant’s arguments based on the fact that the minutes do not show that any representative of MBBel spoke at the meeting, that the latter took part in the meeting as importer and not as representative of its branches, and that the dealers’ association did not have the necessary authority to adopt binding decisions are irrelevant. Any person who takes part in a meeting which results in anti‑competitive agreements must raise objections in order to indicate clearly that he is not a party to the agreement. The minutes of the meeting of 20 April 1995 do not record any opposition whatsoever on MBBel’s part. The latter even approved the limitation on discounts to three per cent. Had the position been otherwise, Mr Rauw could not have stated that if that limitation were to be exceeded there would be cuts in vehicle supplies, knowing that only MBBel was in a position to take such a step. 175 Contrary to what the applicant maintains (see paragraph 162 above), MBBel had an interest in putting an end to price slashing. It made no sense for MBBel to maintain high average prices if the dealers were always to grant larger discounts, thereby undermining the credibility of the list prices. Furthermore MBBel, as an importer, supplies not only the Belgian dealers, thus creating a vertical relationship, but also final customers through its Brussels branches, thus giving rise to the horizontal relationship, disputed by the applicant, between MBBel and its dealers. 176 Plainly, Mr Goossens of the Belgian dealers’ association did not consider it necessary, in order to accuse the branches of price slashing, for representatives of those branches to take part in the meeting of 20 April 1995 as well as several members of MBBel’s management. It is clear that MBBel was treated not only as a supplier but also as a competitor of the dealers and that it participated in the agreement to restrict discounts in both those capacities. 177 Contrary to what the applicant contends (see paragraph 162 above), the statement of objections was not restricted to vertical competition. The Commission explained (in point 222 of the statement of objections) that the purpose of the action agreed upon between MBBel and the dealers in order to combat price slashing and exercise control over the granting of discounts by cuts in vehicle supplies where discounts exceeded three per cent was to restrict price competition in Belgium. MBBel was accordingly referred to not only as a party to an agreement to restrict discounts by cutting supplies but also, more generally, as an undertaking which took part in an agreement to limit discounts, exercise control over the conduct of dealers with regard to discounts and cut supplies where discounts in excess of three per cent were granted. Moreover, the applicant cannot describe the legal analysis of MBBel’s participation in the agreement as new, since the Commission had indicated in the statement of objections that MBBel had already been party to a price agreement, primarily of a horizontal nature, prior to 20 April 1995, namely the action against ‘price slashing’. It is not necessary for the agreement to be binding under civil law for it to constitute an agreement for the purposes of Article 81(1) EC (Case C‑277/87 Sandoz Prodotti Farmaceutici v Commission [1990] ECR I‑45, paragraph 13) (see paragraph 160 above). 178 The contested decision shows that the Belgian dealers were aware that the announcement of ghost shopping would be implemented and that MBBel was very insistent that the dealers maintained their actual resale prices at the highest possible level (recitals 117 and 119 in the contested decision). The applicant’s argument that the individual appraisals of the various dealers were anonymous is wrong. Indeed, there had already been a failure to respect the anonymity of those appraisals in the minutes of the meeting of 27 March 1996, as the dealer Van Steen NV was referred to in them by name. The individual discounts which the five dealers investigated were ready to grant did not have to be described in detail in the minutes, since it was clear that each of the dealers had offered a discount higher than the three per cent figure allowed by the association. The alleged later differences of opinion between the dealers with regard to the level of discounts are irrelevant, particularly as the agreement at issue was binding on them inter alia as regards MBBel. 179 The appointment of Tokata on 26 November 1996 shows that the dealers’ conduct with regard to discounts was an important factor in carrying out ghost shopping, contrary to what is maintained by the applicant, which considers it to represent only one of several factors (see paragraph 165 above). The true purpose of the appointment was to test the reaction of the 47 Belgian dealers to a request for a discount of seven per cent. 180 According to the Commission, the applicant denies any connection between, on the one hand, the agreement of 20 April 1995 and, on the other hand, the ghost shopping carried out at the five dealers in Antwerp in spring 1996 and the instructions of November 1996 to carry out ghost shopping at all the Belgian dealers (see paragraph 166 above). The time-limit of the end of 1995 laid down under the agreement of 20 April 1995 relates only to the specific sanction imposed, namely the cutting of supplies, and not to the setting of a ceiling on discounts of three per cent. The Commission did not claim that the ghost shopping was carried out pursuant to the decision of 20 April 1995, but held that such shopping showed that the dealers were aware that this type of action would be taken. The Commission adds that on 14 March 1996 MBBel expressed its dissatisfaction with the fact that a dealer in Charleroi had sold a W 210 series vehicle with a discount of six per cent. 181 As regards the appreciable restriction on trade between Member States, which the applicant denies (see paragraph 168 above), the creation and maintenance of an artificial zone in which high prices are practised may give rise to trade patterns which differ from normal patterns. It is clear from case-law that practices restricting competition which extend over the whole territory of a Member State by their very nature have the effect of reinforcing the partitioning of markets on a national basis (Bayerische Motorenwerke, cited in paragraph 132 above, at paragraph 20; Case C-309/99 Wouters and Others [2002] ECR I-1577, paragraph 95; and Case T-62/98 Volkswagen v Commission [2000] ECR II-2707, paragraph 179). 182 The Commission claims that the applicant terminated the fixing of selling prices in Belgium only with the circular of 10 June 1999 (recital 223 in the contested decision). It again states that the date referred to in the minutes of the meeting of 20 April 1995, namely the end of 1995, related only to the sanction of cutting supplies and not the agreement to limit discounts to three per cent. The dealers’ practices in relation to discounting were also monitored in 1996 (recitals 117 and 118 in the contested decision). Furthermore, those checks were not limited in any way to vehicles in the W 210 series, but also included other types of vehicles, in this case C-Class cars. Since the principal objective of carrying out ghost shopping was to monitor discounts granted by the dealers, as was decided on 20 April 1995, the extension of the measures to other classes of vehicles and the criticisms made in relation to excessive discounts (recital 119 in the contested decision) prove that the agreement of 20 April 1995, which the minutes show reflected practices already carried out in the past, was not in any way a unique, isolated and temporary measure. Similarly, the Commission refers to the applicant’s argument that the aim of the price‑fixing agreement was to improve dealers’ profitability. According to the Commission, that objective could not be achieved by a measure which was only intended to last for a few months. 183 The Commission considers that the applicant’s arguments referred to in paragraphs 169 to 171 above regarding its responsibility in the present case are without foundation. The applicant’s responsibility for the conduct of MBBel arises purely because that company was almost wholly owned by the applicant because, given its ties to the parent company, it was not in a position to adopt its own distribution policy and constituted an economic unit with the applicant. 184 The Commission states in the first place that, where, as in these proceedings, the parent company holds 100 per cent of the shares in its subsidiary, the Commission does not have to prove that the parent actually gave the subsidiary the instructions which it carried out. Stora Kopparbergs Bergslags v Commission, cited in paragraph 171 above, to which the applicant refers, shows that it is permissible in such a case to assume that the parent company in fact exercises a controlling influence on the conduct of its subsidiary, particularly where the parent put itself forward as being the sole interlocutor of the Commission with respect to the infringement concerned. In those circumstances, it is for the applicant to overcome that presumption by sufficient evidence. In the present case, the applicant also put itself forward to the Commission as the sole interlocutor as regards the infringement committed in Belgium. Nor did the applicant deny that it was in a position to exercise a controlling influence on the conduct of that subsidiary on the market. Lastly, the applicant has failed to provide any proof that MBBel could conduct its affairs on an independent basis. 185 The Commission also states that the applicant had been informed of the efforts made by MBBel to maintain average prices at a high level (recital 119 in the contested decision). 186 The first point to be made is that the applicant objects that the Commission stated for the first time in the contested decision, with respect to the infringement regarding the fixing of selling prices in Belgium, that MBBel had participated in a horizontal restriction on competition. The contested decision states that ‘MBBel behaved both as a competitor of the dealers, namely as operator of two branches, and as a supplier to the dealers’. In addition, the Commission held in the contested decision that the latter, vertical, aspect was clearly the ‘focal point of the agreement’ (recital 141). 187 Although the applicant does not put the point in those terms, the Court considers that that argument should be interpreted as an objection based on the infringement of the rights of the defence. 188 A reading of Article 19(1) of Regulation No 17 in conjunction with Articles 2 and 4 of Regulation No 99/63/EEC of the Commission of 25 July 1963 on the hearings provided for in Article 19(1) and (2) of Regulation No 17 (OJ, English Special Edition 1963-1964, p. 47) shows that the Commission is to communicate objections which it raises against undertakings or associations concerned by them and is to deal in its decisions only with those objections in respect of which those undertakings or associations have been afforded the opportunity of making known their views as to the accuracy and the relevance of the facts, objections and surrounding circumstances on which the Commission relies (see, to that effect, Case 85/76 Hoffmann-La Roche v Commission [1979] ECR 461, paragraph 9, and Joined Cases T-10/92 to T-12/92 and T-15/92 Cimenteries CBR and Others v Commission [1992] ECR II‑2667, paragraph 33). 189 It is settled case-law that the statement of objections must be couched in terms that, albeit succinct, are sufficiently clear to enable the parties concerned properly to identify the conduct complained of by the Commission. It is only on that condition that the statement of objections can fulfil its function under the Community regulations of giving undertakings all the information necessary to enable them to defend themselves properly before the Commission adopts a final decision (see, inter alia, Case T-352/94 Mo och Domsjö v Commission [1998] ECR II-1989, paragraph 63; Case T-348/94 Enso Española v Commission [1998] ECR II-1875, paragraph 83; and Case T-308/94 Cascades v Commission [1998] ECR II-925, paragraph 42). It is also settled case-law that that requirement is observed where the decision does not allege that the persons concerned have committed infringements other than those referred to in the statement of objections and takes into consideration only facts on which the persons concerned have had the opportunity of making known their views (see, inter alia, Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 94, and Joined Cases T-191/98 and T-212/98 to T-214/98 Atlantic Container and Others v Commission [2003] ECR II-3275, paragraph 113). However, the Commission’s final decision is not necessarily required to be a replica of the statement of objections (Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C‑213/00 P, C‑217/00 P and C-219/00 P Aalborg Portland and Others v Commission [2004] ECR I-123, paragraph 67, and ACF Chemiefarma v Commission, paragraph 91). 190 It is in the light of those principles that the objection based on the infringement of the applicant’s rights of defence should be considered. 191 In the present case, it should be determined whether the objection that MBBel was party to an alleged horizontal restriction of competition was set out in the statement of objections in sufficiently clear terms to enable the applicant to become properly aware of it. 192 The Court takes the view that where the statement of objections provides a clear indication of the nature of the infringement of competition law which the undertaking in question is alleged to have committed and the material facts relied on in that regard, that undertaking is in a position to reply to those allegations and to defend its rights. For the decision adopted by the Commission subsequently to categorise an economic agreement as ‘vertical’ or ‘horizontal’ does not constitute a fundamental alteration to the complaints set out in the statement of objections. 193 The Commission did not explicitly invoke either the horizontal or the vertical aspect of the infringement in question in the statement of objections and thus did not categorise the alleged infringement as ‘horizontal’ or ‘vertical’. However, the applicant does not deny that the Commission briefly set out in the statement of objections the reasons why MBBel was alleged to have entered into an agreement with the Belgian dealers to fix the selling price of Mercedes vehicles in Belgium. The facts and the material criticisms of MBBel’s conduct set out by the Commission in the contested decision were therefore referred to in the statement of objections. It should also be pointed out that the Commission took the view in the contested decision that the vertical aspect of the alleged infringement was crucial, with the horizontal aspect being invoked on a purely ancillary basis. 194 In those circumstances, compliance with the rights of the defence did not require the Commission explicitly to categorise the infringement in question as vertical or horizontal in the statement of objections. 195 For the sake of completeness, the Court would add that the applicant does no more than raise this objection without indicating in what way the fact that the Commission is alleged not to have raised the ‘horizontal’ aspect of the infringement before the adoption of the contested decision caused it to suffer damage. The documents before the Court show that the applicant replied to the allegations regarding the fixing of selling prices in Belgium made by the Commission in the statement of objections. The applicant did not argue in its application that its reply to the statement of objections would have been materially different if the word ‘horizontal’ had featured in the statement. It should also be pointed out that a reading of the part of the contested decision which relates to the imposition of the fine for the infringement in question shows that the Commission did not explicitly rely on the horizontal aspect of the infringement in imposing the fine (recitals 245 to 248). 196 The contested decision shows that the Commission took the view that an agreement to restrict price competition in Belgium was entered into on 20 April 1995 between MBBel and the Belgian Mercedes-Benz dealers’ association, under which discounts were limited to three per cent and an external agency was to monitor the level of discounts granted for the E‑Class, with higher discounts entailing a cut in supplies of vehicles of that class (recitals 113 and 177). 197 The section of the minutes of the meeting in question headed ‘action against price slashing’ states: ‘Relationships between dealers have improved as a result of that action. [One dealer – Mr Goossens –] accuses the Brussels branches of price slashing. An outside agency will be employed to carry out “ghost shopping” to test the level of discounts on the W 210. If a discount higher than three per cent is granted, the number of vehicles allocated until [the] end [of] 1995 will be reduced.’ 198 The applicant acknowledges that, at the meeting of 20 April 1995 which MBBel attended, the Belgian Mercedes-Benz dealers’ association referred to an agency commissioned to carry out visits using ghost shoppers. It maintains, however, that the dealers’ association cannot take any decision which is binding on its members and that it may only formulate ‘recommendations’. It also states that MBBel took no steps to implement those recommendations, nor did it approve them. MBBel attended only as observer and importer and none of its representatives spoke at the meeting. Furthermore, even if there were to have been a limitation of discounts, that would not have had an appreciable effect on trade between Member States. 199 It is settled case-law that for there to be an agreement within the meaning of Article 81(1) EC it is sufficient for the undertakings concerned to have expressed their joint intention to behave on the market in a certain way (ACF Chemiefarma v Commission, cited in paragraph 189 above, at paragraph 112; Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 86; and Joined Cases T-305/94 to T-307/94, T‑313/94 to T-316/94, T-318/94, T-325/94, T‑328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappijand Others v Commission (‘PVC II’) [1999] ECR II-931, paragraph 715). 200 Far from requiring that an actual ‘plan’ be drawn up, the criteria of coordination and cooperation laid down by case-law must be understood in the light of the concept inherent in the provisions of the Treaty relating to competition that every economic operator must determine independently the policy which he intends to adopt in the common market. Although it is true that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however strictly preclude any direct or indirect contact between such operators, the object or effect of which is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market (Suiker Unie and Others v Commission, cited in paragraph 41 above, at paragraphs 173 and 174, and PVC II, cited in paragraph 199 above, at paragraph 720). 201 Where there is a dispute as to the existence of an infringement of the competition rules, it is for the Commission to prove the infringements found by it and to adduce evidence capable of demonstrating to the requisite legal standard the existence of the circumstances constituting an infringement (Case C-185/95 P Baustahlgewebe v Commission [1998] ECR I-8417, paragraph 58). 202 However, where it has been established that an undertaking has participated in meetings between undertakings of a manifestly anti‑competitive nature, it is for that undertaking to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention, by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs (see, to that effect, Case C-199/92 P Hüls v Commission [1999] ECR I-4287, paragraph 155, and Case C-235/92 P Montecatini v Commission [1999] ECR I-4539, paragraph 181). In the absence of evidence of that distancing, the fact that an undertaking does not abide by the outcome of those meetings is not such as to relieve it of full responsibility for the fact that it participated in the concerted practice (Case T-347/94 Mayr‑Melnhof v Commission [1998] ECR II-1751, paragraph 135, and Joined Cases T-25/95, T-26/95, T-30/95 to T-32/95, T-34/95 to T-39/95, T-42/95 to T-46/95, T-48/95, T-50/95 to T-65/95, T-68/95 to T-71/95, T-87/95, T-88/95, T-103/95 and T-104/95 Cimenteries CBR and Others v Commission [2000] ECR II-491, paragraph 1389). 203 It cannot be disputed that MBBel was present at the meeting of the dealers’ association on 20 April 1995, during which the continuation of ‘price slashing’ and the intention to take steps to detect and prevent discounts higher than three per cent were referred to. It must be noted that a number of senior representatives of MBBel were present at that meeting and that the minutes of it were drawn up by Mr Rauw, who was MBBel’s manager for dealer development (see, inter alia, recital 115 in the contested decision). The applicant’s contentions that MBBel played a minor role at the meeting in question (see paragraph 161 above) are therefore not supported by the documents before the Court. The participation of those representatives of MBBel at the meeting in question shows that, contrary to what the applicant maintains, MBBel played a central role in the discussions. 204 Accordingly, as MBBel did not prove that it distanced itself from the discussions on price discounts, the Commission was entitled to consider that MBBel, by its unqualified presence at the meeting of 20 April 1995 during which the objective of taking action against ‘price slashing’ was clearly referred to, had participated in the joint intention which led to the putting into place of the measures to detect and prevent the discounts in question. 205 Furthermore, the applicant’s assertion that the MBBel branches were not active members of the dealers’ association at the time is irrelevant, since MBBel’s participation in the anti-competitive agreement has been established. 206 It should also be held that, as the Commission contends, only MBBel was in a position to implement the threat made at the meeting of 20 April 1995 to cut off supplies of vehicles allocated. Its silence on that occasion can be interpreted only as an approval of and participation in the action against ‘price slashing’ which had already been decided upon by the Belgian dealers since, in particular, the threat of cutting off the supplies of vehicles allocated until the end of 1995 if discounts higher than three per cent were granted required the active participation of MBBel as supplier of the dealers and strengthened the agreement in question. 207 The presence of that undertaking at the meeting, without it publicly distancing itself from its discussions, therefore led the other participants to believe that it accepted the decisions taken at the meeting and that it intended to contribute by its own conduct to the common objectives pursued by all the participants. The fact that the action against ‘price slashing’ had been put in place before the meeting did not prevent the Commission from taking the view that MBBel had participated in a decision taken on 20 April 1995 as to future prices and was disposed to give its active support to price fixing, the monitoring of prices charged by dealers and, if necessary, the application of sanctions in the event of failure to comply with the instructions from that date. 208 The applicant’s argument that the fact that MBBel checked from time to time to see whether dealers were performing all their duties as intermediaries (see paragraph 165 above) was perfectly lawful, since the dealers undertook in their commercial dealership agreement to adopt a high-quality market position, is not persuasive and must be rejected. The applicant acknowledges in its application that the dealers’ pricing policies were one factor, among many others, in that assessment (see paragraph 165 above). The prices charged by the dealers have no connection with the quality of the services they provide. Furthermore, MBBel does not attempt to justify those checks on pricing policies on the basis of Clause 11 of the Belgian dealership agreement, which provides that MBBel may determine a maximum price, but not a minimum price. 209 It is also necessary to reject the applicant’s argument that the information gathered was anonymous (see paragraph 168 above) and that it was impossible to take action against specific dealers. It is clear from the minutes of the meeting of the Mercedes dealers in Antwerp of 27 March 1996 that discounts given by a particular dealer, namely Van Steen NV, were identified by ghost shoppers and raised at the meeting in question. 210 As regards the applicant’s argument that the dealers’ association did not have the authority to take decisions binding its members, but only to formulate recommendations, it is settled case-law that a measure may be categorised as a decision of an association of undertakings for the purposes of Article 81(1) EC even if it is not binding on the members concerned, at least to the extent that the members to whom the decision applies comply with its terms (see, by way of analogy, Joined Cases 96/82 to102/82, 104/82, 105/82, 108/82 and 110/82 IAZ and Others v Commission [1983] ECR 3369, paragraph 20; Van Landewyck and Others v Commission, cited in paragraph 199 above, at paragraphs 88 and 89; and Case T-136/94 Eurofer v Commission [1999] ECR II-263, paragraph 15). That requirement is sufficiently established in this case by the fact that the members of the dealers’ association in Belgium and MBBel decided at the meeting of 20 April 2005 to monitor, using ghost purchasing by members of an outside agency, the level of discounts given for the W 210 vehicle model and that ghost shoppers did indeed make visits to dealers. That information shows that the course of action decided upon at the meeting of 20 April 1995 was implemented. 211 With respect to the applicant’s argument referred to in paragraph 162 above that it is not clear that the MBBel branches had an interest in limiting the rate of discounts, the Court is of the view that, since MBBel’s participation in the concerted practice has been established, it is not necessary to consider whether MBBel and its branches had an interest in participating in it. In any event, as the Commission has argued, MBBel and, accordingly, its branches had an interest in ending the price slashing, in particular as it supplies not only the dealers but also final customers through a number of branches. The letter of 17 October 1995 from MBBel to Mercedes-Benz AG, in which MBBel stated that it was doing ‘all [it] can to carry out [its] work correctly ([it is] avoiding exports) and [is] attempting to keep [its] average price at a high level’, also shows, as the Commission stated in recital 119 in the contested decision, the store set on a low level of price discounting by the Belgian dealers. In that regard, the applicant’s argument that MBBel was referring to average list prices and not the selling prices actually invoiced by the dealers is not persuasive and must be rejected. 212 The applicant’s argument that the fixing of selling prices in Belgium did not affect inter-State trade to an appreciable extent, since it only concerned sales in that country and cross-border sales were not affected, must be rejected. It is settled case-law that where a concerted practice extends over the whole of the territory of a Member State it has, by its very nature, the effect of reinforcing the partitioning of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about (Wouters and Others, cited in paragraph 181 above, at paragraph 95; Case 8/72 Vereeniging van Cementhandelaren v Commission [1972] ECR 977, paragraph 29; Remia and Others v Commission, cited in paragraph 81 above, at paragraph 22; and Case C-35/96 Commission v Italy [1998] ECR I‑3851, paragraph 48). The applicant does not deny that the meeting of 20 April 1995, and thus the infringement in question, concerned the whole of Belgium, as the Commission held in recital 197 in the contested decision. 213 The applicant also contends that the Commission has failed to show that the purported infringement lasted from 20 April 1995 until the circular letter of 10 June 1999, in which the applicant stated inter alia that the dealers were to be free to set the prices and terms of their sales to customers. The Commission ought to have held that the infringement ceased at the end of 1995, as the action against ‘price slashing’ referred to in the minutes of the meeting of 20 April 1995 was temporary and related only to the introduction of the new W 210 model. 214 It is clear from case-law that it is for the Commission to prove not only the existence of the concerted practice, but also its duration (see Dunlop Slazenger v Commission, cited in paragraph 84 above, at paragraph 79, and Cimenteries CBR and Others v Commission, cited in paragraph 188 above, at paragraph 2802). 215 In the present case, there is more than one source of evidence to suggest that the infringement continued after the end of 1995. As the Commission rightly maintains, it is clear from the minutes of the meeting of 20 April 1995 that the time-limit laid down of the end of 1995 relates only to the sanction agreed upon and not to the fixing of the ceiling on discounts at three per cent. In addition, the minutes of the meeting of 27 March 1996 show that ghost shopping for the E 290 TD model was carried out inter alia at five dealers in Belgium in 1996. Contrary to what the applicant contends (see paragraph 166 above), the meeting of 20 April 1995 and that of 27 March 1996 are connected. Furthermore, in a letter of 14 March 1996, MBBel clearly expressed its dissatisfaction with the fact that a W 210 series vehicle had been sold with a discount of six per cent. The insertion of an exclamation mark after that percentage (‘6%!’) leaves no room for doubt that the discount in question was considered to be worthy of criticism. In the light of the objections raised by MBBel against discounts higher than three per cent granted by dealers in Belgium and the continuation of ghost shopping, the dealers would have expected repercussions if discounting were detected until well after the end of 1995. In those circumstances, the Commission was entitled to hold that the agreement of 20 April 1995 fixing the prices of vehicles in Belgium was not a temporary measure, but lasted until it was terminated by the circular of 10 June 1999. 216 By its argument that the Commission did not state whether the infringement relating to price fixing in Belgium had always been perpetrated with the same degree of intensity (see paragraph 168 above), the applicant contends that the Commission committed a manifest error of assessment as regards the seriousness of the infringement at certain times. The Court is of the view that the Commission correctly assessed the duration (see paragraph 215 above) and the seriousness of the infringement in question. Furthermore, the applicant does not dispute the seriousness of the infringement. Given that the infringement lasted for the period established in the contested decision, it is not for the Commission to establish that it was committed with the same intensity when there was no proof that it had ceased. 217 The applicant complains that the Commission imputed to it the conduct of MBBel, its subsidiary in Belgium, solely because it had nearly a 100 per cent shareholding in that subsidiary. 218 In that regard, it should be noted that the fact that a subsidiary has separate legal personality is not sufficient to exclude the possibility of imputing its conduct to the parent company, in particular where the subsidiary, although having separate legal personality, does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company (see, inter alia, ICI v Commission, cited in paragraph 85 above, at paragraphs 132 and 133; Case 52/69 Geigy v Commission [1972] ECR 787, paragraph 44; and Case 6/72 Europemballage and Continental Can v Commission [1973] ECR 215, paragraph 15). A 100 per cent shareholding in the capital of the subsidiary cannot, in itself, be sufficient to prove the existence of such control by the parent company. The imputation to the parent company of its subsidiary’s conduct is always dependent on a finding that management power was actually exercised (see, to that effect, ICI v Commission, cited in paragraph 85 above, at paragraphs 132 to 141; Joined Cases 32/78 and 36/78 to 82/78 BMW Belgium and Others v Commission [1979] ECR 2435, paragraph 24; and Stora Kopparbergs Bergslags v Commission, cited in paragraph 171 above, at paragraph 23). 219 As the Court of Justice held in Stora Kopparbergs Bergslags v Commission, cited in paragraph 171 above, at paragraph 28, while a 100 per cent shareholding does not in itself suffice for a finding of responsibility against the parent company, the Commission is also entitled to base its decision on the imputation to the parent company of the conduct of the subsidiary on the fact that the parent company did not dispute that it was in a position to exert a decisive influence on its subsidiary’s commercial policy and produced no evidence to support its claim that the subsidiary was autonomous. Given the fact that the whole of the share capital of the subsidiary was held, the Commission is entitled to assume that the parent company exerted a decisive influence on the conduct of its subsidiary, particularly where the parent company had put itself forward in the administrative procedure as being the sole representative of the companies in the group. 220 In those circumstances, it is for the parent company to rebut that presumption by sufficient evidence. 221 It is clear from the documents before the Court in the present case that the applicant does not deny that Mercedes-Benz held the whole of the capital of MBBel at the time of the infringement in question and acknowledges that it had put itself forward in the administrative procedure as being the sole representative before the Commission with respect to the Belgian infringement. Moreover, the applicant does no more than contend that it was not aware of the activities of MBBel and denies that it gave active support to those activities, without providing any evidence whatsoever that it was not in a position to influence MBBel’s trading policy or evidence as to the latter’s autonomy. It follows that the applicant has not rebutted the presumption that it did indeed exert a decisive influence on the conduct of its subsidiary MBBel, by adducing sufficient evidence. 222 This part of the third plea and, accordingly, the third plea in its entirety must therefore be rejected. The fourth plea, alleging that the amount of the fine imposed by Article 3 of the contested decision was incorrectly set 223 The applicant contends that the fine imposed by Article 3 of the contested decision lacks any justification in the absence of any infringement of Article 81(1) EC. Even if such an infringement were to be established, the fine is excessive. 224 As regards the conduct in relation to the German market, the applicant essentially argues that the fine should be declared to be illegal since the measures which Mercedes-Benz is alleged to have taken were adopted on the basis of commercial agency agreements which, as they contain no restrictions applicable to commercial agents, fall outside the scope of Article 81(1) EC. 225 In so far as it could infringe Article 81(1) EC, the prohibition on sale to leasing companies in Spain is in any event exempt by virtue of Regulation No 1475/95, which precludes the imposition of a fine. Even if the Community Court does not accept the applicant’s submissions, it must take into consideration the fact that there are substantial legal arguments available to it in support of its contention that those practices satisfy the conditions for exemption. 226 As regards the fixing of selling prices in Belgium, the applicant argues that, although the Commission claims (recital 245 in the contested decision) that such price fixing related exclusively to the W 210 model, it none the less found that discounting practice was monitored for other models. That finding plainly relates to the ‘ghost shopping’ that was carried out by Tokata for the C-Class models. Those visits did not relate to the alleged price fixing (see paragraph 167 above). The Commission ought not to have treated the fact that a number of models were involved as an aggravating factor. Furthermore, the statement in recitals 223 and 225 of the contested decision that the selling prices had been fixed from 20 April 1995 until 10 June 1999 is contradicted by the fact that the decision recorded in the minutes of the meeting of 20 April 1995 had effect only until the end of 1995 (see paragraph 174 above). MBBel did not have a major role in the alleged limitation of price discounts. On the contrary, that measure had already been initiated by the dealers prior to the meeting of 20 April 1995. Even if it were the case that MBBel participated in that measure, it was not in charge of its implementation. Any participation in the measure was not for the purposes of defending MBBel’s own interests but in order to improve the profitability of the dealers. 227 As regards the infringement constituted by the fixing of selling prices in Belgium, the Commission submits that the applicant’s arguments should be rejected. In the first place, its assessment in recital 245 in the contested decision was only that ‘overall’ the infringement in question was ‘serious’ and it set the basic amount of the fine at EUR 7 million, which represents approximately one third of the maximum fine of EUR 20 million laid down for serious infringements under the guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3). The complaint against the applicant was that it monitored discounts given by dealers not only on the W 210 model but also on other models of vehicle. Furthermore, even if the infringement in question were to have been restricted to the W 210 model, the Commission was entitled to take that point into consideration for the purposes of the deterrent effect of the fine. 228 The Commission considers that it has already refuted the applicant’s objections regarding the duration of the infringement (see paragraph 182 above). 229 Furthermore, the Commission did not rely on the fact that MBBel may have had a leading role in restricting discounts when it calculated the amount of the fine, but merely took account of MBBel’s active participation in the measures to fix selling prices in Belgium. Without such active participation, the sanction for exceeding the ceiling on discounts could not have been implemented. The minutes of the meeting of 20 April 1995 show that the action against ‘price slashing’ had existed beforehand. However, the limitation of discounts to a maximum of three per cent was decided upon at that meeting, with the active participation of the applicant, and it cannot therefore be claimed that MBBel was confronted with that measure after it had been adopted. As regards the interest that MBBel itself had, the Commission argues that the limitation of discounts served to maintain the importer’s policy of high prices. Lastly, the assessment of the matter would have been no different if MBBel had in fact wished to maintain the profitability of the dealers (AEG v Commission, cited in paragraph 84 above, at paragraphs 40 to 42 and 71 to 73). 230 The first point to make is that it follows from the finding made in relation to the previous pleas that the fine specified in Article 3 of the contested decision should be annulled in so far as it was imposed on the applicant by reason of the instructions given to the German agents to sell new vehicles supplied so far as at all possible only to customers from their contract territory and to avoid internal competition, and to require payment of a deposit of 15 per cent of the price of the vehicle where vehicles were ordered by clients from outside the contract territory. The fine of a starting amount of EUR 71.825 million should first of all be reduced by EUR 47.025 million (recital 242). 231 The findings made in relation to the previous pleas also show that the fine specified in Article 3 of the contested decision should be annulled in so far as it was imposed on the applicant by reason of the restriction of supplies of passenger cars to leasing companies for stock purposes in Germany and Spain. The fine of a starting amount of EUR 71.825 million should secondly be reduced by EUR 15 million (recital 244). 232 As regards the infringement constituted by the fixing of prices in Belgium, the Court is of the opinion that the applicant is wrong to argue that the Commission treated the fact that a number of models were involved as an aggravating factor. It is clear from recital 248 in the contested decision that the Commission did not take any aggravating factor whatsoever into account when setting the fine. In any event, while it is true that the Commission stated in the contested decision that on 26 November 1996 MBBel instructed Tokata to carry out ghost shopping at 47 Belgian dealers and to monitor discounts granted on C‑Class models, that fact shows, as the Commission contends, that the ghost purchases were normal practice on MBBel’s part and that they were not limited to a specific model. 233 With respect to the applicant’s argument as to the duration of the infringement involving price fixing in Belgium, the Court is of the view that the Commission’s determination in that regard was correct (see paragraph 215 above). The Court also finds that MBBel played a central role in fixing the selling prices of vehicles in Belgium (see paragraph 209 above). There is therefore no reason to reduce the fine imposed for the infringement in question. 234 In the light of all the above, the part of the fine which relates to the infringements in Germany and Spain must be annulled. The other arguments relied on by the applicant in support of its application for annulment of the fine or a reduction in its amount must be rejected. The Court, in the exercise of its unlimited jurisdiction, confirms the amount of the fine relating to the infringement involving price fixing in Belgium at EUR 9.8 million. Costs235 Under Article 87(3) of the Rules of Procedure of the Court of First Instance, the Court may, where each party succeeds on some and fails on other grounds, order costs to be shared or order each party to bear its own costs. In the present case, it is appropriate to order the Commission to bear its own costs and 60 per cent of the applicant’s costs. On those grounds,THE COURT OF FIRST INSTANCE (Fifth Chamber)hereby:1. Annuls Article 1 of Commission Decision 2002/758/EC of 10 October 2001 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.264 – Mercedes‑Benz) save in so far as it finds that DaimlerChrysler AG and its legal predecessors Daimler‑Benz AG and Mercedes-Benz AG have themselves or through their subsidiary Mercedes-Benz Belgium SA infringed Article 81(1) EC by participating in agreements to restrict the granting of discounts in Belgium, those agreements having been concluded on 20 April 1995 and terminated on 10 July 1999;2. Annuls Article 2 with the exception of its first sentence;3. Annuls Article 3 of Decision 2002/758 in so far as it set the amount of the fine imposed on the applicant at EUR 71.825 million;4. Sets the amount of the fine imposed by Article 3 of Decision 2002/758 for the infringement relating to price fixing in Belgium at EUR 9.8 million;5. Dismisses the remainder of the action;6. Orders the Commission to bear its own costs and 60 per cent of those of the applicant and orders the applicant to bear 40 per cent of its own costs.LindhGarcía-ValdecasasCookeDelivered in open court in Luxembourg on 15 September 2005.H. Jung P. LindhRegistrar President* Language of the case: German. | 5c89f-2b8b71e-4209 | EN |
THE COURT OF FIRST INSTANCE CONFIRMS THE VALIDITY OF THE FIGURATIVE COMMUNITY TRADE MARK "INTERTOPS' FOR BETTING SERVICES OF ALL KINDS | Sportwetten GmbH GeravOffice for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM)(Community trade mark – Application for a declaration of invalidity – Figurative Community trade mark including the word element INTERTOPS – Mark contrary to public policy or to accepted principles of morality – Article 7(1)(f) and (2) and Article 51 of Regulation (EC) No 40/94)Summary of the JudgmentCommunity trade mark – Surrender, revocation and invalidity – Absolute grounds of invalidity – Mark contrary to public policy or to accepted principles of morality – Assessment based solely on examination of the mark itself in relation to the goods and services covered – Facts relating to the conduct of the proprietor of the trade mark – Not relevant(Council Regulation No 40/94, Art. 7(1)(f))It is the Community trade mark itself, namely the sign in relation to the goods or services as they appear upon registration of the trade mark, which is to be assessed in order to determine whether that mark is contrary to public policy or accepted principles of morality within the meaning of Article 7(1)(f) of Regulation No 40/94, likely to lead to a declaration of invalidity pursuant to Article 51(1) of that regulation. An overall reading of the various subparagraphs of Article 7(1) of Regulation No 40/94 shows that they refer to the intrinsic qualities of the mark applied for and not to circumstances relating to the conduct of the person holding the trade mark. It follows that the fact that the proprietor of a Community trade mark is prohibited, in a Member State, from offering the services covered by the mark and from advertising them cannot in any way be considered as relating to the intrinsic qualities of that trade mark within the meaning of the abovementioned interpretation. Consequently, that fact cannot have the effect of rendering the trade mark itself contrary to public policy or to accepted principles of morality. (see paras 27-29)JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)13 September 2005 (*) In Case T-140/02,Sportwetten GmbH Gera, established in Gera (Germany), represented by A. Zumschlinge, lawyer, applicant,Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by D. Schennen and G. Schneider, acting as Agents, defendant,the other party to the proceedings before the Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), intervener before the Court of First Instance, being Intertops Sportwetten GmbH, established in Salzburg (Austria), represented initially by H. Pfeifer, and subsequently by R. Heimler, lawyers, ACTION brought against the decision of the Fourth Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) of 21 February 2002 (Case R 338/2000-4), relating to an application for a declaration of invalidity of the figurative Community trade mark INTERTOPS, THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Second Chamber), composed of J. Pirrung, President, A.W.H. Meij and I. Pelikánová, Judges,Registrar: J. Plingers, Administrator,having regard to the application lodged at the Registry of the Court of First Instance on 2 May 2002,having regard to the response lodged at the Court Registry on 5 August 2002,having regard to the intervener’s response lodged at the Court Registry on 22 August 2002,having regard to the reply lodged at the Court Registry on 7 January 2003,having regard to the intervener’s rejoinder lodged at the Court Registry on 29 July 2003,further to the hearing on 16 February 2005,gives the followingJudgment Background to the dispute1 On 11 January 1999, the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (‘OHIM’) published the registration as a Community trade mark of the figurative sign reproduced below and in respect of which the colours red, white and black were claimed, a registration which had been sought by the intervener under Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1): 2 The services in respect of which registration of the mark was sought come within Class 42 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended, and correspond to the following description: ‘Bookmakers, betting services of all kinds’ (hereinafter ‘the services in question’ and ‘the Community trade mark in question’). 3 On 17 May 1999, the applicant lodged at OHIM an application for a declaration of invalidity concerning the Community trade mark in question, under Article 51(1)(a) of Regulation (EC) No 40/94. In support of its application, the applicant relied on the absolute ground for refusal under Article 7(1)(f) and (2) of Regulation No 40/94. 4 At that date, the applicant was itself holder of the German trade mark covering the word sign INTERTOPS SPORTWETTEN (hereinafter ‘the German trade mark’) in respect of the same services as those set out above. 5 By decision of 2 February 2000, the Cancellation Division of OHIM rejected the application for a declaration of invalidity on the ground that the Community trade mark in question was contrary neither to public policy nor to accepted principles of morality. 6 By decision of 21 February 2002 (hereinafter ‘the contested decision’), the Board of Appeal dismissed the appeal brought by the applicant and ordered it to pay the costs of the appeal proceedings. 7 According to the Board of Appeal, it is the trade mark itself which must be examined in order to assess whether it is contrary to Article 7(1)(f) of Regulation No 40/94. The applicant did not allege that the Community trade mark in question was of itself contrary to public policy or to accepted principles of morality, if only in Germany. The questions whether public law precludes the intervener from offering the services in question, as such, in part of the Community or whether the intervener’s advertising of those services is, as such, contrary to accepted principles of morality have no connection to the trade mark under which it decides to offer its services. The fact that it is impossible for the intervener to use the Community trade mark in question in Germany is, if anything, a consequence of the unlawful nature of the offer of the services in question, but does not lead to the conclusion that use of that mark is of itself unlawful. Consequently, in the view of the Board of Appeal, it is not necessary to examine, in particular, whether Article 7 of Regulation No 40/94 should be interpreted independently or with reference to the particular national characteristics on the subject, or to consider the conclusions to which Article 106(2) of Regulation No 40/94 may lead. Forms of order sought8 The applicant claims that the Court should: – annul the contested decision;– declare the Community trade mark in question invalid;– in the alternative, find that the Community trade mark in question cannot be pleaded in opposition to the German trade mark.9 OHIM contends that the Court should: – dismiss the application;– order the applicant to pay the costs.10 The intervener contends that the Court should dismiss the applicant’s claims. 11 In its rejoinder, the intervener asks the Court to add to the file the decision of the Deutsches Patent‑ und Markenamt (German Patent and Trade Mark Office) of 23 August 2000, by which that office ordered the removal from the register of the German trade mark. 12 At the hearing, the intervener also contended that the applicant should be ordered to pay the costs. Law The applicant’s first head of claim, seeking annulment of the contested decision Pleas in law and arguments of the parties13 In support of its claim for annulment, the applicant raises a single plea in law, alleging that the contested decision infringes Article 51 of Regulation No 40/94, read together with Article 7(1)(f) and (2) of that regulation. 14 It points out that the legislation of numerous Member States, in particular that of Germany, provides that only undertakings licensed by the national authorities in their respective territory are authorised to offer the services in question. Since the intervener does not hold a licence to offer the services in question in Germany, having regard to Paragraph 284 of the Strafgesetzbuch (German Criminal Code), it is not authorised, in that country, to offer those services or to advertise them. By judgment of 14 March 2002, the Bundesgerichtshof (German Federal Supreme Court) prohibited it from advertising its services in Germany, and a number of German judicial decisions have prohibited third parties from using the Community trade mark in question in Germany. Furthermore, the intervener itself admitted, in a number of cases in Germany, that it would not obtain such a licence there. The applicant adds that the national legislation referred to above, including Paragraph 284 of the Strafgesetzbuch, are compatible with Community law (Case C‑275/92 Schindler [1994] ECR I‑1039; Case C‑124/97 Läärä and Others [1999] ECR I‑6067, and Case C‑67/98 Zenatti [1999] ECR I‑7289). 15 According to the applicant, it follows that the Community trade mark in question is contrary to public policy or to accepted principles of morality in Germany and in other Member States, within the meaning of Article 7(1)(f) of Regulation No 40/94. 16 It refers, in that regard, to the rulings of the Bundespatentgericht (German Federal Patent Court) in the cases known as ‘McRecht’, ‘McLaw’ and ‘Cannabis’, since, although no ground for invalidity was found, it was held in those cases that where a given provider is not authorised to offer its services because of a statutory prohibition, it holds no rights in a trade mark relating to the provision of those services. 17 Next, the applicant disputes that uniform European standards are required for the interpretation of Article 7(1)(f) of Regulation No 40/94. It follows from the case-law referred to above, in particular from the Zenatti judgment, cited above, that national views on the regulation of the taking of bets on sporting events must be taken into account at the European level. Article 106(2) of Regulation No 40/94 does not mean that those views must be taken into account solely at a national level, but that they may also be taken into account at that level. Otherwise, according to the applicant, Article 7(2) of Regulation No 40/94 would be deprived of its substance in that, where the Community trade mark in question cannot be used in only part of the Community, a declaration of invalidity of that mark could not be made. 18 The applicant also submits that, having regard to the principle that a trade mark must be used in order to continue to enjoy protection, if its use is precluded at the outset in respect of the services for which it is registered and if any other use is prohibited in the field of those services, it is incapable of any economic exploitation and no right to registration exists. With regard to a Community trade mark, if its use in a single Member State is sufficient to satisfy the requirement of use laid down in Article 15 of Regulation No 40/94, Article 7(2) of that regulation expresses the principle that the holder of a trade mark is able to use it everywhere in the Community, disregarding an insignificant part thereof. 19 Furthermore, the applicant alleges that, since registration of the Community trade mark in question was sought on 27 November 1996, with the result that it has priority over the German mark, if the Community trade mark were not declared invalid, the applicant would be prevented from using the German trade mark even though the intervener is not authorised to offer its services in Germany. 20 Finally, the applicant disputes the interpretation of Article 7(1)(f) of Regulation No 40/94 adopted by OHIM, to the effect that the provision permits the refusal to register only trade marks which are manifestly contrary to fundamental standards of life in society, such as insults or blasphemy. In any event, even if that were accepted, the provision has been infringed in the present case. It follows from the case-law referred to above that the Court of Justice accords great importance to the protection of citizens against the risk of exploitation of their passion for gambling. Services likely to bring a person to financial ruin by exploiting that passion must be assessed in the same way as insults or blasphemy. 21 OHIM and the intervener dispute that this plea in law is well founded. Findings of the Court22 It should be noted, first of all, that Article 51(1)(a) of Regulation No 40/94 provides, in the version applicable until 9 March 2004, on which date Council Regulation (EC) No 422/2004 of 19 February 2004 amending Regulation No 40/94 (OJ 2004 L 70, p. 1) entered into force, that a Community trade mark is to be declared invalid on application to OHIM ‘where the Community trade mark has been registered in breach of the provisions of … Article 7 [of that regulation]’. 23 Article 7(1)(f) states that ‘trade marks which are contrary to public policy or to accepted principles of morality’ are not to be registered and Article 7(2) provides that ‘[p]aragraph 1 shall apply notwithstanding that the grounds of non-registrability obtain in only part of the Community’. 24 It should be noted, at the outset, that in so far as the applicant’s arguments allegedly relate to Member States other than Germany, they are not supported by any concrete or precise evidence. Consequently, to that extent, those arguments are irrelevant. 25 Next, the applicant does not maintain that the sign covered by the Community trade mark in question is, in itself, contrary to public policy or accepted principles of morality, or that the services covered by that trade mark are so contrary. Its arguments refer, inter alia, to the claim that, pursuant to national legislation providing that only undertakings licensed by the competent authorities are authorised to offer services connected with gambling, the intervener is prohibited, in Germany, from offering the services in question and from advertising them. In that regard, it is common ground that the intervener does not hold a licence to offer the services in question in Germany. 26 However, the Court considers that that fact does not mean that the Community trade mark in question is contrary to public policy or accepted principles of morality within the meaning of Article 7(1)(f) of Regulation No 40/94. 27 In that regard, it should be pointed out, first of all, that, as was held in the contested decision and as OHIM and the intervener submit, it is the trade mark itself, namely the sign in relation to the goods or services as they appear upon registration of the trade mark, which is to be assessed in order to determine whether it is contrary to public policy or accepted principles of morality. 28 In that connection, it should be noted that, in its judgment in Case T‑224/01 Durferrit v OHIM – Kolene(NU-TRIDE) [2003] ECR II‑1589, the Court made clear that an overall reading of the various subparagraphs of Article 7(1) of Regulation No 40/94 shows that they refer to the intrinsic qualities of the mark applied for and not to circumstances relating to the conduct of the person applying for the trade mark (paragraph 76). 29 The fact that the intervener is prohibited, in Germany, from offering the services in question and from advertising them cannot in any way be considered as relating to the intrinsic qualities of that trade mark within the meaning of the abovementioned interpretation. Consequently, that fact cannot have the effect of rendering the trade mark itself contrary to public policy or to accepted principles of morality. 30 Next, it should be noted that none of the arguments raised, moreover, by the applicant can alter that finding. 31 With regard to the rulings made by the Bundespatentgericht in the abovementioned cases of McRecht, McLaw and Cannabis, it is clear from the case‑law that the Community trade mark regime is an autonomous system which applies independently of any national system (Case T‑32/00 Messe München v OHIM(electronica) [2000] ECR II-3829, paragraph 47). Accordingly, whether or not a sign is registrable as a Community trade mark must be assessed by reference to the relevant Community legislation only (Case T‑36/01 Glaverbel v OHIM(surface of a sheet of glass) [2002] ECR II‑3887, paragraph 34). It follows that the decisions of the Bundespatentgericht are not relevant to the present case. In any event, the fact remains that, as the applicant admits, none of those decisions finds a ground for invalidity. Moreover, they relate to signs and goods which are different from those in the present case. 32 With regard to the argument based on the principle that a trade mark must be used in order to continue to enjoy protection, it suffices to note that, as has been stated above, it is the trade mark itself, namely the sign in relation to the goods or services as they appear upon registration of the trade mark, which must be assessed for the purposes of applying Article 7(1)(f) of Regulation No 40/94. It follows that any question relating to the use of the Community trade mark in question is not relevant to the application of that provision. 33 With regard to the argument that, if the Community trade mark in question were not declared invalid, the applicant would be prevented from using its German trade mark, it suffices to note that, even if it were accepted, that fact is irrelevant to the question whether the Community trade mark is contrary to public policy or to accepted principles of morality. That question, the only one at issue in the present case, relates to the absolute grounds for refusal under Article 7 of Regulation No 40/94 which are to be the subject of an independent assessment, without any connection to other trade marks. The question of the use by the applicant of its German trade mark is therefore not relevant to the present case. 34 Finally, with regard to the argument based on Article 106(2) of Regulation No 40/94, it should be noted that that provision states that ‘this regulation shall, unless otherwise provided for, not affect the right to bring proceedings under the civil, administrative or criminal law of a Member State or under provisions of Community law for the purpose of prohibiting the use of a Community trade mark to the extent that the use of a national trade mark may be prohibited under the law of that Member State or under Community law’. 35 Although it follows from that provision that the use of a trade mark may be prohibited on the basis, inter alia, of rules relating to public policy and accepted principles of morality, notwithstanding the fact that the trade mark is protected by a Community registration, it does not follow that that power is relevant in the light of the question under Article 51(1)(a) of Regulation No 40/94 and raised by the applicant, which is whether that trade mark was registered in compliance with the provisions of Article 7 of that regulation. This argument must therefore be rejected. 36 Furthermore, since it has been held above that the fact that the intervener is not authorised in Germany to offer the services in question or to advertise them in no way means that the Community trade mark in question is contrary to Article 7(1)(f) of Regulation No 40/94, it is not necessary to examine the question, argued by the parties, whether that provision is to be interpreted independently. In the same way, it is not necessary either to examine the accuracy of OHIM’s interpretation of that provision or to examine the arguments raised by the applicant in response to that interpretation. 37 Finally, since the fact that the intervener is not authorised in Germany to offer the services in question or to advertise them is not relevant to the application of Article 7(1)(f) of Regulation No 40/94, there is no need to consider whether, as the intervener claims, that fact is effectively contrary to freedom to provide services. 38 It follows from all the foregoing that the sole plea raised in support of the first head of claim must be rejected and, therefore, that the head of claim must also be rejected. The second head of claim, seeking a declaration of invalidity of the Community trade mark in question39 With regard to the second head of claim, it follows from the context of the first and second heads of claim that the second presupposes that the first, seeking the annulment of the contested decision, is granted, at least in part, and that, as the applicant confirmed at the hearing, the second is therefore brought only if the first head is allowed. 40 Since it has not been found that the contested decision should be annulled, there is no need to adjudicate on the admissibility or the merits of the second head of claim (see, to that effect, Case T‑66/03 ‘Drie Mollen sinds 1818’ v OHIM – Nabeiro Silveria (Galáxia) [2004] ECR II‑0000, paragraphs 50 and 51). The third head of claim, raised in the alternative and seeking a declaration that the Community trade mark in question cannot be pleaded in opposition to the German trade mark Arguments of the parties41 In support of this claim, the applicant states that it must be clearly established that the Community trade mark in question does not give its holder the effect of a complete ‘block’ throughout the Community when it cannot use the trade mark in a part thereof although that possibility is open to other undertakings. 42 At the hearing, OHIM and the intervener submitted that the third head of claim should be rejected as being inadmissible, on the ground of a lack of sufficient argument and because such a decision falls within the scope of national law and not within the jurisdiction of the Court. 43 It is necessary to rule on this alternative head of claim to the extent that, as has been held above, the first and second heads of claim, submitted as principal claims, must be rejected. 44 However, since the applicant does not produce any evidence in support of the third head of claim, it must be rejected as being inadmissible on the ground that it does not comply with the requirement laid down in Article 44(1)(c) of the Rules of Procedure of the Court of First Instance that the application must contain, inter alia, a summary of the pleas in law. The application made by the intervener seeking the addition to the file of the decision by which the Deutsches Patent- und Markenamt ordered the removal from the register of the German trade mark45 In that regard, it is sufficient to note that, since there is no need to rule on the applicant’s application for the Community trade mark in question to be declared invalid and the remainder of the present action must be dismissed, there is no need to rule on the application made by the intervener. Costs46 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. In this case, the applicant has been unsuccessful and OHIM has applied for costs against it. At the hearing, the intervener also applied for the applicant to be ordered to pay the costs. The fact that the intervener did not apply for costs until the hearing does not debar the Court from awarding them (Case 113/77 NTN Toyo Bearing and Others v Council [1979] ECR 1185 and the Opinion of Advocate General Warner in that case ECR 1212, 1274). The applicant should therefore be ordered to pay all the costs. On those grounds,THE COURT OF FIRST INSTANCE (Second Chamber)hereby:1. Declares that there is no need to adjudicate on the applicant’s application for a declaration that the figurative Community trade mark including the word element INTERTOPS is invalid, or on the intervener’s application for a document to be added to the file.2. Dismisses the remainder of the action.3. Orders the applicant to pay all the costs. Pirrung Meij Pelikánová Delivered in open court in Luxembourg on 13 September 2005.H. Jung J. PirrungRegistrar President* Language of the case: German. | 8e7e9-f75fcba-4eea | EN |
THE EUROPEAN COMMUNITY HAS THE POWER TO REQUIRE THE MEMBER STATES TO LAY DOWN CRIMINAL PENALTIES FOR THE PURPOSE OF PROTECTING THE ENVIRONMENT | Commission of the European CommunitiesvCouncil of the European Union(Action for annulment – Articles 29 EU, 31(e) EU, 34 EU and 47 EU – Framework Decision 2003/80/JHA – Protection of the environment – Criminal penalties – Community competence – Legal basis – Article 175 EC)Opinion of Advocate General Ruiz-Jarabo Colomer delivered on 26 May 2005 Judgment of the Court (Grand Chamber), 13 September 2005 Summary of the JudgmentEnvironment — Protection — Community competence — Criminal penalties — Framework Decision 2003/80 on the protection of the environment through criminal law — Appropriate legal basis — Article 175 EC – Decision based on Title VI of the Treaty on European Union — Infringement of Article 47 EU (Arts 135 EC, 175 EC and 280(4) EC; Art. 47 EU; Council Framework Decision 2003/80, Arts 1 to 7)Framework Decision 2003/80 on the protection of the environment through criminal law, being based on Title VI of the Treaty on European Union, encroaches upon the powers which Article 175 EC confers on the Community, and, accordingly, the entire framework decision being indivisible, infringes Article 47 EU. Articles 1 to 7 of that framework decision, which entail partial harmonisation of the criminal laws of the Member States, in particular as regards the constituent elements of various criminal offences committed to the detriment of the environment, could have been properly adopted on the basis of Article 175 EC in so far as, on account of both their aim and their content, their principal objective is the protection of the environment, which constitutes one of the essential objectives of the Community. In this regard, while it is true that, as a general rule, neither criminal law nor the rules of criminal procedure fall within the Community’s competence, this does not, however, prevent the Community legislature, when the application of effective, proportionate and dissuasive criminal penalties by the competent national authorities is an essential measure for combating serious environmental offences, from taking measures which relate to the criminal law of the Member States which it considers necessary in order to ensure that the rules which it lays down on environmental protection are fully effective. That competence of the Community legislature in relation to the implementation of environmental policy cannot be called into question by the fact that Articles 135 EC and 280(4) EC reserve to the Member States, in the spheres of customs cooperation and the protection of the Community’s financial interests respectively, the application of national criminal law and the administration of justice. (see paras 41-42, 47-48, 51-53)JUDGMENT OF THE COURT (Grand Chamber)13 September 2005 (*) In Case C-176/03,APPLICATION for annulment pursuant to Article 35 EU brought on 15 April 2003,Commission of the European Communities, represented by M. Petite, J.‑F. Pasquier and W. Bogensberger, acting as Agents, with an address for service in Luxembourg, applicant,supported by:European Parliament, represented by G. Garzón Clariana, H. Duintjer Tebbens and A. Baas, and M. Gómez-Leal, acting as Agents, with an address for service in Luxembourg, intervener,Council of the European Union, represented by J.‑C. Piris, J. Schutte and K. Michoel, acting as Agents, with an address for service in Luxembourg, defendant,Kingdom of Denmark, represented by J. Molde, acting as Agent, Federal Republic of Germany, represented by W.‑D. Plessing and A. Dittrich, acting as Agents, Hellenic Republic, represented by E.‑M. Mamouna and M. Tassopoulou, acting as Agents, with an address for service in Luxembourg, Kingdom of Spain, represented by N. Díaz Abad, acting as Agent, with an address for service in Luxembourg, French Republic, represented by G. de Bergues, F. Alabrune and E. Puisais, acting as Agents, Ireland, represented by D. O’Hagan, acting as Agent, and P. Gallagher, E. Fitzsimons SC and E. Regan BL, with an address for service in Luxembourg, Kingdom of the Netherlands, represented by H.G. Sevenster and C. Wissels, acting as Agents, Portuguese Republic, represented by L. Fernandes and A. Fraga Pires, acting as Agents, Republic of Finland, represented by A. Guimaraes-Purokoski, acting as Agent, with an address for service in Luxembourg, Kingdom of Sweden, represented by A. Kruse, K. Wistrand and A. Falk, acting as Agents, United Kingdom of Great Britain and Northern Ireland, represented by C. Jackson, acting as Agent, and R. Plender QC, interveners,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, R. Silva de Lapuerta and A. Borg Barthet, Presidents of Chambers, R. Schintgen (Rapporteur), N. Colneric, S. von Bahr, J. N. Cunha Rodrigues, G. Arestis, M. Ilešič and J. Malenovský, Judges, Advocate General: D. Ruiz-Jarabo Colomer,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 5 April 2005,after hearing the Opinion of the Advocate General at the sitting on 26 May 2005,gives the followingJudgment1 By its application the Commission of the European Communities is seeking annulment of Council Framework Decision 2003/80/JHA of 27 January 2003 on the protection of the environment through criminal law (OJ 2003 L 29, p. 55; ‘the framework decision’). Legal framework and background2 On 27 January 2003, on the initiative of the Kingdom of Denmark, the Council of the European Union adopted the framework decision.3 Based on Title VI of the Treaty on European Union, in particular Articles 29 EU, 31(e) EU and 34(2)(b) EU, as worded prior to the entry into force of the Treaty of Nice, the framework decision constitutes, as is clear from the first three recitals in its preamble, the instrument by which the European Union intends to respond with concerted action to the disturbing increase in offences posing a threat to the environment. 4 The framework decision lays down a number of environmental offences, in respect of which the Member States are required to prescribe criminal penalties. 5 Thus, Article 2 of the framework decision, entitled ‘Intentional offences’, provides:‘Each Member State shall take the necessary measures to establish as criminal offences under its domestic law (a) the discharge, emission or introduction of a quantity of substances or ionising radiation into air, soil or water which causes death or serious injury to any person; (b) the unlawful discharge, emission or introduction of a quantity of substances or ionising radiation into air, soil or water which causes or is likely to cause their lasting or substantial deterioration or death or serious injury to any person or substantial damage to protected monuments, other protected objects, property, animals or plants; (c) the unlawful disposal, treatment, storage, transport, export or import of waste, including hazardous waste, which causes or is likely to cause death or serious injury to any person or substantial damage to the quality of air, soil, water, animals or plants; (d) the unlawful operation of a plant in which a dangerous activity is carried out and which, outside the plant, causes or is likely to cause death or serious injury to any person or substantial damage to the quality of air, soil, water, animals or plants; (e) the unlawful manufacture, treatment, storage, use, transport, export or import of nuclear materials or other hazardous radioactive substances which causes or is likely to cause death or serious injury to any person or substantial damage to the quality of air, soil, water, animals or plants; (f) the unlawful possession, taking, damaging, killing or trading of or in protected wild fauna and flora species or parts thereof, at least where they are threatened with extinction as defined under national law; (g) the unlawful trade in ozone-depleting substances,when committed intentionally.’6 Article 3 of the framework decision, entitled ‘Negligent offences’, provides:‘Each Member State shall take the necessary measures to establish as criminal offences under its domestic law, when committed with negligence, or at least serious negligence, the offences enumerated in Article 2.’ 7 Article 4 of the framework decision states that each Member State is to take the necessary measures to ensure that participating in or instigating the conduct referred to in Article 2 is punishable. 8 Article 5(1) of the framework decision provides that the penalties thus laid down must be ‘effective, proportionate and dissuasive’ including, ‘at least in serious cases, penalties involving deprivation of liberty which can give rise to extradition’. Article 5(2) adds that the criminal penalties ‘may be accompanied by other penalties or measures’. 9 Article 6 of the framework decision governs the liability, as the result of an act or omission, of legal persons and Article 7 sets out the sanctions to which they are to be subject, which ‘include criminal or non-criminal fines and may include other sanctions’. 10 Finally, Article 8 of the framework decision concerns jurisdiction and Article 9 deals with prosecutions brought by a Member State which does not extradite its own nationals. 11 The Commission objected in the various Council bodies to the legal basis relied on by the Council to require the Member States to impose criminal penalties on persons committing environmental offences. In its submission, the correct legal basis in that respect was Article 175(1) EC and it had indeed put forward, on 15 March 2001, a proposal for a Directive of the European Parliament and of the Council on the protection of the environment through criminal law (OJ 2001 C 180 E, p. 238, ‘the proposed directive’), based on Article 175 EC, the annex to which listed the Community law measures to which the offences set out in Article 3 of the proposal relate. 12 On 9 April 2002, the European Parliament expressed its view on both the proposed directive, at first reading, and on the draft framework decision. 13 It concurred with the Commission’s view of the scope of the Community’s competence, whilst calling on the Council (i) to use the framework decision as a measure complementing the directive that would take effect in relation to the protection of the environment through criminal law solely in respect of judicial cooperation and (ii) to refrain from adopting the framework decision before adoption of the proposed directive (see texts adopted by the Parliament on 9 April 2002 bearing references A5‑0099/2002 (first reading) and A5‑0080/2002). 14 The Council did not adopt the proposed directive, but the fifth and seventh recitals to the framework decision are worded as follows: ‘(5) The Council considered it appropriate to incorporate into the present Framework decision a number of substantive provisions contained in the proposed Directive, in particular those defining the conduct which Member States have to establish as criminal offences under their domestic law. …(7) The Council has considered this proposal but has come to the conclusion that the majority required for its adoption by the Council cannot be obtained. The said majority considered that the proposal went beyond the powers attributed to the Community by the Treaty establishing the European Community and that the objectives could be reached by adopting a Framework-Decision on the basis of Title VI of the Treaty on European Union. The Council also considered that the present Framework Decision, based on Article 34 of the Treaty on European Union, is a correct instrument to impose on the member States the obligation to provide for criminal sanctions. The amended proposal submitted by the Commission was not of a nature to allow the Council to change its position in this respect.’ 15 The Commission appended the following statement to the minutes of the Council meeting at which the framework decision was adopted: ‘The Commission takes the view that the Framework Decision is not the appropriate legal instrument by which to require Member States to introduce sanctions of a criminal nature at national level in the case of offences detrimental to the environment. As the Commission pointed out on several occasions within Council bodies, it considers that in the context of the competences conferred on it for the purpose of attaining the objectives stated in Article 2 of the Treaty establishing the European Community, the Community is competent to require the Member States to impose sanctions at national level – including criminal sanctions if appropriate – where that proves necessary in order to attain a Community objective. This is the case for environmental matters which are the subject of Title XIX of the Treaty establishing the European Community.Furthermore, the Commission points out that its proposal for a Directive on the protection of the environment through criminal law has not been appropriately examined under the codecision procedure. If the Council adopts the Framework Decision despite this Community competence, the Commission reserves all the rights conferred on it by the Treaty.’ The action16 By order of the President of the Court of 29 September 2003, the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Kingdom of the Netherlands, the Portuguese Republic, the Republic of Finland, the Kingdom of Sweden and the United Kingdom of Great Britain and Northern Ireland, on the one hand, and the Parliament, on the other, were granted leave to intervene in support of the form of order sought by the Council and the Commission respectively. 17 By order of 17 March 2004, the President of the Court dismissed the application brought by the European Economic and Social Committee for leave to intervene in support of the form of order sought by the Commission. Arguments of the parties18 The Commission challenges the Council’s choice of Article 34 EU, in conjunction with Articles 29 EU and 31(e) EU, as the legal basis for Articles 1 to 7 of the framework decision. It submits that the purpose and content of the latter are within the scope of the Community’s powers on the environment, as they are stated in Article 3(1) EC and Articles 174 to 176 EC. 19 Although it does not claim that the Community legislature has a general competence in criminal matters, the Commission submits that the legislature is competent, under Article 175 EC, to require the Member States to prescribe criminal penalties for infringements of Community environmental‑protection legislation if it takes the view that that is a necessary means of ensuring that the legislation is effective. The harmonisation of national criminal laws, in particular of the constituent elements of environmental offences to which criminal penalties attach, is designed to be an aid to the Community policy in question. 20 The Commission recognises that there is no precedent in this area. It relies, however, in support of its argument, on the case-law of the Court concerning the duty of loyal cooperation and the principles of effectiveness and equivalence (see, inter alia, Case 50/76 Amsterdam Bulb [1977] ECR 137, paragraph 33, Case C‑186/98 Nunes and de Matos [1999] ECR I‑4883, paragraphs 12 and 14, and the order of 13 July 1990 in Case C‑2/88 IMM Zwartveld and Others [1990] ECR I‑3365, paragraph 17). 21 Likewise, a number of regulations adopted in the sphere of fisheries and transport policy either require the Member States to bring criminal proceedings or impose restrictions on the types of penalties which those States may impose. The Commission refers, in particular, to two Community measures which require the Member States to introduce penalties which are necessarily criminal in nature, although that qualification has not been expressly employed (see Article 14 of Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (OJ 1991 L 166, p. 77) and Articles 1 to 3 of Council Directive 2002/90/EC of 28 November 2002 defining the facilitation of unauthorised entry, transit and residence (OJ 2002 L 328, p. 17)). 22 In addition, the Commission submits that the framework decision must in any event be annulled in part on the ground that Articles 5(2), 6 and 7 thereof leave the Member States free to prescribe penalties other than criminal penalties, even to choose between criminal and other penalties, which undeniably falls within the Community’s competence. 23 However, the Commission does not maintain that the framework decision as a whole should have been the subject-matter of a directive. In particular, it does not dispute that Title VI of the Treaty on European Union is the appropriate legal basis for the provisions of the decision which deal with jurisdiction, extradition and prosecutions of persons who have committed offences. However, given that those provisions are incapable of existing independently, it must apply for annulment of the framework decision in its entirety. 24 The Commission also puts forward a ground of challenge alleging abuse of process. In that regard, it relies on the fifth and seventh recitals in the preamble to the framework decision, which show that the choice of an instrument under Title VI of the Treaty was based on considerations of expediency, since the proposed directive had failed to obtain the majority required for its adoption because a majority of Member States had refused to recognise that the Community had the necessary powers to require the Member States to prescribe criminal penalties for environmental offences. 25 The Parliament concurs with the Commission’s arguments. It submits, more specifically, that the Council confused the Community’s power to adopt the proposed directive and the power, not claimed by the Community, to adopt the framework decision in its entirety. The matters upon which the Council relies in support of its argument are, in reality, considerations of expediency concerning the choice of whether or not to impose solely criminal penalties, considerations which should have been dealt with in the legislative procedure on the basis of Articles 175 EC and 251 EC. 26 The Council and the Member States which have intervened in these proceedings, with the exception of the Kingdom of the Netherlands, submit that, as the law currently stands, the Community does not have power to require the Member States to impose criminal penalties in respect of the conduct covered by the framework decision. 27 Not only is there no express conferral of power in that regard, but, given the considerable significance of criminal law for the sovereignty of the Member States, there are no grounds for accepting that this power can have been implicitly transferred to the Community at the time when specific substantive competences, such as those exercised under Article 175 EC, were conferred on it. 28 Articles 135 EC and 280 EC, which expressly reserve to the Member States the application of national criminal law and the administration of justice, confirm that interpretation. 29 That interpretation is also borne out by the fact that the Treaty on European Union devotes a specific title to judicial cooperation in criminal matters (see Articles 29 EU, 30 EU and 31(e) EU), which expressly confers on the European Union competence in criminal matters, in particular as regards the determination of the constituent elements of the relevant offences and penalties. The Commission’s position is therefore contradictory, since it amounts, on the one hand, to claiming that the authors of the Treaty on European Union and the EC Treaty intended to confer by implication on the Community competence in criminal matters and, on the other, to disregarding the fact that the same authors expressly attributed such a competence to the European Union. 30 None of the judgments or secondary legislation to which the Commission refers lends support to its argument.31 First, the Court has never obliged the Member States to adopt criminal penalties. According to its case-law, it is certainly the responsibility of the Member States to ensure that infringements of Community law are penalised under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance, and the penalty must, moreover, be effective, dissuasive and proportionate to the infringement; furthermore, the national authorities must proceed with respect to infringements of Community law with the same diligence as that which they bring to bear in implementing corresponding national laws (see, in particular, Case 68/88 Commission v Greece [1989] ECR 2965, paragraphs 24 and 25). However, the Court has not held, either expressly or by implication, that the Community is competent to harmonise the criminal laws applicable in the Member States. It has rather held that the choice of penalties is a matter for the Member States. 32 Second, legislative practice is in keeping with that interpretation. The various pieces of secondary legislation restate the traditional form of words, by virtue of which ‘effective, proportionate and dissuasive sanctions’ are to be prescribed (see, for example, Article 3 of Directive 2002/90), but do not call into question the freedom of the Member States to choose between proceeding under administrative or criminal law. On the rare occasions when the Community legislature has specified that the Member States are to bring criminal or administrative proceedings, it has merely stated expressly the choice which was open to them in any event. 33 Furthermore, whenever the Commission has proposed to the Council that a Community measure having implications for criminal matters be adopted, the Council has detached the criminal part of that measure so that it may be dealt with in a framework decision (see Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro (OJ 1998 L 139, p. 1), which had to be supplemented by Council Framework Decision 2000/383/JHA of 29 May 2000 on increasing protection by criminal penalties and other sanctions against counterfeiting in connection with the introduction of the euro (OJ 2000 L 140, p. 1); see also Directive 2002/90, supplemented by Council Framework Decision 2002/946/JHA of 28 November 2002 on the strengthening of the penal framework to prevent the facilitation of unauthorised entry, transit and residence (OJ 2002 L 328, p. 1)). 34 In this instance, regard being had to both its purpose and content, the framework decision concerns the harmonisation of criminal law. The mere fact that it seeks to combat environmental offences is not such as to found the Community’s competence. In fact, the framework decision supplements Community law on environmental protection. 35 In addition, the Council contends that the plea alleging abuse of process is based on an incorrect reading of the preamble to the framework decision. 36 The Kingdom of the Netherlands, whilst supporting the form of order sought by the Council, adopts a slightly more qualified argument than the Council. It contends that, in exercising the powers conferred on it by the EC Treaty, the Community may require the Member States to provide for the possibility of punishing certain conduct under national criminal law, provided that the penalty is inseparably linked to the relevant substantive Community provisions and that it can actually be shown that imposing penalties under criminal law in that way is necessary for the achievement of the objectives of the Treaty in the area concerned (see Case C‑240/90 Germany v Commission [1992] ECR I‑5383). That could be the case if the enforcement of a harmonising rule based, for example, on Article 175 EC gave rise to a need for criminal penalties. 37 Conversely, if it is apparent from the content and nature of the proposed measure that it is intended essentially to bring about a general harmonisation of criminal laws and that the system of penalties is not inseparably linked to the area of Community law concerned, Articles 29 EU, 31(e) EU and 34(2)(b) EU are the correct legal basis for the measure. That is the case in this instance. It is clear from the purpose and content of the framework decision that it is intended, generally, to secure harmonisation of criminal laws in the Member States. The fact that rules adopted under the EC Treaty may be concerned is not decisive. Findings of the Court38 Article 47 EU provides that nothing in the Treaty on European Union is to affect the EC Treaty. That requirement is also found in the first paragraph of Article 29 EU, which introduces Title VI of the Treaty on European Union. 39 It is the task of the Court to ensure that acts which, according to the Council, fall within the scope of Title VI of the Treaty on European Union do not encroach upon the powers conferred by the EC Treaty on the Community (see Case C‑170/96 Commission v Council [1998] ECR I-2763, paragraph 16). 40 It is therefore necessary to ascertain whether Articles 1 to 7 of the framework decision affect the powers of the Community under Article 175 EC inasmuch as those articles could, as the Commission maintains, have been adopted on the basis of the last-mentioned provision. 41 On that point, it is common ground that protection of the environment constitutes one of the essential objectives of the Community (see Case 240/83 ADBHU [1985] ECR 531, paragraph 13, Case 302/86 Commission v Denmark [1988] ECR 4607, paragraph 8, Case C‑213/96 Outokumpu [1998] ECR I‑1777, paragraph 32). In that regard, Article 2 EC states that the Community has as its task to promote ‘a high level of protection and improvement of the quality of the environment’ and, to that end, Article 3(1)(l) EC provides for the establishment of a ‘policy in the sphere of the environment’. 42 Furthermore, in the words of Article 6 EC ‘[e]nvironmental protection requirements must be integrated into the definition and implementation of the Community policies and activities’, a provision which emphasises the fundamental nature of that objective and its extension across the range of those policies and activities. 43 Articles 174 EC to 176 EC comprise, as a general rule, the framework within which Community environmental policy must be carried out. In particular, Article 174(1) EC lists the objectives of the Community’s action on the environment and Article 175 EC sets out the procedures to be followed in order to achieve those objectives. The Community’s powers are, in general, exercised in accordance with the procedure laid down in Article 251 EC, following consultation of the Economic and Social Committee and the Committee of the Regions. However, in relation to certain spheres referred to in Article 175(2) EC, the Council takes decisions alone, acting unanimously on a proposal from the Commission after consulting the Parliament and the two abovementioned bodies. 44 As the Court has previously held, the measures referred to in the three indents of the first subparagraph of Article 175(2) EC all imply the involvement of the Community institutions in areas such as fiscal policy, energy policy or town and country planning policy, in which, apart from Community policy on the environment, either the Community has no legislative powers or unanimity within the Council is required (Case C‑36/98 Spain v Council [2001] ECR I‑779, paragraph 54). 45 Moreover, it must be borne in mind that, according to the Court’s settled case-law, the choice of the legal basis for a Community measure must rest on objective factors which are amenable to judicial review, including in particular the aim and the content of the measure (see, inter alia, Case C-300/89 Commission v Council [1991] ECR I-2867, ‘Titanium dioxide’, paragraph 10, and Case C‑336/00 Huber [2002] ECR I‑7699, paragraph 30). 46 As regards the aim of the framework decision, it is clear both from its title and from its first three recitals that its objective is the protection of the environment. The Council was concerned ‘at the rise in environmental offences and their effects which are increasingly extending beyond the borders of the States in which the offences are committed’, and, having found that those offences constitute ‘a threat to the environment’ and ‘a problem jointly faced by the Member States’, concluded that ‘a tough response’ and ‘concerted action to protect the environment under criminal law’ were called for. 47 As to the content of the framework decision, Article 2 establishes a list of particularly serious environmental offences, in respect of which the Member States must impose criminal penalties. Articles 2 to 7 of the decision do indeed entail partial harmonisation of the criminal laws of the Member States, in particular as regards the constituent elements of various criminal offences committed to the detriment of the environment. As a general rule, neither criminal law nor the rules of criminal procedure fall within the Community’s competence (see, to that effect, Case 203/80 Casati [1981] ECR 2595, paragraph 27, and Case C‑226/97 Lemmens [1998] ECR I‑3711, paragraph 19). 48 However, the last-mentioned finding does not prevent the Community legislature, when the application of effective, proportionate and dissuasive criminal penalties by the competent national authorities is an essential measure for combating serious environmental offences, from taking measures which relate to the criminal law of the Member States which it considers necessary in order to ensure that the rules which it lays down on environmental protection are fully effective. 49 It should also be added that in this instance, although Articles 1 to 7 of the framework decision determine that certain conduct which is particularly detrimental to the environment is to be criminal, they leave to the Member States the choice of the criminal penalties to apply, although, in accordance with Article 5(1) of the decision, the penalties must be effective, proportionate and dissuasive. 50 The Council does not dispute that the acts listed in Article 2 of the framework decision include infringements of a considerable number of Community measures, which were listed in the annex to the proposed directive. Moreover, it is apparent from the first three recitals to the framework decision that the Council took the view that criminal penalties were essential for combating serious offences against the environment. 51 It follows from the foregoing that, on account of both their aim and their content, Articles 1 to 7 of the framework decision have as their main purpose the protection of the environment and they could have been properly adopted on the basis of Article 175 EC. 52 That finding is not called into question by the fact that Articles 135 EC and 280(4) EC reserve to the Member States, in the spheres of customs cooperation and the protection of the Community’s financial interests respectively, the application of national criminal law and the administration of justice. It is not possible to infer from those provisions that, for the purposes of the implementation of environmental policy, any harmonisation of criminal law, even as limited as that resulting from the framework decision, must be ruled out even where it is necessary in order to ensure the effectiveness of Community law. 53 In those circumstances, the entire framework decision, being indivisible, infringes Article 47 EU as it encroaches on the powers which Article 175 EC confers on the Community. 54 There is therefore no need to examine the Commission’s argument that the framework decision should in any event be annulled in part in so far as Articles 5(2), 6 and 7 leave the Member States free also to provide for penalties other than criminal penalties, even to choose between criminal penalties and other penalties, matters allegedly falling undeniably within the Community’s competence. 55 In the light of all the foregoing, the framework decision must be annulled. Costs56 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Council has been unsuccessful, the Council must be ordered to pay the costs. Pursuant to the first paragraph of Article 69(4), the interveners in these proceedings must bear their own costs. On those grounds, the Court (Grand Chamber) hereby:1. Annuls Council Framework Decision 2003/80/JHA of 27 January 2003 on the protection of the environment through criminal law;2. Orders the Council of the European Union to pay the costs;3. Orders the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Kingdom of the Netherlands, the Portuguese Republic, the Republic of Finland, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland and the European Parliament to bear their own costs.[Signatures]* Language of the case: French. | 5fd88-eff6bfd-43ce | EN |
ADVOCATE GENERAL GEELHOED SUGGESTS THAT THE REGULATION ON COMPENSATION AND ASSISTANCE TO AIR PASSENGERS IS VALID | The Queen on the application of:International Air Transport AssociationandEuropean Low Fares Airline AssociationvDepartment for Transport(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court)) (Carriage by air – Regulation (EC) No 261/2004 – Articles 5, 6 and 7 – Compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights – Validity – Interpretation of Article 234 EC)Summary of the Judgment1. Preliminary rulings – Reference to the Court – Challenge to the validity of a Community act before a national court(Art. 234, para. 2, EC)2. Transport – Carriage by air – Regulation No 261/2004 – Measures to assist and take care of passengers in the event of a long delay to a flight(European Parliament and Council Regulation No 261/2004, Art. 6; Montreal Convention 1999)3. Acts of the institutions – Statement of reasons – Obligation – Scope (Art. 253 EC; European Parliament and Council Regulation No 261/2004, Arts 5, 6 and 7)4. Transport – Carriage by air – Regulation No 261/2004 – Measures to assist, take care of and compensate passengers in the event of cancellation of, or a long delay to, a flight(European Parliament and Council Regulation No 261/2004, Arts 5, 6 and 7)5. Transport – Carriage by air – Regulation No 261/2004 – Measures to assist, take care of and compensate passengers in the event of cancellation of, or a long delay to, a flight1. The fact that the validity of a Community act is contested before a national court is not in itself sufficient to warrant referral of a question to the Court of Justice for a preliminary ruling. Courts against whose decisions there is a judicial remedy under national law may examine the validity of a Community act and, if they consider that the arguments put forward before them by the parties in support of invalidity are unfounded, they may reject them, concluding that the act is completely valid, given that, in so doing, they are not calling into question the existence of the Community act. On the other hand, where such a court considers that one or more arguments for invalidity of a Community act which have been put forward by the parties or, as the case may be, raised by it of its own motion are well founded, it must stay proceedings and make a reference to the Court for a preliminary ruling on the act’s validity. (see paras 28-30, 32, operative part 1)2. The measures to assist and take care of passengers in the event of a long delay to a flight which are prescribed in Article 6 of Regulation No 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights constitute standardised and immediate measures to redress the damage which is linked to the inconvenience that delay in the carriage of passengers by air causes. These measures are not among those the institution of which is regulated by the Montreal Convention for the Unification of Certain Rules for International Carriage by Air and cannot therefore be considered inconsistent with the Convention. That Convention governs the conditions under which, after a flight has been delayed, the passengers concerned may bring actions for damages by way of redress on an individual basis from the carriers liable for damage resulting from that delay, but does not shield those carriers from any other form of intervention. The standardised and immediate measures prescribed in Article 6 of Regulation No 261/2004 do not prevent the passengers concerned, should the same delay also cause them damage conferring entitlement to compensation, from being able to bring in addition actions to redress that damage under the conditions laid down by the Montreal Convention. (see paras 44-48)3. Articles 5, 6 and 7 of Regulation No 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights are not invalid by reason of breach of the obligation to state reasons. Regulation No 261/2004 clearly discloses the essential objective pursued by the institutions and thus cannot be required to contain a specific statement of reasons for each of the technical choices made. Since the objective of protecting passengers required acceptance of standardised and effective compensatory measures which could not give rise to discussion at the very moment when they were to be applied, a situation which the defence of extraordinary circumstances would not have failed to bring about, the Community legislature was able, without breaching its obligation to state reasons, to refrain from setting out the reasons why it considered that operating air carriers could not rely on such a defence in order to be exempted from their obligations to assist and take care of passengers laid down in Articles 5 and 6 of the regulation. Likewise, the Community legislature was able, without rendering the act in question unlawful, to lay down in Article 7 the principle that fixed compensation was payable in the event of cancellation of a flight and the amount of the compensation without setting out the reasons why it had chosen that measure and that amount. (see paras 69-70, 72, 77)4. Given that the Community legislature is allowed a broad discretion in the field of the common transport policy, the legality, from the point of view of observance of the principle of proportionality, of a measure adopted in that field can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue. The measures to assist, care for and compensate passengers that are prescribed in Articles 5, 6 and 7 of Regulation No 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights do not appear manifestly inappropriate to the objective pursued by the Community legislature, which relates to strengthening protection for passengers who suffer cancellation of, or long delays to, flights. On the contrary, the measures prescribed by Articles 5 and 6 of the regulation are in themselves capable of immediately redressing some of the damage suffered by those passengers and therefore enable a high level of passenger protection to be ensured. Furthermore, the criteria adopted for determining the passengers’ entitlement to those measures, namely the length of the delay and the wait for the next flight or the time taken to inform them of the flight’s cancellation, do not appear in any way unrelated to the requirement for proportionality. Also, given that the standardised and immediate compensatory measures at issue vary according to the significance of the damage suffered by the passengers, they likewise do not appear to be manifestly inappropriate merely because carriers cannot rely on the defence of extraordinary circumstances. Next, it has not been established that if passengers were to take out voluntary insurance to cover the risks inherent in flight delays and cancellations, that would in any event make it possible to remedy the damage suffered by passengers on the spot. Such a measure cannot, therefore, be regarded as being more appropriate to the objective pursued than those chosen by the Community legislature. Also, since the harmful consequences to which a delay gives rise are in no way related to the price paid for a ticket, the argument that the measures chosen to alleviate those consequences should have been determined in proportion to the cost of the ticket cannot be upheld. Finally, the compensation prescribed in Article 7 of the regulation, which passengers may claim when they have been informed of a flight cancellation too late, does not appear manifestly inappropriate to the objective pursued, given the existence of the extraordinary circumstances defence enabling air carriers to be exempted from paying that compensation and of the conditions restricting the application of this obligation. Furthermore, the amount of the compensation, set on the basis of the distance of the flights concerned, likewise does not appear excessive. (see paras 80, 82, 84-88, 91)5. Articles 5, 6 and 7 of Regulation No 261/2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, which impose the same obligations on all air carriers, are not invalid by reason of a breach of the principle of equal treatment, even though such obligations are not placed on other means of transport. First, the situations of undertakings operating in different transport sectors are not comparable since modes of transport are not interchangeable as regards the conditions of their use. Second, with regard to air transport, passengers whose flights are cancelled or subject to a long delay are in an objectively different situation from that experienced by passengers on other means of transport in the event of incidents of the same nature. Furthermore, the damage suffered by passengers of air carriers in the event of cancellation of, or a long delay to, a flight is similar whatever the airline with which they have a contract and is unrelated to the pricing policies operated by the airline. Accordingly, if the Community legislature is not to infringe the principle of equality, having regard to the aim pursued by the regulation of increasing protection for all passengers of air carriers, it is incumbent upon it to treat all airlines identically. (see paras 96-99)JUDGMENT OF THE COURT (Grand Chamber)10 January 2006 (*) (Carriage by air – Regulation (EC) No 261/2004 – Articles 5, 6 and 7 –Compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights – Validity – Interpretation of Article 234 EC)In Case C-344/04,REFERENCE for a preliminary ruling under Article 234 EC from the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court), made by decision of 14 July 2004, received at the Court on 12 August 2004, in the proceedings The Queen on the application of: International Air Transport Association,Department for Transport,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K. Schiemann and J. Malenovský (Rapporteur), Presidents of Chambers, C. Gulmann, R. Silva de Lapuerta, K. Lenaerts, P. Kūris, E. Juhász, G. Arestis and A. Borg Barthet, Judges,Advocate General: L.A. Geelhoed,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 7 June 2005,after considering the observations submitted on behalf of:– the International Air Transport Association, by M. Brealey QC and M. Demetriou, Barrister, instructed by J. Balfour, Solicitor,– the European Low Fares Airline Association, by G. Berrisch, Rechtsanwalt, and C. Garcia Molyneux, abogado,– the United Kingdom Government, by M. Bethell, acting as Agent, and C. Lewis, Barrister,– the European Parliament, by K. Bradley and M. Gómez Leal, acting as Agents,– the Council of the European Union, by E. Karlsson, K. Michoel and R. Szostak, acting as Agents,– the Commission of the European Communities, by F. Benyon and M. Huttunen, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 8 September 2005,gives the followingJudgment1 This reference for a preliminary ruling concerns, first, the validity of Articles 5, 6 and 7 of Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91 (OJ 2004 L 46, p. 1). It concerns, secondly, the interpretation of the second paragraph of Article 234 EC. 2 The reference was made in proceedings brought by the International Air Transport Association (‘IATA’) and the European Low Fares Airline Association (‘ELFAA’) against the Department for Transport concerning the implementation of Regulation No 261/2004. Legal context International rules3 The Convention for the Unification of Certain Rules for International Carriage by Air (‘the Montreal Convention’) was approved by decision of the Council of 5 April 2001 (OJ 2001 L 194, p. 38). 4 Chapter III of the Montreal Convention, headed ‘Liability of the carrier and extent of compensation for damage’, is comprised by Articles 17 to 37. 5 Article 19 of the Convention, headed ‘Delay’, provides: ‘The carrier is liable for damage occasioned by delay in the carriage by air of passengers, baggage or cargo. Nevertheless, the carrier shall not be liable for damage occasioned by delay if it proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage or that it was impossible for it or them to take such measures.’ 6 Article 22(1) of the Convention limits the liability of the carrier for delay to 4 150 Special Drawing Rights (SDRs) for each passenger. Article 22(5) essentially provides that this limit is not to apply if the damage results from an act or omission of the carrier, done with intent to cause damage or recklessly and with knowledge that damage would probably result. 7 Article 29 of the Convention, headed ‘Basis of claims’, reads as follows: ‘In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights. In any such action, punitive, exemplary or any other non-compensatory damages shall not be recoverable.’ Community rules Regulation (EC) No 2027/978 Council Regulation (EC) No 2027/97 of 9 October 1997 on air carrier liability in the event of accidents (OJ 1997 L 285, p. 1) was amended by Regulation (EC) No 889/2002 of the European Parliament and of the Council of 13 May 2002 (OJ 2002 L 140, p. 2) (‘Regulation No 2027/97’). 9 Article 3(1) of Regulation No 2027/97 provides: ‘The liability of a Community air carrier in respect of passengers and their baggage shall be governed by all provisions of the Montreal Convention relevant to such liability.’ 10 The annex to Regulation No 2027/97 contains inter alia the following provisions, under the heading ‘Passenger delays’: ‘In case of passenger delay, the air carrier is liable for damage unless it took all reasonable measures to avoid the damage or it was impossible to take such measures. The liability for passenger delay is limited to 4 150 SDRs (approximate amount in local currency).’ Regulation No 261/200411 The first and second recitals in the preamble to Regulation No 261/2004 are worded as follows: ‘(1) Action by the Community in the field of air transport should aim, among other things, at ensuring a high level of protection for passengers. Moreover, full account should be taken of the requirements of consumer protection in general. (2) Denied boarding and cancellation or long delay of flights cause serious trouble and inconvenience to passengers.’12 The 12th recital in the preamble states: ‘The trouble and inconvenience to passengers caused by cancellation of flights should also be reduced. This should be achieved by inducing carriers to inform passengers of cancellations before the scheduled time of departure and in addition to offer them reasonable re-routing, so that the passengers can make other arrangements. Air carriers should compensate passengers if they fail to do this, except when the cancellation occurs in extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.’ 13 The 14th recital states: ‘As under the Montreal Convention, obligations on operating air carriers should be limited or excluded in cases where an event has been caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. Such circumstances may, in particular, occur in cases of political instability, meteorological conditions incompatible with the operation of the flight concerned, security risks, unexpected flight safety shortcomings and strikes that affect the operation of an operating air carrier.’ 14 Article 5 of Regulation No 261/2004, headed ‘Cancellation’, states: ‘1. In case of cancellation of a flight, the passengers concerned shall:(a) be offered assistance by the operating air carrier in accordance with Article 8; and(b) be offered assistance by the operating air carrier in accordance with Article 9(1)(a) and 9(2), as well as, in event of re-routing when the reasonably expected time of departure of the new flight is at least the day after the departure as it was planned for the cancelled flight, the assistance specified in Article 9(1)(b) and 9(1)(c); and (c) have the right to compensation by the operating air carrier in accordance with Article 7, unless:(i) they are informed of the cancellation at least two weeks before the scheduled time of departure; or(ii) they are informed of the cancellation between two weeks and seven days before the scheduled time of departure and are offered re-routing, allowing them to depart no more than two hours before the scheduled time of departure and to reach their final destination less than four hours after the scheduled time of arrival; or (iii) they are informed of the cancellation less than seven days before the scheduled time of departure and are offered re-routing, allowing them to depart no more than one hour before the scheduled time of departure and to reach their final destination less than two hours after the scheduled time of arrival. 2. When passengers are informed of the cancellation, an explanation shall be given concerning possible alternative transport.3. An operating air carrier shall not be obliged to pay compensation in accordance with Article 7, if it can prove that the cancellation is caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. 4. The burden of proof concerning the questions as to whether and when the passenger has been informed of the cancellation of the flight shall rest with the operating air carrier.’ 15 Article 6 of Regulation No 261/2004, headed ‘Delay’, is worded as follows: ‘1. When an operating air carrier reasonably expects a flight to be delayed beyond its scheduled time of departure:(a) for two hours or more in the case of flights of 1 500 kilometres or less; or(b) for three hours or more in the case of all intra-Community flights of more than 1 500 kilometres and of all other flights between 1 500 and 3 500 kilometres; or (c) for four hours or more in the case of all flights not falling under (a) or (b),passengers shall be offered by the operating air carrier:(i) the assistance specified in Article 9(1)(a) and 9(2); and(ii) when the reasonably expected time of departure is at least the day after the time of departure previously announced, the assistance specified in Article 9(1)(b) and 9(1)(c); and (iii) when the delay is at least five hours, the assistance specified in Article 8(1)(a).2. In any event, the assistance shall be offered within the time-limits set out above with respect to each distance bracket.’16 Article 7 of Regulation No 261/2004, headed ‘Right to compensation’, provides: ‘1. Where reference is made to this Article, passengers shall receive compensation amounting to:(a) EUR 250 for all flights of 1 500 kilometres or less;(b) EUR 400 for all intra-Community flights of more than 1 500 kilometres, and for all other flights between 1 500 and 3 500 kilometres;(c) EUR 600 for all flights not falling under (a) or (b).In determining the distance, the basis shall be the last destination at which the denial of boarding or cancellation will delay the passenger’s arrival after the scheduled time. 2. When passengers are offered re-routing to their final destination on an alternative flight pursuant to Article 8, the arrival time of which does not exceed the scheduled arrival time of the flight originally booked (a) by two hours, in respect of all flights of 1 500 kilometres or less; or(b) by three hours, in respect of all intra-Community flights of more than 1 500 kilometres and for all other flights between 1 500 and 3 500 kilometres; or (c) by four hours, in respect of all flights not falling under (a) or (b),the operating air carrier may reduce the compensation provided for in paragraph 1 by 50%.3. The compensation referred to in paragraph 1 shall be paid in cash, by electronic bank transfer, bank orders or bank cheques or, with the signed agreement of the passenger, in travel vouchers and/or other services. 4. The distances given in paragraphs 1 and 2 shall be measured by the great circle route method.’17 Article 8 of Regulation No 261/2004, headed ‘Right to reimbursement or re-routing’, states: ‘1. Where reference is made to this Article, passengers shall be offered the choice between:(a) – reimbursement within seven days, by the means provided for in Article 7(3), of the full cost of the ticket at the price at which it was bought, for the part or parts of the journey not made, and for the part or parts already made if the flight is no longer serving any purpose in relation to the passenger’s original travel plan, together with, when relevant, – a return flight to the first point of departure, at the earliest opportunity;(b) re-routing, under comparable transport conditions, to their final destination at the earliest opportunity; or(c) re-routing, under comparable transport conditions, to their final destination at a later date at the passenger’s convenience, subject to availability of seats. 2. Paragraph 1(a) shall also apply to passengers whose flights form part of a package, except for the right to reimbursement where such right arises under Directive 90/314/EEC. 3. When, in the case where a town, city or region is served by several airports, an operating air carrier offers a passenger a flight to an airport alternative to that for which the booking was made, the operating air carrier shall bear the cost of transferring the passenger from that alternative airport either to that for which the booking was made, or to another close-by destination agreed with the passenger.’ 18 Article 9 of Regulation No 261/2004, headed ‘Right to care’, provides: ‘1. Where reference is made to this Article, passengers shall be offered free of charge:(a) meals and refreshments in a reasonable relation to the waiting time;(b) hotel accommodation in cases– where a stay of one or more nights becomes necessary, or– where a stay additional to that intended by the passenger becomes necessary;(c) transport between the airport and place of accommodation (hotel or other).2. In addition, passengers shall be offered free of charge two telephone calls, telex or fax messages, or e-mails.3. In applying this Article, the operating air carrier shall pay particular attention to the needs of persons with reduced mobility and any persons accompanying them, as well as to the needs of unaccompanied children.’ The main proceedings and the questions referred for a preliminary ruling19 IATA is an association comprising 270 airlines from 130 countries, which carry 98% of scheduled international air passengers worldwide. ELFAA was established as an unincorporated association in January 2004 and represents the interests of 10 low-fare airlines from 9 European countries. These two associations each brought before the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court), judicial review proceedings against the Department for Transport relating to the implementation of Regulation No 261/2004. 20 The High Court of Justice, satisfied that the claimants’ arguments were not without substance, decided to refer to the Court of Justice the seven questions put forward by them contesting the validity of Regulation No 261/2004. Since the Department for Transport doubted that a reference on six of those questions was necessary as they did not, in its view, raise any real doubt as to the validity of the regulation, the High Court of Justice wished to ascertain what test had to be satisfied, or what threshold passed, before a question concerning the validity of a Community instrument had to be referred to the Court of Justice on the basis of the second paragraph of Article 234 EC. In those circumstances, the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court), decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘(1) Whether Article 6 of Regulation No 261/2004 is invalid on grounds that it is inconsistent with the … Montreal Convention …, and in particular Articles 19, 22 and 29 [thereof], and whether this (in conjunction with any other relevant factors) affects the validity of the Regulation as a whole? (2) Whether the amendment of Article 5 of the Regulation during consideration of the draft text by the Conciliation Committee was done in a manner that is inconsistent with the procedural requirements provided for in Article 251 EC and, if so, whether Article 5 of the Regulation is invalid and, if so, whether this (in conjunction with any other relevant factors) affects the validity of the Regulation as a whole? (3) Whether Articles 5 and 6 of Regulation No 261/2004 (or part thereof) are invalid on grounds that they are inconsistent with the principle of legal certainty, and if so whether this invalidity (in conjunction with any other relevant factors) affects the validity of the Regulation as a whole? (4) Whether Articles 5 and 6 of Regulation No 261/2004 (or part thereof) are invalid on grounds that they are not supported by any or any adequate reasoning, and if so whether this invalidity (in conjunction with any other relevant factors) affects the validity of the Regulation as a whole? (5) Whether Articles 5 and 6 of Regulation No 261/2004 (or part thereof) are invalid on grounds that they are inconsistent with the principle of proportionality required of any Community measure, and if so whether this invalidity (in conjunction with any other relevant factors) affects the validity of the Regulation as a whole? (6) Whether Articles 5 and 6 of Regulation No 261/2004 (or part thereof) are invalid on grounds that they discriminate, in particular, against the members of the second Claimant organisation in a manner that is arbitrary or not objectively justified, and if so whether this invalidity (in conjunction with any other relevant factors) affects the validity of the Regulation as a whole? (7) Is Article 7 of the Regulation (or part thereof) void or invalid on grounds that the imposition of a fixed liability in the event of flight cancellation for reasons that are not covered by the extraordinary circumstances defence is discriminatory, fails to meet the standards of proportionality required of any Community measure, or is not based on any adequate reasoning, and if so whether this invalidity (in conjunction with any other relevant factors) affects the validity of the Regulation as a whole? (8) In circumstances where a national court has granted permission to bring a claim in that national court, which raises questions as to the validity of provisions of a Community instrument and which it considers is arguable and not unfounded, are there any principles of Community law in connection with any test or threshold which the national court should apply when deciding under [the second paragraph of Article 234] EC whether to refer those questions of validity to the [Court of Justice of the European Communities]?’ 21 By order of the President of the Court of 24 September 2004, the referring court’s request that the accelerated procedure provided for in the first paragraph of Article 104a of the Rules of Procedure be applied to the present case was rejected. The questions Question 822 By its eighth question, which it is appropriate to examine first, the referring court asks, in essence, whether the second paragraph of Article 234 EC is to be interpreted as requiring a national court to refer a question as to the validity of a Community act to the Court of Justice for a preliminary ruling only if there is more than a certain degree of doubt concerning its validity. Admissibility23 The European Parliament contends that the question is inadmissible since no answer which the Court might provide to the question would be of any assistance for the decision in the case before the referring court, which relates to the validity of Regulation No 261/2004. 24 It is settled case-law that a reference from a national court may be refused only if it is quite obvious that the interpretation of Community law sought bears no relation to the actual facts of the main action or to its purpose, or where the problem is hypothetical or the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraph 61; Case C‑105/94 Celestini [1997] ECR I-2971, paragraph 22; and Case C-355/97 Beckand Bergdorf [1999] ECR I-4977, paragraph 22). Save for such cases, the Court is, in principle, bound to give a preliminary ruling on questions concerning the interpretation of Community law (see Bosman, paragraph 59). 25 In the main proceedings, when the claimants contested the validity of Regulation No 261/2004 before the referring court the question arose for the latter as to whether that challenge to the regulation’s validity warranted a reference to the Court for a preliminary ruling as provided in Article 234 EC. Accordingly, the interpretation of that article which the referring court seeks by means of the present question cannot be considered to bear no relation to the purpose of the main action. The fact that the referring court has at the same time also referred to the Court questions concerning the validity of Regulation No 261/2004 and that the answers which will be provided to them may dispose of the main proceedings cannot call into question the relevance which the question on the interpretation of Article 234 EC possesses in itself. 26 The question asked should therefore be answered. Substance27 It is settled case-law that national courts do not have the power to declare acts of the Community institutions invalid. The main purpose of the jurisdiction conferred on the Court by Article 234 EC is to ensure that Community law is applied uniformly by national courts. That requirement of uniformity is particularly vital where the validity of a Community act is in question. Differences between courts of the Member States as to the validity of Community acts would be liable to jeopardise the very unity of the Community legal order and undermine the fundamental requirement of legal certainty (Case 314/85 Foto-Frost [1987] ECR 4199, paragraph 15; Case C-27/95 Bakers of Nailsea [1997] ECR I-1847, paragraph 20; and Case C-461/03 Gaston Schul Douane-expediteur [2005] ECR I‑0000, paragraph 21). The Court of Justice alone therefore has jurisdiction to declare a Community act invalid (Joined Cases C-143/88 and C-92/89 Zuckerfabrik Süderdithmarschen and Zuckerfabrik Soest [1991] ECR I-415, paragraph 17, and Case C-6/99 Greenpeace France and Others [2000] ECR I‑1651, paragraph 54). 28 Article 234 EC does not constitute a means of redress available to the parties to a case pending before a national court and therefore the mere fact that a party contends that the dispute gives rise to a question concerning the validity of Community law does not mean that the court concerned is compelled to consider that a question has been raised within the meaning of Article 234 EC (see, to this effect, Case 283/81 Cilfit [1982] ECR 3415, paragraph 9). Accordingly, the fact that the validity of a Community act is contested before a national court is not in itself sufficient to warrant referral of a question to the Court for a preliminary ruling. 29 The Court has held that courts against whose decisions there is a judicial remedy under national law may examine the validity of a Community act and, if they consider that the arguments put forward before them by the parties in support of invalidity are unfounded, they may reject them, concluding that the act is completely valid. In so doing, they are not calling into question the existence of the Community act (Foto-Frost, paragraph 14). 30 On the other hand, where such a court considers that one or more arguments for invalidity, put forward by the parties or, as the case may be, raised by it of its own motion (see, to this effect, Case 126/80 Salonia [1981] ECR 1563, paragraph 7), are well founded, it is incumbent upon it to stay proceedings and to make a reference to the Court for a preliminary ruling on the act’s validity. 31 In addition, the spirit of cooperation which must prevail in the operation of the preliminary reference procedure means that the national court is to set out in its order for reference the reasons why it considers such a reference to be necessary. 32 Consequently, the answer to the eighth question must be that, where a court against whose decisions there is a judicial remedy under national law considers that one or more arguments for invalidity of a Community act which have been put forward by the parties or, as the case may be, raised by it of its own motion are well founded, it must stay proceedings and make a reference to the Court for a preliminary ruling on the act’s validity . The other questions33 By its first seven questions, the referring court asks, in essence, whether Articles 5, 6 and 7 of Regulation No 261/2004 are invalid and, if relevant, whether their invalidity is liable to result in invalidity of that regulation as a whole. The consistency of Article 6 of Regulation No 261/2004 with the Montreal Convention34 By its first question, the referring court essentially asks whether Article 6 of Regulation No 261/2004 is inconsistent with Articles 19, 22 and 29 of the Montreal Convention. 35 Article 300(7) EC provides that ‘agreements concluded under the conditions set out in this Article shall be binding on the institutions of the Community and on Member States’. In accordance with the Court’s case-law, those agreements prevail over provisions of secondary Community legislation (Case C-61/94 Commission v Germany [1996] ECR I-3989, paragraph 52, and Case C-286/02 Bellio F.lli [2004] ECR I-3465, paragraph 33). 36 The Montreal Convention, signed by the Community on 9 December 1999 on the basis of Article 300(2) EC, was approved by Council decision of 5 April 2001 and entered into force, so far as concerns the Community, on 28 June 2004. Therefore from that last date the provisions of that Convention have, in accordance with settled case-law, been an integral part of the Community legal order (Case 181/73 Haegeman [1974] ECR 449, paragraph 5, and Case 12/86 Demirel [1987] ECR 3719, paragraph 7). It was after that date that, by decision of 14 July 2004, the High Court of Justice made the present order for reference in the judicial review proceedings before it. 37 Article 6 of Regulation No 261/2004 provides that, in the event of a long delay to a flight, the operating air carrier must offer to assist and take care of the passengers concerned. It does not provide that the carrier may escape such obligations in the event of extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. 38 IATA and ELFAA submitted in their applications to the referring court and submit before this Court that Article 6 of Regulation No 261/2004 is accordingly incompatible with the Montreal Convention which contains, in Articles 19 and 22(1), clauses excluding and limiting the air carrier’s liability in the event of delay in the carriage of passengers and which provides, in Article 29, that any action for damages, however founded, can only be brought subject to the conditions and limits set out in the Convention. 39 As to those submissions, Articles 19, 22 and 29 of the Montreal Convention are among the rules in the light of which the Court reviews the legality of acts of the Community institutions since, first, neither the nature nor the broad logic of the Convention precludes this and, second, those three articles appear, as regards their content, to be unconditional and sufficiently precise. 40 It is to be noted with regard to the interpretation of those articles that, in accordance with settled case-law, an international treaty must be interpreted by reference to the terms in which it is worded and in the light of its objectives. Article 31 of the Vienna Convention of 23 May 1969 on the Law of Treaties and Article 31 of the Vienna Convention of 21 March 1986 on the Law of Treaties between States and International Organisations or between International Organisations, which express, to this effect, general customary international law, state that a treaty is to be interpreted in good faith in accordance with the ordinary meaning to be given to its terms in their context and in the light of its object and purpose (see, to this effect, Case C-268/99 Jany and Others [2001] ECR I-8615, paragraph 35). 41 It is clear from the preamble to the Montreal Convention that the States party thereto recognised ‘the importance of ensuring protection of the interests of consumers in international carriage by air and the need for equitable compensation based on the principle of restitution’. It is therefore in the light of this objective that the scope which the authors of the Convention intended to give to Articles 19, 22 and 29 is to be assessed. 42 It is apparent from those provisions of the Montreal Convention, which are contained in Chapter III headed ‘Liability of the carrier and extent of compensation for damage’, that they lay down the conditions under which any actions for damages against air carriers may be brought by passengers who invoke damage sustained because of delay. They limit the carrier’s liability to 4 150 SDRs for each passenger. 43 Any delay in the carriage of passengers by air, and in particular a long delay, may, generally speaking, cause two types of damage. First, excessive delay will cause damage that is almost identical for every passenger, redress for which may take the form of standardised and immediate assistance or care for everybody concerned, through the provision, for example, of refreshments, meals and accommodation and of the opportunity to make telephone calls. Second, passengers are liable to suffer individual damage, inherent in the reason for travelling, redress for which requires a case-by-case assessment of the extent of the damage caused and can consequently only be the subject of compensation granted subsequently on an individual basis. 44 It is clear from Articles 19, 22 and 29 of the Montreal Convention that they merely govern the conditions under which, after a flight has been delayed, the passengers concerned may bring actions for damages by way of redress on an individual basis, that is to say for compensation, from the carriers liable for damage resulting from that delay. 45 It does not follow from these provisions, or from any other provision of the Montreal Convention, that the authors of the Convention intended to shield those carriers from any other form of intervention, in particular action which could be envisaged by the public authorities to redress, in a standardised and immediate manner, the damage that is constituted by the inconvenience that delay in the carriage of passengers by air causes, without the passengers having to suffer the inconvenience inherent in the bringing of actions for damages before the courts. 46 The Montreal Convention could not therefore prevent the action taken by the Community legislature to lay down, in exercise of the powers conferred on the Community in the fields of transport and consumer protection, the conditions under which damage linked to the abovementioned inconvenience should be redressed. Since the assistance and taking care of passengers envisaged by Article 6 of Regulation No 261/2004 in the event of a long delay to a flight constitute such standardised and immediate compensatory measures, they are not among those whose institution is regulated by the Convention. The system prescribed in Article 6 simply operates at an earlier stage than the system which results from the Montreal Convention. 47 The standardised and immediate assistance and care measures do not themselves prevent the passengers concerned, should the same delay also cause them damage conferring entitlement to compensation, from being able to bring in addition actions to redress that damage under the conditions laid down by the Montreal Convention. 48 Those measures, which enhance the protection afforded to passengers’ interests and improve the conditions under which the principle of restitution is applicable to passengers, cannot therefore be considered inconsistent with the Montreal Convention. The validity of Article 5 of Regulation No 261/2004 in the light of Article 251 EC49 By its second question, the referring court essentially asks whether, in amending Article 5 of the draft at the origin of Regulation No 261/2004, as resulting from Common Position (EC) No 27/2003 of 18 March 2003 (OJ 2003 C 125 E, p. 63) (‘the draft regulation’), the Conciliation Committee provided for in Article 251 EC complied with the procedural requirements which that article entails. 50 It is necessary, first of all, to set out the context in which the Conciliation Committee acted in the procedure for adoption of Regulation No 261/2004, having regard in particular to the concerns of the Community legislature relating to whether or not account was to be taken of circumstances allowing air carriers to be exempted from their obligations to take care of and assist passengers in the event of cancellation of, or a long delay to, a flight. 51 In Common Position No 27/2003, the Council decided that air carriers could be exempted from their compensation and care obligations imposed, in the event of cancellation of flights, by Article 5 of the draft regulation and from their care obligations imposed, in the event of a long delay, by Article 6 of that draft, if they could prove that the cancellation or delay was caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. 52 When the Parliament considered that common position on 3 July 2003, at second reading, it did not propose any amendment to Article 5 of the draft regulation. On the other hand, it adopted, inter alia, Amendment 11 on Article 6 of the draft, in particular removing all reference to the exemption clause relating to extraordinary circumstances (‘the extraordinary circumstances defence’). 53 By letter of 22 September 2003 the Council gave notice that it was unable to approve all the Parliament’s amendments, and the President of the Council, in agreement with the President of the Parliament, convened a meeting of the Conciliation Committee. 54 At its meeting of 14 October 2003, the Conciliation Committee reached agreement on a joint text, approved on 1 December 2003, under which, in particular, all reference in Article 5 of the draft regulation to the extraordinary circumstances defence allowing air carriers to be exempted from their care obligations in the event of flight cancellations was removed. The regulation was adopted, in accordance with the joint text of the Conciliation Committee, by the Parliament at third reading, on 18 December 2003, and by the Council, on 26 January 2004. 55 The claimants in the main proceedings contend that, in amending Article 5 of the draft regulation when no amendment had been made to that article by the Parliament at second reading, the Conciliation Committee exceeded the powers conferred upon it by Article 251 EC. 56 In the co-decision procedure, the Conciliation Committee is convened if the Council does not agree to the amendments proposed by the Parliament at second reading. It is common ground that there was such a disagreement in the procedure for adoption of Regulation No 261/2004, justifying the convening of the Conciliation Committee. 57 Contrary to IATA’s submissions, once the Conciliation Committee has been convened, it has the task not of coming to an agreement on the amendments proposed by the Parliament but, as is clear from the very wording of Article 251 EC, ‘of reaching agreement on a joint text’, by addressing, on the basis of the amendments proposed by the Parliament, the common position adopted by the Council. The wording of Article 251 EC does not therefore itself include any restriction as to the content of the measures chosen that enable agreement to be reached on a joint text. 58 In using the term ‘conciliation’, the authors of the Treaty intended to make the procedure adopted effective and to confer a wide discretion on the Conciliation Committee. In adopting such a method for resolving disagreements, their very aim was that the points of view of the Parliament and the Council should be reconciled on the basis of examination of all the aspects of the disagreement, and with the active participation in the Conciliation Committee’s proceedings of the Commission of the European Communities, which has the task of taking ‘all the necessary initiatives with a view to reconciling the positions of the … Parliament and the Council’. 59 In this light, taking account of the power to mediate thus conferred on the Commission and of the freedom which the Parliament and the Council finally have as to whether or not to accept the joint text approved by the Conciliation Committee, Article 251 EC cannot be read as limiting on principle the power of that committee. The mere fact that, in the present case, Article 5 of the draft regulation was not amended by the Parliament at second reading does not show that the committee exceeded the powers conferred upon it by Article 251 EC. 60 The claimants in the main proceedings further contend that, since meetings of the Conciliation Committee are not public in nature, the principles of representative democracy are undermined. 61 It is true that genuine participation of the Parliament in the legislative process of the Community, in accordance with the procedures laid down by the Treaty, represents an essential factor in the institutional balance intended by the Treaty. However, it is not in dispute that the Parliament is itself represented on the Conciliation Committee and that this representation is indeed made up in accordance with the relative size of each political group in the Parliament. Furthermore, under Article 251(5) EC the joint text adopted by the Conciliation Committee must still be examined by the Parliament itself with a view to its approval. This examination, which necessarily takes place in the conditions of transparency normal for the proceedings of that assembly, thus ensures in any event the genuine participation of the Parliament in the legislative process in compliance with the principles of representative democracy. 62 It should be noted, having regard to the documents before the Court, that in the present case the disagreement brought before the Conciliation Committee related in particular to whether or not air carriers could rely on the extraordinary circumstances defence in order to be exempted from their obligations to assist and take care of passengers, imposed by Article 6 of the draft regulation, in the event of a long delay to a flight. The Conciliation Committee reached an agreement under which all reference to the extraordinary circumstances defence was removed from Article 6 of the draft, in order to ensure that passengers were taken care of and assisted immediately whatever the cause of the flight delay. The committee then also agreed, in order to ensure a coherent and symmetrical approach, to remove from Article 5 of the draft the same reference, with regard to obligations to take care of passengers in the event of cancellation of a flight. 63 Accordingly, the Conciliation Committee did not exceed the limits of its powers in amending Article 5 of the draft regulation. The obligation to state reasons and observance of the principle of legal certainty64 By its third and fourth questions, the referring court essentially asks whether Articles 5 and 6 of Regulation No 261/2004 are invalid in that they are inconsistent with the principle of legal certainty or do not satisfy the obligation to state reasons. By its seventh question, it also enquires whether Article 7 of the regulation complies with that obligation. 65 The claimants in the main proceedings plead that the contested regulation contains ambiguities, gaps and contradictions which affect its legality having regard to both the obligation to state reasons and observance of the principle of legal certainty. 66 It is to be remembered that, while the statement of reasons required by Article 253 EC must show clearly and unequivocally the reasoning of the Community authority which adopted the contested measure, so as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to exercise its powers of review, it is not required to go into every relevant point of fact and law (see, inter alia, Case C-122/94 Commission v Council [1996] ECR I‑881, paragraph 29; Case C-210/03 Swedish Match [2004] ECR I-11893, paragraph 63; and Joined Cases C-154/04 and C-155/04 Alliance for Natural Health and Others [2005] ECR I-0000, paragraph 133). 67 In addition, the question whether a statement of reasons satisfies the requirements must be assessed with reference not only to the wording of the measure but also to its context and to the whole body of legal rules governing the matter in question. In the case of a measure intended to have general application, as in the main proceedings, the preamble may be limited to indicating the general situation which led to its adoption, on the one hand, and the general objectives which it is intended to achieve, on the other (see, inter alia, Case C-342/03 Spain v Council [2005] ECR I‑1975, paragraph 55). If the contested measure clearly discloses the essential objective pursued by the institutions, it would be excessive to require a specific statement of reasons for each of the technical choices made by them (see, inter alia, Case C-100/99 Italy v Council andCommission [2001] ECR I‑5217, paragraph 64, and Alliance for Natural Health, paragraph 134). 68 The principle of legal certainty is a fundamental principle of Community law which requires, in particular, that rules should be clear and precise, so that individuals may ascertain unequivocally what their rights and obligations are and may take steps accordingly (see Case 169/80 Gondrand Frèresand Garancini [1981] ECR 1931; Case C-143/93 Van Es Douane Agenten [1996] ECR I-431, paragraph 27; and Case C-110/03 Belgium v Commission [2005] ECR I-2801, paragraph 30). 69 In light of the case-law cited above, it must be stated, first, that Articles 5 and 6 of Regulation No 261/2004 lay down precisely and clearly the obligations owed by an operating air carrier in the event of cancellation of, or a long delay to, a flight. The objective of those provisions is apparent, with equal clarity, from the first and second recitals in the preamble to the regulation, according to which action by the Community in the field of air transport should aim, among other things, at ensuring a high level of protection for passengers and take account of the requirements of consumer protection in general, inasmuch as cancellation of, or long delay to, flights causes serious inconvenience to passengers. 70 Furthermore, the 12th and 13th recitals in the preamble to the regulation state that passengers whose flights are cancelled should be able to obtain compensation if they are not informed in good time of the cancellation, be able either to obtain reimbursement of their tickets or to obtain re-routing under satisfactory conditions, and be adequately cared for while awaiting a later flight. The 17th recital states that passengers whose flights are delayed for a specified time should be adequately cared for and should be able to cancel their flights with reimbursement of their tickets or to continue them under satisfactory conditions. These details thus clearly disclose the essential objective pursued. 71 It is also not in dispute that the various kinds of damage suffered by passengers in the event of cancellation of, or a long delay to, a flight exist. It has not been established, nor indeed has it been asserted, that incidents of this nature amount to no more than an insignificant phenomenon. Neither Article 253 EC nor any other provision indicates that, in order for the Community measure at issue to be valid, it would have to contain precise figures justifying the need for action on the part of the Community legislature. 72 Nor can Regulation No 261/2004 be required to contain a specific statement of reasons for each of the technical choices made. Since the objective of protecting passengers required acceptance of standardised and effective compensatory measures which could not give rise to discussion at the very moment when they were to be applied, a situation which, quite evidently, the extraordinary circumstances defence would not have failed to bring about, the Community legislature was able, without breaching its obligation to state reasons, to refrain from setting out the reasons why it considered that operating air carriers could not rely on such a defence in order to be exempted from their obligations laid down in Articles 5 and 6 of the regulation. Likewise, contrary to ELFAA’s submissions, the Community legislature was able, without rendering the act in question unlawful, to lay down in Article 7 the principle that fixed compensation was payable in the event of cancellation of a flight and the amount of the compensation without setting out the reasons why it had chosen that measure and that amount. 73 Second, the standardised and immediate measures laid down in Article 6 of Regulation No 261/2004 are not among those whose institution is regulated by the Montreal Convention, and are not inconsistent with that Convention. It follows that the provisions of Regulation No 261/2004 governing in this way certain rights of passengers in the event of long delays to flights were capable of being made subject to conditions different from those laid down by the Convention with regard to other rights. Accordingly, they are not in any way contrary to the provisions which are contained in Regulation No 2027/97 and were adopted, in accordance with Article 1 thereof, in order to implement the relevant provisions of the Montreal Convention. 74 In those circumstances, the claimants in the main proceedings cannot maintain that, by not referring to Regulation No 2027/97, Regulation No 261/2004 was adopted in breach of the obligation to state reasons. Nor can Article 6 of Regulation No 261/2004 be read as having, in breach of the principle of legal certainty, denied the undertakings represented by the claimants in the main proceedings the ability to ascertain unequivocally the obligations owed by them as a consequence of the system resulting from Regulation No 2027/97. 75 Third, the claimants in the main proceedings submit that Regulation No 261/2004 envisages, in an inconsistent manner in the 14th and 15th recitals in its preamble, that extraordinary circumstances may limit or exclude an operating air carrier’s liability in the event of cancellation of, or long delays to, flights whereas Articles 5 and 6 of the regulation, which govern its obligations in such a case, do not accept such a defence to liability except with regard to the obligation to pay compensation. 76 However, it must be stated with regard to those submissions, first, that while the preamble to a Community measure may explain the latter’s content (see Alliance for Natural Health, paragraph 91), it cannot be relied upon as a ground for derogating from the actual provisions of the measure in question (Case C-162/97 Nilsson andOthers [1998] ECR I‑7477, paragraph 54, and Case C-136/04 DeutschesMilch‑Kontor [2005] ECR I-0000, paragraph 32). Second, the wording of those recitals indeed gives the impression that, generally, operating air carriers should be released from all their obligations in the event of extraordinary circumstances, and it accordingly gives rise to a certain ambiguity between the intention thus expressed by the Community legislature and the actual content of Articles 5 and 6 of Regulation No 261/2004 which do not make this defence to liability so general in character. However, such an ambiguity does not extend so far as to render incoherent the system set up by those two articles, which are themselves entirely unambiguous. 77 It follows from the foregoing considerations that Articles 5, 6 and 7 of Regulation No 261/2004 are not invalid by reason of breach of the principle of legal certainty or of the obligation to state reasons. Observance of the principle of proportionality78 By its fifth and seventh questions, the referring court asks, in essence, whether Articles 5, 6 and 7 of Regulation No 261/2004 are invalid by reason of an infringement of the principle of proportionality. 79 The principle of proportionality, which is one of the general principles of Community law, requires that measures implemented through Community provisions should be appropriate for attaining the objective pursued and must not go beyond what is necessary to achieve it (see, inter alia, Case C-210/00 KäsereiChampignon Hofmeister [2002] ECR I-6453, paragraph 59; Case C-491/01 British American Tobacco (Investments) and Imperial Tobacco [2002] ECR I-11453, paragraph 122; and SwedishMatch, paragraph 47). 80 With regard to judicial review of the conditions referred to in the previous paragraph, the Community legislature must be allowed a broad discretion in areas which involve political, economic and social choices on its part, and in which it is called upon to undertake complex assessments. Consequently, the legality of a measure adopted in those fields can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue (see, to this effect, Case C-84/94 United Kingdom v Council [1996] ECR I-5755, paragraph 58; Case C-233/94 Germany v Parliament and Council [1997] ECR I-2405, paragraphs 55 and 56; Case C-157/96 National Farmers’ Union and Others [1998] ECR I-2211, paragraph 61; and British American Tobacco (Investments) and Imperial Tobacco, paragraph 123). That is so, in particular, in the field of the common transport policy (see, to this effect, in particular, Joined Cases C-248/95 and C-249/95 SAM Schiffahrt and Stapf [1997] ECR I-4475, paragraph 23, and Joined Cases C‑27/00 and C-122/00 Omega Air and Others [2002] ECR I-2569, paragraph 63). 81 The claimants in the main proceedings submit that the measures to assist, care for and compensate passengers that are prescribed by Articles 5, 6 and 7 of Regulation No 261/2004 in the event of cancellation of, or a long delay to, a flight do not enable the objective of reducing such instances of cancellation or delay to be achieved and are in any event, by reason of the considerable financial charges which they will impose on Community air carriers, totally disproportionate to the objective pursued. 82 In assessing whether the measures in question are necessary, it should be noted that the immediate objective pursued by the Community legislature, as apparent from the first four recitals in the preamble to Regulation No 261/2004, is to strengthen protection for passengers who suffer cancellation of, or long delays to, flights, by redressing, in an immediate and standardised manner, certain damage caused to passengers placed in such circumstances. 83 Admittedly, in addition to this direct objective explicitly set out by the Community legislature, the regulation, like any other generally applicable legislation, may implicitly involve other, secondary, objectives such as, as the claimants in the main proceedings submit, that of reducing, through preventive action, the number of flights that are cancelled or subject to a long delay. The Court has the task of assessing first of all whether the measures adopted are manifestly inappropriate in the light of the regulation’s explicit objective, that relating to strengthening protection for passengers, the legitimacy of which is not in itself contested. 84 It must be stated, first, that the measures prescribed by Articles 5 and 6 of Regulation No 261/2004 are in themselves capable of immediately redressing some of the damage suffered by passengers in the event of cancellation of, or a long delay to, a flight and therefore enable a high level of passenger protection, sought by the regulation, to be ensured. 85 Second, it is not in dispute that the extent of the various measures chosen by the Community legislature varies according to the significance of the damage suffered by the passengers, its significance being assessed by reference either to the length of the delay and the wait for the next flight or to the time taken to inform them of the flight’s cancellation. The criteria thus adopted for determining the passengers’ entitlement to those measures do not therefore appear in any way unrelated to the requirement for proportionality. 86 Third, the standardised and immediate compensatory measures such as the re-routing of passengers, the supply of refreshments, meals or accommodation or the making available of means of communication with third parties are designed to cater for passengers’ immediate needs on the spot, whatever the cause of the flight’s cancellation or delay. Given that these measures vary, as stated in the previous paragraph of this judgment, according to the significance of the damage suffered by the passengers, they likewise do not appear to be manifestly inappropriate merely because carriers cannot rely on the extraordinary circumstances defence. 87 Fourth, it has not been established that if, as advocated by ELFAA, passengers were to take out voluntary insurance to cover the risks inherent in flight delays and cancellations, that would in any event make it possible to remedy the damage suffered by passengers on the spot. Such a measure cannot, therefore, be regarded as being more appropriate to the objective pursued than those chosen by the Community legislature. 88 Fifth, the harmful consequences to which a delay gives rise and which Regulation No 261/2004 seeks to remedy are in no way related to the price paid for a ticket. Therefore, the argument that the measures chosen to alleviate those consequences should have been determined in proportion to the cost of the ticket cannot be upheld. 89 Sixth, while IATA and ELFAA contend that the abovementioned measures could well have significant consequences for carriers’ financial burdens and are not appropriate to the regulation’s secondary objective of reducing the number of flights that are cancelled or subject to a long delay, it must be stated that figures on the frequency of those delays and cancellations have not been given in the proceedings before the Court. Accordingly, the theoretical costs which those measures involve for airlines, as put forward by the parties concerned, do not in any event enable it to be regarded as established that those effects would be out of proportion to the interest in the measures. 90 Moreover, the discharge of obligations pursuant to Regulation No 261/2004 is without prejudice to air carrier’s rights to seek compensation from any person, including third parties, in accordance with national law, as Article 13 of the regulation provides. Such compensation accordingly may reduce or even remove the financial burden borne by the carriers in consequence of those obligations. Nor does it appear unreasonable for those obligations initially to be borne, subject to the abovementioned right to compensation, by the air carriers with which the passengers concerned have a contract of carriage that entitles them to a flight that should be neither cancelled nor delayed. 91 Seventh, so far as concerns the compensation prescribed in Article 7 of Regulation No 261/2004, which passengers may claim by virtue of Article 5 when they have been informed of a flight cancellation too late, air carriers can be exempted from payment of that compensation if they prove that the cancellation was caused by extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken. Given the existence of such a ground for exemption and of the conditions restricting the application of this obligation to which air carriers are not subject if the information is provided sufficiently early or accompanied by offers of re-routing, the obligation does not appear manifestly inappropriate to the objective pursued. Furthermore, the amount of the compensation, set at EUR 250, 400 or 600 depending on the distance of the flights concerned, likewise does not appear excessive and indeed, as maintained by the Commission in its observations without being contradicted, essentially amounts to an update of the level of compensation laid down by Council Regulation (EEC) No 295/91 of 4 February 1991 establishing common rules for a denied-boarding compensation system in scheduled air transport (OJ 1991 L 36, p. 5), taking account of inflation since its entry into force. 92 It follows from the foregoing considerations that Articles 5, 6 and 7 of Regulation No 261/2004 are not invalid by reason of infringement of the principle of proportionality. Observance of the principle of equal treatment93 By its sixth and seventh questions, the referring court asks, in essence, whether Articles 5, 6 and 7 of Regulation No 261/2004 are invalid by reason of an infringement of the principle of equal treatment. 94 ELFAA submits that the low-fare airlines which it represents suffer discriminatory treatment since the measures prescribed in those articles impose the same obligations on all air carriers without distinction on the basis of their pricing policies and the services that they offer. Furthermore, Community law does not impose the same obligations on other means of transport. 95 It is settled case-law that the principle of equal treatment or non-discrimination requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified (Swedish Match, paragraph 70). 96 First, having regard in particular to the manner in which they operate, the conditions governing their accessibility and the distribution of their networks, different modes of transport are not interchangeable as regards the conditions of their use (see, to this effect, SAM Schiffahrt and Stapf, paragraph 34). The situation of undertakings operating in each of those different transport sectors is accordingly not comparable. 97 Second, with regard to air transport, passengers whose flights are cancelled or subject to a long delay are in an objectively different situation from that experienced by passengers on other means of transport in the event of incidents of the same nature. Because, in particular, of the location of airports, which are generally outside urban centres, and of the particular procedures for checking-in and reclaiming baggage, the inconvenience suffered by passengers when such incidents occur is not comparable. 98 Finally, the damage suffered by passengers of air carriers in the event of cancellation of, or a long delay to, a flight is similar whatever the airline with which they have a contract and is unrelated to the pricing policies operated by the airline. Accordingly, if the Community legislature was not to infringe the principle of equality, having regard to the aim pursued by Regulation No 261/2004 of increasing protection for all passengers of air carriers, it was incumbent upon it to treat all airlines identically. 99 It follows that Articles 5, 6 and 7 of Regulation No 261/2004 are not invalid by reason of a breach of the principle of equal treatment. 100 In view of all the foregoing considerations, the answer to the first seven questions referred to the Court must be that examination thereof has revealed no factor of such a kind as to affect the validity of Articles 5, 6 and 7 of Regulation No 261/2004. Costs101 Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. Where a court against whose decisions there is a judicial remedy under national law considers that one or more arguments for invalidity of a Community act which have been put forward by the parties or, as the case may be, raised by it of its own motion are well founded, it must stay proceedings and make a reference to the Court of Justice for a preliminary ruling on the act’s validity.2. Examination of the questions referred to the Court has revealed no factor of such a kind as to affect the validity of Articles 5, 6 and 7 of Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights, and repealing Regulation (EEC) No 295/91.[Signatures]* Language of the case: English. | abc8a-60176ae-4bd9 | EN |
BY EXCLUDING GIBRALTAR FROM PART OF THE SCOPE OF THE DIRECTIVE ON MUTUAL ASSISTANCE IN THE FIELD OF TAXATION, THE UNITED KINGDOM HAS FAILED TO FULFIL ITS COMMUNITY OBLIGATIONS | Commission of the European CommunitiesvUnited Kingdom of Great Britain and Northern Ireland(Failure of a Member State to fulfil obligations –– Directive 77/799/EEC –– Mutual assistance by the competent authorities –– Fields of VAT and excise duties –– Partial transposition –– Territory of Gibraltar)Opinion of Advocate General Tizzano delivered on 10 March 2005 Judgment of the Court (Grand Chamber), 21 July 2005 Summary of the JudgmentApproximation of laws – Mutual assistance by the authorities of the Member States in the field of direct and indirect taxation — Directive 77/799 — Fields of value added tax and excise duties — Application to the territory of Gibraltar — Failure to fulfil obligations(Act of Accession of 1972, Arts 28 and 29; Council Directive 77/799)Under Article 28 of the Act of Accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland, the acts of the institutions of the Community on the harmonisation of legislation of Member States concerning turnover taxes are not to apply to Gibraltar, unless the Council, acting unanimously on a proposal from the Commission, provides otherwise. Provisions which merely require cooperation between the Member States, leaving each of them to use their own methods of enquiry and communication of information, cannot be regarded as such acts. That is true of Directive 77/799 concerning mutual assistance by the competent authorities of the Member States in the field of direct and indirect taxation, as amended by Directive 79/1070 and by Directive 92/12 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products. That directive, in so far as it concerns value added tax, is not therefore one of the ‘acts on the harmonisation of legislation of Member States concerning turnover taxes’ within the meaning of Article 28 of the Act of Accession and does therefore apply to Gibraltar. In so far as it concerns excise duties, Directive 77/799 as amended also applies to Gibraltar. Any non-application to that territory of provisions requiring harmonisation of those duties as such, under Article 29 of the Act of Accession in conjunction with Annex I, Section I, point 4, thereto, which provides that Gibraltar does not form part of the Community customs territory, does not mean, in any event, that Gibraltar falls outside the requirement of mutual assistance by the competent authorities of the Member States provided for by Directive 77/799 as amended in the field of excise duties. It follows that, by failing to implement in the territory of Gibraltar, in the fields of value added tax and excise duties, Directive 77/799 as amended, the United Kingdom has failed to fulfil its obligations under the EC Treaty. (see paras 42, 44-46, 50-51, 53-54, 56, operative part)JUDGMENT OF THE COURT (Grand Chamber)21 July 2005 (*) (Failure of a Member State to fulfil obligations – Directive 77/799/EEC – Mutual assistance by the competent authorities – Fields of VAT and excise duties – Partial transposition– Territory of Gibraltar)In Case C-349/03,ACTION under Article 226 EC for failure to fulfil obligations, brought on 7 August 2003,Commission of the European Communities, represented by R. Lyal, acting as Agent, with an address for service in Luxembourg, applicant,supported by:Kingdom of Spain, represented by N. Díaz Abad, acting as Agent, with an address for service in Luxembourg, intervener,United Kingdom of Great Britain and Northern Ireland, represented by K. Manji and R. Caudwell, acting as Agents, and D. Wyatt QC, with an address for service in Luxembourg, defendant,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, A. Rosas, R. Silva de Lapuerta and A. Borg Barthet, Presidents of Chambers, R. Schintgen, N. Colneric (Rapporteur), S. von Bahr, J.N. Cunha Rodrigues, G. Arestis, M. Ilešič, J. Malenovský and J. Klučka, Judges, Advocate General: A. Tizzano,Registrar: R. Grass,having regard to the written procedure,after hearing the Opinion of the Advocate General at the sitting on 10 March 2005,gives the followingJudgment1 By its application, the Commission of the European Communities seeks from the Court a declaration that, by failing to implement in the territory of Gibraltar Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct and indirect taxation (OJ 1977 L 336, p. 15), as amended by Council Directive 79/1070/EEC of 6 December 1979 (OJ 1979 L 331, p. 8) and by Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (OJ 1992 L 76, p. 1) (‘Directive 77/799 as amended’), the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under the EC Treaty. 2 By order of the President of the Court of 4 December 2003, the Kingdom of Spain was granted leave to intervene in support of the form of order sought by the Commission. 3 The United Kingdom contends that the Commission’s application should be dismissed and that the Commission should be ordered to pay the costs. Relevant provisions The partial exclusion of the territory of Gibraltar from the scope of Community law4 Article 28 of the Act concerning the Conditions of Accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland and the Adjustments to the Treaties (OJ, English Special Edition of 27 March 1972, p. 14) (‘the Act of Accession’) provides: ‘Acts of the institutions of the Community relating to the products in Annex II to the EEC Treaty and the products subject, on importation into the Community, to specific rules as a result of the implementation of the common agricultural policy, as well as the acts on the harmonisation of legislation of Member States concerning turnover taxes, shall not apply to Gibraltar unless the Council, acting unanimously on a proposal from the Commission, provides otherwise.’ 5 Under Article 29 of the Act of Accession, in conjunction with Annex I, Section I, point 4, thereto, Gibraltar does not form part of the Community customs territory. Directive 77/799 and its amendments6 Directive 77/799, in its original version, concerned mutual assistance by the competent authorities of the Member States in the field of direct taxation. It was adopted on the basis of Article 100 of the EEC Treaty (which became, after amendment, Article 100 of the EC Treaty, now Article 94 EC). 7 Directive 79/1070 widened the scope of Directive 77/799 by extending it to value added tax (‘VAT’). It was adopted on the basis of Article 99 of the EEC Treaty (amended by the Single European Act, which became, after amendment, Article 99 of the EC Treaty, now Article 93 EC) and Article 100 of the EEC Treaty. 8 According to the first recital in the preamble to Directive 79/1070, ‘the practice of tax evasion and tax avoidance leads to budget losses and to violations of the principle of fair taxation and jeopardises healthy competition … this therefore affects adversely the smooth running of the common market’. 9 The second recital in the preamble to that directive states:‘… in order to combat this practice more effectively, cooperation between tax administrations within the Community should be strengthened in accordance with common principles and rules’. 10 As set out in the third recital in the preamble to that directive:‘… mutual assistance [by the competent authorities of the Member States] should be extended to cover indirect taxes in order to ensure that these are correctly assessed and collected’. 11 The fourth recital in the preamble to Directive 79/1070 states:‘… as a matter of particular urgency, mutual assistance must be extended to cover value added tax, both because it is a general tax on consumption and because it plays an important part in the Community’s own resources system’. 12 Article 2 of Directive 79/1070 provides that the Member States are to bring into force the laws, regulations or administrative provisions necessary to comply with that directive by 1 January 1981. 13 Directive 92/12 again widened the scope of Directive 77/799 by extending it to excise duties on mineral oils, alcohol and alcoholic beverages and manufactured tobacco. Directive 92/12 was based on Article 99 of the EEC Treaty as amended by the Single European Act. 14 In the words of the first recital in the preamble to Directive 92/12:‘… the establishment and functioning of the internal market require the free movement of goods, including those subject to excise duties’. 15 The fourth recital in the preamble to that directive states that, in order to ensure the establishment and functioning of the internal market, chargeability of excise duties should be identical in all the Member States. 16 Article 1(1) of Directive 77/799 as amended provides:‘In accordance with this Directive the competent authorities of the Member States shall exchange any information that may enable them to effect a correct assessment of taxes on income and capital and any information relating to the assessment of the following indirect taxes: – value added tax,– excise duty on mineral oils,– excise duty on alcohol and alcoholic beverages,– excise duty on manufactured tobacco.’17 Article 8(1) of that directive provides:‘This Directive shall impose no obligation to have enquiries carried out or to provide information if the Member State, which should furnish the information, would be prevented by its laws or administrative practices from carrying out these enquiries or from collecting or using this information for its own purposes.’ 18 Under Article 31(1) of Directive 92/12, the Member States are to bring into force the laws, regulations and administrative provisions necessary to comply with that directive on 1 January 1993. Pre-litigation procedure19 Since the Commission took the view that the United Kingdom had not informed it of the measures adopted to ensure the transposition into national law of Directive 77/799 as amended, with regard to the territory of Gibraltar, it initiated infringement proceedings under Article 226 EC and gave the United Kingdom an opportunity to submit its observations. The United Kingdom authorities then notified the Commission of the measures they had taken concerning direct taxation by Ordinance No 26 of 1997 to amend the income tax ordinance (Income Tax (Amendment) (No 2) Ordinance 1997), which came into force on 1 October 1997. The United Kingdom took the view, however, that since Gibraltar is not subject to the common system of VAT or to the harmonised rules on excise duties, the provisions of Directive 77/799 as amended on those levies do not apply to that territory. Following a supplementary letter of formal notice, on 27 June 2002 the Commission sent a reasoned opinion inviting the United Kingdom to take the measures necessary to comply with it within two months of its notification. Since the Commission took the view that the observations submitted by the United Kingdom Government further to that opinion showed that the failure to fulfil obligations alleged in the reasoned opinion was continuing, it decided to bring this action. The action Arguments of the parties20 The Commission accepts that, pursuant to Article 28 of the Act of Accession, the territory of Gibraltar is excluded from the scope of the rules on the harmonisation of turnover taxes and it is prepared, for the purposes of these proceedings, to assume that the provisions of Community law on the harmonisation of excise duties likewise do not apply to Gibraltar. 21 However, it submits that Directive 77/799 as amended, concerning mutual assistance by the competent authorities of the Member States in the fields of VAT and excise duties, is among the provisions of Community law applicable to Gibraltar. 22 That directive establishes a mechanism for the exchange of information between the tax authorities of the Member States to enable them better to enforce national legislation. Its objective is solely to facilitate the exchange of information necessary for the assessment and collection of taxes in accordance with the tax system of each Member State, thus countering tax evasion, avoiding distortions of capital movements and safeguarding healthy competition. The amendments to Directive 77/799 by Directives 79/1070 and 92/12 do not affect the tax law as such of the Member States. The directive is not a measure harmonising legislation on VAT or excise duties. 23 Information from the Gibraltar tax authorities may be useful or even essential for the correct assessment of VAT or excise duties in other parts of the European Community even though those taxes are not applied in Gibraltar. 24 Ultimately, it could be argued that Article 10 EC requires the extension to Gibraltar of the mutual information system.25 Given that Directive 92/12 concerns almost exclusively the harmonisation of substantive laws on excise duties, it is necessarily based on Article 99 of the EEC Treaty. The mere fact that a provision appears in a measure concerned mainly with substantive harmonisation does not imbue it with the character of a harmonising provision. As regards Directive 79/1070, it should have been based on Article 100 of the EEC Treaty. The legal basis relied on to extend the scope of Directive 77/799 to VAT and then excise duties cannot in any event determine the treatment of mutual assistance measures for the purposes of Article 28 of the Act of Accession. 26 The Spanish Government submits that, although the exclusion of certain territories from the harmonisation of indirect taxation was something desired and accepted by the Community, for various reasons, the Community did not intend those territories to become refuges for evasion to the detriment of the other Member States, through one Member State refusing to provide another with information relating to one of those territories. Such a situation would probably preclude substantive harmonisation in the other territories which are indeed subject to harmonisation. 27 The economic reality of Gibraltar has been transformed, including its influence on various aspects of the operation of the internal market. The Kingdom of Spain, as a party which has suffered particular damage as a result of the non-implementation, has sufficient evidence to show that the non-application to Gibraltar of Directive 77/799 as amended is damaging to the Member States. That argument, taken to its logical conclusion, means that there is a duty of cooperation between the Member States which derives from Article 10 EC. 28 There have been developments in the understanding of, and the importance to be given to, mutual cooperation between tax administrations through the exchange of information for the purpose of combating tax evasion and tax avoidance more effectively. It has become possible to make a distinction depending on whether a cooperation measure relates to a tax harmonisation objective or relates simply to a measure which does not have that dimension and confines itself to laying down rules for cooperation between the Member States. 29 Although there are territories in Spain in which VAT does not apply or which do not form part of the customs union, the Kingdom of Spain does not consider that Directive 77/799 as amended by Directive 79/1070 or Directive 92/12 should not apply in those territories. 30 In conclusion, the Spanish Government considers that the fact that certain territories are excluded from the scope of application of VAT and harmonised excise duties does not entail their automatic exclusion from the scope of Directive 77/799 as amended. That directive is intended to be of general geographical application. 31 The United Kingdom Government challenges the merits of the action. The extensions of the scheme of Directive 77/799 to VAT by Directive 79/1070, on the one hand, and to excise duties by Directive 92/12, on the other, are not applicable to Gibraltar. 32 To the extent that Directive 77/799 as amended relates to mutual assistance on VAT, it comprises ‘harmonisation of legislation of Member States concerning turnover taxes’ within the meaning of Article 28 of the Act of Accession and, consequently, does not apply to Gibraltar. The words of that provision should be given their natural meaning. 33 To the extent that that directive relates to mutual assistance on excise duties, it likewise does not apply to Gibraltar. This follows from Gibraltar’s exclusion from the Community customs territory and the fact that the provisions of the EC Treaty which aim to secure the free movement of goods in the internal market have no application to Gibraltar. The first recital in the preamble to Directive 92/12 and a number of other recitals show that the purpose of that directive is to ensure the free movement of goods. 34 It is impossible to distinguish the objectives of mutual assistance in the assessment and collection of VAT and excise duties from the objectives of harmonisation of the provisions relating to VAT and customs duties themselves. The assessment and collection of VAT and customs duties, with which the mutual assistance provided for by that directive is closely concerned, are inextricably linked to the underlying taxes and duties which are to be assessed and collected. The efficiency with which a tax system is administered is an important factor in determining the effective rate of tax and is, in practical terms, inseparable from the revenue-raising power of the Member States. 35 The extensions of the scope of Directive 77/799 by Directives 79/1070 and 92/12 were adopted on the basis of Article 99 of the EEC Treaty, relating to the harmonisation of legislation concerning indirect taxation to the extent that such harmonisation is necessary to ensure the establishment and the functioning of the internal market. The legal bases used in order to extend the mutual assistance arrangements to VAT and excise duties cannot be determinative of the matters at issue in these proceedings, but are the background to the present dispute and should be taken into account. 36 The United Kingdom Government notes that, in paragraph 67 of Case C-338/01 Commission v Council [2004] ECR I-4829, the Court held that the words ‘fiscal provisions’ contained in Article 95(2) EC must be interpreted as covering not only the provisions determining taxable persons, taxable transactions, the basis of imposition, and rates of and exemptions from direct and indirect taxes, but also those relating to arrangements for the collection of such taxes. Analogous considerations apply to the present case. 37 The United Kingdom’s approach is consistent with that adopted in recent Community tax legislation, which treats measures of cooperation on VAT as tax harmonisation measures (see the third recital in the preamble to Council Regulation (EC) No 1798/2003 of 7 October 2003 on administrative cooperation in the field of value added tax and repealing Regulation (EEC) No 218/92 (OJ 2003 L 264, p.1)). 38 Reliance on Article 10 EC as the basis of the argument, in order to avoid a conclusion which would otherwise be drawn from Article 28 of the Act of Accession, is not consistent with either the letter or the spirit of Article 10 EC. 39 The Kingdom of Spain’s contentions as to the legal position of the Spanish territories in question are not relevant to the matters at issue in the present proceedings. Findings of the Court Preliminary remark40 In the light of the pre-litigation procedure and the reasoning in the application, this action must be understood as relating to the non-implementation of Directive 77/799 as amended only as regards VAT and excise duties. Mutual assistance by the competent authorities in the field of VAT41 Under Article 299(4) EC, the Treaty is to apply to Gibraltar since it is a Crown colony for whose external relations the United Kingdom is responsible. However, under the Act of Accession, certain Treaty provisions do not apply to Gibraltar (see Case C-30/01 Commission v United Kingdom [2003] ECR I-9481, paragraph 47). Those exceptions were introduced on account of the special legal position of that territory and, in particular, its status as a free port. 42 Under Article 28 of the Act of Accession, the acts of the institutions of the Community on the harmonisation of legislation of Member States concerning turnover taxes are not to apply to Gibraltar, unless the Council of the European Union, acting unanimously on a proposal from the Commission, provides otherwise. 43 As an exception to the application of Community law in the territory of the Community, that provision must be given an interpretation which limits its scope to that which is strictly necessary to safeguard the interests which it allows Gibraltar to protect. It must also be read in the light of the second sentence of the first paragraph of Article 10 EC, pursuant to which the Member States are required to facilitate the achievement of the Community’s tasks (see, to that effect, Joined Cases 194/85 and 241/85 Commission v Greece [1988] ECR 1037, paragraph 20). 44 Therefore, provisions which merely require cooperation between the Member States, leaving each of them to use their own methods of enquiry and communication of information, cannot be regarded as ‘acts on the harmonisation of legislation of Member States concerning turnover taxes’ within the meaning of Article 28 of the Act of Accession. 45 However, Directive 77/799 as amended does not go further, as is apparent in particular from Article 8(1) thereof, which refers to the limits to exchange of information arising from the laws or administrative practices of the Member State concerned. 46 It must therefore be concluded that Directive 77/799 as amended, in so far as it concerns VAT, is not one of the ‘acts on the harmonisation of legislation of Member States concerning turnover taxes’ within the meaning of Article 28 of the Act of Accession. 47 That finding is not inconsistent with that made by the Court in its judgment in Commission v Council, cited above, which provides an interpretation of ‘fiscal provisions’ within the meaning of Article 95(2) EC, and not of ‘acts on … harmonisation’ within the meaning of Article 28 of the Act of Accession. 48 Furthermore, it is true that the third recital in the preamble to Regulation No 1798/2003, relied on by the United Kingdom Government, states that ‘the tax harmonisation measures taken to complete the internal market should therefore include the establishment of a common system for the exchange of information between the Member States whereby the Member States’ administrative authorities are to assist each other and cooperate with the Commission in order to ensure the proper application of VAT on supplies of goods and services, intra-Community acquisition of goods and importation of goods’. 49 However, a provision of primary law such as Article 28 of the Act of Accession cannot be interpreted in the light of a recital in a measure of secondary legislation. In addition, the abovementioned third recital is part of the statement of reasons for a regulation adopted by the Community legislature on the basis of Article 93 EC which, in particular, is not a derogating measure, unlike Article 28 of the Act of Accession. That recital is not therefore capable of calling into question the Court’s finding in paragraph 46 of this judgment. 50 It follows from all the foregoing that Directive 77/799 as amended, in so far as it concerns VAT, does apply to Gibraltar. Mutual assistance by the competent authorities in the field of excise duties51 In this regard, it must be noted that, under Article 29 of the Act of Accession in conjunction with Annex I, Section I, point 4, thereto, Gibraltar does not form part of the Community customs territory. Like Article 28 of the Act of Accession, that exception must be interpreted strictly. 52 For the purposes of this case, it is not necessary to determine whether Gibraltar’s exclusion from the Community customs territory means that the provisions of Directive 92/12 on the harmonisation of the substantive laws on excise duties do not apply to Gibraltar. 53 Even assuming that those provisions do not apply in that territory, that exclusion does not mean, in any event, that Gibraltar falls outside the requirement of mutual assistance by the competent authorities of the Member States provided for by Directive 77/799 as amended in the field of excise duties. The fact that the Gibraltar authorities are subject to that requirement has no bearing on any non-application to that territory of provisions requiring harmonisation of those duties as such. 54 Accordingly, Directive 77/799 as amended, in so far as it concerns excise duties, does apply to Gibraltar.55 In the light of all the foregoing, the Commission’s action must be considered to be well founded.56 It must therefore be held that, by failing to implement in the territory of Gibraltar, in the fields of VAT and excise duties, Directive 77/799 as amended, the United Kingdom has failed to fulfil its obligations under the EC Treaty. Costs57 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the United Kingdom has been unsuccessful, the latter must be ordered to pay the costs. Under the first subparagraph of Article 69(4) of the Rules of Procedure, the Kingdom of Spain, as intervener, is to bear its own costs. On those grounds, the Court (Grand Chamber) hereby:1. Declares that, by failing to implement in the territory of Gibraltar, in the fields of value added tax and excise duties, Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct and indirect taxation, as amended by Council Directive 79/1070/EEC of 6 December 1979 and by Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under the EC Treaty;2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs;3. Orders the Kingdom of Spain to bear its own costs.[Signatures]* Language of the case: English. | d150b-530f5e8-48b2 | EN |
THE AWARD BY A MUNICIPALITY OF A PUBLIC SERVICE CONCESSION TO A COMPANY WITH PREDOMINANTLY PUBLIC SHARE CAPITAL MUST COMPLY WITH TRANSPARENCY CRITERIA | Consorzio Aziende Metano (Coname)vComune di Cingia de’ Botti(Reference for a preliminary ruling from the Tribunale amministrativo regionale per la Lombardia)(Articles 43 EC, 49 EC and 81 EC –– Concession for the management of a public gas-distribution service)Opinion of Advocate General Stix-Hackl delivered on 12 April 2005 Judgment of the Court (Grand Chamber), 21 July 2005 Summary of the Judgment1. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Concept – Grant by a public authority of a concession to operate a public service – Excluded (Art. 81 EC)2. Freedom of movement for persons – Freedom of establishment – Freedom to provide services – Direct award of a concession for the management of a public gas‑distribution service – Not permissible in the absence of sufficient transparency(Arts 43 EC and 49 EC)1. Article 81 EC, which applies, according to its wording, to agreements ‘between undertakings’, does not, in principle, apply to contracts for concessions concluded between municipalities acting in their capacity as public authorities and concessionaires entrusted with responsibility for a public service. (see para. 12)2. Articles 43 EC and 49 EC preclude the direct award by a municipality of a concession for the management of the public gas-distribution service to a company in which there is a majority public holding and in the capital of which the municipality in question has a 0.97% holding, if that award does not comply with transparency requirements which, without necessarily implying an obligation to hold an invitation to tender, are, in particular, such as to enable an undertaking located in the territory of a Member State other than that of the municipality in question to have access to appropriate information regarding that concession, so that, if that undertaking had so wished, it would have been in a position to express its interest in obtaining that concession. (see paras 21, 28, operative part)JUDGMENT OF THE COURT (Grand Chamber)21 July 2005 (*) (Articles 43 EC, 49 EC and 81 EC – Concession for the management of a public gas-distribution service)In Case C-231/03,REFERENCE for a preliminary ruling under Article 234 EC from the Tribunale amministrativo regionale per la Lombardia (Italy), by decision of 14 February 2003, received at the Court on 28 May 2003, in the proceedings Comune di Cingia de’ Botti,intervener:Padania Acque SpA,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans (Rapporteur), A. Rosas, R. Silva de Lapuerta and A. Borg Barthet, Presidents of Chambers, R. Schintgen, S. von Bahr, J.N. Cunha Rodrigues, G. Arestis, M. Ilešič, J. Malenovský and J. Klučka, Judges, Advocate General: C. Stix-Hackl,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 1 March 2005,after considering the observations submitted on behalf of:– Consorzio Aziende Metano (Coname), by M. Zoppolato, avvocato,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by G. Fiengo, avvocato dello Stato,– the Netherlands Government, by D.J.M. de Grave, acting as Agent,– the Austrian Government, by M. Fruhmann, acting as Agent, – the Finnish Government, by A. Guimaraes-Purokoski, acting as Agent,– the Commission of the European Communities, by X. Lewis, K. Wiedner and C. Loggi, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 12 April 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Articles 43 EC, 49 EC and 81 EC.2 That reference has been made in proceedings between Consorzio Aziende Metano (‘Coname’) and the Comune di Cingia de’ Botti (municipality of Cingia de’ Botti) concerning the award by the latter to Padania Acque SpA (‘Padania’) of service covering the management, distribution and maintenance of methane gas distribution installations. Law3 Under Article 22(3) of Law No 142 of 8 June 1990 on the organisation of local self‑government (Legge no 142, recante ordinamento delle autonomie locali) (ordinary supplement to GURI No 135 of 12 June 1990, ‘Law No 142/1990’), a service such as that covering the management, distribution and maintenance of methane gas distribution installations may be provided by the public authority itself, by concession to third parties through recourse to outside undertakings or, in accordance with Article 22(3)(e), ‘by means of companies limited by shares or limited‑liability companies with predominantly local public capital, established by, or with the participation of, the body responsible for the public service and, if it is found to be appropriate due to the nature or extent of the territory covered by the service, with the participation of a number of public or private operators’. The main proceedings and the question referred for a preliminary ruling4 Coname had concluded with the Comune di Cingia de’ Botti a contract for the award of the service covering the maintenance, operation and monitoring of the methane gas network for the period from 1 January 1999 to 31 December 2000. 5 By letter of 30 December 1999, that municipality informed Coname that, by decision of 21 December 1999, the municipal council had entrusted the service covering the management, distribution and maintenance of the methane gas distribution installations for the period from 1 January 2000 to 31 December 2005 to Padania. The latter company’s share capital is predominantly public, held by the province of Cremona and almost all the municipalities of that province. The Comune di Cingia de’ Botti holds a 0.97% share in the capital of that company. 6 The service at issue in the main proceedings was entrusted to Padania by direct award pursuant to Article 22(3)(e) of Law No 142/1990. 7 Coname, which claims that the referring court should, inter alia, annul the decision of 21 December 1999, submits that the award of that service should have been made following an invitation to tender. 8 As it took the view that the outcome of the proceedings before it hinges on the interpretation of certain provisions of the EC Treaty, the Tribunal amministrativo regionale per la Lombardia (Lombardy Regional Administrative Court) decided to stay those proceedings and to refer the following question to the Court for a preliminary ruling: ‘Do Articles 43 [EC], 49 [EC] and 81 EC, in so far as they prohibit, respectively, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State and on freedom to provide services within the Community in respect of nationals of Member States, as well as commercial and corporate practices which are liable to prevent, restrict or distort competition within the European Union, preclude provision for the direct award, that is to say without an invitation to tender, of the management of the public gas‑distribution service to a company in which a municipality has a holding, whenever that holding is such as to preclude any direct control over the management itself, and must it therefore be declared that, as is the case in these proceedings, where the holding amounts to 0.97%, the essential preconditions for “in-house” management are not met?’ The question referred for a preliminary ruling9 It must be observed at the outset that the case in the main proceedings appears to relate, as follows from the reply given by the referring court to a request for clarification made by the Court under Article 104(5) of its Rules of Procedure, to a service described as a concession, which does not fall within the scope of either Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1) or Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ 1993 L 199, p. 84) (see, to that effect, Case C-324/98 Telaustria and Telefonadress [2000] ECR I-10745, paragraph 56, and the order in Case C‑358/00 Buchhändler-Vereinigung [2002] ECR I-4685, paragraph 28). 10 The present judgment is therefore based on the premiss that the main proceedings concern the award of a concession, a premiss which it is for the referring court to verify. 11 That having been made clear, the referring court seeks, by its question, an interpretation of Articles 43 EC, 49 EC and 81 EC. Article 81 EC12 It must be recalled that Article 81 EC, which applies, according to its wording, to agreements ‘between undertakings’, does not, in principle, apply to contracts for concessions concluded between municipalities acting in their capacity as public authorities and concessionaires entrusted with responsibility for a public service (see, to that effect, Case 30/87 Bodson [1988] ECR 2479, paragraph 18). 13 Consequently, as the Finnish Government and the Commission rightly point out, that provision does not apply to the case in the main proceedings, as it is described in the order for reference. 14 There is therefore no need to answer the question in that regard. Articles 43 EC and 49 EC15 By its question, the referring court seeks, in essence, to ascertain whether Articles 43 EC and 49 EC preclude the direct award, that is to say without an invitation to tender, by a municipality of a concession for the management of the public gas-distribution service to a company with predominantly public capital in which that municipality holds a 0.97% share. 16 It must be remembered that the award of such a concession is not governed by any of the directives by which the Community legislature has regulated the field of public contracts. In the absence of any such legislation, the consequences in Community law of the award of such concessions must be examined in the light of primary law and, in particular, of the fundamental freedoms provided for by the Treaty. 17 In that regard, it must be pointed out that, in so far as the concession in question may also be of interest to an undertaking located in a Member State other than the Member State of the Comune di Cingia de’ Botti, the award, in the absence of any transparency, of that concession to an undertaking located in the latter Member State amounts to a difference in treatment to the detriment of the undertaking located in the other Member State (see, to that effect, Telaustria and Telefonadress, paragraph 61). 18 In the absence of any transparency, the latter undertaking has no real opportunity of expressing its interest in obtaining that concession. 19 Unless it is justified by objective circumstances, such a difference in treatment, which, by excluding all undertakings located in another Member State, operates mainly to the detriment of the latter undertakings, amounts to indirect discrimination on the basis of nationality, prohibited under Articles 43 EC and 49 EC (see in particular, to that effect, Case C-111/91 Commission v Luxembourg [1993] ECR I-817, paragraph 17, Case C-337/97 Meeusen [1999] ECR I-3289, paragraph 27, and Case C‑294/97 Eurowings Luftverkehr [1999] ECR I-7447, paragraph 33 and the case-law cited). 20 With regard to the case in the main proceedings, it is not apparent from the file that, because of special circumstances, such as a very modest economic interest at stake, it could reasonably be maintained that an undertaking located in a Member State other than that of the Comune di Cingia de’ Botti would have no interest in the concession at issue and that the effects on the fundamental freedoms concerned should therefore be regarded as too uncertain and indirect to warrant the conclusion that they may have been infringed (see, to that effect, Case C-69/88 Krantz [1990] ECR I-583, paragraph 11; Case C‑44/98 BASF [1999] ECR I-6269, paragraph 16; and the order in Case C‑431/01 Mertens [2002] ECR I‑7073, paragraph 34). 21 In those circumstances, it is for the referring court to satisfy itself that the award of the concession by the Comune di Cingia de’ Botti to Padania complies with transparency requirements which, without necessarily implying an obligation to hold an invitation to tender, are, in particular, such as to ensure that an undertaking located in the territory of a Member State other than that of the Italian Republic can have access to appropriate information regarding that concession before it is awarded, so that, if that undertaking had so wished, it would have been in a position to express its interest in obtaining that concession. 22 If that is not the case, it must be concluded that there was a difference in treatment to the detriment of that undertaking.23 With regard to the objective circumstances that could justify such a difference in treatment, it must be pointed out that the fact that the Comune di Cingia de’ Botti has a 0.97% holding in the share capital of Padania does not, by itself, constitute one of those objective circumstances. 24 Even if the need for a municipality to exercise control over a concessionaire managing a public service may constitute an objective circumstance capable of justifying a possible difference in treatment, it must be pointed out that the 0.97% holding is so small as to preclude any such control, as the referring court itself observes. 25 At the hearing, the Italian Government submitted, in essence, that, in contrast to some large Italian cities, most municipalities lack the resources to provide, through in-house structures, public services such as that of gas distribution within their territory, and are therefore obliged to resort to structures, such as that of Padania, in the share capital of which several municipalities have holdings. 26 In that regard, it must be held that a structure such as that of Padania may not be treated in the same way as a structure through which a municipality or a city manages, on an in‑house basis, a public service. As is apparent from the file, Padania is a company open, at least in part, to private capital, which precludes it from being regarded as a structure for the ‘in-house’ management of a public service on behalf of the municipalities which form part of it. 27 The Court has not been made aware of any other objective circumstance capable of justifying any difference in treatment.28 In those circumstances, the answer to the question referred must be that Articles 43 EC and 49 EC preclude, in circumstances such as those at issue in the main proceedings, the direct award by a municipality of a concession for the management of the public gas‑distribution service to a company in which there is a majority public holding and in which the municipality in question has a 0.97% holding, if that award does not comply with transparency requirements which, without necessarily implying an obligation to hold an invitation to tender, are, in particular, such as to enable an undertaking located in the territory of a Member State other than that of the municipality in question to have access to appropriate information regarding that concession, so that, if that undertaking had so wished, it would have been in a position to express its interest in obtaining that concession. Costs29 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Articles 43 EC and 49 EC preclude, in circumstances such as those at issue in the main proceedings, the direct award by a municipality of a concession for the management of the public gas‑distribution service to a company in which there is a majority public holding and in the capital of which the municipality in question has a 0.97% holding, if that award does not comply with transparency requirements which, without necessarily implying an obligation to hold an invitation to tender, are, in particular, such as to enable an undertaking located in the territory of a Member State other than that of the municipality in question to have access to appropriate information regarding that concession, so that, if that undertaking had so wished, it would have been in a position to express its interest in obtaining that concession.[Signatures]* Language of the case: Italian. | c7869-40895f1-49c8 | EN |
THE REGULATION ON ORGANIC PRODUCTION FROM NOW ON PRECLUDES THE USE, IN SPAIN, OF THE TERMS "BIOLÓGICO' OR "BIO' IN THE ADVERTISING MATERIAL OF PRODUCTS WHICH HAVE NOT BEEN ORGANICALLY PRODUCED | Commission of the European CommunitiesvKingdom of Spain(Failure of a Member State to fulfil obligations — Community rules on organic production of agricultural products and indications referring thereto on agricultural products and foodstuffs — National legislation authorising the use of the term ‘bio’ in respect of products which have not been organically produced) Opinion of Advocate General Kokott delivered on 17 March 2005 Judgment of the Court (First Chamber), 14 July 2005 Summary of the Judgment1. Actions for failure to fulfil obligations — Examination of the merits by the Court — Situation to be taken into consideration — Situation at the end of the period laid down in the reasoned opinion(Art. 226 EC)2. Agriculture — Common agricultural policy — Organic production method of agricultural products and indications referring thereto on agricultural products and foodstuffs — Regulation No 2092/91 — Indications referring to that production method — Use of those indications and of their derivatives for products not produced by such a method — Use of the terms ‘biológico’ and ‘bio’ in Spain — Permitted in the version amended by Regulation No 1804/1999(Council Regulation No 2092/91, as amended by Council Regulation No 1804/1999, Art. 2)3. Actions for failure to fulfil obligations — Proof of failure — Burden of proof on the Commission — Presumptions — Not permissible1. The question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in that Member State at the end of the period laid down in the reasoned opinion. Subsequent changes cannot be taken into account by the Court. (see para. 31)2. The list of indications referring to the organic production method set out in Article 2 of Regulation No 2092/91 on organic production of agricultural products and indications referring thereto on agricultural products and foodstuffs, as amended to include livestock production by Regulation No 1804/1999, is by no means exhaustive. It follows that the Member States may, where current usage changes in their territory, add expressions other than those set out in that list to their national legislation to refer to the organic production method. As regards Spanish, since the expression ‘ecológico’ alone, encompassing the derivative ‘eco’, is included in the list set out in Article 2 of that regulation, the Spanish Government cannot be criticised for failing to prevent producers of products which are not organically-produced from using other expressions such as ‘biológico’ or ‘bio’. It further does not follow from the wording of that article that the derivative ‘bio’ must, because it is mentioned in that Article 2 as a usual derivative, be accorded specific protection in all Member States and in all languages, including those in respect of which, on the list in that article, terms are mentioned which do not correspond to the French expression ‘biologique’. (see paras 34-36)3. In an action for failure to fulfil obligations, it is for the Commission to prove the allegation that the obligation has not been fulfilled. It is the Commission which must provide the Court with the evidence necessary for the Court to establish that the obligation has not been fulfilled, and it may not rely on any presumption. (see para. 41)JUDGMENT OF THE COURT (First Chamber)14 July 2005 (*) (Failure of a Member State to fulfil obligations – Community rules on organic production of agricultural products and indications referring thereto on agricultural products and foodstuffs – National legislation authorising the use of the term ‘bio’ in respect of products which have not been organically produced) In Case C-135/03,ACTION under Article 226 EC for failure to fulfil obligations, brought on 26 March 2003,Commission of the European Communities, represented by G. Berscheid, B. Doherty, F. Jimeno Fernandez and S. Pardo Quintillán, acting as Agents, with an address for service in Luxembourg, applicant,Kingdom of Spain, represented by N. Díaz Abad and E. Braquehais Conesa, acting as Agents, defendant,THE COURT (First Chamber),composed of P. Jann (Rapporteur), President of the Chamber, K. Lenaerts, J.N. Cunha Rodrigues, M. Ilešič and E. Levits, Judges,Advocate General: J. Kokott,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 3 March 2005,after hearing the Opinion of the Advocate General at the sitting on 17 March 2005,gives the followingJudgment1 By its application, the Commission of the European Communities asks the Court to declare that: – by maintaining in its domestic legal system and in current usage the term ‘bio’, on its own or in combination with other terms, for products which have not been obtained in accordance with organic production methods, thereby infringing Article 2 in conjunction with Article 5 of Council Regulation (EEC) No 2092/91 of 24 June 1991 on organic production of agricultural products and indications referring thereto on agricultural products and foodstuffs (OJ 1991 L 198, p. 1), as amended by Council Regulation (EC) No 1935/95 of 22 June 1995 (OJ 1995 L 186, p. 1) and, to include livestock production, by Council Regulation (EC) No 1804/1999 of 19 July 1999 (OJ 1999 L 222, p. 1; ‘Regulation No 2092/91’), – by failing to adopt the measures necessary to prevent misleading use of that term, thereby infringing Article 2 in conjunction with Article 10a of Regulation No 2092/91, – by failing to adopt measures to prevent consumers from being misled as to the method of manufacture or production of foodstuffs, thereby infringing Article 2 of that regulation in conjunction with Article 2(1)(a)(i) of Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs (OJ 2000 L 109, p. 29), and – by maintaining in the Autonomous Community of Navarre, contrary to the same provisions, the use of the term ‘bio’, on its own or in conjunction with other terms, for dairy products in respect of which that term has been customarily and continuously used when they have not been obtained in accordance with the organic production method, the Kingdom of Spain has infringed that regulation and that directive, and in particular the abovementioned provisions of those measures. Law Community legislation2 Regulation No 2092/91 established a framework of Community rules on production, labelling and inspection of organically-produced products. The fifth recital in the preamble states that that regulation seeks to ensure conditions of fair competition between the producers of such products, to ensure transparency at the various stages of production and to improve the credibility of such products in the eyes of consumers. 3 Article 2 of that regulation provides:‘For the purpose of this Regulation, a product shall be regarded as bearing indications referring to the organic production method, where, in the labelling, advertising material or commercial documents, such a product, its ingredients or feed materials are described by the indication in use in each Member State, suggesting to the purchaser that the product, its ingredients or feed materials have been obtained in accordance with the rules of production laid down in Article 6 and in particular the following terms or their usual derivatives (such as bio, eco etc.) or diminutives, alone or combined, unless such terms are not applied to agricultural products in foodstuffs or feedingstuffs or clearly have no connection with the method of production: – in Spanish: ecológico,– in Danish: økologisk,– in German: ökologisch, biologisch,– in Greek: βιολογικό,– in English: organic,– in French: biologique,– in Italian: biologico,– in Dutch: biologisch,– in Portuguese: biológico,– in Finnish: luonnonmukainen,– in Swedish: ekologisk.’ 4 Article 5 of that regulation provides: ‘1. The labelling and advertising of a product specified in Article 1(1)(a) may refer to organic production methods only where: (a) such indications show clearly that they relate to a method of agricultural production; (b) the product was produced in accordance with the rules laid down in Articles 6 and 7 or imported from a third country under the arrangements laid down in Article 11; (c) the product was produced or imported by an operator who is subject to the inspection measures laid down in Articles 8 and 9. …’5 Article 10a of Regulation No 2092/91 provides:‘1. Where a Member State finds irregularities or infringements relating to the application of this Regulation in a product coming from another Member State and bearing indications as referred to in Article 2 and/or Annex V it shall inform the Member State which designated the inspection authority or approved the inspection body and the Commission thereby. 2. Member States shall take whatever measures and action are required to prevent fraudulent use of the indications referred to in Article 2 and/or Annex V.’ 6 Furthermore, Article 2(1) of Directive 2000/13, which concerns foodstuffs as a whole, provides: ‘1. The labelling and methods used must not:(a) be such as could mislead the purchaser to a material degree, particularly:(i) as to the characteristics of the foodstuff and, in particular, as to its nature, identity, properties, composition, quantity, durability, origin or provenance, method of manufacture or production; National legislation7 Article 3(1) of Royal Decree No 1852/1993 of 22 October 1993 on organic agricultural production and indications referring thereto on agricultural products and foodstuffs (BOE No 283 of 26 November 1993, p. 33528) originally provided: ‘In accordance with the provisions of Article 2 of Regulation No 2092/91, a product shall in every case bear indications referring to the organic production method where in the labelling, advertising material or commercial documents such a product or its ingredients are described by the term “ecológico”. Similarly, in addition to the specific indications applicable by the Autonomous Communities, it will be possible to use the words: “obtenido sin el empleo de productos químicos de sínteses”, “biológico”, “orgánico”, “biodinámico”, and their respective compound nouns, and the terms “eco” and “bio”, whether or not used with the name of the product, its ingredients or its brand name.’ 8 That decree was amended by Royal Decree No 506/2001 of 11 May 2001 (BOE No 126 of 26 May 2001, p. 18609). Article 3(1) now provides: ‘In accordance with the provisions of Article 2 of Regulation (EC) No 2092/91, as amended by Regulation (EC) No 1804/1999, a product shall in any event be regarded as bearing indications referring to the organic production method where such a product, its ingredients or feed materials are described in the labelling, advertising material or commercial documents by the term “ecológico” or its derivative “eco”, alone or combined with the name of the product, its ingredients or its brand name.’ 9 The third and fifth recitals in the preamble to that royal decree state that that amendment was necessary in order to eliminate any doubt about the terms which, under Community legislation, are reserved for organic production and to eliminate all confusion which may arise from those terms for the consumer, whilst taking into consideration the actual situation of the food sector in Spain, in which use of the term ‘bio’ has become widespread to describe foodstuffs which have certain characteristics unconnected with organic production methods. 10 Furthermore, as regards the Autonomous Commune of Navarre, Article 2 of Regional Decree No 617/1999 of 20 December 1999 (Navarre BO No 4 of 10 January 2000) provides that a product is regarded as bearing indications referring to the organic production method where the product is designated by the terms ‘ecológico’, ‘obtenido sin el empleo de productos químicos de síntesis’, ‘biológico’, ‘orgánico’, ‘biodinámico’ or by the abbreviations ‘eco’ and ‘bio’. 11 Regional Decree No 212/2000 of 12 June 2000 (Navarre BO No 83 of 10 July 2000) added the following paragraph to Article 1 of Regional Decree No 617/1999: ‘This decree shall not apply to dairy products in respect of which the term “bio” has been customarily and continuously used because that term bears no relation to the organic method of production.’ 12 The recital in the preamble to that regional decree explains that that amendment takes account of the actual situation in the Navarre region where the term ‘bio’, which is applied to dairy products, does not generally correspond to the concept or the method of organic production. The pre-litigation procedure13 During the drafting stage of Royal Decree No 506/2001, the Commission received several complaints drawing its attention to that legislative amendment and claiming that it infringed Regulation No 2092/91. Since that royal decree was adopted notwithstanding the approach made by its services to the Spanish authorities, the Commission initiated the infringement procedure under the first paragraph of Article 226 EC. 14 After giving the Kingdom of Spain the opportunity to submit its observations, the Commission delivered, on 24 April 2002, a reasoned opinion requesting that Member State to adopt the measures necessary to comply with that opinion within two months of its notification. The Spanish Government did not comply with the opinion and so the Commission brought the present action. The action Arguments of the parties15 According to the Commission, Royal Decree No 506/2001, which reserves only the term ‘ecológico’ and its derivative ‘eco’ to the organic production method and consequently authorises the use of the term ‘bio’ for products which are not organically produced, infringes Articles 2, 5 and 10a of Regulation No 2092/91. Article 2 of that regulation clearly precludes the use of derivatives of terms which designate the organic production method in respect of products which have not been organically produced. The term ‘bio’ is expressly referred to in that article as an example of such a derivative. In the list of terms in the various languages set out in that article, the reference to the term ‘ecológico’ alone in the case of Spanish has no bearing on that interpretation. That list, introduced by the phrase ‘in particular’, contains examples only and is not exhaustive. 16 The context and purpose of Article 2 of Regulation No 2092/91 confirm that interpretation. Indeed it would be inconceivable in the common market that the term ‘bio’ be protected in some Member States and not in others. 17 Moreover, according to current usage in Spain and contrary to the contention of the Spanish Government, consumers attribute the same weight to the terms ‘ecológico’ and ‘biológico’. That finding is corroborated by the earlier version of Royal Decree No 1852/1993, which provided that the terms ‘biológico’ and ‘bio’, on the one hand, and ‘ecológico’ and ‘eco’, on the other, could be used without distinction to describe organically-produced products. The same applies in respect of the rules in force in the Autonomous Community of Navarre. 18 It is clear from specific examples that the terms ‘ecológico’ and ‘biológico’ are often used in the same way in Spain. Numerous products labelled ‘biológico’ bear an indication on their packaging that they are organically produced. The Spanish press also uses the two terms interchangeably. 19 The Commission received complaints that, in Spain, the term ‘bio’ was being used unlawfully and fraudulently. Faced with such a situation, the Member States are required under Article 10a(2) of Regulation No 2092/91 to take whatever measures and action are required to prevent such use. Since the Spanish Government has failed to take such measures it should be declared that that provision too has been infringed. 20 For the same reasons, namely the fact that the Spanish authorities tolerate the fraudulent use of the term ‘bio’, the Commission submits that it should also be declared that those authorities have infringed Article 2(1)(a)(i) of Directive 2000/13. The authorisation to market under the ‘biológico’ or ‘bio’ label foodstuffs which have not been organically produced results in consumers being misled as to the method of manufacture or production of the foodstuffs concerned, all the more so since genuine organically-produced products are usually offered at a significantly higher price. 21 As regards more particularly the rules in force in the Navarre Autonomous Community, the Commission submits that they rightly reserve the use of the terms ‘biológico’ and ‘bio’ to organically-produced products. However, an exception has wrongly been included in respect of dairy products. 22 The Spanish Government denies the alleged failure to fulfil obligations. It contends that the Court should dismiss the Commission’s action and order that institution to pay the costs. It claims that it is clear from the wording of Article 2 of Regulation No 2092/91 in the version applicable in the present case that reference should be made, when designating the organic method of production, to the linguistic indications set out in the list in that article. That list specifically sets out for Spanish the term ‘ecológico’ and not the terms ‘biológico’ or ‘bio’. Producers are therefore free in Spain to use the terms ‘biológico’ or ‘bio’ for products which have not been organically produced without that usage being treated as unlawful or fraudulent. 23 The Spanish Government claims that in the absence of any harmonisation of the indications in question at Community level, the differences between the Member States’ rules must be accepted. If the drafters of Regulation No 2092/91 had wanted the designation of organically-produced products to be subject to the same rules in all Member States, they should have imposed the same term, translated into the various Community languages, in each of those States. The list in question shows however that that is not the case. 24 In the Spanish consumer’s mind, the term ‘bio’, which is much less well-known in Spain than in other Member States, does not in fact refer to the organic method of production but is instead associated with products which in general terms are wholesome and good for the health. An opinion poll conducted in 1999 in Madrid revealed that only 3% of those polled associated the term ‘bio’ with the organic production method whilst 86% associated it simply with dairy products, primarily yoghurt. It cannot therefore be accepted that that term is used in Spain to denote the organic production method. 25 The Spanish Government therefore disputes the complaints alleging infringement of Articles 2, 5 and 10a of Regulation No 2092/91 and Article 2 of Directive 2000/13. Since it is clear from the opinion poll relied on that the vast majority of Spanish consumers do not associate the term ‘bio’ with the organic production method, the practice in question cannot mislead them. 26 The Commission challenges the objectivity, reliability and relevance of that opinion poll. It submits that since the meaning of certain terms changes very quickly in the sector in question, a poll conducted in 1999 has no weight with regard to the situation as it was in 2002. Similarly, the poll in question was based on a very small sample and, given the questions asked and the methods used, no firm conclusion can be drawn from it. 27 At the hearing the Spanish Government stated, in reply to a question from the Court, that most of the autonomous communities have regional rules which are identical to those in force in the Navarre Autonomous Community, allowing interchangeably with ‘ecológico’ and ‘eco’, a number of other terms to denote organically-produced products, often including ‘biológico’ and ‘bio’. 28 Similarly, at the hearing the parties made submissions on the potential effect on the outcome of the dispute of the version of Regulation No 2092/91 as amended by Council Regulation (EC) No 392/2004 of 24 February 2004 (OJ 2004 L 65, p. 1), and by the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded (OJ 2003 L 236, p. 346). 29 Indeed, Regulation No 392/2004 added, in Article 2 of Regulation No 2092/91, a provision that the terms listed in that article in the various languages ‘shall be regarded as indications referring to the organic production method throughout the Community and in any Community language’. That version of Article 2 is in particular the subject of the reference for a preliminary ruling giving rise to the judgment of 14 July 2005 in Case C-107/04 Comité Andaluz de Agricultura Ecológica [2005] ECR I-0000. 30 Whilst the Commission submits that that amendment to Article 2 of Regulation No 2092/91 is merely declaratory of the implicit meaning of the previous wording of that provision, the Spanish Government contends that it is a substantial amendment which however has no bearing on the present infringement proceedings. Findings of the Court 31 As a preliminary point it should be noted that according to settled case-law, the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in that Member State at the end of the period laid down in the reasoned opinion (see, inter alia, Case C-63/02 Commission v United Kingdom [2003] ECR I-821, paragraph 11, and Case C‑341/02 Commission v Germany [2005] ECR I-0000, paragraph 33). Subsequent changes cannot be taken into account by the Court (see, inter alia, Case C-482/03 Commission v Ireland, not published in the ECR, paragraph 11). 32 Since the date of the Commission’s reasoned opinion was 24 April 2002 and the period accorded to the Kingdom of Spain was two months, the question whether there has been a failure to fulfil obligations as alleged must be assessed in the light of Regulation No 2092/91 and not that regulation as amended by Regulation No 392/2004. 33 Article 2 of Regulation No 2092/91 refers as regards the labelling, advertising material or commercial documents of organically-produced products to ‘indications in use in each Member State, suggesting to the purchaser that the product, … [has] been obtained in accordance with the rules of [organic] production’ and ‘in particular’ to ‘the … terms or their usual derivatives’ set out in a list containing, in respect of each of the 11 official languages of the Community then in force, one or two expressions. In the case of 5 of the 11 languages, there is only one expression on that list which corresponds to the French term ‘biologique’. In the case of three other languages there is only one expression which corresponds to the French term ‘écologique’. In respect of German, two expressions corresponding to those two terms are cited without distinction and for each of the two remaining languages another expression is given. 34 That list, which is introduced by the words ‘in particular’, is by no means exhaustive. It follows that the Member States may, where current usage changes in their territory, add expressions other than those set out in that list to their national legislation to refer to the organic production method. 35 In the version applicable to the present infringement proceedings, the wording of Article 2 of Regulation No 2092/91 is unequivocal in that regard. Since in the case of Spanish the expression ‘ecológico’ alone, encompassing the derivative ‘eco’, is included in the list set out in that article, the Spanish Government cannot be criticised for failing to prevent producers of products which are not organically-produced from using other expressions such as, in this case, ‘biológico’ or ‘bio’. 36 Contrary to the Commission’s submission, it further does not follow from the wording of that Article 2 that the derivative ‘bio’ must, because it is mentioned in that article as a usual derivative, be accorded specific protection in all Member States and in all languages, including those in respect of which, on the list in that article, terms are mentioned which do not correspond to the French expression ‘biologique’. As has been noted above, that was so at the time of the facts in 5 of the 15 Member States. The reference in Article 2 of Regulation No 2092/91 to the derivatives ‘bio, eco, etc.’ does not justify reserving special treatment to the term ‘bio’ alone. 37 Whilst it may be desirable, given the increasing importance of the market for organically-produced products at Community level, to harmonise the indications in respect of such products, it is for the Community legislature to react to such a need. The amendment to Article 2 of Regulation No 2092/91 by Regulation No 392/2004 is evidence of such a development. As is clear from the judgment in Comité Andaluz de Agricultura Ecológica, cited above, the version of Article 2 resulting from that amendment must in fact be interpreted as meaning that the expressions set out in that article must be protected in all of the official languages of the Community. 38 However, that amendment has no bearing on the previous legislative situation, in the light of which the present infringement proceedings must be assessed. The adoption of a new version of Article 2 of Regulation No 2092/91 suggests the intention of the legislature to amend that article and not to leave it unchanged. If there had been no such intention, the adoption of the legislative amendment in question would not have been necessary. 39 Lastly, the Commission cannot succeed in its argument that the Kingdom of Spain was required also to reserve, in addition to the use of the single expression ‘ecológico’ and its derivative ‘eco’, the use of the term ‘bio’ to organically-produced products because of use of that term in Spain which led Spanish consumers to regard that term nevertheless as referring to the organic production method. 40 It is true, as the Commission contends, that the content of the national legislation prior to the amendment introduced by Royal Decree No 506/2001 and the legislation in force in the Navarre Autonomous Community provide important evidence in that regard. The same is true of the information provided by the Spanish Government at the hearing, in reply to a question from the Court, that in many other regions, the use of the terms ‘biológico’ or ‘bio’ seems to be reserved to organically-produced products. Moreover, the doubt cast by the Commission on the opinion poll relied on by the Spanish Government is also prima facie not wholly unfounded. 41 It should however be noted that it is settled case-law that, in an action for failure to fulfil obligations, it is for the Commission to prove the allegation that the obligation has not been fulfilled. It is the Commission which must provide the Court with the evidence necessary for the Court to establish that the obligation has not been fulfilled, and it may not rely on any presumption (see, inter alia, Case C‑194/01 Commission v Austria [2004] ECR I-4579, paragraph 34, and Commission v Germany, cited above, paragraph 35). In the present case, apart from the indications referred to above relating to some use of the terms ‘biológico’ and ‘bio’ on the Spanish market, the Commission has not shown that, in that market, those terms suggest to Spanish purchasers in general that the products concerned are organically produced. Whilst, in that respect, the doubt cast by the Commission on the opinion poll relied on by the Spanish Government is not unfounded, it nevertheless remains the case that the Commission has adduced no evidence to show that, in Spain, when the period laid down in the reasoned opinion expired, the use of the terms ‘biológico’ or ‘bio’ to designate organically-produced products was so widespread that the Spanish consumer associated those terms with the organic method of production. The Commission has therefore not succeeded in refuting the assertion made in the recital in the preamble to Royal Decree No 506/2001 that, in adopting that royal decree, the use of the term ‘bio’ had become widespread in Spain to designate foodstuffs which have certain characteristics unconnected with the organic method of production. 42 Since an infringement of the obligations arising from Article 2 of Regulation No 2091/92 in the version applicable to the present proceedings cannot therefore be declared, it follows that an infringement of Articles 5 and 10a of that regulation and Article 2(1)(a)(i) of Directive 2000/13, which depends upon that infringement, cannot be regarded as made out either. 43 Furthermore, in respect of the infringement which the Commission alleges arises from the use of the term ‘bio’ in the Navarre Autonomous Community, it suffices to find that the Court’s reasoning in respect of Royal Decree No 506/2001 also applies in respect of the regional rules applicable in the Navarre Autonomous Community. Consequently, there can be no declaration of infringement in that respect either. 44 In those circumstances, the action must be dismissed in its entirety. Costs45 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Kingdom of Spain has applied for costs, and the Commission has been unsuccessful, the latter must be ordered to pay the costs. On those grounds, the Court (First Chamber) hereby:1. Dismisses the action;2. Orders the Commission of the European Communities to pay the costs. [Signatures]* Language of the case: Spanish. | ac0cb-c459f07-427e | EN |
THE COURT OF JUSTICE ESSENTIALLY CONFIRMS THE JUDGMENT OF THE COURT OF FIRST INSTANCE CONCERNING THE PARTICIPATION OF PRODUCERS OF STAINLESS STEEL FLAT PRODUCTS IN A CARTEL IN THE COMMON MARKET | Compañía española para la fabricación de aceros inoxidables SA (Acerinox)vCommission of the European Communities(Appeal – ECSC Treaty – Agreements, decisions and concerted practices – Alloy surcharge – Parallel conduct – Reduction of the fine – Cooperation in the administrative procedure – Rights of the defence)Opinion of Advocate General Léger delivered on 28 October 2004 Judgment of the Court (First Chamber), 14 July 2005 Summary of the Judgment1. ECSC – Agreements, decisions and concerted practices – Prohibition – Infringement – Proof – Burden of proof on the Commission – Exception – Participation of the undertaking concerned in meetings having an anti‑competitive object – Reversal of the burden of proof(ECSC Treaty, Art. 65)2. ECSC – Agreements, decisions and concerted practices – Prohibition – Infringement – Administrative procedure – Request for information – Rights of the defence – Right to refuse to provide answers that imply admission of an infringement (ECSC Treaty, Art. 36, first para.)3. ECSC – Agreements, decisions and concerted practices – Fines – Amount – Determination – Non-imposition or reduction of the fine in return for the cooperation of the undertaking concerned – Larger reduction in a case of admission of the infringement –– Breach of the undertaking’s rights of defence and in particular its right to refuse to provide answers that imply admission of an infringement – None (ECSC Treaty, Art. 65(5); Commission Communication 96/C 207/04, part D)1. Where, in the light of the evidence put forward by the Commission, the participation of the undertaking in meetings of a manifestly anti-competitive character is established, it is for the undertaking concerned to put forward evidence to establish that its participation in those meetings was without any anti‑competitive intention by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs. (see para. 46)2. While, in the context of a procedure to establish the existence of an infringement of the competition rules, the Commission is entitled to compel an undertaking to provide all necessary information concerning such facts as may be known to that institution, it may not, however, compel that undertaking to provide it with answers which might involve an admission on its part of the existence of an infringement which it is incumbent upon the Commission to prove. (see paras 85-86)3. While the Commission may not compel an undertaking to admit its participation in an infringement in the field of competition, it is not thereby prevented from taking account, when fixing the amount of a fine, of the assistance given to it by the undertaking concerned by which it is able to establish the existence of the infringement with less difficulty and, in particular, of the fact that an undertaking admitted its participation in the infringement. It may grant an undertaking that has assisted it in that way a significant reduction of the amount of its fine and grant a substantially lesser reduction to another undertaking which merely did not deny the main factual allegations on which the Commission based its objections. The admission of an alleged infringement is entirely voluntary. It is not in any way coerced to admit the existence of the cartel. Therefore, it is not a breach of the rights of defence for the Commission to take account of the degree of cooperation with it shown by the undertaking concerned, including admission of the infringement, for the purpose of imposing a lower fine. The Leniency Notice and, in particular part D thereof, must therefore be interpreted as meaning that the type of cooperation, capable of giving rise to a reduction of the fine, which the undertaking concerned may provide is not limited to admitting the nature of the facts but also involves admitting participation in the infringement. (see paras 87-91)JUDGMENT OF THE COURT (First Chamber)14 July 2005 (*) (Appeal – ECSC Treaty – Agreement, decisions and concerted practices – Alloy surcharge – Parallel conduct – Reduction of the fine – Cooperation in the administrative procedure – Rights of the defence)In Case C-57/02 P,APPEAL under Article 49 of the ECSC Statute of the Court of Justice, brought on 22 February 2002,Compañía española para la fabricación de aceros inoxidables SA (Acerinox), established in Madrid (Spain), represented by A. Vandencasteele and D. Waelbroeck, avocats, appellant,the other party to the proceedings being:Commission of the European Communities, represented by A. Whelan, acting as Agent, and J. Flynn, Barrister, with an address for service in Luxembourg, defendant at first instance, THE COURT (First Chamber),composed of P. Jann, President of the Chamber, A. Rosas, R. Silva de Lapuerta, K. Lenaerts and S. von Bahr (Rapporteur), Judges,Advocate General: P. Léger,Registrar: R. Grass,having regard to the written procedure, after hearing the Opinion of the Advocate General at the sitting on 28 October 2004,gives the followingJudgment1 By its appeal, Compañía española para la fabricación de aceros inoxidables SA (Acerinox) (‘Acerinox’) seeks annulment of the judgment of the Court of First Instance of the European Communities of 13 December 2001 in Case T‑48/98 Acerinox v Commission [2001] ECR II‑3859 (‘the contested judgment’) which only partially upheld its application for the annulment of Commission Decision 98/247/ECSC of 21 January 1998 relating to a proceeding under Article 65 of the ECSC Treaty (Case IV/35.814 – Alloy Surcharge) (OJ 1998 L 100, p. 55, hereinafter ‘the contested decision’). Facts2 The facts giving rise to the proceedings before the Court of First Instance, as described by latter Court, may be summarised as follows for the purposes of this judgment. 3 Acerinox is a company incorporated under Spanish law operating in the stainless steel sector, producing flat products in particular.4 On 16 March 1995, following reports in the specialised press and complaints from several consumers, the Commission, under Article 47 of the ECSC Treaty, asked a number of stainless steel producers for information concerning the application by those producers of a general price increase known as the ‘alloy surcharge.’ 5 The alloy surcharge is a price supplement which is calculated on the basis of the prices of the alloying materials and is added to the basic price for stainless steel. The cost of the alloying materials used by stainless steel producers (nickel, chromium and molybdenum) forms a very large proportion of the total production costs. The prices of those materials are extremely volatile. 6 On the basis of the information obtained, on 19 December 1995 the Commission served a statement of objections on 19 undertakings, including Acerinox. 7 In December 1996 and January 1997, after the Commission had carried out a number of on-site inspections, lawyers or representatives of a number of undertakings, including Acerinox, informed the Commission of their wish to cooperate. On 17 December 1996, Acerinox sent a statement to the Commission to that effect. 8 On 24 April 1997, the Commission served on those undertakings a new statement of objections replacing that of 19 December 1995. 9 On 21 January 1998, the Commission adopted the contested decision.10 According to that decision, the prices for alloys and stainless steel fell sharply in 1993. When nickel prices started to rise in September 1993, producers’ profits were considerably reduced. To remedy this, most of the producers of stainless flat products agreed, at a meeting held in Madrid on 16 December 1993 (hereinafter ‘the Madrid meeting’), to increase their prices on a concerted basis by changing the parameters for calculating the alloy surcharge. To that end they decided to apply, as from 1 February 1994, an alloy surcharge based on the method last used in 1991, taking as reference values prices prevailing in September 1993 for all producers, when the price of nickel had reached an historical low. 11 The contested decision states that the alloy surcharge calculated on the basis of the newly determined reference values was applied by all producers to their sales in Europe as from 1 February 1994, except in Spain and Portugal. 12 In Article 1 of the contested decision, the Commission found that Acerinox, ALZ NV, Acciai speciali Terni SpA (‘AST’), Avesta Sheffield AB (‘Avesta’), Hoesch Stahl AG, which became Krupp Thyssen Nirosta GmbH as from 1 January 1995, Thyssen Stahl AG, which became Krupp Thyssen Nirosta GmbH as from 1 January 1995, and Ugine SA, then known as Usinor SA (‘Usinor’), had infringed Article 65(1) of the ECSC Treaty from December 1993 to November 1996 in the case of Avesta and in the case of all the other undertakings up to the date of the decision, by modifying and by applying in a concerted fashion the reference values used to calculate the alloy surcharge. It considered that that practice had both the object and the effect of restricting and distorting competition within the common market 13 Under Article 2 of the contested decision, the following fines were imposed:– Acerinox: ECU 3 530 000– ALZ NV: ECU 4 540 000– AST: ECU 4 540 000– Avesta: ECU 2 810 000– Krupp Thyssen Nirosta GmbH: ECU 8 100 000 écus, and– Usinor: ECU 3 860 000. The action before the Court of First Instance and the contested judgment14 By application lodged at the Registry of the Court of First Instance on 13 March 1998, Acerinox brought an action for annulment of the contested decision in so far as it concerned the applicant and, in the alternative, for a substantial reduction of the fine imposed on it by that decision. 15 By the contested judgment, the Court of First Instance largely confirmed the contested decision.16 The Court of First Instance held, in paragraph 45 of the contested judgment, that Acerinox must be regarded as having participated in the agreement relating to the application of an alloy surcharge calculated on the basis of reference values agreed at the Madrid meeting (hereinafter ‘the agreement’) as from 16 December 1993 in the case of the Member States other than the Kingdom of Spain and, as regards the latter Member State, as from no later than 14 January 1994. In paragraph 64 of the contested judgment, it concluded that the Commission had been fully entitled to consider that the agreement was not applied on a sporadic basis but lasted until the adoption of the contested decision. 17 The Court of First Instance also held, in paragraph 91 of the contested judgment, that, because of the gravity of the infringement, the amount of the fine imposed on Acerinox could not be regarded as disproportionate. It considered that Acerinox’s conduct was not such as to allow reduction of the fine to the same extent as for Usinor and Avesta which, for their part, had admitted the existence of concertation. 18 On the other hand, the Court of First Instance held, in paragraph 141 of the contested judgment, that the Commission had infringed the principle of equal treatment by taking the view that Acerinox and two other undertakings had not provided any new information within the meaning of the Commission’s Notice on the non‑imposition or reduction of fines in cartel cases (OJ 1996 C 207, p. 4, hereinafter ‘the Leniency Notice’) even though they had admitted the existence of the Madrid meeting. In paragraph 152 of that judgment, the Court of First Instance considered that it was appropriate to grant those undertakings a reduction of the fines imposed on them of 20% rather than the 10% allowed in the contested decision. 19 The Court of First Instance thus reduced the fine imposed on Acerinox by setting it at EUR 3 136 000 and for the rest dismissed the action. 20 The Court of First Instance ordered Acerinox to bear its own costs and to pay two thirds of the Commission’s costs. It ordered the Commission to bear one third of its own costs. The form of order sought and the pleas in law on which the appeal is based21 Acerinox claims that the Court of Justice should:– set aside the contested judgment; – annul the contested decision or, at least, substantially reduce the amount of the fine or, in the alternative, refer the case back to the Court of First Instance, and – order the Commission to pay the costs.22 The Commission contends that the Court of Justice should:– dismiss the appeal;– in the alternative, if the contested judgment is set aside in part, reject the claim for annulment of the contested decision, and – order Acerinox to pay the costs.23 Acerinox puts forward the following six pleas in support of its appeal:– manifest error of interpretation leading to an incorrect statement of reasons concerning its alleged participation in the cartel in Spain; – incorrect statement of reasons for rejection of the argument concerning the existence of parallel conduct outside Spain;– error of law concerning assessment of the duration of the alleged infringement;– lack of a statement of reasons for rejecting an argument concerning the duration of the alleged infringement;– incorrect statement of reasons concerning the proportionality of the fine, and– breach of fundamental rights of the defence regarding reduction of the amount of the fine. The request for leave to submit observations in response to the Advocate General’s Opinion and, in the alternative, for reopening of the oral procedure24 By a document lodged at the Registry of the Court of Justice on 2 December 2004, Acerinox sought leave to submit written observations in response to the Advocate General’s Opinion and, in the alternative, requested the Court of Justice to order the reopening of the oral procedure under Article 61 of the Rules of Procedure. 25 Acerinox wishes to give its views on the parts of that Opinion concerning, first, the evidential value of the fax mentioned in paragraph 37 of the contested judgment, which had been sent on 14 January 1994 by Avesta to its subsidiaries (hereinafter ‘the January 1994 fax’), and, second, the reasoning in paragraph 90 of that judgment. 26 In that connection, it must be borne in mind that the Statute of the Court of Justice and its Rules of Procedure do not make any provision for parties to submit observations in response to the Opinion of the Advocate General (see the order of 4 February 2000 in Case C-17/98 Emesa Sugar [2000] ECR I-665, paragraph 2). Accordingly, the request for leave to submit written observations in response to the Advocate General’s Opinion must be rejected. 27 Furthermore, the Court of Justice may, on its own initiative or on a proposal from the Advocate General, or at the request of the parties, order that the oral procedure be reopened, in accordance with Article 61 of its Rules of Procedure, if it considers that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see Case C‑470/00 P Parliament v Ripa di Meana and Others [2004] ECR I-4167, paragraph 33, and Case C‑210/03 Swedish Match [2004] ECR I-0000, paragraph 25). However, in this case, the Court, after hearing the views of the Advocate General, considers that it has all the information it needs to decide the present appeal. Consequently, the request that the oral procedure be reopened must be rejected. The appeal The first plea in law Arguments of the parties28 By its first plea, Acerinox criticises the Court of First Instance for interpreting in a manifestly incorrect way its arguments concerning the question of its participation in an alleged cartel in Spain and for giving incorrect reasons on that point in the contested judgment. 29 This plea is concerned with paragraphs 37 and 38 of the contested judgment, in which the Court of First Instance held as follows:‘37 It is clear from the file that, as pointed out in paragraph 33 of the Decision, Avesta, by fax of 14 January 1994, informed its subsidiaries, including the one in Spain, of the position taken by some of its competitors concerning the date for application of the alloy surcharge on their domestic markets. With regard more specifically to Acerinox, it is stated: “Acerinox have announced that surcharges will apply from 1 April 1994 (yes, April!)”.38 The applicant does not contest the truth of the statements attributed to it but confines itself to asserting that that statement shows even more clearly that no agreement or concerted practice existed at the date of the Madrid meeting concerning deferred application of the alloy surcharge in Spain. The fact nevertheless remains that such a statement constitutes evidence of the fact that, on 14 January 1994, Acerinox had in any event expressed its intention to apply an alloy surcharge in Spain in line with the terms agreed by the undertakings concerned at the Madrid meeting and had thus complied with that agreement.’ 30 Acerinox claims that the Court of First Instance wrongly held, in paragraph 38 of the contested judgment, that it had not challenged the truth of the allegations made by Avesta in the January 1994 fax. It claims that it expressly contested the evidential value of that fax in its application to the Court of First Instance and that the reasoning in the contested judgment on that point is based on a distortion of the evidence. 31 The Commission contends that this plea is both inadmissible and unfounded. It is inadmissible in so far as Acerinox seeks to pass off as defective reasoning what is in fact an assessment of fact. 32 In any event, the Court of First Instance correctly deduced from that fax that if, in December 1993, Acerinox hesitated about participating in the cartel in Spain, its hesitations had disappeared by January 1994. Findings of the Court33 It must be noted that, in its application to the Court of First Instance for annulment of the contested decision, Acerinox states, with regard to the content of the January 1994 fax, that ‘[t]hat information … with regard to the announcement made by [Acerinox], which itself would have been incoherent with the attitude adopted by the rest of the industry was inaccurate. No such “announcement” was made’. 34 It is thus clear from the actual terms of Acerinox’s application to the Court of First Instance that the applicant contested the truth of the statements attributed to it in that fax. It follows that, by stating the opposite, the Court of First Instance incorrectly presented Acerinox’s point of view. 35 The January 1994 fax constituted a decisive piece of evidence as to the fact that Acerinox participated in a cartel on the Spanish market. 36 It must therefore be considered, as the Advocate General observed in point 38 of his Opinion, that the Court of First Instance was not entitled to rely on the January 1994 fax as evidence without explaining why Acerinox’s objection to that fax should be rejected. By failing to reply to the argument put forward by the applicant on that point, the Court of First Instance failed to fulfil its obligation to state reasons under Article 30 and the first paragraph of Article 46 of the ECSC Statute of the Court of Justice. 37 The first plea put forward by Acerinox must therefore be upheld to the extent to which it seeks to demonstrate that the contested judgment contained an incorrect statement of reasons concerning that undertaking’s participation in a cartel in Spain. 38 It follows that the contested judgment must be annulled to the extent to which it concludes, on the ground that that undertaking did not contest the truth of the statements attributed to it in the January 1994 fax, that Acerinox participated in a cartel on the Spanish market. 39 However, since that annulment of the contested judgment is only partial, it is necessary to examine the remaining pleas in law. The second plea40 By its second plea, Acerinox criticises the Court of First Instance for not adequately stating its reasons for rejecting the argument that its action in places other than Spain was merely a manifestation of parallel conduct and not the implementation of a concerted practice. 41 According to Acerinox, the Court of First Instance rightly found, in paragraph 42 of the contested judgment, that it applied an alloy surcharge at different times in various Member States. However, it was stated in several passages both in the contested decision and in the contested judgment itself that the objective of the Madrid meeting was, on the contrary, a simultaneous price increase by the amount of that alloy surcharge. 42 Acerinox considers that it is in that context that it is necessary to examine its argument to the effect that its conduct merely reflected adjustment to market conditions and did not derive from concertation between the undertakings concerned. 43 Acerinox considers that the Court of First Instance did not establish, in paragraph 43 of the contested judgment, the requisite causal link between the Madrid meeting and its conduct in the market, and that the Court of First Instance did not therefore give sufficient reasons for its finding of Acerinox’s alleged participation in the infringement outside Spain. That finding should therefore, in its opinion, be set aside by the Court of Justice. 44 The Commission contends that the Court of First Instance rejected Acerinox’s argument in reliance on matters of fact which cannot be re-examined by the Court of Justice, such as Acerinox’s presence at the Madrid meeting, its attitude at that meeting, in that it did not distance itself from the other participants, and the reality and the dates of the application of the alloy surcharges in several Member States. The Court of First Instance thus found that the tariff applied by Acerinox in those States derived not from any adjustment to conduct observed on the market but from concertation. 45 The Commission considers that, in any event, the Court of First Instance’s reasoning in paragraphs 41 to 43 of the contested judgment clearly shows the existence of a causal relationship between the concertation deriving from the Madrid meeting and Acerinox’s conduct in the market. That link cannot be called in question on the ground that Acerinox implemented the alloy surcharges slightly later than the planned date. 46 In the first place, the Court of First Instance correctly stated in paragraph 30 of the contested judgment the rule governing the burden of proof where the participation of undertakings in meetings of a manifestly anti-competitive character is established. Thus, it pointed out, relying on the judgments in Case C‑199/92 P Hüls v Commission [1999] ECR I-4287, paragraph 155, and in Case C‑235/92 P Montecatini v Commission [1999] ECR I-4539, paragraph 181, that it is for the undertaking concerned to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs. 47 Secondly, the Court of First Instance took care to apply that rule to the circumstances of the case before it. It first observed, in paragraph 31 of the contested judgment, that it was undisputed that Acerinox had taken part in the Madrid meeting and also that that meeting involved concertation between certain producers of stainless steel flat products concerning part of the final price thereof, contrary to Article 65(1) of the ECSC Treaty. 48 The Court of First Instance then considered whether Acerinox had distanced itself from the other participants in that meeting by making clear its intention not to apply the alloy surcharge in the Member States other than the Kingdom of Spain. 49 In that connection, the Court of First Instance found, in paragraph 41 of the contested judgment, that Acerinox had not proved that it had distanced itself from the other participants. It observed, on the contrary, relying on a statement made by Acerinox in reply to questions from the Commission, that that company had not claimed to have adopted the same attitude, at the Madrid meeting, as the one decided upon regarding application of the alloy surcharge in Spain, but conceded that ‘[a] majority of those present was in favour of applying the surcharge as soon as possible’. The Court made it clear in paragraph 42 of that judgment that Acerinox subsequently applied an alloy surcharge in various European countries, on various dates, between February and May 1994. 50 From the foregoing, the Court of First Instance inferred, in paragraph 43 of the contested judgment, that Acerinox could not properly claim that the alignment of its alloy surcharges with those applied by the other producers operating in those markets was the result merely of parallel conduct since that alignment had been preceded by concertation between the undertakings concerned, the purpose of which was the use and application of the same reference values in the method for calculating the alloy surcharge. 51 The Court of First Instance concluded, in paragraph 45 of the contested judgment, that Acerinox was to be considered as having participated in the agreement to the extent to which the latter was concerned with application of the alloy surcharge in the Member States other than Spain. 52 It is clear from the analysis made by the Court of First Instance that it correctly applied the rule of law set out in paragraph 46 of this judgment. It thus found, first, that Acerinox had taken part in a meeting of a manifestly anti-competitive nature; second, that no evidence been produced by that undertaking to show that it had distanced itself from the objectives of that meeting regarding calculation and use of the alloy surcharge; and, third, that Acerinox had applied alloy surcharges in accordance with the formula determined at that meeting, before dismissing the possibility that such application reflected parallel conduct. 53 The Court of First Instance thus established the existence of a link between the Madrid meeting and Acerinox’s conduct in the Member States other than Spain and, therefore, gave full reasons for its conclusion that that undertaking was to be regarded as having participated in the agreement in those States. 54 It follows that the second plea must be rejected as unfounded. The third plea55 By its third plea, Acerinox criticises the Court of First Instance for applying an incorrect legal criterion to assess the duration of the alleged infringement. 56 According to Acerinox, by holding, in paragraph 64 of the contested judgment, that the Commission was entitled to consider that the infringement lasted until January 1998, without mentioning the existence of any concertation whatsoever between the parties beyond the first months of 1994, even though the agreement had supposedly come to an end, the Court of First Instance misapplied the relevant case-law of the Court of Justice, as set out in paragraph 63 of that judgment. The duration of the infringement, in so far as there was one, was limited to the first half of 1994. 57 The abovementioned case-law shows that an infringement of Article 85 of the EC Treaty (now Article 81 EC) and, by analogy, Article 65 of the ECSC Treaty, continues only if a degree of concertation persists between the undertakings concerned. However, it has not been demonstrated that the alloy surcharge was the subject of regular and coordinated review by those undertakings. 58 The Commission contends that the third plea in law is based on a false premiss, in so far as no part of the contested judgment can be interpreted as a finding that the agreement had ceased to be in force a few months after the beginning of 1994. 59 According to the Commission, the Court of First Instance rightly held, in paragraph 61 of the contested judgment, that Acerinox’s maintenance throughout the period concerned of the reference values agreed at the Madrid meeting cannot be explained otherwise than by the existence of concertation which lasted beyond the first months of 1994. 60 It need merely be pointed out that, contrary to Acerinox’s allegations, the Court of First Instance did not consider that the agreement had come to an end before the adoption of the contested decision on 21 January 1998. On the contrary, it is clear from paragraphs 60, 61, 63 and 64 of the contested judgment that, according to the Court of First Instance, the agreement lasted until the adoption of that decision. 61 In paragraph 60 of the contested judgment, the Court of First Instance found that, until that date, Acerinox and the other undertakings continued to apply the reference values agreed at the Madrid meeting. In paragraph 61 of that judgment, it pointed out that the subject-matter of the infringement alleged against Acerinox was the determination of the amount of the alloy surcharge on the basis of the calculation formula embodying reference values identical to those of its competitors, determined jointly with other producers and in concertation with them. The Court of First Instance inferred that the maintenance by that undertaking of those reference values in the formula for calculating the alloy surcharge which it applied could not be accounted for otherwise than by the existence of concertation. 62 In paragraph 63 of the contested judgment, the Court of First Instance pointed out that the effects of the agreement lasted until the adoption of the contested decision without the agreement having been formally brought to an end. The Court of First Instance concluded, in paragraph 64 of that judgment, that, in so far as Acerinox had not, before the adoption of that decision, abandoned the application of the reference values agreed at the Madrid meeting, the Commission was entitled to consider that the infringement had lasted until that date. 63 It must therefore be considered, as stated by the Advocate General in point 107 of his Opinion, that Acerinox’s argument that the Court of First Instance misapplied the case-law of the Court of Justice concerning the application of its competition rules to the effects of an agreement which has formally come to an end is, in any event, irrelevant since it is based on the false premiss that the agreement had ceased during 1994. 64 The third plea must therefore be rejected as unfounded. The fourth plea65 By its fourth plea, which is concerned with paragraph 62 of the contested judgment, Acerinox criticises the Court of First Instance for not giving its reasons for rejecting the argument that, in July 1994, the price of nickel had reached its original level, so that the concerted practice at issue had ceased to have any effect whatsoever as from that date. 66 Acerinox claims that it is undisputed that the formula for calculating the alloy surcharge had been used for 25 years. Given that the purpose of the practice was merely to apply a downward adjustment to the trigger figure for a pre-existing alloy surcharge, the fact that the price of nickel reached, on a date in July 1994, the level at which the value had previously been fixed is relevant. According to Acerinox, it was on that date that the concerted practice of lowering the trigger figure automatically ceased to have any effect whatsoever since an alloy surcharge was in any event applicable by virtue of the pre-existing formula. 67 The Commission contends that Acerinox cannot merely assert that an alloy surcharge would have had to be paid in any event, whether based on the method used before the implementation of the agreement or afterwards. The fact that the July 1994 nickel price was the same as the old trigger value for an alloy surcharge was a matter of random economic circumstances and depended on developments in the nickel market. What is important, in the Commission’s view, is that the alloy surcharge applicable under the new calculation method was always higher than that payable under the earlier method, regardless of the price of nickel. 68 In paragraph 62 of the contested judgment, the Court of First Instance considered that, in so far as the reference values for the alloying materials involved in the infringement remained unchanged, the fact that the price of nickel returned, on a particular date, to its ‘initial level’ did not mean that the infringement had then ceased to produce its anti-competitive effects but simply that the calculation of the alloy surcharge had to take account of that development. For that reason, the Court of First Instance rejected Acerinox’s argument as irrelevant. 69 In that connection, it must be held that, when the Court of First Instance rejected Acerinox’s argument, it stated its reasons for doing so. It is clear from paragraph 62 of the contested judgment that the concerted reduction of the reference value for nickel meant that an alloy surcharge would be applicable if the price of that raw material was higher than that new value. However, Acerinox has not given any explanation as to why the fall in the price of nickel as from July 1994 prevented the agreement from producing its effects. 70 In those circumstances, the Court of First Instance was right to reject Acerinox’s argument as irrelevant.71 The fourth plea must therefore be rejected as manifestly unfounded. The fifth plea72 By its fifth plea, Acerinox criticises the Court of First Instance for failing, in paragraph 90 of the contested judgment, to take account of the respective weight of the undertakings concerned in assessing the proportionality of the fine. It maintains, in particular, that the Court of First Instance took no account of its argument that the difference between its percentage market share and that of Usinor, which is 7 points, represented 65% of its market share and should therefore be regarded as very large. Moreover, the fact that that difference is considerable is only one of the relevant criteria for assessing the weighting to be applied in accordance with the Commission Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3, hereinafter ‘the Guidelines’). The Court of First Instance therefore, in Acerinox’s view, did not give sufficient reasons for its assessment of the proportionality of the fine imposed on Acerinox. 73 The Commission contends that the figure of 65% is misleading and that the Court of First Instance was right to hold that the Commission had not made any error of assessment in taking the view that the difference between the market shares of the undertakings concerned was not considerable and did not justify applying weightings to the amount of the fines. 74 The Court of First Instance verified the merits of the method used by the Commission to determine the amount of the fine and referred, in paragraph 77 of the contested judgment, to the Guidelines. In paragraphs 78 and 81 thereof, it observed that the Commission had fixed the starting point for the fine by reference to the gravity of the infringement, in accordance with the Guidelines. 75 As regards the Commission’s decision not to apply different weightings to that amount for the various undertakings concerned, the Court of First Instance held, in paragraph 90 of the contested judgment, that the Commission was fully entitled to rely, inter alia, on the size and economic strength of those undertakings, having found them all to be large on the basis that the six undertakings concerned accounted for more than 80% of European production of finished stainless steel products. 76 The Court of First Instance made it clear, also in paragraph 90, that the comparison made by Acerinox between its market share of about 11% and those of Usinor, AST and Avesta of about 18%, 15%, and 14% respectively is not such as to disclose any considerable disparity between those undertakings, within the meaning of the sixth paragraph of Section 1 A of the Guidelines, such as to render differentiation necessary in the appraisal of the gravity of the infringement. 77 In that connection, it is necessary to refer to the Guidelines. The sixth paragraph of Section 1 A thereof states that, where an infringement involves several undertakings, after the basic amount of the fine has been determined according to the seriousness of the infringement ‘it might be necessary in some cases to apply weightings to the amounts determined … in order to take account of the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition, particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same type’. 78 By holding that the difference between Acerinox’s market share, which is about 11%, and those of Usinor, AST and Avesta, which represent between 14% and 18% of the same market, was not considerable and by not accepting the figure of 65% put forward by Acerinox, the Court of First Instance did not make any error of assessment. As the Commission rightly submits, that percentage is misleading in that it gives a disproportionately large impression of the difference between the respective market shares of the undertakings concerned, on the basis of an irrelevant comparison. 79 Moreover, apart from the allegedly considerable difference between the respective market shares of Usinor and Acerinox, the latter has put forward no argument such as to justify the application of weightings to the amount of the fines in accordance with the sixth paragraph of Section 1 A of the Guidelines. 80 Consequently, it must be held that the Court of First Instance properly gave the reasons for its conclusion by stating that the difference between the market shares of the undertakings concerned was not such as to justify applying weightings to the fine imposed on Acerinox, and that it was right to hold that the amount of the fine was not disproportionate. 81 In those circumstances, the fifth plea must be rejected as unfounded. The sixth plea82 By its sixth plea, Acerinox alleges that the Court of First Instance erred in law by refusing to grant it a reduction of the fine imposed on it of the same magnitude as that allowed to the other undertakings that were parties to the agreement, on the ground that it contested the objections made against it, even though it cooperated with the Commission in a manner comparable to that of those undertakings. That refusal is, in its view, discriminatory and constitutes a breach of its fundamental rights of defence. 83 Acerinox claims that the Court of First Instance accepted, in paragraph 139 of the contested judgment, that the degrees of cooperation with the Commission shown by those undertakings were comparable as regards substantially admitting the facts, namely their participation in the Madrid meeting, the nature of the discussions at that meeting and the measures taken to apply the alloy surcharge. The Court of First Instance nevertheless limited to 20% the reduction of the fine granted to Acerinox even though the reduction was 40% for Usinor. Acerinox maintains that the Court of First Instance’s approach is tantamount to treating the undertakings differently according to the way in which they decided to exercise their rights of defence in response to the statement of objections. 84 The Commission considers that, since Usinor and Avesta cooperated by admitting their participation in the concertation, Acerinox was not entitled to the same reduction of the fine as that granted to those two undertakings. 85 In order to establish whether the Court of First Instance erred in law by granting to Acerinox a smaller reduction of its fine than that granted to Usinor and Avesta, it is necessary to refer to the case-law of the Court of Justice concerning the extent of the Commission’s powers in preliminary investigation procedures and administrative procedures, having regard to the need to respect the rights of the defence. 86 According to the judgment in Case 374/87 Orkem v Commission [1989] ECR 3283, paragraphs 34 and 35, the Commission is entitled to compel an undertaking to provide all necessary information concerning such facts as may be known to it but may not compel an undertaking to provide it with answers which might involve an admission on its part of the existence of an infringement which it is incumbent upon the Commission to prove. 87 However, while the Commission may not compel an undertaking to admit its participation in an infringement, it is not thereby prevented from taking account, when fixing the amount of the fine, of the assistance given by that undertaking, of its own volition, in order to establish the existence of the infringement. 88 In that connection, it is clear from the judgment in Case C-298/98 P Finnboard v Commission [2000] ECR I-10157, and in particular from paragraphs 56, 59 and 60 thereof, that the Commission may, when fixing the amount of a fine, take account of the assistance given to it by the undertaking concerned by which it is able to establish the existence of the infringement with less difficulty and, in particular, of the fact that an undertaking admitted its participation in the infringement. It may grant an undertaking that has assisted it in that way a significant reduction of the amount of its fine and grant a substantially lesser reduction to another undertaking which merely did not deny the main factual allegations on which the Commission based its objections. 89 As the Advocate General observed in point 140 of his Opinion, an undertaking’s admission of an alleged infringement is entirely voluntary. It is not in any way coerced to admit the existence of the cartel. 90 It must therefore be considered that the fact that the Commission took account of the degree of cooperation with it shown by the undertaking concerned, including admission of the infringement, for the purpose of imposing a lower fine, does not constitute a breach of its rights of defence. 91 That is the construction to be placed on the Leniency Notice and, in particular part D thereof, according to which the Commission may grant an undertaking a reduction of 10 to 50% of the amount of the fine that it would have imposed in the absence of cooperation, in particular where that undertaking informs the Commission that it does not substantially contest the facts on which the Commission has based its allegations. Thus, the type of cooperation, capable of giving rise to a reduction of the fine, which the undertaking concerned may provide is not limited to admitting the nature of the facts but also involves admitting participation in the infringement. 92 In this case, the Court of First Instance pointed out, in paragraph 146 of the contested judgment, that, according to the contested decision, only Usinor and Avesta had admitted the existence of concertation. It made it clear that, according to that decision, Acerinox admitted that concertation had taken place but denied participating therein, so that its cooperation with the Commission was more limited than that of Usinor and Avesta. 93 The Court of First Instance found, in paragraph 147 of the contested judgment, that, although Acerinox substantially admitted the facts on which the Commission relied, so as to justify a reduction of 10% of the amount of the fine imposed on that company, there was absolutely nothing in the documents before the Court to show that it also expressly admitted its involvement in the infringement. 94 Relying on the case-law of the Court of Justice, the Court of First Instance observed, in paragraph 148 of the contested judgment, that a reduction of the fine imposed is justified only if the conduct of the undertaking concerned enabled the Commission to ascertain the infringement more easily and that that is not the case where, in its response to the statement of objections, that undertaking denies any participation in the infringement. 95 The Court of First Instance properly concluded therefrom, in paragraph 149 of the contested judgment, that the Commission correctly took the view, having regard to Acerinox’s response to the statement of objections, that the latter did not behave in such a manner as to justify an additional reduction of the amount of the fine for its cooperation in the administrative procedure. 96 The sixth plea must therefore be rejected as unfounded.97 It follows from all the foregoing considerations that only the first plea in law on which Acerinox bases its appeal is well founded. The consequences of the partial annulment of the contested judgment98 Pursuant to the first paragraph of Article 61 of the Statute of the Court of Justice, if an appeal is well founded and the Court of Justice quashes the decision of the Court of First Instance, it may itself then give final judgment in the matter, where the state of the proceedings so permits, or refer the case back to the Court of First Instance for judgment. 99 In the present case, the state of the proceedings is such that judgment can be given with regard to Acerinox’s plea in law concerning the lack of evidence of its participation in the infringement in the Spanish market and in particular the lack of evidential value of the January 1994 fax. 100 Before the Court of First Instance, Acerinox maintained that, although it took part in the Madrid meeting, it refused at that meeting to subscribe to the common system for the alloy surcharge and consequently it never participated in any agreement to apply that alloy surcharge. In its view, the January 1994 fax which, according to recital 33 in the preamble to the contested decision, stated that ‘Acerinox have announced that surcharges will be applied from 1 April 1994 (yes April!)’ does not constitute any proof whatsoever of its participation in the agreement, in particular in the Spanish market. 101 Acerinox made the following statement regarding that fax in its application to the Court of First Instance:‘That information … with regard to the announcement made by [Acerinox], which itself would have been incoherent with the attitude adopted by the rest of the industry was inaccurate. No such “announcement” was made … [T]he only country where Acerinox issues a public price list and thus makes price “announcements” is Spain. It is undisputed that no change was made to the price list before 20 May 1994 when the applicant announced to the Commission and to [its] clients its decision to align, from June 1994, its alloy surcharge to the one already implemented by its competitors in other Member States since February.’ 102 In its reply before the Court of First Instance, Acerinox added that the indication attributed to it in that fax instead ‘confirms the absence of any agreement or concerted practice on a delayed implementation by the applicant. It is indeed undisputed that the information was wrong. Should there have been any agreement or concerted practice, one would have expected the statement to be correct’. 103 It must be borne in mind, as the Advocate General observed in point 200 of his Opinion, that, in the event of a dispute as to the existence of an infringement of the competition rules, it is incumbent on the Commission to prove the infringement found by it and to adduce evidence such as to show, to a sufficient legal standard, the existence of circumstances constituting such an infringement. 104 In that connection, it is important to note that certain points were established by the Commission and have not been contested by Acerinox: – first, the Commission makes it clear, in recital 21 to the contested decision, that Acerinox organised the Madrid meeting and that it was one of the participants; – next, Acerinox – as it states – applied the alloy surcharges, using the same formula as that adopted at that meeting, from February 1994 in Denmark, then in other Member States between March and June of the same year. The application of the alloy surcharge in Spain was envisaged for June of that year; – finally, the January 1994 fax, drawn up by Avesta’s representative at the Madrid meeting, presents Acerinox as one of the undertakings that participated in that meeting and one that had already given notice of its intention to apply the alloy surcharges. 105 So far as concerns that fax, although Acerinox casts doubt on the interpretation made thereof, it does not contest either its existence or the fact that it was expressed in the terms stated. Since that fax was drawn up following the Madrid meeting and indicated that, as from January 1994, Acerinox had manifested its intention to apply the alloy surcharges adopted at that meeting, the Commission was right to consider that it constituted a document capable of proving that undertaking’s participation in the infringement. 106 The fact that the date mentioned in that fax did not correspond with those of the actual application of the surcharges by Acerinox in the Member States is not a sufficient basis for rejecting the document as evidence of the intention manifested by Acerinox to proceed to apply it in that way. 107 In view of the facts referred to in paragraph 104 of the present judgment, the Commission was entitled, without committing any error of assessment, to reach the conclusion that Acerinox had participated in the agreement in all the Member States concerned, including Spain. 108 It follows from the foregoing that the plea put forward by Acerinox in support of its application to the Court of First Instance, to the effect that the January 1994 fax cannot serve as proof of its membership of that cartel, is unfounded and must, therefore, be rejected. 109 Consequently, Acerinox’s application to the Court of First Instance, to the extent to which it is based on that plea, must itself be rejected. Costs110 Under the first paragraph of Article 122 of the Rules of Procedure, where an appeal is well founded and the Court itself gives final judgment in the case, the Court is to make a decision as to costs. Under the first subparagraph of Article 69(2) of the same rules, which is applicable to appeal proceedings pursuant to Article 118 thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has asked for costs to be awarded against Acerinox and the latter has been for the most part unsuccessful in its appeal and has failed in the sole plea relied on in its application to the Court of First Instance, which the Court of Justice considered following partial annulment of the contested judgment, it must be ordered to pay the costs of the present proceedings. As regards the costs of the proceedings at first instance which led to the contested judgment, they must be borne in the manner determined in paragraph 3 of the operative part of that judgment. On those grounds, the Court (First Chamber) hereby:1. Annuls the judgment of the Court of First Instance of the European Communities of 13 December 2001 in Case T-48/98 Acerinox v Commission to the extent to which it rejected the plea in law put forward by Compañía española para la fabricación de aceros inoxidables SA (Acerinox) alleging the lack of a statement of reasons relating to its alleged participation in an agreement on the Spanish market;2. For the rest, dismisses the appeal;3. Dismisses the action for annulment brought by Compañía española para la fabricación de aceros inoxidables SA (Acerinox) to the extent to which it is based on a plea in law alleging that the Commission of the European Communities was wrong to attribute evidential value to the fax sent on 14 January 1994 by Avesta Sheffield AB to its subsidiaries;4. Orders Compañía española para la fabricación de aceros inoxidables SA (Acerinox) to pay the costs of the present proceedings. The costs of the proceedings at first instance leading to the judgment of the Court of First Instance referred to in paragraph 1 of the operative part of this judgment shall be borne in the manner set out in paragraph 3 of the operative part of that judgment.[Signatures]* Language of the case: English. | 67cce-5285514-4d96 | EN |
FOR THE FIRST TIME THE COURT ORDERS A MEMBER STATE TO PAY BOTH A PERIODIC PENALTY PAYMENT AND A LUMP SUM FINE FOR A SERIOUS AND PERSISTENT FAILURE TO COMPLY WITH COMMUNITY LAW | 12 July 2005 (*) (Failure of a Member State to fulfil obligations – Fisheries – Control obligations placed on the Member States – Judgment of the Court establishing a breach of obligations – Non-compliance – Article 228 EC – Payment of a lump sum – Imposition of a penalty payment)In Case C-304/02,ACTION under Article 228 EC for failure to fulfil obligations, brought on 27 August 2002,Commission of the European Communities, represented by M. Nolin, H. van Lier and T. van Rijn, acting as Agents, with an address for service in Luxembourg, applicant,vFrench Republic, represented by G. de Bergues and A. Colomb, acting as Agents, defendant,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann (Rapporteur) and C.W.A. Timmermans, Presidents of Chambers, C. Gulmann, J.‑P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr and J.N. Cunha Rodrigues, Judges, Advocate General: L.A. Geelhoed, Registrar: M. Múgica Arzamendi, Principal Administrator, subsequently M.‑F. Contet, Principal Administrator, and H. von Holstein, Deputy Registrar, having regard to the written procedure and further to the hearing on 3 March 2004,after hearing the Opinion of the Advocate General at the sitting on 29 April 2004,having regard to the order of 16 June 2004 reopening the oral procedure and further to the hearing on 5 October 2004,after hearing the oral observations of:– the Commission, represented by G. Marenco, C. Ladenburger and T. van Rijn, acting as Agents,– the French Republic, represented by R. Abraham, G. de Bergues and A. Colomb, acting as Agents,– the Kingdom of Belgium, represented by J. Devadder, acting as Agent,– the Czech Republic, represented by T. Boček, acting as Agent,– the Kingdom of Denmark, represented by A.R. Jacobsen and J. Molde, acting as Agents,– the Federal Republic of Germany, represented by W.D. Plessing, acting as Agent,– the Hellenic Republic, represented by A. Samoni and E.M. Mamouna, acting as Agents,– the Kingdom of Spain, represented by N. Diaz Abad, acting as Agent,– Ireland, represented by D. O’Donnell and P. Mc Cann, acting as Agents,– the Italian Republic, represented by I.M. Braguglia, acting as Agent,– the Republic of Cyprus, represented by D. Lissandrou and E. Papageorgiou, acting as Agents,– the Republic of Hungary, represented by R. Somssich and A. Muller, acting as Agents,– the Kingdom of the Netherlands, represented by J. van Bakel, acting as Agent,– the Republic of Austria, represented by E. Riedl, Rechtsanwalt,– the Republic of Poland, represented by T. Nowakowski, acting as Agent,– the Portuguese Republic, represented by L. Fernandes, acting as Agent,– the Republic of Finland, represented by T. Pynnä, acting as Agent,– the United Kingdom of Great Britain and Northern Ireland, represented by D. Anderson QC,after hearing the Opinion of the Advocate General at the sitting on 18 November 2004,gives the followingJudgment1 By its application, the Commission of the European Communities requests the Court to:– declare that, by failing to take the necessary measures to comply with the judgment of 11 June 1991 in Case C-64/88 Commission v France [1991] ECR I-2727, the French Republic has failed to fulfil its obligations under Article 228 EC; – order the French Republic to pay to the Commission, into the account ‘European Community own resources’, a penalty payment in the sum of EUR 316 500 for each day of delay in implementing the measures necessary to comply with the judgment in Case C-64/88 Commission v France, cited above, from delivery of the present judgment until the judgment in Case C‑64/88 Commission v France has been complied with; – order the French Republic to pay the costs. Community legislation Rules regarding controls 2 The Council has established certain control measures for fishing activities by vessels of the Member States. Those measures have been successively set out in Council Regulation (EEC) No 2057/82 of 29 June 1982 establishing certain control measures for fishing activities by vessels of the Member States (OJ 1982 L 220, p. 1), in Council Regulation (EEC) No 2241/87 of 23 July 1987 establishing certain control measures for fishing activities (OJ 1987 L 207, p. 1) which repealed and replaced Regulation No 2057/82, and in Council Regulation (EEC) No 2847/93 of 12 October 1993 establishing a control system applicable to the common fisheries policy (OJ 1993 L 261, p. 1) which repealed and replaced Regulation No 2241/87 on 1 January 1994. 3 The control measures set out in those regulations are essentially identical.4 Article 1(1) and (2) of Regulation No 2847/93 provides:‘1. In order to ensure compliance with the rules of the common fisheries policy, a Community system is hereby established including in particular provisions for the technical monitoring of: – conservation and resource management measures,– structural measures,– [measures] concerning the common organisation of the market,as well as certain provisions relating to the effectiveness of sanctions to be applied in cases where the abovementioned measures are not observed. 2. To this end, each Member State shall adopt, in accordance with Community rules, appropriate measures to ensure the effectiveness of the system. It shall place sufficient means at the disposal of its competent authorities to enable them to perform their tasks of inspection and control as laid down in this Regulation.’ 5 Article 2(1) of Regulation No 2847/93 states:‘In order to ensure compliance with all the rules in force concerning conservation and control measures, each Member State shall, within its territory and within maritime waters subject to its sovereignty or jurisdiction, monitor fishing activity and related activities. It shall inspect fishing vessels and investigate all activities thus enabling verification of the implementation of this Regulation, including the activities of landing, selling, transporting and storing fish and recording landings and sales.’ 6 Article 31(1) and (2) of Regulation No 2847/93 provides:‘1. Member States shall ensure that the appropriate measures be taken, including of administrative action or criminal proceedings in conformity with their national law, against the natural or legal persons responsible where common fisheries policy have [sic] not been respected, in particular following a monitoring or inspection carried out pursuant to this Regulation. 2. The proceedings initiated pursuant to paragraph 1 shall be capable, in accordance with the relevant provisions of national law, of effectively depriving those responsible of the economic benefit of the infringements or of producing results proportionate to the seriousness of such infringements, effectively discouraging further offences of the same kind.’ Technical rules7 The technical measures for the conservation of fishery resources which are envisaged by the rules regarding controls have been set out inter alia in Council Regulation (EEC) No 171/83 of 25 January 1983 (OJ 1983 L 24, p. 14), repealed and replaced by Council Regulation (EEC) No 3094/86 of 7 October 1986 (OJ 1986 L 288, p. 1), itself repealed and replaced with effect from 1 July 1997 by Council Regulation (EC) No 894/97 of 29 April 1997 (OJ 1997 L 132, p. 1), in turn partially repealed and replaced with effect from 1 January 2000 by Council Regulation (EC) No 850/98 of 30 March 1998 for the conservation of fishery resources through technical measures for the protection of juveniles of marine organisms (OJ 1998 L 125, p. 1). 8 The technical measures laid down by those regulations are essentially identical.9 The measures concern, inter alia, the minimum mesh size for nets, the prohibition on attaching to nets certain devices by means of which the mesh is obstructed or diminished, and the prohibition on offering for sale fish of less than the minimum size (‘undersized fish’) except for catches representing only a limited percentage of the overall catch (‘by-catches’). The judgment in Case C-64/88 Commission v France10 In the judgment in Case C-64/88 Commission v France, the Court declared: ‘by failing to carry out between 1984 and 1987 controls ensuring compliance with technical Community measures for the conservation of fishery resources, laid down by [Regulation No 171/83] and by [Regulation No 3094/86], the French Republic has failed to fulfil its obligations under Article 1 of [Regulation No 2057/82] and under Article 1 of [Regulation No 2241/87]’. 11 In that judgment, the Court upheld five complaints against the French Republic:– inadequate controls in relation to the minimum mesh size for nets (paragraphs 12 to 15 of the judgment);– inadequate controls in relation to the attachment to nets of devices prohibited by the Community rules (paragraphs 16 and 17 of the judgment); – failure to fulfil control obligations in relation to by-catches (paragraphs 18 and 19 of the judgment);– failure to fulfil control obligations so far as concerns compliance with the technical measures of conservation prohibiting the sale of undersized fish (paragraphs 20 to 23 of the judgment); – failure to fulfil the obligation to take action in respect of infringements (paragraph 24 of the judgment). Pre-litigation procedure12 By letter of 8 November 1991, the Commission requested the French authorities to inform it of the measures taken to comply with the judgment in Case C-64/88 Commission v France. On 22 January 1992 the French authorities replied that they ‘[intended] to do their utmost to comply with the [Community] provisions’. 13 In the course of a number of visits to French ports the Commission inspectors found that the situation had improved, but noted that the French authorities’ controls were inadequate in several respects. 14 After requesting the French Republic to submit its observations, on 17 April 1996 the Commission issued a reasoned opinion in which it stated that the judgment in Case C-64/88 Commission v France had not been complied with in the following respects: – failure to comply with the Community rules in the measuring of the minimum mesh size of nets;– inadequate controls, enabling undersized fish to be offered for sale;– laxness on the part of the French authorities in taking action in respect of infringements.15 Pointing out that financial penalties could be imposed for failure to comply with a judgment of the Court, the Commission set a time-limit of two months for the French Republic to take all the measures necessary in order to comply with the judgment in Case C-64/88 Commission v France. 16 In the course of an exchange of correspondence between the French authorities and Commission staff, the former kept the Commission informed of the measures that it had taken and was continuing to implement to strengthen controls. 17 At the same time, inspection visits were made to French ports. On the basis of reports drawn up after visiting Lorient, Guilvinec and Concarneau from 24 to 28 August 1996, Guilvinec, Concarneau and Lorient from 22 to 26 September 1997, Marennes-Oléron, Arcachon and Bayonne from 13 to 17 October 1997, south Brittany and Aquitaine from 30 March to 4 April 1998, Douarnenez and Lorient from 15 to 19 March 1999 and Lorient, Bénodet, Loctudy, Guilvinec, Lesconil and Saint-Guénolé from 13 to 23 July 1999, the Commission staff reached the conclusion that two problems remained, namely inadequate controls enabling undersized fish to be offered for sale and the laxness on the part of the French authorities in taking action in respect of infringements. 18 The inspectors’ reports prompted the Commission to issue a supplementary reasoned opinion on 6 June 2000, in which it stated that the judgment in Case C‑64/88 Commission v France had not been complied with as regards the two matters mentioned above. The Commission indicated that, in this context, it regarded as ‘particularly serious the fact that public documents relating to sales by auction officially use the code “00” in clear breach of Council Regulation (EC) No 2406/96 of 26 November 1996 laying down common marketing standards for certain fishery products’ (OJ 1996 L 334, p. 1). It pointed out that financial penalties could be imposed. 19 In their response of 1 August 2000, the French authorities essentially contended that since the last inspection report national fisheries control had undergone significant change. An internal reorganisation had taken place, with the establishment of a fisheries control ‘unit’, which subsequently became a fisheries control ‘task force’, and the means of control had been strengthened, including the provision of patrol boats and of a system for the on-screen surveillance of vessels’ positions and the circulation of instructions for the use of control staff. 20 On an inspection visit from 18 to 28 June 2001 to the communes Guilvinec, Lesconil, Saint-Guénolé and Loctudy, the Commission’s inspectors recorded poor controls, the presence of undersized fish and the offering for sale of those fish under the code ‘00’. 21 By letter of 16 October 2001, the French authorities sent to the Commission a copy of an instruction addressed to the regional and departmental maritime directorates, enjoining them to put an end to use of the code ‘00’ by 31 December 2001 and to apply from that date the statutory penalties to economic operators not complying with the instruction. The French authorities referred to an increase since 1998 in the number of proceedings for infringement of the rules on minimum sizes and to the deterrent effect of the penalties imposed. They also informed the Commission of the adoption in 2001 of a general fisheries control plan, which laid down priorities, including implementation of a hake recovery plan and strict control of compliance with minimum sizes. 22 Taking the view that the French Republic still had not complied with the judgment in Case C-64/88 Commission v France, the Commission brought the present action. Procedure before the Court23 In answer to a question asked by the Court with a view to the hearing on 3 March 2004, the Commission informed the Court that, since the present action was brought, its staff had made three further inspection visits (from 11 to 16 May 2003 to Sète and Port-Vendres, from 19 to 20 June 2003 to Loctudy, Lesconil, Saint-Guénolé and Guilvinec, and from 14 to 22 July 2003 to Port-la-Nouvelle, Sète, Le Grau-du-Roi, Carro, Sanary‑sur-Mer and Toulon). According to the Commission, it is apparent from the mission reports on those visits that the number of cases of undersized fish being offered for sale had decreased in Brittany but problems remained on the Mediterranean coast with regard to bluefin tuna, and that inspections on landing were infrequent. 24 The Commission explained that, in order to assess the effectiveness of the measures taken by the French authorities, it would need to have the reports and sets of statistics relating to implementation of the various measures for the general organisation of fisheries control to which the French Government had referred. 25 After being requested by the Court to indicate the number of inspections at sea and on land which the French authorities had carried out since the bringing of the present action with a view to ensuring compliance with the rules relating to the minimum size of fish, the number of infringements recorded and the action taken by the courts in respect of those infringements, on 30 January 2004 the French Government lodged fresh statistics. They show that the number of inspections, findings of infringement and convictions was lower in 2003 than in 2002. 26 The French Government stated that the decrease in inspections at sea was due to the mobilisation of French vessels to fight the pollution caused by the shipwrecking of the oil tanker Prestige and that inspections on land had decreased because the discipline of fishermen had improved. It explained that the decrease in the number of convictions was due to the effects of Law No 2002-1062 of 6 August 2002 granting an amnesty (JORF No 185 of 9 August 2002, p. 13647), while pointing out that the average amount of the fines imposed had increased. The breach of obligations alleged The geographical area at issue27 It should be noted as a preliminary point that the declaration made in the operative part of the judgment in Case C-64/88 Commission v France that the French Republic had failed to carry out controls ensuring compliance with technical Community measures for the conservation of fishery resources, laid down by Regulations Nos 171/83 and 3094/86, only concerned, as is apparent from the delimitation set out in Article 1(1) of those regulations, the taking and landing of fishery resources occurring in certain areas of the north-east Atlantic. 28 As submitted by the French Government and explained by the Commission at the hearing on 3 March 2004, the present action thus relates only to the situation in those areas. The reference date29 The Commission sent the first reasoned opinion to the French Republic on 14 April 1996 and, subsequently, a supplementary reasoned opinion on 6 June 2000. 30 It follows that the reference date for assessing the alleged breach of obligations is the date upon which the period laid down in the supplementary reasoned opinion of 6 June 2000 expired, that is to say two months after notification of that opinion (Case C-474/99 Commission v Spain [2002] ECR I‑5293, paragraph 27, and Case C-33/01 Commission v Greece [2002] ECR I‑5447, paragraph 13). 31 Since the Commission has claimed that the Court should impose a penalty payment on the French Republic, it should also be ascertained whether the alleged breach of obligations has continued up to the Court’s examination of the facts. The extent of the obligations on the Member States under the common fisheries policy32 Article 1 of Regulation No 2847/93, which constitutes a specific embodiment, in the field of fisheries, of the obligations imposed on the Member States by Article 10 EC, provides that the Member States are to adopt appropriate measures to ensure the effectiveness of the Community system for conservation and management of fishery resources. 33 Regulation No 2847/93 imposes in this regard a joint responsibility on Member States (see, in relation to Regulation No 2241/87, Case C-9/89 Commission v Spain [1990] ECR I-1383, paragraph 10). This joint responsibility means that when a Member State fails to fulfil its obligations, it prejudices the interests of the other Member States and of their economic operators. 34 It is imperative that the Member States fulfil the obligations incumbent on them under the Community rules in order to ensure the protection of fishing grounds, the conservation of the biological resources of the sea and their exploitation on a sustainable basis in appropriate economic and social conditions (see, in relation to failure to comply with the quota system for the fishing years 1991 to 1996, Joined Cases C-418/00 and C-419/00 Commission v France [2002] ECR I-3969, paragraph 57). 35 To this end, Article 2 of Regulation No 2847/93, which repeats the obligations laid down by Article 1(1) of Regulation No 2241/87, obliges the Member States to monitor fishing activity and related activities. It requires them to inspect fishing vessels and investigate all activities, including the activities of landing, selling, transporting and storing fish and recording landings and sales. 36 Article 31 of Regulation No 2847/93, which takes up the obligations laid down in Article 1(2) of Regulations Nos 2057/82 and 2241/87, requires the Member States to take action in respect of recorded infringements. It states that the proceedings initiated must be capable of effectively depriving those responsible of the economic benefit of the infringements or of producing results proportionate to the seriousness of such infringements, effectively discouraging further offences of the same kind. 37 Regulation No 2847/93 thus provides specific indications as to the content of the measures which must be taken by the Member States and which must seek to ensure that fishery operations are conducted properly with the objective of both preventing any breaches and punishing such breaches. That objective means that the measures implemented must be effective, proportionate and a deterrent. As the Advocate General has observed in point 39 of his Opinion of 29 April 2004, there must be a serious risk, for persons engaging in fishing activity and related activities, that in the event of infringement of the rules of the common fisheries policy, they will be detected and have sufficiently severe penalties imposed on them. 38 It is in light of those considerations that the question whether the French Republic has taken all the necessary measures to comply with the judgment in Case C‑64/88 Commission v France should be examined. The first complaint: inadequate controls Arguments of the parties39 The Commission maintains that it is clear from the findings made by its inspectors that the French authorities’ controls regarding compliance with the Community provisions on the minimum size of fish are still deficient. 40 The increase in the number of inspections to which the French Government refers cannot modify those findings since only inspections at sea are involved. The control plans adopted by the French Government in 2001 and 2002 are not, in themselves, capable of bringing the alleged breach of obligations to an end. Implementation of those plans involves the prior setting of objectives, which are necessary in order to be able to assess the effectiveness and operability of the plans. Moreover, the plans must actually be implemented, which the visits made to French ports since the plans were established have not demonstrated. 41 The French Government observes, first of all, that the inspection reports upon which the Commission relies were never made known to the French authorities, which were not in a position to respond to the statements that they contain. Furthermore, those reports are founded on mere suppositions. 42 It also submits that since delivery of the judgment in Case C-64/88 Commission v France it has been constantly strengthening its control mechanisms. This strengthening has taken the form of an increase in the number of inspections at sea and the adoption, in 2001, of a general control plan, supplemented, in 2002, by a ‘minimum catch sizes’ control plan. With regard to the effectiveness of those measures, it points out that it has been possible to record no marketing of undersized fish on several inspection visits made by Commission inspectors. 43 Finally, in the French Government’s submission, the Commission merely asserts that the measures taken by it are inappropriate without indicating the measures capable of bringing the alleged breach of obligations to an end. Findings of the Court44 Like the procedure laid down in Article 226 EC (see, in relation to failure to comply with the quota system for the fishing years 1988 and 1990, Case C‑333/99 Commission v France [2001] ECR I-1025, paragraph 33), the procedure laid down in Article 228 EC is based on the objective finding that a Member State has failed to fulfil its obligations. 45 In the present instance, the Commission has adduced in support of its complaint mission reports drawn up by its inspectors.46 The French Government’s line of argument, put forward at the stage of its rejoinder, that the reports to which the Commission referred in its application cannot be used as evidence that the breach of obligations has persisted on the ground that they were never made known to the French authorities, cannot be upheld. 47 It can be seen from the reports adduced by the Commission that all the reports subsequent to 1998, which have been put in evidence in their entirety or in the form of extensive extracts, refer to accounts of meetings in the course of which the competent national authorities were informed of the results of the inspection visits and were therefore able to present their observations on the findings of the Commission’s inspectors. While this reference is not found in the earlier reports, put in evidence in the form of extracts limited to the findings of fact made by the inspectors, it is sufficient to point out that in its letter of 1 August 2000, sent to the Commission in response to the supplementary reasoned opinion of 6 June 2000, the French Government set out its observations on the content of those reports without putting in issue the circumstances of their disclosure to the French authorities. 48 That being so, it should be examined whether the information contained in the mission reports adduced by the Commission is such as to establish an objective finding that a breach by the French Republic of its control obligations has persisted. 49 As regards the situation on expiry of the period laid down in the supplementary reasoned opinion of 6 June 2000, it is apparent from the reports to which the Commission referred in that opinion (see paragraph 17 of this judgment) that the inspectors were able to record the presence of undersized fish, on each of the six visits that they made. They were able to record, in particular, that there was a market for undersized hake, offered for sale under the name ‘merluchons’ or ‘friture de merluchons’ (small hake) and, in breach of the marketing standards laid down by Regulation No 2406/96, under the code ‘00’. 50 On five of those six visits, the landing and offering for sale of the undersized fish took place without monitoring by the competent national authorities. As the French Government acknowledged in its response of 1 August 2000 to the supplementary reasoned opinion of 6 June 2000, the persons whom the inspectors were able to meet ‘did not fall within the classes of officers empowered to find infringements of the fishery rules and were not attached to the maritime authorities’. On the sixth visit, the inspectors recorded that undersized fish had been landed and offered for sale in the presence of national authorities empowered to find infringements of the fishery rules. However, those authorities refrained from taking action against the offenders. 51 This evidence enables it to be found that, in the absence of effective action by the competent national authorities, a practice of offering undersized fish for sale persisted which was sufficiently constant and widespread to prejudice seriously, by reason of its cumulative effect, the objectives of the Community system for conservation and management of fishery resources. 52 Moreover, the similarity and recurrence of the situations recorded in all the reports enable it to be held that those instances can only have resulted from structural inadequacy of the measures implemented by the French authorities and, consequently, from a failure on their part to fulfil the obligation imposed on them by the Community rules to carry out controls that are effective, proportionate and a deterrent (see, to this effect, Case C-333/99 Commission v France, cited above, paragraph 35). 53 It must therefore be found that, on expiry of the period laid down in the supplementary reasoned opinion of 6 June 2000, the French Republic, by failing to carry out controls of fishing activities in accordance with the requirements laid down by the Community provisions, had not taken all the necessary measures to comply with the judgment in Case C-64/88 Commission v France and was accordingly failing to fulfil its obligations under Article 228 EC. 54 As regards the situation on the date of examination of the facts by the Court, the information available shows that significant deficiencies persisted. 55 On the visit made to Brittany in June 2001 (see paragraph 20 of this judgment), the Commission inspectors were once again able to record the presence of undersized fish. A decrease in the number of cases of such fish being offered for sale was recorded on a subsequent visit to the same area in June 2003 (see paragraph 23 of the present judgment). However, that fact is not decisive in light of the concurring findings, set out in the reports drawn up at the time of those two visits, concerning the ineffectiveness of the controls on land. 56 Where the Commission has adduced sufficient evidence to show that the breach of obligations has persisted, it is for the Member State concerned to challenge in substance and in detail the information produced and its consequences (see, to this effect, Case 272/86 Commission v Greece [1988] ECR 4875, paragraph 21, and Case C-365/97 Commission v Italy [1999] ECR I-7773, paragraphs 84 to 87). 57 In this connection, it is to be noted that the information concerning the increase in inspections in pursuance of the plans adopted in 2001 and 2002, on which the French Government relied in its defence, conflicts with the information supplied by it in answer to the Court’s questions (see paragraph 26 of this judgment), according to which the number of inspections at sea and on land was lower in 2003 than in 2002. 58 Even if divergent information of that kind can, as the French Government contends, be regarded as showing an improvement in the situation, the fact remains that the efforts made cannot excuse the failures that occurred (Case C‑333/99 Commission v France, paragraph 36). 59 In this connection, the French Government’s argument that the decrease in inspections is justified by the improved discipline of fishermen cannot be upheld either. 60 As the French Government has itself pointed out in its defence, actions designed to change behaviour and mentality involve a long process. It must therefore be considered that the structural deficiency, extending over a period of more than 10 years, of the controls designed to ensure compliance with the rules relating to the minimum size of fish resulted in behaviour on the part of the economic operators concerned that it will be possible to correct only after action over a lengthy period. 61 Accordingly, in light of the detailed evidence submitted by the Commission, the information adduced by the French Government is not sufficiently substantial to demonstrate that the measures which it has implemented regarding the control of fishing activities display the efficacy necessary to meet its obligation to ensure the effectiveness of the Community system for conservation and management of fishery resources (see paragraphs 37 and 38 of the present judgment). 62 It must therefore be found that, on the date upon which the Court examined the facts which were presented to it, the French Republic, by failing to carry out controls of fishing activities in accordance with the requirements laid down by the Community provisions, had not taken all the necessary measures to comply with the judgment in Case C-64/88 Commission v France and was accordingly failing to fulfil its obligations under Article 228 EC. The second complaint: inadequacy of action taken63 The Commission contends that the proceedings brought by the French authorities for infringement of the Community provisions concerning the minimum size of fish are insufficient. Generally, the inadequacy of the controls is reflected in the number of proceedings. Furthermore, it is apparent from the information provided by the French Government that, even when infringements are recorded, action is not systematically taken. 64 The Commission observes that the statistics submitted by the French Government before the period laid down in the supplementary reasoned opinion of 6 June 2000 expired are too general in that they concern the whole of France and do not specify the nature of the infringements in respect of which proceedings were brought. 65 The information provided subsequently cannot be taken as showing that the French authorities apply a policy of deterrent penalties so far as concerns infringements of the rules relating to the minimum size of fish. The Commission points out that, for 2001, the French Government notified, pursuant to Council Regulation (EC) No 1447/1999 of 24 June 1999 establishing a list of types of behaviour which seriously infringe the rules of the common fisheries policy (OJ 1999 L 167, p. 5) and Commission Regulation (EC) No 2740/1999 of 21 December 1999 laying down detailed rules for the application of Regulation No 1447/1999 (OJ 1999 L 328, p. 62), 73 cases of infringement of the rules relating to the minimum size of fish. However, only eight cases, that is to say 11%, resulted in imposition of a fine. 66 While the Commission acknowledges that the circular of the Minister for Justice of 16 October 2002, to which the French Government refers, constitutes an appropriate measure, it considers nevertheless that the way in which the circular will be applied should be checked. In this connection, it observes that the latest figures notified by the French Government for 2003 show a reduction in the number of convictions. 67 The French Government contends that since 1991 the number of infringements in respect of which proceedings have been brought, and the sentences, have been constantly increasing. It stresses, however, that a purely statistical examination of the number of infringements in respect of which proceedings are brought cannot, by itself, give an account of the effectiveness of a control system since it rests on the entirely unproven presupposition that the number of infringements is stable. 68 The French Government refers to a circular which the Minister for Justice addressed on 16 October 2002 to the Principal State Prosecutors at the cours d’appel (Courts of Appeal) of Rennes, Poitiers, Bordeaux and Pau, recommending that proceedings be systematically brought in respect of infringements and that deterrent penalties be demanded. It acknowledges, however, that the circular could not have full effect in 2002 or 2003 because of Law No 2002-1062, which granted an amnesty in respect of infringements committed before 17 May 2002 in so far as the fine did not exceed EUR 750. 69 The obligation on the Member States to make sure that penalties which are effective, proportionate and a deterrent are imposed for infringements of Community rules is of fundamental importance in the field of fisheries. If the competent authorities of a Member State were systematically to refrain from taking action against the persons responsible for such infringements, both the conservation and management of fishery resources and the uniform application of the common fisheries policy would be jeopardised (see, in relation to failure to comply with the quota system for the fishing years 1991 and 1992, Case C-52/95 Commission v France [1995] ECR I-4443, paragraph 35). 70 So far as concerns, in this instance, the situation on expiry of the period laid down in the supplementary reasoned opinion of 6 June 2000, it is sufficient to recall the findings made in paragraphs 49 to 52 of the present judgment. Since it has been established that infringements which the national authorities could have found to exist were not recorded and since reports were not drawn up in respect of offenders, it is clear that those authorities failed to fulfil the obligation to take action, which the Community rules impose on them (see, to this effect, Case C‑64/88 Commission v France, paragraph 24). 71 As regards the situation on the date upon which the Court examined the facts, reference should be made to the findings in paragraphs 54 to 61 of the present judgment, according to which significant deficiencies in the controls persisted. In light of those findings, the increase in the number of infringements in respect of which proceedings were brought, to which the French Government has referred, cannot be considered sufficient. As the French Government has observed, a purely statistical examination of the number of infringements in respect of which proceedings are brought cannot, by itself, give an account of the effectiveness of a control system. 72 Furthermore, as the Commission has pointed out, it is clear from the information provided by the French Government that proceedings are not brought in respect of all the infringements that are recorded. It is also apparent that deterrent penalties are not imposed in respect of all the infringements in respect of which proceedings are brought. The fact that numerous fisheries infringements were eligible to benefit from Law No 2002-1062 attests that, in all those cases, fines of less than EUR 750 were imposed. 73 Accordingly, in light of the detailed evidence submitted by the Commission, the information adduced by the French Government is not sufficiently substantial to demonstrate that the measures which it has implemented so far as concerns the taking of action in respect of infringements of the fisheries rules display the efficacy, proportionality and deterrence necessary to meet its obligation to ensure the effectiveness of the Community system for conservation and management of fishery resources (see paragraphs 37 and 38 of the present judgment). 74 It must therefore be found that, both on expiry of the period laid down in the supplementary reasoned opinion of 6 June 2000 and on the date upon which the Court examined the facts which were presented to it, the French Republic, by failing to ensure that action was taken in respect of infringements of the rules governing fishing activities in accordance with the requirements laid down by the Community provisions, had not taken all the necessary measures to comply with the judgment in Case C-64/88 Commission v France and was accordingly failing to fulfil its obligations under Article 228 EC. Financial penalties for the breach of obligations75 To punish the failure to comply with the judgment in Case C-64/88 Commission v France, the Commission suggested that the Court should impose a daily penalty payment on the French Republic from delivery of the present judgment until the day on which the breach of obligations is brought to an end. In light of the particular features of the breach that has been established, the Court considers that it should examine in addition whether imposition of a lump sum could constitute an appropriate measure. The possibility of imposing both a penalty payment and a lump sum Arguments of the parties and submissions made to the Court76 When invited to give their views on whether, in proceedings brought under Article 228(2) EC, the Court may, where it finds that the Member State concerned has not complied with the Court’s judgment, impose both a lump sum and a penalty payment on it, the Commission and the Danish, Netherlands, Finnish and United Kingdom Governments answered in the affirmative. 77 Their reasoning is based, essentially, on the fact that those two measures are complementary, in that each of them respectively seeks to achieve a deterrent effect. A combination of those measures should be regarded as one and the same means of achieving the objective laid down by Article 228 EC, that is to say not only to induce the Member State concerned to comply with the initial judgment but also, from a wider viewpoint, to reduce the possibility of similar infringements being committed again. 78 The French, Belgian, Czech, German, Greek, Spanish, Irish, Italian, Cypriot, Hungarian, Austrian, Polish and Portuguese Governments have put forward a contrary view. 79 They rely on the wording of Article 228(2) EC and on the use of the conjunction ‘or’, to which they accord a disjunctive sense, and on the objective of this provision. The provision is not punitive in nature, since Article 228(2) EC does not seek to punish the defaulting Member State, but only to induce it to comply with a judgment establishing a breach of obligations. It is not possible to distinguish several periods of a breach of obligations; only its entire duration is to be taken into consideration. The imposition of more than one financial penalty is contrary to the principle prohibiting the same conduct from being punished twice. Furthermore, in the absence of Commission guidelines concerning the applicable criteria for calculating a lump sum, imposition of such a sum by the Court would conflict with the principles of legal certainty and transparency. It would also compromise equal treatment between Member States, since such a measure was not envisaged in the judgments in Case C-387/97 Commission v Greece [2000] ECR I-5047 and Case C-278/01 Commission v Spain [2003] ECR I‑14141. 80 The procedure laid down in Article 228(2) EC has the objective of inducing a defaulting Member State to comply with a judgment establishing a breach of obligations and thereby of ensuring that Community law is in fact applied. The measures provided for by that provision, namely a lump sum and a penalty payment, are both intended to achieve this objective. 81 Application of each of those measures depends on their respective ability to meet the objective pursued according to the circumstances of the case. While the imposition of a penalty payment seems particularly suited to inducing a Member State to put an end as soon as possible to a breach of obligations which, in the absence of such a measure, would tend to persist, the imposition of a lump sum is based more on assessment of the effects on public and private interests of the failure of the Member State concerned to comply with its obligations, in particular where the breach has persisted for a long period since the judgment which initially established it. 82 That being so, recourse to both types of penalty provided for in Article 228(2) EC is not precluded, in particular where the breach of obligations both has continued for a long period and is inclined to persist. 83 This interpretation cannot be countered by reference to the use in Article 228(2) EC of the conjunction ‘or’ to link the financial penalties capable of being imposed. As the Commission and the Danish, Netherlands, Finnish and United Kingdom Governments have submitted, that conjunction may, linguistically, have an alternative or a cumulative sense and must therefore be read in the context in which it is used. In light of the objective pursued by Article 228 EC, the conjunction ‘or’ in Article 228(2) EC must be understood as being used in a cumulative sense. 84 The objection raised, in particular by the German, Greek, Hungarian, Austrian and Polish Governments, that imposition of both a penalty payment and a lump sum, taking into consideration the same period of breach twice, would infringe the principle non bis in idem must also be rejected. Since each penalty has its own function, it is to be determined in such a way as to fulfil that function. It follows that, where the Court imposes a penalty payment and a lump sum simultaneously, the duration of the breach is taken into consideration as one of a number of criteria, in order to determine the appropriate level of coercion and deterrence. 85 The argument, relied on by the Belgian Government in particular, that, in the absence of guidelines adopted by the Commission for calculating a lump sum, imposition of a lump sum would conflict with the principles of legal certainty and transparency cannot be upheld either. While such guidelines do help to ensure that the Commission acts in a manner which is transparent, foreseeable and consistent with legal certainty (see, in relation to the guidelines concerning calculation of penalty payments, Case C-387/97 Commission v Greece, cited above, paragraph 87), the fact remains that exercise of the power conferred on the Court by Article 228(2) EC is not subject to the condition that the Commission adopts such rules, which, in any event, cannot bind the Court (Case C-387/97 Commission v Greece, paragraph 89, and Case C-278/01 Commission v Spain, cited above, paragraph 41). 86 As to the objection, raised by the French Government, that imposition of both a penalty payment and a lump sum in the present case would compromise equal treatment since it was not envisaged in the judgments in Case C-387/97 Commission v Greece and Case C-278/01 Commission v Spain, it is for the Court, in each case, to assess in light of its circumstances the financial penalties to be imposed. Accordingly, the fact that both measures were not imposed in the cases decided previously cannot in itself constitute an obstacle to the imposition of both in a subsequent case, if, having regard to the nature, seriousness and persistence of the breach of obligations established, that appears appropriate. The Court’s discretion as to the financial penalties that can be imposed87 The Commission and the Czech, Hungarian and Finnish Governments have answered in the affirmative the question whether the Court may, where appropriate, depart from the Commission’s suggestions and impose a lump sum on a Member State although the Commission did not suggest this. In their submission, the Court has a discretion in the matter, which extends to determining the penalty considered to be the most appropriate, irrespective of the Commission’s suggestions in this regard. 88 The French, Belgian, Danish, German, Greek, Spanish, Irish, Italian, Netherlands, Austrian, Polish and Portuguese Governments take an opposing view. They put forward substantive and procedural arguments. With regard to substance, they submit that exercise by the Court of such a discretion would infringe the principles of legal certainty, predictability, transparency and equal treatment. The German Government adds that the Court in any event lacks the political legitimacy necessary to exercise such a power in a field where assessments of political expediency play a considerable role. At the procedural level, the aforementioned governments stress that so extensive a power is incompatible with the general principle of civil procedure common to all the Member States that courts cannot go beyond the parties’ claims, and dwell upon the need for an interpartes procedure enabling the Member State concerned to exercise its rights of defence. 89 With regard to the arguments derived from the principles of legal certainty, predictability, transparency and equal treatment, reference should be made to the findings made in paragraphs 85 and 86 of this judgment. 90 So far as concerns the German Government’s argument as to the Court’s lack of political legitimacy to impose a financial penalty not suggested by the Commission, the various stages involved in the procedure laid down in Article 228(2) EC should be distinguished. Once the Commission has exercised its discretion as to the initiation of infringement proceedings (see, inter alia, in relation to Article 226 EC, the judgment in Case C-74/02 Commission v Germany [2003] ECR I‑9877, paragraph 17, and the judgment of 21 October 2004 in Case C-477/03 Commission v Germany, not published in the ECR, paragraph 11), the question of whether or not the Member State concerned has complied with a previous judgment of the Court is subjected to a judicial procedure in which political considerations are irrelevant. It is in performance of its judicial function that the Court assesses the extent to which the situation prevailing in the Member State in question complies with the initial judgment and, where appropriate, assesses the seriousness of a persisting breach of obligations. It follows that, as the Advocate General has observed in point 24 of his Opinion of 18 November 2004, the appropriateness of imposing a financial penalty and the choice of the penalty most suited to the circumstances of the case can be appraised only in the light of the findings made by the Court in the judgment to be delivered under Article 228(2) EC and therefore fall outside the political sphere. 91 The argument that, in departing from or going beyond the Commission’s suggestions, the Court infringes a general principle of procedural law which prohibits courts from going beyond the parties’ claims is not well founded either. The procedure provided for in Article 228(2) EC is a special judicial procedure, peculiar to Community law, which cannot be equated with a civil procedure. The order imposing a penalty payment and/or a lump sum is not intended to compensate for damage caused by the Member State concerned, but to place it under economic pressure which induces it to put an end to the breach established. The financial penalties imposed must therefore be decided upon according to the degree of persuasion needed in order for the Member State in question to alter its conduct. 92 As regards the rights of defence that the Member State concerned must be able to exercise, which have been dwelt upon by the French, Belgian, Netherlands, Austrian and Finnish Governments, the procedure laid down in Article 228(2) EC must, as the Advocate General has observed in point 11 of his Opinion of 18 November 2004, be regarded as a special judicial procedure for the enforcement of judgments, in other words as a method of enforcement. It is in this context, therefore, that the procedural guarantees which must be available to the Member State in question are to be assessed. 93 It follows that, once it has been found in interpartes proceedings that a breach of Community law persists, the rights of defence which are to be accorded to the defaulting Member State so far as concerns the financial penalties envisaged must take account of the objective pursued, namely securing and guaranteeing that the law is again complied with. 94 In the present case, so far as concerns the truth with regard to the conduct liable to give rise to the imposition of financial penalties, the French Republic had the opportunity to defend itself throughout a pre-litigation procedure which lasted nearly nine years and gave rise to two reasoned opinions, and, in the present proceedings, in the course of the written procedure and at the hearing of 3 March 2004. That examination of the facts led the Court to find that a breach by the French Republic of its obligations persisted (see paragraph 74 of the present judgment). 95 The Commission which, in the two reasoned opinions, had drawn the risk of financial penalties to the attention of the French Republic (see paragraphs 15 and 18 of the present judgment), indicated to the Court the criteria (see paragraph 98 of the present judgment) capable of being taken into consideration when determining the financial penalties intended to exert sufficient economic pressure on the French Republic to prompt it to put an end to its breach of obligations as rapidly as possible, and the respective weightings to be given to those criteria. The French Republic set out its views on the criteria in the written procedure and at the hearing on 3 March 2004. 96 By order of 16 June 2004, the Court requested the parties to give their views on whether, where the Court finds that a Member State has not taken the necessary measures to comply with a previous judgment and the Commission has requested the Court to impose a penalty payment on that State, the Court may impose on the Member State a lump sum or, as the case may be, a lump sum and a penalty payment. The parties stated their views at the hearing on 5 October 2004. 97 It follows that the French Republic has been able to make its submissions on all the matters of law and of fact necessary for establishing that the breach of obligations alleged against it has persisted and for deciding upon the seriousness of the breach and the measures which may be adopted in order to bring it to an end. On the basis of those matters, which have been the subject of inter partes proceedings, it is for the Court to determine, according to the degree of persuasion and deterrence which appears to it to be required, the financial penalties appropriate for making sure that the judgment in Case C-64/88 Commission v France is complied with as rapidly as possible and preventing similar infringements of Community law from recurring. The financial penalties appropriate in the present case Imposition of a penalty payment98 On the basis of the method of calculation which it has set out in its communication 97/C 63/02 of 28 February 1997 on the method of calculating the penalty payments provided for pursuant to Article [228] of the EC Treaty (OJ 1997 C 63, p. 2), the Commission suggested that the Court should impose on the French Republic a penalty payment of EUR 316 500 for each day of delay by way of penalty for non-compliance with the judgment in Case C-64/88 Commission v France, from the date of delivery of the judgment in the present case until the day on which the judgment in Case C-64/88 Commission v France has been complied with. 99 The Commission considers that an order imposing a penalty payment is the most appropriate instrument for putting an end as soon as possible to the infringement which has been established and that, in the present case, a penalty payment of EUR 316 500 for each day of delay fits the seriousness and duration of the infringement, due regard being had to the need to make the penalty effective. That sum is calculated by multiplying a uniform basic amount of EUR 500 by a coefficient of 10 (on a scale of 1 to 20) for the seriousness of the infringement, by a coefficient of 3 (on a scale of 1 to 3) for the duration of the infringement and by a coefficient of 21.1 (based on the gross domestic product of the Member State in question and the weighting of votes in the Council of the European Union), which is deemed to reflect the ability to pay of the Member State concerned. 100 The French Government submits that there is no reason to impose a penalty payment because it has brought the breach of obligations to an end and, in the alternative, that the amount of the penalty payment requested is disproportionate. 101 It points out that, so far as the seriousness of the infringement is concerned, in Case C-387/97 Commission v Greece the Commission suggested a coefficient of 6, although the breach of obligations compromised public health and no measure had been taken with a view to complying with the previous judgment, two factors which are absent here. Accordingly, the coefficient of 10 suggested by the Commission in the present case is not acceptable. 102 The French Government also maintains that the measures required to comply with the judgment in Case C-64/88 Commission v France were unable to produce immediate effects. Given the inevitable time-lag between the adoption of the measures and their impact becoming perceptible, the Court cannot take into account the whole of the period passing between delivery of the first judgment and that of the forthcoming judgment. 103 As to those submissions, while it is clear that a penalty payment is likely to encourage the defaulting Member State to put an end as soon as possible to the breach that has been established (Case C-278/01 Commission v Spain, paragraph 42), it should be remembered that the Commission’s suggestions cannot bind the Court and are only a useful point of reference (Case C-387/97 Commission v Greece, paragraph 89). In exercising its discretion, it is for the Court to set the penalty payment so that it is appropriate to the circumstances and proportionate both to the breach that has been established and to the ability to pay of the Member State concerned (see, to this effect, Case C-387/97 Commission v Greece, paragraph 90, and Case C-278/01 Commission v Spain, paragraph 41). 104 In that light, and as the Commission has suggested in its communication of 28 February 1997, the basic criteria which must be taken into account in order to ensure that penalty payments have coercive force and Community law is applied uniformly and effectively are, in principle, the duration of the infringement, its degree of seriousness and the ability of the Member State to pay. In applying those criteria, regard should be had in particular to the effects of failure to comply on private and public interests and to the urgency of getting the Member State concerned to fulfil its obligations (Case C-387/97 Commission v Greece, paragraph 92). 105 As regards the seriousness of the infringement and, in particular, the effects of failure to comply on private and public interests, it is to be remembered that one of the key elements of the common fisheries policy consists in rational and responsible exploitation of aquatic resources on a sustainable basis, in appropriate economic and social conditions. In this context, the protection of juvenile fish proves decisive for reestablishing stocks. Failure to comply with the technical measures of conservation prescribed by the common policy, in particular the requirements regarding the minimum size of fish, therefore constitutes a serious threat to the maintenance of certain species and certain fishing grounds and jeopardises pursuit of the fundamental objective of the common fisheries policy. 106 Since the administrative measures adopted by the French authorities have not been implemented in an effective manner, they cannot reduce the seriousness of the breach established. 107 Having regard to those factors, the coefficient of 10 (on a scale of 1 to 20) is therefore an appropriate reflection of the degree of seriousness of the infringement. 108 As regards the duration of the infringement, suffice it to state that it is considerable, even if the starting date be that on which the Treaty on European Union entered into force and not the date on which the judgment in Case C-64/88 Commission v France was delivered (see, to this effect, Case C-387/97 Commission v Greece, paragraph 98). Accordingly, the coefficient of 3 (on a scale of 1 to 3) suggested by the Commission appears appropriate. 109 The Commission’s suggestion of multiplying a basic amount by a coefficient of 21.1 based on the gross domestic product of the French Republic and on the number of votes which it has in the Council is an appropriate way of reflecting that Member State’s ability to pay, while keeping the variation between Member States within a reasonable range (see Case C-387/97 Commission v Greece, paragraph 88, and Case C-278/01 Commission v Spain, paragraph 59). 110 Multiplying the basic amount of EUR 500 by the coefficients of 21.1 (for ability to pay), 10 (for the seriousness of the infringement) and 3 (for the duration of the infringement) gives a sum of EUR 316 500 per day. 111 As regards the frequency of the penalty payment, account should, however, be taken of the fact that the French authorities have adopted administrative measures which could serve as a framework for implementation of the measures required to comply with the judgment in Case C-64/88 Commission v France. Nevertheless, it is not possible for the necessary adjustments to previous practices to be instantaneous or their impact to be perceived immediately. It follows that any finding that the infringement has come to an end could be made only after a period allowing an overall assessment to be made of the results obtained. 112 Having regard to those considerations, the penalty payment must be imposed not on a daily basis, but on a half-yearly basis. 113 In light of all of the foregoing, the French Republic should be ordered to pay to the Commission, into the account ‘European Community own resources’, a penalty payment of 182.5 x EUR 316 500, that is to say of EUR 57 761 250, for each period of six months from delivery of the present judgment at the end of which the judgment in Case C-64/88 Commission v France has not yet been fully complied with. Imposition of a lump sum114 In a situation such as that which is the subject of the present judgment, in light of the fact that the breach of obligations has persisted for a long period since the judgment which initially established it and of the public and private interests at issue, it is essential to order payment of a lump sum (see paragraph 81 of the present judgment). 115 The specific circumstances of the case are fairly assessed by setting the amount of the lump sum which the French Republic will have to pay at EUR 20 000 000. 116 The French Republic should therefore be ordered to pay to the Commission, into the account ‘European Community own resources’, a lump sum of EUR 20 000 000. Costs117 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the French Republic has been unsuccessful, the latter must be ordered to pay the costs. On those grounds, the Court (Grand Chamber) hereby:1. Declares that:– by failing to carry out controls of fishing activities in accordance with the requirements laid down by the Community provisions, and– by failing to ensure that action is taken in respect of infringements of the rules governing fishing activities in accordance with the requirements laid down by the Community provisions,the French Republic has not implemented all the necessary measures to comply with the judgment of 11 June 1991 in Case C-64/88 Commission v France and has accordingly failed to fulfil its obligations under Article 228 EC;2. Orders the French Republic to pay to the Commission of the European Communities, into the account ‘European Community own resources’, a penalty payment of EUR 57 761 250 for each period of six months from delivery of the present judgment at the end of which the judgment in Case C-64/88 Commission v France has not yet been fully complied with;3. Orders the French Republic to pay to the Commission of the European Communities, into the account ‘European Community own resources’, a lump sum of EUR 20 000 000;4. Orders the French Republic to pay the costs.[Signatures]* Language of the case: French. | 81f24-7a71455-4ec6 | EN |
THE COURT SETS ASIDE THE JUDGMENT OF THE COURT OF FIRST INSTANCE FINDING THAT THE COMMISSION HAD UNLAWFULLY FAILED TO ACT IN REGARD TO THE ESTABLISHMENT OF MAXIMUM RESIDUE LIMITS FOR VETERINARY MEDICINAL PRODUCTS | Commission of the European CommunitiesvCEVA Santé Animale SA and Pfizer Enterprises Sàrl, formerly Pharmacia Entreprises SA (Appeal – Regulation (EEC) No 2377/90 – Veterinary medicinal products – Establishment of a maximum residue level for progesterone – Conditions governing the non-contractual liability of the Community)Opinion of Advocate General Jacobs delivered on 23 September 2004 Judgment of the Court (Grand Chamber), 12 July 2005 Summary of the Judgment1. Appeals — Pleas in law — Erroneous appraisal of evidence properly adduced — Inadmissible except in cases of distortion — Obligation on the Court of First Instance to state reasons for its appraisal of the evidence — Scope(Art. 225 EC; Statute of the Court of Justice, Art. 58, first para.; Council Regulation No 2377/90)2. Non-contractual liability — Conditions — Sufficiently serious breach of Community law — Discretion of the institution when adopting a measure — Need to take that discretion into account in examining liability(Art. 288, second para., EC)3. Agriculture — Uniform legislation — Maximum limits on residues of veterinary medicinal products in foodstuffs of animal origin — Procedure for fixing limits — Regulation No 2377/90 — Temporary inaction of the Commission in fixing maximum limits for progesterone residues — Sufficiently serious breach of Community law — None(Art. 288, second para., EC; Council Regulation No 2377/90)1. While it is for the Court of First Instance alone to assess the value to be attached to the items of evidence adduced before it, and while it cannot be required to give express reasons for its assessment of the value of each piece of evidence presented to it, in particular where it considers that evidence to be unimportant or irrelevant to the outcome of the dispute, the Court of First Instance is none the less obliged to provide reasons which will allow the Court to exercise its judicial review. Those reasons must make it possible for the Court to review any distortion of the evidence submitted to the Court of First Instance. In its judgment declaring the Community to be liable following the failure of the Commission to propose a draft regulation fixing maximum residue levels (MRLs) for progesterone before 25 July 2001, the Court of First Instance, by referring only to the opinion of the Committee on Veterinary Medicinal Products recommending that progesterone be included in Annex II to Regulation No 2377/90 laying down a Community procedure for the establishment of maximum residue limits of veterinary medicinal products in foodstuffs of animal origin, without explaining why the Commission was obliged to follow that opinion, in disregard of the differing opinions from other sources, did not allow the Court to identify the link which the Court of First Instance established between the opinion of that committee and the consequences in law which it derived from that opinion. It follows that the Court of First Instance failed to provide adequate reasoning for its judgment on that point. (see paras 50, 53)2. Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals, the breach must be sufficiently serious, and there must be a direct causal link between the breach of the obligation devolving on the institution and the damage sustained by the injured parties. With regard to the second condition, the decisive test for determining whether a breach of Community law is sufficiently serious is whether the Community institution concerned manifestly and gravely disregarded the limits on its discretion. Where that institution has only a considerably reduced, or even no, discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach. The determining factor in deciding whether there has been such an infringement is therefore the discretion which was available to the institution concerned. The Court of First Instance therefore errs in law if it takes the view, without having established the scope of the discretion enjoyed by the Commission, that the Commission’s inaction constitutes a clear and serious breach of Community law giving rise to liability on the part of the Community. (see paras 63-66, 69)3. In delicate and controversial cases, the Commission must have a sufficiently broad discretion and enough time to submit for re-examination the scientific questions which determine its decision. Thus, in not submitting a draft regulation on the fixing of maximum residue limits (MRLs) for progesterone prior to 25 July 2001, pursuant to Regulation No 2377/90 laying down a Community procedure for the establishment of maximum residue limits of veterinary medicinal products in foodstuffs of animal origin, the Commission did not breach Community law in a sufficiently serious way as to give rise to liability on the part of the Community. Although an application to have an MRL established for progesterone had been before it since 1993, the Commission found itself facing a situation of continuing scientific uncertainty characterised by divergences between scientific opinions. It was for that reason unable to adopt its preliminary position on the maintenance of the use of progesterone for therapeutic or zootechnical purposes until 2000. It was unable to submit that draft measure without taking that position, which constituted a stage which necessarily had to precede the taking of a position on the establishment of an MRL for that substance, since an MRL may be established for a pharmacologically active substance only if that substance is intended to be placed on the market. (see paras 75, 82, 87, 93)JUDGMENT OF THE COURT (Grand Chamber)12 July 2005 (*) In Case C-198/03 P,APPEAL under Article 56 of the Statute of the Court of Justice, brought on 12 May 2003, Commission of the European Communities, represented by T. Christoforou and M. Shotter, acting as Agents, with an address for service in Luxembourg, appellant,the other parties to the proceedings being:CEVA Santé Animale SA, having its registered office in Libourne (France), represented by D. Waelbroeck, avocat, N. Rampal, abogada, and U. Zinsmeister, Rechtsanwältin, applicant at first instance in Case T-344/00,Pfizer Enterprises Sàrl, formerly Pharmacia Enterprises SA and, prior to that, Pharmacia & Upjohn SA, having its registered office in Luxembourg (Luxembourg), represented by D. Waelbroeck, N. Rampal and U. Zinsmeister, applicant at first instance in Case T-345/00,supported byInternational Federation for Animal Health (IFAH), formerly Fédération européenne de la santé animale (Fedesa), established in Brussels (Belgium), represented by A. Vandencasteele, avocat, intervener at first instance in Case T-345/00,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann (Rapporteur), C.W.A. Timmermans and A. Borg Barthet, Presidents of Chambers, J.‑P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues, M. Ilešič, J. Malenovský, U. Lõhmus and E. Levits, Judges, Advocate General: F.G. Jacobs,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 6 July 2004,after hearing the Opinion of the Advocate General at the sitting on 23 September 2004,gives the followingJudgment1 By its appeal, the Commission of the European Communities is seeking partial annulment of the judgment delivered by the Court of First Instance of the European Communities on 26 February 2003 in Joined Cases T-344/00 and T‑345/00 CEVA and Pharmacia Enterprises v Commission [2003] ECR II‑229 (hereinafter ‘the judgment under appeal’) in so far as it held that the Commission’s inaction between 1 January 2000 and 25 July 2001 was of such a kind as to give rise to liability on the part of the Community. The legal framework Regulation No 2377/902 On 26 June 1990 the Council of the European Communities adopted Regulation (EEC) No 2377/90 laying down a Community procedure for the establishment of maximum residue limits of veterinary medicinal products in foodstuffs of animal origin (OJ 1990 L 224, p. 1). 3 The preamble to that regulation contains, among others, the first, third and sixth recitals, which are worded as follows:‘… the use of veterinary medicinal products in food-producing animals may result in the presence of residues [in] foodstuffs obtained from treated animals; …… in order to protect public health, maximum residue limits must be established in accordance with generally recognised principles of safety assessment, taking into account any other scientific assessment of the safety of the substances concerned which may have been undertaken by international organisations, in particular the Codex Alimentarius or, where such substances are used for other purposes, by other scientific committees established within the Community; … it is therefore necessary to lay down a procedure for the establishment of maximum residue levels of veterinary medicinal products by the Community, following a single scientific assessment of the highest possible quality; …’4 Under Regulation No 2377/90 the Commission is required to establish the maximum residue limit (hereinafter ‘MRL’), defined in Article 1(1)(b) of the Regulation as being ‘the maximum concentration of residue resulting from the use of a veterinary medicinal product … which may be accepted by the Community to be legally permitted or recognised as acceptable in or on a food’. 5 Regulation No 2377/90 makes provision for four annexes to be drawn up in which pharmacologically active substances, intended for use in veterinary medicines to be administered to ‘food producing animals’, may be included. Annex I comprises the list of substances for which MRLs have been fixed, Annex II comprises the list of substances that are not subject to MRLs, Annex III comprises the list of substances for which provisional MRLs have been fixed, and Annex IV comprises the list of substances for which no MRL can be fixed. 6 Article 4 of Regulation No 2377/90 provides that a provisional MRL may be established only ‘provided that there are no grounds for supposing that residues of the substance concerned at the level proposed present a hazard for the health of the consumer.’ 7 In its original version, Article 14 of Regulation No 2377/90 provided as follows:‘With effect from 1 January 1997, the administration to food-producing animals of veterinary medicinal products containing pharmacologically active substances which are not mentioned in Annexes I, II or III shall be prohibited within the Community …’. 8 Council Regulation (EC) No 434/97 of 3 March 1997 amending Regulation No 2377/90 (OJ 1997 L 67, p. 1) deferred to 1 January 2000 the date initially fixed in Article 14 for most of the substances the use of which was authorised on the date of entry into force of Regulation No 2377/90 and in respect of which documented applications for the establishment of MRLs had been lodged before 1 January 1996. The substances in question included progesterone. Directive 96/229 Article 3(a) of Council Directive 96/22/EC of 29 April 1996 concerning the prohibition on the use in stockfarming of certain substances having a hormonal or thyrostatic action and of ß-agonists, and repealing Directives 81/602/EEC, 88/146/EEC and 88/299/EEC (OJ 1996 L 125, p. 3) requires Member States to prohibit the administration to farm animals of substances having a gestagenic action, of which progesterone is one. 10 Article 4 of that directive provides that Member States may, by way of derogation and subject to certain conditions, authorise the administration of progesterone to farm animals for therapeutic purposes. The facts of the dispute and the proceedings before the Court of First Instance11 CEVA Santé animale SA (‘CEVA’) and Pfizer Enterprises Sàrl, formerly Pharmacia Enterprises SA and, before that, Pharmacia & Upjohn SA (‘Pfizer’), are pharmaceutical undertakings which have, from a date prior to the entry into force of Regulation No 2377/90, marketed a veterinary medicinal product containing the active ingredient progesterone. 12 CEVA submitted an application to the Commission in 1993 for the establishment of an MRL for progesterone in cattle and horses.13 In November 1996 the European Agency for the Evaluation of Medicinal Products (‘the EMEA’) informed CEVA that, at its meeting in October 1996, the Committee on Veterinary Medicinal Products (‘the CVMP’) had recommended that progesterone be included in Annex II to Regulation No 2377/90 and that the opinion of the CVMP would be forwarded to the Commission for adoption by the Committee for Adaptation to Technical Progress of the Directives on Veterinary Medicinal Products (‘the Standing Committee’). 14 In April 1997 the Commission sent new scientific information to the EMEA and requested a re-assessment of the risks relating to the hormones oestradiol-17ß and progesterone. 15 In October 1997 the EMEA informed CEVA that ‘… the Commission has decided to stop the adoption procedure for progesterone as new scientific data have recently become apparent concerning oestradiol, which are considered relevant also for progesterone. The CVMP has therefore been requested to undertake a reconsideration of the assessment in light of these additional data.’ 16 In April 1998 the Commission wrote again to the EMEA requesting it to allow the CVMP to take account of scientific information which was to become available in the course of 1998 from a number of sources, such as the International Agency for Research on Cancer (‘IARC’), an advisory body to the World Health Organisation, the United States National Institute of Health, and the results of a number of specific studies commissioned by the Commission. 17 The Commission was informed in May 1998 that the Joint FAO/WHO Expert Committee on Food Additives (‘JECFA’), the scientific committee which advises the Codex Alimentarius Commission on food additives and contaminants, was also planning to re-evaluate three natural hormones, including progesterone, in February 1999. 18 In February 1999 the Commission published in the Official Journal a ‘call for scientific documentation required for risk assessment of … progesterone … used for animal growth promotion purposes’. 19 The JECFA published the summary of its evaluation on the three natural hormones in or around April 1999. The JECFA concluded that, on the basis of the available data, it would not be necessary to establish numerical MRLs for the three hormones examined. 20 In April 1999 the Commission asked the EMEA to send it ‘the update of the evaluation’, which it had requested in 1997, of the hormones oestradiol-17ß and progesterone ‘at your earliest convenience, in order to allow the adoption and publication of the results of this evaluation before 1 January 2000’. 21 In May 1999 the Commission forwarded to the EMEA the opinion of the Scientific Committee on Veterinary Measures Relating to Public Health (‘the SCVPH’) of 30 April 1999. The summary of that report concluded as follows: ‘Taking into account both the hormonal and non-hormonal toxicological effects …, it has to be concluded that the issues of concern include neurobiological, developmental, reproductive and immunological effects, as well as immunotoxiocity, genotoxicity and carcinogenicity. In consideration of the recent concerns relating to the lack of understanding of critical developmental periods in human life as well as the uncertainties in the estimates of endogenous [naturally occurring] hormone production rates and metabolic clearance capacity, particularly in prepubertal children, no threshold level and therefore no ADI [acceptable daily intake] can be established for any of the six hormones’. 22 By letter of 20 December 1999 the EMEA informed CEVA that, at its meeting in early December 1999, the CVMP had confirmed its earlier opinion recommending that progesterone be included in Annex II to Regulation No 2377/90. 23 The CVMP stated as follows in its opinion:‘The Committee, having evaluated the applications, recommended in October 1996 to include progesterone in Annex II [to] … Regulation … No 2377/90. That opinion was, however, not adopted by the Commission. In 1997 and 1999 the European Commission brought new data on steroidal sex hormones to the attention of the Committee and requested a re-evaluation of the substance in the light of new data. The Committee, having considered the applications and the new data as stated in the appended summary report, confirmed the previous opinion and recommended that the above-mentioned substance shall be inserted in Annex II [to] … Regulation … No 2377/90 ...’. 24 On 3 May 2000 the SCVPH adopted a re-evaluation of its opinion of April 1999. Asked to confirm that there was no recent scientific information that would lead it to revise its previous opinion or to revise the relevant parts thereof as necessary, it concluded that recent scientific information did not provide convincing data or arguments making a revision of its previous conclusions necessary. It stated that it had again discussed the obvious gaps in the present knowledge on the metabolism of animals treated with the hormones under consideration and on residue disposition of those hormones and that it expected that the ongoing European Union research programmes would provide additional data on those two matters. 25 On 24 May 2000 the Commission adopted a proposal for a directive of the European Parliament and the Council amending Directive 96/22 (COM (2000) 320 final) (OJ 2000 C 337 E, p. 163). The proposal required, inter alia, Member States provisionally to prohibit the administration of progesterone to farm animals while allowing them to maintain the derogation for therapeutic and zootechnical purposes. 26 In July 2000 CEVA and Pfizer put the Commission on formal notice to take the necessary measures for including progesterone in Annex II to Regulation No 2377/90 as soon as possible. 27 In November 2000 CEVA and Pfizer brought proceedings before the Court of First Instance seeking, principally, a declaration pursuant to Article 232 EC that, by failing to take the necessary measures for the inclusion of progesterone in Annex II to Regulation No 2377/90, the Commission had failed to comply with its obligations under Community law and, secondly, damages under Articles 235 EC and 288 EC. The International Federation for Animal Health, formerly Fédération européenne de la santé animale (‘IFAH’), intervened in support of the form of order sought by Pfizer. Legislative developments after the actions had been brought28 On 25 July 2001 the Commission adopted a proposal for a Council regulation amending Annex I to Regulation (EEC) No 2377/90 (COM (2001) 627 final) classifying progesterone in Annex I to that regulation. 29 In accordance with Article 8 of Regulation No 2377/90, that proposal was referred to the Standing Committee. As the latter did not issue a favourable opinion, the proposal was rejected during the Council meeting of agriculture ministers held on 21 and 22 January 2002. 30 In December 2002 the Commission submitted to the Standing Committee a second proposal classifying progesterone in Annex III to Regulation No 2377/90. That proposal did not obtain the favourable opinion of the Standing Committee. 31 On 22 September 2003 the European Parliament and the Council adopted Directive 2003/74/EC amending Directive 96/22 (OJ 2003 L 262, p. 17). In its amended version, Article 3 of Directive 96/22 prohibits provisionally the administration of progesterone to farm animals. Article 5 of that directive, as amended, provides for a derogation from that prohibition in regard to the administration of progesterone for therapeutic or zootechnical purposes. 32 On 24 October 2003 the Commission adopted Regulation (EC) No 1873/2003 amending Annex II to Regulation No 2377/90 (OJ 2003 L 275, p. 9). That regulation includes progesterone in Annex II only for intravaginal therapeutic or zootechnical use on female bovine, ovine, caprine and equine animals. The judgment under appeal33 The Court of First Instance joined the actions in Cases T-344/00 and T‑345/00 for purposes of the judgment. In the judgment under appeal, the Court of First Instance held that there was no longer any need to rule on the actions for failure to act inasmuch as the Commission had acted by submitting a proposal for a regulation on 25 July 2001. 34 With regard to the form of order seeking damages, the Court of First Instance began by pointing out, in paragraph 99 of the judgment under appeal, that, where it is confronted with a matter which is scientifically and politically complex and sensitive, the Commission is entitled to seek a further opinion from the CVMP and, in paragraph 100 thereof, that the progesterone file is indeed a scientifically and politically complex file. The Court of First Instance then went on to rule: ‘101 However, that complexity does not excuse the Commission’s inaction after 1 January 2000. Given that the CVMP entirely confirmed its first opinion, even after taking into consideration the new scientific data presented to it by the Commission, and the fact that the Commission itself has always maintained the view that progesterone should continue to be authorised for therapeutic and zootechnical treatment, the Commission disregarded the legitimate interests of the [respondents], of which it was perfectly well aware, in a clear and serious way by failing to adopt the measures needed for its continued use, for therapeutic and zootechnical purposes, after 1 January 2000, the date from which, under Article 14 of the 1990 Regulation, the administration to food-producing animals of veterinary medicinal products containing pharmacologically active substances which are not mentioned in Annexes I, II or III to the 1990 Regulation was prohibited within the Community. It is important to note in this context that the application for an MRL to be established for progesterone was made as early as September 1993. 102. Even if the scientific and political complexities of the file were such as to prevent the Commission from adopting, shortly after the CVMP issued its second opinion, a draft regulation conforming to that opinion, the Commission ought to have concerned itself with the interests of the [respondents], for example by adopting draft measures establishing a provisional MRL on the basis of Article 4 of the 1990 Regulation or by arranging for a (second) deferral of the time-limit laid down in Article 14 thereof. 103 That being so, the inaction of the Commission between 1 January 2000 and 25 July 2001 constitutes a clear and serious breach of the principle of sound administration giving rise, in principle, to liability on the Community’s part. There is therefore no need in the present case to establish whether the Commission’s inaction was administrative or legislative in nature, or to determine the exact scope of its discretion in setting MRLs.’ 35 With regard to the existence of a causal link between the Commission’s inaction and the harm suffered by the then applicants, the Court of First Instance held: ‘107 The Commission’s argument that there is no causal link between its inaction and the damage sustained, on the ground that it is for the competent national authorities to adopt marketing authorisation decisions, cannot be accepted. Indeed, if national authorities have withdrawn or suspended marketing authorisations or suspended procedures for issuing such authorisations because no MRL has been fixed for progesterone, they did so simply in order to comply with the prohibition under Article 14 of the 1990 Regulation and Article 4(2) of Council Directive 81/851/EEC of 28 September 1981 on the approximation of the laws of the Member States relating to veterinary medicinal products (OJ 1981 L 317, p. 1) (now Article 6 of Directive 2001/82/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to veterinary medicinal products (OJ 2001 L 311, p. 1). That being so, the damage is attributable to the Commission’s inaction. …’ 36 The Court of First Instance allowed the parties a six-month period to reach an agreement on the amount of damages, failing which it would itself rule on the matter. The forms of order sought by the parties37 The Commission submits that the Court should set aside the judgment under appeal as regards the actions for damages, rule on the substance of the applications for damages by dismissing them as unfounded, and order CEVA and Pfizer to pay the costs. 38 CEVA and Pfizer, supported by IFAH, submit, primarily, that the appeal should be dismissed and the Commission ordered to pay the costs. 39 CEVA and Pfizer had brought a cross-appeal by which they sought to have the judgment under appeal set aside to the extent to which it dismissed the action concerning the failure to act. They withdrew that cross-appeal following the adoption of Regulation No 1873/2003. The appeal40 The Commission puts forward five grounds of appeal: error in the interpretation and application of Article 14 of Regulation No 2377/90; error in the interpretation and application of the principle of good administration; misconstruction of the evidence, or at least insufficient reasons in that regard; error in the interpretation and application of Article 288 EC; and failure to rule on the objection of inadmissibility which the Commission had raised against the action brought by Pfizer for failure to act. The ground of appeal alleging an error in the interpretation and application of Article 14 of Regulation No 2377/90 Arguments of the parties41 According to the Commission, the Court of First Instance, in paragraphs 101 and 102 of the judgment under appeal, interpreted Article 14 of Regulation No 2377/90 as imposing an obligation on the Commission to act before 1 January 2000. The Commission contends that it was under no absolute obligation to take a decision on the applications submitted before that date. That time-limit was nothing more than a default risk management rule in the sense that, if the risk assessment was not completed in time, only the administration of veterinary medicinal products containing the substances in question to food-producing animals would be prohibited for as long as those substances were not placed on one of the first three annexes to Regulation No 2377/90. 42 CEVA and Pfizer submit that the ground is new and, for that reason, inadmissible. In the alternative, they argue that the Commission itself acknowledged that it was under an obligation to act before 1 January 2000. The interpretation supported by the Commission would have the consequence that the substances which had not been examined prior to that date would become de facto prohibited, something which would have been contrary to the legislative intention of maintaining veterinary medicinal products on the market. Findings of the Court43 With regard to the admissibility of this ground, it is clear from the documents before the Court of First Instance that the issue of the binding nature of the date set out in Article 14 of Regulation No 2377/90 was raised by CEVA and Pfizer, inter alia in points 51 to 57 of the application in Case T-344/00 and in points 44 to 49 of the application in Case T-345/00, and that the Commission addressed that issue, inter alia in points 53 to 55 and in points 51 to 55 of its respective statements in defence in those two cases. The objection of inadmissibility raised by CEVA and Pfizer in which they contend that that ground is new must for that reason be rejected. 44 On the merits, it must be noted that the wording of Article 14 of Regulation No 2377/90 is limited to stating that, with effect from the date indicated, the administration to food-producing animals of veterinary medicinal products containing pharmacologically active substances which are not mentioned in Annexes I, II or III is to be prohibited within the Community. That wording does not allow the inference to be drawn, as CEVA and Pfizer contend, that that date constituted for the Commission a time-limit by which it was obligated to ensure that the substances in question would be included in the corresponding annexes to Regulation No 2377/90. 45 However, the indication of a date with effect from which the administration of veterinary medicinal products containing active substances is to be prohibited unless those substances are included on one of the lists provided for by Regulation No 2377/90 does mean that the absence of a decision on that point must be justified. 46 It does not follow from paragraphs 101 and 102 of the judgment under appeal that the Court of First Instance interpreted Article 14 of Regulation No 2377/90 any differently and derived from it, as the Commission contends, an obligation on that institution to have concluded the appraisal and classified the substances concerned before the date indicated. The Court of First Instance does not state that the Commission was under an obligation to take a formal decision before 1 January 2000 but confines itself to establishing that the absence of a decision after that date was not justified. 47 In those circumstances, the ground must be rejected. The ground of appeal alleging misconstruction of the evidence or, in any event, insufficient reasons in that regard48 By this ground of appeal, the Commission argues that, in paragraph 101 of the judgment under appeal, the Court of First Instance misconstrued the evidence which the Commission had adduced in order to establish that there was scientific uncertainty in so far as it failed to take all of the factual information into account. The Court of First Instance overlooked entirely the relevance of scientific data other than the opinion of the CVMP, in particular the evaluation of progesterone-related risks conducted by the competent committee, namely the SCVPH. The extreme brevity of the reasoning of the Court of First Instance may also be regarded as constituting inadequate reasoning. 49 In response, CEVA and Pfizer state that, in addition to the fact that it is not its function to rule on scientific issues, the Court of First Instance took due account of the scientific difficulties presented by the progesterone file and the findings of the CVMP, to which the new data on the use of the hormone in question had been submitted. 50 While it is for the Court of First Instance alone to assess the value to be attached to the items of evidence adduced before it, and while it cannot be required to give express reasons for its assessment of the value of each piece of evidence presented to it, in particular where it considers that evidence to be unimportant or irrelevant to the outcome of the dispute (Case C-237/98 P Dorsch Consult v Council and Commission [2000] ECR I‑4549, paragraphs 50 and 51), the Court of First Instance is none the less obligated to provide reasons which will allow the Court to exercise its judicial review. Those reasons must make it possible for the Court to review any distortion of the evidence submitted to the Court of First Instance. 51 In the present case, it is clear from the documents before the Court of First Instance that the Commission explained, in point 23 of its statement in defence in Cases T-344/00 and T-345/00, that ‘when [it] received on 6 January 2000 the opinion of the CVMP on the hormones, including progesterone, it found itself faced with divergent and in some respects conflicting scientific information.’ The Commission stressed in particular the differences between the opinions of the CVMP, the SCVPH, the JECFA and the IARC. 52 In paragraph 101 of the judgment under appeal, the Court of First Instance referred to the fact that ‘the CVMP entirely confirmed its first opinion, even after taking into consideration the new scientific data presented to it by the Commission’ and to the ‘fact that the Commission itself [had] always maintained the view that progesterone should continue to be authorised for therapeutic and zootechnical treatment’ for the purpose of concluding that the Commission had disregarded the legitimate interests of the then applicants in a clear and serious way by failing to adopt the measures required for the continued use of progesterone, for therapeutic and zootechnical purposes, after 1 January 2000. 53 The Court of First Instance thus confined itself to referring to the second opinion of the CVMP without explaining why the Commission was obliged to follow that opinion, and disregarded the differing opinions from other sources, which, in accordance with the third recital in the preamble to Regulation No 2377/90, had to be regarded as being relevant, such as the SCVPH, the JECFA or the IARC. That sole reference, without any mention of the other opinions available, does not allow the Court to identify the link which the Court of First Instance established between the opinion of the CVMP and the consequences in law which it derived from that opinion. It follows that the Court of First Instance failed to provide adequate reasoning for its judgment on that point. 54 The reference to the fact that the Commission had always taken the view that the use of progesterone had to continue to be authorised for therapeutic or zootechnical purposes cannot remedy that shortcoming. That designation of the Commission’s conduct, in addition to being itself bereft of any indication as to the findings on which it is based, provides no clearer details as to the scope which the Court of First Instance attributed to the second opinion of the CVMP. 55 It follows that the ground must be upheld. The ground of appeal alleging a mistaken interpretation and application of Article 288 EC56 By this ground of appeal the Commission argues that, in holding that the conditions for establishing the Community’s non-contractual liability had been satisfied, the Court of First Instance committed two errors of law. 57 First, it submits, the Court of First Instance erred in taking the view, in paragraph 103 of the judgment under appeal, after having found that the Commission’s conduct constituted a clear and serious infringement of the principle of sound administration, that there was no need in the case to determine the exact scope of the Commission’s discretion in setting MRLs. That reasoning, the Commission argues, is erroneous inasmuch as an analysis of the seriousness of the alleged infringement presupposes an analysis of the degree of discretion enjoyed by the institution concerned. 58 Second, in holding, in paragraph 107 of the judgment under appeal, that there was a causal link between the Commission’s inaction and the damage sustained by CEVA and Pfizer, that is to say, the impossibility which they faced of selling their products in the Community as from 1 January 2000, the Court of First Instance, according to the Commission, misinterpreted the provisions of Regulation No 2377/90 and its relationship with other relevant provisions of Community law, in particular Directive 81/851. 59 CEVA and Pfizer take the view that the Commission was under an obligation to take the measures necessary to guarantee the continued marketing and administration to food-producing animals of veterinary medicinal products containing progesterone after 1 January 2000. The absence of any action by the Commission to guarantee their legitimate expectations and rights constitutes, in their opinion, a serious and manifest breach of that obligation, irrespective of its exact nature. 60 So far as concerns the existence of a causal link, CEVA and Pfizer argue that the failure of the Commission to establish an MRL had the result that the veterinary medicinal products containing progesterone could no longer be administered and that the national authorities withdrew or suspended marketing authorisations for those products. 61 The second paragraph of Article 288 EC requires the Community, in the case of non-contractual liability, to make good, in accordance with the general principles common to the laws of the Member States, any damage caused by its institutions or servants in the performance of their duties. 62 The system of rules which the Court has worked out with regard to that provision takes into account, inter alia, the complexity of the situations to be regulated, difficulties in the application or interpretation of the texts and, more particularly, the margin of discretion available to the author of the act in question (Joined Cases C-46/93 and C-48/93 Brasserie du Pêcheur and Factortame [1996] ECR I‑1029, paragraph 43; Case C-352/98 P Bergaderm and Goupil v Commission [2000] ECR I‑5291, paragraph 40; Case C-312/00 P Commission v Camar and Tico [2002] ECR I‑11355, paragraph 52; and Case C-472/00 P Commission v Fresh Marine [2003] ECR I‑7541, paragraph 24). 63 The Court has ruled that Community law confers a right to reparation where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and, finally, there must be a direct causal link between the breach of the obligation devolving on the institution and the damage sustained by the injured parties (Brasserie du Pêcheur and Factortame, paragraph 51; Bergaderm and Goupil v Commission, paragraphs 41 and 42; Commission v Camar and Tico, paragraph 53; and Commission v Fresh Marine, paragraph 25, all cited above). 64 With regard to the second condition, the Court has stated that the decisive test for determining whether a breach of Community law is sufficiently serious is whether the Community institution concerned manifestly and gravely disregarded the limits on its discretion (Brasserie du Pêcheur and Factortame, paragraph 55; Bergaderm and Goupil v Commission, paragraph 43; Commission v Camar and Tico, paragraph 54; and Commission v Fresh Marine, paragraph 26). 65 Where that institution has only a considerably reduced, or even no, discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach (Bergaderm and Goupil v Commission, paragraph 44; Commission v Camar and Tico, paragraph 54; and Commission v Fresh Marine, paragraph 26). 66 The determining factor in deciding whether there has been such an infringement is therefore the discretion available to the institution concerned (Bergaderm and Goupil v Commission, paragraph 46; Commission v Camar and Tico, paragraph 55; and Commission v Fresh Marine, paragraph 27). 67 While the question as to the scope of the Commission’s discretion in establishing MRLs had been the subject of discussion between the parties, with the applicants at the time arguing that the Commission did not have any discretion and the Commission, on the contrary, arguing that it had a broad discretion (see paragraphs 61, 64 and 65 of the judgment under appeal), the Court of First Instance did not at any point in the judgment under appeal explain in detail the discretion which the Commission enjoys in establishing MRLs. 68 Nor did the Court of First Instance set out adequately for legal purposes the reasons or circumstances which might exceptionally have explained why such an analysis would serve no purpose (for the inadequacy of the reasoning given in paragraph 101 of the judgment under appeal, see above paragraphs 52 to 54 of the present judgment). 69 It must for those reasons be concluded that the Court of First Instance erred in law in holding in paragraph 103 of the judgment under appeal, without having established the scope of the discretion enjoyed by the Commission, that the Commission’s inaction between 1 January 2000 and 25 July 2001 constituted a clear and serious breach of Community law giving rise to liability on the part of the Community. 70 The ground of appeal must therefore be upheld.71 In those circumstances, without it being necessary to rule on the other grounds adduced in support of the appeal, in particular that alleging misinterpretation and incorrect application of the principle of sound administration to the facts of the present case, the appeal must be upheld and the judgment under appeal set aside to the extent to which it found that there had been inaction on the part of the Commission between 1 January 2000 and 25 July 2001 of such kind as to give rise to liability on the part of the Community. Substance72 Under the first paragraph of Article 61 of the Statute of the Court of Justice, the latter may, where it sets aside a judgment of the Court of First Instance, itself give final judgment in the matter where the state of the proceedings so permits. 73 In this case, it is first necessary to determine whether the Commission’s conduct between 1 January 2000 and 25 July 2001, the period in respect of which the Court of First Instance found that there had been inaction of such kind as to give rise to liability on the part of the Community, constitutes a clear and serious disregard of the limits imposed on the Commission’s discretion. 74 It is thus necessary to determine the extent of that discretion.75 It must be remembered in this regard that the Court, ruling in relation to a legal procedure similar to that provided for under Regulation No 2377/90, held that, in delicate and controversial cases, the Commission must have a sufficiently broad discretion and enough time to submit for re-examination the scientific questions which determine its decision (see Bergaderm and Goupil v Commission, paragraph 66). 76 That case-law is germane to the present case in the light of the recitals in the preamble to Regulation No 2377/90.77 It follows from the third recital in the preamble to Regulation No 2377/90 that the establishment of MRLs for veterinary medicinal products administered to food-producing animals is intended to protect public health. 78 The third recital also states that MRLs are to be established in accordance with generally recognised principles of safety assessment, taking into account any other scientific assessment of the safety of the substances concerned which may have been undertaken by international organisations. 79 The sixth recital in the preamble states that the procedure for the establishment of MRLs at Community level must involve a single scientific assessment of the highest possible quality. 80 It follows that the Commission must be given a discretion which is sufficient to allow it to determine, on a fully informed basis, the measures that are necessary and appropriate for the protection of public health. 81 As the Court of First Instance properly recognised in paragraph 100 of the judgment under appeal, the progesterone file is one that is particularly complex. 82 That complexity is attributable, inter alia, to the facts, as noted by the Court of First Instance in paragraph 100 of the judgment under appeal, that progesterone is an endogenous substance and that there are at present no reliable analytical methods by which to check abuse of that substance. It is apparent from the documents before the Court of First Instance that, although an application to have an MRL established for progesterone had been before it since 1993, the Commission found itself facing a situation of continuing scientific uncertainty characterised by divergences between the scientific opinions adopted between 1996 and 1999 by the CVMP, on the one hand, and, on the other, the SCVPH and other international scientific bodies, which the Commission, in accordance with the third recital in the preamble to Regulation No 2377/90, takes into account. 83 In those circumstances, the Commission was entitled to seek an additional opinion from the CVMP (Case C-151/98 P Pharos v Commission [1999] ECR I‑8157, paragraph 26), as the Court of First Instance, moreover, recognised in paragraph 99 of the judgment under appeal. 84 In its second opinion of December 1999 the CVMP had maintained its recommendation in favour of including progesterone in Annex II to Regulation No 2377/90, which is reserved for substances in respect of which it does not appear necessary to establish an MRL. In its report of April 1999 the SCVPH had concluded that greater exposure to hormones might be associated with an increased risk of cancer and negative effects on development and that continued exposure, even at small dosages, appeared likely to increase that risk further, even though no quantification was possible at that stage. 85 In those circumstances, it does not appear unreasonable for the Commission to have awaited the adoption by the SCVPH in May 2000 of a re-evaluation of its report of April 1999 prior to taking a decision on the authorisation in principle of the use of progesterone for therapeutic purposes. 86 The Commission adopted a position on that issue on 24 May 2000 when it adopted a draft directive amending Directive 96/22, which provided inter alia for Member States to prohibit on a temporary basis the administration of progesterone to food-producing animals, while maintaining the possibility of derogating in the case of administration for therapeutic or zootechnical purposes. 87 That position on the maintenance of the use of progesterone for therapeutic or zootechnical purposes constituted a stage which necessarily had to precede the taking of a position on the establishment of an MRL for that substance, since an MRL may be established for a pharmacologically active substance only if that substance is intended to be placed on the market (Case C‑248/99 P France v Monsanto and Commission [2002] ECR I‑1, paragraph 80). 88 In its opinion of December 1999 the CVMP had recommended that progesterone be included in Annex II to Regulation No 2377/90 and, as a consequence, that opinion did not contain any recommendation as to the establishment of an MRL. The Commission explained that, in view of the opinion of the SCVPH, it considered that that direction did not amount to an acceptable risk management measure and that, as a result, it decided to propose that progesterone be included in Annex I to that regulation. That meant that an MRL would be established in the draft regulation to be submitted. According to the Commission, in the light of the continuing scientific uncertainties, that operation was complex in nature, a fact which explains why the Commission was not able to submit the draft regulation until 25 July 2001. 89 Regard being had to the extent of the discretion available to the Commission and to all of the factual circumstances, it does not appear that, in taking that decision on the basis of public-health considerations, the Commission disregarded in a clear and serious manner the limits on its discretion. 90 In paragraph 102 of the judgment under appeal, the Court of First Instance ruled that, even if the scientific and political complexities of the file were such as to prevent the Commission from adopting, shortly after the CVMP had issued its second opinion, a draft regulation conforming to that opinion, the Commission ought none the less to have adopted measures to safeguard the interests of CEVA and Pfizer. 91 With regard to the first measure referred to by the Court of First Instance, that is to say, the Commission’s adoption of draft measures establishing a provisional MRL on the basis of Article 4 of Regulation No 2377/90, it must be borne in mind that that article applies only ‘provided that there are no grounds for supposing that residues of the substance concerned at the level proposed present a hazard for the health of the consumer’, a condition which precisely was not satisfied in a situation of scientific uncertainty and disquiet in regard to public health. 92 With regard to the second measure referred to by the Court of First Instance by way of alternative argument, that is to say, a new deferral by the Commission of the time-limit laid down in Article 14 of Regulation No 2377/90, suffice it to point out that the deferral of that time-limit would also not have been an appropriate measure for safeguarding public health. 93 In the light of all those considerations, it therefore does not appear that, in not submitting a draft regulation prior to 25 July 2001, the Commission breached Community law in a sufficiently serious way as to give rise to liability on the part of the Community. 94 Accordingly, without it being necessary to examine the other conditions necessary for the establishment of non-contractual liability on the part of the Community, the actions must be dismissed. Costs95 Under the first paragraph of Article 122 of the Rules of Procedure, where the appeal is well founded and the Court itself gives final judgment in the case, the Court is required to make a decision as to costs. Under Article 69(2) of the Rules of Procedure, applicable to appeal proceedings by virtue of Article 118 thereof, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. 96 CEVA and Pfizer have been unsuccessful in their defence and the Commission has asked for the costs to be awarded against them. CEVA and Pfizer must accordingly be ordered to pay the costs of both the proceedings before the Court of First Instance and the present proceedings. 97 In accordance with the third subparagraph of Article 69(4) of the Rules of Procedure, applicable to appeal proceedings by virtue of Article 118 thereof, IFAH shall bear its own costs in both the proceedings before the Court of First Instance and the present proceedings. On those grounds, the Court (Grand Chamber) hereby:1. Sets aside the judgment of the Court of First Instance of the European Communities of 26 February 2003 in Joined Cases T‑344/00 and T‑345/00 CEVA and Pharmacia Enterprises v Commission in so far as it established that there had been inaction on the part of the Commission of the European Communities between 1 January 2000 and 25 July 2001 of such a kind as to give rise to liability on the part of the Community;2. Dismisses the actions;3. Orders CEVA Santé Animale SA and Pfizer Enterprises Sàrl to pay the costs of both the proceedings before the Court of First Instance of the European Communities and the present proceedings;4. Orders the International Federation for Animal Health to bear its own costs in both the proceedings before the Court of First Instance and the present proceedings.[Signatures]* Language of the case: English. | db983-c6ba5e8-4533 | EN |
THE COURT CONFIRMS THE VALIDITY OF THE COMMUNITY DIRECTIVE ON FOOD SUPPLEMENTS | The Queen, on the application of Alliance for Natural Health and OthersvSecretary of State for Health and National Assembly for Wales(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court)) (Approximation of laws – Food supplements – Directive 2002/46/EC – Prohibition on trade in products not complying with the directive – Validity – Legal basis – Article 95 EC – Articles 28 EC and 30 EC – Regulation (EC) No 3285/94 – Principles of subsidiarity, proportionality and equal treatment – Right to property – Freedom to pursue an economic activity – Obligation to state reasons)Opinion of Advocate General Geelhoed delivered on 5 April 2005 Judgment of the Court (Grand Chamber), 12 July 2005 Summary of the Judgment1. Approximation of laws — Food supplements — Directive 2002/46 — Prohibition on trade in food supplements containing certain vitamins or certain minerals — Measure aimed at improving the functioning of the internal market — Legal basis — Article 95 EC — Need to ensure a high level of human health protection(Art. 95 EC; European Parliament and Council Directive 2002/46, Arts 3, 4(1) and 15(b), and Annexes I and II)2. Free movement of goods — Quantitative restrictions — Measures having equivalent effect — Prohibition, arising from a Community measure, on marketing food supplements containing certain vitamins or certain minerals — Not permissible — Justification — Protection of public health — Conditions(Arts 28 EC and 30 EC; European Parliament and Council Directive 2002/46, Arts 3, 4(1), 4(5) and 15(b), and Annexes I and II)3. Common commercial policy — Regulation by the Community institutions — Regulation No 3285/94 — Purpose — Liberalisation of imports from non-member States — Effect on the conditions for placing the imported products on the market — None — Effect(Council Regulation No 3285/94)4. Approximation of laws — Food supplements — Directive 2002/46 — Harmonisation measures — Prohibition on marketing food supplements containing certain vitamins or certain minerals — Infringement of the principle of subsidiarity — None(Arts 5, second subpara., EC and 95(3) EC; European Parliament and Council Directive 2002/46, Arts 3, 4(1) and 15(a) and (b))5. Approximation of laws — Food supplements — Directive 2002/46 — Harmonisation measures — Prohibition on marketing food supplements containing certain vitamins or certain minerals — Infringement of the principle of equal treatment — None(European Parliament and Council Directive 2002/46, 11th recital, Arts 3, 4(1) and 15(a) and (b), and Annex II)6. Approximation of laws — Food supplements — Directive 2002/46 — Harmonisation measures — Prohibition on marketing food supplements containing certain vitamins or certain minerals — Failure to respect the private and family life of consumers — None(Art. 6(2) EU; European Parliament and Council Directive 2002/46, Arts 3, 4(1) and 15(b))7. Community law — Principles — Fundamental rights –– Right to property –– Freedom to pursue a trade or profession –– Restrictions –– Prohibition, arising from a Community measure, on marketing food supplements containing certain vitamins or certain minerals –– Breach of the right to property –– None –– Breach of the right of manufacturers of those products freely to pursue a trade or profession –– Whether permissible –– Restriction justified by the general interest –– Breach of the principle of proportionality –– None(European Parliament and Council Directive 2002/46, Arts 3, 4(1) and 15(b))1. When there are obstacles to trade, or it is likely that such obstacles will emerge in the future, because the Member States have taken, or are about to take, divergent measures with respect to a product or a class of products, which bring about different levels of protection and thereby prevent the product or products concerned from moving freely within the Community, Article 95 EC authorises the Community legislature to intervene by adopting appropriate measures. Consequently, Article 95 EC constitutes the only appropriate legal basis for Articles 3, 4(1) and 15(b) of Directive 2002/46 relating to food supplements, owing to the differing national rules to which they were subject before the adoption of the directive and the inherent risk of their free movement being impeded, which may have a direct impact on the functioning of the internal market in this field. Similar provisions must, however, respect both Article 95(3) EC, which explicitly requires that, in achieving harmonisation, a high level of protection of human health should be guaranteed, and the legal principles referred to in the Treaty or identified by the case‑law, in particular, the principle of proportionality. Thus, the fact that human health considerations played a part in the decision to prohibit marketing food supplements containing the vitamins, minerals or other vitamin or mineral substances which are not included in the lists annexed to that directive, resulting from the combined provisions of Article 3, 4(1) and 15(b) of Directive 2002/46, cannot invalidate the foregoing assessment. (see paras 31-32, 35, 40, 42)2. The provisions of Articles 3, Article 4(1) and 15(b) of Directive 2002/46 relating to food supplements constitute a restriction on the free movement of goods between Member States for the purposes of Article 28 EC. By prohibiting the marketing in the Community of food supplements containing vitamins, minerals, or vitamin and mineral substances not included on the lists annexed to that directive, those provisions are capable of restricting the free movement of food supplements within the Community. Such a measure, adopted on the basis of considerations related to the protection of human health, can nevertheless be justified, pursuant to Article 30 EC, provided that it is necessary and proportionate in relation to the objective pursued. In order to satisfy the requirement of proportionality, the prohibition on marketing products containing substances not included on the positive lists laid down in the applicable legislation must be accompanied by a procedure designed to allow a given substance to be added to those lists and the procedure must comply with the general principles of Community law, in particular the principle of sound administration and legal certainty. Such a procedure must be accessible in the sense that it must be expressly mentioned in a measure of general application which is binding on the authorities concerned. It must be capable of being completed within a reasonable time. An application to have a substance included on a list of authorised substances may be refused by the competent authorities only on the basis of a full assessment of the risk posed to public health by the substance, established on the basis of the most reliable scientific data available and the most recent results of international research. If the procedure results in a refusal, the refusal must be open to challenge before the courts. The procedure referred to in Article 4(5) of Directive 2002/46, which allows a vitamin, a mineral, or a vitamin and mineral substance to be added to the lists mentioned above, fulfils those conditions. (see paras 48-51, 72-74, 89)3. The objective of Regulation No 3285/94 on the common rules for imports and repealing Regulation No 518/94 is to liberalise imports of products originating in non-member States. However, it does not aim to liberalise the placing on the market of those products, which takes place after import. It follows that that regulation is of no relevance for the purpose of assessing the legality of Community measures whose effect is to prohibit the placing on the market within the Community of products imported from non-member States which do not satisfy the conditions laid down for such placing on the market for reasons relating to the protection of human health. (see paras 95-96)4. Articles 3, 4(1) and 15(b) of Directive 2002/46 relating to food supplements do not infringe the principle of subsidiarity laid down in the second subparagraph of Article 5 EC. The prohibition, under those provisions, on marketing food supplements which do not comply with Directive 2002/46, supplemented by the obligation of the Member States under Article 15(a) of the directive to permit trade in food supplements complying with that directive, has the objective of removing barriers resulting from differences between the national rules on vitamins, minerals and vitamin or mineral substances authorised or prohibited in the manufacture of food supplements, whilst ensuring, in accordance with Article 95(3) EC, a high level of human-health protection. To leave Member States the task of regulating trade in food supplements which do not comply with Directive 2002/46 would perpetuate the uncoordinated development of national rules and, consequently, obstacles to trade between Member States and distortions of competition so far as those products are concerned. Thus, the objective pursued by Articles 3, 4(1) and 15(b) of the directive cannot be satisfactorily achieved by action taken by the Member States alone and requires action to be taken by the Community. (see paras 105-108)5. Articles 3, 4(1) and 15(b) of Directive 2002/46 relating to food supplements do not infringe the principle of equal treatment.The prohibition, under those provisions, on marketing food supplements containing the vitamin and mineral substances which are not included on the positive list in Annex II to Directive 2002/46 is based on the fact that the substances had not, at the time when that directive was adopted, been subject to a scientific evaluation by the competent authorities so as to ensure their conformity with the criteria of safety and bioavailability referred to in the 11th recital of the preamble to the directive, unlike the substances which are included in it. That difference in situations therefore permits a difference in treatment, and an infringement of the principle of equal treatment cannot be successfully pleaded. (see paras 116, 118-119)6. The fact that Articles 3, 4(1) and 15(b) of Directive 2002/46 relating to food supplements may deprive people of the right to consume food supplements which do not comply with that directive cannot be regarded as amounting to a breach of respect for their private and family life within the meaning of Article 8 of the European Convention on Human Rights. (see paras 123-124)7. The right to property, and likewise the freedom to pursue an economic activity, form part of the general principles of Community law. However, those principles are not absolute but must be viewed in relation to their social function. Consequently, the exercise of the right to property and the freedom to pursue an economic activity may be restricted, provided that any restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute in relation to the aim pursued a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed. In that respect, the prohibition on marketing and placing on the Community market food supplements which do not comply with that directive, which arises from the provisions of Articles 3, 4(1) and 15(b) of Directive 2002/46 relating to food supplements, in no way calls property rights into question. No economic operator can claim a right to property in a market share, even if it held it at a time before the introduction of a measure affecting the market, since such a market share constitutes only a momentary economic position exposed to the risks of changing circumstances. Conversely, that prohibition is capable of restricting the freedom of manufacturers of food supplements to carry on their business activities. However, in the light of the public interest objective of the protection of human health pursued by the prohibition, such a restriction cannot be found to constitute a disproportionate impairment of the right to exercise the business activities of these manufacturers. (see paras 126-129)JUDGMENT OF THE COURT (Grand Chamber)12 July 2005 (*) (Approximation of laws – Food supplements – Directive 2002/46/EC – Prohibition on trade in products not complying with the directive – Validity – Legal basis – Article 95 EC – Articles 28 EC and 30 EC – Regulation (EC) No 3285/94 – Principles of subsidiarity, proportionality and equal treatment – Right to property – Freedom to pursue an economic activity – Obligation to state reasons)In Joined Cases C-154/04 and C-155/04,REFERENCES for a preliminary ruling under Article 234 EC from the High Court of Justice England and Wales, Queen’s Bench Division (Administrative Court), made by decisions of 17 March 2004, received at the Court on 26 March 2004, in the proceedings The Queen, on the application of: Alliance for Natural Health (C-154/04), Nutri-Link LtdSecretary of State for HealthandNational Association of Health Stores (C-155/04), Health Food Manufacturers LtdSecretary of State for Health,National Assembly for Wales, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K. Lenaerts (Rapporteur), Presidents of Chambers, C. Gulmann, A. La Pergola, J.‑P. Puissochet, R. Schintgen, J. Klučka, U. Lõhmus, E. Levits and A. Ó Caoimh, Judges, Advocate General: L.A. Geelhoed,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 25 January 2005,after considering the observations submitted on behalf of:– the Alliance for Natural Health and Nutri-Link Ltd, by K.P.E. Lasok QC, A. Howard and M. Patchett-Joyce, Barristers,– the National Association of Health Stores and Health Food Manufacturers Ltd, by R. Thompson QC and S. Grodzinski, Barrister,– the United Kingdom Government, by M. Bethell, acting as Agent, and C. Lewis, Barrister,– the Greek Government, by N. Dafniou and G. Karipsiadis, acting as Agents,– the Portuguese Government, by L. Fernandes, acting as Agent,– the European Parliament, by M. Moore and U. Rösslein, acting as Agents,– the Council of the European Union, by E. Karlsson and E. Finnegan, acting as Agents,– the Commission of the European Communities, by J.‑P. Keppenne and M. Shotter, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 5 April 2005,gives the followingJudgment1 These references for a preliminary ruling concern the validity of Articles 3, 4(1) and 15(b) of Directive 2002/46/EC of the European Parliament and of the Council of 10 June 2002 on the approximation of the laws of the Member States relating to food supplements (OJ 2002 L 183, p. 51). 2 The references were made following applications brought (i) on 10 October 2003 by the National Association of Health Stores and Health Food Manufacturers Ltd (Case C‑155/04) and (ii) on 13 October 2003 by the Alliance for Natural Health and Nutri-Link Ltd (Case C‑154/04) seeking leave for judicial review of the Food Supplements (England) Regulations 2003 and the Food Supplements (Wales) Regulations 2003 (‘the Food Supplements Regulations’). Those two sets of regulations transpose Directive 2002/46 into the law of England and Wales. Law3 Directive 2002/46, adopted on the basis of Article 95 EC, ‘concerns food supplements marketed as foodstuffs and presented as such’, as is clear from Article 1(1) of the directive. 4 According to the first recital of the preamble to the directive, ‘[t]here is an increasing number of products marketed in the Community as foods containing concentrated sources of nutrients and presented for supplementing the intake of those nutrients from the normal diet’. 5 The second recital of the preamble to the directive states:‘Those products are regulated in Member States by differing national rules that may impede their free movement, create unequal conditions of competition, and thus have a direct impact on the functioning of the internal market. It is therefore necessary to adopt Community rules on those products marketed as foodstuffs.’ 6 The 5th recital states that ‘[i]n order to ensure a high level of protection for consumers and facilitate their choice, the products that will be put on to the market must be safe and bear adequate and appropriate labelling’. 7 It is clear from the 6th, 7th and 8th recitals to the directive that, given the wide range of nutrients and other ingredients which might be present in food supplements, including, but not limited to, vitamins, minerals, amino acids, essential fatty acids, fibre and various plants and herbal extracts, the Community legislature gave priority to laying down measures for vitamins and minerals used as ingredients in food supplements. It is stated that other Community rules for nutrients other than vitamins and minerals, and for other substances with a nutritional or physiological effect used as ingredients in food supplements, are to be adopted at a later stage once adequate and appropriate scientific data are available and that until those Community rules are adopted national rules concerning those nutrients and substances can continue to be applied in compliance with the provisions of the EC Treaty. 8 The 9th, 10th, 11th and 12th recitals to Directive 2002/46 are worded as follows:‘(9) Only vitamins and minerals normally found in, and consumed as part of, the diet should be allowed to be present in food supplements although this does not mean that their presence therein is necessary. Controversy as to the identity of those nutrients that could potentially arise should be avoided. Therefore, it is appropriate to establish a positive list of those vitamins and minerals. (10) There is a wide range of vitamin preparations and mineral substances used in the manufacture of food supplements currently marketed in some Member States that have not been evaluated by the Scientific Committee on Food and consequently are not included in the positive lists. These should be submitted to the European Food Safety Authority for urgent evaluation, as soon as appropriate files are presented by the interested parties. (11) The chemical substances used as sources of vitamins and minerals in the manufacture of food supplements should be safe and also be available to be used by the body. For this reason, a positive list of those substances should also be established. Such substances as have been approved by the Scientific Committee on Food, on the basis of the said criteria, for use in the manufacture of foods intended for infants and young children and other foods for particular nutritional uses can also be used in the manufacture of food supplements. (12) In order to keep up with scientific and technological developments it is important to revise the lists promptly, when necessary. Such revisions would be implementing measures of a technical nature and their adoption should be entrusted to the Commission in order to simplify and expedite the procedure.’ 9 For the purposes of Directive 2002/46 ‘food supplements’ is defined by Article 2(a) of the directive as ‘foodstuffs the purpose of which is to supplement the normal diet and which are concentrated sources of nutrients or other substances with a nutritional or physiological effect, alone or in combination, marketed in dose form, namely forms such as capsules, pastilles, tablets, pills and other similar forms, sachets of powder, ampoules of liquids, drop dispensing bottles, and other similar forms of liquids and powders designed to be taken in measured small unit quantities’. 10 Article 2(b) of the directive defines ‘nutrients’ as vitamins and minerals.11 Under Article 3 of Directive 2002/46, Member States are to ensure that food supplements may be marketed within the Community only if they comply with the rules laid down in the directive. 12 Article 4 of Directive 2002/46 provides:‘1. Only vitamins and minerals listed in Annex I, in the forms listed in Annex II, may be used for the manufacture of food supplements, subject to paragraph 6. …5. Modifications to the lists referred to in paragraph 1 shall be adopted in accordance with the procedure referred to in Article 13(2). 6. By way of derogation from paragraph 1 and until 31 December 2009, Member States may allow in their territory the use of vitamins and minerals not listed in Annex I, or in forms not listed in Annex II, provided that: (a) the substance in question is used in one or more food supplements marketed in the Community on the date of entry into force of this Directive, (b) the European Food Safety Authority has not given an unfavourable opinion in respect of the use of that substance, or its use in that form, in the manufacture of food supplements, on the basis of a dossier supporting use of the substance in question to be submitted to the Commission by the Member State not later than 12 July 2005. 7. Notwithstanding paragraph 6, Member States may, in compliance with the rules of the Treaty, continue to apply existing national restrictions or bans on trade in food supplements containing vitamins and minerals not included in the list in Annex I or in the forms not listed in Annex II. … ’13 Article 11 of Directive 2002/46 provides:‘1. Without prejudice to Article 4(7), Member States shall not, for reasons related to their composition, manufacturing specifications, presentation or labelling, prohibit or restrict trade in products referred to in Article 1 which comply with this Directive and, where appropriate, with Community acts adopted in implementation of this Directive. 2. Without prejudice to the Treaty, in particular Articles 28 and 30 thereof, paragraph 1 shall not affect national provisions which are applicable in the absence of Community acts adopted under this Directive’. 14 Article 13 of the Directive is worded as follows:‘1. The Commission shall be assisted by the Standing Committee on the Food Chain and Animal Health instituted by Regulation (EC) No 178/2002 … (hereinafter referred to as “the Committee”). 2. Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months.3. The Committee shall adopt its rules of procedure.’15 Article 14 of Directive 2002/46 provides:‘Provisions that may have an effect upon public health shall be adopted after consultation with the European Food Safety Authority.’16 Article 15 of the directive provides:‘Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 31 July 2003. They shall forthwith inform the Commission thereof. Those laws, regulations and administrative provisions shall be applied in such a way as to:(a) permit trade in products complying with this Directive, from 1 August 2003 at the latest; (b) prohibit trade in products which do not comply with the Directive, from 1 August 2005 at the latest.…’17 Pursuant to Article 16, Directive 2002/46 entered into force on 12 July 2002, the day of its publication in the Official Journal of the European Communities. 18 Directive 2002/46 contains two annexes drawing up lists concerning the ‘[v]itamins and minerals which may be used in the manufacture of food supplements’ and ‘[v]itamin and mineral substances which may be used in the manufacture of food supplements’ (‘the positive lists’). The main actions and the question referred to the Court19 The claimants in Case C‑154/04 are a Europe-wide association of manufacturers, wholesalers, distributors, retailers and consumers of food supplements and a small specialist distributor and retailer of food supplements in the United Kingdom. 20 The claimants in Case C‑155/04 are two trade associations representing around 580 companies, the majority of which are small firms which distribute dietary products in the United Kingdom. 21 All the claimants in the main actions maintain that the provisions of Article 3 in conjunction with those of Article 4(1) and Article 15(b) of Directive 2002/46 are incompatible with Community law and must consequently be declared invalid. Those provisions, which prohibit with effect from 1 August 2005 the marketing of foodstuffs which do not comply with the directive, were transposed into national law by the Food Supplements Regulations. 22 The High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court), granted permission to apply for judicial review and decided to stay the proceedings and to refer to the Court the following question, cast in identical terms in both these cases: ‘Are Articles 3, 4(1), and 15(b) of Directive 200[2]/46/EC invalid by reason of:(a) the inadequacy of Article 95 EC as a legal basis;(b) infringement of (i) Articles 28 EC and 30 EC and/or (ii) Articles 1(2) and 24(2)(a) of Council Regulation (EC) No 3285/94 (of 22 December 1994 on the common rules for imports and repealing Regulation (EC) No 518/94 (OJ 1994 L 349, p. 53)); (c) infringement of the principle of subsidiarity;(d) infringement of the principle of proportionality;(e) infringement of the principle of equal treatment;(f) infringement of Article 6(2) [EU], read in the light of Article 8 and Article 1 of the First Protocol to the European Convention on Human Rights, and of the fundamental right to property and/or the right to carry on an economic activity; (g) infringement of Article 253 EC and/or the duty to give reasons?’23 By order of the President of the Court of 7 May 2004, the national court’s applications to apply to the present cases the accelerated procedure provided for in Article 104a of the Rules of Procedure were dismissed. By the same order, Cases C‑154/04 and C‑155/04 were joined for the purposes of the written and oral procedure and judgment. The question referred to the Court Part (a) of the question24 By part (a) of its question, the national court is asking whether Articles 3, 4(1) and 15(b) of Directive 2002/46 are invalid on the ground that Article 95 EC does not afford them an appropriate legal basis. 25 The claimants in Case C‑154/04 submit that the prohibition arising from those provisions of Directive 2002/46 does not contribute to improving the conditions for the establishment and functioning of the internal market. On the assumption that the reason for the prohibition lies in public-health considerations, reliance on Article 95 EC constitutes a misuse of powers since, under Article 152(4)(c) EC, the Community has no power to harmonise national legislation on human health. 26 The claimants in Case C‑155/04 claim, first, that Articles 3, 4(1) and 15(b) of Directive 2002/46 are contrary to the principle of the free movement of goods within the Community, a principle with which the Community legislature must comply when exercising its powers under Article 95 EC (see Case C‑51/93 Meyhui [1994] ECR I‑3879, paragraphs 10 and 11). Second, the provisions entail direct and immediate restrictions on trade with third countries and should thus have been adopted on the basis of Article 133 EC. 27 In that regard, it must be borne in mind that, as provided for by Article 95(1) EC, the Council of the European Union, acting in accordance with the procedure referred to in Article 251 EC and after consulting the European Economic and Social Committee, is to adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market. 28 By virtue of the Court’s case-law, while a mere finding of disparities between national rules is not sufficient to justify having recourse to Article 95 EC (see, to that effect, Case C‑376/98 Germany v Parliament and Council [2000] ECR I‑8419, paragraph 84), it is, however, otherwise where there are differences between the laws, regulations or administrative provisions of the Member States which are such as to obstruct the fundamental freedoms and thus have a direct effect on the functioning of the internal market (Case C‑434/02 Arnold André [2004] ECR I‑0000, paragraph 30, and Case C‑210/03 Swedish Match [2004] ECR I‑0000, paragraph 29; see also, to that effect, Germany v Parliament and Council, paragraph 95, and Case C‑491/01 British American Tobacco (Investments) and Imperial Tobacco [2002] ECR I‑11453, paragraph 60). 29 It also follows from the Court’s case-law that, although recourse to Article 95 EC as a legal basis is possible if the aim is to prevent the emergence of future obstacles to trade resulting from multifarious development of national laws, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them (Arnold André, paragraph 31, and Swedish Match, paragraph 30; see also, to that effect, Case C‑350/92 Spain v Council [1995] ECR I‑1985, paragraph 35, Germany v Parliament and Council, paragraph 86, Case C‑377/98 Netherlands v Parliament and Council [2001] ECR I‑7079, paragraph 15, and British American Tobacco (Investments) and Imperial Tobacco, paragraph 61). 30 The Court has also held that, provided that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the Community legislature cannot be prevented from relying on that legal basis on the ground that public health protection is a decisive factor in the choices to be made (British American Tobacco (Investments) and Imperial Tobacco, paragraph 62, Arnold André, paragraph 32, and Swedish Match, paragraph 31). 31 It must be noted in that regard that the first subparagraph of Article 152(1) EC provides that a high level of human health protection is to be ensured in the definition and implementation of all Community policies and activities, and that Article 95(3) EC explicitly requires that, in achieving harmonisation, a high level of protection of human health should be guaranteed (British American Tobacco (Investments) and Imperial Tobacco, paragraph 62, Arnold André, paragraph 33, and Swedish Match, paragraph 32). 32 It follows from the foregoing that when there are obstacles to trade, or it is likely that such obstacles will emerge in the future, because the Member States have taken, or are about to take, divergent measures with respect to a product or a class of products, which bring about different levels of protection and thereby prevent the product or products concerned from moving freely within the Community, Article 95 EC authorises the Community legislature to intervene by adopting appropriate measures, in compliance with Article 95(3) EC and with the legal principles mentioned in the Treaty or identified in the case-law, in particular the principle of proportionality (Arnold André, paragraph 34, and Swedish Match, paragraph 33). 33 Depending on the circumstances, those appropriate measures may consist in requiring all the Member States to authorise the marketing of the product or products concerned, subjecting such an obligation of authorisation to certain conditions, or even provisionally or definitively prohibiting the marketing of a product or products (Arnold André, paragraph 35, and Swedish Match, paragraph 34). 34 It is in the light of those principles that it is necessary to ascertain whether the conditions for recourse to Article 95 EC as legal basis were satisfied in the case of the provisions to which the national court’s question refers. 35 According to the second recital to Directive 2002/46, food supplements were regulated, before the directive was adopted, by differing national rules liable to impede their free movement and thus have a direct impact on the functioning of the internal market. 36 As the European Parliament and the Council have noted in their written observations, those statements are borne out by the fact that prior to the adoption of Directive 2002/46 a number of cases were brought before the Court which related to situations in which traders had encountered obstacles when marketing in a Member State other than their State of establishment food supplements lawfully marketed in the latter State. 37 Furthermore, at point 1 of the Explanatory Memorandum to the proposal for a directive of the European Parliament and of the Council on the approximation of the laws of the Member States relating to food supplements (COM(2000) 222 final, presented by the Commission on 10 May 2000 (OJ 2000 C 311 E, p. 207)), it is stated, as the Greek Government, the Council and the Commission have pointed out in their written observations, that before that proposal was presented the Commission services had received ‘a substantial number of complaints from economic operators’ on account of the differences between national rules which ‘the application of the principle of mutual recognition did not succeed in overcoming’. 38 In those circumstances action on the part of the Community legislature on the basis of Article 95 EC was justified in relation to food supplements. 39 It follows from the foregoing that Articles 3, 4(1) and 15(b) of Directive 2002/46, which give rise to a prohibition, with effect from 1 August 2005 at the latest, on marketing food supplements which do not comply with the directive, could be adopted on the basis of Article 95 EC. 40 In view of the cases cited at paragraphs 30 and 31 of this judgment, the fact that human health considerations played a part in the formulation of the provisions concerned cannot invalidate the foregoing assessment. 41 As regards the argument of the claimants in Case C‑155/04 that Articles 3, 4(1) and 15(b) of Directive 2002/46 should be based on Article 133 EC, it must be stated that the fact that those provisions may incidentally affect international trade in food supplements does not make it possible validly to challenge the fact that the primary objective of those provisions is to further the removal of differences between national rules which may affect the functioning of the internal market in that area (see, to that effect, British American Tobacco (Investments) and Imperial Tobacco, paragraph 96). 42 Consequently, Article 95 EC constitutes the only appropriate legal basis for Articles 3, 4(1) and 15(b) of Directive 2002/46.43 It follows that those provisions are not invalid by reason of lack of an appropriate legal basis. Part (b) of the question44 By part (b) of its question, the national court is asking whether Articles 3, 4(1) and 15(b) of Directive 2002/46 are invalid by reason of infringement of Articles 28 EC and 30 EC and/or infringement of Articles 1(2) and 24(2)(a) of Regulation No 3285/94. 45 In both the present cases the claimants in the main actions submit that the prohibition arising from the provisions with which the question referred to the Court is concerned constitutes a restriction on intra-Community and international trade in food supplements hitherto lawfully put into circulation. 46 The claimants in Case C‑155/04 add that neither Article 30 EC nor Article 24(2)(a) of Regulation No 3285/94 can justify the sudden introduction of a restriction on trade in products whose safety had never before been put in doubt. Articles 28 EC and 30 EC47 It must be observed that by virtue of settled case-law the prohibition of quantitative restrictions and of all measures having equivalent effect, laid down in Article 28 EC, applies not only to national measures but also to measures adopted by the Community institutions (see Case 15/83 Denkavit Nederland [1984] ECR 2171, paragraph 15, Meyhui, paragraph 11, Case C‑114/96 Kieffer and Thill [1997] ECR I‑3629, paragraph 27, and Arnold André, paragraph 57). 48 Nevertheless, as Article 30 EC provides, Article 28 EC does not preclude prohibitions or restrictions justified, inter alia, on grounds of protection of the health and life of humans (see Arnold André, paragraph 58, and Swedish Match, paragraph 60). 49 The provisions of Article 3 in conjunction with those of Article 4(1) and 15(b) of Directive 2002/46 constitute a restriction covered by Article 28 EC. By prohibiting the marketing in the Community of food supplements containing vitamins and minerals, or vitamin and mineral substances, not included on the positive lists, those provisions are capable of restricting the free movement of food supplements within the Community. 50 As the Advocate General has stated at point 40 of his Opinion, it is clear from the preamble to Directive 2002/46, and in particular from the 5th, 9th, 10th and 11th recitals thereto, that the Community legislature gives, as the rationale for the prohibition, considerations related to the protection of human health. 51 It remains necessary to ascertain whether the measure is necessary and proportionate in relation to the objective of protecting human health. 52 With regard to judicial review of those conditions, the Community legislature must be allowed a broad discretion in an area such as that involved in the present case, which entails political, economic and social choices on its part, and in which it is called upon to undertake complex assessments. Consequently, the legality of a measure adopted in that area can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue (see British American Tobacco (Investments) and Imperial Tobacco, paragraph 123). 53 In the present cases, the claimants in the main actions submit that the prohibition at issue is neither necessary nor proportionate in relation to the objective put forward. 54 First, they deny that the prohibition is necessary. They maintain to that end that Articles 4(7) and 11(2) of Directive 2002/46 give the Member States the power to restrict trade in food supplements which do not comply with the directive. A Community prohibition is thus superfluous. 55 First of all, it must be stated that Article 4(7) of Directive 2002/46 – as is clear from its actual wording and from the legislative history of the directive – is intrinsically linked to Article 4(6) of the directive, as was confirmed at the hearing by the Parliament, the Council and the Commission. 56 It follows that the power of the Member States laid down in Article 4(7) of Directive 2002/46 to continue to apply, in compliance with the rules of the Treaty, existing national restrictions or bans on trade in food supplements containing vitamins and minerals or vitamin and mineral substances not included on the positive lists is merely the corollary of a Member State’s ability under Article 4(6) to allow in its territory until 31 December 2009 the use of such constituents on the conditions set out in that provision. 57 As the Advocate General has observed at point 22 of his Opinion, the purpose of Article 4(7) of Directive 2002/46 is solely to provide that Member States other than a State which allows on its territory, within the limits and in compliance with the conditions set out in Article 4(6), the use in the manufacture of food supplements of vitamins, minerals or vitamin or mineral substances not included on the positive lists, do not have to allow imports into their own territory of food supplements containing such ingredients. 58 The argument of the claimants in the main actions which is founded on Article 4(7) of Directive 2002/46 thus does not give grounds for concluding that the prohibition at issue is unnecessary. 59 Next, as regards Article 11(2) of Directive 2002/46, when that provision is read in conjunction with the 8th recital to the directive, it becomes clear that its purpose is to preserve, until specific Community rules are adopted, the application, in compliance with the Treaty, of national rules concerning nutrients other than vitamins and minerals or other substances with nutritional or physiological effect used as ingredients in food supplements. 60 Article 11(2) of Directive 2002/46 is thus directed solely at food supplements containing nutrients or substances not falling with the material scope of the directive. Consequently, it is of no relevance for the purpose of ascertaining whether the prohibition in Articles 3, 4(1) and 15(b) of the directive is necessary. 61 Second, the claimants in the main actions maintain that the prohibition is disproportionate.62 They submit in that regard that the positive lists are inadequate. That is because the list of substances in Annex II to Directive 2002/46 was compiled on the basis not of the criteria pertaining to safety and bioavailability set out in the 11th recital in the preamble to the directive but of lists identifying ingredients authorised in the manufacture of food for particular nutritional purposes. It follows that the prohibition affects a large number of nutrients which are none the less suitable for a normal diet and are currently manufactured and marketed in certain Member States and which have hitherto not been shown to represent a risk to human health. The prohibition in Directive 2002/46 is also unjustified and disproportionate in the case of vitamins and minerals in natural forms, although they are usually found in the normal diet and are better tolerated by the body than vitamins and minerals from synthetic sources. 63 It must be stated, at the outset, that if the various recitals in the preamble to Directive 2002/46 are read together, it is apparent that the directive concerns food supplements containing vitamins and/or minerals derived from a manufacturing process using ‘chemical substances’ (11th recital), and not food supplements whose ingredients include ‘amino acids, essential fatty acids, fibre and various plant and herbal extracts’ (6th recital), whose conditions for use consequently remain ‘until … specific Community rules are adopted’ within the scope of ‘national rules’, ‘without prejudice to the provisions of the Treaty’ (8th recital). 64 Next, it must be noted that the positive lists correspond, as the claimants in Case C-155/04 have observed, to the list of substances included in the categories ‘vitamins’ and ‘minerals’ in the Annex to Commission Directive 2001/15/EC of 15 February 2001 on substances that may be added for specific nutritional purposes in foods for particular nutritional uses (OJ 2001 L 52, p. 19). 65 As is stated in the 4th recital in the preamble to Directive 2001/15, the selection of the substances identified in the annex to the directive took into account criteria of safety and availability for use by humans, criteria referred to in the 11th recital to Directive 2002/46. 66 As is clear when the 10th and 11th recitals to Directive 2002/46 are read together, the fact that a certain number of chemical substances used as ingredients in food supplements marketed in some Member States are currently not authorised at European level is explained by the fact that the substances at issue in the main actions had not, at the time when the directive was adopted, received a favourable evaluation, from the point of view of the criteria of safety and bioavailability, from the competent European scientific authorities. 67 The information provided by the claimants in the main actions in their written observations about certain vitamin or mineral substances not included on the positive list in Annex II to Directive 2002/46 is not such as to cast doubt on the merits of that explanation. It is apparent from it that at the time when the directive was adopted those substances had not yet been evaluated by the Scientific Committee on Food or that, at the very least, the committee continued to entertain serious doubts, in the absence of adequate and appropriate scientific data, regarding their safety and/or their bioavailability. 68 In those circumstances and in view of the need for the Community legislature to take account of the precautionary principle when it adopts, in the context of the policy on the internal market, measures intended to protect human health (see, to that effect, Case C‑157/96 National Farmers’ Union and Others [1998] ECR I‑2211, paragraph 64, and Case C‑180/96 United Kingdom v Commission [1998] ECR I‑2265, paragraph 100, and Case C‑41/02 Commission v Netherlands [2004] ECR I‑0000, paragraph 45), the authors of Directive 2002/46 could reasonably take the view that an appropriate way of reconciling the objective of the internal market, on the one hand, with that relating to the protection of human health, on the other, was for entitlement to free movement to be reserved for food supplements containing substances about which, at the time when the directive was adopted, the competent European scientific authorities had available adequate and appropriate scientific data capable of providing them with the basis for a favourable opinion, whilst giving scope, in Article 4(5) of the directive, for obtaining a modification of the positive lists by reference to scientific and technological developments. 69 It is also necessary to state in that regard that, by virtue of Article 7 of Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ 2002 L 31, p. 1), the Community legislature is entitled to adopt the provisional risk management measures necessary to ensure a high level of health protection and may do so whilst awaiting further scientific information for a more comprehensive risk assessment, as is stated in the 10th recital to Directive 2002/46. 70 Contrary to the contention of the claimants in Case C‑154/04, a negative list system, which entails limiting the prohibition to only the substances included on that list, might not suffice to achieve the objective of protecting human health. Reliance in this instance on such a system would mean that, as long as a substance is not included on the list, it can be freely used in the manufacture of food supplements, even though, by reason of its novelty for example, it has not been subject to any scientific assessment apt to guarantee that it entails no risk to human health. 71 The claimants in the main action submit that the procedures referred to in Article 4(5) and (6) of Directive 2002/46 lack transparency because of the lack of precision in the criteria applied by the European Food Safety Authority in its examination of dossiers seeking authorisation to use a substance not included on the positive lists. The procedures thus represent a particularly heavy financial and administrative burden. 72 In that regard, a measure which, like that at issue in the main actions, includes a prohibition on marketing products containing substances not included on the positive lists laid down in the applicable legislation must be accompanied by a procedure designed to allow a given substance to be added to those lists and the procedure must comply with the general principles of Community law, in particular the principle of sound administration and legal certainty. 73 Such a procedure must be accessible in the sense that it must be expressly mentioned in a measure of general application which is binding on the authorities concerned. It must be capable of being completed within a reasonable time. An application to have a substance included on a list of authorised substances may be refused by the competent authorities only on the basis of a full assessment of the risk posed to public health by the substance, established on the basis of the most reliable scientific data available and the most recent results of international research. If the procedure results in a refusal, the refusal must be open to challenge before the courts (see, by analogy, Case C‑24/00 Commission v France [2004] ECR I‑1277, paragraphs 26, 27 and 36, and Case C‑95/01 Greenham and Abel [2004] ECR I‑1333, paragraphs 35, 36 and 50). 74 In the case of Directive 2002/46, the procedure accompanying the measure at issue, by which a vitamin, a mineral or a vitamin or mineral substance may be added to the positive lists, is referred to in Article 4(5) of the directive, which deals with modification of the lists. 75 It follows that, for the purposes of assessing the validity of the prohibition stemming from Articles 3, 4(1) and 15(b) of Directive 2002/46, the Court’s review must concern solely the legality of the procedure referred to in Article 4(5) of the directive. A review of the validity of the procedure laid down in Article 4(6), which is designed for obtaining a temporary national authorisation and which thus pursues a different purpose from that of the procedure laid down in Article 4(5), falls, however, outside the scope of the assessment in these cases. 76 Article 4(5) of Directive 2002/46 refers to Article 13(2) of the directive, which provides, in its first subparagraph, that ‘[w]here reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof’. 77 As is stated in the 12th recital to Directive 2002/46, the reference to the procedure laid down in Articles 5 and 7 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (OJ 1999 L 184, p. 23) meets the concern that it should be possible, when it is necessary to revise the positive lists to reflect scientific and technological developments, to use a simplified and accelerated procedure in the form of technical implementing measures for whose adoption the Commission is responsible. 78 As is shown by the 7th and 9th recitals in the preamble to Decision 1999/468, that procedure, known as ‘comitology’, is intended to reconcile, on the one hand, the requirement for effectiveness and flexibility arising from the need regularly to amend and update aspects of Community legislation in the light of developments in scientific understanding in the area of the protection of human health or safety and, on the other hand, the need to take account of the respective powers of the Community institutions. 79 Within the framework of the comitology procedure, provision is made, under Article 5 of Decision 1999/468, for the Commission to submit to the committee referred to in Article 13(1) of Directive 2002/46, a draft of the measures to be taken, on which the committee must deliver its opinion ‘within a time-limit which [its] chairman may lay down according to the urgency of the matter’ (Article 5(2)). When the committee has delivered its opinion, it is for the Commission to adopt the measures envisaged if they are in accordance with the opinion (Article 5(3)). If that is not the case or if the committee does not deliver an opinion, the Commission must, ‘without delay’, submit to the Council a proposal relating to the measures to be taken and must inform the European Parliament (Article 5(4)) and the Council may act within a period of three months (Article 5(6), first subparagraph, of Decision 1999/468; Article 13(2), second subparagraph, of Directive 2002/46). If within that period the Council opposes the Commission’s proposal, the Commission must re-examine its proposal and may submit the same proposal or an amended proposal to the Council or present a legislative proposal on the basis of the Treaty (Article 5(6), second subparagraph). However, if on the expiry of that period the Council has neither adopted the proposed implementing act nor indicated its opposition to the proposal for implementing measures, those measures are adopted by the Commission (Article 5(6), third subparagraph). 80 The provisions of Article 13(2), second subparagraph, of Directive 2002/46 in conjunction with those of Article 5 of Decision 1999/468, to which Article 4(5) of Directive 2002/46 refers, ensure that once the matter has been brought before the committee by the Commission under Article 5(2) of the decision the procedure for amending the positive lists is completed within a reasonable time. 81 It would, no doubt, have been desirable, as regards the stage between the filing of a dossier seeking modification of the positive lists and the time when the matter is brought before the committee (a stage which includes, inter alia, consultation of the European Food Safety Authority as envisaged in both Article 14 of, and the 10th recital to, Directive 2002/46), for the directive to have included provisions which in themselves ensured that that stage be completed transparently and within a reasonable time. 82 The absence of any such provisions cannot, however, be regarded as such as to jeopardise the proper functioning of the procedure for modifying the positive lists within a reasonable time. It is none the less the responsibility of the Commission, by virtue of the implementing powers conferred on it by Directive 2002/46 concerning, inter alia, the way the procedure is operated, to adopt and make accessible to interested parties, in accordance with the principle of sound administration, the measures necessary to ensure generally that the consultation stage with the European Food Safety Authority is carried out transparently and within a reasonable time. 83 By providing for the procedure established in Article 5 of Decision 1999/468 to apply, Article 4(5) of Directive 2002/46 also ensures that an application for inclusion on the positive lists of a vitamin, a mineral or a vitamin or mineral substance can be rejected only by a binding legal act, which may be subject to judicial review. 84 It must be added in that regard that Directive 2002/46 contains nothing to compel or encourage the competent European authorities to take account, in the procedure referred to in Article 4(5) of the directive, of criteria which do not relate to the objective of protecting human health. 85 On the contrary, it is clear from the 9th recital to Directive 2002/46 that the criterion that the vitamin or mineral be normally found in, and consumed as part of, the diet is the only relevant criterion for the purposes of the list in Annex I to the directive. As the claimants in Case C‑154/04 have observed, although the proposal for the directive mentioned at paragraph 37 of this judgment provided for a second criterion, namely that the vitamins and minerals in question should be ‘considered essential nutrients’, as is shown by the 7th recital in the preamble to the proposal, that criterion is no longer included in the 9th recital to Directive 2002/46. As regards the list in Annex II to the directive, it is apparent from the 11th recital that the only relevant criteria are those relating to the safety and bioavailability of the chemical substance in question. 86 Such statements show that the relevant criteria for the purposes of the positive lists and the application of the procedure for modification of those lists can, as conceived by the Community legislature, relate only to grounds of human-health protection, to the exclusion of considerations concerning nutritional needs. 87 It should also be stated that the criticisms made by the claimants in the main actions of the procedure for modifying the positive lists concern in essence the administrative and financial burdens involved in presenting files seeking such modifications and the way in which the criteria of safety and bioavailability set out in the 11th recital to Directive 2002/46 are applied by the European Food Safety Authority when considering individual files. 88 However, although such factors may, depending on the circumstances, be advanced in support of an action for annulment of a final decision refusing an application for modification of the positive lists or an action for damages against the European Food Safety Authority under Article 47(2) of Regulation No 178/2002, they cannot, in themselves, affect the legality of the procedure for modifying the positive lists, as the Greek Government has pointed out in its written observations. 89 It must therefore be concluded that the analysis at paragraphs 76 to 88 of this judgment has not revealed any factor of such a kind as to affect the legality of the procedure laid down in Article 4(5) of Directive 2002/46 with regard to modification of the positive lists. 90 Finally, it should be noted that, when the Community legislature wishes to delegate its power to amend aspects of the legislative act at issue, it must ensure that that power is clearly defined and that the exercise of the power is subject to strict review in the light of objective criteria (see, to that effect, Case 9/56 Meroni v High Authority [1958] ECR 133, at p. 152) because otherwise it may confer on the delegate a discretion which, in the case of legislation concerning the functioning of the internal market in goods, would be capable of impeding, excessively and without transparency, the free movement of the goods in question. 91 In this instance, as has been stated at paragraphs 85 and 86 of this judgment, the 9th and 11th recitals to Directive 2002/46 state that the only relevant criteria concerning the positive lists relate, as regards vitamins and minerals, to the fact that the latter are normally found in and consumed as part of the diet and, as regards chemical substances used as sources of vitamins or minerals, to the safety and bioavailability of the substance concerned. 92 Those statements, which are closely related to the concrete expression of those criteria through the positive lists in the body of Directive 2002/46 and which should ideally have been included in the actual provisions of the directive (see, to that effect the Inter-Institutional Agreement of the European Parliament, of the Council and of the Commission of 22 December 1998 on common guidelines for the quality of drafting of Community legislation (OJ 1999 C 73, p. 1)), limit the Commission’s power to modify the lists through their reference to objective criteria connected exclusively with public health. They show that in this instance the Community legislature laid down the essential criteria to be applied in the matter when the powers thus delegated are exercised (see, to that effect, Case 25/70 Köster [1970] ECR 1161, paragraph 6). 93 It follows that Articles 3, 4(1) and 15(b) of Directive 2002/46 are not invalid by reason of an infringement of Articles 28 EC and 30 EC. Articles 1(2) and 24(2)(a) of Regulation No 3285/9494 It is appropriate to point out that Regulation No 2385/94 was adopted in the framework of the common commercial policy, as is apparent from its legal basis, namely Article 113 of the EC Treaty (now, after amendment, Article 133 EC). 95 The objective of the regulation is to liberalise imports of products originating in non-member States. However, it does not aim to liberalise the placing on the market of those products, which takes place after import (see Case C‑296/00 Expo Casa Manta [2002] ECR I‑4657, paragraphs 30 and 31). 96 It follows that, as the Parliament, the Council and the Commission have rightly submitted and as the Advocate General has pointed out at points 57 and 58 of his Opinion, Regulation No 3285/94 is of no relevance for the purpose of assessing the legality of Community measures whose effect is to prohibit the placing on the market within the Community of products imported from non-member States which do not satisfy the conditions laid down for such placing on the market for reasons relating to the protection of human health. 97 Furthermore, even if there were a conflict between Articles 3, 4(1) and 15(b) of Directive 2002/46 and Articles 1(2) and 24(2)(a) of Regulation No 3285/94, it would then be necessary to state that the directive was adopted on the basis of Article 95 EC and thus does not constitute a measure implementing the regulation. 98 It follows that there is no need to consider the validity of the relevant provisions of Directive 2002/46 in the light of Regulation No 3285/94. Part (c) of the question99 By part (c) of its question, the national court is asking whether Articles 3, 4(1) and 15(b) of Directive 2002/46 are invalid by reason of an infringement of the principle of subsidiarity. 100 In both these cases, the claimants in the main actions submit that the provisions interfere unjustifiably with the powers of the Member States in a sensitive area involving health, social and economic policy. The claimants in Case C‑154/04 add that the Member States are the best placed to determine, on their respective markets, the public health requirements which would justify a barrier to the free marketing of food supplements on their national territory. 101 In that regard, it is appropriate to recall that the principle of subsidiarity is set out in the second subparagraph of Article 5 EC, which provides that the Community, in areas which do not fall within its exclusive competence, is to take action only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. 102 Paragraph 3 of the Protocol on the application of the principles of subsidiarity and proportionality, annexed to the Treaty, states that the principle of subsidiarity does not call into question the powers conferred on the Community by the Treaty, as interpreted by the Court of Justice. 103 As the Court has already held, the principle of subsidiarity applies where the Community legislature makes use of Article 95 EC, inasmuch as that provision does not give it exclusive competence to regulate economic activity on the internal market, but only a certain competence for the purpose of improving the conditions for its establishment and functioning by eliminating barriers to the free movement of goods and the freedom to provide services or by removing distortions of competition (British American Tobacco (Investments) and Imperial Tobacco, paragraph 179). 104 In deciding whether Articles 3, 4(1) and 15(b) of Directive 2002/46 comply with the principle of subsidiarity, it is necessary to consider whether the objective pursued by those provisions could be better achieved by the Community. 105 In that regard, it must be stated that the prohibition, under those provisions, on marketing food supplements which do not comply with Directive 2002/46, supplemented by the obligation of the Member States under Article 15(a) of the directive to permit trade in food supplements complying with the directive (see, by analogy, British American Tobacco (Investments) and Imperial Tobacco, paragraph 126), has the objective of removing barriers resulting from differences between the national rules on vitamins, minerals and vitamin or mineral substances authorised or prohibited in the manufacture of food supplements, whilst ensuring, in accordance with Article 95(3) EC, a high level of human-health protection. 106 To leave Member States the task of regulating trade in food supplements which do not comply with Directive 2002/46 would perpetuate the uncoordinated development of national rules and, consequently, obstacles to trade between Member States and distortions of competition so far as those products are concerned. 107 It follows that the objective pursued by Articles 3, 4(1) and 15(b) of Directive 2002/46 cannot be satisfactorily achieved by action taken by the Member States alone and requires action to be taken by the Community. Consequently, that objective could be best achieved at Community level. 108 It follows from the foregoing that Articles 3, 4(1) and 15(b) of Directive 2002/46 are not invalid by reason of an infringement of the principle of subsidiarity. Part (d) of the question109 By part (d) of its question, the national court is asking whether Articles 3, 4(1) and 15(b) of Directive 2002/46 are invalid by reason of an infringement of the principle of proportionality. 110 The claimants in the main actions maintain that those provisions constitute a disproportionate means of achieving the intended objective. The arguments put forward in support of that claim are those set out at paragraphs 54, 62, 70 and 71 of this judgment. 111 However, it is clear from the analysis set out at paragraphs 55 to 60, 63 to 70 and 72 to 92 of this judgment that Articles 3, 4(1) and 15(b) of Directive 2002/46 are measures appropriate for achieving the objective which they pursue and that, given the obligation of the Community legislature to ensure a high level of protection of human health, they do not go beyond what is necessary to attain that objective. 112 It follows that Articles 3, 4(1) and 15(b) of Directive 2002/46 are not invalid by reason of an infringement of the principle of proportionality. Part (e) of the question113 By part (e) of its question, the national court is asking whether Articles 3, 4(1) and 15(b) of Directive 2002/46 are invalid by reason of an infringement of the principle of equal treatment. 114 The claimants in both actions submit that those provisions infringe that principle because certain substances which do not satisfy the criteria set out in the 11th recital to Directive 2002/46 were included on the positive lists without having been subject to additional tests, whereas burdensome requirements are imposed on manufacturers of food supplements containing non-authorised substances in order to prove that the abovementioned criteria have been met. They add that there is no objective justification for that difference in treatment, the lists not having been compiled on the basis of the criteria laid down by the Directive. 115 In that regard, it is appropriate to bear in mind that, by virtue of settled case-law, the principle of equal treatment requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified (see Joined Cases C‑184/02 and C‑223/02 Spain and Finland v Parliament and Council [2004] ECR I‑7789, paragraph 64; Arnold André, paragraph 68, and Swedish Match, paragraph 70). 116 As the United Kingdom Government, the Parliament and the Commission have observed in their written observations, the vitamin and mineral substances which are not included on the positive list in Annex II to Directive 2002/46 are not in the same situation as those which are included on it. In fact, unlike the latter substances, those that are not included on the list, had not, at the time when the directive was adopted, been subject to a scientific evaluation by the competent European authorities so as to ensure their conformity with the criteria of safety and bioavailability referred to in the 11th recital to the directive. 117 Since each substance has, as is stated in those observations, its own characteristics, a substance which had not yet been evaluated in accordance with those criteria could not be treated in the same way as a substance included on the positive lists. 118 That difference in situations therefore permitted a difference in treatment, and an infringement of the principle of equal treatment cannot be successfully pleaded. 119 It follows from the foregoing that Articles 3, 4(1) and 15(b) of Directive 2002/46 are not invalid by reason of an infringement of the principle of equal treatment. Part (f) of the question120 By part (f) of its question, the national court is asking whether Articles 3, 4(1) and 15(b) of Directive 2002/46 are invalid by reason of infringement of Article 6(2) EU, read in the light of Article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 (‘the ECHR’) and Article 1 of the First Protocol to the Convention, and of the fundamental right to property and/or the right to carry on an economic activity. 121 In both cases the claimants in the main actions maintain that there is such an infringement. They submit that Directive 2002/46 is an unjustified and disproportionate impairment of the ability of manufacturers of food supplements to pursue their activities, which have hitherto been carried on entirely lawfully, and of the individual right to freedom of choice as regards food products. 122 In that regard, it must first be observed that Article 6(2) EU provides: ‘The Union shall respect fundamental rights, as guaranteed by the [ECHR] and as they result from the constitutional traditions common to the Member States, as general principles of Community law’. 123 Article 8 of the ECHR entitled ‘Right to respect for private and family life’ provides, at paragraph (1), that ‘[e]veryone has the right to respect for his private and family life, his home and his correspondence’ and, at paragraph (2), that ‘[t]here shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others’. 124 The fact that Articles 3, 4(1) and 15(b) of Directive 2002/46 may deprive people of the right to consume food supplements which do not comply with the directive cannot be regarded as amounting to a breach of respect for private and family life. 125 Article 1 of the First Protocol to the ECHR states, under the heading ‘Protection of Property’: ‘Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.’ 126 It is clear from settled case-law that the right to property, with which the provisions reproduced in the preceding paragraph are concerned, and likewise the freedom to pursue an economic activity, form part of the general principles of Community law. However, those principles are not absolute but must be viewed in relation to their social function. Consequently, the exercise of the right to property and the freedom to pursue an economic activity may be restricted, provided that any restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute in relation to the aim pursued a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed (see, inter alia, Case 265/87 Schräder [1989] ECR 2237, paragraph 15, and Case C‑200/96 Metronome Musik [1998] ECR I‑1953, paragraph 21). 127 It is the case here that the prohibition on the marketing and placing on the Community market of food supplements which do not comply with Directive 2002/46 is capable of restricting the freedom of manufacturers of those products to carry on their business activities. 128 Nevertheless, their right to property is not called into question by the introduction of such a measure. No economic operator can claim a right to property in a market share, even if he held it at a time before the introduction of a measure affecting the market, since such a market share constitutes only a momentary economic position exposed to the risks of changing circumstances (Case C‑280/93 Germany v Council [1994] ECR I‑4973, paragraph 79, and Swedish Match, paragraph 73). Nor can an economic operator claim an acquired right or even a legitimate expectation that an existing situation which is capable of being altered by measure taken by the Community institutions within the limits of their discretion will be maintained (Case 52/81 Faust v Commission [1982] ECR 3745, paragraph 27, and Swedish Match, paragraph 73). 129 As has been stated above, the prohibition arising from Articles 3, 4(1) and 15(b) of Directive 2002/46 is intended to protect human health, which is an objective of general interest. It is not evident that the prohibition is inappropriate in relation to that objective. In those circumstances, the obstacle to the freedom to pursue an economic activity which a measure of that kind represents cannot be found, in the light of the aim pursued, to constitute a disproportionate impairment of the right to exercise that freedom or to the right to property. 130 It follows that Articles 3, 4(1) and 15(b) of Directive 2002/46 are not invalid by reason of infringement of Article 6(2) EU, read in the light of Article 8 of the ECHR and Article 1 of the First Protocol thereto, the fundamental right to property or the right to pursue an economic activity. Part (g) of the question131 By part (g) of its question, the national court is asking whether Articles 3, 4(1) and 15(b) of Directive 2002/46 are invalid by reason of an infringement of the obligation to state reasons laid down in Article 253 EC. 132 The claimants in Case C‑154/04 maintain that no reasons are given for the prohibition arising from those provisions, which, in their submission, amounts to an infringement of Article 253 EC. 133 In that regard, it should be observed that, although the reasoning required by Article 253 EC must show clearly and unequivocally the reasoning of the Community authority which adopted the contested measure so as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to exercise its power of review, it is not required to go into every relevant point of fact and law (Case C‑122/94 Commission v Council [1996] ECR I‑881, paragraph 29). 134 Furthermore, the question whether a statement of reasons satisfies the requirements must be assessed with reference not only to the wording of the measure but also to its context and to the whole body of legal rules governing the matter in question. If the contested measure clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for each of the technical choices made by the institution (see, inter alia, Case C‑100/99 Italy v Council and Commission [2001] ECR I-5217, paragraph 64). 135 Here, the 9th recital to Directive 2002/46 explains that the vitamins and minerals affected by the prohibition are those which are not normally found in, or consumed as part of, the diet. 136 As regards existing vitamin and mineral substances covered by the prohibition, the 10th and 11th recitals to Directive 2002/46 clearly disclose that such a measure relates to the general concern, expressed in the 5th recital to the directive, to ensure a high level of protection for consumers by authorising the placing on the market only of products which are safe for human health and is explained by the fact that the substances concerned had not, at the time when the directive was adopted, been evaluated by the Scientific Committee on Food by reference to the criteria of safety and bioavailability on the basis of which the positive list in Annex II to the directive was drawn up. 137 It follows that Articles 3, 4(1) and 15(b) of Directive 2002/46 are not invalid by reason of an infringement of the obligation to state reasons laid down in Article 253 EC. 138 In view of all the foregoing considerations, the answer to the question referred to the Court must be that examination of the question has revealed no factor of such a kind as to affect the validity of Articles 3, 4(1) and 15(b) of Directive 2002/46. Costs139 Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Examination of the question referred to the Court has revealed no factor of such a kind as to affect the validity of Articles 3, 4(1) and 15(b) of Directive 2002/46/EC of the European Parliament and of the Council of 10 June 2002 on the approximation of the laws of the Member States relating to food supplements.[Signatures]* Language of the case: English. | a6b2a-fd483b8-4c7f | EN |
THE DISTINCTIVE CHARACTER REQUIRED FOR REGISTRATION OF A MARK MAY BE ACQUIRED THROUGH ITS USE AS PART OF AN ALREADY REGISTERED TRADE MARK | Société des produits Nestlé SAvMars UK Ltd(Reference for a preliminary ruling from the Court of Appeal (England and Wales) (Civil Division))(Trade marks — Directive 89/104/EEC — Absence of distinctive character — Distinctive character acquired through use — Use as part of or in conjunction with a registered trade mark)Opinion of Advocate General Kokott delivered on 27 January 2005 Judgment of the Court (Second Chamber), 7 July 2005 Summary of the JudgmentApproximation of laws – Trade marks – Directive 89/104 – Refusal of registration or nullity – Absence of distinctive character – Distinctive character acquired through use – Use of a mark as part of or in conjunction with a registered trade mark(Council Directive 89/104, Art. 3(3))The distinctive character of a mark referred to in Article 3(3) of First Directive 89/104 relating to trade marks may be acquired in consequence of the use of that mark as part of or in conjunction with another mark. While, in regard to acquisition of distinctive character through use, the identification, by the relevant class of persons, of the product or service as originating from a given undertaking must be as a result of the use of the mark as a trade mark, in order for the latter condition to be satisfied, the mark in respect of which registration is sought need not necessarily have been used independently. Such identification may be as a result both of the use, as part of a registered trade mark, of a component thereof and of the use of a separate mark in conjunction with a registered trade mark. (see paras 26-27, 30, 32, operative part)JUDGMENT OF THE COURT (Second Chamber)7 July 2005 (*) (Trade marks – Directive 89/104/EEC – Absence of distinctive character – Distinctive character acquired through use – Use as part of or in conjunction with a registered trade mark)In Case C-353/03,REFERENCE to the Court under Article 234 EC by the Court of Appeal (England and Wales) (Civil Division) (United Kingdom), made by decision of 25 July 2003, received at the Court on 18 August 2003, in the proceedings Mars UK Ltd,THE COURT (Second Chamber),composed of C.W.A. Timmermans, President of the Chamber, R. Silva de Lapuerta, C. Gulmann (Rapporteur), P. Kūris and G. Arestis, Judges, Advocate General: J. Kokott,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and following the hearing on 20 January 2005,after considering the observations submitted on behalf of:– Société des produits Nestlé SA, by J. Mutimear, Solicitor, and H. Carr QC,– Mars UK Ltd, by V. Marsland, Solicitor, and M. Bloch QC,– the United Kingdom Government, by E. O’Neill, acting as Agent, and M. Tappin, Barrister,– the Irish Government, by D.J. O’Hagan, acting as Agent,– the Commission of the European Communities, by N.B. Rasmussen and M. Shotter, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 27 January 2005,gives the followingJudgment1 This request for a preliminary ruling concerns the interpretation of Articles 3(3) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1, hereinafter ‘the directive’) and Article 7(3) of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1). 2 It arises in the context of a dispute between Société des produits Nestlé SA (‘Nestlé’) and Mars UK Ltd (‘Mars’) concerning the application by Nestlé for the registration as a mark of a part of a slogan constituting a registered mark of which that company is already the owner. Legal framework3 Under Article 2 of the directive ‘a trade mark may consist of any sign capable of being represented graphically, particularly words, including personal names, designs, letters, numerals, the shape of goods or of their packaging, provided that such signs are capable of distinguishing the goods or services of one undertaking from those of other undertakings’. 4 Article 3 of the directive entitled ‘Grounds for refusal or invalidity’ is worded as follows:‘1. The following shall not be registered or if registered shall be liable to be declared invalid:…(b) trade marks which are devoid of any distinctive character;…’3. A trade mark shall not be refused registration or be declared invalid in accordance with paragraph 1(b) … if, before the date of application for registration and following the use which has been made of it, it has acquired a distinctive character. …’ 5 Article 4 and Article 7(1)(b) and (3) of the regulation are worded in terms which are essentially identical to the terms of Article 2 and Article 3(1)(b) and (3) of the directive. Main proceedings and question referred6 Both the slogan ‘Have a break … Have a Kit Kat’ and the name KIT KAT are marks registered in the United Kingdom in Class 30, as defined by the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as amended and revised, that is to say for chocolate, chocolate products, confectionery, candy and biscuits. 7 On 28 March 1995 Nestlé, the proprietor of those two marks, applied for registration in the United Kingdom of the words HAVE A BREAK as a mark in respect of Class 30. 8 That application was opposed by Mars which relied in particular on Article 3(1)(b) of the directive.9 On 31 May 2002 the opposition was upheld on the basis of that provision and the application for registration was rejected.10 Nestlé appealed to the High Court of Justice of England and Wales, Chancery Division. The appeal was rejected by decision dated 2 December 2002. 11 Nestlé appealed against that decision to the Court of Appeal (England and Wales) (Civil Division).12 The Court of Appeal considers, in light of the evidence in the dispute before it, that the expression ‘HAVE A BREAK’ is devoid of inherent distinctive character and that, consequently, the provisions of Article 3(1)(b) of the directive, as a matter of principle, preclude its registration as a mark. 13 It considers that registration may therefore occur only on the basis of Article 3(3) of the directive, subject to proof of distinctive character acquired through use. 14 It points out that the application for registration was rejected on the ground that the phrase ‘HAVE A BREAK’ was essentially used as part of the registered mark HAVE A BREAK … HAVE A KIT KAT and not, genuinely, as an independent trade mark. 15 It states that, according to Nestlé, that view of the matter could have serious consequences for operators seeking to register marks comprising shapes since such marks are seldom used by themselves. 16 It considers that a slogan-like phrase associated with a trade mark may, by repetition over time, create a separate and independent impression and thus acquire distinctive character through use. 17 Under those circumstances the Court of Appeal (England and Wales) (Civil Division) decided to stay the proceedings and refer the following question to the Court for a preliminary ruling: ‘May the distinctive character of a mark referred to in Article 3(3) of [the directive] and Article 7(3) of [the regulation] be acquired following or in consequence of the use of that mark as part of or in conjunction with another mark?’ The question referred18 In light of the indications contained in the order for reference, the question raised must be understood as seeking only an interpretation of the directive, since the regulation is not applicable to the facts of the main dispute. 19 By its question the referring court is essentially asking whether the distinctive character of a mark referred to in Article 3(3) of the directive may be acquired in consequence of the use of that mark as part of or in conjunction with a registered trade mark. 20 Nestlé and the Irish Government consider that the distinctive character of a mark may, under Article 3(3) of the directive, be acquired following use of that mark as part of or in conjunction with another mark. 21 Mars, the United Kingdom Government and the Commission of the European Communities consider that a mark cannot acquire a distinctive character solely in consequence of use as part of a composite mark. Conversely, Mars and the Commission acknowledge that a mark may acquire a distinctive character in consequence of use in conjunction with another mark. In the United Kingdom Government’s view, distinctive character may also be acquired through use of the mark as a physical component. 22 In that regard it should be pointed out that, under Article 2 of the directive, a mark has distinctive character when it is capable of distinguishing the goods or services of one undertaking from those of other undertakings. 23 Under Article 3(1)(b) of the directive a mark devoid of any distinctive character may not be registered or, if registered, is liable to be declared invalid. 24 However, the provision mentioned in the preceding paragraph is rendered inapplicable if, before the date of application for registration and following the use which has been made of the mark, it has acquired a distinctive character. 25 Whether inherent or acquired through use, distinctive character must be assessed in relation, on the one hand, to the goods or services in respect of which registration is applied for and, on the other, to the presumed expectations of an average consumer of the category of goods or services in question, who is reasonably well-informed and reasonably observant and circumspect (judgment in Case C-299/99 Philips [2002] ECR I-5475, paragraphs 59 and 63). 26 In regard to acquisition of distinctive character through use, the identification, by the relevant class of persons, of the product or service as originating from a given undertaking must be as a result of the use of the mark as a trade mark (judgment in Philips, paragraph 64). 27 In order for the latter condition, which is at issue in the dispute in the main proceedings, to be satisfied, the mark in respect of which registration is sought need not necessarily have been used independently. 28 In fact Article 3(3) of the directive contains no restriction in that regard, referring solely to the ‘use which has been made’ of the mark. 29 The expression ‘use of the mark as a trade mark’ must therefore be understood as referring solely to use of the mark for the purposes of the identification, by the relevant class of persons, of the product or service as originating from a given undertaking. 30 Yet, such identification, and thus acquisition of distinctive character, may be as a result both of the use, as part of a registered trade mark, of a component thereof and of the use of a separate mark in conjunction with a registered trade mark. In both cases it is sufficient that, in consequence of such use, the relevant class of persons actually perceive the product or service, designated exclusively by the mark applied for, as originating from a given undertaking. 31 The matters capable of demonstrating that the mark has come to identify the product or service concerned must be assessed globally and, in the context of that assessment, the following items may be taken into consideration: the market share held by the mark; how intensive, geographically widespread and long-standing use of the mark has been; the amount invested by the undertaking in promoting the mark; the proportion of the relevant class of persons who, because of the mark, identify goods as originating from a particular undertaking; and statements from chambers of commerce and industry or other trade and professional associations (judgment in Joined Cases C-108/97 and C‑109/97 Windsurfing Chiemsee [1999] ECR I-2779, paragraphs 49 and 51). 32 In the final analysis, the reply to the question raised must be that the distinctive character of a mark referred to in Article 3(3) of the directive may be acquired in consequence of the use of that mark as part of or in conjunction with a registered trade mark. Costs33 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Second Chamber) hereby rules:The distinctive character of a mark referred to in Article 3(3) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks may be acquired in consequence of the use of that mark as part of or in conjunction with a registered trade mark.[Signatures]* Language of the case: English. | b99df-5b74a6a-47e8 | EN |
THE LEGISLATION ON ADMISSION TO AUSTRIAN UNIVERSITIES IS CONTRARY TO COMMUNITY LAW | Commission of the European CommunitiesvRepublic of Austria(Failure of a Member State to fulfil obligations –– Articles 12 EC, 149 EC and 150 EC –– Conditions of access to university education –– Discrimination)Opinion of Advocate General Jacobs delivered on 20 January 2005 Judgment of the Court (Second Chamber), 7 July 2005 Summary of the Judgment1. Actions for failure to fulfil obligations — Subject-matter of the proceedings —Determination in the course of the pre-litigation procedure (Art. 226 EC)2. Community law — Principles — Equal treatment — Discrimination on grounds of nationality — Access to higher education — Different conditions for holders of secondary education diplomas awarded in other Member States — Indirect discrimination — Not permissible in the absence of objective justification (Arts 12 EC, 149 EC and 150 EC)3. Freedom of movement for persons — Derogations — Justification — Need for an analysis of the appropriateness and proportionality of the restrictive measure — Burden of proof on the Member State 4. International agreements — Agreements concluded by Member States — Agreements predating the EC Treaty — Article 307 EC — Scope — Possibility of exercising rights under such agreements in intra-Community relations — Not included(Art. 307 EC)1. In an action for failure to fulfil obligations, the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under Community law and, on the other, to avail itself of its right to defend itself against the charges formulated by the Commission. Accordingly, the letter of formal notice from the Commission to that Member State and then the reasoned opinion issued by it delimit the subject-matter of the dispute, so that it cannot thereafter be extended. Consequently, the reasoned opinion and the application must be based on the same complaints. However, that requirement cannot be stretched so far as to mean that in every case the statement of the complaints set out in the letter of formal notice, the wording of the reasoned opinion and the form of order sought in the application must be exactly the same, provided that the subject-matter of the proceedings as defined in the reasoned opinion has not been extended or altered. (see paras 22-24)2. A Member State which fails to take the necessary measures to ensure that holders of secondary education diplomas awarded in other Member States can gain access to higher and university education organised by it under the same conditions as holders of secondary education diplomas awarded in that Member State fails to fulfil its obligations under Articles 12 EC, 149 EC and 150 EC. Although applicable without distinction to all students, a provision of national law providing that students who have obtained their secondary education diploma in a Member State other than the Member State concerned and who wish to pursue their higher or university studies in a given area of education in that State must not only produce that diploma, but also prove that they fulfil the conditions of access to higher or university studies in the State where they obtained their diploma, is liable to have a greater effect on nationals of other Member States than on nationals of the Member State concerned, and therefore the difference in treatment introduced by that provision results in indirect discrimination contrary to the principle of non‑discrimination on the grounds of nationality contained in Article 12 EC. Such differential treatment could be justified only if it were based on objective considerations independent of the nationality of the persons concerned and were proportionate to the legitimate aim of the national provisions. (see paras 42, 46-48, 60, 75, operative part 1)3. It is for the national authorities which invoke a derogation from the fundamental principle of freedom of movement for persons to show in each individual case that their rules are necessary and proportionate to attain the aim pursued. The reasons which may be invoked by a Member State by way of justification must be accompanied by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that State and specific evidence substantiating its arguments. (see para. 63)4. Whilst Article 307 EC allows Member States to honour obligations owed to non-member States under international agreements preceding the Treaty, it does not authorise them to exercise rights under such agreements in intra‑Community relations. (see para. 73)JUDGMENT OF THE COURT (Second Chamber)7 July 2005 (*) (Failure of a Member State to fulfil obligations – Articles 12 EC, 149 EC and 150 EC – Conditions of access to university education – Discrimination)In Case C-147/03,ACTION under Article 226 EC for failure to fulfil obligations, brought on 31 March 2003,Commission of the European Communities, represented by W. Bogensberger and D. Martin, acting as Agents, with an address for service in Luxembourg, applicant,supported byRepublic of Finland, represented by A. Guimaraes-Purokoski and T. Pynnä, acting as Agents, with an address for service in Luxembourg, intervener,Republic of Austria, represented by H. Dossi and E. Riedl, acting as Agents, assisted by C. Ruhs and H. Kasparovsky, with an address for service in Luxembourg, defendant, THE COURT (Second Chamber),composed of R. Silva de Lapuerta, President of the Fifth Chamber acting for the President of the Second Chamber, C. Gulmann, J. Makarczyk (Rapporteur), P. Kūris and J. Klučka, Judges, Advocate General: F.G. Jacobs,Registrar: M.-F. Contet, Principal Administrator,having regard to the written procedure and further to the hearing on 25 November 2004,after hearing the Opinion of the Advocate General at the sitting on 20 January 2005,gives the followingJudgment1 By its application, the Commission of the European Communities is seeking a declaration from the Court that, by failing to take the necessary measures to ensure that holders of secondary education diplomas awarded in other Member States can gain access to higher and university education organised by it under the same conditions as holders of secondary education diplomas awarded in Austria, the Republic of Austria has failed to fulfil its obligations under Articles 12 EC, 149 EC and 150 EC. The legal framework Community legislation2 Article 3(1) EC provides: ‘For the purposes set out in Article 2, the activities of the Community shall include, as provided in this Treaty and in accordance with the timetable set out therein: …(q) a contribution to education and training of quality and to the flowering of the cultures of the Member States’.3 The first paragraph of Article 12 EC provides: ‘Within the scope of application of this Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.’ 4 According to Article 149 EC: ‘1. The Community shall contribute to the development of quality education by encouraging cooperation between Member States and, if necessary, by supporting and supplementing their action, while fully respecting the responsibility of the Member States for the content of teaching and the organisation of education systems and their cultural and linguistic diversity. 2. Community action shall be aimed at:– encouraging mobility of students and teachers, inter alia by encouraging the academic recognition of diplomas and periods of study; 3. The Community and the Member States shall foster cooperation with third countries and the competent international organisations in the field of education, in particular the Council of Europe. …’5 Finally, under Article 150 EC:‘1. The Community shall implement a vocational training policy which shall support and supplement the action of the Member States, while fully respecting the responsibility of the Member States for the content and organisation of vocational training. 2. Community action shall aim to:– facilitate access to vocational training and encourage mobility of instructors and trainees and particularly young people …’ National legislation 6 Paragraph 36 of the Law on University Studies, (Universitäts-Studiengesetz, ‘the UniStG’), entitled ‘university entrance qualification’ (Besondere Universitätsreife), provides: ‘(1) In addition to possession of a general university entrance qualification, students must demonstrate that they meet the specific entrance requirements for the relevant course of study, including entitlement to immediate admission, applicable in the State which issued the general qualification. (2) Where the university entrance qualification was issued in Austria, that means passes in the additional papers prescribed for admission to the relevant course of study in the Universitätsberechtigungsverordnung [University Entrance Regulation]. (3) If the course of study for which the student is applying in Austria is not offered in the State which issued the qualification, he or she must meet the entrance requirements for a course of study which is offered in that State and which is as closely related as possible to the course applied for in Austria. (4) The Federal Minister may by regulation designate groups of persons whose university entrance qualification is to be regarded, by reason of their close personal ties with Austria or their activity on behalf of the Republic of Austria, as issued in Austria for the purposes of establishing possession of the specific university entrance requirements. (5) On the basis of the certificate produced in order to demonstrate possession of a general university entrance qualification, the principal of the university shall determine whether the student meets the specific entrance requirements for the course of study chosen.’ Pre-litigation procedure 7 On 9 November 1999 the Commission sent to the Republic of Austria a letter of formal notice by which it claimed that Paragraph 36 of the UniStG infringes Articles 12 EC, 149 EC and 150 EC. It requested the Republic of Austria to submit its observations within two months. 8 By letter of 3 January 2000 the Republic of Austria replied to that letter of formal notice. 9 On 29 January 2001 the Commission sent a supplementary letter of formal notice to the Austrian authorities, to which those authorities replied by letter of 3 April 2001. 10 Since it was not satisfied by the replies submitted by the Republic of Austria, the Commission sent it a reasoned opinion on 17 January 2002, calling on it to adopt within two months of the date of notification of that opinion the measures necessary to ensure that holders of secondary education diplomas awarded in other Member States can gain access to Austrian higher or university education under the same conditions as holders of secondary education diplomas awarded in Austria. 11 Finding the Austrian Government’s reply of 22 March 2002 unsatisfactory, the Commission brought the present action. 12 By order of the President of the Court of 17 September 2003, the Republic of Finland was granted leave to intervene in this case in support of the form of order sought by the Commission. The application to reopen the oral procedure13 By application of 8 February 2005, received at the Court Registry on 15 February 2005, the Republic of Austria requested the reopening of the oral procedure. It bases its request on information emanating from the media after the hearing. According to that information, five German Länder plan to introduce student registration fees of EUR 500 as from winter 2005/06. The introduction of those registration fees would have the effect of interfering with the regulation of access to Austrian higher education. 14 Moreover, the reopening of the oral procedure would enable the Republic of Austria to debate the Opinion of the Advocate General. 15 On this point, it is sufficient to recall that the Statute of the Court and its Rules of Procedure make no provision for the parties to submit observations in response to the Advocate General’s Opinion (see, in particular, the order in Case C-17/98 Emesa Sugar [2000] ECR I-665, paragraph 2). 16 As regards the other reason put forward by the Republic of Austria for the purpose of reopening the oral procedure, it must be borne in mind that the Court may, of its own motion, on a proposal from the Advocate General or at the request of the parties, order that the oral procedure should be reopened in accordance with Article 61 of its Rules of Procedure, if it considers that it lacks sufficient information or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see, in particular, Case C-209/01 Schilling and Fleck-Schilling [2003] ECR I-13389, paragraph 19, and Case C‑30/02 Recheio – Cash & Carry [2004] ECR I-6051, paragraph 12). 17 Since this case does not correspond to either of those two situations, the Court considers that there is no reason to order the reopening of the oral procedure. Admissibility Arguments of the parties18 The Republic of Austria contends that the action is inadmissible on the ground that the Commission altered the subject-matter of the procedure between the pre-litigation phase and this action. Thus, the Commission submitted in its application that the proceedings do not concern the academic recognition of secondary education diplomas as carried out by the Austrian authorities, whereas in the reasoned opinion it defined the subject-matter of the procedure as being ‘whether the Austrian rules governing the academic recognition of diplomas awarded in other Member States and the access by holders of those diplomas to higher education are compatible with Community law’. 19 In the alternative, the Republic of Austria contends that the plea relating to the regulatory power of the Austrian authorities under Paragraph 36(4) of the UniStG is inadmissible on the ground that the Commission puts forward, in its application and for the first time, a set of arguments in that regard. 20 In response, the Commission submits that the subject-matter of the procedure initiated against the Republic of Austria has remained identical between the pre-litigation phase and this action. It notes in particular that, in the supplementary letter of formal notice which it sent to the Republic of Austria, it stated that the subject-matter of the procedure concerned only the compatibility of Austrian legislation with the EC Treaty as regards access to higher education by holders of general university entrance qualifications awarded in other Member States, to the exclusion of the academic recognition of diplomas. 21 As regards Paragraph 36(4) of the UniStG, the Commission states that it did not intend to put forward a new complaint. It sought merely to bring to the Court’s attention the fact that that provision, which introduced indirect discrimination against nationals of other Member States, has replaced a similar provision which gave rise to direct discrimination based on nationality. In so doing, the Commission did not put forward a new complaint, but merely illustrated the fact that, while it accepts the Republic of Austria’s argument that Paragraph 36 of the UniStG does not give rise to direct discrimination, it none the less constitutes a covert form of discrimination. Findings of the Court22 It is settled case-law that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under Community law and, on the other, to avail itself of its right to defend itself against the charges formulated by the Commission (see, in particular, Case C-152/98 Commission v Netherlands [2001] ECR I-3463, paragraph 23; Case C-439/99 Commission v Italy [2002] ECR I-305, paragraph 10, and Case C‑185/00 Commission v Finland [2003] ECR I-14189, paragraph 79). 23 Accordingly, the letter of formal notice from the Commission to the Member State concerned and then the reasoned opinion issued by it delimit the subject-matter of the dispute, so that it cannot thereafter be extended. Consequently, the reasoned opinion and the application must be based on the same complaints (see, in particular, Case C-191/95 Commission v Germany [1998] ECR I-5449, paragraph 55; Case C-139/00 Commission v Spain [2002] ECR I-6407, paragraph 18, and Commission v Finland, cited above, paragraph 80). 24 However, that requirement cannot be stretched so far as to mean that in every case the statement of the complaints set out in the letter of formal notice, the wording of the reasoned opinion and the form of order sought in the application must be exactly the same, provided that the subject-matter of the proceedings as defined in the reasoned opinion has not been extended or altered (see, in particular, the judgments cited above in Commission v Germany, paragraph 56, Commission v Spain, paragraph 19, and Commission v Finland, paragraph 81). 25 In the present case, the Commission did not alter the subject-matter of the dispute between the pre-litigation and judicial phases. In its application, the Commission formulated complaints and pleas in law identical to those referred to in the two letters of formal notice and the reasoned opinion. The Republic of Austria was thus duly informed of the nature of the infringement of Community law alleged by the Commission and, in particular, the indirectly discriminatory nature of the national provision in question, which related therefore to the conditions of access to the Austrian higher and university education system for students holding secondary education diplomas from other Member States. 26 With regard to the objection relating to Paragraph 36(4) of the UniStG, the Commission has clearly stated that it mentioned it only for the purposes of illustrating the fact that that subparagraph had replaced a similar provision which was directly discriminatory. It is not therefore a new complaint. 27 Accordingly, the Commission has not altered or extended the subject-matter of the dispute in its application and the action is admissible. Substance The scope of Community law 28 The Commission is of the opinion that the discrimination contained in Paragraph 36 of the UniStG relates solely to the conditions of access to Austrian higher or university education, a matter which, in its view, falls within the material scope of the Treaty. 29 The Republic of Finland also takes the view, like the Commission, that the action relates solely to the conditions of admission to Austrian higher education of holders of diplomas awarded in another Member State, and that it does not affect the question of the academic recognition of diplomas. 30 The Republic of Austria asserts that Paragraph 36 of the UniStG governs the recognition of secondary education diplomas for the purpose of gaining access to Austrian universities. However, it submits that the academic recognition of diplomas for the purpose of commencing or pursuing higher education or other training does not fall within the scope of the Treaty. 31 Under the first paragraph of Article 12 EC, within the scope of application of the Treaty, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality is to be prohibited. 32 As the Court has already held in paragraph 25 of Case 293/83 Gravier [1985] ECR 593, the conditions of access to vocational training fall within the scope of the Treaty (see also Case C-65/03 Commission v Belgium [2004] ECR I-6427, paragraph 25). 33 It also follows from the case-law that both higher education and university education constitute vocational training (see Case 24/86 Blaizot [1988] ECR 379, paragraphs 15 to 20, and Case 42/87 Commission v Belgium [1988] ECR 5445, paragraphs 7 and 8). 34 In the present case, Paragraph 36 of the UniStG lays down the conditions governing access to higher or university education in Austria. In that connection, it provides that, in addition to satisfying the general requirements for access to higher or university studies, holders of general university entrance qualifications awarded in other Member States must prove that they meet the specific requirements governing access to the chosen course, which are laid down by the State which issued those qualifications and give entitlement to direct admission to those studies. 35 In those circumstances, the provision at issue must be examined in the light of the Treaty and, in particular, in the light of the principle of non-discrimination on the grounds of nationality contained in Article 12 EC. The plea alleging infringement of Community law 36 The Commission asserts that the right to equal treatment laid down by Article 12 EC necessarily includes the right for holders of diplomas awarded in another Member State, once their diploma is deemed to be equivalent, not to be made subject to conditions which are not imposed on students who have obtained their diploma in Austria for the purpose of gaining access to the same Austrian higher or university education course. Otherwise, that article would be deprived of all useful effect. 37 Pursuant to Paragraph 36 of the UniStG, access by holders of diplomas awarded in another Member State to certain Austrian higher or university education courses is made subject to a condition to which holders of general university entrance qualifications awarded in Austria are not subject. 38 The Commission submits that that condition constitutes indirect discrimination since, although Austrian nationals who have obtained a diploma in another Member State are also subject to that same condition, it affects nationals from other Member States more than Austrian nationals. 39 The Republic of Finland takes the view, like the Commission, that the condition laid down in Paragraph 36 of the UniStG, which does not concern holders of Austrian secondary education diplomas, is contrary to Community law, in particular to Article 12 EC. 40 The Republic of Austria disputes the Commission’s analysis according to which access to higher education is subject in Austria to a two-stage procedure consisting of, first, recognition on an equal basis of diplomas awarded on completion of secondary studies and, second, verification of other conditions. Admission to Austrian universities is, in reality, subject to proof of general aptitude and of specific aptitude for university studies and no condition other than academic recognition of the qualification giving access to university studies is required. 41 According to settled case-law, the principle of equal treatment prohibits not only overt discrimination based on nationality but also all covert forms of discrimination which, by applying other distinguishing criteria, lead in fact to the same result (see, in particular, Case 152/73 Sotgiu [1974] ECR 153, paragraph 11; Case C-65/03 Commission v Belgium, cited above, paragraph 28, and Case C-209/03 Bidar [2005] ECR I-0000, paragraph 51). 42 In the present case, the national legislation in question provides that students who have obtained their secondary education diploma in a Member State other than the Republic of Austria and who wish to pursue their higher or university studies in a given area of Austrian education must not only produce that diploma, but also prove that they fulfil the conditions of access to higher or university studies in the State where they obtained their diploma, such as, in particular, success in an entrance examination or obtaining a sufficient grade to be included in the numerus clausus. 43 It appears therefore that Paragraph 36 of the UniStG introduces not only differential treatment to the detriment of students who have obtained their secondary education diplomas in a Member State other than the Republic of Austria, but also between those same students according to the Member State in which they obtained their secondary education diploma. 44 The opportunities offered by the Treaty relating to free movement are not fully effective if a person is penalised merely for using them. That consideration is particularly important in the field of education in view of the aims pursued by Article 3(1)(q) EC and the second indent of Article 149(2) EC, namely encouraging mobility of students and teachers (see Case C-224/98 D’Hoop [2002] ECR I-6191, paragraphs 30 to 32). 45 Case-law has moreover established that Union citizenship is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to enjoy the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for (Case C-184/99 Grzelczyk [2001] ECR I-6193, paragraph 31, and D’Hoop, cited above, paragraph 28). 46 Thus, the legislation in question places holders of secondary education diplomas awarded in a Member State other than the Republic of Austria at a disadvantage, since they cannot gain access to Austrian higher education under the same conditions as holders of the equivalent Austrian diploma. 47 Thus, although Paragraph 36 of the UniStG applies without distinction to all students, it is liable to have a greater effect on nationals of other Member States than on Austrian nationals, and therefore the difference in treatment introduced by that provision results in indirect discrimination. 48 Consequently, the differential treatment in question could be justified only if it were based on objective considerations independent of the nationality of the persons concerned and were proportionate to the legitimate aim of the national provisions (Case C-274/96 Bickel and Franz [1998] ECR I-7637, paragraph 27, and D’Hoop, cited above, paragraph 36). Justification of discrimination – Justification based on safeguarding the homogeneity of the Austrian higher or university education system 49 The Republic of Austria submits that justification of unequal treatment falling within the scope of Article 12 EC is not limited to grounds of public policy, public security and public health, and that, according to settled case-law, it is possible to justify discrimination based on nationality in cases of indirect discrimination. 50 The Republic of Austria invokes, in that regard, the safeguarding of the homogeneity of the Austrian education system. Relying by analogy on the case-law of the Court, it submits that, if the rights available in the country of origin are not taken into consideration, it can expect a large number of holders of diplomas awarded in other Member States to try to attend university and higher education courses in Austria and that that situation would cause structural, staffing and financial problems (see Case C-158/96 Kohll [1998] ECR I-1931, paragraph 41, and Case C-368/98 Vanbraekel and Others [2001] ECR I-5363, paragraph 47). 51 The Commission submits that it follows from the case-law of the Court, in particular from Case 15/69 Ugliola [1969] ECR 363 and Case C-484/93 Svensson and Gustavsson [1995] ECR I-3955, that a discriminatory measure may be justified only on the exceptional grounds expressly provided for in the Treaty, namely public policy, public security and public health. However, no ground of that type has been put forward by the Republic of Austria. 52 In addition, to concede that the Austrian legislation may be justified by grounds other than those expressly provided for by the Treaty would render meaningless, according to the Commission, the concept of indirect discrimination as it results from Sotgiu, cited above, that is discrimination which, although based on an apparently neutral criterion, in fact leads to the same result as discrimination on the grounds of nationality. 53 Moreover, the Commission claims that in any event Paragraph 36 of the UniStG infringes the principle of proportionality. – Justification based on preventing abuse of Community law 54 The Republic of Austria points out that, in Case 115/78 Knoors [1979] ECR 399 and Case C-61/89 Bouchoucha [1990] ECR I-3551, the Court recognised the legitimate interest that a Member State may have in preventing certain of its nationals, by means of facilities created under the Treaty, from improperly evading the application of their national legislation as regards training for a trade or profession and that Community law does not allow national legislation to be circumvented in that area. 55 In response, the Commission points out that in Case C-436/00 X and Y [2002] ECR I-10829, the Court found that whether there is abuse or fraudulent conduct must be examined individually on a case-by-case basis and should be based on objective evidence, and that the mere fact of exercising the right to freedom of movement cannot be regarded as an abuse (Case C-212/97 Centros [1999] ECR I-1459). – Justification based on international conventions 56 The Republic of Austria contends that Paragraph 36 of the UniStG complies with conventions concluded within the framework of the Council of Europe, in this case that of 11 December 1953 on the equivalence of diplomas leading to admission to universities (European Treaties Series, No 15, ‘the 1953 Convention’), and that of 11 April 1997 on the recognition of qualifications concerning higher education in the European Region (European Treaties Series, No 165, ‘the 1997 Convention’). 57 The Commission points out that, under Article 307 EC, the rights and obligations arising from agreements concluded between one or more Member States and one or more third countries before the accession of a Member State are not affected by the provisions of the Treaty. However, to the extent that such agreements are not compatible with the Treaty, the Member State or States concerned must take all appropriate steps to eliminate the incompatibilities established. 58 It also draws attention to the settled case-law of the Court, according to which whilst Article 307 EC allows Member States to honour obligations owed to non-member States under international agreements preceding the Treaty, it does not authorise them to exercise rights under such agreements in intra-Community relations (Case C-473/93 Commission v Luxembourg [1996] ECR I-3207, paragraph 40). 59 Consequently, according to the Commission, the Republic of Austria may not rely on the 1953 Convention. Nor may the 1997 Convention be relied on, since it was concluded after the accession of the Republic of Austria. – Justification based on safeguarding the homogeneity of the Austrian higher or university education system60 It must be borne in mind, as found in paragraph 47 of this judgment, that Paragraph 36 of the UniStG gives rise to indirect discrimination, since it is liable to affect students from other Member States more than Austrian students. Furthermore, it emerged from the hearing before the Court that the Austrian legislation aims to restrict access to Austrian universities for holders of diplomas awarded in other Member States. 61 As the Advocate General points out in point 52 of his Opinion, excessive demand for access to specific courses could be met by the adoption of specific non-discriminatory measures such as the establishment of an entry examination or the requirement of a minimum grade; thus Article 12 EC would be complied with. 62 Furthermore, it must be observed that the risks alleged by the Republic of Austria are not exclusive to its higher or university education system but have been and are suffered by other Member States. Among those Member States is the Kingdom of Belgium, which had introduced similar restrictions, which were held to be incompatible with the requirements of Community law (see Case C-65/03 Commission v Belgium, cited above). 63 Moreover, it is for the national authorities which invoke a derogation from the fundamental principle of freedom of movement for persons to show in each individual case that their rules are necessary and proportionate to attain the aim pursued. The reasons which may be invoked by a Member State by way of justification must be accompanied by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that State and specific evidence substantiating its arguments (see, to that effect, Case C-42/02 Lindman [2003] ECR I-13519, paragraph 25, and Case C-8/02 Leichtle [2004] ECR I-2641, paragraph 45). 64 In the present case, the Republic of Austria simply maintained at the hearing that the number of students registering for courses in medicine could be five times the number of available places, which would pose a risk to the financial equilibrium of the Austrian higher education system and, consequently, to its very existence. 65 It must be pointed out that no estimates relating to other courses have been submitted to the Court and that the Republic of Austria has conceded that it does not have any figures in that connection. Moreover, the Austrian authorities have accepted that the national legislation in question is essentially preventive in nature. 66 Consequently, it must be held that the Republic of Austria has failed to demonstrate that, in the absence of Paragraph 36 of the UnistG, the existence of the Austrian education system in general and the safeguarding of the homogeneity of higher education in particular would be jeopardised. The legislation in question is therefore incompatible with the objectives of the Treaty. 67 Second, the Austrian Government has put forward a justification alleging that it is necessary for Member States to prevent abuse of Community law and drawing attention to the legitimate interest that a Member State may have in preventing certain of its nationals, by means of facilities created under the Treaty, from improperly evading the application of their national legislation as regards training for a trade or profession. 68 According to case-law, whether there is abuse or fraudulent conduct must be examined individually on a case-by-case basis and must be based on objective evidence (see Centros, paragraphs 24 and 25, and X and Y, paragraphs 42 and 43). 69 It must also be borne in mind that Article 149(2) EC, second indent, expressly provides that Community action is to be aimed at encouraging mobility of students and teachers, inter alia by encouraging the academic recognition of diplomas and periods of study. Moreover, Article 150(2) EC, third indent, provides that Community action is to aim to facilitate access to vocational training and encourage mobility of instructors and trainees and particularly young people. 70 In this case, it need merely be observed that the possibility for a student from the European Union, who has obtained his secondary education diploma in a Member State other than Austria, to gain access to Austrian higher or university education under the same conditions as holders of diplomas awarded in Austria constitutes the very essence of the principle of freedom of movement for students guaranteed by the Treaty, and cannot therefore of itself constitute an abuse of that right. 71 The Republic of Austria submits, third, that Paragraph 36 of the UniStG complies with the 1953 and 1997 Conventions. 72 In that regard, it must be held that, according to Article 307 EC, the rights and obligations arising from agreements concluded for acceding States, before the date of their accession, between one or more Member States on the one hand, and one or more third countries on the other, are not affected by the provisions of the Treaty. However, and to the extent that such agreements are not compatible with the Treaty, the Member State or States concerned must take all appropriate steps to eliminate the incompatibilities established. 73 It is settled case-law that, whilst Article 307 EC allows Member States to honour obligations owed to non-member States under international agreements preceding the Treaty, it does not authorise them to exercise rights under such agreements in intra-Community relations (see, in particular, Commission v Luxembourg, cited above, paragraph 40, and Case C-203/03 Commission v Austria [2005] ECR I‑0000, paragraphs 57 to 59). 74 Consequently, the Republic of Austria may not invoke by way of justification either the 1953 Convention or a fortiori the 1997 Convention, which was concluded after the Republic of Austria acceded to the Union. 75 Having regard to the foregoing considerations, it must be held that, by failing to take the necessary measures to ensure that holders of secondary education diplomas awarded in other Member States can gain access to higher and university education organised by it under the same conditions as holders of secondary education diplomas awarded in Austria, the Republic of Austria has failed to fulfil its obligations under Articles 12 EC, 149 EC and 150 EC. Costs76 Article 69(2) of the Rules of Procedure provides that the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Republic of Austria has been unsuccessful, the Republic of Austria must be ordered to pay the costs. On those grounds, the Court (Second Chamber) hereby:1. Declares that, by failing to take the necessary measures to ensure that holders of secondary education diplomas awarded in other Member States can gain access to higher and university education organised by it under the same conditions as holders of secondary education diplomas awarded in Austria, the Republic of Austria has failed to fulfil its obligations under Articles 12 EC, 149 EC and 150 EC; 2. Orders the Republic of Austria to pay the costs. [Signatures]* Language of the case: German. | 70099-2c69197-4db0 | EN |
THE COURT OF JUSTICE EXTENDS TRADE-MARK PROTECTION BY ALLOWING SERVICE MARKS FOR RETAIL TRADE | Praktiker Bau- und Heimwerkermärkte AG(Reference for a preliminary ruling from the Bundespatentgericht)(Trade marks –– Directive 89/104/EEC –– Trade marks in respect of services –– Registration –– Services provided in connection with retail trade –– Specification of content of services –– Similarity between the services in question and goods or other services)Opinion of Advocate General Léger delivered on 13 January 2005 Judgment of the Court (Second Chamber), 7 July 2005 Summary of the Judgment1. Approximation of laws — Trade marks — Directive 89/104 — Trade marks in respect of services — Concept of ‘services’ — Community concept — Uniform interpretation(Council Directive 89/104)2. Approximation of laws — Trade marks — Directive 89/104 — Trade marks in respect of services — Concept of ‘services’ — Retail trade in goods — Included — Requirements for registration(Council Directive 89/104, Art. 2)1. It falls to the Court to supply a uniform interpretation of the concept of ‘services’ within the meaning of Directive 89/104 to approximate the laws of the Member States relating to trade marks. Determination of the nature and content of the service eligible for protection by a registered trade mark is subject, not to the provisions on registration procedures, in regard to which the Member States retain full freedom, but to the substantive conditions for acquiring the right conferred by the trade mark. Moreover, if the concept of ‘services’ were a matter for the Member States, conditions for the registration of service trade marks could vary according to the national legislation concerned. Therefore, the objective that acquisition of the right in the trade mark should be subject to ‘conditions … identical’ in all Member States would not be attained. (see paras 30-33)2. The concept of ‘services’ within the meaning of Directive 89/104 to approximate the laws of the Member States relating to trade marks covers services provided in connection with retail trade in goods. No overriding reason based on the directive or on general principles of Community law precludes those services from being covered by the concept of ‘services’ within the meaning of the directive or, therefore, the trader from having the right to obtain, through the registration of his trade mark, protection of that mark as an indication of the origin of the services provided by him. For the purposes of registration of a trade mark for such services, it is not necessary to specify in detail the service(s) in question. However, details must be provided with regard to the goods or types of goods to which those services relate. (see paras 35, 39, 52, operative part 1-2)JUDGMENT OF THE COURT (Second Chamber)7 July 2005 (*) (Trade marks – Directive 89/104/EEC – Trade marks in respect of services – Registration – Services provided in connection with retail trade – Specification of content of services – Similarity between the services in question and goods or other services)In Case C-418/02,REFERENCE for a preliminary ruling under Article 234 EC from the Bundespatentgericht (Germany), made by decision of 15 October 2002, received at the Court on 20 November 2002, in the proceedings Praktiker Bau- und Heimwerkermärkte AG, THE COURT (Second Chamber),composed of C.W.A. Timmermans, President of the Chamber, C. Gulmann (Rapporteur), R. Schintgen, N. Colneric and J.N. Cunha Rodrigues, Judges, Advocate General: P. Léger,Registrar: M. Múgica Arzamendi, Principal Administrator,having regard to the written procedure and further to the hearing on 1 July 2004,after considering the observations submitted on behalf of:– Praktiker Bau- und Heimwerkermärkte AG, by M. Schaeffer, Rechtsanwalt,– the French Government, by G. de Bergues and A. Bodard‑Hermant, acting as Agents,– the Austrian Government, by E. Riedl, acting as Agent,– the United Kingdom Government, by K. Manji, acting as Agent, and M. Tappin, Barrister,– the Commission of the European Communities, by N.B. Rasmussen and S. Fries, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 13 January 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Articles 2, 4(1)(b) and 5(1)(b) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (OJ 1989 L 40, p. 1, ‘the directive’). 2 That reference was made in proceedings between Praktiker Bau- und Heimwerkermärkte AG (‘Praktiker Märkte’) and the Deutsches Patent- und Markenamt (German Patent and Trade Mark Office) concerning the registration of a trade mark in respect of services provided in connection with retail trade. Law3 Article 2 of the directive provides:‘A trade mark may consist of any sign capable of being represented graphically, particularly words, including personal names, designs, letters, numerals, the shape of goods or of their packaging, provided that such signs are capable of distinguishing the goods or services of one undertaking from those of other undertakings.’ 4 Article 4(1) of that directive states:‘A trade mark shall not be registered or, if registered, shall be liable to be declared invalid:(a) if it is identical with an earlier trade mark, and the goods or services for which the trade mark is applied for or is registered are identical with the goods or services for which the earlier trade mark is protected; (b) if because of its identity with, or similarity to, the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the earlier trade mark.’ 5 Article 5(1) provides:‘The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade: (a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered; (b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.’ 6 The 12th recital in the preamble to the directive states that it is necessary that its provisions are entirely consistent with those of the Convention for the Protection of Industrial Property, signed at Paris on 20 March 1883, last revised at Stockholm on 14 July 1967 and amended on 28 September 1979 (United Nations Treaty Series, vol. 828, No 11851, p. 305, ‘the Paris Convention’), which is binding on all the Member States of the Community. 7 The Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended (‘the Nice Agreement’), was concluded on the basis of Article 19 of the Paris Convention, which reserves for the countries of the Union the right to make separately between themselves special agreements for the protection of industrial property. 8 In the classification which it establishes (‘the Nice Classification’), Class 35, relating to services, is headed as follows: ‘Advertising;business management;business administration;office functions.’9 The Explanatory Note relating to that class states:‘...This Class includes, in particular:– the bringing together, for the benefit of others, of a variety of goods (excluding the transport thereof), enabling customers to conveniently view and purchase those goods; …This Class does not include, in particular:– activity of an enterprise the primary function of which is the sale of goods, i.e., of a so-called commercial enterprise;…’10 Article 2 of the Nice Agreement states:‘(1) Subject to the requirements prescribed by this Agreement, the effect of the Classification shall be that attributed to it by each country of the Special Union. In particular, the Classification shall not bind the countries of the Special Union in respect of either the evaluation of the extent of the protection afforded to any given mark or the recognition of service marks. (2) Each of the countries of the Special Union reserves the right to use the Classification either as a principal or as a subsidiary system. (3) The competent Office of the countries of the Special Union shall include in the official documents and publications relating to registrations of marks the numbers of the classes of the Classification to which the goods or services for which the mark is registered belong. The main proceedings and the questions referred for a preliminary ruling11 Praktiker Märkte filed for registration with the Deutsches Patent- und Markenamt the mark Praktiker in relation to, inter alia, the service described as ‘retail trade in building, home improvement, gardening and other consumer goods for the do-it-yourself sector’. 12 The Deutsches Patent- und Markenamt rejected that application. It considered that the concept of ‘retail trade’ claimed did not denote independent services having autonomous economic significance. That concept related only to the distribution of goods as such. The economic activities which formed the core of goods distribution, in particular the purchase and sale of goods, were not services for which a trade mark could be registered. Trade-mark protection could be achieved only by applying for registration of a trade mark in respect of the goods distributed in each case. 13 Praktiker Märkte brought an appeal before the Bundespatentgericht (Federal Patents Court) against the decision rejecting its application. It argued inter alia that the economic trend towards a service society necessitated a re‑appraisal of retail trade as a service. The consumer’s purchasing decision would increasingly be influenced not only by the availability and price of a product, but also by other aspects such as the variety and assortment of goods, their presentation, the service provided by staff, advertising, image and the location of the store, etc. Such services provided in connection with retail trade enabled retailers to be distinguishable from their competitors. Such services ought to be eligible for protection by service trade marks. Trade‑mark protection was now accepted in relation to the services provided by a retailer, not only by the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (‘OHIM’), but also by the majority of Member States. A uniform assessment of this question within the Community was imperative. 14 Against that background, the Bundespatentgericht decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Does retail trade in goods constitute a service within the meaning of Article 2 of the directive?If the answer to this question is in the affirmative:2. To what extent must the content of such services provided by a retailer be specified in order to guarantee the certainty of the subject‑matter of trade-mark protection that is required in order to: (a) fulfil the function of the trade mark, as defined in Article 2 of the directive, namely, to distinguish the goods or services of one undertaking from those of other undertakings, and (b) define the scope of protection of such a trade mark in the event of a conflict?3. To what extent is it necessary to define the scope of similarity (Article 4(1)(b) and Article 5(1)(b) of the directive) between such services provided by a retailer and (a) other services provided in connection with the distribution of goods, or(b) the goods sold by that retailer?’15 The referring court points out that Article 2 of the directive does not contain any definitions of the terms ‘goods’ and ‘services’ which it uses. 16 In that court’s view, the core of the independent activity of a retailer, by which he comes into direct competition with other traders and for which separate protection of a service trade mark could be necessary, remains the specific activities of a trader which make distribution of goods possible, without being confined to carrying out such distribution. They include bringing together goods from a variety of undertakings to form a range and offering them for sale from a single distribution entity, whether by way of traditional retailing, mail order or e-commerce. Even if those services are not charged separately to individual customers, they can nevertheless be considered to be provided for remuneration, through the profit margin. 17 However, in the opinion of the Bundespatentgericht, for the function of the trade mark as an indication of origin to be fulfilled, the subject‑matter of the protection conferred must be determined with sufficient precision. General concepts such as ‘retail services’ do not satisfy the requirement of certainty in relation to exclusive rights. Restrictions confining such protection only to the goods distributed do not overcome the indeterminate nature of the words ‘retail trade’ in the individual sector concerned. They leave open the question of what services are covered, apart from the mere sale of those goods. Similar objections can be raised with regard to the provision of details relating to the type of sales location, such as ‘department store’ or ‘supermarket’, for example. 18 The need for a restriction, when registering trade marks, of the content of ‘services provided by a retailer’ applies to an even greater extent to the interpretation of ‘likelihood of confusion’ in Article 4(1)(b) and Article 5(1)(b) of the directive. Even a reasonable specification, at the time of the registration procedure, of the content of ‘services provided by a retailer’ would ultimately prove insufficient if the service trade mark registered were to be granted a scope of protection which was not capable of review as a result of a wide interpretation of ‘similarity of [the] goods or services’. The questions referred for a preliminary ruling The first two questions19 By its first two questions, which must be considered together, the Bundespatentgericht seeks in essence to ascertain whether the concept of ‘services’ referred to by the directive, in particular in Article 2, is to be interpreted as including services provided in connection with retail trade in goods and, if so, whether the registration of a service trade mark in respect of such services is subject to the specification of certain details. Observations submitted to the Court20 Praktiker Märkte submits that retail trade in goods constitutes a service within the meaning of the directive. A trade mark protecting it as a service is capable of fulfilling the function of the trade mark as an indication of origin. It is not necessary to specify the content of the services provided in order to determine the subject‑matter of protection. 21 The French Government stated at the hearing that it now accepts that certain specific services ancillary to retailing, the content of which would have to be specified, may constitute services separate from selling and may therefore be eligible for trade‑mark protection. 22 The Austrian Government submits that the central core of retail trade, namely the sale of goods, is not a service capable of forming the subject‑matter, as such, of trade‑mark protection, as is confirmed, in its view, by the Explanatory Note to Class 35 of the Nice Classification. Only services provided over and above that central core, the content of which would have to be specified, could give rise to registration of a service trade mark. 23 The United Kingdom Government submits that a trade mark can properly be registered for a service if consumers are provided, by reference to that trade mark, with an identifiable service over and above mere trade in goods. The Explanatory Note to Class 35 in the Nice Classification confirms that mere sale of goods does not constitute an identifiable service, but that aspects of the retail activity relating to the bringing together, for the benefit of others, of a variety of goods, enabling customers to conveniently view and purchase those goods, can constitute a service eligible for protection by a trade mark. For the purpose of registering such a trade mark, the aspects of the activity constituting the service as well as the sector(s) of retail activity covered should be specifically stated in order to guarantee the certainty of the subject‑matter of protection. 24 The Commission submits that retail trade in goods constitutes a service within the meaning of the directive where the conditions of Article 50 EC are satisfied. Protection by a service trade mark may apply to any activities which are not pure selling. It is not possible to list exhaustively all the services in question. They may include arrangement of the goods, the site, general ease of use, the attitude and commitment of staff, and customer care. 25 In the Commission’s view, the question of specification of the content of services arises, from a formal legal point of view, with respect to registration of the trade mark. That question is a matter for the Member States, as is clear from the fifth recital in the preamble to the directive, according to which it is for Member States to determine the provisions of procedure concerning registration, namely, for example, the form of registration procedures. In that regard, only Class 35 of the Nice Classification can be contemplated for the registration of a trade mark for retail trade. The Nice Agreement does not, for its part, lay down any conditions concerning description of the service. Reply of the Court26 It follows from the first recital in the preamble to the directive that the purpose of the latter is to approximate the laws of the Member States in order to remedy disparities which may impede the free movement of goods and freedom to provide services and may distort competition within the common market. 27 Under Article 1, the directive applies to ‘every trade mark in respect of goods or services’.28 It does not contain a definition of ‘services’, which Article 50 EC describes as ‘normally provided for remuneration’.29 Nor does it specify the conditions to which registration of a trade mark for a service is subject, where such registration is provided for by national legislation. 30 In that regard, it should be noted that the fifth recital in the preamble to the directive states that Member States remain free to fix the provisions of procedure concerning the registration of trade marks, in order, for example, to determine the form of registration procedures. The seventh recital nevertheless emphasises that attainment of the objectives sought by the approximation of laws requires that the conditions for obtaining a registered trade mark be, in general, identical in all Member States. 31 However, determination of the nature and content of the service eligible for protection by a registered trade mark is subject, not to the provisions on registration procedures, but to the substantive conditions for acquiring the right conferred by the trade mark. 32 If the concept of ‘services’ were a matter for the Member States, conditions for the registration of service trade marks could vary according to the national legislation concerned. The objective that acquisition of the right in the trade mark should be subject to ‘conditions … identical’ in all Member States would not be attained. 33 It therefore falls to the Court to supply a uniform interpretation of the concept of ‘services’ within the meaning of the directive (see, by analogy, Joined Cases C-414/99 to C-416/99 Zino Davidoff and Levi Strauss [2001] ECR I‑8691, paragraphs 42 and 43). 34 In that regard, it should be noted that the objective of retail trade is the sale of goods to consumers. That trade includes, in addition to the legal sales transaction, all activity carried out by the trader for the purpose of encouraging the conclusion of such a transaction. That activity consists, inter alia, in selecting an assortment of goods offered for sale and in offering a variety of services aimed at inducing the consumer to conclude the abovementioned transaction with the trader in question rather than with a competitor. 35 No overriding reason based on the directive or on general principles of Community law precludes those services from being covered by the concept of ‘services’ within the meaning of the directive or, therefore, the trader from having the right to obtain, through the registration of his trade mark, protection of that mark as an indication of the origin of the services provided by him. 36 That consideration is illustrated by the Explanatory Note to Class 35 of the Nice Classification, according to which that class includes ‘the bringing together, for the benefit of others, of a variety of goods … enabling customers to conveniently view and purchase those goods’. 37 With regard to Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1), it must be observed that OHIM now accepts that the services provided by retail undertakings are, as such, eligible for registration as Community trade marks and that they will fall under Class 35 of the Nice Classification (see Communication No 3/01 of the President of [OHIM] of 12 March 2001 concerning the registration of Community trade marks for retail services). 38 Moreover, it must be noted that, firstly, all the parties concerned which have submitted observations to the Court have accepted that at least certain services provided in connection with retail trade can constitute services within the meaning of the directive and that, secondly, according the information before the Court, such an analysis underlies a practice now widely adopted in the Member States. 39 Consequently, it must be concluded that the concept of ‘services’ within the meaning of the directive includes services provided in connection with retail trade in goods. 40 The question arises as to whether, in the particular case of the retail trade, the concept of ‘services’ within the meaning of the directive needs further specification. 41 In that regard, in the observations submitted to the Court, it was maintained that the services eligible for protection as retail services should be identified in a way which distinguishes them from services which, being closely connected with the sale of goods, could not give rise to registration of a trade mark. It was pointed out, moreover, that the application for registration of the trade mark should specify in detail the service(s) for which the applicant seeks protection. 42 It is argued that such details are necessary, in particular, to safeguard the essential function of the trade mark, namely, as the guarantee of the identity of the origin of the goods or services covered by the trade mark, and to prevent trade marks for retail services from being afforded over‑wide and indeterminate protection. 43 The difficulty of the questions thus raised is illustrated by the different answers proposed by the parties which submitted observations and by the information available to the Court regarding the current practices of the Member States. 44 For the reasons set out below, there is no need to rely on a definition of ‘retail services’ for the purposes of the directive which is more restrictive than that which follows from the description contained in paragraph 34 of this judgment. 45 It must first be stated that any distinction between the various categories of services provided with the sale of goods which involved a more restrictive definition of ‘retail services’ would prove artificial in the light of the reality of the important economic sector represented by retail trade. It would inevitably raise difficulties both as regards the general definition of the criteria to be adopted and as regards the application of those criteria in practice. 46 Admittedly, a more restrictive definition of ‘retail services’ would reduce the protection afforded to the proprietor of the trade mark, so that questions concerning the application of Articles 4(1) and 5(1) of the directive would arise less often. 47 However, that is not sufficient to justify a restrictive interpretation.48 There is nothing to indicate that any problems resulting from the registration of trade marks for retail services could not be resolved on the basis of the two relevant provisions of the directive, as they have been interpreted by the Court. In that regard, it should be recalled that, according to the Court’s case‑law, the likelihood of confusion must be assessed globally, taking into account all the factors relevant to the circumstances of the case (see Case C-251/95 SABEL [1997] ECR I‑6191, paragraph 22, and Case C-39/97 Canon [1998] ECR I-5507, paragraph 16). In the context of that global assessment, it is possible to take into consideration, if need be, the particular features of the concept of ‘retail services’ that are connected with its wide scope, having due regard to the legitimate interests of all interested parties. 49 In those circumstances, for the purposes of registration of a trade mark covering services provided in connection with retail trade, it is not necessary to specify in detail the service(s) for which that registration is sought. To identify those services, it is sufficient to use general wording such as ‘bringing together of a variety of goods, enabling customers to conveniently view and purchase those goods’. 50 However, the applicant must be required to specify the goods or types of goods to which those services relate by means, for example, of particulars such as those contained in the application for registration filed in the main proceedings (see paragraph 11 of this judgment). 51 Such details will make it easier to apply Articles 4(1) and 5(1) of the directive without appreciably limiting the protection afforded to the trade mark. They will also make it easier to apply Article 12(1) of the directive, which states that ‘[a] trade mark shall be liable to revocation if, within a continuous period of five years, it has not been put to genuine use in the Member State in connection with the … services in respect of which it is registered, and there are no proper reasons for non-use’. 52 The answer to the first two questions referred for a preliminary ruling must therefore be that the concept of ‘services’ referred to by the directive, in particular in Article 2, covers services provided in connection with retail trade in goods. For the purposes of registration of a trade mark for such services, it is not necessary to specify the actual service(s) in question. However, details must be provided with regard to the goods or types of goods to which those services relate. The third question53 By its third question, the referring court seeks, in essence, to ascertain whether the concept of ‘similarity’ referred to in Articles 4(1)(b) and 5(1)(b) of the directive, giving rise, in some circumstances, to a likelihood of confusion within the meaning of those provisions, must be interpreted by reference to specific restrictive criteria with regard to service trade marks protecting services provided in connection with retail trade in goods. 54 It is apparent from the order for reference that, in the main proceedings, the application for registration of the trade mark Praktiker in respect of retail services was refused on the ground that the definition claimed, ‘retail trade’, did not denote services eligible for registration as a trade mark. 55 The reference for a preliminary ruling does not contain any indication that the referring court could find it necessary to rule on the concept of ‘similarity’ referred to in Articles 4(1)(b) and 5(1)(b) of the directive in connection with a likelihood of confusion within the meaning of those provisions. 56 Consequently, those provisions, while relevant for the purposes of answering the first two questions, are not relevant in the context of the third question. 57 The Court has no jurisdiction to answer questions referred for a preliminary ruling where it is obvious that the interpretation of Community law sought bears no relation to the actual facts of the main proceedings or to their purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted (see, in particular, Case C-421/01 Traunfellner [2003] ECR I-11941, paragraph 37). 58 In those circumstances, the third question referred for a preliminary ruling must be held to be hypothetical in the light of the main proceedings and, accordingly, must be declared inadmissible. Costs59 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Second Chamber) hereby rules:1. The concept of ‘services’ referred to by First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, in particular in Article 2, covers services provided in connection with retail trade in goods.2. For the purposes of registration of a trade mark for such services, it is not necessary to specify in detail the service(s) in question. However, details must be provided with regard to the goods or types of goods to which those services relate.[Signatures]* Language of the case: German. | a8bd9-2891c2d-4612 | EN |
A SYSTEM OF COMPULSORY MOTOR VEHICLE INSURANCE WHICH REFUSES OR LIMITS, IN A DISPROPORTIONATE MANNER, COMPENSATION FOR A PASSENGER WHO HAS CONTRIBUTED TO THE OCCURRENCE OF THE DAMAGE OR INJURY INFRINGES COMMUNITY LAW | Katja Candolin and OthersvVahinkovakuutusosakeyhtiö Pohjola and Jarno Ruokoranta(Reference for a preliminary ruling from the Korkein oikeus)(Compulsory motor vehicle insurance – Directives 84/5/EEC and 90/232/EEC – Rules on civil liability – Passenger’s contribution to the loss or injury – Refusal or limitation of the right to compensation)Opinion of Advocate General Geelhoed delivered on 10 March 2005 Judgment of the Court (First Chamber), 30 June 2005 Summary of the JudgmentApproximation of laws — Insurance against civil liability in respect of motor vehicles — Directives 72/166, 84/5 and 90/232 — Determination of the rules on civil liability applicable to road accidents — Conditions for limiting the right to compensation paid by compulsory motor vehicle insurance based on the contribution to the damage of a passenger who is a victim of the accident — Powers of the Member States — Limits — Effect of the fact that the passenger concerned is the ‘owner of the vehicle’ — None(Council Directives 72/166, Art. 3(1), 84/5, Art. 2(1), and 90/232, Art. 1)It is clear from the aim of Directives 72/166, 84/5 and 90/232 on the approximation of the laws of the Member States in relating to insurance against civil liability in respect of the use of motor vehicles, and from their wording, that they do not seek to harmonise the rules of the Member States governing civil liability and that, as Community law stands at present, the Member States are free to determine the rules of civil liability applicable to road accidents, and, in particular, the conditions for limiting the right to compensation paid by the compulsory motor vehicle insurance on account of the fact that the passenger who is a victim of the accident contributed to the injury. The Member States must, however, exercise their powers in compliance with Community law and, in particular, with Article 3(1) of Directive 72/166, Article 2(1) of Directive 84/5 and Article 1 of Directive 90/232, whose aim is to ensure that compulsory motor vehicle insurance allows all passengers who are victims of an accident caused by a motor vehicle to be compensated for the injury or loss they have suffered. The national provisions which govern compensation for road accidents cannot, therefore, deprive those provisions of their effectiveness. Such would be the case specifically where, solely on the basis of the passenger’s contribution to the occurrence of his injuries, national rules, established on the basis of general and abstract criteria either denied the passenger the right to be compensated by the compulsory motor vehicle insurance or limited such a right in a disproportionate manner. The fact that the passenger concerned is the owner of the vehicle the driver of which caused the accident is irrelevant in that regard. (see paras 24, 27-29, 31, 35, operative part)JUDGMENT OF THE COURT (First Chamber)30 June 2005 (*) In Case C-537/03,Reference for a preliminary ruling under Article 234 EC from the Korkein Oikeus (Finland), made by decision of 19 December 2003, received at the Court on 22 December 2003, in the proceedings Katja Candolin,Jari-Antero Viljaniemi,Veli-Matti Paananen,Vahinkovakuutusosakeyhtiö Pohjola,Jarno Ruokoranta,THE COURT (First Chamber),composed of P. Jann, President of the Chamber, K. Lenaerts, J.N. Cunha Rodrigues (Rapporteur), E. Juhász and M. Ilešič, Judges,Advocate General: L.A. Geelhoed,Registrar: H. von Holstein, Deputy Registrar,having regard to the written procedure and further to the hearing on 19 January 2005,after considering the observations submitted on behalf of:– Mr Paananen, by M. Hunnakko, asianajaja,– Vahinkovakuutusosakeyhtiö Pohjola, by M. Mäkelä, acting as Agent,– the Finnish Government, by T. Pynnä, acting as Agent,– the German Government, by M. Lumma, acting as Agent,– the Austrian Government, by E. Riedl, acting as Agent,– the Swedish Government, by K. Norman, acting as Agent,– the Norwegian Government, by I. Djupvik, acting as Agent, and T. Nordby, advocate,– the Commission of the European Communities, by E. Traversa and M. Huttunen, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 10 March 2005,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Second Council Directive 84/5/EEC of 30 December 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles (OJ 1984 L 8, p. 17) (‘the Second Directive’) and Third Council Directive 90/232/EEC of 14 May 1990 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles (OJ 1990 L 129, p. 33) (‘the Third Directive’). 2 The reference was made in the course of proceedings between Ms Candolin, Mr Viljaniemi and Mr Paananen and the insurance company Vahinkovakuutusosakeyhtiö Pohjola (‘Pohjola’) and Mr Ruokoranta, concerning damages to be paid to them as a result of a car accident. Legal background Community law3 Pursuant to Article 3(1) of Council Directive 72/166/EEC of 24 April 1972 on the approximation of the laws of Member States relating to insurance against civil liability in respect of the use of motor vehicles, and to the enforcement of the obligation to insure against such liability (OJ, English Special Edition 1972 (II), p. 360) (‘the First Directive’): ‘Each Member State shall … take all appropriate measures to ensure that civil liability in respect of the use of vehicles normally based in its territory is covered by insurance. The extent of the liability covered and the terms and conditions of the cover shall be determined on the basis of these measures.’ 4 The seventh and ninth recitals in the preamble to the Second Directive are worded as follows:‘Whereas it is in the interest of victims that the effects of certain exclusion clauses be limited to the relationship between the insurer and the person responsible for the accident; … … the members of the family of the insured person, driver or any other person liable should be afforded protection comparable to that of other third parties, in any event in respect of their personal injuries’. 5 Article 2(1) of the Second Directive provides that:‘Each Member State shall take the necessary measures to ensure that any statutory provision or any contractual clause contained in an insurance policy issued in accordance with Article 3(1) of Directive 72/166/EEC, which excludes from insurance the use or driving of vehicles by: – persons who do not have express or implied authorisation thereto, or– persons who do not hold a licence permitting them to drive the vehicle concerned, – persons who are in breach of the statutory technical requirements concerning the condition and safety of the vehicle concerned,shall, for the purposes of Article 3(1) of Directive 72/166/EEC, be deemed to be void in respect of claims by third parties who have been victims of an accident. However the provision or clause referred to in the first indent may be invoked against persons who voluntarily entered the vehicle which caused the damage or injury, when the insurer can prove that they knew the vehicle was stolen. …’6 Article 1 of the Third Directive provides:‘Without prejudice to the second subparagraph of Article 2(1) of Directive 84/5/EEC, the insurance referred to in Article 3(1) of Directive 72/166/EEC shall cover liability for personal injuries to all passengers, other than the driver, arising out of the use of a vehicle. National law7 At the time the facts arose in the main proceedings, Paragraph 7(1) and (3) of the Law on motor vehicle insurance (Liikennevakuutuslaki (279/1959)) of 26 June 1959, as amended by Law 656/1994, was worded as follows: ‘1. If a person who has met with road accident damage himself contributed to its occurrence, his compensation may, as regards damage incurred other than personal injury, be reduced or refused depending on what his fault was, how the vehicle was driven and what other circumstances influenced the damage. If a person has caused injury to his own person deliberately or by gross negligence, compensation for that is paid only in so far as the other circumstances have influenced the occurrence of the injury. …If a person has caused injury to his own person when driving a vehicle in a situation in which the alcohol content of his blood during the journey or after it was at least 1.2 per mille or he had at least 0.60 milligrams of alcohol per litre of air exhaled, or has caused injury when driving a vehicle otherwise under the influence of alcohol or/and of an intoxicating substance other than alcohol or under the joint influence of alcohol and an intoxicating substance other than alcohol, so that his ability to act correctly was considerably impaired, compensation is paid from the vehicle’s insurance only in so far as there is a special reason for that. What is said above on the driver’s right to compensation applies also to a passenger, if when he sustained the injury he was in the vehicle although he knew or should have known of the driver’s condition referred to above.’ 8 As a result of a reasoned opinion sent on 20 March 2002 by the Commission of the European Communities to the Republic of Finland, the second sentence of Paragraph 7(3) was amended by Law 548/2002. Pursuant to that new provision: ‘A passenger’s compensation may be reasonably reduced on the ground of his own contributory fault, if when he sustained the injury he was in the vehicle with a driver as described in this subparagraph.’ 9 Since the entry into force on 1 February 2003 of Law 1144/2002, Paragraph 7(1) of the Law on motor vehicle insurance is worded as follows: ‘If a person has intentionally caused personal injury to himself, compensation is paid only in so far as the other circumstances have influenced the occurrence of injury. If a person has contributed by gross carelessness to the occurrence of the personal injury he has suffered, the compensation may be reduced or refused according to what is reasonable having regard to the circumstances.’ The dispute in the main proceedings and the questions referred for a preliminary ruling10 On 21 April 1997 Mrs Candolin, the mother of Ms Candolin, was travelling together with Mr Viljaniemi and Mr Paananen in Mr Paananen’s car, which was driven on that occasion by Mr Ruokoranta. During the journey a road accident occurred, causing the death of Mrs Candolin as well as serious injuries to the other passengers. 11 It is apparent from the order for reference that the driver and all the other passengers were drunk.12 The Porin Käräjäoikeus (District Court, Pori) sentenced Mr Ruokoranta to a term of imprisonment and ordered him to pay compensation to Ms Candolin, Mr Viljaniemi and Mr Paananen. As regards the question of the payment of compensation by Pohjola, the District Court, taking the view that the passengers should have noticed the driver’s drunken state, held that, in principle, none of them was entitled to receive compensation from Pohjola by reason of Paragraph 7(3) of the Law on motor vehicle insurance as amended by Law 656/1994. However, if there were a ‘special reason’, within the meaning of Paragraph 7(3,) for paying compensation then Pohjola could be ordered to pay it. Taking account of the serious injuries suffered by Mr Paananen and the fact that Mr Ruokoranta, given his financial circumstances, would probably be unable to compensate him, the Porin Käräjäoikeus held that Pohjola had to pay that compensation. On the other hand, it held that no ‘special reason’ could be relied on as regards Ms Candolin and Mr Viljaniemi. 13 An appeal was brought before Turun Hovioikeus (Court of Appeal, Turku) which held that Pohjola was no longer liable to pay the compensation which Mr Ruokoranta owed to Mr Paananen. 14 Ms Candolin, Mr Viljaniemi and Mr Paananen therefore brought an appeal against the judgment of the Turun Hovioikeus before the Korkein Oikeus (Supreme Court). They claim that their compensation should be covered by the insurance company on the basis of the motor vehicle insurance. Pohjola denies that it has any obligation to pay compensation on the ground that where a passenger enters a vehicle in the knowledge that he runs a higher than normal risk of being injured he must be liable for the consequences of his conduct. 15 Taking the view that the legal provisions in force at the time of the facts must be interpreted in accordance with Community law, the Korkein Oikeus decided to stay its proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Does the requirement in Article 1 of the Third Directive …, under which all passengers other than the driver are to be compensated from insurance for personal injuries arising out of the use of a vehicle, or any other provision or principle of Community law lay down restrictions in assessing the significance of the passenger’s own contributory fault under national law, in connection with his right to compensation payable from compulsory motor vehicle insurance? 2. Is it consistent with Community law, in any situation other than the cases mentioned in the second subparagraph of Article 2(1) of the Second Directive …, to exclude or limit, on the basis of the conduct of a passenger in a vehicle, his right to obtain compensation from compulsory motor vehicle insurance for road accident damage? May that come into question, for example, when a person has entered a vehicle as a passenger although he could have seen that the danger of an accident and of his suffering injury was greater than normal? 3. Does Community law preclude the driver’s intoxication, which influences his capability of driving the vehicle safely, from being regarded as such a factor to be taken into account? 4. Does Community law preclude the right of a car owner who is a passenger in the car to compensation for personal injury payable from compulsory motor vehicle insurance from being assessed more severely than that of other passengers on the ground that he permitted an intoxicated person to drive his car?’ The questions referred for a preliminary ruling16 By those questions, which it is appropriate to examine together, the national court asks essentially whether the second subparagraph of Article 2(1) of the Second Directive and Article 1 of the Third Directive preclude a national law according to which compensation paid under compulsory motor vehicle insurance may be refused or limited on the basis of the passenger’s contribution to the injury he has suffered, and whether the answer is different where the passenger is the owner of the vehicle. 17 As a preliminary point it must be recalled that the First, Second and Third Directives are designed to ensure the free movement of vehicles normally based on Community territory and of persons travelling in those vehicles and to guarantee that the victims of accidents caused by those vehicles receive comparable treatment irrespective of where in the Community the accident has occurred (Case C-129/94 Ruiz Bernáldez [1996] ECR I-1829, paragraph 13). 18 In view of the aim of protecting victims, the Court has held that Article 3(1) of the First Directive precludes an insurer from relying on statutory provisions or contractual clauses in order to refuse to compensate third-party victims of an accident caused by the insured vehicle (RuizBernáldez, paragraph 20). 19 The Court has also held that the first subparagraph of Article 2(1) of the Second Directive simply repeats that obligation with respect to provisions or clauses in a policy excluding from insurance the use or driving of vehicles in particular cases (persons not authorised to drive the vehicle, persons not holding a driving licence, persons in breach of the statutory technical requirements concerning the condition and safety of the vehicle) (RuizBernáldez, paragraph 21). 20 By way of derogation from that obligation, the second subparagraph of Article 2(1) provides that certain persons may be excluded from compensation by the insurer, having regard to the situation they have themselves brought about (persons entering a vehicle which they know to have been stolen) (RuizBernáldez, paragraph 21). 21 However, as it is a provision which establishes a derogation from a general rule, the second subparagraph of Article 2(1) of the Second Directive must be interpreted strictly. 22 As the Advocate General rightly stated, in point 42 of his Opinion, any other interpretation would allow Member States to limit payment of compensation to third-party victims of a road accident to certain circumstances, which is precisely what the directives are intended to avoid. 23 It follows that the second subparagraph of Article 2(1) of the Second Directive must be interpreted as meaning that a statutory provision or a contractual clause in an insurance policy which excludes the use or driving of vehicles from the insurance may be relied on against third parties who are victims of a road accident only where the insurer can prove that the persons who voluntarily entered the vehicle which caused the injury knew that it was stolen. 24 As regards the refusal or limitation of the right to compensation paid by the compulsory motor vehicle insurance on account of the fact that the passenger who is a victim of an accident contributed to the injury, it is clear from the aim of the first, second and third directives, and from their wording, that they do not seek to harmonise the rules of the Member States governing civil liability and that, as Community law stands at present, the Member States are free to determine the rules of civil liability applicable to road accidents (Case C-348/98 Mendes Ferreiraand Delgado Correia Ferreira [2000] ECR I-6711, paragraphs 23 and 29). 25 In that regard, Pohjola and the Finnish, German, Austrian and Norwegian Governments claim that Community law does not impose any limits on the appraisal, under national law on civil liability, of the extent to which the passenger contributed to the occurrence of his injuries. 26 Such an argument cannot be accepted.27 The Member States must exercise their powers in compliance with Community law and, in particular, with Article 3(1) of the First Directive, Article 2(1) of the Second Directive and Article 1 of the Third Directive, whose aim is to ensure that compulsory motor vehicle insurance allows all passengers who are victims of an accident caused by a motor vehicle to be compensated for the injury or loss they have suffered. 28 The national provisions which govern compensation for road accidents cannot, therefore, deprive those provisions of their effectiveness. 29 Such would be the case specifically where, solely on the basis of the passenger’s contribution to the occurrence of his injuries, national rules, established on the basis of general and abstract criteria, either denied the passenger the right to be compensated by the compulsory motor vehicle insurance or limited such a right in a disproportionate manner. 30 It is only in exceptional circumstances that the amount of the victim’s compensation may be limited on the basis of an assessment of his particular case. 31 In the determination of whether those circumstances exist and whether the limit on the compensation is proportionate, which is a matter for the national court, the fact that the passenger concerned is the owner of the vehicle the driver of which caused the accident is irrelevant. 32 By providing that insurance for civil liability in respect of the use of motor vehicles covers liability for personal injuries to all passengers other than the driver, Article 1 of the Third Directive lays down only one distinction between the driver and the other passengers. 33 Furthermore, the protective aims recalled in paragraphs 18 to 20 of this judgment require that the legal position of the owner of the vehicle, present in the vehicle at the time of the accident as a passenger, be the same as that of any other passenger who is a victim of the accident. 34 That interpretation is supported by the way in which Community law has evolved. The seventh recital in the preamble to the Second Directive states that it is in the interest of victims that the effects of certain exclusion clauses should be limited to the relationship between the insurer and the person responsible for the accident. In order to give protection comparable to that of other third parties who are victims, as is clear from the ninth recital in the preamble to that directive, Article 3 has extended insurance cover for personal injuries to members of the family of the insured person and the driver or any other person who is liable. Article 1 of the Third Directive adopts an even broader formula, by providing for compensation for personal injuries for all passengers other than the driver. Therefore, the owner of the vehicle, who is a passenger, is not excluded from the benefit of compensation. 35 In light of the foregoing considerations, the answer to the questions referred must be that, in circumstances such as those in the main proceedings, Article 2(1) of the Second Directive and Article 1 of the Third Directive preclude a national rule which allows the compensation borne by the compulsory motor vehicle insurance to be refused or limited in a disproportionate manner on the basis of the passenger’s contribution to the injury or loss he has suffered. The fact that the passenger concerned is the owner of the vehicle the driver of which caused the accident is irrelevant. Costs36 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (First Chamber) rules as follows:In circumstances such as those in the main proceedings, Article 2(1) of Second Council Directive 84/5/EEC of 30 December 1983 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles and Article 1 of Third Council Directive 90/232/EEC of 14 May 1990 on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles, preclude a national rule which allows the compensation borne by the compulsory motor vehicle insurance to be refused or limited in a disproportionate manner on the basis of the passenger’s contribution to the injury or loss he has suffered. The fact that the passenger concerned is the owner of the vehicle the driver of which caused the accident is irrelevant.[Signatures]* Language of the case: Finnish. | 6ef60-0db2858-48c0 | EN |
THE COURT OF JUSTICE UPHOLDS THE JUDGMENTS OF THE COURT OF FIRST INSTANCE CONCERNING A CARTEL ON THE EUROPEAN DISTRICT HEATING MARKET | Dansk Rørindustri and OthersvCommission of the European Communities(Appeal – Competition – District heating pipes (pre-insulated pipes) – Article 85(1) of the EC Treaty (now Article 81(1) EC) – Cartel – Boycott – Fines – Guidelines on the method of setting fines – Non-retroactivity – Legitimate expectations – Lawfulness – Leniency notice – Obligation to state reasons)Opinion of Advocate General Tizzano delivered on 8 July 2004 Judgment of the Court (Grand Chamber), 28 June 2005 Summary of the Judgment1. Procedure — Measures of inquiry — Examination of witnesses — Discretion of the Court of First Instance – Impact of the general principle of Community law of the right to a fair judicial process(Rules of Procedure of the Court of First Instance, Art. 68(1))2. Procedure — Application initiating the proceedings – Formal requirements – Summary account of the pleas in law put forward – Pleas in law not set out in the application – Reference to elements in an annex – Inadmissible(Rules of Procedure of the Court of First Instance, Art. 44(1)(c))3. Competition – Community rules – Undertaking – Concept(EC Treaty, Arts 85 and 86 (now Arts 81 EC and 82 EC))4. Competition – Community rules – Infringement by an undertaking – Attribution to another undertaking in view of the economic and legal links between them – Conditions – Insufficiency of a single control of capital(EC Treaty, Art. 85(1) (now Art. 81(1) EC))5. Competition – Agreements, decisions and concerted practices – Participation of an undertaking in an anti-competitive initiative – Sufficiency, in order to engage the liability of the undertaking, of tacit approval without publicly distancing itself or reporting the matter to the competent authorities6. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Criteria for assessment – Anti-competitive object – Sufficient finding7. Appeals – Pleas in law – Plea submitted for the first time in the context of the appeal – Inadmissible(EC Statute of the Court of Justice, Art. 51)8. Competition – Community rules – Infringements – Fines – Determination – Criteria – Raising of the general level of fines – Whether permissible – Conditions(EC Treaty, Arts 85(1) and 86 (now Arts 81(1) EC and 82 EC); Council Regulation No 17)9. Community law – Principles — Protection of legitimate expectations – Limits – Elimination of infringements of the competition rules – Determination of the amount of fines – Method of calculating fines – Discretion of the institutions – Lack of effect of the Leniency Notice(Commission Notice 96/C 207/04)10. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Attenuating circumstances – Obligation for the Commission to adhere to its previous practice in taking decisions – None(Council Regulation No 17, Art. 15(2))11. Community law – General principles of law – Non-retroactivity of penal provisions – Scope – Fines imposed for infringement of the competition rules – Included – Possible breach owing to the application to an infringement committed before their introduction of the Guidelines on the method of setting fines – Foreseeability of the changes introduced by the Guidelines – No breach(European Convention on Human Rights, Art. 7; Council Regulation No 17, Art. 15; Commission Notice 98/C 9/03)12. Acts of the institutions – Guidelines on the method of setting fines imposed for infringements of the competition rules – Act of general application – Effects(Commission Notice 98/C 9/03)13. Competition – Fines – Amount – Determination – Criteria – Overall turnover of the undertaking concerned – Turnover achieved with the goods forming the subject-matter of the infringement – Respective taking into consideration – Limits14. Appeals – Jurisdiction of the Court of Justice – Challenge, for reasons of fairness, of the assessment made by the Court of First Instance of the amount of the fines imposed on undertakings – Excluded – Review limited to ascertaining the taking into consideration by the Court of First Instance of the essential factors to assess the gravity of the infringement and all the arguments raised against the fine imposed(TC Treaty, Art. 85 (now Art. 81 EC); EC Statute of the Court of Justice, Art. 51; Council Regulation No 17, Art. 15)15. Competition – Guidelines on the method of setting fines – Calculation method taking into account various elements of flexibility to the detriment of the turnover of the hitherto privileged undertaking — Conformity with Article 15(2) of Regulation No 17(Council Regulation No 15, Art. 15(2); Commission Notice 98/C 9/03)16. Competition – Fines – Amount – Determination – Maximum amount – Calculation – Distinction between the final amount and the intermediate amount of the fine – Consequences 17. Competition – Fines – Amount – Determination – Criteria – Financial situation of the undertaking concerned – Whether taken into consideration – Obligation – None18. Competition – Fines – Amount – Determination – Criteria – Reduction in the amount of the fine in exchange for the cooperation of the undertaking involved – Conditions – Discretionary power of the Commission (Council Regulation No 17, Art. 15(2); Commission Notice 96/C 207/04, Section D, points 1 and 2)19. Competition – Administrative procedure – Respect for the rights of the defence – Statement of objections – Necessary content – Indication of the criteria for calculating the contemplated fine – Premature indication – Absence of obligation to indicate a possible change of policy concerning the level of the amount of fines(Council Regulation No 17)20. Appeals – Pleas in law – Inadequate statement of reasons – Jurisdiction of the Court of Justice – Taking into consideration of the facts found by the Court of First Instance – Included(EC Treaty, Art. 190 (now Art. 253 EC))21. Acts of the institutions – Statement of reasons – Obligation – Scope – Decisions – Remedy of a failure to state reasons during the administrative procedure – Not permissible(EC Treaty, Art. 190 (now Art. 253 EC))1. Even where a request for the examination of witnesses, made in the application, states precisely about what facts and for what reasons the witness or witnesses should be examined, it falls to the Court of First Instance to assess the relevance of the application to the subject-matter of the dispute and the need to examine the witnesses named. The existence of a discretion in that regard on the part of the Court of First Instance cannot be challenged on the basis of the general principle of Community law inspired by Article 6(1) of the European Convention on Human Rights, which provides that everyone is entitled to a fair hearing, and, more particularly, the principle laid down in paragraph 3(d) of that article, which provides that everyone charged with a criminal offence has the right to obtain the attendance and examination of witnesses on his behalf on the same conditions as witnesses against him, a principle that constitutes a particular aspect of the right to a fair hearing. In practice, that latter provision does not confer on the accused an absolute right to obtain the attendance of witnesses before a court and it is in principle for the national court to determine whether it is necessary or appropriate to call a witness. Article 6(3) of that Convention does not therefore require that every witness be called but is aimed at full equality of arms, ensuring that the procedure in issue, considered in its entirety, gave the accused an adequate and proper opportunity to challenge the suspicions concerning him. (see paras 68-71)2. It follows from Article 44(1)(c) of the Rules of Procedure of the Court of First Instance that the essential facts and law on which an application is based must be apparent from the text of the application itself, even if only stated briefly, and that a reference in the application to such elements in an annex to the application is therefore not sufficient. Likewise, it is not for the Court of First Instance to seek and identify in the annexes the pleas and arguments on which it may consider the action to be based, since the annexes have a purely evidential and ancillary purpose. (see paras 94, 97, 100)3. In the field of competition law, the concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed. It does not require that the economic unit concerned have legal personality. (see paras 112-113)4. The anti-competitive conduct of an undertaking can be attributed to another undertaking where it has not decided independently upon its own conduct on the market but carried out, in all material respects, the instructions given to it by that other undertaking, having regard in particular to the economic and legal links between them. In that regard, the fact that the share capital of two separate commercial companies is held by the same person or the same family is insufficient, in itself, to establish that those companies are a single economic unit with the result that, under Community competition law, the actions of one company can be attributed to the other and that one can be held liable to pay the fine for the other. (see paras 117-118)5. It is sufficient for the Commission to show that an undertaking participated in meetings at which anti-competitive agreements were concluded, without manifestly opposing them, to prove to the requisite standard that the undertaking participated in the cartel. Where participation in such meetings has been established, it is for that undertaking to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs. In that regard, a party which tacitly approves of an unlawful initiative, without publicly distancing itself from its content or reporting it to the administrative authorities, effectively encourages the continuation of the infringement and compromises its discovery. That complicity constitutes a passive mode of participation in the infringement which is therefore capable of rendering the undertaking liable in the context of a single agreement. Nor is the fact that an undertaking does not act on the outcome of a meeting having an anti-competitive object such as to relieve it of responsibility for the fact of its participation in a cartel, unless it has publicly distanced itself from what was agreed in the meeting. (see paras 142-144)6. For the purposes of applying Article 85(1) of the Treaty (now Article 81(1) EC), it is sufficient that the object of an agreement should be to restrict, prevent or distort competition irrespective of the actual effects of that agreement. Consequently, in the case of agreements reached at meetings of competing undertakings, that provision is infringed where those meetings have such an object and are thus intended to organise artificially the operation of the market. In such a case, the liability of a particular undertaking in respect of the infringement is properly established where it participated in those meetings with knowledge of their object, even if it did not proceed to implement any of the measures agreed at those meetings. The fact of the participation in the cartel of dominant or particularly powerful undertakings in a position to take retaliatory measures against other, much less powerful, participants should the latter publicly distance themselves from what was decided at meetings having an anti-competitive object, the greater or lesser degree of regular participation by the undertaking concerned in the meetings and of completeness of its implementation of the measures agreed are relevant not to the establishment of its liability but rather to the extent of that liability and thus to the severity of the penalty. (see paras 145, 150)7. To allow a party to put forward for the first time before the Court of Justice a plea in law which it has not raised before the Court of First Instance would mean allowing that party to bring before the Court of Justice, whose jurisdiction in appeals is limited, a wider case than that heard by the Court of First Instance. In an appeal the jurisdiction of the Court of Justice is thus confined to examining the assessment by the Court of First Instance of the pleas argued before it. (see para. 165)8. The fact that the Commission, in the past, imposed fines of a certain level for certain types of infringement does not mean that it is estopped from raising that level within the limits indicated in Regulation No 17 if that is necessary to ensure the implementation of Community competition policy; on the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy. The supervisory task conferred on the Commission by Articles 85(1) and 86 of the EC Treaty (now Articles 81(1) EC and 82 EC) not only includes the duty to investigate and punish individual infringements but also encompasses the duty to pursue a general policy designed to apply, in competition matters, the principles laid down by the Treaty and to guide the conduct of undertakings in the light of those principles. (see paras 169-170, 227)9. Traders cannot have a legitimate expectation that an existing situation which is capable of being altered by the Commission in the exercise of its discretionary power will be maintained. That principle clearly applies in the field of competition policy, which is characterised by a wide discretion on the part of the Commission, in particular as regards the determination of the amount of fines. Undertakings involved in an administrative procedure in which fines may be imposed cannot therefore acquire a legitimate expectation in the fact that the Commission will not exceed the level of fines previously imposed. It follows that a legitimate expectation cannot be based on a method of calculating fines either. Furthermore, the legitimate expectation that traders are able to derive from the Leniency Notice is limited to an assurance that their fines will be reduced by a certain percentage, but does not extend to the method of calculating fines or, a fortiori, to a specific level of the fine capable of being calculated at the time when the trader decides to implement his intention to cooperate with the Commission. (see paras 171-173, 187-188, 228)10. As regards the determination of the amount of the fine to be imposed for infringement of the competition rules, the mere fact that the Commission, in its previous practice when taking decisions, granted a certain rate of reduction for specific conduct does not mean that it is required to grant the same proportionate reduction when assessing similar conduct in a subsequent administrative procedure. (see para. 192)11. The principle of non-retroactivity of criminal laws, enshrined in Article 7 of the European Convention on Human Rights as a fundamental right, constitutes a general principle of Community law which must be observed when fines are imposed for infringement of the competition rules and requires that the penalties imposed correspond with those fixed at the time when the infringement was committed. The concept of ‘law’ (‘droit’) for the purposes of Article 7(1) corresponds to ‘law’ (‘loi’) used in other provisions of that Convention and encompasses both law of legislative origin and that deriving from case-law. Although that provision, which enshrines in particular the principle that offences and punishments are to be strictly defined by law (nullum crimen, nulla poena sine lege), cannot be interpreted as prohibiting the gradual clarification of the rules of criminal liability, it may preclude the retroactive application of a new interpretation of a rule establishing an offence. That is particularly true of a judicial interpretation which produces a result which was not reasonably foreseeable at the time when the offence was committed, especially in the light of the interpretation put on the provision in the case-law at the material time. Like that case-law on new developments in case-law, a change in an enforcement policy, in this instance the Commission’s general competition policy in the matter of fines, especially where it comes about as a result of the adoption of rules of conduct such as the Guidelines adopted by the Commission on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, may have an impact from the aspect of the principle of non-retroactivity. Having particular regard to their legal effects and to their general application, such rules of conduct come, in principle, within the concept of ‘law’ for the purposes of Article 7(1) of the Convention. In order to ensure that the principle of non-retroactivity was observed, it is necessary to ascertain whether the change in question was reasonably foreseeable at the time when the infringements concerned were committed. In that regard, the scope of the notion of foreseeability depends to a considerable degree on the content of the text in issue, the field it is designed to cover and the number and status of those to whom it is addressed. A law may still satisfy the requirement of foreseeability even if the person concerned has to take appropriate legal advice to assess, to a degree that is reasonable in the circumstances, the consequences which a given action may entail. This is particularly true in relation to persons carrying on a professional activity, who are used to having to proceed with a high degree of caution when pursuing their occupation. They can on this account be expected to take special care in assessing the risks that such an activity entails. Having regard to the fact that the proper application of the Community competition rules requires that the Commission may at any time, within the limits indicated in Regulation No 17, adjust the level of fines to the needs of Community competition policy and, accordingly, that it may raise the level of the amount of fines by reference to that applied in the past, not only by raising the level of the amount of fines in imposing fines in individual decisions, but also by raising it by the application, in particular cases, of rules of conduct of general application, such as the Guidelines, it follows that those Guidelines and, in particular, the new method of calculating fines contained therein, on the assumption that it has the effect of increasing the level of the fines imposed, were reasonably foreseeable for undertakings at the time when the infringements were committed, before those Guidelines were adopted. (see paras 202, 216-219, 222-224, 227-231)12. In adopting rules of conduct designed to produce external effects, as is the case of the Guidelines, which are aimed at traders, and in announcing by publishing them that they will henceforth apply to the cases to which they relate, the institution in question imposes a limit on the exercise of its discretion and cannot depart from those rules under pain of being found, where appropriate, to be in breach of the general principles of law, such as equal treatment or the protection of legitimate expectations. It cannot therefore be precluded that, on certain conditions and depending on their content, such rules of conduct, which are of general application, may produce legal effects. In that regard, even though the Guidelines adopted by the Commission on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty do not constitute the legal basis of the decision imposing a fine on a trader, as that decision is based on Articles 3 and 15(2) of Regulation No 17, they determine, generally and abstractly, the method which the Commission has bound itself to use in assessing the fines imposed by the decision and, consequently, ensure legal certainty on the part of the undertakings. (see paras 210-213)13. The gravity of the infringements must be assessed in the light of numerous factors, such as the particular circumstances of the case, its context and the dissuasive effect of fines, although no binding or exhaustive list of the criteria to be applied has been drawn up. The factors capable of affecting the assessment of the gravity of the infringements include the conduct of each of the undertakings, the role played by each of them in the establishment of the concerted practices, the profit which they were able to derive from those practices, their size, the value of the goods concerned and the threat that infringements of that type pose to the objectives of the Community. It follows that, on the one hand, it is permissible, for the purpose of fixing the amount of the fine, to have regard both to the total turnover of the undertaking, which gives an indication, albeit approximate and imperfect, of the size of the undertaking and of its economic power, and to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, which gives an indication of the scale of the infringement. On the other hand, it follows that it is important not to confer on one or the other of those figures an importance disproportionate in relation to the other factors and, consequently, that the fixing of an appropriate fine cannot be the result of a simple calculation based on the total turnover. That is particularly the case where the goods concerned account for only a small part of that figure. (see paras 241-243, 257, 292, 312)14. In the context of an appeal the purpose of review by the Court of Justice is, first, to examine to what extent the Court of First Instance took into consideration, in a legally correct manner, all the essential factors to assess the gravity of particular conduct in the light of Article 85 of the Treaty (now Article 81 EC) and Article 15 of Regulation No 17 and, second, to consider whether the Court of First Instance responded to a sufficient legal standard to all the arguments raised by the appellant with a view to having the fine cancelled or reduced. On the other hand, it is not for the Court of Justice, when ruling on questions of law in the context of an appeal, to substitute, on grounds of fairness, its own assessment for that of the Court of First Instance exercising its unlimited jurisdiction to rule on the amount of fines imposed on undertakings for infringements of Community law. (see paras 244-245, 303)15. In setting out in the Guidelines the method which it proposed to apply when calculating fines imposed under Article 15(2) of Regulation No 17, the Commission remained within the legal framework laid down by that provision and did not exceed the discretion conferred on it by the legislature. Although that method marks a departure from the Commission’s previous practice, which placed more emphasis on the turnover of the undertakings on which fines were imposed, it does not contravene the provisions of that article, as interpreted in the case-law, which do not in any way require that fines be calculated on amounts based on the turnover of the undertakings concerned. On the contrary, by envisaging that numerous factors will be taken into account in assessing the gravity of the infringement fine, including in particular the profits secured by the infringement or the need to ensure the deterrent effect of the fines, while not precluding the taking into account of turnover, and therefore by introducing flexibility, it allows the Commission to exercise its discretion in full conformity with those provisions. (see paras 252, 254, 258, 260-261, 267)16. The upper limit of the amount of the fine referred to in Article 15(2) of Regulation No 17 must be understood to mean that the amount of the fine ultimately imposed on an undertaking cannot exceed that limit. That provision therefore does not prohibit the Commission from referring, for the purposes of its calculation, to an intermediate amount in excess of that limit. Nor does it preclude intermediate calculations which take the gravity and the duration of the infringement from being carried out on an amount higher than that limit. Where it turns out, following the calculation, that the final amount of the fine must be reduced by the amount by which it exceeds the upper limit, the fact that certain factors such as the gravity and duration of the infringement are not actually reflected in the amount of the fine imposed is merely a consequence of the application of that upper limit to the final amount. That upper limit seeks to prevent fines being imposed which it is foreseeable that the undertakings, owing to their size, as determined, albeit approximately and imperfectly, by their total turnover, will not be able to pay. That limit is therefore one which is uniformly applicable to all undertakings and arrived at according to the size of each of them and seeks to ensure that the fines are not excessive or disproportionate. That upper limit thus has a distinct and autonomous objective by comparison with the criteria of gravity and duration of the infringement. The only possible consequence of the upper limit is that the amount of the fine calculated on the basis of those criteria will be reduced to the maximum permitted level. Its application implies that the undertaking concerned will not pay the fine which in principle would be payable if it were assessed on the basis of those criteria. (see paras 277-283, 323)17. The Commission is not required, when determining the amount of the fine, to take into account the poor financial situation of an undertaking, since recognition of such an obligation would be tantamount to giving an unjustified competitive advantage to undertakings least well adapted to the market conditions. (see para. 327)18. The Commission has a discretion to find that information provided by an undertaking and capable, in principle, of coming within situations permitting a reduction in the fine under Section D, point 2, of the Leniency Notice does not necessarily have to induce it to grant the undertaking a reduction under that notice. Furthermore, a reduction under the Leniency Notice can be justified only where the information provided and, more generally, the conduct of the undertaking concerned might be considered to demonstrate genuine cooperation on its part. It is clear from the very concept of cooperation, as described in the Leniency Notice, and in particular in the introduction and Section D, point 1, that it is only where the conduct of the undertaking concerned reveals such a spirit of cooperation that a reduction may be granted on the basis of that notice. Accordingly, an undertaking which has provided incomplete and in part inaccurate information could not claim that its conduct had been of that type. (see paras 393-397)19. Provided that the Commission indicates expressly in the statement of objections that it will consider whether it is appropriate to impose fines on the undertakings concerned and that it sets out the principal elements of fact and of law that may give rise to a fine, such as the gravity and the duration of the alleged infringement and the fact that it has been committed ‘intentionally or negligently’, it fulfils its obligation to respect the undertakings’ right to be heard. In doing so, it provides them with the necessary elements to defend themselves not only against a finding of infringement but also against the fact of being fined. However, to give indications of the level of the contemplated fines, when the undertakings have not been in a position to put forward their observations on the objections held against them, would be tantamount to anticipate inappropriately the Commission’s decision. Nor, likewise, is the Commission required to indicate in the statement of objections the possibility that it might change its policy as regards the level of the amount of the fines, a possibility which depends on general competition policy considerations with no direct bearing on the particular circumstances of the cases in question. (see paras 428, 434-435)20. The question of the extent of the obligation to state reasons is a question of law reviewable by the Court on appeal, since a review of the legality of a decision carried out in that context must necessarily take into consideration the facts on which the Court of First Instance based itself in reaching its conclusion as to the adequacy or inadequacy of the statement of reasons. (see para. 453)21. The purpose of the obligation to state reasons is to enable the Court to review the legality of the decision and to provide the person concerned with sufficient information to make it possible to ascertain whether the decision is well founded or whether it is vitiated by a defect which may permit its legality to be contested. The statement of reasons must therefore, in principle, be notified to the person concerned at the same time as the decision adversely affecting him and a failure to state the reasons cannot be remedied by the fact that the person concerned learns the reasons for the decision during the proceedings before the Court. (see paras 462-463)JUDGMENT OF THE COURT (Grand Chamber)28 June 2005 (*) Table of contentsI – Legal frameworkThe European Convention for the Protection of Human Rights and Fundamental FreedomsRegulation No 17The GuidelinesThe Leniency NoticeII – FactsIII – The actions before the Court of First Instance and the judgments under appealIV – Forms of order sought by the parties to the appealV – The grounds for setting aside the judgments under appealVI – The appealsA – The procedural pleas1. The plea alleging breach of Article 68(1) of the Rules of Procedure of the Court of First Instance, in that the Court rejected the Henss/Isoplus group’s application for certain witnesses to be heard by way of a measure of investigation 2. The plea whereby ABB alleges a breach of Articles 44(1)(c) and 48(2) of the Rules of Procedure of the Court of First Instance owing to its refusal to consider a legal opinion annexed to the reply B – The substantive pleas in law, relating to the imputability of the infringement1. The plea in law alleging infringement of Article 85(1) of the Treaty owing to the fact that certain undertakings in the Henss/Isoplus group were taken into account and that the infringement was imputed to that group as an ‘undertaking’ within the meaning of that provision 2. The pleas in law alleging breach of Article 85(1) of the Treaty owing to the attribution to the Henss/Isoplus group and to Brugg of an infringement of the competition rules on account of their participation in a meeting having an anti-competitive object C – Substantive pleas in law, relating to the determination of the amount of the fines1. Pleas in law relating to breach of the principles of protection of legitimate expectations and non-retroactivity owing to the application of the Guidelines to the infringements in issue (a) Pleas in law alleging breach of the principle of protection of legitimate expectations(b) The pleas in law alleging breach of the principle of non-retroactivity2. The pleas in law relating to the legality of the method of calculating the amount of the fines as laid down in the Guidelines or applied in the contested decision (a) The pleas in law alleging breach of Article 15(2) of Regulation No 17 consisting in the determination in the contested decision of the amount of the fines according to the calculation method provided for in the Guidelines (b) The pleas in law alleging breach of the principles of proportionality and equal treatment when determining, in the contested decision, the amount of the fines according to the calculation method provided for in the Guidelines (c) The pleas in law whereby the Henss/Isoplus group alleges breach of the rights of the defence in the assessment of the aggravating circumstances (d) The plea in law whereby LR A/S alleges failure to take attenuating circumstances into account(e) The pleas whereby the Henss/Isoplus group and LR A/S allege failure to take into account, or to take sufficiently into account, their cooperation during the administrative procedure D – Pleas in law relating to the right to be heard and the obligation to state reasons1. Pleas in law alleging breach of the right to be heard2. The pleas in law alleging breach of the obligation to state reasons in respect of the calculation of the finesVII – CostsIn Joined Cases C-189/02 P, C-202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P,APPEALS under Article 49 of the EC Statute of the Court of Justice, lodged on 17 May 2002 in the first case, 29 May 2002 in the second, 3 June 2002 in the next four cases and 5 June 2002 in the last case, Dansk Rørindustri A/S, established in Fredericia (Denmark), represented by K. Dyekjær-Hansen and K. Høegh, advokaterne (C-189/02 P), Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH, established in Rosenheim (Germany), Isoplus Fernwärmetechnik Gesellschaft mbH, established in Hohenberg (Austria), Isoplus Fernwärmetechnik GmbH, established in Sondershausen (Germany), represented by P. Krömer, Rechtsanwalt, with an address for service in Luxembourg (C‑202/02 P),KE KELIT Kunststoffwerk GmbH, established in Linz (Austria), represented by W. Löbl, Rechtsanwalt, with an address for service in Luxembourg (C‑205/02 P), LR af 1998 A/S, formerly Løgstør Rør A/S, established in Løgstør (Denmark), represented by D. Waelbroeck, avocat, and H. Peytz, advokat (C-206/02 P), Brugg Rohrsysteme GmbH, established in Wunstorf (Germany), represented by T. Jestaedt, H.-C. Salger and M. Sura, Rechtsanwälte, with an address for service in Luxembourg (C-207/02 P), LR af 1998 (Deutschland) GmbH, formerly Lögstör Rör (Deutschland) GmbH, established in Fulda (Germany), represented by H.-J. Hellmann, Rechtsanwalt, with an address for service in Luxembourg (C‑208/02 P), ABB Asea Brown Boveri Ltd, established in Zurich (Switzerland), represented by A. Weitbrecht, Rechtsanwalt, J. Ruiz Calzado, abogado, and M. Bay, avvocato, with an address for service in Luxembourg (C-213/02 P), appellants,the other parties to the proceedings being:Commission of the European Communities, represented by W. Mölls, P. Oliver and H. Støvlbæk, acting as Agents, assisted by A. Böhlke, Rechtsanwalt (C‑189/02 P, C-202/02 P, C-205/02 P and C‑208/02 P), and R. Thompson QC (C‑206/02 P and C-213/02 P), with an address for service in Luxembourg, defendant at first instance,HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co. KG,HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH Verwaltungsgesellschaft,represented by P. Krömer, Rechtsanwalt, with an address for service in Luxembourg (C-202/02 P),applicants at first instance, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans (Rapporteur) and R. Silva de Lapuerta, Presidents of Chamber, C. Gulmann, R. Schintgen, N. Colneric, S. von Bahr and J.N. Cunha Rodrigues, Judges, Advocate General: A. Tizzano,Registrar: H. von Holstein, Deputy Registrar, and M.-F. Contet, Principal Administrator,having regard to the written procedure and further to the hearing on 16 March 2004,after hearing the Opinion of the Advocate General delivered at the sitting on 8 July 2004,gives the followingJudgment1 The present appeals were brought by Dansk Rørindustri A/S (‘Dansk Rørindustri’) (C-189/02 P), Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH, Isoplus Fernwärmetechnik Gesellschaft mbH and Isoplus Fernwärmetechnik GmbH (together ‘the Henss/Isoplus group’) (C-202/02 P), KE KELIT Kunststoffwerk GmbH (‘KE KELIT’) (C‑205/02 P), LR af 1998 A/S, formerly Løgstør Rør A/S (‘LR A/S’) (C-206/02 P), Brugg Rohrsysteme GmbH (‘Brugg’) (C-207/02 P), LR af 1998 (Deutschland) GmbH, formerly Lögstör Rör (Deutschland) GmbH (‘LR GmbH’) (C-208/02 P) and ABB Asea Brown Boveri Ltd (‘ABB’) (C-213/02 P). 2 By their appeals, those undertakings requested the Court to set aside the judgments of the Court of First Instance of the European Communities of 20 March 2002 concerning them, namely the judgments in Case T-21/99 Dansk Rørindustri v Commission [2002] ECR II-1681, Case T-9/99 HFB and Others v Commission [2002] ECR II-1487, Case T-17/99 KE KELIT v Commission [2002] ECR II-1647, Case T-23/99 LR AF 1998 v Commission [2002] ECR II-1705, Case T‑15/99 Brugg Rohrsysteme v Commission [2002] ECR II-1613, Case T-16/99 Lögstör Rör v Commission [2002] ECR II-1633 and Case T-31/99 ABB Asea Brown Boveri v Commission [2002] ECR II-1881 (hereinafter, for example, ‘the judgment in Dansk Rørindustri v Commission’, where the reference is to one of those judgments, or ‘the judgments under appeal’, where the reference is to all of the judgments). 3 By the judgments under appeal, the Court of First Instance, inter alia, reduced the fine imposed on ABB by Commission Decision 1999/60/EC of 21 October 1998 relating to a proceeding under Article 85 of the EC Treaty (IV/35.691/E-4 – Pre-insulated pipes) (OJ 1999 L 24, p. 1) (‘the contested decision’) and essentially dismissed the actions for annulment of that decision. I – Legal framework The European Convention for the Protection of Human Rights and Fundamental Freedoms 4 Article 7 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 (‘the ECHR’), entitled ‘No punishment without law’, provides in paragraph 1: ‘No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed.’ Regulation No 175 Article 15 of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (OJ, English Special Edition 1959-1962, p. 87) provides: ‘1. The Commission may by decision impose on undertakings or associations of undertakings fines of from 100 to 5 000 units of account where, intentionally or negligently: …(b) they supply incorrect information in response to a request made pursuant to Article 11(3) or (5) or to Article 12, or do not supply information within the time-limit fixed by a decision taken under Article 11(5); 2. The Commission may by decision impose on undertakings or associations of undertakings fines of from 1 000 to 1 000 000 units of account, or a sum in excess thereof but not exceeding 10% of the turnover in the preceding business year of each of the undertakings participating in the infringement where, either intentionally or negligently: (a) they infringe Article 85(1) or Article 86 of the Treaty; … In fixing the amount of the fine, regard shall be had both to the gravity and to the duration of the infringement.’ The Guidelines6 The Commission notice entitled ‘Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65 of the ECSC Treaty’, published in the Official Journal of the European Communities of 14 January 1998 (OJ 1998 C 9, p. 3; ‘the Guidelines’), states in the preamble: ‘The principles outlined here should ensure the transparency and impartiality of the Commission’s decisions, in the eyes of the undertakings and of the Court of Justice alike, while upholding the discretion which the Commission is granted under the relevant legislation to set fines within the limit of 10% of overall turnover. This discretion must, however, follow a coherent and non-discriminatory policy which is consistent with the objectives pursued in penalising infringements of the competition rules. The new method of determining the amount of a fine will adhere to the following rules, which start from a basic amount that will be increased to take account of aggravating circumstances or reduced to take account of attenuating circumstances.’ The Leniency Notice 7 In its Notice on the non-imposition or reduction of fines in cartel cases, published in the Official Journal of the European Communities on 18 July 1996 (OJ 1996 C 207, p. 4; ‘the Leniency Notice’), a draft of which had been published on 19 December 1995 (OJ 1995 C 341, p. 13; ‘the draft Leniency Notice’), the Commission defined the conditions under which an undertaking which cooperates with the Commission during its investigation may be exempted from a fine or be granted a reduction in the amount of the fine which would otherwise have been imposed on it, as indicated in Section A, paragraph 3, of that notice. 8 Section A, paragraph 5, of the Leniency Notice provides:‘Cooperation by an [undertaking] is only one of several factors which the Commission takes into account when fixing the amount of a fine. …’. 9 Section E, paragraph 3, of the Leniency Notice, on procedure, provides, in particular:‘The Commission is aware that this notice will create legitimate expectations on which [undertakings] may rely when disclosing the existence of a cartel to the Commission.’ II – Facts10 The facts giving rise to the actions before the Court of First Instance, as set out in the judgments under appeal, may for the purposes of the present judgment be summarised as follows. 11 The appellants are companies operating in the district heating sector. They produce, or market, pre-insulated pipes for that sector. 12 Following a complaint lodged on 18 January 1995 by the Swedish undertaking Powerpipe AB (‘Powerpipe’), the Commission and representatives of the Competition Authorities of the Member States concerned carried out, on 28 June 1995, certain investigations, on the basis of Article 14 of Regulation No 17, at the premises of 10 undertakings or associations in the district heating sector, including the applicants, or certain establishments belonging to them. 13 The Commission sent requests for information, pursuant to Article 11 of Regulation No 17, to most of the undertakings involved in the facts in issue. 14 On 20 March 1997, the Commission sent a statement of objections to certain of the applicants and to the other undertakings concerned, in accordance with Article 2(1) of Commission Regulation No 99/63/EEC of 25 July 1963 on the hearings provided for in Article 19(1) and (2) of Council Regulation No 17 (OJ, English Special Edition 1963-1969, p. 47). 15 A hearing of the undertakings concerned took place on 24 and 25 November 1997.16 On 21 October 1998, the Commission adopted the contested decision, in which it found that various undertakings, and in particular certain of the appellants, had participated in a series of agreements and concerted practices within the meaning of Article 85(1) of the EC Treaty (now Article 81(1) EC) (‘the cartel’). 17 According to the decision, an agreement was concluded in late 1990 between the four Danish producers of district heating pipes on the principle of general cooperation on their national market. That agreement involved ABB IC Møller A/S, the Danish subsidiary of ABB, Dansk Rørindustri, also known as Starpipe, LR A/S and Tarco Energi A/S (‘Tarco’, the four companies being referred to collectively as ‘the Danish producers’). 18 One of the first measures was found to have consisted in coordinating in a price increase both on the Danish market and on export markets. In order to protect the Danish market, quotas were set, then implemented and monitored by a contact group composed of the senior sales staff of the undertakings concerned. 19 According to the contested decision, two German producers, the Henss/Isoplus group and Pan-Isovit GmbH (which subsequently became Lögstör Rör (Deutschland) GmbH and then LR GmbH), joined from autumn 1991 in the regular meetings with the Danish producers. In the context of those meetings, negotiations on dividing the German market took place. Those negotiations led, in August 1993, to agreements fixing sales quotas for each participating undertaking. 20 According to the decision, an agreement was reached between all those producers in 1994 to fix quotas for the whole of the European market. That Community-wide cartel was structured on two levels. The directors’ club, consisting of the chairmen or managing directors of the undertakings participating in the cartel, allocated quotas to each undertaking both on the market as a whole and on each of the national markets, in particular the Danish, German, Italian, Netherlands, Austrian, Finnish and Swedish markets. For certain national markets, a contact group was set up, composed of local sales managers, who were given the task of administering the agreements by assigning projects and coordinating the bids. 21 As regards the German market, the contested decision states that following a meeting on 18 August 1994 of the six main European producers, namely ABB, Dansk Rørindustri, the Henss/Isoplus group, LR A/S, LR GmbH and Tarco, and also Brugg, a first meeting of the contact group for Germany was held on 7 October 1994. The meetings of that group continued long after the Commission’s investigations, at the end of June 1995, although from that time they were held outside the European Union, in Zurich (Switzerland). The meetings in Zurich continued until 25 March 1996, or some days after certain of the undertakings received the requests for information sent by the Commission. 22 As an element of the cartel, the decision refers, in particular, to the adoption and implementation of concerted measures designed to eliminate the only large undertaking not forming part of the cartel, Powerpipe. The Commission explains that certain participants in the cartel recruited ‘key employees’ from that company and gave it to understand that it must withdraw from the German market. 23 When Powerpipe was awarded a large German project in March 1995, a meeting was held in Düsseldorf (Germany), attended by the seven undertakings which had met on 18 August 1994. It was decided at that meeting to establish a collective boycott of Powerpipe’s customers and suppliers. That boycott was then implemented. 24 In the contested decision, the Commission sets out the reasons why not only the express market-sharing arrangement concluded between the Danish producers at the end of 1990 but also the arrangements concluded after October 1991 may together be regarded as forming an agreement prohibited by Article 85(1) of the Treaty. 25 Furthermore, the Commission states that the cartel in Denmark and the Community-wide cartel are merely the expression of a single cartel which began in Denmark but which from the outset had the long-term objective of extending the participants’ control to the entire common market. According to the Commission, the continuous agreement between producers had a significant effect on trade between Member States. 26 In the judgments under appeal, the Court of First Instance observed that it was not disputed that in the contested decision the amount of the fines was calculated according to the method laid down in the Guidelines, as indicated in particular at paragraphs 222 and 275 of the judgment in LR AF 1998 v Commission. 27 It is common ground, moreover, that the contested decision makes no reference to the Guidelines, that the undertakings were not informed during the administrative procedure that the method set out in those Guidelines would be applied to them and that that method was not mentioned in the statement of objections or referred to at the hearings of the undertakings. 28 It should further be noted that, with the exception of the Henss/Isoplus group, all the undertakings concerned by the contested decision had their fines reduced by the Commission pursuant to the Leniency Notice. That reduction, in the form of a percentage applied to the amount of the fine which would be payable in principle, was granted in return for their cooperation during the administrative procedure. That cooperation consisted in having agreed not to dispute the essential elements of the infringements or in having contributed, to varying degrees, to establishing the proof of the infringements. 29 The contested decision contains the following provisions:‘Article 1ABB …, Brugg …, Dansk Rørindustri …, Henss/Isoplus Group, [KE KELIT], Oy KWH Tech AB, Løgstør Rør A/S, Pan-Isovit GmbH, Sigma Tecnologie di rivestimento S.r.l. and Tarco … have infringed Article 85(1) of the Treaty by participating, in the manner and to the extent set out in the reasoning, in a complex of agreements and concerted practices in the pre-insulate pipes sector which originated in about November/December 1990 among the four Danish producers, was subsequently extended to other national markets and brought in Pan-Isovit and Henss/Isoplus, and by late 1994 consisted of a comprehensive cartel covering the whole of the common market. The duration of the infringements was as follows:– in the case of ABB, Dansk Rør[industri], Løgstør, Pan-Isovit … from about November/December 1990 to at least March or April 1996, – in the case of [the] Henss/Isoplus [Group], from about October 1991 up to the same time,– in the case of Brugg from about August 1994 up to the same time,– in the case of [KE KELIT] from about January 1995 up to the same time,The principal characteristics of the infringement consisted in:– dividing national markets and eventually the whole European market amongst themselves on the basis of quotas, – allocating national markets to particular producers and arranging the withdrawal of other producers, – agreeing prices for the product and for individual projects,– allocating individual projects to designated producers and manipulating the bidding procedure for those projects in order to ensure that the assigned producer was awarded the contract in question, – in order to protect the cartel from competition from the only substantial non-member, Powerpipe …, agreeing and taking concerted measures to hinder its commercial activity, damage its business or drive it out of the market altogether. Article 3The following fines are hereby imposed on the undertakings named in Article 1 in respect of the infringements found therein:(a) ABB …, a fine of ECU 70 000 000;(b) Brugg …, a fine of ECU 925 000;(c) Dansk Rørindustri …, a fine of ECU 1 475 000;(d) [the] Henss/Isoplus [group], a fine of ECU 4 950 000, for which the following companies are jointly and severally liable:– HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co. KG,– HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH Verwaltungsgesellschaft,– Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH (formerly Dipl.-Kfm Walter Henss GmbH Rosenheim),– Isoplus Fernwärmetechnik GmbH, Sondershausen,– Isoplus Fernwärmetechnik Ges.mbH – stille Gesellschaft,– Isoplus Fernwärmetechnik Ges mbH, Hohenberg; (e) [KE KELIT], a fine of ECU 360 000; (g) Løgstør Rør A/S, a fine of ECU 8 900 000; (h) Pan-Isovit GmbH, a fine of ECU 1 500 000;…’ III – The actions before the Court of First Instance and the judgments under appeal30 By applications lodged at the Registry of the Court of First Instance, eight of the 10 undertakings fined by the contested decision, including the seven present appellants, brought actions for annulment of that decision in whole or in part and, in the alternative, for annulment of or a reduction in the fine imposed on them. 31 By the judgment in Dansk Rørindustri v Commission, the Court of First Instance: – annulled Article 1 of the contested decision in that it found that Dansk Rørindustri had participated in the infringement between April and August 1994; – dismissed the remainder of the application;– ordered Dansk Rørindustri to bear its own costs and to pay 90% of those incurred by the Commission;− ordered the Commission to bear 10% of its own costs.32 By the judgment in HFB and Others v Commission, the Court of First Instance: – annulled Articles 3(d) and 5(d) of the contested decision as regards HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH & Co. KG and HFB Holding für Fernwärmetechnik Beteiligungsgesellschaft mbH Verwaltungsgesellschaft; – ordered the companies in the group to bear their own costs, including those relating to the interlocutory proceedings, and to pay 80% of the costs incurred by the Commission, including those relating to the interlocutory proceedings; − ordered the Commission to bear 20% of its own costs, including those relating to the interlocutory proceedings.33 By the judgments in KE KELIT v Commission, LR AF 1998 v Commission, Brugg Rohrsysteme v Commission and Lögstör Rör v Commission, the Court of First Instance: – dismissed the actions;– ordered the applicants to pay the costs.34 By the judgment in ABB Asea Brown Boveri v Commission, the Court of First Instance: – ordered that the fine imposed on ABB in Article 3 of the contested decision be reduced to EUR 65 million;– ordered the applicant to bear its own costs and pay 90% of the costs incurred by the Commission; IV – Forms of order sought by the parties to the appeal35 Dansk Rørindustri claims that the Court should:– reduce the amount of the fine imposed on it by the contested decision;– in the alternative, set aside the judgment in Dansk Rørindustri v Commission and refer the case back to the Court of First Instance for a fresh adjudication on the amount of the fine; – order the Commission to pay the costs incurred by the appellant in the proceedings before the Court of First Instance and before the Court of Justice. 36 The Henss/Isoplus Group claims that the Court should:– set aside the judgment in HFB and Others v Commission, with the exception of the first paragraph of the operative part, and annul the contested decision; – in the alternative, set aside the judgment under appeal with the exception of the first paragraph of the operative part and refer the case back to the Court of First Instance so that the latter may complete the proceedings and give judgment afresh; – further in the alternative, set aside the judgment under appeal in the second paragraph of the operative part and reduce the amount of the fine imposed on the companies in the group by the contested decision; – order the Commission to pay the costs incurred by those companies in the proceedings before the Court of First Instance and before the Court of Justice. 37 KE KELIT claims that the Court should:– set aside the judgment in KE KELIT v Commission; – in the alternative, set aside that judgment and refer the case back to the Court of First Instance for reconsideration;– further in the alternative, reduce the amount of the fine imposed on it by the contested decision;– in any event, order the Commission to pay the costs incurred by the appellant in the proceedings before the Court of First Instance and before the Court of Justice. 38 LR A/S claims that the Court should:– set aside the judgment in LR AF 1998 v Commission; – annul the contested decision imposing a fine on the appellant or, at least, substantially reduce the amount of the fine, or, in the alternative, refer the case back to the Court of First Instance; – declare the Guidelines illegal pursuant to Article 184 of the EC Treaty (now Article 241 EC);– order the Commission to pay the costs.39 Brugg claims that the Court should:– set aside the judgment in Brugg Rohrsysteme v Commission and annul Articles 1 and 3 of the contested decision; – in the alternative, reduce the amount of the fine imposed on Brugg by that decision;40 LR GmbH claims that the Court should:– set aside the judgment in Lögstör Rör v Commission and make a definitive determination as follows: annul the contested decision in so far as it concerns Brugg and, on a subsidiary basis, reduce the amount of the fine and order the Commission to pay the costs; – very much in the alternative, set aside the judgment under appeal and refer the case back to the Court of First Instance for a determination. 41 ABB claims that the Court should:– set aside paragraphs 2 and 3 of the operative part of the judgment in ABB Asea Brown Boveri v Commission; – annul Article 3 of the contested decision in so far as it concerns ABB;– further reduce the amount of the fine imposed on it by that decision;– in the alternative, refer the case back to the Court of First Instance for a determination in accordance with the judgment of the Court of Justice; – order the Commission to pay all the costs of the proceedings, including those incurred by ABB in connection with the appeal.42 The Commission contends, in all of the present cases, that the Court should:– uphold the judgments under appeal;– order the applicants to pay the costs of the proceedings. V – The grounds for setting aside the judgments under appeal43 Dansk Rørindustri puts forward three pleas in law:– breach of Regulation No 17 and of the principles of proportionality and equal treatment, in that the Court of First Instance did not condemn the fact that the amount of the fine imposed on it is disproportionate to the infringement; – breach of Regulation No 17 and of the principles of protection of legitimate expectations and non-retroactivity, in that the Court of First Instance did not condemn the fact that the fine imposed on the appellant was determined on the basis of the principles of the Guidelines, when they are appreciably different from the principles in force at the time of the infringements, of the statement of objections and of the hearing; – breach of the rights of defence, in that the Court of First Instance did not condemn the fact that Dansk Rørindustri was not given the opportunity during the administrative procedure to comment on the changes made by the Guidelines to the Commission’s practice in determining the amount of the fine for infringement of the competition rules. 44 The Henss/Isoplus Group puts forward seven pleas in law, some of which contain a number of parts:– unlawfulness of the Guidelines owing to:– the Commission’s lack of competence;– breach of the principle of equal treatment;– breach of the rights of defence;– breach of the principle of non-retroactivity;– breach of the right to be heard in respect of the application of the Guidelines when setting the amount of the fines;– breach of Article 15(2) of Regulation No 17 when setting the amount of the fines, owing to:– failure to apply the Leniency Notice to the companies concerned;– breach of the rights of defence as a fundamental right when assessing aggravating circumstances;– breach of Article 85(1) of the Treaty owing to the consequences drawn from the participation of the companies concerned in a meeting having an anti-competitive object; – breach of Article 85(1) of the Treaty on account of the fact that the companies concerned were deemed to constitute the Henss/Isoplus group and the infringement was imputed to that group as an ‘undertaking’; – procedural defect owing to the Court of First Instance’s refusal to order the hearing of witnesses as a measure of investigation, as requested by the applicant; – procedural defect owing to contradictions between the judgment under appeal and the case-file.45 KE KELIT puts forward five pleas in law:– breach of the principles of equal treatment and protection of legitimate expectations owing to the determination of the fine according to the Guidelines; – breach of the principle of equal treatment as regards the duration of the infringement;– breach of the rights of the defence;– breach of the obligation to state reasons.46 LR A/S puts forward four pleas in law:– breach of the principles of proportionality and equal treatment and also of Regulation No 17, owing to the excessive and discriminatory nature of the fine and, in the alternative, unlawfulness of the Guidelines; – breach of the principles of protection of legitimate expectations and of non-retroactivity and also of Article 190 of the EC Treaty (now Article 253 EC), in that the Commission wrongly departed from its previous practice in relation to cooperation and retroactively applied the Guidelines and also a stricter code on cooperation and, at the very least, failure to state the reasons for such retroactive application; – failure to take sufficient account of the attenuating circumstances applicable to the appellant;– failure to take sufficient account of the appellant’s cooperation.47 Brugg puts forward five pleas in law:– breach of the principles of non-retroactivity, protection of legitimate expectations and good administration, owing to the application of the Guidelines in determining the amount of the fine; – breach of the principle of protection of legitimate expectations owing to the change in the method of calculating the fine after the appellant had cooperated; – breach of the rights of defence owing to the application of the Guidelines without the appellant having been heard;– breach of the principle of equal treatment owing to the non-reduction of the basic amount used in setting the appellant’s fine; – errors in the application of Article 85(1) of the Treaty as regards the appellant’s participation in the boycott of Powerpipe.48 LR GmbH puts forward four pleas in law:– breach of the principles of non-retroactivity and protection of legitimate expectations owing to the retroactive application of the Guidelines; – breach of Article 15(2) of Regulation No 17 and of the principle of the lawfulness of administrative action owing to the Commission’s failure, in the exercise of its discretion, to observe the limits on the use of that power laid down in that provision and also misuse of that power in applying that provision in the present case, owing to breach of the principles of proportionality and equal treatment, to the appellant’s detriment; – breach of the obligation to state reasons referred to in Article 190 of the Treaty, in that the contested decision contains no reasoning in relation to the retroactive application of the Guidelines; – breach of the rights of defence owing to the Commission’s failure to respect the appellant’s right to be heard in relation to the retroactive application of the Guidelines. 49 ABB puts forward three pleas in law:– breach of Articles 44(1)(c) and 48(2) of the Rules of Procedure of the Court of First Instance as regards the Court’s decision to dismiss as inadmissible a legal opinion annexed to the reply; – breach of the principle of protection of legitimate expectations in that, particularly in the light of the Leniency Notice, the applicant was entitled to rely on the Commission’s established practice in calculating the amount of the fine, so that the Commission could not arbitrarily depart from such a practice; – breach of Article 15(2) of Regulation No 17, in that the Court of First Instance approved the Commission’s determination of the gravity of the infringement committed by ABB without taking account of its turnover on the relevant market. VI – The appeals50 The parties and the Advocate General having been heard on that point, it is appropriate, on account of the connection between them, to join the present cases for the purposes of the judgment, in accordance with Article 43 of the Rules of Procedure of the Court. A – The procedural pleas51 It is appropriate first of all to deal with the pleas whereby the Henss/Isoplus group and ABB allege a number of breaches of the Rules of Procedure of the Court of First Instance. 1. The plea alleging breach of Article 68(1) of the Rules of Procedure of the Court of First Instance, in that the Court rejected the Henss/Isoplus group’s application for certain witnesses to be heard by way of a measure of investigation 52 By its sixth plea, the Henss/Isoplus group complains that the Court of First Instance, at paragraphs 36 to 38 of the judgment in HFB and Others v Commission, dismissed its application to order that Mr Boysen, Mr B. Hansen, Mr N. Hansen, Mr Hybschmann, Mr Jespersen and Mr Volandt be heard as witnesses, in accordance with Article 68(1) of the Rules of Procedure of the Court of First Instance. It submits that the substance of those paragraphs is vitiated by a procedural defect. 53 Contrary to what is stated at paragraph 37 of that judgment, the application for the six persons in question to be heard did state the facts in respect of which proof by witnesses should be ordered. At paragraph 72 of the application which the Henss/Isoplus Group lodged before the Court of First Instance, it was stated that the application that witnesses be heard had been made in order to prove that the undertakings of the group had not participated in the cartel before October 1994. 54 That plea must be rejected.55 It follows from paragraph 34 of the judgment under appeal that the Court of First Instance did indeed take note of the fact that a hearing had been requested ‘in order to prove that neither the applicants nor the Henss/Isoplus group participated in an illegal practice or measure or in any other similar conduct for the purposes of Article 85(1) of the … Treaty before October 1994’. 56 However, the Court of First Instance observed at paragraph 36 of that judgment that, according to the final subparagraph of Article 68(1) of its Rules of Procedure, an application by a party for the examination of a witness is to state precisely about what facts and for what reasons the witness should be examined. 57 At the following paragraph of that judgment, the Court noted that, particularly at paragraphs 20, 40, 50, 66 to 71, 94, 96, 125 and 142 of the application, there were references to certain persons who could act as witnesses in relation to the facts set out in each of the paragraphs in question but that the names of the six persons whom the Henss/Isoplus group expressly requested be called as witnesses before the Court of First Instance were not to be found in those paragraphs. The Court of First Instance therefore found that, for those six persons, the Henss/Isoplus group had failed to state the facts in respect of which proof by witnesses should be ordered. 58 The Court of First Instance concluded, at paragraph 38 of the judgment, that without there being any need to consider whether it was appropriate to hear the six persons in question, the application for witnesses to be heard should not be granted. 59 The Court of First Instance was faced, first, with a significant body of precise facts in respect of which the Henss/Isoplus group had offered to provide proof in its application by having a series of persons called for examination and, second, with a formal request that six different persons be called as witnesses pursuant to Article 68(1) of the Rules of Procedure of the Court of First Instance, also formulated in that application, in order to prove generally that the group undertakings concerned had not participated in the agreement before October 1994, although the application did not refer to the precise facts in respect of which proof was being offered. 60 Faced with the manifest lack of clarity on that point of what was a voluminous application, the Court of First Instance correctly held that the request that the six persons concerned be examined did not indicate precisely the facts in respect of which those persons should be heard as witnesses. 61 The Henss/Isoplus group further submits that the examination of persons other than those six persons should be taken not as a mere offer of proof but as a request that they be examined as witnesses, within the meaning of Article 68(1) of the Rules of Procedure of the Court of First Instance. 62 By that complaint, the Henss/Isoplus group therefore criticises the Court of First Instance for having distorted the scope of its application on that point. 63 That complaint is unfounded. 64 It follows from that application, and in particular from paragraph 145, to which the appellant makes specific reference, moreover, that the appellant itself drew a distinction between the evidence offered within the meaning of Article 44(1) of the Rules of Procedure of the Court of First Instance and its formal request for the measure of investigation consisting in the examination of six other persons pursuant to Article 68(1) of the Rules of Procedure. The appellant has thus failed to demonstrate any distortion on this point. 65 In the alternative, the Henss/Isoplus group maintains that, even on the assumption that its request for the persons concerned to be examined as witnesses was not submitted in accordance with Article 68(1) of the Rules of Procedure, the Court of First Instance should in any event have ordered their examination of its own motion. 66 It submits that, since fines imposed under competition law must be classified as ‘criminal’ for the purposes of Article 6 of the ECHR, the Court of First Instance is in any event required, pursuant to paragraph 3 of that provision and to the general principle of Community law of the right to a fair hearing, to summon and hear the witnesses for the defence designated by name by the defendant. 67 In that regard, it should be borne in mind that the Court of First Instance is the sole judge of whether the information available concerning the cases before it needs to be supplemented (see, in particular, Joined Cases C-57/00 P and C-61/00 P Freistaat Sachsen and Others v Commission [2003] ECR I-9975, paragraph 47, and Case C-136/02 P Mag Instrument v OHIM [2004] ECR I-0000, paragraph 76). 68 Furthermore, as the Court has held in another case concerning competition law, even where a request for the examination of witnesses, made in the application, states precisely about what facts and for what reasons the witness or witnesses should be examined, it falls to the Court of First Instance to assess the relevance of the application to the subject-matter of the dispute and the need to examine the witnesses named (Case C-185/95 P Baustahlgewebe v Commission [1998] ECR I-8417, paragraph 70). 69 The existence of a discretion in that regard on the part of the Court of First Instance cannot be challenged on the basis, relied on by the Henss/Isoplus group, of the general principle of Community law inspired by Article 6(1) of the ECHR, which provides that everyone is entitled to a fair hearing, and, more particularly, the principle laid down in paragraph 3(d) of that article, which provides that everyone charged with a criminal offence has the right to obtain the attendance and examination of witnesses on his behalf on the same conditions as witnesses against him, a principle that constitutes a particular aspect of the right to a fair hearing. 70 It follows from the case-law of the European Court of Human Rights that that provision does not confer on the accused an absolute right to obtain the attendance of witnesses before a court and that it is in principle for the national court to determine whether it is necessary or appropriate to call a witness (see, among other authorities, Pisano v Italy, judgment of 27 July 2000, unreported, § 21; S.N. v Sweden, judgment of 2 July 2002, Reports of Judgments and Decisions, 2002-V, § 43; and Destrehem v France, judgment of 18 May 2004, unreported, § 39). 71 According to that case-law, Article 6(3) of the ECHR does not require that every witness be called but is aimed at full equality of arms, ensuring that the procedure in issue, considered in its entirety, gave the accused an adequate and proper opportunity to challenge the suspicions concerning him (see, in particular, Pisano v Italy, § 21). 72 In the present case, it is common ground, as may be seen from paragraph 21 of the judgment in HFB and Others v Commission, that the Court of First Instance, by way of a measure of organisation of procedure, requested the Henss/Isoplus group to answer certain written questions and to produce certain documents and that the parties complied with those requests. The Court of First Instance cannot therefore be accused of having been in breach of its duty to investigate the facts (see, to that effect, Baustahlgewebe v Commission, paragraph 76). 73 At paragraphs 137 to 181 of that judgment, moreover, the Court of First Instance examined a large number of documents on the file and concluded that the Commission was entitled to find that the Henss/Isoplus group had participated in a cartel from October 1991 until October 1994. 74 It follows that the appellant had ample opportunity to demonstrate that the undertakings belonging to it had not participated in the cartel before October 1994. 75 Contrary to what the Henss/Isoplus group contends, therefore, the Court of First Instance was not required to order of its own motion the examination of the witnesses for the defence concerned. 76 In the light of the foregoing, the plea must be rejected. 2. The plea whereby ABB alleges a breach of Articles 44(1)(c) and 48(2) of the Rules of Procedure of the Court of First Instance owing to its refusal to consider a legal opinion annexed to the reply 77 By its first plea in law, ABB maintains that, in holding at paragraphs 112 to 114 of the judgment in ABB Asea Brown Boveri v Commission that the legal opinion of Professor J. Schwarze (‘the legal opinion’) annexed to the reply which it lodged at the Court of First Instance could not be taken into consideration in whole or in part, the Court of First Instance infringed Articles 44(1)(c) and 48(2) of the Rules of Procedure. 78 By the first part of this plea, ABB criticises the Court of First Instance for having erred in law in finding, at paragraph 112 of the judgment under appeal, that, in accordance with Article 48(2) of the Rules of Procedure of the Court of First Instance, the legal opinion was inadmissible since it contained certain general principles which supported pleas in law that had not been raised in the application before the Court of First Instance. 79 Since paragraphs 115 to 136 of the judgment deal only with the principle of protection of legitimate expectations, the Court of First Instance relied in that regard on the assumption that the plea was confined to that principle, so that any other principle of administrative law analysed in the legal opinion constitutes a new plea and is therefore inadmissible within the meaning of Article 48(2) of the Rules of Procedure of the Court of First Instance. 80 However, ABB maintains that the legal opinion, in referring in particular to certain principles of administrative law, develops only arguments which clarify the precise legal basis and in particular the scope of the principle of protection of legitimate expectations. Those arguments seek essentially to demonstrate that the Commission’s discretion in fixing the amount of the fine was limited in the circumstances of the present cases. 81 The appellant submits that the legal opinion therefore contains only arguments set out in support of a plea already raised in the application before the Court of First Instance, and no new plea in law. 82 In that regard, it must be held that the legal opinion, which amounts to 101 paragraphs in all, examines, inter alia, six principles of Community law, namely the principle of protection of legitimate expectations, the principle that the administration is bound by its own acts, the principle of estoppel, the principle of fair administration, the principle venire contra factum proprium and the right to a fair hearing, and indeed the protection of the rights of the defence. 83 It follows from paragraph 19 of the legal opinion that those principles are examined for the purposes of establishing whether Community law includes rules that limit the Commission’s discretion when imposing fines in the field of competition law and that preclude it from altering its established practice in determining the amount of fines and from applying its new practice in a case such as this. 84 Paragraph 43 of the legal opinion states that, from various aspects and possibly to varying degrees, none of those principles may restrict the Commission’s discretion. 85 At paragraphs 44 to 96 of the legal opinion, each of those principles is examined individually and applied to the present case. 86 At paragraphs 97 to 101 of the opinion, the conclusion is drawn that in the present case the Commission’s discretion was in fact limited in that it could not depart from its previous practice. 87 At paragraph 98 of the opinion, it is stated that in so far as those principles are binding, they are similar.88 It follows from the structure and the content of the legal opinion that, although there are certain points of correspondence between the principles of administrative law set out in that opinion and the pleas in law raised in the application, the object of the opinion is clearly not limited to an account of the arguments clarifying or amplifying the plea relating to protection of legitimate expectations, as ABB contends, but consists in developing a number of autonomous principles intended to demonstrate that in the present case the Commission could not depart from its previous practice in determining the amount of fines. In that regard, it must be held that the principle of protection of legitimate expectations constitutes only one of the six principles developed for that purpose. 89 Accordingly, as the Commission maintained, it follows from the wording of the legal opinion that the latter sought to refer for the first time to certain principles not raised in the application before the Court of First Instance. 90 In the light of the foregoing, the first part of the first plea in law put forward by ABB must be rejected.91 By the second part of its first plea in law, ABB maintains that the Court of First Instance erred in law in holding, at paragraph 113 of the judgment in ABB Asea Brown Boveri v Commission, that the legal opinion could not be taken into consideration in whole or in part, since under Article 4(1)(c) of the Rules of Procedure of the Court of First Instance, the application must state the subject-matter of the proceedings and a summary of the pleas in law on which the application is based. 92 ABB submits that the Court of First Instance found no defect in the application or in the reply that could justify the application of that provision. Consequently, it was wrong to hold that ABB sought to compensate for an inadequate plea in law by making a general reference to the legal opinion. Nor was there any basis for relying by analogy on that provision of the Rules of Procedure of the Court of First Instance, as the Court of First Instance did at paragraph 113 of the judgment under appeal. 93 In that regard, it is necessary to retrace the reasoning followed by the Court of First Instance at paragraph 113 of the judgment in ABB Asea Brown Boveri v Commission. 94 The Court of First Instance pointed out that it follows from Article 44(1)(c) of the Rules of Procedure that the essential facts and law on which an application is based must be apparent from the text of the application itself, even if only stated briefly, and that a reference in the application to such elements in an annex to the application is therefore not sufficient. 95 The Court of First Instance referred, in particular, to the settled case-law of the Court of Justice on the Commission’s obligation, in any application lodged under Article 226 EC, to state the precise facts on which the Court of Justice is to adjudicate and also, at least briefly, the elements of law and of fact on which those complaints are based. 96 In that regard, it follows from that case-law that that obligation is not satisfied if the Commission’s complaints are set out in the application only in the form of a reference to the grounds stated in the formal letter and in the reasoned opinion, or again in the part of the application devoted to the legal background (see, to that effect, inter alia, Case C-52/90 Commission v Denmark [1992] ECR I-2187, paragraphs 17 and 18; Case C-375/95 Commission v Greece [1997] ECR I-5981, paragraph 35; and Case C-202/99 Commission v Italy [2001] ECR I-9319, paragraphs 20 and 21). 97 The Court of First Instance also observed that it is not for it to seek and identify in the annexes the pleas and arguments on which it may consider the action to be based, since the annexes have a purely evidential and ancillary purpose. 98 In the light of those elements, the Court of First Instance, since part of the legal opinion in question could not be taken into consideration, concluded that it was not for it to seek and identify in that opinion the passages that might be taken into account qua annexes supporting and supplementing ABB’s pleadings on specific points. 99 Regard being had to the grounds preceding it, that conclusion must be taken to mean that the purely probative and instrumental purpose of the annexes means that, in so far as the legal opinion contains, in addition to the new, and therefore inadmissible, pleas in law, elements of law on which certain pleas expressed in the application are based, those elements must be set out in the actual body of the reply to which that opinion is annexed or, at the very lest, be sufficiently identified in that reply. 100 In adopting those criteria and in holding that they were not satisfied in the present case, the Court of First Instance did not err in law. 101 Nor did the Court of First Instance distort the scope of the reply lodged before it. Paragraph 31 of the reply merely makes a general reference to the legal opinion. Furthermore, the fact, relied on by ABB, that in certain paragraphs of the reply references are made, in the form of footnotes, to passages in the legal opinion is not capable of calling in question the conclusion at which the Court of First Instance arrived on that point. 102 In those circumstances, the plea must be rejected. B – The substantive pleas in law, relating to the imputability of the infringement103 It is appropriate to examine, second, the substantive pleas in law raised by the Henss/Isoplus group and by Brugg, whereby the appellants challenge the judgments concerning them on certain points relating to the imputability of the infringement as found against them in the contested decision and confirmed by the Court of First Instance. 1. The plea in law alleging infringement of Article 85(1) of the Treaty owing to the fact that certain undertakings in the Henss/Isoplus group were taken into account and that the infringement was imputed to that group as an ‘undertaking’ within the meaning of that provision 104 By its fifth plea in law, the Henss/Isoplus group criticises the Court of First Instance for having held, at paragraphs 54 to 68 of the judgment in HFB and Others v Commission, that the Commission was correct in the contested decision to take into account certain undertakings in the Henss/Isoplus group and to impute the infringement to that group. 105 The appellant maintains, first of all, that at paragraph 66 of the judgment the Court of First Instance erred in law when it rejected its argument that an undertaking for the purposes of the Treaty provisions on competition must necessarily have legal personality. 106 That, in the appellant’s submission, is not the case for either the ‘Henss/Isoplus’ group, on the assumption that it constitutes an economic entity, or Mr Henss as the person who, according to the judgment, controlled the various undertakings belonging to the group. 107 The Henss/Isoplus group claims that its argument finds support in Article 1 of Protocol 22 to the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3), which provides that ‘undertaking’ for the purposes of the Treaty provisions on competition designates any entity (‘Rechtssubjekt’ in the German version) carrying out activities of a commercial or economic nature. 108 That is borne out, in particular, by the case-law of the Court of Justice on the provisions of the ECSC Treaty on competition (Joined Cases 17/61 and 20/61 Klöckner-Werke and Hoesch v High Authority [1962] ECR 325 and Case 19/61 Mannesmann v High Authority [1962] ECR 357). 109 In other judgments, notably those cited by the Court of First Instance at paragraph 66 of the judgment under appeal, the Court of Justice did not yet definitively settle the question of principle as to whether the classification of undertaking for the purposes of competition law requires in all circumstances that the entity concerned must have legal personality (Case 48/69 ICI v Commission [1972] ECR 619; Case 6/72 Europemballage and Continental Can v Commission [1973] ECR 215; Case 170/83 Hydrotherm [1984] ECR 2999; and Case C-41/90 Höfner and Elser [1991] ECR I-1979). 110 While it is true, in the Henss/Isoplus group’s submission, that the infringement committed by an undertaking having its own legal personality may be imputed to its parent company, a holding company, where the latter controls it and they therefore form the same economic unit (see, in particular, ICI v Commission, cited above, and also Europemballage and Continental Can v Commission, cited above), such imputation none the less requires that the controlling entity itself must have legal personality. 111 A natural person, such as Mr Henss in the present case, cannot, in his sole capacity as a member or shareholder, be classified as an undertaking within the meaning of Article 85(1) of the Treaty. Accordingly, that case-law is not relevant in this case. 112 In that regard, it should be observed that, according to settled case-law, in the field of competition law, the concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed (see, in particular, Case C-309/99 Wouters and Others [2002] ECR I-1577, paragraph 46 and the case-law cited). 113 It follows clearly from that case-law that the concept of an undertaking for the purposes of the Treaty provisions on competition does not require that the economic unit concerned have legal personality. Nor, as the Henss/Isoplus group maintains, is that interpretation confined to the particular cases in which the Court of Justice gave judgment, such as the judgments in Hydrotherm or Höfner and Elser; it is an interpretation of general application. 114 The argument based on the German version of Article 1 of Protocol 22 to the Agreement on the European Economic Area and, in particular, the concept of a ‘subject of law’ (‘Rechtssubjekt’) in that article does not allow that interpretation to be called into question. 115 The concept of a ‘subject of law’ does not necessarily exclude natural persons. In any event, such a concept is lacking in all the other language versions, which contain only the concept of ‘entity’. 116 The Henss/Isoplus group contends, next, that undertakings which are not linked either from the point of view of capital or from the aspect of company law and which therefore are not dependent on a controlling undertaking cannot become a group merely because of the existence of possible links between natural persons who are not undertakings. 117 In that regard, it is settled case-law that the anti-competitive conduct of an undertaking can be attributed to another undertaking where it has not decided independently upon its own conduct on the market but carried out, in all material respects, the instructions given to it by that other undertaking, having regard in particular to the economic and legal links between them (see, in particular, Case C-294/98 P Metsä-Serla and Others v Commission [2000] ECR I-10065, paragraph 27). 118 It is true that the mere fact that the share capital of two separate commercial companies is held by the same person or the same family is insufficient, in itself, to establish that those companies are a single economic unit with the result that, under Community competition law, the actions of one company can be attributed to the other and that one can be held liable to pay the fine for the other (see Case C-196/99 P Aristrain v Commission [2003] ECR I-11005, paragraph 99). 119 However, in the present case the Court of First Instance did not infer the existence of the economic unit constituting the Henss/Isoplus group solely from the fact that the undertakings concerned were controlled from the viewpoint of their share capital by a single person, in this case Mr Henss. 120 It follows from paragraphs 56 to 64 of the judgment in HFB and Others v Commission that the Court of First Instance reached the conclusion that that economic unit existed on the basis of a series of elements which established that Mr Henss controlled the companies concerned, including, in addition to the fact that he or his wife held, directly or indirectly, all or virtually all the shares, the fact that Mr Henss held key functions within the management boards of those companies and also the fact that he represented the various undertakings at meetings of the directors’ club, as indicated at paragraph 20 of this judgment, and that the undertakings were allocated a single quota by the cartel. 121 The Henss/Isoplus group maintains, finally, and in the alternative, that the various undertakings grouped together by the Commission do not belong to the same economic entity since they are not deprived of autonomy and do not depend on outside instructions. By that argument, the appellant maintains that the undertakings concerned were not, in one way or another, under the de facto control of Mr Henss. 122 In that regard, it should be observed that considerations such as those set out by the Court of First Instance at paragraphs 56 to 64 of the judgment in HFB and Others v Commission, which seek to establish the existence of an economic unit, are based on a series of findings of fact which are not amenable to discussion on appeal, unless the relevant facts or evidence adduced before the Court of First Instance have been distorted or the material inaccuracy of the findings of the Court of First Instance is apparent from the documents placed on the case-file (see, to that effect, in particular, Metsä-Serla and Others v Commission, paragraph 37, and Mag Instrument v OHIM, paragraphs 39 and 76). 123 As regards paragraph 57 of the judgment, the Court of First Instance did not hold, as the Henss/Isoplus group maintains, that during the reference period, i.e. the infringement period established by the Commission, namely October 1991 to March/April 1996, Mr Henss was not only the director of but also a shareholder in Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH. On that point, there is no inconsistency with the case-file, so that the procedural defect alleged in that regard by the appellant, as part of the seventh plea in law, must be rejected. 124 As regards paragraph 58 of that judgment, the Court of First Instance did not hold what the appellant maintains, namely that during the reference period Mr Henss held the majority of the shares in Isoplus Fernwärmetechnik Gesellschaft mbH through a trustee but never acted as director. 125 It must be held, therefore, that the specific criticism of paragraphs 57 and 58 does not establish any distortion of the relevant facts or of evidence on the part of the Court of First Instance or reveal the existence of a material inaccuracy in the findings of that court emerging from the documents placed on the case-file. 126 As regards Isoplus Fernwärmetechnik GmbH, the Henss/Isoplus group maintains that Mr Henss and Mr and Mrs Papsdorf were never directors and that the shares in that company, moreover, were held during the reference period on behalf of a third party by Isoplus Fernwärmetechnik Gesellschaft mbH in its own name, on behalf of a third party by Mr and Mrs Papsdorf through that company, acting as trustee, and for a third party by other natural persons, also through that trustee. 127 Those facts are the same as the facts found by the Court of First Instance at paragraph 59 of the judgment under appeal, so that a distortion of the relevant facts or of an item of evidence is not established on that point either. Nor is any material inaccuracy in the findings of the Court of First Instance apparent from the documents placed on the case-file. 128 The Henss/Isoplus group further maintains that it follows from those facts that Isoplus Fernwärmetechnik GmbH was outside the influence of both Mr Henss and Mr and Mrs Papsdorf. 129 That complaint is inadmissible, since it raises the question as to whether the conditions of the existence of an economic unit were satisfied in this case. Such an examination, which is based on an appraisal of the facts, cannot as such be challenged in an appeal (see Metsä-Serla and Others v Commission, paragraph 30). 130 In those circumstances, the Court of First Instance cannot be criticised for having held, following an overall and, in principle, sovereign assessment of a range of facts, that the various undertakings constituting the Henss/Isoplus group must, for that purpose, be regarded as belonging to a single economic entity. 131 This plea must therefore be rejected. 2. The pleas in law alleging breach of Article 85(1) of the Treaty owing to the attribution to the Henss/Isoplus group and to Brugg of an infringement of the competition rules on account of their participation in a meeting having an anti-competitive object 132 By their fourth and fifth pleas in law respectively, the Henss/Isoplus group and Brugg each criticise the Court of First Instance for having found, at paragraphs 223 to 227 of the judgment in HFB and Others v Commission and paragraphs 52 to 66 of the judgment in BruggRohrsysteme v Commission, that the Commission was correct in the contested decision to impute the infringement or part thereof to them on account of their participation in meetings having an anti-competitive object. 133 The Henss/Isoplus group disputes, in particular, that Mr Henss’s participation before October 1994 in meetings having an anti-competitive object justified the conclusion that the group should be regarded as having participated in the cartel resulting from those meetings, which concerned the period October 1991 to October 1994. 134 Brugg contends that the Court of First Instance was wrong to infer from its participation in the meeting held on 24 March 1995, during which the boycott of Powerpipe was discussed, proof that it actually participated in that boycott. 135 The Henss/Isoplus group relies, by analogy, on the principle established by the case-law that the Commission may refuse access to certain documents on the ground that an undertaking in a dominant position is capable of taking retaliatory measures against an undertaking who collaborated in the investigation carried out by the Commission (Case C-310/93 P BPB Industries and British Gypsum v Commission [1995] ECR I-865, paragraphs 26 and 27, and Case T-65/89 BPB Industries and British Gypsum v Commission [1993] ECR II-389, paragraph 33). 136 It follows, in the appellant’s submission, that even if the economically weak undertakings who did not publicly distance themselves from what was discussed at meetings whose object was manifestly anti-competitive and to which they were summoned by undertakings in a dominant or economically more powerful position than they, those undertakings must be relieved of their liability for participating in an unlawful cartel when they do not implement the decisions taken at those meetings. 137 In the present case, the Henss/Isoplus group did not denounce what was discussed at the meetings which it attended, owing to the participation, in particular, of ABB, an undertaking in a dominant position, and LR A/S, an undertaking much more powerful than the appellant. 138 However, the appellant did not implement the results of those meetings, which is shown by the continuous fall in prices on the pre-insulated pipes market between October 1991 and October 1994. 139 Brugg claims that, as a mere reseller of the products concerned, it was not capable of implementing a boycott.140 It further submits that the Court of First Instance was wrong to find at paragraph 62 of the judgment in Brugg Rohrsysteme v Commission that, in so far as Powerpipe was a direct competitor of Brugg on the German market, Brugg had an interest in any boycott of Powerpipe by other participants in the cartel. 141 The Court finds that the Court of First Instance was correct to reject those complaints.142 It is settled case-law that it is sufficient for the Commission to show that the undertaking concerned participated in meetings at which anti-competitive agreements were concluded, without manifestly opposing them, to prove to the requisite standard that the undertaking participated in the cartel. Where participation in such meetings has been established, it is for that undertaking to put forward evidence to establish that its participation in those meetings was without any anti-competitive intention by demonstrating that it had indicated to its competitors that it was participating in those meetings in a spirit that was different from theirs (see, in particular, Joined Cases C-204/00 P, C-205/00 P, C‑211/00 P, C-213/00 P, C-217/00 P and C-219/00 P Aalborg Portland and Others v Commission [2004] ECR I-123, paragraph 81 and the case-law cited). 143 In that regard, a party which tacitly approves of an unlawful initiative, without publicly distancing itself from its content or reporting it to the administrative authorities, effectively encourages the continuation of the infringement and compromises its discovery. That complicity constitutes a passive mode of participation in the infringement which is therefore capable of rendering the undertaking liable in the context of a single agreement (see Aalborg Portland and Others v Commission, cited above, paragraph 84). 144 Nor is the fact that an undertaking does not act on the outcome of a meeting having an anti-competitive object such as to relieve it of responsibility for the fact of its participation in a cartel, unless it has publicly distanced itself from what was agreed in the meeting (see Aalborg Portland and Others v Commission, paragraph 85 and the case-law cited). 145 For the purposes of applying Article 85(1) of the Treaty, it is sufficient that the object of an agreement should be to restrict, prevent or distort competition irrespective of the actual effects of that agreement. Consequently, in the case of agreements reached at meetings of competing undertakings, that provision is infringed where those meetings have such an object and are thus intended to organise artificially the operation of the market. In such a case, the liability of a particular undertaking in respect of the infringement is properly established where it participated in those meetings with knowledge of their object, even if it did not proceed to implement any of the measures agreed at those meetings. The greater or lesser degree of regular participation by the undertaking in the meetings and of completeness of its implementation of the measures agreed is relevant not to the establishment of its liability but rather to the extent of that liability and thus to the severity of the penalty (see Joined Cases C‑238/99 P, C-244/99 P, C-245/99 P, C-247/99 P, C‑250/99 P to C‑252/99 P and C-254/99 P Limburgse Vinyl Maatschappij and Others v Commission [2002] ECR I-8375, paragraphs 508 to 510). 146 It follows that the fact put forward by Brugg that it did not implement, and indeed was not capable of implementing, the boycott agreed at the meeting of 24 March 1995 cannot discharge its liability for having participated in that measure, unless it publicly distanced itself from what was agreed at the meeting, which Brugg does not claim to have done. 147 It is true, as Brugg maintains, and contrary to the finding made by the Court of First Instance at paragraph 62 of the judgment in BruggRohrsysteme v Commission, that it is irrelevant in that regard whether Brugg had an interest in any boycott of one of its direct competitors by other participants in the cartel (see, to that effect, Aalborg Portland and Others v Commission, paragraph 335). 148 However, that is a complaint directed against a ground included in the judgment purely for the sake of completeness which cannot lead to the judgment being set aside and is therefore nugatory (see, in particular, Case C-184/01 P Hirschfeldt v EEA [2002] ECR I-10173, paragraph 48 and the case-law cited). 149 In Brugg’s case, moreover, it is apparent from the contested decision that, contrary to Brugg’s contention, the Commission did not regard its participation in the boycott of Powerpipe as an aggravating circumstance, since the only aggravating circumstance found in its case consisted in its having continued the infringement after the investigations. 150 Likewise, in the light of the case-law cited at paragraphs 142 to 145 of this judgment, the fact, put forward by the Henss/Isoplus group, that the participation in the cartel of dominant or particularly powerful undertakings in a position to take retaliatory measures against other, much less powerful, participants should the latter publicly distance themselves from what was decided at meetings having an anti-competitive object, has no effect on the liability of those undertakings for their participation in the anti-competitive measure, but may, where appropriate, have consequences for the determination of the level of the penalty. 151 As the Commission appositely observes, the opposite argument would be unacceptable, as the consequence would be that Article 85(1) of the Treaty would be applied differently depending on the size of the undertakings, since the less powerful undertakings would be favoured. 152 In the light of the foregoing, the pleas in law examined must be rejected. C – Substantive pleas in law, relating to the determination of the amount of the fines153 All of the appellants criticise the judgments under appeal as regards the calculation of the fines imposed on them.154 The Court will deal, first, with the complaints alleging breach of certain principles owing to the application of the Guidelines to infringements such as those in the present case and, second, with those relating to the lawfulness of the method of calculating the fines set out in the Guidelines or applied in the contested decision. 1. Pleas in law relating to breach of the principles of protection of legitimate expectations and non-retroactivity owing to the application of the Guidelines to the infringements in issue 155 Most of the appellants criticise the Court of First Instance for having held that the Commission did not breach the principles of protection of legitimate expectations and non-retroactivity by applying the Guidelines to the present cases in the contested decision. (a) Pleas in law alleging breach of the principle of protection of legitimate expectations156 By their respective pleas in law, Dansk Rørindustri (second plea in law), KE KELIT (first plea in law), LR A/S (second plea in law), Brugg (first and second pleas in law), LR GmbH (first plea in law, second part) and ABB (second plea in law) claim, in essence, that they were entitled to found a legitimate expectation on the Commission’s previous decision-making practice in calculating the amount of fines, as was apparent at the time when the infringements were committed. 157 The appellants refer to a consistent and long-standing practice consisting in calculating the amount of fines on the basis of the turnover achieved with the relevant product on the relevant geographic market (‘the relevant turnover’), an amount which, moreover, cannot in any event exceed the maximum amount of the fine referred to in Article 15(2) of Regulation No 17, namely 10% of the worldwide turnover of the undertaking for all of its products (‘the worldwide turnover’). 158 It also follows from that practice that the maximum amount of the fine would not exceed 10% of the relevant turnover.159 According to those appellants, the Commission could not, without breaching their legitimate expectation in that previous practice, apply in their case the calculation method set out in the Guidelines, which had been adopted both after the infringements and after the hearings, the final stage in the administrative procedure before the Commission, since that method is radically new. 160 The novelty of that method, in the appellants’ submission, lies primarily in the fact that it consists in taking as a starting point for the calculation certain predetermined basic amounts which reflect the gravity of the infringement and which in themselves bear no relation to the relevant turnover; the basic amount may then be adjusted upwards or downwards, depending on the duration of the infringement and on any aggravating or attenuating circumstances and, finally, may be further reduced in order to take account of any cooperation with the Commission during the administrative procedure. 161 The appellants submit that the Commission could not depart arbitrarily from its previous practice in taking decisions or, at the very least, should have warned them of that change in good time or have specifically stated why it was applying that new method. 162 The appellants further maintain that the expectation which they were able to derive from the Commission’s previous practice in taking decisions when calculating fines was all the more legitimate because their decision to cooperate with the Commission was necessarily based on that practice and, in particular, on the benefits which they could rely on obtaining by cooperating, in the light of that practice. 163 The legitimate expectation based on the Leniency Notice extends, according to the very wording of that notice, to the calculation of the amount of the fine which serves as the basis for the calculation, an amount to which the reduction granted for cooperation, expressed as a percentage, is then applied. 164 First of all, the pleas in law whereby Dansk Rørindustri and KE KELIT allege breach of the principle of protection of legitimate expectations must be rejected as inadmissible. 165 According to settled case-law, to allow a party to put forward for the first time before the Court of Justice a plea in law which it has not raised before the Court of First Instance would mean allowing that party to bring before the Court, whose jurisdiction in appeals is limited, a wider case than that heard by the Court of First Instance. In an appeal the Court’s jurisdiction is thus confined to examining the assessment by the Court of First Instance of the pleas argued before it (see, in particular, Case C-458/98 P Industrie des poudres sphériques v Council [2000] ECR I-8147, paragraph 74). 166 Before the Court of First Instance, Dansk Rørindustri and KE KELIT did not put forward any plea alleging breach of the principle of protection of legitimate expectations owing to the application of the Guidelines. 167 So far as those appellants are concerned, therefore, the pleas are new pleas and are thus inadmissible in an appeal.168 As regards the substance, LR A/S, Brugg, LR GmbH and ABB criticise the Court of First Instance for having, at paragraphs 241 to 248 of the judgment in LR AF 1998 v Commission, paragraphs 137 to 144 of the judgment in Brugg Rohrsysteme v Commission, paragraphs 248 to 257 of the judgment in Lögstör Rör v Commission and paragraphs 122 to 136 of the judgment in ABB Asea Brown Boveri v Commission, breached the principle of protection of legitimate expectations by rejecting the pleas which they had put forward in reliance of that principle before the Court of First Instance. 169 In that regard, the Court of First Instance correctly observed that the fact that the Commission, in the past, imposed fines of a certain level for certain types of infringement does not mean that it is estopped from raising that level within the limits indicated in Regulation No 17 if that is necessary to ensure the implementation of Community competition policy. On the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy (Joined Cases 100/80 to 103/80 Musique Diffusion française and Others v Commission [1983] ECR 1825, paragraph 109, and Aristrain v Commission, cited above, paragraph 81). 170 The supervisory task conferred on the Commission by Articles 85(1) and 86 of the EC Treaty (now Article 82 EC) not only includes the duty to investigate and punish individual infringements but also encompasses the duty to pursue a general policy designed to apply, in competition matters, the principles laid down by the Treaty and to guide the conduct of undertakings in the light of those principles (see Musique Diffusion française and Others v Commission, paragraph 105). 171 As the Court of First Instance appositely observed, traders cannot have a legitimate expectation that an existing situation which is capable of being altered by the Commission in the exercise of its discretionary power will be maintained (Case C-350/88 Delacre and Others v Commission [1990] ECR I-395, paragraph 33 and the case-law cited). 172 That principle clearly applies in the field of competition policy, which is characterised by a wide discretion on the part of the Commission, in particular as regards the determination of the amount of fines. 173 The Court of First Instance was also correct to infer that undertakings involved in an administrative procedure in which fines may be imposed cannot acquire a legitimate expectation in the fact that the Commission will not exceed the level of fines previously imposed, so that in the present case the applicants could not, in particular, found a legitimate expectation on the level of fines imposed in Commission Decision 94/601/EC of 13 July 1994 relating to a proceeding under Article 85 of the EC Treaty (IV/C/33.833 – Cartonboard) (OJ 1994 L 243, p. 1). As the Commission observes, it follows that a legitimate expectation cannot be based on a method of calculating fines either. 174 A number of the appellants submit that that case-law is called in question by the judgment in Case 344/85 Ferriere San Carlo v Commission [1987] ECR 4435, paragraphs 12 and 13. In that judgment, the Court of Justice held, in essence, that since the trader in question had not been individually warned in good time of the termination of a practice which the Commission had followed for two years, consisting in tolerating deliveries in excess of quotas, the fine imposed by the Commission for exceeding a quota was contrary to the trader’s legitimate expectation that the practice would be continued. 175 As the Commission observed, any information which might be derived from that judgment could not in any event be relied on in the specific context of the Commission’s supervisory powers in the field of competition law, to which the principles set out at paragraphs 169 and 170 of the present judgment apply. 176 The Court of First Instance correctly held, moreover, that the Commission’s previous practice in taking decisions was not based exclusively on relevant turnover and that, accordingly, a legitimate expectation could not be founded on such a practice. 177 In that regard, it must be borne in mind that the Court of First Instance has exclusive jurisdiction to find and appraise the relevant facts and also to assess the evidence. The appraisal of those facts and the assessment of that evidence thus does not, save where they distort the evidence, constitute a point of law which is subject, as such, to review by the Court of Justice on appeal (see, in particular, Mag Instrument v OHIM, cited above, paragraph 39). 178 LR A/S, Brugg, LR GmbH and ABB do not dispute the existence of the decisions to which the Court of First Instance refers, but maintain that they relate to isolated cases. In that regard, they refer to a number of decisions and positions adopted by the Commission which, in their submission, show that, on the contrary, a sufficiently consistent and clear practice in taking decisions was indeed established as regards the calculation of the amount of fines according to a percentage of relevant turnover. 179 Even if that argument were correct, however, it would not serve to show any distortion of the facts or the evidence adduced before the Court of First Instance. In reality, the appellants are criticising a factual, and therefore sovereign, appraisal by that Court. The argument cannot therefore succeed at the appeal stage. 180 As regards the appellants’ claim that the Commission’s previous practice in taking decisions shows that the maximum amount of the fine cannot exceed the limit of 10% of relevant turnover, that also relates to a question of a factual nature which the Court cannot settle in an appeal. 181 It should be pointed out, however, as the Commission, moreover, has observed, that such a limit does not in any event follow from Article 15(2) of Regulation No 17, since the limit provided for in that provision relates to overall turnover and not to the relevant turnover of the undertakings (see, to that effect, Musique Diffusion française and Others v Commission, paragraph 119). 182 The same appellants further maintain that they were able to found a legitimate expectation on the Commission’s previous practice in taking decisions when calculating fines, in so far as their decision to cooperate with the Commission was necessarily based on that practice and, in particular, on the benefits which they could count on deriving from their cooperation in the light of that practice. 183 They submit, notably by analogy with Case 120/86 Mulder [1986] ECR 2321, paragraph 24, that the Commission encouraged that cooperation by publishing the Leniency Notice and would have benefited from it in the present case, so that it undertook not to modify afterwards the basis on which that cooperation had been offered. 184 They contend that if the Commission were entitled to change as it saw fit the method of calculating the amount of fines, the legitimate expectation that traders may count on deriving from the Leniency Notice, namely the right to benefit from a reduction in their fines, might well become illusory. 185 Traders should therefore be able to assess the benefits of cooperating and should be in a position to calculate in advance the absolute amount of the fine payable, depending on whether or not they decide to cooperate. 186 In that regard, it must be held, as the Court of First Instance held at paragraph 143 of the judgment in BruggRohrsysteme v Commission and at paragraphs 127 and 128 of the judgment in ABB Asea Brown Boveri v Commission, that it cannot be inferred from the Leniency Notice that that notice could found a legitimate expectation that the calculation will follow a particular method or that the fines will be set at a particular level. 187 It follows from Part E, point 3 of the Leniency Notice that the Commission is aware that the notice will create legitimate expectations on which undertakings may rely when disclosing the existence of a cartel to the Commission. Part A, point 5, of the Leniency Notice states that cooperation by an undertaking is only one of several factors which the Commission takes into account when fixing the amount of a fine. 188 When those points are read together, it is apparent that the legitimate expectation that traders are able to derive from the notice is limited to an assurance that their fines will be reduced by a certain percentage, but that the notice does not extend to the method of calculating fines or, a fortiori, to a specific level of the fine capable of being calculated at the time when the trader decides to implement his intention to cooperate with the Commission. 189 Furthermore, LR A/S and LR GmbH criticise the Court of First Instance for having held, at paragraphs 244 to 246 of LR AF 1998 v Commission and at paragraphs 255 to 257 of Lögstör Rör v Commission, that the Commission was not required to follow its practice of reducing the fines imposed on those parties for cooperation as it existed at the time when they cooperated, that is to say, the practice set out in the draft Leniency Notice, which was supposed to correspond to the practice already adopted in Decision 94/601. The appellants further criticise the Court of First Instance for having held at those paragraphs that the Commission was required to apply the Leniency Notice although it had been adopted after they had cooperated and was less favourable to the two appellants than that practice. 190 Those appellants maintain, essentially, that they were able to found a legitimate expectation on the Commission’s practice and that the Commission could not therefore apply the final version of the Leniency Notice, which was less favourable to them. 191 However, the Court of First Instance was correct to reject that plea, on the ground that traders could not place a legitimate expectation in such a practice being maintained when, in fixing the amount of fines, the Commission has a discretion which allows it to raise the general level of fines at any time, within the limits set out in Regulation No 17, if that is necessary to ensure the implementation of the Community competition policy, as observed at paragraphs 169 and 170 of this judgment. 192 It follows, as the Court of First Instance correctly held, that the mere fact that the Commission, in its previous practice when taking decisions, granted a certain rate of reduction for specific conduct does not mean that it is required to grant the same proportionate reduction when assessing similar conduct in a subsequent administrative procedure. 193 The Court of First Instance further stated, also correctly, that LR A/S and LR GmbH could not believe, at the time of making contact with the Commission, that the Commission would apply in their case the method set out in its draft Leniency Notice, since it was clear from that text that it was a draft. 194 Last, the Court of First Instance cannot be criticised for having held, at paragraph 245 of LR AF 1998 v Commission, that the Leniency Notice could found a legitimate expectation and that the Commission would now be bound to apply it. 195 Part E, point 3, of the Leniency Notice expressly states that ‘[t]he Commission is aware that this notice will create legitimate expectations on which [undertakings] may rely when disclosing the existence of a cartel to the Commission’. 196 Paragraph 245 of the judgment in LR AF 1998 v Commission must be taken to mean that traders could place a legitimate expectation in the application of the Leniency Notice although they were not entitled to place a legitimate expectation in what they alleged to be the Commission’s previous practice. 197 It follows from the foregoing that the pleas in law considered must be rejected in their entirety. (b) The pleas in law alleging breach of the principle of non-retroactivity198 By their respective pleas, Dansk Rørindustri (second plea), the Henss/Isoplus group (first plea, fourth part), KE KELIT (third plea), LR A/S (second plea), Brugg (first plea) and LR GmbH (first plea) each criticise the Court of First Instance for having held, at paragraphs 162 to 182 of Dansk Rørindustri v Commission, paragraphs 487 to 496 of HFB and Others v Commission, paragraphs 108 to 130 of KE KELIT v Commission, paragraphs 217 to 238 of LR AF 1998 v Commission, paragraphs 106 to 129 of Brugg Rohrsysteme v Commission and paragraphs 215 to 238 of Lögstör Rör v Commission, that in applying the method of calculating the fines as provided for in the Guidelines the Commission did not breach the principle of non-retroactivity. 199 It is appropriate to deal at the outset with the plea raised by LR A/S, in so far as it complains, in particular, that the Court of First Instance did not condemn the contested decision on account of the infringement consisting in what LR A/S alleges to be the retroactive application of the Leniency Notice. 200 It must be stated that that plea was not raised before the Court of First Instance. It is therefore, in accordance with the case-law cited at paragraph 165 of this judgment, a new plea and, accordingly, is inadmissible in an appeal. 201 In the various judgments under appeal, the Court of First Instance rejected those complaints on the basis of what was essentially the same reasoning. It may be summarised as follows. 202 The Court of First Instance held, first of all and correctly, that the principle of non-retroactivity of criminal laws, enshrined in Article 7 of the ECHR as a fundamental right, constitutes a general principle of Community law which must be observed when fines are imposed for infringement of the competition rules and that that principle requires that the penalties imposed correspond with those fixed at the time when the infringement was committed. 203 The Court of First Instance then held that the Guidelines remain within the legal framework governing the determination of the amount of fines, as defined, before the infringements took place, in Article 15 of Regulation No 17. 204 The method of calculating fines set out in the Guidelines continues to be based on the principles prescribed in that provision, since the calculation is still made on the basis of the gravity and the duration of the infringement and the fine cannot exceed a maximum of 10% of overall turnover. 205 The Guidelines therefore do not alter the legal framework of the penalties, which continues to be defined solely by Regulation No 17. The Commission’s previous decision-making practice is not part of the legal framework. 206 Last, according to the Court of First Instance, there is no retroactive increase in the fines even though the Guidelines may in certain cases entail an increase in the fines. That follows from the margin of discretion in fixing the amount of the fines which the Commission enjoys under Regulation No 17. The Commission may thus, at any time, adjust the level of fines to the needs of its competition policy, on condition that it remains within the limits set out in Regulation No 17, as established in the case-law cited at paragraph 169 of this judgment. 207 In that regard, it must be noted that that analysis is based essentially on the premiss that the Guidelines do not form part of the legal framework that determines the amount of fines, which consists exclusively of Article 15 of Regulation No 17, so that the application of the Guidelines to infringements committed before they were adopted cannot run counter to the principle of non-retroactivity. 208 Such a premiss is incorrect.209 The Court has already held, in a judgment concerning internal measures adopted by the administration, that although those measures may not be regarded as rules of law which the administration is always bound to observe, they nevertheless form rules of practice from which the administration may not depart in an individual case without giving reasons that are compatible with the principle of equal treatment. Such measures therefore constitute a general act and the officials and other staff concerned may invoke their illegality in support of an action against the individual measures taken on the basis of the measures (see Case C-171/00 P Libéros v Commission [2002] ECR I-451, paragraph 35). 210 That case-law applies a fortiori to rules of conduct designed to produce external effects, as is the case of the Guidelines, which are aimed at traders. 211 In adopting such rules of conduct and announcing by publishing them that they will henceforth apply to the cases to which they relate, the institution in question imposes a limit on the exercise of its discretion and cannot depart from those rules under pain of being found, where appropriate, to be in breach of the general principles of law, such as equal treatment or the protection of legitimate expectations. It cannot therefore be precluded that, on certain conditions and depending on their content, such rules of conduct, which are of general application, may produce legal effects. 212 Furthermore, as the Advocate General observed in substance at point 59 of his Opinion, the case-law cited at paragraph 209 of this judgment on the legal effects of such rules of conduct confirms the correctness of the conclusion reached by the Court of First Instance at paragraph 420 of HFB and Others v Commission and paragraph 276 of LR AF 1998 v Commission that even though the Guidelines do not constitute the legal basis of the contested decision, as that decision was based on Articles 3 and 15(2) of Regulation No 17, they may none the less form the subject-matter of an objection of illegality under Article 184 of the Treaty. 213 The Court of First Instance was also correct to observe, at paragraph 418 of HFB and Others v Commission and paragraph 274 of LR AF 1998 v Commission, that although the Guidelines do not constitute the legal basis of the contested decision, they determine, generally and abstractly, the method which the Commission has bound itself to use in assessing the fines imposed by the decision and, consequently, ensure legal certainty on the part of the undertakings. 214 Just as the admissibility of an objection of illegality raised against rules of conduct such as the Guidelines is not subject to the requirement that those rules constitute the legal basis of the act alleged to be illegal, the relevance of the Guidelines in the light of the principle of non-retroactivity does not presuppose that the Guidelines form the legal basis for the fines. 215 In that context, it is appropriate to refer to the case-law of the European Court of Human Rights on Article 7(1) of the ECHR, which, moreover, is cited by a number of the applicants (see, in particular, Eur. Court H.R., S.W. v United Kingdom and C.R. v United Kingdom, judgments of 22 November 1995, Series A Nos 335-B and 335-C, §§ 34 to 36 and §§ 32 to 34; Cantoni v France, judgment of 15 November 1996, Reports of Judgments and Decisions, 1996-V, §§ 29 to 32, and Coëme and Others v Belgium, judgment of 22 June 2000, Reports, 2000-VII, § 145). 216 It follows from that case-law that the concept of ‘law’ (‘droit’) for the purposes of Article 7(1) corresponds to ‘law’ (‘loi’) used in other provisions of the ECHR and encompasses both law of legislative origin and that deriving from case-law. 217 Although that provision, which enshrines in particular the principle that offences and punishments are to be strictly defined by law (nullum crimen, nulla poena sine lege), cannot be interpreted as prohibiting the gradual clarification of the rules of criminal liability, it may, according to that case-law, preclude the retroactive application of a new interpretation of a rule establishing an offence. 218 That is particularly true, according to that case-law, of a judicial interpretation which produces a result which was not reasonably foreseeable at the time when the offence was committed, especially in the light of the interpretation put on the provision in the case-law at the material time. 219 It follows from that case-law of the European Court of Human Rights that the scope of the notion of foreseeability depends to a considerable degree on the content of the text in issue, the field it is designed to cover and the number and status of those to whom it is addressed. A law may still satisfy the requirement of foreseeability even if the person concerned has to take appropriate legal advice to assess, to a degree that is reasonable in the circumstances, the consequences which a given action may entail. This is particularly true in relation to persons carrying on a professional activity, who are used to having to proceed with a high degree of caution when pursuing their occupation. They can on this account be expected to take special care in assessing the risks that such an activity entails (see Cantoni v France, cited above, § 35). 220 Those principles are also consistently reflected in the case-law of the Court to the effect that the obligation on the national court to refer to the content of the directive when interpreting the relevant rules of its national law is limited by the general principles of law which form part of Community law and in particular the principles of legal certainty and non-retroactivity (see Case 80/86 Kolpinghuis Nijmegen [1987] ECR 3969, paragraph 13). 221 According to that case-law, such an interpretation cannot lead to the imposition on an individual of an obligation laid down by a directive which has not been transposed or, a fortiori, have the effect of determining or aggravating, on the basis of the decision and in the absence of a law enacted for its implementation, the liability in criminal law of persons who act in contravention of that directive’s provisions (see, in particular, Kolpinghuis Nijmegen, cited above, paragraph 14, and Case C-168/95 Arcaro [1996] ECR I-4705, paragraph 42). 222 Like that case-law on new developments in case-law, a change in an enforcement policy, in this instance the Commission’s general competition policy in the matter of fines, especially where it comes about as a result of the adoption of rules of conduct such as the Guidelines, may have an impact from the aspect of the principle of non-retroactivity. 223 Having particular regard to their legal effects and to their general application, as indicated at paragraph 211 of this judgment, such rules of conduct come, in principle, within the principle of ‘law’ for the purposes of Article 7(1) of the ECHR. 224 As stated at paragraph 219 of this judgment, in order to ensure that the principle of non-retroactivity was observed, it is necessary to ascertain whether the change in question was reasonably foreseeable at the time when the infringements concerned were committed. 225 In that regard, it should be noted that, as a number of the appellants have pointed out, the main innovation in the Guidelines consisted in taking as a starting point for the calculation a basic amount, determined on the basis of brackets laid down for that purpose by the Guidelines; those brackets reflect the various degrees of gravity of the infringements but, as such, bear no relation to the relevant turnover. The essential feature of that method is thus that fines are determined on a tariff basis, albeit one that is relative and flexible. 226 It is therefore necessary to consider whether that new method of calculating fines, on the assumption that it has the effect of increasing the level of fines imposed, was reasonably foreseeable at the time when the infringements concerned were committed. 227 As already stated at paragraph 169 of this judgment in connection with the pleas alleging breach of the principle of protection of legitimate expectations, it follows from the case-law of the Court that the fact that the Commission, in the past, imposed fines of a certain level for certain types of infringement does not mean that it is estopped from raising that level within the limits indicated in Regulation No 17 if that is necessary to ensure the implementation of Community competition policy. On the contrary, the proper application of the Community competition rules requires that the Commission may at any time adjust the level of fines to the needs of that policy. 228 It follows, as already held at paragraph 173 of this judgment, that undertakings involved in an administrative procedure in which fines may be imposed cannot acquire a legitimate expectation in the fact that the Commission will not exceed the level of fines previously imposed or in a method of calculating the fines. 229 Consequently, the undertakings in question must take account of the possibility that the Commission may decide at any time to raise the level of the fines by reference to that applied in the past. 230 That is true not only where the Commission raises the level of the amount of fines in imposing fines in individual decisions but also if that increase takes effect by the application, in particular cases, of rules of conduct of general application, such as the Guidelines. 231 It must be concluded that, particularly in the light of the case-law cited at paragraph 219 of this judgment, the Guidelines and, in particular, the new method of calculating fines contained therein, on the assumption that this new method had the effect of increasing the level of the fines imposed, were reasonably foreseeable for undertakings such as the appellants at the time when the infringements concerned were committed. 232 Accordingly, in applying the Guidelines in the contested decision to infringements committed before they were adopted, the Commission did not breach the principle of non-retroactivity. 233 In the light of all the foregoing, all the pleas examined must be rejected. 2. The pleas in law relating to the legality of the method of calculating the amount of the fines as laid down in the Guidelines or applied in the contested decision 234 By their respective pleas in law, Dansk Rørindustri (first plea in law), the Henss/Isoplus group (first and third pleas in law), KE KELIT (first and second pleas in law), LR A/S (first and third pleas in law), Brugg (fourth plea in law), LR GmbH (second plea in law) and ABB (third plea in law) criticise the Court of First Instance for having rejected the pleas whereby they sought to demonstrate that certain aspects of the method of calculating the amount of the fines laid down in the Guidelines or as applied in the contested decision are contrary to Article 15(2) of Regulation No 17 and to certain general principles, in particular the principles of proportionality and equal treatment, and indeed of the rights of the defence. 235 In that regard, the Henss/Isoplus group and LR GmbH, by way of principal submission, and LR A/S, by way of alternative submission, dispute the legality of the Guidelines on the ground that the illegality of the calculation method followed in the present case is inherent in the Guidelines. 236 The admissibility of the objection of illegality raised in that regard by those appellants and admitted by the Court of First Instance cannot be disputed. 237 Regard being had to the legal effects which may be produced by rules of conduct such as the Guidelines, and since the Guidelines contain provisions of general application which, it is accepted, were applied by the Commission in the contested decision, as stated at paragraphs 209 to 214 of this judgment, it cannot be denied that there is a direct link between the contested decision and the Guidelines. (a) The pleas in law alleging breach of Article 15(2) of Regulation No 17 consisting in the determination in the contested decision of the amount of the fines according to the calculation method provided for in the Guidelines 238 Dansk Rørindustri, the Henss/Isoplus group, LR A/S, LR GmbH and ABB maintain that the Court of First Instance erred in law in holding that the method of calculating the fines, as applied in the contested decision, does not infringe Article 15(2) of Regulation No 17. 239 The Henss/Isoplus group, LR A/S and LR GmbH infer that the Commission was not competent to adopt the Guidelines.240 It should be noted at the outset, first, that according to the case-law of the Court, in fixing the amount of the fines, regard must be had to duration and to all the factors capable of affecting the assessment of the gravity of the infringements (see Musique Diffusion française and Others v Commission, paragraph 129). 241 The gravity of the infringements must be assessed in the light of numerous factors, such as the particular circumstances of the case, its context and the dissuasive effect of fines, although no binding or exhaustive list of the criteria to be applied has been drawn up (see, in particular, Limburgse Vinyl Maatschappij and Others v Commission, paragraph 465). 242 The factors capable of affecting the assessment of the gravity of the infringements include the conduct of each of the undertakings, the role played by each of them in the establishment of the concerted practices, the profit which they were able to derive from those practices, their size, the value of the goods concerned and the threat that infringements of that type pose to the objectives of the Community (see Musique Diffusion française and Others v Commission, paragraph 129). 243 It follows that, on the one hand, it is permissible, for the purpose of fixing the fine, to have regard both to the total turnover of the undertaking, which gives an indication, albeit approximate and imperfect, of the size of the undertaking and of its economic power, and to the proportion of that turnover accounted for by the goods in respect of which the infringement was committed, which gives an indication of the scale of the infringement. On the other hand, it follows that it is important not to confer on one or the other of those figures an importance disproportionate in relation to the other factors and, consequently, that the fixing of an appropriate fine cannot be the result of a simple calculation based on the total turnover. That is particularly the case where the goods concerned account for only a small part of that figure (see Musique Diffusion française and Others v Commission, paragraph 121, and Case 322/81 Michelin v Commission [1983] ECR 3461, paragraph 111). 244 It should be borne in mind, second, that in the context of an appeal the purpose of review by the Court of Justice is, first, to examine to what extent the Court of First Instance took into consideration, in a legally correct manner, all the essential factors to assess the gravity of particular conduct in the light of Article 85 of the Treaty and Article 15 of Regulation No 17 and, second, to consider whether the Court of First Instance responded to a sufficient legal standard to all the arguments raised by the appellant with a view to having the fine cancelled or reduced (see, in particular, Baustahlgewebe v Commission, cited above, paragraph 128, and Case C-359/01 P British Sugar v Commission [2004] ECR I-4933, paragraph 47). 245 As regards the allegedly disproportionate nature of the fine, on the other hand, it must be borne in mind that it is not for the Court of Justice, when ruling on questions of law in the context of an appeal, to substitute, on grounds of fairness, its own assessment for that of the Court of First Instance exercising its unlimited jurisdiction to rule on the amount of fines imposed for infringements of Community law (see, in particular, Baustahlgewebe v Commission, paragraph 129, and British Sugar v Commission, paragraph 48). 246 It follows that a plea must be declared inadmissible in so far as it seeks a general re-examination of the fines (see Baustahlgewebe v Commission, paragraph 129, and British Sugar v Commission, paragraph 49). 247 Dansk Rørindustri, the Henss/Isoplus group, LR A/S, LR GmbH and ABB maintain, first of all, that the calculation method applied in the present case, in that it consists in taking as a starting point the basic amounts defined in the Guidelines, which are not determined according to relevant turnover, is contrary to Article 15(2) of Regulation No 17, as interpreted by the Court of Justice. 248 That, they contend, entails a mechanical calculation which fails to take into account, or at least to take sufficiently into account, the relevant turnover and the requirement that the fines for each undertaking concerned be adapted individually. 249 The Henss/Isoplus group, LR A/S and LR GmbH maintain on that basis that, in adopting such a calculation method in its Guidelines, the Commission exceeded the limits of the discretion conferred on it by Regulation No 17, so that the Guidelines are unlawful on account of the Commission’s lack of competence. 250 However, it follows from a thorough analysis of the content of the Guidelines, as carried out, in particular, at paragraphs 223 to 232 of the judgment in LR AF 1998 v Commission, that, as stated, moreover, at the first subparagraph of Section 1 of the Guidelines, the basic amount is to be determined according to the gravity and duration of the infringements, which are the only criteria referred to in Article 15(2) of Regulation No 17, and therefore in conformity with the legal framework of penalties as defined in that provision. 251 As is apparent from, in particular, paragraphs 225 to 230 of the judgment in LR AF 1998 v Commission, the Court of First Instance based that conclusion on the following analysis of the Guidelines: ‘225 According to the Guidelines, the Commission is to take as the starting point in calculating the amount of the fines an amount determined according to the gravity of the infringement … In assessing the gravity of the infringement, account must be taken of its nature, its actual impact on the market, where this can be measured, and the size of the relevant market (first paragraph of Section 1.A). Within that framework, infringements are to be put into one of three categories: “minor infringements”, for which the likely fines are between ECU 1 000 and ECU 100 000, “serious infringements”, for which the likely fines are between ECU 1 million and ECU 20 million, and “very serious infringements”, for which the likely fines are above ECU 20 million, (first to third indents of the second paragraph of Section 1.A). Within each of these categories, and in particular as far as serious and very serious infringements are concerned, the proposed scale of fines is to make it possible to apply differential treatment to undertakings according to the nature of the effective economic capacity of offenders to cause significant damage to other operators, in particular consumers, and to set the fine at a level which ensure that it has a sufficiently deterrent effect (fourth paragraph of Section 1.A). 226 Account may also be taken of the fact that large undertakings usually have legal and economic knowledge and infrastructures which enable them more easily to recognise that their conduct constitutes an infringement and be aware of the consequences stemming from it under competition law (fifth paragraph of Section 1.A). 227 It may be necessary in some cases to apply weightings to the amounts determined within each of the three categories in order to take account of the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition, particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same type. Consequently, it may be necessary to adapt the general starting point according to the specific nature of each undertaking … (sixth paragraph of Section 1.A). 228 As regards the factor relating to the duration of the infringement, the Guidelines draw a distinction between infringements of short duration (in general, less than one year), for which the amount determined for gravity should not be increased, infringements of medium duration (in general, one to five years), for which the amount determined or gravity may be increased by up to 50%, and infringements of long duration (in general, more than five years), for which the amount determined for gravity may be increased by 10% per year (first to third indents of the first paragraph of Section 1.B). 229 The Guidelines then set out, by way of example, a list of aggravating and attenuating circumstances which may be taken into consideration in order to increase or reduce the basic amount and refer to the [Leniency Notice]. 230 By was of general comment, it is stated that the final amount calculated according to this method (basic amount increased or reduced on a percentage basis) may not in any case exceed 10% of the worldwide turnover of the undertakings, as laid down by Article 15(2) of Regulation No 17 (Section 5(a)). The Guidelines further provide that, depending on the circumstances, account should be taken, once the above calculations have been made, of certain objective factors such as a specific economic context, any economic or financial benefit derived by the offenders, the specific characteristics of the undertakings in question and their real ability to pay in a specific social context, and that the fines should be adjusted accordingly (Section 5(b)).’ 252 The Court of First Instance did not err in law when it concluded that, in setting out in the Guidelines the method which it proposed to apply when calculating fines imposed under Article 15(2) of Regulation No 17, the Commission remained within the legal framework laid down by that provision and did not exceed the discretion conferred on it by the legislature, as stated at paragraph 432 of the judgment in HFB and Others v Commission and paragraph 277 of the judgment in LR AF 1998 v Commission. 253 The Court of First Instance was therefore correct on that point to reject the objections of illegality raised against the Guidelines and alleging that the Commission lacked competence to adopt them. 254 That conclusion is not called in question by the first complaint put forward by the appellants, namely that in setting out in the Guidelines a method of calculating fines which is not based on the turnover of the undertakings concerned, the Commission departed from the judicial interpretation of Article 15 of Regulation No 17. 255 As the Court of First Instance held, in particular at paragraph 442 of the judgment in HFB and Others v Commission and paragraph 278 of the judgment in LR AF 1998 v Commission, the Commission is not required, when assessing fines in accordance with the gravity and duration of the infringement in question, to calculate the fines on the basis of the turnover of the undertaking concerned. 256 As the Court of First Instance observed, in particular at paragraphs 443 and 444 of the judgment in HFB and Others v Commission and also at paragraphs 280 and 281 of the judgment in LR AF 1998 v Commission, that conclusion is clearly based on principles which, according to the case-law of the Court of Justice set out at paragraphs 240 to 243 of this judgment, derive from Article 15 of Regulation No 17. 257 It follows from those principles that, subject to compliance with the upper limit provided for in that decision, which refers to total turnover (see Musique Diffusion française and Others v Commission, paragraph 119), it is permissible for the Commission to take account of the turnover of the undertaking concerned in order to assess the gravity of the infringement when determining the amount of the fine, but that disproportionate importance must not be attributed to that turnover by comparison with other relevant factors. 258 In that regard, it must be further stated, as the Court of First Instance also correctly observed, in particular at paragraph 447 of the judgment in HFB and Others v Commission and paragraph 283 of the judgment in LR AF 1998 v Commission, that although the Guidelines do not provide that the fines are to be calculated according to the overall turnover of the undertakings concerned or their turnover on the relevant product market, they do not preclude such turnover from being taken into account in determining the amount of the fine in order to comply with the general principles of Community law and where circumstances demand it. 259 In that regard, the Court of First Instance held, in particular at paragraphs 284 and 285 of the judgment in LR AF 1998 v Commission: ‘284 It so happens that, under the Guidelines, the turnover of the undertakings concerned may be relevant when the actual economic capacity of the offenders to cause significant harm to other traders and the need to ensure that the fine has sufficient deterrent effect is taken into consideration, or when account is taken of the fact that large undertakings usually have legal and economic knowledge and infrastructures which enable them more easily to recognise that their conduct constitutes an infringement and be aware of the consequences stemming from it under competition law (see paragraph 226 above). The turnover of the undertakings concerned may also be relevant when the specific weight and, therefore, the real impact of the offending conduct of each undertaking on competition is determined, particularly where there is considerable disparity between the sizes of the undertakings committing infringements of the same type (see paragraph 227 above). Likewise, the turnover of the undertakings may give an indication of any economic or financial benefit acquired by the offenders or of other specific characteristics which, depending on the circumstances, may need to be taken into consideration (see paragraph 230 above). 285 Furthermore, the Guidelines state that the principle of equal punishment for the same conduct may, if the circumstances so warrant, lead to different fines being imposed on the undertakings concerned without this differentiation being governed by arithmetical calculation (seventh paragraph of Section 1(A)).’ 260 On the contrary, since the calculation method recommended by the Guidelines envisages that numerous factors will be taken into account in assessing the gravity of the infringement for the purpose of determining the amount of the fine, including in particular the profits secured by the infringement or the need to ensure the deterrent effect of the fines, it seems to correspond better with the principles laid down by Regulation No 17 as interpreted by the Court of Justice, notably in its judgment in Musique Diffusion française and Others v Commission, than what is alleged to be the Commission’s earlier practice, referred to by the applicants, in which the relevant turnover played a predominant and relatively mechanical role. 261 The appellants cannot therefore claim that the calculation method laid down in the Guidelines, in so far as it consists in taking as the starting point basic amounts which are not determined according to relevant turnover, is contrary to Article 15(2) of Regulation No 17 as interpreted by the Court. 262 As the Advocate General observed at point 73 of his Opinion, the contested decision itself shows that the method laid down in the Guidelines allows turnover to be taken into account, since in that decision the Commission divided the applicants into four groups according to their size and, consequently, adopted basic amounts which differed considerably. 263 In that regard, the Court of First Instance held at paragraphs 295 to 297 of the judgment in LR AF 1998 v Commission: ‘295 In order to take account of the difference in size of the undertakings which took part in the infringement, the Commission divided the undertakings into four categories according to their relative importance in the market in the Community, subject to adjustment where appropriate to take account of the need to ensure effective deterrence (second to fourth paragraphs of point 166 of the decision). It follows from points 168 to 183 of the decision that the specific starting points for the calculation of the fines imposed on the four categories were, in order of size, ECU 20 million, ECU 10 million, ECU 5 million and ECU 1 million. 296 As regards the determination of the starting points for each category, the Commission stated, following a question put by the Court, that these amounts reflect the importance of each undertaking in the pre-insulated pipe sector, having regard to its size and weight compared with ABB and in the context of the cartel. For that purpose, the Commission took into account not only their turnover on the relevant market but also the relative importance which the members of the cartel ascribed to each of them, as evidenced by the quotas allocated within the cartel, set out in annex 60 to the statement of objections, and by the results obtained and forecast in 1995, set out in annexes 169 to 171 of the statement of objections. 297 In addition, the Commission made a further upward adjustment of the starting point for the calculation of the fine to be imposed on ABB, to ECU 50 million, to take account of its position as one of Europe’s largest industrial combines (point 168 of the decision).’ 264 Although the Guidelines provide for a basic amount which may exceed EUR 20 million for very serious infringements, such as that in the present case, it must be pointed out that in the contested decision that amount was significantly adjusted for all the undertakings concerned, following the approach taken by the Commission and described by the Court of First Instance, as stated in the preceding paragraph of this judgment. 265 In the contested decision, the starting point was fixed at EUR 10 million for LR A/S, an undertaking in the second category, at EUR 5 million for Dansk Rørindustri, the Henss/Isoplus group and LR GmbH, undertakings in the third category, and at EUR 1 million for Brugg, an undertaking in the fourth category. As for ABB, a specific starting point of EUR 50 million was set. 266 It follows from the analysis of the terms of the Guidelines made by the Court of First Instance, as described at paragraph 251 of this judgment, that, contrary to the appellants’ contention, the Guidelines do not lay down an arithmetical calculation method which does not allow the fines imposed on each undertaking concerned to be adjusted individually to take account of the relative gravity of its participation in the infringement. 267 As the Advocate General observed at point 75 of his Opinion, that analysis shows, on the contrary, that the Guidelines display flexibility in a number of ways, enabling the Commission to exercise its discretion in accordance with Article 15 of Regulation No 17, as interpreted by the Court of Justice, whose case-law was recalled, in that regard, at paragraphs 240 to 243 of this judgment. 268 As observed at paragraph 264 of this judgment, the Guidelines, as applied in the contested decision, also entail significant adjustments to the amount of the fines, according to the particular features of each trader, particularly as regards the basic amounts. 269 In so far as the appellants’ pleas must be understood as criticising the Court of First Instance for not having condemned the contested decision on the ground that their relevant turnover was not sufficiently taken into account, they must be rejected. 270 In the light of the case-law of the Court to the effect that turnover is only one of the factors which the Commission may take into account when calculating the amount of fines, as indicated at paragraph 243 of this judgment, and since it is common ground that turnover was indeed taken into account in the contested decision, it must be held that the judgments under appeal disclose no error of law on that point. 271 In so far as the appellants intend, by these pleas in law, to impute to the Court of First Instance certain errors relating to the finding or to the assessment of facts, it is sufficient to state that no distortion of the facts has been demonstrated and that no material inaccuracy in the findings of the Court of First Instance is evident from the documents on the file. 272 Dansk Rørindustri, the Henss/Isoplus group, LR A/S and LR GmbH claim, next, that since the basic amounts are not determined according to the relevant turnover of each undertaking, but in absolute amounts which prove to be particularly high in the case of small and medium-sized undertakings, the limit of 10% of total turnover referred to in Article 15(2) of Regulation No 17 is already exceeded at this initial stage of the calculation for undertakings of their size, so that ultimately, in such a situation, the final amount of the fine imposed is calculated arithmetically and solely on the basis of total turnover. 273 That, in the appellants’ submission, would have the consequence that, in such a situation, the adjustments for the duration of the infringement or to take account of any aggravating or attenuating circumstances, since they are applied to an amount above the limit of 10% of total turnover, cannot be reflected in the final amount of the fine and, accordingly, are not taken into account, or are taken into account only in an abstract fashion, or theoretically. 274 In their submission, Article 15(2) of Regulation No 17 requires that those factors be actually taken into account in the calculation of the fine and be specifically reflected in the final amount of the fine. 275 The Henss/Isoplus group, LR A/S and LR GmbH maintain, last, on that basis, that in adopting such a calculation method in the Guidelines, the Commission exceeded its discretion under Regulation No 17, so that the Guidelines are illegal on account of the Commission’s lack of competence. 276 In that regard, it must be held that the Court of First Instance’s reasoning, notably at paragraphs 287 to 290 of the judgment in LR AF 1998 v Commission, which led to that argument being rejected, is not vitiated by any error of law. 277 The Court of First Instance was correct to hold, in essence, that the upper limit of the amount of the fine referred to in Article 15(2) of Regulation No 17 must be understood to mean that the amount of the fine ultimately imposed on an undertaking cannot exceed that limit and that the Guidelines are consistent with that principle, as may be seen from point 5(a) thereof. 278 As the Court of First Instance rightly held, Article 15(2) of Regulation No 17 does not therefore prohibit the Commission from referring, for the purpose of its calculation, to an intermediate amount in excess of that limit. Nor does it preclude intermediate calculations that take account of the gravity and duration of the infringement from being applied to an amount above that limit. 279 Where it turns out, following the calculation, that the final amount of the fine must be reduced by the amount by which it exceeds the upper limit, the fact that certain factors such as the gravity and duration of the infringement are not actually reflected in the amount of the fine imposed is merely a consequence of the application of that upper limit to the final amount. 280 As the Commission contended, that upper limit seeks to prevent fines being imposed which it is foreseeable that the undertakings, owing to their size, as determined, albeit approximately and imperfectly, by their total turnover, will not be able to pay (see, to that effect, Musique Diffusion française and Others v Commission, paragraphs 119 and 121). 281 That limit is therefore one which is uniformly applicable to all undertakings and arrived at according to the size of each of them and seeks to ensure that the fines are not excessive or disproportionate. 282 That upper limit thus has a distinct and autonomous objective by comparison with the criteria of gravity and duration of the infringement. 283 The only possible consequence of the upper limit is that the amount of the fine calculated on the basis of those criteria will be reduced to the maximum permitted level. Its application implies that the undertaking concerned will not pay the fine which in principle would be payable if it were assessed on the basis of those criteria. 284 That is all the more so if, as in this case for Dansk Rørindustri, the Henss/Isoplus group, LR A/S and LR GmbH, the adjustments concerned are likely to increase further the amount of the fine. 285 For those appellants, no attenuating circumstance was found by the Commission and the basic amount could only be adjusted upwards on account of the factors established by the Commission, namely for the duration of the infringement and for certain aggravating circumstances. 286 It follows that the application of the upper limit had the effect that those applicants did not receive the increases which, in principle, would have been payable on account of those aggravating circumstances. 287 Contrary to Dansk Rørindustri’s and LR A/S’s contention, the application of the upper limit referred to in Article 15(2) of Regulation No 17 does not therefore imply that the amount of the fine was calculated solely on the basis of the undertaking’s total turnover. 288 The fact that the final amount of the fine is equal to that upper limit does not mean that it was calculated solely on the basis of that limit but that that amount, which should in principle have been fixed in the light of the gravity and duration of the infringement, was reduced to that limit. 289 LR A/S cannot therefore criticise the Court of First Instance for having contradicted itself in holding, first, that according to the case-law of the Court of Justice, the assessment of the gravity of the infringement when determining the amount of the fine cannot be based on a single factor and, on the other hand, that in the contested decision the amounts of the fines were fixed at the level of the upper limit. 290 The Henss/Isoplus group maintains, with reference to the fifth indent of point 2 of the Guidelines, that the Guidelines introduced a new aggravating circumstance, based on the gains improperly made by a undertaking as a result of the infringement. 291 It submits that that circumstance is not covered by Article 15(2) of Regulation No 17. There is a further danger, that the profit made by the undertaking will be taken into account twice, since it is already taken into consideration in determining the gravity of the infringement. Accordingly, the Guidelines are unlawful on that point, since the Commission was not competent to adopt them. 292 In fact the Court of First Instance was correct to hold at paragraphs 454 to 456 of the judgment in HFB and Others v Commission that it follows from the case-law of the Court of Justice that the profit which the undertakings were able to derive from their practices is one of the factors to be considered in assessing the gravity of the infringement and that taking that factor into account is designed to ensure that the fine is deterrent (see Musique Diffusion française and Others v Commission, paragraph 129). 293 Clearly, therefore, that is a factor that can be taken into consideration in accordance with Article 15(2) of Regulation No 17, irrespective of whether it is expressly mentioned in the Guidelines. 294 The Guidelines provide that account must be taken, as an aggravating circumstance, of the need to increase the penalty in order to exceed the amount of gains improperly made as a result of the infringement, when it is objectively possible to estimate that amount. As the Commission maintained, it follows that where that aggravating circumstance is found to exist the basic amount will be increased where on an objective estimate of such improper gains it can be established that the level of the basic amount is insufficient to neutralise the profit which an undertaking derives from the infringement. 295 In those circumstances, the Guidelines do not entail the inherent risk that the profit will be taken into account twice.296 It follows that the pleas in law must be rejected. (b) The pleas in law alleging breach of the principles of proportionality and equal treatment when determining, in the contested decision, the amount of the fines according to the calculation method provided for in the Guidelines 297 Dansk Rørindustri, the Henss/Isoplus group, KE KELIT, LR A/S, Brugg and LR GmbH criticise the Court of First Instance for having rejected the pleas in law whereby they alleged a breach of the principles of proportionality and, where appropriate, equal treatment when determining, in the contested decision, the amount of the fines according to the calculation method provided for in the Guidelines. 298 Those appellants maintain essentially that, according to the method provided for in the Guidelines, the basic amounts are determined not according to the relevant turnover but in terms of set amounts which are fixed at particularly high levels for undertakings of their size, namely small and medium-sized undertakings, designated in the contested decision as undertakings in the second and third categories. 299 It follows, in their submission, that in the case of such undertakings, the upper limit of 10% of total turnover referred to in Article 15(2) of Regulation No 17 is considerably exceeded at that initial stage of the calculation, so that, unless they are reduced under the Leniency Notice, the fines imposed on them are effectively set at the level of that upper limit and therefore correspond to the maximum amount of the fine. 300 The appellants maintain that that level of the fines imposed on them entails unequal treatment and a breach of the principle of proportionality, which would be particularly manifest if the level of their fines were compared with that of the fine imposed on ABB, the only multinational undertaking operating in the district heating sector and the undisputed ringleader of the cartel, since that fine represents only a very small percentage – in fact 0.36% – of ABB’s total turnover before it was reduced in application of the Leniency Notice. 301 The plea whereby LR A/S seeks to demonstrate a breach of the principles of proportionality and equal treatment must be rejected at the outset as inadmissible, as that breach, in the appellant’s submission, was the consequence of the fact that the maximum amount of the fine was imposed on it in spite of the following attenuating circumstances, which in its view are undisputed: – it was not the ringleader of the cartel;– it was placed under considerable pressure by ABB, a much more powerful undertaking than the appellant. Furthermore, the infringement which LR A/S is alleged to have committed is much less serious than the one alleged to have been committed by ABB; – LR A/S, which achieved only 36.8% of its turnover on the relevant product market, is not an undertaking specialising in a single product; – the cartel was initially confined to Denmark and acquired a Community dimension only during a relatively short period;− there is no evidence that LR A/S profited from the infringements;– there are a number of further attenuating circumstances.302 As thus formulated, this plea seeks a general re-examination of the fine imposed on LR A/S and, to that extent, it is inadmissible in an appeal, in accordance with the case-law referred to at paragraphs 245 and 246 of this judgment. 303 It should also be recalled that, in the context of an appeal, the purpose of review by the Court of Justice is, first, to examine to what extent the Court of First Instance took into consideration, in a legally correct manner, all the essential factors to assess the gravity of particular conduct in the light of Article 85 of the Treaty and Article 15 of Regulation No 17 and, second, to consider whether the Court of First Instance responded to a sufficient legal standard to all the arguments raised by the appellant with a view to having the fine cancelled or reduced, as has already been observed at paragraph 244 of this judgment. 304 At paragraphs 198 to 210 of the judgment in Dansk Rørindustri v Commission, paragraphs 292 to 301 of the judgment in LR AF 1998 v Commission and paragraphs 299 to 305 of the judgment in Lögstör Rör v Commission, the Court of First Instance was able to hold, without making an error susceptible of being called in question in an appeal, that the level of the amount of the fine imposed on the applicants in the second and third categories could not be regarded as entailing unequal treatment, particularly in the light of the level of the fine imposed on ABB. 305 The Court of First Instance arrived at that conclusion following a detailed examination of the method of calculating the fines as followed in the contested decision. 306 In that regard, the Court of First Instance explained that the amounts of the fines were established on the basis of basic amounts, themselves determined by reference to the likely amount of EUR 20 million indicated in the Guidelines for very serious infringements, which were adjusted for all the undertakings concerned according, in particular, to their respective size and to the relative gravity of their participation in the infringement. 307 Thus, the basic amount was fixed at EUR 5 million for Dansk Rørindustri, LR A/S and LR GmbH. The Court of First Instance also emphasised that the basic amount chosen for ABB was increased to EUR 50 million in order to take account of its position as one of the main European groups in the sector concerned. 308 The Court of First Instance further pointed out that the basic amount chosen for ABB, after being increased on account of the duration of the infringement, was increased by a further 50% in order to take account of aggravating circumstances, including the circumstance of having been the ringleader of the cartel. 309 It is also clear that the percentages chosen in that regard for Dansk Rørindustri, LR A/S and LR GmbH were set at considerably lower levels on account of the respective and less important roles which those undertakings had played in the cartel, as is apparent, in particular, from paragraph 306 of the judgment in Lögstör Rör v Commission. 310 At paragraph 210 of the judgment in Dansk Rørindustri v Commission, paragraph 298 of the judgment in LR AF 1998 v Commission and paragraph 304 of the judgment in Lögstör Rör v Commission, the Court of First Instance concluded, without erring in law, that, regard being had to all the relevant factors taken into consideration, the difference between the starting point chosen for Dansk Rørindustri, LR A/S and LR GmbH, on the one hand, and that chosen for ABB, on the other, was objectively justified. 311 The correctness of that conclusion is also reinforced by the multiple weightings applied in the contested decision in respect of the duration of the infringement and the aggravating circumstances, which differ significantly according to the gravity of the participation of each undertaking concerned in the infringement. 312 As the Court of First Instance correctly held, in particular at paragraph 442 of the judgment in HFB and Others v Commission and paragraph 278 of the judgment in LR AF 1998 v Commission, it follows from the principles set out at paragraphs 240 to 243 of this judgment that the Commission is not required, when assessing fines in accordance with the gravity and duration of the infringement in question, to ensure, where fines are imposed on a number of undertakings involved in the same infringement, that the final amounts of the fines resulting from its calculations for the undertakings concerned reflect any distinction between them in terms of their overall turnover or their relevant turnover. 313 The Court of First Instance was therefore correct to reject the objection of illegality raised by the Henss/Isoplus group in so far as that objection was based on the allegation that the Guidelines were illegal owing to a breach of the principle of equal treatment, on account of the fact that the calculation method set out in the Guidelines is not based on the turnover of the undertakings concerned. 314 The plea in law put forward on that point by the Henss/Isoplus group cannot therefore be upheld.315 The Court of First Instance, also correctly, inferred from the principles set out at paragraphs 240 to 243 of this judgment that the Commission could not be criticised for having imposed a starting point which led to a final amount of the fine that, expressed as a percentage of total turnover, was higher than the amount of the fine imposed on ABB. 316 It was essentially on the basis of the same reasoning as that summarised at paragraphs 306 to 310 of this judgment, moreover, that the Court of First Instance, at paragraphs 303 and 304 of the judgment in LR AF 1998 v Commission, rejected the argument that the Commission did not take sufficient account of LR A/S’s relevant turnover, which in that undertaking’s submission had the effect that it received a discriminatory fine by comparison with the fines imposed on the undertakings in the third category. 317 In so far as it is admissible, the plea in law raised on that point by LR A/S cannot therefore be upheld.318 The plea whereby that appellant alleges discrimination by comparison with the undertakings in the fourth category is not admissible in the context of this appeal, since it is apparent from the application which LR A/S lodged before the Court of First Instance that such a plea in law was not raised in that application. 319 On the basis of the reasoning set out at paragraphs 306 to 310, the Court of First Instance was also able, without making any error of law, to hold that the fines thus imposed were not disproportionate. 320 Since, in assessing the proportionate nature of the amount of the fines, the Court of First Instance took into consideration, in a legally correct manner, all the factors essential to assess the gravity of particular conduct in the light of Article 85 of the Treaty and Article 15 of Regulation No 17, and since, moreover, it has not been established that the Court of First Instance did not respond to a sufficient legal standard to all the arguments raised by the appellants with a view to having the fine cancelled or reduced, the arguments whereby they seek to establish that a particular factor was taken into account only insufficiently by the Court of First Instance are inadmissible in an appeal. 321 Dansk Rørindustri and LR GmbH criticise the Court of First Instance for having failed to condemn the contested decision on the ground that the application of the upper limit referred to in Article 15(2) of Regulation No 17 to the final amount of the fine had the consequence that, for certain undertakings including those appellants, adjustments to the basic amount, which were favourable to those undertakings in absolute or relative terms, were not reflected in the final amount, since they were applied to the amount exceeding the upper limit, whereas, for other undertakings involved in the same cartel, such adjustments were actually reflected in the final amount of the fine imposed on them. Such an outcome is, in their submission, contrary to the principle of equal treatment. 322 In that regard, LR GmbH criticises the fact that the relatively short duration of the infringement found in its case by comparison with other undertakings such as ABB was not reflected in the final amount of its fine, whereas the duration of the infringement was reflected in the fines imposed on other undertakings such as Brugg and KE KELIT, so that the final amount of their fines did not have to be reduced to the level of the upper limit referred to in Article 15(2) of Regulation No 17. Dansk Rørindustri criticises the Court of First Instance, in particular, because the reduction in the duration established in its case was not reflected in the final amount of its fine. 323 As indicated at paragraphs 278 to 283 of this judgment, however, such an outcome cannot be criticised on the basis of the principle of equal treatment, since it is merely the consequence of the application of that upper limit to the final amount of the fine, as for those appellants the upper limit in question proved to be exceeded. 324 The Court must also examine three specific complaints alleging breach of the principles of equal treatment and proportionality.325 First of all, in the context of its first plea in law, LR A/S criticises the Court of First Instance for having, at paragraph 308 of the judgment in LR AF 1998 v Commission, rejected its argument that the fine was disproportionate, in so far as the Commission had not taken account of its ability to pay the fine and had thus set the amount of the fine at a level that threatened its survival. 326 That plea cannot be upheld.327 The Court of First Instance correctly held at that paragraph that the Commission is not required, when determining the amount of the fine, to take into account the poor financial situation of an undertaking concerned, since recognition of such an obligation would be tantamount to giving an unjustified competitive advantage to undertakings least well adapted to the market conditions (see, to that effect, Joined Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82 IAZ v Commission [1983] ECR 3369, paragraphs 54 and 55). 328 Next, by its second plea in law, KE KELIT criticises the Court of First Instance for having held, at paragraphs 167, 169 and 170 of the judgment in KE KELIT v Commission, that the Commission could not be criticised for having increased the fine imposed by 10% in order to take account of the duration of the infringement established against it, namely approximately 15 months, when if that duration had been 12 months there would have been no increase for duration. 329 As the appellant’s infringement was of medium duration within the meaning of the second indent of the first paragraph of point 1.B of the Guidelines – an infringement of one to five years, for which the maximum increase may be 50% – the increase due in respect of the three months in excess of one year, for which no additional amount is envisaged, as indicated in the first indent of the first paragraph of point 1.B of the Guidelines, should have been calculated on a linear basis for each month by which the period of one year was exceeded. The proper increase is therefore 1.042% per month, 50% divided by 48 months, or 3.126% for the three months whereby the period of one year was exceeded. 330 That linear approach, in the appellant’s submission, is dictated by the principle of equal treatment, which requires that the differences between undertakings participating in the cartel in terms of the duration of the infringement must be reflected in the amount of the fine. 331 The appellant maintains that the Court of First Instance itself proceeded in that way at paragraphs 214 to 216 of the judgment in Dansk Rørindustri v Commission, in that it reduced the fine by 1% for each month during which it found that the infringement had not been established. 332 The Court of First Instance therefore breached the principle of equal treatment by not adopting the same approach in respect of KE KELIT (see, to that effect, Case C-280/98 P Weig v Commission [2000] ECR I-9757, paragraph 63). 333 That plea in law is unfounded.334 At paragraphs 167 to 171 of the judgment in KE KELIT v Commission, the Court of First Instance held, essentially, that the duration of the infringement established in respect of KE KELIT was not disproportionate on the ground that the Commission had not taken such a linear approach as its basis in the contested decision. 335 As is apparent from paragraphs 170 and 178 of the grounds of the contested decision, to which the Court of First Instance refers at paragraph 170 of the judgment under appeal, the Commission took into account, in respect of all the undertakings, the fact that, first, in the early period the arrangements were incomplete and of limited effect outside the Danish market, second, the arrangements were in abeyance from late 1993 to early 1994 and, third, they reached their most developed form only with the Europe-wide cartel set up in 1994 and 1995. 336 In the light of the wide discretion which the Commission enjoys in setting fines, the Court of First Instance did not err in law when it held that the increase in the fine to reflect the duration of the infringement by KE KELIT was not vitiated by a breach of the principle of equal treatment. 337 As regards KE KELIT’s argument based on the judgment in Dansk Rørindustri v Commission, it does admittedly follow from the case-law of the Court that when the amount of fines is being decided, the exercise of unlimited jurisdiction cannot result in discrimination between undertakings which have participated in an agreement contrary to Article 85(1) of the Treaty and that if the Court of First Instance intended, in the case of one of those undertakings, to depart specifically from the method followed by the Commission, which it had not called in question, it should have given reasons for doing so in the judgment under appeal (see, in particular, Case C-338/00 P Volkswagen v Commission [2003] ECR I-9189, paragraph 146). 338 However, that principle is not applicable in the present case, since it is common ground that the amount of the fine imposed on KE KELIT was not determined by the Court of First Instance in the exercise of its unlimited jurisdiction but by the Commission in the contested decision. 339 Furthermore, it follows from a reading of paragraph 55 together with paragraph 215 of the judgment in Dansk Rørindustri v Commission that the Court of First Instance did not intend to depart from the calculation method followed by the Commission but, on the contrary, sought to satisfy itself that the three factors which it took into account in assessing the duration of the infringement, as set out at paragraph 335 of this judgment, were reflected in the period taken for Dansk Rørindustri. 340 Nor is it established that KE KELIT’s situation is comparable to Dansk Rørindustri’s, since, in particular, KE KELIT was found to have committed an infringement of medium duration within the meaning of point 1 B of the Guidelines, namely one to five years, whereas Dansk Rørindustri was found to have committed an infringement of long duration within the meaning of that provision, namely more than five years. 341 Last, by its fourth plea in law, Brugg criticises paragraphs 149 to 157 of the judgment in BruggRohrsysteme v Commission. 342 It maintains that what in itself was an appropriate ratio of five to one was adopted by the Commission as the specific starting point for the calculation of the fines imposed on the undertakings in the third and fourth categories respectively. 343 However, as the basic amount chosen for undertakings in the third category already exceeded the upper limit of 10% referred to in Article 15(2) of Regulation No 17, that ratio was abandoned as that amount was reduced to the level of the upper limit. 344 It was then necessary, in the appellant’s submission, also to reduce the basic amount of the undertakings in the fourth category, in order to reinstate the ratio of five to one at that stage of the calculation. 345 That plea must be rejected.346 The Court of First Instance was correct to reject that plea on the ground, set out at paragraph 155 of the judgment in BruggRohrsysteme v Commission, that the fact that the starting point taken into account for undertakings in the third category resulted in amounts that had to be reduced in order to take the limit of 10% of turnover provided for in Article 15 of Regulation No 17 into consideration, when no such reduction was necessary for undertakings in the fourth category, could not be considered discriminatory. That difference in treatment is merely the direct consequence of the maximum limit placed on fines by that regulation, the lawfulness of which has not been called in question and which clearly applies only where the amount of the fine envisaged would have exceeded 10% of the turnover of the undertaking concerned, as stated at paragraphs 278 to 283 of this judgment. 347 It follows from all of the foregoing that the pleas put forward by the appellants alleging breach of the principles of proportionality and of equal treatment must be rejected in their entirety. (c) The pleas in law whereby the Henss/Isoplus group alleges breach of the rights of the defence in the assessment of the aggravating circumstances 348 By the third part of its first plea in law, the Henss/Isoplus group criticises the Court of First Instance for having erred in law in rejecting, at paragraphs 474 to 481 of the judgment in HFB and Others v Commission, the objection of illegality raised against the Guidelines and, in particular, the second indent of point 2 of the Guidelines, which provides for an increase in the basic amount for ‘aggravating circumstances such as: … refusal to cooperate with or attempts to obstruct the Commission in carrying out its investigations’. 349 The appellant contends that, on that point, the Guidelines entail a breach of the rights of the defence and must therefore be declared inapplicable to it, since that aggravating circumstance would apply immediately an undertaking exercised its rights of defence, in particular if it refuses, in accordance with the case-law, to provide information within the meaning of Article 11 of Regulation No 17, on the ground that the information would help to incriminate it. 350 That complaint cannot be upheld.351 As the Court of First Instance correctly recalled at paragraph 478 of the judgment in HFB and Others v Commission, the conduct of the undertaking during the administrative procedure may be one of the factors to be taken into account when fixing the fine (see, in particular, Case C-298/98 P Finnboard v Commission [2000] ECR I-10157, paragraph 56). 352 As is clear from paragraph 478 of that judgment, the second indent of point 2 of the Guidelines must be taken to mean that an undertaking which disputes the Commission’s position and limits its cooperation to that which is required under Regulation No 17 will not, on that ground, have an increased fine imposed on it (see Finnboard v Commission, cited above, paragraph 58). 353 Accordingly, the aggravating circumstance consisting in the refusal to cooperate with or attempts to obstruct the Commission in carrying out its investigations cannot be applied where the undertaking concerned is merely exercising its rights of defence. 354 By the second part of its third plea in law, moreover, the Henss/Isoplus group criticises the Court of First Instance for having erred in law in holding, at paragraphs 555 to 565 of the judgment in HFB and Others v Commission, that its fundamental right to defend itself was not infringed on account of the fact that the Commission took as an aggravating circumstance the fact that the appellant attempted to deceive it about the actual relationships between the undertakings of that group. 355 The appellant maintains that the Court of First Instance was wrong to hold that the Commission was entitled to criticise it for having disputed the existence of relationships governed by company law and for not having disclosed strictly confidential fiduciary relationships between different companies. 356 In so doing, the Henss/Isoplus group was, it contends, merely exercising its right to defend itself, so that those facts could not be held against it as aggravating circumstances by the Commission. 357 That argument proceeds from a misreading of paragraphs 556 to 560 of the judgment under appeal.358 In those paragraphs, the Court of First Instance held that the Henss/Isoplus group did not confine itself during the administrative procedure to disputing the findings of fact and the legal position adopted by the Commission, but supplied the Commission with incomplete and partly inaccurate information. 359 The Court of First Instance arrived at that conclusion following what was in principle a sovereign assessment of the evidence before it and, in particular, in the light of an examination of the answers to the requests for information and also of the Henss/Isoplus group’s observations on the statement of objections. 360 Contrary to the appellant’s suggestion, moreover, paragraph 557 of the judgment in HFB and Others v Commission does not mean that the Court of First Instance found that the request for information under Article 11 of Regulation No 17 which was sent to the appellant contained a question relating specifically to the fiduciary relationships between the undertakings in the group, relationships of which the Commission was not required and indeed was not able to know. 361 On the contrary, the Court of First Instance merely found that, in answer to a more general question asking the undertaking concerned to provide full details of the meetings held with the competing companies and, in particular, as regards the participants in those meetings, their names, undertakings and positions, that undertaking provided certain incomplete and partly inaccurate information. 362 Clearly, therefore, there is no contradiction on that point between that finding and the case-file. Accordingly, the procedural defect alleged in that regard by the Henss/Isoplus group as part of its seventh plea in law must be rejected. 363 In the light of all of the foregoing, the pleas in law whereby the Henss/Isoplus group alleges a breach of the rights of the defence in the assessment of the aggravating circumstances must be rejected. (d) The plea in law whereby LR A/S alleges failure to take attenuating circumstances into account364 By its third plea in law, LR A/S criticises the Court of First Instance for having held, at paragraphs 336 to 346 of the judgment in LR AF 1998 v Commission, that the Commission was entitled to take the view that no attenuating circumstance should be recognised in its case. 365 On that point, LR A/S maintains, first, that it should have been given a reduction on account of the following attenuating circumstances: – its subordinate position in relation to ABB, the largest operator and the only multinational group in the district heating sector, as well as the ringleader of the cartel; – the economic pressure brought to bear on LR A/S by ABB to take part in the cartel and to implement the cartel’s decisions;– the fact that ABB’s alleged infringements were much more serious than those found against LR A/S.366 In fact, the Court of First Instance was correct to hold, at paragraph 338 of the judgment under appeal, that the fact that the applicant was a medium-sized undertaking did not constitute an attenuating circumstance. 367 As regards, more particularly, its position in relation to ABB, LR A/S claims that, contrary to the finding made by the Court of First Instance at paragraph 339 of the judgment under appeal, the requirement to determine the amount of the fine imposed on it on the basis of all the relevant individual factors required that the pressure brought to bear by ABB on the other undertakings participating in the cartel, such as LR A/S, should be reflected in a downwards adjustment of its own fine and not merely in an upwards adjustment of ABB’s fine. 368 Nor, in the appellant’s submission, does the latter adjustment reflect any differences between LR A/S’s position and that of other undertakings which were not, or were to a lesser degree, subject to such pressure, and leads to systematic discrimination against LR A/S by comparison with those undertakings. 369 However, the Court of First Instance cannot be criticised for having rejected that complaint, on the ground that LR A/S could have reported the pressure to the competent authorities and lodged a complaint with the Commission under Article 3 of Regulation No 17 rather than participate in the cartel. 370 The existence of such pressure does nothing to alter the reality and the gravity of the infringement committed by LR A/S.371 Last, LR A/S disputes paragraph 345 of the judgment in LR AF 1998 v Commission, in which the Court of First Instance held that the fact that the appellant set up a compliance programme could not be regarded as an attenuating circumstance leading to a reduction in the fine. In the appellant’s submission, the Court of First Instance thus failed to have regard to a well-established practice. 372 That argument cannot be accepted.373 The Court of First Instance did not err in law in holding at paragraph 345 of the judgment that although it was important that LR A/S had taken measures to prevent future infringements of Community competition law by its personnel, that fact did not alter the reality of the infringement found in the present case. The Court of First Instance was correct to hold that that fact did not in itself mean that the Commission was obliged to reduce the appellant’s fine on account of an attenuating circumstance. 374 In the light of the foregoing, the plea in law under consideration must be rejected. (e) The pleas whereby the Henss/Isoplus group and LR A/S allege failure to take into account, or to take sufficiently into account, their cooperation during the administrative procedure 375 By the first part of its third plea in law, the Henss/Isoplus group criticises the Court of First Instance for having held, at paragraphs 607 to 623 of the judgment in HFB and Others v Commission, that the Commission was correct to refuse to reduce its fine under the Leniency Notice and that, accordingly, the Commission did not infringe Article 15(2) of Regulation No 17 on that point. 376 In that regard, the Henss/Isoplus group complains that the Court of First Instance, first, held at paragraphs 609 and 610 of the judgment under appeal that the Commission was correct to refuse to reduce its fine under the sixth indent of point 3 of the Guidelines, on the ground that such a reduction assumes that the infringement in question does not fall within the scope of the Leniency Notice, whereas a cartel comparable to that in question clearly falls within the scope of that notice, as described in Section A, point 1, of that notice. 377 The appellant submits that Section A, point 1, does not indicate that the notice applies only to such infringements.378 Nor does it follow from the Leniency Notice that the Commission could take account of admissions or cooperation in part only on the basis of that notice. Such a restrictive interpretation is in any event, in the appellant’s contention, contrary to Article 6 of the ECHR and to the principle of the presumption of innocence as a general principle of Community law. 379 The Henss/Isoplus group’s argument on that point is based on a misreading of paragraphs 609 and 610 of the judgment under appeal. 380 On the basis of an interpretation of the sixth indent of point 3 of the Guidelines which, moreover, reveals no error in law, the Court of First Instance merely held that the specific attenuating circumstance referred to in that indent applies only to infringements which do not fall within the scope of the Leniency Notice. 381 As the Court of First Instance asserts, there is no dispute that there was a cartel in this case and, consequently, there was an infringement which does indeed fall within the scope of that notice. 382 Accordingly, the Court of First Instance was correct to conclude that the Commission could not be criticised for not having taken the appellant’s cooperation into account on the basis of that attenuating circumstance. 383 The Henss/Isoplus group then maintains that the final sentence of paragraph 615 of the judgment under appeal is vitiated by a procedural defect in so far as the case-file indicates that, in their response to the statement of objections, all the companies belonging to that group acknowledged having participated in the cartel on a Community-wide scale from late 1994 to early 1996. 384 By that complaint, the appellant essentially criticises the Court of First Instance for having held that in their observations on the statement of objections the companies of the group did not dispute having participated in the cartel only in respect of the period before October 1994 but disputed their participation throughout the entire period of the infringement. 385 The line of argument developed in that regard by the Henss/Isoplus group before the Court does not serve to establish that, on that point, the Court of First Instance misunderstood the scope of the response to the statement of objections by interpreting it as meaning that, in that document, the group of companies concerned disputed their participation in the cartel throughout the entire period of its existence. 386 Accordingly, it does not follow from the documents on the file that the Court of First Instance’s findings are factually incorrect.387 The Henss/Isoplus group claims, last, that, contrary to what the Court of First Instance held, the Commission was required under Section D of the Leniency Notice to grant it a significant reduction in its fine. 388 The appellant submits that, unlike Sections B and C of the notice, in order to obtain a reduction under Section D the undertaking concerned is not required to give permanent and total cooperation, but is required merely, before a statement of objections is sent, to provide information, documents or other evidence which materially contribute to establishing the existence of the infringement. 389 It maintains that both the Court of First Instance, at paragraph 617 of the judgment in HFB and Others v Commission, and the Commission, at the hearing and at points 110 and 180 of the grounds of the contested decision, acknowledged that the appellants’ cooperation and admissions, although only partial, satisfied in principle the conditions for the application of the first indent of Section D, point 2, of the Leniency Notice. 390 The Henss/Isoplus group contends that it could not be refused that reduction on the ground of aggravating circumstances or of the fact that it refrained, in the exercise of its rights of defence, to disclose certain information to the Commission, that it provided the Commission with incorrect information or that it disputed certain facts. 391 That complaint must be rejected.392 Admittedly, as the appellant observes, it follows from paragraph 617 of the judgment in HFB and Others v Commission that the Court of First Instance acknowledged that the appellant had cooperated, albeit not decisively, and made admissions, although only partial. 393 However, the Court of First Instance was correct, and made no error of law capable of being condemned on appeal, to hold that the information provided by the applicant and capable, in principle, of coming within situations permitting a reduction in the fine under Section D, point 2, of the Leniency Notice, would not necessarily have had to induce the Commission to grant the applicant a reduction under that notice. 394 The Commission has a discretion in that regard, as may be seen from the very wording of that point and, in particular, from the introductory words ‘Such cases may include …’. 395 Furthermore, and above all, a reduction under the Leniency Notice can be justified only where the information provided and, more generally, the conduct of the undertaking concerned might be considered to demonstrate genuine cooperation on its part. 396 It is clear from the very concept of cooperation, as described in the Leniency Notice, and in particular in the introduction to Section D, point 1, that it is only where the conduct of the undertaking concerned reveals such a spirit of cooperation that a reduction may be granted on the basis of that notice. 397 As the Court of First Instance found, at paragraphs 618 and 622 of the judgment under appeal, in the present case, by providing incomplete and in part inaccurate information, the Henss/Isoplus group could not claim that its conduct had been of that type. 398 Contrary to the appellant’s contention, the Court of First Instance did not breach what the appellant alleges to be the criminal-law principle that an admission, even where it is only a partial admission, must necessarily lead to a reduction in the fine, nor did it breach the rights of the defence or the principle non bis in idem. 399 As regards a reduction in the amount of the fine designed to reward an undertaking for a contribution during the administrative procedure which enabled the Commission to establish an infringement with less difficulty and, where appropriate, to put an end to that infringement, it would be absurd, as the Commission contends, if the latter were required to grant such a reduction where the contribution in question does not enable it to attain that objective, but, on the contrary, even prevented it from doing so. 400 As the Court has already held at paragraphs 358 to 362 of this judgment, the Henss/Isoplus group cannot claim in a situation such as this that its rights of defence were infringed. 401 The appellant was not required to cooperate or to make any admission. Furthermore, the rights of the defence do not entail a right to be able to communicate incomplete and partly inaccurate information. 402 Nor can a breach of the principle non bis in idem be established, if it was based on the fact that the conduct in question has already been taken into account as an aggravating circumstance. 403 The fact that an undertaking is not rewarded for cooperation which did not allow the Commission to establish an infringement with less difficulty and, where appropriate, to put an end to it cannot be classified as a sanction additional to the punishment consisting in recognition of an aggravating circumstance. 404 By its fourth plea in law, LR A/S claims that paragraphs 359 to 370 of the judgment in LR AF 1998 v Commission are vitiated by an error of law in that the Court of First Instance approved the level of the reduction in the fine granted by the Commission in respect of the appellant’s cooperation during the administrative procedure, namely 30%, whereas the appellant claims that it was entitled to a greater reduction for cooperation. 405 First, as already held at paragraphs 191 to 196 of the present judgment in response to the appellant’s second plea in law, the appellant could not rely on any legitimate expectation in what it alleged to have been the Commission’s practice in taking decisions at the time when it cooperated and which would in this instance have been more advantageous than the Leniency Notice. 406 Accordingly, in so far as the fourth plea in law raised by LR A/S seeks to challenge paragraphs 361 and 366 of the judgment at first instance on the same basis, it must be rejected. 407 LR A/S maintains, second, that it should have been granted a greater reduction on account of the fact that it was the first undertaking to cooperate with the Commission, which in its submission led other undertakings to follow suit. 408 In that regard, it is sufficient to point out that, at paragraphs 363 to 365 of the judgment under appeal, the Court of First Instance held, following a sovereign assessment of elements of fact, that the amount of the reduction granted to LR A/S for cooperation was appropriate, particularly since it follows from the contested decision that the Commission was not prepared to grant a reduction of 50% of the fine to undertakings which had not communicated information to it before receiving a request for information and since it is common ground that the appellant communicated documents to the Commission only after receiving such a request. 409 Third, LR A/S criticises the Court of First Instance for having rejected, at paragraph 368 of the judgment, its argument that it ought not to have been fined in respect of the period after the dawn raids, since it was the first undertaking to reveal that the cartel had continued after the Commission’s dawn raids. 410 The ground stated by the Court of First Instance at paragraph 368 of the judgment under appeal, namely that the infringement, and therefore the reduction, must be considered as a whole when assessing cooperation, is not decisive and does not preclude a greater reduction. 411 In that regard, the Court of First Instance held, without making any error of law susceptible of being condemned on appeal, that the fact that the cartel continued after the dawn raids was an aspect indissociable from the infringement and that the infringement could only be considered as a whole when applying the Leniency Notice. 412 As regards the amount of the reduction, which LR A/S challenges, the Court of First Instance’s reasoning at paragraph 368 of the judgment in LR AF 1998 v Commission, which was based on the Leniency Notice, is not vitiated by any error of law as regards the interpretation of that notice. This complaint cannot therefore be upheld. 413 LR A/S claims, fourth, that in holding at paragraphs 240 to 245 of the judgment in ABB Asea Brown Boveri v Commission that ABB should receive a reduction of more than 30% on account of the fact that it, unlike, in particular, the appellant, did not contest the truth of the main facts after receiving the statement of objections, the Court of First Instance penalised LR A/S merely for exercising its rights of defence. The Court of First Instance therefore infringed fundamental principles as established, in particular, by Article 6 of the ECHR and, in addition, discriminated against the appellant. 414 In fact, it follows from paragraph 243 of the judgment in ABB Asea Brown Boveri v Commission that the Court of First Instance, referring to the second paragraph of point 26 and the fifth paragraph of point 27 of the grounds of the contested decision, held that, unlike ABB, LR A/S claimed that there had been no cartel outside the Danish market before 1994 and that, in addition, there had been no continuous cartel. LR A/S also denied having participated in or implemented any action designed to eliminate Powerpipe. 415 In those circumstances, the Court of First Instance cannot be held to have subjected LR A/S to any discriminatory treatment by comparison with ABB. 416 Contrary to its contention, LR A/S was not penalised by comparison with ABB merely for having exercised its rights of defence.417 In this particular case, ABB, unlike the other undertakings such as LR A/S, chose to waive the right to dispute the main facts described by the Commission and also the conclusions which it reached and, in that regard, fully cooperated with the Commission in order to be able to benefit from a further reduction in its fine. 418 Thus ABB exercised a free choice and the Commission treated it favourably.419 That route was also open to LR A/S. It does not follow that, because LR A/S was not granted a further reduction, on the ground that it had decided not to follow that route, it was forced to testify under threat of a penalty, contrary to Article 6 of the ECHR, or that it was penalised merely for exercising its rights of defence. 420 In the light of all of the foregoing, the fourth plea in law raised by LR A/S must be rejected in its entirety. D – Pleas in law relating to the right to be heard and the obligation to state reasons 1. Pleas in law alleging breach of the right to be heard421 By their respective pleas in law, Dansk Rørindustri (third plea), the Henss/Isoplus group (first two pleas), KE KELIT (fourth plea), Brugg (third plea) and LR GmbH (fourth plea) criticise the Court of First Instance for having rejected their pleas alleging breach of the right to be heard on account of the fact that, during the administrative procedure and in particular in response to the statement of objections, they were unable to present their views on the question of what they alleged to be the retroactive application of the Guidelines in the present case, in so far as the Commission did not at any point in the administrative procedure indicate that it intended to apply the Guidelines. 422 It must be held at the outset that, as the Commission correctly contended, the plea in law put forward by Dansk Rørindustri in that regard was not raised before the Court of First Instance and is therefore a new plea and as such is inadmissible in an appeal. 423 In its reply, Dansk Rørindustri maintains that it is not a fresh plea, since it can be inferred by implication from the pleas in law and arguments which it put forward before the Court of First Instance in connection with the setting of the fine. 424 However, it follows from the file transmitted by the Court of First Instance that Dansk Rørindustri did not raise the plea relating to the right to be heard, either in the application or in the reply, in support of one of the other pleas in law which it raised at first instance. 425 It must be emphasised, moreover, on that point that the appeal does not indicate or permit the identification of the paragraphs or the part of the judgment under appeal which are criticised. 426 It must be borne in mind that, according to consistent case-law, it follows from Article 168a of the EC Treaty (now Article 225 EC), the first paragraph of Article 51 of the EC Statute of the Court of Justice and Article 112(1)(c) of the Rules of Procedure of the Court of Justice that an appeal must state precisely the contested elements of the judgment which the appellant seeks to have set aside and also the legal arguments specifically advanced in support of the appeal, failing which the appeal or plea concerned is inadmissible (see, inter alia, Limburgse Vinyl Maatschappij and Others v Commission, paragraph 497 and the case-law cited). 427 As regards the pleas in law advanced on that point by the Henss/Isoplus group, KE KELIT, Brugg and LR GmbH, apart from some aspects specific to those appellants which will be dealt with below in so far as they are criticised in this appeal, the Court of First Instance essentially rejected them on the same grounds, at paragraphs 310 to 322 of the judgment in HFB and Others v Commission, paragraphs 75 to 89 of the judgment in KE KELIT v Commission, paragraphs 82 to 98 of the judgment in BruggRohrsysteme v Commission and paragraphs 192 to 206 of the judgment in Lögstör Rör v Commission. 428 In those judgments, the Court of First Instance first of all correctly observed that, according to a consistent line of decisions of the Court of Justice, provided that the Commission indicates expressly in the statement of objections that it will consider whether it is appropriate to impose fines on the undertakings concerned and that it sets out the principal elements of fact and of law that may give rise to a fine, such as the gravity and the duration of the alleged infringement and the fact that it has been committed ‘intentionally or negligently’, it fulfils its obligation to respect the undertakings’ right to be heard. The Court of First Instance also correctly held that, in doing so, it provides them with the necessary elements to defend themselves not only against a finding of infringement but also against the fact of being fined (see, to that effect, in particular, Musique Diffusion française and Others v Commission, paragraph 21). 429 The Court of First Instance then held that, for each of those appellants, examination of the statement of objections revealed that it contained elements of fact and of law on which the Commission intended to base the calculation of the amount of the fine to be imposed on the undertakings concerned and concluded that, in that regard, their right to be heard had been properly respected. 430 As regards an assessment of the evidence, namely the statement of objections of each of those appellants, review by the Court at the stage of the appeal is limited to cases where that evidence has been distorted (see, in particular, Mag Instrument v OHIM, paragraph 39). 431 The arguments put forward by the Henss/Isoplus group, KE KELIT, Brugg and LR GmbH do not seek to demonstrate such distortion, so that that part of the judgments under appeal cannot be criticised. 432 Those appellants maintain that the Court of First Instance erred in law in holding that the statement of objections sent to each of the appellants concerned contained sufficient evidence for the right to be heard to be respected and that it followed that, in this case, respect for that right did not require more and that, accordingly, the Commission was not required to inform the appellants during the administrative procedure that it intended to apply a new method of calculating the fines. 433 The appellants concerned claim, in essence, that in this case the intention to apply the Guidelines should have been mentioned during the administrative procedure, since those rules brought about a fundamental reform of the method of calculating fines and since, moreover, they were to be applied retroactively. In those circumstances, that information constituted an element necessary to the defence of those appellants on the question of the calculation of the amount of the fines. 434 In that regard, the Court of First Instance was correct to observe that, according to a consistent line of decisions of the Court of Justice, to give indications of the level of the contemplated fines, when the undertakings have not been in a position to put forward their observations on the objections held against them, would be tantamount to anticipate inappropriately the Commission’s decision (see Musique Diffusion française and Others v Commission, paragraph 21, and Michelin v Commission, paragraph 19). 435 The Court of First Instance further held, also correctly, that according to that same line of decisions the Commission was not required to indicate in the statement of objections the possibility that it might change its policy as regards the level of the amount of the fines, a possibility which depends on general competition policy considerations with no direct bearing on the particular circumstances of the cases in question (see Musique Diffusion française and Others v Commission, paragraph 22). 436 It does appear, admittedly, that the Guidelines contain a new method of calculating the amount of fines which introduces a significant reform in that regard, in particular as regards the tariffication, albeit relative and flexible, of the basic amounts which they provide for as the starting points for the calculation. 437 However, it is clear from the rejection of the complaints relating to the alleged illegality of the Guidelines, as held at paragraphs 250 to 253 of this judgment that that new method is founded on the imperative criteria of the gravity and the duration of the infringement provided for in Article 15(2) of Regulation No 17 in that it consists essentially in specifying the way in which the Commission proposes to employ those criteria when determining the amount of the fines. 438 It is true that the Guidelines contain important details on that point and that it may be desirable that the Commission should provide the undertakings with those details, provided that that does not mean that it anticipates its decision in an inappropriate manner. 439 The fact remains that, as the Court of First Instance correctly held, the right to be heard in respect of the calculation of the amount of the fines does not cover the way in which the Commission proposes to employ the imperative criteria of the gravity and the duration of the infringement when determining the amount of the fines. 440 As regards the appellants’ argument that they were entitled to be heard in respect of the Commission’s intention to apply the Guidelines retroactively, it must be emphasised that, as held at paragraph 231 of this judgment, the new calculation method set out in the Guidelines was reasonably foreseeable for the undertakings concerned at the time when the infringements concerned were committed. In those circumstances, the appellants cannot rely on the right to be heard in respect of the retroactive application of the Guidelines. This complaint must therefore also be rejected. 441 It is appropriate to deal next with the few specific arguments advanced by certain appellants in support of the pleas in law whereby they allege breach of the right to be heard. 442 The Henss/Isoplus group criticises the Court of First Instance for having stated, at paragraph 312 of the judgment in HFB and Others v Commission, that, as regards the determination of the amount of the fines, the undertakings have an additional guarantee as regards their rights of defence, in so far as the Court of First Instance adjudicates with unlimited jurisdiction and may, inter alia, cancel or reduce the fine under Article 17 of Regulation No 17. 443 The Henss/Isoplus group claims that it is entitled, under that regulation, to two levels of unlimited jurisdiction, namely before the Commission and before the Court of First Instance, and cannot therefore be deprived of one of those tiers by the breach of the right to be heard in respect of the calculation of the fine. It maintains that a breach of the rights of the defence at the stage of the administrative procedure cannot be made good during the procedure before the Court of First Instance. 444 That complaint is unfounded.445 As the Commission has observed, at paragraph 312 of the judgment in HFB and Others v Commission the Court of First Instance merely held, correctly, that its unlimited jurisdiction in regard to fines constitutes an additional guarantee. Contrary to the Henss/Isoplus group’s contention, it neither held nor suggested that this entailed replacing the tier consisting in the administrative procedure before the Commission and allowing the Court of First Instance to make good any breach of the rights of the defence during such a procedure. 446 The appellant further maintains that the Court of First Instance erred in law in rejecting its first plea in law, alleging breach of the right to be heard, since, in particular, the aggravating circumstance provided for in the second indent of Section 2 of the Guidelines – namely refusal to cooperate with or attempts to obstruct the Commission in carrying out its investigations – was established in its case without its having been informed of the Commission’s intention to proceed in that manner and, consequently, without the appellant’s having been heard on that point. 447 In that regard, it is sufficient to hold that that argument cannot be upheld, since it is apparent from the case-file that that circumstance clearly cannot form the subject-matter of the statement of objections, as it came about during that stage of the administrative procedure, namely in the response to the statement of objections lodged by the Henss/Isoplus group, and continued thereafter. 448 Brugg criticises the Court of First Instance for having rejected, at paragraph 97 of the judgment in BruggRohrsysteme v Commission, its argument that at the hearing the Commission gave it to understand that the fine would be determined on the basis of its relevant turnover. As the Court of First Instance observed at the same paragraph, the Commission expressly requested Brugg to confirm that turnover at the hearing. At no time, in Brugg’s contention, did the Commission indicate that it would base its decision on the Guidelines. 449 In that regard, it is sufficient to state that by that complaint the appellant seeks to call in question, by means of a mere assertion, an assessment of the facts by the Court of First Instance, which, subject to any distortion of the evidence, is not a question of law amenable, as such, to review by the Court. 450 Since the appellant does not put forward any argument capable of establishing any distortion of the evidence in question, as examined at paragraphs 94 to 97 of the judgment in Brugg Rohrsysteme v Commission, that complaint must be rejected. 2. The pleas in law alleging breach of the obligation to state reasons in respect of the calculation of the fines451 By their respective pleas in law, KE KELIT (fifth plea in law), LR A/S (second plea in law) and LR GmbH (third plea in law) criticise the Court of First Instance for having held, at paragraph 205 of the judgment in KE KELIT v Commission, paragraph 390 of the judgment in LR AF 1998 v Commission and paragraph 374 of the judgment in Lögstör Rör v Commission, that the Commission was not required to explain in the contested decision whether and for what reasons it was applying the Guidelines. 452 KE KELIT and LR GmbH claim that, owing to the significance of the changes made by the Guidelines to the method of calculating the amount of the fines, the reasons for that change and for the retroactive application of the Guidelines in the present case should have been specifically explained in the contested decision. LR A/S maintains that the decision ought to have stated the reasons for the retroactive application of the Guidelines and of the Leniency Notice. 453 In that regard, it must be borne in mind, first of all, that according to the case-law of the Court, the extent of the obligation to state reasons is a question of law reviewable by the Court on appeal, since a review of the legality of a decision carried out in that context must necessarily take into consideration the facts on which the Court of First Instance based itself in reaching its conclusion as to the adequacy or inadequacy of the statement of reasons (see to that effect Case C-188/96 P Commission v V [1997] ECR I-6561, paragraph 24). 454 As regards the appellants’ complaint that the contested decision should have stated the reasons for the retroactive application of the Guidelines, it must be borne in mind that it was held at paragraph 231 of this judgment that the new method of calculation set out in the Guidelines was reasonably foreseeable for the undertakings concerned at the time when the infringements were committed. In those circumstances, the retroactive application of the Guidelines did not require a specific statement of reasons. This complaint must therefore also be rejected. 455 As regards the plea in law whereby LR A/S alleges breach of the obligation to state reasons for the retroactive application of the Leniency Notice, that too must be rejected. 456 For the same reasons as those set out at paragraphs 227 to 231 of this judgment, even on the assumption that it did have the effect of raising the level of the fines imposed, the Leniency Notice was reasonably foreseeable for undertakings such as the appellant at the time when the infringements concerned were committed, so that the application of the notice to infringements committed before it was adopted did not breach the principle of non-retroactivity. 457 Accordingly, the contested decision was not required to state the reasons for the retroactive application of the Leniency Notice. 458 In the three judgments in KE KELIT v Commission, LR AF 1998 v Commission and Lögstör Rör v Commission, the Court of First Instance is not to be criticised for not having explained the legal framework applying to the present case, in particular the application of the Guidelines. 459 It also follows from the judgments under appeal, and in particular from paragraph 209 of LR AF 1998 v Commission, that the Commission did not at any time state that it intended to apply the Guidelines. 460 It is apparent from reading the contested decision that it contains no express reference to the Guidelines.461 It must be borne in mind that the Guidelines constitute rules of conduct of general application which the Commission is in principle required to apply. It follows that the lawfulness of a decision applying the Guidelines, such as the contested decision, may be appraised in the light of the Guidelines, as held at paragraph 211 of this judgment. 462 According to a consistent body of case-law, the purpose of the obligation to state reasons is to enable the Court to review the legality of the decision and to provide the person concerned with sufficient information to make it possible to ascertain whether the decision is well founded or whether it is vitiated by a defect which may permit its legality to be contested (see, in particular, Case C-199/99 P Corus UK v Commission [2003] ECR I-11177, paragraph 145). 463 The statement of reasons must in principle be notified to the person concerned at the same time as the decision adversely affecting him and a failure to state the reasons cannot be remedied by the fact that the person concerned learns the reasons for the decision during the proceedings before the Court (Case 195/80 Michel v Parliament [1981] ECR 2861, paragraph 22). 464 It follows that it must be ascertained whether, at the time of the adoption of the contested decision, the undertakings knew with sufficient certainty that the calculation of the amount of the fines had been made on the basis of the new calculation method provided for in the Guidelines in order to be able, where appropriate, to challenge the lawfulness of that decision from the aspect of those Guidelines. 465 In the judgments under appeal, the Court of First Instance held, correctly, that the requirement to state reasons is, inter alia, a function of the context and of the whole body of rules governing the matter in question. It inferred that the Commission was not required to explain whether and for what reasons it was applying the Guidelines in the present case, since the introduction to the Guidelines states that ‘[t]he new method of determining the amount of a fine will adhere to the following rules’. The Commission thus undertook to apply the Guidelines when determining the amount of fines for infringement of the competition rules. 466 It must be held, however, that the passage from the introduction to the Guidelines cited in the preceding paragraph does not establish clearly and unambiguously that it is intended to determine the scope of the Guidelines ratione temporis, so that it covers infringements, such as those in the present case, which took place before the Guidelines were adopted. 467 At the very least, the Court of First Instance observed at paragraph 375 of the judgment in Lögstör Rör v Commission that, in any event, in the grounds of the contested decision relating to the application of Article 15(2) of Regulation No 17, in particular at points 163 to 168 of that decision, the Commission expressly set out considerations on the calculation of the amount of the fine analogous to those contained in the grounds of the Guidelines. 468 An examination of all the grounds of the contested decision relating to the calculation of the amount of the fine, namely points 168 to 183, confirms that the decision could reasonably be taken by the undertakings in question to contain an application as regards the Guidelines and the new calculation method provided for therein. 469 In those circumstances, the Court of First Instance was able to conclude that the contested decision contained a sufficient statement of reasons. 470 Accordingly, the pleas in law whereby KE KELIT, LR A/S and LR GmbH allege a breach of the obligation to state reasons in respect of the calculation of the fines must be rejected. VII – Costs 471 Under Article 69(2) of the Rules of Procedure, which applies to the appeal by virtue of Article 118 of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. As the Commission has applied for costs and Dansk Rørindustri, the Henss/Isoplus group, KE KELIT, LR A/S, Brugg, LR GmbH and ABB have been unsuccessful, they must be ordered to pay the costs. On those grounds, the Court (Grand Chamber) hereby:1. Joins Cases C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P for the purposes of the judgment;2. Dismisses the appeals;3. Orders Dansk Rørindustri A/S, Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH, Isoplus Fernwärmetechnik Gesellschaft mbH, Isoplus Fernwärmetechnik GmbH, KE KELIT Kunststoffwerk GmbH, LR af 1998 A/S, Brugg Rohrsysteme GmbH, LR af 1998 (Deutschland) GmbH and ABB Asea Brown Boveri Ltd to pay the costs.[Signatures]* Languages of the case: Danish, German and English. | 43940-72a7edc-44cb | EN |
THE COURT OF JUSTICE CONFIRMS THAT THE PRINCIPLE THAT NATIONAL LAW MUST BE INTERPRETED IN CONFORMITY WITH COMMUNITY LAW APPLIES IN THE AREA OF POLICE AND JUDICIAL COOPERATION IN CRIMINAL MATTERS | Criminal proceedings against Maria Pupino(Reference for a preliminary ruling by the judge in charge of preliminary enquiries at the Tribunale di Firenze)(Police and judicial cooperation in criminal matters – Articles 34 EU and 35 EU – Framework Decision 2001/220/JHA – Standing of victims in criminal proceedings – Protection of vulnerable persons – Hearing of minors as witnesses – Effects of a framework decision)Opinion of Advocate General Kokott delivered on 11 November 2004 Judgment of the Court (Grand Chamber), 16 June 2005 Summary of the Judgment1. Preliminary rulings — Reference to the Court of Justice — National court or tribunal for the purposes of Article 35 EU — Definition — Judge in charge of preliminary enquiries — Included(Art. 35 EU)2. Preliminary rulings — Jurisdiction of the Court of Justice — Police and judicial cooperation in criminal matters — Framework decision for the approximation of laws — Request for interpretation involving the principle of interpretation in conformity with national law — Jurisdiction to provide that interpretation(Art. 234 EC; Arts 35 EU and 46(b) EU)3. European Union — Police and judicial cooperation in criminal matters — Member States — Obligations — Duty of loyal cooperation with the institutions4. European Union — Police and judicial cooperation in criminal matters — Framework decisions for the approximation of national laws — Implementation by Member States — Duty to interpret in conformity with national law — Limits — Compliance with general principles of law — Interpretation of national law contra legem — Not permissible(Art. 249(3) EC; Art. 34(2)(b) EU)5. European Union — Police and judicial cooperation in criminal matters — Status of victims in criminal proceedings — Framework Decision 2001/220 — Protection of particularly vulnerable victims — Arrangements — Conditions for hearing evidence of young children — Hearing outside the trial and before it takes place — Whether permissible — Limits(Council Framework Decision 2001/220/JHA, Arts 2, 3 and 8(4))1. Where a Member State has indicated that it accepts the jurisdiction of the Court of Justice to rule on the validity and interpretation of the acts referred to in Article 35 EU, the Court of Justice has jurisdiction to give a preliminary ruling on a question from a judge in charge of preliminary enquiries. Where acting in criminal proceedings, that judge acts in a judicial capacity, so that he must be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 35 EU. (see paras 20, 22)2. Under Article 46(b) EU, the system under Article 234 EC is capable of being applied to Article 35 EU, subject to the conditions laid down by that provision. Like Article 234 EC, Article 35 EU makes reference to the Court of Justice for a preliminary ruling subject to the condition that the national court ‘considers that a decision on the question is necessary in order to enable it to give judgment’, so that the case-law of the Court of Justice on the admissibility of references under Article 234 EC is, in principle, transposable to references for a preliminary ruling submitted to the Court of Justice under Article 35 EU. It follows that the presumption of relevance attaching to questions referred by national courts for a preliminary ruling may be rebutted only in exceptional cases, where it is quite obvious that the interpretation of Community law sought bears no relation to the actual facts of the main action or to its purpose, or where the problem is hypothetical and the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted. Save for such cases, the Court is, in principle, required to give a ruling on questions concerning the interpretation of the acts referred to in Article 35(1) EU. In that context, irrespective of the degree of integration envisaged by the Treaty of Amsterdam in the process of creating an ever closer union among the peoples of Europe within the meaning of the second paragraph of Article 1 EU, it is perfectly comprehensible that the authors of the Treaty on European Union should have considered it useful to make provision, in the context of Title VI of that treaty, dealing with police and judicial cooperation in criminal matters, for recourse to legal instruments with effects similar to those provided for by the EC Treaty, in order to contribute effectively to the pursuit of the Union’s objectives. The jurisdiction of the Court of Justice to give preliminary rulings under Article 35 EU would be deprived of most of its useful effect if individuals were not entitled to invoke framework decisions in order to obtain a conforming interpretation of national law before the courts of the Member States. (see paras 19, 28-30, 36, 38)3. It would be difficult for the Union to carry out its task effectively if the principle of loyal cooperation, requiring in particular that Member States take all appropriate measures, whether general or particular, to ensure fulfilment of their obligations under European Union law, were not also binding in the area of police and judicial cooperation in criminal matters under Title VI of the EU Treaty, which is moreover entirely based on cooperation between the Member States and the institutions. (see para. 42)4. The binding nature of framework decisions adopted on the basis of Title VI of the Treaty on European Union, dealing with police and judicial cooperation in criminal matters, is formulated in terms identical with those in the third paragraph of Article 249 EC, concerning directives. It involves an obligation on the part of the national authorities to interpret in conformity with national law. Thus, when applying national law, the national court that is called upon to interpret it must do so as far as possible in the light of the wording and purpose of the framework decision in order to attain the result which it pursues and thus comply with Article 34(2)(b) EU. The obligation on the national court to refer to the content of a framework decision when interpreting the relevant rules of its national law is, however, limited by general principles of law, particularly those of legal certainty and non-retroactivity. In particular, those principles prevent that obligation from leading to the criminal liability of persons who contravene the provisions of a framework decision from being determined or aggravated on the basis of such a decision alone, independently of an implementing law. Similarly, the principle of conforming interpretation cannot serve as the basis for an interpretation of national law contra legem. That principle does, however, require that, where necessary, the national court consider the whole of national law in order to assess how far it can be applied in such a way as not to produce a result contrary to that envisaged by the framework decision. (see paras 34, 43-45, 47, 61, operative part)5. Articles 2, 3 and 8(4) of Council Framework Decision 2001/220/JHA of 15 March 2001 on the standing of victims in criminal proceedings set out a number of objectives, including ensuring that particularly vulnerable victims receive specific treatment best suited to their circumstances. Those provisions must be interpreted as allowing the competent national court to authorise young children, who claim to have been victims of maltreatment, to give their testimony in accordance with arrangements allowing those children to be guaranteed an appropriate level of protection, for example outside the trial and before it takes place. The arrangements for taking evidence used must not, however, be incompatible with the basic legal principles of the Member State concerned, as Article 8(4) of that framework decision provides. Nor may they deprive the accused person of the right to a fair trial under Article 6 of the European Convention on Human Rights. (see paras 54, 57, 59, 61, operative part)JUDGMENT OF THE COURT (Grand Chamber)16 June 2005 (*) In Case C-105/03,REFERENCE for a preliminary ruling under Article 35 EU by the judge in charge of preliminary enquiries at the Tribunale di Firenze (Italy), made by decision of 3 February 2003, received at the Court on 5 March 2003, in criminal proceedings against Maria Pupino THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, R. Silva de Lapuerta and A. Borg Barthet, Presidents of Chambers, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues (Rapporteur), P. Kūris, E. Juhász, G. Arestis and M. Ilešič, Judges Advocate General: J. Kokott,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 26 October 2004,after considering the observations submitted on behalf of:– Mrs Pupino, represented by M. Guagliani and D. Tanzarella, avvocati,– the Italian Government, represented by I.M. Braguglia, acting as Agent, assisted by P. Gentili, avvocato dello Stato,– the Greek Government, represented by A. Samoni-Rantou and K. Boskovits, acting as Agents,– the French Government, represented by R. Abraham, G. de Bergues and C. Isidoro, acting as Agents,– the Netherlands Government, represented by H.G. Sevenster and C. Wissels, acting as Agents,– the Portuguese Government, represented by L. Fernandes, acting as Agent,– the Swedish Government, represented by A. Kruse and K. Wistrand, acting as Agents,– the United Kingdom Government, represented by R. Caudwell and E. O’Neill, acting as Agents, assisted by M. Hoskins, Barrister,– the Commission of the European Communities, represented by M. Condou‑Durande and L. Visaggio, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 11 November 2004,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Articles 2, 3 and 8 of Council Framework Decision 2001/220/JHA of 15 March 2001 on the standing of victims in criminal proceedings (OJ 2001 L 82, p. 1; ‘the Framework Decision’). 2 The reference has been made in the context of criminal proceedings against Mrs Pupino, a nursery school teacher charged with inflicting injuries on pupils aged less than five years at the time of the facts. Legal background European Union Law The Treaty on European Union3 Under Article 34(2) EU, in the version resulting from the Treaty of Amsterdam, which forms part of Title VI of the Treaty on European Union, headed ‘Provisions on police and judicial cooperation in criminal matters’: ‘The Council shall take measures and promote cooperation, using the appropriate form and procedures as set out in this Title, contributing to the pursuit of the objectives of the Union. To that end, acting unanimously on the initiative of any Member State or of the Commission, the Council may: …b) adopt framework decisions for the purpose of approximation of the laws and regulations of the Member States. Framework decisions shall be binding upon the Member States as to the result to be achieved but shall leave to the national authorities the choice of form and methods. They shall not entail direct effect; …’4 Article 35 EU provides:‘1. The Court of Justice shall have jurisdiction, subject to the conditions laid down in this Article, to give preliminary rulings on the validity and interpretation of framework decisions, and decisions on the interpretation of conventions established under this Title and on the validity and interpretation of the measures implementing them. 2. By a declaration made at the time of signature of the Treaty of Amsterdam or at any time thereafter, any Member State shall be able to accept the jurisdiction of the Court of Justice to give preliminary rulings as specified in paragraph 1. 3. A Member State making a declaration pursuant to paragraph 2 shall specify that either:a) any court or tribunal of that State against whose decisions there is no judicial remedy under national law may request the Court of Justice to give a preliminary ruling on a question raised in a case pending before it and concerning the validity or interpretation of an act referred to in paragraph 1 if that court or tribunal considers that a decision on the question is necessary to enable it to give judgment; or b) any court or tribunal of that State may request the Court of Justice to give a preliminary ruling on a question raised in a case pending before it and concerning the validity or interpretation of an act referred to in paragraph 1 if that court or tribunal considers that a decision on the question is necessary to enable it to give judgment. ...’5 The information published in the Official Journal of the European Communities of 1 May 1999 (OJ 1999 L 114, p. 56) on the date of entry into force of the Treaty of Amsterdam shows that the Italian Republic has made a declaration under Article 35(2) EU, whereby it has accepted the jurisdiction of the Court of Justice to rule in accordance with the arrangements under Article 35(3)(b) EU. The Framework Decision6 Under Article 2 of the Framework Decision, headed ‘Respect and recognition’:‘1. Each Member State shall ensure that victims have a real and appropriate role in its criminal legal system. It shall continue to make every effort to ensure that victims are treated with due respect for the dignity of the individual during proceedings and shall recognise the rights and legitimate interests of victims with particular reference to criminal proceedings. 2. Each Member State shall ensure that victims who are particularly vulnerable can benefit from specific treatment best suited to their circumstances.’ 7 Article 3 of the Framework Decision, headed ‘Hearings and provision of evidence’ provides:‘Each Member State shall safeguard the possibility for victims to be heard during proceedings and to supply evidence.Each Member State shall take appropriate measures to ensure that its authorities question victims only insofar as necessary for the purpose of criminal proceedings.’ 8 Article 8 of the Framework Decision, headed ‘Right to protection’, provides in paragraph 4:‘Each Member State shall ensure that, where there is a need to protect victims – particularly those most vulnerable – from the effects of giving evidence in open court, victims may, by decision taken by the court, be entitled to testify in a manner which will enable this objective to be achieved, by any appropriate means compatible with its basic legal principles.’ 9 Under Article 17 of the Framework Decision, each Member State is required to bring into force the laws, regulations and administrative provisions necessary to comply with the Framework Decision ‘not later than 22 March 2002’. National legislation10 Article 392 of the Codice di procedura penale (Italian Code of Criminal Procedure; ‘the CPP’), which appears in Book V, Part II, Title VII, headed ‘Preliminary enquiries and preliminary hearing’, provides: ‘1. During the preliminary enquiry, the Public Prosecutor’s Office and the person being examined may ask the judge to take evidence under special arrangements: a) where there are reasonable grounds for believing that the witness cannot be heard in open court by reason of illness or serious impediment; b) where, on the basis of specific facts, there are reasonable grounds for believing that the witness is vulnerable to violence, threats, offers or promises of money or other benefits, to induce him or her not to testify or to give false testimony. 1a. In proceedings for offences under Articles 600a, 600b, 600d, 609a, 609c, 609d, and 609g of the criminal code [concerning sexual offences or offences with a sexual background], the Public Prosecutor’s Office and the person being examined may ask for persons aged under 16 years to be heard in accordance with special arrangements even outside the cases referred to in paragraph 1. 11 Under Article 398(5a) of the CPP:‘In enquiries concerning offences under Articles 600a, 600b, 600d, 609a, 609c, 609d, and 609g of the criminal code, where the evidence involves minors under 16, the judge shall determine by order the place, time and particular circumstances for hearing evidence where a minor’s situation makes it appropriate and necessary. In such cases, the hearing can be held in a place other than the court, in special facilities or, failing that, at the minor’s home. The witness statements must be fully documented by the use of sound and audiovisual recording equipment. Where recording equipment or technical personnel are not available, the judge shall use the expert report or technical advice procedures. The interview shall also be minuted. The recordings shall be transcribed only at the request of the parties.’ Factual background and the question referred12 The order for reference shows that, in the criminal proceedings against Mrs Pupino, it is alleged that, in January and February 2001, she committed several offences of ‘misuse of disciplinary measures’ within the meaning of Article 571 of the Italian Criminal Code (‘the CP’) against a number of her pupils aged less than five years at the time, by such acts as regularly striking them, threatening to give them tranquillisers and to put sticking plasters over their mouths, and forbidding them from going to the toilet. She is further charged that, in February 2001, she inflicted ‘serious injuries’, as referred to in Articles 582, 585 and 576 of the CP, in conjunction with Article 61(2) and (11) thereof, by hitting a pupil in such a way as to cause a slight swelling of the forehead. The proceedings before the Tribunale di Firenze are at the preliminary enquiry stage. 13 The referring court states in that respect that, under Italian law, criminal procedure comprises two distinct stages. During the first stage, namely that of the preliminary enquiry, the Public Prosecutor’s Office makes enquiries and, under the supervision of the judge in charge of preliminary enquiries, gathers the evidence on the basis of which it will assess whether the prosecution should be abandoned or the matter should proceed to trial. The final decision on whether to allow the prosecution to proceed or to dismiss the matter is taken by the judge in charge of preliminary enquiries at the conclusion of an informal hearing. 14 A decision to send the examined person for trial opens the second stage of the proceedings, namely the adversarial stage, in which the judge in charge of preliminary enquiries does not take part. The proceedings proper begin with this stage. It is only at that stage that, as a rule, evidence must be taken at the initiative of the parties and in compliance with the adversarial principle. The referring court states that it is during the trial that the parties’ submissions may be accepted as evidence within the technical sense of the term. In those circumstances, the evidence gathered by the Public Prosecutor’s Office during the preliminary enquiry stage, in order to enable the Office to decide whether to institute criminal proceedings by proposing committal for trial or to ask for the matter to be closed, must be subjected to cross-examination during the trial proper in order to acquire the value of ‘evidence’ in the full sense. 15 The national court states, however, that there are exceptions to that rule, laid down by Article 392 of the CPP, which allow evidence to be established early, during the preliminary enquiry period, on a decision of the judge in charge of preliminary enquiries and in compliance with the adversarial principle, by means of the Special Inquiry procedure. Evidence gathered in that way has the same probative value as that gathered during the second stage of the proceedings. Article 392(1a) of the CPP has introduced the possibility of using that special procedure when taking evidence from victims of certain restrictively listed offences (sexual offences or offences with a sexual background) aged less than 16 years, even outside the cases envisaged in paragraph 1 of that article. Article 398(5a) of the CPP also allows the same judge to order evidence to be taken, in the case of enquiries concerning offences referred to in Article 392(1a) of the CPP, under special arrangements allowing the protection of the minors concerned. According to the national court, those additional derogations are designed to protect, first, the dignity, modesty and character of a minor witness, and, secondly, the authenticity of the evidence. 16 In this case, the Public Prosecutor’s Office asked the judge in charge of preliminary enquiries in August 2001 to take the testimony of eight children, witnesses and victims of the offences for which Mrs Pupino is being examined, by the special procedure for taking evidence early, pursuant to Article 392(1a) of the CPP, on the ground that such evidence could not be deferred until the trial on account of the witnesses’ extreme youth, inevitable alterations in their psychological state, and a possible process of repression. The Public Prosecutor’s Office also requested that evidence be gathered under the special arrangements referred to in Article 398(5a) of the CPP, whereby the hearing should take place in specially designed facilities, with arrangements to protect the dignity, privacy and tranquillity of the minors concerned, possibly involving an expert in child psychology by reason of the delicate and serious nature of the facts and the difficulties caused by the victims’ young age. Mrs Pupino opposed that application, arguing that it did not fall within any of the cases envisaged by Article 392(1) and (1a) of the CPP. 17 The referring court states that, under the national provisions in question, the application of the Public Prosecutor’s Office would have to be dismissed. Those provisions do not provide for the use of the Special Inquiry procedure, or for the use of special arrangements for gathering evidence, where the facts are such as those alleged against the defendant, even if there is no reason to preclude those provisions also covering cases other than those referred to in Article 392(1) of the CPP in which the victim is a minor. A number of offences excluded from the scope of Article 392(1) of the CPP might well prove more serious for the victim than those referred to in that provision. That, in the view of the national court, is the case here, where, according to the Public Prosecutor’s Office, Mrs Pupino maltreated several children aged less than five years, causing them psychological trauma. 18 Considering that, ‘apart from the question of the existence or otherwise of a direct effect of Community law’, the national court must ‘interpret its national law in the light of the letter and the spirit of Community provisions’, and having doubts as to the compatibility of Articles 392(1a) and 398(5a) of the CPP with Articles 2, 3 and 8 of the Framework Decision, inasmuch as the provisions of that code limit the ability of the judge in charge of preliminary enquiries to apply the Special Inquiry procedure for the early gathering of evidence, and the special arrangements for its gathering, to sexual offences or offences with a sexual background, the judge in charge of preliminary enquires at the Tribunale di Firenze has decided to stay the proceedings and ask the Court of Justice to rule on the scope of Articles 2, 3 and 8 of the Framework Decision. Jurisdiction of the Court of Justice19 Under Article 46(b) EU, the provisions of the EC, EAEC and ECSC Treaties concerning the powers of the Court of Justice and the exercise of those powers, including the provisions of Article 234 EC, apply to the provisions of Title VI of the Treaty on European Union under the conditions laid down by Article 35 EU. It follows that the system under Article 234 EC is capable of being applied to the Court’s jurisdiction to give preliminary rulings by virtue of Article 35 EU, subject to the conditions laid down by that provision. 20 As stated in paragraph 5 of this judgment, the Italian Republic indicated by a declaration which took effect on 1 May 1999, the date on which the Treaty of Amsterdam came into force, that it accepted the jurisdiction of the Court of Justice to rule on the validity and interpretation of the acts referred to in Article 35 EU in accordance with the rules laid down in paragraph 3(b) of that article. 21 Concerning the acts referred to in Article 35(1) EU, Article 35(3)(b) provides, in terms identical to those of the first and second paragraphs of Article 234 EC, that ‘any court or tribunal’ of a Member State may ‘request the Court of Justice to give a preliminary ruling’ on a question raised in a case pending before it and concerning the ‘validity or interpretation’ of such acts, ‘if it considers that a decision on the question is necessary to enable it to give judgment’. 22 It is undisputed, first, that the judge in charge of preliminary enquiries in criminal proceedings, such as those instituted in this case, acts in a judicial capacity, so that he must be regarded as a ‘court or tribunal of a Member State’ within the meaning of Article 35 EU (see to that effect, in relation to Article 234 EC, Joined Cases C‑54/94 and C-74/94 Cacchiarelli and Stanghellini [1995] ECR I-391, and Joined Cases C-74/95 and C-129/95 X [1996] ECR I-6609) and, secondly, that the Framework Decision, based on Articles 31 EU and 34 EU, is one of the acts referred to in Article 35(1) EU, in respect of which the Court may give a preliminary ruling. 23 Whilst in principle, therefore, the Court of Justice has jurisdiction to reply to the question raised, the French and Italian Governments have nevertheless raised an objection of inadmissibility against the application that has been made, arguing that the Court’s answer would not be useful in resolving the dispute in the main proceedings. 24 The French Government argues that the national court is seeking to apply certain provisions of the Framework Decision in place of national legislation, whereas, in accordance with the very wording of Article 34(2)(b) EU, Framework Decisions cannot have such a direct effect. It further points out that, as the national court itself acknowledges, an interpretation of national law in accordance with the Framework Decision is impossible. In accordance with the case-law of the Court of Justice, the principle that national law must be given a conforming interpretation cannot lead to an interpretation that is contra legem, or to a worsening of the position of an individual in criminal proceedings, on the basis of the Framework Decision alone, which is precisely what would happen in the main proceedings. 25 The Italian Government argues as its main argument that framework decisions and Community directives are completely different and separate sources of law, and that a framework decision cannot therefore place a national court under an obligation to interpret national law in conformity, such as the obligation which the Court of Justice has found in its case-law concerning Community directives. 26 Without expressly querying the admissibility of the reference, the Swedish and United Kingdom Governments generally argue in the same way as the Italian Government, insisting in particular on the inter-governmental nature of cooperation between Member States in the context of Title VI of the Treaty on European Union. 27 Finally, the Netherlands Government stresses the limits imposed on the obligation of conforming interpretation and poses the question whether, assuming that obligation applies to framework decisions, it can apply in the case in the main proceedings, have regard precisely to those limits. 28 As stated in paragraph 19 of this judgment, the system under Article 234 EC is capable of being applied to Article 35 EU, subject to the conditions laid down in Article 35. 29 Like Article 234 EC, Article 35 EU makes reference to the Court of Justice for a preliminary ruling subject to the condition that the national court ‘considers that a decision on the question is necessary in order to enable it to give judgment’, so that the case-law of the Court of Justice on the admissibility of references under Article 234 EC is, in principle, transposable to references for a preliminary ruling submitted to the Court of Justice under Article 35 EU. 30 It follows that the presumption of relevance attaching to questions referred by national courts for a preliminary ruling may be rebutted only in exceptional cases, where it is quite obvious that the interpretation of Community law sought bears no relation to the actual facts of the main action or to its purpose, or where the problem is hypothetical and the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted. Save for such cases, the Court is, in principle, required to give a ruling on questions concerning the interpretation of the acts referred to in Article 35(1) EU (see for example, in relation to Article 234 CE, Case C-355/97 Beck and Bergdorf [1999] ECR I-4977, paragraph 22, and Case C-17/03 VEMW and Others [2005] ECR I‑0000, paragraph 34). 31 Having regard to the arguments of the French, Italian, Swedish, Netherlands and United Kingdom Governments, it has to be examined whether, as the national court presupposes and as the French, Greek and Portuguese Governments and the Commission maintain, the obligation on the national authorities to interpret their national law as far as possible in the light of the wording and purpose of Community directives applies with the same effects and within the same limits where the act concerned is a framework decision taken on the basis of Title VI of the Treaty on European Union. 32 If so, it has to be determined whether, as the French, Italian, Swedish and United Kingdom Governments have observed, it is obvious that a reply to the question referred cannot have a concrete impact on the solution of the dispute in the main proceedings, given the inherent limits on the obligation of conforming interpretation. 33 It should be noted at the outset that the wording of Article 34(2)(b) EU is very closely inspired by that of the third paragraph of Article 249 EC. Article 34(2)(b) EU confers a binding character on framework decisions in the sense that they ‘bind’ the Member States ‘as to the result to be achieved but shall leave to the national authorities the choice of form and methods’. 34 The binding character of framework decisions, formulated in terms identical to those of the third paragraph of Article 249 EC, places on national authorities, and particularly national courts, an obligation to interpret national law in conformity. 35 The fact that, by virtue of Article 35 EU, the jurisdiction of the Court of Justice is less extensive under Title VI of the Treaty on European Union than it is under the EC Treaty, and the fact that there is no complete system of actions and procedures designed to ensure the legality of the acts of the institutions in the context of Title VI, does nothing to invalidate that conclusion. 36 Irrespective of the degree of integration envisaged by the Treaty of Amsterdam in the process of creating an ever closer union among the peoples of Europe within the meaning of the second paragraph of Article 1 EU, it is perfectly comprehensible that the authors of the Treaty on European Union should have considered it useful to make provision, in the context of Title VI of that treaty, for recourse to legal instruments with effects similar to those provided for by the EC Treaty, in order to contribute effectively to the pursuit of the Union’s objectives. 37 The importance of the Court’s jurisdiction to give preliminary rulings under Article 35 EU is confirmed by the fact that, under Article 35(4), any Member State, whether or not it has made a declaration pursuant to Article 35(2), is entitled to submit statements of case or written observations to the Court in cases which arise under Article 35(1). 38 That jurisdiction would be deprived of most of its useful effect if individuals were not entitled to invoke framework decisions in order to obtain a conforming interpretation of national law before the courts of the Member States. 39 In support of their position, the Italian and United Kingdom Governments argue that, unlike the EC Treaty, the Treaty on European Union contains no obligation similar to that laid down in Article 10 EC, on which the case-law of the Court of Justice partially relied in order to justify the obligation to interpret national law in conformity with Community law. 40 That argument must be rejected.41 The second and third paragraphs of Article 1 of the Treaty on European Union provide that that treaty marks a new stage in the process of creating an ever closer union among the peoples of Europe and that the task of the Union, which is founded on the European Communities, supplemented by the policies and forms of cooperation established by that treaty, shall be to organise, in a manner demonstrating consistency and solidarity, relations between the Member States and between their peoples. 42 It would be difficult for the Union to carry out its task effectively if the principle of loyal cooperation, requiring in particular that Member States take all appropriate measures, whether general or particular, to ensure fulfilment of their obligations under European Union law, were not also binding in the area of police and judicial cooperation in criminal matters, which is moreover entirely based on cooperation between the Member States and the institutions, as the Advocate General has rightly pointed out in paragraph 26 of her Opinion. 43 In the light of all the above considerations, the Court concludes that the principle of conforming interpretation is binding in relation to framework decisions adopted in the context of Title VI of the Treaty on European Union. When applying national law, the national court that is called upon to interpret it must do so as far as possible in the light of the wording and purpose of the framework decision in order to attain the result which it pursues and thus comply with Article 34(2)(b) EU. 44 It should be noted, however, that the obligation on the national court to refer to the content of a framework decision when interpreting the relevant rules of its national law is limited by general principles of law, particularly those of legal certainty and non-retroactivity. 45 In particular, those principles prevent that obligation from leading to the criminal liability of persons who contravene the provisions of a framework decision from being determined or aggravated on the basis of such a decision alone, independently of an implementing law (see for example, in relation to Community directives, Joined Cases C-74/95 and C-129/95 X [1996] ECR I-6609, paragraph 24, and Joined Cases C-387/02, C-391/02 and C-403/02 Berlusconi and Others [2005] ECR I-0000, paragraph 74). 46 However, the provisions which form the subject-matter of this reference for a preliminary ruling do not concern the extent of the criminal liability of the person concerned but the conduct of the proceedings and the means of taking evidence. 47 The obligation on the national court to refer to the content of a framework decision when interpreting the relevant rules of its national law ceases when the latter cannot receive an application which would lead to a result compatible with that envisaged by that framework decision. In other words, the principle of conforming interpretation cannot serve as the basis for an interpretation of national law contra legem. That principle does, however, require that, where necessary, the national court consider the whole of national law in order to assess how far it can be applied in such a way as not to produce a result contrary to that envisaged by the framework decision. 48 In this case, as the Advocate General has pointed out in paragraph 40 of her Opinion, it is not obvious that an interpretation of national law in conformity with the framework decision is impossible. It is for the national court to determine whether, in this case, a conforming interpretation of national law is possible. 49 Subject to that reservation, the Court will answer the question referred. The question referred for a preliminary ruling50 By its question, the national court essentially asks whether, on a proper interpretation of Articles 2, 3 and 8(4) of the Framework Decision, a national court must be able to authorise young children, who, as in this case, claim to have been victims of maltreatment, to give their testimony in accordance with arrangements ensuring them an appropriate level of protection, outside the public trial and before it is held. 51 Article 3 of the Framework Decision requires each Member State to safeguard the possibility for victims to be heard during proceedings and to supply evidence, and to take appropriate measures to ensure that its authorities question victims only insofar as necessary for the purpose of criminal proceedings. 52 Articles 2 and 8(4) of the Framework Decision require each Member State to make every effort to ensure that victims are treated with due respect for their personal dignity during proceedings, to ensure that particularly vulnerable victims benefit from specific treatment best suited to their circumstances, and to ensure that where there is a need to protect victims, particularly those most vulnerable, from the effects of giving evidence in open court, victims may, by decision taken by the court, be entitled to testify in a manner enabling that objective to be achieved, by any appropriate means compatible with its basic legal principles. 53 The Framework Decision does not define the concept of a victim’s vulnerability for the purposes of Articles 2(2) and 8(4). However, independently of whether a victim’s minority is as a general rule sufficient to classify such a victim as particularly vulnerable within the meaning of the Framework Decision, it cannot be denied that where, as in this case, young children claim to have been maltreated, and maltreated, moreover, by a teacher, those children are suitable for such classification having regard in particular to their age and to the nature and consequences of the offences of which they consider themselves to have been victims, with a view to benefiting from the specific protection required by the provisions of the Framework Decision referred to above. 54 None of the three provisions of the Framework Decision referred to by the national court lays down detailed rules for implementing the objectives which they state, and which consist, in particular, in ensuring that particularly vulnerable victims receive ‘specific treatment best suited to their circumstances’, and the benefit of special hearing arrangements that are capable of guaranteeing to all victims treatment which pays due respect to their individual dignity and gives them the opportunity to be heard and to supply evidence, and in ensuring that those victims are questioned ‘only insofar as necessary for the purpose of criminal proceedings’. 55 Under the legislation at issue in the main proceedings, testimony given during the preliminary enquiries must generally be repeated at the trial in order to acquire full evidential value. It is, however, permissible in certain cases to give that testimony only once, during the preliminary enquiries, with the same probative value, but under different arrangements from those which apply at the trial. 56 In those circumstances, achievement of the aims pursued by the abovementioned provisions of the framework decision require that a national court should be able, in respect of particularly vulnerable victims, to use a special procedure, such as the Special Inquiry for early gathering of evidence provided for in the law of a Member State, and the special arrangements for hearing testimony for which provision is also made, if that procedure best corresponds to the situation of those victims and is necessary in order to prevent the loss of evidence, to reduce the repetition of questioning to a minimum, and to prevent the damaging consequences, for those victims, of their giving testimony at the trial 57 It should be noted in that respect that, according to Article 8(4) of the Framework Decision, the conditions for giving testimony that are adopted must in any event be compatible with the basic legal principles of the Member State concerned. 58 Moreover, in accordance with Article 6(2) EU, the Union must respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms signed in Rome on 4 November 1950 (‘the Convention’), and as they result from the constitutional traditions common to the Member States, as general principles of law. 59 The Framework Decision must thus be interpreted in such a way that fundamental rights, including in particular the right to a fair trial as set out in Article 6 of the Convention and interpreted by the European Court of Human Rights, are respected. 60 It is for the national court to ensure that – assuming use of the Special Inquiry and of the special arrangements for the hearing of testimony under Italian law is possible in this case, bearing in mind the obligation to give national law a conforming interpretation – the application of those measures is not likely to make the criminal proceedings against Mrs Pupino, considered as a whole, unfair within the meaning of Article 6 of the Convention, as interpreted by the European Court of Human Rights (see, for example, ECHR judgments of 20 December 2001, P.S. v Germany, of 2 July 2002, S.N. v Sweden, Reports of judgments and decisions 2002-V, of 13 February 2004, Rachdad v France, and the decision of 20 January 2005, Accardi and Others v Italy, App. 30598/02). 61 In the light of all the above considerations, the answer to the question must be that Articles 2, 3 and 8(4) of the Framework Decision must be interpreted as meaning that the national court must be able to authorise young children, who, as in this case, claim to have been victims of maltreatment, to give their testimony in accordance with arrangements allowing those children to be guaranteed an appropriate level of protection, for example outside the trial and before it takes place. The national court is required to take into consideration all the rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the Framework Decision. Costs62 Since these proceedings are, for the parties to the main proceedings, a step in the proceedings before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than by those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Articles 2, 3 and 8(4) of Council Framework Decision 2001/220/JHA of 15 March 2001 on the standing of victims in criminal proceedings must be interpreted as meaning that the national court must be able to authorise young children, who, as in this case, claim to have been victims of maltreatment, to give their testimony in accordance with arrangements allowing those children to be guaranteed an appropriate level of protection, for example outside the trial and before it takes place.The national court is required to take into consideration all the rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the Framework Decision.[Signatures]* Language of the case: Italian. | 7fc78-70ef4e7-4649 | EN |
THE COMMISSION'S DECISION DECLARING THE RESTRUCTURING AID FOR SNCM PLANNED BY FRANCE COMPATIBLE WITH THE COMMON MARKET IS ANNULLED | Corsica Ferries France SASvCommission of the European Communities(State aid – Application for annulment – Restructuring aid – Decision declaring the aid to be compatible with the common market – Commission guidelines – Obligation to state reasons – Compliance with conditions – Aid limited to the minimum)Judgment of the Court of First Instance (Third Chamber), 15 June 2005 Summary of the Judgment1. Actions for annulment – Pleas in law – Lack of or inadequate statement of reasons – Distinguished from manifest error of assessment(Arts 230 EC and 253 EC)2. Acts of the institutions – Statement of reasons – Obligation – Scope – Commission decision on State aid – Decision on aid for restructuring firms in difficulty (Arts 87(1) and (3)(c) EC and 253 EC; Community guidelines on State aid for restructuring and rescuing firms in difficulty)3. State aid – Prohibition – Derogations – Discretion of the Commission – Judicial review – Limits (Art. 87(3)(c) EC)4. State aid – Prohibition – Derogations – Discretion of the Commission – Possibility of adopting guidelines – Binding effect – Judicial review 5. Actions for annulment – Contested measure – Assessment of legality in the light of the information available at the time of adoption of the measure – Retrospective considerations – No effect (Art. 230 EC)6. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Aid for restructuring firms in difficulty – Identification of firms in difficulty(Art. 87(3)(c) EC; Community guidelines on State aid for restructuring and rescuing firms in difficulty, points 4, 5(a) and 6)7. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Aid for restructuring firms in difficulty – Conditions – Limitation to the strict minimum needed – Restructuring plan including an undertaking to dispose of non-essential assets – Consequence – Obligation to use the whole of the proceeds of the disposal to fund the restructuring plan(Art. 87(3)(c) EC; Community guidelines on State aid for restructuring and rescuing firms in difficulty, point 40)8. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Aid for restructuring firms in difficulty – Discretion of the Commission – Power to make an approximate evaluation of the net proceeds of the disposal of assets under the restructuring plan – Limit 9. Acts of the Community institutions – Statement of reasons – Obligation – Scope – Correction of an error of reasoning during the proceedings before the Court – Not permissible (Art. 253 EC)1. A plea based on infringement of Article 253 EC is a separate plea from one based on a manifest error of assessment. While the former, which alleges absence of reasons or inadequacy of the reasons stated, goes to an issue of infringement of essential procedural requirements within the meaning of Article 230 EC and, involving a matter of public policy, must be raised by the Community judicature of its own motion, the latter, which goes to the substantive legality of a decision, is concerned with the infringement of a rule of law relating to the application of the Treaty, again within the meaning of Article 230 EC, and can be examined by the Community judicature only if it is raised by the applicant. The obligation to state reasons is thus a separate question from that of the merits of those reasons. It would therefore be inappropriate for the Court to examine, in considering fulfilment of the obligation to state reasons, the substantive legality of the reasons relied on by the Commission to justify its decision. It follows that, in a plea based on a failure to state reasons or a lack of adequate reasons, objections and arguments which aim to challenge the merits of the contested decision are misplaced and irrelevant. (see paras 52, 58-59)2. The scope of the duty to state reasons depends on the nature of the measure in question and on the context in which it was adopted. The statement of reasons must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, so as to enable the persons concerned to ascertain the reasons for it so that they can defend their rights and ascertain whether or not the measure is well founded and to enable the Community judicature to exercise its power of review. It is not necessary for the statement of reasons to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC of the Treaty must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In particular, the Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned, for example, matters which were manifestly irrelevant or insignificant or plainly of secondary importance, and it is sufficient if it sets out the facts and the legal considerations having decisive importance in the context of the decision. With regard to the characterisation of a measure as aid, the obligation to state reasons requires that the reasons which led the Commission to consider that the measure concerned falls within the scope of Article 87(1) EC should be stated. As regards the compatibility of State aid for restructuring with Article 87(3)(c) EC, the obligation to state reasons is complied with when the Commission’s decision states the reasons why it considers the aid to be justified having regard to the conditions laid down in the Community Guidelines on State aid for rescuing and restructuring firms in difficulty, in particular, the existence of a restructuring plan, satisfactory evidence as to the long-term viability and the proportionality of the aid, in light of the contribution of the beneficiary of it. (see paras 62-66, 132)3. In the application of Article 87(3)(c) EC, the Commission has a wide discretion, the exercise of which involves complex economic and social assessments which must be made in a Community context. Judicial review of the manner in which that discretion is exercised is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with and to verifying the accuracy of the facts relied on and that there has been no error of law, manifest error of assessment in regard to the facts or misuse of powers. Consequently, it is not for the Court to substitute its own economic assessment for that of the author of the decision. (see paras 137-138)4. The Commission is bound by the guidelines and notices that it issues in the area of supervision of State aid inasmuch as they do not depart from the rules in the Treaty and are accepted by the Member States. Accordingly, by assessing specific aid in the light of such guidelines, previously adopted by it, the Commission cannot be considered to exceed the limits of its discretion or to waive that discretion. On the one hand, it retains the power to repeal or amend any guidelines if the circumstances so require. On the other, the guidelines concern a defined sector and are based on the desire to follow a policy established by it. In that context, it is for the Court to verify whether the requirements which the Commission has itself laid down, as mentioned in those guidelines, have been observed. (see paras 139-141)5. In an action for annulment under Article 230 EC, the legality of a Community measure must be assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted and cannot depend on the possible existence of opportunities for circumvention or on retrospective considerations of its efficacy. In particular, complex assessments made by the Commission must be examined solely on the basis of the information available to it at the time when those assessments were made. (see paras 142-143)6. Although the Community Guidelines on State aid for rescuing and restructuring firms in difficulty provide that a firm is ‘in any event’ regarded as being in difficulty where a material part of its share capital has disappeared, there is nothing to prevent a firm from establishing that it is in financial difficulty for the purposes of the guidelines by the use of other evidence, even if it has not lost a significant part of its share capital. (see para. 185)7. Where, in order to benefit from restructuring aid, an undertaking undertook in its restructuring plan to dispose of non-essential assets, it must apply the whole of the proceeds of disposal of those assets to the funding of the restructuring plan. That obligation does not oblige the beneficiary of aid in any way to use all of its resources to reduce the amount of the aid granted, but only to use all the resources generated by assets considered to be non-essential in carrying on the company’s activities for the purposes of its restructuring. Such a contribution to the restructuring plan from the beneficiary out of its own resources is necessary in order to ensure that the aid remains, as required by point 40 of the Community Guidelines on State aid for rescuing and restructuring firms in difficulty, limited to the strict minimum needed to enable restructuring to be undertaken on the basis of the existing financial resources of the beneficiary company, its shareholders or the business group to which it belongs. (see paras 266, 313)8. When assessing the compatibility of restructuring aid with the common market, the Commission is not bound to estimate the specific cost of each of the measures to be undertaken by the company in question. Besides the fact that a precise evaluation of the various items of expenditure would in any event have been uncertain owing to the prospective nature of the measures envisaged, the Commission is entitled, in the exercise of its broad discretion, to confine itself to an overall assessment. It follows that the Commission is, in principle, entitled, in the exercise of its broad discretion, to proceed on the basis of an approximate evaluation of the net proceeds of the disposal of assets provided for in the restructuring plan, having regard to the difficulty of determining those proceeds with precision. However, if the assets to be disposed of under the plan have in fact already been disposed of and the Commission is therefore aware of the actual amount of the net proceeds of that disposal, the Commission, in the light, in particular, of the principle laid down under Article 87(1) EC that State aid is prohibited, cannot, when determining whether the aid was limited to the minimum, restrict itself as regards those assets to an assessment ‘in overview’ of the reserves available. (see paras 272-273, 278, 282-283)9. The reasons for a decision must appear in the actual body of the decision and, save in exceptional circumstances, explanations given ex post facto cannot be taken into account. It follows that the decision must be self-sufficient and that the reasons on which it is based may not be stated in written or oral explanations given subsequently when the decision in question is already the subject of proceedings brought before the Community judicature. (see para. 287)JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber)15 June 2005 (*) (State aid – Application for annulment – Restructuring aid – Decision declaring the aid to be compatible with the common market – Commission guidelines – Obligation to state reasons – Compliance with conditions – Aid limited to the minimum)In Case T-349/03,Corsica Ferries France SAS, established in Bastia (France), represented by S. Rodrigues and C. Scapel, lawyers, with an address for service in Luxembourg, applicant,Commission of the European Communities, represented by C. Giolito and H. van Vliet, acting as Agents, with an address for service in Luxembourg, defendant,supported byFrench Republic, represented by G. de Bergues and S. Ramet, acting as Agents, with an address for service in Luxembourg, and bySociété nationale maritime Corse-Méditerranée (SNCM) SA, established in Marseilles (France), represented initially by H. Tassy, and subsequently by O. d’Ormesson and A. Bouin, lawyers, interveners,APPLICATION for annulment of Commission Decision 2004/166/EC of 9 July 2003 on aid which France intends to grant for the restructuring of the Société nationale maritime Corse-Méditerranée (SNCM) (OJ 2004 L 61, p. 13), THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Third Chamber), composed of M. Jaeger, President, V. Tiili and O. Czúcz, Judges,Registrar: I. Natsinas, Administrator,having regard to the written procedure and further to the hearing on 18 November 2004,gives the followingJudgment Legal framework1 Article 87 EC states that: ‘1. Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market. …3. The following may be considered to be compatible with the common market:(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest …’ 2 Section 8 of the Community guidelines on State aid to maritime transport (OJ 1997 C 205, p. 5) provides that the Commission is to apply the guidelines on restructuring and rescuing firms in difficulty to restructuring aid for maritime companies. 3 In the Community guidelines on State aid for rescuing and restructuring firms in difficulty (OJ 1999 C 288, p. 2) (‘the guidelines’), which apply from 9 October 1999, the Commission sets out the conditions under which the aid concerned may be declared to be compatible with the common market under Article 87(3)(c) EC. Point 3.2.2 of the guidelines states that those conditions concern the question whether the beneficiary qualifies as a firm in difficulty, restoration of viability, the avoidance of undue distortions of competition, the limitation of aid to the minimum, the imposition of conditions and obligations necessary in order to ensure that the aid does not distort competition to an extent contrary to the common interest and the full implementation of a restructuring plan. 4 Council Regulation (EEC) No 3577/92 of 7 December 1992 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage) (OJ 1992 L 364, p. 7) requires Member States to open up national cabotage markets. Article 4 of that regulation provides that whenever a Member State concludes public service contracts, it is to do so on a non-discriminatory basis in respect of all Community shipowners. Facts1. Relevant shipping companies5 The applicant is a shipping company operating regular services to Corsica from mainland France (Toulon and Nice) and Italy (Savona and Livorno). 6 The Société nationale maritime Corse-Méditerranée (‘SNCM’) is a shipping company operating regular services to Corsica from mainland France (Nice, Toulon and Marseilles) and to North Africa (Tunisia and Algeria) from mainland France and seasonal services to Sardinia from April to September. 7 Currently, 80% of SNCM’s shares are held by the Compagnie générale maritime et financière (‘CGMF’) and 20% by the Société nationale des chemins de fer (‘SNCF’). The objects of CGMF, in which the French State has a direct 100% share, are the authorisation of any operations of maritime transport, outfitting and chartering of ships and the acquisition of shares and any commercial or industrial operations directly or indirectly connected with those objects. 8 SNCM holds a minority interest in the Compagnie méridionale de navigation (‘CMN’), a shipping company operating between Marseilles and Corsica, which is controlled by the Stef-TFE Group through the Compagnie méridionale de participation. 2. Public service obligations relating to shipping services between mainland France and Corsica9 Since 1948, regular shipping services between mainland France and Corsica have been operated as public service obligations.10 Until 1976, those services were provided under a system partly regulated by French law, as a national cabotage monopoly. Under that system, the State paid companies providing the service a lump-sum subsidy to balance their accounts in return for fulfilling public service requirements concerning the ports to be served, regularity, frequency, the capacity to provide the service, fares charged and the crewing of the ship. 11 In 1976, France laid down new conditions for providing public shipping services to Corsica on the basis of a territorial continuity principle. That principle aims to limit the disadvantages involved in being an island and to ensure that the island is served in a way which resembles services on the mainland as closely as possible. A concessions scheme was established with a set of specifications laying down the public service framework. A framework agreement was concluded with SNCM and CMN for a period of 25 years, expiring on 31 December 2001. 12 Between 1976 and 1982, the French Government established, on the basis of that framework agreement, the procedures for providing the service. 13 The Law of 30 July 1982 conferring special status on the region of Corsica transferred to the Corsican Assembly the management of territorial continuity in a contractual framework with the French State. Subsequently, the Law of 13 May 1991 conferring status on the territorial community of Corsica granted that assembly full responsibility for services to the island. Since then, those services have been administered by the Office des transports de la Corse (‘OTC’). 14 Since 1991, two five-year agreements have been concluded between the OTC and the two concessionary companies on the basis of the framework agreement. The first of those agreements (‘the 1991 agreement’) specified the manner in which the public service was to be performed for the period from 1991 to 1996 and the second (‘the 1996 agreement’) did so in relation to the period from 1996 to 2001. The agreements also laid down the principles governing the payment of the lump-sum subsidy from the budget for territorial continuity in return for the obligations imposed. At the time, the public service obligations covered all services to Corsica from three ports in mainland France, namely Nice, Toulon and Marseilles. 15 In 2001, acting under Regulation No 3577/92, the Corsican regional authority issued a call for tenders in order to select the operator responsible for operating the public services between mainland France and Corsica under a five-year contract from 1 January 2002, in return for financial compensation. Given the increase in competition on crossings from Toulon and Nice, the Corsican regional authority decided that only services operated from Marseilles should be subject to those public service obligations. 16 The contract was awarded jointly to SNCM and CMN, as the applicant withdrew its bid.17 Under a ‘public service delegation agreement’ (‘the 2002 agreement’) concluded between the Corsican regional authority and OTC, SNCM and CMN are required, as concessionaries, to provide regular shipping services between Marseilles and Corsica from 1 January 2002, subject to a duty to comply with a number of public service obligations regarding frequency, capacity, timetables, fares (maximum fares according to season, mandatory reductions for certain categories of persons) and service quality. Under that agreement, those obligations are to be performed in exchange for financial compensation, termed ‘reference compensation’, paid on a reducing annual basis, the amount of which is determined on the basis of anticipated revenue and is adjusted at the end of each year in line with the difference between anticipated revenue and actual revenue. The agreement provides that the maximum amount of financial compensation for the whole of the period covered by it is to be EUR 326.85 million for SNCM and EUR 128.2 million for CMN, that is to say a total of EUR 455.05 million. The 2002 agreement also provides that the final annual compensation for each concessionary is to be limited to the operational deficit incurred in providing the public service obligations allowing for a reasonable return on marine capital employed in proportion to its effective utilisation, with that reasonable return being set at 15% of the market value of the vessels, as defined in the agreement. The 2002 agreement expires on 31 December 2006 unless previously terminated by agreement between all the parties. Administrative procedure1. Aid in favour of SNCM by way of compensation for public service obligations under the 1991 agreement and the 1996 agreement 18 On 22 December 1998, following objections regarding aid granted to Corsica Marittima, a subsidiary of SNCM which carries passengers between Corsica and Italy, the Commission communicated to the French Republic its decision to initiate the formal investigation procedure in respect of the aid under Article 93(2) of the EC Treaty (now Article 88(2) EC) (OJ 1999 C 62, p. 9). That case was registered as Case C-78/98. 19 On 28 February 2001, following fresh complaints regarding the aid received by SNCM to cover the cost of its public service obligations, the Commission communicated to the French Republic its decision to initiate the formal investigation procedure in respect of the aid under Article 88(2) EC (OJ 2001 C 117, p. 9). That case was registered as Case C-14/01. 20 By Decision 2002/149/EC of 30 October 2001 on the State aid awarded by France to SNCM (OJ 2002 L 50, p. 66), the Commission, closing the procedures initiated in Cases C-78/98 and C-14/01, held that the aid of EUR 787 million granted to SNCM for the period from 1999 to 2001 by way of compensation for the public service obligations provided to Corsica from three ports on mainland France, namely Nice, Toulon and Marseilles, by SNCM was compatible with the common market under Article 86(2) EC. No action for annulment of that decision has been brought before the Court of First Instance. 2. Rescue aid and restructuring aid in favour of SNCM21 On 20 December 2001, the French authorities notified the Commission of a cash advance from CGMF to SNCM of EUR 22.5 million by way of rescue aid. That aid was registered as NN 27/2002 (formerly N 849/2001), as it had already been paid in part to SNCM. 22 By letter of 18 February 2002, the French Republic notified the Commission of a plan to grant aid for the restructuring of SNCM. The proposed restructuring aid comprised the recapitalisation of SNCM, through CGMF, in the sum of EUR 76 million, thereby increasing SNCM’s capital from EUR 30 million to EUR 106 million. That aid was registered by the Commission as notified aid under reference N 118/2002. 23 By Decision C (2002) 2611 final of 17 July 2002, the Commission authorised the rescue aid to SNCM under the preliminary procedure for investigating aid laid down under Article 88(3) EC. In its decision, the Commission held that the aid notified satisfied the five criteria laid down under the guidelines, in particular the undertaking by the French State to notify a restructuring plan. No action for annulment of that decision has been brought before the Court of First Instance. 24 By letter of 19 August 2002 addressed to the French Republic, the Commission, having determined in a preliminary investigation that the restructuring aid notified gave rise to concerns as to its compatibility with the common market, decided to initiate the formal investigation procedure under Article 88(2) EC in accordance with Article 4(4) and Article 6 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88] of the EC Treaty (OJ 1999 L 83, p. 1) (‘the decision to initiate the formal investigation procedure’). The aid notified was registered under the new reference C-58/2002. 25 By letter of 8 October 2002, sent on 15 October together with its annexes, the French authorities communicated their observations on the decision to initiate the formal investigation procedure to the Commission. 26 On 11 December 2002, the decision to initiate the formal investigation procedure, accompanied by a summary, was published in the Official Journal of the European Communities (OJ 2002 C 308, p. 29). Interested parties were invited to submit their observations on the plan to provide aid as notified within a period of one month from the date of publication. 27 By letter of 8 January 2003, the applicant submitted to the Commission its written observations on the decision to initiate the formal investigation procedure. In addition, the Commission received observations from the Stef-TFE Group and from various local and regional authorities. The Commission forwarded all the observations received to the French Republic and gave it the opportunity to comment on them. 28 On 4 February 2003, at the applicant’s request, the Commission held a meeting with it, during which the applicant provided it with further documents. 29 By letter of 10 February 2003, the French authorities submitted arguments to the Commission intended to show that the plan to provide aid complied with the guidelines, together with details of new undertakings regarding the number of staff and level of wages, control of intermediate consumption and SNCM’s fares policy. 30 By letter of 13 February 2003, the French authorities provided the Commission with their comments on the observations of the applicant and Stef-TFE. 31 By letter of 21 February 2003, the French authorities replied to the additional questions raised in the Commission’s letter of 10 February 2003. 32 By fax of 27 May 2003, the French authorities provided the Commission with their comments on the documents which the applicant had submitted to the Commission on 4 February 2003 and which the latter had forwarded to the French authorities by letter of 21 February 2003. 33 On 9 July 2003, the Commission adopted Decision 2004/166/EC on aid which France intends to grant for the restructuring of SNCM (OJ 2004 L 61, p. 13). That decision (‘the contested decision’) is the subject of the present action for annulment. 34 The operative part of the decision is worded as follows:‘Article 1The restructuring aid which France plans to grant to [SNCM] is compatible with the common market under the conditions laid down in Articles 2 to 5. Article 2From the date on which this Decision is notified and until 31 December 2006, SNCM shall refrain from acquiring new ships and signing contracts for building, ordering or chartering new or renovated ships. From the date on which this Decision is notified and until 31 December 2006, SNCM can only operate the 11 ships which SNCM already possesses, namely: the Napoléon Bonaparte, Danielle Casanova, Île de Beauté, Corse, Liamone, Aliso, Méditerranée, Pascal Paoli, Paglia Orba, Monte Cinto and Monte d’Oro. If for reasons beyond its control SNCM has to replace one of its ships before 31 December 2006, the Commission may authorise such a replacement on the basis of a duly reasoned notice served by France. Article 3SNCM group shall dispose of all its direct and indirect holdings in the following companies:– Amadeus France,– Compagnie Corse Méditerranée,– Société civile immobilière Schuman,– Société méditerranéenne d’investissements et de participations,– Someca.Instead of disposing of its holdings in Société méditerranéenne d’investissements et de participations, SNCM may sell this company’s sole asset, the Southern Trader, and close down this subsidiary. The disposals may be made, at the choice of the French authorities, either through public auction or through a call for expressions of interest published in advance, providing for a minimum period of two months for any response. France shall provide the Commission with proof of all these disposals. The low level of bids which SNCM might receive cannot be invoked as a reason for not going ahead with the disposals. If there are no bids and if France can show proof that all the necessary publicity has been made, the condition laid down in the first paragraph shall be deemed to have been complied with. Article 4In respect of all links to Corsica, SNCM shall, from the date on which this Decision is notified and until 31 December 2006, refrain from pursuing a fares policy in respect of published fares intended to offer lower fares than those of each of its competitors for equivalent destinations and services and identical dates. The Commission reserves the right to initiate an investigation procedure whenever it finds that the conditions laid down in this Decision have not been complied with, and in particular the condition laid down in the first paragraph. The condition laid down in the first paragraph is complied with if every day the lowest prices advertised by SNCM are higher than the lowest promotional prices advertised by each of its competitors for equivalent destinations and services. The condition laid down in the first paragraph shall no longer apply if the prices of the said competitors exceed SNCM’s fares that were in force in the reference year 1996, corrected for inflation. Before 30 June each year, France shall inform the Commission of all the elements necessary to show that this condition has been duly complied with in the preceding calendar year in respect of all crossings to or from Corsica. Article 5In accordance with the commitments made by the French authorities in the restructuring plan, the annual number of round trips of ships on the various sea links to and from Corsica are until 31 December 2006 limited to the thresholds indicated in Table 3 of this Decision, save for exceptional reasons for which SNCM is not responsible that would oblige it to transfer particular round trips to other ports, and save for any change made to the public service obligations incumbent on the company. Article 6France is authorised to recapitalise SNCM through a first payment of EUR 66 million from the date on which this Decision is notified. Until the end of the restructuring period, i.e. until 31 December 2006, the Commission may decide, upon a request from the French authorities, to subsequently authorise a second payment to SNCM which will correspond to the difference between the EUR 10 million remaining and the proceeds from the disposals required in Article 3, in accordance with the conditions laid down in the said Article. Such a decision can be taken only if the action required in Article 3 has been carried out, the proceeds from the disposals does not exceed EUR 10 million and the conditions laid down in Articles 2, 4 and 5 have been complied with, without prejudice to the Commission’s right to initiate, where appropriate, the formal investigation procedure for failure to comply with any of these conditions. Failing this, the second instalment of aid shall not be paid. Article 7Within six months of the date on which this Decision is notified, France shall inform the Commission of the measures taken to comply with it. …’ Procedure and forms of order sought35 By application lodged at the Registry of the Court of First Instance on 13 October 2003, the applicant brought the present action. 36 By document lodged at the Registry on 3 February 2004, the French Republic sought leave to intervene in support of the forms of order sought by the Commission. 37 By document lodged at the Registry on 26 February 2004, SNCM sought leave to intervene in support of the forms of order sought by the Commission. 38 By order of 10 March 2004, the French Republic was granted leave to intervene.39 By order of 30 March 2004, SNCM was granted leave to intervene.40 Upon hearing the report of the Judge-Rapporteur, the Court (Third Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure, requested the parties to reply to written questions. The parties complied with those requests within the prescribed period. 41 In their replies, the parties informed the Court that, on 8 September 2004, the Commission had adopted Decision C (2004) 3359 final (‘the decision of 8 September 2004’), amending the contested decision. Pursuant to an additional written question from the Court, the main parties were asked to state their views on the effect of that decision on the present action. 42 The parties presented oral argument and replied to the questions put by the Court at the hearing on 18 November 2004. 11 43 The applicant claims that the Court should:– annul the contested decision;– order the Commission to pay the costs.44 The Commission, supported by the French Republic and SNCM, contends that the Court should:– dismiss the action;– order the applicant to pay the costs. Law 45 The applicant puts forward two pleas in law in support of the present action for annulment. The first plea is based on infringement of Article 253 EC inasmuch as the decision is inadequately reasoned. The second plea is based on infringement of Article 87(3)(c) EC, of Regulation No 659/1999 and of the guidelines inasmuch as the contested decision contains errors of fact and manifest errors of assessment. 46 At the outset, however, it is necessary to consider any effect that the decision of 8 September 2004 may have on the present action. 1. Preliminary observation regarding the effect of the decision of 8 September 2004 on the present action47 In the decision of 8 September 2004, the Commission amended the contested decision in order, as is shown by the second recital in the new decision, to allow SNCM to replace the Asco by the Aliso in the list of vessels set out in Article 2 of the contested decision, that is to say in the list of ships which SNCM is authorised to use during the restructuring period and, in the light of the difficulties encountered in selling the Asco, to dispose either of that ship or the Aliso. 48 It must however be noted that it is settled case-law that in the context of an application for annulment under Article 230 EC the legality of a Community measure must be assessed on the basis of the facts and the law as they stood at the time when the measure was adopted (Joined Cases T-371/94 and T-394/94 British Airways and Others v Commission [1998] ECR II-2405, paragraph 81). 49 Furthermore, it does not appear in the present case that the decision of 8 September 2004 led to some of the pleas and arguments put forward by the applicant in support of the present action becoming irrelevant. Nor, when the matter was raised in a written question from the Court, did either the applicant or the Commission suggest that such was the result. 50 In those circumstances, the decision of 8 September 2004 does not affect the present action for annulment of the contested decision in any way. 2. The first plea, based on infringement of Article 253 EC inasmuch as the contested decision is inadequately reasoned 51 By this plea, the applicant submits that the contested decision is inadequately reasoned as regards the nature of the aid measure at issue and the question whether part of the aid represents public service compensation, the setting-aside of the concerns which led to the initiation of the formal investigation procedure, the assessment of the restoration of viability, the realism of the assumptions made as to restructuring and the determination of non-strategic holdings. Preliminary observations on the scope of the plea52 It must be noted that case-law provides that a plea based on infringement of Article 253 EC is a separate plea from one based on a manifest error of assessment. While the former, which alleges absence of reasons or inadequacy of the reasons stated, goes to an issue of infringement of essential procedural requirements within the meaning of Article 230 EC and, involving a matter of public policy, must be raised by the Community judicature of its own motion, the latter, which goes to the substantive legality of a decision, is concerned with the infringement of a rule of law relating to the application of the Treaty, again within the meaning of Article 230 EC, and can be examined by the Community judicature only if it is raised by the applicant. The obligation to state reasons is thus a separate question from that of the merits of those reasons (Case C-367/95 P Commission v Sytraval and Brink’s France [1998] ECR I-1719, paragraph 67; Case C-17/99 France v Commission [2001] ECR I-2481, paragraph 35; Case C‑159/01 Netherlands v Commission [2004] ECR I-4461, paragraph 65; and Case T-158/99 Thermenhotel Stoiser Franz and Others v Commission [2004] ECR II‑1, paragraph 97). 53 In the present case, the applicant, by its first plea, limits itself to arguing that the contested decision is, in some respects, inadequately reasoned and thus contrary to Article 253 EC, as is explicitly shown by the heading to that plea in the application (‘Infringement of essential procedural requirements: insufficient statement of reasons’) and the reasoning set out under it, in particular in paragraphs 17, 18 and 43 of the application – which refer respectively to the infringement of essential procedural requirements, the case-law relating to Article 253 EC and the need to annul the contested decision having regard to its ‘formal legality’ – as well as by the third and fourth paragraphs of the summary of the application produced by the applicant – which refer to the existence of ‘an insufficient statement of reasons’. 54 The scope thereby conferred on that plea is not disputed by the parties. In reply to the observations of the Commission and the French Republic in that regard, the applicant observes, as is stated in paragraph 3 of the reply, that by that plea it criticises the Commission’s statement of reasons as being ‘insufficient’ and that the Commission has ‘failed’ to state adequate reasons. 55 Moreover, the application shows that the applicant is fully aware of the distinction between the obligation to state reasons and a manifest error of assessment since, having contested the adequacy of the reasons set out in the contested decision in the first plea, it argues in its second plea (headed ‘Infringement of the EC Treaty and the implementing rules: material errors of fact and manifest errors of assessment’), based on infringement of Article 87(3) EC and the guidelines, that the contested decision contains manifest errors of assessment. The same distinction appears in the summary of the application, in which the applicant states in paragraph 3 that ‘the application seeks the annulment of the contested decision on the ground that it is vitiated both by an insufficient statement of reasons and by material and manifest errors of assessment’. Similarly, in its reply, having acknowledged the observations made by the Commission and the French Republic on this point, the applicant states once again that it alleges, first, failures to comply with the obligation to state reasons and, secondly, manifest errors of assessment. 56 In those circumstances, the first plea put forward by the applicant in support of the present action must be understood as being based exclusively on an infringement of Article 253 EC inasmuch as the contested decision is inadequately reasoned in a number of areas, since the objections put forward by the applicant in order to contest the merits of the contested decision are set out under the second plea. 57 Plainly, however, as the Commission, supported by the French Republic, rightly points out, several of the objections and arguments put forward by the applicant under the first plea do not seek to establish that the contested decision is inadequately reasoned, but that it contains errors. Under the cloak of challenging the reasons given in the contested decision, the applicant is truly thereby challenging the merits of it. 58 As the Court of Justice has already held, it would be inappropriate for the Court of First Instance to examine, in considering fulfilment of the obligation to state reasons, the substantive legality of the reasons relied on by the Commission to justify its decision (France v Commission, cited in paragraph 52 above, paragraph 38). 59 It follows that, in a plea based on a failure to state reasons or a lack of adequate reasons, objections and arguments which aim to challenge the merits of the contested decision are misplaced and irrelevant (see, to that effect, Thermenhotel Stoiser Franz and Others v Commission, cited in paragraph 52 above, paragraph 97; Joined Cases T-305/94 to T-307/94, T-313/94 to T-315/94, T-316/94, T‑318/94, T-325/94, T-328/94, T-329/94 and T-335/94 Limburgse Vinyl Maatschappij and Others v Commission [1999] ECR II-931, paragraph 389; Case T-86/95 Compagnie générale maritime and Others v Commission [2002] ECR II-1011, paragraph 425; and Joined Cases T‑191/98 and T-212/98 to T-214/98 Atlantic Container Line and Others v Commission [2003] ECR II-3275, paragraphs 1175 and 1176). 60 Furthermore, since the applicant has expressly confirmed that the first plea was based exclusively on an insufficient statement of reasons and it is clear from the manner in which the application is set out that the applicant is aware of the distinction between an insufficient statement of reasons and the presence of errors in the reasons, it is not for the Court to reclassify the objections put forward under this plea which truly seek to challenge the merits of the contested decision. That is all the more the case where, as in these proceedings, the applicant puts forward a second plea based on the existence of manifest errors of assessment, under which some of those objections are restated for the purposes of challenging the merits of the contested decision. 61 Accordingly, it is appropriate to consider under this plea only whether the contested decision is adequately reasoned. The applicant’s objections and arguments set out under this plea which truly seek to challenge the merits of the decision must be rejected as being irrelevant. The objections relating to the statement of reasons for the contested decision Preliminary observations 62 According to settled case-law, the scope of the duty to state reasons depends on the nature of the measure in question and on the context in which it was adopted. The statement of reasons must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, so as to enable the persons concerned to ascertain the reasons for it so that they can defend their rights and ascertain whether or not the measure is well founded and to enable the Community judicature to exercise its power of review (Commission v Sytraval and Brink’s France, cited in paragraph 52 above, paragraph 63; Joined Cases T-228/99 and T-233/99 Westdeutsche Landesbank Girozentrale v Commission [2003] ECR II-435, paragraph 278; and Case T-109/01 Fleuren Compost v Commission [2004] ECR II-127, paragraph 119). 63 It is not necessary for the statement of reasons to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (France v Commission, cited in paragraph 52 above, paragraph 36; Joined Cases T‑298/97, T-312/97, T-313/97, T-315/97, T-600/97 to T-607/97, T‑1/98, T-3/98 to T-6/98 and T-23/98 Alzetta and Others v Commission [2000] ECR II-2319, paragraph 175; and Westdeutsche Landesbank Girozentrale v Commission, cited in paragraph 62 above, paragraph 279). 64 In particular, the Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned and it is sufficient if it sets out the facts and the legal considerations having decisive importance in the context of the decision (Case T-459/93 Siemens v Commission [1995] ECR II-1675, paragraph 31, and Westdeutsche Landesbank Girozentrale v Commission, cited in paragraph 62 above, paragraph 280). Thus, the Court of Justice has already held that the Commission was not required to define its position on matters which were manifestly irrelevant or insignificant or plainly of secondary importance (Commission v Sytraval and Brink’s France, cited in paragraph 52 above, paragraph 64). 65 With regard to the characterisation of a measure as aid, the obligation to state reasons requires that the reasons which led the Commission to consider that the measure concerned falls within the scope of Article 87(1) EC should be stated (Westdeutsche Landesbank Girozentrale v Commission, cited in paragraph 62 above, paragraph 281). 66 As regards the compatibility of State aid for restructuring with Article 87(3)(c) EC, it is clear from case-law that the obligation to state reasons is complied with when the Commission’s decision states the reasons why it considers the aid to be justified having regard to the conditions laid down in the guidelines, in particular the existence of a restructuring plan, satisfactory evidence as to the long-term viability and the proportionality of the aid taking into account the contribution of the beneficiary of it (see, to that effect, France v Commission, cited in paragraph 52 above, paragraph 37, and Case T‑214/95 Vlaamse Gewest v Commission [1998] ECR II-717, paragraph 102; see, as regards other Community guidelines relating to State aid, Fleuren Compost v Commission, cited in paragraph 62 above, paragraph 125). 67 It is in the light of those principles that it should be considered whether the contested decision is adequately reasoned in the present case. The nature of the measure in question and the status of public service compensation of a part of the aid 68 The applicant argues that the contested decision is inadequately reasoned with respect to the determination of the amount of the undercompensation for the performance of public service obligations. It states that the Commission has not provided it with details of the expert report used for that purpose, that the contested decision fails to explain why the grant in respect of the depreciation of the Liamone is taken into account, although that vessel was not required for the operation of the public service concession, and that it cannot be determined from the decision which part of the total amount of the aid actually represented public service compensation. 69 It should be noted at the outset that the Commission took the view in recital 259 in the contested decision that, independently of the need to analyse the cash injection in the form of restructuring aid, the part of the aid corresponding to undercompensation for the performance of public service obligations for the period from 1991 to 2001 was compatible with the common market under Article 86(2) EC. 70 It is apparent that, in order to determine the amount of the undercompensation for the performance of public service obligations, the Commission calculated, in recitals 256 and 257 in the contested decision, the amount of the losses incurred by SNCM between 1991 and 2001 on all services to Corsica that were subject to a public service obligation. It explains in that regard that, for the period from 1991 to 1999, it took as a basis the result before tax for services to Corsica, as determined in the expert report used for the purposes of Decision 2002/149, under deduction of the appreciation on disposal of vessels, while for the period between 2000 and 2001, which is not covered by the report, it recalculated itself the result before tax for Corsica services, on the basis of the approach used in Decision 2002/149, and deducted provisions for restructuring already included in the restructuring costs notified, there having been no disposal of vessels during the two years in question. As regards the possible deficit in 2002 on services between Marseilles and Corsica, the Commission states that that deficit could not be recognised ‘as since 1 January 2002 the operating fares for services to Corsica from Marseilles and the amounts of financial compensation have been agreed between the public authorities and SNCM on a contractual basis, contrary to the practice followed for the 1991 and 1996 agreements’. 71 On that basis, the Commission concludes, in recital 258 in the contested decision, that the aggregated corrected results of appreciations on vessels sold in that period and restructuring costs is EUR 53.48 million for the whole of the period from 1991 to 2001. A summary of the Commission’s calculations is set out in Table 11 in recital 257 in the contested decision. 72 However, in recital 260 in the contested decision, the Commission took the view that, as the French authorities had notified aid of a higher amount, namely EUR 76 million, as restructuring aid, and as the procedure under Article 88(2) EC had been initiated for that reason, the aid in question ought to be investigated in its entirety as restructuring aid. That investigation forms the subject‑matter of recitals 261 to 367 in the contested decision. 73 In those circumstances, the applicant’s objection that the contested decision is inadequately reasoned as regards compliance with the conditions laid down under Article 86(2) EC must be rejected as being misplaced. In so far as the Commission took the view that it was appropriate to consider the whole of the aid of EUR 76 million, including the element corresponding to the undercompensation for the performance of public service obligations amounting to EUR 53.48 million, as restructuring aid under that part of its investigation which forms the subject-matter of recitals 261 to 367 in the contested decision, a failure to state adequate reasons as to the compatibility of the amount of the undercompensation with Article 86(2) EC will not, of itself, result in the annulment of the contested decision, as the reasoning underlying it is set out in the recitals relating to the assessment of the aid as restructuring aid. 74 By contrast, it is necessary to consider the applicant’s objection relating to the inadequacy of the reasons set out in the contested decision regarding the determination of the amount of the undercompensation for the performance of public service obligations. In recital 327 in the contested decision, the Commission held, in assessing whether the aid was limited to the minimum for the purposes of the guidelines, that the part of the aid corresponding to the undercompensation was necessary for SNCM’s restructuring. To that extent, any inadequacy in the statement of reasons in relation to the determination of the amount of the undercompensation for the performance of public service obligations could affect the assessment of the aid as restructuring aid. 75 In that regard, it is clear, however, that the reasons set out in recitals 256 to 260 in the contested decision, which disclose both the criteria taken into account by the Commission in determining the amount of the undercompensation for the performance of public service obligations and the method of calculation used for that purpose, enable the persons concerned to be aware of the justifications for the measure taken, so that they can defend their rights and ascertain whether or not the measure is well founded and so as to enable the Community judicature to exercise its power of review. 76 None of the arguments and objections put forward by the applicant affects that conclusion.77 As regards, first, the failure of the Commission to make the expert report available to the applicant, the Court finds that that complaint is irrelevant for the purposes of establishing whether there has been an infringement of the obligation to state reasons. Even assuming it to be proved, such a failure does not constitute in any way an absence of reasons in the contested decision or mean that the reasoning stated in the contested decision is inadequate. At its highest, that complaint would allow the applicant to invoke a possible breach of its right of access to the file, which would not go to the statement of reasons but to respect for the rights of the defence. However, it must be stated, and the point is not disputed, that the applicant does not invoke such a breach of its rights of defence. Such a plea does not concern an infringement of essential procedural requirements and cannot be raised by the Court of its own motion (see Joined Cases T‑67/00, T‑68/00, T‑71/00 and T‑78/00 JFE Engineering and Others v Commission [2004] ECR II‑2501, paragraph 425, and the case-law cited there). 78 In so far as the applicant argues by that complaint that it was not in a position to understand the reasoning which led the Commission to determine the amount of the undercompensation for the performance of public service obligations, it suffices to hold that the Commission’s reasoning in that regard is, as mentioned above, set out clearly and explicitly in recitals 256 to 258 in the contested decision. 79 With respect to the contention that the Commission was not entitled to rely on the report in question for the years 2000 and 2001 and that the provisional accounts used by the Commission for those years differ from the published final accounts, those are matters which relate to the validity of the Commission’s methodology and are, accordingly, irrelevant to the present plea based on a failure to state adequate reasons. 80 As regards, secondly, the purported absence of reasoning in relation to the taking into account of the grant for the depreciation of the Liamone when that ship was not required for the operation of the public service concession, it must be held that that contention is based on an incorrect reading of the contested decision. It is clear from Table 11 in recital 257 in the contested decision that, contrary to what the applicant maintains, the Commission did not take that grant into account for the purposes of determining the amount of the undercompensation for the performance of public service obligations. The sum of EUR 14.771 million which that depreciation represents is deducted from the deficit relating to the public service activities and not added to those activities. Moreover, when questioned at the hearing by the Court, the applicant expressly acknowledged that its reading of the contested decision on that point was incorrect. Plainly, the Commission cannot be criticised for failing to substantiate reasoning which does not appear in its decision. 81 As the Commission explains in its written pleadings, the amount of the depreciation of the Liamone is, by contrast, taken into account in the costs of the restructuring plan which form the subject-matter of the investigation carried out in recitals 261 to 367, the exceptional depreciation of that vessel being recorded in that plan, as is clear from, in particular, recitals 126, 144, 302 and 330 in the contested decision. 82 In its reply and at the hearing, the applicant stated that the objection in question was in fact intended to show that it is illogical for the Commission to take the view that the Liamone was necessary for the performance of the public service obligations prior to 2002, when it acknowledges having excluded the grants for the depreciation of that ship from the calculation of the additional costs linked to public service obligations in respect of which no compensation was paid. As, in the applicant’s view, the Liamone was not required for the carrying-out of public service obligations, it considers that the Commission wrongly took the depreciation of that vessel into account as part of the costs of the restructuring plan. 83 However, it is clear that those contentions, which amend the scope of the objection as originally set out in the application, seek to challenge the merits of the assessments made in the contested decision and, accordingly, that they must be rejected as being irrelevant as regards the plea under consideration. 84 As regards, thirdly, the purported impossibility of determining the proportion of the total amount of the aid which truly represented compensation for the performance of public service obligations, it is sufficient to find that, contrary to what the applicant maintains, the Commission expressly states at recital 258 and in Table 11 in recital 257 in the contested decision that that proportion is EUR 53.48 million, and does so after having set out the calculation which produced that amount in recitals 256 and 257 in the decision. 85 Inasmuch as the applicant objects in that regard that the Commission did not state reasons to the ‘necessary level’ for the compensation for the performance of public service obligations and did not investigate the possibility that the additional costs linked to the public service obligations might be excessive, particularly the reason why 50% of SNCM’s losses were incurred in 2000 and 2001, it must be held that the applicant seeks by that objection to challenge the calculation of the undercompensation carried out by the Commission, inasmuch as that calculation takes the amount of the losses incurred by SNCM as a basis. Such an objection, which seeks to challenge the merits of the contested decision in that respect, is irrelevant to the present plea. 86 Moreover, inasmuch as that objection can be understood as criticising the Commission for having failed to state adequate reasons in the contested decision in that regard, it must be observed that the applicant did not raise such an objection during the administrative procedure, either in its observations on the decision to initiate the formal procedure or at the meeting of 4 February 2003, so that the Commission cannot be criticised for failing to reply to it in its decision. 87 In any event, it is clear that the contested decision states to the requisite legal standard both the reasons why the Commission takes the view that the losses incurred by SNCM allow the amount of the undercompensation for the performance of public service obligations to be determined and the reasons why those losses should have arisen. 88 As regards the reasons why the losses incurred by SNCM allow the amount of the undercompensation for the performance of public service obligations to be determined, it must be pointed out that in recital 257 in the contested decision the Commission stated that, in order to establish that amount, it was ‘following the same approach and criteria as Decision 2002/149/EC’, which was adopted following a procedure in which the applicant participated as an interested party and which related to aid granted to the same company under agreements relating to the same public service obligations, and to the same period, as the 1996 agreement applied until 2001. 89 In those circumstances, having regard to the express reference in the contested decision to Decision 2002/149 and taking account of the fact that the last-mentioned decision relates to matters well known to the applicant, it must be accepted that Decision 2002/149 is capable of supplementing the statement of reasons in the contested decision as regards the determination of the undercompensation for the performance of public service obligations (see, to that effect, Case C‑42/01 Portugal v Commission [2004] ECR I‑6079, paragraphs 69 and 70, and Case T-213/00 CMA CGM and Others v Commission [2003] ECR II‑913, paragraph 217). 90 In recitals 87 to 105 in Decision 2002/149, the Commission stated, on the basis of its expert’s conclusions relating to the period from 1991 to 1999, that the amount of the losses determined by the expert reasonably reflected the cost of the public service obligations. In the light of those losses and notwithstanding the payment of compensation under the 1991 agreement and the 1996 agreement, the Commission held in that decision that there was no overcompensation. 91 As regards the reasons for SNCM’s losses, it must be observed that both in the contested decision (recitals 281, 282 and 326) and in Decision 2002/149 (recital 123), to which recital 257 in the contested decision refers, the Commission stated that the financial compensation provided for under the 1991 agreement and the 1996 agreement was insufficient to cover the whole of the cost of the public service obligations because, in particular, it was relatively independent of revenue. In addition, in recital 282 in the contested decision, the Commission stated that the applicant’s arrival on the market in 1996 had negative effects on SNCM’s results. 92 It follows that the applicant’s objections regarding the reasons given in the contested decision relating to the undercompensation for the performance of public service obligations must be rejected in their entirety. The setting-aside of the concerns which led to the initiation of the formal investigation procedure93 The applicant considers that the contested decision fails to state to the requisite legal standard the reasons why the Commission set aside the concerns which led to the initiation of the formal investigation procedure as regards the connections between SNCM’s losses and its public service obligations, the effect of SNCM’s ship purchasing policy on its accounting results, the measures proposed in order to increase SNCM’s productivity and the measures to reduce intermediate consumption, as well as SNCM’s future fares policy. 94 In order to consider whether the Commission gave adequate reasons in the contested decision in that regard, it is necessary to determine the scope of the concerns raised by the Commission in the decision to initiate the formal investigation procedure, in order, next, to establish the extent to which the contested decision set out the reasons why those concerns could be set aside. 95 As regards, first, the connections between SNCM’s losses and its public service obligations, it must be held that the Commission raised concerns in the decision to initiate the formal investigation procedure as to SNCM’s restoration of viability, on the ground that the analytical data provided in the restructuring plan did not allow the structural causes of SNCM’s chronic losses over recent years to be determined. The Commission considered that it had to establish that the restructuring aid would not serve to offset past operating losses and that the restructuring plan under which the aid was to be made available would put the undertaking on a footing which would enable it to make an operating profit in future. In that regard, the Commission noted in the decision to initiate the formal investigation procedure, first, that the restructuring plan did not show how SNCM was to reduce its losses on routes which had formerly been subject to public service obligations and, secondly, that the plan had to be able to guarantee the viability of the company even if SNCM were not to be awarded the public service obligations contract for services between Marseilles and Corsica after 2006. 96 It follows that there are two separate aspects to the concerns raised by the Commission regarding the connections between SNCM’s losses and the public service obligations, namely, first, whether the aid for the costs connected with the public service obligations between 1991 and 2001 was set at the proper amount, as that aid was to allow the company to cover past losses arising exclusively from the performance of the public service obligations under the 1991 agreement and the 1996 agreement and, secondly, the contribution which the aid would make to the restoration of viability for the period between 2002 and 2006, as that aid was to allow the company to reduce its future losses on routes which are not, or are no longer going to be, subject to public service obligations. 97 As regards, first, the question whether the aid in relation to the costs connected with the public service obligations between 1991 and 2001 was set at the proper amount, it is sufficient to note that it has already been held above that the reason why the losses incurred by SNCM in the past on services to Corsica, which were at the time all subject to public service obligations, could be regarded as corresponding to the additional costs borne by SNCM in order to perform those obligations was set out to the requisite legal standard both in the contested decision, in particular in recitals 256, 257, 281 and 282, and in Decision 2002/149, to which it refers. 98 It must be held in that regard that the applicant’s objections regarding the reasoning set out in recitals 281 and 282 in the contested decision, by which it contends that the 2002 agreement is not designed to offset losses and that the arrival of a competitor in 1996 was the result of Community liberalisation, in reality concern the merits of the Commission’s findings and not the reasoning underlying them. Those objections must accordingly be rejected as being irrelevant. 99 Furthermore, as regards any losses that may have been incurred in the carrying-out of public service obligations under the 2002 agreement, the contested decision gives adequate reasons in recital 256 in the decision, where the Commission states that those losses cannot be recognised as the compensation was agreed on a contractual basis. 100 As regards, secondly, the contribution of the aid to the restoration of viability for the period from 2002 to 2006, it must first of all be held that in recitals 263 to 282 in the contested decision, contrary to what the applicant contends, the Commission analysed the causes which led to SNCM’s difficulties and put a figure on the costs arising from them. In particular, in recitals 270 to 273, the Commission considered, in that context, the rationality of SNCM’s purchasing policy for new ships. Next, in recitals 299 to 303, the Commission set out the reasons why the restructuring plan ought to allow for a restoration of SNCM’s viability both prior to 2006 and after that date. It must be noted in that regard that in recitals 142 to 152 in the contested decision the Commission set out in detail the anticipated financial results under the ‘intermediate scenario’ adopted both for the period between 2002 and 2006 and for the period after 2006. In addition, in recital 315 in the contested decision, the Commission noted that SNCM’s plans for recovery included the sale of four ships. Furthermore, in recitals 111 and 113 in the contested decision, the Commission, contrary to what the applicant maintains, noted and described the additional undertakings proposed by the French authorities following the decision to initiate the formal investigation procedure in order to reduce staff costs and the purchase cost of intermediate consumption. In recital 114 in the contested decision, the Commission held that those undertakings, combined with fleet reduction, had led to a reduction of maintenance expenditure from EUR 29.6 million to EUR 23 million between 2001 and 2002. 101 It is clear that, in those recitals, taken as a whole, the Commission set out to the requisite legal standard the reasons why SNCM will be in a position under the restructuring plan to reduce its future losses on those routes that are not, or will no longer be, subject to public service obligations. 102 None of the arguments put forward by the applicant is capable of affecting that conclusion. 103 With respect, first of all, to the objections based on a purported lack of consistency in the reasons for the contested decision where it holds that the proposed savings on intermediate purchases are inadequate (recital 279) and that the accounts for 2002 are not positive, contrary to the forecasts made in the restructuring plan (recital 280), it is clear that those objections relate to the merits of the contested decision in relation to those points and not its reasoning, and they must accordingly be rejected as being irrelevant. 104 As regards, next, the contention that recitals 258 to 260 in the contested decision do not specify the reasons why the aid must be assessed under the guidelines, it suffices to hold that that contention is incorrect, since the contested decision states in recital 260 that the aid was notified as restructuring aid and that its amount exceeds that of the undercompensation for the performance of public service obligations, and next, in recital 326, that the restructuring aid may cover both the costs of the different actions provided for in the restructuring plan and the losses incurred by the company in carrying out its public service agreements until the end of 2001. 105 As regards, lastly, the contentions based on the judgment of the Court of Justice in Case C-280/00 Altmark Trans and Regierungspräsidium Magdeburg [2003] ECR I-7747, it must be observed that, as that judgment was delivered after the contested decision, the Commission was clearly under no duty to set out the reasons why the conditions laid down in that judgment were satisfied in the present case, a point which is, moreover, accepted by the applicant. 106 With respect, in the second place, to the effect of SNCM’s ship purchasing policy on its accounting results, it suffices to hold that the applicant’s objection, by which it calls into question the finding in recital 271 in the contested decision that SNCM has not excessively invested in fleet renewal in recent years, seeks to challenge the merits of the Commission’s appraisal of that matter and the methodology adopted for that purpose, by criticising it, in particular, for failing to take account of a number of factors which the applicant considers to be relevant and for having restricted itself to a purely balance-sheet-related analysis. Such an objection is irrelevant in the context of the present plea. 107 In any event, it must be held, as has already been stated above, that recitals 269 to 273 in the contested decision set out to the requisite legal standard the reasons why SNCM’s ship purchasing policy did not lead to overinvestment. 108 With respect, in the third place, to the measures proposed in order to increase SNCM’s productivity and the absence of concrete measures to reduce the amount of intermediate consumption, it must again be held that, by its objections in that regard, the applicant is challenging the merits of the Commission’s appraisal. Those objections seek to deny that the concerns in this area could be set aside, since the Commission holds in recitals 279 and 280 in the contested decision that the plan entitled ‘achetons mieux’ (‘buy better’) is not sufficient and that the results for 2002 are not positive. Such objections are irrelevant in the context of the present plea. 109 In any event, it must be noted that it has already been observed above that the contested decision was adequately reasoned in that regard by recitals 113, 114 and 279. 110 With respect lastly, and in the fourth place, to SNCM’s future fares policy, it is once again clear that the applicant is truly challenging the merits of the Commission’s appraisal. The applicant is essentially arguing that the Commission’s appraisal of SNCM’s fares policy prior to the adoption of the contested decision was incorrect and that it did not have the material available to it to make an appraisal of that policy in 2003. Those objections are irrelevant in the context of the present plea and must accordingly be rejected. 111 Furthermore, inasmuch as the applicant’s objections are to be understood as criticising the Commission for failing to provide a specific response in the contested decision to the applicant’s contentions regarding SNCM’s ticket prices prior to the adoption of the decision, it must be observed that the Commission expressly states in recital 359 that the arguments put forward by the French Republic in that regard, which are set out in recitals 119 to 123 and 191 to 203, enable those contentions to be rejected. 112 It follows from the above that the applicant’s objections and arguments relating to the reasoning underlying the setting-aside of the concerns which gave rise to the initiation of the formal investigation procedure must be rejected in their entirety. The assessment of restoration of viability 113 The applicant is of the view that the contested decision is inadequately reasoned as regards restoration of viability, inasmuch as the Commission does not state the reasons why it agreed to take account, as a derogation from the principle laid down in the guidelines, of external factors, namely the expansion of the Maghreb market, anticipated developments in services to and from Nice and the possibility that the 2002 agreement would not be renewed after 2006. 114 It must be noted in that regard that point 32 of the guidelines states that ‘the improvement in viability must derive mainly from internal measures contained in the restructuring plan and may be based on external factors such as variations in prices and demand over which the company has no great influence if the market assumptions made are generally acknowledged’. 115 In the present case, as regards, in the first place, the expansion of the market to the Maghreb, the Commission states in recital 300 in the contested decision that the effect of the restructuring measures is not dependent on market trends ‘except for the increase of services to the Maghreb which corresponds in particular to a return to the position which SNCM had in the mid-1990s’. In recitals 66 to 81 in the contested decision, the Commission held, on the basis of the market survey provided for the purposes of the restructuring plan, that that market was likely to expand considerably. In the light of point 32 of the guidelines, the applicant was thus fully able to understand the reason underlying the Commission’s conclusion set out in recital 300 in the contested decision. 116 Furthermore, the same findings regarding the expansion of the market to the Maghreb were also referred to explicitly in the decision to initiate the formal investigation procedure. Although the applicant argued in its written observations of 8 January 2003 regarding the initiation of that procedure that SNCM’s market share objectives were ambitious having regard to the strong competition offered by the national companies and stated that SNCM’s commercial reputation in North Africa was a negative one, at no stage did it challenge the assumption adopted in the market survey that there would be a considerable increase in the market. Apart from the fact that that conduct confirms the fact that the assumption of an increase in that market was generally acknowledged for the purposes of the guidelines, it also explains why the Commission did not provide more specific reasons for that aspect of the contested decision in the absence of any objection on the applicant’s part. 117 With respect, in the second place, to the continuation of services between Nice and Corsica, the applicant’s objection is based on an incorrect reading of the contested decision. Contrary to what the applicant maintains, the Commission does not accept in the contested decision that those services should be maintained on the ground that the market is expanding, but for the reasons set out in recital 302, namely that the importance of those services is diminishing and that the early depreciation of the Liamone will facilitate a return to positive results. It must also be observed that, in recital 283 in the contested decision, the Commission referred in that context to its concern to avoid the emergence of a de facto monopoly of the applicant on services to Corsica. While it is true that, in recital 316 in the contested decision, which the applicant does not refer to, the Commission refers to the strong growth in the market throughout the Gulf of Genoa and Toulon, it does not, however, do so in order to supply an external justification for SNCM maintaining its position in Nice, but, on the contrary, to emphasise the importance of the compensatory measures in favour of competitors, including, in particular, the virtual withdrawal from Toulon and the limitation on round trips on services to Nice. Plainly, the Commission could be under no duty to provide reasons in its decision for a position which it does not adopt. 118 As regards the alleged absence of reasons for the failure to take account of options other than retaining or withdrawing services between Nice and Corsica, it is clear from the applicant’s observations of 8 January 2003 on the initiation of the formal procedure that, contrary to what it contends in its reply, it did not put forward any other option, but merely claimed, in essence, that SNCM was not capable of becoming profitable on that route. In those circumstances, the Commission did not have to provide reasons in the contested decision concerning the failure to take account of other options. 119 With respect, in the third place, to the possibility that the 2002 agreement might not be renewed after 2006, it is sufficient to hold that the contested decision is adequately reasoned in that regard in recital 303, as the Commission states there that, with regard to long-term viability, ‘implementation of the plan should make it possible for the company to face competition effectively when contracts are renewed’. Furthermore, the contested decision states in recital 149 that ‘it is important to know what will be the company’s competitive position in 2006 at the end of the current public service delegation contract and how viable the company will be’, a point which is considered again in recital 310. 120 Inasmuch as the applicant argues that it is inconsistent to treat the possibility of a non-renewal of the agreement as premature, while at the same time assessing long-term viability, it is sufficient to hold that that objection, which relates to the merits of the contested decision, is irrelevant in the context of the present plea. 121 It follows from the above that the objections and arguments of the applicant as to the reasons relating to restoration of viability must be rejected in their entirety. Whether the assumptions underlying the restructuring are realistic122 As regards the question whether the assumptions underlying the restructuring are realistic, the applicant argues that Commission merely restated the guidelines and indicated, in recital 306 in the contested decision, that the market survey submitted by the French authorities provided a ‘sound basis for scenarios of company development’. 123 It is none the less clear from recitals 139 to 141 in the contested decision that the Commission stated reasons in that decision why the three scenarios relating to financial trends, namely the best-case and worst-case scenarios considered in the market survey and the intermediate scenario adopted in the restructuring plan, which point 33 of the guidelines requires, were a ‘sound basis’ for assessing the company’s development. The Commission states its reasons in relation to the best‑case and worst-case scenarios in recital 139, before concluding that those assumptions ‘on the whole seem to present a situation that is quite representative of possible developments’. In recital 140, the Commission adds that the results under the worst-case scenario could be improved by a fine-tuning by SNCM of its supply to demand according to the time of year. Furthermore, in recital 141 in the contested decision, having compared the trend of the main financial indicators under the three possible scenarios in Table 6, the Commission held that ‘these simulations show[ed] that SNCM should become profitable again in each of the three scenarios’. 124 As to the remainder, the applicant’s objections are indissociable from those relating to restoration of viability. Under point 32 of the guidelines, the requirement that the restructuring plan be based on realistic assumptions relative to future operating conditions exists in order to determine whether the plan allows for a restoration of viability. 125 It is clear from recitals 142 to 148 in the contested decision that the trends envisaged in the intermediate scenario adopted for the purposes of assessing a restoration of viability were determined after an arithmetical analysis of the following points: the redeployment of services to the Maghreb, services between Nice and Corsica, services between Marseilles and Corsica and SNCM’s indebtedness. In addition, it is clear from recitals 149 to 152 that the market survey also took into account the possibility that the public service agreement might not be renewed after 2006. It is also clear that each of those points is addressed specifically in recitals 300 to 304 and, as consideration of the objections relating to restoration of viability has already shown, those recitals contain a sufficient statement of the reasons why the Commission considers that the restructuring plan is capable of procuring a restoration of viability, even if SNCM were not to be carrying out its public service obligations. 126 With respect to the argument based on the increase in the capacity of the fleet in 2004 following the acquisition of a new ship by the applicant, it must be noted that the Commission is not obliged to reply to all the arguments of fact and of law put forward during the administrative procedure. Furthermore, contrary to what the applicant maintains, neither the written observations of 8 January 2003 nor recitals 169 to 174 in the contested decision, which summarise, without challenge by the applicant, the arguments submitted by it at the meeting of 4 February 2003, show that the applicant particularly drew the Commission’s attention to that point. 127 As regards the fact that the Commission has adjudicated in other decisions on the validity of aid to shipping companies after a detailed analysis of the financial trends of the company which is the beneficiary of the restructuring plan, not only having regard to its cash flow, but also to its ability to earn profits and its ability to procure financing (for example, Commission Decision 2002/15/EC of 8 May 2001 concerning State aid implemented by France in favour of the ‘Bretagne Angleterre Irlande’ company (‘BAI’ or ‘Brittany Ferries’) (OJ 2002 L 12, p. 33)), it is sufficient to hold that the extent of the reasoning set out in that decision, to which the contested decision does not refer in support of its own reasoning, does not show in any way that, were it to have been adopted in the same field, the contested decision is inadequately reasoned and, in any event, does not affect the preceding conclusion that recitals 300 to 304 in the contested decision are adequately reasoned as regards the question of restoration of viability. 128 Lastly, inasmuch as the applicant criticises the Commission for having taken account only of the arithmetical assumptions put forward by the French authorities in support of its conclusions regarding restoration of viability, which are, moreover, now shown to be factually incorrect, an objection of that kind, which seeks to challenge the merits of the Commission’s appraisal of the matter, is irrelevant in the context of the present plea. That applies in particular to the argument based on the alleged failure to investigate the cash flow of the beneficiary of the aid and the failure to take account of the increase in the capacity of the fleet as a result of the applicant’s acquisition of a new ship. 129 It follows from the above that the applicant’s objections and arguments regarding the reasoning in relation to whether the assumptions underlying the restructuring are realistic must be rejected in their entirety. Determination of non-strategic shareholdings 130 The applicant considers that the contested decision is inadequately reasoned as regards the reason why SNCM’s shareholding in CMN constitutes a strategic shareholding which accordingly does not have to be disposed of. 131 However, it is clear from recitals 348 to 354 in the contested decision that the Commission set out in detail in the decision, in reply to the arguments put forward by the applicant and by Stef-TFE during the administrative procedure, the reasons why it considered that that shareholding was essential and did not have to be disposed of. In particular, the Commission noted in that regard in recitals 349 to 351 in the contested decision that the two companies participated in carrying out the public service contract, that they had developed synergies on services to Corsica which went beyond what is required by the 2002 agreement and that the fleets of CMN and SNCM were complementary. Those statements clearly provide adequate reasoning in the contested decision in that regard. 132 While it is true, as regards the claim that there was a failure to take into account the value of SNCM’s shares in CMN, that recital 174 in the contested decision shows that that claim was made at the meeting of 4 February 2003, it must be pointed out that the Commission is not under an obligation to reply to all the arguments of fact and of law put forward during that procedure. It must be held that recitals 348 to 354 in the contested decision provide adequate reasons in relation to the shareholding in CMN. Moreover, it must also be observed that the applicant was in a position to understand the Commission’s reasoning in that regard, as it is clear from recital 256 in the contested decision that the Commission took the view that unrealised appreciation could not be taken into account for the purposes of determining the level of resources available to SNCM. 133 As to the remainder, the arguments put forward by the applicant in order to emphasise the allegedly contradictory nature of the reasoning of the contested decision in relation to that point seek in reality to challenge the merits of the contested decision. Those arguments must accordingly be rejected as irrelevant in the context of the present plea. 134 It follows from the above that the objections and arguments put forward by the applicant regarding the reasoning in relation to the level at which shareholdings are to be determined to be non-strategic must be rejected in their entirety. Conclusion as regards the first plea in law135 It follows from all the above points that the first plea in law, based on infringement of Article 253 EC, inasmuch as the contested decision is inadequately reasoned, must be rejected. 3. The second plea, based on infringement of Article 87(3)(c) EC, of Regulation No 659/1999 and of the guidelines inasmuch as the contested decision contains errors of fact and manifest errors of assessment136 By this plea, the applicant argues that the contested decision contains errors of fact and manifest errors of assessment regarding the assessment of a part of the aid as compensation for the performance of public service obligations, the analysis of the causes leading to SNCM’s financial difficulties, compliance with the guidelines and the need for the conditions imposed by the Commission. Preliminary observation regarding the review undertaken by the Court137 It is settled case-law that, in the application of Article 87(3)(c) EC, the Commission has a wide discretion, the exercise of which involves complex economic and social assessments which must be made in a Community context (Case 310/85 Deufil v Commission [1987] ECR 901, paragraph 18, and Case C‑372/97 Italy v Commission [2004] ECR I‑3679, paragraph 83). 138 Judicial review of the manner in which that discretion is exercised is confined to establishing that the rules of procedure and the rules relating to the duty to give reasons have been complied with and to verifying the accuracy of the facts relied on and that there has been no error of law, manifest error of assessment in regard to the facts or misuse of powers (Case C-409/00 Spain v Commission [2003] ECR I-1487, paragraph 93; Italy v Commission, cited in paragraph 137 above, paragraph 83; Case T-149/95 Ducros v Commission [1997] ECR II‑2031, paragraph 63; Case T-123/97 Salomon v Commission [1999] ECR II-2925, paragraph 47; Case T-110/97 Kneissl Dachstein v Commission [1999] ECR II‑2881, paragraph 46; and Westdeutsche Landesbank Girozentrale v Commission, cited in paragraph 62 above, paragraph 282). In particular, it is not for the Court to substitute its own economic assessment for that of the author of the decision (British Airways and Others v Commission, cited in paragraph 48 above, paragraph 79). 139 Furthermore, case-law provides that the Commission is bound by the guidelines and notices that it issues in the area of supervision of State aid inasmuch as they do not depart from the rules in the Treaty and are accepted by the Member States (Spain v Commission, cited in paragraph 138 above, paragraph 95; Case T‑198/01 Technische Glaswerke Ilmenau v Commission [2004] ECR II-2717, paragraph 149; and Case T-176/01 Ferriere Nord v Commission [2004] ECR II‑3931, paragraph 134). 140 It is clear from case-law that by assessing specific aid in the light of such guidelines, previously adopted by it, the Commission cannot be considered to exceed the limits of its discretion or to waive that discretion. On the one hand, it retains the power to repeal or amend any guidelines if the circumstances so require. On the other, the guidelines concern a defined sector and are based on the desire to follow a policy established by it (Vlaamse Gewest v Commission, cited in paragraph 66 above, paragraph 89). 141 In that context, it is for the Court to verify whether in the present case the requirements which the Commission has itself laid down, as mentioned in those guidelines, have been observed (Case T-35/99 Keller and Keller Meccanica v Commission [2002] ECR II-261, paragraph 77, and Ducros v Commission, cited in paragraph 138 above, paragraphs 61 and 62). 142 Furthermore, it must be pointed out that, in an action for annulment under Article 230 EC, the legality of a Community measure must be assessed on the basis of the elements of fact and of law existing at the time when the measure was adopted. In particular, complex assessments made by the Commission must be examined solely on the basis of the information available to it at the time when those assessments were made (Salomon v Commission, cited in paragraph 138 above, paragraph 48, and Kneissl Dachstein v Commission, cited in paragraph 138 above, paragraph 47). 143 Lastly, the mere assertion that one of the conditions authorising aid is not complied with cannot cast doubt on the legality itself of the decision authorising it. In general, the legality of a Community act cannot depend on the possible existence of opportunities for circumvention or on retrospective considerations of its efficacy (British Airways and Others v Commission, cited in paragraph 48 above, paragraph 291, and Salomon v Commission, cited in paragraph 138 above, paragraph 49). 144 It is in the light of the abovementioned principles that the objections and arguments put forward by the applicant must be considered. The objections relating to the validity of the contested decision 145 In so far as the present plea is based on infringement of Regulation No 659/1999, it must be rejected at the outset as being irrelevant. That regulation, which lays down the rules of procedure applying to the investigation of State aid, cannot be infringed in any way by the alleged errors of fact and manifest errors of assessment attributed to the Commission, particularly since the contested decision was adopted after the initiation of the formal investigation procedure provided for under Article 88(2) EC. It is also clear that the applicant does not put forward any argument to show that the contested decision infringes Regulation No 659/1999 and fails to identify the provisions of that regulation infringed by the decision. 146 The present plea accordingly falls to be considered only in so far as it alleges infringement of Article 87(3)(c) EC and of the guidelines. The assessment of part of the aid as public service compensation 147 The applicant argues that the Commission incorrectly assessed the part of the aid representing undercompensation for the performance of public service obligations in that, first, it took into account the depreciation of the Liamone, although that vessel is not used for public service obligations and, secondly, it failed to take into account the potential appreciation of the fleet which is used for such obligations. In addition, the applicant refers to the substantial increase in losses between 2000 and 2001. 148 These objections must be rejected as irrelevant in that they aim to establish that the contested decision incorrectly assessed the compatibility of the aid with Article 86(2) EC, since, in recital 260 in the contested decision, the Commission held that the whole of the aid of EUR 76 million in question, including the part representing undercompensation for the performance of public service obligations, should be investigated as restructuring aid. 149 By contrast, it is appropriate to investigate these objections in so far as they aim to challenge the determination by the Commission of the amount of the undercompensation for the performance of public service obligations. 150 As regards, first, the depreciation of the Liamone, the applicant’s objection is based on an incorrect reading of the contested decision. Contrary to what the applicant submits, in calculating the part of the aid representing undercompensation for the performance of public service obligations, the Commission did not take into account the grant relating to that depreciation, but quite the contrary, as is clear from Table 11 in recital 257 in the contested decision, it subtracted the amount of that grant in its calculations. Moreover, in response to questions put by the Court at the hearing, the applicant expressly acknowledged that its reading of the contested decision on that point was incorrect. 151 It follows from the above that the sum of EUR 53.48 million considered by the Commission to represent the non-compensated costs of the public service obligations undertaken by SNCM on services to Corsica between 1991 and 2001 does not include the depreciation of the Liamone. 152 As regards, secondly, the potential appreciation of the fleet used for public service obligations, the applicant states that the market value of the five ships used for public service obligations on 31 December 2001 is higher, to the extent of EUR 22.2 million, than their net book value. The applicant contends that the losses incurred between 1991 and 2001 on services to Corsica, which, according to the Commission, correspond to the undercompensation for the performance of public service obligations, should accordingly be reduced by the amount of that appreciation. 153 It should first be held in that regard (and the point is not contested) that the alleged latent appreciation was not recorded in SNCM’s accounts for 2000 and 2001, which were certified by auditors. As the Commission argues, without being challenged by the applicant, and as the former confirmed at the hearing, it follows from the application of general accounting principles, in particular the principle of prudence, that a company is not in principle entitled to revalue the amount credited to an asset on its balance sheet on the ground that its market value is higher than its book value. The same principles provide that in the contrary case a company must apply early depreciation where the market value of an asset is lower than its book value. 154 It is true that the applicant contends, in general terms, in the context of other objections, that the provisional accounts held by the Commission at the time when the contested decision was adopted differed from the final accounts approved by the auditors, which became available after the adoption of the contested decision. However, the applicant provides no evidence to support that assertion and at no point does it indicate in what way the provisional accounts differ from the certified final accounts. 155 Next, and most importantly, it must be pointed out that, in recital 272 in the contested decision, the Commission indicated that two of the five ships used for public service obligations before 2002 were mortgaged, while, as regards the three remaining ships, the company had not found any bank prepared to accept them under mortgage guarantee. The Commission held in that respect that ‘the level of the company’s indebtedness and its weak cash flow, detailed below, which only just enables it to service its existing debt, are such that it is unlikely that any bank, acting as a private lender under market conditions, would be inclined to offer SNCM an additional loan. The risk that SNCM would not be able to pay back the instalments of the debt would be significant in view of the sums involved. Similar difficulties make it impossible for SNCM to have recourse to lease-back operations to reduce its indebtedness. The Commission’s experience in effectively seizing ships or aircraft shows that it is difficult to enforce this in practice if such assets are used for services of national or regional interest’. It is clear that, although the applicant challenges those findings, it provides no concrete evidence under the objections concerned that would call them into question. 156 Lastly, inasmuch as the applicant argues that SNCM should have realised the purported gains by way of appreciation in order to produce additional revenue from its own resources and thus to reduce the losses arising from the exercise of public service obligations, that contention must be rejected, as it would require the sale of precisely those ships that are used by SNCM for its public service obligations. 157 In those circumstances, it does not appear that the Commission committed a manifest error of assessment by excluding latent appreciation of the ships used for public service obligations from the calculation of the undercompensation for the performance of public service obligations. 158 Contrary to what the applicant contends, there is no inconsistency with the methodology adopted in Decision 2002/149. As recital 102 in that decision makes clear, the Commission there took account, in order to correct the amount of losses arising from the performance of public service obligations, of the amount of the capital gains actually realised on three ships that were disposed of between 1991 and 1999. By contrast, that decision does not show that the Commission also took into account latent appreciation on other ships which had not actually been disposed of. While it is therefore correct that in Decision 2002/149 the Commission found it necessary to correct SNCM’s accounting results for services to Corsica by allocating a capital gain to it which did not appear in the figures for those services but was included in other figures, the situation in the present case is entirely different, since the applicant criticises the Commission for failing to correct SNCM’s accounts by taking account of appreciation that is not included in the accounts. 159 As for the point which was stressed by the applicant that, conversely, the Commission took account of the depreciation of the Liamone in determining the restructuring costs, it suffices to hold that that point, as has been held above, results from the strict application of accounting rules which have not been challenged by the applicant. 160 As regards, thirdly, the alleged significant increase in SNCM’s losses between 2000 and 2001, it is sufficient to hold that, far from calling into question the finding set out in recital 256 in the contested decision that SNCM incurred substantial deficits between 1991 and 2001 on all services to Corsica that were subject to public service obligations, that point, assuming it to be true, confirms that finding and cannot accordingly call into question in any way the analysis in the contested decision relating to the part of the aid corresponding to the undercompensation for the performance of public service obligations. 161 Accordingly, the objections and arguments put forward by the applicant relating to the determination of the undercompensation for the performance of public service obligations must be rejected in their entirety. The analysis of the causes which led to SNCM’s financial difficulties162 The applicant essentially argues that SNCM’s difficulties arise not from the constraints imposed by the public service obligations but from its overcapacity, which results from a policy of overinvestment in new ships. 163 It should be noted at the outset in that regard that point 33 of the guidelines provides that ‘the restructuring plan should describe the circumstances that led to the company’s difficulties, thereby providing a basis for assessing whether the proposed measures are appropriate’. 164 It follows that, as the Commission rightly contends, the analysis of the causes of SNCM’s difficulties set out by the Commission in recitals 263 to 281 in the contested decision, giving particular consideration to SNCM’s ship purchasing policy, the extent of the wage bill, the effect of intermediate purchases and the effect of public service constraints, is not necessary in itself, but only for the purposes of determining the adequacy of the measures proposed to remedy those difficulties and thus to procure restoration of the viability of the company concerned. 165 It follows that in the present case the objections put forward by the applicant regarding SNCM’s overcapacity can establish that the contested decision is flawed only if they are able to demonstrate the inadequacy of the measures provided for under the contested decision to allay the concerns raised by the Commission in relation to that point. 166 It should be pointed out in that regard that in the contested decision the Commission, having stated in recital 333 that ‘the reduction of the fleet provided for in the restructuring plan should be balanced in the light of the ship purchase policy which SNCM has pursued in recent years’, held in recitals 336 to 339 in the contested decision that it was appropriate, without making a finding as to the existence of overcapacity on SNCM’s part or quantifying that overcapacity, to impose on SNCM, as well as the undertaking given in the restructuring plan, referred to in recitals 97 to 101 and 315, to dispose of four ships, three additional conditions intended to reduce its capacity, namely a limit on the fleet of the SNCM Group to the current number of ships following disposal of the four ships, a prohibition on SNCM from renewing its fleet during a specified period and a limit on the number of round trips on the various services to Corsica. As required by points 35 and 36 of the guidelines, those conditions reflected the Commission’s concern, expressed in recitals 311 to 317 in the contested decision, to mitigate any adverse effects of the aid on competitors by limiting SNCM’s presence to its traditional market, namely services to Corsica. 167 It must be held that, while by the present objections the applicant is arguing that SNCM’s capacity is excessive, the applicant does not explain why the undertaking by the French authorities as to the disposal of four ships and the additional conditions imposed by the Commission referred to above do not represent an adequate remedy for the alleged overcapacity. 168 In those circumstances, the applicant’s objections in that regard are irrelevant. 169 In any event, those objections are unfounded. 170 First, the Court must reject the contention that the Commission’s finding in recital 271 in the contested decision that SNCM had not excessively invested in fleet renewal in recent years was reached on the basis of net immobilisations of ships and not on the basis of trends in the capacity offered by SNCM as regards places offered. 171 In examining the trend in net immobilisations of ships, the Commission was not seeking to investigate whether SNCM was providing excess capacity but, as recital 270 in the contested decision and point III 2 of the decision to initiate the procedure explicitly state, the rationality of the company’s purchasing decisions in order to be satisfied that past losses did not result from factors other than public service obligations between 1991 and 2001. Thus, having considered the trend in net immobilisations of SNCM’s ships and held that SNCM had not invested excessively, the Commission went on, in recital 272 in the contested decision, to examine SNCM’s indebtedness as a result of the purchase of the ships in question. 172 It follows that the applicant’s objection is made on the basis of an incorrect reading of the contested decision.173 In any event, it is plain that the statistics put forward by the applicant relating to the trend in vessel capacity as regards places do not support its argument, since they clearly show, as, moreover, the applicant does not dispute, that that capacity has reduced, taking into account the sale of four ships after refitting and the purchase of three other ships. In that regard, the statement made in the reply that the average capacity of the three new ships as regards places is, for its part, higher than that of the previous fleet must be rejected as being irrelevant, as the purported average capacity is a purely theoretical piece of information and bears no relationship to the actual capacity offered by SNCM’s ships. 174 With respect to the assertion that that reduction in the number of places does not bear any relation to the reduction in traffic suffered by SNCM and was dictated more by the alleged reduction in SNCM’s turnover, the reduction in public service obligations and the increase in the number of crossings by the applicant, it must be pointed out that that contention is irrelevant since it is on those grounds in particular that the Commission regarded it as necessary, without making a finding as to the existence of overcapacity on SNCM’s part or quantifying that overcapacity, to reduce the capacity offered by SNCM by imposing various conditions. It must once again be stated that, although the applicant criticises the Commission for failing to hold that SNCM’s capacity is excessive, it does not challenge the remedies put forward by the Commission by way of compensatory measures in favour of competitors. 175 In any event, the applicant cannot claim to prove SNCM’s overcapacity by invoking the fact that the Pascal Paoli, in service on the Marseilles to Bastia route, offers a higher number of places than those provided for in the 2002 agreement. It is clear from Annex I to that agreement that it lays down a minimum number of places in order to ensure a minimum service, termed a ‘basic’ service. Furthermore, the Commission held, without being challenged by the applicant, that the Pascal Paoli had an identical number of cabins to those required under the public service obligations. 176 As regards, secondly, the claim that SNCM’s losses increased in 2000 and 2001, that is to say in precisely those years in which the Liamone was delivered and the Danielle Casanova was ordered, it is sufficient to hold that the applicant has provided no concrete evidence to establish a causal connection between those matters and the increases in SNCM’s losses. 177 In the light of those points, the objections regarding the analysis of the causes of SNCM’s difficulties must be rejected in their entirety. Compliance with the guidelines178 The applicant submits that the Commission has committed errors of fact and manifest errors of assessment as regards compliance with the conditions laid down in the guidelines with respect to whether the firm which is the beneficiary of the aid is a firm in difficulty, the assessment of the restoration of viability, the avoidance of undue distortions of competition and the limitation of aid to the minimum. 179 It should be noted as a preliminary point that, by those objections, the applicant is merely alleging breach by the Commission of the conditions set out in the guidelines as regards the four points referred to above, and does not claim that the guidelines are unlawful in the light of Article 87(3)(c) EC. 180 In those circumstances, consideration of those objections must be restricted to examining whether the Commission complied with its own guidelines and cannot extend to the lawfulness of those guidelines under the EC Treaty. As the applicant has not raised any argument in that regard, such a question does not form part of the case which the Court can or must consider of its own office (see, inter alia, Commission v Sytraval and Brink’s France, cited in paragraph 52 above, paragraph 67). 181 It is in the light of that preliminary observation that the Court will consider the objections and arguments put forward by the applicant in order to show that the contested decision infringed the guidelines. – Whether SNCM was a firm in difficulty 182 The applicant essentially criticises the Commission for having held that SNCM was a firm in difficulty in the light of the disappearance of its share capital, taking the net book value of its assets as a basis and without taking into account the possibility of rendering some of them liquid. 183 While there is no Community definition of what constitutes a firm in difficulty, the Commission states at point 4 of the guidelines that it regards a firm as being in difficulty ‘where it is unable, whether through its own resources or with the funds it is able to obtain from its owners/shareholders or creditors, to stem losses which, without outside intervention by the public authorities, will almost certainly condemn it to go out of business in the short or medium term’. 184 The Commission states in point 5(a) of the guidelines that ‘in particular, a firm is, in any event and irrespective of its size, regarded as being in difficulty for the purposes of these Guidelines … in the case of a limited company, where more than half of its registered capital has disappeared and more than one quarter of that capital has been lost over the preceding 12 months’. In addition, in point 6 of the guidelines, the Commission indicates: ‘The usual signs of a firm being in difficulty are increasing losses, diminishing turnover, growing stock inventories, excess capacity, declining cash flow, mounting debt, rising interest charges and falling or nil net asset value … In any event, a firm in difficulty is eligible only where, demonstrably, it cannot recover through its own resources or with the funds it obtains from its owners/shareholders or creditors.’ 185 It follows that, although the guidelines provide that a firm is ‘in any event’ regarded as being in difficulty where a material part of its share capital has disappeared, there is nothing to prevent a firm from establishing that it is in financial difficulty for the purposes of the guidelines by the use of other evidence, such as the factors referred to above, even if it has not lost a significant part of its share capital. 186 In the present case, the Commission took the view that SNCM satisfied both the condition laid down under point 5(a) of the guidelines and that laid down in point 6. Accordingly, after holding in recital 291 in the contested decision that SNCM had lost more than half of its share capital, more than a quarter of which had disappeared during the preceding year, it held, in recitals 292 to 294 in the contested decision, that other factors showed that SNCM was a firm in difficulty for the purposes of the guidelines. The Commission referred in that regard to the increase in losses, the reduction in turnover, the increase in financial debt, the increase in financial charges, the reduction in capital, the weakness of capital in relation to the company’s size, financing requirement and the net fixed assets of the company, together with the weakness of its internal financing capacity. The Commission went on to state, in recital 295 in the contested decision, that the French authorities had confirmed to it that the banks were refusing to lend money to SNCM because of its indebtedness, even though SNCM proposed to put up its newest vessels, unencumbered by mortgage or other servitude, as a security for a bank loan. 187 It is clear that, although, by the objections in question, the applicant denies that the condition laid down under point 5(a) of the guidelines is satisfied, it does not actually challenge those findings of the contested decision. 188 Taking the applicant’s position at its highest, its first submission is that SNCM’s balance sheet for the 2002 financial year did not bear an auditors’ certificate. It is however clear that that contention is not supported by any concrete evidence. 189 To the extent that, by that objection, the applicant criticises the Commission for having adopted the contested decision on the basis of provisional accounts, a point which is not contested and is explicitly referred to in recitals 17 and 293 in the contested decision, it suffices to hold that the applicant puts forward no evidence in that regard to show that the final accounts differed from the provisional accounts. 190 The manifestly unfounded allegations relating to the annual accounts of SNCM must accordingly be rejected at the outset.191 Next, as regards more particularly the factors referred to in recitals 293 and 294 in the contested decision, it must be held that the applicant does no more than dispute the Commission’s analysis of SNCM’s internal financing capacity. It is clear that the other factors referred to in the contested decision, in particular the level of losses and of financial indebtedness, are capable by themselves of establishing that SNCM was a firm in difficulty. While the applicant challenges the level of SNCM’s indebtedness for the first time in its observations on the statements in intervention, it fails however to indicate in what way the purported error should mean that the Commission’s conclusion that SNCM was a firm in difficulty should be altered. At several points in its pleadings, the applicant itself forcefully pointed out the significant increase in SNCM’s indebtedness between 2000 and 2001 as the result of alleged overinvestment in ships. 192 Those factors are, in any event, not called into question by the claim, which the applicant made for the first time in the reply, that SNCM carried on a fares war. Such conduct is not incompatible in any way with the existence of financial difficulties. On the contrary, the fact that SNCM offered extremely low prices, possibly beneath the level of its costs, may bear out the fact that it is a firm in difficulty, since such conduct is capable of resulting in financial losses. The fact, also mentioned in the reply, that SNCM appointed a new managing director in 2003 cannot be taken into account for the purposes of considering the lawfulness of the contested decision, since it took place after the latter’s adoption. 193 Lastly, as regards the assertion that, contrary to what the Commission stated in recital 295 in the contested decision, some ships were available to be put up as security for a bank loan, it suffices to hold that that assertion is not supported by any concrete evidence. At most, in its observations on the statements in intervention, the applicant states in that regard that, according to SNCM’s statement in intervention, that company obtained a credit of EUR 22.5 million at the end of 2001 and that it could have obtained a short-term credit of EUR 40 million in 2002. However, in reply to a question from the Court on that point, SNCM explained at the hearing that the ‘credit’ was in reality an existing line of credit which was entirely exhausted at the time when the contested decision was adopted. It is clear that the applicant did not dispute that explanation, which is, moreover, confirmed by recital 272 in the contested decision, where the Commission states that, having regard to SNCM’s indebtedness and its weak cash flow, no bank acting as a private lender under market conditions would be inclined to offer an ‘additional’ loan to SNCM. In any event, the fact that SNCM obtained or could have obtained bank loans in 2002 does not call into question the fact that, at the time when the contested decision was adopted, the Commission found that the banks were henceforth refusing to make any new lending available to SNCM. In those circumstances, the finding set out in recital 295 in the contested decision, which is also repeated in substantive terms in recital 272 in the decision, must be held to be established. 194 It follows from the above that the fact that SNCM was a firm in difficulty within the meaning of the guidelines must be held to be established to the requisite legal standard by the factors set out in recitals 293 and 294 in the contested decision. 195 Accordingly, the objections put forward by the applicant in order to challenge the Commission’s findings in relation to the disappearance of SNCM’s share capital are ineffective. 196 It must in any event be observed in that regard that, although the applicant criticises the Commission for having undervalued SNCM’s assets in adopting a strictly accounting approach, based on the net value of the assets and disregarding their market value and the possibility of using some of them as security, it fails to indicate how taking the market value of those assets into consideration could lead to a materially different conclusion from that reached in the contested decision, namely that, contrary to what was held in that decision, SNCM did not lose half of its capital and that a quarter of that capital disappeared during the final year. On the contrary, in its observations on the statements in intervention, the applicant itself acknowledges that a quarter of the share capital had disappeared during the final 12 months. Similarly, although, as has already been mentioned above, the applicant maintains that some ships are available to be used as security for a bank loan, it fails to put forward any figures or concrete evidence in support of its contention, apart from material put forward by SNCM itself, which, as stated in paragraph 193 above, does not alter the analysis set out in the contested decision on the matter. 197 It follows from the above that the applicant’s objections regarding the disappearance of SNCM’s share capital are irrelevant and have no factual basis. 198 On those grounds, the objections and arguments put forward by the applicant in relation to the question whether SNCM was a firm in difficulty must be rejected. – Restoration of viability199 The applicant criticises the Commission for not considering an intermediate option between SNCM continuing its activities with the benefit of the grant of aid and the disappearance of that undertaking in the absence of any grant of aid. 200 It is clear that those objections are made on the basis of an incorrect reading of the contested decision. As the Commission rightly submits, the contested decision did not accept either of the extreme solutions which the applicant refers to and opted, in line with what the applicant proposes, for an intermediate solution. 201 Thus, as is stated in recitals 300 to 302 in the contested decision, SNCM was obliged for the purposes of ensuring its restoration of viability, first, to redeploy its activities to the Maghreb in the light of the prospects for growth in that market and, secondly, to abandon those activities which, even after restructuring, would remain structurally loss-making, in particular the services between Italy and Corsica operated by Corsica Marittima. 202 Furthermore, in recitals 315 to 317 in the contested decision, with a view to preventing undue distortions of competition, the Commission required SNCM, as well as terminating services between Italy and Corsica, to implement a virtual withdrawal of services between Toulon and Corsica, to limit the number of round trips made each year from 2003, specifically on services between Nice and Corsica, and to sell four ships. In addition, the Commission thought it necessary, in order to avoid SNCM using surplus liquid assets for aggressive activities that might cause distortions on the market, to prohibit it from financing any new investment other than the costs of redeploying its activities to the Maghreb, even in order to replace existing ships. 203 Lastly, in order to preserve the common interest, the Commission also imposed, in recitals 331 to 367 in the contested decision, a series of requirements on SNCM in order to limit its capacity and to prevent it from adopting an aggressive fares policy. To that end, as well as the measures referred to above relating to the number of round trips and investment, the Commission required SNCM to limit its fleet to the current total number of ships following disposal of the four ships, to dispose of non-strategic shareholdings and prohibited it from acting as a price leader. Those conditions are set out in Articles 2 to 5 of the operative part of the contested decision. 204 It follows from the above that, far from having authorised SNCM to continue its existing activities with the benefit of the grant of the aid in question, the Commission in fact adopted a decision which required SNCM, in order to benefit from that aid, to modify some of its activities significantly. In those circumstances, the applicant’s objections in that regard must be rejected. 205 Inasmuch as the applicant seeks more particularly by these objections to challenge, under the cloak of a general criticism of the investigation of the restoration of viability, the continuing presence of SNCM on services between Nice and Corsica, where the applicant itself is in direct competition with SNCM, it must be observed that, although the applicant appears in its application to criticise the Commission for failing to require SNCM to withdraw completely from services between Nice and Corsica, it submits, in more qualified terms, in its reply that the Commission ought to have required SNCM to reduce its presence on those services. 206 In so far as, in the first place, the applicant criticises the contested decision on the ground that the Commission should have required SNCM to reduce its presence on services between Nice and Corsica, it suffices to hold that such a criticism results from an incorrect reading of the contested decision, since, as is clear from the above, the Commission did indeed require SNCM to take measures for the purpose of reducing its presence on those services in the form of limitations on the number of round trips. It is of no relevance in that regard that the condition imposed by the Commission takes the form of a lowering of the number of annual crossings rather than a reduction in traffic, since in any event it entails a limitation on SNCM’s activities out of Nice. The applicant’s objection in this regard accordingly has no factual basis. 207 In so far as, in the second place, the applicant criticises the contested decision on the ground that the Commission should have required SNCM to withdraw completely from services between Nice and Corsica, it must be pointed out that, in recital 302 in the contested decision, the Commission stated in that regard that, although services from Nice remained uncertain, their relative importance was diminishing and the early depreciation of the Liamone in 2001 would make it possible to turn the company around to positive results on that link and that even a reduced presence from Nice remained necessary for the company’s position on the market as a whole. Furthermore, in recital 338 in the contested decision, the Commission stated that it had not imposed more drastic conditions with regard to capacity reduction because, inter alia, of the prospects for traffic increase to Corsica and the risk of bringing about a situation in which SNCM’s direct competitor had a monopoly position on links between mainland France and Corsica. 208 It is clear, first, that the applicant does not contest the ground set out in recital 302 in the contested decision that the importance of services from Nice is diminishing and that the early depreciation of the Liamone in 2001 will make it possible to turn the company round to positive results on that link. 209 Secondly, with respect to the reasoning relating to SNCM’s position on the market as a whole, the applicant, without actually contesting it, merely states that it does not understand it. It is plain that by that reasoning the Commission was accepting that SNCM’s presence on services between Nice and Corsica was necessary in order to reduce its dependence on the traditional route between Marseilles and Corsica, which is the subject of public service obligations. That is apparent from the final part of recital 302 in the contested decision, which states that redeployment to the Maghreb will help to reduce the company’s dependence on that traditional route. Contrary to what the applicant argues, SNCM remains vulnerable at Marseilles, since the 2002 agreement expires in 2006 and it has no exclusive rights on that route. It is also the case that the applicant withdrew from the tender process relating to the award of the 2002 agreement. Moreover, the applicant cannot reasonably deny the need for SNCM to diversify its services, since the applicant operates services on four routes to Corsica. Furthermore, SNCM explained in that connection, without being challenged by the applicant, that inasmuch as a significant number of journeys are made from Nice and to Marseilles (or vice versa) withdrawal from Nice would necessarily have negative repercussions as far as Marseilles is concerned. Similarly, as is clear from recital 205 in the contested decision, which is not challenged by the applicant, the French authorities have emphasised the complementary relationship between services from and to Nice and Marseilles and the need for SNCM to provide a balance of services in the light of the applicant’s presence on routes from four mainland ports. 210 As regards the objection set out in the observations on the statements in intervention that the retention of unprofitable services is not justified by its complementary relationship with more profitable services, that objection is founded on two unproven hypotheses. First, for reasons which will be addressed in detail below, the applicant fails to show in any way that routes from Nice are unprofitable. Secondly, as regards routes from Marseilles, it is clear that, contrary to what the applicant suggests, not only can its profitability not be imputed to a purported monopoly on that route, as SNCM has no exclusive rights in relation to those routes, but also that the applicant fails to have regard to the fact that the sole purpose of the 2002 agreement is to reimburse the cost of public service obligations on that crossing, without providing any guaranteed profit to SNCM. Were the applicant’s position to be correct, it would be difficult to understand why the applicant chose to operate from Nice and to cease operating from Marseilles. 211 Thirdly, as regards the risk invoked by the Commission in relation to services from Nice that a monopoly might be created, it must be pointed out that the Court has already held that the Commission was entitled to consider, in the exercise of its wide discretion, that the presence of an undertaking was necessary in order to prevent the emergence of a strengthened oligopolistic structure on the markets in question (Kneissl Dachstein v Commission, cited in paragraph 138 above, paragraph 97). 212 It is clear in the present case that the applicant, which does not deny that it is SNCM’s only current competitor on services between Nice and Corsica, so that the withdrawal of SNCM from that route would confer on the applicant a de facto monopoly on that route, does no more than contend that Moby Lines and other Italian companies might start services on that route. It must however be observed that neither Moby Lines nor any other Italian company mentioned by the applicant is currently active on routes between mainland France and Corsica. Moreover, the applicant provides no information whatsoever to support its argument that shipping companies currently have plans to begin services on that route. In those circumstances, the applicant’s assertions in that regard cannot call into question the Commission’s conclusions with respect to the risk that a monopoly be created in its favour on services between Nice and Corsica. 213 None of the other arguments put forward by the applicant is capable of calling into question the Commission’s findings regarding the need to maintain SNCM’s presence on services between Nice and Corsica. 214 As regards, first, the alleged structurally loss-making nature of that route, it is clear that not only does the applicant not provide any concrete information to support its claim in any way, but also that its uninterrupted presence on that route since 1999 disproves that argument. It should be noted first of all in that regard that the applicant has not ceased increasing its capacity, as the applicant itself points out in its reply, where it refers to an increase of 109% in its sailings to Corsica between 2000 and 2004. Furthermore, the applicant states in its reply that an order for a 12th ship will allow it to increase its services on French routes by 70%. Next, the Commission held in recitals 65 and 86 in the contested decision, without being challenged by the applicant, that the applicant embarked upon an aggressive policy to conquer a larger share of the market on services to Corsica in 2001 and that, under that strategy, it offered overcapacity for one or two years to attract new customers. 215 As regards, next, the assertion that SNCM is selling at a loss on routes where there is competition, it must also be held that that assertion is founded on an unproven hypothesis. The questions raised by the applicant as to why SNCM did not contemplate a restructuring plan in 1992, when it was clear that liberalisation of cabotage would come into force from 1999, are plainly irrelevant. When a restructuring plan was presented to the Commission in 2002, it was under a duty to adopt a position as regards that plan only. The assertion that that plan might, circumstances permitting, have been presented earlier is made on the basis of a theoretical assumption and cannot affect the lawfulness of the contested decision. In any event, SNCM cannot be criticised for seeking to adapt to its new competitive environment by relying on its own resources without seeking restructuring aid, where, furthermore, there has been no evidence to show that the guidelines would have allowed it to have been validly granted to SNCM at that time. 216 Furthermore, as regards SNCM’s purported inability to carry on its activities in an unsubsidised competitive context, it suffices to hold that such an assertion is not substantiated. It should be pointed out in that regard that it is only since 2002 that SNCM has been operating on the route between Nice and Corsica without any public service obligation and the corresponding public compensation. Besides, the applicant itself states in its application that SNCM is operating with three vessels to the Maghreb, which is another route operated without any public service obligation, with positive results. 217 As regards, lastly, the alleged overcapacity on the market to Corsica, it should be noted that in recitals 82 to 87 and 313 in the contested decision, the Commission held that, on the basis of the market survey submitted by the French authorities, there was no overcapacity on services to Corsica. 218 None of the factors put forward by the applicant is capable of calling that conclusion into question. On the contrary, since the applicant itself points out, as has already been established, that it increased its crossings to Corsica by 109% between 2000 and 2004 and that the order for a 12th ship would allow it to increase its services by 70% on the routes to France, the assertion that there is excessive capacity on the market lacks any credibility. Moreover, the applicant fails to provide any information regarding the overall level of services offered. Furthermore, recital 170 in the contested decision, which has not been challenged in this action, shows that at the meeting with the Commission of 4 February 2003 representatives of the applicant stated that the market in respect of crossings between mainland France and Corsica ‘was doing well, with a 17% increase between 2000 and 2001 and 13% increase between 2001 and 2002’, thereby confirming the Commission’s finding, recorded in recital 61 in the contested decision, that, on the basis of the market survey submitted by the French authorities, the market was experiencing sustained growth. Similarly, it should be noted that, according to the applicant’s own figures put forward in the reply, the market rose by 6.6% in 2000 to 2001, by 8.3% in 2001 to 2002 and, although it showed some levelling off, by 1% in 2002 to 2003. In that regard, the clear difference between these figures and those for the preceding periods serves, moreover, only to cast doubts upon the credibility of the applicant’s line of reasoning. Lastly, as regards the figures put forward in the observations on the statements in intervention in order to show a reduction in the number of passengers at the beginning of 2004, it suffices to hold that not only do those figures concern a period after the contested decision, but also, as they relate only to a single year, they cannot by themselves call into question the forecasts of growth over the period from 2002 to 2006. 219 It follows from the above that none of the objections put forward by the applicant is capable of showing that the Commission committed a manifest error of assessment in failing to require SNCM to withdraw completely from the Nice to Corsica route. 220 The applicant’s objections and arguments relating to restoration of viability must accordingly be rejected in their entirety. – The prevention of undue distortions of competition 221 The applicant argues that the Commission incorrectly assessed the distortions of competition arising from the grant of the aid in question and failed to consider a number of distortions which became apparent on the investigation of that aid. 222 As regards, first, the distortions of competition arising from the grant of the aid in question, it should be noted that in recital 312 in the contested decision the Commission held that, in accordance with point 39 of the guidelines, it was necessary to limit SNCM’s presence on its traditional market, namely services to Corsica, where it faces competition from Community operators, which is not the case as regards services to the Maghreb. Thus, in recitals 313 to 317, having held that there was no excess capacity on the market, the Commission accepted that the following four compensatory measures were sufficient to reduce SNCM’s presence on its market to the direct benefit of its competitors: the termination of services between Italy and Corsica operated by Corsica Marittima, the virtual withdrawal of services between Toulon and Corsica, the limitation on the total number of places on offer and the number of round trips made each year from 2003, in particular on services between Nice and Corsica, and the sale of four ships. In addition, the Commission considered it to be necessary, in order to avoid SNCM using surplus liquid assets for activities that might cause distortions on the market, to prohibit SNCM from financing any new investment other than the costs of redeploying its activities to the Maghreb incorporated in the restructuring plan. 223 By those objections, the applicant, without challenging the sale of the ships and the virtual withdrawal from Toulon, contests the Commission’s conclusions as to the absence of excess capacity on the market, the termination of services between Italy and Corsica and the limitation on the number of round trips. 224 As regards, first, the question whether there is excess capacity on the market, it suffices to hold that the applicant’s contentions in that respect have already been rejected in paragraph 217 above. At this point, the applicant merely adds, in reply to the observation of the French Republic concerning the purchase by the applicant itself of a new ship in 2004, that its decision in that regard had been taken before SNCM’s recapitalisation plan. However, apart from the fact that the applicant has failed to prove that that purchase would not have been undertaken if the recapitalisation plan had been known of, it must be held that, as is shown by the complaint lodged by the applicant with the Commission on 18 February 2004 relating to misuse of aid by SNCM, the increase in capacity undertaken by it on the Nice route is not limited to the new ship purchased in 2004 but has been under way continuously from 1996, with the construction of three fast ships in 1996 and two fast ferries in 2001, which, as it says itself, allowed it to increase its capacity on that route by 18.17% in 2004. 225 As regards, secondly, the termination of services between Italy and Corsica, there is no dispute, as the applicant states, that this took place in January 2002, before the implementation of the restructuring plan. However, that fact cannot mean that that measure no longer represents a compensatory measure in favour of competitors by reducing SNCM’s presence on its market, since it is apparent that the withdrawal of that route was provided for in the restructuring plan adopted on 17 December 2001 and notified to the Commission on 18 February 2002. As the Commission rightly submits, it is for each economic operator to adopt the measures necessary to limit damage done to it and that done to competitors. In that regard, even though it was true, as the applicant contends, that the restructuring plan did not perceive withdrawal of the route concerned as a compensatory measure in favour of competitors within the meaning of the guidelines, that is irrelevant since it is not in dispute that a measure of that kind is likely to reduce the distortions of competition resulting from the aid in question. 226 With respect, thirdly, to the limitation on the number of round trips, it seems that by its objection in that regard the applicant criticises the Commission for having taken as a basis for imposing that measure the number of passengers carried between mainland France and Corsica, as set out in Table 2 in recital 53 in the contested decision, and not the number of places actually offered. 227 It should be noted in that regard that in Article 5 of the operative part of the contested decision the Commission required SNCM, as a compensatory measure in favour of competitors, to limit the annual number of round trips on the various sea links to and from Corsica ‘to the thresholds indicated in Table 3 [in recital 104 in the contested decision]’. The cross-reference to Table 2 in recital 53 in the contested decision made by note 113 to recital 315 in the contested decision, which sets out in the statement of reasons the condition set out in Article 5 of the operative part, is plainly the result of a clerical error. 228 It follows that, contrary to what the applicant contends, the limitation on round trips to Corsica was determined having regard not to the number of passengers carried but to the number of crossings. The applicant’s argument is accordingly founded on an incorrect reading of the contested decision. 229 In any event, it should be observed that while the Commission states in recital 315 in the contested decision that it imposed the limitation of the total number of places on offer ‘and’ the number of round trips made each year from 2003 on SNCM as a compensatory measure in favour of competitors, it is clear, by contrast, from Article 5 of the operative part of that decision as well as from recitals 337, 363 and 364, which form the basis of that condition, that it is only the limitation on the annual number of round trips that is imposed on SNCM as a condition of the aid being authorised. As the Commission confirmed at the hearing in reply to a question from the Court, the contested decision should thus be regarded as not imposing any limitation on SNCM with respect to places offered on those ships. 230 That being the case, it is plain that under this objection the applicant does not indicate either in what way the limitations on round trips imposed by the contested decision are manifestly inadequate to reduce undue distortions of competition resulting from the grant of the aid or in what way the approach it suggests would have the result of imposing different limitations on round trips, which would better be able to reduce those distortions. 231 It is admittedly true in that regard that, as the applicant argues, a limitation on round trips is not necessarily the same in all cases as a limitation on the number of places, as SNCM’s ships do not all have the same capacity and, at least in theory, the services on which they are used could be changed, as the 2002 agreement provides only that, for the provision of public service obligations, there is to be an allocation ‘in principle’ of each specified ship to a particular route. In that regard, the explanation given by SNCM at the hearing that the 2002 agreement is interpreted by the signatories to it as prohibiting changes to the routes on which ships are used cannot be accepted, as it directly contradicts the terms of that agreement. Moreover, it should be noted that in recital 29(c) in the contested decision the Commission itself noted that the high-speed ships Liamone and Asco operated ‘mainly’ from Nice. 232 However, it must be accepted that, at the very least, the limitation on the number of round trips is capable of contributing to the objective of reducing capacity. The applicant does not challenge the Commission’s finding set out in recital 104 in the contested decision that the limitation of the number of round trips provided for by the restructuring plan, which forms the basis of the condition laid down in Article 5 of the operative part of the contested decision, entails a reduction in the number of places offered of 28% on all services. The applicant has likewise not challenged the finding set out in recital 316 in the contested decision that ‘throughout the Gulf of Genoa and from Toulon, SNCM is lowering its services on offer by more than one million places a year compared with 2001, i.e. a division by more than two, which is to the immediate benefit of its competitors even though it is these services that are showing the strongest growth’. 233 In addition, it must be pointed out that the reduction in capacity which the contested decision provides for is achieved not only by the condition relating to round trips but, as is clear from recitals 315 to 317 and 333 to 358, and from Articles 2 and 3 of the operative part of the decision, by a set of conditions which provide also for the closure of Corsica Marittima, the virtual withdrawal from Toulon, the disposal of four ships, the disposal of non-strategic shareholdings, the limitation of the fleet to the 11 ships remaining after the disposal of the four ships and the prohibition, in principle, of renewing those ships. 234 The applicant’s objections in relation to those matters must accordingly be rejected.235 As regards, secondly, the purported failure to consider certain distortions of competition, the applicant objects that the Commission did not investigate the State aid issues arising from the exceptional fiscal depreciation which allows SNCM to apply early depreciation to the Liamone. 236 It is clear, first of all, that, contrary to what the applicant submits, the early depreciation of the Liamone is not the result of exceptional fiscal depreciation. As has already been pointed out above, the early depreciation of an asset results from the application of accounting rules under which, by virtue of a principle of prudence, a company must correct its balance sheet by providing for exceptional depreciation where it establishes that one of its assets has a real or market value which is lower than its book value. Thus, in the present case, as recital 144 in the contested decision makes clear, SNCM provided for such exceptional depreciation in 2001 in relation to the Liamone in the sum of EUR 14.8 million. 237 That exceptional depreciation bears no relation to the exceptional fiscal depreciation permitted under French legislation. As the Commission states in note 106 to recital 294 in the contested decision: ‘Exceptional depreciation is the difference between straight-line depreciation, deducted from assets on the balance sheet, and diminishing balance depreciation authorised by tax law. If diminishing balance depreciation is not used to enter depreciation into the accounts, the difference between it and cumulated straight-line depreciation is entered under liabilities (exceptional depreciation), traditionally included in French accounting under capital. Total depreciation at the end of the accounting period remains the same and the system therefore does not make it possible to anticipate and generate a tax reduction in the first years.’ In the present case, recital 294 in the contested decision shows that SNCM provided, under the heading ‘regulated provisions’, for exceptional depreciation of EUR 60 million, which depreciation does not necessarily relate to the Liamone. 238 As the applicant’s present objection is founded on an incorrect premiss, it must be rejected on that ground alone.239 In addition, it is clear that, as the Commission maintains without being challenged by the applicant, the mechanism of exceptional depreciation laid down under national accounting law being open to all undertakings, it cannot constitute a State aid within the meaning of Article 87(1) EC. 240 With respect to the assertion, made for the first time in the reply, that that depreciation allowed SNCM to cover through aid potential losses in order to anticipate a potential risk, it suffices to hold that the applicant has not disputed that SNCM’s accounts for 2001 which provided for that depreciation were properly certified and it is not for the Court, in the absence of any grounds for doing so, to question them. The Commission was therefore entitled in the present case to take the view, without committing a manifest error of assessment, that that depreciation represented a cost for SNCM which could be offset by the aid concerned as part of its restructuring. 241 Lastly and in any event, in so far as the objection in question falls to be understood as seeking to challenge the exceptional fiscal depreciation provided for by SNCM, it must also be held that such an arrangement, which is laid down under national accounting law, is open to all undertakings and thus cannot, as such, constitute a State aid within the meaning of Article 87(1) EC. 242 On those grounds, the applicant’s objections and arguments relating to the prevention of undue distortions of competition must be rejected in their entirety. – The limitation of the aid to the minimum243 The applicant submits that the aid authorised is not limited to the strict minimum needed to allow for the restructuring of SNCM in the light of the undertaking’s resources. It challenges in that regard the amount of undercompensation for the performance of public service obligations, the cost of the social plan, the amount of the depreciation of the Liamone and the net proceeds of disposal of ships and fixed assets provided for under the restructuring plan. 244 It should be noted first of all that the restructuring aid notified by the French authorities amounts to EUR 76 million. As recital 326 in the contested decision makes clear, that restructuring aid comprises a financial component and an operational component. The financial component corresponds to the undercompensation for the performance of public service obligations in the past. In recitals 256 to 258 in the contested decision, the Commission held that the financial component corresponded to the losses incurred by SNCM for the performance of its public service obligations until 2001. As regards the operational component, recital 328 in the contested decision shows that it corresponds to the costs of the various actions provided for under the restructuring plan. 245 In recitals 256 to 258 in the contested decision, the Commission calculated that the undercompensation for the performance of public service obligations amounted, as it notes in recital 327, to EUR 53.48 million. In recital 328 in the contested decision, the Commission held that the restructuring costs amounted to EUR 46 million. According to note 120 to recital 328 in the decision, that amount covers the operational restructuring measures (EUR 31.2 million) and the depreciation of the Liamone (EUR 14.8 million). However, as SNCM was expected to realise EUR 21 million by way of net proceeds of disposal upon implementation of the disposals provided for in the restructuring plan (recitals 97 to 99 and 319 in the contested decision), the Commission, having taken the view that the company was unable to find other internal sources of capital to finance its restructuring programme, reached the conclusion in recital 328 in the contested decision that the sum of EUR 76 million was justified to restore the company’s viability in the short term. 246 However, in order to take account of the proceeds of disposal of non‑strategic shareholdings required by Article 3 of the operative part of the contested decision which would supplement the disposals under the restructuring plan, the Commission, as it explains in recitals 329, 357 and 358 in the contested decision, authorised the restructuring aid in question under Article 6 of the operative part of the decision to the extent only of a first tranche of EUR 66 million, thus refraining from giving authorisation for the second tranche of EUR 10 million. If it becomes apparent that the disposals concerned have generated more than EUR 10 million for the company, the second tranche cannot be granted to SNCM. However, should those disposals generate less than EUR 10 million, the remainder will be paid, after authorisation by the Commission, with the proceeds of those disposals being taken into account. 247 By its objections relating to the question whether the aid was limited to the minimum, the applicant seeks to challenge the calculation both of the amount of the undercompensation for the performance of public service obligations (financial component) and of the restructuring costs (operational component). 248 With reference, first, to the amount of the undercompensation for the performance of public service obligations, it suffices to note that the applicant’s objections concerning the merits of the contested decision in that regard have already been rejected in paragraphs 149 to 161 above. The additional objection made at this point, according to which SNCM also provided for excessive depreciation to the extent of EUR 22.2 million, corresponding to latent appreciation on the fleet, cannot be accepted, since the amount authorised in respect of depreciation of assets arises purely by virtue of the application of accounting rules which are not challenged by the applicant. In any event, as the past accounts of SNCM which gave effect to that depreciation have been certified, a matter which is not in dispute, it is not for the Court to question them. Furthermore, it has already been held in paragraph 193 above that the Commission was entitled to hold that the level of SNCM’s indebtedness and the weakness of its cash flow were not such as to lead a bank, acting as a private lender under market conditions, to offer an additional loan to SNCM. 249 As regards, secondly, the amount of the restructuring costs, the applicant estimates, first, the costs of the operational restructuring measures not at EUR 31.2 million but at EUR 17.091 million on the basis of the costs of the social plan, or at EUR 16.86 million on the basis of the amount of the grant recorded in SNCM’s accounts for 2002. 250 It is plain, however, with respect to the figure of EUR 17.091 million, that that amount relates, as Table 11 in recital 257 in the contested decision clearly shows, only to the cost of the social plan for routes to Corsica. The restructuring in question concerns not only SNCM’s services to Corsica but the whole of the company’s activities, in particular its services to the Maghreb. As regards the figure of EUR 16.86 million, the Commission and SNCM have explained, without being challenged by the applicant, that not all the expenses of restructuring could be provided for in the accounts, as they represented investment expenses. 251 Since, as to the rest, the applicant merely criticises the Commission in a general fashion for failing to investigate the real cost of the social plan, without providing other evidence to challenge the amount of EUR 31.2 million adopted in the contested decision, it must be considered to be established that that amount corresponds to the costs of the operational restructuring measures. 252 As regards, secondly, the depreciation of the Liamone, the applicant considers that that depreciation is unjustified. 253 In so far as the applicant refers in that regard to the arguments already considered in the context of other objections above, those arguments must be rejected for the same reasons as those set out in paragraphs 150 and 151 above. 254 As regards the assertion made in the observations on the statements in intervention that SNCM was under no obligation to purchase an oversized high-speed vessel, particularly as it had concerns itself in 1998 as to the poor availability figures for its high-speed vessels, it suffices to note that the objections put forward by the applicant to deny the absence of significant overinvestment have also already been rejected in paragraphs 170 to 175 above. In any event, the concerns expressed by SNCM regarding the profitability of the new high‑speed vessels in 1998, when it stated that the use of those vessels for public service obligations depended on the positive outcome of their experimental use, are not such as to call into question the justification for purchasing a high-speed vessel in 2000. The same applies to the observations expressed by the chairman of SNCM in a newspaper article of 4 November 2004 on which the applicant relies. Apart from the fact that such an article cannot carry significant evidential weight, it must be held that while, in that article, the chairman of SNCM questions, as the applicant notes, whether it was appropriate to order the Liamone, he also adds, as the applicant fails to point out, that ‘at the time, customers wanted the company to provide a high-quality product’, whereas ‘nowadays … passengers give priority first of all and above all to fares’, while stating at the same time that the Liamone was ‘universally acclaimed when it was launched’. 255 As regards, thirdly, the net proceeds of disposal provided for under the restructuring plan, the applicant criticises the Commission for failing to take account, in determining whether the aid was limited to the minimum, of the net proceeds of disposal of the fixed assets provided for under the restructuring plan and which were in fact realised in 2003. 256 In that regard, it should be noted that in recital 328 in the contested decision the Commission, having indicated that it had adopted the figure of EUR 46.0 million for costs linked with operational restructuring measures, stated that SNCM ‘should make EUR 21 million in the net revenue from disposals following implementation of the disposals provided for in the restructuring plan’. In those circumstances, and having regard to the fact that the financial undercompensation for the performance of public service obligations in the period between 1991 and 2001 amounted to EUR 53.48 million, the Commission concluded in that recital that ‘the sum of EUR 76 million [was] completely justified to restore the company’s viability in the short term’. 257 It is not disputed, as is clear from note 121 to recital 328 in the contested decision, which refers to recitals 97 to 101 in that decision, that the amount of EUR 21 million referred to in recital 328 in the contested decision relates to the net proceeds of disposal mentioned in recital 99 in the decision. 258 It is relevant that, in that section of the contested decision, the Commission, having noted, first, in recital 97, that SNCM had made provision in its restructuring plan for selling four of its vessels in 2002, namely the Napoléon, the Liberté, the Monte Rotondo, and the high‑speed ship Asco, all of which are stated to have been sold apart from the Asco, and, secondly, in recital 98, that to those disposals there should be added that of the Southern Trader which was currently in progress, stated that ‘the expected proceeds from these disposals were EUR 40 million, representing a cash injection (net proceeds of disposal) of EUR 21 million, taking account of residual refunds’. 259 It must, however, be noted that in recital 101 in the contested decision, the Commission added the following:‘At the same time, [SNCM] had in its restructuring plan intended to dispose of the [fixed] assets present in its subsidiaries (Marseilles offices). These were disposed of for EUR 12 million in 2003, with EUR 5.1 million appreciation.’ 260 It is thus apparent from the terms of the contested decision that the Commission held that, under its restructuring plan, SNCM had, as regards, first, the sale of ships, anticipated realising net proceeds of disposal of EUR 21 million, and as regards, secondly, the sale of fixed assets, in fact disposed of those assets and thereby realised EUR 12 million by way of net proceeds of disposal. 261 In recital 328 in the contested decision, however, the Commission, when determining the minimum amount, stated only that SNCM was to make EUR 21 million by way of net revenue from disposals, without referring to the sum of EUR 12 million mentioned in recital 101 in the decision relating to the net proceeds of disposal of the fixed assets. 262 In order to explain the findings of the contested decision in that regard, the Commission first of all submitted in its defence that the receipts arising from the disposals of fixed assets did not fundamentally alter the analysis, having regard to the fact that the surplus generated of EUR 5.1 million had had a marginal impact on the reduction of the financial indebtedness, with the result that the risk of surplus cash had to be disregarded. Both the French Republic and SNCM, as interveners, also supported that view in their written submissions. 263 Next, in the rejoinder, the Commission adopted the same argument as that used by SNCM, namely that it had not been in a position to make the calculations necessary to determine the cash which might have been at SNCM’s disposal, by reason of the lack of consistency in the figures available at the time when the contested decision was adopted and their lack of clarity as to what precisely they represented. In that regard, the Commission stated that many of the disposals required in the contested decision were disposals provided for under the restructuring plan that had not been implemented at the time the contested decision was adopted, that a number of the figures relating to provisional net proceeds of disposal required to be reduced in the light of the difficulties faced by SNCM following the adoption of the contested decision in finding a purchaser and that the figures put forward by the French authorities were in large measure provisional. For those reasons, the Commission indicated that it had evaluated ‘in overview’ the cash that was reasonably available to SNCM in order to fund the costs of the restructuring plan from its own resources to the maximum extent possible, both before and after the contested decision. 264 However, none of those explanations can be accepted to justify the failure to take into account the net proceeds of disposal of the fixed assets. 265 As regards the first explanation, it must be pointed out that point 40 of the guidelines requires that the amount of the aid must be limited to the ‘strict minimum needed to enable restructuring to be undertaken in the light of the existing financial resources of the company’. 266 It follows from this that, since in the present case SNCM undertook in its restructuring plan to dispose of non-essential naval and fixed assets, it must, as the Commission accepted in reply to written questions put by the Court, apply the whole of the proceeds of disposal of those assets to the funding of the restructuring plan. Contrary to what SNCM contends, that obligation does not oblige the beneficiary of aid in any way to use all of its resources to reduce the amount of the aid granted, but only to use all the resources generated by assets considered to be non-essential in carrying on the company’s activities for the purposes of its restructuring. Such a contribution to the restructuring plan from the beneficiary out of its own resources is necessary in order to ensure that the aid remains, as required by point 40 of the guidelines, limited to the strict minimum needed to enable restructuring to be undertaken on the basis of the existing financial resources of the company, its shareholders or the business group to which it belongs. 267 Furthermore, that is the approach adopted by the Commission in the contested decision, since, first, recital 328 in the decision shows that for the purposes of satisfying itself that the aid was limited to the minimum needed the Commission deducted from the total cost of the operational restructuring measures the whole of the sum of EUR 21 million representing net proceeds of disposal mentioned there, stating, moreover, that SNCM was unable to find other internal resources to fund its restructuring. Secondly, the Commission also took account of the obligation to limit the amount of the aid to the strict minimum needed by requiring that payment under the scheme be made over a period of time, and be subject to offset. Under Article 6 of the operative part of the contested decision, the Commission authorised the aid in question to the extent only of a first tranche of EUR 66 million, with payment of the remainder of EUR 10 million being made conditional on the result of the disposal of a number of non-strategic shareholdings required by the Commission under Article 3 of the operative part of the decision. Clearly, those arrangements for authorising the aid in tranches also reflect the fact that the Commission intended to take account of the whole of the proceeds of disposal realised in relation to non-essential assets, since, as it states in recital 341 in the contested decision, the proceeds of those disposals should ‘proportionately’ reduce the requirement for aid in view of the need to keep the amount of the aid to a minimum in accordance with point 40 of the guidelines. 268 It follows from the above that in determining whether the aid granted to SNCM was limited to the minimum the Commission was under a duty to take into account the whole of the net proceeds of disposal realised in implementation of the restructuring plan. 269 In that regard, the contention that the amount of the aid authorised in the contested decision does not allow SNCM to benefit from surplus cash is irrelevant. 270 It is true that point 40 of the guidelines required the Commission to determine, as it did in recital 330 in the contested decision, that neither the form in which the aid was granted nor its amount would lead SNCM to have surplus cash available to it which it might use to pursue aggressive, market-distorting activities. Nevertheless, the fact that the amount of the aid authorised in the contested decision made it possible to avoid such a risk does not justify the Commission’s failure to take account of the net proceeds of disposal of the fixed assets, as to do so could have led it to declare aid of a lower amount to be compatible, or, depending on the circumstances, to declare the aid in question to be incompatible, with the common market, with the result, on any basis, that it would have been all the more possible to avoid the risk of distortion of competition. 271 The Commission’s explanation regarding the marginal impact of the net proceeds of disposal of the fixed assets on SNCM’s financial situation must accordingly be rejected. 272 As regards the second explanation, it should be noted that the Court has already held in relation to restructuring aid (Kneissl Dachstein v Commission, cited in paragraph 138 above, paragraph 84) that the Commission was not bound to estimate the specific cost of each of the measures to be undertaken by the company in question. Besides the fact that a precise evaluation of the various items of expenditure would in any event have been uncertain owing to the prospective nature of the measures envisaged, the Commission is entitled, in the exercise of its broad discretion, to confine itself to an overall assessment. 273 It must therefore be accepted that in the present case, given the difficulty in putting a definite figure on the net proceeds of disposal of the naval assets and fixed assets under the restructuring plan, the Commission was, in principle, entitled, in the exercise of its broad discretion, to proceed on the basis of an approximate evaluation of those proceeds. 274 None the less, in the present case, it must be stated that, as regards, first, the disposal of the naval assets, the Commission stated in recitals 97 and 98 in the contested decision that three of the four ships which were to be disposed of under the restructuring plan, namely the Napoléon, the Liberté and the Monte Rotondo had already been sold, with only the high-speed ship Asco not finding a purchaser, and that the disposal of the Southern Trader was in hand. Similarly, while the Commission indicates in recital 99 in the decision that the ‘expected’ net proceeds from those disposals were EUR 21 million taking account of residual refunds, it states in the same recital that ‘the Monte Rotondo and Napoléon were disposed of in 2002’, while ‘the Liberté and Southern Trader have been or will be disposed of in 2003’, the latter being the subject of an offer to sell. Moreover, the Commission states in recital 99 in the contested decision that ‘the total net proceeds of the disposal of these four vessels was EUR 1.2 million in excess of the sum expected’. 275 It is therefore clear from the wording itself of the contested decision that at the time of its adoption the Commission was aware of the actual amount of the net proceeds of disposal of a number of ships, as it holds in relation to the disposal of four ships that there was a surplus of net proceeds of disposal over their estimated value. With respect to the Napoléon and the Monte Rotondo, since they were disposed of in 2002, the Commission must, given the passage of time between those disposals and the adoption of the contested decision, necessarily have been aware of all information required to determine the exact amount of their net proceeds of disposal. As regards the Liberté, which was disposed of in 2003 prior to the adoption of the contested decision, it is also clear that, subject to the need, should the case arise, to make minor adjustments to take account of subsequent costs requiring to be set against the sale price, the Commission should likewise have been aware of all material information needed to allow it to calculate the amount of the net proceeds of disposal. 276 Moreover, in reply to a written question from the Court, the Commission has confirmed that its staff could have determined the surplus realised on the disposal of the Napoléon, Monte Rotondo and Liberté on the basis of information provided by the French authorities on 14 May 2003, that is to say approximately two months prior to the adoption of the contested decision. 277 It is true that, by contrast, as regards the fifth ship, namely the Southern Trader, only an estimate of its net proceeds of disposal was available to the Commission. However, in relation to that ship, it is clear from Article 3 of the operative part of the contested decision that its disposal was to be taken into account only, as SNCM rightly states, on payment of the second tranche of the aid, as the ship was leased to one of SNCM’s subsidiaries, Société méditerranéenne d’investissements et de participations (‘SMIP’), which was considered by the Commission to be a non-strategic shareholding. Thus, the second paragraph of Article 3 of the operative part of the contested decision provides that instead of disposing of that holding SNCM may sell that company’s sole asset, the Southern Trader, and close down that subsidiary. In reply to a written question from the Court on that point, the Commission accordingly confirmed that the net proceeds of disposal of the Southern Trader were not included in the sum of EUR 21 million referred to in recital 99 in the contested decision. 278 It follows from the above that at the time when the contested decision was adopted the Commission should have been aware of the actual amount of the net proceeds of disposal of the ships which were to be sold under the restructuring plan and which had in fact been disposed of on the date on which the decision was adopted. 279 Secondly, as regards the net proceeds of disposal of the fixed assets, it must be noted that in recital 101 in the contested decision the Commission stated that ‘[the fixed assets] were disposed of for EUR 12 million in 2003, with EUR 5.1 million appreciation’. It is thus clear from the wording itself of that recital that the Commission puts forward the figure of EUR 12 million referred to in it not as an approximate assessment but as a precise evaluation of the net proceeds of a disposal that had actually been made. 280 Moreover, in reply to a written question from the Court, the Commission confirmed that the figure of EUR 12 million referred to in recital 101 in the contested decision was derived from information provided by the French authorities on 14 May 2003, that is to say approximately two months prior to the adoption of the contested decision. 281 In those circumstances, it also cannot be accepted, contrary to what the Commission submits in its written pleadings, that the amount of the net proceeds of disposal of the fixed assets was not clearly and definitively known on the date when the contested decision was adopted. 282 It is thus plain from the wording of the contested decision that at the time of its adoption the Commission had to be aware, as regards both the naval assets and the fixed assets which were to be disposed of under the restructuring plan and which had already been disposed of at that time, not only of the figure for their net proceeds of disposal that was incorporated in the plan, but also of the actual amount of those net proceeds of disposal. 283 In those circumstances and in the light, in particular, of the principle laid down under Article 87(1) EC that State aid is prohibited, the Commission was not entitled, in determining whether the aid was limited to the minimum, to restrict itself as regards those assets to an assessment ‘in overview’ of the cash reserves available to SNCM. 284 Since, as regards the disposal of the naval assets, the Commission determined that there was a surplus of net proceeds of disposal over and above the estimate of EUR 21 million incorporated in the restructuring plan and, as regards the disposal of the fixed assets, that the net proceeds of disposal amounted to EUR 12 million, it could not, without committing a manifest error of assessment, when determining in recital 328 in the contested decision whether the aid was limited to the minimum, use only the estimated figure of EUR 21 million given in the restructuring plan for the disposal of the naval assets. 285 Accordingly, the explanation put forward by the Commission regarding the lack of clarity in the figures available at the time when the contested decision was adopted must also be rejected. 286 In reply to written questions from the Court, the Commission has, under a new explanation which does not appear in its defence or in the rejoinder, submitted, on the basis of confidential documents not produced in the present Court proceedings, that the net proceeds of disposal of EUR 21 million mentioned in recital 99 in the contested decision covered in reality both the disposal of the four ships referred to in recital 97 in the decision and that of the fixed assets under the restructuring plan. The same explanation was given by SNCM in its statement in intervention. 287 However, even without determining the validity of that explanation by reference to the documents relied on by the Commission, it must be pointed out that it is settled case-law that the reasons for a decision must appear in the actual body of the decision and that, save in exceptional circumstances, explanations given ex post facto cannot be taken into account (Case T-61/89 Dansk Pelsdyravlerforening v Commission [1992] ECR II-1931, paragraph 131; Case T‑295/94 Buchmann v Commission [1998] ECR II‑813, paragraph 171; and Joined Cases T‑374/94, T‑375/94, T‑384/94 and T‑388/94 European Night Services and Others v Commission [1998] ECR II‑3141, paragraph 95). It follows that the decision must be self-sufficient and that the reasons on which it is based may not be stated in written or oral explanations given subsequently when the decision in question is already the subject of proceedings brought before the Community judicature (Case T-16/91 RV Rendo and Others v Commission [1996] ECR II-1827, paragraph 45). 288 In the present case, the explanation put forward by the Commission and SNCM, in terms of which the net proceeds of disposal of the fixed assets are included in the figure of EUR 21 million of net proceeds of disposal mentioned in recital 99 in the contested decision, does not appear in the contested decision, which, moreover, the Commission conceded at the hearing in reply to a question put by the Court. 289 It is in any event clear that that explanation, put forward belatedly by the Commission, is inconsistent with the contested decision. As recitals 97 and 98 in the contested decision refer merely to the planned disposals of ships by SNCM, and as there has been no reference of any kind prior to this part of the contested decision to the disposal of fixed assets, which are mentioned for the first time in recital 101 in the contested decision, it is clear that the reference in recital 99 in the decision to the expected proceeds from ‘these’ disposals being EUR 21 million necessarily relates only to the disposals of ships referred to in the previous recitals, namely recitals 97 and 98. Similarly, the statement in recital 101 in the contested decision that ‘at the same time’ SNCM had intended to dispose of fixed assets, which were in fact disposed of for EUR 12 million, confirms that the net proceeds of disposal of the fixed assets were considered by the Commission to be separate from the net proceeds of disposal of the ships and as being complementary to them. It must also be pointed out that neither recital 328 nor recital 341 in the contested decision, which refer, without more, to net proceeds of disposal of EUR 21 million, can be interpreted as meaning that that figure includes not only the net proceeds of disposal of the ships but also the net proceeds of disposal of the fixed assets. 290 It follows that the explanation put forward by the Commission and SNCM, according to which the sum of EUR 21 million taken into account in determining the minimum amount of aid in recital 328 in the contested decision includes the disposal of fixed assets, must be rejected. 291 In any event, even if it were accepted that, as the Commission and SNCM contend, the expected net proceeds of disposal of EUR 21 million referred to in recital 99 in the contested decision are to be understood as including the net proceeds of disposal of the fixed assets, it none the less remains the case that the Commission was not entitled to take account in recital 328 in the contested decision only of net proceeds of disposal of EUR 21 million for the purposes of satisfying itself that the aid was limited to the minimum. 292 While it is conceivable that the net proceeds of disposal of the naval and fixed assets were estimated in the restructuring plan at EUR 21 million, it cannot be accepted, contrary to what the Commission argued at the hearing, that it is entitled to rely on mere forecasts, even though they do not reflect the true position, so as not to delay the adoption of its decision. Since the estimate of the net proceeds of disposal of EUR 21 million used in the restructuring plan was established in December 2001, as is shown by note 31 to recital 88 in the contested decision, the Commission was under a duty, in the light of the requirement under the guidelines to determine that the aid was strictly necessary, to correct that estimate in order to take account of SNCM’s actual position at the time when the contested decision was adopted almost 19 months later. 293 Accordingly, while SNCM is right to argue that, having encountered difficulties in disposing of the high-speed vessel Asco, the Commission was entitled when it adopted the contested decision to take into account a lower figure for the net proceeds of disposal of that ship than the estimate provided in the restructuring plan, thereby making a negative correction to that estimate, the Commission was also under a duty to make any positive corrections that might increase the estimates relating to the other ships. 294 In the present case, recitals 99 and 101 in the contested decision show that SNCM not only disposed of the three other ships which were to be sold under the restructuring plan together with the Southern Trader and that the total of the net proceeds of sale of those four ships was in fact EUR 1.2 million higher than had been expected but also disposed of the fixed assets that were to be sold under the plan, thereby realising net proceeds of EUR 12 million. 295 It is clear, and is not, moreover, denied by SNCM, that the reduction in the net proceeds arising from the negative correction relating only to the high-speed vessel Asco cannot compensate completely for the failure to take those points into account. 296 In its statement in intervention, SNCM provided the Court, for each of the four ships which were to be sold under the restructuring plan, with a figure representing the ‘actual resources available to SNCM’. As has already been held above, since the Napoléon and Monte Rotondo were disposed of in 2002, it must be the case that, having regard to the passage of time between those disposals and the adoption of the contested decision, the figure given by SNCM includes the exact amount of the net proceeds of disposal of those ships. Similarly, as regards the Liberté, which was disposed of in 2003 before the adoption of the contested decision, it is also clear that, subject to the need to make any minor adjustments that may be relevant, the figure given in SNCM’s statement in intervention represents the approximate amount of the net proceeds of disposal of that ship, as the principal information needed to calculate that amount was known at the time when the contested decision was adopted. Furthermore, SNCM confirmed at the hearing that the figure provided in its statement in intervention was correct. 297 That information provided by SNCM shows that, even allowing for negative proceeds of disposal of the high-speed vessel Asco, the true amount of the net proceeds of disposal of the four ships concerned was approximately EUR 16.5 million, so that, taking into consideration the net proceeds of disposal of EUR 12 million specified in recital 101 in the contested decision arising from the disposal of the fixed assets, the aggregate net proceeds of disposal available to SNCM at the time when the contested decision was adopted must have amounted to approximately EUR 28.5 million, rather than the figure of EUR 21 million taken into account by the Commission in the contested decision. 298 In that regard, SNCM’s contentions that the sum referred to in recital 101 in the contested decision relates to gross proceeds of disposal must be rejected, as they are directly contradictory to the wording of that recital. With respect to the claim that the amount referred to in that recital relates in part to the sale of assets that were essential to the activities of the company, it suffices to hold that, apart from the fact that no other evidence is offered in support of that claim, there is nothing in either recital 101 or recital 328 in the contested decision that could justify the failure to take the net proceeds of disposal of those fixed assets into account. It must in any event be pointed out that, even when the figures given by SNCM regarding the net proceeds of disposal of the fixed assets are taken into consideration, the actual amount of the resources available to the company, as indicated by it in its statement in intervention, is EUR 24.9 million. 299 Furthermore, when questioned on the matter at the hearing, the Commission ultimately accepted that the aggregate amount of the net proceeds of disposal of the naval and fixed assets available to the company at the time when the contested decision was adopted was greater than EUR 21 million. 300 It thus follows from the above that the contested decision is vitiated by a manifest error of assessment in that, in determining the minimum amount of the aid, it adopts a figure for net proceeds of disposal of EUR 21 million, whereas it is clear from the decision and the explanations provided in these proceedings that the Commission was in a position to determine, on the basis of the information in its possession at the time when the contested decision was adopted, that the net proceeds of disposal were greater than EUR 21 million. 301 None of the other arguments put forward by the Commission and the interveners is capable of undermining that conclusion.302 In the first place, the assertion made by the Commission in the rejoinder that, when considering in the future the second tranche of EUR 10 million under Article 6 of the operative part of the contested decision, it will be appropriate to take into account the net proceeds of the expected disposal of the fixed assets and the ships which were to be disposed of under the restructuring plan and which had not yet been disposed of on the date on which the contested decision was adopted must be rejected as being without foundation. 303 While it is true that Articles 3 and 6 of the operative part of the contested decision provide for the net proceeds of disposal of fixed assets by SNCM to be deducted from the second tranche of the aid, it is clear from the wording of those articles and from recitals 357 and 358 which constitute their essential basis, that the second tranche is intended only to take account of disposals of the non-strategic shareholdings required by the Commission as a condition of the aid being compatible with the common market. Those disposals are exhaustively listed in the first paragraph of Article 3 of the operative part of the contested decision and relate to the shareholdings in Amadeus France, Compagnie Corse Méditerranée, Société civile immobilière Schuman, SMIP and Someca. 304 As the Commission confirmed on several occasions in its replies to the written questions and at the hearing, the fixed assets referred to in the abovementioned provisions of the operative part of the decision regarding payment of the second tranche are not included within the scope of the disposals of fixed assets mentioned in recital 101 in the decision which the Commission was required to take into account in determining in recital 328 in the decision whether the aid was limited to the minimum. As regards the Southern Trader, which was held by SMIP, the Commission explained in its replies to the written questions that it required its disposal in Article 3 of the operative part of the contested decision because of the lack of clarity in the restructuring plan as to the sale of that ship, so that that ship could not be considered to be an asset included in the EUR 21 million figure incorporated in the restructuring plan. 305 It follows from the above that, contrary to what the Commission suggested in its written pleadings, the net proceeds of disposal of the fixed assets referred to in recital 101 in the contested decision do not have to be taken into account when the second tranche of the aid falls to be paid. 306 Accordingly, the fact that it is open to the Commission to give subsequent consideration to the question whether the conditions for payment of the second tranche are satisfied does not affect in any way the above conclusions as to the failure to take account, in determining whether the aid was limited to the minimum, of the aggregate net proceeds of disposal of the non-essential assets. 307 For the same reason, it is not open to the Commission to contend, as it did at the hearing, that in authorising the aid by way of a first tranche of EUR 66 million it had satisfied itself that the aid was limited to the minimum, as the bringing into consideration of net proceeds of disposal of non-essential assets in excess of EUR 21 million ought, in principle, to have led it to find that the amount of aid notified by the French authorities did not satisfy the requirement that the aid be limited to the minimum and, accordingly, that the conditions for the aid to be declared to be compatible with the common market in terms of Article 87(3)(c) EC were not satisfied. 308 As regards, in the second place, the point, briefly made by the Commission, that the amount of the undercompensation for the performance of public service obligations was underestimated until the end of 2001, it suffices to hold that that point was duly taken into account by the Commission in determining whether the aid was limited to the minimum since, as recitals 326 and 327 in the contested decision in particular make clear, the part of the aid notified by the French authorities as restructuring aid intended to permit ‘[the drawing of] a definitive line under the consequences of the inadequacy of financial compensation under the [1991 agreement and the 1996 agreement] in view of the operating expenses and onshore costs recorded for this period on the sea links covered by the public service obligations’ was authorised in the sum of EUR 53.48 million. Therefore, that fact cannot be taken into account a second time in determining the net proceeds of disposal of the non-essential assets to be deducted for the purposes of calculating the minimum amount of the aid. 309 As regards, in the third place, SNCM’s contention that the restructuring costs ultimately adopted in the contested decision, that is to say EUR 25 million (EUR 46 million less EUR 21 million), and the amount of the undercompensation for the performance of public service obligations, namely EUR 53.48 million, could together justify up to EUR 78.48 million of restructuring aid, thus providing a margin of EUR 2.48 million, it suffices to hold that the aid notified by the French authorities related to aid not of EUR 78.48 million but of EUR 76 million. It is not for the Court, when faced with proceedings for annulment, to rule on the lawfulness of aid of a different amount from that considered by the Commission, thereby substituting its own assessment for that of the latter (Joined Cases T‑79/95 and T-80/95 SNCF and British Railways v Commission [1996] ECR II-1491, paragraph 64). It must also be observed that the difference invoked by SNCM is insignificant in relation to the error committed in its favour in determining the amount of the net proceeds of disposal of non-essential assets. 310 As regards, in the fourth place, SNCM’s contention that the amount of the aid in the strict sense is only EUR 22.5 million, that is to say the difference between the financial injection made by the French State and the undercompensation for the performance of public service obligations, and thus represents 48% of the restructuring costs of EUR 46 million, that contention is based on the false premiss that the amount of the undercompensation for the performance of public service obligations does not constitute a State aid within the meaning of Article 87(1) EC. That would only be the case if the conditions laid down in Altmark Trans and Regierungspräsidium Magdeburg (cited in paragraph 105 above) relating to that part of the financial injection were satisfied. However, it is not for the Court to substitute its own assessment for that of the Commission in annulment proceedings (SNCF and British Railways v Commission, cited in paragraph 309 above, paragraph 64). 311 That point applies all the more in the present case since the Commission expressly stated in the contested decision, as is clear in particular from recitals 260 and 326 in the decision, that, even if the amount of the undercompensation for the performance of public service obligations could be justified under Article 86(2) EC, the whole of the aid in question of EUR 76 million fell to be investigated as restructuring aid, including the part representing undercompensation for the performance of public service obligations, on the ground that the aid in question had been notified as restructuring aid and that the restoration of viability required that that aid also allowed for the repayment of the indebtedness arising from that undercompensation. 312 In those circumstances, it appears that the total amount of the aid in question, namely EUR 76 million, represents approximately 76% of the total restructuring costs, amounting, by adding the undercompensation for the performance of public service obligations of EUR 53.48 million and the restructuring costs of EUR 46 million, to EUR 99.48 million. Furthermore, even if only the first tranche of EUR 66 million is taken into account, it is clear that that tranche still represents approximately 66% of the total costs. 313 In any event, even assuming that the conditions laid down in Altmark Trans and Regierungspräsidium Magdeburg (cited in paragraph 105 above) were satisfied, the fact that the aid would represent less than 50% of the restructuring costs in such a case does not undermine in any way the finding that that aid nevertheless remains excessive given the failure to take account of the whole of the net proceeds of the disposals realised in implementation of the restructuring plan. As was stated above, point 40 of the guidelines requires that restructuring aid be limited to ‘the strict minimum needed’ taking account of the existing financial resources of the company resulting inter alia from the sale of certain assets that are not essential to the company’s survival. 314 Finally, as regards, in the fifth place, the contention advanced by the French Republic in its written pleadings that the other methods of evaluation put forward by the French authorities would have justified a sum equivalent to the aid in question, it suffices to hold that, in recitals 320 to 325 in the contested decision, the Commission expressly rejected those methods in favour of an alternative method which it itself had drawn up. 315 It must accordingly be concluded that the applicant’s objection relating to the Commission’s failure to take into account the aggregate of the proceeds of disposal of the non-essential assets in determining whether the aid was limited to the minimum is well founded, the contested decision being vitiated in that regard by a manifest error of assessment. Conclusion as regards the second plea in law316 It follows from all the above considerations that the second plea in law, based on infringement of Article 87(3)(c) EC and the guidelines inasmuch as the contested decision contains errors of fact and manifest errors of assessment, must be rejected save for the objection based on an erroneous appraisal of the question whether the aid was limited to the minimum. 317 As the requirement that the aid be limited to the minimum is, as the Commission has indicated at points 19 and 20 of the guidelines, linked to the condition specified in Article 87(3)(c) EC that, in order for aid to be declared compatible with the common market, it must not adversely affect trading conditions to an extent contrary to the common interest, it follows that the defect which renders the contested decision unlawful goes to one of the conditions laid down under Article 87(3)(c) EC which must be satisfied in order for aid to be declared to be compatible with the common market. 318 In those circumstances, it must be held that the conditions required to be satisfied for the aid in question to be declared to be compatible with the common market were not satisfied in the present case. Accordingly, the defect which renders the contested decision unlawful had, in the present case, a decisive effect on the outcome (Case T-126/99 Graphischer Maschinenbau v Commission [2002] ECR II-2427, paragraph 49). 319 Accordingly, since the determination of the question whether the aid was limited to the minimum is of essential importance in the general scheme of the contested decision (Westdeutsche Landesbank Girozentrale v Commission, cited in paragraph 62 above, paragraph 420) and since it is not for the Court to substitute its own assessment for that of the Commission in proceedings for annulment (SNCF and British Railways v Commission, cited in paragraph 309 above, paragraph 64), that decision must be annulled and there is no need to consider the merits of the objections put forward by the applicant regarding the conditions imposed by the contested decision. 320 In particular, it remains open, inter alia in the light of Altmark Trans and Regierungspräsidium Magdeburg (cited in paragraph 105 above) to the Commission to undertake a reappraisal in the light of Article 87(1) EC of the extent to which the measure concerned or, at the least, of a part of it, constitutes State aid, and for it to vary, as appropriate, the conditions imposed by the contested decision in so far as those conditions are still necessary having regard to the amount of the measure constituting State aid (see, to that effect, SNCF and British Railways v Commission, cited in paragraph 309 above, paragraph 64). 321 It follows from the above that the contested decision must be annulled. Costs322 Under Article 87(2) of the Rules of Procedure of the Court of First Instance, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has been unsuccessful in its pleadings and the applicant has applied for costs, the Commission must be ordered to bear its own costs and to pay those of the applicant. 323 In accordance with the third subparagraph of Article 87(4) of the Rules of Procedure, SNCM, as intervener, shall bear its own costs. 324 Under the first subparagraph of Article 87(4) of the Rules of Procedure, Member States which have intervened in the proceedings are to bear their own costs. It follows that the French Republic must bear its own costs. On those grounds,THE COURT OF FIRST INSTANCE (Third Chamber)hereby:1. Annuls Commission Decision 2004/166/EC of 9 July 2003 on aid which France intends to grant for the restructuring of the Société nationale maritime Corse-Méditerranée (SNCM);2. Orders the Commission to bear the costs of the applicant together with its own costs;3. Orders the French Republic and SNCM to bear their own costs.JaegerTiiliCzúczDelivered in open court in Luxembourg on 15 June 2005.H. Jung M. JaegerRegistrar PresidentTable of contentsLegal frameworkFacts1. Relevant shipping companies2. Public service obligations relating to shipping services between mainland France and CorsicaAdministrative procedure1. Aid in favour of SNCM by way of compensation for public service obligations under the 1991 agreement and the 1996 agreement2. Rescue aid and restructuring aid in favour of SNCMProcedure and forms of order soughtLaw1. Preliminary observation regarding the effect of the decision of 8 September 2004 on the present action2. The first plea, based on infringement of Article 253 EC inasmuch as the contested decision is inadequately reasonedPreliminary observations on the scope of the pleaThe objections relating to the statement of reasons for the contested decisionPreliminary observationsThe nature of the measure in question and the status of public service compensation of a part of the aidThe setting-aside of the concerns which led to the initiation of the formal investigation procedureThe assessment of restoration of viabilityWhether the assumptions underlying the restructuring are realisticDetermination of non-strategic shareholdingsConclusion as regards the first plea in law3. The second plea, based on infringement of Article 87(3)(c) EC, of Regulation No 659/1999 and of the guidelines inasmuch as the contested decision contains errors of fact and manifest errors of assessment Preliminary observation regarding the review undertaken by the CourtThe objections relating to the validity of the contested decisionThe assessment of part of the aid as public service compensationThe analysis of the causes which led to SNCM’s financial difficultiesCompliance with the guidelines– Whether SNCM was a firm in difficulty– Restoration of viability– The prevention of undue distortions of competition– The limitation of the aid to the minimumConclusion as regards the second plea in lawCosts* Language of the case: French. | 6f89b-8d0f505-40b0 | EN |
THE COURT OF FIRST INSTANCE LARGELY CONFIRMS THE COMMISSION'S DECISION CONCERNING A CARTEL ON THE SPECIALITY GRAPHITE MARKET | Judgment of the Court of First Instance (Second Chamber) of 15 June 2005 − Tokai Carbon and Others v Commission (Joined Cases T-71/03, T-74/03, T-87/03 and T-91/03)Competition – Cartels – Specialty graphite market – Price fixing – Liability – Calculation of fines – Cumulation of penalties – Duty to state reasons – Rights of the defence – Guidelines on the method of setting fines – Applicability – Gravity and duration of the infringement – Attenuating circumstances – Aggravating circumstances – Ability to pay – Cooperation during the administrative procedure – Methods of payment1. Competition – Agreements, decisions and concerted practices – Undertaking – Meaning – Economic unit – Attribution of the infringements – Parent company and subsidiary undertakings – Joint and several liability of the companies concerned (Art. 81(1) EC) (see paras 54, 58-60, 62)2. Competition – Agreements, decisions and concerted practices – Participation in meetings of undertakings having an anti-competitive object – Circumstance from which, where the undertaking concerned has not distanced itself from the decisions adopted, it may be concluded that it participated in the ensuing cartel (Art. 81(1) EC) (see para. 65)3. Competition – Fines – Community penalties and penalties imposed by the authorities of a Member State or a non-member State for infringement of national competition law – Breach of the principle non bis in idem – None (Council Regulation No 17, Art. 15) (see para. 112)4. Competition – Administrative procedure – Observance of the rights of the defence – Statement of objections – Necessary content – Indications concerning the method of determining the level of the proposed fine – Premature indications – Consequences (Council Regulation No 17, Art. 19(1)) (see paras 138-141)5. Competition – Fines – Amount – Determination – Legal framework – Article 15(2) of Regulation No 17 – Introduction by the Commission of guidelines introducing changes to its previous decision-making practice – Infringement of the principles of non-retroactivity and legal certainty – None (Regulation No 17, Art. 15(2); Commission Communication 98/C 9/03) (see paras 160-161)6. Competition – Fines – Amount – Discretion of the Commission – Unlimited jurisdiction of the Court of First Instance – Possibility, in that context, of taking into consideration additional information which is not mentioned in the decision imposing the fine (Art. 229 EC; Council Regulation No 17, Art. 17) (see para. 164)7. Competition – Fines – Amount – Determination – Turnover to be taken into consideration in calculating the fine – Commission’s discretion while respecting the limit set down in Article 15(2) of Regulation No 17 (Council Regulation No 17, Art. 15(2)) (see para. 180)8. Competition – Fines – Amount – Determination – Turnover to be taken into consideration – Turnover internal to the group of undertakings – Included (Council Regulation No 17, Art. 15(2)) (see para. 260)9. Competition – Fines – Amount – Determination – Criteria – Attenuating circumstances – Termination of the infringement after the Commission’s intervention – Need for a causal link (Council Regulation No 17, Art. 15(2); Commission Communication No 98/C 9/03, para. 3) (see paras 288-292)10. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringements – Respective roles of the undertakings involved in the infringements (Council Regulation No 17, Art. 15) (see para. 316)11. Competition – Fines – Amount – Determination – Criteria – Financial situation of the undertaking concerned – May be taken into consideration — Whether obligatory – No such obligation (Council Regulation No 17, Art. 15) (see para. 333)12. Competition – Fines – Amount – Determination – Criteria – Taking into account of the cooperation with the Commission of the undertaking charged with an offence – Concept of ‘first undertaking’ which cooperated (Council Regulation No 17, Art. 15(2); Commission Communication No 96/C 207/04) (see para. 362)13. Competition – Fines – Amount – Limit fixed by Article 15(2) of Regulation No 17 – Implementing procedures (Council Regulation No 17, Art. 15(2)) (see paras 389-390)14. Competition – Fines – Determined on the basis of an undertaking’s own conduct – Effect of the fact that another trader has not been penalised – None (Council Regulation No 17, Art. 15) (see para. 397)15. Competition – Fines – Discretion of the Commission – Scope – Power to determine the arrangements for payment of the fines – Imposition of default interest – Margin of discretion in fixing the rate (Council Regulation No 17, Art. 15(2) (see paras 411-412)Re: ACTIONS for the annulment in whole or in part of Commission Decision C(2002) 5083 final of 17 December 2002 relating to a proceeding under Article 81 EC and Article 53 of the EEA Agreement (Case COMP/E-2/37.667 – Speciality Graphite) Operative partThe Court:1. In Case T-71/03 Tokai Carbon v Commission: – dismisses the action;– orders the applicant to pay the costs.2. In Case T-74/03 Intech EDM BV v Commission: – orders the applicant to pay the costs. 3. In Case T-87/03 Intech EDM AG v Commission: – sets the fine imposed on the applicant by Article 3 of Decision COMP/E-2/37.667 at EUR 420 000;– amends Article 3(h) of Decision COMP/E-2/37.667 so that the joint and several liability of Intech EDM AG is limited to EUR 420 000; – dismisses the remainder of the action;– orders the applicant to bear two thirds of its own costs and to pay two thirds of the costs incurred by the Commission, and the Commission to bear one third of its own costs and to pay one third of the costs incurred by the applicant. 4. In Case T-91/03 SGL Carbon v Commission: – sets the fine imposed on the applicant by Article 3 of Decision COMP/E-2/37.667 at EUR 9 641 970 in respect of the infringement committed in the isostatic graphite sector; | 3d5c0-674a474-4244 | EN |
STATE AID: THE COURT OF FIRST INSTANCE REVIEWS FOR THE FIRST TIME THE LEGALITY OF A DECISION TAKEN BY THE COMMISSION AFTER BEING REQUESTED TO DO SO WITHIN TWO MONTHS | Regione autonoma della SardegnavCommission of the European Communities(State aid – Aid scheme for the restructuring of small agricultural enterprises – Aid affecting trade between Member States and distorting or threatening to distort competition – Guidelines on State aid for rescuing and restructuring firms in difficulty – Conditional decision – Time-limits applicable to the procedure for controlling State aid – Protection of legitimate expectations – Statement of reasons – Intervention – Intervener’s claims, pleas and arguments)Judgment of the Court of First Instance (Fourth Chamber, Extended Composition), 15 June 2005 Summary of the Judgment1. State aid – Plans to grant aid – Examination by the Commission – Plans for schemes of assistance for the rescue or restructuring of small and medium-sized enterprises or small agricultural enterprises – Guidelines on State aid for rescuing and restructuring firms in difficulty – Usual period of two months – Period applicable for an ‘authorisation’ occurring at the end of the preliminary examination phase(Art. 88(2), first para., and (3) EC; Guidelines on State aid for rescuing and restructuring firms in difficulty, point 4.1, first para.)2. State aid – Plans to grant aid – Examination by the Commission – Preliminary phase – Duration – Extension by the Commission by means of questions unnecessary for the review of the aid – Not allowed – Possibility of engaging in a dialogue with the Member State to enable it to complete an incomplete notification(Art. 88(3) EC)3. State aid – Existing aid and new aid – Conversion of new aid into existing aid – Conditions – Possibility for the Commission to initiate the formal investigation procedure in the absence of prior notice by the Member State of implementation of its plan4. State aid – Plans to grant aid – Examination by the Commission – Preliminary review and main review – Duty to act within a reasonable time – Assessment of actual situation (Art. 88(2) and (3) EC)5. State aid – Compatibility of the aid with the common market – Possible legitimate expectation of the persons concerned – Protection – Conditions and limits (Art. 88(2), first para., EC; Council Regulation No 659/1999, Art. 7(1) and (3))6. State aid – Commission decision finding non-notified aid to be incompatible with the common market – Duty to state reasons – Information required (Art. 253 EC)7. State aid – Effect on trade between Member States – Adverse effect on competition – Criteria for assessment – Aid of limited individual importance but spent in a sector characterised by intense competition and a large number of small enterprises(Art. 87(1) EC)8. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Discretion of the Commission – Possibility of adopting guidelines – Complex economic assessment – Judicial review – Limits(Art. 87(3) EC)9. State aid – Examination by the Commission – Approval of a general aid scheme – Condition – Implementation not capable of leading to the grant of individual aid which is not necessary to fulfil one of the objectives laid down by Article 87(3)(a) to (d) EC(Art. 87(3)(a) to (d) EC)10. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Aid for restructuring firms in difficulty – Identification of firms in difficulty(Art. 87(3)(c) EC; Guidelines on State aid for rescuing and restructuring firms in difficulty, point 2.1, first para.)11. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Aid for restructuring firms in difficulty – Taking into account the location of firms in an assisted area – Limits(Art. 87(3)(a) and (c) EC; Guidelines on State aid for rescuing and restructuring firms in difficulty, points 2.4, second para., and 3.2.1 to 3.2.3)12. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Aid for restructuring firms in difficulty – Conditions – Cumulative conditions – Consequence – Possibility for the Commission to prohibit the payment of aid in the absence of adequate information on the fulfilment of one of the conditions(Art. 87(3)(c) EC; Guidelines on State aid for rescuing and restructuring firms in difficulty, point 3.2.2)13. Procedure – Interveners – Pleas different from those of the supported main party – Admissibility – Condition – Connection with the subject-matter of the case – Admissibility not to be narrowly assessed in relation to potential beneficiaries of an aid scheme intervening on the side of the dispensing body(Statute of the Court of Justice, Art. 40, fourth para.; Rules of Procedure of the Court of First Instance, Art. 116(4))14. Procedure – Interveners – Disputed admissibility of a plea relied on by an intervener taking into account its dubious connection with the subject-matter of the case – Plea having, in any event, to be rejected on another ground or as unfounded – Possibility for the Court to dismiss without ruling on its admissibility15. State aid – Prohibition – Derogations – Scope of the derogation – Restrictive interpretation – Economic disadvantages caused directly by natural disasters or exceptional occurrences(Art. 87(1) and (2)(b) EC)16. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Aid for restructuring firms in difficulty located in an assisted area – Conditions under which applicable – Examination by the Commission (Art. 87(3)(c) EC)17. State aid – Prohibition – Derogations – Aid which may be considered compatible with the common market – Assessment in the light of Article 87 EC – Taking an earlier practice into account – Not included 18. Procedure – Presentation of pleas – Plea expressed in abstract terms, not clarified by sufficiently clear and precise information – Inadmissible (Rules of Procedure of the Court of First Instance, Art. 116(4)(b))1. The first paragraph of point 4.1 of the Guidelines on State aid for rescuing and restructuring firms in difficulty states, in particular, that the Commission ‘will be prepared to authorise’ plans for schemes of assistance for the rescue or restructuring of small and medium-sized enterprises (SMEs) or small agricultural enterprises (SAEs) and ‘will do so within the usual period of two months from the receipt of complete information, unless the scheme qualifies for the accelerated clearance procedure, in which case the Commission is allowed 20 working days’. Those terms must be construed in the context of the procedural provisions laid down in the Treaty for the monitoring of State aid. The guidelines which the Commission may adopt in order to clarify the practice that it intends to follow in that area cannot depart from the provisions of the Treaty. It follows that a planned aid scheme for restructuring SMEs can be authorised by the Commission within the period referred to in the first paragraph of point 4.1 of the Guidelines only if, at the end of the ‘usual period of two months’, that is, the period allowed for its preliminary examination laid down in Article 88(3) EC, the Commission forms the view either that the measures envisaged do not constitute aid, or that they constitute aid which is undoubtedly compatible with the common market. If, on the other hand, the Commission is unable to reach such a conclusion, it is obliged to initiate the formal investigation procedure under the first subparagraph of Article 88(2) EC. (see paras 28-29, 33)2. The preliminary examination phase of planned aid schemes, laid down in Article 88(3) EC, is subject to a mandatory two-month period that runs from the receipt by the Commission of complete notification. In order for a notification to be regarded as complete it is sufficient for it to contain, either in its original form or once the Member State concerned has replied to the Commission’s requests, the information needed to enable the Commission to form a prima facie opinion of the compatibility of the project which has been notified to it. It follows that, whilst the Commission cannot prevent the two-month period from running its course while it demands information which is not needed to enable it to form a prima facie opinion, it is, on the other hand, pursuant to the purpose of Article 88(3) EC, entitled to engage in a dialogue with the Member State concerned with a view to enabling the latter to complete its notification if the necessary information does not appear in it. (see paras 40-41)3. The conversion of new aid into existing aid is subject to two conditions which are sufficient and necessary; the first is that the Commission must not initiate the formal investigation procedure within two months of receipt of the complete notification, and the second is that the Member State concerned must give the Commission prior notice of implementation of its plan. Where no notice of implementation of a scheme is notified to the Commission by the Member State, with the result that one of the two conditions required for the conversion of new aid into existing aid is lacking, the Commission may legitimately decide to initiate the formal investigation procedure in relation thereto. (see paras 48-49)4. It is a general principle of Community law that the conduct of an administrative procedure should be of reasonable duration. Further, the fundamental requirement of legal certainty, which precludes the Commission from being able to postpone the exercise of its powers indefinitely, means that the Court has to assess whether the progress of the administrative procedure indicates excessively belated action on the part of that institution. Whilst, in the context of the formal investigation procedure laid down in Article 88(2) EC, a Member State has an interest in complying with the deadlines imposed to submit its comments or provide the additional information requested by the Commission, without however being bound to do so, time elapsing as a result of its conduct leading to a failure to respect those deadlines nevertheless remains its responsibility. (see paras 53, 59)5. In principle, and save in exceptional circumstances, a legitimate expectation that aid is lawful cannot be invoked unless that aid has been granted in compliance with the procedure laid down in Article 88 EC. In order for aid to have been granted in compliance with the procedure laid down in Article 88 EC, that procedure, which is suspensory in nature, must have been brought to a close. Consequently, where the formal investigation procedure has been initiated in accordance with the first subparagraph of Article 88(2) EC, it must subsequently have been closed by means of a positive decision in accordance with Article 7(1) and (3) of Regulation No 659/1999. Therefore, it is only once such a decision has been adopted by the Commission, and the period for bringing an action against that decision has expired, that a legitimate expectation as to the lawfulness of the aid concerned can be pleaded. (see paras 64-65)6. The statement of reasons for a measure must be appropriate to that measure and must disclose clearly the reasoning followed by the institution which adopted it in such a way as to enable the persons concerned to understand the basis for it and the court to review the justification for it, without being required to go into all the relevant facts and points of law, since the question of compliance with Article 253 EC is assessed by taking the wording of that measure into account as much as its legal and factual context. Where a decision is adopted by the Commission in relation to the monitoring of State aid, even if the very circumstances in which aid is granted are sufficient to show that the aid is capable of affecting trade between Member States and of distorting or threatening to distort competition, the Commission must at least set out those circumstances in the statement of reasons for that decision. (see paras 73-74)7. In its classification of planned aid or of an aid scheme in the light of Article 87(1) EC, the Commission is not required to determine the actual effect but only to examine whether the project is liable to affect trade between Member States and distort or threaten to distort competition. Neither the relatively small amount of aid envisaged nor the modest size of the eligible firms in itself precludes a planned aid scheme from being liable to affect trade between Member States and to distort or threaten to distort competition. The same applies to the limited scale of the economic sector concerned. Other factors can also be taken into account, such as the particular degree of exposure to competition in the economic sector. Such is the case of a sector which is exposed to intense competition and, in particular, whose structure, which is characterised by a large number of small-scale operators, is such that the creation of an aid scheme that is available to a large number of them can have an impact on competition even where individual grants of aid under that scheme are small. (see paras 84-87)8. Under Article 87(3) EC the Commission has a wide discretion. None the less, in order to exercise that discretion, it may adopt rules of guidance such as the Community Guidelines on State aid for rescuing and restructuring firms in difficulty, so long as those rules do not depart from the provisions of the Treaty. Where such a measure has been adopted, the Commission is governed by it. It is therefore for the Court to check that the Commission has observed the rules which it adopted. However, since the wide discretion conferred upon the Commission, clarified, where appropriate, by the guidance rules adopted, involves complex economic and social appraisals having to be carried out in a Community context, the Court has limited control over these. It confines its review to determining whether the rules governing procedure and the requirement for a statement of reasons have been complied with, whether the facts are accurately stated and whether there has been any manifest error of assessment or any misuse of powers. (see paras 94-97)9. The opportunity which is given to the Member State concerned to give notice of a planned aid scheme and, once the Commission has approved it after examining its general characteristics, to dispense with notification of individual aid measures granted pursuant to that scheme, subject, where appropriate, to conditions and obligations imposed in that respect, cannot, therefore, justify the grant of individual aid measures which would have been declared incompatible if they had been the subject of an individual notification without negating the effect of the principle of incompatibility of aid set out in Article 87 EC. In particular, it cannot lead to individual aid measures being granted which, although consistent with one of the objectives of Article 87(3)(a) to (d) EC, are nevertheless not necessary in order for that objective to be met. The Commission must therefore check that planned aid schemes submitted for its examination are set up in such a way as to ensure that the individual aid measures to be granted according to their provisions will be limited to firms which are actually eligible for them. If that proves not to be the case, it is for the Commission, in the exercise of its wide discretion, to take that into account and to assess whether it is appropriate to adopt a conditional or negative decision, in so far as it can do so from the information available to it. (see paras 103-105)10. The first paragraph of point 2.1 of the Guidelines on State aid for rescuing and restructuring firms in difficulty makes it clear that the Commission regards as being in difficulty a firm which is unable to recover through its own resources or by raising the funds it needs from shareholders or borrowing. It puts forward various trend indicators for assessing how much a firm’s situation is worsening, together with various specific indicators for assessing the particular gravity of that situation in certain cases. The first paragraph of point 2.1 of those Guidelines indicates that the importance which the Commission attaches to trend indicators does not necessarily make other kinds of indicator unsuitable, such as those based on an average. However, such indicators will, in any event, be suitable only if it is thereby possible to identify the genuine and demonstrable difficulties which the eligible firms have encountered. Failing that, the aid cannot be regarded as being required by those firms or necessary in order to meet the objective of Article 87(3)(c) EC. (see paras 108, 111)11. The second paragraph of point 2.4 of the Guidelines on State aid for rescuing and restructuring firms in difficulty states, in particular, that where the firms involved in a plan for restructuring aid are located in an assisted area, the Commission will take regional considerations under subparagraphs (a) and (c) of Article 87(3) EC into account as stated in point 3.2.3 of the Guidelines. The latter, headed ‘Conditions for restructuring aid in assisted areas’, states, in particular, that where a proposed aid scheme for restructuring firms in difficulty concerns an assisted or less-favoured area, the Commission is required to take that into account and, to that end, is authorised, notwithstanding structural overcapacity in the sector concerned, to apply flexibly the rule as to capacity reduction laid down in the Guidelines, if regional development needs justify it. By contrast, it does not in any way follow that where the sector affected by a new aid plan appears not to be suffering overcapacity, and the Commission therefore waives the requirement of a capacity reduction by eligible firms, that plan should, for that reason alone, be regarded as being compatible with the common market. On the contrary, the project must still satisfy the principle laid down in point 3.2.1 of the Guidelines on State aid for rescuing and restructuring firms in difficulty, according to which a new aid plan for restructuring can be granted only in circumstances in which it can be demonstrated that the approval of restructuring aid is in the Community interest and, therefore, that it fulfils the conditions as to restoration of viability, avoidance of undue distortions of competition and proportionality which are set out in point 3.2.2 of the Guidelines. Although the Commission can show ‘flexibility’ in that respect, it cannot be ‘wholly permissive’, according to point 3.2.3 of the Guidelines. (see paras 115-117)12. In order to be declared compatible with the common market in application of Article 87(3)(c) EC, a restructuring aid plan for a firm in difficulty must be linked to a restructuring programme designed to reduce or redirect its activities. Point 3.2.2 of the Guidelines on State aid for rescuing and restructuring firms in difficulty, which lays down that requirement, stipulates, in particular, that the restructuring plan should fulfil three material conditions. It is essential, first of all, that it should restore the viability of the beneficiary firm within a reasonable timescale and on the basis of realistic assumptions (point 3.2.2(i)), secondly, that it should avoid undue distortions of competition (point 3.2.2(ii)) and, thirdly, that it should be in proportion to the restructuring costs and benefits (point 3.2.2(iii)). As those conditions are cumulative, the Commission must declare a restructuring aid plan to be incompatible if even one of those conditions has not been satisfied. Furthermore, in order to fulfil its duty to cooperate with the Commission, the Member State concerned must provide all the information necessary to enable the Commission to verify that those conditions are satisfied. Therefore, as it clearly could not base its assessment on a mere claim when the Member State continued to fail to provide the information enabling the Commission to satisfy itself that the project met one of the cumulative conditions laid down at point 3.2.2 of the Guidelines, in spite of repeated requests by that institution, the Commission was entitled to consider that the information available to it did not allow it to conclude that the project satisfied that condition and, therefore, to adopt a decision that the project was incompatible with the common market, without it being necessary to consider the other conditions laid down by that point. (see paras 126-129, 137, 142-143, 149)13. The fourth paragraph of Article 40 of the Statute of the Court of Justice and Article 116(4) of the Rules of Procedure of the Court of First Instance give the intervener the right to set out arguments as well as pleas independently, in so far as they support the form of order sought by one of the main parties and are not entirely unconnected with the issues underlying the dispute, as established by the applicant and defendant, as that would change the subject-matter of the dispute. It is thus for the Court, when determining the admissibility of the pleas put forward by an intervener, to determine whether they are connected with the subject-matter of the dispute, as defined by the main parties. As regards proceedings initiated by a regional authority concerning the compatibility with the common market of an aid scheme for the restructuring of an economic sector that has been proposed by that authority, there can be no question that the firms liable to benefit from that scheme and their representatives are by their nature in a position in which they can usefully complement the applicant authority’s case, particularly in regard to the difficulties which the aid is intended to resolve and the effect which it may have. The connection of their pleas to the subject-matter of the dispute must not therefore be narrowly assessed. (see paras 151-154, 193, 195)14. It is for the Court, when determining the admissibility of the pleas put forward by an intervener, to determine whether they are connected with the subject-matter of the dispute, as defined by the main parties. In those circumstances, where it appears that a plea of dubious connection to the subject-matter of the dispute is in any event to be dismissed as inadmissible for another reason or because it is unfounded, it is open to the Court to dismiss that plea without ruling on the issue whether the intervener went beyond the parameters of its role in support of the form of order sought by one of the main parties. (see paras 153, 188)15. Article 87(2)(b) EC is an exception to the general principle of the incompatibility of aid with the common market and must, as such, be strictly interpreted, with the result that only damage caused directly by natural disasters or exceptional occurrences can justify application of that provision. Furthermore, the Court must assess the legality of a Commission decision concerning State aid in the light of the information available, or which could have been available, to the Commission when the decision was adopted. The Commission cannot therefore be criticised for having taken the view that the project was not proposing to grant aid under Article 87(2)(b) EC and, consequently, for having ruled out the application of that provision, when an examination of the correspondence exchanged in the course of the administrative procedure shows that the national authorities never stated, let alone demonstrated, to the Commission that the project set up aid designed to make good the damage referred to in Article 87(2)(b) EC. (see paras 165-166, 168)16. The Commission is obliged to take Article 158 EC into account as described in the second paragraph of point 1.3 and in point 3.2.3 of the Guidelines on State aid for rescuing and restructuring firms in difficulty when deciding whether a plan for new aid for restructuring firms in difficulty confined to an assisted or less-favoured area, may be declared to be compatible with the common market in accordance with the exemption in Article 87(3)(c) EC. However, the mere fact that a plan for new aid aims to meet the objectives of a Treaty provision other than the exemption in Article 87(3) EC being relied upon by the Member State concerned does not in itself mean that the plan satisfies the conditions for that derogation to apply. (see paras 172, 175)17. The legality of a Commission decision declaring that new aid does not fulfil the conditions under which the exemption in Article 87(3)(c) EC applies must be assessed solely in the context of that article. Therefore, the reliance on an earlier decision-making practice, assuming that is established, is to be dismissed as irrelevant. (see para. 177)18. A plea of illegality, which can be interpreted as a plea in support, must, in accordance with Article 116(4)(b) of the Rules of Procedure of the Court of First Instance, be made by its author. An abstract statement, which is not clarified by sufficiently clear and precise information to enable the other parties to respond to it and the Court to exercise its authority, does not fulfil that minimum presentational requirement laid down by the Rules of Procedure and must, therefore, be dismissed as inadmissible. (see paras 186, 188)JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber, Extended Composition)15 June 2005 (*) In Case T‑171/02,Regione autonoma della Sardegna, represented by G. Aiello and G. Albenzio, avvocati dello Stato, with an address for service in Luxembourg, applicant,supported byConfederazione italiana agricoltori della Sardegna,Federazione regionale coltivatori diretti della Sardegna,Federazione regionale degli agricoltori della Sardegna,established in Cagliari (Italy), represented by F. Ciulli and G. Dore, lawyers,interveners,Commission of the European Communities, represented by V. Di Bucci, acting as Agent, with an address for service in Luxembourg, defendant,APPLICATION for annulment of Commission Decision 2002/229/EC of 13 November 2001 on the aid scheme which the Sardinia Region (Italy) is planning to implement for the restructuring of holdings in difficulty in the protected crops sector (OJ 2002 L 77, p. 29), THE COURT OF FIRST INSTANCEOF THE EUROPEAN COMMUNITIES (Fourth Chamber, Extended Composition), composed of H. Legal, President, V. Tiili, A.W.H. Meij, M. Vilaras and N.J. Forwood, Judges,Registrar: J. Palacio González, Principal Administrator,having regard to the written procedure and further to the hearing on 1 July 2004,gives the followingJudgment Background to the dispute1 By letter of 12 January 1998, the Italian authorities notified the Commission of a planned aid scheme provided for in Decision No 48/7 of the Giunta regionale della Sardegna (Regional Executive of Sardinia) of 2 December 1997, approving a ‘Regional plan for the restructuring of holdings in the protected crops sector’ (hereinafter ‘the project’). The Commission received that notification on 15 January 1998. 2 The project initially involved an aid scheme for restructuring.3 Sardinian small agricultural enterprises (SAEs) in difficulty were eligible under the scheme. The criteria for a ‘difficulty’ for the purpose of the project involved, for the SAE concerned, first, an ‘average operating loss of at least 25% of net profits over the last three marketing years’, and secondly, ‘debts in excess of 30% of operating capital, by reference to debts outstanding as at 31 December 1996’. According to the Italian authorities, approximately 500 Sardinian SAEs fulfilled those criteria. 4 To be able to benefit from the aid scheme, eligible firms had to comply with a number of conditions, including the ‘submission of a restructuring plan showing how all production costs would be met under normal operating conditions and an operating profit achieved’ and the ‘liquidation of part of the operational activities, structures or assets as required to achieve the economic and financial equilibrium of the business’. 5 The sector in issue was that of protected agricultural crops. The products concerned were various species of greenhouse-cultivated vegetables, fruit, mushrooms, plants and flowers. 6 The proposed aid entailed, first of all, measures for restructuring the debt of eligible firms. Those measures were to be adopted either by the creditor banking institutions of the firm concerned (waiver of interest and of interest on arrears on debts outstanding as at 31 December 1996; waiver of interest on arrears on debts due between 1 January 1997 and the end of a rescheduling agreement), or by the regional authorities (assumption of part of the burden of the principal debt comprising debts outstanding as at 31 December 1996; subsidising interest on debts due or created after 31 December 1996). The regional authorities’ share of the cost of those measures amounted to 75% of total debts comprising outstanding debts as at 31 December 1996, net of interest on arrears payable to creditor banking institutions. Those measures were fixed to last for a maximum of 15 years. 7 Secondly, the project envisaged a non-repayable contribution to a variety of production investment measures (installation of protection, ventilation, air conditioning, insulation, drainage and irrigation systems, and upgrading or replacement of outdated equipment). Those investment measures were described as ‘essential’ for restructuring. The regional authorities’ share of the cost of those measures amounted to 75% of total eligible expenditure. Those measures were described as lasting ‘for the normal time required for technical completion’. 8 Thirdly, the project provided for technical assistance, professional training and advice by the Ente regionale di sviluppo e assistenza tecnica in agricoltura (Regional office for development and technical assistance in the agricultural sector). Those measures were presented as ‘ordinary activities’ which ‘[did] not involve additional costs’. They were described as being of ‘unlimited duration’. 9 The total amount of public resources involved in financing the aid scheme for restructuring was ITL 60 billion, approximately EUR 30 million. The maximum grant to each firm to benefit from the aid was limited in turn to ITL 600 million, approximately EUR 300 000. 10 Secondly, the project set out the declared intention of the Italian Republic to provide rescue aid for SAEs in temporary and serious financial difficulty ‘capable of being allocated in the form of a guarantee or grant of loans of minimum amounts at standard rates or, in any event, calculated in terms of maintaining operational activities until the restructuring phase’. 11 By letter of 1 February 1999 the Commission notified the Italian Republic of its decision to initiate the formal investigation procedure provided for in Article 88(2) EC. The Italian authorities received that letter on 4 February 1999. 12 By letter of 14 September 2001 the Italian authorities asked the Commission to adopt a decision within two months in accordance with Article 7(7) of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1). The Commission received that letter on 17 September 2001. 13 On 13 November 2001 the Commission adopted Decision 2002/229/EC on the aid scheme which the Sardinia Region (Italy) is planning to implement for the restructuring of holdings in difficulty in the protected crops sector (OJ 2002 L 77, p. 29, hereinafter ‘the Decision’), which was published on 20 March 2002. 14 The Decision declares in Article 1 that the project is incompatible with the common market and may not be implemented. Procedure and forms of order sought by the parties15 The Regione autonoma della Sardegna (hereinafter ‘the applicant’) brought the present action by application lodged at the Registry of the Court of First Instance on 6 June 2002. 16 The case was initially allocated to the First Chamber, Extended Composition, and subsequently to the Fourth Chamber, Extended Composition, the Judge-Rapporteur having been assigned to the Fourth Chamber as a result of changes in the composition of the Chambers of the Court with effect from 1 October 2003. 17 By application lodged at the Registry of the Court of First Instance on 8 August 2002, the Confederazione italiana agricoltori della Sardegna, the Federazione regionale coltivatori diretti della Sardegna and the Federazione regionale degli agricoltori della Sardegna applied for leave to intervene in the proceedings in support of the form of order sought by the applicant. That application for leave to intervene was served on the parties. They did not submit observations within the prescribed period. 18 By order of 9 December 2002 the President of the First Chamber, Extended Composition, of the Court of First Instance granted leave to intervene. The interveners lodged a statement in intervention at the Registry of the Court on 5 February 2003. 19 The parties presented oral argument and replied to the questions put to them by the Court at the hearing on 1 July 2004. On that occasion, the Commission withdrew its claim for the action to be dismissed as being inadmissible on the ground of delay. Formal note of this was taken in the minutes. 20 The applicant claims that the Court should:– annul the Decision; – order the Commission to pay the costs.21 The interveners claim that the Court should:– primarily, annul the Decision;– alternatively, annul the Decision ‘in so far as it does not provide that aid up to the sum of EUR 100 000 per holding is lawful’;22 The Commission claims that the Court should:– dismiss the action; – order the applicant to pay the costs and the interveners to bear their own costs as well as the costs incurred by the Commission as a result of their intervention. LawA – Claim for annulment of the Decision in its entirety23 In support of its claim for the annulment of the Decision in its entirety, the applicant, supported by the interveners, essentially invokes eight pleas as follows: – breach of the first paragraph of point 4.1 of Information from the Commission of 19 September 1997 concerning Community guidelines on State aid for rescuing and restructuring firms in difficulty (97/C 283/02) (OJ 1997 C 283, p. 2; hereinafter ‘the Guidelines’); – breach of Article 88 EC; – excessive duration of the administrative procedure;– misapplication of the principle of protection of legitimate expectations;– breach of Article 253 EC;– failure to act diligently;– breach of Article 87(3)(c) EC and of the Guidelines;– breach of Article 7(4) of Regulation No 659/1999.24 Further, the interveners request that the Court ‘additionally reject, as appropriate, the application of unlawful provisions in accordance with Article 241 EC’, and essentially invoke four further pleas as follows: – infringement of the right to be heard;– breach of Article 87(2)(b) EC;– breach of Article 158 EC and Declaration No 30 on island regions, annexed to the Final Act of the Treaty of Amsterdam;– breach of Council Directive 72/159/EEC of 17 April 1972 on the modernisation of farms (OJ, English Special Edition 1972 (II), p. 324) and of Council Directive 75/268/EEC of 28 April 1975 on mountain and hill farming and farming in certain less-favoured areas (OJ 1975 L 128, p. 1). 25 Those two sets of pleas must be considered in turn.1. Pleas common to the applicant and to the intervenersa) Plea relating to breach of the first paragraph of point 4.1 of the Guidelines Arguments of the parties26 According to the applicant, supported by the interveners, the Commission did not respect the usual two-month period which it laid down for itself in the first paragraph of point 4.1 of the Guidelines for the monitoring of planned aid schemes for restructuring small and medium-sized enterprises (SMEs). 27 The Commission contests that plea. Findings of the Court 28 The first paragraph of point 4.1 of the Guidelines states, in particular, that the Commission ‘will be prepared to authorise’ plans for schemes of assistance for the rescue or restructuring of SMEs or SAEs and ‘will do so within the usual period of two months from the receipt of complete information, unless the scheme qualifies for the accelerated clearance procedure, in which case the Commission is allowed 20 working days’. 29 Those terms must be construed in the context of the procedural provisions laid down in the Treaty for the monitoring of State aid. The guidelines which the Commission may adopt in order to clarify the practice that it intends to follow in that area cannot depart from the provisions of the Treaty (Case 310/85 Deufil v Commission [1987] ECR 901, paragraph 22, and Case C‑382/99 Netherlands v Commission [2002] ECR I‑5163, paragraph 24). 30 In order to monitor new aid which the Member States plan to grant, Article 88 EC distinguishes between a preliminary examination phase and a formal investigation procedure. 31 The preliminary examination phase provided for in Article 88(3) EC is intended merely to allow the Commission a sufficient period of time for reflection and investigation so that it can form a prima facie opinion on the draft plans notified to it, thus enabling it to conclude either that they do not constitute aid, or that they are compatible with the common market or even that any doubts in that regard make a detailed investigation essential (Case 120/73 Lorenz [1973] ECR 1471, paragraph 3, and Case C‑204/97 Portugal v Commission [2001] ECR I‑3175, paragraph 34). Given the interest of the Member State concerned in being informed of the position quickly, the process is, in principle, of an urgent nature and is, on that basis, subject to a mandatory two-month period that runs from the receipt by the Commission of complete notification (Lorenz, cited above, paragraph 4, and Case C‑334/99 Germany v Commission [2003] ECR I‑1139, paragraphs 49 and 50). 32 The formal investigation procedure provided for in the first subparagraph of Article 88(2) EC is essential where the Commission is unable to satisfy itself after the preliminary examination phase that a plan does not constitute aid or that, despite constituting aid, it is compatible with the common market. The aim of the procedure is therefore to enable the Commission to be fully informed of all the facts of the case by carrying out all the requisite consultations, as it is under a duty to do, before reaching its final decision, as well as to protect the rights of potentially interested third parties by allowing them to make their views known (Case 84/82 Germany v Commission [1984] ECR 1451, paragraph 13; Case 323/82 Intermills v Commission [1984] ECR 3809, paragraph 17; and Portugal v Commission, cited in paragraph 31 above, paragraph 33). 33 It follows that a planned aid scheme for restructuring SMEs can be authorised by the Commission within the period referred to in the first paragraph of point 4.1 of the Guidelines only if, at the end of the ‘usual period of two months’, that is, the period allowed for its preliminary examination, the Commission forms the view either that the measures envisaged do not constitute aid, or that they constitute aid which is undoubtedly compatible with the common market. If, on the other hand, the Commission is unable to reach such a conclusion, it is obliged to initiate the formal investigation procedure. 34 That interpretation is also confirmed by the description of the period of 20 working days which is laid down in the Communication to the Member States on the accelerated clearance of aid schemes for SMEs and of amendments of existing schemes (92/C 213/03) (OJ 1992 C 213, p. 10), to which the Guidelines refer. It is clear from the wording of the second and final paragraphs of that communication that even where a planned aid scheme satisfies all the conditions required in order for the period of 20 working days to apply, the Commission undertakes only ‘in principle’ not to object after that period has expired, thus reserving its full powers to ‘decide’, that is, where appropriate to adopt a decision to initiate the formal investigation procedure and, at the end of that procedure, a final positive, conditional or negative decision. 35 Thus, since the first paragraph of point 4.1 of the Guidelines refers only to the period applicable to the preliminary examination phase provided for in Article 88 EC, as interpreted by the Court of Justice, this plea, which was intended to stand alone, must be dismissed and the plea relating to breach of Article 88 EC must be examined. b) Plea relating to breach of Article 88 EC36 According to the applicant, the Commission staggered its requests for additional information instead of grouping them together and, for that reason, misinterpreted the purpose of the preliminary examination phase provided for in Article 88(3) EC, which is of an urgent nature, particularly where, as in this case, a plan relates to firms in difficulty. 37 According to the interveners, the Commission decided to initiate the formal investigation procedure provided for in the first subparagraph of Article 88(2) EC after the two-month period laid down for that purpose had expired, and therefore it related to what was consequently an existing aid scheme. 38 The Commission disputes those arguments. Findings of the Court39 The applicant’s arguments, which concern the progress of the preliminary examination phase, and those of the interveners, which concern the circumstances in which the decision to initiate the formal investigation procedure was taken, must be assessed in the light of the principles established before Regulation No 659/1999 came into force. That happened on 16 April 1999, when the formal investigation procedure was already pending. 40 First, as has been noted in the examination of the previous plea, the preliminary examination phase is subject to a mandatory two-month period that runs from the receipt by the Commission of complete notification. In order for a notification to be regarded as complete it is sufficient for it to contain, either in its original form or once the Member State concerned has replied to the Commission’s requests, the information needed to enable the Commission to form a prima facie opinion of the compatibility of the project which has been notified to it (Case C‑99/98 Austria v Commission [2001] ECR I‑1101, paragraph 56). 41 It follows that, whilst the Commission cannot prevent the two-month period from running its course while it demands information which is not needed to enable it to form a prima facie opinion (Austria v Commission, cited in paragraph 40 above, paragraphs 61 to 65), it is, on the other hand, pursuant to the purpose of Article 88(3) EC, entitled to engage in a dialogue with the Member State concerned with a view to enabling the latter to complete its notification if the necessary information does not appear in it (Joined Cases 91/83 and 127/83 Heineken Brouwerijen [1984] ECR 3435, paragraphs 17 and 18; Case C‑301/87 France v Commission [1990] ECR I‑307, paragraphs 27 and 28; Joined Cases C‑15/98 and C‑105/99 Italy and Sardegna Lines v Commission [2000] ECR I‑8855, paragraph 44; Case T‑73/98 Prayon‑Rupel v Commission [2001] ECR II‑867, paragraph 99). 42 In the present case, having received the Italian authorities’ initial notification on 15 January 1998, the Commission considered that it did not have all the particulars needed to form a prima facie opinion. By fax of 9 March 1998, it asked the Italian Republic to provide it with an initial set of additional information within four weeks. The Commission’s services also met with the applicant’s representatives on 4 June 1998. By fax of 19 June 1998, the Commission asked the Italian authorities to confirm in writing the information supplied at that meeting and to provide it, within four weeks, with the information requested on 9 March 1998. The applicant replied to those requests by letter of 27 August 1998, which the Italian authorities passed to the Commission on 10 September, and which the latter received on 15 September. The Commission took the view that it still did not have all the particulars needed. By fax of 19 October 1998, it asked the Italian Republic to provide it with a second set of additional information within four weeks. The applicant replied to that request by letter of 12 November 1998, which the Italian authorities passed to the Commission on 16 November 1998, and which the latter received on 19 November 1998. 43 More than 10 months thus passed between the date on which the Commission received the initial notification and the date on which that notification was complete. 44 However, it must be concluded from examining the correspondence exchanged at that time, first, that the initial notification, consisting of five pages, contained only an incomplete and imprecise description of the project scheme for restructuring aid that was envisaged by the Italian Republic and, in particular, of its eligibility criteria, of the measures required to be included in the restructuring plan to be submitted by each firm that was to benefit from it and of the individual aid that could be granted to them. Furthermore, it provided in general terms for the grant of rescue aid. The Italian authorities later withdrew that grant but only informed the Commission of that fact by a letter sent on 10 September 1998. 45 Second, by letters dated 19 June and 19 October 1998, the Commission did indeed raise certain new or supplementary questions, but it also repeated questions which had been put on 9 March 1998, to which replies were only sent by letter of 10 September 1998. In particular, with each letter, the Commission renewed its request to be supplied with the economic documentation missing from the notification, the need for which had been pointed out at the meeting on 4 June 1998. The applicant itself acknowledges that it was with the aim of ‘clarifying the scope and effects’ of the project that ‘the Commission and the Italian authorities engaged in extensive correspondence’ during the preliminary examination phase. 46 Lastly, the project was of some importance as it aimed to resolve the difficulties of approximately 500 firms, approximately one quarter of the SAEs operating in the greenhouse crops sector in Sardinia, and of a certain complexity as it envisaged implementing an aid scheme consisting of various financial measures which had to be funded either by the regional authorities or by the banking institutions which had made loans to the firms in question, as well as various investment measures for the benefit of the latter. 47 Accordingly, the Commission rightly sought to obtain from the Italian authorities, through successive requests, the information needed to form a prima facie opinion. When a Member State submits an incomplete and imprecise notification and is then slow to produce the additional information and clarification properly requested by the Commission, the regional authorities of that Member State cannot be allowed to base their argument on the resulting delay. 48 Secondly, the conversion of new aid into existing aid is subject to two conditions which are sufficient and necessary; the first is that the Commission must not initiate the formal investigation procedure within two months of receipt of the complete notification, and the second is that the Member State concerned must give the Commission prior notice of implementation of its plan (Lorenz, cited in paragraph 31 above, paragraphs 4 and 6, and Austria v Commission, cited in paragraph 40 above, paragraph 84). 49 In the present case, it is sufficient to note that the Italian Republic gave the Commission no notice of implementation, with the result that one of the two conditions required for the conversion of the project to an existing aid scheme was lacking, that it therefore remained new aid and that, as a result, the Commission was entitled to decide to initiate the formal investigation procedure in relation thereto (see, on that point, Case T‑187/99 Agrana Zucker und Stärke v Commission [2001] ECR II‑1587, paragraph 39). 50 The plea must therefore be dismissed in its entirety.c) Plea relating to the excessive duration of the administrative procedure51 Having taken the view that the administrative procedure lasted an excessively long time, the applicant, supported by the interveners, argues that there was a failure to observe a reasonable timescale and that the fundamental requirement of legal certainty was not adhered to. 52 The Commission contests that plea. 53 It is a general principle of Community law that the conduct of an administrative procedure should be of reasonable duration (Case T‑190/00 Regione Siciliana v Commission [2003] ECR II‑0000, paragraph 136). Further, the fundamental requirement of legal certainty, which precludes the Commission from being able to postpone the exercise of its powers indefinitely, means that the Court has to assess whether the progress of the administrative procedure indicates excessively belated action on the part of that institution (Joined Cases C‑74/00 P and C‑75/00 P Falck and Acciaieriedi Bolzano v Commission [2002] ECR I‑7869, paragraphs 140 and 141, and Case T‑109/01 Fleuren Compost v Commission [2004] ECR II‑0000, paragraphs 145 to 147). 54 In the present case, it is apparent from the progress of the preliminary examination phase, described in paragraph 42 above, that more than 12 months passed between receipt by the Commission of the initial notification on 15 January 1998, and receipt by the Italian Republic on 4 February 1999 of the letter giving notice of the decision to initiate the formal investigation procedure. 55 However, more than eight months of that period may be accounted for by the time that passed between the despatch to the Italian Republic of an initial request for additional information on 9 March 1998, and receipt by the Commission on 19 November 1998 of the last of the information sought. The applicant acknowledged in its written submissions that the intervening exchange of correspondence had served to clarify the wording and scope of the project. It also conceded at the hearing that the extended time taken for that exchange was to a large extent due to the lateness and incomplete nature of its replies to the questions put by the Commission. In view of those points and the circumstances described in paragraphs 44 to 46 above, it cannot be held that the preliminary examination phase lasted an unreasonably long time, or that the Commission acted too slowly. 56 Since the entry into force of Regulation No 659/1999 on 16 April 1999, the formal investigation procedure is subject to an indicative period of 18 months, which may be extended by common agreement between the Commission and the Member State concerned according to Article 7(6) of that regulation. That regulation applies to any administrative procedure pending before the Commission when it came into force, with the exception of those of its provisions to which particular implementation rules apply (Case T‑369/00 Département du Loiret v Commission [2003] ECR II‑1789, paragraphs 50 and 51). That provision therefore applies in the present case. 57 As the period of 18 months provided for in Article 7(6) of Regulation No 659/1999 is indicative only, it is necessary to consider whether it is apparent from the progress of the formal investigation procedure that the Commission failed to take a reasonable amount of time or acted too slowly. The chronology of that procedure is as follows: – 4 February 1999: receipt by the Italian Republic of the Commission’s letter of 1 February 1999 informing it of the decision to initiate the formal investigation procedure and inviting it to submit comments within one month; – 15 June 1999: receipt by the Commission of the comments of the Italian Republic; – 3 July 1999: publication of Commission Information 1999/C 187/02 on an invitation to submit comments (OJ 1999 C 187, p. 2); – 7 December 1999: despatch by the Commission, and receipt by the Italian Republic, of a request for additional information, to be provided within four weeks; – 4 July 2000: receipt by the Commission of a request for ‘deferment of the time-limit for closure of the procedure’ sent by the Italian Republic at the applicant’s request; – 11 July 2000: grant by the Commission of a two-month extension for provision of the information requested on 7 December 1999; – 9 February 2001: receipt by the Commission of the information requested on 7 December 1999; – 17 September 2001: receipt by the Commission of a request for adoption of a final decision within two months in accordance with Article 7(7) of Regulation No 659/1999, sent by the Italian Republic at the applicant’s request; – 15 November 2001: notification of the Decision to the Italian Republic.58 That chronology shows that 17 months, less than the indicative period of 18 months laid down in Article 7(6) of Regulation No 659/1999, elapsed between initiation of the formal investigation procedure and the request for an extension of that period, and that a total of 33½ months elapsed before the procedure was closed. 59 That total period is attributable mainly to the failure to observe the one-month period given to the Italian Republic to submit its comments (which was exceeded by three and a half months), the period of four weeks to provide the additional information requested by the Commission (exceeded by six and a half months prior to the request for an extension) and the extension of two months to collate and supply that information (exceeded by almost five months). Whilst it was in the Italian Republic’s interest to comply with those deadlines, although it was not bound to do so, the Italian Republic nevertheless remains responsible for the time which elapsed as a result of its conduct (see, on that point, Case C‑305/89 Italy v Commission [1991] ECR I‑1603, paragraph 30, and Regione Siciliana v Commission, cited in paragraph 53 above, paragraph 138). 60 Furthermore, although the six months which elapsed between receipt of the comments submitted by the Italian Republic (on 15 June 1999) and the despatch by the Commission of a request for additional information (on 7 December 1999) and the nine months which elapsed between receipt of that information (on 9 February 2001) and adoption of the Decision (on 13 November 2001) seem significant, they are not, however, excessive, particularly given the circumstances described in paragraphs 46 and 59 above and the numerous doubts as to the compatibility of the project with the common market which were expressed by the Commission in its decision to initiate the formal investigation procedure. The Commission cannot therefore be accused of having made the procedure last an excessively long time. 61 The plea must therefore be dismissed.d) Plea relating to the failure to comply with the principle of protection of legitimate expectations62 The applicant maintains that it acquired a legitimate expectation that the project was compatible with the common market because of the significant correspondence between the Italian Republic and the Commission in the course of the administrative procedure as well as the exceptional duration of that procedure. The interveners take the view that such a legitimate expectation arose because of the Commission’s silence over a period of seven months from receipt of the last of the information requested of the Italian Republic in the course of the formal investigation procedure. 63 The Commission contests that plea. 64 In principle, and save in exceptional circumstances, a legitimate expectation that aid is lawful cannot be invoked unless that aid has been granted in compliance with the procedure laid down in Article 88 EC (Case C‑5/89 Commission v Germany [1990] ECR I‑3437, paragraphs 14 and 16). 65 In order for aid to have been granted in compliance with the procedure laid down in Article 88 EC, that procedure, which is suspensory in nature, must have been brought to a close. Consequently, where the formal investigation procedure has been initiated in accordance with the first subparagraph of Article 88(2) EC, it must subsequently have been closed by means of a positive decision in accordance with Article 7(1) and (3) of Regulation No 659/1999. Therefore, it is only once such a decision has been adopted by the Commission, and the period for bringing an action against that decision has expired, that a legitimate expectation as to the lawfulness of the aid concerned can be pleaded (Case T‑126/99 Graphischer Maschinenbau v Commission [2002] ECR II‑2427, paragraph 42). 66 In the present case, assuming that the applicant, which is not a trader but the regional authority which devised the planned aid scheme, is entitled to plead a legitimate expectation, the project was clearly never the object of a positive decision and none of the factual arguments pleaded by the parties constitutes an exceptional circumstance which might have allowed the applicant to expect, even before the Decision was adopted, that the Commission considered or would consider that project to be compatible with the common market. 67 First of all, the correspondence exchanged in the course of the administrative procedure remained within the limits of dialogue enabling the Commission to obtain from the Italian Republic the information needed to form a prima facie opinion (see paragraphs 41 to 47 and 55 above), and then the additional information requested on the effects of the project on the market (see paragraph 59 above). Furthermore, reading that correspondence shows that, in its letters, which were passed to the applicant by the Italian Republic, the Commission was always careful to express serious doubts about certain aspects of the project and to reserve its definitive assessment, as it pointed out at the hearing, and which was not disputed. 68 Secondly, the administrative procedure was not unreasonably protracted, as examination of the previous plea has shown. Even less is its duration exceptional, therefore. 69 Thirdly, although it is true that after receiving the last of the information requested, the Commission remained silent for seven months until the Italian Republic asked it to make a decision within two months pursuant to Article 7(7) of Regulation No 659/1999, that silence could not be construed as an implied approval on the part of that institution, because it was still under an obligation to close the formal investigation procedure by means of a decision in accordance with Article 7(1) of that regulation. 70 The plea must therefore be dismissed.e) Plea relating to breach of Article 253 EC71 The applicant and the interveners maintain that the Decision is in breach of Article 253 EC inasmuch as it contains an inadequate statement of reasons as regards the description of the economic sector in question and the examination of the effects of the project on trade between Member States and on competition. 72 The Commission contests that plea.73 The statement of reasons for a measure must be appropriate to that measure and must disclose clearly the reasoning followed by the institution which adopted it in such a way as to enable the persons concerned to understand the basis for it and the court to review the justification for it, without being required to go into all the relevant facts and points of law, since the question of compliance with Article 253 EC is assessed by taking the wording of that measure into account as much as its legal and factual context (Case 2/56 Geitling v High Authority [1957 and 1958] ECR 3, at p. 15, and Case C-42/01 Portugal v Commission [2004] ECR I‑0000, paragraph 66). 74 Where a decision is adopted by the Commission in relation to the monitoring of State aid, even if the very circumstances in which aid is granted are sufficient to show that the aid is capable of affecting trade between Member States and of distorting or threatening to distort competition, the Commission must at least set out those circumstances in the statement of reasons for that decision (Joined Cases 296/82 and 318/82 Netherlands and Leeuwarder Papierwarenfabriek v Commission [1985] ECR 809, paragraph 24, and Case C‑372/97 Italy v Commission [2004] ECR I‑0000, paragraph 71). 75 In the present case, recital 41 in the preamble to the Decision states that the intended aid encourages the production of fruit, vegetables and plants. In the light of recital 8, which lists different species of fruit, vegetables, plants and flowers cultivated in greenhouses by the Sardinian SAEs for whom the project was intended, those particulars adequately describe the economic sector concerned. 76 Recital 41 in the preamble to the Decision then sets out statistical information to show that Italy is the principal vegetable producer in the European Union and that Sardinia constitutes an important production area in Italy. It thus indicates why the project is liable to affect trade between Member States. 77 Similarly, recital 43 in the preamble to the Decision indicates that aid for restructuring firms in difficulty shifts the burden of structural change on to other more efficient firms and encourages a subsidy race. It also refers to points 1.1 and 2.3 of the Guidelines, which also deal with that issue. Thus it indicates why the project is liable to distort or threaten to distort competition. 78 Finally, recitals 51 and 54 in the preamble to the Decision, in which the compatibility of the project is assessed in the light of the condition laid down in point 3.2.2(ii) of the Guidelines of avoiding undue distortions of competition, complete that statement of reasons by setting out in more detail the risk that the project will have the effect of increasing production and affecting prices in the sector concerned. 79 It therefore appears that it was not impossible to identify from the statement of reasons for the Decision the sector in question and the effects or possible effects of the project on trade between Member States and on competition. 80 The plea must therefore be dismissed.f) Plea relating to the Commission’s failure to act diligently81 The applicant, supported by the interveners, accuses the Commission of merely considering the possible effects of the project in the abstract. A genuine analysis would have led it to conclude that, taking into account the limited economic scale of the greenhouse-crop sector in Sardinia, the modest size of the eligible firms and the small amount of intended aid, the project did not affect trade and neither distorted nor threatened to distort competition. 82 The Commission contests that plea. 83 Although the plea formally relates to a failure to act diligently, examination of the merits shows that it concerns the essence of the Decision and not the circumstances of its adoption. Moreover the applicant confirmed at the hearing that it was claiming that the ‘lack of diligence and of justification in regard to the assessment of the compatibility of the project’ amounted to a ‘fundamental defect’ in that, if the Commission had ‘taken into account the actual circumstances’, it ‘would have seen that it [was] impossible, in any event, for the project to distort free competition’. 84 In so far as the applicant expressly calls into question recitals 41 and 43 in the preamble to the Decision concerning the categorisation of the project, analysis of the plea shows that it relates either to an error of law in that Article 87(1) EC requires the Commission to determine the actual effect of the project on trade between Member States and on competition, or an error of assessment in that the conditions for the application of Article 87(1) EC to trade between Member States and to competition were not met in the present case. 85 However, the Commission is not required to determine the actual effect of planned aid or of an aid scheme but only to examine whether the project is liable to affect trade between Member States and distort or threaten to distort competition (Case C‑298/00 P Italy v Commission [2004] ECR I‑0000, paragraph 49, and Case C‑372/97 Italy v Commission, cited in paragraph 74 above, paragraph 44). In the present case, the Commission had therefore not erred in law in examining the effect of the project on trade between Member States or on competition in the manner indicated in relation to the previous plea. 86 Further, neither the relatively small amount of aid envisaged nor the modest size of the eligible firms in itself precludes a planned aid scheme from being liable to affect trade between Member States and to distort or threaten to distort competition (Case 730/79 Philip Morris v Commission [1980] ECR 2671, paragraphs 11 and 12; Case C‑142/87 Belgium v Commission [1990] ECR I‑959, paragraph 43; and Case C‑372/97 Italy v Commission, cited in paragraph 74 above, paragraph 53). The same applies to the limited scale of the economic sector concerned (Case C‑280/00 Altmark Trans and Regierungspräsidium Magdeburg [2003] ECR I‑7747, paragraph 82, and Case C‑372/97 Italy v Commission, cited in paragraph 74 above, paragraph 60). 87 Other factors can also be taken into account, such as the particular degree of exposure to competition in the economic sector in which the eligible holdings operate (Case 259/85 France v Commission [1987] ECR 4393, paragraph 24, and Case C‑372/97 Italy v Commission, cited in paragraph 74 above, paragraph 54). The agricultural sector, and the fruit and vegetable sector in particular, is exposed to intense competition. In particular, its structure, which is characterised by a large number of small-scale operators, is such that the creation of an aid scheme that is available to a large number of them, as in the present case, can have an impact on competition even where individual grants of aid under that scheme are small (Case C‑372/97 Italy v Commission, cited in paragraph 74 above, paragraph 57). The arguments put forward by the applicant and by the interveners do not therefore, by themselves, establish an error of assessment in that regard. 88 From that point of view, the plea must therefore be dismissed.89 In so far as the applicant states that it disputes the assessment of the compatibility of the project having regard to Article 87(3)(c) EC, the plea is understood to relate to a manifest error of assessment in that the project would not adversely affect trading conditions to an extent contrary to the common interest. The application of that provision also presupposes the need to take into consideration the effect of a State measure on trade between Member States and on competition (Case C‑169/95 Spain v Commission [1997] ECR I‑135, paragraph 20), as the Guidelines also state in the second paragraph of point 2.4 and in point 3.2.2(ii). 90 From that point of view, the plea is the same as the following plea, and will be examined jointly with it.g) Plea relating to breach of Article 87(3)(c) EC and the Guidelines91 According to the applicant, supported by the interveners, the examination of the compatibility of the project with the common market, undertaken in the light of Article 87(3)(c) EC in relation to aid to facilitate the development of certain economic activities or of certain economic areas, and in the light of the Guidelines, is flawed by reason of errors of law and manifest errors of assessment. 92 In addition, the interveners argue that the Commission infringed points 3.2.3, 3.2.4 and 3.2.5 of the Guidelines.93 The Commission submits that those arguments should be dismissed in their entirety. 94 Under Article 87(3) EC the Commission has a wide discretion (Philip Morris v Commission, cited in paragraph 86 above, paragraph 17, and Case C‑372/97 Italy v Commission, cited in paragraph 74 above, paragraph 83). 95 None the less, in order to exercise that discretion, it may adopt rules of guidance such as the Guidelines which apply in the present case, so long as those rules do not depart from the provisions of the Treaty. Where such a measure has been adopted, the Commission is governed by it (Deufil v Commission, cited in paragraph 29 above, paragraph 22; Case C‑313/90 CIRFS and Others v Commission [1993] ECR I‑1125, paragraph 36, and Netherlands v Commission, cited in paragraph 29 above, paragraph 24). 96 It is therefore for the Court to check that the Commission has observed the rules which it adopted (Case T‑35/99 Keller and Keller Meccanica v Commission [2002] ECR II‑261, paragraph 77). 97 However, since the wide discretion conferred upon the Commission, clarified, where appropriate, by the guidance rules adopted, involves complex economic and social appraisals having to be carried out in a Community context, the Court has limited control over these. It confines its review to determining whether the rules governing procedure and the requirement for a statement of reasons have been complied with, whether the facts are accurately stated and whether there has been any manifest error of assessment or any misuse of powers (PhilipMorris v Commission, cited in paragraph 86 above, paragraph 24; Case C‑56/93 Belgium v Commission [1996] ECR I‑723, paragraph 11; Case T‑110/97 KneisslDachstein v Commission [1999] ECR II‑2881, paragraph 46). 98 In that context, the applicant and the interveners criticise, first of all, the overall assessment of the project (recital 45 in the preamble to the Decision); secondly, the assessment of the definition of firm in difficulty for the purpose of the project in the light of the first paragraph of point 2.1 of the Guidelines (recital 46 in the preamble to the Decision); thirdly, the failure to assess the compatibility of the project in the light of the special rules laid down in points 3.2.3, 3.2.4 and 3.2.5 of the Guidelines; and, fourthly, its assessment in the light of the general rules laid down in point 3.2.2 of the Guidelines (recitals 48 to 58 in the preamble to the Decision). – Overall assessment of the project99 According to the applicant, the Commission could not base the Decision on the fact that implementing the restructuring aid scheme notified to it by the Italian Republic was liable, given the automatic nature of the measures which the project entailed, to result in the grant of individual aid measures to SAEs which were not in difficulty and which were not, therefore, eligible for them. 100 Given that argument, it must first be examined whether the Commission can sustain such an argument in support of a decision declaring a planned aid scheme for restructuring firms in difficulty to be incompatible with the common market and, second, an assessment must be made as to whether the Commission could sustain such an argument in support of the Decision in the present case. 101 Under Article 87(3) EC and at the end of the procedure laid down in Article 88(2) EC, the Commission may declare, by means of a positive or conditional decision, that a planned aid scheme is compatible with the common market. The Member State concerned can then dispense with notifying the Commission of individual aid measures taken pursuant to that scheme, subject, where appropriate, to the conditions and obligations imposed by the Commission in that respect. The latter has a wide discretion in the matter (Case C‑47/91 Italy v Commission [1994] ECR I‑4635, paragraph 21, and Case C-321/99 P ARAP and Others v Commission [2002] ECR I‑4287, paragraph 72). 102 When it assesses the description of such a project and its compatibility with the common market, the Commission is entitled to confine itself to examining its general characteristics, as they appear from the complete notification, without being required to examine each particular case in which it applies (Case 248/84 Germany v Commission [1987] ECR 4013, paragraph 18; Case C‑75/97 Belgium v Commission [1999] ECR I‑3671, paragraph 48; Italy and Sardegna Lines v Commission, cited in paragraph 41 above, paragraph 51; Case C‑351/98 Spain v Commission [2002] ECR I‑8031, paragraph 67, and Case C‑278/00 Greece v Commission [2004] ECR I‑0000, paragraph 24). 103 The opportunity which is given to the Member State concerned to give notice of a planned aid scheme and, once the Commission has approved it after examining its general characteristics, to dispense with notification of individual aid measures granted pursuant to that scheme, subject, where appropriate, to conditions and obligations imposed in that respect, cannot, as the Commission rightly maintains, justify the grant of individual aid measures which would have been declared incompatible if they had been the subject of an individual notification without negating the effect of the principle of incompatibility of aid set out in Article 87 EC. In particular, it cannot lead to individual aid measures being granted which, although consistent with one of the objectives of Article 87(3)(a) to (d) EC, would none the less not be necessary in order for that objective to be met (Philip Morris v Commission, cited in paragraph 86 above, paragraph 17; Agrana Zucker und Stärke v Commission, cited in paragraph 49 above, paragraph 74; Graphischer Maschinenbau v Commission, cited in paragraph 65 above, paragraph 34). 104 The Commission must therefore check that planned aid schemes submitted for its examination are set up in such a way as to ensure that the individual aid measures to be granted according to their provisions will be limited to firms which are actually eligible for them. 105 If that proves not to be the case, it is for the Commission, in the exercise of its wide discretion, to take that into account and to assess whether it is appropriate to adopt a conditional or negative decision, in so far as it can do so from the information available to it (see, to that effect, Spain v Commission, cited in paragraph 102 above, paragraph 87, and Case T‑9/98 Mitteldeutsche Erdöl-Raffinerie v Commission [2001] ECR II‑3367, paragraph 116). 106 In the present case, the question of whether the Commission could take the view that that was not the case is linked to the appropriateness of the definition of firms in difficulty for the purposes of the project, as is apparent from recital 46 in the preamble to the Decision. These two issues must therefore be considered together. – Assessment of the definition of firms in difficulty for the purposes of the project, having regard to the first paragraph of point 2.1 of the Guidelines 107 The applicant and the interveners argue that recital 46 in the preamble to the Decision, which assesses the definition of firms in difficulty for the purposes of the project, is undermined by an error of law or, at the very least, a manifest error of assessment. The Commission, it is claimed, erred in law in departing from the Guidelines, the first paragraph of point 2.1 of which does not require that definition to be based on criteria which show that the situation of the firms seeking to benefit from the restructuring aid is continuously worsening. At the very least, it committed a manifest error of assessment in failing to conclude that the criteria selected for the project were adequate for the purpose of establishing that the firms concerned were in an economic situation that justified the grant of restructuring aid, notwithstanding the possible improvement in that situation at the end of the reference period. 108 The first paragraph of point 2.1 of the Guidelines makes it clear that the Commission regards as being in difficulty a firm which is unable to recover through its own resources or by raising the funds it needs from shareholders or borrowing. It puts forward various trend indicators for assessing how much a firm’s situation is worsening, together with various specific indicators for assessing the particular gravity of that situation in certain cases. 109 It is quite clear from the wording of that point that the Commission did not depart from the Guidelines in pointing out, prior to the assessment of the definition chosen in the present case, the importance it usually attaches to indicators which show the gradual worsening of difficulties suffered by firms intended to benefit from a restructuring aid scheme. The argument relating to an error of law in that respect must, therefore, be dismissed. 110 Next, it is clear from reading recital 46 in the preamble to the Decision that, in support of its assessment that the definition of a firm in difficulty chosen by the Italian authorities in the present case led it to doubt the compatibility of the project with the common market, the Commission states, in essence, that the criteria used were unsuitable and unreliable because they were based on an average. 111 The first paragraph of point 2.1 of the Guidelines indicates that the importance which the Commission attaches to trend indicators does not necessarily make other kinds of indicator unsuitable, such as those based on an average as in the project. However, such indicators will, in any event, be suitable only if it is thereby possible to identify the genuine and demonstrable difficulties which the eligible firms have encountered. Failing that, the aid cannot be regarded as being required by those firms or necessary in order to meet the objective of Article 87(3)(c) EC. 112 In the present case, it cannot be regarded as manifestly wrong to have taken the view that the criteria chosen did not guarantee that the aid scheme would be available only to firms in difficulty within the meaning of the first paragraph of point 2.1 of the Guidelines. The applicant’s and the interveners’ allegations to that effect are not based on anything which could lead to the conclusion that a manifest error of assessment had been made in that regard. – Failure to apply the rules in points 3.2.3, 3.2.4 and 3.2.5 of the Guidelines113 The rules in points 3.2.3, 3.2.4 and 3.2.5 of the Guidelines, which the interveners claim the Commission failed to apply, are ‘special provisions’ subject to which the ‘general conditions’ set out in point 3.2.2 of the Guidelines apply, as stated in the first paragraph of that point. 114 First of all, the interveners consider that, since the Commission took formal note of the lack of overcapacity in the sector and waived the requirement of a reduction in capacity (recital 53 in the preamble to the Decision), it should have concluded that the project complied with point 3.2.3 of the Guidelines and, consequently, was compatible with the common market. 115 The second paragraph of point 2.4 of the Guidelines states, in particular, that where the firms involved in a plan for restructuring aid are located in an assisted area, the Commission will take regional considerations under subparagraphs (a) and (c) of Article 87(3) EC into account as stated in point 3.2.3 of the Guidelines. The latter, headed ‘Conditions for restructuring aid in assisted areas’, states, in particular, that where a proposed aid scheme for restructuring firms in difficulty concerns an assisted or less-favoured area, the Commission is required to take that into account and, to that end, is authorised, notwithstanding structural overcapacity in the sector concerned, to apply flexibly the rule as to capacity reduction laid down in the Guidelines, if regional development needs justify it. 116 By contrast, it certainly does not follow that where the sector affected by a new aid plan appears not to be suffering overcapacity, and the Commission therefore waives the requirement of a capacity reduction by eligible firms, that plan should, for that reason alone, be regarded as being compatible with the common market. 117 On the contrary, the project must still satisfy the principle laid down in point 3.2.1 of the Guidelines, according to which a new aid plan for restructuring can be granted only in circumstances in which it can be demonstrated that the approval of restructuring aid is in the Community interest and, therefore, that it fulfils the conditions as to restoration of viability, avoidance of undue distortions of competition and proportionality which are set out in point 3.2.2 of the Guidelines. Although the Commission can show ‘flexibility’ in that respect, it cannot be ‘wholly permissive’, according to point 3.2.3 of the Guidelines (Case T‑152/99 HAMSA v Commission [2002] ECR II‑3049, paragraph 114). 118 In the present case, establishing that there did not appear to be overcapacity in the Sardinian greenhouse-crop sector did not therefore force the Commission to conclude that the project was compatible with the common market. The argument relating to an error of law on that point is, for that reason, unfounded. 119 Secondly, the interveners consider that, since all the firms eligible for the project were SAEs, the Commission should have applied point 3.2.4 of the Guidelines. 120 Point 1.2 of the Guidelines states that there are circumstances in which aid for restructuring may be justified; in particular it may be justified ‘by wider economic benefits of the [SME] sector, and by the special needs of SMEs and of [SAEs]’. Point 3.2.4 of the same Guidelines, headed ‘Aid for restructuring [SMEs]’, states, specifically, that ‘the Commission will not require aid for restructuring to meet the same strict conditions as aid for restructuring large firms, particularly as regards capacity reductions and reporting obligations’. 121 It follows that the Commission is required to apply the rules laid down in point 3.2.2 of the Guidelines flexibly when it examines the compatibility with the common market of an aid project for restructuring SMEs or SAEs in difficulty, such as the project in issue in the present case. The rules in question, although relaxed, therefore remain applicable. 122 Therefore, assessing the merits of the considerations which led the Commission to conclude that the project did not comply with those rules will determine whether the rules were applied flexibly, taking into account the beneficial economic role of the SAEs and their particular requirements (see paragraph 141 below). 123 Thirdly, the interveners maintain that the Commission could not refuse to assess the compatibility of the project in the light of point 3.2.5 of the Guidelines on the – in their view, irrelevant – ground that the Italian authorities had not asked for it to be applied. 124 The introductory paragraph of point 3.2.5 of the Guidelines, headed ‘Provisions applicable only to aid for restructuring in the agricultural sector’, states: ‘The Commission, at the request of the Member State concerned, and as an alternative to the general provisions of [the Guidelines] concerning capacity reduction, will apply the following provisions for operators in the agricultural sector …’ 125 In the present case, recitals 33 and 52 in the preamble to the Decision, the accuracy of which is undisputed on this point, state that the Italian authorities did not at any time ask the Commission, which had drawn their attention to that option, to apply the rules laid down in point 3.2.5 of the Guidelines. Not only could the Commission therefore have confined itself to applying the rules in point 3.2.2 of the Guidelines, but it was obliged to do so. The argument based on an error of law on that point is, consequently, unfounded. – Assessment of the project having regard to the rules in point 3.2.2 of the Guidelines126 In order to be declared compatible with the common market in application of Article 87(3)(c) EC, a restructuring aid plan for a firm in difficulty must be linked to a restructuring programme designed to reduce or redirect its activities (see Joined Cases C‑278/92, C‑279/92 and C‑280/92 Spain v Commission [1994] ECR I‑4103, paragraph 67; Case C‑17/99 France v Commission [2001] ECR I‑2481, paragraph 45, and Prayon-Rupel v Commission, cited in paragraph 41 above, paragraph 70). 127 Point 3.2.2 of the Guidelines, which lays down that requirement, stipulates, in particular, that the restructuring plan should fulfil three material conditions. It is essential, first of all, that it should restore the viability of the beneficiary firm within a reasonable timescale and on the basis of realistic assumptions (point 3.2.2(i)), secondly, that it should avoid undue distortions of competition (point 3.2.2(ii)) and, thirdly, that it should be in proportion to the restructuring costs and benefits (point 3.2.2(iii)). 128 As those conditions are cumulative, the Commission must declare a restructuring aid plan to be incompatible if even one of those conditions has not been satisfied (France v Commission, cited in paragraph 126 above, paragraphs 49 and 50; Greece v Commission, cited in paragraph 102 above, paragraphs 100 and 101, and HAMSA v Commission, cited in paragraph 117 above, paragraph 79). 129 Furthermore, in order to fulfil its duty to cooperate with the Commission, the Member State concerned must provide all the information necessary to enable the Commission to verify that the conditions for the derogation from which it seeks to benefit are satisfied (Cases C‑364/90 Italy v Commission [1993] ECR I‑2097, paragraph 20, and C‑372/97 Italy v Commission, cited in paragraph 74 above, paragraphs 81 to 85). 130 Lastly, the Court must assess the legality of a Commission decision concerning State aid in the light of the information available, or which could have been available, to the Commission when the decision was adopted (Case 234/84 Belgium v Commission [1986] ECR 2263, paragraph 16, and Case C‑277/00 Germany v Commission [2004] ECR I‑0000, paragraph 39). 131 In the present case, the Italian authorities notified a planned aid scheme for restructuring around 500 SAEs. That project was required to ensure that the individual restructuring plans submitted by the SAEs seeking to benefit from the aid satisfied the conditions laid down in point 3.2.2 of the Guidelines. The Commission took the view, in recitals 48 to 58 in the preamble to the Decision, that that was not the case. 132 The applicant and the interveners maintain, first, that the assessment of the project in the light of point 3.2.2(i) of the Guidelines is flawed because of manifest errors of assessment. 133 It is apparent from the wording of point 3.2.2(i) of the Guidelines, headed ‘Restoration of viability’, that the condition combines two requirements. First, the restoration of viability must be based principally on internal factors and therefore only secondarily on external factors, provided that the latter appear to be realistic. Second, it must appear to be capable of being achieved within a reasonable timescale and to be durable. 134 As regards the first of those requirements, the Commission noted, in recitals 49 and 50 in the preamble to the Decision, that the restoration of viability was based in particular on two external factors: the first on the hypothesis that revenues had to increase because of promotional campaigns which it was assumed would create new outlets, and the second on the hypothesis that revenues would not decline because increased production would not affect prices. It took the view that the first of those hypotheses was not proven and the second not verifiable and, moreover, unrealistic. 135 According to the statements by the Italian authorities and the applicant, the project was based ‘essentially on internal measures’ which meant an increase in production of almost 40% by the beneficiary firms and an increase in their revenues of more than 50%, and ‘to a significant degree’ on an external factor, the ‘increasing demand for local products’. 136 The Decision, which deals with that external factor in recitals 49 and 50 in the preamble, might initially give the impression that the Commission omitted to examine the internal factors. However, it is apparent from a more careful reading that the Commission, implicitly but necessarily, recognised the significance and relevance of those factors. It is effectively only because the Commission had conceded that those factors might result in an increase in supply of around 40% that the Commission debated whether that increase could, in the absence of sufficient demand, involve a fall in prices and hinder the restoration of viability that it was supposed to ensure. That is why the Commission asked for economic information concerning the existence of outlets and the effect of production increases on prices, as it also confirmed at the hearing without being challenged. 137 However, the Italian authorities did not at any time supply precise information concerning outlets or, specifically, the promotional campaigns which they intended to organise, as they had stated to the Commission in the course of the administrative procedure. Clearly the Commission could not base its assessment on a mere claim (see, by analogy, Case C-372/97 Italy v Commission, cited in paragraph 74 above, paragraph 84). 138 Moreover, when questioned on that point at the hearing, the applicant admitted that the promotional campaigns were only ‘hypothetical’.139 Likewise, the Italian authorities never supplied conclusive information about the effect on prices of the production increases which they had described to the Commission. Essentially, in a letter dated 26 January 2001, they supplied the market study requested by the Commission on 19 June 1998, 19 October 1998 and 7 December 1999. That study, which describes, in particular, an underlying and relative increase in the sale price of the ‘salad’ tomato and the red pepper in the province of Cagliari between 1995 and 1997, shows how the price of those two products could ultimately evolve in that province, all things being equal. On the other hand it could be argued, without manifest error, that it does not provide convincing information as to how the price of those products, and of the other products concerned, would evolve in the province of Cagliari and in the rest of Sardinia if the over 40% production increase expected in that region as a result of the project is taken into account. 140 When questioned on that point at the hearing, the applicant did not, moreover, dispute the unsatisfactory nature of that study and confined itself to explaining that other evidence had to be taken into account, such as the proposal’s objectives of encouragement, rationalisation and specialisation by SAEs. 141 That argument cannot, however, be sustained. The Commission can fulfil its duty under point 3.2.4 of the Guidelines to display flexibility when determining whether a plan concerning SMEs or SAEs satisfies the condition as to restoration of viability laid down in point 3.2.2(i) of the Guidelines only if it has precise and conclusive data. 142 It appears therefore, first of all, that the Italian Republic failed to provide the information which would have enabled the Commission to satisfy itself that the project was capable of restoring the viability of eligible SAEs on the basis of realistic hypotheses, in spite of repeated requests by that institution, and, secondly, that the latter therefore had to resign itself to concluding, without committing a manifest error of assessment on that point, that the information available to it did not remove the doubts which it had in that regard. 143 Since it cannot be held that the Commission committed a manifest error of assessment in forming the view that it could not conclude from the information available to it that the project satisfied the condition as to the restoration of viability, and since the conditions laid down in point 3.2.2 of the Guidelines apply cumulatively (see paragraphs 127 and 128 above), the plea must be rejected, it being unnecessary to examine the arguments relating to the assessment of the project in the light of the other conditions set out in point 3.2.2 (France v Commission, cited in paragraph 126 above, paragraph 50; Greece v Commission, cited in paragraph 102 above, paragraph 101; HAMSA v Commission, cited in paragraph 117 above, paragraph 108). h) Plea relating to breach of Article 7(4) of Regulation No 659/1999144 According to the applicant, supported by the interveners, the Commission wrongly adopted a negative decision under Article 7(5) of Regulation No 659/1999 instead of a conditional decision under Article 7(4) of that regulation. 145 The Commission contests that plea. 146 Article 7 of Regulation No 659/1999, headed ‘Decisions of the Commission to close the formal investigation procedure’, provides, inter alia: ‘1. Without prejudice to [the withdrawal of notification by the Member State concerned], the formal investigation procedure shall be closed by means of a decision as provided for in paragraphs 2 to 5 of this Article. …4. The Commission may attach to a positive decision conditions subject to which an aid may be considered compatible with the common market and may lay down obligations to enable compliance with the decision to be monitored (hereinafter referred to as a “conditional decision”). 5. Where the Commission finds that the notified aid is not compatible with the common market, it shall decide that the aid shall not be put into effect (hereinafter referred to as a “negative decision”). 6. Decisions taken pursuant to paragraphs 2, 3, 4 and 5 shall be taken as soon as the doubts referred to in Article 4(4) have been removed. The Commission shall as far as possible endeavour to adopt a decision within a period of 18 months from the opening of the procedure. This time limit may be extended by common agreement between the Commission and the Member State concerned. 7. Once the time limit referred to in paragraph 6 has expired, and should the Member State concerned so request, the Commission shall, within two months, take a decision on the basis of the information available to it. If appropriate, where the information provided is not sufficient to establish compatibility, the Commission shall take a negative decision.’ 147 It will be recalled, in regard to the application of those provisions to the present case, that on 14 September 2001 the Italian Republic asked the Commission to adopt a decision in accordance with Article 7(7) of Regulation No 659/1999, and that on 13 November 2001 the Commission adopted the Decision, in which it took the view, essentially, that the information provided by the Italian Republic did not remove all the doubts which it had as to the compatibility of the project with the common market. 148 It follows from an examination of the plea relating to breach of Article 87(3)(c) EC and of the Guidelines that the assessment which led the Commission to conclude that the project did not satisfy the condition as to the restoration of viability laid down in point 3.2.2(i) of the Guidelines (recitals 49 and 50 in the preamble to the Decision) cannot be regarded as manifestly wrong (see paragraphs 132 to 142 above). 149 As the conditions set out in point 3.2.2 of the Guidelines apply cumulatively (see paragraphs 127, 128 and 143 above) and as the information provided by the Italian Republic is thus not sufficient to establish that the project is compatible with the common market, the Commission was entitled to adopt a negative decision in accordance with Article 7(7) of Regulation No 659/1999. 150 The plea must therefore be dismissed.2. The interveners’ other pleas151 The fourth paragraph of Article 40 of the Statute of the Court of Justice provides that an application to intervene is to be limited to supporting the form of order sought by one of the parties. Article 116(4) of the Rules of Procedure provides that the statement in intervention must contain, in particular, a statement of the form of order sought by the intervener in support of or opposing, in whole or in part, the form of order sought by one of the parties, as well as the pleas in law and arguments relied on by the intervener. 152 Those provisions give the intervener the right to set out arguments as well as pleas independently, in so far as they support the form of order sought by one of the main parties and are not entirely unconnected with the issues underlying the dispute, as established by the applicant and defendant, as that would otherwise change the subject-matter of the dispute (see Case 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v High Authority [1961] ECR 1, at p. 18; Case C‑155/91 Commission v Council [1993] ECR I‑939, paragraph 24; Case C‑501/00 Spain v Commission [2004] ECR I-0000, paragraphs 131 to 157; Joined Cases T‑125/96 and T‑152/96 Boehringer v Council and Commission [1999] ECR II‑3427, paragraph 183). 153 It is thus for the Court, when determining the admissibility of the pleas put forward by an intervener, to determine whether they are connected with the subject-matter of the dispute, as defined by the main parties. 154 As regards proceedings initiated by a regional authority concerning the compatibility with the common market of an aid scheme for the restructuring of an economic sector that has been proposed by that authority, there can be no question that the firms liable to benefit from that scheme and their representatives are by their nature in a position in which they can usefully complement the applicant authority’s case, particularly in regard to the difficulties which the aid is intended to resolve and the effect which it may have. The connection of their pleas to the subject-matter of the dispute must not therefore be narrowly assessed. 155 However, where it appears that an action, the admissibility of which is in question, must in any event be dismissed on the merits, it is open to the Court to rule on the merits at the outset for the purposes of procedural economy (see, to that effect, Case C‑23/00 P Council v Boehringer [2002] ECR I‑1873, paragraph 52, and Case C‑233/02 France v Commission [2004] ECR I‑2759, paragraph 26). Similarly, where it appears that a plea of dubious connection to the subject-matter of the dispute is in any event to be dismissed as inadmissible for another reason or because it is unfounded, it is open to the Court to dismiss that plea without ruling on the issue whether the intervener went beyond the parameters of its role in support of the form of order sought by one of the main parties (see, for example, Case C‑118/99 France v Commission [2002] ECR I‑747, paragraphs 64 and 65). 156 The pleas put forward by the interveners in the present case must be examined in the light of those principles.a) Plea relating to infringement of the right to be heard157 In essence, according to the interveners, the Commission may have infringed the right to be heard, which is one of the procedural guarantees enshrined in Article 88(2) EC. It cannot be established from the Decision whether other Member States submitted comments, as interested parties, on the compatibility of the project with the common market. If that proved to be the case, it should be noted that the Italian Republic was not given the opportunity to respond to them. 158 The Commission, which did not respond to that plea in its written submissions, argued at the hearing that, overall, the pleas put forward by the interveners were largely inadmissible on the ground that they did not correspond to those of the applicant. 159 It follows from a reading of the Decision, the accuracy of which on that point is not disputed by the interveners, that the plea, which is, moreover, submitted on a speculative basis, has no foundation in fact. It is stated in recital 4 in the preamble to the Decision that the Commission received no comments from interested parties during the formal investigation procedure. 160 Interested parties, according to the definition given in Article 1(h) of Regulation No 659/1999, include in particular any Member State except for one which plans to grant or has granted new aid and qualifies, on that basis, as a Member state concerned. 161 It can thus be deduced from the Decision that no Member State, acting as an interested party, submitted comments on the compatibility of the project with the common market of which the Commission could have notified the Italian Republic. 162 Accordingly, the plea must be dismissed without it being necessary to rule on its admissibility as regards its connection to the subject-matter of the dispute or the possibility that the potential beneficiaries of an aid scheme could invoke an infringement of the right to be heard which the Member State concerned is entitled to exercise in the procedure laid down in Article 88(2) EC. b) Plea relating to breach of Article 87(2)(b) EC163 The interveners argue that, by refusing to apply it, the Commission was in breach of Article 87(2)(b) EC as regards making good the damage caused by natural disasters or exceptional occurrences. 164 The Commission did not respond to that plea in its written submissions but argued generally at the hearing that the pleas relied upon by the interveners were largely inadmissible on the ground that they do not correspond to those of the applicant. The applicant considered that those pleas did not change the subject-matter of the dispute in any way. 165 The plea is manifestly unfounded. Article 87(2)(b) EC is an exception to the general principle of the incompatibility of aid with the common market and must, as such, be strictly interpreted, with the result that only damage caused directly by natural disasters or exceptional occurrences can justify application of that provision (Greece v Commission, cited in paragraph 102 above, paragraph 81). Furthermore, as has already been pointed out above, the Court must assess the legality of a Commission decision concerning State aid in the light of the information available, or which could have been available, to the Commission when the decision was adopted. 166 In the present case, an examination of the correspondence exchanged in the course of the administrative procedure shows that the Italian authorities never stated, let alone demonstrated, to the Commission that the project set up aid designed to make good the damage referred to in Article 87(2)(b) EC. On the contrary, they always presented it as being intended to set up an aid scheme for restructuring firms in difficulty. As such, it had to be analysed in the light of the Guidelines, which, in the first paragraph of point 2.4, expressly exclude aid referred to in Article 87(2)(b) EC from their ambit. 167 Furthermore, the applicant confirmed at the hearing that although the occurrences which it described as disastrous were, among other factors, such as the island nature of Sardinia, the cause of the Sardinian SAEs’ difficulties, the project did seek to ‘go beyond mere compensation’ for those occurrences alone. 168 The Commission cannot therefore be criticised for having taken the view, in recital 44 in the preamble to the Decision, that the project was not proposing to grant aid under Article 87(2)(b) EC and, consequently, for having ruled out the application of that provision (see, to that effect, Italy v Commission, cited in paragraph 129 above, paragraph 20; Case C-113/00 Spain v Commission [2002] ECR I‑7601, paragraphs 68 and 69; and Germany v Commission, cited in paragraph 130 above, paragraph 40). 169 Accordingly, the plea must be dismissed without it being necessary to rule on whether it is connected to the subject-matter of the dispute. c) Plea relating to breach of Article 158 CE and Declaration No 30 on island regions, annexed to the Final Act of the Treaty of Amsterdam 170 The interveners complain that the Commission breached Article 158 EC and Declaration No 30 by failing to take into consideration in the Decision the fact that the project aimed to meet the objectives of those instruments. They refer, in particular, to decisions in which the Commission has taken into account the delay in economic and social development that is linked to island status. 171 The Commission takes the view that that plea must be dismissed as inadmissible on the ground that it was not raised by the applicant and is unfounded in any event. The applicant argued at the hearing that that plea did not change the subject-matter of the dispute in any way. 172 The plea, although distinct from those raised by the applicant, is admissible. The applicant raised a plea relating to breach of Article 87(3)(c) EC and the Guidelines. Where it assesses a plan for new aid for restructuring firms in difficulty that concerns an assisted or less-favoured area, the Commission takes Article 158 EC into account as described in the second paragraph of point 1.3 and in point 3.2.3 of the Guidelines. Therefore, if, as the interveners maintain, the Commission did not take any account of the fact that the project aimed to meet the objectives of Article 158 EC, it is bound to have been in breach of Article 87(3)(c) EC and the Guidelines. 173 As to the merits, it must be pointed out that the first paragraph of Article 158 EC provides that, in order to promote its overall harmonious development, the Community is to develop and pursue its actions leading to the strengthening of its economic and social cohesion; the second paragraph provides that, in particular, the Community is to aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions or islands, including rural areas. 174 When the Commission examines whether a proposed aid scheme for restructuring firms in difficulty may be declared to be compatible with the common market in accordance with the exemption in Article 87(3)(c) EC, it is, as has previously been pointed out, required by point 3.2.3 of the Guidelines to take account of the objectives of Article 158 EC and the regional effects of a plan for new aid intended for a specific sector. 175 However, the mere fact that a plan for new aid aims to meet the objectives of a Treaty provision other than the exemption in Article 87(3) EC being relied upon by the Member State concerned does not in itself mean that the plan satisfies the conditions for that exemption to apply (see, to that effect, Case 47/69 France v Commission [1970] ECR 487, paragraph 13, and Joined Cases C‑261/01 and C‑262/01 Van Calster and Others [2003] ECR I‑12249, paragraph 47). 176 On the contrary, in the present case, the conditions laid down in point 3.2.2 of the Guidelines remain applicable, albeit flexibly, and the preceding examination of the pleas shows that the Commission, being required to make a decision within two months on the basis of the information in its possession, was able to reach the view that the Italian Republic had not supplied conclusive evidence to establish that the project satisfied those conditions and, having regard to the doubts existing in that respect, was able to close the investigation by means of a final negative decision. 177 That conclusion is not undermined by the fact that in certain decisions adopted previously in relation to the monitoring of State aid, the Commission took account of information relating to island status, which the interveners did not, however, specify further. The legality of a Commission decision declaring that new aid does not fulfil the conditions under which the exemption in Article 87(3)(c) EC applies must be assessed solely in the context of that article, and not in the light of the Commission’s earlier decision-making practice, assuming that is established (see, by analogy, Joined Cases C-57/00 P and C-61/00 P Freistaat Sachsen and Others v Commission [2003] ECR I‑9975, paragraphs 52 and 53). 178 As regards the reliance placed on Declaration No 30, it is irrelevant. The Decision is a measure with individual import, the adoption of which falls within the scope of the Commission’s responsibility to ensure that Article 87 EC is complied with and Article 88 EC implemented; it is not the exercise of Community legislative power involving the adoption of ‘specific measures’ ‘where justified, in favour of [island] regions in order to integrate them better into the internal market on fair conditions’ referred to in that declaration. 179 The plea must therefore be dismissed.d) Plea relating to infringement of Directives 72/159 and 75/268180 The interveners complain that the Commission did not refer to the provisions of Directives 72/159 and 75/268 in the Decision. The first of those directives provides for financial and investment aid, such as that in the present case, to be declared compatible with the common market, while the second provides for the objectives of the common agricultural policy to be met in the least favoured agricultural areas. They are supplemented by Council Regulation (EEC) No 797/85 of 12 March 1985 on improving the efficiency of agricultural structures (OJ 1985 L 93, p. 1) which, in Article 18, also gives Member States the power to adopt specific regional measures, which could cover the measures envisaged by the project. The combination of those provisions allowed the Commission to rule out the use of the Guidelines and not to oppose the implementation of the project. 181 The Commission replies that the plea must be dismissed as inadmissible and, in any event, irrelevant. The applicant argued at the hearing that the plea did not change the subject-matter of the dispute in any way. 182 The Decision was adopted on 13 November 2001 at the end of a preliminary examination phase which was launched on 15 January 1998 and a formal investigation procedure initiated by decision which the Italian Republic received on 4 February 1999. 183 Directive 75/268 was repealed by Article 41(1) of Council Regulation (EC) No 950/97 of 20 May 1997 on improving the efficiency of agricultural structures (OJ 1997 L 142, p. 1), which entered into force on the seventh day following its publication in the Official Journal of the European Communities on 2 June 1997. Similarly, Regulation (EEC) No 797/85 was repealed by Article 40(1) of Council Regulation (EEC) No 2328/91 of 15 July 1991 on improving the efficiency of agricultural structures (OJ 1991 L 218, p. 1), which entered into force on the third day following its publication in the Official Journal of the European Communities on 6 August 1991. The interveners cannot therefore base any argument on those measures; furthermore, it is observed that they do not at any point invoke the measures which replaced them. 184 As regards Directive 72/159, the interveners confine themselves to arguing that Articles 8 and 14 ‘do not preclude the compatibility [of the project] and permit the Guidelines to be dispensed with’ but they do not explain, let alone demonstrate, in what respect the Commission should, or at least could, have decided otherwise than it did. Moreover, the provisions mentioned do not refer to proposals for new aid for restructuring firms in difficulty that are notified to the Commission for examination in the light of Article 87(3)(c) EC, such as the project that is the object of the Decision. On the contrary, Article 8 of Directive 72/159 concerns ‘a system of selective incentives to farms suitable for development’ which ‘Member States shall introduce’ in order ‘to encourage their operation and development under rational conditions’ in the circumstances referred to in Articles 1 to 10 of that directive. Article 14 of that directive concerns ‘[a]ids for investments’ which are prohibited or, by way of exception, authorised ‘subject to … Articles [87 EC to 89 EC]’. 185 Accordingly, the plea must be dismissed without it being necessary to rule on whether it is connected to the subject-matter of the dispute. e) The request that the Court ‘reject, as appropriate, the application of unlawful provisions in accordance with Article 241 EC’186 Arguments for that request, which can be interpreted as a plea in support of the action (order in Case C‑289/99 P Schiocchet v Commission [2000] ECR I‑10279, paragraph 25), must be made by its author, according to Article 116(4)(b) of the Rules of Procedure. An abstract statement, which is not clarified by sufficiently clear and precise information to enable the parties to respond to it and the Court to exercise its authority, does not fulfil that requirement (Joined Cases 19/60, 21/60, 2/61 and 3/61 Fives Lille Cail and Others v High Authority [1961] ECR 281, at p. 295, and the order in Case T-85/92 De Hoe v Commission [1993] ECR II‑523, paragraph 20). 187 In the present case, the interveners do not plead, even summarily, the illegality of any Community measure. In particular, although they submit that some of the provisions of Regulation No 659/1999 are incompatible with the principle of legal certainty, they do not specify which are the provisions in question, nor do they expressly dispute the legality of those provisions. 188 In those circumstances, the plea does not meet the minimum presentational requirements laid down by the Rules of Procedure and must, therefore, be dismissed as being inadmissible, without it being necessary to rule on whether it is connected to the subject-matter of the dispute. 189 As the pleas in support of the form of order sought in relation to the annulment of the Decision in its entirety have all been dismissed, these must also be dismissed. B – Claim for partial annulment of the Decision, in so far as it does not provide that aid up to the sum of EUR 100 000 is lawful1. Arguments of the parties190 In support of their claim for the partial annulment of the Decision, the interveners raise a single plea based on the misapplication of the de minimis rule. 191 The Commission takes the view that those submissions do not support those of the applicant which seeks the complete, rather than partial, annulment of the Decision, and must therefore be dismissed as inadmissible, that the plea in support is not connected with the subject-matter of the dispute inasmuch as it is unconnected with the applicant’s pleas, and must itself, therefore, be dismissed as inadmissible, and that that plea is in any event irrelevant since the de minimis rule is inapplicable in this case. 192 The applicant argued at the hearing that the interveners’ alternative claims were included within its own claims and that the plea relied upon in support of those alternative claims did not change the subject-matter of the dispute in any way. 2. Findings of the Court193 It follows from the fourth paragraph of Article 40 of the Statute of the Court of Justice and from Article 116(4) of the Rules of Procedure that, whilst an intervener cannot submit claims which go beyond those in support of which it makes its intervention (Case T‑184/97 BP Chemicals v Commission [2000] ECR II‑3145, paragraph 39), it can, on the other hand, support those claims only partly. 194 In the present case, the applicant sought the annulment of the Decision in so far as it is declared, in Article 1, that the project is incompatible with the common market. In seeking, in the alternative, the annulment of the Decision in so far as it does not limit that declaration of incompatibility to aid in the amount of EUR 100 000 or above, the interveners are not adding new claims to those of the applicant. Their alternative claims partly support those of the applicant in accordance with Article 116(4) of the Rules of Procedure, and are therefore admissible. 195 Next, as has already been pointed out above, the fourth paragraph of Article 40 of the Statute of the Court of Justice and Article 116(4) of the Rules of Procedure give the intervener the right to set out arguments as well as pleas independently, in so far as they support the form of order sought by one of the main parties and are not entirely unconnected with the issues underlying the dispute, as established by the applicant and defendant, as that would otherwise change the subject-matter of the dispute. 196 In the present case, the applicant relied upon a plea based, in essence, on the contention that the project involved small amounts of aid which would not affect trade between Member States within the meaning of Article 87(1) EC and would not adversely affect trading conditions to an extent contrary to the common interest within the meaning of Article 87(3)(c) EC (see paragraphs 81 to 90 above). For their part, the interveners raise a plea based on infringement of the de minimis rule. 197 The de minimis rule applies to the condition as to the effect on trade between Member States laid down in Article 87(1) EC and clarifies the way in which the Commission is to examine that condition, on the principle that a small amount of aid does not have an appreciable effect on trade between Member States (Netherlands v Commission, cited in paragraph 29 above, paragraphs 3 and 25). 198 The interveners’ plea is therefore connected to the subject-matter of the dispute and is, as a result, admissible.199 As to the merits, the de minimis rule does not apply to aid granted to firms operating in the agricultural sector, as the Guidelines state in the second paragraph of point 2.3 and in the first paragraph of point 3.2.5(c). In the present case, it is not disputed that the project involved granting aid to such firms. Therefore, it is irrelevant to argue that that rule has been misapplied (Spain v Commission, cited in paragraph 168 above, paragraph 35, and Greece v Commission, cited in paragraph 102 above, paragraph 74). 200 The plea must therefore be dismissed, as must the claims for the partial annulment of the Decision.201 Consequently, the application must be dismissed in its entirety. Costs202 Article 87(2) of the Rules of Procedure provides that the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Article 87(4) of the Rules of Procedure provides that the Court may order an intervener other than a Member State or an institution to bear its own costs. 203 In the present case, since the applicant has been unsuccessful, it must be ordered to pay the costs as applied for by the Commission, except for those incurred by the Commission as a result of the intervention. It must also be ruled that the interveners are to bear their own costs as well as the costs incurred by the Commission as a result of their intervention, in accordance with the Commission’s application to that effect. On those grounds,THE COURT OF FIRST INSTANCE (Fourth Chamber, Extended Composition)hereby:1. Dismisses the application;2. Orders the Regione autonoma della Sardegna to pay the costs, with the exception of those referred to in point 3 below;3. Orders the Confederazione italiana agricoltori della Sardegna, the Federazione regionale coltivatori diretti della Sardegna and the Federazione regionale degli agricoltori della Sardegna to bear their own costs, in addition to those incurred by the Commission as a result of their intervention.Legal Tiili Meij Vilaras Forwood Delivered in open court in Luxembourg on 15 June 2005.H. Jung H. LegalRegistrar President* Language of the case: Italian. | 9c957-f4444fa-4b12 | EN |
THERE ARE EXCEPTIONS TO THE PRINCIPLE THAT THE STATE OF EMPLOYMENT IS PRIMARILY RESPONSIBLE FOR PAYMENT OF FAMILY BENEFITS WHERE EMPLOYED PERSONS ARE ENTITLED TO THE SAME FAMILY BENEFITS BOTH IN THE STATE OF THEIR EMPLOYMENT AND - SOLELY ON THE GROUND OF THEIR RESIDENCE THERE - IN THE STATE IN WHICH THEY LIVE WITH THEIR FAMILY | Christine Dodl and Petra OberhollenzervTiroler Gebietskrankenkasse(Reference for a preliminary ruling from the Oberlandesgericht Innsbruck)(Regulations (EEC) Nos 1408/71 and 574/72 – Family benefits – Child-raising allowance – Entitlement to benefits of the same kind in the Member State of employment and the Member State of residence)Opinion of Advocate General Geelhoed delivered on 24 February 2005 Judgment of the Court (Grand Chamber), 7 June 2005 Summary of the Judgment1. Social security for migrant workers — Community legislation — Scope ratione personae — Worker within the meaning of Regulation No 1408/71 — Definition — Person insured under a social security scheme — Assessment by the national court(Council Regulation No 1408/71, Art. 1(a))2. Social security for migrant workers — Family allowances — Community rules for prevention of overlapping benefits — Article 10(1)(a) of Regulation No 574/72 — Worker entitled to allowances for a family member in the State of employment and in the State of residence — Applicable legislation — Legislation of the Member State of employment(Council Regulation No 574/72, as amended by Regulation No 410/2002, Art. 10(1)(a))3. Social security for migrant workers — Family allowances — Community rules for prevention of overlapping benefits — Article 10(1)(b)(i) of Regulation No 574/72 — Worker entitled to allowances in the State of employment for a child in respect of whom there is also a right to allowances in another Member State, the place of residence of the child and employment of the person having the care of the child — Suspension of the right to benefits in the State of employment up to the sum of the benefits paid in the State of residence(Council Regulation No 574/72, as amended by Regulation No 410/2002, Art. 10(1)(b)(i))1. A person has the status of an employed or self-employed person within the meaning of Regulation No 1408/71 where he is covered, even if only in respect of a single risk, on a compulsory or optional basis, by a general or special social security scheme mentioned in Article 1(a) of that regulation, irrespective of the existence of an employment relationship. It is for the national court to make the necessary enquiries to determine whether those entitled belong to a branch of the social security system and, accordingly, whether they are ‘employed persons’ within the meaning of Article 1(a) of that regulation. (see para. 34, operative part 1)2. Where the legislation of the Member State of employment and that of the Member State of residence of an employed person each provide for an entitlement to family benefits in respect of the same member of that person’s family and for the same period, the Member State responsible for paying those benefits is, in principle, the Member State of employment pursuant to Article 10(1)(a) of Regulation No 574/72 fixing the procedure for implementing Regulation No 1408/71, as amended and updated by Regulation No 410/2002. (see para. 64, operative part 2)3. Notwithstanding Article 10(1)(a) of Regulation No 574/72 fixing the procedure for implementing Regulation No 1408/71, as amended and updated by Regulation No 410/2002, where a person having the care of children, in particular the spouse or partner of an employed person, carries out a professional or trade activity in the Member State of residence, the family benefits must be paid by that Member State in application of Article 10(1)(b)(i) of Regulation No 574/72, irrespective of who is designated as directly entitled to those benefits by the legislation of that State. In that situation, the payment of family benefits by the Member State of employment is to be suspended up to the sum of family benefits provided for by the legislation of the Member State of residence. JUDGMENT OF THE COURT (Grand Chamber)7 June 2005 (*) In Case C-543/03,REFERENCE for a preliminary ruling under Article 234 EC from the Oberlandesgericht Innsbruck (Austria), made by decision of 16 December 2003, received at the Court on 29 December 2003, in the proceedings Christine Dodl,Petra OberhollenzerTiroler Gebietskrankenkasse, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas, Presidents of Chambers, C. Gulmann, J.‑P. Puissochet, K. Schiemann (Rapporteur), J. Makarczyk, P. Kūris, E. Juhász, U. Lõhmus, E. Levits and A. Ó Caoimh, Judges, Advocate General: L.A. Geelhoed,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 14 December 2004,after considering the observations submitted on behalf of:– C. Dodl and P. Oberhollenzer, by J. Hobmeier, Rechtsanwalt,– the Tiroler Gebietskrankenkasse, by A. Bramböck, acting as Agent,– the Austrian Government, by H. Dossi, E. Riedl and G. Hesse, acting as Agents, and S. Holzmann, Rechtsanwältin,– the German Government, by W.-D. Plessing and A. Tiemann, acting as Agents,– the Finnish Government, by A. Guimaraes‑Purokoski, acting as Agent,– the Commission of the European Communities, by D. Martin, H. Kreppel and B. Martenczuk, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 24 February 2005,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Community regulations relating to the coordination of social security schemes. It refers, in particular, to Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Regulation (EC) No 1386/2001 of the European Parliament and of the Council of 5 June 2001 (OJ 2001 L 187, p. 1) (hereinafter ‘Regulation No 1408/71’), as well as to Council Regulation (EEC) No 574/72 of 21 March 1972 fixing the procedure for implementing Regulation No 1408/71 (OJ English Special Edition 1972(I), p. 159), as amended and updated by Commission Regulation (EC) No 410/2002 of 27 February 2002 (OJ 2002 L 62, p. 17) (hereinafter ‘Regulation No 574/72’). 2 The reference was made in the course of proceedings between Ms Dodl and Ms Oberhollenzer and the Tiroler Gebietskrankenkasse (Tyrol Regional Health Insurance Fund) concerning the latter’s refusal to grant them childcare allowances. Law Community legislation Regulation No 1408/713 Article 2(1) of Regulation No 1408/71 provides:‘This Regulation shall apply to employed or self-employed persons … who are or have been subject to the legislation of one or more Member States and who are nationals of one of the Member States … as well as to the members of their families and their survivors.’ 4 Article 4(1) of that regulation provides:‘This Regulation shall apply to all legislation concerning the following branches of social security: …(h) family benefits.’ 5 According to Article 13 of the same regulation:‘1. … persons to whom this Regulation applies shall be subject to the legislation of a single Member State only. That legislation shall be determined in accordance with the provisions of this Title; 2. …(a) a person employed in the territory of one Member State shall be subject to the legislation of that State even if he resides in the territory of another Member State …; …’6 Under Article 73 of Regulation No 1408/71, which concerns employed or self-employed persons, the members of whose families reside in a Member State other than the competent State: ‘An employed or self-employed person subject to the legislation of a Member State shall be entitled, in respect of the members of his family who are residing in another Member State, to the family benefits provided for by the legislation of the former State, as if they were residing in that State …’. 7 Article 76(1) of the same regulation, which lays down rules of priority in cases of overlapping entitlement to family benefits under the legislation of the competent State and under the legislation of the Member State of residence of the members of the family, provides: ‘Where, during the same period, for the same family member and by reason of carrying on an occupation, family benefits are provided for by the legislation of the Member State in whose territory the members of the family are residing, entitlement to the family benefits due in accordance with the legislation of another Member State, if appropriate under Articles 73 or 74, shall be suspended up to the amount provided for in the legislation of the first Member State.’ Regulation No 574/728 Article 10(1) of Regulation No 574/72, which lays down the rules applicable to employed or self-employed persons in the case of overlapping of rights to family benefits or family allowances, provides: ‘(a) Entitlement to benefits or family allowances due under the legislation of a Member State, according to which acquisition of the right to those benefits or allowances is not subject to conditions of insurance, employment or self-employment, shall be suspended when, during the same period and for the same member of the family, benefits are due only in pursuance of the national legislation of another Member State or in application of Articles 73, 74, 77 or 78 of the Regulation, up to the sum of those benefits. (b) However, where a professional or trade activity is carried out in the territory of the first Member State: (i) in the case of benefits due either only under national legislation of another Member State or under Articles 73 or 74 of the Regulation to the person entitled to family benefits or to the person to whom they are to be paid, the right to family benefits due either only under national legislation of that other Member State or under these Articles shall be suspended up to the sum of family benefits provided for by the legislation of the Member State in whose territory the member of the family is residing. The cost of the benefits paid by the Member State in whose territory the member of the family is residing shall be borne by that Member State; National legislation Austrian law9 According to Article 2(1) of the Law on Compensation for Family Expenses (Familienlastenausgleichsgesetz) of 24 October 1967 (BGBl. I, 376/1967), in the amended version applicable to the case in the main proceedings: ‘Persons who have their domicile or permanent residence in Federal territory are entitled to family allowance …’.10 Paragraph 2 of the Law on Childcare Allowance (Kinderbetreuungsgeldgesetz) of 8 August 2001 (BGBl. I, 103/2001), which came into force on 1 January 2002, provides: ‘1. A parent … shall be entitled to childcare allowance for his or her child … where(1) there is an entitlement to family allowance for that child under the Familienlastenausgleichsgesetz … or where there is no such entitlement for that child simply because there is an entitlement to a similar foreign benefit; (2) the parent lives in the same household as the child; and(3) the total material amount of the parent’s income (Paragraph 8) during the calendar year does not exceed the limit of EUR 14 600.00. … 4. Childcare allowance cannot be drawn by both parents simultaneously for the same child. German law11 According to Paragraph 1 of the Federal Law on the Grant of Child-raising Allowance and Parental Leave (Bundeserziehungsgeldgesetz) of 7 December 2001 (BGBl. 2001 I No 65): ‘1. Any person who:(1) is permanently or ordinarily resident in Germany;(2) has a dependent child in his household;(3) looks after and brings up that child; and(4) has no, or no full-time, employment is entitled to child-raising allowance. The main proceedings and the questions referred for a preliminary ruling12 The two claimants in the main proceedings, Ms Dodl and Ms Oberhollenzer, are Austrian nationals working in Austria but resident in Germany. They live with their husband and partner respectively, both of whom are German nationals working full-time in Germany. 13 Following the birth of her son on 21 April 2002, Ms Dodl took unpaid maternity leave from 21 June 2002 to 7 October 2002.14 Ms Oberhollenzer gave birth to her son on 10 September 2002 and consequently took unpaid maternity leave from 8 November 2002 to 9 September 2004. 15 As fathers, Ms Dodl’s husband and Ms Oberhollenzer’s partner received the child allowance in Germany that corresponds to Austrian family allowance, but they did not receive the German national child-raising allowance because they were in full-time employment. 16 The applications for payment of the Federal child-raising allowance which the claimants in the main proceedings lodged in Germany were refused, in respect of Ms Dodl, by decision of the Amt für Versorgung und Familienförderung München I (Munich I Benefit and Family Support Office) of 13 May 2003 and, in respect of Ms Oberhollenzer, by decisions of the Amt für Versorgung und Familienförderung Augsburg (Augsburg Benefit and Family Support Office) of 14 November 2002 and 22 April 2003. The reason given by the German authorities was that, in their view, the Republic of Austria was responsible for payment of the allowance sought. In addition, in Ms Dodl’s case, it was also argued that the income limit applicable under German law had been exceeded. 17 The claimants also attempted to obtain a childcare allowance in Austria.18 Their applications were rejected by decisions of the Tiroler Gebietskrankenkasse dated 28 April and 5 June 2003 respectively, those decisions being based on Articles 73, 75 and 76 of Regulation No 1408/71 in conjunction with Article 10(1)(b) of Regulation No 574/72. 19 The claimants in the main proceedings each challenged those decisions in the Landesgericht Innsbruck (Regional Court, Innsbruck) and asked for an order that the Tiroler Gebietskrankenkasse award them childcare allowance in the statutory amount as from 1 July 2002 in respect of Ms Dodl and 30 September 2002 in respect of Ms Oberhollenzer. In support of their applications, they argued that the principle that the State of employment is responsible for payment should have been applied, in response to which the Tiroler Gebietskrankenkasse claimed that where there are two different Member States of employment, it is the State of residence that has foremost responsibility for payment of family benefit. It is only after payment of the German child‑raising allowance that the Republic of Austria might be required to make a top-up payment of childcare allowance in certain circumstances. 20 The Landesgericht Innsbruck dismissed Ms Dodl’s and Ms Oberhollenzer’s actions by judgments of 17 July 2003 and 17 September 2003 respectively. The court considered that where parents work in different Member States, the State that should have primary responsibility for the payment of family benefit is the one in which the child is permanently resident, in this case, the Federal Republic of Germany. If the German benefit were lower than the Austrian benefit, the Republic of Austria would be liable to pay only the difference. 21 The claimants in the main proceedings lodged appeals against those judgments before the Oberlandesgericht Innsbruck (Innsbruck Higher Regional Court). In support of their appeals, they maintain that, inasmuch as the purpose of childcare allowance is to provide an income for the parent who is on unpaid leave from his or her occupation in order to care for a child and who therefore sustains loss of earnings, the principle that the State of employment is responsible for payment should apply. Ms Dodl and Ms Oberhollenzer point out that, at the time material to the main proceedings, they were still in an employment relationship, which was merely suspended for the duration of their parental leave. 22 The Tiroler Gebietskrankenkasse disputed that argument and asked for the claims to be dismissed.23 Having joined the two cases for the purposes of a common procedure and judgment, the Oberlandesgericht Innsbruck decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘(1) Is Article 73 of Regulation (EEC) No 1408/71 ... in conjunction with Article 13 of that regulation, as amended, to be interpreted as extending even to employed persons whose employment relationships are still in existence but do not involve any duty to carry out work or pay remuneration (unpaid leave) or any social security obligations under national law? (2) If the answer to the first question should be in the affirmative:Is the State of the place of employment responsible for the benefit payment in such a case even if the employed person and those members of his or her family for whom family benefit such as Austrian “Kinderbetreuungsgeld” (childcare allowance) might be payable have not lived in the State of the place of employment, particularly during the period of unpaid leave?’ Substance The first question24 By its first question, the national court is essentially asking whether the claimants in the main proceedings have lost the status of ‘employed persons’ within the meaning of Regulation No 1408/71 as a result of the suspension of their employment relationship during which, under Austrian law, they were not required to pay social security contributions. More particularly, the national court queries the effects of such a suspension on the application of Article 13(2)(a) of Regulation No 1408/71 and, consequently, of Article 73 of the same regulation. 25 It seems that the national court’s main concern underlying the first question is the risk that the claimants in the main proceedings could escape all social protection, so far as the award of family benefits is concerned, if their employment relationship does not qualify as employment on account of its suspension. 26 All the parties which submitted written observations are agreed that in spite of the temporary suspension of their employment relationship, the claimants are ‘employed persons’ within the meaning of Article 1(a) of Regulation No 1408/71. 27 In that connection, it must be pointed out that there is no single definition of worker/employed or self-employed person in Community law; it varies according to the area in which the definition is to be applied (Case C-85/96 Martínez Sala [1998] ECR I‑2691, paragraph 31). It is therefore necessary to consider the meaning of the term ‘employed person’ that is envisaged in the context of Regulation No 1408/71. 28 Article 2(1) of Regulation No 1408/71 states that the regulation is to apply to employed or self-employed persons who are or have been subject to the legislation of one or more Member States as well as to the members of their families. 29 The terms ‘employed person’ and ‘self-employed person’ are defined by Article 1(a) of Regulation No 1408/71. They designate any person insured under one of the social security schemes mentioned in the aforementioned Article 1(a) for the contingencies and under the conditions mentioned in that provision (Case C-2/89 Kits van Heijningen [1990] ECR I-1755, paragraph 9, and Case C-275/96 Kuusijärvi [1998] ECR I-3419, paragraph 20). 30 Accordingly a person has the status of an ‘employed person’ within the meaning of Regulation No 1408/71 where he is covered, even if only in respect of a single risk, on a compulsory or optional basis, by a general or special social security scheme mentioned in Article 1(a) of that regulation, irrespective of the existence of an employment relationship (Martínez Sala, cited above, paragraph 36, and Kuusijärvi, cited above, paragraph 21). 31 Thus, as the Advocate General pointed out in paragraph 12 of his Opinion, in the light of the case-law of the Court, it is therefore not the status of the employment relationship which determines whether or not a person continues to fall within the scope ratione personae of Regulation No 1408/71, but the fact that he or she is covered against risks under a social security scheme mentioned in Article 1(a) of that regulation. It follows from this that the mere suspension of the main obligations of an employment relationship for a given period of time cannot deprive the employee of his or her status as an ‘employed person’ within the meaning of Article 73 of that regulation. 32 It is apparent from the decision to refer that, under Austrian law, the claimants in the main proceedings were not, during the period of their parental leave, covered by full compulsory insurance (including health, accident and retirement insurance) as persons employed full-time are. According to the information provided by the national court, once compulsory insurance ceases the claimants are entitled to benefits only under the health insurance scheme – subject to certain conditions. The national court assumes that, in certain circumstances, the claimants in the main proceedings could therefore fall back on sickness benefits. 33 In any event, it is for the national court to make the necessary enquiries to determine whether the claimants in the main proceedings belonged to a branch of the Austrian social security system during the periods in respect of which the allowances in issue were applied for and, accordingly, whether they were ‘employed persons’ within the meaning of Article 1(a) of Regulation No 1408/71. 34 The answer to the first question must therefore be that a person has the status of an ‘employed person’ within the meaning of Regulation No 1408/71 where he is covered, even if only in respect of a single risk, on a compulsory or optional basis, by a general or special social security scheme mentioned in Article 1(a) of that regulation, irrespective of the existence of an employment relationship. It is for the national court to make the necessary enquiries to determine whether the claimants in the main proceedings belonged to a branch of the Austrian social security system during the periods in respect of which the allowances in issue were applied for and, accordingly, whether they were ‘employed persons’ within the meaning of Article 1(a). The second question35 By its second question, the national court asks which Member State is primarily responsible for paying the family benefit in issue if the claimants in the main proceedings are persons covered by Regulation No 1408/71, which presupposes that the Court of Justice will rule on the possible relevance and, if appropriate, the application of the rules against overlapping, namely Article 76 of Regulation No 1408/71 and Article 10 of Regulation No 574/72, in circumstances such as those of the case in the main proceedings. Observations submitted to the Court36 The observations submitted to the Court differ as regards the interpretation of Regulations No 1408/71 and No 574/72 and determination of the Member State responsible for the payment of benefits. 37 Thus, the Tiroler Gebietskrankenkasse argued that since each of the two parents carries on an occupation, one in Germany and the other in Austria, there must be two different States of employment. The resulting overlapping of benefits is resolved in Article 76 of Regulation No 1408/71, which establishes that priority is to be given to the Member State of residence which is consequently responsible for the payment of family benefits, the other State having only secondary responsibility. 38 The Austrian Government also advocates that solution whilst pointing out that, following the Court’s reasoning in Joined Cases C-245/94 and C-312/94 HoeverandZachow [1996] ECR I‑4895 in relation to family benefits, the determination of which family members trigger entitlement to benefits cannot depend on national legislation. Rather, the family as a whole should be taken into consideration. 39 The German Government puts forward two arguments in support of the contrary view. It argues, first, that the principle invoked by the Austrian Government and set out by the Court in Hoever and Zachow (cited above) is not relevant to the present case because of the particular circumstances of the case which gave rise to that judgment. The approach taken by the Court in that case ought, in fact, to be reserved for those cases in which the persons concerned find that they do not have rights in relation to the State of employment. 40 Second, the German Government considers that the rules against overlapping in Article 76 of Regulation No 1408/71 and Article 10 of Regulation No 574/72 do not apply in the present case because there are no simultaneous rights to family benefits for the same child. In the circumstances of the case in the main proceedings, the other parent has no such right, since the fathers of the children do not fulfil the conditions of entitlement to the allowances under German law. 41 Accordingly, the German Government concludes that, in accordance with Article 73 of Regulation No 1408/71, it is for the State of employment alone, in this case, the Republic of Austria, to pay the family benefit even if the recipient and the recipient’s family are not resident in that State. 42 The Commission of the European Communities supported that conclusion in its written observations. It argued that since the State of employment principle is fundamental to Regulations No 1408/71 and No 574/72, other solutions need be sought only if application of that principle would have unacceptable consequences – in particular, loss of entitlement to the family benefit. 43 However, at the hearing the Commission indicated that it had reconsidered its position in favour of the Member State of residence having primary responsibility, and it asked the Court to take into account the family circumstances of the claimants in the main proceedings. According to the Commission, the provision which governs their situation is thus Article 10(1)(b) of Regulation No 574/72, which suspends the entitlement provided for in Article 73 of Regulation No 1408/71 where the spouse of the employed person carries out a professional or trade activity in the Member State of residence. Such an approach would be fully consistent with the judgment in Case C-119/91 McMenamin [1992] ECR I-6393, which is directly relevant to the present case. Findings of the Court44 In order to resolve the difficulty in interpreting Regulations Nos 1408/71 and 574/72 which is at the heart of the negative conflict of competence in the case in the main proceedings, and to give the national court an answer which will be of assistance, it is necessary, for the purpose of answering the second question, to consider the scope of Article 73 of Regulation No 1408/71, to examine how it relates to the provisions against overlapping in those regulations and to determine which of those provisions applies in this case. 45 As is apparent from its wording, the said Article 73 covers precisely the situation in which the family of an employed person is resident in a Member State other than the competent State, and it guarantees the grant of the family benefits provided for by the applicable legislation of the latter as if the employed person’s family was resident in its territory. 46 That provision is intended to prevent Member States from making entitlement to and the amount of family benefits dependent on residence of the members of the worker’s family in the Member State providing the benefits, so that Community workers are not deterred from exercising their right to freedom of movement (see, in particular, Hoever and Zachow, cited above, paragraph 34, and Case C-333/00 Maaheimo [2002] ECR I-10087, paragraph 34). 47 Article 73 of Regulation No 1408/71 goes together with the rule laid down in Article 13(2)(a) of the same regulation which states that a worker employed in the territory of one Member State shall be subject to the legislation of that State even if he resides in the territory of another Member State. That arrangement stems from the objective of Regulation No 1408/71, which is to guarantee all workers who are nationals of the Member States and who move within the Community equality of treatment in regard to the different national laws and the enjoyment of social security benefits irrespective of the place of their employment or of their residence, and it must be interpreted uniformly in all Member States regardless of the arrangements made by national laws on the acquisition of entitlement to family benefits (Case 104/80 Beeck [1981] ECR 503, paragraph 7). 48 It must therefore be noted that, for the purposes of the combined provisions of Article 73 and Article 13(2)(a) of Regulation No 1408/71, the claimants in the main proceedings, who reside with their families in a Member State other than the State of employment, acquire entitlement under Community law to family allowances in the latter State. 49 It must be pointed out, however, that whilst the said Article 73 constitutes a general rule, it is not an absolute rule. The entitlement which the claimants in the main proceedings derive, in their capacity as ‘employed persons’, from Article 13 and Article 73 of Regulation No 1408/71 must be set against the rules against overlapping in that regulation and in Regulation No 574/72, since there is a risk that entitlement under the legislation of the State of residence could overlap with that under the legislation of the State of employment. 50 It appears that that is the case here. According to information from the national court, the birth of each claimant’s child gives rise to an entitlement to family allowances in Austria and in Germany. In Austria, entitlement to childcare allowance vests in the mother in her capacity as an employed person in that Member State in application of Article 73 of Regulation No 1408/71. In Germany, under German law, one of the parents is entitled to receive a child-raising allowance on the basis that that parent and his or her child are resident there. 51 Circumstances such as those of the case in the main proceedings can result in overcompensation of family expenses and must therefore be considered in the light of the provisions against overlapping, namely Article 76 of Regulation No 1408/71 and Article 10 of Regulation No 574/72. 52 It is appropriate to consider in turn the possible situations to which the said provisions are intended to apply.53 It is apparent from the wording of Article 76 of Regulation No 1408/71 that that provision is intended to resolve cases where entitlement to family benefits under Article 73 of that regulation overlaps with entitlement under the national legislation of the family members’ State of residence by reason of the carrying on of an occupation. It is common ground that Article 76 is not relevant in the present case, since entitlement to family benefits under German law is conditional on the claimant’s being resident in Germany and having no, or no full-time, employment. 54 On the other hand, Article 10 of Regulation No 574/72 applies where there is a risk of overlap between entitlement under Article 73 of Regulation No 1408/71 and entitlement to receive family benefits under the national legislation of the State of residence, irrespective of any such professional or trade activity. 55 It follows that Article 10 of Regulation No 574/72 is the relevant provision against overlapping in the present case. It covers situations in which only one of the parents carries out a professional or trade activity as well as situations in which both parents do so. 56 Article 10(1)(a) of the said regulation provides, in particular, that where family benefits are due in the child’s State of residence, irrespective of conditions of insurance or employment, such entitlement is to be suspended where benefits are due in application of Article 73 of Regulation No 1408/71. 57 However, where a professional or trade activity is carried out in the child’s State of residence by the person entitled to the family benefits or by the person to whom they are paid, Article 10(1)(b)(i) of Regulation No 574/72 provides for the suspension of entitlement to those benefits which exist in the State of employment under Article 73 of Regulation No 1408/71. 58 In McMenamin, cited above, paragraphs 24 and 25, the Court clarified the meaning of the periphrasis ‘the person entitled to the family benefits or family allowances, or the person to whom they are paid’. It held that it must be understood as encompassing in particular, apart from the spouse, a person who is not or is no longer married to the person entitled to benefits in pursuance of Article 73 of Regulation No 1408/71 or that person himself if the overlapping entitlement to family allowances arises because that person is also working in the State of residence. The legislature chose to define that group of persons by their common characteristic, namely their status as persons entitled to family allowances in the Member State of residence, rather than by giving an exhaustive list. 59 The Court then held that the exercise by a person having the care of children, and, in particular, by the spouse of the person entitled in pursuance of Article 73 of Regulation No 1408/71, of a professional or trade activity in the Member State of residence of the children suspends, under Article 10 of Regulation No 574/72, the right to allowances in pursuance of Article 73 of Regulation No 1408/71 up to the amount of the allowances of the same kind actually paid by the Member State of residence, irrespective of who is designated as directly entitled to the family allowances by the legislation of that State (McMenamin, cited above, paragraph 27). 60 That interpretation of Article 10(1)(b)(i) of Regulation No 574/72 can be directly applied to situations such as that in the case in the main proceedings with regard to the exercise by Ms Dodl’s spouse and Ms Oberhollenzer’s partner of a professional or trade activity in the Member State of residence. Consequently, it is that State, in this case, the Federal Republic of Germany, which is responsible for paying the family benefits in issue. 61 It must be added that, contrary to the German Government’s argument, the fact that the fathers of the children do not fulfil the conditions of entitlement to the allowances provided for by the German legislation because of their full-time professional or trade activity is irrelevant to the application of Article 10(1)(b)(i) of Regulation No 574/72. 62 In order for that article to apply and thereby to trigger the reversal of priorities in favour of the competence of the Member State of residence, it is not necessary for the professional or trade activity to be carried out by the person who is personally entitled to the family benefits. It is sufficient for entitlement to allowances in the State of residence to vest in one of the parents – in this case, the mother. 63 However, it is important to point out that in the situation referred to by the national court, where Ms Dodl was not entitled to the German child-raising allowance on the ground that the income limit applicable under the German legislation had been exceeded, and where her husband was not entitled to it either because he was in full-time employment, Ms Dodl’s circumstances are governed solely by Article 73 of Regulation No 1408/71 and there is no need to resort to the rules against overlapping provided for in that regulation and in Regulation No 574/72. 64 The answer to the second question must therefore be that where the legislation of the Member State of employment and that of the Member State of residence of an employed person each provide for an entitlement to family benefits in respect of the same member of that person’s family and for the same period, the Member State responsible for paying those benefits is, in principle, the Member State of employment pursuant to Article 10(1)(a) of Regulation No 574/72. However, where a person having the care of children, in particular the spouse or partner of the employed person, carries out a professional or trade activity in the Member State of residence, the family benefits must be paid by that Member State in application of Article 10(1)(b)(i) of Regulation No 574/72, irrespective of who is designated as directly entitled to those benefits by the legislation of that State. In that situation, the payment of family benefits by the Member State of employment is to be suspended up to the sum of family benefits provided for by the legislation of the Member State of residence. Costs65 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. A person has the status of an employed or self-employed person within the meaning of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Regulation (EC) No 1386/2001 of the European Parliament and of the Council of 5 June 2001 where he is covered, even if only in respect of a single risk, on a compulsory or optional basis, by a general or special social security scheme mentioned in Article 1(a) of that regulation, irrespective of the existence of an employment relationship. It is for the national court to make the necessary enquiries to determine whether the claimants in the main proceedings belonged to a branch of the Austrian social security system during the periods in respect of which the allowances in issue were applied for and, accordingly, whether they were ‘employed persons’ within the meaning of Article 1(a).2. Where the legislation of the Member State of employment and that of the Member State of residence of an employed person each provide for an entitlement to family benefits in respect of the same member of that person’s family and for the same period, the Member State responsible for paying those benefits is, in principle, the Member State of employment pursuant to Article 10(1)(a) of Council Regulation (EEC) No 574/72 of 21 March 1972 fixing the procedure for implementing Regulation No 1408/71, as amended and updated by Commission Regulation (EC) No 410/2002 of 27 February 2002.However, where a person having the care of children, in particular the spouse or partner of the employed person, carries out a professional or trade activity in the Member State of residence, the family benefits must be paid by that Member State in application of Article 10(1)(b)(i) of Regulation No 574/72, as amended by Regulation No 410/2002, irrespective of who is designated as directly entitled to those benefits by the legislation of that State. In that situation, the payment of family benefits by the Member State of employment is to be suspended up to the sum of family benefits provided for by the legislation of the Member State of residence.[Signatures]* Language of the case: German. | 5a390-1dfe628-4aa8 | EN |
THE GRANT OF PREFERENTIAL ACCESS TO THE CROSS-BORDER ELECTRICITY TRANSMISSION NETWORK TO AN UNDERTAKING WHICH PREVIOUSLY HELD A MONOPOLY, BECAUSE OF CONTRACTS CONCLUDED PRIOR TO THE LIBERALISATION OF THE MARKET, AMOUNTS TO DISCRIMINATION PROHIBITED BY THE SECOND ELECTRICITY DIRECTIVE | Vereniging voor Energie, Milieu en Water and OthersvDirecteur van de Dienst uitvoering en toezicht energie(Reference for a preliminary ruling from the College van Beroep voor het bedrijfsleven)(Internal market in electricity – Preferential access to the system for cross-border transmission of electricity – Undertaking previously responsible for the operation of services of general economic interest – Long-term contracts existing prior to the liberalisation of the market – Directive 96/92/EC – Principle of non-discrimination – Principles of the protection of legitimate expectations and of legal certainty)Opinion of Advocate General Stix-Hackl delivered on 28 October 2004 Judgment of the Court (Grand Chamber), 7 June 2005 Summary of the Judgment1. Preliminary rulings — Jurisdiction of the Court — Limits — Questions that are manifestly irrelevant and hypothetical questions referred in a context which rules out any purposeful reply(Art. 234 EC)2. Approximation of laws — Measures intended for the establishment and operation of the internal market in electricity — Directive 96/92 — Rule of non-discriminatory access to the electricity transport network — Scope of Articles 7(5) and 16 — Application to all discrimination — Possibility of securing derogating measures via the procedure set out in Article 24(European Parliament and Council Directive 96/92, Arts 7(5), 16 and 24)3. Community law — Principles — Protection of legitimate expectations — Limits — Prudent and circumspect trader4. Community law — Principles — Legal certainty — Meaning — Rules adversely affecting individuals — Requirement of clarity and precision — Legislative amendments — Whether permissible — Taking of particular situations into account1. Within the framework of the cooperation between the Court and national courts and tribunals established by Article 234 EC, it is for the national court alone to determine, in the light of the particular circumstances of the case before it, both the need for a preliminary ruling to enable it to deliver judgment and the relevance of the questions which it submits to the Court. The Court can refuse a request submitted by a national court only where it is manifestly obvious that the ruling sought by that court on the interpretation of Community law bears no relation to the actual facts of the main action or its purpose or that the problem is general or hypothetical. (see para. 34)2. Articles 7(5) and 16 of Directive 96/92 concerning common rules for the internal market in electricity, which require that the action of the system operator and that of the State in creating access to the system should be non-discriminatory, are not limited to covering technical rules but apply to all discrimination. Those articles preclude national measures that grant an undertaking, by reason of commitments given before the directive entered into force, preferential capacity for the cross-border transmission of electricity, whether those measures derive from the system operator, the controller of system management or the legislature, in the case where such measures have not been authorised within the framework of the procedure set out in Article 24 of that directive, which, in order to tone down some of the consequences of liberalisation, provides for the possibility of applying a transitional regime under certain conditions. (see paras 45-47, 57, 71, operative part 1, 2)3. The principle of the protection of legitimate expectations is one of the fundamental principles of the Community. Any trader on the part of whom an institution has promoted reasonable expectations may rely on that principle. However, if a prudent and circumspect trader can foresee the adoption of a Community measure that is likely to affect his interests, he cannot plead that principle if such a measure is adopted. (see paras 73, 74)4. The principle of legal certainty requires that rules involving negative consequences for individuals should be clear and precise and that their application should be predictable for those subject to them. An individual cannot, however, place reliance on there being no legislative amendment whatever, but can call into question only the arrangements for the implementation of such an amendment. Likewise, the principle of legal certainty does not require that there be no legislative amendment, requiring as it does, rather, that the legislature take account of the particular situations of traders and provide, where appropriate, adaptations to the application of the new legal rules. (see paras 80, 81)JUDGMENT OF THE COURT (Grand Chamber)7 June 2005 (*) (Internal market in electricity – Preferential access to the system for cross-border transmission of electricity – Undertaking previously responsible for the operation of services of general economic interest – Long-term contracts existing prior to the liberalisation of the market – Directive 96/92/EC – Principle of non-discrimination – Principles of the protection of legitimate expectation and of legal certainty)In Case C-17/03,REFERENCE under Article 234 EC for a preliminary ruling by the College van Beroep voor het bedrijfsleven (Administrative Court for Trade and Industry) (Netherlands), by decision of 13 November 2002, received at the Court on 16 January 2003, in the proceedings concerning: Vereniging voor Energie, Milieu en Water,Amsterdam Power Exchange Spotmarket BV,Eneco NVDirecteur van de Dienst uitvoering en toezicht energie,intervening party:Nederlands Elektriciteit Administratiekantoor BV, previously Samenwerkende Elektriciteits Produktiebedrijven NV, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas (Rapporteur), Presidents of Chambers, J.-P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr, M. Ilešič, J. Malenovský and U. Lõhmus, Judges, Advocate General: C. Stix-Hackl,Registrar: M.-F. Contet, Principal Administrator,having regard to the written procedure and further to the hearing on 29 June 2004,after considering the observations submitted on behalf of:– Vereniging voor Energie, Milieu en Water, by I. VerLoren van Themaat and M. het Lam, advocaten,– Amsterdam Power Exchange Spotmarket BV, by P.W.A. Goes, advocaat,– Eneco NV, by J.J. Feenstra, advocaat,– Nederlands Elektriciteit Administratiekantoor BV, by J. de Pree and Y. de Vries, advocaten, – the Netherlands Government, by H.G. Sevenster, acting as Agent,– the French Government, by G. de Bergues and C. Lemaire, acting as Agents,– the Finnish Government, by T. Pynnä and A. Guimaraes-Purokoski, acting as Agents,– the Norwegian Government, by K.B. Moen and I. Djupvik, acting as Agents,– the Commission of the European Communities, by H. Støvlbæk, M. van Beek and A. Bouquet, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 28 October 2004,gives the followingJudgment1 The reference for a preliminary ruling concerns, first, the interpretation of Article 86(2) EC and, second, that of Article 7(5) of Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20) (‘the Directive’). 2 This reference has been submitted in the context of a dispute between, on the one hand, the undertakings Vereniging voor Energie, Milieu en Water, Amsterdam Power Exchange Spotmarket BV and Eneco BV and, on the other, the Directeur van de Dienst uitvoering en toezicht energie (the Director of the Service for Implementation and Control of Energy Supply) (‘the DTE’ or ‘the controller of system management’) relating to the latter’s decision to reserve, on a preferential basis, a portion of the capacity of the cross-border system for the importation of electricity into the Netherlands to Nederlands Elektriciteit Administratiekantoor BV (‘NEA’), which, at the time when the dispute in the main proceedings arose, was known as Samenwerkende Elektriciteits Produktiebedrijven NV (‘the SEP’). Legal framework Community law3 The Directive marks the second phase in the liberalisation of the market in electricity within the European Community. According to recital (2) in its preamble, its objective is to complete a competitive internal market in electricity. 4 Recital (4) in the preamble to the Directive provides: ‘… establishment of the internal market in electricity is particularly important in order to increase efficiency in the production, transmission and distribution of this product, while reinforcing security of supply and the competitiveness of the European economy …’. 5 Recital (5) states that: ‘… the internal market in electricity needs to be established gradually, in order to enable the industry to adjust in a flexible and ordered manner to its new environment and to take account of the different ways in which electricity systems are organised at present’. 6 Recital (25) in the preamble to the Directive provides as follows: ‘…each transmission system must be subject to central management and control in order to ensure the security, reliability and efficiency of the system in the interests of producers and their customers; … a transmission system operator should therefore be designated and entrusted with the operation, maintenance, and, if necessary, development of the system; … the transmission system operator must behave in an objective, transparent and non-discriminatory manner’. 7 The final recital in the preamble to the Directive provides: ‘… this Directive constitutes a further phase of liberalisation; … once it has been put into effect, some obstacles to trade in electricity between Member States will nevertheless remain in place; … therefore, proposals for improving the operation of the internal market in electricity may be made in the light of experience …’. 8 Article 7, which features in Chapter IV of the Directive, entitled ‘Transmission system operation’, provides as follows:‘1. Member States shall designate or shall require undertakings which own transmission systems to designate, for a period of time to be determined by Member States having regard to considerations of efficiency and economic balance, a system operator to be responsible for operating, ensuring the maintenance of, and, if necessary, developing the transmission system in a given area and its interconnectors with other systems, in order to guarantee security of supply. 2. Member States shall ensure that technical rules establishing the minimum technical design and operational requirements for the connection to the system of generating installations, distribution systems, directly connected consumers’ equipment, interconnector circuits and direct lines are developed and published. These requirements shall ensure the interoperability of systems and shall be objective and non-discriminatory. ... 3. The system operator shall be responsible for managing energy flows on the system, taking into account exchanges with other interconnected systems. To that end, the system operator shall be responsible for ensuring a secure, reliable and efficient electricity system and, in that context, for ensuring the availability of all necessary ancillary services. …5. The system operator shall not discriminate between system users or classes of system users, particularly in favour of its subsidiaries or shareholders. …’9 The first sentence of Article 16 of the Directive, which features in Chapter VII, entitled ‘Organisation of access to the system’, provides that, for such organisation, Member States may choose between negotiated access and the single buyer procedure. The second sentence of Article 16 states that ‘[b]oth sets of procedure shall operate in accordance with objective, transparent and non-discriminatory criteria.’ 10 Article 24(1) and (2) of the Directive provides as follows:‘1. Those Member States in which commitments or guarantees of operation given before the entry into force of this Directive may not be honoured on account of the provisions of this Directive may apply for a transitional regime which may be granted to them by the Commission, taking into account, amongst other things, the size of the system concerned, the level of interconnection of the system and the structure of its electricity industry. The Commission shall inform the Member States of those applications before it takes a decision, taking into account respect for confidentiality. This decision shall be published in the Official Journal of the European Communities. 2. The transitional regime shall be of limited duration and shall be linked to expiry of the commitments or guarantees referred to in paragraph 1. The transitional regime may cover derogations from Chapter[s] IV, VI and VII of this Directive. Applications for a transitional regime must be notified to the Commission no later than one year after the entry into force of this Directive.’ National legislation11 Under Article 2 of the Elektriciteitswet of 16 November 1989 (Netherlands Law laying down rules for the generation, import, transmission and sale of electricity) (Staatsblad 1989, p. 535) (‘the 1989 EW’) a company designated for that purpose (‘the designated company’) had been given the task, in conjunction with the licensees, of ensuring the reliable and efficient public distribution of electricity at costs which were to be as low as possible and justified in the light of the public interest. 12 Under Article 34 of the 1989 EW, only the designated company was authorised to import into the Netherlands electricity intended for public distribution. 13 Under Article 35 of the 1989 EW, that company was not authorised to enter into contracts for the importation of electricity intended for public distribution without the approval of the competent minister. The latter could refuse to grant approval only if the interest of proper supply of electricity and electrical energy so required. 14 The designated company within the terms of Articles 2, 34 and 35 of the 1989 EW was the SEP, the rights of which were assumed by NEA with effect from 1 January 2001. 15 The Elektriciteitswet of 2 July 1998 (the Netherlands Law laying down rules for the generation, import, transmission and sale of electricity) (Staatsblad 1998, p. 427) (‘the 1998 EW’) was designed to transpose the Directive and repealed the 1989 EW with effect from 1 July 1999. 16 Following the entry into force of the 1998 EW, the SEP transferred operation of the high-voltage network to its subsidiary TenneT BV (‘TenneT’). Ownership of that network was transferred in 2001 to Saranne BV (‘Saranne’), which was also a subsidiary of the SEP. Also in 1991, the State acquired ownership, first, of TenneT and, subsequently, of Saranne. 17 Under Article 16 of the 1998 EW TenneT has among its tasks those of establishing and maintaining the network, ensuring that it is reliable and secure, guaranteeing a sufficient reserve capacity and supplying to third parties electricity imported into the Netherlands and exported from the Netherlands to other countries. 18 Under Article 24 of the 1998 EW the network operator must ensure that access to it is available to generators, intermediaries, suppliers and purchasers of electricity under non-discriminatory conditions. 19 Supervision of the operation of the network and of the network operator is, pursuant to the 1998 EW, entrusted to the DTE. In hierarchical terms, the DTE is subject to the Minister for Economic Affairs, who may issue to the DTE both individual and general instructions. 20 Pursuant to, in particular, Article 36 of the 1998 EW, the DTE is required to determine, on a proposal by the network operator, the conditions governing access to that network. 21 To that end, the DTE adopted, by decision of 12 November 1999, the conditions governing operation of the system for the cross-border transmission of electricity (‘the System Code’). 22 Under, inter alia, Articles 5.6.4 and 5.6.7 of Chapter 5 of the System Code, for 2000 an electricity import capacity of 1 500 MW of the 3 200 MW available on cross-border lines was reserved on a preferential basis for the SEP for the transmission of electricity which was the subject of purchase contracts signed by the SEP in accordance with Article 35 of the 1989 EW. 23 In issue are three contracts for the purchase of electricity which the SEP concluded with a view to fulfilling its task under Article 2 of the 1989 EW. 24 Those contracts were concluded respectively:– in 1989 with Électricité de France for the purchase of 600 MW per annum until 31 March 2002 and of 750 MW per annum from 1 April 2002 to 31 March 2009; – in 1989 with Preussen Elektra AG for the purchase of 300 MW per annum up to 31 December 2005;– in 1990 with Vereinigte Elektrizitätswerke Westfalen AG for the purchase of 600 MW per annum up to 31 March 2003 (these three contracts, taken together, are hereinafter referred to as ‘the international contracts of the SEP’). 25 Next, the preferential allocation to the SEP of an annual capacity for the cross-border transmission of electricity for the period after 2000 was expressly regulated by the Overgangswet elektriciteitsproduktiesektor (Transitional Law on the electricity generating sector) of 21 December 2000 (Staatsblad 2000, p. 607) (‘the Overgangswet 2000’). 26 Article 13(1) of the Overgangswet 2000 provides as follows:‘The system operator of the national high-voltage grid shall, on request, allocate to the designated company a maximum of 900 MW until 31 March 2005 and a maximum of 750 MW from 1 April 2005 to 31 March 2009 for the transmission of electricity where such transmission serves to implement the agreements concluded in 1989 and 1990 between the designated company, of the one part, and Électricité de France, Preussen Elektra AG and Vereinigte Elektrizitätswerke Westfalen AG, of the other part, in the version thereof in force on 1 August 1998 and in so far as those agreements are still in force. …’ The dispute in the main proceedings and the questions referred for preliminary ruling 27 The claimants in the main proceedings lodged an administrative objection to the adoption of Chapter 5 of the System Code by the DTE. 28 By decision of 17 July 2000 the DTE dismissed that objection. It recognised that the preferences granted to the SEP constituted obstacles to the proper functioning of the electricity market. It also stated that meaningful competition on the market for the generation of electricity in the Netherlands is still extensively limited, so much so that competition can in practice operate only by means of electricity generated outside the Netherlands. It pointed out in this context that the available capacity for cross-border transmission is 3 200 MW and that increasing the latter would be expensive. From this it concluded that a reservation for the outstanding period of the international contracts of the SEP would involve a serious restriction on import possibilities and thus on trade in electricity for other market operators. 29 The DTE, however, justified its decision rejecting the complaint by taking the view that the contracts in question were long-term ongoing contracts concluded by the SEP in accordance with the legislation in force at the time and pursuant to a service of general economic interest within the terms of Article 86 EC. Furthermore, the 1998 EW did not, it found, contain any provision capable of casting doubt on the validity of those contracts, with the result that those contracts had in principle to be performed. Interruption of the existing contracts would amount to unacceptable interference with the legal certainty of the parties and would also constitute a significant financial loss. In addition, performance of those contracts would not take up all of the international transmission capacity. 30 The claimants in the main proceedings brought an action against the decision of the DTE before the College van Beroep voor het Bedrijfsleven. They submitted that that measure had been taken in breach of Articles 28 EC, 81 EC, 82 EC and 86 EC and was contrary to the principle of non-discrimination laid down in Article 7(5) of the Directive and Article 24 of the 1998 EW and to the principles of non-discrimination and objectivity. That decision, they continued, also ignored the interest in promoting the development of trade on the market in electricity within the terms of Article 36 of that Law. The claimants also submitted that the method for attribution of the System Code had to be classified as a ‘technical regulation’ and ought, for that reason, to have been brought to the knowledge of the Commission, in accordance with Council Directive 83/189/EEC of 28 March 1983 laying down a procedure for the provision of information in the field of technical standards and regulations (OJ 1983 L 109, p. 8). 31 In those circumstances, the College van Beroep voor het bedrijfsleven decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘I.(a) Can Article 86(2) EC be invoked to justify continuing to grant a company which was formerly entrusted with the operation of services of general economic interest and which entered into certain commitments in connection with such operation a special right to enable it to honour those commitments after the particular task assigned to it has been completed? (b) If this question is answered in the affirmative, is a rule which provides for the preferential allocation for a period of ten years of half to a quarter (declining over time) of the cross-border transmission capacity for electricity to the undertaking concerned nevertheless invalid because it 1. is not proportionate in relation to the – public – interest served thereby; 2. affects trade to such an extent as would be contrary to the interests of the Community?II.(a) Is Article 7(5) of the … Directive to be interpreted as meaning that the prohibition of discrimination contained therein is restricted to the requirement that the system operator must not draw any distinction in granting access to the system by means of technical rules? If so, is an allocation method relating to the cross-border transmission capacity of electricity to be regarded as a technical rule within the meaning of the abovementioned provision? (b) In the event that the allocation method must be regarded as a technical rule or in the event that Article 7(5) of the … Directive is not limited to technical rules, is a rule under which preferential cross-border transmission capacity is made available for contracts concluded in connection with a particular public task compatible with the prohibition of discrimination contained in that article?’ The second question 32 By its second question, which it is appropriate to examine first, the national court is seeking in substance to ascertain whether the prohibition of discrimination laid down in Article 7(5) of the Directive precludes measures such as Articles 5.6.4 and 5.6.7 of the System Code and Article 13(1) of the Overgangswet 2000 (hereinafter ‘the measures in issue’), which allocate to the SEP, on a priority basis, a part of the capacity for the importation of electricity so as to enable it to fulfil its obligations under the international contracts which it concluded at the time when it was entrusted with the task of ensuring the reliable and effective operation of the public distribution of electricity at costs which were as low as possible and justified in the light of the public interest. 33 It should first be noted that Article 7(5) of the Directive refers to the system operator of the national electricity transmission system (judgment of 14 April 2005 in Joined Cases C-128/03 and C-129/03 AEM and AEM Torino [2005] ECR I-0000, paragraph 56). While it would appear that the System Code established by the DTE cannot be attributed to the Netherlands operator of the electricity grid (TenneT), the fact none the less remains that the national court is questioning the Court of Justice as to the scope of that provision. 34 Within the framework of the cooperation between the Court and national courts and tribunals established by Article 234 EC, it is solely for the national court to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. The Court can refuse a request submitted by a national court only where it is quite obvious that the ruling sought by that court on the interpretation of Community law bears no relation to the actual facts of the main action or its purpose or where the problem is general or hypothetical (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraphs 59 to 61, Case C-369/95 Somalfruit and Camar [1997] ECR I-6619, paragraphs 40 and 41, and Case C-36/99 Idéal tourisme [2000] ECR I-6049, paragraph 20). 35 It appears, in the case in the main proceedings, that the system operator took specific measures by refusing system access to at least one of the claimants in the main proceedings (Eneco NV), pursuant to Article 5.6.4 or Article 5.6.7 of the System Code. The national court was for that reason justified in forming the view that the interpretation of Article 7(5) of the Directive is necessary for the purpose of resolving the dispute in the main proceedings. It is therefore appropriate to interpret that provision in the light of Articles 5.6.4 or 5.6.7 of the System Code. 36 To the extent to which the dispute in the main proceedings relates to State measures that are not attributable to the system operator, reference should also be made to Article 16 of the Directive. It follows from Article 16 that although, for the organisation of access to the system, Member States may choose between the negotiated access procedure and the single buyer procedure, both sets of procedure must be operated in accordance with objective, transparent and non-discriminatory criteria (AEM and AEM Torino, cited above, paragraph 57). Article 16 of the Directive thus prohibits Member States from organising access to the system in a discriminatory manner. 37 Article 13(1) of the Overgangswet 2000, which provides that for the year 2001 et seq. the system operator is to grant the SEP priority access to the network for cross-border transmission of electricity, was introduced after the application in the main proceedings had been brought. It is for that reason necessary to examine that provision in relation to the principle of non-discrimination set out in Article 16 of the Directive. 38 So far as concerns the scope of Article 7(5) of the Directive, that provision does not, according to the claimants in the main proceedings, merely cover technical rules but also prohibits measures such as those here in issue. 39 The Netherlands, French, Finnish and Norwegian Governments, together with the Commission, also submit that Article 7(5) of the Directive does not apply solely to technical rules. They take the view, however, that the measures in issue do not amount to discrimination prohibited by that provision. 40 By contrast, according to NEA, in view of the fact that the other paragraphs of Article 7 of the Directive deal with those technical rules, the inference should be drawn that paragraph (5) itself refers only to technical rules. As the measures in issue are not capable of being described as technical rules, they do not, NEA submits, come within the scope of Article 7(5) of the Directive. 41 In interpreting a provision of Community law, it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it is part (see, inter alia, Case 292/82 Merck [1983] ECR 3781, paragraph 12; Case 337/82 St. Nikolaus Brennerei [1984] ECR 1051, paragraph 10; and Case C-223/98 Adidas [1999] ECR I-7081, paragraph 23). 42 In the first place, Article 7(5) of the Directive is couched in general terms which prohibit ‘[all discrimination] between system users or classes of system users’. The wording of that provision does not therefore contain any indication which argues in favour of a restrictive interpretation limited to technical rules. 43 Second, it follows from the context of Article 7 of the Directive that paragraph (5) thereof cannot be limited to technical rules. Article 7(2) already provides that technical rules must not be discriminatory. If the rule on non-discrimination set out in Article 7(5) were limited to technical rules, that provided for in Article 7(2) would serve no purpose. 44 Third, with regard to the objectives of the Directive, recital (25) in the preamble thereto states, without setting out any limitation in regard to technical rules, that a system operator must behave ‘in an objective, transparent and non-discriminatory manner’. 45 In the light of the foregoing, it must be concluded that Article 7(5) of the Directive is not limited to covering technical rules but must be interpreted as applying to all discrimination. 46 The same conclusion must be drawn in regard to Article 16 of the Directive. The rule on non-discrimination laid down in that article is couched in general terms and must be read in the light of Article 3(1) of the Directive, under which Member States are required to refrain from all discrimination in regard to the rights and obligations of electricity undertakings. 47 On the question as to whether the measures in issue amount to discrimination contrary to the Directive, it should be borne in mind that the provisions of the Directive, which require that the action of the system operator and that of the State in creating access to the system should not be discriminatory, are specific expressions of the general principle of equality (see AEM and AEM Torino, paragraph 58; see also, by analogy, in regard to the second subparagraph of Article 40(3) of the EC Treaty (now, after amendment, the second subparagraph of Article 34(2) EC), Case C-280/93 Germany v Council [1994] ECR I-4973, paragraph 67, and, in the matter of defence against dumped imports from non-member countries, the judgment of 27 January 2005 in Case C‑422/02 P Chemi-Con (Deutschland) v Council [2005] ECR I‑0000, paragraph 33). 48 The prohibition of discrimination, which is one of the fundamental principles of Community law, requires that comparable situations are not treated differently unless such difference in treatment is objectively justified (see, inter alia, Germany v Council, cited above, paragraph 67). 49 Under the measures in issue, priority allocation was granted to the SEP in 2000 in respect of 1 500 MW of the available 3 200 MW of cross-border capacity for electricity transmission, corresponding to 47% of the available capacity. The maximum capacity reserved for NEA on a priority basis from 2001 to 31 March 2009 is 750 MW, in accordance with Article 13(1) of the Overgangswet 2000, which corresponds to 23.4% of available capacity. As Eneco NV has stated, without being challenged on this point, its request for capacity to import electricity was turned down by TenneT pursuant to the measures in issue and it was for that reason unable to supply the electricity which it had undertaken to provide to its customers following the liberalisation of the market. As a result, Eneco NV argues, those in competition with the SEP were placed at a significant economic disadvantage, particularly in view of the fact that, as emerges from the order for reference, competition in the supply of electricity in the Netherlands is in practice able to operate only by way of electricity generated outside that Member State. 50 It is common ground that priority access, such as that granted to the SEP and subsequently to NEA, to the network for the cross-border transmission of electricity pursuant to measures such as those here in issue amounts to differential treatment. 51 NEA, however, supported in substance by the Netherlands and French Governments, avers that its situation is not comparable to that of the other operators. The international contracts of the SEP were concluded at a time when the latter was the owner of the high-tension network and the interconnectors. Those contracts, NEA submits, were concluded within the framework of the performance of a task of general economic interest based on the 1989 EW and the object of which was to ensure electricity supply in the Netherlands for purposes of resale at reasonable prices. 52 Prior to the liberalisation of the electricity market in the Netherlands, the SEP was indeed the only undertaking authorised to import electricity and entrusted with the task of general economic interest which consisted in ensuring the reliable and efficient operation of the public distribution of electricity at costs that were as low as possible and justified in the light of the public interest. 53 However, by reason of the liberalisation of the market as a result of the transposition of the Directive, the SEP lost its import monopoly. That import market was opened to other competing operators. At the same time, since the entry into force of the 1998 EW, the SEP has no longer been entrusted with the aforementioned task. 54 It is for that reason necessary to verify whether the difference in treatment consisting in the priority access granted to the SEP, and subsequently to NEA, to the network for the cross-border transmission of electricity pursuant to the measures in issue is justified in the light of the Directive. 55 NEA, together with, essentially, the Netherlands and Norwegian Governments, submits that such a difference in treatment is justified on the ground that the SEP was required to conclude those long-term contracts in performance of its task. Characterised by a high fixed cost and a relatively low price per MW, those contracts, it is argued, would severely penalise NEA if it were unable to import the quantities of electricity contemplated, in view of the absence of adequate capacity on the network for cross-border transmission. That, NEA contends, justifies a certain capacity on that network being reserved for NEA on a priority basis. 56 That argument cannot be accepted.57 In order to tone down some of the consequences of liberalisation, the Directive provides, in Article 24, for the possibility of applying a transitional regime under certain conditions. Under that provision Member States may seek derogations from, inter alia, Chapters IV and VII of the Directive, which contain Articles 7 and 16 respectively, in the case where commitments or guarantees of operation given before the entry into force of the Directive may not be honoured on account of its provisions. 58 In view of the existence of that specific provision for dealing with individual situations arising out of the legal context existing before the Directive entered into force, the existence, or otherwise, of discrimination within the terms of Articles 7(5) and 16 of the Directive has to be appraised without any regard being had to those individual situations. 59 In accordance with Article 24 of the Directive, applications for a derogation had to be submitted by Member States no later than one year after the Directive entered into force. Article 24 also provides that the decision was to be a matter for the Commission, which, for that purpose, had to take into account, inter alia, the size and level of interconnection of the system concerned, as well as the structure of the electricity industry in the State in question. Prior to taking a decision, the Commission also had to inform the Member States of those applications, the Member States thereby having the possibility of notifying their position to the Commission. Finally, any derogations within the terms of Article 24 had to be of limited duration and be linked to the expiry of the commitments or guarantees in question. 60 The Kingdom of the Netherlands could have had recourse to Article 24 of the Directive for the purpose of requesting, in good time, a temporary derogation from Articles 7(5) and 16 thereof in favour of the SEP in the form of a request to be allowed to allocate to that undertaking, on a priority basis, part of the capacity for the cross-border transmission of electricity. It did not, however, do so, as it submitted, and only after the expiry of the prescribed period, merely a request for compensation in respect of a portion of the financial losses which would be incurred by the SEP by reason of the performance of the international contracts concluded for its previous public service task (see point 44 of Commission Decision 1999/796/EC of 8 July 1999 concerning the application of the Netherlands for a transitional regime under Article 24 of Directive 96/92/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity (OJ 1999 L 319, p. 34)). The Kingdom of the Netherlands thus did not request authorisation in regard to the measures in question and the Commission was unable to authorise the measure which the Kingdom of the Netherlands had envisaged as it was notified outside the time-limit. 61 The procedure, criteria and limits set out in Article 24 of the Directive would be rendered meaningless if it were to be accepted that a Member State may unilaterally, and without complying with that procedure, apply differing treatment to electricity importers on grounds that are precisely capable of justifying, under Article 24 of the Directive, a derogation from Articles 7(5) and 16 thereof. 62 In the first place, any other interpretation would risk jeopardising, contrary to the objective of the Directive, the transition from a monopolistic and compartmentalised market in electricity to one that is open and competitive. By the effect of the measures in question, the access of new operators to the market would be significantly imperilled, even blocked, and the position of the undertaking previously holding the monopoly in the Netherlands could be protected against competition from other operators beyond the possibilities which the Community legislature envisaged in the Directive for the purpose of reconciling the completion of the electricity market with the safeguarding of commitments entered into under the previous legislation. 63 Second, the system of derogations provided for in Article 24 of the Directive is designed, inter alia, to ensure equal treatment for undertakings previously holding a national monopoly and which find themselves in a situation such as that of NEA. Equal treatment of this kind could be compromised if it were accepted that each Member State could, outside of the procedure and conditions laid down in Article 24 of the Directive, confer an advantage on the undertaking previously holding its monopoly in order to safeguard performance of the long-term contracts which that undertaking concluded prior to the liberalisation of the electricity market. That would run counter to the objective of the Directive set out in recital (12) in its preamble, according to which ‘whatever the nature of the prevailing market organisation, access to the system must be open in accordance with this Directive and must lead to equivalent economic results in the States and hence to a directly comparable level of opening-up of markets and to a directly comparable degree of access to electricity markets’. 64 The Netherlands Government, however, submits that the provisions of Articles 3(3) and 17(5) of the Directive, which allow the system operator, in certain circumstances, to refuse access to the system, demonstrate that the reservation of some cross-border electricity transmission capacity is not necessarily at variance with the principle of non-discrimination. A similar line of reasoning is developed by the Finnish Government, which refers to Articles 8(2) and 17(5) of the Directive, as well as by the Norwegian Government and the Commission, which also make reference to Articles 17(5) and 3(3) of the Directive. 65 Article 3(3) of the Directive allows Member States to derogate, under certain conditions, from Articles 5, 6, 17, 18 and 21 of the Directive. It does not apply to Article 7 or to Article 16 of the Directive. Article 3(3) of the Directive cannot therefore be relied on to justify a derogation from Articles 7(5) and 16 thereof. 66 Article 17(5) of the Directive provides that the system operator may refuse access to the system where it lacks the necessary capacity and that duly substantiated reasons must be given for such a refusal. However, in the light of what is stated in paragraphs 56 to 63 of this judgment, priority access based on the existence of contracts concluded before the Directive entered into force and granted outwith the procedure provided for in Article 24 of the Directive cannot be regarded as justified. 67 Article 8(2) of the Directive provides as follows:‘Without prejudice to the supply of electricity on the basis of contractual obligations, including those which derive from the tendering specifications, the dispatching of generating installations and the use of interconnectors shall be determined on the basis of criteria which may be approved by the Member State and which must be objective, published and applied in a non-discriminatory manner which ensures the proper functioning of the internal market in electricity. They shall take into account the economic precedence of electricity from available generating installations [or] interconnector transfers and the technical constraints on the system.’ 68 That provision does not limit, either directly or indirectly, the scope of the principle of non-discrimination set out in Articles 7(5) and 16 of the Directive. It cannot therefore be successfully relied on. 69 Nor, in that connection, can reliance be successfully placed on the final recital in the preamble to the Directive, referred to by the Commission, which states that the Directive constitutes merely a further phase in the liberalisation of the electricity market and will leave some obstacles to trade in electricity between Member States. As it is worded in a very general manner, that recital cannot justify derogations from Articles 7(5) and 16 of the Directive. 70 The same holds with regard to recital (5) in the preamble to the Directive, which is relied on by NEA and provides that the internal market in electricity has to be established gradually. The gradual nature of liberalisation follows from the fact that the market was to be opened to large-scale consumers alone in 2000, to medium-sized consumers in 2002 and, finally, to all consumers in 2004. This gradual character is also reflected in the transitional and derogating provisions of Article 24 of the Directive. Recital (5) cannot, however, form the basis for derogations from Articles 7(5) and 16 of the Directive. 71 It follows that priority access to a portion of the capacity for the cross-border transmission of electricity conferred on an operator by reason of commitments assumed before the Directive entered into force, but without compliance with the procedure set out in Article 24 of the Directive, must be regarded as being discriminatory within the terms of Articles 7(5) and 16 of the Directive and as therefore being contrary to those articles. 72 NEA and the Finnish Government point out, however, that an operator such as NEA is entitled to perform the international contracts of the SEP by reason of the principles of the protection of legitimate expectations and of legal certainty. 73 The principle of the protection of legitimate expectations is unquestionably one of the fundamental principles of the Community (see, inter alia, Case C-104/97 P Atlanta v European Community [1999] ECR I-6983, paragraph 52, and Joined Cases C-37/02 and C-38/02 Di Lenardo and Dilexport [2004] ECR I-6945, paragraph 70). 74 It is settled case-law that any trader on the part of whom an institution has promoted reasonable expectations may rely on the principle of the protection of legitimate expectations. However, if a prudent and circumspect trader could have foreseen that the adoption of a Community measure is likely to affect his interests, he cannot plead that principle if the measure is adopted (see, inter alia, Atlanta v European Community, cited above, paragraph 52, and Di Lenardo and Dilexport, cited above, paragraph 70). 75 In the present case, the Community institutions did not adopt any measure or assume any form of conduct which could have pointed to the maintenance of the legislative situation in force in 1989 and 1990, under which the international contracts of the SEP were concluded. 76 In particular, although, in its judgment in Case C-157/94 Commission v Netherlands [1997] ECR I-5699, it dismissed the Commission’s action for a declaration that, as the law stood prior to the entry into force of the Directive, there had been a breach of Article 37 of the EC Treaty (now, after amendment, Article 31 EC) by Netherlands legislation, in casu the 1989 EW, which granted the SEP exclusive rights to import electricity, the Court did not in any way guarantee that the legislative situation at Community level would remain unchanged. 77 Moreover, the Directive is merely the second stage in a process which it was stated would lead to liberalisation of the market in electricity, the first stage having been marked by Council Directive 90/547/EEC of 29 October 1990 on the transit of electricity through transmission grids (OJ 1990 L 313, p. 30). According to the first recital in the preamble to Directive 90/547, the European Council recognised, at its successive meetings, the need for a single internal market in energy. Furthermore, in its Communication COM (89) 336 final of 29 September 1989 on increased intra-community electricity exchanges: a fundamental step towards completing the internal energy market, which accompanied the draft of Directive 90/547, the Commission contemplated the possibility that the networks for the transmission of electricity reserved for national or regional monopolies should be made available to third parties and it regarded it as necessary that import and export monopolies be removed (see points 2 and 52 of that communication). 78 It cannot therefore be argued that the Community institutions created well-founded expectations on the part of the SEP that a monopoly for the importation of electricity into the Netherlands would be maintained or that the SEP would be allowed to enjoy a preferential right to use the network for the cross-border transmission of electricity until the expiry of the international contracts which had been entered into. 79 Admittedly, the public authorities in the Netherlands did adopt a national legislative framework within which the SEP concluded international contracts for the purpose of performing its task of general economic interest designed to ensure the reliable and efficient operation of the distribution of electricity at costs as low as possible and justified in the light of the public interest. A Member State cannot, however, bind the Community in such a way that the latter is unable to undertake or pursue the liberalisation of the market in electricity. 80 With regard to the principle of legal certainty, this requires in particular that rules involving negative consequences for individuals should be clear and precise and their application predictable for those subject to them (see, to this effect, Case 325/85 Ireland v Commission [1987] ECR 5041, Case C-143/93 Van Es Douane Agenten [1996] ECR I-431, paragraph 27; and Case C-63/93 Duff and Others [1996] ECR I-569, paragraph 20). 81 As the Court has already ruled, an individual cannot place reliance on there being no legislative amendment whatever, but can only call into question the arrangements for the implementation of such an amendment (see, with regard to a legislative amendment removing the right to deduct value added tax in respect of certain costs connected with lettings of immovable property, Joined Cases C-487/01 and C-7/02 Gemeente Leusden and Holin Groep [2004] ECR I-5368, paragraph 81). In like manner, the principle of legal certainty does not require that there be no legislative amendment, requiring as it does, rather, that the legislature take account of the particular situations of traders and provide, where appropriate, adaptations to the application of the new legal rules. 82 It is in this regard important to stress that the Directive contains provisions which allow account to be taken of the special situations of traders such as the SEP within the context of the liberalisation of the market in electricity. The Directive offered Member States, in particular in Article 24, the possibility of applying for a derogation from Articles 7(5) and 16 with regard to operating commitments or guarantees granted before the Directive entered into force. The Kingdom of the Netherlands did not avail itself of that possibility (see point 44 of Decision 1999/796). 83 The Commission stresses that there is no obligation in the Directive to revoke contracts such as the international contracts of the SEP. That situation, however, does not authorise breach of the rules of the Directive on the ground that such breach is necessary in order to honour those contracts. Furthermore, revocation of those contracts would merely be an indirect and potential consequence of the Directive. The Directive also does not prevent an operator such as the SEP (which became NEA with effect from 2001) from selling, outside the Netherlands, electricity which it has undertaken to purchase pursuant to its international contracts. 84 NEA also invokes Regulation (EC) No 1228/2003 of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity (Text with EEA relevance) (OJ 2003 L 176, p. 1), in particular point 2 under the heading ‘Position of long-term contracts’ in the annex to that regulation, which provides that ‘[e]xisting long-term contracts shall have no pre-emption rights when they come up for renewal’. According to NEA, it follows from that provision that it must be possible to honour contracts concluded before that regulation entered into force. 85 That argument cannot alter the appraisal made up to the present point. That provision of Regulation No 1228/2003, which was not in force at the time of the facts which gave rise to the dispute in the main proceedings, is entirely consistent with the interpretation of Articles 7(5) and 16 of the Directive set out in paragraphs 56 to 63 of this judgment and cannot therefore be brought into question. It merely confirms in this case that any derogations from those articles which may be granted pursuant to Article 24 of the Directive cannot extend beyond the duration of the commitments assumed in contracts concluded before the Directive entered into force. 86 Those findings do not prejudge the reply to the question as to whether and to what extent an undertaking such as NEA may, on the basis of national law, seek to recover compensation for loss which it may have incurred by reason of the choice made by the Netherlands authorities not to seek a derogation under Article 24 of the Directive in respect of the measures in issue. 87 It follows that circumstances such as those posited by the parties and the interested parties which have submitted observations to the Court do not allow any effective reliance to be placed on the principle of the protection of legitimate expectations and the principle of legal certainty. 88 The answer to the second question must therefore be that:– Articles 7(5) and 16 of the Directive are not limited to covering technical rules but must be construed as applying to all discrimination; – those articles preclude national measures that grant an undertaking preferential capacity for the cross-border transmission of electricity, whether those measures derive from the system operator, the controller of system management or the legislature, in the case where such measures have not been authorised within the framework of the procedure set out in Article 24 of the Directive. The first question89 By its first question the national court is essentially asking whether Article 86(2) EC is to be construed as justifying measures such as those being contested in the main proceedings. 90 In view of the reply to the second question, it is no longer necessary to reply to the first question. Costs91 As these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. Articles 7(5) and 16 of Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity are not limited to covering technical rules but must be construed as applying to all discrimination.2. Those articles preclude national measures that grant an undertaking preferential capacity for the cross-border transmission of electricity, whether those measures derive from the system operator, the controller of system management or the legislature, in the case where such measures have not been authorised within the framework of the procedure set out in Article 24 of Directive 96/92.[Signatures]* Language of the case: Dutch. | d877f-ddeda16-4a14 | EN |
THE ITALIAN LAW SUSPENDING VOTING RIGHTS ATTACHING TO HOLDINGS EXCEEDING 2% OF THE CAPITAL OF UNDERTAKINGS IN THE ELECTRICITY AND GAS SECTORS INFRINGES THE PRINCIPLE OF FREE MOVEMENT OF CAPITAL | Commission of the European CommunitiesvItalian Republic(Failure of a Member State to fulfil obligations – Article 56 EC – Automatic suspension of voting rights in privatised undertaking)Opinion of Advocate General Kokott delivered on 3 March 2005 Judgment of the Court (First Chamber), 2 June 2005 Summary of the JudgmentFree movement of capital — Restrictions — National rules limiting voting rights attaching to holdings of the capital of undertakings operating in the energy sector acquired by certain public undertakings — Not permissible(Art. 56 EC)A Member State which maintains in force rules providing for the automatic suspension of voting rights attaching to holdings in excess of 2% of the capital of undertakings operating in the electricity and gas sectors, where those holdings are acquired by public undertakings not quoted on regulated financial markets and enjoying a dominant position in their own domestic markets, has failed to fulfil its obligations under Article 56 EC. Such rules mean that the category of public undertakings concerned is precluded from participating effectively in the management and control of the undertakings at issue and has the effect of dissuading public undertakings established in other Member States, in particular, from acquiring shares in those undertakings. (see paras 30, 42, operative part)JUDGMENT OF THE COURT (First Chamber)2 June 2005 (*) In Case C-174/04,ACTION for failure to fulfil obligations under Article 226 EC, brought on 13 April 2004,Commission of the European Communities, represented by E. Traversa and C. Loggi, acting as Agents, with an address for service in Luxembourg, applicant,Italian Republic, represented by I.M. Braguglia, acting as Agent, assisted by P. Gentili, avvocato dello Stato, with an address for service in Luxembourg, defendant,THE COURT (First Chamber),composed of P. Jann (Rapporteur), President of the Chamber, K. Lenaerts, N. Colneric, K. Schiemann and E. Juhász, Judges,Advocate General: J. Kokott,Registrar: R. Grass,having regard to the written procedure, after hearing the Opinion of the Advocate General at the sitting on 3 March 2005,gives the followingJudgment1 By its application, the Commission of the European Communities seeks a declaration from the Court that Decree-Law (decreto-legge) No 192 of 25 May 2001 (GURI No 120 of 25 May 2001, p. 4), converted into Law No 301 entitled ‘Urgent provisions to ensure the liberalisation and privatisation of specific public service sectors’ (Legge No 301, recante disposizioni urgenti per salvaguardare i processi di liberalizzazione e privatizzazione di specifici settori dei servizi pubblici), of 20 July 2001 (GURI No 170 of 24 July 2001, p. 4 – ‘Decree-Law No 192/2001’), is incompatible with Article 56 EC in so far as it provides for automatic suspension of the voting rights attached to shareholdings exceeding 2% of the capital of companies in the electricity and gas sectors. Legal background Community law2 Article 56(1) EC is worded as follows: ‘Within the framework of the provisions set out in this chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.’ 3 Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty (OJ 1988 L 178, p. 5) contains a nomenclature of the capital movements referred to in Article 1 of that directive (hereinafter ‘the nomenclature annexed to Directive 88/361’). It lists, in particular, the following movements: ‘I. Direct investments …1. Establishment and extension of branches or new undertakings belonging solely to the person providing the capital, and the acquisition in full of existing undertakings. 2. Participation in new or existing undertaking with a view to establishing or maintaining lasting economic links.…’4 According to the explanatory notes that the end of Annex I to Directive 88/361, ‘direct investments’ means:‘Investments of all kinds by natural persons or commercial, industrial or financial undertakings, and which serve to establish or to maintain lasting and direct links between the person providing the capital and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity. This concept must therefore be understood in its widest sense. …As regards those undertakings mentioned under I-2 of the Nomenclature which have the status of companies limited by shares, there is participation in the nature of direct investment where the block of shares held by a natural person of another undertaking or any other holder enables the shareholder, either pursuant to the provisions of national laws relating to companies limited by shares or otherwise, to participate effectively in the management of the company or in its control. 5 The nomenclature annexed to Directive 88/361 also mentions the following movements:‘III. Operations in securities normally dealt in on the capital market ......A. Transactions in securities on the capital market 1. Acquisition by non-residents of domestic securities dealt in on a stock exchange …3. Acquisition by non-residents of domestic securities not dealt in on a stock exchange … National law6 Article 1(1) and (2) of Decree-Law No 192/2001 provide:‘Until completion, within the European Union, of a market wholly open to competition in the electricity and gas sectors, with a view to safeguarding the processes of liberalisation and privatisation that are under way, in the case of legal persons controlled directly or indirectly by a State or by other public authorities and enjoying a dominant position in their domestic markets and not quoted on regulated financial markets, which acquire, directly or indirectly, or through an intermediary, including by means of a future or deferred public offer, holdings in excess of 2% in the capital of companies operating in the abovementioned sectors, directly or through companies controlled by or associated with them, the grant or the transfer of authorisation or concession measures provided for by Legislative Decrees No 79 of 16 March 1999 on electrical energy and No 164 of 23 May 2000 on the internal market in natural gas shall be subject to to the conditions set out in paragraph 2. The limit of 2% shall apply to the legal person itself and to the group to which it belongs, being deemed to be the person, whether or not in the form of a company, which exercises control, the controlled companies and those subject to joint control, and related companies. The limit shall also apply to legal persons who, directly or indirectly, including through controlled, linked or fiduciary companies or through intermediaries, enter into, with or without third parties, agreements relating to the exercise of voting rights or agreements or pacts between shareholders. If the limit referred to in paragraph 1 is exceeded, from the time of the grant or transfer of the authorisations or concessions referred to in paragraph 1, the voting rights attaching to the shares in excess of that limit shall be automatically suspended and shall not be taken into account in the quorum of deliberative meetings. Future or deferred acquisition or subscription rights shall likewise not be exercisable.’ The pre-litigation procedure7 By letter of 23 October 2002, the Commission informed the Italian Government that it considered that Decree-Law No 192/2001, in so far as it provides, in relation to undertakings operating in the electricity and gas sectors, for the suspension of voting rights attached to holdings in excess of 2% where those holdings are acquired by public undertakings, was contrary to the Treaty provisions on the free movement of capital. It therefore called on the Italian Government to submit its observations within a period of two months. 8 The Italian Government replied that, although Decree-Law No 192/2001 constituted a restriction on the free movement of capital, it nevertheless represented the only possible way of protecting the Italian market from forms of investment which do not meet the criteria of freedom of competition. 9 Taking the view that those observations did not justify the rules at issue, the Commission sent the Italian Republic a reasoned opinion on 11 July 2003, requesting compliance within a period of two months. 10 The Italian Government did not respond to the reasoned opinion and the Commission therefore instituted the present proceedings before the Court. The application Arguments of the parties11 Relying on the judgments of the Court in Case C-376/98 Commission v Portugal [2002] ECR I-4731; Case C-483/99 Commission v France [2002] ECR I-4781; Case C-503/99 Commission v Belgium [2002] ECR I-4809; Case C-463/00 Commission v Spain [2003] ECR I-4581, and Case C-98/01 Commission v United Kingdom [2003] ECR I-4641, the Commission submits that Decree-Law No 192/2001 introduces different and restrictive treatment for investments made by a particular category of investors and consequently impedes the free movement of capital within the Community. In particular, those rules have a dissuasive effect on public undertakings of other Member States which might be interested in acquiring a holding in companies operating in the electricity and gas sectors, since they would be unable to participate effectively in the decisions of such companies or to influence the way in which they are managed. 12 Article 56 EC draws no distinction between discriminatory and non-discriminatory measures or between public and private undertakings. Although that article does not define the concept of ‘capital movements’, direct cross-frontier investment falls within that concept by virtue of the nomenclature annexed to Directive 88/361. It is characterised, in particular, by the possibility of taking an effective part in the management and control of a company. The acquisition of holdings and the full exercise of voting rights attached to such holdings are therefore covered by the concept of ‘capital movements’. 13 The Italian Government contends that the application should be dismissed. 14 Decree-Law No 192/2001 does not in its view give rise to discriminatory treatment. It concerns acquisitions made by Italian public undertakings in the same way as acquisitions made by public undertakings of other Member States. 15 Moreover, a limitation of voting rights does not in every case affect the free movement of capital. The Italian Government refers, by way of example, to Articles 85 to 97 of Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities (OJ 2001 L 184, p. 1), and Article 10 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments, amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ 2004 L 145, p. 1), which directly implemented Article 56 EC. Those provisions, which also allow a limitation of voting rights to ensure that an ordinary capital investment does not give rise to an effective power of control and management of a company, are not themselves incompatible with the principle of the free movement of capital. 16 Decree-Law No 192/2001 is in its view compatible with the free movement of capital, principally because it pursues the Community objectives formulated in the Commission Communication of 13 March 2001 entitled ‘Completing the internal energy market’ (COM (2001) 125 final), in particular that of limiting the anti-competitive influence that public undertakings holding a monopoly which take control of undertakings operating in the electricity and gas sectors might exercise in the relevant markets. 17 It is true that the opening up of the markets of the Member States in the electricity and gas sectors has progressed considerably in recent years because of Community legislation, in particular Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20) and Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 concerning common rules for the internal market in natural gas (OJ 1998 L 204, p. 1). 18 However, those directives have been transposed into the legal orders of the Member States in such a way that the opening up of a number of domestic markets has been asymmetrical. Certain States chose to open their markets to an extent greater than that provided for by those directives, whilst others confined themselves to opening their markets strictly within the limits imposed by those directives. The measures adopted at Community level to rectify that imbalance have, however, proved insufficient. It is therefore the responsibility not only of the Community institutions but also of the Member States to remedy the asymmetry existing in the competitive structure of the market in question and any distortions of competition which might derive from possible abuses. 19 Thus, Decree-Law No 192/2001 was the only instrument capable of ensuring that the Italian market was not subjected to speculative and anti-competitive attacks by public entities operating in the same sector in other Member States and enjoying advantages by virtue of their national legislation. 20 The problem in this case is different from that which arose in Commission v Portugal, Commission v France, Commission v Belgium, Commission v Spain and Commission v United Kingdom. In those cases, the national measures at issue were designed in each case to maintain the State’s influence and to prevent liberalisation. In contrast, Decree-Law No 192/2001, in so far as it is addressed solely to public undertakings, is designed to exclude State influence. Therefore, the criteria laid down in the abovementioned judgments cannot be transposed to the present case. 21 Furthermore, Decree-Law No 192/2001 is of a temporary nature. It will apply only until attainment of a fully liberalised internal market in the gas and electricity sectors. 22 Finally, being concerned solely with public undertakings holding a dominant position in their domestic markets, it confines itself to strictly necessary and proportional measures. 23 According to the Commission, those arguments are all irrelevant. 24 The Member States are not entitled to encroach upon the competence of the Community in this area. It is the responsibility not of national governments but of the Commission, as guardian of the Treaties, to ensure the proper application of the Community provisions at issue and to take action against any infringements in the area of freedom of competition. Unilateral measures adopted by certain Member States, on the pretext of avoiding distortions in their markets, in fact introduce such distortions in the Community market as a whole, which is unacceptable. The national measures at issue in this case are of a strictly protectionist character. 25 Moreover, it cannot be contended that the Community legislation is inadequate. The legislation has even been strengthened recently by a number of measures, in particular Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC (OJ 2003 L 176, p. 37) and Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC (OJ 2003 L 176, p. 57). Findings of the Court26 It must be borne in mind at the outset that Article 56(1) EC gives effect to the free movement of capital between Member States and between Member States and non-member countries. To that end, in the chapter of the Treaty entitled ‘Capital and payments’, it provides that all restrictions on movements of capital between Member States and between Member States and third countries are to be prohibited. 27 Although the Treaty does not define the terms ‘movements of capital’ and ‘payments’, it is settled case‑law that Directive 88/361, together with the nomenclature annexed to it, has an indicative value for the purposes of defining the notion of capital movements (see Commission v United Kingdom, paragraph 39, and Case C-222/97 Trummer and Mayer [1999] ECR I-1661, paragraphs 20 and 21). 28 Points I and III of the nomenclature annexed to Directive 88/361 and the explanatory notes which it contains indicate that direct investment in the form of a shareholding in an undertaking and the acquisition of securities on the capital market constitute capital movements within the meaning of Article 56 EC. By virtue of those explanatory notes, direct investment, in particular, is characterised by the possibility of participating effectively in the management and control of a company. 29 In the light of those considerations, it is necessary to examine whether Decree-Law No 192/2001, which provides for the automatic suspension of voting rights attaching to holdings exceeding 2% of the capital of undertakings operating in the electricity and gas sectors, where such holdings are acquired by public undertakings that are not quoted on regulated financial markets and hold a dominant position, constitutes a restriction on capital movements between Member States. 30 In that connection, it must be pointed out that the suspension of voting rights, as provided for in Decree-Law No 192/2001, means that the category of public undertakings concerned is precluded from participating effectively in the management and control of Italian undertakings operating in the electricity and gas markets. Since the objective pursued by Decree-Law No 192/2001 is to avoid ‘anti-competitive attacks by public entities operating in the same sector in other Member States’, it has the effect of dissuading public undertakings established in other Member States, in particular, from acquiring shares in Italian undertakings operating in the energy sector. 31 It follows that the suspension of voting rights provided for by Decree-Law No 192/2001 constitutes a restriction on the free movement of capital prohibited, in principle, by Article 56 EC. 32 The fact that the legislation at issue is addressed only to a category of public undertakings holding a dominant position in their domestic markets does not detract from that finding. The Treaty provisions on the free moment of capital do not draw a distinction between private undertakings and public undertakings or between undertakings that hold a dominant position and those that do not. 33 Furthermore, the Italian Government cannot claim, on the basis of the compatibility with the Treaty provisions on the free movement of capital of those provisions of Directive 2004/39 which, under certain conditions, allow a limitation of the voting rights attaching to certain shares, that the same applies to Decree-Law No 192/2001. That directive, which was adopted in the context of freedom of establishment and not, contrary to the Italian Government’s assertion, in the context of Article 56 EC, was adopted in relation to a different and very specific situation, namely the admission of transferable securities to official listing. It provides for limitations on voting rights only to penalise failure to comply with legislative provisions. Those limitations are not, therefore, in contrast to those imposed by Decree-Law No 192/2001, liable to dissuade undertakings of other Member States from making investments in certain domestic undertakings. Moreover, Articles 85 to 97 of Directive 2001/34 merely lay down obligations to provide information when a substantial holding in a company quoted on the stock exchange is acquired or transferred and an obligation on Member States to impose appropriate penalties for infringement of those obligations. Measures adopted by Member States in that connection are irrelevant in the context of the present case. 34 It is also necessary to consider whether the restriction on the free movement of capital might be justifiable under the provisions of the Treaty. 35 In that connection, it must be borne in mind that the free movement of capital, as a fundamental principle of the Treaty, may be restricted only by national rules which are justified by reasons referred to in Article 58(1) EC or by overriding public-interest grounds. Furthermore, in order to be so justified, the national legislation must be suitable for securing the objective which it pursues and must not go beyond what is necessary in order to attain it, so as to accord with the principle of proportionality (see Commission v Belgium, paragraph 45, and Case C-319/02 Manninen [2004] ECR I-7498, paragraph 29). 36 The Italian Government contends that, through the process of liberalisation and privatisation, the energy markets in Italy have been opened up to competition. Decree-Law No 192/2001 is designed to ensure sound and fair conditions of competition in those markets. It makes it possible to ensure that, pending effective liberalisation of the energy sector in Europe, the Italian market is not subjected to anti-competitive attacks by public undertakings operating in the same sector in other Member States that have been placed at an advantage by domestic legislation which has kept them in a privileged position. If control of undertakings operating in the Italian electricity and gas markets were acquired by public undertakings of that kind, the efforts of the Italian authorities to open up the energy sector to competition might be negated. 37 In that connection, as the Court has already held, an interest in generally strengthening the competitive structure of the market in question cannot constitute valid justification for restrictions on the free movement of capital (see Commission v Portugal, paragraph 52). 38 In any event, Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1) is applicable. It must be borne in mind in that regard that the domestic rules at issue apply only to public undertakings which already hold a dominant position in their national markets. Pursuant to Article 2(3) of Regulation No 139/2004, the Commission is required to prohibit concentrations with a Community dimension which would significantly impede effective competition in the common market or a substantial part thereof ‘in particular as a result of the creation or strengthening of a [pre‑existing] dominant position’. 39 The Italian Government also refers to the need to safeguard the supply of energy within Italian territory.40 Even though the need to safeguard energy supplies may, under certain conditions, justify restrictions of fundamental freedoms under the Treaty (see Case 72/83 Campus Oil and Others [1984] ECR 2727, paragraphs 34 and 35, and Commission v Belgium, paragraph 46), the Italian Government has not demonstrated in what way a limitation of voting rights affecting only one specific category of public undertakings is necessary in order to attain that objective. In particular, it has not explained why it is necessary for the shares of undertakings operating in the energy sector in Italy to be held by private shareholders or by public shareholders quoted on regulated financial markets for the undertakings concerned to be able to guarantee sufficient and uninterrupted supplies of electricity and gas in the Italian market. 41 It follows that the Italian Government has not established that Decree-Law No 192/2001 is necessary in order to safeguard the energy supplies in Italy. 42 It must therefore be held that, by keeping in force Decree-Law No 192/2001, which provides for the automatic suspension of voting rights attaching to holdings in excess of 2% of the capital of undertakings operating in the electricity and gas sectors, where those holdings are acquired by public undertakings not quoted on regulated financial markets and enjoying a dominant position in their own domestic markets, the Italian Republic has failed to fulfil its obligations under Article 56 EC. Costs43 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Italian Republic has been unsuccessful, the Italian Republic must be ordered to pay the costs. On those grounds, the Court (First Chamber) hereby:1. Declares that, by maintaining in force Decree-Law (decreto-legge) No 192 of 25 May 2001, converted into Law No 301, entitled ‘Urgent provisions to ensure the liberalisation and privatisation of specific public service sectors’ (legge n° 301, recante disposizioni urgenti per salvaguardare i processi di liberalizzazione e privatizzazione di specifici settori dei servizi publici), of 20 July 2001, which provides for the automatic suspension of voting rights attaching to holdings in excess of 2% of the capital of undertakings operating in the electricity and gas sectors, where those holdings are acquired by public undertakings not quoted on regulated financial markets and enjoying a dominant position in their own domestic markets, the Italian Republic has failed to fulfil its obligations under Article 56 EC;2. Orders the Italian Republic to pay the costs.[Signatures]* Language of the case: Italian. | a9e38-b2f8f44-4300 | EN |
A PAY-PER-VIEW SERVICE WHICH CONSISTS OF TRANSMITTING TELEVISION PROGRAMMES INTENDED FOR RECEPTION BY THE PUBLIC AND WHICH IS NOT SUPPLIED ON INDIVIDUAL DEMAND IS A TELEVISION BROADCASTING SERVICE | Mediakabel BVvCommissariaat voor de Media(Reference for a preliminary ruling from the Raad van State)(Directive 89/552/CEE – Article 1(a) – Television broadcasting services – Scope of application – Directive 98/34/EC – Article 1(2) – Information society service – Scope of application)Opinion of Advocate General Tizzano delivered on 10 March 2005 Judgment of the Court (Third Chamber), 2 June 2005 Summary of the Judgment1. Freedom to provide services — Television broadcasting activities — Directive 89/552 — Concept of ‘television broadcasting’ — Definition independent of Article 1(a) of Directive 89/552, irrespective of the concept of ‘information society service’ in Directive 98/34 — Services coming within that concept — Criteria(European Parliament and Council Directive 98/34, Art. 1(2); Council Directive 89/552, Art. 1(a))2. Freedom to provide services — Television broadcasting activities — Directive 89/552 — Concept of ‘television broadcasting’ — Service consisting of broadcasting television programmes intended for reception by the public and not provided at the individual request of a recipient — Included — Manner of compliance with the obligation to reserve for European works a majority proportion of transmission time — Irrelevant(Council Directive 89/552, Arts 1(a), and 4(1))1. The concept of ‘television broadcasting’ referred to in Article 1(a) of Directive 89/552 concerning the pursuit of television broadcasting activities, as amended by Directive 97/36, is defined independently by that provision. It is not defined by opposition to the concept of ‘information society service’ within the meaning of Article 1(2) of Directive 98/34, laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on information society services, as amended by Directive 98/48, and therefore does not necessarily cover services which are not covered by the latter concept. A service comes within the concept of ‘television broadcasting’ if it consists of the initial transmission of television programmes intended for reception by the public, that is, an indeterminate number of potential television viewers, to whom the same images are transmitted simultaneously. The manner in which the images are transmitted is not a determining element in that assessment. (see paras 25, 33, operative part 1-2)2. A service which consists of broadcasting television programmes intended for reception by the public and which is not provided at the individual request of a recipient of services is a television broadcasting service within the meaning of Article 1(a) of Directive 89/552 concerning the pursuit of television broadcasting activities, as amended by Directive 97/36. Priority is to be given to the standpoint of the service provider in the analysis of the concept of ‘television broadcasting service’, as the determining criterion for that concept is the broadcast of television programmes ‘intended for reception by the public’. However, the situation of services which compete with the service in question is not relevant for that assessment. Moreover, the conditions in which the provider of such a service complies with the obligation referred to in Article 4(1) of Directive 89/552, to reserve for European works a majority proportion of his transmission time, are irrelevant for the classification of that service as a television broadcasting service. (see paras 42, 45, 52, operative part 3-4)JUDGMENT OF THE COURT (Third Chamber)2 June 2005(*) In Case C-89/04,REFERENCE for a preliminary ruling under Article 234 EC from the Raad van State (Netherlands), made by decision of 18 February 2004, received at the Court on 20 February 2004, in the proceedings Commissariaat voor de Media, THE COURT (Third Chamber),composed of A. Rosas, President, A. Borg Barthet, J.‑P. Puissochet (Rapporteur), S. von Bahr and J. Malenovský, Judges,Advocate General: A. Tizzano,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 20 January 2005,after considering the observations submitted on behalf of: – Mediakabel BV, by M. Geus and E. Steyger, advocaten,– the Commissariaat voor de Media, by G. Weesing, advocaat,– the Netherlands Government, by H.G. Sevenster and C. Wissels, acting as Agents,– the Belgian Government, by A. Goldman, acting as Agent, assisted by A. Berenboom and A. Joachimowicz, avocats,– the French Government, by G. de Bergues and S. Ramet, acting as Agents,– the United Kingdom Government, by C. Jackson, acting as Agent,– the Commission of the European Communities, by W. Wils, acting as Agent,after hearing the Opinion of the Advocate General at the sitting on 10 March 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Article 1(a) of Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities (OJ 1989 L 298, p. 23), as amended by Directive 97/36/EC of the European Parliament and of the Council of 30 June 1997 (OJ 1997 L 202, p. 60) (‘Directive 89/552’) and Article 1(2) of Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on information society services (OJ 1998 L 204, p. 37), as amended by Directive 98/48/EC of the European Parliament and of the Council of 20 July 1998 (OJ 1998 L 217, p. 18) (‘Directive 98/34’). 2 The reference was made in the context of proceedings brought by Mediakabel BV (‘Mediakabel’) against a decision by the Commissariaat voor de Media (Media Authority), which found that the ‘Filmtime’ service offered by Mediakabel to its customers was a television broadcasting service subject to the prior authorisation procedure applicable to those services in the Netherlands. Legal framework Community legislation3 Directive 89/552 lays down inter alia in Article 4(1) an obligation for television broadcasters to reserve a majority proportion of their transmission time for European works. 4 Article 1 of that directive provides:‘For the purpose of this Directive:(a) “television broadcasting” means the initial transmission by wire or over the air, including that by satellite, in unencoded or encoded form, of television programmes intended for reception by the public. It includes the communication of programmes between undertakings with a view to their being relayed to the public. It does not include communication services providing items of information or other messages on individual demand such as telecopying, electronic data banks and other similar services; …’.5 Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market (‘Directive on electronic commerce’) (OJ 2000 L 178, p. 1) lays down the legal framework applicable to information society services. According to Article 2(a) of that directive, ‘information society services’ means ‘services within the meaning of Article 1(2) of Directive 98/34/EC as amended by Directive 98/48/EC’. 6 According to Article 1 of Directive 98/34:‘For the purposes of this Directive, the following meanings shall apply:…(2) “service”: any information society service, that is to say, any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services. For the purposes of this definition:– “at a distance” means that the service is provided without the parties being simultaneously present,– “by electronic means” means that the service is sent initially and received at its destination by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means, – “at the individual request of a recipient of services” means that the service is provided through the transmission of data on individual request. An indicative list of services not covered by this definition is set out in Annex V.This Directive shall not apply to:– radio broadcasting services,– television broadcasting services covered by point (a) of Article 1 of Directive 89/552/EEC.7 Annex V to Directive 98/34, entitled ‘Indicative list of services not covered by the second subparagraph of point 2 of Article 1’, includes a point 3, concerning ‘Services not supplied “at the individual request of a recipient of services”’, which covers ‘Services provided by transmitting data without individual demand for simultaneous reception by an unlimited number of individual receivers (“point to multipoint” transmission)’. Point 3(a) refers to ‘television broadcasting services (including near-video on-demand services), covered by point (a) of Article 1 of Directive 89/552/EEC’. 8 According to recital 18 to the Directive on electronic commerce:‘… television broadcasting within the meaning of Directive EEC/89/552 and radio broadcasting are not information society services because they are not provided at individual request; by contrast, services which are transmitted point to point, such as video-on-demand or the provision of commercial communications by electronic mail are information society services’. National legislation 9 Under Article 1(f) of the Mediawet (Law on the Media), ‘programme’ means: ‘an electronic product with visual and auditory content intended for broadcast and for reception by the general public or part of the general public, except for data services which are available only at individual request, and other interactive services’. Article 1(l) defines a ‘programme for special broadcast’ as ‘an encoded programme broadcast and intended for reception by that part of the general public which has signed an agreement concerning the reception thereof with the broadcaster which manages the programme’. 10 Under Article 71a(1) of the Mediawet, a commercial broadcaster may only transmit or have transmitted a television programme it has developed if it has obtained authorisation to do so from the Commissariaat voor de Media, without prejudice to the provisions of the Telecommunicatiewet (Law on Telecommunications). The main proceedings and the questions referred for a preliminary ruling11 Since the end of 1999, Mediakabel has offered its subscribers, first, the ‘Mr Zap’ offer through certain broadcasting networks operated by third parties. That service, which is authorised by the Commissariaat voor de Media pursuant to the Mediawet, allows, in return for a monthly subscription, reception of a number of television broadcasts which supplement the programmes transmitted by the network supplier, using a decoder and a smart card. Second, Mediakabel offers its Mr Zap subscribers pay-per-view service for additional programmes as part of an offer called ‘Filmtime’. If a Mr Zap subscriber wishes to order a film from the Filmtime catalogue, he makes that order separately using his remote control or telephone and, after identifying himself using a personal identification code and paying by automatic debit, he receives an individual key which allows him to view one or more of the 60 films on offer each month, at the times indicated on the television screen or in the programme guide. 12 By decision of 15 March 2001, the Commissariaat voor de Media informed Mediakabel that it considered Filmtime to be a programme for special broadcast within the meaning of Article 1 of the Mediawet, for which the appropriate authorisation therefore had to be obtained in accordance with Article 71a(1) thereof. Mediakabel submitted an application for authorisation to the Commissariaat voor de Media, but stated when lodging the application that the procedure followed did not seem to be applicable to the service in question which was, in its view, an interactive service falling within the category of information society services and thus outside the scope of competence of the Commissariaat voor de Media. By decision of 19 June 2001, the Commissariaat voor de Media authorised the broadcast of the televised programme for special broadcast ‘Filmtime’ for a period of five years, without prejudice to the provisions of the Telecommunicatiewet. 13 Mediakabel brought an action against that decision, which was dismissed by the Commissariaat voor de Media on 20 November 2001. Mediakabel’s action before the Rechtbank te Rotterdam (Rotterdam District Court) was also dismissed, by decision of 27 September 2002. 14 Mediakabel then brought an appeal before the Raad van State, where it maintained that Filmtime was not a programme within the meaning of Article 1 of the Mediawet. It argued inter alia that that service was accessible only on individual request and that it should therefore be classified not as a television broadcasting service but as an information society service supplied on individual demand within the meaning of the third sentence of Article 1(a) of Directive 89/552 and thereby falling outside the scope of application of that directive. Since it concerns films which are not always available immediately on demand, that service constitutes, in Mediakabel’s view, a ‘near-video on-demand’ which, precisely because it is accessible at individual request by subscribers, cannot be made subject to the requirements of Directive 89/552, in particular the obligation to reserve a certain percentage of the programming time to European works. 15 The Raad van State states that the concept of ‘programme’ within the meaning of Article 1(f) of the Mediawet should be interpreted in keeping with that of ‘television broadcasting’ services referred to in Article 1(a) of Directive 89/552. It states that Directive 98/34, in particular point 3(a) of Annex V thereto, which includes near-video on-demand under television broadcasting services, seems to give a more specific definition of that concept than that given in Article 1(a) of Directive 89/552, thus making it more difficult to determine the respective scopes of application of that directive and of the Directive on electronic commerce. The national court also notes that Filmtime bears the hallmarks of both an information society service, including the fact that it is accessible on individual demand by the subscriber, and of a television broadcasting service, since Mediakabel selects the films available and determines their broadcast frequency and schedules. 16 In those circumstances, the Raad van State decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling: ‘(1) (a) Is the term “television broadcasting” within the meaning of Article 1(a) of Directive 89/552/EEC to be interpreted as not covering an “information society service” within the meaning of Article 1(2) of Directive 98/34/EC, as amended by Directive 98/48/EC, but as covering services such as those set out in the indicative list of services not covered by Article 1(2) of Directive 98/34/EC, including “near-video on-demand services”, contained in Annex V to Directive 98/34/EC, in particular subparagraph (3), which therefore do not constitute “information society services”? (b) If the answer to Question 1a is in the negative, how should a distinction be drawn between the term “television broadcasting” within the meaning of Article 1(a) of Directive 89/552/EEC and the term “communication services providing items of information … on individual demand” also set out therein? (2) (a) On the basis of which criteria must it be determined whether a service such as that at issue, which involves encoded signals, transmitted over a network, of a range of films selected by the provider, which subscribers can, in return for a separate payment per film and using a key sent by the provider on individual demand, decode and view at various times determined by the provider, and which contains elements of an (individual) information society service and also elements of a television broadcasting service, constitutes a television broadcasting service or an information society service? (b) In this regard is priority to be given to the standpoint of the subscriber or rather to that of the service provider? Is the kind of services with which the service concerned is in competition relevant in this regard? (3) In that connection is it relevant that,– on the one hand , classification of a service such as that at issue as an “information society service” to which Directive 89/552/EEC does not apply might undermine the effectiveness of that directive, in particular as regards the objectives underlying the requirement thereunder to reserve a specific percentage of transmission time for European works, and – on the other, if Directive 89/552/EEC does apply, the requirement thereunder to reserve a specific percentage of transmission time for European works is not entirely apposite because the subscribers pay per film and can only view the film which has been paid for?’ The questions referred for a preliminary ruling Question 1(a) 17 By Question 1(a), the national court asks whether the concept of ‘television broadcasting’ within the meaning of Article 1(a) of Directive 89/552 covers services which do not fall within the concept of ‘information society service’ within the meaning of Article 1(2) of Directive 98/34 and which are covered by point 3 of Annex V to the latter directive. 18 As rightly pointed out by the Belgian Government, the scope of the concept of ‘television broadcasting service’ is determined independently by Article 1(a) of Directive 89/552, which contains all the relevant elements in that regard. Thus the concept includes any service consisting of the initial transmission by wire or over the air, including that by satellite, in encoded or unencoded form, of television programmes intended for reception by the public. 19 Directive 98/34 and the Directive on electronic commerce have a purpose different from that of Directive 89/552. They lay down the Community legal framework applicable only to information society services referred to in Article 1(2) of Directive 98/34, that is, any services provided at a distance by electronic means and at the individual request of a recipient of services. Directive 98/34 provides expressly in that provision that it does ‘not apply to … television broadcasting services covered by point (a) of Article 1 of Directive 89/552’. Thus on this point Directive 98/34 merely refers to Directive 89/552 and, like the Directive on electronic commerce, does not contain any definition of the concept of television service. 20 To be sure, Annex V to Directive 98/34, relating to services not covered by the definition of information society service, appears to contain elements defining the concept of ‘television broadcasting services’ which are more specific than those given in Directive 89/552. First, that annex includes, in point 3, television broadcasting services among the services ‘provided by transmitting data without individual demand for simultaneous reception by an unlimited number of individual receivers (point to multipoint transmission)’. Second, at (a) of the same point, it is stated that television broadcasting services include ‘near-video on-demand’. 21 However, that annex, in keeping with its title and Article 1(2) of Directive 98/34, serves only as a guideline and is intended only to define by exclusion the concept of ‘information society service’. It is not intended to, nor does it, specify the boundaries of the concept of ‘television broadcasting service’, the definition of which rests solely on the criteria laid down in Article 1(a) of Directive 89/552. 22 Moreover, the scope of the concept of ‘television broadcasting’ can certainly not be inferred by exclusion from that of the concept of ‘information society service’. Directive 98/34, both in Article 1(2) and in Annex V, refers to services which are not covered by the concept of ‘information society service’ and which do not as such constitute television broadcasting services. This is the case, inter alia, of radio broadcasting services. Likewise, television broadcasting services cannot be limited to services ‘provided by transmitting data without individual demand for simultaneous reception by an unlimited number of individual receivers’, referred to in point 3 of Annex V to Directive 98/34. If that interpretation was followed, services such as television available by subscription, transmitted to a limited number of recipients, would be excluded from the concept of ‘television broadcasting service’, whereas they do come within that concept, by virtue of the criteria laid down in Article 1(a) of Directive 89/552. 23 Lastly, it was not the intention of the Community legislature, when Directives 98/34 and 98/48 were adopted, to amend Directive 89/552, which itself had been amended less than a year earlier by Directive 97/36. Thus recital 20 to Directive 98/48, which amended Directive 98/34, states that Directive 98/48 ‘is without prejudice to the scope of … Directive 89/552’. 24 Accordingly, Directive 98/34 does not affect the scope of application of Directive 89/552. 25 In the light of the foregoing, the answer to Question 1(a) should be that the concept of ‘television broadcasting’ referred to in Article 1(a) of Directive 89/552 is defined independently by that provision. It is not defined by opposition to the concept of ‘information society service’ within the meaning of Article 1(2) of Directive 98/34 and therefore does not necessarily cover services which are not covered by the latter concept. Question 1(b) 26 By Question 1(b), the national court asks essentially what are the criteria for determining whether a service constitutes ‘television broadcasting’ within the meaning of Article 1(a) of Directive 89/552 or ‘communication services providing items of information … on individual demand’ referred to in the same article. 27 The criteria for that distinction are laid down expressly in Article 1(a) of Directive 89/552.28 A service constitutes ‘television broadcasting’ if it consists of initial transmission of television programmes intended for reception by the public. 29 First, the Court notes that the manner in which images are transmitted is not a determining factor in that assessment, as evidenced by the use in Article 1(a) of Directive 89/552 of the terms ‘by wire or over the air, including that by satellite, in unencoded or encoded form’. The Court has thus held that transmission by cable comes within the scope of that directive, even though cable distribution was not very widespread at the time when Directive 89/552 was adopted (see Case C‑11/95 Commission v Belgium [1996] ECR I-4115, paragraphs 15 to 25). 30 Next, the service in question must consist of the transmission of television programmes intended for reception by the public, that is, an indeterminate number of potential television viewers, to whom the same images are transmitted simultaneously. 31 Lastly, the exclusion of ‘communication services … on individual demand’ from the concept of ‘television broadcasting’ means that, conversely, the latter concept covers services which are not supplied on individual demand. The requirement that the television programmes must be ‘intended for reception by the public’ in order to come within that concept supports this analysis. 32 Thus, a pay-per-view television service, even one which is accessible to a limited number of subscribers, but which comprises only programmes selected by the broadcaster and is broadcast at times set by the broadcaster, cannot be regarded as being provided on individual demand. Consequently, it comes within the concept of ‘television broadcasting’. The fact that the images in such a service are accessible using a personal code is not relevant in this respect, because the subscribing public all receive the broadcast at the same time. 33 Accordingly, the answer to Question 1(b) should be that a service comes within the concept of ‘television broadcasting’ referred to in Article 1(a) of Directive 89/552 if it consists of the initial transmission of television programmes intended for reception by the public, that is, an indeterminate number of potential television viewers, to whom the same images are transmitted simultaneously. The manner in which the images are transmitted is not a determining element in that assessment. Questions 2(a) and (b) 34 By Questions 2(a) and (b), which it is appropriate to examine together, the national court asks essentially whether a service such as Filmtime, at issue in the main proceedings, is a television broadcasting service falling within the scope of application of Directive 89/552 or an information society service coming under the Directive on electronic commerce, and which criteria must be taken into consideration in such an analysis. 35 As rightly pointed out by the Commissariaat voor de Media, the Netherlands Government, the Belgian Government, the French Government, the United Kingdom Government and the Commission, it is clear from the information in the order for reference that a service such as Filmtime meets the criteria for constituting a ‘television broadcasting service’ as discussed in the answer to Question 1(b). 36 Such a service consists of the broadcast of films intended for a television viewing public, and therefore does concern television programmes broadcast for an indeterminate number of potential television viewers. 37 Mediakabel’s argument that that type of service, which is accessible only on individual demand, using a specific key granted individually to each subscriber, thereby constitutes an information society service provided ‘on individual demand’ cannot be accepted. 38 Although such a service fulfils the first two criteria for constituting an ‘information society service’ within the meaning of Article 1(2) of Directive 98/34, that is, it is provided at a distance and transmitted in part by electronic equipment, it does not meet the third criterion of the concept, according to which the service in question must be provided ‘at the individual request of a recipient of services’. The list of films offered as part of a service such as Filmtime is determined by the service provider. That selection of films is offered to all subscribers on the same terms, either through written media or through information transmitted on the television screen, and those films are accessible at the broadcast times determined by the provider. The individual key allowing access to the films is only a means of unencoding images the signals of which are sent simultaneously to all subscribers. 39 Such a service is thus not commanded individually by an isolated recipient who has free choice of programmes in an interactive setting. It must be considered to be a near-video on-demand service, provided on a ‘point to multipoint’ basis and not ‘at the individual request of a recipient of services’. 40 Mediakabel stated to the Court that it did not agree before the Raad van State that Filmtime should be classified as a near-video on-demand service. That statement is of no relevance for the classification, however, which results from an examination of the objective characteristics of the type of services in question. 41 Moreover, contrary to Mediakabel’s submissions, the concept of ‘near-video on-demand’ is one known to the Community legislature. Although it is true that it has not been specifically defined by Community law, the concept is referred to in the indicative list in Annex V to Directive 98/34, where it is included among television broadcasting services. Likewise, points 83 and 84 of the Explanatory Report accompanying the European Convention on Transfrontier Television of 5 May 1989, which was drawn up at the same time as Directive 89/552 and to which the latter refers in recital 4 thereto, indicate that near-video on-demand is not a ‘communication service operating on individual demand’, a concept which corresponds to that referred to in Article 1(a) of Directive 89/552 and thus comes within the scope of application of that convention (see, to that effect, concerning other points in the Explanatory Report of the European Convention on Transfrontier Television, Joined Cases C-320/94, C-328/94, C-329/94 and C‑337/94 to C‑339/94 RTI and Others [1996] ECR I-6471, paragraph 33, and Case C-245/01 RTL Television [2003] ECR I-12489, paragraph 63). 42 The determining criterion for the concept of ‘television broadcasting service’ is therefore the broadcast of television programmes ‘intended for reception by the public’. Accordingly, priority should be given to the standpoint of the service provider in the assessment. 43 The manner in which the images are transmitted, by contrast, is not a determining factor in that assessment, as stated in response to Question 1(b). 44 As to the situation of services which compete with the service in question, it is not necessary to take it into consideration since each of those services is governed by a specific regulatory framework and no principle requires that the same legal regime be set for services which have different characteristics. 45 Accordingly, the answer to Questions 2(a) and (b) should be that a service such as Filmtime, which consists of broadcasting television programmes intended for reception by the public and which is not provided at the individual request of a recipient of services, is a television broadcasting service within the meaning of Article 1(a) of Directive 89/552. Priority is to be given to the standpoint of the service provider in the analysis of the concept of ‘television broadcasting service’. However, the situation of services which compete with the service in question is not relevant for that assessment. Question 346 By its third question, the national court asks essentially whether the difficulty for the provider of a service such as Filmtime to comply with the obligation laid down in Article 4(1) of Directive 89/552 to reserve a certain percentage of programming time for European works may preclude its classification as a television broadcasting service. 47 This question must be answered in the negative, for two sets of reasons.48 First, since the service in question fulfils the criteria for being classified as a television broadcasting service, it is not necessary to take into account the consequences of that classification for the service provider. 49 The scope of application of legislation cannot be made contingent on possible adverse consequences it may have for traders to whom the Community legislature intended it to apply. In addition, a narrow interpretation of the concept of ‘television broadcasting service’, which would have the effect of excluding a service such as that at issue in the main proceedings from the scope of application of the directive, would jeopardise the objectives pursued by it and therefore cannot be accepted. 50 Second, the provider of a service such as Filmtime is not entirely prevented from complying with Article 4(1) of Directive 89/552. 51 That provision sets a quota for European works in the ‘transmission’ time of the television broadcaster in question but cannot be intended to require television viewers to actually watch those works. Although it is undeniable that the provider of a service such as that at issue in the main proceedings does not determine the works which are actually chosen and watched by the subscribers, the fact remains that that provider, like any operator broadcasting television programmes intended for reception by the public, chooses the works which he broadcasts. The films which are in a list that that provider offers to the subscribers to the service all give rise to the broadcast of signals, transmitted in identical conditions to the subscribers, who have the choice to unencode or not the images thus transmitted. The provider therefore knows his overall transmission time, and can thus comply with the obligation imposed on him to ‘reserve for European works … a majority proportion of [his] transmission time’. 52 In the light of the foregoing, the answer to the third question should be that the conditions in which the provider of a service such as Filmtime complies with the obligation referred to in Article 4(1) of Directive 89/552 to reserve for European works a majority proportion of his transmission time are irrelevant for the classification of that service as a television broadcasting service. Costs53 Since these proceedings are, for the parties to the main proceedings, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Third Chamber) hereby rules:1. The concept of ‘television broadcasting’ referred to in Article 1(a) of Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, as amended by Directive 97/36/EC of the European Parliament and of the Council of 30 June 1997, is defined independently by that provision. It is not defined by opposition to the concept of ‘information society service’ within the meaning of Article 1(2) of Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on information society services, as amended by Directive 98/48/EC of the European Parliament and of the Council of 20 July 1998, and therefore does not necessarily cover services which are not covered by the latter concept.2. A service comes within the concept of ‘television broadcasting’ referred to in Article 1(a) of Directive 89/552, as amended by Directive 97/36, if it consists of the initial transmission of television programmes intended for reception by the public, that is, an indeterminate number of potential television viewers, to whom the same images are transmitted simultaneously. The manner in which the images are transmitted is not a determining element in that assessment. 3. A service such as Filmtime, which consists of broadcasting television programmes intended for reception by the public and which is not provided at the individual request of a recipient of services, is a television broadcasting service within the meaning of Article 1(a) of Directive 89/552, as amended by Directive 97/36. Priority is to be given to the standpoint of the service provider in the analysis of the concept of ‘television broadcasting service’. However, the situation of services which compete with the service in question is not relevant for that assessment. 4. The conditions in which the provider of a service such as Filmtime complies with the obligation referred to in Article 4(1) of Directive 89/552, as amended by Directive 97/36, to reserve for European works a majority proportion of his transmission time are irrelevant for the classification of that service as a television broadcasting service.[Signatures]* Language of the case: Dutch. | 782ab-69be740-4e89 | EN |
IN THE OPINION OF ADVOCATE GENERAL STIX-HACKL, GERMAN PRACTICE OF DEPORTING CITIZENS OF THE UNION WHO HAVE BEEN CONVICTED OF CRIMINAL OFFENCES IS CONTRARY TO COMMUNITY LAW | Commission of the European CommunitiesvFederal Republic of Germany(Failure of a Member State to fulfil obligations – Articles 8a and 48 of the EC Treaty (now, after amendment, Articles 18 EC and 39 EC) – Directives 64/221/EEC, 73/148/EEC and 90/364/EEC – Regulation (EEC) No 1612/68 – Freedom of movement for nationals of Member States – Public policy – Right to respect for family life – National legislation relating to the prohibition on residence and expulsion – Administrative practice – Criminal conviction – Expulsion)Summary of the Judgment1. Actions for failure to fulfil obligations – Proof of failure – Burden of proof on Commission (Art. 226 EC)2. Actions for failure to fulfil obligations – Subject-matter of the dispute – Determination in the course of the pre-litigation procedure3. Freedom of movement for persons – Exceptions – Public policy grounds(Art. 39 EC; Council Directives 64/221, Art. 3, and 73/148, Art. 10)1. In proceedings for failure to fulfil obligations, it is for the Commission to prove the existence of the alleged infringement and to provide the Court with the information necessary for it to determine whether the infringement is made out, and the Commission may not rely on any presumption for that purpose. With regard in particular to a complaint concerning the implementation of a national provision, proof of a Member State’s failure to fulfil its obligations requires production of evidence different from that usually taken into account in an action for failure to fulfil obligations concerning solely the terms of a national provision. In those circumstances the failure to fulfil obligations can be established only by means of sufficiently documented and detailed proof of the alleged practice of the national administration and/or courts, for which the Member State concerned is answerable. Furthermore, although a State’s action consisting in an administrative practice contrary to the requirements of Community law can amount to a failure to fulfil obligations for the purposes of Article 226 EC, that administrative practice must be, to some degree, of a consistent and general nature. (see paras 48-50)2. The letter of formal notice sent by the Commission to a Member State, and the reasoned opinion issued by the Commission under Article 226 EC, delimit the subject-matter of the dispute, so that it cannot thereafter be extended. Consequently, the reasoned opinion and the proceedings brought by the Commission must be based on the same complaints as those set out in the letter of formal notice initiating the pre-litigation procedure. However, there can be no requirement that in every case the statement of complaints in the letter of formal notice, the operative part of the reasoned opinion and the form of order sought in the application must be exactly the same, where the subject-matter of the proceedings has not been extended or altered but simply limited. (see paras 59-61)3. Reliance by a national authority on the concept of public policy as a derogation from the fundamental principle of freedom of movement for persons presupposes, in any event, the existence, in addition to the perturbation of the social order which any infringement of the law involves, of a genuine and sufficiently serious threat to one of the fundamental interests of society. A Member State which provides that, in the case of Community nationals holding an unlimited residence permit, only ‘serious’ public policy grounds can justify expulsion fails in this respect to fulfil its obligations under Article 39 EC, Article 3 of Directive 64/221 on the coordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health and Article 10 of Directive 73/148 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services. Such national legislation gives rise to doubt as to whether the requirements of Community law are properly taken into consideration in the case of Community nationals holding a limited residence permit. (see paras 34, 70, 72, 126, operative part)JUDGMENT OF THE COURT (First Chamber)27 April 2006 (*) In Case C-441/02,ACTION under Article 226 EC for failure to fulfil obligations, brought on 5 December 2002,Commission of the European Communities, represented by C. O’Reilly and W. Bogensberger, acting as Agents, with an address for service in Luxembourg, applicant,supported by:Italian Republic, represented by I.M. Braguglia, acting as Agent, and M. Fiorilli, avvocato dello Stato, intervener,Federal Republic of Germany, represented initially by W.-D. Plessing, and subsequently by A. Tiemann, acting as Agents, defendant,THE COURT (First Chamber),composed of P. Jann, President of the Chamber, K. Schiemann, J.N. Cunha Rodrigues (Rapporteur), K. Lenaerts and E. Juhász, Judges, Advocate General: C. Stix-Hackl,Registrar: R. Grass,having regard to the written procedure,after hearing the Opinion of the Advocate General at the sitting on 2 June 2005,gives the followingJudgment1 By its application, the Commission of the European Communities is seeking a declaration from the Court that: – in failing to make sufficiently clear in its legislation that expulsion orders against citizens of the Union may not be based on an enabling provision which provides mandatorily for expulsion on the ground of a final criminal conviction or provides mandatorily for it as the general rule, or in basing expulsion orders against citizens of the Union on this unclear enabling provision; – in failing to implement in sufficiently clear terms in Paragraph 12(1) of the Law on entry and residence of nationals of Member States of the European Economic Community (Gesetz über Einreise und Aufenthalt von Staatsangehörigen der Mitgliedstaaten der Europäischen Wirtschaftsgemeinschaft, BGBl. 1980 I, p. 116) of 21 January 1980 (the ‘Aufenthaltsgesetz/EWG’) the requirements under Community law with regard to restriction of freedom of movement, or in basing expulsion orders against citizens of the Union on this unclear enabling provision; – in failing to make sufficiently clear in its legislation that expulsion orders against citizens of the Union may not be based on an enabling provision which pursues general preventive aims, or in justifying expulsion orders against citizens of the Union with deterrence of other foreign nationals; – in adopting expulsion orders against citizens of the Union which fail to maintain a reasonable relationship between the fundamental right to respect for the right to family life, on the one hand, and the preservation of public order, on the other; and – in ordering the immediate enforcement of expulsion orders against citizens of the Union in non-urgent cases, the Federal Republic of Germany has failed to fulfil its obligations under Articles 18 EC and 39 EC, under the fundamental right to respect for family life as a general principle of Community law, and under Articles 3 and 9 of Council Directive 64/221/EEC of 25 February 1964 on the coordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ, English Special Edition, 1963-1964, p. 117), Article 1 of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition, 1968 (II), p. 475), Articles 1, 4, 5, 8 and 10 of Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services (OJ 1973 L 172, p. 14), and Articles 1 and 2 of Council Directive 90/364/EEC of 28 June 1990 on the right of residence (OJ 1990 L 180, p. 26). Legal context Community legislation2 Article 3(1) and (2) of Directive 64/221 reads: ‘1. Measures taken on grounds of public policy or of public security shall be based exclusively on the personal conduct of the individual concerned. 2. Previous criminal convictions shall not in themselves constitute grounds for the taking of such measures.’ 3 Article 9 of that directive provides: ‘1. Where there is no right of appeal to a court of law, or where such appeal may be only in respect of the legal validity of the decision, or where the appeal cannot have suspensory effect, a decision refusing renewal of a residence permit or ordering the expulsion of the holder of a residence permit from the territory shall not be taken by the administrative authority, save in cases of urgency, until an opinion has been obtained from a competent authority of the host country before which the person concerned enjoys such rights of defence and of assistance or representation as the domestic law of that country provides for. This authority shall not be the same as that empowered to take the decision refusing renewal of the residence permit or ordering expulsion. 2. Any decision refusing the issue of a first residence permit or ordering expulsion of the person concerned before the issue of the permit shall, where that person so requests, be referred for consideration to the authority whose prior opinion is required under paragraph 1. The person concerned shall then be entitled to submit his defence in person, except where this would be contrary to the interests of national security.’ 4 Article 1 of Regulation No 1612/68 provides: ‘1. Any national of a Member State shall, irrespective of his place of residence, have the right to take up an activity as an employed person, and to pursue such activity, within the territory of another Member State in accordance with the provisions laid down by law, regulation or administrative action governing the employment of nationals of that State. 2. He shall, in particular, have the right to take up available employment in the territory of another Member State with the same priority as nationals of that State.’ 5 Article 1 of Directive 73/148 states: ‘1. The Member States shall, acting as provided in this Directive, abolish restrictions on the movement and residence of: (a) nationals of a Member State who are established or who wish to establish themselves in another Member State in order to pursue activities as self-employed persons, or who wish to provide services in that State; (b) nationals of Member States wishing to go to another Member State as recipients of services; (c) the spouse and the children under twenty-one years of age of such nationals, irrespective of their nationality; (d) the relatives in the ascending and descending lines of such nationals and of the spouse of such nationals, which relatives are dependent on them, irrespective of their nationality. 2. Member States shall favour the admission of any other member of the family of a national referred to in paragraph 1(a) or (b) or of the spouse of that national, which member is dependent on that national or spouse of that national or who in the country of origin was living under the same roof.’ 6 According to Article 4 of that directive: ‘1. Each Member State shall grant the right of permanent residence to nationals of other Member States who establish themselves within its territory in order to pursue activities as self-employed persons, when the restrictions on these activities have been abolished pursuant to the Treaty. As proof of the right of residence, a document entitled “Residence Permit for a National of a Member State of the European Communities” shall be issued. This document shall be valid for not less than five years from the date of issue and shall be automatically renewable. Breaks in residence not exceeding six consecutive months and absence on military service shall not affect the validity of a residence permit. A valid residence permit may not be withdrawn from a national referred to in Article 1(1)(a) solely on the grounds that he is no longer in employment because he is temporarily incapable of work as a result of illness or accident. Any national of a Member State who is not specified in the first subparagraph but who is authorised under the laws of another Member State to pursue an activity within its territory shall be granted a right of abode for a period not less than that of the authorisation granted for the pursuit of the activity in question. However, any national referred to in subparagraph 1 and to whom the provisions of the preceding subparagraph apply as a result of a change of employment shall retain his residence permit until the date on which it expires. 2. The right of residence for persons providing and receiving services shall be of equal duration with the period during which the services are provided. Where such period exceeds three months, the Member State in the territory of which the services are performed shall issue a right of abode as proof of the right of residence. Where the period does not exceed three months, the identity card or passport with which the person concerned entered the territory shall be sufficient to cover his stay. The Member State may, however, require the person concerned to report his presence in the territory. 3. A member of the family who is not a national of a Member State shall be issued with a residence document which shall have the same validity as that issued to the national on whom he is dependent.’ 7 According to Article 5 of Directive 73/148: ‘The right of residence shall be effective throughout the territory of the Member State concerned.’8 Article 8 of that directive reads: ‘Member States shall not derogate from the provisions of this Directive save on grounds of public policy, public security or public health.’ 9 Article 10 of Directive 73/148 provides: ‘1. The Council Directive of 25 February 1964 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services shall remain applicable until this Directive is implemented by the Member States. 2. Residence documents issued pursuant to the Directive referred to in paragraph 1 shall remain valid until the date on which they next expire.’ 10 Article 1 of Directive 90/364 states: ‘1. Member States shall grant the right of residence to nationals of Member States who do not enjoy this right under other provisions of Community law and to members of their families as defined in paragraph 2, provided that they themselves and the members of their families are covered by sickness insurance in respect of all risks in the host Member State and have sufficient resources to avoid becoming a burden on the social assistance system of the host Member State during their period of residence. The resources referred to in the first subparagraph shall be deemed sufficient where they are higher than the level of resources below which the host Member State may grant social assistance to its nationals, taking into account the personal circumstances of the applicant and, where appropriate, the personal circumstances of persons admitted pursuant to paragraph 2. Where the second subparagraph cannot be applied in a Member State, the resources of the applicant shall be deemed sufficient if they are higher than the level of the minimum social security pension paid by the host Member State. 2. The following shall, irrespective of their nationality, have the right to install themselves in another Member State with the holder of the right of residence: (a) his or her spouse and their descendants who are dependants;(b) dependent relatives in the ascending line of the holder of the right of residence and his or her spouse.’11 According to Article 2 of Directive 90/364: ‘1. Exercise of the right of residence shall be evidenced by means of the issue of a document known as a “Residence permit for a national of a Member State of the EEC”, the validity of which may be limited to five years on a renewable basis. However, the Member States may, when they deem it to be necessary, require revalidation of the permit at the end of the first two years of residence. Where a member of the family does not hold the nationality of a Member State, he or she shall be issued with a residence document of the same validity as that issued to the national on whom he or she depends. For the purpose of issuing the residence permit or document, the Member State may require only that the applicant present a valid identity card or passport and provide proof that he or she meets the conditions laid down in Article 1. 2. Articles 2, 3, 6(1)(a) and (2) and Article 9 of Directive 68/360/EEC shall apply mutatis mutandis to the beneficiaries of this Directive. The spouse and the dependent children of a national of a Member State entitled to the right of residence within the territory of a Member State shall be entitled to take up any employed or self-employed activity anywhere within the territory of that Member State, even if they are not nationals of a Member State. Member States shall not derogate from the provisions of this Directive save on grounds of public policy, public security or public health. In that event, Directive 64/221/EEC shall apply. 3. This Directive shall not affect existing law on the acquisition of second homes.’ National legislation12 Paragraph 2(2) of the Law on Foreign Nationals (Ausländergesetz, BGBl. 1990 I, p. 1354) provides: ‘This law applies to foreign nationals who are entitled to freedom of movement under Community law, save where otherwise provided by Community law and the Aufenthaltsgesetz/EWG’. 13 Paragraph 45 of that Law reads: ‘(1) A foreign national may be expelled where his residence endangers public security, public order or other important interests of the Federal Republic of Germany. (2) In deciding whether to order expulsion, the following matters shall be taken into account:1. the length of the foreign national’s lawful residence and personal, economic and other connections which deserve protection in the Federal territory; 2. the consequences of expulsion for members of the foreign national’s family who reside lawfully in the Federal territory and who live with him as member of his family; and …’14 Paragraph 46 of the Ausländergesetz states: ‘Under Paragraph 45(1) a person may be expelled in particular where he …2. has committed an infringement, other than an isolated or minor infringement, of legal provisions or of judicial or administrative decisions or orders, or has committed outside the Federal territory an offence which is regarded as an intentional offence within the Federal territory; 3. has infringed a statutory provision or an administrative order relating to prostitution;4. uses heroin, cocaine or other similarly dangerous narcotic and is not willing to undergo the treatment needed for his rehabilitation, or withdraws from such treatment; …’ 15 Paragraph 47 of that Law provides: ‘(1) A foreign national shall be expelled:1. where, after being convicted of one or more intentional offences, he has been definitively sentenced to at least three years’ imprisonment or youth custody or where, after being convicted of a number of intentional offences over a period of five years, he has been definitively sentenced to a number of terms of imprisonment or youth custody amounting to at least three years or where, on the occasion of the most recent definitive conviction, a term of preventive detention (‘Sicherungsverwahrung’) was ordered; or 2. where he has been definitively sentenced to an unsuspended term of at least two years’ youth custody or to an unsuspended term of imprisonment for an intentional offence under the Law on Narcotics (Betäubungsmittelgesetz), a breach of the peace … or a public order offence … (2) A foreign national shall, as a rule, be expelled: 1. where he has been definitively sentenced to an unsuspended term of at least two years’ youth custody or to an unsuspended term of imprisonment for one or more intentional offences; 2. where, in contravention of the Law on Narcotics and without authorisation, he cultivates, produces, imports, conveys through the territory, exports, sells, puts into circulation by any other means or traffics in narcotics, or aids or abets such acts; 3. where, in the course of a prohibited or dispersed public assembly or procession, he has been involved, as a perpetrator or accomplice, in acts of violence against persons or property committed collectively by a group of individuals in a manner endangering public security; (3) A foreign national who is entitled to special protection against expulsion under Article 48(1) [of the EC Treaty, now after amendment Article 39(1) EC] shall, as a rule, be expelled in the cases referred to in subparagraph 1. In the cases referred to in subparagraph 2, the decision to expel him shall be a discretionary matter. In the cases referred to in subparagraphs 1 and 2, a decision to expel a foreign national aged between 18 and 21 years who has grown up in the Federal territory and who holds a residence permit of unlimited duration or the right to reside on the territory shall be a discretionary matter. Subparagraphs 1 and 2(1) shall not apply to foreign nationals who are minors.’ 16 According to Article 48 of the Ausländergesetz: ‘(1) A foreign national who1. has the right to reside on the territory;2. has a residence permit of unlimited duration and was born on Federal territory or entered Federal territory as a minor;3. has a residence permit of unlimited duration and is married to or cohabiting with a foreign national covered by subparagraph 1 or 2 above; 4. lives with a German family member as a member of his family;5. is a recognised asylum-seeker and enjoys the legal status of a foreign refugee on Federal territory or holds a travel document issued by an authority of the Federal Republic of Germany under the Convention Relating to the Status of Refugees of 28 July 1951 (BGBl. 1953 II, p. 559); 6. has the right to reside under Paragraph 32a;may be expelled only on serious grounds of public security or public policy. Those grounds generally exist in the cases covered by Paragraph 47(1). (2) A foreign national who is a minor and whose parents or parent of whom he is a dependant are lawfully resident in the Federal Republic of Germany shall not be expelled unless he has been definitively convicted, on a number of occasions, of intentionally committing significant, serious or particularly serious offences. A young person aged between 18 and 21 years who has grown up on Federal territory and who lives with his parents as a member of their household may be expelled only under Paragraph 47(1), (2)(1) or (3).’ 17 Paragraph 12 of the Aufenthaltsgesetz/EWG provides: ‘(1) In so far as this Law grants freedom of movement and has not already provided for restrictive measures in the above provisions, refusal of leave to enter and refusal to issue or extend an EC residence permit, restrictive measures referred to in Paragraph 3(5), the second sentence of Paragraph 12(1) and Paragraph 14 of the Ausländergesetz, and expulsion or deportation in relation to the persons referred to in Paragraph 1 shall be permitted only on grounds of public policy, public security or public health (Article 48(3) and Article 56(1) of the Treaty establishing the European Economic Community). Foreign nationals who hold an unlimited EC residence permit may be expelled only on serious grounds of public security or public policy. (3) The decisions or measures referred to in subparagraph 1 may be adopted only where a foreign national gives cause for doing so on account of his personal conduct. This shall not apply to decisions or measures adopted to protect public health. (4) The existence of a previous criminal conviction shall not in itself be a sufficient ground for adopting any of the decisions or measures referred to in subparagraph 1. (7) If the issue or extension of an EC residence permit is refused, an expulsion order made or deportation threatened on pain of legal sanction, a period of time must be given within which the foreign national must leave the territory wherein the present Law applies. Except in urgent cases, that period must be at least fifteen days where no EC residence permit has yet been issued, and at least one month where an EC residence permit has been issued. 18 Paragraph 4(2) of the Regulations governing freedom of movement for EU citizens (Freizügigkeitsverordnung/EG) provides that Paragraph 12(2) to (9) of the Aufenthaltsgesetz/EWG applies mutatis mutandis to nationals of Member States who do not have an occupation. 19 Paragraph 80(2) and (3) of the Code of Procedure before the Administrative Courts (Verwaltungsgerichtsordnung, ‘VwGO’) reads as follows: ‘(2) Suspensory effect shall pertain except: 4. where the authority which issued the administrative order, or which is to adjudicate on the appeal, has ordered immediate enforcement specifically in the public interest or in the overriding interest of a person concerned. The Länder may also provide that appeals are to have no suspensory effect where they are brought against measures which are taken by the Länder themselves by way of administrative enforcement pursuant to Federal law. (3) In cases falling within subparagraph 2(4), reasons must be given in writing for the particular need for immediate enforcement of the administrative act. Specific reasons shall not be required where an authority adopts an emergency measure, designated as such, in the public interest and as a precaution, in a case of immediate danger, in particular in a case of harm constituting a threat to life, health or property. Pre-litigation procedure20 After examining several dozen petitions and complaints sent to the European Parliament and the Commission by Italian nationals residing in the Land of Baden-Württemberg concerning measures taken against them by the German authorities on public policy grounds and affecting their right to reside in Germany, the Commission, in a letter of formal notice of 8 July 1998, drew the attention of the Federal Republic of Germany to the matter of whether certain statutory provisions and administrative practices were compatible with the provisions of Community law concerning the right to reside in the Member States. 21 As the German Government’s reply dated 25 March 1999 did not allay the Commission’s doubts, the Commission sent a reasoned opinion to the Federal Republic of Germany on 24 July 2000, in which it reiterated the complaints set out in the letter of formal notice and called on the Federal Republic of Germany to take the measures necessary to comply with that opinion within two months of its notification. 22 In its reply of 26 September 2000 the German Government denied the existence of any administrative practice contrary to Community law, stating that it was prepared to investigate whether some clarification needed to be made in certain specific areas of national legislation. 23 As the Commission had not been informed that such clarification had been made, and as it also took the view that the checks proposed to determine whether such clarification was needed were in any event not adequate to deal with its complaints, the Commission decided to bring the present action. The action The first complaint: German legislation and practice take insufficient account of personal conduct in cases of expulsion of nationals of other Member States on public policy grounds Arguments of the parties24 The Commission maintains that, since Paragraph 47(1) of the Ausländergesetz provides that expulsion of a foreign national is mandatory (hereinafter ‘mandatory expulsion’) and Paragraph 47(2) provides that such expulsion is mandatory as a general rule (hereinafter ‘expulsion as a general rule’) where the individual concerned has been convicted of one of the offences referred to in those subparagraphs, the competent authority has no discretion in its decision-making. 25 The Commission notes that Paragraph 47(1) and (2) of the Ausländergesetz makes general reference to ‘foreign nationals’ and therefore includes nationals of the Member States. In so far as that provision applies to Community nationals, the Commission, supported by the Italian Government, argues that it is in stark and irreconcilable conflict with the requirements of Article 3(1) and (2) of Directive 64/221. Article 3 of the latter provides that an expulsion order must be based exclusively on the personal conduct of the individual concerned and previous criminal convictions cannot in themselves constitute grounds for such an order, Under Paragraph 47(1) and (2) of the Ausländergesetz, however, the competent authorities do not have the discretion which they require to examine cases individually, but instead have a general discretion, provided by the legislature, related solely to whether or not the foreign national concerned has a previous conviction. The Commission takes the view that Paragraph 47(1) and (2) of the Ausländergesetz conflicts with Paragraph 12(3) and (4) of the Aufenthaltsgesetz/EWG, although according to the German Government it is supposed to clarify those provisions. 26 According to the Commission, this conflicting legal situation clearly leads to problems in the practical application of the national legislation and hence to orders that are contrary to Community law. An expulsion order based on Paragraph 47 of the Ausländergesetz is contrary to Community law, and infringement of that law is particularly evident in cases where the competent authorities expressly state in their order that, given the existence of a previous criminal conviction, they have no discretion to decide against expulsion. The German legislation requires clarification in order to leave no room for doubt that the requirements of Community law have been taken into account. 27 The Commission makes clear that the purpose of the present action is not to examine individual cases, and that the expulsion cases mentioned in its application are cited merely as examples in order to illustrate the general nature of an administrative practice that is contrary to Community law because it is based on legislation which does not transpose the requirements of the Community rules with sufficient clarity. In the Commission’s view, it follows beyond any doubt from those examples that incorrect orders have been made not on isolated occasions but quite frequently and are therefore of a general nature leading to certain practices that are incompatible with Community law, although such practices differ in extent from one region to another. 28 The German Government points out that the expulsion of nationals of Member States is not governed only by Paragraph 47 of the Ausländergesetz, but also by Paragraph 12 of the Aufenthaltsgesetz/EWG in the case of citizens of the Union who have an occupation, and by Paragraph 4 of the Freizügigkeitsverordnung/EG, which extends application of that Paragraph 12 to citizens of the Union who do not have an occupation. 29 Paragraph 12 of the Aufenthaltsgesetz/EWG states clearly that an examination must be made on an individual basis, including an assessment of the personal conduct of the person concerned, and that previous criminal convictions are not in themselves sufficient to justify expulsion. That provision, which repeats almost word for word the text of Article 3(1) and (2) of Directive 64/221, is a sufficiently clear and precise transposition of those provisions into domestic law. Contrary to the Commission’s contention, Paragraph 47 of the Ausländergesetz in conjunction with Paragraph 12 of the Aufenthaltsgesetz/EWG does not create a legal situation that is vague and self-contradicting. Indeed, Paragraph 2(2) of the Ausländergesetz makes clear that the provisions of the Aufenthaltsgesetz/EWG take precedence over the rules of the Ausländergesetz, so that the consequent legal effect of mandatory expulsion (Paragraph 47(1) of the Ausländergesetz) or expulsion as a general rule (Article 47(2) of the Ausländergesetz) applies to foreign nationals entitled to freedom of movement under Community law only where the conditions laid down in Paragraph 12 of the Aufenthaltsgesetz/EWG are met. The complaint that the transposition of Article 3 of Directive 64/221 into German law is insufficiently clear should be rejected. 30 With regard to the complaint that the Federal Republic of Germany based expulsion orders on ‘that unclear basis’, the German Government responds that there is no administrative practice contrary to Community law and that the Commission is not in a position to prove that such a practice exists, which it is moreover required to do. 31 It is conceivable that in some cases the competent administrative authorities have terminated the residence of nationals of other Member States by orders made not only in breach of domestic law but also of Community law, which takes precedence over domestic law. However, besides the fact that they did not all result in expulsion or entry refusal, the 51 cases mentioned by the Commission in its application extended over a period of 9 years and concerned only 3 of the 16 Länder. The contested measures do not therefore have the requisite level of consistency and generality to establish the existence of an administrative practice. The Commission’s complaint is based principally on the assumption that orders that were also contrary to Community law were made in cases other than those mentioned in the application, something which has not been proved. Findings of the Court32 As the Court observed in Case C-503/03 Commission v Spain [2006] ECR I-0000, paragraph 43, the right of Member State nationals to enter and remain on the territory of another Member State is not unconditional. Among the limits laid down or authorised by Community law, Article 2 of Directive 64/221 enables Member States to prohibit nationals of other Member States from entering their territory on grounds of public policy or public security. 33 The Community legislature has nevertheless made reliance by the Member States on such grounds subject to strict limits. Article 3(1) of Directive 64/221 states that measures taken on grounds of public policy or public security are to be based exclusively on the personal conduct of the individual concerned and Article 3(2) states that previous criminal convictions do not in themselves constitute grounds for the taking of such measures. The existence of a previous criminal conviction can therefore only be taken into account in so far as the circumstances which gave rise to that conviction are evidence of personal conduct constituting a present threat to the requirements of public policy (Case 30/77 Bouchereau [1977] ECR 1999, paragraph 28; Case C-348/96Calfa [1999] ECR I-11, paragraph 24; and Case C-503/03 Commission v Spain, paragraph 44). 34 The Court, for its part, has always emphasised that the public policy exception is a derogation from the fundamental principle of freedom of movement for persons, which must be interpreted strictly, and that its scope cannot be determined unilaterally by the Member States (Case 36/75 Rutili [1975] ECR 1219, paragraph 27; Bouchereau, paragraph 33; Calfa, paragraph 23; Joined Cases C-482/01 and C-493/01Orfanopoulos and Oliveri [2004] ECR I-5257, paragraphs 64 and 65; and Case C-503/03 Commission v Spain, paragraph 45). 35 According to settled case-law, reliance by a national authority on the concept of public policy presupposes, in any event, the existence, in addition to the perturbation of the social order which any infringement of the law involves, of a genuine and sufficiently serious threat to one of the fundamental interests of society (Rutili, paragraph 28; Bouchereau, paragraph 35; Orfanopoulos and Oliveri, paragraph 66; and Case C‑503/03 Commission v Spain, paragraph 46). 36 It is in the light of those considerations that the Commission’s first complaint should be examined. That complaint comprises two parts: the first alleging incorrect transposition into domestic law of the Community law rules on the expulsion of Community nationals on grounds of public policy, and the second concerning the practice followed by the administration in that regard. – Allegedly incorrect transposition37 Under Paragraph 47 of the Ausländergesetz, a foreign national, that is to say, any person who does not have German nationality (Paragraph 1(2) of that Law), is to be expelled (mandatory expulsion) if he has been definitively convicted of an offence referred to in Paragraph 47(1), whilst such expulsion is to take place as a general rule (expulsion as a general rule) if he has been convicted of an offence referred to in Paragraph 47(2)(1). 38 The provisions of Paragraph 47(1) and (2)(1) of the Ausländergesetz, considered in isolation, in so far as they lead to the expulsion of Community nationals following a criminal conviction, without the offender’s personal conduct or the actual danger he represents with regard to public policy being taken into account as a matter of course, do not meet the requirements of Community law (see, to that effect, with regard to Paragraph 47(1)(2) of the Ausländergesetz, Orfanopoulos and Oliveri, paragraphs 59 and 69 to 71). 39 However, as the German Government has rightly observed, the Aufenthaltsgesetz/EWG applies as special legislation to nationals of Member States who are entitled to freedom of movement under the EC Treaty. Under Paragraph 2(2) of the Ausländergesetz, that Law applies to foreign nationals entitled to freedom of movement under Community law save where Community law and the Aufenthaltsgesetz/EWG, which applies in particular to nationals of other Member States who have an occupation, provide otherwise. Moreover, Paragraph 4(2) of the Freizügigkeitsverordnung/EG extends application of Paragraph 12(2) to (9) of the Aufenthaltsgesetz/EWG to nationals of Member States who do not have an occupation. 40 Accordingly, the Aufenthaltsgesetz/EWG, being special legislation (a lex specialis) vis-à-vis the Ausländergesetz (a lex generalis), prevails over the provisions of the Ausländergesetz in situations which it specifically seeks to regulate (see, with regard to Community directives, Case C-444/00 Mayer Parry Recycling [2003] ECR I-6163, paragraph 57). 41 Paragraph 12(3) and (4) of the Aufenthaltsgesetz/EWG indeed states that an expulsion order may be adopted only where a foreign national gives cause for doing so on account of his personal conduct, and the existence of a previous criminal conviction is not in itself a sufficient ground for adopting such a measure. 42 Although the scope of national laws, regulations or administrative provisions must be assessed in the light of the interpretation given to them by national courts (see, in particular, Case C-129/00 Commission v Italy [2003] ECR I-14637, paragraphs 30 to 33), the Commission is not alleging in the present case that the legislation at issue has been the subject of different judicial constructions that may be taken into account, some leading to the application of that legislation in compliance with Community law, others leading to an application which is incompatible with it, with the result that such legislation is not sufficiently clear to ensure its application in compliance with Community law. 43 In those circumstances, there is no basis to the Commission’s complaint alleging infringement of Community law in so far as the German legislation does not provide sufficiently clearly that expulsion from the territory of the Federal Republic of Germany of a national of another Member State entitled to freedom of movement under Community law must not automatically follow a criminal conviction without any account being taken of the personal conduct of the offender or of the present danger which that conduct represents for the requirements of public policy. – The existence of an alleged administrative practice that is contrary to Community law 44 It is clear from the conclusions of the application initiating proceedings that, by its first complaint, the Commission seeks not only a finding that the rules of Community law have been incorrectly transposed into domestic law, but also a finding that ‘expulsion orders’ have been made in breach of those rules. 45 The Court has held on several occasions that the Commission may ask the Court to find that, in not having achieved, in a specific case, the result intended by a directive, a Member State has failed to fulfil its obligations (see, in particular, Joined Cases C-20/01 and C-28/01 Commission v Germany [2003] ECR I-3609, paragraph 30; Case C-157/03 Commission v Spain [2005] ECR I-2911, paragraph 44; and Case C-503/03 Commission v Spain, paragraph 59). 46 As is clear from paragraph 27 above, and notwithstanding the loose drafting of the submissions set out in the application on this point, the Commission expressly stated during the proceedings before the Court that the purpose of its action is not to request the Court to examine specific issues raised by individual cases in connection with the various complaints, but to demonstrate that the German legislation inadequately transposes the requirements of Community law, thereby giving rise to an administrative practice that is contrary to Community law. In that context, the Commission refers to a number of cases that it cites purely as examples in order to illustrate certain types of decisions and administrative practices for which the Federal Republic of Germany is criticised in the present proceedings. The fact that the Commission cites specific cases does not in any way mean that no other cases should be regarded as being examples of infringement of Community law. 47 According to the Court’s case-law, a failure to fulfil obligations may arise due to the existence of an administrative practice which infringes Community law, even if the applicable national legislation itself complies with that law, as follows from paragraphs 39 to 43 of the present judgment (see, in particular, Case C-278/03 Commission v Italy [2005] ECR I-3747, paragraph 13). 48 In that regard it must first be noted that, according to established case-law, in proceedings for failure to fulfil obligations, it is for the Commission to prove the existence of the alleged infringement and to provide the Court with the information necessary for it to determine whether the infringement is made out, and the Commission may not rely on any presumption for that purpose (see, in particular, Case C-287/03 Commission v Belgium [2005] ECR I-3761, paragraph 27). 49 With regard in particular to a complaint concerning the implementation of a national provision the Court has held that proof of a Member State’s failure to fulfil its obligations requires production of evidence different from that usually taken into account in an action for failure to fulfil obligations concerning solely the terms of a national provision, and that in those circumstances the failure to fulfil obligations can be established only by means of sufficiently documented and detailed proof of the alleged practice of the national administration and/or courts, for which the Member State concerned is answerable (Case C-287/03 Commission v Belgium, paragraph 28). 50 The Court has also held that, although a State’s action consisting in an administrative practice contrary to the requirements of Community law can amount to a failure to fulfil obligations for the purposes of Article 226 EC, that administrative practice must be, to some degree, of a consistent and general nature (see Case C-387/99Commission v Germany [2004] ECR I-3751, paragraph 42; Case C-494/01 Commission v Ireland [2005] ECR I-3331, paragraph 28; and Case C-287/03 Commission v Belgium, paragraph 29). 51 The Commission has, however, failed to establish the existence in Germany of an administrative practice having the characteristics required under the case-law of the Court. 52 The Commission merely listed in its application a number of cases in which it alleged that administrative decisions had been taken in breach of the requirements of Community law. It did not provide the Court with the decisions in question, merely reproducing in its application a short extract from some of them. The Commission has therefore clearly failed to provide the Court with the evidence necessary for it to determine the existence of the alleged failure, especially since the German Government specifically challenges the reliability of the information relied on, citing in a number of cases decisions taken in response to official complaints by the persons concerned (Condo, Ferri, Gaudino, Guaglianone, Marchese and Procopio cases) against the decisions to which the Commission refers in its application. 53 Moreover, the fifty or so decisions listed by the Commission were taken, according to the information given in the application initiating proceedings, between December 1992 (Torsello) and January 2001 (Sulimanov), that is to say, over a period of almost nine years. The Court cannot in any event therefore find that there is a general and consistent practice contrary to Community law, since the Commission, which may not rely on any presumption, has been unable to provide it with the evidence needed in order to refute the German Government’s assertion that these are isolated decisions and do not point to a general and consistent practice. 54 That conclusion is all the more compelling since, as the German Government contends, the general administrative provisions relating to the Ausländergesetz (Allgemeine Verwaltungsvorschrift zum Ausländergesetz), which are intended for, and apply to, the German administrative authorities, state, on the one hand, that a foreign national may be expelled on public policy grounds under Paragraph 12(1) of the Aufenthaltsgesetz/EWG only where that person gives cause for such a measure on account of his personal conduct, and the existence of a previous criminal conviction is insufficient to justify expulsion, and, on the other hand, that Paragraph 12(3) provides that expulsion is to be based only on the personal conduct of the foreign national and that it may be ordered only on specific preventive grounds and where there is a genuine and sufficiently serious threat to one of the fundamental interests of society. 55 Therefore, although the German Government does not deny that expulsion orders may have been made in isolated cases without the requirements of Community law being adequately taken into account, the Commission’s complaint alleging the existence of an administrative practice incompatible with Community law must be rejected as being unfounded. 56 It follows that the first complaint must be rejected in its entirety. Second complaint: German legislation and practice fail to take adequate account of the existence of a serious threat to public order in cases of expulsion of nationals of other Member States holding a limited residence permit Admissibility– Arguments of the parties57 The German Government contends that the Commission, in its application, criticises the Federal Republic of Germany not only for failing to comply fully with its obligation to transpose Directive 64/221 into domestic law, but also for establishing an administrative practice contrary to Community legislation. However, in its reasoned opinion, the Commission mentioned only the unclear transposition of the rules of Community law in Paragraph 12(1) of the Aufenthaltsgesetz/EWG and did not criticise it for an alleged administrative practice that is contrary to that law as regards implementation of that provision. The second complaint, it is submitted, is therefore inadmissible in so far as the Commission is seeking a ruling that such a practice exists, since the Court has consistently held that the Commission may not rely in its action on matters which were not raised at the pre-litigation stage. 58 The Commission rejects any allegation that it has extended the subject-matter of the dispute, maintaining that by its first three complaints it is objecting to the situation under German law regarding the expulsion of foreign nationals principally because the coexistence of occasionally conflicting provisions, which are a source of misunderstanding for the authorities responsible for applying the law, in practice regularly results in expulsion orders that are incompatible with Community law. In the same way that the lack of clarity regarding the legal situation results in the coexistence of those provisions, the expulsion orders based on those provisions are necessarily connected with those three complaints and cannot be dissociated from them. – Findings of the Court59 The Court has consistently held (see, inter alia, Case C-365/97 Commission v Italy [1999] ECR I-7773, paragraph 23) that the letter of formal notice sent by the Commission to a Member State, and the reasoned opinion issued by the Commission, delimit the subject-matter of the dispute, so that it cannot thereafter be extended. The opportunity for the Member State concerned to submit its observations, even if it chooses not to avail itself thereof, constitutes an essential guarantee intended by the EC Treaty, adherence to which is an essential formal requirement of the procedure for finding that a Member State has failed to fulfil its obligations. 60 Consequently, the reasoned opinion and the proceedings brought by the Commission must be based on the same complaints as those set out in the letter of formal notice initiating the pre-litigation procedure (Case C-191/95 Commission v Germany [1998] ECR I-5449, paragraph 55). The reasoned opinion and the application must be based on the same grounds and pleas, with the result that the Court cannot examine a ground of complaint which was not formulated in the reasoned opinion (Case 76/86 Commission v Germany [1989] ECR 1021, paragraph 8), which for its part must contain a cogent and detailed exposition of the reasons which led the Commission to the conclusion that the Member State concerned had failed to fulfil one of its obligations under the Treaty (see, in particular, Case C-350/02 Commission v Netherlands [2004] ECR I-6213, paragraph 20). 61 However, there can be no requirement that in every case the statement of complaints in the letter of formal notice, the operative part of the reasoned opinion and the form of order sought in the application must be exactly the same, where the subject-matter of the proceedings has not been extended or altered but simply limited (Case C-191/95 Commission v Germany, paragraph 56; Case C-365/97 Commission v Italy, paragraph 25; and Case C-177/04 Commission v France [2006] ECR I-0000, paragraph 37). 62 In the present case, the part of the second complaint alleging the existence of an administrative practice contrary to Community law corresponds in essence to the complaint contained in Point IV of the reasoned opinion, in which the Commission alleges that the Federal Republic of Germany adopted expulsion orders in cases where the existence of a genuine and sufficiently serious threat to the requirements of public policy affecting one of the fundamental interests of society had not been proved. To this is added the fact that, in the part of the reasoned opinion entitled ‘Threat to the requirements of public policy’, the Commission does indeed allege that ‘administrative practices’ exist in Germany that are based on an interpretation of the first sentence of Paragraph 12(1) of the Aufenthaltsgesetz/EWG which fails to meet the conditions under which Community law permits restrictions on freedom of movement on public policy grounds. 63 In those circumstances, the Commission cannot be criticised for not repeating the exact wording of the complaints raised during the pre-litigation procedure in the form of order sought in the application initiating the proceedings, when it took care to align that form of order on the detailed statement of complaints. 64 The objection that the application is partially inadmissible must therefore be rejected. Substance65 The Commission claims that the Aufenthaltsgesetz/EWG, which is intended to transpose into German law the rules of Community law relating to restriction of freedom of movement on grounds of public policy, is not sufficiently clear as regards the rule laid down in Paragraph 12(1) of that Law, which is crucial in the present case. Whilst the first sentence of that provision states that a foreign national entitled to freedom of movement may be refused residence ‘on grounds of public policy, public security or public health’, the second sentence of Paragraph 12(1) provides, solely in the case of foreign nationals holding an ‘unlimited EC residence permit’, that they may be expelled only on ‘serious’ grounds relating to public security or public policy. The structure of the provision in question is, the Commission submits, misleading in so far as it might be understood and, as administrative practice shows, it is in fact understood to mean that simple grounds of public policy and public security are sufficient in order to expel persons entitled to freedom of movement who do not have an ‘unlimited EC residence permit’ and that the existence of serious grounds is required only in order to expel foreign nationals who hold such a permit. 66 There are numerous decisions which in principle constitute an incorrect interpretation of public policy within the meaning of the first sentence of Paragraph 12(1) of the Aufenthaltsgesetz/EWG. It is sometimes expressly stated in such decisions that it is unnecessary to ascertain the existence of serious public policy grounds because the existence of such grounds is required only in the case referred to in the second sentence of that provision, namely that of foreign nationals holding an ‘unlimited EC residence permit’. The Commission cites seven cases as examples in support of this contention. 67 According to the Commission, the legal situation and administrative practice in Germany need to be specifically clarified in that regard, leaving no possible room for doubt regarding the requirement that, whatever the duration of the residence permit, an expulsion measure presupposes that the personal conduct of the person concerned will demonstrate the existence of a genuine and sufficiently serious threat to a fundamental interest of society (see, in particular, Bouchereau, paragraphs 33 to 35). 68 The German Government contends, by contrast, that Paragraph 12(1) of the Aufenthaltsgesetz/EWG transposes the requirements under the Community rules relating to restriction of freedom of movement with sufficient clarity. 69 With regard to the allegation that an administrative practice exists that is contrary to Community law, the German Government contends that, even if that part of the second complaint were admissible, it does not see how the Commission can conclude, solely on the basis of fewer than 20 individual cases listed in the application, that such an administrative practice exists and is implemented systematically throughout the Federal territory. Allegedly incorrect transposition70 As noted in paragraph 35 above, the Court has consistently held that reliance by a national authority on the concept of public policy presupposes, in any event, the existence, in addition to the perturbation of the social order which any infringement of the law involves, of a genuine and sufficiently serious threat to one of the fundamental interests of society. 71 The first sentence of Paragraph 12(1) of the Aufenthaltsgesetz/EWG provides that nationals of other Member States who are entitled to freedom of movement under Community law may be expelled only on grounds of public policy, public security and public health and mentions in parenthesis Article 48(3) and Article 56(1) of the EC Treaty (now, after amendment, Article 46(1) EC). The second sentence of Paragraph 12(1) states that foreign nationals holding an ‘unlimited EC residence permit’ may be expelled only on ‘serious’ grounds relating to public security or public policy 72 Although the reference to primary Community law contained in the first sentence of Paragraph 12(1) of the Aufenthaltsgesetz/EWG may be considered to show adequately that the concept of public policy must be interpreted in the same way as it is interpreted in those articles of the Treaty, as implemented by Directive 64/221 and clarified by the case-law of the Court, the fact remains that the second sentence of Paragraph 12(1), since it adds that, in the case of Community nationals holding an unlimited residence permit, only ‘serious’ public policy grounds can justify expulsion, gives rise to doubt as to whether the requirements of Community law are properly taken into consideration in the case of Community nationals holding a limited residence permit. 73 According to settled case-law, the provisions of directives must be implemented with unquestionable binding force, and the specificity, precision and clarity necessary to satisfy the requirements of legal certainty (see, in particular, Case C-159/99 Commission v Italy [2001] ECR I-4007, paragraph 32, and Case C-415/01 Commission v Belgium [2003] ECR I-2081, paragraph 21). 74 Paragraph 12(1) of the Aufenthaltsgesetz/ESG does not therefore transpose sufficiently clearly, with regard to nationals of Member States holding a limited residence permit, the requirements stemming from the case-law referred to in paragraph 70 above, under which expulsion is justified only in the case of a genuine and sufficiently serious threat affecting a fundamental interest of society. 75 The general administrative provisions relating to the Ausländergesetz, relied on by the German Government in support of its contention that the national legislation satisfies the requirement of the principle of legal certainty, do not cast doubt on that view. 76 In that regard, suffice it to say that the principle of legal certainty requires appropriate publicity for the national measures adopted pursuant to Community rules in such a way as to enable the persons concerned by such measures to ascertain the scope of their rights and obligations in the particular area governed by Community law (see, in particular, Case C-415/01 Commission v Belgium, paragraph 21). This is not the case so far as the general administrative provisions are concerned, since it is common ground that they are of an internal nature and are intended for the administration in order to ensure that it adopts a consistent approach to specific issues. 77 In those circumstances, the first part of the second complaint is well-founded. The alleged administrative practice contrary to Community law78 In paragraphs 49 and 50 above, the Court noted that, with regard to complaints concerning the implementation of a national provision, proof of a Member State’s failure to fulfil its obligations requires production of evidence different from that usually taken into account in an action for failure to fulfil obligations concerning solely the terms of a national provision. In those circumstances, the failure to fulfil obligations can be established only by means of sufficiently documented and detailed proof of the alleged practice of the national administration and/or courts, for which the Member State concerned is answerable. Although a State’s action consisting in an administrative practice contrary to the requirements of Community law can amount to a failure to fulfil obligations for the purposes of Article 226 EC, that administrative practice must be, to some degree, of a consistent and general nature. 79 The Commission merely listed 17 cases in which it alleged that administrative decisions had been taken in breach of the requirements of Community law. It did not provide the Court with the decisions in question or even reproduce any extracts from them to support its allegation. The Commission has therefore clearly failed to provide the Court with the evidence necessary for it to determine the existence of the alleged failure, especially since the German Government specifically challenges the reliability of the information relied on by reproducing, in particular, with regard to two of the cases to which the Commission refers in its application (Moffa and Nardelli), an extract from the decision in question designed to show that the requirements of Community law were taken into account. 80 On that ground alone the second part of the second complaint must be rejected as unfounded. Third complaint: German legislation and practice take general preventive considerations into account in cases of expulsion81 The German Government contends that the reasoned opinion did not contain any complaint that there was a lack of clarity in the German legislation regarding the prohibition on adopting general preventive measures, and so that part of the third complaint should be declared inadmissible. 82 The Commission’s response is that it stated in the letter of formal notice that all decisions based on Paragraph 47(1) and (2) of the Ausländergesetz necessarily, due to the generally preventive aim of that provision, involve unlawful general preventive considerations and therefore infringe Community law. This complaint was maintained in the reasoned opinion and so the plea of inadmissibility should be rejected. 83 The reasoned opinion and the proceedings brought by the Commission must be based on the same grounds and pleas (see, in particular, paragraph 60 above). That is so in the present case. 84 As the Advocate General observed in points 111 and 112 of her Opinion, the part of the third complaint concerning incorrect transposition into domestic law of the requirement that general preventive considerations cannot constitute grounds for the expulsion of Community nationals corresponds in essence to the complaint contained in point (III) of the conclusions of the reasoned opinion, in which the Commission alleges that the Federal Republic of Germany has failed to make sufficiently clear in its legislation that expulsion orders against citizens of the Union may not be based on a provision which provides for mandatory expulsion, or expulsion as a general rule, in the case of a definitive criminal conviction. In addition, in the part of the reasoned opinion entitled ‘Deterrence’, the Commission indeed alleges that all expulsion orders based on Paragraph 47 of the Ausländergesetz necessarily, due to the general preventive aim of that provision, involve unlawful general preventive considerations, with the result that it is thus referring directly to the legislation in question. 85 In those circumstances, the Commission cannot be criticised for not repeating the exact wording of the complaints raised during the pre-litigation procedure in the form of order sought in the application initiating the proceedings, when it took care to align that form of order on the detailed statement of complaints. 86 The objection that the third complaint is partially inadmissible must therefore be rejected. 87 The Commission asserts that the expulsion rules laid down in Paragraph 47(1) and (2) of the Ausländergesetz pursue general preventive aims, in that mandatory expulsion or expulsion as a general rule is intended to deter other foreign nationals from committing offences that are the same or similar to those perpetrated by the foreign nationals who are expelled. All the decisions based on those provisions contain, by force of circumstances, an unlawful general preventive aspect, in view of the objective of that rule, and are for that reason alone contrary to Community law. The reference to Paragraph 12 of the Aufenthaltsgesetz/EWG, made simply as an additional reference, makes no difference to the fact that such decisions are based on a legal provision whose application is incompatible with Community law due to the general preventive aim which it pursues. 88 This general preventive aim pursued by mandatory expulsion is also expressly mentioned in a number of decisions, although it does not appear from the grounds for such decisions that they are based for other reasons on specific preventive grounds. In any event, such a distinction is not noticeable in some decisions, since they set out general preventive aims at the same time as specific preventive aims, as cumulative grounds, thereby indicating that the measure concerned is based on both types of consideration. In addition, in those decisions particular significance is sometimes assigned in the grounds to the general preventive effect. According to the Commission, it follows therefrom that that administrative practice amounts to basing the decisions in question also on general preventive grounds and is for that reason contrary to Community law (Case C-340/97 Nazli [2000] ECR I-957, paragraph 63). 89 In those circumstances, the legal situation and administrative practice in Germany need to be specifically clarified in that regard in order to leave no room for doubt regarding implementation of the national legislation. Unclear and ambiguous transposition of obligations under Community law is not in conformity with the requirements of correct transposition of Directive 64/221. 90 With regard to the complaint that the national legislation itself lacks clarity, the German Government responds that the legislation indicates clearly and unambiguously that Community nationals may not be expelled on grounds that pursue general preventive aims. The Commission, it submits, is disregarding the fact that the expulsion orders against such nationals are not based in law exclusively on Paragraph 47 of the Ausländergesetz, but must also comply with the provisions of Paragraph 12 of the Aufenthaltsgesetz/EWG, which are mandatory and take precedence over those of Paragraph 47. General prevention is provided for only in respect of nationals of non-member countries. 91 As regards the complaint that an administrative practice exists which is contrary to Community law, the German Government denies the existence of a series of incorrect individual decisions which constitute such a practice. The few cases the Commission mentions are not sufficient to conclude that there is an ongoing and general administrative practice contrary to Community law. It should be added that it is clear from the general administrative provisions relating to the Ausländergesetz, which have a decisive influence over whether an administrative practice exists since they are legally binding on the administration in its action, that it is prohibited for the administration to justify expulsion orders against Community nationals on the basis of the deterrent effect such expulsion has on other foreign nationals. 92 The fact that the German administrative authorities rely on general preventive grounds as well as specific preventive grounds is perfectly compatible with Article 3(1) of Directive 64/221, where the single requirement laid down in that provision, namely, to give adequate reasons regarding the person and conduct of the individual concerned, is met. 93 According to the case-law of the Court, Community law precludes expulsion of a national of a Member State on grounds of a general preventive nature, that is to say, expulsion which has been ordered for the purpose of deterring other foreign nationals (see, in particular, Case 67/74 Bonsignore [1975] ECR 297, paragraph 7, and Nazli, paragraph 59), in particular where such measure automatically follows a criminal conviction, without any account being taken of the personal conduct of the offender or of the danger which that person represents for the requirements of public policy (see Calfa, paragraph 27). 94 As was stated in paragraphs 39 to 43 above, the Aufenthaltsgesetz/EWG, being special legislation vis-à-vis the Ausländergesetz, prevails over the provisions of the Ausländergesetz in situations which it specifically seeks to regulate. 95 According to the first sentence of Paragraph 12(3) of the Aufenthaltsgesetz/EWG, measures for the expulsion of Community nationals entitled to freedom of movement under Community law may be adopted only where the person concerned gives cause for doing so on account of his personal conduct. It follows that any expulsion on general preventive grounds is prohibited as regards that category of persons. 96 Moreover, as was stated in connection with the first complaint (see paragraph 42 above), the Commission is not alleging in the present case that the legislation at issue has been the subject of different judicial constructions that may be taken into account, some leading to the application of that legislation in compliance with Community law, others leading to an application which is incompatible with it, with the result that such legislation is not sufficiently clear to ensure its application in compliance with Community law. 97 In those circumstances, there is no basis to the Commission’s complaint alleging infringement of Community law on the ground that the German legislation does not provide sufficiently clearly that general preventive considerations must not be taken into account when expelling from the territory of the Federal Republic of Germany a national of another Member State entitled to freedom of movement under Community law. An alleged administrative practice contrary to Community law98 It is appropriate to observe that the Commission merely listed in its application a number of cases in which it alleged that the expulsion order had been adopted partly in order to pursue general preventive aims. It did not provide the Court with the decisions in question, but merely reproduced a short extract from just some of them. The Commission has therefore clearly failed to provide the Court with the evidence necessary for it to determine the existence of the alleged failure, especially since the German Government challenges the reliability of the information produced, citing a number of cases in which, in particular, decisions were taken in response to official complaints by the persons concerned (Condo and Procopio) against the decisions to which the Commission refers in its application. 99 Moreover, the eleven decisions mentioned by the Commission were taken, according to the information given in the application initiating proceedings, between March 1993 (Sassano) and November 1997 (Pugliese), that is to say, over a period of almost five years. The Court cannot in any event therefore find that there has been a general and consistent practice contrary to Community law, since the Commission, which may not rely on any presumption, has not been able to provide it with the evidence needed in order to refute the German Government’s assertion that these are isolated decisions and do not point to a general and consistent practice. 100 That conclusion is all the more unavoidable when account is taken of the fact that, as the German Government contends, one of the general administrative provisions relating to the Ausländergesetz states that expulsion may be ordered only on specific preventive grounds and only in the case of a genuine and sufficiently serious threat to one of the fundamental interests of society. 101 Therefore, although the German Government does not deny that expulsion orders may have been made in isolated cases without the requirements of Directive 64/221 being taken adequately into account, the Commission’s complaint alleging the existence of an administrative practice incompatible with Community law must, in the light of the case-law mentioned in paragraphs 48 to 50 above, be rejected as unfounded. 102 The third complaint must therefore be rejected in its entirety. Fourth complaint: failure to take adequate account of the fundamental right to respect for family life when expulsion orders are adopted103 The Commission maintains that, when expelling Community nationals on the basis of the public policy exception governed by Directive 64/221, Member States have an obligation to take into consideration not only the fundamental principle of freedom of movement for persons, but also the impact of such expulsion on fundamental rights, in particular the right to respect for family life established by Article 8 of the Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950 (‘the ECHR’), a right which the Court is required to uphold (see, in particular, Case C-60/00 Carpenter [2002] ECR I-6279, paragraph 41). 104 The Commission mentions in that regard a number of cases in which, in its view, the German administrative authorities have infringed the principle of proportionality in a particularly crude and blatant manner. It cites two cases in which those authorities did not examine the issue of proportionality, five cases in which they did not examine proportionality because they considered that automatic expulsion did not call for such an examination, and fourteen cases in which the significance of the fundamental right to respect for family life was not taken adequately into account. 105 The German Government contends that the Commission has not been able to demonstrate that an administrative practice exists which fails to strike the balance between the right to family life and the need to comply with public policy requirements. This alleged administrative practice has not been proved since, in particular, the mere fact that there have been some expulsion orders where no mention has been made in the grounds of the family ties of the persons concerned does not support the conclusion that a general administrative practice exists. 106 Contrary to the Commission’s assertions, the provisions governing the expulsion of Community nationals, in particular Paragraph 48 of the Ausländergesetz and Paragraph 12 of the Aufenthaltsgesetz/EWG, lay down an almost mandatory requirement to assess the proportionality of the expulsion order to take into account the overriding importance of protecting marriage and family life. Under Article 6 of the German Constitution, marriage and family enjoy the special protection of the Federal State and the administrative authorities are formally required to take that constitutional status into consideration when applying measures. The Commission is wrong to complain that those authorities did not assess the issue of proportionality and, in the cases in which the Commission found that the expulsion orders were disproportionate, the criteria which it applies are also incorrect, which almost inevitably leads it to draw incorrect conclusions. 107 According to the case-law of the Court, the examination on a case-by-case basis by the national authorities of whether there is personal conduct constituting a present threat to the requirements of public policy and, if necessary, of where lies the fair balance between the legitimate interests in issue must be made in compliance with the general principles of Community law (Orfanopoulos and Oliveri, paragraph 95). 108 In that regard, it is necessary to take into account the fundamental rights whose observance the Court ensures. Reasons of public interest may be invoked to justify a national measure which is likely to obstruct the exercise of the fundamental freedoms guaranteed by the Treaty only if the measure in question takes account of such rights (see, to that effect, Case C-260/89ERT [1991] ECR I-2925, paragraph 43; Case C-368/95Familiapress [1997] ECR I-3689, paragraph 24; Carpenter, paragraph 40; and Orfanopoulos and Oliveri, paragraph 97). 109 In that context, the importance of ensuring protection of the family life of Community nationals in order to eliminate obstacles to the exercise of the fundamental freedoms guaranteed by the Treaty has been recognised under Community law. It is established, in particular, that the removal of a person from the country where close members of his family are living may amount to an infringement of the right to respect for family life as guaranteed by Article 8 of the ECHR, which is among the fundamental rights which, according to the Court’s settled case-law, are protected in Community law (see, in particular, the ruling of the European Court of Human Rights of 2 August 2001 in Orfanopoulos and Oliveri, paragraph 98). Such interference will infringe the ECHR if it does not meet the requirements of Article 8(2), that is, unless it is ‘in accordance with the law’, motivated by one or more of the legitimate aims under that paragraph and ‘necessary in a democratic society’, that is to say, justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued (see, in particular, the ruling of the European Court of Human Rights of 2 August 2001 in Boultif v Switzerland, no. 54273/00, §§ 39, 41 and 46, ECHR 2001-IX and Carpenter, paragraph 42). 110 The Commission has not demonstrated that an administrative practice exists in Germany that is contrary to the requirements regarding protection of the right to respect for family life and has the requisite level of consistency and generality as stipulated in the Court’s case-law. 111 The Commission merely listed in its application a number of cases in which it alleged that the expulsion order had failed to take adequate account of the right to respect for family life, or failed to take that right into account at all. It did not provide the Court with the decisions in question, merely reproducing a short extract from only some of them. The Commission has therefore clearly failed to provide the Court with the evidence necessary for it to determine the existence of the alleged failure, especially since the German Government specifically challenges (in particular, in Solimando, Racabulto and Condo) the soundness of the Commission’s assertion that insufficient account was taken of the right to respect for family life in all of the orders which the Commission cited. 112 Moreover, the 21 orders in question were made, according to the information given in the application initiating proceedings, between December 1992 (Torsello) and March 2001 (Theodoridis), that is to say, over a period of almost nine years. The Court cannot in any event therefore find that there is a general and consistent practice contrary to Community law, since the Commission, which may not rely on any presumption, has not been able to provide it with the evidence needed in order to refute the German Government’s assertion that these are at most isolated decisions and not indicative of a general and consistent practice. 113 Therefore, although the German Government does not deny that isolated expulsion orders may have been adopted without the requirements relating to the right to respect for family life being adequately taken into account, the Commission’s complaint alleging the existence of an administrative practice incompatible with Community law must, in the light of the case-law cited in paragraphs 48 to 50 above, be rejected as unfounded. Fifth complaint: systematic use of immediate expulsion although the situation is not urgent 114 The Commission contends that, where an expulsion order challenged before the courts concerns only the lawfulness of the measures or has no suspensive effect, the first subparagraph of Article 9(1) of Directive 64/221 requires, ‘save in cases of urgency’, prior implementation of a specific procedure before an independent authority, which is required to give an opinion. As German law relating to foreign nationals does not have a specific procedure within the meaning of that provision, it follows that in the case of expulsion of Community nationals, suspensive effect cannot be excluded under an administrative order issued under Paragraph 80(2)(4) of the VwGO except in ‘cases of urgency’ within the meaning of the abovementioned provision of Directive 64/221. 115 According to the Commission, such a case of urgency can be envisaged only where immediate enforcement is the sole means of averting a specific, imminent and serious risk of an offence against public policy. Since immediate expulsion constitutes an infringement of the fundamental right to freedom of movement and the right to respect for family life, the competent authority must prove in each individual case referred to it that the conditions laid down have been met. At least in the case of Community nationals who have been resident for a long time in the host Member State, the principle of proportionality dictates that immediate enforcement of an expulsion order should be ordered only as an exception and solely in cases of acknowledged seriousness and urgency. 116 The Commission contends that, under Paragraph 80(2)(4) of the VwGO, the suspensory effect of an expulsion order may be excluded in cases where the order applies to a Community national who has appealed or brought an action for annulment, where there is specific interest that expulsion should be enforced immediately. Although that ‘specific interest’ must go further than the interest justifying expulsion itself, German administrative practice regularly establishes, almost automatically and without adequate grounds, that there is a specific interest in expulsion being enforced immediately. Examination of the cases submitted to the Commission by no means supports the conclusion that the administrative authorities have taken into account the urgency criterion required by Community law in order for enforcement to be effected immediately. The Commission mentions in that connection 17 cases which do not meet the requirements of Community law. In addition to almost systematic recourse to immediate enforcement, the unavoidable conclusion, according to the Commission, is that the existence of a specific interest of society in immediate enforcement, an interest which necessarily extends beyond the general interest justifying expulsion, is demonstrated by a brief statement rather than by specific evidence. 117 The legal situation and administrative practice in Germany therefore need to be clarified in order to leave no room whatsoever for doubt in that regard. 118 The German Government’s response is that an order for immediate enforcement is made after individual determination of the specific requirements for so doing. The fact that expulsion orders are often accompanied by immediate enforcement orders, although they are independent of one another, is the almost inevitable result of the fact that Community nationals who meet the very strict requirements for an expulsion order to be made against them nearly always meet the requirements for that order to be enforced immediately also. 119 An order for immediate enforcement attaching to an expulsion order also does not conflict with the procedural safeguards provided under Community law. Not only can nationals of other Member States protect themselves against an expulsion order using the same appeal procedures as those available to German nationals against administrative acts, but they are also entitled to apply for their appeal to have suspensory effect (Paragraph 80(5) of the VwGO). German law therefore meets the minimum requirements laid down by Article 9(1) of Directive 64/221 with regard to the suspensory effect of an appeal. 120 Moreover, the wide procedural safeguards which the Federal Republic of Germany provides against expulsion far exceed the minimum safeguards provided for in Article 9 of Directive 64/221 and offer effective protection for the subjective rights which Community nationals enjoy under Community law. First, the lawfulness and expediency of an administrative act complained of, even in the case of an expulsion order, are as a rule examined straightaway during preliminary proceedings before the administrative authority prior to any proceedings to have the act set aside. That procedural safeguard is still available even where the expulsion order is accompanied by an order for immediate enforcement. Second, review by the administrative courts is always possible, even in cases where there are no preliminary proceedings. The administrative court, on its own initiative, establishes the decisive facts and fully examines the legality of the expulsion order as regards both its formal aspects and its substance. 121 The purpose of Article 9(1) of Directive 64/221 is to provide minimum procedural safeguards for persons whose expulsion from the territory has been ordered. That article, which applies in three situations, namely in the absence of any possibility of an appeal to a court of law, where such an appeal relates only to the legality of the decision, or where it has no suspensory effect, provides for the intervention of a competent authority other than that empowered to take the decision. Save in cases of urgency, the administrative authority may take its decision only after obtaining the opinion of the other competent authority (see, in particular, Orfanopoulos and Oliveri, paragraph 105). 122 The Commission has not demonstrated, moreover, that an administrative practice exists in Germany that is contrary to the requirements laid down in Article 9(1) of Directive 64/221 and has the requisite level of consistency and generality, as stipulated in the Court’s case-law. 123 The Commission merely listed in its application a number of cases in which it alleged that an immediate expulsion order had been made in breach of the requirements laid down in Article 9(1). It did not provide the Court with the orders in question, merely a short extract from them that was reproduced in the application. The Commission has once more clearly failed to provide the Court with the evidence necessary for it to determine the existence of the alleged failure, especially since the German Government specifically challenges the Commission’s assertion that examination of the cases submitted to it does not support the conclusion that the German authorities took into account the urgency criterion that must be respected under Community law before immediate enforcement is effected. 124 Moreover, the 17 orders mentioned by the Commission were made, according to the information given in the application initiating proceedings, between August 1993 (Clarizia) and July 2000 (Moffa), that is to say, over a period of seven years. The Court cannot in any event therefore find that there is a general and consistent practice contrary to Community law, since the Commission, which may not rely on any presumption, has not been able to provide it with the evidence needed in order to refute the German Government’s assertion that no general and consistent practice exists in the sense alleged by the Commission. 125 Therefore, the Commission’s complaint alleging the existence of an administrative practice incompatible with Community law must, in the light of the case-law mentioned in paragraphs 48 to 50 above, be rejected as unfounded. 126 In the light of all the above considerations, it must be held that, by failing to transpose in sufficiently clear terms in Paragraph 12(1) of the Aufenthaltsgesetz/EWG the requirements under Community law with regard to restriction of freedom of movement, the Federal Republic of Germany has failed to fulfil its obligations under Article 39 EC, Article 3 of Directive 64/221 and Article 10 of Directive 73/148. Costs127 Under Article 69(2) of the Rules of Procedure, an unsuccessful party is to be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the Federal Republic of Germany has applied for the Commission to be ordered to pay the costs and the Commission has been essentially unsuccessful in its pleadings, it must be ordered to pay the costs. Under the first subparagraph of Article 69(4) of the Rules of Procedure, Member States which intervene in the proceedings are to bear their own costs. On those grounds, the Court (First Chamber) hereby: 1. Declares that, by failing to transpose in sufficiently clear terms in Paragraph 12(1) of the Law on entry and residence of nationals of Member States of the European Economic Community (Gesetz über Einreise und Aufenthalt von Staatsangehörigen der Mitgliedstaaten der Europäischen Wirtschaftsgemeinschaft) of 21 January 1980 the requirements under Community law with regard to restriction of freedom of movement, the Federal Republic of Germany has failed to fulfil its obligations under Article 39 EC, Article 3 of Council Directive 64/221/EEC of 25 February 1964 on the coordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health and Article 10 of Council Directive 73/148/EEC of 21 May 1973 on the abolition of restrictions on movement and residence within the Community for nationals of Member States with regard to establishment and the provision of services; 2. For the rest, dismisses the application; 3. Orders the Commission of the European Communities to pay the costs;4. Orders the Italian Republic to bear its own costs.[Signatures]* Language of the case: German. | d1063-25d6138-4bf8 | EN |
ACCORDING TO ADVOCATE GENERAL LÉGER THE CONSUMER'S RIGHT OF CANCELLATION IN THE CASE OF DOOR-STEP SELLING BY AN INTERMEDIARY EXISTS EVEN IF THE TRADER WAS UNAWARE OF THAT PRACTICE | Crailsheimer Volksbank eGvKlaus Conrads and Others(Reference for a preliminary ruling from the Hanseatisches Oberlandesgericht in Bremen)(Consumer protection – Contracts negotiated away from business premises – Loan agreement linked to property purchase concluded in a doorstep-selling situation – Right of cancellation)Opinion of Advocate General Léger delivered on 2 June 2005 Judgment of the Court (Second Chamber), 25 October 2005 Summary of the Judgment1. Approximation of laws – Consumer protection in the case of contracts negotiated away from business premises – Directive 85/577 – Conditions under which applicable – Contract concluded in a doorstep-selling situation – Intervention by a third party in the name of or on behalf of a trader – Awareness of trader that contract was concluded in that situation – Additional condition – Not permissible (Council Directive 85/577, Arts 1 and 2)2. Approximation of laws – Consumer protection in the case of contracts negotiated away from business premises – Directive 85/577 – Loan agreement serving to finance the purchase of immovable property – Cancellation – Effects – Obligation to repay immediately with interest – Whether permissible (Council Directive 85/577, Arts 4 and 5(2))1. Articles 1 and 2 of Directive 85/577 to protect the consumer in respect of contracts negotiated away from business premises must be interpreted as meaning that, when a third party intervenes in the name of or on behalf of a trader in the negotiation or conclusion of a contract, the application of the Directive cannot be made subject to the condition that the trader was or should have been aware that the contract was concluded in a doorstep-selling situation as referred to in Article 1 of the Directive. There is no basis in the wording of the Directive for inferring the existence of such an additional condition and to accept such an additional condition is contrary to the objective of the Directive which is to protect the consumer from the element of surprise inherent in doorstep selling. (see paras 42-43, 45, operative part 1)2. Directive 85/577 to protect the consumer in respect of contracts negotiated away from business premises does not preclude, in the case of a loan agreement serving to finance the purchase of immovable property: - a requirement that a consumer who has exercised his right to cancel under the Directive must pay back the loan proceeds to the lender, even though according to the scheme drawn up for the investment the loan serves solely to finance the purchase of the immovable property and is paid directly to the vendor thereof; - a requirement that the amount of the loan must be paid back immediately;- national legislation which provides for an obligation on the consumer, in the event of cancellation of a secured credit agreement, not only to repay the amounts received under the agreement but also to pay to the lender interest at the market rate. However, in a situation where, if the bank had complied with its obligation to inform the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the risks inherent in investments, Article 4 of the Directive requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks. (see para. 49, operative part 2)JUDGMENT OF THE COURT (Second Chamber)25 October 2005 (*) (Consumer protection – Contracts negotiated away from business premises – Loan agreement linked to property purchase concluded in a doorstep‑selling situation – Right of cancellation)In Case C-229/04,REFERENCE for a preliminary ruling under Article 234 EC, from the Hanseatisches Oberlandesgericht in Bremen (Germany), made by decision of 27 May 2004, received at the Court on 2 June 2004, in the proceedings Klaus Conrads,Frank Schulzke and Petra Schulzke-Lösche,Joachim Nitschke,THE COURT (Second Chamber),composed of C.W.A. Timmermans, President of the Chamber, J. Makarczyk, C. Gulmann (Rapporteur), R. Silva de Lapuerta and P. Kūris, Judges, Advocate General: P. Léger,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 17 March 2005,after considering the observations submitted on behalf of:– Crailsheimer Volksbank eG, by M. Siegmann and N. Polt, Rechtsanwälte,– Mr Conrads, Mr Schulzke and Mrs Schulzke-Lösche and Mr Nitschke, by E. Ahr and K.-O. Knops, Rechtsanwälte,– the German Government, by A. Dittrich and C.-D. Quassowski, acting as Agents,– the French Government, by R. Loosli-Surrans, acting as Agent,– the Commission of the European Communities, by A. Aresu, H. Kreppel and S. Gruenheid, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 2 June 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ 1985 L 372, p. 31, ‘the Directive’), in particular Articles 1, 2 and 5(2) thereof. 2 The reference was made in proceedings brought by Crailsheimer Volksbank eG (‘the Bank’) against K. Conrads, F. Schulzke, P. Schulzke-Losche and J. Nitschke (‘the borrowers’) concerning the cancellation, under the applicable national law on doorstep selling, of the credit agreements concluded between the borrowers and the Bank to finance the purchase of immovable property. Legal context The Community legislation3 The Directive is intended to provide consumers in the Member States with a minimum of protection in the area of doorstep selling, in order to protect them from the risks arising on the conclusion of a contract away from the business premises of the trader. The fourth and fifth recitals in the preamble to the Directive read: ‘… the special feature of contracts concluded away from the business premises of the trader is that as a rule it is the trader who initiates the contract negotiations, for which the consumer is unprepared or which he does not expect; … the consumer is often unable to compare the quality and price of the offer with other offers; … … the consumer should be given a right of cancellation over a period of at least seven days in order to enable him to assess the obligations arising under the contract’. 4 Article 1(1) of the Directive provides:‘This Directive shall apply to contracts under which a trader supplies goods or services to a consumer and which are concluded:…– during a visit by a trader:(i) to the consumer’s home or to that of another consumer;where the visit does not take place at the express request of the consumer.’5 Article 2 of the Directive provides:‘For the purposes of this Directive:...“trader” means a natural or legal person who, for the transaction in question, acts in his commercial or professional capacity, and anyone acting in the name or on behalf of a trader.’ 6 Article 3(2)(a) of the Directive provides:‘This Directive shall not apply to:(a) contracts for the construction, sale and rental of immovable property or contracts concerning other rights relating to immovable property. …’7 Article 4 of the Directive provides:‘In the case of transactions within the scope of Article 1, traders shall be required to give consumers written notice of their right of cancellation within the period laid down in Article 5, together with the name and address of a person against whom that right may be exercised. Such notice shall be dated and shall state particulars enabling the contract to be identified. It shall be given to the consumer:(a) in the case of Article 1(1), at the time of conclusion of the contract;Member States shall ensure that their national legislation lays down appropriate consumer protection measures in cases where the information referred to in this Article is not supplied.’ 8 Article 5 of the Directive provides:‘The consumer shall have the right to renounce the effects of his undertaking by sending notice within a period of not less than seven days from receipt by the consumer of the notice referred to in Article 4, in accordance with the procedure laid down by national law. 2. The giving of the notice shall have the effect of releasing the consumer from any obligations under the cancelled contract.’9 Article 7 of the Directive provides:‘If the consumer exercises his right of renunciation, the legal effects of such renunciation shall be governed by national laws, particularly regarding the reimbursement of payments for goods or services provided and the return of goods received.’ 10 Article 8 of the Directive provides:‘This Directive shall not prevent Member States from adopting or maintaining more favourable provisions to protect consumers in the field which it covers.’ The case-law of the Court11 In its judgment in Case C-481/99 Heininger [2001] ECR I-9945, the Court interpreted three aspects of the Directive. 12 First, it held that the Directive applied to secured credit agreements, that is to say, credit agreements for financing the purchase of immovable property. In paragraph 32 of that judgment, it held that, whilst an agreement of the type in question is linked to a right relating to immovable property, in that the loan must be secured by a charge on immovable property, that feature is not sufficient for the agreement to be regarded as concerning a right relating to immovable property for the purposes of Article 3(2)(a) of the Directive. 13 It concluded that a consumer who has entered into a secured credit agreement in a doorstep-selling situation has a right of cancellation under Article 5 of the Directive. It pointed out, in paragraph 35 of that judgment, that the effects of a cancellation of that agreement in accordance with the Directive on the contract for the purchase of the immovable property and on the provision of security in the form of a charge on it fall to be governed by national law. 14 Finally, the Court observed that the minimum period of seven days allowed for cancellation must be calculated from the time the consumer receives the notice concerning his right of cancellation from the trader. In paragraph 48 of the judgment in Heininger it held that the doorstep-selling directive precludes the national legislature from imposing a time-limit of one year from the conclusion of the contract within which the right of cancellation provided for in Article 5 of that Directive may be exercised, where the consumer has not received the information specified in Article 4. The national legislation 15 The Directive was transposed into German law by the Gesetz über den Widerruf von Haustürgeschäften und ähnlichen Geschäften (Law on the cancellation of doorstep transactions and analogous transactions) of 16 January 1986 (BGBl. 1986 I, p. 122, the ‘HWiG’). 16 In the version applicable at the material time, Paragraph 1(1) of the HWiG provides:‘Where the customer was induced to make a declaration of intention to conclude a contract for a service for valuable consideration:1. by oral negotiations at his place of work or in a private home,that declaration of intention takes effect only if the customer does not give written notice revoking it within a period of one week’. 17 Paragraph 3 of the HWiG provides:‘(1) In the event of cancellation, each contracting party shall return to the other whatever it has received. Damage to or loss of the object or any other matter preventing the return of the object shall not preclude cancellation. If the customer is liable for the damage, loss or other matter preventing return, he shall pay the difference in value or the value of the object to the other contracting party. (2) Where the customer has not been informed pursuant to Article 2 and has not otherwise been made aware of his right of cancellation, he shall be held liable for the damage, loss or other matter preventing return only if he has not exercised the care he usually exercises with his own possessions. (3) For the right to use or apply goods and for the other services supplied up to the date of cancellation, the value of such right or services must be paid; loss of value as a result of normal use of goods or other services shall be disregarded. (4) The customer may demand compensation from the other party for necessary expenditure on the goods.’18 The German Civil Code (Bürgerliches Gesetzbuch) provides in Paragraph 123, which concerns avoidance for deceit or threats:‘1. A person may avoid a declaration of will that has been induced by deceit or by an unlawful threat.2. If the deceit is perpetrated by a third person, a declaration that had to be made to another person may be avoided only if the latter person knew or ought to have known of the deceit. …’ The disputes in the main proceedings19 In the early 1990s a property development company built an apartment complex in the Stuttgart area intended for letting primarily to businessmen. The property complex was to be run as a hotel by an operating company acting as lessee. 20 The apartments were sold on a joint ownership basis to individuals, including the borrowers, as an investment entailing tax advantages. The property development company used a sales company under its supervision which set up a ‘timetable’ for the various steps necessary to arrange the purchase and its financing. The sales company, in turn, used independent intermediaries, including the broker, Mr W. (‘the broker’), who negotiated the purchases at issue in the main proceedings. In most cases the purchase of the apartments was financed by a bank (the DSL-Bank) which undertook part of the expenditure with preferential security, while the Bank, which had already provided the finance for the property development company to construct the complex, financed the remainder of the expenditure with a lower-ranking charge as security. 21 In the three cases in the main proceedings, the broker’s method was to make appointments, in some cases several appointments, with the borrowers at their home in order to show them calculation models and compile personal information and data concerning their solvency in order to draw up an application for financing. The broker would return several weeks later to have the loan agreements, which had been drawn up in the meantime by the Bank, signed. In parallel, the property purchase contracts or a power of attorney authorising the conclusion of such a contract were authenticated by a notary. 22 The building was completed in February 1993. Five months later the operating company discontinued the rental payments and became insolvent at the beginning of 1994. The property development company paid the agreed rent until the end of 1993 and became insolvent in 1995. The anticipated rate of occupation was never achieved. 23 Subsequently, the revenue derived from the investment proved insufficient. On account of the restrictions in the declaration of apportionment the residential units could not be utilised separately in practice, as individual use or individual letting was prohibited. 24 The borrowers also discontinued their payments to the Bank.25 Following the termination of the loan agreements by the borrowers, the Bank brought proceedings against each of the borrowers for payment of what was owed to it with interest. 26 In the case of Mr Conrads, the Landgericht (Regional Court) Bremen upheld the Bank’s application by judgment of 4 December 2001. 27 On appeal by that borrower against that judgment, the Hanseatisches Oberlandesgericht (Hanseatic Higher Regional Court) in Bremen ordered enquiries to establish whether the loan agreement was concluded in a doorstep‑selling situation. It was established that the broker approached that borrower on his own initiative and reached agreement with him on his participation in the tax saving scheme of the property development company in a doorstep-selling situation. By judgment of 16 January 2003, the Hanseatisches Oberlandesgericht in Bremen set aside the judgment of the Landgericht Bremen and dismissed the original application. 28 The Hanseatisches Oberlandesgericht in Bremen stated as grounds for that dismissal, first, that the Bank was liable by reason of the false information supplied on the monitoring of the use of the funds and other matters, second, that the right to repayment of the loan had to be assessed in the light of the objections made about the builder and, third, that the cancellation of the loan agreement under the HWiG was valid. 29 On that point, the referring court declared that the circumstances were those of a doorstep-selling situation. As to where responsibility for that situation lay, it cited and applied the principles set out on that subject by the 11th Chamber of the Bundesgerichtshof (Federal Court of Justice). It is on that basis that the Hanseatisches Oberlandesgericht in Bremen held the Bank responsible for the doorstep-selling situation of which it held the Bank was unaware as a result of its negligence, pointing out that the very short time‑limit allowed by the timetable should have led it to ask for more information about the circumstances of the negotiation of the contracts. As the purchase and the financing formed a single economic unit, the referring court refused to uphold the application for repayment made by the Bank under Paragraph 3 of the HWiG. 30 On appeal on a point of law by the Bank, the Bundesgerichtshof set aside the judgment of the Hanseatisches Oberlandesgericht in Bremen by judgment of 27 January 2004 and referred the case back to that court for it to rule on the matter again. 31 In the case of Mr Schulzke and Mrs Schulzke-Lösche, the Landgericht Bemen upheld the application of the Bank by judgment of 27 November 2001. 32 On appeal by those borrowers the Hanseatisches Oberlandesgericht in Bremen heard the testimony of a witness. It was revealed that the loan agreement was also concluded following a visit by the broker to the borrowers’ home. Proceedings were stayed in the light of the appeal on a point of law in the case of Mr Conrads. 33 As regards the application for repayment of the loan brought by the Bank against Mr Nitschke, it was dismissed by the Landgericht Bremen. The Bank appealed against that decision to the Hanseatisches Oberlandesgericht in Bremen. The questions referred for a preliminary ruling34 As a preliminary point, the Hanseatisches Oberlandesgericht in Bremen explains that, since the judgment in Heininger, there has been disagreement, in Germany, between the 11th Chamber of the Bundesgerichtshof and a number of courts of first and second instance regarding the legal effects of that judgment. 35 According to the referring court, the conditions for the right of cancellation provided for by Paragraph 1 of the HWiG are themselves controversial. It states in that regard that, according to the settled case-law of the Bundesgerichtshof, the right of cancellation does not turn solely on the existence of a doorstep-selling situation but also on responsibility for it. This case-law is linked to the official explanatory memorandum attached to the HWiG, which specifically recommends the interpretation of Paragraph 1 of that law on the basis of the legal principles laid down in Paragraph 123(2) of the BGB, that is to say that a contracting party must be held responsible for the deceptive conduct of a third party only where it was or ought to have been aware of the conduct of that third party. According to the Bundesgerichtshof, a person who is taken unawares in a doorstep-selling situation and is caused to make a declaration of intent must not be in a better position than a person who is the victim of deceit. The Hanseatisches Oberlandesgericht in Bremen takes the view, rather, that the Directive contains nothing to suggest that the right of cancellation should be restricted in that way, as it makes that right dependent only on the existence of a doorstep‑selling situation. The first question therefore concerns the conditions under which a lender must be considered responsible for a doorstep‑selling situation. 36 The Hanseatisches Oberlandesgericht in Bremen also raises the question whether, in a doorstep‑selling situation, cancellation necessarily entails an obligation to repay the loan. Its second to fourth questions thus concern the legal effects of cancellation. 37 In that regard, the referring court states that the Bundesgerichtshof takes the view that, in circumstances such as those of the main proceedings, the borrower must repay the loan even where it has been paid to a third party, such as the property development company in this case. That court adds that the Bundesgerichtshof interprets Paragraph 3(1)(1) of the HWiG as meaning that following cancellation of the loan the borrower has to pay back the loan immediately in a one-off sum and not in the instalments provided for in the agreement. 38 The Hanseatisches Oberlandesgericht in Bremen refers to the reference for a preliminary ruling by the Landgericht Bochum in Case C-350/03 Schulte [2005] ECR I-0000 leading to the judgment also delivered today, in which the Court was also asked to rule on the legal effects of the cancellation of a secured credit agreement in a doorstep‑selling situation. 39 As regards the second question, which, like the third question of the Landgericht Bochum in the above case, concerns the obligation to repay, the referring court maintains that, to guarantee the effectiveness of the Directive, and Article 5(2) thereof in particular, the borrower does not have to repay the loan where he is persuaded in a doorstep-selling situation not only to conclude the loan agreement but also to allow the loan proceeds to be paid irreversibly to a third party without any further right of disposal. No obligation to repay should arise from such an instruction given by a person taken unawares. As regards its third and fourth questions, the Hanseatisches Oberlandesgericht in Bremen states that they correspond to the fourth question of the Landgericht Bochum in Schulte, cited above. 40 In those circumstances, the Hanseatisches Oberlandesgericht in Bremen decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Is it compatible with Article 1(1) of Directive 85/577/EEC for the rights of consumers, in particular their right of cancellation, to be made subject not only to the existence of a doorstep-selling situation as referred to in Article 1(1) of the directive but also to additional criteria for responsibility, such as a trader’s deliberate use of a third party in the conclusion of the agreement or a trader’s negligence in respect of the third party’s conduct in connection with the doorstep selling? 2. Is it compatible with Article 5(2) of Directive 85/577/EEC for a mortgage borrower, who not only concluded the loan agreement in a doorstep-selling situation but also arranged, in that situation, for the loan to be paid into an account which, in practice, is no longer at his disposal, to have to pay back the loan to the lender if the agreement is cancelled? 3. Is it compatible with Article 5(2) of Directive 85/577/EEC for the mortgage borrower, if he is required to pay back the loan following cancellation, to have to do so not on the instalment repayment dates laid down in the agreement but immediately in a one-off sum? 4. Is it compatible with Article 5(2) of Directive 85/577/EEC for the mortgage borrower, if he is also required to pay back the loan following cancellation, to have to pay interest on it at the normal market rate?’ The questions The first question 41 By this question the referring court essentially seeks to know whether Articles 1 and 2 of the Directive must be interpreted as meaning that, when a third party intervenes in the name of or on behalf of a trader in the negotiation or conclusion of a contract, the application of the Directive can be made subject not only to the condition that the contract has been concluded in a doorstep‑selling situation defined in Article 1 of the Directive but also to the condition that the trader was or should have been aware that the contract was concluded in that situation. 42 In that regard, suffice it to observe that there is no basis in the wording of the Directive for inferring the existence of such an additional condition. Article 1 of the Directive provides that it applies to contracts concluded between a trader and a consumer in a doorstep‑selling situation and, under Article 2 of the Directive, for the purposes thereof, ‘trader’ means any person who acts in the name or on behalf of a trader. 43 Moreover, to accept such an additional condition would be contrary to the objective of the Directive which is to protect the consumer from the element of surprise inherent in doorstep selling. 44 That interpretation is borne out by paragraph 43 of the judgment of 22 April 1999 in Case C-423/97 Travel Vac [1999] ECR I-2195, according to which, in order for the consumer to have the right of renunciation, it is sufficient for him to be in one of the situations described in Article 1 of the Directive and there is no need to require in addition that he was influenced or manipulated by the trader. 45 Therefore, the answer to the first question must be that Articles 1 and 2 of the Directive must be interpreted as meaning that when a third party intervenes in the name of or on behalf of a trader in the negotiation or conclusion of a contract, the application of the Directive cannot be made subject to the condition that the trader was or should have been aware that the contract was concluded in a doorstep‑selling situation as referred to in Article 1 of the Directive. The second, third and fourth questions46 By these questions the referring court essentially seeks to know whether the Directive, and Article 5(2) thereof in particular, precludes a requirement that, in the event of cancellation, a mortgage borrower must pay back to the lender the amount of a loan where the loan agreement was concluded in a doorstep-selling situation and where the borrower had the loan paid into an account which, in practice, is no longer at his disposal, and, if not, whether it precludes a requirement that the borrower must repay the loan not on the instalment repayment dates laid down in the agreement but immediately in a one-off sum with interest at the market rate. 47 It must be observed that, as the Bank, the borrowers, the German and French Governments and the Commission pointed out and the referring court noted, the second, third and fourth questions essentially correspond to the third and fourth questions referred in the case leading to the judgment in Schulte. 48 In reply to those questions, the Court ruled in that judgment that the Directive does not preclude:– a requirement that a consumer who has exercised his right to cancel under the Directive must pay back the loan proceeds to the lender, even though according to the scheme drawn up for the investment the loan serves solely to finance the purchase of the immovable property and is paid directly to the vendor thereof; – a requirement that the amount of the loan must be paid back immediately;– national legislation which provides for an obligation on the consumer, in the event of cancellation of a secured credit agreement, not only to repay the amounts received under the agreement but also to pay to the lender interest at the market rate. However, in a situation where, if the Bank had complied with its obligation to inform the consumer of his right of cancellation, the consumer would have been able to avoid exposure to the risks inherent in investments such as those at issue in the main proceedings, Article 4 of the Directive requires Member States to ensure that their legislation protects consumers who have been unable to avoid exposure to such risks, by adopting suitable measures to allow them to avoid bearing the consequences of the materialisation of those risks. 49 Accordingly, the answers to the questions referred must be given in the same terms as those given in the judgment in Schulte, that is to say that the Directive, and Article 5(2) thereof in particular, does not preclude: – national legislation which provides for an obligation on the consumer, in the event of cancellation of a secured credit agreement, not only to repay the amounts received under the agreement but also to pay to the lender interest at the market rate; Costs50 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Second Chamber) hereby rules:1. Articles 1 and 2 of Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises must be interpreted as meaning that when a third party intervenes in the name of or on behalf of a trader in the negotiation or conclusion of a contract, the application of the Directive cannot be made subject to the condition that the trader was or should have been aware that the contract was concluded in a doorstep‑selling situation as referred to in Article 1 of the Directive. 2. Directive 85/577, and Article 5(2) thereof in particular, does not preclude:– a requirement that a consumer who has exercised his right to cancel under the Directive must pay back the loan proceeds to the lender, even though according to the scheme drawn up for the investment the loan serves solely to finance the purchase of the immovable property and is paid directly to the vendor thereof;– national legislation which provides for an obligation on the consumer, in the event of cancellation of a secured credit agreement, not only to repay the amounts received under the agreement but also to pay to the lender interest at the market rate;[Signatures]* Language of the case: German. | 72b76-2af9905-4d7c | EN |
THE COURT OF JUSTICE HAS NO JURISDICTION TO ANSWER THE QUESTIONS REFERRED BY THE GREEK COMPETITION COMMISSION | Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and OthersvGlaxoSmithKline plcandGlaxoSmithKline AEVE, formerly Glaxowellcome AEVE(Reference for a preliminary ruling from the Epitropi Antagonismou)(Admissibility — Meaning of court or tribunal of a Member State — Abuse of a dominant position — Refusal to supply pharmaceutical products to wholesalers — Parallel trade)Opinion of Advocate General Jacobs delivered on 28 October 2004 Judgment of the Court (Grand Chamber), 31 May 2005 Summary of the JudgmentQuestions referred for a preliminary ruling — Reference to the Court — National court or tribunal for the purposes of Article 234 EC — Meaning — ‘Epitropi Antagonismou’ (Greek Competition Commission) — Excluded(Art. 234 EC)In order to determine whether a body making a reference is a court or tribunal for the purposes of Article 234 EC, which is a question governed by Community law alone, the Court takes account of a number of factors, such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law and whether it is independent. In addition, a body may refer a question to the Court only if there is a case pending before it and if it is called upon to give judgment in proceedings intended to lead to a decision of a judicial nature. The Epitropi Antagonismou (Greek Competition Commission) does not satisfy those criteria. First of all, it is subject to the supervision of the Minister for Development, which implies that that minister is empowered, within certain limits, to review the lawfulness of its decisions. Next, even though its members enjoy personal and operational independence, there are no particular safeguards in respect of their dismissal or the termination of their appointment, which does not appear to constitute an effective safeguard against undue intervention or pressure from the executive on those members. In addition, its President is responsible for the coordination and general policy of its secretariat and is the supervisor of the personnel of that secretariat, with the result that, by virtue of the operational link between the Epitropi Antagonismou, a decision-making body, and its secretariat, a fact-finding body on the basis of whose proposal it adopts decisions, the Epitropi Antagonismou is not a clearly distinct third party in relation to the State body which, by virtue of its role, may be akin to a party in the course of competition proceedings. Finally, a competition authority such as the Epitropi Antagonismou is required to work in close cooperation with the Commission and may, pursuant to Article 11(6) of Regulation No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, be relieved of its competence by a decision of the Commission, with the consequence that the proceedings initiated before it will not lead to a decision of a judicial nature. (see paras 29-37)JUDGMENT OF THE COURT (Grand Chamber)31 May 2005 (*) (Admissibility – Meaning of court or tribunal of a Member State – Abuse of a dominant position – Refusal to supply pharmaceutical products to wholesalers – Parallel trade)In Case C-53/03,REFERENCE under Article 234 EC for a preliminary ruling, by the Epitropi Antagonismou (Greece), by decision of 22 January 2003, received at the Court on 5 February 2003, in the proceedings Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others,Panellinios syllogos farmakapothikarion,Interfarm – A. Agelakos & Sia OE and Others,K.P. Marinopoulos Anonymos Etairia emporias kai dianomis farmakeftikon proïonton and Others,GlaxoSmithKline plc,GlaxoSmithKline AEVE, formerly Glaxowellcome AEVE, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and R. Silva de Lapuerta, Presidents of Chambers, C. Gulmann (Rapporteur), R. Schintgen, N. Colneric and S. von Bahr, Judges Advocate General: F.G. Jacobs,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 18 May 2004,after considering the observations submitted on behalf of:– Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others, by P. Kaponis and S. Orfanoudakis, dikigoroi,– Panellinios syllogos farmakapothikarion and K.P. Marinopoulos Anonymos Etairia emporias kai dianomis farmakeftikon proïonton and Others, by L. Roumanias and G. Papaïoannou, dikigoroi, and W. Rehmann, Rechtsanwalt, – Farmakeftikos Syndesmos Anonymi Emporiki Etairia, by D. Chatzinikolis, dikigoros,– Interfarm A. Agelakos & Sia OE and Others, by G. Mastorakos, dikigoros,– GlaxoSmithKline plc and GlaxoSmithKline AEVE, by D. Kyriakis, dikigoros, I. Forrester QC and A. Schulz, Rechtsanwalt,– the Swedish Government, by A. Kruse, acting as Agent,– the Commission of the European Communities, by T. Christoforou and F. Castillo de la Torre, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 28 October 2004,gives the followingJudgment1 This request for a preliminary ruling concerns the interpretation of Article 82 EC.2 The request was made in proceedings before the Epitropi Antagonismou (the Greek Competition Commission), between the complainants, Synetairismos Farmakopoion Aitolias & Akarnanias (Syfait) and Others (‘Syfait and Others’), Panellinios syllogos farmakapothikarion (‘PSF’), Interfarm – A. Agelakos & Sia OE and Others (‘Interfarm and Others’) and K.P. Marinopoulos Anonymos Etairia emporias kai dianomis farmakeftikon proïonton and Others (‘Marinopoulos and Others’), and GlaxoSmithKline plc (‘GSK plc’), a United Kingdom company, and its subsidiary incorporated under Greek law, GlaxoSmithKline AEVE, formerly Glaxowellcome AEVE (‘GSK AEVE’), concerning the latter two companies’ refusal to meet orders for certain pharmaceutical products on the Greek market. Law Community law3 Article 82 EC provides:‘Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in:(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.’ National law4 Article 2 of Law No 703/1977 on the control of monopolies and oligopolies and the protection of free competition (FEK (Official Gazette) A’ 278), as amended by Law No 2941/2001 (FEK A’ 201, hereafter ‘Law No 703/1977’), essentially corresponds to Article 82 EC. The dispute in the main proceedings and the questions referred for a preliminary ruling5 Syfait and Others are associations of pharmacists established in Greece whose main activity is the operation of a joint wholesale repository for pharmaceutical products, which they purchase from various pharmaceutical companies in order to ensure the supply of their members. 6 PSF is an association of wholesalers of pharmaceutical products established in Greece, which defends the interests of its members. 7 Interfarm and Others are wholesalers of pharmaceutical products established in Greece. Marinopoulos and Others are distributors of pharmaceutical products operating in Greece. 8 GSK AEVE is established in Greece and is wholly owned by GSK plc, a manufacturer of pharmaceutical products established in the United Kingdom resulting from the merger in 2000 of Glaxowellcome plc and SmithKline Beecham. 9 GSK AEVE imports and distributes numerous proprietary medicinal products including Imigran, Lamictal and Serevent. Those are newly created medicines resulting from research and technology and are classified as prescription medicines. 10 The members of Syfait and Others, and of PSF, and Interfarm and Others and Marinopoulos and Others buy those medicines, amongst others, in all forms from GSK AEVE and then distribute them on the national market and abroad. 11 Until November 2000, GSK AEVE met all orders which it received. A large proportion of the supplies corresponding to those orders was re-exported to other Member States, especially to the United Kingdom because of the much lower price of Imigran, Lamictal and Serevent in Greece. 12 From early November 2000, invoking significant shortages on the Greek market, which it attributed to re-exports by third parties, GSK AEVE changed its system of distribution in Greece and stopped meeting the orders of the complainants in the main proceedings and of third parties, stating that it would supply hospitals and pharmacies directly. 13 In February 2001, considering that the supply of medicinal products had to some extent been normalised, and that the stocks of hospitals and pharmacies had been rebuilt, GSK AEVE replaced the previous sales system with another system of distribution. 14 The complainants in the main proceedings brought before the Epitropi Antagonismou the question of GSK AEVE’s marketing of Imigran, Lamictal and Serevent on the Greek market under successive systems of distribution since November 2000. They alleged that that company had not met in full the orders it had received and that such conduct is an abuse of a dominant position within the meaning of Article 2 of Law No 703/1977 and Article 82 EC. 15 By Decision No 193/111 of 3 August 2001 ordering interim measures, the Epitropi Antagonismou temporarily required GSK AEVE, pending adoption of the decision in the main proceedings, to meet the orders for the three medicinal products in question. GSK AEVE applied to the Diikitiko Efetio Athinon (Administrative Appeal Court, Athens) for an order suspending that decision, but it was confirmed on 10 January 2002 and was still in force at the date of the referring decision. 16 The Epitropi Antagonismou states that GSK AEVE complied with the interim measures prescribed by Decision No 193/111 at least to the extent that that company was supplied by GSK plc. That supply exceeded the consumption needs of the domestic market. The evidence provided to the Epitropi Antagonismou by GSK AEVE shows, however, that orders were considerably higher than that level, in particular in September 2001, so that not all orders could be met. 17 In the referring decision, the Epitropi Antagonismou states that GSK AEVE and GSK plc comply with the circular adopted on 27 November 2001 by the Ethnikos Organismos Farmakon (National Organisation for Medicines), which provides that all participants in the distribution of prescribed medicines ‘must supply to the domestic market quantities at least equal to current prescription levels … plus an amount (25%) to cover any emergencies and changes of circumstance’. 18 Furthermore, on 5 December 2001, GSK AEVE applied to the Epitropi Antagonismou for negative clearance under Article 11 of Law No 703/1977 in respect of its refusal to cover more than 125% of Greek demand. 19 Faced simultaneously with that application by GSK AEVE for negative clearance and the complaints from Syfait and Others, PSF, Interfarm and Others and Marinopoulos and Others against GSK AEVE and GSK plc, the Epitropi Antagonismou asks to what extent the refusal by the latter two companies to meet in full the orders placed by the complainants constitutes an abuse of a dominant position within the meaning of Article 82 EC. If it is not an abuse, the Epitropi Antagonismou states that it will be in a position to consider whether the conditions for the grant of the negative clearance sought by GSK AEVE are satisfied. 20 In those circumstances, the Epitropi Antagonismou decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Where the refusal of an undertaking holding a dominant position to meet fully the orders sent to it by pharmaceutical wholesalers is due to its intention to limit their export activity and, thereby, the harm caused to it by parallel trade, does the refusal constitute per se an abuse within the meaning of Article 82 EC? Is the answer to that question affected by the fact that the parallel trade is particularly profitable for the wholesalers because of the different prices, resulting from State intervention, in the Member States of the European Union, that is to say by the fact that pure conditions of competition do not prevail in the pharmaceuticals market, but a regime which is governed to a large extent by State intervention? Is it ultimately the duty of a national competition authority to apply Community competition rules in the same way to markets which function competitively and those in which competition is distorted by State intervention? 2. If the Court holds that limitation of parallel trade, for the reasons set out above, does not constitute an abusive practice in every case where it is engaged in by an undertaking holding a dominant position, how is possible abuse to be assessed? In particular:(a) Do the percentage by which normal domestic consumption is exceeded and/or the loss suffered by an undertaking holding a dominant position compared with its total turnover and total profits constitute appropriate criteria? If so, how are the level of that percentage and the level of that loss determined (the latter as a percentage of turnover and total profits), above which the conduct in question may be abusive? (b) Is an approach entailing the balancing of interests appropriate, and, if so, what are the interests to be compared? In particular:(i) is the answer affected by the fact that the ultimate consumer/patient derives limited financial advantage from the parallel trade? and (ii) is account to be taken, and to what extent, of the interests of social insurance bodies in cheaper medicinal products?(c) What other criteria and approaches are considered appropriate in the present case?’ The jurisdiction of the Court21 As a preliminary point, it is necessary to ascertain whether the Epitropi Antagonismou is a court or tribunal within the meaning of Article 234 EC and whether the Court therefore has jurisdiction to make a ruling on the questions referred to it. The national law governing the Epitropi Antagonismou22 Article 8(1) of Law No 703/1977 provides:‘An Epitropi Antagonismou shall be established which shall operate as an independent authority. Its members shall enjoy personal and operational independence and shall be bound in the exercise of their duties only by the law and their conscience. The Epitropi Antagonismou shall be administratively and economically autonomous subject to the supervision of the Ministry for … [Development].’ 23 The Epitropi Antagonismou has nine members appointed pursuant to Article 8(3) of Law No 703/1977. Four members and their deputies are chosen by the minister from lists of three persons which are submitted by each of four professional bodies. The other members include a member of the government legal service or a judge of the highest rank, two academics, one a lawyer and the other an economist, and two persons of acknowledged repute with experience of economic law and competition policy. According to Article 8(5) of Law No 703/1977, the members of the Epitropi Antagonismou and their deputies are appointed by the Minister for Development for a term of three years. 24 Article 8(6) of the same law provides:‘The president of the Epitropi Antagonismou and his deputy shall be appointed by the Minister [for Development] from amongst the members of the [Epitropi Antagonismou]… The president of the Epitropi Antagonismou shall be a member of the national civil service and shall exclusively perform that task for the duration of his term of office …’ 25 Article 8(7) of Law No 703/1977 provides:‘During their term of office, the President and the members shall not carry on, whether for remuneration or otherwise, any other public function or professional activity, whether or not in-house, which is incompatible with the role and duties of a member of the Epitropi Antagonismou.’ 26 As regards relations between the Epitropi Antagonismou and its secretariat, Article 8C(1)(b) of the same law provides: ‘The President shall coordinate and direct the secretariat of the [Epitropi Antagonismou].’27 Article 8C(1)(d) of the same law provides:‘The President is the immediate superior of the personnel of the secretariat of the Epitropi Antagonismou and shall exercise disciplinary power over them.’ 28 According to Article 8C(3), the President of the Epitropi Antagonismou may authorise the Director General or the directors of the secretariat of the Epitropi Antagonismou to exercise some of his powers. The Director General is to be appointed for three years, and the appointment is renewable by decision of the Minister for Development subject to the assent of the Epitropi Antagonismou, as laid down by the second sentence of Article 8D(1) of Law No 703/1977. Findings of the Court29 According to settled case-law, in order to determine whether a body making a reference is a court or tribunal for the purposes of Article 234 EC, which is a question governed by Community law alone, the Court takes account of a number of factors, such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law and whether it is independent (see, in particular, Case C‑54/96 Dorsch Consult [1997] ECR I-4961, paragraph 23, Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others [2000] ECR I-1577, paragraph 33, Case C-195/98 Österreichischer Gewerkschaftsbund [2000] ECR I‑10497, paragraph 24, and Case C-516/99 Schmid [2002] ECR I-4573, paragraph 34). Moreover, a national court may refer a question to the Court only if there is a case pending before it and if it is called upon to give judgment in proceedings intended to lead to a decision of a judicial nature (see, in particular, Case C‑134/97 Victoria Film [1998] ECR I-7023, paragraph 14, and Österreichischer Gewerkschaftsbund, paragraph 25). 30 It should be noted, first of all, in this regard that the Epitropi Antagonismou is subject to the supervision of the Minister for Development. Such supervision implies that that minister is empowered, within certain limits, to review the lawfulness of the decisions adopted by the Epitropi Antagonismou. 31 Next, whilst it is true that the members of the Epitropi Antagonismou enjoy personal and operational independence and are bound in the exercise of their duties only by the law and their conscience within the meaning of Law No 703/1977, it nevertheless remains that there are no particular safeguards in respect of their dismissal or the termination of their appointment. That system does not appear to constitute an effective safeguard against undue intervention or pressure from the executive on the members of the Epitropi Antagonismou (see, to that effect, Case C-103/97 Köllensperger and Atzwanger [1999] ECR I-551, paragraph 21). 32 It should also be noted that under Article 8C(1)(b) and (d) of Law No 703/1977, the President of the Epitropi Antagonismou is responsible for the coordination and general policy of the secretariat, is the immediate superior of the personnel of that secretariat and exercises disciplinary power over them. 33 It should be noted in this regard that the Tribunales Económico-Administrativos (Economic and Administrative Courts) (Spain) were found by the Court, in paragraphs 39 and 40 of the Gabalfrisa judgment, to be third parties in relation to the departments of the tax authority responsible for the management, clearance and recovery of VAT, particularly given the separation of functions between them. However, in so far as there is an operational link between the Epitropi Antagonismou, a decision-making body, and its secretariat, a fact-finding body on the basis of whose proposal it adopts decisions, the Epitropi Antagonismou is not a clearly distinct third party in relation to the State body which, by virtue of its role, may be akin to a party in the course of competition proceedings. 34 Lastly, it should be noted that a competition authority such as the Epitropi Antagonismou is required to work in close cooperation with the Commission of the European Communities and may, pursuant to Article 11(6) of Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ 2003 L 1, p. 1), be relieved of its competence by a decision of the Commission. It should moreover be noted in this context that Article 11(6) of Regulation No 1/2003 essentially maintains the rule in Article 9(3) of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition, 1959-1962 p. 87), that the competition authorities of the Member States are automatically relieved of their competence where the Commission initiates its own proceedings (see in that connection the 17th recital in the preamble to Regulation No 1/2003). 35 A body may refer a question to the Court only if there is a case pending before it and if it is called upon to give judgment in proceedings intended to lead to a decision of a judicial nature (see Victoria Film, paragraph 14, and Österreichischer Gewerkschaftsbund, paragraph 25). 36 Whenever the Commission relieves a national competition authority such as the Epitropi Antagonismou of its competence, the proceedings initiated before that authority will not lead to a decision of a judicial nature. 37 It follows from the factors examined, considered as a whole, that the Epitropi Antagonismou is not a court or tribunal within the meaning of Article 234 EC. 38 Accordingly, the Court has no jurisdiction to answer the questions referred by the Epitropi Antagonismou. Costs39 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the Epitropi Antagonismou, the decision on costs is a matter for that body. The costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:The Court of Justice of the European Communities has no jurisdiction to answer the questions referred by the Epitropi Antagonismou by decision of 22 January 2003.[Signatures]* Language of the case: Greek. | 1185c-6433c01-46a1 | EN |
THE SWEDISH MONOPOLY ON RETAIL SALES OF MEDICINAL PREPARATIONS IS CONTRARY TO COMMUNITY LAW | Criminal proceedingsagainstKrister Hanner(Reference for a preliminary ruling from the Stockholms tingsrätt)(Articles 28 EC, 31 EC, 43 EC and 86(2) EC — Marketing of medicinal preparations — Establishment of retail traders — National monopoly on the retail sale of medicinal preparations — Undertaking entrusted with providing a service of general economic interest)Opinion of Advocate General Léger delivered on 25 May 2004 Judgment of the Court (Grand Chamber), 31 May 2005 Summary of the Judgment1. State monopolies of a commercial character –– Article 31 EC –– Purpose –– Obligation to arrange sales monopolies so as to exclude any discrimination against medicinal preparations from other Member States(Art. 31 EC)2. State monopolies of a commercial character –– Article 31 EC –– National monopoly on the retail sale of medicinal preparations –– Monopoly characterised by criteria and methods for selecting products which fail to guarantee the exclusion of any discrimination –– Not permissible –– Justification pursuant to Article 86(2) EC –– None(Arts 31 EC and 86(2) EC)1. Although Article 31(1) EC does not require total abolition of State monopolies of a commercial character, it requires them to be adjusted in such a way as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States. Thus, that provision precludes sales monopolies arranged in such a way as to put at a disadvantage, in law or in fact, trade in goods from other Member States as compared with trade in domestic goods. In particular, a State sales monopoly must be arranged in such a way as to exclude any discrimination against goods from other Member States regarding its system of selection, the organisation of its retail sales network and its marketing and advertising measures. (see paras 34, 36, 39-41)2. Article 31(1) EC must be interpreted as precluding a retail sales monopoly of medicinal preparations arranged in such a way that it makes no provision for a purchasing plan or for a system of ‘calls for tenders’ within the framework of which producers whose products are not selected would be entitled to be apprised of the reasons for the selection decision and to contest such decisions before an independent supervisory authority. Such a monopoly is not arranged in such a way as to exclude any discrimination but is liable to place trade in medicinal preparations from other Member States at a disadvantage as compared with trade in national medicinal preparations. Such a sales system could not be justifiable under Article 86(2) EC. While that provision may be relied upon to justify the grant by a Member State, to an undertaking entrusted with the operation of services of general economic interest, of exclusive rights which are contrary to Article 31(1) EC, to the extent to which performance of the particular tasks assigned to it can be achieved only through the grant of such rights and provided that the development of trade is not affected to such an extent as would be contrary to the interests of the Community, it cannot however justify a sales monopoly in the absence of a selection system that excludes any discrimination against medicinal preparations from other Member States. (see paras 42-45, 47-49, operative part)JUDGMENT OF THE COURT (Grand Chamber)31 May 2005 (*) (Articles 28 EC, 31 EC, 43 EC and 86(2) EC – Marketing of medicinal preparations – Establishment of retail traders – National monopoly on the retail sale of medicinal preparations – Undertaking entrusted with providing a service of general economic interest)In Case C-438/02,REFERENCE for a preliminary ruling under Article 234 EC,from the Stockholms tingsrätt (Sweden), made by decision of 29 November 2002, received at the Court on 4 December 2002, in criminal proceedings against Krister Hanner,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann (Rapporteur), C.W.A. Timmermans and A. Rosas, Presidents of Chambers, J-P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr and J.N. Cunha Rodrigues, Judges, Advocate General: P. Léger,Registrar: M. Múgica Arzamendi, Principal Administrator,having regard to the written procedure and further to the hearing on 20 January 2004,after considering the observations submitted on behalf of:– Mr Hanner, by I. Forrester QC, J. Killick, Barrister, A. Schulz, Rechtsanwalt, L. Hiljemark and R. Olofsson, advokater, and A.-K. Pettersson, juris kandidat, – the Swedish Government, by A. Kruse, acting as Agent,– the Netherlands Government, by H.G. Sevenster, acting as Agent,– the Commission of the European Communities, by L. Ström and M.H. Støvlbæk, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 25 May 2004,gives the followingJudgment1 This request for a preliminary ruling concerns the interpretation of Articles 28 EC, 31 EC and 43 EC.2 The request was made in criminal proceedings against Krister Hanner concerning an infringement of the Swedish rules reserving the retail sale of medicinal preparations to Apoteket AB (‘Apoteket’). Law The national legislation3 In Sweden, under Article 4 of the Lag (1996:1152) om handel med läkemedel m.m. (Law No 1152 of 1996 on trade in medicinal preparations), retail trade in non-prescription and prescription medicinal preparations can be engaged in only by the State or by legal persons over which the State has a dominant influence. The government determines which legal person is entitled to carry on such trade and lays down the detailed rules applicable to such trade. 4 Article 5 of the same Law provides for an exception to that rule regarding the retail sale of certain medicinal preparations to hospitals, doctors and veterinary surgeons. Such sales may in fact be undertaken by other operators provided that they hold a wholesale trade permit. 5 Article 6 of the Lag om handel med läkemedel provides that the distribution of medicinal preparations must be carried out rationally in order to guarantee the availability of safe and effective medicinal preparations. 6 Under Article 11 of the same law, infringement of Article 4 thereof is punishable by a fine or imprisonment of a maximum of two years. 7 Article 1 of the Läkemedelslag (1992:859) (Law No 859 of 1992 on medicinal preparations) defines the term ‘medicinal preparation’ as any product intended to be administered to humans or animals in order to prevent, diagnose, relieve or cure illnesses or symptoms thereof or which is intended to be used for an equivalent purpose. 8 Pursuant to Article 5 of that law, a medicinal preparation may in principle be sold only after a marketing authorisation has been issued for it either by the competent Swedish authority or by an authority of another Member State and, in the latter case, after recognition of that authorisation in Sweden. 9 The Swedish Government or, on its authority, the Läkemedelsverket (the competent authority for the control of medicines) may decide, when necessary for health reasons, that a medicinal preparation may be made available only on prescription or in accordance with instructions from a person authorised to prescribe medicinal preparations. 10 In principle, prescription medicinal preparations are subsidised by the State (subsidised medicinal preparations) whereas non-prescription medicinal preparations are not (non-subsidised medicinal preparations). The implementing measures11 Since 1970, the Swedish Government has entrusted retail trade in medicinal preparations to Apoteksbolaget AB, and, later, to its successor Apoteket, which is concerned by the main proceedings. 12 Apoteket is a mainly not-for-profit company limited by shares, incorporated under Swedish law, the management of which is for the most part made up of politicians and State civil servants. According to the order for reference, the Swedish State has a majority holding of two thirds of its capital. 13 Apoteket does not itself import medicinal preparations but obtains supplies direct from manufacturers in Sweden or from two wholesalers, Kronans Droghandel and Tamro. The latter serve as logistical centres for the supply of medicinal preparations to Apoteket but do not pursue a commercial policy of their own. 14 According to the information provided by the national court, Apoteket’s sales network comprises about 800 pharmacies which it owns and manages itself. The location of those pharmacies is determined by Apoteket in close cooperation with the municipal authorities and health authorities. In rural areas, Apoteket uses the services of about 970 Apoteksombud (pharmaceutical agents), which are under its control. They are private operators, in general local food businesses, which issue prescription medicinal preparations to consumers and may also sell certain non-prescription medicinal preparations. The stocks held by the pharmaceutical agents are the property of Apoteket and the product range is decided on by Apoteket’s regional manager jointly with the local health services. At the material time, Apoteket also sold non-prescription medicinal preparations by telephone. 15 Under an agreement between the Swedish State and Apoteket of 20 December 1996 (‘the 1996 agreement’), as in force at the material time, Apoteket was required: – in close cooperation with the health services, to organise a nationwide system for the distribution of medicinal preparations, suited to local conditions and ensuring the reliable, rational and efficient supply of medicinal preparations; – in applying its policy of setting up and organising sales outlets, to safeguard consumers’ interests; – to hold sufficient stocks of medicinal preparations and maintain sufficient delivery capacity to meet the legitimate needs of the health system; – to supply as promptly as possible all prescription and non-prescription medicinal preparations; – to ensure that medicinal preparations are supplied at the lowest possible cost, both within its distribution chain and elsewhere;– to apply a single price policy throughout national territory; the selling prices of subsidised medicinal preparations are determined by the medicinal preparations price committee and those of non-subsidised medicinal preparations by Apoteket itself, in such a way as to allow a fair return on capital; – to endeavour at all times to ensure enhanced productivity and rationalisation; and– to provide its customers, independently of producers, with impartial information. The main proceedings and the questions referred to the Court of Justice16 The Swedish authorities commenced criminal proceedings against Mr Hanner, in his capacity of general manager of Bringwell International AB, a Swedish company owned partly by Norwegians and partly by Swedes. That company had, between 30 May and 27 July 2001, marketed, in breach of the Swedish rules reserving retail sales of medicinal preparations to Apoteket (hereinafter ‘the sales regime at issue in the main proceedings’) 12 packages of Nicorette Plåster (patches), and of Nicorette Tuggummi (chewing gum). Those products are regarded as non-prescription medicinal preparations within the meaning of the Lag om handel med läkemedel. 17 In his defence, Mr Hanner has contended that those rules establish a State monopoly contrary to Articles 28 EC, 31 EC and 43 EC. 18 Entertaining doubts as to the compatibility with Community law of the sales regime at issue, the Stockolms tingsrätt (District Court, Stockholm) stayed its proceedings pending a preliminary ruling from the Court of Justice on the following questions: ‘1. There is an independent system at national level for the testing and approval of medicinal products intended to maintain good quality for medicinal products and prevent damaging effects of medicinal products. Certain medicinal products also require a prescription from a registered doctor. In such circumstances does Article 31 EC preclude national legislation which provides that retail trade in medicinal products may only be carried on by the State or by legal persons in which the State has a determining influence, the objective of which is to meet the need for safe and effective medicinal products? 2. Does Article 28 EC preclude legislation such as that described in Question 1, in the light of the information in that question.3. Does Article 43 EC preclude legislation such as that described in Question 1, in the light of the information in that question.4. Does the principle of proportionality preclude legislation such as that described in Question 1, on examination of Questions 1 to 3? 5. Would the answer to Questions 1 to 4 be different if “non-prescription” medicinal products were entirely or partly exempted from the requirement under national legislation that retail trade in medicinal products be carried on only by the State or by legal persons in which the State has a determining influence?’ The questions referred to the Court of Justice The first question19 By its first question, the national court seeks essentially to ascertain whether Article 31(1) EC precludes a sales regime of the kind at issue in the main proceedings which grants exclusive retailing rights. Observations submitted to the Court20 Mr Hanner and the Commission submit that the sales regime at issue in the main proceedings constitutes a discriminatory State monopoly contrary to Article 31 EC. 21 In support of his view, Mr Hanner maintains that the system of selection based on foreseeable patterns of demand makes it very difficult for new non-prescription medicinal preparations to be included in the stocks and displays of pharmacies and pharmaceutical agents. 22 In the case of certain types of medicinal preparations, such as nasal sprays and preparations to combat fever and headaches, most products displayed in pharmacies are manufactured either in Sweden or by undertakings having very close links with Sweden, or else are marketed by Swedish undertakings. 23 He adds that there are not enough sales outlets and that pharmacies’ opening hours are very limited.24 Mr Hanner also claims that the sales regime at issue in the main proceedings cannot be justified on public-interest grounds since the exclusive right is unnecessary and is in any event disproportionate because it applies not only to prescription medicinal preparations but also to non-prescription preparations. 25 The Commission considers that the sales regime at issue in the main proceedings is liable to place trade in medicinal preparations from other Member States at a disadvantage as compared with domestic medicinal preparations and is therefore potentially discriminatory. The system of selecting non-prescription medicinal preparations lacks transparency, does not provide for reasons to be given for refusals and is not subject to any independent control. The sales network is largely based on pharmaceutical agents, the number and locations of which are neither governed by objective criteria nor subject to monitoring. 26 The Swedish Government, on the other hand, submits a number of arguments to show that the sales regime at issue in the main proceedings does not constitute a discriminatory State monopoly contrary to Article 31 EC. 27 It observes that, as far as the system of selection of medicinal preparations is concerned, the selection of prescription products depended, at the material time, essentially on factors over which Apoteket had no influence, namely the fact that a medicinal preparation was or was not subsidised and the choice made by the prescribing doctor. Similarly, the selection of non-prescription medicinal preparations is based on a purely objective commercial criterion, namely the foreseeable pattern of demand. Moreover, Apoteket is obliged to supply all medicinal preparations on demand and, in practice, using a central, computerised register of products approved as medicinal preparations for sale in Sweden, is in a position to do so within 24 hours. Moreover, for every new product approved as a medicinal preparation, an information leaflet is sent to all pharmacies. In addition, manufacturers are free to influence both consumer demand and Apoteket’s selection decisions by carrying out advertising campaigns for their non-prescription medicinal preparations. 28 As regards the organisation of the sales network, Apoteket is obliged, as part of its policy of establishing sales outlets, to safeguard the interests of consumers. Moreover, the number of sales locations is not so limited as to compromise consumers’ procurement of supplies of medicinal preparations. 29 The Swedish Government also observes, with regard to the promotion of medicinal preparations, that Apoteket is required to provide independent information concerning products. Moreover, as already mentioned in paragraph 27 of this judgment, manufacturers themselves are free, in the case of non-prescription medicinal preparations, to carry out advertising campaigns addressed to consumers. 30 Finally, the Swedish Government also maintains that the sales regime at issue in the main proceedings is justified, in so far as Apoteket is entrusted with providing a service of general economic interest, namely the distribution of medicinal preparations throughout Swedish territory at uniform prices. 31 The Netherlands government, for its part, considers that the national court has not given sufficient detail concerning the selection system used by Apoteket for procuring its supplies of medicinal preparations and has not therefore given sufficient information for a decision to be reached as to whether, and if so to what extent, that sales regime at issue is contrary to Article 31 EC. Findings of the Court32 It is clear from the first subparagraph of Article 31(1) EC that that provision applies to State monopolies of a commercial character. Pursuant to the second subparagraph of Article 31(1) EC, that provision applies to any body through which a Member State, in law or in fact, either directly or indirectly supervises, determines or appreciably influences imports or exports between Member States. 33 In the present case, as the Advocate General observes in points 36 to 39 of his Opinion, it must be pointed out that the sales regime at issue in the main proceedings constitutes a State monopoly of a commercial character within the meaning of Article 31(1) EC. Apoteket carries on a commercial activity, namely the retail sale of medicinal preparations, which is reserved exclusively to it by the Lag om handel med läkemedel. Moreover, the Swedish Government does not deny that Apoteket is subject, for the purposes of that activity, to State control, owing both to the State’s majority holding in the capital of that company and to its management structure. 34 In such a situation, it is clear from settled case-law that, although it does not require total abolition of State monopolies of a commercial character, Article 31(1) EC requires them to be adjusted in such a way as to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States (see, to that effect, Case 59/75 Manghera and Others [1976] ECR 91, paragraphs 4 and 5; Case 91/78 Hansen [1979] ECR 935, paragraph 8; Case 78/82 Commission v Italy [1983] ECR 1955, paragraph 11; Case C-387/93 Banchero [1995] ECR I-4663, paragraph 27; and Case C-189/95 Franzén [1997] ECR I-5909, paragraph 38). 35 In fact, the purpose of Article 31(1) EC is to reconcile the possibility for Member States to maintain certain monopolies of a commercial character as instruments for the pursuit of public interest aims with the requirements of the establishment and functioning of the common market. It aims at the elimination of obstacles to the free movement of goods, save, however, for restrictions on trade which are inherent in the existence of the monopolies in question (Franzén, paragraph 39). 36 Thus, as far as sales monopolies are concerned, the Court has held that monopolies are not allowed if they are arranged in such a way as to put at a disadvantage, in law or in fact, trade in goods from other Member States as compared with trade in domestic goods (see, to that effect, Franzén, paragraph 40). 37 It is therefore necessary to determine whether the sales regime at issue in the main proceedings is arranged in such a way as to exclude any discrimination against goods from other Member States. 38 Accordingly, it is necessary to consider whether the way in which the State monopoly in question is organised and operates is liable to place medicinal preparations from other Member States at a disadvantage (see, to that effect, Franzén, paragraph 40) or whether that monopoly does in practice place such medicinal preparations at a disadvantage. 39 As regards the first of those two aspects, it is clear from Franzén (paragraphs 44 and 51) that, first, the selection system of a sales monopoly must be based on criteria that are independent from the origin of the products and must be transparent by providing both for an obligation to state reasons for decisions and for an independent monitoring procedure. 40 Second, the retail network of such a monopoly must be organised in such a way that the number of sales outlets is not limited to the point of compromising consumers’ procurement of supplies (see, to that effect, in relation to Article 28 EC, Banchero, paragraph 39, and in relation to Article 31(1) EC, Franzén, paragraph 54). 41 Finally, such a monopoly’s marketing and advertising measures must be impartial and independent of the origin of the products and must endeavour to make known new products to consumers (see, to that effect, Franzén, paragraph 62). 42 In the present case, it is clear from the information before the Court that the 1996 agreement makes no provision for a purchasing plan or for a system of ‘calls for tenders’ within the framework of which producers whose products are not selected would be entitled to be apprised of the reasons for the selection decision. Nor does it provide for any opportunity to contest such decisions before an independent supervisory authority. On the contrary, under that agreement, Apoteket appears, in principle, to be entirely free to select a product range of its choice. 43 Thus, the 1996 agreement does not ensure that all discrimination is ruled out. However, the Swedish Government has not claimed that any other measure exists which might compensate for that lack of structural safeguards. 44 Those circumstances are a sufficient basis for finding that the way in which Apoteket is organised and operates, and more particularly its system of selecting medicinal preparations, is liable to place trade in medicinal preparations from other Member States at a disadvantage as compared with trade in Swedish medicinal preparations. Thus, that State monopoly is not arranged in such a way as to exclude any discrimination against medicinal preparations from other Member States. It thus infringes Article 31(1) EC. 45 Accordingly, it is unnecessary to deal with the second aspect, namely the question whether Apoteket does in practice place medicinal preparations from other Member States at a disadvantage. 46 However, the Swedish Government contends that the sales regime at issue in the main proceedings can be justified.47 In that connection, it is clear from the case-law of the Court that Article 86(2) EC may be relied upon to justify the grant by a Member State, to an undertaking entrusted with the operation of services of general economic interest, of exclusive rights which are contrary to Article 31(1) EC, to the extent to which performance of the particular tasks assigned to it can be achieved only through the grant of such rights and provided that the development of trade is not affected to such an extent as would be contrary to the interests of the Community (see, to that effect, Case C-157/94 Commission v Netherlands [1997] ECR I-5699, paragraph 32, Case C-158/94 Commission v Italy [1997] ECR I-5789, paragraph 43, and Case C-159/94 Commission v France [1997] ECR I-5815, paragraph 49). 48 However, a sales regime of the kind at issue in the main proceedings, as described in paragraphs 42 and 43 of this judgment, cannot be justified under Article 86(2) EC in the absence of a selection system that excludes any discrimination against medicinal preparations from other Member States. 49 Consequently, the answer to the first question must be that Article 31(1) EC precludes a sales regime which grants an exclusive retail right and is arranged in the same way as the sales regime at issue in the main proceedings. The second to fifth questions50 In view of the answer given to the first question, it is unnecessary to answer the others. Costs51 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Article 31(1) EC precludes a sales regime which grants an exclusive retail right and is arranged in the same way as the sales regime at issue in the main proceedings. [Signatures]* Language of the case: Swedish. | 5d403-369ca9f-40a5 | EN |
THE AUTHORISATION PROCEDURE FOR IMPORTATION INTO FRANCE OF MEDICINAL PRODUCTS FOR PERSONAL USE NOT EFFECTED BY PERSONAL TRANSPORT IS INCOMPATIBLE WITH THE TREATY RULES CONCERNING THE FREE MOVEMENT OF GOODS | Commission of the European CommunitiesvFrench Republic(Failure of a Member State to fulfil obligations – Measures having equivalent effect – Prior authorisation procedure for personal imports of medicinal products – Medicinal products for human consumption – Homeopathic medicinal products)Opinion of Advocate General Geelhoed delivered on 21 October 2004 Judgment of the Court (Second Chamber), 26 May 2005. Summary of the Judgment1. Free movement of goods — Quantitative restrictions — Measures having equivalent effect — Medicinal products — Prior authorisation procedure on the importation of personal imports, not effected by personal transport, of medicinal products lawfully prescribed in the Member State into which they are imported and authorised both in that Member State and in the Member State of origin — Not permissible(Art. 28 EC; Council Directive 65/65)2. Free movement of goods — Quantitative restrictions — Measures having equivalent effect — Medicinal products — Prior authorisation procedure on personal imports, not effected by personal transport, of homeopathic medicinal products lawfully prescribed in the Member State into which they are imported and registered in another Member State — Not permissible(Art. 28 EC; Council Directive 92/73)3. Free movement of goods — Quantitative restrictions — Measures having equivalent effect — Medicinal products — Prior authorisation procedure on personal imports, not effected by personal transport, of medicinal products lawfully prescribed in the Member State into which they are imported and not authorised in that Member State but only in the Member State of origin, identical to the procedure applicable to medicinal products imported for commercial purposes — Not permissible(Art. 28 EC)1. A Member State fails to fulfil its obligations under Article 28 EC by applying a prior authorisation procedure to personal imports, not effected by personal transport, of medicinal products lawfully prescribed in that Member State and authorised both in the latter and in the Member State where they are purchased, under Directive 65/65 on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products. (see para. 49, operative part)2. A Member State fails to fulfil its obligations under Article 28 EC by applying a prior authorisation procedure to personal imports, not effected by personal transport, of homeopathic medicinal products lawfully prescribed in that Member State and registered in another Member State pursuant to Directive 92/73 widening the scope of Directives 65/65 and 75/319 on the approximation of provisions laid down by law, regulation or administrative action relating to medicinal products and laying down additional provisions on homeopathic medicinal products. 3. A Member State fails to fulfil its obligations under Article 28 EC by applying a disproportionate prior authorisation procedure to personal imports, not effected by personal transport, of medicinal products lawfully prescribed in that Member State and not authorised in the latter but only in the Member State where they are purchased, namely the same authorisation procedure to those imports as it does to medicinal products imported for commercial purposes. (see paras 42, 49, operative part)JUDGMENT OF THE COURT (Second Chamber)26 May 2005 (*) In Case C-212/03,ACTION under Article 226 EC for failure to fulfil obligations, brought on 15 May 2003,Commission of the European Communities, represented by H. Støvlbæk and B. Stromsky, acting as Agents, with an address for service in Luxembourg, applicant,French Republic, represented by G. de Bergues, C. Bergeot-Nunes and R. Loosli-Surrans, acting as Agents, with an address for service in Luxembourg, defendant, THE COURT (Second Chamber),composed of C.W.A. Timmermans, President of the Chamber, C. Gulmann (Rapporteur), R. Schintgen, J. Makarczyk and J. Klučka, Judges, Advocate General: L.A. Geelhoed,Registrar: M. Múgica Arzamendi, Principal Administrator,having regard to the written procedure and further to the hearing on 9 September 2004,after hearing the Opinion of the Advocate General at the sitting on 21 October 2004,gives the followingJudgment1 By its application, the Commission of the European Communities asks the Court to declare that, by applying:– a prior authorisation procedure to personal imports, not effected by personal transport, of medicinal products lawfully prescribed in France and authorised under Council Directive 65/65/EEC of 26 January 1965 on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products (OJ, English Special Edition 1965-1966, p. 20), as amended by Council Directive 93/39/EEC of 14 June 1993 (OJ 1993 L 214, p. 22) (‘Directive 65/65’), both in France and in the Member State where they are purchased; – a prior authorisation procedure to personal imports, not effected by personal transport, of homeopathic medicinal products lawfully prescribed in France and registered in a Member State pursuant to Council Directive 92/73/EEC of 22 September 1992 widening the scope of Directives 65/65/EEC and 75/319/EEC on the approximation of provisions laid down by law, regulation or administrative action relating to medicinal products and laying down additional provisions on homeopathic medicinal products (OJ 1992 L 297, p. 8); and – a disproportionate prior authorisation procedure to personal imports, not effected by personal transport, of medicinal products lawfully prescribed in France and not authorised in that Member State but only in the Member State where they are purchased, the French Republic has failed to fulfil its obligations under Article 28 EC. National regulations2 Articles R 5142-12, R 5142-13 and R 5142-14 of the French Public Health Code, in the version in force at that time, provided:‘Article R 5142-12 – Any medicinal product for which no marketing authorisation has been issued as referred to in Article L 601 or temporary authorisation for use as referred to in Article L 601-2(b) granted in respect of imported medicinal products … must, prior to importation into French customs territory, obtain an import authorisation from the director-general of the Agence française de sécurité sanitaire des produits de santé (French Agency for the Safety of Health Products) … …Article R 5142-13 – Individuals may import medicinal products only in a quantity that is consistent with their personal therapeutic use for a treatment period of not more than three months under normal use, or for the prescribed treatment period. Where individuals import the medicinal product personally, they are exempt from requiring authorisation. Article R 5142-14 – Applications for an import authorisation must include:(a) the name or trade name and the address of the natural or legal person responsible for importation;(b) the country of provenance and, where different, the country of origin of the medicinal product;(c) the name, composition, pharmaceutical form, dosage and method of administration;(d) the quantities imported.The application must be accompanied by:4. Where a medicinal product is imported by an individual other than by personal transport, where appropriate the doctor’s prescription drawn up in accordance with the special conditions of prescription and supply that apply under French legislation for the medicinal product in question. In all cases the director-general of the French Agency for the Safety of Health Products may ask the applicant to supply any supplementary information needed to evaluate the application.’ Pre-litigation procedure3 Following a complaint, the Commission decided to examine the compatibility with Community law of the entire authorisation procedure for importation into France of medicinal products for personal use. 4 In a letter of formal notice of 9 March 2000 addressed to the French Government, the Commission informed the latter that the French regulations on the importation of medicinal products, in so far as they require a prior authorisation to be issued in respect of imports of medicinal products by individuals not effected by personal transport, might constitute a measure having equivalent effect to a quantitative restriction on imports prohibited under Article 28 EC. 5 In reply to that letter of formal notice, the French authorities submitted, in a letter of 11 May 2000, that if the control introduced by the French regulations in respect of importation of medicinal products by individuals constituted such a measure, that measure was justified by Article 30 EC since it was intended solely to guarantee the protection of health and life of humans through measures which are not disproportionate. 6 The Commission took the view that that reply was not such as to call in question the grounds for complaint put forward in its letter of formal notice and issued a reasoned opinion on 23 October 2001 calling on the French Republic to take the measures necessary to comply with that opinion within two months of its notification. 7 On 18 December 2001 the French Government sent the Commission a note enclosing a draft decree concerning importation of medicinal products for human consumption. Since that reply, in the Commission’s opinion, contained nothing capable of altering its assessment, the Commission decided to bring the present action. The action8 By its application, the Commission refers to three situations involving personal imports, not effected by personal transport, of lawfully prescribed medicinal products. Those are imports of: – medicinal products which, in accordance with Community law, are authorised both in France and in the Member State where they are purchased; – homeopathic medicinal products which, in accordance with Community law, are registered in another Member State; and– medicinal products which are not authorised in France but are authorised in the Member State where they are purchased.9 The Commission notes that, in those three situations, a prior authorisation is required. It submits that that requirement is per se contrary to Article 28 EC in the first two situations outlined and that the authorisation procedure, as applied by the authorities concerned in the third situation, is disproportionate and therefore also contrary to that article. The first complaint: the procedure for importation of medicinal products authorised both in France and in the Member State where they were purchased Arguments of the parties10 The Commission takes the view that a prior authorisation procedure imposed on the importation of medicinal products authorised both in the Member State into which they are imported and in the Member State from which they are exported, under the conditions set out in the application, constitutes a restriction on the free movement of goods between Member States contrary to Article 28 EC. 11 The French Government does not substantially challenge that assessment but is of the opinion that the Commission’s analysis is based on an incorrect reading of the French regulations, which, in the circumstances to which the present complaint refers, do not lay down any prior authorisation procedure in respect of medicinal products for which a marketing authorisation has already been obtained in France. 12 The Commission counters by stating that it is calling in question, not the French regulations, but an administrative practice under which the competent authority requires import authorisations in respect of medicinal products intended for personal use and already authorised in France. 13 The French Government concedes that that administrative practice is ambiguous but notes that, in any event, that practice concerns applications from nationals of Member States in only 1% of cases. Findings of the Court14 It should be stated, first, that by its complaint the Commission is referring to an administrative practice requiring the issue of an authorisation in respect of personal imports, not effected by personal transport, of lawfully prescribed medicinal products and, secondly, that the French Government does not substantially deny that such a practice, were it established, would constitute a restriction contrary to Article 28 EC. 15 In respect of that administrative practice, the French Government accepts that, according to a document delivered to the Commission concerning the procedure set up by the French Agency for the Safety of Health Products (‘AFSSAPS’), an import authorisation is required in respect of a certain number of products for which a marketing authorisation has already been obtained in France. However, it states that that authorisation procedure concerns, in practice, applications made by nationals of Member States in only 1% of cases. 16 That latter circumstance, however, is not such as to remove the restrictive nature of the administrative practice in question for the purpose of Article 28 EC. Rather than the absolute or relative number of authorisations granted, it is the very fact that they are required which is decisive. 17 In those circumstances, an administrative practice requiring authorisation in respect of personal imports, not effected by personal transport, of medicinal products lawfully prescribed and authorised under Directive 65/65/EEC, both in France and in the Member State where they are purchased, must be found to exist in France. 18 It follows that the Commission’s first complaint must be upheld. The second complaint: the procedure for importation of homeopathic medicinal products registered in another Member State19 The Commission takes the view that it is contrary to Article 28 EC to make homeopathic medicinal products falling within Article 7(1) of Directive 92/73 and registered in another Member State subject to a prior authorisation procedure. 20 The Commission submits that, where a homeopathic medicinal product is registered in a Member State, it does not, a priori, present any health risk, given that Article 7(1) of Directive 92/73 provides that only homeopathic medicinal products with a sufficient degree of dilution to guarantee their safety may be registered, and that, in addition, the rules relating to the manufacture and control of homeopathic medicinal products have been harmonised. 21 According to the French Government, the authorisation procedure in question is in no way contrary to Article 28 EC. The Member States are free, on grounds of health protection, to require such authorisations. 22 The French Government observes that Directive 92/73 does not lay down a mutual recognition procedure, but a simple obligation for Member States to take due account of registrations or authorisations already issued by another Member State. The view cannot therefore be taken that that directive has established a sufficient degree of harmonisation of Community law to release the Member State of importation from responsibility for the patients concerned. 23 It must be stated, first, that requiring an authorisation in respect of the personal importation, not effected by personal transport, of a homeopathic medicinal product lawfully placed on the market in the Member State of exportation constitutes a restriction on the free movement of goods contrary to Article 28 EC which, however, may be justified by the need to protect the health of humans. 24 In that respect, as regards homeopathic medicinal products as defined in Article 2 of Directive 92/73, that directive lays down rules for the harmonisation of the manufacture, control and inspection of those medicinal products and is designed in particular, according to the eighth and ninth recitals in the preamble thereto, to provide users with a clear indication of the homeopathic character of those products and with sufficient guarantees as to their quality and safety. 25 Moreover, the 10th and 11th recitals in that directive show that the latter lays down a distinction between, on the one hand, traditional homeopathic medicinal products placed on the market without therapeutic indications in a dosage which does not present a risk for the patient and, on the other, homeopathic medicinal products marketed with therapeutic indications or in a form which may present risks. 26 The medicinal products in the first group are, under Article 7(1) of Directive 92/73, subject to a special, simplified registration procedure. That procedure applies only if all the conditions listed in that provision are satisfied, including those relating to the absence of any specific therapeutic indication appearing on the labelling and to the degree of dilution which is to guarantee the safety of the medicinal product. In particular, the medicinal product may not contain either more than one part per 10 000 of the mother tincture or more than 1/100th of the smallest dose used in allopathy with regard to active principles whose presence in an allopathic medicinal product results in the obligation to submit a doctor’s prescription. 27 The homeopathic medicinal products belonging to the second group as referred to in the preamble to Directive 92/73 are, under Article 9(1) thereof, to be authorised in accordance with the rules applicable to medicinal products other than homeopathic medicinal products. For medicinal products in that group, a Member State may, under Article 9(2) of that directive, introduce or retain in its territory specific rules for the pharmacological and toxicological tests and clinical trials of medicinal products in accordance with the principles and characteristics of homeopathy as practised in that Member State. 28 The present complaint refers only to homeopathic medicinal products which have been registered in accordance with the procedure laid down by Article 7 of Directive 92/73, namely medicinal products which have been manufactured, controlled and inspected in accordance with the harmonised rules and which have a sufficient degree of dilution to guarantee their safety. 29 The French Government has not shown that, on grounds of health protection, a prior authorisation procedure is necessary in respect of personal imports, not effected by personal transport, of such medicinal products. 30 It follows that the Commission’s second complaint must be upheld. The third complaint: procedure for importation of medicinal products not authorised in France but authorised in the Member State where they were bought31 The Commission claims that, as regards the medicinal products referred to in this complaint, the prior authorisation procedure set up should be easily accessible, carried out within a reasonable period and lead to an import authorisation in respect of medicinal products not presenting a risk to public health. However, the procedure applied by the French authorities to personal imports of such medicinal products does not satisfy those criteria and is therefore disproportionate in relation to the objective pursued. 32 Accordingly, in the Commission’s view the procedure in question is not easily accessible given that it is not straightforward for the patient concerned to gather information on the qualitative and quantitative composition of the product which is intended for importation and to supply the directions for use and the labelling of that product, which are available only in another Member State. In addition, there is no provision defining the period prescribed to AFSSAPS for processing the application for an import authorisation. 33 Further, it appears that AFSSAPS checks that the medicinal product imported contains active principles present in the composition of medicinal products already evaluated in France. That control precludes, de facto, the possibility of obtaining an authorisation in respect of a medicinal product not authorised in France. 34 The French Government claims that the prior authorisation procedure in question is justified in order to combat fraud or abuse of the system of marketing authorisations. 35 It submits, next, that the procedure in question satisfies the conditions stated by the Commission as capable of justifying the existence of a prior authorisation procedure. First, the detailed rules of that procedure are laid down in Articles R 5142-12, R 5142-13 and R 5142-14 of the Public Health Code, and, secondly, it is common ground that individuals have the opportunity to bring proceedings before the courts against decisions taken by AFSSAPS. 36 In respect of the period within which the authorisation procedure should be brought to completion, the French Government is of the opinion that a period of two months is reasonable, since that is a maximum period and, in practice, in respect of applications submitted by individuals, that period is equal to or less than 24 hours in 50% of cases and equal to or less than 72 hours in 85% of cases. 37 So far as concerns the burden imposed on applicants in relation to information, the French Government submits that the French authorities require individuals to supply information only to the extent to which those authorities, having carried out research or taken up the relevant contacts, do not have information on the medicinal product concerned. 38 By the present complaint, the Commission is referring to the importation into France of medicinal products not authorised in that Member State but already authorised in the State where they were purchased, which are lawfully prescribed and are intended for personal use. 39 Whereas, under Article R 5142-13 of the Public Health Code, the French regulations exempt from authorisation importation of such medicinal products when they are transported personally by persons who use them, that is not the case when the importation by those persons of the same medicinal products is not effected by personal transport. 40 In respect of the latter imports, the general rules on import authorisations laid down in Articles R 5142-12 and R 5142-14 of the Public Health Code generally apply. 41 The fact that Article L 601-2 of the Public Health Code set up a procedure of temporary authorisation for use applying to patients suffering from serious or rare diseases is not relevant in this case in view of the limited scope of application of that procedure. 42 Although the Commission does not dispute, in this case, that the authorities concerned are free to require an authorisation for the imports covered by this complaint, it rightly claims, however, that it is disproportionate to apply the same authorisation procedure to those imports as it does to medicinal products imported for commercial purposes. 43 Although grounds of health protection may justify restrictions on the free movement of goods between Member States, such measures must comply with the principle of proportionality. They must be confined to what is actually necessary to ensure the safeguarding of public health; they must be proportionate to the objective pursued, which could not have been attained by measures which are less restrictive of intra-Community trade (see Case C-192/01 Commission v Denmark [2003] ECR I-9693, paragraph 45). 44 The French Government has not demonstrated the need to make the imports in question, which would be exempt from requiring authorisation if they had been effected by personal transport, subject to the authorisation procedure applied to commercial imports. 45 So far as concerns the imports referred to by the present complaint, it is for the French authorities to adopt an authorisation procedure adapted to the specific nature of those imports and the restrictive effects on intra-Community trade of which do not go beyond what is necessary to attain the objective pursued (see, concerning a specific procedure relating to parallel imports of medicinal products, the judgment of 12 October 2004 in Case C-263/03 Commission v France, not published in the ECR, paragraphs 19 and 20). 46 That procedure must be easily accessible and capable of being brought to completion within a reasonable period (see Commission v France, paragraph 21). 47 Since it has not laid down those specific rules, the French Republic has not fulfilled its obligations under Article 28 EC.48 Under those circumstances, the present complaint must also be upheld.49 Having regard to all of the foregoing considerations, it must be held that, by applying:– a prior authorisation procedure to personal imports, not effected by personal transport, of medicinal products lawfully prescribed in France and authorised under Directive 65/65, both in France and in the Member State where they are purchased; – a prior authorisation procedure to personal imports, not effected by personal transport, of homeopathic medicinal products lawfully prescribed in France and registered in a Member State pursuant to Directive 92/73; and Costs50 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the French Republic has been unsuccessful, the latter must be ordered to pay the costs. On those grounds, the Court (Second Chamber) hereby:1. Declares that, by applying:– a prior authorisation procedure to personal imports, not effected by personal transport, of medicinal products lawfully prescribed in France and authorised under Council Directive 65/65/EEC of 26 January 1965 on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products, as amended by Council Directive 93/39/EEC of 14 June 1993, both in France and in the Member State where they are purchased;– a prior authorisation procedure to personal imports, not effected by personal transport, of homeopathic medicinal products lawfully prescribed in France and registered in a Member State pursuant to Council Directive 92/73/EEC of 22 September 1992 widening the scope of Directives 65/65/EEC and 75/319/EEC on the approximation of provisions laid down by law, regulation or administrative action relating to medicinal products and laying down additional provisions on homeopathic medicinal products; and– a disproportionate prior authorisation procedure to personal imports, not effected by personal transport, of medicinal products lawfully prescribed in France and not authorised in that Member State but only in the Member State where they are purchased,the French Republic has failed to fulfil its obligations under Article 28 EC;2. Orders the French Republic to pay the costs.[Signatures]* Language of the case: French. | ed7c7-7c00bc0-4d83 | EN |
A COMPANY MAY DEDUCT INPUT TAX ON SUPPLIES RECEIVED IN CONNECTION WITH A NEW SHARE ISSUE PROVIDED THAT ITS ECONOMIC ACTIVITIES ARE SUBJECT TO VAT | Kretztechnik AGvFinanzamt Linz(Reference for a preliminary ruling from the Unabhängiger Finanzsenat, Außenstelle Linz) (Sixth VAT Directive — Supplies for consideration — Share issue — Admission of a company to a stock exchange — Deductibility of VAT)Opinion of Advocate General Jacobs delivered on 24 February 2005 Judgment of the Court (First Chamber), 26 May 2005 Summary of the Judgment1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions — Supplies of goods or services effected for consideration — Meaning — New share issue — Not included(Council Directive 77/388, Art. 2(1))2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax — Tax charged on expenditure incurred for supplies acquired in the context of a share issue — Right to deduct — Condition(Council Directive 77/388, Art. 17(1) and (2))1. A new share issue, whether or not carried out in connection with admission of the company concerned to a stock exchange, does not constitute a transaction falling within the scope of Article 2(1) of Sixth Council Directive (77/388/EEC) on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 95/7. That transaction does not constitute a supply of goods or of services for consideration within the meaning of that provision.(see paras 27-28, operative part 1)2. Article 17(1) and (2) of Sixth Directive 77/388, as amended by Directive 95/7, confer the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions. The costs of those supplies form part of the overheads of the company concerned and are, as such, component parts of the price of its products, as those supplies have a direct and immediate link with the whole economic activity of the taxable person. (see paras 36, 38, operative part 2)JUDGMENT OF THE COURT (First Chamber)26 May 2005 (*) (Sixth VAT Directive – Supplies for consideration – Share issue – Admission of a company to a stock exchange – Deductibility of VAT)In Case C-465/03,REFERENCE for a preliminary ruling under Article 234 EC, by the l’Unabhängiger Finanzsenat, Außenstelle Linz (Austria), by decision of 20 October 2003, received at the Court on 5 November 2003, in the proceedings Finanzamt Linz,THE COURT (First Chamber),composed of P. Jann, President of the Chamber, K. Lenaerts (Rapporteur), J.N. Cunha Rodrigues, M. Ilešič and E. Levits, Judges,Advocate General: F.G. Jacobs,Registrar: M.-F. Contet, Principal Administrator,having regard to the written procedure and further to the hearing on 15 December 2004,after considering the observations submitted on behalf of:– Kretztechnik AG, by P. Farmer, Barrister, assisted by J. Kajus and Professor B. Terra,– Finanzamt Linz, by W. Ritirc, acting as Agent,– the Austrian Government, by H. Dossi, acting as Agent,– the Danish Government, by J. Molde, acting as Agent,– the German Government, by F. Huschens, M. Lumma and A. Tiemann, acting as Agents,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by P. Gentili, Avvocato dello Stato,– the United Kingdom Government, by M. Bethell, acting as Agent, and M. Hall, Barrister, – the Commission of the European Communities, by D. Triantafyllou and K. Gross, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 24 February 2005,gives the followingJudgment1 This request for a preliminary ruling concerns the interpretation of Articles 2 and 17 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), as amended by Council Directive 95/7/EC of 10 April 1995 (OJ 1995 L 102, p. 18, hereinafter ‘the Sixth Directive’). 2 The questions were raised in proceedings between Kretztechnik AG (‘Kretztechnik’) and the Finanzamt Linz (Linz District Tax Office) concerning the latter’s refusal to allow that company to deduct value added tax (‘VAT’) paid by it on supplies relating to the issue of shares for the purposes of its admission to the Frankfurt Stock Exchange (Germany). Legal background The Community legislation3 The second paragraph of Article 2 of First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ English Special Edition, Series I, 1967, p. 14), provides that ‘[o]n each transaction, [VAT], calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of [VAT] borne directly by the various cost components.’ 4 Under Article 2(1) of the Sixth Directive, ‘the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such’ is subject to VAT. 5 Article 4(1) and (2) of the Sixth Directive are worded as follows:‘1. “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity. 2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity.’ 6 Under Article 5(1) of the Sixth Directive, ‘the transfer of the right to dispose of tangible property as owner’ is regarded as a supply of goods. 7 The first subparagraph of Article 6(1) of that directive states that ‘any transaction which does not constitute a supply of goods’ is a supply of services. 8 Article 13B(d)(5) of the Sixth Directive provides that the Member States are to exempt from VAT ‘transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities’. 9 Article 17(1) and (2) of the Sixth Directive provide:‘1. The right to deduct shall arise at the time when the deductible tax becomes chargeable. 2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay: (a) [VAT] due or paid in respect of goods or services supplied or to be supplied to him by another taxable person; …’10 Article 17(5) of the Sixth Directive concerns the deductibility of VAT in those cases where goods or services are used by a taxable person both for transactions giving rise to the right to deduction of VAT and for those not giving rise to that right. In such cases, the first subparagraph of that provision states that ‘only such proportion of the [VAT] shall be deductible as is attributable to the former transactions’. National law11 The Sixth Directive was transposed into Austrian domestic law by the 1994 Law on Turnover Tax (Umsatzsteuergesetz 1994, BGBl. 663/1994), in the version published in 1999 (BGBl. I, 106/1999). The main proceedings and the questions referred to the Court of Justice12 Kretztechnik is a company limited by shares established in Austria whose objects are the development and distribution of medical equipment. By resolution of its general meeting of shareholders of 18 January 2000, its capital was increased from EUR 10 million to EUR 12.5 million. With a view to raising the capital needed for that increase, it applied for admission to the Frankfurt Stock Exchange. 13 Kretztechnik was listed on that stock exchange in March 2000. Its capital was increased by the issue of bearer shares.14 The tax assessment of 5 July 2002 drawn up by the Finanzamt Linz for 2000 did not allow deduction of the input VAT paid by Kretztechnik on the supplies linked with its admission to the stock exchange. Since the issuing of shares is regarded in Austria as being exempt from VAT on the basis of a provision of national law analogous to Article 13B(d)(5) of the Sixth Directive, that company cannot, according to the Finanzamt, avail itself of any right to deduct input VAT. 15 Kretztechnik challenged that tax assessment before the Unabhängiger Finanzsenat, Außenstelle Linz (Independent Tax Tribunal, Linz), which decided to stay its proceedings and seek a preliminary ruling from the Court of Justice on the following questions: ‘1) In becoming listed on a stock market and in issuing shares in that connection to new shareholders in return for the issue price, does a public limited company make a supply for consideration within the meaning of Article 2(1) of [the] Sixth … Directive? 2) If the first question is answered in the affirmative: are Article 2(1) and Article 17 of the Sixth Directive to be interpreted as meaning that all services obtained in connection with a listing on the stock market are to be attributed to an exempt supply and that for that reason there is no right to a deduction of input tax? 3) If the first question is answered in the negative: is there a right under Article 17(1) and (2) of the Sixth Directive to deduct input tax on the ground that the services in respect of which a deduction of input tax is claimed (advertising, agent’s fees, and legal and technical advice) are used for the purposes of the undertaking’s taxable transactions?’ The questions submitted to the Court The first question16 Kretztechnik, the Danish and Italian Governments and the Commission of the European Communities consider that a company does not effect a supply for consideration within the meaning of Article 2(1) of the Sixth Directive when it issues new shares in connection with its admission to a stock exchange. In that regard, they point out that Kretztechnik is entering the stock market in order to finance its business activities as provided for in its statutes and not as part of a commercial activity of dealing in securities. 17 In contrast, the Finanzamt Linz and the Austrian, German and United Kingdom Governments maintain that, even though the mere acquisition and holding of shares in a company is not to be regarded as an economic activity (see Case C‑60/90 Polysar Investments Netherlands [1991] ECR I‑3111; Case C-80/95 Harnas & Helm [1997] ECR I‑745, and Case C-442/01 KapHag [2003] ECR I‑6851), the issue of shares by a taxable person in order to increase its capital with a view to carrying on its economic activity constitutes a taxable transaction within the meaning of Article 2(1) of the Sixth Directive. That interpretation is, in their view, borne out by Article 13B(d)(5) of that directive, which presupposes the existence of a transaction that is, in principle, taxable. 18 In that connection, it must be borne in mind that it is clear from Article 2(1) of the Sixth Directive, which defines the scope of VAT, that, within a Member State, only activities of an economic nature are subject to VAT. Economic activities are defined in Article 4(2) of the Sixth Directive as encompassing all activities of producers, traders and persons supplying services, in particular the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis (KapHag, paragraph 36). 19 It is settled case‑law that the mere acquisition and holding of shares is not to be regarded as an economic activity within the meaning of the Sixth Directive. The mere acquisition of financial holdings in other undertakings does not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis because any dividend yielded by that holding is merely the result of ownership of the property and is not the product of any economic activity within the meaning of that directive (see Harnas & Helm, paragraph 15; KapHag, paragraph 38, and Case C-8/03 Banque Bruxelles Lambert (BBL) [2004] ECR I‑0000, paragraph 38). If, therefore, the acquisition of financial holdings in other undertakings does not in itself constitute an economic activity within the meaning of that directive, the same must be true of activities consisting in the sale of such holdings (see Case C-155/94 Wellcome Trust [1996] ECR I-3013, paragraph 33; KapHag, paragraph 40, and BBL, paragraph 38). 20 On the other hand, transactions that consist in obtaining income on a continuing basis from activities which go beyond the compass of the simple acquisition and sale of securities, such as transactions carried out in the course of a business trading in securities, do fall within the scope of the Sixth Directive but are exempted from VAT under Article 13B(d)(5) of that directive (see Case C-77/01 EDM [2004] ECR I-0000, paragraph 59, and BBL, paragraph 41). 21 As regards the question whether the issue of shares by a company may be regarded as an economic activity within the scope of Article 2(1) of the Sixth Directive, it is important to note, first, that the nature of such a transaction does not differ according to whether it is carried out by a company in connection with its admission to a stock exchange or by a company not quoted on a stock exchange. 22 Second, it must be borne in mind that, under Article 5(1) of the Sixth Directive, a supply of goods involves the transfer of the right to dispose of tangible property as owner. The issue of new shares – which are securities representing intangible property – cannot therefore be regarded as a supply of goods for consideration within the meaning of Article 2(1) of that directive. 23 The taxability of a share issue therefore depends on whether that transaction constitutes a supply of services for consideration within the meaning of Article 2(1) of the Sixth Directive. 24 In that connection the Court has already held that a partnership which admits a partner in consideration of payment of a contribution in cash does not effect to that partner a supply of services for consideration within the meaning of Article 2(1) of the Sixth Directive (KapHag, paragraph 43). 25 The same conclusion must be drawn regarding the issue of shares for the purpose of raising capital.26 As the Advocate General rightly observes in points 59 and 60 of his Opinion, a company that issues new shares is increasing its assets by acquiring additional capital, whilst granting the new shareholders a right of ownership of part of the capital thus increased. From the issuing company’s point of view, the aim is to raise capital and not to provide services. As far as the shareholder is concerned, payment of the sums necessary for the increase of capital is not a payment of consideration but an investment or an employment of capital. 27 It follows that a share issue does not constitute a supply of goods or of services for consideration within the meaning of Article 2(1) of the Sixth Directive. Therefore, such a transaction, whether or not carried out in connection with admission of the company concerned to a stock exchange, does not fall within the scope of that directive. 28 The answer to the first question must therefore be that a new share issue does not constitute a transaction falling within the scope of Article 2(1) of the Sixth Directive. The second question29 In view of the answer given to the first question, it is unnecessary to answer the second. The third question30 By its third question, the national court seeks essentially to ascertain whether Article 17(1) and (2) of the Sixth Directive confer a right to deduction of input VAT paid on supplies linked with a share issue. 31 The Finanzamt Linz and the Austrian, Danish, German and Italian Governments maintain that, since a share issue associated with admission to a stock exchange does not constitute a taxable transaction within the meaning of Article 2(1) of the Sixth Directive, there is no right to deduct the VAT levied on the supplies acquired for consideration for the purposes of that share issue. In contrast to the position in Case C-408/98 Abbey National [2001] ECR I‑1361, in the present case the inputs, which are subject to VAT, do not form an integral part of Kretztechnik’s overall economic activity as a component of the price of the products that it markets. The expenses associated with those supplies are linked only to the admission of the company to a stock exchange and have no connection with its general business on which tax is paid. 32 Conversely, Kretztechnik, the United Kingdom Government and the Commission consider that, even if the inputs subject to VAT were connected not with specific taxable transactions but with expenses relating to the share issue, they could form part of the overheads of the company and constitute components of the price of the products marketed by it. In those circumstances, Kretztechnik has a right to deduct the input VAT on expenditure incurred in obtaining the supplies linked to the admission of that company to a stock exchange (see Case C-4/94 BLP Group [1995] ECR I-983, paragraph 25; Case C.98/98 Midland Bank [2000] ECR I‑4177, paragraph 31, and Abbey National, paragraphs 34 to 36). 33 In that connection, it must be borne in mind that, according to settled case-law, the right of deduction provided for in Articles 17 to 20 of the Sixth Directive is an integral part of the VAT scheme and in principle may not be limited. It must be exercised immediately in respect of all the taxes charged on transactions relating to inputs (see, in particular, Case C-62/93 BP Soupergaz [1995] ECR I‑1883, paragraph 18, and Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others [2000] ECR I‑1577, paragraph 43). 34 The deduction system is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures complete neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see, to that effect, Case 268/83 Rompelman [1985] ECR 655, paragraph 19; Case C-37/95 Ghent Coal Terminal [1998] ECR I-1, paragraph 15; Gabalfrisa and Others, paragraph 44; Midland Bank, paragraph 19, and Abbey National, paragraph 24). 35 It is clear from the last-mentioned condition that, for VAT to be deductible, the input transactions must have a direct and immediate link with the output transactions giving rise to a right of deduction. Thus, the right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see Midland Bank, paragraph 30, and Abbey National, paragraph 28, and also Case C-16/00 Cibo Participations [2001] ECR I-6663, paragraph 31). 36 In this case, in view of the fact that, first, a share issue is an operation not falling within the scope of the Sixth Directive and, second, that operation was carried out by Kretztechnik in order to increase its capital for the benefit of its economic activity in general, it must be considered that the costs of the supplies acquired by that company in connection with the operation concerned form part of its overheads and are therefore, as such, component parts of the price of its products. Those supplies have a direct and immediate link with the whole economic activity of the taxable person (see BLP Group, paragraph 25; Midland Bank, paragraph 31; Abbey National, paragraphs 35 and 36, and Cibo Participations, paragraph 33). 37 It follows that, under Article 17(1) and (2) of the Sixth Directive, Kretztechnik is entitled to deduct all the VAT charged on the expenses incurred by that company for the various supplies which it acquired in the context of the share issue carried out by it, provided, however, that all the transactions carried out by that company in the context of its economic activity constitute taxed transactions. A taxable person who effects both transactions in respect of which VAT is deductible and transactions in respect of which it is not may, under the first subparagraph of Article 17(5) of the Sixth Directive, deduct only that proportion of the VAT which is attributable to the former transactions (Abbey National, paragraph 37, and Cibo Participations, paragraph 34). 38 The answer to the third question must therefore be that Article 17(1) and (2) of the Sixth Directive confer the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions. Costs39 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than those of those parties, are not recoverable. On those grounds, the Court (First Chamber) hereby rules:1. A new share issue does not constitute a transaction falling within the scope of Article 2(1) of Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 95/7/EC of 10 April 1995.2. Article 17(1) and (2) of Sixth Directive 77/388, as amended by Directive 95/7, confer the right to deduct in its entirety the VAT charged on the expenses incurred by a taxable person for the various supplies acquired by him in connection with a share issue, provided that all the transactions undertaken by the taxable person in the context of his economic activity constitute taxed transactions.[Signatures]* Language of the case: German. | f182a-f994b8b-49e3 | EN |
THE COURT DISMISSES THE ACTION BROUGHT AGAINST THE PROGRESSIVE BAN ON ANIMAL TESTING FOR THE PURPOSE OF DEVELOPING AND MARKETING COSMETICS | French RepublicvEuropean ParliamentandCouncil of the European Union(Cosmetic products – Testing on animals – Directive 2003/15/EC – Partial annulment – Article 1(2) – Non-severability – Inadmissibility)Opinion of Advocate General Geelhoed delivered on 17 March 2005 Judgment of the Court (Grand Chamber), 24 May 2005 Summary of the JudgmentActions for annulment — Subject-matter — Partial annulment — Condition — Severability of the contested provisions — Objective criterion — Condition not satisfied — Inadmissibility(Art. 230 EC; European Parliament and the Council Directive 2003/15, Art. 1(1) and (2))Partial annulment of a Community act is possible only if the elements the annulment of which is sought may be severed from the remainder of the act. That requirement of severability is not satisfied in the case where the partial annulment of an act would have the effect of altering its substance. The question whether partial annulment may have such an effect is an objective criterion, and not a subjective criterion linked to the political intention of the authority which adopted the act at issue. It is for that reason necessary to treat as inadmissible an action brought by a Member State seeking annulment of Article 1(2) of Directive 2003/15 amending Directive 76/768 on the approximation of the laws of the Member States relating to cosmetic products in so far as that provision introduces into Directive 76/768 an Article 4a, the purpose of which is, inter alia, to set out the conditions governing the prohibition of marketing cosmetic products containing ingredients or combinations of ingredients that have been tested on animals, while Article 1(1) of Directive 2003/15, which provides for the deletion of Article 4(1)(i) of Directive 76/768, which has similar subject-matter and which Article 4a, as inserted, is intended to replace, as is clear from recital (18) in the preamble to Directive 2003/15, remains in force, inasmuch as the Member State did not request annulment of Article 1(1), even by way of alternative submission. As Article 1(1) and Article 1(2) of Directive 2003/15 are inseparable provisions, the partial annulment requested by the Member State would objectively alter the very substance of the provisions adopted by the Community legislature in regard to testing on animals for the purpose of developing cosmetic products. (see paras 12-16, 20, 21)JUDGMENT OF THE COURT (Grand Chamber)24 May 2005 (*) (Cosmetic products – Testing on animals – Directive 2003/15/EC – Partial annulment – Article 1(2) – Non-severability– Inadmissibility)In Case C-244/03,ACTION for annulment under Article 230 EC, brought on 3 June 2003,French Republic, represented initially by F. Alabrune, C. Lemaire and G. de Bergues, and subsequently by the latter and by J.‑L. Florent and D. Petrausch, acting as Agents, with an address for service in Luxembourg, applicant,European Parliament, represented initially by J.L. Rufas Quintana and M. Moore, and subsequently by the latter and by K. Bradley, acting as Agents, with an address for service in Luxembourg, Council of the European Union, represented by J.‑P. Jacqué and M.C. Giorgi Fort, acting as Agents, defendants,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann and C.W.A. Timmermans, Presidents of Chambers, C. Gulmann, A. La Pergola, J.‑P. Puissochet, R Schintgen, K. Schiemann (Rapporteur), J. Makarczyk, P. Kūris, U. Lõhmus, E. Levits and A. Ó Caoimh, Judges, Advocate General: L.A. Geelhoed,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 18 January 2005,after hearing the Opinion of the Advocate General at the sitting on 17 March 2005,gives the followingJudgment1 By its action, the French Republic is seeking the annulment of Article 1(2) of Directive 2003/15/EC of the European Parliament and of the Council of 27 February 2003 amending Council Directive 76/768/EEC on the approximation of the laws of the Member States relating to cosmetic products (OJ 2003 L 66, p. 26) in so far as that provision introduces an Article 4a into Directive 76/768 (hereinafter ‘the contested provision’). 2 Article 4a (hereinafter ‘the provision in issue’) is worded as follows:‘1. Without prejudice to the general obligations deriving from Article 2, Member States shall prohibit:(a) the marketing of cosmetic products where the final formulation, in order to meet the requirements of this Directive, has been the subject of animal testing using a method other than an alternative method after such alternative method has been validated and adopted at Community level with due regard to the development of validation within the OECD; (b) the marketing of cosmetic products containing ingredients or combinations of ingredients which, in order to meet the requirements of this Directive, have been the subject of animal testing using a method other than an alternative method after such alternative method has been validated and adopted at Community level with due regard to the development of validation within the OECD; (c) the performance on their territory of animal testing of finished cosmetic products in order to meet the requirements of this Directive; (d) the performance on their territory of animal testing of ingredients or combinations of ingredients in order to meet the requirements of this Directive, no later than the date on which such tests are required to be replaced by one or more validated alternative methods listed in Annex V to Council Directive 67/548/EEC of 27 June 1967 on the approximation of laws, regulations and administrative provisions relating to the classification, packaging and labelling of dangerous substances … or in Annex IX to this Directive. No later than 11 September 2004 the Commission shall, in accordance with the procedure referred to in Article 10(2) and after consultation of the Scientific Committee on Cosmetic Products and Non-Food Products intended for consumers (SCCNFP), establish the contents of Annex IX. 2. The Commission, after consultation of the SCCNFP and of the European Centre for the Validation of Alternative Methods (ECVAM) and with due regard to the development of validation within the OECD, shall establish timetables for the implementation of the provisions under paragraph 1(a), (b) and (d), including deadlines for the phasing-out of the various tests. The timetables shall be made available to the public not later than 11 September 2004 and be sent to the European Parliament and the Council. The period for implementation shall be limited to a maximum of six years after the entry into force of Directive 2003/15/EC in relation to paragraph 1(a), (b) and (d). (2.1) In relation to the tests concerning repeated-dose toxicity, reproductive toxicity and toxicokinetics, for which there are no alternatives yet under consideration, the period for implementation of paragraph 1(a) and (b) shall be limited to a maximum of 10 years after the entry into force of Directive 2003/15/EC. (2.2) The Commission shall study possible technical difficulties in complying with the ban in relation to tests, in particular those concerning repeated-dose toxicity, reproductive toxicity and toxicokinetics, for which there are no alternatives yet under consideration. Information about the provisional and final results of these studies should form part of the yearly reports presented pursuant to Article 9. On the basis of these annual reports, the timetables established in accordance with paragraph 2 may be adapted within a maximum time-limit of six years as referred to in paragraph 2 or 10 years as referred to in paragraph 2.1 and after consultation of the entities referred to in paragraph 2. (2.3) The Commission shall study progress and compliance with the deadlines as well as possible technical difficulties in complying with the ban. Information about the provisional and final results of the Commission studies should form part of the yearly reports presented pursuant to Article 9. If these studies conclude, at the latest two years prior to the end of the maximum period referred to in paragraph 2.1, that for technical reasons one or more tests referred to in paragraph 2.1 will not be developed and validated before the expiry of the period referred to in paragraph 2.1, it shall inform the European Parliament and the Council and shall put forward a legislative proposal in accordance with Article 251 of the Treaty. (2.4) In exceptional circumstances where serious concerns arise as regards the safety of an existing cosmetic ingredient a Member State may request the Commission to grant a derogation from paragraph 1. The request shall contain an evaluation of the situation and indicate the measures necessary. On this basis, the Commission may, after consultation of the SCCNFP and by means of a reasoned decision, authorise the derogation in accordance with the procedure referred to in Article 10(2). This authorisation shall lay down the conditions associated with this derogation in terms of specific objectives, duration and reporting of the results. A derogation shall only be granted if:(a) the ingredient is in wide use and cannot be replaced by another ingredient able to perform a similar function; (b) the specific human health problem is substantiated and the need to conduct animal tests is justified and is supported by a detailed research Protocol proposed as the basis for the evaluation. …’3 Article 1(1) of Directive 2003/15 provides for the deletion of Article 4(1)(i) of Directive 76/768. Article 4(1)(i), which was introduced into Directive 76/768 by Council Directive 93/35/EEC of 14 June 1993 amending for the sixth time Directive 76/768 (OJ 1993 L 151, p. 32), provided as follows: ‘Without prejudice to their general obligations deriving from Article 2, Member States shall prohibit the marketing of cosmetic products containing: …(i) ingredients or combinations of ingredients tested on animals after 1 January 1998 in order to meet the requirements of this Directive. If there has been insufficient progress in developing satisfactory methods to replace animal testing, and in particular in those cases where alternative methods of testing, despite all reasonable endeavours, have not been scientifically validated as offering an equivalent level of protection for the consumer, taking into account OECD toxicity test guidelines, the Commission shall, by 1 January 1997, submit draft measures to postpone the date of implementation of this provision, for a sufficient period, and in any case for no less than two years, in accordance with the procedure laid down in Article 10. … 4 The date for the application of the latter provision was first deferred to 30 June 2000 and then to 30 June 2002 by Commission Directive 97/18/EC of 17 April 1997 (OJ 1997 L 114, p. 43) and Commission Directive 2000/41/EC of 19 June 2000 (OJ 2000 L 145, p. 25) respectively. 5 According to recital (18) in the preamble to Directive 2003/15, ‘[the] provisions of Directive 93/35/EEC banning the marketing of cosmetic products containing ingredients or combinations of ingredients tested on animals should be superseded by the provisions of this Directive. In the interests of legal certainty therefore it is appropriate to apply Article 1(1) of this Directive with effect from 1 July 2002, whilst fully respecting the principle of legitimate expectations’. 6 The second paragraph of Article 4 of Directive 2003/15 provides that Article 1(1) thereof is to apply from 1 July 2002. The action7 The French Republic relies on five pleas in support of its action. Primarily, it contends that the provision in issue infringes the principle of legal certainty. In the alternative, the French Republic submits that that provision interferes with the right freely to pursue a trade or profession and infringes the precautionary principle and the principles of proportionality and non-discrimination. It further requests that the defendants be ordered to pay the costs. 8 The Parliament and the Council contest both the admissibility and the merits of the action and submit that the action should be dismissed and the applicant ordered to pay the costs. 9 According to the Parliament, in so far as it provides in point (1) for the removal of the prohibition of marketing hitherto set out in Article 4(1)(i) of Directive 76/768 and in point (2) for the replacement of that prohibition by the system of prohibitions set out in the provision in issue, Article 1 of Directive 2003/15 forms a non-severable whole. To uphold the applicant’s request for partial annulment would amount to legislating by judicial means. The Parliament points out in this regard that the part of Directive 2003/15 which deals with testing on animals was the result of an overall compromise reached within the conciliation committee at the conclusion of particularly difficult discussions involving the Council, the Commission and the Parliament. It is, the Parliament argues, obvious that, particularly in view of the legal context in which the contested provision features, Article 1(1) of Directive 2003/15 would never have been approved without the adoption at the same time of the provision in issue, with the result that those two provisions form a non-severable whole. 10 The Council pointed out during the hearing that it shared the view taken by the Parliament as to the impossibility of granting the partial annulment sought. Such an annulment, in the Council’s view, would adversely affect the substance of Directive 2003/15 and the essential objectives pursued by the Community legislature by bringing about a system opposed in all respects to those objectives. 11 The French Government submits that the contested provision is severable from the other provisions of Directive 2003/15, which continue to produce legal effects. That is the case both with regard to the provisions of that directive concerning the safety of cosmetic products and consumer information and in respect of Article 1(1) of Directive 2003/15 providing for the deletion of Article 4(1)(i) of Directive 76/768 with effect from 30 June 2002. 12 It must be borne in mind in this regard that, as follows from settled case-law, partial annulment of a Community act is possible only if the elements the annulment of which is sought may be severed from the remainder of the act (see, inter alia, Case C-29/99 Commission v Council [2002] ECR I-11221, paragraphs 45 and 46; Case C-378/00 Commission v Parliament and Council [2003] ECR I‑937, paragraph 30; and Case C-239/01 Germany v Commission [2003] ECR I‑10333, paragraph 33). 13 Likewise, the Court has repeatedly ruled that that requirement of severability is not satisfied in the case where the partial annulment of an act would have the effect of altering its substance (Joined Cases C‑68/94 and C-30/95 France and Others v Commission [1998] ECR I‑1375, paragraph 257; Commission v Council, cited above, paragraph 46; and Germany v Commission, cited above, paragraph 34). 14 Admittedly, as the French Government points out, the Court has ruled, in regard to an implementing regulation adopted by the Commission, that the question whether partial annulment may alter the substance of the contested act is an objective criterion, and not a subjective criterion linked to the political intention of the authority which adopted the act at issue (Germany v Commission, cited above, paragraph 37). 15 In the present case, however, the unavoidable conclusion is that annulment of the contested provision, while Article 1(1) of Directive 2003/15 continues to apply, would objectively alter the very substance of the provisions adopted by the Community legislature in regard to testing on animals for the purpose of developing cosmetic products, as those provisions, moreover, constitute one of the principal axes of that directive. 16 The provision in issue, the grounds for the adoption of which are set out in the first 10 recitals in the preamble to Directive 2003/15, is, as becomes clear from recital (18) in that preamble, intended to ‘supersede’ Article 4(1)(i) of Directive 76/768. 17 As they have in part the same objective, that is to say, to set out in clearer terms the conditions governing the prohibition of marketing cosmetic products containing ingredients or combinations of ingredients that have been tested on animals, those two provisions, as the Parliament has correctly pointed out, could not have co-existed. The repeal of the former provision appears in this case as the consequence of the adoption of the new provision, a fact noted in recital (18) in the preamble to Directive 2003/15. 18 Furthermore, the connection between the provision in issue and that which it replaces is also emphasised by recital (4) in the preamble to Directive 2003/15, which states that ‘[in] accordance with Directive 86/609/EEC and with Directive 93/35/EEC, it is essential that the aim of abolishing animal experiments for testing cosmetic products be pursued and that the prohibition of such experiments becomes effective in the territory of the Member States’. 19 In those circumstances, the view must be taken that the inclusion of the provision in issue in Directive 76/768 and the deletion of Article 4(1)(i) of Directive 76/768 constitute a non-severable whole. 20 As the contested provision is thus non-severable from Article 1(1) of Directive 2003/15, it follows that the partial annulment requested by the applicant is impossible. 21 As the applicant has not requested, even by way of alternative submission, the annulment of Article 1(1), and as it, moreover, stressed in its reply and pointed out at the hearing that such a request by it would have been meaningless and that it was not seeking annulment of that provision, it must necessarily be held that the action is inadmissible (see the above judgments in Commission v Council, paragraphs 45 to 51, Commission v Parliament and Council, paragraphs 29 and 30, and Germany v Commission, paragraphs 33 to 38). Costs22 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Parliament and the Council have applied for costs to be awarded against the French Republic and the latter has been unsuccessful, the French Republic must be ordered to pay the costs. On those grounds, the Court (Grand Chamber) hereby:1. Dismisses the action;2. Orders the French Republic to pay the costs.[Signatures]* Language of the case: French. | ca6bd-e64e4e2-4383 | EN |
JUDGMENT GIVEN AGAINST GREECE FOR NOT TAKING ALL THE MEASURES NECESSARY FOR REPAYMENT OF THE AID GRANTED TO OLYMPIC AIRWAYS WHICH WAS FOUND TO BE INCOMPATIBLE WITH THE COMMON MARKET | Commission of the European CommunitiesvHellenic Republic(State aid – Obligation to recover – Absolute impossibility of implementation – Absence)Opinion of Advocate General Geelhoed delivered on 1 February 2005 Judgment of the Court (Second Chamber), 12 May 2005 Summary of the Judgment1. Actions for failure to fulfil obligations — Failure to comply with the obligation to recover aid granted — Grounds of defence — Absolute impossibility of implementation — Assessment criteria — Difficulties in implementation — Obligation on the Commission and the Member State to cooperate in seeking a solution consistent with the Treaty(Arts 10 EC and 88(2) EC)2. Actions for failure to fulfil obligations — Failure to comply with a Commission decision relating to State aid — Grounds of defence — Plea questioning the lawfulness of the decision — Inadmissible3. State aid — Commission decision finding aid to be incompatible with the common market and ordering it to be repaid — Commission’s power to leave the calculation of the exact amount to be repaid to the national authorities1. The only defence available to a Member State in opposing an application by the Commission under Article 88(2) EC for a declaration that it has failed to fulfil its Treaty obligations is to plead that it was absolutely impossible for it properly to implement the decision ordering recovery of the aid in question. The condition that it be absolutely impossible to implement a decision is not fulfilled, as regards a Commission decision relating to State aid, where the defendant government merely informs the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real step to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled those difficulties to be overcome. Where the implementation of such a decision encounters only a certain number of national difficulties, the Commission and the Member State concerned must respect the principle underlying Article 10 EC, which imposes a duty of genuine cooperation on the Member States and the Community institutions, and must work together in good faith with a view to overcoming difficulties whilst fully observing the Treaty provisions, and in particular the provisions on State aid. (see paras 35, 42-43)2. In the context of an action which concerns the failure to implement a decision on State aid which has not been referred to the Court by the Member State to which it is addressed, the latter is not justified in challenging the lawfulness of such a decision. (see para. 38)3. No provision of Community law requires the Commission, when ordering the recovery of aid declared incompatible with the common market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission’s decision to include information enabling the recipient to work out himself, without overmuch difficulty, that amount. The Commission can therefore legitimately confine itself to declaring that there is an obligation to repay the aid in question and leave it to the national authorities to calculate the exact amounts to be repaid. Furthermore, as the operative part of a decision on State aid is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption, the amounts to be repaid pursuant to the Commission’s decision can be established by reading the grounds thereof. (see paras 39-41)JUDGMENT OF THE COURT (Second Chamber)12 May 2005 (*) In Case C-415/03,ACTION under Article 88(2) EC for failure to fulfil obligations, brought on 25 September 2003,Commission of the European Communities, represented by D. Triantafyllou and J. Buendía Sierra, acting as Agents, with an address for service in Luxembourg, applicant,Hellenic Republic, represented by A. Samoni-Rantou, and by P. Mylonopoulos, F. Spathopoulos and P. Anestis, acting as Agents, with an address for service in Luxembourg, defendant,THE COURT (Second Chamber),composed of C.W.A. Timmermans, President of the Chamber, R. Silva de Lapuerta (Rapporteur), R. Schintgen, G. Arestis and J. Klučka, Judges, Advocate General: L.A. Geelhoed,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 8 December 2004,after hearing the Opinion of the Advocate General at the sitting on 1 February 2005,gives the followingJudgment1 By its action, the Commission of the European Communities asks the Court to declare that, by failing to take within the prescribed period all the measures necessary for repayment of the aid found to be unlawful and incompatible with the common market – except that relating to the contributions to the national social security institution (‘the IKA’) –, in accordance with Article 3 of Commission Decision 2003/372/EC of 11 December 2002 on aid granted by Greece to Olympic Airways (OJ 2003 L 132, p. 1), or, in any event, by failing to inform it of the measures taken pursuant to Article 4 of that decision, the Hellenic Republic has failed to fulfil its obligations under Articles 3 and 4 of that decision and the EC Treaty. Background to the dispute2 In 1996 the Commission initiated against the Hellenic Republic the procedure laid down in Article 93(2) of the EC Treaty (now Article 88(2) EC), which led to the adoption of Commission Decision 1999/332/EC of 14 August 1998 on aid granted by Greece to Olympic Airways (OJ 1999 L 128, p. 1; ‘the approval decision’) concerning guarantees, the reduction and conversion to equity of debts approved in 1994, and also other guarantees and capital injections totalling GRD 40.8 billion, to be paid in three instalments of GRD 19, 14 and 7.8 billion. The grant of that aid was coupled with a revised restructuring plan for the period from 1998 to 2002 and was subject to special conditions. 3 Following further complaints about the grant of aid to Olympic Airways, the Commission, by decision of 6 March 2002, initiated the procedure laid down in Article 88(2) EC, on the ground that the company’s restructuring plan had not been implemented and that some of the conditions laid down by the approval decision had not been fulfilled. That decision required the Hellenic Republic to provide the Commission with information pursuant to Article 10 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 88 of the EC Treaty (OJ 1999 L 83, p. 1). 4 On 9 August 2002 the Commission addressed to the Hellenic Republic a further injunction to provide the information previously requested, requiring in particular the production by the latter of the accounts and figures relating to the payment of operating costs to the State. The replies given by the Greek authorities on this subject were deemed insufficient by the Commission. 5 On 11 December 2002 the Commission approved Decision 2003/372, which is based in particular on the findings that most of the objectives of the Olympic Airways restructuring plan had not been attained, that the conditions imposed by the approval decision had not been fully met and that the approval decision was wrongly implemented. In addition, the Commission refers to the existence of new operating aid, which consists, in essence, in the toleration by the Greek State of the non-payment, or deferment of the payment dates, of social security contributions for October to December 2001, value added tax (‘VAT’) on fuel and spare parts, rent payable to airports for the period 1998 to 2001, airport charges and a tax imposed on passengers on departure from Greek airports, called ‘spatosimo’. 6 The operative part of Decision 2003/372 is worded as follows:‘Article 1The restructuring aid granted by Greece to Olympic Airways in the form of:(a) loan guarantees extended to the company until 7 October 1994 pursuant to Article 6 of Greek Law No 96/75 of 26 June 1975;(b) new loan guarantees totalling USD 378 million for loans to be contracted before 31 March 2001 for the purchase of new aircraft and for investment necessary for the relocation of Olympic Airways to the new airport in Spata; (c) easing of the undertaking’s debt burden by GRD 427 billion; (d) conversion of GRD 64 billion of the undertaking’s debt to equity;(e) a capital injection of GRD 54 billion reduced to GRD 40.8 billion in three instalments of GRD 19, 14 and 7.8 billion in 1995, 1998 and 1999 respectively, is considered to be incompatible with the common market within the meaning of Article 87(1) of the Treaty, as the following conditions, under which the initial authorisation of the aid has been granted, are no longer met: (a) the full implementation of the restructuring plan aimed at the achievement of the long-term viability of the company;(b) the observance of 24 specific undertakings attached to the authorisation of the aid, and(c) the regular monitoring of the implementation of the restructuring aid.Article 2The State aid which Greece has implemented in the form of tolerance of a persistent non-payment of social security obligations, of VAT on fuel and spare parts payable by Olympic Aviation, of rentals for different airports, of airport charges payable to Athens International Airport and other airports, of Spatosimo tax is incompatible with the common market. Article 31. Greece shall take the necessary measures to recover from the beneficiary the aid of GRD 14 billion (EUR 41 million) referred to in Article 1 which is not compatible with the Treaty and the aid referred to in Article 2 and unlawfully made available to the beneficiary. 2. Recovery shall be effected without delay and in accordance with the procedures of national law provided they allow the immediate and effective execution of the decision. The aid to be recovered shall include interest from the date on which the aid was at the disposal of the beneficiary until the date of its recovery. Interest shall be calculated on the basis of the reference rate used for calculating the grant-equivalent of regional aid. Article 4Greece shall inform the Commission within a period of two months from the date of notification of the present Decision of the measures to be taken to comply with it. …’7 On 11 February 2003 the Greek Government informed the Commission that it had instructed an independent expert to ascertain whether Olympic Airways had debts to the State outstanding, and whether it had received preferential treatment. On the basis of the information thus obtained, the Government stated that it would not implement Articles 3 and 4 of Decision 2003/372. 8 On 6 March 2003 the Commission informed the Greek Government that it was required to comply with Decision 2003/372. On 12 May 2003 the Commission sent the Government a notice with additional explanations as to the quantification of the further aid and requesting detailed information on the arrangements for the repayment of EUR 41 million, representing the second instalment of the injection of capital, together with proof of payment by Olympic Airways of the debts referred to in Article 2 of the aforementioned decision. 9 The Greek authorities replied by letter of 26 June 2003. With regard to the repayment of the sum of EUR 41 million, they stated first that they intended to take a decision to recover that aid before the end of August 2003 and, second, that the legal effects of Decision 2003/372 as well as the procedure which the Commission had followed in adopting it were being ‘examined’. They also noted that Olympic Airways was about to settle its debt of EUR 2.46 million relating to rents due to Greek airports. 10 With regard to the debt totalling EUR 27.4 million owed to the IKA, the Greek authorities referred to an agreement reached between Olympic Airways and the IKA, as well as to a payment to the latter of EUR 5.28 million, so that there was no longer any question of ‘forbearance in relation to a debt’ for the benefit of Olympic Airways. 11 As regards the debt of EUR 33.9 million in respect of airport charges owed to Spata airport, the Greek authorities claimed that they had no powers because of the mode of administration of that airport. However, they referred to a payment of EUR 4.83 million made on the basis of an agreement reached in that connection, and produced proof of payment of that sum by Olympic Airways. The agreement also provides for the debt to be settled in 12 quarterly payments. The authorities stated that the total amount of the debt will be repaid by April 2005. 12 As for the debt of EUR 61 million, which corresponds to the ‘spatosimo’ tax, the Greek authorities argued that a payment of EUR 22.8 million had been made on the basis of agreements reached in that connection. They produced supporting documents for that amount and for other payments. Regarding the debt of EUR 28.9 million owed to ministries and public institutions, the Greek authorities pleaded that they had no details of the repayment liabilities, as they had no specific particulars of the air tickets issued to employees of those ministries. 13 Since it was not satisfied with the explanations provided by the Hellenic Republic, the Commission brought the present action. The action Arguments of the parties14 With regard to the second instalment of the capital injection of EUR 41 million, which had been approved in 1998, the Commission notes that the Greek authorities have not recovered this amount from Olympic Airways. 15 The Commission submits that the Greek authorities have not pleaded that it is absolutely impossible to implement Decision 2003/372. The authorities have merely issued a demand for payment and notification thereof, and made a declaration according to which those measures have become the subject of an objection together with an application for a stay of enforcement of the demand, which means that there has been no restitution. 16 The Commission notes that, in spite of the adoption of Decision 2003/372, the measures taken have permitted the transfer, without any consideration, of not only the personnel of Olympic Airways, but also its most profitable assets, free of all the company’s debts, to a new company called ‘Olympic Airlines’, and have made it impossible to recover the former company’s debts from the new firm. The latter, to which the liabilities of Olympic Airways were not transferred, is therefore placed under a regime of special protection with regard to the creditors of the former. 17 According to the Commission, by that transfer, the Greek authorities have prevented the recovery of the aid, since Olympic Airways mainly retains the liabilities without having assets capable of discharging the corresponding debts. 18 With regard to the airport charges owed, the Commission argues that the schedule for payment of those charges constitutes a new financial facility and an unauthorised postponement of the implementation of Decision 2003/372. It adds that the schedule has furthermore not been complied with. Indeed, the first payment was made five months late and represented only part of the sum due. In addition, the amount paid in June 2003 did not correspond to the four quarterly payments which were due by April 2003. 19 According to the Commission, it has been given no information about the payment of VAT on fuel and spare parts.20 With regard to the ‘spatosimo’ tax, the Commission claims that the grant of facilities extending over a further four years for the settlement of that tax gives Olympic Airways a further financial benefit and exceeds the parameters of the implementation of Decision 2003/372 within the time-limits laid down therein. 21 The Commission emphasises that, apart from rare exceptions in relation to certain amounts, the majority of the aid due to be repaid remains in the possession of the beneficiary company. Furthermore, potential legal difficulties, such as those relating to the entry of debts in the corresponding budget or to the requirements of the State revenue code, cannot justify an absolute inability to implement Decision 2003/372. 22 Lastly, the Commission rejects the argument concerning the forbearance which a private investor would have shown, faced with persistent non-payment of the sums in issue. Applying that test and taking account of the many aid payments made in the last 10 years, Decision 2003/372 rightly considered that a private creditor would not have tolerated such persistent non-payment of the debts in issue. 23 As a preliminary point, the Greek Government considers that the matters raised by the Commission, in relation to the transfer of not only the personnel but also the most profitable assets of the former company Olympic Airways to the new company Olympic Airlines, constitute an inadmissible argument in the context of the present proceedings, because of the examination procedure initiated by a decision of the Commission of 16 March 2004, which relates to the same operation. 24 As for Olympic Airways’ debt to the State of EUR 41 million, the Greek Government considers that it has complied with Article 3 of Decision 2003/372. Pursuant to that decision, the competent tax authority issued a document confirming the debt, plus interest. That document constituted the writ of execution needed for the recovery of the sum due, so that the Greek authorities complied with the requirements of the decision by implementing all the means available under the national legal system for recovering that sum. 25 So far as the other financial interventions are concerned, the Greek Government argues that Decision 2003/372 does not specify whether the sums referred to therein are definitive as to the amount of State aid to be recovered and that, as far as payments or facilities are concerned, that decision also does not identify expressly and clearly the amounts concerned. 26 The Greek Government notes that the recovery of the sums which the Commission regards as State aid in favour of Olympic Airways must be carried out in accordance with the national provisions relating to the procedure for recovering public revenue. According to those provisions, the recovery from individuals and undertakings of debts owed to the State requires that the sums due have first been established precisely. 27 The Government argues that Article 2 of Decision 2003/372 does not state the amount of the sums corresponding to the further State aid paid to Olympic Airways which has been described as incompatible with the common market. As regards the detail of those sums, it appears only in the grounds for the decision, in a fragmentary and unclear manner, yet without it being specified whether those sums constitute the definitive amount of State aid to be recovered. 28 In any event, according to the Greek Government, the various sums which appear in the accounts of Olympic Airways as the company’s debts and charges do not fall within the concept of aid. As a result, determining State aid in cases of outstanding and unrecovered debts requires an assessment of the actual amount of the benefit resulting from a possible toleration of non-payment. 29 According to the Greek Government the rents due to Greek airports are the subject of a procedure for a declaration by the tax authority so that the period for recovery may begin. The VAT relating to spare parts and fuel has to be paid, together with statutory penalties and increases, on the basis of the VAT return for 2003. 30 As for the charges owed to Spata Airport, the Greek Government claims that it does not have the power to order that the sum concerned be recovered from Olympic Airways. Spata Airport is a company established under private law and, although the State controls 55% of its capital, it is subject to the legal framework laid down in the company’s articles of association and in the development agreement for that airport. According to that legal framework, the management of that company is solely responsible for decisions relating to the settlement of charges due and to the conclusion of debt settlement agreements. 31 So far as the so-called ‘spatosimo’ tax is concerned, the Greek Government refers to a certain number of payments as well as to a debt settlement agreement. Findings of the Court32 With regard to the obligation set out in Article 3(1) of Decision 2003/372 concerning the recovery from the beneficiary company of EUR 41 million, and taking into account the reservations expressed by the Hellenic Republic concerning the admissibility of the Commission’s argument that the transfer of not only the personnel, but also the most profitable assets of the company Olympic Airways to the new company Olympic Airlines made the recovery of the aid granted more difficult, it must be stressed that, as the Advocate General rightly states in points 27 and 28 of his Opinion, the fact that that operation is the subject of another examination as to its nature as State aid is irrelevant to the issue whether such an operation constitutes an obstacle to the recovery of aid that was granted earlier. In the context of the present proceedings, the only issue is that of determining whether this transfer creates obstacles to the implementation of the aforementioned decision. 33 On that point, it must be noted that, as shown by the information given by the Commission which is not disputed by the Greek Government, the operation in issue transferred all the assets of the company Olympic Airways, free of all debts, to the new company Olympic Airlines. It must be added that that operation was structured in such a way as to make it impossible, under national law, to recover the debts of the former company Olympic Airways from the new company Olympic Airlines. 34 That being the case, the operation created an obstacle to the effective implementation of Decision 2003/372 and to the recovery of the aid by means of which the Greek State had supported the commercial activities of that company. The purpose of that decision, which aims to restore undistorted competition in the civil aviation sector, was thus seriously compromised. 35 It must be added that the action taken by the Greek authorities, that is to say, the adoption of a decision to proceed with recovery of Olympic Airways’ debt of EUR 41 million, had no real effect with regard to the actual reimbursement of that sum by the company. Furthermore, the Greek Government did not provide any explanation as to why it might be absolutely impossible to proceed with the recovery of that debt. According to settled case-law, the only defence available to a Member State in opposing an application by the Commission under Article 88(2) EC for a declaration that it has failed to fulfil its Treaty obligations is to plead that it was absolutely impossible for it properly to implement the decision ordering recovery (see, in particular, Case C-280/95 Commission v Italy [1998] ECR I-259, paragraph 13, and Case C‑378/98 Commission v Belgium [2001] ECR I-5107, paragraph 30). 36 In those circumstances, it must be declared that the Hellenic Republic has failed to fulfil its obligation to recover the amount referred to in Article 3(1) of Decision 2003/372. 37 So far as concerns the obligation to recover the other amounts of aid declared incompatible with the common market, referred to in Article 2 of Decision 2003/372, it must be emphasised at the outset that the various kinds of payments concerned as well as their technical features have been detailed in points 206 to 208 of the grounds of the decision. They are, in particular, airport charges, payment obligations in relation to VAT, contractual obligations to pay rent to the airports, as well as taxes, the non-payment or deferred payment of which was tolerated by the Greek authorities. 38 As for the argument of the Hellenic Republic in relation to the absence of a financial benefit as a result of the forbearance which a private investor would have shown towards the persistent non-payment of certain sums, it must be noted that that argument calls into question the lawfulness of Decision 2003/372. In the context of the present action, which concerns the failure to implement a decision on State aid which has not been referred to the Court by the Member State to which it is addressed, the latter is not justified in challenging the lawfulness of such a decision (see, in particular, Case C-404/97 Commission v Portugal [2000] ECR I-4897, paragraph 34, and Case C-261/99 Commission v France [2001] ECR I‑2537, paragraph 18). Consequently, the classification in Decision 2003/372 of the persistent non-payment of the various debts of Olympic Airways as State aid cannot be called into question in the context of the present proceedings. 39 As regards the argument of the Hellenic Republic that, as far as the various kinds of payments referred to in Article 2 of Decision 2003/372 are concerned, the decision cannot be implemented because of the absence of precise information about the sums to be recovered, it should be observed that, according to the case-law of the Court, no provision of Community law requires the Commission, when ordering the recovery of aid declared incompatible with the common market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission's decision to include information enabling the recipient to work out himself, without overmuch difficulty, that amount (see, in particular, Case C-480/98 Spain v Commission [2000] ECR I-8717, paragraph 25). 40 The Commission was therefore able legitimately to confine itself to declaring that there is an obligation to repay the aid in question and leave it to the national authorities to calculate the exact amounts to be repaid. 41 It must be added that, according to the settled case-law of the Court, whereby the operative part of a decision on State aid is indissociably linked to the statement of reasons for it, so that, when it has to be interpreted, account must be taken of the reasons which led to its adoption (see, in particular, Case C-355/95 P TWD v Commission [1997] ECR I-2549, paragraph 21), the amounts to be repaid pursuant to Decision 2003/372 can be established by reading Article 2 in conjunction with points 206 to 208 of the grounds thereof. 42 With regard to the argument of the Hellenic Republic that the implementation of Decision 2003/372 has encountered a certain number of national difficulties, it should be observed that, in such a situation, the Commission and the Member State concerned must respect the principle underlying Article 10 EC, which imposes a duty of genuine cooperation on the Member States and the Community institutions, and must work together in good faith with a view to overcoming difficulties whilst fully observing the Treaty provisions, and in particular the provisions on State aid (see Case C-348/93 Commission v Italy [1995] ECR I-673, paragraph 17, and Commission v France, cited above, paragraph 24). That has not happened in this case. 43 It must be added that the Hellenic Republic has also not pleaded the absolute impossibility of proceeding with the diligent performance of its obligations under Articles 2 and 3 of Decision 2003/372. It is apparent from the settled case-law of the Court that the condition that it be absolutely impossible to implement a decision is not fulfilled where the defendant government merely informs the Commission of the legal, political or practical difficulties involved in implementing the decision, without taking any real step to recover the aid from the undertakings concerned, and without proposing to the Commission any alternative arrangements for implementing the decision which could have enabled those difficulties to be overcome (see, in particular, Case 94/87 Commission v Germany [1989] ECR 175, paragraph 10, and Case C‑499/99 Commission v Spain [2002] ECR I-6031, paragraph 25). 44 Furthermore, it is apparent from the statements of the Hellenic Republic concerning the efforts made by the national authorities to recover the aid referred to in Articles 2 and 3(1) of Decision 2003/372 that the authorities have restricted themselves to a certain number of procedural and administrative steps, partial arrangements for the settlement of debts and offset operations. Those initiatives which, moreover, were late or incomplete or without binding effect and which, in any event, did not result in the actual recovery of the sums owed by Olympic Airways, cannot be regarded as complying with the obligations of Member States in relation to the recovery of State aid. 45 It follows from all the foregoing that the Commission’s application must be held to be well founded.46 Consequently, it must be declared that, by failing to take within the prescribed period all the measures necessary for repayment of the aid found to be unlawful and incompatible with the common market – except that relating to the contributions to the IKA –, in accordance with Article 3 of Decision 2003/372, the Hellenic Republic has failed to fulfil its obligations under that article. Costs47 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission applied for costs and the Hellenic Republic has been unsuccessful, the latter must be ordered to pay the costs. On those grounds, the Court (Second Chamber) hereby:1. Declares that, by failing to take within the prescribed period all the measures necessary for repayment of the aid found to be unlawful and incompatible with the common market – except that relating to the contributions to the national social security institution –, in accordance with Article 3 of Commission Decision 2003/372/EC of 11 December 2002 on aid granted by Greece to Olympic Airways, the Hellenic Republic has failed to fulfil its obligations under that article;2. Orders the Hellenic Republic to pay the costs.[Signatures]* Language of the case: Greek. | 5450b-ca6c99f-4238 | EN |
THE PROHIBITION ON USING THE NAME "TOCAI' FOR CERTAIN ITALIAN WINES, ARISING FROM AN AGREEMENT BETWEEN THE EUROPEAN COMMUNITY AND THE REPUBLIC OF HUNGARY, IS VALID AS REGARDS THE ASPECTS EXAMINED BY THE COURT | Regione autonoma Friuli-Venezia Giulia andAgenzia regionale per lo sviluppo rurale (ERSA)vMinistero delle Politiche Agricole e Forestali(Reference for a preliminary ruling from the Tribunale amministrativo regionale del Lazio)(External relations – EC-Hungary Agreement on the reciprocal protection and control of wine names – Protection in the Community of a name relating to certain wines originating in Hungary – Geographical indication ‘Tokaj’ – Exchange of letters – Possibility of using the word ‘Tocai’ in the term ‘Tocai friulano’ or ‘Tocai italico’ for the description and presentation of certain Italian wines, in particular quality wines produced in specified regions (‘quality wines psr’), during a transitional period expiring on 31 March 2007 – Exclusion of that possibility at the end of the transitional period – Validity – Legal basis – Article 133 EC – Principles of international law relating to treaties – Articles 22 to 24 of the TRIPs Agreement – Protection of fundamental rights – Right to property) Opinion of Advocate General Jacobs delivered on 16 December 2004 Judgment of the Court (Second Chamber), 12 May 2005 Summary of the Judgment1. International agreements — Agreements entered into by the Community — Conclusion — EC-Hungary Agreement on the reciprocal protection and control of wine names — Legal basis — Article 133 EC(Art. 133 EC; EC-Hungary Association Agreement; EC-Hungary Agreement on wines)2. International agreements — Agreements entered into by the Community — EC‑Hungary Agreement on the reciprocal protection and control of wine names — Rules governing geographical homonyms — Conditions for application — Name ‘Tocai’ for Italian wines and ‘Tokaj’ for Hungarian wines — Name ‘Tocai’ not a protected geographical indication — Exchange of letters prohibiting the use of that name — Infringement of those rules — None(EC-Hungary Agreement on wines, Art. 4(5))3. International agreements — Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) — Homonymity between a geographical indication of a third country and a name including the name of a vine variety used for the description and presentation of certain Community wines — Right, recognised in the agreement, for producers who have used that name traditionally and in good faith to continue to use it — None(TRIPs Agreement, Arts 22 to 24)4. Community law — Principles — Fundamental rights — Right to property — Restrictions — Prohibition on use of the name ‘Tocai’ for Italian wines — None — Prohibition pursuing an aim of general interest(Protocol No 1 to the European Convention of Human Rights, Art. 1, first para.; EC‑Hungary Agreement on wines)1. The European Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part, is not the legal basis of Decision 93/724 concerning the conclusion of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names. The appropriate legal basis for the conclusion by the Community alone of the latter agreement is Article 133 EC, as referred to in the preamble to Decision 93/724, an article which confers on the Community competence in the field of the common commercial policy. That agreement is part of those laid down in Article 63 of Regulation No 822/87 on the common organisation of the market in wine and its principal objective is to promote trade between the Contracting Parties by facilitating on a reciprocal basis, on the one hand, the marketing of wines originating in Hungary by guaranteeing those wines the same protection as that provided for in respect of quality wines produced in a specified region of Community origin and, on the other, the marketing in that country of wines originating in the Community. (see paras 70, 79-80, 83, operative part 1-2)2. The rules governing homonyms laid down in Article 4(5) of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names (EC-Hungary Agreement on wines) concern geographical indications protected by virtue of that agreement. Since the terms ‘Tocai friulano’ and ‘Tocai italico’, unlike the Hungarian wine names ‘Tokaj’ and ‘Tokaji’, do not appear in part A of the Annex to the EC-Hungary Agreement on wines and are the name of a vine or vine variety recognised in Italy as being suitable for the production of certain quality wines produced in a specified region, they cannot be classed as geographical indications within the meaning of that agreement. It follows that the prohibition of use of the name ‘Tocai’ in Italy after the expiry of the transitional period laid down in the EC-Hungary Agreement on wines, resulting from the exchange of letters concerning Article 4 of that agreement, is not contrary to the rules governing homonyms laid down in Article 4(5) of that agreement. It also follows that the Joint Declaration concerning Article 4(5) of the EC‑Hungary Agreement on wines, in so far as it states in the first paragraph that, in respect of Article 4(5)(a) of that agreement, the Contracting Parties noted that at the time of the negotiations they were not aware of any specific case to which the provisions referred to could be applicable, is not a clear misrepresentation of reality. (see paras 87-88, 90, 92, 98, 102, operative part 3-4)3. Articles 22 to 24 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs), set out in Annex 1 C to the Agreement establishing the World Trade Organisation, are to be interpreted as meaning that, in a case which concerns homonymity between a geographical indication of a third country and a name including the name of a vine variety used for the description and presentation of certain Community wines made from it, those provisions, even though they do not prohibit the continued and similar use of such a name, also do not require that that name may continue to be used in the future notwithstanding the twofold circumstance that it has been used in the past by the producers concerned either in good faith or for at least 10 years prior to 15 April 1994 and that it clearly identifies the country, region or area of origin of the protected wine in such a way as not to mislead the consumer. (see paras 110, 115, operative part 5)4. The right to property does not preclude the prohibition on use by the operators concerned in an autonomous Italian region of the word ‘Tocai’ in the term ‘Tocai friulano’ or ‘Tocai italico’ for the description and presentation of certain Italian quality wines produced in a specified region at the end of a 13-year transitional period, resulting from the exchange of letters concerning the use of the word ‘Tocai’, annexed to the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names but not referred to in the latter. That prohibition, in so far as it does not exclude any reasonable method of marketing the Italian wines concerned, does not constitute a deprivation of possessions as referred to in the first paragraph of Article 1 of Protocol No 1 to the European Convention on Human Rights. In addition, even if it were shown that that restriction were to entail a restriction of the fundamental right to property, that restriction may be justified in so far as, by prohibiting the use of that name which is a homonym of the ‘Tokaj’ geographical indication of Hungarian wines, it pursues an aim of general interest, which is to promote trade between the Contracting Parties by facilitating on a reciprocal basis the marketing of wines which are described or presented using a geographical indication. (see paras 122, 127, 134, operative part 6)JUDGMENT OF THE COURT (Second Chamber)12 May 2005 (*) In Case C‑347/03,REFERENCE for a preliminary ruling under Article 234 EC from the Tribunale amministrativo regionale del Lazio (Italy), made by decision of 9 June 2003, received at the Court on 7 August 2003, in the proceedings Regione autonoma Friuli-Venezia Giulia and Agenzia regionale per lo sviluppo rurale (ERSA)Ministero delle Politiche Agricole e Forestali,third party:Regione Veneto,THE COURT (Second Chamber),composed of C.W.A. Timmermans (Rapporteur), President of the Chamber, R. Silva de Lapuerta, R. Schintgen, G. Arestis and J. Klučka, Judges, Advocate General: F.G. Jacobs,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 14 October 2004,after considering the observations submitted on behalf of:– Regione autonoma Friuli-Venezia Giulia and Agenzia regionale per lo sviluppo rurale (ERSA), by E. Bevilacqua and F. Capelli, avvocati, – the Italian Government, by I.M. Braguglia, acting as Agent, and M. Fiorilli, avvocato dello Stato,– the Hungarian Government, by J. Fazekas and M. Ficsor, acting as Agents,– the Council of the European Union, by F. Ruggeri Laderchi and F. Florindo Gijón, acting as Agents,– the Commission of the European Communities, by E. Righini et F. Dintilhac, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 16 December 2004,gives the followingJudgment1 The reference for a preliminary ruling concerns the validity and interpretation of Council Decision 93/724/EC of 23 November 1993 concerning the conclusion of an Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names (OJ 1993 L 337, p. 93, ‘the EC‑Hungary Agreement on wines’) and of Commission Regulation (EC) No 753/2002 of 29 April 2002 laying down certain rules for applying Council Regulation (EC) No 1493/1999 as regards the description, designation, presentation and protection of certain wine sector products (OJ 2002 L 118, p. 1). 2 That reference was made in proceedings between the Regione autonoma Friuli‑Venezia Giulia (Autonomous region of Friuli-Venezia Giulia) and the Agenzia regionale per lo sviluppo rurale (Regional Agency for Rural Development, ERSA) (together, ‘the Region and ERSA’) and the Ministero della Politiche Agricole e Forestali (Italian Ministry of Agricultural and Forestry Policy). 3 Those proceedings concern an application for annulment of the Ministerial Decree of 26 September 2002 laying down national conditions for the use, in derogation from Article 19(1)(c) of Regulation (EC) No 753/2002, of the names of vine varieties and their synonyms including a geographical indication, listed in Annex II to that regulation, which may appear on the labelling of Italian [quality wines produced in specified regions] and [typical geographical indications] (GURI No 247 of 21 October 2002, p. 3, ‘the Decree of 26 September 2002’), in so far as it precludes the use of the word ‘Tocai’ in the term ‘Tocai friulano’ or its synonym ‘Tocai italico’ for the description and presentation of certain Italian wines, in particular quality wines produced in specified regions (‘quality wines psr’), at the end of a transitional period expiring on 31 March 2007. Legal framework International law The Vienna Convention on the Law of Treaties4 Article 48(1) of the Vienna Convention on the Law of Treaties of 23 May 1969 provides:‘A State may invoke an error in a treaty as invalidating its consent to be bound by the treaty if the error relates to a fact or situation which was assumed by that State to exist at the time when the treaty was concluded and formed an essential basis of its consent to be bound by the treaty.’ 5 Under Article 59 of that Convention:‘1. A treaty shall be considered as terminated if all the parties to it conclude a later treaty relating to the same subject-matter and: (a) it appears from the later treaty or is otherwise established that the parties intended that the matter should be governed by that treaty; or (b) the provisions of the later treaty are so far incompatible with those of the earlier one that the two treaties are not capable of being applied at the same time. …’ The European Convention for the Protection of Human Rights and Fundamental Freedoms6 Article 1 of Protocol No 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms (‘the ECHR’) signed at Rome on 4 November 1950 provides: ‘Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.’ Law arising from the Agreement establishing the World Trade Organisation7 The Agreement on Trade-Related Aspects of Intellectual Property Rights (‘the TRIPs Agreement’), which is set out in Annex 1 C to the Agreement establishing the World Trade Organisation (‘the WTO Agreement’), was approved on behalf of the European Community, as regards matters within its competence, by Council Decision 94/800/EC of 22 December 1994 (OJ 1994 L 336, p. 1). 8 Article 1 of the TRIPs Agreement, headed ‘Nature and Scope of Obligations’, provides in paragraph 2: ‘For the purposes of this Agreement, the term “intellectual property” refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II.’ 9 Articles 22 to 24 of that agreement are in Part II thereof, which deals with ‘Standards concerning the Availability, Scope and Use of Intellectual Property Rights’, and specifically in Section 3 of that part, relating to ‘Geographical Indications’. 10 Under Article 22 of that agreement, headed ‘Protection of Geographical Indications’: ‘1. Geographical indications are, for the purposes of this Agreement, indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin. …’ 11 Article 23 of the TRIPs Agreement, headed ‘Additional Protection for Geographical Indications for Wines and Spirits’, stipulates: ‘1. Each Member shall provide the legal means for interested parties to prevent use of a geographical indication identifying wines for wines not originating in the place indicated by the geographical indication in question or identifying spirits for spirits not originating in the place indicated by the geographical indication in question … . … 3. In the case of homonymous geographical indications for wines, protection shall be accorded to each indication … Each Member shall determine the practical conditions under which the homonymous indications in question will be differentiated from each other, taking into account the need to ensure equitable treatment of the producers concerned and that consumers are not misled. 12 Article 24 of that agreement, headed ‘International Negotiations; Exceptions’, provides: ‘1. Members agree to enter into negotiations aimed at increasing the protection of individual geographical indications under Article 23. … 3. In implementing this Section, a Member shall not diminish the protection of geographical indications that existed in that Member immediately prior to the date of entry into force of the WTO Agreement. 4. Nothing in this Section shall require a Member to prevent continued and similar use of a particular geographical indication of another Member identifying wines or spirits in connection with goods or services by any of its nationals or domiciliaries who have used that geographical indication in a continuous manner with regard to the same or related goods or services in the territory of that Member either (a) for at least 10 years preceding 15 April 1994 or (b) in good faith preceding that date. 6. … Nothing in this Section shall require a Member to apply its provisions in respect of a geographical indication of any other Member with respect to products of the vine for which the relevant indication is identical with the customary name of a grape variety existing in the territory of that Member as of the date of entry into force of the WTO Agreement. The EC-Hungary Association Agreement13 The Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part, concluded and approved on behalf of the Community by Decision 93/742/Euratom, ECSC, EC of the Council and the Commission of 13 December 1993 (OJ 1993 L 347, p. 1, ‘the EC-Hungary Association Agreement’), was signed in Brussels on 16 December 1991 and, in accordance with the second paragraph of Article 123, entered into force on 1 February 1994. 14 Pending the entry into force of the EC-Hungary Association Agreement, the Interim Agreement between the European Economic Community and the European Coal and Steel Community, of the one part, and the Republic of Hungary, of the other part, on trade and trade-related matters was concluded and approved on behalf of the Community by Council Decision 92/230/EEC of 25 February 1992 (OJ 1992 L 116, p. 1, ‘the EC-Hungary Interim Agreement’). That agreement was signed in Brussels on 16 December 1991 and entered into force on 25 February 1992. The EC-Hungary Agreement on wines15 The EC-Hungary Agreement on wines, signed at Brussels on 29 November 1993, was concluded and approved on behalf of the Community by Decision 93/724 and entered into force on 1 April 1994. 16 The first citation in the preamble to Decision 93/724 states: ‘Having regard to the Treaty establishing the European Community, and in particular Article [133] thereof’. 17 The first and third recitals in the preamble to that decision are worded as follows: ‘Whereas the Agreement negotiated between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names will help make measures to eliminate unfair competition in trade more effective, ensure a greater degree of consumer protection and promote trade in wine between the Contracting Parties; whereas it is therefore desirable to approve the said Agreement; Whereas, since the provisions of the Agreement are directly linked to measures covered by the common commercial and agricultural policy [in this case the Community rules in the wine sector], the said Agreement must be established at Community level’. 18 Under Article 1 of that decision: ‘The Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names, the Protocol, exchanges of letters and declarations annexed thereto are hereby approved on behalf of the Community. The text of the acts referred to in the first paragraph are attached to this Decision.’ 19 The first citation in the preamble to the EC-Hungary Agreement on wines states: ‘Having regard to the Europe Agreement establishing an association between the European Communities and their Member States and the Republic of Hungary, signed in Brussels on 16 December 1991’. 20 Article 1 of the EC-Hungary Agreement on wines stipulates: ‘The Contracting Parties agree, on the basis of reciprocity, to protect and control names of wines originating in the Community and in Hungary on the conditions provided for in this Agreement.’ 21 Article 2(2) of that agreement provides: ‘For the purposes of this Agreement, unless the contrary intention appears: – “geographical indication” shall mean an indication, including an “Appellation of origin”, which is recognised in the laws and regulations of a Contracting Party for the purpose of the description and presentation of a wine originating in the territory of a Contracting Party, or in a region or locality in that territory, where a given quality, reputation or other characteristic of the wine is essentially attributable to its geographical origin, 22 Under Article 4 of that agreement: ‘1. The following names are protected: (a) as regards wines originating in the Community:…– the geographical indications and traditional expressions referred to in the Annex;(b) as regards wines originating in Hungary: – the geographical indications and traditional expressions referred to in the Annex, as they appear in the Hungarian wine legislation, … 3. In the Community, the protected Hungarian names: – are reserved exclusively to the wines originating in Hungary to which they apply, and– may not be used otherwise than under the conditions provided for by the laws and regulations of Hungary.5. In the case of homonymous or identical geographical indications: (a) where two indications, protected by virtue of this Agreement, are homonymous or identical, protection shall be accorded to each indication, provided that: – the geographical name in question has been used traditionally and consistently to describe and present a wine produced in the geographical area to which it refers, – the wine is not falsely represented to consumers as originating in the territory of the other Contracting Party; In such cases, the Contracting Parties shall determine the practical conditions under which the homonymous or identical indications in question will be differentiated from each other, taking into account the need to ensure equitable treatment of the producers concerned and that consumers are not misled.’ 23 Part B (‘Wines originating in the Republic of Hungary’), section I (‘Geographical indications’), point 3.4 (‘Wine-growing region Tokaj-Hegyalja’) of the Annex to the EC-Hungary Agreement on wines, headed ‘List of protected names for wines referred to in Article 4’, includes the name ‘Tokaj’. Part A (‘Wines originating in the European Community’) of that annex does not include either of the terms ‘Tocai friulano’ or ‘Tocai italico’. 24 The exchange of letters concerning Article 4 of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names (OJ 1993 L 337, p. 169, ‘the exchange of letters on Tocai’), which is one of the acts referred to in the first paragraph of Article 1 of Decision 93/724, also entered into force on 1 April 1994. 25 After referring inter alia to Article 4(3) of the EC-Hungary Agreement on wines, the signatories of those letters confirm that: ‘1. For a transitional period of thirteen years from the entry into force of that Agreement, the application of the latter will not preclude the lawful use of the name “Tocai” to designate and present certain Italian quality wines psr under the following conditions. Without prejudice to particular Community provisions and, where applicable, any more restrictive national provisions, the wine must be: – obtained from the “Tocai friulano” vine variety; – produced from grapes totally harvested in the Italian regions Veneto and Friuli;– designated and presented solely by the name of the variety “Tocai friulano” or by its synonym “Tocai italico”, the two words making up those names appearing together without any intervening words, in characters of the same type and size on a single line and separate from the name of the geographical unit in which the wine originates. In addition, the size of the characters used for those words may not exceed that of the characters giving the name of that geographical unit; – marketed outside the territory of Hungary. 4. Without prejudice to the provisions referred to in point 3, the possibility of using the name “Tocai” in accordance with the conditions set out in point 1 will expire at the end of the transitional period referred to therein. 26 Under the Joint Declaration concerning Article 4(5) of the [EC-Hungary] Agreement [on wines] (OJ 1993 L 337, p. 171, ‘the Joint Declaration on homonymous indications’), which is also one of the acts referred to in the first paragraph of Article 1 of Decision 93/724: ‘In respect of Article 4(5)(a) the Contracting Parties noted that at the time of the negotiations they were not aware of any specific case to which the provisions of this article could be applicable. Community legislation on the common organisation of the market in wine (‘the COM in wine’) The COM in wine in force at the time of the conclusion of the EC-Hungary Agreement on wines27 Under Article 63 of Council Regulation (EEC) No 822/87 of 16 March 1987 on the common organisation of the market in wine (OJ 1987 L 84, p. 1): ‘1. For the purposes of marketing within the Community, imported wines intended for direct human consumption and bearing a geographical ascription may, where reciprocal arrangements can be established, be controlled and protected as provided for in [Article 15 of Regulation No 823/87] in respect of quality wines psr. 2. Paragraph 1 shall be implemented by agreements with the relevant third countries to be negotiated and concluded in accordance with the procedure laid down in Article [133 EC]. 3. Detailed rules for the application of this article shall be adopted in accordance with the procedure laid down in Article 83.’ 28 Under Article 1(3) of Council Regulation (EEC) N 823/87 of 16 March 1987 laying down special provisions relating to quality wines produced in specified regions (OJ 1987 L 84, p. 59), as amended by Council Regulation (EEC) No 2043/89 of 19 June 1989 (OJ 1989 L 202, p. 1, ‘Regulation No 823/87’): ‘Member States shall forward to the Commission the list of quality wines psr which they have recognised, stating, for each of these quality wines psr, details of the national provisions governing the production and manufacture of these quality wines psr. The Commission shall have the said list published in the “C” series of the Official Journal of the European Communities.’ 29 Article 4(1) of Regulation No 823/87 provides: ‘Each Member State shall draw up a list of vine varieties suitable for producing each of the quality wines psr produced in its territory, … varieties [which] must belong to the recommended or authorised categories referred to in Article 13 of Regulation (EEC) No 822/87.’ 30 Under Article 15(4) of Regulation No 823/87: ‘… Without prejudice to the Community provisions concerning specific types of quality wine psr, Member States may … authorise the name of a specified region to be accompanied by details relating to the method of manufacture or the type of product or by the name of a vine variety or a synonym thereof. 31 The term ‘Tocai friulano’ appears in Title I of the Annex to Commission Regulation (EEC) No 3800/81 of 16 December 1981 determining the classification of vine varieties (OJ 1981 L 381, p. 1), in particular in Part V of sub-title I, as a vine variety recommended or authorised in certain Italian provinces. 32 Article 14(1) of Council Regulation (EEC) No 2392/89 of 24 July 1989 laying down general rules for the description and presentation of wines and grape musts (OJ 1989 L 232, p. 13) provides: ‘The name of a vine variety as referred to in Article 11(2)(n) to describe a quality wine psr may be used on the labelling only if: (a) that variety is on the list drawn up by the Member States pursuant to Article 4(1) of Regulation (EEC) No 823/87 designating the vine varieties which are suitable for producing each of the quality wines psr produced in their territory; (b) the name of the variety appears:– as one of the recommended or authorised varieties in the classification of vine varieties for the administrative unit concerned,– where appropriate, on a list of synonyms to be adopted; this list may provide that a given synonym may be used only to describe a quality wine psr produced in the areas of production in which such use is traditional and customary; (e) the name of that variety does not cause confusion with the name of a specified region or geographical unit used to describe another quality wine psr or an imported wine.’ 33 Article 26(1) of that regulation provides: ‘The description on the labelling of imported wines intended for direct human consumption, described by reference to a geographical area and appearing on a list to be adopted, shall include the following information: (a) the name of a geographical unit situated in the third country concerned, in accordance with the conditions laid down in Article 29; This list may include only imported wines for which, in each case, the conditions of production are recognised as being equivalent to those for a quality wine psr or for a table wine bearing an indication of geographical origin.’ 34 Article 11(2) of Commission Regulation (EEC) No 3201/90 of 16 October 1990 laying down detailed rules for the description and presentation of wines and grape musts (OJ 1990 L 309, p. 1) provides: ‘The list of imported wines described by reference to a geographical area referred to in Article 26(1) of Regulation (EEC) No 2392/89 is set out in Annex II hereto. The names on that list shall be shown in such a way that they are clearly distinguishable from other information on the label of the imported wine concerned, particularly with regard to the geographical names referred to in Article 26(2)(b) of Regulation (EEC) No 2392/89.’ 35 Hungarian wines bearing the name ‘Tokaj’ or ‘Tokaji’ are included under Title 11, point 5, of Annex II to Regulation No 3201/90, headed ‘List … of imported wines described by reference to a geographical area’. 36 Under Article 12(1) of that regulation: ‘The list of the synonyms of names of the vine varieties which may be used to describe table wines and quality wines psr in accordance with Articles 5(1)(b) and 14(1)(b) of Regulation (EEC) No 2392/89 is set out in Annex III hereto.’ 37 The variety ‘Tocai friulano’ and its synonym ‘Tocai italico’ are included in point 5 of Annex III, headed ‘List … of the synonyms of names of wine varieties that may be used to describe table wines and quality wines psr’. The COM in wine in force on the date of the main proceedings38 Council Regulation (EC) No 1493/1999 of 17 May 1999 on the common organisation of the market in wine (OJ 1999 L 179, p. 1) was rendered applicable from 1 August 2000. 39 Article 19(1) of that regulation provides: ‘Member States shall classify vine varieties for the production of wine. …’ 40 Rules relating to the description, designation and presentation of certain wine products and to the protection of certain particulars and terms are set out in Articles 47 to 53 and in Annexes VII and VIII of that regulation. 41 Article 50 of Regulation No 1493/1999 provides: ‘1. Member States shall take all necessary measures to enable interested parties to prevent, on the terms set out in Articles 23 and 24 of the [TRIPs] Agreement, the use in the Community of a geographical indication attached to the products referred to in Article 1(2)(b) for products not originating in the place indicated by the geographical indication in question … . 2. For the purposes of this article, “geographical indications” is taken to mean indications which identify a product as originating in the territory of a third country which is a member of the World Trade Organisation or in a region or locality within that territory, in cases where a certain quality, reputation or other given characteristic of the product may be attributed essentially to that geographical place of origin. 42 Under Article 52(1) of that regulation: ‘If a Member State uses the name of a specified region to designate a quality wine psr or, where appropriate, a wine intended for processing into such a quality wine psr, that name may not be used to designate products of the wine sector not produced in that region and/or products not designated by the name in accordance with the provisions of the relevant Community and national rules. … Without prejudice to the Community provisions concerning specific types of quality wine psr, Member States may, in the case of certain conditions of production which they shall determine, authorise the name of a specified region to be accompanied by details relating to the method of manufacture or the type or by the name of a vine variety or a synonym thereof. 43 Annex VII(A), points 1 and 2, of Regulation No 1493/1999 indicates that the labelling of quality wines psr and wines originating in third countries is to include certain compulsory references, including the sales description which is to consist, in the case of quality wines psr, of inter alia the name of the production area and, in the case of imported wines, of the word ‘wine’, which must be supplemented by the name of the country of origin, and, when they are designated with a geographical indication, by the name of the geographical area in question. 44 Annex VII(B), points 1 and 4, provides: ‘1. The labelling of the products obtained in the Community may be supplemented by the following particulars, under conditions to be determined: (b) in the case of table wines with geographical indication and quality wines psr:– the name of one or more vine varieties, 4. Member States of production may make certain particulars in paragraphs 1 and 2 compulsory, prohibit them or restrict their use in respect of wines produced in their territory.’ 45 Article 54(4) of Regulation No 1493/1999 provides: ‘Member States shall forward to the Commission the list of quality wines psr which they have recognised, stating, for each of these quality wines psr, details of the national provisions governing the production and manufacture of those quality wines psr.’ 46 Regulation No 1493/1999 was implemented by Regulation No 753/2002. 47 Article 19 of Regulation No 753/2002, headed ‘Indication of vine variety’, provides: ‘1. The names of the vine varieties used for the production of a table wine with a geographical indication or a quality wine psr or their synonyms may be given on the label of the wine concerned provided that: (c) the variety name or one of its synonyms does not include a geographical indication used to describe a quality wine psr, a table wine or an imported wine listed in the agreements concluded between the Community and third countries, and, where it is accompanied by another geographical term, is given on the label without that geographical term; 2. By way of derogation from paragraph 1(c): (a) the variety name or one of its synonyms that includes a geographical indication may be shown on the label of a wine with that geographical indication; (b) the variety names and their synonyms listed in Annex II may be used under the national and Community rules in force on the date of entry into force of this Regulation. 3. The Member States concerned shall notify the Commission, by 1 October 2002, of the measures referred to in point (b) of paragraph 2. The Commission shall take all appropriate steps to ensure that these measures are publicised.’ 48 Annex II to that regulation, headed ‘List of vine varieties and their synonyms that include a geographical indication and that may appear on the labelling of wines in accordance with Article 19(2)’, lists inter alia, in relation to Italy, the term ‘Tocai Friulano, Tocai Italico’. A footnote relating to that term states that ‘the name “Tocai friulano” and its synonym “Tocai italico” may be used during a transitional period until 31 March 2007’. 49 In that respect, that annex did not undergo any amendment as a result of the adoption of Commission Regulation (EC) No 1429/2004 of 9 August 2004 amending Regulation No 753/2002 (OJ 2004 L 263, p. 11). The Italian legislation50 Article 1(1) of the Decree of 26 September 2002 provides: ‘The national conditions for the use, by way of derogation from Article 19(1)(c) of Regulation (EC) No 753/2002, of names of vine varieties and their synonyms including a geographical indication which may appear on the labelling of [quality wines psr] and of Italian wines with a typical geographical indication are laid down in Annex I which forms an integral part of this Decree, in which for Italy the names of vine varieties and their synonyms including a geographical indication which are mentioned in Annex II to Regulation (EC) No 753/2002 are listed.’ 51 Annex I to the Decree of 26 September 2002 mentions inter alia, under the heading ‘Names of vine varieties or their synonyms’, ‘Tocai friulano or Tocai italico’, to which the following notice headed ‘Extent of the derogation (administrative territory and/or specific [quality wine psr] and/or [wines with typical geographical indication]’) relates: ‘For some [quality wines psr] of the regions Frioul-Venezia Giulia and Venezia for a transitional period ending on 31 March 2007 in accordance with the Agreement between the [European Union] and the Republic of Hungary.’ The facts in the main proceedings and the questions referred for a preliminary ruling52 In its decision, the referring court points out that the Region and ERSA criticise the unfairness arising from the fact that, of the 106 wine names to which the derogation from Article 19(1)(c) of Regulation No 753/2002 applies, only in the case of Tocai friulano or Tocai italico and the French name Tokay Pinot gris is that derogation limited in time. 53 That court then refers to the argument put forward by the Region and ERSA, intended to demonstrate the importance attached to the historical origins of the name Tocai friulano. 54 It is, they maintain, a vine variety which is native to the area of Collio goriziano (region of Friuli-Venezia Giulia) and has been grown there since ancient times. It is used for the production of a dry white wine which is not suitable for laying down. 55 The referring court notes that, in the light of those explanations, the Region and ERSA have submitted the following pleas in law: – misuse of powers on grounds of an insufficient statement of reasons and inconsistency arising from the fact that the Italian authorities applied to the Commission for a derogation unlimited in time, but subsequently approved the decree of 26 September 2002 with the temporal limitation for which it provides; – misuse of powers on grounds of manifest unfairness and breach of the principle of equal dignity of all Community citizens arising from the fact that the discrimination against the Italian wine producers is completely unjustified; – unlawfulness deriving from the unlawfulness of the EC-Hungary Agreement on wines, since the act on which the unlawful limitation is based, namely that agreement as approved by Decision 93/724, is itself unlawful in that: – the two homonymous products are completely different, the Hungarian wine being a sweet wine;– the two communities have used the same name since time immemorial;– it is legitimate to remedy the homonymity by adding the name of the region or vine variety in question; which is also possible under the EC-Hungary Agreement and the Madrid Agreement of 1891; – given that the Republic of Hungary is due to accede to the European Community, the EC-Hungary Agreement on wines, in order to remain valid, must be consistent with the principles contained in the WTO Agreement, in particular Articles 22 to 24 of the TRIPs Agreement, which govern misleading geographical indications; – the EC-Hungary Agreement on wines is contrary to principles of international law in that the limitation in time of use of the name in question arises from an exchange of letters (namely the exchange of letters on Tocai) and not from the text of the agreement, violates the principle of customary international law and is based on a false representation of reality so far as the homonymity in question is concerned; – breach of Article 1 of the Protocol to the ECHR and of Article 17 of the Charter of fundamental rights of the European Union proclaimed at Nice on 7 December 2000 (OJ 2000 C 364, p. 1,‘the Charter of fundamental rights’) in that it follows from those provisions that intellectual property is protected, that no one is to be deprived of his or her possessions except in the public interest, that the principles of proportionality and fair compensation must be observed and that restrictions of the right to property must in any event be effected in accordance with law. 56 The referring court further observes that, by the Decree of 26 September 2002, the national authorities merely transposed the provision of Regulation No 753/2002 and Annex II thereto limiting in time the use of the name ‘Tocai friulano’ and that those authorities have simply pointed out that that limitation arises from an agreement between the Community and the Republic of Hungary. 57 It is therefore plain, in that court’s view, that the harm alleged in the main action, namely the fact that the name Tocai friulano or Tocai italico cannot be used after 31 March 2007, arises directly from two sources of Community law, namely Decision 93/724 and Regulation No 753/2002. 58 In those circumstances, the Tribunale amministrativo regionale del Lazio, taking the view that the outcome of the main proceedings hinged on the answers to certain questions of Community law, decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Can the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part, concluded on 16 December 1991 … , provide a proper and sufficient legal basis for conferring on the European Community power to conclude the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names of 29 November 1993 … , with particular reference to the provisions of Article 65(1), to Joint Declaration No 13 and to Annex XIII (points 3, 4 and 5) of the Europe Agreement of 1991 on the possible reservation of the sovereignty and jurisdiction of the Member States in the matter of national geographical names used with reference to food and wine and restraint of any transfer of jurisdiction or competence in that matter to the European Community? 2. In view of, inter alia, what is said in Opinion 1/94 of the Court of Justice of the European Communities concerning the exclusive competence of the European Community, should the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names … , which specifies the protection of geographical names which have intellectual and commercial property significance, be declared invalid and of no effect within the Community legal order because the agreement itself has not been ratified by the individual Member States of the European Community? 3. In the event that the Community Agreement of 1993 … is to be regarded as lawful and applicable in its entirety, should the prohibition of the use in Italy after 2007 of the name “Tocai”, which arises from the exchange of letters between the parties to the agreement, annexed to the agreement, be regarded as invalid and of no effect because it is inconsistent with the rules governing geographical homonyms established in the agreement itself (see Article 4(5) of and the Protocol to the Agreement)? 4. Should the second Joint Declaration annexed to the 1993 Agreement … , which implies that the Contracting Parties were unaware, at the time of their negotiations, of the existence of homonyms connected with European and Hungarian wines, be regarded as a clear misrepresentation of reality (given that the Italian and Hungarian names used to refer to “Tocai” wines have existed alongside each other for centuries, were officially recognised in 1948 in an agreement between Italy and Hungary and were recently brought within the scope of Community law) such as to render null and void that part of the 1993 Agreement which prohibits the use in Italy of the name Tocai, on the basis of Article 48 of the Vienna Convention on the Law of Treaties? 5. In the light of Article 59 of the Vienna Convention on the Law of Treaties, is the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPs Agreement) … , which was concluded within the context of the World Trade Organisation (WTO) and entered into force on 1 January 1996, thus after the Community Agreement of 1993 … entered into force, to be interpreted as meaning that its provisions governing homonyms in wine names apply in place of those of the Community Agreement of 1993 where there is inconsistency between the two, given that the parties to both agreements are the same? 6. In the case of two names that are homonyms and refer to wines produced in two different countries both party to the TRIPs Agreement (and both where the homonym relates to two geographical names used in both the countries party to TRIPs and where it relates to a geographical name in one country and the like name relates to a vine traditionally cultivated in another country party to TRIPs), must Articles 22 to 24 in [Part II, Section 3 of Annex 1 C] to the Agreement establishing the World Trade Organisation, which contains the TRIPs Agreement… , which entered into force on 1 January 1996, be interpreted as meaning that both the names may continue to be used provided that they have been used in the past by the respective producers either in good faith or for at least 10 years prior to 15 April 1994 (Article 24(4) [of the TRIPs Agreement] and each name clearly indicates the country or region or area of origin of the wine to which it refers in such a way as not to mislead consumers? 7 Does the right of ownership set out in Article 1 of Protocol No 1 to the European Convention on Human Rights and Fundamental Freedoms … and taken up in Article 17 of the Charter of fundamental rights of the European Union proclaimed in Nice on 7 [December] 2000 also cover intellectual property in the names of the places of origin of wines and the exploitation thereof, and, consequently, does the protection of that right preclude application of the agreement set out in the exchange of letters annexed to the Agreement between the European Community and the Republic of Hungary on reciprocal protection and control of wine names … , but not included in the body of that agreement, under which wine producers of the Friuli region will not be permitted to use the name “Tocai friulano”, particularly in view of the total lack of any compensation to the wine producers of the Friuli region thus dispossessed, the lack of any general public interest justifying their dispossession and the disregard for the principle of proportionality? 8. In the event that it is held that the Community provisions contained in the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names … and/or the exchange of letters annexed thereto are unlawful to the extent described in the preceding questions, must the provisions of Regulation … No 753/2002, under which use of the name “Tocai friulano” is to be prohibited after 31 March 2007 (Article 19(2)), be regarded as invalid or in any event of no effect?’ 59 By application of 11 March 2005, received at the Court Registry on 15 March 2005, the Region and ERSA requested the Court to allow all the parties involved in this case to submit observations on certain new facts set out in that application before the Court gives judgment. Those new facts concern the imminent conclusion by the Community of new agreements with Australia and the United States which, under Article 24(6) of the TRIPs Agreement, would allow producers in those countries to continue using the name ‘Tokay’ on their national markets and on third-country markets. 60 In that regard, it should be recalled that the Court may of its own motion, on a proposal from the Advocate General or at the request of the parties, order that the oral procedure be reopened, in accordance with Article 61 of the Rules of Procedure, if it considers that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see, inter alia, Case C‑299/99 Philips [2002] ECR I‑5475, paragraph 20). 61 The Court considers that there is no need in this case to order the reopening of the oral procedure, which was closed on 16 December 2004, since it has before it all the material necessary for it to answer the questions raised in the main proceedings. 62 The application of the Region and ERSA must therefore be rejected. The questions referred for a preliminary ruling The first question63 By its first question, the referring court seeks in essence to ascertain whether the EC-Hungary Association Agreement provided an appropriate legal basis for the adoption of Decision 93/724 by which the Community concluded the EC-Hungary Agreement on wines. 64 That question is founded on the premiss that the legal basis conferring on the Community power to conclude the EC-Hungary Agreement on wines is the EC‑Hungary Association Agreement. That premiss apparently derives from the reference, in the first citation in the preamble to the EC-Hungary Agreement on wines, to the EC-Hungary Association Agreement. 65 However, as the Council and the Commission correctly pointed out, that premiss cannot be accepted.66 The purpose of the reference to the EC-Hungary Association Agreement is to place the EC-Hungary Agreement on wines in its political context. It must not be construed as identifying the provisions of Community law on the basis of which the Community concluded the latter agreement. 67 The legal basis conferring on the Community power to conclude the EC-Hungary Agreement on wines is however mentioned in the first citation in the preamble to Decision 93/724 by which that agreement was concluded and approved on behalf of the Community. 68 It is clear from that citation that the legal basis in question is Article 133 EC, which confers on the Community competence in the field of the common commercial policy. 69 The question as to whether the legal basis thus adopted by the Council is appropriate is the subject‑matter of the second question referred for a preliminary ruling and will therefore be examined in the context of that question. 70 In the light of the foregoing, the answer to the first question must be that the EC‑Hungary Association Agreement is not the legal basis of Decision 93/724 by which the EC-Hungary Agreement on wines was concluded. The second question71 By its second question, the referring court seeks in essence to ascertain whether Article 133 EC, which confers on the Community exclusive competence in the field of the common commercial policy, is an appropriate legal basis for the conclusion by the Community alone of the EC-Hungary Agreement on wines, in view of the fact that that agreement contains rules governing the protection of geographical names which have intellectual and commercial property significance. 72 According to the settled case-law of the Court, the choice of the legal basis for a Community measure must rest on objective factors which are amenable to judicial review, including in particular the aim and the content of the measure (see, inter alia, Case C-336/00 Huber [2002] ECR I-7699, paragraph 30). 73 It follows from the first citation in the preamble to Decision 93/724 that the Council specifically chose Article 133 EC as the legal basis for the conclusion of the EC-Hungary Agreement on wines. 74 It is also apparent from the third recital in the preamble to that decision that, since the provisions of the Agreement were directly linked to measures covered by the common commercial and agricultural policy, in this instance the Community legislation on wine, the Council took the view that the Agreement had to be established at Community level. 75 According to the case-law of the Court, a Community act falls within the exclusive competence in the field of the common commercial policy provided for in Article 133 EC only if it relates specifically to international trade in that it is essentially intended to promote, facilitate or govern trade and has direct and immediate effects on trade in the products concerned (see Opinion 1/94 [1994] ECR I-5267, paragraph 57, Opinion 2/00 [2001] ECR I-9713, paragraph 40, and Case C-281/01 Commission v Council [2002] ECR I-12049, paragraphs 40 and 41). 76 In particular, in this case, the question arises as to whether the EC-Hungary Agreement on wines falls within the Community’s exclusive competence in the field of the common commercial policy or whether, as the Region and ERSA and the Italian Government maintain, it forms part of the protection of intellectual property rights, a field in which the Community and the Member States are jointly competent. 77 In that regard, it is appropriate to recall the Community legislation which was applicable ratione temporis, namely the COM in wine in force when the EC‑Hungary Agreement on wines was concluded. 78 Article 63 of Regulation No 822/87 provides that, for the purposes of marketing within the Community, imported wines intended for direct human consumption and bearing a geographical ascription may, where reciprocal arrangements can be established, be controlled and protected as provided for in respect of quality wines psr and that that provision is to be implemented by agreements with the relevant third countries to be negotiated and concluded in accordance with the procedure laid down in Article 133 EC. 79 The EC-Hungary Agreement on wines is clearly an agreement referred to in Article 63 of Regulation No 822/87. 80 The principal objective of such agreements is to promote trade between the Contracting Parties by facilitating on a reciprocal basis, on the one hand, the marketing of wines originating in the third countries concerned by guaranteeing those wines the same protection as that provided for in respect of quality wines psr of Community origin and, on the other, the marketing in those third countries of wines originating in the Community. 81 Those agreements guarantee, in particular, reciprocal protection for certain geographical indications mentioned on the labelling used to market the wines concerned in the Community and in the third country concerned. They are therefore an instrument directly affecting trade in wines (see, to that effect, Commission v Council, cited above, paragraph 40). 82 In the light of those considerations, it must be concluded that such agreements satisfy the criteria which, according to the case‑law cited in paragraph 75 of the present judgment, must be fulfilled in order for a Community measure to fall within the scope of the exclusive competence in the field of the common commercial policy provided for in Article 133 EC. 83 It follows that the answer to the second question must be that Article 133 EC, as referred to in the preamble to Decision 93/724, is an appropriate legal basis for the conclusion by the Community alone of the EC-Hungary Agreement on wines. The third question84 By its third question, the referring court seeks in essence to ascertain whether, in the event that the EC-Hungary Agreement on wines is to be regarded as lawful and applicable in its entirety, the prohibition of the use of the name ‘Tocai’ in Italy after 31 March 2007 which arises from the exchange of letters on Tocai is invalid and of no effect because it is inconsistent with the rules governing homonyms laid down in Article 4(5) of that agreement. 85 This question must be understood by reference to the argument of the Region and ERSA to the effect that there is a contradiction between the rules governing homonyms laid down in Article 4(5) of the EC-Hungary Agreement on wines and the prohibition arising from the exchange of letters on using the word ‘Tocai’ in the term ‘Tocai friulano’ or ‘Tocai italico’ for the description and presentation of certain Italian quality wines psr at the end of the transitional period expiring on 31 March 1997. 86 That contradiction arises from the fact that, in the exchange of letters on Tocai, priority was given to the Hungarian name ‘Tokaj’ to the detriment of the Italian homonym ‘Tocai’, whereas the rules governing homonyms laid down in Article 4(5) of the EC-Hungary Agreement, the main agreement, from which an act annexed thereto, such as the exchange of letters on Tocai, may not derogate, are based on a rule guaranteeing the coexistence of both names provided that they are not likely to give rise to confusion. 87 In that regard, it must be pointed out that such a conflict can exist only if each of the names deemed to be homonymous within the meaning of Article 4(5) of the EC-Hungary Agreement constitutes a geographical indication protected by virtue of that agreement. 88 It follows from Article 4(1)(a) of that agreement that, as regards wines originating in the Community, the geographical indications protected by virtue of that agreement are listed in the Annex thereto, in part A, headed ‘Wines originating in the Community’. 89 Unlike the Hungarian name ‘Tokaj’, which appears in part B of that annex, which mentions the geographical indications relating to wines originating in the Republic of Hungary which are protected under Article 4(1)(b) of the EC-Hungary Agreement on wines, the terms ‘Tocai friulano’ and ‘Tocai italico’ do not appear in part A of that annex, which concerns wines originating in the Community. 90 In addition and in any event, the latter names cannot be classed as geographical indications within the meaning of the EC-Hungary Agreement on wines. 91 Under Article 2(2) of that agreement, a ‘geographical indication’ is ‘an indication, including an “Appellation of origin”, which is recognised in the laws and regulations of a Contracting Party for the purpose of the description and presentation of a wine originating in its territory, or in a region or locality in that territory, where a given quality, reputation or other characteristic of the wine is essentially attributable to its geographical origin’. 92 Under the relevant legislation in force in the Community on the date when the EC-Hungary Agreement on wines was concluded, the names ‘Tocai friulano’ and ‘Tocai italico’ were not a geographical indication but the name of a vine or vine variety recognised in Italy as being suitable for the production of certain quality wines psr produced in that Member State. 93 It is common ground that the term ‘Tocai friulano’ appeared in Title I of the Annex to Regulation No 3800/81 as a vine variety recommended, and even authorised, in certain Italian provinces, and in point 5 of Annex III to Regulation No 3201/90 as a synonym of the vine variety ‘Tocai italico’ which could be used to describe certain Italian quality wines psr. 94 By contrast, the Hungarian wines known as ‘Tokaj’ or ‘Tokaji’ appeared in point 5 of Title 11 of Annex II to Regulation No 3201/90 under the heading ‘List … of imported wines described by reference to a geographical area’. 95 The Region and ERSA and the Italian Government maintain that the Community legislation provided and still provides that, in Italy, for the purpose of describing and presenting certain Italian quality wines psr, if certain conditions laid down in specifications are complied with, the geographical indications concerned, such as ‘Collio goriziano’, ‘Collio’, ‘Isonzo del Friuli’ and ‘Isonzo’, may be combined with an indication of the vine variety ‘Tocai friulano’ or its synonym ‘Tocai italico’ from which the wines are made. 96 However, no evidence produced before the Court indicates that the choice thus made by that Member State to allow such a combination has led to the wording resulting from that combination constituting a geographical indication in such a way that the terms ‘Tocai friulano’ and ‘Tocai italico’ which form part of it no longer denote a vine variety but a geographical indication. 97 It is, on the contrary, apparent from the reference to the terms ‘Tocai friulano’ and ‘Tocai italico’ in Annex II to Regulation No 753/2002 that, even in the Community legislation applicable at the time of the main proceedings, those terms still related to a vine variety which could, under Article 19(2)(b) and (3) of that regulation, be used on the label of the Italian quality wines psr concerned. They are therefore not the name of a vine variety or one of its synonyms that includes a geographical indication for the purposes of Article 19(2)(a) of that regulation. 98 In the light of the foregoing, the answer to the third question must be that the prohibition of use of the name ‘Tocai’ in Italy after 31 March 2007 resulting from the exchange of letters on Tocai is not contrary to the rules governing homonyms laid down in Article 4(5) of the EC-Hungary Agreement on wines. The fourth question99 By its fourth question, the referring court seeks in essence to ascertain whether the Joint Declaration on homonyms, in so far as it states in the first paragraph that in respect of Article 4(5)(a) of the EC‑Hungary Agreement on wines the Contracting Parties noted that at the time of the negotiations they were not aware of any specific case to which the provisions referred to could be applicable, is a clear misrepresentation of reality, invalidating, under Article 48 of the Vienna Convention on the Law of Treaties, that agreement in so far as it prohibits the use of the name ‘Tocai’ in Italy after 31 March 2007. 100 This question must be understood in the light of the argument of the Region and ERSA that a number of factors showed beyond doubt the erroneous nature of the Joint Declaration on homonyms, since the Commission and the Republic of Hungary could not have been unaware of the existence of homonymity between the names ‘Tocai’ referring to an Italian dry wine and ‘Tokaj’ referring to a Hungarian dessert wine. 101 However, as paragraphs 88 to 97 of the present judgment make clear, the Italian name ‘Tocai friulano’ and its synonym ‘Tocai italico’ are not a protected geographical indication within the meaning of the EC-Hungary Agreement on wines, so that the provisions of Article 4(5)(a) of that agreement concerning homonyms do not apply for the purpose of resolving a possible case of homonymity or identity between that name and the Hungarian name ‘Tokaj’ which, as was held in paragraph 89 of the present judgment, is a geographical indication protected by virtue of the same agreement. 102 Consequently, the answer to the fourth question must be that the Joint Declaration on homonyms, in so far as it states in the first paragraph that in respect of Article 4(5)(a) of the EC-Hungary Agreement on wines the Contracting Parties noted that at the time of the negotiations they were not aware of any specific case to which the provisions referred to could be applicable, is not a clear misrepresentation of reality. The sixth question103 By its sixth question, which must be answered before the fifth, the referring court asks in essence whether Articles 22 to 24 of the TRIPs Agreement are to be interpreted as meaning that, in the case of homonymity between geographical names or between a geographical indication and a name including the name of a vine variety, each of the names may continue to be used in the future provided that it has been used in the past by the respective producers either in good faith or for at least 10 years prior to 15 April 1994 and that it clearly identifies the country, region or area of origin of the protected wine in such a way as not to mislead the consumer. 104 The Region and ERSA and the Italian Government maintain that Articles 22 to 24 of the TRIPs Agreement require the Community, as a member of the WTO, to protect each of the homonymous geographical indications, including in the case of homonymity between a geographical indication and the name of a vine variety, and that, consequently, those articles preclude removal of the protection from the name ‘Tocai friulano’. 105 That argument cannot be accepted in view of the actual wording of the relevant provisions of those articles of the TRIPs Agreement.106 In the first place, Article 23(3) of the TRIPs Agreement stipulates inter alia that, in the case of homonymous geographical indications for wines, protection is to be accorded to each indication and that each WTO Member is to determine the practical conditions under which the homonymous indications in question will be differentiated from each other, taking into account the need to ensure equitable treatment of the producers concerned and that consumers are not misled. 107 Under Article 22(1) of the TRIPs Agreement, ‘geographical indications’ means indications which identify a good as originating in the territory of a Member of the WTO, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin. 108 As has already been held in paragraphs 88 to 97 of the present judgment, unlike the Hungarian name ‘Tokaj’, the Italian names ‘Tocai friulano’ and ‘Tocai italico’ relate to the name of a vine or vine variety but are not a geographical indication within the meaning of the EC-Hungary Agreement on wines. In view of the fact that the meaning of ‘geographical indication’ as defined in the latter agreement is in essence the same as that adopted in Article 22(1) of the TRIPs Agreement, the same finding is dictated in the context of the TRIPs Agreement. 109 Consequently, Article 23(3) of the TRIPs Agreement is not applicable in the main proceedings since that case does not concern homonymity between two geographical indications. 110 In the second place, Article 24(4) of the TRIPs Agreement provides that nothing in Section 3 of that agreement is to require a Member of the WTO to prevent continued and similar use of a particular geographical indication of another Member identifying wines or spirits in connection with goods or services by any of its nationals or domiciliaries who have used that geographical indication in a continuous manner with regard to the same or related goods or services in the territory of that Member either for at least 10 years prior to 15 April 1994 or in good faith prior to that date. 111 It follows clearly from that provision that, although the Community is not required to prohibit continued and similar use of a particular geographical indication of another Member of the WTO identifying wines or spirits by a national or domiciliary of a Member State in the territory of a Member State, as referred to in Article 24(4) of the TRIPs Agreement, that provision does not preclude such a prohibition. 112 In other words, Article 24(4) of the TRIPs Agreement must be interpreted as establishing, under the conditions which it lays down, a right and not an obligation to grant protection to any homonym. 113 As regards, in the third place, Article 24(6) of the TRIPs Agreement, that provision permits inter alia the Community, as a Member of the WTO, to apply the provisions of that agreement in respect of a geographical indication of any other Member of the WTO with respect to products of the vine for which the relevant indication is identical with the customary name of a grape variety existing in the territory of a Member State as of the date of entry into force of the WTO Agreement. 114 That provision therefore also establishes a right and not an obligation for the Community to grant protection to a Community grape or vine variety if that variety is the homonym of a geographical indication relating to a wine originating in a third country. 115 In those circumstances, the answer to the sixth question must be that Articles 22 to 24 of the TRIPs Agreement are to be interpreted as meaning that, in a case such as that in the main proceedings, which concerns homonymity between a geographical indication of a third country and a name including the name of a vine variety used for the description and presentation of certain Community wines made from it, those provisions do not require that that name may continue to be used in the future notwithstanding the twofold circumstance that it has been used in the past by the producers concerned either in good faith or for at least 10 years prior to 15 April 1994 and that it clearly identifies the country, region or area of origin of the protected wine in such a way as not to mislead the consumer. 116 In the light of that answer, there is no longer any need to answer the fifth question since it was asked on the assumption that the EC-Hungary Agreement on wines, in so far as it has the effect of precluding use of the word ‘Tocai’ for the description and presentation of certain Italian quality wines psr at the end of a transitional period expiring on 31 March 2007, is incompatible with the provisions of Articles 22 to 24 of the TRIPs Agreement since the latter require that, where there is homonymity, each of the names may continue to be used in the future. 117 It follows from the answer given to the sixth question that that assumption does not apply in the main proceedings, which concern homonymity between a geographical indication of a third country and a name including the name of a vine variety used for the description and presentation of certain Community wines. The seventh question118 By its seventh question, the referring court seeks in essence to ascertain whether the right to property set out in Article 1 of Protocol No 1 to the ECHR and incorporated in Article 17 of the Charter of fundamental rights includes intellectual property in designations of origin of wines and its exercise and, if so, whether protection of the latter precludes the operators concerned in the autonomous region of Friuli-Venezia Giulia from being deprived of the possibility of using the word ‘Tocai’ in the term ‘Tocai friulano’ or ‘Tocai italico’ for the description and presentation of certain Italian quality wines psr at the end of a transitional period expiring on 31 March 2007, as arises from the exchange of letters on Tocai annexed to the EC-Hungary Agreement on wines but not from the body of that agreement, particularly in view of the lack of any form of compensation for the dispossessed wine producers of Friuli, the lack of any general interest justifying that dispossession and the disregard for the principle of proportionality. 119 According to settled case-law, the right to property is one of the general principles of Community law. However, it is not absolute but must be viewed in relation to its social function. Consequently, the exercise of the right to property may be restricted, provided that those restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute in relation to the aim pursued a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed (see, to that effect, inter alia, Case C-306/93 SMW Winzersekt [1994] ECR I-5555, paragraph 22, and Joined Cases C-37/02 and C-38/02 Di Lenardo and Dilexport [2004] ECR I‑0000, paragraph 82 and the case-law cited). 120 In order to determine the scope of the fundamental right to property, a general principle of Community law, account must be taken inter alia of Article 1 of Protocol No 1 to the ECHR establishing that right. 121 It is therefore necessary to examine whether the prohibition of the use of the word ‘Tocai’ for the description and presentation of certain Italian quality wines psr from 1 April 2007, resulting from the exchange of letters on Tocai, constitutes disproportionate and intolerable interference, impairing the very substance of the fundamental right to property of the economic operators concerned. 122 That prohibition, in so far as it does not exclude any reasonable method of marketing the Italian wines concerned, does not constitute a deprivation of possessions as referred to in the first paragraph of Article 1 of Protocol No 1 to the ECHR. 123 Consequently, the lack of any compensation for the dispossessed wine producers of Friuli, to which attention is drawn by the referring court, does not in itself constitute a circumstance demonstrating incompatibility between the prohibition at issue in the main proceedings and the right to property. 124 In addition, without there being any need to determine whether that measure, as a measure controlling the use of property, constitutes interference with the right to respect for property which may fall within the scope of the second paragraph of Article 1 of Protocol No 1 to the ECHR and therefore entail a restriction of the fundamental right to property, it must be stated that a restriction of that right, if established, may be justified. 125 The case-law of the European Court of Human Rights shows that, in order to be justified, a measure controlling the use of property must comply with the principle of lawfulness and pursue a legitimate aim by means reasonably proportionate to that aim (see, inter alia, Eur. Court HR, Jokela v Finland judgment of 21 May 2002, Reports of Judgments and Decisions 2002-IV, § 48). 126 As regards, first, the lawfulness of the prohibition at issue in the main proceedings, it is common ground that the exchange of letters on Tocai annexed to the EC-Hungary Agreement on wines expressly imposes that prohibition and that, by Decision 93/724, that act was approved on behalf of the Community. It is therefore a measure introduced by a lawful provision adopted, as was observed in paragraphs 77 to 81 of the present judgment, in the context of the COM in wine in force at the time of the conclusion of that agreement. 127 With regard, next, to the aim of general interest pursued by the measure at issue in the main proceedings, it has already been observed, in paragraphs 80 and 81 of the present judgment, that the EC-Hungary Agreement on wines, of which that measure forms part, seeks to implement a policy within the framework of the COM in wine, the main objective of which is to promote trade between the Contracting Parties by facilitating on a reciprocal basis, on the one hand, the marketing of wines originating in third countries which are described or presented using a geographical indication, by guaranteeing the same protection for those wines as that provided for in respect of quality wines psr of Community origin, and, on the other, the marketing in those third countries of wines originating in the Community. 128 It is clear from inter alia the third and fifth recitals in the preamble to Regulation No 2392/89 that the objective of the Community rules on the description and presentation of wines is to reconcile the need to provide the final consumer with clear and accurate information on the products concerned with the need to protect producers on their territory against distortions of competition. 129 The objective thus pursued by the measure at issue in the main proceedings is a legitimate aim of general interest (see SMW Winzersekt, cited above, paragraph 25). 130 Finally, it is necessary to examine whether that measure is proportionate to the aim of general interest referred to.131 In a case concerning a Community measure adopted within the framework of the COM in wine, prohibiting, on the expiry of a transitional period of five years, the use of the term ‘méthode champenoise’ for wines not entitled to the registered designation ‘Champagne’, the Court recalled that, according to settled case‑law, the Community legislature has a broad discretion in matters concerning the common agricultural policy, which corresponds to the political responsibilities given to it by Articles 34 EC and 37 EC, and that the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate, having regard to the objective which the competent institution is seeking to pursue (see SMW Winzersekt, cited above, paragraph 21). 132 It is important to note in this regard that, at the end of the transitional period, the Italian quality wines psr in question will be able to continue to be produced from the vine variety ‘Tocai friulano’ and to be marketed under their respective geographical names, although without the addition of the name of the vine variety from which they are produced. 133 In this case, the proportionality of the measure at issue in the main proceedings cannot be disputed since a transitional period of 13 years was provided for in the exchange of letters on Tocai and, as the Commission observed at the hearing, alternative terms are available to replace the name ‘Tocai friulano’ and its synonym ‘Tocai italico’, namely, inter alia, ‘Trebbianello’ and ‘Sauvignonasse’. 134 In those circumstances, the answer to the seventh question must be that the right to property does not preclude the prohibition on use by the operators concerned in the autonomous region of Friuli-Venezia Giulia of the word ‘Tocai’ in the term ‘Tocai friulano’ or ‘Tocai italico’ for the description and presentation of certain Italian quality wines psr at the end of a transitional period expiring on 31 March 2007, resulting from the exchange of letters on Tocai annexed to the EC-Hungary Agreement on wines but not referred to in the latter. The eighth question135 By its eighth question, the referring court seeks to ascertain whether, in the event that it is held that the EC-Hungary Agreement on wines and/or the exchange of letters on Tocai are unlawful to the extent described in the preceding questions, the provisions of Article 19(2) of Regulation No 753/2002, which abolish the use of the name ‘Tocai friulano’ after 31 March 2007, are invalid or in any event of no effect. 136 Since this question is asked only in the event that examination of the first seven questions referred for a preliminary ruling shows the EC-Hungary Agreement on wines and/or the exchange of letters on Tocai to be unlawful to the extent described in those questions, and since it follows from the answers given to those questions by the present judgment that that is not the case, there is no need to answer it. 137 It should also be pointed out that, in principle, it is for the referring court alone to define the scope of the questions which it finds necessary to refer to the Court for a preliminary ruling. 138 It follows, as the Commission rightly observed at the hearing, that certain questions, raised inter alia at the hearing by the Region and ERSA and by the Italian Government with regard to the eighth question referred for a preliminary ruling, that is to say, those seeking to ascertain whether the validity of the EC-Hungary Agreement on wines is affected as the result of an alleged breach of the duty to state reasons, or even of the principle of proportionality and of the principle of equal treatment as enshrined in Article 34(2) EC, cannot be examined by the Court since they clearly exceed the scope of the eighth question as worded by the referring court. Costs139 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Second Chamber) hereby rules:1. The European Agreement establishing an association between the European Communities and their Member States, of the one part, and the Republic of Hungary, of the other part, is not the legal basis of Council Decision 93/724/EC of 23 November 1993 concerning the conclusion of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names.2. Article 133 EC, as referred to in the preamble to Decision 93/724, is an appropriate legal basis for the conclusion by the Community alone of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names.3. The prohibition of use of the name ‘Tocai’ in Italy after 31 March 2007 resulting from the exchange of letters concerning Article 4 of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names is not contrary to the rules governing homonyms laid down in Article 4(5) of that agreement.4. The Joint Declaration concerning Article 4(5) of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names, in so far as it states in the first paragraph that in respect of Article 4(5)(a) of that agreement the Contracting Parties noted that at the time of the negotiations they were not aware of any specific case to which the provisions referred to could be applicable, is not a clear misrepresentation of reality.5. Articles 22 to 24 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, set out in Annex 1 C to the Agreement establishing the World Trade Organisation, approved on behalf of the Community, as regards matters within its competence, by Council Decision 94/800/EC of 22 December 1994, are to be interpreted as meaning that, in a case such as that in the main proceedings, which concerns homonymity between a geographical indication of a third country and a name including the name of a vine variety used for the description and presentation of certain Community wines made from it, those provisions do not require that that name may continue to be used in the future notwithstanding the twofold circumstance that it has been used in the past by the producers concerned either in good faith or for at least 10 years prior to 15 April 1994 and that it clearly identifies the country, region or area of origin of the protected wine in such a way as not to mislead the consumer.6. The right to property does not preclude the prohibition on use by the operators concerned in the autonomous region of Friuli‑Venezia Giulia (Italy) of the word ‘Tocai’ in the term ‘Tocai friulano’ or ‘Tocai italico’ for the description and presentation of certain Italian quality wines produced in specified regions at the end of a transitional period expiring on 31 March 2007, resulting from the exchange of letters concerning Article 4 of the Agreement between the European Community and the Republic of Hungary on the reciprocal protection and control of wine names annexed to that agreement but not referred to in the latter.[Signatures]* Language of the case: Italian. | 30bfa-6aafc90-4f66 | EN |
THE COURT GIVES JUDGMENT AGAINST IRELAND FOR GENERAL AND PERSISTENT BREACHES OF THE WASTE DIRECTIVE | Commission of the European CommunitiesvIreland(Failure of a Member State to fulfil obligations – Environment – Waste management – Directive 75/442/EEC, as amended by Directive 91/156/EC – Articles 4, 5, 8, 9, 10, 12, 13 and 14)Opinion of Advocate General Geelhoed delivered on 23 September 2004 Judgment of the Court (Grand Chamber), 26 April 2005. Summary of the Judgment1. Actions for failure to fulfil obligations — Subject-matter of the dispute —Determination of the subject-matter in the course of the pre-litigation procedure — Failure of a general nature to comply with the provisions of a directive — Production before the Court of additional evidence intended to support the proposition that the failure is general and consistent — Whether permissible(Art. 226 EC)2. Actions for failure to fulfil obligations — Proof of failure — Burden of proof on the Commission — Submission of evidence that the obligation has not been fulfilled — Onus of rebuttal on the Member State proceeded against3. Member States — Obligations — Supervisory task entrusted to the Commission — Duty of the Member States — Cooperation with inquiries relating to the application of directives — Obligation to investigate and to provide information (Arts 10 EC, 211 EC and 226 EC; Council Directive 75/442, as amended by Directive 91/156)4. Environment — Waste disposal — Directive 75/442 — Implementation by the Member States — Obligation to achieve a certain result — Obligation on operators to obtain a permit prior to any waste disposal or waste recovery operations — Obligation on the Member States to conduct checks (Art. 249, third para., EC; Council Directive 75/442, as amended by Directive 91/156, Arts 9 and 10)5. Environment — Waste disposal — Directive 75/442 — Article 12 — Requirement that the collection and transport of waste be subject either to a system of prior authorisation or to a registration procedure — Choice by a Member State of the authorisation system — Consequence — Irrelevance, as regards the correct implementation of the directive, of any registration(Council Directive 75/442, as amended by Directive 91/156, Art. 12)6. Environment — Waste disposal — Directive 75/442 — Article 5 — Obligation to establish an integrated and adequate network of disposal installations — Obligation not satisfied where a large number of installations lack a permit and the overall disposal capacity is insufficient(Council Directive 75/442, as amended by Directive 91/156, Art. 5)7. Environment — Waste disposal — Directive 75/442 — Obligation on the Member States resulting from the first paragraph of Article 4 — Obligation infringed in the event of persistent infringement of Articles 9 and 10(Council Directive 75/442, as amended by Directive 91/156, Arts 4, first para., 9 and 10)8. Environment — Waste disposal — Directive 75/442 — Article 8 — Obligations on the Member States with regard to holders of waste — Obligations also applicable with regard to the operator or owner of an illegal tip, and not capable of being satisfied simply by penal action (Council Directive 75/442, as amended by Directive 91/156, Art. 8)9. Environment — Waste disposal — Directive 75/442 — Articles 13 and 14 — Obligation to make establishments carrying out disposal and recovery operations subject to periodic inspections — Aim of the inspections — Compliance with the conditions laid down in permits — Inspection not capable of meeting the requirements of the directive if the establishment does not hold the prescribed permit(Council Directive 75/442, as amended by Directive 91/156, Arts 13 and 14)1. The subject-matter of proceedings under Article 226 EC is delimited by the pre-litigation procedure governed by that provision. Accordingly, the Commission cannot seek a declaration of a specific failure by a Member State to fulfil its obligations regarding a particular factual situation that has not been referred to in the course of the pre-litigation procedure. However, in so far as an action seeks to raise a failure of a general nature to comply with a directive’s provisions, concerning in particular the national authorities’ systemic and consistent tolerance of situations not in accordance with that directive, the production by the Commission of additional evidence intended, at the stage of proceedings before the Court, to support the proposition that the failure thus alleged is general and consistent cannot be ruled out in principle. Since the Commission may, in its application, clarify its initial grounds of complaint provided that it does not alter the subject-matter of the dispute, the production of fresh evidence intended to illustrate the grounds of complaint set out in its reasoned opinion, which allege a failure of a general nature to comply with the provisions of a directive, does not alter the subject-matter of the dispute. Thus, facts of which the Commission becomes aware after issue of the reasoned opinion may properly be mentioned by it in support of its application for the purpose of illustrating the failure of a general nature to fulfil obligations raised by it. (see paras 35-39)2. In proceedings under Article 226 EC for failure to fulfil obligations it is incumbent upon the Commission to prove the allegation that the obligation has not been fulfilled. It is the Commission’s responsibility to place before the Court the information needed to enable the Court to establish that the obligation has not been fulfilled, and in so doing the Commission may not rely on any presumption. However, where the Commission has adduced sufficient evidence of certain matters in the territory of the defendant Member State which is such as to show that the Member State’s authorities have developed a repeated and persistent practice that is contrary to the provisions of a directive, it is incumbent on the Member State to challenge in substance and in detail the information produced and the consequences flowing therefrom. (see paras 41, 44, 47)3. The Member States are required, under Article 10 EC, to facilitate the achievement of the Commission’s tasks, which consist in particular, pursuant to Article 211 EC, in ensuring that the provisions of the Treaty and the measures taken by the institutions pursuant thereto are applied. So far as concerns checking that the national provisions intended to ensure effective implementation of a directive that covers fields in respect of which the Commission does not have investigative powers of its own – as is the case with Directive 75/442 on waste, as amended by Directive 91/156 – are applied correctly in practice, the Commission is largely reliant on the information provided by any complainants and by the Member State concerned. In such circumstances, it is primarily for the national authorities to conduct the necessary on-the-spot investigations, in a spirit of genuine cooperation and mindful of each Member State’s duty to facilitate the general task of the Commission and to provide it with all the information requested for that purpose. (see paras 42-43, 45, 197-198)4. Articles 9 and 10 of Directive 75/442 on waste, as amended by Directive 91/156, impose on the Member States obligations formulated in clear and unequivocal terms to achieve a certain result, under which undertakings or establishments which carry out waste disposal operations or waste recovery operations in those States must hold a permit. It follows that a Member State complies with its obligations under those provisions only if, in addition to having correctly transposed the provisions into domestic law, it checks that operators in fact have, before they carry out any disposal or recovery operations, a permit issued in accordance with Article 9, the absence of which cannot be made up for by the mere submission of an application. The Member State thus has the task of making sure that the permit system set up is actually applied and complied with, in particular by conducting appropriate checks for that purpose and ensuring that operations carried out without a permit are actually brought to an end and punished. (see paras 116-118)5. Article 12 of Directive 75/442 on waste, as amended by Directive 91/156, provides in particular that establishments or undertakings which collect or transport waste on a professional basis are to be registered with the competent authorities where they are not subject to authorisation. That provision thus requires the Member States to choose a permit system or a registration procedure. Where a Member State has opted for a permit system, it cannot claim that, although, because of delays for which it could be held responsible, operators did not have a permit on the relevant date, it has complied with its obligations on the basis that the submission of an application for a permit is equivalent to registration. (see paras 142, 144-145)6. In accordance with Article 5 of Directive 75/442 on waste, as amended by Directive 91/156, the establishment of an integrated and adequate network of waste disposal installations, taking account of the best available technology not involving excessive costs, and the network having to enable waste to be disposed of in one of the nearest appropriate installations, is among the objectives pursued by that directive. Accordingly, a Member State which allows a large number of waste disposal installations to operate without a permit and on whose territory the disposal network, taken as a whole, is close to saturation point and not sufficient to absorb the waste produced in that territory fails to fulfil the obligations laid down in Article 5 of the directive. (see paras 149-158)7. While it is not possible, in principle, to draw the direct inference from the fact that a situation is not in conformity with the objectives laid down in the first paragraph of Article 4 of Directive 75/442 on waste, as amended by Directive 91/156, that a Member State has necessarily failed to fulfil the obligations under that provision, namely to take the requisite measures to ensure that waste is disposed of without endangering human health and without harming the environment, it is nevertheless undisputed that if that situation persists, in particular if it leads to a significant deterioration in the environment over a protracted period without any action being taken by the competent authorities, that may indicate that the Member State has exceeded the discretion conferred by that provision. Where a Member State has generally and persistently failed to fulfil its obligation to ensure a correct implementation of Articles 9 and 10 of the directive which relate to permit systems for waste disposal and waste recovery operations, that fact alone is sufficient to establish that it has likewise failed generally and persistently to fulfil the requirements of Article 4 of the directive, a provision closely linked to Articles 9 and 10. (see paras 169-171)8. Article 8 of Directive 75/442 on waste, as amended by Directive 91/156, which inter alia implements the principle that preventive action should be taken, provides that the Member States have the task of ensuring that any holder of waste has it handled by a private or public waste collector or by an undertaking which carries out waste disposal and recovery operations, or recovers or disposes of it himself in accordance with the provisions of the directive. The Member States are obliged to take those measures also in relation to the operator or owner of an illegal tip, since he must be regarded as the holder of waste for the purposes of that article. Such an obligation is not satisfied where a Member State confines itself to ordering the sequestration of the illegal tip and prosecuting the operator of the tip. (see paras 179, 181-182)9. According to Article 13 of Directive 75/442 on waste, as amended by Directive 91/156, the appropriate periodic inspections that that provision requires are to cover in particular establishments or undertakings which carry out the operations referred to in Articles 9 and 10 of the directive, which must, by virtue of the latter two provisions, obtain in advance an individual permit containing a number of requirements and conditions. If such permits are not granted and, therefore, no requirements and conditions are laid down by a permit with regard to a given undertaking or establishment, the inspections of the latter which would be carried out cannot, by definition, meet the requirements of Article 13 of the directive. One of the fundamental aims of the inspections prescribed by that provision is to check that the requirements and conditions laid down in permits issued in accordance with Articles 9 and 10 of the directive are complied with. The same holds for records kept by the establishments or undertakings referred to by the latter provisions, which, as Article 14 of the directive specifies, must indicate in particular the quantities and nature of the waste or also its treatment method. (see paras 190-192)JUDGMENT OF THE COURT (Grand Chamber)26 April 2005 (*) In Case C-494/01,ACTION under Article 226 EC for failure to fulfil obligations, brought on 20 December 2001,Commission of the European Communities, represented by R. Wainwright and X. Lewis, acting as Agents, with an address for service in Luxembourg, applicant,Ireland, represented by D. O’Hagan, acting as Agent, assisted by P. Charleton SC and A. Collins BL, with an address for service in Luxembourg, defendant, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann (Rapporteur), C.W.A. Timmermans and A. Rosas, Presidents of Chambers, J.‑P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues, M. Ilešič, J. Malenovský, U. Lõhmus and E. Levits, Judges, Advocate General: L.A. Geelhoed, Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 6 July 2004,after hearing the Opinion of the Advocate General at the sitting on 23 September 2004,gives the followingJudgment1 By its application, the Commission of the European Communities requests the Court to declare that:– by failing to take all the measures necessary to ensure a correct implementation of the provisions of Articles 4, 5, 8, 9, 10, 12, 13 and 14 of Council Directive 75/442/EEC of 15 July 1975 on waste (OJ 1975 L 194, p. 39), as amended by Council Directive 91/156/EEC of 18 March 1991 (OJ 1991 L 78, p. 32) (‘the Directive’), Ireland has failed to comply with its obligations under those provisions; – by failing to respond completely and satisfactorily to a request for information dated 20 September 1999 in relation to a waste operation at Fermoy, County Cork, Ireland has failed to fulfil the obligations which it has pursuant to Article 10 EC. Relevant provisions2 Article 4 of the Directive provides:‘Member States shall take the necessary measures to ensure that waste is recovered or disposed of without endangering human health and without using processes or methods which could harm the environment, and in particular: – without risk to water, air, soil and plants and animals, – without causing a nuisance through noise or odours, – without adversely affecting the countryside or places of special interest. Member States shall also take the necessary measures to prohibit the abandonment, dumping or uncontrolled disposal of waste.’ 3 Article 5 of the Directive provides: ‘1. Member States shall take appropriate measures, in cooperation with other Member States where this is necessary or advisable, to establish an integrated and adequate network of disposal installations, taking account of the best available technology not involving excessive costs. The network must enable the Community as a whole to become self-sufficient in waste disposal and the Member States to move towards that aim individually, taking into account geographical circumstances or the need for specialised installations for certain types of waste. 2. The network must also enable waste to be disposed of in one of the nearest appropriate installations, by means of the most appropriate methods and technologies in order to ensure a high level of protection for the environment and public health.’ 4 Article 8 of the Directive states: ‘Member States shall take the necessary measures to ensure that any holder of waste: – has it handled by a private or public waste collector or by an undertaking which carries out the operations listed in Annex II A or B, or – recovers or disposes of it himself in accordance with the provisions of this Directive.’5 Article 9 of the Directive is worded as follows:‘1. For the purposes of implementing Articles 4, 5 and 7, any establishment or undertaking which carries out the operations specified in Annex II A must obtain a permit from the competent authority referred to in Article 6. Such permit shall cover: – the types and quantities of waste, – the technical requirements, – the security precautions to be taken, – the disposal site, – the treatment method. 2. Permits may be granted for a specified period, they may be renewable, they may be subject to conditions and obligations, or, notably, if the intended method of disposal is unacceptable from the point of view of environmental protection, they may be refused.’ 6 Article 10 of the Directive provides:‘For the purposes of implementing Article 4, any establishment or undertaking which carries out the operations referred to in Annex II B must obtain a permit.’ 7 Article 12 of the Directive is worded as follows:‘Establishments or undertakings which collect or transport waste on a professional basis or which arrange for the disposal or recovery of waste on behalf of others (dealers or brokers), where not subject to authorisation, shall be registered with the competent authorities.’ 8 Article 13 of the Directive provides:‘Establishments or undertakings which carry out the operations referred to in Articles 9 to 12 shall be subject to appropriate periodic inspections by the competent authorities.’ 9 Article 14 of the Directive states:‘All establishments or undertakings referred to in Articles 9 and 10 shall: – keep a record of the quantity, nature, origin, and, where relevant, the destination, frequency of collection, mode of transport and treatment method in respect of the waste referred to in Annex I and the operations referred to in Annex II A or B, – make this information available, on request, to the competent authorities referred to in Article 6. Member States may also require producers to comply with the provisions of this Article.’ 10 Annexes II A and II B to the Directive respectively list waste disposal operations and waste recovery operations as carried out in practice. Pre-litigation procedure11 The Commission received three complaints concerning Ireland. The first related to the dumping of construction and demolition waste on wetlands within the area of the City of Limerick (‘Complaint 1997/4705’). The second referred to the storage of organic waste in lagoons at Ballard, Fermoy, County Cork, and its disposal through landspreading by a private operator lacking a permit (‘Complaint 1997/4792’). The third concerned storage of various types of waste at Pembrokestown, Whiterock Hill, County Wexford, by a private operator lacking a permit (‘Complaint 1997/4847’). 12 On 30 October 1998 the Commission sent a letter of formal notice to Ireland in respect of those complaints. This was followed, on 14 July 1999, by a reasoned opinion, relating only to Complaints 1997/4705 and 1997/4792, which alleged that Ireland had infringed the second paragraph of Article 4 and Articles 9 and 10 of the Directive. Ireland was requested to take the measures necessary to comply with the reasoned opinion within two months following its notification. 13 In its responses of 7 October and 23 November 1999, Ireland denied that it had in any way failed to fulfil its obligations as regards the two complaints referred to in the preceding paragraph. 14 The Commission also received five other complaints concerning Ireland. The first of these raised the operation without a permit of a municipal landfill at Powerstown, County Carlow, since 1975 (‘Complaint 1999/4351’). The second related to the dumping of waste (rubble), and the operation without a permit of a private waste treatment facility, in a green area on the Poolbeg Peninsula, Dublin (‘Complaint 1999/4801’). The third concerned the operation without a permit of two municipal landfills, one at Tramore and the other at Kilbarry, County Waterford, since 1939 and 1970 respectively, adjoining and/or encroaching upon protected areas (‘Complaint 1999/5008’). The fourth related to the use since the 1980s, by a private operator lacking a permit, of waste facilities in disused quarries at Lea Road and Ballymorris, Portarlington, County Laois (‘Complaint 1999/5112’). The fifth concerned the operation, without a permit, of a municipal landfill at Drumnaboden, County Donegal (‘Complaint 2000/4408’). 15 On the basis of those complaints and the information gathered in the course of investigating them, the Commission sent a letter of formal notice to Ireland on 25 October 2000. 16 The Commission also received four further complaints directed against Ireland, the first relating to the operation, without a permit, of a private waste storage and treatment facility at Cullinagh, Fermoy, County Cork (‘Complaint 1999/4478’). The second concerned the depositing of demolition and construction waste by a private operator, since 1990, on an area on the foreshore at Carlingford Lough, Greenore, County Louth (‘Complaint 2000/4145’). The third related to general waste collection by unlicensed and unregistered private undertakings which were not regulated, at Bray, County Wicklow (‘Complaint 2000/4157’). The fourth concerned the tipping of various types of waste, principally demolition and construction waste, on four wetlands located at Ballynattin, Pickardstown, Ballygunner Bog and Castletown, County Waterford (‘Complaint 2000/4633’). 17 On 17 April 2001 the Commission sent a fresh letter of formal notice to Ireland referring to those last four complaints and recalling the letter of formal notice of 25 October 2000. 18 In addition, after the Commission had received no response to a request for information dated 20 September 1999 addressed to Ireland in relation to Complaint 1999/4478, on 28 April 2000 the Commission sent it a letter of formal notice alleging a breach of Article 10 EC. 19 On 26 July 2001 the Commission sent to Ireland a reasoned opinion that set out the analysis of the 12 aforementioned complaints, referring to the letters of formal notice of 30 October 1998, 28 April 2000, 25 October 2000 and 17 April 2001 and to the reasoned opinion of 14 July 1999. The Commission alleged that Ireland had failed to fulfil its obligations to take all the measures necessary to ensure a correct implementation of Articles 4, 5, 8, 9, 10, 12, 13 and 14 of the Directive and its obligations resulting from Article 10 EC, and called on it to take the measures necessary to comply with the reasoned opinion within two months of receipt thereof. 20 The Commission also stated that those complaints did not constitute the only cases of non-compliance with the Directive and that it reserved the right to cite other examples in order to illustrate the breaches of a general nature in implementing the provisions of the Directive of which it accuses the Irish authorities. 21 Considering that Ireland had not complied with the reasoned opinions of 14 July 1999 and 26 July 2001, the Commission brought the present action. Consideration of the action Breaches of the Directive The subject-matter of the action, the date as at which it must be determined whether the alleged failures to fulfil obligations have occurred and the admissibility of certain grounds of complaint relied on by the Commission 22 The Commission begins by stating that, following a Treaty infringement procedure initiated against Ireland and the subsequent adoption of the Waste Management Act, 1996 (‘the 1996 Act’) – one of the aims of which was to make operations in respect of waste managed by local authorities (‘municipal waste’) subject to a system of licences issued by the Environmental Protection Agency (‘the EPA’) – and its implementing regulations, the legal framework for waste management in Ireland has been improved considerably. With the exception of a failure to transpose Article 12 of the Directive, the present proceedings therefore principally seek a finding that the Irish authorities are not complying with their obligations to achieve a certain result because they are not ensuring that the Directive is actually applied. 23 The Commission further explains in this regard that this action seeks a declaration of failure to fulfil obligations not only on account of the shortcomings noted in the specific situations covered by the 12 complaints referred to in paragraphs 11, 14 and 16 of this judgment but also, and more fundamentally, on account of the general and persistent nature of the deficiencies which characterise the actual application of the Directive in Ireland, of which the specific situations mentioned in those complaints simply constitute examples. It is a matter of ensuring the full recognition and implementation in Ireland of the seamless chain of responsibility for waste which the Directive establishes, by requiring: holders of waste to discard it through specified operators; the operators collecting or dealing with the waste to be subject to a permit or registration system and to inspection; and the abandonment, dumping or uncontrolled disposal of waste to be prohibited. 24 In the Commission’s submission, the fact that the action is thus intended in particular to raise systemic deficient administrative practices means that it is justified in adducing further evidence to prove the existence of those practices and their continuation over a long period. Likewise, the fact that in certain of the specific cases raised by the Commission a permit was finally issued or certain steps completed before the period laid down in the reasoned opinion expired is not decisive for the existence of a failure to fulfil obligations that is linked to the existence of such practices. 25 The Irish Government contends that the 12 complaints to which the Commission refers in the reasoned opinion must delimit the subject-matter of the proceedings. Other facts or complaints not notified to Ireland during the pre-litigation procedure may not be relied on in support of the action, and the Commission is not permitted to draw general conclusions from the examination of specific complaints by presuming an alleged systemic failure on Ireland’s part. 26 Furthermore, the question whether Ireland might have failed to fulfil its obligations must be determined by reference to the situation prevailing on the date upon which the two-month period set in the reasoned opinion of 26 July 2001 expired. 27 As to those various submissions, it should be stated, first, in relation to the subject-matter of the present proceedings, that, without prejudice to the Commission’s obligation to satisfy in each and every case the burden of proof which it bears, in principle nothing prevents the Commission from seeking in parallel a finding that provisions of a directive have not been complied with by reason of the conduct of a Member State’s authorities with regard to particular specifically identified situations and a finding that those provisions have not been complied with because its authorities have adopted a general practice contrary thereto, which the particular situations illustrate where appropriate. 28 It is accepted that an administrative practice can be the subject-matter of an action for failure to fulfil obligations when it is, to some degree, of a consistent and general nature (see, in particular, Case C-387/99 Commission v Germany [2004] ECR I-0000, paragraph 42, and the case-law cited). 29 Second, as is clear from settled case-law, the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion (see, inter alia, Case C-446/01 Commission v Spain [2003] ECR I‑6053, paragraph 15). 30 In the present case, although Ireland is alleged not to have complied with the reasoned opinions of 14 July 1999 and 26 July 2001 within the periods laid down by them, the Commission has stated in reply to a written question from the Court that the second of those opinions was intended to consolidate and gather together all the information and arguments previously exchanged between the parties and that, consequently, it replaced the first opinion. 31 In those circumstances, the failures to fulfil obligations alleged by the Commission must be assessed in light of the situation prevailing at the end of the two-month period laid down in the reasoned opinion of 26 July 2001 (‘the 2001 reasoned opinion’). 32 Admittedly, it follows that the Court cannot declare that Ireland has failed to fulfil its obligations under the Directive with regard to a given particular situation where it is established that, on the date of expiry of that period, the deficiencies alleged by the Commission had been remedied. On the other hand, as the Commission rightly submits, in so far as the action also seeks a declaration that there has been a general failure on the part of the competent national authorities to fulfil obligations, the fact that the deficiencies pointed out in one or other case have been remedied does not necessarily mean that the general and continuous approach of those authorities, to which such specific deficiencies would testify where appropriate, has come to an end. 33 Third, in the context of proceedings for failure to fulfil obligations, the purpose of the pre-litigation phase is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under Community law and, on the other, to avail itself of its right to defend itself against the charges formulated by the Commission (see, inter alia, Case C-350/02 Commission v Netherlands [2004] ECR I-0000, paragraph 18, and the case-law cited). 34 The proper conduct of that procedure constitutes an essential guarantee required by the EC Treaty not only in order to protect the rights of the Member State concerned, but also so as to ensure that any contentious procedure will have a clearly defined dispute as its subject-matter (see, inter alia, Commission v Netherlands, cited above, paragraph 19, and the case-law cited). 35 The subject-matter of proceedings under Article 226 EC is accordingly delimited by the pre-litigation procedure governed by that provision. The Commission’s reasoned opinion and the application must be based on the same grounds and pleas, with the result that the Court cannot examine a ground of complaint which was not formulated in the reasoned opinion, which for its part must contain a cogent and detailed exposition of the reasons which led the Commission to the conclusion that the Member State concerned had failed to fulfil one of its obligations under the Treaty (see, inter alia, Commission v Netherlands, paragraph 20, and the case-law cited). 36 It indeed follows that the Commission cannot seek a declaration of a specific failure by Ireland to fulfil its obligations under the Directive regarding a particular factual situation that was not referred to in the course of the pre-litigation procedure. A specific ground of complaint of that kind must necessarily have been relied on at the pre-litigation stage, in order that the Member State concerned has the opportunity to remedy the particular situation complained of or to avail itself of its right to defend itself in that regard; such defence may in particular prompt the Commission to withdraw the ground of complaint and/or help to delimit the subject-matter of the dispute that the Court will subsequently have before it. 37 On the other hand, in so far as the action seeks to raise a failure of a general nature to comply with the Directive’s provisions, concerning in particular the Irish authorities’ systemic and consistent tolerance of situations not in accordance with the Directive, the production of additional evidence intended, at the stage of proceedings before the Court, to support the proposition that the failure thus alleged is general and consistent cannot be ruled out in principle. 38 It should be noted that in its application the Commission may clarify its initial grounds of complaint provided, however, that it does not alter the subject-matter of the dispute. In producing fresh evidence intended to illustrate the grounds of complaint set out in its reasoned opinion, which allege a failure of a general nature to comply with the provisions of a directive, the Commission does not alter the subject-matter of the dispute (see, by analogy, the judgment of 12 October 2004 in Case C-328/02 Commission v Greece, not published in the ECR, paragraphs 32 and 36). 39 In the present case, contrary to the Irish Government’s submissions, although they were not referred to during the pre-litigation procedure the facts relating to massive illegal dumping of, on occasions hazardous, waste in County Wicklow, of which the Commission became aware after issue of the reasoned opinion, could therefore properly be mentioned by the latter in support of its application for the purpose of illustrating the failures of a general nature to fulfil obligations raised by it. The burden of proof40 The Irish Government has raised in defence numerous objections relating to the burden of proof. In particular it has cast doubt on the truth of numerous facts alleged by the Commission on the conclusion of the investigation of the 12 complaints which were received by it. The Irish Government has also contended that the Commission is not justified in drawing general conclusions from the examination of those specific complaints by presuming alleged systemic failures by Ireland to fulfil its obligations. 41 It is to be remembered that in proceedings under Article 226 EC for failure to fulfil obligations it is incumbent upon the Commission to prove the allegation that the obligation has not been fulfilled. It is the Commission’s responsibility to place before the Court the information needed to enable the Court to establish that the obligation has not been fulfilled, and in so doing the Commission may not rely on any presumption (see, in particular, Case 96/81 Commission v Netherlands [1982] ECR 1791, paragraph 6, and Case C-408/97 Commission v Netherlands [2000] ECR I-6417, paragraph 15). 42 However, the Member States are required, under Article 10 EC, to facilitate the achievement of the Commission’s tasks, which consist in particular, pursuant to Article 211 EC, in ensuring that the provisions of the Treaty and the measures taken by the institutions pursuant thereto are applied (Case 96/81 Commission v Netherlands, paragraph 7, and Case C-408/97 Commission v Netherlands, paragraph 16). 43 In this context, account should be taken of the fact that, where it is a question of checking that the national provisions intended to ensure effective implementation of the directive are applied correctly in practice, the Commission which, as the Advocate General has observed in point 53 of his Opinion, does not have investigative powers of its own in the matter, is largely reliant on the information provided by any complainants and by the Member State concerned (see, by analogy, Case C‑408/97 Commission v Netherlands, paragraph 17). 44 It follows in particular that, where the Commission has adduced sufficient evidence of certain matters in the territory of the defendant Member State, it is incumbent on the latter to challenge in substance and in detail the information produced and the consequences flowing therefrom (see to this effect Case C‑365/97 Commission v Italy [1999] ECR I‑7773 (‘SanRocco’), paragraphs 84 and 86). 45 In such circumstances, it is indeed primarily for the national authorities to conduct the necessary on-the-spot investigations, in a spirit of genuine cooperation and mindful of each Member State’s duty, recalled in paragraph 42 of the present judgment, to facilitate the general task of the Commission (SanRocco, paragraph 85). 46 Thus, where the Commission relies on detailed complaints revealing repeated failures to comply with the provisions of the directive, it is incumbent on the Member State to contest specifically the facts alleged in those complaints (see, by analogy, Case 272/86 Commission v Greece [1988] ECR 4875, paragraph 19). 47 Likewise, where the Commission has adduced sufficient evidence to show that a Member State’s authorities have developed a repeated and persistent practice which is contrary to the provisions of a directive, it is incumbent on that Member State to challenge in substance and in detail the information produced and the consequences flowing therefrom (see, by analogy, Case 272/86 Commission v Greece, cited above, paragraph 21, and SanRocco, paragraphs 84 and 86). The facts relating to the complaints examined by the Commission48 As is apparent from paragraphs 11 to 21 of the present judgment, the Commission bases its action in particular on the alleged conduct of the Irish authorities in various specific situations examined following 12 complaints from private parties. Since the factual circumstances upon which the Commission seeks to rely have been disputed by Ireland, it should be ascertained whether they have been proved to the required legal standard. – Dumping of waste in Limerick (Complaint 1997/4705)49 The Commission submits that in 1997 Limerick Corporation, a local authority with responsibility for applying waste legislation, tolerated dumping of construction and demolition waste on wetlands in Limerick. It further observes that the EPA stated in a letter of 23 January 1998 that depositing of that kind amounted to recovery operations not requiring authorisation. In addition, the waste was not entirely removed, and dumping continued on the wetlands and other nearby areas of wetland. 50 The Commission relies in this regard on Complaint 1997/4705. Apart from the letter from the EPA, it adduces photographic negatives from the complainant showing mounds of debris amidst wetland vegetation, newspaper articles indicating that the instances of unauthorised dumping of waste on the wetlands in Limerick were common knowledge and photographs from complainants taken in 2002 testifying to the presence of demolition and construction waste on those wetlands. 51 The Irish Government replies that, according to Limerick Corporation, just three lorry loads were, in error, deposited in October 1997 on the area covered by Complaint 1997/4705 and that the waste was removed within hours of its deposit. The facts alleged are not proved, particularly at the date upon which the period set in the 2001 reasoned opinion expired. As to the more recent deposits on the area covered by that complaint, the Irish Government states that they are small in amount and affirms that the waste will be removed promptly. The other deposits alleged by the Commission are not material to the present proceedings and occurred for infilling and development purposes. Moreover, as regards an infilling proposal with a view to developing sporting facilities, the EPA’s position was consistent with Irish legislation which, until 20 May 1998, did not require a licence for waste recovery. 52 In this instance, the Court holds that, given the detailed nature of Complaint 1997/4705 and the evidence adduced by the Commission, the Irish Government cannot, as is apparent from paragraphs 42 to 47 of this judgment, take refuge behind the otherwise unsupported assertions of Limerick Corporation or simply contend that the facts alleged are not proved or that the waste deposits in question occurred in implementation of a controlled policy of recovery or infrastructure development, without challenging in substance and in detail the information produced by the Commission or supporting its own allegations with specific evidence. 53 Contrary to what the Irish Government suggests, the body of evidence adduced by the Commission is in addition relevant for the purpose of substantiating the ground of complaint set out by it relating to the local authorities’ persistent tolerance of the unauthorised deposit of waste on the wetlands situated in Limerick. 54 In light of the foregoing, the Court finds that the evidence mentioned in paragraph 50 of this judgment shows to the required legal standard that in 1997 the competent local authority tolerated unauthorised depositing of construction and demolition waste on wetlands in Limerick, that such depositing continued in the area in question, in particular in the course of the present proceedings, and that other depositing also took place on two further wetlands very close by. It is also proved that the EPA stated in a letter sent on 23 January 1998 to Limerick Corporation that, under the Irish legislation in force at that time, such depositing did not require authorisation if it occurred for the purpose of recovery. 55 The fact that the wetlands in question are of particular ecological interest is not denied by the Irish Government and is sufficiently clear from the case‑file, especially from the fact that classification of one of them has been envisaged as a special area of conservation under Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ 1992 L 206, p. 7). It is apparent, moreover, from photographs and newspaper articles adduced by the Commission and from a letter dated 8 December 1997 from the Department of Arts, Heritage, Gaeltacht and the Islands that the wetlands in question have been badly damaged. – Unauthorised operations involving the storage of waste in lagoons and its landspreading, at Ballard, Fermoy, County Cork (Complaint 1997/4792) 56 The Commission submits that Cork County Council, the competent waste management authority, has since 1990 tolerated the carrying out by a private operator without a permit of operations involving the storage on a large scale of organic waste in lagoons at Ballard and the disposal of that waste by landspreading, failing to ensure that those operations ceased and were punished. Furthermore, the facilities in question were constructed without the necessary planning consent and the latter was granted in 1998, making it easier for those operations to continue. 57 In its defence the Irish Government concedes that the storage and landspreading operations carried out by the operator concerned required possession of a permit. It considers, however, that the conduct of Cork County Council was appropriate. That authority established in April 1992 that the activities complained of had ceased. When they recommenced, it took steps in 1996 to ensure that no further material was deposited in the lagoons in question. After finding none the less, on an inspection carried out in August 2001, that the storage activity had recommenced, Cork County Council commenced legal proceedings which resulted, in March 2002, in the defendant’s being found guilty and fined EUR 1 800. All illegal depositing has ceased since then and the waste still present was removed. 58 In its reply, the Commission maintains that the operations in question never ceased. It adduces for this purpose various letters, including a number from Cork County Council itself, which show that waste was deposited at Ballard until June 2002 at least. Furthermore, the only penalty imposed on the operator responsible was for failure to provide information to the council. 59 Without contesting this last allegation made by the Commission, the Irish Government indicates in its rejoinder lodged at the Court Registry on 10 January 2003 that Cork County Council is considering the question of bringing legal proceedings against the operator in question. The removal of the waste still on the site is moreover imminent. 60 In light of the foregoing, the Court holds that it is proved to the required legal standard that substantial unauthorised operations involving the storage of waste in lagoons and/or its landspreading were pursued on the initiative of a private operator in Ballard, County Cork, between 1990 and June 2002 at least, without the competent authorities taking appropriate measures to bring those operations to an end and without the operations giving rise to penalties. Nor is it disputed that the installations necessary for such operations were retained although they did not have the necessary planning consent and that in 1998 the competent authorities issued such a consent authorising the retention of such installations. – Unauthorised waste storage operations at Pembrokestown, Whiterock Hill, County Wexford (Complaint 1997/4847)61 The Commission contends that a private operator stored waste between 1995 and 2001 on a site at Pembrokestown, notwithstanding three district court decisions in 1996 and 1997 successively fining him, on conviction in this regard, IEP 100, and then IEP 400 twice, a fact which testifies in particular to the inadequacy of the penalties imposed. Furthermore, those operations exposed local residents to substantial nuisances of which Wexford County Council was aware, as is apparent in particular from the terms of its decision of 23 February 1996 refusing an application for planning consent relating to the site concerned, a decision which is adduced by the Commission. 62 In the Irish Government’s submission, such fines were consistent with the European Communities (Waste) Regulations, 1979, in force at the material time, which provided for the imposition, on summary conviction, of a fine not exceeding IEP 600 and/or a term of imprisonment not exceeding six months. Since the operations were of an intermittent nature, Wexford County Council also considered it inappropriate to obtain an injunction against the person concerned to prevent them. Finally, a licence dated 24 January 2001, which the Irish Government adduces, was granted in respect of the operations. 63 In this instance, the Court finds that the material in the file shows to the required legal standard that between 1995 and January 2001 waste storage operations took place on a private site located at Pembrokestown in conditions prejudicial to the adjacent residents in the absence of any authorisation, without the competent authorities taking appropriate measures to bring those operations to an end and without the operations being subject to penalties sufficiently effective to exert a deterrent effect. It is also proved that a licence as provided for by the 1996 Act was granted by the EPA to the operator of this site on 24 January 2001. – Unauthorised operation of the Powerstown municipal landfill, County Carlow (Complaint 1999/4351)64 The Commission submits in its application that the Powerstown municipal landfill, in County Carlow, has been operating without a permit since 1975. Although a licence application was submitted on 27 February 1998 on the basis of the 1996 Act, a decision had not yet been issued on 23 February 2000, while the facility had continued to operate since the submission of the licence application. 65 The Irish Government does not contest those allegations but adduces a licence relating to the landfill granted by the EPA on 24 March 2000. – Unauthorised operation of a waste storage and treatment facility at Cullinagh, Fermoy, County Cork (Complaint 1999/4478)66 The Commission submits that Cork County Council has since 1991 tolerated the running by a private operator without a permit of a waste storage and treatment facility on a site located at Cullinagh, in an area with groundwater, failing to ensure that those operations ceased and were punished, despite the successive refusals issued in respect of the applications for planning consent made by that operator between 1991 and 1994. 67 The Irish Government states that in April 2002 a decision was adopted authorising the concern to carry out recovery operations at the rate of 6 500 tonnes of waste per annum. This decision is not, however, adduced. In the Irish Government’s submission, no groundwater contamination from the facility concerned has been ascertained and the licence requires a procedure for monitoring and assessing groundwater quality to be implemented. The planning consents were granted by Cork County Council, then set aside by the appeal body. 68 The Court accordingly holds that it is proved to the required legal standard that a waste storage and treatment site was operated without a permit, at any rate between 1991 and April 2002, in an area where a risk of groundwater contamination could not be ruled out, without the competent authorities taking appropriate measures to bring its operation to an end and without its operation giving rise to penalties. As is apparent from the preceding paragraph, the Irish Government acknowledges, moreover, that the competent authorities granted planning consents for those facilities at a time when the facilities did not have the permit prescribed by the Directive. – Dumping of waste and unauthorised operation of waste treatment facilities on the Poolbeg Pensinsula, Dublin (Complaint 1999/4801)69 The Commission submits, first, that the competent authorities of the city of Dublin tolerated, from 1997, dumping of construction and demolition waste in a green area on the Poolbeg Peninsula, failing to ensure that the dumping ceased or was punished or that the waste concerned was removed. Second, those authorities tolerated the operation on the peninsula, without a permit, of two treatment facilities for metallic waste, failing to ensure that such operation ceased or was punished, and even went so far as to have Community financial assistance granted to the facilities in question. 70 With regard to the two aforementioned facilities, the Irish Government stated, in its letters of 12 December 2000 and 26 June 2001 responding to requests for information sent to it by the Commission, that, following permit applications submitted on 23 September and 15 October 1998 respectively, the facilities were granted permits by decisions dated 3 August 2000 and 1 March 2001. As to the Community aid, the Irish Government states in its defence that it was granted by mistake. 71 The Irish Government further contends that there was only one past instance of fly-tipping and that the site was remediated before the period set in the 2001 reasoned opinion expired, without there being any evidence of environmental damage on the site. Since the fly-tippers were not identified, they could not be punished. 72 In its reply, the Commission maintains that it is clear from detailed information received from complainants who were in regular contact with Dublin Port Company, which has responsibility for the Poolbeg Peninsula, and with Dublin Corporation, which is the competent waste management authority, and from photographs which it adduces that dumping of waste continued until the beginning of 2000 and that the site concerned was not in fact cleaned up by the Irish authorities until the end of that year. 73 In its rejoinder, the Irish Government contests those allegations made by the Commission and submits that the photographs adduced by it are insufficient to support them. 74 The Court finds, first, that in its letters of 12 December 2000 and 26 June 2001 the Irish Government acknowledged that significant dumping of rubble took place in the past in the area at issue and stated that the rubble was levelled to serve as foundation material for a platform for pipe assembly operations. Second, the complainants’ assertions and the photographs adduced by the Commission are sufficiently precise and detailed in nature for the Irish Government to be unable, as pointed out in paragraphs 42 to 47 of this judgment, merely to contend that the facts alleged are not proved without challenging in substance and in detail the information produced by the Commission or supporting its own allegations with specific evidence. 75 In light of the foregoing, the Court holds that it is proved to the required legal standard that the competent authorities of the city of Dublin tolerated, from 1997 up until 2000, the unauthorised presence of rubble dumped in a green area on the Poolbeg Peninsula, failing to ensure that dumping ceased or that the waste in question was removed. Those authorities also tolerated the operation on the Poolbeg Peninsula without a permit of two waste treatment facilities until 3 August 2000 and 1 March 2001 respectively when the permit applications relating to them were granted, failing to ensure that their operation was brought to an end or penalties imposed on the operator. Those facilities also received Community financial assistance. – Unauthorised operation of municipal landfills at Tramore and Kilbarry, County Waterford (Complaint 1999/5008)76 According to the documents and pleadings produced by the parties, the Tramore landfill, which has been in operation since the 1930s, adjoins a special protection area within the meaning of Council Directive 79/409/EEC of 2 April 1979 on the conservation of wild birds (OJ 1979 L 103, p. 1) and falls partially within an area proposed as a natural heritage area and as a special area of conservation within the meaning of Directive 92/43. It is also apparent from those documents that the licence application in respect of this landfill, which was not submitted until 30 September 1998, was granted by the EPA on 25 September 2001. 77 The Kilbarry landfill, which has been in operation since the beginning of the 1970s, adjoins wetlands proposed as a natural heritage area and encroaches on a former area of scientific interest. The licence application in respect of the landfill, submitted on 30 September 1997, was granted by the EPA on 19 October 2001. 78 According to the Commission, the unauthorised operation of these two landfills has, moreover, caused significant environmental harm and nuisance, consisting in particular in encroachments upon the adjacent wetlands and a consequent reduction in their area. 79 In its letter sent to the Commission on 30 November 2000 in response to a request by the latter for information, the Irish Government maintains that the reduction in area of the wetlands adjoining the Kilbarry landfill occurred 10 years earlier. As to the alleged adverse environmental effects, the Irish Government denies that the Tramore landfill has had any significant adverse effect on the adjacent special protection area, but acknowledges on the other hand that the EPA has expressed concerns with regard to the Kilbarry landfill. 80 In its defence, the Irish Government also explains that, following amendment of the boundary of the proposed special area of conservation at Tramore by Dúchas, the authority responsible for nature conservation, the landfill no longer encroaches upon that area. It further submits that all the harmful effects on the environment and, in particular, on the various environmentally sensitive areas adjoining the landfills in question, are now dealt with in an appropriate manner in the licences of 25 September and 19 October 2001. 81 The Court finds that the Irish Government admits the encroachment of the Kilbarry landfill on the surrounding wetlands and the consequent reduction in their area. 82 As to the Tramore landfill, it is apparent from a letter sent on 29 May 2000 by the Irish authority responsible for nature conservation that it blames Waterford County Council both for the landfill’s encroachments upon the proposed special area of conservation and for the damage caused to the latter. A draft conservation plan adopted by the same authority on 20 July 2000, which the Commission also adduces, confirms that encroachments upon the proposed special area of conservation have taken place since 1993, causing serious impairment to it and damage in the areas adjacent to the landfill. Photographs from May 2001, adduced by the Commission, also show waste adjacent to the boundary of the landfill and encroaching upon the surrounding natural environment. 83 Finally, certain findings made in the inspection reports written in the course of the licensing procedures for the two landfills and in the licences themselves and various specific conditions imposed by the licences attest that significant harm to the environment, in particular, the aqueous environment, has been caused by the landfills’ operation. Due compliance with the various conditions imposed in those licences also involves adopting implementing measures and carrying out works, so that mere issue of the licences is not capable of ensuring that the environmental harm resulting from the operation of the two landfills in question is immediately brought to an end. Moreover, this finding is confirmed in particular by the annual environmental report drawn up in October 2002 by Waterford County Council, in accordance with the requirements of the licence relating to the Tramore landfill. 84 In light of the foregoing, the Court holds that it is proved to the required legal standard that the Tramore and Kilbarry municipal landfills, whose establishment dates back to the 1930s and 1970s, continued to operate without authorisation until 25 September and 19 October 2001 respectively, when the EPA granted the licence applications concerning them, submitted on 30 September 1998 and 30 September 1997 respectively. It is also proved to the required legal standard that those landfills encroached upon sensitive wetlands of particular ecological interest, causing in particular impairment of the wetlands and a reduction in their area, and that they were at the origin of significant environmental pollution of various kinds which, as is clear from the preceding paragraph, has not been entirely brought to an end merely because the aforementioned licences have been issued. – Unauthorised operation of waste facilities at Lea Road and Ballymorris, County Laois (Complaint 1999/5112)85 The Commission submits that the competent local authorities have tolerated the running, since the 1980s, by a private operator without a permit of waste facilities which are located in disused quarries at Lea Road and Ballymorris, near Portarlington, County Laois, and are both within the catchment of the River Barrow which has an important aquifer, those authorities having failed to ensure that the activities ceased or that they were punished. 86 After acknowledging, in a letter sent to the Commission on 28 November 2000, that waste management activities had indeed taken place on those sites without the required authorisation, the Irish Government states, however, in its defence that Laois County Council confirmed to it in September 2001 that all activity had meanwhile ceased on the Lea Road site. As regards the Ballymorris site, it states that in February 2002 the EPA issued a proposed decision refusing the licence sought. 87 In its reply, the Commission contests that the waste management operations carried out at Lea Road have ceased. It adduces in this connection various reports drawn up following site inspections, including one dated 6 June 2002 accompanied by photographic negatives attesting that significant waste management and storage activities continued on the site, at least until that date. The Commission likewise adduces various inspection reports and photographic negatives demonstrating the extent of the waste management operations carried out at Ballymorris. 88 In its rejoinder, lodged at the Court Registry on 10 January 2003, the Irish Government states that a decision on the licence application relating to the Ballymorris site is expected in March 2003. 89 In light of the foregoing, the Court holds that it is proved to the required legal standard that the competent Irish authorities have tolerated the running, since the 1980s, by a private operator without a permit of two significant waste facilities which are located in disused quarries at Lea Road and Ballymorris, near Portarlington, County Laois, and are both within the catchment of the River Barrow which has an important aquifer, those authorities having failed to ensure that the activities ceased or that they were punished. In the case of the Lea Road site, that situation persisted at least until 6 June 2002 and, in the case of the Ballymorris site, until 10 January 2003. – Operation without a permit of the municipal landfills at Drumnaboden, Muckish and Glenalla, County Donegal (Complaint 2000/4408)90 It is common ground between the parties that, after a licence application was submitted on 30 September 1998 pursuant to the 1996 Act in respect of the municipal landfill at Drumnaboden, the closure of the landfill was ordered by decision of Donegal County Council dated 26 April 1999. That authority was accordingly prompted to decide to continue operation of the municipal landfills at Muckish and Glenalla, which had closed shortly before 1 March 1999, the deadline before which an application for a licence under the 1996 Act had to be made in respect of every existing municipal landfill. Consequently, waste management activities resumed in the latter two landfills, whereas the licence applications concerning them were not submitted until 5 October 1999. Notwithstanding the lateness of those applications, the EPA made no objections to continuance of those landfills’ operation. – Unauthorised dumping and depositing of waste at Carlingford Lough, Greenore, County Louth (Complaint 2000/4145)91 The Commission submits that from 1990 the Irish authorities tolerated unauthorised dumping of construction and demolition waste on an area on the foreshore at Carlingford Lough, Greenore, County Louth, failing to ensure that those operations ceased or were punished or that the waste was removed. 92 The Irish Government indicated in a letter sent to the Commission on 9 April 2001 that the Department of the Marine and Natural Resources had considered that the question of that waste would be resolved in the context of a local development proposal under examination. In addition, the Department of the Environment and Local Government forwarded to the Commission a copy of a report dated 23 October 2000 in which the waste deposited at Carlingford Lough is identified as builders’ rubble. 93 In its defence, the Irish Government contends, however, that this last assessment is incorrect. Following trial excavations carried out on the site in January 2002 at the request of Louth County Council, it was apparent that the material present on the site comprised boulders and stone excavated from a quarry and deposited at that location by the undertaking Greenore Port for the purpose of land reclamation, so that there was no waste disposal. Furthermore, it is now proposed to use that material in the construction of a seawall. 94 Here, the Court finds that it is apparent from the evidence adduced by the Commission, which includes, in particular, letters from complainants and from the Department of the Marine and Natural Resources, two inspection reports drawn up by officials of that ministry following site inspections in 1993 and 1997 and various photographs taken in January 2002, that the waste in question does comprise demolition rubble, in particular reinforced concrete and scrap iron. That evidence also shows to the required legal standard that from 1990 such demolition and construction waste was in fact dumped and kept by a private operator lacking a permit on an area on the foreshore at Carlingford Lough and that that situation was tolerated at least until January 2002 by the competent Irish authorities, who failed to ensure that those activities ceased and were punished or that the waste was removed. – Waste collection by unlicensed and unregistered private undertakings at Bray, County Wicklow (Complaint 2000/4157)95 The Commission submits that in January 2000 Bray Urban District Council decided to cease domestic waste collection and invited residents to turn to private collectors, a list of whom was sent to them. According to the Commission, the private collectors were not registered or authorised for the purposes of Article 12 of the Directive, because that provision had not been transposed into Irish law. 96 In its letter sent to the Commission on 4 October 2000, the Irish Government states, first, that the municipality of Bray maintained records regarding all waste collectors operating in its area. Second, it informs the Commission of the future adoption of regulations under which waste collection in Ireland will be subject to a permit system. – Unauthorised tipping of waste on sites at Ballynattin, Pickardstown, Ballygunner Bog and Castletown, County Waterford (Complaint 2000/4633) 97 In its application, the Commission contends that Waterford County Council tolerated, at least until December 2001, unauthorised tipping of various types of waste, mainly construction and demolition rubble, on various wetlands in the county, including the sites at Ballynattin, Pickardstown, Ballygunner Bog and Castletown, failing to ensure that those activities ceased or were punished or that the waste was removed. 98 In its defence, lodged at the Court on 19 August 2002, the Irish Government maintains that, on the date upon which the period laid down in the 2001 reasoned opinion expired, all dumping had ceased on the Pickardstown, Castletown and Ballygunner Bog sites. Furthermore, steps had been taken by Waterford County Council to secure the removal of the waste tipped on the first two sites. The third had in the meantime been grassed over and, according to the council, removal of the waste would not enable the wetland concerned to be restored to its original state. The Irish Government states in addition that in January 2002 proceedings were brought with regard to the Ballynattin site, after a notice served by Waterford County Council in June 2000 requiring all depositing to cease and the waste to be removed had no effect. 99 In support of its reply, the Commission adduces photographic negatives from September 2002 which reveal the presence of demolition waste on the Ballynattin, Pickardstown and Castletown sites and a building in the course of construction on the first of those three sites. 100 In its rejoinder, lodged at the Court on 10 January 2003, the Irish Government submits that the dumping of waste at Ballynattin, Pickardstown, Ballygunner Bog and Castletown occurred on areas respectively representing 0.1, 0.8, 0.4 and 1 hectare, that is to say 0.15%, 27%, 6% and 17% of the wetlands concerned. In the case of the Ballynattin site, a circuit court order had required removal of the waste and demolition of the building under construction, and an application to have the site owner committed to prison was made before the circuit court in December 2002. The Irish Government further states that, having recently been informed of fresh dumping of waste on the Castletown site, Waterford County Council expressed its intention to require the removal of the waste deposited on this site and the Pickardstown site. 101 In light of the foregoing, the Court holds that it is proved to the required legal standard that waste, mainly construction and demolition waste, has been deposited on various wetlands in County Waterford, at the Ballynattin, Pickardstown, Ballygunner Bog and Castletown sites, on the initiative of private operators, and that on the date upon which the period set in the 2001 reasoned opinion expired, the competent local authority had not ensured that that dumping had ceased and been punished or that the waste concerned had been removed, a situation which moreover continued to obtain after the present action was brought.a Breach of Articles 9 and 10 of the Directive– Arguments of the parties102 The Commission submits that, as provided by Articles 9 and 10 of the Directive, all waste operations have had to take place under a permit since 1977. Such permits, which are issued for the purposes of implementing Article 4 of the Directive and must specify the conditions to be complied with by those operations in order to preserve the environment, absolutely must be such that they are granted in advance. 103 According to the Commission, numerous municipal waste operations are, however, carried out without a permit in Ireland, as is attested, for example, by the cases of the Powerstown and Tramore and Kilbarry landfills, the respective subjects of Complaints 1999/4351 and 1999/5008. 104 Furthermore, the time taken to process licence applications submitted under the 1996 Act is excessive as regards existing facilities, whilst the latter continue systematically to operate during the licensing procedure. The reply sent by the Irish Government to the Commission on 23 February 2000 indicates that, out of 137 licence applications of this type, 102 remained pending as at 2 February 2000. In the case of the Muckish and Glenalla landfills, which are referred to in Complaint 2000/4408, the EPA even tolerated continuance of their operation without a licence application having been submitted within the time-limit laid down by the 1996 Act. 105 In the Commission’s submission, Ireland also fails to fulfil its obligations by not subjecting municipal landfills that closed before that time-limit expired to the permit procedure provided for in Article 9 of the Directive. 106 As regards waste dealt with by private operators, the Commission contends that the Irish authorities, at various levels, also tolerate the continuation over long periods of unauthorised operations in a very large number of places in Ireland, failing to ensure that they cease or are punished, as is apparent in particular from investigation of Complaints 1997/4705, 1997/4792, 1999/4478, 1999/4801, 1999/5112, 2000/4145 and 2000/4633. The few penalties that are imposed continue, moreover, to have no deterrent effect at all, as is shown in particular by examination of Complaint 1997/4847. Unscrupulous operators are thus encouraged, on making a simple financial calculation, to continue their illegal activities, while their competitors who comply with the Directive’s requirements are penalised. 107 Where applications are made for a permit or planning consent that relate to existing unlawful facilities, the competent Irish authorities furthermore allow the activities concerned to continue, the authorisation finally granted covering the earlier breaches in such cases, as is shown by examination, in particular, of Complaints 1997/4792, 1999/4478, 1999/4801, 1999/5112 and 2000/4145. In the case covered by Complaint 1997/4705, the EPA even accepted that infilling on wetlands was equivalent to recovery and that, in those circumstances, no permit was required under national law. 108 The Irish Government submits in defence, with regard to operations relating to municipal waste, that at the end of September 2001 only 14 operational municipal landfills were still to be licensed and that the situation was entirely regularised on 29 November 1992, the date on which the final licence was issued. The time taken to process the applications is normal, given the wave of simultaneous applications relating to existing facilities, the complexity of the application files and the cumbersomeness of the licensing procedure. The case of the Glenalla and Muckish landfills is exceptional. 109 In addition, Article 9 of the Directive does not require that a facility that closed before expiry of the statutory period within which a licence application had to be submitted be retroactively subject to authorisation. 110 As regards waste dealt with by the private sector, the Irish Government disputes that there is a general tendency on the part of the Irish authorities to tolerate unauthorised operations. Thus, between May 1998 and August 2002, 651 applications were submitted for permits in respect of existing or proposed activities and 384 permits were issued. 111 Furthermore, the 1996 Act provides for the imposition of appropriate fines and terms of imprisonment, and infringements of that Act do give rise to penalties. In its defence, lodged at the Court on 19 August 2002, the Irish Government submits that, according to information which it does not adduce but has been communicated to it by 33 of the 34 competent local authorities, since May 1996 more than 930 notices have been issued requiring the cessation of unauthorised activity and removal of the waste concerned to an authorised facility and 76 notices requiring other action have been issued, while those authorities have completed 111 prosecutions since 1998 and 84 are in progress. The EPA has brought 14 prosecutions under the 1996 Act. 112 The courts have also given judgment against the defendant in various cases. In support of this contention, the Irish Government adduces a High Court judgment of 31 July 2002 ordering the defendants to remediate a site in County Wicklow on which hazardous hospital waste had been illegally landfilled. It also relies on a judgment delivered by Naas District Court, imposing three terms of imprisonment for unlawful holding of waste. 113 As regards the specific cases raised in the complaints sent to the Commission, the Irish Government disputes, in so far as the facts are relevant to the present proceedings, that the Irish authorities have not been active in dealing with them. Furthermore, the Directive does not prevent recovery operations which do not cause any significant environmental damage from continuing during the permit procedure. As to the EPA’s letter of 20 March 1998, it simply reflected Irish law as it stood at the time, since waste recovery activities were subject to authorisation only under the Waste Management (Licensing) (Amendment) Regulations, 1998, which entered into force on 19 May 1998. – Findings of the Court114 A preliminary point to note is that in Ireland municipal waste was not subject to a permit system until the 1996 Act and its implementing regulations were adopted. As regards waste managed by private operators, certain statements on the part of the Irish Government suggest that its disposal has been subject to such a system since 1980, while its recovery has been since 1998 only. 115 As is apparent from paragraphs 22 and 23 of this judgment, the action seeks, however, a declaration that, on the date upon which the two-month period set in the 2001 reasoned opinion expired, Ireland was not complying with its obligations under Articles 9 and 10 of the Directive, that is to say to ensure that all waste operations actually take place under a permit. 116 In this regard, it should be observed at the outset that, in accordance with the third paragraph of Article 249 EC, a directive is binding, as to the result to be achieved, upon each Member State to which it is addressed. In the present instance, Articles 9 and 10 of the Directive impose on the Member States obligations formulated in clear and unequivocal terms to achieve a certain result, under which undertakings or establishments which carry out waste disposal operations or waste recovery operations in those States must hold a permit. It follows that a Member State has complied with its obligations under those provisions only if, in addition to the correct transposition of the provisions into domestic law, the operators concerned have the permit required (see, by analogy, in relation to the prior authorisation required to operate incineration plants referred to in Article 2 of Council Directive 89/369/EEC of 8 June 1989 on the prevention of air pollution from new municipal waste incineration plants (OJ 1989 L 163, p. 32), Case C‑139/00 Commission v Spain [2002] ECR I-6407, paragraph 27). 117 As the Advocate General has observed in points 27 to 29 of his Opinion, the Member States therefore have the task of making sure that the permit system set up is actually applied and complied with, in particular by conducting appropriate checks for that purpose and ensuring that operations carried out without a permit are actually brought to an end and punished. 118 Furthermore, the permit systems referred to in Articles 9 and 10 of the Directive are intended, as is apparent from the very wording of those provisions, to enable Article 4 of the Directive to be implemented correctly, in particular by ensuring that disposal and recovery operations carried out under such permits comply with the various requirements set by Article 4. For this purpose, the permits must contain a number of details and conditions, as is moreover expressly laid down in Article 9 of the Directive in relation to disposal operations. It follows that the authorisation processes referred to in Articles 9 and 10 must necessarily be such that they precede all disposal or recovery operations (see, to this effect, Case C-230/00 Commission v Belgium [2001] ECR I-4591, paragraph 16). Contrary to the Irish Government’s assertions, mere submission of a permit application cannot therefore have the effect of making such operations consistent with the requirements of those provisions. 119 In this regard, the Irish Government’s argument that the implementation in practice of a permit system introduced by national legislation requires a transitional period during which existing facilities must be able to remain operational cannot succeed in the present proceedings. 120 As provided in Article 13 of Directive 75/442, the Member States were required to bring into force the measures needed in order to comply with that directive within 24 months of its notification. Articles 9 and 10 of the Directive replaced Article 8 of Directive 75/442 and, with a view to continuity of the pre-existing obligations, strengthened the latter, which already provided for a permit system for facilities at which waste was treated, stored or tipped (see to this effect, in particular, SanRocco, paragraph 37). 121 The Irish Government therefore had the task of initiating in good time the procedures necessary for transposing into national law, initially, Article 8 of Directive 75/442 and, subsequently, Articles 9 and 10 of the Directive, so that those procedures were completed within the time-limits prescribed by the directives and the obligations formulated in clear and unequivocal terms in those provisions to achieve a certain result, namely that the operations concerned be carried out only under the requisite permits, were met. In so far as the measures adopted by Ireland to transpose the directives were belated, they cannot be relied on to justify the failure to fulfil obligations (see, by analogy, Case C‑60/01 Commission v France [2002] ECR I-5679, paragraphs 33, 37 and 39). 122 With the benefit of those introductory points of clarification, it must be stated that, as regards municipal landfills, it is apparent from paragraph 108 of the present judgment that, on the Irish Government’s own admission, on the date upon which the period set in the 2001 reasoned opinion expired, 14 operational landfills did not have a licence. 123 The Irish Government likewise admits that, when that period expired, it was the systematic practice of the Irish authorities to allow existing facilities to continue to operate during the period from the date on which the licence application was submitted until the date of the decision taken after examination of the application. As is apparent from paragraph 84 of this judgment, that was in particular true of the Tramore and Kilbarry landfills. 124 It is also apparent from various documents submitted to the Court that, at the time, the periods elapsing in practice before such existing facilities were granted or refused a licence were, taken as a whole, quite considerable; the Irish Government itself acknowledged that those periods were a matter for concern in its letter sent to the Commission on 30 November 2000. 125 An article entitled ‘Waste Licensing 1997‑2002: Lessons from the Application process’ published in 2002 in the Irish Planning and Environmental Law Journal, which the Irish Government adduces, thus refers to an average duration of 808 days for the procedure for considering licence applications. It is apparent from paragraph 84 of this judgment that licences relating to the Tramore and Kilbarry municipal landfills, whose establishment nevertheless dates back to the 1930s and 1970s, were issued only on conclusion of procedures lasting 36 and 48 months respectively, although those landfills were the source of significant environmental pollution and of harm to sites of particular ecological interest. 126 According to that article, the main causes of such slowness are the extremely high number of applications dating from the same time relating to existing sites that were often poorly located and subject to little monitoring, and clearly insufficient staff numbers at the EPA. As the Advocate General has observed in point 75 of his Opinion, where a Member State has been failing for some 20 years to fulfil its obligation to achieve the result prescribed in Article 9 of the Directive, it is incumbent upon it to do everything to remedy that failure as rapidly as possible. 127 It follows from all of the foregoing that, on the date upon which the period set in the 2001 reasoned opinion expired, Ireland had not yet met its obligation, by which it had been bound since 1977, to ensure that all municipal landfills hold the requisite permit. The failure to fulfil obligations, which is the result, all at once, of extremely belated transposition of Article 9 of the Directive, of systematically refraining from requiring existing unauthorised activities to cease while the licensing procedure took place, and of a lack of appropriate measures for ensuring that facilities were promptly made subject to the domestic system finally set up, was as at that date both general and persistent in nature. 128 As to the municipal landfills which closed down before expiry of the period laid down for submission of a licence application under the 1996 Act and its implementing regulations, suffice it to state that the Commission has not claimed that that legislation transposed the Directive incorrectly because it was not laid down that such landfills had to be subject to authorisation. As is clear from paragraph 22 of this judgment, the Commission has, on the contrary, stressed both during the pre-litigation procedure and before the Court that, with the exception of Article 12 of the Directive, its action was intended to complain not of a failure to transpose the Directive but of deficiencies in the actual implementation of the national provisions adopted for the purposes of such transposition. In those circumstances, the Commission cannot seek, in the present action, a declaration that Ireland has failed to fulfil its obligations because its administrative authorities did not, in the context of application of the 1996 Act and its implementing regulations which do not envisage such a possibility, make such closed-down landfills subject to the permit procedure provided for in Article 9 of the Directive. 129 As regards the handling of waste by private operators, the Court holds that, as is apparent from the findings made in paragraphs 60, 63, 68, 75, 89, 94 and 101 of this judgment, a number of Irish local authorities have displayed tolerance towards unauthorised operations relating to significant quantities of waste in numerous places in Ireland, often over very long periods, failing to take appropriate measures to ensure that such operations ceased and were effectively punished and to prevent their recurrence. 130 It is also apparent from those findings that this approach was still being displayed on the date upon which the period set in the 2001 reasoned opinion expired. 131 First, as is apparent from paragraphs 118 and 119 of this judgment, the fact that a permit application was, in some cases, submitted in respect of an existing facility does not in any way permit the view to be taken, contrary to the practice followed by the Irish authorities, that the requirements of Article 9 or 10 of the Directive were met or that the activities in question could be allowed to continue during the permit procedure. 132 Second, as the Commission rightly submits, the circumstance that in two of the specific situations examined, covered by paragraphs 63 and 75 of this judgment, a permit was finally issued before the period set in the 2001 reasoned opinion expired affects neither the fact that no penalty was imposed for the past in respect of the unauthorised operations in question nor the finding that, at the time under consideration, there was a generalised tendency in Ireland on the part of the competent local authorities to tolerate situations in which those provisions were not complied with. 133 This tolerant approach is indicative of a large-scale administrative problem, as the Advocate General has observed in point 121 of his Opinion, and it was sufficiently general and long-lasting to enable the conclusion to be drawn that a practice attributable to the Irish authorities existed consisting in not ensuring a correct implementation of Articles 9 and 10 of the Directive. 134 This assessment is, moreover, borne out by various documents adduced by the Commission. In particular, it is apparent from an especially detailed analytical and statistical study, entitled ‘Strategic Review & Outlook for Waste Management Capacity and the Impact on the Irish Economy’, of July 2002, that on the date upon which the period set in the 2001 reasoned opinion expired the Irish network of waste disposal installations was close to saturation point and that this situation was accompanied by the appearance of a high number of illegal dumps and deposits. The same finding is made in a document entitled ‘National Waste Management Strategy’, submitted to the Irish Government in January 2002 by the Institution of the Engineers of Ireland, which points out that hundreds if not thousands of illegal dumps are scattered across Ireland. 135 As regards County Wicklow in particular, newspaper articles published between 8 December 2001 and 9 April 2002 and a report dated 7 September 2001 from Wicklow County Council attest inter alia that, around the time when the period set in the 2001 reasoned opinion expired, close to 100 illegal sites were recorded in the county, some of which were of a considerable size and contained hazardous waste originating in particular from hospitals. 136 Since the Commission thus supplied sufficient evidence indicating that the Irish authorities maintained a general and persistent approach of tolerance towards numerous situations betraying a breach of the requirements laid down in Articles 9 and 10 of the Directive, failing to ensure that those situations were in fact brought to an end and that effective penalties were imposed, it was incumbent on Ireland, as is apparent from paragraphs 42 to 47 of this judgment, to challenge in substance and in detail that evidence and the consequences flowing therefrom. 137 It must be held that, here, Ireland did not meet that requirement in merely formulating, otherwise unsupported, general contentions, such as those set out in paragraphs 110 to 112 of this judgment, and adducing a judicial decision which, since it came after the date upon which the period set by the 2001 reasoned opinion expired, cannot, after all, be relevant for the purpose of assessing the conduct of the Irish authorities at that date. 138 Furthermore, in its rejoinder, lodged at the Court on 10 January 2003, the Irish Government itself indicated that it had recently adopted various initiatives with a view to supporting a consistent approach in the application of environmental standards, involving in particular: the provision to local authorities of funding intended to enable them to enforce those standards; making those authorities subject to an environmental management system drawn up by the EPA; a more structured and effective approach with regard to inspections; the drafting of a bill including strengthened environmental provisions; and the creation of a specialist office for this purpose. In an article, which the Commission adduces, published in the IrishTimes on 14 August 2002, it is likewise reported that the Minister for the Environment stated that the creation of such an office was one of his priorities given the clear need for stricter and more consistent compliance with waste legislation. 139 It follows from the foregoing and from the finding made in paragraph 127 of this judgment regarding municipal landfills that it is proved to the required legal standard that, as at the date upon which the two-month period set in the 2001 reasoned opinion expired, Ireland was generally and persistently failing to fulfil its obligation to ensure a correct implementation of Articles 9 and 10 of the Directive, so that the Commission’s claim in this respect must be upheld. Breach of Article 12 of the Directive140 The Commission contends that the Waste Management (Collection Permit) Regulations, 2001 (‘the 2001 Regulations’), of which it was notified on 27 September 2001, transpose Article 12 of the Directive both belatedly and unsatisfactorily. The 2001 Regulations set 30 November 2001 as the deadline for submitting permit applications. Provided that the permit application is submitted before that date, the operators concerned are, moreover, authorised to pursue their activities until the procedure has been completed. This belated transposition had the effect of excluding undertakings collecting and transporting waste from any requirement for a permit or registration, as is shown in particular by the facts raised in Complaint 2000/4157. 141 In the Irish Government’s submission, the 2001 Regulations transpose Article 12 of the Directive correctly and brought the failure to fulfil obligations to an end. As to the transitional measures of which the Commission complains, the Irish Government maintains that submission of a permit application is at least equivalent to registration for the purposes of Article 12, a concept which can in fact be understood as a mere formal notification to the authority, without a need to satisfy prior conditions. Nor does the specific case referred to by the Commission betray a failure by Ireland to fulfil its obligations. 142 Article 12 of the Directive provides in particular that establishments or undertakings which collect or transport waste on a professional basis are to be registered with the competent authorities where they are not subject to authorisation. 143 The Irish Government does not contest the Commission’s assertion that the permit system belatedly implemented by the 2001 Regulations provides that, from 30 November 2001, waste collection will be carried out in accordance with the requirements of a permit issued by the local authority and that any permit application relating to existing activities is to have been submitted before that date. 144 Accordingly, on the date upon which the two-month period set in the 2001 reasoned opinion expired, possession of a permit or registration was not yet compulsory for waste collection operations. Furthermore, even if all the operators concerned submitted a permit application pursuant to the 2001 Regulations before that date, which has not been established by the Irish Government, the submission of such an application cannot, contrary to its submissions, be taken as equivalent to registration for the purposes of Article 12 of the Directive and, consequently, satisfy the requirements of that provision. Article 12 requires the Member States to choose a permit system or a registration procedure and Ireland did not opt for the second approach. 145 It follows from the foregoing that the Commission’s claim must be upheld inasmuch as it seeks a declaration that Ireland did not correctly transpose Article 12 of the Directive. Breach of Article 5 of the Directive146 The Commission submits that Ireland has not taken appropriate measures to establish an integrated and adequate network of waste disposal installations, since numerous installations operate without a permit, giving rise moreover to harm to the environment as attested, for example, by the case of the Tramore and Kilbarry landfills which are referred to in Complaint 1999/5008. 147 The inadequacy of the Irish disposal network is also clear from the fact that it has reached saturation point, a fact which has indeed contributed to the appearance of illegal waste dumping on a large scale. 148 The Irish Government denies any breach of Article 5 of the Directive. First, the Commission has not established that there was not a permit system in compliance with Article 9 of the Directive on the date upon which the period set in the 2001 reasoned opinion expired. Second, inasmuch as the term ‘adequate’ may be interpreted as referring to sufficient available space to meet a Member State’s current disposal requirements, the various documents adduced by the Commission to demonstrate an alleged lack of disposal capacity in Ireland are not convincing. The Commission has in particular not established that waste could not be disposed of because of insufficient landfill capacity, and the fact that certain landfills are coming close to closure is in no way unusual. The Commission also fails to take account of factors such as the possibility of sharing disposal capacity between local authorities or of extending existing landfills, proposals for new landfills that are in the course of being examined or the development of recovery infrastructure. 149 The establishment of an integrated and adequate network of disposal installations, taking account of the best available technology not involving excessive costs, the network having to enable waste to be disposed of in one of the nearest appropriate installations, in accordance with Article 5 of the Directive, is among the objectives pursued by the Directive (Joined Cases C-53/02 and C-217/02 Commune de Braine-le-Château and Others [2004] ECR I-0000, paragraph 33). 150 As provided in the first subparagraph of Article 9(1) of the Directive, it is ‘for the purposes of implementing Articles 4, 5 and 7’ of the Directive that any establishment or undertaking which carries out disposal operations must obtain a permit. This phrase means that implementation of Article 5 of the Directive is meant to be achieved in particular by issuing individual permits (see, to this effect, Commune de Braine-le-Château, cited above, paragraphs 40, 41 and 43). 151 However, as is apparent from paragraph 139 of this judgment, as at the date upon which the two-month period set in the 2001 reasoned opinion expired, Ireland was generally and persistently failing to fulfil its obligation to ensure a correct implementation of Article 9 of the Directive by allowing a large number of waste disposal installations to operate without a permit. 152 As the Commission rightly contends, this circumstance is sufficient to conclude that as at that date Ireland was not complying with the obligations laid down in Article 5 of the Directive. 153 As is apparent from paragraphs 118, 149 and 150 of this judgment, the permit system provided for in Article 9 of the Directive is intended to ensure that waste disposal operations are consonant with the various objectives pursued by the Directive. For this purpose, permits must, as is clear from the very wording of that provision, contain a number of requirements relating in particular to the types and quantities of waste, the technical requirements, the security precautions to be taken, the disposal site and the treatment method. 154 In conjunction with the management plans referred to in Article 7 of the Directive, the requirements which must appear in individual permits therefore manifestly constitute an essential condition for the establishment, in accordance with Article 5 of the Directive, of an integrated and adequate network of disposal installations taking account, as Article 5 provides, in particular of the best available technology not involving excessive costs and of geographical circumstances or the need for specialised installations for certain types of waste, while enabling disposal in one of the nearest appropriate installations, by means of the most appropriate methods and technologies in order to ensure a high level of protection for the environment and public health. 155 Furthermore, it is apparent from the documents adduced by the Commission, in particular the report referred to in point 92 of the Advocate General’s Opinion and the July 2002 study mentioned in paragraph 134 of this judgment, that, on the date upon which the period set in the 2001 reasoned opinion expired, the Irish network of disposal installations, taken as a whole, was close to saturation point and was not sufficient to absorb the waste produced in that Member State. It is also evident from those documents that this situation was accompanied by the appearance of a high number of illegal dumps and deposits across the whole country. 156 The precise and detailed information contained in those various documents has not been challenged in substance and in detail by Ireland which has merely cast doubt, in very general terms, on its evidential value, accordingly not satisfying the requirements noted in paragraphs 42 to 47 of this judgment. 157 In those circumstances, it must be found that, on the date upon which the period set in the 2001 reasoned opinion expired, Ireland had failed to take appropriate measures to introduce an integrated and adequate network of disposal installations which, as is clear from Article 5 of the Directive, must be such as to enable the Community as a whole to become self-sufficient in waste disposal and the Member States to move towards that aim individually. 158 It follows from all of the foregoing that the Commission’s claim alleging breach of Article 5 of the Directive must be upheld. Breach of Article 4 of the Directive159 The Commission submits that the lengthy absence of an operational permit system in compliance with Articles 9 and 10 of the Directive is sufficient in itself to establish that Ireland has not taken the measures required to ensure the recovery or disposal of waste without endangering human health and without using processes or methods which could harm the environment, as it was obliged to do pursuant to the first paragraph of Article 4 of the Directive. 160 Since the latter provision must be interpreted in accordance with the precautionary and preventive principles, actual harm is not required for it to be breached. In the present case, as is apparent in particular from the investigation of Complaints 1997/4705, 1997/4792, 1999/4801, 1999/5008, 2000/4408, 2000/4145 and 2000/4633, the illegal operations raised in them in fact caused numerous instances of degradation of sites of particular interest, and actual damage to the environment, without Ireland taking the necessary remedial measures, in particular by ensuring that the sites were restored and that the waste illegally deposited on them was appropriately disposed of or recovered. 161 Furthermore, Ireland has not complied with its obligation to prohibit the dumping or uncontrolled disposal of waste, under the second paragraph of Article 4 of the Directive. 162 The Irish Government submits with regard to the first paragraph of Article 4 of the Directive that the Commission has established neither the absence of a permit system in compliance with Article 9 of the Directive on the date upon which the period set in the 2001 reasoned opinion expired nor that actual environmental harm attributable to the Irish authorities has occurred. Furthermore, the Directive does not prohibit authorisation of landfilling activity in environmentally sensitive areas. 163 Moreover, the Commission has not established that the Irish authorities have failed to deal with ongoing problems arising from past activities. Appropriate measures are provided for in permits issued in respect of existing sites, such as the Kilbarry and Tramore sites and the Drumnaboden site, respectively referred to in Complaints 1999/5008 and 2000/4408, while the identification and assessment of landfills closed before being subject to authorisation are provided for in section 22(7)(h) of the 1996 Act, so that any remedial measures may take place, account being taken of cost-effectiveness. 164 Furthermore, the Commission has not established an infringement of the second paragraph of Article 4 of the Directive as at the date upon which the period set in the 2001 reasoned opinion expired. 165 It is to be remembered that the obligation to dispose of waste without endangering human health and without harming the environment forms part of the very objectives of Community environmental policy and that Article 4 of the Directive is intended in particular to implement the principle that preventive action should be taken, contained in the second sentence of the first subparagraph of Article 174(2) EC, by virtue of which it is for the Community and the Member States to prevent, reduce and, in so far as is possible, eliminate from the outset the sources of pollution or nuisance by adopting measures of a nature such as to eliminate recognised risks (see Joined Cases C-175/98 and C-177/98 Lirussi and Bizzaro [1999] ECR I‑6881, paragraph 51, and Case C-387/97 Commission v Greece [2000] ECR I-5047, paragraph 94). 166 First, Article 4 of the Directive sets out various objectives which the Member States must observe in their performance of the more specific obligations imposed on them by other provisions of the Directive (see, to this effect, Case C-236/92 Comitato di coordinamento per la difesa della cava and Others [1994] ECR I‑483, paragraph 12). 167 According to the very wording of the first subparagraph of Article 9(1) of the Directive and Article 10 thereof, it is inter alia ‘for the purposes of implementing’ Article 4 that any establishment or undertaking which carries out waste disposal operations or waste recovery operations must obtain a permit. As has been pointed out in paragraph 150 of the present judgment, this phrase means that implementation of Article 4 is meant to be achieved in particular by issuing such individual permits (Commune de Braine‑le‑Château, paragraphs 41 and 43). 168 Second, even though the first paragraph of Article 4 of the Directive does not specify the actual content of the measures to be taken in order to ensure that waste is disposed of without endangering human health and without harming the environment, that provision, which contains obligations independent of those arising from the other provisions of the Directive, is none the less binding on the Member States as to the objective to be achieved, while leaving to them a margin of discretion in assessing the need for such measures (San Rocco, paragraph 67, and Case C-387/97 Commission v Greece, cited above, paragraphs 55 and 58). 169 While it is true that it is, in principle, not possible to draw the direct inference from the fact that a situation is not in conformity with the objectives laid down in the first paragraph of Article 4 of the Directive that the Member State concerned has necessarily failed to fulfil the obligations under that provision, namely to take the requisite measures to ensure that waste is disposed of without endangering human health and without harming the environment, it is nevertheless undisputed that if that situation persists, in particular if it leads to a significant deterioration in the environment over a protracted period without any action being taken by the competent authorities, that may indicate that the Member States have exceeded the discretion conferred on them by that provision (San Rocco, paragraphs 67 and 68). 170 Here it is proved that, as is apparent from paragraph 139 of the present judgment, as at the date upon which the two-month period set in the 2001 reasoned opinion expired, Ireland was generally and persistently failing to fulfil its obligation to ensure a correct implementation of Articles 9 and 10 of the Directive. 171 As the Advocate General has observed in point 98 of his Opinion, that fact is sufficient to establish that Ireland has failed, likewise generally and persistently, to fulfil the requirements of Article 4 of the Directive, a provision closely linked to Articles 9 and 10. 172 First, as pointed out in paragraphs 118 and 167 of this judgment, the permit system referred to in Articles 9 and 10 of the Directive is intended to ensure that waste disposal operations and waste recovery operations carried out under such permits are consonant with the objectives laid down in the first paragraph of Article 4 of the Directive. For this purpose, the permits must necessarily include a number of requirements as is expressly provided by Article 9 of the Directive, a provision which refers in particular, in this connection, to the types and quantities of waste, the technical requirements, the security precautions to be taken, the disposal site and the treatment method. It follows that the scrutiny of such permit applications and the requirements, conditions and obligations which those permits include are among the means of attaining the objectives listed in the first paragraph of Article 4. 173 Second, under the second paragraph of Article 4 of the Directive, the Member States must in particular prohibit all uncontrolled disposal of waste. 174 In the present instance, the failure of a general and persistent nature to fulfil the obligations arising from Article 4 of the Directive, which has thus been established by reason of the infringement of the requirements of Articles 9 and 10 of the Directive, is accompanied in addition, in certain of the specific situations complained of by the Commission, by a failure to fulfil the more specific obligation recalled in paragraphs 168 and 169 of this judgment. 175 It is apparent from paragraphs 54, 55, 84, 94 and 101 of this judgment that, on the date upon which the period set in the 2001 reasoned opinion expired, Ireland had failed, in the face of factual situations that were inconsistent with the objectives of the first paragraph of Article 4 of the Directive for a lengthy period and led to a significant deterioration in the environment, to take the necessary measures to ensure that the waste in question was disposed of without endangering human health and without harming the environment, so that that Member State has exceeded the discretion conferred on it by that provision. 176 It follows from all of the foregoing that the Commission’s claim alleging breach of Article 4 of the Directive is well founded. Breach of Article 8 of the Directive177 In the Commission’s submission, Ireland has also infringed Article 8 of the Directive, by failing to ensure that those who hold waste disposed of without a permit have it handled by a private or public waste collector or by an undertaking authorised to carry out disposal or recovery operations, or dispose of or recover it themselves after obtaining a permit in compliance with the Directive’s requirements. Specific examples of breaches of this provision are apparent in particular from examination of the facts raised in Complaints 1997/4792, 1999/4801, 1999/5112, 2000/4145 and 2000/4633. 178 The Irish Government contends that the Commission has not proved the alleged failure to fulfil obligations.179 Article 8 of the Directive, which inter alia implements the principle that preventive action should be taken, provides that the Member States have the task of ensuring that any holder of waste has it handled by a private or public waste collector or by an undertaking which carries out waste disposal and recovery operations, or recovers or disposes of it himself in accordance with the provisions of the Directive (Lirussi and Bizzaro, cited above, paragraph 52). 180 First, such obligations are the corollary to the prohibition on the abandonment, dumping or uncontrolled disposal of waste laid down in the second paragraph of Article 4 of the Directive, a provision already found to have been breached by Ireland in paragraph 176 of the present judgment (see Case C-1/03 Van de Walle and Others [2004] ECR I-0000, paragraph 56). 181 Second, the operator or owner of an illegal tip must be regarded as the holder of waste for the purposes of Article 8 of the Directive, so that this provision imposes on the Member State concerned the obligation to take, in his regard, the steps necessary to ensure that that waste is handed over to a private or public waste collector or a waste disposal undertaking, unless it is possible for the operator or owner himself to recover or dispose of the waste (see, in particular, San Rocco, paragraph 108, the judgment of 9 September 2004 in Case C-383/02 Commission v Italy, not published in the ECR, paragraphs 40, 42 and 44, and the judgment of 25 November 2004 in Case C-447/03 Commission v Italy, not published in the ECR, paragraphs 27, 28 and 30). 182 The Court has held, furthermore, that such an obligation is not satisfied where a Member State confines itself to ordering the sequestration of the illegal tip and prosecuting the operator of the tip (San Rocco, paragraph 109). 183 In the present case it is clear that, as the Commission rightly submits, on the date upon which the period set in the 2001 reasoned opinion expired, Ireland had not complied with its obligation to ensure a correct implementation of Article 8 of the Directive. 184 As is clear from paragraphs 127 and 139 of this judgment, it is proved that, as at that date, Ireland was generally and persistently failing to fulfil its obligation to ensure a correct implementation of Article 9 of the Directive, by allowing undertakings or establishments lacking the permit prescribed by that provision to pursue waste disposal activities, and not ensuring that those activities were actually brought to an end and punished. 185 It may accordingly be deduced from the finding set out in the preceding paragraph that Ireland has failed to ensure that holders of waste comply with the obligation owed by them to have waste handled by a private or public waste collector or by an undertaking which carries out the operations listed in Annex II A or Annex II B to the Directive, or to recover or dispose of it themselves in accordance with the provisions of the Directive. 186 Furthermore, it is apparent from the findings made in paragraphs 60, 89, 94 and 101 of this judgment that, on the date upon which the period set in the 2001 reasoned opinion expired, Ireland had failed in the various specific cases in question to comply with the obligation recalled in paragraph 181 of this judgment. 187 The Commission’s claim alleging breach of Article 8 of the Directive must accordingly be upheld. Breach of Articles 13 and 14 of the Directive188 In the Commission’s submission, the failure to comply with Articles 9 and 10 of the Directive inevitably entails infringement of Article 13 thereof, which provides that undertakings or establishments which carry out the operations referred to in Articles 9 and 10 are to be subject to periodic inspections, and of Article 14 of the Directive, relating to the keeping of records by those operators. 189 Ireland contends that it has not infringed Articles 9 and 10 of the Directive. It also denies that it has failed to fulfil its obligation to introduce periodic inspections. Section 15 of the 1996 Act transposes Article 13 of the Directive correctly and nothing in the latter provision indicates that the inspections required can be carried out only in respect of operators holding a permit. Nor is there an automatic link between the issue of permits and the keeping of records that is required by Article 14 of the Directive. 190 According to Article 13 of the Directive, the appropriate periodic inspections that that provision requires must cover in particular establishments or undertakings which carry out the operations referred to in Articles 9 and 10 of the Directive. In addition, as is apparent in particular from paragraph 118 of this judgment, such establishments or undertakings must, by virtue of the latter two provisions, obtain in advance an individual permit containing a number of requirements and conditions. 191 It is clear that, if such permits are not granted and, therefore, no requirements and conditions are laid down by a permit with regard to a given undertaking or establishment, the inspections of the latter which would be carried out cannot, by definition, meet the requirements of Article 13 of the Directive. A fundamental aim of the inspections prescribed by that provision is, obviously, to check that the requirements and conditions laid down in permits issued in accordance with Articles 9 and 10 of the Directive are complied with. 192 The same holds for records kept by the establishments or undertakings referred to by the latter provisions, which, as Article 14 of the Directive specifies, must indicate in particular the quantities and nature of the waste or also its treatment method. Such particulars are intended in particular to enable the inspecting authority to check that the requirements and conditions that are laid down in permits issued in accordance with the Directive are complied with, which, as Article 9 of the Directive itself states, must cover the types and quantities of waste and its treatment method. 193 Here, it is apparent from paragraph 139 of this judgment that, as at the date upon which the two-month period set in the 2001 reasoned opinion expired, Ireland was generally and persistently not meeting its obligation to ensure a correct implementation of Articles 9 and 10 of the Directive. It follows that Ireland was failing, to a corresponding extent, to fulfil its obligation to ensure a correct implementation of Articles 13 and 14 of the Directive. 194 It follows from the foregoing that the Commission’s claim alleging breach of the latter provisions is well founded. Breach of Article 10 EC195 The Commission further requests the Court to declare that Ireland has failed to comply with the obligations which it has pursuant to Article 10 EC by not responding to its letter of 20 September 1999 seeking observations on Complaint 1999/4478. 196 Ireland does not deny that it has failed to fulfil its obligations resulting from that provision.197 The Member States are under a duty, by virtue of Article 10 EC, to facilitate the achievement of the Commission’s tasks, which consist in particular, in accordance with Article 211 EC, in ensuring that the measures taken by the institutions pursuant to the Treaty are applied (see, in particular, Case C-33/90 Commission v Italy [1991] ECR I-5987, paragraph 18). 198 It follows that the Member States are required to cooperate in good faith with the inquiries of the Commission pursuant to Article 226 EC, and to provide the Commission with all the information requested for that purpose (Case 192/84 Commission v Greece [1985] ECR 3967, paragraph 19, and Case C-82/03 Commission v Italy [2004] ECR I-0000, paragraph 15). 199 Accordingly, the Commission’s claim alleging breach of Article 10 EC must be upheld.200 Having regard to all of the foregoing, it must be held that:– by failing to take all the measures necessary to ensure a correct implementation of the provisions of Articles 4, 5, 8, 9, 10, 12, 13 and 14 of the Directive, Ireland has failed to comply with its obligations under those provisions; – by failing to respond to a request for information dated 20 September 1999 in relation to waste operations at Fermoy, County Cork, Ireland has failed to fulfil the obligations which it has pursuant to Article 10 EC. Costs201 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and Ireland has been unsuccessful, the latter must be ordered to pay the costs. On those grounds, the Court (Grand Chamber) hereby:1. Declares that, by failing to take all the measures necessary to ensure a correct implementation of the provisions of Articles 4, 5, 8, 9, 10, 12, 13 and 14 of Council Directive 75/442/EEC of 15 July 1975 on waste, as amended by Council Directive 91/156/EEC of 18 March 1991, Ireland has failed to comply with its obligations under those provisions;2. Declares that, by failing to respond to a request for information dated 20 September 1999 in relation to waste operations at Fermoy, County Cork, Ireland has failed to fulfil the obligations which it has pursuant to Article 10 EC;3. Orders Ireland to pay the costs.[Signatures]* Language of the case: English. | 891dc-c1dd999-4fdd | EN |
AN INCREASED CHARGE FOR A TRANSITIONAL PERIOD FOR ACCESS TO AND USE OF THE ELECTRICITY TRANSMISSION SYSTEM IN ITALY FOR HYDRO AND GEOTHERMIC ELECTRICITY PRODUCERS IS NOT STATE AID PER SE IN FAVOUR OF THOSE COMPANIES NOT SUBJECT TO THE INCREASED CHARGE | AEM SpA and AEM Torino SpAvAutorità per l’energia elettrica e per il gas and Others(Reference for a preliminary ruling from the Consiglio di Stato)(Internal market in electricity – Increased charge for access to and use of the national electricity transmission system – State aid – Directive 96/92/EC – Access to the system – Principle of non-discrimination)Opinion of Advocate General Stix-Hackl delivered on 28 October 2004 Judgment of the Court (Third Chamber), 14 April 2005. Summary of the Judgment1. State aid — Meaning — Measures creating different treatment of undertakings in relation to charges connected with the nature and general scheme of the system of charges in question — Excluded(Art. 87 EC)2. State aid — Meaning — Method by which aid is financed — Included — Condition — Method of financing forming an integral part of the aid measure — Hypothecation of special tax to aid 3. Approximation of laws — Measures directed at the establishment and functioning of the internal market in electricity — Directive 96/92 — Rule of non-discriminatory access to the national electricity transmission system — Adoption by a Member State of a measure imposing an increased charge for a transitional period only on certain electricity generation and distribution undertakings for access to and use of that system to offset the advantage created for those undertakings by the liberalisation of the market — Whether permissible(European Parliament and Council Directive 96/92, Arts 7(5), 8(2), and 16)1. The concept of State aid within the meaning of Article 87(1) EC is wider than that of a subsidy because it embraces not only positive benefits, such as the subsidies themselves, but also measures which, in various forms, mitigate the normal burdens on the budget of an undertaking. However, the concept of aid does not encompass measures creating different treatment of undertakings in relation to charges where that difference is attributable to the nature and general scheme of the system of charges in question. That is the case with a measure which imposes an increased charge for a transitional period for access to and use of the national electricity transmission system only on undertakings generating and distributing electricity from hydroelectric or geothermal installations to offset the advantage created for those undertakings, during the transitional period, by the liberalisation of the market in electricity following the implementation of Directive 96/92 concerning common rules for the internal market in electricity. That different treatment is not therefore per se State aid within the meaning of Article 87 EC. (see paras 38-39, 43, operative part 1)2. The method by which an aid is financed may render the entire aid scheme incompatible with the common market. Therefore, the aid cannot be considered separately from the effects of its method of financing. On the contrary, consideration of an aid measure by the Commission must necessarily also take into account the method of financing the aid where that method forms an integral part of the measure. However, for a special tax to be regarded as forming an integral part of an aid measure, it must be hypothecated to the aid measure under the relevant national rules, in the sense that the revenue from the tax is necessarily allocated for the financing of the aid. It is only in the event of such hypothecation that the revenue from the special tax has a direct impact on the amount of the aid and, consequently, on the assessment of the compatibility of the aid with the common market. It follows that if there is hypothecation of the increased charge for access to and use of the national electricity transmission system to a national scheme of aid, in the sense that the revenue from the increase is necessarily allocated for the financing of the aid, that increase is an integral part of that scheme and must therefore be considered together with the latter. (see paras 45-47, operative part 1)3. Article 7(5), Article 8(2), and Article 16 of Directive 96/92 concerning common rules for the internal market in electricity, like the general principle of non-discrimination of which they are specific applications, preclude different treatment of comparable situations and like treatment of different situations. The rule of non-discriminatory access to the national electricity transmission system laid down in Directive 96/92 does not, however, preclude a Member State from adopting a measure which imposes an increased charge for a transitional period for access to and use of that system only on certain electricity generation and distribution undertakings to offset the advantage created for those undertakings, during the transitional period, by the altered legal framework following the liberalisation of the market in electricity as a result of the implementation of that directive. Such a measure treats differently situations which are not comparable. However, it is a matter for the national court to satisfy itself that the increased charge does not go beyond what is necessary to offset that advantage. (see paras 56-60, operative part 2)JUDGMENT OF THE COURT (Third Chamber)14 April 2005 (*) In Joined Cases C-128/03 and C-129/03,REFERENCES for a preliminary ruling under Article 234 EC from the Consiglio di Stato (Italy), made by decisions of 14 January 2003, received at the Court on 24 March 2003, in the proceedings AEM SpA (C-128/03), AEM Torino SpA (C-129/03) Autorità per l’energia elettrica e per il gas and Others,third party:ENEL Produzione SpA,THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, A. Borg Barthet, S. von Bahr (Rapporteur), J. Malenovský and U. Lõhmus, Judges,Advocate General: C. Stix-Hackl,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 8 September 2004,after considering the observations submitted on behalf of:– AEM SpA and AEM Torino SpA, by O. Brouwer, advocaat, and T. Salonico, avvocato,– the Italian Government, by I.M. Braguglia, acting as Agent, and M. Fiorilli, avvocato dello Stato,– the Commission of the European Communties, by V. Di Bucci et H. Støvlbæk, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 28 October 2004,gives the followingJudgment1 The references for a preliminary ruling concern the interpretation of Article 87 EC and Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20), in particular Articles 7 and 8 thereof. 2 Those questions were raised in proceedings brought by AEM SpA (‘AEM’) and AEM Torino SpA (‘AEM Torino’) by which those companies contested two decisions of the Autorità per l’energia elettrica e per il gas (Electricity and Gas Authority; ‘the AEEG’) and a ministerial decree increasing the charge on certain hydroelectric and geothermal power stations for access to and use of the national electricity transmission system. Relevant provisions Community legislation3 Article 1 of Directive 96/92 states that the directive ‘establishes common rules for the generation, transmission and distribution of electricity. It lays down the rules relating to the organisation and functioning of the electricity sector, access to the market, the criteria and procedures applicable to calls for tender and the granting of authorisations and the operation of systems’. 4 Article 7(1) and (5) of Directive 96/92 provide:‘1. Member States shall designate or shall require undertakings which own transmission systems to designate, for a period of time to be determined by Member States having regard to considerations of efficiency and economic balance, a system operator to be responsible for operating, ensuring the maintenance of, and, if necessary, developing the transmission system in a given area and its interconnectors with other systems, in order to guarantee security of supply. …5. The system operator shall not discriminate between system users or classes of system users, particularly in favour of its subsidiaries or shareholders.’ 5 Article 8(1) to (3) of the same directive provide:‘1. The transmission system operator shall be responsible for dispatching the generating installations in its area and for determining the use of interconnectors with other systems. 2. Without prejudice to the supply of electricity on the basis of contractual obligations, including those which derive from the tendering specifications, the dispatching of generating installations and the use of interconnectors shall be determined on the basis of criteria which may be approved by the Member State and which must be objective, published and applied in a non-discriminatory manner which ensures the proper functioning of the internal market in electricity. They shall take into account the economic precedence of electricity from available generating installations of interconnector transfers and the technical constraints on the system. 3. A Member State may require the system operator, when dispatching generating installations, to give priority to generating installations using renewable energy sources or waste or producing combined heat and power.’ 6 Article 24(1) of the directive states:‘1. Those Member States in which commitments or guarantees of operation given before the entry into force of this Directive may not be honoured on account of the provisions of this Directive may apply for a transitional regime which may be granted to them by the Commission, taking into account, amongst other things, the size of the system concerned, the level of interconnection of the system and the structure of its electricity industry. The Commission shall inform the Member States of those applications before it takes a decision, taking into account respect for confidentiality. This decision shall be published in the Official Journal of the European Communities.’ 7 Article 24(2) of Directive 96/92 states that applications for a transitional regime are to be notified to the Commission no later than one year after the entry into force of that directive. National legislation8 Legislative Decree No 79 of 16 March 1999 on the implementation of Directive 96/92/EC concerning common rules for the internal market in electricity (Gazzetta ufficiale della Repubblica italiana No 75 of 31 March 1999, p. 8) (‘Legislative Decree No 79/99’) states in Article 3(10) that a charge is payable to the system operator for access to and use of the national transmission system. That charge is determined independently of the geographical location of the production sites and final customers and, in any event, on the basis of non-discriminatory criteria. The amount of the charge is determined by the AEEG which also adjusts its rate. 9 Article 3(11) of Legislative Decree No 79/99 provides that the general revenue charges relating to the electricity system include different expenditure: research expenditure, expenditure incurred in the dismantling of decommissioned nuclear power stations, those related to closure of the nuclear fuel cycle and those of related and consequent activities. Those general revenue charges are specified by one or more decrees of the Ministro dell’industria, commercio e dell’artigianato (Minister for Industry, Commerce and Craft Industries), in consultation with the Ministro del tesoro, bilancio e della programmazione economica (Minister for the Treasury, the Budget and Economic Planning), on a proposal of the AEEG. 10 Under Article 2(1) of the Decree of the Ministro dell’industria, del commercio e dell’artigianato of 26 January 2000 on the determination of the general revenue charges of the electricity system, adopted in cooperation with the Ministro del tesoro, del bilancio e della programmazione economica on a proposal of the AEEG (Gazzetta ufficiale della Repubblica italiana No 27 of 3 February 2000, p. 12) (‘the Decree of 26 January 2000’), general revenue charges relating to the electricity system are defined as: ‘(a) restitution to the generation and distribution undertakings, under the criteria defined in this decree, of the non-recoverable portion, following implementation of [Directive 96/92], of the costs incurred in connection with electricity generation; (b) financial offset for the overvaluation, stemming from implementation of [Directive 96/92], of electricity generated by hydroelectric and geothermal installations which, as at 19 February 1997, were the property of or were available to generation and distribution undertakings; (c) costs related to the dismantling of decommissioned nuclear power stations and to the closure of the nuclear fuel cycle and related activities resulting therefrom; (d) costs of research and development for the purpose of technological innovation of general interest for the electricity system;(e) application of favourable rates for the supply of electricity provided for in Article 2(2)(4) of Decision No 70/97 of [the AEEG] and by the Decree of the Ministro dell’industria, del commercio e dell’artigianato of 19 December 1995.’ 11 As to financial offset for the overvaluation referred to in Article 2(1)(b) of the Decree of 26 January 2000, Article 3(3) of that decree, under the heading ‘Charges resulting from implementation of [Directive 96/92]’, provides: ‘… in order to offset, if only in part, the general revenue charges relating to the electricity system only the amount of overvaluation of electricity generated by hydroelectric and geothermal installations not benefiting from a contribution [in favour of new installations using renewable energy sources] under the decisions of the Comitato interministeriale dei prezzi [Inter-ministerial committee on prices] of 12 July 1989 (No 15), 14 November 1990 (No 34) and 29 April 1992 (No 6), as amended, shall be recovered for a period of seven years with effect from 1 January 2000 and subject to the detailed rules laid down in Article 5. The provisions hereof shall not apply to installations with a nominal power not greater than 3 MW or to hydroelectric pumping installations.’ 12 Under Article 5(9) of the Decree of 26 January 2000:‘The amount of the overvaluation to be recovered in respect of the period stated in Article 3(3) shall be equal for the year 2000 to the approved variable unit cost of electricity generated by thermal power stations using commercial fossil fuels, as provided for in Article 6(5) of Decision No 70/1997 of [the AEEG]. In subsequent years for each power station and in each two-month period, it shall be equal to a proportion of the difference between the average weighted value of wholesale prices of electricity sold on the national market from time to time during that two-month period, using as weightings the quantities of electricity generated by the station from time to time during the two-month period, and the average fixed unit costs of the station as determined by [the AEEG] on an annual basis up to 31 December of the preceding year. For the years 2001 and 2002 such proportion shall be equal to 75%; for the years 2003 and 2004 50% and for the years 2005 and 2006 25%. After that date the proportion shall be equal to zero.’ 13 Under Article 2(1) and (2) of Decision No 231/00 of the AEEG of 20 December 2000 and Article 2(1), (2) and (8) of Decision No 232/00 of the AEEG of 20 December 2000 concerning determination of the increased charge in respect of electricity generated by hydroelectric and geothermal installations for access to and use of the national transmission system for 2000 to 2006 (Ordinary Supplement to Gazzetta ufficiale della Repubblica italiana No 4 of 5 January 2001, p. 13) (‘Decision No 231/00’ and ‘Decision No 232/00’), the electricity stated in Article 3(3) of the Decree of 26 January 2000 which is generated and supplied to the system by installations which, as at 19 February 1997, were the property of or were available to generation and distribution undertakings, attracts an increased charge for use of the system covering the power services, to offset the overvaluation within the meaning of Article 2(1)(b) of the Decree of 26 January 2000. 14 Under Article 3(1) of both Decision No 231/00 and Decision No 232/00 the revenue from the increased charge referred to in Article 2 of those decisions (‘the increased charge’) is to be paid into the ‘Cassa conguaglio per il settore elettrico’ (Equalisation fund for the electricity sector, hereinafter ‘equalisation fund’) by the system operator. Article 3(2) of those decisions provides that those payments are to be credited to the ‘Conto per la gestione della compensazione della maggiore valorizzazione dell’energia elettrica nella transizione’ (Account for offsetting the overvaluation of electricity during the transitional period). Under Article 3(3) of the said decisions any surplus on the latter account is to be transferred to the ‘Conto per nuovi impianti da fonti rinnovabili e assimilate’ (Account for new installations using renewable and assimilated energy sources). The main proceedings15 According to the orders for reference, AEM and AEM Torino brought proceedings before the Tribunale amministrativo regionale per la Lombardia challenging Decision No 231/00 and Decision No 232/00 and their preparatory, basic and related measures, including the Decree of 26 January 2000. 16 When those proceedings were dismissed, AEM and AEM Torino lodged appeals before the Consiglio di Stato for annulment of the decisions of dismissal. 17 In the orders for reference, the Consiglio di Stato states in particular that AEM and AEM Torino claim that the increased charge comes entirely within the regime of aid for the functioning of certain undertakings or generation financed by levies on supplies by undertakings in the sector, which amounts to State aid within the meaning of Article 87(1) EC, granted in the present case in disregard of the procedure laid down in the EC Treaty. AEM and AEM Torino also submit that dissimilar charges for access to the transmission system, with a heavier burden on certain undertakings, constitutes an infringement of one of the fundamental principles of Directive 96/92 as regards universal access without discrimination to that system. The questions referred for a preliminary ruling18 In the view of the Consiglio di Stato, an examination of the provisions challenged, taken together, shows that the increased charge is based on the need to offset the undue advantages and to counter the competitive imbalances which arose in the first period of liberalisation of the electricity market, set from 2000 to 2006, following implementation of Directive 96/92. 19 In that regard it notes that in fact prior to liberalisation the generation and distribution undertakings of electricity coming from hydroelectric and geothermal installations applied a tariff of which one element, B, related to the cost of the fuel. However, the portion representing that element of the tariff was paid by the undertakings to the equalisation fund which, in turn, transferred it to the thermal installations which were the only ones to bear a fuel cost. 20 That change has produced a twofold advantage for those undertakings. First, following elimination of the B element of the tariff for customers on the captive market and which was previously intended for the equalisation fund, those undertakings are able to receive a charge of an equal amount across national territory for the captive market still subject to the tariff system on the basis of criteria which still take account of a fuel cost, although they do not bear that cost. Secondly, that advantage is intended to be applied also on the open market in the case of eligible customers, inasmuch as wholesale prices on the captive market constitute a reference for bilateral bargaining on the open market. Both advantages are attributable solely to the altered legal framework following liberalisation of the sector and not to an alteration in terms of efficiency and competitiveness. 21 The Consiglio di Stato states in an explanatory memorandum on the regulation of tariffs of 4 August 1999 (‘the explanatory memorandum’) that the AEEG maintained that, were the generation and distribution undertakings permitted to retain the benefit of that overvaluation of hydroelectric and geothermal generation, revenue would be created for those undertakings and a charge would arise for the electricity system as a direct consequence of liberalisation, thus entailing higher tariffs for consumers not founded on higher costs. 22 The explanatory memorandum goes on to state that ‘in the case of electricity generated by hydroelectric and geothermal installations, that consequence must be avoided by imposing on that electricity an increased charge for access to and use of the transmission system within the meaning of Article 3(10) of Legislative Decree No 79/99, pending expiry of existing concessions for the extraction of water for hydroelectric uses and for utilisation of geothermal resources for the purposes of thermal electricity generation. The yield from those increases may be used to offset “stranded costs” which might arise and could not be met in any other way or may be used for financing general revenue charges relating to the electricity system including those concerning the promotion of electricity generated by installations using renewable energy sources.’ 23 Annex 2 to the explanatory memorandum states, first, that the tariff regulation based on the system in force prior to implementation of Directive 96/92 provided for the grant of contributions paid by the equalisation fund in favour of electricity generation differentiated according to the type of installation and producer. 24 It is stated in that annex that such differentiation in the system of contributions to electricity generation is incompatible with a liberalised framework of generation. Under a liberalised framework it is inevitable that, for each period, a single market price is formed for wholesale electricity which all producers fix and charge, irrespective of the type of installation utilised. 25 Finally, it is stated in that annex that the profit which results for electricity generated by hydroelectric and geothermal installations depends on the availability of scarce resources, namely water and geothermal resources for use in electricity generation, which are not valued in a proper manner under the current system. 26 The Consiglio di Stato adds that, so far as concerns electricity on the free market, the increased charge for access to and use of the national transmission system was introduced from the year 2000 by Decision No 231/00, whereas for electricity on the captive market the increase was only introduced from 2001 by Decision No 232/00. That is attributable to the fact that, on the captive market, elimination of the B element of the tariff and of the contributions to the fuel costs related to it was deferred until 2001. 27 The Consiglio di Stato also states that recovery of the overvaluation is determined by reducing it progressively until the end of 2006 in such a way as to allow the market to attain an equilibrium which is actually competitive. 28 It further states that it has taken note of the fact that the increased charge is not based on Article 24 of Directive 96/92.29 On the basis of those considerations, the Consiglio di Stato believes it necessary to clarify, first, whether a regime such as the one in question in the main proceedings constitutes State aid within the meaning of the rules laid down in Article 87 EC et seq. 30 In that regard, it notes that the yield from the increased charge is not used to cross-subsidise certain undertakings or categories of undertakings operating in the market but seeks to offset the general revenue charges of the electricity system for the benefit of users. It is therefore a general measure of economic policy which does not aim to benefit certain undertakings or the production of certain goods but, on the contrary, pursues an interest of a general nature. In fact, according to the Consiglio di Stato, contrary to what is indicated in places in the preparatory documents, the provisions at issue do not seek to allocate the revenue raised to a specific category of undertakings with a view to covering the stranded costs. Decisions Nos 231/00 and 232/00 further provide – merely as a possibility – that any surplus on the account for offsetting the overvaluation of electricity during the transitional period may be transferred to the account for new installations using renewable and assimilated energy sources. In the final analysis, it is not the provisions in question of the Decree of 26 January 2000 providing for the relevant sums to be paid into an account intended to meet the general revenue charges of the system which may be classed as State aid. Rather, it may be the distinct and subsequent determination to use those sums, henceforth publicly available, in favour of certain undertakings or the production of certain goods within the meaning of Article 87(1) EC which may amount to State aid. 31 Secondly, the Consiglio di Stato believes it necessary to check the compatibility of such a regime with the principles and provisions of Directive 96/92, in particular Article 7 thereof and the 25th recital in the preamble thereto, as regards ensuring universal network access without discrimination, and Article 8 of the same directive as regards laying down the criteria for dispatching the generating installations. 32 It is in those circumstances that the Consiglio di Stato decided to stay the proceedings and refer to the Court for a preliminary ruling two questions which are identical in Cases C-128/03 and C-129/03: ‘(1) Can an administrative measure which, on the terms and for the purposes stated in the reasoning, imposes on certain undertakings using the electricity transmission system an increased charge for access to and use of that system intended to finance general revenue charges of the electricity system be regarded as a State aid for the purposes of Article 87 et seq of the [EC] Treaty? (b) Must the principles established in Directive 96/92 concerning the liberalisation of the internal market in electricity, and in particular Articles 7 and 8 thereof concerning operation of the electricity transmission system, be interpreted as precluding the possibility for a Member State to adopt a measure imposing on certain undertakings, for a transitional period, an increased charge in order to offset the overvaluation of hydroelectric and geothermal energy occasioned, on the terms and for the purposes stated in the reasoning, by the altered legislative framework and to finance general revenue charges of the electricity system?’ 33 By order of 6 May 2003 the President of the Court ordered that Cases C-128/03 and C-129/03 be joined. Substance The first question34 By its first question, the national court asks essentially whether a measure such as the one at issue in the main proceedings, under which a Member State imposes only on certain users of the electricity transmission system an increased charge for access to and use of that system, constitutes State aid within the meaning of Article 87 EC. Observations submitted to the Court35 AEM and AEM Torino note that the Decree of 26 January 2000 and Decisions Nos 231/00 and 232/00, and also Decision No 228/01 of the AEEG of 18 October 2001 approving a consolidated version of provisions of the AEEG for the provision of services in the transmission, measurement and sale of electricity (Ordinary Supplement to Gazzetta ufficiale della Repubblica italiana No 277 of 22 December 2001, p. 5), impose on certain undertakings generating and distributing hydroelectricity and electricity from geothermal sources an increased charge for access to the national transmission system, with a view to offsetting the general revenue charges of the electricity system and the costs of generation of the power stations admitted to the system of contributions in favour of new installations using renewable energy sources. AEM and AEM Torino maintain that those provisions are an integral part of the schemes of State aid provided for by the Decree of 26 January 2000 to finance the general revenue charges of the Italian electricity system (stranded costs) and by Article 22(3) of Law No 9/91 of 9 January 1991 on rules for the implementation of the new national plan on energy: institutional aspects, hydroelectric power stations and electric, hydrocarbon and geothermal lines, autoproduction and fiscal provisions (Ordinary Supplementto Gazzetta ufficiale della Repubblica italiana No 13 of 16 January 1991, p. 3), to grant incentives to generate electricity obtained from renewable and assimilated sources. 36 The Italian Government submits that an administrative measure which, in the context of lowering generation costs, imposes on certain undertakings generating and distributing hydroelectricity and geothermal electricity which use the national transmission system an increased charge which is temporary and degressive for access and use designed to finance the general revenue charges of the electricity system cannot be classed as State aid. 37 The Commission of the European Communities, for its part, maintains that a measure such as the one which is the subject of the main proceedings and which, on the terms and for the purposes stated in the reasoning, provides for certain undertakings which use the electricity grid to pay an increased charge for access to and use of the system, intended to finance general revenue charges of the electricity system, does not constitute State aid within the meaning of Article 87 EC et seq. Findings of the Court38 It should be noted that Article 87(1) EC defines State aid which is governed by the Treaty as aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods, in so far as it affects trade between Member States. The concept of State aid within the meaning of that provision is wider than that of a subsidy because it embraces not only positive benefits, such as the subsidies themselves, but also measures which, in various forms, mitigate the normal burdens on the budget of an undertaking (see, in particular, Case 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v High Authority [1961] ECR 1, p. 19, Case C-256/97 DM Transport [1999] ECR I-3913, paragraph 19, and Case C-276/02 Spain v Commission [2004] ECR I-0000, paragraph 24). 39 However, the concept of aid does not encompass measures creating different treatment of undertakings in relation to charges where that difference is attributable to the nature and general scheme of the system of charges in question (see, in particular, Case C-351/98 Spain v Commission [2002] ECR I-8031, paragraph 42, and Case C-159/01 Netherlands v Commission [2004] ECR I-0000, paragraph 42). 40 In the case in the main proceedings, according to the orders for reference the increased charge for access to and use of the national electricity transmission system demanded only from undertakings generating and distributing electricity from hydroelectric or geothermal installations is intended to offset the advantage created for those undertakings by the liberalisation of the market in electricity following the implementation of Directive 96/92. The transitional regime for the initial period of that liberalisation enables those undertakings to charge, first, a price on the captive market set on the basis of criteria which take account of a fuel cost which they do not bear and which is no longer offset by an element of the tariff paid by them to the equalisation fund, and secondly, a price on the open market for which the wholesale price on the captive market constitutes a reference, whilst, as Annex 2 to the explanatory note in particular shows, under concessions for the extraction of water for hydroelectric uses and for utilisation of geothermal resources for the purposes of thermal electricity generation, those resources are not yet properly valued. 41 As the national court observed, that advantage does not result from altered criteria for efficiency and competition, but from the altered legal framework following liberalisation of the electricity sector. 42 Further, according to the explanatory memorandum the electricity generated by those undertakings will not be subject to the increased charge until expiry of existing concessions for the extraction of water for hydroelectric uses and for utilisation of geothermal resources for the purposes of thermal electricity generation. Also according to the order for reference, the increased charge is to be degressive until the end of 2006. 43 Consequently, a measure such as the one at issue in the main proceedings, which imposes an increased charge for a transitional period for access to and use of the national electricity transmission system only on undertakings generating and distributing electricity from hydroelectric or geothermal installations to offset the advantage created for those undertakings, during the transitional period, by the liberalisation of the market in electricity following the implementation of Directive 96/92, constitutes different treatment of undertakings in relation to charges which is attributable to the nature and general scheme of the system of charges in question. That difference is not therefore per se State aid within the meaning of Article 87 EC. 44 However, AEM and AEM Torino have claimed that the increased charge is an integral part of the schemes of State aid provided for by the Decree of 26 January 2000 to finance the general revenue charges of the Italian electricity system (stranded costs) and by Article 22(3) of Law No 9/91 to promote the generation of electricity from renewable and assimilated sources. 45 According to the case-law of the Court, the method by which an aid is financed may render the entire aid scheme incompatible with the common market. Therefore, the aid cannot be considered separately from the effects of its method of financing. On the contrary, consideration of an aid measure by the Commission must necessarily also take into account the method of financing the aid where that method forms an integral part of the measure (see Joined Cases C-261/01 and C-262/01 Van Calster and Others [2003] ECR I-12249, paragraph 49). 46 However, for a special tax to be regarded as forming an integral part of an aid measure, it must be hypothecated to the aid measure under the relevant national rules, in the sense that the revenue from the special tax is necessarily allocated for the financing of the aid. It is only in the event of such hypothecation that the revenue from the special tax has a direct impact on the amount of the aid and, consequently, on the assessment of the compatibility of the aid with the common market (see, to that effect, Case C-174/02 Streekgewest [2005] ECR I-0000, paragraph 26, and Case C-175/02 Pape [2005] ECR I-0000, paragraph 15). 47 It follows that if, as in a situation such as that in the main proceedings, there is hypothecation of the increased charge for access to and use of the national electricity transmission system to a national scheme of aid, in the sense that the revenue from the increase is necessarily allocated for the financing of the aid, that increase is an integral part of that scheme and must therefore be considered together with the latter. 48 The case‑file does not contain sufficiently specific information in that regard to enable the Court to rule on that question.49 In that connection, it should also be noted that the Commission stated that on 25 July 2000 the Italian authorities notified to it the Decree of 26 January 2000 as an aid measure as provided for in Article 88(3) EC, and that that decree referred to financial offset for the overvaluation and therefore indirectly to the increased charge. At the hearing, the Commission stated that the investigation procedure in respect of that decree is still pending. 50 The answer to the first question referred for a preliminary ruling must therefore be that a measure such as the one at issue in the main proceedings, which imposes an increased charge for a transitional period for access to and use of the national electricity transmission system only on undertakings generating and distributing electricity from hydroelectric or geothermal installations to offset the advantage created for those undertakings, during the transitional period, by the liberalisation of the market in electricity following the implementation of Directive 96/92, constitutes different treatment of undertakings in relation to charges which is attributable to the nature and general scheme of the system of charges in question. That different treatment is not therefore per se State aid within the meaning of Article 87 EC. 51 However, aid cannot be considered separately from the effects of its method of financing. If, in a situation such as that in the main proceedings, there is hypothecation of the increased charge for access to and use of the national electricity transmission system to a national scheme of aid, in the sense that the revenue from the increase is necessarily allocated for the financing of the aid, that increase is an integral part of that scheme and must therefore be considered together with the latter. The second question52 By its second question, the national court asks essentially if Article 7(5) and Article 8(2) of Directive 96/92, inasmuch as they prohibit all discrimination between users of the national electricity transmission system, preclude a Member State from adopting a measure, such as the one at issue in the main proceedings, imposing an increased charge for a transitional period only on certain electricity generation and distribution undertakings for access to and use of that system. 53 AEM and AEM Torino submit that an increased charge for access to and use of the national transmission system which is imposed, if only for a transitional period, on certain undertakings only, in particular having regard to the fact that that period of increase coincides with the phase of introducing competition on the Italian electricity market after it has been opened to such competition, is incompatible with the basic principle of access to the system on the basis of objective, transparent and non-discriminatory criteria provided for in Directive 96/92. 54 The Italian Government is of the opinion that the fact that a Member State imposes on certain electricity generation and distribution undertakings an increased charge which is for a transitional period and degressive for access to and use of the national electricity transmission system in order to balance an advantage which results from the overvaluation of hydroelectricity and electricity from geothermal sources attributable to the new legislative framework owing to the liberalisation of the internal market in electricity is not incompatible with the principles laid down by Directive 96/92. 55 The Commission considers that the principles laid down by Directive 96/92 concerning liberalisation of the internal market in electricity, and in particular Articles 7 and 8 on operation of the national transmission system, do not preclude the possibility for a Member State to adopt a measure imposing for a transitional period on certain undertakings an increased charge intended to offset the overvaluation of hydroelectricity and geothermal electricity occasioned by the altered legislative framework and to finance general revenue charges of the electricity system. 56 It should first be noted that Article 7(5) of Directive 96/92 refers to the system operator of the national electricity transmission system, and Article 8(2) of that directive refers to the order of dispatching of electricity generating installations. However, first, the measures at issue in the main proceedings are a ministerial decree and decisions adopted by a public authority, not by the system operator. Secondly, the national provisions referred to in the actions lodged by AEM and AEM Torino relate to the conditions for access to the system and not the order of dispatching of electricity generating installations. 57 However, it follows from Article 16 of Directive 96/92 that although, for the organisation of access to the system, Member States may choose between the negotiated access procedure and the single buyer procedure, both sets of procedure must be operated in accordance with objective, transparent and non-discriminatory criteria. 58 In any event, those provisions, like the general principle of non-discrimination of which they are specific applications, preclude different treatment of comparable situations and like treatment of different situations (see, as to the principle of non-discrimination, in particular Case C-442/00 Rodríguez Caballero [2002] ECR I-11915, paragraph 32). 59 As the Court has stated in paragraphs 42 and 43 of this judgment, the national measure at issue in the main proceedings imposes an increased charge for a transitional period for access to and use of the national electricity transmission system only on undertakings generating and distributing electricity from hydroelectric or geothermal installations to offset the advantage created for those undertakings, during the transitional period, by the altered legal framework following the liberalisation of the market in electricity as a result of the implementation of Directive 96/92. Whilst such a measure treats differently situations which are not comparable, it is nevertheless a matter for the national court to satisfy itself that the increased charge does not go beyond what is necessary to offset that advantage. 60 Therefore, the answer to the second question referred for a preliminary ruling must be that the rule of non-discriminatory access to the national electricity transmission system laid down in Directive 96/92 does not preclude a Member State from adopting a measure, such as the one at issue in the main proceedings, which imposes an increased charge for a transitional period for access to and use of that system only on certain electricity generation and distribution undertakings to offset the advantage created for those undertakings, during the transitional period, by the altered legal framework following the liberalisation of the market in electricity as a result of the implementation of that directive. However, it is a matter for the national court to satisfy itself that the increased charge does not go beyond what is necessary to offset that advantage. Costs61 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Third Chamber) hereby rules:1. A measure such as the one at issue in the main proceedings, which imposes an increased charge for a transitional period for access to and use of the national electricity transmission system only on undertakings generating and distributing electricity from hydroelectric or geothermal installations to offset the advantage created for those undertakings, during the transitional period, by the liberalisation of the market in electricity following the implementation of Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity, constitutes different treatment of undertakings in relation to charges which is attributable to the nature and general scheme of the system of charges in question. That different treatment is not therefore per se State aid within the meaning of Article 87 EC.However, aid cannot be considered separately from the effects of its method of financing. If, in a situation such as that in the main proceedings, there is hypothecation of the increased charge for access to and use of the national electricity transmission system to a national scheme of aid, in the sense that the revenue from the increase is necessarily allocated for the financing of the aid, that increase is an integral part of that scheme and must therefore be considered together with the latter.2. The rule of non-discriminatory access to the national electricity transmission system laid down in Directive 96/92 does not preclude a Member State from adopting a measure, such as the one at issue in the main proceedings, which imposes an increased charge for a transitional period for access to and use of that system only on certain electricity generation and distribution undertakings to offset the advantage created for those undertakings, during the transitional period, by the altered legal framework following the liberalisation of the market in electricity as a result of the implementation of that directive. However, it is a matter for the national court to satisfy itself that the increased charge does not go beyond what is necessary to offset that advantage.[Signatures]* Language of the case: Italian. | 829c2-b9430e1-4f63 | EN |
THE COURT ANNULS A COMMISSION DECISION REJECTING IN ITS ENTIRETY A REQUEST FOR ACCESS TO THE ADMINISTRATIVE FILE IN A COMPETITION CASE CONCERNING AUSTRIAN BANKS | Verein für KonsumenteninformationvCommission of the European Communities(Access to documents – Regulation (EC) No 1049/2001 – Request relating to a very large number of documents – Total refusal of access – Obligation to carry out a concrete, individual examination – Exceptions)Judgment of the Court of First Instance (First Chamber, Extended Composition), 13 April 2005 Summary of the Judgment1. Procedure – Intervention – Application for leave to intervene in support of the form of order sought by one of the parties – Application containing additional arguments altering the framework of the dispute – Inadmissibility of those arguments(Statute of the Court of Justice, Art. 40, fourth para.; Rules of Procedure of the Court of First Instance, Art. 116(3)) 2. European Communities – Institutions – Right of public access to documents – Regulation No 1049/2001 – Obligation on the institution to carry out a concrete, individual examination of the documents – Scope – Exclusion of the obligation – Conditions (European Parliament and Council Regulation No 1049/2001, Art. 4)3. European Communities – Institutions – Right of public access to documents – Regulation No 1049/2001 – Obligation on the institution to carry out a concrete, individual examination of the documents – Failure to perform the obligation – Breach of principle of proportionality – Examination proving particularly onerous and inappropriate – Derogation from the obligation to examine – Burden of proof on the institution – Obligation on the institution to consult with the applicant 1. Although the fourth paragraph of Article 40 of the Statute of the Court of Justice, which applies to the Court of First Instance by virtue of Article 53 of that Statute and under Article 116(3) of the Rules of Procedure of the Court of First Instance, does not preclude an intervener from using arguments different from those used by the party it is supporting, that is nevertheless on the condition that they do not alter the framework of the dispute and that the intervention is still intended to support the form of order sought by that party. That condition is not met, inter alia, where the intervener’s additional arguments, assuming that they are well founded, would permit a finding that the contested decision is unlawful whereas the form of order sought by the party which the intervener claims to support is only the dismissal of the action for annulment. Thus having the effect of altering the framework of the dispute as defined in the application and the defence, those additional arguments must therefore be rejected as inadmissible. (see paras 52-53, 55)2. The examination required for the purpose of processing a request for access to documents made on the basis of Regulation No 1049/2001 regarding public access to European Parliament, Council and Commission documents must be specific in nature. On the one hand, the mere fact that a document concerns an interest protected by an exception cannot justify its application. Such application may, in principle, be justified only if the institution has previously assessed, firstly, whether access to the document would specifically and actually undermine the protected interest and, secondly, in the hypothetical case referred to in Article 4(2) and (3) of that regulation, there is no overriding public interest in disclosure. On the other hand, the risk of a protected interest being undermined must be reasonably foreseeable and not purely hypothetical. The institution concerned must therefore undertake a concrete and individual examination of the contents of each of the documents referred to in the application and indicate, at the very least by reference to categories of documents, the reasons for which it considers that the documents detailed in the request received by it are related to a category of information covered by an exception. However, that examination may not be necessary where, due to the particular circumstances of the individual case, it is obvious that access must be refused or, on the contrary, granted. Such could be case, inter alia, if certain documents are either manifestly covered in their entirety by an exception to the right of access or, conversely, manifestly accessible in their entirety, or, finally, have already been the subject of a concrete, individual assessment by the institution in similar circumstances. (see paras 69, 72-73, 75)3. The refusal by an institution to examine concretely and individually the documents covered by a request for access constitutes, in principle, a manifest breach of the principle of proportionality which requires measures adopted by Community institutions not to exceed the limits of what is appropriate and necessary in order to attain the objectives pursued. However, an institution applied to must retain the right, in particular cases where concrete, individual examination of the documents would entail an unreasonable amount of administrative work, to balance the interest in public access to the documents against the burden of work so caused, in order to safeguard, in those particular cases, the interests of good administration. It is only in exceptional cases and only where the administrative burden entailed by a concrete, individual examination of the documents proves to be particularly heavy, thereby exceeding the limits of what may reasonably be required, that such a derogation from the obligation to examine the documents must be permissible. The institution relying on that exception must adduce proof of the scale of such an administrative burden. It must, where appropriate, try to consult with the applicant in order, on the one hand, to ascertain or to ask him to specify his interest in obtaining the documents in question and, on the other, to consider specifically whether and how it may adopt a measure less onerous than a concrete, individual examination of the documents, preferring the option which, whilst not itself constituting a task which exceeds the limits of what may reasonably be required, remains the most favourable to the applicant’s right of access. (see paras 99-100, 102, 112-114)JUDGMENT OF THE COURT OF FIRST INSTANCE (First Chamber, Extended Composition)13 April 2005 (*) In Case T-2/03,Verein für Konsumenteninformation, established in Vienna (Austria), represented by A. Klauser, lawyer, applicant,Commission of the European Communities, represented by S. Rating and P. Aalto, acting as Agents, with an address for service in Luxembourg, defendant,supported byBank für Arbeit und Wirtschaft AG, established in Vienna, represented by H.-J. Niemeyer, lawyer, with an address for service in Luxembourg, and byÖsterreichischeVolksbanken AG, established in Vienna, andNiederösterreichische Landesbank-Hypothekenbank AG, established in Sankt Pölten (Austria), represented by R. Roniger, A. Ablasser and W. Hemetsberger, lawyers,interveners,APPLICATION for annulment of Commission Decision D (2002) 330472 of 18 December 2002 relating to a request for access to the administrative file in Case COMP/36.571/D-1, Austrian banks – ‘Lombard Club’, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (First Chamber, Extended Composition),composed of B. Vesterdorf, President, M. Jaeger, P. Mengozzi, M.E. Martins Ribeiro and I. Labucka, Judges,Registrar: H. Jung,having regard to the written procedure and further to the hearing on 28 September 2004,gives the followingJudgment Legal framework1 Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001 regarding public access to European Parliament, Council and Commission documents (OJ 2001 L 145, p. 43) defines the principles, conditions and limits governing the right of access to documents of those institutions, provided for in Article 255 EC. That regulation has been applicable since 3 December 2001. 2 Commission Decision 2001/937/EC, ECSC, Euratom of 5 December 2001 amending its rules of procedure (OJ 2001 L 345, p. 94) repealed Commission Decision 94/90/ECSC, EC, Euratom of 8 February 1994 on public access to Commission documents (OJ 1994 L 46, p. 58), which ensured that effect was given, as regards the Commission, to the code of conduct on public access to Council and Commission documents (OJ 1993 L 340, p. 41, ‘the code of conduct’). 3 Article 2 of Regulation No 1049/2001 provides:‘1. Any citizen of the Union, and any natural or legal person residing or having its registered office in a Member State, has a right of access to documents of the institutions, subject to the principles, conditions and limits defined in this Regulation. …3. This Regulation shall apply to all documents held by an institution, that is to say, documents drawn up or received by it and in its possession, in all areas of activity of the European Union. …’4 Article 3 of Regulation No 1049/2001 lays down certain definitions as follows:‘For the purpose of this Regulation:(a) “document” shall mean any content whatever its medium (written on paper or stored in electronic form or as a sound, visual or audiovisual recording) concerning a matter relating to the policies, activities and decisions falling within the institution’s sphere of responsibility; (b) “third party” shall mean any natural or legal person, or any entity outside the institution concerned, including the Member States, other Community or non-Community institutions and bodies and third countries.’ 5 Article 4 of Regulation No 1049/2001, relating to the exceptions to the abovementioned right of access, states: ‘1. The institutions shall refuse access to a document where disclosure would undermine the protection of:… (b) privacy and the integrity of the individual, in particular in accordance with Community legislation regarding the protection of personal data. 2. The institutions shall refuse access to a document where disclosure would undermine the protection of:– commercial interests of a natural or legal person, including intellectual property,– court proceedings and legal advice,– the purpose of inspections, investigations and audits,unless there is an overriding public interest in disclosure.3. Access to a document, drawn up by an institution for internal use or received by an institution, which relates to a matter where the decision has not been taken by the institution, shall be refused if disclosure of the document would seriously undermine the institution’s decision‑making process, unless there is an overriding public interest in disclosure. Access to a document containing opinions for internal use as part of deliberations and preliminary consultations within the institution concerned shall be refused even after the decision has been taken if disclosure of the document would seriously undermine the institution’s decision-making process, unless there is an overriding public interest in disclosure. 4. As regards third-party documents, the institution shall consult the third party with a view to assessing whether an exception in paragraph 1 or 2 is applicable, unless it is clear that the document shall or shall not be disclosed. 6. If only parts of the requested document are covered by any of the exceptions, the remaining parts of the document shall be released. Background to the dispute6 The Verein für Konsumenteninformation (‘the VKI’ or ‘the applicant’) is a consumer organisation constituted under Austrian law. In order to facilitate its task of safeguarding the interests of consumers, Austrian law confers on the VKI the right to bring proceedings before the Austrian civil courts in order to assert certain financial claims of consumers, which the latter have previously assigned to it. 7 By Decision 2004/138/EC of 11 June 2002 relating to a proceeding under Article 81 of the EC Treaty (in Case COMP/36.571/D-1: Austrian banks – ‘Lombard Club’) (OJ 2004 L 56, p. 1), the Commission found that eight Austrian banks had participated, over a number of years, in a cartel known as the ‘Lombard Club’ covering almost the whole of Austria (‘the Lombard Club decision’). In the Commission’s view, the banks referred to had, within that cartel, inter alia, fixed jointly the interest rates for certain investments and loans. The Commission therefore imposed fines totalling EUR 124.26 million on those banks, which included in particular the Bank für Arbeit und Wirtschaft AG (‘BAWAG’), the Österreichische Volksbanken‑AG (‘ÖVAG’) and the Niederösterreichische Landesbank‑Hypothekenbank AG (‘NÖ‑Hypobank’). 8 The VKI is currently conducting several sets of proceedings against BAWAG before the Austrian courts. In those proceedings, the VKI claims that, on account of an incorrect adjustment of the interest rates applicable to variable‑interest loans granted by BAWAG, the latter charged its customers too much interest over a number of years. 9 By letter of 14 June 2002, the applicant requested authorisation from the Commission to consult the administrative file relating to the Lombard Club decision. In support of its request, the VKI stated inter alia that, in order to secure damages for the consumers on whose behalf it was acting, it had to be able to put forward specific claims regarding both the illegality of BAWAG’s conduct under competition law and the effects of that conduct. To that end, consultation of the Lombard Club file would have been a significant, or even indispensable, help to it. 10 By letter of 3 July 2002, the Commission asked the VKI to clarify its request and, in particular, its legal basis. In reply to that letter, the VKI stated, by letter of 8 July 2002, that its request was based inter alia on Article 255(1) and (2) EC, on Regulation No 1049/2001, on the provisions implementing that regulation and on Article 42 of the Charter of fundamental rights of the European Union proclaimed at Nice on 7 December 2000 (OJ 2000 C 364, p. 1, ‘the Charter of fundamental rights’), as well as on Articles 5 EC and 10 EC. 11 On 24 July 2002, at a meeting with the Commission’s staff, the representatives of the VKI raised the possibility that the applicant could give an undertaking in writing to use the information obtained solely for the purpose of asserting consumers’ claims in the national proceedings against BAWAG. 12 By letter of 12 August 2002, the VKI supplemented its request by confirming that it was prepared to give the undertaking mentioned at the meeting on 24 July 2002. 13 By letter of 12 September 2002, the Commission, basing its decision on Regulation No 1049/2001, rejected the VKI’s request in its entirety. 14 On 26 September 2002, the VKI made a confirmatory request as referred to in Article 7((2) of Regulation No 1049/2001, in which it stated, inter alia, while maintaining its request, that it was not interested primarily in the Commission’s internal documents. 15 On 14 October 2002, the Commission acknowledged receipt of that confirmatory request and informed the applicant that, owing to the number of documents requested, the time-limit for replying which was applicable to the processing of its request was extended by 15 working days. 16 On 18 December 2002, the Commission adopted Decision D (2002) 330472 relating to a request for access to the administrative file in Case COMP/36.571/D‑1, Austrian banks – ‘Lombard Club’ (‘the contested decision’). The contested decision confirms the rejection of 12 September 2002. 17 In the contested decision, the Commission divided, in the first place, the documents in the Lombard Club file, except for the internal documents, into 11 separate categories. Excluding internal documents, that file contains more than 47 000 pages. 18 In the second place, the Commission detailed the reasons on which it based its view that each of the categories previously identified was covered by one or more of the exceptions provided for by Regulation No 1049/2001. 19 In the third place, the Commission took the view that, in cases where the application of certain exceptions would necessitate a balancing of the conflicting interests, the VKI had not referred to an overriding public interest in the access requested. 20 In the fourth place, the Commission listed the reasons why partial access was not possible in this case. In the Commission’s view, a detailed examination of each document, which was necessary for any partial consultation, would have represented an excessive and disproportionate amount of work for it. 21 In the fifth place, the Commission took the view that no consultation of third parties in order to consider possible access to the documents of which they were the authors was necessary in this case since, pursuant to Article 4(4) of Regulation No 1049/2001, it was clear that those documents did not have to be disclosed. 22 The Commission concluded in the contested decision that the applicant’s request for access had to be rejected in its entirety. Procedure before the Court of First Instance23 By application lodged at the Registry of the Court of First Instance on 7 January 2003, the VKI brought an action for annulment of the contested decision. By separate document lodged on the same day, it applied to have that action adjudicated on under an expedited procedure in accordance with Article 76a of the Rules of Procedure of the Court of First Instance. 24 By separate document lodged on 8 January 2003, the VKI applied for legal aid.25 On 20 January 2003, the Commission lodged its observations on the application for an expedited procedure. 26 The First Chamber of the Court of First Instance, to which the case was assigned by decision of 20 January 2003, rejected the application for an expedited procedure by a decision of 28 January 2003, which was notified to the applicant on the following day. 27 On 18 February 2003, the Commission lodged its observations on the application for legal aid.28 On 10 March 2003, the Commission lodged its defence.29 The applicant’s application for legal aid was rejected by order of the President of the Court of 14 March 2003.30 By letter of 1 April 2003, the applicant waived its right to lodge a reply. 31 On 15 April 2003, BAWAG lodged an application to intervene in support of the form of order sought by the Commission. The Kingdom of Sweden and the Republic of Finland applied, on 16 and 25 April respectively, to intervene in support of the form of order sought by the VKI. Finally, on 29 April 2003, ÖVAG and NÖ-Hypobank jointly applied to intervene in support of the form of order sought by the Commission. 32 By order of the President of the First Chamber of the Court of First Instance of 1 August 2003, the Republic of Finland and the Kingdom of Sweden were granted leave to intervene in support of the form of order sought by the applicant. In the same order, BAWAG, on the one hand, and ÖVAG and NÖ-Hypobank, on the other, were granted leave to intervene in support of the form of order sought by the Commission. 33 Those applications having been made within the period prescribed in Article 115(1) of the Rules of Procedure, the interveners received, pursuant to Article 116(2) of the Rules of Procedure, a copy of every document served on the parties. 34 The Republic of Finland and the Kingdom of Sweden lodged, on 10 and 12 September 2003 respectively, applications to withdraw their interventions. 35 On 26 September 2003, BAWAG, on the one hand, and ÖVAG and NÖ-Hypobank, on the other, lodged their statements in intervention.36 Since the VKI and the Commission did not lodge any observations on the applications to withdraw lodged by the Republic of Finland and the Kingdom of Sweden, the President of the First Chamber, by order of 6 November 2003, removed from the file of this case the interventions of those interveners and ordered the VKI and the Commission to bear their own costs in respect of those interventions. 37 On 14 November 2003, the applicant lodged its written observations on the statements in intervention, whereas those of the Commission were lodged on 11 November 2003. 38 Pursuant to Article 14 of the Rules of Procedure and acting on a proposal from the First Chamber, the Court decided, after the parties had been heard in accordance with Article 51 of those rules, to refer the case to a Chamber with an extended composition. 39 Upon hearing the Report of the Judge-Rapporteur, the Court (First Chamber, Extended Composition) decided to open the oral procedure and, as a measure of organisation of procedure provided for in Article 64 of the Rules of Procedure, put certain questions in writing to the Commission and the interveners. 40 On 6 July 2004, the Commission and the interveners replied in writing to the Court’s questions.41 The parties presented oral argument and their replies to the Court’s questions at the hearing on 28 September 2004. Forms of order sought by the parties42 The applicant claims that the Court should:– annul the contested decision;– order the production of, and examine, the file in question with a view to determining whether the claims of the VKI are well founded; – order the Commission to pay the costs. 43 The Commission contends that the Court should:– dismiss the action;– order the applicant to pay the costs.44 BAWAG, in support of the Commission, submits that the Court should:– order the applicant to pay the costs, including those incurred by the intervener.45 Finally, ÖVAG and NÖ-Hypobank, in support of the Commission, submit that the Court should: Law The framework of the dispute and the admissibility of certain arguments put forward by the interveners 46 It is not disputed that the Commission adopted the contested decision under Regulation No 1049/2001.47 The VKI’s action is based, essentially, on six pleas. By its first plea, the VKI submits that it is incompatible with the right of access to documents and, in particular, with Regulation No 1049/2001 to refuse access to the whole of an administrative file without having first actually examined each of the documents contained in the file. In its second plea, the VKI claims that the Commission applied or interpreted incorrectly several of the exceptions provided for in Article 4(1) and (2) of Regulation No 1049/2001. In its third plea, the VKI argues that the Commission concluded unlawfully that the balance of the conflicting interests was not in favour of disclosure of the administrative file referred to by its request. In its fourth plea, the VKI maintains that the Commission should, at the very least, have granted it partial access to the file. By its fifth plea, the VKI claims that the failure to consult the banks which were the authors of certain documents constitutes an infringement of Article 4(4) of Regulation No 1049/2001. Finally, in its sixth plea, the applicant complains that the Commission infringed Article 255 EC, Article 42 of the Charter of fundamental rights and Articles 5 EC and 10 EC. 48 In their statements in intervention, BAWAG, on the one hand, and ÖVAG and NÖ-Hypobank, on the other, put forward a number of arguments (‘the additional arguments’) intended to show, in the first place, that Regulation No 1049/2001 applies only to documents produced during the Community legislative process, in the second place, that the right of access to documents concerning competition cases was, at the material time, governed only by Regulation No 17 of the Council of 6 February 1962, First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87), in the third place, that an association with public-law status does not enjoy the right of access provided for by Regulation No 1049/2001, in the fourth place, that the VKI’s request for access was unlawful under Regulation No 1049/2001, in the fifth place, that Regulation No 1049/2001 is contrary to Article 255 EC in that it allows access to documents originating from third parties and, in the sixth place, that that regulation can apply only to documents which came into the possession of the institutions after it became applicable, that is, from 3 December 2001. 49 The additional arguments thus seek to demonstrate, firstly, that Regulation No 1049/2001 was not applicable in this case, or, secondly, that it was applied incorrectly by the Commission, or, thirdly, that it constitutes an unlawful legal basis for the contested decision. 50 Consequently, if one or more of the additional arguments were to be accepted by the Court, that would permit a finding that the contested decision is unlawful. However, it should be pointed out that the interveners were granted leave to intervene in this case in support of the form of order sought by the Commission and that, moreover, the latter contends that the action for annulment should be dismissed. 51 When questioned in writing and at the hearing about the compatibility of the additional arguments with the form of order supported by the interveners, the latter replied in essence that, according to case‑law, an intervener is entitled to advance arguments which differ from or even conflict with those of the party which he supports (Case 30/59 De Gezamenlijke Steenkolenmijnen in Limburg v High Authority [1961] ECR 1, 17 and 18, and Joined Cases T-228/99 and T-233/99 Westdeutsche Landesbank Girozentrale v Commission [2003] ECR II‑435, paragraph 145). 52 However, under the fourth paragraph of Article 40 of the Statute of the Court of Justice, which applies to the Court of First Instance by virtue of Article 53 of that Statute, an application to intervene must be limited to supporting the form of order sought by one of the parties. In addition, under Article 116(3) of the Rules of Procedure, the intervener must accept the case as it finds it at the time of its intervention. Although those provisions do not preclude an intervener from using arguments different from those used by the party it is supporting, that is nevertheless on the condition that they do not alter the framework of the dispute and that the intervention is still intended to support the form of order sought by that party (see, to that effect, Case C‑245/92 P Chemie Linz v Commission [1999] ECR I‑4643, paragraph 32; Case C‑248/99 P France v Monsanto and Commission [2002] ECR I‑1, paragraph 56; and Case T-119/02 Royal Philips Electronics v Commission [2003] ECR II‑1433, paragraphs 203 and 212). 53 In this case, since, on the one hand, assuming that they are well founded, the additional arguments would permit a finding that the contested decision is unlawful and since, on the other hand, the form of order sought by the Commission is the dismissal of the action for annulment and is not supported by arguments seeking a declaration that the contested decision is unlawful, it is clear that consideration of the additional arguments would have the effect of altering the framework of the dispute as defined in the application and the defence (see, to that effect, Joined Cases T-447/93 to T-449/93 AITEC and Others v Commission [1995] ECR II‑1971, paragraph 122, and Case T-243/94 British Steel v Commission [1997] ECR II‑1887, paragraphs 72 and 73). 54 Moreover, the interveners’ claim that the additional arguments support, in essence, the form of order sought by the Commission, namely, refusal of the access to documents requested by the applicant, must be rejected. Firstly, in this case, the Commission has certainly not contended that the requested access to the documents at issue should be refused regardless of the reasons for the contested decision, but only that the action for annulment should be dismissed. Secondly, it is not for the Court, when reviewing the lawfulness of a measure, to assume the role of the Commission and determine whether access to the contested documents is to be refused for reasons other than those mentioned in the contested decision. 55 The additional arguments must therefore be rejected as inadmissible. The first plea, alleging failure to carry out a concrete examination of the documents referred to in the request for access, and the fourth plea, alleging infringement of the right to partial access56 The first and fourth pleas put forward by the applicant must be examined first and together. Arguments of the parties– The first plea, alleging failure to carry out a concrete examination of the documents referred to in the request for access57 In its first plea, the VKI claims that, in the contested decision, the Commission, contrary to Regulation No 1049/2001, exempted the whole of the Lombard Club file from the right of access without carrying out a concrete examination of each of the documents contained in that file. However, only actual circumstances applying to specific documents can justify an exception to the right of access to those documents. 58 In reply to the applicant’s first plea, the Commission contends that, in this case, it is not necessary to determine whether it refused access to all the documents referred to in the request for access, but only whether it gave a proper statement of reasons for its refusal in respect of all those documents. However, the Commission certainly did not, in this case, exclude the whole of the Lombard Club file from the right of access but, on the contrary, explained why the reasons for refusal listed in Article 4 of Regulation No 1049/2002 precluded disclosure of the documents in that file. 59 The Commission adds that it is not contrary to Community law to refuse access to various categories of documents without examining each of the documents in those categories where, as in this case, the reasons for the Commission’s refusal are stated in respect of each category. The Court has expressly held that the Commission is entitled to subdivide a file into categories, to which it may then refuse access altogether, provided that it mentions the reasons for its refusal (Case T‑105/95 WWF UK v Commission [1997] ECR II‑313, paragraph 64). 60 Finally, the Commission points out that examination of the various documents and parts of documents within those categories did not take place since the effort involved in such an operation would have been disproportionate. – The fourth plea, alleging infringement of the right to partial access61 The VKI submits that total refusal of access to the file would have been justified only if all the documents in it were covered by at least one of the exceptions in Article 4 of Regulation No 1049/2001. Since that condition was not satisfied in this case, the applicant should at least have been entitled to partial access. The Commission’s ‘commendable’ concern to limit its workload cannot have the consequence of destroying the chances of compensation for the damage suffered by consumers as the result of a cartel. 62 The Commission challenges the validity of those arguments. It acknowledges that the case‑law of the Court of Justice and the Court of First Instance recognises the existence of a right of partial access to documents. The Commission none the less points out that such access may be refused where it involves a disproportionate effort for the institution concerned. 63 The effort required for a file of more than 47 000 pages is bound to be disproportionate. That is at the very least the case where, on the one hand, the number of documents likely to be made available in each relevant category is very small and, on the other hand, those documents are manifestly of no use. Since the documents in the file are arranged in chronological order, any partial access would involve reviewing it in its entirety. Moreover, the task of drawing up a table of contents for the whole file would, having regard to the application of the exceptions in Article 4 of Regulation No 1049/2001, be just as disproportionate as partial access. The Commission concedes that the disproportionate nature of the effort involved does not in itself constitute a reason for refusal. However, where it is clear from an analysis of strictly‑defined categories of documents that access must be refused, no additional examination of each document within the relevant category is justified. 64 Both BAWAG and ÖVAG and NÖ-Hypobank essentially support the arguments of the Commission. They point out that where an applicant has expressly indicated its interest in its request for access, it is disproportionate to require the institution to which that request is made to grant partial access to documents which do not serve the purpose of the request. Findings of the Court65 It is common ground that the Commission did not carry out a concrete, individual examination of the documents comprising the Lombard Club file. At the hearing, the Commission confirmed that, in response to the applicant’s confirmatory request, it had divided the Lombard Club file, excluding the internal documents, into 11 separate categories of documents, although without examining each of the documents. It is also clear from the contested decision that, after defining those categories, the Commission considered that ‘one or more exceptions provided for in Article 4 of Regulation No 1049/2001 appl[ied] to each category of document, without there being any overriding public interest in disclosure’. The Commission then stated that, ‘for reasons of proportionality, it [did] not appear either necessary or expedient to undertake an examination of the documents beyond the abovementioned categories’. The Commission further stated, ‘as a subsidiary consideration’, that publication of the Lombard Club decision was sufficient to ‘safeguard’ the interests of the applicant. 66 In the light of those considerations, it must therefore be determined whether the Commission was obliged, in principle, to carry out a concrete, individual examination of the documents referred to in the request for access, then, if so, to examine to what extent that obligation to examine could be qualified by certain exceptions based, inter alia, on the amount of work entailed by it. – The obligation to carry out a concrete, individual examination67 Article 2 of Regulation No 1049/2001 defines the principle of the right of access to documents of the institutions. Article 4 of Regulation No 1049/2001 sets out a number of exceptions to the right of access. Finally, Articles 6 to 8 of Regulation No 1049/2001 lay down certain procedures according to which a request for access must be processed. 68 The effect of those provisions is that the institution to which a request for access is made under Regulation No 1049/2001 is obliged to examine and reply to that request and, in particular, to determine whether any of the exceptions referred to in Article 4 of the regulation is applicable to the documents in question. 69 According to settled case‑law, the examination required for the purpose of processing a request for access to documents must be specific in nature. On the one hand, the mere fact that a document concerns an interest protected by an exception cannot justify application of that exception (see, to that effect, Case T‑20/99 Denkavit Nederland v Commission [2000] ECR II‑3011, paragraph 45). Such application may, in principle, be justified only if the institution has previously assessed, firstly, whether access to the document would specifically and actually undermine the protected interest and, secondly, in the circumstances referred to in Article 4(2) and (3) of Regulation No 1049/2001, there is no overriding public interest in disclosure. On the other hand, the risk of a protected interest being undermined must be reasonably foreseeable and not purely hypothetical (see, to that effect, Case T‑211/00 Kuijer v Council [2002] ECR II‑485, paragraph 56, ‘Kuijer II’). Consequently, the examination which the institution must undertake in order to apply an exception must be carried out in a concrete manner and must be apparent from the reasons for the decision (see, to that effect, Case T‑188/98 Kuijer v Council [2000] ECR II‑1959, paragraph 38, ‘Kuijer I’, and Case T‑14/98 Hautala v Council [1999] ECR II‑2489, paragraph 67). 70 That concrete examination must, moreover, be carried out in respect of each document referred to in the request for access. It is apparent from Regulation No 1049/2001 that all the exceptions mentioned in Article 4(1) to (3) are specified as being applicable to ‘a document’. 71 The need for such a concrete, individual examination, as opposed to an abstract, general examination, is also confirmed by the case‑law concerning the application of the code of conduct. 72 On the one hand, the code of conduct, the principles of which were in part reproduced in Article 4 of Regulation No 1049/2001, contained a first category of exceptions requiring the institution to refuse access to a document where disclosure ‘could undermine’ the interests protected by those exceptions. The Court has consistently held that the use of the conditional form ‘could’ means that before deciding on a request for access to documents the Commission must consider, ‘for each document requested’, whether, in the light of the information in its possession, disclosure is in fact likely to undermine one of the interests protected by the exceptions (Case T‑124/96 Interporc v Commission [1998] ECR II‑231, paragraph 52, and Case T‑123/99 JT’s Corporation v Commission [2000] ECR II‑3269, paragraph 64). In view of the fact that the conditional form is maintained in Article 4(1) to (3) of Regulation No 1049/2001, the case‑law developed in connection with the code of conduct is capable of being applied to Regulation No 1049/2001. It must therefore be held that an institution is obliged to assess in a concrete and individual manner whether exceptions to the right of access apply to each of the documents referred to in a request. 73 On the other hand, as the Commission rightly points out, the Court has in fact held, in essence, in its judgment in WWF UK v Commission, cited in paragraph 59 above (paragraph 64), that an institution is required to indicate, at the very least by reference to categories of documents, the reasons for which it considers that the documents detailed in the request received by it are related to a category of information covered by an exception. Nevertheless, regardless of whether the paragraph relied on by the Commission lays down only a rule that reasons must be stated, a concrete, individual examination is in any event necessary where, even if it is clear that a request for access refers to documents covered by an exception, only such an examination can enable the institution to assess the possibility of granting the applicant partial access under Article 4(6) of Regulation No 1049/2001. In the context of applying the code of conduct, the Court has moreover already rejected as insufficient an assessment of documents by reference to categories rather than on the basis of the actual information contained in those documents, since the examination required of an institution must enable it to assess specifically whether an exception invoked actually applies to all the information contained in those documents (JT’s Corporation v Commission, cited in paragraph 72 above, paragraph 46). 74 It must therefore be concluded that where an institution receives a request for access under Regulation No 1049/2001 it is required, in principle, to carry out a concrete, individual assessment of the content of the documents referred to in the request. 75 However, that approach, to be adopted in principle, does not mean that such an examination is required in all circumstances. Since the purpose of the concrete, individual examination which the institution must in principle undertake in response to a request for access made under Regulation No 1049/2001 is to enable the institution in question to assess, on the one hand, the extent to which an exception to the right of access is applicable and, on the other, the possibility of partial access, such an examination may not be necessary where, due to the particular circumstances of the individual case, it is obvious that access must be refused or, on the contrary, granted. Such could be case, inter alia, if certain documents were either, first, manifestly covered in their entirety by an exception to the right of access or, conversely, manifestly accessible in their entirety, or, finally, had already been the subject of a concrete, individual assessment by the Commission in similar circumstances. 76 In this case, it is common ground that the Commission based the contested decision on a general analysis by reference to categories of documents of the Lombard Club file. It is also established that the Commission did not carry out a concrete, individual examination of the documents referred to in the request for access in order to assess whether the exceptions relied on applied or whether partial access could be granted. 77 It must therefore be examined whether the applicant’s request related to documents in respect of which, by reason of the circumstances of the case, it was not necessary to carry out such a concrete, individual examination. 78 In that regard, the Commission took the view, in the contested decision, that the documents referred to in the applicant’s request were covered by four separate exceptions to the right of access. 79 The first of the exceptions relied on by the Commission concerns the protection of the purpose of inspections, referred to in the third indent of Article 4(2) of Regulation No 1049/2001. In the contested decision, the Commission justified the application of that exception on the basis, in essence, of two factors. 80 Firstly, according to the Commission, the Lombard Club decision is the subject‑matter of a number of actions for annulment before the Court of First Instance which are still pending and on which the latter has therefore not yet ruled. Consequently, access by third parties to those documents could affect the new assessment it might be called upon to make if its decision were annulled and might lead the applicants to raise certain pleas in those actions. 81 Secondly, according to the Commission, a large number of the documents in the file were provided by the undertakings penalised in the Lombard Club decision, either on the basis of the Commission Notice on the non-imposition or reduction of fines in cartel cases (OJ 1996 C 207, p. 4), which was applicable at the material time, or in connection with requests for information or investigations under Articles 11 and 14 of Regulation No 17. Consequently, allowing third parties access to those documents would deter undertakings from cooperating with the Commission and would be detrimental to inspections and investigations in future cases. The same reasoning applies to documents drawn up by third parties. 82 The Court is of the view, however, that the Commission was not entitled to reach such a general conclusion applicable to the whole of the Lombard Club file without having first carried out a concrete, individual examination of the documents comprising it. 83 Firstly, it is not clear from the contested decision that the Commission specifically ascertained that each document referred to in the request was in fact included in one of the 11 categories identified. On the contrary, the reasons for the contested decision, which were confirmed by the Commission at the hearing, indicate that the manner in which the Commission carried out that division was, at least in part, abstract. The Commission seems to have acted more on the basis of what it imagined the content of the documents in the Lombard Club file to be than on the basis of an actual examination. That division into categories therefore remains approximate, both from the point of view of its exhaustiveness and from the point of view of its accuracy. 84 Secondly, the considerations set out by the Commission in the contested decision, as moreover in its defence, remain vague and general. In the absence of an individual examination, that is to say, document by document, they do not demonstrate with sufficient certainty and detail that the Commission’s argument, even if well founded in principle, applies to all the documents in the Lombard Club file. The fears expressed by the Commission remain mere assertions and are, consequently, utterly hypothetical. 85 There is nothing to show that all the documents referred to in the request are clearly covered by the exception relied on. In point 1 of the contested decision, the Commission itself notes that ‘the exception provided for in the third indent of Article 4(2) applies in large part to certain documents, or even in full to all the categories’. 86 It is true that, in the table which it attached to its defence, the Commission stated that, in its view, the exception relied on applied to all the documents referred to in the file. However, as is clear from the considerations set out in the preceding paragraph, that table contradicts the reasons for the contested decision. 87 Finally, and in any event, it is not apparent from the reasons given for the contested decision that each of the documents comprising the Lombard Club file, taken individually, is covered in its entirety by the exception referred to in the third indent of Article 4(2) of Regulation No 1049/2001. It is not clear that disclosure of any information contained in them would undermine the purposes of the Commission’s inspections and investigations. 88 The absence of any concrete, individual examination of the documents referred to by the applicant’s request is therefore not justified in the case of the documents allegedly covered by the first exception relied on by the Commission. 89 The same finding must apply with regard to the documents covered, according to the contested decision, by the second, third and fourth exceptions. Those exceptions relate to the protection of commercial interests (first indent of Article 4(2) of Regulation No 1049/2001), the protection of court proceedings (second indent of Article 4(2)) and the protection of privacy and the integrity of the individual (Article 4(1)(b)). It is clear from points 2, 3, 10, 12 and 13 of the contested decision that, in the Commission’s view, those exceptions concern only some of the documents referred to in the request. In particular, in point 13 of the contested decision, the Commission states that ‘it is possible that a large proportion of the documents drawn up by the banks concerned or by third parties also contain information the disclosure of which could affect privacy and the integrity of the individual’. 90 It is therefore apparent from the contested decision that the exceptions relied on by the Commission do not necessarily apply to the whole of the Lombard Club file and that, even in the case of the documents to which they may apply, they may concern only certain passages in those documents. 91 Finally, the interveners rely on the exception in Article 4(3) of Regulation No 1049/2001. They maintain that the Lombard Club decision has been the subject‑matter of several actions for annulment and that it is therefore not yet a decision ‘taken’ within the meaning of Article 4(3), which justifies a total refusal of access. However, since that exception was not relied on by the Commission in the contested decision, it is not for the Court to assume the role of that institution and determine whether that exception is actually applicable to the documents referred to by the request. 92 Consequently, the Commission was bound, in principle, to carry out a concrete, individual examination of each of the documents referred to in the request in order to determine whether any exceptions applied or whether partial access was possible. 93 Nevertheless, since, in this case, the Commission did not carry out such an examination, it must be determined whether it is permissible for an institution to justify a total refusal of access by reason of the very large amount of work which, according to that institution, is entailed by such an examination. – Application of an exception related to the amount of work involved in carrying out a concrete, individual examination94 Under Article 6(3) of Regulation No 1049/2001, ‘in the event of a request relating to a very long document or to a very large number of documents, the institution concerned may confer with the applicant informally, with a view to finding a fair solution’. 95 In this case, it is apparent from the file that the applicant and the Commission met on 24 July 2002, but that that meeting and the contacts which followed it did not lead to a solution. 96 Regulation No 1049/2001 does not contain any provision expressly permitting the institution, in the absence of a fair solution reached together with the applicant, to limit the scope of the examination which it is normally required to carry out in response to a request for access. 97 In the introductory part of the contested decision, the Commission nevertheless, in essence, justifies the failure to carry out a concrete, individual examination of the documents in question by application of the principle of proportionality. The Commission states inter alia that ‘for reasons of proportionality, it does not appear either necessary or expedient to undertake an examination of the documents beyond the [abovementioned] categories’. The Commission also relies on application of the principle of proportionality in points 10, 13 and 24 of the contested decision. 98 It must therefore be examined whether it is in fact permissible, on the basis of the principle of proportionality, to refrain from applying the principle of a concrete, individual examination of the documents referred to in a request for access under Regulation No 1049/2001. 99 According to consistent case‑law, the principle of proportionality requires measures adopted by Community institutions not to exceed the limits of what is appropriate and necessary in order to attain the objectives pursued; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (Case C‑157/96 National Farmers’ Union and Others [1998] ECR I‑2211, paragraph 60, and Case T‑211/02 Tideland Signal v Commission [2002] ECR II‑3781, paragraph 39). The principle of proportionality also requires that derogations remain within the limits of what is appropriate and necessary for achieving the aim in view (Case 222/84 Johnston [1986] ECR 1651, paragraph 38, and Hautala v Council, cited in paragraph 69 above, paragraph 85). 100 Consequently, the refusal by an institution to examine concretely and individually the documents covered by a request for access constitutes, in principle, a manifest breach of the principle of proportionality. A concrete, individual examination of the documents in question enables the institution to achieve the aim pursued by the exceptions referred to in Article 4(1) to (3) of Regulation No 1049/2001 and results, moreover, in identification of the only documents covered, in whole or in part, by those exceptions. It therefore constitutes, for the purposes of the applicant’s right of access, a measure less onerous than a complete refusal to examine the documents. 101 It should however be borne in mind that it is possible for an applicant to make a request for access, under Regulation No 1049/2001, relating to a manifestly unreasonable number of documents, perhaps for trivial reasons, thus imposing a volume of work for processing of his request which could very substantially paralyse the proper working of the institution. It should also be noted that, where a request relates to a very large number of documents, the institution’s right to seek a ‘fair solution’ together with the applicant, pursuant to Article 6(3) of Regulation No 1049/2001, reflects the possibility of account being taken, albeit in a particularly limited way, of the need, where appropriate, to reconcile the interests of the applicant with those of good administration. 102 An institution must therefore retain the right, in particular cases where concrete, individual examination of the documents would entail an unreasonable amount of administrative work, to balance the interest in public access to the documents against the burden of work so caused, in order to safeguard, in those particular cases, the interests of good administration (see, by analogy, Hautala v Council, cited in paragraph 69 above, paragraph 86). 103 However, that possibility remains applicable only in exceptional cases.104 Firstly, concrete, individual examination of the documents referred to in a request for access under Regulation No 1049/2001 is one of the elementary duties of an institution in response to such a request. 105 Secondly, public access to documents of the institutions is an approach to be adopted in principle, whereas the power to refuse access is the exception (see, by analogy with the principle laid down for application of the code of conduct, Kuijer II, paragraph 55). 106 Thirdly, exceptions to the principle of access to documents must be interpreted strictly (see, by analogy with the code of conduct, Case T‑111/00 British American Tobacco International (Investments) v Commission [2001] ECR II‑2997, paragraph 40). That case‑law justifies a fortiori the need to construe particularly strictly any limitations placed on the diligence which must normally be displayed by an institution in deciding to apply an exception, since such limitations increase, from the time the request is received, the risk that the right of access may be compromised. 107 Fourthly, there are many circumstances in which for the Commission to have discretion not to carry out a concrete, individual examination when such an examination is necessary would run counter to the principle of good administration, which is one of the guarantees afforded by the Community legal order in administrative procedures and to which the duty of the competent institution to examine carefully and impartially all the relevant aspects in the individual case is linked (Case T‑44/90 La Cinq v Commission [1992] ECR II‑1, paragraph 86, and Joined Cases T-528/93, T-542/93, T-543/93 and T-546/93 Métropole télévision and Others v Commission [1996] ECR II‑649, paragraph 93). 108 Fifthly, it is not, in principle, appropriate that account should be taken of the amount of work entailed by the exercise of the applicant’s right of access and its interest in order to vary the scope of that right. 109 With regard to the applicant’s interest, under Article 6(1) of Regulation No 1049/2001 he is not required to justify his request and therefore he does not normally have to demonstrate any interest. 110 As regards the amount of work entailed in processing a request for access, Regulation No 1049/2001 expressly envisages the possibility that a request for access may relate to a very large number of documents, since Articles 7(3) and 8(2) provide that the time-limits for processing initial requests and confirmatory requests may be extended in exceptional cases such as, for example, in the event of an application relating to a very long document or to a very large number of documents. 111 Sixthly, the amount of work entailed in considering a request for access depends not only on the number of documents referred to in the request and their volume, but also on their nature. Consequently, the need to undertake a concrete, individual examination of very numerous documents does not, on its own, provide any indication of the amount of work entailed in processing a request for access, since that amount of work also depends on the required depth of that examination. 112 Accordingly, it is only in exceptional cases and only where the administrative burden entailed by a concrete, individual examination of the documents proves to be particularly heavy, thereby exceeding the limits of what may reasonably be required, that a derogation from that obligation to examine the documents may be permissible (see, by analogy, Kuijer II, paragraph 57). 113 In addition, in so far as the right of access to documents held by the institutions constitutes an approach to be adopted in principle, it is with the institution relying on an exception related to the unreasonableness of the task entailed by the request that the burden of proof of the scale of that task rests. 114 Finally, where the institution has adduced proof of the unreasonableness of the administrative burden entailed by a concrete, individual examination of the documents referred to in the request, it is obliged to try to consult with the applicant in order, on the one hand, to ascertain or to ask him to specify his interest in obtaining the documents in question and, on the other, to consider specifically whether and how it may adopt a measure less onerous than a concrete, individual examination of the documents. Since the right of access to documents is the principle, the institution nevertheless remains obliged, against that background, to prefer the option which, whilst not itself constituting a task which exceeds the limits of what may reasonably be required, remains the most favourable to the applicant’s right of access. 115 It follows that the institution may avoid carrying out a concrete, individual examination only after it has genuinely investigated all other conceivable options and explained in detail in its decision the reasons for which those various options also involve an unreasonable amount of work. 116 It must therefore be examined, in this case, whether the Commission was in a situation where concrete, individual examination of the documents referred to in the request for access imposed on it a burden exceeding the limits of what might reasonably be required, so that, taking into account the applicant’s interest, it could specifically consider other options for processing the request, with a view, where appropriate, to adopting a measure less onerous in terms of its workload. 117 With regard, first, to whether a concrete, individual examination of each of the documents referred to in the request was unreasonable, it should be noted that the contested decision does not mention the precise number of documents in the Lombard Club file, but merely the number of pages which it contains. A mere reference to a number of pages is not sufficient, as such, for the purpose of assessing the amount of work entailed by a concrete, individual examination. Nevertheless, in the light, on the one hand, of the categories identified by the Commission in the contested decision and, on the other, of the nature of the file in question, it is clearly apparent from the papers in the case that the documents referred to are very numerous. 118 In addition, consultation of a file of more than 47 000 pages comprising many documents such as those belonging to the categories identified by the Commission is likely to be an extremely large task. 119 Firstly, it is clear that the documents in the Lombard Club file are filed in chronological order. In that regard, at the hearing, the Commission stated that, in view of the date of the contested decision, the documents referred to in the applicant’s request had not yet been recorded in the register provided for by Article 11 of Regulation No 1049/2001, the coverage of which, according to Article 8(1) of the Commission Decision of 5 December 2001 amending its rules of procedure, is to be extended gradually. 120 Secondly, in the light of the main categories identified by the Commission and of the reasons for the contested decision, it can be accepted that the documents referred to by the applicant’s request contain a great deal of information which must be subjected to a concrete analysis in the light of the exceptions to the right of access and, in particular, information which could undermine the protection of the commercial interests of the banks involved in the Lombard Club file. 121 Thirdly, in the light of the main categories identified by the Commission, it can also be accepted that the Lombard Club file consists of a large number of documents originating from third parties. Consequently, the volume of work involved in examining concretely and individually the documents contained in that file could be increased by the need, where appropriate, to consult those third parties in accordance with Article 4(4) of Regulation No 1049/2001. 122 In this case, therefore, there are a number of factors which suggest that concrete, individual examination of all the documents in the Lombard Club file might represent a very large amount of work. Nevertheless, without there being any need to take a definitive view as to whether those factors demonstrate sufficiently in law that the amount of work involved exceeded the limits of what might reasonably be required of the Commission, it must be pointed out that the contested decision, which refuses altogether to grant the applicant any access, could in any event be lawful only if the Commission had previously explained specifically the reasons for which the alternatives to a concrete, individual examination of each of the documents referred to also represented an unreasonable amount of work. 123 In this case, the applicant informed the Commission, on 14 June 2002, that the purpose of its request was to enable it to produce certain evidence in proceedings brought against BAWAG before the Austrian courts. 124 It is also clear that, on 24 July 2002, at a meeting with the Commission’s staff, the representatives of the VKI mentioned the possibility that the applicant could give an undertaking in writing to use the information obtained solely for the purpose of asserting consumers’ claims. 125 In addition, in its confirmatory request of 26 September 2002, the applicant stated that it was not interested primarily in the Commission’s internal documents, which prompted the latter to exclude those documents from the scope of its analysis in the contested decision. 126 Notwithstanding those considerations, it is not apparent from the reasons for the contested decision that the Commission considered specifically and exhaustively the various options available to it in order to take steps which would not impose an unreasonable amount of work on it but would, on the other hand, increase the chances that the applicant might receive, at least in respect of part of its request, access to the documents concerned. 127 Thus, in the contested decision, the Commission stated ‘as a subsidiary consideration’ that publication of the Lombard Club decision was sufficient to ‘safeguard’ the interests of the applicant. 128 In addition, in point 24 of the contested decision, the Commission refused, in the following terms, to grant partial access to the documents included in the Lombard Club file: ‘We have undertaken in this case, for the purpose of deciding on your request, a categorisation of all the documents in the file and, in the case of some, a sub‑categorisation. The alternative would be to examine each document, after consulting third parties where appropriate. In this specific instance, the file consists of more than 47 000 pages, not counting the internal documents. On the basis that an examination by reference to categories indicates that the documents in the file are – with the exception of a few documents already published – very largely subject to the exceptions provided for by the regulation, a separate examination of each document would impose on the Commission an inappropriate and disproportionate amount of work. That is particularly so because the other parts of the documents, or some of them, which could possibly be disclosed, would very probably serve neither the interests [of the] VKI in proving the unlawfulness of the conduct of the banks concerned in civil proceedings, nor other public interests.’ 129 It is therefore clear that the Commission took into account the applicant’s interest as a very subsidiary consideration in comparing the likely effects of two types of practice, namely, in the first place, an individual examination of the documents included in the Lombard Club file and, in the second place, an examination limited to the categories established among those same documents on the basis of their nature. 130 However, it is not apparent from the reasons for the contested decision that the Commission assessed, in a concrete, specific and detailed manner, on the one hand, the other conceivable options for limiting its workload and, on the other, the reasons which could allow it to avoid carrying out any examination rather than adopting, where appropriate, a measure less restrictive of the applicant’s right of access. In particular, it is not apparent from the contested decision that, as regards the identification of documents contained in a file arranged in chronological order, the Commission specifically examined the option of asking the banks involved in the Lombard Club file to provide it with the dates of the documents submitted by them, which might possibly have enabled it to find some of them more easily in its file. In addition, although the Commission stated in its defence that drawing up a table of contents would have been a disproportionate task, the examination of that option is not mentioned at all in the contested decision and therefore cannot be considered to have been specifically examined. Finally, it is likewise not apparent from the contested decision that the Commission evaluated the amount of work involved in identifying, then examining, individually and concretely, the few documents most likely to satisfy immediately and, where appropriate, partially in the first instance the applicant’s interests. 131 The outright refusal by the Commission to grant the applicant access is therefore vitiated by an error of law. The first and fourth pleas must therefore be upheld. Consequently, without there being any need to rule on the other pleas put forward by the applicant, the contested decision must be annulled. The request for production of documents132 It is for the Community judicature to decide, in the light of the circumstances of the case and in accordance with the provisions of the Rules of Procedure on measures of inquiry, whether it is necessary for a document to be produced (Case C-196/99 P Aristrain v Commission [2003] ECR I‑11049, paragraph 67). 133 Since the first and fourth pleas of the applicant must be upheld without there being any need to examine the documents in question, there is certainly no need in this case to order the production requested. Costs134 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has been unsuccessful, it must be ordered to pay the costs borne by the VKI, in accordance with the form of order sought by the latter. 135 Under the third subparagraph of Article 87(4) of the Rules of Procedure, the Court may order an intervener to bear its own costs. In this case, the interveners are to bear their own costs. On those grounds,THE COURT OF FIRST INSTANCE (First Chamber, Extended Composition)hereby:1. Annuls Decision D (2002) 330472 relating to a request for access to the administrative file in Case COMP/36.571/D‑1, Austrian banks – ‘Lombard Club’;2. Orders the Commission to pay the costs;3. Orders the interveners to bear their own costs.VesterdorfJaegerMengozziMartins Ribeiro LabuckaDelivered in open court in Luxembourg on 13 April 2005.H. Jung B. VesterdorfRegistrar President* Language of the case: German. | bc101-752904b-4bdc | EN |
THE FIRST JUDGMENT ON THE EFFECTS OF A PARTNERSHIP AGREEMENT: EQUAL WORKING CONDITIONS FOR RUSSIAN PROFESSIONAL FOOTBALL PLAYERS IN NATIONAL COMPETITIONS WITHIN THE MEMBER STATES | Igor SimutenkovvMinisterio de Educación y CulturaandReal Federación Española de Fútbol(Reference for a preliminary ruling from the Audiencia Nacional)(Communities-Russia Partnership Agreement – Article 23(1) – Direct effect – Conditions relating to employment – Principle of non-discrimination – Football – Limit on the number of professional players having the nationality of non-member countries who may appear on a team in a national competition) Opinion of Advocate General Stix-Hackl delivered on 11 January 2005 Judgment of the Court (Grand Chamber), 12 April 2005. Summary of the Judgment1. International agreements — Community agreements — Direct effect — Article 23(1) of the Communities-Russia Partnership Agreement(Communities-Russia Partnership Agreement, Art. 23(1))2. International agreements — Communities-Russia Partnership Agreement — Workers — Equal treatment — Working conditions — Rule drawn up by a sports federation of a Member State which limits the number of professional players from non-member countries who may take part in national competitions — Not permissible1. Inasmuch as it lays down, in clear, precise and unconditional terms, a prohibition precluding any Member State from discriminating, on grounds of nationality, against Russian workers, vis-à-vis that State’s own nationals, so far as their conditions of employment, remuneration and dismissal are concerned, Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, has direct effect, with the result that individuals to whom that provision applies are entitled to rely on it before the courts of the Member States. (see paras 22, 29)2. Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, precludes the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions organised at national level only a limited number of players from countries which are not parties to the Agreement on the European Economic Area. (see para. 41, operative part)JUDGMENT OF THE COURT (Grand Chamber)12 April 2005 (*) In Case C-265/03,REFERENCE under Article 234 EC for a preliminary ruling, made by the Audiencia Nacional (Spain), by decision of 9 May 2003, received at the Court on 17 June 2003, in the proceedings Ministerio de Educación y Cultura,Real Federación Española de Fútbol,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas, Presidents of Chambers, C. Gulmann, A. La Pergola, J.-P. Puissochet, J. Makarczyk, P. Kūris, M. Ilešič (Rapporteur), U. Lõhmus, E. Levits and A. Ó Caoimh, Judges, Advocate General: C. Stix-Hackl,Registrar: R. Grass,having regard to the written procedure,after considering the observations submitted on behalf of:– Mr Simutenkov, by M. Álvarez de la Rosa, abogado, and F. Toledo Hontiyuelo, procuradora,– Real Federación Española de Fútbol, by J. Fraile Quinzaños, abogado, and J. Villasante García, procurador,– the Spanish Government, by E. Braquehais Conesa, acting as Agent,– the Commission of the European Communities, by F. Hoffmeister, D. Martin and I. Martínez del Peral, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 11 January 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, signed in Corfu on 24 June 1994 and approved on behalf of the Communities by Decision 97/800/ECSC, EC, Euratom: Council and Commission Decision of 30 October 1997 (OJ 1997 L 327, p. 1) (‘the Communities-Russia Partnership Agreement’). 2 That reference has been submitted in the context of a dispute between Mr Simutenkov, on the one hand, and the Ministerio de Educación y Cultura (Ministry of Education and Culture) and the Real Federación Española de Fútbol (Royal Spanish Football Federation) (‘the RFEF’), on the other, concerning sporting rules which limit the number of players from non-member countries who may be fielded in national competitions. The legal framework3 The Communities-Russia Partnership Agreement entered into force on 1 December 1997. Article 23(1), which features in Title IV of that agreement (‘Provisions on business and investment’), under Chapter I, which is itself entitled ‘Labour conditions’, provides as follows: ‘Subject to the laws, conditions and procedures applicable in each Member State, the Community and its Member States shall ensure that the treatment accorded to Russian nationals legally employed in the territory of a Member State shall be free from any discrimination based on nationality, as regards working conditions, remuneration or dismissal, as compared to its own nationals.’ 4 Article 27 of the Communities-Russia Partnership Agreement is worded as follows:‘The Cooperation Council shall make recommendations for the implementation of Articles 23 and 26 of this Agreement.’5 Article 48 of the Communities-Russia Partnership Agreement, which also features in Title IV, provides:‘For the purpose of this Title, nothing in the Agreement shall prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons and supply of services, provided that, in so doing, they do not apply them in a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of the Agreement. …’ The dispute in the main proceedings and the question referred for preliminary ruling6 Mr Simutenkov is a Russian national who, at the time of the facts in the dispute in the main proceedings, was living in Spain, where he had a residence permit and a work permit. Employed as a professional football player under an employment contract entered into with Club Deportivo Tenerife, he held a federation licence as a non-Community player. 7 In January 2001, Mr Simutenkov submitted, through that club, an application to the RFEF for it to replace the federation licence which he held with a licence that was identical to that held by Community players. In support of that application, he relied on the Communities-Russia Partnership Agreement. 8 By decision of 19 January 2001, the RFEF turned down that application on the basis of its General Regulations and the agreement which it had concluded on 28 May 1999 with the national professional football league (‘the agreement of 28 May 1999’). 9 Under Article 129 of the General Regulations of the RFEF, a professional football player’s licence is a document issued by the RFEF which entitles a player to practise that sport as a member of that federation and to be fielded in matches and official competitions as a player belonging to a specific club. 10 Article 173 of the General Regulations provides:‘Without prejudice to the exceptions laid down herein, in order to register as a professional and obtain a professional licence, a footballer must meet the general requirement of holding Spanish nationality or the nationality of one of the countries of the European Union or the European Economic Area.’ 11 Article 176(1) of the General Regulations provides: ‘1. Clubs entered for official professional competitions at national level shall be entitled to register foreign non-Community players in the number stipulated in the relevant agreements concluded between the RFEF, the Liga Nacional de Fútbol Profesional (National Professional Football League) and the Asociación de Futbolistas Españoles (Association of Spanish Footballers). Those agreements also govern the number of such footballers who may take part simultaneously in a game …’12 Under the agreement of 28 March 1999, the number of players not having the nationality of a Member State who were allowed to participate at any time in the Spanish First Division was limited to three for the 2000/01 to 2004/05 seasons and, in the case of the Second Division, to three for the 2000/01 and 2001/02 seasons and to two for the following three seasons. 13 As he took the view that the distinction which those Regulations draw between nationals of a Member State of the European Union or of the European Economic Area (‘the EEA’), on the one hand, and nationals of non-member countries, on the other, is incompatible, so far as Russian players are concerned, with Article 23(1) of the Communities-Russia Partnership Agreement and limits the exercise of his profession, Mr Simutenkov brought an action before the Juzgado Central de lo Contencioso Administrativo (Central Court for Contentious Administrative Proceedings) against the decision of 19 January 2001 turning down his application for a new licence. 14 Following the dismissal of that application by a judgment of 22 October 2002, Mr Simutenkov appealed to the Audiencia Nacional (National High Court), which decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘Is it contrary to Article 23 of the [Communities-Russia Partnership Agreement] … for a sports federation to apply to a professional sportsman of Russian nationality who is lawfully employed by a Spanish football club, as in the main proceedings, a rule which provides that clubs may use in competitions at national level only a limited number of players from countries outside the European Economic Area?’ The question referred for preliminary ruling15 By its question the national court asks whether Article 23(1) of the Communities-Russia Partnership Agreement is to be construed as precluding the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions at national level only a limited number of players from countries which are not parties to the EEA Agreement. 16 Mr Simutenkov and the Commission of the European Communities take the view that Article 23(1) of the Communities-Russia Partnership Agreement precludes a rule such as that laid down by the agreement of 28 May 1999. 17 The RFEF, by contrast, invokes in support of its position the words ‘[s]ubject to the laws, conditions and procedures applicable in each Member State’, which feature at the beginning of Article 23(1). It infers from this proviso that the competence which legislation confers on it to issue licences to football players and the sports regulations which it has adopted must be applied in a manner which takes priority over the principle of non-discrimination laid down in that provision. It also submits that the issue of a licence and the rules relating thereto form part of the organisation of competitions and do not concern working conditions. 18 The Spanish Government adopts the views expressed by the RFEF and submits in particular that, under the national rules and the case-law which interprets them, a federation licence is not a working condition but rather an administrative permit which serves as an authorisation to take part in sporting competitions. 19 In order to provide a useful reply to the question posed, it is necessary, first of all, to examine whether Article 23(1) of the Communities-Russia Partnership Agreement can be relied on by an individual before the courts of a Member State and, second, if the answer is affirmative, to determine the scope of the principle of non-discrimination which that provision lays down. The direct effect of Article 23(1) of the Communities-Russia Partnership Agreement20 It must be pointed out that, as this question concerning the effect of the provisions of the Communities-Russia Partnership Agreement within the legal systems of the parties to that Agreement (‘the parties’) has not been resolved therein, it is for the Court to resolve that question in the same way as any other question of interpretation concerning the application of agreements within the Community (judgment in Case C-149/96 Portugal v Council [1999] ECR I‑8395, paragraph 34). 21 In this regard, according to well-established case-law, a provision in an agreement concluded by the Communities with a non-member country must be regarded as being directly applicable when, regard being had to its wording and to the purpose and nature of the agreement, the provision contains a clear and precise obligation which is not subject, in its implementation or effects, to the adoption of any subsequent measure (judgments in Case C-63/99 Gloszczuk [2001] ECR I-6369, paragraph 30, and in Case C-171/01 Wählergruppe Gemeinsam [2003] ECR I-4301, paragraph 54). 22 It follows from the wording of Article 23(1) of the Communities-Russia Partnership Agreement that that provision lays down, in clear, precise and unconditional terms, a prohibition precluding any Member State from discriminating, on grounds of nationality, against Russian workers, vis-à-vis their own nationals, so far as their conditions of employment, remuneration and dismissal are concerned. Workers who are entitled to the benefit of that provision are those who hold Russian nationality and who are lawfully employed in the territory of a Member State. 23 Such a rule of equal treatment lays down a precise obligation as to results and, by its nature, can be relied on by an individual before a national court as a basis for requesting that court to disapply discriminatory provisions without any further implementing measures being required to that end (judgments in Case C-162/00 Pokrzeptowicz-Meyer [2002] ECR I-1049, paragraph 22, and in Wählergruppe Gemeinsam, cited above, paragraph 58). 24 That interpretation cannot be brought into question by the words ‘[s]ubject to the laws, conditions and procedures applicable in each Member State’, which feature at the beginning of Article 23(1) of the Communities-Russia Partnership Agreement, or by Article 48 of that Agreement. Those provisions cannot be construed as allowing the Member States to subject application of the principle of non-discrimination set out in Article 23(1) of that agreement to discretionary limitations, which would have the effect of rendering that provision meaningless and thus depriving it of any practical effect (Pokrzeptowicz-Meyer, cited above, paragraphs 23 and 24, and Case C-438/00 Deutscher Handballbund [2003] ECR I‑4135, paragraph 29). 25 Nor does Article 27 of the Communities-Russia Partnership Agreement preclude Article 23(1) thereof from having direct effect. The fact that Article 27 provides that Article 23 is to be implemented on the basis of recommendations by the Cooperation Council does not make the applicability of Article 23, in its implementation or effects, subject to the adoption of any subsequent measure. The role which Article 27 confers on that council is to facilitate compliance with the prohibition of discrimination but cannot be regarded as limiting the immediate application of that prohibition (see, in that regard, Case C-18/90 Kziber [1991] ECR I-199, paragraph 19, and Case C-262/96 Sürül [1999] ECR I-2685, paragraph 66). 26 The finding that the principle of non-discrimination set out in Article 23(1) of the Communities-Russia Partnership Agreement is directly effective is not, moreover, gainsaid by its purpose and nature. 27 Article 1 states that the purpose of the Agreement is to establish a partnership between the parties with a view to promoting, inter alia, the development between them of close political relations, trade and harmonious economic relations, political and economic freedoms, and the achievement of gradual integration between the Russian Federation and a wider area of cooperation in Europe. 28 The fact that the Agreement is thus limited to establishing a partnership between the parties, without providing for an association or future accession of the Russian Federation to the Communities, is not such as to prevent certain of its provisions from having direct effect. It is clear from the Court’s case-law that when an agreement establishes cooperation between the parties, some of the provisions of that agreement may, under the conditions set out in paragraph 21 of the present judgment, directly govern the legal position of individuals (Kziber, cited above, paragraph 21, Case C-113/97 Babahenini [1998] ECR I-183, paragraph 17, and Case C-162/96 Racke [1998] ECR I-3655, paragraphs 34 to 36). 29 In the light of all of the foregoing, it must be held that Article 23(1) of the Communities-Russia Partnership Agreement has direct effect, with the result that individuals to whom that provision applies are entitled to rely on it before the courts of the Member States. The scope of the principle of non-discrimination set out in Article 23(1) of the Communities-Russia Partnership Agreement30 The question which has been referred by the national court is similar to that referred to the Court in the case which led to the above judgment in Deutscher Handballbund. In that judgment the Court ruled that the first indent of Article 38(1) of the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Slovak Republic, of the other part, signed in Luxembourg on 4 October 1993 and approved on behalf of the Communities by Decision 94/909/ECSC, EEC, Euratom of the Council and the Commission of 19 December 1994 (OJ 1994 L 359, p. 1) (‘the Communities-Slovakia Association Agreement’) had to be construed as precluding the application to a professional sportsman of Slovak nationality, who was lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation in that State under which clubs were authorised to field, during league or cup matches, only a limited number of players from non-member countries that are not parties to the EEA Agreement. 31 The first indent of Article 38(1) of the Communities-Slovakia Association Agreement was worded as follows:‘Subject to the conditions and modalities applicable in each Member State:– treatment accorded to workers of Slovak Republic nationality legally employed in the territory of a Member State shall be free from any discrimination based on nationality, as regards working conditions, remuneration or dismissal, as compared to its own nationals’. 32 The Court ruled, inter alia, that a rule which limits the number of professional players, nationals of the non-member country in question, who might be fielded in national competitions did relate to working conditions within the meaning of the first indent of Article 38(1) of the Communities-Slovakia Association Agreement inasmuch as it directly affected participation in league and cup matches of a Slovak professional player who was already lawfully employed in the host Member State (Deutscher Handballbund, cited above, paragraphs 44 to 46). 33 The Court also ruled that the interpretation of Article 48(2) of the EC Treaty (now, after amendment, Article 39(2) EC) which it handed down in its judgment in Case C-415/93 Bosman [1995] ECR I-4921 to the effect that the prohibition of discrimination on grounds of nationality applies to rules laid down by sporting associations which determine the conditions under which professional sportsmen can engage in gainful employment and precludes a limitation, based on nationality, on the number of players who may be fielded at the same time, could be transposed to the first indent of Article 38(1) of the Communities-Slovakia Association Agreement (Deutscher Handballbund, paragraphs 31 to 37 and 48 to 51). 34 The wording of Article 23(1) of the Communities-Russia Partnership Agreement is very similar to that of the first indent of Article 38(1) of the Communities-Slovakia Association Agreement. The only significant difference between the respective wording of those two provisions is in the use of the terms ‘the Community and its Member States shall ensure that the treatment accorded to Russian nationals … shall be free from any discrimination based on nationality’ and ‘treatment accorded to workers of Slovak Republic nationality … shall be free from any discrimination based on nationality’. In view of the finding in paragraphs 22 and 23 of this judgment that the wording of Article 23(1) of the Communities-Russia Partnership Agreement lays down, in clear, precise and unconditional terms, a prohibition of discrimination on grounds of nationality, the difference in drafting highlighted above is not a bar to the transposition, to Article 23(1) of the Communities-Russia Partnership Agreement, of the interpretation upheld by the Court in Deutscher Handballbund. 35 Admittedly, unlike the Communities-Slovakia Association Agreement, the Communities-Russia Partnership Agreement is not intended to establish an association with a view to the gradual integration of that non-member country into the European Communities but is designed rather to bring about ‘the gradual integration between Russia and a wider area of cooperation in Europe’. 36 However, it does not in any way follow from the context or purpose of that Partnership Agreement that it intended to give to the prohibition of ‘discrimination based on nationality, as regards working conditions … as compared to [the Member State’s] own nationals’ any meaning other than that which follows from the ordinary sense of those words. Consequently, in a manner similar to the first indent of Article 38(1) of the Communities-Slovakia Association Agreement, Article 23(1) of the Communities-Russia Partnership Agreement establishes, for the benefit of Russian workers lawfully employed in the territory of a Member State, a right to equal treatment in working conditions of the same scope as that which, in similar terms, nationals of Member States are recognised as having under the EC Treaty, which precludes any limitation based on nationality, such as that in issue in the main proceedings, as the Court established in similar circumstances in the above judgments in Bosman and Deutscher Handballbund. 37 Furthermore, in the judgments in Bosman and Deutscher Handballbund, the Court held that a rule such as that in issue in the main proceedings related to working conditions (Deutscher Handballbund, paragraphs 44 to 46). The fact that Article 23(1) of the Communities-Russia Partnership Agreement applies only in regard to working conditions, remuneration or dismissal, and thus does not extend to rules concerning access to employment, is accordingly irrelevant. 38 In addition, the limitation based on nationality does not relate to specific matches between teams representing their respective countries but applies to official matches between clubs and thus to the essence of the activity performed by professional players. As the Court has also ruled, such a limitation cannot be justified on sporting grounds (Bosman, paragraphs 128 to 137; Deutscher Handballbund, paragraphs 54 to 56). 39 Moreover, no other argument has been put forward in the observations submitted to the Court that is capable of providing objective justification for the difference in treatment between, on the one hand, professional players who are nationals of a Member State or of a State which is a party to the EEA Agreement and, on the other, professional players who are Russian nationals. 40 Finally, as has been stated in paragraph 24 of the present judgment, the words ‘[s]ubject to the laws, conditions and procedures applicable in each Member State’, which feature at the beginning of Article 23(1) of the Communities-Russia Partnership Agreement, and Article 48 of that Agreement cannot be construed as allowing Member States to subject the application of the principle of non-discrimination set out in the former of those two provisions to discretionary limitations, inasmuch as such an interpretation would have the effect of rendering that provision meaningless and thus depriving it of any practical effect. 41 In the light of the foregoing, the answer to the question referred must be that Article 23(1) of the Communities-Russia Partnership Agreement is to be construed as precluding the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions organised at national level only a limited number of players from countries which are not parties to the EEA Agreement. Costs42 As these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than those of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) rules:Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, signed in Corfu on 24 June 1994 and approved on behalf of the Communities by Decision 97/800/ECSC, EC, Euratom: Council and Commission Decision of 30 October 1997, must be construed as precluding the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions organised at national level only a limited number of players from countries which are not parties to the Agreement on the European Economic Area.[Signatures]* Language of the case: Spanish. | 3a3ab-867b11d-45d4 | EN |
THE COSTS OF MEDICAL TREATMENT OF A PERSON HOLDING FORMS E 111 AND E 112 WHO, FOR URGENT MEDICAL REASONS, HAS TO BE ADMITTED TO HOSPITAL IN A NON-MEMBER COUNTRY MUST BE BORNE, IN ACCORDANCE WITH ITS RULES, BY THE SOCIAL SECURITY INSTITUTION OF THE MEMBER STATE OF STAY ON BEHALF OF THE INSTITUTION OF THE MEMBER STATE OF AFFILIATION | Heirs of Annette KellervInstituto Nacional de la Seguridad Social (INSS)andInstituto Nacional de Gestión Sanitaria (Ingesa)(Reference for a preliminary ruling from the Juzgado de lo Social nº 20 de Madrid)(Social security — Articles 3 and 22 of Regulation No 1408/71 — Article 22 of Regulation No 574/72 — Hospital treatment in a Member State other than the competent Member State — Need for urgent treatment of vital importance — Transfer of the insured person to a hospital institution in a non-member country — Scope of forms E 111 and E 112)Opinion of Advocate General Geelhoed delivered on 13 January 2005 Judgment of the Court (Grand Chamber), 12 April 2005. Summary of the Judgment1. Preliminary rulings — Admissibility — Need to provide the Court with sufficient information on the factual and legislative context(Art. 234 EC; Statute of the Court of Justice, Art. 23)2. Preliminary rulings — Jurisdiction of the Court — Limits — Jurisdiction of the national court — Determination and assessment of the facts of the dispute — Need for a preliminary ruling and relevance of the questions raised — Assessment by the national court(Art. 234 EC)3. Social security for migrant workers — Community legislation — Scope — Treatment provided outside Community territory — No effect — Criterion of applicability — Person concerned affiliated to a social security scheme of a Member State(Council Regulations Nos 1408/71 and 574/72)4. Social security for migrant workers –– Sickness insurance — Worker staying in a Member State other than the competent State — Issue by the competent institution of a Form E 111 or E 112 — Compulsory recognition, except in the case of abuse, of the medical findings and decisions of doctors authorised by the institution of the Member State of stay concerning urgent treatment(Council Regulation No 1408/71, Art. 22(1)(a)(i) and (c)(i))5. Social security for migrant workers — Sickness insurance — Worker staying in a Member State other than the competent State — Issue by the competent institution of a Form E 111 or E 112 — Medical findings of doctors authorised by the institution of the Member State of stay showing that treatment in another State is necessary — Right to benefits in kind whose cost is borne by the competent institution — Condition — Obligation of the competent institution of the Member State of stay under national legislation to provide persons insured with it with those benefits(Council Regulation No 1408/71, Art. 22(1)(c)(i))6. Social security for migrant workers — Sickness insurance — Worker staying in a Member State other than the competent State — Issue by the competent institution of a Form E 111 or E 112 — Medical findings of doctors authorised by the institution of the Member State of stay showing that treatment in a non-member country is necessary — Cost of medical treatment — Cost borne by the institution of the Member State of stay under its legislation and then reimbursed by the institution of the competent Member State in the case of treatment provided for by its legislation or, failing that, direct reimbursement by that institution to the person insured — Conditions(Council Regulation No 1408/71, Arts 22(1)(a)(i) and (c)(i) and 36)1. The need to provide an interpretation of Community law which will be of use to the national court makes it necessary that the national court should define the factual and legislative context of the questions it is asking or, at the very least, explain the factual circumstances on which those questions are based. The information provided in orders for reference must not only enable the Court to reply usefully but must also give the Governments of the Member States and the interested parties the opportunity to submit observations pursuant to Article 23 of the Statute of the Court of Justice. It is the Court’s duty to ensure that that opportunity is safeguarded, bearing in mind that under that provision only the orders for reference are notified to the interested parties. (see paras 29-30)2. In proceedings under Article 234 EC, which is based on a clear separation of functions between the national courts and the Court of Justice, any assessment of the facts in the case is a matter for the national court. Similarly, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of Community law, the Court is in principle bound to give a ruling. (see para. 33)3. The mere fact that medical treatment was given outside Community territory is not enough to exclude the application of Regulations Nos 1408/71 and 574/72, as amended and updated by Regulation No 2001/83, since the decisive criterion for their applicability is that the insured person concerned is affiliated to a social security scheme of a Member State. (see para. 38)4. Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 and Article 22(1) and (3) of Regulation No 574/72, both as amended and updated by Regulation No 2001/83, must be interpreted as meaning that, where the competent institution has consented, by issuing a Form E 111 or Form E 112, to one of its insured persons receiving medical treatment in a Member State other than the competent Member State, it is bound – subject to the existence of any abuse – by the findings as regards the need for urgent vitally necessary treatment made during the period of validity of the form by doctors authorised by the institution of the Member State of stay, and by the decision of those doctors, taken during that period on the basis of those findings and the current state of medical knowledge, to transfer the patient to another State, even if that State is not a Member State of the European Union. In such circumstances, the competent institution is not entitled to require the person concerned to return to the competent Member State for a medical examination there or have him examined in the Member State of stay, nor to subject the above findings and decisions to its approval. (see paras 50, 53-54, 56-57, 63, operative part 1)5. Where it turns out, in the course of the medical treatment undergone by an insured person in the territory of a Member State other than the competent Member State which he has been authorised by the competent institution to go to for medical purposes, that the pathology with which he is diagnosed necessitates urgent treatment of vital importance which, in the present state of medical knowledge, the doctors authorised by the institution of the State of stay consider can only be provided in an establishment in the territory of another State, Article 22(1)(c)(i) of Regulation No 1408/71 and Article 22(1) and (3) of Regulation No 574/72, both as amended and updated by Regulation No 2001/83, must be interpreted as meaning that the insured person’s right to the benefits in kind provided on behalf of the competent institution is subject to the condition that, under the legislation administered by the institution of the Member State of stay, that institution is obliged to provide a person insured with it with the benefits in kind corresponding to such treatment. (see paras 60, 63, operative part 1)6. Where doctors authorised by the institution of the Member State of stay have for reasons of vital urgency and in the light of current medical knowledge chosen to transfer the insured person to a hospital establishment in a non-member country, Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71, as amended and updated by Regulation No 2001/83, must be interpreted as meaning that, provided that the institution of the Member State of stay has no reason seriously to doubt the correctness of that medical decision, the cost of the treatment given in that State is to be borne by the institution of the Member State of stay in accordance with the legislation it administers, under the same conditions as those applicable to insured persons covered by that legislation. In the case of treatment which is among the benefits provided for by the legislation of the competent Member State, it is then for the institution of that State to assume the cost of the benefits thus given, by reimbursing the institution of the Member State of stay under the conditions laid down in Article 36 of Regulation No 1408/71. Where the cost of the treatment provided in an establishment in a non-member country has not been assumed by the institution of the Member State of stay, but it is established that the person concerned would have been entitled to have the cost borne and the treatment is among the benefits provided for by the legislation of the competent Member State, it is for the competent institution to reimburse that person or his heirs directly the cost of that treatment, so as to ensure a level of assumption of costs equivalent to that which that person would have enjoyed if the provisions of Article 22(1) of Regulation No 1408/71 had been applied. (see paras 67, 69-70, operative part 2)JUDGMENT OF THE COURT (Grand Chamber)12 April 2005 (*) (Social security – Articles 3 and 22 of Regulation No 1408/71 – Article 22 of Regulation No 574/72 – Hospital treatment in a Member State other than the competent Member State – Need for vital urgent treatment – Transfer of the insured person to a hospital institution in a non-member country – Scope of forms E 111 and E 112)In Case C‑145/03,REFERENCE for a preliminary ruling under Article 234 EC, made by the Juzgado de lo Social n° 20 de Madrid (Spain), by decision of 6 November 2001, received at the Court on 31 March 2003, in the proceedings Heirs of Annette Keller Instituto Nacional de la Seguridad Social (INSS),Instituto Nacional de Gestión Sanitaria (Ingesa), formerly Instituto Nacional de la Salud (Insalud), THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, R. Silva de Lapuerta, K. Lenaerts (Rapporteur) and A. Borg Barthet, Presidents of Chambers, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues, E. Juhász, G. Arestis and M. Ilešič, Judges, Advocate General: L.A. Geelhoed,Registrar: H. von Holstein, Deputy Registrar,having regard to the written procedure and further to the hearing on 9 November 2004,after considering the observations submitted on behalf of:– the heirs of Annette Keller, by C. Fernández Álvarez and A. Pedrajas Moreno, abogados,– Instituto Nacional de Gestión Sanitaria (Ingesa) and Instituto Nacional de la Seguridad Social (INSS), by A.R. Trillo García, A. Llorente Álvarez and F. Sánchez-Toril y Riballo, abogados, – the Belgian Government, by A. Snoecx and E. Dominkovits, acting as Agents,– the Spanish Government, by E. Braquehais Conesa, acting as Agent,– the Netherlands Government, by H. Sevenster, S. Terstal, C. Wissels and N. Bel, acting as Agents,– the Commission of the European Communities, by H. Michard, I. Martínez del Peral and D. Martin, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 13 January 2005,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Articles 3, 19 and 22 of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community and Article 22(1) and (3) of Council Regulation (EEC) No 574/72 of 21 March 1972 laying down the procedure for implementing Regulation No 1408/71, both as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983 (OJ 1983 L 230, p. 6) (‘Regulation No 1408/71’ and ‘Regulation No 574/72’). 2 The reference was made in the course of proceedings between the heirs of Ms Keller, who succeeded her in the course of the main proceedings, and Instituto Nacional de la Seguridad Social (INSS) and Instituto Nacional de Gestión Sanitaria (Ingesa) (‘the defendants in the main proceedings’). The dispute arose from the refusal by Ingesa, which at the time was called Instituto Nacional de la Salud (Insalud), to reimburse the costs of hospital treatment received by Ms Keller in a hospital in Switzerland. Legal context Community legislation3 Under Article 3(1) of Regulation No 1408/71, ‘[s]ubject to the special provisions of this Regulation, persons resident in the territory of one of the Member States to whom this Regulation applies shall be subject to the same obligations and enjoy the same benefits under the legislation of any Member State as the nationals of the State’. 4 Article 19 of that regulation, entitled ‘Residence in a Member State other than the competent State – General rules’, states:‘1. An employed or self-employed person residing in the territory of a Member State other than the competent State, who satisfies the conditions of the legislation of the competent State for entitlement to benefits, taking account where appropriate of the provisions of Article 18, shall receive in the State in which he is resident: (a) benefits in kind provided on behalf of the competent institution by the institution of the place of residence in accordance with the provisions of the legislation administered by that institution as though he were insured with it; …’5 Article 22 of Regulation No 1408/71, entitled ‘Stay outside the competent State – Return to or transfer of residence to another Member State during sickness or maternity – Need to go to another Member State in order to receive appropriate treatment’, lays down in paragraphs 1 and 2: ‘1. An employed or self-employed person who satisfies the conditions of the legislation of the competent State for entitlement to benefits, taking account where appropriate of the provisions of Article 18, and: (a) whose condition necessitates immediate benefits during a stay in the territory of another Member State; or…(c) who is authorised by the competent institution to go to the territory of another Member State to receive there the treatment appropriate to his condition, shall be entitled:(i) to benefits in kind provided on behalf of the competent institution by the institution of the place of stay … in accordance with the provisions of the legislation which it administers, as though he were insured with it; the length of the period during which benefits are provided shall be governed, however, by the legislation of the competent State; 2. …The authorisation required under paragraph 1(c) may not be refused where the treatment in question is among the benefits provided for by the legislation of the Member State on whose territory the person concerned resides and where he cannot be given such treatment within the time normally necessary for obtaining the treatment in question in the Member State of residence taking account of his current state of health and the probable course of the disease.’ 6 Article 36 of Regulation No 1408/71 provides:‘1. Without prejudice to the provisions of Article 32, benefits in kind provided in accordance with the provisions of this chapter by the institution of one Member State on behalf of the institution of another Member State shall be fully refunded. 2. The refunds referred to in paragraph 1 shall be determined and made in accordance with the procedure provided for by the implementing Regulation referred to in Article 98, either on production of proof of actual expenditure or on the basis of lump-sum payments. In the latter case, the lump-sum payments shall be such as to ensure that the refund is as close as possible to actual expenditure.3. Two or more Member States, or the competent authorities of those States, may provide for other methods of reimbursement or may waive all reimbursement between institutions under their jurisdiction.’ 7 Article 22 of Regulation No 574/72 lays down in paragraphs 1 and 3:‘1. In order to receive benefits in kind under Article 22(1)(b)(i) of [Regulation No 1408/71], an employed or self-employed person shall submit to the institution of the place of residence a certified statement testifying that he is entitled to continue receiving the said benefits. The certified statement, which shall be issued by the competent institution, shall specify in particular, where necessary, the maximum period during which such benefits may continue to be provided, in accordance with the provisions of the legislation of the competent State. The certified statement may, at the request of the person concerned, be issued after his departure if, for reasons of force majeure, it cannot be drawn up beforehand. 3. Paragraphs 1 and 2 shall apply by analogy in respect of the provisions of benefits in kind in the case referred to in Article 22(1)(c)(i) of the Regulation.’ 8 As is apparent from Decision No 153 (94/604/EC) of the Administrative Commission of the European Communities on social security for migrant workers of 7 October 1993 on the model forms necessary for the application of Regulations (EEC) No 1408/71 and (EEC) No 574/72 (E 001, E 103 to E 127) (OJ 1994 L 244, p. 22), Form E 111 is the certificate necessary for the application of Article 22(1)(a)(i) of Regulation No 1408/71 and Form E 112 is the one necessary for the application of Article 22(1)(c)(i) of that regulation. Spanish legislation9 In the version in force at the material time, Article 102(3) of the Ley General de la Seguridad Social (General Law on Social Security) provided that ‘[t]he institutions responsible for providing medical treatment shall not be responsible for costs which may be incurred where the beneficiary has recourse to medical institutions other than those proposed to him, except in cases provided for by the legislation’. 10 Paragraphs 1 and 4 of Article 18, headed ‘Medical treatment provided by institutions outside the social security system’, of Decree No 2766/67 of 16 November 1967, as amended by Decree No 2575/73 of 14 September 1973 (‘Decree No 2766/67’), provide: ‘1. Where the beneficiary, on his own initiative or that of a member of his family, has recourse to institutions other than those made available to him, the institutions responsible for providing medical treatment shall not assume responsibility for costs which may have been incurred, except in the cases provided for in paragraphs 3 and 4 of this article. 4. Where recourse to medical institutions other than those made available by the social security system is the result of the need for vital urgent treatment, the beneficiary may make to the institution responsible for providing him with medical care a request for reimbursement of the costs incurred, which will be granted if it is established, in the light of the results of the investigation carried out in that respect, that reimbursement is justified.’ German legislation11 Paragraph 18(1) of Book V of the Sozialgesetzbuch – Gesetzliche Krankenversicherung (Code of Social Security – Statutory sickness insurance), in the version in force at the material time, provided: ‘If treatment of an illness in accordance with the generally recognised state of medical knowledge is only possible abroad, the sickness fund may assume responsibility for all or part of the costs of the necessary treatment …’ The main proceedings and the questions referred for a preliminary ruling12 Ms Keller, of German nationality, was resident in Spain at the material time, and was affiliated to that Member State’s general social security scheme. 13 As she intended to go to Germany for family reasons, Ms Keller asked Insalud to issue a Form E 111, which was given to her before departure, for the period from 15 September to 15 October 1994. 14 During that stay, Ms Keller was admitted to the Gummersbach District Hospital (Germany), which is attached to the Cologne University Clinic. She was then diagnosed with a malignant tumour of the nose, the nasal cavity, the eye socket and the base of the skull, with ramification in the intercranial space, sufficiently serious to be likely to cause the patient’s death at any time. 15 Wishing to be able to continue receiving in Germany the medical treatment necessitated by the condition affecting her, Ms Keller requested Insalud to issue a Form E 112. As appears from an internal memorandum of that body of 23 February 1995, that form was issued to her, on the ground that in view of the serious nature of her state of health a transfer to Spain was not advisable. The period of validity of that form, which was extended on several occasions, ran from 24 October 1994 to 21 June 1996. 16 Following numerous examinations and a thorough analysis of the various possibilities of treatment available, the doctors of the Cologne University Clinic considered that, in view of its extremely delicate nature and the special expertise it required, the surgical operation which was immediately and vitally necessary for Ms Keller could only be performed in the Zurich University Clinic (Switzerland). A report by an ear-nose-and-throat specialist, which was produced to the national court, states that that private clinic was the only one in Europe which could treat with recognised scientific efficacy the condition Ms Keller was suffering from. 17 The doctors of the Cologne University Clinic thereupon transferred Ms Keller to the Zurich University Clinic, where during a stay in hospital from 10 to 25 November 1994 she underwent surgery, the results of which were considered satisfactory. Following that operation Ms Keller had to undergo radiotherapy from 15 December 1994 to 22 February 1995. The total cost of the treatment amounted to CHF 87 030 and was paid in full by Ms Keller. 18 On 26 April 1995 Ms Keller sought reimbursement of that sum from Insalud.19 Her application was refused by a decision of Insalud of 10 August 1995. In reliance on Article 102 of the Ley General de la Seguridad Social and Article 18(1) of Decree No 2766/67, Insalud stated, in support of its decision, that reimbursement of the costs of medical treatment provided in a non-member country required express prior authorisation on its part. 20 Ms Keller’s objection against that decision was rejected by Insalud on 7 December 1995.21 On 3 May 1999 Ms Keller again applied for reimbursement of the costs of her hospital treatment in Switzerland. That application was refused by a decision of the health inspectorate of Insalud of 26 July 1999, on the ground that ‘… although the illness was serious, it did not have the character of a life-threatening emergency which justifies going outside the national and/or Community public health scheme in order to be treated in a private setting outside the Community, without allowing the Spanish management authority to examine and propose the corresponding care options appropriate to the condition from which the patient was suffering’. 22 Ms Keller brought proceedings against that decision in the Juzgado de lo Social n° 20 de Madrid (Social Court No 20, Madrid). Following an application by Insalud of 2 November 2000, the action was extended to Instituto Nacional de la Seguridad Social, on the ground that that institution would have to reimburse the costs at issue in the main proceedings if the action were successful. 23 Ms Keller died on 30 October 2001. Her heirs carried on the main proceedings.24 The Juzgado de lo Social n° 20 de Madrid is uncertain, first, as to whether the competent Spanish institution is bound by the diagnosis and choice of treatment of the doctors authorised by the German institution concerned. 25 That court is uncertain, second, whether, having regard to the principle of equal treatment set out in Articles 3, 19 and 22 of Regulation No 1408/71, there is an obligation to reimburse the costs of Ms Keller’s hospital treatment in the Zurich University Clinic, in view of the fact that it was confirmed that, under the legislation applicable in Germany, where Ms Keller was staying when the hospital treatment became necessary, she would have had those costs paid in full if she had been affiliated to AOK Rheinland (Rhineland Local General Sickness Fund). 26 In this respect, the national court refers to two certificates issued in the year 2000 by AOK Rheinland, to which Ms Keller was affiliated as from 15 March 1996. The first certificate, dated 4 May 2000 and included in the case-file, shows that the costs of the operation and the post-operative treatment undergone by Ms Keller in 1999 in the Zurich University Clinic following a recurrence of the tumour were paid in full by the German social security system. According to the order for reference, the second certificate, dated 22 December 2000, shows that the costs of the medical treatment Ms Keller received in the Zurich University Clinic in 1994 and 1995 would have been reimbursed in full by AOK Rheinland if she had at that time been affiliated to it. 27 In those circumstances, the Juzgado de lo Social n° 20 de Madrid decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Are Form E 111 and in particular Form E 112, the issue of which is provided for in Articles 22(1)(c) of Regulation No 1408/71 and Article 22(1) and (3) of Regulation No 574/72, binding on the competent institution which issues them (in this case the Spanish social security) as regards the diagnosis made by the institution of the place of residence (in this case the German public health service), and specifically the conclusions reached therein that the worker required an immediate surgical operation as the only treatment capable of saving her life and that the operation could only be carried out by a hospital in a country not belonging to the European Union, namely the Zurich University Clinic in Switzerland, so that the institution of the place of residence may send the worker to that hospital without the competent institution being authorised to require the worker to return so that it can carry out the medical examinations it considers appropriate and offer him the care options appropriate for the condition which he presents? 2. Is the principle of equal treatment laid down in Article 3 of Regulation No 408/71, which provides that workers are to “... enjoy the same benefits under the legislation of any Member State as the nationals of that State”, in conjunction with Articles 19(1)(a) and 22(1)(i) of that regulation, which provide that a worker moving within the Community is to be entitled to benefits in kind provided by the institution of the place of stay or residence in accordance with the provisions which it administers, as though he were insured with it, to be interpreted as meaning that the competent institution is required to assume the costs of the health care provided in a country outside the European Union when it is established that if the worker had been affiliated to or been insured by the institution of the place of residence he would have been entitled to that health benefit, when in addition the said health care – that is, health care in cases of life‑threatening emergency provided by private centres, including those in countries not belonging to the European Union – is among the benefits provided for by the legislation of the competent State?’ The questions referred for a preliminary ruling Admissibility28 First, the defendants in the main proceedings point to contradictions in the order for reference between the account of the facts in the order and the wording of the first question. They submit that those contradictions make it difficult to understand that question and consequently make it less easy to draft relevant written observations and less easy for the Court to provide the national court with an answer which will be of use to it. 29 On this point, it must be recalled that, according to settled case-law, the need to provide an interpretation of Community law which will be of use to the national court makes it necessary that the national court should define the factual and legislative context of the questions it is asking or, at the very least, explain the factual circumstances on which those questions are based (see, inter alia, Case C‑72/03 Carbonati Apuani [2004] ECR I‑0000, paragraph 10). 30 The information provided in orders for reference must not only enable the Court to reply usefully but must also give the Governments of the Member States and the interested parties the opportunity to submit observations pursuant to Article 23 of the Statute of the Court of Justice. It is the Court’s duty to ensure that that opportunity is safeguarded, bearing in mind that under that provision only the orders for reference are notified to the interested parties (Case C‑67/96 Albany [1999] ECR I‑5751, paragraph 40). 31 In the present case, the order for reference makes it possible – as is shown by the content of the observations submitted by the parties to the main proceedings and the Governments of the Member States – to assess the relevance and the scope of the national court’s first question. By that question, that court asks essentially whether the issue by the institution to which the person in question is affiliated (‘the competent institution’) of a Form E 111 or E 112 for the purposes of the application of Article 22(1)(a)(i) or (c)(i) of Regulation No 1408/71 means that that institution is bound by the findings of the medical bodies of the Member State in which the insured person is staying (‘the Member State of stay’) as to the vital need for an urgent surgical operation having regard to the condition from which the insured person is suffering, and by their choice of treatment involving a transfer to a hospital situated in a State which is not a member of the European Union. 32 Second, the Spanish Government submits that, contrary to what is stated in the order for reference, Ms Keller’s admission to the Zurich University Clinic resulted not from a decision to transfer her taken by the doctors of the Cologne University Clinic but from a personal initiative on the part of Ms Keller, who left the hospital in which she was being treated against the advice of the German doctors. It follows, according to the Government, that the reference for a preliminary ruling is based on a purely hypothetical case, while the actual circumstances of the case at issue in the main proceedings do not in fact raise any question of interpretation of Community law. 33 In this regard, it must be recalled that, in proceedings under Article 234 EC, which are based on a clear separation of functions between the national courts and the Court of Justice, any assessment of the facts in the case is a matter for the national court. Similarly, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of Community law, the Court is in principle bound to give a ruling (see, inter alia, Case C‑326/00 IKA [2003] ECR I‑1703, paragraph 27). 34 In the present case, as is apparent from the account of the facts in the order for reference, the national court considered that Ms Keller’s admission to the Zurich University Clinic followed from a decision of the doctors of the Cologne University Clinic taken after several examinations and a detailed analysis of the possibilities of treatment in relation to the patient’s condition. The national court relies in this respect on the report of an ear-nose-and-throat surgeon which stated that, at the material time, the Zurich University Clinic was the only one in Europe capable of performing with a real chance of success the kind of operation necessitated by Ms Keller’s condition. 35 As to the statement by Ms Keller produced by the Spanish Government in support of its assertions, in which she confirmed that she was leaving the Gummersbach Hospital voluntarily, on her own initiative and against the advice of the German doctors, it relates not to her departure for Switzerland but to a temporary discharge of Ms Keller from the hospital in order to visit a member of her family, as is apparent from information in the documents produced by the heirs of Ms Keller in support of their reply to a written question from the Court, which was not contradicted at the hearing. 36 The Spanish Government’s argument that the request for a preliminary ruling is purely hypothetical must therefore be rejected.37 Third, the defendants in the main proceedings and the Spanish Government submit that Regulations No 1408/71 and No 574/72 cannot apply to the present case because the medical treatment at issue in the main proceedings was provided in Switzerland. The outcome of the main proceedings does not therefore depend on the interpretation of Community law, but is a matter exclusively for national law. 38 It must be observed on this point, however, that the mere fact that the treatment was given outside Community territory is not enough to exclude the application of those regulations, since the decisive criterion for their applicability is that the insured person concerned is affiliated to a social security scheme of a Member State (see, to that effect, Case 300/84 vanRoosmalen [1986] ECR 3097, paragraph 30; Joined Cases 82/86 and 103/86 Laborero and Sabato [1987] ECR 3401, paragraph 25; and Case C‑60/93 Aldewereld [1994] ECR I‑2991, paragraph 14). 39 In the present case, Ms Keller was affiliated at the material time to the Spanish social security scheme and was the holder of forms issued by Insalud under Article 22 of Regulation No 1408/71. The applicability in the main proceedings of Regulations Nos 1408/71 and 574/72 is therefore beyond doubt. 40 Whether the issue of a Form E 111 or E 112 by the competent institution means that that institution is required to bear the costs of medical treatment provided to the insured person in a non-member country depends on the proper interpretation of the provisions of Community law which are the subject of the questions referred by the national court. Substance Preliminary considerations41 The context of the questions which have been referred is national legislation under which the insured person is entitled to reimbursement of the costs of medical treatment received, without prior consultation of bodies within the national health system, from bodies outside that system, where it is shown that that treatment met an urgent vital need. 42 Before answering the questions, it should be observed that, although the order for reference refers to the institution of the ‘place of residence’ to designate the German social security institution and the doctors authorised by that institution, it is common ground that at the material time Ms Keller was resident in the competent Member State, namely Spain. As the defendants in the main proceedings point out, Ms Keller’s presence in Germany at that time thus corresponds not to the case provided for in Article 19 of Regulation No 1408/71 but to that mentioned in Article 22 of that regulation. It follows that there is no need to answer the request for a preliminary ruling in so far as it relates to the interpretation of Article 19(1)(a) of Regulation No 1408/71. The first question43 By its first question, the national court essentially asks whether the issue by the competent institution of a Form E 111, necessary for the application of Article 22(1)(a)(i) of Regulation No 1408/71, or a Form E 112, necessary for the application of Article 22(1)(c)(i) of that regulation, means that that institution is bound by the diagnosis of doctors authorised by the institution of the Member State of stay as regards the existence of a life-threatening emergency necessitating immediate surgery, and by the decision of those doctors to transfer the insured person to a hospital establishment in the territory of a non-member country on the ground that that establishment, according to current medical knowledge, is the only one to perform the kind of operation required with a real chance of success. 44 To answer that question, reference should be made, as the Advocate General suggests in points 15 to 17 of his Opinion, to the objective pursued by Article 22 of Regulation No 1408/71 and the function of Forms E 111 and E 112 in the system established by that article. 45 In the context of the general objectives of the EC Treaty, Article 22 of Regulation No 1408/71 is one of a number of measures designed to allow a worker from one Member State to enjoy, under the conditions which it specifies, benefits in kind in the other Member States, whatever the national institution to which he is affiliated and whatever the place of his residence (Case C‑156/01 Van der Duin and ANOZ Zorgverzekeringen [2003] ECR I‑7045, paragraph 50). 46 By guaranteeing that a person covered by social insurance under the legislation of one Member State whose state of health makes medical services immediately necessary during a stay in another Member State, or who has been authorised by the competent institution to go to another Member State to receive treatment there which is appropriate to his state of health, has access to treatment in that other Member State on reimbursement conditions as favourable as those enjoyed by insured persons covered by the legislation of that State, Article 22 of Regulation No 1408/71 helps to facilitate the free movement of persons covered by social insurance and, to the same extent, the provision of cross-frontier medical services between Member States (see Case C‑368/98 Vanbraekel and Others [2001] ECR I‑5363, paragraph 32, and Case C‑56/01 Inizan [2003] ECR I‑12403, paragraph 21). 47 As the Netherlands Government observes in its written observations, the achievement of the objective pursued by Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 is based on a sharing of responsibilities between the competent institution and the institution of the Member State of stay. 48 The very wording of Article 22 of Regulation No 1408/71 shows, on the one hand, that it is for the competent institution to decide, in the case covered by paragraph 1(c) of that article, on the grant of authorisation for the insured person to go to another Member State for medical purposes, to fix in accordance with its national legislation the duration of the provision of services in the Member State of stay, and to bear the cost of those services. On the other hand, it is for the institution of the Member State of stay to provide those services in accordance with the provisions of the legislation it administers, as if the insured person concerned were affiliated to it. 49 In this context, Forms E 111 and E 112 are intended to assure the institution of the Member State of stay and the doctors authorised by that institution that the holders of those forms are entitled to receive in that Member State, during the period specified in the form, treatment whose cost will be borne by the competent institution. 50 It follows from that rule of sharing of responsibilities, in correlation with the Community measures relating to the mutual recognition of diplomas, certificates and other evidence of the formal qualifications of practitioners of medicine (see, in this respect, Case C‑120/95 Decker [1998] ECR I-1831, paragraph 42, and Case C‑158/96 Kohll [1998] ECR I-1931, paragraphs 47 and 48), that, once it has agreed, by issuing a Form E 111 or Form E 112, that one of its insured persons in one of the cases provided for in Article 22(1) of Regulation No 1408/71 may receive medical treatment outside the competent Member State, the competent institution is in the hands of the doctors authorised by the institution of the Member State of stay, acting within the scope of their office, who are called on to treat the insured person in the latter State, and it is obliged to accept and recognise the findings and choices of treatment made by those doctors as if they had been made by authorised doctors who would have had to treat the insured person in the competent Member State, subject to the existence of any abuse (see, by analogy, in the context of medical findings concerning the incapacity for work of a person covered by social insurance made by the institution of the Member State of residence or stay pursuant to Article 18 of Regulation No 574/72, Case C‑206/94 Paletta [1996] ECR I-2357, paragraphs 24 to 28). 51 In the case referred to in Article 22(1)(a) of Regulation No 1408/71, the doctors established in the Member State of stay are clearly best placed to assess the state of health of the person concerned and the immediate treatment required by that state. In the case provided for in Article 22(1)(c) of Regulation No 1408/71, the authorisation issued by the competent institution implies that, during the period of validity of the authorisation, that institution places its confidence in the institution of the Member State in which it has allowed the insured person to stay for medical purposes, and in the doctors authorised by the latter institution. 52 It must be recalled in this respect that, as the Court has held in the field of the freedom to provide services, doctors established in other Member States must be regarded as providing the same guarantees of professional competence as doctors established within the country (see Kohll, paragraph 48). 53 Accordingly, where the competent institution, by issuing a Form E 111 or Form E 112, has agreed that one of its insured persons is to receive medical treatment outside the competent Member State, it is bound by the findings relating to the need for urgent vital treatment made by the doctors authorised by the institution of the Member State of stay (see, in an analogous sense, in the context of Article 19 of Regulation No 1408/71 and Article 18 of Regulation No 574/72, Case 22/86 Rindone [1987] ECR 1339, paragraphs 9 to 14, and Case C‑45/90 Paletta [1992] ECR I‑3423, paragraph 28). 54 Similarly, the competent institution is bound by the choice of treatment made by those doctors on the basis of their findings and in accordance with the current state of medical knowledge, including where that choice is to transfer the person concerned to another State to be given the urgent treatment necessitated by his condition which it is not possible for the doctors in the Member State of stay to provide. 55 As the Advocate General observes in point 23 of his Opinion, it is of no importance for determining whether the competent institution is bound by such findings and decisions that the State to which those doctors have decided to transfer the patient is not a member of the European Union, since the choice of treatment thus made is, having regard to the considerations in points 47 to 52 above, within the competence of the doctors authorised by the institution of the Member State of stay and of that institution. 56 In those circumstances, and as the defendants in the main proceedings themselves conceded in their written observations, the person concerned, covered by a Form E 111 or E 112, cannot be required to return to the competent Member State to undergo a medical examination there, when doctors authorised by the institution of the Member State of stay consider that his state of health requires urgent vitally necessary treatment (see, to that effect, Rindone, paragraph 21). 57 Moreover, it cannot be argued, as the defendants in the main proceedings do, that the findings made and decisions on treatment taken by doctors authorised by the institution of the Member State of stay must be subject to the approval of the competent institution. Such an argument would amount to disregarding the rule of shared responsibilities which underlies Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 and the principle of mutual recognition of doctors’ professional skills, and would be contrary to the interests of patients who need urgent vitally necessary treatment. 58 It is significant in this respect, as Ms Keller observed in the main proceedings and the Netherlands Government did in its written observations, that while, in order to obtain benefits in kind such as the payment of a pension in accordance with Article 22(1)(a)(ii) of Regulation No 1408/71, an insured person staying in a Member State other than the competent Member State may, under Article 18(5) of Regulation No 574/72, be required by the competent institution to be examined by a doctor chosen by it, that institution is not, on the other hand, entitled to have such an examination carried out in the cases, relating to benefits in kind, referred to in Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71. 59 The Spanish Government submits that, since the authorisation referred to in Article 22(1)(c) of Regulation No 1408/71 is intended to allow the person concerned to go to another Member State ‘to receive there’ the treatment appropriate to his condition, the right conferred by point (c)(i) of that paragraph on an insured person in possession of a Form E 112 concerns solely the treatment provided in the Member State, identified in that form, which the competent institution has authorised him to go to for that purpose, to the exclusion of any treatment given him in another State. 60 However, where it turns out, in the course of the treatment undergone by the insured person in the territory of the Member State which he has been authorised by the competent institution to go to for medical purposes, that the condition with which he is diagnosed necessitates urgent treatment of vital importance which, in the present state of medical knowledge, the doctors authorised by the institution of that Member State consider can only be provided in an establishment in the territory of a State other than that Member State, Article 22(1)(c)(i) of Regulation No 1408/71 must be interpreted as meaning that the insured person’s right to the benefits in kind provided by the institution of the Member State of stay includes the treatment provided in that establishment, on condition that, under the legislation administered by that institution, it is obliged to provide a person insured with it with the benefits in kind corresponding to such treatment. 61 The defendants in the main proceedings submit that the objective of planning and organising the provision of hospital care would be endangered if insured persons were allowed to have free access to health services in any State, including non-member countries. 62 While the Court has indeed held that such an objective may be justification for the assumption by the competent institution of the costs of hospital treatment received outside the competent Member State being subject to prior authorisation by that institution (see Case C‑157/99 Smits and Peerbooms [2001] ECR I‑5473, paragraphs 76 to 80, and Case C‑385/99 Müller-Fauré and Van Riet [2003] ECR I‑4509, paragraphs 76 to 82), considerations connected with that objective are not relevant, by contrast, where the competent institution has precisely consented, by issuing a Form E 111 or E 112, to one of its insured persons receiving hospital treatment outside the competent Member State. 63 In the light of the foregoing, the first question should be answered as follows:– Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 and Article 22(1) and (3) of Regulation No 574/72 must be interpreted as meaning that, where the competent institution has consented, by issuing a Form E 111 or Form E 112, to one of its insured persons receiving medical treatment in a Member State other than the competent Member State, it is bound by the findings as regards the need for urgent vitally necessary treatment made during the period of validity of the form by doctors authorised by the institution of the Member State of stay, and by the decision of those doctors, taken during that period on the basis of those findings and the current state of medical knowledge, to transfer the patient to a hospital establishment in another State, even if that State is a non-member country. However, in such a situation, in accordance with Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71, the insured person’s right to the benefits in kind provided on behalf of the competent institution is subject to the condition that, under the legislation administered by the institution of the Member State of stay, that institution is obliged to provide persons insured with it with the benefits in kind corresponding to such treatment. – In such circumstances, the competent institution is not entitled to require the person concerned to return to the competent Member State in order to undergo a medical examination there or to have him examined in the Member State of stay, nor to make the above findings and decisions subject to its approval. The second question64 By its second question, the national court essentially asks the Court to determine the conditions and arrangements for assumption of the costs linked to medical treatment received in a non-member country in circumstances such as those mentioned in the preceding paragraph. 65 It should be recalled that, according to Article 22(1)(i) of Regulation No 1408/71, an insured person who is in one of the situations referred to in points (a) and (c) of that paragraph must in principle, for the period fixed by the competent institution, enjoy the benefits in kind provided on behalf of that institution by the institution of the Member State of stay, in accordance with the provisions of the legislation it administers, as if the insured person were insured with it (see Vanbraekel and Others, paragraph 32, and Inizan, paragraph 20). 66 The right thus conferred on the insured person consequently means that the cost of the treatment given is initially borne by the institution of the Member State of stay, in accordance with the legislation it administers, and the competent institution is subsequently to reimburse the institution of the Member State of stay under the conditions laid down in Article 36 of Regulation No 1408/71 (see Vanbraekel and Others, paragraph 33, and Inizan, paragraphs 20, 22 and 23). 67 Where doctors authorised by the institution of the Member State of stay have for reasons of vital urgency and in the light of current medical knowledge chosen to transfer the insured person to a hospital establishment in a non-member country, Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 must be interpreted as meaning that, provided that the institution of the Member State of stay has no reason seriously to doubt the correctness of that medical decision, the cost of the treatment given in that State is to be borne by that institution in accordance with the legislation it administers, under the same conditions as those applicable to insured persons covered by that legislation. In the case of treatment which is among the benefits provided for by the legislation of the competent Member State, it is then for the competent institution to assume the cost of the benefits thus provided, by reimbursing the institution of the Member State of stay under the conditions laid down in Article 36 of Regulation No 1408/71. 68 As to the argument of the defendants in the main proceedings concerning the need to control social security expenditure, it must be observed that the fact that the medical treatment is provided outside the Member State of stay does not put the competent institution in a different situation from that in which the same treatment could have been provided in that Member State, since the legislation applicable and any consequent limits on reimbursement are, in both cases, those of the Member State of stay (see, by analogy, Decker, paragraphs 38 to 40, and Kohll, paragraphs 40 to 42). 69 It should also be added that both the effectiveness and the spirit of the Community provisions at issue require the conclusion that, where it is established that the person concerned would have been entitled to have the cost of medical treatment received in a non-member country borne by the institution of the Member State of stay (see paragraphs 25 and 26 above) and that treatment is among the benefits provided for by the legislation of the competent Member State, it is for the competent institution to reimburse to that person or his heirs directly the cost of that treatment, so as to ensure a level of assumption of costs equivalent to that which that person would have enjoyed if the provisions of Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 had been applied (see, to that effect, Vanbraekel and Others, paragraph 34, and IKA, paragraph 61). 70 In the light of the foregoing, the answer to the second question should be:– Where doctors authorised by the institution of the Member State of stay have for reasons of vital urgency and in the light of current medical knowledge chosen to transfer the insured person to a hospital establishment in a non-member country, Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 must be interpreted as meaning that the cost of the treatment provided in that State must be borne by the institution of the Member State of stay in accordance with the legislation administered by that institution, under the same conditions as those applicable to insured persons covered by that legislation. In the case of treatment which is among the benefits provided for by the legislation of the competent Member State, it is then for the institution of that State to bear the cost of the benefits thus provided, by reimbursing the institution of the Member State of stay under the conditions laid down in Article 36 of Regulation No 1408/71. – Where the cost of the treatment provided in an establishment in a non-member country has not been assumed by the institution of the Member State of stay, but it is established that the person concerned was entitled to have the cost borne and the treatment is among the benefits provided for by the legislation of the competent Member State, it is for the competent institution to reimburse to that person or his heirs directly the cost of that treatment, so as to ensure a level of assumption of costs equivalent to that which that person would have enjoyed if the provisions of Article 22(1) of Regulation No 1408/71 had been applied. 71 In those circumstances, there is no need to answer the request for a preliminary ruling in so far as it relates to the interpretation of Article 3 of Regulation No 1408/71. Costs72 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) rules as follows:1. Article 22(1)(a)(i) and (c)(i) of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community and Article 22(1) and (3) of Council Regulation (EEC) No 574/72 of 21 March 1972 laying down the procedure for implementing Regulation No 1408/71, both as amended and updated by Council Regulation (EEC) No 2001/83 of 2 June 1983, must be interpreted as meaning that, where the competent institution has consented, by issuing a Form E 111 or Form E 112, to one of its insured persons receiving medical treatment in a Member State other than the competent Member State, it is bound by the findings as regards the need for urgent vitally necessary treatment made during the period of validity of the form by doctors authorised by the institution of the Member State of stay, and by the decision of those doctors, taken during that period on the basis of those findings and the current state of medical knowledge, to transfer the patient to a hospital establishment in another State, even if that State is a non-member country. However, in such a situation, in accordance with Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71, the insured person’s right to the benefits in kind provided on behalf of the competent institution is subject to the condition that, under the legislation administered by the institution of the Member State of stay, that institution is obliged to provide persons insured with it with the benefits in kind corresponding to such treatment.In such circumstances, the competent institution is not entitled to require the person concerned to return to the competent Member State in order to undergo a medical examination there or to have him examined in the Member State of stay, nor to make the above findings and decisions subject to its approval.2. Where doctors authorised by the institution of the Member State of stay have for reasons of vital urgency and in the light of current medical knowledge chosen to transfer the insured person to a hospital establishment in a non-member country, Article 22(1)(a)(i) and (c)(i) of Regulation No 1408/71 must be interpreted as meaning that the cost of the treatment provided in that State must be borne by the institution of the Member State of stay in accordance with the legislation administered by that institution, under the same conditions as those applicable to insured persons covered by that legislation. In the case of treatment which is among the benefits provided for by the legislation of the competent Member State, it is then for the institution of that State to bear the cost of the benefits thus provided, by reimbursing the institution of the Member State of stay under the conditions laid down in Article 36 of Regulation No 1408/71.Where the cost of the treatment provided in an establishment in a non-member country has not been assumed by the institution of the Member State of stay, but it is established that the person concerned was entitled to have the cost borne and the treatment is among the benefits provided for by the legislation of the competent Member State, it is for the competent institution to reimburse to that person or his heirs directly the cost of that treatment, so as to ensure a level of assumption of costs equivalent to that which that person would have enjoyed if the provisions of Article 22(1) of Regulation No 1408/71 had been applied.[Signatures]* Language of the case: Spanish. | 66fbd-b6e7d1b-4228 | EN |
ACCORDING TO ADVOCATE GENERAL POIARES MADURO A GROUP RELIEF SCHEME WHICH DOES NOT ALLOW A PARENT COMPANY TO DEDUCT THE LOSSES OF ITS SUBSIDIARIES ESTABLISHED ABROAD UNDER ANY CIRCUMSTANCES IS INCOMPATIBLE WITH COMMUNITY LAW | Marks & Spencer plcvDavid Halsey (Her Majesty's Inspector of Taxes)(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Chancery Division)(Articles 43 EC and 48 EC – Corporation tax – Groups of companies – Tax relief – Profits of parent companies – Deduction of losses incurred by a resident subsidiary– Allowed – Deduction of losses incurred in another Member State by a non-resident subsidiary – Not included)Summary of the JudgmentFreedom of movement for persons – Freedom of establishment – Tax provisions – Corporation tax – Tax relief – National provisions preventing the deduction by a parent company of the losses incurred in another Member State by a subsidiary established in that State – Lawfulness – Limits (Arts 43 EC and 48 EC)As Community law now stands, Articles 43 EC and 48 EC do not preclude provisions of a Member State which generally prevent a resident parent company from deducting from its taxable profits losses incurred in another Member State by a subsidiary established in that Member State although they allow it to deduct losses incurred by a resident subsidiary. However, it is contrary to Articles 43 EC and 48 EC to prevent the resident parent company from doing so where the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods and where there are no possibilities for those losses to be taken into account in its State of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party. (see para. 59, operative part)JUDGMENT OF THE COURT (Grand Chamber)13 December 2005 (*) (Articles 43 EC and 48 EC – Corporation tax– Groups of companies – Tax relief – Profits of parent companies – Deduction of losses incurred by a resident subsidiary– Allowed – Deduction of losses incurred in another Member State by a non-resident subsidiary – Not included)In Case C-446/03,REFERENCE for a preliminary ruling under Article 234 EC from the High Court of Justice of England and Wales, Chancery Division (United Kingdom), made by decision of 16 July 2003, received at the Court on 22 October 2003, in the proceedings David Halsey (Her Majesty’s Inspector of Taxes), THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas, Presidents of Chambers, C. Gulmann (Rapporteur), A. La Pergola, J.‑P. Puissochet, R. Schintgen, N. Colneric, J. Klučka, U. Lõhmus, E. Levits and A. Ó Caoimh, Judges, Advocate General: M. Poiares Maduro,Registrar: K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 1 February 2005,after considering the observations submitted on behalf of:– Marks & Spencer plc, by G. Aaronson QC and P. Farmer, Barrister,– the United Kingdom Government, by M. Bethell, acting as Agent, with R. Plender QC and D. Ewart, Barrister,– the German Government, by W.-D. Plessing and A. Tiemann, acting as Agents,– the Greek Government, by K. Boskovits and V. Kyriazopoulos, and also by I. Pouli and S. Trekli, acting as Agents,– the French Government, by G. de Bergues and C. Jurgensen-Mercier, acting as Agents,– Ireland, by D.J. O’Hagan, acting as Agent, with E. Fitzsimons SC and G. Clohessy, BL,– the Netherlands Government, by H.G. Sevenster, S. Terstal and J. van Bakel, acting as Agents,– the Finnish Government, by A. Guimaraes-Purokoski, acting as Agent,– the Swedish Government, by A. Kruse, acting as Agent,– the Commission of the European Communities, by R. Lyal, acting as Agent,after hearing the Opinion of the Advocate General at the sitting on 7 April 2005,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Articles 43 EC and 48 EC. 2 The request was submitted in proceedings between Marks & Spencer plc (‘Marks & Spencer’) and the United Kingdom tax authority concerning the latter’s rejection of a claim for tax relief by Marks & Spencer, which sought to deduct from its taxable profits in the United Kingdom losses incurred by its subsidiaries established in Belgium, Germany and France. National legal context3 The provisions of national law applicable in the main proceedings are to be found in the Income and Corporation Taxes Act 1988 (‘the ICTA’). They are set out below on the basis of the information provided in the decision for reference. Liability to corporation tax 4 Under sections 6(1) and 11(1) of the ICTA, corporation tax is charged on the profits of companies which are resident in the United Kingdom or which conduct trading activities in the United Kingdom through a branch or agency. 5 Under section 8(1) of the ICTA, resident companies are charged to corporation tax in respect of their worldwide profits. Under section 11(1), non-resident companies are charged to corporation tax only in respect of the profits attributable to their United Kingdom branches or agencies. 6 Under taxation conventions between the United Kingdom and, in particular, Belgium, Germany and France, the foreign subsidiaries of resident companies, as non-resident companies, fall within the scope of United Kingdom corporation tax in respect of their trading activities only if those activities are conducted in the United Kingdom through a permanent establishment within the meaning of those Conventions. 7 A tax credit system of relieving double taxation is provided for in the United Kingdom. 8 That system has, in particular, the following two aspects. 9 First, a company established in the United Kingdom which conducts trading activities in another Member State through a branch in that State is taxed in the United Kingdom on the profits of that subsidiary and deducts from the tax payable the tax paid in the other Member State, or is allowed to deduct that tax when calculating branch profits or losses in the United Kingdom. The branch trading profits are calculated on United Kingdom tax principles. If a trading loss arose that loss could be set against the profits of the company established in the United Kingdom. Any unrelieved loss may be carried forward to subsequent periods. The fact that the loss may also be relieved in the other Member State against the branch’s future profits does not affect the relief against United Kingdom profits. 10 Second, a company established in the United Kingdom which conducts trading activities in another Member State through a subsidiary established in that State is taxed in the United Kingdom on the dividends paid by that subsidiary and credit is given for the tax paid in the other Member State on the profits out of which the dividend is paid and for any withholding tax. Where controlled foreign company legislation is not applicable, the parent company is not taxed on its non-resident subsidiary’s profits and it cannot set the subsidiary’s losses against its own profits. 11 Under section 208 of the ICTA, dividends received by a parent company established in the United Kingdom from a subsidiary also established in that Member State are not taxed, unlike those paid by a subsidiary established in another Member State. Group relief for losses 12 In the United Kingdom, group relief allows the resident companies in a group to offset their profits and losses among themselves. 13 Section 402 of the ICTA provides: ‘(1) Subject to and in accordance with this Chapter and section 492(8), relief for trading losses and other amounts eligible for relief from corporation tax may, in the cases set out in subsections (2) and (3) below, be surrendered by a surrendering company (“the surrendering company”) and, on the making of a claim by another company (“the claimant company”) may be allowed to the claimant company by way of relief from corporation tax called group relief. (2) Group relief shall be available in a case where the surrendering company and the claimant company are both members of the same group …” 14 Section 403 of the ICTA provides that: ‘(1) If in an accounting period (“the surrender period”) the surrendering company has – (a) trading losses … the amount may, subject to the provisions of this Chapter, be set off for the purposes of corporation tax against the total profits of the claimant company for its corresponding accounting period.’ 15 As regards the accounting periods ending before 1 April 2000, section 413(5) of the ICTA states: ‘References in this Chapter to a company apply only to bodies corporate resident in the United Kingdom …’16 Following a change in the law consequent upon the judgment of the Court of 16 July 1998 in Case C-264/96 ICI [1998] ECR I-4695, group relief has since 2000 been applicable to profits and losses within the scope of United Kingdom tax law. 17 As a consequence of that change in the law: – losses made by a United Kingdom branch of a non-resident company may be surrendered to another group company for offset against its United Kingdom taxable profits; – losses made by a group company established in the United Kingdom may be surrendered to the branch for offset against its profits in the United Kingdom. Main proceedings and questions referred for a preliminary ruling18 Marks & Spencer is a company incorporated and registered in England and Wales. It is the parent company of a number of companies established in the United Kingdom and in other States. It is one of the leading United Kingdom retailers of clothing, food, homeware and financial services. 19 From 1975 Marks & Spencer began to move into other States, with the opening of a store in France. By the end of the 1990s it had sales outlets in more than 36 countries, with a network of subsidiaries and a system of franchises. 20 A trend towards increasing losses became evident in the mid-1990s. 21 In March 2001 Marks & Spencer announced its intention to divest itself of its Continental European activity. By 31 December 2001 the French subsidiary had been sold to third parties, while the other subsidiaries, including those established in Belgium and Germany, had ceased trading. 22 In the United Kingdom, Marks & Spencer claimed group tax relief pursuant to paragraph 6 of Schedule 17A to the ICTA in respect of losses incurred by its subsidiaries in Belgium, Germany and France for the four accounting periods ended 31 March 1998, 31 March 1999, 31 March 2000 and 31 March 2001. It is clear from the file before the Court that both parties to the main proceedings agree that the losses must be computed on a United Kingdom tax basis. At the tax authority’s request, Marks & Spencer therefore recomputed the losses on that basis. 23 Each of the subsidiaries had operated in the Member State in which it had its registered office. The subsidiaries had no permanent establishment in the United Kingdom and had never traded there. 24 The claims for relief were rejected on the ground that group relief could only be granted for losses recorded in the United Kingdom. 25 Marks & Spencer appealed against that refusal before the Special Commissioners of Income Tax, which dismissed the appeal. 26 Marks & Spencer appealed against that decision before the High Court of Justice of England and Wales, Chancery Division, which decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1) In circumstances where:– Provisions of a Member State, such as the United Kingdom provisions on group relief, prevent a parent company which is resident for tax purposes in that State from reducing its taxable profits in that State by setting off losses incurred in other Member States by subsidiary companies which are resident for tax purposes in those States, where such set off would be possible if the losses were incurred by subsidiary companies resident in the State of the parent company; – The Member State of the parent company:– subjects a company resident within its territory to corporation tax on its total profits, including the profits of branches in other Member States, with arrangements for the availability of double taxation relief for those taxes incurred in another Member State and under which branch losses are taken account of in those taxable profits; – does not subject the undistributed profits of subsidiaries resident in other Member States to corporation tax;– subjects the parent company to corporation tax on any distributions to it by way of dividend by the subsidiaries resident in other Member States while not subjecting the parent company to corporation tax on distributions by way of dividend by subsidiary companies resident in the State of the parent; – grants double taxation relief to the parent company by way of a credit in respect of withholding tax on dividends and foreign taxes paid on the profits in respect of which dividends are paid by subsidiary companies resident in other Member States; is there a restriction under Article 43 EC, in conjunction with Article 48 EC? If so, is it justified under Community law?2) (a) What difference, if any, does it make to the answer to Question 1 that, depending on the law of the Member State of the subsidiary, it is or may be possible in certain circumstances to obtain relief for some or all of the losses incurred by the subsidiary against taxable profits in the State of the subsidiary? (b) If it does make a difference, what significance, if any, is to be attached to the fact that:– a subsidiary resident in another Member State has now ceased trading and, although there is provision for loss relief subject to certain conditions in that State, there is no evidence that in the circumstances such relief was obtained; – a subsidiary resident in another Member State has been sold to a third party and, although there is provision under the law of that State for the losses to be used under certain conditions by a third party purchaser, it is uncertain whether they were so used in the circumstances of the case; – the arrangements under which the Member State of the parent company takes account of the losses of UK resident companies apply regardless of whether the losses are also relieved in another Member State? (c) Would it make any difference if there were evidence that relief had been obtained for the losses in the Member State in which the subsidiary was resident and, if so, would it matter that the relief was obtained subsequently by an unrelated group of companies to which the subsidiary was sold?’ Question 1 27 By its first question, the High Court seeks essentially to ascertain whether Articles 43 EC and 48 EC preclude provisions of a Member State which prevent a resident parent company from deducting from its taxable profits losses incurred in another Member State by a subsidiary established in that Member State although they allow it to deduct losses incurred by a resident subsidiary. 28 In other words, the question is whether such provisions constitute a restriction on freedom of establishment, contrary to Articles 43 EC and 48 EC. 29 In that regard, it must be borne in mind that, according to settled case-law, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law (see, in particular, Joined Cases C-397/98 and C-410/98 Metallgesellschaft and Others [2001] ECR I-1727, paragraph 37 and the case-law cited). 30 Freedom of establishment, which Article 43 EC grants to Community nationals and which includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected, entails, in accordance with Article 48 EC, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Community, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency (see, in particular, Case C-307/97 Saint Gobain ZN [1999] ECR I-6161, paragraph 35). 31 Even though, according to their wording, the provisions concerning freedom of establishment are directed to ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation (see, in particular, ICI, cited above, paragraph 21). 32 Group relief such as that at issue in the main proceedings constitutes a tax advantage for the companies concerned. By speeding up the relief of the losses of the loss-making companies by allowing them to be set off immediately against the profits of other group companies, such relief confers a cash advantage on the group. 33 The exclusion of such an advantage in respect of the losses incurred by a subsidiary established in another Member State which does not conduct any trading activities in the parent company’s Member State is of such a kind as to hinder the exercise by that parent company of its freedom of establishment by deterring it from setting up subsidiaries in other Member States. 34 It thus constitutes a restriction on freedom of establishment within the meaning of Articles 43 EC and 48 EC, in that it applies different treatment for tax purposes to losses incurred by a resident subsidiary and losses incurred by a non-resident subsidiary. 35 Such a restriction is permissible only if it pursues a legitimate objective compatible with the Treaty and is justified by imperative reasons in the public interest. It is further necessary, in such a case, that its application be appropriate to ensuring the attainment of the objective thus pursued and not go beyond what is necessary to attain it (see, to that effect, Case C-250/95 Futura Participations and Singer [1997] ECR I-2471, paragraph 26, and Case C-9/02 De Lasteyrie du Saillant [2004] ECR I-2409, paragraph 49). 36 The United Kingdom and the other Member States which submitted observations in the present proceedings claim that, from the aspect of a group relief system such as that at issue in the main proceedings, resident subsidiaries and non-resident subsidiaries are not in comparable tax situations. In accordance with the principle of territoriality applicable both in international law and in Community law, the Member State in which the parent company is established has no tax jurisdiction over non-resident subsidiaries. As regards the latter, tax competence belongs in principle, in accordance with the usual allocation of competence in such matters, to the States on whose territory they are established and carry out commercial activities. 37 In that regard, it must be noted that, in tax law, the taxpayers’ residence may constitute a factor that might justify national rules involving different treatment for resident and non-resident taxpayers. However, residence is not always a proper factor for distinction. In effect, acceptance of the proposition that the Member State in which a company seeks to establish itself may freely apply to it a different treatment solely by reason of the fact that its registered office is situated in another Member State would deprive Article 43 EC of all meaning (see Case 270/83 Commission v France [1986] ECR 273, paragraph 18). 38 In each specific situation, it is necessary to consider whether the fact that a tax advantage is available solely to resident taxpayers is based on relevant objective elements apt to justify the difference in treatment. 39 In a situation such as that in the proceedings before the national court, it must be accepted that by taxing resident companies on their worldwide profits and non-resident companies solely on the profits from their activities in that State, the parent company’s Member State is acting in accordance with the principle of territoriality enshrined in international tax law and recognised by Community law (see, in particular, Futura Participations and Singer, paragraph 22). 40 However, the fact that it does not tax the profits of the non-resident subsidiaries of a parent company established on its territory does not in itself justify restricting group relief to losses incurred by resident companies. 41 In order to ascertain whether such a restriction is justified, it is necessary to consider what the consequences would be if an advantage such as that at issue in the main proceedings were to be extended unconditionally. 42 On that point, the United Kingdom and the other Member States which submitted observations put forward three factors to justify the restriction. 43 First, in tax matters profits and losses are two sides of the same coin and must be treated symmetrically in the same tax system in order to protect a balanced allocation of the power to impose taxes between the different Member States concerned. Second, if the losses were taken into consideration in the parent company’s Member State they might well be taken into account twice. Third, and last, if the losses were not taken into account in the Member State in which the subsidiary is established there would be a risk of tax avoidance. 44 As regards the first justification, it must be borne in mind that the reduction in tax revenue cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is in principle contrary to a fundamental freedom (see, in particular, Case C-319/02 Manninen [2004] ECR I‑7477, paragraph 49 and the case-law cited). 45 None the less, as the United Kingdom rightly observes, the preservation of the allocation of the power to impose taxes between Member States might make it necessary to apply to the economic activities of companies established in one of those States only the tax rules of that State in respect of both profits and losses. 46 In effect, to give companies the option to have their losses taken into account in the Member State in which they are established or in another Member State would significantly jeopardise a balanced allocation of the power to impose taxes between Member States, as the taxable basis would be increased in the first State and reduced in the second to the extent of the losses transferred. 47 As regards the second justification, relating to the danger that losses would be used twice, it must be accepted that Member States must be able to prevent that from occurring. 48 Such a danger does in fact exist if group relief is extended to the losses of non-resident subsidiaries. It is avoided by a rule which precludes relief in respect of those losses. 49 As regards, last, the third justification, relating to the risk of tax avoidance, it must be accepted that the possibility of transferring the losses incurred by a non-resident company to a resident company entails the risk that within a group of companies losses will be transferred to companies established in the Member States which apply the highest rates of taxation and in which the tax value of the losses is therefore the highest. 50 To exclude group relief for losses incurred by non-resident subsidiaries prevents such practices, which may be inspired by the realisation that the rates of taxation applied in the various Member States vary significantly. 51 In the light of those three justifications, taken together, it must be observed that restrictive provisions such as those at issue in the main proceedings pursue legitimate objectives which are compatible with the Treaty and constitute overriding reasons in the public interest and that they are apt to ensure the attainment of those objectives. 52 That analysis is not affected by the indications, set out in the second part of the first question, relating to the arrangements applicable in the United Kingdom: – to the profits and losses of a foreign subsidiary of a company established in that Member State;– to the dividends distributed to a company established in that State by a subsidiary established in another Member State.53 None the less, the Court must ascertain whether the restrictive measure goes beyond what is necessary to attain the objectives pursued. 54 Marks & Spencer and the Commission contended that measures less restrictive than a general exclusion from group relief might be envisaged. By way of example, they referred to the possibility of making relief conditional upon the foreign subsidiary’s having taken full advantage of the possibilities available in its Member State of residence of having the losses taken into account. They also referred to the possibility that group relief might be made conditional on the subsequent profits of the non-resident subsidiary being incorporated in the taxable profits of the company which benefited from group relief up to an amount equal to the losses previously set off. 55 In that regard, the Court considers that the restrictive measure at issue in the main proceedings goes beyond what is necessary to attain the essential part of the objectives pursued where: – the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods, if necessary by transferring those losses to a third party or by offsetting the losses against the profits made by the subsidiary in previous periods, and – there is no possibility for the foreign subsidiary’s losses to be taken into account in its State of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party. 56 Where, in one Member State, the resident parent company demonstrates to the tax authorities that those conditions are fulfilled, it is contrary to Articles 43 EC and 48 EC to preclude the possibility for the parent company to deduct from its taxable profits in that Member State the losses incurred by its non-resident subsidiary. 57 It is also important, in that context, to make clear that Member States are free to adopt or to maintain in force rules having the specific purpose of precluding from a tax benefit wholly artificial arrangements whose purpose is to circumvent or escape national tax law (see, to that effect, ICI, paragraph 26, and De Lasteyrie du Saillant, paragraph 50). 58 Furthermore, in so far as it may be possible to identify other, less restrictive measures, such measures in any event require harmonisation rules adopted by the Community legislature. 59 Accordingly, the answer to the first question must be that, as Community law now stands, Articles 43 EC and 48 EC do not preclude provisions of a Member State which generally prevent a resident parent company from deducting from its taxable profits losses incurred in another Member State by a subsidiary established in that Member State although they allow it to deduct losses incurred by a resident subsidiary. However, it is contrary to Articles 43 EC and 48 EC to prevent the resident parent company from doing so where the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods and where there are no possibilities for those losses to be taken into account in its State of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party. Question 2 60 In the light of the answer to the first question, there is no need to answer the second question. Costs61 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:As Community law now stands, Articles 43 EC and 48 EC do not preclude provisions of a Member State which generally prevent a resident parent company from deducting from its taxable profits losses incurred in another Member State by a subsidiary established in that Member State although they allow it to deduct losses incurred by a resident subsidiary. However, it is contrary to Articles 43 EC and 48 EC to prevent the resident parent company from doing so where the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods and where there are no possibilities for those losses to be taken into account in its State of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party.[Signatures]* Language of the case: English. | 89c84-eefd134-40f2 | EN |
ADVOCATE GENERAL TIZZANO SETS OUT HIS VIEWS ON THE VALIDITY OF THE DIRECTIVE ON COMPOUND ANIMAL FEEDINGSTUFFS WHICH WAS ADOPTED FOLLOWING THE BSE AND DIOXIN CRISES | ABNA Ltd and OthersvSecretary of State for Health and Others(References for preliminary rulings from the the High Court of Justice (England and Wales), Queen’s Bench Division (Administrative Court), from the Consiglio di Stato and from the Rechtbank ‘s-Gravenhage)(Animal health and public health requirements – Compound feedingstuffs for animals – Indication of the exact percentages of the components of a product – Infringement of the principle of proportionality)Summary of the Judgment1. Acts of the institutions – Choice of legal basis – Criteria – Measure concerning compound feedingstuffs – Measure contributing directly to the protection of public health – Adoption on the basis of Article 152(4)(b) EC – Legality (Art. 152(4)(b) EC; European Parliament and Council Directive 2002/2)2. Protection of public health – Compound feedingstuffs – Directive 2002/2 – Public-health protection objective – Difference in treatment objectively justified (Art. 152(1) EC; European Parliament and Council Directive 2002/2, Art. 1(1)(b) and 1(4))3. Protection of public health – Compound feedingstuffs – Directive 2002/2 – Principle of proportionality – Obligation on manufacturers to indicate to customers the exact composition of a feedingstuff – Breach – Obligation to indicate the percentages of the ingredients of a feedingstuff – Breach – None (European Parliament and Council Directive 2002/2, Art. 1(1)(b) and 1(4))4. Protection of public health – Compound feedingstuffs – Directive 2002/2 – Application – Condition – Adoption of a positive list of feed materials designated by their specific names – None (European Parliament and Council Directive 2002/2, recital (10) in the preamble)5. Acts of the institutions – Grant by a national court of suspension of the application of a Community measure – Referral to the Court by way of a reference for a preliminary ruling on the appraisal of validity – Power of the administrative authorities of the other Member States to suspend application of that measure pending the judgment of the Court – No such power 1. In the context of the organisation of the powers of the Community, the choice of the legal basis for a measure must rest on objective factors which are amenable to judicial review. Those factors include, in particular, the aim and content of the measure. Directive 2002/2 on the circulation of compound feedingstuffs is based on Article 152(4)(b) EC, which allows the adoption of measures in the veterinary and phytosanitary fields having as their direct objective the protection of public health. It follows from an examination of the recitals in the preamble to that directive that the objective pursued by the Community legislature, when it adopted, in Article 1(1)(b) and 1(4), the provisions relating to the indication of feed materials for animal feedingstuffs, was to respond to the need to have more detailed information in regard to the indication of the components of feedingstuffs in order to ensure, inter alia, the traceability of potentially contaminated feed materials for the purpose of identifying specific batches, a matter beneficial to public health. Those provisions are therefore likely to contribute directly to the pursuit of the objective of safeguarding public health and were thus able to be validly adopted on the basis of Article 152(4)(b) EC. (see paras 54-57, 60)2. The objective pursued by Directive 2002/2 on the circulation of compound feedingstuffs, namely the protection of public health, may justify a difference in treatment, particularly when one bears in mind the obligation under Article 152(1) EC to ensure a high level of human health protection in the definition and implementation of all Community policies and activities. Furthermore, even though it may be possible to demonstrate that measures as restrictive as those in Article 1(1)(b) and 1(4) of Directive 2002/2 may also be justified in areas in which such measures have not yet been taken, such as that of foodstuffs intended for human consumption, that does not constitute a sufficient reason for taking the view that the measures adopted within the area which is the subject of the Community measures in issue are not lawful on the ground of their discriminatory character. If that were not so, this would have the effect of bringing the level of public health protection down to that of the existing legislation which provides the least protection. (see paras 64 and 65)3. Article 1(1)(b) of Directive 2002/2 on the circulation of compound feedingstuffs, which requires manufacturers of compound feedingstuffs to indicate, at a customer’s request, the exact composition of a feedingstuff, is invalid in the light of the principle of proportionality. That obligation impacts seriously on the economic interests of manufacturers, as it obliges them to disclose the formulas for the composition of their products, at the risk of those products being used as models, possibly by customers themselves, and those manufacturers cannot obtain the benefit of the investments which they have made in terms of research and innovation. Such an obligation cannot be justified by the pursued objective of protecting public health and manifestly goes beyond what is necessary to attain that objective. First, that obligation is independent of any problem relating to feedingstuff contamination and has to be met only if the customer so requests. Furthermore, the indication, on the labelling, of the percentages within brackets should normally make it possible to identify a feedingstuff suspected of being contaminated, in order to assess the degree of danger which it represents in relation to the weight indicated and to decide, if necessary, to withdraw it temporarily pending the results of laboratory analyses, or for the establishment of the traceability of the product by the public authorities concerned. Finally, irrespective of the control procedures in relation to food safety established within the framework of Regulation No 178/2002, which was adopted on the same day as Directive 2002/2, Article 1(5) of the latter provides that manufacturers of compound feedingstuffs are obliged to make available to the authorities responsible for carrying out official inspections, on request, any document concerning the composition of feedingstuffs intended to be put into circulation which enables the accuracy of the information given by the labelling to be verified. By contrast, Article 1(4) of that directive, which imposes the obligation to indicate, within brackets, the percentages of the ingredients making up a feedingstuff, does not infringe the principle of proportionality because, within the framework of the broad discretion which the Community legislature is recognised as having in this area, that obligation is a measure which is liable to contribute to the objective of safeguarding animal and human health. It makes it possible to identify the ingredients of a feedingstuff that are suspected of having been contaminated without awaiting the results of laboratory analyses and to withdraw that feedingstuff rapidly from use. (see paras 69, 76, 82-86, operative part 3)4. Directive 2002/2 on the circulation of compound feedingstuffs must be interpreted as meaning that its application is not subject to the adoption of the positive list of feed materials designated by their specific names, as provided for in recital (10) in the preamble to that directive. It follows from the wording of that recital that the establishment of a proposal for a positive list of feed materials can constitute only an aspiration on the part of the Community legislature. That recital envisages merely the carrying-out of a feasibility study, the drafting of a report and the submission of an appropriate proposal which takes account of the conclusions reached in that report. Moreover, the content of that recital is not reproduced in the operative part of the directive and examination of the latter does not in any way indicate that its implementation is contingent on the adoption of that positive list. More specifically, it does not appear that the labelling obligation cannot be complied with in the absence of such a list or that the repeal of Directive 91/357 laying down the categories of feed materials which may be used for the purposes of labelling compound feedingstuffs for animals other than pet animals made it impossible to implement Directive 2002/2, as manufacturers can, in the absence of Community rules, or even national rules, in that regard, use current specific designations of the feed materials. (see paras 95-98, operative part 4)5. Even in the case in which a court of a Member State forms the view that the conditions have been satisfied under which it may suspend application of a Community measure, in particular where the question of the validity of that measure has already been referred to the Court of Justice, the competent national administrative authorities of the other Member States cannot suspend application of that measure until such time as the Court has ruled on its validity. National courts alone are entitled to determine, taking into consideration the specific circumstances of the cases brought before them, whether the conditions governing the grant of interim relief have been satisfied. The coherence of the system of interim legal protection requires that national courts should be able to order suspension of enforcement of a national administrative measure based on a Community regulation, the legality of which is contested. However, the uniform application of Community law, which is a fundamental requirement of the Community legal order, means that the suspension of enforcement of administrative measures based on a Community regulation, whilst it is governed by national procedural law, in particular as regards the making and examination of the application, must in all the Member States be subject, at the very least, to conditions which are uniform so far as the granting of such relief is concerned and are the same as those of an application for interim relief brought before the Court. In order to determine, in particular, whether the conditions relating to urgency and the risk of serious and irreparable damage have been satisfied, the national court dealing with an application for interim relief must examine the circumstances particular to the case before it and consider whether immediate enforcement of the measure which is the subject of the application for interim relief would be likely to result in irreversible damage to the applicant which could not be made good if the Community measure were to be declared invalid. As the court responsible for applying, within the framework of its jurisdiction, the provisions of Community law and consequently under an obligation to ensure that Community law is fully effective, the national court, when dealing with an application for interim relief, must take account of the damage which the interim measure may cause to the legal regime established by a Community measure for the Community as a whole. It must consider, on the one hand, the cumulative effect which would arise if a large number of courts were also to adopt interim measures for similar reasons and, on the other, those special features of the applicant’s situation which distinguish it from the other economic operators concerned. In particular, if the grant of interim relief may represent a financial risk for the Community, the national court must be in a position to require the applicant to provide adequate guarantees. National administrative authorities are not in a position to adopt interim measures while complying with the conditions for granting such measures as defined by the Court. In the first place, the actual status of those authorities is not in general such as to guarantee that they have the same degree of independence and impartiality as that which national courts are recognised as having. Likewise, it is not certain that such authorities would benefit from the exercise of the adversarial principle inherent to judicial proceedings, which allows account to be taken of the arguments put forward by the different parties before the interests in issue are weighed one against the other at the time when a decision is being taken. (see paras 103-109, 111, operative part 5)JUDGMENT OF THE COURT (Grand Chamber)6 December 2005 (*) (Animal health and public health requirements – Composite feedingstuffs for animals – Indication of the exact percentage of the components of a product – Infringement of the principle of proportionality)In Joined Cases C‑453/03, C‑11/04, C‑12/04 and C‑194/04,REFERENCES for preliminary rulings under Article 234 EC, brought by the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court) (United Kingdom) (C‑453/03), by the Consiglio di Stato (Italy) (C‑11/04 and C‑12/04) and by the Rechtbank ’s-Gravenhage (Netherlands) (C‑194/04), by decisions of 23 October 2003, 11 November 2003 and 22 April 2004, received by the Court on 27 October 2003, 15 January 2004 and 26 April 2004 respectively, in the proceedings The Queen, on the application of: ABNA Ltd (C‑453/03), Denis Brinicombe,BOCM Pauls Ltd,Devenish Nutrition Ltd,Nutrition Services (International) Ltd, Primary Diets LtdSecretary of State for Health,Food Standards Agency,Fratelli Martini & C. SpA (C‑11/04), Cargill SrlMinistero delle Politiche Agricole e Forestali,Ministero della Salute,Ministero delle Attività Produttive,Ferrari Mangimi Srl (C‑12/04), Associazione nazionale tra i produttori di alimenti zootecnici (Assalzoo)Ministero delle Attività ProduttiveandNederlandse Vereniging Diervoederindustrie (Nevedi) (C‑194/04), Productschap Diervoeder, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas (Rapporteur), Presidents of Chambers, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues, R. Silva de Lapuerta, P. Kūris, E. Juhász, G. Arestis, A. Borg Barthet and M. Ilešič, Judges, Advocate General: A. Tizzano,Registrars: M.-F. Contet, Principal Administrator, and K. Sztranc, Administrator,having regard to the written procedure and further to the hearing on 30 November 2004,after considering the observations submitted on behalf of:– ABNA Ltd, by D. Anderson QC and E. Whiteford, Solicitor,– Fratelli Martini & C. SpA, by F. Capelli, avvocato, and B. Klaus, Rechtsanwältin,– Ferrari Mangimi Srl, by E. Cappelli, P. De Caterini and A. Bandini, avvocati,– Nederlandse Vereniging Diervoederindustrie (Nevedi), by H. Ferment, advocaat,– the United Kingdom Government, by M. Bethell (C‑453/03), acting as Agent, and C. Lewis (C‑453/03), Barrister,– the Italian Government, by I.M. Braguglia and M. Fiorilli (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), acting as Agents, and by G. Albenzio (C‑194/04), avvocato dello Stato, – the Netherlands Government, by S. Terstal (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), H. G. Sevenster (C‑453/03 and C‑194/04) and J.G.M. van Bakel (C‑453/03 and C‑194/04), acting as Agents, – the Danish Government, by J. Molde (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), acting as Agent,– the Greek Government, by K. Marinou (C‑453/03) and S. Charitaki (C‑11/04 and C‑12/04), and by G. Kanellopoulos and V. Kontolaimos (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), acting as Agents, – the Spanish Government, by M. Muñoz Pérez (C‑453/03, C‑11/04 and C‑12/04) and J.M. Rodríguez Cárcamo (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), acting as Agents, – the French Government, by G. de Bergues (C‑453/03) and R. Loosli-Surrans (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), acting as Agents, – the European Parliament, by E. Waldherr (C‑453/03), and by M. Moore, G. Ricci (C‑453/03, C‑11/04, C‑12/04 and C‑194/04) and A. Baas (C‑194/04), acting as Agents, – the Council of the European Union, by T. Middleton and F. Ruggeri Laderchi (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), and by A.‑M. Colaert (C‑194/04), acting as Agents, – the Commission of the European Communities, by B. Doherty and P. Jacob (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), and by C. Cattabriga (C‑453/03, C‑11/04, C‑12/04 and C‑194/04), acting as Agents, after hearing the Opinion of the Advocate General at the sitting on 7 April 2005,gives the followingJudgment1 The references for preliminary rulings centre essentially on the validity of Directive 2002/2/EC of the European Parliament and of the Council of 28 January 2002 amending Council Directive 79/373/EEC on the circulation of compound feedingstuffs and repealing Commission Directive 91/357/EEC (OJ 2002 L 63, p. 23), in particular Article 1(1)(b) and 1(4) thereof. 2 Those references have been made in the context of the examination of requests by manufacturers of compound feedingstuffs for animals or representatives of that industry for the annulment or suspension of the rules adopted for the purpose of transposing in national law the contested provisions of Directive 2002/2. The legal framework3 Directive 2002/2 is based on Article 152(4)(b) EC, which provides: ‘The Council, acting in accordance with the procedure referred to in Article 251 and after consulting the Economic and Social Committee and the Committee of the Regions, shall contribute to the achievement of the objectives referred to in this Article through adopting: …(b) by way of derogation from Article 37, measures in the veterinary and phytosanitary fields which have as their direct objective the protection of public health;’. 4 It is appropriate to set out the following recitals in the preamble to Directive 2002/2: ‘(2) As regards labelling, the purpose of Directive 79/373/EEC is to ensure that stock farmers are informed objectively and as accurately as possible as to the composition and use of feedingstuffs. (3) Hitherto, Directive 79/373/EEC provided for a flexible declaration confined to the indication of the feed materials without stating their quantity in feedingstuffs for production animals, while retaining the possibility of declaring categories of feed materials instead of declaring the feed materials themselves. (4) Nonetheless, the bovine spongiform encephalopathy crisis and the recent dioxin crisis have demonstrated the inadequacy of the current provisions and the need for more detailed qualitative and quantitative information on the composition of compound feedingstuffs for production animals. (5) Detailed quantitative information may help to ensure that potentially contaminated feed materials can be traced to specific batches, which will be beneficial to public health and avoid the destruction of products which do not present a significant risk to public health. (6) Accordingly, it is appropriate, at this stage, to impose a compulsory declaration for all the feed materials as well as their amount in compound feedingstuffs for production animals. (7) For practical reasons, it is appropriate that declarations of the feed materials included in compound feedingstuffs for production animals be provided on an ad hoc label or accompanying document. (8) The declaration of the feed materials in feedingstuffs constitutes, in certain cases, an important item of information for stock farmers. It is therefore appropriate that the person responsible for labelling supply, at the customers’ request, a detailed list of all the feed materials used and their exact percentages by weight. (10) On the basis of a feasibility study, the Commission will submit a report to the European Parliament and the Council by 31 December 2002, accompanied by an appropriate proposal for the establishment of a positive list, taking account of the conclusions of the report. (12) Since it will no longer be possible in the future to declare categories of feed materials instead of declaring the feed materials themselves in the case of compound feedingstuffs for production animals, Commission Directive 91/357/EEC of 13 June 1991 laying down the categories of feed materials which may be used for the purposes of labelling compound feedingstuffs for animals other than pet animals … should be repealed’. 5 Article 1(1)(b) of Directive 2002/2 amends Article 5 of Council Directive 79/373/EEC of 2 April 1979 on the marketing of compound feedingstuffs (OJ 1979 L 86, p. 30). Article 1(1)(b) provides: ‘1. Article 5(1) is hereby amended as follows:(b) the following point shall be added: “(k) in the case of compound feedingstuffs other than those intended for pets, the indication ‘the exact percentages by weight of feed materials used in this feedingstuff may be obtained from: ...’ (name or trade name, address or registered office, telephone number and e-mail address of the person responsible for the particulars referred to in this paragraph). This information shall be provided at the customer’s request.”;’. 6 Article 1(4) of Directive 2002/2 includes a number of provisions replacing Article 5c of Directive 79/373/EC. Article 1(4) is worded as follows: ‘4. Article 5c shall be replaced by the following: “Article 5c1. All feed materials used in the compound feedingstuff shall be listed by their specific names.2. The listing of feed materials for feedingstuffs shall be subject to the following rules:(a) compound feedingstuffs intended for animals other than pets:(i) listing of feed materials for feedingstuffs with an indication, in descending order, of the percentages by weight present in the compound feedingstuff; (ii) as regards the above percentages, a tolerance of ± 15% of the declared value shall be permitted;…’. 7 Article 1(5) of Directive 2002/2 provides for a paragraph to be added to Article 12 of Directive 79/373. That paragraph provides that Member States ‘shall stipulate that the manufacturers of compound feedingstuffs are obliged to make available to the authorities responsible for carrying out official inspections, on request, any document concerning the composition of feedingstuffs intended to be put into circulation which enables the accuracy of the information given by the labelling to be verified’. 8 Article 2 of Directive 2002/2 provides: ‘Commission Directive 91/357/EEC shall be repealed as from 6 November 2003.’9 The stages in the adoption of Directive 2002/2 that are material to the present cases may be set out in the following terms. 10 On 7 January 2000 the Commission of the European Communities presented a proposal for a European Parliament and Council directive amending Directive 79/373 (document COM(1999) 744 final). 11 The explanatory memorandum on that proposal explains that, as a result of the crisis brought about by bovine spongiform encephalopathy (‘BSE’), the European Parliament wished to require manufacturers of compound feedingstuffs for animals to make a declaration regarding the quantities of the various ingredients used in their feedingstuffs. In the debate surrounding the text, that declaration became known as the ‘open declaration’. 12 The explanatory memorandum states in particular: ‘The Commission realises the advantages of an “open declaration” in the labelling provisions of compound feedingstuffs for production animals in order to facilitate the traceability of feed materials. The recent events of oils and additives contaminated by dioxins [originating] in Belgium and Germany respectively reinforce the importance of detailed information on the labels of compound feedingstuffs. Actually the contamination level of a compound feedingstuff depends on the quantity of contaminated feed material incorporated [in] the feed and consequently … exhaustive information [on] all feed materials included in the compound feedingstuff as well as their different amounts is of great importance.’ 13 In response to the objections of Member States, which were in favour of an optional declaration, and those of the manufacturers of compound feedingstuffs for animals, which wished to protect the intellectual property of the feed formulas, the explanatory memorandum states as follows: ‘The Commission, on the contrary, is of the opinion that a facultative open declaration is against the farmers’ right [to] information and against the envisaged transparency. Furthermore, the Commission considers that an optional open declaration would inevitably lead to distortions of competition between the feed compounders. … With regard to the protection of the intellectual property of the feed formulas, the Commission, in order to seek a maximum of transparency, cannot accept this argument. There is actually no breach of commercial confidentiality, because there are normally no patented feedingstuff formulas. Even if it [were] the case, the formula could not be kept as a secret. In fact, the publication of the ingredients would not undermine the intellectual property rights.’ 14 On 4 October 2000, the Parliament, on its first reading, proposed five amendments to that proposal for a directive (OJ 2001 C 178, p. 177). 15 On 19 December 2000, the Council of the European Union adopted Common Position (EC) No 6/2001 with a view to adopting Directive 2002/2 (OJ 2001 C 36, p. 35). According to the Council’s statement of reasons, it took the view that it was not realistic to require manufacturers to provide a declaration of the precise quantities of feed materials, and for that reason it proposed the solution of a declaration indicating the feed materials according to their percentage by weight, in descending order, within given bands. However, a detailed and precise list of those quantities was to be provided by the manufacturer on individual request by a customer. On 21 December 2000 the Commission presented an amended proposal for a European Parliament and Council directive amending Directive 79/373 which was in line with the Common Position (document COM(2000) 780 final) (OJ 2001 C 120 E, p. 178). 16 On 5 April 2001, on a second reading, the Parliament proposed amendments to that modified proposal for a directive which reinstated the ‘open declaration’ (document A5-0079/2001) (OJ 2002 C 21 E, p. 310). 17 As the result of a conciliation procedure, a compromise text was adopted and incorporated in Directive 2002/2. Under that compromise text, manufacturers must indicate the quantities of feed materials used in the composition of the products with a tolerance of ± 15% of the declared value, but are required, on request by a customer, to provide the exact percentages by weight of the feed materials making up a feedingstuff product. 18 On 24 April 2003 the Commission presented a feasibility report on a positive list of feed materials for animal feedingstuffs (document COM(2003) 178 final). That report states that the establishment of such a list would not contribute to ensuring the safety of animal feedingstuffs and that the Commission would for that reason not be submitting any proposal in that regard. It did, however, announce in that report initiatives in other areas designed to improve the safety of animal feedingstuffs. The disputes in the main proceedings and the questions referred for preliminary ruling In Case C-453/0319 The claimants in the main proceedings, which specialise in the manufacture of compound feedingstuffs for animals, seek the annulment of the legislation adopted to transpose the contested provisions of Directive 2002/2 into national law. By judgment of 6 October 2003, the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court), temporarily suspended application of that legislation. 20 Also by judgment of 6 October 2003, the High Court set out the grounds of its reference for a preliminary ruling. The question, as worded in a decision of 23 October 2003, is as follows: ‘Are Article 1(1)(b) of Directive 2002/02 and/or Article 1(4) of Directive 2002/02, to the extent that it amends Article 5c(2)(a) of Directive 79/373 by requiring percentages to be listed, invalid by reason of: a. the absence of a legal basis in Article 152(4)(b) EC;b. infringement of the fundamental right to property;c. infringement of the principle of proportionality?’21 By application lodged at the Registry of the Court on 18 February 2004, the company Lambey SA sought leave to intervene in Case C‑453/03, in accordance with Article 40 of the Statute of the Court of Justice, with a view to submitting its observations. That application was declared inadmissible by order of the President of the Court of 30 March 2004. In Cases C-11/04 and C-12/0422 Directive 2002/2 was transposed in Italian law by way of a decree of the Minister for Agricultural and Forestry Policy of 25 June 2003, concerning additions and amendments to the annexes to Law No 281 of 15 February 1963 on the rules for the preparation and marketing of animal feedingstuffs and implementing Directive 2002/2/EC of 28 January 2002 (GURI No 181 of 6 August 2003) (‘Law No 281/1963’), which applied with effect from 6 November 2003. 23 As the Consiglio di Stato (Council of State) points out in the decisions to refer which underlie Cases C‑11/04 and C‑12/04, the effect of that decree was to make it compulsory for manufacturers of compound feedingstuffs to set out on the labelling the list of the feed materials, indicating, in descending order, the percentages in relation to the total weight. In accordance with Directive 2002/2, those feed materials must be designated by their specific name, which may be replaced by the name of the category to which they belong, by following the categories grouping together several feed materials established in accordance with Article 10(a) of Directive 79/373, which was implemented by way of Commission Directive 91/357/EEC of 13 June 1991 laying down the categories of ingredients which may be used for the purposes of labelling compound feedingstuffs for animals other than pet animals (OJ 1991 L 193, p. 34). 24 The Consiglio di Stato points out in this connection that Directive 91/357, which was adopted pursuant to the abovementioned Article 10(a), was revoked by Directive 2002/2 with effect from 6 November 2003, without the Commission having been able to submit a draft measure containing the positive list of feed materials which could be used. The Italian authorities referred to the provisional list of feed materials contained in Annex VII, Part A, to Law No 281/1963 and, for those feed materials not featuring on that list, to the designations contained in Part B, that is to say, specifically to the general categories laid down by Directive 91/357. 25 The appellants in the main proceedings, which specialise in the manufacture of compound animal feedingstuffs, brought appeals before the Consiglio di Stato against decisions by the Tribunale amministrativo di Lazio (Lazio Administrative Court). They seek the annulment of the rules adopted for the purpose of transposing, in Italian law, the contested provisions of Directive 2002/2. The Consiglio di Stato, by two separate decisions, suspended temporarily the implementation of those rules. 26 With regard to the protection of public health, the Consiglio di Stato points out that plant-based animal feedingstuffs present less risks than compound feedingstuffs containing meat and bone meal, the use of which lay behind the emergence of BSE. Moreover, Article 152(4)(b) EC covers only measures relating to animal diseases and treatment, whereas the question of the labelling of plant-based animal feedingstuffs would not directly have the objective of protecting public health. 27 In the decision to refer underlying Case C‑11/04, the Consiglio di Stato sets out the view that, in the light of the doubt expressed as to the proportionality of the contested Community measure, a question concerning infringement of the right to property under Article 1 of the First Additional Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms, restated in Article 17 of the Charter of Fundamental Rights of the European Union signed at Nice on 7 December 2000 (OJ 2000 C 364, p. 1), concerning intellectual property relating to business secrecy and industrial know-how, does not appear to be manifestly unfounded. 28 In the decision to refer underlying Case C‑12/04, the Consiglio di Stato expresses uncertainty as to whether Directive 2002/2 is applicable. In its view, the failure to draw up the list of feed materials which may be used renders the Community legislation incomplete and makes it impossible to impose guidelines as to the labelling of the products intended for animal feedingstuffs and renders obligations as to food safety pointless. 29 The Consiglio di Stato also points out, in its reference in Case C‑12/04, that the obligation to indicate the quantities of feed materials is not provided for under the legislation on the labelling of foodstuffs, that is to say, Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs (OJ 2000 L 109, p. 29). From this it concludes that, paradoxically, compound animal feedingstuffs are subject to a much stricter regime, with regard to the obligations concerning the information on labelling, than that applicable to foodstuffs intended for human consumption. 30 In Case C‑11/04, the Consiglio di Stato decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Must Article 152(4)(b) EC be interpreted as being the correct legal basis for the adoption of measures on labelling, contained in Directive 2002/2/EC, where they refer to the labelling of vegetable feedingstuffs? 2. In so far as it imposes an obligation to indicate the precise feed materials contained in compound feedingstuffs, which applies even to vegetable-based feedingstuffs, is Directive 2002/2/EC justified on the basis of the precautionary principle in the absence of a risk assessment, based on scientific studies, which requires that precautionary measure on the basis of a possible correlation between the quantity of feed materials used and the risk of the diseases to be prevented? And is that directive nevertheless justified in the light of the principle of proportionality, in so far as the obligations on the part of the feedingstuffs industry to disclose information to the public authorities, which are required to maintain business secrecy, and are competent to monitor health protection, are not sufficiently directed to the attainment of the public health objectives supposed to be the purpose of the measure, instead imposing general rules requiring the indication of the percentage quantities of feed materials used on the labels of vegetable-based feedingstuffs? 3. In so far as it fails to respect the principle of proportionality, does Directive 2002/2/EC conflict with the fundamental right of property of the citizens of the Member States?’ 31 In Case C‑12/04, the Consiglio di Stato decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. [Question identical to the first question referred in Case C‑11/04]2. [Question identical to the second question referred in Case C‑11/04]3. Must Directive 2002/2/EC be interpreted as meaning that its application, and therefore its effectiveness, is subject to the adoption of a positive list of feed materials containing their specific names, as set out in the tenth recital to the preamble and the Commission Report (COM 2003 178) dated 24 April 2003 or must the implementation of the directive in the Member States take place before the adoption of the positive list of feed materials laid down by the directive, with reference to a list of the feed materials contained in the compound feedingstuffs by the names and generic definitions of their commodity classes? 4. Is Directive 2002/2/EC to be regarded as unlawful on the grounds of infringement of the principle of equal treatment and non-discrimination to the detriment of feedingstuff producers when compared with the producers of foodstuffs for human consumption in so far as the former are subject to rules requiring indications of the quantities of feed materials in compound feedingstuffs?’ 32 In each of the cases in the main proceedings the Consiglio di Stato states that similar questions were referred to the Court by the High Court of Justice on [23] October 2003 but that the respective decisions to refer are justified in order not to prejudice the appellants’ right to a fair hearing before the Community Court. 33 By order of the President of the Court of 25 March 2004, Cases C‑11/04 and C‑12/04 were joined for the purposes of the written and oral procedures and of the judgment. In Case C‑194/0434 The Nederlandse Vereniging Diervoederindustrie (Nevedi) (Netherlands Association for the Animal Feedingstuff Industry) (‘Nevedi’), the claimant in the main proceedings, applied for suspension of the legislation adopted to transpose the contested provisions of Directive 2002/2 in Netherlands law. 35 The Productschap Diervoeder (Commodity Board for Animal Feedingstuffs) (‘the Productschap’), the defendant in the main proceedings, is a public body within the terms of the Law on the organisation of undertakings (Wet op de Bedrijfsorganisatie). Under that legislation the Productschap is empowered to adopt regulations concerning animal feedingstuffs. Such regulations must, however, be approved by the Netherlands Minister for Agriculture, Nature and Food Quality. 36 Article 1(4) of Directive 2002/2 was transposed in Netherlands law, with effect from 6 November 2003, in Articles 7.3.2(1) and 7.3.1(1)(1) of the 2003 Productschap Diervoeder regulation on animal feedingstuffs (Verordening PDV Diervoeders 2003), in the version resulting from amending regulation No PDV-25 of 11 April 2003 (PBO Blad No 42 of 27 June 2003). 37 By letter of 24 November 2003, the Productschap called on the Minister for Agriculture, Nature and Food Quality to approve a new regulation abrogating the rules on labelling which resulted from the transposition of the provisions of Directive 2002/2. In his response to that request, that Minister, on 19 January 2004, refused to approve the proposal submitted to him on the ground that it was incompatible with Community law. The Minister stated that only the Court of Justice or a national court – the latter pending a decision by the Court of Justice – had jurisdiction, in certain cases, to suspend the implementation of measures giving effect to Community law. The national authority itself, he stated, did not enjoy any such competence. 38 Nevedi requested the Rechtbank ’s-Gravenhage to suspend the regulation transposing Directive 2002/2 pending a decision by the Court of Justice on the validity of that directive. It referred, inter alia, to a question referred for a preliminary ruling in this regard by a court in the United Kingdom of Great Britain and Northern Ireland. 39 By its decision making the reference, the chamber of the Rechtbank ’s‑Gravenhage responsible for granting interim relief upheld the application for suspension brought before it, and decided to stay the proceedings in respect of the remaining heads of claim and to refer the following questions to the Court for a preliminary ruling: 1. Is Article 1(1)(b) of Directive 2002/2 and/or Article 1(4) of Directive 2002/2, to the extent to which it amends Article 5c(2)(a) of Directive 79/373 by requiring percentages to be listed, invalid by reason of: (a) the absence of a legal basis in Article 152(4)(b) EC;(b) infringement of fundamental rights, such as the right to property and the right freely to exercise a trade or profession;(c) infringement of the principle of proportionality?2. If the conditions are satisfied under which a national court of a Member State is entitled to suspend implementation of a contested measure of the Community institutions, in particular also the condition that the question concerning the validity of the contested measure has already been referred by a national court of that Member State to the Court of Justice, are the competent public authorities of the other Member States themselves also entitled, without judicial intervention, to suspend the contested measure until such time as the Court … has given a ruling on the validity of that measure?’ 40 In view of the similarity of the questions referred, it is appropriate to join the different cases for the purpose of delivering one single judgment. The requests for the reopening of the oral procedure41 By letter of 9 May 2005 Fratelli Martini & Co. SpA (‘Fratelli Martini’) and Cargill Srl, the appellants in the main proceedings in Case C‑11/04, requested the Court to order, pursuant to Article 61 of the Rules of Procedure, that the oral procedure be reopened. As the basis for their application, they submitted that they had established scientific errors in the example given in the course of the hearing by the Agent of the Danish Government, and that that example has been used by the Advocate General as a basis for his reasoning. They attached a technical report to that application. 42 It must be pointed out in this regard that the Court may, of its own motion, on a proposal from the Advocate General, or at the request of the parties, order the reopening of the oral procedure, in accordance with Article 61 of the Rules of Procedure, if it takes the view that it lacks sufficient information or that the case should be decided on the basis of an argument which has not been debated between the parties (see Case C-309/99 Wouters and Others [2002] ECR I-1577, paragraph 42, Case C-434/02 Arnold André [2004] ECR I-11825, paragraph 27, and Case C-210/03 Swedish Match [2004] ECR I-11893, paragraph 25). 43 In the present case, however, the Court, after hearing the Advocate General, takes the view that it has all the information necessary for it to answer the questions referred for a preliminary ruling. The application for the oral procedure to be reopened must therefore be dismissed. The admissibility of the questions referred for preliminary ruling in Case C‑194/0444 The Parliament, the Council and the Commission submit that the questions referred for preliminary ruling are inadmissible on the ground that the Rechtbank ’s-Gravenhage has failed to set out in sufficient detail the factual and legislative context or the reasons which induced it to refer those questions. In particular, they argue, the Rechtbank ’s‑Gravenhage does not in any way explain the breaches of fundamental rights and infringement of the principle of proportionality relied on, no more than in regard to the second question referred. 45 On this point, according to settled case-law, the need to provide an interpretation of Community law which will be of use to the national court makes it necessary that the national court should define the factual and legislative context of the questions it is asking or, at the very least, explain the factual circumstances on which those questions are based (see, inter alia, the order in Case C‑190/02 Viacom [2002] ECR I‑8287, paragraph 15 and the references there cited, and the judgments in Case C‑134/03 Viacom Outdoor [2005] ECR I‑1167, paragraph 22, and Case C‑145/03 Keller [2005] ECR I‑2529, paragraph 29). 46 The Court has also stressed that it is important for the referring court to set out the precise reasons why it was unsure as to the interpretation of Community law and why it considered it necessary to refer questions to the Court for a preliminary ruling. The Court has thus ruled that it is essential that the referring court provide at the very least some explanation of the reasons for the choice of the Community provisions which it requires to be interpreted and of the link it establishes between those provisions and the national legislation applicable to the dispute (see, inter alia, the order in Viacom, cited above, paragraph 16, and the judgment in Case C‑318/00 Bacardi-Martini and Cellier des Dauphins [2003] ECR I‑905, paragraph 43). 47 One of the reasons for those requirements is that the information provided in orders for reference must not only be such as to enable the Court to reply usefully but must also enable the Governments of the Member States and other interested parties to submit observations pursuant to Article 23 of the Statute of the Court of Justice (orders in Case C‑422/98 Colonia Versicherung and Others [1999] ECR I‑1279, paragraph 5, and in Viacom, paragraph 14; judgment in Keller, cited above, paragraph 30). 48 In the case in the main proceedings, the Rechtbank ’s-Gravenhage, ruling in an application for interim relief, indicated the factual and legal context of the questions which it referred. It set out, concisely but adequately, the reasons which led it to refer those questions. 49 Furthermore, it must be pointed out that the Rechtbank ’s-Gravenhage made reference to the questions submitted by the United Kingdom court concerning the same subject. The Parliament, Council and Commission could not have failed to identify Case C‑453/03, in which each of those institutions had just submitted observations at the moment when the decision to refer underlying Case C‑194/04 was notified to them. There are consequently no grounds on which those institutions can argue that it was impossible for them to submit observations in full knowledge of the facts. 50 Finally, with regard to the second question, this cannot be regarded as being hypothetical on the ground that the claimant in the main proceedings in any event requested a national court to suspend application of the Community measure. It is clear from the observations submitted by that claimant that it is challenging the refusal of the competent minister to repeal the national legislation transposing Directive 2002/2 and the need to request a court to suspend application of that legislation, and that it also makes reference to the associated costs and to the harm occasioned thereby to the individual concerned. The question thus does not appear to be manifestly bereft of relevance within the context of the dispute in the main proceedings. 51 The questions referred in Case C‑194/04 must for those reasons be declared admissible. The questions referred for preliminary ruling The legal basis52 By heading (a) of the question referred in Case C‑453/03, Question 1 in both Case C‑11/04 and Case C‑12/04, and Question 1(a) in Case C‑194/04, the respective referring courts are essentially asking the Court to rule on the validity of Article 1(1)(b) and 1(4) of Directive 2002/2, on the ground that Article 152(4)(b) EC is not an appropriate legal basis for the adoption of those provisions, having particular regard to the fact that they relate to the labelling of plant-based animal feedingstuffs. 53 As the Council has stated in its observations and argued at the hearing, if the contested measure had not directly had the objective of safeguarding public health, it could have come under Article 37 EC, which also confers competence on the Community legislature. Review of the legal basis of Directive 2002/2 does, however, remain relevant for the purpose of verifying whether the procedure for the adoption of that directive was vitiated by any irregularity (see, in this connection, Case C‑491/01 British American Tobacco (Investments) and Imperial Tobacco [2002] ECR I‑11453, paragraph 111). 54 According to settled case-law, in the context of the organisation of the powers of the European Community the choice of the legal basis for a measure must rest on objective factors which are amenable to judicial review. Those factors include in particular the aim and content of the measure (see, in particular, Case C-269/97 Commission v Council [2000] ECR I‑2257, paragraph 43, Case C-36/98 Spain v Council [2001] ECR I-779, paragraph 58, and British American Tobacco (Investments) and Imperial Tobacco, cited above, paragraph 93). 55 Directive 2002/2 is based on Article 152(4)(b) EC, which allows the adoption of measures in the veterinary and phytosanitary fields having as their direct objective the protection of public health. 56 The third and fourth recitals in the preamble to Directive 2002/2 set out the position in law with regard to the indication of feed materials for animal feedingstuffs as it existed prior to the adoption of that directive and the need for more detailed information, as evidenced by the BSE and dioxin crises. According to the fifth recital in the preamble to Directive 2002/2, detailed quantitative information may help to ensure that potentially contaminated feed materials can be traced to specific batches, which will be beneficial to public health. 57 It follows from an examination of those recitals that the objective pursued by the Community legislature, when it adopted the provisions relating to the indication of feed materials for animal feedingstuffs, was to safeguard the protection of public health. 58 Contrary to what has been stated by the Consiglio di Stato in its referral decisions underlying Cases C‑11/04 and C‑12/04, plant-based feedingstuffs may present health risks that are comparable to those found in feedingstuffs of animal origin. Fratelli Martini and the institutions which have submitted observations in those cases referred correctly to the problems posed by aflatoxin B1, which is a carcinogenic, genotoxic toxin produced by certain types of fungus present on cereals and nuts, to the 1999 dioxin crisis, which had an impact on the manufacture of compound feedingstuffs in Belgium, and to cases of contamination of cereals by herbicides and the presence, in waste water used for the production of animal feedingstuffs, of a hormone used in the manufacture of human contraceptives. 59 As the Agent of the Danish Government stated at the hearing, it appears that the indication of the percentages of the components of a product allows for targeted examination in the event of contamination and makes it possible rapidly to remove suspect feedingstuffs from the market. According to the Danish Government, the indication of a high percentage of biological maize contained in a feedingstuff administered by a farmer to cattle allowed the Danish authorities, in 2004, to identify that component as being the likely source of a high level of aflatoxin B1 present in the milk produced by that farmer and intended for human consumption. This made it possible to withdraw immediately the contaminated product, without any need to await the result of laboratory analyses. 60 It must accordingly be held that the provisions of Directive 2002/2 which are under challenge in the cases in the main proceedings are likely to contribute directly to the pursuit of the objective of safeguarding public health. 61 It follows that the objections alleging that those provisions are invalid by reason of an incorrect legal basis are unfounded. Infringement of the principle of equal treatment62 By its fourth question in Case C‑12/04, the Consiglio di Stato asks whether Directive 2002/2 is to be declared unlawful as infringing the principle of equal treatment and non-discrimination by reason of the fact that manufacturers of animal feedingstuffs are subject to a regime under which they are required to provide quantitative information on the feed materials used in the manufacture of the compound animal feedingstuffs, whereas manufacturers of foodstuffs intended for human consumption are not so required. 63 It is settled case-law that the principle of equal treatment requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified (Arnold André, cited above, paragraph 68; Swedish Match, cited above, paragraph 70; and Joined Cases C‑154/04 and C‑155/04 Alliance for Natural Health and Others [2005] ECR I‑0000, paragraph 115). 64 The objective pursued by Directive 2002/2 is the protection of public health. Such an objective may justify a difference in treatment, particularly when one bears in mind the obligation under Article 152(1) EC to ensure a high level of human health protection in the definition and implementation of all Community policies and activities. 65 Furthermore, as the Council has quite correctly stressed, even though one might be able to demonstrate that equally restrictive measures may also be justified in areas in which such measures have not yet been taken, such as that of foodstuffs intended for human consumption, that does not constitute a sufficient reason for taking the view that the measures adopted within the area which is the subject of the Community measures in issue are not lawful on the ground of their discriminatory character. If that were not so, this would have the effect of bringing the level of public health protection down to that of the existing legislation which provides the least protection. 66 It follows that the examination of the question referred has not revealed any factor liable to affect the validity of Article 1(1)(b) and 1(4) of Directive 2002/2 in regard to the principle of equal treatment and non-discrimination. Infringement of the principle of proportionality67 By heading (c) of the question referred in Case C‑453/03, Question 2 in both Case C‑11/04 and Case C‑12/04, and Question 1(c) in Case C‑194/04, the respective referring courts are essentially asking whether the provisions of Article 1(1)(b) and 1(4) of Directive 2002/2 infringe the principle of proportionality. In this context, the Consiglio di Stato also asks the Court whether there may be an infringement of the precautionary principle in that those provisions were adopted without a risk analysis based on scientific studies having been carried out. 68 According to settled case-law, the principle of proportionality, which is one of the general principles of Community law, requires that measures implemented through Community provisions be appropriate for attaining the objective pursued and must not go beyond what is necessary to achieve it (Arnold André, paragraph 45, and Swedish Match, paragraph 47). 69 With regard to judicial review of the conditions referred to in the previous paragraph, it should be noted that the Community legislature must be allowed a broad discretion in an area such as that in issue in the present case, which involves political, economic and social choices on its part, and in which it is called on to undertake complex assessments. Consequently, the legality of a measure adopted in that area can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institutions are seeking to pursue (see, in this regard, Arnold André, paragraph 46, Swedish Match, paragraph 48, and Alliance for Hatural Health and Others, cited above, paragraph 52). Observations submitted to the Court70 The claimants in the main proceedings, supported by the Spanish and United Kingdom Governments, submit essentially that the notification of the precise composition of the feedingstuffs in question seriously affects their economic rights and interests and is not necessary for the protection of health in view of the legislation which already exists within the animal feedingstuff sector. 71 They rely in this regard on the other provisions of Directive 79/373, as amended by Directive 2002/2, in particular Article 5(5)(d), which requires the batch reference number to be indicated, and Article 12, which requires manufacturers to make available to the competent national authorities any document concerning the composition of feedingstuffs. According to the claimants in the main proceedings, those two obligations, the need for which they do not dispute, make it possible to ensure traceability of those feedingstuffs while at the same time respecting the economic interests of manufacturers, since those authorities are bound by an obligation of confidentiality and may use the information received only for the purpose of safeguarding public health. 72 With regard to the content of animal feedingstuffs, the claimants in the main proceedings cite Council Directive 70/524/EEC of 23 November 1970 concerning additives in feedingstuffs (OJ, English Special Edition 1970 (III), p. 840) and Council Directive 1999/29/EC of 22 April 1999 on the undesirable substances and products in animal nutrition (OJ 1999 L 115, p. 32). At the date of the hearing, the latter directive had been amended and recast by Directive 2002/32/EC of the European Parliament and of the Council of 7 May 2002 on undesirable substances in animal feed (OJ 2002 L 140, p. 10). 73 Finally, the claimants in the main proceedings cite Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety (OJ 2002 L 31, p. 1), which was adopted on the same day as Directive 2002/2 and which, they argue, constitutes the new framework legislation in regard to food safety. Article 18 of that regulation requires traceability, inter alia, of any substance liable to be incorporated into animal feed, and Article 20 of that regulation provides for procedures for withdrawing from the market foodstuffs which may be regarded as not satisfying animal feed safety requirements. 74 The Italian, Netherlands, Danish, Greek and French Governments, and the Parliament, Council and Commission, by contrast, take the view that, regard being had to the public-health objective being pursued, the requirement that the percentages of ingredients making up a feedingstuff be indicated does not infringe the principle of proportionality. 75 The Parliament also invokes an objective of transparency. It refers to the loss of credibility of the competent authorities as a result of the BSE crisis, which can be offset only by a policy of transparency. This factor, it submits, ought to be taken into consideration for the purpose of assessing the proportionality of a measure intended simply to allow breeders to decide on the feedingstuff for their livestock. It is in particular for that reason that it is not sufficient for manufacturers to inform the competent health authorities of the exact composition of feedingstuffs. Reply of the Court76 As has been pointed out in paragraphs 59 and 60 of the present judgment, the obligation to indicate the percentages of the ingredients of a feedingstuff is a measure which is liable to contribute to the objective of safeguarding animal and human health. It makes it possible to identify the ingredients of a feedingstuff that are suspected of having been contaminated without awaiting the results of laboratory analyses and to withdraw that feedingstuff rapidly from use. 77 In view of the requirement under Article 1(3) of Directive 2002/2 that the batch reference number of the product be indicated, that measure does not appear to be redundant. That indication makes it possible to establish the traceability of the batch of compound feedingstuffs, but not directly that of its ingredients. Furthermore, the investigation into traceability may require a certain period of time, whereas a situation involving the risk of a food crisis calls for a rapid reaction. 78 The same applies with regard to the other legislative measures referred to by the claimants in the respective main proceedings. These relate to the content of products (Directives 70/524 and 1999/29) or procedures relating to food safety (Regulation No 178/2002), but none of these contains any provision imposing an obligation to indicate the ingredients on a product. Those legislative measures thus do not enable the authorities concerned or the person using a product to have sufficient information for the immediate adoption of appropriate preventive measures in the event of a food crisis. 79 The different claimants in the respective main proceedings argue that the indication of the exact percentages of the ingredients of a product is no guarantee that the compound feedingstuff is safe or that its ingredients are not contaminated. It must, however, be pointed out that the purpose of the obligation to indicate the ingredients is not to guarantee that there is no contamination but rather, in the event that those ingredients are contaminated, to allow rapid identification of the feedingstuffs containing those ingredients. 80 That said, as the Advocate General has correctly stated in points 115 to 119 of his Opinion, it does not appear that the obligation imposed on manufacturers to inform customers, on request, of the exact quantitative composition of animal feedingstuffs is necessary for the purpose of pursuing that objective. 81 Apart from the indication of data within brackets, that is to say, with a margin of tolerance of ± 15% of the declared value, which must feature on the labelling of the product pursuant to Article 1(4) of Directive 2002/2, the manufacturer is required, on request by a customer, to notify the latter in writing of the exact percentages by weight of the feed materials used in the feedingstuff, in accordance with Article 1(1)(b) of Directive 2002/2. 82 As the claimants in the main proceedings have emphasised, the obligation to provide customers with the exact indication of the ingredients of a feedingstuff impacts seriously on the economic interests of manufacturers, as it obliges them to disclose the formulas for the composition of their products, at the risk of those products being used as models, possibly by those customers themselves, and that the manufacturers cannot obtain the benefit of the investments which they have made in terms of research and innovation. 83 An obligation of this kind cannot be justified by the objective of protecting public health which is being pursued and manifestly goes beyond what is necessary to attain that objective. It must be pointed out, inter alia, that this obligation is independent of any problem relating to foodstuff contamination and has to be met only if the customer so requests. Furthermore, it is clear from the explanations provided and from the examples submitted to the Court that the indication, on the labelling, of the percentages within brackets should normally make it possible to identify a foodstuff suspected of being contaminated, in order to assess the degree of danger which it represents in relation to the weight indicated and to decide, if necessary, to withdraw it temporarily pending the results of laboratory analyses, or for the establishment of the traceability of the product by the public authorities concerned. 84 Finally, irrespective of the control procedures established within the framework of Regulation No 178/2002, which was adopted on the same day as Directive 2002/2, it must be pointed out that Article 1(5) of Directive 2002/2 provides that manufacturers of compound feedingstuffs are obliged to make available to the authorities responsible for carrying out official inspections, on request, any document concerning the composition of feedingstuffs intended to be put into circulation which enables the accuracy of the information given by the labelling to be verified. 85 Regard being had to those factors, it must be held that Article 1(1)(b) of Directive 2002/2, which requires manufacturers of compound feedingstuffs to indicate, at a customer’s request, the exact composition of a feedingstuff, is invalid in the light of the principle of proportionality. By contrast, examination of the question submitted has not revealed any factor capable of affecting the validity of Article 1(4) of Directive 2002/2 in the light of that principle. 86 By heading (b) of the question referred in Case C‑453/03, Question 3 in Case C‑11/04 and Question 1(b) in Case C‑194/04, the respective referring courts also in substance asked the Court to rule on the validity of the provisions of Article 1(1)(b) and 1(4) of Directive 2002/2 on the ground that they are in breach of fundamental rights, in particular the right to property and the right freely to carry on a trade or profession. 87 It must be noted in this regard that, as is clear from settled case-law, the right to property, in the same way as the freedom to pursue an economic activity, forms part of the general principles of Community law. However, those principles are not absolute but must be viewed in relation to their social function. Consequently, the exercise of the right to property and the freedom to pursue an economic activity may be restricted, provided that any restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute in relation to the aim pursued a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed (see, most recently, Alliance for Natural Health and Others, cited above, paragraph 126). 88 However, in view of the reply given to the question concerning the principle of proportionality, it is no longer necessary to examine whether the contested provision adversely affects the right to property enjoyed by manufacturers of compound feedingstuffs or the right freely to carry on a trade or profession. The fact that no positive list was adopted89 By Question 3 in Case C‑12/04, the Consiglio di Stato asks whether Directive 2002/2 is to be interpreted as meaning that its application and, consequently, its effectiveness are subject to the adoption of the positive list of feed materials designated by their specific names, as provided for in recital (10) in the preamble to that directive. 90 Ferrari Mangimi Srl and the Spanish Government submit that this must be the case. They point out that the previous legislation imposed an obligation to indicate the feed materials in accordance with a provisional list and, in the event that that list could not be used, imposed the alternative obligation to declare the general categories of feed materials, such as those indicated in the annex to Directive 91/357. Directive 2002/2, they argue, repealed that legislation and provided for the establishment, by the Commission, of a positive list of feed materials. Following a study, however, the Commission concluded that the definition of such a list would not be entirely conclusive for the purpose of guaranteeing the safety of animal feedingstuffs and it did not submit any proposal for the establishment of such a list. The Commission’s report, they continue, stressed that it was impossible to include on a positive list thousands of separate products manufactured at different sites with a variety of technological methods and liable to present divergent levels of safety and differing nutritional and technical characteristics. That report also pointed out that the safety risk lay, not in the feed materials themselves, but rather in the possibility that they could be accidentally or maliciously contaminated. 91 The Spanish Government insists on the mandatory requirement of legal certainty, which requires that Community legislation should enable concerned persons to be aware of the precise scope of the obligations which it imposes on them. 92 The Greek Government finds that, as the registration, on a single list, of the substances liable to be used has not been harmonised by Community legislation, the regulation of this is accordingly a matter for national law. That de facto situation does not, it argues, prevent effective application of Directive 2002/2 in the Member States. 93 The Parliament, the Council and the Commission take the view that there is no connection between the adoption of the positive list envisaged in recital (10) in the preamble to Directive 2002/2, which is no more than an aspiration without any independent legal status and engages the Commission only in a political sense, and the implementation of the provisions on labelling. The Member States are therefore required to apply that directive independently of the adoption of such a list by confining themselves to insisting on the use of the common designations of the feed materials. 94 Recital (10) in the preamble to Directive 2002/2 provided that, on the basis of a feasibility study, the Commission should present a report to the Parliament and the Council by 31 December 2002, accompanied by an appropriate proposal and taking account of the conclusions of that report, for the establishment of a positive list of feed materials used in compound feedingstuffs for production animals. 95 It follows from the wording of that recital that the establishment of a proposal for a positive list of feed materials can constitute only an aspiration on the part of the Community legislature. That recital envisages merely the carrying-out of a feasibility study, the drafting of a report and the submission of an appropriate proposal which takes account of the conclusions reached in that report. 96 Moreover, the content of that recital is not reproduced in the operative part of the directive and examination of the directive does not in any way indicate that its implementation is contingent on the adoption of that positive list. More specifically, it does not appear that the labelling obligation cannot be complied with in the absence of such a list. 97 In regard to the repeal of Directive 91/357, it does not appear that this made it impossible to implement Directive 2002/2, as manufacturers can, in the absence of Community rules, or even national rules, in that regard, use current specific designations of the feed materials. 98 It follows that Directive 2002/2 must be interpreted as meaning that its application is not contingent on the adoption of the positive list of feed materials designated by their specific names referred to in recital (10) in the preamble to that directive. The powers of the competent national authorities to suspend application of a Community measure99 By its second question, the Rechtbank ’s-Gravenhage asks whether, if the conditions are satisfied under which a national court of a Member State is entitled to suspend implementation of a contested measure of the Community institutions, in particular where the question concerning the validity of that contested measure has already been referred by a national court of that Member State to the Court of Justice, the competent national authorities of the other Member States are themselves also entitled, without judicial intervention, to suspend application of that measure until such time as the Court of Justice has given a ruling on its validity. 100 Nevedi, the claimant in the main proceedings in Case C‑194/04, submits that the national court addressed its second question to the Court of Justice by reason of the fact that, as the body with competence to issue regulations applicable in matters of livestock feed in the Netherlands, the Productschap was about to suspend of its own motion, that is to say, without judicial intervention, the application of the open declaration rules pending a ruling by the Court in Case C‑453/03. It was because of the refusal of the Minister concerned to suspend the applicable rules that Nevedi was constrained to institute legal proceedings and to request the Rechtbank ’s-Gravenhage, acting pursuant to its jurisdiction to grant interim relief, to suspend those rules. 101 Nevedi points out that, when the conditions which, according to the Court’s case-law, govern the possibility of relying on the provisions of a directive before a national court are satisfied, all authorities, including the administrative authorities, are themselves also obliged to apply those provisions (see Case 103/88 Fratelli Costanzo [1989] ECR 1839, paragraphs 31 and 32). If those administrative authorities are obliged, in the same way as the judicial authorities, to apply the provisions of a directive, they ought also to be authorised, on grounds of procedural economy, to suspend application of a disputed Community measure under the same conditions as are those judicial authorities. 102 The Italian, Netherlands and Greek Governments, together with the Commission, refer to the Court’s case-law on interim measures, the guarantees of impartiality and independence provided by a national court, the need for a uniform application of Community law, and the objectives of the preliminary-ruling procedure. 103 As the Court has held in its judgment in Joined Cases C‑143/88 and C‑92/89 Zuckerfabrik Süderdithmarschen and Zuckerfabrik Soest [1991] ECR I‑415, paragraph 18 (‘Zuckerfabrik’), references for preliminary rulings on the validity of a measure, like actions for annulment, allow the legality of acts of the Community institutions to be reviewed. In the context of actions for annulment, Article 242 EC enables applicants to request enforcement of the contested act to be suspended and empowers the Court to order such suspension. The coherence of the system of interim legal protection therefore requires that national courts should also be able to order suspension of enforcement of a national administrative measure based on a Community regulation, the legality of which is contested (see also Case C‑465/93 Atlanta Fruchthandelsgesellschaft and Others (I) [1995] ECR I‑3761, paragraph 22, and Case C‑68/95 T. Port [1996] ECR I‑6065, paragraph 49; on the Court’s lack of jurisdiction to order interim measures in the context of preliminary-ruling proceedings, see the order of the President of the Court in Case C‑186/01 R Dory [2001] ECR I‑7823, paragraph 13). 104 The Court has, however, ruled that the uniform application of Community law, which is a fundamental requirement of the Community legal order, means that the suspension of enforcement of administrative measures based on a Community regulation, whilst it is governed by national procedural law, in particular as regards the making and examination of the application, must in all the Member States be subject, at the very least, to conditions which are uniform so far as the granting of such relief is concerned and which it has defined as being the same conditions as those of the application for interim relief brought before the Court (Zuckerfabrik, cited above, paragraphs 26 and 27). 105 The Court has pointed out in particular that, in order to determine whether the conditions relating to urgency and the risk of serious and irreparable damage have been satisfied, the national court dealing with the application for interim relief must examine the circumstances particular to the case before it and consider whether immediate enforcement of the measure which is the subject of the application for interim relief would be likely to result in irreversible damage to the applicant which could not be made good if the Community act were to be declared invalid (Zuckerfabrik, paragraph 29; Atlanta Fruchthandelsgesellschaft and Others (I), cited above, paragraph 41). 106 As the court responsible for applying, within the framework of its jurisdiction, the provisions of Community law and consequently under an obligation to ensure that Community law is fully effective, the national court, when dealing with an application for interim relief, must take account of the damage which the interim measure may cause to the legal regime established by a Community measure for the Community as a whole. It must consider, on the one hand, the cumulative effect which would arise if a large number of courts were also to adopt interim measures for similar reasons and, on the other, those special features of the applicant’s situation which distinguish it from the other operators concerned (Atlanta Fruchthandelsgesellschaft and Others (I), paragraph 44). 107 In particular, if the grant of interim relief may represent a financial risk for the Community, the national court must also be in a position to require the applicant to provide adequate guarantees, such as the deposit of money or other security (Zuckerfabrik, paragraph 32; Atlanta Fruchthandelsgesellschaft and Others (I), paragraph 45). 108 The unavoidable conclusion in this regard is that national administrative authorities, such as those in issue in Case C‑194/04, are not in a position to adopt interim measures while complying with the conditions for granting such measures as defined by the Court. 109 In this context, it is in particular appropriate to point out that the actual status of those authorities is not in general such as to guarantee that they have the same degree of independence and impartiality as that which national courts are recognised as having. Likewise, it is not certain that such authorities would benefit from the exercise of the adversarial principle inherent to judicial proceedings, which allows account to be taken of the arguments put forward by the different parties before the interests in issue are weighed one against the other at the time when a decision is being taken. 110 So far as concerns the argument that considerations of expedition or cost may justify the need to recognise the national administrative authorities as having competence, it must be emphasised that national courts ruling in applications for interim relief may in general adopt decisions within very short periods of time. In any event, an argument relating to expedition or cost cannot be conclusive in regard to the guarantees offered by the systems of judicial protection established by the respective legal systems of the Member States. 111 The answer to the question referred must therefore be that, even in the case in which a court of a Member State forms the view that the conditions have been satisfied under which it may suspend application of a Community measure, in particular where the question of the validity of that measure has already been referred to the Court, the competent national administrative authorities of the other Member States cannot suspend application of that measure until such time as the Court of Justice has ruled on its validity. National courts alone are entitled to verify, taking into consideration the specific circumstances of the cases brought before them, whether the conditions governing the grant of interim relief have been satisfied. Costs112 Since these proceedings are, for the parties to the main proceedings, a step in the actions pending before the national courts, the decision on costs is a matter for those courts. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. Examination of heading (a) of the question referred in Case C‑453/03, of Question 1 in Cases C‑11/04 and C‑12/04, and of Question 1(a) in Case C‑194/04 has not revealed any factor capable of supporting the conclusion that Article 1(1)(b) and 1(4) of Directive 2002/2/EC of the European Parliament and of the Council of 28 January 2002 amending Council Directive 79/373/EEC on the circulation of compound feedingstuffs and repealing Commission Directive 91/357/EEC was not validly adopted on the basis of Article 152(4)(b) EC. 2. Examination of Question 4 in Case C‑12/04 has not revealed any factor capable of affecting the validity of Article 1(1)(b) and 1(4) of Directive 2002/2 in the light of the principle of equal treatment and non-discrimination.3. Article 1(1)(b) of Directive 2002/2, which requires manufacturers of compound animal feedingstuffs to indicate, at a customer’s request, the exact composition of a feedingstuff, is invalid in the light of the principle of proportionality. By contrast, examination of heading (c) of the question referred in Case C‑453/03, of Question 2 in Cases C‑11/04 and C‑12/04, and Question 1(c) in Case C‑194/04 has not revealed any factor capable of affecting the validity of Article 1(4) of Directive 2002/2 in the light of that principle.4. Directive 2002/2 must be interpreted as meaning that its application is not contingent on the adoption of the positive list of feed materials designated by their specific names referred to in recital (10) in the preamble to that directive.5. Even in the case in which a court of a Member State forms the view that the conditions have been satisfied under which it may suspend application of a Community measure, in particular where the question of the validity of that measure has already been referred to the Court, the competent national administrative authorities of the other Member States cannot suspend application of that measure until such time as the Court has ruled on its validity. National courts alone are entitled to determine, taking into consideration the specific circumstances of the cases brought before them, whether the conditions governing the grant of interim relief have been satisfied.[Signatures]* Languages of the cases: English, Italian and Dutch. | 667aa-ba6405a-44d9 | EN |
WITHOUT BEING THE OWNER OF A TRADE MARK, A THIRD PARTY MAY USE IT IN ORDER TO INDICATE THE INTENDED PURPOSE OF A PRODUCT WHICH IT MARKETS | The Gillette Company and Gillette Group Finland OyvLA-Laboratories Ltd Oy(Reference for a preliminary ruling from the Korkein oikeus)(Trade marks – Directive 89/104/EEC – Article 6(1)(c) – Limitations on the protection conferred by the trade mark – Use by a third party where it is necessary to indicate the intended purpose of a product or service)Opinion of Advocate General Tizzano delivered on 9 December 2004 Judgment of the Court (Third Chamber), 17 March 2005. Summary of the Judgment1. Approximation of laws – Trade marks – Directive 89/104 – Limitation of the effects of the trade mark – Use of the mark by a third party in order to indicate the intended use of a product – Condition for lawfulness – Whether use necessary – Criteria for assessment – Verification by the national court – Same criteria applied to accessories and spare parts as to other categories of possible intended purposes(Council Directive 89/104, Art. 6(1)(c))2. Approximation of laws – Trade marks – Directive 89/104 – Limitation of the effects of the trade mark – Use of the mark by a third party in order to indicate the intended use of a product – Condition for lawfulness – Use in accordance with honest practices in industrial and commercial matters – Criteria for assessment – Verification by the national court3. Approximation of laws – Trade marks – Directive 89/104 – Limitation of the effects of the trade mark – Use of the mark by a third party in order to indicate the intended use of a product – Marketing not only of spare parts or accessories but also of the product itself – Conditions for lawfulness – Whether necessary and in accordance with honest practices in industrial and commercial matters regarding the use of the mark1. The lawfulness or otherwise of a third party’s use of a trade mark to indicate the intended purpose of a product or service, under Article 6(1)(c) of First Directive 89/104 on trade marks, depends on whether that use is necessary to indicate the purpose of the product. That is the case where such use in practice constitutes the only means of providing the public with comprehensible and complete information on that intended purpose in order to preserve the undistorted system of competition in the market for that product. It is for the national court to determine whether that condition is fulfilled, taking account of the nature of the public for which the product marketed by the third party in question is intended. Since, moreover, that provision makes no distinction between the possible intended purposes of products when assessing the lawfulness of the use of the trade mark, the criteria for assessing the lawfulness of the use of the trade mark with accessories or spare parts in particular are thus no different from those applicable to other categories of possible intended purposes for the products. (see para. 39, operative part 1)2. The condition of ‘honest use’ within the meaning of Article 6(1)(c) of Directive 89/104 on trade marks, constitutes in substance the expression of a duty to act fairly in relation to the legitimate interests of the trade mark owner. The use of the trade mark will not be in accordance with honest practices in industrial and commercial matters if, for example:– it is done in such a manner as to give the impression that there is a commercial connection between the third party and the trade mark owner; – it affects the value of the trade mark by taking unfair advantage of its distinctive character or repute;– it entails the discrediting or denigration of that mark,– or where the third party presents its product as an imitation or replica of the product bearing the trade mark of which it is not the owner. The fact that a third party uses a trade mark of which it is not the owner in order to indicate the intended purpose of the product which it markets does not necessarily mean that it is presenting it as being of the same quality as, or having equivalent properties to, those of the product bearing the trade mark. Whether there has been such presentation depends on the facts of the case, and it is for the referring court to determine whether it has taken place by reference to the circumstances. Whether the product marketed by the third party has been presented as being of the same quality as, or having equivalent properties to, the product whose trade mark is being used is a factor which the referring court must take into consideration when it verifies that that use is made in accordance with honest practices in industrial or commercial matters. (see para. 49, operative part 2)3. Where a third party that uses a trade mark of which it is not the owner markets not only a spare part or an accessory but also the product itself with which the spare part or accessory is intended to be used, such use falls within the scope of Article 6(1)(c) of Directive 89/104 on trade marks in so far as it is necessary to indicate the intended purpose of the product marketed by the latter and is made in accordance with honest practices in industrial or commercial matters. (see para. 53, operative part 3)JUDGMENT OF THE COURT (Third Chamber)17 March 2005(1)THE COURT (Third Chamber),,after hearing the Opinion of the Advocate General at the sitting on 9 December 2004,gives the followingLegal backgroundany sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered; any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.’ affixing the sign to the goods or to the packaging thereof; offering the goods, or putting them on the market or stocking them for these purposes …’the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts; it does not create confusion in the market place between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor; it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor; it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products; it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name.’ What are the criteria a) on the basis of which the question of regarding a product as a spare part or accessory is to be decided, and on the basis of which the question of regarding a product as a spare part or accessory is to be decided, and b) on the basis of which those products to be regarded as other than spare parts and accessories which can also fall within the scope of the said subparagraph are to be determined? on the basis of which those products to be regarded as other than spare parts and accessories which can also fall within the scope of the said subparagraph are to be determined? Is the permissibility of the use of a third party’s trade mark to be assessed differently, depending on whether the product is like a spare part or accessory or whether it is a product which can fall within the scope of the said subparagraph on another basis? How should the requirement that the use must be “necessary” to indicate the intended purpose of a product be interpreted? Can the criterion of necessity be satisfied even though it would in itself be possible to state the intended purpose without an express reference to the third party’s trade mark, by merely mentioning only for instance the technical principle of functioning of the product? What significance does it have in that case that the statement may be more difficult for consumers to understand if there is no express reference to the third party’s trade mark? What factors should be taken into account when assessing use in accordance with honest commercial practice? Does mentioning a third party’s trade mark in connection with the marketing of one’s own product constitute a reference to the fact that the marketer’s own product corresponds, in quality and technically or as regards its other properties, to the product designated by the third party’s trade mark? Does it affect the permissibility of the use of a third party’s trade mark that the economic operator who refers to the third party’s trade mark also markets, in addition to a spare part or accessory, a product of his own with which that spare part or accessory is intended to be used with?’ it is done in such a manner as to give the impression that there is a commercial connection between the third party and the trade mark owner; it affects the value of the trade mark by taking unfair advantage of its distinctive character or repute;it entails the discrediting or denigration of that mark;or where the third party presents its product as an imitation or replica of the product bearing the trade mark of which it is not the owner. The lawfulness or otherwise of the use of the trade mark under Article 6(1)(c) of the First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks depends on whether that use is necessary to indicate the intended purpose of a product. The condition of ‘honest use’ within the meaning of Article 6(1)(c) of Directive 89/104, constitutes in substance the expression of a duty to act fairly in relation to the legitimate interests of the trade mark owner. – it is done in such a manner as to give the impression that there is a commercial connection between the third party and the trade mark owner; – it affects the value of the trade mark by taking unfair advantage of its distinctive character or repute; – it entails the discrediting or denigration of that mark; – or where the third party presents its product as an imitation or replica of the product bearing the trade mark of which it is not the owner. Where a third party that uses a trade mark of which it is not the owner markets not only a spare part or an accessory but also the product itself with which the spare part or accessory is intended to be used, such use falls within the scope of Article 6(1)(c) of Directive 89/104 in so far as it is necessary to indicate the intended purpose of the product marketed by the latter and is made in accordance with honest practices in industrial and commercial matters. 1 – Language of the case: Finnish. Language of the case: Finnish. | 58d08-b946d6e-4f6d | EN |
ASSISTANCE COVERING MAINTENANCE COSTS OF STUDENTS FALLS WITHIN THE SCOPE OF APPLICATION OF THE EC TREATY FOR THE PURPOSES OF THE PROHIBITION OF DISCRIMINATION ON GROUNDS OF NATIONALITY | The Queen, on the application of Dany BidarvLondon Borough of Ealing and Secretary of State for Education and Skills(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court)) (Citizenship of the Union – Articles 12 EC and 18 EC – Assistance for students in the form of subsidised loans – Provision limiting the grant of such loans to students settled in national territory)Opinion of Advocate General Geelhoed delivered on 11 November 2004 Judgment of the Court (Grand Chamber), 15 March 2005 Summary of the Judgment1. EC Treaty – Scope of application for the purposes of the prohibition of any discrimination on grounds of nationality – Assistance provided to students to cover their maintenance costs – Included – National legislation reserving the grant of such assistance to students settled in the national territory – Not possible for students who are nationals of other Member States to be regarded as settled – Not permissible(Art. 12 EC)2. Preliminary rulings – Interpretation – Temporal effect of interpretative judgments – Retroactive effect – Limits imposed by the Court – Conditions – Significance for the Member State concerned of the financial consequences of a judgment – Not decisive(Art. 234 EC)1. Assistance, whether in the form of subsidised loans or of grants, provided to students lawfully resident in the host Member State to cover their maintenance costs falls within the scope of application of the Treaty for the purposes of the prohibition of discrimination laid down in the first paragraph of Article 12 EC. That provision must be interpreted as precluding national legislation which grants students the right to such assistance only if they are settled in the host Member State, while excluding a national of another Member State from obtaining, as a student, the status of settled person, even if that national is lawfully resident and has received a substantial part of his secondary education in the host Member State and has consequently established a real link with the society of that State. It is indeed legitimate for a Member State to grant such assistance only to students who have demonstrated a certain degree of integration into the society of that State. It cannot, however, require the students concerned to establish a link with its employment market. On the other hand, the existence of a certain degree of integration may be regarded as established by a finding that the student in question has resided in the host Member State for a certain length of time. However, by precluding any possibility of a national of another Member State obtaining settled status as a student, that legislation makes it impossible for such a national, whatever his actual degree of integration, to enjoy the right to assistance, and consequently prevents him from being able to pursue his studies under the same conditions as a national of that State who is in the same situation. (see paras 48, 57-59, 61-63, operative part 1, 2)2. The interpretation the Court gives to a rule of Community law is limited to clarifying and defining the meaning and scope of that rule as it ought to have been understood and applied from the time of its coming into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships arising and established before the judgment ruling on the request for interpretation, provided that in other respects the conditions enabling an action relating to the application of that rule to be brought before the courts having jurisdiction are satisfied. It is only exceptionally that the Court may, in application of the general principle of legal certainty inherent in the Community legal order, be moved to restrict the possibility for any person concerned of relying on a provision it has interpreted with a view to calling in question legal relationships established in good faith. The financial consequences which might ensue for a Member State from a preliminary ruling do not in themselves justify limiting the temporal effect of the ruling. (see paras 66-68, operative part 3)JUDGMENT OF THE COURT (Grand Chamber)15 March 2005(1)THE COURT (Grand Chamber),,after hearing the Opinion of the Advocate General at the sitting on 11 November 2004,gives the followingLegal backgrounddeveloping the European dimension in education, particularly through the teaching and dissemination of the languages of the Member States, encouraging mobility of students and teachers, by encouraging inter alia, the academic recognition of diplomas and periods of study, promoting cooperation between educational establishments,developing exchanges of information and experience on issues common to the education systems of the Member States,encouraging the development of youth exchanges and of exchanges of socio-educational instructors,encouraging the development of distance education.acting in accordance with the procedure referred to in Article 251, after consulting the Economic and Social Committee and the Committee of the Regions, shall adopt incentive measures, excluding any harmonisation of the laws and regulations of the Member States, acting by a qualified majority on a proposal from the Commission, shall adopt recommendations.’he is ordinarily resident in England and Wales on the first day of the first academic year of the course;he has been ordinarily resident throughout the three-year period preceding that day in the United Kingdom and Islands; andhis residence in the United Kingdom and Islands has not during any part of that three-year period been wholly or mainly for the purpose of receiving full-time education. Whether, given the decisions of the Court of Justice of the European Communities in … Lair … and … Brown … and developments in the law of the European Union, including the adoption of Article 18 EC and developments in relation to the competence of the European Union in the field of education, assistance with maintenance costs for students attending university courses, such assistance being given by way of either (a) subsidised loans or (b) grants, continues to fall outside the scope of the application of the EC Treaty for the purposes of Article 12 EC and the prohibition on discrimination on grounds of nationality? If either part of question 1 is answered in the negative, and if assistance with maintenance costs for students in the form of grants or loans [does] now fall within the scope of Article 12 EC, what criteria should the national court apply in determining whether the conditions governing eligibility for such assistance are based on objectively justifiable considerations not dependent on nationality? If either part of question 1 is answered in the negative, whether Article 12 EC may be relied upon to claim entitlement to assistance with maintenance costs from a date prior to the date of the judgment of the Court of Justice in the present case and, if [not], whether an exception should be made for those who initiated legal proceedings before that date?’ Assistance, whether in the form of subsidised loans or of grants, provided to students lawfully resident in the host Member State to cover their maintenance costs falls within the scope of application of the EC Treaty for the purposes of the prohibition of discrimination laid down in the first paragraph of Article 12 EC. The first paragraph of Article 12 EC must be interpreted as precluding national legislation which grants students the right to assistance covering their maintenance costs only if they are settled in the host Member State, while precluding a national of another Member State from obtaining the status of settled person as a student even if that national is lawfully resident and has received a substantial part of his secondary education in the host Member State and has consequently established a genuine link with the society of that State. There is no need to limit the temporal effects of the present judgment. 1 – Language of the case: English. Language of the case: English. | 50c2a-39aa599-4982 | EN |
THE ACTION BROUGHT BY SPAIN CHALLENGING CALLS FOR APPLICATIONS ISSUED BY EUROJUST IS INADMISSIBLE | Kingdom of SpainvEurojust(Action for annulment under Article 230 EC – Action brought by a Member State challenging calls for applications, issued by Eurojust, for positions as members of the temporary staff – No jurisdiction of the Court – Inadmissible) Opinion of Advocate General Poiares Maduro delivered on 16 December 2004 Judgment of the Court (Grand Chamber), 15 March 2005. Summary of the Judgment1. Procedure – Legal basis of an action – Choice for the applicant and not the Community judicature – Admissibility assessed in the light of the applicant’s choice2. Actions for annulment – Challengeable acts – Action brought by a Member State against a call for applications, issued by Eurojust, for positions as members of the temporary staff – Excluded – Requirement for judicial review – Rules(Article 230 EC; Article 35 EU, 41 EU, 46(b) EU; Statute of the Court, Arts 40 and 56; Staff Regulations of Officials, Art. 91; Council Decision 2002/187, Art. 30)1. In judicial proceedings, it is for the applicant to choose the legal basis of its action and not for the Community judicature itself to choose the most appropriate legal basis. It follows that, where the applicant brings its action under a particular provision, while leaving to the discretion of the Court the choice of the most appropriate legal basis to examine that action, the admissibility of that action must be examined in the light of that provision. (see para. 35)2. A call for applications, issued by Eurojust, for positions as members of the temporary staff is not capable of being the subject of an action for annulment under Article 230 EC. Such a call is not included in the list of acts the legality of which the Court may review under that article. Moreover, Article 41 EU does not provide that Article 230 EC is to apply to the provisions on police and judicial cooperation in criminal matters in Title VI of the EU Treaty, the jurisdiction of the Court in such matters being defined in Article 35 EU, to which Article 46(b) EU refers. Such a call for applications is not, however, exempt from judicial review, for, as is clear from Article 30 of Decision 2002/187, setting up Eurojust with a view to reinforcing the fight against serious crime, Eurojust staff are to be subject to the rules and regulations applicable to officials and other servants of the European Communities. It follows that the main parties concerned, namely the candidates for the various positions in the contested calls for applications, have access to the Community Courts under the conditions laid down in Article 91 of the Staff Regulations of Officials. In the event of such an action, Member States would be entitled to intervene in the proceedings in accordance with Article 40 of the Statute of the Court of Justice and could, where appropriate, as is clear from the second and third paragraphs of Article 56 of that Statute, appeal against the judgment of the Court of First Instance. (see paras 36-38, 40-43)JUDGMENT OF THE COURT (Grand Chamber)15 March 2005(1)applicant,defendant,THE COURT (Grand Chamber),,after hearing the Opinion of the Advocate General at the sitting on 16 December 2004,gives the followingLawadopt decisions for any other purpose consistent with the objectives of this title, excluding any approximation of the laws and regulations of the Member States. These decisions shall be binding and shall not entail direct effect; the Council, acting by a qualified majority, shall adopt measures necessary to implement those decisions at the level of the Union; provisions of Title VI, under the conditions provided for by Article 35; …’.‘1. The engagement of temporary staff shall be directed to securing for the institution the services of persons of the highest standard of ability, efficiency and integrity, recruited on the broadest possible geographical basis from among nationals of Member States of the Communities. …2. A member of the temporary staff may be engaged only on condition that:he produces evidence of a thorough knowledge of one of the languages of the Communities and of a satisfactory knowledge of another language of the Communities to the extent necessary for the performance of his duties.’ for the position of Data-protection Officer (OJ 2003 C 34 A, p. 1), ‘excellent knowledge of English and French. Ability to work in other European Community languages would be an asset’; for the position of Accounting Officer (OJ 2003 C 34 A, p. 4), ‘thorough knowledge of one official language of the European Union and a satisfactory knowledge of another language of the Union, including a satisfactory knowledge of English’; for the position of IT‑informatics expert (webmaster) of the European judicial network (OJ 2003 C 34 A, p. 6), ‘a good knowledge of English is essential. Capacity to communicate in at least two other official languages of the European Communities, including French, will definitely be considered an asset’; for the position of Legal Officer (OJ 2003 C 34 A, p. 11), ‘excellent knowledge of English and French. Ability to work in other European Community languages would be an asset’; for the position of Librarian/Archivist (OJ 2003 C 34 A, p. 13), no particular requirements;for the position of Press Officer (OJ 2003 C 34 A, p. 16), ‘capacity to communicate in at least English and French. Knowledge of other official languages of the European Communities will be an asset’; for the position of Secretary to the General Administration (OJ 2003 C 34 A, p. 18), ‘a thorough knowledge of English and French. A satisfactory knowledge of other Community languages would definitely be considered an asset’. Declares that the application is inadmissible;Orders the Kingdom of Spain to pay the costs;Orders the Republic of Finland to bear its own costs. 1 – Language of the case: Spanish. Language of the case: Spanish. | 2232a-a89ce88-4179 | EN |
ACCORDING TO ADVOCATE GENERAL POIARES MADURO, THE PROVISIONS OF SPANISH LAW LIMITING THE RIGHT TO DEDUCT VAT OF TAXABLE PERSONS IN RECEIPT OF SUBSIDIES FOR THE PURPOSE OF FUNDING THEIR ACTIVITIES ARE CONTRARY TO COMMUNITY LAW | Commission of the European CommunitiesvKingdom of Spain(Failure of a Member State to fulfil obligations –– Articles 17 and 19 of the Sixth VAT Directive –– Subsidies –– Limitation of the right to deduct)Opinion of Advocate General Poiares Maduro delivered on 10 March 2005 Judgment of the Court (Third Chamber), 6 October 2005 Summary of the JudgmentTax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax – Limitations on the right to deduct – Subsidies – National legislation providing for a deductible proportion of tax for taxable persons who carry out only taxable transactions, and limiting the right to deduct tax on the purchase of goods and services which are subsidised – Not permissible (Council Directive 77/388, Arts 17(2) and (5), and 19)A Member State which, in the context of subsidised activities, provides for a deductible proportion of value added tax for taxable persons who carry out only taxable transactions, and which lays down a special rule which limits the right to deduct value added tax on the purchase of goods and services which are subsidised, fails to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes. (see para. 31, operative part)JUDGMENT OF THE COURT (Third Chamber)6 October 2005 (*) (Failure of a Member State to fulfil its obligations – Articles 17 and 19 of the Sixth VAT Directive – Subsidies – Limitation of the right to deduct)In Case C-204/03,ACTION under Article 226 EC for failure to fulfil obligations, brought on 14 May 2003,Commission of the European Communities, represented by E. Traversa and L. Lozano Palacios, acting as Agents, with an address for service in Luxembourg, applicant,Kingdom of Spain, represented by N. Díaz Abad, acting as Agent, with an address for service in Luxembourg, defendant,THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, J.-P. Puissochet, S. von Bahr (Rapporteur), J. Malenovský and U. Lõhmus, Judges, Advocate General: M. Poiares Maduro,Registrar: R. Grass,having regard to the written procedure, after hearing the Opinion of the Advocate General at the sitting on 10 March 2005,gives the followingJudgment1 By its application, the Commission of the European Communities seeks a declaration from the Court that, by providing for a deductible proportion of value added tax (‘VAT’) for taxable persons who carry out only taxable transactions, and by laying down a special rule which limits the right to deduct VAT on the purchase of goods and services which are subsidised, the Kingdom of Spain has failed to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), as amended by Council Directive 95/7/EC of 10 April 1995 (OJ 1995 L 102, p. 18; ‘the Sixth Directive’). Legal framework Community legislation 2 Article 11A(1)(a) of the Sixth Directive provides that the taxable amount shall be:‘in respect of supplies of goods and services … everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies including subsidies directly linked to the price of such supplies’. 3 Article 17(2)(a) of the directive, in the version resulting from Article 28f thereof, provides that, ‘[i]n so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay … value added tax due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person’. 4 Article 17(5) provides that: ‘As regards goods and services to be used by a taxable person both for transactions covered by paragraphs 2 and 3, in respect of which value added tax is deductible, and for transactions in respect of which value added tax is not deductible, only such proportion of the value added tax shall be deductible as is attributable to the former transactions. This proportion shall be determined, in accordance with Article 19, for all the transactions carried out by the taxable person.…’5 Article 19(1) of the Sixth Directive, entitled ‘Calculation of the deductible proportion’, states that: ‘The proportion deductible under the first subparagraph of Article 17(5) shall be made up of a fraction having: – as numerator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions in respect of which value added tax is deductible under Article 17(2) and (3); – as denominator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions included in the numerator and to transactions in respect of which value added tax is not deductible. The Member States may also include in the denominator the amount of subsidies, other than those specified in Article 11A(1)(a). National legislation 6 Article 102 of Law No 37/1992 of 28 December 1992 on value added tax (BOE No 312 of 29 December 1992, p. 44247), as amended by Law No 66/1997 of 30 December 1997 (BOE No 313 of 31 December 1997, p. 38517; ‘Law No 37/1992’), is devoted to the proportion rule governing deduction of that tax. The first paragraph of that article states that: ‘The proportion rule shall apply where the taxable person in the course of his trade or business carries out both supplies of goods or services in respect of which value added tax is deductible and other transactions of a similar nature in respect of which it is not. The proportion rule shall also apply where the taxable person receives subsidies which, in accordance with Article 78(2)(3) of this Law, do not form part of the taxable amount, inasmuch as they are intended to fund the taxable person’s trade or business activities.’ 7 Article 104 of Law No 37/1992 refers to the general proportion. The second paragraph of Article 104(2)(2) states that: ‘Capital subsidies shall be included in the denominator of the proportion, but they may be imputed in fifths to the tax year during which they were received and to the four following tax years. Nevertheless, capital subsidies granted in order to fund the purchase of certain goods or services, acquired in connection with transactions that are taxable and not exempted from VAT, will reduce exclusively the amount of the deduction of VAT borne or paid in respect of those transactions, to the precise extent to which they have contributed to their funding.’ Pre-litigation procedure 8 The Commission initiated the infringement procedure under Article 226 EC by a letter of formal notice sent to the Spanish Government on 20 April 2001, in which it maintained that Article 102 and the second paragraph of Article 104(2)(2) of Law No 37/1992 restrict, contrary to Articles 17(2) and (5) and 19 of the Sixth Directive, the right to deduct VAT. 9 The Kingdom of Spain submitted its observations in response to that letter of formal notice by letter of 28 May 2001. 10 Unsatisfied with that response, the Commission sent a reasoned opinion on 27 June 2002 requesting that Member State to adopt the measures necessary to comply with the opinion within two months of its notification. 11 By letter of 20 September 2002, the Kingdom of Spain replied to the reasoned opinion, reiterating its disagreement with the position adopted by the Commission. The action Preliminary considerations 12 It should be noted that the provisions of Law No 37/1992, referred to in paragraphs 6 and 7 of the present judgment, contain a general rule and a special rule. 13 Under the general rule, laid down in Article 102 of the Law read in conjunction with the first sentence of the provisions of Article 104 of that same law, cited in paragraph 7 of the present judgment, subsidies to finance the trade or business of a taxable person, which do not form part of the basis of VAT assessment, are taken into account in the calculation of the deductible proportion in so far as they are part of the denominator of the portion which that proportion results from. Those subsidies thus generally diminish the right to deduct enjoyed by taxable persons. The latter consist not only of taxable persons who use the goods and services obtained as inputs to carry out, at the same time, transactions in respect of which VAT is deductible and other transactions of a similar nature in respect of which it is not (‘mixed taxable persons’), but also taxable persons who use goods and services exclusively to carry out transactions in respect of which VAT is deductible (‘fully taxable persons’). 14 The special rule is contained in the second sentence of the provisions of Article 104 of Law No 37/1992, cited in paragraph 7 of the present judgment. Under that rule, subsidies granted specifically to fund the purchase of certain goods or services acquired in connection with transactions that are taxable and not exempted from VAT reduce exclusively the amount of the deduction of VAT borne or paid in respect of those transactions, to the precise extent to which they have contributed to their funding. Consequently, in the case of a subsidy amounting, for example, to 20% of the purchase price of a good or service, the right to deduct the VAT specifically imposed on that good or service is reduced by 20%. Arguments of the parties15 The Commission submits that the general rule laid down by Law No 37/1992 unlawfully extends the restriction of the right to deduct laid down in Article 17(5), read in conjunction with Article 19 of the Sixth Directive, by applying that restriction not only to mixed taxable persons but also to fully taxable persons. In addition, the special rule set out in that Law introduces a mechanism of deduction which is not provided for in the Sixth Directive and is thus contrary to it. 16 The Spanish Government considers, for its part, that the Commission gives the Sixth Directive a literal interpretation which fails to take account of the objectives of the text and, in particular, the principle that VAT should be neutral. 17 According to that government, Article 19 of the Sixth Directive does not simply constitute a rule for calculating the proportion mentioned in Article 17(5) of that directive aimed at calculating, in the case of mixed taxable persons, the proportion of taxed activities in respect of which VAT is deductible in relation to the total amount of the taxable person’s taxed and exempted activities. By providing in Article 19 that Member States may include in the denominator of the proportion subsidies which are not directly linked to the price of the transactions and which are therefore not included in the taxable amount as defined in Article 11A(1)(a) of that directive, the legislature introduced an exception to the rule laid down in Article 17(5) as regards mixed taxable persons by allowing restrictions of the right to deduct of fully taxable persons. 18 The Spanish Government submits that the purpose of Article 19 of the Sixth Directive is to allow Member States to re-establish the balance as regards competition and, in doing that, to observe the principle that tax should be neutral. In support of that view it cites the example of a transporter who obtains a subsidy to purchase a vehicle. The subsidy allows him to reduce the cost of his service and, thus, the amount of VAT applicable to it. Furthermore, if, with the help of that subsidy, the transporter can deduct the whole VAT on the amount spent on inputs, he gains a further advantage over his competitors who have not received subsidies. 19 The Spanish Government adds that the special rule laid down in Law No 37/1992 provides for a restriction of the right to deduct which is more limited than that which results from the application of Article 19 of the Sixth Directive, since it concerns the deduction of VAT relating only to the goods or services obtained with the help of the subsidy and it has no impact on the deduction of tax as regards other goods or services obtained by the taxable person. 20 As an ancillary point, the Spanish Government requests the Court, should it not agree with the interpretation which that government puts forward, to limit the effects in time of its judgment. The non-retroactive application of the effects of the judgment is justified, first, by the fact that the Spanish authorities acted in good faith in adopting the legislation at issue and, second, by the problems which the Court’s judgment could give rise to. Findings of the Court 21 Article 17(2) of the Sixth Directive sets out the principle of the right to deduct VAT. The latter concerns input tax on the goods and services used by taxable persons for the needs of their taxed transactions. 22 Where the taxable person carries out, at the same time, transactions in respect of which VAT is deductible and exempted transactions in respect of which it is not, Article 17(5) of the directive states that only such proportion of the VAT shall be deductible as is attributable to the taxed transactions. That proportion is calculated according to the method laid down in Article 19 of the directive. 23 As the Court has repeatedly pointed out, any limitation of the right to deduct VAT affects the level of the tax burden and must be applied in a similar manner in all the Member States. Consequently, derogations are permitted only in the cases expressly provided for in the Sixth Directive (see, in particular, Case 50/87 Commission v France [1988] ECR 4797, paragraph 17, Case C-62/93 BP Supergas [1995] ECR I-1883, paragraph 18, and Case C-409/99 Metropol and Stadler [2002] ECR I-81, paragraph 42). 24 In that regard, it must be noted that Article 19 of the Sixth Directive, entitled ‘Calculation of the deductible proportion’, refers expressly to Article 17(5) of that directive, to which it is wholly related. 25 The provisions of the second indent of Article 19(1) on subsidies other than those specified in Article 11A(1)(a) of the Sixth Directive, that is to say subsidies which are not included in the price of the good or service provided and which do not form part of the taxable amount, must be read in the light of Article 17(5). However, as is clear from its wording, Article 17(5) only applies to mixed taxable persons. It follows that, given that it is not an exception applicable to both mixed and fully taxable persons, the second indent of Article 19(1) permits limitations of the right to deduct, taking account of the subsidies thus defined, only in the case of mixed taxable persons. 26 Consequently, by extending the restriction of the right to deduct to fully taxable persons, the general rule laid down in Law No 37/1992 introduces a restriction which goes beyond the one expressly provided for in Articles 17(5) and 19 of the Sixth Directive and infringes the provisions of the directive. 27 In relation to the special rule set out in the Law, it is sufficient to point out that it introduces a mechanism for limiting the right to deduct which is not provided for in Articles 17(5) and 19 of the Sixth Directive or in any other provision of the directive. Consequently, such a mechanism is not authorised by the directive. 28 The Spanish Government’s argument that its interpretation of Article 19 of the Sixth Directive enables balance in terms of competition, and hence the principle that VAT should be neutral, to be observed must be rejected. The Member States are required to apply the Sixth Directive even if they consider it to be less than perfect. As indicated in Case C-388/98 Commission v Netherlands [2001] ECR I-8265, paragraphs 55 and 56, even if the interpretation put forward by certain Member States better served certain aims of the Sixth Directive, such as fiscal neutrality, the Member States may not disregard the provisions expressly laid down in that directive by introducing, in this case, limitations of the right to deduct other than those laid down in Articles 17 and 19 of that directive. 29 As regards the restriction of the effects in time of the Court’s judgment requested by the Spanish Government, it must be noted that it is only exceptionally that the Court may, in application of the general principle of legal certainty inherent in the Community legal order, be moved to decide on such a restriction. 30 In that regard, and as pointed out by the Advocate General in paragraph 24 of his Opinion, it must be established that the State authorities were prompted to adopt legislation or conduct contrary to Community law because of objective and significant uncertainty regarding the implications of the Community provisions concerned (see, to that effect, Case C-359/97 Commission v United Kingdom [2000] ECR I-6355, paragraph 92). However, there was no such uncertainty in this instance. It is thus not necessary to restrict the effects in time of the present judgment. 31 In the light of those considerations, it must be held that, by providing for a deductible proportion of VAT for taxable persons who carry out only taxable transactions, and by laying down a special rule which limits the right to deduct VAT on the purchase of goods and services which are subsidised, the Kingdom of Spain has failed to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of the Sixth Directive. Costs32 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Kingdom of Spain has been unsuccessful in its pleas, the latter must be ordered to pay the costs. On those grounds, the Court (Third Chamber) hereby:1. Declares that, by providing for a deductible proportion of value added tax for taxable persons who carry out only taxable transactions, and by laying down a special rule which limits the right to deduct VAT on the purchase of goods and services which are subsidised, the Kingdom of Spain has failed to fulfil its obligations under Community law, and, in particular, Articles 17(2) and (5) and 19 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 95/7/EC of 10 April 1995; 2. Orders the Kingdom of Spain to pay the costs. [Signatures]* Language of the case: Spanish. | a3432-9cb1a7d-44d0 | EN |
FRENCH LEGISLATION WHICH RESTRICTS THE BENEFIT OF A TAX CREDIT ONLY TO RESEARCH CARRIED OUT IN FRANCE RESTRICTS THE FREEDOM TO PROVIDE SERVICES | Laboratoires Fournier SAvDirection des vérifications nationales et internationales(Reference for a preliminary ruling from the Tribunal administratif de Dijon)(Restrictions on the freedom to provide services – Tax legislation – Corporation tax – Tax credit for research)Opinion of Advocate General Jacobs delivered on 9 December 2004 Judgment of the Court (Third Chamber), 10 March 2005 Summary of the JudgmentFreedom to provide services – Restrictions – Tax legislation – Corporation tax – National legislation restricting the benefit of a tax credit for research to research carried out in that Member State – Not permissible – Justification – None(Art. 49 EC)Article 49 EC precludes legislation of a Member State which restricts the benefit of a tax credit for research only to research carried out in that Member State. Such legislation is, albeit indirectly, based upon the place of establishment of the provider of services and is consequently liable to restrict its cross-border activities. It cannot be justified by the need to safeguard the coherence of the tax system, to promote research or to ensure effective fiscal supervision. (see paras 18, 20, 23-24, 26, operative part)JUDGMENT OF THE COURT (Third Chamber)10 March 2005(1)THE COURT (Third Chamber),,after hearing the Opinion of the Advocate General at the sitting on 9 December 2004,gives the followingNational legislationIndustrial and commercial or agricultural undertakings assessed on their actual profit may receive a tax credit equal to 50% of the amount by which research expenditure in the course of a year exceeds the average expenditure of the same nature, recalculated in line with any increase in the retail price index excluding tobacco, incurred in the course of the two preceding years ...’ 1 – Language of the case: French. Language of the case: French. | f1f91-82ab9d9-479a | EN |
DISTANCE CONTRACTS FOR CAR HIRE ARE NOT COVERED BY THE RIGHT TO A FULL REFUND IN THE EVENT OF CANCELLATION BY THE CONSUMER | easyCar (UK) LtdvOffice of Fair Trading(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Chancery Division)(Protection of consumers in respect of distance contracts – Directive 97/7/EC – Contracts for the provision of transport services – Concept – Car hire contracts)Opinion of Advocate General Stix-Hackl delivered on 11 November 2004 Judgment of the Court (First Chamber), 10 March 2005. Summary of the JudgmentApproximation of laws – Protection of consumers in respect of distance contracts – Directive 97/7 – Scope – Exemptions provided for under Article 3(2) – Contracts for the provision of transport services – Meaning – Contracts for the provision of car hire services – Included(Parliament and Council Directive 97/7, Art. 3(2))Article 3(2) of Directive 97/7 on the protection of consumers in respect of distance contracts is to be interpreted as meaning that ‘contracts for the provision of transport services’ can cover all contracts governing services in the field of transport, including those involving an activity which does not include, as such, the carriage of the customer or his goods, but which is aimed at enabling the customer to perform that carriage. That concept thus includes contracts for the provision of car hire services the essential nature of which is the making available to the consumer of a means of transport. (see paras 23, 27, 31, operative part)JUDGMENT OF THE COURT (First Chamber)10 March 2005(1)(Protection of consumers in respect of distance contracts – Directive 97/7/EC – Contracts for the provision of transport services – Meaning – Contracts for car hire)THE COURT (First Chamber),,after hearing the Opinion of the Advocate General at the sitting on 11 November 2004,gives the followingLaw 1 – Language of the case: English. Language of the case: English. | 6d78b-8f87300-45ba | EN |
A LEGAL PERSON CANNOT PLEAD BEFORE A NATIONAL COURT THE INCOMPATIBILITY OF COMMUNITY LEGISLATION WITH CERTAIN RULES OF THE WORLD TRADE ORGANISATION (WTO) | Léon Van Parys NVvBelgisch Interventie- en Restitutiebureau (BIRB)(Reference for a preliminary ruling from Raad van State (Belgium))(Common organisation of the markets – Bananas – GATT 1994 – Articles I and XIII – Framework agreement of 23 April 1993 between the EEC and the Cartagena Group – Direct effect – Recommendations and decisions of the WTO Dispute Settlement Body – Legal effects)Opinion of Advocate General Tizzano delivered on 18 November 2004 Judgment of the Court (Grand Chamber), 1 March 2005. Summary of the JudgmentPreliminary rulings – Determination of validity – Not possible to rely on WTO agreements to challenge the legality of a Community measure – Exceptions – Community measure intended to ensure their implementation or referring to them expressly and specifically – Decision of the WTO Dispute Settlement Body – Community obligations – Right to rely on the WTO agreements – None(Art. 234 EC)Given their nature and structure, the WTO agreements are not in principle among the rules in the light of which the Court is to review the legality of measures adopted by the Community institutions. It is only where the Community has intended to implement a particular obligation assumed in the context of the WTO, or where the Community measure refers expressly to the precise provisions of the WTO agreements, that it is for the Court to review the legality of the Community measure in question in the light of the WTO rules. By undertaking after the adoption of the decision of the WTO Dispute Settlement Body (DSB) to comply with the rules of that organisation and, in particular, with Articles I(1) and XIII of GATT 1994, the Community did not intend to assume a particular obligation in the context of the WTO, capable of justifying an exception to the impossibility of relying on WTO rules before the Community Courts and enabling the latter to exercise judicial review of the relevant Community provisions in the light of those rules. First, even where there is a decision of the DSB holding that the measures adopted by a member are incompatible with the WTO rules, the WTO dispute settlement system nevertheless accords considerable importance to negotiation between the parties. In those circumstances, to require courts to refrain from applying rules of domestic law which are inconsistent with the WTO agreements would have the consequence of depriving the legislative or executive organs of the contracting parties of the possibility afforded in particular by Article 22 of the Understanding on rules and procedures governing the settlement of disputes of reaching a negotiated settlement, even on a temporary basis. Secondly, to accept that the Community Courts have the direct responsibility for ensuring that Community law complies with the WTO rules would deprive the Community’s legislative or executive bodies of the discretion which the equivalent bodies of the Community’s commercial partners enjoy. Therefore, an economic operator cannot plead before a court of a Member State that Community legislation is incompatible with certain WTO rules, even if the DSB has stated that that legislation is incompatible with those rules. (see paras 39-42, 48, 53-54, operative part)JUDGMENT OF THE COURT (Grand Chamber)1 March 2005(1)(Common organisation of the markets – Bananas – GATT 1994 – Articles I and XIII – Framework agreement of 23 April 1993 between the EEC and the Cartagena Group – Direct effect – Recommendations and decisions of the WTO dispute settlement body – Legal effects)THE COURT (Grand Chamber),,after hearing the Opinion of the Advocate General at the sitting on 18 November 2004,gives the followingLaw“traditional imports from ACP States” means imports into the Community of bananas originating in the States listed in the Annex hereto up to a limit of 857 700 tonnes (net weight) per year; these are termed “traditional ACP bananas”; “non-traditional imports from ACP States” means imports into the Community of bananas originating in ACP States but not covered by definition 1; these are termed “non-traditional ACP bananas”; “imports from non-ACP third States” means bananas imported into the Community originating in third States other than the ACP States; these are termed “third State bananas”.’ either renounce their use of the licence by informing the relevant issuing authority accordingly within 10 working days of publication of the Regulation fixing the reduction percentage, whereupon the security lodged against the licence shall be released immediately; or submit one or more fresh licence applications for the origins for which available quantities have been published by the Commission, up to an amount equal to or smaller than the quantity applied for but not covered by the original licence issued. Such requests shall be submitted within the time limit laid down in point (a) and shall be subject to all the conditions governing licence applications. Do … Regulation (EEC) No 404/93 … as amended by … Regulation (EC) No 1637/98 …, … Regulation (EC) No 2362/98 …, … Regulation (EC) No 2806/98 …, … Regulation (EC) No 102/[19]99 … and Regulation (EC) No 608/1999 … infringe Article I, Article XIII:1 and Article XIII:2(d) of GATT 1994, taken separately or together, inasmuch as they: introduce to the benefit of twelve countries named in the annex to Regulation No 1637/98 a joint quota of a maximum of 857 700 [tonnes] of bananas (“traditional ACP bananas”) and, moreover, in that that quota does not accord with a distribution of trade that approaches trade without restrictions in so far as it is included in the system introduced by Regulation No 1637/98, the import of bananas being regulated solely on the basis of a tariff quota; introduce a tariff quota for a total quantity of 2 535 000 tonnes for third countries and for non-traditional ACP bananas and then allocate that tariff quota in percentage terms on the basis of a non-representative period, since the import of bananas in the period from 1994 to 1996 was already subject to restrictive conditions? Do the regulations referred to in paragraph 1 infringe Article 4 of the framework agreement … inasmuch as by that agreement, the European Community undertook to have its relations with Ecuador governed by the provisions of GATT and to grant that country most-favoured-nation treatment? Do the regulations referred to in paragraph 1 hereof infringe the principle of the protection of legitimate expectations and the principle of good faith in international public law and international customary law, inasmuch as the Commission has not fulfilled the obligations arising for the Community from GATT 1994, has misused legal procedures and has not taken account of judicial proceedings and of the outcome of an international dispute settlement procedure inasmuch as, despite declarations made at the time of the adoption of Regulation No 1637/98, it has not established a system under which import licences for bananas are issued to “genuine importers”? Has the Commission exceeded the authority given to it by … Regulation No 404/93, as amended by Regulation No 1637/98, by adopting the tariff quota for the import of bananas while disregarding the obligations which arise for the Community from GATT 1994 and GATS [General Agreement on Trade in Services] or which must, where appropriate, be taken into account, because of its avowed intention to adapt the regime for the import of bananas into the Community to the applicable WTO agreements, as a positive rule of law to be integrated into Community law?’ after declaring to the DSB its intention to comply with the DSB’s decision of 25 September 1997, the Community amended its system for imports of bananas upon the expiry of the period allocated to it for that purpose; as a result of the challenge by the Republic of Ecuador to the compatibility with the WTO rules of the new system of trade with third States arising from Regulation No 1637/98, the matter was referred to an ad hoc panel pursuant to Article 21(5) of the understanding and that panel held in a report adopted by the DSB on 6 May 1999 that that system continued to infringe Articles I(1) and XIII of GATT 1994; in particular, the United States of America was authorised, in 1999, pursuant to Article 22(2) of the understanding and following an arbitration procedure, to suspend concessions to the Community up to a certain level; the Community system was the subject of further amendments introduced by Regulation No 216/2001, applicable with effect from 1 April 2001 pursuant to the second paragraph of Article 2; agreements were negotiated with the United States of America on 11 April 2001 and with the Republic of Ecuador on 30 April 2001, with a view to bringing the Community legislation into conformity with the WTO rules. 1 – Language of the case: Dutch. Language of the case: Dutch. | eec9b-2ef9d3e-4fe1 | EN |
THE OPERATION OF GAMES OF CHANCE OR GAMING MACHINES IN PLACES OTHER THAN LICENSED PUBLIC CASINOS MAY NOT BE SUBJECT TO VAT WHERE THE SAME ACTIVITIES IN LICENSED PUBLIC CASINOS ARE EXEMPT FROM VAT | Finanzamt GladbeckvEdith Linneweber and Finanzamt Herne-WestcontreSavvas Akritidis(Reference for a preliminary ruling from the Bundesfinanzhof)(Sixth VAT Directive – Exemption for games of chance – Determination of the conditions and limitations to which the exemption is subject – Liability of games organised outside public casinos – Respect for the principle of fiscal neutrality – Article 13B(f) – Direct effect)Opinion of Advocate General Stix-Hackl delivered on 8 July 2004 Judgment of the Court (Second Chamber), 17 February 2005 Summary of the Judgment1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions provided for by the Sixth Directive – Exemption for games of chance – National legislation excluding from the exemption the operation of such games by traders other than those running licensed public casinos – Not permissible – Individuals may rely on the relevant provision before the national court(Council Directive 77/388, Art. 13B(f))2. Preliminary rulings – Interpretation – Effect of interpretative judgments ratione temporis – Retroactive effect – Limits imposed by the Court – Significance for the Member State concerned of the financial consequences of the judgment – Not decisive (Art. 234 EC)1. Article 13B(f) of the Sixth Directive, according to which the operation of all games of chance and gaming machines is in principle to be exempted from value added tax while the Member States retain the power to lay down the conditions and limitations of that exemption, must be interpreted as meaning that it precludes national legislation which provides that the operation of all games of chance and gaming machines is exempt from VAT where it is carried out in licensed public casinos, while the operation of the same activity by traders other than those running casinos does not enjoy that exemption. In exercising the powers conferred on them by that provision, the Member States must respect the principle of fiscal neutrality and cannot validly make that exemption dependent upon the identity of the operator of such games and machines. Moreover, that provision has direct effect in the sense that it can be relied on by an operator of games of chance or gaming machines before national courts to prevent the application of rules of national law which are inconsistent with that provision. Where the conditions or limitations which a Member State imposes on the exemption from VAT for games of chance or gambling are contrary to the principle of fiscal neutrality, that Member State cannot rely on such conditions or limitations to refuse an operator of such games the exemption which he may legitimately claim under the Sixth Directive. (see paras 23-24, 29-30, 37-38, operative part 1-2)2. It is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision it has interpreted with a view to calling in question legal relations established in good faith. In that regard, the financial consequences which might ensue for a Member State from a preliminary ruling have never in themselves justified limiting the temporal effect of such a ruling (see paras 42, 44)JUDGMENT OF THE COURT (Second Chamber)17 February 2005(1)(Sixth VAT Directive – Exemption for games of chance – Determination of the conditions and limitations to which the exemption is subject – Liability of games organised outside public casinos – Respect for the principle of fiscal neutrality – Article 13B( f) – Direct effect)In Joined Cases C-453/02 and C-462/02,THE COURT (Second Chamber),,after hearing the Opinion of the Advocate General at the sitting on 8 July 2004,gives the following Legal background the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such; Is Article 13B(f) of [the Sixth Directive] to be interpreted as precluding a Member State from making the organisation of gambling subject to value added tax if it is exempt when organised by a licensed public casino? Does Article 13B(f) of [the Sixth Directive] prohibit a Member State from making the operation of a gaming machine subject to value added tax if the operation of a gaming machine by a licensed public casino is exempt, or must the game of chance machines operated outside casinos also be comparable for that purpose in essential respects, for example as regards the maximum stake and the maximum winnings, with the gaming machines in the casinos? Is the installer of the machine permitted to rely on the exemption laid down in Article 13B(f) of [the Sixth Directive]?’Does Article 13B(f) of [the Sixth Directive] prohibit a Member State from making the organisation of a card game subject to value added tax solely if the organisation of a card game by a licensed public casino is exempt, or must card games organised outside casinos also be comparable for that purpose in essential respects, for example as regards the game rules, the maximum stake and the maximum winnings, with card games in the casinos? Article 13B(f) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment precludes national legislation which provides that the operation of all games of chance and gaming machines is exempt from VAT where it is carried out in licensed public casinos, while the operation of the same activity by traders other than those running casinos does not enjoy that exemption. Article 13B(f) of the Sixth Directive has direct effect in the sense that it can be relied on by an operator of games of chance or gaming machines before national courts to prevent the application of rules of national law which are inconsistent with that provision. 1 – Language of the case: German. Language of the case: German. | b2069-0239db5-4eca | EN |
THE APPEAL AGAINST THE JUDGMENT OF THE COURT OF FIRST INSTANCE ANNULLING THE DECISION OF THE EUROPEAN COMMISSION PROHIBITING THE MERGER OF TETRA LAVAL AND SIDEL IS DISMISSED | Commission of the European CommunitiesvTetra Laval BV(Appeal – Competition – Regulation (EEC) No 4064/89 – Decision declaring a ‘conglomerate-type’ concentration incompatible with the common market – Leveraging – Scope of judicial review – Factors to be taken into consideration – Behavioural commitments)Opinion of Advocate General Tizzano delivered on 25 May 2004 Judgment of the Court (Grand Chamber), 15 Feburary 2005 Summary of the Judgment1. Competition – Concentrations – Examination by the Commission – Assessments of an economic nature – Conglomerate-type concentration – Discretion as regards assessment – Review by the Court – Limits(Council Regulation No 4064/89, Art. 2)2. Competition – Concentrations – Assessment of compatibility with the common market – Conglomerate-type concentration – Presentation of a close prospective examination supported by convincing evidence (Council Regulation No 4064/89, Art. 2(2) and (3))3. Competition – Concentrations – Assessment of compatibility with the common market – Conglomerate-type concentration – Taking into account of foreseeable anti‑competitive conduct capable of resulting in leveraging – Whether permissible – No obligation on the Commission to assess its likelihood having regard to the risks inherent in its adoption by an undertaking (Art. 82 EC; Council Regulation No 4064/89, Art. 2(2) and (3))4. Competition – Concentrations – Examination by the Commission – Commitments by the undertakings concerned capable of rendering the notified operation compatible with the common market – Taking into account of behavioural and structural undertakings (Council Regulation No 4064/89 Arts 2(2) and (3) and 8(2))5. Competition – Concentrations – Assessment of compatibility with the common market – Taking into account of the elimination or significant reduction of potential competition tending to reinforce a dominant position – Whether permissible – Obligation of the Commission to establish the alleged reinforcement – Mere finding as to the existence of a clear dominant position on the part of the acquiring undertaking not sufficient (Council Regulation No 4064/89, Art. 2(1), (2) and (3))1. The basic provisions of Regulation No 4064/89 on the control of concentrations between undertakings, in particular Article 2, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review by the Community Courts of the exercise of that discretion, which is essential for defining the rules on concentrations, must take account of the margin of discretion implicit in the provisions of an economic nature which form part of the rules on concentrations. Whilst the Court recognises that the Commission has a margin of discretion with regard to economic matters, that does not mean that the Community Courts must refrain from reviewing the Commission’s interpretation of information of an economic nature. Not only must the Community Courts, inter alia, establish whether the evidence relied on is factually accurate, reliable and consistent but also whether that evidence contains all the information which must be taken into account in order to assess a complex situation and whether it is capable of substantiating the conclusions drawn from it. Such a review is all the more necessary in the case of a prospective analysis required when examining a planned merger with conglomerate effect. (see paras 38-39)2. A prospective analysis of the kind necessary in merger control must be carried out with great care since it does not entail the examination of past events – for which often many items of evidence are available which make it possible to understand the causes – or of current events, but rather a prediction of events which are more or less likely to occur in future if a decision prohibiting the planned concentration or laying down the conditions for it is not adopted. Thus, the prospective analysis consists of an examination of how a concentration might alter the factors determining the state of competition on a given market in order to establish whether it would give rise to a serious impediment to effective competition. Such an analysis makes it necessary to envisage various chains of cause and effect with a view to ascertaining which of them are the most likely. The analysis of a conglomerate-type concentration is a prospective analysis in which, first, the consideration of a lengthy period of time in the future and, secondly, the leveraging necessary to give rise to a significant impediment to effective competition mean that the chains of cause and effect are dimly discernible, uncertain and difficult to establish. That being so, the quality of the evidence produced by the Commission in order to establish that it is necessary to adopt a decision declaring the concentration incompatible with the common market is particularly important, since that evidence must support the Commission’s conclusion that, if such a decision were not adopted, the economic development envisaged by it would be plausible. (see paras 42-44)3. The Commission’s analysis of the effects of a conglomerate-type concentration must comprise a comprehensive examination of the probability of the adoption of anti-competitive conduct capable of resulting in leveraging, that is to say, it must take into account both the incentives to adopt such conduct and the factors liable to reduce, or even eliminate, those incentives, including the possibility that such conduct is unlawful. However, it would run counter to the purpose of prevention of Regulation No 4064/89 on the control of concentrations between undertakings to require the Commission to examine, for each proposed merger, the extent to which the incentives to adopt anti-competitive conduct would be reduced, or even eliminated, as a result of the unlawfulness of the conduct in question, the likelihood of its detection, the action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue. Such an assessment would make it necessary to carry out an exhaustive and detailed examination of the rules of the various legal orders which might be applicable and of the enforcement policy practised in them. Moreover, if it is to be relevant, such an assessment calls for a high probability of the occurrence of the acts envisaged as capable of giving rise to objections on the ground that they are part of anti-competitive conduct. It follows that, at the stage of assessing a proposed merger, an assessment intended to establish whether an infringement of Article 82 EC is likely and to ascertain that it will be penalised in several legal orders would be too speculative and would not allow the Commission to base its assessment on all of the relevant facts with a view to establishing whether they support an economic scenario in which a development such as leveraging will occur. (see paras 74-77)4. As regards commitments offered by the undertakings concerned which are capable of rendering the notified concentration compatible with the common market, the principle is that these must enable the Commission to conclude that the concentration at issue will not create or strengthen a dominant position within the meaning of Article 2(2) and (3) of Regulation No 4068/89 on the control of concentrations between undertakings. It is to be inferred from that principle that the categorisation of a proposed commitment as behavioural or structural is immaterial and that the possibility cannot automatically be ruled out that commitments which are prima facie behavioural, for instance a commitment not to use a trade mark for a certain period or to make part of the production capacity of the entity arising from the concentration available to third-party competitors or, more generally, to grant access to essential facilities on non-discriminatory terms, may also be capable of preventing the emergence or strengthening of a dominant position. (see para. 86)5. It follows from Article 2(1) of Regulation No 4064/89 on the control of concentrations between undertakings that the Commission, when assessing the compatibility of a concentration with the common market, must take account of a number of factors, such as the structure of the relevant markets, actual or potential competition from undertakings, the position of the undertakings concerned and their economic and financial power, possible options available to suppliers and users, any barriers to entry and trends in supply and demand. Accordingly, the mere fact that the acquiring undertaking already holds a clear dominant position on the relevant market, although constituting an important factor, does not in itself suffice to justify a finding that a reduction in the potential competition which that undertaking must face constitutes a strengthening of its position. The potential competition represented by a producer of substitute products on a segment of the relevant market is only one of the set of factors which must be taken into account when assessing whether there is a risk that a concentration might strengthen a dominant position. It cannot be ruled out that a reduction in that potential competition might be compensated by other factors, with the result that the competitive position of the already dominant undertaking remains unchanged. (see paras 125-127)JUDGMENT OF THE COURT (Grand Chamber)15 February 2005(1)In Case C-12/03 P, appellant,applicant at first instance,THE COURT (Grand Chamber),,after hearing the Opinion of the Advocate General at the sitting on 25 May 2004,gives the following Regulation (EEC) No 4064/89 It is necessary first to determine whether a merger transaction creating a competitive structure which does not immediately confer on the merged entity a dominant position may nevertheless be prohibited under Article 2(3) of the Regulation, when in all likelihood it will allow that entity, as a result of leveraging by the acquiring party from a market in which it is already dominant, to obtain in the relatively near future a dominant position on another market in which the party acquired currently holds a leading position, and when the acquisition in question has significant anti-competitive effects on the relevant markets. …The Court observes that, in principle, a merger between undertakings which are active on distinct markets is not usually of such a nature as immediately to create or strengthen a dominant position due to the combination of the market shares held by the parties to the merger. The factors which are of significance for the relative positions of competitors within a given market are generally to be found within the market itself, namely in particular the market shares held by the competitors and the conditions of competition on the market. It does not follow, however, that the conditions of competition on a market can never be affected by factors external to that market. Thus, by way of example, in a case where the markets in question are neighbouring markets and one of the parties to a merger transaction already holds a dominant position on one of the markets, the means and capacities brought together by the transaction may immediately create conditions allowing the merged entity to leverage its way so as to acquire, in the relatively near future, a dominant position on the other market. This could especially be the case where the relevant markets are tending to converge and where, in addition to the dominant position held by one of the parties to the transaction on a market, the other party, or one of the other parties, to the transaction holds a leading position on another market. Any other interpretation of Article 2(3) of the Regulation could deprive the Commission of the power to exercise control over merger transactions which have solely or principally a conglomerate effect. Consequently, in a prospective analysis of the effects of a conglomerate-type merger transaction, if the Commission is able to conclude that a dominant position would, in all likelihood, be created or strengthened in the relatively near future and would lead to effective competition on the market being significantly impeded, it must prohibit it (see, in this regard, Kali & Salz , paragraph 221; Gencor v Commission , paragraph 162; and Airtours v Commission , paragraph 63). In this context, it is also appropriate to distinguish, on the one hand, between a situation where a merger having conglomerate effects immediately changes the conditions of competition on the second market and results in the creation or strengthening of a dominant position on that market due to the dominant position already held on the first market and, on the other hand, a situation where the creation or strengthening of a dominant position on the second market does not immediately result from the merger, but will occur, in those circumstances, only after a certain time and will result from conduct engaged in by the merged entity on the first market where it already holds a dominant position. In this latter case, it is not the structure resulting from the merger transaction itself which creates or strengthens a dominant position within the meaning of Article 2(3) of the Regulation, but rather the future conduct in question. The Commission’s analysis of a merger producing a conglomerate effect is conditioned by requirements similar to those defined by the Court with regard to the creation of a situation of collective dominance ( Kali & Salz , paragraph 222; and Airtours v Commission , paragraph 63). Thus the Commission’s analysis of a merger transaction which is expected to have an anti-competitive conglomerate effect calls for a particularly close examination of the circumstances which are relevant for an assessment of that effect on the conditions of competition in the reference market. As the Court has already held, where the Commission takes the view that a merger should be prohibited because it will create or strengthen a dominant position within a foreseeable period, it is incumbent upon it to produce convincing evidence thereof ( Airtours v Commission , paragraph 63). Since the effects of a conglomerate-type merger are generally considered to be neutral, or even beneficial, for competition on the markets concerned, as is recognised in the present case by the economic writings cited in the analyses annexed to the parties’ written pleadings, the proof of anti-competitive conglomerate effects of such a merger calls for a precise examination, supported by convincing evidence, of the circumstances which allegedly produce those effects (see, by analogy, Airtours v Commission , paragraph 63).’ As stated above, under Article 2(3) of the Regulation, concentrations which create or strengthen a dominant position as a result of which effective competition would be significantly impeded in the common market or in a substantial part of it must be declared incompatible with the common market. 221 In the case of an alleged collective dominant position, the Commission is therefore obliged to assess, using a prospective analysis of the reference market, whether the concentration which has been referred to it leads to a situation in which effective competition in the relevant market is significantly impeded by the undertakings involved in the concentration and one or more other undertakings which together, in particular because of correlative factors which exist between them, are able to adopt a common policy on the market and act to a considerable extent independently of their competitors, their customers, and also of consumers. Such an approach warrants close examination in particular of the circumstances which, in each individual case, are relevant for assessing the effects of the concentration on competition in the reference market. In this respect, however, the basic provisions of the Regulation, in particular Article 2 thereof, confer on the Commission a certain discretion, especially with respect to assessments of an economic nature. Consequently, review by the Community judicature of the exercise of that discretion, which is essential for defining the rules on concentrations, must take account of the discretionary margin implicit in the provisions of an economic nature which form part of the rules on concentrations.’ At the hearing, the Commission stated that its reasoning is not based on the precise accuracy of its forecasts, inasmuch as it is accepted that there will be significant future growth. It also acknowledged there that, in the light of the remaining uncertainties surrounding the commercial applicability of the necessary barrier technologies, it could not assume significant PET growth for the [non-flavoured] UHT milk market, and that even the weak growth predicted in the contested decision could turn out to be an overestimation. It did, however, emphasise that its forecasts for probable strong growth in the use of PET for fresh milk, juices, FFDs and particularly tea/coffee drinks in the period up to 2005 were entirely plausible. The Court finds that the use of PET will not actually increase for UHT milk and, consequently, for approximately half of the LDP market. As regards the rest of the LDP market, it must be found that the PCI report, [entitled “The Potential for PET in the Packaging of Liquid Dairy Products (2001)”,] the only independent study to concentrate on the LDP market, predicts growth as a result of which PET use will be 9.2% of the fresh non-flavoured milk market in 2005 (PCI, p. 64). In addition there is the fact that, for aseptic packaging, the Warrick report [entitled “Warrick Research Report Packaging Markets – Aseptic Packaging Markets World and Western Europe – 2000”] predicts only minimal growth, of 1%, for flavoured milk, and a slight decline for other milk-based drinks, whilst the Pictet report [entitled “Analysts’ Report Pictet – European Packaging Machinery, Move into PET”] does not give any specific forecasts for LDPs. On the basis of that evidence, the Commission has not shown what it claims to have shown in its defence, namely that its forecasts for LDPs are based on a prudent analysis of the independent studies or on a solid, coherent body of evidence obtained by it through its market investigation. The growth estimates adopted by the Commission (paragraph 209 above) are not really very convincing. The PCI report, on the other hand, provides the only proof which might possibly support the forecast of a 25% market share for PET in other milk-based drinks (namely flavoured milk and drinks based on milk and yoghurt) by 2005 (PCI, pp. 63 and 64). However, if that growth were to be realised, the relevant volume would increase only by 62 000 tonnes for 2000, to reach 92 800 tonnes in 2005, an increase which is not very significant in relation to the roughly 120 million tonnes of milk produced in the Community each year (PCI, p. 9). More generally, the contested decision does not explain adequately how PET could displace HDPE as the main material competing with carton by 2005, especially in the important fresh milk packaging segment. It must be pointed out that the Commission does not dispute either the overall figure of 17.3% for the use of HDPE for LDPs given by [the consulting company] Canadean for 2000 (see table 3 in recital 66) or the forecast that that figure could reach 19.5% by 2005 (see table 5 in recital 105). As regards juices, the Commission’s forecast is even less convincing. Although the Commission itself acknowledged that the growth in question would be due mainly to a switch from glass to PET, it did not conduct any analysis of the glass market. In the absence of such an analysis, the Court is unable to ascertain the accuracy of the Commission’s forecasts for juices. An analysis of that kind would have been indispensable to enable the Court to determine the likely level of switch from glass to carton, PET and HDPE. It was all the more indispensable given the differences between the relevant forecasts made in the Canadean and Warrick studies, on the one hand, and the Pictet study, on the other, as regards levels of growth and the time periods used in the analyses. It follows that the growth forecasts for LDPs and juices as stated by the Commission in the contested decision have not been proven to the requisite legal standard. Although a certain amount of growth in those segments is likely, especially for premium products, convincing evidence of the extent of the growth is lacking. By contrast, the independent studies do show that, by 2005, there will in all likelihood be a significant increase in the use of PET for packaging FFDs and tea/coffee drinks, including isotonic drinks. Since the level of growth forecast in the contested decision was not seriously called into question by the applicant at the hearing and is not overestimated compared with the forecast in the studies, the Court finds that the Commission did not commit an error on this point.’ The behavioural commitment, namely the separation of Sidel from Tetra Pak, together with the confirmation of pre-existing Article 82 undertakings, are submitted in particular with regard to the concerns on the ability of the merged entity to leverage its dominant position in carton packaging to gain a dominant position in PET packaging equipment. This commitment and the pre-existing Article 82 commitments are, however, purely behavioural. As such, they are not suitable to restore conditions of effective competition on a permanent basis, since they do not address the permanent change in the market structure created by the notified operation that causes these concerns. The “separation” of Sidel from Tetra Pak companies does not alter the fact that, as expressly acknowledged in the commitment itself, Sidel’s board will “be held responsible directly by the Tetra Laval Group board”. It cannot be expected that such separation will prevent Sidel from implementing the commercial strategy of the Tetra Laval Group. In addition Sidel’s legal status could be changed, i.e. Sidel might be de-listed and turned into a private company like Tetra Laval which would make monitoring of “firewalls” virtually impossible. The commitment not to “bundle” as well as the confirmation of the pre-existing Article 82 commitments constitute pure promises not to act in a certain manner, indeed not to act in contravention of Community law. Such behavioural promises are in contrast with the Commission’s stated policy on remedies and with the purpose of the Merger Regulation itself … and are extremely difficult if not impossible to monitor effectively. Overall, in addition to being complex in their implementation and in their monitoring, these commitments cannot be considered as capable of removing effectively the competition problems identified.’ ‘156 In the present case, the leveraging from the aseptic carton market, as described in the contested decision, would manifest itself – in addition to the possibility of the merged entity engaging in practices such as tying sales of carton packaging equipment and consumables to sales of PET packaging equipment and forced sales (recitals 345 and 365) – firstly, by the probability of predatory pricing by the merged entity (recital 364, cited in paragraph 49 above); secondly, by price wars; and, thirdly, by the granting of loyalty rebates. Engaging in these practices would enable the merged entity to ensure, as far as possible, that its customers on the carton markets obtain from Sidel any PET equipment they may require. The contested decision finds that Tetra holds a dominant position on the aseptic carton markets, that is to say, the markets for aseptic carton packaging systems and aseptic cartons (recital 231, see paragraph 40 above), a finding which is not disputed by the applicant. It should be recalled that, according to settled case-law, where an undertaking is in a dominant position it is in consequence obliged, where appropriate, to modify its conduct so as not to impair effective competition on the market regardless of whether the Commission has adopted a decision to that effect (Case 322/81 Michelin v Commission [1983] ECR 3461, paragraph 57; Case T-51/89 Tetra Pak v Commission [1990] ECR II-309, paragraph 23; and Joined Cases T-125/97 and T-127/97 Coca-Cola v Commission [2000] ECR II-1733, paragraph 80). Moreover, in response to the questions put by the Court at the hearing, the Commission did not deny that leveraging by Tetra through the conduct described above could constitute abuse of Tetra’s pre-existing dominant position in the aseptic carton markets. This could also be the case, according to the concerns expressed by the Commission in its defence, in circumstances where the merged entity refused to participate in the installation and any necessary conversion of Sidel SBM machines, to provide after-sales service or to honour the guarantees for such machines when sold by converters. However, the Commission went on to state that the fact that a type of conduct may constitute an independent infringement of Article 82 EC does not preclude that conduct from being taken into account in the Commission’s assessment of all forms of leveraging made possible by a merger transaction. In this regard, it must be stated that, although the Regulation provides for the prohibition of a merger creating or strengthening a dominant position which has significant anti-competitive effects, these conditions do not require it to be demonstrated that the merged entity will, as a result of the merger, engage in abusive, and consequently unlawful, conduct. Although it cannot therefore be presumed that Community law will not be complied with by the parties to a conglomerate-type merger transaction, such a possibility cannot be excluded by the Commission when it carries out its control of mergers. Accordingly, when the Commission, in assessing the effects of such a merger, relies on foreseeable conduct which in itself is likely to constitute abuse of an existing dominant position, it is required to assess whether, despite the prohibition of such conduct, it is none the less likely that the entity resulting from the merger will act in such a manner or whether, on the contrary, the illegal nature of the conduct and/or the risk of detection will make such a strategy unlikely. While it is appropriate to take account, in its assessment, of incentives to engage in anti-competitive practices, such as those resulting in the present case for Tetra from the commercial advantages which may be foreseen on the PET equipment markets (recital 359), the Commission must also consider the extent to which those incentives would be reduced, or even eliminated, owing to the illegality of the conduct in question, the likelihood of its detection, action taken by the competent authorities, both at Community and national level, and the financial penalties which could ensue. Since the Commission did not carry out such an assessment in the contested decision, it follows that, in so far as the Commission’s assessment is based on the possibility, or even the probability, that Tetra will engage in such conduct in the aseptic carton markets, its findings in this respect cannot be upheld. Moreover, the fact that the applicant offered commitments regarding its future conduct is also a factor which the Commission should have taken into account in assessing whether it was likely that the merged entity would act in a manner which could result in the creation of a dominant position on one or more of the relevant PET equipment markets. There is no indication in the contested decision that the Commission took account of the implications of those commitments when it assessed the creation of such a position in future through leveraging. 162 It follows from the foregoing that it is necessary to examine whether the Commission based its analysis of the likelihood of leveraging from the aseptic carton markets, and of the consequences of such leveraging by the merged entity, on sufficiently convincing evidence. In the course of that examination it is necessary, in the present case, to take account only of conduct which would, at least probably, not be illegal. In addition, since the anticipated dominant position would only emerge after a certain lapse of time, by 2005 according to the Commission, its analysis of the future position must, whilst allowing for a certain margin of discretion, be particularly plausible.’ ‘217 The leveraging methods referred to in recital 364 of the contested decision (cited in paragraph 49 above) are based on Tetra’s dominant position on the aseptic carton markets. Given, in particular, Tetra’s commitment to divest itself of its preforms operations, the leveraging would be carried out by two types of measures: first, through pressure leading to tied sales or sales which bundle equipment and consumables for carton packaging jointly with PET packaging equipment. That pressure could be put on Tetra customers needing to continue to use carton packaging for some of their production and especially those customers with long-term agreements with Tetra for their carton packaging needs (recital 365, cited in paragraph 50 above). Second, measures could be adopted to offer incentives, such as predatory pricing, price wars and loyalty rebates. However, the use, by an undertaking with a dominant position like Tetra’s on the aseptic carton markets, of pressure in the form of tied sales or incentives such as predatory pricing or loyalty rebates that are not objectively justified, would usually constitute an abuse of that position. As this Court has already held, the possible recourse to such strategies cannot be presumed by the Commission, as it has done in the contested decision, in order to justify a decision prohibiting a merger transaction which has been notified to it in accordance with the Regulation (see paragraphs 154 to 162 above). It follows that the leveraging practices which may be taken into consideration by the Court are limited to those which, at least probably, do not constitute an abuse of a dominant position on the aseptic carton markets. It is, therefore, necessary merely to consider strategies for tied or bundled sales which are not in themselves forced, for loyalty rebates that are objectively justified on the carton markets, and for offers of reduced prices for carton or PET packaging equipment that are not predatory within the meaning of well-established case-law (Case C-62/86 AKZO v Commission [1991] ECR I-3359, particularly paragraphs 102, 115, 156 and 157; judgment in Case C-333/94 Tetra Pak v Commission [[1996] ECR I‑5951], paragraphs 41 to 44, upholding the judgment in Case T-83/91 [ Tetra Pak v Commission [1994] ECR II‑755], and the Opinion of Advocate General Fennelly in Joined Cases C-395/96 P and C-396/96 P Compagnie maritime belge transports and Others v Commission [2000] ECR I-1365, particularly paragraphs 123 to 130). Against that background, it is necessary to examine whether the Commission took account of the commitment concerning separation between Sidel and Tetra Pak companies, agreed in principle for a 10-year period, according to which “no joint offerings of any of Tetra Pak’s carton products together with Sidel’s SBM machines are to be made”. It is apparent from the contested decision that Tetra asked the Commission to take note of its existing obligations under Article 3(3) of … Decision 92/163 …, which provides: “Tetra Pak shall not practice predatory or discriminatory prices and shall not grant to any customer any form of discount on its products or more favourable payment terms not justified by an objective consideration. Thus, discounts on cartons should be granted solely according to the quantity of each order, and orders for different types of carton may not be aggregated for that purpose.” It follows that Tetra gave a clear indication of its willingness to comply fully with the special obligations imposed on it by Article 82 EC as a result of the dominant position it holds on the aseptic carton markets. It also reiterated its acceptance of all of the relevant obligations imposed on it following the finding in Decision 92/163 of an infringement of Article 82 EC as regards those markets. It also undertook, in the context of the present proceedings, to make no joint offers of its carton products together with Sidel’s SBM machines. Consequently, the only methods of tied or bundled sales which would actually be feasible for the merged entity would be offers made by Tetra to its current customers on the carton markets which would not be compulsory or forced and which would only be in respect of carton packaging equipment and/or carton products, on the one hand, and PET packaging equipment other than SBM machines, on the other. It must also be observed that, notwithstanding the emphasis placed by the Commission in the contested decision (recitals 177 and 369), in its written observations and oral pleadings on the significance of the merged entity’s ability to offer almost all of the equipment necessary for setting up an integrated PET production line, it is clear from the commitments that it would not be possible for that entity to make a joint offer to a customer for carton packaging equipment and an integrated PET production line, at least not one containing a Sidel SBM machine. Moreover, although the finding in the contested decision regarding the price discrimination allegedly practised in the past by Sidel is not, having regard to the parties’ written pleadings and the oral pleadings of the Commission concerning the underlying econometric analysis, vitiated by a manifest error of assessment, it cannot constitute sufficiently convincing evidence that the merged entity will continue to behave in a similar way. Unlike Sidel prior to the merger, the merged entity would be bound not only by the commitments but also by the various obligations limiting Tetra’s conduct. It must therefore be found that the merged entity’s possible means of leveraging would be quite limited. An examination of the foreseeable consequences of its resorting to such conduct must take account of this.’ The Court finds, firstly, that the emphasis placed in the contested decision on sensitive products belonging to “common product segments” is based on an objective criterion, namely the fact that these products belong to the category of carton-packaged products and the possibility, at least from a technical standpoint, of them being packaged in PET, which, in the light of the growth to be expected (see paragraphs 201 to 216 above), is likely to become a fairly widespread commercial reality by 2005, at least for FFDs and tea/coffee drinks. 261 However, the contested decision fails to provide sufficiently convincing evidence to demonstrate the allegedly specific characteristics of SBM machines used for packaging sensitive products. Admittedly, a combined machine specifically designed for filling carbonated drinks cannot be used for juices. However, that far from proves that low- and high-capacity SBM machines, even ones tailored before sale to the specific wishes of their purchasers, do not remain generic machines, as argued in essence by the applicant, that is to say, capable of packaging several types of products. As for the alleged specificity of packaging moulds according to the product intended for them, as argued by the Commission, whilst the applicant does not dispute that the number of moulds determines the capacity of the machine, this specific fact does not prove that SBM machines, of which moulds are merely a component, differ significantly from each other. It is clear from the notification that moulds last on average for three years, whilst an SBM machine lasts for up to 15 years (recital 304). Although Sidel makes its own moulds, the contested decision does not dispute the information on the moulds market provided in the notification, according to which Sidel is not active in that market (that is, as a supplier of moulds to third parties) and the competition amongst those undertakings which are active is very strong, especially from SIG, which claims on its internet site that it is a world leader (recital 309). Nor does the contested decision call into question the statement in the notification that, in a large facility, a customer can use several SBM machines in order to combine them for its various production needs. The contested decision does not contain any examination of whether the flexibility required by some customers for SBM machine moulds can be explained by needs relating to such uses. In its defence, the Commission refers to a number of changes which can be made to an SBM machine to enhance its performance or make it more useful in an integrated PET production line, such as the addition of a special blow air filtration system or ultraviolet treatment to reduce the risk of contamination before the preforms enter the SBM machine. At the hearing, the Commission stated that these changes are evidence of the very specific characteristics of an SBM machine used in a PET packaging line to which the contested decision refers (recital 177). Tetra, whilst disputing the Commission’s approach of attributing specific characteristics of other components of a PET production line to SBM machines, none the less stated that these changes represented a mere 5% of the cost of an SBM machine. The Court finds, first, that the contested decision makes no reference to this information. Although the decision correctly stresses the importance of the individual needs of customers who require an aseptic PET filling line in particular, namely a basic guarantee of aseptic conditions, this cannot justify the definition of a distinct sub-market for SBM machines used in filling lines for the sensitive products at issue here. The mere fact that each SBM machine must be installed in a PET line in order to be useful to its purchaser does not justify that specific characteristics of other PET equipment in that line should be attributed to the SBM machines themselves. There is all the more reason to accept the generic nature of SBM machines, inasmuch as at the hearing the Commission was unable to rebut Tetra’s assertion regarding the relatively low cost, when compared to the cost of a so-called “standard” SBM machine, especially a high-capacity SBM machine, of making any necessary changes to render the machine more compatible for use with aseptic and non-aseptic PET filling machines, or possibly with aseptic filling machines capable of conversion from PET to HDPE. The parties agree, moreover, that combined machines, which are still only rarely used for aseptic filling (see paragraphs 248 and 249 above), do not constitute a distinct market, as is also clear from the contested decision. As regards the possibility of determining exactly which group a given customer belongs to when he purchases an SBM machine and whether or not that customer may, at least currently within the [European Economic Area], be able to find a better price through arbitrage between the available suppliers, it is clear that those possibilities, if established, would apply as much to SBM machines used for non-sensitive products as to those used to package sensitive products. The possibility for the merged entity to identify the group to which a customer belongs is due to the fact that many customers in the carton markets who will switch to PET will be current Tetra customers. However, this possible benefit, resulting from the first-mover advantage which the merged entity will foreseeably have, does not preclude those customers from turning to other suppliers of SBM machines if they become dissatisfied with the conditions offered by the merged entity. Therefore, on the basis of the evidence in the contested decision, the Commission committed an error, first, by finding that “the majority of SBM machines are generic” (recital 177) and, second, by distinguishing between them according to end-use. The contested decision does not provide sufficient evidence to justify the definition of distinct sub-markets among SBM machines with reference to their end-use. Consequently, the only sub-markets it is necessary to consider are those for low- and high-capacity machines.’ Dismisses the appeal; Orders the Commission of the European Communities to pay the costs. 1 – Language of the case: English. Language of the case: English. | af894-26fb184-4025 | EN |
THE FIFA REGULATIONS ON THE OCCUPATION OF FOOTBALL PLAYERS' AGENTS ARE NOT CONTRARY TO COMMUNITY COMPETITION LAW | Laurent PiauvCommission of the European Communities(Fédération internationale de football association (FIFA) Players’ Agents Regulations – Decision by an association of undertakings – Articles 49 EC, 81 EC and 82 EC – Complaint – No Community interest – Rejection)Judgment of the Court of First Instance (Fourth Chamber), 26 January 2005 Summary of the Judgment1. Procedure – Intervention – Plea of inadmissibility not raised by the defendant – Inadmissibility – Absolute bar to proceeding – To be considered of the Court’s own motion (Statute of the Court of Justice, Arts 40, fourth para., and 53; Rules of Procedure of the Court of First Instance, Arts 113 and 116(3))2. Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them – Decision closing a procedure initiated under Regulation No 17 following a complaint – Maker of the complaint – Other undertaking recognised as having a legitimate interest in submitting comments in the administrative procedure – Admissibility (Arts 81 EC, 82 EC and 230, fourth para., EC; Council Regulation No 17)3. Competition – Community rules – Associations of undertakings – Definition – National football associations – Included(Arts 2 EC and 81 EC)4. Competition – Community rules – Associations of undertakings – Definition – Fédération internationale de football – Included(Art. 81 EC)5. Competition – Agreements, decisions and concerted practices – Decisions of associations of undertakings – Definition – Regulations governing the activity of players’ agents adopted by the Fédération internationale de football – Included 6. Competition – Administrative procedure – Examination of complaints – Complaint against the regulation of an economic activity with no sport-related object by a private-law body not having been delegated power by a public authority – Decision closing the administrative procedure – Judicial review limited to the assessments made by the Commission from the point of view of the rules on competition(Council Regulation No 17)7. Competition – Administrative procedure – Examination of complaints – Taking into account the Community interest in investigating a case – Criteria of assessment – Discretion of the Commission – Limits – Judicial review(Arts 81 EC, 82 EC and 85(1) EC)8. Competition – Agreements, decisions and concerted practices – Not allowed – Exemptions – Regulations governing the activity of players’ agents adopted by the Fédération internationale de football – Introduction of a licence as a condition for carrying on the occupation – Objective of raising professional standards and collective organisation of agents – Whether permissible(Art. 81(3) EC)9. Competition – Dominant position – Collective dominant position – Definition – Collective entity – Conditions(Art. 82 EC)10. Competition – Dominant position – Collective dominant position – Conditions – Position of the Fédération internationale de football in the market for players’ agents’ services1. An application to intervene must be limited to supporting the form of order sought by one of the parties. An intervener is not therefore entitled to raise a plea of inadmissibility that is not relied on by the party in support of whose form of order it was granted leave to intervene. However, under Article 113 of the Rules of Procedure, the Court may at any time, of its own motion, consider whether there exists any absolute bar to proceeding with a case, including any raised by the interveners. (see paras 35-37)2. The Commission’s refusal to continue with a procedure carried out on the basis of a complaint lodged under Regulation No 17 and the rejection of that complaint adversely affect its originator, who must be able to institute proceedings in order to protect his legitimate interests. Similarly, another undertaking which the Commission has recognised as having a legitimate interest in submitting comments in such a procedure is entitled to bring proceedings against the decision definitively closing it. (see para. 38)3. National associations which are groupings of football clubs for which the practice of football is an economic activity and are therefore undertakings within the meaning of Article 81 EC are associations of undertakings within the meaning of that provision. The fact that those national associations are groupings of ‘amateur’ clubs alongside ‘professional’ clubs is not capable of calling that assessment into question. In this regard, the mere fact that a sports association or federation unilaterally classifies sportsmen or clubs as ‘amateur’ does not in itself mean that they do not engage in economic activities within the meaning of Article 2 EC. (see paras 69-70)4. The Fédération internationale de football (FIFA) constitutes an association of undertakings within the meaning of Article 81 EC. It is a grouping of national associations which are themselves both associations of undertakings, since their members are clubs which carry on an economic activity, and undertakings, since they themselves carry on an economic activity in that they are required, under FIFA’s statutes, to participate in competitions organised by it, must pay back to it a percentage of the gross receipts for each international match, and are recognised by those statutes, with FIFA, as being holders of exclusive broadcasting and transmission rights for the sporting events in question. Article 81 EC applies to associations in so far as their own activities or those of the undertakings belonging to them are calculated to produce the results to which it refers. The legal framework within which decisions are taken by undertakings and the classification given to that framework by the various national legal systems are irrelevant as far as the applicability of the Community rules on competition is concerned. (see paras 71-72)5. The regulations adopted by the Fédération internationale de football (FIFA) to govern the activity of players’ agents, an economic activity involving the provision of services which does not fall within the scope of the specific nature of sport as defined by the case-law of the Court of Justice, constitutes a decision by an association of undertakings within the meaning of Article 81(1) EC, which must comply with the Community rules on competition where it has effects in the Community. On the one hand, the regulations were adopted by FIFA of its own authority and not on the basis of rule-making powers conferred on it by public authorities in connection with a recognised task in the general interest concerning sporting activity, and, on the other hand, since those regulations are binding on national associations that are members of FIFA, which are required to draw up similar rules that are subsequently approved by that federation, and on clubs, players and players’ agents, they are the reflection of FIFA’s resolve to coordinate the conduct of its members with regard to the activity of players’ agents. (see paras 73-75)6. Regulation which constitutes policing of an economic activity and touches on fundamental freedoms falls in principle within the competence of the public authorities. The very principle of regulation of an economic activity concerning neither the specific nature of sport nor the freedom of internal organisation of sports associations by a private-law body which has not been delegated any such power by a public authority cannot from the outset be regarded as compatible with Community law. Judicial review in the context of an action concerning the lawfulness of a decision taken by the Commission following a procedure carried out on the basis of a complaint lodged under Regulation No 17, for the treatment of which the Commission could not apply any powers other than those it holds in this context, is necessarily limited to the rules on competition and the assessment made by the Commission of the alleged infringements of those rules by the decision complained of. This review can therefore extend to compliance with other provisions of the Treaty only in so far as any infringement of them reveals a concomitant breach of the rules on competition. Moreover, it can relate to a possible breach of fundamental principles only in the event that that breach resulted in an infringement of the rules on competition. (see paras 76-79)7. When the Commission examines a complaint in a competition matter from the point of view of the Community interest, the assessment of that interest depends on the factual and legal circumstances of each case, which may differ considerably from case to case, and not on predetermined criteria which must be applied. The number of criteria of assessment the Commission may refer to should not therefore be limited, nor conversely should it be required to have recourse exclusively to certain criteria. Second, the Commission, entrusted by Article 85(1) EC with the task of ensuring application of Articles 81 EC and 82 EC, is responsible for defining and implementing Community competition policy and for that purpose has a discretion as to how it deals with complaints. That discretion is not unlimited, however, and the Commission must assess in each case the seriousness and duration of the interferences with competition and the persistence of their consequences. Furthermore, review by the Community judicature of the exercise by the Commission of the discretion conferred on it in this regard must not lead it to substitute its assessment of the Community interest for that of the Commission, but focuses on whether or not the contested decision is based on materially incorrect facts or is vitiated by an error of law, a manifest error of appraisal or misuse of powers. (see paras 80-81, 120)8. The players’ agent’s licence, required by a rule of the Fédération internationale de football (FIFA) and a condition for carrying on that occupation, constitutes a barrier to access to that economic activity and therefore necessarily affects competition. However, in view of the fact that, first, FIFA pursues a dual objective of raising professional and ethical standards for the occupation of players’ agent in order to protect players, who have a short career; second, competition is not eliminated by the licence system, which appears to result in a qualitative selection, appropriate for the attainment of the objective of raising professional standards for the occupation of players’ agent, rather than a quantitative restriction on access thereto; and, finally, the current conditions governing the exercise of the occupation of players’ agent are characterised by there being virtually no national rules and no collective organisation for players’ agents, the restrictions stemming from the compulsory nature of the licence might benefit from an exemption on the basis of Article 81(3) EC. (see paras 101-104)9. Article 82 EC deals with the conduct of one or more economic operators abusing a position of economic strength and thus hindering the maintenance of effective competition on the relevant market by allowing that operator to behave to an appreciable extent independently of its competitors, its customers and, ultimately, consumers. The expression ‘one or more undertakings’ in that article implies that a dominant position may be held by two or more economic entities legally independent of each other, provided that from an economic point of view they present themselves or act together on a particular market as a collective entity. Three cumulative conditions must be met for a finding of collective dominance: first, each member of the dominant oligopoly must have the ability to know how the other members are behaving in order to monitor whether or not they are adopting the common policy; second, the situation of tacit coordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market; thirdly, the foreseeable reaction of current and future competitors, as well as of consumers, must not jeopardise the results expected from the common policy. (see paras 109-111)10. The Fédération internationale de football (FIFA) holds a collective dominant position on the market for players’ agents’ services, in that its rules governing their activity may, when implemented, result in the undertakings operating on the market in question, namely the clubs, being so linked as to their conduct on a particular market that they present themselves on that market as a collective entity vis-à-vis their competitors, their trading partners and consumers. Because the regulations are binding for national associations that are members of FIFA and the clubs forming them, these bodies appear to be linked in the long term as to their conduct by rules that they accept and that other actors (players and players’ agents) cannot break on pain of sanctions that may lead to their exclusion from the market, in particular in the case of players’ agents. Such a situation therefore characterises a collective dominant position for clubs on the market for the provision of players’ agents’ services, since, through the rules to which they adhere, the clubs lay down the conditions under which the services in question are provided. The fact that FIFA is not itself an economic operator that buys players’ agents’ services on the market in question and that its involvement stems from rule-making activity, which it has assumed the power to exercise in respect of the economic activity of players’ agents, is irrelevant as regards the application of Article 82 EC, since FIFA is the emanation of the national associations and the clubs, the actual buyers of the services of players’ agents, and it therefore operates on this market through its members. (see paras 112-116)JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber)26 January 2005 (*) (Fédération internationale de football association (FIFA) Players’ Agents Regulations – Decision by an association of undertakings – Articles 49 EC, 81 EC and 82 EC – Complaint –No Community interest – Rejection)In Case T-193/02,Laurent Piau, residing in Nantes (France), represented by M. Fauconnet, lawyer, applicant,Commission of the European Communities, represented by O. Beynet and A. Bouquet, acting as Agents, with an address for service in Luxembourg, defendant,supported byFédération internationale de football association (FIFA), established in Zurich (Switzerland), represented by F. Louis and A. Vallery, lawyers, intervener,APPLICATION for annulment of the Commission’s decision of 15 April 2002 rejecting the complaint lodged by the applicant concerning the Fédération internationale de football association (FIFA) Players’ Agents Regulations, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fourth Chamber),composed of H. Legal, President, V. Tiili and M. Vilaras, Judges,Registrar: I. Natsinas, Administrator,having regard to the written procedure and further to the hearing on 22 April 2004,gives the followingJudgment Background to the dispute1 The Fédération internationale de football association (FIFA) is an association governed by Swiss law founded on 21 May 1904. Under its statutes, in the version which entered into force on 7 October 2001, its members are national associations (Article 1), which are groupings of football clubs classified as amateur or professional, the latter having specific associations known as ‘professional leagues’. National associations may also form confederations (Article 9). Players in national associations affiliated to FIFA are either amateur or non-amateur (Article 61). 2 Under its statutes, FIFA’s objects are to promote football, to foster friendly relations among national associations, confederations, clubs and players, and to draw up and monitor regulations and methods concerning the laws of the game and the practice of football (Article 2). 3 FIFA’s statutes, regulations and decisions are binding on its members (Article 4). FIFA has legislative, executive and administrative bodies, namely the Congress, the Executive Committee and the general secretariat, as well as standing and ad hoc committees (Article 10). FIFA’s ‘judicial’ bodies are the Disciplinary Committee and the Appeal Committee (Article 43). The Arbitration Tribunal for Football, initially envisaged as the sole mandatory body for the settlement of disputes exceeding a value fixed by the Congress (Article 63), has not been set up. Under an agreement between FIFA and the International Council of Arbitration for Sport, the jurisdiction of the Arbitration Tribunal for Football is exercised by the Court of Arbitration for Sport, a body set up by the International Olympic Committee with its seat in Lausanne (Switzerland), which rules on the basis of FIFA rules, the Code of Sports-related Arbitration and, additionally, Swiss law. Actions for annulment may be lodged against its decisions before the Swiss Federal Court. 4 The regulations governing the application of the statutes provide that players’ agents must possess an agent’s licence issued by FIFA (Article 16) and authorise the Executive Committee to draw up binding rules for agents (Article 17). 5 On 20 May 1994 FIFA adopted the Players’ Agents Regulations, which were amended on 11 December 1995 and entered into force on 1 January 1996 (‘the original regulations’). 6 The original regulations made the exercise of this occupation subject to the possession of a licence issued by the competent national association and reserved the occupation for natural persons (Articles 1 and 2). The procedure prior to obtaining the licence provided for an interview to ascertain the candidate’s knowledge (in particular of law and sport) (Articles 6, 7 and 8). The candidate also had to have regard to certain incompatibilities and moral conditions, such as having no criminal record (Articles 2, 3 and 4). They also had to deposit a bank guarantee of 200 000 Swiss francs (CHF) (Article 9). Relations between the agent and the player had to be governed by a contract for maximum period of two years, which was renewable (Article 12). 7 A sanctions mechanism was laid down for agents, players and clubs in the event of infringement of the regulations. Agents could face a caution, censure or warning, a fine of an unspecified amount, or withdrawal of their licence (Article 14). Players and clubs could be fined up to CHF 50 000 and CHF 100 000 respectively. Players could also be liable to disciplinary suspensions (of up to 12 months). Suspension measures or bans on transfers could also be applied to clubs (Articles 16 and 18). A ‘Players’ Status Committee’ was designated as FIFA’s supervisory and decision-making body (Article 20). 8 On 23 March 1998 Mr Piau lodged a complaint with the Commission in which he challenged the original regulations. He alleged, first of all, that the regulations were contrary to ‘Article [49] et seq. of the [EC] Treaty concerning free competition with regard to services’, because of the restrictions on access to the occupation imposed by opaque examination procedures and by the requirement of a guarantee and because of the controls and sanctions provided for. Secondly, he considered that the regulations were likely to give rise to discrimination between citizens of the Member States. Thirdly, he complained that the regulations did not include any legal remedies against decisions or applicable sanctions. 9 Previously, on 20 February 1996, Multiplayers International Denmark had lodged a complaint with the Commission challenging the compatibility of the regulations with Articles 81 EC and 82 EC. The Commission had also been notified of petitions lodged with the European Parliament by German and French nationals, which were declared admissible by the European Parliament on 29 October 1996 and 9 March 1998 respectively and which also concerned these rules. 10 The Commission initiated a procedure under Regulation No 17 of the Council of 6 February 1962, First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87) and sent FIFA a statement of objections on 19 October 1999. The statement of objections stated that the [original] regulations constituted a decision by an association of undertakings within the meaning of Article 81 EC and called into question the compatibility with that article of the restrictions contained in the regulations relating to the licence requirement, the exclusion of legal persons from the award of a licence, the prohibition on clubs and players using unlicensed agents, the requirement of a bank guarantee and the sanctions. 11 In its reply to the statement of objections, dated 4 January 2000, FIFA disputed that the regulations could be classified as a decision by an association of undertakings. It justified the restrictions contained in the regulations in the interests of raising ethical standards and levels of professional qualification and claimed that they could be exempted under Article 81(3) EC. 12 A hearing was held at the Commission on 24 February 2000 and was attended by the representatives of Mr Piau and of FIFA, as well as representatives of the international professional players’ trade union, FIFPro, which expressed the interest of players in the regulation of agents. 13 Following the administrative procedure initiated by the Commission, on 10 December 2000 FIFA adopted new Players’ Agents Regulations, which entered into force on 1 March 2001 and were amended again on 3 April 2002. 14 The new FIFA regulations (‘the amended regulations’) maintain the obligation, in order to exercise the occupation of players’ agent, which is still reserved for natural persons, to hold a licence issued by the competent national association for an unlimited period (Articles 1, 2 and 10). The candidate, who must satisfy the requirement of having an ‘impeccable reputation’ (Article 2), must take a written examination (Articles 4 and 5). The examination consists in a multiple-choice test to verify the candidate’s knowledge of the law and sport (Annex A). The agent must also take out a professional liability insurance policy or, failing that, deposit a bank guarantee to the amount of CHF 100 000 (Articles 6 and 7). 15 The relations between the agent and the player must be the subject of a written contract for a maximum period of two years, which may be renewed. The contract must stipulate the agent’s remuneration, which is calculated on the basis of the player’s basic gross salary and, if the parties cannot reach agreement, is fixed at 5% of the salary. A copy of the contract must be sent to the national association, whose register of contracts must be made available to FIFA (Article 12). Licensed players’ agents are required, inter alia, to adhere to FIFA’s statutes and regulations and to refrain from approaching a player who is under contract with a club (Article 14). 16 A system of sanctions against clubs, players and agents is set up. They may all be punished, in the event of failure to comply with the above rules, by a caution, censure, or warning, or by a fine (Articles 15, 17 and 19). Players’ agents may have their licence suspended or withdrawn (Article 15). Players may be suspended for up to 12 months (Article 17). Clubs may also be punished by suspension measures and bans on transfers of at least three months (Article 19). Fines may also be imposed on players’ agents, players and clubs. For players’ agents, the amount of the fine is not specified, as in the original regulations, while in the case of players and clubs minimum amounts of CHF 10 000 and CHF 20 000 respectively are now provided for (Articles 15, 17 and 19). All these sanctions are cumulative (Articles 15, 17 and 19). Disputes are dealt with by the competent national association or the ‘Players’ Status Committee’ (Article 22). Transitional measures allow licences granted under the former provisions to be validated (Article 23). A code of professional conduct and a standard representation contract are also annexed to the amended regulations (Annexes B and C). 17 The amendments made on 3 April 2002 state that nationals of the European Union or the European Economic Area (EEA) must make their application for a licence to the national association of their home country or the country of domicile without any condition relating to length of residence and that they may take out the required insurance policy in any country of the European Union or the EEA. 18 On 9 and 10 July 2001 the European Parliament declared that the files opened following the petitions mentioned in paragraph 9 above were closed. 19 On 3 August 2001 the Commission sent Mr Piau a letter under Article 6 of Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in certain proceedings under Articles [81] and [82] of the EC Treaty (OJ 1998 L 354, p. 18). In that letter, the Commission pointed out that its representation to FIFA had resulted in the elimination of the main restrictive aspects of the Players’ Agents Regulations and that there was no longer any Community interest in continuing with the procedure. 20 The Commission sent a similar letter to Multiplayers International Denmark on 12 November 2001, to which that complainant did not reply. 21 In response to the letter of 3 August 2001 mentioned in paragraph 19 above, on 28 September 2001 Mr Piau informed the Commission that he was maintaining his complaint. He claimed that the infringements of Article 81(1) EC still remained in the amended regulations with respect to the examination and professional liability insurance and that new restrictions had been introduced in the form of rules relating to professional conduct, the standard contract and the determination of remuneration. In the view of the complainant, these restrictions could not be covered by an exemption on the basis of Article 81(3) EC. In addition, Mr Piau stated that the Commission had not examined the rules in question having regard to Article 82 EC. 22 By a decision of 15 April 2002 (‘the contested decision’), the Commission rejected Mr Piau’s complaint. The Commission stated that there was no Community interest in continuing with the procedure in so far as the most important restrictive provisions at issue in the complaint had been repealed, whilst the licence requirement could be justified, the remaining restrictions could enjoy an exemption under Article 81(3) EC, and Article 82 EC was not applicable in the present case. Procedure and forms of order sought by the parties23 By an application lodged on 14 June 2002, Mr Piau brought the present action. 24 On 5 November 2002 FIFA applied to intervene in support of the form of order sought by the Commission. By order of the President of the First Chamber of the Court of First Instance of 5 December 2002, that intervention was allowed. 25 By decision of the Court of First Instance of 2 July 2003, the Judge-Rapporteur was assigned, from 1 October 2003, to the Fourth Chamber, to which the case was therefore reassigned. 26 By a measure of organisation of procedure notified on 11 March 2004, the Court of First Instance asked the Commission and FIFA questions about professional liability insurance, remuneration of players’ agents and legal remedies provided for under the amended regulations, and asked Mr Piau questions regarding the steps he had taken with a view to carrying on the occupation of players’ agent. 27 FIFA, the Commission and Mr Piau answered the questions asked by the Court by letters received on 1, 2 and 5 April 2004 respectively.28 The parties presented oral argument and replied to the Court’s questions at the hearing on 22 April 2004.29 The applicant claims that the Court should: – annul the contested decision;– order the Commission to pay the costs.30 The Commission contends that the Court should:– dismiss the action;– order the applicant to pay the costs.31 FIFA claims that the Court should:– declare the action inadmissible and, in any event, unfounded; Admissibility Arguments of the parties32 FIFA questions the admissibility of the action. It claims that the applicant does not have a legal interest in bringing proceedings since he has never taken any official steps with a view to carrying on the occupation of players’ agent and the French law applicable to his situation is stricter than the FIFA regulations. 33 The Commission states that it did not raise a plea of inadmissibility with regard to the application because it considered that Mr Piau had links with the football world and that he had wished to carry on the occupation of players’ agent. 34 Mr Piau contends that his action, which was brought against the Commission’s decision rejecting his complaint, is admissible. He asserts that he has wished to carry on the occupation of players’ agent since 1997 and that there are inconsistencies between the FIFA rules and the French legislation. Findings of the Court35 The Commission has not raised a plea of inadmissibility. An application to intervene must be limited to supporting the form of order sought by one of the parties (Article 40, last paragraph, of the Statute of the Court of Justice, applicable to the Court of First Instance under Article 53 of that Statute). 36 FIFA is not therefore entitled to raise a plea of inadmissibility that is not relied on by the party in support of whose form of order it was granted leave to intervene. The Court is not therefore bound to consider the pleas on which it relies in this regard (Case C‑313/90 CIRFS and Others v Commission [1993] ECR I‑1125, paragraph 22). 37 However, under Article 113 of the Rules of Procedure, the Court may at any time, of its own motion, consider whether there exists any absolute bar to proceeding with a case, including any raised by the interveners (Case T-239/94 EISA v Commission [1997] ECR II-1839, paragraph 26). 38 It is common ground that Mr Piau is the person to whom a Commission decision that definitively closes a procedure initiated on the basis of Regulation No 17 was addressed and that he duly brought an action against that decision. The refusal to continue with such a procedure and the rejection of a complaint adversely affect its originator who, according to settled case-law, should be able to institute proceedings in order to protect his legitimate interests (Case 26/76 Metro v Commission [1977] ECR 1875, paragraph 13, and Case T-37/92 BEUCandNCC v Commission [1994] ECR II-285, paragraph 36). The Court has also ruled that another undertaking which the Commission has recognised as having a legitimate interest in submitting comments in a procedure pursuant to Regulation No 17 is entitled to bring proceedings (Metro v Commission, paragraphs 6, 7 and 11 to 13). Substance 1. The treatment of the complaint39 Mr Piau claims, first, that the Commission has failed to comply with its obligations in dealing with a complaint lodged under Article 3 of Regulation No 17. Although FIFA had not notified the original regulations, the Commission had refrained from taking a position on the alleged infringement and presumed that the regulations were possibly exempt. Its actions are contrary to the principle of good faith which must govern relations between citizens and the Community and the principle of legal certainty. 40 He submits, second, that the Commission did not conduct an inquiry or state reasons for the contested decision with reference to Article 82 EC, although his complaint also concerned that article, as can be seen inter alia from the letters of 31 January and 30 March 2001 exchanged between the applicant and the Commission. The investigation did not relate to Article 82 EC, which was not mentioned in the statement of objections. The Commission therefore harmed Mr Piau’s legitimate expectations by failing to examine his complaint in this regard. 41 The Commission claims, first, that the failure to notify does not mean that the unnotified measure is illegal under Community law. 42 Second, the defendant contends that it was not required to conduct an inquiry or to state reasons for its decision with reference to Article 82 EC, which was not mentioned in the complaint but was relied on belatedly (on 28 September 2001) by the applicant, as there was nothing to suggest that that provision had been infringed. 43 FIFA maintains that the contested decision did not require a statement of reasons with reference to Article 82 EC, which was not mentioned in the complaint and was relied on belatedly by the applicant. In any case, the Commission, which could reject the complaint solely on the ground that there was no Community interest, gave an adequate statement of reasons in the contested decision with reference to Article 82 EC. Findings of the Court 44 First, as regards the treatment of the complaint under Regulation No 17, it should be pointed out that the Commission has broad discretion in this area (see, to that effect, Case C‑119/97 P Ufex and Others v Commission [1999] ECR I‑1341, paragraphs 88 and 89). 45 In the present case, Mr Piau lodged a complaint on 23 March 1998 concerning the FIFA Players’ Agents Regulations, drafted as a summary outline, which referred to ‘Article [49] et seq. of the [EC] Treaty concerning free competition with regard to services’, but did not mention Regulation No 17. The Commission, which had received another complaint concerning the same regulations (see paragraph 9 above), considered that the facts adduced raised certain questions of competition law and considered Mr Piau’s complaint to have been lodged under Article 3 of Regulation No 17. 46 The Commission then conducted the administrative procedure laid down for infringements in competition matters, conducting an inquiry, sending a statement of objections to FIFA on 19 October 1999 and holding a hearing of the interested parties on 24 February 2000. It is common ground that this procedure eventually resulted in FIFA adopting amended Players’ Agents Regulations on 10 December 2000. Since it was satisfied with the amendments made by FIFA to the rules in question, the Commission then considered that no further steps should be taken in the procedure, and notified Mr Piau of this by sending him a letter on 3 August 2001 under Article 6 of Regulation No 2842/98 and then rejecting his complaint on 15 April 2002. 47 It is apparent that the Commission properly applied, from a procedural point of view, the powers conferred on it by Regulation No 17, which was applicable at that time, to conduct an inquiry into a complaint in a competition matter, having regard to its discretion in this area. The Commission did not therefore fail to comply with its obligations in this regard. The fact that the original regulations had not been notified to the Commission does not affect the lawfulness of the procedure, since the sole effect of the failure to give notification was to deprive the Commission of the opportunity to take a decision concerning, in particular, a possible exemption for the regulations under Article 81(3) EC, in the absence of an application by FIFA to that effect. Lastly, the applicant has not adduced any evidence to show that, in dealing with his complaint, the Commission failed to act in good faith or breached the principle of legal certainty. 48 Second, as regards the inquiry into the complaint and statement of reasons for the contested decision with reference to Article 82 EC, it can be seen from the documents before the Court that the complaint lodged on 23 March 1998 did not mention Article 82 EC. However, Mr Piau did rely on that provision in his letter of 28 September 2001 which stated, in response to the Commission’s communication under Article 6 of Regulation No 2842/98, that he was maintaining his complaint (see paragraph 21 above). In that letter, the complainant argued that, in his view, the case had not been investigated with reference to Article 82 EC, even though FIFA was abusing a dominant position, and that, in a letter of 30 March 2001, the Commission had stated that his complaint related primarily to Articles 81 EC and 82 EC. 49 The applicant cannot rely on the principle of protection of legitimate expectations with respect to information contained in the requests for information sent by the Commission to FIFA on 11 November 1998 and 19 July 1999, which envisaged the possibility of infringements of Articles 81 EC and 82 EC. Such information cannot be equated with precise assurances that may give rise to reasonable expectations (see, for example, Joined Cases T‑485/93, T‑491/93, T‑494/93 and T‑61/98 Dreyfus and Others v Commission [2000] ECR II-3659, paragraph 85). Furthermore, subsequently, in the statement of objections of 19 October 1999, the Commission did not identify any infringements with reference to Article 82 EC, but only with reference to Article 81 EC. 50 The Commission cannot, for its part, claim that the belated mention by the applicant of Article 82 EC in the course of the administrative procedure relieved it of the obligation to conduct an inquiry and state reasons for the contested decision in this regard. As long as the administrative procedure had not been concluded and a decision had not been taken on Mr Piau’s complaint, the Commission could still conduct fresh investigations if new objections, whose relevance it had to assess, were raised. 51 On the other hand, in so far as, after examining the points of fact and of law relating to the application of Article 82 EC, the Commission decided that an investigation of the complaint was unwarranted or unnecessary in this regard, it was not required to pursue the investigation on this point (Case T‑74/92 Ladbroke v Commission [1995] ECR II‑115, paragraph 60). 52 With regard to its statement of reasons having regard to Article 82 EC, the contested decision states that Mr Piau’s comments on that provision ‘are vague with regard to the market on which FIFA is said to have a dominant position and the alleged abuse’. It explains that FIFA is not active on the market for provision of advice [to players] in which players’ agents operate and concludes that ‘Article 82 EC does not apply in the present case as described by the complainant’. In the circumstances of the present case, such information satisfies the Commission’s obligation to give a statement of reasons (Case T‑74/92 Ladbroke v Commission, cited above, paragraph 60). 53 It follows from the above considerations that Mr Piau is not justified in claiming that the Commission failed to comply with its obligations in dealing with the complaint referred to it. The applicant’s pleas pertaining to that claim must therefore be rejected. 2. Community interest54 Mr Piau claims that his complaint was of Community interest. The market is ‘cross-border in nature’, the most important restrictive provisions of the original regulations have not been repealed and the amended regulations cannot be the subject of an exemption under Article 81(3) EC. The anti-competitive effects will remain, since agents licensed under the original regulations will retain the market shares that they have acquired. In addition, Article 82 EC is applicable. Lastly, Mr Piau cannot obtain adequate protection before the national courts. 55 He submits, first, that the Commission made an error of assessment with regard to the FIFA Players’ Agents Regulations. The obligation, on pain of sanctions, to comply with the FIFA regulations constitutes an obstacle to ‘free competition with regard to services’ and freedom of establishment and prevents any unlicensed players’ agents from gaining market access. The provision contained in the amended regulations relating to remuneration of players’ agents amounts to fixing of an imposed price, which restricts competition. The requirement of a standard contract infringes the principle of freedom of contract and the obligation imposed on the national association to send a copy to FIFA does not guarantee the protection of personal data. The code of professional conduct annexed to the regulations leaves scope for arbitrary action. The amended regulations are not compatible with the French legislation governing the occupation; however, the French football federation had given preference to the regulations and awarded licences in contravention of national legislation. The amended regulations also prohibit recourse to the ordinary courts. 56 Second, Mr Piau claims that the amended regulations cannot enjoy an exemption on the basis of Article 81(3) EC, since none of the conditions set out in that provision is satisfied. The restrictions are neither essential, appropriate nor proportionate. On the contrary, those regulations eliminate any competition, since FIFA alone is authorised to grant a licence. He submits that, behind the declared objective of protecting players and raising ethical standards in the occupation of players’ agent, FIFA’s real intention is to take complete control of the occupation of players’ agent in breach of the freedom to carry on a business and the principle of non-discrimination. Mr Piau also argues that the ‘specific nature of sport’, which makes it possible to derogate from Community competition law, cannot be relied on in the present case, since the activity in question is not linked directly to sport. 57 Third, Mr Piau submits that FIFA holds a dominant position on the ‘football market’ and is abusing its dominant position on the related market of services provided by players’ agents. FIFA is an association of undertakings and the amended regulations constitute a decision by an association of undertakings. Representing the interests of all buyers, FIFA is acting as a monopsony, a single buyer imposing its conditions on sellers. The abuses of the dominant position are the result of the binding provisions of the regulations. Licensed players’ agents also hold, jointly, a collective dominant position which they are abusing through the FIFA rules. The market in the services provided by players’ agents is reserved for members of the association of undertakings and unlicensed agents are prohibited from having access. 58 Fourth, Mr Piau submits that, by making access to the occupation of players’ agent subject to the possession of a licence, the amended regulations are an obstacle to freedom to provide services and freedom to carry on a business. He argues that FIFA does not have any legitimacy to lay down rules governing an economic activity and that the Commission thus implicitly delegated it a power to regulate an activity of providing services in contravention of the competences conferred on the Member States. 59 The Commission submits, principally, that there was no Community interest to justify continuing with the procedure, that the complaint was rightly rejected on that ground, and that Mr Piau’s action is consequently unfounded. The ‘cross-border nature’ of the market does not necessarily mean that there is a Community interest. The most important restrictions had been removed in the amended regulations. Any persistent effects of the original regulations can be regarded as transitional measures guaranteeing the acquired rights of agents licensed under the old system. The fact that a complaint challenges alleged abuses of a dominant position does not in itself allow the conclusion that there is a Community interest. Contrary to his assertions, the applicant is not prevented from referring the matter to an ordinary law court. 60 In the alternative, the Commission submits, first, that the applicant’s arguments, based on provisions not falling within the scope of competition law, are inadmissible or unfounded, since it does not derive from Regulation No 17, or from any other legal basis, the power to act with regard to an association of undertakings on bases other than compliance with rules of Community competition law. The Commission also submits that Community law accepts the recognition of acquired rights and that the applicant’s fears over protection of personal data are unfounded. It argues that, while the organisation of the occupation of players’ agent has not been harmonised at Community level, the FIFA regulations, which lay down uniform conditions for access at world level, are not liable to restrict the free movement of players’ agents. 61 Second, the Commission submits that it did not make an error of assessment with regard to the rules in question, which seek to protect players and to ensure that agents are qualified. In the absence of an internal organisation of the occupation, the licence system imposes justified, essential and proportionate qualitative restrictions. In addition, the main restrictions have been removed, in particular concerning conditions of access to the occupation and examination procedures. The amended regulations are proportionate to the objectives set out and take into account the specific nature of sport. The provision relating to agents’ remuneration merely lays down a subsidiary rule, allowing the parties a large degree of freedom. The standard contract does not hamper the parties’ freedom and the limitation of its duration to two years promotes competition. The alleged prohibition on having recourse to ordinary law courts is not proven to exist. The rules of professional conduct, which can be justified by the general interest, are proportionate and compatible with Community competition law. Lastly, the binding nature of the regulations and the sanctions provided for therein are inherent in the existence of rules. 62 Third, the Commission submits that the amended regulations satisfy the conditions for an exemption laid down by Article 81(3) EC. The restrictions entailed, which are intended to raise ethical and professional standards, are proportionate. Competition is not eliminated. The very existence of regulations promotes a better operation of the market and therefore contributes to economic progress. 63 Fourth, the Commission submits that Article 82 EC, which concerns only economic activities, is not applicable to the present case, which relates to a purely regulatory activity. FIFA cannot be described as an ‘economic power’ or a monopsony and no abuse has been shown to exist on a market related to the ‘football market’. FIFA does not represent the economic interests of clubs and players. Licensed players’ agents are a fairly scattered occupation, without any structural links, and do not therefore abuse a collective dominant position. On the other hand, the Commission submits that FIFA is an association of undertakings and that the regulations at issue constitute a decision by an association of undertakings. 64 FIFA submits, first, that the Commission was right to reject Mr Piau’s complaint on grounds of lack of Community interest. The restrictive provisions retained in the amended regulations have a qualitative purpose. They do not include any restrictions prohibited by Article 81(1) EC and are justified under Article 81(3) EC. The anti-competitive effects that allegedly persist do not result from the rules in question, but from the activity of agents. The ‘cross-border nature’ of the market has no bearing on the likely Community interest of a case. 65 Second, FIFA submits that the amended regulations cannot be classified as a decision by an association of undertakings, since professional clubs, which may be regarded as undertakings, form only a minority of the members of the national associations, which are the members of the international organisation. The regulations adopted by FIFA are not therefore the expression of the will of professional clubs. The amended regulations do not contain any considerable restrictions of competition. The procedures for obtaining a licence are now satisfactory. Professional liability insurance, whose amount is determined objectively, is an appropriate means to settle disputes. The provisions relating to agents’ remuneration are not comparable with a price-fixing mechanism. The standard contract contains conventional stipulations and does not in any way violate privacy. The rules of professional conduct, the sanctions mechanism and the dispute settlement system are not contrary to Article 81 EC. 66 Third, FIFA submits that the amended regulations could have been the subject of an exemption under Article 81(3) EC. Those rules are necessary in the absence of organisation of the occupation and of national legislation and because of the global dimension of football. They raise professional and ethical standards for the occupation of players’ agent, the increasing number of whom shows that the rules in question are not restrictive. 67 Fourth, FIFA submits that Article 82 EC is not applicable and that it has not abused a dominant position. It states that it is not an association of undertakings and argues that, in exercising its regulatory power, which is at issue in this case, it does not carry on economic activities. It argues that the applicant never mentioned the ‘football market’ in the course of the administrative procedure and that the fact that it exercises a regulatory power over economic actors in a certain market does not mean that it is active on that market or, a fortiori, that it holds a dominant position. Furthermore, the market for the provision of advice at issue in the present case is not connected with any market where FIFA is active. Its situation cannot be classified as a monopsony either, since FIFA does not represent either clubs or players in their relations with agents. Similarly, licensed agents do not exercise a collective dominant position which they abuse through the FIFA rules. The nature of the FIFA Players’ Agents Regulations68 Without classifying on the basis of Community law either the nature of the Players’ Agents Regulations or FIFA as the author of those regulations, in the contested decision the Commission examined Mr Piau’s complaint with reference to the Community rules on competition, in particular Article 81 EC. That provision and the powers conferred on the Commission to ensure compliance concern decisions, agreements or practices on the part of undertakings or associations of undertakings, since Community law applies only in so far as the acts or conduct in question and the authors of such acts or conduct fall within the scope of that provision. In the present proceedings, the Commission has pointed out that, in its opinion, FIFA constituted an association of undertakings and the regulations at issue were a decision by an association of undertakings, thereby confirming the view it took in the statement of objections, a view shared by Mr Piau, but contested by FIFA. 69 As regards, first, the concept of an association of undertakings, and without it being necessary to rule on the admissibility of the arguments put forward by an intervener which go against the claims made by the party in support of which it is intervening, it is common ground that FIFA’s members are national associations, which are groupings of football clubs for which the practice of football is an economic activity. These football clubs are therefore undertakings within the meaning of Article 81 EC and the national associations grouping them together are associations of undertakings within the meaning of that provision. 70 The fact that the national associations are groupings of ‘amateur’ clubs, alongside ‘professional’ clubs, is not capable of calling that assessment into question. In this regard, it should be noted that the mere fact that a sports association or federation unilaterally classifies sportsmen or clubs as ‘amateur’ does not in itself mean that they do not engage in economic activities within the meaning of Article 2 EC (see, to that effect, Joined Cases C‑51/96 and C‑191/97 Deliège [2000] ECR I‑2549, paragraph 46). 71 Furthermore, the national associations, which are required, under FIFA’s statutes, to participate in competitions organised by it, must pay back to it a percentage of the gross receipts for each international match and are recognised, by those statutes, with FIFA, as being holders of exclusive broadcasting and transmission rights for the sporting events in question, also carry on an economic activity in this regard (see Case T‑46/92 Scottish Football v Commission [1994] ECR II‑1039). They therefore also constitute undertakings within the meaning of Article 81 EC. 72 Since the national associations constitute associations of undertakings and also, by virtue of the economic activities that they pursue, undertakings, FIFA, an association grouping together national associations, also constitutes an association of undertakings within the meaning of Article 81 EC. That provision applies to associations in so far as their own activities or those of the undertakings belonging to them are calculated to produce the results to which it refers (Case 71/74 Frubo v Commission [1975] ECR 563, paragraph 30). The legal framework within which decisions are taken by undertakings and the classification given to that framework by the various national legal systems are irrelevant as far as the applicability of the Community rules on competition is concerned (Case 123/83 BNIC [1985] ECR 391, paragraph 17). 73 As regards, second, the concept of a decision by an association of undertakings, it is apparent from the documents before the Court that the purpose of the occupation of players’ agent, under the very wording of the amended regulations, is ‘for a fee, on a regular basis [to introduce] a player to a club with a view to employment or [to introduce] two clubs to one another with a view to concluding a transfer contract’. This is therefore an economic activity involving the provision of services, which does not fall within the scope of the specific nature of sport, as defined by the case-law (Case 13/76 Donà [1976] ECR 1333, paragraphs 14 and 15, Case C-415/93 Bosman [1995] ECR I‑4921, paragraph 127, Deliège, paragraphs 64 and 69, and Case C‑176/96 LehtonenandCastors Braine [2000] ECR I‑2681, paragraphs 53 to 60). 74 On the one hand, the Players’ Agents Regulations were adopted by FIFA of its own authority and not on the basis of rule-making powers conferred on it by public authorities in connection with a recognised task in the general interest concerning sporting activity (see, by analogy, Case C‑309/99 Wouters and Others [2002] ECR I‑1577, paragraphs 68 and 69). Those regulations do not fall within the scope of the freedom of internal organisation enjoyed by sports associations either (Bosman, paragraph 81, and Deliège, paragraph 47). 75 On the other hand, since they are binding on national associations that are members of FIFA, which are required to draw up similar rules that are subsequently approved by FIFA, and on clubs, players and players’ agents, those regulations are the reflection of FIFA’s resolve to coordinate the conduct of its members with regard to the activity of players’ agents. They therefore constitute a decision by an association of undertakings within the meaning of Article 81(1) EC (Case 45/85 Verband der Sachversicherer v Commission [1987] ECR 405, paragraphs 29 to 32, and Wouters and Others, paragraph 71), which must comply with the Community rules on competition, where such a decision has effects in the Community. 76 With regard to FIFA’s legitimacy, contested by the applicant, to enact such rules, which do not have a sport-related object, but regulate an economic activity that is peripheral to the sporting activity in question and touch on fundamental freedoms, the rule-making power claimed by a private organisation like FIFA, whose main statutory purpose is to promote football (see paragraph 2 above), is indeed open to question, in the light of the principles common to the Member States on which the European Union is founded. 77 The very principle of regulation of an economic activity concerning neither the specific nature of sport nor the freedom of internal organisation of sports associations by a private-law body, like FIFA, which has not been delegated any such power by a public authority, cannot from the outset be regarded as compatible with Community law, in particular with regard to respect for civil and economic liberties. 78 In principle, such regulation, which constitutes policing of an economic activity and touches on fundamental freedoms, falls within the competence of the public authorities. Nevertheless, in the present dispute, the rule-making power exercised by FIFA, in the almost complete absence of national rules, can be examined only in so far as it affects the rules on competition, in the light of which the lawfulness of the contested decision must be assessed, while considerations relating to the legal basis that allows FIFA to carry on regulatory activity, however important they may be, are not the subject of judicial review in this case. 79 The present action concerns the lawfulness of a decision taken by the Commission following a procedure carried out on the basis of a complaint lodged under Regulation No 17, for the treatment of which the Commission could not apply any powers other than those it holds in this context. Judicial review is necessarily limited to the rules on competition and the assessment made by the Commission of the alleged infringements of those rules by the FIFA regulations. This review can therefore extend to compliance with other provisions of the Treaty only in so far as any infringement of them reveals a concomitant breach of the rules on competition. Moreover, it can relate to a possible breach of fundamental principles only in the event that that breach resulted in an infringement of the rules on competition. Assessment of the Community interest of the complaint80 The contested decision rejects Mr Piau’s complaint on grounds of lack of Community interest in continuing with the procedure. It should be pointed out, first, that the assessment of the Community interest raised by a complaint in competition matters depends on the factual and legal circumstances of each case, which may differ considerably from case to case, and not on predetermined criteria which must be applied (see, to that effect, Ufex and Others v Commission, paragraphs 79 and 80). Second, the Commission, entrusted by Article 85(1) EC with the task of ensuring application of Articles 81 EC and 82 EC, is responsible for defining and implementing Community competition policy and for that purpose has a discretion as to how it deals with complaints. That discretion is not unlimited, however, and the Commission must assess in each case the seriousness and duration of the interferences with competition and the persistence of their consequences (see, to that effect, Ufex and Others v Commission, paragraphs 88, 89, 93 and 95). 81 Furthermore, review by the Community judicature of the exercise, by the Commission, of the discretion conferred on it in this regard must not lead it to substitute its assessment of the Community interest for that of the Commission but focuses on whether or not the contested decision is based on materially incorrect facts, or is vitiated by an error of law, a manifest error of appraisal or misuse of powers (Case T‑115/99 SEP v Commission [2001] ECR II‑691, paragraph 34). 82 In the present case, three kinds of considerations form the basis for the Commission’s assessment regarding lack of Community interest, namely the repeal of the most restrictive provisions contained in the original regulations, the eligibility of the amended regulations for an exemption under Article 81(3) EC, and the inapplicability of Article 82 EC. – Repeal of the most restrictive provisions contained in the original regulations 83 The contested decision starts by noting that the most important restrictive provisions that were part of the regulations adopted on 20 May 1994 were deleted in the regulations adopted on 20 December 2000. It examines the provisions of the FIFA regulations under five headings, relating to the examination, insurance, the code of professional conduct, the setting of remuneration for players’ agents and the standard contract. 84 First, as regards the examination, the Commission states in the contested decision that candidates must now take a written examination, consisting in a multiple-choice test, the procedures and dates for which, as set out in the annex to the amended regulations, are uniform throughout the world. It notes that a two-stage appeal system is now envisaged and that the two-year residence requirement for European Union nationals was removed by an amendment to the regulations on 3 April 2002. The contested decision states that the requirement of an ‘impeccable reputation’ for obtaining the licence, which must be interpreted in accordance with national laws, would be construed in France, where Mr Piau is resident, as having no criminal conviction. In the final analysis, the Commission did not consider the applicant’s claims of arbitrariness to be well founded. 85 Second, in the contested decision, the Commission notes that a professional liability insurance policy, required of everyone, whose base relates to the objective criterion of the turnover of the players’ agent, replaced the requirement of lodging a guarantee and that it can be taken out with various insurance companies in all the countries of the Union. On this point, in response to the Court’s questions mentioned in paragraph 26 above, FIFA produced examples of professional liability insurance contracts offered to players’ agents by 12 insurance companies within the European Union or the EEA. The contested decision also points out that the required guarantee, which must cover all risks liable to result from the representation activity, does not appear to be disproportionate to the risks covered, for example, by professional insurance in the liberal professions. 86 Third, as far as the code of professional conduct is concerned, in the contested decision the Commission considers that the elementary principles of good professional conduct set out in that code, annexed to the amended regulations, which refer in particular to rules relating to professional conscientiousness, truthfulness, fairness, objectivity, transparency, sincerity, justice and equity, do not impose a disproportionate obligation on players’ agents. 87 Fourth, as regards setting the remuneration of players’ agents, in the contested decision the Commission examined Article 12 of the regulations, which provides that the agent’s salary is calculated on the basis of the player’s basic gross salary and will be 5% of the salary if the parties cannot reach agreement. It considers that this provision refers to an objective, transparent criterion (the player’s basic gross salary) and is merely a (subsidiary) mechanism for the settlement of disputes. 88 Fifth, the contested decision states that Mr Piau’s complaint concerning the breach of privacy stemming from the fact that a copy of the contract signed between a player and an agent is sent to the relevant national association for registration is not a problem capable of being caught by the Community rules on competition. 89 The contested decision does not therefore show that the principles stemming from the case-law referred to in paragraphs 80 and 81 above regarding the extent of its obligations were breached by the Commission, which closely examined the evidence put forward by the applicant. 90 The Commission did not make a manifest error of assessment with regard to the provisions of the amended regulations examined in paragraphs 84 to 88 above by considering that the examination offered satisfactory guarantees of objectivity and transparency, that the professional liability insurance obligation did not constitute a disproportionate requirement and, with regard to the provisions of the regulations relating to remuneration for players’ agents, by implicitly excluding a classification as the fixing of imposed prices from the point of view of competition law (Joined Cases T‑213/95 and T‑18/96 SCK and FNK v Commission [1997] ECR II‑1739, paragraphs 158, 159 and 161 to 164). 91 The arguments outlined by Mr Piau in this case relating to the content of the amended regulations, which concern the obligation under the regulations to comply with FIFA rules, the content of the standard contract, the sanctions system and legal remedies, do not call that assessment into question. 92 First, the obligation imposed on players’ agents to comply with the FIFA rules concerning, among other things, transfers of players does not appear in itself to be contrary to the rules on competition, as the FIFA rules on transfers of players, which were not the object of Mr Piau’s complaint, cannot be examined in the present dispute, since they fall outside its scope. When asked about this point at the hearing, the applicant did not explain, any more than he did in his written pleadings, how the obligation to comply with FIFA rules might affect competition. 93 Second, the provisions on the content of the contract between the agent and the player, under which the contract, in writing, must set out the criteria and details of the agent’s remuneration and cannot have a term of longer than two years, although that term is renewable, do not reveal any interference with competition. The limitation of the duration of contracts to two years, which does not preclude the renewal of the commitment, seems likely to encourage the fluidity of the market and, as a result, competition. In fact, this relatively limited framing of contractual relations seems likely to help to make the parties’ financial and legal relations more secure, without jeopardising competition. 94 Third, the sanctions system, summarised in paragraph 16 above, in so far as it can affect the rules on competition, does not appear to be open to criticism. The amended regulations provide that the sanctions applicable to agents, players and clubs are caution, censure, warning, suspension or withdrawal of licence for agents, suspension of up to 12 months for players and suspension measures or bans on transfers for at least three months for clubs, which cannot be regarded as manifestly excessive for a system of professional sanctions. Furthermore, the amounts of the fines for players and clubs were reduced from those in the original regulations. In addition, Mr Piau has not produced any evidence to show that this mechanism is applied in an arbitrary and discriminatory manner, thereby interfering with competition. 95 Fourth, with respect to legal remedies available in the ordinary courts, and assuming that the provisions of the amended regulations may have an effect on the rules on competition in this regard, it is apparent from the answers given by FIFA and by the Commission to the questions asked by the Court (see paragraph 26 above) that, irrespective of the system of remedies against decisions by national associations or by the Players’ Status Committee, which is competent in matters involving players’ agents, before the Court of Arbitration for Sport, interested parties can always have recourse to the ordinary courts, in particular in order to assert their rights under national law or under Community law, and actions for annulment can also be brought before the Swiss Federal Court against decisions by the Court of Arbitration for Sport. The applicant, who, at the hearing, reported difficulties and slow progress affecting national court proceedings, has not however established that he was deprived of all remedies before the ordinary courts or, a fortiori, that competition was thereby affected. 96 It follows from the above considerations that the pleas in law and arguments put forward by Mr Piau based on competition law do not call into question the conclusion that the Commission was entitled to consider that the most restrictive provisions of the regulations in question had been repealed. The applicant’s arguments in this regard must therefore be rejected. 97 The pleas in law and arguments put forward by the applicant which are not related to competition law should also be rejected, since they do not indicate any infringements in this regard. Mr Piau has not shown that his pleas in law and arguments regarding the breach of contractual freedom, the incompatibility of the FIFA regulations with the French legislation and the interference with the protection of personal data disclose an infringement of the rules on competition. His pleas in law and arguments, which are not, moreover, accompanied by corroborative evidence, must therefore be rejected as irrelevant in a competition matter. 98 In addition, the argument put forward by Mr Piau that, since agents licensed under the original regulations retained their licences, anti-competitive effects persisted cannot be accepted. On the one hand, the applicant does not establish that this fact would in itself give rise to anti-competitive effects. On the other hand, it is contrary to the principle of legal certainty to call into question legal positions which are not shown to have been unlawfully acquired (see, by analogy, Case T‑498/93 Dornonville de la Cour v Commission [1994] ECR-SC I‑A‑257 and II‑813, paragraphs 46 to 49 and 58). Moreover, as the Court has held with regard to transitional measures relating to recognition of diplomas – this case-law being applicable to the present case – it is permitted to preserve acquired rights in similar cases (Case C‑447/93 Dreessen [1994] ECR I‑4087, paragraph 10, and Joined Cases C‑69/96 to C‑79/96 Garofalo and Others [1997] ECR I‑5603, paragraphs 29 to 33). 99 In the light of all the foregoing considerations, the Commission did not commit a manifest error in its assessment of the rules in question or with regard to the alleged persistence of the anti-competitive effects of the original regulations, the reason for Mr Piau’s complaint. The applicant is not therefore justified in claiming that the most restrictive provisions of the original regulations were not abolished and that anti-competitive effects persisted because those provisions were retained in the amended regulations. – Eligibility of the provisions of the amended regulations for an exemption under Article 81(3) EC 100 In the contested decision, the Commission considers that the compulsory nature of the licence might be justified and that the amended regulations could be eligible for an exemption under Article 81(3) EC. It explains that the licence system, which imposes restrictions that are more qualitative than quantitative, seeks to protect players and clubs and takes into consideration, in particular, the risks incurred by players, who have short careers, in the event of poorly negotiated transfers. It considers that, since there is at present no organisation of the occupation of players’ agent and no generalised national rules, the restriction inherent in the licence system is proportionate and essential. 101 The actual principle of the licence, which is required by FIFA and is a condition for carrying on the occupation of players’ agent, constitutes a barrier to access to that economic activity and therefore necessarily affects competition. It can therefore be accepted only in so far as the conditions set out in Article 81(3) EC are satisfied, with the result that the amended regulations might enjoy an exemption on the basis of this provision if it were established that they contribute to promoting economic progress, allow consumers a fair share of the resulting benefit, do not impose restrictions which are not indispensable to the attainment of these objectives, and do not eliminate competition. 102 Various legal and factual circumstances have been relied on to justify the adoption of the regulations and the actual principle of the compulsory licence, which lies at the heart of the mechanism in question. It seems that, first of all, within the Community, France alone has adopted rules governing the occupation of sports agent. Furthermore, it is not contested that, collectively, players’ agents do not, at present, constitute a profession with its own internal organisation. It is not contested either that certain practices on the part of players’ agents could, in the past, have harmed players and clubs, financially and professionally. FIFA explained that, in laying down the rules in question, it was pursuing a dual objective of raising professional and ethical standards for the occupation of players’ agent in order to protect players, who have a short career. 103 Contrary to the claims made by the applicant, competition is not eliminated by the licence system. That system appears to result in a qualitative selection, appropriate for the attainment of the objective of raising professional standards for the occupation of players’ agent, rather than a quantitative restriction on access to that occupation. On the contrary, the quantitative opening up of this occupation is corroborated by statistics communicated by FIFA at the hearing. FIFA stated, without being contradicted, that while it recorded 214 players’ agents in 1996, when the original regulations entered into force, it estimated that there were 1 500 at the beginning of 2003 and that 300 candidates had passed the examination at sessions held in March and September of that year. 104 In view of the circumstances set out in paragraphs 102 and 103 above and the current conditions governing the exercise of the occupation of players’ agent, where there are virtually no national rules and no collective organisation for players’ agents, the Commission did not commit a manifest error of assessment by considering that the restrictions stemming from the compulsory nature of the licence might benefit from an exemption on the basis of Article 81(3) EC, and, moreover, by rightly reserving the right to review the rules in question. The arguments put forward by Mr Piau in this regard must therefore be rejected. 105 Similarly, the applicant’s argument that the ‘specific nature of sport’ may not be relied on to justify a derogation from the rules on competition must be rejected as irrelevant. The contested decision is not based on such an exception and envisages the exercise of the occupation of players’ agent as an economic activity, without claiming that it should be accepted as falling within the scope of the specific nature of sport, which in fact it does not. 106 Mr Piau’s arguments relating to the breaches of freedom to conduct business and freedom to provide services should also be rejected, since the applicant has not shown that they disclose a concomitant infringement of the rules on competition that precludes an exemption for the amended regulations on the basis of Article 81(3) EC. – Inapplicability of Article 82 EC107 The contested decision states that Article 82 EC does not apply in the present case, as described by the applicant, since FIFA is not active on the market for the provision of advice to players. 108 Article 82 EC prohibits any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it. 109 That provision deals with the conduct of one or more economic operators abusing a position of economic strength and thus hindering the maintenance of effective competition on the relevant market by allowing that operator to behave to an appreciable extent independently of its competitors, its customers and, ultimately, consumers (Joined Cases C‑395/96 P and C‑396/96 P Compagnie maritime belge transports and Others v Commission [2000] ECR I‑1365, paragraph 34). 110 The expression ‘one or more undertakings’ in Article 82 EC implies that a dominant position may be held by two or more economic entities legally independent of each other, provided that from an economic point of view they present themselves or act together on a particular market as a collective entity (Compagnie maritime belge transports and Others v Commission, paragraph 36). 111 Three cumulative conditions must be met for a finding of collective dominance: first, each member of the dominant oligopoly must have the ability to know how the other members are behaving in order to monitor whether or not they are adopting the common policy; second, the situation of tacit coordination must be sustainable over time, that is to say, there must be an incentive not to depart from the common policy on the market; thirdly, the foreseeable reaction of current and future competitors, as well as of consumers, must not jeopardise the results expected from the common policy (Case T‑342/99 Airtours v Commission [2002] ECR II‑2585, paragraph 62, and Case T‑374/00 Verband der freien Rohrwerke and Others v Commission [2003] ECR II-0000, paragraph 121). 112 In the present case, the market affected by the rules in question is a market for the provision of services where the buyers are players and clubs and the sellers are agents. In this market FIFA can be regarded as acting on behalf of football clubs since, as has already been stated (see paragraphs 69 to 72 above), it constitutes an emanation of those clubs as a second-level association of undertakings formed by the clubs. 113 A decision like the FIFA Players’ Agents Regulations may, where it is implemented, result in the undertakings operating on the market in question, namely the clubs, being so linked as to their conduct on a particular market that they present themselves on that market as a collective entity vis-à-vis their competitors, their trading partners and consumers (Compagnie maritime belge transports and Others v Commission, paragraph 44). 114 Because the regulations are binding for national associations that are members of FIFA and the clubs forming them, these bodies appear to be linked in the long term as to their conduct by rules that they accept and that other actors (players and players’ agents) cannot break on pain of sanctions that may lead to their exclusion from the market, in particular in the case of players’ agents. Within the meaning of the case-law cited in paragraphs 110 and 111 above, such a situation therefore characterises a collective dominant position for clubs on the market for the provision of players’ agents’ services, since, through the rules to which they adhere, the clubs lay down the conditions under which the services in question are provided. 115 It seems unrealistic to claim that FIFA, which is recognised as holding supervisory powers over the sport-related activity of football and connected economic activities, such as the activity of players’ agents in the present case, does not hold a collective dominant position on the market for players’ agents’ services on the ground that is not an actor on that market. 116 The fact that FIFA is not itself an economic operator that buys players’ agents’ services on the market in question and that its involvement stems from rule-making activity, which it has assumed the power to exercise in respect of the economic activity of players’ agents, is irrelevant as regards the application of Article 82 EC, since FIFA is the emanation of the national associations and the clubs, the actual buyers of the services of players’ agents, and it therefore operates on this market through its members. 117 As regards abuse of the alleged dominant position, however, it follows from the above considerations regarding the amended regulations and the possible exemption under Article 81(3) EC that such an abuse has not been established. It has been found that those regulations did not impose quantitative restrictions on access to the occupation of players’ agent that could be detrimental to competition, but qualitative restrictions that may be justified in the present circumstances. The abuses of the dominant position that, according to the applicant, stem from the regulations are not therefore established and his arguments in this regard must be rejected. 118 Lastly, Mr Piau’s argument that licensed players’ agents are abusing their collective dominant position within the meaning of Article 82 EC must also be rejected in the absence of structural links between these agents, the existence of which Mr Piau has failed to establish. The holding of the same licence, the use of the same standard contract and the fact that agents’ remuneration is determined on the basis of the same criteria do not prove the existence of a dominant position for licensed players’ agents, and the applicant does not show that the parties concerned adopt an identical approach or that they implicitly divide up the market. 119 Consequently, although the Commission wrongly considered that FIFA did not hold a dominant position on the market for players’ agents’ services, the other findings contained in the contested decision, namely that the most restrictive provisions of the regulations had been deleted and that the licence system could enjoy an exemption decision under Article 81(3) EC, would accordingly lead to the conclusion that there was no infringement under Article 82 EC and to the rejection of the applicant’s arguments in this regard. Therefore, despite the error in law made by the Commission in taking the view that Article 82 EC was not applicable, its application could not, in any event, have resulted in a finding of an abuse of a dominant position based on the other findings that had rightly been made from the examination of the regulations. Thus, the lawfulness of the rejection of the complaint on the ground of lack of Community interest in continuing with the procedure is not affected. 120 In the light of the foregoing considerations, the Commission did not commit a manifest error of assessment in deciding to reject Mr Piau’s complaint on the ground of lack of Community interest in continuing with the procedure. The ‘cross-border nature’ of the market, which is not disputed, is irrelevant in this regard, since this fact alone does not confer a Community interest on a complaint. In view of the fact that the assessment of the Community interest raised by a complaint depends on the circumstances of each case, the number of criteria of assessment the Commission may refer to should not be limited, nor conversely should it be required to have recourse exclusively to certain criteria (Ufex and Others v Commission, paragraphs 79 and 80). 121 The action brought by Mr Piau must therefore be dismissed. Costs122 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. 123 Since the applicant has been unsuccessful and the Commission has applied for costs, the applicant must be ordered to bear his own costs and pay those incurred by the Commission. 124 Under the third subparagraph of Article 87(4) of the Rules of Procedure, the Court may order an intervener other than the Member States and the institutions to bear its own costs. 125 In the circumstances of the present case, FIFA must be ordered to bear its own costs in connection with its intervention.On those grounds,THE COURT OF FIRST INSTANCE (Fourth Chamber)hereby:1. Dismisses the application;2. Orders the applicant to bear his own costs and pay those incurred by the Commission;3. Orders the Fédération internationale de football association to bear its own costs. Legal TiiliVilarasDelivered in open court in Luxembourg on 26 January 2005.H. Jung H. LegalRegistrar President* Language of the case: French. | c45f0-ea77cc5-4cec | EN |
NATIONAL LEGISLATION WHICH MAKES FAMILY BENEFITS PAID TO THE MEMBERS OF THE FAMILY OF A PRISONER WHO IS A COMMUNITY NATIONAL SUBJECT TO THE CONDITION THAT HE REMAIN IN PRISON IN THAT STATE IS NOT CONTRARY TO THE PRINCIPLE OF EQUALITY | Criminal proceedingsagainstNils Laurin Effing(Reference for a preliminary ruling from the Oberster Gerichtshof (Austria))(Family benefits – Grant by a Member State of advances on maintenance payments for minor children – Child of a prisoner – Conditions of granting the maintenance payment – Prisoner transferred to another Member State to serve his sentence – Article 12 EC – Articles 3 and 13 of Regulation (EEC) No 1408/71)Opinion of Advocate General Kokott delivered on 25 May 2004 Judgment of the Court (First Chamber), 20 January 2005. Summary of the Judgment1. Social security for migrant workers – Community rules – Scope ratione materiae – Benefits paid as an advance on maintenance payments for minor children – Person with maintenance obligation serving a prison sentence – Included(Council Regulation No 1408/71, Arts 1(u)(i) and 4(1)(h))2. Social security for migrant workers – Community rules – Scope ratione personae – Person covered by unemployment insurance during a period of imprisonment – Included(Council Regulation No 1408/71, Art. 2(1))3. Social security for migrant workers – Applicable legislation – Person having ceased all occupational activity in one Member State and having transferred his residence to another Member State – Prisoner having started to serve his sentence in one Member State and having been transferred to another Member State – Application of the legislation of the latter State(Council Regulation No 1408/71, Art. 13(2)(a) and (f))4. Social security for migrant workers – Family benefits – Person having ceased all occupational activity in one Member State and having transferred his residence to another Member State – Applicable national legislation making the grant of those benefits conditional on residence – Whether permissible(Art. 12 EC; Council Regulation No 1408/71, Art. 3)1. The expression ‘to meet family expenses’ in Article 1(u)(i) of Regulation No 1408/71 is to be interpreted as referring in particular to a public contribution to a family’s budget to alleviate the financial burdens involved in the maintenance (‘Unterhalt’) of children. It follows from this that a benefit, such as the advance on maintenance payments, provided for by the Österreichisches Bundesgesetz über die Gewährung von Vorschüssen auf den Unterhalt von Kindern (Unterhaltsvorschussgesetz) (Austrian Federal Law on the Grant of Advances for the Maintenance of Children) and granted on the ground that the father of the child, the person with the maintenance obligation, is serving a prison sentence, constitutes a family benefit within the meaning of Article 4(1)(h) of Regulation No 1408/71. (see para. 27)2. A person has the status of employed person within the meaning of Regulation No 1408/71 where he is covered, if only in respect of a single risk, compulsorily or an optional basis, by a general or special social security scheme mentioned in Article 1(a) of that regulation, irrespective of the existence of an employment relationship. Therefore, a person covered by unemployment insurance during a period in which he was serving a prison sentence is an employed person within the meaning of Article 2(1) of that regulation. (see paras 32-33)3. Where an employed person within the meaning of Article 2(1) of Regulation No 1408/71 has been transferred, as a prisoner, from the Member State where he has ceased all occupational activity and has started to serve his sentence to another Member State, from which he comes in order to serve the remainder of his sentence there, it is the legislation of the latter Member State which, in the area of family benefits and in accordance with the provisions of Article 13(2) of that regulation, is the applicable legislation. (see paras 44, 52, operative part)4. Although Article 12 EC and Article 3 of Regulation No 1408/71 are designed to eliminate discrimination on grounds of nationality which might result from the legislation or administrative practice of a Member State, they cannot have the effect of introducing disparities in treatment which may follow from differences in national legislation pertaining to family benefits designated as applicable under conflict of law rules such as those contained in Article 13(2) of Regulation No 1408/71. In a situation where an employed person has been transferred, as a prisoner, from the Member State where he has ceased all occupational activity and has started to serve his sentence to another Member State, from which he originates, in order to serve the remainder of his sentence, those provisions do not preclude the legislation of the first Member State making the grant of family benefits provided for by internal law to members of the family of such a Community national subject to the condition that he remain a prisoner on its territory. (see paras 51-52, operative part)JUDGMENT OF THE COURT (First Chamber)20 January 2005(1) In Case C-302/02,THE COURT (First Chamber),,after hearing the Opinion of the Advocate General at the sitting on 25 May 2004,gives the following Legal framework family benefits.’a person employed in the territory of one Member State shall be subject to the legislation of that State even if he resides in the territory of another Member State or if the registered office or place of business of the undertaking or individual employing him is situated in the territory of another Member State; a person who is self‑employed in the territory of one Member State shall be subjected to the legislation of that State even if he resides in the territory of another Member State; a person to whom the legislation of a Member State ceases to be applicable, without the legislation of another Member State becoming applicable to him in accordance with one of the rules laid down in the aforegoing subparagraphs or in accordance with one of the exceptions or special provisions laid down in Articles 14 to 17 shall be subject to the legislation of the Member State in whose territory he resides in accordance with the provisions of that legislation alone.’ 1 – Language of the case: German. Language of the case: German. | 0b942-479d49f-4c89 | EN |
THE COURT OF JUSTICE ADJUDICATES FOR THE FIRST TIME ON THE EUROPEAN INSTITUTIONS' IMPLEMENTING POWERS IN THE CONTEXT OF IMPLEMENTATION OF THE SCHENGEN AGREEMENT | Commission of the European CommunitiesvCouncil of the European Union(Regulations (EC) Nos 789/2001 and 790/2001 – Visa policy – Border checks and surveillance – Article 202 EC – Implementing powers reserved to the Council – Updating reserved to the Member States – Specific cases – Obligation to state reasons)Opinion of Advocate General Léger delivered on 27 April 2004 Judgment of the Court (Full Court), 18 January 2005 Summary of the Judgment 1. Acts of the institutions – Regulations – Basic regulations and implementing regulations – Implementing powers reserved to the Council – Conditions – Specific and substantiated cases – Procedures for the exercise of implementing powers in respect of the rules concerning the crossing of external borders and visas(Arts 202 EC and 253 EC; Council Regulations Nos 789/2001 and 790/2001; Council Decision 1999/468, Art. 1, first subpara.)2. European Union – Police and judicial cooperation in criminal matters – Convention implementing the Schengen Agreement – Crossing of external borders and visas – Establishment by the Council of a procedure for the transmission of amendments made by the Member States to the implementation procedures – Whether permitted(Council Regulations No 789/2001, Art. 2, and No 790/2001, Art. 2)1. In accordance with Article 202 EC and the first subparagraph of Article 1 of Decision 1999/468 laying down the procedures for the exercise of implementing powers conferred on the Commission (Second Comitology Decision), when measures implementing a basic instrument need to be taken at Community level, it is the Commission which, in the normal course of events, is responsible for exercising that power. The Council must properly explain, by reference to the nature and content of the basic instrument to be implemented or amended, any exception to the rule. In that regard, in the preamble to Regulations Nos 789/2001 and 790/2001 reserving to the Council implementing powers with regard to certain detailed provisions and practical procedures for examining visa applications and the carrying-out of border checks and surveillance at the external borders respectively, the Council specifically referred to the enhanced role of the Member States in respect of visas and border surveillance and to the sensitivity of those areas, in particular as regards political relations with non-member States. It could reasonably consider itself to be concerned with a specific case and thus it duly stated the reasons, in accordance with Article 253 EC, for its decision to reserve to itself, on a transitional basis, power to implement a series of provisions exhaustively listed in the Common Consular Instructions and in the Common Manual, which set out the rules concerning the crossing of external borders and visas, contained in the Convention implementing the Schengen Agreement. Assessed in their proper context, such considerations, although general and laconic, are such as to show clearly the grounds justifying the reservation of powers to the Council and to allow the Court to exercise its power of review. (see paras 49-53, 59)2. It is apparent from Article 2 of Regulations Nos 789/2001 and 790/2001 reserving to the Council implementing powers with regard to certain detailed provisions and practical procedures for examining visa applications and the carrying-out of border checks and surveillance at the external borders respectively that each Member State may itself amend, sometimes in agreement with the other Member States, certain of those provisions or procedures. With regard to those texts, adopted at a time when the area concerned was a matter for intergovernmental cooperation, their integration into the framework of the European Union with effect from the entry into force of the Treaty of Amsterdam did not, of itself, result in the Member States being immediately stripped of the powers which they were entitled to exercise under those instruments in order to ensure their proper implementation. In that quite specific and transitional situation, prior to the evolution of the Schengen acquis within the legal and institutional framework of the European Union, no objection can be made to the Council having established a procedure for the transmission by the Member States of amendments which they are authorised to make, unilaterally or in collaboration with the other Member States, to certain of those provisions, the contents of which depend exclusively on information which they alone possess, since it has not been shown that it was appropriate to use a uniform updating procedure in order to ensure proper and effective implementation. (see paras 65, 69-71)JUDGMENT OF THE COURT (Full Court)18 January 2005(1) In Case C-257/01,applicant,intervener,defendant,THE COURT (Full Court),,after hearing the Opinion of the Advocate General at the sitting on 27 April 2004,gives the following Legal framework …confer on the Commission, in the acts which the Council adopts, powers for the implementation of the rules which the Council lays down. The Council may impose certain requirements in respect of the exercise of these powers. The Council may also reserve the right, in specific cases, to exercise directly implementing powers itself. The procedures referred to above must be consonant with principles and rules to be laid down in advance by the Council, acting unanimously on a proposal from the Commission and after obtaining the Opinion of the European Parliament.’ measures on the crossing of the external borders of the Member States which shall establish: (a) standards and procedures to be followed by Member States in carrying out checks on persons at such borders; standards and procedures to be followed by Member States in carrying out checks on persons at such borders; (b) rules on visas for intended stays of no more than three months, including: rules on visas for intended stays of no more than three months, including: (i) the list of third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement; the list of third countries whose nationals must be in possession of visas when crossing the external borders and those whose nationals are exempt from that requirement; (ii) the procedures and conditions for issuing visas by Member States; the procedures and conditions for issuing visas by Member States; (iii) a uniform format for visas; a uniform format for visas; (iv) rules on a uniform visa; rules on a uniform visa; …’the diplomatic mission or consular post responsible for visa applications for a visit not exceeding three months (Part II of the CCI); initiation of the application procedure for a visit not exceeding three months (Part III of the CCI);examination of the application and the decision relating thereto (Part V of the CCI);how to fill in visa‑stickers (Part VI of the CCI);administrative management and organisation of the visa sections (Part VII of the CCI);consular cooperation at local level (Part VIII of the CCI); regulations governing the movement of holders of diplomatic, official duty and service passports, and holders of laissez-passers which certain international intergovernmental organisations issue to their officials (Annex 2 to the CCI other than Schedule B and visa requirements relating to the countries referred to in Schedule A for which prior consultation is not necessary); the joint list of third countries whose nationals are subject to airport visa requirements by all Member States which are Contracting Parties to the Schengen Agreement (‘the Schengen States’), holders of travel documents issued by these third countries also being subject to this requirement (Annex 3, Part I, to the CCI); the list of residence permits of the States of the European Economic Area for which the holders are exempt from the airport transit visa requirement (Annex 3, Part III, to the CCI); the list of honorary consuls authorised, in exceptional cases and on a temporary basis, to issue uniform visas (Annex 6 to the CCI); the instructions concerning entries in the electronically scanned section (Annex 10 to the CCI);criteria for determining whether a travel document may bear a visa (Annex 11 to the CCI);the fees to be charged, in euro, corresponding to the administrative costs of processing the visa application (Annex 12 to the CCI); details of how to complete the visa‑stickers (Annex 13 to the CCI); rules and procedures governing information to be sent by Contracting Parties when issuing visas with limited territorial validity, when cancelling, revoking and reducing the duration of validity of uniform visas and when issuing national residence permits (Annex 14 to the CCI); model harmonised forms providing proof of invitation, sponsorship and accommodation drafted by the Contracting Parties (Annex 15 to the CCI). the list of countries whose nationals are not subject to a visa requirement in one or more Schengen States when they are holders of diplomatic, official or service passports, but who are subject to this requirement when they are holders of ordinary passports (Annex 2, Schedule A, to the CCI, with the exception of the visa requirements relating to the countries mentioned in that schedule which must be the subject of prior consultation); the list of countries whose nationals are subject to visas in one or more Schengen States, when they are holders of diplomatic, official or service passports, but who are not subject to this requirement when they are holders of ordinary passports (Annex 2, Schedule B, to the CCI); the joint list of third countries whose nationals are subject to an airport visa requirement by some Schengen States only, with holders of travel documents issued by these third countries also being subject to this requirement (Annex 3, Part II, to the CCI); the list of documents entitling holders to entry without a visa (Annex 4 to the CCI);the list of visa applications which must be the subject of prior consultation with the central authorities of the Member State with which the application is lodged in accordance with Article 17(2) of the CISA (Annex 5A to the CCI); the list of visa applications which must be the subject of prior consultation with the central authorities of other Contracting Parties, in accordance with Article 17(2) of the CISA (Annexes 5B and 5C to the CCI); the reference amounts (that is to say, adequate means of subsistence) required for crossing borders fixed annually by the national authorities (Annex 7 to the CCI); information which, in certain cases, must be given by the authorities in the ‘Remarks’ section of the visa‑sticker (Annex 9 to the CCI); certain aspects of the computerised procedure for consultation for the purposes of issuing visas (Annexes 6 and 9 to the ‘Schengen Consultation Network (Technical Specifications’)). crossing the border at authorised border crossing points (Part I, point 1.2, of the CM);crossing the border at places other than authorised border crossing points (Part I, points 1.3, 1.3.1 and 1.3.3, of the CM);the list, for each country, of documents recognised as valid for the crossing of external borders and of those which may bear a visa (Part I, point 2.1, of the CM); the technical description of the stick-in visa given in Annex 6 to the CM (Part I, point 3.1.2, of the CM);the specimen stick-in visas with examples of possible endorsements provided for in Annex 7 to the CM (Part I, point 3.1.3, of the CM); the rule that ‘[t]he endorsements printed on the stick-in visa are to be in English, French and the respective national languages’ (Part I, point 3.1.4, of the CM); the rule that ‘[t]he rules and procedures governing information to be sent by Contracting Parties when issuing visas with limited territorial validity, when cancelling, revoking and reducing the duration of uniform visas and when issuing national residence permits are described in Annex 8a’ (Part I, point 3.2.4, of the CM); the documentary evidence or information establishing the likelihood of the reasons given for entry which may be provided (Part I, points 4.1, 4.1.1 and 4.1.2, of the CM); the officers authorised to carry out checks and surveillance (Part II, point 1.1, of the CM);the procedures for checks (Part II, point 1.3, of the CM);certain detailed provisions concerning the procedures for refusing entry (Part II, points 1.4.1, 1.4.1a and 1.4.4 to 1.4.8, of the CM); the detailed provisions concerning the affixing of stamps (Part II, point 2.1, of the CM);certain detailed provisions concerning the surveillance of external borders at places other than crossing points and outside office opening hours (Part II, points 2.2.2, 2.2.3 and 2.2.4, of the CM); the information which must be entered in a register (Part II, point 2.3, of the CM);checks on road traffic (Part II, point 3.1, of the CM);checks on rail traffic (Part II, point 3.2, of the CM);the procedure determining the place where persons and hand baggage are checked with regard to international civil air traffic (Part II, point 3.3.1, of the CM); additional procedures for checking persons in relation to international civil air traffic (Part II, points 3.3.2, 3.3.3, 3.3.4 and 3.3.5, of the CM); the procedure for checks in aerodromes (Part II, point 3.3.6, of the CM);the rule that ‘[i]n order to prevent dangers, checks must be carried out, in airports and aerodromes, on passengers on internal flights, where uncertainty exists whether such passengers are exclusively coming from, or solely bound for, the territories of the Contracting Parties without landing on the territory of a third State’ (Part II, point 3.3.7, of the CM); checks on maritime traffic, with the exclusion of regular ferry services, pleasure boating, coastal fisheries and inland waterway transport (Part II, point 3.4, of the CM); checks on inland waterway shipping (Part II, point 3.5, of the CM);exchange of information (Part II, point 4.1, of the CM);secondment of liaison officers (Part II, point 4.2, of the CM);the issue of visas at the border (Part II, points 5.2 to 5.6, of the CM);special rules on the checking of the pilots of aircraft and other crew members (Part II, point 6.4, of the CM);special rules on the checking of seamen (Part II, point 6.5, of the CM);special rules on the checking of holders of diplomatic, official or service passports (Part II, point 6.6, of the CM);special rules on the checking of cross-border workers (Part II, point 6.7, of the CM);special rules on the checking of minors (Part II, point 6.8, of the CM);special rules on the checking of group trips (Part II, point 6.9, of the CM);special rules on the checking of aliens who submit an application for asylum at the border (Part II, point 6.10, of the CM);special rules on the checking of members of international organisations (Part II, point 6.11, of the CM);the specimen long-stay visa (Annex 9 to the CM).the rule that ‘[n]ationals of the Kingdom of Belgium, the Kingdom of Denmark, the French Republic, the Grand Duchy of Luxembourg and the Kingdom of the Netherlands shall be authorised to cross, at any point, the borders of the State whose nationality they hold’ (Part I, point 1.3.2, of the CM); authorised border crossing points for the purposes of Part I, point 1.2, of the CM (Annex 1 to the CM);specimen stick‑in visas for the purposes of Part I, point 3.1.3, of the CM (Annex 7 to the CM);specimen separate sheets (that is to say, authorisations replacing visas) (Annex 12 to the CM);specimen cards issued by the Ministry of Foreign Affairs (Annex 13 to the CM). Dismisses the action; Orders the Commission of the European Communities to pay the costs. 1 – Language of the case: English. Language of the case: English. | feb97-adbd1c4-4e01 | EN |
THE PROTECTIVE REGIME LAID DOWN BY THE DIRECTIVE ON THE CONSERVATION OF NATURAL HABITATS APPLIES ONLY TO SITES THAT HAVE BEEN PLACED ON THE LIST OF SITES OF COMMUNITY IMPORTANCE ESTABLISHED BY THE COMMISSION | Società Italiana Dragaggi SpA and OthersvMinistero delle Infrastrutture e dei Trasporti and Regione Autonoma del Friuli Venezia Giulia(Reference for a preliminary ruling from the Consiglio di Stato)(Directive 92/43/EEC – Conservation of natural habitats – Wild fauna and flora – National list of sites eligible for identification as sites of Community importance – Conservation measures)Opinion of Advocate General Kokott delivered on 8 July 2004 Judgment of the Court (Second Chamber), 13 January 2005 Summary of the JudgmentEnvironment – Conservation of natural habitats and of wild fauna and flora – Directive 92/43 – Special areas of conservation – Sites, included in the national lists, eligible for identification as sites of Community importance – Protective measures – Inapplicability of the measures prescribed in Article 6(2), (3) and (4) – Obligation on the Member States to safeguard their ecological interest(Council Directive 92/43, Arts 4(5), and 6(2),(3) and (4))On a proper construction of Article 4(5) of Directive 92/43 on the conservation of natural habitats and of wild fauna and flora, the protective measures prescribed in Article 6(2), (3) and (4) of that directive are required only as regards sites which, in accordance with the third subparagraph of Article 4(2) of the directive, are on the list of sites selected as sites of Community importance adopted by the Commission in accordance with the procedure laid down in Article 21 of the directive. Consequently, those measures do not apply to the sites included in the national lists transmitted to the Commission pursuant to Article 4(1) of the directive. However, by virtue of that directive, the Member States are required, as regards the latter sites, which are eligible for identification as sites of Community importance, and in particular as regards those hosting priority natural habitat types or priority species, to take protective measures that are appropriate, from the point of view of the directive’s conservation objective, for the purpose of safeguarding the relevant ecological interest which those sites have at national level. (see paras 21-22, 25, 28-30, operative part)JUDGMENT OF THE COURT (Second Chamber)13 January 2005(1) (Directive 92/43/EEC – Conservation of natural habitats – Wild fauna and flora – National list of sites eligible for identification as sites of Community importance – Conservation measures)In Case C-117/03,THE COURT (Second Chamber),,after hearing the Opinion of the Advocate General at the sitting on 8 July 2004,gives the following Legal context on a proper construction of Article 4(5) of the Directive, the protective measures prescribed in Article 6(2), (3) and (4) of the Directive are required only as regards sites which, in accordance with the third subparagraph of Article 4(2) of the Directive, are on the list of sites selected as sites of Community importance adopted by the Commission in accordance with the procedure laid down in Article 21 of the Directive; in the case of sites eligible for identification as sites of Community importance which are included in the national lists transmitted to the Commission and, in particular, sites hosting priority natural habitat types or priority species, the Member States are, by virtue of the Directive, required to take protective measures that are appropriate, from the point of view of the Directive’s conservation objective, for the purpose of safeguarding the relevant ecological interest which those sites have at national level. 1 – Language of the case: Italian. Language of the case: Italian. | e97b1-49e798e-40ba | EN |
FIRST CASE RELATING TO ONE OF THE COMMUNITY'S PARTNERSHIP AGREEMENTS : IN THE VIEW OF ADVOCATE GENERAL STIX-HACKL, PROFESSIONAL FOOTBALLERS OF RUSSIAN NATIONALITY WHO ARE LEGALLY EMPLOYED IN A MEMBER STATE HAVE AN UNRESTRICTED RIGHT TO PARTICIPATE IN COMPETITIONS RUN BY THEIR ASSOCIATION | Igor SimutenkovvMinisterio de Educación y CulturaandReal Federación Española de Fútbol(Reference for a preliminary ruling from the Audiencia Nacional)(Communities-Russia Partnership Agreement – Article 23(1) – Direct effect – Conditions relating to employment – Principle of non-discrimination – Football – Limit on the number of professional players having the nationality of non-member countries who may appear on a team in a national competition) Opinion of Advocate General Stix-Hackl delivered on 11 January 2005 Judgment of the Court (Grand Chamber), 12 April 2005. Summary of the Judgment1. International agreements — Community agreements — Direct effect — Article 23(1) of the Communities-Russia Partnership Agreement(Communities-Russia Partnership Agreement, Art. 23(1))2. International agreements — Communities-Russia Partnership Agreement — Workers — Equal treatment — Working conditions — Rule drawn up by a sports federation of a Member State which limits the number of professional players from non-member countries who may take part in national competitions — Not permissible1. Inasmuch as it lays down, in clear, precise and unconditional terms, a prohibition precluding any Member State from discriminating, on grounds of nationality, against Russian workers, vis-à-vis that State’s own nationals, so far as their conditions of employment, remuneration and dismissal are concerned, Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, has direct effect, with the result that individuals to whom that provision applies are entitled to rely on it before the courts of the Member States. (see paras 22, 29)2. Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, precludes the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions organised at national level only a limited number of players from countries which are not parties to the Agreement on the European Economic Area. (see para. 41, operative part)JUDGMENT OF THE COURT (Grand Chamber)12 April 2005 (*) In Case C-265/03,REFERENCE under Article 234 EC for a preliminary ruling, made by the Audiencia Nacional (Spain), by decision of 9 May 2003, received at the Court on 17 June 2003, in the proceedings Ministerio de Educación y Cultura,Real Federación Española de Fútbol,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas, Presidents of Chambers, C. Gulmann, A. La Pergola, J.-P. Puissochet, J. Makarczyk, P. Kūris, M. Ilešič (Rapporteur), U. Lõhmus, E. Levits and A. Ó Caoimh, Judges, Advocate General: C. Stix-Hackl,Registrar: R. Grass,having regard to the written procedure,after considering the observations submitted on behalf of:– Mr Simutenkov, by M. Álvarez de la Rosa, abogado, and F. Toledo Hontiyuelo, procuradora,– Real Federación Española de Fútbol, by J. Fraile Quinzaños, abogado, and J. Villasante García, procurador,– the Spanish Government, by E. Braquehais Conesa, acting as Agent,– the Commission of the European Communities, by F. Hoffmeister, D. Martin and I. Martínez del Peral, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 11 January 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, signed in Corfu on 24 June 1994 and approved on behalf of the Communities by Decision 97/800/ECSC, EC, Euratom: Council and Commission Decision of 30 October 1997 (OJ 1997 L 327, p. 1) (‘the Communities-Russia Partnership Agreement’). 2 That reference has been submitted in the context of a dispute between Mr Simutenkov, on the one hand, and the Ministerio de Educación y Cultura (Ministry of Education and Culture) and the Real Federación Española de Fútbol (Royal Spanish Football Federation) (‘the RFEF’), on the other, concerning sporting rules which limit the number of players from non-member countries who may be fielded in national competitions. The legal framework3 The Communities-Russia Partnership Agreement entered into force on 1 December 1997. Article 23(1), which features in Title IV of that agreement (‘Provisions on business and investment’), under Chapter I, which is itself entitled ‘Labour conditions’, provides as follows: ‘Subject to the laws, conditions and procedures applicable in each Member State, the Community and its Member States shall ensure that the treatment accorded to Russian nationals legally employed in the territory of a Member State shall be free from any discrimination based on nationality, as regards working conditions, remuneration or dismissal, as compared to its own nationals.’ 4 Article 27 of the Communities-Russia Partnership Agreement is worded as follows:‘The Cooperation Council shall make recommendations for the implementation of Articles 23 and 26 of this Agreement.’5 Article 48 of the Communities-Russia Partnership Agreement, which also features in Title IV, provides:‘For the purpose of this Title, nothing in the Agreement shall prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons and supply of services, provided that, in so doing, they do not apply them in a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of the Agreement. …’ The dispute in the main proceedings and the question referred for preliminary ruling6 Mr Simutenkov is a Russian national who, at the time of the facts in the dispute in the main proceedings, was living in Spain, where he had a residence permit and a work permit. Employed as a professional football player under an employment contract entered into with Club Deportivo Tenerife, he held a federation licence as a non-Community player. 7 In January 2001, Mr Simutenkov submitted, through that club, an application to the RFEF for it to replace the federation licence which he held with a licence that was identical to that held by Community players. In support of that application, he relied on the Communities-Russia Partnership Agreement. 8 By decision of 19 January 2001, the RFEF turned down that application on the basis of its General Regulations and the agreement which it had concluded on 28 May 1999 with the national professional football league (‘the agreement of 28 May 1999’). 9 Under Article 129 of the General Regulations of the RFEF, a professional football player’s licence is a document issued by the RFEF which entitles a player to practise that sport as a member of that federation and to be fielded in matches and official competitions as a player belonging to a specific club. 10 Article 173 of the General Regulations provides:‘Without prejudice to the exceptions laid down herein, in order to register as a professional and obtain a professional licence, a footballer must meet the general requirement of holding Spanish nationality or the nationality of one of the countries of the European Union or the European Economic Area.’ 11 Article 176(1) of the General Regulations provides: ‘1. Clubs entered for official professional competitions at national level shall be entitled to register foreign non-Community players in the number stipulated in the relevant agreements concluded between the RFEF, the Liga Nacional de Fútbol Profesional (National Professional Football League) and the Asociación de Futbolistas Españoles (Association of Spanish Footballers). Those agreements also govern the number of such footballers who may take part simultaneously in a game …’12 Under the agreement of 28 March 1999, the number of players not having the nationality of a Member State who were allowed to participate at any time in the Spanish First Division was limited to three for the 2000/01 to 2004/05 seasons and, in the case of the Second Division, to three for the 2000/01 and 2001/02 seasons and to two for the following three seasons. 13 As he took the view that the distinction which those Regulations draw between nationals of a Member State of the European Union or of the European Economic Area (‘the EEA’), on the one hand, and nationals of non-member countries, on the other, is incompatible, so far as Russian players are concerned, with Article 23(1) of the Communities-Russia Partnership Agreement and limits the exercise of his profession, Mr Simutenkov brought an action before the Juzgado Central de lo Contencioso Administrativo (Central Court for Contentious Administrative Proceedings) against the decision of 19 January 2001 turning down his application for a new licence. 14 Following the dismissal of that application by a judgment of 22 October 2002, Mr Simutenkov appealed to the Audiencia Nacional (National High Court), which decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘Is it contrary to Article 23 of the [Communities-Russia Partnership Agreement] … for a sports federation to apply to a professional sportsman of Russian nationality who is lawfully employed by a Spanish football club, as in the main proceedings, a rule which provides that clubs may use in competitions at national level only a limited number of players from countries outside the European Economic Area?’ The question referred for preliminary ruling15 By its question the national court asks whether Article 23(1) of the Communities-Russia Partnership Agreement is to be construed as precluding the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions at national level only a limited number of players from countries which are not parties to the EEA Agreement. 16 Mr Simutenkov and the Commission of the European Communities take the view that Article 23(1) of the Communities-Russia Partnership Agreement precludes a rule such as that laid down by the agreement of 28 May 1999. 17 The RFEF, by contrast, invokes in support of its position the words ‘[s]ubject to the laws, conditions and procedures applicable in each Member State’, which feature at the beginning of Article 23(1). It infers from this proviso that the competence which legislation confers on it to issue licences to football players and the sports regulations which it has adopted must be applied in a manner which takes priority over the principle of non-discrimination laid down in that provision. It also submits that the issue of a licence and the rules relating thereto form part of the organisation of competitions and do not concern working conditions. 18 The Spanish Government adopts the views expressed by the RFEF and submits in particular that, under the national rules and the case-law which interprets them, a federation licence is not a working condition but rather an administrative permit which serves as an authorisation to take part in sporting competitions. 19 In order to provide a useful reply to the question posed, it is necessary, first of all, to examine whether Article 23(1) of the Communities-Russia Partnership Agreement can be relied on by an individual before the courts of a Member State and, second, if the answer is affirmative, to determine the scope of the principle of non-discrimination which that provision lays down. The direct effect of Article 23(1) of the Communities-Russia Partnership Agreement20 It must be pointed out that, as this question concerning the effect of the provisions of the Communities-Russia Partnership Agreement within the legal systems of the parties to that Agreement (‘the parties’) has not been resolved therein, it is for the Court to resolve that question in the same way as any other question of interpretation concerning the application of agreements within the Community (judgment in Case C-149/96 Portugal v Council [1999] ECR I‑8395, paragraph 34). 21 In this regard, according to well-established case-law, a provision in an agreement concluded by the Communities with a non-member country must be regarded as being directly applicable when, regard being had to its wording and to the purpose and nature of the agreement, the provision contains a clear and precise obligation which is not subject, in its implementation or effects, to the adoption of any subsequent measure (judgments in Case C-63/99 Gloszczuk [2001] ECR I-6369, paragraph 30, and in Case C-171/01 Wählergruppe Gemeinsam [2003] ECR I-4301, paragraph 54). 22 It follows from the wording of Article 23(1) of the Communities-Russia Partnership Agreement that that provision lays down, in clear, precise and unconditional terms, a prohibition precluding any Member State from discriminating, on grounds of nationality, against Russian workers, vis-à-vis their own nationals, so far as their conditions of employment, remuneration and dismissal are concerned. Workers who are entitled to the benefit of that provision are those who hold Russian nationality and who are lawfully employed in the territory of a Member State. 23 Such a rule of equal treatment lays down a precise obligation as to results and, by its nature, can be relied on by an individual before a national court as a basis for requesting that court to disapply discriminatory provisions without any further implementing measures being required to that end (judgments in Case C-162/00 Pokrzeptowicz-Meyer [2002] ECR I-1049, paragraph 22, and in Wählergruppe Gemeinsam, cited above, paragraph 58). 24 That interpretation cannot be brought into question by the words ‘[s]ubject to the laws, conditions and procedures applicable in each Member State’, which feature at the beginning of Article 23(1) of the Communities-Russia Partnership Agreement, or by Article 48 of that Agreement. Those provisions cannot be construed as allowing the Member States to subject application of the principle of non-discrimination set out in Article 23(1) of that agreement to discretionary limitations, which would have the effect of rendering that provision meaningless and thus depriving it of any practical effect (Pokrzeptowicz-Meyer, cited above, paragraphs 23 and 24, and Case C-438/00 Deutscher Handballbund [2003] ECR I‑4135, paragraph 29). 25 Nor does Article 27 of the Communities-Russia Partnership Agreement preclude Article 23(1) thereof from having direct effect. The fact that Article 27 provides that Article 23 is to be implemented on the basis of recommendations by the Cooperation Council does not make the applicability of Article 23, in its implementation or effects, subject to the adoption of any subsequent measure. The role which Article 27 confers on that council is to facilitate compliance with the prohibition of discrimination but cannot be regarded as limiting the immediate application of that prohibition (see, in that regard, Case C-18/90 Kziber [1991] ECR I-199, paragraph 19, and Case C-262/96 Sürül [1999] ECR I-2685, paragraph 66). 26 The finding that the principle of non-discrimination set out in Article 23(1) of the Communities-Russia Partnership Agreement is directly effective is not, moreover, gainsaid by its purpose and nature. 27 Article 1 states that the purpose of the Agreement is to establish a partnership between the parties with a view to promoting, inter alia, the development between them of close political relations, trade and harmonious economic relations, political and economic freedoms, and the achievement of gradual integration between the Russian Federation and a wider area of cooperation in Europe. 28 The fact that the Agreement is thus limited to establishing a partnership between the parties, without providing for an association or future accession of the Russian Federation to the Communities, is not such as to prevent certain of its provisions from having direct effect. It is clear from the Court’s case-law that when an agreement establishes cooperation between the parties, some of the provisions of that agreement may, under the conditions set out in paragraph 21 of the present judgment, directly govern the legal position of individuals (Kziber, cited above, paragraph 21, Case C-113/97 Babahenini [1998] ECR I-183, paragraph 17, and Case C-162/96 Racke [1998] ECR I-3655, paragraphs 34 to 36). 29 In the light of all of the foregoing, it must be held that Article 23(1) of the Communities-Russia Partnership Agreement has direct effect, with the result that individuals to whom that provision applies are entitled to rely on it before the courts of the Member States. The scope of the principle of non-discrimination set out in Article 23(1) of the Communities-Russia Partnership Agreement30 The question which has been referred by the national court is similar to that referred to the Court in the case which led to the above judgment in Deutscher Handballbund. In that judgment the Court ruled that the first indent of Article 38(1) of the Europe Agreement establishing an association between the European Communities and their Member States, of the one part, and the Slovak Republic, of the other part, signed in Luxembourg on 4 October 1993 and approved on behalf of the Communities by Decision 94/909/ECSC, EEC, Euratom of the Council and the Commission of 19 December 1994 (OJ 1994 L 359, p. 1) (‘the Communities-Slovakia Association Agreement’) had to be construed as precluding the application to a professional sportsman of Slovak nationality, who was lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation in that State under which clubs were authorised to field, during league or cup matches, only a limited number of players from non-member countries that are not parties to the EEA Agreement. 31 The first indent of Article 38(1) of the Communities-Slovakia Association Agreement was worded as follows:‘Subject to the conditions and modalities applicable in each Member State:– treatment accorded to workers of Slovak Republic nationality legally employed in the territory of a Member State shall be free from any discrimination based on nationality, as regards working conditions, remuneration or dismissal, as compared to its own nationals’. 32 The Court ruled, inter alia, that a rule which limits the number of professional players, nationals of the non-member country in question, who might be fielded in national competitions did relate to working conditions within the meaning of the first indent of Article 38(1) of the Communities-Slovakia Association Agreement inasmuch as it directly affected participation in league and cup matches of a Slovak professional player who was already lawfully employed in the host Member State (Deutscher Handballbund, cited above, paragraphs 44 to 46). 33 The Court also ruled that the interpretation of Article 48(2) of the EC Treaty (now, after amendment, Article 39(2) EC) which it handed down in its judgment in Case C-415/93 Bosman [1995] ECR I-4921 to the effect that the prohibition of discrimination on grounds of nationality applies to rules laid down by sporting associations which determine the conditions under which professional sportsmen can engage in gainful employment and precludes a limitation, based on nationality, on the number of players who may be fielded at the same time, could be transposed to the first indent of Article 38(1) of the Communities-Slovakia Association Agreement (Deutscher Handballbund, paragraphs 31 to 37 and 48 to 51). 34 The wording of Article 23(1) of the Communities-Russia Partnership Agreement is very similar to that of the first indent of Article 38(1) of the Communities-Slovakia Association Agreement. The only significant difference between the respective wording of those two provisions is in the use of the terms ‘the Community and its Member States shall ensure that the treatment accorded to Russian nationals … shall be free from any discrimination based on nationality’ and ‘treatment accorded to workers of Slovak Republic nationality … shall be free from any discrimination based on nationality’. In view of the finding in paragraphs 22 and 23 of this judgment that the wording of Article 23(1) of the Communities-Russia Partnership Agreement lays down, in clear, precise and unconditional terms, a prohibition of discrimination on grounds of nationality, the difference in drafting highlighted above is not a bar to the transposition, to Article 23(1) of the Communities-Russia Partnership Agreement, of the interpretation upheld by the Court in Deutscher Handballbund. 35 Admittedly, unlike the Communities-Slovakia Association Agreement, the Communities-Russia Partnership Agreement is not intended to establish an association with a view to the gradual integration of that non-member country into the European Communities but is designed rather to bring about ‘the gradual integration between Russia and a wider area of cooperation in Europe’. 36 However, it does not in any way follow from the context or purpose of that Partnership Agreement that it intended to give to the prohibition of ‘discrimination based on nationality, as regards working conditions … as compared to [the Member State’s] own nationals’ any meaning other than that which follows from the ordinary sense of those words. Consequently, in a manner similar to the first indent of Article 38(1) of the Communities-Slovakia Association Agreement, Article 23(1) of the Communities-Russia Partnership Agreement establishes, for the benefit of Russian workers lawfully employed in the territory of a Member State, a right to equal treatment in working conditions of the same scope as that which, in similar terms, nationals of Member States are recognised as having under the EC Treaty, which precludes any limitation based on nationality, such as that in issue in the main proceedings, as the Court established in similar circumstances in the above judgments in Bosman and Deutscher Handballbund. 37 Furthermore, in the judgments in Bosman and Deutscher Handballbund, the Court held that a rule such as that in issue in the main proceedings related to working conditions (Deutscher Handballbund, paragraphs 44 to 46). The fact that Article 23(1) of the Communities-Russia Partnership Agreement applies only in regard to working conditions, remuneration or dismissal, and thus does not extend to rules concerning access to employment, is accordingly irrelevant. 38 In addition, the limitation based on nationality does not relate to specific matches between teams representing their respective countries but applies to official matches between clubs and thus to the essence of the activity performed by professional players. As the Court has also ruled, such a limitation cannot be justified on sporting grounds (Bosman, paragraphs 128 to 137; Deutscher Handballbund, paragraphs 54 to 56). 39 Moreover, no other argument has been put forward in the observations submitted to the Court that is capable of providing objective justification for the difference in treatment between, on the one hand, professional players who are nationals of a Member State or of a State which is a party to the EEA Agreement and, on the other, professional players who are Russian nationals. 40 Finally, as has been stated in paragraph 24 of the present judgment, the words ‘[s]ubject to the laws, conditions and procedures applicable in each Member State’, which feature at the beginning of Article 23(1) of the Communities-Russia Partnership Agreement, and Article 48 of that Agreement cannot be construed as allowing Member States to subject the application of the principle of non-discrimination set out in the former of those two provisions to discretionary limitations, inasmuch as such an interpretation would have the effect of rendering that provision meaningless and thus depriving it of any practical effect. 41 In the light of the foregoing, the answer to the question referred must be that Article 23(1) of the Communities-Russia Partnership Agreement is to be construed as precluding the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions organised at national level only a limited number of players from countries which are not parties to the EEA Agreement. Costs42 As these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than those of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) rules:Article 23(1) of the Agreement on partnership and cooperation establishing a partnership between the European Communities and their Member States, of one part, and the Russian Federation, of the other part, signed in Corfu on 24 June 1994 and approved on behalf of the Communities by Decision 97/800/ECSC, EC, Euratom: Council and Commission Decision of 30 October 1997, must be construed as precluding the application to a professional sportsman of Russian nationality, who is lawfully employed by a club established in a Member State, of a rule drawn up by a sports federation of that State which provides that clubs may field in competitions organised at national level only a limited number of players from countries which are not parties to the Agreement on the European Economic Area.[Signatures]* Language of the case: Spanish. | 647ad-b29943d-4b8e | EN |
THE AWARD OF A PUBLIC SERVICE CONTRACT TO AN UNDERTAKING WITH PARTLY PRIVATE CAPITAL, REGARDLESS OF THE PERCENTAGE OF THE HOLDING, DOES NOT CONSTITUTE AN IN-HOUSE OPERATION EXEMPTED FROM THE COMMUNITY PUBLIC PROCUREMENT RULES | Stadt Halle and RPL Recyclingpark Lochau GmbHvArbeitsgemeinschaft Thermische Restabfall- und Energieverwertungsanlage TREA Leuna(Reference for a preliminary ruling from the Oberlandesgericht Naumburg)(Directive 92/50/EEC – Public service contracts – Award with no public call for tenders – Award of the contract to a semi-public undertaking – Judicial protection – Directive 89/665/EEC)Opinion of Advocate General Stix-Hackl delivered on 23 September 2004 Judgment of the Court (First Chamber), 11 January 2005 Summary of the Judgment1. Approximation of laws – Review procedures relating to the award of public supply and public works contracts – Directive 89/665 – Obligation of the Member States to provide for review procedures – Reviewable decisions – Meaning – Decisions taken outside a formal award procedure and prior to a formal call for tenders – Included – Access to review procedures – Conditions – Requirement for procedure to have reached a particular stage – Not permissible(Council Directives 89/665, Art. 1(1), and 92/50)2. Approximation of laws – Award procedures for public service contracts – Directive 92/50 – Scope – Contracting authority having a holding in the capital of a company legally distinct from it together with one or more private undertakings – Contract concluded by the contracting authority with that company – Included(Council Directive 92/50)1. Article 1(1) of Directive 89/665 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, as amended by Directive 92/50 relating to the coordination of procedures for the award of public service contracts, itself amended by Directive 97/52, must be interpreted as meaning that the obligation of the Member States to ensure that effective and rapid remedies are available against decisions taken by contracting authorities extends also to decisions taken outside a formal award procedure and decisions prior to a formal call for tenders, in particular the decision on whether a particular contract falls within the personal and material scope of Directive 92/50, as amended. That possibility of review is available to any person having or having had an interest in obtaining the contract in question who has been or risks being harmed by an alleged infringement, from the time when the contracting authority has expressed its will in a manner capable of producing legal effects. The Member States are not therefore authorised to make the possibility of review subject to the fact that the public procurement procedure in question has formally reached a particular stage. (see para. 41, operative part 1)2. Where a contracting authority intends to conclude a contract for pecuniary interest relating to services within the material scope of Directive 92/50 relating to the coordination of procedures for the award of public service contracts, as amended by Directive 97/52, with a company legally distinct from it, in whose capital it has a holding together with one or more private undertakings, the public award procedures laid down by that directive must always be applied, even if the holding is a majority one. (see para. 52, operative part 2)JUDGMENT OF THE COURT (First Chamber)11 January 2005(1) (Directive 92/50/EEC – Public service contracts – Award with no public call for tenders – Award of the contract to a semi-public undertaking – Judicial protection – Directive 89/665/EEC)In Case C-26/03,THE COURT (First Chamber),,after hearing the Opinion of the Advocate General at the sitting on 23 September 2004,gives the following Legal background take, at the earliest opportunity and by way of interlocutory procedures, interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting authority; either set aside or ensure the setting-aside of decisions taken unlawfully, including the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure; award damages to persons harmed by an infringement.“public undertaking” shall mean any undertaking over which the public authorities may exercise directly or indirectly a dominant influence by virtue of their ownership of it, their financial participation therein, or the rules which govern it. A dominant influence on the part of the public authorities shall be presumed when these authorities, directly or indirectly, in relation to an undertaking: – hold the majority of the undertaking’s subscribed capital, or hold the majority of the undertaking’s subscribed capital, or – control the majority of the votes attaching to shares issued by the undertaking, or control the majority of the votes attaching to shares issued by the undertaking, or – can appoint more than half of the members of the undertaking’s administrative, managerial or supervisory body; can appoint more than half of the members of the undertaking’s administrative, managerial or supervisory body;“affiliated undertaking” shall mean … any undertaking over which the contracting entity may exercise, directly or indirectly, a dominant influence within the meaning of paragraph 2 … . a contracting entity awards to an affiliated undertaking; (b) Does the first sentence of Article 1(1) of [Directive 89/665] require Member States to ensure that decisions of contracting authorities made prior to the issue of a formal invitation to tender, in particular the decision on the preliminary questions of whether a particular procurement process falls within the personal or material scope of the directives relating to the award of public contracts or exceptionally is outside the scope of procurement law, may be reviewed effectively and as rapidly as possible? Does the first sentence of Article 1(1) of [Directive 89/665] require Member States to ensure that decisions of contracting authorities made prior to the issue of a formal invitation to tender, in particular the decision on the preliminary questions of whether a particular procurement process falls within the personal or material scope of the directives relating to the award of public contracts or exceptionally is outside the scope of procurement law, may be reviewed effectively and as rapidly as possible? (c) If Question [1(a)] is answered in the affirmative and Question [1(b)] is answered in the negative: If Question [1(a)] is answered in the affirmative and Question [1(b)] is answered in the negative: Is the obligation of a Member State to ensure that the decision of a contracting authority not to award a public contract in a procedure which complies with the directives relating to the award of public contracts may be reviewed effectively and as rapidly as possible satisfied if the availability of review procedures depends on a specified, formal stage in the procurement procedure having been reached, for example the commencement of oral or written contractual negotiations with a third party? (b) If Question [2(a)] is answered in the negative: If Question [2(a)] is answered in the negative: In what circumstances is a contracting partner whose shareholders include a private person (a “semi-public company”) to be regarded as part of the public administration or, as the case may be, of the contracting authority’s undertaking? In particular: – Does “control” by the contracting authority, for example within the meaning of Articles 1(2) and 13(1) of [Directive 93/38] as amended by the [Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1)] and by Directive 98/4/EC of the European Parliament and of the Council of 16 February 1998 (OJ 1998 L 101, p. 1), suffice, from the point of view of structure and degree of control, for a semi-public company to be regarded as part of the contracting authority’s undertaking? Does “control” by the contracting authority, for example within the meaning of Articles 1(2) and 13(1) of [Directive 93/38] as amended by the [Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1)] and by Directive 98/4/EC of the European Parliament and of the Council of 16 February 1998 (OJ 1998 L 101, p. 1), suffice, from the point of view of structure and degree of control, for a semi-public company to be regarded as part of the contracting authority’s undertaking? – Does any influence the private co-shareholder in the semi-public company may legally have on the contracting partner’s strategic objectives and/or individual decisions relating to the management of its undertaking preclude regarding the semi-public company as part of the contracting authority’s undertaking? Does any influence the private co-shareholder in the semi-public company may legally have on the contracting partner’s strategic objectives and/or individual decisions relating to the management of its undertaking preclude regarding the semi-public company as part of the contracting authority’s undertaking? – Does a comprehensive right of direction, in respect only of decisions on concluding the contract and providing the services concerning the specific procurement procedure, suffice, from the point of view of structure and degree of control, for a semi-public company to be regarded as part of the contracting authority’s undertaking? Does a comprehensive right of direction, in respect only of decisions on concluding the contract and providing the services concerning the specific procurement procedure, suffice, from the point of view of structure and degree of control, for a semi-public company to be regarded as part of the contracting authority’s undertaking? – Does the fact that at least 80% of the undertaking’s average turnover in the services sector within the Community during the last three years derives from providing those services for the contracting authority or for undertakings affiliated to or to be regarded as part of the contracting authority, or, where the mixed undertaking has not yet carried on business for three years, that it is to be expected by way of forecast that that 80% rule will be fulfilled, suffice, from the point of view of carrying out the essential part of its activities for the contracting authority, for a semi-public company to be regarded as part of the contracting authority’s undertaking?’ Does the fact that at least 80% of the undertaking’s average turnover in the services sector within the Community during the last three years derives from providing those services for the contracting authority or for undertakings affiliated to or to be regarded as part of the contracting authority, or, where the mixed undertaking has not yet carried on business for three years, that it is to be expected by way of forecast that that 80% rule will be fulfilled, suffice, from the point of view of carrying out the essential part of its activities for the contracting authority, for a semi-public company to be regarded as part of the contracting authority’s undertaking?’ Article 1(1) of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, as amended by Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts, itself amended by European Parliament and Council Directive 97/52/EC of 13 October 1997, must be interpreted as meaning that the obligation of the Member States to ensure that effective and rapid remedies are available against decisions taken by contracting authorities extends also to decisions taken outside a formal award procedure and decisions prior to a formal call for tenders, in particular the decision on whether a particular contract falls within the personal and material scope of Directive 92/50, as amended. That possibility of review is available to any person having or having had an interest in obtaining the contract in question who has been or risks being harmed by an alleged infringement, from the time when the contracting authority has expressed its will in a manner capable of producing legal effects. The Member States are not therefore authorised to make the possibility of review subject to the fact that the public procurement procedure in question has formally reached a particular stage. Where a contracting authority intends to conclude a contract for pecuniary interest relating to services within the material scope of Directive 92/50, as amended by Directive 97/52, with a company legally distinct from it, in whose capital it has a holding together with one or more private undertakings, the public award procedures laid down by that directive must always be applied. 1 – Language of the case: German. Language of the case: German. | ef3b6-b35025e-4d6f | EN |
THE COURT OF FIRST INSTANCE LARGELY UPHOLDS THE COMMISSION'S DECISION IMPOSING SANCTIONS ON A SERIES OF CARTEL AGREEMENTS ON THE AUSTRIAN BANKING MARKET (LOMBARD CLUB) | Raiffeisen Zentralbank Österreich AG and OthersvCommission of the European Communities(Competition – Agreements, decisions and concerted practices – Austrian banking market – ‘Lombard Club’ – Effect on trade between Member States – Calculation of fines)Judgment of the Court of First Instance (Second Chamber), 14 December 2006 Summary of the Judgment1. Actions for annulment – Jurisdiction of the Community judicature (Arts 229 EC and 230, fourth para., EC)2. Actions for annulment – Application brought by the natural or legal person to whom the contested measure is addressed – Transfer of the application to a third person – Not permissible 3. Competition – Administrative procedure – Application by a natural or legal person for a finding of an infringement(Arts 81 EC and 82 EC; Council Regulations Nos 17, Art. 3(1) and (2), and 2842/98, Arts 6 to 8)4. Competition – Agreements, decisions and concerted practices – Prohibition – Infringements – Agreements and concerted practices capable of being treated as constituting a single infringement(Art. 81(1) EC)5. Competition – Administrative procedure – Commission decision finding an infringement 6. Competition – Administrative procedure – Commission decision finding an infringement 7. Competition – Agreements, decisions and concerted practices – Effect on trade between Member States 8. Competition – Agreements, decisions and concerted practices – Definition of the market – Subject-matter (Arts 81(1) EC and 82 EC)9. Competition – Agreements, decisions and concerted practices – Definition of the market – Subject-matter (Art. 81 EC)10. Competition – Agreements, decisions and concerted practices – Effect on trade between Member States 11. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Effect on trade between Member States 12. Competition – Agreements, decisions and concerted practices – Agreements considered to be constituent elements of a single anti-competitive agreement 13. Competition – Community rules – Infringements – Committed deliberately (Art. 81 EC; Council Regulation No 17, Art. 15(2))14. Competition – Agreements, decisions and concerted practices – Notification – Effects (Art. 81(1) and (3) EC; Council Regulation No 17, Art. 15(5)(a))15. Competition – Fines – Amount – Determination – Guidelines on the method of setting fines for infringements of the competition rules (Charter of Fundamental Rights, Art. 49; Council Regulation No 17, Art. 15(2); Commission Notice 98/C 9/03)16. Competition – Fines – Amount – Determination – Legal context (Council Regulation No 17, Arts 3 and 15(2); Commission Notices 96/C 207/04 and 98/C 9/03)17. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement (Commission Notice 98/C 9/03)18. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement (Council Regulation No 17; Commission Notice 98/C 9/03)19. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement (Art. 81(1) EC; Commission Notice 98/C 9/03)20. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement (Council Regulation No 17, Art. 15(2))21. Competition – Community rules – Infringements – Attribution 22. Competition – Fines – Amount – Determination (Council Regulation No 17, Art. 15(2); Commission Notice 98/C 9/03, points 1A, 2 and 3)23. Competition – Administrative procedure – Statement of objections – Necessary content (Council Regulation No 17, Art. 17)24. Competition – Fines – Amount – Determination (Council Regulation No 17, Art. 15(2); Commission Notice 98/C 9/03, point 1A)25. Competition – Fines – Amount – Determination – Criteria – Duration of the infringement(Council Regulation No 17, Art. 15(2); Commission Notice 98/C 9/03)26. Competition – Fines – Amount – Determination – Criteria – Mitigating circumstances (Council Regulation No 17, Art. 15(2); Commission Notice 98/C 9/03, point 3)27. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Mitigating circumstances (Commission Notice 98/C 9/03, point 3, first indent)28. Competition – Fines – Amount – Determination – Criteria – Mitigating circumstances (Council Regulation No 17, Art. 15; Commission Notice 98/C 9/03, point 3, second indent)29. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Aggravating or mitigating circumstances (Council Regulation No 17, Art. 15(2); Commission Notice 98/C 9/03, point 3, third indent)30. Competition – Fines – Amount – Determination – Criteria – Mitigating circumstances 31. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Mitigating circumstances 32. Competition – Fines – Amount – Determination – Non-imposition or reduction of the fine in return for the cooperation of the undertaking concerned (Council Regulation No 17, Arts 11(1), (2), (4) and (5), and 15(2); Commission Notice 96/C 207/04)33. Competition – Administrative procedure – Request for information (Council Regulation No 17, Art. 11(2) and (5))34. Competition – Fines – Amount – Determination – Non-imposition or reduction of the fine in return for the cooperation of the undertaking concerned (Council Regulation No 17, Art. 11(5); Commission Notice 96/C 207/04)35. Competition – Fines – Amount – Determination – Non-imposition or reduction of the fine in return for the cooperation of the undertaking concerned (Council Regulation No 17, Art. 11(5); Commission Notice 96/C 207/04, title D, point 2)36. Competition – Fines – Amount – Determination – Reduction justified by irregularities during the administrative procedure – Condition 1. The Community judicature may take note of a change of name of a party to proceedings and an action for annulment brought by the addressee of a measure may be continued by the universal successor in title of that addressee, in particular in the case of the death of a natural person or where a legal person ceases to exist and all its rights and obligations are transferred to another person. In such circumstances, the universal successor in title is necessarily substituted automatically for its predecessor as addressee of the contested measure. Conversely, the Community judicature has no power, either in the context of an action for annulment under Article 230 EC or even in the exercise of its unlimited jurisdiction under Article 229 EC, with regard to penalties, to amend the decision of a Community institution by replacing the addressee thereof by another natural or legal person when that addressee still exists. That power belongs only to the institution that adopted the measure concerned. Thus, once the competent institution has adopted a decision and, therefore, established the identity of the person to whom the decision is to be addressed, it is not for the Court to substitute another person for the latter. (see paras 71-72)2. An application brought by a person in his capacity of addressee of a measure in order to give effect to his rights in the context of an action for annulment under Article 230 EC and/or of an application for amendment under Article 229 EC cannot be transferred to a third person who is not the addressee thereof. If such a transfer were to be allowed, there would be a discrepancy between the status by virtue of which the action was brought and the status by virtue of which it was purportedly pursued. Moreover, such a transfer would give rise to a discrepancy between the identity of the addressee of the measure and that of the person litigating as addressee. (see para. 73)3. If, under Article 3(1) of Regulation No 17, the Commission finds, ‘upon application or upon its own initiative’, that there is infringement of Article 81 EC or of Article 82 EC, it may by decision require the undertakings or associations of undertakings concerned to bring such infringement to an end. Under Article 3(2) of Regulation No 17, such an application may be made by a natural or legal person who claims a legitimate interest in that regard. It is apparent from Articles 6 to 8 of Regulation No 2842/98 on the hearing of parties in certain proceedings under Articles 81 EC and 82 EC that persons who have made such an application enjoy certain procedural rights, including in particular the right to receive a copy of the non-confidential version of the statement of objections. Such an application may be validly submitted once an infringement procedure has been commenced on the Commission’s own initiative. Regulations No 17 and No 2842/98 do not, for the purpose of recognising the standing of a person as an applicant, require that the application derives from the Commission’s opening of the infringement proceedings and that the investigation into the infringement complained of has not yet started. If the position were otherwise, persons with a legitimate interest in obtaining a finding of infringement of the competition rules would be prevented from exercising, in the course of the procedure, the procedural rights associated with that status under Articles 6 to 8 of Regulation No 2842/98. In that regard, a political party may validly invoke its status as a recipient of banking services and the fact of suffering economic damage as a result of anti-competitive practices in order to justify a legitimate interest in submitting an application for a finding by the Commission that those practices constituted an infringement of Articles 81 EC and 82 EC. There is nothing to prevent an end-purchaser of goods or services from satisfying the requirements for having a legitimate interest within the meaning of Article 3 of Regulation No 17. An end-user who proves that his interests have been, or are liable to be, adversely affected as a result of the restriction of competition in question has a legitimate interest within the meaning of that provision in lodging an application or a complaint with a view to obtaining a finding by the Commission of an infringement of Articles 81 EC and 82 EC. It is irrelevant that, initially, the end-purchaser claimed a general interest which it sought to defend as an opposition political party and that it only later contended that, as an end-user of the services in question, it had been economically damaged by the cartel complained of. That first stance could not deprive it of the opportunity to rely subsequently, in order to justify a legitimate interest within the meaning of Regulation No 17, on its status as a customer of the banks against which the procedure had been initiated, and on the economic loss which it allegedly suffered as a result of the agreements in question. The admission of an interested party as a complainant, together with the transmission to that party of the statement of objections, cannot moreover be made subject to the condition that it must occur prior to any oral hearing before the Commission. Regulations No 17 and No 2842/98 do not lay down any specific time-limit within which a third party applicant or complainant showing a legitimate interest must exercise his right to receive the statement of objections and be heard in the context of an infringement procedure. Thus, Articles 7 and 8 of Regulation No 2842/98 merely provide that the Commission is to provide the applicant or complainant with a copy of the objections and set a date by which the applicant or complainant may make known his views in writing, any such person being entitled to express his views orally if he so requests. It follows that the right of an applicant or complainant to receive the statement of objections and to be heard in an administrative procedure for the establishment of an infringement of Articles 81 EC and 82 EC may be exercised at any time during the course of the procedure. (see paras 95-98, 100-101)4. An infringement of Article 81(1) EC may result not only from an isolated act but also from a series of acts or from continuous conduct. That interpretation cannot be challenged on the ground that one or several elements of that series of acts or continuous conduct could also constitute in themselves and taken in isolation an infringement of that provision. When the different actions form part of an ‘overall plan’, because their identical object distorts competition within the common market, the Commission is entitled to impute responsibility for those actions on the basis of participation in the infringement considered as a whole. A system of committees established by banks in order to coordinate their conduct regularly with respect to the essential factors of competition in the market in banking products and services in a Member State may thus be classified as a single overall cartel where one of them, as the top-level body at the head of all the other committees, has dealt with questions falling within the scope of numerous specific committees, and which takes fundamental decisions, performs a role of arbitrator between the various groups in cases of disciplinary problems regarding compliance with the agreements and where there is close interlocking of the committees and their decision-making process, because the committees sometimes hold joint meetings, the terms of reference of the groups overlap and the committees keep each other informed of their activities. (see paras 111, 114, 117-120, 126)5. In the context of procedures for applying the competition rules, the fact that a trader who was in a position similar to that of the penalised operator was not found by the Commission to have committed any infringement cannot in any event constitute a ground for setting aside the finding of an infringement by the penalised operator, provided that it was properly established. (see para. 138)6. Faced with a network of very complex agreements, the Commission enjoys a discretion in determining which of the various concerted practices it considers as particularly significant, and that choice can only be subject to limited review by the Court. (see para. 144)7. In order for an agreement between undertakings to be able to affect trade between Member States, it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or fact that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States, in a manner which might harm the attainment of the objectives of a single market between States. The effect on intra-Community trade is therefore normally the result of a combination of several factors which, taken separately, are not necessarily decisive. It is of little importance in that regard that the influence of a cartel on trade is unfavourable, neutral or favourable. A restriction of competition is liable to affect trade between Member States when it is likely to divert trade patterns from the course which they would otherwise have followed. Therefore, the effects of partitioning of the markets are not alone to be taken into consideration in concluding that a cartel is capable of affecting trade between Member States. Only the capability of a cartel to affect trade between Member States, that is to say its potential effect, is sufficient for it to fall within the scope of Article 81 EC and it is not necessary to demonstrate an actual effect on trade. The fact that a past infringement is examined after the event is not such as to change that criterion, a potential effect on trade also being sufficient in such a case. It is nevertheless necessary for the potential effect of the cartel on inter-State trade to be appreciable, or, in other words, that it be not insignificant. (see paras 163-164, 166-167)8. The definition of the relevant market differs according to whether Article 81 EC or Article 82 EC is to be applied. In the context of the application of Article 81 EC, the reason for defining the relevant market is to determine whether the agreement, the decision by an association of undertakings or the concerted practice at issue is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market. That is why, for the purposes of Article 81(1) EC, the objections to the definition of the market adopted by the Commission cannot be seen in isolation from those concerning the impact on trade between Member States and the impairing of competition. Thus, the objection to the definition of the relevant market is of no consequence provided that the Commission has rightly concluded that the agreement in question distorted competition and was liable to have an appreciable effect on trade between Member States. (see para. 172)9. In competition law, the relevant market comprises the totality of the products which, with respect to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited extent interchangeable with other products. Since the various banking services covered by agreements between banks cannot be substituted for each other, however, most customers of universal banks call for a set of banking services, such as deposits, loans and payment operations, and competition between those banks is liable to relate to all those services, a narrow definition of the relevant market would therefore be artificial in that business sector. Moreover, a separate examination would not make it possible fully to appreciate the effects of agreements which, although relating to products or services and customers (retail or corporate) that are different, nevertheless fall within the same business sector. The effect on trade between Member States may be indirect, and the market on which it is liable to arise is not necessarily the same as the market for the products or services of which the prices are fixed by the cartel. The fixing of prices for a wide range of retail and corporate banking services is liable, as a whole, to have repercussions on other markets. Consequently, the Commission is not required, in such a case, to examine separately the markets for the various banking products covered by such agreements in assessing the effects on trade between Member States in this case. (see paras 173-175)10. The fact that certain clauses of an agreement do not have the object or effect of restricting competition does not preclude an overall examination of the agreement. With greater reason, that applies where certain agreements within a single cartel might qualify for an exemption. It follows that when examining a system of committees established by banks in order to coordinate their conduct with respect to the essential factors of competition in the market in banking products and services in a Member State, the Commission may take account of the potential cumulative effect of all the committees in order to determine whether the cartel as a whole is capable of affecting trade between Member States. On the other hand, the question whether each of the committees in isolation is capable of affecting trade between Member States is not relevant. It also follows that it is unnecessary to establish that any one or other of the various committees, in isolation, is liable to affect trade between Member States for it to be found that the cartel as a whole is capable of so doing. Therefore, the capability of the committees to affect inter-State trade does not presuppose that any particular concerted practice involved services of a cross-border nature. (see paras 176-178, 195-196, 208)11. An agreement extending over the whole of the territory of a Member State by its very nature has the effect of reinforcing the compartmentalisation of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about. It follows that there is, at least, a strong presumption that a practice restrictive of competition applied throughout the territory of a Member State is liable to contribute to compartmentalisation of the markets and to affect intra-Community trade. That presumption can only be rebutted if an analysis of the characteristics of the agreement and its economic context demonstrates the contrary. In that connection, with regard to the banking sector, there may be agreements covering the entire territory of a Member State which do not have an appreciable effect on trade between Member States. This is not the case, however, with a complex infringement consisting of concerted practices within a committee involving not only almost all the credit establishments in the Member State in question but also a wide range of banking products and services, in particular deposits and loans and, therefore, capable of changing the conditions of competition throughout that Member State. In such a case, the fact that the members of the cartel did not take measures to exclude foreign competitors from the market provides no basis for concluding that there was no cross-border effect. Such an infringement may have contributed to maintenance of the barriers to access to the market, in that it facilitated retention of structures in the Member State in question, the inefficiency of which, moreover, was admitted by one of the participants itself, and of the corresponding habits on the part of customers. (see paras 180-185)12. In order to establish the participation of an undertaking in a single agreement, the Commission must prove that the undertaking intended to contribute by its own conduct to the common objectives pursued by all the participants and that it was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and that it was prepared to take the risk. Such is the case where, in the context of a system of committees established by banks in order to coordinate their conduct regularly with respect to the essential factors of competition in the market in banking products and services in a Member State, one of them participated in the most important committees dealing with lending and deposit conditions and where those committees maintained particularly close relations with the top-level body, that bank could not therefore have been unaware that the committees in which it participated formed part of a wider set of agreements and that its participation in the concerted practices on deposit and lending conditions contributed to the pursuit of the cartel’s objectives as a whole. It is irrelevant, in that connection, that the bank at issue was absent from certain committees. The fact that an undertaking has not taken part in all aspects of a cartel or that it has played only a minor role in the aspects in which it did participate is not material to the establishment of the existence of an infringement on its part. Those factors must be taken into consideration only when the gravity of the infringement is assessed and if and when it comes to determining the fine. Neither is it relevant that the bank in question was not familiar with the detail of the concerted practices taking place within numerous committees in which it did not participate nor the fact that it was unaware of the existence of certain committees. (see paras 189-193)13. It is not necessary for an undertaking to have been aware that it was infringing the competition rules for an infringement to be regarded as having been committed intentionally. It is sufficient that it could not have been unaware that its conduct had as its object the restriction of competition in the common market. In that regard, whether or not the undertaking in question was aware of the interpretation of the cross-border criterion adopted by the Commission or the case-law is not decisive; what is important is whether it knew of the circumstances specifically giving rise to the capability of the cartel to affect trade between Member States or, at least, whether it could not have been unaware of them. Such is the case where, in the context of a system of committees established by banks in order to coordinate their conduct regularly with respect to the essential factors of competition in the market in banking products and services in a Member State, the banks knew, through their participation in the main committees, that the network covered the whole territory of the Member State and a very wide range of important banking services, in particular loans and deposits, and where they were therefore aware of the essential facts giving rise to an effect on trade between Member States. It is not appropriate in this regard to ascertain to what extent the banks were aware of the incompatibility of their conduct with Article 81 EC. Similarly, the fact that under national law certain cartels were not automatically prohibited but could be prohibited, in response to an application, by a court of competent jurisdiction has no impact on the intentional nature of the infringement of Article 81 EC. Finally, the public nature of the meetings and the participation therein of the national authorities does not affect either the intention to restrict competition or the knowledge of the circumstances giving rise to the capability of the agreement to affect trade between Member States. (see paras 205-207, 209)14. Notification is not a mere formality imposed on undertakings but an indispensable condition for obtaining certain benefits. Under the terms of Article 15(5)(a) of Regulation No 17, no fine may be imposed in respect of acts taking place after notification, provided they fall within the limits of the activity described in the notification. That advantage enjoyed by an undertaking which notifies an agreement or a concerted practice is the counterpart of the risk incurred by the undertaking in itself reporting the agreement or concerted practice. That undertaking in fact takes the risk not only of having the agreement or practice found to be in breach of Article 81(1) EC and of having the application of paragraph 3 refused but also of being punished by a fine for acts prior to notification. A fortiori, an undertaking which did not wish to run that risk cannot claim, on being fined for an infringement in respect of an agreement which was not notified, that there was a hypothetical possibility that notification might have led to an exemption. (see para. 213)15. Since the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty and, in particular, the new method of calculating fines which they incorporate, were reasonably foreseeable by it, prior to their adoption, at the time of committing an infringement, an undertaking cannot take exception to the method followed in calculating the fines on the ground that the Commission, by applying the guidelines and by having again made its practice more stringent at a later stage, infringed the principle of non-retroactivity upheld by Article 7 of the European Convention for the Protection of Human Rights and Article 49 of the Charter of Fundamental Rights of the European Union. (see paras 217-218)16. The Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty are an instrument designed to clarify, in compliance with superior rules of law, the criteria that the Commission intends applying when exercising the discretion conferred on it by Article 15(2) of Regulation No 17 for the purpose of setting fines. In setting out in the Guidelines the method which it proposed to apply when calculating fines imposed under Article 15(2) of Regulation No 17, the Commission remained within the legal framework laid down by that provision and did not exceed the discretion conferred on it by the legislature. Although rules of that kind designed to produce external effects cannot be classified as rules of law by which the administration is bound in all cases, they nevertheless set out rules of conduct that indicate the practice to be followed and from which the administration cannot depart, in a particular case, without giving reasons that are compatible with the principle of equal treatment. By adopting such rules of conduct and announcing, by publishing them, that it will henceforth apply them to the cases to which they relate, the Commission imposes a limit on the exercise of its discretion and cannot depart from those rules if it wishes to avoid a finding, if it be the case, that it is in breach of the general principles of law, such as equal treatment or the protection of legitimate expectations. Even though the Guidelines do not therefore constitute the legal basis of the decision imposing a penalty on an undertaking for breach of the Community competition rules – which is based on Articles 3 and 15(2) of Regulation No 17 – they none the less determine, generally and abstractly, the method which the Commission has bound itself to use in setting the amount of fines imposed by the decision and, consequently, ensure legal certainty on the part of the undertakings. The limitation which the Commission has imposed on its discretion by adopting the Guidelines is not, however, incompatible with the retention of a considerable degree of discretion. The Guidelines display flexibility in a number of ways, enabling the Commission to exercise its discretion in accordance with Article 15 of Regulation No 17, as interpreted by the Court of Justice. Like the Guidelines, the notice on the non-imposition or reduction of fines in cartel cases has created legitimate expectations on which undertakings rely, so that the Commission is obliged to comply with it when assessing the latter’s cooperation for the purpose of setting the fine. It therefore falls to the Court of First Instance, in reviewing the legality of the contested decision, to verify whether the Commission exercised its discretion in accordance with the method set out in the Guidelines and the Leniency Notice and, to the extent to which it establishes any departure therefrom, to verify whether that departure is legally justified and supported by a statement of reasons to the requisite legal standard. However, the Commission’s discretion and the self-imposed limits on it do not prejudge the exercise, by the Community judicature, of its unlimited jurisdiction. (see paras 219-227)17. The fact that, in the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, the Commission set out its approach to assessment of the gravity of an infringement does not prevent it from assessing infringements as a whole by reference to all the relevant circumstances of the case, including factors that are not expressly mentioned in the Guidelines. In fixing the amount of fines regard must be had to the duration of the infringement and to all the factors capable of affecting the assessment of the gravity of the infringement. The gravity of infringements must be assessed in the light of numerous factors, such as the particular circumstances of the case, its context and the dissuasive effect of fines, although no binding or exhaustive list of the criteria to be applied has been drawn up. In that connection, it is in particular the assessment of the nature of the infringement which enables account to be taken of various relevant factors, which the Guidelines could not list exhaustively and which include the potential impact (as opposed to the actual and measurable impact) of the infringement on the market. (see paras 237-239)18. The three aspects to be taken into account in the assessment of the gravity of the infringement with regard to the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, namely, its nature, its actual impact on the market, where this can be measured, and the size of the relevant geographic market, do not carry the same weight in the context of an overall examination. The nature of the infringement plays a major role, in particular, in characterising ‘very serious’ infringements. In that regard, it is clear from the description of very serious infringements given in the Guidelines that agreements or concerted practices designed in particular to set prices may, on the basis of their nature alone, be classified as ‘very serious’, without there being any need to characterise such conduct by reference to a particular impact or geographic area. That conclusion is corroborated by the fact that, whilst the description of serious infringements expressly mentions their impact on the market and their effects on extensive areas of the common market, that of very serious infringements, on the other hand, does not mention any requirement as to the actual market impact or the effects produced in a particular geographic area. While there is an interdependence between the three criteria in that a high degree of seriousness in the light of one or other of the criteria may offset the lesser gravity of the infringement in other respects, the extent of the geographic market is only one of the three criteria which are relevant to overall assessment of the gravity of the infringement, and, among those interdependent criteria, is not an autonomous criterion in the sense that only infringements affecting most of the Member States would be classifiable as ‘very serious’. Neither the Treaty, nor Regulation No 17, nor the Guidelines, nor the case-law support the conclusion that only geographically very extensive restrictions may be considered as such. Therefore, not only infringements involving the participation of almost all undertakings in the European market can be classified as very serious within the meaning of the Guidelines. (see paras 240-241, 311, 313, 381)19. Horizontal price agreements constitute very serious infringements, within the meaning of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, even in the absence of other restrictions on competition such as partitioning of the market. The ‘very serious’ nature of such infringements is exacerbated in particular where they are committed in a sector, such as the banking sector, which is important to the economy as a whole and where the agreements at issue are extensive covering a wide range of important products and involving the vast majority of the economic operators in the relevant market, including the largest undertakings. The gravity of an infringement by reason of its nature depends above all on the danger that it represents to undistorted competition. In that regard, the breadth of a price agreement, as regards both the products concerned and the undertakings involved, plays a decisive role and an extensive horizontal price cartel relating to such an important economic sector cannot normally escape the classification of very serious infringement, whatever its context. The lack of any secrecy surrounding the cartel, the fact that the cartel has been created and maintained with the support of the Member State concerned, the taking into account of considerations relating to the deterrent nature of fines, the fact that the infringement involves a concerted practice, the approval or tolerance of unlawful conduct by the public authorities, the fact that other subjects have also been dealt with, that are neutral from the standpoint of competition law, or that the Member State concerned had recently acceded to the European Union at the material time, cannot affect the assessment of the intrinsic gravity of the infringement. (see paras 249-250, 252, 254-257, 260, 262-263)20. In assessing the actual impact of an infringement on the market, it is incumbent on the Commission to take as a reference the competition which would normally have prevailed if there had been no infringement. In the case of a price cartel, the Commission may legitimately infer that the infringement had effects from the fact that the cartel members took measures to apply the agreed prices, for example by announcing them to customers, instructing their employees to use them as a basis for negotiation and monitoring their application by their competitors and their own sales departments. In order to conclude that there has been an impact on the market, it is sufficient that the agreed prices have served as a basis for determining individual transaction prices, thereby limiting customers’ room for negotiation. On the other hand, the Commission cannot be required, where the implementation of a cartel has been established, systematically to demonstrate that the agreements in fact enabled the undertakings concerned to achieve a higher level of transaction prices than that which would have prevailed in the absence of a cartel. In order to assess the gravity of the infringement, it is decisive to ascertain that the cartel members did all they could to give concrete effect to their intentions. What then happened at the level of the market prices actually obtained is liable to have been influenced by other factors outside the control of the members of the cartel. The members of the cartel cannot therefore benefit from external factors which counteracted their own efforts by turning them into factors justifying a reduction of the fine. (see paras 284-287)21. It falls, in principle, to the legal or natural person managing the undertaking in question when the infringement was committed to answer for that infringement, even if, when the decision finding the infringement was adopted, another person had assumed responsibility for operating the undertaking. While the legal person managing the undertaking at the time of the infringement exists, responsibility for the undertaking’s infringement follows that legal person, even though the assets and personnel which contributed to the commission of the infringement have been transferred to third persons after the period of the infringement. On the other hand, where, between the infringement and the time when the undertaking in question must answer for it, the person responsible for the operation of that undertaking has ceased in law to exist, it is necessary, first, to establish the combination of physical and human elements which contributed to the infringement and then to identify the person who has become responsible for their operation, so as to avoid the result that, because of the disappearance of the person responsible for its operation when the infringement was committed, the undertaking may evade liability for it. When the undertaking in question ceases to exist, upon being merged with a purchaser, the latter takes on its assets and liabilities for infringements of Community law. In such cases, the liability for the infringement committed by the undertaking taken over may be attributed to the purchaser. Such liability of a purchaser exists even in a case where the liability for an infringement committed by an undertaking before it was taken over may be imputed to an earlier parent company. That possibility does not in itself mean that the subsidiary itself will be penalised. An undertaking – that is to say an economic unit comprising personal, tangible and intangible elements – is directed by the organs provided for in its articles of association and any decision imposing a fine on it may be addressed to the management as provided for in the undertaking’s articles of association even though the financial consequences of the fine are ultimately borne by its owners. That rule would not be observed if the Commission, faced with unlawful conduct on the part of an undertaking, were always required to ascertain who is the owner exercising a decisive influence on the undertaking and were allowed to impose a sanction only on that owner. Since the power to penalise the parent company for the conduct of a subsidiary thus has no bearing on the legality of a decision addressed only to the subsidiary that participated in the infringement, the Commission may choose to penalise either the subsidiary that participated in the infringement or the parent company that controlled it during that period. That choice is also available to the Commission where there are successive changes in the economic control of the subsidiary. Although, in such a case, the Commission may impute the conduct of a subsidiary to the former parent company for the period prior to the transfer and thereafter to the new parent company, it is not required to do so and may choose to penalise only the subsidiary for its own conduct. (see paras 324-326, 329, 331-332, 372)22. Account must be taken, for the purpose of classifying undertakings into categories in accordance with the sixth paragraph of Section 1A of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, of the objective or structural characteristics of the undertakings and the situation in the relevant market. Those objective factors include not only the size and power of an undertaking in the market, as reflected by the undertaking’s market share or turnover, but also its links with other undertakings where such links are capable of influencing the structure of the market. The effective capacity of an undertaking to cause significant damage and the real impact of the infringement committed by it must be assessed against the background of the economic reality. It is therefore legitimate for the Commission, under the Guidelines, to take account of such relationships in order to determine the effective economic capacity of the members of a cartel to cause damage and the specific weight of their infringement. In that connection, the structure of the market can be influenced not only where links between undertakings confer on one of them a power of management or complete control of the competitive conduct of other operators, as in the case of economic units. An undertaking’s power in the market may also increase, beyond its own market share, where it maintains stable relationships with other undertakings in which it is capable of informally exercising de facto influence on their conduct. The same applies where the links between undertakings have the effect of reducing or eliminating competition between them. The fact that such links are not of such a nature as to justify the finding that the undertakings concerned form part of a single economic entity does not mean that the Commission must disregard them and assess the market situation as if those links did not exist. On the other hand, the specific conduct of the various members of a cartel or the degree of their individual culpability is not decisive, as such, for the purpose of division into categories. The conduct of an undertaking may, it is true, give some indication of the nature of its relations with other undertakings. The existence of specific types of conduct, such as the organisation of exchanges of information with the latter or the explicit adoption of positions at cartel meetings designed to defend their interests or require them to observe anti-competitive agreements, is not, however, either necessary or in itself sufficient to justify taking into consideration the market share of the latter undertakings when the power in the market of the first undertaking is assessed. In the absence of stable relationships with the undertakings with which information is exchanged or whose interests are represented, such conduct is not decisive for the purpose of classifying undertakings into categories, whereas, if appropriate, account may be taken of it when aggravating and mitigating circumstances are appraised, under Sections 2 and 3 of the Guidelines. It follows that, in the context of a system of committees established by banks in order to coordinate their conduct regularly with respect to the essential factors of competition in the market in banking products and services in a Member State, since the links between the lead institutions and the decentralised banks of their groupings endowed the lead institutions with far greater economic power than that which derived from their market shares as commercial banks and reflected the market share of their respective groupings in their entirety, a correct assessment of the effective capacity of the lead institutions to cause significant damage and of the specific weight of their unlawful conduct necessitates an examination not only of their own market shares as commercial banks but also of the market shares of the decentralised banks and therefore justifies the allocation of the market shares of the decentralised sectors to the central establishments. (see paras 359-362, 377, 404, 407, 409)23. In so far as the Commission indicates expressly, in its statement of objections, that it is going to consider whether it is appropriate to impose fines on the undertakings concerned and has indicated the main factual and legal criteria capable of attracting a fine, such as the gravity and the duration of the alleged infringement and whether that infringement was committed ‘intentionally or negligently’, it fulfils its duty to respect those undertakings’ rights of defence. On the other hand, the Commission is not obliged, when indicating the elements of fact and of law on which it is to base its calculation of the fines, to explain the way in which it would use each of those elements in determining the level of the fine and this, especially since the undertakings have an additional guarantee, as regards the setting of the amount of the fine, in that the Court of First Instance has unlimited jurisdiction and may in particular cancel or reduce the fine pursuant to Article 17 of Regulation No 17. (see para. 369)24. The Commission’s approach, in setting the amount of the fines, of dividing the members of a cartel into several categories, making the basic amounts for all undertakings in the same group the same, cannot in principle be criticised, although it ultimately ignores differences of size of undertakings in the same category. The Commission is not required to ensure, when fines are imposed on several undertakings involved in the same infringement, that the final amounts of the fines reflect every distinction between the undertakings concerned with regard to their size. The fact remains, however, that any such division into categories must be in conformity with the principle of equal treatment and the determination of thresholds for each of the categories identified must be coherent and objectively justified. (see paras 422-423)25. Under the last subparagraph of Article 15(2) of Regulation No 17, regard must be had, in addition to the gravity of the infringement, to the duration of the infringement in fixing the amount of the fine. It follows that the impact of the duration of the infringement on the starting amount of the fine must, as a general rule, be significant. Except in special circumstances, that militates against a purely symbolic increase of the starting amount on account of the duration of the infringement. Thus, where an agreement with an anti-competitive objective is not implemented, it is nevertheless necessary to take account of the period during which the agreement existed, that is, the time between the date on which it was entered into and the date on which it was terminated. Accordingly, an increase corresponding to 10% a year of the starting amount cannot be reserved for special cases. The Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty lay down that limit only for infringements of long duration, whilst for those of medium duration (in general one to five years) the sole upper limit was set at 50% of the starting amount, which does not rule out exceeding a rate of increase of 10% a year. Furthermore, an increase in the fine by reference to the duration of the infringement is not limited to a situation in which there is a direct relation between the duration and serious harm caused to the Community objectives referred to in the competition rules. (see paras 465-467)26. The Commission must comply with the terms of its own Guidelines when determining the amount of fines. However, the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty do not state that the Commission must always take account separately of each of the mitigating circumstances listed in Section 3 of the Guidelines and it is not obliged to grant an additional reduction on such grounds automatically; the appropriateness of any reduction of the fine in respect of mitigating circumstances must be examined comprehensively on the basis of all the relevant circumstances. The adoption of the Guidelines has not rendered irrelevant the case-law under which the Commission enjoys a discretion as to whether or not to take account of certain matters when setting the amount of the fines it intends imposing, by reference in particular to the circumstances of the case. Thus, in the absence of any binding indication in the Guidelines regarding the mitigating circumstances that may be taken into account, the Commission has retained a degree of latitude in making an overall assessment of the extent to which a reduction of fines may be made in respect of mitigating circumstances. (see paras 472-473)27. According to the first indent of Section 3 of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, ‘an exclusively passive or “follow-my-leader” role’ of an undertaking in the commission of the infringement may, if established, constitute a mitigating circumstance. In that connection, one circumstance that may indicate the adoption by an undertaking of a passive role within a cartel is where the undertaking’s participation in cartel meetings is significantly more sporadic than that of the ‘ordinary’ members of the cartel. However, provided that an undertaking has participated, even without playing an active role, in one or more meetings with an anti-competitive purpose, it must be regarded as having participated in the cartel unless it proves that it publicly distanced itself from the unlawful concertation. By its presence at the meetings, the undertaking adheres or at least gives the other participants to believe that it adheres in principle to the terms of the anti-competitive agreements concluded at the meetings. In that connection, in assessing its passive or follow-my-leader role, it is not relevant whether or not the undertaking benefited from the agreements. First, a follower may also benefit from the effects of a cartel. Second, the fact of not benefiting from an infringement cannot constitute a mitigating circumstance, since otherwise the fine would cease to have any deterrent effect. (see paras 481-482, 486, 489)28. According to the second indent of Section 3 of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, ‘non-implementation in practice of the offending agreements or practices’ may amount to a mitigating circumstance. However, the fact that an undertaking whose participation in a concerted practice with its competitors is established did not conduct itself in the market in the manner agreed with its competitors does not necessarily have to be taken into account, as a mitigating circumstance, when the amount of the fine to be imposed is determined. An undertaking which, despite colluding with its competitors, follows a more or less independent policy in the market may simply be trying to exploit the cartel for its own benefit and an undertaking which does not distance itself from the results of a meeting in which it was present in principle retains full responsibility for the fact of its participation in the cartel. Therefore, the Commission is not required to recognise the existence of a mitigating circumstance consisting of non-implementation of a cartel unless the undertaking relying on that circumstance is able to show that it clearly and substantially opposed the implementation of the cartel, to the point of disrupting the very functioning of it, and that it did not give the appearance of adhering to the agreement and thereby incite other undertakings to implement the cartel in question. It would be too easy for undertakings to reduce the risk of being required to pay a heavy fine if they were able to take advantage of an unlawful cartel and then benefit from a reduction in the fine on the ground that they had played only a limited role in implementing the infringement, when their attitude encouraged other undertakings to act in a way that was more harmful to competition. (see paras 490-491)29. Under the third indent of Section 3 of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, ‘termination of the infringement as soon as the Commission intervenes (in particular when it carries out checks)’ is a mitigating circumstance. However, a reduction of the fine by reason of the termination of an infringement as soon as the Commission intervenes cannot be automatic but depends on an appraisal of the circumstances of the case by the Commission, in the context of its discretion. In that regard, the application of that provision of the Guidelines in favour of an undertaking will be particularly appropriate where the conduct in question is not manifestly anti-competitive. Conversely, its application will be less appropriate, as a general rule, where the conduct is clearly anti-competitive, on the assumption that it is proven. Even if, in the past, the Commission has regarded voluntary termination of an infringement as a mitigating circumstance, it is entitled, when applying its Guidelines, to take account of the fact that, even though their illegality was established at the inception of Community competition policy, very serious manifest infringements are relatively frequent and, therefore, to take the view that it is appropriate to abandon that generous practice and no longer reward the termination of such an infringement by a reduction of the fine. In those circumstances, the appropriateness of a reduction of a fine by reason of termination of the infringement may depend on whether the undertakings in question could reasonably doubt the illegality of their conduct and reference to the manifest nature of the infringement could constitute a sufficient indication of the reasons for the Commission’s choice not to apply a reduction of the fine for such a reason. (see paras 497-499)30. In the context of enlargement of the European Union, the possible legality of anti-competitive agreements under national law is not in itself sufficient to leave room for reasonable doubt as to the illegal nature of the conduct of the participating undertakings under Community law. This is particularly the case where the undertakings in question have considerable resources available to them. It is the responsibility of such undertakings to prepare for the legal consequences of the accession to the European Union of the Member State in which they are established, and, in particular, to apprise themselves in due time of the terms of the Community competition rules (and indeed the law of the European Economic Area) which will be applicable to them and the new features thereof compared with national law. Whilst it is not excluded that, in certain circumstances, a national legal framework or conduct on the part of national authorities may constitute mitigating circumstances, the approval or tolerance of the infringement by the national authorities cannot be taken into account under that heading where the undertakings in question have the necessary resources available to them to obtain precise and accurate legal information. (see paras 504-505)31. When it imposes a penalty for breach of the competition rules, the Commission is not required to treat the poor financial health of the sector in question as a mitigating circumstance; the fact that in previous cases the Commission took account of the economic situation in the sector as a mitigating circumstance does not mean that it must necessarily continue to follow that practice. As a general rule, cartels come into being when a sector is experiencing difficulties. (see para. 510)32. In competition law, cooperation in an investigation that does not go further than what is required of undertakings under Article 11(4) and (5) of Regulation No 17 does not justify reduction of the fine. On the other hand, such a reduction is justified where an undertaking has provided information well in excess of that which the Commission may require under Article 11 of Regulation No 17. In order to justify reduction of a fine for cooperation, the conduct of an undertaking must facilitate the Commission’s task of finding and bringing to an end infringements of Community competition rules and reveal a true spirit of cooperation. Therefore, the Court must first consider whether the Commission disregarded the extent to which the cooperation of the undertakings in question exceeded what was required under Article 11 of Regulation No 17. In that connection, it should undertake a comprehensive review concerning, in particular, the extent to which the undertakings’ rights of defence limit their obligation to reply to requests for information. Second, the Court should verify whether the Commission correctly appraised, in the light of the notice on the non-imposition or reduction of fines in cartel cases, the extent to which the cooperation provided helped to establish the infringement. Within the limits laid down by that notice, the Commission has a discretion in assessing whether the information or documents voluntarily provided by the undertakings have facilitated its task and whether it is appropriate to grant a reduction to an undertaking under that notice. That assessment is the subject of limited review by the Court. In the exercise of its discretion, the Commission is not, however, entitled to disregard the principle of equal treatment, which is infringed where comparable situations are treated differently or different situations are treated in the same way, unless such difference of treatment is objectively justified. That principle precludes the Commission from treating in different ways cooperation on the part of undertakings covered by the same decision. On the other hand, the mere fact that the Commission has, in earlier decisions, granted a certain rate of reduction for particular conduct does not mean that it is obliged to grant the same proportional reduction when appraising similar conduct in the context of a later administrative procedure. Where a request for information is made under Article 11(1) and (2) of Regulation No 17 in order to obtain information of which the Commission may require disclosure by a decision under paragraph 5 of that article, only the promptness of the reply from the undertaking concerned can be classified as voluntary. It is for the Commission to decide whether that promptness facilitated its task in such a way as to justify a reduction of the fine and the Leniency Notice does not require it systematically to reduce fines for that reason. Moreover, while the fact that a cartel exists is likely to facilitate the Commission’s task during an inquiry more than mere acknowledgement that the facts are substantially correct and the Commission may therefore treat undertakings that have admitted the facts differently from those that have also admitted the existence of a cartel, the Commission is not, however, obliged to draw such a distinction. It must, in each individual case, consider whether such an admission actually made its task easier. This is not the case with an explicit admission of the anti-competitive object of meetings aimed at price collusion and other aspects of competition, because such object derives from their very purpose. (see paras 529-534, 536, 559)33. In the context of competition proceedings, the Commission may not compel an undertaking, by means of a request for information under Article 11(5) of Regulation No 17, to provide it with answers that might involve an admission on its part of an infringement which it is incumbent upon the Commission to prove. In order to ensure the effectiveness of Article 11(2) and (5) of Regulation No 17 it is nevertheless entitled to compel undertakings to provide all necessary information concerning such facts as may be known to them and to disclose to the Commission, if necessary, such documents relating thereto as are in its possession, even if the latter may be used to establish the existence of anti-competitive conduct. The Commission may thus compel undertakings to answer purely factual questions and ask for documents already in existence to be produced. On the other hand, requests calling on an undertaking to describe the object of and what occurred at meetings in which it participated and also the results or conclusions of those meetings where it is suspected that the object of the meetings was to restrict competition are incompatible with the rights of the defence, given that they are liable to compel the undertaking concerned to admit its participation in an infringement of the Community competition rules. It follows that since the Commission, following its investigations, had copious information indicative of the existence of a network of agreements organised within a large number of committees covering all banking products on a specific market, it may legitimately require the banks in question, by means of requests for information under Article 11(5) of Regulation No 17, to indicate dates of the committee meetings and details of their participants, whether it concerns the committees about which, after its investigations, the Commission had precise information, such as their names and the dates of certain meetings, or all the other committees. (see paras 539-541, 543)34. The sending of documents to the Commission by a company, the production of which the Commission is entitled to require under Article 11(5) of Regulation No 17, cannot be regarded as voluntary cooperation within the meaning of the notice on the non-imposition or reduction of fines in cartel cases. (see para. 544)35. In the context of competition proceedings, while the undertakings in question provided it voluntarily with information going beyond what had been asked of them, by means of a request for information under Article 11(5) of Regulation No 17, the Commission does not exceed the discretion available to it in assessing, in accordance with the first indent of Section D.2 of the notice on the non-implementation or reduction of fines in cartel cases, by deciding that such cooperation could only be taken into account if it gave rise to added value either by the disclosure of ‘new facts’ or explanations improving understanding of the case. Neither the Leniency Notice nor the case-law on this subject requires the Commission to reduce a fine by reason of action which, in practice or logistically, supports its investigation. (see paras 552-553)36. In competition law, although certain procedural irregularities during the administrative procedure may on occasion justify a reduction of the fine even if they are not such as to entail annulment of the contested decision, only procedural irregularities capable of seriously harming the interests of the party invoking them can justify such a reduction. That in particular may be the case where irregularities involve an infringement of the European Convention for the Protection of Human Rights. (see paras 568-569)JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)14 December 2006 (*) In Joined Cases T‑259/02 to T‑264/02 and T‑271/02,Raiffeisen Zentralbank Österreich AG, established in Vienna (Austria), represented by S. Völcker, lawyer, applicant in Case T-259/02,Bank Austria Creditanstalt AG, established in Vienna, represented by C. Zschocke and J. Beninca, lawyers, applicant in Case T-260/02,Anteilsverwaltung BAWAG PSK AG, formerly Bank für Arbeit und Wirtschaft AG, established in Vienna, represented initially by H.‑J. Niemeyer and M. von Hinden, then by H.-J. Niemeyer, lawyers, applicant in Case T-261/02,Raiffeisenlandesbank Niederösterreich-Wien AG, established in Vienna, represented by H. Wollmann, lawyer, applicant in Case T-262/02,BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG, formerly Österreichische Postsparkasse AG, established in Vienna, represented initially by H.-J. Niemeyer and M. von Hinden, then by H.-J. Niemeyer, lawyers, applicant in Case T-263/02,Erste Bank der oesterreichischen Sparkassen AG, established in Vienna, represented initially by W. Kirchhoff, F. Montag, G. Bauer and A. Wegner, then by F. Montag and A. Wegner, lawyers, applicant in Case T-264/02,Österreichische Volksbanken AG, established in Vienna, Niederösterreichische Landesbank-Hypothekenbank AG, established in St Pölten (Austria), both represented by R. Roniger, A. Ablasser, R. Bierwagen and F. Neumayr, lawyers,applicants in Case T-271/02,Commission of the European Communities, represented initially by S. Rating, then by A. Bouquet, acting as Agents, and D. Waelbroeck and U. Zinsmeister, lawyers, defendant,APPLICATIONS for total or partial annulment of Commission Decision 2004/138/EC of 11 June 2002 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.571/D-1: Austrian banks – ‘Lombard Club’ (OJ 2004 L 56, p. 1) and, in the alternative, for reduction of the fines imposed on the applicants, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber),composed of J. Pirrung, President, N.J. Forwood and S. Papasavvas, Judges,Registrar: C. Kristensen, Administrator,having regard to the written procedure and following the hearing on 11 October 2005,gives the followingJudgment Background I – Subject-matter of the dispute1 By Decision 2004/138/EC of 11 June 2002 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.571/D-1: Austrian banks – ‘Lombard Club’) (OJ 2004 L 56, p. 1; ‘the contested decision’ or ‘the decision’), the Commission found that certain undertakings had participated in a series of agreements and concerted practices within the meaning of Article 81(1) EC. 2 In particular, the following eight banks were involved, they being the addressees of the contested decision:– Erste Bank der oesterreichischen Sparkassen AG (‘Erste’);– Raiffeisen Zentralbank Österreich AG (‘RZB’);– Bank Austria AG, which became, as from 13 August 2002, Bank Austria Creditanstalt AG (‘BA-CA’);– Bank für Arbeit und Wirtschaft AG (‘BAWAG’);– Österreichische Postsparkasse AG (‘PSK’);– Österreichische Volksbanken AG (‘ÖVAG’);– Niederösterreichische Landesbank-Hypothekenbank AG (‘NÖ‑Hypo’);– Raiffeisenlandesbank Niederösterreich-Wien AG (‘RLB’).3 In essence, the Commission criticises the addressees of the contested decision for establishing a system of regular meetings (‘the committee meetings’ or ‘the committees’), to which it refers as the ‘Lombard network’, in which they covered every conceivable subject and regularly coordinated their conduct with respect to the essential factors of competition in the Austrian market in banking products and services. 4 On the basis of the factual findings and legal assessments made in the contested decision, the Commission imposed fines on the undertakings concerned. 5 The aim of the present actions is not to contest the substance of the facts described in the contested decision. The actions relate essentially only to certain aspects of the legal assessment made of those facts and the amounts of the fines imposed on the applicants. II – The applicants6 In Austria, a distinction is drawn between single-tier banks and multi-tier bank groupings, also described as being ‘decentralised’. Savings banks and credit unions thus have a two-tier structure, and agricultural credit cooperatives (Raiffeisen banks) have a three-tier structure. In each of these multi-tier structures (hereinafter referred to as ‘the savings bank sector’, ‘the Raiffeisen sector’ and ‘the credit union sector’ and, together, as the ‘decentralised sectors’), a central establishment, ordinarily known as a ‘lead institution’ (‘the central establishment’ or ‘the lead institution’), carries out support and service functions for the banks in the sector. Erste, RZB and ÖVAG are the central establishments for, respectively, the savings bank sector, the Raiffeisen sector and the credit union sector. The complex relations between those establishments and the other members of the structure, and their mutual rights and obligations, are governed by the Bundesgesetz über das Bankwesen (Bankwesengesetz – BWG) (BGBl. 1993, p. 3903 (Law on the banking system)), which was published on 30 July 1993 and entered into force on 1 January 1994. A – Erste (Case T-264/02)7 Erste is a public limited company and the successor, as from 1993, to a savings bank founded in Vienna in 1819 under the name ‘Erste österreichische Spar-Cassa’. In the 1980s, and more so from 1990, the latter had extended its business beyond the boundaries of its original market. Initially, the company was called ‘Die Erste Österreichische Spar-Casse-Bank AG’ (‘EÖ’). In May 1997, it purchased 53% of the shares in GiroCredit Bank der österreichischen Sparkassen AG (‘GiroCredit’), which assumed the role of lead institution for the savings banks. From 1994 until the purchase of the shares by the applicant (then named EÖ), most of the shares in GiroCredit were held by the Bank Austria group. 8 GiroCredit remained an independent legal person and continued to act as lead institution for the savings banks until October 1997, when GiroCredit and Erste merged and the name of Erste was changed to ‘Erste Bank der oesterreichischen Sparkassen AG’. At the time of the October 1997 merger, Erste resumed the function of lead institution for the approximately 70 savings banks existing in Austria during the period concerned. The conduct of GiroCredit was imputed by the contested decision to Erste. B – RZB (Case T-259/02)9 RZB is the lead institution of the Raiffeisen sector, the first tier of which comprises about 615 independent local banks and their branches. The eight regional banks (Raiffeisen-Landesbanken) form the second level. The local Raiffeisen banks in the same province (Land) are owners of their regional bank. RZB, to which central service tasks are entrusted, is the third tier. RZB is owned as to 80% by the regional banks. C – RLB (Case T-262/02)10 RLB is one of the regional banks in the Raiffeisen sector. In 1997, it took over Raiffeisenbank Wien AG (‘RBW’), of which it was the main shareholder. The latter establishment participated in the committees, and its infringement is imputed to RLB. D – BA-CA (Case T-260/02)11 BA-CA is a credit establishment deriving from the merger in September 1998 of Bank Austria AG (‘BA’) and Creditanstalt AG (‘CA’). The name of BA-CA was changed to ‘Bank Austria Creditanstalt AG’ only on 13 August 2002, that is to say after the contested decision was adopted but before the action was brought. The conduct of CA before the merger is imputed to BA-CA. E – Anteilsverwaltung BAWAG PSK AG (Case T-261/02) and BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG (Case T‑263/02)12 Anteilsverwaltung BAWAG PSK AG (the applicant in Case T‑261/02; ‘AVB’) has, since a restructuring in 2005 of the group of companies to which BAWAG and PSK belonged, been the name of BAWAG which, with effect from 1 October 2005, transferred all its banking business to BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG (the applicant in Case T‑263/02; ‘BAWAG PSK’). Until that date, BAWAG was a credit establishment and, as from December 2000, the main shareholder of PSK. The latter was a credit establishment in the form of a joint stock company, which in 1997 became the successor to Österreichische Postsparkasse, a legal person governed by public law. PSK had a majority holding in Bank der Österreichischen Postsparkasse AG (‘PSK-B’), with which it merged in 1998 and whose conduct is imputed to it by the contested decision. Until the merger of PSK and BAWAG PSK on 1 October 2005, BAWAG and PSK were public limited companies and legally independent banks. F – ÖVAG and NÖ-Hypo (Case T-271/02)13 ÖVAG is an Austrian credit establishment which, as a commercial bank, provides banking services on a regional scale in the Austrian market, focusing mainly on small and medium-sized enterprises (SMEs) and individuals. From a geographical point of view, its business is limited to Vienna and its environs; during the period covered by the contested decision, it ran 26 branches in Vienna and 2 in Lower Austria. In addition to operating as a commercial bank, ÖVAG acts as lead institution of the Austrian Federation of Credit Unions. Those establishments possess, through a holding company, a majority of the shares in ÖVAG. Moreover, ÖVAG has holdings in smaller undertakings that supply banking and financial services, including in particular NÖ-Hypo. 14 NÖ-Hypo was established in 1888 as a regional farm mortgage bank. Until 1992, it was a legal person governed by public law operating under the auspices of the Province of Lower Austria. In September 1992, it was converted, following an injection of capital, into a company limited by shares. Since 1 January 1997, NÖ-Hypo has formed part of the ÖVAG group. It operates 27 agencies, 20 of which are in Lower Austria and 7 in Vienna. NÖ-Hypo operates primarily in the public sector. From a geographical point of view, NÖ-Hypo’s business is limited to the Province of Lower Austria and Vienna. III – Administrative procedure15 Having become aware in April 1997 of a document which gave grounds for suspecting the existence in the Austrian banking market of agreements or concerted practices contrary to Article 81 EC, the Commission opened a formal investigation procedure. On 30 June 1997, pursuant to Article 3 of Regulation No 17 of the Council of 6 February 1962, First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87), the Freiheitliche Partei Österreichs, a political party (‘the FPÖ’), lodged a complaint against eight Austrian credit establishments suspected of participating in agreements and/or concerted practices restricting competition. 16 On 23 and 24 June 1998, the Commission carried out unannounced inspections at several banks, including most of the addressees of the contested decision. On 21 September 1998, the Commission sent a request for information under Article 11(2) of Regulation No 17 to numerous credit establishments suspected of having participated in those agreements or concerted practices. 17 Immediately after receiving the request for information, the main banks concerned offered the Commission their ‘cooperation’ in the investigation of the case, and went so far as to suggest that they would state the facts ‘voluntarily’ (instead of answering the request for information) and at the same time waive the right to a hearing; in return, the Commission Directorate-General for Competition would cancel its request for information and would impose only a ‘moderate’ fine. Whilst acknowledging the banks’ promptness in offering their cooperation, the Commission declined to make any agreement in that regard. 18 All the addressees subsequently responded to the request for information. In doing so, some expressed the view that they were under no obligation to reply to most of the questions put to them and that they were therefore submitting the relevant documents and answering the relevant questions voluntarily as part of the abovementioned cooperation. The Commission rejected that interpretation of the law as being incorrect. 19 Soon afterwards, the largest banks concerned, including the applicants, with the exception of RLB, transmitted to the Commission a 132-page document described as a ‘joint exposition of the facts’ in which they set out at length the historical background to their cartel and summarised briefly and assessed from their point of view the content of the individual committee meetings as it appeared from the documents which had been seized and from those which they had been requested to produce. At the same time, they produced 16 binders containing documents, sorted according to committee, with detailed lists of contents. In order that it might assess any added value that the documents submitted with the joint exposition of the facts might represent, the Commission asked the banks to indicate whether any of those documents were not yet known to the Commission, and if so which. The banks, however, considered this to be neither feasible nor necessary. 20 On 13 September 1999, the Commission sent to eight banks a statement of objections dated 11 September 1999. After they had been granted access to the file and had made written submissions, a hearing was held on 18 and 19 January 2000. On 22 November 2000, the Commission sent to the banks a supplementary statement of objections. The undertakings concerned were again granted access to the file and submitted further written observations to the Commission, and a second hearing was held on 27 February 2001. 21 On 11 June 2002, the Commission adopted the contested decision.IV – The contested decisionA – General observations22 In Article 1 of the contested decision, the Commission states that the eight banks to which the decision is addressed infringed Article 81(1) EC by taking part in agreements and concerted practices in respect of prices, charges and advertising, with the object of restricting competition on the market in banking products and services in Austria, from 1 January 1995 to 24 June 1998. 23 Article 2 of the contested decision requires the undertakings mentioned in Article 1 immediately to bring to an end the infringement in question in so far as they have not already done so and to refrain in future from repeating any act or conduct which has the same object or effect as that infringement. 24 Article 3 of the contested decision imposes on its addressees the following fines:– Erste: EUR 37.69 million;– RZB: EUR 30.38 million;– BA-CA: EUR 30.38 million;– BAWAG: EUR 7.59 million;– PSK: EUR 7.59 million;– ÖVAG: EUR 7.59 million;– NÖ-Hypo: EUR 1.52 million;– RLB: EUR 1.52 million.B – Findings concerning the background to the cartel, the various committees, their relationships and the role of the lead institutions25 The contested decision states that in Austria there is a long tradition of agreements between banks, mainly about interest rates and charges and fees, based in some measure, until the 1980s, on a statute law, though the latter had been repealed by 1 January 1994, when the Republic of Austria joined the European Economic Area (EEA) and the BWG entered into force. 26 Credit establishments nevertheless continued to conclude agreements, in particular on lending and deposit rates, within the network. 27 The contested decision states, in Title 5, that the agreements were comprehensive as regards their content, highly institutionalised and closely interconnected, and covered the entire Austrian territory. For every banking product there was a separate committee on which the competent employees at the second or third level of management of the banks concerned sat. In practice, this separation as regards content was not strictly adhered to: sometimes, substantively related topics which were covered by more than one committee were dealt with in one and the same committee. Finally, the individual committees were part of an organisational whole. 28 Each month, apart from August, senior representatives of the largest Austrian banks got together as the top-level body (known as the ‘Lombard Club’). In addition to matters of general interest that were clearly neutral from a competition point of view, they discussed changes in interest rates, advertising measures, and so forth. At some of these meetings, representatives of the Austrian National Bank (‘the OeNB’) were present. 29 One level down were the product-based specialist committees. The most important ones, in that regard, were the lending rates committees and the deposit rates committees which, as their names suggest, dealt with lending and deposit interest rates and they were convened either separately or jointly. A constant flow of information took place in particular between those committees and the Lombard Club. 30 Regional committees, which were diverse and numerous, held regular meetings in every province of Austria. In certain provinces, even the hierarchical structure of the Lombard Club and the specialist committees was replicated. 31 During the federal committee meetings on lending and/or deposit rates, bank representatives from Vienna met their opposite numbers from the provinces and their decisions were in principle valid for the whole of Austria. 32 In addition, there were special committees for, inter alia, corporate banking, retail banking business involving the self-employed, mortgage lending and building loans (named ‘the Minilombard Committee’, ‘the Key Account Management Committee’, ‘the Liberal Professions Lending Rates Committee’, ‘the Mortgage Committee’ and ‘the Building Loans Deposit Rates Committee’). 33 Lastly, there were meetings, at regular intervals, of a large number of further committees on matters of relevance from a competition point of view: in the Treasurer Committee (Treasurerrunde), federal financing and interest rate questions were discussed; in the various payments transactions committees (in particular the Payment Transactions Committee, the Cross-Border Transactions Committee and the Organising Committee of Austrian Credit Institution Associations), fees and charges for payment transactions were among the matters discussed; in the Export Financing Committee, matters of export financing were discussed, and in the Securities Committee, minimum fees, charges and interest rates were discussed. 34 Of all those special committees, the most noteworthy is the Controller Committee (Controllerrunde), on which the representatives of the controlling departments of the leading Austrian banks sat. It was at meetings of this committee that, for instance, uniform calculation bases and joint proposals for improved earnings were drawn up. The banks thereby increased the mutual transparency of their respective cost and calculation factors. 35 Between all these committees, concerned primarily with lending and deposit rates and with charges and fees, a regular flow of information took place. Discussions in one committee were often held over pending agreement in another. Lastly, the higher rank of the Lombard Club meant that, in controversial cases, its guidance was awaited. 36 With a view to extensive, countrywide implementation of (or for the purpose of coordination with) the agreements concluded in the abovementioned Vienna committee meetings, there was also a regular flow of information to the various regional committees in the provinces and from the latter to the central committees in Vienna. From time to time, regional committees sent representatives to federal committee meetings on lending and/or deposit rates. 37 The Commission states, in the contested decision, that, during the period covered by its investigation (namely from 1 January 1994 to the end of June 1998), at least 300 meetings took place in Vienna alone, quite apart from the numerous regional committee meetings. In terms of working days, this means that, in Vienna alone, a meeting took place every four days. It observes that, even outside that institutionalised network, numerous contacts took place between representatives of the banks concerned – sometimes at the highest level – on interest rates and charges and fees. 38 The Commission draws attention to the particular role played by the lead institutions in the Lombard network as coordinators and representatives of their respective bank groupings, namely, in the case of Erste (previously GiroCredit), the savings bank sector; in the case of RZB, the Raiffeisen sector; and, in the case of ÖVAG, the credit union sector. According to the Commission, that role was directly utilised for the smooth functioning of the Lombard network. First, the lead institutions organised the mutual transfer of information between Vienna and the provinces within the respective bank groupings; second, they represented the interests of their grouping vis-à-vis the other groupings in the cartel. According to the Commission, they were thus perceived as representatives of their respective groupings by the other participants. The agreements were therefore reached not only between the individual institutions themselves but also between the groupings. 39 The Commission then explains in detail, in Titles 6 to 12 of the contested decision, how the institutionalised and closely interconnected network of numerous, wide-ranging committees led to a situation where the institutions concerned regularly and continuously jointly coordinated their behaviour in the market, particularly with regard to interest rates and bank charges and fees. C – The banks’ arguments and legal assessment40 After observing that the banks concerned did not contest the facts established by the Commission as regards the conduct and content of the committee meetings, in Title 13 of the contested decision the Commission rejects, first, the banks’ arguments regarding the specific historical, societal, economic and social aspects of the cartel and, second, their contention, based on an economic report drawn up by Professor von Weizsäcker, that the agreements had not had any influence on the Austrian banking market. 41 Title 14 of the contested decision is concerned with the legal assessment of the cartel. First of all, the Commission rejects the banks’ thesis that the special economic context of the banking industry is such that competition law should not be fully applied to that sector. 42 The banks argued that the Commission is not competent to take action on an infringement of Article 53 of the EEA Agreement committed in 1994, in response to which the Commission, whilst contending that that view would thwart the full effectiveness of the EEA Agreement, waived the right to find that Article 53 of the EEA Agreement had been infringed in respect of that year. 43 The Commission characterises the facts surrounding the infringement as complex and of considerable duration, comprising both agreements and concerted practices. It emphasises that the undertakings concerned intended to restrict competition and also states that the concerted practices had concrete effects on the Austrian banking market, despite the fact that the commitments given were not always complied with by the banks. 44 In that title of the contested decision, recitals 438 to 469 give details of the repercussions of the concerted practices on trade between Member States. 45 As regards the fact that the contested decision was addressed only to some of the very large number of banks that took part in the practices at issue, the Commission emphasises that the banks to which the contested decision was addressed were singled out because of the particular frequency of their participation in meetings of the major committees and that, moreover, with the exception of NÖ-Hypo and RLB, they play an important role in the Austrian banking market on account of their size. 46 As regards, finally, the duration of the infringement, the contested decision indicates that the practices in question fell, as from 1 January 1995, within the scope of Article 81(1) EC and that the Commission considered that no further committee meetings took place after the time of the June 1998 investigations, so that the infringement ended at that time. D – The requirement that the infringement be brought to an end and calculation of the fines47 Title 16 of the contested decision deals with the ‘remedies’ adopted by the Commission.48 First, the Commission requires the undertakings concerned to bring the infringement to an end, in accordance with Article 3 of Regulation No 17. 49 Next, as regards the fines imposed, the Commission observes first of all that the infringement was committed intentionally.50 The amount of the fines imposed on the addressees of the contested decision (see paragraph 24 above) was calculated on the basis of the methodology set out in the guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3; ‘the Guidelines’) and the Commission notice on the non-imposition or reduction of fines in cartel cases (OJ 1996 C 207, p. 4; ‘the Leniency Notice’). 51 In that regard, the Commission describes the bank meetings as ‘very serious infringements’ of Article 81 EC, and states that the relatively limited size of the relevant geographic market does not change that assessment. Next, it divides the participants in the agreements into five categories according to their respective market shares. It attributes to the lead institutions the market shares of the banks in the sector which they lead. For example, the market shares of all the Raiffeisen banks were attributed to RZB which, as a result, was placed in the first of the five categories, for which the starting amount of the fine was set at EUR 25 million. 52 In determining the duration of the infringement, the Commission found that it extended from 1 January 1995 until the end of June 1998. On account of that duration, it increased the starting amount by 35%. 53 The Commission did not give any bank the benefit of mitigating circumstances; it considers, in particular, that the division of roles within the bank meetings is not relevant in that regard. 54 Finally, the Commission granted the addressees of the contested decision, under the Leniency Notice, a reduction of 10% of the fine for not contesting the facts. Procedure and forms of order sought55 By separate applications lodged at the Registry of the Court of First Instance on 30 August and 2 September 2002, the addressees of the contested decision brought the present actions. 56 After hearing the parties’ views, the President of the Second Chamber of the Court of First Instance, by order of 12 September 2005, joined the seven cases for the purposes of the oral procedure and judgment, in accordance with Article 50 of the Rules of Procedure of the Court of First Instance. 57 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (Second Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure under Article 64 of the Rules of Procedure, asked the parties to lodge certain documents and put questions to them. The parties complied with those requests within the appointed period. 58 The Commission requested confidential treatment for certain information contained in the documents produced by it, with regard to the applicants other than BA-CA, on the ground that the latter’s business secrets were involved, and it produced non-confidential versions of the documents concerned. Since the confidential data were not relevant to examination of the pleas of BA-CA, but had a bearing on pleas raised by other applicants, the Court decided to place in the file only the non-confidential versions of the documents concerned, so that, under Article 67(3) of the Rules of Procedure, the confidential data could not be taken into consideration. 59 At the hearing on 11 October 2005, the parties presented oral argument and answered questions put to them by the Court. In response to one such question, Erste produced documents concerning its market share. The other parties gave their views on those documents in writing, and the oral procedure was closed on 7 November 2005. 60 RZB (the applicant in Case T-259/02) claims that the Court of First Instance should:– annul the contested decision in so far as it relates to the applicant;– in the alternative, reduce the fine imposed on it;– order the Commission to pay the costs.61 BA-CA (the applicant in Case T-260/02) claims that the Court of First Instance should:– in the alternative, appropriately reduce the fine imposed on it;62 AVB (the applicant in Case T-261/02, formerly BAWAG) claims that the Court of First Instance should:– annul Articles 1 to 3 of the contested decision in so far as they relate to BAWAG;– in the alternative, reduce the fine imposed on BAWAG to an equitable amount;63 RLB (the applicant in Case T-262/02) claims that the Court of First Instance should:– annul the contested decision;– in the alternative, annul Articles 3 and 4 of the contested decision in so far as they relate to the applicant;64 BAWAG PSK (the applicant in Case T-263/02, formerly PSK) claims that the Court of First Instance should:– annul Articles 1 to 3 of the contested decision in so far as they relate to PSK;– in the alternative, reduce the fine imposed on PSK to an appropriate amount;65 Erste (the applicant in Case T-264/02) claims that the Court of First Instance should:– in the alternative, annul the fine imposed on it;– in the further alternative, reduce the fine to an appropriate amount;66 ÖVAG and NÖ-Hypo (the applicants in Case T-271/02) claim that the Court of First Instance should:– annul Article 1 of the contested decision in so far as it relates to them;– annul the first sentence of Article 2 of the decision, in so far as it relates to them;– annul Article 3 of the decision, in so far as it relates to them, or, in the alternative, reduce the fine imposed on them by that article; – in the alternative to the first head of claim, annul the decision to admit the FPÖ as complainant and the decision to forward the statements of objections to it; 67 In Case T-259/02, the Commission contends that the Court of First Instance should:– dismiss the application;– increase the amount of the fine imposed on RZB to EUR 33.75 million;– order the applicant to pay the costs.68 In Cases T-260/02 to T-264/02 and T-271/02, the Commission contends that the Court of First Instance should:– dismiss the applications;– order the applicants to pay the costs. The effect of a restructuring on BAWAG (Case T-261/02) and PSK (Case T-263/02)69 By letter of 16 January 2006, the board of directors of BAWAG and PSK informed the Court of First Instance that, as part of the restructuring of the group of undertakings of which those two credit establishments formed part, BAWAG PSK was thereafter the successor to the two applicants in Cases T-261/02 and T-263/02. 70 It is apparent from the documents annexed to that letter, first, that BAWAG transferred its banking business to BAWAG PSK and changed its name to AVB, and, second, that PSK merged with BAWAG PSK. In its letter of 16 January 2006, the board of directors of BAWAG and PSK stated that BAWAG PSK was the sole successor to BAWAG as regards the latter’s banking business. 71 It is true that the Community judicature may take note of a change of name of a party to proceedings. Moreover, an action for annulment brought by the addressee of a measure may be continued by the universal successor in title of that addressee, in particular in the case of the death of a natural person or where a legal person ceases to exist and all its rights and obligations are transferred to another person (see, to that effect, the judgments of the Court of Justice in Case 92/82 Gutmann v Commission [1983] ECR 3127, paragraph 2, and Case 294/83 Les Verts v Parliament [1986] ECR 1339, paragraphs 13 to 18). It must be borne in mind that, in such circumstances, the universal successor in title is necessarily substituted automatically for its predecessor as addressee of the contested measure. 72 Conversely, the Community judicature has no power, either in the context of an action for annulment under Article 230 EC or even in the exercise of its unlimited jurisdiction under Article 229 EC, with regard to penalties, to amend the decision of a Community institution by replacing the addressee thereof by another natural or legal person when that addressee still exists. That power belongs only to the institution that adopted the measure concerned. Thus, once the competent institution has adopted a decision and, therefore, established the identity of the person to whom the decision is to be addressed, it is not for the Court to substitute another person for the latter (see, to that effect, Joined Cases T‑67/00, T‑68/00, T‑71/00 and T‑78/00 JFE Engineering and Others v Commission [2004] ECR II‑2501, paragraph 47). 73 It must then be considered that an application brought by a person in his capacity of addressee of a measure in order to give effect to his rights in the context of an action for annulment under Article 230 EC and/or of an application for amendment under Article 229 EC cannot be transferred to a third person who is not the addressee thereof. If such a transfer were to be allowed, there would be a discrepancy between the status by virtue of which the action was brought and the status by virtue of which it was purportedly pursued. Moreover, such a transfer would give rise to a discrepancy between the identity of the addressee of the measure and that of the person litigating as addressee (JFE Engineering and Others v Commission, cited in paragraph 72 above, paragraph 48). 74 It is therefore appropriate to take formal note of the change of name of BAWAG to AVB and of the fact that, following the merger mentioned above, BAWAG PSK became the successor to PSK. On the other hand, it would not be appropriate to replace AVB by BAWAG PSK in Case T-261/02, whatever the effects under Austrian law of the restructuring that has taken place. Consequently, BAWAG (now called AVB) remains the applicant in Case T-261/02, whereas BAWAG PSK has automatically become the applicant in Case T‑263/02. 75 Given that the contested decision had been addressed to BAWAG and to PSK and that the latter have made their written and oral submissions to the Court under their former names, those names will be used to refer to those applicants in the remainder of the present judgment. LawI – The applications for annulment of the contested decision in its entiretyA – The pleas alleging infringements of the Rules of Procedure1. The final report of the Hearing Officer (Cases T-260/02, T‑261/02 and T‑263/02)(a) Arguments of the applicants76 BA-CA, BAWAG and PSK observe that the copy of the final report of the Hearing Officer sent to the applicants under Article 16(3) of Commission Decision 2001/462/EC, ECSC of 23 May 2001 on the terms of reference of Hearing Officers in certain competition procedures (OJ 2001 L 162, p. 21) (the ‘Terms of Reference’) bears no signature. They consider this to constitute a breach of essential procedural requirements justifying annulment of the contested decision. 77 BAWAG and PSK (Cases T-261/02 and T-263/02) state that the uncertainty as to whether the copy of the final report sent to them was in fact the final version undermined their ability to defend themselves properly against the contested decision. 78 BA-CA (Case T-260/02) contends that the contested decision was adopted by the Commission in an improper manner because the final report of the Hearing Officer had not been authenticated. Moreover, the word ‘draft’ appearing on the copies submitted to the Advisory Committee and the Members of the Commission was liable to affect the assessment of the report by those authorities and, therefore, the result of the administrative procedure. Moreover, it suspects that the final report was presented to the Members of the Commission only in the German language, so that the fourth paragraph of Article 6 of the Commission’s Rules of Procedure of 29 November 2000 (OJ 2000 L 208, p. 26; ‘the Commission Rules of Procedure’) was infringed. It requests that the Court of First Instance adopt a measure of organisation of procedure granting it full access to the Commission file. (b) Findings of the Court79 The first paragraph of Article 15 of the Terms of Reference provides:‘The Hearing Officer shall, on the basis of the draft decision to be submitted to the Advisory Committee in the case in question, prepare a final report in writing on the respect of the right to be heard, as referred to in Article 13(1). This report will also consider whether the draft decision deals only with objections in respect of which the parties have been afforded the opportunity of making known their views and, where appropriate, the objectivity of any enquiry within the meaning of Article 14.’ 80 According to Article 16 of the Terms of Reference:‘1. The Hearing Officer’s final report shall be attached to the draft decision submitted to the Commission, in order to ensure that, when it reaches a decision on an individual case, the Commission is fully apprised of all relevant information as regards the course of the procedure and respect of the right to be heard. 2. The final report may be modified by the Hearing Officer in the light of any amendments to the draft decision up to the time the decision is adopted by the Commission. 3. The Commission shall communicate the Hearing Officer’s final report, together with the decision, to the addressees of the decision. It shall publish the Hearing Officer’s final report in the Official Journal of the European Communities, together with the decision, having regard to the legitimate interest of undertakings in the protection of their business secrets.’ 81 As regards, first, the complaint that the final report was not signed, it must be observed that the Commission has produced, as an annex to its defence, three copies of that report (in German), namely: – the one sent to the addressees of the contested decision;– the one sent to the Advisory Committee;– the one sent to the Members of the Commission,the text of which is identical, whilst only the second one bears a signature. Moreover, the last two copies bear the words ‘Entwurf’ (draft) and ‘Intern’ (internal). 82 It is apparent from those documents that the Hearing Officer signed at least one copy of the final report, which shows that the text was definitive and was the one sent to the competent authorities in accordance with the wishes of the Hearing Officer. In those circumstances, the fact that other copies of that report, which were identical to the signed version (with the exception of the removal, in certain cases, of the word ‘draft’), were sent to the addressees without having been signed cannot be held to be an infringement of essential procedural requirements, such as to justify annulment of the contested decision. 83 BAWAG’s and PSK’s complaint that the lack of a signature on the copy of the final report sent to them at the same time as the notification of the contested decision undermined their rights of defence, making it more difficult for them to draw up their defence against that decision, is misconceived. The lack of a signature was not capable of undermining the applicants’ rights of defence during the administrative procedure. In so far as the applicants’ arguments seek to show that the absence of a signature might have prompted doubts as to whether or not the report was final, so that criticism of that report and, therefore, their defence before the Court of First Instance would be more uncertain, it must be pointed out that such doubts could have been raised in a request for measures of organisation of procedure and that Article 48(2) of the Rules of Procedure enables the parties to defend their rights in relation to the result of such measures by raising new pleas if appropriate. 84 Second, BA-CA’s complaint alleging breach of the obligation to authenticate the Hearing Officer’s final report must be rejected. The Hearing Officer’s final report is not a measure taking one of the forms provided for in Article 14 ECSC, Article 249 EC or Article 161 EAEC, for which authentication is required under the fifth paragraph of Article 18 of the Commission Rules of Procedure. 85 Third, with regard to the word ‘draft’ appearing on the copies of the final report submitted to the Advisory Committee and the Members of the Commission, it must be borne in mind that Article 16(2) of the Terms of Reference provides that, before the adoption of the decision, the Hearing Officer’s final report may be modified by him in the light of any amendments to the draft decision. It is not therefore illegal for the word ‘draft’ to appear on the report when it is forwarded to the competent authorities. The fact that such a ‘draft’ is not replaced by a definitive version if it is not modified cannot render illegal the decision adopted on the basis of it. It cannot be presumed that the Members of the Commission, when dealing with a decision imposing fines, would fail in their obligation, set out in Article 16(1) of the Terms of Reference, to take account of the Hearing Officer’s final report, because of the word ‘draft’ appearing on it. 86 Fourth, it must be pointed out that there is no basis for BA-CA’s suspicion that the final report may not have been submitted to the competent authorities in all the required languages. In that regard, the fourth paragraph of Article 6 of the Commission Rules of Procedure provides: ‘The agenda and the necessary working documents shall be circulated to the Members of the Commission within the time-limit and in the working languages prescribed by the Commission in accordance with Article 25.’ 87 It is well known that the Commission’s working documents are as a general rule presented in German, English and French.88 In response to a measure of organisation of procedure, the Commission has produced the German, English and French versions of the final report, accompanied by notes from the Commission Secretariat-General dated 4 June 2002, showing that those versions were sent to the Members of the Commission. Consequently, BA-CA’s complaint is factually unfounded. 89 BA-CA’s request for full access to the Commission’s administrative file must also be rejected. It follows from the foregoing that such a measure is not necessary to enable it to verify whether the Hearing Officer’s final report was in fact presented in the requisite language versions. Moreover, BA-CA has not stated in relation to what other pleas production of the Commission’s administrative file might prove necessary. 90 It follows that the complaints made by BA-CA, BAWAG and PSK concerning the Hearing Officer’s final report must be rejected.2. The status granted to the FPÖ political party in the administrative procedure (Cases T-260/02 and T-271/02)(a) Arguments of the parties91 BA-CA, ÖVAG and NÖ-Hypo criticise the Commission for improper conduct, first, by admitting the FPÖ as a complainant under Article 3 of Regulation No 17 and, second, for sending non-confidential versions of the statements of objections to that political party. They claim that those decisions infringed Articles 3 and 20 of Regulation No 17 and their rights of defence, first, because, since the FPÖ’s complaint was lodged after the Commission opened the procedure, it did not give rise to that procedure; second, because the FPÖ could not show a legitimate interest in submitting an application under Article 3 of Regulation No 17, the fact that it was a bank customer being insufficient in that regard; third, because the oral hearings had already taken place when those two decisions were adopted; and, fourth, because the Commission did not obtain a commitment from the FPÖ to fulfil the obligations incumbent on complainants. In their view, the consequence of those irregularities should be that the contested decision be annulled. 92 BA-CA also alleges that the Commission infringed its rights of defence by failing – despite several requests – to communicate to it, in that connection, a decision that could be contested in legal proceedings, thereby depriving it of the possibility of bringing an action against the transmission of the statements of objections. Moreover, it claims that the Commission infringed the EC Treaty by not doing everything within its power to curtail abuse of the statements of objections by the FPÖ and that it failed to oppose the FPÖ’s misuse of the documents forwarded to it and in particular failed to request their return. 93 The Commission is of the opinion that the complaints concerning the transmission of the statements of objections to the FPÖ have no bearing on the subject-matter of these proceedings. It states that the admission of the FPÖ as a complainant had no influence whatsoever on the contested decision and that the decision authorising the transmission of the statements of objections to the FPÖ should have been the subject of a separate procedure, an application ex post facto in the context of the present proceedings no longer being possible, if only by reason of the expiry of limitation periods. 94 In its rejoinder, the Commission adds that the applicants have no standing to bring proceedings under the fourth paragraph of Article 230 EC against the admission of the FPÖ as a complainant and the transmission of the statements of objections because their legal status is not affected by those measures. The Commission also contends that the effect of which they complain and the prejudice they consider themselves to have suffered derive not from acts of the Commission but from the later entirely independent conduct of the FPÖ. The Commission is also of the opinion that it was perfectly entitled to admit the FPÖ as a complainant and, therefore, was required to transmit the statements of objections to it. 95 Article 3(1) of Regulation No 17 provides that, if the Commission finds, ‘upon application or upon its own initiative’, that there is infringement of Article 81 EC or of Article 82 EC, it may by decision require the undertakings or associations of undertakings concerned to bring such infringement to an end. Under Article 3(2) of Regulation No 17, such an application may be made by a natural or legal person who claims a legitimate interest in that regard. It is apparent, next, from Articles 6 to 8 of Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in certain proceedings under Articles [81] and [82] of the Treaty (OJ 1998 L 354, p. 18) that persons who have made such an application enjoy certain procedural rights, including in particular the right to receive a copy of the non-confidential version of the statement of objections. 96 First, with regard to the question whether the Commission infringed Article 3 of Regulation No 17 by admitting the FPÖ to the procedure, the applicants’ view that such an application cannot be validly submitted once an infringement procedure has been commenced on the Commission’s own initiative must be rejected. Regulations No 17 and No 2842/98 do not, for the purpose of recognising the standing of a person as an applicant, require that the application derives from the Commission’s opening of the infringement proceedings and that the investigation into the infringement complained of has not yet started. If the position were otherwise, persons with a legitimate interest in obtaining a finding of infringement of the competition rules would be prevented from exercising, in the course of the procedure, the procedural rights associated with that status under Articles 6 to 8 of Regulation No 2842/98. 97 Second, it must be observed that the Commission rightly concluded that the FPÖ could validly invoke its status as a recipient of banking services in Austria and the fact of suffering economic damage as a result of anti-competitive practices in order to justify a legitimate interest in submitting an application for a finding by the Commission that those practices constituted an infringement of Articles 81 EC and 82 EC 98 In that regard, there is nothing to prevent an end-purchaser of goods or services from satisfying the requirements for having a legitimate interest within the meaning of Article 3 of Regulation No 17. The Court of First Instance considers that an end-user who proves that his interests have been, or are liable to be, adversely affected as a result of the restriction of competition in question has a legitimate interest within the meaning of that provision in lodging an application or a complaint with a view to obtaining a finding by the Commission of an infringement of Articles 81 EC and 82 EC. 99 It must be borne in mind in that connection that the rules designed to ensure that competition is not distorted in the internal market are ultimately intended to enhance the well-being of consumers. That aim is apparent in particular from the terms of Article 81 EC. Although the prohibition laid down in paragraph 1 of that provision may be declared inapplicable to agreements that contribute to improving the production or distribution of the goods in question or promoting technical or economic progress, that possibility, provided for in Article 81(3) EC, is in particular subject to the condition that a fair share of the resulting benefit should be reserved to the consumers of those goods. Competition law and policy thus have an undeniable impact on the specific economic interests of end-purchasers of goods or services. The recognition that such customers – who claim to have suffered economic damage as a result of a contract or conduct liable to restrict or distort competition – have a legitimate interest in obtaining a declaration by the Commission that Articles 81 EC and 82 EC have been infringed contributes to attainment of the objectives of competition law. 100 That conclusion cannot be undermined by the fact that, initially, the FPÖ claimed a general interest which it sought to defend as an opposition political party and that it only later contended that, as an end-user of Austrian bank services, it had been economically damaged by the cartel complained of. That first stance could not deprive it of the opportunity to rely subsequently, in order to justify a legitimate interest within the meaning of Regulation No 17, on its status as a customer of the banks against which the procedure had been initiated, and on the economic loss which it allegedly suffered as a result of the agreements in question. 101 Third, the admission of an interested party as a complainant, together with the transmission to that party of the statement of objections, cannot be made subject to the condition that it must occur prior to any oral hearing before the Commission. Regulations No 17 and No 2842/98 do not lay down any specific time-limit within which a third party applicant or complainant showing a legitimate interest must exercise his right to receive the statement of objections and be heard in the context of an infringement procedure. Thus, Articles 7 and 8 of Regulation No 2842/98 merely provide that the Commission is to provide the applicant or complainant with a copy of the objections and set a date by which the applicant or complainant may make known his views in writing, any such person being entitled to express his views orally if he so requests. It follows that the right of an applicant or complainant to receive the statement of objections and to be heard in an administrative procedure for the establishment of an infringement of Articles 81 EC and 82 EC may be exercised at any time during the course of the procedure. 102 As regards, fourth, the arguments concerning the FPÖ’s use of the documents made available to it, it must be borne in mind that, under Article 7 of Regulation No 2842/98, that political party, as an applicant, was entitled to receive a non-confidential version of the statements of objections. The Commission cannot, on the basis of mere suspicions concerning possible misuse of such documents, curtail the right to disclosure of the statement of objections provided for in Article 7 of Regulation No 2842/98 in favour of a third-party applicant who validly shows a legitimate interest. Finally, no use which the FPÖ may have made of the documents disclosed to it can be imputed to the Commission and no such use can therefore affect the legality of the contested decision. 103 It follows that the applicants’ pleas concerning the admission of the FPÖ to the procedure must be rejected as unfounded, without there being any need for the Court to give a decision on their admissibility. 3. Conclusion104 The pleas alleging infringement of procedural rules must therefore be rejected in their entirety.B – The pleas alleging incorrect appraisal of the agreements1. Preliminary observations105 Without denying the existence of the committee meetings, BAWAG and PSK (Cases T‑261/02 and T‑263/02) seek annulment of the contested decision in its entirety, alleging infringement of Article 81(1) EC by reason of an incorrect appraisal of the agreements. 106 First, in essence, they challenge the classification of the committee meetings as a single cartel. Without putting forward a separate plea, RLB, ÖVAG and NÖ-Hypo (Cases T‑262/02 and T‑271/02) challenge that classification as a single cartel in the context of their pleas alleging that the agreements had no cross-border effects and contend that the potential of the committee meetings to affect trade between Member States should be examined separately for each of them. Those arguments will be examined in the context of the present plea. 107 Second, BAWAG and PSK claim that the committee meetings did not result in a high level of concertation between the banks and that the latter engaged in fierce competition. This complaint concerns, essentially, the assessment of the gravity of the infringement and could not, even if it were well founded, lead to annulment of the contested decision in its entirety. It will therefore be examined below, in the context of the claims for reduction of the fine, with the other complaints concerning the gravity of the infringement. 2. The classification of the committee meetings as a single infringement (Cases T‑261/02 to T‑263/02 and T‑271/02)108 The applicants in these cases maintain that the Commission wrongly considered that the committee meetings amounted to a single overall cartel. They claim above all that the various committees acted independently and that the Lombard Club performed no role of coordination or management as far as they were concerned. 109 RLB (Case T-262/02) does not deny that there were exchanges of information between the committees concerning deposits and lending (Lending and Deposit Rates Committees, the Lombard Club, the Controller Committee) but contends that the Lombard Club never concerned itself with services of a cross-border nature. Moreover, it states that the Commission alleged the existence of an overall agreement for the first time in its defence. 110 The Commission states that the classification of the committee meetings as an overall cartel is justified. As an annex to its rejoinder, it has produced a series of documents from the administrative file to show the close relationship between the committees. 111 An infringement of Article 81(1) EC may result not only from an isolated act but also from a series of acts or from continuous conduct. That interpretation cannot be challenged on the ground that one or several elements of that series of acts or continuous conduct could also constitute in themselves and taken in isolation an infringement of that provision. When the different actions form part of an ‘overall plan’, because their identical object distorts competition within the common market, the Commission is entitled to impute responsibility for those actions on the basis of participation in the infringement considered as a whole (Joined Cases C‑204/00 P, C‑205/00 P, C‑211/00 P, C‑213/00 P, C‑217/00 P and C‑219/00 P Aalborg Portland and Others v Commission [2004] ECR I‑123, paragraph 258). 112 In that connection, recital 73 to the contested decision states as follows: ‘The object of the agreements at issue was to restrict and distort competition between the undertakings concerned in relation to the matters dealt with by the committees. The agreements and concerted measures were intended … to improve the banks’ earnings. A departure from the cartel agreements, which, in the banks’ view, safeguarded “reasonable competition”, would, on the other hand, lead to an “erosion of margins”.’ The Commission thus states at that point, essentially, that there was a comprehensive plan pursuing the aim of eliminating price competition for all bank services covered by the committee meetings. RLB’s complaint that the Commission alleged the existence of a single overall cartel for the first time in its defence must therefore be rejected. 113 In order to ascertain whether the Commission was legally entitled to conclude, on the basis of the evidence available to it, that the concertation within the various committees formed part of a comprehensive plan to restrict competition, it is necessary to analyse the passages of the contested decision containing certain findings underpinning its conclusion as to the existence of a single cartel, to which it refers in its rejoinders in Cases T-261/02 to T-263/02 and T-271/02, and the documents on which those findings are based, produced as an annex to those rejoinders. 114 First, to show that the Lombard Club, as the top-level body at the head of all the other committees, dealt with questions falling within the scope of numerous specific committees, the Commission refers to documents concerning the meetings of that body held on 7 June 1995 and 8 May 1996. 115 As regards the first of those meetings, recital 167 to the contested decision cites a ‘confidential memo’ drawn up by a CA director relating to an informal meeting of 24 May 1995 between the representatives of BA, CA, BAWAG, GiroCredit, RZB and PSK, concerning the matters which were to be examined and settled at the Lombard Club meeting of 7 June 1995. That document demonstrates that the Lombard Club in fact dealt with questions falling within the terms of reference of committees dealing with different matters, including services of a cross-border nature, such as concertation on deposit and lending rates for both retail and corporate business, and on other conditions governing loans, including export financing. 116 As regards the Lombard Club meeting of 8 May 1996, recital 248 to the contested decision refers to three documents, the first of which is a note in the NÖ-Hypo file of 10 May 1996, addressed to, among others, the general managers of that bank, according to which, at the Lombard Club meeting of 8 May 1996, the representatives ‘agreed … basic matters’, relating in particular to the house bank margins (Hausbankspanne) for export financing, interest rates and other conditions for various types of loans, the advertising of interest rates and handling fees. The second document refers to ‘preparation of a minimum fees proposal for securities business and payments’, whereas the third document contains proposals adopted at that Lombard Club meeting. Those documents also confirm that the Lombard Club dealt with and decided on matters within the scope of numerous specific committees. The first two more particularly corroborate the finding that the Lombard Club was regarded as competent to decide on the prices to be set for certain important cross-border transactions, such as export financing, payments and securities business. 117 Second, it is clear from the documents cited by the Commission in recitals 216 and 248 to the contested decision that the Lombard Club took fundamental decisions. Thus, recital 216 to the contested decision refers to a file note on a Vienna committee meeting on deposit transactions and retail lending of 6 February 1996, addressed to the general manager of one of the banks concerned and relating to preparations for the Lombard Club meeting planned for the following day. According to that note, ‘“appropriate decisions in principle” were expected from the Lombard Club on 7 February [1996]’ on certain matters discussed at the committee meeting. Recital 284 to the contested decision cites a file note drawn up by a BAWAG employee concerning a meeting of the ‘Deposit Rates Committee’ of 25 October 1996, at which a reduction of the interest rates on capital savings accounts was discussed. According to that note, a Federal Deposit Rates Committee meeting was planned for 12 November 1996, so that it would be possible to make ‘suitable recommendations … for the … Lombard [general managers’ meeting] on 13 November 1996’. Those documents clearly indicate that the authors expected that the Lombard Club would take decisions on matters of principle concerning the points discussed at other committee meetings. 118 Third, the Commission established that the Lombard Club performed a role of arbitrator and was approached by the various groups in cases of disciplinary problems, referring in particular, in recital 166 to the contested decision, to a PSK internal memorandum which summarises an ‘exchange of experience between banks’ of 24 May 1995, according to which it was envisaged that ‘“interest rate discipline” would … be the “theme of the Lombard Club meeting in June”’ and the participants were of the opinion that better discipline could be expected only ‘if compliance with the minimum margins became a “point of honour” for the management board members’. That document shows that the Lombard Club was seen by the members of other committees as the appropriate authority for dealing with problems of ‘discipline’ regarding compliance with the agreements. 119 Fourth, recital 67 to the contested decision describes the close interlocking of the committees and their decision-making process, stating that the ‘common decision-making process went … through several committee meetings (involving mostly the Vienna [and Federal] Lending and/or Deposit Rates Committee[s], the Minilombard Committee … and the Lombard Club)’. That finding is based on two documents relating to a meeting of the Vienna Lending and Deposit Rates Committee of 30 August 1995, from which it appears that the bank representatives discussed their reaction to a reduction in the OeNB’s interest rate. A decision concerning savings and loan rates for retail business was envisaged at a later meeting on deposit and lending business on 7 September 1995, whereas the final decision on a possible adjustment of rates for corporate loans was to be taken by the Lombard Club on 13 September 1995, on the basis of a proposal drawn up at a Minilombard meeting of 8 September 1995. It is apparent from those consistent documents that the committee meetings on deposit and lending rates for retail and corporate business formed part of a common plan generally to limit competition by means of interest rates. 120 Fifth, recitals 126, 130 and 237 to the contested decision provide examples of the fact that committees sometimes held joint meetings, that the terms of reference of the groups overlapped and that the committees kept each other informed of their activities. Whilst recital 126 describes a meeting of the Controller Committee held in December 1994, recital 130, on the other hand, refers to a meeting of the Treasurer Committee of early January 1995. The invitation to that committee meeting, according to which short-term lending and deposit interest rates were to be examined, suggested that the participants who did not themselves have direct influence on the determination of their banks’ fixed-rate short-term loans should invite ‘an appropriate person responsible for key account management’ (for example, the relevant member of the Key Account Management Committee) to accompany them. Recital 237 cites a message sent by the Association of Regional Farm Mortgage Banks to its members, informing them of a Minilombard meeting of 23 April 1996 and envisaging a decision-making procedure similar to that described in paragraph 119 above. 121 Those elements, taken together, justify the Commission’s conclusion that there was an agreement in principle between all the banks participating in the cartel to eliminate price competition in relation to a wide range of retail and corporate banking services, including ‘key accounts’. The fact that the documents cited do not explicitly refer to all the banking services covered by the various meetings, or to all the committees, does not affect that conclusion. 122 Whilst it is true that the Commission also referred, in this context, to certain documents that are not relevant to its conclusion, because they do not relate to the period of the infringement or do not concern the Vienna Lombard Club (as in the case of the documents cited in recitals 66, 107 and 160 to the contested decision concerning implementation of Lombard Club decisions with regard to the various committee meetings), that fact is not capable of undermining the conclusion that the committees formed part of a comprehensive plan, pursuing a common aim. 123 It is also apparent from the documents analysed in paragraphs 114 to 121 above that the Lombard Club decisions were concerned above all with matters of principle and that they were prepared, in detail, by other committees. That division of tasks readily explains, contrary to RLB’s contention, how the general managers of the banks meeting in the Lombard Club were able to run the cartel by meeting only 11 times a year. 124 The view of BAWAG and PSK, which seek to minimise the evidential value of those documents by claiming that the role of the Lombard Club was misperceived and overestimated by the participants in the other meetings, who were in general members of middle management, must also be rejected. Some of the documents analysed above were written by or addressed to general managers of certain banks who personally attended Lombard Club meetings and therefore were perfectly apprised of the role played by it. The Commission cannot therefore be said to have exaggerated the evidential value of those documents. 125 Finally, contrary to BAWAG’s and PSK’s contention, it is clear from the documents analysed that the references to the management role of the Lombard Club in recitals 304 and 306 to the contested decision are not isolated cases. This is also confirmed by an internal CA memorandum produced by BAWAG and PSK as an annex to their applications, informing the addressees of the matters discussed at a committee meeting on deposit and lending business of 17 April 1996. That memorandum envisages the preparation of a proposal that was first to be the subject of concertation within that committee and then to be discussed and, if necessary, decided upon within the Lombard Club. 126 It follows from the foregoing that the complaints concerning the classification of the committee meetings as a single overall cartel are unfounded. C – The choice of the addressees of the contested decision (Case T‑271/02)1. Arguments of the parties127 ÖVAG and NÖ-Hypo are of the opinion that the choice of addressees of the contested decision is illegal as far as they are concerned. They do not challenge the criteria which they consider to have been relied on in making that choice, namely the frequency of participation in the main committee meetings and the size of each establishment in the Austrian banking market. They claim, however, that the application of those criteria is illegal because it is not supported by a sufficient statement of reasons, is based on incorrect factual findings and does not observe the principle of equal treatment. ÖVAG and NÖ-Hypo submit that the contested decision does not state for what reason and according to what criteria the Vienna committees and the Federal Lending and/or Deposit Rates Committees, including the Retail Lending Rates Committee and the Liberal Professions Committee, the Minilombard and the Controller Committees, were chosen as ‘the most important’. 128 They also criticise the Commission for failing to take a position, in the contested decision, on their argument that the committees’ decision-making process was determined by a ‘narrower circle’ of large banks, to which they did not belong and which, in their view, was the most important of the committees. 129 ÖVAG and NÖ-Hypo acknowledge having participated in some of the committees described in the decision as the ‘most important’, but they contend that the frequency of their participation in such committees was low and much lower not only than that of most of the other banks to which the decision was addressed but also than that of certain banks to which the decision was not addressed. 130 They state that the contested decision refers on several occasions to the participation of the banks CA, BA, RZB, Erste or GiroCredit, PSK and (less often) BAWAG in a ‘narrower banking circle’ within which representatives of the largest Austrian banks met, in particular in order to prepare for Lombard Club meetings. They claim that the concertation process properly so called was decided on by that ‘smaller circle’, to which they did not belong. According to ÖVAG and NÖ-Hypo, the addressees of the contested decision would have been completely different if the Commission had correctly qualified as ‘main committees’ the Lombard Club and, in particular, the meetings of the ‘narrower circle’, in which all the decisions were prepared. 131 ÖVAG and NÖ-Hypo also consider that their inclusion within the scope of the contested decision is not justified by the criterion of the size of the banks and that the Commission infringed the principle of equal treatment by choosing them as addressees of the contested decision. (b) Arguments of the Commission 132 The Commission states that the size of the establishments in the Austrian market was not used as a criterion and that the addressees of the contested decision were chosen solely by reference to the frequency of their participation in the main committees. It rejects the view that ÖVAG and NÖ-Hypo participated in the committee meetings much less often than most of the other addressees of the contested decision. 133 The Commission considers that it was not required to take account, for the purposes of its decision, of the existence of a smaller banking circle. It states that the only factor which determined the selection of ÖVAG and NÖ-Hypo as addressees of the decision was their frequent participation in the main committee meetings, together with the other banks, and the fact that within those meetings they reached agreement on the interest rates and conditions to be applied. In its rejoinder, it adds that, although certain members of the Lombard Club may have engaged in concerted action and exchanged information in advance, those individual instances of concertation served, however, only to prepare for concerted practices within the various committees. 2. Findings of the Court(a) The criteria applied by the Commission and the size of the establishments134 It must be observed, first of all, that the view put forward by ÖVAG and NÖ-Hypo that the size of the undertakings was adopted as a criterion to identify the addressees of the contested decision derives from a misinterpretation of recital 470 to the contested decision, which states in particular as follows: ‘The addressees of this Decision have been singled out because of the particular frequency of their participation in meetings of the major committees: the Vienna and Federal Lending and/or Deposit Rates Committees (including the Consumer Lending and Liberal Professions Lending Rates Committees), the Minilombard Committee and the Controller Committee. In addition, with the exception of NÖ-Hypo and RBW (as from July 1997 RLB), they play an important role in the Austrian banking market because of their size.’ 135 The last sentence of that recital does not refer to a criterion applied by the Commission but indicates the result, in terms of the size of the undertakings in question, of applying the only criterion used, which is that of frequent participation in the main committees. 136 Consequently, the applicants’ complaints concerning the application of the alleged criterion of the size of the undertakings are unfounded. 137 If ÖVAG and NÖ-Hypo also thereby seek to claim that the Commission should have used the size of the undertakings as a criterion for choosing addressees, such a thesis cannot be accepted. 138 According to settled case-law, the fact that a trader who was in a position similar to that of an applicant was not found by the Commission to have committed any infringement cannot in any event constitute a ground for setting aside the finding of an infringement by that applicant, provided that it was properly established (Joined Cases C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85 Ahlström Osakeyhtiö and Others v Commission [1993] ECR I‑1307, paragraph 146). 139 It follows from that case-law that the Commission is entitled to address to each undertaking against which an infringement is found a decision recording that infringement and imposing a penalty on it. Arguments based on a comparison of the situation of the addressee of such a decision with the situation of other undertakings (whether or not addressees of the same decision) cannot in any circumstances call in question the legality of the decision in so far as it finds and penalises a duly established infringement. Such arguments are not therefore relevant to the choice of ÖVAG and NÖ-Hypo as addressees of the decision. (b) The identification of the main committees The statement of reasons140 Recital 470 to the contested decision, cited in paragraph 134 above, describes as ‘the major committees’ the Vienna and Federal Lending and/or Deposit Rates Committee (including the Consumer Lending and Liberal Professions Lending Rates Committees), the Minilombard Committee and the Controller Committee. 141 The various committees are described in recital 51 to the contested decision, which indicates clearly, in relation to most of them, why particular importance is attached to them. Admittedly, the importance of the Minilombard Committee is not specifically mentioned in that recital. However, as the Commission correctly points out, it goes without saying that a committee devoted to interest rates on loans granted to commercial customers is particularly important. That importance should be evident to the banks to which the contested decision is addressed. 142 Since the Commission had set out the reasons for which it had described certain committees as particularly important, it was not required to explain in addition why it did not attribute the same importance to other committees. 143 Therefore, the complaint alleging an inadequate statement of reasons to support the choice of the ‘major committees’ is unfounded. The assessment of the importance of the committees and the ‘smaller banking circle’144 Faced with a network of agreements as complex as the one in this case, the Commission enjoyed a discretion in determining which of the various concerted practices it considered as particularly significant, and that choice can only be subject to limited review by the Court. In that connection, the Commission was entitled, without committing a manifest error, to attribute greater importance to the committees of broad scope than to regional or specialised concerted practices, the former being liable to influence the latter. The fact that those committees, described as particularly important by the Commission, involved banks established in Vienna rather than those in other cities or regions is not such as to undermine the conclusion that the choice made by the Commission was legitimate. 145 Nor did the Commission exceed the bounds of its discretion by refusing to include among the most important committees a ‘smaller banking circle’, in which the largest banks engaged in concertation with the committees. Moreover, ÖVAG and NÖ-Hypo cannot rely on the situation of other undertakings that participated in the infringement to challenge their own inclusion among the addressees of the contested decision. (c) The frequency of ÖVAG’s and NÖ-Hypo’s participation in the major committees146 As regards the frequency of the participation of ÖVAG and NÖ-Hypo in the committees, it is apparent from a table produced by the Commission as an annex to its defence, the content of which is not contested, that those two establishments participated in all the main committees. Admittedly, NÖ-Hypo’s participation in the Minilombard Committee (3 meetings out of 21) and the Controller Committee (1 meeting out of 40) appears to be of little significance. On the other hand, NÖ-Hypo participated in 14 meetings of the federal committees out of a total of 15, and in 32 of the Vienna committees out of a total of 50. As regards ÖVAG, it is apparent from that table that it was present at all the federal committee meetings, at 42 Vienna committee meetings out of a total of 50, at 17 Minilombard meetings out of a total of 21, and at 14 meetings of the Controller Committee out of a total of 40. The complaint that the Commission disregarded the frequency of participation of ÖVAG and NÖ-Hypo in the major committee meetings must therefore be rejected. (d) Conclusion147 It follows from the foregoing considerations that the complaints made by ÖVAG and NÖ-Hypo regarding the choice of addressees of the contested decision must be rejected. D – The use as evidence of documents dating back to 1994 (Case T-271/02)148 ÖVAG and NÖ-Hypo criticise the Commission for failing in its obligation to state reasons by basing certain important findings on documents pre-dating the period for which the infringement was established. They also claim that the use of those documents had an impact on the decision on fines. 149 The Commission acknowledges having referred to documents dating from 1994 to describe the general background to the cartel. It nevertheless contends that its findings concerning the infringements are based on documents dating from 1995. 2. Findings of the Court 150 The obligation to state reasons cannot be breached by the use of documents pre-dating the period covered by the contested decision. It is legitimate for the Commission to describe, in a decision imposing fines, the wider context of the unlawful conduct. 151 Moreover, ÖVAG and NÖ-Hypo state that they do not contest the content of the statement of objections. Nor do they contest the accuracy of the specific findings contained in the contested decision by alleging that they are not based on evidence dating from the relevant period 152 In those circumstances, the reference in the contested decision to documents pre-dating the period in respect of which the infringement was found cannot affect the validity of the contested decision. E – The pleas alleging that the committees had no impact on trade153 All the applicants claim that the Lombard Club committees are not caught by the prohibition contained in Article 81(1) EC because they were not capable of affecting trade between Member States. 154 In the contested decision, the Commission assessed the capability of the committees as a whole to affect trade between Member States in general. The result of that comprehensive examination, set out in recitals 442, 451 and 469 to the contested decision, may be summarised as follows: – the network created by the Lombard Club comprised a large number of closely interlinked committees and covered the whole of Austria; – it involved almost all Austrian credit establishments;– it concerned the full range of banking products and services on offer in Austria;– the anti-competitive aim of the committees is not disputed;– the cartel modified the conditions of competition throughout Austria;– it was thus liable to have an impact, on the demand side, on the conduct of undertakings and consumers with direct or indirect links to cross-border trade; – it was also liable to influence decisions of foreign banks to enter the market;– it was therefore liable appreciably to affect trade between Member States.That conclusion is illustrated, in recitals 454 to 465, by a series of examples concerning, first, the demand side, and, second, the supply side. 155 The applicants challenge that appraisal. First, they put forward certain general considerations concerning the interpretation of the criterion of cross-border trade and its application to the present case, contending in particular that the capability of the various committees to affect trade between Member States should have been examined separately for each of them. Second, they contest the examples of potential effects on trade between Member States provided by the Commission in recitals 454 to 465 to the contested decision. Third, RLB refers to the special circumstances of RBW. 2. The interpretation of the criterion of capability of affecting trade between Member States and its application to this case156 The applicants claim that the Lombard Club agreements amounted to a purely national cartel, since only Austrian credit establishments participated in it and it was concerned only with the provision of services on the Austrian national market, or indeed regional or local markets. 157 RLB invokes the principle of subsidiarity enshrined in Article 5 EC, which in its view militates against a broad interpretation of the condition in Article 81(1) EC concerning inter-State effects. It observes that the aim of maintaining undistorted competition may conflict with other objectives of economic policy, such as that of monetary stability, the resolution of these conflicts being, ultimately, an issue of a political nature. It states that, until 1986 at least, the Commission regarded agreements between banks relating solely to interest rates and authorised or approved by the national authorities as a legitimate instrument of monetary policy of the Member States. Referring to the participation of the OeNB in the committees in question, RLB claims that it is not for the Commission to impose its present view of the relationship between competition policy and monetary policy in place of the view of the Austrian banking supervisory authority in a case whose effects are not felt beyond Austrian territory. 158 All the applicants maintain that the likelihood of the various committees affecting trade between Member States must be appraised separately for each of them. In support of their view that there is no link between the committees such as to justify an overall assessment of their effects, they contend, first, that the classification of the committees as a single overall cartel is incorrect and, second, that the banking services with which the committees were concerned fall within different markets. RZB, ÖVAG and NÖ-Hypo state that if none of the agreements, considered individually, is capable of producing inter-State effects, the cross-border nature of the agreements as a whole cannot be inferred from an overall examination. BAWAG, RLB, PSK and Erste contend that no such overall effect of the agreements can be inferred from the cross-border nature of the services covered by a number of committees. Finally, RLB is of the opinion that a separate examination is necessary regarding the multilateral interbank rates dealt with in the committees concerning payments, because agreements on such matters may qualify for an exemption under Article 81(3) EC. 159 The applicants consider that it cannot be stated in general terms that a cartel covering all the territory of a Member State is liable, by its very nature, appreciably to affect trade between the Member States. They infer from the case-law (Joined Cases C-215/96 and C-216/96 Bagnasco and Others [1999] ECR I‑135) and the Commission’s previous practice (Commission Decision 1999/687/EC of 8 September 1999 relating to a proceeding under Article 81 of the EC Treaty (IV/34.010 – Nederlandse Vereniging van Banken (1991 GSA Agreement), IV/33.793 – Nederlandse Postorderbond, IV/34.234 – Verenigde Nederlandse Uitgeversbedrijven and IV/34.888 – Nederlandse Organisatie van Tijdschriften Uitgevers/Nederlandse Christelijke Radio Vereniging) (OJ 1999 L 271, p. 28; ‘the Netherlands Banks decision II’)) that that applies more particularly to agreements between credit establishments. In their view, additional circumstances (lacking in this case) are required, alongside territorial extent, before a ‘national’ cartel can be found to be of a cross-border nature. According to some of the applicants, it is necessary in that regard for the cartel to have effects involving partitioning of the market. 160 The applicants state, in that connection, that no measure designed to keep foreign competitors out of the Austrian market was either taken or considered. First, they claim that such measures were not necessary, because the banking services covered by the more important agreements (savings deposits and loans to individuals and small undertakings) were of little interest to foreign banks. In their view, that was the case, first, because the barriers to access to the market were high (in particular, the customers’ preference for local banks, language problems and the need to have a substantial network of agencies), second, because the provision of such services does not generate attractive profits and, third, because the market in those services in Austria was saturated. They also submit that foreign banks were present in the Austrian market. 161 The Commission contests those arguments The principles governing appraisal of the capability of affecting trade between Member States162 The aim of the condition relating to effects on trade between Member States contained in Article 81(1) EC is to define, in the context of the law governing competition, the boundary between the areas respectively covered by Community law and the law of the Member States. Thus, Community law covers any agreement or any practice which is capable of constituting a threat to freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market between the Member States, in particular by partitioning the national markets or by affecting the structure of competition within the common market. On the other hand, conduct the effects of which are confined to the territory of a single Member State is governed by the national legal order (Case 22/78 Hugin v Commission [1979] ECR 1869, paragraph 17). 163 According to settled case-law, in order for an agreement between undertakings to be able to affect trade between Member States, it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or fact that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States, in a manner which might harm the attainment of the objectives of a single market between States (Case 42/84 Remia and Others v Commission [1985] ECR 2545, paragraph 22). The effect on intra-Community trade is therefore normally the result of a combination of several factors which, taken separately, are not necessarily decisive (Case C-250/92 DLG [1994] ECR I‑5641, paragraph 54; Bagnasco and Others, cited in paragraph 159 above, paragraph 47; and Case C-359/01 P British Sugar v Commission [2004] ECR I‑4933, paragraph 27). 164 It is of little importance in that regard that the influence of a cartel on trade is unfavourable, neutral or favourable. A restriction of competition is liable to affect trade between Member States when it is likely to divert trade patterns from the course which they would otherwise have followed (Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 172). Therefore, the argument put forward by certain of the applicants in this case, to the effect that only the effects of partitioning of the markets may be taken into consideration in concluding that a cartel is capable of affecting trade between Member States, must be rejected. 165 That broad interpretation of the criterion of the capability of affecting trade between Member States is not contrary to the principle of subsidiarity invoked by RLB. As the Commission has rightly pointed out, the Treaty provides that any conflicts between maintaining undistorted competition and other legitimate objectives of economic policy are to be resolved by the application of Article 81(3) EC. That provision may therefore be regarded as a special provision giving effect to the principle of subsidiarity in the sphere of cartels. That principle cannot therefore be invoked in order to restrict the scope of Article 81 EC (see, to that effect, Case T-65/98 Van den Bergh Foods v Commission [2003] ECR II‑4653, paragraph 197). 166 Next, it must be emphasised that the capability of a cartel to affect trade between Member States, that is to say its potential effect, is sufficient for it to fall within the scope of Article 81 EC and that it is not necessary to demonstrate an actual effect on trade (Bagnasco and Others, cited in paragraph 159 above, paragraph 48, and Case C-219/95 P Ferriere Nord v Commission [1997] ECR I‑4411, paragraph 19). The fact that in this case a past infringement was examined after the event is not such as to change that criterion, a potential effect on trade also being sufficient in such a case. Consequently, the arguments put forward by Erste, ÖVAG and NÖ-Hypo to the effect that the absence of any effect of the agreements on the market should have been taken into consideration as indicating that they could not affect trade between Member States must be rejected. 167 It is nevertheless necessary for the potential effect of the cartel on inter-State trade to be appreciable, or, in other words, that it be not insignificant (Case C-306/96 Javico [1998] ECR I‑1983, paragraphs 12 to 17; Case T-213/00 CMA CGM and Others v Commission [2003] ECR II‑913, ‘FETTCSA’, paragraph 207). Overall examination of the cross-border effect of the committees168 As regards the question whether in this case the Commission was entitled to make an overall assessment of that potential impact for all the concerted practices taking place within the Lombard network committees, it is clear from the case-law that the effect on trade between Member States of agreements between which a direct link exists and which form an integral part of a whole must be examined together, whereas agreements between which there is no direct link and which concern separate activities must be examined separately (Case T-77/94 VGB and Others v Commission [1997] ECR II‑759, paragraphs 126, 142 and 143). 169 Contrary to the contentions of ÖVAG and NÖ-Hypo, the question whether there are uniform contractual arrangements relating to straightforward products of the same kind and of which the importance for inter-State trade is clear is not decisive. 170 A link justifying and necessitating an overall examination of the capability of affecting trade between Member States exists in particular between agreements or other types of conduct amounting to a single infringement. As is apparent from paragraphs 111 to 125 of this judgment, the Commission was legally entitled to conclude that the concerted practices within the various Lombard Club committees were part of a single infringement in that they were elements of an overall plan designed to distort competition. 171 The applicants cannot deduce from the fact that, in Bagnasco and Others, cited in paragraph 159 above, the Court of Justice carried out a separate examination of the clauses relating to two separate banking operations, contained in standard banking conditions applied by the members of the Association of Italian Banks, that a general rule exists, prohibiting an overall examination of the capability of the agreements at issue in this case to affect trade between Member States. In the Bagnasco and Others case, the Court was called on to give a preliminary ruling on the compatibility of those clauses with Article 85 of the EC Treaty (now Article 81 EC). It found that, in the case of one of the operations concerned, the standard banking conditions did not have the object or effect of restricting competition, whereas the clauses relating to the other operation were not liable to affect trade between Member States. In that case, the question of an overall examination of the cross-border effects of the banking conditions, of which those clauses formed part, did not therefore arise. 172 As regards the argument put forward by BA-CA, BAWAG, PSK, Erste, ÖVAG and NÖ-Hypo that the Commission disregarded the fact that the various banking products with which the committees were concerned fell within separate markets, and that their capability of affecting trade between Member States should be examined separately in relation to each of those markets, it must be borne in mind, first, that the definition of the relevant market differs according to whether Article 81 EC or Article 82 EC is to be applied. In the context of the application of Article 81 EC, the reason for defining the relevant market is to determine whether the agreement, the decision by an association of undertakings or the concerted practice at issue is liable to affect trade between Member States and has as its object or effect the prevention, restriction or distortion of competition within the common market. That is why, for the purposes of Article 81(1) EC, the objections to the definition of the market adopted by the Commission cannot be seen in isolation from those concerning the impact on trade between Member States and the impairing of competition. Thus, the objection to the definition of the relevant market is of no consequence provided that the Commission has rightly concluded, on the basis of the documents referred to in the contested decision, that the agreement in question distorted competition and was liable to have an appreciable effect on trade between Member States (Case T-61/99 Adriatica di Navigazione v Commission [2003] ECR II‑5349, paragraph 27). In this case, the complaint concerning definition of the markets is an objection to the method adopted by the Commission in assessing the effect on trade, so that it cannot be rejected, from the outset, as being of no consequence. 173 According to the case-law, the relevant market comprises the totality of the products which, with respect to their characteristics, are particularly suitable for satisfying constant needs and are only to a limited extent interchangeable with other products (Case 322/81 Michelin v Commission [1983] ECR 3461, paragraph 37). 174 In the present case, the various banking services covered by the agreements cannot be substituted for each other. However, most customers of universal banks call for a set of banking services, such as deposits, loans and payment operations, and competition between those banks is liable to relate to all those services. A narrow definition of the relevant market would therefore be artificial in that business sector. Moreover, a separate examination would not make it possible fully to appreciate the effects of agreements which, although relating to products or services and customers (retail or corporate) that are different, nevertheless fall within the same business sector. The effect on trade between Member States may be indirect, and the market on which it is liable to arise is not necessarily the same as the market for the products or services of which the prices are fixed by the cartel (Case 123/83 BNIC [1985] ECR 391, paragraph 29, and Ahlström Osakeyhtiöand Others v Commission, cited in paragraph 138 above, paragraph 142). As the Commission rightly pointed out in recitals 456 to 459 to the contested decision, the fixing of prices for a wide range of retail and corporate banking services is liable, as a whole, to have repercussions on other markets. 175 Consequently, the Commission was not required to examine separately the markets for the various banking products covered by the committees in assessing the effects on trade between Member States in this case (see, by analogy, Case T-29/92 SPO and Others v Commission [1995] ECR II‑289, paragraphs 76 to 83, in which the relevant market was taken to be the construction market in the Netherlands). 176 Next, there is no basis for the argument put forward by RLB that the capability of affecting trade between Member States of the agreements on interbank rates dealt with by the committees on international payments must be examined separately from the other agreements, because those agreements might qualify for an exemption under Article 81(3) EC. First, RLB does not claim that any exemption was requested for such agreements. Next, it is clear from Case 193/83 Windsurfing International v Commission [1986] ECR 611, paragraphs 96 and 97, that the fact that certain clauses of an agreement do not have the object or effect of restricting competition does not preclude an overall examination of the agreement. With greater reason, that applies where certain agreements within a single cartel might qualify for an exemption. 177 It follows that the Commission may take account of the potential cumulative effect of all the committees in order to determine whether the cartel as a whole is capable of affecting trade between Member States (VGB and Others v Commission, cited in paragraph 168 above, paragraph 140). On the other hand, the question whether each of the committees in isolation is capable of affecting trade between Member States is not relevant (see, by analogy, Windsurfing International v Commission, cited in paragraph 176 above, paragraph 96). It also follows that it is unnecessary to establish that any one or other of the various committees, in isolation, is liable to affect trade between Member States for it to be found that the cartel as a whole is capable of so doing. 178 Therefore, the capability of the committees to affect inter-State trade does not presuppose that any particular concerted practice involved services of a cross-border nature. The argument that the Commission cannot, on the basis of an overall examination, infer that the cartel had a cross-border effect deriving from the cross-border effect of a number of committees of very little importance, as compared with the agreements as a whole, is therefore irrelevant. The capability of a cartel covering the entire territory of a Member State to affect trade between Member States 179 It is not disputed that the overall cartel found by the Commission in this case covered the whole of Austrian territory.180 According to settled case-law of the Court of Justice and of the Court of First Instance, an agreement extending over the whole of the territory of a Member State by its very nature has the effect of reinforcing the compartmentalisation of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about (Case 8/72 Vereeniging van Cementhandelaren v Commission [1972] ECR 977, paragraph 29; Remia and Others v Commission, cited in paragraph 163 above, paragraph 22; Case C‑35/96 Commission v Italy [1998] ECR I-3851, paragraph 48; and Case C-309/99 Wouters and Others [2002] ECR I‑1577, paragraph 95; see also Case T‑62/98 Volkswagen v Commission [2000] ECR II-2707, paragraph 179). Moreover, it has been held that a State measure approving a scale of lawyers’ fees, covering the whole territory of a Member State, was capable of affecting trade between Member States within the meaning of Article 81(1) EC (see, to that effect, Case C-35/99 Arduino [2002] ECR I‑1529, paragraph 33). 181 It follows from that case-law that there is, at least, a strong presumption that a practice restrictive of competition applied throughout the territory of a Member State is liable to contribute to compartmentalisation of the markets and to affect intra-Community trade. That presumption can only be rebutted if an analysis of the characteristics of the agreement and its economic context demonstrates the contrary. 182 In that connection, with regard to the banking sector, it is clear from Bagnasco and Others, cited in paragraph 159 above, paragraphs 51 to 53, that there may be agreements covering the entire territory of a Member State which do not have an appreciable effect on trade between Member States. Moreover, the Commission took a similar approach in the Netherlands Banks decision II (cited in paragraph 159 above, recital 61). 183 The complex infringement at issue in the present case differs, however, from the agreements covered by the judgment and the decision mentioned in the foregoing paragraph which each concerned a specific banking operation (on the one hand, a general guarantee for the granting of a loan on current account and, on the other, acceptance giros). The concerted practices within the Lombard network involved not only almost all the credit establishments in Austria but also a wide range of banking products and services, in particular deposits and loans and, therefore, they were capable of changing the conditions of competition throughout that Member State. 184 In those circumstances, the argument that the members of the cartel did not take measures to exclude foreign competitors from the market provides no basis for concluding that there was no cross-border effect. 185 The Lombard network may have contributed to maintenance of the barriers to access to the market described by the applicants (see paragraph 160 above), in that it facilitated retention of structures in the Austrian banking market, the inefficiency of which was admitted by BA-CA itself, and of the corresponding habits on the part of customers. 186 Therefore, the applicants have not rebutted the presumption that, considered as a whole, the cartel, which operated throughout Austria, had the effect of compartmentalising markets and was liable to affect inter-State trade. (c) Conclusion187 Since the Commission legitimately inferred in this case that, because it covered the entire territory of a Member State, the overall cartel was liable to affect trade between the Member States, the applicants’ complaints concerning the examples given in the contested decision are unfounded. 3. The particular case of RLB (Case T-262/02) (a) Arguments of the parties 188 RLB observes that RBW, whose conduct is imputed to it, did not participate in most of the committees and that those in which it did participate had no connection with cross-border operations. It is of the opinion that RBW cannot be criticised for participating in a cartel that covered without distinction the whole range of banking products and that the capability of trade between Member States being affected must therefore be examined separately for the committees in which RBW participated. (b) Findings of the Court 189 In order to establish the participation of an undertaking in a single agreement, the Commission must prove that the undertaking intended to contribute by its own conduct to the common objectives pursued by all the participants and that it was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and that it was prepared to take the risk (Aalborg Portlandand Others v Commission, cited in paragraph 111 above, paragraph 83; Case C-49/92 P Commission v Anic Partecipazioni [1999] ECR I‑4125, paragraph 87; and Joined Cases C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P Dansk Rørindustriand Others v Commission [2005] ECR I‑5425, paragraph 145). 190 RLB admits that RBW participated in the committees on deposit and lending rates both at federal level and in Vienna, that is to say in the most important committees dealing with lending and deposit conditions (see paragraphs 140 and 144 above). The Commission found, in recital 51(b) to the contested decision, that those committees maintained particularly close relations with the Lombard Club, which RLB does not contest. 191 RBW could not therefore have been unaware that the committees in which it participated formed part of a wider set of agreements and that its participation in the concerted practices on deposit and lending conditions contributed to the pursuit of the cartel’s objectives as a whole. Given that the committees on lending and deposit rates were particularly important for the cartel as a whole, RBW, by reason of its participation in those committees, was aware of the most significant types of actual conduct planned or put into effect by the other banks in pursuit of the objectives of the cartel, namely coordination of the conditions for deposits and lending. 192 RLB places particular emphasis on RBW’s absence from the committees dealing with cross-border operations. However, the fact that an undertaking has not taken part in all aspects of a cartel or that it has played only a minor role in the aspects in which it did participate is not material to the establishment of the existence of an infringement on its part. Those factors must be taken into consideration only when the gravity of the infringement is assessed and if and when it comes to determining the fine (see, to that effect, Commission v Anic Partecipazioni, cited in paragraph 189 above, paragraph 90, and Aalborg Portlandand Others v Commission, cited in paragraph 111 above, paragraph 86). 193 Similarly, neither the fact that RBW was not familiar with the detail of the concerted practices taking place within numerous committees in which it did not participate nor the fact that it was unaware of the existence of certain committees, such as those concerning cross-border operations, if their existence is established, can detract from the Commission’s finding that it participated in the cartel as a whole. Because of its participation in the Federal Lending Rates and Deposit Rates Committees, RBW could not have been unaware of the general scope and the essential characteristics of the cartel as a whole. 194 The Commission therefore rightly concluded that RBW had participated in the cartel as a whole and not only in certain isolated agreements. It follows that it was right to conclude that RBW’s conduct was caught by Article 81 EC. 195 Moreover, as is apparent from paragraph 178 above, the fact that the cartel as a whole related to, among other things, certain cross-border operations is not decisive for the purpose of concluding that it was capable of affecting trade between Member States, the agreements on lending and deposit conditions which were at the centre of the cartel and in which RBW participated being far more important in that regard. 196 It must also be stated that, since the Commission has established to the requisite legal standard that the infringement of Article 81(1) EC in which an undertaking participated was apt to affect trade between Member States, it is not necessary for it to demonstrate that the individual participation of that undertaking affected trade between Member States (Case T-13/89 ICI v Commission [1992] ECR II‑1021, paragraph 305). 197 Therefore, RLB’s complaint concerning the limited participation of RBW in the committees must be rejected.II – The claims for annulment of Article 2 of the contested decision (Cases T-259/02, T-264/02 and T-271/02)A – Arguments of the applicants198 RZB, Erste, ÖVAG and NÖ-Hypo seek annulment of the order to bring the infringement to an end, addressed to the banks in Article 2 of the contested decision. In their view, that order is unlawful because it is accepted that the banks had already brought the infringement to an end by the date of the investigations, in June 1998. B – Findings of the Court199 The Commission enjoys a wide discretion when deciding whether it is necessary, in carrying out its task of ensuring compliance with the competition rules, to adopt measures under Article 3(1) of Regulation No 17. Therefore, the existence of a lingering doubt as to the actual cessation of an infringement is sufficient for it to be able legally to order the undertakings to bring the infringement to an end. 200 The claims made by RZB, Erste, ÖVAG and NÖ-Hypo that Article 2 of the contested decision should be annulled are therefore unfounded. III – The claims for annulment of Article 3 of the contested decision A – Lack of fault (Cases T-261/02 to T-264/02 and T-271/02)201 BAWAG, RLB, PSK, Erste, ÖVAG and NÖ-Hypo are of the opinion that the Commission infringed Article 15(2) of Regulation No 17 by imposing a fine on them, because the infringement of Article 81 EC alleged against them, if substantiated, was not committed either intentionally or negligently. They maintain above all that no fault can be attributed to them regarding the capability of the agreements to affect trade between Member States. 202 BAWAG, PSK, Erste, ÖVAG and NÖ-Hypo claim that the matters indicated in recitals 29 to 50 to the contested decision do not show that the Austrian banks were aware of the incompatibility of the committees with Article 81 EC. BAWAG, PSK, ÖVAG and NÖ-Hypo also invoke the Austrian law applicable to cartels at that time, according to which ‘behavioural cartels’ (Verhaltenskartelle), being agreements that are not binding on the parties, were lawful in Austria until 1 January 2000, unless they had been prohibited by a court of competent jurisdiction. ÖVAG and NÖ-Hypo also refer to the public nature of the committees and the participation therein of the public authorities. 203 RLB submits that the question of fault depends not on knowledge of the prohibition of the cartels but on knowledge of the facts which render that prohibition applicable to the case in question, and that such knowledge was lacking in the case of RBW (whose conduct is attributed to it), because of the latter’s geographically limited activities. At the hearing, it stated that only one person participated in the committees on behalf of RBW and that, at the time of the infringement, RBW did not have an internal legal department. BAWAG, ÖVAG and NÖ-Hypo also emphasise the regional nature of their activities and the minor role of cross-border transactions in that context. 204 The Commission contests those arguments.205 According to settled case-law, it is not necessary for an undertaking to have been aware that it was infringing the competition rules for an infringement to be regarded as having been committed intentionally; it is sufficient that it could not have been unaware that its conduct had as its object the restriction of competition in the common market (Case T-61/89 Dansk Pelsdyravlerforening v Commission [1992] ECR II‑1931, paragraph 157; SPO and Others v Commission, cited in paragraph 175 above, paragraph 356; and Case T-347/94 Mayr-Melnhof v Commission [1998] ECR II‑1751, ‘Mayr-Melnhof’, paragraph 375). 206 In that regard, whether or not the applicants were aware of the interpretation of the cross-border criterion adopted by the Commission or the case-law is not decisive; what is important is whether they knew of the circumstances specifically giving rise to the capability of the cartel to affect trade between Member States or, at least, whether they could not have been unaware of them. 207 All the applicants knew, through their participation in the main committees, that the Lombard Club network covered the whole territory of Austria and a very wide range of important banking services, in particular loans and deposits. They were therefore aware of the essential facts giving rise in this case to an effect on trade between Member States. 208 On the other hand, as observed in paragraph 178 above, the fact that certain agreements, of minor importance compared with the cartel as a whole, were concerned with cross-border operations is neither essential nor, of itself, sufficient for a finding that the cartel as a whole was capable of affecting trade between Member States. Nor is it decisive whether all the banks were apprised of the fact that the agreements related, among other things, to cross-border operations. 209 It is not therefore appropriate in the present context to ascertain to what extent the applicants were aware of the incompatibility of their conduct with Article 81 EC. Similarly, the fact that under Austrian law certain cartels were not automatically prohibited but could be prohibited, in response to an application, by a court of competent jurisdiction (if it were assumed that the Lombard Club agreements formed part of those arrangements) has no impact on the intentional nature of the infringement of Article 81 EC (see, to that effect, Mayr-Melnhof, cited in paragraph 205 above, paragraphs 373 to 376). Finally, the arguments based on the public nature of the meetings and the participation therein of the national authorities does not affect either the intention to restrict competition or the knowledge of the circumstances giving rise to the capability of the agreement to affect trade between Member States. 210 As regards, more particularly, Case T-262/02, RBW’s participation in more than 80% of the Vienna committees and more than 90% of the Federal Lending Rates and Deposit Rates Committees shows that its representative could not have been unaware that the concerted practices concerning those operations were not limited to Vienna but covered a large part or even the whole of Austria. Therefore, regardless of whether the RBW executives were kept informed of the concerted practices within the Lombard network concerning other banking operations, it must be stated that RBW was aware of the essential facts giving rise to the effect of the cartel in which it participated on trade between Member States. 211 Therefore, the complaint that the infringement was not committed intentionally must be rejected. The applicants’ arguments purporting to show the lack of any negligence are therefore irrelevant. B – The possibility of an exemption for the agreements (Cases T-262/02 and T-271/02)212 RLB, ÖVAG and NÖ-Hypo claim that the Commission does not usually impose fines where the agreements in question are capable of being granted an exemption under Article 81(3) EC. They are of the opinion that the agreements in question fall within that case. RLB refers to Article 4(2)(1) of Regulation No 17 which, in its view, implies that there is a presumption of legality and would have enabled the Commission, in this case, to grant a retroactive exemption. ÖVAG and NÖ-Hypo claim in particular that the agreements in question were designed to offer Austrian consumers the whole range of best-quality banking services at affordable prices and that some of them, concerning the determination of interbank commissions might have qualified for an exemption. 213 This plea cannot be upheld, given that the agreements in question were not notified. Notification is not a mere formality imposed on undertakings but an indispensable condition for obtaining certain benefits. Under the terms of Article 15(5)(a) of Regulation No 17, no fine may be imposed in respect of acts taking place after notification, provided they fall within the limits of the activity described in the notification. That advantage enjoyed by an undertaking which notifies an agreement or a concerted practice is the counterpart of the risk incurred by the undertaking in itself reporting the agreement or concerted practice. That undertaking in fact takes the risk not only of having the agreement or practice found to be in breach of Article 81(1) EC and of having the application of paragraph 3 refused but also of being punished by a fine for acts prior to notification. A fortiori, an undertaking which did not wish to run that risk cannot claim, on being fined for an infringement in respect of an agreement which was not notified, that there was a hypothetical possibility that notification might have led to an exemption (Joined Cases 100/80 to 103/80 Musique Diffusion française and Others v Commission [1983] ECR 1825, ‘MDF’, paragraph 93). 214 In any event, the applicants have not demonstrated that the network of agreements in this case fulfilled the conditions for the grant of an exemption. C – Conclusion215 The pleas seeking annulment of Article 3 of the contested decision are therefore unfounded.IV – The claims for reduction of the fines imposedA – Preliminary observations216 Under Article 15(2) of Regulation No 17, the Commission imposed fines on all the applicants. It is apparent from recitals 502 to 542 to the contested decision that – even though the contested decision does not refer explicitly thereto, save in recital 529 concerning mitigating circumstances and, in relation to an argument put forward by the banks, in footnote 519 – the Commission decided to calculate the amount of the fines in accordance with the methodology set out in the Guidelines. Moreover, the Commission reduced those amounts by 10% in accordance with the Leniency Notice. 1. The applicability of the Guidelines and the Leniency Notice (a) The alleged breach of the principle of non-retroactivity (Case T‑264/02)217 Erste takes exception to the method followed in calculating the fines on the ground that the Commission, by applying guidelines adopted after the cessation of the infringement and by having again made its practice more stringent during autumn 2001, breached the principle of non-retroactivity upheld by Article 7 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950, and Article 49 of the Charter of Fundamental Rights of the European Union, proclaimed on 7 December 2000 in Nice (OJ 2000 C 364, p. 1). 218 As held by the Court in its judgment in Dansk Rørindustriand Others v Commission, cited in paragraph 189 above, paragraphs 202 to 232, that plea must be rejected, given that the Guidelines and, in particular, the new method of calculating fines which they incorporate, even if it is accepted they had an aggravating effect on the level of fines imposed, were reasonably foreseeable by undertakings such as the applicants when the infringements in question were committed. (b) The relevance of the Guidelines and the Leniency Notice to judicial review of the contested decision219 The Guidelines are an instrument designed to clarify, in compliance with superior rules of law, the criteria that the Commission intends applying when exercising the discretion conferred on it by Article 15(2) of Regulation No 17 for the purpose of setting fines. 220 In setting out in the Guidelines the method which it proposed to apply when calculating fines imposed under Article 15(2) of Regulation No 17, the Commission remained within the legal framework laid down by that provision and did not exceed the discretion conferred on it by the legislature (Dansk Rørindustriand Others v Commission, cited in paragraph 189 above, paragraph 252). 221 Although rules of that kind designed to produce external effects cannot be classified as rules of law by which the administration is bound in all cases, they nevertheless set out rules of conduct that indicate the practice to be followed and from which the administration cannot depart, in a particular case, without giving reasons that are compatible with the principle of equal treatment. 222 By adopting such rules of conduct and announcing, by publishing them, that it will henceforth apply them to the cases to which they relate, the Commission imposes a limit on the exercise of its discretion and cannot depart from those rules if it wishes to avoid a finding, if it be the case, that it is in breach of the general principles of law, such as equal treatment or the protection of legitimate expectations. 223 Even though the Guidelines do not therefore constitute the legal basis of the contested decision – which is based on Articles 3 and 15(2) of Regulation No 17 – they none the less determine, generally and abstractly, the method which the Commission has bound itself to use in setting the amount of fines imposed by the decision and, consequently, ensure legal certainty on the part of the undertakings (Dansk Rørindustriand Others v Commission, cited in paragraph 189 above, paragraphs 209 to 213). 224 The limitation which the Commission has imposed on its discretion by adopting the Guidelines is not, however, incompatible with the retention of a considerable degree of discretion (Case T-44/00 Mannesmannröhren-Werke v Commission [2004] ECR II‑2223, paragraphs 246, 274 and 275). The Guidelines display flexibility in a number of ways, enabling the Commission to exercise its discretion in accordance with Article 15 of Regulation No 17, as interpreted by the Court of Justice (Dansk Rørindustriand Others v Commission, cited in paragraph 189 above, paragraph 267). 225 Like the Guidelines, the Leniency Notice has created legitimate expectations on which undertakings rely, so that the Commission is obliged to comply with it when assessing the latter’s cooperation for the purpose of setting the fine (Case T-23/99 LR AF 1998 v Commission [2002] ECR II‑1705, paragraph 360). 226 It therefore falls to the Court of First Instance, in reviewing the legality of the contested decision, to verify whether the Commission exercised its discretion in accordance with the method set out in the Guidelines and the Leniency Notice and, to the extent to which it establishes any departure therefrom, to verify whether that departure is legally justified and supported by a statement of reasons to the requisite legal standard. 227 However, the Commission’s discretion and the self-imposed limits on it do not prejudge the exercise, by the Community judicature, of its unlimited jurisdiction. 2. The applicants’ complaints228 With the exception of RLB (Case T-262/02), all the applicants contest the amount of their fines. First, they claim that it was wrong to classify the infringement as ‘very serious’ (see Section B below). Second, several applicants contest the legality of dividing the addressees of the contested decision into categories and determining the starting amounts by reference to their market shares (see Section C below). Third, RZB (Case T‑259/02), BAWAG (Case T‑261/02) and PSK (Case T‑263/02) criticise the assessment of the duration of the infringement (see Section D below). Fourth, the applicants claim various mitigating circumstances (see Section E below). Fifth, they claim that the Commission failed to observe the Leniency Notice (see Section F below). Sixth, and finally, ÖVAG and NÖ-Hypo (Case T-271/02) claim that their fine should be reduced on account of the breach of certain procedural rules (see Section G below). 229 The arguments put forward by the applicants in contesting the assessment of the gravity of the infringement and those relating to mitigating circumstances overlap to some extent, and the way in which those arguments are arranged and the pleas set out display certain differences from one case to another. 230 In order to decide on the appropriate framework for consideration of those arguments, a reference to the scheme of the Guidelines is necessary. 231 Whilst Article 15(2) of Regulation No 17 mentions only the two criteria of the gravity and the duration of the infringement, the Guidelines first provide for assessment of the gravity of the infringement as such, on the basis of which a ‘general starting amount’ may be set. Second, gravity is analysed in relation to the characteristics of the undertaking concerned, in particular its size and its position in the relevant market, which may give rise to the application of a weighting to the starting amount, the classification of undertakings into categories and the setting of a ‘specific starting amount’ (see, to that effect, Case T-224/00 Archer Daniels Midland andArcher Daniels Midland Ingredients v Commission [2003] ECR II‑2597, ‘ADM’, paragraphs 45 to 47). Third, the duration of the infringement is taken into account in determining the basic amount and, fourth, the Guidelines provide for aggravating or mitigating circumstances to be taken into account to assess, in particular, the relative gravity of the participation of each of the undertakings concerned in the infringement (ADM, paragraph 260). 232 Thus, the assessment of the gravity of the infringement as such depends in particular on the capability of the unlawful conduct to undermine the objectives of the Treaty (MDF, cited in paragraph 213 above, paragraph 107), regardless of the contribution made by each undertaking and its individual culpability, whereas the aggravating or mitigating circumstances relate, as demonstrated by the examples given in the Guidelines, to the reprehensible nature of the individual conduct of the undertaking concerned. 233 A distinction must therefore be drawn between, first, the factors liable to influence the potential capability of the infringement adversely to affect undistorted competition and the other objectives of the Treaty, which will be analysed in the context of the assessment of the gravity of the infringement, and, second, the factors relating to the individual conduct of the addressees of the contested decision, which will be examined in the context of mitigating circumstances. Certain matters relied on by the applicants will nevertheless have to be examined in the light of both those aspects. B – The classification of the infringement as ‘very serious’1. General considerations on the assessment of gravity234 With regard to the assessment of the gravity of infringements as such, the Guidelines state as follows: ‘In assessing the gravity of the infringement, account must be taken of its nature, its actual impact on the market, where this can be measured, and the size of the relevant geographic market. Infringements will thus be put into one of three categories: minor infringements, serious infringements and very serious infringements.’235 First, the applicants claim that the infringement cannot, by its nature, be classified as very serious and criticise the Commission for failing to take account of the historical context of the cartel. Second, they maintain that the agreements had no actual impact on the market. Third, they refer to the smallness of the relevant geographic market. Fourth, RZB considers that the selective character of the action taken by the Commission means that the infringement cannot be classified as ‘very serious’. 236 Before those complaints are examined, it is necessary to set out a number of preliminary considerations concerning the relationship between the three aspects of the assessment of the gravity of the infringement which are to be taken into account under the Guidelines. 237 First, the fact that, in the Guidelines, the Commission set out its approach to assessment of the gravity of an infringement does not prevent it from assessing infringements as a whole by reference to all the relevant circumstances of the case, including factors that are not expressly mentioned in the Guidelines. 238 According to the case-law of the Court of Justice, in fixing the amount of fines regard must be had to the duration of the infringement and to all the factors capable of affecting the assessment of the gravity of the infringement (MDF, cited in paragraph 213 above, paragraph 129). The gravity of infringements must be assessed in the light of numerous factors, such as the particular circumstances of the case, its context and the dissuasive effect of fines, although no binding or exhaustive list of the criteria to be applied has been drawn up (Dansk Rørindustriand Others v Commission, cited in paragraph 189 above, paragraphs 240 and 241). 239 In that connection, it is in particular the assessment of the nature of the infringement which enables account to be taken of various relevant factors, which the Guidelines could not list exhaustively and which include the potential impact (as opposed to the actual and measurable impact) of the infringement on the market. 240 Next, it should be observed that the three abovementioned aspects of the assessment of the gravity of the infringement do not carry the same weight in the context of an overall examination. The nature of the infringement plays a major role, in particular, in characterising ‘very serious’ infringements. In that regard, it is clear from the description of very serious infringements given in the Guidelines that agreements or concerted practices designed in particular, as in this case, to set prices may, on the basis of their nature alone, be classified as ‘very serious’, without there being any need to characterise such conduct by reference to a particular impact or geographic area. That conclusion is corroborated by the fact that, whilst the description of serious infringements expressly mentions their impact on the market and their effects on extensive areas of the common market, that of very serious infringements, on the other hand, does not mention any requirement as to the actual market impact or the effects produced in a particular geographic area (Joined Cases T-49/02 to T-51/02 Brasserie nationale and Others v Commission [2005] ECR II‑3033, paragraph 178). 241 Moreover, there is an interdependence between the three criteria in that a high degree of seriousness in the light of one or other of the criteria may offset the lesser gravity of the infringement in other respects. 2. The nature and context of the infringement242 First, with regard to the nature of the infringement, BAWAG, PSK and Erste (Cases T‑261/02, T-263/02, T-264/02) maintain that, according to Commission decision-making practice, horizontal agreements on prices are typically classified as ‘very serious’ infringements when they are accompanied by other restrictions, such as partitioning of the markets. BAWAG and PSK claim that the fact that the cartel covered numerous banking products is not relevant to the assessment of its gravity because gravity depends on the damage caused by the cartel and not its extent. In their view, the participation of all the large Austrian banks in the infringement is likewise not sufficient to warrant the classification of very serious, in so far as the participation of undertakings representing almost all the European market would be required for that to be the case. 243 The banks also state that the infringement attributed to them was not a traditional, secret cartel, created for anti-competitive purposes and designed to yield monopolistic profits and adversely affect consumers. According to ÖVAG and NÖ-Hypo, the true nature of the committees was closer to a (possibly illegal) information exchange than a typical cartel pure and simple. 244 Next, with regard to the context of the infringement, the applicants first criticise the Commission for ignoring the fact that the origin of the agreements was legal, in that they were created by the State for the purposes of economic orientation, in accordance, according to RZB, ÖVAG and NÖ-Hypo, with the Austrian tradition that the State, in order to achieve its objectives in the public interest, relies on cooperation both between undertakings and with the social partners. The applicants consider that it is necessary to draw a distinction between the situation of undertakings which create a secret and institutionalised cartel for anti-competitive purposes and their own situation, characterised by the fact that they simply failed to abandon in due time a practice which was previously legal. RZB and Erste refer to the particular features of the banking market, in particular the State’s interest in ensuring stability in that sector, which are the reason for extensive intervention by the public authorities and mitigate the gravity of the infringement. BAWAG and PSK also state that the agreements were a unique historical phenomenon which is not likely to be repeated, so that a heavy fine is not necessary in this case to ensure a deterrent effect. 245 Second, BA-CA, ÖVAG and NÖ-Hypo claim that, even after the accession of Austria to the Community, cartels of the kind represented by the committees were not prohibited by Austrian competition law, which favoured non-binding ‘behavioural cartels’. 246 Third, the applicants refer to the influence of the State authorities, in particular the OeNB, the Wirtschaftskammer (Austrian Chamber of the Economy) and the Ministry of Finance, within the committees. They emphasise that the State authorities participated actively in the committees, expressing disfavour in particular concerning the fierce competition between banks. BA-CA claims that the role of the OeNB was much more important than is indicated in recital 374 to the contested decision and that the OeNB brought pressure to bear on the banks to modify their trading conditions. 247 Fourth, the applicants consider that the institutionalised nature of the cartel is accounted for by the legal origin of the meetings and therefore adds nothing to the gravity of the infringement. BAWAG and PSK also observe that the meetings were to a considerable extent devoted to matters that were neutral as regards competition law. 248 Fifth, Erste refers to the recent accession of Austria to the European Union.249 As regards, first, the nature of the infringement, the Commission rightly emphasised, in recital 506 to the contested decision and in footnote 514, that horizontal price agreements constitute very serious infringements, even in the absence of other restrictions on competition such as partitioning of the market (ADM, cited in paragraph 231 above, paragraphs 117 to 126; see also SPO and Others v Commission, cited in paragraph 175 above, paragraph 377). 250 In this case, the ‘very serious’ nature of the infringement is exacerbated in particular, as rightly pointed out in recital 506 to the contested decision, by the importance of the banking sector to the economy as a whole and by the breadth of the agreements, which covered a wide range of important banking products and involved the participation of the vast majority of the economic operators in the relevant market, including the largest undertakings. The gravity of an infringement by reason of its nature depends above all on the danger that it represents to undistorted competition. In that regard, the breadth of a price agreement, as regards both the products concerned and the undertakings involved, plays a decisive role. In any event, the applicants’ view that only infringements involving the participation of almost all the undertakings in the European market may be classified as very serious is unfounded (see also paragraphs 307 and 313 below regarding the importance of the extent of the relevant geographic market). 251 The view put forward by the banks that the cartel had no anti-competitive aim conflicts with the very nature of the agreements, whose purpose was to restrict or indeed eliminate price competition. The same applies to the submission by ÖVAG and NÖ-Hypo that the infringement should be classified as an information exchange rather than a price cartel. 252 As regards the argument that the cartel was not secret, it must be pointed out that the contested decision does not rely on the secrecy of the agreements to justify the classification of the infringement as very serious (see recitals 505 to 514). Admittedly, the Commission refers, in its defence pleadings, to the Leniency Notice, Section A.1 of which states that ‘[s]ecret cartels between enterprises aimed at fixing prices … are among the most serious restrictions of competition’. However, that reference forms part of an argument to demonstrate the ‘very serious’ nature of horizontal price agreements, which is clearly apparent from the reference that follows to the Guidelines, which make it clear that the category of very serious infringements essentially comprises ‘horizontal restrictions such as price cartels’, without mentioning the secret nature or otherwise of those infringements. It follows that the arguments concerning the lack of secrecy of the agreements are not relevant to the Commission’s assessment of the gravity of the infringement. In any event, although the secret nature of a cartel is a factor liable to exacerbate its gravity, it is not an indispensable condition for an infringement to be classified as ‘very serious’. 253 The applicants’ complaints concerning the classification of the cartel as very serious by reason of its nature must therefore be rejected. 254 It must also be observed that a horizontal price cartel as extensive as the one found by the Commission in this case, relating to such an important economic sector, cannot normally escape the classification of very serious infringement, whatever its context. In any event, the circumstances invoked by the applicants in this case are not such as to affect the validity of the Commission’s assessment of the gravity of the infringement. 255 As regards the historical context of the cartel, the Commission correctly observes, first, that the legal bases on which the committees were initially founded had been repealed no later than the time of Austria’s accession to the EEA. During the period covered by the contested decision, there was no provision of national law that could compel banks to engage in concerted practices or restrict their freedom of action in the market. As to the ‘Austrian traditions’ referred to by certain applicants, it must be pointed out that the political preferences and traditions of Member States may sometimes conflict with the fundamental objective of undistorted competition embodied in Article 3(g) EC. Therefore, the fact that a cartel has been created and maintained with State support does not affect its potential to detract from the objectives of the Treaty. 256 The argument that a heavy fine is not necessary because of the one-off nature of the agreements is not relevant in the present context. The deterrent nature of fines is certainly one of the many factors that must be taken into account in assessing the gravity of an infringement within the meaning of Article 15 of Regulation No 17 (MDF, cited in paragraph 213 above, paragraph 120). However, as stated in paragraph 231 above, the Guidelines draw a distinction between different aspects of gravity within the meaning of Article 15(2) of Regulation No 17 and provide for the deterrent effect to be taken into account together with that of the ‘intrinsic’ gravity of the infringement. That distinction is justified by the fact that it adds transparency to the process by which the Commission sets fines. Therefore, considerations relating to the deterrent nature of fines cannot be validly relied on to contest the assessment of the intrinsic gravity of an infringement. 257 As regards, second, the arguments to the effect that Austrian law tolerated ‘behavioural cartels’ (Verhaltenskartelle) even after Austria’s accession to the Communities and throughout the duration of the infringement, the Commission rightly emphasised that that fact does not affect the existence of an infringement of Article 81 EC and likewise cannot influence the assessment of the gravity of that infringement. According to the description of Austrian law given in particular by BA-CA, ÖVAG and NÖ-Hypo, the privileged position until 2000 of ‘behavioural cartels’ was linked to their non-binding character. On the other hand, Article 81 EC prohibits concerted practices in the same way as agreements and the Guidelines likewise draw no distinction, for the purpose of assessing gravity, between binding agreements and ‘gentlemen’s agreements’. 258 Third, with regard to the participation of the State authorities in the committees, referred to by the applicants, it must be borne in mind first of all that the Member States may not enact measures enabling private undertakings to escape from the constraints imposed by Articles 81 EC to 89 EC (Case 13/77 INNO [1977] ECR 2115, paragraph 33). Whilst it is true that undertakings cannot be penalised for anti-competitive conduct if it has been imposed by a national law incompatible with those provisions or by irresistible pressure brought to bear upon them by the national authorities, the position is different where such a law or such conduct is limited to encouraging or facilitating autonomous anti-competitive conduct by undertakings (see, by analogy, Case C‑198/01 CIF [2003] ECR I‑8055, paragraphs 52 to 56, and Case T-387/94 Asia Motor France and Others v Commission [1996] ECR II‑961, paragraph 65). 259 In that connection, it is undisputed that the conduct of the national authorities in question in this case did not have the effect of compelling the banks to engage in anti-competitive conduct. It is true that a note produced by BAWAG and PSK refers to a ‘call by the OeNB to the banks to reduce their unreasonable price competition for deposits and lending’. It does not however appear that it was compulsory for the banks to comply with that call. The examples of alleged pressure exercised by the OeNB on banks, referred to by BA-CA, show that the OeNB exhorted the banks to lower interest rates but give no indication that they were invited to engage in concertation on that matter and still less that the banks had been exposed to irresistible pressure to that effect. That involvement does not therefore affect the liability of the applicants for their illegal conduct. 260 Neither does it affect the intrinsic gravity of the infringement. The State authorities’ intervention in the committees, as described by the applicants, cannot in any way reduce the potential of the price cartel in question in this case to detract from the objectives of the Treaty. On the contrary, such approval or tolerance of unlawful conduct by the public authorities is liable to reinforce the effects of the illegal agreements. 261 It must also be pointed out that the question whether the conduct of the national authorities may nevertheless be taken into consideration as a mitigating circumstance (see, to that effect, CIF, cited in paragraph 258 above, paragraph 57) will be examined below in paragraphs 504 and 505. 262 As regards, fourth, the institutionalised character of the cartel, it is legitimate for the Commission to take account of the fact that a cartel was operated in the form of a system of regular institutionalised meetings (Case T-308/94 Cascades v Commission [1998] ECR II‑925, paragraphs 104 and 194). Admittedly, the Lombard network was created at a time when the agreements were not illegal. The fact nevertheless remains that the banks used that pre-existing structure for their unlawful concertation and may thereby have made a considerable contribution to the operation and effectiveness of the overall cartel. The fact that the meetings also dealt with other subjects, that were neutral from the standpoint of competition law, does not diminish the extent to which undistorted competition was jeopardised by such a well-organised system of concertation. 263 Finally, the Republic of Austria’s recent accession to the European Union at the material time has no influence on the intrinsic gravity of the infringement. 264 Consequently, the circumstances invoked by the applicants cannot affect the validity of the finding, in recital 506 to the contested decision, that, by their nature, the Lombard network agreements constitute a very serious infringement. 3. The specific impact of the infringement on the market265 The applicants object to the classification of the infringement as very serious on the ground that the Commission has not demonstrated appreciable effects of the cartel on the market. They claim, first, that such an effect must be demonstrated to justify the classification of the infringement as very serious; second, that the considerations set out in the contested decision concerning the impact of the cartel are insufficient for that purpose; and, third, that the economic report by Professor von Weizsäcker produced by them during the administrative procedure demonstrated the lack of any such impact. (a) The contested decision266 In its analysis of the gravity of the infringement, the Commission observes, in recital 508 to the contested decision:‘The implementation and impact of the cartel may be taken into account, amongst a number of aspects, in cases where the practices at issue are not aimed directly at the restriction of competition, and consequently are caught by Article 81[EC] only as a result of their practical effects.’ 267 It then states that the banks concerned participated regularly and frequently in numerous committee meetings and that the documents for the period in question which have been gathered clearly show the manner in which the banks implemented the agreements concluded in the committee meetings or in which they took account of the information they obtained on those occasions from their competitors in order to take their own decisions. For matters of detail, the Commission refers to recitals 430 to 437 to the contested decision, which, for the purpose of establishing the infringement, give a description of the implementation of the cartel decisions. 268 The Commission infers from this, in recital 510 to the contested decision, that those overall agreements, which lasted several years, had an impact on the market. It adds that the fact that the cartel members had to accept failures or sometimes even mutually acknowledged the failure of their efforts does not mean that their agreements could not have had effects on the market. It states, finally, that the report drawn up on behalf of the banks likewise did not prove that the cartel had no effects. (b) The classification of BA-CA’s arguments269 BA-CA, which puts forward only the last two complaints mentioned in paragraph 265 above, claims that its plea is not directed against the classification of the infringement as very serious but alleges a breach of the obligation to state reasons. It submits that economic effects may be taken into account, in determination of the fine, only where they have actually been established and are supported by a statement of reasons and that the Commission bears the onus of proof in that regard. 270 By arguing thus, BA-CA essentially criticises the Commission for not having proved the impact of the infringement on the market. That complaint concerns not the statement of the reasons on which the contested decision is based but rather the classification of the infringement as very serious. The obligation to state reasons is an essential procedural requirement which must be distinguished from the merits of the reasons given, which concern the substantive legality of the contested measure (Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 67, and Case C‑17/99 France v Commission [2001] ECR I‑2481, paragraph 35). Therefore, it will be necessary to examine BA-CA’s complaints at the same time as those concerning the merits of the assessment of the gravity of the infringement contained in the contested decision, raised by the other applicants. (c) Arguments of the parties271 First, the banks submit that, under the Guidelines and the case-law, it is necessary to take account of the specific impact of an infringement on the market in order to determine its gravity. BAWAG also states that the principle of proportionality requires that particularly harmful agreements should attract more severe sanctions than those which have had little or no effect. 272 The applicants claim that the burden of proof of a practical impact of the cartel on the market falls upon the Commission. They submit that the considerations set out in the contested decision regarding the implementation of the agreements are not sufficient to demonstrate any such impact. RZB, BAWAG, PSK and Erste maintain that it is necessary, in order to provide such proof, to demonstrate, by means of an economic study, that the interest rates and commissions charged in Austria during the relevant period differed significantly from those which would have been applied in the absence of any infringement. 273 Second, the applicants criticise the reasoning of the contested decision. Without challenging the Commission’s factual findings regarding the implementation of the agreements, BA-CA, BAWAG, PSK and Erste submit that the examples provided are not representative, that the file contains numerous examples of non-compliance with the agreements and that the banks secretly engaged in intense competition. BA-CA and BAWAG state that their own conduct in particular falls within that case. According to BAWAG and PSK, the documents in which the banks expressed their views on the implementation of and compliance with the agreements contain only subjective assessments of individual bank employees and do not therefore provide a reliable basis for judging their actual economic effects. 274 BA-CA and Erste claim that the agreements could not in any event be complied with in the marketplace because they concerned only the ‘official’ rates displayed at counters, whereas the rates actually offered to customers depend on other parameters, in particular the scale of the transaction, the customer’s solvency and the authority granted to employees to depart from the official rate. 275 BA-CA and Erste draw attention to the importance of the key lending rates for the evolution of the rates applied by the banks. In their view, the economic necessity of following changes in those rates means that there is no causal link between the results of the committee meetings and the rates set by the banks. 276 RZB, BAWAG, PSK and Erste, finally, consider that the Commission cannot link the existence of effects to the frequency of the committee meetings. They add that those meetings concerned numerous matters which were neutral as regards competition and fulfilled a social function. 277 Third, the applicants criticise the Commission for not taking account of the findings of Professor von Weizsäcker’s report, produced by them. They submit that that report showed, by statistical methods, that neither the prices charged by banks nor their income exceeded, on average, those which would have been achieved in the absence of the agreements. They consider that the objections made against that report in the contested decision are unfounded. RZB, ÖVAG and NÖ-Hypo maintain that the conclusions of the report can only be refuted by another scientifically valid study. The applicants note that the Commission declined, in the contested decision, to rely on the counter-report which it had had drawn up, because of its technical weaknesses. 278 The Commission considers that a cartel may be classified as a very serious infringement by reason of its anti-competitive object, even if it has no effect on the market. However, it considers that in this case the impact of the cartel was established. 279 It states that a cartel does not produce effects only from the time at which it is proved that prices would have evolved differently in the context of free competition, but rather from the time when the agreements are implemented. It observes that the documents seized by it, which date from the relevant time, clearly show how the banks implemented the agreements concluded at the committee meetings and how, when taking their own decisions, they took account of the information they obtained there from their competitors. In its view, it is incontestable that the cartel had effects at that level, even though, in certain cases, the banks were unable to reach an agreement or did not comply with the agreements. 280 The Commission is therefore of the opinion that the report produced by the banks is not decisive as regards determining the gravity of the infringement. It adds that the report did not convincingly prove that the cartel had no effects on price development. (d) Findings of the Court 281 As a preliminary point, it must be stated that the contested decision took account of the actual impact of the cartel on the market when assessing the gravity of the infringement. Although the Commission states, in recitals 429 and 508, that it is not necessary to take account of the actual effects where the anti-competitive object of a cartel is established, recitals 509 and 510 and also recitals 430 to 436 nevertheless find that there were effects, in this case, deriving in particular from the implementation of the agreements, even though it is conceded in recital 436 that it is not possible to quantify them precisely. 282 It is thus not relevant to establish, in this case, whether the Guidelines make the classification of a cartel as ‘very serious’ subject to proof of an actual impact on the market. Given that the Commission enjoys a discretion regarding assessment of the gravity of infringements, the legality of that assessment depends on the merits of the findings on which it is actually based, and not on the question whether all the matters which the Commission took into account were necessary for that purpose. 283 It is therefore appropriate to consider, first, the question whether the Commission is entitled to conclude, from the implementation of a cartel, that the cartel had an actual impact on the market, second, whether it was right to find that there was such implementation in this case and, third, whether in that context it disregarded the relevance and probative value of the report produced by the banks. 284 First of all, it must be borne in mind that, in assessing the actual impact of an infringement on the market, it is incumbent on the Commission to take as a reference the competition which would normally have prevailed if there had been no infringement (see, to that effect, Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraphs 619 and 620; Mayr-Melnhof, cited in paragraph 205 above, paragraph 235; Case T-141/94 Thyssen Stahl v Commission [1999] ECR II‑347, paragraph 645; and ADM, cited in paragraph 231 above, paragraph 150). 285 First, in the case of a price cartel, the Commission may legitimately infer that the infringement had effects from the fact that the cartel members took measures to apply the agreed prices, for example by announcing them to customers, instructing their employees to use them as a basis for negotiation and monitoring their application by their competitors and their own sales departments. In order to conclude that there has been an impact on the market, it is sufficient that the agreed prices have served as a basis for determining individual transaction prices, thereby limiting customers’ room for negotiation (Case T-7/89 Hercules Chemicals v Commission [1991] ECR II‑1711, paragraphs 340 and 341, and Joined Cases T‑305/94 to T‑307/94, T‑313/94 to T‑316/94, T‑318/94, T‑325/94, T‑328/94, T‑329/94 and T‑335/94 Limburgse Vinyl Maatschappijand Others v Commission [1999] ECR II‑931, paragraphs 743 to 745). 286 On the other hand, the Commission cannot be required, where the implementation of a cartel has been established, systematically to demonstrate that the agreements in fact enabled the undertakings concerned to achieve a higher level of transaction prices than that which would have prevailed in the absence of a cartel. In that regard, the view that only the fact that the level of transaction prices would have been different in the absence of collusion may be taken into account in determining the gravity of the infringement cannot be upheld (Case C-279/98 P Cascades v Commission [2000] ECR I‑9693, paragraphs 52 and 62). Moreover, it would be disproportionate to require such proof, which would absorb considerable resources, given that it would necessitate making hypothetical calculations based on economic models whose accuracy it would be difficult for the Court to verify and whose infallibility is in no way proved (Opinion of Advocate General Mischo in Case C-283/98 P Mo och Domsjö v Commission [2000] ECR I‑9855, I‑9858, point 109). 287 In order to assess the gravity of the infringement, it is decisive to ascertain that the cartel members did all they could to give concrete effect to their intentions. What then happened at the level of the market prices actually obtained was liable to be influenced by other factors outside the control of the members of the cartel. The members of the cartel cannot therefore benefit from external factors which counteracted their own efforts by turning them into factors justifying a reduction of the fine (Opinion of Advocate General Mischo in Mo och Domsjö v Commission, cited in paragraph 286 above, points 102 to 109). 288 It was therefore legitimate for the Commission to rely on the implementation of the cartel in concluding that there was an impact on the market. 289 As regards, second, the merits of the findings relied on by the Commission in drawing that conclusion in this case, it must be observed, first, that the applicants do not object to the examples of implementation of the Lombard network agreements provided in the contested decision. 290 As regards, next, the argument that those examples are not representative because the file also contains numerous instances of non-compliance with the agreements and of competition between the banks, it must be observed that the fact that the agreements were not always complied with by the cartel members is not sufficient to rule out an effect on the market. 291 In that regard, the examples mentioned by BA-CA, BAWAG, PSK and Erste do not show that the conclusion that the cartel was implemented is incorrect. 292 BA-CA refers to several passages of the contested decision (recitals 149, 172, 199, 229, 264, 283 and 299 et seq.) that mention cases in which specific agreements were not observed by certain banks. Those examples show, first, that the Commission did not disregard the fact that the implementation of the agreements was not complete. However, they certainly do not confirm BA-CA’s thesis that there were only ‘isolated attempts to give effect’ to the agreements. Thus, recital 149 notes that PSK was reproached by the other banks for not complying with the agreement on the rate for a certain savings product, recital 172 describes the other banks’ reaction to a reduction in the lending rate made by BAWAG ‘without prior notice’, and recital 199 refers to a lack of discipline for which Erste was held to be ‘the culprit’ by the other banks. It is clear from those examples that banks which individually departed from the agreements were exposed to criticism from the other members of the cartel which, it seems, complied with them. Although, in a committee meeting described in recital 229, a matter considered was ‘preferential measures started by some institutions’ contrary to the agreements, the participants nevertheless found that the banks had ‘stuck essentially to the agreements’ reached a month earlier. Similarly, recital 264 describes discussions at which Erste complained of the application of rates not conforming to the agreements by several competitors, whilst the latter, although conceding that ‘the measures were slower to take effect’ within their establishments, stated that everything was running to plan. Finally, recital 283 speaks of a rebuke envisaged by the Lombard Club concerning the lack of discipline on rates, whereas recitals 299 to 301 describe infringements of certain agreements and the banks’ efforts to counter them. Those passages as a whole do not in any way support BA-CA’s view that non-compliance with the agreements was the rule and their implementation by the banks the exception. 293 BAWAG and PSK cite 28 documents in the Commission file dealing with non-compliance with the agreements and the existence of competition between the banks, whilst Erste submits a list of 85 references, concerning 74 documents, 22 of which are the same as the documents relied on by BAWAG and PSK. 294 However, those documents are not incompatible with the Commission’s conclusion. For example, the three banks rely on the minutes of a committee meeting on deposit transactions of 27 September 1995, from which BAWAG and PSK cite an extract, to the effect that ‘the RBW representative observed that … the conditions and due dates agreed at the committee meeting … were not complied with’. That passage is directly preceded by the following: ‘In that context, the representatives of certain establishments complain that, on the due dates for reducing rates envisaged at the committee meeting, the [rates of certain specific savings contracts] were not automatically reduced equally. Volksbank, CA-BV, [RBW], NÖ-Hypo, PSK and Erste adjusted their conditions in that regard. [BA] and BAWAG will not do so until the end of September.’ In the same document, addressed to the chief executive of BAWAG, it is also stated that another bank had complained that, in a survey, it was found that higher interest rates than agreed for a new deposit could be obtained from BAWAG and PSK. The document goes on: ‘This involves our agencies [details of addresses]. Appropriate measures have been taken through our branches department.’ That document thus provides examples both of non-compliance with the agreements on certain matters and of their implementation regarding others, and the rebuke addressed by a bank to agencies which did not comply with the agreements. 295 In view of the numerous uncontested examples of implementation of the agreements mentioned in the contested decision, the fact that in certain cases the agreements were not respected by one or more banks, that the banks did not succeed in maintaining the agreed level of rates or increase their profitability or that there was competition between them regarding certain products is not sufficient to undermine the finding that the agreements were implemented and had effects on the market. 296 In that context, the arguments of BA-CA and BAWAG concerning their own conduct cannot be accepted. The conduct which an undertaking claims to have adopted is not relevant to the assessment of the impact of a cartel on the market and only the effects resulting from the whole infringement are to be taken into account (Commission v Anic Partecipazioni, cited in paragraph 189 above, paragraphs 150 and 152, and Hercules Chemicals v Commission, cited in paragraph 285 above, paragraph 342). 297 The banks’ argument that the interest rates actually applied to customers often departed from the ‘official’ rates agreed at the committee meetings and displayed at the counters, because of the specific characteristics of individual transactions and the authority of bank employees to depart from those rates, within certain limits, is not relevant. The ‘official’ rates displayed by the banks represent the starting point for negotiations with individual customers and, accordingly, influence the result arrived at. 298 As regards the argument of BAWAG and PSK that the documents in which the banks themselves assess the specific application of their agreements are not probative because they contain only subjective assessments by bank employees, it must be observed that the reliability of documents in which members of a cartel express an opinion as to its ‘success’ must be assessed on a case-by-case basis (Cascades v Commission, cited in paragraph 262 above, paragraph 186, and Limburgse Vinyl Maatschappijand Others v Commission, cited in paragraph 285 above, paragraphs 746 and 747). Doubts as to the probative value of such statements may in particular be justified where they refer to impressions which are not founded on concrete factors and opposite positions have been taken by other members of the cartel in respect of the same periods. However, the latter are not automatically more credible than the former. In this case, the Commission observes that the banks assessed the practical application of the agreements on the basis of regular checks at other banks (recital 433 to the contested decision), and that fact is not contested. In those circumstances, the Commission was entitled to rely, inter alia, on the documents in which the cartel members expressed their views, at the material time, on the implementation of the cartel, inferring, in reaching that conclusion, that the cartel had an impact on the market. 299 Next, it must be observed that the importance of the key lending rates as regards the rates applied by the banks is not contested by the Commission, which rightly criticises the banks for having coordinated their reaction to the evolution of the key lending rates. The effect of the agreements, deriving in this case from their implementation, and the fact that the rates applied by the banks followed the key lending rates, so that it is difficult to measure the actual impact of the agreements, are not in themselves sufficient to undermine the validity of the Commission’s reasoning. 300 Finally, whilst it is true that the Commission cannot infer solely from the number and frequency of the committee meetings that the latter had an impact on the market (ADM, cited in paragraph 231 above, paragraph 159), the reference to that frequency in the contested decision is merely a secondary facet of the Commission’s reasoning on which the legality of the assessment of the gravity of the infringement cannot depend. 301 It follows that the finding that the cartel was implemented has not been undermined by the arguments of the parties.302 Third, the report produced by the banks does not demonstrate that the Commission made any error in inferring that the implementation of the agreements gave rise to an actual impact on the market. First, it must be observed that the expert found, on the basis of a comparison between the Austrian banking market and the German banking market, that the commercial conditions enjoyed by bank customers in Austria were not less favourable than those applied in the German market and that the Austrian banks’ profitability was lower than that of the German banks. Second, the expert observed, on the basis of two inquiries relating to representative banking products, that no measurable influence of the target rates set by the agreements on the average rates actually applied by the banks could be detected. 303 The expert thus limited the subject-matter of his study to an examination of certain specific questions, and his analysis did not concern all the potential effects of the agreements on the market. The report cannot therefore demonstrate the absence of any actual impact of the cartel on the market. 304 First, the Commission was thus entitled to consider, without falling into error, that the comparison with the market of another Member State is not capable of demonstrating what conditions would have been applied in the Austrian market in the absence of the agreements and that it cannot be inferred from the data concerning the banks’ profitability that the cartel had no effect. 305 Second, the fact that the report did not measure, in statistical terms, a significant impact of the cartel on average prices does not prove that the agreements had no effect on the determination of the transaction prices applied to customers, which could be taken into consideration for the purpose of assessing the gravity of the infringement. 306 It follows that the complaints concerning the impact of the infringement on the market must be rejected in their entirety.4. The extent of the relevant geographic market307 With the exception of BA-CA (Case T-260/02) and RLB (Case T-262/02), all the applicants are of the opinion that the classification of the infringement as ‘very serious’, despite the limited size of the relevant geographic market, is contrary to the Guidelines, to the Commission’s previous decisions and to the principle of proportionality. Moreover, RZB, BAWAG and PSK (Cases T-259/02, T‑261/02 and T-263/02) consider that the reasoning of the contested decision is not sufficient in that regard. RZB states, however, that it does not intend to plead the inadequacy of the reasoning and requests that the Court examine the substance of the contested decision. 308 According to recital 511 to the contested decision:‘In view of the special circumstances of the present case and the context of the infringement, the comparatively limited size of the territory of Austria does not prevent the infringement being considered a very serious one.’ 309 Read in conjunction with recitals 506 to 510 to the contested decision, concerning the nature of the infringement and the implementation and effects of the cartel, that succinct statement of reasons is sufficiently clear to enable the banks to understand the reasons that prompted the Commission to consider that, despite the limited extent of the market, the infringement should be classified as ‘very serious’. 310 As regards the well-foundedness of that assessment, first, recital 511 shows that the Commission did not disregard the limited extent of the relevant geographic market or fail to take it into consideration. 311 Second, the extent of the geographic market is only one of the three criteria which, according to the Guidelines, are relevant to overall assessment of the gravity of the infringement. Among those interdependent criteria, the nature of the infringement plays a major role (see paragraphs 240 and 241 above). On the other hand, the size of the geographic market is not an autonomous criterion in the sense that only infringements affecting most of the Member States would be classifiable as ‘very serious’. Neither the Treaty, nor Regulation No 17, nor the Guidelines, nor the case-law support the conclusion that only geographically very extensive restrictions may be considered as such (Case T‑241/01 Scandinavian Airlines System v Commission [2005] ECR II‑2917, paragraph 87). Therefore, the argument of BAWAG and PSK that only infringements involving the participation of almost all undertakings in the European market can be classified as very serious (see paragraphs 242 and 250 above) must be rejected. 312 Third, the entire territory of a Member State, even if relatively ‘small’ in comparison with the other Member States, in any event constitutes a substantial part of the common market (Michelin v Commission, cited in paragraph 173 above, paragraph 28, as regards the Netherlands market, and Brasserie nationale and Others v Commission, cited in paragraph 240 above, paragraph 177, as regards the Luxembourg market). In that context, BAWAG’s argument that the agreements in which it participated extended only to Vienna and the eastern part of Austria must be rejected, given that it is necessary to assess the gravity of the infringement as a whole, which does not depend on the actual conduct of a specific undertaking (see, to that effect, Hercules Chemicals v Commission, cited in paragraph 285 above, paragraph 342). It is uncontested that the overall cartel covers the whole of Austria. 313 Therefore the limited size of the relevant geographic market does not preclude the classification as ‘very serious’ of the infringement found in this case. 5. The selective nature of the proceedings taken (Case T-259/02)314 RZB also claims that the classification of the infringement as ‘very serious’ is incompatible with the Commission’s decision to institute proceedings against only some of the undertakings that participated in the infringement. 315 That argument cannot be upheld. Since the Commission legitimately adopted as a criterion for choosing the addressees of the decision their frequent participation in the most important committee meetings (see paragraphs 134 to 145 above), the fact that it did not take proceedings against all the members of the cartel does not prevent it from classifying as ‘very serious’ the price-cartel infringement at issue in this case. 6. Conclusion as to the gravity of the infringement316 For the reasons given above, all the applicants’ complaints concerning the classification of the infringement as ‘very serious’ in the contested decision must be rejected. C – The division of the addressees of the contested decision into categories and the setting of the starting amounts317 As is apparent from recitals 519 and 520 to the contested decision, the Commission divided the addressees of the contested decision into five categories, by reference to the available data concerning their market shares, for which it set initial amounts of EUR 25, 12.5, 6.25, 3.13 and 1.25 million respectively. In its defence, the Commission explained that the guide values for market shares for the first four categories of undertaking were approximately 22%, 11%, 5.5% and 2.75%, whilst the fifth category (to which it refers as the ‘catch-up category’) comprises banks with a market share of less than 1%. 318 The applicants put forward a number of complaints concerning various aspects of the determination of their market shares, the division into categories and the setting of starting amounts. First, Erste (Case T-264/02) submits that it is illegal for the Commission to have imputed to it the infringement of a bank (GiroCredit) with which it merged but which, previously, formed part of the BA-CA group (see below, paragraph 319 et seq.). Second, RZB (Case T‑259/02), Erste and ÖVAG (Case T‑271/02) object to the Commission’s attributing to them as central establishments for the decentralised sectors, namely those of the Raiffeisen banks, the savings banks and the credit unions, the market shares of their respective sectors for the purpose of division into categories (see paragraph 337 et seq. below). Third, several applicants criticise the Commission for breaching the obligation to state reasons regarding the division into categories and the setting of starting amounts (see paragraph 410 et seq. below). Fourth, BAWAG, PSK and NÖ‑Hypo (Cases T-261/02, T-263/02 and T-271/02) allege a breach of the principle of equal treatment (see paragraphs 418 to 431 below), and, fifth, PSK, Erste and ÖVAG claim that the Commission’s findings regarding their market shares are incorrect (see paragraph 432 et seq. below). 1. The attribution of GiroCredit’s infringement to Erste (Case T‑264/02)(a) The facts on which this plea is based and the contested decision 319 Erste (under its former name EÖ) purchased in May 1997 53% of the shares in GiroCredit, which was the lead institution for the savings banks. From 1994 until the purchase of the shares by EÖ, the majority of GiroCredit’s shares were held by the Bank Austria group (see paragraphs 7 and 11 above). In October 1997, GiroCredit and EÖ merged and the name EÖ was changed to Erste. 320 In recitals 475 to 481 to the contested decision, the Commission considered whether the responsibility for the infringement committed by GiroCredit should be imputed to Erste or to BA. It considered that it could not conclude that GiroCredit’s commercial policy had been influenced by BA before the takeover by Erste. It therefore concluded that GiroCredit itself was responsible for the infringement and that that liability was transferred to Erste following the merger. (b) Arguments of the parties321 Erste is of the opinion that GiroCredit’s unlawful conduct during the period prior to its purchase should be imputed to BA and not to itself. It submits, on the basis of documentary evidence which it produces, that the conditions under which liability for the conduct of a subsidiary may be attributed to the parent company were fulfilled in the relationship between BA and GiroCredit. 322 The Commission contends that it has not been established that the conditions for imputing GiroCredit’s infringement to BA are satisfied. It considers that, in any event, it may choose to impose the penalty either on the parent company or on the subsidiary, even where the conditions for attributing the conduct of the subsidiary to the parent company are fulfilled. (c) Findings of the Court323 In connection with the present plea, it is appropriate, first, to examine whether the conditions in which the purchaser of an undertaking is responsible for the infringements committed by the latter prior to the purchase are fulfilled in this case and, second, to consider the impact on the responsibility of the purchaser of the fact that the undertaking purchased was previously controlled by another parent company. 324 According to settled case-law, it falls, in principle, to the legal or natural person managing the undertaking in question when the infringement was committed to answer for that infringement, even if, when the decision finding the infringement was adopted, another person had assumed responsibility for operating the undertaking (Cascades v Commission, cited in paragraph 286 above, paragraph 78). While the legal person managing the undertaking at the time of the infringement exists, responsibility for the undertaking’s infringement follows that legal person, even though the assets and personnel which contributed to the commission of the infringement have been transferred to third persons after the period of the infringement (Case T-327/94 SCA Holding v Commission [1998] ECR II‑1373, paragraph 63, confirmed by the judgment of the Court of Justice in Case C-297/98 P SCA Holding v Commission [2000] ECR I‑10101, paragraph 25). 325 On the other hand, where, between the infringement and the time when the undertaking in question must answer for it, the person responsible for the operation of that undertaking has ceased in law to exist, it is necessary, first, to establish the combination of physical and human elements which contributed to the infringement and then to identify the person who has become responsible for their operation, so as to avoid the result that, because of the disappearance of the person responsible for its operation when the infringement was committed, the undertaking may evade liability for it (Limburgse Vinyl Maatschappijand Others v Commission, cited in paragraph 285 above, paragraph 953). 326 When the undertaking in question ceases to exist, upon being merged with a purchaser, the latter takes on its assets and liabilities for infringements of Community law (Opinion of Advocate General Mischo in Case C-286/98 P Stora Kopparbergs Bergslags v Commission [2000] ECR I‑9925, I‑9928, point 75). In such cases, the liability for the infringement committed by the undertaking taken over may be attributed to the purchaser (see, by analogy, Commission v Anic Partecipazioni, cited in paragraph 189 above, paragraph 145). 327 In this case, the legal person responsible for the operation of GiroCredit’s banking business before its merger with EÖ was GiroCredit Bank der österreichischen Sparkassen AG. Having been taken over by EÖ in 1997, that legal person ceased to exist in October 1997 as a result of its merger with EÖ, now Erste. 328 In accordance with the principles set out above, Erste must therefore answer for the infringement committed by GiroCredit prior to the latter’s purchase by EÖ. 329 Next, it is appropriate to consider whether such liability of a purchaser must be rejected in a case where the liability for an infringement committed by an undertaking before it was taken over may be imputed to an earlier parent company. 330 In that regard, it must be borne in mind that, according to settled case-law, the conduct of a subsidiary with a separate legal personality may be imputed to the parent company, in particular where the subsidiary does not decide independently upon its own conduct in the market but carries out, in all material respects, the instructions given to it by the parent company (Case 48/69 ICI v Commission [1972] ECR 619, paragraphs 132 and 133; Case C-294/98 P Metsä-Serlaand Others v Commission [2000] ECR I‑10065, paragraph 27; and Case C-196/99 P Aristrain v Commission [2003] ECR I‑11005, paragraph 96; and Limburgse Vinyl Maatschappijand Others v Commission, cited in paragraph 285 above, paragraph 960) or where the parent company, which is capable of having a decisive influence on the commercial policy of its subsidiary, is aware of and approves of the latter’s participation in the cartel (Case T-309/94 KNP BT v Commission [1998] ECR II‑1007, paragraphs 41, 42, 45, 47 and 48, confirmed by the judgment of the Court of Justice in Case C-248/98 P KNP BT v Commission [2000] ECR I‑9641, paragraph 73). 331 That possibility of imposing a penalty on the parent company for its subsidiary’s unlawful conduct does not in itself, however, mean that the subsidiary itself will be penalised. An undertaking – that is to say an economic unit comprising personal, tangible and intangible elements (Case 19/61 Mannesmann v High Authority [1962] ECR 357, 371) – is directed by the organs provided for in its articles of association and any decision imposing a fine on it may be addressed to the management as provided for in the undertaking’s articles of association (management board, management committee, chairman, manager, and so on) even though the financial consequences of the fine are ultimately borne by its owners. That rule would not be observed if the Commission, faced with unlawful conduct on the part of an undertaking, were always required to ascertain who is the owner exercising a decisive influence on the undertaking and were allowed to impose a sanction only on that owner (Joined Cases T‑236/01, T‑239/01, T‑244/01 to T‑246/01, T‑251/01 and T‑252/01 Tokai Carbon and Others v Commission [2004] ECR II‑1181, ‘Tokai I’, paragraphs 279 to 281). Since the power to penalise the parent company for the conduct of a subsidiary thus has no bearing on the legality of a decision addressed only to the subsidiary that participated in the infringement, the Commission may choose to penalise either the subsidiary that participated in the infringement or the parent company that controlled it during that period. 332 That choice is also available to the Commission where there are successive changes in the economic control of the subsidiary. Although, in such a case, the Commission may impute the conduct of a subsidiary to the former parent company for the period prior to the transfer and thereafter to the new parent company (see, to that effect, KNP BT v Commission, cited in paragraph 330 above, paragraph 73), it is not required to do so and may choose to penalise only the subsidiary for its own conduct. 333 Admittedly, given the nature of the infringements in question and the degree of severity of the ensuing penalties, responsibility for committing those infringements is personal in nature (Commission v Anic Partecipazioni, cited in paragraph 189 above, paragraph 78) and a person, whether natural or legal, must be penalised only for acts imputed to it individually (Joined Cases T-45/98 and T-47/98 Krupp Thyssen Stainless and Acciai speciali Terni v Commission [2001] ECR II‑3757, ‘KTS’, paragraph 63, and ADM, cited in paragraph 231 above, paragraph 261). In accordance with that principle, the Commission may not impute to the purchaser of a company liability for the latter’s conduct prior to the purchase, such liability having to be imputed to the company itself provided that the company still exists (see, to that effect, KNP BT v Commission, cited in paragraph 330 above, paragraph 72, and Cascades v Commission, cited in paragraph 286 above, paragraphs 77 to 80). 334 On the other hand, it is not incompatible with that principle to impute responsibility to a subsidiary for its own conduct even if that means, where the subsidiary has lost its legal personality prior to the infringement, that the penalty is imposed on the purchaser, who is unconnected with the infringement. 335 Provided that the Commission has established an undertaking’s participation in a cartel, it is entitled to impose a fine on the natural or legal person managing it, or indeed, if the latter no longer exists, on the successor to the latter, without being required to ascertain whether the undertaking acted autonomously or in accordance with the instructions of a parent company. Otherwise, the Commission’s inquiries would be made considerably more laborious by the need to verify, in each case where there were successive controllers of an undertaking, to what extent the latter’s acts could be imputed to the former parent company. 336 It follows, without there being any need to verify whether GiroCredit’s conduct could have been imputed to BA, that the Commission did not in any way act illegally by imputing that conduct to Erste, as the successor to GiroCredit. 2. The attribution of the market shares of the banks in the ‘decentralised sectors’ to the central establishments (Cases T‑259/02, T‑264/02 and T‑271/02) 337 RZB, Erste and ÖVAG are of the opinion that the classification of them is illegal because the Commission attributed to them, as the lead institutions of the decentralised sectors comprising the Raiffeisen banks, savings banks and credit unions, the market share of the entire sectors concerned. (a) Contested decision 338 The contested decision justifies the attribution to the central establishments of the market shares of their respective sectors by the following considerations: ‘(515) The infringement is thus to be classified as a very serious one; within that category, the scale of the fines to be imposed makes it possible to differentiate between offenders so as to take account of their effective economic capacity. At the same time it allows a fine to be set at a level which ensures that it has a sufficiently dissuasive effect. A differentiated approach of this kind is especially desirable here, because there is a wide variation in the size of the undertakings or groupings that took part in the infringement. (516) In this case account has to be taken of the special features of the Austrian market. It would be quite unrealistic to confine the importance of Erste, RZB and ÖVAG in the network, and their effective capacity to restrict competition at the expense of consumers, to the volume of their own individual business as commercial banks. (517) The documents in the case make it impressively clear that these undertakings, in line with their role as leaders of their respective groupings, made an essential contribution to the effectiveness of the network throughout Austria via intensive flows of information within those groupings. They did not represent their own interests only, but those of their groupings as well, and were regarded as representatives of their groupings by the other parties to the cartel. The agreements were not just between the individual institutions but between the groupings as a whole. (518) To ignore the groupings behind the institutions that headed them, that is to say the savings banks grouping, the agricultural credit cooperative grouping [Raiffeisen banks] and the credit union grouping, would result in the fines being set at a level which did not do justice to the facts, which was out of touch with reality, and which had no dissuasive effect. The dissuasive effect will be sufficient only if in future the lead institutions refrain from engaging in cartel conduct as representatives of their groupings.’ Arguments of the applicants339 First, the applicants claim that the Commission infringed their rights of defence and the obligation to state reasons. Second, they assert that the Commission disregarded, from the legal point of view, the conditions under which it is permissible to attribute the market shares of one undertaking to another for the purposes of calculating the fine. Third, the applicants contest the factual findings which the Commission relied on to justify the allocation of the market shares and its assessment of those facts. – The rights of the defence and the statement of reasons340 Erste criticises the Commission for breaching its rights of defence because the statement of objections made no mention of the Commission’s intention to attribute to the central establishments the market shares of their groupings. Moreover, Erste and ÖVAG claim that neither the alleged transmission of information to the decentralised banks nor the alleged representation thereof by the lead institutions was mentioned in the statement of objections. 341 Moreover, Erste is of the opinion that the Commission infringed its obligation to state reasons regarding the attribution of market shares. – The conditions for attributing market shares342 RZB and Erste state that the attribution to the central establishments of the market shares of the banks belonging to their sectors amounts to attributing to them the conduct of all those banks. They state that there is no legal basis for doing so and to do so is contrary to the personal nature of liability for infringements of competition law, given that the sectors in question cannot be regarded as economic units. RZB and Erste consider that the Commission is thereby trying to go back on its decision to take proceedings selectively against certain undertakings that participated in the infringement and to penalise the conduct of banks belonging to the three abovementioned sectors without giving them an opportunity to defend themselves. 343 RZB adds that the Commission’s approach is not consistent because it imposed a fine on RLB, which also belongs to the Raiffeisen grouping. Similarly, Erste maintains, in the context of its plea alleging incorrect determination of the market shares of the savings bank grouping (see paragraph 440 below), that EÖ’s market share was taken into consideration twice, since an individual fine was imposed on it and it was one of the decentralised banks in the savings bank grouping before its merger with the central establishment GiroCredit as a result of which Erste came into being (see paragraph 319 above). Erste adds that the imputation of the conduct of the savings banks to the central establishment leads to unfair results, given that it is not entitled in law or in fact to apportion liability for the fine between legally independent savings banks. 344 According to the applicants, neither the ‘effective capacity’ of the undertakings to harm consumers nor the necessity for the fine to be sufficiently dissuasive is such as to justify that attribution. In that context, ÖVAG and Erste criticise the Commission for not complying with the principle of equal treatment as between the large centralised banks and the decentralised sectors. ÖVAG adds that the Commission, by attributing the market shares of the sectors to the lead institutions, wrongly assimilated the latter to the large commercial banks with a network of agencies bound by instructions from head office. Moreover, it criticises the Commission for wrongly failing to take account of a transmission of information similar to that for which the decentralised sectors were criticised between BA-CA and certain banks in which the latter has substantial holdings. 345 RZB and Erste also refer to the rules applicable to associations of undertakings which in this case, in their view, preclude the attribution of market shares of the sectors to the lead institutions. First, they refer to the judgment of the Court of First Instance in Joined Cases T‑213/95 and T‑18/96 SCK and FNK v Commission [1997] ECR II‑1739, paragraph 254, which, in their view, excludes the possibility of attributing the economic power of the sectors to the lead institutions because the latter are not associations of undertakings but rather undertakings. Second, they claim that the attribution of the market shares of the decentralised banks to the lead institutions is not permissible because the latter have no possibility of binding the banks in their sector, whereas, according to the case-law, the capacity of an association to bind its members is a condition for the attribution of the latter’s market shares. Third, they assert that the allocation of market shares to the lead institutions is incompatible with the subsidiary nature of the liability of associations of undertakings provided for in Section 5(c) of the Guidelines. According to the applicants, it was quite possible, in the present case, to commence infringement proceedings against the decentralised banks and impose appropriate penalties on them. – The factual findings and the assessment thereof346 First, the applicants criticise the Commission for disregarding the legal and economic independence of the decentralised banks, emphasising that they are not able to give instructions to the establishments within their sectors. They draw attention in particular, in their answers to the questions put to them by the Court, to the absence of any ‘factual’ power to influence the competitive behaviour of the decentralised banks. 347 RZB explains in that regard that the Raiffeisen sector has a ‘bottom-up’ structure whereby the local Raiffeisen banks (or ‘primary’ banks) are cooperative members of the regional banks (or ‘secondary’ banks, known as ‘Raiffeisen-Landesbanken’), the latter in turn holding more than 80% of the shares in RZB. According to RZB, RZB and the Raiffeisen-Landesbanken only provide certain ‘service functions’ vis-à-vis banks at the primary or secondary level. It states that it has no holding in the capital of the latter and is thereby distinguished from the lead institutions of the other decentralised sectors. RZB claims that it is at most an instrument of the primary banks and Raiffeisen-Landesbanken and that the latter, conversely, are not subject to instructions from RZB. In its view, the organisation of the sector into cooperatives makes it impossible to attribute the conduct of the primary banks to RZB, and the fact that in certain partial areas they present the same external appearance cannot change that situation in any way. RZB states that the absence of hierarchical structures was the cause of the well-known ‘lack of discipline’ in the Raiffeisen sector when it came to implementing the recommendations of the banks’ meetings, about which the other banks complained regularly. In its view, the Raiffeisen structure is inherently such that the individual Raiffeisen banks, jealous of their own autonomy, provided RZB only with incomplete information on the envisaged conditions or even announced in advance that they would determine their conditions ‘themselves’. 348 Erste describes first of all the interests it holds in the capital of certain savings banks. It is of the opinion that there was no possibility, in view of the limited size of such interests, that the savings bank constituted an economic unit which could justify attribution of the conduct of the savings banks to the central establishment. Next, it states that the legislative provisions concerning the savings bank sector and the statutes of the central establishment are designed to allow or facilitate the carrying-on of banking business for small credit establishments in the decentralised sector, and relate to functions that those establishments cannot take on alone by reason of their smallness and their lack of resources. It then undertakes a detailed analysis of those provisions, from which it infers that they confer on the central establishment no influence on the commercial conduct of the savings banks. Erste criticises the Commission for having ‘two weights and two measures’ because the rights and obligations on which it bases the attribution of the regional savings banks to GiroCredit existed until October 1997 in clearly larger proportions between GiroCredit and BA, which, moreover, had a majority holding in the capital of GiroCredit. Erste emphasises that, notwithstanding that fact, the Commission did not impute the conduct of GiroCredit to BA. Erste maintains that, from the factual point of view also, the commercial conduct of the savings banks was independent of the lead institution. In that regard, it observes, first, that the burden of proving that Erste/GiroCredit actually controlled the commercial conduct of the savings banks is borne by the Commission, which produced no such proof in the decision. Nevertheless, it makes the following points to demonstrate the independence of the savings banks’ commercial conduct: – the independence of the savings banks vis-à-vis the lead institution was guaranteed by the Austrian Law on savings banks and by the Law on public limited companies; – although the lead institution was entitled to exercise a dominant influence on the conduct of the savings banks, special provisions in Article 30 of the BWG had to be applied, and that did not take place; – the savings banks were better placed than the lead institution to draw up their banking conditions by reference to the regional and local situation; – each savings bank followed its own commercial policy and the banking conditions established by the savings banks for their commercial relations with customers were different; – above all, the regional savings banks competed with each other and with the subsidiaries of the lead institution in numerous local markets during the period concerned. 349 Second, as regards the exchanges of information between the lead institutions and the decentralised banks, RZB admits that such an exchange took place within its sector but it denies that the internal information and representation mechanisms were specially set up in order to implement the agreements. It states that the Raiffeisen sector infrastructure already existed when the infringements commenced and merely reflected the three-level structure of that sector. RZB is of the opinion that the transmission of information by RZB for the purpose of implementing the agreements at local level was certainly not of decisive importance because there were direct ‘horizontal’ contacts at local level and the Raiffeisen-Landesbanken could themselves obtain information regarding the agreements. Erste and ÖVAG maintain, on the other hand, that no transfer of information between the central establishment and the decentralised establishments has been proved in the case either of the savings banks or of the credit unions. 350 Third, RZB and Erste contest the findings contained in particular in recitals 61 and 517 to the contested decision to the effect that they were ‘representatives’ of their sectors and/or were regarded as such by the other banks. 351 RZB states it had no power to bind the whole sector at the meetings of the banks concerned, a fact which was entirely clear to the other participants in the meetings. It adds that it had no interest in ensuring that the whole Raiffeisen sector applied the agreements, given that, by reason of the structure of the sector, it would not have benefited from any gain allegedly deriving from the prohibited cartels. 352 Erste states, on the basis of a detailed analysis of the documents cited in the contested decision, in particular in recital 62, that those documents do not prove the allegation that it (or indeed GiroCredit before the merger) acted as representative of the whole savings bank sector at the committee meetings. In its reply, it adds that the Commission likewise cannot infer from the notification made in October 1999 of a draft agreement concluded within the savings banks sector, in which it was stated that the lead institution is required ‘to uphold the interests of the savings banks’, that it defended the interests of the latter in the committee meetings. It stated, at the hearing, that the savings banks sector underwent profound changes between 1997 and 1999 in that a closer relationship developed between the establishments and there were changes in the way they were presented in the market. Moreover, it contests the allegation made, in its view, in recital 61 to the contested decision that agreements on business conditions also existed within the group. 353 Fourth, Erste claims that the Commission cannot invoke the alleged influence of the Vienna committees on the regional committees to justify the attribution in question. It states that the contested decision disregards the fact that, although Erste/GiroCredit was present in the Länder, it was present through its own branches and not through the independent regional savings banks. Erste does not deny that itself or GiroCredit participated in the committee meetings at regional locations where it had branches. It emphasises that that does not mean that it attempted to bring influence to bear on the regional savings banks, which took part in those committee meetings independently of their lead institution, and states that it treated the regional savings banks at the committee meetings in exactly the same way as the other banks present. Arguments of the Commission354 The Commission states in particular that a distinction must be drawn between the attribution of the illegal conduct of one undertaking to another undertaking and the division of undertakings into categories for the purpose of determining the starting amount of the fine and it states that it penalised each of the lead institutions only for its own conduct, namely its contribution to the operation of the cartel throughout Austrian territory by means of the transmission of information intended for or originating from establishments within its sector. According to the Commission, the arguments concerning the lack of an economic unit and of rules applicable to associations of undertakings are therefore not relevant. It considers that it had good reason to take account of the market shares, in the light of the Guidelines, because it was necessary to take account of the effective capacity of the lead institutions to cause damage to competition. Finally, it claims that the lead institutions form, with their groupings, units carrying on a joint economic activity, in a similar way to economic units. Preliminary observations355 As a preliminary point, it is appropriate to bear in mind that the attribution to the central establishments of the market shares of the banks in their sectors relates to the division of the addressees of the contested decision into categories. By using its power in that regard, provided for in the sixth paragraph of Section 1A of the Guidelines, the Commission sought to take account of the effective capacity of those establishments to distort competition and the specific weight, and therefore the real impact on competition, of their unlawful conduct. 356 In that connection, the applicants’ view that the contested decision, by attributing the market shares of the banks in their sectors to the lead institutions, imputed to them the unlawful conduct of the latter, must be rejected. The contested decision does not base the allocation of market shares on specific findings relating to the actual participation of the decentralised banks in the infringement. As is apparent from recitals 516 to 518, in the first place the Commission relied on an examination of the particular features of the Austrian banking market which, in its view, is characterised by the fact that the importance of the central establishments within their networks and their effective capacity to distort competition are greater than would appear to be the case having regard to their respective activities as commercial banks. Second, the Commission referred to the role played by the lead institutions, on the one hand, within those sectors regarding implementation of the agreements, in particular through exchanges of information, and, on the other, as representatives of the sectors within the cartel. By so doing, the Commission penalised the lead institutions for their own conduct, the gravity of which was determined on the basis of the nature of the infringement committed – namely horizontal price agreements – account also being taken of the fact that the banking sector offers services which are of very great importance in both the retail and corporate sectors, that is to say for the economy as a whole (recitals 506 and 507 to the contested decision). 357 All the applicants’ complaints based on the incorrect premiss that the Commission attributed to them unlawful conduct engaged in by the banks in their sectors must therefore be rejected. 358 Moreover, it is undisputed that the fines imposed by the Commission on the lead institutions do not exceed the ceiling of 10% of their turnover, laid down in Article 15(1) of Regulation No 17. It is also common ground that the Commission did not classify the lead institutions as associations of undertakings. Therefore, the conditions which the case-law imposes for the allocation of the turnover of the members of an association of undertakings to that association for the purpose of determining that ceiling are not relevant in this case. Similarly, the Court must reject all the other complaints concerning failure to observe the conditions applicable to the way the turnover of members of an association of undertakings should be factored into the determination of a fine imposed on that association. 359 Next, it must be observed, as all the parties confirmed in the answers they gave to the questions put to them by the Court, that account must be taken, for the purpose of classifying undertakings into categories in accordance with the sixth paragraph of Section 1A of the Guidelines, of the objective or structural characteristics of the undertakings and the situation in the relevant market. 360 Those objective factors include not only the size and power of an undertaking in the market, as reflected by the undertaking’s market share or turnover, but also its links with other undertakings where such links are capable of influencing the structure of the market. As the Commission rightly observed in recitals 516 and 518 to the contested decision, the effective capacity of an undertaking to cause significant damage and the real impact of the infringement committed by it must be assessed against the background of the economic reality. It is therefore legitimate for the Commission, under the Guidelines, to take account of such relationships in order to determine the effective economic capacity of the members of a cartel to cause damage and the specific weight of their infringement. 361 It must be made clear in that connection that the structure of the market can be influenced not only where links between undertakings confer on one of them a power of management or complete control of the competitive conduct of other operators, as in the case of economic units. An undertaking’s power in the market may also increase, beyond its own market share, where it maintains stable relationships with other undertakings in which it is capable of informally exercising de facto influence on their conduct. The same applies where the links between undertakings have the effect of reducing or eliminating competition between them (see, by analogy, Case 27/76 United Brands v Commission [1978] ECR 207, paragraphs 99 to 103). The fact that such links are not of such a nature as to justify the finding that the undertakings concerned form part of a single economic entity does not mean that the Commission must disregard them and assess the market situation as if those links did not exist. 362 On the other hand, the specific conduct of the various members of a cartel or the degree of their individual culpability is not decisive, as such, for the purpose of division into categories. The conduct of an undertaking may, it is true, give some indication of the nature of its relations with other undertakings. The existence of specific types of conduct, such as the organisation of exchanges of information with the latter or the explicit adoption of positions at cartel meetings designed to defend their interests or require them to observe anti-competitive agreements, is not, however, either necessary or in itself sufficient to justify taking into consideration the market share of the latter undertakings when the power in the market of the first undertaking is assessed. In the absence of stable relationships with the undertakings with which information is exchanged or whose interests are represented, such conduct is not decisive for the purpose of classifying undertakings into categories, whereas, if appropriate, account may be taken of it when aggravating and mitigating circumstances are appraised, under Sections 2 and 3 of the Guidelines. 363 The reasoning on which the Commission based the allocation of market shares (see paragraph 356 above) must be interpreted in the light of the foregoing considerations. 364 In that regard, it is necessary to construe the reference, made in recitals 516 and 517 to the contested decision, to the role of the lead institutions as representatives of their sectors and the statement that there were agreements between the groups as referring essentially to elements inherent in the status of lead institution, such as the influence which the latter could bring to bear on the members of the group by virtue of its role, and not to acts specifically carried out by the applicants. That is borne out by recital 58 to the contested decision, according to which: ‘At this point the special part played in the network by the lead institutions Erste (ex‑GiroCredit), RZB and ÖVAG must be examined. Their historical, well‑practised role as coordinator and representative of their respective bank groupings on the Austrian banking market was directly utilised for the smooth functioning of the Lombard network. Firstly, they organised the mutual transfer of information between Vienna and the provinces within the respective bank groupings, and secondly they represented the interests of their grouping vis‑à‑vis the other groupings in the cartel.’ 365 The Commission also relied on objective factors relating to the structure of the market, stating that there are ‘special links’ which confer on the savings bank network a ‘group-like structure’ (footnote 21) and that the local Raiffeisen banks, despite not being subject to directions from RZB or the regional banks, ‘present … a restricted competitive relationship with one another’ (footnote 23). 366 Against that background, the reference to certain behavioural aspects forms part of the description of the lead institutions’ role. The exchanges of information referred to in the contested decision indicate the role of the lead institutions and their position within the groupings whereas the concept of ‘representation’ does not refer solely to particular conduct but may be construed also in a structural sense. 367 When examining the pleas of the central establishments challenging the legality of the contested decision regarding its allocation to them of the market shares of the banks in their sectors, the Court must take account of the foregoing considerations and of the discretion enjoyed by the Commission in determining the amount of the fines (Case T-150/89 Martinelli v Commission [1995] ECR II‑1165, paragraph 59) and exercise judicial review that is limited to verifying observance of the procedural rules and the obligation to state reasons, the material accuracy of the facts, and the absence of errors in law, of manifest errors of assessment and of misuse of powers. In addition to that examination of legality, it is incumbent on the Court to consider whether it should exercise its unlimited jurisdiction regarding the fine imposed on the central establishments. 368 First, it is therefore necessary to consider whether the contested decision respected the rights of the defence, which are procedural rules, and whether it adequately states the reasons relied on for the allocation to the central establishments of the market shares of the decentralised banks. Second, the legality of the reasoning which prompted the Commission to make that allocation will be examined in the light of the personal nature of liability for infringements of competition law. Third, it will be necessary to examine the applicants’ complaints regarding failure to observe the Guidelines, breach of the principle of equal treatment and the incompatibility of the Commission’s approach with the judgment in SCK and FNK v Commission, cited in paragraph 345 above. Fourth and lastly, the examination will consider the applicants’ complaints concerning the material accuracy of the factual findings on which the Commission relied and the question whether, in view of the role of the central establishments, the allocation made by the Commission was justified. The rights of the defence and the statement of reasons369 The Court must first reject the complaint that the Commission breached the applicants’ rights of defence by failing to mention, in the statement of objections, its intention to attribute the market shares of the decentralised sectors to the central establishments. As far as the calculation of the amount of the fines is concerned, it is sufficient, according to settled case-law, for the Commission to indicate expressly, in its statement of objections, that it is going to consider whether it is appropriate to impose fines on the undertakings concerned and to indicate the main factual and legal criteria capable of attracting a fine, such as the gravity and the duration of the alleged infringement and whether that infringement was committed ‘intentionally or negligently’ (MDF, cited in paragraph 213 above, paragraph 21). On the other hand, the Commission is not obliged, when indicating the elements of fact and of law on which it is to base its calculation of the fines, to explain the way in which it would use each of those elements in determining the level of the fine. Moreover, the undertakings have an additional guarantee, as regards the setting of the amount of the fine, in that the Court of First Instance has unlimited jurisdiction and may in particular cancel or reduce the fine pursuant to Article 17 of Regulation No 17 (LR AF 1998 v Commission, cited in paragraph 225 above, paragraphs 199, 200 and 206). In this case, the Commission indicated in the statement of objections that RZB, Erste and ÖVAG were lead institutions of their respective sectors. That indication was sufficient to respect the applicants’ rights of defence in that regard. 370 It follows that the complaints put forward by Erste and ÖVAG that the statement of objections did not contain sufficient information regarding the transmission of information within their sectors and regarding the representation of the decentralised banks by those central establishments must also be rejected. The reference to those matters in the contested decision forms part of the analysis of the effective capacity of the lead institutions to distort competition, for the purpose of classification into categories. In that context, they provide guidance illustrating the role played by the lead institutions, a role mentioned in the statement of objections. On the other hand, those matters have no separate influence on the assessment of the gravity of the infringement which, as already observed, was determined on the basis of the nature of the infringement, having regard to the importance of the banking sector for the economy as a whole (see, to that effect, Scandinavian Airlines System v Commission, cited in paragraph 311 above, paragraphs 158 and 159). Therefore, the Commission was not obliged to make any reference to them in the statement of objections. 371 As regards the complaint alleging inadequate reasoning, it must be stated that the indications given concerning the reasons for attributing the market shares of the decentralised groupings set out in recitals 515 to 518 to the contested decision are sufficient to enable the applicants to defend their rights and for the Court to carry out its review. It is clear from recitals 516 and 518 that the Commission sought to take account of the economic reality represented by the position of the central establishments within the decentralised banking networks and the influence they were capable of bringing to bear on the banks in their sectors in order to assess the effective capacity of those establishments to distort competition. In order to explain why the effective capacity of the latter to cause damage to competition corresponded to the capacity of all the decentralised sectors, recital 517 refers to the contribution made by the central establishments to the effectiveness of the Lombard network, to the representation of the interests of the sectors by those establishments and to the perception of the other participants in the committees, which, according to the contested decision, regarded the central establishments as representatives of the sectors. Regardless of whether those considerations justify the Commission’s approach, they indicate sufficiently clearly the reasons for which it considered that that approach should be adopted. The legality of the Commission’s approach in the light of the personal nature of liability for infringements of competition law 372 In accordance with the principle that liability for infringements of competition law is of a personal nature, a natural or legal person can be penalised only for acts imputed to him individually (see paragraph 333 above). 373 It must be borne in mind, in the first place, that the contested decision did not impute to the lead institutions the unlawful conduct of the banks in their sectors but penalised them for their own conduct, which was determined according to their capacity to cause damage to competition and the specific impact of their infringement, which result from the position occupied by them within the decentralised banking sectors (see paragraphs 355 to 366 above). 374 Since the Commission did not impute to the lead institutions any unlawful conduct of the decentralised banks, it is not relevant in this case to establish whether the links between the members of such a bank grouping mean that it can be classified as an economic unit. It follows that the complaint that the Commission’s approach was incompatible with the personal nature of liability for infringements of competition law is unfounded. 375 In that context, the applicants criticise the Commission for taking an inconsistent approach leading to a twofold penalty, in so far as it imposed individual penalties on two establishments forming part of the decentralised sectors, in which it found an infringement had been committed. They are, first, RLB, which forms part of the Raiffeisen sector and, second, EÖ, which, before its merger with the lead institution GiroCredit from which Erste originated, was one of the decentralised banks in the savings bank grouping (see paragraph 319 above). 376 In making that complaint, the lead institutions claim essentially that the Commission, having chosen to divide the cartel members into categories according to their market shares, was required then to set in advance a maximum aggregate amount for the fine, corresponding to 100% of the market shares of the members of the cartel, and then to apportion that total amount among the undertakings penalised according to their individual market shares. Admittedly, the Court of Justice and the Court of First Instance have recognised that such an approach is compatible with the individual determination of penalties (Case 45/69 Boehringer v Commission [1970] ECR 769, paragraphs 55 and 56, and Joined Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82 IAZ and Others v Commission [1983] ECR 3369, paragraphs 52 and 53; Joined Cases T‑191/98 and T‑212/98 to T‑214/98 Atlantic Container Line and Others v Commission [2003] ECR II‑3275, paragraph 1572). That cannot, however, be regarded as the only permissible approach. The only binding maximum amount that the Commission is required to observe in determining fines derives from Article 15(2) of Regulation No 17 and relates individually to each undertaking that participated in the infringement. The Commission may therefore, in particular, as it did in the Guidelines, give preference to an approach taking as its starting point the gravity of the individual infringement of each undertaking, assessed according to its power in the market. 377 As stated in paragraph 361 above, an undertaking’s power in the market and its capacity to cause damage to competition may be greater than the power and capacity in those respects which it derives directly from its individual market share, by reason of the informal links that it maintains with other operators, even if those links do not give it complete control of the latter’s conduct in the market. Where such links exist, the liability of those other operators is not affected by any consideration of the informal influence which the former undertaking is capable of bringing to bear on their conduct. It follows that it is not illegal, as regards individual determination of the penalty to be applied to each undertaking that participated in the infringement, to penalise both the lead institution, having regard to the impact of its infringement, as deriving from the influence it can exercise over the decentralised banks, and the latter for the infringement that they themselves committed. 378 Since the Commission’s approach thus consists in penalising each of the addressees of the contested decision for its own conduct, that approach cannot be classified as inconsistent and no twofold penalty is inflicted on the banks. It follows that RZB’s criticism that the Commission imposed a penalty for the conduct of the decentralised banks without giving them an opportunity to defend themselves must also be rejected. 379 Similarly, since the lead institutions were not penalised for the conduct of the decentralised banks, the legality of the Commission’s approach is not conditional upon each lead institution being able to pass on to the decentralised banks the burden of the fine imposed upon it. 380 It also follows that the criticism that the Commission tried to negate the effects of its decision not to take action against all the banks that participated in the committees is unfounded. The fact that the Commission does not initiate a procedure against certain undertakings that have participated in a cartel or that it does not impose any penalty on them cannot in itself preclude it from attributing the market shares of those undertakings to other cartel members if it is necessary to do so in order fully to establish the power of the latter in the market, having regard to the economic realities. The other complaints concerning the legality of the Commission’s approach– The compatibility of the Commission’s approach with the Guidelines 381 It must be borne in mind that, according to settled case-law, the factors to be taken into account in assessing the gravity of an infringement may, depending on the circumstances, include the volume and value of the goods in respect of which the infringement was committed and the size and economic power of the undertaking (MDF, cited in paragraph 213 above, paragraph 120, and IAZ and Others v Commission, cited in paragraph 376 above, paragraph 52). However, that does not in any way imply that the Commission is not entitled, in determining the gravity of the infringement, to attach more importance to the nature of the infringement than to the size of the undertakings (FETTCSA, cited in paragraph 167 above, paragraph 411). In this case, as emphasised in paragraphs 356 and 370 above, the criterion used to determine the gravity of the infringement was its nature, and the criterion of the applicants’ market shares was used, according to recital 519 to the contested decision, only at the later and separate stage of classification of the undertakings into categories in accordance with the sixth paragraph of Section 1A of the Guidelines. It is clear from the considerations set out in paragraphs 360 and 361 above that the Commission is entitled to take account, at that last stage, of the relations which the authors of an infringement maintain with other undertakings. Therefore, the complaint that the imputation of responsibility in question cannot be justified by a reference to the effective capacity of the lead institutions to cause damage to consumers cannot be upheld. 382 Next, it must be stated that RZB’s criticism that the contested decision infringed the Guidelines by taking the need for fines to be sufficiently deterrent as an independent ground for allocating market shares is factually deficient. As stated in paragraphs 364 to 366 above, the Commission based that allocation, essentially, on the role of the lead institutions. In those circumstances, neither the general reference to the dissuasive effect of the fine in recital 515 to the contested decision, nor the reference in recital 518, which was made when the economic reality was being examined in order to assess the effective capacity of the banks to cause damage to competition and the specific weight of the infringement, does anything more than take account of the dissuasive nature of fines as envisaged in the fourth paragraph of Section 1A of the Guidelines. Since deterrence is an aim of the fine, the requirement of ensuring deterrence is a general requirement by which the Commission must be guided throughout its calculation of the fine. 383 As regards RZB’s complaint that it is not necessary to take account of the market shares of the groupings in order to ensure a deterrent effect as far as it is concerned, it must be observed that the requirement of ensuring that fines have a sufficient deterrent effect is not conditional upon any likelihood that the authors of the infringement will reoffend. Even if the addressees of the contested decision do not envisage repeating conduct similar to that addressed by the contested decision, the dissuasive effect of penalties set solely in relation to the market shares of the lead institutions as commercial banks might prove insufficient in comparison with the damage that their infringements might cause. It is also legitimate for the Commission to take account of the dissuasive effect of its decision vis-à-vis other undertakings which might find themselves in a situation comparable to that of the lead institutions. Finally, RZB’s complaint that the Commission infringed its obligation to state reasons because it did not set out, in the contested decision, considerations concerning such a dissuasive effect in general terms is unfounded. The relevance of that aspect of deterrence is clear and specific references to that point were not necessary to enable RZB to challenge the contested decision on that point or to enable the Court of First Instance to carry out its review. 384 In this context, ÖVAG’s contention that the division into categories must take account only of the size of the undertakings and that deterrence is not relevant in that context must also be rejected. Provision is made for the size of undertakings to be taken into account and for them to be divided into categories essentially in order to ensure that the fines have a sufficiently dissuasive effect. 385 It follows that the applicants’ complaints that the Commission’s approach is contrary to the Guidelines must be rejected.– The alleged breach of the principle of equal treatment386 With regard to the criticism that the Commission infringed the principle of equal treatment by wrongly regarding the decentralised sectors as similar to the large centralised banks, it must be observed that, in so far as the personal nature of liability for infringements of competition law was respected, it is for the Commission, in accordance with the Guidelines, to assess whether the economic reality justified attributing to the lead institutions the economic power of their sectors. Without prejudice to the exercise of its unlimited jurisdiction, the Court of First Instance may censure that assessment only in cases of manifest error. However, no such error has been established. 387 As regards ÖVAG’s complaint that exchanges of information between BA-CA and certain banks in which the latter had holdings were disregarded, the Commission rightly points out that BA-CA would not have been classified in a different category if the market shares of the banks concerned had been attributed to it. – The judgment in SCK and FNK v Commission388 With regard to the argument that the allocation of market shares to the central establishments is contrary to the judgment in SCK and FNK v Commission, cited in paragraph 345 above, it must be observed that, in that case, the Court held that the assessment of the proportionality of a fine imposed on an undertaking (within the limits laid down in Article 15(2) of Regulation No 17) must be made in relation to that undertaking’s turnover without account being taken of the turnover of other undertakings maintaining commercial links with it if they cannot as a whole be classified as an association of undertakings. Given that the applicants do not deny the proportionality of the fine imposed on them in relation to their own turnover, their complaint based on the SCK and FNK v Commission judgment must be rejected as ineffective. The complaints concerning findings of fact and the assessment of the central establishments’ role389 With regard to the accuracy of the findings of fact on which the contested decision is based, the applicants in essence criticise the Commission for failing to produce evidence of certain conduct referred to in recital 517 to the contested decision, namely exchanges of information (Erste and ÖVAG) and the representation of the decentralised banks within the committees (RZB and Erste). 390 On the other hand, in their arguments concerning the independence of the decentralised banks, the structure of the sectors and the tasks of the central establishments, the applicants do not contest the specific factual findings set out in the contested decision concerning the role of those establishments within the sectors but, in essence, object to the assessment of that role by the Commission and the inferences to be drawn from it regarding appraisal of their power in the market. 391 When examining these complaints, first, it is incumbent on the Court of First Instance to verify, as part of its examination of the legality of the contested decision, whether the Commission committed errors of fact or manifest errors of assessment in that regard. Second, it has power to assess, in the exercise of its unlimited jurisdiction under Article 229 EC and Article 17 of Regulation No 17, the appropriateness of the amount of the fines. That assessment may justify the production and taking into account of additional information which the duty to state reasons under Article 253 EC does not as such require to be set out in the decision (KNP BT v Commission, cited in paragraph 330 above, paragraphs 38 to 40, and Case T-220/00 Cheil Jedang v Commission [2003] ECR II‑2473, paragraph 215). 392 In that regard, the links existing between the central establishments of the three sectors and the decentralised banks are described in particular in a judgment of the Constitutional Court of Austria of 23 June 1993, produced by the Commission in response to questions put to it by the Court. 393 Dealing with an application from a local (or primary) Raiffeisen bank against a provision of the Law on credit establishments then in force, which required decentralised banks associated with a central establishment as part of a ‘sectoral network’ (sektoraler Verbund) to maintain liquid reserves of a certain size with the central establishment, the Constitutional Court states first of all that the banks’ membership of such a network is voluntary and that there are multiple legal relationships between the network members and the central establishment, based on the Law governing companies, cooperative societies and associations and the statutes thereof. It explains that that closely interlocking network of rights and obligations developed over many decades, in the case both of the Raiffeisen sector, to which its judgment related, and of the credit unions and savings banks. The Constitutional Court states that the legislature is entitled to take account of the situation deriving from those developments and to take as a starting point the principle that the partners which joined such a network work together, on the basis of the same cooperative philosophy and in the best way for both sides, to further their parallel interests. It emphasises that the provision at issue in the proceedings before it is designed more particularly to safeguard the legal and economic autonomy of the ‘primary banks’, whilst keeping to a minimum the disadvantages associated with the business operations of small or very small economic entities. The Constitutional Court then observes that that provision is not only designed to ensure sufficient liquidity but is supplemented by the ‘legal guarantee of the sectoral grouping by the central body’. It goes on to say that those two objectives are clearly in the general interest and justify the contested rules, to such an extent that in many respects a grouping guarantees the activity of numerous smaller financial establishments, which is in line with the requirements of modern economic life and the resulting aspirations of the legislature. 394 The applicants have not shown that that description of the role of the central establishments and their relations with the decentralised banks was not correct or that the situation during the period of the infringement significantly differed from that described by the judgment of the Constitutional Court. Admittedly, the applicants indicated at the hearing, in response to questions put by the Court, that a new Law on the banking system had been adopted in 1994, thus post-dating the judgment of the Constitutional Court and pre-dating the period of the infringement. However, they gave no specific information concerning any divergences between that new law and the previous legal situation which might be relevant in assessing the role of the central establishments for the purposes of the present cases. 395 In view of the role of the central establishments and their relations with the decentralised banks, as described by a superior court of the Member State concerned, on the basis of information provided by the government of that State, it must be considered that the banks in the three groupings were linked with each other in such a way that they cannot in all respects be regarded as competitors in the market and that they had common interests which the lead institutions pursued. 396 It is true that RZB and Erste state that there is competition between the decentralised banks to the extent to which they are present in the same markets. 397 RZB admits, however, that the decentralised banks in the Raiffeisen sector were established in different markets and at different locations. With regard to the Raiffeisen sector, the Constitutional Court also observed that it was appropriate ‘to take into account … the particular market opportunities, which [could] be seized by the members when meeting as a grouping only by means of joint action in the economy, on an Austria-wide scale and beyond, thereby enabling them to build up advantages regarding both a regional focus and regional and supra-regional representation’. The Commission also produced extracts from a report on RZB’s business for the year 2000 in which RZB itself describes the ‘Raiffeisen bank grouping’ as if it constituted one and the same undertaking. 398 On the other hand, Erste states that there were 17, or even 29, places where GiroCredit and Erste itself were in direct competition, through their subsidiaries, with members of the savings bank grouping and that in many places several savings banks were present and competed with each other. 399 That statement is not however incompatible with the existence of links of a structural nature between establishments in the decentralised sectors and the central establishments, which served as a basis for the Commission’s view that competition in the Austrian banking market takes place between commercial banks (Aktienbanken) and the three ‘sectors’ of savings banks, Raiffeisen banks and credit unions. That view is the basis not only of the contested decision but also of the decisions in which the Commission dealt with concentrations in that market (see, in particular, the Commission decisions of 7 November 2000 declaring a concentration to be compatible with the common market (Case COMP/M.2140 – BAWAG/PSK), and of 14 November 2000 declaring a concentration to be compatible with the common market (Case COMP/M.2125 – Hypovereinsbank/Bank Austria) (OJ 2000 C 362, p. 7). The possibility cannot be excluded, in the case of a commercial bank which maintains a presence in the local markets through its subsidiaries, that there is some competition between the subsidiaries of such a bank established in the same locality. 400 Next, it is apparent from the judgment of the Constitutional Court that one of the functions of the central establishments is to provide the banks in their sectors with services relating to functions that those establishments could not undertake alone because of their smallness and their scant resources and that such a function is not incompatible with the independence of the decentralised establishments in those sectors, but is designed, on the contrary, to guarantee their autonomy. In their answers to the written questions put to them by the Court, Erste and ÖVAG confirmed that they carry out such a function. On the other hand, RZB stated that it had performed such a function in the past but denied that it continued to do so, stating in particular that the regional banks have not needed such services since the 1980s. That statement is, however, incompatible with the description of the functioning of the central establishments in the 1993 judgment of the Constitutional Court, which relates more particularly to the Raiffeisen sector. In that regard, the Constitutional Court referred in particular to certain services provided for in the statutes of the Raiffeisen regional bank in question, such as assistance and advice to members relating to economic issues, participation in guarantee establishments designed to protect both the members of the network and their customers and representation of members’ interests. Furthermore, in the RZB business report for the year 2000 mentioned above, it was stated that RZB performed ‘central service functions’ with the grouping. In those circumstances, it must be considered that the role of the central establishments was characterised, in particular, by service functions designed to enable the members of decentralised networks to carry on banking business despite their often limited size. 401 In view of all the foregoing, it must be stated that the links between the members of the bank groupings were liable to affect the structure of the market. Those considerations also show that an inherent feature of the position of the lead institutions was that, at the most important committee meetings in which they participated regularly, they played the role of representatives of their sectors, most of whose members, with the exception of RBW and NÖ-Hypo, were not present. 402 In that connection, it must be observed that the concept of ‘representation’ must be understood in the present context in an economic sense and not in a strict civil law sense. That concept implies, as indicated in recital 517 to the contested decision, representation of the economic interests of the entire sector. On the other hand, the question whether the central establishments had power legally to bind the decentralised banks is irrelevant in the present context, since in any event by virtue of Article 81(2) EC there was no possibility of the latter being legally ‘bound’ vis-à-vis other members of the cartel. 403 Nor is it relevant in that regard whether representation of the groupings’ interests formed part of the functions attributed to the central establishments by law or by their statutes, or whether that task was entrusted to associations of which the establishments of the various groupings are members (Österreichischer Raiffeisenverband, Sparkassenverband and Österreichischer Genossenschaftsverband). In view of the important and central role played by the lead institutions within their respective groupings, their participation in the main committees was necessarily perceived by the other banks not as participation merely as commercial banks but as participation of the sectors as such. That is particularly so because the decisions of most of the main committees concerned bank services which played a minor role in the lead institutions’ own commercial activities, whereas they were an essential part of the business of the decentralised banks. Moreover, those committees gave out ‘signals’ designed to orientate the decisions of the regional and local committees. In those circumstances, no relevance attaches to the question whether the representatives of the lead institutions within the committees carried out, at committee meetings, specific acts of ‘representation’ of the decentralised banks, such as declarations made or commitments given on behalf of those banks. Consequently, the applicants’ complaints that such conduct was not established by documentary evidence must be rejected as irrelevant. 404 The Court considers that, because of the links described above, a correct assessment of the effective capacity of the lead institutions to cause significant damage and of the specific weight of their unlawful conduct necessitates an examination not only of their own market shares as commercial banks but also of the market shares of the decentralised banks. 405 The service and assistance functions described above imply that the necessary expertise for operations falling outside the framework of day-to-day banking services, by reason of their difficulty, their importance or their exceptional nature, was concentrated within the lead institutions. The decentralised banks, which had no equivalent expertise, therefore had to rely on information from the lead institutions when taking decisions on questions falling outside ordinary banking operations. In those circumstances, the executives of the decentralised banks could easily be prompted to imitate the unlawful conduct of their lead institution without being overconcerned as to its legality, unless there were specific commercial reasons for following a different course of action. The lead institutions’ membership of the cartel was therefore liable to give to the executives of the banks belonging to the groupings the impression that participation in the agreements was desirable conduct in the interest of the grouping as a whole, advocated by those with greater expertise and better information and that it was appropriate to adopt such conduct, without there being any exposure to unreasonable risk. It thus considerably facilitated the decision of the executives of the decentralised banks to participate in it as well. On the other hand, non-participation of the lead institutions in the overall cartel would have given to the decentralised banks a signal that any anti-competitive conduct in which they might engage in the context of the Lombard network at local or regional level was a matter for which they alone were responsible and was not approved by the lead institution. In that regard, it is difficult to imagine that the decentralised banks would have systematically participated in local or regional concerted practices if the lead institutions had kept away from the committee meetings held in Vienna. 406 Although that influence of the lead institutions’ conduct on that of the members of their groupings could be strengthened by information flows between the central establishment and the decentralised establishments, as admitted by RZB, the existence of such exchanges is not, however, decisive in that regard. Little importance attaches to the means by which the decentralised banks were informed of the agreements in which the lead institutions participated provided that it was such participation, in conjunction with the position of the central establishment within the sector, that influenced the competitive behaviour of the decentralised banks in the manner described in the foregoing paragraph. It follows that the arguments put forward by Erste and ÖVAG, to the effect that such exchanges of information were not established as far as they were concerned, must be rejected as irrelevant. 407 It follows from all the foregoing considerations that the links between the lead institutions and the decentralised banks of their groupings endowed the lead institutions with far greater economic power than that which derived from their market shares as commercial banks and reflected the market share of their respective groupings in their entirety. 408 In those circumstances, the applicants’ complaints concerning the assessment of the facts in the contested decision in that regard cannot be upheld. Conclusion409 It follows that all the complaints made against the allocation of the market shares of the decentralised sectors to the central establishments must be rejected. 3. The statement of reasons for the division into categories and determination of the starting amounts (Cases T-260/02, T-261/02, T-263/02 and T-264/02) 410 BA-CA, BAWAG, PSK and Erste claim that the contested decision does not set out sufficient reasoning regarding the classification into categories. First, they criticise the Commission for not indicating the criteria it applied in that respect. Second, they claim that the contested decision does not enable them to verify the calculation of the market shares used for the classification into categories. BAWAG and PSK emphasise in particular that neither the period that the Commission considered as relevant, nor the sources on which it relied, nor its method of calculation based on market shares in the various markets taken into account, nor the overall market share are clearly apparent from the contested decision. PSK also claims that the Commission set separate starting amounts for it and for PSK-B (see paragraph 12 above) without indicating their respective market shares. 411 BA-CA, BAWAG and PSK are also of the opinion that the setting of the starting amounts for the various categories is not supported by an adequate statement of reasons, in particular regarding the calculation method and the criteria adopted. 412 The Commission is of the opinion that the contested decision contains an adequate statement of reasons. As regards the complaint that the market shares of PSK and PSK-B are not indicated separately, it adds that the banks know their own market shares and are therefore able to check the accuracy of the contested decision. 413 It is settled case-law that the statement of reasons for an individual decision must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Community Court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case. It is not necessary for the reasoning to go into all relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to the context in which that measure was adopted (Commission v Sytraval and Brink’s France, cited in paragraph 270 above, paragraph 63). 414 As regards the determination of fines for infringements of competition law, the Commission fulfils its obligation to state reasons where it indicates, in its decision, the factors on the basis of which the gravity and duration of the infringement were assessed, without being required to include in it a more detailed account or the figures relating to the method of calculating the fines (Cascades v Commission, cited in paragraph 286 above, paragraphs 38 to 47; see also Atlantic Container Line and Others v Commission, cited in paragraph 376 above, paragraphs 1522 and 1525). However useful statements of figures relating to the calculation of fines may be, they are not essential to compliance with the duty to state reasons (Case C-182/99 P Salzgitter v Commission [2003] ECR I-10761, paragraph 75). 415 In this case, the indications in the contested decision enabled the applicants to put forward numerous pleas alleging substantive illegality in relation to the calculation factors used to divide them into categories. The Commission stated, first, that the classification was based on market shares (recital 519) and, second, indicated the market shares of the addressees of the contested decision according to its calculations (recital 9). The Austrian banks are aware of their own market shares, which they can calculate on the basis of the monthly statistics published by the OeNB and their own turnover. Therefore, the fact that the contested decision indicated only partially (in footnotes 17 and 522) the specific sources from which the Commission obtained the figures on which it relied and did not explain the calculation method used to determine market shares and to classify the banks into categories did not adversely affect the latter’s defence. That applies also to the failure to indicate separately the market shares of PSK and PSK-B, which did not prevent PSK from contesting that aspect of the contested decision in detail. It follows that the Commission did not breach its obligation to give reasons in relation to the division into categories. 416 As regards determination of the starting amounts, those amounts translate into figures the division into categories made in the contested decision, and that provides an adequate explanation of their relative importance (Atlantic Container Line and Others v Commission, cited in paragraph 376 above, paragraph 1555). As regards the reasons underlying those amounts in absolute terms, it must be borne in mind that fines constitute an instrument of the Commission’s competition policy and the Commission must be allowed a margin of discretion when fixing their amount in order that it may channel the conduct of undertakings towards observance of the competition rules (Martinelli v Commission, cited in paragraph 367 above, paragraph 59). Moreover, it is important to ensure that fines are not easily foreseeable by economic operators. The Commission cannot therefore be required to set out reasons in that connection other than those relating to the gravity of the infringement. 417 The complaints concerning the reasoning of the contested decision regarding classification into categories and determination of the starting amounts are therefore unfounded. 4. The alleged breach of the principle of equal treatment (Cases T‑261/02, T-263/02 and T-271/02)418 BAWAG and PSK are of the opinion that it was contrary to the principle of equal treatment for them to be classified, each with a market share of 5%, in the third category with ÖVAG and Erste, which have a market share of 7% each. BAWAG emphasises that that difference of 40% in relative terms is very close to the difference between ÖVAG and CA (42.9%), and they were placed in different categories. According to BAWAG, ÖVAG and NÖ-Hypo, the borderline between categories cannot be justified by differences in market shares in absolute terms because it is differences in relative terms that are decisive. 419 BAWAG and PSK also consider that they were placed at a disadvantage compared with BA-CA and Erste, whose market shares are five, or even six times as big as theirs, whereas their fines are only four, or five times higher. 420 ÖVAG and NÖ-Hypo claim that the classification into categories does not take sufficient account of the difference in turnover and market shares of the undertakings placed in the fourth and fifth categories, which is much greater than the differences between the other categories, or of the differences of size of the undertakings classified in the latter category. Moreover, they claim that the classification into categories should be carried out separately for ÖVAG (whose market share is less than 1%) and for the grouping of credit unions (whose market share is about 4%), which, in their view, would result in the grouping being placed in the fourth category and ÖVAG in the last category. They are of the opinion that the Commission took that approach in Erste’s case. 421 The Commission states that the market shares of the undertakings placed in the same category are closer to each other than the market shares of the undertakings placed in the neighbouring categories and that the divergences between market shares of undertakings placed in the same category are an inherent feature of the system. 422 As regards the division of the cartel members into several categories, the effect of which is to make the basic amounts for all undertakings in the same group the same, it must be observed that the Commission’s approach in so doing, although ultimately ignoring differences of size of undertakings in the same category, cannot in principle be criticised. The Commission is not required to ensure, when fines are imposed on several undertakings involved in the same infringement, that the final amounts of the fines reflect every distinction between the undertakings concerned with regard to their size (see FETTCSA, cited in paragraph 167 above, paragraph 385, and the case-law there cited). 423 The fact remains, however, that any such division into categories must be in conformity with the principle of equal treatment and the determination of thresholds for each of the categories identified must be coherent and objectively justified (FETTCSA, cited in paragraph 167 above, paragraph 416). 424 In this case, the Commission did not set precise thresholds for the five categories which it identified but indicated, in its defence, ‘guide values’ for the market shares of undertakings placed in the same category. The differences between those guide values are coherent and objectively justified as regards the first to fourth categories. The guide value for the second to fourth categories corresponds, in each instance, to one-half of that of the category above, and the same applies to the corresponding starting amount. 425 As regards the fifth category, the so-called ‘catch-up’ category, the Commission departed from that system by grouping together undertakings whose market share (less than 1%) corresponds, at most, to about one-third of the guide value for the fourth category (2.75%), and it may also be considerably lower. Whilst the differences between the market shares of the undertakings belonging to that category are not great in terms of percentage points, the relative differences between them may be considerable. The starting amount of EUR 1.25 million which it set for that category is less than one-half, but greater than one-third, of the figure of EUR 3.13 million adopted for the fourth category. 426 Despite such differences of relative size as may exist between the undertakings with a market share of less than 1%, the Commission did not exceed its margin of discretion by placing them in the same category. Admittedly, it has been held that it is differences of size in relative terms that reflect the actual specific weight of the addressees of a decision (FETTCSA, cited in paragraph 167 above, paragraph 424). However, the usefulness of the Commission’s right to classify undertakings into categories would be considerably diminished if any difference between market shares, although important in relative terms and even where it corresponded to a very small divergence in terms of percentage points, precluded the placing of different undertakings in the same category as regards fines. 427 Moreover, the principle of equal treatment does not mean that the starting amount for that ‘catch-up category’ cannot be higher, in comparison with the size of the undertakings concerned, than those set for the categories above. The deterrent nature of a fine depends not only on its relative size in relation to the size of the penalised undertaking or its position in the market, but also on the amount of the fine in absolute terms. In that regard, it is for the Commission, in the exercise of its discretion concerning fines and subject to the exercise by the Court of First Instance of its unlimited jurisdiction, to set the starting amounts for all the undertakings covered by its decision at a sufficiently high level to ensure a deterrent effect. 428 The Commission did not therefore breach the principle of equal treatment to the detriment of the undertakings placed in the last category. 429 Next, it must be observed, subject to review of the complaints concerning the accuracy of the market shares, that the classification of BAWAG and PSK (with a market share of 5%) in the same category as ÖVAG and Erste (with a market share of 7%) does not exceed the limits of what is acceptable in the light of the principles of proportionality and equal treatment. A market share of 5% is very close to the guide value of 5.5% adopted for the third category, whilst a market share of 7% is significantly closer to that guide value than to that set for the category above (11%). 430 Finally, the principle of equal treatment did not in this case require the Commission to carry out its classification into categories separately for ÖVAG and for the credit union grouping. ÖVAG’s view that the Commission should have carried out a separate classification of that kind in the case of the lead institution Erste and the savings bank grouping derives from a factual error, given that the separate fine imposed on Erste/EÖ related to the period in which the latter was not yet the lead institution for that grouping, whilst a single starting amount was set for the lead institution (GiroCredit before the merger, then Erste), having regard to the market share of the grouping. 431 Therefore, the complaints in Cases T-261/02, T-263/02 and T‑271/02 alleging breach of the principle of equal treatment regarding the determination of starting amounts are unfounded. 5. Determination of market shares (Cases T-263/02, T‑264/02 and T‑271/02) PSK and PSK-B (Case T-263/02)432 First, PSK criticises the Commission for acting arbitrarily in relying, for the purposes of classification, on the market shares for retail and corporate lending and deposit transactions, without precisely defining the market, whereas, according to the contested decision, the cartel extended well beyond those transactions. 433 Second, PSK claims that the inappropriateness and arbitrariness of the Commission’s aggregating approach is demonstrated by its own situation. It observes that its market shares display considerable differences depending on whether lending or deposit transactions are involved. It states that the figure of about 5% adopted by the Commission for the joint market share of PSK and PSK-B is incorrect and states that, except in the case of retail savings deposits, its market share is much lower than 5%. In its reply, PSK provides particularised data, compiled by it on the basis of official figures from the OeNB monthly statements, according to which its precise market share in the retail and corporate deposit and lending markets was, from 1999 to 2001 (that is to say after the takeover of PSK-B), between 3.2 and 3.6%. In response to questions put to it by the Court, it also produced a statement of its market shares for the years 1995 to 1998 and PSK-B’s market shares for the years 1996 to 1998. 434 Third, PSK criticises the Commission for disregarding the fact that PSK-B’s position in the market was totally insignificant. It explains that PSK-B was almost a detached department of PSK specialising in lending, and it was absent from all the other areas of banking or else played only a minimal role. It states that PSK-B’s market share during the period covered by the investigation represented barely 1.5% in lending to retail customers and about 0.7% in corporate lending. PSK considers that, if the market shares had been calculated correctly, PSK-B could, at most, have been placed only in the fifth category. In its reply, it adds that, even if the approach set out by the Commission in its defence is applied and the cumulative market share of the two establishments is apportioned as to half each between PSK and PSK-B, the result for each of those banks is an average market share varying only between 1.6 and 1.8%. According to PSK, it was therefore necessary to place both PSK and PSK-B in the fifth category and to reduce the amount of the fine accordingly. 435 First, the Commission states that it determined the capacity of the banks to distort competition on the basis of their shares of a representative market, the markets for retail and corporate lending and deposit business being the main markets for banking products. It considers that the division into categories made by it on that basis is objective and appropriate and submits that it was not required to apply a weighting to the market shares relating to the deposit and lending sectors because the latter display turnovers of similar size. 436 Second, the Commission states that PSK has not demonstrated that its market shares were lower than the level indicated in the decision. It concludes, on the basis of information given by PSK itself, that PSK and PSK-B together held a market share of at least 4%. It refers, first, to PSK’s application, according to which, for deposit business, PSK’s market share, aggregated with that of PSK-B, amounts to 5% and, second, the notice of the merger of PSK with BAWAG, which refers to a cumulative market share of 3% in the lending sector. The average of those two figures gives, according to the Commission, a total market share of 4%, which must then be apportioned as to approximately half each between the two banks, because PSK, which, for a long period, was not authorised to engage in lending business, concentrated on deposit business and entrusted lending transactions to PSK-B. The Commission thus obtained for each of the two banks an average market share of at least 2%. 437 Third, the Commission is of the opinion that PSK and PSK-B were correctly placed in the fourth category, the guide value for which is 2.75%. In its view, it is immaterial in that regard whether their market share was 2.75%, as alleged by the Commission, or 1.6 to 1.8% as now asserted by PSK. It explains that the undertakings placed in the fourth category hold market shares which are smaller than those in the third category (about 5.5%) and higher than those in the fifth category (less than 1%). According to the Commission, the undertakings in the category in which PSK and PSK-B should be placed are between those two groups, and thus in a bracket of market shares extending from well over 1% to well under 5%. Erste and the savings bank grouping438 Erste claims that the 30% market share attributed to the savings bank grouping in recital 9 to the contested decision includes the market shares of two banks on which separate fines were imposed, namely, first, BA (without CA) and, second, EÖ (the name of Erste before the merger with GiroCredit). 439 Erste claims that BA is a savings bank by virtue of its legal form and therefore, for OeNB statistical purposes, falls within the savings bank sector. According to OeNB figures for 1995 to 1998, the market share of the savings bank sector (including BA) was about 30% (between 25 and 35% according to the markets), of which 12 to 13% related to BA. Erste infers that BA’s market share was attributed to the savings bank grouping in error, a fact which in its view is corroborated by the data concerning the number of branches and employees set out in recital 9 to the contested decision, which, in its view, include also those of BA. It states that OeNB official statistics have greater probative value than the decisions on control of concentrations on which the Commission relied and criticises the Commission for not applying weightings to the various sectors of business. 440 Erste also claims that the savings bank sector’s market share includes that of EÖ, even though a separate fine was imposed on it for the period before the merger with GiroCredit 441 Erste also observes that EÖ’s fine was calculated on the basis of a market share of 7% which, in its view, corresponds in fact to its market share after the merger with GiroCredit, EÖ’s market share during the period for which the separate fine was imposed having been only about 4%. 442 The Commission denies having attributed BA’s market share to Erste. In the alternative, it submits that that complaint is irrelevant since Erste would have to be placed in the first category even if its market share were 12 to 13% lower than that established in the contested decision. Similarly, the alleged inclusion of ËO’s market share in that of the savings bank grouping would have no impact on the division into categories. As regards the market share established for Erste/EÖ (before the merger), the Commission states that it does not include that of GiroCredit and that it was, in any event, higher than 5%. ÖVAG and the credit union grouping443 ÖVAG and NÖ-Hypo state that the market share of the credit union grouping (including ÖVAG) is far lower than 7%, namely, according to ÖVAG’s calculations, about 5% and, according to official studies, only 3 to 4%. 444 The Commission is of the opinion that those complaints are irrelevant because, with a market share of 5%, ÖVAG would in any event have been placed in the third category. It adds that ÖVAG’s market share is significantly over 5% and offers to prove this by means of confidential documents produced in the procedures leading to the decisions on control of concentrations to which it referred in the contested decision. 445 As regards, first, the choice of markets, the Commission did not commit any error in considering that the retail and corporate lending and deposit markets were representative in order to evaluate the relationships of economic forces in the Austrian banking market and by taking the average of the banks’ market shares in those markets as the basis for the division into categories. 446 As regards, second, the Commission’s finding that the joint market share of PSK and PSK-B was 5% in the combined deposits and lending markets, it must be pointed out that that figure is not disputed with regard to deposits by retail customers and that, according to the data produced by PSK in reply to questions put to it by the Court, the joint market share of PSK and PSK-B for all deposits, including those of corporate customers, was not on average lower than 4.89% for the years 1996 to 1998. 447 On the other hand, with regard to lending, the applicant maintains that the joint market share of PSK and PSK-B was lower than 2%, whilst the Commission contends that their market share was 3.5 or 4%. In support of their statements, the parties have produced the following documents: – a document from the procedure for the control of concentrations submitted by the Commission as an annex to its rejoinder, according to which the market share of the ‘PSK group’ in the lending market was 3% in 1998; – a document drawn up in 1997 by PSK, forming part of the administrative file in this case and produced by the Commission in response to questions put to it by the Court, according to which its ‘customer share’ in the lending market was 3 to 4%; – a document drawn up in the procedure for the control of concentrations COMP/M.873, BA/CA, produced by the Commission in response to questions put to it by the Court, the confidential version of which demonstrates, according to the Commission, that PSK had in 1995 a market share of 4% in lending business, whereas the non-confidential version of that document indicates, for the various lending markets, brackets of 2 to 6%, 3 to 7% and 1 to 5%; – a statement provided by PSK in response to questions put to it by the Court according to which the joint market share of PSK and PSK-B in the lending market varied, between 1996 and 1998, from 1.49 to 2.03%, with an average of about 1.8%. 448 As regards the first of those documents, it must be observed in the first place that the Commission had indicated in its rejoinder, mistakenly, that it derived from procedure COMP/M.2140, BAWAG/PSK (see paragraph 436 above). In its written replies to the Court’s questions, it indicated that that document had in fact been produced in procedure COMP/M.2125, HypoVereinsbank/Bank Austria, in which it was one of the documents notified. It must be held that that error prompted the Commission to attribute to that document greater probative value than it had in reality. Contrary to what the Commission considered when relying on that document, it had not been drawn up by PSK but by competitors of PSK, which were parties to another concentration. Since each bank knew its own market share (see paragraph 415 above), the statements given by the parties to a concentration in the Austrian banking market regarding their own market shares have considerable probative value. On the other hand, information that may be given by banks concerning the market shares of their competitors is normally of an approximate nature, given that it concerns the latter’s business secrets. That is confirmed, in this case, by the fact that that document, which does not indicate the period to which it relates, mentions a market share of 4% for the PSK group in the deposits market, whereas, according to PSK and the Commission, that market share was about 5%. Therefore the figures contained in that document cannot be regarded as reliable regarding the market shares of PSK and PSK-B. 449 As regards the second document, the ‘share of customers’ to which it refers must be distinguished from the market share, given that the latter depends not only on the number of lending transactions but also on their volume. As regards the third document, only the non-confidential version can be taken into account by the Court of First Instance, in accordance with Article 67(3) of the Rules of Procedure. That version indicates brackets that are too wide to facilitate, in this context, a sufficiently precise evaluation of the joint market share. Finally, it must be pointed out that the figures calculated by PSK on the basis of the OeNB monthly statements are significantly lower than those resulting from the documents produced by the Commission. 450 According to those figures, the joint market share of PSK and PSK-B in the deposits market (4.89%) and the lending market (1.8%), calculated in accordance with the method used by the Commission, amounted on average to about 3.35%. It must be pointed out that it has not been established, by the details provided by the parties in response to measures of organisation of the procedure, that the joint market share of PSK and PSK-B exceeded that figure. 451 The discrepancy between that figure and the Commission’s finding as to the joint market share of PSK and PSK-B is such that it may have influenced the category in which they were placed. 452 On the basis of a joint market share for PSK and PSK-B of 3.35%, a market share of 1.675% would have had to be attributed, according to the Commission’s approach, to each of those two establishments. In such a case, their being placed in the fourth category would not have been acceptable in the light of the principles of proportionality and equal treatment and would have undermined the coherence of the system of division into categories adopted by the Commission in this case. A market share of 1.675% corresponds to only about 60% of the guide value of 2.75% set for the fourth category and about 25% of the market share of 7% which, according to the Commission, justified the placing of Erste and ÖVAG in the third category and the setting of a fine twice as high as that imposed on PSK and PSK-B. Finally, the taking into account of the joint market share of PSK and PSK-B (3.35%) should have resulted, according to the system adopted by the Commission, in their being placed in the fourth category, in which it placed PSK and PSK-B separately. However, it is not compatible with the classification system adopted in this case for undertakings of which one has a market share twice as big as that of the other to be placed in the same category, except as regards the ‘catch-up category’. Admittedly, as the Commission observes, the discrepancy between a market share of 1.675% and the guide value for the fifth category (less than 1%) is too big for PSK and PSK-B to be placed in the latter. It must be pointed out that the Commission, in view of the data on the basis of which it made its division into categories, did not take account in its system of market shares of between 1 and 2%, whereas it should have done so if the market shares of PSK and PSK-B had actually been within that bracket. 453 In those circumstances, the Court should, in the exercise of its unlimited jurisdiction, set the starting amount for the fines to be imposed on PSK and PSK-B. 454 In that connection, it is appropriate to set a single starting amount for PSK and PSK-B. Whilst it is true that the Commission had determined separate starting amounts, it nevertheless, taking account of the merger of those two establishments in 1998, imposed a single fine on PSK. In view of all the information in the file regarding the market shares of PSK and PSK-B, in particular information produced in the context of measures of organisation of procedure, it is appropriate to set a starting amount of EUR 3.13 million, corresponding to the fourth category. 455 According to recital 9 to the contested decision, Erste (after merging with GiroCredit) and the savings bank grouping had a market share of 30%, whilst the market share of Erste alone was about 7%. It is apparent from recitals 519 and 522 to the contested decision that the Commission calculated two separate starting amounts, first for the lead institution (GiroCredit before the merger and Erste after the merger), to which the market shares of the savings bank grouping were attributed and, second, for EÖ as regards the period prior to the merger. The increase by reason of the duration of the infringement was applied to the starting amount of the lead institution for the whole period concerned (three-and-a-half years) and that of EÖ for the period prior to the merger (three years). – The fine imposed on the lead institution456 It is apparent from the considerations set out in paragraphs 377 and 378 above that the Commission did not illegally consider that the market share of the savings bank grouping included that of EÖ, which was thus taken into consideration both to determine the starting amount for the savings bank grouping and for the determination of its own fine. 457 As regards the complaint that BA’s market share, which was close to 12 to 13%, was mistakenly included in the figure of 30% attributed by the contested decision to the entity made up of the lead institution and the savings banks, it must be stated that, after deduction of BA’s market share, the remaining market share of 17 to 18% still justified classification in the first category, given that it is much closer to the guide value of 22% than to that of 11%, which related to the second category. That complaint must therefore be rejected in the context of the examination of the legality of the Commission decision, given that, even if it were upheld, it could not call in question the operative part of the contested decision. Moreover, the Court considers, in the exercise of its unlimited jurisdiction, that the placing of Erste in the first category is justified with a view to arriving at a fine of an appropriate amount. – The separate fine imposed on EÖ458 The complaint alleging inaccuracy of the market share of 7% attributed to EÖ by the contested decision is ineffective. According to the indications given by Erste in its application and in response to questions put to it by the Court, EÖ’s market share was 5.3% for deposits, 4.8% for corporate lending and 4.1 to 4.4% for retail lending. If it is assumed that those figures are accurate, the result would merely be that, overall, EÖ’s market share was lower than 5%, so that its classification in the third category, with a guide value of 5.5%, must, in any event, be regarded as justified. ÖVAG and the credit union grouping (Case T-271/02)459 To demonstrate the Commission’s error regarding the market share attributed to ÖVAG by the contested decision, ÖVAG produced three documents, namely: – a table for the years 1994 to 1998 according to which the market share of the credit union grouping varied, in terms of balance-sheet total, from 4.31 to 4.45%; – a table apparently drawn up by the OeNB indicating the market shares of the Austrian banks in 1999 and 2000, according to which the market share of the credit union grouping was 2.7%, or 2.8%, but without specifying the market in relation to which those figures were calculated; – a diagram apparently drawn up by the OeNB which indicates market shares in terms of balance-sheet totals, without indicating the period covered by it, according to which the market share attributed to ÖVAG was 4.38%. 460 It must be pointed out that those documents do not relate to the markets in retail and corporate lending and deposit business, in relation to which the Commission evaluated the market shares of the addressees of the contested decision. Moreover, the second document does not relate to the period of the infringement, and the figures it contains differ significantly from those in the first document for that period. Moreover, the market shares indicated in the first and third documents are closer to the guide value for the third category (5.5%) than to that of the fourth category (2.75%), both in absolute and in relative terms. 461 It follows that the complaints put forward by ÖVAG are not such as to affect the validity of its classification in the third category. Moreover, the Court considers, in the exercise of its unlimited jurisdiction, that the classification of ÖVAG in the third category is justified for the purpose of arriving at a fine of an appropriate amount. (c) Conclusion 462 It follows that the starting amount of the fine imposed on PSK and PSK-B (Case T‑263/02) should be set at EUR 3.13 million, whilst the complaints concerning the determination of market shares and the setting of starting amounts raised by Erste (Case T-264/02) and ÖVAG (Case T‑271/02) must be rejected. 6. Conclusion concerning the division into categories and the setting of starting amounts463 It follows from all the foregoing that, except as regards PSK and PSK-B (Case T-263/02), all the applicants’ complaints concerning the division into categories and the setting of starting amounts must be rejected. D – The pleas concerning the duration of the infringement (Cases T‑259/02, T‑261/02 and T-263/02)464 RZB, BAWAG and PSK consider that the increase of 35% of the starting amount on account of the duration of the agreements is excessive. They refer to the reduced frequency of the committee meetings and of the intensity of concertation between the banks in 1997 and 1998 and submit that an increase of 10% per year is, under the Guidelines, the maximum by which the starting amount may be increased. BAWAG and PSK also state that, for infringements lasting less than one year, no increase of the fine is permissible. They consider that, by applying a rate of increase of 10% per year, the Commission illegally failed to exercise the discretion available to it under the Guidelines. 465 Under the last subparagraph of Article 15(2) of Regulation No 17, regard must be had, in addition to the gravity of the infringement, to the duration of the infringement in fixing the amount of the fine. It follows that the impact of the duration of the infringement on the starting amount of the fine must, as a general rule, be significant. Except in special circumstances, that militates against a purely symbolic increase of the starting amount on account of the duration of the infringement. Thus, where an agreement with an anti-competitive objective is not implemented, it is nevertheless necessary to take account of the period during which the agreement existed, that is, the time between the date on which it was entered into and the date on which it was terminated (FETTCSA, cited in paragraph 167 above, paragraph 280). 466 The applicants’ view that, according to the Guidelines, the starting amount may not be increased by more than 10% a year on account of the duration of the infringement cannot be upheld. The Guidelines lay down that limit only for infringements of long duration, whilst for those of medium duration (in general one to five years) the sole upper limit was set at 50% of the starting amount, which does not rule out exceeding a rate of increase of 10% a year. Therefore, the applicants’ view that an increase corresponding to 10% a year of the starting amount must be reserved for special cases must be rejected. Similarly, the criticism that the Commission failed to use its discretion when fixing the additional amount within the maximum limit is unfounded. 467 As regards the assertion that the infringement which the applicants are alleged to have committed was diminishing in intensity, it must be pointed out that an increase in the fine by reference to the duration of the infringement is not limited to a situation in which there is a direct relation between the duration and serious harm caused to the Community objectives referred to in the competition rules (Joined Cases T-202/98, T-204/98 and T-207/98 Tate & Lyle and Others v Commission [2001] ECR II‑2035, paragraph 106; see also Case T-203/01 Michelin v Commission [2003] ECR II‑4071, paragraph 278). 468 Therefore, the pleas concerning the increase of the starting amount on account of the duration of the infringement must be rejected. E – Mitigating circumstances469 The applicants criticise the Commission for failing to take account of the mitigating circumstances to which they referred in the administrative procedure. 470 First, RZB (Case T‑259/02), BAWAG (Case T-261/02), PSK (Case T‑263/02), and ÖVAG and NÖ-Hypo (Case T-271/02) claim that the infringement was committed negligently and not intentionally. As has been held in paragraphs 201 to 211 above, that complaint is unfounded. Second, BAWAG, PSK and Erste (Case T‑264/02) assert that the agreements were not implemented. In so far as their arguments relate to the infringement as a whole and not to the individual conduct of the applicants, they have been examined in the context of assessment of the intrinsic gravity of the infringement (see paragraphs 289 to 295 above). Third, the same applies to the argument concerning the allegedly marginal effects of the infringement, put forward as a mitigating circumstance in Cases T-259/02, T-261/02 and T-263/02, which comes within the scope of the assessment of the intrinsic gravity of the infringement (see paragraphs 231 to 233 above). 471 Fourth, RZB, BAWAG, PSK, ÖVAG and NÖ-Hypo criticise the Commission for disregarding their individual roles within the cartel. Fifth, several banks refer to the immediate termination of the infringement after the investigations. Sixth, BAWAG, PSK and Erste maintain that the Commission should have taken account of the fact that there was reasonable doubt as to whether the banks’ conduct constituted an infringement. Seventh and last, Erste criticises the Commission for failing to take account, as a mitigating circumstance, of the crisis in the Austrian banking sector. 472 Before the complaints concerning the various matters referred to above are examined, it should be noted that the Commission must comply with the terms of its own Guidelines when determining the amount of fines. However, the Guidelines do not state that the Commission must always take account separately of each of the mitigating circumstances listed in Section 3 of the Guidelines and it is not obliged to grant an additional reduction on such grounds automatically; the appropriateness of any reduction of the fine in respect of mitigating circumstances must be examined comprehensively on the basis of all the relevant circumstances. 473 The adoption of the Guidelines has not rendered irrelevant the previous case-law under which the Commission enjoys a discretion as to whether or not to take account of certain matters when setting the amount of the fines it intends imposing, by reference in particular to the circumstances of the case (see, to that effect, the order of the Court of Justice of 25 March 1996 in Case C‑137/95 P SPO and Others [1996] ECR I-1611, paragraph 54; Ferriere Nord v Commission, cited in paragraph 166 above, paragraphs 32 and 33, and Joined Cases C‑238/99 P, C‑244/99 P, C‑245/99 P, C‑247/99 P, C‑250/99 P to C‑252/99 P and C‑254/99 P Limburgse Vinyl Maatschappij and Others v Commission [2002) ECR I‑8375, paragraph 465; see also, to that effect, the judgment in KNP BT v Commission, cited in paragraph 330 above, paragraph 68). Thus, in the absence of any binding indication in the Guidelines regarding the mitigating circumstances that may be taken into account, it must be concluded that the Commission has retained a degree of latitude in making an overall assessment of the extent to which a reduction of fines may be made in respect of mitigating circumstances. 2. The role of certain applicants within the committees (Cases T‑259/02, T-260/02, T-261/02, T-263/02 and T-271/02)474 RZB (Case T-259/02) states, first, that the agreements were essentially unconnected with its own banking business so that it pursued no interest of its own and, second, that its contribution to the committees was limited to forwarding information to the other Raiffeisen sector banks and was minimal compared with that of the other banks, whose own business was covered by the agreements. It considers that its position is comparable to that of an ‘overseer of the cartel’, that is to say an undertaking whose limit is confined to overseeing compliance with the cartel and carrying out acts of collaboration such as the forwarding of information, coordination and control. 475 PSK (Case T-263/02) claims that its role was negligible by reason of the restrictions to which its business was subject, whilst PSK-B had very limited commercial weight, that they did not participate at all in certain committees and that their participation in others was limited or passive. It refers to the sporadic nature of PSK-B’s participation in the committees (15% of 335 committee meetings, for which a list of participants was supplied as an annex to the statement of objections) and criticises the Commission for failing to assess the individual participation of PSK and PSK-B separately, in so far as it imposed separate fines on them. 476 ÖVAG and NÖ-Hypo (Case T-271/02) claim that they should be classified as ‘followers’. They again refer to the existence of a ‘small banking circle’ (see paragraph 145 above), within which the largest banks consulted each other before the committee meetings and took the decisions with which the other members of the cartel (such as ÖVAG and NÖ-Hypo) could only associate themselves, without being able to influence their content. 477 BA-CA (Case T-260/02) asserts, without explicitly invoking mitigating circumstances, that its own conduct did not conform to the agreements and that there was no causal link between the agreements and its own interest rate policy. BAWAG (Case T-261/02) refers to its role as a ‘free electron’ whose systematic failure to observe the agreements considerably upset the work of the committees and gave rise to retaliatory measures and criticisms from the other banks. It explains its participation in the committees by the need not to be isolated from the numerous concerted practices that took place within that environment that were compatible with competition law. 478 The Commission refers to its discretion regarding the taking into account of mitigating circumstances and considers that there was no need to take account of the allocation of roles within the cartel, in so far as all the participants benefited equally from the agreements and exchanges of information and the participation of all the banks was of capital importance to ensure that the cartel worked. 479 With regard to RZB, PSK and PSK-B, it observes that their role in the committee meetings was not passive or insignificant. In Case T-271/02, the Commission does not contest the existence of the ‘narrower circle’ mentioned by ÖVAG and NÖ-Hypo, but contends that those occasional concerted practices between some members of the cartel were merely preparatory. It draws attention to the active participation of ÖVAG and NÖ-Hypo in the concertations in the context of the most important committees and the importance of that participation for the functioning of the cartel. 480 According to the Commission, BAWAG has not demonstrated that it was compelled to participate in the infringement against its will and, in any event, its conduct was not capable of neutralising many of the anti-competitive effects of the agreements concluded by the other banks, its market share being only 5%. Passive conduct or ‘follow-my-leader’ role (Cases T-259/02, T-263/02 and T-271/02)481 According to the first indent of Section 3 of the Guidelines, ‘an exclusively passive or “follow-my-leader” role’ of an undertaking in the commission of the infringement may, if established, constitute a mitigating circumstance. 482 In that connection, first, it is clear from the case-law that one circumstance that may indicate the adoption by an undertaking of a passive role within a cartel is where the undertaking’s participation in cartel meetings is significantly more sporadic than that of the ‘ordinary’ members of the cartel (Case T-311/94 BPB de Eendracht v Commission [1998] ECR II-1129, paragraph 343; Cheil Jedang v Commission, cited in paragraph 391 above, paragraph 168, and Tokai I, cited in paragraph 331 above, paragraph 331). 483 It was precisely on the basis of their frequent participation in the committees that it regarded as most important that the Commission chose the addressees of the contested decision (see recital 470), and it is clear from the statement recording the participation of the various banks in those committee meetings, produced by the Commission, that RZB, PSK and ÖVAG participated in about 70% of the meetings (the total number of which was 126), PSK-B in 30% and NÖ-Hypo in about 40%, and that cannot be described as sporadic (see paragraph 146 above). The fact that PSK-B may have participated less frequently in other committees does not justify any different conclusion. 484 As regards the criticism based by ÖVAG and NÖ-Hypo on the failure to take account of the role of a ‘smaller banking circle’ which, according to them, ran the cartel, it must be borne in mind that the Commission did not disregard the existence of prior concertation among the large banks and that it does not appear that its decision to attribute decisive importance to other committees in assessing the respective role of the cartel members was adopted in breach of rules governing procedure or statements of reasons. Nor have ÖVAG and NÖ-Hypo demonstrated that the Commission committed errors of fact or misused its powers or that it committed any manifest error of assessment in choosing to concentrate on the ‘institutionalised’ meetings of the various committees of the Lombard network (see paragraphs 144 and 145 above). 485 As regards, second, the conduct of the banks at the meetings, RZB, PSK, ÖVAG and NÖ-Hypo do not refer to any specific circumstances, or evidence such as statements by other members of the cartel, capable of demonstrating that their attitude at the meetings in question differed significantly from that of the other banks by amounting to a purely passive or follow-my-leader role. 486 Moreover, provided that an undertaking has participated, even without playing an active role, in one or more meetings with an anti-competitive purpose, it must be regarded as having participated in the cartel unless it proves that it publicly distanced itself from the unlawful concertation (see Joined Cases T‑25/95, T‑26/95, T‑30/95 to T‑32/95, T‑34/95 to T‑39/95, T‑42/95 to T‑46/95, T‑48/95, T‑50/95 to T‑65/95, T‑68/95 to T‑71/95, T‑87/95, T‑88/95, T‑103/95 and T‑104/95 Cimenteries CBR and Others v Commission [2000] ECR II-491, the ‘Cement judgment’, paragraph 3199, and the case-law there cited). By their presence at the meetings, the applicants adhered or at least gave the other participants to believe that they adhered in principle to the terms of the anti-competitive agreements concluded at the meetings (Case T-50/00 Dalmine v Commission [2004] ECR II-2395, paragraph 296). 487 It must also be pointed out that the contested decision recognises, in recitals 539 to 541, the existence of certain differences between the roles played by the various banks within the committees, and in particular the more important role of the large banks, or the banking groups, with regard both to invitations to the committee meetings and to the conduct of meetings. It observes however that, in so far as the role of the various banks or the various banking groups is in line with their position in the market, the necessary differentiation was already taken into account when the banks were allocated to different categories. The applicants have not demonstrated that the Commission committed a manifest error in considering that such differentiation was sufficient to reflect the role of the various banks within the cartel (see, by analogy, FETTCSA, cited in paragraph 167 above, paragraph 293), and the Court considers that it is likewise not appropriate to depart from that view in the exercise of its unlimited jurisdiction. 488 That differentiation is also sufficient to take account of the alleged absence of any interest of their own in relation to the agreements concerning bank business which they did not carry on themselves, to which RZB and PSK refer. In RZB’s case, the assessment of its role within the cartel cannot be separated from that of its role as a lead institution, and the complaints concerning the taking into account of that role have been rejected in paragraphs 367 to 407 above. As regards PSK and PSK-B, it must be noted that the circumstances invoked by PSK in the present context have been taken into consideration in relation to the division into categories (see paragraphs 445 to 454 above), which is sufficient to take adequate account of the role of PSK and PSK-B within the cartel. 489 Finally, in assessing the passive or follow-my-leader role of the applicants, it is not relevant whether or not the addressees of the contested decision benefited from the agreements. First, a follower may also benefit from the effects of a cartel. Second, the fact of not benefiting from an infringement cannot constitute a mitigating circumstance, since otherwise the fine would cease to have any deterrent effect (see, to that effect FETTCSA, cited in paragraph 167 above, paragraphs 340 to 342, and the case-law there cited, and Tokai I, cited in paragraph 331 above, paragraph 347). The role of BA-CA (Case T-260/02) and of BAWAG (Case T-261/02)490 According to the second indent of Section 3 of the Guidelines, ‘non-implementation in practice of the offending agreements or practices’ may also amount to a mitigating circumstance. However, the fact that an undertaking whose participation in a concerted practice with its competitors is established did not conduct itself in the market in the manner agreed with its competitors does not necessarily have to be taken into account, as a mitigating circumstance, when the amount of the fine to be imposed is determined. 491 An undertaking which, despite colluding with its competitors, follows a more or less independent policy in the market may simply be trying to exploit the cartel for its own benefit (SCA Holding v Commission, cited in paragraph 324 above, paragraph 142, and Cascades v Commission, cited in paragraph 262 above, paragraph 230) and an undertaking which does not distance itself from the results of a meeting in which it was present in principle retains full responsibility for the fact of its participation in the cartel (Cement judgment, cited in paragraph 486 above, paragraph 1389). Therefore, the Commission is not required to recognise the existence of a mitigating circumstance consisting of non-implementation of a cartel unless the undertaking relying on that circumstance is able to show that it clearly and substantially opposed the implementation of the cartel, to the point of disrupting the very functioning of it, and that it did not give the appearance of adhering to the agreement and thereby incite other undertakings to implement the cartel in question. It would be too easy for undertakings to reduce the risk of being required to pay a heavy fine if they were able to take advantage of an unlawful cartel and then benefit from a reduction in the fine on the ground that they had played only a limited role in implementing the infringement, when their attitude encouraged other undertakings to act in a way that was more harmful to competition (Mannesmannröhren-Werke v Commission, cited in paragraph 224 above, paragraphs 277 to 279). 492 As regards BA-CA, it does not appear from the file that it openly opposed the conclusion or implementation of agreements. It merely invokes the lack of any influence of the decisions taken at certain committee meetings on the interest rates actually applied by it or the former CA. That circumstance cannot be taken into account to reduce the fine imposed on BA-CA. 493 As regards BAWAG, the extracts from the Commission’s administrative file which it produced as an annex to its application do not give a uniform impression as to its conduct. Thus, it appears that, on several occasions, BAWAG unilaterally offered to customers better conditions than those agreed between the banks, sometimes surprising its competitors or behaving differently from what had been indicated at a committee meeting, sometimes after announcing its intention not to comply with the agreements. However, on one of those occasions, CA and Erste behaved in the same way as BAWAG, which was therefore not the only member of the cartel to behave independently at that time. There are also examples of meetings in which BAWAG manifested its disapproval, at least partially or with regard to the dates for implementation of the agreed conditions. Its conduct occasionally forced other banks to adjust or to examine whether they could implement an agreement regardless of BAWAG’s conduct; it was criticised on that point, the other banks having stated that their confidence in BAWAG was shaken, and its exclusion from certain committees was envisaged. However, it is apparent from minutes referred to by BAWAG itself in another context, cited in paragraph 294 above, that BAWAG reproached certain of its agencies which were not complying with the agreements. 494 Those documents show that BAWAG sometimes explicitly refused to participate in the agreements, that on occasions it used the cartel for its own benefit, and that, on other occasions, it respected the agreements concluded. Despite its limited market share, the possibility is not excluded that its conduct may also at certain times have disrupted the implementation of the agreements by the other banks. In view of the ambiguous nature of BAWAG’s conduct, it has not however been demonstrated that the Commission committed a manifest error by refusing to recognise a mitigating circumstances in its case. The Court considers that again it is not appropriate to reduce the fine on that ground by exercising its unlimited jurisdiction. 3. The termination of the infringement (Cases T-259/02, T-261/02, T-263/02, T‑264/02 and T-271/02)495 RZB, BAWAG, PSK, Erste, ÖVAG and NÖ-Hypo criticise the Commission for failing to comply with the Guidelines by refusing to take into account the fact that the banks brought the committee meetings to an end immediately after the investigations. They consider that the Commission cannot in this case rely on the fact that the infringement at issue was ‘well known’ as a basis for refusing to consider that fact as a mitigating circumstance within the meaning of the Guidelines. ÖVAG and NÖ‑Hypo emphasise in that connection that they were not aware that they were infringing Article 81(1) EC. They add that the Commission failed in its obligation to state reasons because the contested decision does not disclose the ‘special circumstances’ which prevented the immediate termination of the infringement from being regarded as a mitigating circumstance. 496 The Commission states that there is no automatic mechanism whereby the termination of an infringement always amounts to a mitigating circumstance and the continuation of an infringement an aggravating circumstance. In this case, it considers that because the infringement was ‘well known’ for many years, its hypothetical termination, after the investigations carried out by the Commission, cannot be regarded as a mitigating circumstance within the meaning of the Guidelines. 497 Under the third indent of Section 3 of the Guidelines, ‘termination of the infringement as soon as the Commission intervenes (in particular when it carries out checks)’ is a mitigating circumstance. However, a reduction of the fine by reason of the termination of an infringement as soon as the Commission intervenes cannot be automatic but depends on an appraisal of the circumstances of the case by the Commission, in the context of its discretion. In that regard, the application of that provision of the Guidelines in favour of an undertaking will be particularly appropriate where the conduct in question is not manifestly anti-competitive. Conversely, its application will be less appropriate, as a general rule, where the conduct is clearly anti-competitive, on the assumption that it is proven (Mannesmanröhren-Werke v Commission, cited in paragraph 224 above, paragraph 281, and Joined Cases T‑71/03, T‑74/03, T‑87/03 and T‑91/03 Tokai Carbon and Others v Commission [2005] ECR II-10, paragraphs 292 and 294). 498 Even if, in the past, the Commission has regarded voluntary termination of an infringement as a mitigating circumstance, it is entitled, when applying its Guidelines, to take account of the fact that, even though their illegality was established at the inception of Community competition policy, very serious manifest infringements are relatively frequent and, therefore, to take the view that it is appropriate to abandon that generous practice and no longer reward the termination of such an infringement by a reduction of the fine (see, by analogy, MDF, cited in paragraph 213 above, paragraphs 108 and 109). 499 In those circumstances, the appropriateness of a reduction of a fine by reason of termination of the infringement depends on whether the banks could reasonably doubt the illegality of their conduct, which will be examined in paragraph 500 et seq. below. It also follows from the foregoing that the reference in recital 529 to the contested decision to the manifest nature of the infringement constitutes a sufficient indication of the reasons for the Commission’s choice. 4. The existence of a reasonable doubt as to the illegality of the restrictive conduct 500 BAWAG (Case T-261/02), PSK (Case T-263/02) and Erste (Case T-264/02) consider that the Commission should have taken into account, as a mitigating circumstance, the existence of reasonable doubts on the part of the banks as to the illegality of their conduct. First, they refer to certain matters disclosed by themselves, and also by other applicants, to contest the classification of the infringement as ‘very serious’. Since those elements are not such as to mitigate the intrinsic gravity of the infringement (see paragraphs 252 to 263 above), it is appropriate at this stage to examine whether they affect the reprehensible nature of the individual conduct of the applicants which have invoked them. The applicants’ arguments in that connection concern in particular the historical context of the cartel and the role played by the national authorities, the fact that, during the relevant period, Austrian law did not prohibit ‘behavioural cartels’ (Verhaltenskartelle), that is to say agreements without binding force, and that it provided for a sectoral derogation from the law governing cartels in favour of credit establishments, the lack of any secrecy surrounding the cartel and the recent accession of the Republic of Austria to the European Union. 501 Second, BAWAG, PSK and Erste refer to the Commission’s previous practice which, in their view, was not clear with regard to credit establishments or, in particular, agreements on interest rates. 502 Erste also claims that the banks entertained reasonable doubts as to the cross-border nature of their conduct. It makes a detailed analysis of the information from which the Commission infers, in recitals 30 to 50 to the contested decision, that the banks were aware of the illegality of their conduct, and states that it does not follow from that information that the banks were aware of the possibility of an infringement throughout the relevant period, or with regard to all the meetings, such doubts having existed only in relation to the committees concerning cross-border transactions or arisen towards the end of the relevant period. 503 In contrast to the rules which prevail when determining whether an infringement has been committed intentionally (see paragraphs 205 to 211 above), it is relevant to ascertain in the present context whether the applicants should reasonably have been aware that they were infringing Article 81 EC, and not merely been aware of the events constituting that infringement. 504 It must be recognised that the situation giving rise to the present case is special by reason of its historical context and the legal origin of the committees. However, it was the responsibility of credit establishments such as the applicants, which have considerable resources available to them, to prepare for the legal consequences of the accession of the Republic of Austria to the European Union, which could have been no surprise to them. In particular, it was the responsibility of the applicants to apprise themselves in due time of the terms of the Community competition rules (and indeed the law of the EEA) which were to be applicable to them and the new features thereof compared with Austrian law. The possible legality of the agreements under national law is therefore not in itself sufficient to leave room for reasonable doubt as to the illegal nature of their conduct under Community law. 505 As regards the participation of certain public authorities (OeNB, the Ministry of Finance and the Wirtschaftskammer) in the meetings, the information produced by the applicants is not sufficient to show reasonable doubt as to the illegality of the committees under Community competition law. Whilst it is not excluded that, in certain circumstances, a national legal framework or conduct on the part of national authorities may constitute mitigating circumstances (see, by analogy, CIF, cited in paragraph 258 above, paragraph 57), the approval or tolerance of the infringement by the Austrian authorities cannot be taken into account under that heading in this case, having regard in particular to the resources available to the banks to obtain precise and accurate legal information. 506 The view that the applicants could reasonably think that their agreements were lawful because the cartel was not secret cannot be upheld. The articles in the press on which BA-CA and Erste rely admittedly demonstrate that the Lombard Club and, to a lesser extent, certain other committees were known in the sectors concerned and that the fact that there was collusion on interest rates was not secret. That is not, however, sufficient to demonstrate that the full extent of the cartel was known to the public. RZB and BA-CA, which contest the legality of the publication of the contested decision, also confirmed in their answers to the questions put to them by the Court that the details of the discussions within the committee meetings were not publicly known. 507 The banks are also wrong to allege legal uncertainty as to the applicability of Article 81 EC to the agreements on bank interest rates, such as to give rise to reasonable doubts as to the illegal nature of their conduct. Even if it is assumed that the Commission’s position regarding such agreements was ambiguous during the 1980s, the press release from the Member of the Commission responsible for competition of 16 November 1989 (referred to in footnote 425 to the contested decision) clearly indicates that, according to the Commission, agreements on bank interest rates ‘limit competition in the same way as price cartels’ and ‘should be avoided or abandoned’. Thus, when the Republic of Austria acceded to the European Union, no uncertainty lingered on that point. 508 BAWAG and PSK cannot contest the relevance of that view on the grounds that it has no binding legal effect and does not explicitly deal with certain legal aspects of the application of Article 81 EC, in particular the appreciable effects of such agreements on competition, the impact on inter-State trade and the possibility of obtaining an exemption. In the measures to which the applicants refer to demonstrate the existence of legal uncertainty regarding interest rate agreements, the Commission reserved its position regarding such agreements, in so far as they are not legally binding measures in relation to which it would have disapplied Article 81 EC. Moreover, questions concerning appreciable effects on competition and the effect on trade between Member States are not specifically concerned with interest rate agreements, whereas the question whether an exemption is possible could have been clarified by recourse to a notification. Furthermore, the fact that the contested decision is the first in which the Commission has imposed a fine for interest rate agreements does not, as such, fall to be classified as a mitigating circumstance. 509 Finally, a possible doubt on the part of the applicants as to the cross-border nature of the agreements cannot be considered reasonable in the present case. 5. The crisis in the banking sector (Case T-264/02) 510 As regards, finally, the structural crisis in the banking sector in Austria referred to by Erste, it must be borne in mind that the Commission is not required to treat the poor financial health of the sector in question as a mitigating circumstance (Case T‑16/99 Lögstör Rör v Commission [2002] ECR II‑1633, paragraphs 319 and 320). The fact that in previous cases the Commission took account of the economic situation in the sector as a mitigating circumstance does not mean that it must necessarily continue to follow that practice (ICI v Commission, cited in paragraph 196 above, paragraph 372). As a general rule, cartels come into being when a sector is experiencing difficulties. 6. Conclusion 511 It follows from the foregoing that the applicants’ complaints concerning the appraisal of mitigating circumstances by the Commission are unfounded. F – The pleas alleging disregard of the Leniency Notice1. The contested decision512 The Commission examined the banks’ cooperation in the light of Section D of the Leniency Notice. It granted them a reduction of 10% of their fines, in accordance with the second indent of Section D.2, on the ground that they did not substantially contest the facts set out in the statement of objections (contested decision, recitals 558 and 559). On the other hand, it refused to grant them a reduction under the first indent of Section D.2, according to which a fine may be reduced if, ‘before a statement of objections is sent, an enterprise provides the Commission with information, documents or other evidence which materially contribute to establishing the existence of the infringement’. 513 As regards the responses to the requests for information, the Commission considered that neither the disclosure of the dates of committee meetings and their participants nor the disclosure of documents concerning the committees was voluntary and that such disclosure could not therefore be treated as cooperation. As to the answers to the questions concerning the subject-matter of the collusory meetings, the Commission states that the decision is founded only on documents that were already available, so that those answers provided no added value (contested decision, recitals 545 and 546). 514 As regards the joint disclosure of facts made by the banks, it considers that it gave no added value beyond what was legally required. It accepts that the joint exposition of the facts goes beyond the information requested by describing in detail the historical context of the network and summarising the subject-matter of the various committee meetings. However, in its view, that statement served not to clarify the facts but rather to defend the banks, by attenuating the gravity of the facts, in particular by omitting to mention interest rates or precise commissions, by embellishing reality when describing certain committees, by describing various committees in isolation and by denying the managerial function carried out by the Lombard Club. 515 As regards the documents produced with the joint exposition of the facts, the Commission observes that the banks were not in a position to identify, in response to its request, those disclosing new facts not contained in the documents gathered during the investigations or required to be produced following requests for information, and concludes that those documents, even though numerous and arranged in chronological order, provided no added value. It also criticises the banks for failing to forward all the documents requested. It refers in that connection to the minutes of the ‘Halle committee meeting’ of 25 May 1998, which it obtained in January 2001 from an anonymous informant, and to reports produced with the response to the supplementary statement of objections (contested decision, recitals 547 to 557). 2. Arguments of the parties516 With the exception of RLB (Case T-262/02), all the applicants claim that the Commission illegally failed to take into account, as voluntary cooperation meriting a reduction of the fine of between 10 and 50% under the first indent of Section D.2 of the Leniency Notice, in particular the responses to the requests for information sent to them and the documents annexed thereto, and the joint exposition of the facts and the documents annexed thereto. 517 In Case T-259/02, RZB, which considers that its cooperation should be treated as spontaneous cooperation under Section B or C of the Leniency Notice, also refers to its admission of the anti-competitive purpose of the infringement. In Case T-260/02, BA-CA criticises the Commission for failing to take account of 33 files of additional documents containing more than 10 000 pages which it produced in April 1999, and additional information which it provided in its reply to the statement of objections. 518 The applicants criticise the Commission for having insisted that their cooperation should provide ‘added value’ in order to be taken into account. They consider that this amounts to unlawful retroactive application of the Commission notice on immunity from fines and reduction of fines in cartel cases (OJ 2002 C 45, p. 3). 519 The applicants assert that their cooperation in the form of replies to the requests for information and production of the joint exposition of the facts was voluntary, in so far as it exceeded by far what the Commission was entitled to request under Article 11 of Regulation No 17 and, in any event, that it considerably facilitated the Commission’s task. 520 As regards their responses to the requests for information, the applicants claim that the Commission put questions to them that were unlawful by virtue of their rights of defence, and to which they were not required to reply. With the exception of RZB (Case T-259/02), they claim that that applies to the questions concerning: – production of internal documents (memoranda, minutes, etc.) concerning specific meetings,– or, in so far as such documents do not exist, descriptions of the subject-matter of those meetings.In addition, they regard as unlawful ‘catch-all’ questions calling on them:– to indicate the dates (including the dates of the first and last meetings) and the participants (name, company, post held) of numerous specifically identified meetings and ‘any other committees that met regularly’, and of all the committees for the Länder or regions (separately for each Land), – to disclose to the Commission all minutes, memoranda, correspondence or other documents – official or otherwise – (in so far as they had not already been seized during investigations) which relate to meetings, discussions or other contacts between each bank and other Austrian credit establishments in connection with the committee meetings covered by the foregoing question (whether those documents were drawn up before, during or after such contacts). 521 According to the banks, their replies to those unlawful questions and the production of the documents requested must be classified as voluntary cooperation. BA-CA (Case T-260/02) maintains that that applies to all the replies to the request for information, because the replies to the lawful questions are closely linked to the replies to the unlawful questions. RZB also claims that all the replies from the banks must be classified as voluntary, since the Commission did not adopt any decision under Article 11(5) of Regulation No 17. 522 As regards the joint exposition of the facts, the applicants assert that the information contained in it and the documents accompanying it went far beyond the information and documents referred to in the requests for information. 523 The applicants assert that their cooperation was useful to the Commission’s investigation. They state that the replies to the unlawful questions and the joint exposition of the facts disclosed new facts by informing the Commission of several committees of whose existence it had been unaware despite its investigations. In their replies, some of the banks provided a list of 36 documents that were cited in the contested decision and, according to them, were produced for the first time with the joint exposition of the facts. 524 In any event, they contend that, with or without such new information, their cooperation considerably facilitated the Commission’s task. First, they refer to the detailed nature of their replies to the requests for information. Second, with regard to the joint exposition of the facts, they claim that, without that orderly presentation of all the facts and documents carried out at great expense and effort, and delivered to the Commission shortly after the start of the investigation, it would have been very difficult for the Commission to understand the relationships between the information and isolated documents from various banks. They observe, giving examples, that on numerous occasions the Commission made use of the description of the committees contained in that exposition and the documents annexed thereto, particularly with regard to the facts which it had not ascertained on the basis of investigations and replies to requests for information. The applicants contest the Commission’s view that the joint exposition of the facts was intended to embellish the facts. They consider that the failure to produce the minutes of a single local meeting, in which several of them did not take part and of whose existence they were even unaware, cannot affect the usefulness of the joint exposition of the facts and that the documents produced in response to the additional statement of objections were not relevant. 525 BAWAG and PSK (Cases T-261/02 and T-263/02) also consider that the reduction of 10% granted because they did not substantially contest the facts is too small, having regard to the Commission’s previous practice in its decisions. 526 The Commission in essence contends that the information and documents provided by the applicants, both in their replies to requests for information and in connection with the joint exposition of the facts, did not provide added value over and above what the banks were required to disclose to it under Article 11 of Regulation No 17. It states that, even if it is assumed that some of the questions asked in the requests for information went beyond what it was entitled to require from the banks, that had no impact because the contested decision was based exclusively on existing documents. 3. Findings of the Court(a) Preliminary considerations527 First of all, RZB’s view that its cooperation should be appraised in the light of Section B or C of the Leniency Notice must be rejected. 528 That cooperation was provided after the Commission carried out checks, and therefore Section B of the Leniency Notice, which refers to cases where an undertaking has reported a secret cartel to the Commission before it has carried out an investigation, is inapplicable. As regards Section C, which relates to circumstances in which an undertaking ‘disclose[s] the secret cartel after the Commission has undertaken an investigation ordered by decision on the premises of the parties to the cartel which has failed to provide sufficient grounds for initiating the procedure leading to a decision’, it cannot be inferred from the fact that the Commission made requests for information following its investigations that the latter did not provide it with a sufficient basis for initiating the procedure with a view to the adoption of a decision. Moreover, as stated in paragraph 506 above, certain aspects of the cartel were not even secret. Therefore, Section C of the Leniency Notice is likewise not applicable in this case. 529 Next, it is settled case-law that cooperation in an investigation that does not go further than what is required of undertakings under Article 11(4) and (5) of Regulation No 17 does not justify reduction of the fine (Case T-12/89 Solvay v Commission [1992] ECR II‑907, paragraphs 341 and 342, and Cascades v Commission, cited in paragraph 262 above, paragraph 260). On the other hand, such a reduction is justified where an undertaking has provided information well in excess of that which the Commission may require under Article 11 of Regulation No 17 (Cascades v Commission, cited in paragraph 262 above, paragraphs 261 and 262, and Case T-230/00 Daesang and Sewon Europe v Commission [2003] ECR II‑2733, paragraph 137). 530 It is also settled case-law that, in order to justify reduction of a fine for cooperation, the conduct of an undertaking must facilitate the Commission’s task of finding and bringing to an end infringements of Community competition rules (see KTS, cited in paragraph 333 above, paragraph 270, and the case-law there cited, and Case T-48/00 Corus UK v Commission [2004] ECR II‑2325, paragraph 193) and reveal a true spirit of cooperation (Dansk Rørindustriand Others v Commission, cited in paragraph 189 above, paragraphs 395 and 396). 531 Therefore, the Court must first consider whether the Commission disregarded the extent to which the banks’ cooperation in this case exceeded what was required under Article 11 of Regulation No 17. In that connection, it should undertake a comprehensive review concerning, in particular, the extent to which the undertakings’ rights of defence limit their obligation to reply to requests for information. 532 Second, the Court should verify whether the Commission correctly appraised, in the light of the Leniency Notice, the extent to which the cooperation provided helped to establish the infringement. Within the limits laid down by that notice, the Commission has a discretion in assessing whether the information or documents voluntarily provided by the undertakings have facilitated its task and whether it is appropriate to grant a reduction to an undertaking under that notice (Dansk Rørindustriand Others v Commission, cited in paragraph 189 above, paragraphs 393 and 394). That assessment is the subject of limited review by the Court. 533 In the exercise of its discretion, the Commission is not, however, entitled to disregard the principle of equal treatment, which is infringed where comparable situations are treated differently or different situations are treated in the same way, unless such difference of treatment is objectively justified (KTS, cited in paragraph 333 above, paragraph 237; see Case T-31/99 ABB Asea Brown Boveri v Commission [2002] ECR II‑1881, paragraph 240, and the case-law there cited, and Tokai I, cited in paragraph 331 above, paragraph 394). That principle precludes the Commission from treating in different ways cooperation on the part of undertakings covered by the same decision. 534 On the other hand, the mere fact that the Commission has, in earlier decisions, granted a certain rate of reduction for particular conduct does not mean that it is obliged to grant the same proportional reduction when appraising similar conduct in the context of a later administrative procedure (see, with regard to a mitigating circumstance, Mayr-Melnhof, cited in paragraph 205 above, paragraph 368, and Case T-319/94 Fiskeby Board v Commission [1998] ECR II‑1331, paragraph 82, and, as regards cooperation, Case T-15/99 Brugg Rohrsysteme v Commission [2002] ECR II‑1613, paragraph 193). (b) The replies to requests for information The absence of a decision under Article 11(5) of Regulation No 17 (Case T-259/02)535 First of all, the Court rejects RZB’s view that the replies to requests for information must be taken into consideration, as a whole, as voluntary cooperation because the Commission did not address to the banks decisions under Article 11(5) of Regulation No 17. 536 Where a request for information is made under Article 11(1) and (2) of Regulation No 17 in order to obtain information of which the Commission may require disclosure by a decision under paragraph 5 of that article, only the promptness of the reply from the undertaking concerned can be classified as voluntary. It is for the Commission to decide whether that promptness facilitated its task in such a way as to justify a reduction of the fine and the Leniency Notice does not require it systematically to reduce fines for that reason. The appraisal of the voluntary nature of the responses to the requests for information537 It must be borne in mind that the breadth of the requests for information addressed by the Commission to the various banks under Article 11(1) and (2) of Regulation No 17 varied between 30 questions (BA-CA) and 3 questions (ÖVAG and PSK-B). The questions in the more detailed requests, to which the banks replied, sought the following, in particular: – for specific meetings of certain committees:– an indication of the participants (names, companies for which they work, posts held);– the production of all internal documents relating thereto (notes, memoranda, minutes);– a description of the subject-matter of meetings, to the extent to which it was not disclosed by the documents produced;– for specifically named committees:– an indication of the dates of their meetings, including those of the first and last meetings, and details of the participants;– production of all documents relating thereto in so far as they had not already been seized during the investigations;– for committees referred to in general terms:– an indication of dates, including those of the first and last meetings, and the participants;– production of all documents relating thereto in so far as they had not already been seized in the investigations;– details of the subject-matter of the meetings;– for ‘any other committees meeting regularly’: an indication of dates, including those of the first and last meetings, and the participants. 538 The requests for information also contained questions of the following type:– ‘Kindly provide all minutes, file notes, correspondence or other documents relating to meetings, discussions or other contacts between your undertaking and other Austrian credit establishments in connection with the committees referred to below or any other committees that met regularly (whether drawn up before, during or after such contacts). Kindly indicate the dates, including those of the first and last meetings, and the participants (name, company, post held)’ (a list of certain committees followed); – ‘Kindly provide all documents (correspondence, instructions, memoranda, file notes, circulars, etc.) and details of any action publicly taken by your undertaking having any bearing on changes to the conditions for deposit and lending business, advertising measures, arrangements concerning commissions and introduction of the “rate indexing clause” during the period from January 1994 to the present time.’ 539 It is settled case-law that the Commission may not compel an undertaking, by means of a request for information under Article 11(5) of Regulation No 17, to provide it with answers that might involve an admission on its part of an infringement which it is incumbent upon the Commission to prove (Case 374/87 Orkem v Commission [1989] ECR 3283, paragraph 35, and Case T-112/98 Mannesmannröhren-Werke v Commission [2001] ECR II‑729, paragraph 67). It is nevertheless entitled to compel undertakings to provide all necessary information concerning such facts as may be known to them and to disclose to the Commission, if necessary, such documents relating thereto as are in its possession, even if the latter may be used to establish the existence of anti-competitive conduct. The Commission may thus compel undertakings to answer purely factual questions and ask for documents already in existence to be produced (Orkem v Commission, paragraph 34, and Case T-112/98 Mannesmannröhren-Werke v Commission, paragraph 65). 540 On the other hand, requests calling on an undertaking to describe the object of and what occurred at meetings in which it participated and also the results or conclusions of those meetings where it is suspected that the object of the meetings was to restrict competition are incompatible with the rights of the defence, given that they are liable to compel the undertaking concerned to admit its participation in an infringement of the Community competition rules (see Mannesmannröhren-Werke v Commission, cited in paragraph 539 above, paragraphs 71 to 73, and the case-law there cited, and Tokai I, cited in paragraph 331 above, paragraphs 402, 403, 406 and 407). 541 It follows that the Commission was fully entitled, by means of requests for information under Article 11(5) of Regulation No 17, to require the banks to indicate dates of committee meetings and details of their participants. That applies not only to the committees about which, after its investigations, the Commission had precise information, such as their names and the dates of certain meetings, but also for all the other committees, given that, following its investigations, the Commission had copious information indicative of the existence of a network of agreements organised within a large number of committees covering all banking products. In those circumstances, the replies to the requests for factual information concerning all the committees cannot be classified as voluntary, and the Commission committed no error in law by refusing to take them into consideration as constituting voluntary cooperation. 542 Next, it is apparent from recital 546 to the contested decision that the Commission acknowledged the voluntary nature of the replies to the questions concerning the subject-matter of the collusive meetings. 543 As to whether the Commission committed an error in law by stating, in recital 546 to the contested decision, that the production of documents in response to the requests for information was not voluntary, it must be borne in mind that, in order to ensure the effectiveness of Article 11(2) and (5) of Regulation No 17, the Commission is entitled to compel an undertaking to provide all necessary information concerning such facts as may be known to it and to disclose to the Commission, if necessary, such documents relating thereto as are in its possession, even if the latter may be used to establish, against it or another undertaking, the existence of anti-competitive conduct (Orkem v Commission, cited in paragraph 539 above, paragraph 34; Case C-301/04 P Commission v SGL Carbon [2006] ECR I‑5915, paragraph 41; and Mannesmannröhren-Werke v Commission, cited in paragraph 539 above, paragraph 65). 544 It follows that the production of documents relating to the meetings identified in the requests for information cannot be regarded as voluntary cooperation because the Commission could have compelled the banks to provide those documents by requesting information under Article 11(5) of Regulation No 17 (Commission v SGL Carbon, cited in paragraph 543 above, paragraph 44). Therefore, the complaint alleging that the Commission erred in law regarding the voluntary nature of the production of those documents cannot be upheld. 545 In any event, the same would apply in the case of a different assessment as to the voluntary nature of the production of such documents. 546 The taking into consideration, as voluntary cooperation, of documents produced by the banks in response to requests for information would not be capable, in this case, of giving rise to a greater reduction of the fines than the 10% which the Commission had already granted in the contested decision. 547 It is apparent, in that connection, from the replies from BAWAG, PSK, Erste and the Commission to the questions put to them by the Court, the correctness of which has not been contested by the other applicants, that, following its investigations, the Commission had in its possession around 5 000 pages of copies of relevant documents to demonstrate the existence, operation, participants, duration and scope of the cartel within the Lombard Club and to identify the most important committees. Whilst it is true that 11 000 pages of documents were produced in response to the requests for information, the applicants do not deny that, for many documents, several copies are contained in the file and that the responses to the requests for information contain numerous documents which the Commission already possessed as a result of its investigations. Moreover, the applicants did not state, in their replies to the questions put to them by the Court, what proportion of the documents produced in response to the requests for information had not been seized during the investigation and of which the production was tantamount to an admission of the infringement. 548 In that connection, it is clear from a table produced by Erste and not challenged by the other parties that 44% of the citations from documents in the contested decision involve documents obtained in the investigations. That demonstrates the importance of those documents for the establishment of the infringement. That importance is borne out by the very detailed nature of the requests for information which the Commission sent to the banks. Those requests show that the Commission had discovered indications or evidence concerning very numerous meetings of the main committees. It must also be stated that, even if the Commission asked numerous questions to which the parties could not be compelled to reply – a matter which it disputes – that does not apply to questions concerning the dates of meetings and the names of the participants. The applicants could therefore be compelled to provide the Commission with information enabling it to attribute the documents seized during the investigations to the various committees and thus to assess their importance and evidential value. 549 It must also be pointed out that the fact that the Commission cited, in the contested decision, documents produced in response to requests for information does not show that it did not possess those documents as a result of its investigations. The Commission stated, without being contradicted, that it preferred to cite documents produced by the applicants by reason of their orderly presentation, whether or not they were previously contained in the file. 550 Moreover, those of the applicants which analysed the evidential value of those documents identified only a few documents to which they attribute substantial probative value. Thus, BAWAG and PSK claim that 37 documents produced by them in response to the requests for information, out of almost 900 documents cited in the contested decision, have considerable evidential value. They do not however claim that those documents were necessary to support the essential findings made in the contested decision. 551 It follows from the foregoing that the applicants have not established that the documents produced in response to the requests for information were necessary to enable the Commission to identify all the essential committees, or that, without them, the evidence obtained through the investigations would have been insufficient to prove the essential elements of the infringement and to enable a decision imposing fines to be adopted. (c) The assessment of the joint exposition of the facts552 The Commission acknowledged, in recital 553 to the contested decision, that the banks had provided voluntarily, in the joint exposition of the facts, information going beyond what had been asked of them. 553 By deciding that such cooperation could only be taken into account if it gave rise to added value either by the disclosure of ‘new facts’ or explanations improving understanding of the case, the Commission did not exceed the discretion available to it in assessing, in accordance with the first indent of Section D.2 of the Leniency Notice, whether cooperation ‘contribute[s] to establishing the existence of the infringement’. Neither the Leniency Notice nor the case-law cited in paragraph 530 above requires the Commission to reduce a fine by reason of action which, in practice or logistically, supports its investigation. 554 As to whether the Commission, in assessing the scope and value of such cooperation, disregarded the extent to which the documents annexed to the joint exposition of the facts were ‘new’ as compared with those annexed to the replies to the requests for information, it must be borne in mind that the banks considered, in the administrative procedure, that they were not in a position to provide the Commission with the detailed information requested on that point (see paragraph 19 above). In those circumstances, the Commission cannot be criticised for making any mistake in that regard. 555 Next, it was legitimate for the Commission to take account, in assessing the usefulness of the banks’ voluntary cooperation, of the fact that they did not submit to it, with the joint exposition of the facts, all the documents concerning the committees (see paragraph 515 above). The incompleteness of the annexes to the joint exposition of the facts affected the reliability of that document and detracted from its usefulness for the Commission’s task. 556 It is also for the Commission to determine whether the explanations given in the joint exposition of the facts enabled it better to understand the case, and the Court cannot censure that assessment unless there has been a manifest error. In that regard, the Commission was entitled to consider that the banks had used that document to present their own view of the committees and therefore as a means of defending itself. It is natural and legitimate for an undertaking involved in a Commission inquiry to act in that way. It follows that such a document, whatever its specific content, cannot relieve the Commission of its own task of studying the case and making its own analysis and evaluation of the facts and evidence. 557 In those circumstances, the fact that the Commission, in drafting the contested decision, used copies of documents provided by the banks in an orderly fashion as an annex to the joint exposition of the facts rather than the copies it had obtained itself through investigations and requests for information, and the descriptive part of the joint exposition of the facts, does not show that the explanations given facilitated the Commission’s substantive work, even if its processing of the file may have been facilitated from the technical point of view. 558 Therefore, the applicants’ complaints concerning the Commission’s assessments of the joint exposition of the facts must be rejected. (d) The complaints specific to RZB and BA-CA RZB’s admission that the object of the infringement was anti-competitive559 RZB’s view that the Commission should have taken account of its explicit admission of the anti-competitive aim of the infringement must be rejected. Admittedly, an admission that a cartel exists is likely to facilitate the Commission’s task during an inquiry more than mere acknowledgement that the facts are substantially correct and the Commission may therefore treat undertakings that have admitted the facts differently from those that have also admitted the existence of a cartel (KTS, cited in paragraph 333 above, paragraph 270). The Commission is not, however, obliged to draw such a distinction. It must, in each individual case, consider whether such an admission actually made its task easier. However, the anti-competitive object of the conduct in question in this case derives, with regard to most of the meetings whose existence was admitted by all the banks, from their very purpose, which was to collude on prices or other aspects of competition. Explicit admission of that purpose adds nothing. The Commission was not therefore required in this case to reduce the fine for that reason. The additional information referred to by BA-CA560 As regards the 33 binders containing more than 10 000 pages of documents sent by BA-CA to the Commission in April 1999, it must be borne in mind that the banks, when submitting the joint exposition of the facts, all sought to cooperate in the investigation in the same way, so that observance of equal treatment in the application of the Leniency Notice means that any reduction of the fine on that ground must be the same for all (KTS, cited in paragraph 333 above, paragraph 270). In those circumstances, the production of additional documents by one of the banks can only justify a further reduction of its fine on an individual basis if that cooperation actually involved the production of new and useful information as compared with that provided jointly by all the undertakings. Moreover, as the Commission has rightly pointed out, the value of those additional documents is inversely proportional to that of the joint exposition of the facts: if the latter were exhaustive, the production of new documents by BA-CA could not have been significant, whereas, in the opposite case, the usefulness of the joint exposition of the facts must be regarded as limited. 561 In that regard, it is clear from BA-CA’s answers to the questions put to it by the Court that, of the more than 10 000 pages of documents produced, 33 documents were cited in the contested decision. The value of voluntary cooperation depends not on the number of documents produced but rather on their relevance and usefulness in establishing the infringement. It cannot be automatically conceded that the production of more than 10 000 pages of documents, of which only 33 are among those on which the contested decision is based, made the Commission’s task any easier. Although documents produced by BA-CA might have contributed to establishing the existence of the infringement, even without having been cited in the contested decision, the use of those documents is an important indication of their usefulness, as, moreover, BA-CA itself asserts in its submissions. In view of the fact that, according to BA-CA’s submissions, the Commission cited 892 documents in the factual part of the contested decision, the contribution made by the additional documents produced by BA-CA must be regarded as limited. That is further supported by the fact that BA-CA does not claim that the documents produced in April 1999 were decisive as regards the essential findings of the contested decision. Admittedly, BA-CA states that, in 21 cases, findings in the contested decision are based solely on one of the documents produced by it in April 1999. However, in six of those cases, the document referred to by BA-CA was cited jointly with other documents, and the applicant has not provided further details enabling the respective importance of the different various documents to be ascertained. In two other cases, BA-CA’s documents relate to examples of concerted practices whose importance in the framework of the cartel as a whole is secondary (recitals 65 and 66 to the contested decision) and, in one case, the document concerned is one set of minutes among several sets for the same meeting (recital 248 to the contested decision). 562 In those circumstances, the Commission was not required to grant BA-CA an additional reduction of the fine on that ground.563 In order to prove that the Commission used documents which it produced, BA-CA asks the Court to take witness evidence from the Commission official mainly responsible for drafting the contested decision. Given that the use of those documents does not in itself demonstrate that the production of them made the Commission’s task substantially easier, that call for evidence is not directly relevant to assessing the usefulness of those documents. That request for measures of organisation of procedure should not therefore be granted. 564 BA-CA is also wrong to claim that the Commission should have taken account, as cooperation, of its response to the statement of objections. The essential purpose of such a response is to enable an undertaking to defend its rights, so that its content must be very closely examined by the Commission. The influence of such a response on the decision taken by the Commission shows that it fulfilled that defensive function but does not mean that it provided added value or that it facilitated or lightened the work of the institution. (e) Conclusion565 It follows from the foregoing that the pleas alleging non-observance of the Leniency Notice must be rejected.566 Furthermore, in view of the gravity of the infringement, by reference to which the level of the fines set by the Commission seems relatively low, the Court considers, in the exercise of its unlimited jurisdiction, that the applicants’ cooperation does not in this case justify any additional reduction of the fines imposed on them. G – Infringement of procedural rules (Case T-271/02)567 The claim made in the alternative by ÖVAG and NÖ-Hypo that the Court should reduce the fines imposed on them by reason of the improper admission of the FPÖ as a complainant and the forwarding of the complaints to that political party cannot be upheld. 568 Admittedly, certain procedural irregularities may on occasion justify a reduction of the fine even if they are not such as to entail annulment of the contested decision (Case C-185/95 P Baustahlgewebe v Commission [1998] ECR I-8417, paragraphs 26 to 48). 569 However, only procedural irregularities capable of seriously harming the interests of the party invoking them can justify a reduction of the fine (Baustahlgewebe v Commission, cited in paragraph 568 above, paragraph 30). That in particular may be the case where irregularities involve an infringement of the European Convention for the Protection of Human Rights and Fundamental Freedoms. No such infringement is alleged in this case, nor is it apparent from the file that the Commission’s conduct to which the banks take exception, in contrast to the conduct of the FPÖ political party, whose actions are not attributable to the Commission, was liable seriously to harm their interests. Without there being any need for the Court to decide whether or not the Commission’s conduct was irregular, it must be pointed out that the irregularities alleged in this case would not, if established, be sufficiently serious to justify a reduction of the fine. H – Conclusion concerning the claims for reduction of the fines570 It follows from the foregoing considerations that the applicants’ pleas for reduction of the fines on the basis of a review of legality must be rejected, with the exception of those relating to the accuracy of the findings concerning the joint market share of PSK and PSK-B (see paragraphs 446 to 452 above). Moreover, the Court considers that there is no reason to reduce the fines on other grounds in the exercise of its unlimited jurisdiction. 571 As regards the amount of the joint fine to be imposed on PSK and PSK-B, the Court considers, in the exercise of its unlimited jurisdiction and having regard to the duration of the infringement and to the banks’ cooperation with the Commission, that the final amount of the fine, as determined for PSK (including PSK-B) in recital 560 to the contested decision and Article 3 of the decision, must be reduced by one-half. Therefore, the joint fine imposed on PSK and PSK-B must be set at EUR 3 795 000. V – The Commission’s claim that the fine imposed on RZB should be increased572 In Case T-259/02, the Commission has asked the Court to increase the fine imposed on RZB, on the ground that it contested, for the first time in its application, the existence of agreements between the banks on cross-border payment transactions, documentary business and the buying and selling of securities. 573 In that connection, it is important to ascertain whether RZB’s conduct made it necessary for the Commission, contrary to any expectation which it might reasonably have based on RZB’s cooperation in the administrative procedure, to draw up and submit a defence to the Court focusing on the arguments concerning illegal acts which it was entitled to consider that RZB would no longer call in question. 574 The importance of the points challenged by RZB in the scheme of the contested decision is minimal. Contrary to RZB’s contention, the existence of the abovementioned cross-border transactions does not contribute decisively to the possibility of establishing that the cartel to which the contested decision relates was liable to affect trade between Member States (see paragraphs 177 and 178 above). 575 The Commission devoted three paragraphs in its defence to its rebuttal of the arguments put forward by RZB. First, it summarised the applicant’s arguments, then it pointed out that RZB had stated that it would not substantially contest the facts and, finally, it stated that it had demonstrated, in the contested decision, the existence of the agreements, the documents challenged by RZB not being intended to provide such proof but rather to provide examples of cross-border payments. The drafting of that defence was not therefore such as to entail special efforts on the part of the Commission. 576 In those circumstances, no increase of the fine is appropriate in this case. The claims that the decisions to admit the FPÖ as complainant and to disclose the statements of objections to it should be annulled (Case T-271/02)577 The claim made in the alternative by ÖVAG and NÖ-Hypo for annulment of the decisions to admit the FPÖ to the administrative procedure and to disclose the complaints to it must be rejected as belated. In reply to the questions put to them by the Court, ÖVAG and NÖ-Hypo stated that they had been informed of the admission of the FPÖ to the procedure and of the intention to forward the complaints to it by a letter from the Commission of 5 November 1999, whereas the Commission states that it sent them that information by letter of 27 March 2001. The application in Case T-271/02, dated 2 September 2002, is therefore, in any event, out of time as regards those decisions. Costs578 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicants in Cases T-260/02 to T-262/02, T-264/02 and T-271/02 have been unsuccessful, they must be ordered to pay the costs, in accordance with the form of order sought by the defendant. 579 As regards Cases T-259/02 and T-263/02, under Article 87(3) of the Rules of Procedure, the Court of First Instance may, where each party succeeds on some heads and fails on others, order that the costs be shared or order each party to bear its own costs. 580 In Case T-259/02, the applicant’s application has been unsuccessful, and the Commission has not succeeded in its counterclaim. Since that counterclaim was merely for an increase of the fine by 10%, it must be held that the applicant has, in essence, been unsuccessful. In those circumstances, RZB should bear its own costs and pay 90% of the Commission’s costs, and the Commission should bear 10% of its own costs. 581 In Case T-263/02, each of the parties should bear its own costs.On those grounds,THE COURT OF FIRST INSTANCE (Second Chamber)hereby:1. In Case T-263/02, reduces to EUR 3 795 000 the amount of the fine imposed on Österreichische Postsparkasse AG, of which the applicant is the successor, by Article 3 of Commission Decision 2004/138/EC of 11 June 2002 relating to a proceeding under Article 81 of the EC Treaty (Case COMP/36.571/D-1: Austrian banks – ‘Lombard Club’);2. For the rest, dismisses the applications;3. In Case T-259/02, rejects the Commission’s counterclaim;4. In Cases T-260/02 to T-262/02, T-264/02 and T‑271/02, orders the applicants to pay the costs;5. In Case T-259/02, orders the applicant to bear its own costs and to pay 90% of the Commission’s costs, and orders the Commission to bear 10% of its own costs;6. In Case T-263/02, orders the parties to bear their own costs.PirrungForwoodPapasavvas Delivered in open court in Luxembourg on 14 December 2006.E. Coulon J. PirrungTable of contentsBackgroundI – Subject-matter of the disputeII – The applicantsA – Erste (Case T-264/02)B – RZB (Case T-259/02)C – RLB (Case T-262/02)D – BA-CA (Case T-260/02)E – Anteilsverwaltung BAWAG PSK AG (Case T-261/02) and BAWAG PSK Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse AG (Case T‑263/02) F – ÖVAG and NÖ-Hypo (Case T-271/02)III – Administrative procedureIV – The contested decisionA – General observationsB – Findings concerning the background to the cartel, the various committees, their relationships and the role of the lead institutions C – The banks’ arguments and legal assessmentD – The requirement that the infringement be brought to an end and calculation of the finesProcedure and forms of order soughtThe effect of a restructuring on BAWAG (Case T-261/02) and PSK (Case T-263/02)LawI – The applications for annulment of the contested decision in its entiretyA – The pleas alleging infringements of the Rules of Procedure1. The final report of the Hearing Officer (Cases T-260/02, T‑261/02 and T‑263/02)(a) Arguments of the applicants(b) Findings of the Court2. The status granted to the FPÖ political party in the administrative procedure (Cases T-260/02 and T-271/02)(a) Arguments of the parties3. ConclusionB – The pleas alleging incorrect appraisal of the agreements1. Preliminary observations2. The classification of the committee meetings as a single infringement (Cases T‑261/02 to T‑263/02 and T‑271/02)C – The choice of the addressees of the contested decision (Case T‑271/02)1. Arguments of the parties(b) Arguments of the Commission2. Findings of the Court(a) The criteria applied by the Commission and the size of the establishments(b) The identification of the main committeesThe statement of reasonsThe assessment of the importance of the committees and the ‘smaller banking circle’(c) The frequency of ÖVAG’s and NÖ-Hypo’s participation in the major committees(d) ConclusionD – The use as evidence of documents dating back to 1994 (Case T-271/02)E – The pleas alleging that the committees had no impact on trade2. The interpretation of the criterion of capability of affecting trade between Member States and its application to this case The principles governing appraisal of the capability of affecting trade between Member StatesOverall examination of the cross-border effect of the committeesThe capability of a cartel covering the entire territory of a Member State to affect trade between Member States(c) Conclusion3. The particular case of RLB (Case T-262/02)II – The claims for annulment of Article 2 of the contested decision (Cases T-259/02, T-264/02 and T-271/02)A – Arguments of the applicantsB – Findings of the CourtIII – The claims for annulment of Article 3 of the contested decisionA – Lack of fault (Cases T-261/02 to T-264/02 and T-271/02)B – The possibility of an exemption for the agreements (Cases T-262/02 and T-271/02)C – ConclusionIV – The claims for reduction of the fines imposedA – Preliminary observations1. The applicability of the Guidelines and the Leniency Notice(a) The alleged breach of the principle of non-retroactivity (Case T‑264/02)(b) The relevance of the Guidelines and the Leniency Notice to judicial review of the contested decision2. The applicants’ complaintsB – The classification of the infringement as ‘very serious’1. General considerations on the assessment of gravity2. The nature and context of the infringement3. The specific impact of the infringement on the market(a) The contested decision(b) The classification of BA-CA’s arguments(c) Arguments of the parties(d) Findings of the Court4. The extent of the relevant geographic market5. The selective nature of the proceedings taken (Case T-259/02)6. Conclusion as to the gravity of the infringementC – The division of the addressees of the contested decision into categories and the setting of the starting amounts1. The attribution of GiroCredit’s infringement to Erste (Case T‑264/02)(a) The facts on which this plea is based and the contested decision(b) Arguments of the parties(c) Findings of the Court2. The attribution of the market shares of the banks in the ‘decentralised sectors’ to the central establishments (Cases T‑259/02, T‑264/02 and T‑271/02) (a) Contested decisionArguments of the applicants– The rights of the defence and the statement of reasons– The conditions for attributing market shares– The factual findings and the assessment thereofArguments of the CommissionPreliminary observationsThe rights of the defence and the statement of reasonsThe legality of the Commission’s approach in the light of the personal nature of liability for infringements of competition law The other complaints concerning the legality of the Commission’s approach– The compatibility of the Commission’s approach with the Guidelines– The alleged breach of the principle of equal treatment– The judgment in SCK and FNK v CommissionThe complaints concerning findings of fact and the assessment of the central establishments’ roleConclusion3. The statement of reasons for the division into categories and determination of the starting amounts (Cases T-260/02, T-261/02, T-263/02 and T-264/02) 4. The alleged breach of the principle of equal treatment (Cases T‑261/02, T-263/02 and T-271/02)5. Determination of market shares (Cases T-263/02, T‑264/02 and T‑271/02)PSK and PSK-B (Case T-263/02)Erste and the savings bank groupingÖVAG and the credit union grouping– The fine imposed on the lead institution– The separate fine imposed on EÖÖVAG and the credit union grouping (Case T-271/02)6. Conclusion concerning the division into categories and the setting of starting amountsD – The pleas concerning the duration of the infringement (Cases T‑259/02, T‑261/02 and T-263/02)E – Mitigating circumstances2. The role of certain applicants within the committees (Cases T‑259/02, T-260/02, T-261/02, T-263/02 and T-271/02)Passive conduct or ‘follow-my-leader’ role (Cases T-259/02, T-263/02 and T-271/02)The role of BA-CA (Case T-260/02) and of BAWAG (Case T-261/02)3. The termination of the infringement (Cases T-259/02, T-261/02, T-263/02, T‑264/02 and T-271/02)4. The existence of a reasonable doubt as to the illegality of the restrictive conduct5. The crisis in the banking sector (Case T-264/02)6. ConclusionF – The pleas alleging disregard of the Leniency Notice1. The contested decision2. Arguments of the parties3. Findings of the Court(a) Preliminary considerations(b) The replies to requests for informationThe absence of a decision under Article 11(5) of Regulation No 17 (Case T-259/02)The appraisal of the voluntary nature of the responses to the requests for information(c) The assessment of the joint exposition of the facts(d) The complaints specific to RZB and BA-CARZB’s admission that the object of the infringement was anti-competitiveThe additional information referred to by BA-CA(e) ConclusionG – Infringement of procedural rules (Case T-271/02)H – Conclusion concerning the claims for reduction of the finesV – The Commission’s claim that the fine imposed on RZB should be increasedThe claims that the decisions to admit the FPÖ as complainant and to disclose the statements of objections to it should be annulled (Case T-271/02) Costs* Language of the case: German. | 09749-5ebdb8e-4551 | EN |
THE COMMUNITY PROHIBITION ON AGREEMENTS, DECISIONS AND CONCERTED PRACTICES APPLIES TO AN EXCLUSIVE FUEL DISTRIBUTION AGREEMENT BETWEEN A SUPPLIER AND A SERVICE-STATION OPERATOR, WHERE THE LATTER ASSUMES THE RISKS LINKED TO THE SALE OF GOODS TO THIRD PARTIES | Confederación Española de Empresarios de Estaciones de ServiciovCompañía Española de Petróleos SA(Reference for a preliminary ruling from the Tribunal Supremo)(Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Article 85 of the EEC Treaty (subsequently Article 85 of the EC Treaty and now Article 81 EC) – Articles 10 to 13 of Regulation (EEC) No 1984/83 – Exclusive fuel purchasing agreements designated ‘sales guarantee commission arrangements’ and ‘agency contracts’ between service-station operators and oil companies) Summary of the Judgment1. Preliminary rulings – Jurisdiction of the Court – Limits (Art. 234 EC)2. Preliminary rulings – Admissibility 3. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Concept(Art. 85 and 85(1) of the EC Treaty (now Art. 81 EC and 81(1) EC))4. Competition – Agreements, decisions and concerted practices – Not allowed – Group exemption – Exclusive purchasing agreements – Regulation No 1984/83(Article 85(3) of the EC Treaty (now Article 81(3) EC); Commission Regulation No 1984/83, Arts 10 to 13)1. Neither the wording of Article 234 EC nor the aim of the procedure established by that article indicates that the Treaty makers intended to exclude from the jurisdiction of the Court requests for a preliminary ruling on a Community provision where the domestic law of a Member State refers to that Community provision in order to determine the rules applicable to a situation which is purely internal to that State. Therefore, where, in regulating internal situations, domestic legislation adopts the same solutions as those adopted in Community law in order to avoid any distortion of competition, it is clearly in the Community interest that, in order to forestall a risk of future differences of interpretation, provisions or concepts taken from Community law should be interpreted uniformly, irrespective of the circumstances in which they are to apply. Thus, although the national provision at issue in the main proceedings makes express reference to an act of Community law only in order to determine the rules applicable to domestic situations, the fact remains that, by means of such a reference, the national legislature decided to apply the same treatment to domestic and to Community situations and the Court has jurisdiction to interpret that act. (see paras 19-20, 22)2. A question referred for a preliminary ruling by a national court is inadmissible where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. In order to ascertain whether the information supplied by the national court satisfies those requirements, the nature and scope of the question raised have to be taken into consideration. In so far as the need for precision with regard to the factual context applies especially in the area of competition, which is characterised by complex factual and legal situations, the Court must examine whether the order for reference supplies sufficient information to enable it to give a useful answer to that question. Where the order for reference does not contain certain information that would be relevant for the purposes of answering the question referred but, despite such gaps, does make it possible to determine the scope of that question, the Court has sufficient factual material to interpret the Community rules concerned and to give a useful answer to that question. (see paras 28-31)3. For the purposes of applying the rules on competition and, in particular, Article 85 of the EEC Treaty (subsequently 85 of the EC Treaty and now Article 81 EC), the formal separation between two parties resulting from their separate legal personality is not conclusive, the decisive test being the unity (or not) of their conduct on the market. Although, in certain circumstances, the relationship between a principal and his agent may be characterised by such economic unity, agents can, however, lose their character as independent traders only if they do not bear any of the risks resulting from the contracts negotiated on behalf of the principal and they operate as auxiliary organs forming an integral part of the principal’s undertaking. Therefore where an intermediary, such as a service-station operator, while having separate legal personality, does not independently determine his conduct on the market since he depends entirely on his principal, such as a supplier of fuel, because the latter assumes the financial and commercial risks as regards the economic activity concerned, the prohibition laid down in Article 85(1) of the Treaty is not applicable to the relationship between that intermediary and the principal. Conversely, where the agreements concluded between a principal and its intermediaries confer on or allow them functions which, from an economic point of view, are approximately the same as those carried out by an independent economic operator, because they make provision for those intermediaries to assume the financial and commercial risks linked to sales or the performance of contracts entered into with third parties, such intermediaries cannot be regarded as auxiliary organs forming an integral part of the principal’s undertaking, so that a clause restricting competition which they have entered into may be an agreement between undertakings for the purposes of Article 85 of the Treaty. It follows that the decisive factor for the purposes of determining whether a service-station operator is an independent economic operator is to be found in the agreement concluded with the principal and, in particular, in the clauses of that agreement, implied or express, relating to the assumption of the financial and commercial risks linked to sales of goods to third parties. That question of risk must be analysed on a case-by-case basis, taking account of the real economic situation rather than the legal classification of the contractual relationship in national law. To that end, it is necessary to apply criteria such as ownership of the goods, the contribution to the costs linked to their distribution, their safe-keeping, liability for any damage caused to the goods or by the goods to third parties, and the making of investments specific to the sale of those goods. However, the fact that the intermediary in reality bears only a negligible share of the risks does not render Article 85 of the Treaty applicable. In such a case, only the obligations imposed on the intermediary in the context of the sale of the goods to third parties on behalf of the principal fall outside the scope of that article. An agency contract may contain clauses concerning the relationship between the agent and the principal to which that article applies, such as exclusivity and non-competition clauses. In that connection, in the context of such relationships, agents are, in principle, independent economic operators and such clauses are capable of infringing the competition rules in so far as they entail locking up the market concerned. Article 85 of the Treaty thus applies to an agreement for the exclusive distribution of motor-vehicle and other fuels concluded between a supplier and a service-station operator where that operator assumes, to a non-negligible extent, one or more financial and commercial risks linked to the sale to third parties. (see paras 41-46, 60-62, 65, operative part 1)4. Article 11 of Regulation No 1984/83 on the application of Article 85(3) of the Treaty [now Article 81(1) EC] to categories of exclusive purchasing agreements lists the obligations that, apart from an exclusivity clause, may be imposed on a reseller, which do not include the imposition of the retail price. Consequently, stipulation of such a price constitutes a restriction on competition not covered by the exemption in Article 10 of that regulation. Articles 10 to 13 of Regulation No 1984/83 must therefore be interpreted as not covering an agreement for the exclusive distribution of motor-vehicle and other fuels concluded between a supplier and a service-station operator in so far as it requires the service-station operator to charge the final retail price stipulated by the supplier. (see paras 64, 66, operative part 2)JUDGMENT OF THE COURT (Third Chamber)14 December 2006 (*) In Case C-217/05,REFERENCE for a preliminary ruling under Article 234 EC, by the Tribunal Supremo (Spain), made by decision of 3 March 2005, received at the Court on 17 May 2005, in the proceedings Compañía Española de Petróleos SA,THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, A. Borg Barthet, J. Malenovský, U. Lõhmus (Rapporteur) and A. Ó Caoimh, Judges,Advocate General: J. Kokott,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 6 July 2006,after considering the observations submitted on behalf of:– Confederación Española de Empresarios de Estaciones de Servicio, by A. Hernández Pardo, C. Flores Hernández and L. Ruiz Ezquerra, abogados, – Compañía Española de Petróleos SA, by J. Folguera Crespo and A. Martínez Sánchez, abogados,– the Commission of the European Communities, by E. Gippini Fournier and K. Mojzesowicz, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 13 July 2006,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Articles 10 to 13 of Commission Regulation (EEC) No 1984/83 of 22 June 1983 on the application of Article 85(3) of the Treaty to categories of exclusive purchasing agreements (OJ 1983 L 173, p. 5). 2 The reference was made in the course of proceedings between Confederaciόn Española de Empresarios de Estaciones de Servicio (‘the Confederation’), the applicant in the main proceedings, and Compañía Española de Petrόleos S.A. (‘CEPSA’), the defendant in the main proceedings, concerning practices by CEPSA alleged to restrict competition, arising from agreements concluded between it and a number of undertakings operating service stations. Legal background Community legislation3 Regulation No 1984/83 excludes from the scope of Article 85(1) of the Treaty (subsequently Article 85 of the EC Treaty and now Article 81 EC) certain categories of exclusive purchasing agreements and concerted practices which normally satisfy the conditions laid down in Article 85(3), on the ground that they lead in general to an improvement in distribution. The regulation contains specific provisions for service-station agreements in Articles 10 to 13. 4 Under Article 10 of Regulation No 1984/83: ‘Pursuant to Article 85(3) of the Treaty and subject to Articles 11 to 13 of this Regulation, it is hereby declared that Article 85(1) of the Treaty shall not apply to agreements to which only two undertakings are party and whereby one party, the reseller, agrees with the other, the supplier, in consideration for the according of special commercial or financial advantages, to purchase only from the supplier, an undertaking connected with the supplier or another undertaking entrusted by the supplier with the distribution of his goods, certain petroleum-based motor-vehicle fuels or certain petroleum-based motor-vehicle and other fuels specified in the agreement for resale in a service station designated in the agreement.’ 5 Article 11 of Regulation No 1984/83 provides: ‘Apart from the obligation referred to in Article 10, no restriction on competition shall be imposed on the reseller other than (a) the obligation not to sell motor-vehicle fuel and other fuels which are supplied by other undertakings in the service station designated in the agreement; (b) the obligation not to use lubricants or related petroleum-based products which are supplied by other undertakings within the service station designated in the agreement where the supplier or a connected undertaking has made available to the reseller, or financed, a lubrication bay or other motor-vehicle lubrication equipment; (c) the obligation to advertise goods supplied by other undertakings within or outside the service station designated in the agreement only in proportion to the share of these goods in the total turnover realized in the service station; (d) the obligation to have equipment owned by the supplier or a connected undertaking or financed by the supplier or a connected undertaking serviced by the supplier or an undertaking designated by him.’ 6 Article 12 of Regulation No 1984/83 sets out the clauses and contractual obligations which preclude the application of Article 10. Article 13 provides that Articles 2(1), 3(3)(a) and (b), 4 and 5 of that regulation are to apply mutatis mutandis to service-station agreements. National legislation7 Article 1(1) of Law No 16/1989 on the Protection of Competition (Ley No 16/1989 de Defensa de la Competencia) of 17 July 1989 (BOE No 170 of 18 July 1989, p. 22747) (‘Law No 16/1989’) classifies as prohibited conduct certain types of anti-competitive conduct drawn directly from Article 85(1) of the Treaty. 8 Royal Decree No 157/1992 implementing Law No 16/1989 with regard to block exemptions, individual authorisations, and the Competition Protection Register (Real Decreto 157/1992, por el que se desarrolla la Ley 16/1989 de 17 de julio en materia de exenciones por categories, autorizaciόn singular y registro de defensa de la competencia) of 21 February 1992 (BOE No 52, of 29 February 1992, p. 7106) (‘Royal Decree No 157/1992’), provides in Article 1: ‘Block exemptions(1) In accordance with Article 5(1)(a) of [Law 16/1989], agreements shall be authorised to which only two undertakings are party and which, belonging to one of the following categories, affect only the national market and satisfy the conditions laid down below for each of those categories: … (b) exclusive purchasing contracts under which one party agrees with another party to purchase, for resale, certain products only from that party, an undertaking connected with that party, or another undertaking entrusted by that party with the distribution of his goods, provided that the agreement complies with the provisions laid down in Commission Regulation (EEC) No 1984/83 of 22 June 1983 … …’ The dispute in the main proceedings and the questions referred for a preliminary ruling9 On 4 May 1995, the Confederation filed a complaint with the Servicio de Defensa de la Competencia (Competition Protection Department), attached to the Ministry of Economic Affairs and Finance, against certain undertakings in the petroleum sector including CEPSA. The Confederation complained that the agreements concluded at the end of 1992 between CEPSA and service-station operators, originally entitled ‘fixed purchase contracts’, subsequently amended to become ‘sales guarantee commission arrangements’ and/or ‘agency contracts’ (‘the agreements concerned’), had the effect of restricting competition. It is apparent from the documents in the file submitted to the Court that 95% of service stations in the CEPSA network are bound by this type of contract. 10 By decision of 7 November 1997, the Confederation’s complaint was filed as requiring no action on the ground that the agreements concerned were not contrary to Article 1(1) of Law No 16/1989, since that provision is not applicable to agreements concluded by commission agents, commercial agents or intermediaries with other undertakings. The appeal by the Confederation against that decision was dismissed by the Tribunal de Defensa de la Competencia by decision of 1 April 1998 on essentially the same grounds. 11 Since its subsequent action before the Audiencia Nacional was also dismissed by decision of 22 January 2002, the Confederation brought an appeal before the Tribunal Supremo. One of the pleas in law relied on in support of that appeal alleges infringement of Article 85(1) of the Treaty and of Regulation No 1984/83, to which Royal Decree No 157/1992 refers. 12 In the context of that dispute, the Tribunal Supremo decided to stay proceedings and to refer the following question to the Court for a preliminary ruling: ‘Must Articles 10 to 13 of Regulation [No 1984/83] be interpreted as meaning that they include within their scope contracts for the exclusive distribution of motor-vehicle and other fuels which are nominally classified as commission or agency contracts and which contain the following clauses: (a) the service-station operator undertakes to sell the supplier’s motor-vehicle and other fuels in accordance with the retail prices, conditions, and sales and business methods stipulated by the supplier; (b) the service-station operator assumes the risk associated with the products as soon as he receives them from the supplier in the storage tanks at the service station; (c) once he has received the products, the service-station operator assumes the obligation to keep the products in the conditions necessary to ensure that they undergo no loss or deterioration and is liable, where applicable, both to the supplier and to third parties for any loss, contamination or adulteration which may affect the products and for any damage arising as a result thereof; (d) the service-station operator is required to pay the supplier the cost of the motor-vehicle and other fuels nine days after the date of their delivery to the service station?’ The question referred for a preliminary ruling The jurisdiction of the Court to answer the question and its admissibility13 CEPSA and the Commission of the European Communities both submit that no reply should be given to the question referred for a preliminary ruling, although for different reasons. 14 First of all, as regards CEPSA’s position, it argues that the Court has no jurisdiction to answer the question referred, first, on the ground that the dispute in the main proceedings is entirely a matter of national law. The reference made to the ‘provisions laid down in Regulation No 1984/83’ by Article 1(1)(b) of Royal Decree No 157/1992 does not really constitute a reference to Community law, but simply incorporates the contents of Articles 10 to 13 of that regulation into national law. Therefore, those provisions of Community law are relevant in the context of the dispute in the main proceedings only as elements of Spanish domestic law. 15 Second, CEPSA takes the view that, in the absence of an effect on trade between Member States, Article 85(1) of the Treaty is not applicable to the dispute in the main proceedings. 16 As a preliminary point, it must be observed that, in the context of the cooperation between the Court of Justice and the national courts provided for by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court (see, in particular, Case C‑415/93 Bosman [1995] ECR I‑4921, paragraph 59, Case C‑28/95 Leur-Bloem [1997] ECR I‑4161, paragraph 24, and Case C‑306/99 BIAO [2003] ECR I‑1, paragraph 88). 17 Where questions submitted by national courts concern the interpretation of a provision of Community law, the Court of Justice is bound, in principle, to give a ruling unless it is obvious that the request for a preliminary ruling is in reality designed to induce the Court to give a ruling by means of a fictitious dispute, or to deliver advisory opinions on general or hypothetical questions, or that the interpretation of Community law requested bears no relation to the actual facts of the main action or its purpose, or that the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, BIAO, paragraph 89 and the case-law cited). 18 That is not the position in the dispute in the main proceedings. 19 The Court has already held that neither the wording of Article 234 EC nor the aim of the procedure established by that article indicates that the Treaty makers intended to exclude from the jurisdiction of the Court requests for a preliminary ruling on a Community provision where the domestic law of a Member State refers to that Community provision in order to determine the rules applicable to a situation which is purely internal to that State (Leur-Bloem, paragraph 25). 20 Therefore, where, in regulating internal situations, domestic legislation adopts the same solutions as those adopted in Community law in order, as in the case in the main proceedings, to avoid any distortion of competition, it is clearly in the Community interest that, in order to forestall a risk of future differences of interpretation, provisions or concepts taken from Community law should be interpreted uniformly, irrespective of the circumstances in which they are to apply (see, in particular, Case C‑28/95 Leur-Bloem, paragraph 32, and Case C‑3/04 Poseidon Chartering [2006] ECR I‑2505, paragraph 16). 21 Furthermore, contrary to CEPSA’s submissions, the circumstances in the case in the main proceedings are different from those in Case C‑346/93 Kleinwort Benson [1995] ECR I‑615. In that judgment, the Court held that it had no jurisdiction to interpret national legislation which did not make a direct and unconditional reference to Community law, but which merely took the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (OJ 1978 L 304, p. 1) as a model and did not wholly reproduce the terms thereof. It is apparent from paragraph 18 of that judgment that express provision was made in that legislation for the national authorities to adopt modifications ‘designed to produce divergence’ between any provision of that legislation and a corresponding provision of the Convention. Moreover, that legislation distinguished between the provisions applicable to Community situations and those applicable to domestic situations. 22 As far as concerns this reference for a preliminary ruling, although Article 1(1)(b) of Royal Decree No 157/1992 makes express reference to Regulation No 1984/83 only in order to determine the rules applicable to domestic situations, the fact remains that, by means of a reference to the provisions of Regulation No 1984/83, the national legislature decided to apply the same treatment to domestic and to Community situations. It follows that where there is a reference to an act of Community law in national legislation, such as there is in the case in the main proceedings, the Court has jurisdiction to interpret that act. 23 Having regard to those considerations, there is no need to examine the arguments put forward by CEPSA as regards the absence of effect on trade between Member States. 24 Therefore, CEPSA’s contention that the Court lacks jurisdiction must be dismissed. 25 As regards the Commission’s position, while not formally pleading that the reference for a preliminary ruling is inadmissible, it emphasises that the factual context of the dispute in the main proceedings is not described adequately in the order for reference, and expresses doubts as to how useful an answer to the question referred for a preliminary ruling will be, having regard to the circumstances of that dispute and, in particular, the fact that, if the file is reopened by the Spanish competition authorities, they may conclude that Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices (OJ 1999 L 336, p. 21), which replaced Regulation No 1984/83, is now applicable. 26 It must be observed in that regard that, according to settled case-law, the need to provide an interpretation of Community law which will be of use to the national court makes it necessary that the national court should define the factual and legislative context of the questions it is asking or, at the very least, explain the factual circumstances on which those questions are based (Case C‑72/03 Carbonati Apuani [2004] ECR I‑8027, paragraph 10, and Case C‑134/03 Viacom Outdoor [2005] ECR I‑1167, paragraph 22). 27 Furthermore, the information provided in the order for reference must not only enable the Court to give a useful answer, but must also give the Governments of the Member States and the other interested parties the opportunity to submit observations pursuant to Article 23 of the Statute of the Court of Justice (see, to that effect, inter alia, orders in Joined Cases C‑128/97 and C‑137/97 Testa and Modesti [1998] ECR I‑2181, paragraph 6, and in Case C‑325/98 Anssens [1999] I‑2969, paragraph 8). 28 Accordingly, a question referred for a preliminary ruling by a national court is inadmissible where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see to that effect, inter alia, Case C‑379/98 PreussenElektra [2001] ECR I‑2099, paragraph 39, and Case C‑390/99 Canal Satélite Digital [2002] ECR I‑607, paragraph 19). 29 In order to ascertain whether the information supplied by the Tribunal Supremo satisfies those requirements, the nature and scope of the question raised have to be taken into consideration. In so far as the need for precision with regard to the factual context applies especially in the area of competition, which is characterised by complex factual and legal situations, the Court must examine whether the order for reference supplies sufficient information to enable it to give a useful answer to that question (see, to that effect, Viacom Outdoor, paragraph 23). 30 In that regard, it must be observed that the order for reference does not contain certain information that would be relevant for the purposes of answering the question referred. Although the wording of the question does indicate that the service-station operator assumes the risks associated with the goods as soon as he receives them from the supplier, the fact remains that the order for reference does not make it clear whether or not that operator assumes certain specific risks under the fuel distribution agreements, who is the owner of the fuel after its delivery to the service-station operator, or who bears the transport costs. 31 Nevertheless, despite such gaps, the order for reference does make it possible to determine the scope of the question referred, as evidenced by the contents of the observations submitted by the parties to the main proceedings and the Commission. Therefore, the Court has sufficient factual material to interpret the Community rules concerned and to give a useful answer to that question. 32 Moreover, as the Advocate General points out in point 30 of her Opinion, it is not obvious that the lawfulness of the 1997 decision by the Servicio de Defensa de la Competencia to file the complaint and not to take any action should not be assessed in the light of the law in force at the time, namely, in particular, Regulation No 1984/83. In any event, the decision as to the applicability of that regulation to the factual situation that is the subject-matter of the dispute in the main proceedings is a matter for the national court. Consequently, the Commission’s doubts as to the relevance of the question referred are also not such as to affect its admissibility. 33 It follows that a reply must be given to the question referred for a preliminary ruling. Substance34 By its question, the national court asks, essentially, whether exclusive fuel distribution contracts with the characteristics it describes fall within the scope of Article 85 of the Treaty and Regulation No 1984/83. 35 As a preliminary point, it must be observed that that regulation merely provides for a block exemption, by which certain categories of agreements between undertakings avoid the prohibition on agreements, decisions and concerted practices laid down in Article 85(1) of the Treaty. Thus, only agreements between undertakings within the meaning of Article 85(1) of the EC Treaty are covered by Regulation No 1984/83. 36 It is therefore appropriate to examine, first of all, whether the agreements at issue in the main proceedings constitute such agreements between undertakings and, second, whether the block exemption introduced by Regulation No 1984/83 is applicable to them. 37 In that connection, it must be recalled that, according to settled case-law, agreements between traders at different levels in the economic process, namely ‘vertical agreements’, may constitute agreements within the meaning of Article 85(1) of the Treaty and be prohibited by that provision (see, to that effect, Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299, 338, and Case C‑266/93 Volkswagen and VAG Leasing [1995] ECR I‑3477, paragraph 17). 38 However, vertical agreements such as the agreements between CEPSA and service-station operators are covered by Article 85 of the EC Treaty only where the operator is regarded as an independent economic operator and there is, consequently, an agreement between two undertakings. 39 It is settled case-law that, in Community competition law, the definition of an ‘undertaking’ covers any entity engaged in an economic activity, regardless of the legal status of that entity and the way in which it is financed (Case C‑41/90 Höfner and Elser [1991] ECR I‑1979, paragraph 21, and Case C‑205/03 P FENIN v Commission [2006] ECR I‑0000, paragraph 25). 40 The Court has also stated that, in the same context, the term ‘undertaking’ must be understood as designating an economic unit for the purpose of the subject-matter of the agreement in question even if in law that economic unit consists of several persons, natural or legal (Case 170/83 Hydrotherm [1984] ECR 2999, paragraph 11). 41 The Court has furthermore made clear that for the purposes of applying the rules on competition the formal separation between two parties resulting from their separate legal personality is not conclusive, the decisive test being the unity of their conduct on the market (see, to that effect, Case 48/69 ICI v Commission [1972] ECR 619, paragraph 140). 42 In certain circumstances, the relationship between a principal and his agent may be characterised by such economic unity (see, to that effect, Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraph 480). 43 In that connection, it is clear, however, from the case-law that agents can lose their character as independent traders only if they do not bear any of the risks resulting from the contracts negotiated on behalf of the principal and they operate as auxiliary organs forming an integral part of the principal’s undertaking (see, to that effect, Volkswagen and VAGLeasing, paragraph 19). 44 Therefore where an intermediary, such as a service-station operator, while having separate legal personality, does not independently determine his conduct on the market since he depends entirely on his principal, such as a supplier of fuel, because the latter assumes the financial and commercial risks as regards the economic activity concerned, the prohibition laid down in Article 85(1) of the Treaty is not applicable to the relationship between that intermediary and the principal. 45 Conversely, where the agreements concluded between a principal and its intermediaries confer on or allow them functions which, from an economic point of view, are approximately the same as those carried out by an independent economic operator, because they make provision for those intermediaries to assume the financial and commercial risks linked to sales or the performance of contracts entered into with third parties, such intermediaries cannot be regarded as auxiliary organs forming an integral part of the principal’s undertaking, so that a clause restricting competition which they have entered into may be an agreement between undertakings for the purposes of Article 85 of the Treaty (see, to that effect, Suiker Unie, paragraphs 541 and 542). 46 It follows that the decisive factor for the purposes of determining whether a service-station operator is an independent economic operator is to be found in the agreement concluded with the principal and, in particular, in the clauses of that agreement, implied or express, relating to the assumption of the financial and commercial risks linked to sales of goods to third parties. As the Commission rightly submitted in its observations, the question of risk must be analysed on a case-by-case basis, taking account of the real economic situation rather than the legal classification of the contractual relationship in national law. 47 In those circumstances, an assessment must be made as to whether or not, in the context of agreements having the characteristics described by the national court, the service-station operators assume certain financial and commercial risks linked to the sale of fuel to third parties. 48 An analysis of how those risks are allocated must be made in the light of the factual circumstances of the case in the main proceedings. As has already been pointed out in paragraph 30 of this judgment, the file submitted to the Court does not provide full information as to the way in which that allocation operates under the agreements concluded between CEPSA and the service-station operators. 49 In that context, it must be recalled that the Court has no jurisdiction to give a ruling on the facts in an individual case or to apply the rules of Community law which it has interpreted to national measures or situations, since those questions are matters within the jurisdiction of the national court (see, in particular, Case 253/03 CLT‑UFA [2006] ECR I‑1831, paragraph 36, and Case C‑451/03 Servizi Ausiliari Dottori Commercialisti [2006] ECR I‑2941, paragraph 69). 50 Nevertheless, in order to give a useful answer to the national court, it is appropriate to set out the criteria enabling an assessment to be made as to the actual allocation of the financial and commercial risks between service-station operators and the fuel supplier under the agreements at issue in the main proceedings, for the purposes of determining whether Article 85 of the Treaty is applicable to them. 51 In that connection, the national court should take account, first, of the risks linked to the sale of the goods, such as the financing of fuel stocks and, second, of the risks linked to investments specific to the market, namely those required to enable the service-station operator to negotiate or conclude contracts with third parties. 52 First, as regards the risks linked to the sale of the goods, it is likely that the service-station operator assumes those risks when he takes possession of the goods at the time he receives them from the supplier, that is to say, prior to selling them on to a third party. 53 Likewise, the service-station operator who assumes, directly or indirectly, the costs linked to the distribution of those goods, particularly the transport costs, should be regarded as thereby assuming part of the risk linked to the sale of the goods. 54 The fact that the service-station operator maintains stocks at his own expense could also be an indication that the risks linked to the sale of the goods are transferred to him. 55 Furthermore, the national court should determine who assumes responsibility for any damage caused to the goods, such as loss or deterioration, and for damage caused by the goods sold to third parties. If the service-station operator were responsible for such damage, irrespective of whether or not he had complied with the obligation to keep the goods in the conditions necessary to ensure that they undergo no loss or deterioration, the risk would have to be regarded as having been transferred to him. 56 It is also necessary to assess the allocation of the financial risk linked to the goods, in particular as regards payment for the fuel should the service-station operator not find a purchaser, or where payment is deferred as a result of payment by credit card, on the basis of the rules or practices relating to the payment system for fuel. 57 In that connection, it is apparent from the order for reference that the service-station operator is required to pay CEPSA the amount corresponding to the sale price of the fuel nine days after the date of delivery and that, by the same date, the service-station operator receives commission from CEPSA, in an amount corresponding to the quantity of fuel delivered. 58 In those circumstances, it is for the national court to ascertain whether the payment to the supplier of the amount corresponding to the sale price of the fuel depends on the quantity actually sold by that date and, as regards the turnover period for the goods in the service-station, whether the fuel delivered by the supplier is always sold within a period of nine days. If the answer is in the affirmative it would have to be concluded that the commercial risk is born by the supplier. 59 As regards the risks linked to investments specific to the market, if the service-station operator makes investments specifically linked to the sale of the goods, such as premises or equipment such as a fuel tank, or commits himself to investing in advertising campaigns, such risks are transferred to the operator. 60 It follows from the foregoing that, in order to determine whether Article 85 of the Treaty is applicable, the allocation of the financial and commercial risks between the service-station operator and the supplier of fuel must be analysed on the basis of criteria such as ownership of the goods, the contribution to the costs linked to their distribution, their safe-keeping, liability for any damage caused to the goods or by the goods to third parties, and the making of investments specific to the sale of those goods. 61 However, as the Commission rightly submits, the fact that the intermediary bears only a negligible share of the risks does not render Article 85 of the Treaty applicable. 62 Nevertheless, it must be pointed out that, in such a case, only the obligations imposed on the intermediary in the context of the sale of the goods to third parties on behalf of the principal fall outside the scope of that article. As the Commission submitted, an agency contract may contain clauses concerning the relationship between the agent and the principal to which that article applies, such as exclusivity and non-competition clauses. In that connection it must be considered that, in the context of such relationships, agents are, in principle, independent economic operators and such clauses are capable of infringing the competition rules in so far as they entail locking up the market concerned. 63 If, following examination of the risks assumed by the service-station operators involved in the case in the main proceedings, the obligations imposed on them in the context of the sale of goods to third parties were not to be regarded as agreements between undertakings within the meaning of Article 85 of the Treaty, the obligation imposed on those service-station operators to sell fuel at a specific price would fall outside that provision and would thus be inherent in CEPSA’s ability to delimit the scope of the activities of its agents. Conversely, if the national court were to conclude that there was an agreement between undertakings within the meaning of Article 85 of the Treaty as regards the sale of goods to third parties, the question would arise as to whether the obligation in question falls within the block exemption provided for in Articles 10 to 13 of Regulation No 1984/83. 64 In that connection, it must be observed that Article 11 of Regulation No 1984/83 lists the obligations that, apart from an exclusivity clause, may be imposed on a reseller, which do not include the imposition of the retail price. Consequently, stipulation by CEPSA of that price would constitute a restriction on competition not covered by the exemption in Article 10 of that regulation. 65 In the light of the foregoing considerations, the answer to the question referred for a preliminary ruling must be that Article 85 of the Treaty applies to an agreement for the exclusive distribution of motor-vehicle and other fuels, such as that at issue in the main proceedings, concluded between a supplier and a service-station operator where that operator assumes, to a non-negligible extent, one or more financial and commercial risks linked to the sale to third parties. 66 Articles 10 to 13 of Regulation No 1984/83 must be interpreted as not covering such an agreement in so far as it requires the service-station operator to charge the final retail price stipulated by the supplier. Costs67 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Third Chamber) hereby rules:1. Article 85 of the EEC Treaty (subsequently Article 85 of the EC Treaty and now Article 81 EC) applies to an agreement for the exclusive distribution of motor-vehicle and other fuels, such as that at issue in the main proceedings, concluded between a supplier and a service-station operator where that operator assumes, to a non-negligible extent, one or more financial and commercial risks linked to the sale to third parties.2. Articles 10 to 13 of Commission Regulation (EEC) No 1984/83 of 22 June 1983 on the application of Article 85(3) of the Treaty to categories of exclusive purchasing agreements must be interpreted as not covering such an agreement in so far as it requires the service-station operator to charge the final retail price stipulated by the supplier.[Signatures]* Language of the case: Spanish. | 0d31c-a87bb07-489f | EN |
NATIONAL LEGISLATION WHICH MAKES DIVIDENDS RECEIVED BY A NON-RESIDENT PARENT COMPANY LIABLE TO A WITHHOLDING TAX, WHILE ALMOST FULLY EXEMPTING DIVIDENDS RECEIVED BY A RESIDENT PARENT COMPANY, RESTRICTS FREEDOM OF ESTABLISHMENT | Denkavit Internationaal BVandDenkavit France SARLvMinistre de l’Économie, des Finances et de l’Industrie(Reference for a preliminary ruling from Conseil d’État (France))(Freedom of establishment – Corporation tax – Payment of dividends – Exemption for dividends paid to resident companies – Withholding tax levied on dividends paid to non-resident companies – Double taxation convention – Possibility of setting off the amount withheld against tax due in another Member State)Summary of the Judgment1. Freedom of movement for persons – Freedom of establishment – Tax legislation(Arts 43 EC and 48 EC)2. Freedom of movement for persons – Freedom of establishment – Tax legislation1. Article 43 EC and Article 48 EC preclude national legislation which, in imposing a liability to tax on dividends paid to a non-resident parent company and allowing resident parent companies almost full exemption from such tax, constitutes a discriminatory restriction on freedom of establishment. Such a difference in the tax treatment of dividends between parent companies, based on the location of their registered office, makes it less attractive for companies established in other Member States to exercise freedom of establishment and they may, in consequence, refrain from acquiring, creating or maintaining a subsidiary in the State which adopts that measure, and constitutes a restriction on freedom of establishment, which is, in principle, prohibited by Article 43 EC and Article 48 EC. It is true that, in the context of measures laid down by a Member State in order to prevent or mitigate the imposition of a series of charges to tax on, or the double taxation of, profits distributed by a resident company, resident shareholders receiving dividends are not necessarily in a situation which is comparable to that of shareholders receiving dividends who are resident in another Member State. However, as soon as a Member State, either unilaterally or by way of a convention, imposes a charge to tax on the income, not only of resident shareholders, but also of non-resident shareholders, from dividends which they receive from a resident company, the situation of those non‑resident shareholders becomes comparable to that of resident shareholders. Once a Member State has chosen to relieve its residents of the imposition of a series of charges to tax on the profits of subsidiaries which are distributed by way of dividend to the parent companies of those subsidiaries, it must extend that relief to non-residents to the extent to which an imposition of that kind on those non-residents results from the exercise of its tax jurisdiction over them. (see paras 29-30, 34-35, 37, 41, operative part 1)2. Article 43 EC and Article 48 EC preclude national legislation which imposes, only as regards non-resident parent companies, a withholding tax on dividends paid by resident subsidiaries, even if a tax convention between the Member State in question and another Member State, authorising that withholding tax, provides for the tax due in that other State to be set off against the tax charged in accordance with the disputed system, whereas a parent company is unable to set off tax in that other Member State, in the manner provided for by that convention. Irrespective of its extent, the difference in tax treatment resulting from the application of such a convention and legislation constitutes discrimination against parent companies on the basis of their registered office, which is incompatible with the freedom of establishment guaranteed by the Treaty. (see paras 49, 56, operative part 2)JUDGMENT OF THE COURT (First Chamber)14 December 2006 (*) In Case C-170/05,REFERENCE for a preliminary ruling under Article 234 EC, by the Conseil d'État (France), made by decision of 15 December 2004, received at the Court on 8 February 2005, in the proceedings Denkavit Internationaal BV,Ministre de l’Économie, des Finances et de l’Industrie,THE COURT (First Chamber),composed of P. Jann, President of the Chamber, K. Lenaerts (Rapporteur), E. Juhász, K. Schiemann and E. Levits, Judges,Advocate General: L.A. Geelhoed,Registrar: K. Sztranc-Sławiczek, Administrator,having regard to the written procedure and further to the hearing on 19 January 2006,after considering the observations submitted on behalf of:– Denkavit Internationaal BV and Denkavit France SARL, by B. Soubeille, avocat,– the French Government, by G. de Bergues, J.C. Gracia and C. Jurgensen, acting as Agents,– the Netherlands Government, by H.G. Sevenster and D.J.M. de Grave, acting as Agents,– the United Kingdom Government, by C. White, acting as Agent, and by J. Stratford, Barrister,– the Commission of the European Communities, by J.‑P. Keppenne and R. Lyal, acting as Agents,– the EFTA Surveillance Authority, by P. Bjørgan and N. Fenger, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 27 April 2006,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Article 43 EC for the purposes of French tax legislation which, at the time of the facts in question, imposed a withholding tax on the payment of dividends by a resident subsidiary to a non-resident parent company, whereas dividends paid by a resident subsidiary to a resident parent company were almost fully exempt from corporation tax. 2 The reference has been made in proceedings brought before the Conseil d’État (French Council of State) concerning the taxation of dividends paid by Denkavit France SARL (‘Denkavit France’) and Agro Finances SARL (‘Agro Finances’), both of which are established in France, to their parent company, Denkavit Internationaal BV (‘Denkavit Internationaal’), which is established in the Netherlands. Legal framework National legislation 3 Under Article 119a(2) of the French Code général des impôts (General Tax Code) (the ‘CGI’), in the version in force at the material time, dividends paid by a resident company to a natural or legal person who was not resident in France for tax purposes or did not have its registered office there were subject to a withholding tax of 25%. In the case of dividends paid by a resident company to a resident shareholder, no withholding tax was levied. 4 By virtue of Articles 145 and 216 of the CGI, a parent company having its registered office or a permanent place of business in France was entitled under certain conditions to almost full exemption from corporation tax in respect of dividends paid by its subsidiary. Apart from a 5% share, such dividends did not form part of the net taxable profits of the parent company and were accordingly exempt from tax in its hands. The 5% share continued to form part of the net taxable profits of the parent company and was subject to tax at the rate applicable for corporation tax purposes. The Franco-Netherlands Tax Convention 5 Article 10(1) of the Convention between the Government of the French Republic and the Government of the Kingdom of the Netherlands for the Avoidance of Double Taxation and the Prevention of Tax Evasion in respect of Taxes on Income and Wealth, signed at Paris on 16 March 1973, (‘the Franco-Netherlands Convention’) provides that dividends paid by a company which is resident in one of the Contracting States to a resident of the other State are taxable in the latter State. However, by virtue of Article 10(2) of that convention, such dividends may, where the parent company owns at least 25% of the capital of the subsidiary, be taxed in the State in which the company making the distribution is resident, at a maximum rate of 5%. 6 Under Article 24A(1) and (3) of the Franco-Netherlands Convention, the Kingdom of the Netherlands may include income that is taxable in France under that convention in the tax base of its residents. As regards income that is taxable in France by virtue of Article 10(2) of the convention, the Kingdom of the Netherlands grants a credit equal to the amount of tax deducted in France, but that credit may not exceed the Netherlands tax payable in respect of that income. The dispute in the main proceedings and the questions referred for preliminary ruling7 At the relevant time, Denkavit Internationaal owned 50% of the capital of Denkavit France and 99.9 % of the capital of Agro Finances, which itself owned 50% of the capital of Denkavit France. 8 In the period between 1987 and 1989, Denkavit France and Agro Finances, which subsequently merged, paid dividends to Denkavit Internationaal of a total amount of FRF 14 500 000. 9 In accordance with the combined provisions of Article 119a(2) of the CGI and Article 10(2) of the Franco-Netherlands Convention, a withholding tax of 5% of the amount of those dividends was levied, corresponding to FRF 725 000. 10 Following an action brought before the Tribunal administratif de Nantes (Adminstrative Court, Nantes), Denkavit Internationaal was repaid the amount of the withholding tax. However, by judgment of 13 March 2001, the Cour administrative d’appel de Nantes (Administrative Appeal Court, Nantes) set aside the judgment of the Tribunal administratif de Nantes and reinstated the liability of Denkavit Internationaal to pay the sum of FRF 725 000. 11 Denkavit Internationaal and Denkavit France brought an appeal in cassation against that judgment before the Conseil d’État. They argue in those proceedings, in particular, that the French tax legislation at issue contravenes Article 43 EC. 12 As it took the view that the withholding tax under the French legislation at issue does not affect resident companies which pay dividends, but non-resident parent companies which are the beneficiaries of those dividends, whereas resident parent companies may be entitled to almost full exemption from corporation tax on dividends paid by their subsidiaries, the national court asks whether, in the light of that difference in tax treatment, a resident parent company and a non‑resident parent company are in an objectively comparable situation as regards the operation of the withholding tax on dividends. 13 The national court is also unsure as to what effect the provisions of the Franco‑Netherlands Convention may have on the assessment of the compatibility of the withholding tax with freedom of establishment. 14 First, because, by virtue of Article 24 of the convention, a parent company which is resident in the Netherlands and which receives dividends from a company which is resident in France may, in principle, set off tax paid in France against the amount of tax payable in the Netherlands, the national court asks whether the withholding tax, which is authorised under the Franco-Netherlands Convention subject to the setting of a maximum rate and the right of Netherlands shareholders receiving those dividends to offset that tax, may be regarded merely as a means of apportioning the taxation of those dividends between the French Republic and the Kingdom of the Netherlands without any effect on the overall charge to tax of the Netherlands parent company and, accordingly, on that company’s freedom of establishment. 15 Secondly, the Conseil d’État asks whether it is necessary to take into account the fact that the company which is resident in the Netherlands can set off that tax only if the tax payable by it in the Netherlands is higher than the tax credit to which it is entitled by virtue of Article 24 of the Franco‑Netherlands Convention. 16 Taking the view in those circumstances that, in order to reach a decision in the main case, an interpretation of Community law is required, the Conseil d’État decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Is a provision which imposes the burden of taxation on a parent company in receipt of dividends which is not resident in France, while relieving parent companies which are resident in France of a similar burden, open to challenge in the light of the principle of freedom of establishment? 2. Is such a withholding tax itself open to challenge in the light of the principle of freedom of establishment, or, where a tax convention between France and another Member State authorising that withholding tax provides for the tax payable in that other Member State to be set off against the tax charged in accordance with the disputed system, must that convention be taken into account in assessing the compatibility of the system with the principle of freedom of establishment? 3. In the event that the second alternative set out [in Question 2] is held to apply, is the existence of the aforementioned convention sufficient to ensure that the disputed system may be regarded merely as a means of apportioning the taxable item between the two States concerned without any effect on the undertakings, or must the fact that a parent company which is not resident in France may be unable to set off tax as provided for by the convention mean that this system must be regarded as incompatible with the principle of freedom of establishment?’ The questions referred for preliminary ruling17 The first point to be noted is that the dispute in the main proceedings relates to matters which occurred before the adoption of Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6). Accordingly, the answers to the questions referred will be based only on the relevant provisions of the EC Treaty. Question 118 By Question 1, the national court essentially asks whether Article 43 EC precludes national legislation which imposes a liability to tax on dividends paid by resident subsidiaries to their parent company when that company is established in another Member State, whilst resident parent companies are almost fully exempt from that tax. Question 1 therefore falls to be understood as extending also to Article 48 EC. 19 First of all, it should be noted that, according to settled case-law, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (Case C-279/93 Schumacker [1995] ECR I‑225, paragraph 21; Case C-264/96 ICI [1998] ECR I‑4695, paragraph 19; and Case C-471/04 Keller Holding [2006] ECR I-2107, paragraph 28) and avoid any discrimination on grounds of nationality (Case C-80/94 Wielockx [1995] ECR I‑2493, paragraph 16; Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651, paragraph 19; and Joined Cases C‑397/98 and C-410/98 Metallgesellschaft and Others [2001] ECR I‑1727, paragraph 37). 20 Freedom of establishment, which Article 43 EC grants to Community nationals and which includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected, entails, in accordance with Article 48 EC, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Community, the right to exercise their activity in the Member State concerned through a subsidiary, branch or agency (Case C-307/97 Saint-Gobain ZN [1999] ECR I-6161, paragraph 35, and Keller Holding, paragraph 29). 21 The abolition of restrictions on freedom of establishment also applies to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of another Member State (Case 270/83 Commission v France [1986] ECR 273, paragraph 13, and Royal Bank of Scotland, paragraph 22) 22 In the case of companies, it should be borne in mind that their registered office for the purposes of Article 48 EC serves, in the same way as nationality in the case of individuals, as the connecting factor with the legal system of a Member State (see Metallgesellschaft and Others, paragraph 42, and the case-law cited). Acceptance of the proposition that the Member State in which a resident subsidiary is established may freely apply different treatment merely by reason of the fact that the registered office of the parent company is situated in another Member State would deprive Article 43 EC of all meaning (see, to that effect, Commission v France, paragraph 18; Case C-330/91 Commerzbank [1993] ECR I‑4017, paragraph 13; Metalgesellschaft and Others, paragraph 42; and Case C-446/03 Marks & Spencer [2005] ECR I‑10837, paragraph 37). Freedom of establishment thus seeks to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination, even minimal, based on the place in which companies have their seat (see, to that effect, Commission v France, paragraph 14, and Saint-Gobain ZN, paragraph 35). 23 It is true that the Court has already held that, in tax law, the taxpayers’ residence may constitute a factor that might justify national rules involving different treatment for resident and non-resident taxpayers. (Marks & Spencer, paragraph 37). 24 Different treatment of resident and non-resident taxpayers cannot therefore in itself be categorised as discrimination within the meaning of the EC Treaty (see, to that effect, Wielockx, paragraph 19). 25 However, a difference in treatment between those two categories of taxpayer must be categorised as discrimination within the meaning of the Treaty where there is no objective difference such as to justify that difference in treatment (see, to that effect, Schumacker, paragraphs 36 to 38, and Royal Bank of Scotland, paragraph 27). 26 In the present case, the national legislation at issue in the main proceedings gives rise, irrespective of the effect of the Franco‑Netherlands Convention, to a difference in the tax treatment of dividends paid by a resident subsidiary to its parent company, according to whether the latter is resident or non-resident. 27 While resident parent companies may be entitled to almost full exemption from tax on dividends received, non-resident parent companies are, by contrast, subject to tax in the form of a withholding tax of 25% of the amount of dividends paid. 28 Accordingly, dividends paid to non-resident parent companies, unlike those paid to resident parent companies, are subject to a series of charges to tax under French tax legislation, in that, as the Advocate General pointed out at points 16 to 18 of his Opinion, those dividends are subject to tax, first, in the form of corporation tax levied on the resident subsidiary making the distribution and, second, in the form of the withholding tax levied on the non-resident parent company receiving the dividends. 29 Such a difference in the tax treatment of dividends between parent companies, based on the location of their registered office, constitutes a restriction on freedom of establishment, which is, in principle, prohibited by Article 43 EC and Article 48 EC. 30 The tax measure at issue in the main proceedings makes it less attractive for companies established in other Member States to exercise freedom of establishment and they may, in consequence, refrain from acquiring, creating or maintaining a subsidiary in the State which adopts that measure (see, to that effect, Case C-324/00 Lankhorst-Hohorst [2002] ECR I‑11779, paragraph 32, and Keller Holding, paragraph 35). 31 However, the French Government argues that the opportunity of benefiting from almost full exemption from tax on dividends is also available to non-resident parent companies which have a fixed place of business in France. For the purposes of a withholding tax provision, such as the provision at issue in the main proceedings, the situation of non-resident parent companies which do not have a fixed place of business in France is not comparable to that of non-resident parent companies which do have a fixed place of business in France. 32 The French Government adds that, in accordance with the principle of territoriality, to exempt dividends paid by resident subsidiaries to non‑resident parent companies which do not have a fixed place of business in France would allow the latter to avoid any liability to tax on their income, both in France and the Netherlands, and anwould undermine the allocation of taxing powers between the French Republic and the Kingdom of the Netherlands. 33 Those arguments cannot be accepted. 34 It is true that, in the context of measures laid down by a Member State in order to prevent or mitigate the imposition of a series of charges to tax on, or the double taxation of, profits distributed by a resident company, resident shareholders receiving dividends are not necessarily in a situation which is comparable to that of shareholders receiving dividends who are resident in another Member State (see, to that effect, Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation [2006] ECR I-0000, paragraphs 57 to 65). 35 However, as soon as a Member State, either unilaterally or by way of a convention, imposes a charge to tax on the income, not only of resident shareholders, but also of non-resident shareholders, from dividends which they receive from a resident company, the situation of those non‑resident shareholders becomes comparable to that of resident shareholders (Test Claimants in Class IV of the ACT Group Litigation, paragraph 68). 36 In the present case, parent companies receiving dividends paid by resident subsidiaries, are, as regards the taxation in France of those dividends, in a comparable situation, whether they receive those dividends as resident parent companies or as non-resident parent companies which have a fixed place of business in France, or as non‑resident parent companies which do not have a fixed place of business in France. In each of those cases, the French Republic imposes a liability to tax on dividends received from a resident company. 37 It must be held in that regard that the exemption in respect of dividends received by resident parent companies is designed to avoid the imposition of a series of charges to tax on the profits of subsidiaries which are distributed by way of dividend to the parent companies of those subsidiaries. As the Advocate General stated at point 22 of his Opinion, since the French Republic has chosen to relieve its residents of such a liability to tax, it must extend that relief to non-residents to the extent to which an imposition of that kind on those non-residents results from the exercise of its tax jurisdiction over them (see, to that effect, Test Claimants in Class IV of the ACT Group Litigation, paragraph 70). 38 In that context, the withholding tax arrangements which apply only to dividends paid by resident subsidiaries to non-resident companies which do not have a fixed place of business in France cannot be justified by the need to prevent those companies from avoiding any liability to tax on those dividends in France and the Netherlands, because resident parent companies are also free of any subsequent liability to tax on those dividends. 39 In refusing to extend to non-resident parent companies the more advantageous national tax treatment accorded to resident parent companies, the national legislation at issue in the main proceedings amounts to a discriminatory measure which is incompatible with the Treaty, in that it imposes a heavier tax burden on dividends paid by resident subsidiaries to Netherlands parent companies than that imposed on dividends paid to French parent companies. 40 Since the French Government has not put forward any other arguments in justification of its position, it must be held that the national provisions at issue in the main proceedings constitute discrimination between parent companies having their registered office in France and those having their registered office in another Member State, contrary to Article 43 EC and Article 48 EC. 41 The answer to Question 1 must therefore be that Article 43 EC and Article 48 EC are to be interpreted precluding national legislation which, in imposing a liability to tax on dividends paid to a non-resident parent company and allowing resident parent companies almost full exemption from such tax, constitutes a discriminatory restriction on freedom of establishment. Questions 2 and 3 42 By Questions 2 and 3, which should be treated together, the national court essentially asks whether a different answer to Question 1 should be given on the basis that, by virtue of the Franco-Netherlands Convention, a parent company which is resident in the Netherlands may, in principle, offset tax paid in France against its liability to tax in the Netherlands and, accordingly, the withholding tax is merely a means of apportioning the taxable item between the Member States concerned, which is not open to challenge under Article 43 EC or Article 48 EC, even though a parent company which is resident in the Netherlands is unable to set off tax as provided for by that convention. 43 In that regard, it should first of all be noted that, in the absence of harmonising measures at Community level and of conventions concluded between all the Member States for the purposes of the second indent of Article 293 EC, the Member States retain competence for determining the criteria for taxation on income with a view to eliminating double taxation by means, inter alia, of international conventions. In those circumstances, the Member States remain at liberty to determine the connecting factors for the allocation of fiscal jurisdiction by means of bilateral agreements (see, to that effect, Saint‑Gobain ZN, paragraph 57, and Case C-265/04 Bouanich [2006] ECR I-923, paragraph 49). 44 The fact remains that, as far as the exercise of the power of taxation so allocated is concerned, the Member States may not, having regard to the principle referred to in paragraph 19 of this judgment, disregard Community rules (Saint-Gobain ZN, paragraph 58). In particular, such an allocation of fiscal jurisdiction does not permit Member States to introduce discriminatory measures which are contrary to the Community rules (Bouanich, paragraph 50). 45 In the present case, since the tax regime arising under the Franco‑Netherlands Convention forms part of the legal framework applying to the main proceedings and has been presented as such by the national court, the Court of Justice must take it into account in order to provide an interpretation of Community law that is relevant to the national court (see, to that effect, Case C-319/02 Manninen [2004] ECR I‑7477, paragraph 21; Bouanich, paragraph 51; and Test Claimants in Class IV of the ACT Group Litigation, paragraph 71). 46 With regard to the tax treatment arising under the Franco-Netherlands Convention, it must be noted that a non-resident company, such as Denkavit Internationaal, is, in principle, authorised under that convention to offset the withholding tax of 5% on French-sourced dividends against its tax liability in the Netherlands. The amount offset cannot, however, exceed the amount of Netherlands tax otherwise payable on those dividends. It is not in dispute that Netherlands parent companies are exempted by the Kingdom of the Netherlands from tax on foreign-sourced dividends, and accordingly on French-sourced dividends, with the result that no credit is given in respect of French withholding tax. 47 It must therefore be held that the combined application of the Franco‑Netherlands Convention and the relevant Netherlands legislation does not serve to overcome the effects of the restriction on freedom of establishment that was held to exist in the answer to Question 1. 48 Under the Franco-Netherlands Convention and the relevant Netherlands Convention, a parent company established in the Netherlands which receives dividends from a subsidiary established in France is liable to withholding tax, admittedly capped by that convention at 5% of the amount of the dividends in question, whereas, as mentioned in paragraph 4 of this judgment, a parent company established in France is almost fully exempt from tax on those dividends. 49 Irrespective of its extent, the difference in tax treatment resulting from the application of that convention and that legislation constitutes discrimination against parent companies on the basis of their registered office, which is incompatible with the freedom of establishment guaranteed by the Treaty. 50 A restriction on freedom of establishment is prohibited by Article 43 EC, even if it is of limited scope or minor importance (see, to that effect, Case 270/83 Commission v France, paragraph 21; Case C-34/98 Commission v France [2000] ECR I-995, paragraph 49; and Case C‑9/02 De Lasteyrie du Saillant [2004] ECR I-2409, paragraph 43). 51 The French Government argues in this regard that, in accordance with the principles laid down under international tax law and as the Franco‑Netherlands Convention provides, it is for the State in which the taxpayer is resident, and not for the State in which the taxed income has its source, to rectify the effects of double taxation. 52 That argument cannot be accepted, since it is irrelevant in the present context. 53 The French Republic cannot rely on the Franco-Netherlands Convention in order to avoid the obligations imposed on it by the Treaty (see, to that effect, Case 270/83 Commission v France, paragraph 26). 54 The combined application of the Franco-Netherlands Convention and the relevant Netherlands legislation does not serve to avoid the imposition of a series of charges to tax to which, unlike a resident parent company, a non-resident parent company is subject and, accordingly, does not serve to overcome the effects of the restriction on freedom of establishment that was held to exist in the answer to Question 1, as has been stated in paragraphs 46 to 48 of this judgment. 55 While resident parent companies benefit from a tax regime which allows them to avoid the imposition of a series of charges to tax, as pointed out in paragraph 37 of this judgment, non-resident parent companies are, by contrast, liable to an imposition of that kind on dividends paid by their subsidiaries established in France. 56 The answer to Questions 2 and 3 must therefore be that Article 43 EC and Article 48 EC are to be interpreted as precluding national legislation which imposes, only as regards non-resident parent companies, a withholding tax on dividends paid by resident subsidiaries, even if a tax convention between the Member State in question and another Member State, authorising that withholding tax, provides for the tax due in that other State to be set off against the tax charged in accordance with the disputed system, whereas a parent company is unable to set off tax in that other Member State, in the manner provided for by that convention. Costs57 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (First Chamber) hereby rules:1. Article 43 EC and Article 48 EC preclude national legislation which, in imposing a liability to tax on dividends paid to a non-resident parent company and allowing resident parent companies almost full exemption from such tax, constitutes a discriminatory restriction on freedom of establishment.2. Article 43 EC and Article 48 EC preclude national legislation which imposes, only as regards non-resident parent companies, a withholding tax on dividends paid by resident subsidiaries, even if a tax convention between the Member State in question and another Member State, authorising that withholding tax, provides for the tax due in that other State to be set off against the tax charged in accordance with the disputed system, whereas a parent company is unable to set off tax in that other Member State, in the manner provided for by that convention.[Signatures]* Language of the case: French. | 6d4ff-cae8c4c-446f | EN |
THE COURT OF FIRST INSTANCE CONFIRMS, IN ESSENCE, THE DECISION OF THE COMMISSION PENALISING AN AGREEMENT IN THE BEEF SECTOR | Fédération nationale de la coopération bétail and viande (FNCBV) and OthersvCommission of the European Communities(Competition – Article 81(1) EC – Beef – Suspension of imports – Fixing of a union price scale – Regulation No 26 – Associations of undertakings – Restriction of competition – Trade union action – Effect on trade between Member States – Obligation to state reasons – Guidelines on the method of setting fines – Principle of proportionality – Gravity and duration of the infringement – Aggravating and attenuating circumstances – Prohibition of multiple sanctions – Rights of the defence)Judgment of the Court of First Instance (First Chamber), 13 December 2006 Summary of the Judgment1. Competition – Community rules – Associations of undertakings – Definition (Art. 81(1) EC)2. Competition – Community rules – Associations of undertakings – Definition (Art. 81(1), EC)3. Competition – Agreements, decisions and concerted practices – Effect on trade between Member States4. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Price-fixing5. Competition – Agreements, decisions and concerted practices – Prohibition – National legal framework for concluding the agreement (Art. 81 EC)6. Competition – Community rules – Material scope of application7. Agriculture – Competition rules – Regulation No 26 (Arts 33 EC, 36 EC and 81(1) EC; Council Regulation No 26, Art. 2(1))8. Competition – Administrative procedure – Statement of objections – Necessary content (Council Regulation No 17; Commission Regulation No 99/63, Art. 4)9. Competition – Fines – Amount – Determination(Art. 253 EC; Council Regulation No 17, Art. 15(2))10. Objection of illegality – Scope – Measures the illegality of which may be pleaded (Art. 241 EC; Commission Notice 98/C 9/03)11. Competition – Fines – Amount – Determination(Art. 81(1) EC; Council Regulation No 17, Art. 15(2))12. Competition – Fines – Amount – Determination – Maximum amount (Council Regulation No 17, Art. 15(2))13. Competition – Fines – Amount – Determination – Criteria – Duration of the infringement(Art. 81(1) EC; Commission Notice 98/C 9/03)14. Competition – Fines – Amount – Determination – Criteria – Gravity of the infringement – Aggravating circumstances 15. Competition – Fines – Amount – Determination – Maximum amount 16. Competition – Fines – Commission decision finding an infringement adopted after a Commission decision not amenable to review penalising or exonerating the same undertaking(Council Regulation No 17, Art. 15)17. Competition – Fines – Amount – Discretion of the Commission – Judicial review – Unlimited jurisdiction 1. Article 81(1) EC applies to associations in so far as their own activities or those of the undertakings belonging to them are calculated to produce the results which it aims to suppress. Having regard to the purpose of that provision, the concept of an association of undertakings must be understood as capable of applying to associations which themselves consist of associations of undertakings. For an agreement between undertakings to fall within the ambit of that provision, it is not necessary for the associations in question to be able to compel their members to fulfil the obligations imposed on them by the agreement. (see paras 49, 89)2. In the context of competition law, the concept of an undertaking encompasses every entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed. Any activity consisting in offering goods and services on a given market is an economic activity. The activity of farmers, whether arable or stock farmers, is certainly of an economic nature. Their activity is indeed the production of goods which they offer for sale in return for payment. Consequently, farmers constitute undertakings within the meaning of Article 81(1) EC. Therefore the unions which bring them together and represent them, and the federations which bring the unions together, may be described as associations of undertakings for the purpose of applying that provision. This conclusion cannot be undermined by the fact that local unions may also bring together farmers’ spouses. First, the spouses of arable or stock farmers who are themselves members of a local farmers’ union probably share in the tasks of the family farm. Second, in any case the mere fact that an association of undertakings may also bring together persons or entities that cannot be described as undertakings is not sufficient to affect its status as an association within the meaning of Article 81(1) EC. Likewise, the argument that, where a farm takes the form of a partnership, it is not the partnership that, through its representative, joins the union, but each of the partners, must be dismissed. What is important for the purpose of classifying an undertaking is not its legal status or the form of farm in question, but the activity of the farm and those who share in it. (see paras 52-55)3. Article 81(1) EC applies only to agreements which may affect trade between Member States. For an agreement between undertakings to be capable of affecting trade between Member States, it must be possible to foresee with a sufficient degree of probability and on the basis of objective factors of law or fact that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States, such as might prejudice the realisation of the aim of a single market between the Member States. Where the infringement in which an undertaking or association of undertakings participated is apt to affect trade between Member States, the Commission is not required to demonstrate that the individual participation of that undertaking or association of undertakings has affected intra-Community trade. Practices restricting competition which extend over the whole territory of a Member State have, by their very nature, the effect of reinforcing compartmentalisation of national markets, thereby holding up the economic interpenetration which the Treaty is intended to bring about. Lastly, where the market concerned is susceptible to imports, the members of a national price cartel can retain their market share only if they defend themselves against foreign competition. (see paras 63, 66-67)4. Article 81(1) EC expressly provides that measures which directly or indirectly fix purchase or selling prices constitute restrictions of competition. Price fixing is a patent restriction of competition. An agreement concluded by federations representing farmers and federations representing slaughterers and fixing minimum prices for certain categories of cows, with the aim of making them binding on all traders in the markets in question, has the object of restricting competition in those markets, inter alia by limiting artificially the commercial negotiating margin of farmers and slaughterers and distorting the formation of prices in the markets in question. This conclusion cannot be undermined by the argument that the agricultural markets are regulated markets where the competition rules do not automatically apply and where the formation of prices quite often does not answer to the free operation of supply and demand. No doubt the agricultural sector has certain specific features and is the object of very detailed regulation which is frequently rather interventionist. However, the Community competition rules apply to the markets for agricultural products, even if certain exceptions are provided for to take account of the particular situation of those markets. Moreover, the agreement in question does not cease to be restrictive merely because the minimum prices are fixed by reference to the government intervention price. Reference to that price does not mean that the minimum price scale loses its anti-competitive object consisting in fixing directly and artificially a predetermined market price or that it can be treated in the same way as the various government support and intervention schemes in the common organisations of the agricultural markets which have the object of stabilising markets characterised by excess supply by means of withdrawing a part of production. (see paras 83, 85-87)5. The legal framework within which agreements between undertakings prohibited by Article 81 EC are made and the classification given to that framework by the various national legal systems are irrelevant as far as the applicability of the Community rules on competition are concerned. Moreover, the alleged inadequacy of government measures to deal with the problems of a particular sector cannot justify the private operators concerned in engaging in practices contrary to the competition rules or in claiming to arrogate to themselves rights which are those of public authorities, either national or Community, in order to substitute their own measures for those of the authorities. Likewise, the fact that conduct on the part of undertakings was known, authorised or even encouraged by national authorities has no bearing, in any event, on the applicability of Article 81 EC. Furthermore, the crisis in a sector cannot, on its own, preclude Article 81(1) EC from applying. (see paras 90-92)6. Agreements concluded in the context of collective negotiations between management and labour in pursuit of measures to improve conditions of work and employment must, by virtue of their nature and purpose, be regarded as falling outside the scope of Article 81(1) EC. However, an agreement concluded by federations representing farmers and federations representing slaughterers aimed at fixing minimum prices for the purchase of cows by slaughterers and suspending beef imports must be held to come within the scope of the prohibitions laid down in Article 81 EC. (see paras 98-100)7. The maintenance of effective competition in the markets for agricultural products is one of the objectives of the common agricultural policy. Whilst Article 36 EC has conferred on the Council responsibility for determining the extent to which the Community competition rules are applicable to the production of and trade in agricultural products, in order to take account of the particular position of the markets for those products, that provision nevertheless established the principle that the Community competition rules are applicable in the agricultural sector. Constituting as it does a derogation, Article 2(1) of Regulation No 26, which provides that Article 81(1) EC does not apply to agreements, decisions and practices which are necessary for the attainment of the objectives of the common agricultural policy, must be interpreted strictly. Furthermore, that provision applies only if the agreement in question is conducive to attainment of all the objectives of Article 33 EC, it being understood that, given that those objectives are sometimes divergent, the Commission may try to reconcile them. Lastly, for the purpose of applying that derogation, measures cannot be regarded as necessary for the attainment of the objectives of the common agricultural policy unless they are proportionate. (see paras 197-199, 208)8. Observance of the rights of the defence is, in all proceedings in which sanctions, in particular fines, may be imposed, a fundamental principle of Community law which must be respected even if the proceedings in question are administrative proceedings. In accordance with that principle, the statement of objections is an essential procedural safeguard which must set forth clearly all the essential facts upon which the Commission is relying at that stage of the procedure. Where the Commission expressly states in its statement of objections that it will consider whether it is appropriate to impose fines on the undertakings and it indicates the main factual and legal criteria capable of giving rise to a fine, such as the gravity and the duration of the alleged infringement and whether that infringement was committed intentionally or negligently, it fulfils its obligation to respect the undertakings’ right to be heard. In doing so, it provides them with the necessary means to defend themselves not only against the finding of an infringement but also against the imposition of fines. To give indications in the statement of objections as regards the level of the fines envisaged, before the undertaking has been invited to submit its observations on the allegations against it, would be to anticipate the Commission’s decision. All the more so, to raise in the statement of objections the question whether the fine which may be imposed by the final decision will adhere to the 10% maximum would also anticipate the decision and would thus be inappropriate. (see paras 217-218, 222)9. Where the Commission imposes a fine on an individual undertaking which is the perpetrator of an infringement, it is not necessarily required, in the absence of specific circumstances, to state express reasons for adhering to the maximum 10% of the turnover of the undertaking in question. The latter must be aware of the existence of that legal limit and the specific amount of its turnover and can then ascertain, even without any reasons in the decision in question, whether or not the 10% maximum was exceeded by the fine imposed on that undertaking. On the other hand, where the Commission sanctions an association of undertakings and ensures that the legal limit of 10% of the turnover on the basis of the aggregate turnover of all or some of the members of the association is not exceeded, it must state this expressly in its decision and must set out the reasons which justify taking the members’ turnover into account. If reasons are not given, the persons concerned will not know the justification for the decision and will not be able to ensure properly that the legal limit was adhered to in the particular case. (see paras 238-239)10. Although the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty are not the legal basis of the decision imposing a fine on a trader, that decision being based on Regulation No 17, they determine, in a general and abstract manner, the method by which the Commission has bound itself in setting the amount of fines. Therefore, there is a direct link between that decision and the Guidelines, with the result that they may form the subject‑matter of an objection of illegality. (see para. 250)11. Cartels relating to prices or the partitioning of markets are by nature very serious infringements. Therefore the Commission did not infringe the principle of proportionality by stating in Section 1A of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty that those kinds of infringements are to be regarded as very serious, for which a starting amount of EUR 20 million is provided. In any event, the flat-rate amounts provided for by the Guidelines are merely indicative and therefore cannot in themselves give rise to an infringement of the principle of proportionality. (see paras 252-253)12. Article 15(2) of Regulation No 17, in providing that the Commission may impose fines of up to 10% of turnover during the preceding business year for each undertaking which participated in the infringement, requires only that the fine eventually imposed on an undertaking be reduced if it should exceed 10% of its turnover, irrespective of the intermediate stages in the calculation intended to take account of the gravity and duration of the infringement. Consequently, Article 15(2) of Regulation No 17 does not prohibit the Commission from referring, during its calculation, to an intermediate amount exceeding 10% of the turnover of the undertaking concerned, provided that the amount of the fine eventually imposed on the undertaking does not exceed that maximum limit. This consideration also applies to the maximum amount of EUR 1 million. (see para. 255)13. In the light of Section 1B of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, which provides that the duration of the infringement may entail a possible increase in the amount of the fine established on the basis of gravity, it seems that the very short duration of the infringement, less than one year, means merely that no additional amount should be imposed on the amount calculated by reference to the gravity of the infringement. In any event, the fact that an infringement was of very short duration does not call into question the existence of an infringement of Article 81(1) EC. (see paras 134, 257-258)14. Secret continuation of an agreement after the Commission has ordered the participating undertakings or associations of undertakings to put an end to that agreement, and the use of violence in order to compel a party to adopt an agreement or to ensure that the agreement is being applied, are among the aggravating circumstances which the Commission may take into account in increasing the amount of a fine imposed pursuant to Article 81 EC. (see paras 271, 278-289)15. Article 15(2) of Regulation No 17 does not prevent the Commission from imposing fines of more than EUR 1 000 000 on associations which allegedly have no turnover. The use of the general term ‘infringement’ in Article 15(2) of Regulation No 17, inasmuch as it covers without distinction agreements, concerted practices and decisions of associations of undertakings, indicates that the upper limits laid down in that provision apply in the same way to agreements and concerted practices as to decisions of associations of undertakings. Where an association of undertakings has no economic activity of its own or where its turnover does not reveal the influence it may have on the market, the Commission may, under certain conditions, take into consideration the turnover of its members for the purpose of calculating the maximum fine which may be imposed on it. Although in that provision the only express reference to the turnover of the undertaking concerns the upper limit of a fine exceeding EUR 1 000 000, Section 5(a) of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty, by which the Commission has bound itself, states that the final amount of fine calculated may not in any case exceed 10% of the worldwide turnover of the undertakings, as laid down by Article 15(2) of Regulation No 17. The limit of 10% of turnover must accordingly be observed, even with regard to the setting of fines of less than EUR 1 million. Moreover, the upper limit of 10% of the turnover must be calculated by reference to the turnover achieved by each of the undertakings that are parties to the agreements and concerted practices or by all the members of the associations of undertakings, at least where the internal rules of the association empower it to bind its members. The possibility of taking into account for that purpose the turnover of all the undertakings that are members of an association is justified by the fact that, in determining the amount of the fines, account may be taken inter alia of such influence as the undertaking may have been able to exercise in the market, in particular by reason of its size and economic power, of which its turnover may give an indication, and the deterrent effect that fines must have. The influence which an association of undertakings may have had on the market depends not on its own turnover, which reveals neither its size nor its economic power, but rather on the turnover of its members which gives an indication of its size and economic power. However, the possibility must not be ruled out that, in certain cases, the turnover of the members of an association could also be taken into account even if the association does not possess formal power to bind its members, there being no internal rules enabling it to do so. The Commission’s option of imposing fines of an amount appropriate to the infringements at issue could otherwise be jeopardised, as associations with a very small turnover but bringing together a large number of undertakings which could not be formally bound but which together have a substantial turnover could be sanctioned only by very small fines, even if the infringements for which they were responsible could have a considerable influence on the markets in question. Furthermore, this eventuality would run counter to the need to ensure that sanctions for infringements of the Community competition rules have a deterrent effect. Therefore, other specific circumstances, beyond the existence of internal rules enabling the association to bind its members, may justify taking account of the aggregate turnover of the members of the association in question. This applies in particular to cases where an infringement on the part of an association involves its members’ activities and where the anti-competitive practices at issue are engaged in by the association directly for the benefit of its members and in cooperation with them, the association having no objective interests independent of those of its members. Although, in some of those situations, the Commission could impose individual fines on each of the member undertakings in addition to sanctioning the association in question, this could be particularly difficult or impossible where the number of members is very large. In those cases, in any event, the option of taking into account the turnover of the basic members of the associations of undertakings must, however, be confined, in principle, to those of their members who operated in the markets affected by the infringements sanctioned in the contested decision. Furthermore, taking into account the turnover of the members of an association of undertakings in determining the 10% limit does not mean that a fine has been imposed on them or even that the association in question has an obligation to recover the amount of the fine from its members. (see paras 313-314, 317-319, 325, 343)16. The principle ne bis in idem is a general principle of Community law which is upheld by the Community courts. In the field of Community competition law, the principle precludes an undertaking from being sanctioned by the Commission or made the defendant to proceedings brought by the Commission a second time in respect of anti-competitive conduct for which it has already been penalised or of which it has been exonerated by a previous decision of the Commission that is not amenable to challenge. The application of the principle ne bis in idem is subject to the threefold condition of identity of the facts, unity of offender and unity of the legal interest protected. Under that principle, therefore, the same person cannot be sanctioned more than once for a single unlawful course of conduct designed to protect the same legal asset. However, it does not prohibit the sanctioning of a number of different associations of undertakings which participated in a single infringement by reason of the participation and the degree of responsibility of each one of them in the infringement, even if some of them are members of the others. (see paras 340-344)17. While the Commission has discretion in setting the amount of fines imposed for infringements of the Community competition rules, the Court has, by virtue of Article 17 of Regulation No 17, unlimited jurisdiction within the meaning of Article 229 EC to review decisions whereby the Commission has fixed a fine and may, consequently, cancel, reduce or increase the fine imposed. Under that unlimited jurisdiction, the Court may, inter alia, adjust the amount of the reduction in the fine granted by the Commission to an undertaking or an association of undertakings as one of the circumstances provided for in Section 5(b) of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty. (see paras 352, 355-361)JUDGMENT OF THE COURT OF FIRST INSTANCE (First Chamber)13 December 2006 (*) In Joined Cases T‑217/03 and T‑245/03,Fédération nationale de la coopération bétail and viande (FNCBV), established in Paris (France), represented by R. Collin, M. Ponsard and N. Decker, lawyers, applicant in Case T‑217/03,Fédération nationale des syndicats d’exploitants agricoles (FNSEA), established in Paris, Fédération nationale bovine (FNB), established in Paris, Fédération nationale des producteurs de lait (FNPL), established in Paris, Jeunes agriculteurs (JA), established in Paris, represented by B. Neouze and V. Ledoux, lawyers,applicants in Case T‑245/03,supported byFrench Republic, represented initially by G. de Bergues, F. Million and R. Abraham, and subsequently by M. de Bergues, E. Belliard and S. Ramet, acting as Agents, intervener,Commission of the European Communities, represented by P. Oliver, A. Bouquet and O. Beynet, acting as Agents, defendant,APPLICATIONS, principally, for annulment of Commission Decision 2003/600/EC of 2 April 2003 relating to a proceeding pursuant to Article 81 EC (Case COMP/C.38.279/F3 – French beef) (OJ 2003 L 209, p. 12) and, alternatively, an application for the cancellation or reduction of the fines imposed by that decision, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (First Chamber),composed of R. García-Valdecasas, President, J.D. Cooke and I. Labucka, Judges,Registrar: E. Coulon,having regard to the written procedure and further to the hearing on 17 May 2006,gives the followingJudgment Legal context1 Article 1 of Regulation No 26 of 4 April 1962 applying certain rules of competition to production of and trade in agricultural products (OJ, English Special Edition 1959-1962, p. 129) provides that Articles [81] to [86] EC and provisions made in implementation thereof shall, subject to Article 2 of that regulation, apply to all agreements, decisions and practices referred to in Articles [81](1) and [82] EC which relate to production of or trade in the products listed in Annex [I] to the Treaty, including in particular live animals and meat and edible meat offals. 2 Article 2(1) of that regulation provides as follows:‘Article 81[1] EC shall not apply to such of the agreements, decisions and practices referred to in the preceding Article as form an integral part of a national market organisation or are necessary for attainment of the objectives set out in Article [33 EC]. In particular, it shall not apply to agreements, decisions and practices of farmers, farmers’ associations, or associations of such associations belonging to a single member State which concern the production or sale of agricultural products or the use of joint facilities for the storage, treatment or processing of agricultural products, and under which there is no obligation to charge identical prices, unless the Commission finds that competition is thereby excluded or that the objectives of Article [33 EC] are jeopardised.’ Facts 3 The applicant in Case T‑217/03, the Fédération nationale de la coopération bétail et viande (FNCBV), comprises 300 cooperative groups of producers in the cattle, pig and sheep-farming sectors and some 30 slaughter and meat-processing groups or undertakings in France. 4 The applicants in Case T‑245/03, namely the Fédération nationale des syndicats d’exploitants agricoles (FNSEA), the Fédération nationale bovine (FNB), the Fédération nationale des producteurs de lait (FNPL) and Jeunes agriculteurs (JA), are unions governed by French law. FNSEA is the main French farmers’ union. Territorially it consists of local unions grouped together in departmental (département) federations or unions of farmers (FDSEA or UDSEA). In each region federations coordinate the activities of FDSEA and UDSEA. In addition, FNSEA comprises 33 specialised associations representing the interests of each type of producer, including FNB and FNPL. Lastly, JA represents farmers under 35 years of age. To be a member of the local centre of JA, it is necessary to be a member of a local union belonging to FDSEA or UDSEA. I – Second ‘mad cow’ crisis5 From October 2000, new cases of bovine spongiform encephalopathy, commonly known as ‘mad cow’ disease, were discovered in several Member States. At the same time, there was an outbreak of foot-and-mouth disease in sheep in the United Kingdom. This situation caused a loss of confidence on the part of consumers, which had an impact on meat consumption in general in Europe and created a new crisis in the beef sector. There was a sharp drop in beef consumption, particularly in France, and also a substantial reduction in French imports and exports. Likewise producer prices of adult cattle fell very considerably in France, while final consumer prices remained relatively stable. 6 To meet this crisis, the Community institutions adopted a whole series of measures. The scope of the intervention mechanisms for withdrawing certain quantities of cattle from the market so as to stabilise supply in relation to demand was extended and a scheme for the purchase of live animals was set up, together with a purchase scheme based on a tender procedure for carcasses or half-carcasses (‘special purchase scheme’). In addition, the Commission authorised several Member States, including France, to grant aid to the beef sector. 7 However, those measures were deemed insufficient by French farmers. In September and October 2001 relations between farmers and slaughterers became particularly tense in France. Groups of farmers stopped lorries illegally in order to check the origin of the meat being transported and blockaded abattoirs. These acts some times led to the destruction of plant and of meat. In return for lifting the blockade of abattoirs, the protesting farmers demanded undertakings from the slaughterers to suspend imports and to apply a so-called ‘union’ price scale. II – Conclusion of the contested agreements and administrative procedure before the Commission8 In October 2001 several meetings took place between the federations representing beef farmers (the applicants in Case T-245/03) and those representing the slaughterers (the Fédération nationale de l’industrie et des commerces en gros des viandes (FNICGV) and the applicant in Case T-217/03). Following a meeting on 24 October 2001, organised at the request of the French Minister for Agriculture, an agreement (‘Agreement of the federations of stock farmers and slaughterers on the minimum slaughterhouse entry price scale for culled cows’) was concluded between the six federations, namely FNSEA, FNB, FNPL, JA, FNCBV and FNICGV. 9 The agreement had two parts. The first was a ‘temporary commitment to suspend imports’, which made no distinction between types of beef. The second consisted of a ‘commitment to apply the slaughterhouse entry price scale to culled cows’ (that is to say, cows to be used either for reproduction or milk production), the arrangements for which were set out in the agreement. Consequently it contained a list of prices per kilogram of carcass for certain categories of cows and the method of calculating the price to be applied to other categories, depending inter alia on the special purchase price set by the Community authorities. The agreement was to enter into force on 29 October 2001 and to be applied until the end of November 2001. 10 On 30 October 2001 the Commission sent the French authorities a letter requesting information on the agreement of 24 October 2001. 11 On 31 October 2001 the applicants in Case T-245/03 and FNICGV held a meeting at Rungis (France) on the initiative of the latter. Those federations adopted the following compromise (‘the Rungis protocol’): ‘“Meat imports” meeting31 October 2001 − RungisThe French undertakings specialising in the import and export sector have held a meeting with the producers’ federations (FNSEA, FNB, FNPL and [JA]) that signed the national inter-trade agreement of 24 October 2001. …They reaffirm the imperative need to bring supply and demand back into balance …In the unprecedented crisis situation currently facing producers, the representatives of the farmers urge importers and exporters to be aware of the seriousness of the crisis. In response, the importers and exporters undertake to demonstrate solidarity.’12 On 9 November 2001, the French authorities replied to the Commission’s request for information of 30 October 2001.13 Also on 9 November 2001, the Commission wrote to the applicants in Case T‑245/03 and to FNICGV requesting information pursuant to Article 11 of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-62, p. 87). As the Commission was not at that time aware that the applicant in Case T‑217/03 had also signed the agreement of 24 October 2001, the request for information was not sent to it. The five federations in question replied to the requests for information on 15 and 23 November 2001. 14 On 19 November 2001, the president of FNICGV informed the president of FNSEA that he felt obliged to bring forward to that day the final date of application of the agreement, initially scheduled for 30 November 2001. 15 On 26 November 2001, the Commission wrote a letter of formal notice to the six federations which had signed the agreement of 24 October 2001 stating that the facts which had come to its knowledge indicated that the Community competition rules had been infringed and the federations were asked to submit their observations and proposals by 30 November 2001 at the latest. The Commission’s letter stated that ‘failing satisfactory proposals by that date, [it] envisages initiating a procedure seeking to establish those infringements and to order that they be discontinued if the agreement has been extended, the possibility also arising of the imposition of fines, if appropriate’. The federations replied that the agreement would end on 30 November 2001 and would not be extended. 16 On 17 December 2001, the Commission carried out investigations on the premises of FNSEA and FNB in Paris pursuant to Article 14(3) of Regulation No 17 and on the premises of FNICGV, also in Paris, on the basis of Article 14(2). 17 On 24 June 2002, the Commission adopted a statement of objections addressed to the six federations. They submitted their written observations between 23 September and 4 October 2002. The federations were heard on 31 October 2002. 18 On 10 January 2003, the Commission sent the applicants a request for information within the meaning of Article 11 of Regulation No 17. In particular, it asked them for the total amount, together with a breakdown according to origin, of the income of each federation and their accounting balance sheets for 2001 and 2002, and also the turnover of their direct and/or indirect members for the latest tax year available (overall turnover and turnover connected with the production or slaughter of cattle). The applicants replied by letters of 22, 24, 27 and 30 January 2003. III – The contested decision19 On 2 April 2003, the Commission adopted decision 2003/600/EC relating to a proceeding pursuant to Article 81 [EC] (Case COMP/C.38.279/F3 – French beef) (OJ 2003 L 209, p. 12, ‘the contested decision’), which is addressed to the applicants and to FNICGV. 20 According to the decision, the federations infringed Article 81(1) EC by concluding on 24 October 2001 a written agreement with a view to fixing a minimum purchase price for certain categories of cattle and suspending imports of beef into France, and by concluding, between the end of November and the beginning of December 2001, a verbal agreement having the same object, applicable as from the expiry of the written agreement. 21 At recitals 135 to 149 of the contested decision, the Commission refused to allow in the present case the exemption provided for by Regulation No 26 in favour of certain activities connected with the production of and trade in agricultural products, finding that the agreement was not necessary for attaining the objectives of the common agricultural policy set out in Article 33 EC. Furthermore, the agreement at issue was not one of the means provided for by Council Regulation (EC) No 1254/1999 of 17 May 1999 on the common organisation of the market in beef and veal (OJ 1999 L 160, p. 21) or by the measures implementing it. Lastly, the measures taken were not proportionate to the objectives allegedly sought. 22 According to the contested decision, the infringement began on 24 October 2001 and lasted at least until 11 January 2002, the expiry date of the last local agreement to apply the national agreement of which the Commission was aware. 23 In view of the nature and the geographic extent of the relevant market, the infringement was described as very serious. To determine the degree of responsibility of each federation, the Commission took into account the ratio between the amount of the annual membership fees collected by the main farmers’ federation, FNSEA, and that of each of the other federations. As the infringement was of short duration, the Commission did not increase the basic amount. 24 The Commission then found that there were several aggravating circumstances in relation to the applicants:– it increased the fines on ENSEA, JA and FNB by 30% because their members had used violence to compel the slaughterers’ federations to adopt the agreement of 24 October 2001; – it increased the fines of all the applicants by 20% by reason of the aggravating circumstance that they continued the agreement in secret after the letter of formal notice of 26 November 2001; – it took into account the preponderant role allegedly played by FNB in the preparation and implementation of the infringement by increasing its fine by 30%. 25 In addition, the Commission took various attenuating circumstances into account:– in view of the passive or follow-my-leader role played by FNPL, the Commission reduced its fine by 30%; – with regard to the applicant in Case T-217/03, the Commission took into account, first, the forceful intervention of the French Minister for Agriculture in favour of the conclusion of the agreement (30% reduction) and, second, the illegal blockading of their members’ establishments by farmers (further 30% reduction). 26 In addition, pursuant to Section 5(b) of the Guidelines on the method of setting fines imposed pursuant to Article 15(2) of Regulation No 17 and Article 65(5) of the ECSC Treaty (OJ 1998 C 9, p. 3, ‘the Guidelines’), the Commission took account of the specific circumstances of the case in question, particularly the specific economic context marked by the crisis in the industry, and reduced by 60% the fines resulting from the application of the abovementioned increases and reductions. 27 The operative part of the contested decision includes the following provisions:‘Article 1[FNSEA], [FNB], [FNPL], [JA], [FNICGV] and [FNCBV] infringed Article 81(1) [EC] by concluding on 24 October 2001 an agreement which had the object of suspending imports of beef into France and fixing a minimum price for certain categories of cattle, and by concluding verbally an agreement with a similar object at the end of November and beginning of December 2001. The infringement began on 24 October 2001 and continued to have effect at least until 11 January 2002.Article 2The federations named in Article 1 shall immediately bring the infringement to an end, in so far as they have not already done so, and shall henceforward refrain from any restrictive practice that has the same or an equivalent object or effect. Article 3The following fines are hereby imposed:– FNSEA: EUR 12 million,– FNB: EUR 1.44 million,– JA: EUR 600 000,– FNPL: EUR 1.44 million,– FNICGV: EUR 720 000,– FNCBV: EUR 480 000.’ Procedure and forms of order sought 28 By applications lodged at the Registry of the Court of First Instance on 19 and 20 June 2003, the applicants brought the present actions. 29 By application lodged on 7 July 2003, FNICGV also brought an action seeking, principally, the cancellation of a fine imposed on it by the contested decision and, alternatively, a reduction in the amount of the fine (Case T‑252/03). By order of 9 November 2004, the Court dismissed the action brought by FNICGV as inadmissible. 30 By separate documents received by the Court Registry on 2 and 11 July 2003, the applicants lodged applications for interim measures seeking to secure total or partial dispensation from the obligation to provide bank guarantees, which was imposed as a condition for avoiding the immediate recovery of the amount of the fines imposed by the contested decision. 31 On 7 October 2003, France applied to intervene in each case in support of the forms of order sought by the applicants. By orders of 6 November 2003, the President of the Fifth Chamber of the Court granted leave to intervene. France lodged statements in intervention on 23 December 2003. 32 By orders of the President of the Court of 21 January 2004, a stay was granted of the applicants’ obligation (save in the case of FNPL, which had made no application to that effect) to furnish bank guarantees in favour of the Commission in order to avoid the immediate recovery of the fines, for a limited period and subject to certain conditions. 33 By way of measures of organisation, the Court asked the parties on 21 February, 8 and 9 March 2006 to produce certain documents and to reply to certain questions. The parties complied within the time-limits allowed. 34 Upon the report of the Judge-Rapporteur, the Court (First Chamber) decided to open the oral procedure.35 By order of 3 April 2006, the President of the First Chamber of the Court, after hearing the parties, ordered the joinder of Cases T‑217/03 and T‑245/03. 36 The parties presented oral argument and replied to questions from the Court at the hearing of 17 May 2006.37 The applicants claim that the Court should:– principally, annul the contested decision;– in the alternative, cancel the fines imposed on them by the contested decision or, in the further alternative, reduce the fines; – order the Commission to pay the costs.38 The French Republic, intervening in support of the applicants, claims that the Court should:– annul the contested decision; 39 The Commission contends that the Court should:– dismiss the applications; – order the applicants to pay the costs.40 By letters of 19 and 22 May 2006, the applicants submitted to the Court documents forming part of the Commission’s administrative file which had not previously been submitted to the Court in full. By order of 7 July 2006, the Court decided to reopen the oral procedure pursuant to Article 62 of the Rules of Procedure. 41 After hearing the parties, the Court adopted a measure pursuant to Article 64 of the Rules of Procedure, consisting in adding to the file the documents lodged by the applicants on 19 and 22 May 2006. The Commission submitted observations on the said documents by letter of 2 August 2006. 42 The oral procedure was then closed on 2 September 2006. Merits of the case43 The applicants seek primarily the annulment of the contested decision. In the alternative, they seek the cancellation or reduction of the fines imposed on them by that decision. I – The claims for annulment of the contested decision 44 The applicants adduce five pleas in law in support of their claims for annulment of the contested decision. The first plea alleges manifest errors of assessment and errors of law in the assessment of the conditions for the application of Article 81(1) EC. The second plea in law alleges manifest errors of assessment and errors of law in establishing the extent and duration of the infringement. The third plea is that the exception provided for by Regulation No 26 was not applied to the disputed agreement. The fourth plea alleges infringement of the rights of the defence. The fifth plea alleges a failure to state reasons. A – First plea in law: manifest errors of assessment and errors of law in the assessment of the conditions required for the application of Article 81(1) EC45 The applicants do not deny concluding the agreement of 24 October 2001, but do deny that it gives rise to an infringement of Article 81(1) EC. The applicants in Case T-245/03 criticise the Commission’s description of them as associations of undertakings within the meaning of that provision and claim that, in the contested decision, the Commission restricted their exercise of the freedom of association. In addition, the applicant in Case T‑217/03 claims that the agreement in question did not appreciably affect trade between the Member States. Lastly, in both cases the applicants submit that the disputed agreement did not entail a restriction of competition. 1. Description of the applicants as associations of undertakings a) Arguments of the parties46 The applicants in Case T-245/03 submit, first, that the Commission manifestly erred in its assessment and infringed Article 81(1) EC in finding that they constituted associations of undertakings. They claim that, even if the two lower levels of their hierarchical organisations in pyramid form are taken into account (namely the department federations and local unions), their members are not undertakings but farmers’ unions or federations. Likewise, the members of local unions cannot be treated as undertakings because the criterion for membership of these does not relate to the agricultural undertaking, as membership is not connected with the status of head of the farm in the case of an individual holding (the spouse of an individual farmer may become a member) or with the status of representative of the legal person in the case of farming in the form of a partnership (each partner deciding individually whether to join a local union or not). Second, the applicants consider that, in the contested decision, the Commission did not give a sufficient statement of the reasons for describing them as associations of undertakings. In particular, the Commission failed to reply to the observations put forward on that point by FNSEA during the administrative procedure. 47 The Commission observes, first, that, to determine whether the applicants are associations of undertakings, it is necessary to determine, in short, who their members are. The farmers in the present case are without any doubt undertakings within the meaning of Article 81 EC. Second, the Commission submits that the contested decision sets out in detail the reasons why it found that the applicants are associations of undertakings within the meaning of that provision. b) Findings of the Court48 First of all, it must be observed that the applicant in Case T‑217/03 does not dispute that the agreement of 24 October 2001 is, so far as the applicant is concerned, an agreement between associations of undertakings within the meaning of Article 81(1) EC. On the other hand, the applicants in Case T‑245/03 maintain that they cannot be described as associations of undertakings within the meaning of that provision. They submit, in substance, that neither their direct members nor their indirect members are undertakings. 49 Article 81(1) EC applies to associations in so far as their own activities or those of the undertakings belonging to them are calculated to produce the results which it aims to suppress (Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 88). Having regard to the purpose of that provision, the concept of an association of undertakings must be understood as being capable of applying to associations which themselves consist of associations of undertakings (see, to that effect, Case T-193/02 Piau v Commission [2005] ECR II-209, paragraph 69; see also, by analogy, Case T‑136/94 Eurofer v Commission [1999] ECR II-263, paragraph 9). 50 In the present case, the applicants concluded the disputed agreements in the interest and on behalf of, not their direct members, which are actually farmers’ federations or unions, but the farmers who are the basic members of the latter. Accordingly the agreement of 24 October 2001, entitled ‘Agreement of the federations of stock farmers and slaughterers’, was concluded by the ‘federations representing stock farmers’, ‘with the aim of opening prospects for a new relationship in the sector for fair and legitimate remuneration of all those involved, stock farmers and undertakings’. Likewise, the Rungis protocol expressly refers to ‘the producers’ federations’. Therefore it must be concluded that the Commission was right to take into consideration the indirect or basic members of the applicants in Case T‑245/03, namely farmers, in order to determine whether they constituted associations of undertakings within the meaning of Article 81(1) EC. 51 Consequently, it is necessary to ascertain whether the Commission was correct in taking the view that farmers, the basic or indirect members of those applicants, could be regarded as undertakings for the purpose of applying Article 81 EC. 52 It has consistently been held that, in the context of competition law, the concept of an undertaking encompasses every entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed (Case C‑55/96 Job Centre [1997] ECR I-7119, paragraph 21). Any activity consisting in offering goods and services on a given market is an economic activity (Case T-513/93 Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II‑1807, paragraph 36). 53 The activity of farmers, whether arable or stock farmers, is certainly of an economic nature. Their activity is indeed the production of goods which they offer for sale in return for payment. Consequently, farmers constitute undertakings within the meaning of Article 81(1) EC. 54 Therefore the unions which bring them together and represent them, and the federations which bring the unions together, may be described as associations of undertakings for the purpose of applying that provision. 55 This conclusion cannot be undermined by the fact that local unions may also bring together farmers’ spouses. First, the spouses of arable or stock farmers who are themselves members of a local farmers’ union probably share in the tasks of the family farm. Second, in any case the mere fact that an association of undertakings may also bring together persons or entities that cannot be described as undertakings is not sufficient to affect its status as an association within the meaning of Article 81(1) EC. Likewise, the applicants’ argument that, where a farm takes the form of a partnership, it is not the partnership that, through its representative, joins the union, but each of the partners, must be dismissed. As stated above (see paragraph 52), what is important for the purpose of classifying an undertaking is not its legal status or the form of farm in question, but the activity of the farm and those who share in it. 56 Lastly, it is also necessary to dismiss the objection that the obligation to state reasons was not fulfilled on the ground, in substance, that, in the contested decision, the Commission did not reply to the observations submitted by FNSEA during the administrative procedure against its categorisation as an association of undertakings. 57 It must be observed that, although Article 253 EC requires the Commission to state the elements of fact and law which constitute the legal basis of the decision and the considerations which led it to adopt the decision, it is not required to discuss all the issues of fact and law which have been raised by every party during the administrative proceedings (Joined Cases T-305/94 to T-307/94, T-313/94 to T‑316/94, T‑318/94, T‑325/94, T‑328/94, T‑329/94 and T‑335/94 Limburgse Vinyl Maatschappij and Others v Commission [1999] ECR II-931, paragraph 388). 58 In the present case, the contested decision sets out briefly the argument of FNSEA that it is neither an undertaking nor an association of undertakings but a trade union, and also the arguments of FNPL and JA in that connection (see recital 97, second indent, recital 98 and recital 99, second indent, of the contested decision). Those arguments are dismissed in detail in the contested decision. Accordingly, it is explained that the applicants represent farmers who engage in the activity of producing goods which they offer for sale, that Regulation No 26 would serve no purpose if they were not also undertakings (recital 105 of the contested decision), that the fact that the applicants take the form of trade unions within the meaning of the French Labour Code does not affect their status as associations of undertakings (recitals 110 and 111 of the contested decision), that their trade union activity does not entitle them to disregard the rules of competition and that penalties have been imposed on similar organisations by the French Competition Board (see recitals 112 to 114 of the contested decision). Lastly, the contested decision also refers to previous decisions of the Commission and the relevant case-law (recitals 104 and 106 of the contested decision). 59 In the light of the foregoing, it must be held that the Commission gave sufficient reasons, in the contested decision, for categorising the applicants as associations of undertakings. 60 Consequently, this complaint must be rejected in its entirety.2. No appreciable effect on trade between Member States 61 The applicant in Case T-217/03 submits that the Commission did not prove that the disputed agreement had an appreciable effect on trade between Member States. The applicant claims that the part of the agreement relating to the suspension of imports was immediately called into question by the Rungis protocol and that, in any case, the applicant was importing hardly any beef cattle and was therefore not concerned in that aspect. The applicant brings together stock farmers’ cooperatives which themselves have slaughtering subsidiaries, the cooperatives collecting and marketing almost exclusively beef produced by their members. Furthermore, the Commission could not base such an effect on trade on no more than an analysis of the potential effects of the agreement, but ought to have examined its real effects. An analysis of trends in the market during the period in question does not show that the agreement produced effects on flows of imports. With regard to minimum selling prices, the applicant observes that the agreement remained in force for nearly one month and submits that its brief duration prevented it from affecting imports into France. 62 The Commission maintains that an agreement with the object of limiting imports is by nature likely to affect trade between Member States. It also claims that the agreement on prices was also likely to affect trade within the Community. b) Findings of the Court63 Article 81(1) EC applies only to agreements which may affect trade between Member States. For an agreement between undertakings to be capable of affecting trade between Member States, it must be possible to foresee with a sufficient degree of probability and on the basis of objective factors of law or fact that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States, such as might prejudice the realisation of the aim of a single market between the States (Case C-359/01 P British Sugar v Commission [2004] ECR I-4933, paragraph 27, and Joined Cases T‑213/95 and T‑18/96 SCK and FNK v Commission [1997] ECR II‑1739, paragraph 175). 64 In the present case, the agreement of 24 October 2001 contained an undertaking to suspend temporarily imports of beef into France. As the contested decision points out, France is one of the main beef importers in the Community. Most of these imports (approximately 95%) are from other Member States (recital 11 of the contested decision). It follows that the disputed agreement was necessarily capable of affecting trade between Member States. 65 This conclusion cannot be refuted by the applicant’s argument that the part of the agreement of 24 October 2001 entitled ‘Imports’ was dropped only a few days later, on the conclusion of the Rungis protocol of 31 October 2001. Any agreement that fulfils the conditions for the application of Article 81(1) EC falls within the scope of that provision. In any case, as will be found below (see paragraph 136), the Rungis protocol, entitled ‘“Meat imports” meeting’, expressly related to imports and did not entail the complete abandonment of the import suspension measures decided upon by the applicants. 66 The applicant’s argument that the ‘Imports’ part of the agreement was of no concern to it because its members import hardly any beef cattle must also be rejected. According to the figures produced by the applicant, its members’ imports represent a percentage of the total beef imports into France which, although small, is not entirely negligible (approximately 1.5% in 2001, that is to say, 3 865 tonnes). At the hearing, the Commission maintained that the applicant’s members had imported larger quantities of beef in the past (15 000 tonnes in the year before the beginning of the crisis), which was not denied by the applicant. It must also be observed that, although it is true that the applicant’s cooperative members collect and market the beef produced by their members, they may also market, up to a limit of 20% of their annual turnover, the production of farmers who are not members. Lastly, in any case, as the infringement in which the applicant participated was apt to affect trade between Member States, the Commission was not required to demonstrate that the applicant’s individual participation affected intra-Community trade (see, to that effect, Case T-14/89 Montedipe v Commission [1992] ECR II-1155, paragraph 254). 67 In addition, it must be observed that the part of the disputed agreement relating to the establishment of a minimum price scale was alone capable of affecting intra-Community trade. Practices restricting competition which extend over the whole territory of a Member State have, by their very nature, the effect of reinforcing compartmentalisation of national markets, thereby holding up the economic interpenetration which the Treaty is intended to bring about (SCK and FNK v Commission, paragraph 179). In this connection, it is necessary to determine the relative extent of the restrictive practice in the relevant market and the economic context of that practice. In the present case, it should be noted that French cattle numbers account for more than 25% of the total cattle population in the Community (recital 10 of the contested decision). Lastly, the Court of Justice has held that, where the market concerned is susceptible to imports, the members of a national price cartel can retain their market share only if they defend themselves against foreign competition (British Sugar v Commission, paragraph 28). 68 Lastly, contrary to the applicant’s assertions, the Commission had no obligation to show that the disputed agreement had an appreciable effect, in practice, on trade between Member States. As indicated in paragraph 63 above, Article 81(1) EC requires only that anti-competitive agreements and concerted practices should be capable of having an effect on trade between Member States (see also Montedipe v Commission, paragraph 253). 69 Consequently, this complaint must be dismissed.3. No restriction of competition70 The applicants submit, in substance, that the disputed agreement did not restrict competition and therefore did not fall within the scope of Article 81(1) EC. 71 The applicants submit that the Commission erred in finding that the agreement in question had an anti-competitive object. They claim that the Commission could not ascribe to them the ‘Imports’ part of the agreement and ought to have reasoned solely on the basis of the restriction of price competition, if any. However, the disputed scale prices were set on the basis of the intervention prices laid down by the Commission itself in the framework of the common organisation of the market (CMO) in the beef sector, which constitute the market reference and are very low. Furthermore, the agreement had only very limited actual effects, or none at all, for a very brief period, with no repercussions on consumer prices. 72 The applicants also allege that the agreement of 24 October 2001 concerned only a minimum recommended price, to which the applicants could not compel their members to adhere. In the case of a vertical agreement, the fixing of recommended prices is not by nature a restriction of competition. Article 4(a) of Commission Regulation (EC) No 2790/1999 of 22 December 1999 on the application of Article 81(3) [EC] to categories of vertical agreements and concerted practices (OJ 1999 L 336, p. 21), prohibits only the fixing of the resale price to a buyer whereas, in the present case, the slaughterers remain free to determine their prices to large retailers or to wholesalers. Lastly, the applicants draw attention to the specific features of the farming sector, which does not permit the lasting emergence of a spontaneous balance between supply and demand and which needs regulation by means other than those of the market, as the competition rules do not apply to it automatically. In support of their arguments, the applicants in Case T‑245/03 annex to their application a legal opinion dated 2 June 2003. 73 In addition, the applicants observe that, when the Commission examines a restriction of competition, it must take into account the overall legal and economic context in which the disputed agreement was concluded and they add that not every agreement between undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 81(1) EC (Case C-309/99 Wouters and Others v Commission [2002] ECR I-1577, paragraph 97). An agreement which has an anti-competitive object or effects escapes the prohibition if it enables different objectives to be safeguarded, provided that the restrictive effects are necessary for safeguarding those objectives and that they do not eliminate all competition in a substantial part of the common market. Therefore the Commission ought to have carried out a detailed and concrete analysis of the nature and object of the agreement in question, as well as its effects, which it failed to do. 74 The applicants also submit that the Commission underestimated the situation of extreme crisis in which French farmers of adult cattle found themselves at the material time. The applicants add that the prices of cattle concerned by the disputed agreement fell in 2001, on average, to their lowest level since 1980 and that the prices paid to producers after the deduction of marketing costs fell below the cost of production, even after deduction of the aid received. European consumption of beef fell by nearly 10% in 2001, which directly affected French farmers, who risked disappearing from the market. 75 The applicants also claim that the successive Community measures were found inadequate to meet the crisis. In particular, the special purchase scheme operates only at the slaughterhouse exit stage, whereas producers’ income is affected only at the slaughterhouse entry stage. Therefore the repercussions on producers of the price measures taken by the Community necessarily go through an inter-trade agreement between producers and slaughterers. 76 In that connection the applicants in Case T-245/03 submit that the Commission ought to have examined the agreement of 24 October 2001 as a regulatory document and they observe that the coordinated management between the State and the union federations is traditional in the farming sector in France. The applicants responded to the French Government’s express and public request, the aim of which was to avoid an economic disaster for beef producers which could lead to the break-up of the beef sector and which was already causing serious public disorder. The applicants note that the French Minister for Agriculture was the instigator of the agreement and that, in a statement to the French Parliament, he expressed his support for the progress in drawing up the agreement. 77 The Commission observes that, as the parties to the disputed agreement had agreed to wall off the national markets and to set minimum prices, it had to be concluded that the very aim of the agreement was to restrict competition. The Commission submits that, in any case, it took account of the economic and legal context of the agreement in the contested decision. The Commission adds that a number of measures were put into place at Community level to obviate the crisis. Lastly, the Commission submits that the encouragement given by the then French Minister for Agriculture to conclude the agreement does not relate to a regulatory power of any kind. 78 Furthermore, the Commission asks the Court to reject as inadmissible the legal opinion produced as an annex by the applicants in Case T‑245/03. Annexes to pleadings have a purely evidential and instrumental purpose (Case T-31/99 ABB Asea Brown Boveri v Commission [2002] ECR II-1881) and the questions of Community law must be examined by the legal representatives in the procedural documents themselves. 79 First of all, the Commission’s application for the rejection of the legal opinion produced by the applicants in Case T-245/03 as inadmissible must fail. It must be observed that all the documents lodged with the application are necessarily placed on the file. Whether the applicant may plead certain of those documents or whether the Court may take them into consideration is a different question. It must be observed that the body of the application may be supported and supplemented on specific points by references to extracts from documents annexed to it, provided that the essential submissions in law appear in the application itself (see, to that effect, Case T-87/05 EDP v Commission [2005] ECR II-3745, paragraph 155, and Case T-209/01 Honeywell v Commission [2005] ECR II-5527, paragraph 57). In the present case, the Court considers that the applicants sufficiently explained in their pleadings their argument that the disputed agreement should be regarded as a regulatory measure. Therefore the annex in question serves only to support and supplement that argument. Consequently, the applicant was entitled to plead it. 80 With regard to the complaint raised by the applicants, they submit, in substance, that the disputed agreement had neither the object nor the effect of preventing, restricting or distorting competition in the single market within the meaning of Article 81(1) EC. 81 It must be observed straightaway that the agreement concluded by the parties on 24 October 2001 provided, first, for a commitment for the temporary suspension of beef imports into France and, second, for a commitment to apply a minimum slaughterhouse entry price scale to culled cows. Contrary to the applicants’ claim, and for the reasons set out in paragraphs 65 and 66 above, an examination of the question whether the disputed agreement was restrictive must take into account not only those of the abovementioned measures relating to prices, but also those aiming at the suspension of imports. 82 Accordingly it must be observed, first, that the commitment in the disputed agreement to suspend imports had, in particular, the object of preventing the entry into France of beef at prices below those of the price scale decided upon by the applicants, in order to ensure the sale of the production of French farmers and the effectiveness of the price scale. It necessarily follows that the object of the disputed agreement was to partition off the French national market and in that way to restrict competition in the single market. 83 Second, with regard to the establishment of a price scale, it must be borne in mind that Article 81(1) EC expressly provides that measures which directly or indirectly fix purchase or selling prices constitute restrictions of competition. It has consistently been held that price fixing is a patent restriction of competition (Case T-148/89 Tréfilunion v Commission [1995] ECR II‑1063, paragraph 109, and Joined Cases T‑374/94, T‑375/94, T‑384/94 and T‑388/94 European Night Servicesand Others v Commission [1998] ECR II-3141, paragraph 136). 84 In the present case, the applicants agreed on a slaughterhouse entry price scale for certain categories of cattle, which provided for a list of prices per kilogram of carcass for certain categories of cows and the method of calculating the price to be applied to other categories, by reference inter alia to the price fixed by the Community authorities in the framework of the special purchase scheme. Contrary to what the applicants claim, it is clear from the actual wording of the relevant stipulations of the disputed agreement that the prices were not recommended or target prices, but minimum prices to which the signatory federations undertook to secure adherence. The agreement provided that ‘the contributions should at least be consistent with this scale.’ Likewise, in a message of 8 November 2001 from the applicants in Case T-245/03 to their members, taking stock of the situation with regard to the application of the agreement of 24 October 2001, reference is made to the application of the ‘minimum price scale’. 85 By its very nature, an agreement such as that in the present case, concluded by federations representing farmers and federations representing slaughterers and fixing minimum prices for certain categories of cows, with the aim of making them binding on all traders in the markets in question, has the object of restricting competition in those markets (see, to that effect, Case 123/83 BNIC [1985] ECR 391, paragraph 22), inter alia by limiting artificially the commercial negotiating margin of farmers and slaughterers and distorting the formation of prices in the markets in question. 86 This conclusion cannot be undermined by the applicants’ argument that the agricultural markets are regulated markets where the competition rules do not automatically apply and where the formation of prices quite often does not answer to the free operation of supply and demand. No doubt the agricultural sector has certain specific features and is the object of very detailed regulation which is frequently rather interventionist. However, it must be observed that the Community competition rules apply to the markets for agricultural products, even if certain exceptions are provided for to take account of the particular situation of those markets, and this will be examined in the context of the third plea. 87 Likewise, the applicants cannot use the argument that the prices of the disputed scale were not restrictive because they were fixed by reference to the prices of the special purchase scheme which were laid down by the Commission itself. The comparative tables produced by the parties at the request of the Court show that, although the prices laid down by the agreement for cows of average or inferior quality were fixed by reference to the prices given in the framework of the special purchase scheme, the prices fixed by the agreement for cows of superior quality (which accounted for 30% of the number slaughtered in 2001) were appreciably higher than the abovementioned intervention prices. In any case, the disputed agreement does not cease to be restrictive merely because the minimum prices are fixed by reference to the government intervention price. Reference to the latter price does not mean that the disputed scale loses its anti-competitive object consisting in fixing directly and artificially a predetermined market price or that it can be treated in the same way as the various government support and intervention schemes in the common organisation of the agricultural markets which have the object of stabilising markets characterised by excess supply by means of withdrawing a part of production. 88 The applicants also allege that, under Article 4(a) of Regulation No 2790/1999, in a vertical agreement only the restriction of the buyer’s ability to determine his sale price is prohibited and they claim that the price scale established by the disputed agreement did not limit the slaughterers’ ability to determine their prices to their customers. However, this reference to Regulation No 2790/1999 is not relevant in the present case. Article 3 of the regulation excludes from the scope of the exemption by category laid down in favour of vertical agreements cases where the supplier’s market share exceeds 30% of the relevant market. The Commission observed, without being contradicted by the applicants, that the production of the members of the stock farmers’ federations substantially exceeded the limit of 30% of the French beef market. 89 With regard to the applicants’ allegation that they could not compel their members to adhere to the minimum prices decided upon, it must be said that, for an agreement between undertakings to fall within the ambit of Article 81(1) EC, it is not necessary for the associations in question to be able to compel their members to fulfil the obligations imposed on them by the agreement (see, to that effect, Case 71/74 Frubo v Commission [1975] ECR 563, paragraphs 29 to 31). Furthermore, it must be noted that the reference to the judgment in Wouters and Others, is irrelevant here because the factual circumstances and the legal problems raised by that case, which concerned the regulation by a professional association of the practice of the profession of lawyer and its organisation, are not comparable with those of the present case. 90 Furthermore, the applicants cannot justify the disputed agreement by pleading the crisis in the beef sector at the material time, which particularly affected French farmers of adult cattle. This circumstance cannot, on its own, lead to the conclusion that the conditions for applying Article 81(1) EC were not fulfilled (see, to that effect, Limburgse Vinyl Maatschappij and Others v Commission, paragraph 740). In any case, it must be observed that, in its assessment, the Commission did not disregard the crisis throughout the sector, as is clear from paragraphs 10 to 15 and 130 of the contested decision. In addition, the Commission took it into account in determining the fines which were reduced by 60%. 91 The applicants must also fail in their argument that the disputed agreement was a national regulatory measure which accorded with the traditional practice in France of management coordinated between the administration and the farmers’ federations and which was justified by the ineffectiveness of the measures adopted by the government authorities. In this connection it must be observed that, first, the legal framework within which agreements covered by Article 81 EC are made and the classification given to that framework by the various national legal systems are irrelevant as far as the applicability of the Community rules on competition are concerned (BNIC, paragraph 17). Second, it must be borne in mind that, at the hearing, the representatives of the French Republic contended that the disputed agreement could not fall within the scope of joint management by the administration and the farmers’ federations because such management takes the form of representation of the latter on national and Community advisory bodies. Third, and lastly, it must be observed that the alleged inadequacy of government measures to deal with the problems of a particular sector cannot justify the private operators concerned in engaging in practices contrary to the competition rules or in claiming to arrogate to themselves rights which are those of public authorities, either national or Community, in order to substitute their own measures for those of the authorities. 92 Likewise, with regard to the role of the French Minister for Agriculture in the conclusion of the agreement of 24 October 2001, suffice it to note that, according to settled case-law, the fact that conduct on the part of undertakings was known, authorised or even encouraged by national authorities has no bearing, in any event, on the applicability of Article 81 EC (Case T‑7/92 Asia Motor Franceand Others v Commission [1993] ECR II-669, paragraph 71, and Tréfilunion v Commission, paragraph 118). 93 Lastly, the applicants’ argument that the Commission failed to show that the disputed agreement had any effect on imports or on market prices must also be rejected. It has consistently been held that, for the purposes of application of Article 81(1) EC, there is no need to take account of the actual effects of an agreement when it has as its object the prevention, restriction or distortion of competition within the common market. Consequently, it is not necessary to show actual anti-competitive effects where the anti-competitive object of the conduct in question is proved (Limburgse Vinyl Maatschappij and Others v Commission, paragraph 741, and Case T‑62/98 Volkswagen v Commission [2000] ECR II‑2707, paragraph 178). As has just been found, the Commission proved that the disputed agreement had the object of restricting competition in the markets in question (see paragraphs 82 to 85 above). The Commission was therefore not required to examine the actual effects of those measures on competition within the common market, particularly in France. 94 Consequently, this complaint must be dismissed.4. Classification of trade union activities95 The applicants in Case T-245/03 submit that the Commission manifestly erred in its assessment in limiting, so far as they are concerned, the freedom of association in trade unions, recognised by Article 12(1) of the Charter of Fundamental Rights of the European Union, proclaimed at Nice on 7 December 2000 (OJ 2000 C 364, p. 1). In particular, the Commission overlooked the specific management functions of French farmers’ unions. The Commission was also seriously imprecise when it demanded that the penalised federations should refrain in future from any agreement, concerted practice or decision which may have an object or effect similar to the infringement alleged against them, whereas a trade union is required to organise concerted action among its members to defend their collective interests. 96 The Commission submits that the fact that the applicants are trade unions does not mean that the competition rules, which are requirements of public policy, do not apply to them. 97 Pursuant to Article 3(1)(g) and (j) EC, the activities of the Community include at one and the same time a system ensuring undistorted competition in the internal market and a policy in the social sphere. Article 137(1)(f) EC thus states that the Community is to support and complement the activities of the Member States in the field of the representation and collective defence of the interests of workers and employers, and Article 139(1) EC provides that the dialogue between management and labour at Community level may lead to contractual relations. Article 81(1) EC, for its part, prohibits agreements which have as their object or effect the prevention, restriction or distortion of competition within the common market. That article constitutes a fundamental provision which is essential for the accomplishment of the tasks entrusted to the Community and, in particular, for the functioning of the internal market (Case C-126/97 Eco Swiss [1999] ECR I‑3055, paragraph 36). 98 The Court of Justice has held that, although certain restrictions of competition are inherent in collective agreements between organisations representing employers and workers, the social policy objectives pursued by such agreements would be seriously undermined if management and labour were subject to Article 81(1) EC when seeking jointly to adopt measures to improve conditions of work and employment. It therefore follows from an interpretation of the provisions of the Treaty as a whole which is both effective and consistent that agreements concluded in the context of collective negotiations between management and labour in pursuit of such objectives must, by virtue of their nature and purpose, be regarded as falling outside the scope of Article 81(1) EC (Case C-67/96 Albany [1999] ECR I-5751, paragraphs 59 and 60). On the other hand, the Court of Justice has ruled that the latter provision was applicable to inter-trade agreements concluded by organisations representing producers, cooperatives, workers and industries within a body governed by public law (BNIC, paragraphs 3 and 16 to 20, and Case 136/86 BNIC [1987] ECR 4789, paragraphs 3 and 13). 99 In the present case, the Court of First Instance considers that the nature and object of the disputed agreement do not justify its exclusion from the scope of Article 81(1) EC. 100 First, it must be observed that the agreement is not a collective agreement and was not concluded by organisations representing employers and workers. There is no employment relationship at all between farmers and slaughterers because farmers do not work for and under the direction of slaughterers, nor are they incorporated into the slaughterers’ undertakings (see, to that effect, Case C-22/98 Becu and Others [1999] ECR I-5665, paragraph 26). On the other hand, as the Court has already found, farmers may be deemed to be undertakings for the purpose of Article 81(1) EC (see paragraph 53 above). Consequently, the disputed agreement is an inter-trade agreement between two links of the production chain in the beef sector. Second, the agreement does not relate to measures for improving conditions of work and employment, but to the suspension of beef imports and the fixing of minimum prices for certain categories of cows. The object of those measures, in the present case, is to restrict competition in the single market. 101 It follows that, although the applicants in Case T‑245/03 may undoubtedly, as federations of agricultural trade unions, legitimately defend the interests of their members, they cannot in the present case plead the freedom of association in trade unions to justify specific actions which are contrary to Article 81(1) EC. 102 The applicants must also fail in their argument that, by requiring them, in Article 2 of the contested decision, to refrain in the future from any restrictive practice that has the same or an equivalent object or effect, the Commission obstructed them in their mission, as trade unions, of bringing to a successful conclusion concerted action for the defence of their collective interests. By requiring the applicants to refrain from repeating the acts at issue and from adopting any similar measures, the Commission merely indicated the consequences, regarding their future conduct, of the finding of illegality in Article 1 of the contested decision (see, to that effect, Joined Cases T-45/98 and T-47/98 Krupp Thyssen Stainless and Acciai speciali Terni v Commission [2001] ECR II-3757, paragraph 311). Furthermore, that requirement is sufficiently specific and is based on the factors which led the Commission to find that the acts at issue were illegal, so that it is clear that the requirement does not relate to the applicants’ general trade union activities. 103 It follows that this complaint must be rejected.104 Consequently, this plea is dismissed.B – Second plea in law: manifest errors of assessment and errors of law in assessing the extent and duration of the infringement 105 The applicants dispute the extent and duration of the infringement found by the Commission. First, they submit that the ‘Imports’ part of the agreement of 24 October 2001 came to an end when the Rungis protocol was signed on 31 October 2001. Second, they deny that the written agreement of 24 October 2001 was extended by a verbal agreement with the same object. 1. Preliminary questions a) The taking into account of local agreements Arguments of the parties106 The applicants submit that the Commission could not take agreements concluded at local level by individual unions of farmers and slaughterers as its basis for determining the duration of the infringement alleged against the national federations. They observe that the burden of proof of the duration of an agreement rests with the Commission and that, if the Commission has chosen to rely on direct documentary evidence to establish the infringement and participation in it, the Commission cannot presume that a party continued to adhere to the agreement beyond the point at which it was last shown to have participated in an implementing measure (Joined Cases T‑25/95, T‑26/95, T‑30/95 to T‑32/95, T‑34/95 to T‑39/95, T‑42/95 to T‑46/95, T‑48/95, T‑50/95 to T‑65/95, T‑68/95 to T‑71/95, T‑87/95, T‑88/95, T‑103/95 and T‑104/95 Cimenteries CBR and Others v Commission [2000] ECR II‑491, paragraphs 4281 to 4283). 107 The applicants observe that they are not signatories of the local agreements in question because those agreements were concluded by separate legal entities, namely the department farmers’ federations, the department JA or the local unions. The local agreements, particularly those concluded from 30 November 2001, were the exclusive result of action by the latter and depend on their ability to obtain minimum prices from their buyers. On this point the applicants refer to the handwritten notes made by the director of FNB at the meeting of 29 November 2001 (‘negotiate your scales regionally’). The fact that the scale of reference prices was sent by FNB to the department federations which asked for it does not confute this finding because the price scale was sent in the context of local negotiations conducted by those federations, and not in the framework of the national agreement. On 11 December 2001 Mr E.C., one of the directors of FNB, sent the price scale to a department federation, expressly pointing out that it had not been renewed by an agreement. Lastly, the applicants dispute the Commission’s argument that the text of the agreements was taken almost word for word from the national agreement. 108 The applicants add that the signatories to those agreements did not take part in the administrative procedure before the Commission. The applicants were unable to reply in their place and stead. Consequently, it is contrary to the rights of the defence and to Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms (ECHR) that those documents were not left out of consideration. 109 The Commission replies that, in assessing the duration of the infringement, it could properly take account of the numerous local agreements concluded after the agreement of 24 October 2001 was signed. The disputed agreement was mainly implemented in the form of the local agreements, particularly after the written agreement expired. Furthermore, all the documents relating to those agreements were seized at the applicants’ premises, which shows that the national federations closely monitored the local implementation of their national agreement. Findings of the Court110 The applicants submit essentially that, for the purpose of determining the duration of the infringement, the Commission was not entitled to take into consideration agreements which were not concluded by them themselves, but by department federations or by local farmers’ unions on one side and the slaughterers’ undertakings on the other. 111 However, it is not disputed that the local federations or farmers’ unions in question were members, whether direct or indirect, of the applicants in Case T‑245/03. 112 It must be observed that, following the signature of the agreement of 24 October 2001, the national farmers’ unions called upon their members to implement the agreement at the local level. Thus, a letter of 25 October 2001 from the applicants in Case T-245/03 to their members, referring to the signature of the agreement on the previous day, states as follows: ‘each of us must be very careful from now on to ensure strict application of the agreement throughout the country … . We ask you also as soon as possible to obtain the signature of undertakings which have not yet signed the agreement. The commitment by undertakings also covers priority given to national supplies’. Likewise, a letter dated 13 December 2001 from the applicants in Case T‑245/03 to their members contains the following passage: ‘… we ask the entire FNSEA network to mobilise … to check the prices with every slaughterer so that our minimum producer guide prices are adhered to. For that purpose, please kindly arrange to contact every slaughterhouse situated in your department.’ Lastly, a letter of 8 November 2001 from the same applicants to their federation members shows that the latter were required to pass to the national federations all the information concerning the measures taken so as to prepare further steps in the union strategy. That information included ‘an exact, detailed list of the undertakings which have not yet signed the price scale or which have signed it but are not applying it’. 113 Therefore it is clear from the file that the applicants in Case T-245/03 encouraged their members to carry out specific acts at slaughterers’ undertakings operating in their respective areas and thus to participate in implementing the disputed agreement. Consequently, the acts of the department federations and local unions formed part of a common strategy with the national federations aimed at ensuring that the measures decided upon at national level were effective throughout France. One of the instruments of that strategy was precisely the conclusion of agreements between the local farmers’ unions and the slaughterers’ undertakings. 114 Thus, a fax sent on 9 November 2001 by the Lower Normandy Fédération régionale des syndicats d’exploitants agricoles (FRSEA) to FNSEA, in response to a questionnaire sent by the latter on 8 November 2001, states as follows: ‘Operations and strategies for applying the price scale: … Formal signature of a regional commitment agreement: observance of the conditions and scale prices by FRSEA (Lower Normandy) and the slaughterers. They have all given a written commitment and have returned the document to us’. Likewise, a fax of 19 November 2001 from the Finistère FDSEA to FNB contains the following passage: ‘Regarding the operations concerning the (minimum) price scale …, verbal agreements have been made with the abattoirs. The written agreement has not yet been returned to us and we have received no complaints from farmers for non-compliance with the price scale.’ Lastly, a fax of 13 November 2001 from the Isère FDSEA to FNSEA and to FNB has annexed to it a standard form of local agreement entitled ‘Application of the national agreement on the minimum price scale’ and contains commitments to adhere to the price scale and to suspend imports temporarily ‘until further national negotiation’. 115 However, the fact that those local agreements were signed by the slaughterers and not by their representative organisations at the national level (including FNICGV and the applicant in Case T-217/03) does not justify leaving those agreements out of consideration in the present case. On this point, the Court considers that the existence of a national agreement between the farmers’ representatives and those of the slaughterers was a decisive factor in overcoming the resistance of the slaughterers’ undertakings to accepting the local agreements submitted to them by the farmers’ representatives. 116 Lastly, it is clear from the file that, contrary to the applicants’ submissions, the local agreements in question often repeated, in substance, the terms of the national agreement. The local agreements frequently reproduce the national agreement word for word (see, for example, the agreement of 31 October 2001 between the Loire FDSEA and the slaughterers’ undertakings of the same department). 117 In the light of the foregoing, the Court considers that those agreements cannot be regarded as the outcome of independent negotiations unconnected with the application of the national agreement. In actual fact, the agreements concluded at the local level were the extension and implementation of the disputed agreement. 118 Therefore, the Court finds that the Commission was right to take the local agreements into consideration for the purpose of assessing the extent and the duration of the infringement attributed to the applicants. 119 In addition, the applicants’ argument that taking the local agreements into consideration amounted to a violation of their rights of defence must be rejected. It must be observed that the documents concerning the local agreements upon which the Commission relied in the contested decision and which were found in the course of investigations in the applicants’ offices formed part of the administrative file. Therefore, the applicants had an opportunity to formulate observations on those documents during the procedure before the Commission. b) Organisation, selection, quotation and interpretation of the documents in the file 120 The applicants submit that, in the contested decision, the Commission misrepresented the handwritten notes found in the office of the director of FNB, on which the Commission to a large extent relied in order to prove the extent and duration of the disputed agreement. Thus, the Commission provided the applicants with only the extracts which it selected itself, it did not arrange them chronologically and did not gather them together, so that they were mixed together with the other documents in the file. Furthermore, there is too much writing on the pages with the abovementioned notes, so that the notes are disordered and often indecipherable. 121 The applicants also dispute the accuracy or the interpretation of a large number of quotations in the contested decision on the grounds that they are incomplete, taken out of context or erroneous, that in reality they contradict the Commission’s argument, that they are not dated and that the persons attending the meetings to whom reference is made cannot be identified. Lastly, the applicants submit that, in interpreting the documents in the file, the Commission reversed the burden of proof because it presumed wrongful conduct on the applicants’ part and only took into consideration incriminating documents and not exculpatory documents. 122 The Commission observes that in the text of a decision it cannot quote in full all the documents on which it relies and claims that making a selection may be open to criticism only if it misrepresents the documents. The Commission rejects the applicants’ further complaints. 123 The applicants do not deny that they had access to all the documents forming part of the Commission’s administrative file (with the single exception of two letters exchanged between the Commission and the Permanent Representation of France to the European Union). In particular, the Commission observed, without being contradicted by the applicants, that they had access to a complete copy of the abovementioned book of handwritten notes of the director of FNB. It follows that the applicants were in a position to identify and to plead all the exculpatory evidence in exoneration contained in the file. In addition, the applicants do not allege that the Commission removed from, or failed to place in, the administrative file any exculpatory documents identified or provided by them. 124 It must also be observed that, in the contested decision, the Commission, like the applicants, often based its findings on extracts from numerous handwritten notes which were found and copied during the investigations at the applicants’ offices. Most of the notes are neither signed nor dated and they are not always very legible. However, it must be observed that the fact that a document is unsigned or undated or is badly written does not impugn its evidentiary value if its origin, probable date and content can be determined with sufficient certainty (see, to that effect, Case T-11/89 Shell v Commission [1992] ECR II-757, paragraph 86). 125 In the present case, the Commission indicated in the contested decision when a document was not dated and was given an approximate date by reference to its content or context. Likewise, where only the initials of those present at meetings were mentioned, the Commission generally deduced from the context who were the persons in question. Lastly, regarding the applicants’ criticism concerning the organisation and classification of the handwritten notes, the Commission explained that the documents in the file were arranged chronologically according to their date of issue or discovery, in the case of documents found during the investigation, the latter documents having been numbered by following the order of the lists which were drawn up. 126 With regard to the applicants’ complaints concerning the use and interpretation of particular items of evidence in the contested decision, they will be examined below in so far as they may call into question the Commission’s findings concerning the extent and duration of the infringement. 2. The attribution to the applicants of an agreement relating to imports 127 The applicants claim that the signing of the Rungis protocol on 31 October 2001 led to the part of the national agreement concerning the suspension of imports (which had taken effect on 29 October 2001) coming to an end only two days later, on 31 October 2001. Therefore the ‘Imports’ part of the agreement had no time to exist and could not be attributed to the applicants. 128 The applicants submit that the Commission misrepresented the facts of the present case and manifestly erred in its assessment in finding that the Rungis protocol comprised an agreement aiming to limit the volume of imports. The undertaking given by importers and exporters in the protocol to show ‘solidarity’ does not aim at imports and is only a reaffirmation on the part of FNICGV, at the request of the farmers’ federations, that it would continue supplies on the conditions laid down in the price scale. The applicant in Case T-217/03 also observes that, as it was not a signatory of the Rungis protocol, it was in any case not concerned by the undertaking of ‘solidarity’. Lastly, the statements by the president of FNICGV on the date of signature of the protocol confirm that the ‘Imports’ part had been dropped. 129 The applicants likewise submit that, in asserting that there was a necessary connection between the price scale and the suspension of imports, the Commission is confusing what the producers wanted and the true situation after the Rungis protocol. The applicants also note the very critical attitude to the ‘Imports’ part of the agreement of 24 October 2001, from the beginning, of importing slaughterers and importing wholesalers who were members of FNICGV, and the applicants allege that the acceptance of that part by the federation was only a token gesture and that it could not be maintained. 130 Furthermore, the applicants complain that the Commission did not take into consideration documents which prove that the agreement on imports no longer existed. They refer, first, to a letter of 8 November 2001 from the national farmers’ federations to their members, from which it is clear that the agreement of 24 October 2001 related only to the application of the minimum price scale, as there is no allusion at all to any restriction whatever of imports. Second, the applicants mention a handwritten note of 14 November 2001 stating: ‘limited agreement; imports continuing today; no retaliation [measures].’ 131 The applicants add that the Commission identified only one local agreement concluded after the signature of the Rungis protocol and comprising a provision for the suspension of imports, namely the agreement drawn up in the department of Isère. The documents dated 9 November 2001, originating from the Lower Normandy FRSEA, and those dated 19 November 2001 from the Finistère FDSEA, are only reports which do not show that the local agreements in question included an undertaking to suspend imports. The other local agreements referred to by the Commission are not subsequent to the Rungis protocol. For example, the agreement concluded in Loire is dated 31 October 2001. 132 Lastly, the applicants claim that examination of the trade volume curves confirms that the suspension of imports did not continue beyond 31 October 2001. They explain that the alleged falls in beef imports in November and December 2001 are due to the constant variation in the monthly quantities imported and that no causal connection can be established between that particular reduction and the existence of an alleged agreement. 133 The Commission submits that the ‘Imports’ part of the agreement of 24 October 2001 was not cancelled after 31 October 2001 by the Rungis protocol. The Commission claims that the protocol aimed to modify the excessively strict commitment to the total suspension of imports but, by referring to ‘solidarity’, led to limiting imports at better prices. According to the Commission, the applicants do not explain how a minimum price agreement could succeed if cheaper imports continued at the same time. Lastly, several local agreements concluded on or after the date of the Rungis protocol, pursuant to a national agreement, always included an undertaking to suspend imports. 134 First of all, the applicants’ argument that, if the ‘Imports’ part was dropped as a result of the Rungis protocol, that part cannot be attributed to them, must be rejected. The fact that an infringement was of very short duration does not call into question the existence of an infringement of Article 81(1) EC. 135 Furthermore, the Court considers that, in order to be effective, a minimum price-fixing agreement needed measures for monitoring or limiting imports. In the present case, as beef from other Member States, in particular Germany and the Netherlands, was cheaper than that produced in France and, because of excess supply, the effectiveness of a price scale necessarily depended on supplies from French farmers to slaughterers’ undertakings established in France. If that were not the case, not only would the price scale not have been such as to remedy the crisis for French farmers, but it could only have exacerbated it in so far as the slaughterers would have turned to products from other Member States or even non-member countries. 136 In any case, the Court considers that, contrary to the applicants’ submissions, the Rungis protocol of 31 October 2001 did not completely eliminate the import suspension measures in the agreement of 24 October 2001, even though it limited them, as the Commission recognised in the contested decision. 137 The applicants’ argument that the protocol related to the price scale, but not imports, must be rejected straightaway. The Rungis protocol is entitled ‘“Meat imports” meeting’. It states that ‘the French undertakings specialising in the import and export sector have held a meeting with the producers’ federations … that signed the national inter-trade agreement of 24 October 2001’. The references in the protocol are to importers and exporters and the text does not allude to the price scale. It follows that the Rungis protocol related to the ‘Imports’ part of the disputed agreement. The message of 31 October 2001 from the president of FNICGV to its members confirms this conclusion. 138 It must be observed that, after some introductory remarks, the protocol contains inter alia the following passage:‘In the unprecedented crisis situation currently facing producers, the representatives of the farmers urge importers and exporters to be aware of the seriousness of the crisis. In response, the importers and exporters undertake to demonstrate solidarity’.139 In view of the circumstances of the present case, including the need to monitor imports to ensure the effectiveness of the price scale, which remained fully in force, the Court considers that the commitment to ‘solidarity’ on the part of importers and exporters must be understood, as the Commission found in the contested decision, as their agreement to limit beef imports in favour of the production of French farmers. 140 This conclusion is not undermined by the abovementioned message of 31 October 2001 from the president of FNICGV to its members, which states: ‘we have found a compromise … enabling the importers to continue their business and to ensure as well as possible the free movement of products reared and marketed by our businesses’. In view of the clear wording of the agreement of 24 October 2001 (namely ‘temporary commitment to suspend imports’), to which the president of FNICGV alludes in his message, this passage remains ambiguous. He speaks of a ‘compromise’ and refers to ensuring the free movement of the products in question ‘as well as possible’, but not to totally free movement. 141 Therefore the Court considers that the Rungis protocol did not completely nullify the ‘Imports’ part of the disputed agreement.142 This conclusion is not contradicted by the two documents relied on by the applicants to show that the ‘Imports’ part was no longer in force in November 2001. 143 With regard to the letter of 8 November 2001 from the applicants in Case T‑245/03 to their members, its purpose was ‘to take stock of the implementation of and compliance with the agreement in the departments two weeks after signature and one week after bringing in the minimum price scale.’ As the applicants observe, that note refers only to measures for the application of the price scale. However, the mere fact that the letter does not allude to the ‘Imports’ part is not in itself sufficient to show that that part had been dropped. 144 With regard to the handwritten notes of 14 November 2001, originating from a section head of FNSEA, one of them states: ‘limited agreement: imports continuing today; no retaliation [measures]’. However, it must be observed that, as the Commission points out, it is clear from their context that the relevant part of those notes refers to defining the strategy of the applicants in Case T‑245/03, in order to prepare their reply to the Commission’s request of 9 November 2001 for information (see paragraph 13 above). These are therefore documents which contain only the position of which the applicants wished to inform the Commission. In the text of these handwritten notes there are several references to ‘Brussels’, to ‘BXL’ or to the ‘DG Competition’. One such reference is as follows: ‘DG Competition – a FNSEA text for the end of the morning’ and then ‘Co-ordinated, if not joint, reply’. Some of these handwritten passages confirm that the extract relied on by the applicants formed part of the observations to be included in the reply to be sent to the Commission. The following phrases, situated close to the abovementioned extract in the document in question, should be cited by way of example: ‘Main points of defence’ or ‘defence of producers’. Consequently, it must be found that the extracts relied upon by the applicants lack the objectivity and reliability necessary for cogent evidence. 145 It must be added that several local agreements containing provisions for the suspension of imports were concluded on the same day as the signing of the Rungis protocol or thereafter. For example, a memo by the Loire FDSEA of 31 October 2001 refers to the conclusion on the same day of an agreement between FDSEA, the JA department centre and the ‘department beef industry’. The memo states that ‘all the undertakings invited … signed the agreement and undertook to apply it’. However, the annexed agreement reproduces almost word for word the agreement of 24 October 2001 and includes a ‘temporary commitment to suspend imports’. Likewise it is clear from the file that, in the department of Isère, at least three local agreements were concluded with slaughterers in November 2001 pursuant to the national agreement and including an obligation to suspend imports temporarily ‘until further national negotiation’: thus, before 13 November 2001 an agreement with the company Provi, on 13 November with the Bigard group and on 15 November with the companies Carrel and Isère Viandes et Salaisons. 146 The applicants’ criticism of the use in the contested decision of documents originating from the Lower Normandy FRSEA dated 9 November 2001, and from the Finistère FDSEA dated 19 November 2001, must also be rejected. The criticism is based on the fact that the documents in question are only reports which do not show that the local agreements concerned included an undertaking to suspend imports. It must be observed, first, that the document of 19 November 2001 was not referred to by the Commission to show the existence of the ‘Imports’ part, but as an example of the local application of the price scale (see recital 86 of the contested decision and paragraph 114 above). Second, with regard to the document of 9 November 2001, suffice it to observe that the Commission used it only to illustrate the existence of local checks on the origin of meat (see recital 80 of the contested decision). The document in question actually contains the following extract: ‘Oren and Calvados are carrying out checks of lorries carrying imported meat: nothing to report.’ 147 The applicants’ submissions on the basis of a statistical analysis of the quantities of beef imported into France must also be rejected. It must be observed that, although the Commission found, in the contested decision, that the available statistics showed an appreciable decline in imports in November 2001 compared with October 2001 and in December 2001 compared with November 2001 and that import levels rose sharply in January 2002 (recital 78 of the contested decision), nevertheless the Commission concluded that the reduction in imports could not be attributed with certainty to the agreement (recital 167 of the contested decision). As the Commission did not rely on those statistical data to prove the duration of the ‘Imports’ part, the applicants’ submissions disputing the interpretation of the figures are irrelevant. In any case, the Court considers that the statistics put forward by the applicants do not support the conclusion that the agreement relating to imports did not exist after 31 October 2001. 148 Furthermore, with regard to the argument of the applicant in Case T‑217/03 that the undertaking of solidarity given in the Rungis protocol was of no concern to it because it was not a signatory, suffice it to observe that the protocol did not contain a new agreement and merely modified the original provision for the suspension of imports in the agreement of 24 October 2001, of which the applicant in Case T‑217/03 was a signatory. In addition, it must be observed that, when questioned by the Court, the applicant in Case T‑217/03 admitted that it did not inform its members, either upon signature of the Rungis protocol or subsequently, of the alleged removal of restrictions on beef imports. The reason it gave was that the measures relating to imports were of no concern to its members. However, it should be noted that at least some of its members imported beef cattle into France, although the quantities were relatively small by comparison with overall imports (see paragraph 66 above). 149 In the light of all the foregoing, it must be concluded that there was no error on the Commission’s part in finding that, in spite of the Rungis protocol, the ‘Imports’ part of the agreement of 24 October 2001 was not completely dropped as from 31 October 2001. 3. Attribution to the applicants of a secret verbal agreement after the end of November 2001150 The applicants submit that the Commission was wrong in finding that the agreement of 24 October 2001 had been extended beyond 30 November 2001 by the parties verbally and in secret. 151 They observe that the extension of an agreement can only result from evidence showing an expression of the consent of all the parties. In the present case, therefore, the Commission had to prove consensus between the producers’ and the slaughterers’ federations in favour of continuing the agreement. However, the slaughterers’ representatives, namely FNICGV and the applicant in Case T‑217/03, had every reason for not continuing it beyond the end of November 2001 after the Commission informed them that it considered that the agreement infringed Article 81 EC. Thus, on 30 November 2001, FNICGV informed its members that the agreement would not be renewed. 152 The applicants also observe that the fact that renewal of the agreement was envisaged or discussed is not sufficient to show that it was actually extended. They claim that the Commission could not take as its sole basis evidence from unilateral statements by the farmers’ federations alone, which contained only union claims. As the Commission had the burden of proof, it was required, according to the applicants, to produce documents originating from the slaughterers, confirming their agreement to maintain the price scale at the national level after 30 November 2001. 153 The applicants dispute the conclusions drawn by the Commission from the handwritten notes of the director of FNB concerning the meetings of 29 November and 5 December 2001. In their view, it is clear from those documents that at the meetings the farmers’ representatives made it known that, as from December 2001, they would try, by means of union action, to induce the slaughterers to apply on the ground the prices laid down in the scale. The applicants also dispute the Commission’s argument that the alleged secret continuation of the agreement also applied to imports and they point out that none of the documents referred to by the Commission relating to the two meetings of 29 November and 5 December 2001 makes the slightest reference to imports. 154 In addition, the applicants assert that the Commission attempts to prove the existence of the verbal agreement with the fact that it was secret. Though the word ‘secret’ was used in the notebook of FNB’s representative, it is contradicted in reality by the publicity given by the farmers’ federations to their union claims. The applicants observe that a secret agreement would have been of no advantage in the present context because the presidents of the signatory federations would not have been able to inform all their members of it. 155 With regard to the alleged local agreements subsequent to 30 November 2001, the Commission has identified only one, namely that concluded on 18 December 2001 by FDSEA, the JAs of the department of Sarthe and the Socopa group. That agreement alone formed the basis of the Commission’s finding that the infringement continued beyond 30 November 2001. The applicants also assert that the Commission did not have the text of that agreement, the documents referring to it mentioning only an agreement on the price scale, which therefore differed from the national agreement of 24 October 2001. In addition, the so-called ‘renewed’ agreements identified by the Commission do not include the date, signatures or the region in question. 156 Moreover, the applicant in Case T-217/03 submits that, as the Commission produced no written document of the slaughterers or involving them, it ought to have proved that the disputed agreement was implemented after 30 November 2001 on the basis of lists of market prices demonstrating that the price scale was adhered to. Although the Commission had tried to prove the existence of the agreement of 24 October 2001 with lists of prices at the national level for the first three weeks during which the agreement was applied, it had not produced any documents with figures relating to the alleged continuation of the agreement. 157 Lastly, the applicants observe that the Commission informed them, by letter of 26 November 2001, that only an extension of the written agreement of 24 October 2001 could give rise to sanctions. They conclude that, by fining them without having proved the existence of the verbal agreement which allegedly renewed the written agreement, the Commission not only manifestly erred in its assessment and erred in law, but failed to abide by its undertakings to the applicants, which amounts to a breach of the principle of the protection of legitimate expectation. 158 The Commission claims that an agreement within the meaning of Article 81(1) EC is not subject to any requirement of form, and an unwritten agreement may perfectly well constitute a prohibited cartel. The Commission observes that, during the second half of November 2001, the applicants still envisaged a written renewal of the agreement and maintains that, after the possibility of a written renewal was discarded, the parties agreed on the secret renewal of the agreement at two meetings on 29 November and 5 December 2001. The Commission adds that numerous documents show that the agreement was continued after 30 November 2001 and submits that it was therefore unnecessary to prove also that it produced effects. Lastly, the Commission disputes the applicants’ interpretation of its letter of 26 November 2001 and claims that, in any case, that question is irrelevant as the agreement was renewed. b) Findings of the Court159 It must be borne in mind that the agreement of 24 October 2001 specified the end of November 2001 as the expiry date. However, it is clear from the contested decision that on 19 November 2001, a few days after receipt of the Commission’s request for information, the president of FNICGV informed the president of FNSEA that he felt ‘obliged to bring forward to today the final date of application of the agreement’ (recital 54 of the contested decision). However, the file does not show that the other signatories actually brought forward the date for the end of the validity of the agreement. Furthermore, the applicants do not dispute the contention that the agreement of 24 October 2001 expired on 30 November 2001, but the fact that the agreement was renewed verbally in secret to beyond the latter date. Therefore, the Court’s examination must be limited to this last question. 160 In that connection, it must be observed, as the Commission confirmed at the hearing, that the contested decision characterises the infringement in question as an agreement concluded by federations representing farmers of the one part and federations representing slaughterers of the other. Consequently, as the applicants maintain, in order to prove the existence of the alleged verbal agreement which extended or renewed the agreement of 24 October 2001, the Commission had to show that the representatives of both the farmers and the slaughterers joined in it. 161 On the other hand, the applicants must fail in their argument that the Commission based its reasoning solely on evidence originating from the farmers’ representatives and ought also to have produced documents originating from the slaughterers. If other documents in the file were sufficient to show that the latter took part in the agreement, the Commission was not obliged to produce evidence originating directly from the slaughterers’ representatives (see, to that effect, Limburgse Vinyl Maatschappi and Others v Commission, paragraph 512). 162 It must be observed that, for the purpose of proving the extension of the agreement of 24 October 2001 beyond the end of November 2001, in the contested decision the Commission relied on a number of documents: first, documents indicating that the renewal of the agreement was planned, even on a date after its alleged termination by FNICGV, on 19 November 2001 (recitals 46 to 53 of the contested decision); second, documents referring to an agreement of all the parties, together with an undertaking not to disclose it, at two meetings which took place on 29 November and 5 December 2001 (recitals 57 to 70 of the contested decision); third, evidence of the implementation of the agreement after the end of November 2001 (recitals 78 to 95 of the contested decision). 163 Consequently, it will be necessary to examine the evidence referred to by the Commission in the light of the applicants’ complaints concerning it. Preparation for the renewal of the agreement 164 In the contested decision, the Commission observes that during the second half of November 2001 the parties were considering renewing the disputed agreement in writing (recitals 48 to 53 of the contested decision). In particular, the Commission relied upon handwritten notes by the director of FNB and an email dated 28 November 2001 from a representative of the Brittany FRSEA to FNB. 165 First, it must be observed that the abovementioned handwritten notes refer to a working meeting held, according to the Commission, between 22 and 27 November 2001, at which the president of FNICGV, Mr L.S., was present. It appears from those notes that the future of the ‘sector agreement’ after the end of November 2001 was discussed in relation to the ‘Prices’ part as well as the ‘Imports’ part. During those discussions, FNICGV refused to ‘continue with [the] written agreement’. The notes also envisage ‘discussing legality’. The possibility of ‘moving on from the agreement’ was, however, examined. 166 Second, it must be observed that the email of 28 November 2001 states as follows: ‘continuation of the price scale over the weeks ahead: all the slaughterers encountered said they were willing to maintain the price scale if all the operators also undertook to do so’. However, this passage only shows that certain slaughterers were prepared to maintain the price measures if an agreement to that effect was concluded. 167 It must therefore be concluded that, although the Commission was certainly entitled to use those documents to prove that the applicants had considered and discussed extending the written agreement of 24 October 2001, the documents on their own do not prove that it was actually renewed. Renewal of the agreement at the meetings of 29 November and 5 December 2001168 The Commission submits that, after the idea of written renewal was dropped, the parties agreed on the secret renewal of the agreement in the course of two meetings held on 29 November and 5 December 2001. – Meeting of 29 November 2001169 With regard to the meeting of 29 November 2001, the Commission, in the contested decision (recitals 57 to 60), begins by examining the handwritten notes of the FNB director. Those notes refer expressly to the ‘meeting Thursday 29 November’. As the heading shows, the first part of the notes relates to the preparation of the applicants’ reply to the Commission’s request for information dated 9 November 2001. The first part includes the following passage: ‘imports have continued (.) Not total compliance with the price agreement(.) The agreement, difficulties – negotiate your price scales regionally’ and, most importantly, ‘OK, we accept non-renewal of the agreement’. Likewise, the following words appear in a box at the top right: ‘Outside information? + no more agreement? … + price agreement’. The Court considers that, in view of their context, these passages are illustrative only of the position that the applicants proposed to adopt vis-à-vis the Commission. Therefore, contrary to the applicants’ argument, these extracts do not prove that it was decided to cease applying the contested measures. 170 Later on it is stated: ‘cannot be renewed as it stands, given its reprehensible character(.) Pressure should continue to apply the intervention prices (in fact, this means applying the price scale)(.) Avoid any frantic communication with one another’. This passage shows that the farmers’ federations wished to continue to demand application of the minimum prices, but this time formally, as a union claim. The following comments are made: ‘speak of target price. Regional price scales?’ The notes also contain the following extract: ‘send letter to FNICGV ‑ FNCBV (.) FNB (:) we take note COM (,) no agreement in future but we continue our union objectives’. Lastly, the following comments are made: ‘COMM. Press release(.) Price scale – anti-EEC therefore we stop, but we take action to recommend prices(,) we farmers(,) union objectives’. 171 In addition, these handwritten notes include passages which show that, contrary to the applicants’ submissions, the slaughterers’ representatives assented to the strategy of aiming to continue to secure adherence to the minimum prices. Several references are made to ‘LS’, which is identified by the Commission as alluding to the president of FNICGV, which is not denied by the applicants. For example: – ‘Signed agreement: we cannot continue it (LS)(.) LS = OK to comply with a price set for withdrawal’. Just beneath this is a list of prices for certain categories of beef, encircled with the words ‘OK agreement’; – ‘“Indicative price”, “target-related price”, “target price”(,) “remunerative price”, “farmer target price”, “farmer target” LS = I will write nothing/tel.’ 172 These extracts likewise mention several times the initials ‘FT’, which appear to refer to the president of the applicant in Case T‑217/03. 173 Lastly, it must be observed that, on the last page of that document (‘summary’) are the words: ‘Good summing-up, unanimous(.) “agreement” (verbal/tel.) on compliance with the “farmer target prices.”’ 174 In the light of all the foregoing, the Court takes the view, contrary to the applicants, that the handwritten notes concerning the meeting of 29 November 2001 may be interpreted as meaning that the slaughterers’ representatives consented to extending the application of the contested measures. Therefore the applicants must fail in their argument that the documents in question show only that the farmers’ federations wished to continue with those measures only within the framework of their union action, in the absence of and outside an agreement with the slaughterers. This argument is in fact contradicted by the contents of the notes themselves. 175 In addition, as observed in the contested decision (see recital 63), several other documents confirm that the applicants agreed verbally at the meeting of 29 November 2001 to continue the disputed agreement. 176 First, in an interview given on 4 December 2001 by the FNB vice-president, Mr G.H., to Vendée Agricole, available on the FNSEA internet site, he stated: ‘last week, we pointed out the usefulness of this price scale in stopping the downward spiral of prices. The undertakings recognise its impact, but at the same time want to comply with the recommendations issued by Brussels. Henceforth, we will no longer speak of an inter-trade agreement on a price scale, but of a target in terms of floor prices. We still insist on the idea of a union price scale!’ The FNB vice-president added: ‘There is nothing in writing on this new “agreement”. Just words. But extremely important in scope. The representatives of the undertakings at national level have also communicated verbally the content of our discussions.’ Finally, referring to several abattoirs in Vendée, he stated: ‘we are asking them if they received instructions (on the prices discussed the previous week) identical to ours from their national structures’. 177 Second, the contested decision refers, in recital 64, to a memo from the Vendée federation of 5 December 2001, which states: ‘the verbal agreement reached at the end of last week by the beef sector is slow in being applied in practice in the field. … The whole sector should communicate on this “agreement” at the beginning of the week’. After a reference to discussions between protesters and a slaughterer, the memo continues: ‘the persons in charge of the abattoir had talks with (the FNICGV president). He confirmed last week’s discussions.’ – Meeting of 5 December 2001178 With regard to the meeting of 5 December 2001, held on the occasion of national beef day, it is necessary first of all to examine, as the contested decision does in recital 66, an email of 6 December 2001 from a representative of the FRSEA Brittany to the FDSEA presidents of his region. The email, which refers to ‘yesterday’s meeting’, states as follows: ‘On this aspect of the minimum prices, the FNICGV and FNCBV national presidents said that they were aware of the need to maintain market prices and to get their members to see this need. Nevertheless we will have no written agreement on this point and the maintenance of prices will depend on our capacity to exert sufficient pressure in the sector. So I suggest that as from the end of this week you should enter into contact … with the slaughterers in your department so as to check up on their commitment to maintain prices on the existing and updated basis and to alert them to the union action which we will be able to implement as from next week in the event of any failure to comply with this commitment.’ 179 The contested decision goes on to consider, in recital 67, an information bulletin issued by FNPL and sent by fax on 10 December 2001, also referring to national beef day, which ‘confirmed the continuation of the price scale.’ The bulletin reports that ‘the representatives of the slaughterers (FT and LS) took note of the unwritten renewal of the price scale’. 180 Lastly, the contested decision refers, in recitals 68 and 69, to other passages in the handwritten notes of the FNB director, entitled ‘Beef day – 5 December 2001.’ Those notes contain the following extracts: ‘we’re to stop saying “against imports”, and go to restaurants and catering’, ‘a mistake = to have stated suspension of imports in writing, but we have been rapped over the knuckles by Brussels and others in the COPA. Without putting it in writing, let us continue with “target prices” or prices below which we don’t want prices [to fall]’. Likewise, just after the comments attributed to the presidents of the applicant in Case T-217/03 and of FNICGV, the note reads: ‘we can no longer put in writing, but continue’. The president of FNICGV then stated: ‘we will maintain (our commitment) on PAS (special purchase price)’ and ‘message passed to our undertakings … informally, the price scale will continue.’ Lastly, the president of the applicant in Case T-217/03 stated in that connection: ‘yes OK but it must be applied by everyone’. With regard to this last statement, contrary to the submissions of the applicant in Case T-217/03, the words ‘applied by everyone’ do not mean that it is impossible to apply the price scale and do not deprive the statement in question of evidential value. Implementation of the agreement after the end of November 2001181 In addition, the contested decision contains references to several actions at local level which confirm that the agreement continued to be applied after 30 November 2001 (recitals 92 to 94 of the contested decision). 182 In particular, a memo from the Vendée FDSEA dated 18 December 2001 states that a slaughterer (the Socopa group) agreed, after a blockade of its premises, to apply the minimum price scale for cows until 11 January 2002. 183 The file also contains two copies of a document entitled ‘Agreement of 25 October 2001 (renewed)’ which includes the following words: ‘Signed and deemed applicable by FNSEA, FNB, FNICGV and FNCBV/SICA’. As the applicants point out, these documents are not dated. However, in recital 94 of the contested decision the Commission identified them respectively as a fax of ‘FDSEA 79’ of 13 December 2001 and as a document sent on the same day by the Deux-Sèvres FDSEA to a slaughterer. 184 Lastly, a fax sent by a representative of FDSEA Maine-et-Loire to the director of FNB on 11 December 2001, entitled ‘Checks at Maine-et-Loire abattoirs’, states: ‘no abnormality found – price scale applied – no imports.’ Findings185 In view of what has been said above, it must be found that, in the contested decision, the Commission proved to the requisite legal standard that the applicants continued to apply the disputed agreement, verbally and in secret, beyond the end of November 2001, in spite of the Commission’s letters of 26 November 2001 informing them that the agreement revealed an infringement of Community competition rules. 186 This finding cannot be undermined by the applicants’ arguments that the secret continuation of the agreement would render it totally ineffective. It must be observed that the file contains several references to the applicants’ wish not to publicise the existence of an undertaking given by the farmers’ representatives and those of the slaughterers after the expiry of the written agreement. However, the Court considers that secrecy did not render the agreement entirely ineffective, particularly as the farmers’ federations continued to call in public for the price scales, but this time in the ostensible form of a union claim, and continued to inform their members of them. Likewise, the file suggests that the slaughterers’ representatives also informed several slaughterers’ undertakings of them verbally (see paragraph 177 above). 187 Furthermore, the Court considers that the continuation of the agreement cannot be denied solely on the basis of FNICGV’s memo of 30 November 2001 stating that ‘the minimum purchase price scale for culled cows concluded on 24 October 2001 has not been and will not be renewed’ and that ‘this is the conclusion reached at the meeting held (yesterday) in Paris in the presence of the signatories of the agreement’. The Court considers that this statement formed part of FNICGV’s public relations strategy, particularly after that federation had been warned by the Commission of the possibility of sanctions by reason of the disputed agreements. In any case, as stated above, documents subsequent to that date show that the president of FNICGV took part in the renewal of the agreement. 188 Lastly, as the Commission proved on the basis of documentary evidence that the agreement was continued, it was not necessary, contrary to the applicants’ claim, to prove its continuation by examining the effects of the agreement on prices during the relevant period. 189 Therefore, the Court finds that the Commission was right to find, in the contested decision, that the duration of the infringement was from 24 October 2001 to 11 January 2002. 190 Consequently, this plea must be dismissed in its entirety.C – Third plea in law: non-application of the exception provided for by Regulation No 26 1. Arguments of the parties191 The applicants submit that the Commission infringed Regulation No 26 and that there were manifest errors of assessment and errors of law on its part in refusing to grant the disputed agreement derogation from the application of Article 81(1) EC, as provided for by Article 2 of Regulation No 26 in favour of certain activities connected with the production and marketing of agricultural products. They maintain that the agreement in question was necessary for achieving the aims of the common agricultural policy. 192 Thus, the applicants claim that, as recognised by the contested decision, the disputed agreement had the objective of ensuring a fair standard of living for beef farmers. They add that the objective of stabilising markets was also achieved because the agreement set up a price mechanism which contributed to ending the existing disruption and enabled farmers to sell their products at profitable prices and consequently to confront the crisis without disappearing from the market. The agreement did not, however, jeopardise the objectives of increasing productivity and ensuring that supplies reach consumers at reasonable prices, in relation to which the agreement was neutral. 193 The applicants consider that in the present case the Commission ought to have tried to reconcile the various objectives (Case 5/73 Balkan-Import-Export [1973] ECR 1091, paragraph 24, and Joined Cases 197/80 to 200/80, 243/80, 245/80 and 247/80 Ludwigshafener Walzmühle and Others v Council and Commission [1981] ECR 3211, paragraph 41). Especially because of the exceptional crisis in the beef sector, the Commission ought to have given priority to the objectives of stabilising markets and ensuring a fair standard of living for the agricultural community. Therefore the Commission ought to have found that, to bring all the objectives listed by Article 33(1) EC into balance, it was justified to apply the derogation provided for by Regulation No 26. 194 The applicants in Case T-245/03 criticise the Commission’s argument in recitals 146 and 147 of the contested decision that the fact that the measures adopted were not provided for by Regulation No 1254/1999 was sufficient to preclude application of the derogation provided for by Article 2 of Regulation No 26. The applicant in Case T-217/03, for its part, claims that the Commission manifestly erred in its assessment and also erred in law in finding that the agreement did not fall within the scope of the objectives laid down by the CMO. The applicant submits inter alia that the agreement complied with the objectives stated in recitals 2 and 31 of Regulation No 1254/1999 and with Article 38(1) thereof. 195 Lastly, the applicants claim that the Commission manifestly erred in its assessment and also erred in law in finding that the disputed agreement was disproportionate. In addition, the Commission stated no reasons for that finding and did not explain what measures other than those provided for by the disputed agreement would have stopped the collapse in prices. 196 The Commission submits that the exception provided for by Article 2 of Regulation No 26 must be interpreted and applied restrictively. In the present case, the disputed agreement may appear appropriate, at best, for attaining only one of the five objectives specified by Article 33 EC (ensuring a fair standard of living for the agricultural community) and it has no connection with the other four. In addition, it goes beyond the framework of the CMO in the beef sector and, in any case, appears disproportionate for attaining the desired objectives. In the final analysis, the agreement does not fall within the scope of the derogation in question. 2. Findings of the Court197 First of all, it must be observed that the maintenance of effective competition in the markets for agricultural products is one of the objectives of the common agricultural policy. Whilst Article 36 EC has conferred on the Council responsibility for determining the extent to which the Community competition rules are applicable to the production of and trade in agricultural products, in order to take account of the particular position of the markets for those products, that provision nevertheless established the principle that the Community competition rules are applicable in the agricultural sector (Case C‑137/00 Milk Marque and National Farmers’ Union [2003] ECR I-7975, paragraphs 57 and 58). 198 By virtue of Article 1 of Regulation No 26, Article 81(1) EC applies to all agreements, decisions and practices referred to in that provision which relate to production of or trade in the agricultural products listed in Annex I to the EC Treaty, including in particular live animals, edible meat and offals, subject to the provisions of Article 2 of the same regulation. The latter provides that Article 81(1) EC does not apply to agreements, decisions and practices which are necessary for the attainment of the objectives of the common agricultural policy set out in Article 33 EC. 199 Constituting as it does a derogation from the general rule in Article 81(1) EC, Article 2 of Regulation No 26 must be interpreted strictly (Case C-399/93 Oude Luttikhuisand Others [1995] ECR I‑4515, paragraph 23, Joined Cases T‑70/92 and T-71/92 Florimex and VGB v Commission [1997] ECR II-693, paragraph 152). Furthermore, it has consistently been held that the first sentence of Article 2(1) of Regulation No 26, which provides for the exception claimed, applies only if the agreement in question is conducive to attainment of all the objectives of Article 33 (Oude Luttikhuisand Others, paragraph 25; Florimex and VGB v Commission, paragraph 153; see also, to that effect, Frubo v Commission, paragraphs 25 to 27). However, the Court has stated that in the event of a conflict between those sometimes divergent objectives, the Commission may try to reconcile them (Florimex and VGB v Commission, paragraph 153). Lastly, as is clear from the very wording of the first sentence of Article 2(1) of Regulation No 26, the agreement in question must be ‘necessary’ for the attainment of those objectives (Oude Luttikhuisand Others, paragraph 25; see also, to that effect, Florimex and VGB v Commission, paragraphs 171 and 185). 200 In accordance with Article 33(1) EC, the objectives of the common agricultural policy are:‘(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour; (b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture; (c) to stabilise markets, (d) to ensure the availability of supplies; (e) to ensure that supplies reach consumers at reasonable prices.’ 201 The applicants submit, essentially, that the disputed agreement was necessary for the attainment of two of those objectives, namely to ensure a fair standard of living for the agricultural community and to stabilise markets, and that it was neutral in relation to the remaining three, which therefore it did not adversely affect. 202 As the applicants point out, the main object of the disputed agreement was to assist beef farmers in France in the crisis situation in the beef sector at the material time. Therefore it may be regarded as having the objective of ensuring a fair standard of living for the agricultural community for the purposes of Article 33(1)(b) EC. 203 On the other hand, the Court considers that the agreement of 24 October 2001 did not aim to stabilise markets, as envisaged by Article 33(1)(c) EC; nor could it be deemed necessary for that purpose. As the contested decision states, the crisis in the beef sector in 2000 and 2001 was due to the massive imbalance between supply and demand caused primarily by the sharp drop in consumption owing to the crisis of confidence resulting from the discovery of new cases of ‘mad cow’ disease and foot-and-mouth disease (see recitals 12, 13 and 142 of the contested decision). Consequently, stabilisation of the markets in question required above all measures to reduce the volume of supply, of which there was a considerable surplus, and to promote the consumption of beef, which had fallen considerably. 204 The disputed agreement did not provide for measures in that respect. Furthermore, not only were the minimum prices which it laid down unlikely to help to stabilise the markets, but could even run counter to that objective to the extent that they might entail an increase in prices likely to reduce consumption even more and thus widen the gap between supply and demand. The introduction of a price scale also represented an artificial fixing of prices, contrary to their natural formation in the market and to the government support and intervention arrangements. In addition, the disputed agreement could only be a purely short-tem measure incapable of producing medium or long-term effects. The limitation of beef imports into France inevitably gave rise to a risk of distortion in intra-Community trade in beef and of adverse effects on the stability of the markets in question in a number of Member States. 205 Moreover, an agreement limiting imports of cheaper products and fixing minimum prices cannot be regarded as neutral in relation to the objective of ensuring that supplies reach consumers at reasonable prices, as envisaged in Article 33(1)(e) EC. As the Commission points out in recital 144 of the contested decision, without being contradicted by the applicants, especially in the case of consumption via restaurant and catering services, which are major users of imported meat, the suspension of imports would probably have the effect of raising prices. Furthermore, even if the scale prices were fixed at the slaughterhouse entry stage, they would also be likely to be passed on to consumers. 206 In the light of the foregoing, it must be found that the disputed agreement can be regarded as necessary only in relation to the objective of ensuring a fair standard of living for the agricultural community. On the other hand, the agreement is likely at least to jeopardise the setting of reasonable prices for supplies to consumers. Lastly, the agreement had no connection with, and was therefore all the more unnecessary for, the stabilisation of markets, ensuring the availability of supplies and increasing agricultural productivity. Therefore, in view of the case-law referred to in paragraph 199 above, the Court considers that the Commission did not err in finding that bringing those different objectives into balance did not justify the conclusion that the derogation provided for by the first sentence of Article 2(1) of Regulation No 26 was applicable in the present case. 207 Furthermore, the objections to the finding, in recitals 146 and 147 of the contested decision, that the disputed agreement is not among the means provided for by the CMO rules in the beef sector, including in particular Regulation No 1254/1999, must be rejected. Contrary to the submission of the applicants in Case T‑245/03, the Commission did not find that circumstance sufficient on its own to rule out the applicability of the derogation based on Regulation No 26, but merely took that factor into account – rightly – in support of its finding that the agreement in question was not necessary for the attainment of the objectives of the common agricultural policy (see, to that effect, Florimex and VGB v Commission, paragraphs 148 to 151). Likewise, the applicant in Case T-217/03 must fail in its argument that the agreement complied with the objectives of that regulation. In particular, the provisions listed by the applicant (namely, recitals 2 and 31 of the preamble to and Article 38(1) of that regulation) merely provide for the right of the Community institutions to take measures in the event of disturbance in the market (see Article 43 of that regulation) and in no way justify a private agreement limiting imports and fixing minimum prices. 208 Lastly, regarding the arguments concerning the proportionality of the contested measures, the complaint alleging failure to state reasons must be rejected. In recital 148 of the contested decision the Commission stated reasons to the requisite legal standard for its finding that the fixing of prices and suspension of imports were serious restrictions of competition and could not be regarded as proportionate to the aims of the agreement. Contrary to the applicants’ submissions, the Commission was not required to state what measures the applicants could have taken to make their agreement comply with Article 2 of Regulation No 26. The complaint that, in examining the applicability of the derogation provided for by that provision, the Commission erred in taking into consideration the disproportionate nature of the measures laid down by the agreement, cannot be upheld either. It has consistently been held that, for the purpose of applying that derogation, measures cannot be regarded as necessary for the attainment of the objectives of the common agricultural policy unless they are proportionate (see, to that effect, Florimex and VGB v Commission, paragraph 177). In the present case, even bearing in mind the special nature of the agricultural markets and the crisis in the beef sector during the relevant period, the restriction of imports and the fixing of prices cannot be regarded as measures proportionate to the objectives pursued as they were serious infringements of competition law. 209 It follows that this plea must be dismissed. D – Fourth plea: infringement of the rights of the defence3. Arguments of the parties210 The applicants submit that the statement of objections, which constitutes an application of the fundamental principle of observance of the rights of the defence, must be couched in terms that, albeit succinct, are sufficiently clear to enable the parties concerned properly to identify the conduct complained of, so as to enable them properly to defend themselves before the Commission adopts a final decision (Case T‑352/94 Mo och Domsjö v Commission [1998] ECR II‑1989, paragraph 63). 211 In the present case, first, the applicants complain that in the statement of objections the Commission did not mention that, in order to determine the amount of the fine of the federations other than FNSEA, it would take into account the annual fees paid by their members. Second, the applicants submit that in the statement of objections the Commission did not indicate in any way that it would calculate the fines by reference to the turnover of the members directly or indirectly belonging to them. The Commission thus failed to inform the applicants of the matters of fact and of law on which the contested decision was based, including the main factors for calculating the fine, and therefore the applicants were unable to submit their observations on the point. 212 The applicants observe that the Court of Justice has held that a statement of objections which merely identifies as the perpetrator of an infringement a collective entity does not make the companies forming that entity sufficiently aware that fines will be imposed on them individually if the infringement is made out and is not sufficient to warn the companies concerned that the amount of the fines imposed will be fixed in accordance with an assessment of the participation of each company in the conduct constituting the alleged infringement (Joined Cases C-395/96 P and C-396/96 P Compagnie Maritime Belge Transports and Others v Commission [2000] ECR I-1365, paragraphs 144 to 146). 213 Lastly, the applicants claim that the Commission’s letter of 10 January 2003 asking them for financial information was not sufficient to ensure observance of the rights of the defence. As the letter was subsequent to the submission of the applicants’ observations and to the date when they were heard, they were not in a position to defend themselves in relation to the matters in issue. Furthermore, the letter gave no indication of the Commission’s intentions. 214 The Commission observes that it has consistently been held that, in the statement of objections, it is only required to state that it will consider whether it is appropriate to impose fines on the undertakings concerned and to indicate the main factual and legal criteria capable of attracting a fine (Joined Cases 100/80 to 103/80 Musique diffusion française and Others v Commission [1983] ECR 1825, paragraph 21). 215 According to the Commission, the applicants must have been aware that their members’ fees would be taken into account and they had every opportunity to submit their observations on sight of the statement of objections. It was also open to them to make their views known on the question of their members’ turnover because on 10 January 2003 the Commission sent them a request for information on that point (see, to that effect, Musique diffusion française and Others v Commission, paragraph 23). 216 Lastly, the Commission disputes the relevance of the judgment in Compagnie Maritime Belge Transports and Others v Commission, relied on by the applicants. The statement of objections in the present case made it very clear that the Commission was contemplating imposing fines on the applicants, the addressees of the statement, and not therefore on the intermediate federations or on individual farmers. In view of the case-law which takes the members of federations into consideration, the applicants could easily have realised the risk and could have defended themselves on that point in the administrative procedure. 2. Findings of the Court217 Observance of the rights of the defence is, in all proceedings in which sanctions, in particular fines, may be imposed, a fundamental principle of Community law which must be respected even if the proceedings in question are administrative proceedings (Case T‑308/94 Cascades v Commission [1998] ECR II-925, paragraph 39). In accordance with that principle, the statement of objections is an essential procedural safeguard which must set forth clearly all the essential facts upon which the Commission is relying at that stage of the procedure (Compagnie Maritime Belge Transports and Others v Commission, paragraph 142). 218 It is settled case-law that, where the Commission expressly states in its statement of objections that it will consider whether it is appropriate to impose fines on the undertakings and it indicates the main factual and legal criteria capable of giving rise to a fine, such as the gravity and the duration of the alleged infringement and whether that infringement was committed intentionally or negligently, it fulfils its obligation to respect the undertakings’ right to be heard. In doing so, it provides them with the necessary means to defend themselves not only against the finding of an infringement but also against the imposition of fines (Musique diffusion française and Others v Commission, paragraph 21, and ABB Asea Brown Boveri v Commission, paragraph 78). 219 The applicants submit that the Commission ought to have mentioned in the statement of objections that it would take account of their annual fees to determine the amount of the fine imposed on the federations other than FNSEA and that it would calculate the fines according to the turnover of the applicants’ members. 220 On this point it must be observed, first, that the Commission calculated the basic amount of the fines by reference to the membership fees collected by the applicants (recitals 169 and 170 of the contested decision). After establishing that the basic amount of the fine on the main farmers’ federation (FNSEA) should be EUR 20 million, taking account of the gravity of the infringement, the Commission used the ratio between the amount of the annual membership fees collected by each of the other federations and that collected by FNSEA as an objective criterion of the relative size of the different farmers’ federations and, consequently, of their individual degree of responsibility for the infringement. Those amounts were thus set at one-fifth (FNPL), one-tenth (FNB and FNCBV) and one-twentieth (JA) of the amount set for FNSEA. 221 Second, it must be observed that the Commission, as it acknowledged before the Court, took into account the turnover of the applicants’ basic members for the purpose of verifying adherence to the 10% maximum laid down by Article 15(2) of Regulation No 17. 222 The Court of Justice has held that to give indications in the statement of objections as regards the level of the fines envisaged, before the undertaking has been invited to submit its observations on the allegations against it, would be to anticipate the Commission’s decision and would thus be inappropriate (Musique diffusion française and Others v Commission, paragraph 21, and ABB Asea Brown Boveri v Commission, paragraph 66). All the more so, to raise in the statement of objections the question whether the fine which may be imposed by the final decision will adhere to the 10% maximum would also anticipate the decision and would thus be inappropriate. 223 Furthermore, contrary to the applicants’ submissions, the judgment in Compagnie Maritime Belge Transports and Others v Commission is not relevant to the present case. In paragraphs 143 to 146 of that judgment, the Court of Justice held that the Commission was required to specify unequivocally, in the statement of objections, the persons on whom fines may be imposed and held that a statement of objections which merely identifies as the perpetrator of an infringement a collective entity does not make the companies forming that entity sufficiently aware that fines will be imposed on them individually and is not sufficient to warn the companies concerned that the amount of the fines will be fixed in accordance with an assessment of the participation of each company in the conduct constituting the alleged infringement. In the present cases, the Commission did not impose sanctions on the applicants’ members, whether direct or indirect, but on the applicants themselves because of their own degree of responsibility for the infringement (recital 169 and Articles 1 and 3 of the contested decision), as the Commission had announced in the statement of objections. The fact that the turnover of the members of an association of undertakings which has committed an infringement is taken into account in no way means that a fine has been imposed on them (Joined Cases T-39/92 and T-40/92 CB and Europay v Commission [1994] ECR II-49, paragraph 139). 224 In the light of the foregoing, the Court finds that the Commission did not infringe the applicants’ rights of defence for having failed to indicate, in the statement of objections, that it proposed to take into account the annual fees collected by the applicants and their members’ turnover for the respective purposes of calculating the basic amount of the fines and verifying the 10% upper limit laid down by Article 15(2) of Regulation No 17. 225 Consequently, this plea must be dismissed. E – Fifth plea in law: failure to state reasons 1. Arguments of the parties226 The applicants point out that the statement of the reasons on which a decision adversely affecting a person is based must be such as to enable the Community judicature to exercise its power of review as to the legality of the decision and to enable the person concerned to ascertain the matters justifying the measure adopted, so that he can defend his rights and verify whether the decision is well founded (Case T‑310/94 Gruber + Weber v Commission [1998] ECR II-1043, paragraph 40). 227 The applicants submit that the contested decision makes no reference to the turnover figures which the Commission is said to have taken into account to calculate the fines, nor to verification of adherence to the 10% upper limit laid down by Article 15(2) of Regulation No 17. Thus the Commission did not mention that it had decided to calculate the upper limit on the basis of the aggregate turnover of the applicants’ members, nor did it state which members were involved. However, a very detailed statement of reasons was called for in the present case, because this was the first time that the Commission had dealt with a case concerning farmers’ unions and because it intended to derogate from the restrictive conditions relating to taking into account the turnover of an association’s members. The Commission’s request for information of 10 January 2003 could not in any case compensate for the lack of a statement of reasons. Lastly, the failure to state reasons means, according to the applicant in Case T‑217/03, that the entire contested decision must be annulled, and not only the part relating to fines. 228 The French Republic observes that the contested decision does not meet the obligation to state reasons pursuant to Article 253 EC. Explanations which the Commission attempts to put forward for the first time in its statement in defence cannot rectify this situation (see, to that effect, Case T‑323/99 INMA and Itainvest v Commission [2002] ECR II-545, paragraph 76). 229 The Commission contends first that this plea cannot justify the annulment of the contested decision in its entirety, but only the annulment of Article 3, as the alleged lack of a statement of reasons concerns the level of fines and does not affect the actual facts or their legal assessment. In any case, the Commission completely fulfilled the obligation to state reasons in the present case. 230 The Commission submits that that obligation is satisfied where it states the factors which it took into account to measure the gravity and the duration of the infringement for the purpose of calculating the fine (Case C-282/98 P Enso Española v Commission [2000] ECR I-9817, paragraphs 40 and 41; Case C‑297/98 P SCA Holding v Commission [2000] ECR I-10101, paragraphs 56 to 65; and Case T‑220/00 Cheil Jedang v Commission [2003] ECR II‑2473, paragraph 218). Therefore the Commission is not required to state in its decision the turnover taken into account or what percentage thereof is levied in the form of a fine, since the question whether the 10% maximum is attained does not form part of the statement of reasons for the decision. The figure of 10% is the legal maximum limit of the fine which may be imposed and does not form part of the reasons for the measure adopted. 231 The Commission also submits that the obligation to state reasons must be assessed in its context and observes that it clearly indicated that it was proceeding on the basis of the Guidelines, Section 5(c) of which permits it to impose on an association a fine equivalent to the total of the individual fines which might have been imposed on each of its members. The applicants cannot be unaware of the principles governing the calculation of the fine, including the fact that the Commission takes into account their members’ turnover in order to ensure that the 10% maximum is not exceeded. It is clear from the contested decision as a whole that the infringement was committed by the applicants not for themselves, but for the benefit of their members. 232 The Commission also observes that, on 10 January 2003, it asked each of the applicants for their members’ turnover figures. The applicant in Case T‑217/03 sent the Commission the information by letter of 27 January 2003. The figures supplied by that federation showed that the 10% maximum was very far from being attained. The applicants in Case T-245/03, on the other hand, stated that they were unable to provide the information. In view of this refusal, the Commission could have adopted a decision ordering the production of the figures on the basis of Article 11(5) of Regulation No 17 accompanied, if necessary, by penalties or fines, but it simply took the view, given the available information, that there was not the slightest likelihood that the 10% maximum of the turnover of the applicants’ members would be attained. 233 It has consistently been held that that the statement of reasons required by Article 253 EC must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent Community Court to exercise its power of review. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (Cheil Jedang v Commission, paragraph 216; Case T-38/02 Groupe Danone v Commission [2005] ECR II-4407, paragraph 96). 234 In the present case, the applicants complain that, in the contested decision, the Commission did not state expressly that the fines imposed did not exceed the 10% maximum of their turnover, as laid down in Article 15(2) of Regulation No 17, and failed to state the reasons why it could take account of their members’ turnover for the purpose of verifying that the maximum was not exceeded. 235 It must be observed that indeed none of the recitals of the contested decision deals with question of adherence to the maximum 10% of turnover to which fines are subject. The Commission likewise omitted to indicate that, to ensure that the 10% limit was not exceeded, it was necessary in the present case to take account of the turnover of the applicants’ basic members; nor did it provide any reason for such a possibility. 236 The Commission nevertheless considers that adherence to the maximum 10% of turnover is only the legal maximum limit of the fine and does not form part of the statement of reasons of the decision. 237 It must be observed that the maximum 10% turnover referred to in Article 15(2) of Regulation No 17 refers to the turnover of the undertaking or association which committed the infringement and which, being the addressee of the decision, is thereby in a position to ensure that the limit is not exceeded. In those circumstances, no specific reasons are required with regard to the observance of the limit. However, where the Commission departs from its usual approach and, for the purpose of imposing the fine, takes into account a turnover different from that of the addressee of the decision sanctioning the infringement, such as the turnover of the members of the sanctioned association, the Commission must necessarily give a specific reason for its decision in that respect, so as to enable the addressee of the decision to ensure that the 10% limit was adhered to in the calculation of the fine. 238 Thus, where the Commission imposes a fine on an individual undertaking which is the perpetrator of an infringement, it is not necessarily required, in the absence of specific circumstances, to state express reasons for adhering to the maximum 10% of the turnover of the undertaking in question. The latter must be aware of the existence of that legal limit and the specific amount of its turnover and can then ascertain, even without any reasons in the decision in question, whether or not the 10% maximum was exceeded by the fine imposed on that undertaking. 239 On the other hand, where the Commission sanctions an association of undertakings and ensures that the legal limit of 10% of the turnover on the basis of the aggregate turnover of all or some of the members of the association is not exceeded, it must state this expressly in its decision and must set out the reasons which justify taking the members’ turnover into account. If reasons are not given, the persons concerned will not know the justification for the decision and will not be able to ensure properly that the legal limit was adhered to in the particular case. 240 This conclusion is not undermined by the case-law relied on by the Commission in paragraph 230 above, according to which it is sufficient, with regard to the scope of the obligation to state reasons concerning the calculation of a fine for infringement of the Community competition rules, for the Commission to set out in its decision the factors which it has taken into account pursuant to the Guidelines and which have enabled it to measure the gravity and duration of the infringement. That case-law relates only to the question of determining the amount of the fine and not that of ensuring that the ultimate fine does not exceed the maximum 10% of the turnover of the undertaking or association sanctioned. 241 It must therefore be concluded that, in the present case, the Commission ought to have indicated in the contested decision that it had used the turnover of the applicants’ basic members, specifying whether it was the turnover of all their members or of particular categories of them, for the purpose of verifying that the fines did not exceed the legal maximum of 10%. Likewise, the Commission ought to have set out the circumstances that enabled it to take account of the aggregate turnover of the applicants’ members for that purpose. 242 Nor can the Commission plead the fact that, in recital 164 of the contested decision, it indicated that it would proceed on the basis of the Guidelines. That generic reference appears in the section concerning the determination of the amount of the fines and has the sole object of drawing attention to the criteria governing the assessment of the gravity of the infringement. In addition, it must be observed that in the contested decision the Commission made no reference to Section 5(c) of the Guidelines concerning the possibility of taking into account the turnover of the members of an association. 243 Likewise, the Commission cannot rely on its letters to the applicants of 10 January 2003 requesting the turnover figures of their members. Even if it were assumed that, in the light of those requests, the applicants understood that the contested decision had taken account of their members’ turnover for the purpose of calculating the 10% maximum, nevertheless the requests cannot compensate for the lack of a statement of reasons on that point in the contested decision, particularly the complete absence of any indication of the reasons why such figures could be used for verifying that the limit was not exceeded. 244 Lastly, with regard to the fact that the applicants in Case T-245/03 did not provide the Commission with their members’ turnover figures, this likewise does not excuse the Commission from setting out in the body of the decision the reasons why it considered it appropriate to take account of the members’ turnover and the reasons why it considered that the 10% limit had not been exceeded in the present case. 245 In the light of all the foregoing, the conclusion must be that the Commission failed to fulfil its obligation to state reasons as required by Article 253 EC. II – Submissions on the cancellation or reduction of the fine 246 The applicants rely on six pleas in law in support of their application for the cancellation or reduction of the fines imposed on them by the contested decision. The first plea is that the Guidelines are unlawful. The second plea alleges infringement of the principle of proportionality, a manifest error of assessment and an error of law in determining the gravity of the infringement. The third plea alleges errors of assessment and of law and infringement of the principle of proportionality in taking account of aggravating and attenuating circumstances. The fourth plea alleges infringement of Article 15(2) of Regulation No 17 in setting the amount of the fines. The fifth plea alleges infringement of the rule against cumulation of penalties. The sixth plea alleges infringement of the principle of proportionality and a manifest error of assessment in taking account of the circumstances provided for by Section 5(b) of the Guidelines. A – First plea: unlawfulness of the Guidelines247 The applicants in Case T-245/03 submit, first, that the Guidelines are contrary to the principle of proportionality. They observe that the assessment of the effect of agreements or practices on the functioning of the market is an essential factor for determining the degree of gravity of an infringement. However, in describing an infringement as very serious, the Commission does not take its effects into consideration at all, but only its nature and the extent of the relevant geographic market. Furthermore, where an infringement is classified as very serious in accordance with Section 1A of the Guidelines, it is liable to a fine of a minimum starting amount of EUR 20 million, which is discretionary and arbitrary. That minimum amount also prevents the Commission from taking account of the importance, the size and the nature of the entity concerned or its profits from the infringement. 248 Second, the applicants submit that the Guidelines are contrary to Article 15(2) of Regulation No 17. They observe, first, that Section 1A of the Guidelines permits the Commission to set the basic amount of a fine at a figure of more than EUR 1 million or 10% of the turnover of the undertaking being sanctioned. However, according to the applicants, Article 15(2) of Regulation No 17, in providing that the Commission must take account of the gravity and the duration of the infringement at the stage of determining the basic amount of the fine, does not permit the basic amount – or the ultimate fine – to exceed the abovementioned limits. The applicants maintain, second, that Section 1B of the Guidelines takes account of the criterion of the duration of the infringement only in order to increase the fine, which leads the Commission to regard in the same way an infringement which lasted a few days and one which lasted almost one year. 249 The Commission observes, first, that the only criteria expressly mentioned by Article 15 of Regulation No 17 are the gravity and the duration of the infringement, and Article 15 lays down no limits or reservations regarding the Commission’s discretion in setting fines, other than adherence to the maximum relating to the turnover of each undertaking. In addition, as very serious infringements are practices the very object of which is manifestly contrary to the principles of the internal market and in order to ensure that fines have a deterrent effect, it appears in no way disproportionate to take EUR 20 million as the starting point. In any case, contrary to the applicants’ assertion, it is possible to go below EUR 20 million within the category of very serious infringements. Second, the Commission submits that the setting of a limit to the fine must be done in relation to its final amount, before leniency is granted, and the fact that short duration is not a factor which reduces the fine, but merely neutral, is not contrary to Article 15(2) of Regulation No 17. 250 It must be observed as a preliminary point that, although the Guidelines are not the legal basis of the contested decision, that being inter alia Regulation No 17, they determine, in a general and abstract manner, the method by which the Commission has bound itself in setting the amount of fines. In the present case, therefore, there is a direct link between the contested individual decision and the general measure represented by the Guidelines. Since the applicants were not in a position to ask that the Guidelines be declared void, they may form the subject‑matter of an objection of illegality (Case T-23/99 LR AF 1998 v Commission [2002] ECR II-1705, paragraphs 274 and 276, and Case T‑64/02 Heubach v Commission [2005] ECR II-5137, paragraph 35). 251 The applicants submit, first, that the Guidelines are contrary to the principle of proportionality because they do not take account of the effects of the agreements or practices in question in the determination of whether an infringement is very serious. 252 On this point, it must be observed that Section 1A of the Guidelines states that very serious infringements include ‘horizontal restrictions such as price cartels and market-sharing quotas, or other practices which jeopardise the proper functioning of the single market, such as the partitioning of national markets’. It has consistently been held that cartels relating to prices or the partitioning of markets are by nature very serious infringements (Case T-65/99 Strintzis Lines Shipping v Commission [2003] ECR II-5433, paragraph 168; Case T‑66/99 Minoan Lines v Commission [2003] ECR II-5515, paragraph 280; and Joined Cases T-49/02 to T-51/02 Brasserie nationale v Commission [2003] ECR II-3033, paragraphs 173 and 174). Therefore the Court considers that the Commission did not infringe the principle of proportionality by stating in its Guidelines that those kinds of infringements are to be regarded as very serious. In any case, the first paragraph of Section 1A of the Guidelines states that, in assessing the gravity of the infringement, account must be taken of its actual impact on the market, where this can be measured. It follows that, in certain specific circumstances, the Commission must take into account the effects of the infringement in question for the purpose of classifying it as very serious or not. 253 Next, regarding the allegedly discretionary and arbitrary nature of the sum of EUR 20 million laid down for very serious infringements, it must be pointed out first that, in accordance with settled case-law, Regulation No 17 allows the Commission a margin of discretion when fixing fines, in order that it may direct the conduct of undertakings towards compliance with the competition rules (Cheil Jedang, paragraph 76). It must also be noted that, as the basic amounts provided for in the Guidelines are merely ‘likely’, the Commission is entirely free to set a starting amount below EUR 20 million. The flat-rate amounts provided for by the Guidelines are merely indicative and therefore cannot in themselves give rise to an infringement of the principle of proportionality (Heubach v Commission, paragraphs 40 and 44). 254 Second, the applicants submit that the method laid down by Section 1A of the Guidelines for calculating fines is contrary to Article 15(2) of Regulation No 17 in that it envisages the possibility of setting a basic fine amount of more than EUR 1 million or 10% of the turnover of the undertaking concerned. 255 However, this argument must fail. Article 15(2) of Regulation No 17, in providing that the Commission may impose fines of up to 10% of turnover during the preceding business year for each undertaking which participated in the infringement, requires only that the fine eventually imposed on an undertaking be reduced if it should exceed 10% of its turnover, irrespective of the intermediate stages in the calculation intended to take account of the gravity and duration of the infringement. Consequently, Article 15(2) of Regulation No 17 does not prohibit the Commission from referring, during its calculation, to an intermediate amount exceeding 10% of the turnover of the undertaking concerned, provided that the amount of the fine eventually imposed on the undertaking does not exceed that maximum limit (LR AF 1998 v Commission, paragraphs 287 and 288). This consideration also applies to the maximum amount of EUR 1 million. 256 The applicants also claim that Section 1B of the Guidelines violates Article 15(2) of Regulation No 17 as it takes account of the criterion of the duration of the infringement only to increase the fine. 257 It must be observed that Article 15(2) lays down that, to determine the amount of the fine, it is necessary to take into account the duration of the infringement as well as its gravity. In that connection, Section 1B of the Guidelines provides that the duration of the infringement may entail a possible increase in the amount of the fine established on the basis of gravity. The Guidelines thus distinguish between infringements of short duration (in general, less than one year), for which there is no increase, infringements of medium duration (in general, one to five years), for which there is an increase of up to 50% in the amount determined for gravity, and, lastly, infringements of long duration (in general, more than five years), for which there is an increase of up to 10% per year in the amount determined for gravity. The Guidelines therefore take no account of the very brief duration of an infringement for the purpose of reducing the amount initially determined. 258 The fact that the duration of the infringement was short does not in the least affect its gravity, which arises from its nature. The Commission was therefore right to find, in accordance with the first indent of the first paragraph of section 1B of the Guidelines, that the very short duration of the infringement, less than one year, meant merely that no additional amount should be imposed on the amount calculated by reference to the gravity of the infringement (Case T‑213/00 CMA CGM and Others v Commission [2003] ECR II-913, paragraph 283). 259 Furthermore, it must be observed that, in accordance with settled case-law, the Guidelines do not go beyond the legal framework for fines set out in Article 15(2) of Regulation No 17. The general method for setting fines described in the Guidelines is based on the two criteria referred to in Article 15(2) of Regulation No 17, namely the gravity of the infringement and its duration, and observes the upper limit determined by reference to the turnover of each undertaking, as laid down in that provision (LR AF 1998 v Commission, paragraphs 231 and 232; Joined Cases T-236/01, T-239/01, T-244/01 to T-246/01, T-251/01 and T-252/01 Tokai Carbon and Others v Commission [2004] ECR II-1181, paragraphs 189 and 190, and Heubach v Commission, paragraph 37). 260 In the light of all the foregoing, this plea must be rejected.B – Second plea: infringement of the principle of proportionality, manifest error of assessment and error of law in determining the gravity of the infringement 261 The applicants submit that the Commission should not have classified the infringement as ‘very serious’, but as ‘serious’. They repeat that the Commission was not justified in attributing to them the ‘Imports’ part of the agreement and they dispute the duration of the ‘Prices’ part. In addition, they complain that the Commission took no account of the slight impact of the disputed measures on the functioning of the market. In actual fact, the acts imputed to them caused no damage to the beef sector as the agreement had no effect on prices or on imports. Thus the slaughterers never claimed to have suffered loss by reason of the agreement on the price scale which, furthermore, did not affect consumer prices. However, the Commission did not examine the importance of the economic sector in question or the actual impact of the agreement. According to the applicants, the Commission was not entitled merely to plead that it was impossible to quantify sufficiently accurately the true effects attributable to the agreement. The applicants also claim that the Commission did not take account of the whole legal and economic context of the case as a whole, particularly the crisis in the sector and the ineffectiveness of the Community measures in overcoming it. Lastly, they claim that the infringement was the outcome of a vertical agreement and not a horizontal agreement. 262 The Commission submits that, in view of the nature of the infringement and the geographic extent of the market in question, the infringement was undoubtedly very serious. 263 It must be observed, first, that it has been held that the Commission was correct with regard to the determination of the duration and extent of the disputed agreement. Therefore the criticism relating to the classification of the gravity of the agreement based on an incorrect weighting of the duration and extent of the infringement must be rejected. 264 Next, it must be noted that the infringements in question, namely the suspension or limitation of beef imports and the fixing of a minimum price scale, are particularly serious. As the Commission rightly points out in the third indent of Section 1A of the Guidelines, practices aiming at the partitioning of national markets are, in principle, very serious infringements. Likewise, the price-fixing measures were, in the present case, a very serious infringement. The object of that part of the disputed agreement was to fix minimum prices for certain categories of cows, with the aim of making them compulsory for all traders in the markets in question (see paragraph 85 above). This finding is not undermined by the applicants’ argument that the disputed agreement constituted a vertical agreement. It must be borne in mind that the agreement was set up by federations representing a very large proportion of both the farmers and slaughterers in France, two links of the production chain in the beef sector (see paragraph 88 above). Furthermore, the infringements at issue affected the main beef market in Europe, extending beyond national territory because of the limitation of imports. It is moreover not disputed that the federations which signed the agreement of 24 October 2001 were the main associations in the sector of beef farming and slaughtering in France. 265 With regard to taking account of the effects of the agreement, the Court considers that, in the present case, the Commission correctly assessed Section 1A of the Guidelines which, for the purpose of assessing the gravity of the infringement, mentions taking account of the actual impact of the infringement on the market only where the impact can be measured. On this point, it must be observed that, in the contested decision, the Commission examined the trend in beef imports into France and in average prices for different categories of beef as a result of the disputed agreement, but found that it was not able to quantify the actual effects of the agreement on intra-Community trade and on prices (recitals 78, 81 and 167 of the contested decision). Lastly, regarding the submissions concerning the economic context of the present case, it must be noted that the Commission took that into account in the contested decision, inter alia for the purposes of application of Section 5(b) of the Guidelines (see paragraphs 350 to 361 below). In any case, this question will be discussed in greater detail below. 266 In the light of the foregoing, the Court considers that, in the present case, the classification of the infringement as ‘very serious’ was justified. 267 This plea must therefore be rejected. C – Third plea: errors of assessment and of law and infringement of the principle of proportionality in taking account of aggravating and attenuating circumstances268 The applicants dispute the increase in the fines on the basis of some of the aggravating circumstances found by the Commission, namely the continuation of the agreement in secret and the use of violence. In addition, the applicant in Case T‑217/03 claims that a number of attenuating circumstances should be taken into account. The applicants submit that, by taking those aggravating and attenuating circumstances into account, the Commission made errors of assessment and of law and infringed the principle of proportionality. 1. Aggravating circumstances: continuation of the agreement in secret269 The applicants deny that the agreement of 24 October 2001 was continued in secret and therefore dispute the 20% increase in the fines on that basis. 270 The Commission maintains that the agreement was continued, in secret and without being in writing, beyond the expiry date of the written agreement of 24 October 2001. 271 It must be observed that on 26 November 2001 the Commission sent a letter of warning to the applicants, informing them that the facts which had come to its knowledge, including the conclusion of the agreement of 24 October 2001, indicated that the Community competition rules had been infringed and the applicants must put an end to this. The applicants replied to the Commission that the agreement would end on 30 November 2001 and that it would not be extended (see paragraph 15 above). However, the Court has found that, contrary to the applicants’ claim, they continued their agreement after 30 November 2001 secretly, in spite of the Commission’s warning and in breach of the assurances they had given the Commission (see paragraph 185 above). In such circumstances, the Court considers that the Commission was entitled to regard the continuation of the infringement as an aggravating circumstance (see, to that effect, LR AF 1998 v Commission, paragraph 324) and consequently to increase the fines by 20%. 272 This complaint must therefore be rejected.2. Aggravating circumstances: the use of violence273 The applicants in Case T-245/03 dispute the 30% increase in the fines imposed on FNSEA, FNB and JA by reason of the alleged use of violence by their members to obtain the slaughterers’ signature to the agreement of 24 October 2001 and to verify its subsequent implementation. 274 The applicants observe that, before 24 October 2001, the main aim of local actions was to persuade the French Government to put into effect a certain number of measures and to make public opinion aware that the farmers alone were suffering the consequences of the crisis. One of those actions had given rise to extremely serious acts of violence on 15 October 2001 in a context of despair. However, FNSEA did not call for blockades of abattoirs and even less for acts of violence. 275 Those acts became much more serious, particularly on 23 October 2001 in the west of France. In this context of extreme tension, the French Minister for Agriculture took the initiative in calling a meeting of the applicants and the slaughterers’ federations. The applicants infer from this that violence was not used by the national farmers’ federations to persuade the slaughterers to sign the agreement of 24 October 2001, but that it was thanks to the signing of that agreement that the violence came to an end on the ground. After the agreement of 24 October 2001 was signed, the situation was different, depending on the region, as the conduct of the representatives of the numerous local or department unions was not the same. In any case, the actions which took place in certain departments were within the framework of the union action organised by the local or department unions and therefore could not be attributed to the applicants. 276 Lastly, the applicants submit that the Commission must observe the principle that penalties are personal (Case C-279/98 P Cascades v Commission [2000] ECR I‑9693, paragraphs 78 and 79) and that therefore it could regard the violent acts as an aggravating circumstance only if it adduced specific proof that each of the three federations in question had actually incited its members to engage in such acts. 277 The Commission observes that the applicants do not deny that acts of violence took place, or that they were carried out by their indirect members. Those acts could be attributed to the applicants, which had advocated union mobilisation and had often been informed of the result of operations organised and perpetrated to ensure the implementation of the national agreement and which were sometimes called for by the applicants. Therefore the Commission was entitled to find that those acts constituted an aggravating circumstance against the applicants. 278 The contested decision finds, in recital 173, that the farmers who were members of the applicants in Case T‑245/03 used violence in order to compel the slaughterers’ federations to adopt the agreement of 24 October 2001 and that they used physical force to set up means of verifying that the agreement was being applied, such as illegal inspections to establish the place of origin of meat. 279 It is clear from the file that numerous actions were carried out in France by groups of farmers, inter alia at the premises of slaughterers, in order to compel observance of the minimum purchase prices of beef and to prevent beef imports. The file also shows that, in the course of some of those actions, acts of violence took place, including the blockading of abattoirs, destruction of meat, ransacking of undertakings and illegal inspections. 280 The applicants in Case T-245/03 admit that such acts took place. However, they deny that they can be imputed to them because they were not committed by their direct members but by members of local or department unions. They also assert that they never called for such acts of violence. 281 In that connection, it must be observed, first, that the applicants in Case T‑245/03, in particular FNSEA, FNB and JA, played a decisive role in laying down and organising the union action aiming to compel adherence to the minimum prices for certain categories of cows and the suspension of beef imports into France. That action was taken by numerous farmers’ unions and federations, direct or indirect members of the applicants, and also by groups of farmers who are not denied in many cases to have been members of those farmers’ unions. 282 Thus the minutes of a coordination meeting of the representatives of FNSEA, FNB, JA and FNPL held on 16 October 2001 indicate that FNB proposed ‘a producer price scale for the different categories of cull cows’. The minutes also indicate that the union strategy proposed for succeeding in imposing the price scale required, in particular, ‘checking the origin of meat, particularly in (the restaurant and catering sector)’ and the ‘mobilisation of all producers according to that objective, that is to say, refuse to sell below the price and/or report those who buy below the price’. Lastly, the minutes refer to the need to ‘mobilise the network according to this new strategy’. Likewise, a memorandum of 19 October 2001 from FNB to the beef sections calls for ‘continuing and intensifying the mobilisation of the beef sections according to the aims set out by the FNB bureau for obtaining a minimum price scale for cull cows’. It is stated that ‘strong union mobilisation (was) imperative in accordance with this objective’ and that its aim should be ‘to persuade undertakings to stick to that principle’, adding that ‘united and coordinated action by all producers (was) essential’. 283 Following the signing of the agreement of 24 October 2001, a memorandum of 25 October 2001 from the applicants in Case T‑245/03 to their members states: ‘each of us must now be very careful to ensure strict application of the agreement throughout the country’. In addition, another memorandum of 13 December 2001 asks: ‘all (members) of the FNSEA network to mobilise … to verify the prices paid by every slaughterer’ and, for that purpose, ‘to organise contacts with every abattoir situated in (their) department’. 284 The foregoing leads to the conclusion that the actions of local unions on the ground formed part of a strategy organised by the applicants. Several documents in the file show that some of the acts of violence at issue took place in the course of those actions. 285 For example, a press article of 17 October 2001 reports the destruction of refrigerators in an abattoir at Fougères, during which the farmers attacked the refrigerators with iron bars and burnt beef carcasses. The article notes that ‘the angry farmers (had) responded to a national call relayed by FNSEA and (JA).’ Similarly, the article states as follows: ‘The president of the FDSEA Mayenne is condemning imports of foreign meat. Behind him, carcasses and piles of cardboard boxes are being put on a giant brazier. “We found what we were looking for. The meat stored here was slaughtered in Holland, Austria, Germany or Italy”’. 286 In the same vein, a press report of 25 October 2001 refers to blockades of beef-processing factories, abattoirs and central purchasing agencies by French farmers’ unions on previous days. After observing that union officials had asserted that, in spite of lifting the blockades, ‘their troops remain mobilised, planning “inspections” of sites to verify whether the undertakings are observing the embargo’, the report reproduces the following statements by the FNSEA president outside a press conference: ‘We are going to meet them. If they do not understand, we have means of persuasion’. The report adds that ‘the French farmers (had) called upon … the French to boycott foreign beef, threatening reprisals against undertakings buying it after 29 October’. 287 Lastly, in an interview on 4 December 2001, the vice-president of FNB stated that, in order to be applied, the price scale required the mobilisation of farmers on the ground’, asserting that, if the prices offered by slaughterers did not conform with the agreed prices, the farmers would blockade the abattoirs in question. 288 Furthermore, the applicants must fail in their argument that the acts of violence were not used by the national farmers’ federations to persuade the slaughterers to sign the agreement of 24 October 2001, as the signing of that agreement rather enabled the violence to cease on the ground. First, the agreement expressly provides that the federations representing the slaughterers concluded the agreement ‘in return for the lifting of the blockade of abattoirs’. Second, as those acts often took place within the framework of the union action launched by the applicants in Case T‑245/03, they cannot justify the conclusion of such an agreement by the need to restore public order which was disturbed by that action. 289 In those circumstances, the Court considers that the Commission was entitled to regard the use of violence as an aggravating circumstance, attributable against FNSEA, FNB and JA, and to increase by 30% the fines imposed on them. 290 It follows that this complaint must be rejected.3. Failure to take account of attenuating circumstances 291 The applicant in Case T-217/03 submits that the Commission did not take account of all the attenuating circumstances provided for by the Guidelines. It states inter alia that the agreement had no effect on the market and that the infringement came to an end as soon as the Commission intervened. It also pleads its entirely passive role in the infringement, despite the statements by its representatives. Those factors should have led the Commission to exempt it from any fine. 292 The Commission replies that the applicant’s arguments are unfounded in fact and in law. 293 First, it must be observed that the argument that the applicant put an end to the infringement as soon as the Commission intervened has no factual basis. It has been found that, contrary to what the applicants claim, they continued their agreement after 30 November 2001, in spite of the Commission’s warning of 26 November 2001 and contrary to the assurances they gave the Commission (see paragraph 271 above). 294 Secondly, it must be observed that the statements by the president of the applicant in Case T-217/03 contradict the applicant’s argument that it played an entirely passive role in the infringement. In a letter of 9 November 2001 to the president of FNSEA, the president of the applicant in Case T‑217/03 makes the following statement: ‘The [applicant in Case T‑217/03] played an active role in the negotiations of 24 October which led to the agreement on a minimum price scale for cows. Although the discussion was difficult … it made rapid progress on the principle of a minimum price scale and I think, with my federation, greatly contributed towards it.’ In any case, the Commission reduced the applicant’s fine by 60%, taking account of two attenuating circumstances relating to the backing of the French Minister for Agriculture in favour of the conclusion of an agreement and the illegal blockading of establishments of the applicant’s members. To a certain extent, those attenuating circumstances are justified by the fact that the applicant did not play a leading or very active role in the infringement, its participation being explained, at least in part, by the particular circumstances of the case. 295 Thirdly and lastly, the Commission cannot be criticised for having failed to find an attenuating circumstance based on the alleged lack of effects of the disputed agreement on the markets. Contrary to what the applicant claims, the Court considers that the file does not show that the agreement caused no effects on the markets in question. In particular, the fact that the Commission was not able to quantify the actual effects of the agreement on prices and intra-Community trade (recital 167 of the contested decision) does not mean that it produced no effect at all. In any case, it must be observed that the appraisal of the effects of an infringement must be carried out, where appropriate, in the context of evaluating its impact on the market for the purpose of assessing its gravity, and not in relation to an appraisal of the individual conduct of each undertaking in order to assess any aggravating or attenuating circumstances (Cheil Jedang v Commission, paragraph 189). 296 It follows that, in the present case, the Commission was entitled to find that there were no attenuating circumstances in favour of the applicant in Case T‑217/03. 297 This complaint must therefore be rejected. 298 Consequently, this plea must be dismissed in its entirety.D – Fourth plea: infringement of Article 15(2) of Regulation No 17 in setting the amount of the fines 299 The applicants in Case T-245/03 begin with the submission that it is clear from Article 15(2) of Regulation No 17 that the Commission cannot impose a fine of more than EUR 1 million on an association of undertakings which has no turnover. That provision should be interpreted restrictively, in view of the seemingly punitive nature of the sanctions for which it provides. 300 The applicant in Case T-217/03 claims, for its part, that the upper limit of 10% of turnover applies to a fine of any amount, even if it is less than EUR 1 million. To allow a fine above that limit would be contrary to the principles of equal treatment and proportionality and would systematically penalise small undertakings. 301 The applicants submit that the fines imposed by the contested decision exceed the limit of 10% of their turnover. Thus, since the income of the applicant in Case T‑217/03 totalled EUR 1 726 864 in 2002, the fine of EUR 480 000 represents more than 25% of its turnover. With regard to the applicants in Case T‑245/03, their fines represent 200% of the annual membership fees of FNSEA, 240% of those of FNB, 80% of those of FNPL and 200% of those of JA. 302 In that connection, the applicants submit that the calculation for the purpose of ensuring that the limit was not exceeded should not have been made by taking into consideration the turnover of their respective members, whether direct or indirect. 303 It is clear from the case-law that the turnover of the members of associations of undertakings can be taken into account for the purpose of calculating the upper limit of 10% only if the association in question is able, by virtue of its internal rules, to bind its members (Case C‑298/98 P Finnboard v Commission [2000] ECR I-10157, paragraph 66; CB and Europay v Commission, paragraph 136; Case T‑29/92 SPO and Others v Commission [1995] ECR II-289, paragraph 385; SCK and FNK v Commission, paragraph 252; and Case T-338/94 Finnboard v Commission [1998] ECR II-1617, paragraph 270). Therefore the members’ turnover must be taken into account only if the disputed practice formed part of the object of the statutes of the association in question or if the statutes permit the members to be bound (see, to that effect, order in Case T‑18/96 R SCK and FNK v Commission [1996] ECR II-407, paragraphs 33 and 34). 304 The applicants maintain that they cannot bind their respective members. The applicant in Case T-217/03 claims that it is empowered merely to unite and defend the trade interests of its members and to represent them vis-à-vis public authorities and trade organisations and that it is not an association responsible for its members’ commercial interests or for concluding agreements on their behalf. Likewise, the applicants in Case T‑245/03 assert there is no legal provision and no stipulation in their respective rules which empowers them to undertake commitments on behalf of their members, much less bind the ‘members of the members affiliated to their members’, that is to say, the natural persons, farmers, who are members of local unions. 305 Lastly, the applicants in Case T-245/03 submit that, even if they were empowered under their internal rules to bind their members, the Commission could not in any case use the method of aggregating the members’ turnover to calculate the fines in the present case. The applicants are not autonomous federations, but have common members. Therefore it would have been necessary to take into account, for each federation, only the aggregate income of the farmers who are members of that federation only. 306 The Commission contends, first, that the argument that it cannot impose a fine of more than EUR 1 million on an association of undertakings which has no turnover is based on an incorrect reading of Article 15(2) of Regulation No 17. 307 It adds that, under that provision, it is required to examine adherence to the upper limit of 10% of turnover only where it imposes a fine exceeding EUR 1 million (Musique diffusion française and Others v Commission, paragraph 119). However, as the applicant in Case T-217/03 was fined EUR 480 000, the Commission could not have disregarded the upper limit in question so far as the applicant was concerned. 308 The Commission points out that Section 5(c) of the Guidelines provides that, in cases involving associations of undertakings, where it is found to be impossible to impose individual fines on member undertakings, an overall fine should be imposed on the association, equivalent to the total of individual fines which might have been imposed on each of the members of the association. To refer only to the budget of a federation would take no account at all of the actual weight of the parties to an agreement. 309 The Commission disputes the applicants’ interpretation of the case-law referred to in paragraph 303 above. It observes that, according to that case-law, the upper limit of 10% may be calculated by reference to the turnover of the members of an association of undertakings ‘at least where, by virtue of its internal rules, the association can bind its members’. The Commission submits that the words ‘at least where’ are not synonymous with ‘provided that’, but rather with ‘at least’ or ‘in any case’. That case-law does not rule out the possibility that other specific circumstances may justify taking account of the turnover of the members of an association. The Commission adds that in the present cases the agreement was concluded by the national federations for the benefit of their members. The applicants have no economic activity and therefore a purely commercial agreement would be of economic interest only to their members. The interests of the federations merge completely with those of their members, the applicants having no interest of their own in concluding the agreement. 310 The Commission argues that, in any event, the applicants in the present case were able to bind their members as contemplated in the abovementioned case-law. The Commission observes that the rules of an association need not necessarily mention that ability, as it may arise from a combination of various provisions. Likewise, the requirement to bind members does not imply power to bind them legally. However that may be, it is clear from examination of the applicants’ rules that they can bind their respective members. 311 According to the Commission, if the turnover of the applicants’ basic members is taken as the basis for calculation, the fines imposed in the present case did not exceed the 10% limit. First, with regard to the applicant in Case T‑217/03, according to the estimates in its letter of 27 January 2003, the fine appears completely marginal in relation to its members’ turnover. Second, regarding the applicants in Case T-245/03, the Commission points out that, taking account of the number of members of FNSEA declared by it, apportioning the total fines over the number of farmer members would give EUR 48.68 per member. Consequently, an average annual turnover of EUR 500 per member would be sufficient to avoid reaching the limit. Similarly, as the beef sector generated a turnover of some EUR 4.4 billion in 2002 and FNSEA stated that it represented 70% of French farmers, its members’ turnover should represent approximately EUR 3 billion. However, the total fines would reach the limit of 10% of the turnover of FNSEA beef farmers only if they generated turnover of less than EUR 160 million, which would represent 3.5% of the beef sector. Lastly, even taking account of the fact that farmers belong to more than one association, the calculation would not change. Accordingly, apportioning FNSEA’s fine over its 270 000 members who are not members of JA would give a figure of EUR 44.44 per farmer. 312 Article 15(2) of Regulation No 17 provides that the Commission may impose on undertakings or associations of undertakings fines from EUR 1 000 to EUR 1 000 000, or a sum in excess thereof but not exceeding 10% of the turnover in the preceding business year of each of the undertakings participating in the infringement. 313 Contrary to the argument of the applicants in Case T‑245/03, this provision does not prevent the Commission from imposing fines of more than EUR 1 000 000 on associations which allegedly have no turnover. According to settled case-law, the use of the general term ‘infringement’ in Article 15(2) of Regulation No 17, inasmuch as it covers without distinction agreements, concerted practices and decisions of associations of undertakings, indicates that the upper limits laid down in that provision apply in the same way to agreements and concerted practices as to decisions of associations of undertakings (Case T-338/94 Finnboard v Commission, paragraph 270, and case-law cited). As will be shown below, where an association of undertakings has no economic activity of its own or where its turnover does not reveal the influence it may have on the market, the Commission may, under certain conditions, take into consideration the turnover of its members for the purpose of calculating the maximum fine which may be imposed on it. 314 On the question whether the threshold of 10% of turnover applies only to fines exceeding EUR 1 million, it must be observed, as did the Court of Justice in the case of Musique diffusion française and Others v Commission, that the only express reference to the turnover of the undertaking in Article 15(2) of Regulation No 17 concerns the upper limit of a fine exceeding EUR 1 000 000 (paragraph 119). However, it must be observed that Section 5(a) of the Guidelines states that the final amount calculated according to the method laid down in Sections 1 to 3 may not ‘in any case’ exceed 10% of the worldwide turnover of the undertakings, as laid down by Article 15(2) of Regulation No 17. As the Commission must comply with the Guidelines, the conclusion must be that the limit of 10% of turnover should have been observed in the present case even with regard to the setting of fines of less than EUR 1 million, like those imposed on the applicant in Case T‑217/03 and on JA (see, to that effect, Joined Cases T‑71/03, T‑74/03, T‑87/03 and T‑91/03 Tokai Carbon and Others v Commission [2005] ECR II-10, paragraph 388). 315 It is common ground that, in the present case, the fines imposed on the applicants exceed 10% of their respective turnover, if ‘turnover’ is understood to mean the overall amount of their income, including the fees paid by their members and the aid they have received. However, the question arises as to whether, as the Commission submits, observance of that limit could nevertheless have been calculated in the present case by reference to the turnover of the applicants’ members. 316 It must be borne in mind that Section 5(c) of the Guidelines provides that, in cases involving associations of undertakings, decisions should, in so far as possible, be addressed to and fines imposed on the individual undertakings belonging to the association. However, where that is not possible (for example, where there are several thousand affiliated undertakings), an overall fine should be imposed on the association, equivalent to the total of individual fines which might have been imposed on each of the members of the association. 317 According to settled case-law, the upper limit of 10% of the turnover must be calculated by reference to the turnover achieved by each of the undertakings that are parties to the agreements and concerted practices or by all the members of the associations of undertakings, at least where the internal rules of the association empower it to bind its members. The possibility of taking into account for that purpose the turnover of all the undertakings that are members of an association is justified by the fact that, in determining the amount of the fines, account may be taken inter alia of such influence as the undertaking may have been able to exercise in the market, in particular by reason of its size and economic power, of which its turnover may give an indication, and the deterrent effect that fines must have. The influence which an association of undertakings may have had on the market depends not on its own turnover, which reveals neither its size nor its economic power, but rather on the turnover of its members which gives an indication of its size and economic power (CB and Europay v Commission, paragraphs 136 and 137; SPO and Others v Commission, paragraph 385; and Case T‑338/94 Finnboard v Commission, paragraph 270). 318 However, that case-law does not rule out the possibility that, in certain cases, the turnover of the members of an association could also be taken into account even if the association does not possess formal power to bind its members, there being no internal rules enabling it to do so. The Commission’s option of imposing fines of an amount appropriate to the infringements at issue could otherwise be jeopardised, as associations with a very small turnover but bringing together a large number of undertakings which could not be formally bound but which together have a substantial turnover could be sanctioned only by very small fines, even if the infringements for which they were responsible could have a considerable influence on the markets in question. Furthermore, this eventuality would run counter to the need to ensure that sanctions for infringements of the Community competition rules have a deterrent effect. 319 Therefore, the Court considers that other specific circumstances, beyond the existence of internal rules enabling the association to bind its members, may justify taking account of the aggregate turnover of the members of the association in question. This applies in particular to cases where an infringement on the part of an association involves its members’ activities and where the anti-competitive practices at issue are engaged in by the association directly for the benefit of its members and in cooperation with them, the association having no objective interests independent of those of its members. Although, in some of those situations, the Commission could impose individual fines on each of the member undertakings in addition to sanctioning the association in question, this could be particularly difficult or impossible where the number of members is very large. 320 In the present case, it must be noted, first, that the primary task of the applicant federations is to defend and to represent the interests of their basic members, namely farmers, cooperative associations and slaughterers. As far as the applicants in Case T-245/03 are concerned, the object of FNSEA is to represent and defend the interests of the farming profession and, for that purpose, it organises, coordinates and harmonises all the trade interests of farmers who are members of the basic unions (Article 8 of its statutes); FNB’s object is the organisation, representation and defence of the common interests of all producers of beef cattle (Article 7 of its statutes); FNPL’s task is the coordination, organisation, representation and defence of the interests of all producers of milk and dairy products (Article 6 of its statutes); lastly, JAs have the task of representing young farmers and defending their interests (Article 6 of its statutes). With regard to the applicant in Case T-217/03, under Article 2(1) of its statutes, it has the task of uniting and defending the trade interests of its members, including associations of cattle producers and their branches operating abattoirs. 321 Second, the disputed agreement did not relate to the activity of the applicants themselves but to that of their basic members. The applicants do not sell, buy, or import beef. Consequently, the undertaking to suspend imports and the establishment of a minimum price scale are not of direct concern to them. The measures laid down in the disputed agreement affected only the applicants’ basic members who were, furthermore, the ones who had to put them into practice. 322 Third, it must be observed that the disputed agreement was concluded directly for the benefit of the applicants’ basic members. With regard, first, to the farmers’ federations, the object of the agreement was to enable their members who are cattle farmers to sell their production and to obtain profitable prices so as to deal with the crisis in the sector at the material time. Second, with regard to the slaughterers’ federations, it must be noted that, although the measures adopted, that is to say, the fixing of minimum prices and the suspension or limitation of imports, may appear potentially contrary to the interests of slaughterers in so far as they could have entailed an increase in their operating costs, nevertheless the conclusion of the disputed agreement had the aim, in the context of the tensions in the present case, of enabling the slaughterers to carry on their business and to reduce to some extent the threats to it. Accordingly the disputed agreement expressly provides that the federations representing slaughterers concluded the agreement ‘in consideration for lifting the blockade of abattoirs’. 323 Fourth, it must be observed that, as already stated, the disputed agreement was put into effect by the conclusion of local agreements between department federations and local farmers’ unions, that is to say, the members of the applicants in Case T‑245/03, and the slaughterers (see paragraphs 112 to 115 above). In addition, specific actions on the part of groups of farmers monitored the implementation of the stipulations of the agreement. 324 In those circumstances, the Court considers that, in the present case, it was justified in taking into account the turnover of the applicants’ basic members for the purpose of calculating the 10% upper limit referred to in Article 15(2) of Regulation No 17. In particular, those turnover figures alone gave an adequate indication in the present case of the applicants’ economic strength and, therefore, of the influence which they were able to exert on the markets in question. 325 The option of taking into account the turnover of the applicants’ basic members must however be confined in the present case to those of their members who operated in the markets affected by the infringements sanctioned in the contested decision, namely the beef farmers, slaughterers and meat-processing undertakings. It must be borne in mind that, with the exception of FNB and, to a smaller extent, FNPL, only a small number of the applicants’ direct and indirect members had interests in the stock-farming sector, in the case of the applicants in Case T‑245/03, and in cattle-slaughtering in the case of the applicant in Case T‑217/03. In actual fact, the agreement did not relate to the activity of the applicants’ members who did not operate in the cattle markets, it was not concluded for their benefit and those members probably did not take part in implementing the contested measures. Consequently, their turnover figures cannot be used in the present case for calculating the 10% upper limit. 326 It is in the light of the foregoing considerations that it must be considered whether the fines imposed in the applicants in the contested decision exceeded the limit of 10% of turnover laid down by Article 15(2) of Regulation No 17. 327 Thus, so far as the applicant in Case T-217/03 is concerned, the estimates it gave in its letter of 27 January 2003 to the Commission show that its fine represented between 0.05 and 0.2% of the 2002 turnover of the cooperative slaughtering and processing undertakings which are its members, depending on whether or not those which are at the same time members of the applicant and of the Syndicat national de l’industrie des viandes (SNIV), the specialised union which brings together the large industrial undertakings in the sector, are taken into account. 328 For the applicants in Case T‑245/03, the Court has no exact figures relating to the turnover of stock farmers who are its members. At first during the administrative procedure, at the request of the Commission, and subsequently in the present action, at the request of the Court, the applicants claimed that they could not produce even approximate figures for the turnover of their farmer members. The applicants were likewise unable to inform the Court of the number of stock farmers who are basic members of FNSEA and of JA respectively and the applicants claimed that FNB and FNPL, strictly speaking, have no basic members. 329 However, the applicants in Case T-245/03 stated that in 2002 the turnover in France from production in the sector of adult cattle was EUR 4 552 billion and that the turnover from the slaughter of adult cattle was EUR 3 430 billion. Taking account of the smaller of those two figures, it must be concluded that the applicants’ fines do not exceed the upper limit of 10% of the turnover of their stock farmer members if they accounted for at least 3.5% in the case of FNSEA, 0.42% in the case of FNB, 0.18% in the case of JA and 0.42% in the case of FNPL of the abovementioned overall turnover. None of the applicants denies that its members account for a significant proportion of the turnover from the slaughter of adult cattle in France. In that connection the Court points out that, in reply to a question put by the President of the Court of First Instance, the applicants in Case T‑245/03 admitted that the members of FNSEA could represent approximately 50% of the 240 000 farmers with more than five adult cattle in France (order in Case T-245/03 R FNSEA and Others v Commission [2004] ECR II-271, paragraph 89). 330 The Court considers that, in those circumstances, it has been sufficiently established that the fines imposed on the applicants in Case T-245/03 do not exceed the upper limit of 10% of the turnover of their respective members. 331 This finding cannot be undermined by the applicants’ argument that, as they have common members, the Commission ought to have taken into account, for each federation, only the aggregate income of the farmers who are members of that federation alone. In actual fact, as the applicants point out, all the farmers who are direct or indirect members of FNB, FNPL or JA are at the same time indirect members of FNSEA. However, for the purpose of verifying observance of the upper limit of 10% of turnover, it is sufficient in the present case if the aggregate total of the fines imposed on the four applicants in Case T-245/03 is below 10% of the turnover of the farmers who are basic members of FNSEA, the federation which brings together the three other applicant federations. For that limit not to be exceeded in the present case, it is sufficient if the turnover of the farmers who are basic members of FNSEA represents at least 4.52% of the turnover from the slaughter of adult cattle in France. For the reasons given above, the Court considers that that is the case here. 332 Lastly, the applicants in Case T-245/03 cannot plead that FNB and FNPL have, strictly speaking, no members in so far as no farmer joins them, whether directly or indirectly. It must be observed that those federations receive membership fees from the department federations (by reference to the total number of cattle in the department and the litres of milk produced there). The department federations bring together the local unions to which the farmers belong. Therefore, the beef farmers may, for the purpose of calculating the 10% limit of turnover, be regarded as basic members of FNB and FNPL, in the same way as they are deemed to be basic members of FNSEA. 333 In the light of all the foregoing, the Court finds that the fines imposed on the applicants in the contested decision do not exceed the upper limit of 10% of the turnover of their respective members. 334 Therefore, this plea must be dismissed. E – Fifth plea: infringement of the rule against cumulation of penalties335 The applicants point out that the rule against cumulation of penalties or the principle ne bis in idem prevents a person from being penalised more than once for the same offence. That principle, which is laid down in Article 4 of Protocol No 7 to the ECHR, is consistently applied in Community competition law (Case 7/72 Boehringer Mannheim v Commission [1972] ECR 1281, paragraph 3) and is a fundamental principle of Community law (Joined Cases C‑238/99 P, C‑244/99 P, C-245/99 P, C-247/99 P, C‑250/99 P to C‑252/99 P and C‑254/99 P Limburgse Vinyl Maatschappij and Others v Commission [2002] ECR I‑8375, paragraph 59). 336 The applicants submit that the contested decision penalised the same persons more than once for the same infringement in so far as FNB, JA and FNPL are members of FNSEA. The natural persons (beef farmers) who belong to local unions could indirectly belong to FNSEA and to FNB, as well as to FNPL (if they have dairy cows) and to JA (if they are under 35 years of age). Likewise, certain members of the applicant in Case T-217/03 are also members of FNSEA. Consequently, a number of fines have been imposed on those persons, although the Commission has only been able to find – indirectly – a single infringement. The applicants dispute the Commission’s argument that the principle of ne bis in idem does not apply in the present case because there is only one procedure. The parallel procedures initiated by the Commission against the applicants led to the repetition of the penalties imposed on them. In addition, the application of that principle cannot be limited to situations where proceedings are brought against undertakings for the same infringement by more than one competition authority. 337 Furthermore, the applicants in Case T‑245/03 state that, in setting the basic amount of the fines, the Commission proceeded on the basis of the ratio between the total annual fees received by FNSEA and those received by each of the other relevant federations. The ratios used are inaccurate however, in that FNB and FNPL repay to FNSEA a portion of the annual fees received by them (namely, in 2001, approximately 10%, corresponding to EUR 60 979, in the case of FNB, and 15%, representing EUR 181 670, in the case of FNPL). The ratios used should therefore be reduced accordingly. 338 The French Government observes that it cannot be disputed that, in the present case, natural persons are members of different federations, even if only by reason of the affiliation of certain federations to FNSEA and therefore those persons have been fined twice for one and the same infringement of competition law. That amounts to imposing an excessive fine on them and is contrary to the principle of proportionality. 339 The Commission observes that, in Community case-law, the principle ne bis in idem applies in cases where an undertaking which has borne (or may bear) a penalty imposed at Community level for infringements of the competition rules has also borne (or may bear) a penalty in other proceedings in a non-member country or in a Member State (see, to that effect, Case 14/68 Wilhelm and Others [1969] ECR 1, and Boehringer Mannheim v Commission, cited above). According to the Commission, the mere fact that the actions complained of are identical is not sufficient to justify the application of that principle, because it is also necessary for the parties to be identical. In the present case, proceedings were initiated against each federation for its own participation in the infringement, each federation being necessary, by virtue of its own influence on the market, for the agreement to be effective. The fact that certain persons are members of more than one of the federations does not diminish the fact that each of the applicants took part in the agreement. Lastly, the proportionality of the fines imposed on several federations with common members is ensured by the 10% limit of turnover, but cannot mean that those members must be exempt. 340 It is clear from the case-law that the principle ne bis in idem is a general principle of Community law which is upheld by the Community Courts. In the field of Community competition law, the principle precludes an undertaking from being sanctioned by the Commission or made the defendant to proceedings brought by the Commission a second time in respect of anti-competitive conduct for which it has already been penalised or of which it has been exonerated by a previous decision of the Commission that is not amenable to challenge (Case T‑224/00 Archer Daniels Midland and Archer Daniels Midland Ingredients v Commission [2003] ECR II-2597, paragraphs 85 and 86, and Tokai Carbon and Others v Commission, paragraphs 130 and 131). The application of the principle ne bis in idem is subject to the threefold condition of identity of the facts, unity of offender and unity of the legal interest protected. Under that principle, therefore, the same person cannot be sanctioned more than once for a single unlawful course of conduct designed to protect the same legal asset (Joined Cases C‑204/00 P, C‑205/00 P, C‑211/00 P, C‑213/00 P, C‑217/00 P and C‑219/00 P Aalborg Portlandand Others v Commission [2004] ECR I‑123, paragraph 338). 341 In the present case, the Commission fined the applicant federations by reason of the participation and the degree of responsibility of each one of them in the infringement (see recital 169 and Articles 1 and 3 of the contested decision). In actual fact, all the applicants took part, albeit with different degrees of involvement and with different consequences, in the infringements penalised by the contested decision. In particular, all the applicant federations signed the agreement of 24 October 2001. Therefore, the Commission was entitled to fine each federation which took part in the disputed agreement on the basis of the individual role played by each one in the signature and implementation of the agreement and of the attenuating and aggravating circumstances relevant to each of them. 342 Contrary to the submissions of the applicants in Case T-245/03, this finding cannot be undermined by the fact that FNB, FNPL and JA are members of FNSEA. The fact is that those federations have independent legal personality and separate budgets and their objects do not always coincide. They thus carry out their respective union activities in defence of their own specific interests (see paragraph 320 above). The fact that those federations to a large extent coordinated their actions and those of their respective members in the present case in the pursuit of common aims does not diminish the respective responsibility of each federation for the infringement. 343 Furthermore, contrary to what the applicants appear to argue, the contested decision did not impose penalties on their basic members, whether direct or indirect. Taking into account the turnover of the members of an association of undertakings in determining the 10% limit does not mean that a fine has been imposed on them or even that the association in question has an obligation to recover the amount of the fine from its members (CB and Europay v Commission, paragraph 139). As the individual farmers who are indirect members of the applicant federations in Case T‑245/03 were not penalised in the contested decision, it cannot be concluded that the fact that the basic members of FNB, FNPL and JA are also members of FNSEA prevented the Commission from penalising each of those federations individually. It is all the more irrelevant that some of the members of the applicant in Case T-217/03 are also members of FNSEA. 344 It follows that the offenders in the present case are not identical, as the contested decision does not penalise the same entities more than once or the same persons for the same acts. Therefore, it must be concluded that the principle ne bis in idem was not infringed. Likewise, as the applicants’ members, whether direct or indirect, were not fined twice for one and the same infringement, contrary to the French Government’s argument, nor was the principle of proportionality infringed. 345 Moreover, the applicants in Case T-245/03 must fail in their argument that, when setting the basic amount of the fines, the Commission wrongly calculated the ratio between the annual membership fees received by FNSEA and the fees paid to FNB and FNPL. In particular, contrary to the applicants’ argument, the Commission was not required to adjust the FNB and FNPL figures by subtracting from them the fees paid by those federations to FNSEA. As the fees were taken into account as an objective indication of the relative size of each federation, the Commission was right to take the view that the relevant figures were their respective overall fees, which reflect the degree of representativeness of each applicant. 346 Consequently, this plea must be dismissed.F – Sixth plea: manifest error of assessment in taking account of the circumstances provided for by Section 5(b) of the Guidelines 347 The applicant in Case T-217/03 asserts that the 60% reduction made by the Commission pursuant to Section 5(b) of the Guidelines to take account of the particular context of the beef crisis should have been applied to the basic amount of the fine and not to the figure resulting after the increases in and deductions from the basic amount for aggravating and attenuating circumstances respectively. There is no justification for derogating from the principle for determining fines, set out in Section 2 of the Guidelines, consisting in calculating a basic amount and increasing or reducing it by a percentage. In the alternative, the applicant claims that the Commission ought to have taken the economic context into account as an attenuating circumstance, as it has done in other cases. 348 The applicants in Case T-245/03 submit, for their part, that the Commission, in applying Section 5(b) of the Guidelines, did not draw the appropriate conclusions from the following circumstances, set out in the contested decision (see recitals 181 and 184): first, it is not the applicants’ object to make a profit; second, the specific characteristics of the agricultural product in question; third, the fact that the Commission penalised for the first time an agreement concluded entirely between federations and which relates to a basic agricultural product and involves two links in the production chain; fourth, the specific context of exceptional crisis. The applicants observe in that connection that, in a decision of 3 February 2003, the United Kingdom competition authorities did not fine a Northern Ireland beef producers’ association which concluded a price agreement, in view of the context in which the agreement was made, marked also by the ‘mad-cow’ crisis and the foot-and-mouth epidemic. The applicants note that, in the present case, such factors did not cause the Commission to make an adequate adjustment to the fines, as a result of which the ultimate amounts remain exorbitant. 349 The Commission contends that the argument of the applicant in Case T‑217/03 concerning the method of calculating the reduction relating to the circumstances provided for in Section 5(b) of the Guidelines disregards both the letter and the spirit of the Guidelines. The complaint that the economic context ought to have been taken into account as an attenuating circumstance is a new plea and is therefore inadmissible. As for the submissions of the applicants in Case T‑245/03, the Commission observes that the 60% reduction in the fine allowed in the present case has no equivalent in its past decisions. 350 Section 5(b) of the Guidelines reads as follows:‘Depending on the circumstances, account should be taken, once the above calculations have been made, of certain objective factors such as a specific economic context, any economic or financial benefit derived by the offenders …, the specific characteristics of the undertakings in question and their real ability to pay in a specific social context, and the fines should be adapted accordingly.’ 351 In the present case, the Commission took account of the specific economic context, marked in particular by the serious crisis in the beef sector, and reduced by 60% the amount resulting from an increase or a reduction in the basic amount of the fines by reason of the aggravating or attenuating circumstances taken into consideration. 352 First, the argument of the applicant in Case T-217/03 that the abovementioned 60% reduction ought to have been applied to the basic amount of the fine and not the amount as already increased and reduced by reason of aggravating and attenuating circumstances must be dismissed. The Guidelines deal with aggravating and attenuating circumstances in Sections 2 and 3 respectively, which state that ‘the basic amount will be increased’ and ‘the basic amount will be reduced’. Section 5(b), by contrast, provides that other circumstances are to be taken into consideration ‘once the above calculations have been made’ and provides that ‘the fines should be adjusted accordingly’. It must therefore be concluded that the calculation method used by the Commission complied with the provisions of the Guidelines. 353 Second, with regard to the alternative submission of the applicant in Case T‑217/03, to the effect that the economic context ought to have been taken into account as an attenuating circumstance, it must be pointed out that this was not raised at the reply stage and is therefore a new plea which must be dismissed pursuant to Article 48(2) of the Rules of Procedure. In any case, it must be observed that Section 5(b) of the Guidelines refers expressly to taking account of the specific economic context of a case; that criterion is not, however, expressly mentioned in Section 3 of the Guidelines, which deals with attenuating circumstances. Consequently, it must be found that the Commission did not err in taking into consideration the specific economic context pursuant to Section 5(b) of the Guidelines and not by way of attenuating circumstances, as the applicant wished. 354 Third, regarding the reference to the decision of United Kingdom competition authorities of 3 February 2003, suffice it is to note that, in assessing the circumstances of the present case, the Commission is not bound by decisions of national authorities in other, somewhat similar cases. 355 Fourth and lastly, it is necessary to reply to the applicants’ arguments that the Commission did not draw all the appropriate inferences from the circumstances of the present case and ought to have made an even greater reduction in the fines pursuant to Section 5(b) of the Guidelines. 356 It must be observed that, in the contested decision, the Commission, in applying the abovementioned provision, took into account the fact that the contested decision was the first to penalise an agreement concluded entirely between union federations relating to a basic agricultural product and involving two links in the production chain, as well as the specific economic context of the case, which went beyond a mere fall in prices or the presence of a well-known disease. The economic context was characterised by the following factors: first, the drop in the consumption of beef as a result of the ‘mad-cow’ crisis, which affected a sector already in a difficult situation; second, intervention measures taken by the Community and national authorities aimed at restoring balance in the beef market; third, the loss of consumer confidence, linked to the fear of ‘mad cow’ disease; fourth, the situation of farmers who, despite Community adjustment measures applied by France, were faced with slaughterhouse entry prices for cows which were falling again, while consumer prices remained stable (recitals 181 to 185 of the contested decision). 357 Having regard to all those circumstances, the Commission decided, pursuant to Section 5(b) of the Guidelines, to allow the applicants a 60% reduction in the fines. 358 It must be borne in mind that, while the Commission has discretion in setting the amount of fines, the Court has, by virtue of Article 17 of Regulation No 17, unlimited jurisdiction within the meaning of Article 229 EC to review decisions whereby the Commission has fixed a fine and may, consequently, cancel, reduce or increase the fine imposed. 359 In the present case, the Court considers that the different consequences identified and taken into account by the Commission in the contested decision pursuant to section 5(b) of the Guidelines are very exceptional. Their exceptional nature arises from the particular characteristics of the applicants, their functions and their respective spheres of activity, as well as from the circumstances inherent in the economic context of this particular case. 360 The Court considers that the 60% reduction in the fines decided upon by the Commission pursuant to Section 5(b) of the Guidelines, although substantial, does not take sufficient account of all those exceptional circumstances. 361 Therefore, to take full and proper account of all the circumstances identified by the Commission in the contested decision and in consideration of the fact that this is the first time that the Commission has sanctioned this type of anti-competitive conduct, the Court, asserting its unlimited jurisdiction, considers it appropriate to set at 70% the reduction to be allowed in the applicants’ fines pursuant to Section 5(b) of the Guidelines. III – Method of calculation and final amount of fine362 In paragraphs 241 and 245 above, the Court has found that, in the contested decision, the Commission failed to state reasons in that it did not state that it had used the turnover of the applicants’ basic members for the purpose of ensuring that the fines did not exceed the upper limit of 10% provided for by Article 15(2) of Regulation No 17; nor did it set out the circumstances which enabled it to take account of those aggregate turnover figures. However, it must be observed that, in paragraphs 324 and 325 above, the Court has found that, in the present case, the Commission was entitled to take into account the turnover of the applicants’ basic members for the purpose of calculating the upper limit, provided that they operated in the markets affected by the infringements sanctioned in the contested decision. 363 The Court considers that, in those circumstances, the failure to state reasons should not entail the annulment of the contested decision as that could only lead to the adoption of another decision identical in substance to the decision annulled (see, to that effect, Case T‑16/02 Audi v OHIM (TDI) [2003] ECR II-5167, paragraph 97), or any alteration in the amount of the fines. 364 However, as appears from paragraph 361 above, the fines imposed on the applicants should be reduced by 70% pursuant to Section 5(b) of the Guidelines, instead of the 60% reduction applied by the Commission. Accordingly, the amounts of the fines are set at: – EUR 360 000 for the applicant in Case T‑217/03; – EUR 9 000 000 for FNSEA;– EUR 1 080 000 for FNB;– EUR 450 000 for JA; – EUR 1 080 000 for FNPL. Costs365 Under Article 87(3) of the Rules of Procedure, where each party succeeds on some and fails on other heads, the Court may order that the costs be shared or that each party bear its own costs. In the present case, it is appropriate to order the applicants to bear their own costs in the main proceedings and to pay three‑quarters of the costs incurred by the Commission in those proceedings. The Commission is to bear one-quarter of its own costs in the main proceedings and all costs in the proceedings for interim measures. 366 Under Article 87(4) of the Rules of Procedure, the French Republic, which intervened in the proceedings, is to bear its own costs. On those grounds,THE COURT OF FIRST INSTANCE (First Chamber)hereby:1. Sets the amount of the fine imposed on the Fédération nationale de la coopération bétail et viande, the applicant in Case T-217/03, at EUR 360 000;2. Sets the amount of the fines imposed on the applicants in Case T-245/03 as follows: EUR 9 000 000 for the Fédération nationale des syndicats d’exploitants agricoles, EUR 1 080 000 for the Fédération nationale bovine, EUR 1 080 000 for the Fédération nationale des producteurs de lait and EUR 450 000 for Jeunes agriculteurs;3. Dismisses the remainder of the application;4. Orders the applicants to bear their own costs in the main proceedings and to pay three-quarters of those of the Commission in the main proceedings;5. Orders the Commission to bear one-quarter of its costs in the main proceedings and to pay all the costs in the proceedings for interim measures;6. Orders the French Republic to bear its own costs.García-Valdecasas Cooke LabuckaDelivered in open court in Luxembourg on 13 December 2006.E. Coulon J.D. CookeRegistrar PresidentTable of contentsLegal contextFactsI – Second ‘mad cow’ crisisII – Conclusion of the contested agreements and administrative procedure before the CommissionIII – The contested decisionProcedure and forms of order soughtMerits of the caseI – The claims for annulment of the contested decisionA – First plea in law: manifest errors of assessment and errors of law in the assessment of the conditions required for the application of Article 81(1) EC 1. Description of the applicants as associations of undertakingsa) Arguments of the partiesb) Findings of the Court2. No appreciable effect on trade between Member States3. No restriction of competition4. Classification of trade union activitiesB – Second plea in law: manifest errors of assessment and errors of law in assessing the extent and duration of the infringement1. Preliminary questionsa) The taking into account of local agreementsArguments of the partiesFindings of the Courtb) Organisation, selection, quotation and interpretation of the documents in the file2. The attribution to the applicants of an agreement relating to imports3. Attribution to the applicants of a secret verbal agreement after the end of November 2001b) Findings of the CourtPreparation for the renewal of the agreementRenewal of the agreement at the meetings of 29 November and 5 December 2001– Meeting of 29 November 2001– Meeting of 5 December 2001Implementation of the agreement after the end of November 2001FindingsC – Third plea in law: non-application of the exception provided for by Regulation No 261. Arguments of the parties2. Findings of the CourtD – Fourth plea: infringement of the rights of the defence3. Arguments of the parties2. Findings of the CourtE – Fifth plea in law: failure to state reasons1. Arguments of the partiesII – Submissions on the cancellation or reduction of the fineA – First plea: unlawfulness of the GuidelinesB – Second plea: infringement of the principle of proportionality, manifest error of assessment and error of law in determining the gravity of the infringement C – Third plea: errors of assessment and of law and infringement of the principle of proportionality in taking account of aggravating and attenuating circumstances 1. Aggravating circumstances: continuation of the agreement in secret2. Aggravating circumstances: the use of violence3. Failure to take account of attenuating circumstancesD – Fourth plea: infringement of Article 15(2) of Regulation No 17 in setting the amount of the finesE – Fifth plea: infringement of the rule against cumulation of penaltiesF – Sixth plea: manifest error of assessment in taking account of the circumstances provided for by Section 5(b) of the GuidelinesIII – Method of calculation and final amount of fineCosts* Language of the case: French. | a0ca9-599a68c-4d60 | EN |
THE COURT DISMISSES THE ACTION BROUGHT BY GERMANY CHALLENGING THE DIRECTIVE ON TOBACCO ADVERTISING | Federal Republic of GermanyvEuropean ParliamentandCouncil of the European Union(Action for annulment – Approximation of laws – Directive 2003/33/EC – Advertising and sponsorship in respect of tobacco products – Annulment of Articles 3 and 4 – Choice of legal basis – Principle of proportionality)Summary of the Judgment1. Approximation of laws – Advertising and sponsorship in respect of tobacco products – Directive 2003/33(European Parliament and Council Directive 2003/33, Arts 3, 4 and 8)2. Approximation of laws – Advertising and sponsorship in respect of tobacco products – Directive 2003/33(European Parliament and Council Directive 2003/33, Art. 3(1))3. Approximation of laws – Measures aimed at improving the functioning of the internal market – Legal basis – Article 95 EC(Arts 95 EC and 152 EC)4. Approximation of laws – Advertising and sponsorship in respect of tobacco products – Directive 2003/33(European Parliament and Council Directive 2003/33, Arts 3 and 4)1. The prohibition on the advertising and sponsorship in respect of tobacco products in printed media, in information society services and in radio broadcasts, provided for in Articles 3 and 4 of Directive 2003/33 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products, could be adopted on the basis of Article 95 EC. In the light, first, of the press and other printed media products, on the date when Directive 2003/33 was adopted, disparities existed between the Member States’ national laws governing the advertising of tobacco products, and those disparities were such as to impede the free movement of goods and the freedom to provide services. The same finding must be made with regard to the advertising of tobacco products in radio broadcasts and information society services, and in respect of sponsorship by tobacco companies of radio broadcasts. Many Member States had already legislated in those areas or were preparing to do so. Given the increasing public awareness of the harm caused to health by the consumption of tobacco products, it was likely that new barriers to trade or to the freedom to provide services were going to emerge as a result of the adoption of new rules reflecting that development and intended to discourage more effectively the consumption of tobacco products. Moreover, Articles 3 and 4 of Directive 2003/33 do in fact have as their object the improvement of the conditions for the functioning of the internal market. The prohibition on advertising in respect of tobacco products in the press and other printed media, laid down in Article 3(1) of that directive, is intended to prevent intra-Community trade in press products from being impeded by the national rules of one or other Member State. Articles 3(2) and 4(1) of the Directive, which prohibit the advertising of tobacco products in information society services and in radio broadcasting, seek to promote freedom to broadcast by radio and the free movement of communications which fall within information society services. Likewise, in prohibiting the sponsorship of radio programmes by undertakings whose principal activity is the manufacture or sale of tobacco products, Article 4(2) of the Directive seeks to prevent the freedom to provide services from being impeded by the national rules of one or other Member State. Moreover, the objective of the Directive, aimed at improving the conditions of functioning of the internal market, is expressed in Article 8, which provides that Member States may not prohibit or restrict the free movement of products or services which comply with that directive. Lastly, the prohibition laid down in Articles 3 and 4 of the Directive is limited to various forms of advertising and sponsorship and does not amount to a general ban. (see paras 55, 61, 65, 71, 73-78, 87-88)2. The term ‘printed publications’ used in Article 3(1) of Directive 2003/33 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products covers only publications such as newspapers, periodicals and magazines; other types of publications do not come within the scope of application of the prohibition on advertising laid down in that provision. This interpretation is borne out by the fourth recital in the preamble to the Directive, which notes that the circulation in the internal market of publications such as periodicals, newspapers and magazines is subject to an appreciable risk of obstacles to free movement as a result of Member States’ laws, regulations and administrative provisions which prohibit or regulate tobacco advertising in those media. The same recital states that, in order to ensure free circulation throughout the internal market for all such media, it is necessary to limit tobacco advertising therein to those magazines and periodicals which are not intended for the general public. (see paras 84-86)3. Provided that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the Community legislature cannot be prevented from relying on that legal basis on the ground that public health protection is a decisive factor in the choices to be made. Article 95(3) EC explicitly requires that, in achieving harmonisation, a high level of protection of human health should be guaranteed. Moreover, the first subparagraph of Article 152(1) EC provides that a high level of human health protection is to be ensured in the definition and implementation of all Community policies and activities. Lastly, while it is true that Article 152(4)(c) EC excludes any harmonisation of laws and regulations of the Member States designed to protect and improve human health, that provision does not mean, however, that harmonising measures adopted on the basis of other provisions of the Treaty cannot have any impact on the protection of human health. (see paras 92-95)4. Articles 3 and 4 of Directive 2003/33 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products do not infringe the principle of proportionality, since they may be regarded as measures appropriate for achieving the objective that they pursue, namely the harmonisation of the law of Member States on the advertising of tobacco products. Nor, given the obligation on the Community legislature to ensure a high level of human health protection, do they go beyond what is necessary in order to achieve that objective. First, the prohibition on the advertising of tobacco products in printed media which is laid down in Article 3 of the Directive does not cover publications intended for professionals in the tobacco trade or published in third countries and not intended principally for the Community market. Furthermore, it was not possible for the Community legislature to adopt, as a less restrictive measure, a prohibition on advertising from which publications intended for a local or regional market would be exempted, given that such an exception would have rendered the field of application of the prohibition on the advertising of tobacco products unsure and uncertain, which would have prevented the Directive from achieving its objective of harmonisation of national law on the advertising of tobacco products. Secondly, the prohibition on the advertising of tobacco products in information society services and in radio broadcasts, as laid down in Articles 3(2) and 4(1) of the Directive, cannot be regarded as disproportionate and can, moreover, be justified by the concern to prevent circumvention, made possible through media convergence, of the prohibition applicable to printed media through increased recourse to those two media. Thirdly, as regards the prohibition on sponsorship of radio programmes which is laid down in Article 4(2) of the Directive, it is not apparent from the preamble to that directive that in not limiting such a measure to activities or events with cross-border effects, the Community legislature exceeded the limits of the discretion available to it in this area. Lastly, nor do the measures laid down in Articles 3 and 4 of the Directive prohibiting advertising and sponsorship infringe the fundamental right of freedom of expression recognised by Article 10 of the European Convention on Human Rights. Even assuming that those measures have the effect of weakening freedom of expression indirectly, journalistic freedom of expression, as such, remains unimpaired and the editorial contributions of journalists are therefore not affected. (see paras 146-152, 156-158)JUDGMENT OF THE COURT (Grand Chamber)12 December 2006 (*) (Action for annulment – Approximation of laws – Directive 2003/33/EC – Advertising and sponsorship in respect of tobacco products – Annulment of Articles 3 and 4 – Choice of legal basis – Articles 95 EC and 152 EC – Principle of proportionality)In Case C-380/03,ACTION for annulment under Article 230 EC, brought on 9 September 2003,Federal Republic of Germany, represented by M. Lumma, W.-D. Plessing and C.-D. Quassowski, acting as Agents, and J. Sedemund, Rechtsanwalt, applicant,European Parliament, represented by R. Passos, E. Waldherr and U. Rösslein, acting as Agents, with an address for service in Luxembourg, Council of the European Union, represented by E. Karlsson and J.-P. Hix, acting as Agents, defendants,supported by:Kingdom of Spain, represented by L. Fraguas Gadea and M. Rodríguez Cárcamo, acting as Agents, with an address for service in Luxembourg, Republic of Finland, represented by A. Guimaraes-Purokoski and E. Bygglin, acting as Agents, with an address for service in Luxembourg, French Republic, represented by G. de Bergues and R. Loosli-Surrans, acting as Agents, with an address for service in Luxembourg, Commission of the European Communities, represented by M.-J. Jonczy, L. Pignataro-Nolin and F. Hoffmeister, acting as Agents, with an address for service in Luxembourg, interveners,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, K. Lenaerts, P. Kūris and E. Juhász, Presidents of Chambers, J.N. Cunha Rodrigues (Rapporteur), R. Silva de Lapuerta, K. Schiemann, G. Arestis, A. Borg Barthet, M. Ilešič and J. Malenovský, Judges, Advocate General: P. Léger,Registrar: K. Sztranc-Sławiczek, Administrator,having regard to the written procedure and further to the hearing on 6 December 2005,after hearing the Opinion of the Advocate General at the sitting on 13 June 2006,gives the followingJudgment1 By its application, the Federal Republic of Germany (‘the applicant’) seeks the annulment of Articles 3 and 4 of Directive 2003/33/EC of the European Parliament and of the Council of 26 May 2003 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products (OJ 2003 L 152, p. 16; ‘the Directive’). 2 The Directive was adopted by the European Parliament and the Council of the European Union following the annulment by the Court (judgment of 5 October 2000 in Case C‑376/98 Germany v Parliament and Council [2000] ECR I-8419; ‘the tobacco advertising judgment’) of Directive 98/43/EC of the European Parliament and of the Council of 6 July 1998 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products (OJ 1998 L 213, p. 9). Legal context3 The Directive was adopted on the same legal bases as Directive 98/43. Like the latter, it regulates advertising and sponsorship in respect of tobacco products in media other than television. 4 The first recital in the preamble to the Directive states that certain obstacles to the free movement of products and services resulting from differences in the relevant legislation of the Member States have already been encountered in the case of press advertising and that distortions of competition arising in the same circumstances have also been noted as regards the sponsorship of certain major sporting and cultural events. 5 The fourth recital in the preamble to the Directive states: ‘The circulation in the internal market of publications such as periodicals, newspapers and magazines is subject to an appreciable risk of obstacles to free movement as a result of Member States’ laws, regulations and administrative provisions which prohibit or regulate tobacco advertising in those media. In order to ensure free circulation throughout the internal market for all such media, it is necessary to limit tobacco advertising therein to those magazines and periodicals which are not intended for the general public such as publications intended exclusively for professionals in the tobacco trade and to publications printed and published in third countries, that are not principally intended for the Community market.’ 6 The fifth recital is worded as follows: ‘The laws, regulations and administrative provisions of the Member States relating to certain types of sponsorship for the benefit of tobacco products with cross-border effects give rise to an appreciable risk of distortion of the conditions of competition for this activity within the internal market. In order to eliminate these distortions, it is necessary to prohibit such sponsorship only for those activities or events with cross-border effects which otherwise may be a means of circumventing the restrictions placed on direct forms of advertising, without regulating sponsorship on a purely national level.’ 7 The sixth recital states: ‘Use of information society services is a means of advertising tobacco products which is increasing as public consumption and access to such services increases. Such services, as well as radio broadcasting, which may also be transmitted via information society services, are particularly attractive and accessible to young consumers. Tobacco advertising by both these media has, by its very nature, a cross-border character, and should be regulated at Community level.’ 8 Article 3 of the Directive provides: ‘1. Advertising in the press and other printed publications shall be limited to publications intended exclusively for professionals in the tobacco trade and to publications which are printed and published in third countries, where those publications are not principally intended for the Community market. Other advertising in the press and other printed publications shall be prohibited.2. Advertising that is not permitted in the press and other printed publications shall not be permitted in information society services.’ 9 Article 4 of the Directive states: ‘1. All forms of radio advertising for tobacco products shall be prohibited.2. Radio programmes shall not be sponsored by undertakings whose principal activity is the manufacture or sale of tobacco products.’10 Article 5 of the Directive is worded as follows: ‘1. Sponsorship of events or activities involving or taking place in several Member States or otherwise having cross-border effects shall be prohibited. 2. Any free distribution of tobacco products in the context of the sponsorship of the events referred to in paragraph 1 having the purpose or the direct or indirect effect of promoting such products shall be prohibited.’ 11 Article 8 of the Directive provides: ‘Member States shall not prohibit or restrict the free movement of products or services which comply with this Directive.’ Forms of order sought 12 The applicant claims that the Court should: – annul Articles 3 and 4 of the Directive;– order the defendants to pay the costs.13 The Parliament and the Council contend that the Court should: – dismiss the action; – order the applicant to pay the costs.14 The Parliament contends in the alternative that, were the Court to intend to annul the Directive because of a formal breach of the duty to state reasons or of the codecision procedure, it should order in accordance with Article 231 EC that the effects of the annulled Directive be preserved until new legislation has been adopted in the field. 15 By orders of the President of the Court of 6 January and 2 March 2004, the Kingdom of Spain, the French Republic, the Republic of Finland and the Commission of the European Communities were granted leave to intervene in support of the forms of order sought by the Parliament and the Council. The action16 The applicant puts forward five pleas in law in support of its action. It submits, first, that Article 95 EC is not an appropriate legal basis for the Directive and, second, that the Directive was adopted in breach of Article 152(4)(c) EC. In the alternative it pleads breach of the duty to state reasons, of the rules governing the codecision procedure that are laid down in Article 251 EC and of the principle of proportionality. The first plea: allegedly incorrect choice of Article 95 EC as legal basis Arguments of the parties17 The applicant submits that the conditions justifying recourse to Article 95 EC for the adoption of Articles 3 and 4 of the Directive are not met. None of the prohibitions laid down in those articles actually contributes to eliminating obstacles to the free movement of goods or to removing appreciable distortions of competition. 18 As regards, first, ‘the press and other printed publications’, referred to in Article 3(1) of the Directive, more than 99.9% of products are marketed not in a number of Member States but only regionally or locally, so that the general prohibition on the advertising of tobacco products which is laid down in that provision responds only very marginally to the supposed need to eliminate barriers to trade. 19 ‘Press’ products are traded between Member States only rarely, on account of not only linguistic and cultural reasons, but also policy reasons of publishers. There is no actual obstacle to their movement within the Community even though certain Member States prohibit tobacco advertising in the press since in those States the foreign press is not subject to such a prohibition. 20 In the applicant’s submission, the same is true of the term ‘other printed publications’ which appears in Article 3(1) of the Directive and covers a wide range of publications such as bulletins produced by local associations, programmes for cultural events, posters, telephone directories and various advertising leaflets and prospectuses. These publications are targeted solely at local people and do not have any cross-border character. 21 Nor does Article 3(1) of the Directive meet the objective of removing appreciable distortions of competition. There is no competitive relationship between local publications in one Member State and those in other Member States or between newspapers, periodicals and magazines with a wider circulation and comparable foreign newspapers, periodicals and magazines. 22 As regards information society services, Article 3(2) of the Directive contributes neither to the elimination of obstacles to the free movement of goods or the freedom to provide services nor to the removal of distortions of competition. In the applicant’s view, consultation on the internet of printed publications from other Member States is marginal and, in any event, does not meet with any technical obstacle because of the freedom of access to those services worldwide. 23 Likewise, in the applicant’s submission, the choice of Article 95 EC as legal basis for the Directive is incorrect with regard to the prohibition, laid down in Article 4 of the Directive, on radio advertising and the sponsorship of radio programmes since the vast majority of radio programmes are addressed to the public in a locality or region and cannot be picked up outside a given area because of the limited range of the transmitters. Furthermore, since the advertising of tobacco products on the radio is prohibited in most Member States, the prohibition thereof in Article 4(1) of the Directive is not justified. The same is true of the prohibition on sponsorship of radio programmes in Article 4(2) of the Directive. 24 Finally, Article 95 EC cannot constitute an appropriate legal basis for the prohibitions on the advertising of tobacco products set out in Articles 3 and 4 of the Directive since the true purpose of those prohibitions is not to improve the conditions for the establishment and functioning of the internal market, but solely to protect public health. The applicant submits that recourse to Article 95 EC as legal basis for the Directive is also contrary to Article 152(4)(c) EC, which expressly excludes any harmonisation of the laws and regulations of the Member States in the field of public health. 25 The Parliament, the Council and the parties intervening in support of them argue that Articles 3 and 4 of the Directive were legitimately adopted on the basis of Article 95 EC and are not contrary to Article 152(4)(c) EC. 26 They state that the prohibition on advertising and sponsorship in respect of tobacco products which is laid down in Articles 3 and 4 of the Directive merely prohibits advertising of those products in periodicals, magazines and newspapers and does not extend to the other publications relied upon by the applicant such as bulletins produced by associations, programmes for cultural events, posters, telephone directories, leaflets and prospectuses. 27 They further contend that intra-Community trade in press products is an incontrovertible reality and that, as is apparent from the first, second and fourth recitals in the preamble to the Directive, there are cross-border effects and an appreciable risk of obstacles to free movement in the internal market as a result of differences between Member States’ national legislation. That risk may increase on account of the accession of the new Member States and differences between their laws. 28 With regard to the prohibition on advertising in the press and other printed publications, the Parliament, the Council and the parties intervening in support of them dispute the relevance of the applicant’s statistical analysis, which is limited exclusively to the German market and cannot be extended to the whole of the European Community, while the current phenomenon of ‘media convergence’ is making a considerable contribution to the development of intra-Community trade in press products inasmuch as numerous newspapers, periodicals and magazines are now available on the internet and thus circulate in all the Member States. 29 They state that it is difficult, or even impossible, to draw a distinction between the press with a local or national circulation and the press with a European or international circulation, and to prohibit advertising of tobacco products in publications distributed across borders while excluding those which are purely local or national would have the effect of rendering the limits of the prohibition particularly unsure and uncertain. Besides, that distinction would be contrary to the objective pursued by the Directive of approximating the laws, regulations and administrative provisions of the Member States relating to the advertising of tobacco products. 30 So far as concerns information society services and the prohibition, laid down in Article 3(2) of the Directive, on advertising tobacco products in those services, the Parliament, the Council and the parties intervening in support of them contest the applicant’s argument that obstacles to trade do not exist as regards information society services. 31 They submit that the prohibition on advertising tobacco products in information society services is prompted by the concern to prevent the circumvention of the prohibition on advertising tobacco products in the press and other printed publications by recourse to media offered on the internet and to avoid distortions of competition. As a result of the current process of media convergence, printed media and radio programmes are already available on the internet. The development of e-papers is tending, moreover, to intensify that process. 32 As regards the prohibition on radio advertising, laid down in Article 4(1) of the Directive, the Parliament, the Council and the parties intervening in support of them submit that it cannot seriously be doubted that radio broadcasting is cross-border in nature since terrestrial frequencies reach well beyond Member States’ borders and more and more radio programmes are broadcast by satellite or by cable. 33 They also state that the 14th recital in the preamble to the Directive expressly refers to Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities (OJ 1989 L 298 p. 23) which, in Articles 13 and 17(2), prohibits all forms of television advertising for tobacco and all sponsorship of television programmes by tobacco-related businesses. 34 The prohibition on radio advertising for tobacco products and on the sponsorship of radio programmes which is laid down in Articles 3 and 4 of the Directive is a prohibition parallel to that laid down by Directive 89/552. 35 The fact that radio advertising is already prohibited in almost all the Member States does not prevent new rules from being introduced at Community level. Findings of the Court36 Article 95(1) EC establishes that the Council is to adopt measures for the approximation of provisions laid down by law, regulation or administrative action in the Member States which have as their object the establishment and functioning of the internal market. 37 While a mere finding of disparities between national rules is not sufficient to justify having recourse to Article 95 EC, it is otherwise where there are differences between the laws, regulations or administrative provisions of the Member States which are such as to obstruct the fundamental freedoms and thus have a direct effect on the functioning of the internal market (see, to this effect, the tobacco advertising judgment, paragraphs 84 and 95; Case C-491/01 British American Tobacco (Investments) and Imperial Tobacco [2002] ECR I-11453, paragraph 60; Case C-434/02 Arnold André [2004] ECR I‑11825, paragraph 30; Case C-210/03 Swedish Match [2004] ECR I-11893, paragraph 29; and Joined Cases C-154/04 and C-155/04 Alliance for Natural Health and Others [2005] ECR I-6451, paragraph 28). 38 It is also settled case-law that, although recourse to Article 95 EC as a legal basis is possible if the aim is to prevent the emergence of future obstacles to trade resulting from multifarious development of national laws, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them (Case C-350/92 Spain v Council [1995] ECR I-1985, paragraph 35; Case C‑377/98 Netherlands v Parliament and Council [2001] ECR I-7079, paragraph 15; British American Tobacco (Investments) and Imperial Tobacco, paragraph 61; Arnold André, paragraph 31; Swedish Match, paragraph 30; and Alliance for Natural Health and Others, paragraph 29). 39 The Court has also held that, provided that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the Community legislature cannot be prevented from relying on that legal basis on the ground that public health protection is a decisive factor in the choices to be made (British American Tobacco (Investments) and Imperial Tobacco, paragraph 62; Arnold André, paragraph 32; Swedish Match, paragraph 31; and Alliance for Natural Health and Others, paragraph 30). 40 It should be noted that the first subparagraph of Article 152(1) EC provides that a high level of human health protection is to be ensured in the definition and implementation of all Community policies and activities, and that Article 95(3) EC explicitly requires that, in achieving harmonisation, a high level of protection of human health should be guaranteed (British American Tobacco (Investments) and Imperial Tobacco, paragraph 62; Arnold André, paragraph 33; Swedish Match, paragraph 32; and Alliance for Natural Health and Others, paragraph 31). 41 It follows from the foregoing that when there are obstacles to trade, or it is likely that such obstacles will emerge in the future, because the Member States have taken, or are about to take, divergent measures with respect to a product or a class of products, which bring about different levels of protection and thereby prevent the product or products concerned from moving freely within the Community, Article 95 EC authorises the Community legislature to intervene by adopting appropriate measures, in compliance with Article 95(3) EC and with the legal principles mentioned in the EC Treaty or identified in the case-law, in particular the principle of proportionality (Arnold André, paragraph 34; Swedish Match, paragraph 33; and Alliance for Natural Health and Others, paragraph 32). 42 It is also to be observed that, by using the words ‘measures for the approximation’ in Article 95 EC, the authors of the Treaty intended to confer on the Community legislature a discretion, depending on the general context and the specific circumstances of the matter to be harmonised, as regards the method of approximation most appropriate for achieving the desired result, in particular in fields with complex technical features (see Case C-66/04 United Kingdom v Parliament and Council [2005] ECR I-10553, paragraph 45, and Case C-217/04 United Kingdom v Parliament and Council [2006] ECR I-3771, paragraph 43). 43 Depending on the circumstances, those measures may consist in requiring all the Member States to authorise the marketing of the product or products concerned, subjecting such an obligation of authorisation to certain conditions, or even provisionally or definitively prohibiting the marketing of a product or products (Arnold André, paragraph 35; Swedish Match, paragraph 34; and Alliance for Natural Health and Others, paragraph 33). 44 It is in the light of those principles that it must be ascertained whether the conditions for recourse to Article 95 EC as a legal basis for Articles 3 and 4 of the Directive were met. 45 First of all, it is to be recalled that the Court has already found that, at the time of adoption of Directive 98/43, disparities existed between national laws on the advertising of tobacco products and that there was a trend in national legislation towards ever greater restrictions (the tobacco advertising judgment, paragraphs 96 and 97). 46 It is common ground that, as mentioned in the first recital in the preamble to Directive 2003/33, at the time of the Directive’s adoption there were differences, as regards those products, between the Member States’ laws, regulations and administrative provisions. According to the information given by the Commission in its written observations, when the draft directive was submitted advertising and/or sponsorship in respect of such products were partially prohibited in six Member States, totally prohibited in four, and the subject of legislative proposals seeking a total prohibition in the remaining five. 47 Having regard, in addition, to the enlargement of the European Union through the accession of 10 new Member States, there was an appreciable risk that those disparities would increase. According to the Commission, some of the new Member States envisaged a total prohibition on advertising and sponsorship in respect of tobacco products while others accepted such acts subject to compliance with certain conditions. 48 The fact that, as pointed out in the eighth recital in the preamble to the Directive, at the time of its adoption negotiations were in progress under the aegis of the World Health Organisation with a view to drawing up a Framework Convention on Tobacco Control (‘the WHO Convention’) does not affect this finding. 49 It is true that the WHO Convention seeks to reduce consumption of tobacco products by providing, inter alia, for a comprehensive ban on advertising, promotion and sponsorship in respect of tobacco products. However, the Convention entered into force after the Directive and not all the Member States have ratified it. 50 Furthermore, the Member States which have signed the Convention are free, under Article 13(2) thereof, to adopt, within a period of five years after the Convention’s entry into force, either a comprehensive ban on tobacco advertising, promotion and sponsorship or, if they are not in a position to undertake a comprehensive ban due to their constitution or constitutional principles, only certain restrictions. 51 It follows that, at the time of the Directive’s adoption, disparities existed between national rules on advertising and sponsorship in respect of tobacco products which justified intervention by the Community legislature. 52 It is in that context that it is necessary to examine the effects of such disparities, in the fields covered by Articles 3 and 4 of the Directive, on the establishment and functioning of the internal market, in order to determine whether the Community legislature was able to use Article 95 EC as a basis for adoption of the contested provisions. 53 The market in press products, like the radio market, is a market in which trade between Member States is relatively sizeable and is set to grow further as a result, in particular, of the link between the media in question and the internet, which is the cross-border medium par excellence. 54 Having regard, first of all, to press products, the movement of newspapers, periodicals and magazines is a reality common to all the Member States and is not limited only to States sharing the same language. The proportion of publications from other Member States may even in certain cases come to more than half of the publications on the market, according to information provided at the hearing by the Parliament, the Council and the parties intervening in support of them which was not challenged. It is necessary to include, in that intra-Community trade in press products on paper, trade made possible by information society services, especially the internet which enables direct access in real time to publications distributed in other Member States. 55 Also, on the date when the Directive was adopted, several Member States already prohibited advertising of tobacco products, as indicated in paragraph 46 of the present judgment, while others were about to do so. Consequently, disparities existed between the Member States’ national laws and, contrary to the applicant’s submissions, those disparities were such as to impede the free movement of goods and the freedom to provide services. 56 First, measures prohibiting or restricting the advertising of tobacco products are liable to impede access to the market by products from other Member States more than they impede access by domestic products. 57 Second, such measures restrict the ability of undertakings established in the Member States where they are in force to offer advertising space in their publications to advertisers established in other Member States, thereby affecting the cross-border supply of services (see, to this effect, Case C-405/98 Gourmet International Products [2001] ECR I-1795, paragraphs 38 and 39). 58 Moreover, even if, in reality, certain publications are not sold in other Member States, the fact remains that the adoption of divergent laws on the advertising of tobacco products creates, or is likely to create, incontestably, legal obstacles to trade in respect of press products and other printed publications (see, to this effect, the tobacco advertising judgment, paragraph 97). Such obstacles therefore also exist for publications placed essentially on a local, regional or national market that are sold in other Member States, even if only by way of exception or in small quantities. 59 Furthermore, it is common ground that certain Member States which have prohibited the advertising of tobacco products exclude the foreign press from that prohibition. The fact that those Member States have chosen to accompany the prohibition with such an exception confirms that, in their eyes at least, there is significant intra-Community trade in press products. 60 Finally, the risk that new barriers to trade or to the freedom to provide services would emerge as a result of the accession of new Member States was real. 61 The same finding must be made with regard to the advertising of tobacco products in radio broadcasts and information society services. Many Member States had already legislated in those areas or were preparing to do so. Given the increasing public awareness of the harm caused to health by the consumption of tobacco products, it was likely that new barriers to trade or to the freedom to provide services were going to emerge as a result of the adoption of new rules reflecting that development and intended to discourage more effectively the consumption of tobacco products. 62 The sixth recital in the preamble to the Directive should be recalled, in which it is stated that use of information society services is a means enabling the advertising of tobacco products which is increasing as public consumption and access to such services increases and that such services, as well as radio broadcasting, which may also be transmitted via information society services, are particularly attractive and accessible to young consumers. 63 Contrary to the applicant’s submissions, tobacco advertising by means of those two media has a cross-border character which enables undertakings engaged in the production and sale of tobacco products to develop marketing strategies for the widening of their customer base outside the Member State from which they come. 64 Furthermore, it was conceivable that, since Article 13 of Directive 89/552 prohibited all forms of television advertising for cigarettes and other tobacco products, the disparities between national rules in respect of tobacco advertising in radio broadcasts and in information society services were liable to encourage the possibility of circumventing that prohibition by recourse to those two media. 65 The same finding can be made as regards sponsorship of radio programmes by tobacco companies. Differences between national rules had already emerged on the date when the Directive was adopted or were about to emerge and those differences were liable to impede the freedom to provide services by denying, qua recipients of services, radio broadcasting bodies established in a Member State where a measure prohibiting sponsorship was in force the benefit of sponsorship from tobacco companies established in another Member State, where such a measure did not exist. 66 As pointed out in the first and fifth recitals in the preamble to the Directive, those differences also meant that there was an appreciable risk of distortions of competition. 67 In any event, as the Court has already held, when the existence of obstacles to trade has been established, it is not necessary also to prove distortions of competition in order to justify recourse to Article 95 EC (see British American Tobacco (Investments) and Imperial Tobacco, paragraph 60). 68 It follows from the foregoing that the barriers and the risks of distortions of competition warranted intervention by the Community legislature on the basis of Article 95 EC. 69 It remains to determine whether, in the fields covered by Articles 3 and 4 of the Directive, those articles are in fact designed to eliminate or prevent obstacles to the free movement of goods or the freedom to provide services or to remove distortions of competition. 70 As regards, first of all, Article 3 of the Directive, the Court has already held that a prohibition on the advertising of tobacco products in periodicals, magazines and newspapers with a view to ensuring the free movement of those goods may be adopted on the basis of Article 95 EC, following the example of Directive 89/552, Article 13 of which, as mentioned in paragraph 64 of the present judgment, prohibits television advertising for tobacco products (the tobacco advertising judgment, paragraph 98). 71 The adoption of such a prohibition, which is designed to apply uniformly throughout the Community, is intended to prevent intra-Community trade in press products from being impeded by the national rules of one or other Member State. 72 It should be pointed out that Article 3(1) of the Directive expressly permits the insertion of advertising for tobacco products in certain publications, in particular in those which are intended exclusively for professionals in the tobacco trade. 73 Furthermore, unlike Directive 98/43, Article 8 of the Directive provides that the Member States are not to prohibit or restrict the free movement of products which comply with the Directive. This article consequently precludes Member States from impeding the movement within the Community of publications intended exclusively for professionals in the tobacco trade, inter alia by means of more restrictive provisions which they consider necessary in order to protect human health with regard to advertising or sponsorship for tobacco products. 74 In preventing the Member States in this way from opposing the provision of advertising space in publications intended exclusively for professionals in the tobacco trade, Article 8 of the Directive gives expression to the objective laid down in Article 1(2) of improving the conditions for the functioning of the internal market. 75 The same finding must be made with regard to the freedom to provide services, which is also covered by Article 8 of the Directive. Under this article, the Member States cannot prohibit or restrict that freedom where services comply with the Directive. 76 Following the example of Article 13 of Directive 89/552, Articles 3(2) and 4(1) of the Directive, which prohibit the advertising of tobacco products in information society services and in radio broadcasting, seek to promote freedom to broadcast by radio and the free movement of communications which fall within information society services. 77 Likewise, in prohibiting the sponsorship of radio programmes by undertakings whose principal activity is the manufacture or sale of tobacco products, Article 4(2) of the Directive seeks to prevent the freedom to provide services from being impeded by the national rules of one or other Member State. 78 It follows from the foregoing that Articles 3 and 4 of the Directive do in fact have as their object the improvement of the conditions for the functioning of the internal market and, therefore, that they were able to be adopted on the basis of Article 95 EC. 79 This conclusion is not called into question by the applicant’s line of argument that the prohibition laid down in Articles 3 and 4 of the Directive concerns only advertising media which are of a local or national nature and lack cross-border effects. 80 Recourse to Article 95 EC as a legal basis does not presuppose the existence of an actual link with free movement between the Member States in every situation covered by the measure founded on that basis. As the Court has previously pointed out, to justify recourse to Article 95 EC as the legal basis what matters is that the measure adopted on that basis must actually be intended to improve the conditions for the establishment and functioning of the internal market (see, to this effect, Joined Cases C-465/00, C-138/01 and C-139/01 Österreichischer Rundfunk and Others [2003] ECR I-4989, paragraphs 41 and 42, and Case C-101/01 Lindqvist [2003] ECR I-12971, paragraphs 40 and 41). 81 Accordingly, it must be held that, as has been stated in paragraph 78 of the present judgment, Articles 3 and 4 of the Directive are intended to improve the conditions for the functioning of the internal market. 82 It should be pointed out that the limits of the field of application of the prohibition set out in Articles 3 and 4 of the Directive are far from random and uncertain. 83 In defining the field of application of the prohibition laid down in Article 3 of the Directive, the German version alone uses the term ‘printed products’ (‘Druckerzeugnisse’) in the heading of that article, whereas the other language versions use the term ‘printed media’, thereby showing the will of the Community legislature not to include every type of publication in the field of application of that prohibition. 84 Furthermore, contrary to the applicant’s argument that the term ‘printed publications’ used in Article 3(1) of the Directive should be interpreted broadly, encompassing bulletins produced by local associations, programmes for cultural events, posters, telephone directories and various leaflets and prospectuses, the term covers only publications such as newspapers, periodicals and magazines. 85 This interpretation is borne out by the fourth recital in the preamble to the Directive, which notes that the circulation in the internal market of publications such as periodicals, newspapers and magazines is subject to an appreciable risk of obstacles to free movement as a result of Member States’ laws, regulations and administrative provisions which prohibit or regulate tobacco advertising in those media. 86 The same recital states that, in order to ensure free circulation throughout the internal market for all such media, it is necessary to limit tobacco advertising therein to those magazines and periodicals which are not intended for the general public. 87 In addition, the prohibition laid down in Articles 3 and 4 of the Directive is limited to various forms of advertising and sponsorship and, contrary to the provisions of Directive 98/43, does not amount to a general ban. 88 It follows from the foregoing that Article 95 EC constitutes an appropriate legal basis for Articles 3 and 4 of the Directive. 89 The first plea is accordingly not well founded and must be dismissed. The second plea: circumvention of Article 152(4)(c) EC90 The applicant maintains that, since the true purpose of the prohibition laid down in Articles 3 and 4 of the Directive is not to improve the conditions for the establishment and functioning of the internal market, the Community legislature, in adopting the provisions at issue, infringed the prohibition laid down in Article 152(4)(c) EC on any harmonisation of the laws and regulations of the Member States in the field of public health. 91 The Parliament, the Council and the parties intervening in support of them, relying on the Court’s case-law, submit that, given that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the objective of public health protection does not in any way preclude the measures covered by that provision from improving the conditions for the establishment and functioning of the internal market (see, to this effect, British American Tobacco (Investments) and Imperial Tobacco, paragraphs 60 and 62). 92 As stated in paragraph 39 of the present judgment, it is settled case-law that, provided that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the Community legislature cannot be prevented from relying on that legal basis on the ground that public health protection is a decisive factor in the choices to be made. 93 Article 95(3) EC explicitly requires that, in achieving harmonisation, a high level of protection of human health should be guaranteed. 94 The first subparagraph of Article 152(1) EC provides that a high level of human health protection is to be ensured in the definition and implementation of all Community policies and activities (British American Tobacco (Investments) and Imperial Tobacco, paragraph 62; Arnold André, paragraph 33; Swedish Match, paragraph 32; and Alliance for Natural Health and Others, paragraph 31). 95 While it is true that Article 152(4)(c) EC excludes any harmonisation of laws and regulations of the Member States designed to protect and improve human health, that provision does not mean, however, that harmonising measures adopted on the basis of other provisions of the Treaty cannot have any impact on the protection of human health (see the tobacco advertising judgment, paragraphs 77 and 78). 96 With regard to the applicant’s argument that public health protection largely prompted the choices made by the Community legislature when adopting the Directive, in particular so far as concerns Articles 3 and 4, suffice it to state that the conditions for recourse to Article 95 EC were met in this instance. 97 The Community legislature therefore did not infringe Article 152(4)(c) EC by adopting Articles 3 and 4 of the Directive on the basis of Article 95 EC. 98 Accordingly, the second plea is unfounded and must also be dismissed. Third plea: breach of the duty to state reasons99 The applicant submits that the Directive fails to comply with the requirement to state reasons laid down in Article 253 EC. The existence of actual barriers to trade, a condition required by the Court to be met if the Community legislature is to have competence, is not mentioned with regard to the prohibition on radio advertising laid down in Article 4 of the Directive or the prohibition on advertising in information society services that is envisaged in Article 3(2). Nor does the preamble to the Directive make any reference whatsoever to the existence of significant distortions of competition concerning those services. 100 In the applicant’s submission, the mere reference in the first recital in the preamble to the Directive to the existence of differences between national laws is not sufficient to justify competence on the part of the Community legislature. The same is true of the consideration that information society services and radio broadcasting have a cross-border character by their very nature. 101 So far as concerns the prohibition on advertising in the press and other printed publications, the applicant contends that, while it is stated in the first recital in the preamble to the Directive that ‘certain obstacles have already been encountered’, no detail is provided concerning the rules and the specific obstacles to trade which could justify competence of the Community legislature under Article 95 EC. 102 Finally, the particular circumstance that the products and services falling within Articles 3 and 4 of the Directive have only marginal cross-border effects should have entailed an assessment as to whether the extension of the prohibitions on advertising to non-cross-border situations was a measure necessary for the functioning of the internal market within the meaning of Article 14 EC. However, no such assessment was carried out. 103 The Parliament, the Council and the parties intervening in support of them observe that the Community legislature clearly set out the grounds which prompted it to adopt the Directive, in particular in the first, second, fourth, fifth and sixth recitals in the preamble, and that the duty to state reasons does not require every relevant point of fact and law to be gone into (see, to this effect, Case 87/78 Welding [1978] ECR 2457, paragraph 11, and British American Tobacco (Investments) and Imperial Tobacco, paragraph 165). 104 They plead that the prohibition on the advertising of tobacco products in printed media laid down in Article 3(1) of the Directive is justified in the first and fourth recitals in the preamble thereto by reference to barriers to trade, whose intensification is to be feared in the future. 105 They explain that the reasons for the prohibition on advertising in information society services are set out in the sixth recital in the preamble to the Directive. 106 They state with regard to the prohibition on radio advertising that a parallel must be drawn with Directive 89/552 which, in Articles 13 and 17(2), prohibits all forms of television advertising for tobacco products and all sponsorship of television programmes by tobacco-related businesses. 107 Although the statement of reasons required by Article 253 EC must show clearly and unequivocally the reasoning of the Community authority which adopted the contested measure, so as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to exercise its power of review, it is not required to go into every relevant point of fact and law (Case C-122/94 Commission v Council [1996] ECR I‑881, paragraph 29; British American Tobacco (Investments) and Imperial Tobacco, paragraph 165; ArnoldAndré, paragraph 61; Swedish Match, paragraph 63; and Alliance for Natural Health and Others, paragraph 133). 108 Furthermore, the question whether a statement of reasons satisfies the requirements must be assessed with reference not only to the wording of the measure but also to its context and to the whole body of legal rules governing the matter in question. If the contested measure clearly discloses the overall objective pursued by the Community institution concerned, it would be excessive to require a specific statement of reasons for each of the technical choices made by the institution (Case C-100/99 Italy v Council and Commission [2001] ECR I-5217, paragraph 64; British American Tobacco (Investments) and Imperial Tobacco, paragraph 166; Arnold André, paragraph 62; Swedish Match, paragraph 64; and Alliance for Natural Health and Others, paragraph 134). 109 In the present case, the 1st, 2nd, 3rd and 12th recitals in the preamble to the Directive clearly show that the measures laid down by it prohibiting advertising and sponsorship in respect of tobacco products are designed to eliminate obstacles to the free movement of goods or services resulting from differences between the Member States’ national laws in that field, while ensuring a high level of public health protection. 110 In addition, the reasons which determined the adoption of such measures are specified for each of the forms of advertising and sponsorship referred to in Articles 3 and 4 of the Directive. 111 As regards, first, the prohibition on advertising in printed media and in certain publications, the fourth recital in the preamble to the Directive states that an appreciable risk exists of obstacles to free movement in the internal market as a result of Member States’ laws, regulations and administrative provisions and that, in order to ensure free circulation throughout the internal market for all such media, it is necessary to limit tobacco advertising therein to those magazines and periodicals which are not intended for the general public such as publications intended exclusively for professionals in the tobacco trade and to publications printed and published in third countries that are not principally intended for the Community market. 112 So far as concerns, second, radio advertising and advertising transmitted via information society services, the sixth recital in the preamble to the Directive refers to the particular attraction and accessibility of these services for young people, whose consumption increases in line with the use of those media. 113 Regarding, third, the prohibition on certain types of sponsorship such as that of radio programmes and activities or events having cross-border effects, the fifth recital in the preamble to the Directive explains that the prohibition in question is intended to prevent the possible circumvention of the restrictions placed on direct forms of advertising. 114 These recitals clearly disclose the essential objective pursued by the Community legislature, namely the improvement of the conditions for the establishment and functioning of the internal market by the removal of obstacles to the free movement of goods or services which serve as a medium for advertising or sponsorship in respect of tobacco products. 115 Furthermore, it is to be noted that the Directive was adopted, following the annulment of Directive 98/43, on the basis of a Commission proposal which was accompanied by an explanatory memorandum that set out comprehensively the differences between the national rules in force in the Member States on advertising and sponsorship in respect of tobacco products. 116 It follows that Articles 3 and 4 of the Directive satisfy the duty to state reasons laid down in Article 253 EC. 117 The third plea is therefore unfounded and must be dismissed. The fourth plea: infringement of the codecision procedure 118 The applicant contends that the Directive was adopted in breach of the codecision procedure set out in Article 251 EC. It submits that substantive amendments were made by the Council after the vote of the Parliament in plenary sitting on the proposal for a directive. 119 According to the applicant, those amendments go beyond mere linguistic or editorial adjustment of the various language versions or the mere correction of manifest factual errors. Article 10(2) of the Directive was added to the text of the Directive after its approval, and Article 11 was substantially amended compared with the version approved by the Parliament since the date of the Directive’s entry into force was brought forward. Furthermore, Article 3 was amended and, in the German version at least, permits a broader interpretation of ‘printed media’ which enlarges the Directive’s field of application. 120 The Parliament, the Council and the parties intervening in support of them submit that, under the codecision procedure, measures are not adopted solely by the Council but, pursuant to Article 254 EC, are jointly signed by the President of the Parliament and by the President of the Council who, by their signatures, take formal notice that the Directive corresponds to the Commission’s proposal coupled with the amendments approved by the Parliament. 121 It would be incompatible with the drafting quality requirements resulting from the existence of a large number of official languages to require the text approved by the Parliament and the text adopted in accordance with the codecision procedure to be strictly identical. 122 In the submission of the Parliament, the Council and the parties intervening in support of them, the corrections made to the Directive do not go beyond the limits of the legal/linguistic finalisation of a text, whether it be a question of Article 3(1) of the Directive, relating to the press and printed publications, or Article 10(2), relating to communication by the Member States to the Commission of the main provisions of national law which they adopt in the field of the Directive. 123 They observe that the amendment to Article 11, which concerns the Directive’s entry into force, was made in accordance with the manual of precedents for acts of the Council, which envisages the entry into force of directives on the day of their publication in order to keep the number of dates as small as possible. 124 By the present action, the applicant seeks to call into question the validity of Articles 3 and 4 of the Directive alone. 125 Accordingly, the plea alleging infringement of the codecision procedure laid down in Article 251 EC with regard to the adoption of Articles 10 and 11 of the Directive in their final form is immaterial to the assessment of the validity of Articles 3 and 4 of the Directive. 126 In any event, the amendments to Articles 10 and 11 of the Directive were the subject of a corrigendum, a fact which is indeed not disputed, and this corrigendum was signed pursuant to Article 254 EC by the President of the Parliament and by the President of the Council, and then published in the Official Journal of the European Union. 127 The amendments made to Article 3 of the Directive, as the Advocate General has rightly stated in point 197 of his Opinion, do not appear to have exceeded the limits applicable when the various language versions of a Community measure are harmonised. 128 The fourth plea must therefore necessarily be dismissed. The fifth plea: breach of the principle of proportionality129 The applicant submits that the prohibitions laid down in Articles 3 and 4 of the Directive infringe the principle of proportionality laid down in the third paragraph of Article 5 EC. 130 These prohibitions, which are drafted in extremely broad terms, cover almost exclusively situations of a local or regional nature and seriously compromise fundamental rights in the economic sectors concerned, rights which are protected by the Community legislature. 131 That is true of freedom of the press and of expression which, in accordance with the Court’s case-law relating to Article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950 (‘the ECHR’), is ensured in particular, from the point of view of the financing of press products, by advertising revenue and unimpeded commercial communication. 132 The extremely general way in which the prohibitions on advertising laid down in Articles 3 and 4 of the Directive have been formulated and in which the term ‘advertising’ has been defined means that the prohibition on advertising covers any indirect effect on the sale of tobacco products of any form of commercial communication and that the editorial contributions of journalists on certain subjects having a link with the production or distribution of tobacco products may be covered by that prohibition. 133 The prejudice caused thereby to freedom of the press is, in the applicant’s submission, all the greater because the press derives 50% to 60% of its income not from the sale of its products but from advertising revenue and in Europe today the media are experiencing a structural economic crisis that is very deep. 134 Furthermore, the inappropriateness of enacting the prohibitions laid down in Articles 3 and 4 of the Directive is shown by the fact that the number of cases in which products or services have a cross-border character is marginal and out of all proportion to the purely local or regional situations, 99% of which have no cross-border effect whatever. 135 It follows that the extension of the prohibitions on advertising to purely national situations is disproportionate vis-à-vis the alleged objective of harmonisation of the internal market. 136 In any event, that measure is neither necessary nor appropriate. The Directive itself contains an appropriate solution in Article 3(1) since press products from third countries not principally intended for the Community market are not subject to that prohibition on advertising. No explanation is given as to why this solution would not also have sufficed for press products from the Community. 137 Likewise, no reason has been given regarding the refusal of the alternative proposed by the applicant of limiting the prohibitions on advertising to activities and services having cross-border effects, a solution which was indeed adopted in Article 5 of the Directive with regard to sponsorship. 138 The applicant thus considers that, if the objective of the Community legislature is weighed against the prejudice to fundamental rights, the contested provisions contained in Articles 3 and 4 of the Directive are inappropriate. It is only as a last resort that the Community legislature could have adopted measures as restrictive as the total prohibition on advertising tobacco products in the press. 139 The Parliament, the Council and the parties intervening in support of them contend that means less restrictive than a directive prohibiting advertising in all printed media and in radio broadcasts were not available to the Community legislature in order to achieve the objective of harmonisation of the internal market. 140 They submit that the Community legislature did not resort to a total prohibition on the advertising of tobacco products. Such advertising was not prohibited in publications intended for professionals in the tobacco trade or in publications printed and published in third countries when those publications are not principally intended for the Community market. Likewise, such advertising was not prohibited in information society services unless it was prohibited in the press and other printed publications. They add that, contrary to the applicant’s contention, the term ‘printed publications’ covers only newspapers, magazines and periodicals. 141 They explain, with regard to the prejudice pleaded by the applicant to the fundamental rights of freedom of the press and freedom of expression, that freedom of expression may, under Article 10(2) of the ECHR, be subject to certain restrictions or penalties, prescribed by law, which are necessary in a democratic society in the interests of the protection of health or morals and that in the present case the prohibition relates to ‘any form of commercial communication with the aim or direct or indirect effect of promoting a tobacco product’, as is apparent from the definition of ‘advertising’ in Article 2(b) of the Directive. Consequently, editorial contributions of journalists are not affected by Articles 3 and 4 of the Directive. 142 They submit that the Court has already held that the ‘discretion enjoyed by the [competent] authorities in determining the balance to be struck between freedom of expression and the abovementioned objectives varies for each of the goals justifying restrictions on that freedom and depends on the nature of the activities in question. When the exercise of the freedom does not contribute to a discussion of public interest …, review is limited to an examination of the reasonableness and proportionality of the interference. This holds true for the commercial use of freedom of expression, particularly in a field as complex and fluctuating as advertising’ (Case C-71/02 Karner [2004] ECR I-3025, paragraph 51). 143 They contend that the Community legislature did not exceed the broad discretion which it enjoys in an area such as that involved in the present case, which entails political, economic and social choices on its part, and in which it is called upon to undertake complex assessments, and that the prohibitions laid down in Articles 3 and 4 of the Directive are necessary and appropriate for achieving the objective of harmonisation of the internal market at a high level of health protection. 144 The principle of proportionality, which is one of the general principles of Community law, requires the means employed by a Community provision to be appropriate for attaining the objective pursued and not to go beyond what is necessary to achieve it (see, inter alia, Case 137/85 Maizena and Others [1987] ECR 4587, paragraph 15; Case C-339/02 ADM Ölmühlen [1993] ECR I-6473, paragraph 15; and Case C-210/00 Käserei Champignon Hofmeister [2002] ECR I‑6453, paragraph 59). 145 With regard to judicial review of the conditions referred to in the previous paragraph, the Community legislature must be allowed a broad discretion in an area such as that involved in the present case, which entails political, economic and social choices on its part, and in which it is called upon to undertake complex assessments. The legality of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institutions are seeking to pursue (see, to this effect, Case C-84/94 United Kingdom v Council [1996] ECR I-5755, paragraph 58; Case C-233/94 Germany v Parliament and Council [1997] ECR I-2405, paragraphs 55 and 56; Case C-157/96 National Farmers’ Union and Others [1998] ECR I-2211, paragraph 61; and British American Tobacco (Investments) and Imperial Tobacco, paragraph 123). 146 Here, it is apparent from the analysis set out in paragraphs 72 to 80 of the present judgment that Articles 3 and 4 of the Directive may be regarded as measures appropriate for achieving the objective that they pursue. 147 Nor, given the obligation on the Community legislature to ensure a high level of human health protection, do they go beyond what is necessary in order to achieve that objective. 148 The prohibition on the advertising of tobacco products in printed media which is laid down in Article 3 of the Directive does not cover publications intended for professionals in the tobacco trade or published in third countries and not intended principally for the Community market. 149 Furthermore, contrary to the applicant’s assertions, it was not possible for the Community legislature to adopt, as a less restrictive measure, a prohibition on advertising from which publications intended for a local or regional market would be exempted, given that such an exception would have rendered the field of application of the prohibition on the advertising of tobacco products unsure and uncertain, which would have prevented the Directive from achieving its objective of harmonisation of national law on the advertising of tobacco products (see, to this effect, Lindqvist, paragraph 41). 150 The same finding must be made with regard to the prohibition, laid down in Articles 3(2) and 4(1) of the Directive, on the advertising of tobacco products in information society services and in radio broadcasts. 151 The prohibition on the advertising of tobacco products in those media, following the example of the prohibition laid down in Article 13 of Directive 89/552, cannot be regarded as disproportionate and can, moreover, be justified by the concern to prevent circumvention, made possible through media convergence, of the prohibition applicable to printed media through increased recourse to those two media. 152 As regards the prohibition on sponsorship of radio programmes which is laid down in Article 4(2) of the Directive, it is not apparent from the preamble to the Directive, particularly the fifth recital, that in not limiting such a measure to activities or events with cross-border effects, following the example of Article 17 of Directive 89/552, the Community legislature exceeded the limits of the discretion available to it in this area. 153 This interpretation is not called into question by the applicant’s argument that prohibitions of this kind would have the effect of denying the press significant advertising income, or even contribute to the closure of certain undertakings, and would, ultimately, prejudice the freedom of expression guaranteed by Article 10 of the ECHR. 154 In accordance with settled case-law, whilst the principle of freedom of expression is expressly recognised by Article 10 of the ECHR and constitutes one of the fundamental pillars of a democratic society, it nevertheless follows from Article 10(2) that freedom of expression may also be subject to certain limitations justified by objectives in the public interest, in so far as those derogations are in accordance with the law, motivated by one or more of the legitimate aims under that provision and necessary in a democratic society, that is to say justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued (see, to this effect, Case C-368/95 Familiapress [1997] ECR I‑3689, paragraph 26; Case C-60/00 Carpenter [2002] ECR I‑6279, paragraph 42; Case C-112/00 Schmidberger [2003] ECR I‑5659, paragraph 79; and Karner, paragraph 50). 155 Also, as has been correctly pointed out by the Parliament, the Council and the parties intervening in support of them, the discretion enjoyed by the competent authorities in determining the balance to be struck between freedom of expression and the objectives in the public interest which are referred to in Article 10(2) of the ECHR varies for each of the goals justifying restrictions on that freedom and depends on the nature of the activities in question. When a certain amount of discretion is available, review is limited to an examination of the reasonableness and proportionality of the interference. This holds true for the commercial use of freedom of expression in a field as complex and fluctuating as advertising (see, in particular, Karner, paragraph 51). 156 In the present case, even assuming that the measures laid down in Articles 3 and 4 of the Directive prohibiting advertising and sponsorship have the effect of weakening freedom of expression indirectly, journalistic freedom of expression, as such, remains unimpaired and the editorial contributions of journalists are therefore not affected. 157 It must therefore be found that the Community legislature did not, by adopting such measures, exceed the limits of the discretion which it is expressly accorded. 158 It follows that those measures cannot be regarded as disproportionate. 159 The fifth plea is therefore unfounded and must be dismissed. 160 Since none of the pleas relied upon by the applicant in support of its action is well founded, the action should be dismissed. Costs161 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Parliament and the Council have applied for costs to be awarded against the Federal Republic of Germany, and the latter has been unsuccessful, it must be ordered to pay the costs. Under Article 69(4) of the Rules of Procedure, Member States and institutions which intervene in the proceedings are to bear their own costs. On those grounds, the Court (Grand Chamber) hereby:1. Dismisses the action;2. Orders the Federal Republic of Germany to pay the costs;3. Orders the Kingdom of Spain, the French Republic, the Republic of Finland and the Commission of the European Communities each to bear their own costs.[Signatures]* Language of the case: German. | 6d875-0def2f4-44f8 | EN |
THE COURT OF FIRST INSTANCE ANNULS THE COMMISSION DECISION RELATING TO THE MEASURES ADOPTED IN 2002 BY SPAIN IN THE AGRICULTURAL SECTOR FOLLOWING THE INCREASE IN FUEL PRICES | Judgment of the Court of First Instance (Second Chamber) of 12 December 2006 – Asociación de Estaciones de Servicio de Madrid and Federación Catalana de Estaciones de Servicio v Commission(Case T-146/03)State aid – Spanish law providing for measures in favour of the agricultural sector following an increase in fuel prices – Formal examination procedure under Article 88(2) EC – Decision finding that certain measures did not constitute aid – Action for annulment – Admissibility – Standing to bring proceedings – Duty to state reasons1. Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them (Arts 88(2) EC and 230, fourth para., EC) (see paras 40-47, 49, 51, 54-56)2. Acts of the Community institutions – Statement of reasons – Obligation – Scope (Arts 87(1) EC and 253 EC) (see paras 78-79, 92)Re: APPLICATION for partial annulment of Commission Decision 2003/293/EC of 11 December 2002 on the measures implemented by Spain in the agricultural sector following the increase in fuel prices (OJ 2003 L 111, p. 24) Operative part The Court: Declares that Article 1 of Commission Decision 2003/293/EC of 11 December 2002 on the measures implemented by Spain in the agricultural sector following the increase in fuel prices is annulled in so far that it finds that the measures to support agricultural cooperatives provided for by Royal Decree Law 10/2000 de medidas urgentes de apoyo a los sectores agrario, pesquero y del transporte (Decree Law on emergency support for agriculture, fisheries and transport) do not constitute aid within the meaning of Article 87(1) EC; Declares that Article 1 of Commission Decision 2003/293/EC of 11 December 2002 on the measures implemented by Spain in the agricultural sector following the increase in fuel prices is annulled in so far that it finds that the measures to support agricultural cooperatives provided for by Royal Decree Law 10/2000 de medidas urgentes de apoyo a los sectores agrario, pesquero y del transporte (Decree Law on emergency support for agriculture, fisheries and transport) do not constitute aid within the meaning of Article 87(1) EC; Orders the Commission to bear its own costs and to pay those incurred by the applicants; Orders the Commission to bear its own costs and to pay those incurred by the applicants; Orders the Kingdom of Spain to bear its own costs. Orders the Kingdom of Spain to bear its own costs. | cc035-f5da4a0-47d2 | EN |
THE COURT OF FIRST INSTANCE ANNULS THE COUNCIL'S DECISION ORDERING THE FREEZING OF THE FUNDS OF THE ORGANISATION DES MODJAHEDINES DU PEUPLE D'IRAN IN THE FIGHT AGAINST TERRORISM | Organisation des Modjahedines du peuple d’IranvCouncil of the European Union(Common foreign and security policy – Restrictive measures directed against certain persons and entities with a view to combating terrorism – Freezing of funds – Action for annulment – Rights of the defence – Statement of reasons – Right to effective judicial protection – Action for damages)Judgment of the Court of First Instance (Second Chamber), 12 December 2006 Summary of the Judgment1. Procedure – Decision replacing the contested decision during the proceedings2. Actions for annulment – Jurisdiction of the Community judicature – Action brought against a common position adopted pursuant to Titles V and VI of the Treaty on European Union (Art. 230 EC; Arts 15 EU, 34 EU, 35 EU and 46 EU)3. Community law – Principles – Rights of the defence – Decision to freeze funds directed against certain persons and entities suspected of terrorist activities(Art. 249 EC; Council Regulation No 2580/2001, Art. 2(3); Council Decision 2005/930)4. Community law – Principles – Rights of the defence – Resolution of the United Nations Security Council requiring restrictive measures to be taken against unspecified persons and entities suspected of terrorist activities – Implementation by the Community in the exercise of own powers (Arts 60 EC, 301 EC and 308 EC; Council Regulation No 2580/2001)5. Community law – Principles – Rights of the defence – Decision to freeze funds directed against certain persons and entities suspected of terrorist activities (Common Position 2001/931, Art. 1(4); Council Regulation No 2580/2001, Art. 2(3))6. European Union – Common foreign and security policy – Police and judicial cooperation in criminal matters – Obligation of sincere cooperation between the Member States and the Community institutions (Art. 10 EC; Common Position 2001/931, Art. 1(4); Council Regulation No 2580/2001, Art. 2(3))7. Community law – Principles – Rights of the defence – Decision to freeze funds directed against certain persons and entities suspected of terrorist activities(Common Position 2001/931, Art. 1(4) and (6))8. Acts of the institutions – Statement of reasons – Obligation – Scope (Art. 253 EC; Council Regulation No 2580/2001)9. Acts of the institutions – Statement of reasons – Obligation – Scope (Art. 253 EC; Common Position 2001/931, Art. 1(4) and (6); Council Regulation No 2580/2001)10. European Communities – Judicial review of the legality of the acts of the institutions (Art. 230, second para., EC; Common Position 2001/931, Art. 1(4) and (6); Council Regulation No 2580/2001, Art. 2(3))1. Where a decision is, during the proceedings, replaced by another decision with the same subject-matter, this is to be considered a new factor allowing the applicant to adapt its claims and pleas in law. It would not be in the interests of the due administration of justice and the requirements of procedural economy to oblige the applicant to make a fresh application to the Court. Moreover, it would be inequitable if the institution in question were able, in order to counter criticisms of a decision contained in an application to the Community judicature, to amend the contested decision or to substitute another for it and to rely in the proceedings on such an amendment or substitution in order to deprive the other party of the opportunity of extending his original pleadings to the later decision or of submitting supplementary pleadings directed against that decision. This also holds true for the scenario in which a regulation of direct and individual concern to an individual is replaced, during the procedure, by a regulation having the same subject-matter. (see paras 28-29)2. The Court of First Instance has jurisdiction to hear an action for annulment directed against a Common Position adopted on the basis of Articles 15 EU under Title V relating to the Common foreign and security policy (CFSP), and 34 EU under Title VI relating to police and judicial cooperation in criminal matters (JHA), only strictly to the extent that, in support of such an action, the applicant alleges an infringement of the Community’s competences. Neither Title V of the EU Treaty relating to the CFSP nor Title VI of the EU Treaty relating to JHA make any provision for actions for annulment of common positions before the Community Courts. Under the EU Treaty, in the version resulting from the Treaty of Amsterdam, the powers of the Court of Justice are listed exhaustively in Article 46 EU. That article does not confer any competence on the Court in relation to the provisions of Title V of the EU Treaty and, under Title VI of the EU Treaty, it follows from Articles 35 EU and 46 EU that legal remedies seeking a ruling as to validity or annulment are available only as against framework decisions, decisions and the measures implementing conventions provided for by Article 34(2)(b), (c) and (d) EU, with the exception of the common positions provided for in Article 34(2)(a) EU. (see paras 46-49, 52, 56)3. The safeguard relating to observance of the actual right to a fair hearing, in the context of the adoption of a decision to freeze funds on the basis of Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism, cannot be denied to the parties concerned solely on the ground that neither the European Convention for the Protection of Human Rights nor the general principles of Community law confer on individuals any right whatsoever to be heard before the adoption of an act of a legislative nature. Although Decision 2005/930 implementing Article 2(3) of Regulation No 2580/2001 has the same general scope as that regulation and, like that regulation, is directly applicable in all Member States and thus, despite its title, is an integral part of that regulation for the purposes of Article 249 EC, it is not, however, of an exclusively legislative nature. Whilst being of general application, it is of direct and individual concern to the persons to whom it refers by name as having to be included in the list of persons, groups and entities whose funds are to be frozen pursuant to that regulation. (see paras 95, 97-98)4. In the context of Security Council Resolution 1373 (2001), it is for the Member States of the United Nations – and, in this case, the Community, through which its Member States have decided to act – to identify specifically the persons, groups and entities whose funds are to be frozen pursuant to that resolution, in accordance with the rules in their own legal order. That resolution does not specify individually the persons, groups and entities who are to be the subjects of those measures; nor did it establish specific legal rules concerning the procedure for freezing funds, or the safeguards or judicial remedies ensuring that the persons or entities affected by such a procedure would have a genuine opportunity to challenge the measures adopted by the States in respect of them. The Community, moreover, does not act under powers circumscribed by the will of the Union or that of its Member States when the Council adopts economic sanctions measures on the basis of Articles 60 EC, 301 EC and 308 EC. Since the identification of the persons, groups and entities contemplated in Security Council Resolution 1373 (2001), and the adoption of the ensuing measure of freezing funds, involve the exercise of the Community’s own powers, entailing a discretionary appreciation by the Community, the Community institutions concerned, in this case the Council, are in principle bound to observe the right to a fair hearing of the parties concerned when they act with a view to giving effect to that resolution. It follows that the safeguarding of the right to a fair hearing is, as a matter of principle, fully applicable in the context of the adoption of a decision to freeze funds under Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism. (see paras 101-102, 106-108)5. In the context of the adoption of a decision to freeze funds under Article 2(3) of Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism, the right to a fair hearing only falls to be exercised with regard to the elements of fact and law which are liable to determine the application of the measure in question to the person concerned, in accordance with those rules. The observance of those rights in that context is however liable to arise at those two levels. The right of the party concerned to a fair hearing must be effectively safeguarded in the first place as part of the national procedure which led to the adoption, by the competent national authority, of the decision referred to in Article 1(4) of Common Position 2001/931 on the application of specific measures to combat terrorism. It is essentially in that national context that the party concerned must be placed in a position in which he can effectively make known his view of the matters on which the decision is based, subject to possible restrictions on the right to a fair hearing which are legally justified in national law, particularly on grounds of public policy, public security or the maintenance of international relations. Next, the right of the party concerned to a fair hearing must be effectively safeguarded in the Community procedure culminating in the adoption, by the Council, of the decision to include or maintain it on the disputed list, in accordance with Article 2(3) of Regulation No 2580/2001. As a rule, in that area, the party concerned need only be afforded the opportunity effectively to make known his views on the legal conditions of application of the Community measure in question, namely, where it is an initial decision to freeze funds, whether there is specific information or material in the file which shows that a decision meeting the definition laid down in Article 1(4) of Common Position 2001/931 was taken in respect of him by a competent national authority and, where it is a subsequent decision to freeze funds, the justification for maintaining the party concerned in the disputed list. (see paras 114-115, 118-120)6. Under Article 10 EC, relations between the Member States and the Community institutions are governed by reciprocal duties to cooperate in good faith. That principle is of general application and is especially binding in the area of police and judicial cooperation in criminal matters governed by Title VI of the EU Treaty, which is moreover entirely based on cooperation between the Member States and the institutions. In a case of application of Article 1(4) of Common Position 2001/931 on the application of specific measures to combat terrorism and Article 2(3) of Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism, provisions which introduce a specific form of cooperation between the Council and the Member States in the context of combating terrorism, that principle entails, for the Council, the obligation to defer as far as possible to the assessment conducted by the competent national authority, at least where it is a judicial authority, both in respect of the issue of whether there are ‘serious and credible evidence or clues’ on which its decision is based and in respect of recognition of potential restrictions on access to that evidence or those clues, legally justified under national law on grounds of overriding public policy, public security or the maintenance of international relations. However, these considerations are valid only in so far as the evidence or clues in question were in fact assessed by the competent national authority. If, on the other hand, in the course of the procedure before it, the Council bases its initial decision or a subsequent decision to freeze funds on information or evidence communicated to it by representatives of the Member States without it having been assessed by the competent national authority, that information must be considered as newly-adduced evidence which must, in principle, be the subject of notification and a hearing at Community level, not having already been so at national level. (see paras 123-125)7. The general principle of observance of the right to a fair hearing requires, unless precluded by overriding considerations concerning the security of the Community or its Member States, or the conduct of their international relations, that the evidence adduced against the party concerned should be notified to it, in so far as possible, either concomitantly with or as soon as possible after the adoption of an initial decision to freeze funds. Subject to the same reservations, any subsequent decision to freeze funds must, in principle, be preceded by notification of any new evidence adduced and a hearing. However, observance of the right to a fair hearing does not require either that the evidence adduced against the party concerned be notified to it before the adoption of an initial measure to freeze funds, or that that party automatically be heard after the event in such a context. In the case of an initial decision to freeze funds, the notification of the evidence requires, in principle, first, that the party concerned be informed by the Council of the specific information or material in the file which indicates that a decision meeting the definition given in Article 1(4) of Common Position 2001/931 on the application of specific measures to combat terrorism has been taken in respect of it by a competent authority of a Member State, and also, where applicable, any new material resulting from information or evidence communicated to the Council by representatives of the Member States without it having been assessed by the competent national authority and, second, that it must be placed in a position in which it can effectively make known its view on the information or material in the file. In the case of a subsequent decision to freeze funds, observance of the right to a fair hearing similarly requires, first, that the party concerned be informed of the information or material in the file which, in the view of the Council, justifies maintaining it in the disputed lists, and also, where applicable, of any new material referred to above and, second, that it must be afforded the opportunity effectively to make known its view on the matter. (see paras 125-126, 137)8. The safeguard relating to the obligation to state reasons provided for by Article 253 EC is fully applicable in the context of the adoption of a decision to freeze funds under Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism. In principle, the statement of reasons for a measure to freeze funds under Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism must refer not only to the statutory conditions of application of that regulation, but also to the reasons why the Council considers, in the exercise of its discretion, that such a measure must be adopted in respect of the party concerned. However, the overriding considerations concerning the security of the Community and its Member States, or the conduct of their international relations, may preclude disclosure to the parties concerned of the specific and complete reasons for the initial or subsequent decision to freeze their funds, just as they may preclude the evidence adduced against those parties from being communicated to them during the administrative procedure. (see paras 109, 146, 148)9. Unless precluded by overriding considerations concerning the security of the Community and its Member States, or the conduct of their international relations, and subject also to the possibility that only the operative part of the decision and a general statement of reasons may be contained in the version of the decision to freeze funds published in the Official Journal, the statement of reasons for an initial decision to freeze funds referred to in Article 1(4) of Common Position 2001/931 on the application of specific measures to combat terrorism must at least make actual and specific reference to precise information or material in the relevant file which indicates that that decision has been taken by a competent authority of a Member State in respect of the party concerned. The statement of reasons for such a decision must also state the reasons why the Council considers, in the exercise of its discretion, that such a measure must be taken in respect of the party concerned. Moreover, the statement of reasons for a subsequent decision to freeze funds as referred to in Article 1(6) of that common position must, subject to the same reservations, state the actual and specific reasons why the Council considers, following re-examination, that the freezing of the funds of the party concerned remains justified, where applicable on the basis of new information or evidence. (see paras 116, 125-126, 147, 151)10. The judicial review of the lawfulness of a decision to freeze funds taken pursuant to Article 2(3) of Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism is that provided for in the second paragraph of Article 230 EC, under which the Community Courts have jurisdiction in actions for annulment brought on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the EC Treaty or of any rule of law relating to its application or misuse of powers. As part of that review, and having regard to the grounds for annulment put forward by the party concerned or raised by the Court of its own motion, it is for the Court to ensure, inter alia, that the legal conditions for applying Regulation No 2580/2001 to a particular scenario, as laid down in Article 2(3) of that regulation and, by reference, either Article 1(4) or Article 1(6) of Common Position 2001/931 on the application of specific measures to combat terrorism, depending on whether it is an initial decision or a subsequent decision to freeze funds, are fulfilled. That implies that the judicial review of the lawfulness of the decision in question extends to the assessment of the facts and circumstances relied on as justifying it, and to the evidence and information on which that assessment is based. The Court must also ensure that the right to a fair hearing is observed and that the requirement of a statement of reasons is satisfied and also, where applicable, that the overriding considerations relied on exceptionally by the Council in disregarding those rights are well founded. That review is all the more imperative where it constitutes the only procedural safeguard ensuring that a fair balance is struck between the need to combat international terrorism and the protection of fundamental rights. Since the restrictions imposed by the Council on the right of the parties concerned to a fair hearing must be offset by a strict judicial review which is independent and impartial, the Community Courts must be able to review the lawfulness and merits of the measures to freeze funds without it being possible to raise objections that the evidence and information used by the Council is secret or confidential. (see paras 153-155)JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)12 December 2006 (*) In Case T‑228/02,Organisation des Modjahedines du peuple d’Iran, established in Auvers-sur-Oise (France), represented by J.-P. Spitzer, lawyer, D. Vaughan QC, and É. de Boissieu, lawyer, applicant,Council of the European Union, represented by M. Vitsentzatos and M. Bishop, acting as Agents, defendant,supported byUnited Kingdom of Great Britain and Northern Ireland, represented initially by J.E. Collins, and subsequently by R. Caudwell and C. Gibbs, acting as Agents, assisted by S. Moore, Barrister, intervener,ACTION, initially, for annulment of Common Position 2002/340/CFSP of 2 May 2002 updating Common Position 2001/931/CFSP on the application of specific measures to combat terrorism (OJ 2002 L 116, p. 75), of Common Position 2002/462/CFSP of 17 June 2002 updating Common Position 2001/931/CFSP and repealing Common Position 2002/340 (OJ 2002 L 160, p. 32), and of Council Decision 2002/460/EC of 17 June 2002 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Decision 2002/334/EC (OJ 2002 L 160, p. 26), in so far as the applicant is included in the list of persons, groups and entities to which those provisions apply and, additionally, a claim for damages, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber),composed of J. Pirrung, President, N.J. Forwood and S. Papasavvas, Judges,Registrar: E. Coulon,having regard to the written procedure and further to the hearing on 7 February 2006,gives the followingJudgment Background to the case1 As appears from the case-file, the applicant, the Organisation des Modjahedines du peuple d’Iran (People’s Mujahidin of Iran, Mujahedin-e Khalq in Farsi), was founded in 1965 and set itself the objective of replacing the regime of the Shah of Iran, then the mullahs’ regime, by a democracy. In 1981 it took part in the foundation of the National Council of Resistance of Iran (NCRI), a body defining itself as the ‘parliament in exile of the Iranian resistance’. At the time of the facts giving rise to the present dispute, it was composed of five separate organisations and an independent section, making up an armed branch operating inside Iran. According to the applicant, however, it and all its members have expressly renounced all military activity since June 2001 and it no longer has an armed structure at the present time. 2 By order of 28 March 2001, the United Kingdom Secretary of State for the Home Department (‘the Home Secretary’) included the applicant in the list of organisations proscribed under the Terrorism Act 2000. The applicant brought two parallel actions against that order, one an appeal before the Proscribed Organisations Appeal Commission (‘POAC’), the other for judicial review before the High Court of Justice (England and Wales), Queen’s Bench Division (Administrative Court) (‘the High Court’). 3 On 28 September 2001, the United Nations Security Council (‘the Security Council’) adopted Resolution 1373 (2001) laying down strategies to combat terrorism by all means, in particular the financing thereof. Paragraph 1(c) of that resolution provides, inter alia, that all States must freeze without delay funds and other financial assets or economic resources of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled by such persons; and of persons and entities acting on behalf of, or at the direction of, such persons and entities. 4 On 27 December 2001, taking the view that action by the Community was needed in order to implement Security Council Resolution 1373 (2001), the Council adopted Common Position 2001/930/CFSP on combating terrorism (OJ 2001 L 344, p. 90) and Common Position 2001/931/CFSP on the application of specific measures to combat terrorism (OJ 2001 L 344, p. 93). 5 According to Article 1(1) of Common Position 2001/931, the latter applies ‘to persons, groups and entities involved in terrorist acts and listed in the Annex’. The applicant’s name does not appear in that list. 6 Article 1(2) and (3) of Common Position 2001/931 defines what is to be understood by ‘persons, groups and entities involved in terrorist acts’ and by ‘terrorist act’. 7 According to the terms of Article 1(4) of Common Position 2001/931, the list in the Annex is to be drawn up on the basis of precise information or material in the relevant file which indicates that a decision has been taken by a competent authority in respect of the persons, groups and entities concerned, irrespective of whether it concerns the instigation of investigations or prosecution for a terrorist act, an attempt to perpetrate, participate in or facilitate such an act based on serious and credible evidence or clues, or condemnation for such deeds. ‘Competent authority’ is understood to mean a judicial authority or, where judicial authorities have no competence in the relevant area, an equivalent competent authority in that area. 8 According to Article 1(6) of Common Position 2001/931, the names of persons and entities in the list in the Annex are to be reviewed at regular intervals and at least once every six months to ensure that there are grounds for keeping them in the list. 9 According to Articles 2 and 3 of Common Position 2001/931, the European Community, acting within the limits of the powers conferred on it by the EC Treaty, is to order the freezing of the funds and other financial assets or economic resources of persons, groups and entities listed in the Annex and is to ensure that funds, financial assets or economic resources or financial or other related services will not be made available, directly or indirectly, for their benefit. 10 On 27 December 2001, considering that a regulation was necessary in order to implement at Community level the measures described in Common Position 2001/931, the Council adopted, on the basis of Articles 60 EC, 301 EC and 308 EC, Council Regulation (EC) No 2580/2001 of 27 December 2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism (OJ 2001 L 344, p. 70). That regulation provides that, except as permitted thereunder, all funds belonging to a natural or legal person, group or entity included in the list referred to in Article 2(3) thereof are to be frozen. Likewise, it is prohibited to make funds available or provide financial services to those persons, groups or entities. The Council, acting by unanimity, is to establish, review and amend the list of persons, groups and entities to which the regulation applies, in accordance with the provisions laid down in Article 1(4), (5) and (6) of Common Position 2001/931. 11 The initial list of persons, groups and entities to which Regulation No 2580/2001 applies was established by Council Decision 2001/927/EC of 27 December 2001 establishing the list provided for in Article 2(3) of Council Regulation (EC) No 2580/2001 (OJ 2001 L 344, p. 83). The applicant’s name is not included in that list. 12 By judgment of 17 April 2002 the High Court dismissed the action for judicial review brought by the applicant against the Home Secretary’s order of 28 March 2001 (see paragraph 2 above), considering, essentially, that the POAC was the appropriate forum to hear the applicant’s arguments, including those alleging infringement of the right to be heard. 13 On 2 May 2002, the Council adopted, under Articles 15 EU and 34 EU, Common Position 2002/340/CFSP, updating Common Position 2001/931 (OJ 2002 L 116, p. 75). The annex thereto updates the list of persons, groups and entities to which Common Position 2001/931 applies. Point 2 of that annex, entitled ‘Groups and entities’, includes inter alia the applicant’s name, identified as follows : ‘Mujahedin-e Khalq Organisation (MEK or MKO) (minus the “National Council of Resistance of Iran” (NCRI)) (a.k.a. The National Liberation Army of Iran (NLA, the militant wing of the MEK), the People’s Mujahidin of Iran (PMOI), National Council of Resistance (NCR), Muslim Iranian Students’ Society)’. 14 By Council Decision 2002/334/EC of 2 May 2002 implementing Article 2(3) of Regulation (EC) No 2580/2001 and repealing Decision 2001/927 (OJ 2002 L 116, p. 33), the Council adopted an updated list of the persons, groups and entities to which that regulation applies. The applicant’s name is included in that list, in the same terms as those employed in the Annex to Common Position 2002/340. 15 On 17 June 2002, the Council adopted Common Position 2002/462/CFSP updating Common Position 2001/931 and repealing Common Position 2002/340 (OJ 2002 L 160, p. 32) and also Council Decision 2002/460/EC implementing Article 2(3) of Regulation (EC) No 2580/2001 and repealing Decision 2002/334 (OJ 2002 L 160, p. 26). The applicant’s name was maintained in the lists provided for by Common Position 2001/931 and by Regulation No 2580/2001 (‘the disputed lists’ or, in the case of the latter, ‘the disputed list’). 16 By judgment of 15 November 2002 the POAC dismissed the appeal brought by the applicant against the Home Secretary’s order of 28 March 2001 (see paragraph 2 above), considering, inter alia, that there was no requirement to hear the applicant’s views beforehand, such a hearing being impractical or undesirable in the context of legislation directed against terrorist organisations. According to that same decision, the legal scheme of the Terrorism Act 2000 provides a genuine opportunity for the applicant’s views to be heard before the POAC. 17 Since then, the Council has adopted a number of common positions and decisions updating the disputed lists. Those in force at the date of the close of the oral procedure were: Common Position 2005/936/CFSP of the Council of 21 December 2005 updating Common Position 2001/931 and repealing Common Position 2005/847/CFSP (OJ 2005 L 340, p. 80), and Council Decision 2005/930/EC of 21 December 2005 implementing Article 2(3) of Regulation No 2580/2001 and repealing Decision 2005/848/EC (OJ 2005 L 340, p. 64). The applicant’s name has always been maintained in the disputed lists by the acts thus adopted. Procedure and forms of order sought18 By application lodged at the Registry of the Court of First Instance on 26 July 2002, the applicant brought the present action, in which it claims that the Court should: – annul Common Positions 2002/340 and 2002/462 and also Decision 2002/460, in so far as those acts concern it;– consequently, declare those Common Positions and that decision to be inapplicable in respect of it;– order the Council to pay EUR 1 by way of damages for the harm suffered;– order the Council to pay the costs.19 In its defence, the Council contends that the Court should:– dismiss the action as in part inadmissible and in part unfounded;– order the applicant to pay the costs.20 By order of 12 February 2003, after the parties had been heard, the President of the Second Chamber of the Court of First Instance granted the United Kingdom of Great Britain and Northern Ireland leave to intervene in support of the forms of order sought by the Council. The intervener lodged its statement in intervention, seeking to have the action dismissed, and the applicant lodged its observations thereon within the prescribed periods. 21 After hearing the report of the Judge-Rapporteur, the Court of First Instance (Second Chamber) decided to open the oral procedure and, by way of measures of organisation of the procedure provided for in Article 64 of the Rules of Procedure of the Court of First Instance, called on the parties, by letter from the Registry of 1 December 2005, to submit their written observations on the inferences to be drawn, for the remainder of the present action, from the new factors, that is, the repeal and replacement on a number of occasions after the application was lodged of the acts challenged in that action, namely Common Positions 2002/340 and 2002/462 and also Decision 2002/460, by acts which have always maintained the applicant in the disputed lists. 22 In its observations, lodged at the Court Registry on 21 December 2005, the Council maintained that it was not necessary to express a view on the Common Positions, since the action is, in its view, in any event inadmissible in this respect. In respect of the Community decisions implementing Regulation No 2580/2001, the Council takes the view that it ‘is appropriate to consider that the application is directed against Decision 2005/848/EC’ of the Council of 29 November 2005 implementing Article 2(3) of Regulation No 2580/2001 and repealing Decision 2005/722/EC (OJ 2005 L 314, p. 46) ‘or any other decision having the same subject-matter which may be in force on the date the Court of First Instance delivers it judgment, in so far as that decision concerns the applicant’. 23 In its observations, lodged at the Registry on 2 January 2006, the applicant takes the view that ‘the present action must be considered to be directed against Common Position 2005/847/CFSP of the Council of 29 November 2005’ updating Common Position 2001/931 and repealing Common Position 2005/725/CFSP (OJ 2005 L 314, p. 41) and ‘Decision 2005/848’. Moreover, in the annex to its observations, the applicant attached a series of new documents, which were put into the case-file. By letter from the Registry of 19 January 2006, those observations and documents were notified to the Council, which acknowledged receipt thereof on 27 January 2006. 24 By letter lodged at the Registry on 25 January 2006, the applicant lodged written observations on the Report for the Hearing, in which it stated inter alia that the action must henceforth also be considered to be directed against Common Position 2005/936 and Decision 2005/930. In the annex to that letter, it attached a further series of new documents. The parties were notified that a decision as to whether those annexes would be put into the case-file would be taken at the hearing. 25 The parties presented oral argument and answered questions put to them by the Court at the hearing on 7 February 2006. During that hearing, the Council argued that the new documents lodged at the Registry by the applicant on 18 and 25 January 2006 (see paragraphs 23 and 24 above) had not been lodged properly. The Council added that it was not in a position to put forth its views properly on those documents because it had been notified of them too late. The Council accordingly asked the Court either not to allow the documents in question to be put into the case-file, or to order that the written procedure be reopened in order to allow the Council to set out its views in writing. The Court reserved its decision on that request, and also on whether the documents referred to in paragraph 24 above would be put into the case-file. 26 In response to a question from the Court, the applicant stated that, as acknowledged by the Council in its observations lodged at the Registry on 23 December 2005 (see paragraph 22 above), the present action must be considered to be directed against Common Position 2005/936 and Decision 2005/930 and also, as the case may be, against all other acts in force on the date the forthcoming judgment is delivered, having the same subject-matter as that common position and decision and having the same effect on it, in so far as those acts concern it. The procedural consequences of the repeal and replacement of the acts initially challenged27 As appears from paragraph 17 above, the acts initially challenged by the present action, namely Common Positions 2002/340 and 2002/462 and also Decision 2002/460 (‘the decision initially contested’), have been repealed and replaced on a number of occasions after the application was lodged, by acts which have always maintained the applicant in the disputed lists. On the date on which the oral procedure was closed, those were Common Position 2005/936 and Decision 2005/930. 28 It must be observed that, where a decision is, during the proceedings, replaced by another decision with the same subject-matter, this is to be considered a new factor allowing the applicant to adapt its claims and pleas in law. It would not be in the interests of the due administration of justice and the requirements of procedural economy to oblige the applicant to make a fresh application to the Court. Moreover, it would be inequitable if the institution in question were able, in order to counter criticisms of a decision contained in an application to the Community judicature, to amend the contested decision or to substitute another for it and to rely in the proceedings on such an amendment or substitution in order to deprive the other party of the opportunity of extending his original pleadings to the later decision or of submitting supplementary pleadings directed against that decision (Case 14/81 Alpha Steel v Commission [1982] ECR 749, paragraph 8; Joined Cases 351/85 and 360/85 Fabrique de Fer de Charleroi and Dillinger Hüttenwerke v Commission [1987] ECR 3639, paragraph 11; Case 103/85 Stahlwerke Peine-Salzgitter v Commission [1988] ECR 4131, paragraphs 11 and 12; and Joined Cases T‑46/98 and T‑151/98 CCRE v Commission [2000] ECR II‑167, paragraph 33). 29 In its judgments in Case T‑306/01 Yusuf and Al Barakaat International Foundation v Council and Commission [2005] ECR II-3533, appeal pending (‘Yusuf’), paragraph 73, and Case T‑315/01 Kadi v Council and Commission [2005] ECR II-3649, appeal pending (‘Kadi’), paragraph 54, the Court applied that case-law to the scenario in which a regulation of direct and individual concern to an individual is replaced, during the procedure, by a regulation having the same subject-matter. 30 Consistently with that case-law, it is therefore appropriate in the present case to allow the applicant’s request that its action be considered, on the date on which the oral procedure was closed, to seek annulment of Common Position 2005/936 and Decision 2005/930, in so far as those acts concern it, and to allow the parties to reformulate their claims, pleas and arguments in the light of those new factors, which implies, for them, the right to submit additional claims, pleas and arguments. 31 In those circumstances, it is appropriate, first, to allow the documents attached to the applicant’s observations on the Report for the Hearing, lodged at the Registry on 25 January 2006 (see paragraph 24 above), to be put into the case-file and, second, to dismiss the Council’s request that neither the documents in question, nor the applicant’s observations in response to the Court’s written question, lodged at the Registry on 18 January 2006 (see paragraphs 23 and 25 above), should be allowed into the case-file. The production of new evidence and documents and the submission of new offers of evidence must be regarded as an inherent part of the parties’ right to reformulate their claims, pleas and arguments, in the light of the new factors referred to in the preceding paragraphs. As to the question whether the addition to the case-file of the documents in question at a late stage justifies, in the present case, a reopening of the written procedure so as to safeguard the Council’s rights of defence (see paragraph 25 above), reference is made to paragraph 182 below. 32 As to the remainder, the Court considers that only actions for annulment of an act in existence adversely affecting the applicant may be brought before it. Accordingly, even if, as held in paragraph 30 above, the applicant may be permitted to reformulate its claims so as to seek annulment of acts which have, during the proceedings, replaced the acts initially challenged, that solution cannot authorise the speculative review of the lawfulness of hypothetical acts which have not yet been adopted (see order in Case T‑22/96 Langdon v Commission [1996] ECR II‑1009, paragraph 16, and case-law cited). 33 It follows that there are no grounds for allowing the applicant to reformulate its claims so that they are directed not only against Common Position 2005/936 and Decision 2005/930, but also, as the case may be, against any other acts in force at the time of the subsequent judgment, having the same subject-matter as those acts and having the same effect on it, in so far as those acts concern it (see paragraph 26 above). 34 Accordingly, for the purposes of the present action, the Court’s review will concern only those acts already adopted and still in force and challenged on the date on which the oral procedure closed, namely Common Position 2005/936 (‘the contested Common Position’) and Decision 2005/930 (‘the contested decision’) (collectively ‘the contested acts’), even if those acts have in turn been repealed and replaced by other acts before the date of delivery of the present judgment. 35 In such circumstances, the applicant still has an interest in obtaining annulment of the contested acts, in that the repeal of an act of an institution does not constitute recognition of the unlawfulness of that act and has only prospective effect, unlike a judgment annulling an act, by which the act is eliminated retroactively from the legal order and is deemed never to have existed. Moreover, as acknowledged by the Council at the hearing, if the contested acts are annulled, it will be obliged to take the measures necessary to comply with that judgment, pursuant to Article 233 EC, which may involve its amending or withdrawing, as the case may be, any acts which have repealed and replaced the acts contested subsequent to the close of the oral procedure (see, to that effect, Joined Cases T‑481/93 and T‑484/93 Exporteurs in Levende Varkens and Others v Commission [1995] ECR II‑2941, paragraphs 46 to 48). The second head of claim36 By its second head of claim, as reformulated at the hearing, the applicant asks the Court to declare the contested acts inapplicable to it, as a consequence of the partial annulment thereof sought by the first head of claim. 37 It is clear that the second head of claim, so formulated, has no scope independent of the first head of claim. That being so, it must be regarded as having no purpose. The application for annulment of the contested Common Position Arguments of the parties38 The applicant maintains that the present action is admissible, since both the contested Common Position and the contested decision concern it directly and individually and affect it adversely. It states, more specifically, that the Court is competent to review the lawfulness of the Common Position in question, failing which justice will be denied. 39 According to the applicant, the principles of a State governed by the rule of law, as enshrined in Article 6(2) EU, apply to all of the Union’s acts, including those adopted as part of the Common Foreign and Security Policy (CFSP) or police and judicial cooperation in criminal matters (commonly known as ‘Justice and Home Affairs’) (JHA). As the right to obtain a judicial determination is part of the foundation of a State governed by the rule of law, as also evidenced by Articles 35 EU and 46 EU and the Court of Justice’s case-law (Case 222/84 Johnston [1986] ECR 1651, paragraph 18, and Case C‑50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I‑6677, paragraphs 38 and 39), none of those acts must fall outside the scope of judicial review by the Court of Justice and the Court of First Instance. Otherwise, according to the applicant, a lawless zone would be created. 40 In any event, the legislative process pursued by the Council in this case must be held to be illegal, as must the basing of the contested Common Position on the provisions relating to the CFSP. In the light of, inter alia, the primacy of Community law as enshrined in Article 47 EU, the Court is competent to declare illegal an act adopted on the basis of CFSP or JHA. The applicant refers to Case C‑170/96 Commission v Council [1998] ECR I‑2763. 41 That process has been characterised by the steadfast will on the part of the Council, relying on an international rule, to circumvent the imperatives of the protection of fundamental rights and democratic, legislative or judicial review of its acts, in disregard of the general principles of Community law. However, the persons in charge of the actual implementation of those acts of the Union remain subject to judicial review, in the light of fundamental rights. 42 That will was, moreover, criticised by the European Parliament when it was consulted on the draft text of Regulation No 2580/2001. It is illustrated, inter alia, by the fact that the Council gave itself the power to implement Regulation No 2580/2001, by way of decisions which, in addition, do not appear to contain reasons. 43 Without denying that the applicant is directly and individually concerned by the contested acts, the Council and the United Kingdom contend that the action is inadmissible in so far as it is directed against the contested Common Position. 44 The Council and the United Kingdom submit that, consequently, the present action must be restricted to a review of the lawfulness of the contested decision, by which the measures provided for by Regulation No 2580/2001 are made applicable to the applicant. Findings of the Court 45 According to the settled case-law of the Court (order of 7 June 2004 in Case T‑338/02 Segi and Others v Council [2004] ECR II‑1647, appeal pending, paragraph 40 et seq.; order of 7 June 2004 in Case T‑333/02 Gestoras Pro Amnistía and Others v Council, not published in the ECR, appeal pending, paragraph 40 et seq., and order of 18 November 2005 in Case T‑299/04 Selmani v Council and Commission, not published in the ECR, paragraphs 52 to 59), the action must be dismissed as, in part, clearly inadmissible and, in part, clearly unfounded in so far as it seeks annulment of the contested Common Position. 46 The Court notes, at the outset, that that Common Position is not an act of the Council adopted on the basis of the EC Treaty and subject, as such, to the review of its lawfulness provided for by Article 230 EC, but rather an act of the Council, composed of representatives of the Governments of the Member States, adopted on the basis of Articles 15 EU, under Title V of the EU Treaty relating to the CFSP, and 34 EU, under Title VI of the EU Treaty relating to JHA. 47 It is clear that neither Title V of the EU Treaty relating to the CFSP nor Title VI of the EU Treaty relating to JHA make any provision for actions for annulment of common positions before the Community Courts. 48 Under the EU Treaty, in the version resulting from the Treaty of Amsterdam, the powers of the Court of Justice are listed exhaustively in Article 46 EU. 49 That article does not confer any competence on the Court in relation to the provisions of Title V of the EU Treaty.50 With respect to the relevant provisions of Title VI of the EU Treaty, that article provides:‘The provisions of the Treaty establishing the European Community, the Treaty establishing the European Coal and Steel Community and the Treaty establishing the European Atomic Energy Community concerning the powers of the Court of Justice of the European Communities and the exercise of those powers shall apply only to the following provisions of this Treaty: ...(b) provisions of Title VI, under the conditions provided for by Article 35 [EU];(d) Article 6(2) [EU] with regard to action of the institutions, in so far as the Court has jurisdiction under the Treaties establishing the European Communities and under this Treaty; ...’.51 According to the relevant provisions of Article 35 EU:‘1. The Court of Justice shall have jurisdiction, subject to the conditions laid down in this Article, to give preliminary rulings on the validity and interpretation of framework decisions, and decisions on the interpretation of conventions established under this Title and on the validity and interpretation of the measures implementing them. …6. The Court of Justice shall have jurisdiction to review the legality of framework decisions and decisions in actions brought by a Member State or the Commission on grounds of lack of competence, infringement of an essential procedural requirement, infringement of this Treaty or of any rule of law relating to its application, or misuse of powers. The proceedings provided for in this paragraph shall be instituted within two months of the publication of the measure. …’.52 It follows from Articles 35 EU and 46 EU that, under Title VI of the EU Treaty, legal remedies seeking a ruling as to validity or annulment are available only as against framework decisions, decisions and the measures implementing conventions provided for by Article 34(2)(b), (c) and (d) EU, with the exception of the common positions provided for in Article 34(2)(a) EU. 53 It should further be noted that the safeguard of observance of fundamental rights referred to in Article 6(2) EU is not relevant to the present case, as Article 46(d) EU gives the Court of Justice no further competence (Segi and Others v Council, paragraph 45 above, paragraph 37). 54 In the Community legal system founded on the principle of conferred powers, as embodied in Article 5 EC, the absence of an effective legal remedy as claimed by the applicant cannot in itself confer independent Community jurisdiction in relation to an act adopted in a related yet distinct legal system, namely that deriving from Titles V and VI of the EU Treaty (Segi and Others v Council, paragraph 45 above, paragraph 38). Nor can the applicant rely on Unión de Pequeños Agricultores v Council, paragraph 39 above. In that judgment (paragraph 40), the Court based its reasoning on the fact that the EC Treaty has established a complete system of legal remedies and procedures designed to ensure judicial review of the lawfulness of acts of the institutions. However, as indicated above, the EU Treaty has, in relation to acts adopted on the basis of Titles V and VI thereof, established a limited system of judicial review, certain areas being outside the scope of that review and certain legal remedies not being available. 55 The Court notes in this respect, however, that, without its being necessary to consider the possibility of challenging the validity of a common position before the courts of the Member States, the contested Common Position requires the adoption of implementing Community and/or national acts in order to be effective. It has not been contended that those implementing acts cannot themselves be the subject-matter of an action for annulment either before the Community Courts or before the national courts. Thus, it has not been established that the applicant does not have available to it an effective legal remedy, albeit indirect, against the acts adopted pursuant to the contested Common Position which affect it adversely and directly. In the present case, moreover, the applicant has availed itself of its right of action against the contested decision. 56 In those circumstances, the Court of First Instance has jurisdiction to hear an action for annulment directed against a Common Position adopted on the basis of Articles 15 EU and 34 EU only strictly to the extent that, in support of such an action, the applicant alleges an infringement of the Community’s competences (Selmani v Council and Commission, paragraph 45 above, paragraph 56). The Community Courts have jurisdiction to examine the content of an act adopted pursuant to the EU Treaty in order to ascertain whether that act affects the Community’s competences and to annul it if it should emerge that it ought to have been based on a provision of the EC Treaty (see, to that effect, Commission v Council, paragraph 40 above, paragraphs 16 and 17, and Case C‑176/03 Commission v Council [2005] ECR I‑7879, paragraph 39; Segi and Others v Council; Gestoras Pro Amnistía and Others v Council, paragraph 45 above, paragraph 41; see also, by analogy, Case C‑124/95 Centro-Com [1997] ECR I‑81, paragraph 25). 57 In the present case, to the extent that the applicant alleges misuse of powers on the part of the Council acting in Union matters in disregard of the Community’s competences, in order to deprive it of all forms of judicial protection, the present action therefore comes within the jurisdiction of the Community Courts. 58 The Court finds, however, that the Council, acting in Union matters, far from infringing the Community’s competences, on the contrary, relied on them in order to implement the contested Common Position. First, the Council, having made use of the relevant Community powers, in particular those laid down in Articles 60 EC and 301 EC, cannot be criticised for having been unaware of them. The applicant has not identified any relevant legal basis other than the provisions actually used in the present case which might have been disregarded, contrary to Article 47 EU. Second, those provisions themselves provide for the prior adoption of a common position or a joint action in order to be applicable. It follows that the prior adoption of a common position before the implementation of the Community competences exercised in the present case demonstrates compliance with those competences and not breach thereof. Moreover, even if the use of a common position on the basis of the EU Treaty means that the persons affected are denied a direct remedy before the Community Courts, namely the possibility of challenging directly the lawfulness of the contested Common Position, such a result does not constitute as such a disregard of the Community’s competences. Lastly, with regard to the Parliament resolution of 7 February 2002, in which the Parliament criticises the choice of a legal basis coming within the field of the EU Treaty for the establishment of the list of persons, groups or entities involved in terrorist acts, it must be noted that that criticism concerns a political choice and does not call into question, as such, the lawfulness of the legal basis chosen or concern the question of failure to observe Community competences (Segi and Others v Council, paragraph 45 above, paragraph 46). 59 The Court, exercising the limited judicial review within its competence under the EC Treaty, can therefore only find that the contested Common Position does not infringe the Community’s competences. 60 It follows from the foregoing that, to the limited extent to which the Court has jurisdiction to hear and determine this action in so far as it is directed against the contested Common Position, that action must be dismissed as manifestly unfounded. The action for annulment of the contested decision61 In support of its claim for annulment of the contested decision, the applicant puts forward three pleas in law. The first plea comprises five parts, alleging infringement of the right to a fair hearing, infringement of essential procedural requirements, infringement of the right to effective judicial protection, infringement of the presumption of innocence and a manifest error of assessment. The second plea is based on infringement of the right to revolt against tyranny and oppression. The third is based on infringement of the principle of non-discrimination. 62 It is appropriate to begin by examining the first plea.63 Under the first plea, the applicant does not contest, as such, either the lawfulness or legitimacy of measures such as the freezing of funds provided for by the contested acts directed against the persons, groups and entities involved in terrorist acts, within the meaning of Common Position 2001/931. 64 The applicant does maintain, however, in the first part of that plea, that the contested decision infringes its fundamental rights, in particular its right to a fair hearing as guaranteed in particular in this case by Article 6(2) EU and by Article 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (‘ECHR’), in that that act imposes sanctions on it and causes it considerable harm, without its having being able to express its views either before the adoption of the act or even afterwards. It submits that, given that its offices and managers are known, its representatives ought to have been summoned and heard before it was included in the disputed list. At the oral hearing, the applicant insisted that it was not even aware of the identity of the national authority that allegedly took the decision in respect of it for the purposes of Article 1(4) of Common Position 2001/931 and Article 2(3) of Regulation No 2580/2001, or of the evidence and information on the basis of which such a decision was taken. According to the applicant, it was included in the disputed list ‘apparently solely only on the basis of documents produced by the Tehran regime’. 65 The applicant adds, in the second and third parts of the plea, that its inclusion in the disputed list, without its views having been heard beforehand and without the slightest indication of the factual and legal grounds providing legal justification, also infringes the obligation to state reasons provided for in Article 253 EC as well as the right to effective judicial protection (Case 3/67 Mandelli v Commission [1968] ECR 25, and Johnston, paragraph 39 above). 66 The applicant further maintains, in the fourth part of the plea, that its inclusion also infringes the presumption of innocence, as guaranteed by Article 48(1) of the Charter of Fundamental Rights and also refers, in this respect, to the judgment of the European Court of Human Rights of 10 February 1995 in Allenet de Ribemont (series A No 308). 67 Lastly, the applicant maintains in the fifth part of the plea that its inclusion in the disputed list is the result of a manifest error of assessment. It states that there is no reason to accuse it of being a terrorist organisation. 68 The Council and the United Kingdom maintain that the contested decision does not infringe the fundamental rights infringement of which is alleged. 69 More specifically, with respect to the right to be heard, the Council observes that the applicant itself has stated that it wrote to the current President of the Council, before the adoption of the decision initially contested, in order to plead its case. The Council maintains that it heard the applicant’s views at that time before proceeding to freeze its funds. It refers to the order of the President of the Second Chamber of the Court of First Instance of 2 August 2000 in Case T‑189/00 R ‘Invest’ Import und Export and Invest Commerce v Commission [2000] ECR II‑2993, paragraph 41, which indirectly implies that early contacts with the authorities, setting out one’s point of view in detail and knowledge of the imminent inclusion in the blacklist are all factors which satisfy the right to be heard. 70 Moreover, the applicant has never contacted the Council again, since the decision initially contested was adopted, in order to have its case reconsidered with a view to its being removed from the disputed list. 71 In any event, it is not apparent from the ECHR, the Charter of Fundamental Rights, a non-binding instrument, or the constitutional traditions common to the Member States, that observance of the right to a fair hearing entails an unconditional right to be heard before the adoption of a civil or administrative sanction measure, such as that challenged in the present case. 72 The Council and the United Kingdom observe that exceptions to the general right to be heard during administrative procedures appear to be possible, at least in some Member States, on grounds of public interest, public policy or the maintenance of international relations, or when the purpose of the decision to be taken would be or could be defeated if the right in question were to be observed. The Council refers to German, French, Italian, English, Danish, Swedish, Irish and Belgian law by way of example. 73 The United Kingdom Government describes the special procedure applicable before the POAC, in the context of an action brought against a decision of the Home Secretary to prohibit an organisation he believes to be involved in terrorism, pursuant to the Terrorism Act 2000. One feature, among others, of that procedure is the appointment of special counsel to represent the applicant before the POAC, sitting in camera, or the fact that the POAC may take into consideration evidence which has not been divulged to that party or its legal representative, pursuant to the law or on grounds of public interest. In this case, the applicant was the subject of such a proscription decision (see paragraph 2 above), against which it has brought two parallel actions, one an appeal before the POAC, the other an action for judicial review before the High Court. By judgment of 17 April 2002, the High Court dismissed the action for judicial review (see paragraph 12 above) and, by judgment of 15 November 2002, the POAC dismissed the appeal (see paragraph 16 above). 74 Likewise, according to the Council and the United Kingdom, Community law does not confer on the applicant any right to be heard before being included in the disputed list. 75 According to the United Kingdom, the present case is different from the one which gave rise to the judgment in Case C‑135/92 Fiskano v Commission [1994] ECR I‑2885, relied on by the applicant, in that the inclusion of the applicant in the disputed list is not the implementation of a procedure concerning it, relating to a pre-existing right, but rather the adoption of a legislative or administrative measure by the Community institutions. A person affected by such a measure is not a defendant in a procedure and, consequently, the question of rights of the defence simply does not arise. Its rights are safeguarded by the possibility of bringing legal proceedings, in this case an action before the Court of First Instance on the basis of Article 230 EC, in order to have ascertained whether the rules at issue have been adopted legally and/or whether the applicant does in fact come within the scope of those rules. 76 The Council also refers, in the same vein, to Case 5/85 AKZO Chemie v Commission [1986] ECR 2585, paragraphs 20 and 24, and Case C‑54/99 Église de scientologie [2000] ECR I‑1335, paragraph 20. The Council doubts, moreover, that the principles deriving from case-law in competition and trade protection cases may be applied without reservation to the present case. In its view, the most relevant case-law for the present case is that which has held that, in the case of a person concerned by a Community sanction adopted on the proposal of a national authority, the right to be heard must actually be secured in the first place in the relations between that undertaking and the national administrative authority (‘Invest’ Import und Export and Invest Commerce v Commission, paragraph 69 above, paragraph 40). 77 The Council states, with regard to Article 6 of the ECHR, that there is nothing in the case-law of the European Court of Human Rights to indicate that the safeguards provided for by that provision should have been applied during the administrative procedure which led to the adoption of the contested decision. The freezing of the applicant’s assets is not a criminal penalty and cannot be equated with such a penalty under the gravity-related criteria applied by the European Court of Human Rights (Eur. Court H.R. Engel and Others, judgment of 8 June 1976, Series A No 22; Campbell and Fell, judgment of 28 June 1984, Series A No 80; and Öztürk, judgment of 23 October 1984, Series A No 85). That court has also held that Article 6(1) of the ECHR is not applicable to the administrative phases of an investigation before the administrative authorities. Only the manner in which the information gathered during the administrative inquiries is used in judicial proceedings is covered by the right to a fair hearing (Eur. Court H.R. Fayed, judgment of 21 September 1994, Series A No 294‑B). 78 The United Kingdom also disputes that Article 6(1) of the ECHR envisages the adoption of legislative or regulatory measures. That provision applies only to challenges concerning rights and obligations of a civil nature, and the safeguards it provides are applicable only where there is a dispute requiring a decision. It thus does not give individuals the right to be heard before the adoption of a set of general rules which interferes with their property rights. In such a situation, individuals are only entitled to bring a subsequent challenge against the lawfulness of those rules or the application thereof to their circumstances (Eur. Court H.R., Lithgow and Others, judgment of 8 July 1986, Series A No 102, and James and Others, judgment of 21 February 1986, Series A No 98). 79 In the present case, in the submission of the United Kingdom, neither the inclusion of the applicant in the disputed list nor, accordingly, the freezing of its assets come within the scope of Article 6(1) of the ECHR. Consequently, the applicant had no right to put forward its arguments before the adoption of those measures. Under that same provision, however, the applicant does have the right to bring legal proceedings to challenge the lawfulness of the acts in question. It has in fact exercised that right in bringing the present action. 80 In any event, the acts at issue in the present case, introduced as an emergency measure, are not disproportionate to the objective pursued and did not cause an unfair lack of balance between the requirements of the public interest and those relating to the protection of fundamental rights, it being understood that the right to a fair hearing may be exercised once those measures have been taken. 81 The Council and the United Kingdom point out that providing information to or hearing the views of the applicant before freezing its assets would have compromised the attainment of the important public interest objective pursued by Regulation No 2580/2001, which is to prevent funds from being used to finance terrorist activities. According to the Council and the United Kingdom, the applicant could have taken advantage of the time period allowed it to submit its comments to transfer those funds out of the Union. 82 The United Kingdom adds that there are in all likelihood overriding reasons of national security for not disclosing to the party concerned the information and evidence on the basis of which a competent authority may adopt a decision finding that an entity is involved in terrorism. 83 As to the alleged failure to state reasons, the Council contends that the contested decision, whilst not containing a specific statement of reasons, merely updates the list provided for by Regulation No 2580/2001, Article 2(3) of which lists the criteria on the basis of which the persons, groups and entities are included in the disputed list. That regulation, the contested Common Position and the contested decision, taken together in a context well known to the applicant, thus satisfy the obligation to state reasons as contemplated in the case-law, it being understood that the material conditions in the fight against terrorism are not the same as those existing in other areas, such as competition (Case C‑350/88 Delacre and Others v Commission [1990] ECR I‑395, paragraph 15; see, in the context of freezing funds, ‘Invest’ Import und Export and Invest Commerce v Commission, paragraph 69 above, paragraph 43). 84 The Council adds that the contested decision does not have any adverse effect on the presumption of innocence.85 As to the allegation of a manifest error of assessment, the Council and the United Kingdom contend that the applicant can hardly claim that it is not a terrorist organisation and that it does not therefore come within the scope of Article 2(3) of Regulation No 2580/2001. 86 The Council and the United Kingdom observe that, under Article 1(4) of Common Position 2001/931, the disputed list is to be established on the basis of precise information or material in the file which indicates that a decision has been taken by a competent national authority identifying a person, group or entity as being involved in terrorist activities. The applicant has not maintained, and nor does anything suggest, that it was not included in the disputed list on the basis of such a decision. 87 The Council acknowledges that, as set out in that same provision, it is to check that the national authorities comply with the criteria fixed by the Union. However, that check does not concern facts such as those alleged by the applicant, or information sometimes based on protected sources or on the actions of specialised units in the Member States. Given the essential role played in the procedure by the competent national authorities, the Council and the United Kingdom take the view that a challenge to the very facts in the light of which those authorities proposed the inclusion of a person in the disputed list or an application for review of their decision can properly be brought only at the national level. The United Kingdom observes in this regard that Article 7 of Regulation No 2580/2001 allows the Commission to amend the annex to that regulation on the basis of information provided by the Member States. 88 Moreover, the Home Secretary, who is the competent national authority in this area in the United Kingdom, has rejected an application brought by the applicant to have itself removed from the list of proscribed organisations pursuant to the Terrorism Act 2000. Whilst noting the applicant’s assertions that it has been involved in a legitimate struggle against an oppressive regime and that its acts of resistance have been focused on military targets in Iran, the Home Secretary declared that he could not accept ‘any right to resort to acts of terrorism, whatever the motivation’. The legal proceedings brought by the applicant against that decision have been rejected (see paragraph 73 above). Findings of the Court89 It is appropriate to begin by examining, together, the pleas alleging infringement of the right to a fair hearing, infringement of the obligation to state reasons and infringement of the right to effective judicial protection, which are closely linked. First, the safeguarding of the right to a fair hearing helps to ensure that the right to effective judicial protection is exercised properly. Second, there is a close link between the right to an effective judicial remedy and the obligation to state reasons. As held in settled case-law, the Community institutions’ obligation under Article 253 EC to state the reasons on which a decision is based is intended to enable the Community judicature to exercise its power to review the lawfulness of the decision and the persons concerned to know the reasons for the measure adopted so that they can defend their rights and ascertain whether or not the decision is well founded (Case 24/62 Germany v Commission [1963] ECR 63, 69; Case C‑400/99 Italy v Commission [2005] ECR I‑3657, paragraph 22; Joined Cases T‑346/02 and T‑347/02 Cableuropa and Others v Commission [2003] ECR II‑4251, paragraph 225). Thus, the parties concerned can make genuine use of their right to a judicial remedy only if they have precise knowledge of the content of and the reasons for the act in question (see, to that effect, Case C‑309/95 Commission v Council [1998] ECR I‑655, paragraph 18, and Case T‑89/96 British Steel v Commission [1999] ECR II‑2089, paragraph 33). 90 In the light of the principal arguments put forward by the Council and the United Kingdom, the Court will begin by considering whether the rights and safeguards alleged by the applicant to have been infringed may, in principle, apply in the context of the adoption of a decision to freeze funds on the basis of Regulation No 2580/2001. The Court will then determine the purpose of and identify the restrictions on those rights and safeguards in such a context. Lastly, the Court will rule on the alleged infringement of the rights and safeguards in question, in the specific circumstances of the present case. Applicability of the safeguards relating to observance of the right to a fair hearing, the obligation to state reasons and the right to effective judicial protection in the context of the adoption of a decision to freeze funds on the basis of Regulation No 2580/2001 – The right to a fair hearing91 According to settled case-law, observance of the right to a fair hearing is, in all proceedings initiated against a person which are liable to culminate in a measure adversely affecting that person, a fundamental principle of Community law which must be guaranteed even in the absence of any rules governing the procedure in question. That principle requires that any person on whom a penalty may be imposed must be placed in a position in which he can effectively make known his view of the matters on which the penalty is based (see Fiskano v Commission, paragraph 75 above, paragraphs 39 and 40, and case-law cited). 92 In the present case, the contested decision, by which an individual economic and financial sanction was imposed on the applicant (freezing of funds), undeniably affects the applicant adversely (see also paragraph 98 below). That case-law is, therefore, relevant to the present case. 93 It follows from that case-law that, subject to exceptions (see paragraph 127 et seq. below), the safeguarding of the right to be heard comprises, in principle, two main parts. First, the party concerned must be informed of the evidence adduced against it to justify the proposed sanction (‘notification of the evidence adduced’). Second, he must be afforded the opportunity effectively to make known his view on that evidence (‘hearing’). 94 So understood, the safeguarding of the right to a fair hearing in the context of the administrative procedure itself is to be distinguished from that resulting from the right to an effective judicial remedy against the act having adverse effects which may be adopted at the end of that procedure (see, to that effect, Case T‑372/00 Campolargo v Commission [2002] ECR-SC I‑A‑49 and II‑223, paragraph 36). The arguments of the Council and the United Kingdom relating to Article 6 of the ECHR (see paragraphs 77 to 79 above) are thus irrelevant to this plea. 95 Moreover, the safeguard relating to observance of the actual right to a fair hearing, in the context of the adoption of a decision to freeze funds on the basis of Regulation No 2580/2001, cannot be denied to the parties concerned solely on the ground, relied on by the Council and the United Kingdom (see paragraphs 78 and 79 above), that neither the ECHR nor the general principles of Community law confer on individuals any right whatsoever to be heard before the adoption of an act of a legislative nature (see, to that effect and by analogy, Yusuf, paragraph 29 above, paragraph 322). 96 It is true that the case-law relating to the right to be heard cannot be extended to the context of a Community legislative process culminating in the enactment of legislation involving a choice of economic policy and applying to the generality of the traders concerned (Case T‑521/93 Atlanta and Others v Council and Commission [1996] ECR II‑1707, paragraph 70, upheld on appeal in Case C‑104/97 P Atlanta v Commission and Council [1999] ECR I‑6983, paragraphs 34 to 38). 97 It is also true that the contested decision, which maintains the applicant in the disputed list, after the applicant had been included by the decision initially contested, has the same general scope as Regulation No 2580/2001 and, like that regulation, is directly applicable in all Member States. Thus, despite its title, it is an integral part of that regulation for the purposes of Article 249 EC (see, by analogy, order in Case T‑45/02 DOW AgroSciences v Parliament and Council [2003] ECR II‑1973, paragraphs 31 to 33, and case-law cited, and Yusuf, paragraph 29 above, paragraphs 184 to 188). 98 In the instant case, however, the contested regulation is not of an exclusively legislative nature. Whilst being of general application, it is of direct and individual concern to the applicant, to whom it refers by name as having to be included in the list of persons, groups and entities whose funds are to be frozen pursuant to Regulation No 2580/2001. Since it is an act which imposes an individual economic and financial sanction (see paragraph 92 above), the case-law cited in paragraph 96 above is therefore irrelevant (see, by analogy, Yusuf, paragraph 29 above, paragraph 324). 99 It is, moreover, appropriate to mention the aspects which distinguish the present case from the cases which gave rise to the judgments in Yusuf and Kadi, paragraph 29 above, where it was held that the Community institutions were not required to hear the parties concerned in the context of the adoption and implementation of a similar measure freezing the funds of persons and entities linked to Osama bin Laden, Al-Qaeda and the Taleban. 100 That solution was justified in those cases by the fact that the Community institutions had merely transposed into the Community legal order, as they were required to do, resolutions of the Security Council and decisions of its Sanctions Committee that imposed the freezing of the funds of the parties concerned, designated by name, without in any way authorising those institutions, at the time of actual implementation, to provide for any Community mechanism whatsoever for the examination or re-examination of individual situations. The Court inferred therefrom that the Community principle relating to the right to be heard could not apply in such circumstances, where a hearing of the persons concerned could not in any event lead the institution to review its position (Yusuf, paragraph 29 above, paragraph 328, and Kadi, paragraph 29 above, paragraph 258). 101 In the present case, by contrast, although Security Council Resolution 1373 (2001) provides inter alia in Paragraph 1(c) that all States must freeze without delay funds and other financial assets or economic resources of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts, of entities owned or controlled directly or indirectly by such persons, and of persons and entities acting on behalf of, or at the direction of, such persons and entities, it does not specify individually the persons, groups and entities who are to be the subjects of those measures. Nor did the Security Council establish specific legal rules concerning the procedure for freezing funds, or the safeguards or judicial remedies ensuring that the persons or entities affected by such a procedure would have a genuine opportunity to challenge the measures adopted by the States in respect of them. 102 Thus, in the context of Resolution 1373 (2001), it is for the Member States of the United Nations (UN) – and, in this case, the Community, through which its Member States have decided to act – to identify specifically the persons, groups and entities whose funds are to be frozen pursuant to that resolution, in accordance with the rules in their own legal order. 103 In that connection, the Council maintained at the hearing that, in the implementation of Security Council Resolution 1373 (2001), the measures that it adopted under circumscribed powers, which thereby benefit from the principle of primacy as contemplated in Articles 25 and 103 of the United Nations Charter, are essentially those provided for by the relevant provisions of Regulation No 2580/2001, which determine the content of the restrictive measures to be adopted in relation to the persons referred to in Paragraph 1(c) of that resolution. However, unlike the acts at issue in the cases which gave rise to the judgments in Yusuf and Kadi, paragraph 29 above, the acts which specifically apply those restrictive measures to a given person or entity, such as the contested decision, do not come within the exercise of circumscribed powers and accordingly do not benefit from the primacy effect in question. The Council submits that the adoption of those acts falls instead within the ambit of the exercise of the broad discretion it has in the area of the CFSP. 104 These submissions may, in substance, be approved by the Court, subject to the potential difficulties in applying Paragraph 1(c) of Resolution 1373 (2001) which may arise owing to the absence, to date, of a universally-accepted definition of the concepts of ‘terrorism’ and ‘terrorist act’ in international law (see, on this point, Final Document (A/60/L1) adopted by the UN General Assembly on 15 September 2005, on the occasion of the world summit celebrating the 60th anniversary of the UN). 105 Lastly, the Council stated at the oral hearing that, as the Community institution which adopted Regulation No 2580/2001 and the decisions implementing that regulation, it did not consider itself to be bound by the common positions adopted as part of the CFSP by the Council in its capacity as the institution composed of the representatives of the Member States, although it did consider it appropriate to ensure that its actions were consistent with the CFSP and the EC Treaty. 106 The Council adds, rightly, that the Community does not act under powers circumscribed by the will of the Union or that of its Member States when, as in the present case, the Council adopts economic sanctions measures on the basis of Articles 60 EC, 301 EC and 308 EC. That point of view is, moreover, the only one compatible with the actual wording of Article 301 EC, according to which the Council is to decide on the matter ‘by a qualified majority on a proposal from the Commission’, and that of Article 60(1) EC, according to which the Council ‘may take’, following the same procedure, the urgent measures necessary for an act under the CFSP. 107 Since the identification of the persons, groups and entities contemplated in Security Council Resolution 1373 (2001), and the adoption of the ensuing measure of freezing funds, involve the exercise of the Community’s own powers, entailing a discretionary appreciation by the Community, the Community institutions concerned, in this case the Council, are in principle bound to observe the right to a fair hearing of the parties concerned when they act with a view to giving effect to that resolution. 108 It follows that the safeguarding of the right to a fair hearing is, as a matter of principle, fully applicable in the context of the adoption of a decision to freeze funds under Regulation No 2580/2001. – The obligation to state reasons109 In principle, the safeguard relating to the obligation to state reasons provided for by Article 253 EC is also fully applicable in the context of the adoption of a decision to freeze funds under Regulation No 2580/2001, a point which has not been questioned by any of the parties. – The right to effective judicial protection110 As to the safeguard relating to the right to effective judicial protection, it should be borne in mind that, according to settled case-law, individuals must be able to avail themselves of effective judicial protection of the rights they have under the Community legal order, as the right to such protection is part of the general legal principles deriving from the constitutional traditions common to the Member States and has been enshrined in Articles 6 and 13 of the ECHR (see Case T‑279/02 Degussa v Commission [2006] II-0000, paragraph 421, and case-law cited). 111 This also applies particularly to measures to freeze the funds of persons or organisations suspected of terrorist activities (see, to that effect, Article XIV of the Guidelines on Human Rights and the Fight against Terrorism, adopted by the Committee of Ministers of the Council of Europe on 11 July 2002). 112 In the present case, the only reservation expressed by the Council, in relation to the applicability of the principle of that safeguard, is that the Court has no jurisdiction to review the internal lawfulness of the relevant provisions of Regulation No 2580/2001, because they were adopted by virtue of powers circumscribed by Security Council Resolution 1373 (2001) and therefore benefit from the principle of primacy referred to in paragraph 103 above. 113 It is not, however, necessary for the Court to rule on the well-foundedness of that reservation because, as will be discussed below, the present dispute can be resolved solely on the basis of a judicial review of the lawfulness of the contested decision, and none of the parties deny that that indeed comes within the Court’s competence. Purpose of and restrictions on the safeguards relating to the right to a fair hearing, the obligation to state reasons and the right to effective judicial protection in the context of the adoption of a decision to freeze funds under Regulation No 2580/2001 114 It is appropriate first, to define the purpose of the safeguard of the right to a fair hearing in the context of the adoption of a decision to freeze funds under Article 2(3) of Regulation No 2580/2001, distinguishing between an initial decision to freeze funds referred to in Article 1(4) of Common Position 2001/931 (‘the initial decision to freeze funds’) and any subsequent decision to maintain a freeze of funds, following a periodic review, as referred to in Article 1(6) of that common position (‘subsequent decisions to freeze funds’). 115 In that context, it should be noted, first, that the right to a fair hearing only falls to be exercised with regard to the elements of fact and law which are liable to determine the application of the measure in question to the person concerned, in accordance with the relevant rules. 116 In the circumstances of the present case, the relevant rules are laid down in Article 2(3) of Regulation No 2580/2001, according to which the Council, acting by unanimity, is to establish, review and amend the list of persons, groups and entities to which that regulation applies, in accordance with the provisions laid down in Article 1(4) to (6) of Common Position 2001/931. Thus, in accordance with Article 1(4) of Common Position 2001/931, the list is to be drawn up on the basis of precise information or material in the relevant file which indicates that a decision has been taken by a competent authority in respect of the persons, groups and entities concerned, irrespective of whether it concerns the instigation of investigations or prosecution for a terrorist act, an attempt to perpetrate, participate in or facilitate such an act based on serious and credible evidence or clues, or condemnation for such deeds. ‘Competent authority’ is understood to mean a judicial authority, or, where judicial authorities have no jurisdiction in the relevant area, an equivalent competent authority in that area. Moreover, the names of persons and entities in the list are to be reviewed at regular intervals and at least once every six months to ensure that there are grounds for keeping them in the list, as provided for by Article 1(6) of Common Position 2001/931. 117 As rightly pointed out by the Council and the United Kingdom, the procedure which may culminate in a measure to freeze funds under the relevant rules therefore takes place at two levels, one national, the other Community. In the first phase, a competent national authority, in principle judicial, must take in respect of the party concerned a decision complying with the definition in Article 1(4) of Common Position 2001/931. If it is a decision to instigate investigations or to prosecute, it must be based on serious and credible evidence or clues. In the second phase, the Council, acting by unanimity, must decide to include the party concerned in the disputed list, on the basis of precise information or material in the relevant file which indicates that such a decision has been taken. Next, the Council must, at regular intervals, and at least once every six months, ensure that there are grounds for keeping the party concerned in the list. Verification that there is a decision of a national authority meeting that definition is an essential precondition for the adoption, by the Council, of an initial decision to freeze funds, whereas verification of the consequences of that decision at the national level is imperative in the context of the adoption of a subsequent decision to freeze funds. 118 Accordingly, the observance of the right to a fair hearing in the context of the adoption of a decision to freeze funds is also liable to arise at those two levels (see, to that effect and by analogy, ‘Invest’ Import und Export and Invest Commerce v Commission, paragraph 69 above, paragraph 40). 119 The right of the party concerned to a fair hearing must be effectively safeguarded in the first place as part of the national procedure which led to the adoption, by the competent national authority, of the decision referred to in Article 1(4) of Common Position 2001/931. It is essentially in that national context that the party concerned must be placed in a position in which he can effectively make known his view of the matters on which the decision is based, subject to possible restrictions on the right to a fair hearing which are legally justified in national law, particularly on grounds of public policy, public security or the maintenance of international relations (see, to that effect, Eur. Court H.R., Tinnelly & Sons Ltd and Others and McElduff and Others v United Kingdom, judgment of 10 July 1998, Reports of Judgments and Decisions, 1998-IV, §78). 120 Next, the right of the party concerned to a fair hearing must be effectively safeguarded in the Community procedure culminating in the adoption, by the Council, of the decision to include or maintain it on the disputed list, in accordance with Article 2(3) of Regulation No 2580/2001. As a rule, in that area, the party concerned need only be afforded the opportunity effectively to make known his views on the legal conditions of application of the Community measure in question, namely, where it is an initial decision to freeze funds, whether there is specific information or material in the file which shows that a decision meeting the definition laid down in Article 1(4) of Common Position 2001/931 was taken in respect of him by a competent national authority and, where it is a subsequent decision to freeze funds, the justification for maintaining the party concerned in the disputed list. 121 However, provided that the decision in question was adopted by a competent national authority of a Member State, the observance of the right to a fair hearing at Community level does not usually require, at that stage, that the party concerned again be afforded the opportunity to express his views on the appropriateness and well-foundedness of that decision, as those questions may only be raised at national level, before the authority in question or, if the party concerned brings an action, before the competent national court. Likewise, in principle, it is not for the Council to decide whether the proceedings opened against the party concerned and resulting in that decision, as provided for by the national law of the relevant Member State, was conducted correctly, or whether the fundamental rights of the party concerned were respected by the national authorities. That power belongs exclusively to the competent national courts or, as the case may be, to the European Court of Human Rights (see, by analogy, Case T‑353/00 Le Pen v Parliament [2003] ECR II‑1729, paragraph 91, upheld on appeal in Case C‑208/03 P Le Pen v Parliament [2005] ECR I‑6051). 122 Nor, if the Community measure to freeze funds is adopted on the basis of a decision by a national authority of a Member State concerning investigations or prosecutions (rather than on the basis of a decision of condemnation), does the observance of the right to a fair hearing require, as a rule, that the party concerned be afforded the opportunity effectively to make known his views on whether that decision is ‘based on serious and credible evidence or clues’, as required by Article 1(4) of Common Position 2001/931. Although that element is one of the legal conditions of application of the measure in question, the Court finds that it would be inappropriate, in the light of the principle of sincere cooperation referred to in Article 10 EC, to make it subject to the exercise of the right to a fair hearing at Community level. 123 The Court notes that, under Article 10 EC, relations between the Member States and the Community institutions are governed by reciprocal duties to cooperate in good faith (see Case C‑339/00 Ireland v Commission [2003] ECR I‑11757, paragraphs 71 and 72, and case-law cited). That principle is of general application and is especially binding in the area of JHA governed by Title VI of the EU Treaty, which is moreover entirely based on cooperation between the Member States and the institutions (Case C‑105/03 Pupino [2005] ECR I‑5285, paragraph 42). 124 In a case of application of Article 1(4) of Common Position 2001/931 and Article 2(3) of Regulation No 2580/2001, provisions which introduce a specific form of cooperation between the Council and the Member States in the context of combating terrorism, the Court finds that that principle entails, for the Council, the obligation to defer as far as possible to the assessment conducted by the competent national authority, at least where it is a judicial authority, both in respect of the issue of whether there are ‘serious and credible evidence or clues’ on which its decision is based and in respect of recognition of potential restrictions on access to that evidence or those clues, legally justified under national law on grounds of overriding public policy, public security or the maintenance of international relations (see, by analogy, Case T‑353/94 Postbank v Commission [1996] ECR II‑921, paragraph 69, and case-law cited). 125 However, these considerations are valid only in so far as the evidence or clues in question were in fact assessed by the competent national authority referred to in the preceding paragraph. If, on the other hand, in the course of the procedure before it, the Council bases its initial decision or a subsequent decision to freeze funds on information or evidence communicated to it by representatives of the Member States without it having been assessed by the competent national authority, that information must be considered as newly-adduced evidence which must, in principle, be the subject of notification and a hearing at Community level, not having already been so at national level. 126 It follows from the foregoing that, in the context of relations between the Community and its Member States, observance of the right to a fair hearing has a relatively limited purpose in respect of the Community procedure for freezing funds. In the case of an initial decision to freeze funds, it requires, in principle, first, that the party concerned be informed by the Council of the specific information or material in the file which indicates that a decision meeting the definition given in Article 1(4) of Common Position 2001/931 has been taken in respect of it by a competent authority of a Member State, and also, where applicable, any new material referred to in paragraph 125 above and, second, that it must be placed in a position in which it can effectively make known its view on the information or material in the file. In the case of a subsequent decision to freeze funds, observance of the right to a fair hearing similarly requires, first, that the party concerned be informed of the information or material in the file which, in the view of the Council, justifies maintaining it in the disputed lists, and also, where applicable, of any new material referred to in paragraph 125 above and, second, that it must be afforded the opportunity effectively to make known its view on the matter. 127 At the same time, however, certain restrictions on the right to a fair hearing, so defined in terms of its purpose, may legitimately be envisaged and imposed on the parties concerned, in circumstances such as those of the present case, where what are in issue are specific restrictive measures, consisting of a freeze of the financial funds and assets of the persons, groups and entities identified by the Council as being involved in terrorist acts. 128 The Court therefore finds, as held in Yusuf, paragraph 29 above, and as submitted in the present case by the Council and the United Kingdom, that notification of the evidence adduced and a hearing of the parties concerned, before the adoption of the initial decision to freeze funds, would be liable to jeopardise the effectiveness of the sanctions and would thus be incompatible with the public interest objective pursued by the Community pursuant to Security Council Resolution 1373 (2001). An initial measure freezing funds must, by its very nature, be able to benefit from a surprise effect and to be applied with immediate effect. Such a measure cannot, therefore, be the subject-matter of notification before it is implemented (Yusuf, paragraph 29 above, paragraph 308; see also, to that effect and by analogy, the Opinion of Advocate General Warner in Case 136/79 National Panasonic v Commission [1980] ECR 2033, 2061, 2068, 2069). 129 However, in order for the parties concerned to be able to defend their rights effectively, particularly in legal proceedings which might be brought before the Court of First Instance, it is also necessary that the evidence adduced against them be notified to them, in so far as reasonably possible, either concomitantly with or as soon as possible after the adoption of the initial decision to freeze funds (see also paragraph 139 below). 130 In that context, the parties concerned must also have the opportunity to request an immediate re-examination of the initial measure freezing their funds (see, to that effect, in the case-law of the Community civil service, Case T‑211/98 F v Commission [2000] ECR-SC I‑A‑107 and II‑471, paragraph 34; Case T‑333/99 X v ECB [2001] ECR-SC II‑3021, paragraph 183, and Campolargo v Commission, paragraph 94 above, paragraph 32). The Court recognises, however, that such a hearing after the event is not automatically required in the context of an initial decision to freeze funds, in the light of the possibility that the parties concerned also have immediately to bring an action before the Court of First Instance, which also ensures that a balance is struck between observance of the fundamental rights of the persons included in the disputed list and the need to take preventive measures in combating international terrorism (see, to that effect and by analogy, the Opinion of Advocate General Warner in National Panasonic v Commission, paragraph 128 above, [1980] ECR 2069). 131 It must be emphasised, however, that the considerations just mentioned are not relevant to subsequent decisions to freeze funds adopted by the Council in connection with the re-examination, at regular intervals, at least every six months, of the justification for maintaining the parties concerned in the disputed list, provided for by Article 1(6) of Common Position 2001/931. At that stage, the funds are already frozen and it is accordingly no longer necessary to ensure a surprise effect in order to guarantee the effectiveness of the sanctions. Any subsequent decision to freeze funds must accordingly be preceded by the possibility of a further hearing and, where appropriate, notification of any new evidence. 132 The Court cannot accept the viewpoint put forward by the Council and the United Kingdom on this point at the oral hearing, to the effect that the Council need only hear the parties concerned, in the context of the adoption of a subsequent decision to freeze funds, if they have previously made an express request to that effect. Under Article 1(6) of Common Position 2001/931, the Council may only adopt such a decision after having ensured that maintaining the parties concerned in the disputed list remains justified, which implies that it must afford them the opportunity effectively to make known their views on the matter. 133 Next, the Court recognises that, in circumstances such as those of this case, where what is at issue is a temporary protective measure restricting the availability of the property of certain persons, groups and entities in connection with combating terrorism, overriding considerations concerning the security of the Community and its Member States, or the conduct of their international relations, may preclude the communication to the parties concerned of certain evidence adduced against them and, in consequence, the hearing of those parties with regard to such evidence, during the administrative procedure (see, by analogy, Yusuf, paragraph 29 above, paragraph 320). 134 Such restrictions are consistent with the constitutional traditions common to the Member States, as submitted by the Council and the United Kingdom, who have pointed out that exceptions to the general right to be heard in the course of an administrative procedure are permitted in many Member States on grounds of public interest, public policy or the maintenance of international relations, or when the purpose of the decision to be taken is or could be jeopardised if the right is observed (see the examples referred to in paragraph 72 above). 135 They are, moreover, consistent with the case-law of the European Court of Human Rights which, even in the more stringent context of adversarial criminal proceedings subject to the requirements of Article 6 of the ECHR, acknowledges that, in cases concerning national security and, more specifically, terrorism, certain restrictions on the right to a fair hearing may be envisaged, especially concerning disclosure of evidence adduced or terms of access to the file (see, by way of example, Chahal v United Kingdom, judgment of 15 November 1996, Report 1996-V, § 131, and Jasper v United Kingdom, judgment of 16 February 2000, No 27052/95, not published in Reports of Judgments and Decisions, §§ 51 to 53, and case-law cited; see also Article IX.3 of the Guidelines adopted by the Committee of Ministers of the Council of Europe, referred to in paragraph 111 above). 136 In the present circumstances, those considerations apply above all to the ‘serious and credible evidence or clues’ on which the national decision to instigate an investigation or prosecution is based, in so far as they may have been brought to the attention of the Council, but it is also conceivable that the restrictions on access may concern the specific content or the particular grounds for that decision, or even the identity of the authority that took it. It is even possible that, in certain, very specific circumstances, the identifiction of the Member State or third country in which a competent authority has taken a decision in respect of a person may be liable to jeopardise public security, by providing the party concerned with sensitive information which it could misuse. 137 It follows from all of the foregoing that the general principle of observance of the right to a fair hearing requires, unless precluded by overriding considerations concerning the security of the Community or its Member States, or the conduct of their international relations, that the evidence adduced against the party concerned, as identified in paragraph 126 above, should be notified to it, in so far as possible, either concomitantly with or as soon as possible after the adoption of an initial decision to freeze funds. Subject to the same reservations, any subsequent decision to freeze funds must, in principle, be preceded by notification of any new evidence adduced and a hearing. However, observance of the right to a fair hearing does not require either that the evidence adduced against the party concerned be notified to it before the adoption of an initial measure to freeze funds, or that that party automatically be heard after the event in such a context. 138 According to settled case-law, the purpose of the obligation to state the reasons for an act adversely affecting a person is, first, to provide the person concerned with sufficient information to make it possible to determine whether the act is well founded or whether it is vitiated by an error which may permit its validity to be contested before the Community Courts and, second, to enable the Community judicature to review the lawfulness of the decision (Case C‑199/99 P Corus UK v Commission [2003] ECR I‑11177, paragraph 145, and Joined Cases C‑189/02 P, C‑202/02 P, C‑205/02 P to C‑208/02 P and C‑213/02 P Dansk Rørindustri and Others v Commission [2005] ECR I‑5425, paragraph 462). The obligation to state reasons therefore constitutes an essential principle of Community law which may be derogated from only for compelling reasons (see Case T‑218/02 Napoli Buzzanca v Commission [2005] ECR II-0000, paragraph 57, and case-law cited). 139 The statement of reasons must therefore in principle be notified to the person concerned at the same time as the act adversely affecting him. A failure to state the reasons cannot be remedied by the fact that the person concerned learns the reasons for the act during the proceedings before the Community Courts (Case 195/80 Michel v Parliament [1981] ECR 2861, paragraph 22, and Dansk Rørindustri and Others v Commission, paragraph 138 above, paragraph 463). The possibility of regularising the total absence of a statement of reasons after an action has been started might prejudice the right to a fair hearing because the applicant would have only the reply in which to set out his pleas contesting the reasons which he would not know until after he had lodged his application. The principle of equality of the parties before the Community Courts would accordingly be affected (Case T‑132/03 Casini v Commission [2005] ECR II-0000, paragraph 33, and Napoli Buzzanca v Commission, paragraph 138 above, paragraph 62). 140 If the party concerned is not afforded the opportunity to be heard before the adoption of an initial decision to freeze funds, compliance with the obligation to state reasons is all the more important because it constitutes the sole safeguard enabling the party concerned, especially after the adoption of that decision, to make effective use of the legal remedies available to it to challenge the lawfulness of that decision (Case T‑237/00 Reynolds v Parliament [2005] ECR II-0000, paragraph 95; see also, to that effect, Joined Cases T‑371/94 and T‑394/04 British Airways and British Midland Airways v Commission [1998] ECR II‑2405, paragraph 64). 141 The Court has consistently held that the statement of reasons required by Article 253 EC must be appropriate to the measure at issue and to the context in which it was adopted. It must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review of the lawfulness thereof. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. It is not necessary for the statement of reasons to specify all the relevant matters of fact and law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In particular, the reasons given for a decision are sufficient if it was adopted in circumstances known to the party concerned which enable him to understand the scope of the measure concerning him (Case 125/80 Arning v Commission [1981] ECR 2539, paragraph 13; Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I-1719, paragraph 63; Case C-301/96 Germany v Commission [2003] ECR I-9919, paragraph 87; Case C‑42/01 Portugal v Commission [2004] ECR I‑6079, paragraph 66; and Joined Cases T‑228/99 and T‑233/99 Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission [2003] ECR II‑435, paragraphs 278 to 280). Moreover, the degree of precision of the statement of the reasons for a decision must be weighed against practical realities and the time and technical facilities available for making the decision (see Delacre and Others v Commission, paragraph 83 above, paragraph 16, and case-law cited). 142 In the context of the adoption of a decision to freeze funds under Regulation No 2580/2001, the grounds for that decision must be assessed primarily in the light of the legal conditions of application of that regulation to a given scenario, as laid down in Article 2(3) thereof and, by reference, in Article 1(4) or Article 1(6) of Common Position 2001/931, depending on whether it is an initial decision or a subsequent decision to freeze funds. 143 The Court cannot accept the position advocated by the Council that the statement of reasons may consist merely of a general, stereotypical formulation, modelled on the drafting of Article 2(3) of Regulation No 2580/2001 and Article 1(4) or (6) of Common Position 2001/931. In accordance with the principles referred to above, the Council is required to state the matters of fact and law which constitute the legal basis of its decision and the considerations which led it to adopt that decision. The grounds for such a measure must therefore indicate the actual and specific reasons why the Council considers that the relevant rules are applicable to the party concerned (see, to that effect, Case T‑117/01 Roman Parra v Commission [2002] ECR-SC I‑A‑27 and II‑121, paragraph 31, and Napoli Buzzanca v Commission, paragraph 138 above, paragraph 74). 144 That entails, in principle, that the statement of reasons of an initial decision to freeze funds must at least refer to each of the aspects referred to in paragraph 116 above and also, where applicable, the aspects referred to in paragraphs 125 and 126 above, whereas the statement of reasons for a subsequent decision to freeze funds must indicate the actual and specific reasons why the Council considers, following re-examination, that the freezing of the funds of the party concerned remains justified. 145 Moreover, when unanimously adopting a measure to freeze funds under Regulation No 2580/2001, the Council does not act under circumscribed powers. Article 2(3) of Regulation No 2580/2001, read together with Article 1(4) of Common Position 2001/931, is not to be construed as meaning that the Council is obliged to include in the disputed list any person in respect of whom a decision has been taken by a competent authority within the meaning of those provisions. This interpretation, endorsed by the United Kingdom at the oral hearing, is confirmed by Article 1(6) of Common Position 2001/931, to which Article 2(3) of Regulation No 2580/2001 also refers, and according to which the Council is to conduct a ‘review’ at regular intervals, at least once every six months, to ensure that ‘there are grounds’ for keeping the parties concerned in the disputed list. 146 It follows that, in principle, the statement of reasons for a measure to freeze funds under Regulation No 2580/2001 must refer not only to the statutory conditions of application of that regulation, but also to the reasons why the Council considers, in the exercise of its discretion, that such a measure must be adopted in respect of the party concerned. 147 The considerations set out in paragraphs 143 to 146 above must nevertheless take account of the fact that a decision to freeze funds under Regulation No 2580/2001, whilst imposing an individual economic and financial sanction, is, like that act, also regulatory in nature, as explained in paragraphs 97 and 98 above. Moreover, a detailed publication of the complaints put forward against the parties concerned might not only conflict with the overriding considerations of public interest which will be discussed in paragraph 148 below, but also jeopardise the legitimate interests of the persons and entities in question, in that it would be capable of causing serious damage to their reputation. Accordingly, the Court finds, exceptionally, that only the operative part of the decision and a general statement of reasons, of the type referred to in paragraph 143 above, need be in the version of the decision to freeze funds published in the Official Journal, it being understood that the actual, specific statements of reasons for that decision must be formalised and brought to the knowledge of the parties concerned by any other appropriate means. 148 Moreover, in circumstances such as those of this case, it must be recognised that the overriding considerations concerning the security of the Community and its Member States, or the conduct of their international relations, may preclude disclosure to the parties concerned of the specific and complete reasons for the initial or subsequent decision to freeze their funds, just as they may preclude the evidence adduced against those parties from being communicated to them during the administrative procedure. In that connection the Court refers to the considerations set out above, in particular in paragraphs 133 to 137 above, regarding the restrictions on the general principle of observance of the right to a fair hearing which may be permitted in such a context. Those considerations are valid, mutatis mutandis, in respect of the restrictions which may be imposed on the obligation to state reasons. 149 Although it is not applicable to the circumstances of the present case, the Court also considers that inspiration may be drawn from the provisions of Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States amending Regulation (EEC) No 1612/68 and repealing Directives 64/221/EEC, 68/360/EEC, 72/194/EEC, 73/148/EEC, 75/34/EEC, 75/35/EEC, 90/364/EEC, 90/365/EEC and 93/96/EEC (OJ 2004 L 158, p. 77, corrigendum OJ 2004 L 229, p. 35, corrigendum to the corrigendum OJ 2005 L 197, p. 34). Article 30(2) of that directive provides that ‘the persons concerned shall be informed, precisely and in full, of the public policy, public security or public health grounds on which the decision [restricting the freedom of movement and residence of a citizen of the Union or a member of his family] taken in their case is based, unless this is contrary to the interests of State security’. 150 In accordance with the settled case-law of the Court of Justice (Case 36/75 Rutili [1975] ECR 1219, and Case 131/79 Santillo [1980] ECR 1585) concerning Council Directive 64/221/EEC of 25 February 1964 on the co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ, English Special Edition 1963-1964, p. 117), repealed by Directive 2004/38, Article 6 of which was essentially identical to Article 30(2) of the latter, any person enjoying the protection of the provisions quoted must be entitled to a twofold safeguard, consisting of notification to him of the grounds on which any restrictive measure has been adopted in his case and the availability of a right of appeal. Subject to the same reservation, in particular, this requirement means that the State concerned must, when notifying an individual of a restrictive measure adopted in his case, give him a precise and comprehensive statement of the grounds for the decision, to enable him to take effective steps to prepare his defence. 151 It follows from all of the foregoing that, unless precluded by overriding considerations concerning the security of the Community and its Member States, or the conduct of their international relations, and subject also to what has been set out in paragraph 147 above, the statement of reasons for an initial decision to freeze funds must at least make actual and specific reference to each of the aspects referred to in paragraph 116 above and also, where applicable, to the aspects referred to in paragraphs 125 and 126 above, and state the reasons why the Council considers, in the exercise of its discretion, that such a measure must be taken in respect of the party concerned. Moreover, the statement of reasons for a subsequent decision to freeze funds must, subject to the same reservations, state the actual and specific reasons why the Council considers, following re-examination, that the freezing of the funds of the party concerned remains justified. 152 Lastly, with respect to the safeguard relating to the right to effective judicial protection, this is effectively ensured by the right the parties concerned have to bring an action before the Court against a decision to freeze their funds, pursuant to the fourth paragraph of Article 230 EC (see, to that effect, Eur. Court H.R., Bosphorus v Ireland, judgment of 30 June 2005, No 45036/98, not yet published in the Reports of Judgments and Decisions, § 165, and decision in Segi and Others and Gestoras pro Amnistía v The 15 Member States of the European Union, judgment of 23 May 2002, Nos 6422/02 and 9916/02, Reports of Judgments and Decisions, 2002-V). 153 Thus the judicial review of the lawfulness of a decision to freeze funds taken pursuant to Article 2(3) of Regulation No 2580/2001 is that provided for in the second paragraph of Article 230 EC, under which the Community Courts have jurisdiction in actions for annulment brought on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the EC Treaty or of any rule of law relating to its application or misuse of powers. 154 As part of that review, and having regard to the grounds for annulment put forward by the party concerned or raised by the Court of its own motion, it is for the Court to ensure, inter alia, that the legal conditions for applying Regulation No 2580/2001 to a particular scenario, as laid down in Article 2(3) of that regulation and, by reference, either Article 1(4) or Article 1(6) of Common Position 2001/931, depending on whether it is an initial decision or a subsequent decision to freeze funds, are fulfilled. That implies that the judicial review of the lawfulness of the decision in question extends to the assessment of the facts and circumstances relied on as justifying it, and to the evidence and information on which that assessment is based, as the Council expressly recognised in its written pleadings in the case giving rise to the judgment in Yusuf, paragraph 29 above (paragraph 225). The Court must also ensure that the right to a fair hearing is observed and that the requirement of a statement of reasons is satisfied and also, where applicable, that the overriding considerations relied on exceptionally by the Council in disregarding those rights are well founded. 155 In the present case, that review is all the more imperative because it constitutes the only procedural safeguard ensuring that a fair balance is struck between the need to combat international terrorism and the protection of fundamental rights. Since the restrictions imposed by the Council on the right of the parties concerned to a fair hearing must be offset by a strict judicial review which is independent and impartial (see, to that effect, Case C‑341/04 Eurofood [2006] ECR I-3813, paragraph 66), the Community Courts must be able to review the lawfulness and merits of the measures to freeze funds without it being possible to raise objections that the evidence and information used by the Council is secret or confidential. 156 Although the European Court of Human Rights recognises that the use of confidential information may be necessary when national security is at stake, that does not mean, in its view, that national authorities are free from any review by the national courts simply because they state that the case concerns national security and terrorism (see Eur. Court H.R., Chahal v United Kingdom, paragraph 135 above, § 131, and case-law cited, and Öcalan v Turkey, judgment of 12 March 2003, No 46221/99, not published in the Reports of Judgments and Decisions, § 106, and case-law cited). 157 The Court finds that, here also, inspiration may be drawn from the provisions of Directive 2004/38. As noted in the case-law referred to in paragraph 150 above, Article 31(1) of that directive provides that the persons concerned are to have access to judicial and, where appropriate, administrative means of redress in the host Member State to appeal against or seek review of any decision taken against them on the grounds of public policy, public security or public health. Moreover, Article 31(3) of that directive provides that the means of redress are to allow for an examination of the lawfulness of the decision, as well as of the facts and circumstances on which the proposed measure is based. 158 The question whether the applicant and/or its lawyers may be provided with the evidence and information alleged to be confidential, or whether they may be provided only to the Court, in accordance with a procedure which remains to be defined so as to safeguard the public interests at issue whilst affording the party concerned a sufficient degree of judicial protection, is a separate issue on which it is not necessary for the Court to rule in the present action (see nevertheless Eur. Court H.R., Chahal v United Kingdom, paragraph 135 above, §§ 131 and 144; Tinnelly & Sons and Others and McElduff and Others v United Kingdom, paragraph 119 above, §§ 49, 51, 52 and 78; Jasper v United Kingdom, paragraph 135 above, §§ 51 to 53; and Al-Nashif v Bulgaria, judgment of 20 June 2002, No 50963/99, not published in the Reports of Judgments and Decisions, §§ 95 to 97, and also Article IX.4 of the Guidelines adopted by the Committee of Ministers of the Council of Europe, cited in paragraph 111 above). 159 Lastly, it is true that the Council enjoys broad discretion in its assessment of the matters to be taken into consideration for the purpose of adopting economic and financial sanctions on the basis of Articles 60 EC, 301 EC and 308 EC, consistent with a common position adopted on the basis of the CFSP. Because the Community Courts may not, in particular, substitute their assessment of the evidence, facts and circumstances justifying the adoption of such measures for that of the Council, the review carried out by the Court of the lawfulness of decisions to freeze funds must be restricted to checking that the rules governing procedure and the statement of reasons have been complied with, that the facts are materially accurate, and that there has been no manifest error of assessment of the facts or misuse of power. That limited review applies, especially, to the Council’s assessment of the factors as to appropriateness on which such decisions are based (see paragraph 146 above and, to that effect, Eur. Court H.R., Leander v Sweden, judgment of 26 March 1987, Series A No 116, § 59, and Al-Nashif v Bulgaria, paragraph 158 above, §§ 123 and 124). Application to the present case160 The Court notes, first, that the relevant legislation, namely Regulation No 2580/2001 and Common Position 2001/931 to which it refers, does not explicitly provide for any procedure for notification of the evidence adduced or for a hearing of the parties concerned, either before or concomitantly with the adoption of an initial decision to freeze their funds or, in the context of the adoption of subsequent decisions, with a view to having them removed from the disputed list. At most, Article 1(6) of Common Position 2001/931 states that ‘the names of persons and entities in the list in the Annex shall be reviewed at regular intervals and at least once every six months to ensure that there are grounds for keeping them on the list’, and Article 2(3) of Regulation No 2580/2001 provides that ‘the Council … shall … review and amend the list …, in accordance with the provisions laid down in Article 1 … (6) of Common Position 2001/931’. 161 Next, the Court finds that at no time before this action was brought was the evidence adduced against the applicant notified to it. The applicant rightly points out that both the initial decision to freeze its funds and subsequent decisions, up to and including the contested decision, do not even mention the ‘specific information’ or ‘material in the file’ showing that a decision justifying its inclusion in the disputed list was taken in respect of it by a competent national authority. 162 Thus, even though the applicant learned that it was soon to be included in the disputed list, and even though it took the initiative to contact the Council in an attempt to prevent the adoption of such a measure (see paragraph 69 above), it had not been apprised of the specific evidence adduced against it in order to justify the sanction envisaged and was not, therefore, in a position effectively to make known its views on the matter. In those circumstances, the Council’s argument that it heard the applicant before proceeding with the freezing of funds cannot be accepted. 163 The foregoing considerations, concerning verification of respect for the right to a fair hearing, are also applicable, mutatis mutandis, to the determination of whether the obligation to state reasons has been fulfilled. 164 In the circumstances of the present case, neither the contested decision nor Decision 2002/334, which it updates, satisfies the requirement of a statement of reasons as set out above; they merely state, in the second recital in their preamble, that it is ‘desirable’ to adopt an up-to-date list of the persons, groups and entities to which Regulation (EC) No 2580/2001 applies. 165 Not only has the applicant been unable effectively to make known its views to the Council but, in the absence of any statement, in the contested decision, of the actual and specific grounds justifying that decision, it has not been placed in a position to avail itself of its right of action before the Court, given the aforementioned links between safeguarding the right to a fair hearing, the obligation to state reasons and the right to an effective legal remedy. It must be borne in mind that the possibility of regularising the total absence of a statement of reasons after an action has been started is currently viewed in the case-law as prejudicing the right to a fair hearing (see paragraph 139 above). 166 Moreover, neither the written pleadings of the different parties to the case, nor the file material produced before the Court, enable it to conduct its judicial review, since it is not even in a position to determine with certainty, after the close of the oral procedure, exactly which is the national decision referred to in Article 1(4) of Common Position 2001/931, on which the contested decision is based. 167 In its application, the applicant merely maintained that it was included in the disputed list ‘apparently solely on the basis of documents produced by the Tehran regime’. In its reply, it added, in particular, that ‘there was nothing by way of explanation as to why it was entered’ in the disputed list and that ‘the reasons for its inclusion were most likely diplomatic’. 168 In its defence and rejoinder, the Council refrained from taking any position on this issue.169 In its statement in intervention, the United Kingdom stated that ‘the Applicant [did] not allege, and there [was] nothing to suggest, that the Applicant [had] not [been] included in the Annex on the basis of [a decision adopted by a competent authority identifying the applicant as being involved in terrorist activities]’. That same statement also appears to indicate that, in the view of the United Kingdom, the decision in question was that of the Home Secretary of 28 March 2001, confirmed by decision of that Home Secretary of 31 August 2001, then, in an action for judicial review, by judgment of the High Court of 17 April 2002 and, lastly, on appeal, by decision of the POAC of 15 November 2002. 170 In its observations on the statement in intervention, the applicant did not specifically refute or even comment upon those observations of the United Kingdom. However, in the light of the applicant’s pleas and general arguments and, more specifically, its allegations referred to in paragraph 167 above, it is not possible simply to accept the United Kingdom’s position at face value. At the hearing, moreover, the applicant reiterated its position that it did not know which competent authority had adopted the national decision in respect of it, nor on the basis of what material and specific information that decision had been taken. 171 Furthermore, at the hearing, in response to the questions put by the Court, the Council and the United Kingdom were not even able to give a coherent answer to the question of what was the national decision on the basis of which the contested decision was adopted. According to the Council, it was only the Home Secretary’s decision, as confirmed by the POAC (see paragraph 169 above). According to the United Kingdom, the contested decision is based not only on that decision, but also on other national decisions, not otherwise specified, adopted by competent authorities in other Member States. 172 It is therefore clear that, even at the end of the oral procedure, the Court is not in a position to review the lawfulness of the contested decision. 173 In conclusion, the Court finds that the contested decision does not contain a sufficient statement of reasons and that it was adopted in the course of a procedure during which the applicant’s right to a fair hearing was not observed. Furthermore, the Court is not, even at this stage of the procedure, in a position to review the lawfulness of that decision. 174 Those considerations must therefore lead to the annulment of the contested decision, in so far as it concerns the applicant, without it being necessary to rule, as part of the action for annulment, on the last two parts of the first plea or on the other pleas and arguments put forward in the action. The claim for damages175 The applicant has not put forward any matters of fact or law in support of its claim seeking for the Council to pay it EUR 1 for the harm allegedly suffered. Neither the Council nor the intervener has expressed any view on this point in their written pleadings or at the hearing. 176 Pursuant to Article 19 of the Statute of the Court of Justice and Article 44(1)(c) of the Rules of Procedure of the Court of First Instance, an application must indicate the subject-matter of the proceedings and include a brief statement of the grounds relied on. The information given must be sufficiently clear and precise to enable the defendant to prepare his defence and the Court of First Instance to decide the case, if appropriate without other information. In order to ensure legal certainty and the sound administration of justice, if an action is to be admissible the essential points of fact and law on which it is based must be apparent from the text of the application itself, even if only stated briefly, provided the statement is coherent and comprehensible (see Case T‑19/01 Chiquita Brands and Others v Commission [2005] ECR II‑315, paragraph 64, and case-law cited). 177 To satisfy those requirements, an application for compensation for damage said to have been caused by a Community institution must indicate the evidence from which the conduct which the applicant alleges against the institution can be identified, the reasons why the applicant considers there is a causal link between the conduct and the damage it claims to have suffered, and the nature and extent of that damage (Case T‑38/96 Guérin automobiles v Commission [1997] ECR II‑1223, paragraphs 42 and 43, and Chiquita Brands and Others v Commission, paragraph 176 above, paragraph 65, and case-law cited). However, a claim for an unspecified form of damage is not sufficiently concrete and must therefore be regarded as inadmissible (Chiquita Brands and Others v Commission, paragraph 176 above, paragraph 66). 178 More specifically, a claim for damages in respect of non-material injury, whether as symbolic reparation or as genuine compensation, must give particulars of the nature of the injury alleged in connection with the conduct for which the defendant institution is held responsible and must quantify the whole of that injury, even if approximately (see Case T‑277/97 Ismeri Europa v Court of Auditors [1999] ECR II‑1825, paragraph 81, and case-law cited). 179 In the present case, the claim for damages contained in the application must in all likelihood be construed as compensation for non-material injury, as it is set at the symbolic amount of EUR 1. The fact remains, however, that the applicant has not specified the nature and type of that non-material injury nor, more importantly, identified the allegedly improper conduct of the Council which it is alleged is the cause of that injury. It is not for the Court to seek and identify, from amongst the various pleas put forward in support of the action for annulment, that or those on which it may consider the claim for damages to be based. Nor is it for the Court to make assumptions and ascertain whether there is a causal link between the conduct referred to in those pleas and the non-material injury alleged. 180 That being so, the claim for damages contained in the application lacks even the most basic detail and must, accordingly, be declared inadmissible, especially given that the applicant did not even attempt to remedy that defect in its reply. 181 It also follows that it is not necessary to rule, in connection with the claim for damages, on the pleas and arguments relied on by the applicant in support of its action for annulment, but not yet considered by the Court (see paragraph 174 above). The request to have the written procedure reopened 182 The considerations which have led the Court to annul the contested decision, in so far as it concerns the applicant, are in no respect based on the new documents lodged by it at the Registry on 18 and 25 January 2006 (see paragraphs 23 and 24 above). Although those documents were put into the case-file (see paragraph 31 above), they must therefore be regarded as being devoid of relevance for the purposes of the present judgment. In those circumstances, it is not necessary to grant the Council’s request to have the written procedure reopened (see paragraph 25 above). Costs183 Article 87(3) of the Rules of Procedure provides that the Court may order that costs be shared or that the parties bear their own costs if each party succeeds on some and fails on other heads. In the circumstances of the present case, the Council must be ordered to pay, in addition to its own costs, four-fifths of the applicant’s costs. 184 Under the first subparagraph of Article 87(4) of the Rules of Procedure, Member States which intervene in the proceedings are to bear their own costs. On those grounds,THE COURT OF FIRST INSTANCE (Second Chamber)hereby:1. Dismisses the action as in part inadmissible and in part unfounded in so far as it seeks annulment of Common Position 2005/936/CFSP of 21 December 2005 updating Common Position 2001/931/CFSP and repealing Common Position 2005/847/CFSP;2. Annuls, in so far as it concerns the applicant, Council Decision 2005/930/EC of 21 December 2005 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Decision 2005/848/EC;3. Dismisses the claim for damages as inadmissible;4. Orders the Council to bear its own costs and to pay four fifths of the applicant’s costs;5. Orders the United Kingdom of Great Britain and Northern Ireland to bear its own costs.Pirrung Forwood PapasavvasDelivered in open court in Luxembourg on 12 December 2006.E. Coulon J. PirrungRegistrar PresidentTable of contentsBackground to the caseProcedure and forms of order soughtThe procedural consequences of the repeal and replacement of the acts initially challengedThe second head of claimThe application for annulment of the contested Common PositionArguments of the partiesFindings of the CourtThe action for annulment of the contested decisionApplicability of the safeguards relating to observance of the right to a fair hearing, the obligation to state reasons and the right to effective judicial protection in the context of the adoption of a decision to freeze funds on the basis of Regulation No 2580/2001 – The right to a fair hearing– The obligation to state reasons– The right to effective judicial protectionPurpose of and restrictions on the safeguards relating to the right to a fair hearing, the obligation to state reasons and the right to effective judicial protection in the context of the adoption of a decision to freeze funds under Regulation No 2580/2001 Application to the present caseThe claim for damagesThe request to have the written procedure reopenedCosts* Language of the case: French. | bcee9-09c8df6-4cf0 | EN |
THE COURT RULES ON THE COMPATIBILITY OF THE UNITED KINGDOM TAX SYSTEM RELATING TO CROSS-BORDER PAYMENTS OF DIVIDENDS WITH COMMUNITY LAW | Test Claimants in Class IV of the ACT Group LitigationvCommissioners of Inland Revenue(Reference for a preliminary ruling from the High Court of Justice of England and Wales, Chancery Division(Freedom of establishment – Free movement of capital – Corporation tax – Payment of dividends – Tax credit – Separate treatment of resident and non-resident shareholders – Bilateral double taxation conventions)Summary of the Judgment1. Freedom of movement for persons – Freedom of establishment – Free movement of capital – Tax legislation2. Freedom of movement for persons – Freedom of establishment – Free movement of capital – Tax legislation(Arts 43 EC and 56 EC)3. Freedom of movement for persons – Freedom of establishment – Free movement of capital – Tax legislation 1. Articles 43 EC and 56 EC must be interpreted as meaning that, where a Member State has a system for preventing or mitigating a series of charges to tax or economic double taxation for dividends paid to residents by resident companies, it must treat dividends paid to residents by non-resident companies in the same way. The situation of shareholders resident in a Member State and receiving dividends from a company established in that State is comparable to that of shareholders who are resident in that State and receive dividends from a company established in another Member State, inasmuch as both the dividends deriving from a national source and those deriving from a foreign source may be subject, first, in the case of corporate shareholders, to a series of charges to tax and, secondly, in the case of ultimate shareholders, to economic double taxation. However, the company making the distribution and the shareholder to whom it is paid are not resident in the same Member State, the Member State in which the company making the distribution is resident is not in the same position as the Member State in which the shareholder receiving the distribution is resident. The position of a Member State in which both the companies making the distribution and the ultimate shareholders are resident is not comparable to that of a Member State in which a company is resident which pays dividends to a non-resident company, which pays them, in turn, to its ultimate shareholders, in that the second State acts, in principle, only as the State in which the distributed profits are derived. On the other hand, it is in its capacity as the Member State in which the shareholder is resident that, when a resident company pays dividends to its resident ultimate shareholders, that Member State grants to such shareholders, on payment of the dividends, a tax credit equal to the fraction of the advance corporation tax paid by the company which made the distributed profits. (see paras 55-56, 58, 64-65)2. Articles 43 EC and 56 EC do not prevent a Member State, on a distribution of dividends by a company resident in that State, from granting companies receiving those dividends which are also resident in that State a tax credit equal to the fraction of the corporation tax paid on the distributed profits by the company making the distribution, when it does not grant such a tax credit to companies receiving such dividends which are resident in another Member State and are not subject to tax on dividends in the first State. (see para. 74, operative part 1)3. Articles 43 EC and 56 EC do not preclude a situation in which a Member State does not extend the entitlement to a tax credit provided for in a double taxation convention concluded with another Member State for companies resident in the second State which receive dividends from a company resident in the first State to companies resident in a third Member State with which it has concluded a double taxation convention which does not provide for such an entitlement for companies resident in that third State. The fact that the reciprocal rights and obligations under the first convention apply only to persons resident in one of the two contracting Member States is an inherent consequence of bilateral double taxation conventions. (see paras 91, 94, operative part 2)JUDGMENT OF THE COURT (Grand Chamber)12 December 2006 (*) In Case C-374/04,REFERENCE for a preliminary ruling under Article 234 EC by the High Court of Justice of England and Wales, Chancery Division (United Kingdom), made by decision of 25 August 2004, received at the Court on 30 August 2004, in the proceedings Commissioners of Inland Revenue,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K. Lenaerts (Rapporteur), R. Schintgen and J. Klučka, Presidents of Chambers, J.N. Cunha Rodrigues, M. Ilešič, J. Malenovský and U. Lõhmus, Judges, Advocate General: L.A. Geelhoed,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 22 November 2005,after considering the observations submitted on behalf of:– Test Claimants in Class IV of the ACT Group Litigation, by G. Aaronson QC, D. Milne QC, P. Farmer and D. Cavender, Barristers,– the United Kingdom Government, by E. O’Neill and C. Gibbs, acting as Agents, and by G. Barling QC, D. Ewart and J. Stratford, Barristers, – the German Government, by W.-D. Plessing and U. Forsthoff, acting as Agents,– the French Government, by J.C. Gracia, acting as Agent,– Ireland, by D.J. O’Hagan, acting as Agent, and by A.M. Collins SC and G. Clohessy BL,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by P. Gentili, avvocato dello Stato,– the Netherlands Government, by H.G. Sevenster and M. De Grave, acting as Agents,– the Finnish Government, by A. Guimaraes-Purokoski, acting as Agent,– the Commission of the European Communities, by R. Lyal, acting as Agent,after hearing the Opinion of the Advocate General at the sitting on 23 February 2006,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Articles 43 EC, 56 EC, 57 EC and 58 EC. 2 The reference has been made in proceedings between groups of companies and the Commissioners of Inland Revenue relating to the refusal by the latter to grant a tax credit to non-resident companies in those groups for dividends paid to them by resident companies. Legal framework Community legislation3 Article 4(1) of Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6) provides: ‘Where a parent company, by virtue of its association with its subsidiary, receives distributed profits, the State of the parent company shall, except when the latter is liquidated, either: – refrain from taxing such profits, or– tax such profits while authorising the parent company to deduct from the amount of tax due that fraction of the corporation tax paid by the subsidiary which relates to those profits and, if appropriate, the amount of the withholding tax levied by the Member State in which the subsidiary is resident, pursuant to the derogations provided for in Article 5, up to the limit of the amount of the corresponding domestic tax.’ National legislation4 Under the tax legislation in force in the United Kingdom, the profits made during an accounting period by every company resident in that Member State are subject to corporation tax in that State. 5 From 1973 onwards, the United Kingdom of Great Britain and Northern Ireland operated a system of taxation known as ‘partial imputation’, under which, in order to avoid economic double taxation when a resident company distributed profits, part of the corporation tax paid by that company was imputed to its shareholders. Until 6 April 1999, the basis of that system was, on the one hand, advance payment of corporation tax by the company making the distribution, and, on the other hand, a tax credit granted to shareholders who had received a dividend. Advance corporation tax 6 Under section 14 of the Income and Corporation Taxes Act 1988 (‘ICTA’), in the version in force at the time of the facts in the main proceedings, a company resident in the United Kingdom which paid dividends to its shareholders was liable to pay advance corporation tax (‘ACT’), calculated by reference to the amount or value of the distribution made. 7 A company had the right to set the ACT paid in respect of a distribution made during a particular accounting period against the amount of mainstream corporation tax for which it was liable in respect of that accounting period, subject to certain restrictions. If the liability of a company for corporation tax was insufficient to allow the ACT to be set off in full, the surplus ACT could be carried back to a previous accounting period or carried forward to a later one, or surrendered to subsidiaries of that company, which could set it off against the amount for which they themselves were liable in respect of corporation tax. Surplus ACT could be surrendered only to United Kingdom-resident subsidiaries. 8 A group of companies in the United Kingdom could also elect to be taxed as a group, in which case companies belonging to that group could postpone payment of ACT until the parent company in the group made a distribution by way of dividend. That system, which formed the subject-matter of the judgment in Joined Cases C-397/98 and C-410/98 Metallgesellschaft and Others [2001] ECR I‑1727, is not at issue in these proceedings. The tax credit granted to resident shareholders 9 Under section 208 of ICTA, where a United Kingdom-resident company received dividends from a company that was also resident in the United Kingdom, it was not liable to corporation tax in respect of those dividends. 10 In addition, by virtue of section 231(1) of ICTA, every payment of dividends subject to ACT by a resident company to another resident company gave rise to a tax credit in favour of the latter company equal to the fraction of the ACT paid by the former company. In terms of section 238(1) of ICTA, the dividend received and the tax credit together constituted ‘franked investment income’ (‘FII’) in the hands of the company receiving the dividends. 11 A United Kingdom-resident company which received dividends from another resident company, the payment of which gave rise to entitlement to a tax credit, could recover the amount of ACT paid by the latter company and deduct it from the amount of ACT which it itself had to pay when making a distribution to its own shareholders, with the result that it was liable for ACT only on the excess. 12 Under Schedule F of ICTA, individual shareholders resident in the United Kingdom were liable to income tax on dividends received from a company resident in that Member State. Those shareholders were, nevertheless, entitled to a tax credit equal to the fraction of the ACT paid by that company. That tax credit could be deducted from the amount owed by that shareholder by way of income tax on the dividend, or could be paid to that person in cash if the amount of the tax credit exceeded the amount of his tax liability. 13 The effect of those provisions was that profits distributed by resident companies were taxed once at company level and were taxed at the level of the ultimate shareholder only to the extent that the latter’s income tax exceeded the amount of the tax credit to which he was entitled. The case of non-resident shareholders 14 A company not resident in the United Kingdom was, in principle, chargeable to tax on its income only in respect of revenue which had its source in that State, including dividends received from a United Kingdom-resident company. However, by virtue of section 233(1) of ICTA, since a non-resident company was not entitled to a tax credit in the United Kingdom, it was not liable to tax on those dividends. 15 By contrast, where, by virtue of a double taxation convention (‘DTC’) concluded by the United Kingdom, a non-resident company was entitled in that Member State to a full or partial tax credit, it was liable to income tax in the United Kingdom on the dividends which it received from a resident company. 16 Likewise, an individual who was not resident in the United Kingdom was, in principle, liable to income tax in that Member State on dividends deriving from a United Kingdom source but, in so far as that individual was not entitled in the United Kingdom to a tax credit under national legislation or a DTC, he was not liable to income tax on those dividends in that State. 17 Although the United Kingdom generally retains the right, in DTCs concluded with other Member States or with non-member countries, to tax the dividends paid by its residents to non-residents, the DTCs often contain restrictions on the rate of tax which the United Kingdom may charge. That maximum rate may vary depending on the circumstances and, in particular, according to whether the shareholder is entitled to a full or partial tax credit under the DTC. 18 Some DTCs concluded by the United Kingdom do not confer entitlement to a tax credit on companies resident in the other contracting State when those companies receive dividends from a United Kingdom‑resident company. That is the case, in particular, with the DTCs concluded with the Federal Republic of Germany and with Japan. 19 Other DTCs provide for a tax credit in certain circumstances. For example, the tax credit provided for under the DTC concluded by the United Kingdom with the Kingdom of the Netherlands is granted in full to shareholders resident in that Member State who control fewer than 10% of the voting rights in the company making the distribution and in part when shareholders control 10% or more of the voting rights. 20 The DTC concluded with the Kingdom of the Netherlands also contains a ‘limitation of benefits’ provision, in terms of which no entitlement to the tax credit under that DTC arises if the non-resident shareholder is itself owned by a company established in a State with which the United Kingdom has concluded a DTC which does not provide entitlement to a tax credit to companies receiving dividends from a United Kingdom‑resident company. 21 Those provisions of the legislation which applied in the United Kingdom were significantly amended by the Finance Act 1998, which applies to dividends paid from 6 April 1999. The legal rules described above are those which applied prior to that date. The main proceedings and the questions referred for preliminary ruling22 The main proceedings are part of a group litigation concerning ACT consisting of claims for restitution and/or compensation brought against the Commissioners of Inland Revenue before the Chancery Division of the High Court of Justice of England and Wales, following the judgment in Metallgesellschaft and Others.23 In that judgment, the Court, giving a ruling on questions referred for a preliminary ruling from the same national court, held, in reply to the first question referred, that it is contrary to Article 43 EC for the tax legislation of a Member State to afford companies resident in that State the possibility of benefiting from a taxation regime allowing them to pay dividends to their parent company without having to pay advance corporation tax where their parent company is also resident in that State but to deny them that possibility where their parent company has its seat in another Member State. 24 In its reply to the second question referred in those cases, the Court held that, where a subsidiary resident in one Member State has been obliged to pay advance corporation tax in respect of dividends paid to its parent company having its seat in another Member State even though, in similar circumstances, the subsidiaries of parent companies resident in the first State were entitled to opt for a taxation regime that allowed them to avoid that obligation, Article 43 EC requires that resident subsidiaries and their non-resident parent companies should have an effective legal remedy in order to obtain reimbursement of or reparation for the financial loss which they have sustained and from which the authorities of the Member State concerned have benefited as a result of the advance payment of tax by the subsidiaries. 25 In the main proceedings, the litigation before the national court concerning ACT comprises four separate classes, in respect of which common issues have been identified. Class IV of the litigation, at the time of the order for reference, encompasses claims by 28 groups of companies, all containing at least one non-resident company, which opposed the refusal of the Commissioners of Inland Revenue to grant a tax credit to such a non-resident company when it received dividends from a resident company. When the 26 The four cases selected by the national court as test cases for the purposes of this reference for a preliminary ruling concern applications brought both by resident companies and by non-resident companies belonging to the same group as the resident companies and which received dividends from them (‘the claimants in the main proceedings’). The cases involve dividends paid between 1974 and 1998 to companies resident in Italy (the Pirelli Group), France (the Essilor Group) and the Netherlands (the BMW and Sony Groups). 27 While, in the case of the Pirelli Group, the non-resident company holds a minority shareholding of at least 10% in the resident company, the other cases concern non-resident parent companies which have 100% control over their resident subsidiary. In the cases of the two parent companies resident in the Netherlands, the first is wholly owned by a company resident in Germany, while the second is owned by a company resident in Japan. 28 The national court observes that those claims concern issues already raised before the Court in Metallgesellschaft and Others, which the Court did not need to answer because of the reply it gave to the first and second questions referred to it by the national court. While in those cases the grant of a tax credit was considered only as an alternative to reimbursement of ACT or reparation for the loss incurred as a result of payment of ACT, the claims brought before the national court are directly concerned with the grant of a tax credit. 29 In those circumstances, the High Court of Justice of England and Wales, Chancery Division, decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Is it contrary to Article[s] 43 EC or 56 EC (having regard to Articles 57 EC and 58 EC) (or their predecessor provisions):(a) for Member State A (such as the United Kingdom):(i) to enact and keep in force legislation which confers an entitlement to a full tax credit in respect of dividends paid by companies resident in Member State A (“relevant dividends”) to individual shareholders resident in Member State A; (ii) to give effect to a provision in double taxation conventions concluded with certain other Member States and third countries which confers an entitlement to a full tax credit (less tax as provided for in those conventions) in respect of relevant dividends to individual shareholders resident in those other Member States and third countries; but not to confer an entitlement to any tax credit (whether full or partial) in respect of relevant dividends when paid by a subsidiary resident in Member State A (such as the United Kingdom) to a parent company resident in Member State B (such as Germany) either under domestic provisions or under the terms of the double taxation convention between those States? (b) for Member State A (such as the United Kingdom) to give effect to a provision in the applicable double taxation convention conferring an entitlement to a partial tax credit in respect of relevant dividends on a parent company resident in Member State C (such as the Netherlands), but not to confer such an entitlement on a parent company resident in Member State B (such as Germany), where there is no provision for a partial tax credit in the double taxation convention between Member State A and Member State B? (c) for Member State A (such as the United Kingdom) not to confer an entitlement to a partial tax credit in respect of relevant dividends on a company resident in Member State C (such as the Netherlands) which is controlled by a company resident in Member State B (such as Germany) when Member State A gives effect to provisions in double taxation conventions which confer such an entitlement: (i) on companies resident in Member State C which are controlled by residents of Member State C;(ii) on companies resident in Member State C which are controlled by residents of Member State D (such as Italy) where there is a provision conferring entitlement to a partial tax credit in respect of relevant dividends in the double taxation convention between Member State A and Member State D; (iii) on companies resident in Member State D irrespective of who controls those companies?(d) Does it make any difference to the answer to Question 1(c) that the company resident in Member State C is controlled, not by a company resident in Member State B, but by a company resident in a third country? 2. If the answer to any part of Question 1(a) to (c) is in the affirmative, what principles does Community law lay down with regard to the Community rights and remedies available in the circumstances set out in those questions? In particular: (a) is Member State A obliged to pay:(i) the full tax credit or an amount equivalent thereto, or(ii) the partial tax credit or an amount equivalent thereto, or (iii) the full or partial tax credit, or an amount equivalent thereto:1. net of any extra income tax payable or which would have been payable if the dividend paid to the relevant claimant had attracted a tax credit, 2. net of such tax calculated on some other basis?(b) to whom should such payment be made:(i) the relevant parent company in Member State B or Member State C, or(ii) the relevant subsidiary in Member State A?(c) is the right to such payment:(i) a right to reimbursement of sums unduly levied such that repayment is a consequence of, and an adjunct to, the right conferred by Article 43 [EC] and/or [Article] 56 [EC], and/or (ii) a right to compensation or damages such that the conditions for recovery laid down in Joined Cases C‑46/93 and C-48/93 Brasserie du Pêcheur and Factortame [[1996] ECR I-1029] must be satisfied, and/or (iii) a right to recover a benefit unduly denied and, if so:1. is such a right a consequence of, and an adjunct to, the right conferred by Article 43 [EC] and/or [Article] 56 [EC], or2. must the conditions for recovery laid down in [Brasserie du Pêcheur and Factortame] be satisfied, or 3. must some other conditions be met?(d) does it make any difference for the purposes of Question 2(c) above whether as a matter of the domestic law of [Member] State A the claims are brought as restitutionary claims or are brought or have to be brought as claims for damages? (e) in order to recover, is it necessary for the company making the claim to establish that it, or its parent, would have claimed a tax credit (full or partial as the case may be) if it had known that under Community law it was entitled to do so? (f) does it make any difference to the answer to Question 2(a) that in accordance with the ruling of the Court of Justice in [Metallgesellschaft and Others] the relevant subsidiary in Member State A may have been reimbursed or may be entitled in principle to reimbursement of, or in respect of, advance corporation tax in relation to the dividend paid to the relevant parent company in Member State B or Member State C? (g) what guidance, if any, does the Court of Justice think it appropriate to provide in the present cases as to which circumstances the national court ought to take into consideration when it comes to determine whether there is a sufficiently serious breach within the meaning of the judgment in [Brasserie du Pêcheur and Factortame], in particular as to whether, given the state of the case-law on the interpretation of the relevant Community law provisions, the breach was excusable?’ The questions referred Question 1(a)30 By Question 1(a), the national court essentially asks whether Articles 43 EC and 56 EC preclude a rule of a Member State, such as the rule at issue in the main proceedings, which, on a payment of dividends by a resident company, grants a full tax credit to the ultimate shareholders receiving the dividends who are resident in that Member State or in another State with which the first Member State has concluded a DTC providing for such a tax credit, but does not grant a full or partial tax credit to companies receiving such dividends which are resident in certain other Member States. 31 The file shows that, rather than putting before the Court an issue involving a difference in treatment between, on the one hand, ultimate shareholders, whether or not resident, receiving dividends paid by a resident company and, on the other hand, non‑resident companies receiving such dividends, the national court requests an interpretation of Community law which will enable it to determine the compatibility with Community law of the different treatment in the United Kingdom which applies, on the one hand, to a resident company which is entitled to a tax credit when it receives dividends from another resident company and whose ultimate resident shareholders are also entitled to a tax credit when they are paid dividends and, on the other hand, to a non-resident company which is not, save in particular cases covered by DTCs, entitled in the United Kingdom to a tax credit when it receives dividends from a resident company and whose ultimate shareholders, whether or not resident, are also not entitled to a tax credit. 32 Under the relevant United Kingdom legislation, while a resident company receiving dividends from another resident company is entitled to a tax credit equal to the amount of the advance corporation tax paid by the latter, conversely, a non-resident company receiving dividends from a resident company is entitled to a full or partial tax credit by virtue of that distribution only where such a tax credit is provided for under a DTC concluded between the State in which the latter company is resident and the United Kingdom. 33 It is true that, in their observations to the Court, the claimants in the main proceedings also refer to the less favourable situation of ultimate shareholders receiving dividends from a non‑resident company, who are not entitled to a tax credit, by comparison with ultimate shareholders who receive dividends from a resident company, who are entitled to such a credit under the relevant United Kingdom legislation, or, in the case of non-resident shareholders, by virtue of a DTC. However, it is clear that the claimants in the main proceedings rely on the less favourable treatment applying to shareholders in non‑resident companies in order only to object to a restriction on freedom of establishment and free movement of capital as regards those companies themselves. 34 The claimants in the main proceedings argue that the United Kingdom legislation in question contravenes Articles 43 EC and 56 EC, since it is liable to discourage non-resident companies from establishing subsidiaries in that Member State, from investing in the capital of resident companies and from raising capital in that State. That legislation cannot be justified either by a relevant difference between the situation of resident companies receiving dividends from a resident company and that of non-resident companies receiving such dividends, or by the objective of ensuring the cohesion of the national tax system or that of preventing the economic double taxation of distributed profits. 35 According to the claimants in the main proceedings, in order to enable non-resident companies receiving dividends from a resident company to place their shareholders on the same footing as shareholders of resident companies receiving such dividends, the United Kingdom should grant a tax credit to non-resident companies. 36 It should be recalled at the outset that, according to well-established case‑law, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (see, inter alia, Case C-35/98 Verkooijen [2000] ECR I‑4071, paragraph 32; Metallgesellschaft and Others, paragraph 37; and Case C‑471/04 Keller Holding [2006] ECR I-2107, paragraph 28). 37 As regards the question whether the national legislation at issue in the main proceedings falls within the scope of Article 43 EC on freedom of establishment or Article 56 EC on free movement of capital, it must be noted that the question referred concerns national measures relating to the taxation of dividends, in terms of which, irrespective of the extent of the holding of the shareholder receiving the dividend, a resident company receiving dividends from another resident company is granted a tax credit, whereas, for a non-resident company receiving such dividends, the grant of a tax credit is dependent on the provisions of such DTC, if any, as the United Kingdom may have concluded with the State in which that company is resident. Under some DTCs, such as that concluded with the Kingdom of the Netherlands, the amount of the tax credit varies depending on the extent of the holding of the shareholder in the company making the distribution. 38 It follows that the measures at issue may fall within the scope of both Article 43 EC and Article 56 EC. 39 The order for reference shows that three of the cases chosen as test cases in the proceedings before the national court concern United Kingdom-resident companies which are wholly owned by non-resident companies. As the nature of the interest in question will confer on the holder definite influence over the company’s decisions and allow it to determine the company’s activities, the provisions of the EC Treaty on freedom of establishment will apply (Case C-251/98 Baars [2000] ECR I-2787, paragraphs 21 and 22; Case C-436/00 X and Y [2002] ECR I‑10829, paragraphs 37 and 66 to 68; and Case C-196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I-0000, paragraph 31). 40 However, as the Advocate General states in points 28 and 30 of his Opinion, there is not sufficient information before the Court to enable it to determine the nature of the relevant holding in the fourth test case or that of the holding of other companies that are parties to the dispute. It may therefore be that the dispute also relates to the effect of the national legislation at issue in the main proceedings on dividends paid by a resident company to non-resident companies having a holding which does not give them definite influence over the decisions of the company making the distribution and does not allow them to determine its activities. That legislation must therefore also be considered in the light of the Treaty provisions on the free movement of capital. 41 As regards, first of all, consideration of the question referred from the point of view of freedom of establishment, the claimants in the main proceedings contend that, since, apart from certain cases covered by DTCs, the relevant United Kingdom legislation does not grant a tax credit to a non-resident company receiving dividends from a resident company or to its ultimate shareholders, whether resident or non‑resident, that legislation restricts the freedom of such a non-resident company to establish subsidiaries in that Member State. By comparison with resident companies receiving dividends from a resident company, a non-resident company is in an unfavourable position, in that, since its shareholders are not entitled to a tax credit, that company must increase the amount of its dividends in order for its shareholders to receive a sum equivalent to that which they would receive if they were shareholders in a resident company. 42 It should be pointed out in that regard that freedom of establishment, which Article 43 EC grants to Community nationals and which includes the right for them to take up and pursue activities as self-employed persons and to set up and manage undertakings, under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected, entails, in accordance with Article 48 EC, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Community, the right to exercise their activity in the Member State concerned through a subsidiary, branch or agency (see, in particular, Case C-307/97 Saint‑Gobain ZN [1999] ECR I-6161, paragraph 35; Case C-446/03 Marks & Spencer [2005] ECR I-10837, paragraph 30; and Cadbury Schweppes and Cadbury Schweppes Overseas, paragraph 41). 43 In the case of companies, it should be borne in mind that their registered office for the purposes of Article 48 EC serves, in the way same as nationality in the case of individuals, as the connecting factor with the legal system of a Member State. Acceptance of the proposition that the Member State in which a company seeks to establish itself may freely apply different treatment merely by reason of its registered office being situated in another Member State would deprive Article 43 EC of all meaning (see, to that effect, Case 270/83 Commission v France [1986] ECR 273, paragraph 18; Case C-330/91 Commerzbank [1993] ECR I‑4017, paragraph 13; Metallgesellschaft and Others, paragraph 42; and Marks & Spencer, paragraph 37). Freedom of establishment thus aims to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination based on the place in which companies have their seat (see, to that effect, Commission v France, paragraph 14, and Saint‑Gobain ZN, paragraph 35). 44 In the present case, it is not disputed that a company resident in the United Kingdom which receives dividends from another resident company is entitled to a tax credit in that Member State, equal to the fraction of the amount of the ACT paid by the latter, whereas a non‑resident company receiving dividends from a resident company is not entitled to such an advantage, unless pursuant to such DTC, if any, as may have been concluded between the State in which it is resident and the United Kingdom. 45 Likewise, where a resident company in turn pays dividends to its ultimate shareholders and is accordingly liable to pay ACT, those shareholders are entitled, when they are resident in the United Kingdom or are subject to a DTC which provides for such an entitlement, to a tax credit in that State which may be deducted from the amount of their liability to income tax or, if the credit exceeds that amount, to be paid in cash. Conversely, where a non‑resident company pays dividends to ultimate shareholders, the latter are not entitled to such a tax credit. 46 In order to determine whether a difference in tax treatment is discriminatory, it is, however, necessary to consider whether, having regard to the national measure at issue, the companies concerned are in an objectively comparable situation. According to well-established case-law, discrimination is defined as treating differently situations which are identical, or treating in the same way situations which are different (see Case C-279/93 Schumacker [1995] ECR I‑225, paragraph 30, and Case C-311/97 Royal Bank of Scotland [1999] ECR I‑2651, paragraph 26). 47 According to the United Kingdom Government, the German Government, the French Government, Ireland and the Italian Government, together with the Commission of the European Communities, in the case of a national measure which grants a tax credit to shareholders receiving dividends from a resident company, the situation of resident shareholders and that of non-resident shareholders are not identical, in that a non-resident company is not liable to tax in the United Kingdom on those dividends. Those Governments point out that a non-resident company is also not liable to ACT when it distributes profits to its own shareholders. 48 Conversely, the claimants in the main proceedings contend that, as regards the taxation of dividends received from a resident company, both resident and non-resident companies receiving those dividends are in an identical situation. While acknowledging that, as regards those dividends, a non-resident company receiving them is not liable to income tax in the United Kingdom or is, by virtue of a DTC, taxable there but is entitled to a tax credit for tax paid by the company making the distribution, they point out that a resident company to which such dividends are paid is also exempt from corporation tax in the United Kingdom on those dividends. 49 It should be noted in that regard that dividends paid by a company to its shareholders may be subject both to a series of charges to tax, since they are taxed, first, at distributing company level, as realised profits, and are then subject to corporation tax at parent company level, and to economic double taxation, since they are taxed, first, at the level of the company making the distribution and are then subject to income tax at ultimate shareholder level. 50 It is for each Member State to organise, in compliance with Community law, its system of taxation of distributed profits and, in that context, to define the tax base as well at the tax rates which apply to the company making the distribution and/or the shareholder to whom the dividends are paid, in so far as they are liable to tax in that State. 51 By virtue of Article 293 EC, Member States are required, so far as necessary, to enter into negotiations with each other with a view to securing for the benefit of their nationals the abolition of double taxation within the Community. However, apart from Convention 90/436/EEC of 23 July 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (OJ 1990 L 225, p. 10), no unifying or harmonising measure for the elimination of double taxation has yet been adopted at Community level, and Member States have not yet concluded any multilateral convention to that effect under Article 293 EC (see Case C‑336/96 Gill [1998] ECR I-2793, paragraph 23; Case C-376/03 D. [2005] ECR I-5821, paragraph 50; and Case C‑470/04 N. [2006] ECR I-0000, paragraph 43). 52 It is against that background that the Court has already held that, in the absence of any unifying or harmonising Community measures, Member States retain the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation (Gilly, paragraphs 24 and 30; Saint‑Gobain ZN, paragraph 57; and N., paragraph 44). 53 It is only in the case of companies of Member States which have a minimum holding of 25% in the capital of a company of another Member State that Article 4 of Directive 90/435, read in conjunction with Article 3 of that directive, in the original version applying at the time of the facts in the main proceedings, obliges each Member State either to exempt profits received by a resident parent company from a subsidiary resident in another Member State or to authorise that parent company to deduct from the amount of tax due that fraction of the corporation tax paid by the subsidiary which relates to those profits and, if appropriate, the amount of the withholding tax levied by the Member State in which the subsidiary is resident. 54 The mere fact that, for holdings to which Directive 90/435 does not apply, it is for the Member States to determine whether, and to what extent, a series of charges to tax and economic double taxation are to be avoided and, for that purpose, to establish, either unilaterally or through DTCs concluded with other Member States, procedures intended to prevent or mitigate such a series of charges to tax and that economic double taxation, does not of itself mean that the Member States are entitled to impose measures that contravene the freedoms of movement guaranteed by the Treaty. 55 Thus, where a Member State has a system for preventing or mitigating a series of charges to tax or economic double taxation for dividends paid to residents by resident companies, it must treat dividends paid to residents by non-resident companies in the same way (see, to that effect, Case C-315/02 Lenz [2004] ECR I‑7063, paragraphs 27 to 49, and Case C-319/02 Manninen [2004] ECR I‑7477, paragraphs 29 to 55). 56 Under such systems, the situation of shareholders resident in a Member State and receiving dividends from a company established in that State is comparable to that of shareholders who are resident in that State and receive dividends from a company established in another Member State, inasmuch as both the dividends deriving from a national source and those deriving from a foreign source may be subject, first, in the case of corporate shareholders, to a series of charges to tax and, secondly, in the case of ultimate shareholders, to economic double taxation (see, to that effect, Lenz, paragraphs 31 and 32, and Manninen, paragraphs 35 and 36). 57 However, although the situation of those shareholders must be treated as being comparable as regards the application to them of the tax legislation of the Member State in which they are resident, the same is not necessarily true, as regards the application of the tax legislation of the Member State in which the company making the distribution is resident, of the situations in which shareholders receiving dividends resident in that Member State and shareholders receiving dividends resident in another Member State are placed. 58 Where the company making the distribution and the shareholder to whom it is paid are not resident in the same Member State, the Member State in which the company making the distribution is resident, that is to say the Member State in which the profits are derived, is not in the same position, as regards the prevention or mitigation of a series of charges to tax and of economic double taxation, as the Member State in which the shareholder receiving the distribution is resident. 59 It must be held in that regard, first, that to require the Member State in which the company making the distribution is resident to ensure that profits distributed to a non-resident shareholder are not liable to a series of charges to tax or to economic double taxation, either by exempting those profits from tax at the level of the company making the distribution or by granting the shareholder a tax advantage equal to the tax paid on those profits by the company making the distribution, would mean in point of fact that that State would be obliged to abandon its right to tax a profit generated through an economic activity undertaken on its territory. 60 Secondly, as regards a procedure for preventing or mitigating economic double taxation by the grant of a tax advantage to the ultimate shareholder, it must be pointed out that it is usually the Member State in which the latter is resident that is best placed to determine the shareholder’s ability to pay tax (see, to that effect, Schumacker, paragraphs 32 and 33, and D., paragraph 27). Likewise, in the case of shareholdings to which Directive 90/435 applies, Article 4(1) of that directive requires the Member State of the parent company which receives profits distributed by a subsidiary which is resident in another Member State, and not the latter State, to avoid a series of charges to tax, either by refraining from taxing such profits or by taxing such profits while authorising that parent company to deduct from the amount of tax due that fraction of the corporation tax paid by the subsidiary which relates to those profits and, if appropriate, the amount of the withholding tax levied by the Member State in which the subsidiary is resident. 61 As regards the national legislation at issue in the main proceedings, it must be pointed out that, where a company resident in the United Kingdom pays dividends to another company, neither the dividends received by a resident company nor those received by a non-resident company are subject to tax in the United Kingdom. 62 There is therefore no difference in treatment in that respect. 63 However, there is a difference between resident companies receiving dividends and non-resident companies receiving dividends as regards the ability of those companies to pay dividends to their ultimate shareholders under rules which entitle those shareholders to a tax credit equal to the fraction of the corporation tax paid by the company which made the distributed profits. It is not in dispute that only resident companies may do so. 64 It is in its capacity as the Member State in which the shareholder is resident that, when a resident company pays dividends to its resident ultimate shareholders, that Member State grants to such shareholders, on payment of the dividends, a tax credit equal to the fraction of the advance corporation tax paid by the company which made the distributed profits. 65 As regards the application of procedures intended to prevent or mitigate the imposition of a series of charges to tax or economic double taxation, the position of a Member State in which both the companies making the distribution and the ultimate shareholders are resident is thus not comparable to that of a Member State in which a company is resident which pays dividends to a non-resident company, which pays them, in turn, to its ultimate shareholders, in that the second State acts, in principle, only as the State in which the distributed profits are derived. 66 In the latter case, it is only when a company resident in a Member State pays dividends to a company resident in another Member State and the shareholders of the lastmentioned company are resident, for their part, in the first State, that that State, as the State in which those shareholders are resident, is obliged, in accordance with the principle laid down in Lenz and Manninen referred to in paragraph 55 of this judgment, to ensure that dividends received by those shareholders from a non‑resident company are subject to the same tax treatment as that which applies to dividends received by a resident shareholder from a resident company. 67 It follows from paragraph 30 of this judgment that the obligation imposed in such a case on a Member State acting in its capacity as the State in which the ultimate shareholder is resident does not fall within the scope of the questions referred by the national court. 68 However, once a Member State, unilaterally or by a convention, imposes a charge to income tax not only on resident shareholders but also on non‑resident shareholders in respect of dividends which they receive from a resident company, the position of those non-resident shareholders becomes comparable to that of resident shareholders. 69 As regards the national measures at issue in the main proceedings, that is the case when, as is mentioned in paragraph 15 of this judgment, a DTC concluded by the United Kingdom provides that a shareholder company which is resident in the other contracting Member State is entitled to a full or partial tax credit for dividends which it receives from a company resident in the United Kingdom. 70 If the Member State of residence of the company making distributable profits decides to exercise its taxing powers not only in relation to profits made in that State but also in relation to income arising in that State and paid to non‑resident companies receiving dividends, it is solely because of the exercise by that State of its taxing powers that, irrespective of any taxation in another Member State, a risk of a series of charges to tax may arise. In such a case, in order for non-resident companies receiving dividends not to be subject to a restriction on freedom of establishment prohibited, in principle, by Article 43 EC, the State in which the company making the distribution is resident is obliged to ensure that, under the procedures laid down by its national law in order to prevent or mitigate a series of liabilities to tax, non-resident shareholder companies are subject to the same treatment as resident shareholder companies. 71 It is for the national court to determine, in each case, whether that obligation has been complied with, taking account, where necessary, of the provisions of the DTC that that Member State has concluded with the State in which the shareholder company is resident (see, to that effect, Case C-265/04 Bouanich [2006] ECR I-923, paragraphs 51 to 55). 72 It follows that legislation of a Member State which, on a payment of dividends by a resident company where no DTC is involved, grants a tax credit equal to the fraction of the advance corporation tax paid by the company making the distributed profits only to resident companies receiving the dividends and which extends the benefit of that tax credit exclusively to resident ultimate shareholders, does not constitute discrimination prohibited by Article 43 EC. 73 Since the reasoning set out in the above paragraphs applies in the same way to non-resident shareholder companies to which dividends have been paid on the basis of a holding which does not confer on them any definite influence on the decisions of the resident distributing company and does not allow them to determine its activities, such legislation also does not restrict the free movement of capital for the purposes of Article 56 EC. 74 The answer to Question 1(a) must therefore be that Articles 43 EC and 56 EC do not prevent a Member State, on a distribution of dividends by a company resident in that State, from granting companies receiving those dividends which are also resident in that State a tax credit equal to the fraction of the corporation tax paid on the distributed profits by the company making the distribution, when it does not grant such a tax credit to companies receiving such dividends which are resident in another Member State and are not subject to tax on dividends in the first State. Question 1(b) to (d)75 By Question 1(b) to (d), the national court essentially asks whether Articles 43 EC and 56 EC preclude a Member State from applying DTCs concluded with other Member States in terms of which, on a payment of dividends by a resident company, companies receiving those dividends which reside in some Member States are not entitled to a tax credit, while companies receiving such dividends which reside in certain other Member States are granted a partial tax credit. 76 In that context, the national court also asks whether it is permissible for a Member State to apply a provision of a DTC, known as a ‘limitation of benefits’ provision, pursuant to which it does not grant a tax credit to a company resident in the other contracting Member State if that company is controlled by a company resident in a third State with which the first Member State has concluded a DTC which, when dividends are paid, makes no provision for a tax credit for a company which is resident in a third country and receives the dividends and whether it is relevant in that regard that the non‑resident company to which the dividends are paid is controlled by a company resident in a Member State or a non-member country. 77 For the reasons set out in paragraphs 37 to 40 of this judgment, it is appropriate to consider the national measures at issue in the main proceedings both from the point of view of freedom of establishment and that of free movement of capital. 78 According to the claimants in the main proceedings, it is contrary to the freedoms of movement for a Member State to confer a tax advantage on nationals of a Member State while refusing it to nationals of another Member State. Under reference to paragraph 26 of the judgment in Commission v France, they contend that the grant of such an advantage cannot be made dependent on the existence of reciprocal advantages granted by the other contracting Member State. 79 The claimants in the main proceedings argue that the extension of advantages conferred by a DTC concluded with a particular Member State to natural or legal persons covered by another DTC would not affect the system of bilateral tax conventions. It is necessary to distinguish between, on the one hand, the right of Member States to allocate their taxing powers in order to avoid the same income being taxed more than once in a number of Member States and, on the other, the exercise by Member States of their taxing powers thus allocated. While a difference in treatment would be justified if it were to reflect differences between tax conventions as regards the allocation of taxing powers, in order, in particular, to reflect variations between the tax systems of the Member States concerned, a Member State cannot, in order to avoid or mitigate economic double taxation, exercise its powers in a selective and arbitrary manner. 80 Conversely, the United Kingdom Government, the German Government, the French Government, Ireland, the Italian Government and the Netherlands Government, together with the Commission, contest the argument that a Member State cannot protect a resident of another Member State against economic double taxation unless it grants the same protection to residents of all Member States. Were that proposition to be accepted, the equilibrium and reciprocity underlying the existing DTCs would be undermined, taxpayers would be able more easily to avoid the provisions of DTCs intended to combat tax avoidance and the legal certainty of taxpayers would be affected accordingly. 81 It should be pointed out in that regard that, in the absence of unifying or harmonising measures at Community level for the elimination of double taxation, the Member States retain competence for determining the criteria for taxation on income with a view to eliminating double taxation by means, inter alia, of international agreements. In those circumstances, the Member States remain at liberty to determine the connecting factors for the allocation of fiscal jurisdiction by means of bilateral agreements (see Gilly, paragraphs 24 and 30; Saint-Gobain ZN, paragraph 57; D., paragraph 52; and Bouanich, paragraph 49). 82 The claimants in the main proceedings object to the difference in treatment imposed on companies that are not resident in the United Kingdom by reason of the fact that the DTCs concluded by that Member State with certain other Member States provide a tax credit for companies resident in those Member States while the DTCs concluded by the United Kingdom with other Member States do not so provide. 83 In order to determine whether such a difference in treatment is discriminatory, it is necessary to consider whether, as regards the measures at issue, the non-resident companies concerned are in an objectively comparable situation. 84 As the Court noted in paragraph 54 of D., the scope of a bilateral tax convention is limited to the natural or legal persons referred to in it. 85 In order to avoid distributed profits being taxed both by the Member State in which the distributing company is resident and by that of the company receiving them, each of the DTCs concluded by the United Kingdom provides for an allocation of taxing powers between that Member State and the other contracting State. While some of those DTCs do not provide for dividends received by a non‑resident company from a company resident in the United Kingdom to be subject to tax in that Member State, other DTCs do provide for such a liability to tax. It is in the latter case that the DTCs provide, each according to its separate conditions, for the grant of a tax credit to a non-resident company to which dividends are paid. 86 As the United Kingdom Government, supported in that regard by most of the other Governments which submitted observations to the Court, observes, the terms under which the DTCs provide for a tax credit for non-resident companies which receive dividends from a resident company vary depending not only on the particular characteristics of the national tax regimes concerned, but also on when the DTCs were negotiated and the extent of the issues on which the Member States concerned managed to reach agreement. 87 The situations in which the United Kingdom grants a tax credit to companies resident in the other contracting State which receive dividends from a United Kingdom-resident company are those in which the United Kingdom also retains the right to tax the companies on those dividends. The rate of tax which the United Kingdom may charge in such cases varies according to the circumstances and, in particular according to whether the DTC provides for a full or a partial tax credit. There is thus a direct link between the entitlement to a tax credit and the rate of tax laid down under such a DTC (see, to that effect, Case C‑58/01 Océ Van der Grinten [2003] ECR I‑9809, paragraph 87). 88 Thus, the grant of a tax credit to a non-resident company receiving dividends from a resident company, as provided for under a number of DTCs concluded by the United Kingdom, cannot be regarded as a benefit separable from the remainder of those DTCs, but is an integral part of them and contributes to their overall balance (see, to that effect, D., paragraph 62). 89 The same applies to the provisions of the DTCs which make the grant of such a tax credit subject to the condition that the non-resident company is not owned, directly or indirectly, by a company resident in a Member State or a non-member country with which the United Kingdom has concluded a DTC which does not provide for such a tax credit. 90 Even where such provisions extend to the situation of a company which is not resident in one of the contracting Member States, they apply only to persons resident in one of those Member States and, by contributing to the overall balance of the DTCs in question, are an integral part of them. 91 The fact that those reciprocal rights and obligations apply only to persons resident in one of the two contracting Member States is an inherent consequence of bilateral double taxation conventions. It follows, as regards the taxation of dividends paid by a company resident in the United Kingdom, that a company resident in a Member State which has concluded a DTC with the United Kingdom which does not provide for such a tax credit is not in the same situation as a company resident in a Member State which has concluded a DTC which does provide for one (see, to that effect, D., paragraph 61). 92 It follows that the Treaty provisions on freedom of establishment do not preclude a situation in which the entitlement to a tax credit laid down in a DTC concluded by a Member State with another Member State for companies resident in the second State which receive dividends from a company resident in the first State does not extend to companies resident in a third Member State with which the first State has concluded a DTC which does not provide for such an entitlement. 93 Since such a situation does not discriminate against non-resident companies receiving dividends from a resident company, the conclusion drawn in the preceding paragraph also applies to the Treaty provisions relating to free movement of capital. 94 In view In view of the foregoing, the answer to Question 1(b) to (d) must be that Articles 43 EC and 56 EC do not preclude a situation in which a Member State does not extend the entitlement to a tax credit provided for in a DTC concluded with another Member State for companies resident in the second State which receive dividends from a company resident in the first State to companies resident in a third Member State with which it has concluded a DTC which does not provide for such an entitlement for companies resident in that third State. Question 2 95 In view of the answer given by the Court to Question 1, there is no need to reply to Question 2. Costs96 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. Articles 43 EC and 56 EC do not prevent a Member State, on a distribution of dividends by a company resident in that State, from granting companies receiving those dividends which are also resident in that State a tax credit equal to the fraction of the corporation tax paid on the distributed profits by the company making the distribution, when it does not grant such a tax credit to companies receiving such dividends which are resident in another Member State and are not subject to tax on dividends in the first State.2. Articles 43 EC and 56 EC do not preclude a situation in which a Member State does not extend the entitlement to a tax credit provided for in a double taxation convention concluded with another Member State for companies resident in the second State which receive dividends from a company resident in the first State to companies resident in a third Member State with which it has concluded a double taxation convention which does not provide for such an entitlement for companies resident in that third State. [Signatures]*Language of the case: English. | 22206-2565dd1-4f6e | EN |
THE DISTRIBUTION OF A SIGNAL BY MEANS OF TELEVISION SETS BY A HOTEL TO ITS CUSTOMERS IS PROTECTED BY COPYRIGHT | Sociedad General de Autores y Editores de España (SGAE)vRafael Hoteles SA(Reference for a preliminary ruling from the Audiencia Provincial de Barcelona)(Copyright and related rights in the information society – Directive 2001/29/EC – Article 3 – Concept of communication to the public – Works communicated by means of television sets installed in hotel rooms)Summary of the JudgmentApproximation of laws – Copyright and related rights – Directive 2001/29 – Harmonisation of certain aspects of copyright and related rights in the information society – Communication to the public – Concept (European Parliament and Council Directive 2001/29, Art. 3(1))The mere provision of physical facilities, such as that of television sets installed in hotel rooms, does not as such amount to a communication to the public within the meaning of Directive 2001/29 on the harmonisation of certain aspects of copyright and related rights in the information society. On the other hand, the distribution of a signal enabling works to be communicated by means of those television sets by a hotel to customers staying in its rooms, whatever technique is used to transmit the signal, constitutes communication to the public within the meaning of Article 3(1) of that directive. As is explained in the Guide to the Berne Convention for the Protection of Literary and Artistic Works, when the author authorises the broadcast of his work, he considers only direct users, that is, the owners of reception equipment who, either personally or within their own private or family circles, receive the programme. If reception is for a larger audience, by an independent act through which the broadcast work is communicated to a new public, such public reception falls within the scope of the author’s exclusive authorisation right. The clientele of a hotel forms such a new public, inasmuch as the transmission of the broadcast work to that clientele using television sets is not just a technical means to ensure or improve reception of the original broadcast in the catchment area. On the contrary, the hotel is the organisation which intervenes, in full knowledge of the consequences of its action, to give access to the protected work to its customers. The private nature of hotel rooms does not preclude a signal from constituting communication to the public.(see paras 41-42, 47, 54, operative part 1-2)JUDGMENT OF THE COURT (Third Chamber)7 December 2006 (*) In Case C-306/05,REFERENCE for a preliminary ruling under Article 234 EC from the Audiencia Provincial de Barcelona (Spain), made by decision of 7 June 2005, received at the Court on 3 August 2005, in the proceedings Rafael Hoteles SA,THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, A. Borg Barthet, J. Malenovský (Rapporteur), U. Lõhmus and A. Ó Caoimh, Judges,Advocate General: E. Sharpston,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 4 May 2006,after considering the observations submitted on behalf of:– the Sociedad General de Autores y Editores de España (SGAE), by R. Gimeno-Bayón Cobos and P. Hernández Arroyo, abogados,– Rafael Hoteles SA, by R. Tornero Moreno, abogado,– the French Government, by G. de Bergues and J.‑C. Niollet, acting as Agents,– Ireland, by D.J. O’Hagan, acting as Agent, assisted by N. Travers BL,– the Austrian Government, by C. Pesendorfer, acting as Agent,– the Polish Government, by K. Murawski, U. Rutkowska and P. Derwicz, acting as Agents,– the Commission of the European Communities, by J.R. Vidal Puig and W. Wils, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 13 July 2006,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Article 3 of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (OJ 2001 L 167, p. 10). 2 This reference was made in the context of proceedings between the Sociedad General de Autores y Editores de España (SGAE) and Rafael Hoteles SA (‘Rafael’), concerning the alleged infringement, by the latter, of intellectual property rights managed by SGAE. Legal context Applicable international law3 The Agreement on Trade-Related Aspects of Intellectual Property Rights (‘the TRIPs Agreement’), as set out in Annex 1C to the Marrakesh Agreement establishing the World Trade Organisation, was approved on behalf of the European Community by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1). 4 Article 9(1) of the TRIPs Agreement provides: ‘Members shall comply with Articles 1 through 21 of the Berne Convention (1971) and the Appendix thereto. However, Members shall not have rights or obligations under this Agreement in respect of the rights conferred under Article 6bis of that Convention or of the rights derived therefrom.’ 5 Article 11 of the Berne Convention for the Protection of Literary and Artistic Works (Paris Act of 24 July 1971), as amended on 28 September 1979 (‘the Berne Convention’) provides: ‘1. Authors of dramatic, dramatico-musical and musical works shall enjoy the exclusive right of authorising:(i) the public performance of their works, including such public performance by any means or process;(ii) any communication to the public of the performance of their works.2. Authors of dramatic or dramatico-musical works shall enjoy, during the full term of their rights in the original works, the same rights with respect to translations thereof.’ 6 Article 11bis(1) of the Berne Convention provides: ‘Authors of literary and artistic works shall enjoy the exclusive right of authorising:(i) the broadcasting of their works or the communication thereof to the public by any other means of wireless diffusion of signs, sounds or images; (ii) any communication to the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organization other than the original one; (iii) the public communication by loudspeaker or any other analogous instrument transmitting, by signs, sounds or images, the broadcast of the work.’ 7 The World Intellectual Property Organisation (WIPO) adopted in Geneva, on 20 December 1996, the WIPO Performances and Phonograms Treaty and the WIPO Copyright Treaty. Those two treaties were approved on behalf of the Community by Council Decision 2000/278/EC of 16 March 2000 (OJ 2000 L 89, p. 6). 8 Article 8 of the WIPO Copyright Treaty provides: ‘Without prejudice to the provisions of Articles 11(1)(ii), 11bis(1)(i) and (ii), 11ter(1)(ii), 14(1)(ii) and 14bis(1) of the Berne Convention, authors of literary and artistic works shall enjoy the exclusive right of authorising any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.’ 9 Joint declarations concerning the WIPO Copyright Treaty were adopted by the Diplomatic Conference on 20 December 1996. 10 The joint declaration concerning Article 8 of that Treaty provides: ‘It is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention. It is further understood that nothing in Article 8 precludes a Contracting Party from applying Article 11bis(2).’ Community legislation 11 The ninth recital in the preamble to Directive 2001/29 states: ‘Any harmonisation of copyright and related rights must take as a basis a high level of protection, since such rights are crucial to intellectual creation. Their protection helps to ensure the maintenance and development of creativity in the interests of authors, performers, producers, consumers, culture, industry and the public at large. Intellectual property has therefore been recognised as an integral part of property.’ 12 The 10th recital in the preamble to that directive states: ‘If authors or performers are to continue their creative and artistic work, they have to receive an appropriate reward for the use of their work, as must producers in order to be able to finance this work. The investment required to produce products such as phonograms, films or multimedia products, and services such as “on-demand” services, is considerable. Adequate legal protection of intellectual property rights is necessary in order to guarantee the availability of such a reward and provide the opportunity for satisfactory returns on this investment.’ 13 The 15th recital in the preamble to that directive states: ‘The Diplomatic Conference held under the auspices of the [WIPO] in December 1996 led to the adoption of two new Treaties, the [WIPO Copyright Treaty] and the [WIPO Performances and Phonograms Treaty], dealing respectively with the protection of authors and the protection of performers and phonogram producers. Those Treaties update the international protection for copyright and related rights significantly, not least with regard to the so-called “digital agenda”, and improve the means to fight piracy world-wide. The Community and a majority of Member States have already signed the Treaties and the process of making arrangements for the ratification of the Treaties by the Community and the Member States is under way. This Directive also serves to implement a number of the new international obligations.’ 14 The 23rd recital in the preamble to that directive states: ‘This Directive should harmonise further the author’s right of communication to the public. This right should be understood in a broad sense covering all communication to the public not present at the place where the communication originates. This right should cover any such transmission or retransmission of a work to the public by wire or wireless means, including broadcasting. This right should not cover any other acts.’ 15 The 27th recital in the preamble to Directive 2001/29 states: ‘The mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Directive.’ 16 Article 3 of that directive provides: ‘1. Member States shall provide authors with the exclusive right to authorise or prohibit any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access them from a place and at a time individually chosen by them. 2. Member States shall provide for the exclusive right to authorise or prohibit the making available to the public, by wire or wireless means, in such a way that members of the public may access them from a place and at a time individually chosen by them: (a) for performers, of fixations of their performances;(b) for phonogram producers, of their phonograms;(c) for the producers of the first fixations of films, of the original and copies of their films;(d) for broadcasting organisations, of fixations of their broadcasts, whether these broadcasts are transmitted by wire or over the air, including by cable or satellite. 3. The rights referred to in paragraphs 1 and 2 shall not be exhausted by any act of communication to the public or making available to the public as set out in this Article.’ National legislation17 The codified text of the Law on intellectual property, which rectifies, clarifies and harmonises the legislative provisions in force in that area (‘the LIP’), was approved by Royal Legislative Decree No 1/1996 of 12 April 1996 (BOE No 97 of 22 April 1996). 18 Article 17 of the LIP provides: ‘The author has the exclusive rights of exploitation of his works regardless of their form and, inter alia, the exclusive rights of reproduction, distribution, public communication and conversion which cannot be exercised without his permission except in circumstances laid down in this Law.’ 19 Article 20(1) of the LIP provides: ‘Public communication shall mean any act by which a number of persons can have access to the work without prior distribution of copies to each of those persons. Communication which takes place within a strictly domestic location which is not integrated into or connected to a distribution network of any kind shall not be classified as public.’ The main proceedings and the questions referred for a preliminary ruling20 SGAE is the body responsible for the management of intellectual property rights in Spain. 21 SGAE took the view that the use of television sets and the playing of ambient music within the hotel owned by Rafael, during the period from June 2002 to March 2003, involved communication to the public of works belonging to the repertoire which it manages. Considering that those acts were carried out in breach of the intellectual property rights attached to the works, SGAE brought an action for compensation against Rafael before the Juzgado de Primera Instancia (Court of First Instance) No 28, Barcelona (Spain). 22 By decision of 6 June 2003, that court partially rejected the claim. It took the view that the use of television sets in the hotel’s rooms did not involve communication to the public of works managed by SGAE. It considered, on the other hand, that the claim was well founded as regards the well-known existence in hotels of communal areas with television sets and where ambient music is played. 23 SGAE and Rafael both brought appeals before the Audiencia Provincial (Provincial Court) de Barcelona, which decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘(1) Does the installation in hotel rooms of television sets to which a satellite or terrestrial television signal is sent by cable constitute an act of communication to the public which is covered by the harmonisation of national laws protecting copyright provided for in Article 3 of Directive [2001/29]? (2) Is the fact of deeming a hotel room to be a strictly domestic location, so that communication by means of television sets to which is fed a signal previously received by the hotel is not regarded as communication to the public, contrary to the protection of copyright pursued by Directive [2001/29]? (3) For the purposes of protecting copyright in relation to acts of communication to the public provided for in Directive [2001/29], can a communication that is effected through a television set inside a hotel bedroom be regarded as public because successive viewers have access to the work?’ The request to have the oral procedure reopened24 By letter received at the Court of Justice on 12 September 2006, Rafael requested the reopening of the oral procedure, pursuant to Article 61 of the Rules of Procedure of the Court of Justice. 25 That request is based on the alleged inconsistency of the Advocate General’s Opinion. Rafael submits that the negative response in the Opinion to the first question unavoidably implies a negative response to the second and third questions, whereas the Advocate General suggests that the answer to the latter questions should be in the affirmative. 26 On that point, it is appropriate to recall that neither the Statute of the Court of Justice nor the Rules of Procedure make provision for the parties to submit observations in response to the Advocate General’s Opinion (see, in particular, Case C-259/04 Emanuel [2006] ECR I‑3089, paragraph 15). 27 The Court may, certainly, of its own motion, on a proposal from the Advocate General or at the request of the parties, order that the oral procedure should be reopened in accordance with Article 61 of its Rules of Procedure, if it considers that it lacks sufficient information or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see, in particular, Case C-209/01 Schilling and Fleck-Schilling [2003] ECR I‑13389, paragraph 19, and Case C-30/02 Recheio – Cash & Carry [2004] ECR I‑6051, paragraph 12). 28 However, the Court finds that in the present case it has all the information necessary to give judgment. 29 Consequently, there is no need to order the reopening of the oral procedure. The questions Preliminary observations 30 It should be stated at the outset that, contrary to Rafael’s submissions, the situation at issue in the main proceedings does not fall within Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission (OJ 1993 L 248, p. 15), but within Directive 2001/29. The latter applies to all communications to the public of protected works, whereas Directive 93/83 only provides for minimal harmonisation of certain aspects of protection of copyright and related rights in the case of communication to the public by satellite or cable retransmission of programmes from other Member States. As the Court has already held, unlike Directive 2001/29, this minimal harmonisation does not provide information to enable the Court to reply to a question concerning a situation similar to that which is the subject of the questions referred for a preliminary ruling (see, to that effect, Case C-293/98 Egeda [2000] ECR I‑629, paragraphs 25 et 26). 31 Next, it should be noted that the need for uniform application of Community law and the principle of equality require that where provisions of Community law make no express reference to the law of the Member States for the purpose of determining their meaning and scope, as is the case with Directive 2001/29/EC, they must normally be given an autonomous and uniform interpretation throughout the Community (see, in particular, Case C-357/98 Yiadom [2000] ECR I‑9265, paragraph 26, and Case C-245/00 SENA [2003] ECR I‑1251, paragraph 23). It follows that the Austrian Government cannot reasonably maintain that it is for the Member States to provide the definition of ‘public’ to which Directive 2001/29 refers but does not define. The first and third questions32 By its first and third questions, which it is appropriate to examine together, the referring court asks, essentially, whether the distribution of a signal through television sets to customers in hotel rooms constitutes communication to the public within the meaning of Article 3(1) of Directive 2001/29, and whether the installation of television sets in hotel rooms constitutes, in itself, an act of that nature. 33 In that respect, it should be noted that that Directive does not define ‘communication to the public’. 34 According to settled case-law, in interpreting a provision of Community law it is necessary to consider not only its wording, but also the context in which it occurs and the objectives pursued by the rules of which it is part (see, in particular, Case C‑156/98 Germany v Commission [2000] ECR I‑6857, paragraph 50, and Case C‑53/05 Commission v Portugal [2006] ECR I-0000, paragraph 20). 35 Moreover, Community legislation must, so far as possible, be interpreted in a manner that is consistent with international law, in particular where its provisions are intended specifically to give effect to an international agreement concluded by the Community (see, in particular, Case C‑341/95 Bettati [1998] ECR I‑4355, paragraph 20 and the case-law cited). 36 It follows from the 23rd recital in the preamble to Directive 2001/29 that ‘communication to the public’ must be interpreted broadly. Such an interpretation is moreover essential to achieve the principal objective of that directive, which, as can be seen from its ninth and tenth recitals, is to establish a high level of protection of, inter alios, authors, allowing them to obtain an appropriate reward for the use of their works, in particular on the occasion of communication to the public. 37 The Court has held that, in the context of this concept, the term ‘public’ refers to an indeterminate number of potential television viewers (Case C‑89/04 Mediakabel [2005] ECR I‑4891, paragraph 30, and Case C-192/04 Lagardère Active Broadcast [2005] ECR I‑7199, paragraph 31). 38 In a context such as that in the main proceedings, a general approach is required, making it necessary to take into account not only customers in hotel rooms, such customers alone being explicitly mentioned in the questions referred for a preliminary ruling, but also customers who are present in any other area of the hotel and able to make use of a television set installed there. It is also necessary to take into account the fact that, usually, hotel customers quickly succeed each other. As a general rule, a fairly large number of persons are involved, so that they may be considered to be a public, having regard to the principal objective of Directive 2001/29, as referred to in paragraph 36 of this judgment. 39 In view, moreover, of the cumulative effects of making the works available to such potential television viewers, the latter act could become very significant in such a context. It matters little, accordingly, that the only recipients are the occupants of rooms and that, taken separately, they are of limited economic interest for the hotel. 40 It should also be pointed out that a communication made in circumstances such as those in the main proceedings constitutes, according to Article 11bis(1)(ii) of the Berne Convention, a communication made by a broadcasting organisation other than the original one. Thus, such a transmission is made to a public different from the public at which the original act of communication of the work is directed, that is, to a new public. 41 As is explained in the Guide to the Berne Convention, an interpretative document drawn up by the WIPO which, without being legally binding, nevertheless assists in interpreting that Convention, when the author authorises the broadcast of his work, he considers only direct users, that is, the owners of reception equipment who, either personally or within their own private or family circles, receive the programme. According to the Guide, if reception is for a larger audience, possibly for profit, a new section of the receiving public hears or sees the work and the communication of the programme via a loudspeaker or analogous instrument no longer constitutes simple reception of the programme itself but is an independent act through which the broadcast work is communicated to a new public. As the Guide makes clear, such public reception falls within the scope of the author’s exclusive authorisation right. 42 The clientele of a hotel forms such a new public. The transmission of the broadcast work to that clientele using television sets is not just a technical means to ensure or improve reception of the original broadcast in the catchment area. On the contrary, the hotel is the organisation which intervenes, in full knowledge of the consequences of its action, to give access to the protected work to its customers. In the absence of that intervention, its customers, although physically within that area, would not, in principle, be able to enjoy the broadcast work. 43 It follows from Article 3(1) of Directive 2001/29 and Article 8 of the WIPO Copyright Treaty that for there to be communication to the public it is sufficient that the work is made available to the public in such a way that the persons forming that public may access it. Therefore, it is not decisive, contrary to the submissions of Rafael and Ireland, that customers who have not switched on the television have not actually had access to the works. 44 Moreover, it is apparent from the documents submitted to the Court that the action by the hotel by which it gives access to the broadcast work to its customers must be considered an additional service performed with the aim of obtaining some benefit. It cannot be seriously disputed that the provision of that service has an influence on the hotel’s standing and, therefore, on the price of rooms. Therefore, even taking the view, as does the Commission of the European Communities, that the pursuit of profit is not a necessary condition for the existence of a communication to the public, it is in any event established that the communication is of a profit-making nature in circumstances such as those in the main proceedings. 45 With reference to the question whether the installation of television sets in hotel rooms constitutes, in itself, a communication to the public within the meaning of Article 3(1) of Directive 2001/29, it should be pointed out that the 27th recital in the preamble to that directive states, in accordance with Article 8 of the WIPO Copyright Treaty, that ‘[t]he mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of [that] Directive.’ 46 While the mere provision of physical facilities, usually involving, besides the hotel, companies specialising in the sale or hire of television sets, does not constitute, as such, a communication within the meaning of Directive 2001/29, the installation of such facilities may nevertheless make public access to broadcast works technically possible. Therefore, if, by means of television sets thus installed, the hotel distributes the signal to customers staying in its rooms, then communication to the public takes place, irrespective of the technique used to transmit the signal. 47 Consequently, the answer to the first and second questions is that, while the mere provision of physical facilities does not as such amount to a communication within the meaning of Directive 2001/29, the distribution of a signal by means of television sets by a hotel to customers staying in its rooms, whatever technique is used to transmit the signal, constitutes communication to the public within the meaning of Article 3(1) of that directive. The second question 48 By its second question, the referring court asks, essentially, whether the private nature of hotel rooms precludes the communication of a work to those rooms by means of television sets from constituting communication to the public within the meaning of Article 3(1) of Directive 2001/29. 49 In that respect, Ireland submits that communication or making available of works in the private context of hotel rooms should be distinguished from the same acts which take place in public areas of the hotel. This argument cannot however be accepted. 50 It is apparent from both the letter and the spirit of Article 3(1) of Directive 2001/29 and Article 8 of the WIPO Copyright Treaty – both of which require authorisation by the author not for retransmissions in a public place or one which is open to the public but for communications by which the work is made accessible to the public – that the private or public nature of the place where the communication takes place is immaterial. 51 Moreover, according to the provisions of Directive 2001/29 and of the WIPO Copyright Treaty, the right of communication to the public covers the making available to the public of works in such a way that they may access them from a place and at a time individually chosen by them. That right of making available to the public and, therefore, of communication to the public would clearly be meaningless if it did not also cover communications carried out in private places. 52 In support of the argument concerning the private nature of hotel rooms, Ireland also invokes the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 (‘the ECHR’), and in particular its Article 8, which prohibits any arbitrary or disproportionate interference by a public authority in the sphere of private activity. However, this argument cannot be accepted either. 53 In that respect, it should be pointed out that Ireland does not make clear who, in a context such as that of the main proceedings, would be the victim of such an arbitrary or disproportionate intervention. Ireland can hardly have in mind the customers who benefit from the signal which they receive and who are under no obligation to pay the authors. Nor can the victim be the hotel since, even though it must be concluded that the hotel is obliged to make such payment, it cannot claim to be a victim of an infringement of Article 8 of the ECHR in so far as the rooms, once made available to its customers, cannot be considered as coming within its private sphere. 54 Having regard to all of the foregoing considerations, the answer to the second question is that the private nature of hotel rooms does not preclude the communication of a work by means of television sets from constituting communication to the public within the meaning of Article 3(1) of Directive 2001/29. Costs55 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Third Chamber) hereby rules:1. While the mere provision of physical facilities does not as such amount to communication within the meaning of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of copyright and related rights in the information society, the distribution of a signal by means of television sets by a hotel to customers staying in its rooms, whatever technique is used to transmit the signal, constitutes communication to the public within the meaning of Article 3(1) of that directive. 2. The private nature of hotel rooms does not preclude the communication of a work by means of television sets from constituting communication to the public within the meaning of Article 3(1) of Directive 2001/29.[Signatures]* Language of the case: Spanish. | 86a3f-5bc62e2-4fd9 | EN |
ABSOLUTE PROHIBITION ON DEROGATION FROM THE SCALE OF LAWYERS' MINIMUM FEES IN ITALY CONSTITUTES A RESTRICTION ON THE FREEDOM TO PROVIDE SERVICES | Federico Cipolla and OthersvRosaria Fazari, née Portolese, and Roberto Meloni (References for a preliminary ruling from the Corte d’appello di Torino and the Tribunale di Roma)(Community competition rules – National rules concerning lawyers’ fees – Setting of professional scales of charges – Freedom to provide services)Summary of the Judgment1. Preliminary rulings – Jurisdiction of the Court (Art. 234 EC)2. Competition – Community rules – Obligations of the Member States (Arts 10 EC, 81 EC and 82 EC)3. Freedom to provide services – Treaty provisions – Field of application(Art. 49 EC)4. Freedom to provide services – Restrictions 1. Where, in a reference for a preliminary ruling, all aspects of the main proceedings before the national court are confined within a single Member State, a reply might none the less be useful to the national court, in particular if its national law were to require that a national of that Member State must be allowed to enjoy the same rights as those which a national of another Member State would derive from Community law in the same situation. (see para. 30)2. Although it is true that Articles 81 EC and 82 EC are, in themselves, concerned solely with the conduct of undertakings and not with laws or regulations emanating from Member States, those articles, read in conjunction with Article 10 EC, which lays down a duty to cooperate, none the less require Member States not to introduce or maintain in force measures, even of a legislative or regulatory nature, which may render ineffective the competition rules applicable to undertakings. Articles 10 EC and 81 EC are infringed where a Member State requires or encourages the adoption of agreements, decisions or concerted practices contrary to Article 81 EC or reinforces their effects, or where it divests its own rules of the character of legislation by delegating to private economic operators responsibility for taking decisions affecting the economic sphere. In that connection, the view cannot be taken that a Member State has delegated to private economic operators responsibility for taking decisions affecting the economic sphere, which would have the effect of depriving the provisions of the character of legislation where, first, the trade organisation concerned is responsible only for producing a draft scale which, as such, is not binding since the Minister has the power to have the draft amended by that organisation and, secondly, the national legislation provides that fees are to be settled by the courts on the basis of the criteria referred to by that same legislation and, moreover, in certain exceptional circumstances and by duly reasoned decision, the court may depart from the maximum and minimum limits fixed. In those circumstances, the Member State is not open to the criticism that it requires or encourages the adoption of agreements, decisions or concerted practices contrary to Article 81 EC of the Treaty or reinforces their effects, or requires or encourages abuses of a dominant position contrary to Article 82 EC or reinforces the effects of such abuses. It follows that Articles 10 EC , 81 EC and 82 EC do not preclude a Member State from adopting a legislative measure which approves, on the basis of a draft produced by a professional body of members of the Bar, a scale fixing a minimum fee for members of the legal profession from which there can generally be no derogation in respect of either services reserved to those members or those, such as out-of-court services, which may also be provided by any other economic operator not subject to that scale. (see paras 46-47, 50-54, operative part 1)3. Article 49 EC requires not only the elimination of all discrimination on grounds of nationality against providers of services who are established in another Member State but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, which is liable to prohibit or further impede the activities of a provider of services established in another Member State where he lawfully provides similar services. Furthermore, Article 49 EC precludes the application of any national rules which have the effect of making the provision of services between Member States more difficult than the provision of services purely within one Member State. (see paras 56-57)4. A Member State’s prohibition of derogation, by agreement, from the minimum fees set by a scale of lawyers’ fees for services which are (a) court services and (b) reserved to lawyers is liable to render access to the legal services market in that Member State more difficult for lawyers established in another Member State and therefore is likely to restrict the exercise of their activities providing services in that Member State. That prohibition therefore amounts to a restriction within the meaning of Article 49 EC. That prohibition deprives lawyers established in another Member State of the possibility, by requesting fees lower than those set by the scale, of competing more effectively with lawyers established on a stable basis in the Member State concerned and who therefore have greater opportunities for winning clients than lawyers established abroad. Likewise, the prohibition thus laid down limits the choice of service recipients in that Member State, because they cannot resort to the services of lawyers established in other Member States who would offer their services in that Member State at a lower rate than the minimum fees set by the scale. However, such a prohibition may be justified where it serves overriding requirements relating to the public interest, is suitable for securing the attainment of the objective which it pursues and does not go beyond what is necessary in order to attain it. In that respect, first, the protection of consumers, in particular recipients of the legal services provided by persons concerned in the administration of justice and, secondly, the safeguarding of the proper administration of justice, are objectives to be included among those which may be regarded as overriding requirements relating to the public interest capable of justifying a restriction on freedom to provide services, on condition, first, that the national measure at issue in the main proceedings is suitable for securing the attainment of the objective pursued and, secondly, it does not go beyond what is necessary in order to attain that objective. It is a matter for the national court to decide whether the restriction on freedom to provide services introduced by that national legislation fulfils those conditions. For that purpose, it is for that court to take account of the factors set out in the following paragraphs. Thus, it must be determined, in particular, whether there is a correlation between the level of fees and the quality of the services provided by lawyers and whether, in particular, the setting of such minimum fees constitutes an appropriate measure for attaining the objectives pursued, namely the protection of consumers and the proper administration of justice. Although it is true that a scale imposing minimum fees cannot prevent members of the profession from offering services of mediocre quality, it is conceivable that such a scale does serve to prevent lawyers, in the context of a market which is characterised by an extremely large number of lawyers who are enrolled and practising, from being encouraged to compete against each other by possibly offering services at a discount, with the risk of deterioration in the quality of the services provided. Account must also be taken of the specific features both of the market in question and the services in question and, in particular, of the fact that, in the field of lawyers’ services, there is usually an asymmetry of information between ‘client-consumers’ and lawyers. Lawyers display a high level of technical knowledge which consumers may not have and the latter therefore find it difficult to judge the quality of the services provided to them. However, the national court will have to determine whether professional rules in respect of lawyers, in particular rules relating to organisation, qualifications, professional ethics, supervision and liability, suffice in themselves to attain the objectives of the protection of consumers and the proper administration of justice. It follows that legislation containing an absolute prohibition of derogation, by agreement, from the minimum fees set by a scale of lawyers’ fees, for services which are (a) court services and (b) reserved to lawyers constitutes a restriction on freedom to provide services laid down in Article 49 EC. It is for the national court to determine whether such legislation, in the light of the detailed rules for its application, actually serves the objectives of protection of consumers and the proper administration of justice which might justify it and whether the restrictions it imposes do not appear disproportionate having regard to those objectives. (see paras 58-61, 64-70, operative part 2)JUDGMENT OF THE COURT (Grand Chamber)5 December 2006 (*) (Community competition rules –National rules concerning lawyers’ fees – Setting of professional scales of charges – Freedom to provide services)In Joined Cases C‑94/04 and C‑202/04,REFERENCES for a preliminary ruling under Article 234 EC from the Corte d’appello di Torino (Italy) and the Tribunale di Roma (Italy), the first made by decisions of 4 February and 5 May 2004 and the second by decision of 7 April 2004, received at the Court on 25 February, 18 May and 6 May 2004 respectively, in the proceedings Federico Cipolla (C‑94/04) Rosaria Fazari, née Portolese,andStefano Macrino,Claudia Capodarte (C‑202/04) Roberto Meloni,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C. W. A. Timmermans, A. Rosas, R. Schintgen, J. Klučka, Presidents of Chambers, J. Malenovský, U. Lỡhmus (Rapporteur) and E. Levits, Judges, Advocate General: M. Poiares Maduro,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 25 October 2005,after considering the observations submitted on behalf of:– Mr Cipolla, by G. Cipolla, avvocatessa,– Mr Meloni, by S. Sabbatini, D. Condello, G. Scassellati Sforzolini and G. Rizza, avvocati,– the Italian Government, by I.M. Braguglia, acting as Agent, and by P. Gentili, avvocato dello Stato,– the German Government, by A. Dittrich, C.‑D. Quassowski and M. Lumma, acting as Agents,– the Austrian Government, by E. Riedl, acting as Agent,– the Commission of the European Communities, by E. Traversa, R. Wainwright, F. Amato and K. Mojzesowicz, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 1 February 2006,gives the followingJudgment1 These references for a preliminary ruling concern the interpretation of Articles 10 EC, 49 EC, 81 EC and 82 EC. 2 The references were made in the course of proceedings between two lawyers and their respective clients in respect of the payment of fees. Relevant provisions3 Royal Decree-Law No 1578 of 27 November 1933 (GURI No 281 of 5 December 1933), converted into Law No 36 of 22 January 1934 (GURI No 24 of 30 January 1934), as subsequently amended (‘the Royal Decree-Law’), provides that the Consiglio Nazionale Forense (National Lawyers’ Council, ‘the CNF’) established under the auspices of the Minister of Justice, is to be composed of lawyers elected by their fellow members, with one representative for each appeal court district. 4 Article 57 of the Royal Decree-Law provides that the criteria for determining fees and emoluments payable to lawyers and ‘procuratori’ in respect of civil and criminal proceedings and out-of-court work are to be set every two years by decision of the CNF. When the CNF has decided upon the scale of lawyers’ fees (‘the scale’), it must be approved under Italian legislation by the Minister of Justice after he has obtained the opinion of the Comitato Interministeriale dei Prezzi (Interministerial Committee on Prices, the CIP) and consulted the Consiglio di Stato (Council of State). 5 Article 58 of the Royal Decree-Law provides that those criteria are to be based on the monetary value of disputes, the level of the court seised and, in criminal matters, the duration of the proceedings. For each procedural step, or series of steps, the scale sets maximum and minimum fees. 6 Article 60 of the Royal Decree-Law provides that fees are to be settled by the court on the basis of those criteria, having regard to the seriousness and number of the issues dealt with. That settlement must remain within the maximum and minimum limits set beforehand. However, in cases of exceptional importance, taking account of the special nature of the disputes and where the inherent value of the service justifies it, the court may exceed the maximum limit set by the scale. Conversely, where the case is easy to deal with, the court may fix fees below the minimum limit. In both cases, the court must give reasons for its decision. 7 Article 2233 of the Italian Civil Code provides, generally, that remuneration under a contract for provision of services which has not been agreed between the parties and cannot be determined by reference to the applicable scales or custom and practice is to be determined by the court after it has heard the opinion of the professional association to which the provider of services belongs. However, as regards the profession of lawyer, Article 24 of Law No 794 of 13 June 1942 (GURI No 172 of 23 July 1942) provides that derogation may not be made from the minimum fees set by the scale for lawyers’ court services and that any agreement to the contrary is void. According to the case-law of the Corte suprema di cassazione (Court of Cassation), that rule also applies to lawyers’ out-of-court services. 8 The scale at issue in Case C-202/04 was set by decision of the CNF of 12 June 1993, as amended on 29 September 1994, and was approved by Ministerial Decree No 585 of 5 October 1994 (GURI No 247 of 21 October 1994). Article 2 of that decree provides that ‘the increases set out in the tables in the annex shall apply with effect from 1 October 1994 as to 50%, and as to the remaining 50% with effect from 1 April 1995’. That staggered increase originated in the comments made by the CIP, which had taken particular account of the rise in inflation. Before approving the scale, the Minister of Justice had consulted the CNF a second time, which had accepted the proposal to postpone the application of the scale at its meeting of 29 September 1994. 9 The scale comprises three categories of remuneration: (a) fees, disbursements and emoluments in respect of lawyers’ court services in civil and administrative proceedings; (b) fees in respect of legal services in criminal proceedings; (c) fees and emoluments in respect of out-of-court work. The disputes in the main proceedings and the questions referred for a preliminary ruling Case C‑94/0410 Mrs Fazari (née Portolese) and two other owners of adjoining land located in the municipality of Moncalieri appointed a lawyer, Federico Cipolla, to bring proceedings against that municipality for compensation for the emergency occupation of that land which was ordered solely by decision of the mayor of Moncalieri and was not followed by an expropriation order. Mr Cipolla drew up three separate summonses and registered three actions against that municipality with the Tribunale di Torino (Turin District Court). 11 The dispute was subsequently resolved by means of a settlement made on the initiative of one of the owners in question but without Mr Cipolla’s involvement. 12 Mr Cipolla, who before drawing up and notifying the three summonses had received LIT 1 850 000 from each of the three applicants in the main proceedings, apparently as advance payment for his professional services, issued Mrs Fazari with an invoice totalling LIT 4 125 000 covering his fees and various disbursements. Mrs Fazari refused to pay that sum. The ensuing dispute was brought before the Tribunale di Torino which, by judgment of 12 June 2003, took judicial notice of the payment of the sum of LIT 1 850 000 and rejected Mr Cipolla’s demand for payment of LIT 4 125 000. Mr Cipolla appealed against that judgment before the Corte d’appello di Torino (Turin Court of Appeal) seeking, inter alia, application of the scale. 13 According to the decision of the national court, in the proceedings brought before that court the question arises whether, if the existence an agreement between the parties relating to the flat-rate remuneration of the lawyer is proved, that alleged agreement relating to the flat-rate sum of LIT 1 850 000, such an agreement ought, despite the Italian legislation, to be deemed valid on the ground that it would be contrary to the Community competition rules for it to be automatically replaced by a calculation of the lawyer’s remuneration on the basis of the scale. 14 In addition, the national court notes that, if a professional who did not live in Italy supplied legal services to a recipient living in that Member State and the contract concerning those services was subject to Italian law, that provision of legal services would be subject to the absolute prohibition of derogation from the remuneration set by the scale. Therefore in that case the binding minimum amount would have to be applied. That prohibition would therefore have the consequence of hindering other lawyers’ access to the Italian services market. 15 In those circumstances, the Corte d’appello di Torino decided to stay proceedings and refer the following questions to the Court for a preliminary ruling: ‘(1) Does the principle of competition under Community law, as set out in Articles 10 EC, 81 EC and 82 EC, also apply to the provision of legal services? (2) Does that principle permit a lawyer’s remuneration to be agreed between the parties, with binding effect?(3) Does that principle preclude an absolute prohibition of derogation from the lawyers’ fees?(4) Does the principle of free movement of services, as laid down in Articles 10 EC and 49 EC, also apply to the provision of legal services? (5) If so, is that principle compatible with the absolute prohibition of derogation from lawyers’ fees?’ Case C-202/0416 On the basis of an opinion from the lawyers’ association and in accordance with the scale, Mr Meloni, a lawyer, sought and obtained an order that Ms Capodarte and Mr Macrino pay fees relating to certain out-of-court services he had provided to them concerning copyright, comprising inter alia oral opinions and letters to the opposing party’s lawyer. 17 Ms Capodarte and Mr Macrini contested that order before the Tribunale di Roma (District Court of Rome), pleading inter alia that the fees demanded by Mr Meloni were disproportionate having regard to the importance of the case dealt with and the services actually performed by the latter. 18 In order to determine the amount of the fees payable to Mr Meloni for those services, the Tribunale di Roma considers that it must assess whether that scale, in so far as it applies to lawyers in respect of out‑of‑court work, is compatible with the rules of the EC Treaty, having regard in particular to the fact that the persons concerned did not have to appoint a lawyer in order to obtain the out-of-court services in question. 19 Accordingly, the Tribunale di Roma decided to stay the proceedings and refer the following question to the Court for a preliminary ruling: ‘Do Articles 5 and 85 of the EC Treaty (now Articles 10 EC and 81 EC) preclude a Member State from adopting a law or regulation which approves, on the basis of a draft produced by a professional body of lawyers, a scale fixing minimum and maximum fees for members of the profession in respect of services rendered in connection with activities (so-called out-of-court work) that are not reserved to lawyers but may be performed by anyone?’ 20 On account of the connection between the two main proceedings, they should be joined for the purposes of the judgment under Article 43 of the Rules of Procedure, read in conjunction with Article 103 of those Rules. The questions referred to the Court Admissibility Case C-94/04– Observations submitted to the Court21 According to Mr Cipolla, the questions referred by the national court are inadmissible on the grounds that they are not relevant to the resolution of the dispute in the main proceedings and are hypothetical. 22 As regards the first plea of inadmissibility, Mr Cipolla maintains that the applicable national law does not require the national court to decide on the existence and lawfulness of an agreement between a lawyer and his client, contrary to what is stated in the decision making the reference. The absence of agreement between those parties and the description of the sum paid by the client as an ‘advance payment’ for professional services have become res judicata since they were not challenged on appeal. 23 As for the second plea of inadmissibility, Mr Cipolla claims that the validity of an agreement made between a lawyer and his client must be assessed only if it is shown that such an agreement exists. However, that is not the case here. Accordingly, the questions referred by the Corte d’appello di Torino should be treated in the same way as a request for an advisory opinion. 24 The German Government considers that since the facts at issue in the main proceedings do not include any transborder element, Article 49 EC does not apply. The Commission of the European Communities, for its part, relying on recent case-law of the Court, and takes the view that the reference for a preliminary ruling is admissible as it concerns the interpretation of Article 49 EC. – The Court’s answer25 As regards Mr Cipolla’s pleas of inadmissibility, it should be recalled that questions on the interpretation of Community law referred by a national court in the factual and legislative context which that court is responsible for defining and the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance (see Case C‑300/01 Salzmann [2003] ECR I-4899, paragraphs 29 and 31). The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Case C-379/98 PreussenElektra [2001] ECR I-2099, paragraph 39, and Case C-466/04 Acereda Herrera [2006] ECR I-0000, paragraph 48). 26 That presumption of relevance cannot be rebutted by the simple fact that one of the parties to the main proceedings contests certain facts, such as those set out in paragraph 22 of this judgment, the accuracy of which is not a matter for the Court to determine and on which the delimitation of the subject-matter of those proceedings depend. 27 Accordingly, it must be considered that, as is clear from the decision making the reference, the main proceedings concern whether there was an agreement concluded between a lawyer and his clients relating to the lawyer’s flat-rate remuneration and whether it should be deemed valid on the ground that it would be contrary to the Community competition rules for it to be automatically replaced by a calculation of the lawyer’s remuneration on the basis of the scale in force in the Member State concerned. 28 In that regard, it must be stated that it is not manifest that the interpretation of Community law sought by the national court bears no relation to the actual facts of the main action or its purpose or that the questions on the interpretation of those rules are hypothetical. 29 Accordingly, even if the existence of the agreement at issue in the main proceedings is not established, it is conceivable that the interpretation of Community law sought by the national court, which may make it possible for the latter to assess the compatibility of the scale with the competition rules introduced by the Treaty, will be of use to that court for the purpose of deciding the dispute before it. That dispute relates principally to the settlement of lawyer’s fees which, as stated in paragraph 6 of this judgment, is to be decided by the court and, subject to certain exceptions, within the maximum and minimum limits set beforehand by the Minister of Justice. 30 Finally, as regards particularly the questions concerning the interpretation of Article 49 EC, although it is common ground that all aspects of the main proceedings before the national court are confined within a single Member State, a reply might none the less be useful to the national court, in particular if its national law were to require, in proceedings such as those in this case, that an Italian national must be allowed to enjoy the same rights as those which a national of another Member State would derive from Community law in the same situation (see, in particular, Case C-451/03 Servizi Ausiliari Dottori Commercialisti [2006] ECR I-2941, paragraph 29). 31 It must therefore be considered whether the provisions of the Treaty on freedom to provide services, of which the interpretation is sought by that court, preclude the application of national legislation law such as that at issue in the main proceedings in so far as it applies to persons who live in Member States other than the Italian Republic. 32 Having regard to the foregoing, it must be held that the reference for a preliminary ruling is admissible. 33 Mr Meloni pleads the inadmissibility of the question referred by the Tribunale di Roma on the ground that there is no link between that question and the outcome of the proceedings before that court, which concerns the application of the scale to the provision of out-of-court services by a lawyer enrolled at the Bar. 34 In addition, the national court did not indicate the precise reasons for its uncertainty as to the interpretation of Community law. 35 The Italian Government submits that, when the parties have not fixed the fees by contract and the client unilaterally challenges the fees invoiced by the professional, as in the dispute in the main proceedings, under Italian law it is for the court before which the dispute has been brought to set those fees as it sees fit. Accordingly, the question of the compatibility of the scale in respect of out-of-court services provided by lawyers with Article 10 EC and 81 EC is irrelevant for the purposes of the outcome of the main proceedings. 36 That government also challenges the relevance of the question referred by the national court in the light of the fact that there is no anti-competitive practice in the case in the main proceedings, either in establishing the scale or on account of the conduct of operators. – The Court’s answer 37 In respect of the first plea of inadmissibility relied on by Mr Meloni, it should be noted that the dispute relates to the application of the scale to out-of-court services provided by a lawyer enrolled at the Bar. By its question, the national court asks whether the competition rules preclude such application where that same scale does not apply to out-of-court services provided by a person not enrolled at the Bar. In those circumstances, the presumption of relevance attaching to the questions on the interpretation of Community law referred by the national court cannot be rebutted. 38 The plea of inadmissibility alleging that the national court did not indicate the precise reasons for its uncertainty as to the interpretation of Community law cannot succeed either. According to the case-law of the Court, it is essential that the national court should give at the very least some explanation of the reasons for the choice of the Community provisions which it requires to be interpreted and on the link it establishes between those provisions and the national legislation applicable to the dispute (see, inter alia, order in Case C-116/00 Laguillaumie [2000] ECR I-4979, paragraph 16). The decision making the reference fully satisfies such a requirement, as moreover the Advocate General pointed out in paragraph 24 of his Opinion. 39 As regards the first plea of inadmissibility put forward by the Italian Government, the national court takes as its premise that, in the context of the dispute before it, under Italian law it must set the fee payable to the lawyer by reference to the scale applicable to lawyers in respect of out-of-court work. 40 As is recalled at paragraph 25 of this judgment, it is not a matter for the Court to determine the accuracy of the factual and legislative context defined by the national court and in which the questions on the interpretation of Community law which it submits to the Court arise. 41 In those circumstances, the presumption of relevance attaching to the question referred to the Court has not been rebutted. 42 As regards the second plea of inadmissibility raised by the Italian Government, it should be recalled that, as was stated in paragraph 37 of this judgment, by its question the national court asks whether the competition rules established by the Treaty preclude application of the scale in the dispute before it. Accordingly, whether there is an anti-competitive practice in the case in the main proceedings is part of the very subject-matter of the question of interpretation referred by the national court and cannot be regarded as irrelevant in this case. 43 It follows that the reference for a preliminary ruling from the Tribunale di Roma is admissible. Substance The first three questions referred in Case C-94/04 and the question referred in Case C-202/0444 By those questions, which can conveniently be dealt with together by way of a reformulation which takes account of the relevant aspects of the two cases and in particular of the fact that, in the disputes in the main proceedings, minimum fees are at issue, the national courts ask, essentially, whether Articles 10 EC, 81 EC and 82 EC preclude a Member State from adopting a legislative measure which approves, on the basis of a draft produced by a professional body of lawyers such as the CNF, a scale fixing a minimum fee for members of the legal profession from which there can generally be no derogation in respect of either services reserved to those members or those such as out-of-court services which may also be provided by any other economic operator not subject to that scale. 45 As a preliminary point, it should be noted that, since the scale extends to the whole of the territory of a Member State, it may affect trade between Member States within the meaning of Articles 81(1) EC and 82 EC (see, to that effect, Case 8/72 Vereeniging van Cementhandelaren v Commission [1972] ECR 977, paragraph 29; Case C-179/90 Merci convenzionali porto di Genova [1991] ECR I-5889, paragraphs 14 and 15; and Case C-35/99 Arduino [2002] ECR I-1529, paragraph 33). 46 According to settled case-law, although it is true that Articles 81 EC and 82 EC are, in themselves, concerned solely with the conduct of undertakings and not with laws or regulations emanating from Member States, those articles, read in conjunction with Article 10 EC, which lays down a duty to cooperate, none the less require Member States not to introduce or maintain in force measures, even of a legislative or regulatory nature, which may render ineffective the competition rules applicable to undertakings (see, in particular, the order in Case C‑250/03 Mauri [2005] ECR I-1267, paragraph 29, and the case-law cited). 47 The Court has held, in particular, that Articles 10 EC and 81 EC are infringed where a Member State requires or encourages the adoption of agreements, decisions or concerted practices contrary to Article 81 EC or reinforces their effects, or where it divests its own rules of the character of legislation by delegating to private economic operators responsibility for taking decisions affecting the economic sphere (order in Mauri, paragraph 30, and the case-law cited). 48 In that respect, the fact that a Member State requires a professional organisation composed of lawyers, such as the CNF, to produce a draft scale of fees does not, in the circumstances specific to the cases in the main proceedings, appear to establish that that State has divested the scale finally adopted of its character of legislation by delegating to lawyers responsibility for taking decisions concerning them. 49 Although the national legislation at issue in the main proceedings does not contain either procedural arrangements or substantive requirements capable of ensuring with reasonable probability that, when producing the draft scale, the CNF conducts itself like an arm of the State working in the public interest, it does not appear that the Italian State has waived its power to make decisions of last resort or to review implementation of that scale (see Arduino, paragraphs 39 and 40). 50 First, the CNF is responsible only for producing a draft scale which, as such, is not binding. Without the Minister of Justice’s approval, the draft scale does not enter into force and the earlier approved scale remains applicable. Accordingly, that Minister has the power to have the draft amended by the CNF. Furthermore, the Minister is assisted by two public bodies, the Consiglio di Stato and the CIP, whose opinions he must obtain before the scale can be approved (see Arduino, paragraph 41). 51 Secondly, Article 60 of the Royal Decree-Law provides that fees are to be settled by the courts on the basis of the criteria referred to in Article 57 of that decree-law, having regard to the seriousness and number of the issues dealt with. Moreover, in certain exceptional circumstances and by duly reasoned decision, the court may depart from the maximum and minimum limits fixed pursuant to Article 58 of the Royal Decree-Law (see, to that effect, Arduino, paragraph 42). 52 In those circumstances, the view cannot be taken that the Italian State has waived its power by delegating to private economic operators responsibility for taking decisions affecting the economic sphere, which would have the effect of depriving the provisions at issue in the main proceedings of the character of legislation (see Arduino, paragraph 43, and the order in Mauri, paragraph 36.) 53 Nor, for the reasons set out in paragraphs 50 and 51 of this judgment, is the Italian State open to the criticism that it requires or encourages the adoption by the CNF of agreements, decisions or concerted practices contrary to Article 81 EC of the Treaty or reinforces their effects, or requires or encourages abuses of a dominant position contrary to Article 82 EC or reinforces the effects of such abuses (see, to that effect, Arduino, paragraph 43, and the order in Mauri, paragraph 37). 54 The answer to the first three questions referred to the Court in Case C‑94/04 and to the question referred in Case C-202/04 must be that Articles 10 EC, 81 EC and 82 EC do not preclude a Member State from adopting a legislative measure which approves, on the basis of a draft produced by a professional body of lawyers such as the CNF, a scale fixing a minimum fee for members of the legal profession from which there can generally be no derogation in respect of either services reserved to those members or those such as out-of-court services which may also be provided by any other economic operator not subject to that scale. The fourth and fifth questions referred in Case C-94/0455 By those two questions, the Corte d’appello di Torino asks, essentially, whether Article 49 EC precludes legislation containing an absolute prohibition of derogation, by agreement, from the minimum fees set by a scale, such as that at issue in the main proceedings, for services which are (a) court services and (b) reserved to lawyers. 56 Article 49 EC requires not only the elimination of all discrimination on grounds of nationality against providers of services who are established in another Member State but also the abolition of any restriction, even if it applies without distinction to national providers of services and to those of other Member States, which is liable to prohibit or further impede the activities of a provider of services established in another Member State where he lawfully provides similar services (see, in particular, Case C‑17/00 De Coster [2001] ECR I-9445, paragraph 29, and Joined Cases C‑544/03 and C‑545/03 Mobistar and Belgacom Mobile [2005] ECR I‑7723, paragraph 29). 57 Furthermore, the Court has already held that Article 49 EC precludes the application of any national rules which have the effect of making the provision of services between Member States more difficult than the provision of services purely within one Member State (see De Coster, paragraph 30, and the case-law cited, and Mobistar andBelgacom Mobile, paragraph 30). 58 The prohibition of derogation, by agreement, from the minimum fees set by a scale such as that laid down by the Italian legislation is liable to render access to the Italian legal services market more difficult for lawyers established in a Member State other than the Italian Republic and therefore is likely to restrict the exercise of their activities providing services in that Member State. That prohibition therefore amounts to a restriction within the meaning of Article 49 EC. 59 That prohibition deprives lawyers established in a Member State other than the Italian Republic of the possibility, by requesting fees lower than those set by the scale, of competing more effectively with lawyers established on a stable basis in the Member State concerned and who therefore have greater opportunities for winning clients than lawyers established abroad (see, by analogy, Case C-442/02 CaixaBank France [2004] ECR I-8961, paragraph 13). 60 Likewise, the prohibition thus laid down limits the choice of service recipients in Italy, because they cannot resort to the services of lawyers established in other Member States who would offer their services in Italy at a lower rate than the minimum fees set by the scale. 61 However, such a prohibition may be justified where it serves overriding requirements relating to the public interest, is suitable for securing the attainment of the objective which it pursues and does not go beyond what is necessary in order to attain it (see, inter alia, Case C-398/95 SETTG [1997] ECR I-3091, paragraph 21, and Servizi Ausiliari Dottoro Commercialisti, paragraph 37). 62 In order to justify the restriction on freedom to provide services which stems from the prohibition at issue, the Italian Government submits that excessive competition between lawyers might lead to price competition which would result in a deterioration in the quality of the services provided to the detriment of consumers, in particular as individuals in need of quality advice in court proceedings. 63 According to the Commission, no causal link has been established between the setting of minimum levels of fees and a high qualitative standard of professional services provided by lawyers. In actual fact, quasi-legislative measures such as, inter alia, rules on access to the legal profession, disciplinary rules serving to ensure compliance with professional ethics and rules on civil liability have, by maintaining a high qualitative standard for the services provided by such professionals which those measures guarantee, a direct relationship of cause and effect with the protection of lawyers’ clients and the proper working of the administration of justice. 64 In that respect, it must be pointed out that, first, the protection of consumers, in particular recipients of the legal services provided by persons concerned in the administration of justice and, secondly, the safeguarding of the proper administration of justice, are objectives to be included among those which may be regarded as overriding requirements relating to the public interest capable of justifying a restriction on freedom to provide services (see, to that effect, Case C‑3/95 Reisebüro Broede [1996] ECR I-6511, paragraph 31, and the case-law cited, and Case C-124/97 Läärä and Others [1999] ECR I-6067, paragraph 33), on condition, first, that the national measure at issue in the main proceedings is suitable for securing the attainment of the objective pursued and, secondly, it does not go beyond what is necessary in order to attain that objective. 65 It is a matter for the national court to decide whether, in the main proceedings, the restriction on freedom to provide services introduced by that national legislation fulfils those conditions. For that purpose, it is for that court to take account of the factors set out in the following paragraphs. 66 Thus, it must be determined, in particular, whether there is a correlation between the level of fees and the quality of the services provided by lawyers and whether, in particular, the setting of such minimum fees constitutes an appropriate measure for attaining the objectives pursued, namely the protection of consumers and the proper administration of justice. 67 Although it is true that a scale imposing minimum fees cannot prevent members of the profession from offering services of mediocre quality, it is conceivable that such a scale does serve to prevent lawyers, in a context such as that of the Italian market which, as indicated in the decision making the reference, is characterised by an extremely large number of lawyers who are enrolled and practising, from being encouraged to compete against each other by possibly offering services at a discount, with the risk of deterioration in the quality of the services provided. 68 Account must also be taken of the specific features both of the market in question, as noted in the preceding paragraph, and the services in question and, in particular, of the fact that, in the field of lawyers’ services, there is usually an asymmetry of information between ‘client-consumers’ and lawyers. Lawyers display a high level of technical knowledge which consumers may not have and the latter therefore find it difficult to judge the quality of the services provided to them (see, in particular, the Report on Competition in Professional Services in Communication from the Commission of 9 February 2004 (COM(2004)83 final, p. 10)). 69 However, the national court will have to determine whether professional rules in respect of lawyers, in particular rules relating to organisation, qualifications, professional ethics, supervision and liability, suffice in themselves to attain the objectives of the protection of consumers and the proper administration of justice. 70 Having regard to the foregoing, the answer to the fourth and fifth questions referred in Case C-94/04 must be that legislation containing an absolute prohibition of derogation, by agreement, from the minimum fees set by a scale of lawyer’s fees such as that at issue in the main proceedings for services which are (a) court services and (b) reserved to lawyers constitutes a restriction on freedom to provide services laid down in Article 49 EC. It is for the national court to determine whether such legislation, in the light of the detailed rules for its application, actually serves the objectives of protection of consumers and the proper administration of justice which might justify it and whether the restrictions it imposes do not appear disproportionate in the light of those objectives. Costs71 Since these proceedings are, for the parties to the main proceedings, a step in the actions before the national courts, the decisions on costs are a matter for those courts. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. Articles 10 EC , 81 EC and 82 EC do not preclude a Member State from adopting a legislative measure which approves, on the basis of a draft produced by a professional body of lawyers such as the Consiglio nazionale forense (National Lawyers’ Council), a scale fixing a minimum fee for members of the legal profession from which there can generally be no derogation in respect of either services reserved to those members or those, such as out-of-court services, which may also be provided by any other economic operator not subject to that scale.2. Legislation containing an absolute prohibition of derogation, by agreement, from the minimum fees set by a scale of lawyers’ fees, such as that at issue in the main proceedings, for services which are (a) court services and (b) reserved to lawyers constitutes a restriction on freedom to provide services laid down in Article 49 EC. It is for the national court to determine whether such legislation, in the light of the detailed rules for its application, actually serves the objectives of protection of consumers and the proper administration of justice which might justify it and whether the restrictions it imposes do not appear disproportionate having regard to those objectives.[Signatures]* Language of the case: Italian. | f092b-11f3ec9-49d3 | EN |
ONLY PRODUCTS ACQUIRED AND TRANSPORTED PERSONALLY BY PRIVATE INDIVIDUALS ARE EXEMPT FROM EXCISE DUTY IN THE MEMBER STATE OF IMPORTATION | Staatssecretaris van FinanciënvB.F. Joustra(Reference for a preliminary ruling from the Hoge Raad der Nederlanden)(Tax provisions – Harmonisation of laws – Directive 92/12/EEC – Excise duties – Wine – Articles 7 to 10 – Determination of the Member State in which duties are chargeable – Acquisition by a private individual for his own use and that of other private individuals – Transport to another Member State by a transport undertaking – Arrangements applicable in the Member State of destination)Summary of the JudgmentTax provisions – Harmonisation of laws – Excise duties – Directive 92/12 – Products subject to excise duty – Determination of the Member State in which duty is chargeable (Council Directive 92/12, Arts 7, 8 and 22(3))Directive 92/12 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products must be construed as meaning that where a private individual who is not operating commercially or with a view to making a profit acquires in one Member State, for his own personal requirements and those of other private individuals, products subject to excise duty which have been released for consumption in that Member State and arranges for them to be transported to another Member State on his behalf by a transport company established in that other State, Article 7 of that Directive, and not Article 8 thereof, is applicable, with the result that excise duty is also to be levied in that other State. For the purposes of applying Directive 92/12, products which are not held for private purposes, and thus do not fall under Article 8 of the directive, must necessarily be regarded as being held for commercial purposes and thus fall under Article 7. For Article 8 to apply, the products in question must have been transported personally by the private individual who purchased them. Under Article 7(6) of that directive, the excise duty paid in the first State is, in such a case, to be reimbursed in accordance with Article 22(3) of the directive. (see paras 29, 37, 53, operative part)JUDGMENT OF THE COURT (Third Chamber)23 November 2006 (*) In Case C‑5/05,REFERENCE for a preliminary ruling under Article 234 EC from the Hoge Raad der Nederlanden (Netherlands), made by decision of 7 January 2005, received at the Court on the same day, in the proceedings B.F. Joustra, THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, A. Borg Barthet and A. Ó Caoimh (Rapporteur), Judges,Advocate General: F.G. Jacobs,Registrar: R. Grass,having regard to the written procedure,after considering the observations submitted on behalf of:– the Netherlands Government, by H.G. Sevenster, acting as Agent,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by G. Albenzio, avvocato dello Stato,– the Polish Government, by T. Nowakowski, acting as Agent,– the Portuguese Government, by L. Fernandes and Â. Seiça Neves, acting as Agents,– the Swedish Government, by K. Wistrand, acting as Agent,– the United Kingdom Government, by M. Bethell, acting as Agent, and S. Moore, Barrister,– the Commission of the European Communities, by P. van Nuffel and K. Gross, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 1 December 2005,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Articles 7 to 9 of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (OJ 1992 L 76, p. 1), as amended by Council Directive 92/108/EEC of 14 December 1992 (OJ 1992 L 390, p. 124) (‘the Directive’). 2 This reference has been made in the course of proceedings between the Staatssecretaris van Financiën (State Secretary for Finances) and Mr Joustra concerning the charging in the Netherlands of excise duty on wine acquired by Mr Joustra in France for his own use and that of other private individuals and transported to the Netherlands on his behalf by a transport company established in the Netherlands. Legal context Community legislation3 The fifth to eighth recitals in the preamble to the Directive state the following: ‘… any delivery, holding with a view to delivery or supply for the purposes of a trader carrying out an economic activity independently or for the purposes of a body governed by public law, taking place in a Member State other than that in which the product is released for consumption gives rise to chargeability of the excise duty in that other Member State; … in the case of products subject to excise duty acquired by private individuals for their own use and transported by them, the duty must be charged in the country where they were acquired; … to establish that products subject to excise duty are not held for private but for commercial purposes, Member States must take account of a number of criteria; … products subject to excise duty purchased by persons who are not approved warehousekeepers or registered or non-registered traders and dispatched or transported directly or indirectly by the vendor or on his behalf must be subject to excise duty in the Member State of destination’. 4 Articles 1 to 10 of the Directive form Title I thereof (‘General Provisions’). 5 Under Article 3(1), the Directive applies, at Community level, to mineral oils, alcohol and alcoholic beverages and to manufactured tobacco. 6 Article 4 of the Directive contains the following definition: ‘…(e) non-registered trader: a natural or legal person without authorised warehousekeeper status, who is entitled, in the course of his business, to receive occasionally products subject to excise duty from another Member State under duty-suspension arrangements. This type of trader may neither hold nor dispatch products under excise duty suspension arrangements. A non-registered trader must guarantee payment of excise duty to the tax authorities of the Member States of destination prior to the dispatch of the goods.’ 7 Article 6(1) of the Directive provides: ‘1. Excise duty shall become chargeable at the time of release for consumption …Release for consumption of products subject to excise duty shall mean:(a) any departure, including irregular departure, from a suspension arrangement;(b) any manufacture, including irregular manufacture, of those products outside a suspension arrangement;(c) any importation of those products, including irregular importation, where those products have not been placed under a suspension arrangement.’ 8 Article 7 of the Directive provides: ‘1. In the event of products subject to excise duty and already released for consumption in one Member State being held for commercial purposes in another Member State, the excise duty shall be levied in the Member State in which those products are held. 2. To that end, without prejudice to Article 6, where products already released for consumption as defined in Article 6 in one Member State are delivered or intended for delivery in another Member State or used in another Member State for the purposes of a trader carrying out an economic activity independently or for the purposes of a body governed by public law, excise duty shall become chargeable in that other Member State. 3. Depending on all the circumstances, the duty shall be due from the person making the delivery or holding the products intended for delivery or from the person receiving the products for use in a Member State other than the one where the products have already been released for consumption, or from the relevant trader or body governed by public law. 4. The products referred to in paragraph 1 shall move between the territories of the various Member States under cover of an accompanying document listing the main data from the document referred to in Article 18(1). The form and content of this document shall be established in accordance with the procedure laid down in Article 24 of this Directive. 5. The person, trader or body referred to in paragraph 3 must comply with the following requirements:(a) before the goods are dispatched, make a declaration to the tax authorities of the Member State of destination and guarantee the payment of the excise duty; (b) pay the excise duty of the Member State of destination in accordance with the procedure laid down by that Member State;(c) consent to any check enabling the administration of the Member State of destination to satisfy itself that the goods have actually been received and that the excise duty to which they are liable has been paid. 6. The excise duty paid in the first Member State referred to in paragraph 1 shall be reimbursed in accordance with Article 22(3).’ 9 Under Article 8 of the Directive: ‘As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired.’ 10 Article 9 of the Directive provides: ‘1. Without prejudice to Articles 6, 7 and 8, excise duty shall become chargeable where products for consumption in a Member State are held for commercial purposes in another Member State. In this case, the duty shall be due in the Member State in whose territory the products are and shall become chargeable to the holder of the products. 2. To establish that the products referred to in Article 8 are intended for commercial purposes, Member States must take account, inter alia, of the following: – the commercial status of the holder of the products and his reasons for holding them,– the place where the products are located or, if appropriate, the mode of transport used,– any document relating to the products,– the nature of the products,– the quantity of the products.For the purposes of applying the content of the fifth indent of the first subparagraph, Member States may lay down guide levels, solely as a form of evidence. These guide levels may not be lower than: …(b) Alcoholic beverageswines (including a maximum of 60 l of sparkling wines) 90 l3. Member States may also provide that excise duty shall become chargeable in the Member State of consumption on the acquisition of mineral oils already released for consumption in another Member State if such products are transported using atypical modes of transport by private individuals or on their behalf. …’ 11 Article 10 of the Directive provides: ‘1. Products subject to excise duty purchased by persons who are not authorised warehousekeepers or registered or non-registered traders and dispatched or transported directly or indirectly by the vendor or on his behalf shall be liable to excise duty in the Member State of destination. For the purposes of this Article, “Member State of destination” shall mean the Member State of arrival of the dispatch or transport. 2. To that end, the delivery of products subject to excise duty already released for consumption in a Member State and giving rise to the dispatch or transport of those products to a person as referred to in paragraph 1, established in another Member State, and which are dispatched or transported directly or indirectly by the vendor or on his behalf shall cause excise duty to be chargeable on those products in the Member State of destination. 3. The duty of the Member State of destination shall be chargeable to the vendor at the time of delivery. However, Member States may adopt provisions stipulating that the excise duty shall be payable by a tax representative, other than the consignee of the products. Such tax representative must be established in the Member State of destination and approved by the tax authorities of that Member State. The Member State in which the vendor is established must ensure that he complies with the following requirements:– guarantee payment of excise duty under the conditions set by the Member State of destination prior to dispatch of the products and ensure that the excise duty is paid following arrival of the products, – keep accounts of deliveries of products.4. In the case referred to in paragraph 2, the excise duty paid in the first Member State shall be reimbursed in accordance with Article 22(4). …’12 Transactions made by non-registered traders are covered by specific provisions set out, in particular, in Articles 16 to 19 of Title III of the Directive (‘Movement of goods’). 13 According to Article 22(1) and (3) in Title IV of the Directive (‘Reimbursement’): ‘1. In appropriate cases, products subject to excise duty which have been released for consumption may, at the request of a trader in the course of his business, be eligible for reimbursement of excise duty by the tax authorities of the Member State where they were released for consumption when they are not intended for consumption in that Member State. However, Member States may refuse this request for reimbursement where it does not satisfy the correctness criteria they lay down. 3. In the cases referred to in Article 7, the Member State of departure is required to reimburse the excise duty paid only where the excise duty was previously paid in the Member State of destination in accordance with the procedure laid down in Article 7(5). However, Member States may refuse this request for reimbursement where it does not satisfy the correctness criteria they lay down.’ National legislation14 Article 2c of the Netherlands Law on excise duty (Wet op de accijns) of 31 October 1991 (Stb. 1991, p. 561, ‘the Law on excise duty’) provides: ‘1. No excise duty is payable where a natural person other than a trader transports a product which is subject to excise duty from a Member State to the Netherlands for his own consumption. 2. Without prejudice to paragraph 1, the holding by a natural person for purposes other than his own consumption of a product subject to excise duty which has been released for consumption in another Member State or imported, and on which no excise duty has been levied in the Netherlands, shall be treated in the same way as a release for consumption. 3. If the quantity of products exceeds a ceiling fixed by ministerial order, the products shall be deemed to be held for purposes other than that of personal consumption unless there is evidence to the contrary.’ 15 Article 3a of Decree No WW 91/440 implementing the Law on excise duty (Uitvoeringsregeling accijns) of 20 December 1991 (Stcrt. 1991, No 252) provides: ‘The quantities referred to in Article 2c(3) of the Law shall be:b. 90 litres in respect of wine; The dispute in the main proceedings and the questions referred for a preliminary ruling16 Mr Joustra and some 70 other private individuals formed a group called the ‘Cercle des Amis du Vin’ (‘the circle’). 17 Each year, on behalf of the circle, Mr Joustra orders wine in France for his own use and that of the other members of the group. On his instructions, that wine is then collected by a Netherlands transport company which transports it to the Netherlands and delivers it to Mr Joustra’s home. The wine is stored there for a few days before being delivered to the other members of the circle on the basis of their respective shares of the quantity purchased. Mr Joustra pays for the wine and the transport and each member of the group then reimburses him for the cost of the quantity of wine delivered to that member and a share of the transport costs calculated in proportion to that quantity. It is common ground that Mr Joustra does not engage in that activity on a commercial basis or with a view to making a profit. 18 It is apparent from the order for reference that the wine ordered by Mr Joustra was released for consumption in France and that excise duty was paid in that Member State. Furthermore, it is common ground that the quantity of wine delivered to each member of the circle did not exceed 90 litres, of which no more than 60 litres was sparkling wine. 19 On 2 December 1997, Mr Joustra declared to the Netherlands tax authorities, which had previously granted to him, at his own request, the status of a non-registered trader, that he had received 13.68 hectolitres of red and white wine and 1.44 hectolitres of sparkling wine. Those authorities levied excise duty of EUR 906.20 (NLG 1 997) on that wine. Mr Joustra disputed liability for that excise duty before the Inspecteur van de Belastingsdienst – Douane te Roosendaal (Tax and Customs Inspectorate, Roosendaal Office, ‘the Inspectorate’). However, his objection was rejected. 20 By decision of 28 November 2002, the Gerechtshof te ’s-Hertogenbosch (Regional Court of Appeal, ’s-Hertogenbosch), to which Mr Joustra appealed against the decision of the Inspectorate dismissing his objection, upheld his application and ordered reimbursement to him of the sum paid in respect of excise duty. According to that court, as it was accepted that Mr Joustra was not holding the wine stored at his home for commercial purposes, the inference had to be drawn that he was not holding it for any purpose other than that of his own consumption within the meaning of Article 2c(2) of the Law on excise duty, which transposed Article 9 of the Directive into national law, and that, therefore, he was not required to pay the excise duty in question. 21 The Staatssecretaris van Financiën and Mr Joustra brought an appeal in cassation and a cross-appeal respectively against the decision of the Gerechtshof te ’s‑Hertogenbosch before the Hoge Raad der Nederlanden (Supreme Court of the Netherlands). 22 In his appeal, the Staatssecretaris van Financiën maintains that the Gerechtshof te ’s-Hertogenbosch relied on a misinterpretation of the term ‘held for commercial purposes’ in Articles 7 and 9 of the Directive. In his opinion, only products which are held by private individuals for their own use and which they have themselves transported fall outside the scope of that term. In his cross-appeal, Mr Joustra submits that the charging of excise duty on the wine in question is covered by Article 8 of the Directive. The words ‘transported by them’ in that provision do not prevent it from being interpreted as meaning that the charging of excise duty in the Member State of destination is precluded where an individual himself purchases, in another Member State, products subject to excise duty and arranges for those products to be transported, under his instructions and on his account, to the Member State of destination by a third party. 23 The Hoge Raad points out that the situation that has given rise to the case in the main proceedings does not appear to be covered by either Article 8 of the Directive or Articles 7 and 9 thereof, unless Article 8 is to be recognised as having a broader scope than was attributed to it by the Court in Case C-296/95 EMU Tabac and Others [1998] ECR I-1605, in particular in paragraphs 33 and 37, or the term ‘held for commercial purposes’ in Articles 7 and 9 of the Directive is construed in such a way as to cover also the situation in which the person to whom the products subject to excise duty have been delivered for the purpose of subsequent distribution among the purchasers carries out his activities without thereby acting on a commercial basis or with a view to making a profit. However, the Hoge Raad observes that EMU Tabac and Others concerned a case in which an agent, operating on a commercial basis, acted in the purchase of products subject to excise duty and also organised their transport, on behalf of the vendor, to the Member State of destination. That is not true of the present case. Therefore the question that arises is whether, regard being had to the principle governing the internal market, as set out in particular in Articles 14 EC and 93 EC, the ruling of the Court in that judgment is capable of being applied to the case in the main proceedings. 24 In those circumstances, the Hoge Raad der Nederlanden decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Must Article 8 of [the Directive] be construed as meaning that excise duty may not be levied other than in the Member State of acquisition in the case where an individual purchases goods subject to excise duty personally and for his own use in one Member State and has them transported by a transport undertaking to another Member State? 2. Must Article 8 of [the Directive] be construed as meaning that excise duty may not be levied other than in the Member State of acquisition where, as in the present case, individuals arrange for goods subject to excise duty to be purchased in one Member State by another individual who is acting neither in a business capacity nor with a view to making a profit and who arranges for the goods to be transported on behalf of the purchasers by a transport undertaking to another Member State? 3. If the answer to (one of) those questions should be in the negative: must Articles 7 and 9 of [the Directive] be construed as meaning that, if an individual arranges for goods subject to excise duty which have been released for consumption in one Member State to be transported by a third party operating on his behalf to another Member State, where they are intended for his own personal requirements and for the personal requirements of others whom that individual also represents, that individual holds in that other Member State those goods subject to excise duty, that is to say, both those intended for his own use and those intended for the use of those other individuals, for commercial purposes within the terms of Articles 7 and 9 of the Directive, even if he is not acting commercially or with a view to making a profit? 4. If the answer to Question 3 should be in the negative, does it follow from any other provision of the Directive that the individual referred to in Question 3 owes excise duty in the other Member State?’ The questions referred for a preliminary ruling25 By its questions, which must be examined together, the Hoge Raad asks, in essence, whether the Directive must be interpreted as meaning that, where a private individual like Mr Joustra, who is not operating commercially or with a view to making a profit, purchases in one Member State, for his own requirements and for those of other individuals, products subject to excise duty, in this case wine, which have been released for consumption in that Member State, and then arranges for them to be transported on his behalf by a transport company established in another Member State, excise duty is also payable in that latter State. 26 In that regard, even though some of the documents in the case suggest that Mr Joustra had the status of a non-registered trader, it is clear from the wording of the questions referred to the Court that those questions presuppose that he did not have such a status. The questions must therefore be examined solely within the context of the general provisions set out in the Directive, in particular Articles 6 to 10 thereof, and not in the light of the specific provisions laid down by the Directive in regard to non-registered traders. 27 As the Court has already pointed out, the purpose of the Directive is to lay down a number of rules on the holding, movement and monitoring of products subject to excise duty, in particular so as to ensure that chargeability of excise duties is identical in all the Member States (EMU Tabac and Others, paragraph 22; Case C-325/99 Van de Water [2001] ECR I-2729, paragraph 39; and Case C-395/00 Cipriani [2002] ECR I-11877, paragraph 41). 28 In this respect, as is apparent inter alia from the fifth and sixth recitals in its preamble, the Directive draws a distinction between, on the one hand, products held for commercial purposes, in respect of which accompanying documents are required for transportation purposes, and, on the other hand, products held for private purposes, in respect of which no document is required (see, to that effect, EMU Tabac and Others, paragraphs 23 and 24). 29 Consequently, and as is apparent from the seventh recital in the preamble to the Directive, for the application of the Directive, products which are not held for private purposes must necessarily be regarded as being held for commercial purposes. 30 As regards products held for commercial purposes, although Article 6 of the Directive provides that excise duty is to become chargeable when goods are released for consumption in a Member State, this does not preclude excise duty from being subsequently levied in another Member State pursuant to Articles 7, 9 or 10, whereupon duty paid in the first State may be reimbursed pursuant to Article 7(6) or Article 10(4) of the Directive (see, to that effect, EMU Tabac and Others, paragraph 42). 31 By contrast, as regards products held for private purposes, Article 8 of the Directive provides that excise duty is payable in the Member State in which they were purchased (see, to that effect, EMU Tabac and Others, paragraph 24). 32 In the present case, with a view to establishing whether excise duty may also be charged in the Member State of destination, it is therefore first of all necessary to examine whether the circumstances described by the Hoge Raad in its questions are capable of coming within the scope of Article 8 of the Directive. The applicability of Article 8 of the Directive33 The Court has already held that, for Article 8 of the Directive to apply, a number of conditions must be satisfied. Thus, the products on which excise duty is chargeable must have been acquired by ‘private individuals’ for ‘their own use’ and transported ‘by them’. Those conditions should make it possible to establish that products on which excise duty is chargeable and which are acquired in one Member State and then transported to another Member State are held for strictly personal purposes (see, to that effect, EMU Tabac and Others, paragraphs 25 and 26). 34 Since it is not disputed in the main proceedings that the products subject to excise duty were acquired by a private individual, it is necessary to examine whether the two other conditions laid down in Article 8 of the Directive have also been met. 35 As regards the first of those conditions, it is clear from the actual terms in which Article 8 of the Directive is couched that it requires that the products be intended for the personal use of the private individual who has acquired them and that it therefore excludes products acquired by a private individual for the use of other private individuals. The latter products cannot be considered to be held for strictly personal purposes by the private individual who has acquired them. 36 It follows that where, as in the main proceedings, products subject to excise duty have been acquired by a private individual not only for his own use, but also for the use of other private individuals, only the products acquired for that private individual’s own use are capable of coming within the scope of Article 8 of the Directive. 37 So far as concerns the second of the conditions, it is also apparent from the words ‘transported by them’ in Article 8 of the Directive that, for that provision to apply, the products in question must have been transported personally by the private individual who purchased them (see, to that effect, EMU Tabac and Others, paragraph 33). 38 However, the Commission of the European Communities submits that, in order to safeguard, in a case such as that in the main proceedings, the principle governing the internal market, referred to in Article 8 of the Directive, that condition should not be interpreted as necessarily implying that the private individual must himself accompany the products which are subject to excise duty. That condition is intended only to establish that products subject to excise duty are held for strictly personal purposes. Where a private individual takes the initiative to have products subject to excise duty transported by a third party and arranges that transport as if he were carrying it out himself, like Mr Joustra in the main proceedings, it also remains possible to ascertain that the products are held for strictly personal purposes. This case is thus different to that which gave rise to the judgment in EMU Tabac and Others. Furthermore, in the event of abuse, the Member States may refuse to apply Article 8 of the Directive. 39 In that regard, it must be borne in mind that, as the Court held in paragraph 32 of EMU Tabac and Others, where the Community legislature intended the Directive to apply in the event of the involvement of a third party in the transport of the products, it did so by means of an express provision formulated for that purpose. That is the case in Articles 9(3) and 10(1) of the Directive. 40 Furthermore, in paragraph 33 of EMU Tabac and Others, the Court also found that none of the language versions of Article 8 of the Directive expressly provides for such involvement and that, on the contrary, the Danish and Greek versions indicate particularly clearly that, for excise duty to be payable in the Member State of acquisition, transportation must be effected personally by the purchaser of the products subject to excise duty. 41 Consequently, and having regard to the wording of Article 8 of the Directive, which does not exhibit any ambiguity, the Court has already held, in paragraphs 37 and 40 of EMU Tabac and Others, that that provision is not applicable where the purchase and/or transportation of products subject to excise duty is effected through an agent, as the Community legislature did not at any point intend that provision to apply in the event of such involvement. 42 It is true that, as the Commission has submitted, in paragraph 48 of EMU Tabac and Others the Court pointed out that the purchase and transport of products subject to excise duty were, in that case, effected by an agent which was not acting at the instigation of the private individuals, but solicited from them orders for the purpose of placing them exclusively with the vendor, with which it formed one and the same economic entity. However, that consideration only led the Court to find that the products at issue in that case had been dispatched or transported directly or indirectly by the vendor or on his behalf within the meaning of Article 10 of the Directive. By contrast, that consideration is irrelevant as regards the application of Article 8 of the Directive. 43 Furthermore, whether or not the transport is initiated by the private individual, the very fact that products subject to excise duty are transported to another Member State by a transport company, which facilitates the transport of quantities of products significantly exceeding those required for his own use by the individual who has acquired them, is sufficient to show that they are not held for strictly personal purposes as required by Article 8 of the Directive. In that regard, it must also be pointed out that, under Article 9(2) of the Directive, both the mode of transport used and the quantities transported are relevant factors for establishing that the products referred to in Article 8 of the Directive are held for commercial purposes and therefore not for personal purposes. 44 That interpretation is all the more compelling because, if Article 8 of the Directive were also applicable where the transport is not carried out personally by the private individual, the effect of that, for the competent authorities of the Member States, would be an increased risk of fraud as the transport of products covered by that provision requires no documentation. 45 However, the Commission submits that such an interpretation of Article 8 would be a retrograde step for the citizens of the European Union as against the situation which prevailed before the Directive entered into force in so far as, under the legislation applicable at that time, the personal effects transported in the course of a removal to another Member State and small consignments which were not of a commercial nature from one private individual to another were exempt from excise duty in the Member State of importation. 46 In that regard, however, it is sufficient to state that, although, as the Commission in fact admits, Article 8 of the Directive contains a lacuna in this regard, it is for the Community legislature to remedy it, if necessary, by adopting the measures required in order to amend that provision. This is, moreover, confirmed by the fact that a proposed amendment to the Directive has in fact been submitted by the Commission to the Council of the European Union for the purpose, inter alia, of extending the benefit of Article 8 thereof to products transported on behalf of private individuals. 47 It follows that, as stated by all the governments which submitted observations, Article 8 of the Directive does not apply where, as in the main proceedings, the products subject to excise duty acquired in one Member State by a private individual for his own use have been transported to another Member State, not by that individual, but by a transport company acting on his behalf. The applicability of Articles 7, 9 and 10 of the Directive48 As Article 8 of the Directive does not apply to a situation such as that at issue in the main proceedings, that situation may therefore come within the scope of Articles 7, 9 or 10 of the Directive. 49 As is apparent from paragraph 42 of this judgment, Article 10 of the Directive, which relates to acquisitions made by private individuals which are dispatched or transported directly or indirectly by the vendor or on his behalf, cannot, however, apply where, as in the case in the main proceedings, the transport is initiated, not by the vendor, but by the private individual who has purchased the products subject to excise duty (EMU Tabac and Others, paragraphs 48 and 49). 50 As regards Article 9 of the Directive, it is apparent from paragraph 2 thereof that that provision applies to products covered by Article 8 of the Directive, that is to say, products acquired by a private individual for his own use and transported by him. Therefore, since it follows from the above that Article 8 of the Directive does not apply to the situation at issue in the main proceedings, Article 9 thereof is not, as such, applicable to that situation either. 51 By contrast, Article 7 of the Directive is capable of applying to the case in the main proceedings since, under paragraph 2 thereof, that provision covers the situation in which products are delivered or intended for delivery in another Member State or used in another Member State for the purposes of a trader carrying out an economic activity independently. That is true of a private individual who, as in the present case, is not acting with a view to profit, since the transport of the products subject to excise duty is carried out by a trader acting on his behalf (see, to that effect, EMU Tabac and Others, paragraph 52). As is apparent from paragraph 29 of this judgment, the Directive is based on the idea that products which are not held for private purposes must necessarily be regarded as being held for commercial purposes. 52 Where excise duty is levied under Article 7 of the Directive in the Member State in which the products are being held for commercial purposes, although they have already been released for consumption in another Member State, Article 7(6) of the Directive provides that the excise duty paid in that other State is to be reimbursed in accordance with Article 22(3) of the Directive. 53 Consequently, the answer to the questions referred for a preliminary ruling is that the Directive must be construed as meaning that where, as in the case in the main proceedings, a private individual who is not operating commercially or with a view to making a profit acquires in one Member State, for his own personal requirements and those of other private individuals, products subject to excise duty which have been released for consumption in that Member State and arranges for them to be transported to another Member State on his behalf by a transport company established in that other State, Article 7 of the Directive, and not Article 8 thereof, is applicable, with the result that excise duty is also to be levied in that other State. Under Article 7(6) of the Directive, the excise duty paid in the first Member State is, in such a case, to be reimbursed in accordance with Article 22(3) of the Directive. Costs54 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Third Chamber) hereby rules:Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, as amended by Council Directive 92/108/EEC of 14 December 1992, must be construed as meaning that where, as in the case in the main proceedings, a private individual who is not operating commercially or with a view to making a profit acquires in one Member State, for his own personal requirements and those of other private individuals, products subject to excise duty which have been released for consumption in that Member State and arranges for them to be transported to another Member State on his behalf by a transport company established in that other State, Article 7 of that Directive, and not Article 8 thereof, is applicable, with the result that excise duty is also to be levied in that other State. Under Article 7(6) of the Directive, the excise duty paid in the first State is, in such a case, to be reimbursed in accordance with Article 22(3) of the Directive.[Signatures]* Language of the case: Dutch. | 585b4-110d8ce-4d0b | EN |
A MEMBER STATE MAY SUBJECT SHARE DIVIDENDS FROM COMPANIES ESTABLISHED IN ITS TERRITORY AND THOSE FROM COMPANIES ESTABLISHED IN ANOTHER MEMBER STATE TO THE SAME UNIFORM TAX RATE | Mark Kerckhaert and Bernadette MorresvBelgian State(Reference for a preliminary ruling from the Rechtbank van eerste aanleg te Gent)(Income tax – Dividends – Tax burden on dividends from shareholdings in companies established in another Member State – No possibility in the State of residence to set off income tax levied at source in another Member State)Summary of the JudgmentFree movement of capital – Restrictions (EC Treaty, Art. 73b(1) (now Art. 56(1) EC))Article 73b(1) of the EC Treaty (now Article 56(1) EC) does not preclude legislation of a Member State, such as Belgian tax legislation, which, in the context of tax on income, makes dividends from shares in companies established in the territory of that State and dividends from shares in companies established in another Member State subject to the same uniform rate of taxation, without providing for the possibility of setting off tax levied by deduction at source in that other Member State. In circumstances such as those of the present case, the adverse consequences which might arise from the application of an income tax system such as the Belgian system at issue in the main proceedings result from the exercise in parallel by two Member States of their fiscal sovereignty. Community law, in its current state and in a situation such as that in the main proceedings, does not lay down any general criteria for the attribution of areas of competence between the Member States in relation to the elimination of double taxation within the Community. Consequently, it is for the Member States to take the measures necessary to prevent double taxation situations by applying, in particular, the apportionment criteria followed in international tax practice in the context of double taxation conventions. (see paras 20-24, operative part)JUDGMENT OF THE COURT (Grand Chamber)14 November 2006 (*) In Case C-513/04,REFERENCE for a preliminary ruling under Article 234 EC from the Rechtbank van eerste aanleg te Gent (Belgium), made by decision of 1 December 2004, received at the Court on 15 December 2004, in the proceedings Mark Kerckhaert,Bernadette MorresBelgische Staat,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K. Lenaerts and E. Juhász, Presidents of Chambers, J.N. Cunha Rodrigues, R. Silva de Lapuerta, G. Arestis, A. Borg Barthet and E. Levits (Rapporteur), Judges, Advocate General: L.A. Geelhoed,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 11 January 2006,after considering the observations submitted on behalf of:– Mr Kerckhaert and Ms Morres, by L. De Broe and P. Wytinck, advocaten,– the Belgian Government, by E. Dominkovits and M. Wimmer, acting as Agents,– the German Government, by M. Lumma and U. Forsthoff, acting as Agents,– the Italian Government, by I.M. Braguglia, acting as Agent, and P. Gentili, avvocato dello Stato,– the Netherlands Government, by H.G. Sevenster, acting as Agent,– the United Kingdom Government, by C. Jackson, acting as Agent, and S. Moore, Barrister,– the Commission of the European Communities, by R. Lyal and W. Wils, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 6 April 2006,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Article 73b(1) of the EC Treaty (now Article 56(1) EC). 2 This reference has been made in the context of an action brought by Mr Kerckhaert and Ms Morres (‘Mr and Mrs Kerckhaert-Morres’) against the Gewestelijke Directie Antwerpen I (‘the Belgian tax administration’) in respect of the latter’s decision refusing to allow them to set off the fixed percentage of 15% of foreign tax provided for in Article 19.A(1)(2) of the Convention of 10 March 1964 between Belgium and France seeking to avoid double taxation and to establish mutual administrative and legal rules of assistance in the field of income tax, as amended by the supplementary agreement signed on 15 February 1971 (‘the France-Belgium Convention’). Belgian tax legislation The Income Tax Code 3 Under Article 171(3) of the Income Tax Code (‘the Tax Code’), dividends are taxable at a rate of 25%. 4 Article 187 of the Tax Code originally provided that, as regards income from shares and invested capital which had been made subject, in another country, to income tax, corporation tax or tax on non-residents, the tax was to be reduced beforehand by a fixed percentage of that foreign tax. 5 Following legislative amendments, natural persons are no longer entitled to benefit from that tax credit when they receive dividends from undertakings established in another State arising from income which has already been taxed in that State by way of tax on income, with the result that that income is subject to taxation at source in that State and to tax at the rate of 25% as laid down in Article 171(3) of the Tax Code. The France-Belgium Convention 6 The France-Belgium Convention seeks, inter alia, to avoid cases of double taxation concerning imposition in the form of tax on income borne by one and the same person in France and Belgium. 7 Article 15(3) thereof provides that: ‘Dividends paid by a French-resident company that would give a right to a tax credit if received by French residents shall also give a right to this tax credit for natural persons resident in Belgium, after deduction of withholding tax calculated at a rate of 15% on the gross dividend consisting of the amount of the distributed dividend increased by the tax credit.’ 8 It is stipulated in Article 19.A(1) of that convention that when dividends are paid by a French-resident company to a Belgian resident other than a company subject to corporation tax, and when these dividends have been taxed at source in France, the Belgian tax due on the amount net of this French tax at source is to be reduced by, first, the withholding tax imposed at the normal rate, and, second, a fixed percentage of foreign tax that is deductible under conditions fixed by Belgian law, provided that such percentage may not be lower than 15% of that net amount. The main proceedings and the question referred 9 In 1995 and 1996 Mr and Mrs Kerckhaert-Morres, who are resident in Belgium, received dividends from Eurofers SARL, a company established in France. 10 A proportion of the amounts received corresponded to the tax credit, in the amount of 50% of the dividends paid, granted by the French tax authorities under Article 15(3) of the France-Belgium Convention as compensation for corporation tax. Under that provision that tax credit is assimilated to dividend income. In France the gross dividends were made subject to a levy of 15%, deducted at source by way of tax on income. 11 Mr and Mrs Kerckhaert-Morres declared that they had received BEF 34 566 204 (EUR 856 873.81) and BEF 7 173 702 (EUR 177 831.43) by way of income from Eurofers SARL in 1995 and 1996 respectively. In their tax return they applied to take advantage of the tax benefit provided for in Article 19.A(1) of the France-Belgium Convention corresponding to the French tax at source. 12 As that tax benefit had been withdrawn by the Belgian legislature, their application was rejected. 13 Taking the view that denying them the right to take advantage of the tax benefit at issue in the main proceedings subjected dividends originating in France to a heavier tax burden than that imposed on dividends from companies established in Belgium, Mr and Mrs Kerckhaert-Morres sought annulment before the Rechtbank van eerste aanleg te Gent of the decision of the Belgian tax administration rejecting their application, alleging, in particular, infringement of Article 73b(1) of the Treaty. 14 As it formed the view that the case pending before it required an interpretation of Community law, the Rechtbank van eerste aanleg te Gent (Court of First Instance, Ghent) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘Must Article 56(1) EC (Article 73b(1) of the EC Treaty at the time of the relevant facts) be interpreted as prohibiting a restriction resulting from a provision in the income tax legislation of a Member State (in the present case Belgium) which subjects dividends from resident companies and dividends from companies resident in another Member State to the same uniform tax rate, without in the latter case providing for the setting off of tax levied at source in that other Member State?’ The question referred15 At the outset it must be pointed out that, according to settled case‑law, although direct taxation falls within the competence of the Member States, the latter must none the less exercise that competence in a manner consistent with Community law (see Case C‑80/94 Wielockx [1995] ECR I‑2493, paragraph 16; Case C‑35/98 Verkooijen [2000] ECR I‑4071, paragraph 32; Case C‑334/02 Commission v France [2004] ECR I‑2229, paragraph 21; Case C‑315/02 Lenz [2004] ECR I‑7063, paragraph 19; and Case C‑319/02 Manninen [2004] ECR I‑7477, paragraph 19). 16 In Verkooijen, Lenz and Manninen, the Court found that the laws of the Member States at issue did not treat in the same way dividend income from companies established in the Member State in which the taxpayer concerned was resident and dividend income from companies established in another Member State, thereby denying recipients of the latter dividends the tax benefits granted to the others. Having concluded that the situation of taxpayers receiving dividends from companies established in another Member State is not objectively different to that of taxpayers receiving dividends from companies established in the Member State in which they are resident, the Court held that the laws at issue amounted to restrictions of the fundamental freedoms guaranteed by the Treaty. 17 Contrary to the arguments submitted by Mr and Mrs Kerckhaert-Morres, the case in the main proceedings differs from those which gave rise to the judgments cited above inasmuch as the Belgian tax legislation does not make any distinction between dividends from companies established in Belgium and dividends from companies established in another Member State. Under Belgian law both are taxed at an identical rate of 25% by way of income tax. 18 In addition, the argument cannot be upheld that, in the present case, shareholders resident in Belgium are in a different situation depending on whether they receive dividends from a company established in Belgium or from a company established in another Member State, such that treating them in the same way, namely by applying a uniform rate of income tax, amounts to discrimination. 19 It is true that discrimination may consist not only in the application of different rules to comparable situations but also in the application of the same rule to different situations (see Case C‑279/93 Schumacker [1995] ECR I‑225, paragraph 30, and Case C‑311/97 Royal Bank of Scotland [1999] ECR I‑2651, paragraph 26). However, in respect of the tax legislation of his State of residence, the position of a shareholder receiving dividends is not necessarily altered, in terms of that case-law, merely by the fact that he receives those dividends from a company established in another Member State, which, in exercising its fiscal sovereignty, makes those dividends subject to a deduction at source by way of income tax. 20 In circumstances such as those of the present case, the adverse consequences which might arise from the application of an income tax system such as the Belgian system at issue in the main proceedings result from the exercise in parallel by two Member States of their fiscal sovereignty. 21 It must be recalled, in that regard, that conventions preventing double taxation such as those envisaged in Article 293 EC are designed to eliminate or mitigate the negative effects on the functioning of the internal market resulting from the coexistence of national tax systems referred to in the preceding paragraph. 22 Community law, in its current state and in a situation such as that in the main proceedings, does not lay down any general criteria for the attribution of areas of competence between the Member States in relation to the elimination of double taxation within the Community. Apart from Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6), the Convention of 23 July 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (OJ 1990 L 225, p. 10) and Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments (OJ 2003 L 157, p. 38), no uniform or harmonisation measure designed to eliminate double taxation has as yet been adopted at Community law level. 23 Consequently, it is for the Member States to take the measures necessary to prevent situations such as that at issue in the main proceedings by applying, in particular, the apportionment criteria followed in international tax practice. The purpose of the France-Belgium Convention is essentially to apportion fiscal sovereignty between the French Republic and the Kingdom of Belgium in those situations. However, that convention is not at issue in the preliminary reference at hand. 24 In the light of all those considerations, the answer to the question referred must be that Article 73b(1) of the Treaty does not preclude legislation of a Member State, such as Belgian tax legislation, which, in the context of tax on income, makes dividends from shares in companies established in the territory of that State and dividends from shares in companies established in another Member State subject to the same uniform rate of taxation, without providing for the possibility of setting off tax levied by deduction at source in that other Member State. Costs25 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Article 73b(1) of the EC Treaty (now Article 56(1) EC) does not preclude legislation of a Member State, such as Belgian tax legislation, which, in the context of tax on income, makes dividends from shares in companies established in the territory of that State and dividends from shares in companies established in another Member State subject to the same uniform rate of taxation, without providing for the possibility of setting off tax levied by deduction at source in that other Member State.[Signatures]* Language of the case: Dutch. | 19270-ca3e01b-4482 | EN |
NEITHER THE WORD TRADE MARK "BUD", NOR TWO FIGURATIVE TRADE MARKS APPLIED FOR BY ANHEUSER-BUSCH ARE SIMILAR TO THE EARLIER GERMAN TRADE MARKS "BIT" AND "BITTE EIN BIT!" | Bitburger Brauerei Th. Simon GmbHvOffice for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM)(Community trade mark – Opposition proceedings – Application for registration of the Community word mark BUD – Applications for registration of the Community figurative marks American Bud and Anheuser Busch Bud – Earlier national word and figurative marks including the term ‘bit’ – Article 8(1)(b) of Regulation No 40/94)Judgment of the Court of First Instance (Fifth Chamber), 19 October 2006 Summary of the Judgment1. Community trade mark – Appeals procedure (Rules of Procedure of the Court of First Instance, Arts 44(1), 46, 130(1), 132(1) and 135(1), second subpara.)2. Community trade mark – Definition and acquisition of the Community trade mark – Relative grounds for refusal – Opposition by the proprietor of an earlier identical or similar mark registered for identical or similar goods or services(Council Regulation No 40/94, Art. 8(1)(b))1. Under Article 44(1) of the Rules of Procedure of the Court of First Instance, which applies to intellectual property matters by virtue of Articles 130(1) and 132(1) of those rules, applications lodged in an action against the Office for Harmonisation in the Internal Market (Trade Marks and Designs) must include a brief statement of the grounds relied on. Although, in that regard, specific points in the text of the application can be supported and completed by references to specific passages in the documents attached, a general reference to other documents cannot compensate for the failure to set out the essential elements of the legal argument which must, under those provisions, appear in the application itself. The same applies to the response of the other party to opposition proceedings before the Board of Appeal of OHIM, intervener before the Court of First Instance, under Article 46 of the Rules of Procedure, which applies to intellectual property matters in accordance with the second subparagraph of Article 135(1) of those rules. Such a statement in response, in so far as it refers to pleadings submitted to OHIM, is inadmissible to the extent that the general references in it cannot be linked to the pleas and arguments put forward in the statement in response itself. (see paras 33-35)2. For an average German consumer there is no likelihood of confusion between, on the one hand, the word mark BUD and the figurative marks American Bud and Anheuser Busch Bud, for which registration as Community trade marks is sought for ‘beer, ale, porter, malted alcoholic and non-alcoholic beverages’ in Class 32 of the Nice Agreement, and, on the other hand, the word mark BIT and the word and figurative mark Bit registered previously in Germany for ‘beers; mineral waters and carbonated waters and other non-alcoholic drinks; fruit drinks and fruit juices; syrups and other preparations for making beverages’ and ‘beer’ respectively in the same class of that Agreement, despite the fact that the products concerned are identical or similar and even though the earlier marks may have a high degree of distinctive character. In view of the notable differences between the marks at issue, and the absence of conceptual similarity between them: – although they display a slight degree of visual and aural similarity, the word mark BUD applied for and the earlier German marks and, – although they display a slight degree of aural similarity, the figurative marks applied for and the earlier German marks are different considered as a whole. There is, a fortiori, no likelihood of confusion between the trade marks applied for and the word and figurative marks ‘Bitte ein Bit!’ registered earlier in Germany for the products: ‘beer and non-alcoholic beverages’ in Class 32, and for various products in Classes 16, 18, 20, 21, 24, 25, 28, 32, 34 and 42 of the Nice Agreement respectively. Those earlier German marks contain additional word elements (‘bitte’, ‘ein’) and graphic elements (‘!’) and a particular style of writing compared with the earlier German marks including the word element ‘bit’. Thus, in visual terms, the former are even more remote from the marks applied for than the latter. Moreover, in aural terms, and even if the earlier German marks Bitte ein Bit! might be designated by reference only to the term ‘bit’ the conclusion of the Court would be no different from that regarding the earlier German marks including the word element ‘bit’. From a conceptual point of view, no evidence has been put before the Court to suggest that the marks at issue show any degree of similarity. Accordingly, assessed as a whole, the marks applied for and the earlier German marks Bitte ein Bit! are not similar. (see paras 107, 109, 123-124)JUDGMENT OF THE COURT OF FIRST INSTANCE (Fifth Chamber)19 October 2006 (*) (Community trade mark – Opposition proceedings – Application for registration of the Community word mark BUD – Applications for registration of the Community figurative marks American Bud and Anheuser Busch Bud – Earlier national word and figurative marks including the term ‘bit’ – Article 8(1)(b) of Regulation No 40/94)In Joined Cases T‑350/04 to T‑352/04,Bitburger Brauerei Th. Simon GmbH, established in Bitburg (Germany), represented by M. Huth-Dierig, lawyer, applicant,Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by A. Folliard-Monguiral, acting as Agent, defendant,the other party to the proceedings before the Board of Appeal of OHIM, intervener before the Court of First Instance, beingAnheuser-Busch, Inc., established in Saint Louis, Missouri (United States), represented by A. Renck, V. von Bomhard, A. Pohlmann, D. Ohlgart and B. Goebel, lawyers, APPLICATIONS against the decisions of the Second Board of Appeal of OHIM of 22 June 2004 in cases R 447/2002‑2, R 451/2002‑2 and R 453/2002‑2 concerning opposition proceedings between Bitburger Brauerei Th. Simon GmbH and Anheuser-Busch, Inc., THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fifth Chamber),composed of M. Vilaras, President, F. Dehousse and D. Šváby, Judges,Registrar: K. Andová, Administrator,having regard to the applications lodged at the Registry of the Court of First Instance on 24 August 2004,having regard to the statements in response of OHIM lodged at the Registry on 9 February 2005,having regard to the statements in response of the intervener lodged at the Registry on 17 February 2005,having regard to the Order of the President of the Fifth Chamber of the Court of First Instance of 26 October 2005 joining the present cases for the purposes of the oral procedure and the judgment, further to the hearing on 17 January 2006,gives the followingJudgment Background to the disputeI – Applications for Community trade marks by Anheuser‑Busch1 Anheuser-Busch, Inc., made three applications for Community trade marks (‘the trade marks applied for’) to the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), pursuant to Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1), as amended: – an application for registration of the word trade mark BUD made on 1 April 1996 for goods within Class 32 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended (‘the Nice Agreement’), corresponding to the following description: ‘Beer, ale, porter, malted alcoholic and non-alcoholic beverages’; – an application for registration of a figurative trade mark (‘figurative mark No 1’):– an application for registration of a figurative trade mark (‘figurative mark No 2’):2 The two latter applications for registration were made on 16 October 1999 for goods in Classes 16, 25 and 32 of the Nice Agreement, corresponding to the following descriptions: – Class 16: ‘Paper, cardboard and goods made from these materials (included in class 16); printed matter; bookbinding materials; stationery; adhesives for stationery or household purposes; instructional and teaching material (except apparatus); plastic materials for packaging (included in class 16); playing cards’; – Class 25: ‘Clothing, footwear, headgear’;– Class 32: ‘Beer, ale, porter, malted alcoholic and non-alcoholic beverages’.3 The applications for figurative marks Nos 1 and 2 were published on 23 March 1998 in Community Trade Marks Bulletin Nos 20/98 and 21/98. 4 The application for a word trade mark was published on 7 December 1998 in Community Trade Marks Bulletin No 93/98. II – Oppositions brought by Bitburger Brauerei against the applications for Community trade marks5 On 10 June 1998 Bitburger Brauerei Th. Simon GmbH (‘Bitburger Brauerei’) brought two oppositions (Nos 48 274 and 49 173) under Article 42 of Regulation No 40/94 against the registration of figurative marks Nos 1 and 2, for all the goods specified in the application for registration. 6 On 3 March 1999 Bitburger Brauerei brought an opposition (No 138 281) under Article 42 of Regulation No 40/94 against the registration of the BUD word mark applied for, for all the goods specified in the application for registration. 7 In the first place, the three oppositions were based on the existence of the following earlier trade marks:– the national word mark BIT registered in Germany on 17 September 1996 (No 39 615 324) for ‘beers; mineral waters and carbonated waters and other non-alcoholic drinks; fruit drinks and fruit juices; syrups and other preparations for making beverages’ in Class 32; – the word and figurative mark Bit registered in Germany on 12 December 1938 (No 505 912) for ‘beer’ in Class 32, reproduced below: – the word and figurative mark Bitte ein Bit! registered in Germany on 5 July 1957 (No 704 211) for the following products: ‘beer and non-alcoholic beverages’ in Class 32, reproduced below: – the word and figurative mark Bitte ein Bit! registered in Germany on 3 November 1987 (No 1 113 784) for various products in Classes 16, 18, 20, 21, 24, 25, 28, 32, 34 and 42, reproduced below: 8 The three oppositions were based on all the goods covered by trade marks No 505 912, No 39 615 324 (BIT) and No 704 211 (Bitte ein Bit!). 9 The opposition (No 138 281) against the BUD word mark applied for was also based on the following goods and services covered by word and figurative mark No 1 113 784 (Bitte ein Bit!), in various classes: beer and non-alcoholic drinks; serving of customers in particular with drinks in all types of restaurants and bars; hiring out of drinks dispense equipment, mobile bars, garden and party furniture. The two oppositions (Nos 48 274 and 49 173) brought against the two figurative marks applied for were also based on the following products covered by word and figurative mark No 1 113 784 (Bitte ein Bit!), in various classes: beer and non-alcoholic beverages; brochures, beermats, advertising cards, posters, ballpoint pens, waiters’ aprons, T-shirts, ties, towels, sweatshirts and blousons. 10 In the second place, with respect specifically to the figurative marks applied for, Bitburger Brauerei relied, in addition to the trade marks described in paragraph 7 above, on the trade mark BIT ‘well known’ in Germany for the following products: beer, including non-alcoholic beer; brochures, beermats, advertising cards, posters, ballpoint pens, T-shirts, ties, towels, sweatshirts and blousons. 11 In the third place, with respect specifically to the word mark BUD applied for, Bitburger Brauerei relied, in addition to the trade marks described in paragraph 7 above, on the following applications for Community trade marks: – an application for a Community figurative trade mark made on 1 April 1996 (No 121 608) for goods in Class 32 of the Nice Agreement corresponding to the following description: ‘beers, beer-like beverages, ales, porters (all aforesaid goods also in non-alcoholic, low alcohol or reduced alcohol form); non-alcoholic drinks; fruit syrups and other raw materials for making non-alcoholic and alcoholic drinks; fruit juices, table waters’, reproduced below: – an application for a Community figurative trade mark made on 1 April 1996 (No 139 634) for goods in Class 32 of the Nice Agreement corresponding to the following description: ‘beers, beer-like beverages, ales, porters (all aforesaid goods also in non-alcoholic, low alcohol or reduced alcohol form); non-alcoholic drinks; fruit syrups and other raw materials for making non-alcoholic and alcoholic drinks; fruit juices, table waters’, reproduced below: 12 In support of its oppositions, Bitburger Brauerei relied on the relative grounds for refusal referred to in Article 8(1)(b) and (5) of Regulation No 40/94. III – Decisions of the Opposition Division13 By three decisions of 27 March 2002, the Opposition Division rejected Bitburger Brauerei’s oppositions.14 With respect to Article 8(1)(b) of Regulation No 40/94, the Opposition Division considered that, in view of the fact that they had been lodged on the same date as the word mark BUD applied for (1 April 1996), applications Nos 121 608 and 139 634 for Community figurative trade marks could not be regarded as earlier rights within the meaning of Article 8(1)(b) of Regulation No 40/94. 15 Moreover, the Opposition Division considered that proof of use of German word and figurative mark No 505 912 (BIT), in the form registered, had not been provided, and that proof of use of German word and figurative marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) had been provided only for ‘beer’ and ‘non-alcoholic beer’ (for the two marks) and for ‘beermats, T-shirts, jackets, beer glasses, bottle openers, ballpoint pens and waiters’ aprons’ (for mark No 1 113 784). 16 Taking those elements into account, the Opposition Division concluded that there was no likelihood of confusion between the marks applied for on the one hand and German word mark No 39 615 324 (BIT) and German word and figurative marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) on the other. 17 In this respect, the Opposition Division considered essentially that, despite the highly distinctive character of word mark No 39 615 324 (BIT) on the German market and the identity of the products concerned (for Class 32), the visual, aural and conceptual differences between the signs in question were sufficient to exclude any likelihood of confusion within the meaning of Article 8(1)(b) of Regulation No 40/94. The Opposition Division therefore concluded that there was no likelihood of confusion, in Germany, between German word mark No 39 615 324 (BIT) and the marks for which registration was sought. The same conclusion followed, according to the Opposition Division, if a mark BIT ‘with a reputation’ in Germany, relied on by Bitburger Brauerei in connection with its oppositions against the two figurative marks applied for, had to be taken into account. 18 As regards German word and figurative marks Nos 704 211 and 1 113 784 (Bitte ein Bit!), the Opposition Division found that they contained additional elements in relation to German word mark No 39 615 324 (BIT) and were consequently different in all respects from the marks applied for. The Opposition Division thus concluded that there was no likelihood of confusion in Germany between German word and figurative marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) and the marks applied for. 19 With respect to Article 8(5) of Regulation No 40/94, Bitburger Brauerei submitted, in connection with the word mark BUD applied for, that word and figurative marks No 505 912 (BIT), No 704 211 and No 1 113 784 (Bitte ein Bit!), word mark No 39 615 324 (BIT), and application No 121 608 for a Community figurative mark were marks with a reputation, and based its opposition on that point. The Opposition Division considered for its part that proof of use of German word and figurative mark No 505 912 (BIT) had not been provided and that Article 8(5) of Regulation No 40/94 could not be relied on. Moreover, with regard to Community trade mark application No 121 608, the Opposition Division considered that, in view of the fact that it had been lodged on the same date as the word mark BUD applied for (1 April 1996), it was not an earlier right within the meaning of Article 8(5) of Regulation No 40/94, read in the light of Article 8(2)(a)(i) of that regulation. Finally, since Article 8(5) of Regulation No 40/94 presupposes that the marks in question are identical or similar, the Opposition Division concluded that German word mark No 39 615 324 (BIT) and German word and figurative marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) could not serve as a basis for opposition under that provision. 20 In addition, in connection with the figurative marks applied for, Bitburger Brauerei relied on the BIT mark well known in Germany. Since Article 8(5) of Regulation No 40/94 presupposes that the marks in question are identical or similar, the Opposition Division concluded that the sign BIT could not serve as a basis for opposition under that provision. IV – Decisions of the Board of Appeal21 On 24 May 2002 Bitburger Brauerei appealed against each of the three decisions of the Opposition Division.22 Bitburger Brauerei sought for those decisions to be set aside in so far as the oppositions had been rejected for goods in Class 32. 23 By three decisions of 22 June 2004 (Case R 453/2002‑2 for the application for the word mark BUD, Case R 447/2002‑2 for the application for figurative mark No 1, and Case R 451/2002‑2 for the application for figurative mark No 2), served on Bitburger Brewery on 29 June 2004 (‘the contested decisions’), the Second Board of Appeal of OHIM dismissed the appeals against the decisions of the Opposition Division. 24 With respect, first, to the two applications for Community trade marks relied on by Bitburger Brauerei against the word mark BUD applied for, the Board of Appeal considered that they could not be classified as ‘earlier marks’ within the meaning of Article 8(1) and (2) of Regulation No 40/94 and thus be the basis of the grounds of opposition referred to in Article 8(1)(b) and (5) of Regulation No 40/94. In addition, in the three contested decisions, the Board of Appeal considered, contrary to the Opposition Division, that German word and figurative mark No 505 912 (BIT) had been the subject of use such as to preserve the rights attached to it. 25 As regards the likelihood of confusion, the Board of Appeal concluded that no such likelihood existed in Germany between the marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT), notwithstanding a certain high distinctive character of the earlier German marks and the identity or similarity of the goods concerned in Class 32. The Board of Appeal’s assessment was based in particular on the visual and aural differences observed between the signs and the absence of conceptual similarity. 26 According to the Board of Appeal, the same conclusion follows – to an even greater extent – as regards the comparison of the marks applied for with German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!), which are composed of several words. 27 With respect to Article 8(5) of Regulation No 40/94, the Board of Appeal considered, in the three contested decisions, that the difference between the signs was such that there could be no question of taking unfair advantage of or being detrimental to the distinctive character or repute of the earlier marks. Moreover, Bitburger Brauerei had not explained why there should be such unfair advantage or detriment. Procedure and forms of order sought by the parties28 On hearing the report of the Judge-Rapporteur, the Court (Fifth Chamber) decided to open the oral procedure and, by way of measures of organisation of procedure, requested the parties to reply to certain questions and to produce certain documents, which they did within the time-limits set. 29 The parties presented oral arguments and replied to the questions put at the hearing on 17 January 2006.30 Bitburger Brauerei claims that the Court should:– annul the contested decisions;– order OHIM to pay the costs.31 OHIM and Anheuser-Busch contend that the Court should:– dismiss the applications;– order Bitburger Brauerei to pay the costs. LawI – Reference to pleadings before OHIM 32 Anheuser-Busch, at the end of its statements in response, refers generally to all the arguments, facts and evidence submitted to OHIM in its pleadings dated 30 March 1999, 2 February 2000, 18 July 2000, 18 November 2002 and 19 August 2003. 33 It should be recalled in this respect that, under Article 44(1) of the Rules of Procedure of the Court of First Instance, which applies to intellectual property matters by virtue of Articles 130(1) and 132(1) of those rules, applications must include a brief statement of the grounds relied on. It is settled case-law that although specific points in the text of the application can be supported and completed by references to specific passages in the documents attached, a general reference to other documents cannot compensate for the failure to set out the essential elements of the legal argument which must, under those provisions, appear in the application itself (Case T‑183/03 Applied Molecular Evolution v OHIM (APPLIED MOLECULAR EVOLUTION) [2004] ECR II‑3113, paragraph 11). 34 That case-law can be applied to the response of the other party to opposition proceedings before the Board of Appeal, intervener before the Court of First Instance, under Article 46 of the Rules of Procedure, which applies to intellectual property matters in accordance with the second subparagraph of Article 135(1) of those rules (Case T‑115/02 AVEX v OHIM – Ahlers (a) [2004] ECR II‑2907, paragraph 11). 35 It follows that Anheuser-Busch’s statements in response, in so far as they refer to pleadings submitted to OHIM, are inadmissible to the extent that the general references in them cannot be linked to the pleas and arguments put forward in the statements in response. II – References to certain decisions of the Boards of Appeal of OHIM36 At several points in their pleadings, Bitburger Brauerei and Anheuser-Busch refer to the decision-making practice of the Board of Appeal of OHIM. 37 It should be recalled in this respect that the decisions concerning registration of a sign as a Community trade mark which the Boards of Appeal of OHIM are called on to take under Regulation No 40/94 are adopted in the exercise of circumscribed powers and are not a matter of discretion. Accordingly, the lawfulness of those decisions must be assessed solely on the basis of that regulation and not on the basis of a previous decision-making practice of those boards (Case C‑37/03 P BioID v OHIM [2005] ECR I-0000, paragraph 47, and Case C‑173/04 P Deutsche SiSi-Werke v OHIM [2006] ECR I‑0000, paragraph 48). 38 The references made by Bitburger Brauerei and Anheuser-Busch are therefore ineffective. III – Lawfulness of the contested decisions39 The applications lodged by Bitburger Brauerei in Joined Cases T‑350/04 to T‑352/04 are based on two pleas in law. The first plea alleges a breach of Article 8(1)(b) of Regulation No 40/94. The second plea alleges a breach of Article 8(5) of Regulation No 40/94. A – First plea in law: breach of Article 8(1)(b) of Regulation No 40/9440 Bitburger Brauerei’s first plea is divided into two parts.41 In the first part, Bitburger Brauerei argues that the Board of Appeal erred in concluding that there was no likelihood of confusion between the marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT). 42 In the second part, Bitburger Brauerei argues that the Board of Appeal erred in concluding that there was no likelihood of confusion between the marks applied for and the earlier German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!). 1. First part of the first plea, concerning the likelihood of confusion between the marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) a) Arguments of Bitburger Brauerei The relevant public43 Referring to the case-law on the likelihood of confusion, Bitburger Brauerei points out that the earlier marks are registered in Germany and the goods in question are everyday consumer goods. Consequently, Bitburger Brauerei considers that the target public is the average German consumer, who is deemed to be reasonably well informed and reasonably observant and circumspect. As regards the assertion in the contested decisions that the average consumer of beer generally knows the brands of beer he likes and is able to distinguish between the various brands, Bitburger Brauerei says that, if the Board of Appeal intended thereby to state that a higher degree of attention should be taken to exist for the goods in question, that reasoning is incorrect. In particular, it is contrary to the judgment in Case T‑99/01 Mystery Drinks v OHIM – Karlsberg Brauerei (MYSTERY) [2003] ECR II‑43, paragraph 37, which held that, for the goods ‘beer’ and ‘non-alcoholic beverages’ in Class 32, German consumers do not have a particularly high degree of attention. Distinctive character of the mark BIT44 Bitburger Brauerei stresses the distinctive character of the mark BIT. Referring to the judgment in Case C‑39/97 Canon [1998] ECR I‑5507, Bitburger Brauerei observes that the distinctive character of a trade mark derives from its intrinsic qualities or degree of recognition on the market. In the present case, the Board of Appeal considered that the term ‘bit’ had at first had ordinary distinctive character. As a result of the extensive use of the marks demonstrated by Bitburger Brauerei, that distinctive character was increased by the reputation acquired in German territory. According to Bitburger Brauerei, the Board of Appeal was therefore right to consider that German trade marks Nos 505 912 and 39 615 324 (BIT) possessed high distinctive character. However, the classification by the Board of Appeal as a ‘certain’ enhanced distinctive character is not correct. The uninterrupted use for decades of the BIT mark and the high degree of publicity, proved by the corresponding documents, had the result that already in July 1993 BIT was a concept known to 83.3% of German beer drinkers, on unprompted questioning, and, on prompted questioning, to 94.8%. It follows that BIT is an extremely well-known mark which thus has an enhanced distinctive character. Comparison of the signs45 Bitburger Brauerei concentrates on the aural comparison of the signs in question and, to begin with, in Cases T‑351/04 and T‑352/04, contests the Board of Appeal’s conclusion that the figurative marks applied for cannot be reduced aurally to the term ‘bud’ alone. 46 In this respect, Bitburger Brauerei considers that the Board of Appeal erred in concluding that the relevant average consumer would designate the figurative marks applied for as American Bud or Anheuser Busch Bud. 47 Bitburger Brauerei states, first, that the assessment of the likelihood of confusion, in the case of complex marks, means more than taking into consideration only one component of a complex trade mark and comparing it with another mark. On the contrary, such a comparison must be made by examining the marks in question, each considered as a whole. However, that does not mean that the overall impression created in the mind of the relevant public by a complex trade mark may not, in certain circumstances, be dominated by one or more of its components (order in Case C‑3/03 P Matratzen Concord v OHIM [2004] ECR I‑3657, paragraph 32, and Case T‑6/01 Matratzen Concord v OHIM – Hukla Germany (MATRATZEN) [2002] ECR II‑4335, paragraphs 33 and 34). With regard to the assessment of the dominant character of one or more given components of a complex trade mark, account must be taken in particular of the intrinsic qualities of each of those components by comparing them with those of the other components (Case T‑6/01 MATRATZEN, paragraph 35). 48 Bitburger Brauerei submits, moreover, that the case-law of the Court of First Instance suggests that, in the case of a combination of two words, there is a likelihood of confusion with an earlier single-word trade mark if one of the components of the combination of words is identical with or similar to the earlier word mark. In support of this assertion, it relies on the judgment in Case T‑286/02 Oriental Kitchen v OHIM – Mou Dybfrost (KIAP MOU) [2003] ECR II‑4953, paragraph 39). 49 In the present case, Bitburger Brauerei submits that the dominant element of the figurative marks applied for is formed by the term ‘bud’. In particular, in the case of figurative mark No 1, which includes the terms ‘american’ and ‘bud’, Bitburger Brauerei argues that the term ‘american’ is a mere indication of geographical origin and hence descriptive. The term ‘bud’ is thus more capable of being retained in the mind of the target public. In the case of figurative mark No 2, which includes the terms ‘anheuser busch’ and ‘bud’, Bitburger Brauerei states that the term ‘bud’ is emphasised graphically by its central position and the fact that it is accompanied by an arrow to the left and to the right. Furthermore, the term ‘bud’ imposes itself on the consumer as the easiest to pronounce and remember. 50 Having concluded that the word element ‘bud’ is the dominant element of the figurative marks applied for (Cases T‑351/04 and T‑352/04), and given that the word mark BUD applied for (Case T‑350/04) consists exclusively of the word ‘bud’, Bitburger Brauerei puts forward identical arguments in the three cases, and disputes the contested decisions’ conclusion that there is no likelihood of confusion in the present case with the earlier BIT marks. 51 In this respect, the Board of Appeal, in considering from the aural point of view that the differences between ‘bud’ and ‘bit’ were sufficient in view of the vowels ‘u’ and ‘i’, wrongly carried out a fragmented analysis of the letters taken individually instead of examining the pronunciation of the word as a whole. Bitburger Brauerei refers here to the MYSTERY judgment, cited in paragraph 43 above, paragraph 46. In the present case, the elements common to the two signs are in a majority quantitatively: each sign consists of a monosyllabic word of three letters; the intonation and the aural rhythm are identical; both signs start with the letter ‘b’; and their final sounds are pronounced identically. In those circumstances, it is incomprehensible that the Board of Appeal could conclude, in paragraph 51 of the contested decisions, that there were ‘considerable differences’ between the signs to be compared. 52 Bitburger Brauerei points out that in German the consonant ‘d’ is pronounced like the consonant ‘t’ when it occurs at the end of a word. The only difference is therefore in the vowels ‘u’ and ‘i’ of the signs in question. Bitburger Brauerei, recalling that account must be taken of the overall aural impression of the signs, states that ‘bit’ and ‘bud’ have a short intonation and are pronounced ‘bitt’ and ‘butt’ respectively. Since the vowels ‘i’ and ‘u’ are surrounded by the dominant plosives ‘b’ and ‘t’, Bitburger Brauerei considers that the overall aural impression of the signs is dominated by the consonants. 53 In those circumstances, the elements common to both signs are dominant, and a consumer who has an unclear recollection of one of the two marks will confuse the marks in question, as they are monosyllables and have the same number of letters and identical initial and final sounds. Bitburger Brauerei adds that monosyllabic trade marks are rare in the beer sector. A consumer who encounters a monosyllabic mark is therefore likely to be reminded of the earlier marks in question, particularly as the marks to be compared coincide almost completely. 54 Finally, after concentrating its arguments on the aural similarity of the signs in question, Bitburger Brauerei states that, visually, the figurative elements and the secondary word elements (‘american’ and ‘anheuser busch’ in the case of the figurative marks applied for) are of no importance when determining the visual likelihood of confusion. In those circumstances, Bitburger Brauerei submits that the visual comparison must be made between the signs ‘bit’ and ‘bud’, which have at least a distant typographical resemblance. Both signs have the same initial letter ‘b’ and consist of three letters. The letters ‘i’ and ‘u’ are characterised by ascending lines and the letters ‘t’ and ‘d’ consist of a vertical basic element and a horizontal bar. There is thus at least a distant visual similarity between the signs in question which is also sufficient to identify a likelihood of confusion in view of the interdependence of the factors concerned. Likelihood of confusion55 Bitburger Brauerei submits, on the basis of Case C‑342/97 Lloyd Schuhfabrik Meyer [1999] ECR I‑3819, paragraph 28, that the aural similarity of the signs concerned is sufficient to produce a likelihood of confusion. It is particularly important in the present case because beer, especially in bars, is ordered orally. Bitburger Brauerei refers on this point to the judgment in MYSTERY, cited in paragraph 43 above, paragraph 48, which stated as follows: ‘It is sufficient that there is a likelihood of confusion and not that confusion be established. Since the goods in question are also consumed after being ordered orally, the aural similarity of the signs in question is in itself sufficient to give rise to the likelihood of confusion.’ Bitburger Brauerei also observes that there is a noise factor in bars and that factor affects the aural perception of the signs in question. The Board of Appeal did not attach sufficient importance to the specific conditions under which the goods in question are sold. 56 On that basis, Bitburger Brauerei submits that a likelihood of confusion exists simply because of the similarity of the signs concerned as a result of the elements they have in common aurally. Where, as in the present case, the earlier marks furthermore have above-average distinctive character and the products are identical, Bitburger Brauerei, referring to Lloyd Schuhfabrik Meyer, cited in paragraph 55 above, paragraph 21, Case T‑388/00 Institut für Lernsysteme v OHIM – Educational Services (ELS) [2002] ECR II‑4301, paragraph 77, and Case T‑129/01 Alejandro v OHIM – Anheuser-Busch (BUDMEN) [2003] ECR II‑2251, paragraph 59, considers that the earlier marks enjoy extended protection. In particular, Bitburger Brauerei points out that the Court of Justice has taken the view that a high distinctive character of the earlier mark argues for – not against – a likelihood of confusion. 57 Moreover, Bitburger Brauerei submits that the Board of Appeal’s conclusion contradicts the judgment of the German Bundesgerichtshof (Federal Court of Justice) of 26 April 2001 in Case I ZR 212/98 Bit/Bud (‘the Bundesgerichtshof judgment’). In particular, Bitburger Brauerei observes that the Bundesgerichtshof considered that there was a likelihood of aural confusion between the words ‘bit’ and ‘bud’ in that the initial sounds were identical and the final sounds coincided in normal German pronunciation. The different sound of the vowels of the two words was moreover offset by the above-average distinctive character of the earlier mark and by the fact that the goods covered were identical. 58 Bitburger Brauerei acknowledges that decisions of national courts have no binding effect in the context of the present proceedings. However, the Bundesgerichtshof’s assessment of the likelihood of confusion between BIT and BUD is based precisely on the rules developed by the Court of Justice, in particular those relating to the taking into account of all the circumstances of a case and the interdependence of the various factors concerned. Bitburger Brauerei adds that the Second Board of Appeal of OHIM took account, in another case, of a judgment of a national court (Case R 70/2002‑2, 11 September 2003, Kabel 1/ARD 1). b) Arguments of OHIM and Anheuser-Busch59 OHIM and Anheuser-Busch contest Bitburger Brauerei’s arguments and submit essentially that the visual and aural differences and the lack of conceptual similarity between the signs in question are sufficient to eliminate any likelihood of confusion, despite the identity or similarity of the goods concerned. 60 Anheuser-Busch challenges the conclusion of the Board of Appeal that the earlier German marks Nos 505 912 and 39 615 324 (BIT) have high distinctive character. Anheuser-Busch submits in particular that the documents produced to OHIM refer to the mark Bitburger, not the mark BIT. Anheuser-Busch also contests the relevance of the declaration of an employee of Bitburger Brauerei and the market study carried out in July 1996 for demonstrating the reputation of the mark BIT in Germany. 61 Anheuser-Busch also points out the characteristics of the German beer market, in particular the very high consumption of beer. Anheuser-Busch concludes from that that the average German consumer of beer is an ‘expert’. 62 Finally, OHIM points out that the contested decisions depart from the Bundesgerichtshof’s judgment as regards the overall assessment of the likelihood of confusion. Anheuser-Busch considers for its part that the decisions of national courts are not binding on OHIM or the Court in the context of the application of Regulation No 40/94. c) Findings of the Court63 According to Article 8(1)(b) of Regulation No 40/94, upon opposition by the proprietor of an earlier trade mark, the trade mark applied for is not to be registered if ‘because of its identity with or similarity to the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected; the likelihood of confusion includes the likelihood of association with the earlier trade mark’. 64 It is settled case-law that the risk that the public might believe that the goods or services in question come from the same undertaking or, as the case may be, from economically linked undertakings constitutes a likelihood of confusion. 65 That case-law also states that the likelihood of confusion must be assessed globally, according to the perception by the relevant public of the signs and the goods or services in question, and taking into account all factors relevant to the circumstances of the case, in particular the interdependence between similarity of the signs and similarity of the goods or services designated (see Case T‑162/01 Laboratorios RTB v OHIM – Giorgio Beverly Hills (GIORGIO BEVERLY HILLS) [2003] ECR II‑2821, paragraphs 31 to 33 and the case-law cited). 66 It should be recalled, moreover, that the more distinctive the earlier mark, the greater will be the likelihood of confusion (Case T‑164/03 Ampafrance v OHIM – Johnson & Johnson (monBéBé) [2005] ECR II‑1401, paragraph 70, and, by analogy, Case C‑251/95 SABEL [1997] ECR I‑6191, paragraph 24). Marks with a highly distinctive character, either per se or because of the recognition they possess on the market, thus enjoy broader protection than marks with a less distinctive character (monBéBé, paragraph 70, and, by analogy, Canon, cited in paragraph 44 above, paragraph 18, and Lloyd Schuhfabrik Meyer, cited in paragraph 55 above, paragraph 20). 67 Since the earlier marks were registered with effect in Germany, the public to be taken into consideration for the assessment of the likelihood of confusion is the public of that Member State. 68 It must also be noted that the goods in question are usually subject to widespread distribution, from the food section of a department store to bars and cafes (see, to that effect, for classes of goods including beer, Case T‑33/03 Osotspa v OHIM – Distribution & Marketing (Hai) [2005] ECR II‑0000, paragraph 44). In those circumstances, the target public is the average consumer, who is deemed to be reasonably well informed and reasonably observant and circumspect (see, in a case also concerning beer, MYSTERY, cited in paragraph 43 above, paragraphs 32 and 37, and, in a case concerning alcoholic beverages, Case T‑296/02 Lidl-Stiftung v OHIM – REWE-Zentral (LINDENHOF) [2005] ECR II‑563, paragraph 45). 69 The Board of Appeal was thus rightly able to consider in the present case that ‘the relevant consumer of the goods in question is the average German consumer’ (paragraph 40 of the contested decision in Case T‑352/04 and paragraph 41 of the contested decisions in Cases T‑350/04 and T‑351/04). For the same reasons, the Board of Appeal’s conclusion that the relevant public does not consist of ‘experts’ can only be concurred with (same paragraphs of the contested decisions). 70 In addition, it must be borne in mind when making the global assessment of the likelihood of confusion that the average consumer only rarely has the opportunity to make a direct comparison between the different marks but must place his trust in the imperfect picture of them which he has kept in his mind (Lloyd Schuhfabrik Meyer, cited in paragraph 55 above, paragraph 26). 71 In the light of the above considerations, it must be ascertained whether, as Bitburger Brauerei submits, the Board of Appeal erred in its assessment of the likelihood of confusion in the present case. i) Similarity of the goods at issue72 Bitburger Brauerei brought proceedings before the Board of Appeal against each of the decisions of the Opposition Division only in so far as the oppositions had been rejected for goods in Class 32. Those are the goods concerned by the present cases. 73 In this respect, the contested decisions rightly observe that ‘[t]he goods at issue are identical or similar’ (paragraph 40 of the contested decisions in Cases T‑350/04 and T‑351/04 and paragraph 39 of the contested decision in Case T‑352/04). That assessment by the Board of Appeal is not contested by the parties. ii) Similarity of the marks at issue74 According to the case-law, the global appreciation of the likelihood of confusion, in relation to the visual, aural or conceptual similarity of the marks in question, must be based on the overall impression given by the marks, bearing in mind in particular their distinctive and dominant components (SABEL, cited in paragraph 66 above, paragraph 23, and Lloyd Schuhfabrik Meyer, cited in paragraph 55 above, paragraph 25). Visual similarity of the marks– Visual similarity between the word mark BUD applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT)75 The Board of Appeal, following the reasoning of the Opposition Division and Anheuser-Busch, stated as follows:‘The two marks admittedly are of identical length, but the differences between them are greater than their similarities. The two marks indeed have the same initial letter, but the remainder is different. The consumer will perceive that graphically’ (paragraph 42 of the contested decision in Case T‑350/04). 76 First, as the Board of Appeal correctly observed, the elements ‘bud’ and ‘bit’ have in common the same initial letter, namely ‘b’. 77 Second, as the Board of Appeal also correctly observed, the monosyllabic terms ‘bud’ and ‘bit’ are of identical length, each consisting of three letters. A more precise analysis would indeed, as Anheuser-Busch argues, allow the conclusion that the sign BUD is in fact longer than the sign BIT. However, such a difference will not be perceivable by the average German consumer. 78 Third, it is correct, as the Board of Appeal essentially states, that the signs at issue differ in their final two letters (‘ud’ for the word sign BUD applied for and ‘it’ for the earlier German marks), even though, as Bitburger Brauerei submits, the letters in question have the common feature of consisting partly of vertical lines. 79 Taking account of all those factors, it must be considered that the signs at issue have noticeable differences, in particular in that two of the three letters they are made up of are different. As the Board of Appeal rightly observed, those differences are greater than the similarity of the signs in question. The relevant consumer will perceive the differences. The conclusion must therefore be that the word mark BUD applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) show a degree of visual similarity that can be classified at most as slight. Bitburger Brauerei itself observes, moreover, in its applications that the visual similarity of the marks in question is ‘distant’. 80 It should be added, with respect to the earlier German word and figurative mark No 505 912, which has a style of lettering that means that the degree of visual similarity with the word mark BUD can be reduced even further, that, as the Board of Appeal noted, that mark has been used by Bitburger Brauerei in different forms, including one with no particular style. – Visual similarity between the figurative marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT)81 The Board of Appeal considered as follows:‘The mark applied for is a complex label which cannot be reduced to the concept “bud” alone. “Bud” may indeed be a distinctive component of the mark, but it does not visually dominate the mark applied for to such an extent that the other elements contained in it, in particular the detailed graphic design in the upper part of the mark and the interesting colouring, are completely relegated to the background. The consumer perceives the mark as a whole and remembers an overall impression. Even if the mark applied for were reduced to the word elements [American Bud or Anheuser-Busch Bud], there would still be a significant visual difference between that combination of words and the short opposing mark [BIT]’ (paragraph 42 of the contested decision in Case T‑351/04 and paragraph 41 of the contested decision in Case T‑352/04). 82 It should be noted that, while the average consumer normally perceives the mark as a whole and does not proceed to analyse its various details, the global assessment of the likelihood of confusion takes account in particular of the distinctive and dominant components of the marks in question (SABEL, cited in paragraph 66 above, paragraph 23), and that in general it is the dominant and distinctive features of a sign which are more easily remembered (see, to that effect, Case T‑104/01 Oberhauser v OHIM – PetitLiberto (Fifties) [2002] ECR II‑4359, paragraphs 47 and 48, and Joined Cases T‑117/03 to T‑119/03 and T‑171/03 New Look v OHIM – Naulover (NLSPORT, NLJEANS, NLACTIVE and NLCollection) [2004] ECR II‑0000, paragraph 39). 83 In the present case, the word elements ‘american’ and ‘bud’ (figurative mark No 1) and ‘anheuser busch’ and ‘bud’ (figurative mark No 2) are in the centre of the figurative marks applied for. Furthermore, they are written in large characters, in blue on white, which makes them stand out visually, especially as the background of the mark applied for is red. 84 The other word elements which appear on a white background, in particular the name and address of Anheuser-Busch, are placed below the terms ‘american’ and ‘bud’ (figurative mark No 1) or ‘anheuser busch’ and ‘bud’ (figurative mark No 2) and are in much smaller characters. The same is true of the word elements which appear in the upper part of the figurative marks, in particular the letters ‘ab’, which are moreover placed on the centre of a shield. The word ‘genuine’ for its part appears twice, on either side of the white rectangle on which the terms ‘american’ and ‘bud’ (figurative mark No 1) or ‘anheuser busch’ and ‘bud’ (figurative mark No 2) are placed. However, the word is placed vertically, making it less easy to read. 85 As to the figurative elements which appear in the upper part of the marks, they represent a shield set off by a motto. Those elements correspond to the decorative parts of a label and are not thus regarded as the principal component. 86 It must therefore be considered that the dominant elements of the two trade marks at issue are constituted by the word elements ‘american’ and ‘bud’ (figurative mark No 1) or ‘anheuser busch’ and ‘bud’ (figurative mark No 2). 87 In this context, even if it could be concluded that the term ‘bud’ was the only distinctive element among the dominant word elements and thus attracted the attention of the relevant public more, it could at the most be considered that a slight verbal similarity existed between the figurative marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT), since a slight visual similarity has already been found, in paragraph 79 above, between the word mark BUD applied for and those earlier German marks. 88 However, in the overall visual assessment of the signs in question, the relative complexity of the figurative marks applied for, which are mixed signs containing not only the verbal components already described but also a number of figurative elements in very varied colours, must be noted (see, to that effect, Fifties, cited in paragraph 82 above, paragraph 38). 89 In the light of all those factors, it must be considered that the figurative marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) are not visually similar. Aural similarity of the marks– Aural similarity between the word mark BUD applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT)90 The Board of Appeal considered in paragraphs 43 and 44 of the contested decision relating to the word mark BUD applied for:‘43. With respect to the aural comparison of the marks, the Board is of the opinion that the “BUD” mark applied for and the opposing mark “BIT” keep a sufficient distance from each other. The vowels “i” and “u” are clearly distinguished aurally. The difference in that letter in the terms “BUD” and “BIT” which consist of three letters suffices to enable the consumer to distinguish them. 44. Nor does a different conclusion follow from the judgment of the Court of First Instance [in ELS, cited in paragraph 56 above]. In that case the Court of First Instance found that that “e” and “i” are pronounced similarly in German and that the consonant phonemes “l” and “s” are pronounced exactly the same in each sign (see paragraph 71). By contrast, the vowels “i” and “u” (or “a” if pronounced as in English) are not pronounced similarly. Moreover, the consonants are not exactly the same. The differences are sufficient even if the products are ordered in pubs.’ 91 First, it must be noted that the initial letters of the signs in question are the same and will not be pronounced differently in German. 92 Second, the letters ‘i’ (in the sign BIT) and ‘u’ (in the sign BUD) are pronounced differently in German. That difference in pronunciation is not contested by Bitburger Brauerei. 93 Third, the letters ‘t’ (in the sign BIT) and ‘d’ (in the sign BUD) resemble each other in pronunciation in the present case, even if the pronunciation may not be strictly identical. Evidence to that effect was produced during the proceedings before OHIM. 94 Fourth, it must be pointed out that the reasoning of the Board of Appeal is not based on the mere fact that the letters ‘i’ and ‘u’ are pronounced differently. The Board of Appeal rightly took into account that the terms ‘bit’ and ‘bud’ both ‘consist of three letters’ (paragraph 43 of the contested decisions). Contrary to Bitburger Brauerei’s assertion, there is nothing to suggest that the letters ‘i’ and ‘u’, the only vowels of the signs in question, play a negligible part in the pronunciation of the terms ‘bit’ and ‘bud’. 95 Seen in the context of the overall pronunciation, the above elements lead to the conclusion that there is a limited degree of aural similarity between the word mark BUD applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT). However, as the Board of Appeal rightly observed, the difference in pronunciation between the vowels ‘i’ and ‘u’ in the two signs in question, consisting of three letters, is sufficient to allow the relevant consumer to distinguish them aurally. – The aural similarity between the figurative marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) 96 The Board of Appeal held, in paragraph 43 of the decision on figurative mark No 1: ‘… the Board considers that the relevant consumer would designate the trade mark applied for as “American bud” which establishes a sufficient distance from the one-syllable opposing mark, “BIT”. However, even if the trade mark applied for were reduced to the word “bud” the two marks would maintain sufficient distance between them. The vowels “i” and “u” are clearly distinguished aurally. The difference in that letter in the terms “bud” and “bit” which consist of three letters suffices to enable the consumer to distinguish them.’ 97 The Board of Appeal held, in paragraphs 42 and 43 of the decision on figurative mark No 2: ’42. … The Board considers that the relevant consumer would designate the trade mark applied for as “anheuser busch bud” which establishes a sufficient distance from the short opposing mark, “BIT”. The Board considers that there is no reason why the average consumer would shorten the name “anheuser busch bud” and use only its final component “bud”. Moreover, there is no reason why the consumer, even if he assumed the words “anheuser” and “busch” were surnames, would fail to pronounce them. Surnames are eminently suitable for forming part of a trade mark. 43. However, even if the trade mark applied for were reduced to the word “bud” the two marks would keep a sufficient distance from each other. The vowels “i” and “u” are clearly distinguished aurally. The difference in that letter in the terms “bud” and “bit” which consist of three letters suffices to enable the consumer to distinguish them.’ 98 Moreover, in paragraph 44 of the two contested decisions on the figurative trade marks applied for, the Board of Appeal added, as it did in the decision on the word mark BUD applied for: ‘Nor does a different conclusion follow from the judgment of the Court of First Instance [in ELS, cited in paragraph 56 above]. In that case the Court of First Instance found that that “e” and “i” are pronounced similarly in German and that the consonant phonemes “l” and “s” are pronounced exactly the same in each sign (see paragraph 71). By contrast, the vowels “i” and “u” (or “a” if pronounced as in English) are not pronounced similarly. Moreover, the consonants are not exactly the same. The differences are sufficient even if the products are ordered in pubs.’ 99 As a preliminary point, it must be observed that a figurative mark, inasmuch as it is composed of a verbal element, is also capable of being reproduced aurally (Case T-359/02 CHUM v OHIM [2005] ECR II-0000, paragraph 49). 100 In the present case, even if it could be concluded that the term ‘bud’ is the only distinctive element amongst the dominant verbal elements ‘american’ and ‘bud’ or ‘anheuser busch’ and ‘bud’, of the figurative marks applied for, in thus attracting more attention from the relevant public, it might be considered, at the most, in view of the finding recorded in paragraph 95 above of the aural similarity between the word mark BUD applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT), that there is a limited aural similarity between the figurative marks applied for and those earlier marks. However, as also observed in paragraph 95 above, the difference in pronunciation between the vowels ‘i’ and ‘u’ in the two signs in question, consisting of three letters, is sufficient to allow the consumer to distinguish them aurally. Conceptual similarity of the marks at issue 101 In paragraph 45 of the contested decisions, the Board of Appeal expressed the view that there was no conceptual similarity between the trade marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT). 102 The earlier German marks Nos 505 912 and 39 615 324 (BIT) are capable of having several meanings. Anheuser-Busch states in that connection that the term ‘bit’ may be understood by the relevant public either as a unit used in information technology or as a reference to the town of Bitburg. Those different meanings are also apparent from the market research undertaken at the request of Bitburger Brauerei and produced in the proceedings before OHIM. 103 As regards the trade marks applied for, it must be observed, first, that the term ‘bud’ does not appear to have any particular significance in the mind of the relevant public. The parties have put forward nothing to contradict that conclusion. 104 Accordingly, it must be considered that the word mark BUD applied for will have no particular conceptual significance in the mind of the relevant public. 105 As regards the figurative trade marks applied for, even if the word ‘american’ (figurative mark No 1) could suggest that the products in question are american in origin or, in any event, in character, and the words ‘anheuser busch’ (figurative mark No 2) could be understood by a part of the relevant public as a reference to the undertaking which manufactured the products in question, the linking of those terms with the term ‘bud’ would not entail any particular conceptual significance. In any event, there is nothing to suggest that those words, taken together, would have a conceptual significance similar to the conceptual significance which can be envisaged for the earlier German marks Nos 505 912 and 39 615 324 (BIT). 106 In the light of the foregoing considerations, it must be held that the trade marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) are not similar from a conceptual point of view. Conclusion regarding the similarity of the marks at issue 107 In the light of all the foregoing considerations, and assessing the marks at issue considered as a whole, it must be held that, in view of the notable differences between the marks at issue, and the absence of conceptual similarity between them: – although they display a slight degree of visual and aural similarity, the word mark BUD applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) are different considered as a whole; – although they display a slight degree of aural similarity the figurative marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) are different considered as a whole. 108 Accordingly, it must be concluded that the trade marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) are not similar. iii) The likelihood of confusion 109 In view of the differences already noted between the trade marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT) it must be held that, despite the existence of a slight degree of visual and aural similarity, there is no likelihood of confusion in this case, despite the fact that the products concerned are identical or similar and even though the earlier marks may have a high degree of distinctive character. 110 The arguments put forward by Bitburger Brauerei cannot call that conclusion into question.111 First, as regards the conditions under which the products in question are sold and, in particular, the question whether those products are essentially ordered orally and whether the noise factor may affect consumers’ aural perception, suffice it to observe that the arguments put forward by Bitburger Brauerei are mere statements which are not based on any evidence which has been produced, at the appropriate time, in the proceedings before OHIM. 112 Furthermore, Bitburger Brauerei has not furnished the slightest proof to show that its goods are generally sold in such a way that the public does not perceive the mark visually. In that regard, it must be borne in mind that, even if bars and restaurants are not negligible distribution channels for the products of Bitburger Brauerei, it is common ground that the consumer will be able to perceive the marks at issue visually in such places, inter alia by examining the bottle served to him or by other means (glasses, advertising posters etc.). Moreover, and above all, it is not disputed that bars and restaurants are not the only sales channels for the goods concerned. They are also sold in supermarkets or other retail outlets. Thus, clearly when purchases are made there consumers can perceive the marks visually since the drinks are presented on shelves (see, to that effect, Case T-3/04 Simonds Farsons Cisk v OHIM [2005] ECR II-0000, paragraphs 57 to 59). It follows that the argument of Bitburger Brauerei relating to the conditions under which the products in question are sold must, in any event, be rejected. 113 Second, as regards the highly distinctive character of the earlier marks and the reference by Bitburger Brauerei to Lloyd Schuhfabrik Meyer, cited in paragraph 55 above, it must be observed that the Court concluded, in paragraph 28 of that judgment, that, according to the degree of distinctiveness of the earlier marks ‘it is possible that mere aural similarity between trade marks may create a likelihood of confusion’. It is apparent from that judgment, first, that the hypothetical case envisaged by the Court is a mere possibility which must take account of the other relevant factors in the case in question and, second, that the Court had in mind a case where the marks at issue are similar aurally. In the present cases despite the possibly high degree of distinctive character of the earlier marks, the differences between the marks noted above in the course of the overall assessment of the likelihood of confusion rule out the likelihood of such confusion between them in Germany. 114 Third, as regards the fact that the conclusion of the Board of Appeal is allegedly inconsistent with the Bundesgerichtshof judgment, it must be observed, first, that the Community trade mark regime is an autonomous system with its own set of objectives and rules peculiar to it and it is self-sufficient and applies independently of any national system (Case T-32/00 Messe München v OHIM(electronica) [2000] ECR II‑3829, paragraph 47, and Case T‑312/03 Wassen International v OHIM – Stroschein Gesundkost (SELENIUM-ACE) [2005] ECR II-0000, paragraph 46. 115 The legality of decisions of the Boards of Appeal must be evaluated solely on the basis of Regulation No 40/94, as interpreted by the Community Courts, and not on the basis of a previous decision-making practice followed by a national court of a Member State, even where the latter is based on provisions analogous to those of that regulation (GIORGIO BEVERLY HILLS, cited in paragraph 65 above, paragraph 53; Case T‑85/02 Díaz v OHIM – Granjas Castelló (CASTILLO) [2003] ECR II‑4835, paragraph 37, and a, cited in paragraph 34 above, paragraph 30). 116 In any event, it must be observed that the Bundesgerichtshof merely found that there was a likelihood of confusion between the German trade mark No 505 912 and a figurative mark identical to figurative mark No 1, on the basis of the aural similarity of the words ‘bud’ and ‘bit’ in those marks. 117 It must be observed, moreover, that the Board of Appeal assessed the likelihood of confusion taken overall between the earlier German word and figurative mark No 505 912 (BIT) and figurative mark No 1, and did not base its decision exclusively on an aural comparison. That overall assessment must take account of all relevant factors of the case and must be based, so far as OHIM is concerned, on Regulation No 40/94 alone. 118 Fourth, as regards the reference made by Bitburger Brauerei at the hearing, to Case T-396/04 Soffass v OHMI – Sodipan (NICKY) [2005] ECR II-0000, suffice it to observe that the Court, in that case, did not conclude, contrary to what Bitburger Brauerei appears to suggest, that there was a likelihood of confusion between the trade mark applied for, NICKY, and the earlier marks, NOKY. Upholding the decision of the Board of Appeal which had referred the case back to the Opposition Division, the Court held that there was a certain similarity between the above marks and that an analysis of the similarity of the products in question should have been made (see, inter alia, paragraphs 38 and 39 of the judgment). The Court pointed out, moreover that the marks in question had the first letter ‘n’ and the ending ‘ky’ in common. According to the Court, since that ending is not usual in the French language it may be regarded as the dominant element in the two marks which draws the attention of French consumers (paragraph 34 of the judgment). That case is different from the present cases. 119 In the light of the foregoing considerations, and without it being necessary to examine the arguments put forward by Anheuser-Busch concerning the degree of distinctive character of the earlier German marks Nos 505 912 and 39 615 324 (BIT), the first part of the first plea relied on by Bitburger Brauerei must be rejected as unfounded. 2. The second part of the first plea concerning the likelihood of confusion between the trade marks applied for and the earlier German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) a) Arguments of the parties120 Bitburger Brauerei takes the view that, in the light of the considerations set out in the first part of the first plea regarding the likelihood of confusion between the trade marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT), there is also a similarity between the trade marks applied for and the German marks Nos 704 211 and 1 113 784 Bitte ein Bit!. Bitburger Brauerei points out in that connection that the slogan Bitte ein Bit! is understood by the public as a concise abbreviation of an order. The public will be guided, with this word order, by the terse brand word ‘bit’, which thus dominates the trade marks with earlier priority. 121 OHIM takes the view, rather, that German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) are more remote from the marks applied for than the earlier German marks Nos 505 912 and 39 615 324 (BIT). Therefore, if there is no likelihood of confusion between those marks and the marks applied for there can be no likelihood of confusion when the earlier marks are ‘Bitte ein Bit!’ b) Findings of the Court122 In view of the findings of the Court regarding the likelihood of confusion between the marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT), it must be held that there is a fortiori no likelihood of confusion between the marks applied for and the earlier German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!). 123 The earlier German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) contain additional word elements (‘bitte’, ‘ein’) and graphic elements (‘!’) and a particular style of writing compared with the earlier German word marks Nos 505 912 and 39 615 324 (BIT). Thus, in visual terms, the former are even more remote from the marks applied for than the latter. Moreover, in aural terms, and even if the earlier German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) might be designated by reference only to the term ‘bit’ the conclusion of the Court would be no different from that regarding the first part of the first plea. From a conceptual point of view, the parties have not furnished evidence to suggest that the marks at issue show any degree of similarity. 124 Accordingly, assessed as a whole, the marks applied for and the earlier German marks Nos 704 211 and 1 113 784 (Bitte ein Bit!) are not similar. There can thus be no likelihood of confusion between those marks. 125 For those reasons, the second part of the first plea relied on by Bitburger Brauerei must be rejected as unfounded.B – The second plea, alleging breach of Article 8(5) of Regulation No 40/941. Arguments of the parties126 Bitburger Brauerei, recalling the terms of Article 8(5) of Regulation No 40/94, states that the Board of Appeal took the view, in the contested decisions, that the difference between the signs was such that there could be no question of taking unfair advantage of, or being detrimental to, the distinctive character or the repute of the earlier trade mark. 127 According to Bitburger Brauerei, the Board of Appeal disregarded the substantial degree of aural similarity between ‘bit’ and ‘bud’. It was true that in the present cases there was also identity of goods or a high degree of similarity of goods. However, going beyond the wording of Article 8(5) of Regulation No 40/94, the Court held that that provision also applied in the case of identity or similarity of goods (Case C-292/00 Davidoff [2003] ECR I-389). 128 The trade mark BIT is a mark with a reputation within the meaning of Article 8(5) of Regulation No 40/94 in Germany. That reputation was proved by Bitburger Brauerei in the proceedings before OHIM. 129 The application for registration of the mark BUD is detrimental to the distinctive character of the earlier trade marks, since registration of a similar sign was applied for in respect of identical goods and, thus, the distinctive character of those earlier marks is weakened. 130 OHIM submits that, although the reputation of the earlier marks may have been established, Bitburger Brauerei has not established that the signs in question were identical or similar and that the marks applied for took unfair advantage of the distinctive character or reputation of the earlier marks. 131 Moreover, under Article 74(2) of Regulation No 40/94 the examination undertaken by OHIM is restricted to the facts, evidence and arguments provided by the parties. Accordingly, the Board of Appeal was entitled to reject the application under Article 8(5) of Regulation 40/94 on the ground that Bitburger Brauerei had ‘failed to explain why such exploitation or adverse effect should exist’. 132 Anheuser-Busch states, first, that Article 8(5) of Regulation No 40/94 requires that the signs at issue are identical or similar. In the case at hand, the marks are not similar, as, it claims, has been demonstrated. 133 Next, Anheuser-Busch points out that the earlier mark must be reputed in order to enjoy protection under Article 8(5) of Regulation No 40/94. In the present case, Bitburger Brauerei has not, it alleges, succeeded in demonstrating the reputation of the BIT mark. 134 Finally, Anheuser-Busch considers that the arguments put forward by Bitburger Brauerei are not sufficient to demonstrate an image transfer on the part of the relevant public. 2. Findings of the Court135 Under Article 8(5) of Regulation No 40/94, ‘upon opposition by the proprietor of an earlier trade mark within the meaning of paragraph 2, the trade mark applied for shall not be registered where it is identical with or similar to the earlier trade mark and is to be registered for goods or services which are not similar to those for which the earlier trade mark is registered, where in the case of an earlier Community trade mark the trade mark has a reputation in the Community and, in the case of an earlier national trade mark, the trade mark has a reputation in the Member State concerned and where the use without due cause of the trade mark applied for would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark’. 136 That article requires inter alia that the mark applied for and the earlier mark be identical or similar. Since is has been concluded that the marks applied for and the earlier German marks Nos 505 912 and 39 615 324 (BIT), and Nos 704 211 and 1 113 784 (Bitte ein Bit!) were not identical or similar, Article 8(5) of Regulation No 40/94 cannot provide a basis for the opposition by Bitburger Brauerei in the present case. 137 The second plea relied on by Bitburger Brauerei must therefore be rejected as unfounded and, consequently, the application must be dismissed in its entirety. Costs138 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since Bitburger Brauerei has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by OHIM and Anheuser‑Busch. On those grounds,THE COURT OF FIRST INSTANCE (Fifth Chamber)Hereby:1. Dismisses the actions;2. Orders Bitburger Brauerei Th. Simon GmbH to pay the costs. Vilaras Dehousse ŠvábyDelivered in open court in Luxembourg on 19 October 2006.Registrar PresidentE. Coulon M. Vilaras* Language of the case: English. | 33d5a-f87441e-4cab | EN |
ADVOCATE GENERAL STIX-HACKL PROPOSES THAT THE TEMPORAL EFFECTS OF THE JUDGMENT IN MEILICKE REGARDING THE COMPATIBILITY OF GERMAN PROVISIONS ON THE TAXATION OF DIVIDENDS SHOULD NOT BE LIMITED | Wienand Meilicke and OthersvFinanzamt Bonn-Innenstadt(Reference for a preliminary ruling from the Finanzgericht Köln)(Income tax – Tax credit for dividends paid by resident companies – Articles 56 EC and 58 EC – Limitation of the temporal effects of the judgment)Opinion of Advocate General Tizzano delivered on 10 November 2005 Opinion of Advocate General Stix-Hackl delivered on 5 October 2006 Judgment of the Court (Grand Chamber), 6 March 2007 Summary of the Judgment1. Free movement of capital – Restrictions (Arts 56 EC and 58 EC)2. Preliminary rulings – Interpretation – Effect of interpretative judgments ratione temporis(Art. 234 EC)1. Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State. Such tax legislation constitutes a restriction on the free movement of capital in that it could deter persons who are fully taxable in the Member State concerned for income tax purposes from investing their capital in companies established in other Member States; it is also liable to have a restrictive effect as regards those companies, in that it constitutes an obstacle to their raising capital in the Member State concerned. Even if that tax legislation is based on a link between the tax advantage and the offsetting tax levy, in providing that the tax credit granted to the shareholder who is fully taxable in the Member State concerned for income tax purposes is to be calculated by reference to the corporation tax due from the company established in that Member State on the profits which it distributes, such legislation does not appear to be necessary in order to preserve the coherence of the national tax system. Having regard to the objective of preventing the double taxation of company profits distributed in the form of dividends, the granting to a shareholder, who is fully taxable in the Member State concerned for income tax purposes and who holds shares in a company established in another Member State, of a tax credit calculated by reference to the corporation tax payable by that company in that latter Member State would not threaten the coherence of the national tax system and would constitute a measure less restrictive of the free movement of capital. Reduction in tax revenue in relation to dividends paid by companies established in other Member States cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is, in principle, contrary to a fundamental freedom. (see paras 20, 23-24, 28-29, 30-31, operative part)2. In the exercise of the jurisdiction conferred on it by Article 234 EC, it is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision, which it has interpreted, with a view to calling in question legal relations established in good faith. Such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought. There must necessarily be a single occasion when a decision is made on the temporal effects of the requested interpretation, which the Court gives of a provision of Community law. In that regard, the principle that a restriction may be allowed only in the actual judgment ruling upon that interpretation guarantees the equal treatment of the Member States and of other persons subject to Community law, under that law, fulfilling, at the same time, the requirements arising from the principle of legal certainty. (see paras 34-37)JUDGMENT OF THE COURT (Grand Chamber)6 March 2007 (*) In Case C-292/04,REFERENCE for a preliminary ruling under Article 234 EC from the Finanzgericht Köln (Germany), made by decision of 24 June 2004, received at the Court on 9 July 2004, in the proceedings Wienand Meilicke,Heidi Christa Weyde,Marina StöfflerFinanzamt Bonn-Innenstadt,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K Lenaerts, R. Schintgen and J. Klučka, Presidents of Chambers, J.N. Cunha Rodrigues, R. Silva de Lapuerta, M. Ilešič, J. Malenovský, U. Lŏhmus and E Levits (Rapporteur), Judges, Advocate General: A. Tizzano and, subsequently, C. Stix-Hackl,Registrar: B. Fülöp and K. Sztranc-Slawiczek, Administrators,having regard to the written procedure and further to the hearing on 8 September 2005,after considering the observations submitted on behalf of:– Mr Meilicke, Ms Weyde and Ms Stöffler, by W. Meilicke and R. Portner, Rechtsanwälte,– the German Government, by C. Quassowski, A. Tiemann and R. Stotz, acting as Agents, assisted by K.-T. Stopp, Rechtsanwältin,– the United Kingdom Government, by T. Ward, barrister,– the Commission of the European Communities, by K. Gross and R. Lyal, acting as Agents,after hearing the Opinion of Advocate General Tizzano at the sitting on 10 November 2005,having regard to the order of 7 April 2006 reopening the oral procedure and further to the hearing on 30 May 2006,– Mr Meilicke, Ms Weyde and Ms Stöffler, by W. Meilicke and D. Habback, Rechtsanwälte,– the German Government, by M. Lumma, R. Stotz and V. Rietmeyer, acting as Agents,– the Czech Government, by T. Boček, acting as Agent,– the Danish Government, by J. Molde, acting as Agent,– the Greek Government, by K. Georgiadi, acting as Agent,– the Spanish Government, by J.M. Rodríguez Cárcamo, acting as Agent, – the French Government, by J.‑Ch. Gracia, acting as Agent,– the Hungarian Government, by R. Somssich and A. Müller, acting as Agents, – the Netherlands Government, by J.M. de Grave, acting as Agent,– the Austrian Government, by H. Dossi, acting as Agent,– the Swedish Government, by K. Wistrand and A. Falk, acting as Agents,– the United Kingdom Government, by P. Baker QC,after hearing the Opinion of Advocate General Stix-Hackl at the sitting on 5 October 2006,gives the followingJudgment1 The reference for a preliminary ruling concerns Articles 56 EC and 58 EC.2 It was made in the course of proceedings between Mr W. Meilicke, Ms H.C. Weyde and Ms M. Stöffler, in their capacity as heirs of Heinz Meilicke, who died on 3 May 1997, and Finanzamt (Tax Office) Bonn-Innenstadt (Germany) (hereinafter ‘the Finanzamt’), regarding the taxation of dividends paid to the deceased in the course of the years 1995 to 1997 by companies established in Denmark and in the Netherlands. Legal background Community law3 In Chapter 4, entitled ‘Capital and payments’, of Title III, itself entitled ‘Free movement of persons, services and capital,’ in Part Three of the EC Treaty, dealing with the policies of the Community, Article 56(1) EC states: ‘Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between the Member States and between Member States and third countries shall be prohibited.’ 4 Article 58(1) EC provides:‘The provisions of Article 56 shall be without prejudice to the right of Member States:(a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested; ...’.5 Article 58(3) EC provides:‘The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 56.’ The German law applicable during the years 1995 to 19976 Under Paragraphs 1, 2 and 20 of the Einkommensteuergesetz (German Income Tax Law) of 7 September 1990 (BGBl. I 1990, p. 1898), as amended by the Law of 13 September 1993 (BGBl. I 1993, p. 1569, hereinafter ‘the EStG’), dividends payable to a person resident in Germany and therefore fully taxable there for income tax purposes, are taxed there as income from capital. 7 Under Paragraph 27(1) of the Körperschaftsteuergesetz (German Corporation Tax Law) of 11 March 1991 (BGBl. I 1991, p. 638), as amended by the Law of 13 September 1993 (BGBl. I 1993, p. 1569), dividends distributed by capital companies fully taxable for corporation tax purposes in Germany, are subject to that tax at 30%. That results in a distribution of 70% of the pre-tax profits with a tax credit of 30/70, that is 3/7 of the dividends received. 8 Under Paragraph 36(2)(3) of the EStG, that tax credit applies only to dividends received from capital companies fully taxable for corporation tax purposes in Germany. Consequently, persons fully taxable for income tax purposes in Germany are entitled to that tax credit when they receive dividends from German companies, but not when they receive dividends from foreign companies. The main proceedings and the question referred for a preliminary ruling9 The late Heinz Meilicke, who was resident in Germany, held shares in companies established in the Netherlands and in Denmark. In the course of the years 1995 to 1997, he received dividends from those shares totalling DEM 39 631.32, that is EUR 20 263.17. 10 By letter of 30 October 2000, the applicants in the main proceedings applied to the Finanzamt for a tax credit equal to 3/7 of those dividends, to be deducted from the income tax payable on behalf of Heinz Meilicke. 11 The Finanzamt rejected that application, on the ground that only corporation tax on companies fully taxable for corporation tax purposes in Germany could be set off against income tax. 12 The applicants brought an action against that decision before the Finanzgericht Köln (Finance Court, Cologne) (Germany).13 Against that background, the Finanzgericht Köln decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘Is Paragraph 36(2)(3) of the [EStG], whereby only corporation tax payable by a fully-taxable corporation or association amounting to 3/7 of the income within the meaning of Paragraph 20(1)(1) or (2) of the [EStG] is set off against income tax, compatible with Articles 56(1) EC and 58(1)(a) and (3) EC?’ The question referred Substance14 As pointed out by the applicants in the main proceedings, the Finanzgericht Köln made its reference for a preliminary ruling prior to the delivery of the judgment of 7 September 2004 in Case C-319/02 Manninen [2004] ECR I‑7477. 15 In paragraph 54 of that judgment, the Court concluded that the calculation of a tax credit granted to a shareholder fully taxable in Finland, who has received dividends from a company established in another Member State, must take account of the tax actually paid by the company established in that other Member State, as such tax arises from the general rules on calculating the basis of assessment and from the rate of corporation tax in that latter Member State. 16 It is clear from the Court file that, during the relevant years, the rate of corporation tax was 34% in Denmark and 35% in the Netherlands. In its observations before the Court, the applicants in the main proceedings maintained that the application to the German tax authorities should have been understood as being a claim for a tax credit not of 3/7 of the income within the meaning of Paragraph 20(1)(1) or (2) of the EStG, but of 34/66 of that income for the dividends of Danish origin and of 35/65 for those originating from the Netherlands. 17 For its part, the German Government, whilst asserting that the judgement in Manninen is not applicable to the main proceedings, states that, within the framework of the system of full set-off under the German legislation on distributions of dividends arising internally, the fraction of 3/7 of the dividends under the German legislation does not constitute a flat-rate set-off but is linked to the corporation tax rate of 30% on the distribution of dividends. In the case of a distribution of dividends of foreign origin, one could not therefore grant a tax credit of 3/7 of the dividends received because it would not be linked to the tax rate applicable to the profits distributed for the purposes of the foreign corporation tax. 18 In those circumstances, it is appropriate to conclude that, by the question it referred, the national court wishes to ascertain, in essence, whether Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State. 19 It is settled case-law that, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651, paragraph 19, and Manninen, paragraph 19). 20 However, tax legislation such as that at issue in the main proceedings constitutes a restriction within the meaning of Article 56 EC. 21 Indeed, it should be noted that the tax credit under the German tax legislation at issue in the main proceedings, like that under the Finnish tax legislation detailed in Manninen, is designed to prevent the double taxation of German companies’ profits distributed to shareholders by setting off the corporation tax due from the company distributing dividends against the tax due from the shareholder by way of income tax on revenue from capital. The end result of such a system is that dividends are taxed in the hands of the shareholder only to the extent that they have not already been taxed as distributed profits in the hands of the company (see, to that effect, Manninen, paragraph 20). 22 Since the tax credit applies solely in respect of dividends paid by companies established in Germany, that legislation disadvantages persons who are fully taxable in that Member State for income tax purposes and receive dividends from companies established in other Member States. Such persons, for their part, are taxed without being entitled to set off the corporation tax payable by those companies in their State of establishment against the tax on the income from capital (see, to that effect, Manninen, paragraph 20). 23 It follows that the tax legislation at issue in the main proceedings could deter persons who are fully taxable in Germany for income tax purposes from investing their capital in companies established in other Member States. 24 Conversely, that legislation is liable to have a restrictive effect as regards those companies, in that it constitutes an obstacle to their raising capital in Germany. Since dividends of non-German origin receive less favourable tax treatment than dividends distributed by companies established in Germany, the shares of companies established in other Member States are less attractive to investors residing in Germany than shares in companies which have their seat in that Member State (see Case C‑35/98 Verkooijen [2000] ECR I-4071, paragraph 35, Manninen, paragraph 23, and Case C-446/04 Test Claimants in the FII Group Litigation [2006] ECR I-0000, paragraph 64). 25 Relying on Case C‑204/90 Bachmann [1992] ECR I‑249 and Case C‑300/90 Commission v Belgium [1992] ECR I‑305, the German Government maintains that the legislation at issue in the main proceedings is justified by the need to safeguard the cohesion of the national tax system. 26 In that respect, it should be noted that, according to settled case-law, first, for an argument based on such justification to succeed, a direct link has to be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy (see Manninen, paragraph 42). 27 Second, an argument based on the need to safeguard the cohesion of a tax system must be examined in the light of the objective pursued by the tax legislation in question (Manninen, paragraph 43). 28 Even if the German tax legislation is based on a link between the tax advantage and the offsetting tax levy, in providing that the tax credit granted to the shareholder who is fully taxable in Germany for income tax purposes is to be calculated by reference to the corporation tax due from the company established in that Member State on the profits which it distributes, such legislation does not appear to be necessary in order to preserve the cohesion of the German tax system (see, to that effect, Manninen, paragraph 45). 29 The objective pursued by the German tax legislation is to prevent the double taxation of company profits distributed in the form of dividends. Having regard to that objective, the cohesion of that tax system is assured as long as the correlation between the tax advantage granted in favour of the shareholder and the tax payable by way of corporation tax is maintained. Therefore, in a case such as that in the main proceedings, the granting to a shareholder, who is fully taxable in Germany for income tax purposes and who holds shares in a company established in another Member State, of a tax credit calculated by reference to the corporation tax payable by that company in that latter Member State would not threaten the cohesion of the German tax system and would constitute a measure less restrictive of the free movement of capital than that laid down by the German tax legislation (see, by analogy, Manninen, paragraph 46). 30 It is true that the granting of a tax credit in relation to corporation tax due in another Member State would entail, for the Federal Republic of Germany, a reduction in its tax receipts in relation to dividends paid by companies established in other Member States. However, it has been consistently held in the case-law that reduction in tax revenue cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is, in principle, contrary to a fundamental freedom (Verkooijen, cited above, paragraph 59, and Manninen, paragraph 49). 31 In the light of the above matters, the reply to the question referred must be that Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State. The temporal effects of this judgment32 In its observations, the German Government made the point that it was possible for the Court, if it declared national legislation such as that at issue in the main proceedings to be incompatible with Articles 56 EC and 58 EC, to limit the temporal effects of this judgment. 33 In support of its argument, that Government, first, drew the Court’s attention to the grave financial consequences which a judgment making such a declaration would have. Second, it argued that prior to the judgment in Verkooijen, the Federal Republic of Germany was entitled to believe that the legislation at issue was compatible with Community law. 34 In that connection, regard must be had to the settled case-law of the Court to the effect that the interpretation which, in the exercise of the jurisdiction conferred on it by Article 234 EC, the Court gives to a rule of Community law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships which arose and were established before the judgment ruling on the request for interpretation, provided that in other respects the conditions for bringing a dispute relating to the application of that rule before the competent courts are satisfied (see, in particular, Case C-347/00 Barreira Pérez [2002] ECR I-8191, paragraph 44, and Joined Cases C‑453/02 and C‑462/02 Linneweber and Akritidis [2005] ECR I‑1131, paragraph 41). 35 It is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision, which it has interpreted, with a view to calling in question legal relations established in good faith (see, in particular, Case C-104/98 Buchner and Others [2000] ECR I-3625, paragraph 39, and Linneweber and Akritidis, cited above, paragraph 42). 36 In addition, as the Court has consistently held, such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought (Case 309/85 Barra [1988] ECR 355, paragraph 13; Case 24/86 Blaizot [1988] ECR 379, paragraph 28; Case C-163/90 Legros and Others [1992] ECR I-4625, paragraph 30; Case C-415/93 Bosman and Others [1995] ECR I-4921, paragraph 142; and Case C-437/97 EKW and Wein & Co. [2000] ECR I-1157, paragraph 57). 37 Indeed, there must necessarily be a single occasion when a decision is made on the temporal effects of the requested interpretation, which the Court gives of a provision of Community law. In that regard, the principle that a restriction may be allowed only in the actual judgment ruling upon that interpretation guarantees the equal treatment of the Member States and of other persons subject to Community law, under that law, fulfilling, at the same time, the requirements arising from the principle of legal certainty. 38 The interpretation sought by the present reference for a preliminary ruling concerns the tax treatment which a Member State must, within the framework of a national system designed to prevent or lessen double taxation, accord to dividends distributed by a company established in another Member State. In that regard, it is clear from Verkooijen that Community law precludes a legislative provision of a Member State, which makes the grant of exemption from income tax payable on dividends paid to natural persons who are shareholders subject to the condition that those dividends are paid by a company whose seat is in that Member State (paragraph 62). 39 The Court did not limit the temporal effects of that judgment.40 In addition, the principles adopted in Verkooijen, which thus clarified the requirements arising from the principle of free movement of capital in respect of dividends received by residents from non-resident companies, were confirmed by the judgments in Case C-315/02 Lenz [2004] ECR I-7063 and in Manninen (see Test Claimants in the FII Group Litigation, cited above, paragraph 215). 41 It is therefore not appropriate to limit the temporal effects of the present judgment. Costs 42 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State.[Signatures]* Language of the case: German. | 8b2cd-44da47a-432c | EN |
AUSTRIAN LEGISLATION LIMITING AN EXEMPTION, ON A TRANSITIONAL BASIS, FOR CIGARETTES IMPORTED FROM SLOVENIA IS COMPATIBLE WITH COMMUNITY LAW | Amalia ValeškovZollamt Klagenfurt(Reference for a preliminary ruling from the Unabhängiger Finanzsenat, Außenstelle Klagenfurt)(Act of Accession to the European Union – Transitional measures – Annex XIII – Taxation – Cigarettes imported from Slovenia – Import into Austria in travellers’ personal luggage – Exemption from excise duty limited to certain quantities – Possibility of maintaining until 31 December 2007 the quantitative limits applied to imports from non-member countries – Directive 69/169/EEC)Summary of the JudgmentAccession of new Member States – Act of Accession of 2003 – Transitional measures – Tax provisions (Arts 23 EC, 25 EC and 26 EC; Act of Accession of 2003, Art. 24, Annexe XIII, point 6(2); Council Directive 69/169, Arts 4(1)(a) and 5(8))Section 6(2) of Annexe XIII to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the treaties on which the European Union is founded is to be interpreted as not precluding the Republic of Austria from maintaining, on a transitional basis, its legislation containing an exemption from excise duty reduced to 25 cigarettes for cigarettes coming from Slovenia imported into the Republic of Austria in the personal luggage of travellers resident in that Member State and entering it directly via its land border or inland waters. That exemption, which was introduced, prior to the accession of the Republic of Slovenia to the Union, on the basis of Article 5(8) of Directive 69/169 on the harmonisation of provisions laid down by law, regulation or administrative action relating to exemption from turnover tax and excise duty on imports in international travel, according to which Member States retain the power to lower the 200-unit duty-free allowance for cigarettes fixed by Article 4(1)(a) of Directive 69/169 for travel between non-member countries and the Community, was introduced in order to prevent Austrian residents from systematically avoiding payment of excise duty on cigarettes by buying, often on repeated short journeys, cigarettes in non-member countries bordering the Republic of Austria where the tax level and therefore prices are considerably lower than those in force in Austria, and by then importing up to 200 of those cigarettes, exempt from excise duty, on each of those journeys. That specific risk of tax avoidance and impairment of the objective of protecting public health persists after the accession of the Republic of Slovenia to the European Union, since, under Section 6(2) of Annex XIII to the Act of Accession, that new Member State may, even though it is required to raise its rates gradually, postpone the application of the overall minimum excise duty on cigarettes until 31 December 2007. The scope of the measure in question is, moreover, specifically limited to what is necessary to combat such practices. Therefore, that measure can still be based on Article 5(8) of Directive 69/169, read in conjunction with Article 24 of the Act of Accession. Moreover, since that national legislation is justified in the light of one of the measures referred to in Article 24 of the Act of Accession, in this case the transitional measure provided for in Section 6(2) of Annex XIII to that act, the question of the compatibility of that legislation with other provisions of primary law, such as Articles 23 EC, 25 EC and 26 EC, can no longer arise. Therefore, those articles must be interpreted as not prohibiting such national legislation, notwithstanding the fact that, following the last enlargement of the European Union, that reduced exemption no longer applies to any non-member country with the sole exception of the Swiss Samnauntal customs enclave, since imports of cigarettes from non-member countries generally benefit from an exemption for 200 units. (see paras 38, 40, 59-61, 67, 71, 74-75, operative part 1-2)JUDGMENT OF THE COURT (Second Chamber)5 October 2006 (*) (Act of Accession to the European Union – Transitional measures – Annex XIII – Taxation – Cigarettes imported from Slovenia – Import into Austria in travellers’ personal luggage – Exemption from excise duty limited to certain quantities – Possibility of maintaining until 31 December 2007 the quantitative limits applied to imports from third countries – Directive 69/169/EEC)In Case C-140/05,REFERENCE for a preliminary ruling under Article 234 EC from the Unabhängiger Finanzsenat, Außenstelle Klagenfurt (Austria), made by decision of 18 March 2005, received at the Court on 25 March 2005, in the proceedings THE COURT (Second Chamber),composed of C.W.A. Timmermans (Rapporteur), President of the Chamber, J. Makarczyk, R. Silva de Lapuerta, G. Arestis and J. Klučka, Judges, Advocate General: M. Poiares Maduro,Registrar: B. Fülöp, Administrator,having regard to the written procedure and further to the hearing on 23 February 2006,after considering the observations submitted on behalf of:– Ms Valeško, by R. Vouk, Rechtsanwalt,– the Austrian Government, by H. Dossi and J. Bauer, acting as Agents,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by G. Albenzio, avvocato dello Stato,– the Slovenian Government, by T. Mihelič and V. Klemenc, acting as Agents,– the Commission of the European Communities, by M. Heller and K. Gross, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 4 May 2006, gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Section 6(2) of Annex XIII to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic [to the European Union] and the adjustments to the Treaties on which the European Union is founded (OJ 2003 L 236, p. 33) (‘the Act of Accession’), as well as Articles 23 EC, 25 EC and 26 EC. 2 That reference was made in the course of proceedings between Ms Valeško and the Zollamt Klagenfurt (Klagenfurt Customs Office, hereinafter ‘the Zollamt’) concerning the exemption from excise duty applicable on the import into Austria of 200 cigarettes from Slovenia. Legal context Community law3 Article 2 of the Act of Accession states: ‘From the date of accession, the provisions of the original Treaties and the acts adopted by the institutions and the European Central Bank before accession shall be binding on the new Member States and shall apply in those States under the conditions laid down in those Treaties and in this Act.’ 4 Article 10 of the Act of Accession provides: ‘The application of the original Treaties and acts adopted by the institutions shall, as a transitional measure, be subject to the derogations provided for in this Act’. 5 Article 24 of the Act of Accession reads: ‘The measures listed in Annexes V, VI, VII, VIII, IX, X, XI, XII, XIII and XIV to this Act shall apply in respect of the new Member States under the conditions laid down in those Annexes.’ 6 Section 6(2) of Annexe XIII to the Act of Accession provides: ‘31992 L 0079: Council Directive 92/79/EEC of 19 October 1992 on the approximation of taxes on cigarettes (OJ L 316, 31.10.1992, p. 8), as last amended by: – 32002 L 0010: Council Directive 2002/10/EC of 12.2.2002 (OJ L 46, 16.2.2002, p. 26).By way of derogation from Article 2(1) of Directive 92/79/EEC, Slovenia may postpone the application of the overall minimum excise duty of EUR 60 and EUR 64 per 1 000 cigarettes for cigarettes of the price category most in demand until 31 December 2007, provided that during this period, Slovenia gradually adjusts its excise duty rates towards the overall minimum excise duty provided for in the Directive. Without prejudice to Article 8 of Council Directive 92/12/EEC on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products [(OJ L 76, 23.3.1992, p. 1. Directive as last amended by Directive 2000/47/EC (OJ L 193, 29.7.2000, p. 73)], and having informed the Commission, Member States may, as long as the above derogation applies, maintain the same quantitative limits for cigarettes which may be brought into their territories from Slovenia without further excise duty payment as those as applied with regard to import from third countries. Member States making use of this possibility may carry out the necessary checks provided that these checks do not affect the proper functioning of the internal market.’ 7 Article 8 of Directive 92/12 provides: ‘As regards products acquired by private individuals for their own use and transported by them, the principle governing the internal market lays down that excise duty shall be charged in the Member State in which they are acquired.’ 8 Article 45(1) of Council Regulation (EEC) No 918/83 of 28 March 1983 setting up a Community system of reliefs from customs duty (OJ 1983 L 105, p. 1), as amended by Council Regulation (EEC) No 1315/88 of 3 May 1988 (OJ 1998 L 123, p. 2, hereinafter ‘Regulation No 918/83’), reads: ‘Subject to Articles 46 to 49, goods contained in the personal luggage of travellers coming from a third country shall be admitted free of import duties, provided such imports are of a non-commercial nature.’ 9 As regards cigarettes, Article 46(1)(a) of Regulation No 918/83 prescribes 200 as the maximum quantity to which the relief referred to in Article 45(1) is limited. 10 Article 49(1) of Regulation No 918/83 provides: ‘Member States may reduce the value and/or the quantities of goods allowed to enter duty-free if they are imported by: – persons residing in the frontier zone,– frontier workers, – the crews of means of transport used between third countries and the Community.…’11 Article 1(1) of Council Directive 69/169/EEC of 28 May 1969 on the harmonisation of provisions laid down by Law, Regulation or Administrative Action relating to exemption from turnover tax and excise duty on imports in international travel (OJ, English Special Edition 1969 (I), p. 232), as amended by Council Directive 94/4/EC of 14 February 1994 amending Directives 69/169/EEC and 77/388/EEC and increasing the level of allowances for travellers from third countries and the limits on tax-free purchases in intra-Community travel (OJ 1994 L 60, p. 14, hereinafter ‘Directive 69/169’), provides: ‘1. Goods contained in the personal luggage of travellers coming from third countries shall be exempt from the turnover tax and excise duty levied on imports if the imported goods have no commercial character and the total value of the goods does not exceed ECU 175 per person’. 12 Article 4(1)(a) of Directive 69/169 provides that each Member State is, as regards imports from third countries, to set a quantitative limit of 200 cigarettes for exemptions from turnover tax and excise duty. 13 Article 5 of Directive 69/169 provides: ‘1. Member States may reduce the value and/or quantity of the goods which may be admitted duty free, down to one-tenth of the values and/or quantities provided for in Articles … 4(1), column II, where such goods are imported from another Member State by persons resident in the frontier zone of the importing Member State or in that of the neighbouring Member State, by frontier zone workers, or by the crew of the means of transport used in international travel. However, duty free entitlement in respect of the goods listed below may be as follows:(a) tobacco products40 cigarettes …2. Member States may set lower limits as to value and/or quantity for the exemption of goods when they are imported from a third country by persons resident in the frontier zone, by frontier zone workers or by the crew of the means of transport used in travel between third countries and the Community. 3. Member States may set lower limits as to value and/or quantity for the exemption of goods when they are imported from another Member State by members of the armed forces of a Member State, including civilian personnel and spouses and dependent children, stationed in another Member State. 8. Member States may reduce the quantities of goods referred to in Article 4(1)(a) and (d) for travellers coming from a third country who enter a Member State.’ National law14 Paragraph 6(3) of the Tabaksteuergesetz (Law on Tobacco Duty) of 31 August 1994 (BGBl. I, 704/1994), as amended by the Abgabenänderungsgesetz (Tax Amendment Law) of 19 December 2003 (BGBl. I, 124/2003), (hereinafter ‘the TabStG’) provides: ‘The Federal Minister for Finance shall be authorised by regulation:(1) to order that tobacco products may be imported free of duty if they can be exempted from customs duty or excise duties pursuant to … Regulation No 918/83 … and any other laws adopted by the European Community: (2) to regulate the duty-free import of tobacco goods from other Member States into the tax territory if such duty-free import is permitted under the rules in point (1): (5) to exclude tobacco duty from the exemption from import duty under Paragraph 2(1) of the Law implementing customs duties if such a measure is necessary for transposing the laws adopted by the European Community or ensuring uniform taxation.’ 15 Under Paragraph 29(1) of the TabStG: ‘Tobacco products purchased in another Member State where they are in free circulation by a natural person for his own use and introduced by him into the tax territory shall be duty-free if they are for private, non-commercial purposes.’ 16 Paragraph 29a of the TabStG reads: ‘1. During the transitional periods mentioned in Paragraph 44f(2), the exemption from excise duty under Paragraph 29 applicable to tobacco products imported into the tax territory in travellers’ personal luggage shall be limited to (3) 200 cigarettes on entry from the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Poland, the Republic of Slovenia and the Slovak Republic. 2. By way of derogation from subparagraph 1, the exemption from excise duty applicable to tobacco products imported in the personal luggage of travellers who are normally resident in the tax territory and enter that territory directly via a land border or inland waters shall be limited, during the transitional periods mentioned in Paragraph 44f(2), to: (2) 25 cigarettes on entry from the Slovak Republic, the Republic of Slovenia or the Republic of Hungary.’17 Paragraph 44f(2)(4) of the TabStG provides: ‘Paragraph 29a … shall enter into force at the same time as the Treaty of Accession of the Czech Republic, the Slovak Republic, the Republic of Hungary, the Republic of Slovenia, the Republic of Poland, the Republic of Estonia, the Republic of Latvia and the Republic of Lithuania to the European Union and shall apply during the transitional periods in respect of (4) the Republic of Slovenia up to 31 December 2007.18 On the basis of the powers conferred upon him by Paragraph 6(3) of the TabStG, the Federal Minister for Finance adopted the Verbrauchsteuerbefreiungsverordnung (Regulation concerning exemption from excise duties) of 5 January 1995 (BGBl. II, 3/1995) which was amended, with effect on and from 1 July 1997 by the Verordnung: Änderung der Verbrauchsteuerbefreiungsverordnung (Regulation amending the Regulation concerning exemption from excise duties) of 19 June 1997 (BGBl. II, 162/1997) (hereinafter ‘the VerbStBefV’). 19 Paragraph 1 of the VerbStBefV provides: ‘1. Unless stipulated otherwise in Paragraphs 2 to 5, products subject to excise duties which are imported from a third country into the tax territory within the meaning of the laws on excise duty shall be exempt from excise duties if they are exempt from customs duty upon import into the the Community customs territory pursuant to: (1) Regulation No 918/83 and the legal provisions adopted for its implementation,(2) Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), and the legal provisions adopted for its implementation, (3) the Law implementing customs duties, BGBl. No 659/1994.2. Unless stipulated otherwise in Paragraphs 4 and 5 of this Regulation, for the purposes of the exemption from excise duties, the Community customs territory shall be replaced by the tax territory within the meaning of the excise duty laws, and third country shall be replaced by any country which falls outside the scope of Directive 92/12.’ 20 Paragraph 3a of the VerbStBefV provides: ‘1. The exemption from excise duty applicable to tobacco products imported in the personal luggage of travellers who are normally resident in the territory to which this Regulation applies and who enter that territory via a land border with States other than the Member States of the European Union and the EFTA States shall be limited to: (1) 25 cigarettes … 2. Subparagraph 1 shall not apply to tobacco products which can be proved to have been purchased in the territory to which this regulation applies or in another Member State of the European Union where they were in free circulation for tax purposes and in respect of which the excise duty has not been reimbursed. 3. Subparagraph 1 shall also apply to tobacco products imported from the Swiss Samnauntal customs enclave. The main proceedings and the questions referred for a preliminary ruling21 Coming from Slovenia, Ms Valeško, an Austrian national, returned on 10 July 2004 to the Republic of Austria, the Member State in which she resides. 22 During a check carried out at the Austrian frontier post of Grablach, she declared 200 Davidoff Gold 200 cigarettes. 23 By decision of 30 July 2004, based on Paragraph 29a of the TabStG and the exemption limited to 25 cigarettes under that provision, the Zollamt (Customs Office) levied tobacco tax on 175 of the 200 cigarettes imported by Ms Valeško, in the sum of EUR 16.80. 24 Ms Valeško appealed against that decision claiming that the exemption from excise duty limited to 25 cigarettes under Paragraph 29a of the TabStG is contrary to Community law. By decision of 17 December 2004, the Zollamt rejected that appeal. 25 Ms Valeško brought an action against that decision before the Unabhängiger Finanzsenat, Außenstelle Klagenfurt (Independent Finance Tribunal, Klagenfurt Division). She asked, should Paragraph 29a of the TabStG be applied, for a question to be referred to the Court of Justice for a preliminary ruling. 26 The national court observes that, under Austrian law, the provisions of customs law apply to the levying of excise duty on imports if goods subject to such duty are brought directly into the tax territory from a third country. 27 According to that court, Section 6(2) of Annex XIII to the Act of Accession could be interpreted as meaning that the Member States may maintain quantitative limits provided that they were already applicable, particularly with regard to the Republic of Slovenia as a third country, at the time of that State’s accession to the European Union. 28 Were that interpretation to be accepted, that condition would be satisfied as regards Paragraph 29a of the TabStG, since the quantitative limit of 25 cigarettes laid down by that provision was already prescribed in Paragraph 3a of the VerbStBefV prior to the accession of the Republic of Slovenia to the European Union. 29 However, in the referring court’s view, another interpretation is also possible. The wording of Section 6(2) of Annex XIII to the Act of Accession, in particular the passage ‘the same quantitative limits … as those applied with regard to imports from third countries’, would permit an approach based on the state of the law in force after the accession of the Republic of Slovenia to the European Union. 30 According to that interpretation, for cigarettes coming from Slovenia, the same quantitative limits would apply as those prescribed for cigarettes from third countries that remain after the last enlargement of the European Union. 31 Were that second interpretation to be upheld, the quantitative limit of 25 cigarettes laid down in Paragraphs 29a of the TabStG and 3a of the VerbStBefV would continue to apply only to imports from the Swiss Samnauntal customs enclave because, apart from the Swiss Confederation and the Principality of Liechtenstein, Member States of the European Free Trade Association, no other third country shares a common frontier with Austria. 32 The referring court expresses doubts about the application to imports from Slovenia of the quantitative limit of 25 cigarettes, since the maintenance of such a restrictive regime seems to go beyond what the legislature intended and, therefore, to conflict with the Act of Accession as well as the principles enshrined in Articles 23 EC, 25 EC and 26 EC. 33 It was in those circumstances that the Unabhängiger Finanzsenat, Außenstelle Klagenfurt decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Are the provisions contained in Section 6(2) of Annex XIII to the Act of Accession, which state that, without prejudice to Article 8 of … Directive 92/12 … and having informed the Commission, Member States may, as long as the above derogation applies, “maintain” the same quantitative limits for cigarettes which may be brought into their territories from Slovenia without further excise duty payment as those applied with regard to imports from third countries, to be interpreted as meaning – in the light of the technical term “maintain” – that they permit quantitative limits which applied in a Member State until the accession of the Republic of Slovenia inter alia in relation to the Republic of Slovenia as a third country? 2. If the Court of Justice concludes that the Treaty provisions in question are not in fact to be construed as permitting quantitative limits which applied in a Member State until the accession of the Republic of Slovenia inter alia in relation to the Republic of Slovenia as a third country: on a proper construction of Articles 23 EC, 25 EC and 26 EC, do the rules of a Member State under which the exemption from excise duty applicable to tobacco products imported in the personal luggage of travellers who are normally resident in the tax territory of that Member State and enter that territory directly via a land border or inland waters is limited to 25 cigarettes on entry from certain other Member States, comply with the principles of the free movement of goods where a quantitative limit of that kind exists only in respect of a customs enclave in a single third country (the Swiss Confederation) whilst from any other third country importation of 200 cigarettes free of excise duty into that Member State is allowed?’ The questions referred for a preliminary ruling The first question34 By its first question, the referring court seeks to ascertain whether Section 6(2) of Annex XIII to the Act of Accession is to be interpreted as meaning that it enables the Republic of Austria to maintain, on a transitional basis, its legislation containing an exemption from excise duty for cigarettes imported in travellers’ personal luggage limited to 25 units, since that exemption was already in force prior to the accession of the Republic of Slovenia to the European Union, or whether that provision of the Act of Accession is to be understood as meaning that the maintenance of such an exemption is subject to the condition that it be applied by the Republic of Austria to imports from third countries by virtue of its current legislation. 35 At the outset, it must be observed that the matter of exemptions from excise duty on imports of goods contained in the personal luggage of travellers coming from third countries, in particular cigarettes, is governed by Directive 69/169. 36 The purpose of that directive, as its title suggests, is to harmonise exemptions from turnover tax and excise duty on imports in international travel. As is clear from the recitals in its preamble and from those in the preambles to the directives subsequently amending it, the aim is to liberalise still further the system of taxes on imports in travel in order to facilitate such travel (Case C-394/97 Heinonen [1999] ECR I-3599, paragraph 25). 37 In addition, in the field covered by Directive 69/169, the Member States retain only the limited powers granted them by the actual provisions of the directive and of the directives amending it (Case C-96/91 Commission v Spain [1992] ECR I-3789, paragraph 10, and the case-law there cited). 38 As regards, in particular, cigarettes, it is clear from Article 4(1)(a) of Directive 69/169 that the exemption from excise duty, for travel between third countries and the Community, is limited to 200 cigarettes. However, under Article 5(2) and (8) of that directive, Member States continue to have power to lower that limit subject to the conditions laid down by those provisions. 39 Those provisions, as applicable both before and after the Republic of Slovenia’s accession to the European Union and at the material time in the main proceedings, have not been amended. 40 It is, in addition, common ground that the Republic of Austria adopted Paragraph 29a of the TabStG and established the exemption limited to 25 cigarettes under that provision on the basis of Article 5(8) of Directive 69/169 and that the national provision was notified by that Member State’s authorities to the Commission as one of the transitional measures referred to in Article 24 of the Act of Accession. 41 Moreover, it is not disputed that that provision of the national legislation reproduced, in essentially identical terms, the exemption already laid down in Paragraph 3a of the VerbStBefV, which applied, from 1 January 1997, to imports by travellers of cigarettes from third countries bordering the Republic of Austria, in particular Slovenia, and which, since the last enlargement of the European Union, applies only to the Samnauntal customs enclave. 42 Therefore, the question arises whether, prior to the Republic of Slovenia’s accession to the Union, the national legislation at issue in the main proceedings establishing the reduced exemption of 25 cigarettes could be based on the limited powers available to the Republic of Austria under Article 5(8) of Directive 69/169, and whether, following that accession, that legislation can still, in view of the intervention of Article 24 of the Act of Accession, be based on those powers. 43 The Commission submits that the question calls for a negative reply. 44 It maintains that the exception under Article 5(8) of Directive 69/169 cannot be invoked as regards a national exemption such as that in question in the main proceedings, since it applies only to imports of goods from certain third countries and it is, moreover, limited to a specific category of travellers from those countries, namely those who are normally resident in Austria and enter that Member State directly via a land border or inland waters. 45 The first three paragraphs of Article 5 of Directive 69/169 lay down some exceptions which apply to certain specifically defined categories of travellers. Those exceptions would be superfluous and might, furthermore, be evaded if Article 5(8) had to be understood as according to the Member States a general power to add other specific categories of travellers to those defined in those first three paragraphs. 46 The recognition of such powers could also lead to the introduction of different exemption regimes in the Member States. The development of such regimes would be likely to compromise the objective of Directive 69/169, namely to facilitate international travel. 47 Finally, the Commission maintains that the interpretation which it advocates is necessary in order to comply with the principle prohibiting any discrimination between third countries in international trade. 48 Those arguments cannot be accepted. 49 As regards the argument based on the setting out in Article 5(1) to (3) of Directive 69/169 of specific exceptions applicable to certain categories of travellers, it must be observed that, among those provisions, Article 5(2) alone can be relevant to the main proceedings, since it covers imports from third countries whereas Article 5(1) and (3) concern goods from another Member State. 50 Whilst it is true that the category of travellers constituted by persons who are normally resident in Austria, the subject of the national measure in question in the main proceedings, is defined more widely than the categories represented by persons resident in the frontier zone, frontier zone workers or the crew of the means of transport used in travel between third countries and the Community within the meaning of Article 5(2) of Directive 69/169, the specific nature of the categories referred to by the last exception does not preclude the application of the exception under Article 5(8) to another category of travellers, defined more widely. 51 Indeed, that last exception is also specific since it applies only to certain exhaustively listed goods, in particular, to cigarettes. 52 According to the wording of Article 5(8) of Directive 69/169, Member States may reduce the quantities of the goods referred to in Article 4(1)(a) and (d) of that directive, among others cigarettes, for travellers coming from a third country who enter a Member State. 53 In view of the general nature of the terms used, the wording of that provision could not found a restrictive interpretation, such as that suggested by the Commission, according to which reduced exemptions adopted under that provision are permitted only if they apply to all third countries without distinction and for all categories of travellers. 54 The general nature of that wording implies, on the contrary, that, as regards the specific goods referred to in Article 4(1)(a) and (d) of Directive 69/169, among others cigarettes, a wide power is reserved to the Member States to reduce the quantities of the goods concerned. 55 It is true that a certain tension exists between that power and the general aim of Directive 69/169, which, as noted in paragraph 36 of this judgment, is to liberalise the system of taxes on imports in travel in order to facilitate such travel. 56 In making use of that power, the Member States are therefore required to limit as far as possible the negative effects which the measures adopted could have on the realisation of the general aim of Directive 69/169 and thus to strike a reasonable balance between that aim and the specific aim of Article 5(8) of Directive 69/169. 57 That specific aim must take account of the particular nature of the goods in question, namely tobacco products such as cigarettes, and of the legal interest which the provision in question in the main proceedings allows to be protected. 58 As the Advocate General pointed out in point 35 of his Opinion, fiscal legislation is an important and effective instrument for discouraging consumption of those products and, therefore, for the protection of public health. 59 It is common ground that Paragraph 3a of the VerbStBefV laying down the exemption limited to 25 cigarettes was introduced in order to prevent Austrian residents from systematically evading payment of the overall minimum excise duty on cigarettes, the rates of which are fixed by Article 2 of Directive 92/79, as amended by Directive 2002/10, by buying, often on repeated short journeys, cigarettes in third countries bordering the Republic of Austria where the tax level and therefore prices are considerably lower than those in force in that Member State, and by then importing up to 200 of those cigarettes, exempt from excise duty, on each of those journeys. 60 That specific risk of evasion of fiscal policy and impairment of the objective of protection of public health persists after the accession of the Republic of Slovenia to the European Union, since, under Section 6(2) of Annex XIII to the Act of Accession, that new Member State may, even though it is required to raise its rates gradually, postpone the application of the overall minimum excise duty on cigarettes until 31 December 2007. 61 It must also be observed that the scope of the measure in question in the main proceedings is specifically limited to what is necessary to combat such practices, which are regarded as posing, having regard particularly to their cumulative effects, a significant risk to the effectiveness of fiscal policy relating to tobacco products, and, therefore, to the imperative of the protection of public health. 62 It is important to note that that measure concerns only persons normally resident in Austria, whose protection in health matters is the responsibility of the Austrian legislature, and who enter Austria directly from a third country with a shared border where the level of taxation on cigarettes is lower than that imposed by the Community legislation in force. 63 That explains why that measure does not apply to imports from third countries bordering Austria, such as the Swiss Confederation and the Principality of Liechtenstein, where the level of taxation on tobacco products is not lower than that imposed by the Community legislation, but does apply to those coming from the Swiss Samnauntal customs enclave, since the level of taxation in that area is lower than that required by the Community legislation. 64 Moreover, the national measure at issue in the main proceedings is not applicable to journeys which are not regarded as representing a significant risk to the effectiveness of fiscal policy relating to those products, such as those made by air, or to journeys made to third countries which do not share a border with Austria. 65 It is therefore evident, given the limitation of its scope on the basis of specific considerations relating to the risk of interference with fiscal policy and the protection of public health which arises from the proximity of the countries concerned and the level of taxation on tobacco products in those countries, that the national measure at issue strikes a reasonable balance between the general aim of Directive 69/169 and the specific aim of Article 5(8) of that directive. 66 As regards the Republic of Slovenia’s situation following its accession to the European Union, it is common ground that the rates of taxation applicable in that Member State to tobacco products, although at a higher level than at that accession, are still lower than those imposed by the Community legislation in force. 67 Therefore, the specific risk which the exemption limited to 25 cigarettes is intended to combat remains, with the result that that measure can still be based on Article 5(8) of Directive 69/169, read in conjunction with Article 24 of the Act of Accession. 68 In those circumstances, the Commission’s argument that the national legislation in question in the main proceedings is discriminatory cannot be accepted. 69 It follows from the foregoing that, in the light of the objectives pursued, the scope of that national legislation is limited to imports from third countries and new Member States bordering the Republic of Austria where the level of taxation on tobacco products is lower than that imposed by the Community legislation. 70 Therefore, since the situation of those third countries and new Member States bordering the Republic of Austria is not comparable to that of other third countries, the difference in treatment resulting from that legislation cannot be regarded as constituting discrimination against imports from those third countries and new Member States. 71 Having regard to the foregoing, the reply to the first question must be that Section 6(2) of Annex XIII to the Act of Accession must be interpreted as meaning that it does not preclude the Republic of Austria from maintaining, on a transitional basis, its exemption from excise duty limited to 25 cigarettes for cigarettes coming from Slovenia imported into the Republic of Austria in the personal luggage of travellers resident in that Member State and entering it directly via its land border or inland waters. The second question72 By its second question, the referring court is asking, in essence, whether Articles 23 EC, 25 EC and 26 EC are to be interpreted as meaning that they prohibit national legislation such as that at issue in the main proceedings, under which the exemption from excise duty for cigarettes imported in travellers’ personal luggage is limited to 25 units on entry to the Republic of Austria from certain other Member States, in particular the Republic of Slovenia, because, following the last enlargement of the European Union, that exemption no longer applies to any third country with the sole exception of the Swiss Samnauntal customs enclave, since imports of cigarettes from third countries generally benefit from an exemption for 200 units. 73 In that respect, as regards the situation subsequent to the Republic of Slovenia’s accession to the European Union, it is clear from paragraph 67 of this judgment that the national legislation at issue in the main proceedings can still be based on Article 5(8) of Directive 69/169, read in conjunction with Article 24 of the Act of Accession. 74 Since that national legislation is justified in the light of one of the measures referred to in Article 24 of the Act of Accession, in this case the transitional measure provided for in Section 6(2) of Annex XIII to that act, the question of the compatibility of that legislation with other provisions of primary law, such as Articles 23 EC, 25 EC and 26 EC, can no longer arise. 75 Therefore, the reply to the second question is that Articles 23 EC, 25 EC and 26 EC must be interpreted as meaning that they do not prohibit national legislation such as that at issue in the main proceedings, under which the exemption from excise duty for cigarettes imported in travellers’ personal luggage is limited to 25 units on entry to the Republic of Austria from certain other Member States, in particular the Republic of Slovenia, notwithstanding the fact that, following the last enlargement of the Union, that reduced exemption no longer applies to any third country with the sole exception of the Swiss Samnauntal customs enclave, since imports of cigarettes from third countries generally benefit from an exemption for 200 units. Costs76 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Second Chamber) hereby rules:1. Section 6(2) of Annexe XIII to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the treaties on which the European Union is founded is to be interpreted as meaning that it does not preclude the Republic of Austria from maintaining, on a transitional basis, its legislation containing an exemption from excise duty reduced to 25 cigarettes for cigarettes coming from Slovenia imported into the Republic of Austria in the personal luggage of travellers resident in that Member State and entering it directly via its land border or inland waters.2. Articles 23 EC, 25 EC and 26 EC must be interpreted as meaning that they do not prohibit national legislation such as that at issue in the main proceedings, under which the exemption from excise duty for cigarettes imported in travellers’ personal luggage is limited to 25 units on entry to the Republic of Austria from certain other Member States, in particular the Republic of Slovenia, notwithstanding the fact that, following the last enlargement of the European Union, that reduced exemption no longer applies to any third country with the sole exception of the Swiss Samnauntal customs enclave, since imports of cigarettes from third countries generally benefit from an exemption for 200 units. [Signatures]* Language of the case: German. | f5a71-d690953-4e01 | EN |
THE COURT OF FIRST INSTANCE DECLARES INADMISSIBLE THE ACTION FOR ANNULMENT BROUGHT AGAINST THE FORWARDING OF INFORMATION HELD BY OLAF TO NATIONAL JUDICIAL AUTHORITIES AND DISMISSES THE APPLICATION FOR DAMAGES IN COMPENSATION FOR THE HARM ALLEGEDLY SUFFERED BY THE APPLICANT | Hans-Martin TillackvCommission of the European Communities(Investigation by the European Anti-Fraud Office (OLAF) into the publication of confidential information – Suspicions of bribery and breach of professional secrecy – Communication to national judicial authorities of information relating to situations liable to lead to criminal proceedings – Search of the home and office of a journalist – Action for annulment – Admissibility – Action for damages – Causal link – Sufficiently serious breach) Judgment of the Court of First Instance (Fourth Chamber), 4 October 2006 Summary of the Judgment1. Actions for annulment – Actionable measures – Meaning – Measures producing binding legal effects (Art. 230 EC; European Parliament and Council Regulation No 1073/1999, Art. 10(2))2. Actions for damages – Autonomy in relation to action for annulment and action for failure to act(Arts 230, fourth para., EC, 235 EC and 288, second para., EC)3. Non-contractual liability – Conditions – Sufficiently serious breach of Community law(Art. 288, second para., EC)1. Measures the legal effects of which are binding on and capable of affecting the interests of the applicant by bringing about a distinct change in his legal position are acts or decisions which may be the subject of an action for annulment in terms of Article 230 EC. Such is not the case for an act by which the European Anti-Fraud Office (OLAF), on the basis of Article 10(2) of Regulation No 1073/1999 concerning investigations conducted by OLAF, forwards to the national judicial authorities information concerning suspicions of breach of professional secrecy and bribery. That Article 10(2) merely provides for the forwarding of information to national judicial authorities, which remain free, in the context of their own powers, to assess the content and significance of that information and, thus, the action to be taken if necessary. Consequently, the possible initiation of legal proceedings following the forwarding of information by OLAF, and the subsequent legal acts, are the sole and entire responsibility of the national authorities. That freedom of the national judicial authorities is not called into question by the duty to cooperate in good faith which implies that, when OLAF forwards them information pursuant to Article 10(2) of Regulation No 1073/1999, the national judicial authorities have to examine that information carefully and draw the appropriate consequences from it in order to comply with Community law. Such a duty of careful examination does not, however, require an interpretation to the effect that the forwarded information in dispute has binding effect, in the sense that the national authorities are obliged to take specific measures, since such an interpretation would alter the division of tasks and responsibilities as prescribed for the implementation of Regulation No 1073/1999. (see paras 67-68, 70, 72)2. The action to establish liability is an autonomous form of action, with a particular purpose to fulfil within the system of legal remedies and subject to conditions of use dictated by its specific purpose. Although actions for annulment and for failure to act seek a declaration that a legally binding measure is unlawful or that such a measure has not been taken, an action to establish liability seeks compensation for damage resulting from a measure or from unlawful conduct, attributable to a Community institution or body. Thus, individuals who, by reasons of the conditions as to admissibility laid down under the fourth paragraph of Article 230 EC, cannot contest directly certain Community acts or measures, none the less have the opportunity of putting in issue conduct lacking the features of a decision, which accordingly cannot be challenged by way of an action for annulment, by bringing an action for non‑contractual liability under Article 235 EC and the second paragraph of Article 288 EC, where such conduct is of such a nature as to entail liability for the Community. (see paras 97-98)3. The non-contractual liability of the Community for the unlawful acts of its bodies, for the purposes of the second paragraph of Article 288 EC, depends on fulfilment of a set of conditions, namely: the unlawfulness of the conduct alleged against the institutions, the fact of damage and the existence of a causal link between that conduct and the damage complained of. As regards the first of those conditions, it is required that there be a sufficiently serious breach of a rule of law intended to confer rights in individuals. In that regard, the principle of sound administration does not, in itself, confer rights upon individuals, except where it constitutes the expression of specific rights such as the right to have affairs handled impartially, fairly and within a reasonable time, the right to be heard, the right to have access to files, or the obligation to give reasons for decisions, for the purposes of Article 41 of the Charter of fundamental rights of the European Union. Moreover, the classification of the conduct of a Community institution as an ‘act of maladministration’ by the European Ombudsman does not mean, in itself, that that conduct constitutes a sufficiently serious breach of a rule of law. In the institution of the Ombudsman, the Treaty has given citizens of the Union, and more particularly officials and other servants of the Community, an alternative remedy to that of an action before the Community Courts in order to protect their interests. That alternative non-judicial remedy meets specific criteria and does not necessarily have the same objective as judicial proceedings. (see paras 116-117, 127-128)JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber)4 October 2006 (*) In Case T-193/04, Hans-Martin Tillack, residing in Brussels (Belgium), represented by I. Forrester QC, T. Bosly, C. Arhold, N. Flandin, J. Herrlinger and J. Siaens, lawyers, applicant,supported byInternational Federation of Journalists (IFJ), established in Brussels (Belgium), represented by A. Bartosch and T. Grupp, lawyers, intervener,Commission of the European Communities, represented by C. Docksey and C. Ladenburger, acting as Agents, defendant,APPLICATION, first, for the annulment of the act by which, on 11 February 2004, the European Anti-Fraud Office (OLAF) forwarded to the German and Belgian judicial authorities information concerning suspicions of breach of professional secrecy and bribery and, second, for damages in compensation for non-material injury suffered by the applicant as a result of the forwarding of that information and of the publication of press releases by OLAF, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fourth Chamber), composed of H. Legal, President, P. Lindh and V. Vadapalas, Judges,Registrar: J. Plingers, Administrator,having regard to the written procedure and further to the hearing on 11 May 2006,gives the followingJudgment Legal framework 1 The European Anti-Fraud Office (OLAF), established by Commission Decision 1999/352/EC, ECSC, Euratom of 28 April 1999 (OJ 1999 L 136, p. 20), is responsible in particular for carrying out internal administrative investigations intended to investigate serious facts, linked to the performance of professional activities, which may constitute a breach of obligations by officials and servants of the Communities likely to lead to disciplinary and, in appropriate cases, criminal proceedings. 2 Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations conducted by OLAF (OJ 1999 L 136, p. 1) governs the inspections, checks and other measures undertaken by employees of OLAF in the performance of their duties. 3 Recital 13 in the preamble to Regulation No 1073/1999 states that:‘… it is for the competent national authorities or the institutions, bodies, offices or agencies, as the case may be, to decide what action should be taken on completed investigations on the basis of the report drawn up by [OLAF]; … it should nevertheless be incumbent upon the Director of [OLAF] to forward directly to the judicial authorities of the Member State concerned information acquired by [OLAF] in the course of internal investigations concerning situations liable to result in criminal proceedings.’ 4 Article 6 of Regulation No 1073/1999, headed ‘Investigations procedure’, provides, at paragraph 6, that ‘the Member States shall ensure that their competent authorities, in conformity with national provisions, give the necessary support to enable [OLAF] employees to fulfil their task’. 5 Article 9 of Regulation No 1073/1999, headed ‘Investigation report and action taken following investigations’, states the following at paragraph 2: ‘… Reports drawn up on that basis shall constitute admissible evidence in administrative or judicial proceedings of the Member State in which their use proves necessary, in the same way and under the same conditions as administrative reports drawn up by national administrative inspectors. …’ 6 Article 10 of Regulation No 1073/1999, entitled ‘Forwarding of information by [OLAF]’, provides at paragraph 2:‘… the Director of [OLAF] shall forward to the judicial authorities of the Member State concerned the information obtained by [OLAF] during internal investigations into matters liable to result in criminal proceedings. …’ Facts giving rise to the dispute7 The applicant is a journalist employed by the German magazine Stern.8 By memorandum of 31 August 2001, Mr van Buitenen, an official of the Commission of the European Communities, notified the existence of possible irregularities in a number of the Commission’s services (‘the van Buitenen memorandum’). A copy of that document was received by OLAF on 5 September 2001. 9 On 23 October 2001, the Director of OLAF instructed the Magistrates, Judicial advice and Follow-up Unit to investigate the allegations made in the van Buitenen memorandum and asked for recommendations as to further proceedings to be taken in relation to them. 10 On 31 January 2002, the Magistrates, Judicial advice and Follow-up Unit issued a confidential internal note, containing 12 proposals and recommendations, including the opening of investigations into some of the allegations referred to in the memorandum. On the basis of that document, the unit drew up an abridged note of 14 February 2002, which was also confidential. 11 The applicant was the author of two articles published in Stern on 28 February and 7 March 2002 respectively, in which he described irregularities within the European institutions. Those articles were based on the van Buitenen memorandum and the OLAF note of 31 January 2002. 12 On 12 March 2002, OLAF, suspecting that its confidential notes of 31 January and 14 February 2002 had been unlawfully disclosed, opened an internal investigation to identify the Community officials or servants who were the source of the leak. 13 On 22 March 2002, the Director of the OLAF Operations, Strategy and Information Services Directorate sent a note to the Director of OLAF to inform him that, according to a trustworthy source, the applicant had handed over EUR 8 000 to an OLAF official for a number of documents related to the van Buitenen case. On the same day, the OLAF spokesman told the Director of OLAF that he had met Mr G., the Commission spokesman dealing with budget and anti-fraud matters, and that the latter had claimed to have been informed by a journalist from Stern that the applicant had paid a member of OLAF in order to obtain documents. 14 On 27 March 2002, OLAF published a press release, headed ‘Internal investigation concerning a leak of confidential information’, which was worded as follows: ‘… Following an apparent leak of confidential information included in a report prepared within OLAF, [OLAF] has decided, in accordance with Article 5(1) of Regulation … No 1073/1999, to open an internal investigation. According to information received by [OLAF], a journalist has received a number of documents relating to the so-called “van Buitenen affair”. It is not excluded that payment may have been made to somebody within OLAF (or possibly another EU institution) for these documents. … [OLAF] always respects the highest ethical standards. It conducts its investigations in full independence. It would however point out that the bribery or payment of officials to provide official information is illegal in Belgium, and the information obtained by OLAF in the course of its investigations is protected by the relevant provisions of Belgian law. If following the internal investigation illegal activity is indicated, it is the intention of [OLAF] that the perpetrators be prosecuted in accordance with the applicable disciplinary and criminal provisions …’ 15 In reply, Stern published a press release on 28 March 2002, in which it, first, confirmed that it was in possession of the van Buitenen memorandum and, secondly, emphasised that it had not paid an official of the European Communities for providing documents connected with the case. That press release also mentions the applicant’s name and address. Stern also wrote to the Chairman of the OLAF Supervisory Committee on 3 April 2002 to object to OLAF’s allegations. 16 On 4 April 2002, the magazine European Voice stated that, according to an OLAF spokesman, OLAF had ‘prima facie evidence’ that ‘a payment might have been made’ and was treating the matter seriously. 17 At a meeting of 9 and 10 April 2002, the OLAF Supervisory Committee asked to be informed of the grounds for suspecting payment in this case. 18 On 11 April 2002, OLAF’s spokesman sent an email to a number of OLAF officials stating the following:‘… the only facts of which we can be certain for the moment are: that a confidential OLAF document has found its way into the hands of the press (which should not have happened), [and that] there have been rumours or speculation around OLAF and around the … Commission that these documents have been paid for (with even an indication of the price paid). It is unacceptable that confidential information from OLAF has been obtained by the press and that this information may have been obtained by means of the corruption of a public servant [and that] allegations, “rumours” or “speculation” of the sort which [OLAF], as an investigative body, has had to endure, remain unverified …’. 19 On 22 October 2002, the applicant lodged a complaint (1840/2002/GG) with the European Ombudsman regarding OLAF’s press release of 27 March 2002. 20 On 9 December 2002, the OLAF investigators formally heard Mr G. He indicated that according to one of his former colleagues from Stern, whose name he refused to reveal, the applicant had received DEM 8 000 or EUR 8 000 to obtain information concerning the Commission or possibly OLAF. 21 On 18 June 2003, in his draft recommendation regarding the applicant’s complaint, the Ombudsman stated that by making allegations of bribery without a factual basis which was both sufficient and available for public scrutiny, OLAF had gone beyond what was proportionate to the purpose pursued by its action, and that that constituted an instance of maladministration. He recommended that OLAF withdraw the published allegations of bribery, which might be understood as referring to the applicant. 22 Following that draft recommendation, OLAF issued a press release on 30 September 2003, entitled ‘OLAF clarification regarding an apparent leak of information’, drafted as follows: ‘On 27 March 2002, … OLAF published a press release in which it announced that an internal investigation had been opened in accordance with Regulation … No 1073/1999 regarding an apparent leak of confidential information included in a report prepared within [OLAF]. That press release stated that, according to information received by [OLAF], a journalist had received a number of documents relating to the so-called “van Buitenen affair”, and that it was not excluded that payment might have been made to somebody within OLAF (or possibly another EU institution) for these documents. OLAF’s enquiries have not yet been completed, but to date, [OLAF] has not obtained proof that such a payment was made.’23 On 12 November 2003, the applicant published an article on Stern’s website criticising the work of OLAF’s Director. 24 In his final decision of 20 November 2003, the Ombudsman reaffirmed, in relation to complaint 1840/2002/GG, that OLAF had committed an act of maladministration and was of the opinion that OLAF, which had accepted his draft recommendation, had not implemented it adequately. In those circumstances, he took the view that a critical remark on his part could constitute adequate reparation for the complainant. 25 Mr G., who had left the Commission in July 2003, had a further hearing before OLAF’s investigators on 6 January 2004. First, he confirmed the points covered at the first hearing and, second, disclosed the name of the person who had given him the information. 26 On 20 and 21 January 2004, at a meeting of the OLAF Supervisory Committee, the director informed the committee of the ‘developments of an ongoing case’ and stated that they involved confidential contacts with national judicial authorities. The minute of the meeting recorded that the members of the committee agreed ‘in the light of the particular circumstances of the case to receive deferred information thereon … , it being declared that OLAF should, at the appropriate time, provide adequate information to the institution concerned’. 27 On 11 February 2004, OLAF forwarded information concerning suspicions of breach of professional secrecy and bribery to the judicial authorities in Brussels (Belgium) and Hamburg (Germany), referring to Article 10(2) of Regulation No 1073/1999. 28 On the basis of the information sent, both the Belgian and German judicial authorities opened investigations into alleged corruption and, in the case of the Belgian judicial authorities, for breach of professional secrecy. 29 On 19 March 2004, on the instructions of the investigating judge responsible for the case, the Belgian police carried out a search at the applicant’s home and office and seized or sealed professional documents and personal belongings. 30 The applicant brought proceedings to challenge that seizure before the Belgian courts. Following those proceedings the Belgian Cour de cassation (Court of Cassation) rejected his appeal on the merits on 1 December 2004. 31 On 15 April 2004, the applicant wrote to the Director of OLAF to complain about the procedure and to request access to the investigation file concerning him. 32 On 7 May 2004, a copy of the letter sent to the Belgian judicial authorities on 11 February 2004, from which all confidential material had been deleted, was sent to the President of the OLAF Supervisory Committee. At the end of May 2004, the applicant also obtained a copy of that letter. 33 On 12 May 2005, the Ombudsman issued a special report to the European Parliament concerning complaint 2485/2004/GG, brought by the applicant. According to that report, OLAF should acknowledge that it had made incorrect and misleading statements in its submissions to the Ombudsman in the investigation into complaint 1840/2002/GG. The European Ombudsman also proposed that the Parliament adopt that recommendation as a resolution. Procedure and forms of order sought 34 By application lodged at the Registry of the Court of First Instance on 1 June 2004, the applicant brought the present action. 35 By separate document registered at the Registry of the Court of First Instance on 4 June 2004, the applicant requested essentially, first, the suspension of the operation of all measures to be adopted in the context of the alleged complaint lodged by OLAF with the Belgian and German judicial authorities on 11 February 2004 and, secondly, an order that OLAF should refrain from obtaining, inspecting, investigating and hearing the contents of all documents and information in the possession of the Belgian judicial authorities as a result of the search carried out at the applicant’s home and office on 19 March 2004. 36 By document lodged at the Registry of the Court of First Instance on 17 June 2004, the International Federation of Journalists (‘the IFJ’) lodged an application to intervene in support of the forms of order sought by the applicant. 37 By order of the President of the Court of First Instance in Case T‑193/04 R Tillack v Commission [2004] ECR II-3575, the President of the Court of First Instance rejected the application for interim measures and reserved costs. 38 By application lodged at the Registry of the Court of Justice on 24 December 2004, the applicant brought an appeal against that order in Tillack v Commission. 39 By order of 26 January 2005, the President of the Fourth Chamber of the Court of First Instance granted the IFJ leave to intervene in the present proceedings. The intervener lodged its statement in intervention and the other parties replied within the prescribed periods. 40 By order of 19 April 2005 in Case C-521/04 P(R) Tillack v Commission [2005] ECR I-3103, the President of the Court of Justice dismissed the appeal in that case and the applicant was ordered to pay the costs. 41 Upon hearing the report of the Judge-Rapporteur, the Court (Fourth Chamber) decided to open the oral procedure. 42 The parties presented oral argument and answered the questions put by the Court at the hearing on 11 May 2006. 43 The applicant claims that the Court should:– annul the decision of OLAF to forward to the German and Belgian judicial authorities the ‘complaint’ of 11 February 2004;– order the Commission to award him damages in an amount to be fixed by the Court, together with interest at a rate to be fixed by the Court; – take such other or further action as justice may require;– order the Commission to pay the costs.44 The Commission contends that the Court should:– dismiss the action for annulment and the action for damages as inadmissible;– in the alternative, dismiss those actions as unfounded;– order the applicant to pay the costs.45 The IFJ submits that the Court should annul the decision of OLAF of 11 February 2004 to ‘forward the complaints’ to the German and Belgian judicial authorities. Law Admissibility of the pleas seeking annulment of the act by which OLAF forwarded information to the German and Belgian judicial authorities Arguments of the parties 46 Without raising a formal plea of inadmissibility, the Commission contends that the application for annulment is manifestly inadmissible, in the absence of any challengeable act for the purposes of the fourth paragraph of Article 230 EC. 47 Referring to the order of the Court of First Instance in Case T‑215/02 Gómez-Reino v Commission [2003] ECR-SC I-A-345 and ECR II-1685, paragraphs 50 and 51, the Commission submits that the act by which OLAF forwarded information to the Belgian and German judicial authorities, in accordance with the obligation laid down in Article 10(2) of Regulation No 1073/1999, represents a preparatory act which, in itself, does not change the legal position of the applicant. It is for the national judicial authorities alone to decide what is to be done with the information forwarded and to decide, in accordance with their national law, whether or not to initiate a judicial inquiry, to carry out investigative measures and to commence criminal proceedings. Thereafter, the national court is competent to decide whether the person concerned is guilty or not. 48 The Commission also submits that, in the judgment in Joined Cases T-377/00, T‑379/00, T-380/00, T-260/01 and T-272/01 Philip Morris and Others v Commission [2003] ECR II-1, the Court of First Instance held that the Commission’s decision to file a civil complaint before a court in the United States was not open to challenge by way of an action under the fourth paragraph of Article 230 EC, since that complaint did not of itself alter the legal position of the defendant. The Commission argues that that decision must apply a fortiori in the present case, where OLAF has neither filed a complaint nor brought proceedings, but has merely forwarded factual information which may or may not prompt the competent authorities to initiate proceedings to which neither OLAF nor the Commission would normally be a party. 49 In addition, the duty of cooperation, laid down in Article 10 EC, has no binding legal effect on the national legal authorities or the applicant. Article 6(6) of Regulation No 1073/1999 does not apply to acts taken in the course of national criminal investigations carried out by judicial authorities of the Member States after having received information from OLAF. Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities (OJ 1996 L 292, p. 2) also has no bearing on the present case. 50 Furthermore, the applicant did enjoy effective judicial protection. First, as the Belgian search warrant is the only measure affecting the applicant’s freedom of speech, judicial protection against that measure must be provided by the Belgian courts. Secondly, even where a national search warrant is issued on the basis of information forwarded by OLAF, national legal remedies also provide legal protection to the complainant, although recourse may be had to Article 234 EC when the claimant argues before the national court that OLAF has infringed Community law in its investigative procedure. Thirdly, the fact that the transmission of information under Article 10(2) of Regulation No 1073/1999 cannot be challenged by way of an action for annulment does not mean that an action for non-contractual liability before the Community Courts is precluded a priori. 51 Lastly, the Commission states that any exception made to the rules on the admissibility of an action under Article 230 EC would have serious adverse consequences for the efficiency, confidentiality and independence of OLAF’s investigations. It maintains that even if the Belgian courts had rejected as inadmissible any plea of infringement of essential procedural requirements by OLAF, the present action for annulment would still not be admissible. Case C‑167/02 P Rothley and Others v Parliament [2004] ECR I-3149 does not lead to a different conclusion. 52 The applicant contends that his action for annulment, brought under Article 230 EC, is admissible. 53 He maintains, first, that OLAF’s ‘complaint’ produced legal effects because the national authorities went on to initiate an investigation. Article 10 EC and Regulation No 1073/1999, particularly Article 6(6) thereof, require the Member States to cooperate with OLAF. 54 Next, the applicant’s interests would not be adequately protected if he were forced to wait until the Belgian authorities took a final decision before being able to challenge OLAF’s ‘complaint’. More generally, journalists and their informants would be deterred from revealing information regarding the Community institutions if they were exposed to the risk that the ‘complaints’ lodged by OLAF might lead to criminal proceedings. The annulment of the contested measure would also help to re-establish the applicant’s reputation, which has been greatly damaged by OLAF’s continuing false allegations. 55 According to the applicant, a challenge to the ‘complaint’ is the only effective way of preventing the illegal exploitation of the information gathered by the Belgian authorities during the search, which might make it possible to identify the applicant’s sources. OLAF may become a civil party in the Belgian criminal proceedings and thereby obtain access to the documents seized. Moreover, the annulment of the ‘complaint’ is itself capable of having legal consequences, in particular by preventing a repetition by the Commission of such a practice. 56 As regards the order in Gómez-Reino v Commission, the applicant takes the view that the circumstances which gave rise to that case were very different from those which have arisen in these proceedings. 57 In addition, Regulation No 1073/1999 and Regulation No 2185/96 confer special powers on OLAF, which is developing close cooperation with the national investigation bodies. 58 In response to the Commission’s argument that OLAF never requested the German or Belgian judicial authorities to take any specific action, the applicant considers that it is incorrect. First, in the ‘complaint’ sent to the Belgian authorities, OLAF recommended swift action in view of the applicant’s alleged impending move to Washington (United States). Next, the OLAF investigators had already contacted the national officials on 13 and 16 January 2004, in order to coordinate the investigation measures. Lastly, OLAF asked the national authorities to search the applicant’s home and office in order to obtain evidence for its internal investigation, as is confirmed by a statement made by the Chairman of OLAF’s Supervisory Committee to the House of Lords Select Committee on the European Union (United Kingdom) on 19 May 2004. The investigating judge therefore did not act in complete independence, but did what OLAF asked. 59 The applicant also contends that the national authorities cannot but have full confidence in the accuracy of OLAF’s investigation reports, which may be used as evidence in court pursuant to Article 9(2) of Regulation No 1073/1999. Breach of professional secrecy by an official of the European Communities is not an offence under Belgian law. Therefore, OLAF was able to become a civil party only because of the privileged relationship it has with the Belgian authorities, which were prepared to act on the ‘complaint’. 60 It follows from the above that OLAF’s ‘complaint’ is not comparable to the Commission’s decision to bring civil proceedings in the case which gave rise to the judgment in Philip Morris International and Others v Commission, where the Commission’s situation was identical to that of an ordinary citizen. The context in which the order in Case T-29/03 Comunidad Autónoma de Andalucía v Commission [2004] ECR II-2923 was made was different to that in this case, in that it concerned the final report in an external investigation procedure. Furthermore, the Court took into account the fact that the Spanish prosecutor had stopped the proceedings in the meantime, so that the report could no longer have any adverse legal effects. 61 Lastly, referring to Rothley and Others v Parliament, the applicant takes the view that Article 230 EC must be applied in the light of the right to effective judicial protection. In the present case, no other legal remedy is available to him to challenge OLAF’s behaviour. It is not possible for him to request a national court to make a reference for a preliminary ruling, since the unlawfulness of OLAF’s conduct does not determine that of the measures taken by the national judicial authorities. Only the Community Courts are competent to judge OLAF and not the national courts or, in the final instance, the European Court of Human Rights. Accordingly, national proceedings do not provide for effective judicial review. It is unacceptable that, in a case where the freedom of the press is at stake, the sole remedy available to the applicant is an application for damages before the Court of First Instance. 62 The IFJ submits that the application is admissible since the ‘complaints’ sent to the German and Belgian judicial authorities constitute decisions for the purposes of the fourth paragraph of Article 230 EC. The action for annulment is not directed against the search carried out by the Belgian authorities but against a decision of OLAF intended to have legal effects as against the applicant. 63 Unlike the case which gave rise to the order in Gómez-Reino v Commission, this case concerns a ‘complaint’ having direct legal consequences for the applicant, and not mere preparatory measures. 64 Referring to Case 180/87 Hamill v Commission [1988] ECR 6141, the IFJ notes that even mere information supplied to national judicial authorities can be the subject of judicial review by the Community Courts. 65 Lastly, the IFJ argues that the action for annulment is also admissible by virtue of the right to effective judicial protection. Article 230 EC must be interpreted in the spirit of a Community based on the rule of law, in order that the applicant may obtain judicial protection against OLAF’s conduct. In that regard, the Belgian courts are not in a position to verify, on a case-by-case basis and exhaustively and thoroughly, whether the acts of the Community institutions are in conformity with Community law. Findings of the Court66 In the present case, the action for annulment is brought against the act by which OLAF, on the basis of Article 10(2) of Regulation No 1073/1999, forwarded the German and Belgium judicial authorities information concerning suspicions of breach of professional secrecy and bribery involving the applicant. 67 According to settled case-law, measures the legal effects of which are binding on and capable of affecting the interests of the applicant by bringing about a distinct change in his legal position are acts or decisions which may be the subject of an action for annulment in terms of Article 230 EC (Case 60/81 IBM v Commission [1981] ECR 2639, paragraph 9, and Case T-309/03 Camós Grau v Commission [2006] ECR II-0000, paragraph 47). 68 However, in the present case, the contested act does not bring about a distinct change in the applicant’s legal position. 69 It is clear from the provisions of Regulation No 1073/1999, in particular from the 13th recital in the preamble and Article 9, that findings of OLAF set out in a final report do not lead automatically to the initiation of judicial or disciplinary proceedings, since the competent authorities are free to decide what action to take pursuant to a final report and are accordingly the only authorities having the power to adopt decisions capable of affecting the legal position of those persons in relation to which the report recommended that such proceedings be instigated (order in Comunidad Autónoma de Andalucía v Commission, paragraph 37, and Camós Grau v Commission, paragraph 51). 70 Equally, Article 10(2) of Regulation No 1073/1999 merely provides for the forwarding of information to national judicial authorities, which remain free, in the context of their own powers, to assess the content and significance of that information and, thus, the action to be taken if necessary. Consequently, the possible initiation of legal proceedings following the forwarding of information by OLAF, and the subsequent legal acts, are the sole and entire responsibility of the national authorities. 71 None of the arguments raised by the applicant and the intervener calls that finding into question. 72 First, the duty to cooperate in good faith entails an obligation on the Member States to take all the measures necessary to guarantee the application and effectiveness of Community law and imposes on Member States and the Community institutions mutual duties to cooperate in good faith (Case C-275/00 First and Franex [2002] ECR I-10943, paragraph 49, and Case C-344/01 Germany v Commission [2004] ECR I-2081, paragraph 79). That duty implies that, when OLAF forwards them information pursuant to Article 10(2) of Regulation No 1073/1999, the national judicial authorities have to examine that information carefully and draw the appropriate consequences from it in order to comply with Community law, if necessary by initiating legal proceedings if they consider such action justified. Such a duty of careful examination does not, however, require an interpretation of that provision to the effect that the forwarded information in dispute has binding effect, in the sense that the national authorities are obliged to take specific measures, since such an interpretation would alter the division of tasks and responsibilities as prescribed for the implementation of Regulation No 1073/1999 (order in Case C-521/04 P(R) Tillack v Commission, paragraph 33). 73 In addition, Article 6(6) of Regulation No 1073/1999, which concerns investigations carried out by OLAF, and Regulation No 2185/96 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities relate to OLAF’s and the Commission’s own powers of investigation. Even if the mutual duty to cooperate in good faith, which is expected of the Member States when exercising their own powers of investigation, implies that the competent national authorities support actions brought in the name of the Community, it bears no relation to the other prerogatives which those authorities have, in particular judicial ones, and does not interfere with their powers. 74 Second, as regards the applicant’s argument that OLAF could become a civil party in the Belgian criminal proceedings in order to obtain access to the documents seized at the applicant’s home and office, it must be pointed out that, even if use were made of that possibility, it would have no effect on whether the act by which OLAF forwards information to national judicial authorities is challengeable or not. 75 Third, Hamill v Commission, which concerns an action for damages and not an action for annulment, in no way states that a forwarding of information by OLAF pursuant to Article 10(2) of Regulation No 1073/1999 would have binding legal effect of a nature so as to affect the applicant’s interests. 76 Fourth, the facts put forward by the applicant, which, in his view, prove that the Belgian judicial authorities did not act in complete independence, but did what OLAF asked, cannot be upheld. 77 In relation, first, to the statement made by the Chairman of the OLAF Supervisory Committee to the House of Lords Select Committee on the European Union on 19 May 2004, the applicant does not provide any form of information enabling the content of that statement to be verified and it cannot, therefore, be taken into consideration. 78 As regards, second, the interim report appended to the letter sent to the Belgian judicial authorities, points 2.2 and 2.3 thereof are respectively worded as follows: ‘As already discussed with the public prosecution service in Hamburg … on 13 January 2004 and with the public prosecution service in Brussels … on 16 January 2004, the transmission of information to the two judicial authorities proves necessary in order to start proceedings which are independent but coordinated; …Swift action is desirable in view of the fact that, according to our information, Mr Tillack will leave Brussels in March this year to become the Stern correspondent in Washington … . With his departure from Brussels, important evidence could disappear for good.’ 79 However, in relation to point 2.2 of the interim report, the applicant does not challenge the Commission’s statement that the contact made between OLAF and the national public prosecution services was related to purely formal issues such as to find out to whom the information should be sent exactly. As regards point 2.3, although OLAF effectively expressed its wish to deal with the case at issue as quickly as possible, that wish is in no way binding on the Belgian judicial authorities. It is not comparable to a request to the Belgian authorities to initiate legal proceedings or to adopt any other measure. Moreover, Article 10(2) of Regulation No 1073/1999 concerning the forwarding of information obtained in the course of investigations, which is sent to the competent national authorities, merely provides for the forwarding of that information to national authorities, which are charged, when exercising their own powers, with deciding what action is to be taken in respect thereof. 80 Finally, the argument alleging the lack of effective judicial protection is irrelevant. That argument is not, in itself, sufficient to justify the admissibility of an action (orders in Case T-247/04 Aseprofar and Edifa v Commission [2005] ECR II-0000, paragraph 59, and Joined Cases T‑236/04 and T-241/04 EEB and Stichting Natuur en Milieu v Commission [2005] ECR II-0000, paragraph 68). Moreover, it is apparent from the case-file and the oral arguments during the hearing that the applicant brought an action before the Belgian courts, and then before the European Court of Human Rights, against measures taken by the Belgian judicial authorities in response to the forwarding of information by OLAF on 11 February 2004. In addition, the applicant also had the opportunity to request the national courts, which have no jurisdiction themselves to declare that the act by which OLAF forwarded information to the Belgian judicial authorities is invalid (see to that effect Case 314/85 Foto-Frost [1987] ECR 4199, paragraph 20), to make a preliminary reference to the Court of Justice in that regard. 81 It follows from the above that, since the forwarding of information pursuant to Article 10(2) of Regulation No 1073/1999 is not, in the present case, a legally binding measure, it cannot be regarded as a measure capable of changing the applicant’s legal position. 82 Consequently, the claim for annulment of the act by which, on 11 February 2004, OLAF forwarded information to the German and Belgian Judicial authorities is inadmissible. Admissibility of the claim for compensation for the alleged damageAdmissibility – Arguments of the parties 83 The Commission argues that the action for damages contains two distinct claims. They cover compensation for the harm allegedly caused, first, by OLAF’s ‘complaint’ and, second, by the OLAF press releases of March 2002 and September 2003 and other public statements made by it. 84 That application is, according to the Commission, inadmissible in its entirety, since it fails to satisfy the conditions laid down by Article 44(1)(c) of the Rules of Procedure of the Court of First Instance. 85 Furthermore, the claim for damages relating to OLAF’s ‘complaint’ is inadmissible as that application for damages is closely linked to an action for annulment which has itself been declared inadmissible. 86 The applicant contends, first of all, that the claim for damages in relation to OLAF’s ‘complaint’ is admissible. He states that OLAF’s misconduct cannot escape judicial review. 87 He next contests the argument that an action for damages is inadmissible if the cause of the damage was itself the subject of an inadmissible action for annulment. 88 Finally, he considers that the application meets the requirements of the Rules of Procedure for the admissibility of an action and is clear enough to enable the defendant to prepare its defence. It describes OLAF’s unlawful conduct, the damage suffered and the reasons for which there is a causal link between the unlawful conduct and the damage. – Findings of the Court 89 According to settled case-law, under the first paragraph of Article 21 of the Statute of the Court of Justice, which is applicable to proceedings before the Court of First Instance by virtue of the first paragraph of Article 53 of that Statute, as well as under Article 44(1)(c) of the Rules of Procedure of the Court of First Instance, all applications are to state the subject-matter of the proceedings and to include a summary of the pleas raised. That statement must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the application, if necessary without any further information. In order to guarantee legal certainty and the sound administration of justice it is necessary, in order for an action to be admissible, that the essential matters of law and fact relied on should be stated, at least in summary form, coherently and intelligibly in the application itself (Case T-38/96 Guérin automobiles v Commission [1997] ECR II-1223, paragraph 41, and Case T-157/01 Danske Busvognmænd v Commission [2004] ECR II-917, paragraph 45). 90 In order to satisfy those requirements, an application seeking compensation for damage allegedly caused by a Community institution must contain information making it possible to identify the conduct alleged against the institution, the reasons for which the applicant considers there is a causal link between the conduct and the damage it claims to have suffered, and the nature and extent of that damage (Case T-387/94 Asia Motor France and Others v Commission [1996] ECR II-961, paragraph 107, and Joined Cases T-215/01, T-220/01 and T-221/01 Calberson GE v Commission [2004] ECR II-587, paragraph 176). 91 In the present case, it must first be pointed out that the claim in the application seeking damages for the harm allegedly suffered is very brief. It does, however, make it possible to identify two instances of alleged misconduct of OLAF, which the applicant claims caused him harm. The first is OLAF’s ‘complaint’ to the Belgian judicial authorities. The second is constituted by OLAF’s press releases of 27 March 2002 and 30 September 2003, the statements of the OLAF spokesman which were published in the European Voice magazine of 4 April 2002, and the statements of the Director of OLAF on Stern TV on 24 March 2004. 92 Next, it is apparent from the application that the harm which the applicant claims to have suffered as a result of the various alleged instances of misconduct by OLAF consists of detriment to his professional reputation and standing in professional circles. The application also makes it possible to identify the extent of the harm allegedly caused by OLAF. 93 Finally, the applicant mentions the existence of a causal link between the alleged harm and the various instances of misconduct of which OLAF is accused. 94 In addition, it is apparent from the arguments developed by the Commission on the well-foundedness of the action that it was properly able to prepare its defence in respect of the conditions for bringing an action for non-contractual liability of the Community. 95 It is thus necessary to dismiss the Commission’s claim that the application does not satisfy the requirements of Article 44(1)(c) of the Rules of Procedure. 96 In relation to the claim for damages regarding OLAF’s ‘complaint’, the Commission also submits that that claim is inadmissible since it is closely linked to an action for annulment which itself is inadmissible. 97 In that regard, the action to establish liability is an autonomous form of action, with a particular purpose to fulfil within the system of legal remedies and subject to conditions of use dictated by its specific purpose. Although actions for annulment and for failure to act seek a declaration that a legally binding measure is unlawful or that such a measure has not been taken, an action to establish liability seeks compensation for damage resulting from a measure or from unlawful conduct, attributable to a Community institution or body (Case C‑234/02 P Médiateur v Lamberts [2004] ECR I‑2803, paragraph 59, and the case-law cited). 98 Thus, individuals who, by reasons of the conditions as to admissibility laid down under the fourth paragraph of Article 230 EC, cannot contest directly certain Community acts or measures, none the less have the opportunity of putting in issue conduct lacking the features of a decision, which accordingly cannot be challenged by way of an action for annulment, by bringing an action for non-contractual liability under Article 235 EC and the second paragraph of Article 288 EC, where such conduct is of such a nature as to entail liability for the Community (Phillip Morris International and Others v Commission, paragraph 123, and Camós Grau v Commission, paragraph 78). 99 Therefore, the admissibility of the action for damages brought by the applicant seeking compensation for the non-material harm which he allegedly suffered as a result of the misconduct which OLAF is accused of must be considered independently of the action for annulment. 100 It follows from the above that the applicant’s claims seeking damages for the harm which he allegedly suffered as a result of OLAF’s alleged misconduct are admissible. Substance 101 The applicant considers that the unlawful administrative acts consist, first of all, of the ‘complaint’ which OLAF made to the Belgian judicial authorities. That complaint was unlawful because it infringed several procedural requirements and the fundamental right of freedom of the press. The applicant also refers to the OLAF press releases of March 2002 and September 2003. In that regard, the Ombudsman stated that the press release of March 2002, based on rumours, was a clear act of maladministration and infringed the principle of proportionality. As such, that press release must be viewed as an unlawful administrative act. The press release of September 2003 was also an act of maladministration and infringed the principle of proportionality by repeating the allegations made in the press release of March 2002. Lastly, the applicant refers to the statements of the OLAF spokesman, as published in the European Voice magazine of 4 April 2002, and to those of the Director of OLAF on Stern TV on 24 March 2004. They are capable of damaging the applicant’s reputation and, being based on mere rumours, also infringe the principle of sound administration. 102 The applicant also submits that OLAF overstepped the discretion which it enjoys. In view of the seriousness of the misconduct, OLAF’s conduct must be regarded as a sufficiently serious breach of a rule of Community law. 103 The applicant claims to have suffered significant non-material damage in the form of harm to his professional reputation and standing in professional circles. First, it is much more difficult to gain information from the sources which he makes use of in order to practise his profession. Secondly, sales of his articles to magazines and newspapers are seriously impeded. OLAF’s actions have thus seriously damaged the applicant’s career prospects. In addition, the existence of non-material damage is particularly apparent where false accusations lead to criminal investigations, searches and seizures, as in the present case. He asks the Court to fix the exact amount of pecuniary compensation, with the objective of both compensating him and acting as a deterrent to the Commission. The applicant provisionally proposes the sum of EUR 250 000. 104 As regards the causal link, the applicant claims that the damage to his reputation was caused by OLAF’s press releases and subsequent announcements, culminating in OLAF’s complaint to the Belgian judicial authorities, which led to the search of his home and office. OLAF’s investigators provided the judicial authorities with guidance and, in the complaint, gave them misleading information as to the urgency of the need for action. The fact that the Belgian authorities may have acted negligently does not compromise the merits of the application. 105 With respect to OLAF’s press releases and other public statements, the applicant points out that OLAF rarely publishes press releases announcing the opening of an investigation. Furthermore, everybody interested in the matter identified the applicant at once as the journalist who had bribed a Community official. Moreover, the facts as they are known today are even more serious than those investigated by the Ombudsman in 2003. In fact, OLAF misinformed the Ombudsman by alleging that it had received information from reliable sources, including Members of the European Parliament, while its only source was Mr G. 106 In his reply, the applicant points out that the public allegations by OLAF not only constitute an act of maladministration but also an infringement of the principles of sound administration, the presumption of innocence and the right to a fair trial. The publication of press releases about ongoing investigations constitutes a breach of Article 8 of Regulation No 1073/1999, since information forwarded or obtained in the course of internal investigations is subject to professional secrecy. 107 The Commission argues that both claims for damages are unfounded.108 As regards, first, the claim for compensation relating to the forwarding of information to the Belgian and German judicial authorities, it argues that OLAF did not infringe any rule of law. Furthermore, the applicant has failed to establish the existence of a sufficiently serious breach of the limits imposed on OLAF’s discretion. 109 As to the existence of the damage claimed, the application provides no concrete information as to the applicant’s particular professional situation. The applicant is an employee of Stern magazine and his reputation has not suffered as a result of the search and seizure undertaken by the Belgian authorities. 110 Most importantly, the applicant has failed to establish any causal link between the forwarding of information by OLAF and the harm he claims to have suffered. Two sovereign and discretionary acts of the Belgian authorities break any causal link: the initiation of criminal investigations; and the search and seizure. Only the latter constitute the direct and determining cause of the damage claimed. Had the search, which falls within the discretionary power of the national authorities, not taken place, the anonymity of the applicant’s informants would not have been put at any risk. If the applicant considers that he has suffered harm as a result of the search, his remedy is to sue the Belgian State for such damages. 111 As regards, second, the claim for compensation relating to the press releases and other public statements, the Commission maintains that OLAF did not contravene any rule of law affecting the applicant and, in particular, his reputation. In particular, the press release of 27 March 2002 does not refer to the name of any journalist or newspaper. It was only in a press release issued by Stern on 28 March 2002 that that magazine claimed to have exclusive possession of the documents disclosed and that the name of the journalist was revealed. Furthermore, the press release of 27 March 2002 described the main object of the investigation in the most neutral way possible. There was nothing untrue or disproportionate in it. To argue that OLAF’s spokesman went too far is tantamount to denying OLAF any right at all to issue a press release confirming that an investigation has been initiated and indicating its subject-matter. In the alternative, the Commission submits that there was no manifest and grave transgression by OLAF of the limits imposed on its discretion in the way it conducts its relations with the media. 112 The Commission also claims that there is, in any event, no causal link between the press release of 27 March 2002 and any harm to the applicant’s reputation. Even on the assumption that, on its being issued, OLAF’s press release could have been understood by the public as referring to the applicant, Stern’s press release published the next day broke any causal link. 113 Lastly, as regards the findings of the Ombudsman, the Commission claims that the factual basis on which he made his recommendation in 2003 is different from that on which the Commission relies before the Court in these proceedings. In addition, the identification by the Ombudsman of an instance of maladministration does not amount to a judicial determination of a breach of the applicant’s rights by the Commission. In particular, the Ombudsman did not address the question whether OLAF had committed a sufficiently serious breach of a rule of law. Furthermore, the Ombudsman applied rules on the burden of proof which were different from those governing actions for non-contractual liability under Article 235 EC and the second paragraph of Article 288 EC. The Ombudsman and the Community Courts apply different criteria and methods of scrutiny, reflecting their quite different nature and function. 114 The IFJ argues that OLAF manifestly overstepped the limits of its discretion in forwarding information to the German and Belgian judicial authorities on the basis of nothing more than rumours and speculation. Such a discretion should have been exercised by having regard in particular to the provisions of Regulation No 1073/1999 and the rights and freedoms of those concerned. 115 The intervener considers that OLAF has contravened the freedom of the press, the right to respect for private life, the EC Treaty, the European Convention for the Protection of Human Rights and Fundamental Freedoms, Regulation No 1073/1999 and certain rules of procedure. 116 It is settled case-law that the non-contractual liability of the Community for the unlawful acts of its bodies, for the purposes of the second paragraph of Article 288 EC, depends on fulfilment of a set of conditions, namely: the unlawfulness of the conduct alleged against the institutions, the fact of damage and the existence of a causal link between that conduct and the damaged complained of (Case 26/81 Oleifici Mediterranei v EEC [1982] ECR 3057, paragraph 16; Case T-175/94 International Procurement Services v Commission [1996] ECR II‑729, paragraph 44; Case T-336/94 Efisol v Commission [1996] ECR II-1343, paragraph 30; and Case T-267/94 Oleifici Italiani v Commission [1997] ECR II-1239, paragraph 20). 117 As regards the first of those conditions, the case-law requires there to be a sufficiently serious breach of a rule of law intended to confer rights on individuals (Case C-352/98 P Bergaderm and Goupil v Commission [2000] ECR I-5291, paragraph 42). As regards the requirement that the breach must be sufficiently serious, the decisive test for determining whether that requirement is met is whether the Community institution concerned has manifestly and gravely disregarded the limits on its discretion. Where that institution has only a considerably reduced or even no discretion, the mere infringement of Community law may be sufficient to establish the existence of a sufficiently serious breach (Case C‑132/00 P Commission v Camar and Tico [2002] ECR I‑11355, paragraph 54, and Joined Cases T‑198/95, T‑171/96, T‑230/97, T‑174/98 and T‑225/99 Comafrica and Dole Fresh Fruit Europe v Commission [2001] ECR II‑1975, paragraph 134). 118 In relation to the condition concerning the causal link, the Community may be held responsible only for damage which is a sufficiently direct consequence of the misconduct of the institution concerned (Joined Cases 64/76 and 113/76, 167/78 and 239/78, 27/79, 28/79 and 45/79 Dumortier Frères and Others v Council [1979] ECR 3091, paragraph 21, and Case T‑333/01 Meyer v Commission [2003] ECR II‑117, paragraph 32). By contrast, it is not the responsibility of the Community to compensate for every harmful consequence, even one remote from the conduct of its bodies (see, to that effect, Dumortier Frères and Others v Council, paragraph 21). 119 If one of those conditions is not satisfied the action must be dismissed in its entirety without its being necessary to examine the other conditions (Case C‑146/91 KYDEP v Council and Commission [1994] ECR I‑4199, paragraphs 19 and 81, and Case T‑170/00 Förde-Reederei v Council and Commission [2002] ECR II‑515, paragraph 37). 120 It is in the light of that case-law that it needs to be assessed whether the various arguments raised by the applicant are well founded. 121 As a preliminary point, the protection of family life, the freedom of the press, the principle of the presumption of innocence and the right to a fair trial, which are fundamental rights, confer rights on individuals which are enforced by the Community Courts. In that regard, the applicant alleges two instances of misconduct of OLAF which, being distinct from one another, must be examined separately. 122 First, as regards the application for damages for the harm allegedly suffered as a result of OLAF’s ‘complaint’, it has been found that it was the task of the judicial authorities to decide what action should be taken in respect of the information forwarded by OLAF on the basis of Article 10(2) of Regulation No 1073/1999, even though that forwarding of information is in no way binding upon them (see paragraph 70 above). Consequently, the conduct of the national judicial authorities, which decided, in the context of their own prerogatives, to initiate legal proceedings and then to carry out investigations, caused the harm allegedly suffered by the applicant. 123 In addition, the applicant does not explain how forwarding information, which is confidential in nature and in respect of which a breach of confidentiality is not alleged, to national judicial authorities could harm his professional reputation and standing in professional circles. 124 It follows that the applicant has not established the existence of a sufficiently direct causal link between the forwarding of the information by OLAF to the Belgian judicial authorities pursuant to Article 10(2) of Regulation No 1073/1999 and the damage claimed. 125 The condition requiring a causal link between the damage alleged and OLAF’s conduct in order for the Community to incur non-contractual liability not having been satisfied in this case, the action for damages relating to OLAF’s ‘complaint’ must be dismissed without it being necessary to examine the other conditions governing that liability. 126 Second, as regards the application for damages to make good the damage allegedly resulting from OLAF’s press releases, the applicant refers to the draft recommendation of the Ombudsman of 10 June 2003 and the latter’s recommendation of 20 November 2003, holding that there had been maladministration, and infers that the press release of 27 March 2002 constitutes ‘as such’, an ‘unlawful administrative act’ and that the press release of 30 September 2003 represents a new instance of maladministration, which, by reiterating the allegations made in the earlier press release, also infringes the principle of proportionality. 127 In that regard, first, the principle of sound administration, which is the only principle alleged to have been breached in this context, does not, in itself, confer rights upon individuals (Case T‑196/99 Area Cova and Others v Council and Commission [2001] ECR II‑3597, paragraph 43), except where it constitutes the expression of specific rights such as the right to have affairs handled impartially, fairly and within a reasonable time, the right to be heard, the right to have access to files, or the obligation to give reasons for decisions, for the purposes of Article 41 of the Charter of fundamental rights of the European Union, proclaimed on 7 December 2000 in Nice (OJ 2000 C 364, p. 1), which is not the case here. 128 For the sake of completeness, the classification as an ‘act of maladministration’ by the Ombudsman does not mean, in itself, that OLAF’s conduct constitutes a sufficiently serious breach of a rule of law within the meaning of the case-law. In the institution of the Ombudsman, the Treaty has given citizens of the Union, and more particularly officials and other servants of the Community, an alternative remedy to that of an action before the Community Courts in order to protect their interests. That alternative non-judicial remedy meets specific criteria and does not necessarily have the same objective as judicial proceedings (Case T-209/00 Lamberts v Ombudsman [2002] ECR II-2203, paragraph 65). 129 Also, in view of the autonomy granted to OLAF by Regulation No 1073/1999 and of the general objective of press releases of providing information to the public, OLAF enjoys discretion as regards the appropriateness and content of its press releases in respect of its investigatory activities. 130 In addition, it is apparent from an examination of the wording of the press release of 27 March 2002 that the only passage which could possibly be deemed prejudicial is worded as follows: ‘According to information received by [OLAF], a journalist has received a number of documents relating to the so-called “van Buitenen affair”. It is not inconceivable that payment may have been made to somebody within OLAF (or possibly another EU institution) for these documents. …’ 131 Even supposing that those with knowledge of the case could make the connection with the applicant, those allegations, formulated in a hypothetical way, without indicating the applicant’s name or the name of the magazine for which he worked, do not constitute a manifest and grave disregard, by OLAF, of the limits of its discretion. Furthermore, it was Stern itself which, in its press release of 28 March 2002, cited the applicant’s name. The applicant’s identity, in relation to OLAF’s investigations, was thus not revealed by OLAF but by his employer Stern magazine. Therefore, the damage that the applicant allegedly suffered to his professional reputation and standing in professional circles, in respect of that publication, cannot be attributed to OLAF. Consequently, the press release in dispute does not amount to a sufficiently serious breach of Community law by OLAF. 132 For its part, OLAF’s press release of 30 September 2003, which was published following the European Ombudsman’s draft recommendation of 18 June 2003, seeks to tone down the allegations contained in the press release of 27 March 2002. It thus states: ‘… OLAF’s enquiries have not yet been completed, but to date, [OLAF] has not obtained proof that such a payment was made.’ Therefore, that press release does not constitute a sufficiently serious breach of a rule of law any more than the previous one. 133 The same conclusion must be drawn in relation to the statement of the OLAF spokesman which was cited in the European Voice magazine of 4 April 2002, according to which OLAF ‘had prima facie evidence that a payment might have been made’, since the cautiousness of the words used does not establish the existence of a sufficiently serious breach of Community law. As for the statement of the Director of OLAF on Stern TV on 24 March 2004, the applicant does not provide any means of verifying its content. 134 Moreover, the applicant does not develop any legal arguments in his application which make it possible to assess how exactly the publication of the press releases and other public statements by OLAF could be classified as a ‘sufficiently serious breach’ of a rule of law. 135 It follows from the above that the applicant has failed to show the existence of a sufficiently serious breach of Community law attributable to OLAF capable of causing him harm. Therefore, his claim for damages in relation to the press releases and OLAF’s other public statements must be dismissed without its being necessary to assess whether the applicant has actually suffered the damage alleged and the extent of that damage. 136 Consequently, the action for damages must be dismissed in its entirety. The request for the production of documents137 The applicant requests the Court to order the Commission to provide a complete copy of the ‘complaints’ forwarded by OLAF to the German and Belgian judicial authorities. 138 In that regard, during the proceedings before the Court, the Commission produced the letters addressed to the German and Belgian judicial authorities on 11 February 2004, in an unexpurgated version. 139 Therefore, there is no need to adjudicate on that request, which has become devoid of purpose. 140 It follows from all the foregoing that the action must be dismissed in its entirety. Costs141 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, and the Commission has applied for costs, the applicant must pay the costs incurred by the Commission, including those relating to the interlocutory proceedings, in addition to its own costs. 142 Under the third subparagraph of Article 87(4) of the Rules of Procedure, the IFJ, which has intervened in these proceedings, is to bear its own costs. On those grounds,THE COURT OF FIRST INSTANCE (Fourth Chamber)hereby:1. Dismisses the action; 2. Declares it unnecessary to give judgment on the request for the production of documents; 3. Orders the applicant to pay his own costs and the costs incurred by the Commission, including those relating to the interlocutory proceedings; 4. Orders the International Federation of Journalists to bear its own costs. Legal Lindh VadapalasDelivered in open court in Luxembourg on 4 October 2006.Registrar PresidentE. Coulon H. Legal* Language of the case: English. | aafea-b187145-45fb | EN |
COMMUNITY LAW DOES NOT PRECLUDE THE REQUIREMENT OF PRIOR AUTHORISATION FOR THE GRANTING OF CREDIT ON A COMMERCIAL BASIS BY A COMPANY ESTABLISHED IN A NON-MEMBER COUNTRY | Fidium Finanz AGvBundesanstalt für Finanzdienstleistungsaufsicht(Reference for a preliminary ruling from the Verwaltungsgericht Frankfurt am Main)(Freedom to provide services – Free movement of capital – Companies established in non-member countries – Activity entirely or principally directed towards the territory of a Member State – Grant of credit on a commercial basis – Requirement of prior authorisation in the Member State in which the service is provided)Summary of the Judgment1. Freedom to provide services – Free movement of capital – Provisions of the Treaty – Examination of a national measure affecting both freedoms(Arts 49 EC and 56 EC)2. Freedom to provide services – Provisions of the Treaty – Scope 1. It is apparent from the wording of Article 49 EC and Article 56 EC, and the position which they occupy in two different chapters of Title III of the Treaty, that, although closely linked, those provisions were designed to regulate different situations and each have their own field of application. Admittedly, it is possible, in certain specific cases in which a national provision concerns both the freedom to provide services and the free movement of capital, that that provision may simultaneously hinder the exercise of both of those freedoms. However, it cannot be argued that, in such circumstances, the provisions concerning the freedom to provide services apply as an alternative to those which govern the free movement of capital. Where a national measure relates both to the freedom to provide services and the free movement of capital at the same time, it is necessary to consider to what extent the exercise of those fundamental liberties is affected and whether, in the circumstances of the main proceedings, one of those prevails over the other. The Court will in principle examine the measure in dispute in relation to only one of those two freedoms if it appears, in the circumstances of the case, that one of them is entirely secondary in relation to the other and may be considered together with it. (see paras 28, 30-31, 34)2. National rules whereby a Member State makes the granting of credit on a commercial basis, on national territory, by a company established in a non-member country subject to prior authorisation, and which provide that such authorisation must be refused, in particular, if that company does not have its central administration or a branch in that territory, thereby hindering access to the financial market of a Member State for companies established in non-member States, affect primarily the exercise of the freedom to provide services within the meaning of Articles 49 EC et seq. Given that the restrictive effects of those rules on the free movement of capital are merely an inevitable consequence of the restriction imposed on the provision of services, it is not necessary to consider whether the rules are compatible with Articles 56 EC et seq. A company established in a non-member State cannot rely on Article 49 EC et seq. Unlike the chapter of the Treaty concerning the free movement of capital, the chapter regulating the freedom to provide services does not contain any provision which enables service providers in non-member countries and established outside the European Union to rely on those provisions; the objective of the latter chapter is to secure the right to provide services for nationals of Member States. (see paras 25, 49-50, operative part)JUDGMENT OF THE COURT (Grand Chamber) 3 October 2006 (*) In Case C-452/04,REFERENCE for a preliminary ruling under Article 234 EC from the Verwaltungsgericht Frankfurt am Main (Germany), made by decision of 11 October 2004, received at the Court on 27 October 2004, in the proceedings Bundesanstalt für Finanzdienstleistungsaufsicht,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas (Rapporteur) and K. Schiemann, Presidents of Chambers, S. von Bahr, J.N. Cunha Rodrigues, R. Silva de Lapuerta, K. Lenaerts, E. Juhász, G. Arestis, A. Borg Barthet and M. Ilešič, Judges, Advocate General: C. Stix-Hackl,Registrar: B. Fülöp, Administrator,having regard to the written procedure and further to the hearing on 18 January 2006,after considering the observations submitted on behalf of:– Fidium Finanz AG, by C. Fassbender and A. Eckhard, Rechtsanwälte, and by N. Petersen, Assessor,– the Bundesanstalt für Finanzdienstleistungsaufsicht, by S. Ihle, S. Deppmeyer and A. Sahavi, acting as Agents, – the German Government, by W.-D. Plessing and C. Schulze-Bahr, acting as Agents,– the Greek Government, by S. Spyropoulos, D. Kalogiros, S. Vodina and Z. Chatzipavlou, acting as Agents,– Ireland, by D. O’Hagan, acting as Agent, and by M. Collins, SC,– the Italian Government, by I.M. Braguglia, acting as Agent, and by P. Gentili, avvocato dello Stato,– the Portuguese Government, by L. Fernandes, L. Máximo dos Santos and Â. Seiça Neves, acting as Agents,– the Swedish Government, by K. Wistrand, acting as Agent,– the Commission of the European Communities, by H. Støvlbæk and T. Scharf, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 16 March 2006,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Articles 49 EC, 56 EC and 58 EC. 2 This reference was made in the context of an action brought by Fidium Finanz AG (‘Fidium Finanz’), a company established in Switzerland, against a decision of the Bundesanstalt für Finanzdienstleistungsaufsicht (Federal Office for the Supervision of Financial Services; ‘the Bundesanstalt’) by which that authority denied it the right to grant credit, on a commercial basis, to customers established in Germany on the ground that it did not have the authorisation required by German law. Legal context Community law3 Articles 49 EC to 55 EC govern the freedom to provide services. The first paragraph of Article 49 EC prohibits restrictions on that freedom within the Community in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended. 4 Articles 56 EC to 60 EC concern the free movement of capital. Article 56(1) EC provides that, within the framework of the provisions of Chapter 4, in Title III, of the EC Treaty entitled ‘Capital and payments’, all restrictions on the movement of capital between Member States and between Member States and non-member countries are to be prohibited. 5 Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [article repealed by the Treaty of Amsterdam] (OJ 1988 L 178, p. 5), entitled ‘Nomenclature of the capital movements referred to in Article 1 of the Directive’, states, in its introduction: ‘…The capital movements listed in this Nomenclature are taken to cover:– all the operations necessary for the purposes of capital movements: conclusion and performance of the transaction and related transfers. … …– operations to repay credit or loans.This Nomenclature is not an exhaustive list for the notion of capital movements – whence a heading XIII-F, “Other capital movements – Miscellaneous”. It should not therefore be interpreted as restricting the scope of the principle of full liberalisation of capital movements as referred to in Article 1 of the Directive.’ 6 That nomenclature includes three different categories of capital movements. Included under Heading VIII, entitled ‘Financial loans and credits’, of that nomenclature are loans and credit granted by non-residents to residents. National law 7 Under Paragraph l(1) of the Law on Credit Institutions (Gesetz über das Kreditwesen), in the version of 9 September 1998 (BGBl. 1998 I, p. 2776; ‘the KWG’), ‘credit institutions’ are ‘undertakings which carry on banking activities on a commercial basis or on a scale requiring operation as a business entity’, and ‘banking activities’ are, inter alia, ‘the granting of money loans and acceptance credits (lending)’. 8 Paragraph 1(1a) of that law defines ‘financial services institutions’ as ‘undertakings which provide financial services to others commercially or on a scale which requires a commercially organised business undertaking’. 9 The first sentence of Paragraph 32(1) of the KWG provides: ‘Any person intending to engage in banking activities or provide financial services in the national territory commercially or on a scale which requires a commercially organised business shall require written authorisation from the Federal Office; …’10 Paragraph 33(1)(6) of the KWG states that authorisation is to be refused, in particular, if the institution does not have its central administration in the national territory. 11 Paragraph 53(1) of the KWG provides that if an undertaking domiciled abroad maintains a branch in Germany which conducts banking business or provides financial services, that branch is deemed to be a credit institution or a financial services institution. 12 Paragraph 53b(1) of the KWG provides for special rules applicable to credit institutions established in other Member States of the European Economic Area. 13 According to the circular of the Bundesanstalt of 16 September 2003, there is deemed to be engagement in banking activities or provision of financial services ‘in the national territory’, within the meaning of Paragraph 32 of the KWG, where ‘the provider of the services has his seat or habitual residence abroad and targets the national market in order to repeatedly offer bank transactions or financial services commercially to institutions and/or persons which have their seat or habitual residence in the national territory’. The main proceedings and the questions referred for a preliminary ruling 14 Fidium Finanz is a company incorporated under Swiss law which has its registered office and central administration in St Gallen (Switzerland). It grants credit of EUR 2 500 or EUR 3 500, at an actual rate of annual interest of 13.94%, to clients established abroad. 15 According to the information provided by Fidium Finanz, approximately 90% of the credit which it grants is to persons resident in Germany. The credit at issue was offered, first, to German citizens resident in Germany who met certain criteria. Subsequently, the target group was made up of workers resident in that Member State who met those criteria. For that credit no credit report is obtained beforehand from the Schufa (the German central credit reporting agency). 16 The credit in dispute is offered by an internet site run from Switzerland. On that site customers can download the forms required, fill them out and send them by post to Fidium Finanz. That credit is also offered by means of credit intermediaries operating in Germany. According to the national court, the latter act neither as representatives nor as authorised agents of Fidium Finanz. They conclude contracts on behalf of that company and are paid commission. 17 Fidium Finanz does not have the authorisation provided for in Paragraph 32(1) of the KWG to carry on banking activities and to provide financial services in Germany. For its business in Switzerland, it is subject to the legislation of that country on consumer credit but, according to the information provided by the national court, the requirement under that legislation that authorisation be obtained was not applicable, at the time of the facts in the main proceedings, to Swiss undertakings which grant credit only abroad. 18 Considering that Fidium Finanz was carrying on banking activities ‘in the national territory’ within the meaning of Paragraph 32 of the KWG, as interpreted by the circular of 16 September 2003, the Bundesanstalt informed that undertaking that it was required to obtain authorisation in order to grant credit. Nevertheless, Fidium Finanz submitted that it did not require any authorisation from a German authority for its activity in so far as its activity is not carried out ‘in the national territory’ for the purposes of the KWG, but is rather ‘directed towards’ that territory. 19 By decision of 22 August 2003, the Bundesanstalt, amongst others, prohibited Fidium Finanz from carrying on lending activities on a commercial basis or on a scale requiring operation as a business entity which target customers established in Germany. Considering that that decision and the subsequent decision of the Bundesanstalt confirming that decision constitute a restriction on the free movement of capital within the meaning of Article 56 EC et seq., Fidium Finanz brought an action before the Verwaltungsgericht Frankfurt am Main. 20 Taking the view that the dispute before it turned on the interpretation of Treaty provisions, the Verwaltungsgericht Frankfurt am Main decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling: ‘1. Can an undertaking having its registered office in a country outside the European Union, in this case Switzerland, rely on the free movement of capital under Article 56 EC in respect of the commercial grant of credit to residents of a Member State of the European Union, in this case the Federal Republic of Germany, as against that Member State and the measures taken by its authorities or courts, or are the preparation, provision and performance of such financial services covered solely by the freedom to provide services under Article 49 et seq. EC? 2. Can an undertaking having its registered office in a country outside the European Union rely on the free movement of capital under Article 56 EC where it grants loans commercially or predominantly to residents domiciled within the European Union and has its registered office in a country in which it is not subject, in relation to the taking up and conduct of that business activity, to the requirement of prior authorisation by a State authority of that country or the requirement of regular supervision of its business activity in a manner which is customary in respect of credit institutions within the European Union, and in this particular case within the Federal Republic of Germany, or does reliance on free movement of capital in such a case constitute misuse of the law? Can such an undertaking be treated, in relation to the law of the European Union, in the same way as persons and undertakings established in the territory of the relevant Member State as regards the obligation to obtain authorisation even though it does not have its registered office in that Member State and also does not maintain a branch there? 3. Do rules which make the commercial grant of credit by an undertaking having its registered office in a country outside the European Union to residents within the European Union subject to authorisation being obtained beforehand from an authority of the relevant Member State of the European Union in which the borrower is domiciled interfere with the free movement of capital under Article 56 EC? In this respect is it relevant whether the unauthorised commercial grant of credit constitutes a criminal offence or merely an administrative one? 4. Is the prior authorisation requirement referred to in Question 3 justified by Article 58(1)(b) EC, in particular as regards– protecting borrowers from contractual and financial obligations towards persons whose reliability has not been checked beforehand,– protecting this category of persons from undertakings or persons operating improperly with regard to their bookkeeping and their obligation under general rules to provide customers with advice and information, – protecting this category of persons from inappropriate or improper advertising,– ensuring that the lending undertaking has adequate financial resources,– protecting the capital market from the unmonitored grant of large-scale credit, and– protecting the capital market and society as a whole from criminal practices as covered in particular by the provisions on combating money laundering and terrorism? 5. Does Article 58(1)(b) EC cover the formulation of an authorisation requirement permissible per se under Community law – in the sense of Question 3 – to obtain which it is mandatory for the undertaking to have its central administration or at least a branch in the Member State concerned to be granted authorisation, in particular in order to – enable business processes and transactions to be genuinely and effectively monitored, that is to say even with little or no notice, by the bodies of the Member State concerned, – render business processes and transactions fully traceable by means of the documents available or to be submitted in the Member State, – have access to those personally responsible for the undertaking in the territory of the Member State, and – ensure, or at least facilitate, payment of the claims of the undertaking’s customers within the Member State?’21 At the oral hearing, Fidium Finanz’s adviser informed the Court that, in March 2005, the competent authorities of the Canton of St Gallen gave that company authorisation to grant consumer credit. The questions Preliminary remarks 22 By its question, the national court wishes to know whether granting credit on a commercial basis constitutes a provision of services and is covered by Article 49 EC et seq. and/or whether it falls within the scope of Article 56 EC et seq. governing the free movement of capital. Should those provisions be applicable in the circumstances of the main case it asks whether they preclude national rules, such as those in dispute in the main proceedings, which make the pursuit of that activity, on national territory, by a company established in a non-member country subject to prior authorisation, and which provide that such authorisation must be refused, in particular, if that company does not have its central administration or a branch in that territory (‘the rules in dispute’). 23 At the outset, it needs to be made clear that the rules in dispute apply to companies established outside the European Economic Area. Credit institutions established in Member states of the European Economic Area are subject, pursuant to Paragraph 53b(1) of the KWG, to special rules, which are not at issue in the questions referred. 24 As is apparent from paragraphs 14 and 15 of the present judgment, Fidium Finanz, established in Switzerland, grants credit on a commercial basis to persons resident in Germany. 25 Contrary to the chapter of the Treaty concerning the free movement of capital, the chapter regulating the freedom to provide services does not contain any provision which enables service providers in non-member countries and established outside the European Union to rely on those provisions. As the Court found in its Opinion of 15 November 1994, Opinion 1/94 [1994] ECR I-5267, paragraph 81, the objective of the latter chapter is to secure the right to provide services for nationals of Member States. Therefore, Article 49 EC et seq. cannot be relied on by a company established in a non-member country. 26 In addition, at the time of the facts in the main proceedings, the Agreement between the European Community and its Member States, of the one part, and the Swiss Confederation, of the other, on the free movement of persons (OJ 2002 L 114, p. 6), signed in Luxembourg on 21 June 1999, to facilitate the provision of services in the territory of the Contracting Parties, had not yet entered into force. 27 Thus, the question arises as to the delimitation of and the relationship between, first, the Treaty provisions concerning the freedom to provide services and, second, those governing the free movement of capital. 28 In that regard, it is apparent from the wording of Article 49 EC and Article 56 EC, and the position which they occupy in two different chapters of Title III of the Treaty, that, although closely linked, those provisions were designed to regulate different situations and they each have their own field of application. 29 That is confirmed, in particular, by Article 51(2) EC, which distinguishes between banking and insurance services connected with movements of capital and the free movement of capital, and which provides that the free movement of those services must be achieved ‘in step with the liberalisation of movement of capital’. 30 Admittedly, it is possible, in certain specific cases in which a national provision concerns both the freedom to provide services and the free movement of capital, that that provision may simultaneously hinder the exercise of both of those freedoms. 31 It has been argued before the Court that, in such circumstances and in the light of the wording of the first paragraph of Article 50 EC, the provisions concerning the freedom to provide services apply as an alternative to those which govern the free movement of capital. 32 That argument cannot be accepted. Although in the definition of the notion of ‘services’ laid down in the first paragraph of Article 50 EC it is specified that the services ‘are not governed by the provisions relating to freedom of movement for goods, capital and persons’, that relates to the definition of that notion and does not establish any order of priority between the freedom to provide services and the other fundamental freedoms. The notion of ‘services’ covers services which are not governed by other freedoms, in order to ensure that all economic activity falls within the scope of the fundamental freedoms. 33 The existence of such an order of priority can also not be inferred from Article 51(2) EC. That provision is primarily addressed to the Community legislature and is explained by the fact that the freedom to provide services and the free movement of capital may progress at different rates. 34 Where a national measure relates to the freedom to provide services and the free movement of capital at the same time, it is necessary to consider to what extent the exercise of those fundamental liberties is affected and whether, in the circumstances of the main proceedings, one of those prevails over the other (see by analogy Case C-71/02 Karner [2004] ECR I-3025, paragraph 47; Case C‑36/02 Omega [2004] ECR I-9609, paragraph 27; and the judgment of the EFTA Court in Case E-1/00 State Management Debt Agency/Islandsbanki-FBA [2000] EFTA Court Report 2000-2001, p. 8, paragraph 32). The Court will in principle examine the measure in dispute in relation to only one of those two freedoms if it appears, in the circumstances of the case, that one of them is entirely secondary in relation to the other and may be considered together with it (see by analogy Case C-275/92 Schindler [1994] ECR I-1039, paragraph 22; Case C-390/99 Canal Satélite Digital [2002] ECR I-607, paragraph 31; Karner, paragraph 46; Omega, paragraph 26; and Case C-20/03 Burmanjer and Others [2005] ECR I-4133, paragraph 35). 35 It is in the light of those considerations that the questions referred should be answered. The first question 36 By its first question the national court asks whether a company established in a non-member country may, in the context of granting credit on a commercial basis to residents of a Member State, rely on the free movement of capital laid down in Article 56 EC, or whether the preparation, provision and performance of such financial services are covered solely by the freedom to provide services laid down in Article 49 EC et seq. 37 The Bundesanstalt, the German and Greek Governments, Ireland, and the Italian and Portuguese Governments consider that the grant of credit on a commercial basis constitutes a service within the meaning of the first paragraph of Article 50 EC and that Article 56 EC et seq. are not applicable in the circumstances of the main case. The Commission of the European Communities and Fidium Finanz contend that the activity in question falls within the free movement of capital and that that company may rely on Article 56 EC. 38 It must be determined, first, into which category of the fundamental freedoms the activity of granting credit on a commercial basis, such as that pursued by Fidium Finanz, falls. 39 It is settled case-law that the business of a credit institution consisting of granting credit constitutes a service within the meaning of Article 49 EC (see, to that effect, Case C-484/93 Svensson and Gustavsson [1995] ECR I-3955, paragraph 11, and Case C-222/95 Parodi [1997] ECR I-3899, paragraph 17). In addition, Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (OJ 2000 L 126, p. 1) seeks to regulate the activity of granting loans, inter alia, from the point of view of both the freedom of establishment and the freedom to provide financial services. 40 Although Fidium Finanz is not a credit institution within the meaning of Community law in so far as its activity does not entail the receiving of deposits or other repayable funds from the public, the activity of granting credit on a commercial basis constitutes a provision of services. 41 As regards the notion of ‘capital movements’, there is no definition thereof in the Treaty. It is, however, settled case-law that, inasmuch as Article 56 EC essentially reproduces the contents of Article 1 of Directive 88/361, and even though that directive was adopted on the basis of Articles 69 and 70(1) of the EEC Treaty, (Articles 67 to 73 of the EEC Treaty have been replaced by Articles 73b to 73g of the EC Treaty, now Articles 56 EC to 60 EC), the nomenclature in respect of ‘movements of capital’ annexed to that directive still has the same indicative value, for the purposes of defining the notion of capital movements (see to that effect, inter alia, Case C-222/97 Trummer and Mayer [1999] ECR I-1661, paragraph 21; Joined Cases C-515/99, C-519/99 to C-524/99 and C-526/99 to C‑540/99 Reisch and Others [2002] ECR I-2157, paragraph 30; and Case C‑513/03 Van Hilten-van der Heijden [2006] ECR I-1957, paragraph 39). 42 Loans and credits granted by non-residents to residents feature under Heading VIII of Annex I to Directive 88/361, entitled ‘Financial loans and credits’. According to the explanatory notes of that annex, that category includes consumer credit, inter alia. 43 It follows that the activity of granting credit on a commercial basis concerns, in principle, both the freedom to provide services within the meaning of Article 49 EC et seq. and the free movement of capital within the meaning of Article 56 EC et seq. 44 It is therefore necessary to consider whether, and if necessary to what extent, the rules in dispute affect the exercise of those two freedoms in the circumstances of the main case and whether they are capable of hindering them. 45 It is apparent from the documents before the Court that the rules in dispute form part of the German legislation on the supervision of undertakings which carry out banking transactions and offer financial services. The purpose of those rules is to supervise the provision of such services and to authorise such provision only for undertakings which guarantee to conduct such transactions properly. Once the operator’s access to the national market has been authorised, the preparation with a view to the loan made and the loan contract signed, that contract is carried out and the amount of the credit is actually transferred to the borrower. 46 The rules in dispute prevent economic operators which do not have the qualities required by the KWG from having access to the German financial market. It is settled case-law that all measures which prohibit, impede or render less attractive the exercise of the freedom to provide services must be regarded as restrictions of that freedom (see, in particular, Case C-439/99 Commission v Italy [2002] ECR I‑305, paragraph 22). If the requirement of authorisation constitutes a restriction on the freedom to provide services, the requirement of a permanent establishment is the very negation of that freedom. For such a requirement to be accepted, it must be shown that it constitutes a condition which is indispensable for attaining the objective pursued (see, inter alia, Parodi, paragraph 31, and Commission v Italy, paragraph 30). 47 In the light of the considerations set out in paragraph 25 of the present judgment, Article 49 EC et seq. cannot be relied on by a company, such as Fidium Finanz, which is established in a non-member country. 48 As regards the free movement of capital within the meaning of Article 56 EC et seq., it is possible that by making financial services offered by companies which are established outside the European Economic Area less accessible for clients established in Germany, the rules effectively make those clients less inclined to have recourse to those services and, therefore, reduce cross-border financial traffic relating to those services. However, that is merely an unavoidable consequence of the restriction on the freedom to provide services (see to that effect Omega, paragraph 27, and Case C-196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I‑0000, paragraph 33, see also by analogy Case C-204/90 Bachmann [1992] ECR I-249, paragraph 34). 49 It is apparent that, in the circumstances of the main case, the predominant consideration is freedom to provide services rather than the free movement of capital. Since the rules in dispute impede access to the German financial market for companies established in non-member countries, they affect primarily the freedom to provide services. Given that the restrictive effects of those rules on the free movement of capital are merely an inevitable consequence of the restriction imposed on the provision of services, it is not necessary to consider whether the rules are compatible with Article 56 EC et seq. 50 In the light of the above, the answer to the first question referred must be that national rules whereby a Member State makes the granting of credit on a commercial basis, on national territory, by a company established in a non-member country subject to prior authorisation, and which provide that such authorisation must be refused, in particular, if that company does not have its central administration or a branch in that territory, affect primarily the exercise of the freedom to provide services within the meaning of Article 49 EC et seq. A company established in a non-member country cannot rely on those provisions. 51 In the light of the reply to the first question, there is no need to answer the other questions referred by the national court. Costs52 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court hereby rules:National rules whereby a Member State makes the granting of credit on a commercial basis, on national territory, by a company established in a non-member country subject to prior authorisation, and which provide that such authorisation must be refused, in particular, if that company does not have its central administration or a branch in that territory, affect primarily the exercise of the freedom to provide services within the meaning of Article 49 EC et seq. A company established in a non-member country cannot rely on those provisions.[Signatures]* Language of the case: German. | afea7-eca1fde-4baa | EN |
THE COURT OF FIRST INSTANCE ANNULS IN PART THE DECISION PROHIBITING GLAXO FROM SELLING ITS MEDICINES AT DIFFERENT PRICES ACCORDING TO THE PLACE OF REIMBURSEMENT | GlaxoSmithKline Services UnlimitedvCommission of the European Communities(Competition – Wholesale distribution of medicines – Parallel trade – Differentiated prices – Article 81(1) EC – Agreement – Restriction of competition – Object – Relevant market – Effect – Article 81(3) EC – Contribution to the promotion of technical progress – No elimination of competition – Proof – Statement of reasons – Subsidiarity)Judgment of the Court of First Instance (Fourth Chamber, Extended Composition), 27 September 2006 Summary of the Judgment1. Acts of the institutions – Statement of reasons – Obligation – Scope – Judicial review(Art. 253 EC)2. Actions for annulment – Pleas in law – Lack of or inadequate statement of reasons – Distinction from challenge to merits of the grounds (Arts 230 EC and 253 EC)3. Actions for annulment – Commission decision adopted on the basis of Article 81(1) EC – Complex economic assessment – Judicial review – Limits (Arts 81(1) EC and 230 EC)4. Actions for annulment – Subject-matter – Decision applying Article 81 EC – Acceptable evidence (Arts 81 EC and 230 EC)5. Competition – Community rules – Substantive scope – Conduct imposed by national measures – Not included – Evaluation of actual scope for free competition (Art. 81(1) EC)6. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Concept – Covering only bilateral or multilateral conduct – Existence of a joint intention as to the conduct to be adopted on the market – Sufficient condition 7. Competition – Agreements, decisions and concerted practices – Agreements between undertakings – Burden of proving the infringement borne by the Commission – Evidence of having distanced itself from the agreement borne by the undertaking relying on its intention to do so 8. Competition – Community rules – Substantive scope – Sector of medicines reimbursed by the national sickness insurance scheme – Included notwithstanding national intervention in matters of prices 9. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Criteria for assessment – Assessment by reference to the economic and legal context – Anti-competitive object rendering proof of anti-competitive effects unnecessary (Arts 3(1)(g) EC and 81(1) EC)10. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Agreements intended to limit parallel trade – Criteria for assessment – Taking into account of effects for final consumers – Presumption of anti-competitive object – Limits – Sector of medicines reimbursed by the sickness insurances scheme – Not included 11. Competition – Agreements, decisions and concerted practices – Adverse effect on competition – Application of unequal conditions to equivalent services – System of differentiated prices – Assessment – Need to take account of the different regulatory framework depending on the Member States – Circumstance of medicines reimbursed by the national sickness insurance schemes(Art. 81(1)(d) EC)12. Community law – Principles – Principle of subsidiarity – Application in the sphere of competition – Requirement of an effect on trade between Member States (Arts 5, second para., EC and 81(1) EC)13. Competition – Agreements, decisions and concerted practices – Not allowed – Exemption – Conditions – Burden of proof – Scope – Examination by the Commission (Art. 81(3) EC)14. Competition – Agreements, decisions and concerted practices – Not allowed – Exemption – Conditions – Complex economic assessment – Discretion of the Commission – Judicial review – Limits 15. Competition – Agreements, decisions and concerted practices – Not allowed – Exemption – Conditions – Improvement in the production or distribution of goods or promotion of technical or economic progress – Appreciable objective advantages of such a kind as to offset the disadvantages of the agreement for competition – Examination by the Commission 16. Actions for annulment – Action against a Commission decision on a request for negative clearance or exemption under Regulation No 17 – Judgment annulling act – Effects (Art. 233, first para., EC; Council Regulations No 17 and No 1/2003)1. Article 253 EC states, in particular, that decisions adopted by the Commission are to state the reasons on which they are based. In order to state the reasons to the requisite legal standard, a decision of the Commission must disclose clearly the reasoning followed by that institution in such a way as to enable the persons concerned to understand the basis for it and the Court to ascertain whether it is well founded. On the other hand, such a decision is not required to go into all the relevant facts and points of law, since the question of compliance with Article 253 EC is assessed by reference to both the wording of the measure and its legal and factual context. The need to state the reasons for its decisions therefore does not place the Commission under any general obligation to refer to a specific judicial decision in the decisions which it adopts. (see paras 49-51)2. The examination of the existence and the scope of the reasons on which a Commission decision is based forms part of the review of essential procedural requirements and of the formal legality of that decision. It must therefore be distinguished from the examination of the merits of the grounds of the decision, which forms part of the review of its substantive legality. (see para. 54)3. When it is dealing with an application for annulment of a Commission decision applying Article 81(1) EC, the Community judicature carries out, in accordance with Article 230 EC, a review of the lawfulness of that decision. In that regard, the Court must undertake a comprehensive review of the examination carried out by the Commission, unless that examination entails a complex economic assessment, in which case review by the Court is confined to ascertaining that there has been no misuse of powers, that the rules on procedure and on the statement of reasons have been complied with, that the facts have been accurately stated and that there has been no manifest error of assessment of those facts. (see paras 57, 145)4. Review by the Court dealing with an action for annulment of a decision applying Article 81 EC is carried out solely by reference to the elements of fact and of law existing on the date of adoption of the contested decision, without prejudice to the possibility afforded to the parties, in the exercise of their rights of defence, to supplement them by evidence established after that date but for the specific purpose of contesting or defending that decision. (see paras 58, 245)5. Article 81(1) EC applies only to anti-competitive conduct engaged in by undertakings on their own initiative.Where, in order to decide whether that provision is applicable, it is necessary first to evaluate the possible impact of national regulations, it must be determined whether those regulations leave any scope for competition that might be prevented, restricted or distorted by autonomous conduct on the part of undertakings. Where it is clear, following that evaluation, that the regulations in question require that undertakings engage in anti-competitive conduct, or eliminate any possibility of competitive activity on their part, Article 81(1) EC does not apply. Where, on the other hand, it is clear that those regulations do leave scope for competition that might be prevented, restricted or distorted by autonomous conduct on the part of undertakings, Article 81(1) EC does apply. The possibility of excluding particular anti-competitive conduct from the scope of that provision on the ground that it is required by national regulations has been applied restrictively by the Community Courts. (see paras 66-70)6. Article 81(1) EC applies only to bilateral or multilateral conduct on the part of undertakings and such conduct may take the form of agreements, concerted practices or decisions of associations. In order for there to be an agreement, it is sufficient that at least two undertakings have expressed their joint intention to conduct themselves on the market in a specific way. While it is therefore essential that the decisions in which the Commission applies Article 81(1) EC show the existence of a joint intention to act on the market in a specific way, those decisions are not required to establish the existence of a joint intention to pursue an anti-competitive aim. (see paras 75-77)7. It is for the Commission to prove the infringements which it finds by adducing, in the decisions in which it applies the competition rules, precise and coherent evidence demonstrating convincingly the existence of the facts constituting those infringements. That evidence may consist of direct evidence, taking the form, for example, of a written document, or, failing that, indirect evidence, for example in the form of conduct. Where the Commission has adduced evidence of the existence of an agreement, it is for an undertaking which has taken part in that agreement and denies having committed an infringement to adduce evidence that it distanced itself from that agreement, evidence which must demonstrate a clear intention, brought to the notice of the other participating undertakings, to withdraw from that agreement. (see paras 82-83, 86)8. The sector of medicines reimbursed by the national sickness insurance scheme continues to be characterised, in a number of Member States, by the existence of regulations which go beyond the mere regulation of an economic activity, in particular in matters of prices. The coexistence of those different national regulations may distort competition. It tends, moreover, to favour a certain partitioning of the national markets on that point. However, it is only where the sector in which the agreement is applied is subject to regulations which preclude the possibility of competition that might be prevented, distorted or restricted by that agreement that Article 81(1) EC is inapplicable. In the sector in question, there may be competition between a producer and his distributors, or between parallel traders and national distributors, which specifically takes advantage of the significant differences in price to which the national regulations in question contribute and which, where the medicines are protected by a patent which confers a temporary monopoly on its holder, is, until the expiry of that patent, the only form of price competition envisageable in respect of them. (see paras 104-107)9. The competition referred to in Article 3(1)(g) EC and Article 81 EC is taken to mean effective competition, that is to say, the degree of competition necessary to ensure the attainment of the objectives of the Treaty. Its intensity may vary to an extent dictated by the nature of the product concerned and the structure of the relevant market. Furthermore, its parameters may assume unequal importance, as price competition does not constitute the only effective form of competition or that to which absolute priority must in all circumstances be given. Consequently, the characterisation of a restriction of competition within the meaning of Article 81(1) EC must take account of the actual framework and, therefore, of the legal and economic context in which the agreement to which that restriction is imputed is deployed. Such an obligation is imposed for the purpose of ascertaining both the object and the effect of the agreement. Thus, when examination of the clauses of an agreement, carried out in their legal and economic context, reveals in itself the existence of an alteration of competition, it may be presumed that that agreement has as its object the prevention, restriction or distortion of competition, so that there is no need to examine its effect. Where that is not so, on the other hand, it is necessary to examine the effect of the agreement and to prove to the requisite legal standard that it actually or potentially prevents, restricts or distorts competition. (see paras 109-112)10. Agreements which ultimately seek to prohibit parallel trade must in principle be regarded as having as their object the prevention of competition, while agreements that clearly intend to treat parallel trade unfavourably must in principle be regarded as having as their object the restriction of competition. However, the mere fact that an agreement is intended to restrict parallel trade is not sufficient to support the conclusion that there is an infringement of Article 81(1) EC. In effect, the objective assigned to that provision is to prevent undertakings, by restricting competition between themselves or with third parties, from reducing the welfare of the final consumer of the products in question. Consequently, the application of Article 81(1) EC cannot depend solely on the fact that an agreement is intended to limit parallel trade or to partition the common market, which leads to the conclusion that it affects trade between Member States, but also requires an analysis designed to determine whether it has as its object or effect the prevention, restriction or distortion of competition on the relevant market, to the detriment of the final consumer. That analysis, which may be abridged when the clauses of the agreement reveal in themselves the existence of an alteration of competition must, on the other hand, be supplemented, depending on the requirements of the case, where that is not so. While it is accepted that parallel trade must be given a certain protection, it is therefore not as such but in so far as it favours the development of trade, on the one hand, and the strengthening of competition, on the other hand, that is to say, in this second respect, in so far as it gives final consumers the advantages of effective competition in terms of supply or price. It is the repercussions which that restriction of parallel trade has or may have on one or other of the parameters of competition, such as the quantity in which a product is supplied or the price at which it is sold, that provides evidence of such a restriction of competition. Then, while it is accepted that an agreement intended to limit parallel trade must in principle be regarded as having as its object the restriction of competition, that applies in so far as the agreement may be presumed to deprive final consumers of those advantages. However, it cannot be presumed that agreements intended to hinder parallel imports of medicines have the effect of depriving final consumers of the advantages linked with those imports. In effect, the prices at which medicines are sold at retail level are subject to control by the Member States, which fix them directly or indirectly at what they deem to be the appropriate level, are determined at structurally different levels in the various Member States, so that it cannot be presumed that parallel trade has an impact on the retail prices charged to the final consumers of medicines reimbursed by the national sickness insurance scheme and thus confers on final consumers an appreciable advantage analogous to that which it would confer if those prices were determined by the free play of supply and demand. (see paras 115-122, 133-134, 140)11. Where it is common ground that, in the case of a given product, in this instance medicines reimbursed by the national sickness insurance schemes, each of the Member States constitutes a distinct market, owing to the differences in the national regulations on the prices and the reimbursement of the medicines in question, the fact that different prices are charged depending on the Member State in which the medicines are intended to be resold and reimbursed is not sufficient to characterise discrimination for the purposes of Article 81(1)(d) EC. (see paras 178-179)12. In the context of Article 81(1) EC, the principle of subsidiarity is given concrete form by the limitation of the prohibition contained therein to agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States. Thus, where a series of objective factors of law or fact makes it possible to foresee with a sufficient degree of probability that such conduct may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States, that conduct must be regarded as capable of affecting trade between Member States, so that it is appropriate for the Community to take action, by reason of the scale and the effects of its action. Where that action takes the form of a Commission decision, the Commission is therefore acting in accordance with the principle of subsidiarity where it establishes to the requisite legal standard that trade between Member States is capable of being affected by the agreement between undertakings, the decision by an association of undertakings or the concerted practice the legality of which it is examining. (see paras 201-202)13. Any agreement which restricts competition, whether by its effects or by its object, may in principle benefit from an exemption under Article 81(3) EC. The application of that provision is subject to certain conditions, satisfaction of which is both necessary and sufficient. First, the agreement concerned must contribute to improving the production or distribution of the goods in question, or to promoting technical or economic progress; second, consumers must be allowed a fair share of the resulting benefit; third, it must not impose on the participating undertakings any restrictions which are not indispensable; and, fourth, it must not afford them the possibility of eliminating competition in respect of a substantial part of the products in question. Consequently, an economic operator who relies on Article 81(3) EC must demonstrate that those conditions are satisfied, by means of convincing arguments and evidence. The Commission, for its part, must adequately examine those arguments and that evidence, that is to say, it must determine whether they demonstrate that the conditions for the application of Article 81(3) EC are satisfied. In certain cases, those arguments and that evidence may be of such a kind as to require the Commission to provide an explanation or justification, failing which it is permissible to conclude that the burden of proof borne by the person who relies on Article 81(3) EC has been discharged. In such a case the Commission must refute those arguments and that evidence. (see paras 233-236)14. The Court dealing with an application for annulment of a decision applying Article 81(3) EC carries out, in so far as it is faced with complex economic assessments, a review confined, as regards the merits, to verifying whether the facts have been accurately stated, whether there has been any manifest error of appraisal and whether the legal consequences deduced from those facts were accurate. It is for the Court to establish not only whether the evidence relied on is factually accurate, reliable and consistent, but also whether it contains all the information which must be taken into account for the purpose of assessing a complex situation and whether it is capable of substantiating the conclusions drawn from it. On the other hand, it is not for the Court to substitute its own economic assessment for that of the institution which adopted the decision the legality of which it is requested to review. The Commission has, in particular, a margin of discretion which is subject to a restricted judicial review, in the operation consisting, once it has been ascertained that one of the criteria on which Article 81(3) EC makes provision for an exemption was satisfied, in weighing up the advantages expected from the implementation of the agreement and the disadvantages which the agreement entails for the final consumer owing to its impact on competition, which takes the form of a balancing exercise carried out in the light of the general interest appraised at Community level. (see paras 241-244)15. In order to be capable of being exempted under Article 81(3) EC, an agreement must contribute to improving the production or distribution of goods or to promoting technical or economic progress. That contribution is not identified with all the advantages which the undertakings participating in the agreement derive from it as regards their activities, but with appreciable objective advantages, of such a kind as to offset the resulting disadvantages for competition. It is therefore for the Commission, in the first place, to examine whether the factual arguments and the evidence submitted to it show, in a convincing manner, that the agreement in question must enable appreciable objective advantages to be obtained, it being understood that these advantages may arise not only on the relevant market but also on other markets and that they are not required to be a direct consequence of the agreement. That approach may entail a prospective analysis, in which case it is appropriate to ascertain whether, in the light of the factual arguments and the evidence provided, it seems more likely either that the agreement in question must make it possible to obtain appreciable advantages or that it will not. In the affirmative, it is for the Commission, in the second place, to evaluate whether those appreciable objective advantages are of such a kind as to offset the disadvantages identified for competition in the context of the examination carried out under Article 81(1) EC. Last, where the Commission is required to determine whether the conditions for the application of Article 81(3) EC are satisfied in a legal and economic context, such as that characteristic of the pharmaceutical sector, where competition is distorted by the presence of national regulations, it must examine with particular attention the arguments and evidence submitted to it by the economic operator relying on Article 81(3) EC. (see paras 247-250, 276, 280, 298, 301)16. Pursuant to the first paragraph of Article 233 EC, the Commission is required to take the necessary measures to comply with a judgment annulling a decision determining a request for exemption under Regulation No 17. To that end, although the notification procedure provided for in Regulation No 17 no longer exists under Regulation No 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, it falls upon the Commission to rule on the request for exemption by reference to the date of that request, in so far as the request remains before it. (see paras 319-320)JUDGMENT OF THE COURT OF FIRST INSTANCE (Fourth Chamber, Extended Composition) 27 September 2006 (*) (Competition – Wholesale distribution of medicines – Parallel trade – Differentiated prices – Article 81(1) EC – Agreement – Restriction of competition – Object – Relevant market – Effect – Article 81(3) EC – Contribution to the promotion of technical progress – No elimination of competition – Evidence – Statement of reasons – Subsidiarity)In Case T‑168/01,GlaxoSmithKline Services Unlimited, formerly Glaxo Wellcome plc, established in Brentford, Middlesex (United Kingdom), represented by S. Martínez Lage, lawyer, I. Forrester QC, F. Depoortere, A. Schultz, T. Louko and I. Vandenborre, lawyers, applicant,Commission of the European Communities, represented initially by P. Oliver, then by É. Gippini Fournier, acting as Agents, defendant,supported by European Association of Euro Pharmaceutical Companies (EAEPC), established in Brussels (Belgium), represented initially by U. Zinsmeister and M. Lienemeyer, then by A. Martin‑Ehlers, and finally by M. Hartmann‑Rüppel, lawyers, by Bundesverband der Arzneimittell-Importeure eV, established in Mülheim an der Ruhr (Germany), represented initially by M. Epping and W. Rehmann, then by W. Rehmann, lawyers, bySpain Pharma, SA, established in Madrid (Spain), represented by P. Muñoz Carpena, B. Ortúzar Somoza and R. Gutiérrez Sánchez, lawyers, and by Asociación de exportadores españoles de productos farmacéuticos (Aseprofar), established in Madrid (Spain), represented initially by M. Araujo Boyd and R. Sanz, then by M. Araujo Boyd and J.L. Buendia Sierra, lawyers, interveners,APPLICATION for annulment of Commission Decision 2001/791/EC of 8 May 2001 relating to a proceeding pursuant to Article 81 of the EC Treaty (Cases IV/36.957/F3 Glaxo Wellcome (notification), IV/36.997/F3 Aseprofar and Fedifar (complaint), IV/37.121/F3 Spain Pharma (complaint), IV/37.138/F3 BAI (complaint) and IV/37.380/F3 EAEPC (complaint)) (OJ 2001 L 302, p. 1), THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Fourth Chamber, Extended Composition),composed of H. Legal, President, P. Lindh, I. Wiszniewska‑Białecka, V. Vadapalas and E. Moavero Milanesi, Judges,Registrar: C. Kristensen, Administrator,having regard to the written procedure and further to the hearing on 7 June 2006,delivers the followingJudgment Legal and factual framework Community law1 Article 3(1)(g) EC provides that the activities of the Community are to include a system ensuring that competition in the internal market is not distorted. 2 Article 81(1) EC provides, in particular, that all agreements between undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market are to be prohibited as incompatible with the common market. 3 Article 81(3) EC provides that the provisions of Article 81(1) EC may be declared inapplicable, inter alia, in the case of any agreement between undertakings which contributes to improving the distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives, or afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. 4 On 21 December 1988, the Council, acting on the basis of Article 100a of the EC Treaty (now, after amendment, Article 95 EC), adopted Directive 89/105/EEC relating to the transparency of measures regulating the prices of medicines for human use and their inclusion in the scope of national health insurance systems (OJ 1989 L 40, p. 8). The objective of that directive is to obtain an overall view of pricing arrangements and of direct and indirect controls on the prices of medicines which the Member States have adopted in order to control public health expenditure on such products, and to eliminate disparities in such measures, which may hinder or distort intra-Community trade in medicines and thereby directly affect the functioning of the common market in medicines. To that end, it establishes, as a first step, a series of requirements intended to ensure that all concerned can verify that the national measures do not constitute quantitative restrictions on imports or exports or measures having equivalent effect thereto. However, those requirements are not to affect either the policies of those Member States, or national policies on price setting and on the determination of social security schemes, except as far as it is necessary to attain transparency. The period within which Member States were to comply with that directive expired on 31 December 1989. Spanish law5 On 20 December 1990 the Kingdom of Spain adopted Ley 25/1990 del Medicamento (Law 25/1990 on medicines, BOE No 306 of 22 December 1990, p. 2643; ‘Law 25/1990’). That law was amended, in particular, by Ley 66/1997 of 30 December 1997 (BOE No 313 of 31 December 1997, p. 38517) and, during the administrative procedure which led to the adoption of the decision contested in the present case, by Ley 55/1999 of 30 December 1999 (BOE No 312 of 30 December 1997, p. 46095). 6 On 23 February 1990, the Kingdom of Spain adopted Real Decreto 271/1990 de reorganización de la intervención de los precios de las especialidades farmacéuticas de uso humano (Royal Decree 271/1990 on the reorganisation of intervention in the prices of pharmaceutical products for human use) (BOE No 53 of 2 March 1990, p. 6086; ‘Decree 271/1990’). That decree was intended, in particular, to allow the Kingdom of Spain to comply with Directive 89/105/EEC. 7 The provisions of Title VIII of Law 25/1990 and Decree 271/1990 establish, in particular, a system of intervention on the part of the Spanish Ministry of Health and Consumption and the Comisión Interministerial de Precios de los Medicamentos (Interministerial Commission on the prices of medicines) attached to it (together ‘the Spanish authorities’), on the maximum wholesale price of medicines reimbursed by the Spanish sickness insurance scheme. Background to the dispute8 The applicant, GlaxoSmithKline Services Unlimited (‘GSK’), formerly Glaxo Wellcome plc, is a company incorporated under the laws of England and Wales and having its registered office in Brentford (United Kingdom). The GlaxoSmithKline group, to which it belongs, is one of the world’s main producers of pharmaceutical products. The group was formed following a concentration between Glaxo Wellcome plc and Smithkline Beecham plc, a transaction which the Commission, by a decision of 8 May 2000 (Case N IV/M.1846 – Glaxo Wellcome/Smithkline Beecham), declared that it did not oppose. 9 Glaxo Wellcome, SA (‘GW’), a company incorporated under Spanish law and established in Madrid (Spain), is one of the Spanish subsidiaries of the GlaxoSmithKline group. Its main activity, directly and via its subsidiaries, is the development, manufacture and marketing of medicines in Spain. 10 By letter of 6 March 1998, GW notified to the Commission a document entitled ‘General Sales Conditions of pharmaceutical specialities belonging to [GW] and its subsidiaries to authorised wholesalers’ (‘the General Sales Conditions’) with a view to obtaining negative clearance or an exemption pursuant to Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-62, p. 87). By letter of 28 July 1998, GSK sent a supplementary notification to the Commission. 11 The General Sales Conditions apply to 82 medicines intended for sale to wholesalers established in Spain with whom GW has commercial relations in Spain outside any distribution network. Those wholesalers may intend to resell the medicines to Spanish hospitals or to Spanish pharmacies, which dispense them to patients on presentation of a medical prescription. They may also intend to resell them in other Member States, through parallel trade, in which they engage on account of price differentials. The 82 medicines to which the General Sales Conditions apply include eight medicines which, according to GSK, are prime candidates for parallel trade, principally between Spain and the United Kingdom. Those medicines are: – an anti-allergy, Beconase;– five anti-asthma products, Becloforte, Becotide, Flixotide, Serevent and Ventolín;– an anti-epileptic, Lamictal;– an anti-migraine, Imigran.12 For all 82 medicines concerned, Clause 4 of the General Sales Conditions provides for two different prices, ‘the Clause 4 A price’ and ‘the Clause 4 B price’. Clause 4 is worded as follows: ‘(A) Pursuant to the provisions of subsections 1 (first paragraph) and 2 of Article 100 of [Law 25/1990], the price of pharmaceutical products of [GW] and its subsidiary companies shall, in no event, exceed the maximum industrial price, established by the Spanish health authorities when the two factors which allow for the application of the said legal rules are present, namely: – that the aforementioned pharmaceutical products are financed by the funds of the Spanish Social Security or by Spanish public funds, – that the acquired pharmaceutical products are subsequently marketed at a national level i.e. through pharmacies or Spanish hospitals. (B) In the absence of one of these two factors (i.e. in all cases where Spanish law gives full freedom to the laboratories to set the prices of their pharmaceutical products themselves), [GW] and its subsidiaries will fix the price of their pharmaceutical products according to real, objective and non-discriminatory economic criteria and completely irrespective of the destination of the product determined by the purchasing warehouse. In particular, [GW] and its subsidiary companies will apply to their pharmaceutical products the price which, on the basis of their internal economic surveys, had been initially proposed to the Spanish health authorities and objectively updated taking account of the increase in the cost of living in accordance with the provisions of subsections 1 (first paragraph) and 2 of Article 100 of [Law 25/1990] and other prior Spanish legislation concerning setting of prices of medicines.’ 13 By letters of 6 March 1998, GW sent the General Sales Conditions to 89 wholesalers established in Spain. Those letters contain, in particular, the following: ‘Important: As proof of acceptance, please return to us a copy of the attached document duly signed. This should be in our possession before 13 March 1998’. 14 Seventy-five wholesalers, with sales accounting for more than 90% of GW’s total sales in Spain in 1998, did as requested.15 The General Sales Conditions entered into force on 9 March 1998.16 Their lawfulness was subsequently disputed before the Spanish Competition Authority and the Spanish courts by two Spanish trade associations, Asociación de Exportadores Españoles de Productos Farmacéuticos (Aseprofar) and Asociación de Empresarios de Cooperativas Farmacéuticas, and also by a Spanish wholesaler, Spain Pharma, SA. 17 In addition, a number of complaints that the General Sales Conditions infringed Article 81(1) EC were lodged with the Commission by Aseprofar, supported by another Spanish trade association, Federación Nacional de Asociaciones de Mayoristas Distribuidores de Especialidades Farmacéuticas y Productos Parafarmacéuticos (Fedifar), by Spain Pharma and by two other trade associations, the Bundesverband der Arzneimittel-Importeure eV (‘BAI’) and the European Association of Euro Pharmaceutical Companies (EAEPC). 18 On 8 May 2001, the Commission adopted Decision 2001/791/EC relating to a proceeding pursuant to Article 81 of the EC Treaty (Cases: IV/36.957/F3 Glaxo Wellcome (notification), IV/36.997/F3 Aseprofar and Fedifar (complaint), IV/37.121/F3 Spain Pharma (complaint), IV/37.138/F3 BAI (complaint), IV/37.380/F3 EAEPC (complaint)) (OJ 2001 L 302, p. 1; ‘the Decision’). 19 Article 1 of the Decision provides that GW ‘has infringed Article 81(1) [EC] by entering into an agreement with Spanish wholesalers operating a distinction between prices charged to wholesalers in the case of domestic resale of reimbursable drugs to pharmacies or hospitals and higher prices charged in the case of exports to any other Member State’. 20 Article 2 of the Decision provides that the request for an exemption of the agreement is rejected.21 Articles 3 and 4 of the Decision order GW to bring the infringement to an end immediately and to inform the Commission of the steps which it has taken in order to do so. Procedure22 By application lodged at the Registry of the Court of First Instance on 23 July 2001, GSK brought the present action.23 By documents lodged at the Court Registry on 8, 12 and 16 November 2001, EAEPC, BAI, Spain Pharma and Aseprofar sought leave to intervene in support of the form of order sought by the Commission, in accordance with the second paragraph of Article 40 of the Statute of the Court of Justice and Article 115(1) of the Rules of Procedure of the Court of First Instance. 24 By documents lodged at the Court Registry on 28 November 2001, 14 December 2001 and 21 March 2002, GSK requested that certain items and secret or confidential information be excluded from the communication of the parties’ submissions to the persons granted leave to intervene in the proceedings, in accordance with Article 116(2) of the Rules of Procedure. 25 By order of 27 November 2002, the President of the First Chamber granted the applications to intervene and reserved the decision on the merits of the requests for confidential treatment. 26 By order of 5 August 2003, the President of the First Chamber of the Court of First Instance granted in part the requests for confidential treatment and, for the remainder, rejected those requests. 27 When the Judge-Rapporteur was assigned to the Fourth Chamber owing to the change in the composition of the Chambers of the Court of First Instance on 1 October 2003, the case was reallocated to that Chamber. 28 By document lodged at the Court Registry on 25 March 2004, GSK requested that certain secret or confidential information be excluded from the communication to the interveners of its observations on the statements in intervention. That request was granted. 29 By letter of 16 April 2004, the Court requested GSK and the Commission to produce certain documents and to answer a written question, on the basis of Articles 49 and 64 of the Rules of Procedure. The parties complied with those measures of organisation of procedure within the prescribed period. 30 By document lodged at the Registry of the Court of First Instance on 7 May 2004, Spain Pharma requested permission, in accordance with Article 35(2) of the Rules of Procedure, to use the Spanish language in the oral procedure. After the parties had been heard, that request was granted. 31 By documents lodged at the Registry of the Court of First Instance on 27 May and 22 June 2004, GSK requested that certain secret or confidential information be excluded from the communication to the interveners of its and the Commission’s answers to the Court’s requests of 16 April 2004. That request was granted. 32 On 7 March 2006, the Court, in accordance with Article 14 of the Rules of Procedure and on a proposal from the Fourth Chamber, decided, after hearing the parties, to refer the case to the Fourth Chamber, Extended Composition. 33 On 15 March 2006, the Court of First Instance (Fourth Chamber), after hearing the report of the Judge-Rapporteur, opened the oral procedure. 34 By letters of 7 and 20 March 2006, the Court requested GSK, the Commission and the interveners to answer a number of written questions and to produce a document, pursuant to Articles 49 and 64 of the Rules of Procedure. The parties complied with those measures of organisation of procedure within the period prescribed for that purpose, with the exception of one question which GSK answered in a document lodged at the Court Registry on 6 June 2006. In the absence of any objections by the parties, who were invited to comment on that point at the hearing, that document was placed on the file. 35 By a document lodged at the Court Registry on 28 April 2006, GSK requested that certain secret or confidential information be excluded from the communication to the interveners of its answers to the Court’s requests of 7 and 20 March 2006. That request was granted. 36 By a document lodged at the Court Registry on 16 May 2000, Aseprofar requested leave to use Spanish during the oral procedure, in accordance with Article 35(2) of the Rules of Procedure. After hearing the parties, the Court granted that request. 37 The parties submitted oral argument and their answers to the questions put by the Court at the hearing on 7 June 2006. Forms of order sought by the parties38 GSK claims that the Court should:– annul the Decision;– order the Commission to pay the costs.39 The Commission contends that the Court should:– dismiss the application;– order GSK to pay the costs.40 Aseprofar submits that the Court should:– order GSK to pay the costs, including those incurred by Aseprofar.41 BAI submits that the Court should:– order GSK to pay the costs, including those incurred by BAI.42 EAEPC submits that the Court should:– order GSK to pay the costs, including those incurred by EAEPC.43 Spain Pharma submits that the Court should:– order GSK to pay the costs, including those incurred by Spain Pharma. Law44 In support of the form of order which it seeks, GSK relies in substance on six pleas, which may be arranged according to whether they seek annulment in whole or, in the alternative, annulment in part of the Decision. 45 In support of its principal claim, whereby it seeks annulment of Article 1 of the Decision, which finds an infringement of Article 81(1) EC, GSK puts forward three pleas in law, alleging, respectively: – failure to state sufficient reasons;– infringement of Article 81(1) EC;– misuse of powers, breach of the principle of subsidiarity and infringement of Article 43 EC.46 In support of its alternative claim, whereby it seeks annulment of Article 2 of the Decision, which rejects its claim for an exemption under Article 81(3) EC, GSK relies on three pleas in law, alleging, respectively: – infringement of Article 81(3) EC;– breach of the principle of proportionality.I – The pleas seeking annulment of Article 1 of the Decision A – The plea alleging inadequate reasoning1. Arguments of the parties47 GSK claims, in substance, that the fact that the Decision makes no reference to the judgment of the Court of First Instance of 26 October 2000 in Case T-41/96 Bayer v Commission [2000] ECR II-3383 means that it is vitiated by inadequate reasoning. 48 The Commission, supported by the interveners, contends that this plea is unfounded.2. Findings of the Court49 Article 253 EC states, in particular, that decisions adopted by the Commission are to state the reasons on which they are based. 50 In order to state the reasons to the requisite legal standard, a decision of the Commission must disclose clearly the reasoning followed by that institution in such a way as to enable the persons concerned to understand the basis for it and the Court to ascertain whether it is well founded. On the other hand, such a decision is not required to go into all the relevant facts and points of law, since the question of compliance with Article 253 EC is assessed by reference to both the wording of the measure and its legal and factual context (Case 2/56 Geitling v High Authority [1957] ECR 2, at 16, and Case T-171/02 Regione Autonoma della Sardegna v Commission [2005] ECR II-2123, paragraph 73). 51 The need to state the reasons for its decisions therefore does not place the Commission under any general obligation to refer to a specific judicial decision in the decisions which it adopts. 52 In the present case, GSK merely asserts that the Decision is vitiated by inadequate reasoning in that it does not refer to a judicial decision. 53 Accordingly, the plea alleging that the reasoning on which the Decision is based is inadequate in that it does not refer to the judgment in Bayer v Commission, paragraph 47 above, must be rejected. 54 In so far as GSK intends in reality, by this plea, to challenge the content of the Decision, it must be observed that the examination of the existence and the scope of the reasons on which a Commission decision is based forms part of the review of essential procedural requirements and of the formal legality of that decision. It must therefore be distinguished from the examination of the merits of the grounds of the decision, which forms part of the review of its substantive legality (Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I-1719, paragraph 67, and Case T-93/02 Confédération nationale du Crédit Mutuel v Commission [2005] ECR II‑143, paragraph 67). To that extent, the plea is indissociable from the plea alleging infringement of Article 81(1) EC, which will be examined below. B – The plea alleging infringement of Article 81(1) EC1. Preliminary considerations55 The application of Article 81(1) EC depends on a series of distinct conditions being satisfied (Case 56/65 Société technique minière [1966] ECR 235, at pp. 248 and 249, and Bayer v Commission, paragraph 47 above, paragraph 174), which must be proved by the person relying on that provision (Joined Cases C‑204/00 P, C‑205/00 P, C‑211/00 P, C‑213/00 P, C‑217/00 P and C‑219/00 P Aalborg Portland and Others v Commission [2004] ECR I‑123, paragraph 78). It is thus necessary to establish, first, that there is an agreement between undertakings, a concerted practice or a decision of an association of undertakings; second, that that agreement, concerted practice or decision has as its object or effect the restriction of competition to an appreciable extent; and, third, that trade between Member States must be capable of being affected, the purpose of that last requirement being solely to determine the application of Community law (Société technique minière, p. 249; Joined Cases C‑89/85, C‑104/85, C‑114/85, C‑116/85, C‑117/85 and C‑125/85 to C‑129/85 Ahlström Osakeyhtiö and Others v Commission [1993] ECR I‑1307, paragraph 176; and Bayer v Commission, paragraph 47 above, paragraph 174). 56 In the present case, since GSK maintains that the Commission applied Article 81(1) to conduct not constituting an agreement within the meaning of that provision, that is to say, a restrictive agreement, it must be borne in mind that the question of the existence of an agreement between undertakings and the question of the restrictive nature of such agreement are distinct and must be examined separately (see, to that effect, Société technique minière, paragraph 55 above, pp. 248 and 249). 57 In that regard, the Court hearing an application for annulment of a decision applying Article 81(1) EC must undertake a comprehensive review of the examination carried out by the Commission (Case 42/84 Remia and Others v Commission [1985] ECR 2545, paragraph 34, and Bayer v Commission, paragraph 47 above, paragraph 62), unless that examination entails a complex economic assessment, in which case review by the Court is confined to ascertaining that there has been no misuse of powers, that the rules on procedure and on the statement of reasons have been complied with, that the facts have been accurately stated and that there has been no manifest error of assessment of those facts (Remia and Others v Commission, paragraph 34, and Aalborg Portland and Others v Commission, paragraph 55 above, paragraph 279). 58 Furthermore, that review is carried out solely by reference to the elements of fact and of law existing on the date of adoption of the contested decision (Joined Cases 15/76 and 16/76 France v Commission [1979] ECR 321, paragraph 7, and Case T-395/94 Atlantic Container Line and Others v Commission [2002] ECR II-875, paragraph 252), without prejudice to the possibility afforded to the parties, in the exercise of their rights of defence, of supplementing them by evidence established after that date, but for the specific purpose of contesting or defending that decision (Case T-87/05 EDP v Commission [2005] ECR II-0000, paragraph 158; see also, to that effect, Case 75/84 Metro v Commission [1986] ECR 3021 (‘Metro II’), paragraphs 75 and 78, and Atlantic Container Lines and Others v Commission, cited above, paragraph 254). 59 In the present case, it follows that the elements of fact that did not exist on the date of adoption of the Decision, in particular the figures relating to the period 2001/2005, and the evidence which did not exist at that date and which was not established for the specific purpose of contesting or defending the Decision in so far as it concludes that there was an infringement, in particular the studies generally covering the effects of parallel trade in medicines in the Community, other than those produced during the administrative procedure, must be excluded from the discussion at the outset. 2. The existence of an agreement between undertakingsa) Content of the Decision 60 The Commission found, at recital 109 to the Decision, that the General Sales Conditions constituted an agreement between GW and all the wholesalers who had subscribed to them. b) Arguments of the parties61 GSK claims that the General Sales Conditions do not constitute an agreement.62 It maintains that GW and the Spanish wholesalers who signed the General Sales Conditions did not manifest an independent will, in so far as the wholesale price of the medicines reimbursed by the Spanish sickness insurance scheme is imposed on them by the applicable Spanish regulations. 63 Furthermore, they did not manifest a concurrent will to restrict competition, but merely a concurrent will to sell and purchase medicines according to the terms set out in the General Sales Conditions. 64 The Commission, supported by the interveners, disputes the merits of those arguments.c) Findings of the Court65 GSK’s arguments lead the Court to examine, in the first place, whether GW and the Spanish wholesalers did manifest an independent will by reference to the Spanish regulations on the wholesale price of medicines reimbursed by the Spanish sickness insurance scheme and therefore whether the conduct with which the Commission was faced was indeed conduct on the part of undertakings and not conduct on the part of the State. Its arguments also lead the Court to examine, in the second place, should it prove necessary to do so, whether GW and those wholesalers manifested a concurrent will, and therefore whether the Commission was indeed faced with bilateral conduct and not with unilateral conduct. Independence of wills66 Article 81(1) EC applies only to anti-competitive conduct engaged in by undertakings on their own initiative (Case 267/86 Van Eycke [1988] ECR 4769, paragraph 16; Joined Cases C‑359/95 P and C‑379/95 P Commission and France v Ladbroke Racing [1997] ECR I‑6265, paragraph 33; and Case C-198/01 CIF [2003] ECR I-8055, paragraph 45). 67 Where, in order to decide whether that provision is applicable, it is necessary first to evaluate the possible impact of national regulations, it must be determined whether those regulations leave any scope for competition that might be prevented, restricted or distorted by autonomous conduct on the part of undertakings (Commission and France v Ladbroke Racing, paragraph 66 above, paragraphs 32 and 35, and CIF, paragraph 66 above, paragraph 66). 68 Where it is clear, following that evaluation, that the regulations in question require that undertakings engage in anti-competitive conduct, or eliminate any possibility of competitive activity on their part, Article 81(1) EC does not apply (Commission and France v Ladbroke Racing, paragraph 66 above, paragraph 33, and CIF, paragraph 66 above, paragraph 67). 69 Where, on the other hand, it is clear that those regulations do leave scope for competition that might be prevented, restricted or distorted by autonomous conduct on the part of undertakings, Article 81(1) EC does apply (Commission and France v Ladbroke Racing, paragraph 66 above, paragraph 34, and CIF, paragraph 66 above, paragraph 56). 70 The possibility of excluding particular anti-competitive conduct from the scope of that provision on the ground that it is required by national regulations has been applied restrictively by the Community Courts (CIF, paragraph 66 above, paragraph 67, and Case T-513/93 Consiglio Nazionale degli Spedizionieri Doganali v Commission [2000] ECR II‑1807, paragraph 60). 71 It is therefore necessary to determine whether, as GSK maintains, the Spanish regulations require GW to apply, in the contracts which it concludes with Spanish wholesalers, prices which differ according to whether or not the medicines which it sells to them will be reimbursed by the Spanish sickness insurance scheme. 72 It is quite clear that the Spanish regulations, which result from the provisions of Title VIII of Law 25/1990 in conjunction with those of Decree 271/1990, do not in any way determine the wholesale prices of medicines which are not reimbursable by the Spanish sickness insurance scheme. GSK has acknowledged, moreover, both in its written submissions and at the hearing, that that assertion, which followed by implication but necessarily from the fact that Law 25/1990, in the version applicable when the General Sales Conditions entered into force, was silent as regards those products, was expressly confirmed by the subsequent amendments to that law, as stated at recitals 37 and 139 to the Decision. 73 Thus, even on the assumption that GSK’s argument, according to which the wholesale prices of medicines which are reimbursable by the scheme are fixed wholly independently by the Spanish authorities and are binding on GW and the Spanish wholesalers, is correct, contrary to the interveners’ contention, the fact remains that the conduct consisting in establishing, by contract, a system of differentiated prices prohibiting the Spanish wholesalers dealing with GW from purchasing at that price (the Clause 4A price) medicines which they will resell in other Member States, and obliging them to purchase those products at a higher price (the Clause 4B price), is not imposed by the Spanish regulations. When questioned on that point at the hearing, moreover, GSK was forced to agree. 74 Accordingly, it cannot be accepted that the national regulations in question required GW to apply, in the contracts which it concluded with Spanish wholesalers, prices which differ according to whether or not the medicines which it sells to them will be reimbursed by the Spanish sickness insurance scheme. Concurrence of wills75 Article 81(1) EC applies only to bilateral or multilateral conduct on the part of undertakings (Case C-49/92 P Commission v Anic Partecipazioni [1999] ECR I‑4125, paragraphs 79 and 112) and such conduct may take the form of agreements, concerted practices or decisions of associations. 76 In order for there to be an agreement, it is sufficient that at least two undertakings have expressed their joint intention to conduct themselves on the market in a specific way (Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 112; Case C-277/87 Sandoz Prodotti Farmaceutici v Commission [1990] ECR I‑45, summary publication, paragraph 13; and Bayer v Commission, paragraph 47 above, paragraphs 67 and 173). 77 While it is therefore essential that the decisions in which the Commission applies Article 81(1) EC show the existence of a joint intention to act on the market in a specific way, those decisions, contrary to GSK’s contention, are not required to establish the existence of a joint intention to pursue an anti-competitive aim. 78 In the present case, the Decision concludes that there is a joint intention expressed by GW and the Spanish wholesalers who subscribed to the General Sales Conditions to conduct themselves on the market in the manner specified in Clause 4 of those conditions, that is to say, to sell and purchase one or other of the 82 medicines to which those conditions apply at the Clause 4A price or the Clause 4B price, depending on whether the conditions laid down in point A of that clause are or are not satisfied. 79 Clearly, that conclusion is confirmed by the case-file, which shows, first of all, that GW adopted General Sales Conditions providing for a system of differentiated prices. Then, GW sent those General Sales Conditions to 89 wholesalers with whom it had commercial relations in Spain. On that occasion, it requested them, emphasising the importance which it ascribed to that request, to return a signed copy ‘[a]s proof of [their] acceptance’, within a mandatory period. Those factual elements reveal the intention expressed by GW to seek the Spanish wholesalers’ agreement to its General Sales Conditions and, therefore, to make them an offer concerning those conditions. Last, 75 of the 89 wholesalers to whom that offer was made did as requested by GW, signing the General Sales Conditions and returning them to GW within the prescribed period. Those factual elements reveal the intention expressed by those wholesalers to accept GW’s offer and thus to form an agreement with GW, as GSK acknowledged at the hearing. 80 None of the arguments put forward by GSK appears to be capable of upsetting that conclusion.81 In particular, GSK cannot find support in the fact that the Commission did not adduce evidence of the existence of a formal prohibition on exports imposed by GW on the Spanish wholesalers or of conduct revealing the tacit acceptance of that prohibition by those wholesalers. 82 It is for the Commission to prove the infringements which it finds by adducing, in the decisions in which it applies the competition rules, precise and coherent evidence demonstrating convincingly the existence of the facts constituting those infringements (Joined Cases 29/83 and 30/83 CRAM and Rheinzink v Commission [1984] ECR 1679, paragraph 20, and Joined Cases C‑2/01 P and C‑3/01 P BAI and Commission v Bayer [2004] ECR I‑23, paragraph 62). 83 That evidence may consist of direct evidence, taking the form, for example, of a written document (Joined Cases T‑25/95, T‑26/95, T‑30/95 to T‑32/95, T‑34/95 to T‑39/95, T‑42/95 to T‑46/95, T‑48/95, T‑50/95 to T‑65/95, T‑68/95 to T‑71/95, T‑87/95, T‑88/95, T‑103/95 and T‑104/95 Cimenteries CBR and Others v Commission [2000] ECR II‑491, paragraph 862, and, on appeal, Aalborg Portland and Others v Commission, paragraph 55 above, paragraph 237), or, failing that, indirect evidence, for example in the form of conduct (Bayer v Commission, paragraph 47 above, paragraph 73, and, on appeal, BAI and Commission v Bayer, paragraph 82 above, paragraph 100). 84 In the present case, it was observed above that the Commission had relied on an exchange of documents showing, beyond all possible doubt, that GW had proposed to the Spanish wholesalers that they conduct themselves on the market in the manner specified in the General Sales Conditions and that most of them had agreed to that proposal. The Commission therefore saw no point, as it again emphasised at the hearing, in seeking other evidence, such as evidence of the conduct of GW and the conduct of those wholesalers. 85 Likewise, GSK cannot validly maintain, in essence, that the wholesalers approached by GW would ultimately have disagreed with GW. 86 Where, as in this case, the Commission has adduced evidence of the existence of an agreement, it is for an undertaking which has taken part in that agreement to adduce evidence that it distanced itself from that agreement, evidence which must demonstrate a clear intention, brought to the notice of the other participating undertakings, to withdraw from that agreement (see, to that effect, BAI and Commission v Bayer, paragraph 82 above, paragraph 63; Aalborg Portland and Others v Commission, paragraph 55 above, paragraphs 81 to 84; and Case T‑61/99 Adriatica di Navigazione v Commission [2003] ECR II‑5349, paragraphs 135 to 138). 87 In the present case, while it is true that some of the Spanish wholesalers who had subscribed to the General Sales Conditions expressed doubts as to the legality of those conditions, as stated at recital 12 to the Decision, there is no indication in the case-file that they distanced themselves from the agreement within the meaning of the case-law. Likewise, it is true that a number of them exported medicines purchased from GW at the Clause 4A price. However, it is also apparent from the case-file that they eventually agreed, at GSK’s request, to pay the invoices corresponding to the difference between that price and the Clause 4B price. In any event, those facts concern only a few wholesalers and it cannot be concluded that they all distanced themselves from the agreement which they had previously concluded with GW. 88 It is also true that three trade associations, Aseprofar, the Asociación de empresarios de cooperativas farmacéuticas and Fedifar, lodged complaints with the Commission and with the Servicio de defensa de competencia (service for the protection of competition), as stated at recital 3 to the Decision, and that the members of those associations, direct members in the case of the first two associations and indirect members in the case of the third, included some of the wholesalers who signed the General Sales Conditions. None the less, the mere fact that a number of trade associations whose members included, among others, some of the signatories of the General Sales Conditions, submitted such complaints cannot suffice to prove that all the wholesalers did not really intend, or no longer intended as from the date on which those complaints were lodged, to collude with GW. 89 Accordingly, it cannot be accepted that GW and the wholesalers who subscribed to the General Sales Conditions did not manifest a joint intention. 90 It follows from the foregoing that it is not apparent, on the basis of GSK’s arguments, that the Commission was wrong to conclude that there was an agreement. 3. The existence of a restriction of competition91 The Commission found at recitals 116 to 143 and 189 to the Decision that Clause 4 of the General Sales Conditions had both the object and the effect of restricting competition. 92 The Commission began by examining the object of that clause and observed at the outset, at recital 116 to the Decision, that the clause sought to limit parallel trade between Spain and other Member States in the medicines sold by GW. The Commission also found, at recital 117 to the Decision, that a comparison between the Clause 4A price, applicable to medicines intended to be resold and reimbursed in Spain, and the Clause 4B price, applicable to medicines intended to be resold or reimbursed in other Member States, revealed that its application would have the effect, depending on the case, of excluding or impeding parallel trade. 93 The Commission then considered, at recitals 117 to 119 to the Decision, that Clause 4 of the General Sales Conditions produced effects tantamount to those of an export ban in a considerable number of cases while impeding parallel trade in other cases in very much the same way as a system of dual pricing. The Commission also considered, at recitals 120 to 123 to the Decision, that the existence in Spain of national regulations relating to the procedures for fixing the wholesale prices of medicines reimbursed by the national Spanish sickness insurance scheme was not capable of altering that analysis. 94 Last, the Commission observed, at recitals 124 and 125 to the Decision, that the Court of Justice and the Court of First Instance had always qualified agreements containing export bans, dual-pricing systems or other limitations of parallel trade as restricting competition ‘by object’, so that Clause 4 of the General Sales Conditions must be regarded as having the object of restricting competition. 95 The Commission proceeded to examine the effect of Clause 4 of the General Sales Conditions and considered at the outset, at recital 126 to the Decision, that the fact of establishing a higher wholesale price where the medicines were to be exported, to which the transaction costs connected with that operation (shipping, repackaging, etc.) had to be added, tended to limit the parallel trade that would be expected in the absence of that price. 96 The Commission then considered, at recitals 127 to 135 to the Decision, that Clause 4 did not merely neutralise a distortion of competition attributable to the Kingdom of Spain and was not justified by the existence of a specific regulatory context. 97 The Commission also found, at recitals 136 to 140 to the Decision, that the differentiated prices specified in Clause 4 of the General Sales Conditions had the effect, first, of restricting the freedom of action of the wholesalers operating in the Member State of origin of the parallel trade and, second, of restricting competition between those wholesalers and the distributors operating in the Member State of destination of that parallel trade. 98 The Commission finally referred, at recitals 141 to 143 to the Decision, to the extent to which currency fluctuations had contributed to parallel trade in medicines between 1996 and 1998, in particular between Spain and the United Kingdom. 99 GSK claims, in substance, that Clause 4 of the General Sales Conditions does not constitute a restriction of competition.100 In the first place, it maintains that competition is distorted at the outset in the prescription medicines sector and that Clause 4 of the General Sales Conditions seeks only to neutralise that situation, which is attributable to the existence of national regulations governing the price of those medicines and also to the absence of Community rules designed to harmonise the national regulations. 101 In the second place, GSK submits that Clause 4 of the General Sales Conditions does not have the object of restricting competition and that the Commission has not demonstrated that it has the effect of doing so, in the light of the specific features of the relevant market and, more generally, of the legal and economic context in which Clause 4 applies. 102 The Commission, supported by the interveners, disputes the merits of those arguments. It contends that it was correct to find that Clause 4 of the General Sales Conditions, which was capable of excluding or impeding parallel trade, had the object and the effect of restricting competition. 103 GSK does not dispute the material accuracy of the facts on which the Commission relied for the purpose of applying Article 81(1) EC, but contests the Commission’s assessment of those facts. All of the applicant’s criticisms relate, in substance, to the consequences to be drawn, when analysing the existence of a restriction of competition, from the legal and economic context peculiar to the medicines sector. More particularly, its criticisms concern, in the first place, the competitive situation existing before Clause 4 of the General Sales Conditions was adopted and, in the second place, the restriction of competition attributed to that clause. The competitive situation existing before Clause 4 of the General Sales Conditions was adopted104 As GSK rightly asserts, the sector of medicines reimbursed by the national sickness insurance scheme continues to be characterised, in a number of Member States, by the existence of regulations which go beyond the mere regulation of an economic activity, in particular in matters of prices (Case 181/82 Roussel and Others [1983] ECR 3849, paragraph 8). The coexistence of those different national regulations may distort competition (Joined Cases C‑267/95 and C‑268/95 Merck and Beecham [1996] ECR I‑6285, paragraph 47). It tends, moreover, to favour a certain partitioning of the national markets on that point (see, by analogy, Joined Cases 40/73 to 48/73, 50/73, 54/73 to 56/73, 111/73, 113/73 and 114/73 Suiker Unie and Others v Commission [1975] ECR 1663, paragraph 24). 105 However, in accordance with the case-law cited at paragraphs 67 to 70 above, it is only where the sector in which the agreement is applied is subject to regulations which preclude the possibility of competition that might be prevented, distorted or restricted by that agreement that Article 81(1) EC is inapplicable. 106 In the present case, however, there is competition between producers of medicines, which is mainly concerned with parameters other than price, in particular innovation (Roussel, paragraph 104 above, paragraph 9), as GSK maintained in its written submissions and at the hearing. 107 Furthermore, there may be competition between a producer and his distributors, or between parallel traders and national distributors, which specifically takes advantage of the significant differences in price to which the national regulations in question contribute and which, where the medicines are protected by a patent which confers a temporary monopoly on its holder, is, until the expiry of that patent, the only form of price competition envisageable in respect of them, as GSK also maintained in its written submissions. 108 Accordingly, as the regulatory situation described by GSK is capable of restricting competition, but not of excluding it, it does not have the consequence of rendering Article 81(1) EC inapplicable. The restriction of competition attributed to Clause 4 of the General Sales Conditions 109 As GSK claims that the Commission did not take proper account of the relevant legal and economic context when it examined the existence of a restriction of competition, it should be noted at the outset that the competition referred to in Article 3(1)(g) EC and Article 81 EC is taken to mean effective competition, that is to say, the degree of competition necessary to ensure the attainment of the objectives of the Treaty. Its intensity may vary to an extent dictated by the nature of the product concerned and the structure of the relevant market. Furthermore, its parameters may assume unequal importance, as price competition does not constitute the only effective form of competition or that to which absolute priority must in all circumstances be given (Case 26/76 Metro v Commission [1977] ECR 1875 (‘Metro I’), paragraphs 20 and 21, and CIF, paragraph 66 above, paragraph 68). 110 Consequently, the characterisation of a restriction of competition within the meaning of Article 81(1) EC must take account of the actual framework and, therefore, of the legal and economic context in which the agreement to which that restriction is imputed is deployed. Such an obligation is imposed for the purpose of ascertaining both the object and the effect of the agreement (Société technique minière, paragraph 55 above, pp. 249 and 250; Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299, at p. 343; and Case C‑399/93 Oude Luttikhuis and Others [1995] ECR I‑4515, paragraph 20). 111 Thus, when examination of the clauses of an agreement, carried out in their legal and economic context, reveals in itself the existence of an alteration of competition, it may be presumed that that agreement has as its object the prevention, restriction or distortion of competition (see Société technique minière, paragraph 55 above, pp. 249, 251 and 252, and Consten and Grundig v Commission, paragraph 110 above, p. 343), so that there is no need to examine its effect (Consten and Grundig v Commission, paragraph 110 above, p. 342, and Commission v Anic Participazioni, paragraph 75 above, paragraph 99). 112 Where that is not so, on the other hand, it is necessary to examine the effect of the agreement and to prove to the requisite legal standard that it actually or potentially prevents, restricts or distorts competition (Société technique minière, paragraph 55 above, pp. 249, 251 and 252, and Case C-7/95 P John Deere v Commission [1998] ECR I‑3111, paragraphs 75 and 77). 113 In the present case, the Court will examine, in turn, GSK’s arguments concerning the object and the effect of Clause 4 of the General Sales Conditions. – The existence of an anticompetitive object114 GSK does not dispute that Clause 4 of the General Sales Conditions was inserted with the intention of limiting the parallel trade between Spain and other Member States, in particular the United Kingdom, in 82 medicines sold by GW. 115 It follows from the case-law that agreements which ultimately seek to prohibit parallel trade must in principle be regarded as having as their object the prevention of competition (Consten and Grundig v Commission, paragraph 110 above, pp. 342 and 343; Case 19/77 Miller International v Commission [1978] ECR 131, paragraphs 7 and 18; Joined Cases 32/78, 36/78 and 82/78 BMW Belgium v Commission [1979] ECR 2435, paragraphs 20 to 28 and 31; and Sandoz Prodotti Farmaceutici v Commission, paragraph 76 above, paragraph 16). 116 It also follows from the case-law that agreements that clearly intend to treat parallel trade unfavourably must in principle be regarded as having as their object the restriction of competition (Joined Cases 96/82 to 102/82, 104/82, 105/82, 108/82 and 110/82 IAZ and Others v Commission [1983] ECR 3369, paragraphs 23 to 25; and Case C‑551/03 P General Motors v Commission [2006] ECR I-0000, paragraphs 67 and 68). 117 However, GSK is correct to maintain that, having regard to the legal and economic context, the Commission could not rely on the mere fact that Clause 4 of the General Sales Conditions established a system of differentiated price intended to limit parallel trade as the basis for its conclusion that that provision had as its object the restriction of competition. 118 In effect, the objective assigned to Article 81(1) EC, which constitutes a fundamental provision indispensable for the achievement of the missions entrusted to the Community, in particular for the functioning of the internal market (Case C‑126/97 Eco Swiss [1999] ECR I‑3055, paragraph 36, and Case C‑453/99 Courage v Crehan [2001] ECR I‑6297, paragraph 20), is to prevent undertakings, by restricting competition between themselves or with third parties, from reducing the welfare of the final consumer of the products in question (Joined Cases T‑213/01 and T‑214/01 Österreichische Postsparkasse and Bank für Arbeit und Wirtschaft v Commission [2006] ECR II-0000, paragraph 115; see also, to that effect, Consten and Grundig v Commission, paragraph 110 above, p. 493, and Case 28/77 Tepea v Commission [1978] ECR 1391, paragraph 56). At the hearing, in fact, the Commission emphasised on a number of occasions that it was from that perspective that it had carried out its examination in the present case, initially concluding that the General Sales Conditions clearly restricted the welfare of consumers, then considering whether that restriction would be offset by increased efficiency which would itself benefit consumers. 119 Consequently, the application of Article 81(1) EC to the present case cannot depend solely on the fact that the agreement in question is intended to limit parallel trade in medicines or to partition the common market, which leads to the conclusion that it affects trade between Member States, but also requires an analysis designed to determine whether it has as its object or effect the prevention, restriction or distortion of competition on the relevant market, to the detriment of the final consumer. As may be seen from the case-law cited at paragraphs 111 and 112 above, that analysis, which may be abridged when the clauses of the agreement reveal in themselves the existence of an alteration of competition, as the Commission observed at the hearing, must, on the other hand, be supplemented, depending on the requirements of the case, where that is not so (Société technique minière, paragraph 55 above, pp. 248 to 251, and Consten and Grundig v Commission, paragraph 110 above, pp. 342 and 343). 120 In particular, in Consten and Grundig v Commission, paragraph 110 above, which gave rise to the case-law cited at paragraphs 115 and 116 above, the Court of Justice, contrary to the Commission’s contention in its written submissions, did not hold that an agreement intended to limit parallel trade must be considered by its nature, that is to say, independently of any competitive analysis, to have as its object the restriction of competition. On the contrary, the Court of Justice merely held, first, that an agreement between a producer and a distributor which might tend to restore the national divisions in trade between Member States might be of such a kind as to frustrate the most fundamental objectives of the Community (p. 340), a consideration which led it to reject a plea alleging that Article 81(1) EC was not applicable to vertical agreements (pp. 339 and 340). The Court of Justice then carried out a competitive analysis, abridged but real, during the course of which it held, in particular, that the agreement in question sought to eliminate any possibility of competition at the wholesale level in order to charge prices which were sheltered from all effective competition, considerations which led it to reject a plea alleging that there was no restriction of competition (pp. 342 and 343). 121 While it has been accepted since then that parallel trade must be given a certain protection, it is therefore not as such but, as the Court of Justice held, in so far as it favours the development of trade, on the one hand, and the strengthening of competition, on the other hand (Case C‑373/90 X [1992] ECR I‑131, paragraph 12), that is to say, in this second respect, in so far as it gives final consumers the advantages of effective competition in terms of supply or price (Tepea v Commission, paragraph 118 above, paragraphs 43 and 56). Consequently, while it is accepted that an agreement intended to limit parallel trade must in principle be considered to have as its object the restriction of competition, that applies in so far as the agreement may be presumed to deprive final consumers of those advantages. 122 However, if account is taken of the legal and economic context in which GSK’s General Sales Conditions are applied, it cannot be presumed that those conditions deprive the final consumers of medicines of such advantages. In effect, the wholesalers, whose function, as the Court of Justice has held, is to ensure that the retail trade receives supplies with the benefit of competition between producers (Metro I, paragraph 109 above, paragraph 40), are economic agents operating at an intermediate stage of the value chain and may keep the advantage in terms of price which parallel trade may entail, in which case that advantage will not be passed on to the final consumers. 123 That context is described in Section I of the Decision, which deals with the facts, and more particularly in Subsections F, entitled ‘Parallel trade in pharmaceutical products with the Community – impact of national regulatory frameworks and currency fluctuations’ and G, entitled ‘Parallel trade in GW products within the Community – impact of the GW sales conditions’. 124 It is apparent on reading that description that the main characteristics of the legal and economic context are as follows, as GSK agreed both in its written submissions and at the hearing. 125 First, according to recitals 31, 36 and 50 to the Decision, the price of medicines reimbursed by the national health insurance schemes is not determined as a result of a competitive process throughout the Community but is directly fixed following an administrative procedure in most Member States and indirectly controlled by the other Member States. 126 Second, according to recital 31 to the Decision, at this stage the harmonisation of the applicable national provisions is limited. In fact, Directive 89/105 endeavours to provide that where the pricing of those medicines is provided for in national law it must be preceded by a transparent procedure and be based on objective and verifiable criteria. For the remainder, according to recital 50 to the Decision, national law may provide that various criteria are to be taken into account, depending on the policy pursued by the Member State concerned as regards public health and the financing of the national sickness insurance scheme, as Directive 89/105 also explains. That is the case, in particular, of Spanish law, which, according to recitals 37 and 38 to the Decision, provides for the direct fixing of a maximum wholesale price and the indirect fixing of a maximum retail price. United Kingdom law does not provide for the fixing of prices but, according to recitals 44 to 46 to the Decision, for control of pharmaceutical companies’ profits. 127 Third, according to recitals 29 to 31 and 34 to the Decision, the differences between the applicable national provisions are a structural cause of the existence of significant price differentials between Member States. 128 Fourth, according to recitals 30, 32 and 53 to the Decision, fluctuations in exchange rates are a cyclical cause of those price differentials. That phenomenon, which potentially affected all Member States of the Community on 6 March 1998, the date on which GSK notified the General Sales Conditions to the Commission, still affected the United Kingdom, Denmark and Sweden on 8 May 2001, the date on which the Commission adopted the Decision, as stated at recital 53 to the Decision. 129 Fifth, those price differentials are themselves the cause of parallel trade in medicines in the Community, according to recital 29 to the Decision. As indicated at recitals 33 and 34 to the Decision, the main Member States of destination of that parallel trade are Denmark, the Netherlands and the United Kingdom. 130 Sixth, certain Member States have adopted provisions which, independently of the question whether they are intended to encourage parallel trade – which the Commission explains at recitals 31, 33, 34, 36 and 52 to the Decision, but which GSK disputes –, may have such an effect. That is notably the case in the United Kingdom, where, as stated at recital 49 to the Decision, the National Health Service automatically pays pharmacists a sum equal to the manufacturer’s list price on the United Kingdom market, minus a standard discount of 4 to 5%, which is supposed to correspond to the savings made by pharmacists where they obtain their supplies elsewhere, at a lower price. 131 Seventh, as stated at recitals 31 and 51 to the Decision, the patient generally bears only a limited part, although this varies from Member State to Member State, of the price of the medicines reimbursed by the national sickness insurance scheme which he consumes. The national sickness insurance scheme bears the essential part. That is notably the case in the United Kingdom, where, according to recital 48 to the Decision, the patient pays GBP 6 per item, unless he belongs to a category exempt from such payment. 132 The Commission refers to certain aspects of that description when it examines the object of Clause 4 of the General Sales Conditions. It thus makes reference to that description, at recital 117 to the Decision, in order to establish the impact of that requirement on parallel trade, which is not disputed. It also refers to that description, at recital 121 to the Decision, in order to explain that, contrary to GSK’s contention, the pharmaceutical companies have a power of negotiation in the Spanish procedure for setting the wholesale price of medicines. 133 At no point, however, does the Commission examine the specific and essential characteristic of the sector, which relates to the fact that the prices of the products in question, which are subject to control by the Member States, which fix them directly or indirectly at what they deem to be the appropriate level, are determined at structurally different levels in the Community and, unlike the prices of other consumer goods to which the Commission referred in its written submissions and at the hearing, such as sports items or motor cycles, are in any event to a significant extent shielded from the free play of supply and demand. 134 That circumstance means that it cannot be presumed that parallel trade has an impact on the prices charged to the final consumers of medicines reimbursed by the national sickness insurance scheme and thus confers on them an appreciable advantage analogous to that which it would confer if those prices were determined by the play of supply and demand. 135 Incidentally, the Commission itself agrees with what is at first sight the ambiguous impact of parallel trade in medicines on the welfare of final consumers, since it states in Communication COM(1998) 588 final of 25 November 1999 on the single market in pharmaceuticals, which is cited at recital 161 to the Decision and referred to by the parties in their written submissions and in their answers to the written questions put by the Court, that unless parallel trade can operate dynamically on prices, it creates inefficiencies because most, although not all, of the financial benefit accrues to the parallel trader rather than to the health care system or the patient (p. 6). 136 Accordingly, it cannot be considered that examination of Clause 4 of the General Sales Conditions, which according to GSK is designed to ensure that the wholesale price set by the Kingdom of Spain is actually charged only for the medicines to which it was intended by law to apply, reveals in itself that competition is prevented, restricted or distorted. 137 None of the arguments of the Commission or the interveners appears to be capable of calling that conclusion in question.138 In particular, the Commission is not entitled, as it did at recitals 118 and 119 to the Decision and in its written submissions, merely to draw parallels with the agreements which it has had occasion to examine in its previous practice in taking decisions and take the view that Clause 4 of the General Sales Conditions resembles those agreements or can be treated in the same way as them. Such an approach ultimately ignores the elements of legal and economic context described above, which are not present in the decisions adopted pursuant to Article 81(1) EC to which the Commission referred. 139 Furthermore, the Commission is not correct to claim that the existence of the Spanish regulations on the setting of the wholesale price of medicines is ultimately not decisive, owing to the power of negotiation which those regulations confer on the pharmaceutical companies, as it did in recitals 120 to 123 to the Decision and in its written submissions. Nor is it correct to submit that the coexistence of different State rules on that subject is also not decisive, in the light of the case-law (BMW Belgium v Commission, paragraph 115 above, paragraph 5, and Case T-175/95 BASF v Commission [1999] ECR II‑1581, paragraphs 121 to 123 and 136), as it also did in its written submissions. 140 In effect, even on the assumption that the Spanish regulations confer a power of negotiation on the pharmaceutical companies, as the Commission and the interveners again maintained at the hearing, the fact remains that the existence of those regulations, and their coexistence with the regulations of other Member States, has a significant impact on an essential parameter of competition (see, by analogy, Suiker Unie and Others v Commission, paragraph 104 above, paragraphs 17 and 71), a contextual element which cannot be overlooked in the competitive analysis. 141 No parallel can therefore be drawn between the cases to which the Commission refers, which, as the Commission itself observed at the hearing, concerned price-freezing measures relating to new vehicles (BMW Belgium v Commission, paragraph 115 above, paragraph 5) or vehicle refinishing paints (BASF v Commission, paragraph 139 above, paragraph 123) in force in a single Member State of the Community, and the present case, which is characterised by the fact that the price of the products in issue, which is finally set by the Member States, falls structurally outside the play of supply and demand and is established at structurally different levels throughout the Community, notwithstanding a residual competition which may be revealed by parallel trade. 142 Last, it cannot be inferred from paragraph 75 of General Motors v Commission, paragraph 116 above, to which the Commission referred in its answer to the written questions put by the Court and at the hearing, that the situation of fact recalled in the preceding paragraph should be completely overlooked. 143 In fact, it follows from paragraph 75 of that judgment that the absence of fiscal harmonisation does not prevent the conclusion that an agreement intended to limit parallel trade in motor vehicles has the object of restricting competition, although, as the Commission observed at the hearing, the absence of such harmonisation has an effect on competition in that sector. On the other hand, it does not in any way follow that the State rules at issue in the present case are indifferent to the competitive analysis, when they have as their object to shield the pricing of medicines reimbursed by the national sickness insurance schemes from competition. 144 As regards the interveners, for their part, it does not avail them to rely as they did at the hearing on the fact that, in reality, the national regulations at issue are not intended to shield the pricing of those medicines from the play of supply and demand, but to compensate for the absence of competition caused by the weight of the pharmaceutical companies on the market and to ensure fair prices. 145 When it is dealing with an application for annulment of a Commission decision applying the competition rules, the Community judicature carries out, in accordance with Article 230 EC, a review of the lawfulness of that decision. The interveners’ arguments rely on facts which are neither mentioned nor, a fortiori, examined by the Commission in the Decision. It is not for the Court to substitute itself for the Commission and examine them for the first time. 146 Furthermore, those arguments must be contrasted with GSK’s arguments that the national rules on patents are intended to allow the pharmaceutical companies to recover their research and development (‘R&D’) costs by granting them a temporary monopoly, following which manufacturers of generic medicines restore competition on price, so that parallel traders, which operate on the market during the lifetime of the patents, are the vectors of artificial competition and not of effective competition within the meaning of Article 3(1)(g) EC and Article 81 EC. 147 Consequently, the principal conclusion reached by the Commission, namely that Clause 4 of the General Sales Conditions must be considered to be prohibited by Article 81(1) EC in so far it has as its object the restriction of parallel trade, cannot be upheld. As the prices of the medicines concerned are to a large extent shielded from the free play of supply and demand owing to the applicable regulations and are set or controlled by the public authorities, it cannot be taken for granted at the outset that parallel trade tends to reduce those prices and thus to increase the welfare of final consumers. An analysis of the terms of Clause 4 of the General Sales Conditions, carried out in that context, therefore does not permit the presumption that that provision, which seeks to limit parallel trade, thus tends to diminish the welfare of final consumers. In this largely unprecedented situation, it cannot be inferred merely from a reading of the terms of that agreement, in its context, that the agreement is restrictive of competition, and it is therefore necessary to consider the effects of the agreement, if only to ascertain what the regulatory authority was able to apprehend on the basis of such a reading. – The existence of an anti-competitive effect148 In order to examine the effect of an agreement on competition, it is necessary, first of all, to define the relevant market or markets, from both a material and a geographic point of view (Case C‑234/89 Delimitis [1991] ECR I‑935, paragraphs 15, 16 and 18). 149 In the present case, as regards the relevant products market, the Commission considered at recitals 112 and 113 to the Decision that, taking into account GSK’s observations that the nature and scope of parallel trade and the General Sales Conditions could give rise to the existence of a product market comprising all prescription medicines, it was not necessary to determine precisely GW’s market shares for each of the 82 medicines involved. Since the Commission, at the hearing, cast doubt on the existence of the GSK observations on which those recitals are based, it must be held that a reading of the supplementary notification reveals that the Decision is not vitiated by an error of fact on that point. 150 As regards the relevant geographic market, the Commission finally considered, at recital 114 to the Decision, that it must be considered to be the national market, owing, in particular, to the existence in the Member States of the Community of different price and reimbursement regulations, different brand and packing strategies, different distribution systems and different prescribing habits. 151 The markets affected by the agreement were not expressly set out by the Commission. It may be inferred from recitals 112 to 114, 117 and 126 to the Decision, however, as the Commission confirmed in its answers to the written questions put by the Court, that these were, first, the Spanish market, where the Spanish wholesalers may purchase medicines from GW, and, second, all the national markets of the Community where they may resell them, that is to say, those where the differential between the Spanish price and the domestic price is sufficient to make parallel trade lucrative. 152 GSK does not dispute the Commission’s approach to the definition of the relevant geographic market, as it again confirmed at the hearing. It is therefore common ground that the geographic market, which is to be understood as the territory on which the objective conditions of competition relating to the relevant product are, if not the same, at least sufficiently homogeneous for all traders (Case 27/76 United Brands v Commission [1978] ECR 207, paragraphs 44 and 53, and Case T‑83/91 Tetra Pak v Commission [1994] ECR II‑755, paragraph 91), may in the present case be taken to be the national market, having regard in particular to the different regulations on the prices and reimbursement of medicines. 153 On the other hand, GSK disputes the Commission’s approach to the definition of the relevant product market. It maintains that, having regard to the Spanish regulations in that regard, the Commission ought to have drawn a distinction between a regulated market, consisting of the medicines intended to be resold and reimbursed in Spain, and a free market, consisting of the medicines intended to be resold and reimbursed in any other Member State. However, that criticism does not appear to be well founded. 154 It follows from recitals 112 and 113 to the Decision that the Commission did not thoroughly investigate the question of the definition of the relevant product market. However, when questioned about the framework within which it had reasoned in practice, the Commission indicated in its answers to the written questions put by the Court that, while taking the view that it was not required to define the relevant product market in so far as it had been able to conclude that there was an anti-competitive object, it had made a summary definition of that market. 155 It also explained, in its written answers and then at the hearing, that, while not adopting an extremely detailed approach in that regard, it had ultimately adhered to the definition traditionally used in such matters, namely a definition based on the third level of the ‘Anatomical therapeutic classification’ (ATC) drawn up by the European Pharmaceutical Medical Research Association (EphMRA). As stated at recitals 16 and 110 to the Decision, that level corresponds to subgroups defined by reference to the therapeutic indication and the pharmacological properties of the medicines concerned. 156 Where the Court rules on an application for annulment of a Community measure, it falls upon it to interpret that measure itself, in particular where the institution which adopted it provides explanations of the way in which it should be understood (Case C‑194/99 P Thyssen Stahl v Commission [2003] ECR I‑10821, paragraphs 55 and 56). In the present case, a reading of the Decision as a whole reveals that the Commission, by implication but necessarily, reasoned within the framework of a market perceived as the market in medicines reimbursed by the Spanish sickness insurance scheme, in so far as they might be subject to parallel trade to other Member States of the Community. Thus, it was in a global manner that the Commission described the parallel trade in medicines sold by GW in Spain, at recitals 64 to 71 to the Decision, and the impact of the General Sales Conditions on that phenomenon, at recitals 72 to 75 to the Decision. It followed the same approach when it examined the restrictive effect of Clause 4 of those conditions, at recitals 117, 126, 137, 139 and 140 to the Decision, while concentrating its attention on a sample of eight medicines particularly suitable for parallel trade about which GSK had provided information to the Commission. It also followed the same approach, ultimately, when it evaluated the appreciable nature of that anti-competitive effect, at recital 144 to the Decision, and also the appreciable effect on trade between Member States, at recital 146 to the Decision. 157 As may be seen from paragraphs 13 and 14 of Commission Notice 97/C 372/03 on the definition of relevant market for the purposes of Community competition law (OJ 1997 C 372, p. 5, paragraphs 13 and 14), the Commission has undertaken to define the relevant product market principally by reference to demand substitutability and supply substitutability. 158 As regards the first aspect, it follows from Article 1(a) of Commission Regulation No 2790/1999 of 22 December 1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices (OJ 1999 L 336, p. 21) that in the context of an agreement such as that at issue in the present case it is necessary to ascertain what products the buyer regards as interchangeable or substitutable by reason of their characteristics, their prices and their intended use. 159 It does not appear to be manifestly incorrect to consider that the buyer, that is to say, the Spanish wholesaler who might engage in parallel trade, is less interested, for that purpose, in the therapeutic indication and the pharmacological products of each of the medicines which he buys from GW than in the fact that all of those medicines are reimbursed by the Spanish sickness insurance scheme and that their price is therefore set by the Spanish authorities. Likewise, it does not appear to be manifestly incorrect to consider that the buyer is less interested in the price of each of the medicines as such than in the fact that there is a sufficient price differential to render parallel trade lucrative, for all of those medicines, between Spain and the Member State of destination. In those circumstances, it is not manifestly incorrect to accept that all the medicines reimbursed by the Spanish sickness insurance scheme which are capable of being sold at a profit owing to the price differential between Spain and the Member State of destination constitute a product market. 160 As regards the second aspect, it may be noted that, as is apparent from the observations of GSK on which the Commission relied at recitals 112 and 113 to the Decision, Clause 4 of the General Sales Conditions was conceived in order to address, in a global manner, the question of parallel trade in medicines sold by GW between Spain and the Member States to which parallel trade might be lucrative for the Spanish wholesalers. 161 Accordingly, the existence of the Spanish rules appears, from the point of view of both buyers and GSK, to be more a factor which confers unity on the relevant product market than an element which ought to serve to distinguish a market for the distribution of medicines intended for domestic consumption, which would be regulated, from a market for the distribution of medicines intended for export, which would be free. In reality, the distinction suggested by GSK relates rather to the evidently territorial nature of the Spanish rules and the national dimension of the relevant geographic market, as, moreover, GSK acknowledged at the hearing. 162 It is necessary, in the second place, to examine the actual or potential effects of the agreement on competition. That examination entails a comparison of the competitive situation resulting from the agreement and the situation that would exist in its absence (Société technique minière, paragraph 55 above, p. 250, and John Deere v Commission, paragraph 112 above, paragraph 76). 163 In the present case, it must be observed at the outset that it follows from recitals 26 and 28 to the Decision that the application of the General Sales Conditions, which became applicable on 9 March 1998, was suspended on 16 October 1998 and remained suspended until the date of adoption of the Decision, as the parties recalled at the hearing. Consequently, the examination carried out by the Commission must be interpreted as being mainly devoted to their potential effects on competition, as the parties agreed at the hearing. 164 In that regard, GSK accepts that Clause 4 of the General Sales Conditions has, or may have, the effect of limiting parallel trade, but denies that it has or may have the effect of restricting competition. The main arguments which it puts forward concern, in substance, four aspects of the Commission’s reasoning in the Decision. First, the fact that Clause 4 of the General Sales Conditions limits parallel trade and impinges on the freedom of action of the Spanish wholesalers does not in itself mean that it has the effect of restricting competition. Second, in the light of the legal and economic context in which Clause 4 operates, the fact that it establishes a system of differentiated prices does not in itself mean that it has the effect of restricting competition. Third, the Commission simply concluded that Clause 4 limited parallel trade, impinged on the freedom of action of the Spanish wholesalers and imposed differentiated prices, so that it did not demonstrate to the requisite legal standard that that provision had the effect of restricting competition. Fourth, the Commission did not in any event take account of the fact that Clause 4 of the General Sales Conditions was confined to neutralising a distortion of competition attributable to the Kingdom of Spain. 165 The Court must determine whether those various criticisms reveal that the Decision was incorrect to find that Clause 4 of the General Sales Conditions had the effect of restricting competition. 166 First, it is common ground that, as stated at recital 126 to the Decision, Clause 4 has the effect of limiting parallel trade in medicines sold by GW in Spain. In numerous cases, it substitutes for a Clause 4A price significantly lower than the prices in force in certain Member States other than Spain a Clause 4B price for which the differential is less or non-existent. To that extent, it cancels or reduces the profits which the Spanish wholesalers might make by exporting the medicines. 167 However, it must be borne in mind that, considered in itself, the fact that an agreement has or may have the effect of limiting parallel trade admittedly affects trade between Member States but does not necessarily restrict competition. It is the repercussions which that restriction of parallel trade has or may have on one or other of the parameters of competition, such as the quantity in which a product is supplied or the price at which it is sold, that provides evidence of such a restriction (see, to that effect, Tepea v Commission, paragraph 118 above, paragraphs 41, 43 and 56). 168 Thus, the fact that in the absence of Clause 4 of the General Sales Conditions the Spanish wholesalers would be able to buy medicines at the wholesale price set by the Spanish authorities, independently of the Member State in which those medicines are intended to be resold and of the national sickness insurance scheme by which they are intended to be reimbursed, and then to resell them in any Member State in which the price is sufficiently higher than the Spanish price to allow them to make a profit, taking into account the transaction costs, does not, independently of any examination of the extent to which parallel trade contributes to price competition, regard being had to the role played by the Member States in that regard, permit the conclusion that there is an effect restrictive of competition. 169 In consequence, GSK is correct to maintain that, after referring to the effect which Clause 4 of the General Sales Conditions has on parallel trade, the Commission was still required to demonstrate the effect on competition. 170 Second, it is not disputed that, as stated at recitals 137 to 139 to the Decision, Clause 4 of the General Sales Conditions has the effect of restricting the freedom of action of the Spanish wholesalers, in particular their freedom to choose their customers. 171 However, not every agreement which restricts the freedom of action of the participating undertakings, or of one of them, necessarily falls within the prohibition in Article 81(1) EC (Case C‑309/99 Wouters and Others [2002] ECR I‑1577, paragraph 97, and Case T‑112/99 M6 and Others v Commission [2001] ECR II‑2459, paragraph 76). In particular, any contract concluded between economic agents operating at different stages of the production and distribution chain has the consequence of binding them and, consequently, of restricting them, according to the stipulated terms, in their freedom of action. In the present case, whatever the price at which the Spanish wholesalers agree to buy a medicine from GW on the Spanish market (the Clause 4A price or the Clause 4B price), they are limited in their freedom of action since, from an economic point of view, they are not capable in the long term of reselling them at a lower price on the other national markets of the Community. However, as the objective of the Community competition rules is to prevent undertakings, by restricting competition between themselves or with third parties, from reducing the welfare of the final consumer of the products in question (paragraph 118 above), it is still necessary to demonstrate that the limitation in question restricts competition, to the detriment of the final consumer. Incidentally, the Commission itself explained, at the hearing, that the limitation of the freedom of action of the Spanish wholesalers was difficult to envisage in isolation and constituted only the starting-point of its examination. 172 Consequently, GSK is correct to maintain that, after relying on the effect of Clause 4 of the General Sales Conditions on the freedom of action of the Spanish wholesalers, the Commission was still required to demonstrate how that provision had the effect of restricting competition to the detriment of the final consumer. 173 Third, it is not disputed that Clause 4 of the General Sales Conditions establishes a system of differentiated prices according to whether each of the 82 medicines concerned is intended to be resold and reimbursed in Spain or in any other Member State. 174 Although at first reading recital 139 to the Decision may appear ambiguous on that point, it is apparent on examination that the Commission took the view in that recital that such a system had a discriminatory effect on account of the destination of the products in question (the Spanish market, on the one hand, and the other national markets, on the other hand). A reading of the Commission’s submissions confirms that interpretation. First, the system of differentiated prices established by GW is compared with a prohibitive discrimination on price according to the country of destination, the Commission taking the view that it results in applying dissimilar conditions to equivalent transactions within the meaning of Article 81(1)(d) EC. Second, the Commission refers to the case-law on Article 82(c) EC, the wording of which is identical to that of Article 81(1)(d) EC. 175 Article 81(1)(d) EC prohibits agreements which apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage. 176 In the present case, it is not open to doubt that the Spanish wholesalers are GW’s trading partners and that GW imposes unequal conditions on them according to whether they resell those medicines in Spain or in other Member States of the Community. On the other hand, it is not demonstrated that those sales constitute equivalent transactions and that the constituent elements of Article 81(1)(d) EC are therefore satisfied. 177 It follows from the case-law to which the Commission refers that Article 82(c) EC does not preclude an undertaking in a dominant position from setting different prices in the various Member States, in particular where the price differences are justified by variations in the conditions of marketing and the intensity of competition, but prohibits it from applying artificial price differences in the various Member States such as to place its customers at a disadvantage and to distort competition in the context of an artificial partitioning of national markets (Tetra Pak v Commission, paragraph 152 above, paragraph 160 and the case-law cited). More generally, it follows from that case-law that, while the fact that an undertaking in a dominant position applies different prices may, in the absence of objective explanation, constitute an indicium of discrimination where those prices are applied on a particular geographic market, characterised by sufficiently homogeneous conditions of competition, that is not the case where they are applied on separate geographic markets, characterised by insufficiently homogeneous conditions of competition, regard being had in particular to the relevant regulatory framework (see, to that effect, United Brands v Commission, paragraph 152 above, paragraphs 44 to 56 and 207, 208, 225, 228 and 233, and Tetra Pak v Commission, paragraph 152 above, paragraphs 92 to 96 and 161, 164, 165, 167 and 170). 178 Those considerations may be transposed to the present case, where a producer and its wholesalers agree to apply different prices according to the Member State in which the products in question are intended to be resold and reimbursed. It is common ground that each of those Member States constitutes a distinct market, in so far as the relevant geographic market is national owing, in particular, to the differences in the national regulations on the prices and the reimbursement of the medicines in question. The Commission itself therefore found in the Decision that where it supplied one or other of those national markets, a Spanish wholesaler operated, having regard in particular to the relevant regulatory framework, in conditions of competition which, as regards price, the parameter specifically concerned by Clause 4 of the General Sales Conditions, were heterogeneous. 179 Consequently, GSK is correct to maintain that the finding of a difference in price is not sufficient to support the conclusion that there is discrimination. It is possible that GSK applies different prices because different markets exist and not so that different markets will exist. 180 Such an explanation is suggested by the Commission itself, moreover, which indicated in Communication COM(1998) 588 final, paragraph 135 above, that the pharmaceutical companies apply price discrimination to reflect the differences in the ability to pay (p. 4) and adds, generally, that it would be extremely difficult to establish an appropriate level of price across the Community, as the choice of a low level would benefit immediate health care expenditure objectives but would provide a steady diminution of Europe’s contribution to global pharmaceutical R&D investment, and the choice of a high level would have the effect of reducing access to care by consumers and payers in countries where economic and social conditions mean that such prices cannot be afforded (p. 11). 181 Fourth, GSK maintains, in substance, that the Commission has not shown in any other way that Clause 4 of the General Sales Conditions had the effect of restricting competition. 182 That is not the case, however. On the contrary, the Commission concluded, following a relatively brief examination, as it acknowledged in its answer to the written questions put by the Court, which was none the less sufficiently complete in the light of the facts of the case (see paragraph 119 above) and of GSK’s arguments, that Clause 4 also had the effect of reducing the welfare of final consumers by preventing them from taking advantage, in the form of a reduction in prices and costs, of the participation of the Spanish wholesalers in intrabrand competition on the markets of destination of the parallel trade originating in Spain. 183 Thus, the Commission found, at recitals 72 to 75 to the Decision, that Clause 4 of the General Sales Conditions required the Spanish wholesalers who bought the medicines sold in Spain by GW to pay a higher price (the Clause 4B price) than the price set by the Spanish authorities, which they would have paid in the absence of the General Sales Conditions (the Clause 4A price). Clause 4 thus has the effect of reducing or cancelling, in numerous cases, the differential hitherto existing between the prices applicable in Spain and those applicable in other Member States of the Community. The number of cases concerned is significant, whether the costs incurred by the Spanish wholesalers when they engage in parallel trade (transport, repackaging, etc.) are disregarded or whether they are taken into consideration. GSK does not dispute those findings of fact. 184 Next, the Commission found, at recitals 48 and 51 to the Decision, that in some Member States an admittedly small part of the price of medicines covered by the General Sales Conditions was borne by the patient, who in that sense constituted a final consumer, within the economic sense of that term, of the products in question. The Commission also found, at recitals 49 and 51 to the Decision, that the remainder of the price of those medicines was reimbursed by the national sickness insurance scheme, which also constituted a final consumer of the products in question, in that it spread the economic risks borne for their health by those covered by the insurance schemes. The Court of Justice has already referred to the special nature, in that respect, of the trade in pharmaceutical products, namely the fact that social security institutions are substituted for consumers as regards responsibility for the payment of medical expenses (Case 238/82 Duphar and Others [1984] ECR 523, paragraph 20). GSK does not dispute those findings of fact, the importance of which the Commission recalled to mind in the context of the reasoning which it had applied in the Decision. 185 Even accepting that competition between the Spanish wholesalers who engage in parallel trade, or between those wholesalers and the distributors established on the market of the Member State of destination of the parallel trade, is limited to the point of allowing them to apply resale prices which are lower than the prices applied by those distributors only to the extent strictly necessary to attract retailers, as convincingly explained in some of the documents produced by GSK, the Commission was entitled to infer, as it did at recital 140 to the Decision, from the findings of fact set out in the preceding paragraphs that Clause 4 of the General Sales Conditions impeded that competition and, in substance, the pressure which in its absence would have existed on the unit price of the medicines in question, to the detriment of the final consumer, taken to mean both the patient and the national sickness insurance scheme acting on behalf of claimants. 186 It is true that, as the Commission observed at recital 133 to the Decision, and then in its answers to the written questions put by the Court and at the hearing, that pressure, considered at the individual level of one of the national markets affected by Clause 4 of the General Sales Conditions, such as the United Kingdom market, may be marginal. However, the Commission also observed, at recital 140 to the Decision, that the fact of impeding this pressure, by means of an agreement concluded with a significant number of Spanish wholesalers and affecting a significant number of products and national markets in the Community, contributed or could contribute, by a network effect, to reinforcing the pre-existing price rigidity on the market. Such reinforcement infringes Article 81(1) EC (see, to that effect, Metro I, paragraph 109 above, paragraph 22, and Case 209/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 139). 187 GSK has not adduced evidence of an error on that point. On the contrary, it acknowledged at the hearing that Clause 4 of the General Sales Conditions, although mainly intended to prevent the transfer of surplus to the wholesalers, might have the effect of reducing the admittedly restricted benefit which their participation in competition provides for the final consumer on the markets of destination of the parallel trade. 188 Last, the Commission found, at recitals 33, 34, 52 and 134 to the Decision, that some national sickness insurance schemes took advantage, to various degrees and according to different procedures, of parallel trade in order to reduce the cost of the medicines which they reimburse. Although GSK denies that the national measures to which the Commission refers have as their object to encourage parallel trade, it does not deny that they may have such an effect, as the Commission observed at the hearing, without being contradicted. Some of the documents which GSK produced, on the contrary, emphasise convincingly that that may be the case. GSK also acknowledges, most recently in its answers to the written questions and at the hearing, that some Member States have adopted measures in order to recover a proportion of the savings which pharmacists have made by means of parallel trade. 189 By focusing on the example of the United Kingdom, which in GSK’s submission was the main target market for parallel trade in medicines sold in Spain by GW, the Commission was able to infer, at recital 134 to the Decision, that Clause 4 of the General Sales Conditions had the effect of depriving the national sickness insurance schemes of the advantage which they would have derived, in the form of a reduction in costs and even independently of any reduction in the retail price, from the participation of the Spanish wholesalers in intrabrand competition. Although it emphasised that that effect is minor, GSK also acknowledged its existence at the hearing. It also acknowledged that such an effect might be produced in Member States other than the United Kingdom. 190 Accordingly, it must be concluded that the Commission was entitled to find, in the light of elements whose relevance has not been validly called in question by GSK, that Clause 4 of the General Sales Conditions had the effect of reducing the welfare of final consumers by preventing them from taking advantage, in the form of a reduction in prices and costs, of the participation of the Spanish wholesalers in intrabrand competition on the national markets of destination of the parallel trade originating in Spain. 191 None of GSK’s arguments appears to be capable of upsetting that conclusion.192 In particular, its fundamental argument that Clause 4 of the General Sales Conditions is justified because it would neutralise a distortion of competition attributable to the Kingdom of Spain is unfounded. The fact that the legal and economic context in which undertakings operate contributes to restricting competition cannot lead to acceptance of conduct on the part of those undertakings which, by preventing or restricting the competition which that context allows to subsist or to arise, in turn infringes the competition rules (Suiker Unie and Others v Commission, paragraph 56 above, paragraph 620, and CIF, paragraph 66 above, paragraph 57). 4. Conclusion193 It follows from the foregoing that GSK has not succeeded in calling in question the Commission’s conclusion that the General Sales Conditions constituted an agreement within the meaning of Article 81(1) EC. 194 It also follows that, although the Commission’s principal conclusion that Clause 4 of the General Sales Conditions has as its object the restriction of competition is incorrect, GSK has not succeeded in calling in question its subsidiary conclusion that that provision had the effect of depriving final consumers of the advantage which they would have derived, in terms of price and costs, from the participation of the Spanish wholesalers in intrabrand competition on the national markets of destination of the parallel trade originating in Spain. 195 Accordingly, the plea alleging infringement of Article 81(1) EC must be rejected.C – The plea alleging misuse of powers, failure to observe the principle of subsidiarity and infringement of Article 43 EC196 GSK claims, in substance, that by prohibiting it from applying differentiated prices the decision ultimately requires it to apply the prices set by the Spanish authorities for the purposes of the wholesale of medicines intended to be resold in Spain and reimbursed by the Spanish sickness insurance scheme in the context of the wholesale of medicines intended to be resold in other Member States or reimbursed by other national sickness insurance schemes, which have their own price control systems. In doing so, it fails to observe the principle of subsidiarity. Furthermore, it infringes the right of establishment provided for in Article 43 EC. Last, in so far as the Commission’s intention is thus to favour the convergence of the price of medicines in the Community, it is guilty of a misuse of powers. 197 The Commission, supported by the interveners, disputes the merits of this plea.198 It should be observed, in the first place, that a decision is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent indicia, to have been taken with the exclusive or main purpose of achieving an end other than that stated (Case 8/57 Aciéries belges v High Authority [1958] ECR 245, at 255, and Joined Cases C‑186/02 P and C‑188/02 P Ramondín and Others v Commission [2004] ECR I‑10653, paragraph 44). 199 In the present case, it is apparent from its written submissions that GSK is speculating as to the aim which it attributes to the Commission but does not rely on indicia on which it might be established to the requisite legal standard that the Decision was adopted with the exclusive or decisive aim of favouring the convergence of prices of medicines in the Community. 200 In the second place, the second paragraph of Article 5 EC provides that, in areas which do not fall within its exclusive competence, the Community is to take action, in accordance with the principle of subsidiarity, only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. 201 In the context of Article 81(1) EC, the principle of subsidiarity is given concrete form by the limitation of the prohibition contained therein to agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States. Thus, where a series of objective factors of law or fact makes it possible to foresee with a sufficient degree of probability that such conduct may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States, that conduct must be regarded as capable of affecting trade between Member States (Consten and Grundig v Commission, paragraph 110 above, p. 341, and Case C‑359/01 P British Sugar v Commission [2004] ECR I‑4933, paragraph 27), so that it is appropriate for the Community to take action, by reason of the scale and the effects of its action (see, to that effect, Case T‑65/98 Van den Bergh Foods v Commission [2003] ECR II‑4653, paragraphs 197 and 198). 202 Where that action takes the form of a Commission decision, the Commission is therefore acting in accordance with the principle of subsidiarity where it establishes to the requisite legal standard that trade between Member States is capable of being affected by the agreement between undertakings, the decision by an association of undertakings or the concerted practice the legality of which it is examining. 203 In the present case, the Commission found, in substance, at recitals 145 and 146 to the Decision, that Clause 4 of the General Sales Conditions was capable of affecting trade between Member States in so far as it established differentiated prices according to whether the wholesalers with whom GW had commercial relations in Spain intended that the medicines which they bought from GW would be resold in Spain or in other Member States of the Community, and GSK does not dispute that. 204 In the third and final place, Article 43 EC confers on the nationals of any Member State, to whom Article 48 EC assimilates companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community, the fundamental freedom (Case 246/80 Broekmeulen [1981] ECR 2311, paragraph 20, and Case C‑19/92 Kraus [1993] ECR I‑1663, paragraphs 28 and 29) to establish themselves in any other Member State on the same conditions as the nationals of that State and prohibits the maintenance or introduction of restrictions on that freedom. 205 Such restrictions consist in any national measures which, even though they are applicable without discrimination on grounds of nationality, are liable to place the nationals of other Member States in a less favourable legal or factual situation by comparison with that of the nationals of the Member State of establishment and thus to hinder or render less attractive the exercise of that fundamental freedom, subject to the exceptions provided for in the Treaty and those recognised by the Court of Justice (Case C‑255/97 Pfeiffer [1999] ECR I‑2835, paragraphs 18 and 19, and Case C‑140/03 Commission v Greece [2005] ECR I‑3177, paragraph 27). 206 In the present case, GSK seeks annulment of a decision applying Article 81(1) EC which was adopted by the Commission in the exercise of the powers conferred on it by the Community competition rules. By its nature, such a decision neither constitutes nor contains any national measure capable of constituting a restriction prohibited by Article 43 EC. It is therefore pointless to claim that that decision constitutes an infringement of that provision (see, by analogy, as concerns Article 49 EC, order of the Court of Justice in Case C‑171/05 P Piau v Commission [2006] ECR I-0000, paragraph 58). 207 Accordingly, the plea alleging misuse of powers, failure to observe the principle of subsidiarity and infringement of Article 43 EC must be rejected in its entirety, as must GSK’s form of order in so far as it seeks annulment of Article 1 of the Decision. II – The pleas seeking annulment of Article 2 of the DecisionA – The plea alleging inadequate reasoning 208 GSK claims, in substance, that the Decision is vitiated by insufficient reasoning, in that the Commission did not carry out an adequate examination of the factual arguments and the evidence submitted to it during the administrative procedure concerning the respective advantages and disadvantages of parallel trade and of Clause 4 of the General Sales Conditions for competition in the medicine sector, as it ought to have done in the light of the judgment in Bayer v Commission, paragraph 47 above. 209 The Commission, supported by the interveners, disputes the validity of this plea.210 The question of the adequacy of the examination carried out by the Commission in a decision applying the competition rules is not a matter for the review of the existence or the extent of the reasoning in that decision but for the review of the merits of its grounds (Commission v Sytraval and Brink’s France, paragraph 54 above, paragraph 67, and Case T‑158/99 Thermenhotel Stoiser Franz and Others v Commission [2004] ECR II‑1, paragraph 97). 211 In the present case, GSK claims that the Decision is vitiated by insufficient reasoning in that the examination of the factual arguments and the evidence submitted in support of its request for an exemption is inadequate. It therefore disputes not so much the reasoning in the Decision as the merits of the grounds devoted to the appraisal of that request under Article 81(3) EC. 212 Accordingly, the present plea relates in reality to the plea alleging infringement of Article 81(3) EC, which is examined below. 213 In so far as GSK also intends to claim that the Decision is insufficiently reasoned as regards the rejection of its request for an exemption, that criticism does not appear to be well founded. At recitals 147 to 188 to the Decision, the Commission explains, in a sufficiently developed manner to enable GSK to understand its reasoning and the Court to review it, that that request must, in the Commission’s view, be rejected on the ground that evidence that the conditions necessary for the grant of an exemption, and primarily an efficiency gain, are satisfied was not adduced to the requisite legal standard. B – The plea alleging infringement of Article 81(3) EC1. Content of the Decision214 The Commission found, at recitals 147 to 189 to the Decision, that GSK had not proved that the conditions for the application of Article 81(3) EC were satisfied in the present case. 215 With reference to the first conditions for the application of that provision, the Commission considered, at recitals 151 and 154 to 176 to the Decision, that GSK had not demonstrated to the requisite legal standard that the General Sales Conditions would contribute to promoting technical progress or to improving the distribution of medicines. 216 With reference to the second condition for the application of Article 81(3) EC, the Commission considered, at recitals 177 to 186 to the Decision, that GSK had not demonstrated to the requisite legal standard that a fair share of the benefits resulting from the General Sales Conditions would be reserved for consumers. 217 The Commission further stated, at recitals 187 and 188 to the Decision, that it was also not established that the General Sales Conditions did not impose restrictions which were not indispensable and did not eliminate competition in respect of a substantial part of the medicines in question. 2. Arguments of the parties218 GSK maintains that the Commission’s conclusion that it was not demonstrated that the conditions for the grant of an exemption were satisfied is vitiated by errors which justify annulment of Article 2 of the Decision. 219 Generally, it submits, in substance, that the Commission did not seriously examine the factual arguments and the evidence supporting its request for an exemption. It then puts forward a number of arguments relating to each of the conditions for the application of Article 81(3) EC. 220 As regards, first of all, the first of those conditions, GSK claims that the Commission did not seriously examine its factual arguments and its evidence that parallel trade would lead to a loss in efficiency by reducing its capacity to innovate, whereas Clause 4 of the General Sales Conditions would bring about a gain in efficiency by enabling it to increase its capacity for innovation. It contends that the Commission was incorrect to conclude that it was not shown that parallel trade was not linked to innovation and, in any event, that it had an appreciable effect on innovation. The applicant contends that it has demonstrated the existence of a contribution to the promotion of technical progress. 221 GSK further maintains that the Commission was incorrect to conclude that it was not demonstrated that Clause 4 of the General Sales Conditions would contribute to improving the distribution of medicines by limiting parallel trade, which leads to delays in placing products on the market in certain Member States and to a less than optimum allocation of the medicines offered for sale by GSK. 222 As regards, next, the second condition for the application of Article 81(3) EC, GSK submits that the Commission was incorrect to conclude that it did not appear that a fair share of the benefits attached to Clause 4 of the General Sales Conditions would be reserved for consumers. It maintains that the Commission misidentified the consumers by including the wholesalers and by not taking fully into account the role played by the Member States in the sector concerned. Furthermore, the Commission manifestly erred in evaluating all the advantages which consumers could expect from its differentiated price system, by comparison with the situation in which they are as a result of parallel trade. 223 GSK further contends that it has clearly demonstrated that Clause 4 of the GSK was indispensable, within the meaning of the third condition for the application of Article 81(3) EC, to the attainment of the advantages which it expected for consumers. 224 Last, GSK submits that it has demonstrated that Clause 4 would not have the effect of eliminating a substantial part of competition, owing to the nature and intensity of competition, in accordance with the fourth condition for the application of Article 81(3) EC. 225 The Commission, supported by the interveners, disputes the merits of those arguments.226 It claims, in the first place, that it carried out a serious and adequate examination of all the factual arguments and the evidence submitted by GSK in support of its request for an exemption. 227 It maintains, in the second place, that it was entitled to conclude that evidence of the existence of the conditions for the application of Article 81(3) EC had not been adduced by GSK. 228 In that regard, it contends, first, that GSK cannot merely claim that the agreement that it concluded with the intention or the effect of impeding parallel trade will allow it to maximise its commercial profits and to allocate a part of them to the financing of its R&D activities. It is incumbent on GSK, on the contrary, to establish, by adducing sufficient evidence to carry conviction, the existence of an objective, specific and direct causal link between the restriction of competition caused by the agreement and the efficiency gains apt to compensate for that restriction. In the present case, the Commission was entitled to find that such a causal link had not been demonstrated. 229 Second, the Commission contends that, even on the assumption that they were sufficiently specific to be capable of being taken into account, GSK’s arguments that parallel trade disrupts the distribution of medicines and leads to delays in placing them on the market, difficulties which Clause 4 of the General Sales Conditions would redress, were not supported to the requisite legal standard at any time during the administrative procedure. 230 Third, the Commission is of the view, in substance, that the wholesalers must be counted among consumers and that they, like patients and the national sickness insurance schemes, may be considered to benefit from parallel trade. The Commission adds that, on the other hand, it has never been demonstrated to the requisite legal standard that consumers would also benefit from Clause 4 of the General Sales Conditions. 231 Fourth, the Commission submits that GSK’s arguments do not reveal that, contrary to what the Commission found in the Decision, the indispensability of Clause 4 of the General Sales Conditions was demonstrated. 232 Fifth, the Commission likewise submits that GSK’s arguments do not seriously call in question the finding that it was not demonstrated that Clause 4 of the General Sales Conditions would not ultimately eliminate competition in respect of a substantial part of the products in question. 3. Findings of the Courta) Preliminary considerations233 Any agreement which restricts competition, whether by its effects or by its object, may in principle benefit from an exemption (Consten and Grundig v Commission, paragraph 110 above, pp. 342, 343 and 347, and Case T‑17/93 Matra Hachette v Commission [1994] ECR II‑595, paragraph 85), as the Commission, moreover, observed at recital 153 to the Decision and at the hearing. 234 The application of that provision is subject to certain conditions, satisfaction of which is both necessary and sufficient (Remia and Others v Commission, paragraph 57 above, paragraph 38, and Matra Hachette v Commission, paragraph 233 above, paragraph 104). First, the agreement concerned must contribute to improving the production or distribution of the goods in question, or to promoting technical or economic progress; second, consumers must be allowed a fair share of the resulting benefit; third, it must not impose on the participating undertakings any restrictions which are not indispensable; and, fourth, it must not afford them the possibility of eliminating competition in respect of a substantial part of the products in question. 235 Consequently, a person who relies on Article 81(3) EC must demonstrate that those conditions are satisfied, by means of convincing arguments and evidence (Joined Cases 43/82 and 63/82 VBVB and VBBB v Commission [1984] ECR 19, paragraph 52, and Aalborg Portland and Others v Commission, paragraph 55 above, paragraph 78). 236 The Commission, for its part, must adequately examine those arguments and that evidence (Consten and Grundig v Commission, paragraph 110 above, p. 347), that is to say, it must determine whether they demonstrate that the conditions for the application of Article 81(3) EC are satisfied. In certain cases, those arguments and that evidence may be of such a kind as to require the Commission to provide an explanation or justification, failing which it is permissible to conclude that the burden of proof borne by the person who relies on Article 81(3) EC has been discharged (Aalborg Portland and Others v Commission, paragraph 55 above, paragraph 79). As the Commission agrees in its written submissions, in such a case it must refute those arguments and that evidence. 237 In the present case, the Commission concentrated its examination on the first condition for the application of Article 81(3) EC, as, moreover, it stated in its written submissions and then at the hearing. It considered, at recitals 151 and 154 to 176 to the Decision, that the factual arguments and the evidence submitted by GSK during the administrative procedure did not demonstrate that that condition was satisfied. 238 The factual arguments and the evidence submitted by GSK for the purpose of establishing that consumers would be allowed a fair share of the benefit resulting from the General Sales Conditions and, consequently, that the second condition for the application of Article 81(3) EC was satisfied were rejected by way of consequence, as the Commission confirmed at the hearing. The Commission found, at recital 179 to the Decision, that as GSK had not demonstrated that the restriction of parallel trade actually achieved any of the benefits required under the first condition, the second condition could also not be fulfilled and therefore needed no further examination. It was only subsequently, and solely in the interest of completeness, that the Commission responded, at recitals 180 to 186 to the Decision, to certain of the arguments put forward by GSK, with a view to establishing that the parallel trade would not give rise to a benefit of which a fair part would be allowed to consumers. 239 As regards the third and fourth conditions for the application of Article 81(3) EC, they were examined summarily, as the Commission indicated in its written submissions and then at the hearing, and were also essentially rejected by way of consequence. Thus, the third condition was rejected, at recital 187 to the Decision, on the ground that, as there was no evidence that the General Sales Conditions gave rise to advantages, it followed that there was no contribution whose indispensability could be analysed. The fourth condition was rejected, at recital 188 to the Decision, because GSK did not put forward any arguments concerning that condition which it had not already submitted and which had not already been rejected. 240 In those circumstances, it is for the Court to determine before all else whether the Commission was entitled to conclude that the factual arguments and the evidence supporting GSK’s request for an exemption did not demonstrate that the first condition for the application of Article 81(3) EC was satisfied. Only if it is not the case must the Court also determine whether the Commission was entitled to conclude that it had also not been shown that the three other conditions for the application of that provision were satisfied. 241 In that regard, the Court dealing with an application for annulment of a decision applying Article 81(3) EC carries out, in so far as it is faced with complex economic assessments, a review confined, as regards the merits, to verifying whether the facts have been accurately stated, whether there has been any manifest error of appraisal and whether the legal consequences deduced from those facts were accurate (Consten and Grundig v Commission, paragraph 110 above, p. 347; Metro I, paragraph 109 above, paragraph 25; Remia and Others v Commission, paragraph 57 above, paragraph 34; and Aalborg Portland and Others v Commission, paragraph 55 above, paragraph 279). 242 It is for the Court to establish not only whether the evidence relied on is factually accurate, reliable and consistent, but also whether it contains all the information which must be taken into account for the purpose of assessing a complex situation and whether it is capable of substantiating the conclusions drawn from it (Case C‑12/03 P Commission v Tetra Laval [2005] ECR I‑987, paragraph 39, and Case T‑210/01 General Electric v Commission [2005] ECR II-0000, paragraphs 62 and 63). 243 On the other hand, it is not for the Court to substitute its own economic assessment for that of the institution which adopted the decision the legality of which it is requested to review. 244 The Commission has, in particular, a margin of discretion which is subject to a restricted judicial review, in the operation consisting, once it has been ascertained that one of the criteria on which Article 81(3) EC makes provision for an exemption was satisfied, in weighing up the advantages expected from the implementation of the agreement and the disadvantages which the agreement entails for the final consumer owing to its impact on competition, which takes the form of a balancing exercise carried out in the light of the general interest appraised at Community level. 245 Furthermore, review of the Commission’s decision is carried out solely by reference to the elements of fact and of law existing on the date of adoption of the contested decision, without prejudice to the possibility afforded to the parties, in the exercise of their rights of defence, to supplement them by evidence established after that date but for the specific purpose of contesting or defending that decision (see paragraph 58 above). 246 In the present case, it follows that the evidence which did not exist at the date of adoption of the Decision and which was not established for the specific purpose of contesting or defending it in so far as the Decision concludes that GSK’s request for an exemption must be rejected, in particular the factual information relating to the period 2001/2005 and the studies entitled ‘Benefits to Payers and Patients from Parallel Trade’ carried out by the University of York in May 2003, ‘The Economic Impact of Pharmaceutical Parallel Trade in European Member States: A Stakeholder Analysis’ carried out by the London School of Economics and Political Sciences in January 2004 and ‘Parallel Imports and the Pricing of Pharmaceutical Products: Evidence from the European Union’ carried out by M. Ganslandt and K.E. Maskus in February 2004, must, as the Commission properly states in its answers to the written questions put by the Court and at the hearing, be disregarded. b) Evidence of a gain in efficiency247 In order to be capable of being exempted under Article 81(3) EC, an agreement must contribute to improving the production or distribution of goods or to promoting technical or economic progress. That contribution is not identified with all the advantages which the undertakings participating in the agreement derive from it as regards their activities, but with appreciable objective advantages, of such a kind as to offset the resulting disadvantages for competition (see, for a contribution towards improvement in production or distribution, Consten and Grundig v Commission, paragraph 110 above, pp. 348 and 349; Case T‑7/93 Langnese-Iglo v Commission [1995] ECR II‑1533, paragraph 180; and Van den Bergh Foods v Commission, paragraph 201 above, paragraph 139; see also, for a contribution towards the promotion of progress, Matra Hachette v Commission, paragraph 233 above, paragraphs 108 to 111). 248 It is therefore for the Commission, in the first place, to examine whether the factual arguments and the evidence submitted to it show, in a convincing manner, that the agreement in question must enable appreciable objective advantages to be obtained (see, to that effect, Metro I, paragraph 109 above, paragraph 43; Metro II, paragraph 58 above, paragraph 55; M6 and Others v Commission, paragraph 171 above, paragraph 143; and Case T‑231/99 Joynson v Commission [2002] ECR II‑2085, paragraphs 48 and 49), it being understood that these advantages may arise not only on the relevant market but also on other markets (Case T‑86/95 Compagnie générale maritime and Others v Commission [2002] ECR II‑1011, paragraph 343). 249 That approach may entail a prospective analysis, in which case it is appropriate to ascertain whether, in the light of the factual arguments and the evidence provided, it seems more likely either that the agreement in question must make it possible to obtain appreciable advantages or that it will not (see, to that effect, Compagnie générale maritime and Others v Commission, paragraph 248 above, paragraph 365, and Van den Bergh Foods v Commission, paragraph 201 above, paragraph 143; see also, by analogy, Tetra Laval v Commission, paragraph 242 above, paragraphs 42 and 43, and General Electric v Commission, paragraph 242 above, paragraph 64). 250 In the affirmative, it is for the Commission, in the second place, to evaluate whether those appreciable objective advantages are of such a kind as to offset the disadvantages identified for competition in the context of the examination carried out under Article 81(1) EC (see, to that effect, Van Landewyck and Others v Commission, paragraph 186 above, paragraphs 183 to 185). 251 In the present case, GSK claimed that Clause 4 of the General Sales Conditions would make it possible to secure advantages both upstream of the relevant market, by encouraging innovation, and on the market itself, by optimising the distribution of medicines. As those markets correspond to different stages of the value chain, the final consumer likely to benefit from those advantages is the same. 252 The Court must therefore determine, first of all, whether the Commission was entitled to conclude that GSK’s factual arguments and evidence, examination of which entailed a prospective analysis, did not demonstrate, with a sufficient degree of probability, that Clause 4 of the General Sales Conditions would make it possible to obtain an appreciable advantage of such a kind as to offset the disadvantage which it entailed for competition, by encouraging innovation. The existence of an appreciable objective advantage 253 Having regard to the nature of GSK’s criticisms, it is appropriate, in the first place, to present the factual arguments and the evidence in support of its request for an exemption on this point and then, in the second place, to review the way in which the Commission examined them. 254 In the first place, recitals 90, 92 to 99, 151 and 154 to the Decision, and also recitals 64 to 68 to the Decision, to which they refer, briefly set out the arguments presented by GSK with a view to convincing the Commission that Clause 4 of the General Sales Conditions would enable innovation to be encouraged. 255 As may be seen from the Decision, those arguments centre on two axes, which are closely linked yet distinct. First, as indicated in the first sentence of recital 154 to the Decision, parallel trade in medicines marketed by GW in Spain leads to a loss in efficiency for interbrand competition, in so far as it reduces GSK’s capacity for innovation. Second, as stated in the second and third sentences of that recital, Clause 4 of the General Sales Conditions will lead to a gain in efficiency for interbrand competition in so far as it will enable GSK’s capacity for innovation to be increased. 256 As may also be seen from the Decision, those two axes of reasoning are developed in GW’s notification, in GSK’s supplementary notification and, above all, in a number of items of economic or econometric evidence submitted by GSK during the administrative procedure, in particular in response to the Commission’s statement of objections. That evidence was placed on the file, principally in annexes to GSK’s written submissions, the content of which it supports and supplements, and for the remainder in answers to the measures of organisation of procedure. They consist of the following documents: – the study entitled ‘Glaxo Wellcome’s Spanish Pricing System: The Need for a New Approach to Parallel Imports’, by London Economics;– the study entitled ‘Pharmaceutical Pricing in the EU – A note in response to the European Commission’s Statement of objections concerning GlaxoWellcome’s Spanish Pricing Agreements’, by Frontier Economics; – the study entitled ‘The Adverse Effects of Parallel Imports on Consumer Welfare’, by Professor P. Rey;– the study entitled ‘The Effects of Parallel Imports on Social Welfare I: Critique’, by Frontier Economics;– the study entitled ‘The Effects of Parallel Imports on Social Welfare II: Critique’, by Professor P. Rey;– the presentation entitled ‘Glaxo Wellcome’s R&D budgeting process’, by A. Baxter.257 It is apparent upon reading the Decision as a whole and the other documents cited in the preceding paragraph that although GSK’s arguments are divided between different documents, although their presentation may vary and although their content may be developed to a greater or lesser extent, particularly in the light of the aspect of the statement of objections against which the document containing them is directed, they are essentially as follows. 258 First, according to the documents produced by GSK, parallel trade in medicines marketed in Spain by GW entails a loss in efficiency. In effect: – the sector for patented medicines reimbursed by a national sickness insurance scheme is characterised by the fact that innovation constitutes the determining parameter of interbrand competition; – innovation in ensured by a level of R&D expenditure which is both substantial and higher than that which characterises most other industries; in GSK’s case, that expenditure represents approximately 14% of its turnover, or approximately GBP 1.3 billion; – as investment in R&D is costly, high-risk and long-term, it is mainly financed from the undertaking’s own funds rather than by borrowing; in GSK’s case it is financed exclusively from its own funds; – R&D financing is dependent on current returns and also on anticipated returns; in GSK’s case, the fact that its capacity for financing increased by 230 times in the 1980s and 1990s was made possible by the existence of very successful medicines, in particular Zantac, which accounted for 40% of its world-wide revenues until 1994; – parallel trade has the effect of reducing the returns of the pharmaceutical company concerned (schematically, for each unit sold at a price of 100 in the country of origin there is a corresponding unsold unit at a price of 100 + n in the country of destination) and, thus, of impeding the possibility of applying, for all sales made in each national market, an optimum price, that is to say, a price set by reference to the preferences peculiar to each Member States; – that impact is concentrated on certain products and on certain geographic markets; in GSK’s case, the losses mainly affect certain medicines consumed in the United Kingdom; – that impact is significant, owing to the significant differential existing between the prices in force in the various Member States of the Community; in particular, the differential between the Spanish price and the United Kingdom price was, in 1998, for the eight medicines principally concerned (paragraph 11 above), between a minimum of 21% and a maximum of 132%; – in that regard, GSK provides estimates, containing confidential figures, of the loss of revenue caused by parallel trade from all Member States to the United Kingdom and concerning all of its medicines, and also relating to the loss of revenue caused by parallel trade from Spain to the United Kingdom and relating to the eight medicines principally concerned, for 1996, 1997 and 1998; – parallel trade also has the effect of reducing the amount which GSK is authorised to deduct, by way of investment in R&D, from the amount of its profits taken into account for the purpose of determining whether it exceeds the maximum rate of return on investment set by National Health Service; in that regard, GSK provides estimates, containing confidential figures, of the amount of the reduction caused by parallel trade from all origins and parallel trade from Spain, in 1998; – the fact that the pharmaceutical company continues to make what are apparently significant profits does not deprive those arguments of relevance, in so far as it is necessary to take account of the method of accounting for investments in R&D, the way in which they are spread over time, their average cost and the degree of risk which they entail; – last, parallel trade has the effect of reducing the capacities for financing R&D; in that regard, GSK provides estimates, containing confidential figures, relating to the percentage of its pre-tax profits which it reinvests in R&D and to the reduction in its R&D budget to which the loss in revenue caused by parallel trade from Spain to the United Kingdom and relating to the eight medicines principally concerned correspond, for the years 1996 to 1998; – the fact that that reduction is quantitatively limited does not deprive that argument of relevance, in so far as it concerns the impact of parallel trade from Spain to the United Kingdom and relating to the eight medicines principally concerned between 1996 and 1998 and in so far as a quantitatively limited reduction may in any event have significant qualitative effects, in particular by leading to less profitable or more risky projects being abandoned; GSK provides a list of nine projects abandoned for that reason; – on the other hand, parallel trade has few positive effects, as parallel traders do not compete on price to any significant extent and keep for themselves a substantial part of the differential between the price in force in the Member State of origin and that applied in the Member State of destination, so that the downward pressure on prices is reduced and the final consumer ultimately derives only a limited benefit. 259 Second, according to the documents produced by GSK, Clause 4 of the General Sales Conditions will lead to a gain in efficiency. In effect: – the cost of R&D is global and joint in that it corresponds to an activity carried out on a world-wide scale and that, for a significant proportion, it is not attributable to a specific production site or a specific product; – the pharmaceutical companies do not control their prices in most Member States; they agree to serve a national market on condition that the price set by the public authorities allows them to cover their marginal costs, but they must still succeed, where they can, in covering their entire global and joint R&D costs; – the differentiated pricing system provided for in Clause 4 of the General Sales Conditions will make it possible to cover the cost of R&D by ensuring that the prices are set, on each national market, at the level corresponding to the preferences of the final consumer, that is to say, ultimately of the Member State concerned; in particular, it will make it possible to prevent the price fixed by the Kingdom of Spain from being exported to the United Kingdom; – the strong competitive pressure by innovation which prevails in the sector ensures that GSK will act as a rational economic operator by transforming, in so far as necessary, those additional profits into investment in R&D. 260 In the second place, the Commission found, at recitals 151, 154, 155 and 169 to the Decision, that it was not proved that parallel trade had a negative impact on GSK’s R&D activities and, in any event, that it was not proved that parallel trade had an appreciable negative effect on those activities. 261 Thus, the Commission essentially examined, at recitals 157 to 168 to the Decision, whether it was demonstrated that parallel trade gave rise to a loss in efficiency, a question which it answered in the negative. It therefore did not consider it necessary to examine in detail whether it was demonstrated that Clause 4 of the General Sales Conditions entailed a gain in efficiency, as that question was addressed only on one specific occasion, at recital 156 to the Decision. 262 Having regard to the relevance of the factual arguments and the evidence submitted by GSK, the Commission’s examination of the loss in efficiency associated with parallel trade, of the extent of that loss of efficiency and of the gain in efficiency associated with Clause 4 of the General Sales Conditions cannot be accepted as sufficient to support the conclusions which the Commission reached on those points. – The relevance of the factual arguments and the evidence submitted by GSK263 The factual arguments and the supporting evidence submitted by GSK appear to be relevant, reliable and credible, having regard to their content (Cimenteries CBR and Others v Commission, paragraph 83 above, paragraph 1838), which is itself corroborated on a number of significant aspects by documents originating with the Commission. 264 Thus, Communication COM(1998) 588 final, paragraph 135 above, which is essentially devoted to enhancing the single market in the pharmaceutical sector, which is not at issue here, also records the relationship existing, in the Commission’s opinion, between innovation, parallel trade and competition in the sector. A reading of that communication reveals that, apart from the statement cited at paragraph 115 above concerning the ambiguous impact of parallel trade on the welfare of final consumers, the Commission makes the following assertions: – the pharmaceutical industry is based on research (pp. 3 and 11) and it is clear that in the patented medicines sector there is very fierce competition in terms of innovation (p. 16), which leads to a continuous flow of new products on the market (p. 11); on the other hand, there is relatively little dynamic competition on prices after the products have been launched (p. 16); – the pharmaceutical industry must pay for investments in R&D (p. 14) and for that purpose it needs to achieve a sufficient level of profitability to be able to devote the necessary resources to R&D to develop innovative products (pp. 17 and 23); – although the European pharmaceutical industry is a powerful industrial sector (the amount of European investments in R&D tripled in 1997 by reference to the 10 previous years), it shows a fall in apparent competitiveness, which is confirmed although that situation is beginning to change; one of the reasons for that situation is that its global profitability and its financial profitability ratio appear to be higher in the United States than in the European Union (pp. 4 and 5); – in order to finance its R&D activities, the pharmaceutical industry seeks to make profits at world-wide level (p. 3);– there are significant differences between the Member States, both in general macroeconomic conditions (especially per-capita income and wealth) and in health systems; there seems to be a well-established positive link between health care expenditure and incomes, although that relationship is not perfect (pp. 3 and 4); – there are important differences between Member States from the point of view of prices, which can be explained by a number of factors; one of the factors responsible for those differences appears to be the extent to which Member States rely on price control, although there are also conjunctural factors such as inflation and currency fluctuations (p. 4); – in that regard, the change to the euro should help to provide a more stable environment for Member States participating in the economic and monetary union (EMU). However, it will also make price differentials in the existing European market much more visible, which could stimulate wholesalers and pharmacists to engage in cross-border transactions (pp. 6 and 7); – it would be extremely difficult to establish a price level which would be appropriate for all the Community. A low level would benefit immediate health care expenditure objectives (at least in the Member States where prices are currently high), but would provoke a steady diminution of Europe’s contribution to global pharmaceutical R&D investment, leading ultimately to disinvestment from the European economy. High levels would reduce access to consumers and payers in those countries where economic and social conditions mean that such prices cannot be afforded (p. 11); – the pharmaceutical companies charge different prices to take account of the differences in the ability to pay (p. 4).265 Admittedly, those extracts concerning the role of innovation and the impact which parallel trade and price differentials, respectively, have on innovation must not be taken to mean that GSK’s factual arguments are necessarily well founded, or to provide a complete and definitive picture of the Commission’s position on that complex question. The fact remains, however, that they corroborate a part of those arguments and of the economic analyses in the supporting evidence, thus attesting to their reliability and their credibility. 266 In its answers to the written questions put by the Court, the Commission stated that Communication (1998) 588 final, paragraph 135 above, also indicated that, in spite of important differences in prices between Member States, it was necessary to adopt an approach consistent with the principles of the single market, which made it impossible to justify measures the effect of which would be to maintain or increase the partitioning of the common market along national lines (p. 18). The Commission further explained that the decision was consistent with that approach. However, that argument cannot be accepted. It presumes that an agreement providing that patented medicines reimbursed by the national sickness insurance schemes will be sold at different prices on different geographic markets, according to the preferences of the final consumer who bears the cost, cannot be granted an exemption in any circumstances. Article 81 EC makes no such provision. 267 As regards, more generally, economic theory, the Commission submitted, as an annex to its defence, the ‘Executive Summary’ of a study dated 8 February 1999 by NERA for the Commission’s Directorate-General ‘Internal Market and Financial Services’, entitled ‘The Economic Consequences of the Choice of Regime of Exhaustion in the Area of Trademarks’. That extract, and in particular the considerations on p. 5, corroborate certain of the analyses put forward in the evidence submitted by GSK concerning the interest that a pharmaceutical company might have in applying different prices according to the market on which the medicines are sold and the particular preferences of final consumers. 268 In those circumstances, the Commission, which itself analysed the system of differentiated prices established by Clause 4 of the General Sales Conditions as discriminatory owing to the destination of the medicines concerned (paragraph 174 above), in the context of the examination which it carried out under Article 81(1) EC, cannot claim, as it did in its answers to the written questions put by the Court, that that question is not relevant in the context of the examination to be carried out under Article 81(3) EC. Nor can it maintain that GSK did not rely on it during the administrative procedure or during these proceedings. On the contrary, by repeatedly claiming that it intends to prevent the prices imposed in Spain from being exported to the United Kingdom, GSK refers in particular to the idea that it intends to establish differentiated prices in order to ensure that the sales which it makes in the United Kingdom will all be made at the price which that Member State allows it to charge and not at the price which the Kingdom of Spain imposes on it. – The loss of efficiency associated with parallel trade 269 The Court notes that the conclusion that it has not been shown that parallel trade leads to a loss in efficiency by altering GSK’s capacity for innovation is based on an examination, at recitals 155 to 161 to the Decision, which does not take into consideration all the factual arguments and evidence pertinently submitted by GSK, contrary to what the Commission maintained in its written submissions, and is not supported by convincing evidence. While the Commission is clearly not required to examine all the arguments submitted to it, it must, on the other hand, in accordance with the case-law cited at paragraphs 236 and 242 above, adequately examine all the evidence which is relevant and, so far as necessary, refute it by means of evidence capable of substantiating its conclusion. 270 Taken as a whole, those arguments revealed that the competitive problem faced by GSK and the solution which it had sought to apply were, according to GSK, as follows. 271 First, the medicines sector is characterised by the importance of competition by innovation. R&D is costly and risky. Its cost is simultaneously a fixed cost (it is not connected with the number of medicines sold), a joint cost (it is incurred upstream from production and distribution and, in part, is not linked with a particular medicine) and a global cost (it is not connected with a particular country). It is most frequently financed from an undertaking’s own funds rather than from borrowing. It therefore requires an optimum flow of income. The optimisation of income may be ensured by adapting the prices of medicines to the preferences of final consumers, where those preferences differ. Price differentiation thus allows the cost of R&D to be recovered from the final consumers who are prepared to pay for it. That practice of differentiated prices, which is presented here in a simplified form, is known to economists as ‘Ramsey Pricing’. 272 Second, the implementation of that practice in the medicines sector is characterised by certain particular traits. When medicines are protected by patents, their price may be maintained, in the particular interest of the producer, at a higher level than the marginal cost throughout the life of the patent. However, when those medicines are reimbursed by the national sickness insurance schemes, their price must, in the general interest, be maintained directly (price control) or indirectly (control of benefits) at a level which is not excessively higher than the marginal cost. The extent of that excess reflects the preference of the final consumer, that is to say, essentially, the national sickness insurance scheme. If the latter is relatively sensitive to the price of the medicine, the excess will tend to be small; if it is relatively insensitive to that price, the excess will tend to be significant. In practice, that degree of sensitivity depends on various parameters, such as the standard of living or the state of public finances. The fraction of the cost of R&D recovered by producers of medicines therefore varies from one Member State to another, according to the income which the applicable price makes available. In the present case, it is in the United Kingdom that GSK could, owing to the regulations applicable, recuperate the global and joint part of its R&D costs. 273 Third, parallel trade has the effect of reducing that income, to an uncertain but real degree. That practice, which economists know as ‘free riding’, is characterised by the fact that the intermediary leaves the role which he traditionally plays in the value chain and becomes an arbitrageur and thus obtains a greater part of the profit. The legitimacy of that transfer of wealth from producer to intermediary is not in itself of interest to competition law, which is concerned only with its impact on the welfare of the final consumer. In so far as the intermediary participates in intrabrand competition, parallel trade may have a pro-competitive effect. In the medicines sector, however, that activity is also seen in a special light, since it does not bring any significant added value for the final consumer. 274 Fourth, Clause 4 of the General Sales Conditions seeks to optimise income and to neutralise parallel trade. It limits the possibilities previously afforded to GW’s wholesalers to sell, outside Spain, medicines bought at the price set with a view to reimbursement by the Spanish sickness insurance scheme. It therefore allows sales in other Member States to be made at the price determined with a view to reimbursement by their respective national sickness insurance schemes. The fact that the profit is retained by the producer will in all likelihood give rise to a gain in efficiency by comparison with the situation in which the profit is shared with the intermediary, because a rational producer which is able to ensure the profitability of its innovations and which operates in a sector characterised by healthy competition on innovation has every interest in reinvesting at least a part of its surplus profit in innovation. 275 However, the very structure of recitals 155 to 161 to the Decision shows that the Commission, after acknowledging the importance of competition by innovation in the relevant sector, failed to undertake a rigorous examination of the factual arguments and the evidence submitted by GSK concerning the nature of the investments in R&D, the characteristics of the financing of R&D, the impact of parallel trade on R&D and the applicable regulations, but confined itself, as indicated at recital 155 to the Decision, to observations which, to say the least, are fragmentary and, as GSK rightly claims, of limited relevance or value. 276 Such an omission is particularly serious where the Commission is required to determine whether the conditions for the application of Article 81(3) EC are satisfied in a legal and economic context, such as that characteristic of the pharmaceutical sector, where competition is distorted by the presence of national regulations. That circumstance obliges the Commission to examine with particular attention the arguments and evidence submitted to it by the person relying on Article 81(3) EC. 277 Thus, the first sentence of recital 157 to the Decision, which deals with the factors at the origin of decisions relating to R&D, relies on one of the economic studies in the file, but gives it an incomplete and unconvincing reading. Admittedly, that study indicates effectively that parallel trade is not the main factor underlying decisions on R&D. However, it immediately adds that those decisions are taken, in particular, according to the general level of current profits or the expected profitability of the products in the development pipeline, as indicated, moreover, in the second sentence of that recital. Those are factors in respect of which GSK maintains that parallel trade has a negative impact, which the Commission accepts in the third sentence of that recital. In those circumstances, the Commission could not omit to carry out a more thorough examination, in the light of the supporting evidence submitted. 278 The remaining part of recital 157 to the Decision, which merely sets out GSK’s possible responses to the loss of efficiency that may be caused by parallel trade, by reducing other budgetary items or using a part of its substantial profits, does not take the place of a response to the arguments that GSK has every interest in investing in R&D, owing to the fact of the lively interbrand competition, which relies on innovation, and finds it impossible to recover the entire proceeds of that investment, in order to reinvest in R&D, because of parallel trade. It also disregards GSK’s arguments that the extent of its profits must be qualified because of the way in which they are accounted for. 279 In those circumstances, the question of the degree of correlation between parallel trade and R&D could not be dealt with without a more thorough examination or be satisfied by the lapidary conclusion that it was not proved that there was a causal link between parallel trade (or its limitation) and R&D, as stated at recitals 151, 154, 155 and 159 to the Decision. 280 As the Commission took advantage, in its written submissions, of the ambiguity of the wording of recital 169 to the Decision, in order to explain that what GSK had failed to prove was no longer the existence of a link between Clause 4 of the General Sales Conditions and the gain in efficiency which it expected from that provision but the existence of a direct link between those two elements, it must be observed that that argument, which was raised most recently at the hearing, cannot be accepted. That distinction is not to be found at recitals 155 to 161 to the Decision, to which recital 169 refers, since those recitals unreservedly conclude that there is no link between the General Sales Conditions and the contribution to the promotion of technical progress. Nor is that distinction provided for in Article 81(3) EC, which allows the exemption of agreements producing a gain in efficiency without distinction as to whether that effect is direct or indirect, and a distinction cannot in principle be drawn where the Treaty draws no distinction (Consten and Grundig v Commission, paragraph 110 above, p. 339). In accordance with the case-law cited at paragraphs 247 and 248 above, any advantage in the form of a gain in efficiency must therefore be taken into account, provided that it is objective and appreciable and that its existence is proved convincingly. – The extent of the loss in efficiency associated with parallel trade 281 The subsidiary conclusion that it is not in any event demonstrated that parallel trade leads to an appreciable loss in efficiency by altering GSK’s capacity to innovate is not convincingly supported and the examination on which its is based, set out at recitals 159 and 162 to 168 to the Decision, does not take into account all the relevant elements put forward in that regard. In essence, it follows from that examination that the loss in efficiency alleged by GSK is limited, first, in time, because it is to be explained less by the price differentials linked to the existence of different regulations in the Member States of the Community, as indicted at recitals 162 and 163 to the Decision, than by the currency fluctuations between 1996 and 1998, as stated at recitals 164 to 166 to the Decision. It also follows from that examination that it is limited in material terms, as indicated at recitals 167 to 169 to the Decision. 282 In that regard, irrespective of the fact that Spanish prices would not be considerably lower than the Community average, which is explained at recitals 162 and 163 to the Decision and the relevance of which is limited in so far as national prices are at structurally different levels owing to the regulatory power of the Member States in that regard and as it therefore manifestly does not appear to be satisfactory, from an economic viewpoint, to reason by reference to a hypothetical Community average, it must be observed that the Commission did not carry out a serious examination before reaching the definitive conclusion, at recitals 164 and 165 to the Decision, that the parallel trade between Spain and the United Kingdom between 1996 and 1998 was of a punctual and limited nature. 283 As may be seen from its written submissions, GSK does not deny that the variations in exchange rates, in particular speculative movements against the GBP in the approach to the final stage of EMU, made a conjunctural contribution to parallel trade in medicines marketed by GW in Spain between 1996 and 1998. However, it maintains that that conjunctural impact, as marked as it could be, constitutes only an aggravating factor, since parallel trade is linked, independently of exchange rate fluctuations, to the fact that the coexistence of different national regulations is reflected in structurally different prices in the Member States of the Community. 284 That argument is relevant and the evidence on which it is based is corroborated both by the extracts from Communication COM(1998) 588 final set out at paragraph 264 above and by the Decision itself. In effect, recitals 31, 32 and 53 to the Decision state that currency fluctuations, which by their very nature have a cyclical effect on parallel trade, constitute only a complicating factor of a phenomenon which is explained, in structural terms, by the existence, in the different Member States of the Community, of different prices for the same medicine. 285 Admittedly, that situation did not in itself prevent the Commission from considering that the parallel trade between the Kingdom of Spain and the United Kingdom between 1996 and 1998 was a special case caused essentially by the appreciation of the GBP against the Spanish peseta (ESP). 286 However, the figures cited by the Commission are too ambiguous to be capable of providing convincing support for that conclusion. According to the Decision, the GBP appreciated by 30% against the ESP between October 1996 and April 1998. During that period, the proportion which parallel imports from Spain represented by reference to all parallel imports into the United Kingdom remained stable in volume (approximately 40%), while those parallel imports increased in value (approximately GBP 20 million in 1996 and approximately GBP 42 million in 1998). As the Commission explained, most recently in its answers to the written questions put by the Court, that attests to the fact that the appreciation of the GBP gave rise to a flow of parallel imports from other Member States. However, that also confirms that, both before and after the appreciation of the GBP, the main part (approximately 40%) of parallel trade to the United Kingdom came from Spain, the remainder being shared among the other source Member States. It therefore does not constitute a sufficient response to GSK’s argument that while the appreciation of the GBP undoubtedly exacerbated the problem caused by parallel trade from Spain, it does not in any way detract from the structural origin of that problem. 287 The argument put forward by the Commission in its answers to the written questions put by the Court, that the increase in parallel trade from Spain during the period 1996/98 may be explained by the expiry, on 6 October 1995, of the transitional period provided for in Articles 47 and 209 of the Act of Accession of the Kingdom of Spain, during which the holder of a patent could exercise the rights which it held under that patent to oppose the import of medicines marketed by itself or with its consent in Spain, does not alter that conclusion, since it clearly has no bearing on the period after the date of notification, to which GSK’s arguments relate. 288 Last, as indicated at recitals 15, 18 and 55 to the Decision, GSK stated during the administrative procedure that although the General Sales Conditions are applicable to 82 medicines, eight of them were prime candidates for parallel trade. In addition, as indicated at recitals 22 and 35 to the Decision, GSK also stated that while the General Sales Conditions were applicable irrespective of the final destination of the medicines concerned, they were mainly aimed at parallel trade between Spain and the United Kingdom. GSK therefore essentially, albeit not exclusively, provided the Commission with figures relating, first, to the price differentials between Spain and the United Kingdom, second, to parallel trade in Becloforte, Beconase, Becotide, Flixotide, Imigran, Lamictal, Serevent and Ventolín between Spain and the United Kingdom during the period 1996/98 and, third, to the impact which according to GSK parallel trade had on its income and its R&D budget. Those figures are set out at recitals 55, 59 to 67, 70, 83, 92, 98 and 99 to the Decision. 289 Furthermore, as indicated at recitals 70 and 71 to the Decision, GSK made clear that parallel trade lay outside formally audited distribution channels and added that the figures provided to the Commission were estimates which might not be reliable but which it could not further refine. Those allegations of fact, which were reiterated in the reply, were not disputed. 290 GSK is correct to maintain that those figures, quite apart from the fact that they are not derisory, must be regarded as a sample attesting not to a punctual and limited loss in efficiency but to a more general loss which was destined to continue. 291 As regards the first aspect, it must be borne in mind that when the Commission considered whether Clause 4 of the General Sales Conditions might present a disadvantage, while it agreed to concentrate on the eight medicines which were the main candidates for parallel trade between Spain and the United Kingdom, as it indicated at recitals 18, 56, 57 and 69 to the Decision, it also took account of the network effect linked with parallel trade in other medicines, between Spain and other Member States, as indicated at recitals 72 to 75, 117, 126, 140 and 144 to the Decision. It is specifically that network effect that rendered significant a restriction of competition which would have been marginal at the level of the United Kingdom alone, according to recital 133 to the Decision. However, the Commission provides no explanation of why it must follow a different approach when examining the question whether Clause 4 of the General Sales Conditions may present an advantage and concentrate exclusively on the figures provided to it by GSK, in the light of the difficulty in ascertaining the reality of parallel trade and of the fact that it agreed to regard the figures provided by GSK as a sample. 292 As regards the second aspect, it must be observed that parallel trade is a phenomenon which may extend beyond the short period taken by the Commission, not only on account of the lasting nature of the price differentials which make it possible but also by reason of the cyclical nature of currency variations, in so far as they still exist. The Commission agrees in Communication COM(1998) 588 final, paragraph 135 above. It also acknowledges, in its defence, that currency fluctuations remain a reality in the case of the Member States which did not proceed to the third stage of EMU in 1999, which specifically include the United Kingdom. 293 In that context, the sample of figures provided by GSK reveals a tendency. The Commission’s question at recital 168 to the Decision, as to whether the figure provided by GSK concerning its overall lost revenue in 1998 might be exaggerated, does not call that conclusion in question. The figure provided in that regard on 14 December 1998 and 14 February 2000 remains higher than the figure for the two preceding years, as indicated at recital 67 to the Decision. Furthermore, GSK’s explanation that the figure previously supplied in that regard, on 28 July 1998, was an estimate, whereas the figure provided in December 1998 and in February 2000 was real and could be explained by the fact that the General Sales Conditions had been applied between spring and autumn 1998, as may be seen from recitals 19, 23, 26, 64, 67 and 168 to the Decision, was sufficiently credible to merit serious examination. – The gain in efficiency associated with Clause 4 of the General Sales Conditions 294 It must be observed that, as GSK correctly maintains, the Commission carried out no serious examination of its factual arguments and its evidence relating, not to the disadvantages of parallel trade, but to the advantages of Clause 4 of the General Sales Conditions. 295 In the light of the structure of GSK’s arguments and also of the discussion of that point during the administrative procedure, the Decision could not avoid examining, first of all, whether parallel trade led to a loss in efficiency for the pharmaceutical industry in general, and for GSK in particular. Only in the absence of any dispute in that regard could the Commission validly dispense with such an examination (see, by analogy, Compagnie générale maritime and Others v Commission, paragraph 248 above, paragraph 345). 296 However, a comparison of the evidence provided by GSK with the other evidence invoked by the Commission in the Decision clearly reveals that in the medicines sector the effect of parallel trade on competition is ambiguous, since the gain in efficiency to which it is likely to give rise for intrabrand competition, the role of which is limited by the applicable regulatory framework, must be compared with the loss in efficiency to which it is likely to give rise for interbrand competition, the role of which is central. 297 In those circumstances, the Commission could not refrain from examining, second, whether Clause 4 of the General Sales Conditions could enable GSK’s capacity for innovation to be reinstated and thus could give rise to a gain in efficiency for interbrand competition. 298 That, moreover, formed the very core of the prospective analysis which the Commission was under a duty to carry out in order to respond to GSK’s request for an exemption. According to the consistent case-law cited at paragraph 247 above, it is necessary to determine whether the agreement prohibited on account of the disadvantage which it represents for competition (Article 81(1) EC) presents an advantage of such a kind as to offset that disadvantage (Article 81(3) EC). 299 The Commission was therefore still required to examine GSK’s arguments relating to the advantages expected of Clause 4 of the General Sales Conditions. In that regard, recital 156 to the Decision, the only recital susceptible of attesting to an examination on that point, indicates essentially: ‘[I]t is a matter of discretion for pharmaceutical companies to decide how much they wish to invest in R&D. Any savings they might hypothetically make by preventing parallel trade would therefore not automatically lead to higher R&D investments. It is conceivable that these savings might merely be added to the companies’ profits. Obviously, the generation of extra profits alone cannot justify an exemption. In this regard, GSK’s argument would mean that the first condition for [the application of Article 81(3) EC] would be fulfilled for every agreement that could be said to contribute to an increase in the revenues of a firm engaged in R&D. The condition would in any case be meaningless, since it is in the nature of any agreement restricting competition to be likely to increase a firm’s earnings.’ 300 However, GSK did not claim that the creation of additional profits would in itself justify an exemption. On the contrary, it maintained that parallel trade prevented it from making the profits necessary for the optimum financing of its R&D, that Clause 4 of the General Sales Conditions would enable it to increase its revenues and that it would have every interest, in the light of the fierce interbrand competition, of the central role played by innovation in that competition and of the methods of financing R&D, in investing a part of this surplus in R&D in order to overtake its competitors or to ensure that it would not be overtaken by them. In other words, it claimed that its General Sales Conditions should be exempted because they would have not merely the immediate effect of increasing its revenues, but above all the secondary effect of increasing its capacity for innovation. Furthermore, it maintained that that advantage must be compared with the fact that, when it was obtained by parallel traders, that surplus did not constitute an advantage, because, not being obliged to engage in genuine competition among themselves, the parallel traders reduced prices only to the extent necessary to attract retailers and therefore kept most of that surplus for themselves, as GSK again submitted at the hearing. 301 The Commission could not merely reject those arguments outright on the ground that the advantage described by GSK would not necessarily be achieved, as it did at recital 156 to the Decision, but was required, in accordance with the case-law, also to examine, as specifically as possible, in the context of a prospective analysis, whether, in the particular circumstances of the case and in the light of the evidence submitted to it, it seemed more likely that the advantages described by GSK would be achieved or, on the contrary, that they would not (Compagnie générale maritime and Others v Commission, paragraph 248 above, paragraph 365). It was not entitled to consider, in a peremptory manner and without providing proper arguments, that the factual arguments and the evidence submitted by GSK must be regarded as hypothetical, as it maintained most recently at the hearing. 302 Furthermore, when questioned on that point at the hearing, the Commission admitted on a number of occasions that it was appropriate to reason in terms of probability, while adding that it was necessary to be strict in that regard and claiming, essentially, that in the present case, in the light of the evidence submitted, and in particular the figures obtained by GSK, it seemed more probable that the advantage claimed would not be achieved. However, that is not the reasoning followed by the Decision. 303 It follows from the foregoing that the Decision is vitiated by a failure to carry out a proper examination, as the Commission did not validly take into account all the factual arguments and the evidence pertinently submitted by GSK, did not refute certain of those arguments even though they were sufficiently relevant and substantiated to require a response, and did not substantiate to the requisite legal standard its conclusion that it was not proved, first, that parallel trade was apt to lead to a loss in efficiency by appreciably altering GSK’s capacity for innovation and, second, that Clause 4 of the General Sales Conditions was apt to enable a gain in efficiency to be achieved by improving innovation. The balancing exercise304 After concluding its examination of the factual arguments and the evidence submitted by GSK and finding that they did not demonstrate the existence of an appreciable objective advantage, the Commission did not carry out the complex assessment (see paragraph 241 above) which would have been involved by the exercise seeking to balance that advantage against the disadvantage for competition identified in the part of the Decision devoted to the application of Article 81(1) EC, as it stated on a number of occasions at the hearing. 305 In effect, the Commission considered, at recital 151 to the Decision, that GSK had not proved that Clause 4 of the General Sales Conditions brought advantages and, at recital 152 to the Decision, that, in such circumstances, no balancing test was necessary, further stating that, in any event, even if it had to undertake such a balancing exercise, the disadvantages in that provision would outweigh the advantages. 306 As may be seen from the foregoing grounds, however, the Commission’s conclusion that evidence of the existence of an appreciable economic advantage had not been submitted is vitiated by a failure to examine adequately the relevant criteria (paragraph 303 above). For its part, the Commission’s finding that Clause 4 of the General Sales Conditions restricts competition is well founded only in so far as it finds that Clause 4 has the effect of depriving final consumers of medicines reimbursed by a national sickness insurance scheme of the advantage which they would have derived, in regard to prices and costs, from the participation of the Spanish wholesalers in intrabrand competition on the markets of destination of the parallel trade from Spain (paragraphs 147, 190 and 194 above). 307 Consequently, the Commission’s conclusion that there is no need to carry out a balancing exercise, which would show in any event that the advantage associated with Clause 4 does not offset the disadvantage which it represents for competition, cannot be upheld. The Commission was required, first, to conduct an appropriate examination of GSK’s factual arguments and evidence, in order to be in a position to carry out, second, the complex assessment necessary in order to weigh up the disadvantage and the advantage associated with Clause 4 of the General Sales Conditions. Conclusion308 It follows from the foregoing that the Commission could not lawfully conclude that, as regards the existence of a contribution to the promotion of technical progress, GSK had not demonstrated that the first condition for the application of Article 81(3) EC was satisfied. In those circumstances, there is no need to examine GSK’s arguments relating to a contribution to the improvement of the distribution of medicines. c) Evidence of the advantage being passed on to the consumer, of the indispensability of Clause 4 of the General Sales Conditions and of the absence of the elimination of competition 309 As stated previously (paragraphs 237 to 239 above), it follows from the Decision and from the oral argument presented at the hearing that the summary conclusions which the Commission reached concerning the existence of a passing-on to consumers, the indispensability of Clause 4 of the General Sales Conditions and the absence of elimination of competition rest on the conclusion relating to the existence of a gain in efficiency. 310 In so far as that conclusion is vitiated by illegality, in that it concerns the existence of a contribution towards the promotion of technical progress, those conclusions are themselves invalid. 311 In so far as, when it examined whether Clause 4 of the General Sales Conditions would or would not eliminate competition for a substantial part of the products, the Commission further stated, at recital 188 to the Decision, that, in any event, for several of the leading products affected by the General Sales Conditions, GSK held substantial market shares (for example, for Zofran, Flixonase, Zovirax and Imigran) in one or more Member States, it remains necessary to review that assessment. 312 In that regard, it must be observed that the Commission acknowledged at the hearing that it had not really resolved the question of GSK’s market power and further stated that it would have had to continue with the analysis in order to determine that point. 313 In fact, owing to the particular legal and economic context of the sector under consideration, the fact of holding substantial market shares, which, moreover, is limited to certain of the relevant products, of which the Commission provided only four examples, clearly does not in itself make it possible to conclude, in a convincing manner, that competition would be eliminated for a substantial part of the relevant products. 314 In effect, irrespective of the question of the definition of the relevant products market, which has been debated by the parties, a number of elements relied on by GSK during the administrative procedure, and then in its written submissions, prevent such a conclusion from being reached automatically. 315 In particular, GSK’s argument to which reference is made at recital 188 to the Decision, which refers to recital 104 to the Decision, was not so irrelevant that the Commission could refrain from making it the subject of a specific assessment under the fourth condition for the application of Article 81(3) EC. In effect, the fact that Clause 4 of the General Sales Conditions prevents the limited pressure which might exist, owing to parallel trade from Spain, on the price and the cost of medicines in the geographic markets of destination must be related to the facts, put forward by GSK and not disputed by the Commission, that competition by innovation is very fierce in the sector and that competition on price exists in another form, although by law it emerges only when, upon expiry of the patent, manufacturers of generic medicines are able to enter the market. In those circumstances, it was still necessary, in accordance with the case-law cited at paragraph 109 above, to assess what form of competition must be given priority with a view to ensuring the maintenance of effective competition sought by Article 3(1)(g) EC and Article 81 EC. 316 It follows from the foregoing that the plea alleging infringement of Article 81(3) EC must be upheld and, consequently, that GSK’s form of order must be granted in so far as it seeks annulment of Article 2 of the Decision, without there being any need to examine the plea alleging breach of the principle of proportionality. 317 Accordingly, the Decision must be annulled in so far as, in Article 2, it rejects GSK’s request for an exemption.318 As the possibility that the provisions of Article 81(1) EC are inapplicable to Clause 4 of the General Sales Conditions, pursuant to Article 81(3) EC, cannot be precluded, the Decision must also be annulled in so far as it orders GSK, in Article 3, to bring that infringement to an end immediately in so far as it has not already done so and, in Article 4, to inform the Commission of the steps which it has taken in order to do so. 319 Pursuant to the first paragraph of Article 233 EC, the Commission is required to take the necessary measures to comply with this judgment. 320 To that end, although the notification procedure provided for in Regulation No 17 no longer exists under Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ 2003 L 1, p. 1), it falls upon the Commission, in the light of the partial annulment of the Decision and the retroactive effect thereof, to rule on the request for exemption presented by GSK by reference to the date of that request (see, to that effect, Case T‑328/03 O2 (Germany) v Commission [2006] ECR II‑0000, paragraphs 47 and 48), in so far as that request remains before it. Costs321 Under the first subparagraph of Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. 322 The first subparagraph of Article 87(3) of the Rules of Procedure provides, in particular, that where each party succeeds on some and fails on other heads, the Court may order that the costs be shared or that each party bear its own costs. 323 In the present case, GSK was unsuccessful in its claim for annulment of Article 1 of the Decision. The Commission, supported by the interveners, was unsuccessful in its claim that the application should be dismissed in its entirety. 324 In those circumstances, the costs must be shared. GSK must bear one half of its own costs and pay one half of the costs incurred by the Commission, including those relating to the interventions. The Commission must bear one half of its own costs and pay one half of those incurred by GSK, including those relating to the interventions. The interveners must bear their own costs. On those grounds,THE COURT OF FIRST INSTANCE (Fourth Chamber, Extended Composition)hereby:1. Annuls Articles 2, 3 and 4 of Commission Decision 2001/791/EC of 8 May 2001 relating to a proceeding pursuant to Article 81 of the EC Treaty (Cases IV/36.957/F3 Glaxo Wellcome (notification), IV/36.997/F3 Aseprofar and Fedifar (complaint), IV/37.121/F3 Spain Pharma (complaint), IV/37.138/F3 BAI (complaint) and IV/37.380/F3 EAEPC (complaint));2. Dismisses the remainder of the application;3. Orders GlaxoSmithKline Services Unlimited to bear one half of its own costs and to pay one half of the costs incurred by the Commission, including those relating to the interventions;4. Orders the Commission to bear one half of its own costs and to pay one half of the costs incurred by GlaxoSmithKline Services, including those relating to the interventions;5. Orders the Asociación de exportadores españoles de productos farmacéuticos (Aseprofar), the Bundesverband der Arzneimittell-Importeure eV, the European Association of Euro Pharmaceutical Companies (EAEPC) and Spain Pharma, SA, to bear their own costs.LegalLindhWiszniewska-BiałeckaVadapalas Moavero MilanesiDelivered in open court in Luxembourg on 27 September 2006.E. Coulon H. Legal Registrar PresidentTable of contentsLegal and factual frameworkCommunity lawSpanish lawBackground to the disputeProcedureForms of order sought by the partiesLawI – The pleas seeking annulment of Article 1 of the DecisionA – The plea alleging inadequate reasoning1. Arguments of the parties2. Findings of the CourtB – The plea alleging infringement of Article 81(1) EC1. Preliminary considerations2. The existence of an agreement between undertakingsa) Content of the Decisionb) Arguments of the partiesc) Findings of the CourtIndependence of willsConcurrence of wills3. The existence of a restriction of competitionThe competitive situation existing before Clause 4 of the General Sales Conditions was adoptedThe restriction of competition attributed to Clause 4 of the General Sales Conditions– The existence of an anticompetitive object– The existence of an anti-competitive effect4. ConclusionC – The plea alleging misuse of powers, failure to observe the principle of subsidiarity and infringement of Article 43 ECII – The pleas seeking annulment of Article 2 of the DecisionB – The plea alleging infringement of Article 81(3) EC1. Content of the Decision2. Arguments of the parties3. Findings of the Courta) Preliminary considerationsb) Evidence of a gain in efficiencyThe existence of an appreciable objective advantage– The relevance of the factual arguments and the evidence submitted by GSK– The loss of efficiency associated with parallel trade– The extent of the loss in efficiency associated with parallel trade– The gain in efficiency associated with Clause 4 of the General Sales ConditionsThe balancing exerciseConclusionc) Evidence of the advantage being passed on to the consumer, of the indispensability of Clause 4 of the General Sales Conditions and of the absence of the elimination of competition Costs* Language of the case: English. | b6942-76e47ae-4889 | EN |
ADVOCATE GENERAL KOKOTT CONSIDERS THAT OSMAN OCALAN IS ENTITLED TO BRING PROCEEDINGS ON BEHALF OF THE PKK | Osman Ocalan, on behalf of the Kurdistan Workers’ Party (PKK)andSerif Vanly, on behalf of the Kurdistan National Congress (KNK)vCouncil of the European Union(Appeal – Specific restrictive measures directed against certain persons and entities with a view to combating terrorism – Action for annulment – Admissibility)Opinion of Advocate General Kokott delivered on 27 September 2006 Judgment of the Court (First Chamber), 18 January 2007 Summary of the Judgment1. Appeals – Grounds – Mere repetition of the pleas and arguments put forward before the Court of First Instance – Error of law pleaded not identified – Inadmissibility – Challenge to the interpretation or application of Community law by the Court of First Instance – Admissibility (Art. 225 EC)2. Appeals – Grounds – Mistaken assessment of the facts – Inadmissibility – Review by the Court of the assessment of the evidence – Possible only where the clear sense of the evidence has been distorted 3. Appeals – Grounds – Plea submitted for the first time on appeal – Inadmissibility (Rules of Procedure of the Court, Arts 42(2) and 118)4. Appeals – Grounds – Possibilities for raising arguments – Restriction (Statute of the Court of Justice, Art. 58; Rules of Procedure of the Court, Art. 113(2))5. Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them (Art. 230, fourth para., EC; Council Regulation No 2580/2001)6. Community law – Principles – Right to effective judicial protection (Council Regulation No 2580/2001)7. Actions for annulment – Natural or legal persons – Locus standi (Art. 230, fourth para., EC)1. An appeal is inadmissible if, without even including an argument specifically identifying the error of law allegedly vitiating the decision under appeal, it merely repeats or reproduces verbatim the pleas in law and arguments previously submitted to the Court of First Instance. By contrast, provided that the appellant challenges the interpretation or application of Community law by the Court of First Instance, the points of law examined at first instance may be discussed again in the course of an appeal. Indeed, if an appellant could not thus base his appeal on pleas in law and arguments already relied on before the Court of First Instance, an appeal would be deprived of part of its purpose. (see para. 32)2. Complaints based on findings of fact and on the assessment of those facts in the contested decision are admissible on appeal where the appellant contends that the Court of First Instance has made findings which the documents in the file show to be substantially incorrect or that it has distorted the clear sense of the evidence before it. There is such distortion where, without recourse to new evidence, the assessment of the existing evidence appears to be clearly incorrect. (see paras 35, 37)3. Under Article 118 of the Rules of Procedure of the Court of Justice, Article 42(2) of those rules, which prohibits generally the introduction of new pleas in law in the course of the procedure, applies to the procedure before the Court of Justice on appeal from a decision of the Court of First Instance. In an appeal the Court’s jurisdiction is thus confined to review of the assessment by the Court of First Instance of the pleas argued before it. (see para. 61)4. It follows from Article 58 of the Statute of the Court of Justice, in conjunction with Article 113(2) of the Rules of Procedure of the Court of Justice, that, on appeal, an appellant may put forward any relevant argument, provided only that the subject-matter of the proceedings before the Court of First Instance is not changed in the appeal. There is no requirement that each argument put forward on appeal must previously have been discussed at first instance. A restriction to this effect cannot be accepted because an appeal would thereby be deprived of a significant part of its purpose. (see para. 66)5. Fundamental rights form an integral part of the general principles of law the observance of which the Court ensures. For that purpose, the Court draws inspiration from the constitutional traditions common to the Member States and from the guidelines supplied by international instruments for the protection of human rights on which the Member States have collaborated or to which they are signatories. The European Convention on Human Rights has special significance in that respect. The case-law of the European Court of Human Rights, as it currently stands, appears to indicate that an organisation which does not appear on the list of persons, groups and entities subject to the restrictive measures laid down by Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism would not be able to establish that it has the status of a victim within the meaning of Article 34 of the ECHR and therefore would not be able to bring an action before that court. Consequently, where the Community judicature concludes that such an organisation is not individually concerned within the meaning of the fourth paragraph of Article 230 EC, as interpreted by the case-law, and its action for annulment is therefore inadmissible, there is no conflict between the ECHR and the fourth paragraph of Article 230 EC. (see paras 74, 76, 82-83)6. The European Community is a community based on the rule of law in which its institutions are subject to judicial review of the compatibility of their acts with the Treaty and with the general principles of law which include fundamental rights. Individuals are therefore entitled to effective judicial protection of the rights they derive from the Community legal order, and the right to such protection is one of the general principles of law stemming from the constitutional traditions common to the Member States. That right has also been enshrined in Articles 6 and 13 of the European Convention on Human Rights. In that respect, as regards Regulation No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism, it is particularly important for that judicial protection to be effective because the restrictive measures laid down by Regulation No 2580/2001 have serious consequences. Not only are all financial transactions and financial services thereby prevented in the case of a person, group or entity covered by the regulation, but also their reputation and political activity are damaged by the fact that they are classified as terrorists. Under Article 2(3) of Regulation No 2580/2001, read in conjunction with Article 1(4) to (6) of Common Position 2001/931, a person, group or entity can be included in the list of persons, groups and entities to which that regulation applies only if there is certain reliable information, and the persons, groups or entities covered must be precisely identified. In addition, it is made clear that the names of persons, groups or entities can be kept on the list only if the Council reviews their situation periodically. All these matters must be open to judicial review. It follows that, where the Community legislature takes the view that an entity retains an existence sufficient for it to be subject to the restrictive measures laid down by Regulation No 2580/2001, it must be accepted, on grounds of consistency and justice, that that entity continues to have an existence sufficient to contest those measures. The effect of any other conclusion would be that an organisation could be included in the list of persons, groups and entities to which that regulation applies without being able to bring an action challenging its inclusion. (see paras 109-112)7. The provisions of the Statute of the Court of Justice, in particular Article 21, the Rules of Procedure of the Court of Justice, in particular Article 38, and the Rules of Procedure of the Court of First Instance, in particular Article 44, were not devised with a view to the commencement of actions by organisations lacking legal personality. In that exceptional situation, the procedural rules governing the admissibility of an action for annulment must be applied by adapting them, to the extent necessary, to the circumstances of the case. It is a question of avoiding excessive formalism which would amount to the denial of any possibility of applying for annulment even though the entity in question has been the object of restrictive Community measures. (see para. 114)JUDGMENT OF THE COURT (First Chamber)18 January 2007 (*) In Case C-229/05 P,APPEAL under Article 56 of the Statute of the Court of Justice, brought on 9 May 2005,Osman Ocalan, on behalf of the Kurdistan Workers’ Party (PKK),Serif Vanly, on behalf of the Kurdistan National Congress (KNK),represented by M. Muller QC, E. Grieves and P. Moser, Barristers, and J.G. Peirce, Solicitor,appellants,the other parties to the proceedings being:Council of the European Union, represented by E. Finnegan and M. Bishop, acting as Agents, defendant at first instance,United Kingdom of Great Britain and Northern Ireland, represented by R. Caudwell, acting as Agent, with an address for service in Luxembourg, Commission of the European Communities,interveners at first instance,THE COURT (First Chamber),composed of P. Jann, President of the Chamber, K. Lenaerts, E. Juhász, J.N. Cunha Rodrigues (Rapporteur) and M. Ilešič, Judges,Advocate General: J. Kokott,Registrar: J. Swedenborg, Administrator,having regard to the written procedure and further to the hearing on 14 September 2006,after hearing the Opinion of the Advocate General at the sitting on 27 September 2006,gives the followingJudgment1 By their appeal, Osman Ocalan, on behalf of the Kurdistan Workers’ Party (PKK), and Serif Vanly, on behalf of the Kurdistan National Congress (KNK), request the Court to set aside the order of the Court of First Instance of the European Communities of 15 February 2005 in Case T-229/02 PKK and KNK v Council [2005] ECR II-539 (‘the contested order’), by which the Court of First Instance dismissed as inadmissible their action for annulment of Council Decision 2002/334/EC of 2 May 2002 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Decision 2001/927/EC (OJ 2002 L 116, p. 33) and of Council Decision 2002/460/EC of 17 June 2002 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Decision 2002/334/EC (OJ 2002 L 160, p. 26). Legal context The European Convention for the Protection of Human Rights and Fundamental Freedoms 2 The European Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950 (‘the ECHR’), provides in Article 6, which is headed ‘Right to a fair trial’, as follows: ‘1 In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice. …’3 Article 13 of the ECHR, headed ‘Right to an effective remedy’, states: ‘Everyone whose rights and freedoms as set forth in this Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.’ 4 Article 34 of the ECHR, headed ‘Individual applications’, provides:‘The [European] Court [of Human Rights] may receive applications from any person, non-governmental organisation or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the protocols thereto. The High Contracting Parties undertake not to hinder in any way the effective exercise of this right.’ Community law5 Taking the view that action by the European Community was needed in order to implement Resolution 1373 (2001) of the United Nations Security Council, on 27 December 2001 the Council of the European Union adopted Common Position 2001/930/CFSP on combating terrorism (OJ 2001 L 344, p. 90) and Common Position 2001/931/CFSP on the application of specific measures to combat terrorism (OJ 2001 L 344, p. 93). 6 Article 1 of Common Position 2001/931 provides:‘1. This Common Position applies in accordance with the provisions of the following Articles to persons, groups and entities involved in terrorist acts and listed in the Annex. …4. The list in the Annex shall be drawn up on the basis of precise information or material in the relevant file which indicates that a decision has been taken by a competent authority in respect of the persons, groups and entities concerned, irrespective of whether it concerns the instigation of investigations or prosecution for a terrorist act, an attempt to perpetrate, participate in or facilitate such an act based on serious and credible evidence or clues, or condemnation for such deeds. Persons, groups and entities identified by the Security Council of the United Nations as being related to terrorism and against whom it has ordered sanctions may be included in the list. For the purposes of this paragraph “competent authority” shall mean a judicial authority, or, where judicial authorities have no competence in the area covered by this paragraph, an equivalent competent authority in that area. 5. The Council shall work to ensure that names of natural or legal persons, groups or entities listed in the Annex have sufficient particulars appended to permit effective identification of specific human beings, legal persons, entities or bodies, thus facilitating the exculpation of those bearing the same or similar names. 6. The names of persons and entities on the list in the Annex shall be reviewed at regular intervals and at least once every six months to ensure that there are grounds for keeping them on the list.’ 7 Article 2 of Common Position 2001/931 states:‘The European Community, acting within the limits of the powers conferred on it by the Treaty establishing the European Community, shall order the freezing of the funds and other financial assets or economic resources of persons, groups and entities listed in the Annex.’ 8 On 27 December 2001, the Council adopted Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism (OJ 2001 L 344, p. 70). 9 Article 2 of that regulation provides:‘1. Except as permitted under Articles 5 and 6:(a) all funds, other financial assets and economic resources belonging to, or owned or held by, a natural or legal person, group or entity included in the list referred to in paragraph 3 shall be frozen; (b) no funds, other financial assets and economic resources shall be made available, directly or indirectly, to, or for the benefit of, a natural or legal person, group or entity included in the list referred to in paragraph 3. 2. Except as permitted under Articles 5 and 6, it shall be prohibited to provide financial services to, or for the benefit of, a natural or legal person, group or entity included in the list referred to in paragraph 3. 3. The Council, acting by unanimity, shall establish, review and amend the list of persons, groups and entities to which this Regulation applies, in accordance with the provisions laid down in Article 1(4), (5) and (6) of Common Position 2001/931/CFSP; such list shall consist of: (i) natural persons committing, or attempting to commit, participating in or facilitating the commission of any act of terrorism;(ii) legal persons, groups or entities committing, or attempting to commit, participating in or facilitating the commission of any act of terrorism; (iii) legal persons, groups or entities owned or controlled by one or more natural or legal persons, groups or entities referred to in points (i) and (ii); or (iv) natural legal persons, groups or entities acting on behalf of or at the direction of one or more natural or legal persons, groups or entities referred to in points (i) and (ii).’ Background10 The contested order states as follows:‘1 It is apparent from the documents before the Court that the [PKK] emerged in 1978 and engaged in an armed struggle against the Turkish Government to obtain recognition of the Kurds’ right to self-determination. According to Mr [Osman] Ocalan’s written evidence, the PKK declared a unilateral ceasefire, whilst reserving the right to self-defence, in July 1999. According to that evidence, in April 2002, in order to reflect that reorientation, the Congress of the PKK decided that “all activities under the name of ‘PKK’ would cease as of 4 April 2002 and that any activities taken under the name of the PKK would be deemed illegitimate” (annex 2 to the application, paragraph 16). A new group, the Kongreya AzadÓ š Demokrasiya Kurdistan (Kurdistan Freedom and Democracy Congress – KADEK), was founded in order to attain political objectives democratically on behalf of the Kurdish minority. Mr [Abdullah] Ocalan was appointed president of KADEK. 2 The [KNK] is an umbrella organisation comprising approximately 30 individual entities. The KNK’s purpose is “to strengthen the unity and cooperation of the Kurds in all parts of Kurdistan and [to] support their struggle based on the best interests of the Kurdish nation” (Article 7A of the KNK’s Charter). According to the written evidence of Mr [Serif] Vanly, President of the KNK, the leader of the PKK was among those who spearheaded the creation of the KNK. The PKK was a member of the KNK and the individual members of the PKK partly financed the KNK.’ 11 On 2 May 2002 the Council adopted Decision 2002/334. This decision added the PKK to the list envisaged in Article 2(3) of Regulation No 2580/2001 (‘the disputed list’). 12 By application registered under number T-206/02, the KNK brought an action for annulment of Decision 2002/334. The Court of First Instance dismissed this action as inadmissible by order of 15 February 2005. No appeal was brought against this order. 13 On 17 June 2002 the Council adopted Decision 2002/460. This decision kept the PKK on the disputed list. The list was then regularly updated by various Council decisions. Procedure before the Court of First Instance14 By application lodged at the Registry of the Court of First Instance on 31 July 2002, the PKK, represented by Osman Ocalan, and the KNK, represented by Serif Vanly, brought an action for annulment of Decisions 2002/334 and 2002/460. The action was registered as Case T-229/02. 15 The application was accompanied by a power of attorney on behalf of the PKK, which reads as follows:‘I, Osman Ocalan, a former member, and on behalf of the organisation formerly known as the PKK hereby authoriseMark Muller, a barrister at 10-11 [Gray’s] Inn SquareEdward Grieves, a barrister at 10-11 [Gray’s] Inn SquareGareth Peirce, a partner at Birnberg Peirce solicitorsto commence and pursue proceedings in the Court of First Instance of the European Communities for the annulment of Decision 2002/334/EC and Regulation No 2580/2001 and take any other step, including the delegation of any matter to another person, applying for interim relief and any necessary appeal to the Court of Justice of the European Communities, to that end.’ 16 By document lodged on 27 November 2002, the Council raised an objection of inadmissibility pursuant to Article 114(1) of the Rules of Procedure of the Court of First Instance. The United Kingdom of Great Britain and Northern Ireland and the Commission of the European Communities were granted leave to intervene in support of the Council. The Commission lodged observations on the objection of inadmissibility. The United Kingdom waived its right to do so. 17 In the contested order the Court of First Instance, ruling on the objection of inadmissibility, dismissed the action as inadmissible. The contested order18 The Court of First Instance concluded that the application of Osman Ocalan on behalf of the PKK was inadmissible on the following grounds: ‘27 It must be held, first of all, that the PKK is to be regarded as being directly and individually concerned by [Decisions 2002/334 and 20002/460], since it is named therein. 28 It is appropriate, next, to make clear that the rules governing the admissibility of an action for annulment as regards a person mentioned in the disputed list – namely the list of persons, groups and entities to which specific restrictive measures for combating terrorism apply – must be construed according to the circumstances of the case. As regards, in particular, those groups or entities it may be that they do not exist legally, or that they were not in a position to comply with the legal rules which usually apply to legal persons. Therefore, excessive formalism would amount to the denial, in certain cases, of any possibility of applying for annulment, even though those groups and entities were the object of restrictive Community measures. 32 In accordance with the principles identified in paragraph 28 above, Mr [Osman] Ocalan, a natural person, is entitled to demonstrate, by any available evidence, that he is acting validly on behalf of the legal person, the PKK, whose representative he claims to be. However, such evidence must, at least, show that the PKK did indeed wish to bring this action and that it was not used as an instrument by a third party, albeit, as the case may be, one of its members. 33 It is appropriate, also, to make clear that it is not for the Court, when examining the admissibility of the action, to rule on the reality of the PKK’s existence. The question raised in the course of that examination is strictly limited to whether Mr [Osman] Ocalan has the capacity to bring an action on behalf of the PKK. 34 First, it must be noted that the action is formally brought by Mr [Osman] Ocalan, “on behalf of” the PKK.35 Secondly, the fact remains that the applicants firmly declare that the PKK was dissolved in April 2002. What is more, according to Mr [Osman] Ocalan’s evidence annexed to the application, the PKK’s Congress, having pronounced its dissolution, adopted, at the same time, the declaration that “all activities under the name of ‘PKK’ would [henceforth] be deemed illegitimate”. 36 Thirdly, it must be pointed out that nowhere in the applicants’ pleadings is Mr [Osman] Ocalan mentioned otherwise than as the PKK’s representative. In particular, it is never claimed that he could have any individual interest in the annulment of [Decisions 2002/334 and 2002/460]. 37 Far from demonstrating Mr [Osman] Ocalan’s legal capacity to represent the PKK, the applicants state, on the contrary, that the PKK no longer exists. It cannot be accepted that a legal person which has ceased to exist, assuming that is so, may validly appoint a representative. 38 The impossibility of accepting that Mr [Osman] Ocalan validly represents the PKK is further strengthened by his own evidence that any activity under the name of the “PKK” is illegitimate after April 2002. According to that evidence, the action which Mr [Osman] Ocalan claims to bring on behalf of the PKK has been declared illegitimate by his principal itself. 39 Therefore, the applicants confront the Court with the paradoxical situation in which the natural person deemed to represent a legal person is not only unable to demonstrate that he represents it validly, but, further, explains why he is unable to represent it. 40 As to the applicants’ argument that there are no other remedies available, that cannot lead to the admission of actions of any person who wishes to defend a third party’s interests. 41 The Court is therefore bound to hold that Mr [Osman] Ocalan has, on his own authority, brought an action on behalf of the PKK. Therefore, the action brought by Mr [Osman] Ocalan on behalf of the PKK is inadmissible.’ 19 The Court of First Instance held that the application of Serif Vanly on behalf of the KNK was inadmissible on the following grounds: 43 … the KNK has already challenged Decision 2002/334 in its action in Case T-206/02. Therefore, because of the identity of the subject-matter, cause of action and parties, this action, in so far as it is brought by the KNK against Decision 2002/334, is inadmissible by virtue of lis pendens. 45 As regards the action brought against Decision 2002/460 by the KNK, it follows from settled case-law that an association formed for the protection of the collective interests of a category of persons cannot be considered to be individually concerned, for the purposes of the fourth paragraph of Article 230 EC, by a measure affecting the general interests of that category, and is therefore not entitled to bring an action for annulment if its members cannot do so individually (Joined Cases 19/62 to 22/62 Fédération nationale de la boucherie en gros et du commerce en gros des viandes and Others v Council [1962] ECR 491, [at p. 499,] and Case T-69/96 Hamburger Hafen- und Lagerhaus and Others v Commission [2001] ECR II-1037, paragraph 49). 46 In this case, it must be noted that, under Article 7A of its Charter, the KNK aims to strengthen the unity and cooperation of the Kurds in all parts of Kurdistan and to support their struggle, based on the best interests of the Kurdish nation. The KNK must therefore be considered to be an association formed for the protection of the collective interests of a category of persons. 47 That conclusion is also supported by the applicants’ argument that the PKK’s listing has a “profoundly chilling effect” on the KNK’s ability to pursue those aims and objectives. By virtue of the above-cited case-law, it cannot be concerned individually in that respect. 48 It must next be established whether the KNK can avail itself of the fact that one or more of its members would be entitled to bring an action for annulment of [Decision 2002/460]. 49 As regards the PKK, it must be held that the applicants, by claiming that it no longer exists, acknowledge, at the very least, that the PKK is no longer a member of the KNK. In that regard, it cannot be accepted that a person’s past membership of an association enables that association to avail itself of that person’s possible right of action. To accept such reasoning would be tantamount to conferring on an association some sort of perpetual right to bring proceedings, despite the fact that that association can no longer claim to represent the interests of its former member. 50 As regards KADEK, the applicants rely on the fact, in essence, that that body, a potential member of the KNK, is affected by Decision 2002/460 to the point of not being able to join the KNK. Even if KADEK might have been entitled to challenge Decision 2002/460 at the date this action was brought, which seems possible, particularly if it could be regarded as the successor in law and/or in fact to the PKK, the KNK cannot avail itself of KADEK’s membership of its organisation, since it is not a member. 51 The applicants allege, finally, that the KNK and its members in general are individually concerned on the ground that their activities are curtailed by the fear of having their assets frozen if they cooperate with an entity named on the disputed list. It must be recalled, in that regard, that the prohibition by [Decision 2002/460] on making funds available to the PKK is of general application, because it is addressed to all persons who are subject to Community law. [Decision 2002/460] thus applies to objectively determined situations and entails legal effects for categories of persons regarded generally and in the abstract (see, to that effect, Case 307/81 Alusuisse Italia v Council and Commission [1982] ECR 3463, paragraph 9). 52 It must be recalled that natural or legal persons can claim to be concerned individually by a measure of general application only if they are affected by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from any other person (Case 25/62 Plaumann v Commission [1963] ECR 95, at p. 107, and Case T-12/93 CCE de Vittel and Others v Commission [1995] ECR II-1247, paragraph 36). The KNK and its members are bound to comply with the prohibition laid down by [Decision 2002/460] concerning the PKK, like all other persons in the Community. The fact that, because of their political opinions, the KNK and its members are more likely than others to suffer the effects of that prohibition is not such as to differentiate them from all other persons within the Community. The fact that a measure of general application may have specific effects which differ according to the various persons to whom it applies is not such as to differentiate them in relation to all the other persons concerned, where that measure is applied on the basis of an objectively determined situation (see Case T-138/98 ACAV and Others v Council [2000] ECR II-341, paragraph 66, and the case-law there cited). 56 Since the KNK cannot avail itself of the fact that one of its members is entitled to bring an action for annulment of [Decision 2002/460], it must be held that it is not individually concerned by that decision. 57 Accordingly, the action, in so far as it is brought by the KNK against Decision 2002/460, is inadmissible.’ Procedure before the Court of Justice and forms of order sought20 By application lodged at the Registry of the Court of Justice on 9 May 2005, Osman Ocalan, on behalf of the PKK, and Serif Vanly, on behalf of the KNK, brought an appeal against the contested order. They claim that the Court of Justice should set the order aside, declare the action brought by Osman Ocalan on behalf of the PKK and by Serif Vanly on behalf of the KNK to be admissible, and order the Council to pay the costs relating to the proceedings on admissibility. 21 The appellants adduce as an annex to their appeal a statement made on 9 May 2005 by Mark Muller, one of the lawyers representing them in the present proceedings, which reads as follows: ‘1. I MARK MULLER, hereby confirm that I represent Abdullah Ocalan in proceedings before the European Court of Human Rights.2. Throughout the course of those proceedings I have regularly visited Mr [Abdullah] Ocalan in prison on Imrali Island … in Turkey. I can confirm that prior to the submission of the current application before the Court of First Instance Mr [Abdullah] Ocalan gave me instructions to challenge the proscription of the PKK in Europe. In addition I have also had cause to meet with other high ranking representatives of the PKK and its alleged successor organisation KADEK in Europe. Once again, I received instructions to pursue the present proceedings. 3. In order to comply with the rules of procedure of the Court [of First Instance] I requested that a power of attorney be obtained from Mr Osman Ocalan who was at that time a high ranking representative of both the organisation formerly known as the PKK and KADEK. 4. Had the Court [of First Instance] sought clarification about this matter I would have immediately instituted steps to obtain all requisite evidence to confirm the aforesaid representations. I did not believe that this was necessary as the Court [of First Instance] had accepted the power of attorney submitted and had communicated the application to the Defendant.’ 22 The Council contends that the Court should dismiss the appeal by both appellants as inadmissible, or in the alternative as unfounded, if necessary refer the case back to the Court of First Instance, and order the appellants to pay the costs of these proceedings. 23 The Commission and the United Kingdom, which intervened at first instance, have not submitted any written observations. Consideration of the appeal Admissibility of the application of Osman Ocalan on behalf of the PKK24 Osman Ocalan on behalf of the PKK (‘the first appellant’) sets out seven grounds of appeal. It is appropriate to begin by examining the fourth of those grounds. The fourth ground of appeal– Arguments of the parties25 In his fourth ground, the first appellant contends that the Court of First Instance distorted the clear sense of the evidence which he submitted so far as concerns the dissolution of the PKK. A close reading of the statement by Osman Ocalan submitted to the Court of First Instance does not show that the PKK has been dissolved in all regards, including for the purposes of challenging its proscription. On the contrary, Osman Ocalan consistently refers in the statement to the continued existence of the PKK and its creation of an allied organisation, KADEK. Accordingly, the Court of First Instance misread the evidence regarding the PKK’s dissolution and existence. 26 The Council’s primary submission is that the fourth ground of appeal is inadmissible because it consists of a repetition of the pleadings at first instance and because it relates to a finding of fact made by the Court of First Instance, namely that the PKK could not have validly appointed Osman Ocalan as its representative for the purposes of the proceedings at first instance. 27 In the alternative, the Council submits that this ground of appeal is clearly unfounded.28 First of all, the Court of First Instance specifically stated, in paragraph 33 of the contested order, that it was not for it to rule on the reality of the PKK’s existence. The question which the Court of First Instance answered in the negative was simply whether Osman Ocalan had the capacity to bring an action on behalf of the PKK. 29 It was the appellants themselves who indicated that the PKK had officially dissolved. Paragraph 16 of Osman Ocalan’s statement annexed to the application at first instance clearly indicates that any activities taken under the name of the PKK would be deemed illegitimate as of 4 April 2002. 30 Next, the submissions of the first appellant are confused in several respects. For example, paragraph 25 of the appeal states that Osman Ocalan is bringing the action on behalf of a subsisting organisation hitherto entitled the PKK. This statement implies that the action is in fact brought on behalf of another unnamed organisation which is no longer the PKK itself. However, the application does not explain what other organisation this might be. 31 Finally, the Court of First Instance made a careful examination of the applicants’ pleadings. The Council considers that the Court’s conclusion in paragraphs 37 to 41 of the contested order that the PKK could not validly appoint a representative was justified on the evidence before it, and submits that the first appellant has not adduced any new arguments in this appeal which cast doubt on that conclusion. – Findings of the Court32 In accordance with the Court’s case-law, an appeal is inadmissible if, without even including an argument specifically identifying the error of law allegedly vitiating the decision under appeal, it merely repeats or reproduces verbatim the pleas in law and arguments previously submitted to the Court of First Instance. By contrast, provided that the appellant challenges the interpretation or application of Community law by the Court of First Instance, the points of law examined at first instance may be discussed again in the course of an appeal. Indeed, if an appellant could not thus base his appeal on pleas in law and arguments already relied on before the Court of First Instance, an appeal would be deprived of part of its purpose (see, to this effect, Case C-25/05 P Storck v OHIM [2006] ECR I-0000, paragraphs 47 and 48, and the case-law cited). 33 The fourth ground of appeal alleges that the Court of First Instance erred in finding that Osman Ocalan had asserted that the PKK lacked capacity to bring an action. This ground contains detailed criticism of the contested order. Furthermore, it relates to a finding made by the Court of First Instance in the contested order, so it could not have been put forward at first instance. 34 Accordingly, the Council’s argument seeking the rejection of the fourth ground of appeal inasmuch as it repeats submissions made at first instance is unfounded and must therefore be rejected. 35 As to the Council’s argument that the fourth ground of appeal is inadmissible because it relates to a finding of fact made by the Court of First Instance, it must be pointed out that, in accordance with the case-law of the Court of Justice, complaints based on findings of fact and on the assessment of those facts in the contested decision are admissible on appeal where the appellant contends that the Court of First Instance has made findings which the documents in the file show to be substantially incorrect or that it has distorted the clear sense of the evidence before it (see, to this effect, Case C-82/01 P Aéroports de Paris v Commission [2002] ECR I-9297, paragraph 56). That is indeed the case here. 36 Consequently, the ground of appeal is admissible.37 With regard to the ground’s merits, it must be examined whether the Court of First Instance distorted the clear sense of the evidence. As the Advocate General has indicated in point 42 of her Opinion, there is such distortion where, without recourse to new evidence, the assessment of the existing evidence appears to be clearly incorrect (see, to this effect, Case C-551/03 P General Motors v Commission [2006] ECR I-3173, paragraph 54). 38 In light of this test, it is to be noted that the evidence adduced before the Court of First Instance concerning the PKK’s existence comprises the statement by Osman Ocalan annexed to the application, the power of attorney which he gave to the lawyers to represent the first appellant, the positions adopted by the Council, and Serif Vanly’s statement, which is also annexed to the application. 39 As regards, first, Osman Ocalan’s statement, he indicates in paragraph 1 thereof that the PKK ‘was, and remains, a political organisation of central importance to the Kurdish people’. 40 In paragraph 11, Osman Ocalan states:‘In July 1999 the PKK declared a unilateral ceasefire. The aim was to work towards a peaceful and democratic solution to the question of Kurdish rights. The PKK declared that all guerrilla activities would halt until further orders were received.’ 41 Paragraphs 15 to 19 of the statement are worded as follows:‘15. [The 8th Congress of the PKK, which took place between 4 and 10 April 2002,] described the PKK as the symbolic name of the “Apoist” movement [“Apo” being a term used for Abdullah Ocalan] in the period of Kurdish national awareness and resistance. It also declared that the PKK symbolised the Kurdish national spirit, conscience and identity. 16. It was decided by the Congress that in order to mirror the major transformations undergone by the PKK, all activities under the name of “PKK” would cease as of 4 April 2002 and that any activities taken under the name of the PKK would be deemed illegitimate. 17. The Congress resolved to carry forward the developments that had been carried out in a planned manner since the [1999] ceasefire and following the event of 7th Congress [“The Peace Project” incorporating the PKK position as evaluated at the 7th Congress on 10 January 2000 is exhibited to this statement]. 18. A new constitution was adopted which altered the structure and organisation of the PKK and set out the strategy of the Apoist Movement. A coordinating organisation would accommodate the various different organisations to be created within parts of Kurdistan and the attendant countries. It was therefore decided to found [KADEK]. 19. A new Management Committee was elected and Abdullah Ocalan was elected as the President of KADEK.’42 Rather than proclaiming the PKK’s dissolution, this document appears to state that the PKK progressively abandoned violent means of action in favour of other means of action. Osman Ocalan explains in particular that the PKK declared a unilateral ceasefire in July 1999, participated in a ‘Peace Project’ at its 7th Congress, held on 10 January 2000, and decided at its 8th Congress, which took place from 4 to 10 April 2002, to cease ‘all activities’ from 4 April 2002. Read in their context, the words ‘all activities’ could simply refer to the abandonment by the PKK of all its violent activities. 43 Furthermore, it appears from paragraphs 18 and 19 of Osman Ocalan’s statement that the structure and organisation of the PKK were simply altered and that the PKK continued to exist under the name KADEK, Abdullah Ocalan remaining its president. 44 Likewise, the verb ‘remains’ used in paragraph 1 of the statement indicates that the PKK continues to exist.45 In any event, Osman Ocalan does not expressly state anywhere in his statement that the 8th Congress of the PKK pronounced the PKK’s dissolution. 46 Accordingly, when this statement is read as a whole it cannot properly be interpreted as affirming that the PKK was entirely dissolved. 47 As regards, second, the power of attorney given to the lawyers to represent the first appellant, Osman Ocalan specifies therein that he is acting ‘on behalf of the organisation formerly known as the PKK’. These words indicate only a change of name and not the PKK’s dissolution. 48 As regards, third, the positions adopted by the Council, it is apparent that, from 2 April 2004, the decisions which in succession replaced Decisions 2002/334 and 2002/460 refer to the PKK as the ‘Kurdistan Workers’ Party (PKK) (a.k.a. KADEK, a.k.a. KONGRA-GEL’ (see, in particular, Council Decision 2004/306/EC of 2 April 2004 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Decision 2003/902/EC (OJ 2004 L 99, p. 28)). This shows that the Council regards the PKK as continuing to exist, but under other names. 49 As regards, finally, the statement by Serif Vanly, President of the KNK, which is annexed to the application at first instance, while it is true that he refers therein to the dissolution of the PKK, that is, however, in the context of the following passage: ‘Since the KNK’s inception the [PKK] has been a member organisation of the KNK. The PKK spearheaded the creation of the KNK and it has since been a central driving force within the KNK, its aims and objectives being aligned with that of the KNK. The PKK is no longer an official member of the KNK after its dissolution in April 2002. However, the organisation born from the PKK, KADEK, seeks to join the KNK. The Honorary President of the KNK remains Abdullah Ocalan.’ 50 This passage does not dictate the conclusion that the PKK ceased entirely to exist in April 2002. Read in its entirety, it suggests rather that the PKK retained a certain existence after this time in a reorganised form and under another name. Serif Vanly’s statement therefore does not contradict the other evidence which has just been examined. 51 It follows that the finding in paragraph 35 of the contested order that, ‘according to Mr [Osman] Ocalan’s evidence annexed to the application, the PKK’s Congress … pronounced [the PKK’s] dissolution’ is incorrect and contrary to the wording of his statement to which the finding refers. 52 Likewise, the statement in paragraph 37 of the contested order that, ‘far from demonstrating Mr [Osman] Ocalan’s legal capacity to represent the PKK, the applicants state, on the contrary, that the PKK no longer exists’ is not consistent with the evidence available to the Court of First Instance. 53 The findings of fact in paragraphs 35 and 37 of the contested order are therefore incorrect and distort the clear sense of the evidence available to the Court of First Instance. It follows that the fourth ground of appeal is well founded. 54 Accordingly, the contested order must be set aside in so far as it declares the first appellant’s application to be inadmissible, and there is no need to consider the other grounds of appeal relied upon by him. Admissibility of the application of Serif Vanly on behalf of the KNK55 Serif Vanly on behalf of the KNK (‘the second appellant’) sets out two grounds of appeal (the eighth and ninth grounds of appeal). The eighth ground of appeal56 In the eighth ground of appeal, the second appellant observes that in the contested order the Court of First Instance held that the action was inadmissible in so far as it was brought by the KNK on the ground that it was not individually concerned, for the purposes of the fourth paragraph of Article 230 EC, by Decision 2002/460. The second appellant submits that that test is too restrictive when dealing with fundamental rights guaranteed under the ECHR. The test for admissibility in such circumstances should be applied more broadly, in line with the admissibility criteria of the European Court of Human Rights, in order not to bar the way to an effective judicial remedy. 57 The second appellant contends that if the Court of Justice were to rule that the KNK’s application is inadmissible in the current proceedings, when, in the same circumstances, the European Court of Human Rights would hold an action brought before it to be admissible, the second appellant would be denied access to the effective remedy to which he is entitled, that is to say, an application seeking examination of whether Regulation No 2580/2001 and Decision 2002/460 infringe his fundamental rights as set out in the ECHR. To refuse such an examination when there is an arguable and admissible case under the ECHR would be in contravention of Article 13 of that Convention in that the second appellant would be purely and simply denied the remedy to which he is entitled. 58 The Council observes that the second appellant does not seek to prove that the Court of First Instance applied incorrectly the provisions of the EC Treaty, as interpreted in Community case-law, when it held that the KNK was not individually concerned by Decision 2002/460. In reality, the second appellant is requesting the Court to disregard the fourth paragraph of Article 230 EC, as interpreted in Community case-law, and to adopt instead the rules on standing provided for by the ECHR. 59 In so far as this ground of appeal concerns the Court of First Instance’s conclusion that the second appellant was not individually concerned, for the purposes of the fourth paragraph of Article 230 EC, by Decision 2002/460, the Council submits that the second appellant has failed to make any new arguments in the appeal and that, consequently, this part of the appeal is inadmissible. In the alternative, the Council pleads that this part of the appeal is unfounded since the Court of First Instance correctly applied settled case-law. 60 In so far as this ground of appeal develops an argument derived from the ECHR, the Council submits that this argument is inadmissible at the appeal stage, as it was not debated between the parties at first instance and the Court of First Instance did not make any finding in relation to it. In the alternative, the argument is unfounded because the European Union and the Community protect fundamental rights in a manner equivalent to that for which the ECHR provides. 61 Regarding the admissibility of this ground of appeal, it is to be remembered that, under Article 118 of the Rules of Procedure of the Court of Justice, Article 42(2) of those rules, which prohibits generally the introduction of new pleas in law in the course of the procedure, applies to the procedure before the Court of Justice on appeal from a decision of the Court of First Instance. In an appeal the Court’s jurisdiction is thus confined to review of the assessment by the Court of First Instance of the pleas argued before it (see Joined Cases C-199/01 P and C‑200/01 P IPK-München v Commission [2004] ECR I‑4627, paragraph 52). 62 At first instance the Council put forward in its objection of inadmissibility a plea alleging that the second appellant did not meet the conditions laid down in the fourth paragraph of Article 230 EC. In his observations on the objection of inadmissibility, the second appellant responded that that provision had to be interpreted in such a way that he was considered to meet those conditions. In this context, the second appellant submitted inter alia that there must be an effective remedy in the case of an act of the Community institutions which infringes fundamental rights and Community law. In the contested order, the Court of First Instance rejected the second appellant’s submissions, but without expressing a view on the consideration that the action brought before it was designed to defend the second appellant’s fundamental rights. 63 It is clear that the interpretation of the fourth paragraph of Article 230 EC and its application to the second appellant’s circumstances were discussed in the proceedings before the Court of First Instance. The present ground of appeal seeks to contest in a detailed manner the Court of First Instance’s interpretation and application of that provision in relation to the second appellant. It follows that the present ground of appeal is not a new plea whose introduction at the appeal stage would be prohibited by Articles 42(2) and 118 of the Rules of Procedure. 64 Where a ground of appeal is admissible, it is in principle for the appellant to set out arguments in support of it as he sees fit, whether by relying on arguments already used before the Court of First Instance or by developing new arguments, in particular in relation to the positions adopted by that Court. If it were otherwise, an appeal would be deprived of part of its purpose (see, to this effect, Storck, paragraph 48, and the case-law cited). 65 It follows that the second appellant is not required to support the present ground of appeal exclusively with new arguments relating to the interpretation of the fourth paragraph of Article 230 EC in Community case-law. The Council’s argument to that effect is unfounded and must be rejected. 66 As regards the admissibility of the arguments derived from the ECHR, it follows from Article 58 of the Statute of the Court of Justice, in conjunction with Article 113(2) of the Rules of Procedure of the Court of Justice, that, on appeal, an appellant may put forward any relevant argument, provided only that the subject-matter of the proceedings before the Court of First Instance is not changed in the appeal. Contrary to the Council’s assertions, there is no requirement that each argument put forward on appeal must previously have been discussed at first instance. A restriction to this effect cannot be accepted because an appeal would thereby be deprived of a significant part of its purpose. 67 Since it is evident that the present ground of appeal does not change the subject-matter of the proceedings before the Court of First Instance, the Council’s argument concerning the ground’s inadmissibility in so far as it refers to the ECHR is unfounded and must be rejected. 68 It follows that the present ground of appeal is admissible in its entirety.69 As to the merits of the ground of appeal, the second appellant submits that Decisions 2002/334 and 2002/460 are of concern to him since, in particular, the KNK provides a representative platform for the PKK and for any deemed successor organisation of the PKK. 70 It is settled case-law that a link of that kind is not sufficient to establish that an entity is individually concerned for the purposes of the fourth paragraph of Article 230 EC. An association which represents a category of natural or legal persons cannot be considered to be individually concerned, for the purposes of that provision, by a measure affecting the general interests of that category (see, to this effect, Fédération nationale de la boucherie en gros et du commerce en gros des viandes and Others v Council, at p. 499, and the order in Case 117/86 UFADE v Council and Commission [1986] ECR 3255, paragraph 12). 71 The second appellant further submits that the KNK would be in danger of having its own funds frozen, pursuant to Decisions 2002/334 and 2002/460, if it dealt with the PKK. 72 In accordance with settled case-law, natural or legal persons can claim to be concerned individually by a measure of general application only if they are affected by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from any other person (see, to this effect, Plaumann v Commission, at p. 107, and Case C-50/00 P Unión dePequeños Agricultores v Council [2002] ECR I‑6677, paragraph 36). 73 If the KNK runs the risk of having its funds frozen, that is by virtue of an objectively defined prohibition which applies in the same way to all persons subject to Community law. In those circumstances, the KNK cannot claim to be individually concerned, for the purposes of the fourth paragraph of Article 230 EC, by Decisions 2002/334 and 2002/460. 74 In concluding, in particular in paragraphs 45, 46, 51 and 52 of the contested order, that the KNK was not individually concerned for the purposes of the fourth paragraph of Article 230 EC, the Court of First Instance correctly applied that provision as interpreted by the case-law. 75 The second appellant contends, however, that when the fourth paragraph of Article 230 EC is interpreted in that way it lays down a condition of admissibility so restrictive that the provision conflicts with the ECHR. 76 Fundamental rights form an integral part of the general principles of law the observance of which the Court ensures. For that purpose, the Court draws inspiration from the constitutional traditions common to the Member States and from the guidelines supplied by international instruments for the protection of human rights on which the Member States have collaborated or to which they are signatories. The ECHR has special significance in that respect (see, inter alia, Case C-112/00 Schmidberger [2003] ECR I-5659, paragraph 71, and Case C‑540/03 European Parliament v Council [2006] ECR I-0000, paragraph 35). 77 In addition, Article 6(2) EU provides:‘The Union shall respect fundamental rights, as guaranteed by the [ECHR] and as they result from the constitutional traditions common to the Member States, as general principles of Community law.’ 78 It is within that framework that the present argument must be considered.79 As provided in Article 34 of the ECHR, the European Court of Human Rights may receive applications from any person, non-governmental organisation or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the ECHR. 80 According to the case-law of the European Court of Human Rights, Article 34 of the ECHR requires as a general rule that, in order to be considered a victim within the meaning of that article, an applicant must claim to have been affected by a violation of the ECHR that has already taken place (see Eur. Court H.R., Klass and Others v. Germany, judgment of 6 September 1978, Series A no. 28, § 33). It is only in highly exceptional circumstances that an applicant may nevertheless claim to be a victim of a violation of the ECHR owing to the risk of a future violation (see Eur. Commission H.R., Tauira and Others v. France, no. 28204/95, decision of 4 December 1995, Decisions and Reports 83-B, p. 112, at p. 130). It is apparent, however, from the case-law of the European Court of Human Rights that persons who claim to be linked to an entity included in the list annexed to Common Position 2001/931, but who are not included in it themselves, do not have the status of victims of a violation of the ECHR within the meaning of Article 34 thereof and that, consequently, their applications are inadmissible (see Eur. Court H.R., Segi and Gestoras Pro-Amnistia and Others v. 15 States of the European Union (dec.), nos. 6422/02 and 9916/02, ECHR 2002-V). 81 The KNK’s situation is comparable to that of the persons linked to the abovementioned entities Segi and Gestoras Pro-Amnistia. The KNK is not included in the disputed list and is therefore not subject to the restrictive measures envisaged by Regulation No 2580/2001. 82 In those circumstances, the case-law of the European Court of Human Rights, as it currently stands, appears to indicate that the KNK would not be able to establish that it has the status of a victim within the meaning of Article 34 of the ECHR and therefore would not be able to bring an action before that court. 83 Consequently, in the circumstances of the present case no conflict between the ECHR and the fourth paragraph of Article 230 EC has been established. 84 The present ground of appeal must accordingly be rejected as unfounded. The ninth ground of appeal85 The second appellant contends that paragraph 49 of the contested order is marred by an error since it is founded on the assumption that the PKK no longer existed, thus prejudging a matter of substance in order to reject an argument concerning the admissibility of the action. 86 The Council states that the Court of First Instance did not rule on the existence or otherwise of the PKK. For the purposes of assessing whether the KNK could rely on the fact that one or more of its members would be entitled to bring an action for annulment of the contested decision, it simply held that by claiming that the PKK no longer existed the second appellant had at the very least acknowledged that the PKK was no longer a member of the KNK. 87 It is apparent from paragraphs 69 to 82 of the present judgment that the KNK is neither individually concerned, for the purposes of the fourth paragraph of Article 230 EC, by Decisions 2002/334 and 2002/460 nor a victim of those decisions within the meaning of Article 34 of the ECHR, irrespective of whether the PKK exists or not. In those circumstances, an erroneous finding by the Court of First Instance that the PKK did not exist could not in any event result in the contested order being set aside as regards the second appellant. 88 The present ground of appeal is thus immaterial.89 It follows that the appeal brought by the second appellant is unfounded and must be dismissed.90 Since the second appellant has been unsuccessful, he must be ordered to pay the costs of the appeal which he brought, pursuant to Articles 69(2) and 122 of the Rules of Procedure of the Court of Justice. Consideration of the action before the Court of First Instance91 In accordance with the second sentence of the first paragraph of Article 61 of the Statute of the Court of Justice, if the decision of the Court of First Instance is set aside the Court of Justice may give final judgment in the matter where the state of the proceedings so permits. That is so in the case of the dispute between the first appellant and the Council so far as concerns the admissibility of the application. 92 The Council puts forward two pleas in support of its request that the first appellant’s application be declared inadmissible. First, in so far as it relates to Decision 2002/334, the application was lodged out of time. Second, the PKK lacks the capacity to be a party to judicial proceedings because it no longer exists. The first plea Arguments of the parties93 According to the Council, the deadline for bringing an action challenging Decision 2002/334 was 29 July 2002. The original of the application was lodged at the Registry of the Court of First Instance on 31 July 2002. Consequently, the application was lodged out of time in so far as it relates to that decision. 94 The Commission, as an intervener at first instance, supported this reasoning and added that the inadmissibility of the application challenging Decision 2002/334 means that the application challenging Decision 2002/460 is inadmissible, since the latter is merely a decision confirming the former. 95 The first appellant responds that his representatives are convinced that they lodged the original of the application, along with five copies, at the Registry of the Court of First Instance on 24 July 2002, even though they lodged a replacement original on 31 July 2002. In those circumstances, and since fundamental rights are at stake, to prevent the first appellant from seeking the annulment of Decision 2002/334 would be unduly formalistic. 96 In any event, in the first appellant’s submission, Decision 2002/460 is an independent decision which was certainly contested within the time-limit. Findings of the Court97 Decision 2002/334 was adopted on 2 May 2002 and published in the Official Journal of the European Communities on 3 May 2002. In addition to the period of two months for bringing an action for annulment which is laid down in the fifth paragraph of Article 230 EC, it is necessary to include in the calculation a period of 14 days from the date of publication of the contested measure, pursuant to Article 102(1) of the Rules of Procedure of the Court of First Instance, and of a single period of 10 days on account of distance, pursuant to Article 102(2) of those rules. The final day of the period determined in accordance with these provisions was 27 July 2002. Since that was a Saturday, the period for bringing an action was extended until the end of Monday, 29 July 2002, pursuant to the first subparagraph of Article 101(2) of the Rules of Procedure. 98 Article 43(1) of the Rules of Procedure of the Court of First Instance requires the original of every pleading to be lodged.99 It appears from the documents before the Court of First Instance that only copies, without an original, were lodged at the Registry of the Court of First Instance on 24 July 2002. Even though the first appellant asserts that his representatives lodged the original of the application together with the copies lodged on that date, he does not adduce any evidence of this. Furthermore, the text of the original lodged on 31 July 2002 displays some differences compared with the copies lodged on 24 July 2002. It must therefore be found that the original of the application was not lodged at the Registry of the Court of First Instance until 31 July 2002, as the Registry’s stamp on it attests. 100 Since the original of the application was not lodged at the Registry of the Court of First Instance within the period required, the first appellant’s application is inadmissible in so far as it challenges Decision 2002/334. 101 This conclusion is not affected by the circumstance, pleaded by the first appellant, that fundamental rights are at stake. Rules concerning time-limits for bringing proceedings are mandatory and must be applied by the court in question in such a way as to safeguard legal certainty and equality of persons before the law. 102 On the other hand, it is common ground that the first appellant challenged Decision 2002/460 within the time-limit laid down.103 As the Court of First Instance correctly held in paragraph 44 of the contested order, that decision is a new decision in relation to Decision 2002/334. As provided in Article 2(3) of Regulation No 2580/2001 and Article 1(6) of Common Position 2001/931, each decision revising the disputed list results from a review by the Council of the situation of the persons, groups and entities covered. 104 It follows that Decision 2002/460 does not merely confirm Decision 2002/334 and that the inadmissibility of the application in so far as it challenges Decision 2002/334 does not prevent the first appellant from contesting Decision 2002/460. The second plea105 The Council submits that the PKK does not have the capacity to bring an action for annulment because, according to the first appellant’s own statements, it has been dissolved. Its non-existence is illustrated by the fact that it does not have headed notepaper. The power of attorney given to the lawyers to represent it is simply set out on a blank sheet of paper bearing Osman Ocalan’s signature. 106 The first appellant contends, first, that he has not stated that the PKK was dissolved and, second, that the PKK retains at least a residual capacity sufficient to contest its inclusion in the disputed list. 107 As has been found in paragraphs 38 to 52 of the present judgment, the available evidence tends to indicate that the PKK was not dissolved at its Congress from 4 to 10 April 2002. It appears in fact, on examining that evidence, that the PKK continued to operate after the Congress, probably in a reorganised form and under other names. 108 Even though the field of the PKK’s activities after 4 April 2002 cannot be defined absolutely precisely in the light of that evidence, it is in any event certain that it retains an existence sufficient to contest its inclusion in the disputed list. 109 The European Community is a community based on the rule of law in which its institutions are subject to judicial review of the compatibility of their acts with the EC Treaty and with the general principles of law which include fundamental rights. Individuals are therefore entitled to effective judicial protection of the rights they derive from the Community legal order, and the right to such protection is one of the general principles of law stemming from the constitutional traditions common to the Member States. That right has also been enshrined in Articles 6 and 13 of the ECHR (see Unión de Pequeños Agricultores v Council, paragraphs 38 and 39). 110 It is particularly important for that judicial protection to be effective because the restrictive measures laid down by Regulation No 2580/2001 have serious consequences. Not only are all financial transactions and financial services thereby prevented in the case of a person, group or entity covered by the regulation, but also their reputation and political activity are damaged by the fact that they are classified as terrorists. 111 Under Article 2(3) of Regulation No 2580/2001, read in conjunction with Article 1(4) to (6) of Common Position 2001/931, a person, group or entity can be included in the disputed list only if there is certain reliable information, and the persons, groups or entities covered must be precisely identified. In addition, it is made clear that the name of persons, groups or entities can be kept on the list only if the Council reviews their situation periodically. All these matters must be open to judicial review. 112 It follows that since, by Decision 2002/460, the Community legislature took the view that the PKK retains an existence sufficient for it to be subject to the restrictive measures laid down by Regulation No 2580/2001, it must be accepted, on grounds of consistency and justice, that that entity continues to have an existence sufficient to contest this measure. The effect of any other conclusion would be that an organisation could be included in the disputed list without being able to bring an action challenging its inclusion. 113 In order to be permitted to bring an action on behalf of such an organisation, it is necessary to show that the organisation concerned does indeed wish to bring the action and that the lawyers who claim to represent it have in fact been instructed for that purpose. 114 The Statute of the Court of Justice, in particular Article 21, the Rules of Procedure of the Court of Justice, in particular Article 38, and the Rules of Procedure of the Court of First Instance, in particular Article 44, were not devised with a view to the commencement of actions by organisations lacking legal personality, such as the PKK. In this exceptional situation, the procedural rules governing the admissibility of an action for annulment must be applied by adapting them, to the extent necessary, to the circumstances of the case. As the Court of First Instance rightly stated in paragraph 28 of the contested order, it is a question of avoiding excessive formalism which would amount to the denial of any possibility of applying for annulment even though the entity in question has been the object of restrictive Community measures. 115 It follows that Osman Ocalan is entitled to demonstrate, by any available evidence, that he is acting validly on behalf of the PKK whose representative he claims to be. 116 Regarding the validity of the representation of the PKK by Osman Ocalan, a doubt arises from the fact that he presents himself in the power of attorney as a former member of the PKK, without his entitlement to represent it being justified on any other basis. 117 However, in the appeal the first appellant has submitted to the Court a statement by Mark Muller, a lawyer, which tends to justify that power of attorney. As confirmed by the judgment of the European Court of Human Rights of 12 May 2005 in Abdullah Ocalan v. Turkey, no. 46221/99, not yet published, Mark Muller represents before that court Abdullah Ocalan who was the leader of the PKK and has been imprisoned in Turkey since 1999. Mark Muller states that, on a visit by him to Abdullah Ocalan in prison, the latter gave him instructions to challenge the proscription of the PKK in Europe. Mark Muller further states that several other high-ranking representatives of the PKK and its successor, KADEK, instructed him to pursue the proceedings brought by the application made to the Court of First Instance. 118 Moreover, Mark Muller states that, when Osman Ocalan signed the power of attorney given to the lawyers to make the application, he was a high-ranking representative of both the PKK and KADEK. 119 These statements, made by a member of the bar of one of the Member States, who is subject as such to a code of professional conduct, are sufficient, in the particular circumstances of the case, to establish that Osman Ocalan is qualified to represent the PKK and in particular to instruct lawyers to act on its behalf. 120 This finding is not affected by the Council’s argument relating to the absence of headed notepaper.121 It is true that in the case of a legal person governed by private law it is customary for the power of attorney given to its lawyers to be set out on headed notepaper, although that is not required by the provisions relating to the procedure before the Court of Justice or the Court of First Instance. However, in the case of an organisation which is not established in accordance with the legal rules that usually apply to legal persons, this factor has little evidential value. 122 In those circumstances, it must be held that Osman Ocalan is authorised to represent the PKK and to instruct lawyers for that purpose. 123 It follows that the first appellant’s application is admissible in so far as it challenges Decision 2002/460. The case must accordingly be referred back to the Court of First Instance for judgment on the substance. 124 Since the case is being referred back to the Court of First Instance for continuation of the proceedings in so far as they concern the first appellant, costs should be reserved in his regard. On those grounds, the Court (First Chamber) hereby:1. Sets aside the order of the Court of First Instance of the European Communities of 15 February 2005 in Case T-229/02 PKK and KNK v Council in so far as it dismisses the application of Osman Ocalan on behalf of the Kurdistan Workers’ Party (PKK);2. Dismisses the appeal as to the remainder;3. Orders Serif Vanly on behalf of the Kurdistan National Congress (KNK) to pay the costs of the appeal brought by him;4. Dismisses the application of Osman Ocalan on behalf of the PKK as inadmissible in so far as it challenges Council Decision 2002/334/EC of 2 May 2002 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Decision 2001/927/EC;5. Declares that the application of Osman Ocalan on behalf of the PKK is admissible in so far as it challenges Council Decision 2002/460/EC of 17 June 2002 implementing Article 2(3) of Regulation (EC) No 2580/2001 on specific restrictive measures directed against certain persons and entities with a view to combating terrorism and repealing Decision 2002/334/EC, and refers the case back to the Court of First Instance of the European Communities for judgment on the substance;6. Reserves the costs of Osman Ocalan on behalf of the PKK.[Signatures]* Language of the case: English. | 45d5a-0e699b5-4a05 | EN |
THE PROVISIONS OF LUXEMBOURG LAW RELATING TO LINGUISTIC KNOWLEDGE WHICH EUROPEAN LAWYERS MUST POSSESS IN ORDER TO BE REGISTERED WITH A BAR ARE CONTRARY TO COMMUNITY LAW | Graham J. WilsonvOrdre des avocats du barreau de Luxembourg(Reference for a preliminary ruling from the Cour administrative)(Freedom of establishment – Directive 98/5/EC – Practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained – Conditions for registration with the competent authority in the host Member State – Prior examination of knowledge of the languages of the host Member State – Remedy before a court or tribunal in accordance with domestic law) Summary of the Judgment1. Freedom of movement for persons – Freedom of establishment – Lawyers – Practice of the profession on a permanent basis in a Member State other than that in which the qualification was obtained – Directive 98/5 (European Parliament and Council Directive 98/5, Art. 9, second para.)2. Freedom of movement for persons – Freedom of establishment – Lawyers – Practice of the profession on a permanent basis in a Member State other than that in which the qualification was obtained – Directive 98/5 (European Parliament and Council Directive 98/5, Arts 3, 4 and 5(3))1. Article 9 of Directive 98/5 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained, which provides that a remedy must be available before a court or tribunal in accordance with the provisions of domestic law against decisions of the competent authority of the host Member State which refuses to register a lawyer who wishes to practise there under his home-country professional title precludes an appeal procedure in which such a decision must be challenged at first instance before a body composed exclusively of lawyers practising under the professional title of the host Member State and on appeal before a body composed for the most part of such lawyers, where the appeal before the supreme court of that Member State permits judicial review of the law only and not the facts. In order to ensure effective judicial protection of the rights laid down in Directive 98/5, the body called upon to hear appeals against decisions refusing registration must be a court or tribunal as defined by Community law and fulfil a certain number of criteria such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law and its independence and impartiality. In that connection, the concept of independence, which is inherent in the task of adjudication, involves primarily an authority acting as a third party in relation to the authority which adopted the contested decision. Furthermore, the concept of independence requires, first, that the body is protected against external intervention or pressure liable to jeopardise the independent judgment of its members as regards proceedings before them. Second, it is linked to impartiality and seeks to ensure a level playing field for the parties to the proceedings and their respective interests with regard to the subject-matter of those proceedings. Those guarantees of independence and impartiality require rules, particularly as regards the composition of the body, in order to dismiss any reasonable doubt in the minds of individuals as to the imperviousness of that body to external factors and its neutrality with respect to the interests before it. Finally, Article 9 of Directive 98/5, although it does not preclude appeal proceedings being brought before a body which is not a court or tribunal, does not provide that a legal remedy may be open to the person concerned only after all other remedies have been exhausted. In any event, where an appeal before a non-judicial body is provided for by national law, Article 9 requires actual access within a reasonable period to a court or tribunal as defined by Community law, which is competent to give a ruling on both fact and law. (see paras 44, 47-53, 60-62, operative part 1)2. Article 3 of Directive 98/5 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained precludes Member States from making the registration of a lawyer with the competent national authority of a Member State who has obtained his qualifications in another State and who wishes to practise under his home country professional title subject to a prior examination of his linguistic proficiency. The Community legislature, in that article, carried out a complete harmonisation of the prior conditions for the exercise of the right conferred by Directive 98/5, by providing that presentation to the competent authority of the host Member State of a certificate attesting to registration with the competent authority of the home Member State is the only condition to which registration of the person concerned in the host Member State may be subject, enabling him to practise there under his home-country professional title. The Community legislature, with a view to making it easier for a particular class of migrant lawyers to exercise the fundamental freedom of establishment, did not opt for a system of prior testing of the knowledge of the persons concerned. However, that exclusion of a system of prior testing of the knowledge, particularly of languages, for European lawyers is accompanied in Directive 98/5 by a set of rules intended to ensure, to a level acceptable in the Community, the protection of consumers and the proper administration of justice. (see paras 65-67, 69, 71, 77, operative part 2)JUDGMENT OF THE COURT (Grand Chamber)19 September 2006 (*) In Case C-506/04,REFERENCE for a preliminary ruling under Article 234 EC by the Cour administrative (Luxembourg), made by decision of 7 December 2004, received at the Court on 9 December 2004, in the proceedings Ordre des avocats du barreau de Luxembourg,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans and A. Rosas, Presidents of Chambers, J.‑P. Puissochet, R. Schintgen, K. Lenaerts (Rapporteur), E. Juhász, E. Levits, A. Ó Caoimh and L. Bay Larsen, Judges, Advocate General: C. Stix-Hackl,Registrar: K. Sztranc-Sławiczek, Administrator,having regard to the written procedure and further to the hearing on 14 March 2006,after considering the observations submitted on behalf of:– Mr Wilson, by L. Lorang, avocat, C. Vajda QC, and V. Sloane, Barrister,– the Ordre des avocats du barreau de Luxembourg, by C. Ossola and C. Kaufhold, avocats,– the Luxembourg Government, by S. Schreiner, acting as Agent, and L. Dupong, avocat,– the French Government, by C. Bergeot-Nunes and G. de Bergues, acting as Agents,– the Italian Government, by I.M. Braguglia, acting as Agent, and A. Cingolo, avvocato dello Stato,– the United Kingdom Government, by R. Caudwell, acting as Agent, and M. Demetriou, Barrister,– the Commission of the European Communities, by A. Bordes and H. Støvlbæk, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 11 May 2006,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained (OJ 1998 L 77, p. 36). 2 The reference was made in the course of proceedings arising from the refusal of the Conseil de l’ordre des avocats du barreau de Luxembourg (Luxembourg Bar Council) (‘the Bar Council’) to register Mr Wilson, a British national, in the Bar Register of the Luxembourg Bar Association. Legal background Directive 98/53 The first paragraph of Article 2 of Directive 98/5 provides: ‘Any lawyer shall be entitled to pursue on a permanent basis, in any other Member State under his home-country professional title, the activities specified in Article 5.’ 4 Article 3 of Directive 98/5, entitled ‘Registration with the competent authority’, provides: ‘1. A lawyer who wishes to practise in a Member State other than that in which he obtained his professional qualification shall register with the competent authority in that State. 2. The competent authority in the host Member State shall register the lawyer upon presentation of a certificate attesting to his registration with the competent authority in the home Member State. It may require that, when presented by the competent authority of the home Member State, the certificate be not more than three months old. It shall inform the competent authority in the home Member State of the registration. …’.5 Article 5 of Directive 98/5, entitled ‘Area of activity’, states: ‘1. Subject to paragraphs 2 and 3, a lawyer practising under his home-country professional title carries on the same professional activities as a lawyer practising under the relevant professional title used in the host Member State and may, inter alia, give advice on the law of his home Member State, on Community law, on international law and on the law of the host Member State. He shall in any event comply with the rules of procedure applicable in the national courts. 2. Member States which authorise in their territory a prescribed category of lawyers to prepare deeds for obtaining title to administer estates of deceased persons and for creating or transferring interests in land which, in other Member States, are reserved for professions other than that of lawyer may exclude from such activities lawyers practising under a home-country professional title conferred in one of the latter Member States. 3. For the pursuit of activities relating to the representation or defence of a client in legal proceedings and in so far as the law of the host Member State reserves such activities to lawyers practising under the professional title of that State, the latter may require lawyers practising under their home-country professional titles to work in conjunction with a lawyer who practises before the judicial authority in question and who would, where necessary, be answerable to that authority or with an “avoué” practising before it. Nevertheless, in order to ensure the smooth operation of the justice system, Member States may lay down specific rules for access to supreme courts, such as the use of specialist lawyers.’ 6 Article 9 of Directive 98/5, entitled ‘Statement of reasons and remedies’, provides: ‘Decisions not to effect the registration referred to in Article 3 or to cancel such registration and decisions imposing disciplinary measures shall state the reasons on which they are based. A remedy shall be available against such decisions before a court or tribunal in accordance with the provisions of domestic law.’ 7 Article 10 of Directive 98/5, entitled ‘Like treatment as a lawyer of the host Member State’, contains the following provisions: ‘1. A lawyer practising under his home-country professional title who has effectively and regularly pursued for a period of at least three years an activity in the host Member State in the law of that State including Community law shall, with a view to gaining admission to the profession of lawyer in the host Member State, be exempted from the conditions set out in Article 4(1)(b) of [Council] Directive 89/48/EEC [of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years’ duration (OJ 1989 L 19, p. 16)] in order to be admitted to the profession of lawyer in the host Member State. “Effective and regular pursuit” means actual exercise of the activity without any interruption other than that resulting from the events of everyday life. …3. A lawyer practising under his home-country professional title who has effectively and regularly pursued a professional activity in the host Member State for a period of at least three years but for a lesser period in the law of that Member State may obtain from the competent authority of that State admission to the profession of lawyer in the host Member State and the right to practise it under the professional title corresponding to the profession in that Member State, without having to meet the conditions referred to in Article 4(1)(b) of Directive 89/48 … under the conditions and in accordance with the procedures set out below: (a) The competent authority of the host Member State shall take into account the effective and regular professional activity pursued during the abovementioned period and any knowledge and professional experience of the law of the host Member State, and any attendance at lectures or seminars on the law of the host Member State, including the rules regulating professional practice and conduct. …’ National law8 Article 5 of the Law of 10 August 1991 on the profession of lawyer (Mémorial A 1991, p. 1110) (‘the Law of 10 August 1991’) provides: ‘No one may practise as a lawyer if he is not registered in the register of a Bar Association established in the Grand Duchy of Luxembourg.’ 9 Article 6 of the Law of 10 August 1991 provides as follows: ‘1. In order to be registered on the Bar Register a person must:(a) satisfy the requirement of good character;(b) prove that he fulfils the requirements for admission to a traineeship.By way of exception, the Bar Council may exempt applicants who have completed their professional training in their home State and who can prove that they have practised the profession for at least five years from certain requirements for admission to a traineeship. (c) be of Luxembourg nationality or a national of a Member State of the European Communities. An applicant who is a national of a State which is not a Member of the European Community may be exempted by the Bar Council from this requirement after it has consulted the Minister for Justice and has been provided with proof of mutuality on the part of the State in question. The same applies for applicants who have the status of political refugee and who are granted asylum in the Grand Duchy of Luxembourg. 2. Before being registered on the Bar Register, an applicant, on presentation by the President of the Bar Council or his representative, shall swear an oath before the Cour de cassation (Court of Cassation) in the following terms: “I swear loyalty to the Grand Duke, obedience to the Constitution and the laws of the State; I swear to respect the authority of the courts; I swear to refrain from giving advice in relation to or defending any cause that I do not believe on my soul and conscience to be just”.’ 10 The conditions for registration were amended by Article 14 of the Law of 13 November 2002 transposing into Luxembourg law Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained, amending (1) the amended Law of 10 August 1991 on the profession of lawyer; (2) the Law of 31 May 1999 on authorising the acceptance of service on behalf of companies (Mémorial A 2002, p. 3202) (‘the Law of 13 November 2002’). 11 Article 14 added to Article 6(1) of the Law of 10 August 1991 inter alia point (d), which lays down the following condition for registration: ‘be proficient in the language of statutory provisions as well as the administrative and court languages as provided for by the Law of 24 February 1984 on the language regime’. 12 The language of statutory provisions is governed by Article 2 of the Law of 24 February 1984 on the language regime (Mémorial A 1984, p. 196) in the following terms: ‘Statutes and their implementing provisions shall be in French. Where statutes and regulatory acts are accompanied by a translation, only the French text is authentic. If regulations not referred to in the preceding paragraph are laid down by an organ of the State, by communes or by public bodies in a language other than French, only the text in the language used by that body is authentic. This article does not derogate from the provisions applicable to international agreements.’13 The administrative and court languages are governed by Article 3 of the Law of 24 February 1984 on the language regime as follows: ‘In administrative, contentious or non-contentious proceedings and judicial matters, the French, German or Luxembourg languages may be used, without prejudice to special provisions on certain matters.’ 14 In accordance with Article 3(1) of the Law of 13 November 2002, a lawyer who has obtained his qualification in a Member State other than the Grand Duchy of Luxembourg (a ‘European lawyer’) must be registered with one of the Bar Associations of that Member State in order to practise there under his home-country professional title. 15 Article 3(2) of that law provides: ‘The Bar Council of the Grand Duchy of Luxembourg, when considering a European lawyer’s application to practise the profession of lawyer under his home-country professional title, shall register him in the Bar Register of the Bar Association following a hearing enabling the Bar Council to verify whether the European lawyer is proficient in at least the languages specified in Article 6(1)(d) of the Law of 10 August 1991, and upon presentation of the documents specified in Article 6(1)(a), (c), first sentence, and (d) of the Law of 10 August 1991, and the certificate of registration of the European lawyer in question with the competent authority of his home Member State. …’ 16 According to Article 3(3) of the Law of 13 November 2002, decisions refusing registration, referred to in Article 3(2), are to state the reasons on which they are based, must be notified to the lawyer concerned, and ‘may be challenged on the conditions and subject to the rules laid down in Article 26(7) et seq. of the Law of 10 August 1991’. 17 Article 26(7) of the Law of 10 August 1991 provides, inter alia where registration in the Bar Register of one of the Bar Associations is refused, that the person concerned may bring the matter before the Conseil disciplinaire et administratif (Disciplinary and Administrative Committee). 18 The composition of that body is governed by Article 24 of the Law of 10 August 1991, as follows: ‘(1) By this Law, there is constituted a Disciplinary and Administrative Committee consisting of five lawyers registered in List I of the Bar Register, of whom four shall be elected by the Luxembourg Bar Association in general meeting by simple majority, and of whom one shall be elected by the Diekirch Bar Association in general meeting by simple majority. The Luxembourg Bar Association in general meeting shall elect four substitutes and the Diekirch Bar Association in general meeting shall elect one substitute. Where a member is prevented from acting, a substitute appointed by the Bar Association to which he belongs shall act in his place, according to order of seniority; and if the substitutes elected by his own Bar Association are unable to act, the member shall be represented by a substitute elected by the other Bar Association. (2) The members shall serve for a term of two years from the 15 September following their election. If the office of a member or of a substitute falls vacant, the Disciplinary and Administrative Committee shall appoint a replacement. The term of office of a replacement member and of a replacement representative shall end on the day on which the term of office of the elected member or substitute he replaces would have ended. The members of the Disciplinary and Administrative Committee may be re-elected. (3) The Disciplinary and Administrative Committee shall elect a chairman and a vice-chairman. Where the chairman and vice-chairman are unable to act, the longest serving member shall preside. The most recently appointed member of the Committee shall act as secretary. (4) Members of the Disciplinary and Administrative Committee shall be Luxembourg nationals who have been registered in List I of the Bar Register for at least five years, and shall not be members of the Bar Council. (5) If it is impossible for the Disciplinary and Administrative Committee to be constituted according to the foregoing provisions, its members shall be appointed by the Council of the Bar Association to which the members to be replaced belong.’ 19 Article 28(1) of the Law of 10 August 1991 provides for the possibility of appeal against the decisions of the Disciplinary and Administrative Committee. 20 In the version prior to the Law of 13 November 2002, Article 28(2) provided: ‘For that purpose there shall be appointed a Conseil disciplinaire et administratif d’appel (Disciplinary and Administrative Appeals Committee), which shall consist of two judges of the Cour d’appel (Court of Appeal) and three lawyers registered in List I of the Bar Register sitting as assessors. The members of the Committee who are judges, their substitutes and the clerk appointed to the Committee shall be appointed by Grand-Ducal Order on a proposal by the Cour supérieure de justice (Supreme Civil Court) for a term of two years. Their remuneration shall be fixed by Grand-Ducal Regulation. The assessor and his substitute shall be appointed for a term of two years by Grand-Ducal Order. They shall be appointed from a list of three lawyers who have been registered for at least five years in List I of the Bar Register, which list shall be submitted by each Bar Association Council for each vacancy. Members of a Bar Association or Bar Council shall not be eligible for appointment as assessor.The Disciplinary and Administrative Appeals Committee shall sit in the offices of the Cour supérieure de justice, which shall also serve as Registry.’ 21 Article 28(2) of the Law of 10 August 1991, as amended by Article 14 of the Law of 13 November 2002, now provides: ‘For that purpose there shall be appointed a Disciplinary and Administrative Appeals Committee, which shall consist of two judges of the Cour d’appel and three lawyers registered in List I of the Bar Register sitting as assessors. The assessors and their substitutes shall be appointed for a term of two years by Grand-Ducal Order. They shall be appointed from a list of five lawyers, who have been registered for at least five years in List I of the Bar Register, to be submitted by each Bar Association Council for each vacancy. The longest‑serving judge shall preside in the Disciplinary and Administrative Appeals Committee.’22 Under Article 8(3) of the Law of 10 August 1991, as amended by Article 14(V) of the Law of 13 November 2002, the Bar Register of each Bar Association consists of four lists, namely: ‘1. List I: lawyers who satisfy the requirements of Articles 5 and 6 and who have passed the examination at the end of traineeship provided for by law; 2. List II: lawyers who satisfy the requirements of Articles 5 and 6;3. List III: non-practising lawyers;4. List IV: lawyers who practise under their home-country professional titles.’ The main proceedings and the questions referred for a preliminary ruling23 Mr Wilson, a UK national, is a barrister. He has been a member of the Bar of England and Wales since 1975. He has practised as a lawyer in Luxembourg since 1994. 24 On 29 April 2003 Mr Wilson was requested by the Bar Council to attend a hearing as provided for by Article 3(2) of the Law of 13 November 2002. 25 On 7 May 2003 Mr Wilson attended the hearing accompanied by a Luxembourg lawyer, but the Bar Council refused to allow the latter to be present. 26 By registered letter of 14 May 2003, the Bar Council notified Mr Wilson of its decision to refuse to register him in List IV of lawyers practising under their home-country professional title in the Bar Register. That decision contained the following statement of reasons: ‘Although the Bar Council informed you that the assistance of a lawyer was not permissible, as it is not provided for by law, you refused to attend the hearing without the assistance of Maître … . The Bar Council was therefore not in a position to ascertain whether you are proficient in languages as provided for by Article 6(1) of the Law of 10 August 1991 …’. 27 In that letter, the Bar Council informed Mr Wilson that, ‘in accordance with Article 26(7) of the Law of 10 August 1991, this decision may be subject to an appeal, by application to the Conseil disciplinaire et administratif (P.O. Box 575, L-1025 Luxembourg) within 40 days of the date of despatch of this letter’. 28 By application of 28 July 2003, Mr Wilson brought an action for the annulment of that refusal before the Tribunal Administratif de Luxembourg (Administrative Court, Luxembourg). 29 By judgment of 13 May 2004 that court held that it had no jurisdiction to hear the case. 30 By application received at the Registry of the Cour Adminsitratif (Higher Administrative Court) on 22 June 2004, Mr Wilson appealed against that judgment. 31 The referring court explains that the issue of whether the appeal procedure introduced by Luxembourg law complies with Article 9 of Directive 98/5 is directly related to the issue of the jurisdiction of the administrative courts to hear the dispute in the main proceedings. On the substance, the referring court is unsure whether the Luxembourg provisions establishing a language test for European lawyers who wish to practise in Luxembourg is compatible with Community law. 32 In those circumstances the Cour administratif decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘1. Should Article 9 of Directive 98/5 … be interpreted as precluding appeal proceedings as provided for under the Law of 10 August 1991, as amended by the Law of 13 November 2002? 2. More particularly, do appeal bodies such as the Conseil disciplinaire et administratif and the Conseil disciplinaire et administratif d’appel constitute “a remedy before a court or tribunal in accordance with domestic law” within the meaning of Article 9 of Directive 98/5 and should [that article] be interpreted as precluding a remedy which requires referral to one or more bodies of this nature before it becomes possible to refer a matter on a question of law to a “court or tribunal” within the meaning of [that article]? 3. Are the competent authorities of a Member State authorised to make the right of a lawyer of [another] Member State to practise on a permanent basis the profession of lawyer under his home-country professional title in the areas of activity specified in Article 5 of Directive 98/5 subject to a requirement of proficiency in the languages of [the first] Member State? 4. In particular, may the competent authorities make the right to practise the profession subject to the condition that the lawyer sit an oral examination in all (or more than one) of the three main languages of the host Member State for the purpose of allowing the competent authorities to verify whether the lawyer is proficient in the three languages, and if so, what procedural guarantees, if any, are required?’ The first and second questions The jurisdiction of the Court to answer those questions and their admissibility33 The Luxembourg Bar Association, supported by the Luxembourg Government, argues that the first two questions are outside the jurisdiction of the Court. By those questions, the referring court seeks an interpretation of Article 9 of Directive 98/5 in the light of national provisions. The Court does not have jurisdiction either to review the compatibility of national provisions with Community law or to interpret such provisions. 34 It is true that it is not for the Court to rule on the compatibility of national rules with provisions of Community law in proceedings brought under Article 234 EC (see, in particular, Case C‑130/93 Lamaire [1994] ECR I-3215, paragraph 10). Furthermore, under the system of judicial cooperation established by that provision the interpretation of national rules is a matter for the national courts and not the Court of Justice (see, in particular, Case C‑37/92 Vanacker and Lesage [1993] ECR I-4947, paragraph 7). 35 On the other hand, the Court does have jurisdiction to supply the national court with all the guidance as to the interpretation of Community law necessary to enable that court to rule on the compatibility of the national rules with the provisions of Community law (see, in particular, Lamaire, paragraph 10). 36 In this case, the first two questions contain a request for an interpretation of Article 9 of Directive 98/5 for the purpose of enabling the referring court to determine the compatibility with that article of the appeal procedure established by Luxembourg law. Consequently, those questions are within the jurisdiction of the Court. 37 The Luxembourg Bar Association also claims that the order for reference does not contain any indication as to the nature, composition and mode of functioning of the review bodies at issue in the main proceedings, which is liable to prevent the Court from providing a useful answer to the national court as regards the first two questions. 38 In that regard, it must be observed that, according to settled case-law, the need to provide an interpretation of Community law which will be of use to the national court makes it necessary for the national court to define the factual and legal context of the questions it is asking or, at the very least, to explain the factual circumstances on which those questions are based (see, inter alia, Case C‑67/96 Albany [1999] ECR I-5751, paragraph 39, and Joined Cases C‑51/96 and C‑191/97 Deliège [2000] ECR I-2549, paragraph 30). 39 The information provided in orders for reference must not only enable the Court to reply usefully but must also give the Governments of the Member States and other interested parties the opportunity to submit observations pursuant to Article 23 of the Statute of the Court of Justice. It is the Court’s duty to ensure that that opportunity is safeguarded, bearing in mind that under that provision only the orders for reference are notified to the interested parties (Albany, paragraph 40, and Case C‑145/03 Keller [2005] ECR I-2529, paragraph 30). 40 In this case, it is clear in the first place from the observations submitted by the parties in the main proceedings, the Governments of the Member States and the Commission of the European Communities that they have been able to effectively put their arguments on the two questions. 41 Secondly, the Court considers that the information contained in the order for reference and the observations submitted to it is sufficient to enable it to reply usefully to the questions referred. 42 Consequently, the Court may answer the first two questions. The substance43 By its first two questions, which it is appropriate to deal with together, the referring court asks the Court essentially to interpret the concept of remedy before a court or tribunal in accordance with the provisions of domestic law for the purposes of Article 9 of Directive 98/5 in the case of an appeal procedure such as that provided for by Luxembourg law. 44 In that regard, it must be recalled that Article 9 of Directive 98/5 provides that a remedy must be available before a court or tribunal in accordance with the provisions of domestic law against decisions of the competent authority of the host Member State which refuses to register a lawyer who wishes to practise there under his home-country professional title. 45 It follows from that provision that Member States must take measures which are sufficiently effective to achieve the aim of Directive 98/5 and that they must ensure that the rights thus conferred may be effectively relied upon before the national courts by the persons concerned (see, by way of analogy, Case 222/84 Johnston [1986] ECR 1651, paragraph 17). 46 As the French Government and the Commission have pointed out, the judicial review required by that provision reflects a general principle of Community law stemming from the constitutional traditions common to the Member States and enshrined in Articles 6 and 13 of the European Convention for the Protection of Human Rights (see, inter alia, Johnston, paragraph 18; Case 222/86 Heylens andOthers [1987] ECR 4097, paragraph 14; Case C‑424/99 Commission v Austria [2001] ECR I‑9285, paragraph 45; and Case C‑459/99 MRAX [2002] ECR I‑6591, paragraph 101). 47 In order to ensure effective judicial protection of the rights laid down in Directive 98/5 the body called upon to hear appeals against decisions refusing registration, referred to in Article 3 of that directive, must be a court or tribunal as defined by Community law. 48 That definition has been laid down in the case-law of the Court relating to the definition of a national court or tribunal within the meaning of Article 234 EC, setting out a certain number of criteria that must be satisfied by the body concerned, such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law (see, to that effect, Case 61/65 Vaassen-Göbbels [1966] ECR 261 and Case C‑54/96 Dorsch Consult [1997] ECR I-4961, paragraph 23) and its independence and impartiality (see, to that effect, Case 14/86 Pretore di Salò v Persons Unknown [1987] ECR 2545, paragraph 7; Case 338/85 Pardini [1988] ECR 2041, paragraph 9; and Case C‑17/00 De Coster [2001] ECR I-9445, paragraph 17). 49 The concept of independence, which is inherent in the task of adjudication, involves primarily an authority acting as a third party in relation to the authority which adopted the contested decision (see, to that effect, inter alia Case C‑24/92 Corbiau [1993] ECR I-1277, paragraph 15, and Case C‑516/99 Schmid [2002] ECR I-4573, paragraph 36). 50 The concept has two other aspects. 51 The first aspect, which is external, presumes that the body is protected against external intervention or pressure liable to jeopardise the independent judgment of its members as regards proceedings before them (see, to that effect, Case C‑103/97 Köllensperger and Atzwanger [1999] ECR I-551, paragraph 21, and Case C‑407/98 Abrahamsson and Anderson [2000] ECR I-5539, paragraph 36; see also, to the same effect, Eur. Court HR Campbell and Fell v. United Kingdom, judgment of 28 June 1984, Series A No 80, § 78). That essential freedom from such external factors requires certain guarantees sufficient to protect the person of those who have the task of adjudicating in a dispute, such as guarantees against removal from office (Joined Cases C‑9/97 and C‑118/97 Jokela andPitkäranta [1998] ECR I-6267, paragraph 20). 52 The second aspect, which is internal, is linked to impartiality and seeks to ensure a level playing field for the parties to the proceedings and their respective interests with regard to the subject-matter of those proceedings. That aspect requires objectivity (see, to that effect, Abrahamsson and Anderson, paragraph 32) and the absence of any interest in the outcome of the proceedings apart from the strict application of the rule of law. 53 Those guarantees of independence and impartiality require rules, particularly as regards the composition of the body and the appointment, length of service and the grounds for abstention, rejection and dismissal of its members, in order to dismiss any reasonable doubt in the minds of individuals as to the imperviousness of that body to external factors and its neutrality with respect to the interests before it (see, in that regard, Dorsch Consult, paragraph 36; Köllensperger andAtzwanger, paragraphs 20 to 23; and De Coster, paragraphs 18 to 21; see also, to that effect, Eur Court HR De Cubber v. Belgium, judgment of 26 October 1984, Series A No 86, § 24). 54 In this case, the composition of the Disciplinary and Administrative Committee as laid down by Article 24 of the Law of 10 August 1991 is characterised by the exclusive presence of lawyers of Luxembourg nationality, registered in List I of the Bar Register – namely the list of lawyers practising under the Luxembourg professional title and who have passed the examination at the end of the traineeship – and elected by the general assemblies of the Bar Associations of Luxembourg and Diekirch. 55 As regards the Disciplinary and Administrative Appeals Committee, the amendment made to Article 28(2) of the Law of 10 August 1991 by Article 14 of the Law of 13 November 2002 confers overriding influence on the assessors, who must be registered on the same list and presented by the Bar Councils of each of the Bar Associations referred to in the preceding paragraph of this judgment, as compared with the professional magistrates. 56 As the Advocate General observed in point 47 of her Opinion, the Bar Council, whose members, in accordance with Article 16 of the Law of 10 August 1991, are lawyers registered in List I of the Bar Register, thus has its decisions refusing registration of a European lawyer reviewed at first instance by a body composed exclusively of lawyers registered on the same list and on appeal by a body composed for the most part of such lawyers. 57 In those circumstances, a European lawyer whose registration on List IV of the Bar Register has been refused by the Bar Council has legitimate grounds for concern that either all or the majority, as the case may be, of the members of those bodies have a common interest contrary to his own, that is, to confirm a decision to remove from the market a competitor who has obtained his professional qualification in another Member State, and for suspecting that the balance of interests concerned would be upset (see, to that effect, Eur. Court HR Langborger v. Sweden, judgment of 22 June 1989, Series A No 155, § 35). 58 The rules governing the composition of bodies such as those at issue in the main proceedings do not appear, therefore, to be of such a kind as to provide a sufficient guarantee of impartiality. 59 Contrary to the submissions of the Luxembourg Bar Council, the concerns relating to those rules of composition cannot be assuaged by the possibility of appeal provided for in Article 29(1) of the Law of 10 August 1991 against the decisions of the Disciplinary and Administrative Appeals Committee. 60 Article 9 of Directive 98/5, although it does not preclude appeal proceedings being brought before a body which is not a court or tribunal, does not provide that a legal remedy may be open to the person concerned only after all other remedies have been exhausted. In any event, where an appeal before a non-judicial body is provided for by national law, Article 9 requires actual access within a reasonable period (see, by way of analogy, Joined Cases C‑238/99 P, C‑244/99 P, C‑245/99 P, C‑247/99 P, C‑250/99P to C‑252/99 P and C‑254/99 P Limburgse Vinyl Maatschappijand Others v Commission [2002] ECR I‑8375, paragraphs 180 to 205, 223 and 234) to a court or tribunal as defined by Community law, which is competent to give a ruling on both fact and law. 61 Apart from the question whether proceedings before two non-judicial bodies may be reconciled with the requirement of a reasonable period, the jurisdiction of the Cour de cassation (Court of Cassation) of the Grand Duchy of Luxembourg is limited to questions of law, so that it does not have full jurisdiction (see, to that effect, Eur. Court H.R. Incal v. Turkey judgment of 9 June 1998, Reports of judgments and decisions 1998-IV, p. 1547, § 72). 62 In the light of the foregoing, the answer to the first two questions must be that Article 9 of Directive 98/5 must be interpreted as meaning that it precludes an appeal procedure in which the decision refusing registration, referred to in Article 3 of that directive, must be challenged at first instance before a body composed exclusively of lawyers practising under the professional title of the host Member State and on appeal before a body composed for the most part of such lawyers, where the appeal before the supreme court of that Member State permits judicial review of the law only and not the facts. The third and fourth questions63 By its third and fourth questions, which it is appropriate to examine together, the referring court asks whether and, if appropriate, in what circumstances Community law allows a host Member State to make the right of a lawyer to practise on a permanent basis in that Member State under his home-country professional title subject to a test of his proficiency in the languages of that Member State. 64 In that regard, as is clear from recital (6) in the preamble to Directive 98/5, by that directive, the Community legislature sought to put an end to the differences in national rules on the conditions for registration with the competent authorities which gave rise to inequalities and obstacles to free movement (see also, to that effect, Case C‑168/98 Luxembourg v Parliament and Council [2000] ECR I-9131, paragraph 64). 65 In that context, Article 3 of Directive 98/5 provides that a lawyer who wishes to practise in a Member State other than that in which he obtained his professional qualification must register with the competent authority in that State, which must register him ‘upon presentation of a certificate attesting to his registration with the competent authority in the home Member State’. 66 Given the objective of Directive 98/5, set out in paragraph 64 of this judgment, it must be held, as the United Kingdom Government and the Commission rightly submitted, that in Article 3 of that directive the Community legislature carried out a complete harmonisation of the prior conditions for the exercise of the right it confers. 67 It is thus apparent that presentation to the competent authority of the host Member State of a certificate attesting to registration with the competent authority of the home Member State is the only condition to which registration of the person concerned in the host Member State may be subject, enabling him to practise in the latter Member State under his home-country professional title. 68 That analysis is confirmed by the Explanatory Memorandum on the Proposal for a European Parliament and Council Directive to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained (COM(94) 572 final), in which, in the comments on Article 3, it is stated that ‘[r]egistration [with the competent authority of the host Member State] is an automatic entitlement where the applicant furnishes proof of his registration with the competent authority in his home Member State’. 69 As the Court has already noted, the Community legislature, with a view to making it easier for a particular class of migrant lawyers to exercise the fundamental freedom of establishment, did not opt for a system of prior testing of the knowledge of the persons concerned (see Luxembourg v Parliament and Council, paragraph 43). 70 Thus Directive 98/5 does not allow the registration of a European lawyer with the competent authority of the host Member State to be conditional on a hearing designed to enable that authority to determine whether the person concerned is proficient in the languages of that Member State. 71 As Mr Wilson, the United Kingdom Government and the Commission submitted, the exclusion of a system of prior testing of the knowledge, particularly of languages, for European lawyers is, however, accompanied in Directive 98/5 by a set of rules intended to ensure, to a level acceptable in the Community, the protection of consumers and the proper administration of justice (see Luxembourg v Parliament andCouncil, paragraphs 32 and 33). 72 Thus, the purpose of the obligation imposed by Article 4 of Directive 98/5 on European lawyers to practise under their home-country professional title in the host Member State is, according to recital (9) in the preamble to that directive, to make clear the distinction between such lawyers and lawyers from the host Member State, so that clients are aware that the professional to whom they entrust the defence of their interests has not obtained his qualification in that Member State (see, to that effect, Luxembourg v Parliament and Council, paragraph 34) and does not necessarily have the knowledge, in particular of languages, which is adequate to deal with the case. 73 As regards activities relating to representation and defence of a client in legal proceedings, Member States are permitted, in accordance with Article 5(3) of Directive 98/5, to require European lawyers practising under their home‑country professional title to work in conjunction with a lawyer who practises before the judicial authority in question and who would, where necessary, be answerable to that authority or with an ‘avoué’ practising before it. That option compensates for any lack of proficiency on the part of the European lawyer in the court languages of the host Member State. 74 Under Articles 6 and 7 of Directive 98/5, a European lawyer must comply not only with the rules of professional conduct applicable in his home Member State but also with those of the host Member State, failing which he will incur disciplinary sanctions and exposure to professional liability (see Luxembourg v Parliament and Council, paragraphs 36 to 41). One of the rules of professional conduct applicable to lawyers is an obligation, like that provided for in the Code of Conduct adopted by the Council of the Bars and Law Societies of the European Union (CCBE), breach of which may lead to disciplinary sanctions, not to handle matters which the professionals concerned know or ought to know they are not competent to handle, for instance owing to lack of linguistic knowledge (see, to that effect, Luxembourg v Parliament and Council, paragraph 42). Communication with clients, the administrative authorities and the professional bodies of the host Member State, like compliance with the rules of professional conduct laid down by the authorities of that Member State, requires a European lawyer to have sufficient linguistic knowledge or recourse to assistance where that knowledge is insufficient. 75 It is also important to point out, as did the Commission, that one of the objectives of Directive 98/5, according to recital (5) in the preamble, is, ‘by enabling lawyers to practise under their home-country professional titles on a permanent basis in a host Member State, [to meet] the needs of consumers of legal services who, owing to the increasing trade flows resulting, in particular, from the internal market, seek advice when carrying out cross-border transactions in which international law, Community law and domestic laws often overlap’. Such international cases, like those to which the law of a Member State other than the host Member State is applicable, may not require a degree of knowledge of the languages of the latter Member State as high as that required to deal with matters in which the law of that Member State is applicable. 76 Finally, it must be observed that like treatment of European lawyers as lawyers of the host Member State, which Directive 98/5 is designed to facilitate, according to recital (14) in the preamble, requires, under Article 10, that the person concerned proves that he has effectively and regularly pursued for a period of at least three years an activity in the law of that State or, where the period is shorter, that he has other knowledge, training or professional experience relating to that law. Such a measure enables European lawyers wishing to integrate into the profession of the host Member State to become familiar with the language(s) of that Member State. 77 In light of the foregoing, the answer to Questions 3 and 4 must be that Article 3 of Directive 98/5 must be interpreted as meaning that the registration of a lawyer with the competent authority of a Member State other than the State where he obtained his qualification in order to practise there under his home-country professional title cannot be made subject to a prior examination of his proficiency in the languages of the host Member State. Costs78 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. Article 9 of Directive 98/5/EC of the European Parliament and of the Council of 16 February 1998 to facilitate practice of the profession of lawyer on a permanent basis in a Member State other than that in which the qualification was obtained must be interpreted as meaning that it precludes an appeal procedure in which the decision refusing registration, referred to in Article 3 of that directive, must be challenged at first instance before a body composed exclusively of lawyers practising under the professional title of the host Member State and on appeal before a body composed for the most part of such lawyers, where the appeal before the supreme court of that Member State permits judicial review of the law only and not the facts.2. Article 3 of Directive 98/5 must be interpreted as meaning that the registration of a lawyer with the competent authority of a Member State other than the State where he obtained his qualification in order to practise there under his home-country professional title cannot be made subject to a prior examination of his proficiency in the languages of the host Member State.[Signatures]* Language of the case: French. | c5a58-b195973-408f | EN |
COMPARATIVE ADVERTISING CAN RELATE COLLECTIVELY TO SELECTIONS OF PRODUCTS | Lidl Belgium GmbH & Co. KGvEtablissementen Franz Colruyt NV(Reference for a preliminary ruling from the Rechtbank van Koophandel te Brussel)(Directives 84/450/EEC and 97/55/EC – Misleading advertising – Comparative advertising – Conditions under which comparative advertising is permitted – Comparison of the general level of the prices charged by chains of stores – Comparison of the prices of a selection of products)Summary of the Judgment1. Approximation of laws – Misleading advertising and comparative advertising – Directive 84/450(Council Directive 84/450, Art. 3a(1)(b))2. Approximation of laws – Misleading advertising and comparative advertising – Directive 84/450(Council Directive 84/450, Art. 3a(1)(c))3. Approximation of laws – Misleading advertising and comparative advertising – Directive 84/4504. Approximation of laws – Misleading advertising and comparative advertising – Directive 84/4505. Approximation of laws – Misleading advertising and comparative advertising – Directive 84/450(Council Directive 84/450, Art. 3a(1)(a))1. The condition under which comparative advertising is permissible that is laid down by Article 3a(1)(b) of Directive 84/450 concerning misleading and comparative advertising, as amended by Directive 97/55, according to which, if comparative advertising is to be permitted, the goods or services being compared must meet the same needs or be intended for the same purpose, must be interpreted as not precluding comparative advertising from relating collectively to selections of basic consumables sold by two competing chains of stores in so far as those selections each consist of individual products which, when viewed in pairs, individually satisfy the requirement of comparability laid down by that provision. The possibility of making a collective comparison relating to a selection of comparable products allows the advertiser to provide consumers with advertising information containing global and summarised data that may prove particularly useful to them. That is especially true in a sector such as the mass distribution sector in which consumers usually make multiple purchases designed to meet their everyday needs. From the viewpoint of such purchases, comparative information relating to the general level of the prices charged by chains of stores or to the level of the prices charged by them in respect of a given selection of products which they sell is liable to prove more useful to consumers than comparative information limited to the prices of some particular product or other. (see paras 34-35, 39, operative part 1)2. The requirement, laid down by Article 3a(1)(c) of Directive 84/450 concerning misleading and comparative advertising, as amended by Directive 97/55, that the advertising ‘objectively compares’ the features of the goods at issue must be interpreted as not signifying, in the event of comparison of the prices of a selection of comparable basic consumables sold by competing chains of stores or of the general level of the prices charged by them in respect of the range of comparable products which they sell, that the products and prices compared, that is to say both those of the advertiser and those of all of his competitors involved in the comparison, must be expressly and exhaustively listed in the advertisement. (see para. 54, operative part 2)3. Article 3a(1)(c) of Directive 84/450 concerning misleading and comparative advertising, as amended by Directive 97/55, must be interpreted as meaning that the following constitute, for the purposes of that provision, ‘verifiable’ features of goods sold by two competing chains of stores: - the prices of those goods;- the general level of the respective prices charged by such chains of stores in respect of their selection of comparable products and the amount liable to be saved by consumers who purchase such products from one rather than the other of those chains, in so far as the goods in question do in fact form part of the selection of comparable products on whose basis that general price level has been determined. (see para. 62, operative part 3)4. Article 3a(1)(c) of Directive 84/450 concerning misleading and comparative advertising, as amended by Directive 97/55, must be interpreted as meaning that a feature mentioned in comparative advertising satisfies the requirement of verifiability laid down by that provision, in cases where the details of the comparison which form the basis for the mention of that feature are not set out in the advertising, only if the advertiser indicates, in particular for the attention of the persons to whom the advertisement is addressed, where and how they may readily examine those details with a view to verifying, or, if they do not possess the skill required for that purpose, to having verified, the details and the feature in question as to their accuracy. Such an obligation makes it possible, in accordance with the objective of consumer protection pursued by the directive, for the persons to whom an advertisement of that kind is addressed to be in a position to satisfy themselves that they have been correctly informed with regard to the purchases of basic consumables which they are prompted to make. (see paras 71-72, 74, operative part 4)5. Article 3a(1)(a) of Directive 84/450 concerning misleading and comparative advertising, as amended by Directive 97/55, must be interpreted as meaning that comparative advertising claiming that the advertiser’s general price level is lower than his main competitors’, where the comparison has related to a sample of products, may be misleading when the advertisement: - does not reveal that the comparison related only to such a sample and not to all the advertiser’s products,- does not identify the details of the comparison made or inform the persons to whom it is addressed of the information source where such identification is possible, or - contains a collective reference to a range of amounts that may be saved by consumers who make their purchases from the advertiser rather than from his competitors without specifying individually the general level of the prices charged, respectively, by each of those competitors and the amount that consumers are liable to save by making their purchases from the advertiser rather than from each of the competitors. It is for the referring court to determine whether the advertisements at issue in the main proceedings display such characteristics.(see paras 85-86, operative part 5)JUDGMENT OF THE COURT19 September 2006 (*) In Case C-356/04,REFERENCE for a preliminary ruling under Article 234 EC from the Rechtbank van Koophandel te Brussel (Belgium), made by decision of 29 July 2004, received at the Court on 18 August 2004, in the proceedings Lidl Belgium GmbH & Co KGEtablissementen Franz Colruyt NV,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, K. Schiemann (Rapporteur) and J. Malenovský, Presidents of Chambers, J.N. Cunha Rodrigues, R. Silva de Lapuerta, K. Lenaerts, P. Kūris, E. Juhász, G. Arestis, A. Borg Barthet and M. Ilešič, Judges, Advocate General: A. Tizzano,Registrar: C. Strömholm, Administrator,having regard to the written procedure and further to the hearing on 7 December 2005,after considering the observations submitted on behalf of:– Lidl Belgium GmbH & Co KG, by M. Lebbe, advocaat,– Etablissementen Franz Colruyt NV, by H. De Bauw, advocaat,– the Belgian Government, by M. Wimmer, acting as Agent,– the French Government, by G. de Bergues and R. Loosli‑Surrans, acting as Agents,– the Polish Government, by T. Nowakowski, acting as Agent,– the Commission of the European Communities, by A. Aresu and R. Troosters, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 29 March 2006,gives the followingJudgment1 This reference for a preliminary ruling relates to the interpretation of Article 3a(1)(a), (b) and (c) of Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising (OJ 1984 L 250, p. 17), as amended by Directive 97/55/EC of the European Parliament and of the Council of 6 October 1997 (OJ 1997 L 290, p. 18) (‘the Directive’). Legal context2 Article 1 of the Directive states: ‘The purpose of this Directive is to protect consumers, persons carrying on a trade or business or practising a craft or profession and the interests of the public in general against misleading advertising and the unfair consequences thereof and to lay down the conditions under which comparative advertising is permitted.’ 3 As provided in Article 2(2) of the Directive, ‘misleading advertising’ means: ‘any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor’. 4 Article 2(2a) of the Directive defines comparative advertising as: ‘any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor’.5 Article 3 of the Directive states: ‘In determining whether advertising is misleading, account shall be taken of all its features, and in particular of any information it contains concerning: (a) the characteristics of goods or services, such as their availability, nature, execution, composition, method and date of manufacture or provision, fitness for purpose, uses, quantity, specification, geographical or commercial origin or the results to be expected from their use, or the results and material features of tests or checks carried out on the goods or services; (b) the price or the manner in which the price is calculated, and the conditions on which the goods are supplied or the services provided; (c) the nature, attributes and rights of the advertiser, such as his identity and assets, his qualifications and ownership of industrial, commercial or intellectual property rights or his awards and distinctions.’ 6 Article 3a(1) of the Directive provides: ‘Comparative advertising shall, as far as the comparison is concerned, be permitted when the following conditions are met:(a) it is not misleading according to Articles 2(2), 3 ...;(b) it compares goods or services meeting the same needs or intended for the same purpose;(c) it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price; …’7 Article 4(1) of the Directive states: ‘Member States shall ensure that adequate and effective means exist to combat misleading advertising and for the compliance with the provisions on comparative advertising in the interests of consumers as well as competitors and the general public. ...’8 Article 6 of the Directive states: ‘Member States shall confer upon the courts or administrative authorities powers enabling them in the civil or administrative proceedings provided for in Article 4: (a) to require the advertiser to furnish evidence as to the accuracy of factual claims in advertising if, taking into account the legitimate interest of the advertiser and any other party to the proceedings, such a requirement appears appropriate on the basis of the circumstances of the particular case and in the case of comparative advertising to require the advertiser to furnish such evidence in a short period of time; and (b) to consider factual claims as inaccurate if the evidence demanded in accordance with (a) is not furnished or is deemed insufficient by the court or administrative authority.’ The main proceedings and the questions referred for a preliminary ruling9 Lidl Belgium GmbH & Co KG (‘Lidl’) and Etablissementen Franz Colruyt NV (‘Colruyt’) each operate in Belgium a chain of stores which essentially retail basic consumables, under the names Lidl and Colruyt respectively. 10 On 19 January 2004, Colruyt sent its customers a mailshot (‘the letter at issue’) worded as follows: ‘…Last year, 2003, you were able once again to make significant savings with Colruyt.On the basis of our average price index for the past year we have calculated that a family spending EUR 100 each week in Colruyt stores: – saved between EUR 366 and EUR 1 129 by shopping at Colruyt’s rather than at any other supermarket (such as Carrefour, Cora, Delhaize, etc.); – and saved between EUR 155 and EUR 293 by shopping at Colruyt’s instead of a hard discounter or wholesaler (Aldi, Lidl, Makro).On the reverse side you will see the evolution of the price differential vis-à-vis other stores in the course of 2003. The figures indicate that the price differential between Colruyt and the other stores has increased even further over the last few months. In order to be able to continue to guarantee the lowest prices, we compare daily 18 000 prices in other stores. In addition, we also collect all promotions. Our data are thus very much up-to-date. We store all the prices in our central computer. Each month we use those prices to calculate the price differential between Colruyt and the other stores. We refer to this as our price index which is certified by Quality Control (Instituut voor Kwaliteitscontrole), an independent body. The result: at Colruyt’s you enjoy, every day and at any time of the year, the lowest prices. In 2004 also we remain true to this guarantee.’ 11 The reverse side of the letter at issue features two charts. The first sets out the price differential between Colruyt and its competitors as at 22 December 2003, a differential which is stated to have been calculated by it on the basis of a daily comparison of the prices, including promotional prices, of comparable products sold in each Colruyt store and in the competing stores located in the region. The second illustrates the development of that differential over the whole of 2003. 12 In addition, the following text appears on the checkout receipts issued at stores operated by Colruyt: ‘How much did you save in 2003?If you spent EUR 100 at Colruyt’s each week, then, according to our price index, you will have saved:– between EUR 366 and EUR 1 129 in comparison with another supermarket (such as Carrefour, Cora, Delhaize, etc.);– between EUR 155 and EUR 293 in comparison with a hard discounter or wholesaler (Aldi, Lidl, Makro).’13 Both the letter at issue and the checkout receipts also refer to Colruyt’s website where further explanation can be found of the system of price comparison applied by it and the method of calculating the price index. 14 In addition, some of Colruyt’s advertising leaflets and checkout receipts contain the following statement regarding a selection of basic consumables sold in Colruyt stores, recognisable by their red labelling on which the word ‘BASIC’ appears: ‘BASIC: Absolutely the lowest prices in Belgium.Even cheaper than the comparable selection of the hard discounters (Aldi, Lidl) and the “Eerste prijs/1er prix” products of other supermarkets (such as Carrefour, Cora, etc.). You will recognise the BASIC products by their red labelling and the word BASIC.’15 Certain advertising leaflets also contain the following wording: ‘BASIC = Absolutely rock-bottom prices:In addition to a significant overall price reduction we can offer you from now on a large number of products that you can compare with those of the typical hard discounters (like Aldi and Lidl) and with the “Eerste prijs/1er prix” products of other supermarkets. These are our BASIC products: everyday basic products at absolutely rock-bottom prices.’ 16 Lidl brought proceedings before the Rechtbank van Koophandel te Brussel (Brussels Commercial Court) for an order requiring the cessation of those various advertising practices which it considers to be contrary to Article 23a of the Belgian Law of 14 July 1991 on commercial practices and consumer information and protection as amended by the Law of 25 May 1999 (Moniteur belge/Belgisch Staatsblad of 23 June 1999, p. 23670). That provision transposed Article 3a of the Directive into national law. 17 In Lidl’s submission, the advertising at issue is not objective, not verifiable and misleading. As regards, first, the advertising relating to the general level of prices, that advertising does not specify the products being compared, the number of them or their prices. Moreover, the general price level, calculated on the basis of a select sample of products sold by Colruyt, is extended by extrapolation to that advertiser’s entire product range. Finally, the advertising does not differentiate individually between the advertiser’s various competitors by a specific reference to the general price level of each of them, but refers to them in groups, placing them imprecisely within a range of price levels. As regards, second, ‘BASIC’ products, the advertising at issue identifies neither the products being compared nor their prices. 18 It was in those circumstances that the Rechtbank van Koophandel te Brussel decided to stay proceedings and refer the following questions to the Court for a preliminary ruling: ‘(1) Must Article 3a(1)(a) of [the] Directive … be construed as meaning that the comparison of the general price level of advertisers with that of competitors, in which an extrapolation is made on the basis of a comparison of the prices of a sample of products, is impermissible inasmuch as this creates in any event the impression that the advertiser is cheaper over its entire range of products, whereas the comparison made relates only to a limited sample of products, unless the advertisement makes it possible to establish which and how many products of the advertiser, on the one hand, and of the competitors used in the comparison, on the other, have been compared, and makes it possible to ascertain where each competitor concerned by the comparison is positioned in the comparison and what its prices might be in comparison with those of the advertiser and of the other competitors used in the comparison? (2) Must Article 3a(1)(b) of [the] Directive … be construed as meaning that comparative advertising is allowed only if the comparison relates to individual goods or services that meet the same needs or are intended for the same purpose, to the exclusion of product selections, even if those selections, on the whole and not necessarily in regard to every component, meet the same needs or are intended for the same purpose? (3) Must Article 3a(1)(c) of [the] Directive … be construed as meaning that comparative advertising in which a comparison of the prices of products, or of the general price level, of competitors is made will be objective only if it lists the products and prices being compared of the advertiser and of all the competitors in the comparison and makes it possible to ascertain the prices being charged by the advertiser and its competitors, in which case all products used in the comparison must be expressly indicated for each individual supplier? (4) Must Article 3a(1)(c) of [the] Directive … be construed as meaning that a feature in comparative advertising will satisfy the requirement of verifiability in that article only if that feature can be verified as to its accuracy by those to whom the advertising is addressed, or is it sufficient if the feature can be verified by third parties to whom the advertising is not addressed? (5) Must Article 3a(1)(c) of [the] Directive … be construed as meaning that the price of products and the general price level of competitors are in themselves verifiable features?’ Consideration of the questions Preliminary observations19 It should be noted at the outset, first, that two separate methods of comparative advertising are at issue in the main proceedings. 20 The first method involves comparing the general level of the prices charged by competing chains of stores in respect of their ranges of comparable products and inferring therefrom the amount that consumers can save on an annual basis depending on whether they purchase their basic consumables each day from one rather than another of those chains (‘the first method of comparison at issue’). Those general price levels are determined monthly, then annually, on the basis of a daily record of the individual prices of a very wide sample of basic consumables, whether identical (branded products) or similar (unbranded products or the chain’s own brand), sold by both the advertiser and each of its competitors. In order to determine the general price levels, the individual prices thus recorded are weighted according to the quantities of each product that are purchased from the advertiser. 21 The second method of advertising is based on the assertion that all of the advertiser’s products that have a red label bearing the word ‘BASIC’ are sold by it at the lowest price in Belgium (‘the second method of comparison at issue’). This selection of products consists of, first, branded products and, second, products sold unbranded or under the advertiser’s own brand name. The price comparison relates, in the case of the first category, exclusively to identical branded products sold by both the advertiser and its competitor and, in the case of the second category, to products of comparable quality sold by the advertiser and its competitor. 22 The second preliminary point to note is that, given the objectives of the Directive and in particular the fact that, as the second recital in the preamble to Directive 97/55 points out, comparative advertising helps to demonstrate objectively the merits of the various comparable products and thus stimulate competition between suppliers of goods and services to the consumer’s advantage, it is settled case-law that the conditions required of comparative advertising must be interpreted in the sense most favourable to it (Case C-112/99 Toshiba Europe [2001] ECR I‑7945, paragraphs 36 and 37, and Case C-44/01 Pippig Augenoptik [2003] ECR I‑3095, paragraph 42; see also Case C-59/05 Siemens [2006] ECR I-0000, paragraphs 22 to 24). Order in which the questions are to be examined23 Since the first question relates in a more specific way to the concept of misleading advertising and is asked exclusively in relation to the first method of comparison at issue, it is justified to deal first with the other four questions which, in a more general manner, relate to the other conditions under which comparative advertising is permitted and concern each of the methods of comparison at issue. Question 224 By its second question, the referring court essentially seeks to ascertain whether Article 3a(1)(b) of the Directive must be interpreted as meaning that comparative advertising relating collectively to selections of basic consumables sold by two competing chains of stores rather than to individual products sold by them is capable of satisfying the condition, laid down by that provision, that it must ‘compare goods or services meeting the same needs or intended for the same purpose’. 25 As is apparent from the second recital in the preamble to Directive 97/55, the harmonisation by the directive of the conditions governing the use of comparative advertising is to help to demonstrate objectively the merits of the ‘various comparable products’. As stated in the ninth recital in its preamble, this requirement that the products be comparable is intended in particular to prevent comparative advertising from being used in an anti-competitive and unfair manner. 26 Article 3a(1)(b) of the Directive sets out that requirement, laying down that, if comparative advertising is to be permitted, the competing goods being compared must meet the same needs or be intended for the same purpose, that is to say they must display a sufficient degree of interchangeability for consumers. 27 It is true, therefore, that in order to satisfy the condition laid down by that provision, all comparative advertising must, in the interests of both consumers and competitors, rest in the final analysis on the comparison of pairs of products satisfying that requirement of interchangeability. 28 On the other hand, Article 3a(1)(b) of the Directive cannot be interpreted as meaning that every comparative advertisement must refer exclusively to such pairs of comparable products, viewed separately, and cannot relate collectively to two sets of such comparable products. 29 The Court has previously pointed out that the choice as to the number of comparisons which the advertiser wishes to make between the products which he is offering and those offered by his competitors falls within the exercise of his economic freedom (Pippig Augenoptik, paragraph 81). 30 Nothing permits the view immediately to be taken that such freedom does not also extend to the ability to make a comparison relating to the whole or part of the comparable product ranges sold by an advertiser and his competitor. 31 First, the wording of Article 3a(1)(b) of the Directive in no way dictates such an interpretation. 32 Second, as recalled in paragraph 22 of the present judgment, the conditions required of comparative advertising must be interpreted in the sense most favourable to it. 33 Having regard, in particular, to the fact that comparative advertising helps to stimulate competition between suppliers of goods and services to the consumer’s advantage, the benefit of such advertising to consumers must thus necessarily be taken into account in assessing the requirement of comparability laid down by Article 3a(1)(b) of the Directive (see, to similar effect in relation to Article 3a(1)(g) of the Directive, Siemens, paragraphs 23 and 24). 34 In this regard it must be accepted, as the Advocate General has observed in points 35 and 36 of his Opinion, that the possibility of making a collective comparison relating to a selection of comparable products allows the advertiser to provide consumers with advertising information containing global and summarised data that may prove particularly useful to them. 35 That is especially true in a sector such as the mass distribution sector in which consumers usually make multiple purchases designed to meet their everyday needs. From the viewpoint of such purchases, comparative information relating to the general level of the prices charged by chains of stores or to the level of the prices charged by them in respect of a given selection of products which they sell is liable to prove more useful to consumers than comparative information limited to the prices of some particular product or other. That is indeed the reason why consumer-protection associations regularly carry out surveys of the general price levels of such stores. 36 Accordingly, in so far as the selections of products of two competitors to which the comparison relates each consist of products which, when viewed individually, satisfy the requirement of comparability laid down by Article 3a(1)(b) of the Directive, a matter which is for the referring court to establish, such selections can themselves be regarded as meeting that requirement. 37 That may be so in particular in the case of selections composed of comparable products sold by two competing chains of stores where it is asserted that the products comprising the advertiser’s selection have the common feature of being cheaper than the – comparable – products comprising his competitor’s. Such pairs of comparable products do not cease to meet the same needs or to be intended for the same purpose simply because they are compared collectively from the point of view of that common comparative feature. 38 The requirement laid down by Article 3a(1)(b) of the Directive may also be satisfied when a comparison is made of the general price level of all the comparable basic consumables sold by two competing chains of stores with a view to inferring therefrom the amount liable to be saved by consumers who make their purchases of such goods from one rather than the other of those chains. In such a situation, both the pairs of comparable products sold by those competing chains and the whole formed by those comparable products when they are acquired together in the context of the purchase of basic consumables are capable of satisfying the condition that they meet the same needs or are intended for the same purpose. 39 Having regard to all of the foregoing, the answer to the second question should be that the condition under which comparative advertising is permissible that is laid down by Article 3a(1)(b) of the Directive must be interpreted as not precluding comparative advertising from relating collectively to selections of basic consumables sold by two competing chains of stores in so far as those selections each consist of individual products which, when viewed in pairs, individually satisfy the requirement of comparability laid down by that provision. Question 3 40 By its third question, the referring court seeks to ascertain whether Article 3a(1)(c) of the Directive must be interpreted as meaning that the requirement, laid down by that provision, that the advertising ‘objectively compares’ the features of the goods concerned signifies, in the event of comparison of the prices of a selection of basic consumables sold by chains of stores or of the general level of the prices charged by them in respect of the range of comparable products which they sell, that all the products and prices compared, that is to say both those of the advertiser and those of all of his competitors involved in the comparison, must be expressly listed in the advertisement. 41 As is apparent from the second recital in the preamble to Directive 97/55, the harmonisation by that directive of the conditions governing the use of comparative advertising is, in particular, to help to demonstrate ‘objectively’ the merits of the various comparable products. 42 The seventh recital in the preamble to Directive 97/55 states that the conditions for permitted advertising should include criteria of objective comparison of the features of goods and services. 43 Read in the light of those two recitals, Article 3a(1)(c) of the Directive must be interpreted as laying down two types of requirement relating to the objectivity of the comparison. 44 First, and as appears from the seventh recital in the preamble to Directive 97/55, the cumulative criteria requiring the product’s feature in respect of which the comparison is made to be material, relevant, verifiable and representative, as laid down by that provision, help to ensure that the comparison is objective. However, the third question referred for a preliminary ruling does not directly concern those criteria; the criterion of verifiability is covered in the fourth and fifth questions. 45 Second, Article 3a(1)(c) of the Directive, echoing the second recital in the preamble to Directive 97/55, expressly states that features which meet the four criteria referred to above must in addition be compared objectively. 46 As the Advocate General has observed in point 44 of his Opinion, this last requirement is essentially intended to preclude comparisons which result from the subjective assessment of their author rather than from an objective finding. 47 It follows that an obligation to set out expressly in the advertisement the various products which comprise the selections compared and their prices cannot apply here by virtue of such a requirement. Data such as the price of an article or the general level of the prices charged by a chain of stores in respect of a range of products do not appear capable of being the subject of subjective assessment, nor can whether the assessment is objective or subjective be affected by whether or not the products and prices to which the comparison relates are expressly listed. 48 It should, moreover, be noted that Article 2(2a) of the Directive defines comparative advertising as any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor, so that advertising may be classified as comparative within the meaning of the Directive where a competitor’s products or services, although not explicitly referred to in the advertising, are identified by it by implication. 49 Furthermore, having regard to the interpretative principles recalled in paragraph 22 of the present judgment, it must be stated that in the case of advertisements relating, as is true of the two methods of comparison at issue, to a large number of goods sold by various competing chains of stores, to require that each of the products compared be, in all circumstances, expressly mentioned in that advertisement could affect the very practicability of such advertising methods. 50 Lidl nevertheless relied on the fact that the Court has previously held that any obligation to restrict each price comparison to the average prices of the products offered by the advertiser and those of rival products would be contrary to the objectives of the Community legislature, the Court observing in this regard that comparative advertising must help to demonstrate objectively the merits of the various comparable products and that such objectivity implies that the persons to whom the advertising is addressed are capable of knowing the actual price differences between the products compared and not merely the average difference between the advertiser’s prices and those of his competitors (Pippig Augenoptik, paragraphs 81 and 82). 51 It must be pointed out that the Court did not in any way intend by that statement to preclude generally any possibility of comparative advertising that relates to the general level of the prices charged by two competitors in respect of a comparable range of products. In so far as the claimed difference in the general price level is indeed based on real price differences recorded between comparable products and the criterion of comparison thus adopted satisfies, in the light of the advertisement’s context, the various requirements laid down by the Directive, in particular by Article 3a(1)(c), such a method of comparative advertising cannot be precluded. 52 First, a comparison designed to demonstrate the difference in the general level of the prices charged by two competing chains of stores in respect of a range of comparable products necessarily presupposes that the actual prices of the comparable products sold by the two competitors are individually compared first. 53 Second, while it is indeed clear that the comparative criterion of the average difference between the prices charged by two competitors or that of the general level of the prices charged by them will appear entirely irrelevant in certain factual contexts which, such as that in Pippig Augenoptik which concerned advertising for pairs of spectacles, relate to an advertisement addressed to consumers called upon to make a single purchase in a shop selling only a certain category of products, the position may be entirely different in other factual contexts. That may be the very situation in the specific context of the present case in which, as is apparent from paragraph 35 above, the general price level is liable to be a particularly relevant criterion of comparison. 54 Having regard to all of the foregoing, the answer to the third question should be that the requirement, laid down by Article 3a(1)(c) of the Directive, that the advertising ‘objectively compares’ the features of the goods at issue must be interpreted as not signifying, in the event of comparison of the prices of a selection of comparable basic consumables sold by competing chains of stores or of the general level of the prices charged by them in respect of the range of comparable products which they sell, that the products and prices compared, that is to say both those of the advertiser and those of all of his competitors involved in the comparison, must be expressly and exhaustively listed in the advertisement. Question 555 By its fifth question, which it is appropriate to examine third, the referring court seeks to ascertain whether Article 3a(1)(c) of the Directive must be interpreted as meaning that the prices of products, and the general level of the prices charged by chains of stores in respect of their selections of comparable products, constitute verifiable features for the purposes of that provision. 56 As regards the prices of products sold by two competitors, such as, in particular, those referred to by the second method of comparison at issue, it must be stated at the outset that Article 3a(1)(c) of the Directive expressly confirms that the prices of two articles may be included among the features which are simultaneously material, relevant, verifiable and representative and the comparison of which is accordingly in principle permissible in so far as the other conditions that the Directive lays down in order for comparative advertising to be permitted are satisfied. The eighth recital in the preamble to Directive 97/55 likewise confirms that the comparison of the price only of goods and services must be possible if this comparison respects certain conditions, in particular that it not be misleading. 57 As the Court has previously pointed out, the comparing of rival offers, particularly as regards price, is indeed inherent in comparative advertising (Pippig Augenoptik, paragraph 80). 58 It follows that the price of a product constitutes a verifiable feature within the meaning of Article 3a(1)(c) of the Directive. 59 In the light, in particular, of the interpretative principle recalled in paragraph 22 of the present judgment, nothing appears moreover to preclude the same from being true of the general level of the prices charged by chains of competing stores in respect of comparable selections of basic consumables, and of the amount liable to be saved by consumers who purchase such goods from one rather than the other of those competing chains. 60 As soon as the prices of the particular comparable products comprising the selection offered by competing chains of stores have been taken into account for the purpose of determining the general level of the prices charged by them in respect of that comparable selection, both the individual price of each particular product thus taken into account and those general price levels, the amount which consumers who purchase their basic consumables from one rather than the other of those competing chains can expect to save and, finally, the validity of the methods of calculation adopted for those purposes are in principle capable of being subject to verification. 61 It must be pointed out, however, that in order for the prices of the goods comprising a selection of products or the general level of the prices charged by a chain of stores in respect of its selection of comparable goods to be verifiable, it is a necessary precondition that, even though, as is apparent from paragraph 54 of the present judgment, the goods whose prices have been thus compared are not required to be expressly and exhaustively listed in the advertisement addressed to the consumer, they must nevertheless be capable of being individually and specifically identified on the basis of the information contained in that advertisement. The prices of goods can necessarily only ever be verified if it is possible to identify the goods. 62 In light of all of the foregoing, the answer to the fifth question should be that Article 3a(1)(c) of the Directive must be interpreted as meaning that the following constitute, for the purposes of that provision, ‘verifiable’ features of goods sold by two competing chains of stores: – the prices of those goods;– the general level of the respective prices charged by such chains of stores in respect of their selection of comparable products and the amount liable to be saved by consumers who purchase such products from one rather than the other of those chains, in so far as the goods in question do in fact form part of the selection of comparable products on whose basis that general price level has been determined. Question 463 By its fourth question, the referring court seeks to ascertain whether Article 3a(1)(c) of the Directive must be interpreted as meaning that a feature mentioned in comparative advertising satisfies the requirement of verifiability laid down by that provision only if the persons to whom the advertising is addressed are in a position to verify that feature as to its accuracy themselves. 64 It should be noted, first, that while that provision requires, in order to ensure objectivity of comparative advertising, that features compared by the advertising be verifiable, that is to say capable of proof, it does not, on the other hand, contain any detail for the purpose of determining the precise conditions in which, and by whom, those features must be capable of verification as to their accuracy. 65 Second, the objectives pursued by the Directive do not permit the inference that verification of the compared features as to their accuracy should be a possibility available particularly to consumers as opposed to other interested parties, including the competitors involved in the comparison. 66 In this regard, the seventh recital in the preamble to Directive 97/55 states that the establishment of the conditions under which comparative advertising is permitted, which should include criteria of objective comparison of the features of goods and services, must enable it to be determined which practices relating to comparative advertising may distort competition, be detrimental to competitors and have an adverse effect on consumer choice. 67 Article 4 of the Directive, for its part, obliges the Member States to ensure that adequate and effective means exist for securing compliance with the provisions on comparative advertising in the interests of consumers as well as competitors and the general public. 68 Third, the penultimate recital in the preamble to the Directive states that the advertiser should be able to prove, by appropriate means, the material accuracy of the factual claims he makes in his advertising, and may in appropriate cases be required to do so by the appropriate court or administrative authority. 69 More specifically, Article 6 of the Directive obliges the Member States to confer on the administrative authorities or courts called upon to ensure compliance with the Directive the power to require the advertiser, when the circumstances of the particular case so demand and taking into account the legitimate interest of the advertiser and any other party to the proceedings, to furnish evidence as to the accuracy of factual claims in advertising and ‘in the case of comparative advertising to require the advertiser to furnish such evidence in a short period of time’. This provision also requires those administrative authorities and courts to be conferred the power to consider factual claims to be inaccurate if the evidence so demanded is not furnished or is deemed insufficient. 70 It follows that, while the advertiser must indeed be in a position to prove, in a short period of time, the factual accuracy of the comparison which he has made, the Directive does not, on the other hand, require him to make such proof available to all interested parties before his advertisement appears. 71 However, the possibility that consumers can obtain from the advertiser, in administrative or judicial proceedings, proof of the factual accuracy of claims in the advertising is not capable of releasing the advertiser, when the products and the prices compared are not set out in the advertisement, from the obligation to indicate, in particular for the attention of the persons to whom the advertisement is addressed, where and how they may readily examine the details of the comparison with a view to verifying their accuracy or having it verified. 72 Such an obligation makes it possible, in accordance with the objective of consumer protection pursued by the Directive, for the persons to whom an advertisement of that kind is addressed to be in a position to satisfy themselves that they have been correctly informed with regard to the purchases of basic consumables which they are prompted to make. 73 Such accessibility of the details of the comparison nevertheless does not mean that the accuracy of the features compared must in all circumstances be capable of being verified by those to whom the advertising is addressed acting in person. It is sufficient for the details allowing such verification to be accessible to those persons under the conditions set out in paragraph 71 of this judgment, in such a way that they may, as a general rule, carry out the desired verification themselves or, more exceptionally and if such verification demands a skill which they do not possess, have it carried out by a third party. 74 Having regard to all the foregoing considerations, the answer to the fourth question should be that Article 3a(1)(c) of the Directive must be interpreted as meaning that a feature mentioned in comparative advertising satisfies the requirement of verifiability laid down by that provision, in cases where the details of the comparison which form the basis for the mention of that feature are not set out in the advertising, only if the advertiser indicates, in particular for the attention of the persons to whom the advertisement is addressed, where and how they may readily examine those details with a view to verifying, or, if they do not possess the skill required for that purpose, to having verified, the details and the feature in question as to their accuracy. Question 175 By its first question, the referring court essentially seeks to ascertain whether an advertisement containing a comparison of the general level of the prices charged by a chain of stores with that of competing chains in respect of their ranges of comparable products and setting out the amount that can be saved by consumers purchasing their basic consumables from one of them must be regarded as misleading advertising for the purposes of Article 3a(1)(a) of the Directive when that general price level is determined on the basis of only some of the products sold by the advertiser, on the ground that such advertising would necessarily give consumers the impression that the advertiser is cheaper over his entire range of products. The referring court wonders, however, whether the fact that the advertising makes it possible to establish, in respect of both the advertiser and his competitors, which and how many products are being compared in order to determine the general level of the prices charged by each of them might prevent the advertising from being in any way misleading. It also raises the question whether it matters from the latter point of view that the advertising indicates the general price level of each of the various competitors involved in the comparison both in relation to the advertiser and between themselves. 76 Article 2(2) of the Directive defines misleading advertising as any advertising which in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and which, by reason of its deceptive nature, is likely to affect their economic behaviour or which, for those reasons, injures or is likely to injure a competitor. 77 It is for national courts to ascertain in the circumstances of each particular case, and bearing in mind the consumers to which the advertising is addressed, whether the latter may be misleading (see, in particular, Case C-373/90 X [1992] ECR I‑131, paragraphs 15 and 16). 78 Those courts must take into account the perception of an average consumer of the products or services being advertised who is reasonably well informed and reasonably observant and circumspect (see X, paragraphs 15 and 16; Case C‑210/96 Gut Springenheide and Tusky [1998] ECR I‑4657, paragraph 31; Case C-220/98 Estée Lauder [2000] ECR I-117, paragraph 27; Case C-99/01 Linhart and Biffl [2002] ECR I‑9375, paragraph 31; and Pippig Augenoptik, paragraph 55). In the present instance, both the advertising methods at issue are addressed not to a specialist public but to end consumers who purchase their basic consumables in a chain of stores. 79 In carrying out the requisite assessment, national courts must also take account of all the relevant factors in the case (Estée Lauder, paragraphs 27 and 30), having regard, as follows from Article 3 of the Directive, to the information contained in the advertising and, more generally, to all its features. 80 The Court has thus held that an omission may render advertising misleading, in particular where, bearing in mind the consumers to which it is addressed, the advertising seeks to conceal a fact which, had it been known, would have deterred a significant number of consumers from making a purchase (X, paragraph 15). 81 With regard, more specifically, to price comparisons, the eighth recital in the preamble to Directive 97/55 states that the comparison of the price only of goods and services should be possible if this comparison respects certain conditions, in particular that it not be misleading. 82 The Court has thus already been led to state that advertising relating to the lower prices of cars that are parallel imports can be considered to be misleading only if it is established that the decision to buy on the part of a significant number of consumers to whom the advertising in question is addressed was made in ignorance of the fact that the lower price of the vehicles was matched by a smaller number of accessories on the cars sold by the parallel importer (X, paragraph 16). 83 Analogously, comparative advertising relating to the general level of the prices charged by competing chains of stores in respect of their comparable ranges of products and to the amount that can be saved by consumers purchasing their basic consumables from one of those chains rather than the other should, for example, be considered to be misleading if it is established, in the light of all the relevant circumstances of the particular case, that the decision to buy on the part of a significant number of consumers to whom that advertising is addressed is made in the mistaken belief that all the advertiser’s products have been taken into account in calculating the general price level, and the amount of savings, that are claimed by the advertising. The same must be true if it is established that such a decision is made in the mistaken belief that that amount will be saved by consumers irrespective of the nature and quantity of the products which they acquire from the advertiser or, for example, in the mistaken belief that all the advertiser’s products without exception are cheaper than those of his competitors. 84 Such advertising will also be misleading if it is established that the collective reference which it contains to a range of amounts that may be saved by consumers who purchase their basic consumables from the advertiser rather than from competing chains of stores and the failure to specify individually the general level of the prices charged by each of those chains in competition with the advertiser and the amount that can be saved in relation to each of them are such as to deceive a significant number of persons to whom the advertising is addressed as to the amount that they are actually liable to save by purchasing their basic consumables from the advertiser rather than from some particular competitor or other, and to affect their economic behaviour to that extent. 85 Accordingly, the answer to the first question should be that Article 3a(1)(a) of the Directive must be interpreted as meaning that comparative advertising claiming that the advertiser’s general price level is lower than his main competitors’, where the comparison has related to a sample of products, may be misleading when the advertisement: – does not reveal that the comparison related only to such a sample and not to all the advertiser’s products, – does not identify the details of the comparison made or inform the persons to whom it is addressed of the information source where such identification is possible, or – contains a collective reference to a range of amounts that may be saved by consumers who make their purchases from the advertiser rather than from his competitors without specifying individually the general level of the prices charged, respectively, by each of those competitors and the amount that consumers are liable to save by making their purchases from the advertiser rather than from each of the competitors. 86 It is for the referring court to determine whether the advertisements at issue in the main proceedings display such characteristics. Costs87 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:1. The condition under which comparative advertising is permissible that is laid down by Article 3a(1)(b) of Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising, as amended by Directive 97/55/EC of the European Parliament and of the Council of 6 October 1997, must be interpreted as not precluding comparative advertising from relating collectively to selections of basic consumables sold by two competing chains of stores in so far as those selections each consist of individual products which, when viewed in pairs, individually satisfy the requirement of comparability laid down by that provision.2. Article 3a(1)(c) of Directive 84/450, as amended by Directive 97/55, must be interpreted as meaning that the requirement, laid down by that provision, that the advertising ‘objectively compares’ the features of the goods at issue does not signify, in the event of comparison of the prices of a selection of comparable basic consumables sold by competing chains of stores or of the general level of the prices charged by them in respect of the range of comparable products which they sell, that the products and prices compared, that is to say both those of the advertiser and those of all of his competitors involved in the comparison, must be expressly and exhaustively listed in the advertisement.3. Article 3a(1)(c) of Directive 84/450, as amended by Directive 97/55, must be interpreted as meaning that the following constitute, for the purposes of that provision, ‘verifiable’ features of goods sold by two competing chains of stores:– the prices of those goods;– the general level of the respective prices charged by such chains of stores in respect of their selection of comparable products and the amount liable to be saved by consumers who purchase such products from one rather than the other of those chains, in so far as the goods in question do in fact form part of the selection of comparable products on whose basis that general price level has been determined.4. Article 3a(1)(c) of Directive 84/450, as amended by Directive 97/55, must be interpreted as meaning that a feature mentioned in comparative advertising satisfies the requirement of verifiability laid down by that provision, in cases where the details of the comparison which form the basis for the mention of that feature are not set out in the advertising, only if the advertiser indicates, in particular for the attention of the persons to whom the advertisement is addressed, where and how they may readily examine those details with a view to verifying, or, if they do not possess the skill required for that purpose, to having verified, the details and the feature in question as to their accuracy.5. Article 3a(1)(a) of Directive 84/450, as amended by Directive 97/55, must be interpreted as meaning that comparative advertising claiming that the advertiser’s general price level is lower than his main competitors’, where the comparison has related to a sample of products, may be misleading when the advertisement:– does not reveal that the comparison related only to such a sample and not to all the advertiser’s products,– does not identify the details of the comparison made or inform the persons to whom it is addressed of the information source where such identification is possible, or– contains a collective reference to a range of amounts that may be saved by consumers who make their purchases from the advertiser rather than from his competitors without specifying individually the general level of the prices charged, respectively, by each of those competitors and the amount that consumers are liable to save by making their purchases from the advertiser rather than from each of the competitors.[Signatures]* Language of the case: Dutch. | 17445-b0cb5b1-4ac2 | EN |
THE COURT OF FIRST INSTANCE ANNULS OHIM'S DECISION NOT TO REGISTER THE FIGURATIVE SIGN "METRO' AS A COMMUNITY TRADE MARK | MIP Metro Group Intellectual Property GmbH & Co. KGvOffice for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM)(Community trade mark – Opposition proceedings – Application for a figurative mark consisting of the word mark METRO – Earlier national word mark METRO – Expiry of protection of earlier national trade mark)Judgment of the Court of First Instance (Third Chamber), 13 September 2006 Summary of the Judgment1. Community trade mark – Definition and acquisition of the Community trade mark – Relative grounds for refusal – Opposition by the proprietor of an earlier identical or similar mark registered for identical or similar goods or services(Council Regulation No 40/94, Arts 8(1)(b) and 42)2. Community trade mark – Observations of third parties and opposition – Examination of the opposition – Scope – Appeals procedure (Council Regulation No 40/94, Art. 61(1))3. Community trade mark – Procedural provisions – Taking of evidence (Council Regulation 40/94, Art. 76; Commission Regulation No 2868/95, Art. 1, Rules 16 and 20)1. The essential purpose of Articles 8 and 42 of Regulation No 40/94 on the Community trade mark and Rules 15, 16 and 20 of the implementing regulation, concerning relative grounds for refusal and opposition proceedings, is to ensure that, by making it possible to refuse registration of a new mark which may conflict with an earlier mark as there is a likelihood of confusion between them, the earlier mark may retain its function of identifying origin. In that regard, the function of an earlier mark as a means of identifying its origin cannot be undermined by another mark which is registered only after the term of protection of the earlier mark has expired. Thus, no conflict can arise between the mark applied for and an earlier mark which has expired during the opposition period, given that the mark applied for may be registered only after the end of the opposition proceedings. (see paras 31-33)2. According to case-law, in the context of the re-examination of the decision on the opposition conducted by the Boards of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) under Article 61(1) of Regulation No 40/94 on the Community trade mark, the outcome of the appeal depends on whether or not a new decision with the same operative part as the decision under appeal may be lawfully adopted at the time of the appeal ruling. In the course of that re-examination, the Office Boards of Appeal may exercise any power within the competence of the department which was responsible for the decision appealed, except where the case is remitted to that department. Consequently, the principle established by that case-law must be regarded as applicable to the findings of the Opposition Division, with the effect that neither the Opposition Division nor the Boards of Appeal may adopt a decision that is unlawful at the time when they make a decision based on the evidence submitted by the parties in the proceedings before them. Thus, the Opposition Division and the Boards of Appeal must take account of changes in circumstances that occur between the filing of the opposition and the decision on the opposition as a result of evidence submitted by the parties in response to the Office’s request for information. (see paras 34-36)3. In order to ascertain in opposition proceedings whether the earlier trade mark’s function of identifying origin may be invalidated as a result of it co-existing in time with the mark applied for, with which it is liable to be confused, the Office for Harmonisation in the Internal Market (Trade Marks and Designs) must be aware of the earlier mark’s term of protection. The power to request information from an opponent on the earlier mark’s term of protection may be inferred from Regulation No 40/94 on the Community trade mark and the implementing regulation. Thus, pursuant to Article 76 of Regulation No 40/94, the Office may request information and the production of documents in any proceedings before it, in particular such information or documents as it deems necessary to enable it to make a decision on the opposition. It follows from Rule 16 in conjunction with Rule 20 of the implementing regulation that the Office may request the opponent to submit facts, evidence and arguments which are not set out in the notice of opposition, including, inter alia, the certificate of registration of the earlier mark. Thus, the Office is entitled to require an opponent to prove that an earlier trade mark has been renewed after its term of protection has expired where such an event occurs after the notice of opposition has been filed and before the Office has given a decision on the opposition. (see paras 38-41,46)JUDGMENT OF THE COURT OF FIRST INSTANCE (Third Chamber)13 September 2006 (*) In Case T‑191/04,MIP METRO Group Intellectual Property GmbH & Co. KG, established in Düsseldorf (Germany), represented by R. Kaase, avocat, applicant,Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by A. Folliard-Monguiral, acting as Agent, defendant,the other party to the proceedings before the Board of Appeal of OHIM, intervener before the Court of First Instance, being Tesco Stores Ltd, established in Cheshunt (United Kingdom), represented by S. Malynicz, Barrister, ACTION brought against the decision of the First Board of Appeal of OHIM of 23 March 2004 (Case R 486/2003-1), relating to opposition proceedings between MIP METRO Group Intellectual Property GmbH & Co. KG and Tesco Stores Ltd, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Third Chamber),composed of M. Jaeger, President, V. Tiili and O. Czúcz, Judges,Registrar: K. Andová, Administrator, having regard to the application lodged at the Registry of the Court of First Instance on 27 May 2004, having regard to the responses of the intervener and OHIM, lodged at the Registry of the Court of First Instance on 13 and 21 September 2004 respectively, further to the hearing on 30 November 2005,gives the followingJudgment Background to the dispute1 On 20 March 1998, MIP METRO Group Intellectual Property GmbH & Co. KG, formerly METRO Cash and Carry GmbH (‘the applicant’) filed an application for a Community trade mark at the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) under Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1), as amended. 2 The trade mark for which registration was sought is the figurative sign reproduced below:3 The application for registration was published in Community Trade Marks Bulletin No 86/99 of 2 November 1999. 4 On 28 January 2000, Tesco Stores Ltd (‘the intervener’) filed a notice of opposition to registration of the trade mark applied for under Article 42 of Regulation No 40/94. The opposition was based on the earlier national word mark METRO, registered in the United Kingdom on 27 July 1993 under No 1543011, whose initial term of protection expired on 27 July 2000. 5 By letter of 13 June 2000, OHIM informed the intervener that it was to be given a four-month period to submit the additional facts, evidence and arguments it felt necessary to substantiate its opposition. In an information sheet attached to that letter, OHIM informed the intervener that if the term of protection of the earlier mark had expired ‘at the time the evidence [was] due’ pursuant to Rule 20(2) of Commission Regulation (EC) No 2868/95 of 13 December 1995 implementing Regulation No 40/94 on the Community trade mark (OJ 1995 L 303, p. 1) (‘the implementing regulation’), the intervener was also to submit a certificate of renewal or equivalent evidence or, failing that, evidence that an application for renewal had been duly filed with the competent authorities. The four-month deadline was subsequently extended and eventually expired on 13 March 2003. 6 Proof of the renewal of the earlier mark was not adduced within this time-limit.7 By letter dated 30 April 2003, the intervener was informed that since it had not provided proof that its registration had been renewed, a decision on the opposition would be made on the basis of the evidence available. 8 The Opposition Division, by decision of 12 June 2003 (‘the decision of the Opposition Division’), rejected the opposition on the ground that the intervener had not proved, although duly invited to do so, that its earlier right was still in force after 27 July 2000, the date on which the term of protection of its trade mark expired, according to the documentation submitted by the intervener. 9 On 11 August 2003, pursuant to Articles 57 to 62 of Regulation No 40/94, the intervener filed a notice of appeal with OHIM against the decision of the Opposition Division. 10 The First Board of Appeal of OHIM upheld the appeal in its decision of 23 May 2004 (‘the contested decision’). It considered that on the date on which the opposition was filed and even on the date the evidence was requested (13 June 2000), the earlier right was still in force and, accordingly, the intervener did not have to prove renewal of its trade mark registration. Forms of order sought by the parties11 The applicant claims that the Court should:– declare the action admissible;– annul the contested decision;– order OHIM to pay the costs of the proceedings.12 OHIM contends that the Court should:– allow the application for annulment of the contested decision;– order the intervener to pay the costs.13 The intervener contends that the Court should:– dismiss the action;– order the applicant to pay the intervener’s costs. Admissibility of OHIM’s claims14 So far as OHIM’s procedural status is concerned, it is to be noted that, while OHIM does not have the requisite capacity to bring an action against a decision of a Board of Appeal, it cannot be required to defend systematically every contested decision of a Board of Appeal or automatically to claim that every action challenging such a decision should be dismissed (Case T-107/02 GE Betz v OHIM – Atofina Chemicals (BIOMATE) [2004] ECR II-1845, paragraph 34; Case T‑186/04 Spa Monopole v OHIM – Spaform (SPAFORM) [2005] ECR II-2333, paragraph 20; and Case T-379/03 Peek & Cloppenburg v OHIM (Cloppenburg) [2005] ECR II-0000, paragraph 22). Nothing prevents OHIM from endorsing an applicant’s claim or from simply leaving the decision to the discretion of the Court, while putting forward all the arguments that it considers appropriate for giving guidance to the Court (BIOMATE, paragraph 36, and Cloppenburg, paragraph 22). On the other hand, it may not seek an order annulling or altering the decision of the Board of Appeal on a point not raised in the application or put forward pleas in law not raised in the application (Cloppenburg, paragraph 22; see also, to that effect, Case C-106/03 P Vedial v OHIM [2004] ECR I-9573, paragraph 34). 15 It follows that the heads of claim by which OHIM endorses the applicant’s claim for annulment must be declared admissible since those heads of claim, and the arguments set out in their support, do not go beyond the bounds of the claims and pleas in law put forward by the applicant. SubstanceA – Arguments of the parties 16 The applicant puts forward a single plea in support of its claim that the contested decision should be annulled. It asserts that the contested decision infringes Regulation No 40/94, in particular Article 74 thereof, and the implementing regulation, in particular Rules 16 and 20. It follows from those provisions that the relevant time when an earlier right has to be in force and to be proved by the opponent to have this status is the time when the Opposition Division makes its decision, or at the very latest, the date on which the period allowed for providing further evidence expires, and not the date on which the opposition was filed. 17 The applicant then submits that the purpose of Rule 16 of the implementing regulation is to enable the applicant for a trade mark and the Opposition Division to ascertain whether the earlier trade mark relied on to oppose the Community trade mark application is valid, since only a valid trade mark can form the basis of an opposition. The Opposition Division is authorised by Rule 16(3) and Rule 20(2) of the implementing regulation to set a time-limit for furnishing evidence if it was not provided together with the notice of opposition. 18 The applicant also maintains that the finding in the contested decision that the Opposition Division cannot, on the one hand, take account of the fact that the term of protection of an earlier trade mark has expired before it has made a decision on the opposition and, on the other hand, require proof that the earlier mark has been renewed, is contrary to Regulation No 40/94 and the implementing regulation and also to the broad logic underlying the relative grounds for refusal. 19 OHIM supports the applicant’s arguments. It observes, in particular, that the contested decision is incompatible with its internal Opposition Guidelines, which provide that ‘[w]ithin the period of four months to complete the file, the opponent should file evidence that the mark/s on which he relies is/are still in force. If there is no evidence of renewal, the earlier registration will not be taken into account … or the opposition will be rejected as not substantiated. However, in order to avoid the Opposition Division taking a decision in an opposition that is based on an earlier registration that has not been renewed, if a registration that was validly proved expires between the end of the four-month period and the moment the decision is taken, the examiner must ask the opponent to provide evidence that the registration has been renewed, regardless of whether or not the applicant raises an objection.’ 20 The intervener puts forward six pleas in law in support of its argument that the Board of Appeal correctly applied Regulation No 40/94 and the implementing regulation. 21 Firstly, it submits that the wording of Article 8(1) of Regulation No 40/94 uses the present tense (‘upon opposition’) rather than the future tense. Further, the wording of Article 8(2) of that regulation uses the past tense (‘trade marks registered’). It argues that when these two provisions are read together, it is clear that the date of opposition is the relevant date. There is accordingly no provision in Article 8 of Regulation 40/94 that places an obligation on an opponent to retain the status of proprietor of the earlier mark or to prove that he has retained that status beyond the opposition period. 22 Secondly, the intervener states that the only requirement set out in Article 42(1) of Regulation No 40/94 is that notice of opposition be given on the ground that the trade mark may not be registered under Article 8 of that regulation. It notes that the requirement is again expressed in the present tense. In addition, there is the requirement that the opponent be, inter alios, the proprietor of the earlier marks referred to in Article 8(2) of Regulation No 40/94. Again, this is expressed in the present tense. The intervener concludes from this that the opponent is not under any obligation to demonstrate that he will remain the proprietor until some unspecified point in the future that is beyond the opposition period. It considers that Article 42(3) of Regulation No 40/94 confirms this analysis in that it requires the opponent to specify the grounds on which the opposition is made, and points out that again the present tense is used. It contends, moreover, that the opponent is required to set out the grounds then in existence that can be cited against the mark applied for. No opponent would be able to state with certainty what the position might be at some unspecified point in the future that is beyond the opposition period. In any event, that would be contrary to the express wording of Article 42(3) of Regulation No 40/94. 23 As its third plea, the intervener submits that Rules 15 and 16 of the implementing regulation are wholly silent on the proposition contended for by the applicant that the validity of an earlier mark must be shown when the Opposition Division makes its decision on the merits. It argues that the fact that the legislature has provided such detailed provisions, yet did not specify that the opponent should have to prove subsistence of his rights beyond the opposition period, should be understood to signify the legislature’s intention that such proof is not required, in accordance with the expressio unius principle. The intervener further notes that these provisions are expressed in the present or past tense. 24 The intervener also refers to Rule 15(2)(c)(i) of the implementing regulation, which provides that ‘where the opposition is entered by the proprietor of the earlier mark or of the earlier right [the notice of opposition shall contain] … an indication that he is the proprietor of such mark or right’. It concludes that all that that rule requires to be shown is that, as of the date when the opposition is entered, the opponent is the proprietor of the earlier mark. 25 As its fourth plea, the intervener submits that the principle of legal certainty requires that Community rules must enable those concerned to know precisely the extent of the obligations which are imposed upon them (Case C-233/96 Denmark v Commission [1998] ECR I-5759, paragraph 38). It maintains that the applicant’s contention, namely that the time when OHIM must determine the validity of an earlier mark is the time of the ruling on the opposition, has an arbitrary and uncertain basis. It argues that the fact that proceedings may become protracted would require an opponent to guess when a decision on the merits was likely to be taken or continuously to provide updated evidence of the subsistence of the earlier mark. 26 As its fifth plea, the intervener argues that it would offend against the Community law principle of non-retroactivity to require the opponent to demonstrate subsistence or validity of the earlier mark beyond the opposition period. 27 It points out what when the opposition was filed on 28 January 2000, the opponent was provided with a form that allowed it to provide a copy of the registration at a later date. The opponent filed a copy of the registration certificate for the earlier mark on 24 February 2000. It states at paragraph 18 of its response that that certificate showed that the mark would remain in force until 27 July 2003, that is, beyond the end of the opposition period. On 13 June 2000, OHIM wrote to the opponent informing it of the commencement of the adversarial part of the proceedings and requesting it to furnish facts, evidence and arguments in support. The intervener maintains that if, as the applicant contends, this letter imposed a requirement that the opponent submit evidence of the renewal of the registration that had already been submitted during the opposition period, such a requirement would be retrospective in effect and, therefore, inadmissible. 28 Lastly, as its sixth plea, the intervener submits that Article 74 of Regulation No 40/94 does not support the applicant’s contention either. It argues that the purpose of Article 74 is set out in the heading of that section, namely to determine the extent to which it is permissible for OHIM to examine facts of its own motion. Accordingly, it does not accept that that provision is to be interpreted as meaning that an opponent must prove to OHIM that a mark remains subsisting and valid until the date when the Opposition Division makes its decision. B – Findings of the Court29 In essence, the applicant, supported by OHIM, criticises two assertions in the contested decision. Firstly, the Board of Appeal wrongly considered that when the term of protection of the mark on which the opposition was based expired, this did not authorise the Opposition Division retrospectively to alter the status of the opponent and reject the opposition. Secondly, it erred in considering that the opponent is required to set out once, and once only, the grounds of its opposition and that, accordingly, neither the Opposition Division nor the Boards of Appeal are entitled to require further proof that the earlier mark on which the opposition is based is still valid. Those assertions are incompatible with the overall scheme of Regulation No 40/94 and the implementing regulation since their effect would be to require the Opposition Division to find that the trade mark applied for and an earlier mark whose term of protection had expired were in conflict. 30 According to well-established case-law, the essential function of a trade mark is to guarantee the identity of the origin of the marked goods to the consumer or end user by enabling him, without any possibility of confusion, to distinguish those goods from others which have another origin (Case 102/77 Hoffmann-La Roche [1978] ECR 1139, paragraph 7; Joined Cases C-456/01 P and C-457/01 P Henkel v OHIM [2004] ECR I‑5089, paragraph 48; and Case C-329/02 P SAT. 1 v OHIM [2004] ECR I-8317, paragraph 23). There is no public interest in conferring the benefit of the full protection envisaged by Regulation No 40/94 on a trade mark which does not fulfil its essential function (Henkel v OHIM, paragraph 48). 31 The essential purpose of Articles 8 and 42 of Regulation No 40/94 and Rules 15, 16 and 20 of the implementing regulation, concerning relative grounds for refusal and opposition proceedings, is to ensure that, by making it possible to refuse registration of a new mark which may conflict with an earlier mark as there is a likelihood of confusion between them, the earlier mark may retain its function of identifying origin. 32 The possibility of such a conflict must be considered from two different angles. Firstly, with regard to the substantive scope of the abovementioned provisions, the earlier mark and the mark applied for must be identical or similar, as must the goods or services designated by those marks, so that confusion may arise between the two signs. Secondly, concerning the temporal scope of those provisions, both those marks must co-exist for a certain period. The function of an earlier mark as a means of identifying its origin cannot be undermined by another mark which is registered only after the term of protection of the earlier mark has expired. If there is no period during which both marks co-exist, no conflict can arise. 33 Accordingly, the Court of First Instance finds that the assertion in the contested decision that ‘[t]here is nothing that permits the Opposition Division to retroactively change an opponent’s status simply because in the course of opposition proceedings … a national registration … expires’ fails to take account of the fact that no conflict can arise between the mark applied for and an earlier mark which has expired during that period, given that the mark applied for may be registered only after the end of the opposition proceedings. As a consequence, the protection which the Board of Appeal recognised the earlier mark as having is not justified by the need to protect the mark’s essential function and is contrary to the spirit and the logic underlying the provisions governing the assessment of relative grounds for refusal and opposition proceedings. 34 Moreover, the applicant and OHIM rightly submit that the Opposition Division and the Boards of Appeal must take account of changes in circumstances that occur between the filing of the opposition and the decision on the opposition as a result of evidence submitted by the parties in response to OHIM’s request for information. 35 The Court of First Instance held in Case T-308/01 Henkel v OHIM – LHS (UK) (KLEENCARE) [2003] ECR II-3253, paragraph 26, that, in the context of the re-examination of the decision on the opposition conducted by the Boards of Appeal under Article 61(1) of Regulation No 40/94, the outcome of the appeal depends on whether or not a new decision with the same operative part as the decision under appeal may be lawfully adopted at the time of the appeal ruling. 36 In the course of that re-examination, the OHIM Boards of Appeal may exercise any power within the competence of the department which was responsible for the decision appealed, except where the case is remitted to that department (KLEENCARE, paragraph 24). Consequently, the principle established by that case-law must be regarded as applicable to the findings of the Opposition Division, with the effect that neither the Opposition Division nor the Boards of Appeal may adopt a decision that is unlawful at the time when they make a decision based on the evidence submitted by the parties in the proceedings before them. 37 However, the intervener takes the view that the contested decision correctly established that the opponent must set out the grounds and evidence in support of its opposition once and once only. The Opposition Division cannot rely on the absence of proof of renewal of the earlier trade mark since its request for information concerning renewal of registration was not justified by any of the provisions in Regulation No 40/94 or the implementing regulation. 38 It is clear from the case-law cited at paragraph 30 above that Regulation No 40/94 and the implementing regulation are to be interpreted in the light of the essential function of a trade mark. In order to ascertain whether the earlier trade mark’s function of identifying origin may be invalidated as a result of it co-existing in time with the mark applied for, with which it is liable to be confused, OHIM must be aware of the earlier mark’s term of protection. 39 The power to request such information from an opponent may be inferred from Regulation No 40/94 and the implementing regulation. Thus, pursuant to Article 76 of Regulation No 40/94, OHIM may request information and the production of documents in any proceedings before it, in particular such information or documents as it deems necessary to enable it to make a decision on the opposition. It follows from Rule 16 in conjunction with Rule 20 of the implementing regulation that OHIM may request the opponent to submit facts, evidence and arguments which are not set out in the notice of opposition, including, inter alia, the certificate of registration of the earlier mark. 40 The intervener, on the other hand, maintains that the opponent cannot be obliged to demonstrate that it will remain the proprietor of the earlier mark until some unspecified point beyond the opposition period. 41 It is to be noted in that regard that, in its first, second, third and sixth pleas, the intervener simply asserts that such an obligation on the part of the opponent does not arise either from Articles 8, 42 or 74 of Regulation No 40/94 or from Rules 15 and 16 of the implementing regulation. It does not advance any argument to deny that Article 76 of Regulation No 40/94 or Rule 16 in conjunction with Rule 20 of the implementing regulation confers the right on OHIM to require an opponent to prove that a trade mark has been renewed after its term of protection has expired where such an event occurs after the notice of opposition has been filed. Moreover, its arguments in that regard are based on an interpretation that relies on the tenses of the verbs used in the abovementioned provisions, considered in isolation, and do not refer at all to the principles on which the relative grounds for refusal and the opposition proceedings are based. 42 Furthermore, the intervener’s argument falls outside the factual ambit of the present case. When the time-limit for providing information expired (13 March 2003) and even at the time of the initial time-limit imposed by the Opposition Division (13 October 2000), the validity of the earlier mark was not dependent on any future factor but on whether the intervener had renewed the registration of its trade mark, whose initial period of protection expired on 27 July 2000. The request made was therefore one for proof of a past event. Accordingly, and contrary to the intervener’s assertions, the Court of First Instance considers that the request for information did not concern the validity of the mark at some unspecified time in the future. 43 By its fourth plea, the intervener argues that the fact that the opponent is not in a position to know whether it must provide proof that the registration of the earlier mark has been renewed on its own initiative, continuously or at OHIM’s request may produce an uncertain legal situation. The requirement to prove that the earlier mark remains valid therefore means that the intervener must guess the date on which the decision on the opposition will be taken. 44 That argument cannot be accepted either. There is nothing whatsoever in the decision of the Opposition Division to suggest that OHIM requires the opponent continuously to submit proof of renewal in the absence of a request for information on the part of OHIM. Nor does such an obligation arise from the procedural documents lodged by the applicant or OHIM. In fact, OHIM’s Opposition Guidelines expressly state the opposite, namely, that ‘the examiner must ask the opponent to provide evidence that the registration has been renewed’. 45 With regard to the intervener’s fifth argument, that it would be contrary to the principle of non-retroactivity to confer power on OHIM to request information on the renewal of the earlier mark, it is sufficient to note that the intervener admitted, in response to a written question from the Court of First Instance, that it had erroneously indicated, at paragraph 18 of its response, on the basis of the documentation provided to the Opposition Division, that the earlier mark remained in force until 27 July 2003, whereas the correct date was in fact 27 July 2000. 46 In the light of the foregoing, the Court of First Instance finds that the Board of Appeal incorrectly held, firstly, that the fact that the term of protection of the earlier mark expired before the Opposition Division gave a decision on the opposition cannot be taken into account by the latter and, secondly, that the Opposition Division does not have the power to request information on the renewal of the earlier mark after the initial evidence has been filed. In so doing, the Board of Appeal interpreted the provisions of Regulation No 40/94 and the implementing regulation governing assessment of relative grounds for refusal and opposition proceedings in a manner contrary to the principles underlying those provisions and, in particular, infringed Article 76 of Regulation No 40/94 and Rule 20 of the implementing regulation. 47 It follows that the applicant’s single plea in law must be upheld and the contested decision annulled. Costs48 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since OHIM has been unsuccessful, in that the contested decision has been annulled, it must be ordered to pay the applicant’s costs, as applied for by the applicant. Since the intervener has been unsuccessful, it must bear its own costs. On those grounds,THE COURT OF FIRST INSTANCE (Third Chamber)hereby:1. Declares that the decision of the First Board of Appeal of the Office for Harmonisation in the Internal Market (Trade Marks and Designs) of 23 March 2004 (Case R 486/2003-1) is annulled;2. Orders OHIM to bear its own costs and to pay those incurred by the applicant;3. Orders the intervener to bear its own costs.Jaeger Tiili Czúcz Delivered in open court in Luxembourg on 13 September 2006.Registrar PresidentE. Coulon M. Jaeger*Language of the case: English. | 348f7-a1a7534-456b | EN |
UNITED KINGDOM LEGISLATION ON CONTROLLED FOREIGN COMPANIES CAN APPLY ONLY TO WHOLLY ARTIFICIAL TAX ARRANGEMENTS | Cadbury Schweppes plc and Cadbury Schweppes Overseas LtdvCommissioners of Inland Revenue(Reference for a preliminary ruling from the Special Commissioners of Income Tax, London)(Freedom of establishment – Law on controlled foreign companies – Inclusion of the profits of controlled foreign companies in the tax base of the parent company)Summary of the Judgment1. Freedom of movement for persons – Freedom of establishment (Arts 43 EC and 48 EC)2. Freedom of movement for persons – Freedom of establishment – Tax legislation1. The mere fact that a resident company establishes a secondary establishment, such as a subsidiary, in another Member State cannot set up a general presumption of tax evasion and justify a measure which compromises the exercise of a fundamental freedom guaranteed by the Treaty. On the other hand, a national measure restricting freedom of establishment may be justified on the ground of prevention of abusive practices where it specifically relates to wholly artificial arrangements, which do not reflect economic reality, aimed at circumventing the application of the legislation of the Member State concerned, in particular with a view to escaping the tax normally due on the profits generated by activities carried out on national territory. (see paras 50-51, 55)2. Articles 43 EC and 48 EC must be interpreted as precluding the inclusion in the tax base of a resident company established in a Member State of profits made by a controlled foreign company in another Member State, where those profits are subject in that State to a lower level of taxation than that applicable in the first State, unless such inclusion relates only to wholly artificial arrangements intended to escape the national tax normally payable. Accordingly, such a tax measure must not be applied where it is proven, on the basis of objective factors which are ascertainable by third parties, that despite the existence of tax motives that controlled company is actually established in the host Member State and carries on genuine economic activities there. (see para. 75, operative part)JUDGMENT OF THE COURT (Grand Chamber)12 September 2006 (*) In Case C-196/04,REFERENCE for a preliminary ruling under Article 234 EC by the Special Commissioners of Income Tax, London (United Kingdom), made by decision of 29 April 2004, received at the Court on 3 May 2004, in the proceedings Cadbury Schweppes plc, Cadbury Schweppes Overseas LtdCommissioners of Inland Revenue,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann and A. Rosas, Presidents of Chambers, J.N. Cunha Rodrigues, R. Silva de Lapuerta, K. Lenaerts (Rapporteur), E. Juhász, G. Arestis and A. Borg Barthet, Judges, Advocate General: P. Léger,Registrar: C. Strömholm, Administrator,having regard to the written procedure and further to the hearing on 13 December 2005,after considering the observations submitted on behalf of:– Cadbury Schweppes plc and Cadbury Schweppes Overseas Ltd, by J. Ghosh, Barrister, and J. Henderson, adviser,– the United Kingdom Government, by R. Caudwell, acting as Agent, and D. Anderson QC, M. Lester and D. Ewart, Barristers,– the Belgian Government, by E. Dominkovits, acting as Agent,– the Danish Government, by J. Molde, acting as Agent,– the German Government, by A. Tiemann and U. Forsthoff, acting as Agents,– the Spanish Government, by L. Fraguas Gadea and M. Muñoz Pérez, acting as Agents,– the French Government, by G. de Bergues and C. Mercier, acting as Agents,– Ireland, by D. O’Hagan, acting as Agent, and R.L. Nesbitt, A. Collins SC and P. McGarry BL,– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by A. Cingolo, avvocato dello Stato, – the Cypriot Government, by A. Pantazi, acting as Agent,– the Portuguese Government, by L. Fernandes and J. de Menezes Leitão, acting as Agents,– the Finnish Government, by A. Guimaraes-Purokoski, acting as Agent,– the Swedish Government, by A. Kruse and I. Willfors, acting as Agents,– the Commission of the European Communities, by R. Lyal, acting as Agent,after hearing the Opinion of the Advocate General at the sitting on 2 May 2006,gives the followingJudgment1 The reference for a preliminary ruling concerns the interpretation of Articles 43 EC, 49 EC and 56 EC. 2 The reference was made in proceedings between Cadbury Schweppes plc (‘CS’) and Cadbury Schweppes Overseas Ltd (‘CSO’) on the one hand and the Commissioners of Inland Revenue on the other hand concerning the taxation of CSO in respect of the profits made in 1996 by Cadbury Schweppes Treasury International (‘CSTI’), a subsidiary of the Cadbury Schweppes group established in the International Financial Services Center in Dublin (Ireland) (‘the IFSC’). National legislation3 The tax legislation of the United Kingdom of Great Britain and Northern Ireland provides that a company resident in that Member State within the meaning of that legislation (‘the resident company’) is subject in that State to corporation tax on its worldwide profits. Those profits include the profits made by branches or agencies through which the resident company carries on its activities outside the United Kingdom. 4 On the other hand, the resident company is not generally taxed on the profits of its subsidiaries as they arise. Nor is it taxed on dividends distributed by a subsidiary established in the United Kingdom. Dividends distributed to a resident company by a subsidiary established abroad are taxed in the hands of that company. In order to prevent double taxation, the United Kingdom tax legislation provides, however, for the grant of a tax credit to the resident company up to the amount of the tax which was paid by the foreign subsidiary as the profits arose. 5 The United Kingdom legislation on controlled foreign companies (‘CFCs’) provides for an exception to the general rule that a resident company is not taxed on the profits of a subsidiary as they arise. 6 That legislation, which is contained in sections 747 to 756 and Schedules 24 to 26 of the Income and Corporation Taxes Act 1988, provides that the profits of a CFC – namely, under the version of that legislation applicable at the time of the facts in the main proceedings (‘the legislation on CFCs’), a foreign company in which the resident company owns a holding of more than 50% – are attributed to the resident company and taxed in its hands, by means of a tax credit for the tax paid by the CFC in the State in which it is established. If those same profits are then distributed in the form of dividends to the resident company, the tax paid by the latter in the United Kingdom on the profits of the CFC is treated as additional tax paid by the latter abroad and gives rise to a tax credit payable in respect of the tax owed by the resident company on those dividends. 7 The legislation on CFCs is designed to apply when the CFC is subject, in the State in which it is established, to a ‘lower level of taxation’, which is the case, under that legislation, in respect of any accounting period in which the tax paid by the CFC is less than three quarters of the amount of tax which would have been paid in the United Kingdom on the taxable profits as they would have been calculated for the purposes of taxation in that Member State. 8 The taxation which is attributable to the application of the legislation on CFCs is accompanied by a number of exceptions. According to the version of that legislation in force at the time of the facts in the main proceedings, that taxation does not apply in any of the following cases: – the CFC adopts an ‘acceptable distribution policy’, which means that a specified percentage (90% in 1996) of its profits are distributed within 18 months of their arising and taxed in the hands of a resident company; – the CFC is engaged in ‘exempt activities’ within the meaning of that legislation, such as certain trading activities carried out from a business establishment; – the CFC satisfies the ‘public quotation condition’, which means that 35% of the voting rights are held by the public, the subsidiary is quoted and its securities are dealt in on a recognised stock exchange, and – the CFC’s chargeable profits do not exceed an amount set at UK £50 000 (de minimis exception).9 The taxation provided for by the legislation on CFCs is also excluded when ‘the motive test’ is satisfied. The latter involves two cumulative conditions. 10 First, where the transactions which gave rise to the profits of the CFC for the accounting period in question produce a reduction in United Kingdom tax compared to that which would have been paid in the absence of those transactions and where the amount of that reduction exceeds a certain threshold, the resident company must show that such a reduction was not the main purpose, or one of the main purposes, of those transactions. 11 Secondly, the resident company must show that it was not the main reason, or one of the main reasons, for the SEC’s existence in the accounting period concerned to achieve a reduction in United Kingdom tax by means of the diversion of profits. According to that legislation, there is a diversion of profits if it is reasonable to suppose that, had the SEC or any related company established outside the United Kingdom not existed, the receipts would have been received by, and been taxable in the hands of, a United Kingdom resident. 12 The decision making the reference also states that in 1996 the United Kingdom tax authorities published a list of States within which, subject to specified conditions, a CFC could be established and carry on its activities and be regarded as meeting the requirements for exemption from the taxation provided for by the legislation on CFCs. The facts in the main proceedings and the question referred for a preliminary ruling13 CS, a resident company, is the parent company of the Cadbury Schweppes group which consists of companies established in the United Kingdom, in other Member States and in third States. That group includes, inter alia, two subsidiaries in Ireland, Cadbury Schweppes Treasury Services (‘CSTS’) and CSTI, which CS owns indirectly through a chain of subsidiaries at the head of which is CSO. 14 CSTS and CSTI, which are established in the IFSC, were subject to a tax rate of 10% at the time of the facts in the main proceedings. 15 The business of CSTS and CSTI is to raise finance and to provide that finance to subsidiaries in the Cadbury Schweppes group. 16 According to the decision making the reference, CSTS replaced a similar structure which included a company established in Jersey. It was established for three purposes: first, to remedy a tax problem encountered by Canadian taxpayers holding CS preference shares, secondly, to avoid the need to obtain consent from the United Kingdom authorities for overseas lending transactions and, thirdly, to reduce the withholding tax on dividends paid within the group under the scheme of Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6). According to that decision, those three objectives could have been achieved if CSTS had been incorporated in accordance with United Kingdom legislation and established in the United Kingdom. 17 CSTI is a subsidiary of CSTS. In the view of the national court, it was incorporated in Ireland in order not to fall within the application of certain United Kingdom tax provisions on exchange transactions. 18 According to the decision making the reference, it is common ground that CSTS and CSTI were established in Dublin solely in order that the profits related to the internal financing activities of the Cadbury Schweppes group could benefit from the tax regime of the IFSC. 19 Given the rate of tax applicable to companies established in the IFSC, the profits of CSTS and CSTI were subject to ‘a lower level of taxation’ within the meaning of the legislation on CFCs. The United Kingdom tax authorities took the view that, for the 1996 financial year, none of the conditions for exemption from taxation provided for by that legislation applied to those subsidiaries. 20 By decision of 18 August 2000, the Commissioners of Inland Revenue therefore claimed, under the CFC legislation, corporation tax from CSO in the sum of UK £8 638 633.54 on the profits made by CSTI in the financial year ending 28 December 1996. The tax notice related only to the profits made by CSTI because, in that financial year, CSTS made a loss. 21 On 21 August 2000, CS and CSO appealed against that tax notice to the Special Commissioners of Income Tax, London. Before that body, they maintained that the legislation on CFCs was contrary to Articles 43 EC, 49 EC and 56 EC. 22 The national court states that it is faced with a series of uncertainties as to the application of Community law to the case before it. 23 First, it asks whether, in establishing and capitalising companies in another Member State solely to take advantage of a tax regime more favourable than that applicable in the United Kingdom, CS is abusing the freedoms introduced by the EC Treaty. 24 Secondly it asks whether, if CS is merely exercising those freedoms in a genuine manner, the correct approach in the circumstances of this case is to consider whether the legislation on CFCs may be viewed as a restriction on the exercise of those freedoms, or discrimination. 25 Should that legislation be viewed as involving a restriction on the freedoms enshrined by the Treaty, the national court asks, thirdly, whether the fact that CS may pay no more tax than what CSTS and CSTI would have paid if they had been established in the United Kingdom means that there is no such restriction. It also asks whether it is relevant that on the one hand there are differences in some respects between the rules for calculating the tax liability in respect of the income of CSTS and CSTI and the ordinary rules applicable to United Kingdom subsidiaries of CS and on the other the fact that losses of a CFC cannot be deducted from the profits of another CFC or from the profits of CS and its United Kingdom subsidiaries, whereas such a deduction would have been available if CSTS and CSTI had been established in the United Kingdom. 26 Should the legislation on CFCs be viewed as involving discrimination, it asks, fourthly, whether a parallel should be drawn between the facts in the main proceedings and the incorporation by CS of subsidiaries in the United Kingdom or the establishment by CS of subsidiaries in a Member State which does not charge a lower rate of tax as provided for in that legislation. 27 Should the legislation on CFCs be viewed as involving discrimination or a restriction on the freedom of establishment, it asks, fifthly, whether that legislation can be justified on grounds of prevention of tax avoidance, given its objective to prevent the reduction or diversion of profits liable to United Kingdom tax; and, if so, whether the legislation may be considered to be proportionate having regard to its purpose and the exemptions which may be obtained by companies which, unlike CS, succeed in proving under the motive test that their purpose does not relate to tax avoidance. 28 In the light of those questions, the Special Commissioners of Income Tax, London, decided to stay the proceedings and refer the following question to the Court for a preliminary ruling: ‘Do Articles 43 EC, 49 EC and 56 EC preclude national tax legislation such as that in issue in the main proceedings, which provides in specified circumstances for the imposition of a charge upon a company resident in that Member State in respect of the profits of a subsidiary company resident in another Member State and subject to a lower level of taxation?’ The question referred for a preliminary ruling29 By that question, the national court asks, essentially, whether Articles 43 EC, 49 EC and 56 EC preclude national tax legislation such as that in issue in the main proceedings, which provides under certain conditions for the imposition of a charge upon the parent company on the profits made by a CFC. 30 That question must be understood as referring also to Article 48 EC, under which companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community are to be treated in the same way as natural persons who are nationals of Member States, referred to in Article 43 EC, for the purposes of the provisions of the Treaty on freedom of establishment. 31 In accordance with settled case-law, national provisions which apply to holdings by nationals of the Member State concerned in the capital of a company established in another Member State, giving them definite influence on the company’s decisions and allowing them to determine its activities come within the substantive scope of the provisions of the Treaty on freedom of establishment (see, to that effect, Case C-251/98 Baars [2000] ECR I-2787, paragraph 22, and Case C-436/00 X and Y [2002] ECR I-10829, paragraph 37). 32 In this case, the legislation on CFCs concerns the taxation, under certain conditions, of the profits of subsidiaries established outside the United Kingdom in which a resident company has a controlling holding. It must therefore be examined in the light of Articles 43 EC and 48 EC. 33 If, as submitted by the applicants in the main proceedings and Ireland, that legislation has restrictive effects on the free movement of services and the free movement of capital, such effects are an unavoidable consequence of any restriction on freedom of establishment and do not justify, in any event, an independent examination of that legislation in the light of Articles 49 EC and 56 EC (see, to that effect, Case C-36/02 Omega [2004] ECR I‑9609, paragraph 27). 34 Before examining the legislation on CFCs in the light of Articles 43 EC and 48 EC, it is important to answer the national court’s initial question seeking to ascertain whether the fact that a company established in a Member State establishes and capitalises companies in another Member State solely because of the more favourable tax regime applicable in that Member State constitutes an abuse of freedom of establishment. 35 It is true that nationals of a Member State cannot attempt, under cover of the rights created by the Treaty, improperly to circumvent their national legislation. They must not improperly or fraudulently take advantage of provisions of Community law (Case 115/78 Knoors [1979] ECR 399, paragraph 25; Case C-61/89 Bouchoucha [1990] ECR I-3551, paragraph 14; and Case C-212/97 Centros [1999] ECR I-1459, paragraph 24). 36 However, the fact that a Community national, whether a natural or a legal person, sought to profit from tax advantages in force in a Member State other than his State of residence cannot in itself deprive him of the right to rely on the provisions of the Treaty (see, to that effect, Case C-364/01 Barbier [2003] ECR I-15013, paragraph 71). 37 As to freedom of establishment, the Court has already held that the fact that the company was established in a Member State for the purpose of benefiting from more favourable legislation does not in itself suffice to constitute abuse of that freedom (see, to that effect, Centros, paragraph 27, and Case C-167/01 Inspire Art [2003] ECR I-10155, paragraph 96). 38 As noted by the applicants in the main proceedings and the Belgian Government, and by the Cypriot Government at the hearing, it follows that the fact that in this case CS decided to establish CSTS and CSTI in the IFSC for the avowed purpose of benefiting from the favourable tax regime which that establishment enjoys does not in itself constitute abuse. That fact does not therefore preclude reliance by CS on Articles 43 EC and 48 EC (see, to that effect, Centros, paragraph 18, and Inspire Art, paragraph 98). 39 It must therefore be examined whether Articles 43 EC and 48 EC preclude the application of legislation such as that on CFCs. 40 According to settled case-law, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law (Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651, paragraph 19; Case C-319/02 Manninen [2004] ECR I-7477, paragraph 19; and Case C-446/03 Marks & Spencer [2005] ECR I-10837, paragraph 29). 41 Freedom of establishment, which Article 43 EC grants to Community nationals and which includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected, entails, in accordance with Article 48 EC, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency (see, in particular, Case C-307/97 Saint Gobain ZN [1999] ECR I-6161, paragraph 35; Marks & Spencer, paragraph 30; and Case C-471/04 Keller Holding [2006] ECR I-0000, paragraph 29). 42 Even though, according to their wording, the provisions of the Treaty concerning freedom of establishment are directed to ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation (see, in particular, Case C-264/96 ICI [1998] ECR I-4695, paragraph 21, and Marks & Spencer, paragraph 31). 43 In this case, it is common ground that the legislation on CFCs involves a difference in the treatment of resident companies on the basis of the level of taxation imposed on the company in which they have a controlling holding. 44 Where the resident company has incorporated a CFC in a Member State in which it is subject to a lower level of taxation within the meaning of the legislation on CFCs, the profits made by such a controlled company are, pursuant to that legislation, attributed to the resident company, which is taxed on those profits. Where, on the other hand, the controlled company has been incorporated and taxed in the United Kingdom or in a State in which it is not subject to a lower level of taxation within the meaning of that legislation, the latter is not applicable and, under the United Kingdom legislation on corporation tax, the resident company is not, in such circumstances, taxed on the profits of the controlled company. 45 That difference in treatment creates a tax disadvantage for the resident company to which the legislation on CFCs is applicable. Even taking into account, as suggested by the United Kingdom, Danish, German, French, Portuguese, Finnish, and Swedish Governments, the fact referred to by the national court that such a resident company does not pay, on the profits of a CFC within the scope of application of that legislation, more tax than that which would have been payable on those profits if they had been made by a subsidiary established in the United Kingdom, the fact remains that under such legislation the resident company is taxed on profits of another legal person. That is not the case for a resident company with a subsidiary taxed in the United Kingdom or a subsidiary established outside that Member State which is not subject to a lower level of taxation. 46 As submitted by the applicants in the main proceedings and by Ireland and the Commission of the European Communities, the separate tax treatment under the legislation on CFCs and the resulting disadvantage for resident companies which have a subsidiary subject, in another Member State, to a lower level of taxation are such as to hinder the exercise of freedom of establishment by such companies, dissuading them from establishing, acquiring or maintaining a subsidiary in a Member State in which the latter is subject to such a level of taxation. They therefore constitute a restriction on freedom of establishment within the meaning of Articles 43 EC and 48 EC. 47 Such a restriction is permissible only if it is justified by overriding reasons of public interest. It is further necessary, in such a case, that its application be appropriate to ensuring the attainment of the objective thus pursued and not go beyond what is necessary to attain it (Case C-250/95 Futura Participations and Singer [1997] ECR I-2471, paragraph 26; Case C-9/02 De Lasteyrie du Saillant [2004] ECR I-2409, paragraph 49; and Marks & Spencer, paragraph 35). 48 The United Kingdom Government, supported by the Danish, German, French, Portuguese, Finnish and Swedish Governments, submits that the legislation on CFCs is intended to counter a specific type of tax avoidance involving the artificial transfer by a resident company of profits from the Member State in which they were made to a low-tax State by means of the establishment of a subsidiary in that State and the effecting of transactions intended primarily to make such a transfer to that subsidiary. 49 In that respect, it is settled case-law that any advantage resulting from the low taxation to which a subsidiary established in a Member State other than the one in which the parent company was incorporated is subject cannot by itself authorise that Member State to offset that advantage by less favourable tax treatment of the parent company (see, to that effect, Case 270/83 Commission v France [1986] ECR 273, paragraph 21; see also, by analogy, Case C-294/97 Eurowings Luftverkehr [1999] ECR I-7447, paragraph 44, and Case C-422/01 Skandia and Ramstedt [2003] ECR I-6817, paragraph 52). The need to prevent the reduction of tax revenue is not one of the grounds listed in Article 46(1) EC or a matter of overriding general interest which would justify a restriction on a freedom introduced by the Treaty (see, to that effect, Case C-136/00 Danner [2002] ECR I-8147, paragraph 56, and Skandia and Ramstedt, paragraph 53). 50 It is also apparent from case-law that the mere fact that a resident company establishes a secondary establishment, such as a subsidiary, in another Member State cannot set up a general presumption of tax evasion and justify a measure which compromises the exercise of a fundamental freedom guaranteed by the Treaty (see, to that effect, ICI, paragraph 26; Case C-478/98 Commission v Belgium [2000] ECR I-7587, paragraph 45; X and Y, paragraph 62; and Case C-334/02 Commission v France [2004] ECR I-2229, paragraph 27). 51 On the other hand, a national measure restricting freedom of establishment may be justified where it specifically relates to wholly artificial arrangements aimed at circumventing the application of the legislation of the Member State concerned (see to that effect ICI, paragraph 26; Case C-324/00 Lankhorst-Hohorst [2002] ECR I-11779, paragraph 37; De Lasteyrie du Saillant, paragraph 50; and Marks & Spencer, paragraph 57). 52 It is necessary, in assessing the conduct of the taxable person, to take particular account of the objective pursued by the freedom of establishment (see, to that effect, Centros, paragraph 25, and X and Y, paragraph 42). 53 That objective is to allow a national of a Member State to set up a secondary establishment in another Member State to carry on his activities there and thus assist economic and social interpenetration within the Community in the sphere of activities as self-employed persons (see Case 2/74 Reyners [1974] ECR 631, paragraph 21). To that end, freedom of establishment is intended to allow a Community national to participate, on a stable and continuing basis, in the economic life of a Member State other than his State of origin and to profit therefrom (Case C-55/94 Gebhard [1995] ECR I-4165, paragraph 25). 54 Having regard to that objective of integration in the host Member State, the concept of establishment within the meaning of the Treaty provisions on freedom of establishment involves the actual pursuit of an economic activity through a fixed establishment in that State for an indefinite period (see Case C-221/89 Factortame and Others [1991] ECR I-3905, paragraph 20, and Case C-246/89 Commission v United Kingdom [1991] ECR I-4585, paragraph 21). Consequently, it presupposes actual establishment of the company concerned in the host Member State and the pursuit of genuine economic activity there. 55 It follows that, in order for a restriction on the freedom of establishment to be justified on the ground of prevention of abusive practices, the specific objective of such a restriction must be to prevent conduct involving the creation of wholly artificial arrangements which do not reflect economic reality, with a view to escaping the tax normally due on the profits generated by activities carried out on national territory. 56 Like the practices referred to in paragraph 49 of Marks & Spencer, which involve arranging transfers of losses, within a group of companies, to companies established in the Member States which apply the highest rates of taxation and in which the tax value of those losses is therefore the highest, the type of conduct described in the preceding paragraph is such as to undermine the right of the Member States to exercise their tax jurisdiction in relation to the activities carried out in their territory and thus to jeopardise a balanced allocation between Member States of the power to impose taxes (see Marks & Spencer, paragraph 46). 57 In the light of those considerations, it must be determined whether the restriction on freedom of establishment arising from the legislation on CFCs may be justified on the ground of prevention of wholly artificial arrangements and, if so, whether it is proportionate in relation to that objective. 58 That legislation covers situations in which a resident company has created a CFC which is subject, in the Member State in which it is established, to a level of taxation which is less than three quarters of the amount of tax which would have been paid in the United Kingdom if the profits of that CFC had been taxed in that Member State. 59 By providing for the inclusion of the profits of a CFC subject to very favourable tax regime in the tax base of the resident company, the legislation on CFCs makes it possible to thwart practices which have no purpose other than to escape the tax normally due on the profits generated by activities carried on in national territory. As the French, Finnish and Swedish Governments stated, such legislation is therefore suitable to achieve the objective for which it was adopted. 60 It must further be determined whether that legislation goes beyond what is necessary to achieve that purpose. 61 The legislation on CFCs contains a number of exceptions where taxation of the resident company on the profits of CFCs does not apply. Some of those exceptions exempt the resident company in situations in which the existence of a wholly artificial arrangement solely for tax purposes appears to be excluded. Thus, the distribution by a CFC of almost the whole of its profits to a resident company reflects the absence of an intention by the latter to escape United Kingdom income tax. The performance by the CFC of trading activities excludes, for its part, the existence of an artificial arrangement which has no real economic link with the host Member State. 62 If none of those exceptions applies, the taxation provided for by the CFC legislation may not apply if the establishment and the activities of the CFC satisfy the motive test. That requires, essentially, that the resident company show, first, that the considerable reduction in United Kingdom tax resulting from the transactions routed between that company and the CFC was not the main purpose or one of the main purposes of those transactions and, secondly, that the achievement of a reduction in that tax by a diversion of profits within the meaning of that legislation was not the main reason, or one of the main reasons, for incorporating the CFC. 63 As stated by the applicants in the main proceedings and by the Belgian Government and the Commission, the fact that none of the exceptions provided for by the legislation on CFCs applies and that the intention to obtain tax relief prompted the incorporation of the CFC and the conclusion of the transactions between the latter and the resident company does not suffice to conclude that there is a wholly artificial arrangement intended solely to escape that tax. 64 In order to find that there is such an arrangement there must be, in addition to a subjective element consisting in the intention to obtain a tax advantage, objective circumstances showing that, despite formal observance of the conditions laid down by Community law, the objective pursued by freedom of establishment, as set out in paragraphs 54 and 55 of this judgment, has not been achieved (see, to that effect, Case C-110/99 Emsland-Stärke [2000] ECR I-11569, paragraphs 52 and 53, and Case C-255/02 Halifax and Others [2006] ECR I-0000, paragraphs 74 and 75). 65 In those circumstances, in order for the legislation on CFCs to comply with Community law, the taxation provided for by that legislation must be excluded where, despite the existence of tax motives, the incorporation of a CFC reflects economic reality. 66 That incorporation must correspond with an actual establishment intended to carry on genuine economic activities in the host Member State, as is apparent from the case-law recalled in paragraphs 52 to 54 of this judgment. 67 As suggested by the United Kingdom Government and the Commission at the hearing, that finding must be based on objective factors which are ascertainable by third parties with regard, in particular, to the extent to which the CFC physically exists in terms of premises, staff and equipment. 68 If checking those factors leads to the finding that the CFC is a fictitious establishment not carrying out any genuine economic activity in the territory of the host Member State, the creation of that CFC must be regarded as having the characteristics of a wholly artificial arrangement. That could be so in particular in the case of a ‘letterbox’ or ‘front’ subsidiary (see Case C-341/04 Eurofood IFSC [2006] ECR I-0000, paragraphs 34 and 35). 69 On the other hand, as pointed out by the Advocate General in point 103 of his Opinion, the fact that the activities which correspond to the profits of the CFC could just as well have been carried out by a company established in the territory of the Member State in which the resident company is established does not warrant the conclusion that there is a wholly artificial arrangement. 70 The resident company, which is best placed for that purpose, must be given an opportunity to produce evidence that the CFC is actually established and that its activities are genuine. 71 In the light of the evidence furnished by the resident company, the competent national authorities have the opportunity, for the purposes of obtaining the necessary information on the CFC’s real situation, of resorting to the procedures for collaboration and exchange of information between national tax administrations introduced by legal instruments such as those referred to by Ireland in its written observations, namely Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation (OJ 1977 L 336, p. 15) and, in this case, the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Ireland for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains of 2 June 1976. 72 In this case, it is for the national court to determine whether, as maintained by the United Kingdom Government, the motive test, as defined by the legislation on CFCs, lends itself to an interpretation which enables the taxation provided for by that legislation to be restricted to wholly artificial arrangements or whether, on the contrary, the criteria on which that test is based mean that, where none of the exceptions laid down by that legislation applies and the intention to obtain a reduction in United Kingdom tax is central to the reasons for incorporating the CFC, the resident parent company comes within the scope of application of that legislation, despite the absence of objective evidence such as to indicate the existence of an arrangement of that nature. 73 In the first case, the legislation on CFCs should be regarded as being compatible with Articles 43 EC and 48 EC. 74 In the second case, on the other hand, the view should be taken, as submitted by the applicants in the main proceedings, the Commission and, at the hearing, the Cypriot Government, that that legislation is contrary to Articles 43 EC and 48 EC. 75 In the light of the preceding considerations, the answer to the question referred must be that Articles 43 EC and 48 EC must be interpreted as precluding the inclusion in the tax base of a resident company established in a Member State of profits made by a CFC in another Member State, where those profits are subject in that State to a lower level of taxation than that applicable in the first State, unless such inclusion relates only to wholly artificial arrangements intended to escape the national tax normally payable. Accordingly, such a tax measure must not be applied where it is proven, on the basis of objective factors which are ascertainable by third parties, that despite the existence of tax motives that CFC is actually established in the host Member State and carries on genuine economic activities there. Costs76 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Articles 43 EC and 48 EC must be interpreted as precluding the inclusion in the tax base of a resident company established in a Member State of profits made by a controlled foreign company in another Member State, where those profits are subject in that State to a lower level of taxation than that applicable in the first State, unless such inclusion relates only to wholly artificial arrangements intended to escape the national tax normally payable. Accordingly, such a tax measure must not be applied where it is proven, on the basis of objective factors which are ascertainable by third parties, that despite the existence of tax motives that controlled company is actually established in the host Member State and carries on genuine economic activities there.[Signatures]* Language of the case: English. | 9e13f-10b7276-4e9a | EN |
ADVOCATE GENERAL RUIZ-JARABO TAKES THE VIEW THAT THE EUROPEAN ARREST WARRANT DOES NOT BREACH THE FUNDAMENTAL RIGHTS TO EQUALITY BEFORE THE LAW AND TO LEGALITY IN CRIMINAL PROCEEDINGS | Advocaten voor de Wereld VZWvLeden van de Ministerraad(Reference for a preliminary ruling from the Arbitragehof)(Police and judicial cooperation in criminal matters – Articles 6(2) EU and 34(2)(b) EU – Framework Decision 2002/584/JHA – European arrest warrant and surrender procedures between Member States – Approximation of national laws – Removal of verification of double criminality – Validity)Opinion of Advocate General Ruiz-Jarabo Colomer delivered on 12 September 2006 Judgment of the Court (Grand Chamber), 3 May 2007 Summary of the Judgment1. Preliminary rulings – Jurisdiction of the Court – Police and judicial cooperation in criminal matters(Arts 34(2)(b) EU and 35(1) EU)2. European Union – Police and judicial cooperation in criminal matters – Approximation of the laws and regulations of the Member States with regard to judicial cooperation in criminal matters(Art. 34(2) EU; Council Framework Decision 2002/584, Art. 31(1))3. European Union – Police and judicial cooperation in criminal matters – Framework Decision on the European arrest warrant and the surrender procedures between Member States(Council Framework Decision 2002/584, Arts 1(3) and 2(2))4. European Union – Police and judicial cooperation in criminal matters – Framework Decision on the European arrest warrant and the surrender procedures between Member States(Council Framework Decision 2002/584, Art. 2(2))1. Under Article 35(1) EU, the Court has jurisdiction, subject to the conditions laid down in that article, to give preliminary rulings on the interpretation and validity of, inter alia, framework decisions, which necessarily implies that it can, even if there is no express power to that effect, be called upon to interpret provisions of primary law, such as Article 34(2)(b) EU where the Court is being asked to examine whether a framework decision has been properly adopted on the basis of that latter provision. (see para. 18)2. Framework Decision 2002/584 on the European arrest warrant and the surrender procedures between Member States, which provides for the approximation of the laws and regulations of the Member States with regard to judicial cooperation in criminal matters and, more specifically, of the rules relating to the conditions, procedures and effects of surrender as between national authorities convicted persons or suspects for the purpose of enforcing judgments or of criminal proceedings, was not adopted in breach of Article 34(2)(b) EU. In so far as it lists and defines, in general terms, the different types of legal instruments which may be used in the pursuit of the objectives of the Union set out in Title VI of the EU Treaty, Article 34(2) EU cannot be construed as meaning that the approximation of the laws and regulations of the Member States by the adoption of a framework decision under Article 34(2)(b) EU cannot relate to areas other than those mentioned in Article 31(1)(e) EU and, in particular, the matter of the European arrest warrant. Furthermore, Article 34(2) EU also does not establish any order of priority between the different instruments listed in that provision. While it is true that the European arrest warrant could equally have been the subject of a convention, it is within the Council’s discretion to give preference to the legal instrument of the framework decision in the case where the conditions governing the adoption of such a measure are satisfied. This latter conclusion is not invalidated by the fact that, in accordance with Article 31(1) of the Framework Decision, the latter was to replace from 1 January 2004, only in relations between Member States, the corresponding provisions of the earlier conventions on extradition set out in that provision. Any other interpretation unsupported by either Article 34(2) EU or by any other provision of the EU Treaty would risk depriving of its essential effectiveness the Council’s recognised power to adopt framework decisions in fields previously governed by international conventions. (see paras 28-29, 37-38, 41-43)3. The principle of the legality of criminal offences and penalties (nullum crimen, nulla poena sine lege), which is one of the general legal principles underlying the constitutional traditions common to the Member States, has also been enshrined in various international treaties, in particular in Article 7(1) of the European Convention on Human Rights. This principle implies that legislation must define clearly offences and the penalties which they attract. That condition is met in the case where the individual concerned is in a position, on the basis of the wording of the relevant provision and with the help of the interpretative assistance given by the courts, to know which acts or omissions will make him criminally liable. In so far as it dispenses with verification of the requirement of double criminality in respect of the offences listed in that provision, Article 2(2) of Framework Decision 2002/584 on the European arrest warrant and the surrender procedures between Member States is not invalid on the ground that it infringes the principle of the legality of criminal offences and penalties. The Framework Decision does not seek to harmonise the criminal offences in question in respect of their constituent elements or of the penalties which they attract. While Article 2(2) of the Framework Decision dispenses with verification of double criminality for the categories of offences mentioned therein, the definition of those offences and of the penalties applicable continue to be matters determined by the law of the issuing Member State, which, as is, moreover, stated in Article 1(3) of the Framework Decision, must respect fundamental rights and fundamental legal principles as enshrined in Article 6 EU, and, consequently, the principle of the legality of criminal offences and penalties. (see paras 49-50, 52-54)4. In so far as it dispenses with verification of double criminality in respect of the offences listed therein, Article 2(2) of Framework Decision 2002/584 on the European arrest warrant and the surrender procedures between Member States is not invalid inasmuch as it does not breach the principle of equality and non-discrimination. With regard, first, to the choice of the 32 categories of offences listed in that provision, the Council was able to form the view, on the basis of the principle of mutual recognition and in the light of the high degree of trust and solidarity between the Member States, that, whether by reason of their inherent nature or by reason of the punishment incurred of a maximum of at least three years, the categories of offences in question feature among those the seriousness of which in terms of adversely affecting public order and public safety justifies dispensing with the verification of double criminality. Consequently, even if one were to assume that the situation of persons suspected of having committed offences featuring on the list set out in Article 2(2) of the Framework Decision or convicted of having committed such offences is comparable to the situation of persons suspected of having committed, or convicted of having committed, offences other than those listed in that provision, the distinction is, in any event, objectively justified. With regard, second, to the fact that the lack of precision in the definition of the categories of offences in question risks giving rise to disparate implementation of the Framework Decision within the various national legal orders, suffice it to point out that it is not the objective of the Framework Decision to harmonise the substantive criminal law of the Member States and that nothing in Title VI of the EU Treaty makes the application of the European arrest warrant conditional on harmonisation of the criminal laws of the Member States within the area of the offences in question. (see paras 57-60)JUDGMENT OF THE COURT (Grand Chamber)3 May 2007 (*) In Case C-303/05,REFERENCE under Article 35 EU for a preliminary ruling by the Arbitragehof (Belgium), made by decision of 13 July 2005, received at the Court on 29 July 2005, in the proceedings Leden van de Ministerraad, THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, R. Schintgen, P. Kūris, E. Juhász and J. Klučka, Presidents of Chambers, J.N. Cunha Rodrigues (Rapporteur), J. Makarczyk, U. Lõhmus, E. Levits and L. Bay Larsen, Judges, Advocate General: D. Ruiz-Jarabo Colomer,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 11 July 2006,after considering the observations submitted on behalf of:– Advocaten voor de Wereld VZW, by L. Deleu, P. Bekaert and F. van Vlaenderen, advocaten,– the Belgian Government, by M. Wimmer, acting as Agent, assisted by E. Jacubowitz and P. de Maeyer, avocats,– the Czech Government, by T. Boček, acting as Agent,– the Spanish Government, by J.M. Rodríguez Cárcamo, acting as Agent,– the French Government, by G. de Bergues, J.‑C. Niollet and E. Belliard, acting as Agents,– the Latvian Government, by E. Balode-Buraka, acting as Agent,– the Lithuanian Government, by D. Kriaučiūnas, acting as Agent,– the Netherlands Government, by H.G. Sevenster, M. de Mol and C.M. Wissels, acting as Agents,– the Polish Government, by J. Pietras, acting as Agent,– the Finnish Government, by E. Bygglin, acting as Agent,– the United Kingdom Government, by S. Nwaokolo and C. Gibbs, acting as Agents, and by A. Dashwood, Barrister,– the Council of the European Union, by S. Kyriakopoulou, J. Schutte and O. Petersen, acting as Agents,– the Commission of the European Communities, by W. Bogensberger and R. Troosters, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 12 September 2006,gives the followingJudgment1 The reference for a preliminary ruling concerns the assessment as to the validity of Council Framework Decision 2002/584/JHA of 13 June 2002 on the European arrest warrant and the surrender procedures between Member States (OJ 2002 L 190, p. 1) (‘the Framework Decision’). 2 This reference has been submitted in the course of an action brought by Advocaten voor de Wereld VZW (‘Advocaten voor de Wereld’) before the Belgian Arbitragehof (Court of Arbitration) and seeking the annulment of the Belgian Law of 19 December 2003 on the European arrest warrant (Belgisch Staatsblad of 22 December 2003, p. 60075) (‘the Law of 19 December 2003’), in particular Articles 3, 5(1) and (2) and 7 thereof. Legal context3 Recital (5) in the preamble to the Framework Decision provides:‘The objective set for the Union to become an area of freedom, security and justice leads to abolishing extradition between Member States and replacing it by a system of surrender between judicial authorities. Further, the introduction of a new simplified system of surrender of sentenced or suspected persons for the purposes of execution or prosecution of criminal sentences makes it possible to remove the complexity and potential for delay inherent in the present extradition procedures. Traditional cooperation relations which have prevailed up till now between Member States should be replaced by a system of free movement of judicial decisions in criminal matters, covering both pre-sentence and final decisions, within an area of freedom, security and justice.’ 4 Recital (6) in the preamble to the Framework Decision is worded as follows:‘The European arrest warrant provided for in this Framework Decision is the first concrete measure in the field of criminal law implementing the principle of mutual recognition which the European Council referred to as the “cornerstone” of judicial cooperation.’ 5 Recital (7) in the preamble to the Framework Decision provides:‘Since the aim of replacing the system of multilateral extradition built upon the European Convention on Extradition of 13 December 1957 cannot be sufficiently achieved by the Member States acting unilaterally and can therefore, by reason of its scale and effects, be better achieved at Union level, the Council may adopt measures in accordance with the principle of subsidiarity as referred to in Article 2 of the Treaty on European Union and Article 5 of the Treaty establishing the European Community. In accordance with the principle of proportionality, as set out in the latter Article, this Framework Decision does not go beyond what is necessary in order to achieve that objective.’ 6 According to recital (11) in the preamble to the Framework Decision:‘In relations between Member States, the European arrest warrant should replace all the previous instruments concerning extradition, including the provisions of Title III of the Convention implementing the Schengen Agreement which concern extradition.’ 7 Article 1 of the Framework Decision, which was adopted on the basis of Article 31(1)(a) and (b) EU and Article 34(2)(b) EU, provides: ‘1. The European arrest warrant is a judicial decision issued by a Member State with a view to the arrest and surrender by another Member State of a requested person, for the purposes of conducting a criminal prosecution or executing a custodial sentence or detention order. 2. Member States shall execute any European arrest warrant on the basis of the principle of mutual recognition and in accordance with the provisions of this Framework Decision. 3. This Framework Decision shall not have the effect of modifying the obligation to respect fundamental rights and fundamental legal principles as enshrined in Article 6 of the Treaty on European Union.’ 8 Article 2 of the Framework Decision provides:‘1. A European arrest warrant may be issued for acts punishable by the law of the issuing Member State by a custodial sentence or a detention order for a maximum period of at least 12 months or, where a sentence has been passed or a detention order has been made, for sentences of at least four months. 2. The following offences, if they are punishable in the issuing Member State by a custodial sentence or a detention order for a maximum period of at least three years and as they are defined by the law of the issuing Member State, shall, under the terms of this Framework Decision and without verification of the double criminality of the act, give rise to surrender pursuant to a European arrest warrant: – participation in a criminal organisation,– terrorism,– trafficking in human beings,– sexual exploitation of children and child pornography,– illicit trafficking in narcotic drugs and psychotropic substances,– illicit trafficking in weapons, munitions and explosives,– corruption,– fraud, including that affecting the financial interests of the European Communities within the meaning of the Convention of 26 July 1995 on the protection of the European Communities’ financial interests, – laundering of the proceeds of crime,– counterfeiting currency, including of the euro,– computer-related crime,– environmental crime, including illicit trafficking in endangered animal species and in endangered plant species and varieties,– facilitation of unauthorised entry and residence,– murder, grievous bodily injury,– illicit trade in human organs and tissue,– kidnapping, illegal restraint and hostage-taking,– racism and xenophobia,– organised or armed robbery,– illicit trafficking in cultural goods, including antiques and works of art,– swindling,– racketeering and extortion,– counterfeiting and piracy of products,– forgery of administrative documents and trafficking therein,– forgery of means of payment,– illicit trafficking in hormonal substances and other growth promoters,– illicit trafficking in nuclear or radioactive materials,– trafficking in stolen vehicles,– rape,– arson,– crimes within the jurisdiction of the International Criminal Court,– unlawful seizure of aircraft/ships,– sabotage.3. The Council may decide at any time, acting unanimously after consultation of the European Parliament under the conditions laid down in Article 39(1) of the Treaty on European Union (TEU), to add other categories of offence to the list contained in paragraph 2. The Council shall examine, in the light of the report submitted by the Commission pursuant to Article 34(3), whether the list should be extended or amended. 4. For offences other than those covered by paragraph 2, surrender may be subject to the condition that the acts for which the European arrest warrant has been issued constitute an offence under the law of the executing Member State, whatever the constituent elements or however it is described.’ 9 Article 31 of the Framework Decision provides:‘1. Without prejudice to their application in relations between Member States and third States, this Framework Decision shall, from 1 January 2004, replace the corresponding provisions of the following conventions applicable in the field of extradition in relations between the Member States: (a) the European Convention on Extradition of 13 December 1957, its additional protocol of 15 October 1975, its second additional protocol of 17 March 1978, and the European Convention on the suppression of terrorism of 27 January 1977 as far as extradition is concerned; (b) the Agreement between the 12 Member States of the European Communities on the simplification and modernisation of methods of transmitting extradition requests of 26 May 1989; (c) the Convention of 10 March 1995 on simplified extradition procedure between the Member States of the European Union;(d) the Convention of 27 September 1996 relating to extradition between the Member States of the European Union;(e) Title III, Chapter 4 of the Convention of 19 June 1990 implementing the Schengen Agreement of 14 June 1985 on the gradual abolition of checks at common borders. 2. Member States may continue to apply bilateral or multilateral agreements or arrangements in force when this Framework Decision is adopted in so far as such agreements or arrangements allow the objectives of this Framework Decision to be extended or enlarged and help to simplify or facilitate further the procedures for surrender of persons who are the subject of European arrest warrants. Member States may conclude bilateral or multilateral agreements or arrangements after this Framework Decision has come into force in so far as such agreements or arrangements allow the prescriptions of this Framework Decision to be extended or enlarged and help to simplify or facilitate further the procedures for surrender of persons who are the subject of European arrest warrants, in particular by fixing time-limits shorter than those fixed in Article 17, by extending the list of offences laid down in Article 2(2), by further limiting the grounds for refusal set out in Articles 3 and 4, or by lowering the threshold provided for in Article 2(1) or (2). The agreements and arrangements referred to in the second subparagraph may in no case affect relations with Member States which are not parties to them. Member States shall, within three months from the entry into force of this Framework Decision, notify the Council and the Commission of the existing agreements and arrangements referred to in the first subparagraph which they wish to continue applying. Member States shall also notify the Council and the Commission of any new agreement or arrangement as referred to in the second subparagraph, within three months of signing it. 3. Where the conventions or agreements referred to in paragraph 1 apply to the territories of Member States or to territories for whose external relations a Member State is responsible to which this Framework Decision does not apply, these instruments shall continue to govern the relations existing between those territories and the other Member States.’ The dispute in the main proceedings and the questions referred for preliminary ruling10 According to the decision making the reference, Advocaten voor de Wereld brought an action before the Arbitragehof on 21 June 2004 in which it sought the annulment, in whole or in part, of the Law of 19 December 2003 transposing the provisions of the Framework Decision into Belgian law. 11 In support of its action, Advocaten voor de Wereld submits inter alia that the Framework Decision is invalid on the ground that the subject-matter of the European arrest warrant ought to have been implemented by way of a convention and not by way of a framework decision since, under Article 34(2)(b) EU, framework decisions may be adopted only ‘for the purpose of approximation of the laws and regulations of the Member States’, which, it claims, is not the position in the present case. 12 Advocaten voor de Wereld also submits that Article 5(2) of the Law of 19 December 2003, which transposes Article 2(2) of the Framework Decision into Belgian domestic law, infringes the principle of equality and non-discrimination in that, for the offences mentioned in that latter provision, in the event of enforcement of a European arrest warrant, there is a derogation, without objective and reasonable justification, from the requirement of double criminality, whereas that requirement is maintained for other offences. 13 Advocaten voor de Wereld further argues that the Law of 19 December 2003 also fails to satisfy the conditions of the principle of legality in criminal matters in that it lists, not offences having a sufficiently clear and precise legal content, but only vague categories of undesirable behaviour. The judicial authority which must decide on the enforcement of a European arrest warrant will, it submits, have insufficient information to determine effectively whether the offences for which the person sought is being charged, or in respect of which a penalty has been imposed on him, come within one of the categories mentioned in Article 5(2) of that Law. The absence of a clear and precise definition of the offences referred to in that provision, it contends, leads to a disparate application of that Law by the various authorities responsible for the enforcement of a European arrest warrant and, by reason of that fact, also infringes the principle of equality and non-discrimination. 14 The Arbitragehof points out that the Law of 19 December 2003 is the direct result of the Council’s decision to regulate the subject-matter of the European arrest warrant by means of a framework decision. The heads of complaint invoked by Advocaten voor de Wereld against that Law also hold good in equal measure with regard to the Framework Decision. In its view, differences of interpretation between courts with regard to the validity of Community measures and the validity of the legislation which constitutes the implementation of those measures in national law jeopardise the unity of the Community legal order and adversely affect the general principle of legal certainty. 15 The Arbitragehof adds that, under Article 35(1) EU, the Court alone has jurisdiction to give a preliminary ruling on the validity of framework decisions and that, under Article 35(2) EU, the Kingdom of Belgium has accepted the Court’s jurisdiction in this field. 16 In those circumstances, the Arbitragehof decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘1. Is [the] Framework Decision … compatible with Article 34(2)(b) of the [EU] Treaty, under which framework decisions may be adopted only for the purpose of approximation of the laws and regulations of the Member States? 2. Is Article 2(2) of [the] Framework Decision …, in so far as it sets aside verification of the requirement of double criminality for the offences listed therein, compatible with Article 6(2) of the [EU] Treaty … and, more specifically, with the principle of legality in criminal proceedings guaranteed by that provision and with the principle of equality and non-discrimination?’ The questions referred for preliminary ruling The first question Admissibility17 The Czech Government submits that the first question referred is inadmissible on the ground that it requires the Court to examine Article 34(2)(b) EU, which is a provision of primary law not reviewable by the Court. 18 That argument is unfounded. Under Article 35(1) EU, the Court has jurisdiction, subject to the conditions laid down in that article, to give preliminary rulings on the interpretation and validity of, inter alia, framework decisions, which necessarily implies that it can, even if there is no express power to that effect, be called upon to interpret provisions of primary law, such as Article 34(2)(b) EU where, as in the case in the main proceedings, the Court is being asked to examine whether a framework decision has been properly adopted on the basis of that latter provision. 19 According to the Czech Government, the first question referred is also inadmissible inasmuch as the decision to refer fails to indicate clearly the relevant grounds which would justify a finding that the framework decision is invalid. It submits that it was for that reason impossible for it to submit any meaningful observations on that question. More specifically, in so far as Advocaten voor de Wereld contends that the Framework Decision did not bring about approximation of the laws of the Member States, it ought to have substantiated that assertion and the Arbitragehof ought to have made a note to that effect in its decision to refer. 20 It should be borne in mind that the information provided in orders for reference must not only be such as to enable the Court to reply usefully but must also enable the governments of the Member States and other interested parties to submit observations pursuant to Article 23 of the Statute of the Court of Justice (order in Case C‑422/98 Colonia Versicherung and Others [1999] ECR I‑1279, paragraph 5). 21 In the case in the main proceedings, the decision making the reference contains sufficient information to address those requirements. As indicated in paragraph 11 of this judgment, it appears from the decision making the reference that Advocaten voor de Wereld is submitting that the subject-matter of the European arrest warrant ought to have been implemented by way of a convention and not by way of a framework decision on the ground that, under Article 34(2)(b) EU, framework decisions may be adopted only ‘for the purpose of approximation of the laws and regulations of the Member States’, which is not the position in the present case. 22 Information of this kind is sufficient not only to enable the Court to provide a useful reply but also to safeguard the possibility open to the parties to the dispute, the Member States, the Council and Commission to submit observations pursuant to Article 23 of the Statute of the Court of Justice, as is, moreover, indicated by the observations lodged by all of the parties which have intervened in these proceedings, including those submitted by the Czech Government. 23 The first question referred is therefore admissible. Substance24 Advocaten voor de Wereld submits, in contrast to all of the other parties which have submitted observations in these proceedings, that the subject-matter of the European arrest warrant ought, in accordance with Article 34(2)(d) EU, to have been regulated by way of a convention. 25 In the first place, it argues, the framework decision could not have been validly adopted for the purpose of the approximation of laws and regulations as referred to in Article 34(2)(b) EU, inasmuch as the Council is empowered to adopt framework decisions only to approximate progressively the rules on criminal matters in the cases referred to in the third indent of the second paragraph of Article 29 EU and in Article 31(e) EU. For other common action on judicial cooperation in criminal matters, the Council must have recourse to conventions, pursuant to Article 34(2)(d) EU. 26 Second, pursuant to Article 31 of the Framework Agreement, the latter was to replace, as from 1 January 2004, the convention law in the field of extradition in relations between Member States. Only a measure of the same kind, that is to say, a convention within the meaning of Article 34(2)(d) EU, can validly derogate from the convention law in force. 27 That argument cannot be accepted.28 As is clear in particular from Article 1(1) and (2) of the Framework Decision and recitals (5), (6), (7) and (11) in its preamble, the purpose of the Framework Decision is to replace the multilateral system of extradition between Member States with a system of surrender, as between judicial authorities, of convicted persons or suspects for the purpose of enforcing judgments or of criminal proceedings based on the principle of mutual recognition. 29 The mutual recognition of the arrest warrants issued in the different Member States in accordance with the law of the issuing State concerned requires the approximation of the laws and regulations of the Member States with regard to judicial cooperation in criminal matters and, more specifically, of the rules relating to the conditions, procedures and effects of surrender as between national authorities. 30 That is precisely the purpose of the Framework Decision in regard, inter alia, to the rules relating to the categories of listed offences in respect of which there is no verification of double criminality (Article 2(2)), to the grounds for mandatory or optional non-execution of the European arrest warrant (Articles 3 and 4), to the content and form of that warrant (Article 8), to the transmission of such a warrant and the detailed procedures governing such transmission (Articles 9 and 10), to the minimum guarantees which must be granted to a requested or arrested person (Articles 11 to 14), to the time-limits and procedures for the decision to execute that warrant (Article 17) and to the time-limits for surrender of the person sought (Article 23). 31 The Framework Decision is based on Article 31(1)(a) and (b) EU, which provides that common action on judicial cooperation in criminal matters is, respectively, to facilitate and accelerate judicial cooperation in relation to proceedings and the enforcement of decisions and to facilitate extradition between Member States. 32 Contrary to what Advocaten voor de Wereld contends, there is nothing to justify the conclusion that the approximation of the laws and regulations of the Member States by the adoption of framework decisions under Article 34(2)(b) EU is directed only at the Member States’ rules of criminal law mentioned in Article 31(1)(e) EU, that is to say, those rules which relate to the constituent elements of criminal offences and the penalties applicable within the areas listed in the latter provision. 33 Under the fourth indent of the first paragraph of Article 2 EU, the development of an area of freedom, security and justice features as one of the objectives of the Union and the first paragraph of Article 29 EU states that, in order to provide citizens with a high level of safety within such an area, common action is to be developed among the Member States, inter alia in the field of judicial cooperation in criminal matters. According to the second indent of the second paragraph of Article 29 EU, ‘closer cooperation between judicial and other competent authorities of the Member States … in accordance with the provisions of Articles 31 [EU] and 32 [EU]’ is to contribute to the achievement of that objective. 34 Article 31(1)(a) and (b) EU does not, however, contain any indication as to the legal instruments which are to be used for this purpose. 35 Moreover, it is in general terms that Article 34(2) EU states that the Council ‘shall take measures and promote cooperation, …, contributing to the pursuit of the objectives of the Union’ and, ‘[to] that end’, empowers the Council to adopt a variety of different types of measures, set out in Article 34(2)(a) to (d) EU, which include framework decisions and conventions. 36 Furthermore, neither Article 34(2) EU nor any other provision of Title VI of the EU Treaty draws a distinction as to the type of measures which may be adopted on the basis of the subject-matter to which the joint action in the field of criminal cooperation relates. 37 Article 34(2) EU also does not establish any order of priority between the different instruments listed in that provision, with the result that it cannot be ruled out that the Council may have a choice between several instruments in order to regulate the same subject-matter, subject to the limits imposed by the nature of the instrument selected. 38 In those circumstances, in so far as it lists and defines, in general terms, the different types of legal instruments which may be used in the ‘pursuit of the objectives of the Union’ set out in Title VI of the EU Treaty, Article 34(2) EU cannot be construed as meaning that the approximation of the laws and regulations of the Member States by the adoption of a framework decision under Article 34(2)(b) EU cannot relate to areas other than those mentioned in Article 31(1)(e) EU and, in particular, the matter of the European arrest warrant. 39 The interpretation to the effect that the approximation of the laws and regulations of the Member States by means of the adoption of framework decisions is not only authorised in the areas referred to in Article 31(1)(e) EU is corroborated by Article 31(1)(c) EU, which states that common action must also be aimed at ‘ensuring compatibility in rules applicable in the Member States, as may be necessary to improve such [judicial] cooperation [in criminal matters]’, without drawing any distinction between the different types of measures which may be used for the purpose of approximating those rules. 40 In the present case, in so far as Article 34(2)(c) EU precludes the Council from using a decision to effect approximation of the laws and regulations of the Member States and in so far as the legal instrument of the common position within the meaning of Article 34(2)(a) EU must be limited to defining the Union’s approach to a particular matter, the question thus arises as to whether, contrary to the argument put forward by Advocaten voor de Wereld, the Council was able validly to regulate the matter of the European arrest warrant by way of a framework decision rather than by means of a convention pursuant to Article 34(2)(d) EU. 41 While it is true that the European arrest warrant could equally have been the subject of a convention, it is within the Council’s discretion to give preference to the legal instrument of the framework decision in the case where, as here, the conditions governing the adoption of such a measure are satisfied. 42 This conclusion is not invalidated by the fact that, in accordance with Article 31(1) of the Framework Decision, the latter was to replace from 1 January 2004, only in relations between Member States, the corresponding provisions of the earlier conventions on extradition set out in that provision. Any other interpretation unsupported by either Article 34(2) EU or by any other provision of the EU Treaty would risk depriving of its essential effectiveness the Council’s recognised power to adopt framework decisions in fields previously governed by international conventions. 43 It follows that the Framework Decision was not adopted in a manner contrary to Article 34(2)(b) EU. The second question44 Advocaten voor de Wereld contends, in contrast to all of the other parties which have submitted observations in these proceedings, that, to the extent to which it dispenses with verification of the requirement of the double criminality of the offences mentioned in it, Article 2(2) of the Framework Decision is contrary to the principle of equality and non-discrimination and to the principle of legality in criminal matters. 45 It must be noted at the outset that, by virtue of Article 6 EU, the Union is founded on the principle of the rule of law and it respects fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950, and as they result from the constitutional provisions common to the Member States, as general principles of Community law. It follows that the institutions are subject to review of the conformity of their acts with the Treaties and the general principles of law, just like the Member States when they implement the law of the Union (see, inter alia, Case C-354/04 P Gestoras Pro Amnistía and Others v Council [2007] ECR I-0000, paragraph 51, and Case C‑355/04 P Segi and Others v Council [2007] ECR I-0000, paragraph 51). 46 It is common ground that those principles include the principle of the legality of criminal offences and penalties and the principle of equality and non-discrimination, which are also reaffirmed respectively in Articles 49, 20 and 21 of the Charter of Fundamental Rights of the European Union, proclaimed in Nice on 7 December 2000 (OJ 2000 C 364, p. 1). 47 It is accordingly a matter for the Court to examine the validity of the Framework Decision in the light of those principles. The principle of the legality of criminal offences and penalties48 According to Advocaten voor de Wereld, the list of more than 30 offences in respect of which the traditional condition of double criminality is henceforth abandoned if those offences are punishable in the issuing Member State by a custodial sentence or detention order for a maximum period of at last three years is so vague and imprecise that it breaches, or at the very least is capable of breaching, the principle of legality in criminal matters. The offences set out in that list are not accompanied by their legal definition but constitute very vaguely defined categories of undesirable conduct. A person deprived of his liberty on foot of a European arrest warrant without verification of double criminality does not benefit from the guarantee that criminal legislation must satisfy conditions as to precision, clarity and predictability allowing each person to know, at the time when an act is committed, whether that act does or does not constitute an offence, by contrast to those who are deprived of their liberty otherwise than pursuant to a European arrest warrant. 49 The principle of the legality of criminal offences and penalties (nullum crimen, nulla poena sine lege), which is one of the general legal principles underlying the constitutional traditions common to the Member States, has also been enshrined in various international treaties, in particular in Article 7(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms (see in this regard, inter alia, Joined Cases C-74/95 and C-129/95 X [1996] ECR I‑6609, paragraph 25, and Joined Cases C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C‑213/02 P Dansk Rørindustri and Others v Commission [2005] ECR I‑5425, paragraphs 215 to 219). 50 This principle implies that legislation must define clearly offences and the penalties which they attract. That condition is met in the case where the individual concerned is in a position, on the basis of the wording of the relevant provision and with the help of the interpretative assistance given by the courts, to know which acts or omissions will make him criminally liable (see, inter alia, European Court of Human Rights judgment of 22 June 2000 in Coëme and Others v Belgium, Reports 2000-VII, § 145). 51 In accordance with Article 2(2) of the Framework Decision, the offences listed in that provision give rise to surrender pursuant to a European arrest warrant, without verification of the double criminality of the act, ‘if they are punishable in the issuing Member State by a custodial sentence or a detention order for a maximum period of at least three years and as they are defined by the law of the issuing Member State’. 52 Consequently, even if the Member States reproduce word-for-word the list of the categories of offences set out in Article 2(2) of the Framework Decision for the purposes of its implementation, the actual definition of those offences and the penalties applicable are those which follow from the law of ‘the issuing Member State’. The Framework Decision does not seek to harmonise the criminal offences in question in respect of their constituent elements or of the penalties which they attract. 53 Accordingly, while Article 2(2) of the Framework Decision dispenses with verification of double criminality for the categories of offences mentioned therein, the definition of those offences and of the penalties applicable continue to be matters determined by the law of the issuing Member State, which, as is, moreover, stated in Article 1(3) of the Framework Decision, must respect fundamental rights and fundamental legal principles as enshrined in Article 6 EU, and, consequently, the principle of the legality of criminal offences and penalties. 54 It follows that, in so far as it dispenses with verification of the requirement of double criminality in respect of the offences listed in that provision, Article 2(2) of the Framework Decision is not invalid on the ground that it infringes the principle of the legality of criminal offences and penalties. The principle of equality and non-discrimination55 According to Advocaten voor de Wereld, the principle of equality and non-discrimination is infringed by the Framework Decision inasmuch as, for offences other than those covered by Article 2(2) thereof, surrender may be made subject to the condition that the facts in respect of which the European arrest warrant was issued constitute an offence under the law of the Member State of execution. That distinction, it argues, is not objectively justified. The removal of verification of double criminality is all the more open to question as no detailed definition of the facts in respect of which surrender is requested features in the Framework Decision. The system established by the latter gives rise to an unjustified difference in treatment as between individuals depending on whether the facts alleged to constitute the offence occurred in the Member State of execution or outside that State. Those individuals will thus be judged differently with regard to the deprivation of their liberty without any justification for that difference. 56 The principle of equality and non-discrimination requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified (see, in particular, Case C-248/04 Koninklijke Coöperatie Cosun [2006] ECR I‑0000, paragraph 72 and the case-law there cited). 57 With regard, first, to the choice of the 32 categories of offences listed in Article 2(2) of the Framework Decision, the Council was able to form the view, on the basis of the principle of mutual recognition and in the light of the high degree of trust and solidarity between the Member States, that, whether by reason of their inherent nature or by reason of the punishment incurred of a maximum of at least three years, the categories of offences in question feature among those the seriousness of which in terms of adversely affecting public order and public safety justifies dispensing with the verification of double criminality. 58 Consequently, even if one were to assume that the situation of persons suspected of having committed offences featuring on the list set out in Article 2(2) of the Framework Decision or convicted of having committed such offences is comparable to the situation of persons suspected of having committed, or convicted of having committed, offences other than those listed in that provision, the distinction is, in any event, objectively justified. 59 With regard, second, to the fact that the lack of precision in the definition of the categories of offences in question risks giving rise to disparate implementation of the Framework Decision within the various national legal orders, suffice it to point out that it is not the objective of the Framework Decision to harmonise the substantive criminal law of the Member States and that nothing in Title VI of the EU Treaty, Articles 34 and 31 of which were indicated as forming the legal basis of the Framework Decision, makes the application of the European arrest warrant conditional on harmonisation of the criminal laws of the Member States within the area of the offences in question (see by way of analogy, inter alia, Joined Cases C-187/01 and C-385/01 Gözütok and Brügge [2003] ECR I-1345, paragraph 32, and Case C‑467/04 Gasparini and Others [2006] ECR I‑0000, paragraph 29). 60 It follows that, in so far as it dispenses with verification of double criminality in respect of the offences listed therein, Article 2(2) of the Framework Decision is not invalid inasmuch as it does not breach Article 6(2) EU or, more specifically, the principle of legality of criminal offences and penalties and the principle of equality and non-discrimination. 61 In the light of all of the foregoing, the answer must be that examination of the questions submitted has revealed no factor capable of affecting the validity of the Framework Decision. Costs62 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Examination of the questions submitted has revealed no factor capable of affecting the validity of Council Framework Decision 2002/584/JHA of 13 June 2002 on the European arrest warrant and the surrender procedures between Member States.[Signatures]* Language of the case: Dutch. | 50a19-c177789-40c5 | EN |
IT IS FOR THE MEMBER STATES TO DEFINE THE PERSONS WHO ARE TO BE ENTITLED TO VOTE AND TO STAND AS A CANDIDATE IN ELECTIONS TO THE EUROPEAN PARLIAMENT | Kingdom of SpainvUnited Kingdom of Great Britain and Northern Ireland(European Parliament – Elections – Right to vote – Commonwealth citizens residing in Gibraltar and not having citizenship of the Union)Summary of the JudgmentParliament – Elections – Right to vote and to stand for election – Persons entitled (Arts 17 EC, 19 EC, 189 EC and 190 EC)In the current state of Community law, the definition of the persons entitled to vote and to stand as a candidate in elections to the European Parliament falls within the competence of each Member State in compliance with Community law. Articles 189 EC, 190 EC, 17 EC and 19 EC do not preclude the Member States from granting that right to vote and to stand as a candidate to certain persons who have close links to them, other than their own nationals or citizens of the Union resident in their territory. Neither Articles 189 EC and 190 EC nor the Act concerning the election of the representatives of the European Parliament by direct universal suffrage expressly and precisely state who are to be entitled to the right to vote and to stand as a candidate for the European Parliament. As regards Articles 17 EC and 19 EC, relating to citizenship of the Union, only the latter deals specifically, in paragraph 2, with the right to vote for the European Parliament. That article is confined to applying the principle of non‑discrimination on grounds of nationality to the exercise of that right. Also, as regards the possible existence of a clear link between citizenship of the Union and the right to vote and stand for election which requires that that right be always limited to citizens of the Union, no clear conclusion can be drawn in that regard from Articles 189 EC and 190 EC, relating to the European Parliament, which state that it is to consist of representatives of the peoples of the Member States. The term ‘peoples’, which is not defined, can have different meanings in the Member States and languages of the Union. As regards the Treaty’s articles relating to citizenship of the Union, no principle can be derived from them that citizens of the Union are the only persons entitled under all the other provisions of the Treaty, which would imply that Articles 189 EC and 190 EC apply to those citizens alone. In fact, while Article 17(2) EC provides that citizens of the Union are to enjoy the rights conferred by the Treaty and be subject to the duties imposed by it, the Treaty recognises rights which are linked neither to citizenship of the Union nor even to nationality of a Member State. As regards Article 19(2) EC, while it implies that nationals of a Member State have the right to vote and to stand as a candidate in their own country and requires the Member States to accord those rights to citizens of the Union residing in their territory, it does not follow that a Member State is prevented from granting the right to vote and to stand for election to certain persons who have a close link with it without however being nationals of that State or another Member State. In addition, since the number of representatives elected in each Member State is laid down by Article 190(2) EC and since, in the current state of Community law, elections to the European Parliament are held in each Member State for the representatives to be elected in that State, an extension by a Member State of the right to vote at those elections to persons other than its own nationals or other than citizens of the Union resident in its territory affects only the choice of the representatives elected in that Member State and has no effect either on the choice or on the number of representatives elected in the other Member States. It follows that the United Kingdom did not infringe Articles 189 EC, 190 EC, 17 EC and 19 EC by adopting a law which provides, in relation to Gibraltar, that Commonwealth citizens resident in Gibraltar who are not Community nationals have the right to vote and to stand as a candidate in elections to the European Parliament. (see paras 65-66, 70-73, 76-78, 80)JUDGMENT OF THE COURT (Grand Chamber)12 September 2006 (*) In Case C-145/04,ACTION under Article 227 EC for failure to fulfil obligations, brought on 18 March 2004,Kingdom of Spain, represented by N. Díaz Abad, F. Díez Moreno and I. del Cuvillo Contreras, acting as Agents, with an address for service in Luxembourg, applicant,United Kingdom of Great Britain and Northern Ireland, represented by R. Caudwell, acting as Agent, and by Lord Goldsmith QC, D. Wyatt QC, D. Anderson QC, and M. Chamberlain, Barrister, with an address for service in Luxembourg, defendant,supported by:Commission of the European Communities, represented by C. Ladenburger, acting as Agent, with an address for service in Luxembourg, intervener,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas (Rapporteur), K. Schiemann and J. Makarczyk, Presidents of Chambers, J.-P. Puissochet, P. Kūris, E. Juhász, E. Levits and A. Ó Caoimh, Judges, Advocate General: A. Tizzano,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 5 July 2005,after hearing the Opinion of the Advocate General at the sitting on 6 April 2006,gives the followingJudgment1 By its action the Kingdom of Spain seeks a declaration that, by enacting the European Parliament (Representation) Act 2003 (‘the EPRA 2003’), the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Articles 189 EC, 190 EC, 17 EC and 19 EC, and under the Act concerning the election of the representatives of the European Parliament by direct universal suffrage, annexed to Council Decision 76/787/ECSC, EEC, Euratom of 20 September 1976 (OJ 1976 L 278, p. 1), as amended by Council Decision 2002/772/EC, Euratom of 25 June 2002 and 23 September 2002 (OJ 2002 L 283, p. 1, ‘the 1976 Act’). Legal context Community law2 Article 17 EC provides as follows: ‘1. Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall complement and not replace national citizenship. 2. Citizens of the Union shall enjoy the rights conferred by this Treaty and shall be subject to the duties imposed thereby.’3 In order to apply Community law, the United Kingdom defined the term ‘nationals’ in a declaration annexed to the Final Act of the Treaty concerning the Accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the European Communities (OJ 1972 L 73, p. 196, ‘the 1972 Declaration’). In view of the entry into force in the United Kingdom of new legislation on nationality, that declaration was replaced in 1982 by a further declaration (OJ 1983 C 23, p. 1, ‘the 1982 Declaration’), which sets out the following categories: ‘(a) British citizens;(b) Persons who are British subjects by virtue of Part IV of the British Nationality Act 1981 and who have the right of abode in the United Kingdom and are therefore exempt from United Kingdom immigration control; (c) British Dependent Territories citizens who acquire their citizenship from a connection with Gibraltar.’4 Article 19(2) EC provides: ‘Without prejudice to Article 190(4) and to the provisions adopted for its implementation, every citizen of the Union residing in a Member State of which he is not a national shall have the right to vote and to stand as a candidate in elections to the European Parliament in the Member State in which he resides, under the same conditions as nationals of that State. This right shall be exercised subject to detailed arrangements adopted by the Council, acting unanimously on a proposal from the Commission and after consulting the European Parliament; these arrangements may provide for derogations where warranted by problems specific to a Member State.’ 5 In accordance with that provision, the Council adopted Council Directive 93/109/EC of 6 December 1993 laying down detailed arrangements for the exercise of the right to vote and stand as a candidate in elections to the European Parliament for citizens of the Union residing in a Member State of which they are not nationals (OJ 1993 L 329, p. 34). 6 The first paragraph of Article 189 EC reads as follows: ‘The European Parliament, which shall consist of representatives of the peoples of the States brought together in the Community, shall exercise the powers conferred upon it by this Treaty.’ 7 Article 190 EC is worded as follows: ‘1. The representatives in the European Parliament of the peoples of the States brought together in the Community shall be elected by direct universal suffrage. ...4. The European Parliament shall draw up a proposal for elections by direct universal suffrage in accordance with a uniform procedure in all Member States or in accordance with principles common to all Member States. The Council shall, acting unanimously after obtaining the assent of the European Parliament, which shall act by a majority of its component members, lay down the appropriate provisions, which it shall recommend to Member States for adoption in accordance with their respective constitutional requirements. ...’8 Article 8 of the 1976 Act provides: ‘Subject to the provisions of this Act, the electoral procedure shall be governed in each Member State by its national provisions.These national provisions, which may if appropriate take account of the specific situation in the Member States, shall not affect the essentially proportional nature of the voting system.’ 9 The second paragraph of Article 15 of the 1976 Act is worded as follows: ‘Annexes I and II shall form an integral part of this Act.’10 Annex II to the 1976 Act, now Annex I by virtue of the new numbering set out in the Annex to Decision 2002/772 (‘Annex I to the 1976 Act’), is worded as follows: ‘The United Kingdom will apply the provisions of this Act only in respect to the United Kingdom.’11 By judgment of 18 February 1999 in the case of Matthewsv.theUnited Kingdom [GC], no. 24833/94, ECHR 1999-I, the European Court of Human Rights decided that by failing to organise elections in Gibraltar for the European Parliament, the United Kingdom was in breach of Article 3 of Protocol No 1 to the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed at Rome on 4 November 1950 (‘Protocol No 1 to the Convention’), which imposes on the Contracting Parties the obligation to hold free elections at reasonable intervals by secret ballot, under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature. In paragraph 64 of its judgment, that Court observed that the applicant, as a resident of Gibraltar, was completely denied any opportunity to express her opinion in the choice of the members of the European Parliament. At the request of the Court of Justice, the United Kingdom confirmed that, as appeared from the report of the Commission of Human Rights, Ms Matthews was a British citizen. 12 The original version of the 1976 Act was amended by Decision 2002/772, which entered into force on 1 April 2004. At the time of that amendment, the Kingdom of Spain opposed the revocation, suggested by the United Kingdom, of Annex I to the 1976 Act. However, the following declaration of the United Kingdom, reflecting a bilateral agreement concluded between that Member State and the Kingdom of Spain, was formally recorded in the minutes of the Council meeting of 18 February 2002 (‘the Declaration of 18 February 2002’): ‘Recalling Article 6(2) of the Treaty on European Union, which states that the Union shall respect fundamental rights, as guaranteed by the European Convention for the Protection of Human Rights and Fundamental Freedoms, signed in Rome on 4 November 1950 and as they result from the constitutional traditions common to the Member States, as general principles of Community law, the UK will ensure that the necessary changes are made to enable the Gibraltar electorate to vote in elections to the EP as part of and on the same terms as the electorate of an existing UK constituency, in order to ensure the fulfilment of the UK’s obligation to implement the judgment of the European Court of Human Rights in the case of Matthews vs UK, consistent with the law of the European Union.’ 13 Minuted likewise was the following declaration of the Council and the Commission: ‘The Council and the Commission take note of the statement made by the UK according to which, in order to ensure the fulfilment of the UK’s obligation to implement the judgment of the European Court of Human Rights in the case of Matthews vs the United Kingdom, the UK will ensure that the necessary changes are made to enable the Gibraltar electorate to vote in elections to the European Parliament, as part of and on the same terms as the electorate of an existing UK constituency, consistent with the law of the European Union.’ The status of Gibraltar14 Gibraltar was ceded by the King of Spain to the British Crown by the Treaty of Utrecht concluded between the former and the Queen of Great Britain on 13 July 1713, which was one of the treaties which put an end to the War of the Spanish Succession. The final sentence of Article X of that treaty stated that if it ever seemed meet to the British Crown to grant, sell or by any means to alienate the property of the town of Gibraltar, a right of pre-emption would be given to the Crown of Spain. 15 Gibraltar is currently a British Crown Colony. It does not form part of the United Kingdom. 16 Executive authority is vested in a Governor, who is appointed by the Queen, and, for certain domestic matters, in a Chief Minister and Ministers who are elected locally. They are responsible to the House of Assembly, elections for which are held every five years. 17 The House of Assembly has the right to make laws in defined domestic matters. The Governor, however, has power to refuse to assent to legislation. The United Kingdom Parliament and the Queen in Council also retain power to legislate for Gibraltar. 18 Gibraltar has its own courts. It is, however, possible to appeal against judgments of Gibraltar’s highest court to the Judicial Committee of the Privy Council. 19 In Community law, Gibraltar is a European territory for whose external relations a Member State is responsible within the meaning of Article 299(4) EC and to which the provisions of the EC Treaty apply. The Act concerning the conditions of accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland and the adjustments to the Treaties (OJ 1972 L 73, p. 14) provides, however, that certain parts of the Treaty are not to apply to Gibraltar. The EPRA 200320 On 8 May 2003 the United Kingdom enacted the EPRA 2003. 21 Section 9 of the EPRA 2003 provides that Gibraltar is to be combined with an existing electoral region in England and Wales to form a new electoral region. In accordance with that provision, the United Kingdom authorities combined Gibraltar with the South West region of England by the European Parliamentary Elections (Combined Region and Campaign Expenditure) (United Kingdom and Gibraltar) Order 2004. 22 Section 14 of the EPRA 2003 provides that, in Gibraltar, a register of European Parliamentary electors (‘the Gibraltar register’) is to be maintained by the Clerk of the House of Assembly of Gibraltar. 23 Section 15 of the EPRA 2003 provides that a person may vote at a European Parliamentary election in Gibraltar if, on the day of the poll, he is registered in the Gibraltar register. 24 Under Section 16(1) of the EPRA 2003, a person is entitled to be registered in the Gibraltar register if that person: – is resident in Gibraltar;– is not subject to a legal incapacity to vote in Gibraltar at a European Parliamentary election (age apart);– is a qualifying Commonwealth citizen (‘QCC’) or a citizen of the European Union (other than a QCC); and– is at least 18 years of age.25 Section 16(5) of the EPRA 2003 defines a QCC as a Commonwealth citizen who – does not, under the law of Gibraltar, require a permit or certificate to enter or remain in Gibraltar; or– for the time being has (or is by virtue of any provision of the law of Gibraltar to be treated as having) a permit or certificate entitling him to enter or remain in Gibraltar. 26 Sections 17 and 18 of the EPRA 2003 provide that various detailed rules relating to the Gibraltar register and to the right to vote may be made by the Lord Chancellor by regulations. Such detailed rules were laid down by the Secretary of State for Constitutional Affairs, to whom certain functions of the Lord Chancellor have been transferred, by the European Parliamentary Elections Regulations 2004, and by the European Parliamentary Elections Ordinance 2004 adopted by the Gibraltar House of Assembly. 27 Section 21 of the EPRA 2003 amends, in order to insert a reference to Gibraltar, Section 10 of the European Parliamentary Elections Act 2002, under which a person is not deprived of the right to be elected a Member of the European Parliament by reason of not being a British citizen but a citizen of the Commonwealth. 28 Section 22 of the EPRA 2003 authorises the making of different provision for different electoral regions and, in particular, for the part of the combined region which is in England and Wales and for Gibraltar. 29 In accordance with Section 23 of the EPRA 2003, the courts of Gibraltar have jurisdiction to hear proceedings arising out of electoral matters. 30 Under Section 28(2) of the EPRA 2003, the act’s geographical application extends to the United Kingdom and Gibraltar. Pre-litigation procedure and proceedings before the Court31 On 28 July 2003, following an exchange of correspondence, the Kingdom of Spain filed with the Commission a complaint pursuant to Article 227 EC against the United Kingdom with a view to the Commission bringing infringement proceedings against the United Kingdom before the Court of Justice because of the alleged incompatibility of the EPRA 2003 with Community law. The United Kingdom filed its observations in response to that complaint with the Commission on 11 September 2003. The Commission heard the representatives of the two Member States concerned on 1 October 2003. Following that hearing, the Commission granted those States leave to submit supplementary written observations, which they did on 3 October 2003. 32 On 29 October 2003, the Commission made this declaration: ‘The Commission considers, following an in-depth analysis of the Spanish complaint and an oral hearing held on 1 October, that the UK has organised the extension of voting rights to residents in Gibraltar within the margin of discretion presently given to Member States by EU law. However, given the sensitivity of the underlying bilateral issue, the Commission at this stage refrains from adopting a reasoned opinion within the meaning of Article 227 [EC] and invites the parties to find an amicable solution.’ 33 The Commission’s press release states, among other things: ‘The EC Treaty grants the European Community competence to lay down a uniform procedure for the elections to the European Parliament. This uniform procedure can include rules defining the category of persons entitled to vote. However, the 1976 Act does not address the issue of franchise. Thus national provisions are applicable. Even if the franchise in European parliamentary elections is covered by general principles relating to elections (i.e. elections have to be direct, universal, free and secret), there is no general principle of Community law according to which the electorate in European Parliament elections cannot be extended beyond citizens of the European Union. As regards the question of electoral regions, the 1976 Act does not include provisions on [the] establishment [of] electoral constituencies, so it is for the Member States to lay down such provisions. Annex [I] to the 1976 Act must be interpreted in the light of the European Convention for the Protection of Human Rights [and Fundamental Freedoms], which guarantees [the] holding of free elections in the choice of legislature, in order to respect the fundamental rights. It is therefore a provision that is sufficiently open to enable the UK to include [the] Gibraltar electorate in the UK’s electorate in European parliamentary elections, according to its national electoral system.’ 34 By order of the President of the Court of 8 September 2004, the Commission was granted leave to intervene in support of the form of order sought by the United Kingdom. The action35 The Kingdom of Spain points out that its action covers solely elections as they are held in Gibraltar and not the United Kingdom’s recognition of the right of QCCs resident in its territory to vote for the European Parliament. 36 It raises two pleas in law in support of its action. By the first, it claims that the extension of the right to vote in European Parliament elections, as provided for by the EPRA 2003, to persons who are not United Kingdom nationals for the purposes of Community law infringes Articles 189 EC, 190 EC, 17 EC and 19 EC. By the second, it claims that the creation of a combined electoral region is contrary to the 1976 Act and to the commitments made by the United Kingdom Government in the Declaration of 18 February 2002. The first plea in law: infringement of Articles 189 EC, 190 EC, 17 EC and 19 EC37 The Kingdom of Spain claims that, by conferring the right to vote on QCCs who are not Community nationals, the United Kingdom is in breach of Articles 189 EC, 190 EC, 17 EC and 19 EC, which, interpreted historically and systematically, recognise the right to vote and to stand as candidates of citizens of the European Union alone. 38 It states that the United Kingdom has defined several categories of British citizens whom it has recognised as having rights which differ according to the nature of the ties connecting them to the United Kingdom. As the Court held in paragraph 24 of its judgment in Case C‑192/99 Kaur [2001] ECR I-1237, the United Kingdom Government’s declarations in that regard must be taken into consideration for determining the scope of the EC Treaty ratione personae. It is not disputed that QCCs are not within the categories set out in the 1982 Declaration. Since Article 17(1) EC links citizenship of the Union to possession of the nationality of a Member State, QCCs are therefore not citizens of the Union. 39 According to the Kingdom of Spain, only citizens of the Union can be recognised as having the right to vote in elections to the European Parliament because of the direct link between citizenship of the Union and the nationality of a Member State, on the one hand, and the enjoyment of rights conferred by the Treaty, on the other. Article 19 EC, which recognises the right to vote and to stand as a candidate, and Article 17(2) EC, which states that citizens of the Union are to enjoy the right conferred by the Treaty, must be construed systematically. Any extension of those rights to other persons must be made expressly, either by the Treaty or by provisions of secondary legislation. Since recognition of the right to vote and to stand as a candidate thus comes within the powers of the Community, any change in the scope ratione personae of such rights can be effected only by Community law. 40 In that regard, the Kingdom of Spain does not deny that the 1976 Act did not make provision for a uniform electoral procedure and that the electoral procedure continues to be governed, in the Member States, by their national arrangements. It submits, however, that the determination of the persons entitled to vote is regulated by Articles 189 EC and 190 EC, in conjunction with Articles 17 EC and 19 EC, and that it is imposed on the Member States. 41 Article 19(2) EC, which confers on citizens of the Union the right to vote and to stand as a candidate in elections to the European Parliament in the Member State in which they reside, under the same conditions as nationals of that State, and Directive 93/109, which lays down the detailed arrangements for the exercise of that right, illustrate the link which exists between nationality and the right to vote. The Kingdom of Spain observes in that regard that a QCC, within the meaning of the EPRA 2003, residing in another Member State cannot exercise his right to vote in that State under those provisions. 42 The Kingdom of Spain also relies, in support of its argument, on the similar provision set out in Article 39 of the Charter of Fundamental Rights of the European Union, proclaimed at Nice on 7 December 2000 (OJ 2000 C 364, p. 1), which uses the expression ‘[e]very citizen of the Union’, and not the term ‘everyone’ or an expression referring to national law. It submits that, since the right to vote of a national of a non-Member State cannot be described as a ‘human right’ or a ‘fundamental freedom’, any reference to Article 53 of that Charter, which provides that it cannot be interpreted as restricting or adversely affecting human rights and fundamental freedoms as recognised by Union law, is unfounded. 43 As regards the expression ‘peoples of the States’ in Article 189 EC, the Kingdom of Spain submits, first, that that provision does not regulate the right to vote in elections. In addition, the fact that the provision was in the EC Treaty before the concept of citizenship was introduced by the Treaty on European Union explains why there is no mention of that concept, no systematic review of the EC Treaty having taken place prior to the holding of the last intergovernmental conference. In any event, the expression ‘peoples of the States’ is a stylistic formula referring to persons sharing the same nationality and not all the persons residing in the territory. The use of the term ‘people’ as meaning ‘nation’ in several of the Member States’ constitutions confirms that interpretation. 44 The Kingdom of Spain disputes the argument that the rights flowing from citizenship of the Union can have different fields of application, because that would mean dismembering that citizenship. In its submission, unity is one of the characteristics that define citizenship, in the sense that all those entitled to that status should enjoy its rights and be subject to its obligations in their entirety. It observes in that regard that the extension of consular protection to third country nationals, given as an example by the United Kingdom, is outside the scope of Community law because it relates to national diplomatic protection. 45 The Kingdom of Spain cites, finally, the Treaty establishing a Constitution for Europe (OJ 2004 C 310, p. 1) in which, it submits, the link between the right to vote in elections to the European Parliament and citizenship of the Union is no longer merely understood, but explicit. Article I-10(2)(b) of that Treaty provides that ‘[c]itizens of the Union … shall have … the right to vote and to stand as candidates in elections to the European Parliament’, Article I-20(2) states that ‘[t]he European Parliament shall be composed of representatives of the Union’s citizens’, and the first indent of Article I-46(2) provides that ‘[c]itizens are directly represented at Union level in the European Parliament’. 46 The United Kingdom sets out the historical reasons which explain why it decided to continue to accord the franchise to resident citizens of other Commonwealth countries. After the Second World War it was agreed at a conference in 1947 between the United Kingdom and the Dominions that each should recognise the others’ freedom to devise their own nationality laws, but that all persons identified by such laws as citizens should continue, in addition, to hold the common status of ‘British subject’. Ireland also took part in that conference and a special status was laid down for the benefit of its citizens. It emerges from a section of the final report of that conference, headed ‘Position of a Citizen of a Commonwealth Country in another Commonwealth Country of which he is not a Citizen’ that, in particular, ‘in order to give body to the common status of British subjects citizens of one country of the Commonwealth who were resident in another such country should, within the limits of the new citizenship system and as far as local conditions allow, be given all the rights possessed by citizens of the country in which they are resident’. Thus, in particular, QCCs, that is to say citizens of the Commonwealth who either do not require, or have, leave to enter and remain in the United Kingdom, have, subject to the requirement of residence, the right to vote in United Kingdom Parliamentary elections. The law provided, likewise, that QCCs residing in the United Kingdom have the right to vote in elections to the European Parliament. Thus, more than a million of them have taken part in each of those elections since 1978. That grant of the right to vote to QCCs is regarded as one of the constitutional traditions of the United Kingdom. 47 Similar provisions have been adopted for Gibraltar and for QCCs resident in Gibraltar, the number of whom is reckoned at 200. To accept, in the context of this action relating to Gibraltar, the principle that QCCs may not vote in elections to the European Parliament would mean that the United Kingdom would have to deprive a large number of people, both in Gibraltar and in the United Kingdom, of their traditional right to vote. 48 The United Kingdom, supported by the Commission, disputes the conclusion which the Kingdom of Spain draws from paragraph 24 of the judgment in Kaur. It submits that the scope ratione personae of the provisions of the EC Treaty varies according to the subject-matter concerned and that the Kaur case concerned only the provisions concerning the freedom of movement of persons and the rights consequent on citizenship in that regard. It emphasises the limited purpose of the 1982 Declaration and the fact that it was not intended to define the categories of persons entitled to vote in elections to the European Parliament. That declaration cannot therefore be used to determine who has the right to vote for the European Parliament, nor may it be understood as meaning that the United Kingdom there expressed an intention to withdraw the franchise from QCCs resident in the United Kingdom who have been entitled to it since the first direct elections to the European Parliament. In addition, the United Kingdom has not gone against its own declaration by extending the right to vote for the European Parliament to QCCs resident in Gibraltar. 49 The United Kingdom, supported in this respect by the Commission, considers that it was entitled to extend the right to vote and to stand for election to the European Parliament to nationals of non-Member States. No provision of Community law prohibits this. 50 First of all, Community law does not regulate the entirety of the right to vote and to stand for election to the European Parliament. The Community has exercised the power, conferred on it by Article 190(4) EC, to define a ‘uniform procedure in all Member States’ or one ‘in accordance with principles common to all Member States’ only by the 1976 Act, Article 8 of which refers, for matters not governed by that Act, to national provisions. Account must also be taken of the general principles of Community law. Since the 1976 Act does not define the categories of persons entitled to vote in elections to the European Parliament, it was compatible with that Act for the question to be regulated by the EPRA 2003. 51 Article 19(2) EC, which confers on citizens of the Union the right to vote in a Member State of which they are not nationals, and Directive 93/109, which lays down the detailed arrangements for the exercise of that right, do not preclude the grant of the right to vote to persons who are not citizens of the Union. The United Kingdom refers to the third recital in the preamble to Directive 93/109, which says that the right to vote and to stand as a candidate in elections to the European Parliament in the State of residence ‘is an instance of the application of the principle of non-discrimination between nationals and non-nationals and a corollary of the right to move and reside freely’. Those provisions are intended, essentially, to remove the nationality requirement, but not to define the right to vote. 52 In addition, Articles 189 EC and 190 EC do not mention citizenship of the Union, but use the expression ‘peoples of the States brought together in the Community’, which is not necessarily to be understood as being synonymous with ‘nationals of the Member States’, but can equally well define a much larger group of persons, such as those residing within a given territory. The United Kingdom points out that although those provisions could have been amended, particularly at the time of the adoption of the Treaty on European Union, the terms ‘nationals’ or ‘citizens of the Union’ were not used. A historical interpretation cannot therefore be relied upon, nor, on the basis of those provisions, can a link be established between Union citizenship and the right to vote in elections to the European Parliament. 53 The Commission submits that those articles cannot be interpreted in the restrictive sense as proposed by the Kingdom of Spain. A link does not exist, in all Member States, between the legitimacy of public power and nationality. It is appropriate to take account of different approaches, such as that resulting from the constitutional tradition of the United Kingdom. 54 As regards Article 17(2) EC, it does not provide that the rights conferred by the Treaty are to be enjoyed by citizens of the Union alone. The United Kingdom, supported by the Commission, points out in that regard that the Treaty confers certain rights on those who do not hold citizenship of the Union, such as the rights to petition the European Parliament and to apply to the Ombudsman. The United Kingdom also argues that some rights which under the Treaty are conferred only on citizens can be extended by Member States to such persons, such as the right to the protection of the diplomatic or consular authorities. It is likewise for the right to take part in political life, which can be accorded by a Member State to third country nationals. That does not entail ‘dismembering Union citizenship’. 55 The Commission submits in that regard that the concept of Union citizenship can be infringed only if citizens’ rights are infringed, be it by outright denial or by an obstacle to their exercise. However, the fact that a Member State, in view of its history and constitutional traditions, extends the right to vote in elections to the European Parliament, under certain conditions, to nationals of third countries with which it has special historical links does not impair the right to vote of citizens of the Union. The United Kingdom states that the conferment of the right to vote on QCCs has no effect on the institutions of the Union or on other Member States and affects only the identity of the representatives returned to the European Parliament from the United Kingdom constituencies. 56 The United Kingdom, supported by the Commission, observes that Article 39(1) of the Charter of Fundamental Rights of the European Union – should the Court consider it relevant to the case – must be interpreted taking account of Article 53 of the Charter. The Commission also argues that the wording of Article 39 should not be regarded as, by itself, requiring the right to vote to be limited to Union citizens. Both the United Kingdom and the Commission interpret that provision as not permitting the right to vote currently conferred by a Member State on third country nationals to be impaired. 57 As regards the Treaty establishing a Constitution for Europe, the United Kingdom submits that it has not yet come into effect and that it is therefore irrelevant. In addition, neither Article I‑20 nor Article I‑46 of that Treaty, at first sight, purports to exclude third country nationals from the franchise or to prescribe the manner in which Member States set conditions for the franchise. Article III‑330, which, like Article 190(4) EC, empowers the Council to adopt measures for the election of Members of the European Parliament, does not seek to limit the Council’s discretion. In any event, the unilateral Declarations appended to the Constitution, in particular Declaration 48 of the United Kingdom on the right to vote at European Parliamentary elections, make clear that the Member States disagreed on the question of the right to vote of third country nationals. 58 The Commission submits, finally, that, although the concept of European citizenship is fundamental to the Union, the same applies to the Union’s commitment to respect the national identities of its Member States. That principle is confirmed by Article 8 of the 1976 Act, since it provides that national provisions on the procedure for elections may if appropriate take account of the specific situation in the Member States. Findings of the Court59 By its first plea in law, the Kingdom of Spain claims that the United Kingdom infringed Articles 189 EC, 190 EC, 17 EC and 19 EC by conferring on QCCs resident in Gibraltar the right to vote and to be elected in elections to the European Parliament. That plea in law is based on the premiss that those provisions of the Treaty establish a link between citizenship of the Union and the right to vote and to stand as a candidate for the European Parliament, the consequence of that link being that only citizens of the Union can have that right. 60 At the outset, it must be recalled that it was to comply with the judgment of the European Court of Human Rights in Matthewsv.theUnited Kingdom that the United Kingdom adopted the legislation challenged by the Kingdom of Spain. 61 As is clear from the Declaration of 18 February 2002, the United Kingdom undertook to ‘ensure that the necessary changes are made to enable the Gibraltar electorate to vote in elections to the European Parliament as part of and on the same terms as the electorate of an existing UK constituency’. 62 Having regard to that declaration, which the Kingdom of Spain does not dispute reflects an agreement reached between those two Member States, and breach of which the Kingdom of Spain moreover relies on in its second plea in law, the United Kingdom adopted for Gibraltar legislation laying down the same conditions in relation to the right to vote and stand for election as those laid down by the legislation applying to the United Kingdom. The expression ‘Gibraltar electorate’ must indeed be understood by reference to the meaning of ‘electorate’ as defined by the United Kingdom legislation. 63 For reasons connected to its constitutional traditions, the United Kingdom chose, both for United Kingdom national elections and for elections to the Gibraltar House of Assembly, to grant the right to vote and to stand for election to QCCs satisfying conditions expressing a specific link with the area in respect of which the elections are held. 64 It is important to note, in that regard, that because Ms Matthews, ‘as a resident of Gibraltar, was completely denied any opportunity to express her opinion in the choice of the members of the European Parliament’, the European Court of Human Rights declared the failure to hold elections in Gibraltar to the European Parliament to be contrary to Article 3 of Protocol No 1 to the Convention. 65 The Kingdom of Spain submits that the extension of the right to vote in elections to the European Parliament to persons who are not citizens of the Union infringes Articles 189 EC, 190 EC, 17 EC and 19 EC. However, Articles 189 EC and 190 EC do not expressly and precisely state who are to be entitled to the right to vote and to stand as a candidate for the European Parliament. 66 As regards Articles 17 EC and 19 EC, which are in Part Two of the Treaty, relating to citizenship of the Union, only the latter of those provisions deals, in paragraph 2, with the right to vote for the European Parliament. That article is confined to applying the principle of non‑discrimination on grounds of nationality to the exercise of that right, by providing that every citizen of the Union residing in a Member State of which he is not a national is to have the right to vote and to stand as a candidate in elections to the European Parliament in the Member State in which he resides, under the same conditions as nationals of that State. 67 Article 190(4) EC refers to the procedure for those elections. It states that elections are to take place by direct universal suffrage in accordance with a uniform procedure in all Member States or in accordance with principles common to all Member States. 68 Article 1 of the 1976 Act provides that members of the European Parliament are to be elected on the basis of proportional representation and that elections are to be by direct universal suffrage and free and secret. Article 2 of the 1976 Act provides that Member States may, in accordance with their specific national situations, establish constituencies for elections to the European Parliament or subdivide their electoral areas in a different manner, without generally affecting the proportional nature of the voting system. Under Article 3 they may set a minimum threshold for the allocation of seats. 69 Article 8 of the 1976 Act states that, subject to the provisions of that Act, the electoral procedure is to be governed in each Member State by its national provisions but those provisions, which may if appropriate take account of the specific situation in the Member States, must not affect the essentially proportional nature of the voting system. 70 However, neither Article 190 EC nor the 1976 Act defines expressly and precisely who are to be entitled to the right to vote and to stand as a candidate in elections to the European Parliament. In themselves, those provisions do not exclude, therefore, a person who is not a citizen of the Union, such as a QCC resident in Gibraltar, from being entitled to the right to vote and stand for election. However, it must be ascertained whether there is, as the Kingdom of Spain submits, a clear link between citizenship of the Union and the right to vote and stand for election which requires that that right be always limited to citizens of the Union. 71 No clear conclusion can be drawn in that regard from Articles 189 EC and 190 EC, relating to the European Parliament, which state that it is to consist of representatives of the peoples of the Member States, since the term ‘peoples’, which is not defined, may have different meanings in the Member States and languages of the Union. 72 As regards the Treaty’s articles relating to citizenship of the Union, no principle can be derived from them that citizens of the Union are the only persons entitled under all the other provisions of the Treaty, which would imply that Articles 189 EC and 190 EC apply to those citizens alone. 73 In fact, while Article 17(2) EC provides that citizens of the Union are to enjoy the rights conferred by the Treaty and be subject to the duties imposed by it, the Treaty recognises rights which are linked neither to citizenship of the Union nor even to nationality of a Member State. Thus, for example, Articles 194 EC and 195 EC stipulate that the rights to present a petition to the European Parliament or to make a complaint to the Ombudsman are not limited to citizens of the Union, but may be exercised by ‘any natural or legal person residing or having its registered office in a Member State’. 74 Moreover, while citizenship of the Union is destined to be the fundamental status of nationals of the Member States, enabling those who find themselves in the same situation to receive the same treatment in law irrespective of their nationality, subject to such exceptions as are expressly provided for (Case C‑184/99 Grzelczyk [2001] ECR I‑6193, paragraph 31), that statement does not necessarily mean that the rights recognised by the Treaty are limited to citizens of the Union. 75 In that regard, in its judgment in Kaur, the Court, which noted the importance of the United Kingdom Government’s Declaration on the meaning of the term ‘nationals’ for the other Contracting Parties to the Treaty concerning the Accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the European Communities, states, in paragraph 24 of that judgment, that that declaration delimits the scope ratione personae of the Community provisions which were the subject of that Treaty. Read in its context, more particularly in combination with paragraph 22 of the judgment, in which the Court states that, by means of the 1972 Declaration, the United Kingdom notified the other Contracting Parties of the categories of citizens to be regarded as its nationals for the purposes of Community law, that sentence refers to the scope of the provisions of the EC Treaty which refer to the concept of ‘national’, such as the provisions relating to the freedom of movement of persons, at issue in the main proceedings which gave rise to that judgment, and not to all the provisions of the Treaty, as the Kingdom of Spain submits. 76 As regards Article 19(2) EC, also relied on by the Kingdom of Spain in support of its argument that there is a link between citizenship of the Union and the right to vote and to stand as a candidate in elections to the European Parliament, it is confined, as pointed out in paragraph 66 above, to stating a rule of equal treatment between citizens of the Union residing in a Member State so far as concerns that right to vote and stand for election. While that provision, like Article 19(1) EC relating to the right of Union citizens to vote and to stand as a candidate at municipal elections, implies that nationals of a Member State have the right to vote and to stand as a candidate in their own country and requires the Member States to accord those rights to citizens of the Union residing in their territory, it does not follow that a Member State in a position such as that of the United Kingdom is prevented from granting the right to vote and to stand for election to certain persons who have a close link with it without however being nationals of that State or another Member State. 77 In addition, since the number of representatives elected in each Member State is laid down by Article 190(2) EC and since, in the current state of Community law, elections to the European Parliament are held in each Member State for the representatives to be elected in that State, an extension by a Member State of the right to vote at those elections to persons other than its own nationals or other than citizens of the Union resident in its territory affects only the choice of the representatives elected in that Member State and has no effect either on the choice or on the number of representatives elected in the other Member States. 78 It follows from all of those considerations that, in the current state of Community law, the definition of the persons entitled to vote and to stand as a candidate in elections to the European Parliament falls within the competence of each Member State in compliance with Community law, and that Articles 189 EC, 190 EC, 17 EC and 19 EC do not preclude the Member States from granting that right to vote and to stand as a candidate to certain persons who have close links to them, other than their own nationals or citizens of the Union resident in their territory. 79 For reasons connected to its constitutional traditions, the United Kingdom chose to grant the right to vote and to stand for election to QCCs who satisfy conditions expressing a specific link with the territory in respect of which the elections are held. In the absence in the Community treaties of provisions stating expressly and precisely which persons have the right to vote and to stand as a candidate in elections to the European Parliament, it does not appear that the United Kingdom’s decision to apply to the elections to that Parliament held in Gibraltar the rules governing the franchise and eligibility for election laid down by its national legislation both for national elections in the United Kingdom and for elections to the Gibraltar House of Assembly is contrary to Community law. 80 For all of those reasons, it must be held that the Kingdom of Spain has not established that the United Kingdom has infringed Articles 189 EC, 190 EC, 17 EC and 19 EC by adopting the EPRA 2003 which provides, in relation to Gibraltar, that QCCs resident in Gibraltar who are not Community nationals have the right to vote and to stand as a candidate in elections to the European Parliament. Consequently, the first plea in law is unfounded. The second plea in law: breach of the 1976 Act and of the commitments made by the United Kingdom Government in the Declaration of 18 February 2002 81 The Kingdom of Spain claims that, by not confining itself, in the EPRA 2003, to attaching the electors resident in Gibraltar to a United Kingdom electoral region in their capacity as persons who have United Kingdom nationality under the terms of the 1982 Declaration, but by providing for the combination of the territory of Gibraltar with an existing electoral region in England and Wales, the United Kingdom was in breach of Annex I to the 1976 Act and of the Declaration of 18 February 2002. 82 The Kingdom of Spain recalls the status of Gibraltar as defined by Article X of the Treaty of Utrecht and, in particular, the right of pre-emption granted to the Kingdom of Spain by the last sentence of that article. It states that, in 1830, the United Kingdom raised Gibraltar to the rank of a Crown Colony and that, when the United Nations was founded in 1946, Gibraltar was registered as a ‘non-self-governing territory’ within the meaning of Chapter XI of the Charter of the United Nations. In addition, the Kingdom of Spain refers to the negotiations in progress between it and the United Kingdom on the subject of Gibraltar’s decolonisation. 83 It submits that, under Resolution 2625 (XXV) of 24 October 1970, adopted by the General Assembly of the United Nations, the territory of a colony must have a status separate and distinct from the territory of the State administering it. Annex I to the 1976 Act is an application of that principle. It submits that the EPRA 2003 infringes the international status of Gibraltar and Annex I to the 1976 Act in that it contains legislation relating to the territory of Gibraltar. As the Kingdom of Spain’s representative explained at the hearing, Gibraltar’s situation is colonial and the recognition of a separate electoral district is a step towards independence which runs counter to the international rules which govern that colony. 84 According to the Kingdom of Spain, while Article 9 of the EPRA 2003 is not necessarily contrary to Annex I to the 1976 Act in that it provides for the combination of Gibraltar with an electoral region of England and Wales, that is not the case with the other provisions of that legislation, which refer solely to Gibraltar. Thus, Article 14 provides for the maintenance of a register of electors in Gibraltar, under the responsibility of the Clerk of the House of Assembly of Gibraltar, and not under the responsibility of an agent of the British Crown. Likewise, the right to be enrolled on the Gibraltar register is defined in relation to the territory of Gibraltar and the right to vote is provided for in Gibraltar. The local courts of Gibraltar have jurisdiction to hear proceedings in electoral matters. Finally, section 28(2) of the EPRA 2003 defines its geographical scope as being the United Kingdom and Gibraltar. There is therefore a territorial application of the provisions relating to elections to the European Parliament although Gibraltar is excluded from the 1976 Act. 85 In view of the inconsistency of the EPRA 2003 with Annex I to the 1976 Act, the Kingdom of Spain submits that the United Kingdom has disregarded its own Declaration of 18 February 2002, a unilateral declaration which created an obligation in international law on the part of the United Kingdom to the Kingdom of Spain, by which, in order to comply with the judgment in Matthewsv. theUnited Kingdom, it undertook to make the necessary changes to enable the Gibraltar electorate to vote in elections to the European Parliament as part of an existing United Kingdom constituency, in compliance with Community law. In the Kingdom of Spain’s submission, it would have sufficed for the United Kingdom to incorporate the Gibraltar electorate in an electoral region of the United Kingdom, without referring to the territory of Gibraltar. 86 The United Kingdom, supported by the Commission, points out the necessity of interpreting Annex I to the 1976 Act so far as possible in the light of and in conformity with fundamental rights, in particular, the right to take part in elections recognised in Article 3 of Protocol No 1 to the Convention, as interpreted by the European Court of Human Rights in Matthewsv. theUnited Kingdom. In order to fulfil its obligations under the Convention, as interpreted in that judgment, and in view of the Kingdom of Spain’s refusal to agree to the revocation of Annex I to the 1976 Act, the United Kingdom undertook, by the Declaration of 18 February 2002, to ensure that the necessary changes would be made to enable the Gibraltar electorate to vote in elections to the European Parliament on the same terms as the electorate of an existing United Kingdom constituency. 87 The United Kingdom submits that it has not broken its undertaking. Gibraltar was combined with the electoral region of South West England in accordance with a recommendation from the Electoral Commission following public consultation. The conditions to be satisfied to be an elector are the same as those laid down by the electoral law of the United Kingdom, namely the requirements of citizenship, residence and enrolment on the electoral register. Those conditions have simply been adapted, with the necessary changes, to the Gibraltar electorate. 88 In the United Kingdom’s submission, the method used, in that it refers to the territory of Gibraltar particularly as regards the elector’s place of residence, is inherent in the United Kingdom electoral system and does not result in treating Gibraltar as a part of the United Kingdom. As regards arrangements for elections or the maintenance of the electoral register, the United Kingdom points out that their being localised in Gibraltar is intended to enable electors in Gibraltar to exercise their rights under the same conditions as the other electors of the electoral region of the South West of England, that is to say, close to their place of residence. 89 The Commission submits, finally, that the discretion left to the Gibraltar authorities is narrow and that the EPRA 2003 provides for safeguards which ensure sufficient control by the United Kingdom’s own authorities. 90 As pointed out in paragraph 60 above, it was to comply with the judgment of the European Court of Human Rights in Matthewsv. theUnited Kingdom that the United Kingdom adopted the legislation challenged by the Kingdom of Spain. The Kingdom of Spain does not dispute, in that regard, that the United Kingdom was bound to comply with that obligation, in spite of the continuation of Annex I to the 1976 Act. Moreover, as pointed out in paragraph 62 above, the Kingdom of Spain does not dispute that the United Kingdom’s Declaration of 18 February 2002 reflects an agreement reached between those two Member States on the conditions under which the United Kingdom was to comply with that judgment. Likewise, as is apparent from paragraph 13 above, the Council and the Commission took formal note of that declaration. 91 In that declaration, the United Kingdom undertook to ‘ensure that the necessary changes are made to enable the Gibraltar electorate to vote in elections to the European Parliament as part of and on the same terms as the electorate of an existing United Kingdom constituency’. 92 As the United Kingdom and the Commission correctly maintained, the expression ‘on the same terms’ cannot be understood as meaning that the United Kingdom legislation would apply without adaptation to the Gibraltar electorate by its assimilation to the electorate of the United Kingdom constituency with which it would be combined. If that were the case, this would imply that the right to vote and to stand for election would be defined in relation to the territory of the United Kingdom, that electors should travel to the United Kingdom to consult the electoral register, vote in the United Kingdom or by post, and bring proceedings in electoral matters before the courts of the United Kingdom. 93 It is, on the contrary, to comply with the requirements resulting from those ‘same terms’ that the United Kingdom transposed its legislation to Gibraltar and adapted it, with the necessary changes, to that territory. Thus a Gibraltar elector is in a similar situation to that of a United Kingdom elector, and need not be faced with difficulties connected to Gibraltar’s status which make it impossible for him to exercise that right to vote or dissuade him from doing so. 94 In that context, it must be noted that, as is clear from paragraph 63 of the judgment in Matthewsv. theUnited Kingdom, the Contracting States enjoy a wide margin of appreciation in imposing conditions on the right to vote. However, those conditions may not curtail the right to vote to such an extent as to impair its very essence and deprive it of effectiveness. They must pursue a legitimate aim and the means employed must not be disproportionate (see also the judgments of the ECHR in Mathieu-Mohin and Clerfaytv.Belgium, judgment of 2 March 1987, Series A no. 113, p. 23, § 52, and Melnychenko v.Ukraine, no. 17707/02, § 54, ECHR 2004-X). 95 In the light of that case‑law of the European Court of Human Rights and the fact that that Court has declared the failure to hold elections to the European Parliament in Gibraltar to be contrary to Article 3 of Protocol No 1 to the Convention in that it denied ‘the applicant, as a resident of Gibraltar’ any opportunity to express her opinion on the choice of the members of the European Parliament, the United Kingdom cannot be criticised for adopting the legislation necessary for the holding of such elections under conditions equivalent, with the necessary changes, to those laid down by the legislation applicable in the United Kingdom. 96 The transposition to the territory of Gibraltar, with the necessary changes, of the United Kingdom legislation is all the less open to challenge since, as is clear from paragraph 59 of the judgment in Matthewsv. theUnited Kingdom, the European Court of Human Rights found no indication in the status of Gibraltar of any local requirements which would have to be taken into account, under Article 56(3) of the Convention, for the application of that Convention to a territory for whose international relations a Contracting State is responsible. 97 For all of those reasons, it must be held that the Kingdom of Spain’s second plea in law is also unfounded. Costs98 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the United Kingdom has applied for costs and the Kingdom of Spain has been unsuccessful, the latter must be ordered to pay the costs. Under the first subparagraph of Article 69(4) of the Rules of Procedure, the Commission, which has intervened in the proceedings, is to bear its own costs. On those grounds, the Court (Grand Chamber) hereby:1. Dismisses the action;2. Orders the Kingdom of Spain to pay the costs;3. Orders the Commission of the European Communities to bear its own costs. [Signatures]* Language of the case: English. | 0988c-cc5bbdc-49b7 | EN |
IN THE VIEW OF ADVOCATE GENERAL KOKOTT, THE STATE AUCTIONING OF 3G MOBILE TELEPHONE LICENCES IS NOT LIABLE TO VAT | T-Mobile Austria GmbH and OthersvRepublik Österreich(Reference for a preliminary ruling from the Landesgericht für Zivilrechtssachen Wien)(Sixth VAT Directive – Taxable transactions – Definition of ‘economic activity’ – Article 4(2) – Allocation of rights making it possible to use a defined part of the radio-frequency spectrum reserved for telecommunications services) Opinion of Advocate General Kokott delivered on 7 September 2006 Judgment of the Court (Grand Chamber), 26 June 2007 Summary of the JudgmentTax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Economic activities within the meaning of Article 4(2) of the Sixth Directive (Council Directive 77/388, Art. 4(2))Article 4(2) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that the allocation, by auction by the national regulatory authority responsible for spectrum assignment, of rights such as rights to use frequencies in the electromagnetic spectrum with the aim of providing the public with mobile telecommunications services does not constitute an economic activity within the meaning of that provision and, consequently, does not fall within the scope of that directive. Such an activity constitutes a necessary precondition for the access of economic operators to the mobile telecommunications market and cannot constitute participation in that market by the competent national authority. Only those operators, who are the holders of the rights granted, operate on the relevant market by exploiting the property in question for the purpose of obtaining income therefrom on a continuing basis. Therefore, in granting such authorisations, the competent national authority is not participating in the exploitation of property, consisting in the said user rights, for the purpose of obtaining income therefrom on a continuing basis. By means of that allocation procedure, that authority exclusively carries out the activity of controlling and regulating the use of the electromagnetic spectrum which has been expressly delegated to it. Furthermore, the fact that the grant of the rights in question gives rise to a payment cannot affect the legal status of that activity. (see paras 42, 44-45, 49, operative part)JUDGMENT OF THE COURT Grand Chamber26 June 2007 (*) In Case C-284/04,REFERENCE for a preliminary ruling under Article 234 EC from the Landesgericht für Zivilrechtssachen Wien (Austria), made by decision of 7 June 2004, received at the Court on 1 July 2004, in the proceedings T-Mobile Austria GmbH,3G Mobile Telecommunications GmbH,mobilkom austria AG, formerly mobilkom austria AG & Co. KG, master-talk Austria Telekom Service GmbH & Co. KG,ONE GmbH,Hutchison 3G Austria GmbH,tele.ring Telekom Service GmbH,tele.ring Telekom Service GmbH, successor to TRA 3G Mobilfunk GmbH, Republik Österreich,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas, K. Lenaerts, P. Kūris, E. Juhász and J. Klučka, Presidents of Chambers, K. Schiemann, J. Makarczyk (Rapporteur) and U. Lõhmus, Judges, Advocate General: J. Kokott,Registrars: B. Fülöp and K. Sztranc-Sławiczek, Administrators,having regard to the written procedure and further to the hearing on 7 February 2006,after considering the observations submitted on behalf of:– T‑Mobile Austria GmbH, by F. Heidinger and W. Punz, Rechtsanwälte,– 3G Mobile Telecommunications GmbH and mobilkom austria AG, by P. Huber, Rechtsanwalt,– master-talk Austria Telekom Service GmbH & Co. KG, ONE GmbH and Hutchison 3G Austria GmbH, by E. Lichtenberger and K. Retter, Rechtsanwälte, – tele.ring Telekom Service GmbH, by T. Kustor and B. Polster, Rechtsanwälte, and C. Staringer, university professor,– Republik Österreich, by U. Weiler, acting as Agent,– the Austrian Government, by H. Dossi, J. Bauer and C. Knecht, acting as Agents,– the Danish Government, by J. Molde, acting as Agent, and by K. Hagel‑Sørensen, advokat,– the German Government, by M. Lumma, C.‑D. Quassowski and C. Schulze‑Bahr, acting as Agents, assisted by K. Stopp and B. Burgmaier, Rechtsanwälte, – the Spanish Government, by J. Rodríguez Cárcamo, acting as Agent,– Ireland, by A. Aston, SC, and G. Clohessy, BL,– the Italian Government, by I.M. Braguglia, acting as Agent, and by P. Gentili, avvocato dello Stato,– the Netherlands Government, by H. Sevenster and M. de Grave, acting as Agents,– the Polish Government, by J. Pietras, acting as Agent,– the United Kingdom Government, by M. Bethell and R. Caudwell, acting as Agents, K. Parker QC, C. Vajda QC, and G. Peretz, Barrister, – the Commission of the European Communities, by K. Gross, R. Lyal, M. Shotter and D. Triantafyllou, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 7 September 2006gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) (‘the Sixth Directive’), and Article 4 of that directive in particular. 2 The reference was made in the course of joined main proceedings brought by T-Mobile Austria GmbH, 3G Mobile Telecommunications GmbH, mobilkom austria AG, formerly mobilkom austria AG & Co. KG, master-talk Austria Telekom Service GmbH & Co. KG, ONE GmbH, Hutchison 3G Austria GmbH, tele.ring Telekom Service GmbH and TRA 3G Mobilfunk GmbH, predecessor to tele.ring Telekom Service GmbH, against Republik Österreich seeking to obtain from the Republik Österreich, for the purposes of the deduction of value added tax (‘VAT’) on inputs, the issuing of invoices in respect of payments made when the applicants in the main proceedings were granted rights to use frequencies in the electromagnetic spectrum with a view to supplying mobile telecommunications services to the public (‘the frequency use rights at issue in the main proceedings’). Legal context Provisions relating to VAT Community legislation3 Under Article 2(1) of the Sixth Directive, the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such is subject to value added tax. 4 Article 4 of the Sixth Directive provides:‘1. “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity. 2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity. …5. States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions. However, when they engage in such activities or transactions, they shall be considered taxable persons in respect of these activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition. In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible. …’5 Article 17 of the Sixth Directive provides:‘1. The right to deduct shall arise at the time when the deductible tax becomes chargeable.2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay: (a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person;6 Item 1 of Annex D to the Sixth Directive refers to telecommunications. National legislation7 Under Paragraph 1(1), indent 1, of the Law on turnover taxes 1994 (Umsatzsteuergesetz 1994, BGBl. 663/1994, ‘the UStG 1994’), deliveries and other supplies which an operator makes for consideration within the country in the course of his business are subject to turnover tax. The same provision states that the charge to tax is not excluded because the transaction is effected on the basis of a legal or administrative act or is to be regarded under a legal provision as effected. 8 According to Paragraph 2(1) of the UStG 1994, an operator is a person who independently carries on a commercial or professional activity, that is to say, any activity pursued on a continuing basis for the purpose of obtaining income. Under Paragraph 2(3) of the UStG 1994, corporations governed by public law carry on commercial or professional activity in principle only within their operations of a commercial nature. 9 The first and second sentences of Paragraph 11(1) of the UStG 1994 provide that if the operator effects transactions within the meaning of Paragraph 1(1), indent 1, of the UStG 1994, he is entitled to issue invoices. Furthermore, if he effects the transactions to another operator for the latter’s undertaking or to a legal person where the latter is not an operator, he is obliged to issue invoices. 10 Those invoices must under Paragraph 11(1), indent 6, of the UStG 1994 state the amount of VAT charged on the transactions.11 It is apparent from Paragraph 2(1) of the Law on corporation tax (Körperschaftsteuergesetz, BGBl. 401/1988, ‘the KStG’) that an operation of a commercial nature of a corporation governed by public law is any installation which is economically independent and serves exclusively or predominantly for a private-economy activity of commercial significance pursued on a continuing basis for the purpose of obtaining income, or other economic advantages in the absence of participation in general economic activity, and not for agriculture or forestry. 12 Paragraph 2(5) of the KStG however provides that there is no private-economy activity within the meaning of subparagraph 1 if the activity serves predominantly for the exercise of public powers. Provisions relating to the allocation of the frequency use rights at issue in the main proceedings Community legislation 13 Directive 97/13/EC of the European Parliament and of the Council of 10 April 1997 on a common framework for general authorisations and individual licences in the field of telecommunications services (OJ 1997 L 117, p. 15) was in force until 25 July 2003. 14 Article 2(1) of Directive 97/13 provides:‘1. For the purposes of this Directive,(d) “essential requirements” means the non-economic reasons in the public interest which may cause a Member State to impose conditions on the establishment and/or operation of telecommunications networks or the provision of telecommunications services. Those reasons shall be the security on network operations, the maintenance of network integrity and, where justified, the interoperability of services, data protection, the protection of the environment and town and country planning objectives, as well as the effective use of the frequency spectrum and the avoidance of harmful interference between radio-based telecommunications systems and other space-based or terrestrial technical systems. …’ 15 As set out in the second sentence of Article 3(3) of Directive 97/13:‘Member States may issue an individual licence only where the beneficiary is given access to scarce physical and other resources or is subject to particular obligations or enjoys particular rights, in accordance with the provisions of Section III.’ 16 Article 4(1) of Directive 97/13 explains the conditions attached to general authorisations as follows:‘Where Member States subject the provision of telecommunications services to general authorisations, the conditions which, where justified, may be attached to such authorisations are set out in points 2 and 3 of the Annex. Such authorisations shall entail the least onerous system possible consistent with enforcing the relevant essential requirements and relevant other public interest requirements set out in points 2 and 3 of the Annex.’ 17 Section III of Directive 97/13, which covers Articles 7 to 11, governs individual licences where circumstances justify the grant of such licences. The first subparagraph of Article 8(1) of that directive provides that ‘[t]he conditions which, in addition to those set out for general authorisations, may, where justified, be attached to individual licences are set out in points 2 and 4 of the Annex’. In accordance with points 2.1 and 4.2 of that annex, this includes inter alia the conditions intended to ensure compliance with relevant essential requirements and specific conditions linked to the effective use and efficient management of radio frequencies. 18 Pursuant to Article 10(1) of Directive 97/13, Member States may limit the number of individual licences to the extent required to ensure the efficient use of radio frequencies. Under Article 10(2), first indent, of that directive, they must, in this respect, give due weight to the need to maximise benefits for users and to facilitate the development of competition. The first subparagraph of Article 10(3) of Directive 97/13 requires that Member States grant such individual licences on the basis of selection criteria which must be objective, non-discriminatory, detailed, transparent and proportionate. 19 It is apparent from Article 11(1) of Directive 97/13 that the grant of licences may give rise to the collection of fees which ‘seek only to cover the administrative costs incurred in the issue, management, control and enforcement of the applicable individual licences’. Furthermore, Article 11(2) provides: ‘Notwithstanding paragraph 1, Member States may, where scarce resources are to be used, allow their national regulatory authorities to impose charges which reflect the need to ensure the optimal use of these resources. Those charges shall be non-discriminatory and take into particular account the need to foster the development of innovative services and competition.’ 20 Directive 97/13 was repealed and replaced as of 25 July 2003 by Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (Framework Directive) (OJ 2002 L 108, p. 33). 21 Article 9 of Directive 2002/21 provides:‘…3. Member States may make provision for undertakings to transfer rights to use radio frequencies [to] other undertakings.4. Member States shall ensure that an undertaking’s intention to transfer rights to use radio frequencies is notified to the national regulatory authority responsible for spectrum assignment and that any transfer takes place in accordance with procedures laid down by the national regulatory authority and is made public. National regulatory authorities shall ensure that competition is not distorted as a result of any such transaction. Where radio frequency use has been harmonised through the application of Decision No 676/2002/EC [of the European Parliament and of the Council of 7 March 2002 on a regulatory framework for radio spectrum policy in the European Community (Radio Spectrum Decision) (OJ 2002 L 108, p. 1)] or other Community measures, any such transfer shall not result in change of use of that radio frequency.’ 22 Under Paragraph 14 of the Law on telecommunications (Telekommunikationsgesetz, BGBl. I, 100/1997, ‘the TKG’), in the version applicable at the material time in the main proceedings, a licence is required to supply mobile voice telephony service and other public mobile telecommunications services using directly operated mobile telecommunications networks. 23 Under Paragraph 15(2)(3) of the TKG, in the case of licences to supply public mobile telecommunications services, such a licence is to be awarded if the frequencies have been granted to the applicant or could be granted simultaneously with the licence. 24 Under Paragraph 21(1) of the TKG, in order to ensure the efficient use of the frequencies awarded, holders of a mobile telecommunications licence have to make a one-off or annual frequency use payment in addition to paying the frequency use fee. 25 Paragraph 49(4) of the TKG read in conjunction with Paragraph 111 thereof provides that the allocation of frequencies intended for the supply of public mobile communications services and for other public telecommunications services falls within the competence of the Telekom-Control-Kommission (Telecommunications Control Commission, ‘the TCK’). 26 The allocation procedure is governed by Paragraph 49a(1) of the TKG, which provides:‘The regulatory authority shall allocate the frequencies afforded to it amongst those applicants who satisfy the general requirements in subparagraphs 1 and 2 of Paragraph 15(2) and guarantee the most efficient use of frequencies. This shall be established by the size of the frequency use payment that is bid.’ 27 In accordance with Paragraphs 108 and 109 of the TKG, the TCK takes the form of a company, Telekom-Control GmbH, the sole shareholder in which is the Austrian State. The dispute in the main proceedings and the questions referred for a preliminary ruling28 On 3 May 1999 the TCK allocated, by auction, the frequency use rights at issue in the main proceedings for the frequencies known as ‘GSM’ (standard DCS-1800) to tele.ring Telekom Service GmbH in consideration of a total payment of EUR 98 108 326 and, on 7 February 2000, the frequency use rights at issue in the main proceedings relating to the frequencies for the European radiocommunications system TETRA to master-talk Austria Telekom Service GmbH & Co. KG for the sum of EUR 4 832 743.47. 29 On 20 November 2000, the TCK allocated the frequency use rights at issue in the main proceedings for the frequencies relating to the mobile telephony systems known as ‘UMTS’ (standard IMT-2000). The procedure, which also took the form of an auction, resulted in the award of those rights to T-Mobile Austria GmbH, 3G Mobile Telecommunications GmbH, mobilkom austria AG & Co. KG, Hutchison 3G Austria GmbH, ONE GmbH and TRA 3G Mobilfunk GmbH for a total payment of EUR 831 595 241.10. 30 By their action, the applicants in the main proceedings seek to obtain the issuing by the Republik Österreich of invoices relating to the allocation of the frequency use rights at issue in the main proceedings in so far as, under the national legislation which transposed Article 17 of the Sixth Directive, those invoices are necessary for the purposes of deducting input VAT. 31 In those circumstances, the Landesgericht für Zivilsachen Wien (Regional Civil Court, Vienna) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: ‘(1) Is the third subparagraph of Article 4(5) of, in conjunction with No 1 of Annex D to, the Sixth Directive … to be interpreted as meaning that the allocation of rights to use frequencies for mobile telecommunications systems in accordance with the UMTS/IMT-2000, GSM/DCS-1800 and TETRA standards (“frequency use rights for mobile telecommunications systems”) by a Member State in return for a frequency use payment is a telecommunications activity? (2) Is the third subparagraph of Article 4(5) of the Sixth Directive to be interpreted as meaning that a Member State whose national law does not provide for the criterion mentioned in [that provision] of the “[non]-negligible” extent of an activity (the de minimis rule) as a condition for having the status of taxable person must therefore be regarded as a taxable person for all telecommunications activities in every case regardless of whether the extent of those activities is negligible? (3) Is the third subparagraph of Article 4(5) of the Sixth Directive to be interpreted as meaning that the allocation of frequency use rights for mobile telecommunications systems by a Member State in return for frequency use payments [corresponding to total amounts] of EUR 831 595 241.10 (UMTS/IMT 2000) or EUR 98 108 326.00 (GSM/DCS-1800 channels) or EUR 4 832 743.47 (TETRA) is to be regarded as an activity of non-negligible extent, so that the Member State is considered a taxable person in respect of that activity? (4) Is the second subparagraph of Article 4(5) of the Sixth Directive to be interpreted as meaning that it would lead to significant distortions of competition if a Member State, when allocating frequency use rights for mobile telecommunications systems in return for [frequency use payments corresponding to total amounts] of EUR 831 595 241.10 (UMTS IMT-2000) or EUR 98 108 326.00 (GSM/DCS-1800 channels) or EUR 4 832 743.47 (TETRA), does not subject those payments to turnover tax and private bidders for those frequencies must subject that activity to [that] tax? (5) Is the first subparagraph of Article 4(5) of the Sixth Directive to be interpreted as meaning that an activity of a Member State which allocates frequency use rights for mobile telecommunications systems to mobile telecommunications operators in such a way that a highest bid for the frequency use payment is first ascertained in an auction procedure and the frequencies are then allocated to the highest bidder does not take place in the exercise of public authority [by that State], so that the State is considered a taxable person in respect of that activity, regardless of the legal nature under the State’s national law of the act which effects the allocation? (6) Is Article 4(2) of the Sixth Directive to be interpreted as meaning that the allocation of frequency use rights for mobile telecommunications systems by a Member State described in Question 5 is to be regarded as an economic activity, so that the Member State is considered a taxable person in respect of that activity? (7) Is the Sixth Directive to be interpreted as meaning that the frequency use payments determined for the allocation of frequency use rights for mobile telecommunications systems are gross payments (which already include VAT) or net payments (to which VAT may still be added)?’ The questions referred for a preliminary ruling The sixth question32 By that question, which must be examined first, the national court is essentially asking whether the allocation by way of an auction by a Member State of rights such as the frequency use rights at issue in the main proceedings constitutes an ‘economic activity’ within the meaning of Article 4(2) of the Sixth Directive. 33 Under Article 4(1) of the Sixth Directive, ‘taxable person’ means any person who independently carries out in any place any economic activity specified in paragraph 2 thereof, whatever the purpose or results of that activity. ‘Economic activity’ is defined in Article 4(2) as including all activities of producers, traders and persons supplying services, inter alia the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis. 34 In that regard, it must be pointed out that, although Article 4 of the Sixth Directive gives a very wide scope to VAT, only activities of an economic nature are covered by that provision (see, to that effect, Case C-306/94 Régie dauphinoise [1996] ECR I-3695, paragraph 15; Case C‑77/01 EDM [2004] ECR I-4295, paragraph 47; and Case C-465/03 Kretztechnik [2005] ECR I-4357, paragraph 18). 35 It is also apparent from settled case-law that an analysis of the definitions of ‘taxable person’ and ‘economic activities’ shows that the scope of the term ‘economic activities’ is very wide, and that the term is objective in character, in the sense that the activity is considered per se and without regard to its purpose or results (see, inter alia, Case C-223/03 University of Huddersfield [2006] ECR I-1751, paragraph 47 and the case-law cited). 36 According to the order for reference, in the main proceedings the activity carried out by the TCK consisted of allocating, by auction, rights to use certain frequencies in the electromagnetic spectrum to economic operators for a specified period. At the end of the awards procedure, those operators were issued with the authorisation to exploit the rights thus acquired to set up telecommunications equipment operating in defined parts of the electromagnetic spectrum. 37 Therefore, it has to be established whether the issuing of such an authorisation is to be regarded, by its very nature, as the ‘exploitation of … property’ within the meaning of Article 4(2) of the Sixth Directive. 38 At the outset, it is important to point out that, in accordance with the requirements of the principle of neutrality of the common system of value added tax, the term ‘exploitation’ refers to all transactions, whatever may be their legal form, by which it is sought to obtain income from the goods in question on a continuing basis (see, to that effect, Case C-186/89 Van Tiem [1990] ECR I-4363, paragraph 18; EDM, paragraph 48; and Case C-8/03 BBL [2004] ECR I-10157, paragraph 36). 39 In that regard, it must be noted that the activity at issue in the main proceedings consists of the issuing of authorisations which allow the economic operators who receive them to exploit the resulting frequency use rights by offering their services to the public on the mobile telecommunications market in return for remuneration. 40 Such an activity constitutes the means of fulfilling the conditions laid down by Community law, for the purpose, inter alia, of ensuring the effective use of the frequency spectrum and the avoidance of harmful interference between radio-based telecommunications systems and other space-based or terrestrial technical systems, as is apparent from Article 2(1)(d) of Directive 97/13 read in conjunction with Articles 4(1) and 8(1) thereof. 41 Furthermore, it should also be pointed out that, under both Directive 97/13 and the TKG, the issuing of such authorisations falls exclusively within the competence of the Member State concerned. 42 Thus, an activity such as that at issue in the main proceedings constitutes a necessary precondition for the access of economic operators such as the applicants in the main proceedings to the mobile telecommunications market. It cannot constitute participation in that market by the competent national authority. Only the operators, who are the holders of the rights granted, operate on the relevant market by exploiting the property in question for the purpose of obtaining income therefrom on a continuing basis. 43 In those circumstances, an activity such as that at issue in the main proceedings cannot, by its very nature, be carried out by economic operators. In that regard, it should be pointed out that it is irrelevant that those operators thereafter have the right to transfer their rights to use radio frequencies. Such a transfer, apart from remaining subject to the control of the national regulatory authority responsible for spectrum assignment, in accordance with Article 9(4) of Directive 2002/21, cannot be compared to the issuing of an authorisation by the State. 44 Therefore, in granting such an authorisation, the competent national authority is not participating in the exploitation of property, consisting in rights to use the radio-frequency spectrum for the purpose of obtaining income therefrom on a continuing basis. By means of that allocation procedure, that authority exclusively carries out the activity of controlling and regulating the use of the electromagnetic spectrum which has been expressly delegated to it. 45 Furthermore, the fact that the grant of rights such as the frequency use rights at issue in the main proceedings gives rise to a payment cannot affect the legal status of that activity (see, to that effect, Case C-343/95 Diego Calì & Figli [1997] ECR I-1547, paragraph 24 and the case-law cited). 46 Consequently, that grant cannot constitute an ‘economic activity’ within the meaning of Article 4(2) of the Sixth Directive.47 That finding is not called into question by the argument that, having regard to Article 4(5) of the Sixth Directive, it is not inconceivable that a regulatory activity carried out by a body governed by public law may constitute an economic activity within the meaning of Article 4(2) of that directive, so that that body would have to be considered a taxable person in respect of that activity. 48 Even if such a regulatory activity could be classified as an economic activity, the fact still remains that the application of Article 4(5) of the Sixth Directive implies a prior finding that the activity considered is of an economic nature. It is apparent from the answer given in paragraph 46 of this judgment that that is not the case. 49 In the light of the foregoing, the answer to the sixth question must be that Article 4(2) of the Sixth Directive is to be interpreted as meaning that the allocation, by auction by the national regulatory authority responsible for spectrum assignment, of rights such as the frequency use rights at issue in the main proceedings does not constitute an economic activity within the meaning of that provision and, consequently, does not fall within the scope of that directive. The other questions50 In view of the answer given to the sixth question, there is no need to answer the other questions asked by the national court. Costs51 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Article 4(2) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, is to be interpreted as meaning that the allocation, by auction by the national regulatory authority responsible for spectrum assignment, of rights such as rights to use frequencies in the electromagnetic spectrum with the aim of providing the public with mobile telecommunications services does not constitute an economic activity within the meaning of that provision and, consequently, does not fall within the scope of that directive. [Signatures]* Language of the case: German. | 97bea-4daee92-4c5f | EN |
THE COURT OF JUSTICE ANNULS THE NEW SUPPORT SCHEME FOR COTTON | Kingdom of SpainvCouncil of the European Union(Actions for annulment – Agriculture – Chapter 10a of Title IV of Regulation (EC) No 1782/2003, inserted by Article 1(20) of Regulation (EC) No 864/2004 – Amendment of the support scheme for cotton – Condition that the area is maintained at least until the boll opening – Compliance with Protocol 4 on cotton annexed to the Act of Accession of the Hellenic Republic to the European Communities – Concept of production aid – Obligation to state reasons – Misuse of powers – General principles of proportionality and protection of legitimate expectations) Summary of the Judgment1. Court of Justice – Organisation – Assignment of cases to the Grand Chamber(Statute of the Court of Justice, Art. 16, third para.; Rules of Procedure of the Court of Justice, Art. 44(4))2. Agriculture – Common agricultural policy – Cotton – Production aid (Act of Accession of the Hellenic Republic, Protocol 4; Council Regulations Nos 1782/2003 and 864/2004, Art. 1)3. Acts of the institutions – Statement of reasons – Obligation – Scope (Art. 253 EC; Council Regulation No 864/2004)4. Actions for annulment – Grounds – Misuse of powers 5. Community law – Principles – Protection of legitimate expectations – Limits (Council Regulation No 864/2004)6. Agriculture – Common agricultural policy – Cotton – Production aid (Act of Accession of the Hellenic Republic, Protocol 4, para. 2; Council Regulation No 864/2004)7. Actions for annulment – Judgment annulling a measure – Effects (Art. 231 EC; Council Regulations No 1782/2003, Title IV, Chapter 10a, and Art. 156(2)(g), and No 864/2004)1. While the third paragraph of Article 16 of the Statute of the Court of Justice requires the Court to sit as a Grand Chamber if a request to that effect is made by inter alia an institution of the Communities which is a party to the proceedings, a referral of a case back to the Court in order that it may be reassigned to a formation composed of a greater number of judges in accordance with Article 44(4) of the Rules of Procedure constitutes a measure which the formation to which the case has been assigned decides on freely and of its own motion. However, to allow a request under the third paragraph of Article 16 of the Statute to be made at a very advanced stage of the proceedings, such as a request made after the close of the oral procedure and thus at the stage of the deliberations, is liable to cause considerable delay to the progress of the proceedings, and therefore to have effects clearly contrary to the requirement of the proper administration of justice which means that the Court must be able in any case brought before it to ensure that a decision is taken following a procedure that is efficient and completed within a proper time. (see paras 22-23)2. The concept of aid to cotton production, as it appears in paragraph 3 of Protocol 4 annexed to the Act of Accession of the Hellenic Republic, does not preclude the condition of eligibility for the specific aid provided for by Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, inserted by Article 1(20) of Regulation No 864/2004 and consisting in the requirement that the area is maintained at least up to the boll opening. In the absence of a definition of production in Protocol 4, nothing in the text or the context of that act indicates that, in the framework of the protocol, the concept of production has a different meaning from that usually accepted, which refers to a process consisting of several stages. In that respect, the mention in the preamble to Protocol 4 of the importance of cotton as a raw material does not imply that the protocol refers only to harvested cotton, but, taken in the context of the preamble of which it forms part, must be understood as merely pointing out that in view of that importance the support scheme for cotton must not have negative effects on trade with third countries. Moreover, the explanation provided by Article 1 of Regulation No 4006/87 amending Protocol No 4 on cotton that the protocol concerns cotton, not carded or combed, falling within heading No 5201 00 of the combined nomenclature in no way excludes cotton as it is at the time of boll opening. At that stage, just indeed as at the later stage of harvesting, the cotton by definition is not carded or combed. (see paras 41-45, 49)3. The statement of reasons required by Article 253 EC must be appropriate to the nature of the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Community Court to exercise its power of review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons for a measure meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. In the case of a measure intended to have general application, the statement of reasons may be limited to indicating, first, the general situation which led to its adoption and, second, the general objectives which it is intended to achieve. Moreover, if a measure of general application clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for the various technical choices made. Those conditions are satisfied by Regulation No 864/2004 amending Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers. The preamble to that regulation gives a transparent and clear summary of the general situation which led the Community legislature to adopt that act and the general objectives pursued. Recitals 5 and 6 together disclose the essence of the objective pursued in so far as the regulation introduces the new cotton support scheme. The Community legislature was not therefore required additionally to give specific reasons for the various technical choices made, such as the choice to make the grant of the specific aid for cotton conditional on the maintenance of cultivation of the cotton up to the boll opening stage. (see paras 57-60, 64-65)4. An act is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent evidence, to have been taken with the exclusive or main purpose of achieving an end other than that stated or evading a procedure specifically prescribed by the Treaty for dealing with the circumstances of the case. (see para. 69)5. Where a prudent and circumspect economic operator could have foreseen that the adoption of a Community measure is likely to affect his interests, he cannot rely on the principle of the protection of legitimate expectations if the measure is adopted. Furthermore, while that principle is one of the fundamental principles of the Community, economic operators are not justified in having a legitimate expectation that an existing situation which is capable of being altered by the Community institutions in the exercise of their discretionary power will be maintained, particularly in an area such as that of the common organisation of the markets, the objective of which involves constant adjustment to reflect changes in economic circumstances. A prudent and circumspect operator could have foreseen the adoption of Regulation No 864/2004 amending Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and that regulation’s reform of the cotton support scheme. That reform was part of a more extensive reform that had been discussed at political level since 1992 and was moreover specifically envisaged in a Commission communication adopted in 2003, which contained a proposal for amendment to Regulation No 1782/2003 and was the subject of a notice published in the Official Journal. Furthermore, the support scheme in the cotton sector had already been the subject of several substantial reforms in the past. (see paras 81, 83-84)6. In view of the wide discretion enjoyed by the Community legislature where the common agricultural policy is concerned, the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue. That discretion, which implies limited judicial review of its exercise, applies not only to the nature and scope of the measures to be taken but also, to some extent, to the finding of the basic facts. However, even though such judicial review is of limited scope, it requires that the Community institutions must be able to show before the Court that in adopting the act they actually exercised their discretion, which presupposes the taking into consideration of all the relevant factors and circumstances of the situation the act was intended to regulate. The labour costs of a fixed nature, such as the costs of the farmers’ workforces and their families, were not included and were thus not taken into consideration in the comparative study drawn up by the Commission of the foreseeable profitability of cotton growing under the support scheme for cotton introduced by Regulation No 864/2004 amending Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, which was used as the basis of the determination of the amount of the specific aid for cotton. However, the relevance of the labour costs in question for the purposes of calculating the production costs of cotton and the foreseeable profitability of that crop appears in itself to be scarcely deniable. Moreover, the potential effects of the reform of the cotton support scheme on the economic situation of the ginning undertakings were not examined. Cotton production is not economically possible without the presence in the vicinity of the production regions of such undertakings operating under economically sustainable conditions, since cotton has little commercial value before being processed and it cannot be transported over long distances. The production of cotton and its processing by the ginning undertakings thus appear to be inextricably linked. The potential effects of the reform of the cotton support scheme on the economic viability of the ginning undertakings therefore constitute a basic factor to be taken into account in order to assess the profitability of cotton growing. In this respect, the Council, the author of Regulation No 864/2004, has not shown before the Court that in adopting the new cotton support scheme established by that regulation it actually exercised its discretion, involving the taking into consideration of all the relevant factors and circumstances of the case. It follows that the information submitted by the Community institutions does not enable the Court to ascertain whether the Community legislature was able, without exceeding the bounds of the broad discretion it enjoys in the matter, to reach the conclusion that fixing the amount of the specific aid for cotton at 35% of the total existing aid under the previous support scheme would suffice to guarantee the objective set out in recital 5 in the preamble to Regulation No 864/2004, namely to ensure the profitability and hence the continuation of that crop, an objective reflecting that laid down in paragraph 2 of Protocol 4 annexed to the Act of Accession of the Hellenic Republic. Consequently, the principle of proportionality was infringed. (see paras 98, 117, 121-122, 124, 126, 128, 131-135)7. Under Article 156(2)(g) of Regulation No 1782/2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers, inserted by Article 1(28) of Regulation No 864/2004, the new cotton support scheme provided for by Chapter 10a of Title IV of Regulation No 1782/2003 is to apply as from 1 January 2006 for the cotton sown as from that date. Farmers in the Member States concerned may consequently already have taken steps to adapt to that scheme so as to be able to benefit from the support it provides for, or at least will have to take such steps shortly. Moreover, the competent authorities of those Member States may already have taken the necessary measures for implementing the scheme, or will soon have to take such measures. In the light of those factors, and in particular in order to avoid any legal uncertainty as to the scheme applicable to aid in the cotton sector following the annulment of Chapter 10a of Title IV of Regulation No 1782/2003, the effects of the annulment must be suspended until the adoption, within a reasonable time, of a new regulation. (see paras 139-141)JUDGMENT OF THE COURT (Second Chamber)7 September 2006 (*) In Case C‑310/04,ACTION for annulment under Article 230 EC, brought on 22 July 2004,Kingdom of Spain, represented by M. Muñoz Pérez, acting as Agent, with an address for service in Luxembourg, applicant,Council of the European Union, represented by M. Balta and F. Florindo Gijón, acting as Agents, defendant,supported byCommission of the European Communities, represented by M. Nolin and S. Pardo Quintillán, acting as Agents, with an address for service in Luxembourg, intervener,THE COURT (Second Chamber),composed of C.W.A. Timmermans (Rapporteur), President of the Chamber, R. Schintgen, R. Silva de Lapuerta, P. Kūris and G. Arestis, Judges, Advocate General: E. Sharpston,Registrar: L. Hewlett, Principal Administrator,having regard to the written procedure and further to the hearing on 19 January 2006,after hearing the Opinion of the Advocate General at the sitting on 16 March 2006,gives the followingJudgment1 By its application the Kingdom of Spain asks the Court to annul Chapter 10a of Title IV of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC) No 1454/2001, (EC) No 1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001 (OJ 2003 L 270, p. 1), inserted by Article 1(20) of Council Regulation (EC) No 864/2004 of 29 April 2004 (OJ 2004 L 161, p. 48) (‘Regulation No 1782/2003 as amended’ and, with respect to Chapter 10a of the regulation, ‘the new cotton support scheme’). Legal context2 On the accession of the Hellenic Republic to the European Communities in 1980 a support scheme for cotton was introduced by Protocol 4 on cotton annexed to the Act of Accession of that Member State (OJ 1979 L 291, p. 174, ‘Protocol 4’). 3 That scheme was applied for the first time to the 1981 harvest, and was later extended when the Kingdom of Spain and the Portuguese Republic acceded to the European Communities in 1986. 4 According to paragraph 2 of Protocol 4, the scheme is intended particularly to support the production of cotton in regions of the Community where it is important for the agricultural economy, to permit the producers concerned to earn a fair income, and to stabilise the market by structural improvements at the level of supply and marketing. 5 Paragraph 3 of Protocol 4, both in its original version and as amended by Council Regulation (EC) No 1050/2001 of 22 May 2001 adjusting, for the sixth time, the system of aid for cotton introduced by Protocol 4 annexed to the Act of Accession of Greece (OJ 2001 L 148, p. 1) provides that the scheme ‘shall include the grant of an aid to production’. 6 Paragraph 6 of Protocol 4, as amended by Regulation No 1050/2001, provides that ‘[t]he Council, acting by a qualified majority on a proposal from the Commission and after consulting the European Parliament, shall decide on the adjustments necessary to the system introduced pursuant to this Protocol and shall adopt the general rules necessary for implementing the provisions of this Protocol’. 7 On the basis of paragraph 6, the Council adopted Council Regulation (EC) No 1051/2001 of 22 May 2001 on production aid for cotton (OJ 2001 L 148, p. 3). 8 Under Articles 2, 11 and 12 of that regulation, the production aid for unginned cotton is equivalent to the difference between the guide price for unginned cotton fixed by the regulation and the world market price, and the aid is paid to cotton ginning undertakings for the unginned cotton purchased by them at a price at least equal to the minimum price fixed by that regulation. 9 As part of the reform of the common agricultural policy the Council adopted Regulation No 1782/2003, which lays down common rules for direct support schemes under the common agricultural policy and for certain support schemes for farmers. 10 To bring the support schemes for cotton, olive oil, raw tobacco and hops into line with those of other sectors of the common agricultural policy, the Council adopted Regulation No 864/2004. 11 Recitals 1, 2, 5, 6, 7, 22 and 23 in the preamble to Regulation No 864/2004 state: ‘(1) The decoupling of direct producer support and the introduction of the single payment scheme are essential elements in the process of reforming the common agricultural policy aimed at moving away from a policy of price and production support to a policy of farmer income support. Regulation (EC) No 1782/2003 … introduced these elements for a variety of agricultural products. (2) In order to meet the objectives that lay at the heart of the reform of the common agricultural policy, the support for cotton, olive oil, raw tobacco and hops should be largely decoupled and integrated into the single payment scheme. …(5) A complete integration in the single payment scheme of the current support scheme in the cotton sector would bring a significant risk of production disruption to the cotton producer regions of the Community. A part of the support should therefore continue to be linked to the cultivation of cotton through a crop specific payment per eligible hectare. Its amount should be calculated in such a way so as to ensure economic conditions which, in regions which lend themselves to that crop, enable activity in the cotton sector to continue and prevent cotton from being driven out by other crops. In order to achieve that goal, it is justified that the total available aid per hectare per Member State is set at 35% of the national share of the aid that went indirectly to the producers. (6) The remaining 65% of the national share of the aid that went indirectly to the producers should be available for the single payment scheme. (7) For environmental reasons, a base area per Member State should be established in order to limit the areas sown under cotton. In addition, the eligible areas should be restricted to those authorised by the Member States. (22) The decoupling of the aid for cotton and raw tobacco might require actions towards restructuring. Additional Community support for the production regions of the Member States in which Community aid for cotton and raw tobacco was granted during 2000, 2001 and 2002 should be made available by a transfer of funds from heading 1(a) to heading 1(b) of the financial perspectives. This additional support should be used as provided for in Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) … (23) In order to ensure the harmonious continuation of the payment of income aid to producers in the cotton, olive oil and tobacco sectors, the option of postponing the integration of these support schemes in the single payment scheme should not apply.’ 12 Regulation No 864/2004 inserted in Title IV of Regulation No 1782/2003 a Chapter 10a, ‘Crop specific payment for cotton’, which comprises Articles 110a to 110f. 13 Under Articles 110a to 110c of Regulation No 1782/2003 as amended: ‘Article 110aScopeAid shall be granted to farmers producing cotton, falling within CN code 5201 00 under the conditions laid down in this Chapter.Article 110bEligibility1. The aid shall be granted per hectare of eligible area of cotton. In order to be eligible, the area shall be located on agricultural land authorised by the Member State for cotton production, sown under authorised varieties and maintained at least until the boll opening under normal growing conditions. However, if the cotton does not attain the stage of boll opening as a result of exceptional weather conditions recognised as such by the Member State, areas fully sown under cotton shall remain eligible for aid provided that the areas in question have up to the boll opening not been used for any other purpose than for the production of cotton. 2. Member States shall authorise the land and the varieties referred to in paragraph 1 in accordance with detailed rules and conditions to be adopted in accordance with the procedure referred to in Article 144(2). Article 110cBase areas and amounts1. A national base area is hereby established for:– Greece: 370 000 ha– Spain: 70 000 ha– Portugal: 360 ha.2. The amount of the aid per eligible hectare shall be in:– Greece: EUR 594 for 300 000 hectares and EUR 342.85 for the remaining 70 000 hectares– Spain: EUR 1 039– Portugal: EUR 556.…’14 Articles 110d and 110e of Regulation No 1782/2003 as amended deal with approved inter-branch organisations, made up of farmers producing cotton and at least one ginner and ‘aiming at, in particular, the supply of qualitatively suitable unginned cotton to the ginner’. These inter-branch organisations can differentiate a maximum of half the aid to which their farmer members are entitled in accordance with scales fixed by them which take into account in particular the quality of the unginned cotton. 15 Regulation No 864/2004 also inserted in Regulation No 1782/2003 a Title IVB, ‘Financial transfers’, containing inter alia Article 143d, ‘Financial transfer for restructuring in the cotton regions’, which reads as follows: ‘As from budget year 2007, an amount of EUR [22 million], originating from the average expenditure for cotton in the years 2000, 2001 and 2002, shall be available per calendar year as additional Community support for measures in cotton producing regions under rural development programming financed under the EAGGF “Guarantee” Section according to Regulation (EC) No 1257/1999.’ 16 Finally, Regulation No 864/2004 inserted in Article 153 of Regulation No 1782/2003 inter alia a Paragraph 4a repealing Regulation No 1051/2001, which continues, however, to apply to the marketing year 2005/06. Under Article 156(2)(g) of Regulation No 1782/2003 as amended, the new support scheme for cotton is to apply from 1 January 2006 for the cotton sown as from that date. Forms of order sought by the parties17 The Spanish Government claims that the Court should: – annul Chapter 10a of Title IV of Regulation No 1782/2003 as amended;– order the Council to pay the costs.18 The Council asks the Court to dismiss the action as unfounded and order the applicant to pay the costs. 19 The Commission, which was given leave to intervene in support of the form of order sought by the Council by order of the President of the Court of 21 September 2004, contends that the Court should dismiss the action as unfounded. Application by the Council for the case to be referred back to the Court in order for it to be reassigned to the Grand Chamber20 By letter lodged at the Court Registry on 5 April 2006, the Council asked for the case to be referred back to the Court in order for it to be reassigned to the Grand Chamber. 21 That application was made under the third paragraph of Article 16 of the Statute of the Court of Justice, which provides that the Court is to sit as a Grand Chamber inter alia when an institution of the Communities that is a party to the proceedings so requests, and under Article 44(4) of the Rules of Procedure of the Court of Justice, which provides that the formation to which a case has been assigned may, at any stage of the proceedings, refer the case back to the Court in order that it may be reassigned to a formation composed of a greater number of judges. 22 It must be observed that the third paragraph of Article 16 of the Statute requires the Court to sit as a Grand Chamber if a request to that effect is made by inter alia an institution of the Communities which is a party to the proceedings, whereas a referral back under Article 44(4) of the Rules of Procedure constitutes a measure which the formation to which the case has been assigned in principle decides on freely and of its own motion. 23 However, to allow a request under the third paragraph of Article 16 to be made at a very advanced stage of the proceedings, in the present case after the close of the oral procedure and thus at the stage of the deliberations, is liable to cause considerable delay to the progress of the proceedings, and therefore to have effects clearly contrary to the requirement of the proper administration of justice which means that the Court must be able in any case brought before it to ensure that a decision is taken following a procedure that is efficient and completed within a proper time. 24 Moreover, the Court considers in the present case that it is in possession of all the material necessary for it to give judgment. 25 The Council’s application must therefore be rejected. The action26 In support of its action, the Spanish Government relies on four pleas in law: infringement of Protocol 4, breach of the obligation to state reasons, misuse of powers, and breach of the general principles of proportionality and the protection of legitimate expectations. First plea: infringement of Protocol 4 Arguments of the parties27 By its first plea, the Spanish Government submits that, in that it lays down as the sole condition for eligibility for the specific aid for cotton that the area must be maintained at least until the boll opening, Article 110b of Chapter 10a of Title IV of Regulation No 1782/2003 as amended is contrary to paragraph 3 of Protocol 4, a provision of primary Community law, and in particular to the requirement in that provision for a system of aid to production. 28 It submits that the term ‘production’ in paragraph 3 of Protocol 4 must be understood as laying down, as a condition for the grant of aid for cotton, that the cotton is harvested. 29 The reference in the third recital in the preamble to that protocol to the importance of cotton as a raw material should be understood as referring to cotton that has been harvested, as only harvested cotton can be processed industrially. 30 Moreover, the explanation provided by Article 1 of Commission Regulation (EEC) No 4006/87 of 23 December 1987 amending Protocol No 4 on cotton (OJ 1987 L 377, p. 49) that that protocol ‘concerns cotton, not carded or combed, falling within heading No 5201 00 of the combined nomenclature’ makes sense only if the term ‘cotton’ refers to harvested cotton, since, at the boll opening stage, the cotton is necessarily of that description. 31 Finally, according to a general principle of law common to the Member States, and enshrined in particular in the civil codes of several of those States, a natural fruit such as cotton cannot be regarded as being produced before it is harvested, since before harvesting a fruit has no legal existence separate from the plant and is thus considered to form part of the plant itself. 32 The requirement for the area to be maintained at least until the boll opening, laid down by Regulation No 1782/2003 as amended as the sole condition of eligibility for the new cotton support scheme, no longer – in contrast to the earlier support schemes – implies that the cotton has to be harvested. 33 The wording of recital 5 in the preamble to Regulation No 864/2004 and that of Chapter 10a of Title IV of Regulation No 1782/2003 as amended confirm that the new support for cotton is an aid to cultivation, not to production of cotton. 34 Studies further show that it is foreseeable that, following the entry into force of the new cotton support scheme, it will no longer be profitable for farmers to ensure that the cotton attains a minimum quality, and consequently they will no longer harvest it. 35 Moreover, according to the classification of aid for the purposes of the agreement on agriculture in Annex 1A to the Agreement establishing the World Trade Organisation, which was approved by the first indent of Article 1(1) of Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336, p. 1) (‘the WTO agreement on agriculture’), the new support scheme for cotton moves from the ‘amber box’ (support for production referred to in Article 6 of that agreement) to the ‘blue box’ (direct payments under production-limiting programmes based on fixed area and yields within the meaning of Article 6(5) of the agreement). 36 That confirms that in the new scheme no importance is attached to the production of cotton. 37 Consequently, that scheme can no longer be classified as aid to production within the meaning of paragraph 3 of Protocol 4. 38 The Council submits that the new cotton support scheme is entirely compatible with Protocol 4, in particular paragraph 3, as it is indeed a scheme of aid to production, even if the event that gives rise to the payment of the aid is now the maintenance of cultivation until the boll opening stage. Findings of the Court39 By its first plea the Spanish Government contests the compatibility of the new condition of eligibility for the specific aid which is part of the new cotton support scheme, namely that the area is maintained at least until boll opening, with paragraph 3 of Protocol 4. 40 It is common ground that this new condition of eligibility for aid does not require the cotton to be harvested. This plea therefore raises essentially the question whether the obligation in paragraph 3 of Protocol 4 to provide for a system of aid to production must be understood as implying that such a system must necessarily make the grant of aid subject to a condition of harvesting. 41 As the Council has observed, the concept of production as usually accepted refers to a process consisting of several stages. 42 In the absence of a definition of the term in Protocol 4, nothing in the text or the context of that act indicates that, in the framework of the protocol, the concept of production has a different meaning from that usually accepted. 43 In that respect, the mention in the preamble to Protocol 4 of the importance of cotton as a raw material does not imply that the protocol refers only to harvested cotton. 44 That mention, taken in the context of the preamble of which it forms part, must be understood as merely pointing out that in view of the importance of cotton as a raw material the support scheme for cotton must not have negative effects on trade with third countries. 45 As regards, next, the explanation provided by Article 1 of Regulation No 4006/87 that Protocol 4 concerns cotton, not carded or combed, falling within heading No 5201 00 of the combined nomenclature, that statement in no way excludes cotton as it is at the time of boll opening. At that stage, just indeed as at the later stage of harvesting, the cotton by definition is not carded or combed. 46 Furthermore, the meanings of the concepts of production, product or fruit which might be derived, as the Spanish Government submits, from definitions common to the civil laws of certain Member States, or even from the classification of aid for the purposes of the WTO agreement on agriculture, are irrelevant in this respect. 47 Consequently, the manifestly restrictive definition of production suggested by the Spanish Government, according to which that term refers only to the final stage of production constituted by the harvest, cannot be accepted. 48 Moreover, the usual meaning of the term production, which refers to the production process as a whole, must be seen in relation to the broad discretion enjoyed by the Council under paragraph 6 of Protocol 4, both in deciding on the adjustments necessary to the system introduced by that protocol and in adopting the general rules necessary for implementing the provisions of the protocol. 49 In the framework of that broad discretion, the Council can make the grant of aid for cotton conditional on the occurrence of one or other stage in the cultivation of cotton. 50 The measure chosen must nevertheless be proportionate to the objectives defined in paragraph 2 of Protocol 4. The question whether that limitation was complied with in the present case is the subject of the second part of the fourth plea put forward by the Spanish Government. 51 It was therefore permissible in principle for the Community legislature to choose, as a condition of eligibility for the aid for cotton, one stage of cultivation, in this case that of the boll opening, rather than the final stage consisting of the harvest, a stage which had to be completed in the previous support schemes. 52 Consequently, the references in recital 5 in the preamble to Regulation No 864/2004 and in the title of Chapter 10a of Title IV of Regulation No 1782/2003 as amended to the new cotton support scheme as aid to cultivation do not mean that that aid does not constitute an aid to cotton production within the meaning of paragraph 3 of Protocol 4. 53 The conclusion must be that the concept of aid to production, as it appears in paragraph 3 of Protocol 4, does not preclude the condition of eligibility for the specific aid provided for by the new cotton support scheme consisting in the requirement that the area is maintained at least up to the boll opening. 54 The first plea must therefore be rejected. Second plea: breach of the obligation to state reasons55 By its second plea the Spanish Government submits that the obligation to state reasons laid down in Article 253 EC was not complied with in connection with the adoption of the new cotton support scheme, since Regulation No 864/2004 introducing that scheme nowhere mentions the reasons for which the Community legislature replaced the previous scheme, under which indirect aid was passed on to producers by ginning undertakings in relation to the cotton harvested, by a scheme introducing direct aid to producers, the grant of which is now subject to the sole condition of maintaining the cultivation of the cotton up to the boll opening. 56 The Council considers that the limits set by the Court’s case-law on statements of reasons for legislative acts of general application were observed. It suffices in this respect to note that Regulation No 864/2004 sets out the general reasons which led the Community legislature, in the exercise of its broad discretion, to adopt the provisions that are the subject of the present action. Moreover, the Community legislature was not obliged to explain specifically why under the new scheme the payment of coupled aid is no longer linked to the quantity or quality of the cotton harvested but to the cotton cultivated on a given area. 57 It is settled case-law that the statement of reasons required by Article 253 EC must be appropriate to the nature of the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Community Court to exercise its power of review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons for a measure meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see, inter alia, Case C‑26/00 Netherlands v Commission [2005] ECR I‑6527, paragraph 113 and the case-law cited). 58 In the case of a measure intended to have general application, as here, the statement of reasons may be limited to indicating, first, the general situation which led to its adoption and, second, the general objectives which it is intended to achieve (see, inter alia, Case C‑342/03 Spain v Council [2005] ECR I‑1975, paragraph 55). 59 Moreover, the Court has repeatedly held that if the contested measure clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for the various technical choices made (see, inter alia, Case C‑284/94 Spain v Council [1998] ECR I‑7309, paragraph 30). 60 In this respect, it must be stated that the preamble to Regulation No 864/2004 gives a transparent and clear summary of the general situation which led the Community legislature to adopt that act and the general objectives pursued. 61 Recitals 1 and 2 in the preamble to that regulation show that the changes made by the regulation are intended to bring the support schemes in certain sectors of the common agricultural policy, including cotton, into line with the objectives of the reform introduced for the other sectors of that policy by Regulation No 1782/2003. 62 Recital 2 states that those objectives involve, for the sectors concerned, moving away from a policy of price and production support to a policy of income support for farmers, and hence decoupling a large part of the support and integrating it into the single payment scheme. 63 Recitals 5 and 6 in the preamble to Regulation No 864/2004 then set out the reasons for which support for cotton cannot be completely decoupled. They also explain the bases on which the amount of support to remain coupled is to be fixed, and state that that amount corresponds to 35% of the total existing indirect aid and that the remaining 65% of that total is to be available for the single payment scheme. 64 It must be concluded that those recitals together disclose the essence of the objective pursued by the institution in adopting Regulation No 864/2004 in so far as it introduces the new cotton support scheme. 65 The Community legislature was not therefore required additionally to give specific reasons for the various technical choices made, such as the choice to make the grant of the specific aid for cotton conditional on the maintenance of cultivation of the cotton up to the boll opening stage. 66 It follows that the second plea must also be rejected. Third plea: misuse of powers67 The Spanish Government submits that, in so far as Regulation No 864/2004 establishes the new cotton support scheme, it is vitiated by the misuse of powers, since it was adopted on the basis of paragraph 6 of Protocol 4, but for a different purpose from that referred to there, and with the essential aim of circumventing the specific procedure provided for by the EC Treaty for amending the provisions of primary law in that protocol. 68 The Council replies that the introduction of the new cotton support scheme by the contested provisions of Regulation No 1782/2003 as amended corresponds perfectly to the concept of ‘necessary adjustment’ mentioned in paragraph 6 of Protocol 4, so that there can be no question of a misuse of powers. 69 As the Court has repeatedly held, an act is vitiated by misuse of powers only if it appears, on the basis of objective, relevant and consistent evidence, to have been taken with the exclusive or main purpose of achieving an end other than that stated or evading a procedure specifically prescribed by the Treaty for dealing with the circumstances of the case (see, to that effect, inter alia, Case C‑342/03 Spain v Council, paragraph 64 and the case-law cited). 70 The Spanish Government has not adduced any such evidence. 71 As regards the aims pursued by the Council when adopting Regulation No 864/2004, in so far as it established the new cotton support scheme, there is nothing in the case-file to support the conclusion that the Council pursued an exclusive or main aim other than that stated in recitals 1 and 2 in the preamble to that regulation, namely adjusting the support scheme in the cotton sector to bring it into line with the objectives of the reform that had already been introduced for other sectors of the common agricultural policy by Regulation No 1782/2003. 72 Nor has the Spanish Government shown that, by adopting Regulation No 864/2004 on the basis of paragraph 6 of Protocol 4, the Council pursued the exclusive or main aim of evading the procedure prescribed for the revision of provisions of primary law. 73 In this respect, it must be noted that the legal basis constituted by paragraph 6 of Protocol 4 confers a wide discretion on the Council to decide on the necessary adjustments to the cotton support scheme provided for by the protocol. 74 The Spanish Government has not produced any evidence to show that the Council in fact pursued an aim other than that of making such adjustments and thus followed the procedure laid down in paragraph 6 of Protocol 4 for making those adjustments with the exclusive or main aim of evading the procedure prescribed for the revision of provisions of primary law. 75 Finally, it is apparent from recital 5 in the preamble to Regulation No 864/2004 that, in adopting that act in so far as it amends the cotton support scheme, the Council intended to comply with the objectives laid down in paragraph 2 of Protocol 4, namely to support the production of cotton in regions of the Community where it is important for the agricultural economy, to permit the producers concerned to earn a fair income, and to stabilise the market by structural improvements at the level of supply and marketing. 76 Whether those objectives were achieved is the subject of the second part of the fourth plea, alleging breach of the principle of proportionality. There is no need therefore to consider the point in connection with the present plea. 77 In the light of the foregoing, the third plea must also be rejected. Fourth plea: breach of the general principles of Community law of proportionality and protection of legitimate expectations78 The second part of this plea, relating to the principle of the protection of legitimate expectations, should be examined first, followed by the first part, relating to the principle of proportionality. Breach of the principle of the protection of legitimate expectations– Arguments of the parties79 The Spanish Government submits that the adoption of Regulation No 864/2004 establishing the new cotton support scheme infringed the legitimate expectations of operators in the cotton sector, who could expect to continue to benefit from a support scheme complying in any case with the objectives stated in paragraph 2 of Protocol 4, in particular the maintenance of cotton production in certain regions of the Community, and the requirement of a system of aid to production as provided for in paragraph 3 of the protocol. 80 The Council submits that the adoption of that regulation did not infringe the legitimate expectations of operators in the cotton sector in the maintenance of an aid system compatible with Protocol 4, as the new cotton support scheme is fully compatible with the objectives of that protocol and does not cause them the considerable loss alleged by the Spanish Government, their income remaining stable. – Findings of the Court81 According to the Court’s settled case-law, any economic operator on whose part an institution has promoted reasonable expectations may rely on the principle of the protection of legitimate expectations. However, if a prudent and circumspect operator could have foreseen that the adoption of a Community measure is likely to affect his interests, he cannot plead that principle if the measure is adopted. Furthermore, while the principle of the protection of legitimate expectations is one of the fundamental principles of the Community, economic operators are not justified in having a legitimate expectation that an existing situation which is capable of being altered by the Community institutions in the exercise of their discretionary power will be maintained, particularly in an area such as that of the common organisation of the markets, the objective of which involves constant adjustment to reflect changes in economic circumstances (Joined Cases C‑37/02 and C‑38/02 Di Lenardo and Dilexport [2004] ECR I‑6911, paragraph 70 and the case-law cited). 82 In the present case, the Spanish Government has not produced any evidence to show that the operators concerned could have entertained any reasonable expectation promoted by the Community institutions that the rules applicable to aid in the cotton sector before their amendment by Regulation No 864/2004 would be maintained. 83 Moreover, in the present case, the principle of the protection of legitimate expectations cannot be relied on, since a prudent and circumspect operator could have foreseen the adoption of Regulation No 864/2004 and that regulation’s reform of the cotton support scheme. 84 As the Advocate General observed in point 70 of her Opinion, that reform was part of a more extensive fundamental reform that had been discussed at political level since 1992 and was moreover specifically envisaged in point 2 of Commission Communication COM(2003) 698 final, adopted on 20 November 2003, which contained a proposal for amendment to Regulation No 1782/2003 and was the subject of a notice published in the Official Journal (OJ 2004 C 96, p. 5). Furthermore, the support scheme in the cotton sector had already been the subject of several substantial reforms in the past. 85 Finally, in so far as the Spanish Government alleges that the principle of the protection of legitimate expectations was infringed because the new cotton support scheme does not comply with the objectives of Protocol 4, that argument merges with the argument put forward in support of the first part of the fourth plea, so that it need not be examined in the context of this part. 86 Consequently, the second part of the fourth plea, alleging breach of the principle of protection of legitimate expectations, must be rejected. Breach of the principle of proportionality87 The Spanish Government submits essentially that the measures adopted in the context of the new cotton support scheme, in particular fixing the amount of the specific aid for cotton at the level of 35% of the aid available under the previous support scheme and making eligibility for the aid conditional only on the maintenance of cultivation until the boll opening, are manifestly inappropriate to the objective as set out in recital 5 in the preamble to the regulation, an objective that reflects the aim laid down in paragraph 2 of Protocol 4. The principle of proportionality has therefore been infringed. 88 Two studies produced by the Spanish Government show that the foreseeable consequence of those measures will be that the profitability of cotton production in the Spanish regions concerned will not be ensured. 89 The probable result of that will be, in particular, the abandoning of a considerable part of Spanish production of raw cotton, or even its replacement by other crops, and a substantial decrease in the degree of utilisation of the processing capacity of the ginning plants in the production regions, threatening their economic viability and possibly even leading to their definitive closure. 90 That latter development would be likely to bring about a further fall in cotton production, since production is not possible without the presence, and hence the economic viability, of such plants in the vicinity of the production regions concerned, as cotton has scarcely any commercial value before it is processed, and it cannot be transported over long distances. 91 The Council and the Commission submit that the disputed measures are not manifestly inappropriate in relation to their objectives as set out in paragraph 2 of Protocol 4 and recital 5 in the preamble to Regulation No 864/2004. 92 The income of producers under the new cotton support scheme, namely the total of the single payment, the specific aid per hectare and the selling price of the harvest, remains substantially the same as under the previous system, so that the profitability of cotton producing undertakings is not affected by the introduction of the new scheme. 93 Moreover, a comparative study of the foreseeable profitability of cotton growing under the new support scheme compared to that of other crops shows that the amount of the specific aid per hectare was fixed at a level which allows producers to achieve for cotton a gross margin excluding the single payment comparable to that produced by other crops such as durum wheat or maize. 94 Consequently, since cotton growing remains viable according to the forecasts, it is not probable that it will be driven out by other crops. 95 The Court’s settled case-law on the principle of proportionality should first be recalled, as it applies in particular in the context of the common agricultural policy. 96 The Community legislature has a wide discretion where the common agricultural policy is concerned, corresponding to the political responsibilities given to it by Articles 34 EC to 37 EC. Consequently, judicial review by the Community Court must be limited to verifying that the measure in question is not vitiated by any manifest error or misuse of powers and that the authority concerned has not manifestly exceeded the limits of its discretion (Case C‑189/01 Jippes and Others [2001] ECR I‑5689, paragraph 80 and the case-law cited). 97 As to review of proportionality, it should be recalled that the principle of proportionality, which is one of the general principles of Community law, requires that acts adopted by Community institutions do not exceed the limits of what is appropriate and necessary in order to attain the legitimate objectives pursued by the legislation in question; where there is a choice between several appropriate measures, recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (Jippes, paragraph 81 and the case-law cited). 98 As regards judicial review of the implementation of that principle, bearing in mind the wide discretion enjoyed by the Community legislature where the common agricultural policy is concerned, the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate in terms of the objective which the competent institution is seeking to pursue (Jippes, paragraph 82 and the case-law cited). 99 What must be ascertained is therefore not whether the measure adopted by the legislature was the only one or the best one possible but whether it was manifestly inappropriate (see, to that effect, Jippes, paragraph 83). 100 As to the new cotton support scheme established by Regulation No 864/2004, it is apparent from recital 5 in the preamble to that regulation that the amount of the specific aid for cotton was determined in such a way as to ensure economic conditions which, in regions which lend themselves to that crop, enable activity in that sector of agriculture to continue and thus prevent cotton from being driven out by other crops. 101 That objective reflects, and defines more precisely, those stated in paragraph 2 of Protocol 4, according to which the system of production aid in the cotton sector is intended in particular to support the production of cotton in regions of the Community where it is important for the agricultural economy, to permit the producers concerned to earn a fair income, and to stabilise the market by structural improvements at the level of supply and marketing. 102 As follows from the case-law cited in paragraphs 98 and 99 above, this part of the plea put forward by the Spanish Government implies an examination of whether the contested measures of the new cotton support scheme are manifestly inappropriate in terms of that objective, which consists essentially in fixing the amount of the specific aid for cotton at a level such that it ensures adequate profitability and hence the continuation of cotton production in regions which lend themselves to that crop, thus avoiding its being driven out by other crops. 103 It is common ground that the adoption of Regulation No 864/2004 was not preceded by a Commission study assessing the probable socio-economic effects of the proposed reform in the cotton sector, whereas such studies had been carried out in connection with the reform of support schemes in some other sectors, such as the tobacco sector. 104 The question therefore arises of the bases on which the amount of the specific aid for cotton was determined, and consequently of whether, on those bases, the Community legislature was able, without exceeding its broad discretion, to reach the conclusion that, if set at 35% of the total existing aid in the previous support scheme, that amount would suffice for attaining the objective pursued of ensuring the profitability and hence the continuation of that crop. 105 In this respect, the Council points to a table drawn up by the Commission containing a comparative study of the foreseeable profitability of cotton growing under the new support scheme in comparison with that of other crops. The Council observes that those figures were submitted to it so that they could be taken into account in the adoption of Regulation No 864/2004. 106 According to the study, the gross margin per hectare excluding the single payment is EUR 744 for cotton, and is thus between the margin for durum wheat, EUR 334, and that for maize, EUR 914. The Commission asserted at the hearing that those figures demonstrate that cotton growing will remain profitable and possible after the entry into application of the reform. 107 The margin in question is calculated according to a formula consisting essentially in subtracting from income per hectare – made up of the selling price of raw cotton, corresponding to EUR 750, and the specific aid of EUR 1 039, giving a total of EUR 1 789 – the production costs, those being the sum of the specific costs and overheads, which, according to the Commission, are to be assessed at EUR 1 045 per hectare. 108 The Council submits, however, that for the purposes of that study of the future profitability of cotton growing account should also be taken of the income deriving from the single payment equivalent to 65% of the existing aid in that sector. 109 It submits that, since the sum of the coupled and decoupled aid under the new cotton support scheme is equivalent to the total amount of the indirect aid granted under the previous support scheme, there is no reason to doubt the future profitability of cotton growing. The reform of aid for that crop is based on its budgetary neutrality. 110 That point of view must be rejected. As the Spanish Government observed without being contradicted by the Commission, in the case of a comparative study of the profitability of alternative crops, the single payment should not be taken into account, as it is granted independently of the crop chosen and even if the farmer decides not to produce anything. 111 That payment therefore has no influence on the farmer’s decision to choose one crop rather than another. The budgetary neutrality of the reform is of no relevance in itself for assessing whether in future farmers will choose to abandon cotton growing or, if so, to replace it by other crops. 112 Relying on two studies, the Spanish Government moreover challenges certain figures used in the calculation of the profitability of cotton growing put forward by the Commission, in particular that relating to production costs. 113 According to those studies, it submits, those costs in fact amount to a minimum of EUR 1 861.81 per hectare. That amount includes labour costs, whereas the corresponding amount used by the Commission wrongly excludes them. Adding the labour costs to the figure of EUR 1 045 per hectare put forward by the Commission reduces to 10% the difference between the Commission’s figure and that adduced by the Spanish Government as regards total production costs. 114 It submits that, since cotton growing requires a much larger workforce than other crops, it is essential that such costs are taken into account in a study of the future profitability of cotton growing. 115 If, then, the Commission’s calculation included labour costs and also took into consideration a selling price consistent with the present level of the market, production costs would be higher than producers’ income under the new support scheme, and the gross margin to be expected for cotton would be zero or even negative, with farmers therefore liable to be working at a loss if they continue to produce cotton. 116 On being questioned on this point at the hearing, the Commission explained that the amount of EUR 1 045 per hectare it took as overheads included in the production costs covers certain labour costs, including those of temporary or seasonal workers and persons performing specific work. 117 However, submits the Commission, a study of the comparative profitability of crops should take account only of specific costs, that is, those linked to the crops concerned, and not of fixed costs, that is, those linked to the operation. The Commission therefore did not include the labour costs of a fixed nature, such as the costs of the farmers’ workforces and their families. 118 The Commission adds that the latter costs could not in any case have been included in the calculation of profitability. First, great – and moreover inexplicable – differences had been observed between the figures for the various regions relating to those costs, so that those figures were not reliable. Second, it is very difficult to divide those costs among the different crops and other activities carried on in each farming operation. 119 In the light of those explanations, the Court must consider whether, by fixing the amount of the specific aid for cotton on the basis of the comparative study referred to in paragraph 105 above, the Community institutions infringed the principle of proportionality. 120 It is true that where, as in the present case, the Community legislature has to assess the future effects of legislation to be enacted although those effects cannot be accurately foreseen, its assessment is open to criticism only if it appears manifestly incorrect in the light of the information available to it at the time of the adoption of the legislation in question (Jippes, paragraph 84 and the case-law cited). 121 It is also true that the Community legislature’s broad discretion, which implies limited judicial review of its exercise, applies not only to the nature and scope of the measures to be taken but also, to some extent, to the finding of the basic facts (see, inter alia, Case C‑120/99 Italy v Council [2001] ECR I‑7997, paragraph 44). 122 However, even though such judicial review is of limited scope, it requires that the Community institutions which have adopted the act in question must be able to show before the Court that in adopting the act they actually exercised their discretion, which presupposes the taking into consideration of all the relevant factors and circumstances of the situation the act was intended to regulate. 123 It follows that the institutions must at the very least be able to produce and set out clearly and unequivocally the basic facts which had to be taken into account as the basis of the contested measures of the act and on which the exercise of their discretion depended. 124 As was noted in paragraphs 116 to 118 above, it is apparent from the information provided by the Commission at the hearing that certain labour costs were not included and were thus not taken into consideration in the comparative study of the foreseeable profitability of cotton growing under the new support scheme which was used as the basis of the determination of the amount of the specific aid for cotton. 125 The Spanish Government submits, however, relying on studies giving figures, that those costs can be calculated, that they are significant, and that taking them into account creates serious doubts as to the profitability of cotton growing under the new support scheme. 126 Without it being necessary to take a decision on the correctness of the figures produced by the various parties, it must be said that the relevance of the labour costs in question for the purposes of calculating the production costs of cotton and the foreseeable profitability of that crop appears in itself to be scarcely deniable. The circumstance relied on by the Commission that obtaining that information would have raised certain technical problems cannot call into question its relevance. 127 Moreover, it must be observed that the Council and the Commission have not put forward specific arguments to disprove the Spanish Government’s assertion that the inclusion of those costs entails an increase in the production costs of cotton such that adequate profitability of that crop under the new support scheme is not ensured, so that that crop, or at least a substantial part of it, is liable to be given up or in some cases driven out by other crops. 128 It is also common ground that the potential effects of the reform of the cotton support scheme on the economic situation of the ginning undertakings were not examined. 129 Admittedly, as the Council observes, the requirement which follows from paragraph 2 of Protocol 4 of maintaining the profitability of cotton production applies as such to cotton producers and not to ginning undertakings. 130 However, a proper study of the effects of that reform on the profitability of cotton production requires an examination of the consequences the reform is liable to produce for ginning undertakings situated in the production regions. 131 As the Spanish Government pointed out without being contradicted, cotton production is not economically possible without the presence in the vicinity of the production regions of such undertakings operating under economically sustainable conditions, since cotton has little commercial value before being processed and it cannot be transported over long distances. 132 The production of cotton and its processing by the ginning undertakings thus appear to be inextricably linked. The potential effects of the reform of the cotton support scheme on the economic viability of the ginning undertakings therefore constitute a basic factor to be taken into account in order to assess the profitability of cotton growing. 133 In those circumstances, the conclusion must be that the Council, the author of Regulation No 864/2004, has not shown before the Court that in adopting the new cotton support scheme established by that regulation it actually exercised its discretion, involving the taking into consideration of all the relevant factors and circumstances of the case, including all the labour costs linked to cotton growing and the viability of the ginning undertakings, which it was necessary to take into account for assessing the profitability of that crop. 134 It follows that the information submitted by the Community institutions does not enable the Court to ascertain whether the Community legislature was able, without exceeding the bounds of the broad discretion it enjoys in the matter, to reach the conclusion that fixing the amount of the specific aid for cotton at 35% of the total existing aid under the previous support scheme would suffice to guarantee the objective set out in recital 5 in the preamble to Regulation No 864/2004, namely to ensure the profitability and hence the continuation of that crop, an objective reflecting that laid down in paragraph 2 of Protocol 4. 135 Consequently, it must be concluded that the principle of proportionality was infringed. 136 It follows that the fourth plea, in so far as it alleges that that principle was infringed, is well founded, and the application must be allowed. 137 In the light of all the foregoing, Chapter 10a of Title IV of Regulation No 1782/2003 as amended must be annulled. Limitation of the effects of the annulment138 Under the second paragraph of Article 231 EC, the Court may, if it considers it necessary to do so, state which of the effects of the regulation that it has declared void are to be considered as definitive. 139 In the present case, it should be noted that under Article 156(2)(g) of Regulation No 1782/2003 as amended the new cotton support scheme is to apply as from 1 January 2006 for the cotton sown as from that date. 140 Farmers in the Member States concerned may consequently already have taken steps to adapt to that scheme so as to be able to benefit from the support it provides for, or at least will have to take such steps shortly. Moreover, the competent authorities of those Member States may already have taken the necessary measures for implementing the scheme, or will soon have to take such measures. 141 In the light of those factors, and in particular in order to avoid any legal uncertainty as to the scheme applicable to aid in the cotton sector following the annulment of Chapter 10a of Title IV of Regulation No 1782/2003 as amended, the effects of the annulment must be suspended until the adoption, within a reasonable time, of a new regulation. Costs142 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they have been applied for in the successful party’s pleadings. Since the Kingdom of Spain has applied for costs and the Council has been unsuccessful, the Council must be ordered to pay the costs. In accordance with Article 69(4) of the Rules of Procedure, the institutions which have intervened in the proceedings are to bear their own costs. On those grounds, the Court (Second Chamber) hereby:1. Annuls Chapter 10a of Title IV of Council Regulation (EC) No 1782/2003 of 29 September 2003 establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers and amending Regulations (EEC) No 2019/93, (EC) No 1452/2001, (EC) No 1453/2001, (EC) No 1454/2001, (EC) No 1868/94, (EC) No 1251/1999, (EC) No 1254/1999, (EC) No 1673/2000, (EEC) No 2358/71 and (EC) No 2529/2001, inserted by Article 1(20) of Council Regulation (EC) No 864/2004 of 29 April 2004;2. Orders the effects of that annulment to be suspended until the adoption, within a reasonable time, of a new regulation;3. Orders the Council of the European Union to pay the costs;4. Orders the Commission of the European Communities to bear its own costs.[Signatures]* Language of the case: Spanish. | c0e65-3da8322-4a1e | EN |
THE UNITED KINGDOM GUIDELINES ON WORKING TIME INFRINGE COMMUNITY LAW | Commission of the European CommunitiesvUnited Kingdom of Great Britain and Northern Ireland(Failure of a Member State to fulfil obligations – Social policy – Protection of the health and safety of workers – Directive 93/104/EC – Organisation of working time – Article 17(1) − Derogation − Articles 3 and 5 – Right to minimum daily and weekly rest periods)Summary of the JudgmentSocial policy – Protection of the safety and health of workers – Directive 93/104 concerning certain aspects of the organisation of working time(Council Directive 93/104, Arts 3, 5 and 17(1))A Member State has failed to fulfil its obligations under Article 17(1), (3) and (5) of Directive 93/104 concerning certain aspects of the organisation of working time, as amended by Directive 2000/34, when it applies to workers whose working time is partially not measured or predetermined or can be determined partially by the worker himself the derogation provided for in Article 17(1) and when it fails to adopt the measures necessary to implement the rights of workers to daily and weekly rest. In this latter respect, in order to ensure that the rights conferred on workers by Directive 93/104 are fully effective, Member States are under an obligation to guarantee that the right to benefit from effective rest is observed. A Member State which, in the national measure implementing that directive, provides that workers are entitled to certain rights to rest and which, in the guidelines for employers and workers on the implementation of those rights, indicates that the employer is nevertheless not required to ensure that the workers actually exercise such rights, does not guarantee compliance with either the minimum requirements laid down by Articles 3 and 5 of that directive or its essential objective. By letting it be understood that, while employers cannot prevent the minimum rest periods from being taken by the workers, they are under no obligation to ensure that the latter are actually able to exercise such a right, the guidelines are clearly liable to render the rights enshrined in Articles 3 and 5 of that directive meaningless and are incompatible with the objective of that directive, in which minimum rest periods are considered to be essential for the protection of workers’ health and safety. (see paras 40, 42, 44, 47, operative part)JUDGMENT OF THE COURT (Third Chamber)7 September 2006 (*) In Case C‑484/04,ACTION under Article 226 EC for failure to fulfil obligations, brought on 23 November 2004,Commission of the European Communities, represented by G. Rozet and N. Yerrell, acting as Agents, with an address for service in Luxembourg, applicant,United Kingdom of Great Britain and Northern Ireland, represented initially by M. Bethell, and subsequently by E. O’Neill, acting as Agents, and by K. Smith, Barrister, defendant,THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, S. von Bahr, A. Borg Barthet, U. Lõhmus and A. Ó Caoimh (Rapporteur), Judges,Advocate General: J. Kokott,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 26 January 2006,after hearing the Opinion of the Advocate General at the sitting on 9 March 2006,gives the followingJudgment1 By its application, the Commission of the European Communities requests the Court to declare that by applying the derogation provided for in Article 17(1) of Council Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organisation of working time (OJ 1993 L 307, p. 18), as amended by Directive 2000/34/EC of the European Parliament and of the Council of 22 June 2000 (OJ 2000 L 195, p. 41), (‘Directive 93/104’) to workers whose working time is partially not measured or predetermined or can be determined partially by the worker himself and by failing to adopt the measures necessary to implement the rights of workers to daily and weekly rest, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under the abovementioned Article 17(1) and under Article 249 EC. Legal context Community legislation2 According to Article 1(1) of Directive 93/104, the directive lays down minimum safety and health requirements for the organisation of working time. 3 Articles 3 and 5 of that directive, which are included in Section II thereof, regulate the minimum daily and weekly rest periods for workers. Member States are thus required to take the measures necessary to ensure that every worker is entitled to a minimum daily rest period of 11 consecutive hours per 24-hour period (Article 3) and, per each seven-day period, to a minimum uninterrupted rest period of 24 hours plus the 11 hours’ daily rest referred to in Article 3 (Article 5, first paragraph). 4 Under Article 17(1) of Directive 93/104: ‘With due regard for the general principles of the protection of the safety and health of workers, Member States may derogate from Article[s] 3, 4, 5, 6, 8 or 16 when, on account of the specific characteristics of the activity concerned, the duration of the working time is not measured and/or predetermined or can be determined by the workers themselves …’. 5 Pursuant to Article 18(1)(a) of the same directive, Member States had to adopt the laws, regulations and administrative provisions necessary to comply with it by 23 November 1996. 6 Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time (OJ 2003 L 299, p. 9) replaced Directive 93/104 with effect from 2 August 2004. However, the Commission’s allegation of failure to fulfil obligations concerns Directive 93/104, which was applicable on the expiry of the period laid down in the reasoned opinion. National legislation7 The Working Time Regulations 1998, in the version in force in 1999 (the ‘WTR’), provides in Regulation 10 thereof, which implemented Article 3 of Directive 93/104, that an adult worker is entitled to a rest period of not less than 11 consecutive hours in each 24-hour period. 8 Regulation 11 of the WTR, implementing Article 5 of the directive, provides that, subject to paragraph (2) thereof, an adult worker is entitled to an uninterrupted rest period of not less than 24 hours in each seven-day period. 9 Regulation 20(2) of the WTR is worded as follows: ‘Where part of the working time of a worker is measured or predetermined or cannot be determined by the worker himself but the specific characteristics of the activity are such that, without being required to do so by the employer, the worker may also do work the duration of which is not measured or predetermined or can be determined by the worker himself, regulations 4(1) and (2) and 6(1), (2) and (7) shall apply only to so much of his work as is measured or predetermined or cannot be determined by the worker himself.’ 10 In order to help employers and workers understand the WTR, the Department of Trade and Industry published a set of guidelines on the various provisions of those regulations (the ‘guidelines’). 11 In accordance with certain paragraphs in sections 5 and 6 of those guidelines, ‘employers must make sure that workers can take their rest, but are not required to make sure they do take their rest’. Pre-litigation procedure12 On 21 March 2002, the Commission sent a letter of formal notice to the United Kingdom under Article 226 EC in which it alleged that the latter had not correctly implemented Articles 3, 5, 8 and 17(1) of Directive 93/104. The United Kingdom authorities replied by letter of 31 May 2002. 13 Since it was not satisfied with that reply, the Commission sent a reasoned opinion to the United Kingdom on 2 May 2003, requesting that Member State to take the measures necessary to comply with its obligations under Directive 93/104 within two months of notification of that opinion. 14 By letter of 30 June 2003, the authorities of that Member State replied to the reasoned opinion, stating that the amendment relating to the calculation of night workers’ hours in accordance with Article 8 of Directive 93/104 had been published, but insisting that the national measures implementing Articles 17(1), 3 and 5 of that directive, including the guidelines, were consistent with it. 15 The Commission therefore decided to bring the present action. The action The first objection, relating to the derogation laid down in Article 17(1) of Directive 93/10416 The Commission’s first objection is that Regulation 20(2) of the WTR goes beyond the derogation laid down in Article 17(1) of Directive 93/104. The derogation applies only to workers whose working time as a whole is not measured or predetermined or can be determined by the workers themselves. However, the Commission notes that the WTR provide that where a worker’s working time is only partially measured, predetermined or determined by the worker the provisions relating to the weekly working period and night work apply only to that part of the work which is measured, predetermined or cannot be determined by the worker himself. 17 In the defence, the United Kingdom states that it no longer challenges that objection and that it undertakes to repeal the contested provision of the WTR. At the hearing it intimated that the provision amending Regulation 20(2) of the WTR would come into force on 6 April 2006. 18 In the reply, the Commission contends that the measures necessary to make the national legislation consistent with Article 17(1) of Directive 93/104 have not yet been taken by the United Kingdom and that therefore the subject-matter of its application remains unchanged. 19 It is settled case-law that whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion, and that the Court cannot take account of any subsequent changes (see, inter alia, Case C‑420/02 Commission v Greece [2004] ECR I-11175, paragraph 23, and Case C‑433/03 Commission v Germany [2005] ECR I‑6985, paragraph 32). 20 So far as concerns the scope of the derogation set out in Article 17(1) of Directive 93/104, it is apparent from the express wording of that provision, as the Commission rightly pointed out, that it applies only to workers whose working time as a whole is not measured or predetermined or can be determined by the workers themselves on account of the kind of activity concerned. 21 It is common ground in the present case that on the expiry of the period set in the reasoned opinion the United Kingdom had not adopted the measures necessary to comply with that provision, so that the Commission’s first objection must be held to be well founded. The second objection, relating to the guidelines and the rest periods laid down in Articles 3 and 5 of Directive 93/104 Admissibility22 The United Kingdom submits that the Commission’s second objection must be rejected as inadmissible. First, it points out that in the reasoned opinion the Commission confined its criticism exclusively to the guidelines, whereas the application is not limited in such a way in so far as it is directed at the lack of adequate measures to ensure full and effective implementation of Directive 93/104, thus going beyond the ambit of the reasoned opinion. 23 Secondly, it claims that pleading a breach of the general obligation imposed on Member States on the basis of the third paragraph of Article 249 EC is an inadequate argument in cases where incorrect implementation of the directive in question should have been argued. It is for the Commission to identify clearly each respect in which the steps taken by the Member States are insufficient to ensure proper implementation of the directive. 24 In that respect, it is settled case-law that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity to comply with its obligations under Community law, on the one hand, and on the other to avail itself of its right to defend itself against the objections formulated by the Commission (see, inter alia, Case C‑152/98 Commission v Netherlands [2001] ECR I‑3463, paragraph 23, and Case C‑29/04 Commission v Austria [2005] ECR I-9705, paragraph 25). 25 It follows that, first, the subject-matter of proceedings under Article 226 EC is delimited by the pre-litigation procedure governed by that provision and that consequently the reasoned opinion and the application must be founded on identical charges (see, inter alia, Commission v Austria, cited above, paragraph 26). However, that requirement cannot be stretched so far as to mean that in every case the statement of the objections expressly set out in the reasoned opinion and the form of order sought in the application must be exactly the same, provided that the subject-matter of the proceedings as defined in the reasoned opinion has not been extended or altered (see Case C‑147/03 Commission v Austria [2005] ECR I‑5969, paragraph 24). 26 Second, the reasoned opinion must contain a cogent and detailed exposition of the reasons which led the Commission to the conclusion that the Member State concerned had failed to fulfil one of its obligations under Community law (see, inter alia, Case C‑439/99 Commission v Italy [2002] ECR I‑305, paragraph 12, and Case C-29/04 Commission v Austria, paragraph 27). 27 In the present case, it is clear from both the reasoned opinion and the Commission’s originating application that the second objection put forward by the latter relates to the retaining, in the form of the guidelines, of express instructions to employers stating that they are not required to ensure that workers actually take their rest periods. Accordingly, the Commission takes the view that the United Kingdom has not taken all the measures necessary to ensure that the objective of Directive 93/104 is met. 28 The subject-matter of the action, which has been clearly defined, has not changed during the proceedings and the first plea of inadmissibility raised by the United Kingdom must therefore be dismissed. 29 Concerning the United Kingdom’s argument that it is not sufficient to rely on the third paragraph of Article 249 EC for the purpose of proving that Directive 93/104 has been incorrectly implemented, the Commission’s second objection does not refer to the incorrect implementation of Articles 3 and 5 of that directive per se but rather to the existence, in the form of the guidelines, of national measures likely to encourage a practice of non-compliance with its provisions relating to the daily and weekly rest rights of workers, an objection clearly stated in the reasoned opinion and the application. 30 In the present case, both the pre-litigation procedure and the proceedings before the Court have demonstrated that the United Kingdom was quite capable of submitting defence arguments against the objections made by the Commission on that issue, those objections being explained in enough detail to enable that Member State to provide a proper reply to them. The fact that the Commission chose to base its second objection solely on the third paragraph of Article 249 EC and not on Articles 3 and 5 of Directive 93/104, which are the provisions of the directive indirectly at issue but whose formal implementation in the WTR is not, as such, the subject of the Commission’s action, cannot, in this situation, make the latter’s second objection inadmissible. 31 The second plea of inadmissibility raised by the United Kingdom must therefore be dismissed and, accordingly, the Commission’s second objection must be declared admissible. Substance32 The Commission submits that the guidelines endorse and encourage a practice of non-compliance with the requirements of Directive 93/104. Employers are instructed that they are not required to ensure that the workers are actually invoking and benefiting from the rest periods to which they are entitled, but merely that those who wish to claim such periods are not prevented from doing so. The Commission maintains that those express instructions to employers through the medium of the guidelines dissuade the latter from ensuring that the workers benefit from the minimum daily and weekly rest requirements imposed by that directive. 33 The United Kingdom submits that, far from encouraging non‑compliance with the national implementing rules, the guidelines emphasise the duty upon employers to ensure that their workers can take the rest periods to which they are entitled, while acknowledging the obvious limits to the employers’ responsibility in this respect. The latter should not behave in a way which would result in preventing the workers from taking the rest to which they have a right, for example by imposing work commitments incompatible with such rest. 34 The United Kingdom claims that an interpretation of Directive 93/104 to mean that it not only requires employers to allow the workers to benefit from the rest periods provided for, but also obliges the workers to take that rest, does not follow from any of the language versions of the directive and would be impractical and ill-defined, given the uncertainties raised as to the extent of the measures which employers would be required to take and the circumstances in which it would be possible to consider that that rest had been appropriately taken. 35 So far as the purpose of Directive 93/104 is concerned, it is apparent from Article 118a of the EC Treaty (Articles 117 to 120 of the EC Treaty have been replaced by Articles 136 EC to 143 EC), which is the legal basis for that directive, from the first, fourth, seventh and eighth recitals in the preamble thereto, from the Community Charter of the Fundamental Social Rights of Workers, adopted at the meeting of the European Council held at Strasbourg on 9 December 1989, mentioned in Article 136 EC, point 8 and the first subparagraph of point 19 of which are referred to in the fourth recital in the preamble to the directive, and also from the express wording of Article 1(1) of the directive, that the latter’s purpose is to lay down minimum requirements intended to improve the living and working conditions of workers through approximation of national provisions concerning, in particular, the duration of working time (see, inter alia, Case C‑173/99 BECTU [2001] ECR I‑4881, paragraph 37, and Case C‑14/04 Dellas and Others [2005] ECR I-10253, paragraph 40). 36 According to those provisions, this harmonisation at Community level in relation to the organisation of working time is intended to guarantee better protection of the safety and health of workers by ensuring that they are entitled to minimum rest periods – particularly daily and weekly – and adequate breaks and by providing for a ceiling of 48 hours on the average duration of the working week, a maximum limit which is expressly stated to include overtime (see BECTU, paragraph 38, and Dellas, paragraph 41). 37 Under Articles 3 and 5 of Directive 93/104, Member States are required to take the measures necessary to ensure that every worker is entitled to a minimum daily rest period of 11 consecutive hours per 24‑hour period and, per each seven-day period, to a minimum uninterrupted rest period of 24 hours plus the 11 hours’ daily rest referred to in Article 3. Those provisions impose clear and precise obligations on the Member States as to the result to be achieved by such entitlement to rest. 38 In addition, in view of both the wording of that directive and its purpose and scheme, the various requirements it lays down concerning minimum rest periods constitute rules of Community social law of particular importance from which every worker must benefit as a minimum requirement necessary to ensure protection of his safety and health (see BECTU, paragraphs 43 and 47; Joined Cases C‑397/01 to C‑403/01 Pfeiffer and Others [2004] ECR I‑8835, paragraph 100; and Dellas, paragraph 49). 39 Therefore, it follows from the express wording of Articles 3 and 5 of Directive 93/104 as well as from the eighth recital thereto, according to which workers must be granted minimum periods of rest, from the purpose of that directive as referred to in paragraphs 35 to 38 of this judgment and from the scheme it puts in place that workers must actually benefit from the daily and weekly periods of rest provided for by the directive. 40 In order to ensure that the rights conferred on workers by Directive 93/104 are fully effective, Member States are under an obligation to guarantee that each of the minimum requirements laid down by the directive is observed, including the right to benefit from effective rest (Dellas, paragraph 53). In fact, that is the only interpretation which accords with the objective of that directive, which is to secure effective protection of the safety and health of employees by allowing them to enjoy the minimum periods of rest to which they are entitled (see Case C‑151/02 Jaeger [2003] ECR I‑8389, paragraph 70). 41 As the Court has held, in the light of the essential purpose of Directive 93/104, which aims to effectively protect the safety and health of workers, each worker must, inter alia, enjoy adequate rest periods, which must not only be effective in enabling the persons concerned to recover from the fatigue engendered by their work, but also preventive in nature, so as to reduce as much as possible the risk of affecting the safety or health of employees which successive periods of work without the necessary rest are likely to produce (Jaeger, paragraph 92). 42 A Member State which, in the national measure implementing Directive 93/104, provides that the workers are entitled to certain rights to rest and which, in the guidelines for employers and workers on the implementation of those rights, indicates that the employer is nevertheless not required to ensure that the workers actually exercise such rights, does not guarantee compliance with either the minimum requirements laid down by Articles 3 and 5 of that directive or its essential objective. 43 As the Advocate General rightly observed in point 67 of her Opinion, and as the Commission furthermore conceded during the hearing, compliance with the obligations set out by Directive 93/104 should not, as a general rule, extend to requiring the employer to force his workers to claim the rest periods due to them. The employer’s responsibility concerning observance of the rest periods provided for by that directive cannot be without limits. 44 However, in the present case, by restricting the obligations on employers as regards the workers’ right to actually benefit from the minimum rest periods provided for in Articles 3 and 5 of Directive 93/104 and, inter alia, letting it be understood that, while they cannot prevent those rest periods from being taken by the workers, they are under no obligation to ensure that the latter are actually able to exercise such a right, the guidelines are clearly liable to render the rights enshrined in Articles 3 and 5 of that directive meaningless and are incompatible with the objective of that directive, in which minimum rest periods are considered to be essential for the protection of workers’ health and safety (see, to that effect, BECTU, paragraph 49). 45 As regards the United Kingdom’s argument that the wording itself of Directive 93/104 indicates that there is a clear distinction between Articles 3, 4, 5 and 7, which refer to individual workers’ rights and set out a mere discretion, and Articles 6 and 8 of the same directive, which clearly impose a precise obligation as to the result to be achieved concerning the limitation of working time, neither the various language versions of that directive nor the Court’s case-law relating to the directive, its objective and the nature of the rights to rest which it lays down support that interpretation. 46 In respect of Article 7(1) of Directive 93/104, which provides, in the same terms as those used in Articles 3 and 5, that Member States are to take the measures necessary to ensure that every worker ‘is entitled’ to paid annual leave of at least four weeks, the Court has also held, in paragraph 44 of BECTU, that under that provision the worker is entitled to actual rest, with a view to ensuring effective protection of his health and safety. 47 In the light of the foregoing considerations, it must be held that by applying the derogation provided for in Article 17(1) of Council Directive 93/104 to workers whose working time is partially not measured or predetermined or can be determined partially by the worker himself and by failing to adopt the measures necessary to implement the rights of workers to daily and weekly rest, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Articles 17(1), 3 and 5 of that directive. Costs48 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the United Kingdom has been unsuccessful, the United Kingdom must be ordered to pay the costs. On those grounds, the Court (Third Chamber) hereby:1. Declares that, by applying the derogation provided for in Article 17(1) of Council Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organisation of working time, as amended by Directive 2000/34/EC of the European Parliament and of the Council of 22 June 2000 to workers whose working time is partially not measured or predetermined or can be determined partially by the worker himself and by failing to adopt the measures necessary to implement the rights of workers to daily and weekly rest, the United Kingdom of Great Britain and Northern Ireland has failed to fulfil its obligations under Articles 17(1), 3 and 5 of that directive;2. Orders the United Kingdom of Great Britain and Northern Ireland to pay the costs.[Signatures]* Language of the case: English. | 28074-3ea75b1-4eee | EN |
THE COURT DISMISSES THE ACTION BROUGHT BY PORTUGAL AGAINST THE COMMISSION DECISION ON THE TAX SCHEME IN THE AZORES | Portuguese RepublicvCommission of the European Communities(Action for annulment – State aid – Decision 2003/442/EC – Tax measures adopted by a regional or local authority – Reductions on the rate of income tax for natural and legal persons having their tax residence in the Azores – Classification as State aid – Selective nature – Justification by the nature and overall structure of the tax system – Obligation to state reasons – Compatibility with the common market)Summary of the Judgment1. State aid – Meaning – Selective nature of the measure(Art. 87(1) EC)2. State aid – Meaning – Selective nature of the measure 3. Acts of the institutions – Statement of reasons – Obligation – Scope (Arts 87(1) EC and 253 EC)4. State aid – Not allowed – Exceptions – Discretion of the Commission (Art. 87(3) EC)1. Article 87(1) EC prohibits State aid ‘favouring certain undertakings or the production of certain goods’ in comparison with others which are in a legal and factual situation that is comparable in the light of the objective pursued by the measure in question, that is to say, selective aid. However, the concept of State aid does not refer to State measures which differentiate between undertakings and which are, therefore, prima facie selective where that differentiation arises from the nature or the overall structure of the system of charges of which they are part. A measure which creates an exception to the application of the general tax system may be justified by the nature and overall structure of the tax system if the Member State concerned can show that that measure results directly from the basic or guiding principles of its tax system. In that connection, a distinction must be made between, on the one hand, the objectives attributed to a particular tax scheme which are extrinsic to it and, on the other, the mechanisms inherent in the tax system itself which are necessary for the achievement of such objectives. (see paras 52, 54, 81)2. Where it is a question of examining whether a measure is selective in character, the determination of the reference framework is essential and that framework need not necessarily be defined within the limits of the national territory. Thus, in order to determine the selectivity of a measure adopted by an infra-State body which seeks to establish in one part only of the territory of a Member State a tax rate which is lower than the rate in force in the rest of that State it is appropriate to examine whether that measure was adopted by that body in the exercise of powers sufficiently autonomous vis-à-vis the central power and, if appropriate, to examine whether that measure indeed applies to all the undertakings established in or all production of goods on the territory coming within the competence of that body. Where a regional or local authority adopts, in the exercise of sufficiently autonomous powers in relation to the central power, a tax rate lower than the national rate and which is applicable only to undertakings present in the territory within its competence, the legal framework appropriate to determine the selectivity of a tax measure may be limited to the geographical area concerned where the infra-State body, in particular on account of its status and powers, occupies a fundamental role in the definition of the political and economic environment in which the undertakings present on the territory within its competence operate. In order that a decision taken in such circumstances can be regarded as having been adopted in the exercise of sufficiently autonomous powers, that decision must, first of all, have been taken by a regional or local authority which has, from a constitutional point of view, a political and administrative status separate from that of the central government. Next, it must have been adopted without the central government being able directly to intervene as regards its content. Finally, the financial consequences of a reduction of the national tax rate for undertakings in the region must not be offset by aid or subsidies from other regions or central government. (see paras 56-58, 62, 65-67)3. The statement of reasons required by Article 253 EC must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to carry out its review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question. Applied to the classification of a measure as aid, that principle requires a statement of the reasons for which the Commission considers that the measure concerned falls within the scope of Article 87(1) EC. In that connection, even in cases where it is clear from the circumstances in which it was granted that the aid is liable to affect trade between Member States or to distort or threaten to distort competition, the Commission must at least set out those circumstances in the statement of reasons for its decision. (see paras 88-89)4. In the application of Article 87(3) EC, the Commission enjoys a wide margin of discretion, the exercise of which involves assessments of an economic and social nature which must be made within a Community context. The Community Courts, in reviewing whether that freedom was lawfully exercised, cannot substitute their own assessment for that of the competent authority but must restrict themselves to examining whether the authority’s assessment is vitiated by a manifest error or misuse of powers. (see para. 99)JUDGMENT OF THE COURT (Grand Chamber)6 September 2006 (*) (Action for annulment – State aid –Decision 2003/442/EC– Tax measures adopted by a regional or local authority – Reductions on the rate of income tax for natural and legal persons having their tax residence in the Azores – Classification as State aid – Selective nature – Justification by the nature and overall structure of the tax system – Obligation to state reasons – Compatibility with the common market)In Case C-88/03,ACTION for annulment under Article 230 EC, brought on 24 February 2003,Portuguese Republic, represented by L. Fernandes, acting as Agent, and J. da Cruz Vilaça and L. Romão, advogados, with an address for service in Luxembourg, applicant,supported byKingdom of Spain, represented by N. Díaz Abad, acting as Agent, with an address for service in Luxembourg, andUnited Kingdom of Great Britain and Northern Ireland, represented by R. Caudwell, acting as Agent, and D. Anderson QC, with an address for service in Luxembourg, interveners,Commission of the European Communities, represented by V. Di Bucci and F. de Sousa Fialho, acting as Agents, with an address for service in Luxembourg, defendant,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas (Rapporteur) and J. Malenovský, Presidents of Chambers Puissochet, R. Schintgen, N. Colneric, S. von Bahr, J. Klučka and U. Lõhmus, Judges, Advocate General: L.A. Geelhoed,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 6 September 2005,after hearing the Opinion of the Advocate General at the sitting on 20 October 2005,gives the followingJudgment1 By its application, the Portuguese Republic seeks the annulment of Commission Decision 2003/442/EC of 11 December 2002 on the part of the scheme adapting the national tax system to the specific characteristics of the Autonomous Region of the Azores which concerns reductions in the rates of income and corporation tax (OJ 2003 L 150, p. 52) (‘the contested decision’). Legal background Community law2 Article 87(1) EC states: ‘Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, insofar as it affects trade between Member States, be incompatible with the common market’. 3 The Commission Notice of 10 December 1998 on the application of the State aid rules to measures relating to direct business taxation (OJ 1998 C 384, p. 3) (‘the Notice on State aid in the field of direct taxation’) states, in paragraph 2, that it proposes to provide clarification on the classification of aid under Article 87(1) EC in the case of tax measures. 4 Article 87(3) EC provides that the following may be regarded as compatible with the common market: ‘(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious under-employment; …(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest; …’.5 Article 299(2) EC states that the provisions of the Treaty apply to the French overseas departments, the Azores, Madeira and the Canary Islands. However, the Community legislature may adopt specific measures aimed, in particular, at laying down the conditions for the application of the Treaty to those regions, given that their economic situation and social structure are adversely affected by a number of factors, the permanence and combination of which severely restrict their development. 6 Under Paragraph 4.15 of the Commission Guidelines on national regional aid (OJ 1998 C 74, p. 9), as amended on 9 September 2000 (OJ 2000 C 258, p. 5) (‘the Guidelines on national regional aid’), regional aid aimed at reducing an undertaking’s current expenses, namely operating aid, is prohibited. 7 However, under Paragraph 4.16.2 of the Guidelines, in the outermost regions qualifying for exemption under Article 87(3)(a) and (c) EC, aid which is not both progressively reduced and limited in time may be authorised in so far as it is intended to offset the additional costs arising in the pursuit of economic activity from the factors identified in Article 299(2) EC, the permanence and combination of which severely restrain the development of such regions. That provision also states that it is the task of the Member State to determine the amount of the additional costs and to prove that such costs are linked to those factors. Furthermore, the proposed aid must be justified in terms of its contribution to regional development, and its nature and level must be proportional to the additional costs it is intended to offset. National legislation8 The Constitution of the Portuguese Republic of 2 April 1976 provides that ‘the Azores and Madeira archipelagos shall be autonomous regions with their own political and administrative statutes and self-government institutions’. In that connection, it provides for a series of provisions regulating the powers, functions and areas of competence of those regions and their respective political and administrative institutions. 9 It is clear from those provisions that the autonomous regions have their own tax revenue as well as part of the State tax revenue, as established by a principle ensuring active national solidarity. Furthermore, the legislative assemblies of those regions have exclusive power under the conditions laid down by a framework law adopted by the Portuguese Republic’s National Assembly, to exercise their own fiscal competence and to adapt State taxes to regional particularities. 10 By Law No 13/98 of 24 February 1998 on the finances of the autonomous regions (lei No 13/98 de 24 de Fevereiro. Lei de Finanças das Regiões Autónomas, Diário da República I, series A, No 46, of 24 February 1998, p. 746) (‘Law No 13/98’), the Portuguese State defined precisely the conditions for that financial autonomy. That law sets out the principles and objectives of regional financial autonomy, provides for the finances of the autonomous regions to be coordinated with State finances, and establishes the principle of national solidarity and the obligation for the central government and the autonomous regions to cooperate. 11 As regards cooperation between the State and the autonomous regions, Article 5(1) to (3) of Law No 13/98 states, in particular: ‘1. In discharging the constitutional and statutory duty of solidarity, the State, which is to take account in this regard of the funds available and the need to ensure equal treatment for all parts of its national territory, shall contribute together with the authorities of the autonomous regions to the achievement of economic development, the correction of inequalities deriving from insularity and to economic and social convergence with the rest of Portugal and the European Union. 2. National solidarity requires, notably, in the financial sphere, budgetary transfers provided for in this Law and which must adapt continuously to the level of development of the autonomous regions and seek above all to create conditions for better financial coverage by own resources. 3. National solidarity aims to guarantee the fundamental principle of equal treatment for all Portuguese citizens and the opportunity for them to benefit from social policies defined at national level, and to contribute to economic and social convergence with the rest of Portugal and the Union … it requires, in particular, budgetary transfers, which must be carried out in accordance with the provision of this Article.’ 12 As stated in point 7 of the grounds of the contested decision, Law No 13/98 also provides that national income and corporation tax constitute revenue for the autonomous regions, under the conditions determined by that law itself. Under Article 37 of the Law, the regional legislative assemblies are authorised to reduce the rates of income and corporation tax applicable there, by up to 30% as compared to those laid down by national legislation. The scheme specific to the Autonomous Region of the Azores13 By Regional Legislative Decree No 2/99/A of 20 January 1999, as amended by Regional Legislative Decree No 33/99/A of 30 December 1999 (‘Decree No 2/99/A’), the legislative body of the Azores Region adopted the arrangements for adapting the national tax system to the region’s specific characteristics under the powers devolved to it in the matter. The decree took effect on 1 January 1999 and includes, in particular, a section concerning reductions in the rates of income and corporation tax. 14 Those reductions apply automatically to all economic operators (natural and legal persons). According to the Portuguese authorities, they are intended, inter alia, to allow undertakings in the Azores to overcome the structural handicaps resulting from their location in an insular region on the periphery of the Community. For that purpose, all persons subject to income or corporation tax in the Azores Region enjoy a reduction in the rate of personal income tax of 20% (15% for 1999) and a reduction in the rate of corporation tax of 30%. The budgetary cost of the reductions is estimated by the Portuguese authorities, as measured by the resulting tax shortfalls, to be approximately EUR 26.25 million a year. The contested decision15 By letter of 5 January 2000, the Portuguese authorities notified the Commission of the European Communities of a scheme adapting the national tax system to the specific characteristics of the Autonomous Region of the Azores. That scheme, which was notified late in response to a request for information made by Commission staff on 7 December 1999 following the appearance of articles in the press, and which entered into force without the authorisation of the Commission, was entered in the register of non-notified aid. 16 Following the examination of the information sent by the Portuguese authorities, the Commission decided to initiate the procedure laid down in Article 88(2) EC, with respect to the part of the scheme concerning reductions in the rate of income tax. In the course of that procedure the Regional Government of the Åland Islands (Finland) sent observations to the Commission in support of the position of the Portuguese authorities. 17 At the conclusion of that procedure the Commission adopted the contested decision. 18 In paragraph 23 of the grounds of that decision, referring to its Notice on State aid in the field of direct taxation, the Commission sets out the criteria which define State aid for the purpose of Article 87(1) EC. The measure concerned must confer an advantage on recipients which relieves them of charges that are normally borne from their budget. Such an advantage must be granted by a Member State or through State resources, in whatever form. The measure concerned must affect competition and trade between Member States. Finally, it must be specific or selective in that it favours certain undertakings or the production of certain goods. 19 In paragraph 24 of the grounds of the contested decision, the Commission concludes that each of those criteria is fulfilled as regards the reduced rates of income and corporation tax in question. It takes the view, in particular, as regards the first three criteria, that: ‘– [i]n so far as the tax reductions in question apply to firms … they provide an advantage which relieves them of charges that are normally borne from their budgets, – granting a tax reduction involves a loss of tax revenue, which … “is equivalent to consumption of State resources in the form of fiscal expenditure”. In so far as this principle also applies to aid granted by regional or local bodies in the Member States, the tax reductions in question are granted through State resources, i.e. resources which in the Portuguese public finance system are allotted to the Autonomous Region of the Azores, – the criterion of competition and trade between Member States being affected presupposes that the beneficiary of the measure pursues an economic activity, regardless of the beneficiary’s legal status or means of financing. Under settled case-law the criterion of trade being affected is met since the recipient firms carry on an economic activity involving trade between Member States … . In view of the extent of its sectoral scope and in so far as at least some of the firms concerned will carry on an activity involving trade between Member States, this is the case of the tax reductions under analysis’. 20 As regards the criterion of selectivity, the Commission cites paragraph 17 of its Notice on State aid in the field of direct taxation. According to that paragraph, the Commission’s decision-making practice shows ‘that only measures whose scope extends to the entire territory of the State escape the specificity criterion laid down in Article 87(1) [EC]’, which ‘itself qualifies as aid measures which are intended to promote the economic development of a region’. The Commission takes the view that the reductions in the tax rates concerned constitute, for firms situated in a particular region in Portugal, an advantage which other undertakings wishing to carry out similar economic operations in other areas of Portugal cannot enjoy. According to paragraph 24 of the grounds of the contested decision, those reductions thereby favour undertakings subject to tax in the Azores as compared with all other Portuguese undertakings within the terms of Article 87(1) EC. 21 The Commission bases that conclusion on the following reasoning, set out in paragraphs 26, 27, 31 and 33 of the grounds of the contested decision. 22 First, in so far as the element of selectivity in the concept of aid is based on a comparison between two groups in the same reference framework (those which benefit from the scheme and those which do not), it can only be established in relation to taxation defined as normal. According to the Commission, ‘it follows both from the general scheme of the Treaty, which concerns aid granted by the State or through State resources, and from the fundamental role the central authorities of the Member States play in defining the political and economic environment in which undertakings operate, thanks to the measures they adopt, the services they provide and possibly the financial transfers they make, that the framework in which such a comparison should be made is the economy of the Member State. … The settled practice of the Commission … consists of classifying as aid tax schemes applicable in particular regions or territories which are favourable in comparison to the general scheme of a Member State …’. 23 Second, it is not consistent with the concept of aid, which encompasses all measures which relieve charges which are normally borne from the budget of one or more undertakings, regardless of their purpose, justification, objective and the status of the public authority which establishes them or whose budget bears the charge, to submit, as the Portuguese authorities have done, that the benefits of limited territorial scope become general measures in the region concerned simply because they are established by the regional, rather than by the central, authority and that they apply throughout the territory under the region’s jurisdiction. ‘A distinction based solely on the body that decides the measure would remove all effectiveness from Article 87 [EC], which seeks to cover the measures concerned exclusively according to their effects on competition and Community trade … .’ 24 The Commission adds that ‘the present decision does not concern a mechanism that would allow all local authorities of a particular level (regions, districts or others) to introduce and levy local taxes with no reference at all to national taxation. On the contrary, the case in point involves a reduction, applicable solely in the Azores, in the rate of tax established by national legislation and applicable on mainland Portugal. Under the circumstances, the measure adopted by the regional authorities clearly constitutes a derogation from the national tax system’. 25 Third, the reductions in the rate of income tax referred to above cannot be justified by the nature or the general scheme of the Portuguese tax system. The Commission takes the view, in particular, that ‘in so far as these reductions do not derive from applying principles such as proportionality or progressive taxation, since on the contrary they favour firms in a specific region regardless of their financial situation, the objectives of regional development attributed to them cannot be considered to be inherent in the Portuguese tax system’. 26 After classifying the measures at issue as State aid, in paragraph 34 of the grounds of the contested decision, the Commission takes the view in paragraph 35 that that aid is operating aid, since it aims to overcome permanent structural handicaps resulting from the insularity of the Azores and the region’s remoteness from mainland economic centres by reducing undertakings’ current expenses. The Commission adds that such aid may be authorised if it is intended to offset the additional costs arising in the pursuit of economic activity from the handicaps identified in Article 299(2) EC, in compliance with the conditions laid down in point 4.16.2 of the Guidelines on national regional aid; specifically, it may be justified by its contribution to regional development and by its nature, and if it is of a level proportional to the additional costs it is intended to compensate. 27 In that connection, the Commission states, in paragraph 38 of the grounds of the contested decision, that, in so far as the reductions in the rates of income and corporation tax are applicable to ‘firms that operate outside the financial sector’, it is able to regard that aid as aid compatible with the common market under the derogation in Article 87(3)(a) EC. 28 On the other hand, the Commission submits that, in so far as it is applicable to undertakings which operate in the financial sector, the reduced rates of income and corporation tax are not justified by their contribution to regional development and their level is not proportional to the handicaps they are intended to alleviate. The Commission is therefore unable to consider those reductions as compatible with the common market, within the meaning of Article 87(3)(a) EC, particularly as it is still not in possession of quantified data enabling it to measure objectively the level of the additional costs facing undertakings liable for tax in the Azores operating in the financial sector. That aid is also not covered by any other derogation laid down in the Treaty. 29 It should be noted that, in paragraph 18 of the grounds of the contested decision, the Commission remarked on the absence of undertakings from the financial sector among those in the basic sample in the study provided by the Portuguese authorities. The Commission observed that the Portuguese authorities had simply explained such an absence by a lack of statistical data relating to those activities, while acknowledging that it was not possible for them to demonstrate rigorously in relation to such activities that the tax reductions in question were, by their nature and level, capable of resolving the specific problems of the Azores. 30 Furthermore, the Commission adds, in paragraph 42 of the grounds of the contested decision, that it is also appropriate, for reasons of transparency and legal certainty, to exclude from the benefit of a decision of compatibility with the common market ‘activities of the “intra-group services” type (activities the economic basis of which is to provide services to undertakings belonging to the same group, as coordination, financial or distribution centres)’.The Commission takes the view that ‘such activities do not contribute sufficiently to regional development and therefore cannot be declared compatible under Article 87(3)(a), or by virtue of other derogations laid down by the Treaty, for the same reasons indicated in relation to the financial sector’. 31 Accordingly, in Article 1 of the contested decision, the Commission declared the part of the scheme adapting the national tax system to the specific characteristics of the Autonomous Region of the Azores which concerns reductions in the rates of income and corporation tax to be compatible with the common market, subject to the provisions of Article 2, under which the part of the aid scheme referred to in Article 1 is incompatible with the common market in so far as it applies to undertakings that carry on financial activities and undertakings which carry on activities of the ‘intra-group services’ type. In Article 3 of the contested decision, the Commission instructed Portugal to take all the necessary measures to recover from the undertakings that carry on the activities referred to in Article 2 the aid made available under the part of the aid scheme referred to in Article 1. Forms of order sought32 By order of the President of the Court of 16 September 2003, the United Kingdom of Great Britain and Northern Ireland was granted leave to intervene in support of the Portuguese Republic. 33 By order of the President of the Court of 9 June 2003, the Kingdom of Spain was granted leave to intervene in support of the Portuguese Republic. 34 The Portuguese Republic claims that the Court should: – declare the action admissible;– declare this action well-founded and, accordingly, annul the contested decision in so far as it classifies the reductions in the rates of income and corporation tax of natural and legal persons having their tax residence in the Azores as State aid; – alternatively, and without prejudice to the foregoing, declare this action well-founded and annul in part the contested decision, in so far as it declares incompatible with the common market the reductions in the rate of tax applicable to undertakings operating in the financial sector and undertakings which carry on activities of the ‘intra-group services’ type, and in so far as Article 3 of the decision orders the Portuguese Republic to recover the amount of those reductions; – order the Commission to pay all the costs, including those incurred by the Portuguese Republic.35 The Commission contends that the Court should: – dismiss the action as unfounded;– order the Portuguese Republic to pay the costs.36 The United Kingdom, intervening in support of the form of order sought by Portugal, contends that the Court should declare the action well-founded and, accordingly, annul the contested decision in so far as it classifies as State aid the reduced rates of income and corporation tax on natural and legal persons having their tax residence in the Azores. The action37 The Portuguese Government puts forward three pleas in law in support of its action. First, it submits, the contested decision is vitiated in two respects by an error of law in the application of Article 87(1) EC. Second, that decision is not sufficiently reasoned, which constitutes an infringement of Article 253 EC. Third, it is vitiated by a manifest error of assessment of the facts which influence the application of Article 87(3)(a) EC. The first plea: error of law in the application of Article 87(1) EC Arguments of the parties38 By its first plea, the Portuguese Government submits that the reduced rates of income and corporation tax provided for by Decree No 2/99/A for natural and legal persons established in the Azores are not selective but general measures and that, in any event, the differences in the charges operated by those reductions are justified by the nature or the structure of the Portuguese tax system. 39 As regards the determination of the selective nature of those measures, the Portuguese Government submits, first of all, that the Commission was wrong to take the whole of Portuguese territory as the reference framework. In order to determine whether a measure is selective in nature it is not necessary to place that measure within a national reference framework. Therefore, where tax concessions whose scope is limited to part of the country are granted by a regional or local authority of a State for the area within its jurisdiction, the reference framework must be the region concerned. Since tax concessions granted in such circumstances are applicable to all undertakings subject to tax in that region, those measures are general, not selective. 40 Next, the Portuguese Government points out that the reduced rates of tax result directly from the founding principles of the Portuguese tax system, in particular the principles of redistribution and national solidarity, and from the degree of autonomy of the region concerned. They are the result of the exercise of constitutional sovereignty and are inspired by the factors set out in Article 299(2) EC, namely insularity, difficult climate and the economic dependence of the Azores on a small number of products. 41 In any event, according to the Portuguese Government, the contested decision disregards the fact that the tax reductions concerned are justified by the nature and structure of the Portuguese tax system. It submits, in that connection, that those measures contribute to the achievement of the structural objectives of the Portuguese tax system, namely the allocation of the tax burden in accordance with ability to pay, with the aim of redistribution. It adds that objective differences exist between the taxpayers in mainland Portugal and those in the Azores. Furthermore, those two factors derive directly from the constitutional and statutory texts which lay down the founding principles of the Portuguese tax system and the principle of autonomy of the outermost regions. 42 According to the Commission, it is clear from the scheme of the Treaty that the selectivity of a measure must be determined by reference to the national framework. To take the region which adopted the measure as the reference framework would be to disregard the functioning and rationale of the Treaty rules on State aid. Even in the absence of substantive selectivity, advantages reserved for undertakings operating in certain regions of a Member State are selective in nature and are therefore capable of constituting State aid. In this case, the contested tax reductions favour undertakings which are liable to tax in the Azores as compared with all other Portuguese undertakings because, in the regions of mainland Portugal, the relevant national taxes cannot be reduced by the local authorities and are therefore applicable in full, which is sufficient for a finding that the contested measure is selective in nature for the purposes of Article 87(1) EC. The fact that the tax reductions concerned were decided on by a body other than the central State is irrelevant: only the effects of the measure, and not its form, may be taken into consideration for the purposes of its classification. 43 The Commission considers, furthermore, that the degree of autonomy of the Autonomous Region of the Azores is in fact limited. The Portuguese State continues to play a crucial role in the definition of the economic framework within which undertakings operate. As an example, undertakings operating in the Azores are able to benefit from infrastructures financed by the central State or a social security system whose financial balance is guaranteed by it. Moreover, the reduction in tax revenue for the region concerned, which results from the reduced tax rates, is indirectly offset at budgetary level by transfers from the central State, by virtue of the principle of financial solidarity. 44 As regards the justification for the tax advantages deriving from the nature and general structure of the Portuguese tax system, the Commission submits that that justification may be accepted only if those advantages result from objective differences between taxpayers. That is not the case with regard to the reductions at issue since they apply to all undertakings established in the Azores, whatever their financial situation, and derive from the economic characteristics of the region, which are factors extrinsic to the tax system. The Commission states that the concept of the nature or overall structure of the system refers to the internal logic of the system of compulsory taxation and to the necessary and proportionate technical distinctions which are intended to deal with the objectively different situations to which the levy system applies, and which meet the requirement that such a system must operate in the best possible manner in all the cases covered by it. 45 The United Kingdom Government, intervening in support of the Portuguese Republic, concentrated its arguments on an appraisal of the selectivity criterion. Dismissing the Commission’s argument that measures which do not cover all the territory of the Member State satisfy the criterion of specificity laid down in Article 87(1) EC, it argues that that criterion is sometimes not satisfied by tax measures which are adopted by devolved or autonomous regions, which apply to all the territory within their competence, and which are not sector-specific. 46 According to the United Kingdom Government, where, as in this case, the legislature of an autonomous region sets tax rates which apply uniformly across the region concerned but which are lower than those applied by decision of the national legislature to other parts of the Member State, the selectivity of the measure cannot be inferred simply from the fact that the other regions are subject to a different level of taxation. Depending on the circumstances, it may be appropriate to determine that selectivity in the context of the region itself and not in the context of the Member State as a whole. Such will be the case where there is a constitutional system which recognises sufficient fiscal autonomy so that a tax reduction granted by a local authority may be regarded as being decided by an autonomous or devolved region which not only has the power to take that decision but which must also bear the financial and political consequences of it. 47 Therefore, the United Kingdom Government submits, before classifying regional tax rates which are lower than the national tax rate as State aid, the Commission should have had regard to the degree of autonomy of the regional or local authority that established the reduced rates taking into account a number of factors, such as the fact that jurisdiction in tax matters is part of a constitutional system conferring a significant degree of political autonomy on the region, the fact that the decision to reduce the tax rate is taken by a body elected by the population of the region or accountable to that population, and the fact that the financial consequences of that decision are borne by the region and are not offset by subsidies or contributions from other regions or from central government. 48 According to the United Kingdom Government, the assessment of a regional tax system for State aid purposes raises broader issues of regional autonomy of considerable constitutional importance. In particular, the United Kingdom’s ‘asymmetrical’ constitutional system of devolution could be called into question, having regard to the position of Scotland and Northern Ireland. 49 The Kingdom of Spain, also intervening in support of the Portuguese Republic, emphasises that devolution, where it exists, forms part of the Member States’ constitutional framework. Following the Commission’s arguments would result in upsetting this constitutional structure, particularly as policy concerning direct taxation remains within the specific competence of the Member States. 50 In its statement in response to the United Kingdom’s intervention, the Commission denies that the approach adopted in the contested decision may hinder the exercise by Scotland or Northern Ireland of the powers conferred on them in tax matters. 51 The Commission adds that the fact that tax reductions applicable in a particular region decided at national level and similar reductions decided by a regional authority are treated in the same way is consistent with the principle that the concept of aid is defined according to the effects of the measure on undertakings or producers, without it being necessary to take account of its causes or aims or the situation of the bodies distributing or managing the aid (Case 173/73 Italy v Commission [1974] ECR 709, paragraphs 27 and 28, and Case 78/76 Steinike & Weinlig [1977] ECR 595, paragraph 21). By contrast, the criteria proposed by the United Kingdom, according to which, ‘depending on the circumstances’, the framework within which the selectivity of measure is assessed is the region or the Member State as a whole is irreconcilable with that principle and would lead to legal uncertainty liable to hinder the review of State aid. Findings of the Court52 Article 87(1) EC prohibits State aid ‘favouring certain undertakings or the production of certain goods’, that is to say, selective aid (Case C-66/02 Italy v Commission [2005] ECR I-10901, paragraph 94). However, according to settled case-law, the concept of State aid does not refer to State measures which differentiate between undertakings and which are, therefore, prima facie selective where that differentiation arises from the nature or the overall structure of the system of charges of which they are part (see, to that effect, Case 173/73 Italy v Commission, paragraph 33, and Case C-148/04 Unicredito Italiano [2005] ECR I-11137, paragraph 51). 53 Accordingly, it is appropriate to examine, first, whether the measures reducing the tax rates in question are selective in nature and, if necessary, to examine whether, as the Portuguese Government submits, those measures are justified by the nature and overall structure of the Portuguese tax system. 54 As regards the assessment of the condition of selectivity, which is a constituent factor in the concept of State aid, it is clear from settled case-law that Article 87(1) EC requires assessment of whether, under a particular statutory scheme, a State measure is such as to ‘favour certain undertakings or the production of certain goods’ in comparison with other undertakings which are in a legal and factual situation that is comparable in the light of the objective pursued by the measure in question (see, to that effect, Case C-143/99 Adria-WienPipeline and Wietersdorfer & Peggauer Zementwerke [2001] ECR I-8365, paragraph 41, Case C-308/01 GIL Insurance and Others [2004] ECR I-4777, paragraph 68, and Case C-172/03 Heiser [2005] ECR I-1627, paragraph 40). 55 Such an analysis is also required in respect of a measure adopted not by the national legislature but by an infra-State authority, since a measure adopted by a regional authority and not the central power is likely to constitute aid if the conditions laid down by Article 87(1) EC are satisfied (see, Case 248/84 Germany v Commission [1987] ECR 4013, paragraph 17). 56 It is clear from the foregoing that in order to determine whether the measure at issue is selective it is appropriate to examine whether, within the context of a particular legal system, that measure constitutes an advantage for certain undertakings in comparison with others which are in a comparable legal and factual situation. The determination of the reference framework has a particular importance in the case of tax measures, since the very existence of an advantage may be established only when compared with ‘normal’ taxation. The ‘normal’ tax rate is the rate in force in the geographical area constituting the reference framework. 57 In that connection, the reference framework need not necessarily be defined within the limits of the Member State concerned, so that a measure conferring an advantage in only one part of the national territory is not selective on that ground alone for the purposes of Article 87(1) EC. 58 It is possible that an infra-State body enjoys a legal and factual status which makes it sufficiently autonomous in relation to the central government of a Member State, with the result that, by the measures it adopts, it is that body and not the central government which plays a fundamental role in the definition of the political and economic environment in which undertakings operate. In such a case it is the area in which the infra-State body responsible for the measure exercises its powers, and not the country as a whole, that constitutes the relevant context for the assessment of whether a measure adopted by such a body favours certain undertakings in comparison with others in a comparable legal and factual situation, having regard to the objective pursued by the measure or the legal system concerned. 59 The Commission’s argument that such an analysis is rendered inadmissible by the wording of the Treaty and the well-established case-law in that field cannot be accepted. 60 It is true, as the Court has already ruled, that the fact that an aid programme has been adopted by a regional authority does not prevent the application of Article 87(1) EC if the relevant conditions are satisfied (see, to that effect, Case 248/84 Germany v Commission, paragraph 17). Furthermore, as the Commission stated, in paragraph 26 of the grounds of the contested decision, the text of the Treaty itself, which in Article 87(3)(a) and (c) classifies measures intended to ‘favour certain undertakings or the production of certain goods’ as State aid which may be declared compatible, indicates that benefits whose scope is limited to part of the territory of the State subject to the rules on aid may constitute selective benefits. However, it cannot be inferred from that that a measure is selective, for the purposes of Article 87(1) EC, on the sole ground that it is applicable only in a limited geographical area of a Member State. 61 Furthermore, it cannot be inferred from the judgment in Case C-156/98 Germany v Commission [2000] ECR I-6857 that a measure the benefit of which is reserved for undertakings situated in certain regions is selective for that reason alone. In paragraph 23 of that judgment the Court held that the fact that a tax concession favoured certain undertakings situated in the new Länder or West Berlin prevented its being a general measure of tax or economic policy. However, the tax concession concerned had been adopted by the national legislature and was applicable to only some of the undertakings in a number of regions in Germany, namely those employing a maximum of 250 employees and whose head office and management were situated in the new Länder or West Berlin, by way of derogation from the national system which is otherwise homogeneous. 62 In order to determine the selectivity of a measure adopted by an infra-State body which, like the measure at issue, seeks to establish in one part of the territory of a Member State a tax rate which is lower than the rate in force in the rest of that State it is appropriate, as stated in paragraph 58 of this judgment, to examine whether that measure was adopted by that body in the exercise of powers sufficiently autonomous vis-à-vis the central power and, if appropriate, to examine whether that measure indeed applies to all the undertakings established in or all production of goods on the territory coming within the competence of that body. 63 In paragraph 50 et seq of his Opinion, the Advocate General specifically identified three situations in which the issue of the classification as State aid of a measure seeking to establish, in a limited geographical area, tax rates lower than the rates in force nationally may arise. 64 In the first situation, the central government unilaterally decides that the applicable national tax rate should be reduced within a defined geographic area. The second situation corresponds to a model for distribution of tax competences in which all the local authorities at the same level (regions, districts or others) have the autonomous power to decide, within the limit of the powers conferred on them, the tax rate applicable in the territory within their competence. The Commission has recognised, as have the Portuguese and United Kingdom Governments, that a measure taken by a local authority in the second situation is not selective because it is impossible to determine a normal tax rate capable of constituting the reference framework. 65 In the third situation described, a regional or local authority adopts, in the exercise of sufficiently autonomous powers in relation to the central power, a tax rate lower than the national rate and which is applicable only to undertakings present in the territory within its competence. 66 In the latter situation, the legal framework appropriate to determine the selectivity of a tax measure may be limited to the geographical area concerned where the infra-State body, in particular on account of its status and powers, occupies a fundamental role in the definition of the political and economic environment in which the undertakings present on the territory within its competence operate. 67 As the Advocate General pointed out in paragraph 54 of his Opinion, in order that a decision taken in such circumstances can be regarded as having been adopted in the exercise of sufficiently autonomous powers, that decision must, first of all, have been taken by a regional or local authority which has, from a constitutional point of view, a political and administrative status separate from that of the central government. Next, it must have been adopted without the central government being able to directly intervene as regards its content. Finally, the financial consequences of a reduction of the national tax rate for undertakings in the region must not be offset by aid or subsidies from other regions or central government. 68 It follows that political and fiscal independence of central government which is sufficient as regards the application of Community rules on State aid presupposes, as the United Kingdom Government submitted, that the infra-State body not only has powers in the territory within its competence to adopt measures reducing the tax rate, regardless of any considerations related to the conduct of the central State, but that in addition it assumes the political and financial consequences of such a measure. 69 Since the Portuguese Government disputes the Commission’s assessment of the selective nature of the tax reduction measures in question, it is necessary to examine whether those measures which favour undertakings liable for tax in the Azores Region fulfil the requirements set out in paragraphs 67 and 68 of this judgment. 70 In that connection, it must be observed that under the Constitution of the Portuguese Republic the Azores form an autonomous region with its own political and administrative status and its own self-government institutions which have the power to exercise their own fiscal competence and adapt national fiscal provisions to regional specificities in accordance with Law No 13/98 and Decree No 2/99/A. 71 As far as concerns economic autonomy, the Portuguese Government, in answer to the Commission’s arguments that the Autonomous Region of the Azores lacks autonomy on account of compensatory financial transfers from the central State, merely observed that the Commission had not submitted any evidence on the merits of those arguments, without itself demonstrating that the Autonomous Region of the Azores does not receive any State financing to make good the fall in tax revenue which may result from reductions in the tax rates. 72 In that regard, it must be observed that, under Article 5(1) of Law No 13/98 and in the context of the adaptation of the national tax system to regional specificities, the constitutional principle of national solidarity was stated to mean that the central State contributes, with the autonomous regional authorities, to the achievement of economic development and the correction of inequalities deriving from insularity and to economic and social convergence with the rest of the national territory. 73 According to Article 32 of that Law, the application of that principle gives rise to a duty incumbent on both the central and regional authorities to promote the correction of inequalities arising from insularity by reducing local tax burden and by an obligation to ensure an appropriate level of public services and private activities. 74 As the Portuguese Government recognises, it is as a corollary to that constitutional and legislative system that Decree No 2/99/A adapts the national tax system to regional specificities. 75 Although the reduction in tax revenue which may result, for the Azores region, from reductions in tax rates may affect the attainment of the objective, recognised by the Portuguese Government, of correcting inequalities in economic development, it is in any event offset by a financing mechanism which is centrally managed. In this case, that financing is expressly provided for in Article 5(2) of Law No 13/98 in the form of budgetary transfers. 76 It follows that the two aspects of the fiscal policy of the regional government, namely the decision to reduce the regional tax burden by exercising its power to reduce tax rates on revenue and the fulfilment of its task of correcting inequalities deriving from insularity, are inextricably linked and depend, from the financial point of view, on budgetary transfers managed by central government. 77 In that context, it must be held that the decision of the government of the Autonomous Region of the Azores to exercise its power to reduce the rates of national tax on revenue in order to allow economic operators in the region to overcome the structural disadvantages deriving from their insular situation on the periphery of the Community, was not adopted in accordance with all the requirements set out in paragraphs 67 and 68 of this judgment. 78 Accordingly, the relevant legal framework for determining the selectivity of the tax measures at issue cannot be defined exclusively within the geographical limits of the Azores region. Those measures must be assessed in relation to the whole of Portuguese territory, in the context of which they appear to be selective. 79 It follows, as the Commission rightly held in the contested decision, that the reductions in the tax rates at issue are selective and not general measures. 80 In accordance with the case-law cited in paragraph 52 of this judgment, it is therefore appropriate to examine whether the tax measures at issue may be justified by the nature or overall structure of the Portuguese tax system, a matter which it is for the Member State concerned to demonstrate. 81 A measure which creates an exception to the application of the general tax system may be justified by the nature and overall structure of the tax system if the Member State concerned can show that that measure results directly from the basic or guiding principles of its tax system. In that connection, a distinction must be made between, on the one hand, the objectives attributed to a particular tax scheme which are extrinsic to it and, on the other, the mechanisms inherent in the tax system itself which are necessary for the achievement of such objectives. 82 Measures such as those at issue, which apply to all economic operators without any distinction as to their financial circumstances, cannot be regarded as ensuring that for the purpose of redistribution the criterion of ability to pay is observed. Although it is true that the disadvantages related to the insularity of the Azores might, in principle, be suffered by all economic operators regardless of their financial circumstances, the mere fact that the regional tax system is conceived in such a way as to ensure the correction of such inequalities does not allow the conclusion to be drawn that every tax advantage granted by the authorities of the autonomous region concerned is justified by the nature and overall structure of the national tax system. The fact of acting on the basis of a regional development or social cohesion policy is not sufficient in itself to justify a measure adopted within the framework of that policy. 83 Therefore, the Portuguese Government has not shown that the adoption by the Autonomous Region of the Azores of the measures at issue was necessary for the functioning and effectiveness of the general tax system. It simply made a general statement to that effect without providing specific evidence in support of it. It has not, therefore, been demonstrated that the measures at issue are justified by the nature or overall structure of the Portuguese tax system. 84 The, Commission was therefore right to hold, in the contested decision, that the difference between the charges resulting from the tax reductions on revenue in question is not justified by the nature or the overall structure of the Portuguese tax system. 85 It follows from all of the foregoing considerations that the first plea in the action must be rejected. The second plea: inadequate statement of reasons with respect to the existence of an adverse effect on intra-Community trade and significant restrictions on competition86 By its second plea the Portuguese Government argues essentially that the reasoning in the contested decision does not meet the requirements of Article 253 EC, in so far as that decision fails to set out or justify the impact on trade between Member States of the reductions of tax rates at issue or the significant effect of the distortion of competition resulting from those measures. 87 The Commission denies that contention, basing its argument, inter alia, on the case-law of the Court to the effect that, as regards an aid scheme of general application, it is sufficient to state that at least in respect of certain beneficiaries the measure affects trade and that the Commission is not obliged to give further details in that regard in its decisions (Case C-310/99 Italy v Commission [2002] ECR I-2289). In this case, the tax rate reductions apply to all economic operators liable to tax in the Azores region. Since at least some of the undertakings concerned carry on an activity involving trade between the Member States and subject to Community competition, the decision contains an adequate statement of reasons. 88 According to settled case-law, the statement of reasons required by Article 253 EC must be appropriate to the act at issue and must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to carry out its review. It is not necessary for the reasoning to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (see, inter alia, Case C-56/93 Belgium v Commission [1996] ECR I-723, paragraph 86, Case C-278/95 P Siemens v Commission [1997] ECR I-2507, paragraph 17, and Case C-501/00 Spain v Commission [2004] ECR I-6717, paragraph 73). 89 Applied to the classification of a measure as aid, that principle requires a statement of the reasons for which the Commission considers that the measure concerned falls within the scope of Article 87(1) EC. In that connection, even in cases where it is clear from the circumstances under which it was granted that the aid is liable to affect trade between Member States or to distort or threaten to distort competition, the Commission must at least set out those circumstances in the statement of reasons for its decision (Case 57/86 Greece v Commission [1988] ECR 2855, paragraph 15, Joined Cases C-329/93, C-62/95 and C-63/95 Germany v Commission [1996] ECR I-5151, paragraph 52, and Case C-156/98 Germany v Commission, paragraph 98). 90 In this case, it is sufficient to observe, in that connection, that the contested decision sets out clearly and applies to the situation in this case the criteria which must be satisfied in order to constitute State aid. 91 As regards the assessment by the Commission of the effects of the aid on intra-Community trade, it must be held that the contested decision, in paragraph 24 of its grounds, and as indicated in paragraph 19 of this judgment, logically deduced from the characteristics of the system in question and from the general scope of the reduced rates of tax that the result of that system, since those reductions apply to all economic sectors in the Azores, is that at least some of the undertakings concerned carry on economic activities involving such trade and, therefore, trade between Member States is likely to be affected. 92 It follows that the second plea raised by the Portuguese Government, relating to an inadequate statement of reasons, must be rejected. The third plea: manifest error of assessment in the application of Article 87(3)(a) EC93 By its third plea, the Portuguese Government complains that the Commission committed a manifest error of assessment in the application of Article 87(3)(a) EC in excluding from the benefit of the derogation laid down by that provision the reductions in the tax rates at issue as they apply to undertakings carrying out financial activities or activities of the ‘intra-group services’ type and in holding them incompatible with the common market in Article 2 of the contested decision. 94 The Portuguese Government submits, first, that activities of the ‘intra-group services’ type do not exist in the Portuguese legal system and, second, that undertakings operating in the financial sector are liable to bear the same additional costs deriving from the remoteness and insularity of the Azores Region as those which have been identified, in respect of other sectors of the economy, by a study carried out by the Centre for European Policy Studies submitted on 3 November 1999 in the context of State aid proceedings relating to the Autonomous Region of Madeira. That study sought to determine the implications of Article 299(2) EC as regards the autonomous regions of Madeira and the Azores. 95 The Commission denies having committed any manifest error of assessment and states first of all that it enjoys, in regard to the assessment of the compatibility of aid, a wide margin of discretion the exercise of which requires assessments of an economic and social nature. 96 The Commission submits, second, that the study by the Centre for European Policy Studies on which the Portuguese Government relies is not relevant for the assessment of the compatibility of the reductions of the tax rates applicable to undertakings operating in the financial sector. That study sets out the costs connected to the situation of the region concerned on the periphery of the Community, without quantifying the impact of the additional costs on the various economic sectors. Although it may legitimately be accepted that all the undertakings located in the Azores Region are confronted with the same permanent structural handicaps, arising from the insular nature of the Azores archipelago and its distance from the economic centres on the mainland, it does not follow that the impact of such handicaps on the additional costs arising from carrying on economic activities are identical in all sectors. 97 According to the Commission, given that the services offered are extremely mobile, the financial sector is in a different situation from other economic sectors in the Azores. For that reason, since the beginning of the proceedings, the Commission has repeatedly requested the Portuguese authorities to provide it with evidence demonstrating that the advantages conferred on the financial sector were justified. The Commission argues that, in the absence of such specific evidence, it was unable, on the basis of the documents provided by the Portuguese authorities, to regard the tax reductions applicable to undertakings operating in that sector as aid compatible with the common market under the derogation provided for in Article 87(3)(a) EC. 98 The Commission states once again that, if a Member State does not provide it with the information requested or provides it only with partial information, the lawfulness of its decision is to be assessed in the light of the information available when the decision was adopted (Case C-382/99 Netherlands v Commission [2002] ECR I-5163, paragraph 49). That principle should be applied even more rigorously in this case since the Portuguese authorities were asked on numerous occasions and the burden of proof that the advantages conferred were justified is on the Member State in accordance with point 4.16.2 of the Guidelines on national regional aid. 99 As a preliminary point, it must be recalled that, for the purposes of Article 87(3) EC, the Commission enjoys a wide margin of discretion, the exercise of which involves assessments of an economic and social nature which must be made within a Community context. The Court, in reviewing whether that freedom was lawfully exercised, cannot substitute its own assessment for that of the competent authority but must restrict itself to examining whether the authority’s assessment is vitiated by a manifest error or misuse of powers (see, in particular, Case C-310/99 Italy v Commission, paragraph 45, Case C-456/00 France v Commission [2002] ECR I-11949, paragraph 41, and Case C-66/02 Italy v Commission, paragraph 135). 100 The Guidelines on national regional aid prohibit regional aid aimed at reducing an undertaking’s current expenses, namely operating aid. However, under point 4.16.2 of the Guidelines, in the outermost regions qualifying for exemption under Article 87(3)(a) and (c) EC, operating aid may be authorised in so far as it is intended to offset the additional costs arising in the pursuit of economic activity from the factors identified in Article 299(2) EC, the permanence and combination of which severely restrict the development of such regions. 101 That point of the Guidelines states that it is the task of the Member State concerned to determine the amount of those additional costs and to prove that they are linked to those factors. Such aid must be justified in terms of its contribution to regional development, and its nature; its level is to be proportional to the additional costs it is intended to offset. 102 It must be observed that, when it argues that the measures at issue fulfil the criteria laid down by the Guidelines not only as regards the sectors of economic activity other than the financial sector, as the Commission recognises in the contested decision, but also as regards the financial sector itself, the Portuguese Government does not dispute the terms of the Guidelines on national regional aid. The Portuguese Government challenges solely the manner in which the Commission applied those guidelines to the financial sector in the Azores region. It takes the view that it has shown that undertakings carrying on financial activities have to contend with the same additional costs arising from the geographical specificity of the region concerned as do any other undertakings located there. 103 As was stated in paragraph 101 of this judgment, according to the Guidelines on national regional aid, it is the task of the Member State which granted the aid to determine the amount and to prove that it is justified in terms of its contribution to regional development and that its level is proportional to the additional costs it is intended to offset. It is clear from the case-file and from paragraph 18 of the grounds of the contested decision that the Portuguese authorities were not in a position to provide such evidence in relation to the financial sector. 104 Although it is true that the contested decision does not state the reason why the Commission deemed it necessary to have quantified evidence with respect to the financial sector, it cannot be inferred from this that the Commission exceeded the limits of its discretion. 105 Therefore, by declaring the part of the aid scheme referred to in Article 1 of the contested decision to be incompatible with the common market, in so far as it applies to undertakings carrying on financial activities, the Commission did not commit a manifest error of assessment. 106 Furthermore, it must be observed, with regard to undertakings carrying on activities of the ‘intra-group services’ type, that, in answer to the Portuguese authorities’ argument that such activities do not currently exist in the Portuguese legal system, the Commission held, in paragraph 42 of the grounds of the contested decision, that, for reasons of transparency and legal certainty, where those activities might in practice be likely to be carried out in the context of services provided mainly to undertakings in a group, the reductions in tax rates applicable to undertakings carrying on such activities must, in the same way as undertakings in the financial sector, be excluded by law from the benefit of the derogation under Article 87(3)(a) EC. The Commission considers that, in so far as their effects on the decision as to the place of establishment by undertakings in a group and the external effect on the local economy are insignificant, such activities do not contribute sufficiently to regional development to be declared compatible in accordance with Article 87(3)(a) EC or other derogations provided by the Treaty, for the reasons already stated as regards the financial sector and regardless of whether such activities exist at a given time in the Portuguese legal system. In the absence of any arguments by the Portuguese Government challenging those assertions, it has not been shown that a manifest error of assessment was committed in respect of such undertakings. 107 Accordingly, the third plea, alleging infringement of Article 87(3)(a) EC, must be rejected. 108 Since none of the pleas raised by the Portuguese Republic can be upheld, the action must be dismissed. Costs109 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Portuguese Republic has been unsuccessful, the latter must be ordered to pay the costs. Pursuant to the first subparagraph of Article 69(4) of the Rules of Procedure, the Member States which have intervened in the proceedings must bear their own costs. On those grounds, the Court (Grand Chamber) hereby1. Dismisses the action;2. Orders the Portuguese Republic to pay the costs;3. Orders the United Kingdom of Great Britain and Northern Ireland and the Kingdom of Spain to bear their own costs.[Signatures]* Language of the case: Portuguese. | 4aeb5-3d494d1-448b | EN |
THE INTERNATIONAL OLYMPIC COMMITTEE'S RULES ON DOPING CONTROL FALL WITHIN THE SCOPE OF COMMUNITY COMPETITION LAW | David Meca-Medina and Igor MajcenvCommission of the European Communities(Appeal – Rules adopted by the International Olympic Committee concerning doping control – Incompatibility with the Community rules on competition and freedom to provide services – Complaint – Rejection)Opinion of Advocate General Léger delivered on 23 March 2006 Judgment of the Court (Third Chamber), 18 July 2006 Summary of the Judgment1. Community law – Scope – Sport – Restriction to economic activities (Art. 2 EC)2. Free movement of persons and services – Workers – Competition – Treaty provisions – Scope (Arts 39 EC, 49 EC, 81 EC and 82 EC)3. Competition – Agreements, decisions and concerted practices – Decisions of associations of undertakings – Meaning (Art. 81(1) EC)1. Having regard to the objectives of the Community, sport is subject to Community law only in so far as it constitutes an economic activity within the meaning of Article 2 EC. (see para. 22)2. Where a sporting activity takes the form of gainful employment or the provision of services for remuneration, which is true of the activities of semi-professional or professional sportsmen, it falls, more specifically, within the scope of Article 39 EC et seq. or Article 49 EC et seq. These Community provisions on freedom of movement for persons and freedom to provide services not only apply to the action of public authorities but extend also to rules of any other nature aimed at regulating gainful employment and the provision of services in a collective manner. However, the prohibitions enacted by these provisions of the Treaty do not affect rules concerning questions which are of purely sporting interest and, as such, have nothing to do with economic activity. With regard to the difficulty of severing the economic aspects from the sporting aspects of a sport, the provisions of Community law concerning freedom of movement for persons and freedom to provide services do not preclude rules or practices justified on non-economic grounds which relate to the particular nature and context of certain sporting events. However, such a restriction on the scope of the provisions in question must remain limited to its proper objective. It cannot, therefore, be relied upon to exclude the whole of a sporting activity from the scope of the Treaty. In light of all of these considerations, it is apparent that the mere fact that a rule is purely sporting in nature does not have the effect of removing from the scope of the Treaty the person engaging in the activity governed by that rule or the body which has laid it down. If the sporting activity in question falls within the scope of the Treaty, the conditions for engaging in it are then subject to all the obligations which result from the various provisions of the Treaty. It follows that the rules which govern that activity must satisfy the requirements of those provisions, which, in particular, seek to ensure freedom of movement for workers, freedom of establishment, freedom to provide services, or competition. Thus, where engagement in the sporting activity must be assessed in the light of the Treaty provisions relating to freedom of movement for workers or freedom to provide services, it will be necessary to determine whether the rules which govern that activity satisfy the requirements of Articles 39 EC and 49 EC, that is to say do not constitute restrictions prohibited by those articles. Likewise, where engagement in the activity must be assessed in the light of the Treaty provisions relating to competition, it will be necessary to determine, given the specific requirements of Articles 81 EC and 82 EC, whether the rules which govern that activity emanate from an undertaking, whether the latter restricts competition or abuses its dominant position, and whether that restriction or that abuse affects trade between Member States. Therefore, even if those rules do not constitute restrictions on freedom of movement because they concern questions of purely sporting interest and, as such, have nothing to do with economic activity, that fact means neither that the sporting activity in question necessarily falls outside the scope of Articles 81 EC and 82 EC nor that the rules do not satisfy the specific requirements of those articles. (see paras 23-31)3. The compatibility of rules with the Community rules on competition cannot be assessed in the abstract. Not every agreement between undertakings or every decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 81(1) EC. For the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects and, more specifically, of its objectives. It has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives and are proportionate to them. The general objective of anti-doping rules relating to sport is to combat doping in order for competitive sport to be conducted fairly and includes the need to safeguard equal chances for athletes, athletes’ health, the integrity and objectivity of competitive sport and ethical values in sport. In addition, given that penalties are necessary to ensure enforcement of the doping ban, their effect on athletes’ freedom of action must be considered to be, in principle, inherent itself in the anti-doping rules. Therefore, even if anti-doping rules are to be regarded as a decision of an association of undertakings limiting the freedom of action of the persons whom they cover, they do not, for all that, necessarily constitute a restriction of competition incompatible with the common market, within the meaning of Article 81 EC, inasmuch as they are justified by a legitimate objective. Such a limitation is inherent in the organisation and proper conduct of competitive sport and its very purpose is to ensure healthy rivalry between athletes. However, the penal nature of such anti-doping rules and the magnitude of the penalties applicable if they are breached are capable of producing adverse effects on competition because they could, if penalties were ultimately to prove unjustified, result in an athlete’s unwarranted exclusion from sporting events, and thus in impairment of the conditions under which the activity at issue is engaged in. It follows that, in order not to be covered by the prohibition laid down in Article 81(1) EC, the restrictions thus imposed by those rules must be limited to what is necessary to ensure the proper conduct of competitive sport. Rules of that kind could indeed prove excessive by virtue of, first, the conditions laid down for establishing the dividing line between circumstances which amount to doping in respect of which penalties may be imposed and those which do not, and second, the severity of those penalties. (see paras 42-45, 47-48)JUDGMENT OF THE COURT (Third Chamber)18 July 2006 (*) In Case C-519/04 P,APPEAL under Article 56 of the Statute of the Court of Justice lodged on 22 December 2004,David Meca-Medina, residing in Barcelona (Spain), Igor Majcen, residing in Ljubljana (Slovenia), represented by J.-L. Dupont and M.-A. Lucas, avocats,appellants,the other parties to the proceedings being:Commission of the European Communities, represented by O. Beynet and A. Bouquet, acting as Agents, with an address for service in Luxembourg, defendant at first instance,Republic of Finland, represented by T. Pynnä, acting as Agent, intervener at first instance,THE COURT (Third Chamber),composed of A. Rosas, President of the Chamber, J. Malenovský (Rapporteur), J.‑P. Puissochet, A. Borg Barthet and A. Ó Caoimh, Judges, Advocate General: P. Léger,Registrar: B. Fülöp, Administrator,having regard to the written procedure and further to the hearing on 23 March 2006,after hearing the Opinion of the Advocate General at the sitting on 23 March 2006,gives the followingJudgment1 By their appeal, Mr Meca-Medina and Mr Majcen ( ‘the appellants’) ask the Court to set aside the judgment of the Court of First Instance of the European Communities of 30 September 2004 in Case T-313/02 Meca-Medina and Majcen v Commission [2004] ECR II-3291 (‘the contested judgment’) by which the latter dismissed their action for annulment of the decision of the Commission of the European Communities of 1 August 2002 rejecting the complaint – lodged by them against the International Olympic Committee (‘the IOC’) – seeking a declaration that certain rules adopted by the IOC and implemented by the Fédération internationale de natation (International Swimming Federation; ‘FINA’) and certain practices relating to doping control were incompatible with the Community rules on competition and freedom to provide services (Case COMP/38158 – Meca-Medina and Majcen/IOC) (‘the decision at issue’). Background to the dispute2 The Court of First Instance summarised the relevant anti-doping rules (‘the anti-doping rules at issue’) in paragraphs 1 to 6 of the contested judgment: ‘1 The [IOC] is the supreme authority of the Olympic Movement, which brings together the various international sporting federations, among which is [FINA]). 2 FINA implements for swimming, by its Doping Control Rules (“the DCR”, cited here in the version in force at the material time), the Olympic Movement’s Anti-Doping Code. DCR 1.2(a) states that the offence of doping “occurs when a banned substance is found to be present within a competitor’s body tissue or fluids”. That definition corresponds to that in Article 2(2) of the abovementioned Anti-Doping Code, where doping is defined as the presence in an athlete’s body of a prohibited substance or the finding that such a substance or a prohibited technique has been used. 3 Nandrolone and its metabolites, Norandrosterone (NA) and Norethiocholanolone (NE) (hereinafter together called “Nandrolone”), are prohibited anabolic substances. However, according to the practice of the 27 laboratories accredited by the IOC and FINA, and to take account of the possibility of endogenous, therefore innocent, production of Nandrolone, the presence of that substance in a male athlete’s body is defined as doping only if it exceeds a limit of 2 nanogrammes (ng) per millilitre (ml) of urine. 4 For a first offence of doping with an anabolic substance, DCR 9.2(a) requires the suspension of the athlete for a minimum of four years, which may however be reduced, under the final sentence of DCR 9.2, DCR 9.3 and DCR 9.10, if the athlete proves that he did not knowingly take the prohibited substance or establishes how that substance could be present in his body without negligence on his part. 5 The penalties are imposed by FINA’s Doping Panel, whose decisions are subject to appeal to the Court of Arbitration for Sport (“the CAS”) under DCR 8.9. The CAS, which is based in Lausanne, is financed and administered by an organisation independent of the IOC, the International Council of Arbitration for Sport (“the ICAS”). 6 The CAS’s rulings are subject to appeal to the Swiss Federal Court, which has jurisdiction to review international arbitration awards made in Switzerland.’ 3 The factual background to the dispute was summarised by the Court of First Instance in paragraphs 7 to 20 of the contested judgment: ‘7 The applicants are two professional athletes who compete in long-distance swimming, the aquatic equivalent of the marathon.8 In an anti-doping test carried out on 31 January 1999 during the World Cup in that discipline at Salvador de Bahia (Brazil), where they had finished first and second respectively, the applicants tested positive for Nandrolone. The level found for Mr D. Meca-Medina was 9.7 ng/ml and that for Mr I. Majcen 3.9 ng/ml. 9 On 8 August 1999, FINA’s Doping Panel suspended the applicants for a period of four years.10 On the applicants’ appeal, the CAS, by arbitration award of 29 February 2000, confirmed the suspension.11 In January 2000, certain scientific experiments showed that Nandrolone’s metabolites can be produced endogenously by the human body at a level which may exceed the accepted limit when certain foods, such as boar meat, have been consumed. 12 In view of that development, FINA and the applicants consented, by an arbitration agreement of 20 April 2000, to refer the case anew to the CAS for reconsideration. 13 By arbitration award of 23 May 2001, the CAS reduced the penalty to two years’ suspension.14 The applicants did not appeal against that award to the Swiss Federal Court.15 By letter of 30 May 2001, the applicants filed a complaint with the Commission, under Article 3 of Council Regulation No 17 of 6 February 1962: First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87), alleging a breach of Article 81 EC and/or Article 82 EC. 16 In their complaint, the applicants challenged the compatibility of certain regulations adopted by the IOC and implemented by FINA and certain practices relating to doping control with the Community rules on competition and freedom to provide services. First of all, the fixing of the limit at 2 ng/ml is a concerted practice between the IOC and the 27 laboratories accredited by it. That limit is scientifically unfounded and can lead to the exclusion of innocent or merely negligent athletes. In the applicants’ case, the excesses could have been the result of the consumption of a dish containing boar meat. Also, the IOC’s adoption of a mechanism of strict liability and the establishment of tribunals responsible for the settlement of sports disputes by arbitration (the CAS and the ICAS) which are insufficiently independent of the IOC strengthens the anti-competitive nature of that limit. 17 According to that complaint, the application of those rules (hereinafter “the anti-doping rules at issue”) leads to the infringement of the athletes’ economic freedoms, guaranteed inter alia by Article 49 EC and, from the point of view of competition law, to the infringement of the rights which the athletes can assert under Articles 81 EC and 82 EC. 18 By letter of 8 March 2002, the Commission informed the applicants, in accordance with Article 6 of Commission Regulation (EC) No 2842/98 of 22 December 1998 on the hearing of parties in certain proceedings under Articles [81] and [82] of the EC Treaty (OJ 1998 L 354, p. 18), of the reasons for which it considered that the complaint should not be upheld. 19 By letter of 11 April 2002, the applicants sent the Commission their observations on the letter of 8 March 2002.20 By decision of 1 August 2002 …, the Commission, after analysing the anti-doping rules at issue according to the assessment criteria of competition law and concluding that those rules did not fall foul of the prohibition under Articles 81 EC and 82 EC, rejected the applicants’ complaint …’. Procedure before the Court of First Instance and the contested judgment4 On 11 October 2002, the present appellants brought an action before the Court of First Instance to have the decision at issue set aside. They raised three pleas in law in support of their action. First, the Commission made a manifest error of assessment in fact and in law, by deciding that the IOC is not an undertaking within the meaning of the Community case-law. Second, it misapplied the criteria established by the Court of Justice in Case C-309/99 Wouters and Others [2002] ECR I-1577, in deciding that the anti-doping rules at issue are not a restriction of competition within the meaning of Article 81 EC. Finally, the Commission made a manifest error of assessment in fact and in law at point 71 of the decision at issue, in rejecting the grounds under Article 49 EC relied upon by the appellants to challenge the anti-doping rules. 5 On 24 January 2003, the Republic of Finland sought leave to intervene in support of the Commission. By order of 25 February 2003, the President of the Fourth Chamber of the Court of First Instance granted leave. 6 By the contested judgment, the Court of First Instance dismissed the action brought by the present appellants.7 In paragraphs 40 and 41 of the contested judgment, the Court of First Instance held, on the basis of case-law of the Court of Justice, that while the prohibitions laid down by Articles 39 EC and 49 EC apply to the rules adopted in the field of sport that concern the economic aspect which sporting activity can present, on the other hand those prohibitions do not affect purely sporting rules, that is to say rules relating to questions of purely sporting interest and, as such, having nothing to do with economic activity. 8 The Court of First Instance observed, in paragraph 42 of the contested judgment, that the fact that purely sporting rules may have nothing to do with economic activity, with the result that they do not fall within the scope of Articles 39 EC and 49 EC, means, also, that they have nothing to do with the economic relationships of competition, with the result that they also do not fall within the scope of Articles 81 EC and 82 EC. 9 In paragraphs 44 and 47 of the contested judgment, the Court of First Instance held that the prohibition of doping is based on purely sporting considerations and therefore has nothing to do with any economic consideration. It concluded that the rules to combat doping consequently cannot come within the scope of the Treaty provisions on the economic freedoms and, in particular, of Articles 49 EC, 81 EC and 82 EC. 10 The Court of First Instance held, in paragraph 49 of the contested judgment, that the anti-doping rules at issue, which have no discriminatory aim, are intimately linked to sport as such. It found furthermore, in paragraph 57 of the contested judgment, that the fact that the IOC might possibly, when adopting the anti-doping rules at issue, have had in mind the concern, legitimate according to the present appellants themselves, of safeguarding the economic potential of the Olympic Games is not sufficient to alter the purely sporting nature of those rules. 11 The Court of First Instance further stated, in paragraph 66 of the contested judgment, that since the Commission concluded in the decision at issue that the anti-doping rules at issue fell outside the scope of Articles 81 EC and 82 EC because of their purely sporting nature, the reference in that decision to the method of analysis in Wouters and Others cannot, in any event, bring into question that conclusion. The Court held in addition, in paragraph 67 of the contested judgment, that the challenging of those rules fell within the jurisdiction of the sporting dispute settlement bodies. 12 The Court of First Instance also dismissed the third plea put forward by the present appellants, holding, in paragraph 68 of the contested judgment, that since the anti-doping rules at issue were purely sporting, they did not fall within the scope of Article 49 EC. Forms of order sought on appeal13 In their appeal, the appellants claim that the Court should:– set aside the contested judgment;– grant the form of order sought before the Court of First Instance;– order the Commission to pay the costs of both sets of proceedings.14 The Commission contends that the Court should:– dismiss the appeal in its entirety;– in the alternative, grant the form of order sought at first instance and dismiss the action for annulment of the decision at issue; – order the appellants to pay the costs including those of the proceedings at first instance.15 The Republic of Finland contends that the Court should:– dismiss the appeal in its entirety. The appeal16 By their arguments, the appellants put forward four pleas in law in support of their appeal. By the first plea, which is in several parts, they submit that the contested judgment is vitiated by an error of law in that the Court of First Instance held that the anti-doping rules at issue did not fall within the scope of Articles 49 EC, 81 EC and 82 EC. By the second plea, they contend that the contested judgment should be annulled because it distorts the clear sense of the decision at issue. By the third plea, they argue that the contested judgment fails to comply with formal requirements because certain of its grounds are contradictory and the reasoning is inadequate. By the fourth plea, they submit that the contested judgment was delivered following flawed proceedings, since the Court of First Instance infringed the rights of the defence. The first plea17 The first plea, alleging an error of law, is in three parts. The appellants submit, first, that the Court of First Instance was mistaken as to the interpretation of the Court of Justice’s case-law relating to the relationship between sporting rules and the scope of the Treaty provisions. They submit, second, that the Court of First Instance misconstrued the effect, in the light of that case-law, of rules prohibiting doping, generally, and the anti-doping rules at issue, in particular. They contend, third, that the Court of First Instance was wrong in holding that the anti-doping rules at issue could not be likened to market conduct falling within the scope of Articles 81 EC and 82 EC and therefore could not be subject to the method of analysis established by the Court of Justice in Wouters and Others. The first part of the plea– Arguments of the parties18 In the appellants’ submission, the Court of First Instance misinterpreted the case-law of the Court of Justice according to which sport is subject to Community law only in so far as it constitutes an economic activity. In particular, contrary to what was held by the Court of First Instance, purely sporting rules have never been excluded generally by the Court of Justice from the scope of the provisions of the Treaty. While the Court of Justice has held the formation of national teams to be a question of purely sporting interest and, as such, having nothing to do with economic activity, the Court of First Instance could not infer therefrom that any rule relating to a question of purely sporting interest has, as such, nothing to do with economic activity and thus is not covered by the prohibitions laid down in Articles 39 EC, 49 EC, 81 EC and 82 EC. The concept of a purely sporting rule must therefore be confined solely to rules relating to the composition and formation of national teams. 19 The appellants further contend that the Court of First Instance was wrong in finding that rules of purely sporting interest are necessarily inherent in the organisation and proper conduct of competitive sport, when, according to the case-law of the Court of Justice, they must also relate to the particular nature and context of sporting events. The appellants also submit that, because professional sporting activity is, in practical terms, indivisible in nature, the distinction drawn by the Court of First Instance between the economic and the non-economic aspect of the same sporting activity is entirely artificial. 20 In the Commission’s submission, the Court of First Instance applied correctly the case-law of the Court of Justice according to which purely sporting rules are, as such, not covered by the rules on freedom of movement. This does therefore involve an exception of general application for purely sporting rules, which is thus not limited to the composition and formation of national teams. Nor does the Commission see how a rule of purely sporting interest and relating to the specific nature of sporting events could fail to be inherent in the proper conduct of the events. 21 In the Finnish Government’s submission, the Court of First Instance’s approach is consistent with Community law.– Findings of the Court22 It is to be remembered that, having regard to the objectives of the Community, sport is subject to Community law in so far as it constitutes an economic activity within the meaning of Article 2 EC (see Case 36/74 Walrave and Koch [1974] ECR 1405, paragraph 4; Case 13/76 Donà [1976] ECR 1333, paragraph 12; Case C-415/93 Bosman [1995] ECR I‑4921, paragraph 73; Joined Cases C-51/96 and C-191/97 Deliège [2000] ECR I‑2549, paragraph 41; and Case C-176/96 Lehtonen and Castors Braine [2000] ECR I‑2681, paragraph 32). 23 Thus, where a sporting activity takes the form of gainful employment or the provision of services for remuneration, which is true of the activities of semi-professional or professional sportsmen (see, to this effect, Walrave and Koch, paragraph 5, Donà, paragraph 12, and Bosman, paragraph 73), it falls, more specifically, within the scope of Article 39 EC et seq. or Article 49 EC et seq. 24 These Community provisions on freedom of movement for persons and freedom to provide services not only apply to the action of public authorities but extend also to rules of any other nature aimed at regulating gainful employment and the provision of services in a collective manner (Deliège, paragraph 47, and Lehtonen and Castors Braine, paragraph 35). 25 The Court has, however, held that the prohibitions enacted by those provisions of the Treaty do not affect rules concerning questions which are of purely sporting interest and, as such, have nothing to do with economic activity (see, to this effect, Walrave and Koch, paragraph 8). 26 With regard to the difficulty of severing the economic aspects from the sporting aspects of a sport, the Court has held (in Donà, paragraphs 14 and 15) that the provisions of Community law concerning freedom of movement for persons and freedom to provide services do not preclude rules or practices justified on non-economic grounds which relate to the particular nature and context of certain sporting events. It has stressed, however, that such a restriction on the scope of the provisions in question must remain limited to its proper objective. It cannot, therefore, be relied upon to exclude the whole of a sporting activity from the scope of the Treaty (Bosman, paragraph 76, and Deliège, paragraph 43). 27 In light of all of these considerations, it is apparent that the mere fact that a rule is purely sporting in nature does not have the effect of removing from the scope of the Treaty the person engaging in the activity governed by that rule or the body which has laid it down. 28 If the sporting activity in question falls within the scope of the Treaty, the conditions for engaging in it are then subject to all the obligations which result from the various provisions of the Treaty. It follows that the rules which govern that activity must satisfy the requirements of those provisions, which, in particular, seek to ensure freedom of movement for workers, freedom of establishment, freedom to provide services, or competition. 29 Thus, where engagement in the sporting activity must be assessed in the light of the Treaty provisions relating to freedom of movement for workers or freedom to provide services, it will be necessary to determine whether the rules which govern that activity satisfy the requirements of Articles 39 EC and 49 EC, that is to say do not constitute restrictions prohibited by those articles (Deliège, paragraph 60). 30 Likewise, where engagement in the activity must be assessed in the light of the Treaty provisions relating to competition, it will be necessary to determine, given the specific requirements of Articles 81 EC and 82 EC, whether the rules which govern that activity emanate from an undertaking, whether the latter restricts competition or abuses its dominant position, and whether that restriction or that abuse affects trade between Member States. 31 Therefore, even if those rules do not constitute restrictions on freedom of movement because they concern questions of purely sporting interest and, as such, have nothing to do with economic activity (Walrave and Koch and Donà), that fact means neither that the sporting activity in question necessarily falls outside the scope of Articles 81 EC and 82 EC nor that the rules do not satisfy the specific requirements of those articles. 32 However, in paragraph 42 of the contested judgment, the Court of First Instance held that the fact that purely sporting rules may have nothing to do with economic activity, with the result that they do not fall within the scope of Articles 39 EC and 49 EC, means, also, that they have nothing to do with the economic relationships of competition, with the result that they also do not fall within the scope of Articles 81 EC and 82 EC. 33 In holding that rules could thus be excluded straightaway from the scope of those articles solely on the ground that they were regarded as purely sporting with regard to the application of Articles 39 EC and 49 EC, without any need to determine first whether the rules fulfilled the specific requirements of Articles 81 EC and 82 EC, as set out in paragraph 30 of the present judgment, the Court of First Instance made an error of law. 34 Accordingly, the appellants are justified in asserting that, in paragraph 68 of the contested judgment, the Court of First Instance erred in dismissing their application on the ground that the anti-doping rules at issue were subject to neither Article 49 EC nor competition law. The contested judgment must therefore be set aside, and there is no need to examine either the remaining parts of the first plea or the other pleas put forward by the appellants. Substance35 In accordance with Article 61 of the Statute of the Court of Justice, since the state of the proceedings so permits it is appropriate to give judgment on the substance of the appellants’ claims for annulment of the decision at issue. 36 The appellants advanced three pleas in support of their action. They criticised the Commission for having found, first, that the IOC was not an undertaking within the meaning of the Community case-law, second, that the anti-doping rules at issue were not a restriction of competition within the meaning of Article 81 EC and, finally, that their complaint did not contain facts capable of leading to the conclusion that there could have been an infringement of Article 49 EC. 37 The appellants contend that the Commission was wrong not to treat the IOC as an undertaking for the purposes of application of Article 81 EC. 38 It is, however, common ground that, in order to rule on the complaint submitted to it by the appellants in the light of Articles 81 EC and 82 EC, the Commission sought, as is explicitly made clear in point 37 of the decision at issue, to proceed on the basis that the IOC was to be treated as an undertaking and, within the Olympic Movement, as an association of international and national associations of undertakings. 39 Since this plea is founded on an incorrect reading of the decision at issue, it is of no consequence and must, for that reason, be dismissed. The second plea40 The appellants contend that in rejecting their complaint the Commission wrongly decided that the anti-doping rules at issue were not a restriction of competition within the meaning of Article 81 EC. They submit that the Commission misapplied the criteria established by the Court of Justice in Woutersand Others in justifying the restrictive effects of the anti-doping rules on their freedom of action. According to the appellants, first, those rules are, contrary to the Commission’s findings, in no way solely inherent in the objectives of safeguarding the integrity of competitive sport and athletes’ health, but seek to protect the IOC’s own economic interests. Second, in laying down a maximum level of 2 ng/ml of urine which does not correspond to any scientifically safe criterion, those rules are excessive in nature and thus go beyond what is necessary in order to combat doping effectively. 41 It should be stated first of all that, while the appellants contend that the Commission made a manifest error of assessment in treating the overall context in which the IOC adopted the rules at issue like that in which the Netherlands Bar had adopted the regulation upon which the Court was called to rule in Wouters and Others, they do not provide any accompanying detail to enable the merits of this submission to be assessed. 42 Next, the compatibility of rules with the Community rules on competition cannot be assessed in the abstract (see, to this effect, Case C-250/92 DLG [1994] ECR I‑5641, paragraph 31). Not every agreement between undertakings or every decision of an association of undertakings which restricts the freedom of action of the parties or of one of them necessarily falls within the prohibition laid down in Article 81(1) EC. For the purposes of application of that provision to a particular case, account must first of all be taken of the overall context in which the decision of the association of undertakings was taken or produces its effects and, more specifically, of its objectives. It has then to be considered whether the consequential effects restrictive of competition are inherent in the pursuit of those objectives (Wouters and Others, paragraph 97) and are proportionate to them. 43 As regards the overall context in which the rules at issue were adopted, the Commission could rightly take the view that the general objective of the rules was, as none of the parties disputes, to combat doping in order for competitive sport to be conducted fairly and that it included the need to safeguard equal chances for athletes, athletes’ health, the integrity and objectivity of competitive sport and ethical values in sport. 44 In addition, given that penalties are necessary to ensure enforcement of the doping ban, their effect on athletes’ freedom of action must be considered to be, in principle, inherent itself in the anti-doping rules. 45 Therefore, even if the anti-doping rules at issue are to be regarded as a decision of an association of undertakings limiting the appellants’ freedom of action, they do not, for all that, necessarily constitute a restriction of competition incompatible with the common market, within the meaning of Article 81 EC, since they are justified by a legitimate objective. Such a limitation is inherent in the organisation and proper conduct of competitive sport and its very purpose is to ensure healthy rivalry between athletes. 46 While the appellants do not dispute the truth of this objective, they nevertheless contend that the anti-doping rules at issue are also intended to protect the IOC’s own economic interests and that it is in order to safeguard this objective that excessive rules, such as those contested in the present case, are adopted. The latter cannot therefore, in their submission, be regarded as inherent in the proper conduct of competitive sport and fall outside the prohibitions in Article 81 EC. 47 It must be acknowledged that the penal nature of the anti-doping rules at issue and the magnitude of the penalties applicable if they are breached are capable of producing adverse effects on competition because they could, if penalties were ultimately to prove unjustified, result in an athlete’s unwarranted exclusion from sporting events, and thus in impairment of the conditions under which the activity at issue is engaged in. It follows that, in order not to be covered by the prohibition laid down in Article 81(1) EC, the restrictions thus imposed by those rules must be limited to what is necessary to ensure the proper conduct of competitive sport (see, to this effect, DLG, paragraph 35). 48 Rules of that kind could indeed prove excessive by virtue of, first, the conditions laid down for establishing the dividing line between circumstances which amount to doping in respect of which penalties may be imposed and those which do not, and second, the severity of those penalties. 49 Here, that dividing line is determined in the anti-doping rules at issue by the threshold of 2 ng/ml of urine above which the presence of Nandrolone in an athlete’s body constitutes doping. The appellants contest that rule, asserting that the threshold adopted is set at an excessively low level which is not founded on any scientifically safe criterion. 50 However, the appellants fail to establish that the Commission made a manifest error of assessment in finding that rule to be justified. 51 It is common ground that Nandrolone is an anabolic substance the presence of which in athletes’ bodies is liable to improve their performance and compromise the fairness of the sporting events in which they participate. The ban on that substance is accordingly in principle justified in light of the objective of anti-doping rules. 52 It is also common ground that that substance may be produced endogenously and that, in order to take account of this phenomenon, sporting bodies, including the IOC by means of the anti-doping rules at issue, have accepted that doping is considered to have occurred only where the substance is present in an amount exceeding a certain threshold. It is therefore only if, having regard to scientific knowledge as it stood when the anti-doping rules at issue were adopted or even when they were applied to punish the appellants, in 1999, the threshold is set at such a low level that it should be regarded as not taking sufficient account of this phenomenon that those rules should be regarded as not justified in light of the objective which they were intended to achieve. 53 It is apparent from the documents before the Court that at the material time the average endogenous production observed in all studies then published was 20 times lower than 2ng/ml of urine and that the maximum endogenous production value observed was nearly a third lower. While the appellants contend that, from 1993, the IOC could not have been unaware of the risk reported by an expert that merely consuming a limited quantity of boar meat could cause entirely innocent athletes to exceed the threshold in question, it is not in any event established that at the material time this risk had been confirmed by the majority of the scientific community. Moreover, the results of the studies and the experiments carried out on this point subsequent to the decision at issue have no bearing in any event on the legality of that decision. 54 In those circumstances, and as the appellants do not specify at what level the threshold in question should have been set at the material time, it does not appear that the restrictions which that threshold imposes on professional sportsmen go beyond what is necessary in order to ensure that sporting events take place and function properly. 55 Since the appellants have, moreover, not pleaded that the penalties which were applicable and were imposed in the present case are excessive, it has not been established that the anti-doping rules at issue are disproportionate. 56 Accordingly, the second plea must be dismissed. The third plea57 The appellants contend that the decision at issue is vitiated by an error of law in that it rejects, at point 71, their argument that the IOC rules infringe Article 49 EC. 58 However, the application made by the appellants to the Court of First Instance relates to the legality of a decision adopted by the Commission following a procedure which was conducted on the basis of a complaint lodged pursuant to Council Regulation No 17 of 6 February 1962: First Regulation implementing Articles [81] and [82] of the Treaty (OJ, English Special Edition 1959-1962, p. 87). It follows that judicial review of that decision must necessarily be limited to the competition rules as resulting from Articles 81 EC and 82 EC, and consequently cannot extend to compliance with other provisions of the Treaty (see, to this effect, the order of 23 February 2006 in Case C-171/05 P Piau, not published in the ECR, paragraph 58). 59 Accordingly, whatever the ground on which the Commission rejected the argument relied upon by the appellants with regard to Article 49 EC, the plea which they now put forward is misplaced and must accordingly also be rejected. 60 In light of all the foregoing considerations, the action brought by the appellants challenging the decision at issue must therefore be dismissed. Costs61 The first paragraph of Article 122 of the Rules of Procedure provides that, where the appeal is unfounded or where the appeal is well founded and the Court of Justice itself gives final judgment in the case, it is to make a decision as to costs. Under Article 69(2) of the Rules of Procedure, which applies to appeal proceedings by virtue of Article 118 of those rules, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. The first subparagraph of Article 69(3) of the rules provides, however, that the Court may order that the costs be shared or that the parties bear their own costs where each party succeeds on some and fails on other heads, or where the circumstances are exceptional. The first subparagraph of Article 69(4) lays down that Member States which intervene in the proceedings are to bear their own costs. 62 Since the Commission has applied for costs to be awarded against the appellants and the latter have in essence been unsuccessful, they must be ordered to pay the costs relating both to the present proceedings and to the proceedings brought before the Court of First Instance. The Republic of Finland is to be ordered to bear its own costs. On those grounds, the Court (Third Chamber) hereby:1. Sets aside the judgment of the Court of First Instance of the European Communities of 30 September 2004 in Case T-313/02 Meca-Medina and Majcen v Commission;2. Dismisses the action under No T-313/02 brought before the Court of First Instance for annulment of the Commission’s decision of 1 August 2002 rejecting the complaint lodged by Mr Meca-Medina and Mr Majcen;3. Orders Mr Meca-Medina and Mr Majcen to pay the costs relating both to the present proceedings and to the proceedings brought before the Court of First Instance;4. Orders the Republic of Finland to bear its own costs.[Signatures]* Language of the case: French. | bfbd6-52ef9a7-43cf | EN |
FOR THE SECOND TIME THE COURT FINDS AGAINST ITALY FOR FAILING TO RECOGNISE THE ACQUIRED RIGHTS OF FORMER | Commission of the European CommunitiesvItalian Republic(Failure of a Member State to fulfil obligations – Judgment of the Court establishing failure – Non-compliance – Article 228 EC – Financial penalties – Recognition of acquired rights of former foreign-language assistants)Opinion of Advocate General Poiares Maduro delivered on 26 January 2006 Judgment of the Court (Grand Chamber), 18 July 2006 Summary of the Judgment1. Member States – Obligations – Failure to fulfil obligations – National system pleaded as justification – Not permissible (Art. 226 EC)2. Actions for failure to fulfil obligations – Judgment of the Court establishing such failure – Breach of the obligation to comply with the judgment(Art. 228(2) EC)1. A Member State cannot plead provisions, practices or situations prevailing in its domestic legal order, such as a system for regulating employment relationships based on collective agreement, to justify failure to observe obligations arising under Community law. (see paras 25-26)2. In an action brought by the Commission for a declaration that, by failing to take all the measures necessary to comply with a judgment declaring it to be in breach of its obligations, the Member State concerned has failed to fulfil its obligations under Article 228 EC, it must be ascertained whether the alleged breach has continued up to the Court’s examination of the facts. In that regard, it is for the Commission to provide the Court with the information necessary to determine the extent to which a Member State has complied with a judgment declaring it to be in breach of its obligations. Moreover, where the Commission has adduced sufficient evidence to show that the breach of obligations has persisted, it is for the Member State concerned to challenge in substance and in detail the information produced and its consequences. (see paras 33, 41, 47, operative part)JUDGMENT OF THE COURT (Grand Chamber)18 July 2006 (*) (Failure of a Member State to fulfil obligations – Judgment of the Court establishing failure – Non-compliance –Article 228 EC– Financial penalties – Recognition of acquired rights of former foreign-language assistants)In Case C-119/04,ACTION under Article 228 EC for failure to fulfil obligations, brought on 4 March 2004,Commission of the European Communities, represented by E. Traversa and L. Pignataro, acting as Agents, with an address for service in Luxembourg, applicant,Italian Republic, represented by I. M. Braguglia, acting as Agent, and M. Fiorilli, Avvocato dello Stato, with an address for service in Luxembourg, defendant,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C. W. A. Timmermans, A. Rosas and J. Malenovský, Presidents of Chambers, J.-P. Puissochet, R. Schintgen, N. Colneric, S. von Bahr, J. N. Cunha Rodrigues (Rapporteur), J. Klučka, U. Lõhmus and E. Levits, Judges, Advocate General: M. Poiares Maduro,Registrar: M. Ferreira, Principal Administrator,having regard to the written procedure and further to the hearing on 15 November 2005,after hearing the Opinion of the Advocate General at the sitting on 26 January 2006,gives the followingJudgment1 By its application, the Commission of the European Communities asks the Court to:– declare that, by not taking all the measures necessary to comply with the judgment of 26 June 2001 in Case C‑212/99 Commission v Italy [2001] (ECR I‑4923), the Italian Republic has failed to fulfil its obligations under Article 228 EC; – order the Italian Republic to pay into the Commission’s ‘European Community own resources’ account, a penalty payment of EUR 309 750 for each day of delay in taking the measures necessary to comply with the judgment in Case C-212/99 Commission v Italy, from the day on which judgment in the present case is delivered until the judgment in that case is complied with; – order the Italian Republic to pay the costs. Legal context Community legislation2 Article 39(1) EC reads as follows:‘Freedom of movement for workers shall be secured within the Community.’3 Under Article 39(2) EC, freedom of movement for workers is to entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment. National legislation4 On 14 January 2004, the Italian Government adopted Decree-Law No 2, laying down urgent provisions relating to the economic treatment of linguistic associates in certain universities and concerning equivalent qualifications (GURI No 11 of 15 January 2004, p. 4) (‘Decree-Law No 2/2004’). 5 Article 1(1) of Decree-Law No 2/2004 provides:‘In compliance with the judgment delivered by the Court of Justice … on 26 June 2001 in Case C-212/99, the financial treatment of linguistic associates, former foreign-language assistants (the ‘former assistants’) at the universities of La Basilicata, Milan, Palermo, Pisa, ‘La Sapienza’ in Rome, and the Eastern University Institute in Naples (‘the universities in question’) … shall correspond to that afforded to part‑time tenured researchers, on a pro rata basis according to the number of hours worked and on the basis that full-time employment is equal to 500 hours per year, with effect from the original date of recruitment, save where more advantageous treatment may be afforded; …’ 6 Under Article 1 of Decree-Law No 57 of 2 March 1987, converted into Law No 158 of 22 April 1987 (GURI No 51 of 3 March 1987) amending Article 32 of Decree of the President of the Republic No 382 of 11 July 1980 (Ordinary Supplement to GURI No 209 of 31 July 1980), the maximum number of teaching hours to be completed each year by tenured researchers is 350 for a full-time post and 200 for a part-time post. The salary of part-time tenured researchers is a standard figure, comprising remuneration for 200 hours’ teaching and for an unspecified number of hours of research. 7 Article 51 of the 1994-1997 national collective employment agreement for university staff (‘the CCNL’) provided that associates and mother-tongue linguistic associates (‘associates and linguistic experts’) were to work 500 actual hours per year. Derogations from that general reference framework were permitted. The judgment of 26 June 2001 in Commission v Italy8 At the first paragraph of the operative part of the judgment in Case C-212/99 Commission v Italy the Court declared that: ‘[b]y not guaranteeing recognition of the rights acquired by former … assistants who have become associates and … linguistic experts, even though such recognition is guaranteed to all national workers, the Italian Republic has failed to fulfil its obligations under Article [39] EC.’ Pre-litigation procedure9 By letter of 31 January 2002, the Commission reminded the Italian authorities that it was necessary to comply with their obligations under the judgment in Case C‑212/99 Commission v Italy. 10 By letters of 10 April, 8 July and 16 October 2002, the Italian authorities replied to that reminder letter by sending the Commission the following: – a copy of a letter, dated 27 March 2002, by which the Minister for Education, Universities and Scientific Research called upon the universities in question to comply with the provisions of the judgment in Case C‑212/99 within 45 days; – information concerning the measures adopted by those universities to ‘ensure recognition of the length of service of … former assistants, on the basis of the judgment delivered by the Court of Justice’; – explanations as to the content and effects of the decisions taken by each of those universities.11 Following on from those communications, by letter of 11 December 2002, the Commission requested clarification from the Italian authorities as to the method and criteria used by the universities in question to calculate the increases in the remuneration of former assistants who, since 1994, had formed part of a newly-established body of associates and linguistic experts. 12 The Italian Government replied to that request by letter of 24 January 2003, sending the Commission a draft CCNL agreement – second two-year financial period 2000-2001 – signed on 18 December 2002 by the governmental agency responsible for negotiating employment contracts in the public sector (ARAN) and by the trade union organisations for university staff. That draft agreement contained specific rules for associates and linguistic experts (former assistants) in order to ‘comply with the judgment delivered by the Court of Justice on 26 June 2001 in Case C‑212/99’. 13 Since it considered that those measures did not demonstrate that the infringement had been remedied, on 30 April 2003 the Commission sent the Italian Republic a reasoned opinion in which it concluded that, by failing to take all the measures necessary to comply with the judgment in Case C‑212/99 Commission v Italy, that Member State had failed to fulfil its obligations under Article 39 EC. The Commission drew the attention of that Member State to the fact that, if the dispute were brought before the Court, it would seek an order for a penalty payment. Further, the Italian Republic was required to adopt the necessary measures to comply with the reasoned opinion within two months of its notification. 14 In response to that reasoned opinion, the Italian Government sent the Commission a number of documents, including, inter alia, letters of 16 June and 12 November 2003, which, respectively, provided the Commission with the final version of the CCNL, signed on 13 May 2003, and notified it of the measures the competent authorities intended to take shortly thereafter. On 28 January 2004, that government sent the Commission a copy of Decree-Law No 2/2004. 15 It was in those circumstances that the Commission, taking the view that the Italian Republic had not fully complied with the judgment in Case C-212/99 Commission v Italy, decided to bring the present action. Failure to fulfil obligations Arguments of the parties16 The Commission points out that Article 22(3) of the final version of the CCNL states that ‘upon further negotiation, the judgment delivered by the Court of Justice … on 26 January 2001 in Case C-212/99 … will be given effect … by the drawing up of a salary scale which will taken into account experience acquired in respect of the category of [associates and linguistic experts]’. For the Commission, that final version does not itself identify a category of workers whose functions can be regarded as equivalent to those exercised by former assistants. 17 The Commission states, further, that Decree-Law No 2/2004 treats former assistants in the same way as part-time tenured researchers. However, a full-time, foreign-language assistant should receive treatment equivalent to that of a full-time tenured researcher, if the former is not to be disadvantaged with regard to arrears of salary and retirement pension rights. The fact that former assistants were awarded pay increases with effect from a certain date does not, of itself, mean that discrimination based on nationality has been removed. 18 The Commission submits that the Italian Republic has failed to prove that the universities paid all the arrears of salary and salary increases due or amounts on account of the social security contributions to which former assistants were entitled in view of the teaching hours they had actually worked. 19 The Italian Republic contends that the steps taken must be considered in the light of the Italian system for regulating employment relationships, which is based on collective agreement. 20 According to that Member State, the purpose of Decree-Law No 2/2004 was specifically to deal with the deadlock reached in the collective negotiations within the universities. To that end, that decree-law required the defaulting universities to reconstruct the career of former assistants by taking the remuneration of part-time tenured researchers as their standard of reference. 21 The Italian authorities maintain that the choice of that category of national workers is justified by the fact that it is not possible to treat the functions of a full-time tenured researcher in the same way as those of a former assistant. 22 Firstly, the principal function of researchers is to carry out scientific research, whilst teaching is merely a secondary, marginal feature of their work. To see it otherwise would be to undervalue that part of a university researcher’s remuneration that is allocated for scientific research. 23 Secondly, the analogy drawn between former assistants and part-time tenured researchers is essentially based on the fact that the employment relationship between the latter and their employer lacks any exclusivity, which enables such researchers to do other professional work. 24 In the circumstances, compliance with the judgment in Case C‑212/99 Commission v Italy required merely that the collective agreement concluded by the universities in question be supplemented by an additional clause setting out the criteria to ensure that former assistants could retain the rights they had acquired in the course of their earlier employment relationships. Findings of the Court25 As a preliminary point, it is to be noted that a Member State cannot plead provisions, practices or situations prevailing in its domestic legal order to justify failure to observe obligations arising under Community law (see, inter alia, Case C-212/99 Commission v Italy, paragraph 34, and Case C-195/02 Commission v Spain [2004] ECR I-7857, paragraph 82). 26 The Italian Republic’s argument that the problem of recognition of rights acquired by former assistants must be considered in the light of the Italian system for regulating employment relationships, which is based on collective agreement, cannot, therefore, be accepted. 27 Further, according to settled case-law, the reference date for assessing whether there has been a failure to fulfil obligations under Article 228 EC is the date of expiry of the period prescribed in the reasoned opinion issued under that provision (see Case C‑304/02 Commission v France [2005] ECR I‑6263, paragraph 30, and Case C-177/04 Commission v France [2006] ECR I-0000, paragraph 20). 28 In the present case, it is common ground that, on the date of expiry of the period prescribed in the reasoned opinion of 30 April 2003, the Italian Republic had not yet taken all of the measures necessary to comply with the judgment in Case C‑212/99 Commission v Italy. 29 As is clear from paragraphs 21 and 22 of the judgment in Case C-212/99 Commission v Italy, the principle of equal treatment laid down by Article 39 EC required that, where former assistants who have been employed under a fixed-term contract have that contract replaced by one of indeterminate duration, they should retain all the rights acquired from the date of their original recruitment. That guarantee had consequences not only with regard to increases in salary, but also with regard to seniority and to payment by the employer of social security contributions. 30 It is apparent from the file that, by way of compliance with the judgment in Case C-212/99 Commission v Italy, as an initial step, the Italian Republic implemented the following measures: – at the University of Milan, a collective agreement concerning associates and linguistic experts, signed on 27 November 1999, provided that work done by the latter as foreign-language assistants was to be taken into account for the purposes of determining their remuneration. Subsequently, by letter of 7 May 2002, that university informed the Italian Government that the remuneration of associates and linguistic experts had been increased and that arrears of salary had been calculated on the basis of a maximum of 450 teaching hours per year; – at the University of Pisa, by decision of the Administrative Director of 13 March 2002 and of the Rector of 10 May 2002, former assistants were to receive arrears of salary on the basis of three seniority increments; – on 17 May 2002, a decision of the Administrative Director of ‘La Sapienza’ University in Rome established that the seniority of former assistants had been calculated on the basis of an annual teaching commitment of 400 hours; – the University of Palermo announced, by letter of 27 May 2002, that it intended to bring up to date the remuneration of former assistants on the basis of calculations that remained to be completed; – by decision of the Rector of the Eastern University Institute in Naples of 20 May 2002, associates and linguistic experts received arrears of salary calculated on the basis of a 318-hour annual teaching commitment; – a decision of the Administrative Director of the University of La Basilicata of 22 May 2002 provided that the seniority of associates and linguistic experts was to be determined on the basis of five increments and a standard annual teaching commitment of 400 hours. 31 Those measures could not be regarded as either adequately or definitively complying with the judgment in Case C-212/99 Commission v Italy and the Italian Government itself did not regard them as so doing. 32 Therefore, notwithstanding the measures set out at paragraph 30 above, on the date of the expiry of the period prescribed in the reasoned opinion, the Italian Republic had still not complied with the judgment in question. 33 Since the Commission seeks the imposition of a penalty payment on the Italian Republic, it must be ascertained whether the alleged breach of obligations has continued up to the Court's examination of the facts (see Case C‑304/02 Commission v France, paragraph 31, and Case C-177/04 Commission v France, paragraph 21). 34 On 14 January 2004, the Italian Republic adopted Decree-Law No 2/2004, the purpose of which was to provide the legal and financial framework necessary finally to enable each of the universities in question to reconstruct precisely the career of former assistants. 35 The legal framework laid down by Decree-Law No 2/2004 is based on two principles, under which, save where more advantageous treatment may be afforded: – the reconstruction of the career of former assistants was to be effected by taking the remuneration of part-time tenured researchers as the standard of reference; – that remuneration was to be granted to former assistants on a pro rata basis according to the number of hours worked and on the basis that full-time employment was equal to 500 teaching hours a year. 36 The criterion of 500 hours per year is based on the number of hours worked by associates and linguistic experts (former assistants) as provided for under the CCNL for the period 1994-1997. It is an objective criterion which makes it possible to deal with the difficulties inherent in assessing the careers of all former assistants on a case by case basis. In that connection, it is sufficient to note that not all of the universities indicated that they had collective agreements setting out the criteria necessary for the precise reconstruction of the career of former assistants. 37 As to the choice of part-time tenured researchers as the appropriate national reference category of national workers for reconstructing the career of former assistants, such a choice is a matter for the national authorities. It does not follow from the judgment in Case C-212/99 Commission v Italy that the Italian Republic was required to identify a category of workers comparable to former assistants and to treat the latter in exactly the same way as that category of workers. 38 In the light of the foregoing, the Court is not able, on the basis of the information provided by the Commission, to establish that the criteria set out at paragraphs 36 and 37 above are inadequate, particularly so since it would appear that the application of those criteria does not, in certain cases, preclude the career of a former assistant from being reconstructed on more advantageous terms. 39 Decree-Law No 2/2004 cannot therefore be regarded as having provided an incorrect legal framework for the purposes of enabling each of the universities in question to reconstruct precisely the career of former assistants. 40 It remains to be ascertained whether the measures taken by the universities in question after the adoption of Decree-Law No 2/2004 achieved the declared objectives. 41 According to settled case-law, it is for the Commission to provide the Court, in the course of these proceedings, with the information necessary to determine the extent to which a Member State has complied with a judgment declaring it to be in breach of its obligations (Case C‑387/97 Commission v Greece [2000] ECR I‑5047, paragraph 73). Moreover, where the Commission has adduced sufficient evidence to show that the breach of obligations has persisted, it is for the Member State concerned to challenge in substance and in detail the information produced and its consequences (Case C‑304/02 Commission v France, paragraph 56). 42 In addition to the statements by the universities in question confirming that the acquired rights of former assistants had been fully recognised, the Italian Government produced detailed tables relating to how such recognition had been put into effect in each of those universities. 43 Admittedly, the payment declarations in the file were produced by the universities and not by the parties entitled and, in the case of the Eastern University Institute in Naples, payment was to be made at a date after the month in which the declaration itself was drawn up (October 2004). 44 However, the information provided to the Court does not call into question the facts set out at paragraph 42 above. 45 Accordingly, the Court does not have sufficient information to permit it to find that, on the date of the Court’s examination of the facts, the breach of obligations persisted. 46 The imposition of a penalty payment is not, therefore, justified.47 In the light of the foregoing, the Court finds that, by not ensuring, at the date of expiry of the period prescribed in the reasoned opinion, recognition of the rights acquired by former assistants who have become associates and linguistic experts, even though such recognition is guaranteed to all national workers, the Italian Republic has failed to take all the measures necessary to comply with the judgment in Case C-212/99 Commission v Italy and has therefore failed to fulfil its obligations under Article 228 EC. Costs48 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission applied for costs and the Italian Republic’s failure to fulfil its obligations has been established, the latter must be ordered to pay the costs. On those grounds, the Court (Grand Chamber) hereby rules:1. By not ensuring, at the date of expiry of the period prescribed in the reasoned opinion, recognition of the rights acquired by former assistants who have become associates and linguistic experts, even though such recognition is guaranteed to all national workers, the Italian Republic has failed to take all the measures necessary to comply with the judgment of 26 June 2001 in Case C-212/99 Commission v Italy and has therefore failed to fulfil its obligations under Article 228 EC.2. Dismisses the action as to the remainder.3. Orders the Italian Republic to pay the costs.[Signatures]* Language of the case: Italian. | c8f8b-7300253-42d8 | EN |
FREEDOM OF MOVEMENT AND RESIDENCE DOES NOT PRECLUDE A RESIDENCE CLAUSE AS A CONDITION FOR THE RETENTION OF ENTITLEMENT TO AN UNEMPLOYMENT ALLOWANCE. | Gérald De CuypervOffice national de l’emploi(Reference for a preliminary ruling from the Tribunal du travail de Bruxelles)(Freedom to move and reside within the territory of the European Union – Unemployment allowances – Requirement actually to reside in national territory)Opinion of Advocate General Geelhoed delivered on 2 February 2006 Judgment of the Court (Grand Chamber), 18 July 2006 Summary of the Judgment1. Social security for migrant workers – Community rules – Substantive scope – Benefits covered and benefits excluded(Council Regulation No 1408/71)2. Citizenship of the European Union – Right of freedom to move and reside within the territory of the Member States – Social advantages (Art. 18 EC)1. A benefit may be regarded as a social security benefit in so far as it is granted, without any individual and discretionary assessment of personal needs, to recipients on the basis of a legally defined position and provided that it concerns one of the risks expressly listed in Article 4(1) of Regulation No 1408/71. In that regard, an allowance granted to unemployed persons aged over 50, the grant of which is not of a discretionary nature, which is intended to cover the risk linked to involuntary loss of employment where the worker retains his capacity for work and the recipients of which are subject to the same conditions as other workers seeking an unemployment allowance, must be regarded as an unemployment allowance that falls within the scope of Regulation No 1408/71 even if, under a national provision, the recipient is exempt from registering as a job-seeker. (see paras 22, 29, 34)2. Freedom of movement and residence, conferred on every citizen of the Union by Article 18 EC, does not preclude a residence clause which is imposed on an unemployed person over 50 years of age who is exempt from the requirement of proving that he is available for work, as a condition for the retention of his entitlement to unemployment benefit. Although such a measure is a restriction on the freedoms conferred by Article 18 EC on every citizen of the European Union, it is justified by the need to monitor the employment and family situation of unemployed persons. That clause allows national authority inspectors to check whether the situation of a recipient of the unemployment allowance has undergone changes which may have an effect on the benefit granted. That justification is accordingly based on objective considerations of public interest independent of the nationality of the persons concerned. Less restrictive measures, such as the production of documents or certificates, would mean that the monitoring would no longer be unexpected and would consequently be less effective, with the result that the measure in question is appropriate for securing the attainment of the objective pursued and does not go beyond what is necessary in order to attain it. (see paras 39, 41-43, 45-48, operative part)JUDGMENT OF THE COURT (Grand Chamber)18 July 2006 (*) In Case C-406/04,REFERENCE for a preliminary ruling under Article 234 EC from the Tribunal du travail de Bruxelles (Belgium) made by decision of 8 September 2004, received at the Court on 23 September 2004, in the proceedings Office national de l’emploi,THE COURT (Grand Chamber),composed of V. Skouris, President, P. Jann, C.W.A. Timmermans, A. Rosas and J. Malenovský, Presidents of Chambers, N. Colneric, S. von Bahr, J.N. Cunha Rodrigues, R. Silva de Lapuerta (Rapporteur), G. Arestis, A. Borg Barthet, M. Ilešič and J. Klučka, Judges, Advocate General: L.A. Geelhoed,Registrar: C. Strömholm, Administrator,having regard to the written procedure and further to the hearing on 23 November 2005,after considering the observations submitted on behalf of:– Mr De Cuyper, by A. de le Court and N. Dugardin, avocats,– the Office national de l’emploi, by R. Dupont and M. Willemet, avocats,– the Belgian Government, by E. Dominkovits and M. Wimmer, acting as Agents,– the German Government, by C. Schulze-Bahr, acting as Agent,– the French Government, by G. de Bergues and O. Christmann, acting as Agents,– the Netherlands Government, by C. Wissels, acting as Agent,– the United Kingdom Government, by S. Moore, Barrister,– the Commission of the European Communities, by D. Martin and M. Condou, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 2 February 2006,gives the followingJudgment1 This reference for a preliminary ruling concerns the interpretation of Articles 17 EC and 18 EC and of Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EC) No 118/97 of 2 December 1996 (OJ 1997 L 28, p. 1), as amended by Council Regulation (EC) No 1606/98 of 29 June 1998 (OJ 1998 L 209, p. 1) (hereinafter ‘Regulation No 1408/71’). 2 The reference was made in the course of proceedings between Mr De Cuyper and the Office national de l’emploi (National Employment Office) (hereinafter ‘ONEM’) regarding the claimant’s exclusion from entitlement to unemployment allowances as from 1 April 1999. Legal context Community legislation3 Article 1(a)(i) of Regulation No 1408/71 provides:‘(a) “employed person” and “self-employed person” mean respectively:(i) any person who is insured, compulsorily or on an optional continued basis, for one or more of the contingencies covered by the branches of a social security scheme for employed or self-employed persons or by a special scheme for civil servants’. 4 Article 2(1) of Regulation No 1408/71 provides:‘This Regulation shall apply to employed or self-employed persons who are or have been subject to the legislation of one or more Member States and who are nationals of one of the Member States or who are stateless persons or refugees residing within the territory of one of the Member States, as well as to the members of their families and their survivors.’ 5 Under Article 10(1) of Regulation No 1408/71:‘Save as otherwise provided in this Regulation, invalidity, old-age or survivors’ cash benefits, pensions for accidents at work or occupational diseases and death grants acquired under the legislation of one or more Member States shall not be subject to any reduction, modification, suspension, withdrawal or confiscation by reason of the fact that the recipient resides in the territory of a Member State other than that in which the institution responsible for payment is situated.’ 6 Article 69(1) of Regulation No 1408/71 provides:‘1. An employed or self-employed person who is wholly unemployed and who satisfies the conditions of the legislation of a Member State for entitlement to benefits and who goes to one or more other Member States in order to seek employment there shall retain his entitlement to such benefits under the following conditions and within the following limits: (a) Before his departure, he must have been registered as a person seeking work and have remained available to the employment services of the competent State for at least four weeks after becoming unemployed. However, the competent services or institutions may authorise his departure before such time has expired. (b) He must register as a person seeking work with the employment services of each of the Member States to which he goes and be subject to the control procedure organised therein. This condition shall be considered satisfied for the period before registration if the person concerned registered within seven days of the date when he ceased to be available to the employment services of the State he left. In exceptional cases, this period may be extended by the competent services or institutions. (c) Entitlement to benefits shall continue for a maximum period of three months from the date when the person concerned ceased to be available to the employment services of the State which he left, provided that the total duration of the benefits does not exceed the duration of the period of benefits he was entitled to under the legislation of that State. In the case of a seasonal worker such duration shall, moreover, be limited to the period remaining until the end of the season for which he was engaged.’ 7 Lastly, Article 71(1) of Regulation No 1408/71 provides:‘1. An unemployed person who was formerly employed and who, during his last employment, was residing in the territory of a Member State other than the competent State shall receive benefits in accordance with the following provisions: (a) (i) A frontier worker who is partially or intermittently unemployed in the undertaking which employs him, shall receive benefits in accordance with the provisions of the legislation of the competent State as if he were residing in the territory of that State; these benefits shall be provided by the competent institution. (ii) A frontier worker who is wholly unemployed shall receive benefits in accordance with the provisions of the legislation of the Member State in whose territory he resides as though he had been subject to that legislation while last employed; these benefits shall be provided by the institution of the place of residence at its own expense. (b) (i) An employed person, other than a frontier worker, who is partially, intermittently or wholly unemployed and who remains available to his employer or to the employment services in the territory of the competent State shall receive benefits in accordance with the provisions of the legislation of that State as though he were residing in its territory; these benefits shall be provided by the competent institution. (ii) An employed person, other than a frontier worker, who is wholly unemployed and who makes himself available for work to the employment services in the territory of the Member State in which he resides, or who returns to that territory, shall receive benefits in accordance with the legislation of that State as if he had last been employed there; the institution of the place of residence shall provide such benefits at its own expense. However, if such an employed person has become entitled to benefits at the expense of the competent institution of the Member State to whose legislation he was last subject, he shall receive benefits under the provisions of Article 69. Receipt of benefits under the legislation of the State in which he resides shall be suspended for any period during which the unemployed person may, under the provisions of Article 69, make a claim for benefits under the legislation to which he was last subject.’ National law8 Article 44 of the Royal Decree of 25 November 1991 regulating unemployment (Moniteur belge, 31 December 1991, p. 29888), in the version in force at the time of the facts in the main proceedings, provided that ‘In order to be eligible for allowances, the unemployed person must have ceased to be in work and in receipt of remuneration for reasons beyond his control.’ Articles 45 and 46 of that decree respectively specified which activities were to be regarded as constituting work and defined remuneration. 9 As set out in Article 66 of the Royal Decree:‘To be eligible for allowances, the unemployed person must have his habitual residence in Belgium and must also actually reside in Belgium.’ 10 Article 89(1) and (3) of the Royal Decree in the version resulting from Article 25 of the Royal Decree of 22 November 1995 (Moniteur belge, 8 December 1995, p. 33144) provides: ‘1. A wholly unemployed person of at least fifty years of age may be exempted, at his request, from Article 48(1)(2), Article 51(1), second subparagraph (3) to (6), and Articles 56 and 58 if he has received at least 312 allowance payments as a wholly unemployed person in the two years preceding that application… …3. By derogation from Article 45(1)(1), an unemployed person entitled to the exemption referred to in paragraphs (1) or (2) may carry on any activity relating to his own property, on his own account and without a view to a profit.’ 11 Under that scheme, an unemployed person who had obtained an exemption from the requirement to sign on was no longer subject to the requirement of being available for work, the requirement to accept any suitable employment, to report to the relevant employment service or to participate in a monitoring scheme. He was also exempt from the requirement to register as a job-seeker. However, receipt of that allowance was incompatible with engaging in paid employment and was of a temporary nature. The main proceedings and the question referred for a preliminary ruling12 Mr De Cuyper, a Belgian national who was born in 1942, was employed in Belgium. He was granted unemployment allowances on 19 March 1997. 13 On 1 April 1998 he obtained dispensation, under the national legislation applicable at that time, from the obligation to submit to the local control procedures imposed on unemployed persons as a matter of course by the Royal Decree of 25 November 1991. 14 On 9 December 1999, he made a declaration to the institution responsible for payment of his unemployment allowances in which he described himself as ‘living alone’ and actually living in Belgium. 15 During April 2000 ONEM inspectors carried out a routine inquiry to ascertain the accuracy of the applicant’s declarations. In the course of that inquiry, Mr De Cuyper admitted that he had not actually lived in Belgium since January 1999, but was resident in France. He stated that he returned to Belgium approximately every three months, that he retained a furnished room in a Belgian commune and that he had not informed the institution responsible for the payment of his unemployment allowances of that change in his place of residence. 16 On the basis of that inquiry ONEM notified Mr De Cuyper, on 25 October 2000, of a decision refusing him unemployment allowances with effect from 1 January 1999 on the ground that, as from that date, he no longer satisfied the requirement of actual residence laid down in Article 66 of the Royal Decree of 25 November 1991. At the same time ONEM demanded repayment by the applicant of the allowances paid since that date, that is to say the equivalent in Belgian francs of EUR 12 452.78. 17 Mr De Cuyper contested that decision before the national court.18 In those circumstances, the Tribunal du travail de Bruxelles (Labour Court, Brussels) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling: ‘Does the obligation actually to reside in Belgium, which under Article 66 of the Royal Decree of 25 November 1991 regulating unemployment is a condition for the award of allowances, applied to an unemployed person over 50 years of age who enjoys an exemption under Article 89 of that Royal Decree from the requirement to sign on entailing dispensation from the requirement to be available for work, amount to a fetter on the freedom of movement and residence of all European citizens under Articles 17 [EC] and 18 [EC]? Does the obligation of residence in the State competent to award unemployment allowances, justified in domestic law by the needs of monitoring compliance with the statutory requirements for the payment of compensation to unemployed persons, satisfy the requirement of proportionality which must be observed in the pursuit of that objective of public interest in that it constitutes a limitation on the freedom of movement and residence of all European citizens under Articles 17 [EC] and 18 [EC]? Does that residence requirement not have the effect of discriminating between European citizens who are nationals of a Member State competent to award unemployment allowances by affording that entitlement to those who do not exercise the right of freedom of movement and residence of all European citizens under Articles 17 [EC] and 18 [EC], whilst denying it to those who do seek to exercise that right, by the deterrent effect which that restriction entails?’ The question referred for a preliminary ruling19 By the question referred, the national court is asking the Court whether Articles 17 and 18 EC, under which citizens of the European Union have the right to move and reside freely within the territory of the Member States, preclude a provision of national law which makes entitlement to an allowance such as that at issue in the main proceedings conditional on actual residence in the Member State concerned, given that that allowance is granted to unemployed persons aged over 50 who are exempt from the requirement to register as job-seekers. 20 The national court categorises that allowance as ‘unemployment benefit’ and the applicant in the main proceedings as an ‘employed person’ within the meaning of Article 1(a) of Regulation No 1408/71. However, the Commission of the European Communities submits that rather than constituting an unemployment benefit falling within the scope of Regulation No 1408/71, that allowance could constitute a pre-retirement benefit similar to that at issue in Case C‑25/95 Otte [1996] ECR I-3745 or even a sui generis benefit. If that were the case, it could fall within the scope of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475) as a social advantage. 21 It therefore appears necessary to ascertain at the outset the nature of the allowance in question in order to determine whether it is a social security benefit to which Regulation No 1408/71 applies. The nature of the allowance22 As far as concerns social security benefits the Court has, on several occasions, discussed the factors to be taken into consideration for the purposes of ascertaining the legal nature of such benefits. Thus, the Court has stated that a benefit may be regarded as a social security benefit in so far as it is granted, without any individual and discretionary assessment of personal needs, to recipients on the basis of a legally defined position and provided that it concerns one of the risks expressly listed in Article 4(1) of Regulation No 1408/71 (see, inter alia, Case 249/83 Hoeckx [1985] ECR 973, paragraphs 12 to 14, and Case C-78/91 Hughes [1992] ECR I-4839, paragraph 15). 23 In the case in the main proceedings, as regards whether the benefit is granted without any individual and discretionary assessment of personal needs, it must be pointed out that grant of the allowance at issue is subject to conditions which are exhaustively listed in Article 44 et seq. of the Royal Decree of 25 November 1991, the competent authorities having no discretion with regard to that grant. Admittedly, the level of the allowance can vary according to the personal circumstances of the unemployed person. However, apart from the fact that that aspect concerns the procedure for calculating the allowance, this is an objective and legally defined criterion which gives entitlement to the benefit without the competent authority being able to take other personal circumstances into consideration. The grant of the allowance therefore does not depend on an individual assessment of the claimant’s personal needs, which is a characteristic feature of social assistance (see Case C-66/92 Acciardi [1993] ECR I-4567, paragraph 15). 24 As regards the requirement that the benefit in question must concern one of the risks expressly listed in Article 4(1) of Regulation No 1408/71, that is satisfied in so far as the allowance covers the risk linked to involuntary loss of employment although the worker retains his capacity for work. 25 The Court has already held that, in order to be categorised as social security benefits, benefits must be regarded, irrespective of the characteristics peculiar to different national legal systems, as being of the same kind when their purpose and object as well as the basis on which they are calculated and the conditions for granting them are identical. On the other hand, characteristics which are purely formal must not be considered relevant criteria for the classification of the benefits (see, to that effect, Case 171/82 Valentini [1983] ECR 2157, paragraph 13). 26 In the light of the foregoing, the allowance at issue in the main proceedings must be examined in order to establish whether it should be regarded as an unemployment benefit. 27 As regards its purpose, that allowance is aimed at enabling the workers concerned to provide for themselves following an involuntary loss of employment when they still have the capacity for work. In order to distinguish between different categories of social security benefits, ‘the risk covered’ by each benefit must also be taken into consideration. Thus an unemployment benefit covers the risk associated with the loss of revenue suffered by a worker following the loss of his employment although he is still able to work. A benefit granted if that risk materialises, namely loss of employment, and which is no longer payable if that situation ceases to exist as a result of the claimant’s engaging in paid employment must be regarded as constituting an unemployment benefit. 28 As regards determination of the amount of the allowance paid to Mr De Cuyper, the basis of calculation used by the Belgian employment services is identical to that used in respect of all unemployed persons, the allowance being calculated according to the rules laid down in Article 114 et seq. of the Royal Decree of 25 November 1991. Those rules provide for a basic amount, fixed at 40% of average daily remuneration, which is increased by an adaptation supplement, fixed at 15% of that remuneration. That amount is deemed to take into account the unemployed person’s specific personal circumstances, as predetermined by law. 29 Lastly, as regards the conditions for granting the benefit, it must be borne in mind that, as ONEM stated at the hearing, Mr De Cuyper is subject to the same conditions as other workers seeking an unemployment allowance. In particular, in order to obtain the allowance, in addition to the fact that he must have ceased to be in work and in receipt of remuneration for reasons beyond his control, a worker must furnish proof of 624 days worked, or days treated as such, during the 36 months preceding his application for the allowance and his employment must have given rise to the payment of social security contributions to be taken into account for the purpose of calculation of the amount of that allowance. 30 Moreover, the allowance at issue in the main proceedings is an allowance which is subject to the Belgian statutory unemployment benefits scheme. The fact that an unemployed person in a situation such as that of Mr De Cuyper is exempt from the requirement to register as a job-seeker and consequently from the requirement of being available for work in no way affects the fundamental characteristics of the allowance as set out in paragraphs 27 and 28 of this judgment. 31 Furthermore, the obtaining of that exemption does not mean that the unemployed person is exempt from the requirement to remain available to the employment services inasmuch as, even if he does not have to register as a job-seeker or accept any suitable employment, he must still remain available to those services so that his employment and family situation can be monitored. 32 In those circumstances, the Commission’s view that the allowance received by Mr De Cuyper is either a pre-retirement benefit, similar to that at issue in the case giving rise to the ruling in Otte, or a sui generis benefit cannot be accepted. 33 The proceedings in Otte concerned an adaptation allowance, granted in the form of a non-compulsory subsidy to mineworkers over a certain age who had become unemployed as a result of the restructuring of the German coal-mine industry, from the time at which they were laid off until they attained retirement age, and receipt of that benefit was compatible with engaging in paid employment. 34 It must thus be concluded that a benefit such as that received by Mr De Cuyper, the grant of which is not of a discretionary nature and which is intended to cover the risk linked to involuntary loss of employment where the worker retains his capacity for work, must be regarded as an unemployment allowance that falls within the scope of Regulation No 1408/71 even if, under a national provision, the recipient is exempt from registering as a job-seeker. Article 18 EC 35 Under Article 18 EC, ‘[e]very citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect’. 36 According to that wording, the right to reside within the territory of the Member States which is conferred directly on every citizen of the Union by Article 18 EC is not unconditional. It is conferred subject to the limitations and conditions laid down by the Treaty and by the measures adopted to give it effect (Case C-456/02 Trojani [2004] ECR I-7573, paragraphs 31 and 32). 37 To that effect it is necessary first of all to examine Regulation No 1408/71. According to Article 10 thereof, unless the regulation provides otherwise, ‘invalidity, old-age or survivors’ cash benefits, pensions for accidents at work or occupational diseases and death grants acquired under the legislation of one or more Member States shall not be subject to any reduction, modification, suspension, withdrawal or confiscation by reason of the fact that the recipient resides in the territory of a Member State other than that in which the institution responsible for payment is situated’. The list in that article does not include unemployment benefits. It follows that that provision does not preclude the legislation of a Member State from making entitlement to an unemployment allowance conditional on residence in the territory of that State. 38 In that regard, Regulation No 1408/71 provides for only two situations in which the competent Member State is required to allow recipients of an unemployment allowance to reside in the territory of another Member State while retaining their entitlement to it. Firstly, there is the situation provided for in Article 69 of the regulation, allowing unemployed persons who go to a Member State other than the competent State ‘in order to seek employment there’ to retain their entitlement to unemployment benefit. Secondly, there is the situation referred to in Article 71 of that regulation, relating to unemployed persons who, during their last employment, were residing in the territory of a Member State other than the competent State. It is clear from the order for reference that a situation such as that of Mr De Cuyper is not covered by either of those articles. 39 It is established that national legislation such as that in this case which places at a disadvantage certain of its nationals simply because they have exercised their freedom to move and to reside in another Member State is a restriction on the freedoms conferred by Article 18 EC on every citizen of the Union (see, to that effect, Case C-224/98 D’Hoop [2002] ECR I-6191, paragraph 31, and Case C‑224/02 Pusa [2004] ECR I-5763, paragraph 19). 40 Such a restriction can be justified, with regard to Community law, only if it is based on objective considerations of public interest independent of the nationality of the persons concerned and proportionate to the legitimate objective of the national provisions. 41 In the present case, the enactment of a residence clause reflects the need to monitor the employment and family situation of unemployed persons. That clause allows ONEM inspectors to check whether the situation of a recipient of the unemployment allowance has undergone changes which may have an effect on the benefit granted. That justification is accordingly based on objective considerations of public interest independent of the nationality of the persons concerned. 42 A measure is proportionate when, while appropriate for securing the attainment of the objective pursued, it does not go beyond what is necessary in order to attain it. 43 The justification given by the Belgian authorities for the existence, in the present case, of a residence clause is the need for ONEM inspectors to monitor compliance with the legal requirements laid down for retention of entitlement to the unemployment allowance. Thus it must inter alia allow those inspectors to check whether the situation of a person who has declared that he is living alone and unemployed has undergone changes which may have an effect on the benefit granted. 44 So far as concerns, in the main proceedings, the possibility of less restrictive monitoring measures, such as those mentioned by Mr De Cuyper, it has not been established that they would have been capable of ensuring the attainment of the objective pursued. 45 Thus, the effectiveness of monitoring arrangements which, like those introduced in this case, are aimed at checking the family circumstances of the unemployed person concerned and the possible existence of sources of revenue which the claimant has not declared is dependent to a large extent on the fact that the monitoring is unexpected and carried out on the spot, since the competent services have to be able to check whether the information provided by the unemployed person corresponds to the true situation. In that regard it must be pointed out that the monitoring to be carried out as far as concerns unemployment allowances is of a specific nature which justifies the introduction of arrangements that are more restrictive than those imposed for monitoring in respect of other benefits. 46 It follows that less restrictive measures, such as the production of documents or certificates, would mean that the monitoring would no longer be unexpected and would consequently be less effective. 47 Accordingly, it must be found that the obligation to reside in the Member State in which the institution responsible for payment is situated, which is justified in domestic law by the need to monitor compliance with the statutory conditions governing the compensation paid to unemployed persons, satisfies the requirement of proportionality. 48 In view of the foregoing considerations, the answer to the question referred must be that freedom of movement and residence, conferred on every citizen of the Union by Article 18 EC, does not preclude a residence clause, such as that applied in the case in the main proceedings, which is imposed on an unemployed person over 50 years of age who is exempt from the requirement of proving that he is available for work, as a condition for the retention of his entitlement to unemployment benefit. Costs49 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Grand Chamber) hereby rules:Freedom of movement and residence, conferred on every citizen of the Union by Article 18 EC, does not preclude a residence clause, such as that applied in the case in the main proceedings, which is imposed on an unemployed person over 50 years of age who is exempt from the requirement of proving that he is available for work, as a condition for the retention of his entitlement to unemployment benefit.[Signatures]* Language of the case: French. | 701ec-18c9cf3-41c3 | EN |
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