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Concerted Practices

Scope and the Burden of Proof

 

This paper aims to identify the scope of Article 101 TFEU, in respect to concerted practices. When such a case arises, the key issue is the burden of proof. The titles under which the paper is structured are as follows:: 1.Introduction, A. Scope, B. Prisoners’ Dilemma; 2.Plausible Explanations; 3.Burden of Proof; 4.Aditional evidence on concentrations; 5.Conclusions.

                                               1.Introduction                                              

 

  1. A.     Scope

The term is used sometimes to refer to the whole of old Article 81 EC, now 101 TFEU, in contrast to unilateral practices which are caught by old Article 82 EC, now Article 102 TFEU; other times it is used to refer just to practices in contrast to contracts, i.e. explicit agreements. Here questions arise to the burden of proof.

Article 101 TFEU applies to agreements and coordinated practices. That is, Article 101 TFEU requires at least a concurrence of wills or a meeting of minds between the undertakings concerned. If the market conduct of an enterprise is not the result of either an agreement or at least a conscious common intention of coordination among competitors, Article 101 TFEU is not

applicable.

As the ECJ stated in ICI[1], Article 101 TFEU draws a distinction between the concept of “concerted practices” and the concepts of “agreements between undertakings” or “decisions by associations of undertakings”. As explained by the ECJ, the reference to concerted practices in Article 101 is intended to bring within the scope of the prohibition a form of coordination between undertakings which, without having reached the stage where an agreement properly so called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition.

The question therefore arises as to what extent, if any, parallel behaviour in an certain market is the result of a meeting of minds or whether, on the contrary, it is the result of the autonomous will of each undertaking? .

The ECJ stated in ICI that: “by its very nature, then, a concerted practice does not have all the elements of a contract but may inter alia arise out of coordination which becomes apparent from the behaviour of the participants”.

Therefore, concentration implies a form of cooperation that: (1) protects the undertakings concerned from the risks of competition; and (2) usually becomes apparent from the behaviour of the participants (for example, from parallel conduct with regard to their pricing policy).

 

                        B. Prisoners’ Dilemma or Game Theory.

According to game theory, if in a game the worst solution for each player is to ignore the behavior of the other players, since such behaviour will affect the outcome of the game, the players will end up cooperating. They will either decide from the very first moment that reaching an agreement is the most advantageous solution, or they will reach the conclusion that it is necessary to cooperate by trial and error. In such a case, the players will cooperate “as if” they had reached an agreement. For game theory it does not matter whether such cooperation is reached through an express agreement or by tacit cooperation (acting “as if” there was an agreement). What matters is whether the conditions of the game create the incentives for the players to cooperate.

The position of the ECJ in ICI must be read in light of the subsequent cases, and mainly in light of Woodpulp II. In Woodpulp II, the ECJ reformulated its previous statement in ICI. The ECJ again said that account must be taken “of the nature of the products, the size and the number of the undertakings and the volume of the market in question”, but with an important difference. The goal of such an analysis is no longer to establish what “the normal conditions of the market” are but to ascertain whether or not the parallel conduct can be explained otherwise than by concentration. Thus, the case law must be seen as an evolution whose outcome is clear. Parallelconduct is not prohibited, and it does not create a presumption iuris tantum of collusion. Nevertheless, parallel conduct can be considered sufficient proof of collusion if concentration is the only plausible explanation.

 

                                                2. Plausible explanations

The list of plausible explanations is not exhaustive, but to date, two main circumstances

have been considered to be plausible explanations for parallel behaviour: (1) price

leadership; and (2) market structure.

As said before, it is legitimate for economic operators to adapt themselves intelligently to the existing and anticipated conduct of their competitors[2].

Consequently, if there is a price leader in the market, competing undertakings could try to adapt themselves to the leader’s commercial policy. Such parallel pricing behavior in an oligopoly, for instance, producing homogeneous goods would not in itself amount to concentration within the meaning of Article 101 TFEU[3].

A price leader could be characterised as an economic operator which due, for example, to its market share, is able to act independently of its competitors, knowing that they would almost certainly follow suit (“dominant price leadership”). Another possibility is so-called “barometric price leadership”, where the firm taking the lead is not dominant but is widely accepted as the best performing operator in the sense of meeting demand and adapting to evolving market conditions (i.e. cost increases).

The conclusion could be quite different if additional evidence is adduced, such as evidence of contacts between undertakings on desirable price changes prior to the adoption of a new price, or of an exchange of information that reinforces such contacts. In any event, an agreement between competitors to follow or to choose a price leader will be regarded as concentration within the meaning of Article 101 TFEU.

Another possibility is that the very structure of the market leads to parallel conduct (in oligopolistic markets).

The ECJ has implicitly acknowledged that, in some markets (i.e oligopolistic), competitors are interdependent. Accordingly, in Woodpulp II the ECJ appointed a group of economic experts to examine the characteristics of the affected market during the period covered by the Commission’s contested decision. After examining the market in the relevant period, the experts concluded that the normal operation of the market was a more plausible explanation for the uniformity of prices than concentration[4]. The ECJ accepted this as a plausible explanation for the parallel conduct and upheld the applicants’ argument that the Commission had not sufficiently proved concentration within the meaning of Article 101 TFEU. It is worth noting that, in Woodpulp II the experts did not say that the normal operation of the market was the sole plausible explanation for the uniformity of prices. For the ECJ, it was enough that there were other explanations apart from collusion. Concentration thus cannot be inferred from the mere existence of parallel conduct.

 

                                                3. Burden of proof

To what extent, if any, the market characteristics amount to a concerted practice within the meaning of Article 101 TFEU?       The ECJ has acknowledged that, although each economic operator must determine its own commercial policy independently, it is legitimate for the economic operators to adapt themselves intelligently to the existing and anticipated conduct of their competitors[5]. However, if adapting intelligently to the existing and anticipated conduct of their competitors is legitimate, it is foreseeable that all the existing operators will adapt similar conduct, i.e. parallel conduct[6]. Such conduct could be easily read as an evidence of “coordination which becomes apparent from the behaviour of the participants”[7], mainly in oligopolistic markets.

The ECJ rightly acknowledged this, and ruled that parallel conduct as such is not caught by Article 101 TFEU and creates no presumption of collusion between the undertakings concerned.

–          Nevertheless, the Court’s case law seemed to provide for two  guidance of this substantive rule:

a)      First, in ICI the ECJ stated that, although parallel behaviour may not by itself be identified with a concerted practice, parallel conduct may amount to strong evidence of concentration if it leads to conditions of competition which do not correspond to the normal conditions of the market, having regard to the nature of the products, the size and number of the undertakings, and the volume of the said market[8].

b)      Second, in Woodpulp II the ECJ ruled that parallel conduct cannot be regarded as proof of concentration unless concentration constitutes the only plausible explanation for such conduct.[9].

In spite of the fact that the language varies from one case to another, these two “exceptions” can be read as a single one: parallel conduct is not proof of concentration if the conduct of the enterprises can be explained by market conditions.

According to the case law of the ECJ, in order to establish that parallel behaviour is the result of concerted action, the evidence must be “sufficiently precise and coherent”[10]. In the light of the foregoing, in Woodpulp II Advocate General considered that this statement of the ECJ implied that it is necessary to establish a degree of certainty that goes beyond any reasonable doubt. He further added that, in “accordance with the principles governing the burden of proof, it is for the Commission to demonstrate that; the burden of proof cannot be shifted simply by a finding of parallel conduct[11]. Moreover, the Advocate General considered that, in any event, if a plausible alternative explanation is put forward by the parties, then concentration cannot be deemed to be established[12].

The position of Advocate General Darmon in Woodpulp II was quite clear: the burden of proof is always borne by the competition authority. Parallel conduct neithercreates a presumption of concentration nor shifts the burden of proof. In view of the conclusions of Advocate General Darmon, in Woodpulp II the ECJ ruled on this point as follows[13]:

“[70] Since the Commission has no documents which directly establish the existence of concentration between the producers concerned, it is necessary to ascertain whether the system of quarterly price announcements, the simultaneity or near-simultaneity of the price announcements and the parallelism of price announcements as found during the period from 1975 to 1981 constitute a firm, precise and consistent body of evidence of prior concentration.

[71] In determining the probative value of those different factors, it must be noted that parallel conduct cannot be regarded as furnishing proof of concentration unless concentration constitutes the only plausible explanation for such conduct. It is necessary to bear in mind that, although [Article 101] of the Treaty prohibits any form of collusion which distorts competition, it does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors (see the judgment in Suiker Unie, cited above, paragraph 174).

[72] Accordingly, it is necessary in this case to ascertain whether the parallel conduct alleged by the Commission cannot, taking account of the nature of the products, the size and the number of the undertakings and the volume of the market in question, be explained otherwise than by concentration.”

The position of the ECJ seems, at first glance, to follow Advocate General Darmon. However, this may not be a realistic interpretation of the existing case law.

First, competition authorities reason, sometimes, in a quite different way: parallel conduct is either proof of concentration, or at least creates a presumption of collusion. No matter how the case law defines the principles governing the burden of the proof in these cases, a competition authority will presume the existence of concentration if there is parallel behaviour. It will then be a hard task for the defendants to find “sufficiently precise and coherent” evidence that concentration is not the only plausible explanation. It is neither practical nor realistic to expect competition authority officials to presume that there is no concentration when facing with parallel behaviour.

Second, Woodpulp II must be read in the light of the previous case law. Indeed, in CRAM and Rheinzink, the ECJ stated: “The Commission’s reasoning is based on the supposition that the facts established cannot be explained other than by concerted action by the two undertakings. Faced with such an argument, it is sufficient for the applicants to prove circumstances which cast the facts established by the Commission in a different light and which thus allow another explanation of the facts to be substituted for the one adopted by the contested Decision” (emphasis added).

This seems to be a much more practical approach. Competition authorities tend to presume that parallel conduct is the result of concentration if they see no clear evidence supporting an alternative explanation. It is then for the defendants to provide an alternative plausible explanation.

This does not mean that a competition authority must never look for alternative explanations. As an initial matter, a competition authority must also examine on its own initiative whether such an alternative explanation exists or not. However, if after a preliminary analysis the competition authority does not find a plausible alternative explanation, the burden of proof will shift to the defendants. It is then for the defendant undertakings to provide evidence which casts the facts established by the competition authority in a different light and which thus allows another explanation for those facts[14].

 

                                                4. Additional evidence of concentration

Nevertheless, the problem of the plausible explanation, the burden of proof or the structure of the market only arises if evidentiary support for the case is insufficient. Parallel conduct could be considered as proof of collusion if it can be connected with other evidence of collusion, in particular with facilitating practices or “plus factors”. These facilitating practices have been defined as activities that promote interdependent behaviour among competitors by reducing their uncertainty as to each other’s future action, or by diminishing their incentive to deviate from a coordinated strategy.

For instance, parallel conduct can be deemed to be proof of concentration if it is accompanied by evidence of any of the following:

Documents.

Taken together, a finding of parallel market conduct and documents which show that the practices were the result of concerted action are sufficient proof of concentration[15].

 

 

Contacts between competitors.

In its landmark Sugar case, the ECJ held that Article 101 TFEU strictly precludes any direct or indirect contact between operators that can influence the conduct on the market of an actual or potential competitor. In such a case, the defendants cannot explain the existence of the parallel conduct by the fact that they have adapted intelligently to the existing and anticipated

conduct of their competitors. Such contacts remove in advance the uncertainty as to the future conduct of the competitors, and thus protect the undertakings from the risks of competition.

These contacts could consist of, for example, meetings between competitors.

Disclosing to competitors the course of conduct that each undertaking

has decided to adopt (or contemplates adopting) on the market.

For example, announcements of price increases, together with parallel conduct, can be regarded as proof of concentration[16].

Exchange of Information.

Exchange of sensitive data can be considered proof of concentration, especially if the data are closely linked to the competitive conditions in respect of which the conduct of competitors is parallel.

Reciprocal supply agreements between competitors.

Reciprocal supply agreements between competitors could be regarded as proof of concentration, especially if, at the same time, the concerned undertakings refrain from supplying competitors’ clients[17].

Common board members.

Having representatives on the board of directors or any other management body of a competitor could be considered a device facilitating collusion.

Associations of enterprises.

If all (or the majority) of the undertakings investigated are members of an association of enterprises, this can be an element supporting an accusation of concentration by a competition authority.

Network of joint ventures coordinated by a parent company.

In the Optical fibers case, the Commission found that concentration in an oligopolistic market could result of a network of interrelated joint ventures with a common technology provider and a common parent company[18]..

The above non-exhaustive list of examples shows that, in the presence of parallel conduct, any device, practice or framework facilitating collusion can be considered sufficient supporting proof of concentration. In such cases, it is not enough for the defence merely to provide a plausible alternative explanation of the parallel conduct. The additional proof (exchange of information, documents, etc.) must also be rebutted.

Furthermore, it should be recalled that most of the facilitating practices can serve precompetitive as well as anticompetitive purposes. Therefore, the mere fact that some sort of facilitating practice exists should not alone lead to a conclusion of illicit collusion among the defendants.

 

                                                5. Conclusions

Since direct proof of illicit collusion is often difficult, when parallel behaviour is accompanied by facilitating practices, as a matter of practice, competition authorities tend to shift the burden of proof to defendant undertakings.

 

The key issue is to distinguish between situations in which strategic coordination implies some sort of illicit collusion and when it merely corresponds to spontaneous coordination resulting from the rational response of each member of the market to the perceived interdependencies.



[1] Case 48/69 Imperial Chemical Industries Ltd. v Commission [1972] ECR 619

[2] Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73, Suiker Unie v Commission [1975] ECR 1663, para. 173-174.

[3] Commission Decision EEC/84/405 of 6 August 1984, Case IV/30.350 – zinc producer group, OJ L 220 [1984], pars. 75-76.

[4] Joined Cases -89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85 A. Ahlström Osakeyhtiö e.a. (Woodpulp II) [1993] ECR I-1307, para. 75 and the following.

[5] Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73 Suiker Unie v Commission [1975] ECR 1663, para. 173-174

[6] Case 172/80 Gerhard Züchner v Bayerische Vereinsbank AG [1981] ECR 1981 para 14 and the following

[7] Case 48/69 Imperial Chemical Industries Ltd. (ICI) v Commission [1972] ECR 619, para. 65

[8]  Case 48/69 Imperial Chemical Industries Ltd. (ICI) v Commission [1972] ECRR 619, para. 66.

[9] 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, A.Ahlström Osakeyhtiö e.a. (Woodpulp II) [1993] ECR I-1307, para. 71.

[10] Joined Cases 29/83 and 30/83 Compagnie Royale Asturienne des Mines SA (CRAM) and Rheinzink GmbH v Commission [1984] ECR 1679, para. 20.

[11] Joined Cases -89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85 A. Ahlström Osakeyhtiö e.a. (Woodpulp II) [1993] ECR I-1307

[12] Idem.

[13] See Opinion of Advocate General Darmon in Joined Cases -89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85, A. Ahlström Osakeyhtiö e.a. (Woodpulp II) [1993] ECR I-1307,para. 96 and 196.

[14] See 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 NV, Elf Atochem SA, BASF AG, Shell International Chemical Company Ltd, DSM NV, DSM Kunststoffen BV, Wacker-Chemie GmbH, Hoechst AG, Société artésienne de vinyle, Montedison SpA, Imperial Chemical Industries plc, Hüls AG and Enichem SpA v Commission (PVC II) [1999] ECR II-931, para. 728.

[15] Idem, para. 724-728.

[16] Case 48/69 Imperial Chemical Industries Ltd. (ICI) v Commission [1972] ECR 619, para. 83 and the following.

[17] Joined Cases 40 to 48, 50, 54 to 56, 111, 113 and 114/73, Suiker Unie v Commission [1975] ECR 1663, para. 173-174.

[18] Commission Decision EEC/86/405 of 14 July 1986, Case IV/30.320 – optical fibers,OJ L 236 [1986]

Pursuant to the Romanian Company Law (“RCL”), the transfer of shares in a limited liability company (“LLC”) towards a person not holding the quality of shareholder in the respective LLC has to be approved by the shareholders representing at least 75% of the share capital.

Following the amendments brought to RCL on 23 June 2010, the above mentioned transfer of shares is subject to a 30-day opposition period within which any prejudiced third party may file an opposition against the transfer and seek damages.

Thus, the registration of the transfer with the Trade Registry is to be performed in 2 stages.

In the first stage, the resolution of shareholders general assembly approving the transfer is submitted and published with the Romanian Official Gazette.

In the second stage, which may not occur earlier than either the expiry of the 30-day opposition period, in case no opposition has been filed, or the rejection by the competent court of law of the opposition filed by a third party, the transfer is registered with the Trade Registry and becomes opposable towards third parties.

Pursuant to these new provisions, the transfer of shares operates either upon the expiry date of the 30-day opposition period, in case no opposition has been filed, or upon the date when the decision of the court of law dismissing the opposition is communicated.

The Romanian Trade Registry has extended the application of the new provisions to transfers of participations in general partnerships and limited partnerships as well. Nevertheless, the new provisions are not applicable in case of joint-stock companies.

The above described provisions hinder the parties’ freedom in structuring share deals in limited liability companies, general partnerships and limited partnerships. Furthermore, they are contrary to the spirit of the amendments brought to RCL on 4 October 2010 by means of which the blocking effect of an opposition filed by a creditor in case of merger and spin-off was removed in order to encourage and stimulate the business and reorganization possibilities of a company (for further details on this matter please refer to our Newsletter Issue 1 on Corporate & Commercial Law in EMEIA).

From a practice perspective, different interpretations may be given to the existing legal text and several alternatives could be advanced in order for the parties to complete a share transfer in the conditions and within the time limit they are pursuing.

►  Competition Council Issues New Order on Access to Investigation Files

For the purpose of observing the EU principles on competition, mainly with respect to uniform and consistent application of the European rules on competition, the Competition Act was amended substantially on 5 August 2010.

Following this amendment, various important enactments having as object the application of the Competition Act were issued by the Romanian Competition Council (“RCC”).

Recently, the conditions and procedure for access to files in which anti-competitive practices or economic concentrations are investigated have been enacted by RCC.

The act, entered into force on 2 March 2011, regulates the persons entitled to access the file, the information that may be accessed, the moment when such access may be granted, as well as the actual procedure to be followed.

In principal, the person having the right to access the investigation file is that whose conduct is scrutinized by RCC in an investigation report. However, in case of an economic concentration, it rests with RCC to decide if the access to file documentation will be granted only to the persons that have notified the economic concentration or will be extended to the other persons involved in the concentration.

In addition, the person filing a complaint before RCC shall have the right to access the file if, after performing its analysis, RCC intends to dismiss the complaint with-out initiating an investigation. However, it rests with RCC to decide whether the person filing the complaint will receive a non-confidential version of the report prior being heard by RCC in case an investigation has been initiated.

Further on, for the case when RCC intends to take interim measures prior to issuing a decision, it will inform the relevant person who will have the right to access all the preliminary documentation save for trade secrets and other confidential information concerning other parties.

Last but not least, the court of law expected to rule a claim for damages arising out of an anti-competitive practice has the right to request from RCC the documentation based on which the decision was issued. Subsequently, the court of law will be under the obligation to secure the confidentiality of trade secrets and other confidential information.

Concerning the file documentation that may be accessed, as a rule the internal documentation of RCC and its correspondence with other local or foreign authorities, as well as the trade secrets and other confidential information concerning the involved parties involved may not be accessed. However, if the person accessing the file considers necessary to know the restricted information in order to prepare its defense, it shall address to RCC’s Chairman who will decide if access to such information will be granted.

Concerning the confidentiality of the information provided, unless expressly requested by the parties, RCC shall not treat the information it receives as confidential. To this end, the person providing the information is required to file a request indicating what information needs to be kept confidential, why the information is to be kept confidential, and, the parties towards which the information is to be kept confidential. Further on, the person is also required to provide a separate non-confidential version of the information provided.

It shall rest with RCC to decide if the information will be treated as confidential or not.

Moreover, as a rule, RCC presumes the data referring to sales, market share and other similar information and which is older than 5 years is no longer confidential.

Esenta dispozitiilor europene in materie: Articolul 110 TFUE si Principiul Anti- Discriminarii

Pentru aplicarea eficienta a dispozitiilor dreptului European, este necesara intelegea motivelor care au stat la baza hotararilor/ ordonantei, pronuntate de Curtea de Justitie a Uniunii Europene in Cauzele Tatu, Nisipeanu si Vijulan. Este de subliniat, in acest sens, caracterul discriminatoriu al legii nationale romane, ce a avut drept rezultat incalcarea principiului egalitatii. Acesta din urma este o regula de drept fara de care justitia, la orice nivel, nu se poate infaptui.

Discriminarea in spetele mai sus mentionate, consta in reglementarea de catre legea domestica (romana) a unui regim de taxare a autovehicolelor de provenienta straina, ceea ce este contrar articolului 110 al Tratatului privind Functionarea Uniunii Europene. Aceasta prevedere, chiar daca nu stipuleaza principiul discriminarii, el este general aplicabil, astfel subinteles.

 

Este un pas important pentru accesul cetateanului roman la justitia europeana, care iata, ca poate servi interesului individual in situatii in care legea romana nu respecta normele si principiile europene.

 

Pentru mai multe detalii, nu ezitati sa ma contactati.

Insolventa- Infractiuni

September 4th, 2011 | Posted by DUCA LL.M in Romanian Law - (0 Comments)

Debitorul are obligatia introducerii cerereii de deschidere a procedurii insolventei in termen de 5 zile de la esuarea negocierilor, in 30 de zile de la aparitia starii de insolventa, dar nu mai mult de 6 luni de la cele mentionate anterior.

Neintroducerea cererii sau introducerea ei tardiva de catre debitor sau reprezentantul sau  legal constituie infractiunea de bancruta, care se pedepseste cu inchisoare de la 3 luni la un an sau cu amenda.

Conform Legii 85/2006, modificata.

Cabinet Avocat Duca, in asociere cu Firma Practician in Insolventa :” Alina Ioana Georgescu”, va va asista cu placere si diligenta in aceste cazuri.

It is mandatory for the debtor to submitt with the Court the request of opening insolvency proceedings within 5 days since the failure of negociations, 30 days since the Insolvency state arose, but not more than6 Months since the two foregoing.

By not submitting or by lately lodging the relevant request for the opening of the Insolvency Procedure, the debtor or its Legal Representative can be found guilty of the Criminal Offence of Bancruptcy, which is punished with Imprisonment from 3 Months to one Year or with a Fine.

According to Law 85/2006, updated.

Duca LLM Law Office in assosciation with Insolvency Office ” Alina Ioana Georgescu”, will proudly and dilligently assist you in these matters.

Laval un Partneri Ltd- Case [341/05]

August 5th, 2011 | Posted by DUCA LL.M in EU Law - (0 Comments)

Ruling of [of 18 December 2007] of the Court the Grand Chamber in Case [341/05], Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet, Svenska Byggnadsarbetareförbundets avdelning 1, Byggettan and Svenska Elektrikerförbundet [2007] ECR I-11767 

 

Referred by [Arbetsdomstolen – Sweden]

 

FACTS:

The Swedish Law on the posting of workers sets out the terms and conditions of employment falling within the matters listed in Directive 96/71, save for minimum rates of pay. The Law is silent on remuneration, the determination of which in Sweden is traditionally entrusted to labour and management by way of collective negotiations. Under Swedish law, trade unions are entitled to have recourse to collective action, under certain conditions, which is aimed at forcing any employer both to enter into negotiations on pay and to sign a collective agreement.

In May 2004, Laval un Partneri Ltd, a Latvian company, posted workers from Latvia to work on building sites in Sweden. The work was carried out by a subsidiary, L&P Baltic Bygg AB, and included the renovation and extension of school premises in the town of Vaxholm.

In June 2004, Laval and Baltic Bygg, on the one hand, and the Swedish building and public works trade union, Svenska Byggnadsarbetareförbundet, on the other, began negotiations with a view to determining the rates of pay for the posted workers and to Laval’s signing the collective agreement for the building sector. However, the parties were unable to reach an agreement. In September and October, Laval signed collective agreements with the Latvian building sector trade union, to which 65% of the posters workers were affiliated.

On 2 November 2004, Byggnadsarbetareförbundet began collective action in the form of a blockade (‘blockad’) of all Laval’s sites in Sweden. The Swedish electricians’ trade union joined in with a sympathy action, the effect of which was to prevent electricians from providing services to Laval. None of the members of those trade unions were employed by Laval. After work had stopped for a certain period, Baltic Bygg was declared bankrupt and the posted workers returned to Latvia.

 

ISSUES/QUESTIONS:

Interpretation of Articles 12 EC and 49 EC (now Articles 18 and 56 TFEU) and Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services/Is it compatible with rules of the EC Treaty on the freedom to provide services and the prohibition of any discrimination on the grounds of nationality and with the provisions of Directive 96/71/EC, for trade unions to attempt, by means of collective action in the form of a blockade, to force a foreign provider of services to sign a collective agreement in the host country in respect of terms and conditions of employment, such as the collective agreement for the building sector, if the situation in the host country is characterised by the fact that the legislation to implement that directive has no express provision concerning the application of terms and conditions of employment in collective agreements? Is it contrary to EU law the existence of a prohibition contained in national rules against trade unions undertaking collective action with the aim of having a collective agreement between other parties set aside or amended?

 

ANSWER of the COURT:

Article 56 TFEU and Article 3 of Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services are to be interpreted as precluding a trade union, in a Member State in which the terms and conditions of employment covering the matters referred to in Article 3(1), first subparagraph, (a) to (g) of that directive are contained in legislative provisions, save for minimum rates of pay, from attempting, by means of collective action in the form of a blockade (‘blockad’) of sites such as that at issue in the main proceedings, to force a provider of services established in another Member State to enter into negotiations with it on the rates of pay for posted workers and to sign a collective agreement the terms of which lay down, as regards some of those matters, more favourable conditions than those resulting from the relevant legislative provisions, while other terms relate to matters not referred to in Article 3 of the directive.

Where there is a prohibition in a Member State against trade unions undertaking collective action with the aim of having a collective agreement between other parties set aside or amended, Articles 49 EC and 50 EC preclude that prohibition from being subject to the condition that such action must relate to terms and conditions of employment to which the national law applies directly.

 

REASONING of the Court

 

The Court points out, first of all, that Directive 96/71 does not allow the host Member State to make the provision of services in its territory conditional on the observance of terms and conditions of employment which go beyond the mandatory rules for minimum protection. As regards the matters referred to in Directive 96/71, the latter expressly lays down the degree of protection which undertakings established in other Member States must guarantee, in the host Member State, to the workers posted to the territory of the latter.

 

The Court then accepts that the right to take collective action must be recognised as a fundamental right which forms an integral part of the general principles of Community law the observance of which the Court ensures, but states that the exercise of that right may be subject to certain restrictions. The fundamental nature of the right to take collective action is not such as to render Community law inapplicable to such action, taken against an undertaking established in another Member State which posts workers in the framework of the transnational provision of services.

 

In this case, the Court points out that the right of trade unions of a Member State to take collective action by which undertakings established in other Member States may be forced into negotiations with the trade unions of unspecified duration in order to ascertain minimum wage rates and to sign a collective agreement – the terms of which go beyond the minimum protection guaranteed by Directive 96/71 – is liable to make it less attractive, or more difficult, for such undertakings to carry out construction work in Sweden, and therefore constitutes a restriction on the freedom to provide services.

 

A restriction on the freedom to provide services may be justified only if it pursues a legitimate objective compatible with the Treaty and is justified by overriding reasons of public interest; if that is the case, it must be suitable for securing the attainment of the objective which it pursues and not go beyond what is necessary in order to attain it.

 

In that regard, the Court points out that the right to take collective action for the protection of the workers of the host State against possible social dumping may constitute an overriding reason of public interest[1]. In that context, the blockading of sites by a trade union of the host Member State which is aimed at ensuring that workers posted in the framework of a transnational provision of services have their terms and conditions of employment fixed at a certain level, falls within the objective of protecting workers.

 

However, as regards the specific obligations, linked to signature of the collective agreement for the building sector which the trade unions seek to impose on undertakings established in other Member States by way of collective action, the obstacle which that action forms cannot be justified with regard to such an objective. With regard to workers posted in the framework of a transnational provision of services, their employer is required, as a result of the coordination achieved by Directive 96/71, to observe a nucleus of mandatory rules for minimum protection in the host Member State.

 

As regards the negotiations on pay which the trade unions seek to impose, by way of collective action, on undertakings established in another Member State which post workers temporarily to their territory, the Court emphasises that Community law does not prohibit Member States from requiring such undertakings to comply with their rules on minimum pay by appropriate means.

 

However, collective action cannot be justified with regard to the public interest objective of protecting workers where the negotiations on pay which that action seeks to require an undertaking established in another Member State to enter into form part of a national context characterised by a lack of provisions, of any kind, which are sufficiently precise and accessible that they do not render it impossible or excessively difficult in practice for such an undertaking to determine the obligations with which it is required to comply as regards minimum pay.

 

Finally, the Court states that that national rules which fail to take into account, irrespective of their content, collective agreements to which undertakings that post workers to Sweden are already bound in the Member State in which they are established, give rise to discrimination against such undertakings, in so far as under those national rules they are treated in the same way as national undertakings which have not concluded a collective agreement.

 

It follows from the Treaty that such discriminatory rules may be justified only on grounds of public policy, public security or public health.

 

The application of those rules to foreign undertakings which are bound by collective agreements to which Swedish law does not directly apply is intended, first, to allow trade unions to take action to ensure that all employers active on the Swedish labour market pay wages and apply other terms and conditions of employment in line with those usual in Sweden, and secondly, to create a climate of fair competition, on an equal basis, between Swedish employers and entrepreneurs from other Member States.

 

Since none of the considerations constitute grounds of public policy, public security or public health, such discrimination cannot be justified[2].

 

Comments:

 

The Court finding regarding the discrimination issue raised by the applicant in the main proceedings is interesting from the standpoint of which it was made a difference between fundamental rights and fundamental freedoms.

Trade unions rely on the legitimate aim of the protection of workers with regard to the blockade to force Laval to sign the collective agreement containing terms and conditions not listed in Article 3(1) a to g and terms and conditions that are more favourable than the legislative minimum applicable in Sweden. The Court applies the principle of proportionality and states that in principle the action is suitable to achieve the aim of worker protection. However, in this case the terms and conditions go beyond the minimum required in Sweden. Clearly worker protection cannot serve as a justification ground when forcing the signing of a collective agreement which goes beyond the minimum level of protection.

 

Regarding the imposing of negotiations on wages through collective action the Court draws the same conclusion. Trade unions rely on the protection of workers and the protection of the fundamental right to collective action as justifying legitimate interests. However, these aims cannot justify collective action imposing wage negotiations when there is no national context which can determine the minimum rate of pay that needs to be observed. In other words, as the minimum wage is determined on a case by case basis it is not possible to determine the minimum which needs to be observed.

 

The Court assessed that the issue of discrimination shall be interpreted only in the light of Article 56 TFEU, ex Article 49 TEC, given the fact that Article 18 TFEU, ex Article 12 TEC contains no specific expression and effect of the principle of non-discrimination, while the latter does.

 

As the second question submitted in Laval revolves entirely on possible justification I will deal with it briefly here. As the national rules are a form of direct discrimination it can only be justified by relying on Article 46 EC, now Article 52 TFEU, the grounds of public policy, public security and public health. As the aims of the Swedish rules are to ensure that wages and other terms and conditions of employment are applied equally in Sweden and to create a climate of fair competition, it cannot be justified by Article 46 EC.

 

The Court reiterated that the principle of non-discrimination derives from the principle of equal treatment, which requires that comparable situations must be treated the same way and that different situations must not be treated in the same way[3]. As a consequence, given that the same national rules were applied to different situations, i.e. the Swedish nationals that did not conclude a collective agreement and foreigners that concluded such an agreement in the State in which they are established, the Court found this to be direct discrimination, that cannot be justified under Article 52 TFEU, ex Article 49 TEC.



[1]Case [341/05], Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet, Svenska Byggnadsarbetareförbundets avdelning 1, Byggettan and Svenska Elektrikerförbundet [2007] ECR I-11767 ,paragraph 103

[2] Case [341/05], Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet, SvenskaByggnadsarbetareförbundets avdelning 1, Byggettan and Svenska Elektrikerförbundet [2007] ECR I 11767,paragraph 108

 

[3] Case [341/05], Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet, SvenskaByggnadsarbetareförbundets avdelning 1, Byggettan and Svenska Elektrikerförbundet [2007] ECR I-11767 ,paragraph 115

 

Jutta Johannes- Case [C-430/97]

August 5th, 2011 | Posted by DUCA LL.M in EU Law - (0 Comments)

Ruling of 10 June 1999 of the Court the First Chamber in Case [C-430/97], Jutta Johannes v Hartmut Johannes [1999] ECR I-03475

 

Referred by [Amtsgericht Köln – Germany]

 

FACTS:

 

The partiest in the main proceedings, both German nationals, married on 18 April 1963 in the United States of America.

The marriage was dissolved by a decree of divorce pronounced by the Tribunal de Première Instance (Court of First Instance), Brussels, on 28 April 1986 against the petitioner under Belgian law, as the law of the last common place of residence of the parties. That decree became absolute on 28 October 1988 and was recognised by the Ministry of Justice of the Land Nordrhein-Westfalen on 21 April 1995.

The deffendant in the main proceedings, a former official of the Commission, has been in receipt of a retirement pension from the European Community since 1 June 1996.

The applicant, Mrs Johannes is claiming, pursuant to the German Law, apportionment on a pro rata basis of the pension rights acquired during the marriage by the parties to the main proceedings, including those acquired by Mr Johannes in his capacity as a Commission official.

The parties agreed that Mr Johannes’ pension rights in respect of the Bundesversicherungsanstalt für Angestellte (Federal Insurance Office for Salaried Employees), relating to a period of employment prior to his appointment as a Community official, are subject to German law as regards apportionment of those rights. However, Mr Johannes contends that the pension paid to him by the European Commission should not be apportioned, relying on arguments based on Community law, in particular on the principle of non-discrimination, as enshrined by the Treaty and Article 27 of Annex VIII to the Staff Regulations.

ISSUES/QUESTIONS:

 

Whether the Staff Regulations, and in particular Article 27 of Annex VIII thereto, preclude the application of rules of national law, such as Paragraph 1587 et seq. of the German Civil Code, which provide for apportionment of pension rights between divorced spouses/ whether the principle of non-discrimination precludes the laws of a Member State regulating the consequences of divorce between an official of the Communities and his former spouse from causing the official to bear a heavier burden, on account of his nationality, than would be borne by an official of a different nationality in the same situation.

 

ANSWER of the COURT:

 

Staff Regulations and in particular Article 27 of Annex VIII thereto, does not preclude the application of rules of national law, such as Paragraph 1587 et seq. of the German Civil Code, which provide for apportionment of pension rights between divorced spouses.

The principle of non-discrimination does not preclude the laws of a Member State regulating the consequences of divorce between an official of the Communities and his former spouse, regard being had to the spouses’ nationality as a connecting factor, from causing the official concerned to bear a heavier burden than would be borne by an official of a different nationality in the same situation.

 

REASONING of the Court

 

The Court followed Advocate General Opinion and stated that EU legislature has no competence to lay down the rights of spouses in divorce proceedings, including those resulting from any compensatory adjustment of pension rights as provided for under German law. Those rights are governed by the rules of private law and family law applying in the Member States, which fall within the competence of those Member States. As a consequence, the Staff Regulations are intended only to regulate the legal relations between the European institutions and their officials, by establishing a series of reciprocal rights and obligations and by affording certain members of an official’s family rights which they may assert in relation to the European Communities. t follows that the Staff Regulations do not in any way preclude the application of national rules of law of the kind contained in Paragraph 1587 et seq. of the BGB, providing for the compensatory adjustment of pension rights between divorced spouses.s

 

As regards the second question, Mr. Johannes compares his situation to that of a European official possessing Belgian nationality and subject to Belgian law. Since there exists no machinery under Belgian law for the apportionment of pension rights, such an official could not be required to pay sums as great as those which Mr. Johannes may be ordered to pay. Mr. Johannes infers from this the existence of discrimination on grounds of nationality, since the difference between the two situations rests solely on the difference in nationality.

 

That argument was not upheld as the Court agreed to the the German Government and the Commission point of view and ruled that the prohibition of all discrimination on grounds of nationality laid down by the Treaty applies only within the Treaty’s area of application. Furthermore, neither the national provisions of private international law determining the substantive national law applicable to the effects of a divorce nor the national provisions of civil law substantively regulating those effects fall within the scope of the Treaty.

 

Comments:

In respect to the principle of non-discrimination on grounds of nationality, it will take affect only if the conflictual situation falls under the competence of EU law. Even if Mr. Johannes correctly invoked the general principle of equal treatment, i.e. Belgian v. German system, the Court found that following existing disparities between Member States’ legislation in family law, nationality of the parties to the proceedings is taken into consideration solely as a connecting factor applied by the rules of private international law for the purposes of determining the substantive national law applicable to the effects of the divorce.

Grzelczyk- Case [C-184/99]

August 5th, 2011 | Posted by DUCA LL.M in EU Law - (0 Comments)

Ruling of 13 20 September 2001 of the Court in Case [C-184/99], Rudy Grzelczyk v Centre public d’aide sociale d’Ottignies-Louvain-la-Neuve [2001] ECR I-06193

 

 

Referred by [Tribunal du travail de Nivelles – Belgium]

 

FACTS:

 

Mr. Grzelczyk, a French national, undertook a course of studies in physical education at the Catholic University of Louvain-la-Neuve. During the first three years of his course, he defrayed his own costs of maintenance, accommodation and studies by taking on various minor jobs and by obtaining credit facilities. The fourth year of his studies being the most demanding, Mr Grzelczyk applied to the Public Social Assistance Centre for Ottignies-Louvain-la-Neuve (“the CPAS”) for payment of the minimum subsistence allowance, or “minimex”, for the year 1998/1999. He was initially granted the allowance.

Mr. Grzelczyk’s entitlement to the minimex was then withdrawn with effect from 1 January 1999, the competent minister basing his decision to stop payment on the fact that Mr Grzelczyk was a student.

When the benefit was introduced in 1974, entitlement was reserved to adults of Belgian nationality, residing in Belgium and not in possession of adequate resources. In 1987 entitlement was extended to include, amongst others, persons to whom the 1968 Community regulation on the freedom of movement of workers within the Community applied.

Mr. Grzelczyk brought an action before the competent Belgian court challenging the CPAS’s decision of 29 January 1999 to stop payment of the minimex.

 

ISSUES/QUESTIONS:

 

 Does the principle of non-discrimination on grounds of nationality and the provisions of the EU citizenship preclude entitlement to a non-contributory social benefit to be made conditional, in the case of nationals of other Member States (in this case France), upon their being regarded as workers, given that that condition did not apply to nationals of the host Member State (in this case Belgium)?

 

ANSWER of the COURT:

 

 The principle of non-discrimination and the provisions of EU citizenship, as enshrined by the Treaty, preclude entitlement to a non-contributory social benefit, such as the minimex, from being made conditional, in the case of nationals of Member States other than the host State where they are legally resident, on their falling within the scope of Regulation No 1612/68 of the Council of 15 October 1968 on the freedom of movement for workers within the Community when no such condition applies to nationals of the host Member State.

 

REASONING of the Court

The Court of Justice first of all held that the minimex was indeed a social benefit and that a Belgian student in the same position as Mr Grzelczyk would have satisfied the conditions for obtaining it. The Court thus found that Mr Grzelczyk had suffered discrimination solely on the ground of his nationality, which, within the sphere of application of the EC Treaty, was prohibited.

The Court of Justice held that among the situations falling within the scope of the Treaty are those involving the exercise of fundamental rights guaranteed by the Treaty and, in particular, situations involving the exercise of the right to move and reside freely in other Member States, which is guaranteed by the Treaty provisions concerning European citizenship. The status of citizen of the European Union is destined to be the fundamental status of nationals of all the Member States, conferring on them, in the fields covered by Community law, equality under the law, irrespective of their nationality.

Since the introduction of European Union citizenship by the Treaty on European Union, which entered into force on 1 November 1993, nothing prevents a citizen of the Union who pursued university studies in a Member State other than the State of which he was a national from relying on the prohibition of all discrimination on grounds of nationality.

The Court pointed out that the Member States may nevertheless require students wishing to benefit from the right of residence on their territory to declare that they have, in accordance with a Community directive, sufficient resources for themselves and, in relevant cases, for their family in order to avoid becoming a burden on the social assistance scheme of the host Member State.

The Court stated, however, that any assessment must be made at the time when the relevant declaration is made, adding that a student’s financial position may change with the passage of time for reasons beyond his control. The provisions of the Community directive do not therefore bar students from subsequently having recourse to the social security system of a host Member State.

That being so, the Court of Justice held that the provisions concerning non-discrimination and European citizenship preclude entitlement to non-contributory social benefits from being made conditional on a criterion which need not be satisfied by nationals of the host Member State in question.

The Court refused the request of the Belgian Government to limit the temporal effects of the judgment. The provisions concerning citizenship of the Union were applicable from the entry into force of the Treaty on European Union.

Comments:

 

This was a cornerstone Ruling which set up the basis for the following Judgments in the area of EU discrimination and citizenship. In this respect, following the introduction of the EU citizenship in 1993, Article 17 and 18 TEC, the Court assessed the case brought before it under these provisions, and in the light of the principle of non-discrimination, even if the Belgian and UK Government argued that the case falls outside the scope rationae materiae of the Treaty. The assessment developed under the principle of equal treatment, where direct discrimination is prohibited. It was found to be direct discrimination, as the sole criteria that led to a difference in treatment was the nationality one. In this regard, the Court compared similar situations, i.e. two students, one French and one Belgian, and found that under Belgian law, the two categories of nationals are treated differently, where the latter is clearly disadvantaged.

Land Hessen- Case [C-360/00]

August 5th, 2011 | Posted by DUCA LL.M in EU Law - (0 Comments)

Ruling of 6 June 2002 of the Court the Fifth Chamber in Case [C-360/00], Land Hessen v G. Ricordi & Co. Bühnen- und Musikverlag GmbH [2002] ECR I-05089

 

Referred by [Bundesgerichtshof – Germany]

 

FACTS:

 

 The question referred  was raised in proceedings between the Land Hessen and G. Ricordi & Co. Bühnen- und Musikverlag GmbH (hereinafter Ricordi), a firm publishing musical and dramatic works, concerning the right to have the opera La Bohème by the Italian composer Giacomo Puccini performed in the 1993/1994 and 1994/1995 seasons.

 

At the material time, artistic and intellectual works were protected in Germany under the 1965 version of the Gezetz über Urheberrecht und verwandte Schutzrechte (German rules). That legislation distinguished between the protection of the works of German nationals and that of the works of foreign authors. Whilst the former enjoyed protection for all their works, whether published or not and regardless of where they were first published, the latter were entitled to protection only for works published in Germany for the first time or within 30 days of their being first published.In other cases, foreign authors enjoyed the protection afforded to their rights by international treaties. The copyright protection granted by German legislation expires 70 years after the 1 January following the author’s death.

Under Italian law the term of copyright protection is 56 years from the time of the author’s death.

The main international agreement governing copyright protection is the Berne Convention for the Protection of Literary and Artistic Works (Paris Act of 24 July 1971) which applies to the main proceedings in the version as amended on 28 September 1979 (the Berne Convention). Provisions related to copyright stipulate that the term of protection granted thereby is to be the life of the author and 50 years after his death. Article 7(5) provides that the 50-year term is to be deemed to begin on 1 January of the year following the death. Under Article 7(6), the contracting parties may, however, grant a longer term of protection. This Convention institutes a scheme known as comparison of the terms of protection. Under that provision, the term of protection is, in any case, to be governed by the legislation of the country where protection is claimed. However, unless the legislation of that country otherwise provides, which German legislation has not, the term is not to exceed the term fixed in the country of origin of the work.

Ricordi holds the rights of performance in the opera La Bohème by Puccini, who died on 29 November 1924. The Land Hessen operates the Staatstheater (State theatre) in Wiesbaden (Germany). During the 1993/1994 and 1994/1995 seasons, the Staatstheater in Wiesbaden staged a number of performances of that opera without Ricordi’s consent. Ricordi argued before a Landgericht (Regional Court, Germany) that, in the light of the prohibition of discrimination on grounds of nationality in the EC Treaty, Puccini’s works were necessarily protected in Germany until the expiry of the 70-year term prescribed by German law, that is, until 31 December 1994. The Land Hessen contended that the opera La Bohème was covered by the term of protection of 56 years prescribed by Italian law, so that the copyright in that work had expired on 31 December 1980.

The Landgericht seised allowed Ricordi’s application. The appeal brought by the Land Hessen was unsuccessful. The Land thus brought an appeal on points of law (Revision).

In the order for reference, the Bundesgerichtshof points out that since, according to the findings made, the opera La Bohème was first published in Italy and not in Germany, it was, at the material time, protected in Germany solely to the extent provided by international treaties. Accordingly, in the light of Article 7(8) of the Berne Convention and the fact that German law does not contain any provision derogating from the principle according to which the term of protection must not exceed the term fixed in the country of origin of the work, the term of protection in Germany for the opera La Bohème was restricted by the term of protection prescribed by Italian law and thus expired in 1980.

According to the referring court, the outcome of the main proceedings depends on the applicability to the facts of the case of the prohibition of discrimination on grounds of nationality in the first paragraph of Article 6 of the EC Treaty.

 

ISSUES/QUESTIONS:

 Term of copyright protection – Principle of non-discrimination on grounds of nationality – Applicability to copyright which arose prior to the entry into force of the EEC Treaty/ Whether the prohibition of discrimination in the first paragraph of Article 6 of the EC Treaty is also applicable to the protection of copyright in cases where the author had died when the EEC Treaty entered into force in the Member State of which he was a national and, if so, whether it precludes the term of protection gran

Ruling of 16 January 2003 [.of the Court Sixth Chamber] in Case C-388/01, Commission of the European Communities v Italian Republic [2003] ECR I-00721

 

Direct action

 

FACTS:

 

Following complaints about discrimination on the basis of nationality or residence in respect of admission to Italian museums, the Commission undertook inquiries as a result of which it concluded that the scheme of preferential rates applicable to persons aged over 60 or 65 years for admission to various Italian museums did indeed entail discrimination.

 

Pursuant to the “failure to fulfill obligations” procedure prescribed by the Treaty, the Commission sent to Italy a formal notice to act in a manner consistent with the principle of non discrimination. The Government then informed the Commission about an imminent amendment to its legislation which would extend to all European citizens aged 60 or 65 years or over free admission to Italian museums. That benefit had until then been allowed only for Italian citizens and certain residents.

 

That amendment concerned only national museums and not municipal museums and monuments (including those of Florence, Padua, Treviso and Venice). The Commission thus decided to bring the EU Court. 

ISSUES/QUESTIONS:

 

Failure to fulfil obligations – Free movement of services – Non-discrimination – Articles 12 EC and 49 EC – Admission to museums, monuments, galleries, archaeological digs, parks and gardens classified as public monuments – Preferential rates granted by local or decentralised State authorities

 

 

ANSWER of the COURT:

 

By allowing discriminatory, advantageous rates for admission to museums, monuments, galleries, archaeological digs, parks and gardens classified as public monuments, granted by local or decentralised State authorities only in favour of Italian nationals and persons resident within the territory of those authorities running the cultural sites in question, who are aged over 60 or 65 years, and by excluding from such advantages tourists who are nationals of other Member States and non-residents who fulfil the same objective age requirements, the Italian Republic has failed to fulfil its obligations under Articles 12 EC and 49 EC.

 

 

REASONING of the Court

 

In its judgment, the Court of Justice has recalled that national legislation on admission to a Member State’s museums which entails discrimination affecting only foreign tourists is prohibited. Furthermore, the equal treatment provided for by the Treaty prohibits all, even

covert, forms of discrimination which, by the application of other criteria of differentiation, lead to the same result. In the present case, under the Italian measure a distinction of treatment is drawn on the basis of residence, which operates mainly to the detriment of nationals of other Member States, since non-residents are in the majority of cases foreigners.

 

Italy did not deny that discrimination but sought to justify it.

 

First of all, it relied on considerations in the general interest arising from economic and fiscal criteria: first, it alluded to the cost of managing cultural assets and, second, it submitted that those advantages constituted consideration for the payment of the taxes by which those residents contribute to the running of the sites concerned.

 

According to the Court of Justice, in the first place, the arguments of a purely economic nature cannot be accepted. In the second place, there is no direct link between any tax on Italian residents and the application of preferential rates for admission to the museums and monuments in question[1]. In addition, the Italian Government put forward the argument that the regulations which introduced the advantageous rates at issue are not within its competence but within that of local authorities.

 

The EU Court did not accept that justification. A Member State alone is responsible towards the Community for compliance with its Community obligations[2].

 

Accordingly, the Court has declared that Italy infringed the Community law principles of the free movement of services and non-discrimination by allowing discriminatory, advantageous rates for admission to cultural sites only in favour of a certain category of persons (Italian nationals and persons aged over 60 or 65 years who are resident within the territory of the

authorities running the sites in question).

 

 

Comments:

 

There were two different discriminatory situations under the Italian law at issue, for example in Venice and Treviso, the Italian tariffs refer to nationality and thus appear to constitute direct discrimination, whereas in others, for example in Florence and Padua, the tariffs refer to residence and the discrimination therefore appears to be indirect.

As direct discrimination cannot be justified, the Court assessed the Case in the light of indirect discrimination, as enshrined by Article 18 TFEU and 56 TFEU, ex Articles 12 and 49 TEC. The Court noted the non-residents, which are in their majority non-nationals, are to be regarded as recipients of services within the Italian territory and by discriminating them on grounds of nationality, the Italian rules at issue hinders the free movement of services, as enshrined by the Treaty. To reach this conclusion, the Court assessed the Case in two steps, namely if there is a discriminatory element, if yes then if it can be justified.

The principle of equal treatment was assessed as regards the requirement that comparable situations must not be treated differently, i.e. non-residents/ non-nationals with the residents/ Italian nationals. The difference in treatment consisting in the residence conditions, under which nationals could benefit of a more favourable treatment, by comparison, the foreigners were discriminated.

As the residence criterion was the source of discrimination, the justification matter was analysed in the light of the reasons in the general interest that ware put forward by the Italian Government. None of them was found to qualify for this status. Worthnoty in this respect, the Courts’ statement at paragraph 23, where it was found that there is no direct link between the tax payers  and the restrictive measure, like in other Cases where such a link was proved[3]. This was actually the integration issue of the non-residents in the Italian society.



[1] Case C-388/01, Commission of the European Communities v Italian Republic [2003] ECR I-00721, paragraph 24

[2] Idem, paragraph 27.

[3] The Court Judgments Case C-107/94 Asscher [1996] ECR I-3089, paragraph 58; Case C-264/96 ICI [1998] ECR I-4695, paragraph 29, and Case C-55/98 Vestergaard [1999] ECR I-7641, paragraph 24).