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12 Cutting Your Losses in the Enforcement Deficit: A Community Right to the Recovery of Unlawfully Levied Charges?

  • Michael Dougan
Extract

The development of a “Community remedial competence” has become the subject of increasing academic analysis, and a burgeoning source of litigation by traders dissatisfied with the levels of judicial protection offered by domestic rules of the Member States. Such litigants are anxious to invoke principles of Community law to support their claims as these principles can, in theory, prescribe more effective means of redress.

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1 Recent surveys of this area include Van Gerven, W.Bridging the Gap Between Community and National Laws: Towards a Principle of Homogeneity in the Field of Legal Remedies32 (1995) CMLRev. 679 ; Ward, A.Effective Sanctions in EC Law: A Moving Boundary in the Division of Competence01 (1995) ELJ 205 ; Szyszczak, E.Making Europe More Relevant to its Citizens: Effective Judicial Process21 (1996) ELRev. 351 ; Himsworth, C.Things Fall Apart: The Harmonisation of Community Judicial Procedural Protection Revisited22 (1997) ELRev. 291 ; and Kakouris, C. N.Do the Member States Possess Judicial Procedural ‘Autonomy’?34 (1997) CMLRev. 1389 .

2 Such as the remedial provisions of the Community Customs Code Regulation 2913/92, OJ 1992 L302/1, particularly Arts. 235-242.

3 See, for example, Case 61/79 Denkavit [1980] ECR 1205 and Case 130/79 Express Dairy Foods [1980] ECR 1887 for the application of domestic rules on unjust enrichment through passing on to illegal national and Community levies, respectively.

4 Capotorti AG in Case 130/79 Express Dairy Foods [1980] ECR 1887, para. 4 of the Opinion.

5 On the distribution of functions between the Member States and Community in the collection of Community levies, see Case 118/76 Balkan [1977] ECR 1177. See also Smith, L. J.A European Concept of Condictio indebiti 19 (1982) CMLRev. 269 .

6 See Case 6/60 Humblet [1960] ECR 559 and Case 26/74 Roquette Frères [1976] ECR 677, where the European Court of Justice refused jurisdiction over a claim for recovery of an unlawful national and Community levy, respectively, in many of the cases, the relevant legislation authorising the collection of Community own resources by national authorities expressly provided that disputes over the levying of charges were to be settled within the domestic legal order: see, for example, Art. 6 of the Council Decision of 21 April 1970 on the Replacement of Financial Contributions from Member States by the Communities’ own Resources, OJ Spec. Ed. 1970 (I) 224.

7 Case 6/60 [1960] ECR 559, 569.

8 Case 26/74 [1976] ECR 677, para. 11.

9 Case 26/74 [1976] ECR 677, para. 12.

10 Case 28/67 [1968] ECR 143, in relation to whether the invalidity of a national tax required that the entire amount be reimbursed or only that part which was incompatible with Community law. See also Case 34/67 Lück [1968] ECR 245 and Case 74/76 lannelli and Volpi [1977] ECR 557.

11 Cases 33 and 45/76 [1976] ECR 1989 and 2043, in relation to the application of national limitation periods on the initiation of proceedings to claims for the recovery of invalid national charges.

12 Case 177/78 [1979] ECR 2161.

13 Case 199/82 [1983] ECR 3595, para. 12. See also Reischl AG in Case 61/79 Denkavit [1980] ECR 1205 and Case 68/79 Just [1980] ECR 501. Capotorti AG in Case 130/79 Express Dairy Foods [1980] ECR 1887 stated, at para. 4 of the Opinion, that “the right of the individual who has paid charges contrary to Community law arises directly from the rule of Community law which imposed the prohibition”. See further the European Court of Justice in Case 309/85 Barra [1988] ECR 355, para. 17 and Case 240/87 Deville [1988] ECR 3513, para. 11.

14 See Cases C-192-218/95 Comateb [1997] ECR I-165, para. 20; Cases C-114-5/95 Texaco and Olieselskabet Danmark [1997] ECR I-4263, para. 40; Case C-242/95 GT-Link [1997] ECR I-4449, para. 58; Case C-188/95 Fantask [1997] ECR I-6783, para. 38; and Cases C-10-22/97 Ministero delle Finanze v. IN.CO.GE.’90, judgment of the European Court of Justice of 22 October 1998 (not yet reported), para. 24. However, where the state has allocated the proceeds of the illegal levies to independent economic operators subject to local authority control, domestic rules may provide that the trader’s right of action lies against the independent operators, not the Member State as such: see Cases C-114-5/95 Texaco and Olieselskabet Danmark [1997] ECR I-4263, paras. 38-43. It is not clear what the position would be if the recipients of the levies were free from public control.

15 Case C-213/89 R v. Secretary of State for Transport, ex parte Factortame [1990] ECR I-2433 and Cases C-6 and 9/90 Francovich [1991] ECR I-5357, respectively.

16 Case 61/79 Denkavit [1980] ECR 1205, para. 22; Case 811/79 Ariete [1980] ECR 2545, para. 9.

17 Case 811/79 Ariete [1980] ECR 2545, para. 16.

18 Case 61/79 Denkavit [1980] ECR 1205, paras. 23-24; Case 811/79 Ariete [1980] ECR 2545, paras. 10-11; Case 68/79 Just [1980] ECR 501, paras. 22-23.

19 Case 130/79 Express Dairy Foods [1980] ECR 1887, para. 12.

20 Ibid at para. 12.

21 For example, Case 61/79 Denkavit [1980] ECR 1205, para. 25; Case 130/79 Express Dairy Foods [1980] ECR 1887, para. 12; Case 811/79 Ariete [1980] ECR 2545, para. 12; Case 68/79 Just [1980] ECR 501, para. 25.

22 Case C-212/94 FMC v. Intervention Board for Agricultural Produce [1996] ECR I-389.

23 The Court bolstered this reasoning by referring to the fact that the relevant Commission measure, Regulation 1922/92, specified the persons entitled to claim reimbursement of unduly levied clawback charges, without making such claims conditional on the trader’s conduct at the time of payment.

24 Case C-188/95 [1997] ECR I-6783. Noted by Ward, A.Indirect Taxes and National Remedies58 CL (1999) 36 and Notaro, N., 35 (1998) CMLRev. 1385 .

25 Directive 69/335 on indirect taxes on the raising of capital, OJ Spec. Ed. 1969 (II) 412.

26 Above n 24 at paras. 38-40. In addition to this argument based on securing the rights of the individual, the Court also noted that to apply Danish law could have the effect of encouraging long-running breaches of Community law.

27 Ibid at paras. 42-52. This has recently been confirmed by the European Court of Justice in a series of references from Italy: Case C-231/96 Edis v. Ministero delle Finanze; Case C-260/96 Ministero delle Finanze v. Spac; Joined Cases C-279-281/96 Ansaldo Energia, judgments of 15 September 1998 (not yet reported). On the classification of illegal charges under national law, for the purposes of applying the principle of equivalence, see also Joined Cases C-10-22/97 Ministero delle Finanze v. IN.CO.GE.’90, judgment of 22 October 1998 (not yet reported).

28 Although in Case C-212/94 FMC [1996] ECR I-389, this was perhaps the only reasoning open to the Court: the relevant provisions of Commission Regulation 1922/22 on the reimbursement of unduly levied clawback charges, OJ 1992 L195/10, laid down certain conditions for recovery, then made a general renvoi to national rules to cover the remainder (Art. 2). However, it seems likely that the Court would have used the same reasoning even in the absence of any express reference to national law in the Regulation: see Tesauro AG at para. 25 of his Opinion and implicit in the Court’s judgment at para. 71.

29 Case 68/79 [1980] ECR 501. See also Case 61/79 Denkavit [1980] ECR 1205; Case 130/79 Express Dairy Foods [1980] ECR 1887; Case 811/79 Ariete [1980] ECR 2545; Case 826/79 M1RECO [1980] ECR 2559; Cases 142-3/80 Esseri and Salengo [1981] ECR 1413. A more recent affirmation of the Court’s basic approach is Case C-212/94 FMC [1996] ECR I-389, para. 74.

30 Case 68/79 Just [1980] ECR 501, para. 26.

31 Smith, above n 5.

32 Partly encouraged by the almost outright hostility shown by the AGs involved. For an earlier example of such hostility, see Reischl AG in Case 61/79 Denkavit [1980] ECR 1205, 1234.

33 Case 199/82 San Giorgio [1983] ECR 3595, para. 15. See also Case 104/86 Commission v. Italy [1988] ECR 1799 (Commission proceedings against Italy in respect of the same national legislation).

34 See Mancini AG in Case 199/82 San Giorgio [1983] ECR 3595, para. 6 of the Opinion.

35 Cases 331, 376 and 378/85 [1988] ECR 1099.

36 At para. 20.

37 Cases C-192-218/95 [1997] ECR I-165 Noted by Biondi, A. and Johnson, L., “The Right to Recovery of Charges Levied in Breach of Community Law: No Small Matter4 (1998) European Public Law 313 .

38 Cases C-192-218/95 [1997] ECR I-165 para. 21. In this respect the Court was adopting the view of Mancini AG in Case 199/82 San Giorgio [1980] ECR 3595, para. 5 of the Opinion.

39 Cases C-192-218/95 [1997] ECR I-165 para. 23.

40 Ibid at paras. 27-28.

41 Cases C-192-218/95 Comateb [1997] ECR I-165, para. 26.

42 See Slynn AC in Cases 331, 376 and 378/85 Bianco [1988] ECR 1099, 1112 and Tesauro AG in Cases C-192-218/95 Comateb [1997] ECR I-165, paras. 18 and 24 of the Opinion.

43 See Cases 331, 376 and 378/85 Bianco [1988] ECR 1099 at para. 20: “the numerous factors which determine commercial strategy vary from one case to another so that it is virtually impossible to determine how they each affect the passing on of the charge.”

44 Case 199/82 San Giorgio [1983] ECR 3595, para. 14; Cases 331, 376 and 378/85 Bianco [1988] ECR 1099, para. 17; Cases C-192-218/95 Comateb [1997] ECR I-165, para. 27.

45 Cases 331, 376 and 378/85 Bianco [1988] ECR 1099, 1112.

46 Case 66/80 [1981] ECR 1191.

47 See Art. 6 of the Council Decision of 21 April 1970 on the Replacement of Financial Contributions from Member States by the Communities’ own Resources, OJ Spec. Ed. 1970 (I) 224, and para. 21 of the Court’s judgment.

48 Case 66/80 [1981] ECR 1191, paras. 23-24.

49 It seems that under the Italian Civil Code, ICC could have claimed repayment regardless of whether the burden of payment had been passed on.

50 This was also the view of Tesauro AG in Joined Cases C-192-218/95 Comateb [1997] ECR I-165, at fn 25 of his Opinion.

51 Joined Cases C-192-218/95 Comateb [1997] ECR I-165, para. 29.

52 Ibid at para. 24.

53 Ibid.

54 Case 68/79 Just [1980] ECR 501, para. 26.

55 Joined Cases C-192-218/95 Comateb [1997] ECR I-165, paras. 31-32. Support for such an approach also comes from Slynn AG in Joined Cases 331, 376 and 378/85 Bianco [1988] ECR 1099, 1112.

56 Joined Cases C-192-218/95 [1997] ECRI-165 para. 33 (emphasis added).

57 Ibid at para. 34. This approach to passing on and the use of Francovich claims in respect of damage suffered by the trader were subsequently confirmed in Case C-242/95 GT-Link [1997] ECR I-4449, paras. 58 and 60.

58 See Slynn AG in Cases 331, 376 and 378/85 Bianco [1988] ECR 1099, 1112 and Tesauro AG in Joined Cases C-192-218/95 Comateb [1997] ECR I-165, para. 23 of the Opinion.

59 See, albeit in the different context of liability for the incorrect implementation of a directive, Case C-392/93 R v. HM Treasury, ex parte British Telecom [1996] ECR I-1631.

60 In this regard, see Deards, E.Brasserie du Pêcheur: Snatching Defeat from the Jaws of Victory?22 (1997) ELRev. 620 , who argues that the application of domestic causation rules may well prove to be a back-door to the emasculation of the right to reparation for breaches of Community law. See also Smith, F. and Woods, L.Causation in Francovich: The Neglected Problem46 (1997) ICLQ 925 . On the other hand, Case C-319/96 Brinkmann Tabakfabriken, judgment of 24 September 1998 (not yet reported) suggests the possible growth of Community relative to national competence in determining the existence of a “direct causal link”.

61 Case C-188/95 [1997] ECR I-6783.

62 Ibid at paras. 78-84 of his Opinion.

63 Especially since, after Case C-212/94 FMC [1996] ECR I-389 and Case C-188/95 Fantask [1997] ECR I-6783, the reasonableness of an error by the national authorities in levying the charge is irrelevant to the action for recovery.

64 Case C-192-218/95 [1997] ECRI-615 at para. 32.

65 Ie, the arguments of Warner AG in Rewe/Comet itself: Cases 33 and 45/76 [1976] ECR 1989 and 2043. On this point, see also Magliveras, K.Unjust Enrichment and Restitution in Community Law6 (1997) Irish Journal of European Law 190 , who suggests that the European Court of Justice lacks any clear doctrine of unjust enrichment at the Community level, making its deference to national unjust enrichment rules understandable in practice.

66 Joined Cases C-143/88 and C-92/89 Zuckerfabrik Süderdithmarshen [1991] ECR I-415 and Case C-465/93 Atlanta [1995] ECR I-3761.

67 In particular, Joined Cases C-6 and 9/90 Francovich [1991] ECR I-5357, Cases C-46 and 48/93 Brasserie du Pêcheur and Factortame III [1996] ECR I-1029 and Cases C-178-179 and 188-190/94 Dillenkofer [1996] ECR I-4845.

68 Joined Cases C-192-218/95 [1997] ECR I-165, paras. 24-25 of the Opinion.

69 Joined Cases C-192-218/95 [1997] ECR I-165, para. 22.

70 Or, in the case of unlawful Community levies, of the Community itself.

71 Case C-377/89 [1991] ECR I-1155, paras. 21 and 26.

72 This decision admittedly stands alone in its outright denial of the relevance of national unjust enrichment rules. This can perhaps be explained on the basis suggested by Mischo AG, ie, that the unjust enrichment of married men who obtained the relevant social security payments was the only point of reference for restoring equality of treatment for married women who had been denied those benefits in breach of Directive 79/7; their unjust enrichment was therefore a necessary, if unfortunate, consequence of the principle of non-discrimination. In any case, the decision shows that the Court is sensitive to the general thrust of the argument based on the state benefiting from its own illegality.

73 This view is strongly supported by Mancini AG in Case 199/82 San Giorgio [1983] ECR 3595, para. 7 of the Opinion and Tesauro AG in Joined Cases C-192-218/95 Comateb [1997] ECR I-165, paras. 21-22 of the Opinion. The latter in particular stated that “I have absolutely no doubt that if it is necessary to choose between the authorities of a Member State which have for years violated Community law and a taxpayer who has paid to those authorities charges that were not properly due, it is certainly not the taxpayer who should be penalised”, even if this might allow some traders to make a profit from recovery.

74 This view is supported by Mancini AG in Case 199/82 San Giorgio [1983] ECR 3595, para. 10 of the Opinion.

75 Similar policy reasons can apply in the context of refunding unlawful Community charges, ie, the collective interest in maintaining respect for higher rules of the Community legal order and in encouraging individuals to help enforce those rules through the national legal systems.

76 Case C-338/91 Steenhorst-Neerings [1993] ECR I-5475.

77 Case C-208/90 Emmott [1991] ECR I-4269.

78 Case C-338/91 Steenhorst-Neerings [1993] ECR I-5475, paras 15-23.

79 Case C-271/91 Marshall II [1993] ECR I-4367.

80 A point also made by Fitzpatrick, B. and Szyszczak, E.Remedies and Effective Judicial Protection in Community Law57 (1994) MLR 434 ; Coppel, J.Time up for Emmott?25 (1996) Industrial Law Journal 153 ; and Prechal, S.EC Requirements for an Effective Remedy” Chapter 1 in Lonbay, J. and Biondi, A. (eds), Remedies for Breach of EC Law (Wiley, 1997).

81 See, for example, Sohrab, J.A. Casenote on Steenhorst-Neerings 31 (1994) CMLRev 875 . See also Case C-394/93 Alonso-Pérez [1995] ECR I–4101: the principles enunciated in Steenhorst-Neerings apply not only to claims for equal treatment on grounds of sex under Directive 79/7 but also to claims for social security benefits made by migrant Community workers under Regulation 1408/71v:, OJ Spec. Ed. 1971 (II) 416 (as amended by Regulation 3427/89), OJ 1989 L331/1: a German rule limiting claims for the backdated payment of family allowance to 6 months was therefore compatible with Community law. For observations on the European Court of Justice’s growing laissez-faire approach to social security matters in general, see: Cousins, M.Equal treatment and social security19 (1994) ELRev. 123 ; Ellis, E.Recent Case law of the Court of Justice on the Equal Treatment of Women and Men31 (1994) CMLRev. 43 and “Recent Developments in European Community Sex Equality Law” 35 (1998) CMLRev. 379.

82 Case C-212/94 [1996] ECR I-389.

83 Ibid at paras. 63-65.

84 As in Case 177/78 Pigs and Bacon Commission v. McCarren [1979] ECR 2161.

85 Case C-246/96 [1997] ECR I-7153. See also the decision in Case C-C326 96 Levez v. T. H. Jennings Charlow Pools, judgment of 1 December 1998 (not yet reported): two-year limit on the back payment of wages withheld in breach of the principle of equal pay for men and women must be disregarded where the employer failed to disclose relevant information to the employee, since such deceit would facilitate a breach of Community law without being justified by reasons of legal certainty.

86 The subject of the first preliminary question: see Case C-246/96 [1997] ECR I-7153 at paras. 20-35.

87 Ibid paras. 41-44.

88 Ibid para. 46. In addition, the Court observed that the effect of the United Kingdom rule was to limit the direct effect of Art. 141 in a manner not supported by the Court’s case law or Protocol No 2 to the Treaty on European Union: Ibid at para. 45.

89 An approach supported by Jacobs AG in Case C-2/94 Denkavit [1996] ECR I-2827 at para. 69 of his Opinion.

90 So, for example, the Equal Pay Act (Northern Ireland) 1970 provides that in proceedings brought to enforce the principle of equality, a woman is not entitled to any payment by way of arrears of remuneration in respect of a period earlier than two years before the date she initiated proceedings. This rule was not relevant to the dispute in Magorrian and was not discussed in the judgment, but according to the Court’s reasoning, it would not contravene Community requirements.

91 Case C-410/92 Johnson v. Chief Adjudication Officer [1994] ECR I-5483. See the note by Docksey, C. 32 (1995) CMLRev. 1447.

92 Ibid at paras. 30-36 of the judgment.

93 For example, in Case 177/78 Pigs and Bacon Commission v. McCarren [1979] ECR 2161, para. 25: it is for the national court to assess according to its own national rules whether and to what extent the levy may be recovered.

94 Joined Cases C-192-218/95 Comateb [1997] ECR I-165, paras. 27-28. On the other hand, the Court has held that whether the partial invalidity of a national tax entitles the payor to a refund of the whole tax or only that part which is incompatible with Community law is a matter for national law: Case 28/67 Molkerei [1968] ECR 143, 154; Case 34/67 Lück [1968] ECR 245, 251; Case 74/76 lannelli and Volpi [1977] ECR 557, para. 22. From the Community point of view, the wrongdoing of the Member State and the consequent threat to Community rights/economic policy are remedied by the trader being able to reclaim that part of a national levy which is devoted to purposes contrary to Community law, without the need to go further and interfere with that part of the levy which complies with Community law: Case 177/78 Pigs and Bacon Commission v. McCarren [1979] ECR 2161, para. 25.

95 See Case 6/60 Humblet [1960] ECR 559, 569; Case 26/74 Roquette Frères [1976] ECR 677, para. 12; Case 130/79 Express Dairy Foods [1980] ECR 1887, paras. 16-17. See also Case 54/81 Fromme [1982] ECR 1449.

96 Case C-271/91 Marshall II [1993] ECR I-4367, para. 31.

97 Ibid at para. 32.

98 Case C-66/95 [1997] ECR I-2163. See the notes by Van Casteren, A., 35 (1998) CMLRev. 481 and Ward, A.New Frontiers in Private Enforcement of EC Directives23 (1998) ELRev. 65 .

99 Case C-66/95 [1997] ECR I-2163, paras. 23-25.

100 Ibid at paras. 31-35.

101 Ibid at paras. 26-27.

102 See Ward, A., 23 (1998) ECRev. 65, 7677 .

103 Joined Cases C-279-281/96 Ansaldo Energia, judgment of 15 September 1998 (not yet reported).

104 Ibid at para. 28.

105 In this regard, the Court of Justice upheld the Member State’s right to apply different rates of interest to different obligations to repay, provided that there was no discrimination between claims based on Community law and those of a purely domestic nature: Joined Cases C-279-281/96 Ansaldo Energia, judgment of 5 September (not yet reported), paras. 29-30. Nor can the Member State discriminate between its own nationals and nationals of other Member States when calculating the applicable rate of interest: see Case C-390/96 Lease Plan Luxembourg v. Belgium, judgment of 7 May 1998 (not yet reported).

106 For an assessment of the possibility of a successful Francovich action on the facts of Ex parte Sutton, see Ward, A., 23 (1998) ELRev. 65 , 78.

107 Also the view of Tesauro AG in Joined Cases C-192-218/95 Comateb [1997] ECR I–165 (at para. 23 of the Opinion) in relation to the repayment of unlawfully levied charges in situations where damage to sales results from passing on.

108 Joined Cases C-46 and 48/93 Brasserie du Pêcheur and Factortame III [1996] ECR I-1029.

109 Case C-66/95 Ex parte Sutton [1997] ECR I-2163, para. 34 (emphasis added).

110 Van Casteren, A., 35 (1998) CMLRev. 481 , 490-1 also notes the Court of Justice’s failure to provide the national courts with any substantive guidance as to the possible success or failure of an action for reparation and contrasts this with its sometimes more forthright assessments.

111 Case C-373/95 Maso [1997] ECR I-4051. See also Joined Cases C-94-95/95 Bonifaci [1997] ECR I-3969.

112 Case C-373/95 Maso [1997] ECR I-4051, para. 41. See also Joined Cases C-94-95/95 Bonifaci [1997] ECR I-3969, para. 53 and the remarks of Jacobs AC in Case C-188/95 Fantask [1997] ECR I-6783 at paras. 81-82 and fn 56 of his Opinion.

113 Note the provisions of the Community Customs Code, OJ 1992 L302/1, Art. 241: interest is not payable unless either national law so provides or the decision to grant a refund is not implemented within three months.

114 An approach most recently confirmed in Joined Cases C-l0-22/97 Ministero delle Finanze v IN.CO.GE.’90, judgment of 22 October 1998 (not yet reported).

* British Academy scholar, University of Cambridge. With many thanks to Dr Angela Ward for all her suggestions on an earlier draft of this paper. The text is based on research carried out during the first year of doctoral study, and was substantially completed in mid-1998; subsequent developments have been incorporated where possible. The financial support of the Humanities Research Board of The British Academy is gratefully acknowledged.

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