What better way to inaugurate our blog than with a note on the important judgment of the Court of Justice of 19 December 2013 in Case C-274/12 Telefonica SA v Commission on the meaning of the phrase “and does not entail implementing measures” contained in Article 263 paragraph 4 in fine TFEU.

You will recall that one of the heralded changes brought about by the Lisbon Treaty was a change to the rules on the standing of individuals to challenge acts of the EU institutions. The (almost) constant case-law of the Court of justice since 1963 – Case 25/62 Plaumann [1963] ECR 95 – interpreted the phrase “of direct and individual concern” in Article 263 paragraph 4 (and its predecessor Article 230 paragraph 4 EC) rather narrowly. Too narrowly for some. Consequently, the Treaty was amended to obviate the need for the plaintiff to show “individual concern” if the act attacked is a “regulatory act” (on the meaning of that, see Case C-583/11 P Inuit Tapiriit Kanatami and others v Parliament and Council. Yes, we’ll cover that in a later post) and if that act “does not entail implementing measures”.

The Court’s judgment sheds light on when that latter condition is met.

The present case concerned a decision of the Commission, addressed to Spain, declaring an aid scheme to be partly incompatible with the common market (decision dated 28 October 2009). The Commission also required Spain to recover the aid which it declared as incompatible.

Telefonica SA, the large Spanish telephone operator, had benefited from some of the aid under the scheme which was declared incompatible by the Commission and thus faced the prospect of having to give it back to the Spanish state. Telefonica sought the annulment of the Decision before the General Court.

The General Court dismissed Telefonica’s action as inadmissible in its order of 23 March 2012 in Case T-228/10. The General Court held that the Decision was a measure that did in fact require implementing measures and consequently Telefonica had to show that it was individually and directly concerned by the Decision under the Plaumann test. The General Court held that Telefonica failed to meet the condition of being individually concerned by the decision. Telefonica then appealed to the Court of Justice and claimed that the Decision is a regulatory act.

Advocate General Kokott, in her opinion of 21 March 2013, opined that the Decision was indeed a regulatory act but that it did entail implementing measures. Consequently, the General Court was right to dismiss Telefonica’s action.

The Court of Justice, in its judgment of 19 December 2013 held that the decision challenged by Telefonica entails implementing measures and upholds the finding of the General Court that it’s action should be dismissed.

The Court first made an important general remark (paragraph 27). It noted that the purpose of the new wording of Article 263, paragraph 4 TFEU is to prevent an individual from being obliged to infringe the law in order to have access to a court for judicial review. Where a regulatory act directly affects the legal situation of a person without requiring implementing measures, that person could be denied effective judicial protection if he did not have a direct legal remedy before the EU courts for the purpose of challenging the legality of the regulatory act. Conversely, where the regulatory act entails implementing measures, judicial review of compliance with EU law is ensured either via a direct action against the implementing act on the basis of Article 263 TFEU coupled with an incidental plea of illegality of the basic act at issue on the basis of Article 277 TFEU or via the national courts where the plaintiff can plead the invalidity of the basic act before a national court which will then request a preliminary ruling from the Court of Justice pursuant to Article 267 TFEU.

The Court then made two other findings. It agreed with the Advocate General that the question whether a regulatory act entails implementing measures should be assessed by reference to the position of the person pleading the right to bring the proceedings. It is irrelevant, states the Court, that the act in question entails implementing measures with regard to other persons. The Court also held that, to determine whether the measure challenged entails implementing measures, reference should be made exclusively to the subject matter of the action and where, as in this case, an applicant seeks only partial annulment of an act, it is solely any implementing measures which that part entails that must be taken into consideration.

The Court then applied those principles to the case at hand in the following way. First, it held that the declaration in the contested decision that the aid scheme is partially incompatible with the common market is addressed solely to Spain and is not binding on any other person, as follows from Article 288 paragraph 4 TFEU.

Second, it stated that the contested part of the decision is concerned exclusively with declaring the aid scheme in issue incompatible with the common market and does not define the specific consequences which that declaration has for each taxpayer. It points out that those consequences will be embodied in administrative documents such as a tax notice. That tax notice constitutes an implementing measure that the declaration of incompatibility of the aid scheme “entails” within the meaning of the final limb of Article 263 paragraph 4 TFEU.

Accordingly, the Court of Justice finds that the General Court was correct in its order under appeal to hold that the measures giving effect to the decision of incompatibility – including the rejection of an application for grant of the tax advantage, a rejection that Telefonica will also be able to contest before the Spanish courts – are implementing measures of the contested decision.

The interesting thing to note is that the Court reached this conclusion without deciding whether the contested decision was a “regulatory act” in the first place, as Telefonica claimed.

As a consequence, Telefonica had to meet the condition of individual concern under the Plaumann test in order to establish that it it had standing to sue. The Court held that Telefonica was not individually concerned by the contested decision. It recalled its settled case-law that an undertaking cannot in principle contest a Commission decision prohibiting an aid scheme if it is concerned by that decision solely by virtue of belonging to the sector in question and being a potential beneficiary of the scheme (Joined Cases C-15/98 and C-105/99 Italy and Sardegna Lines v Commission [2000] ECR I-8855, paragraph 33).

Finally, the Court dealt with Telefonica’s plea that the General Court failed to have regard to its right to effective judicial review flowing from Articles 6 and 13 ECHR and from Article 47 of the Charter of Fundamental Rights.

It held that judicial review of compliance with the EU legal order is ensured, as follows from Article 19 paragraph 1 TEU, both by the Court of Justice and the courts of the Member States. Thus when an EU act entails national implementing measures, it can challenge those national measures before a national court and claim that the EU act is invalid and cause the latter to refer the issue of validity to the Court of Justice for a preliminary ruling.

And just so that you are aware, there is another case pending on a similar, but not quite identical issue. See the Advocate general’s opinion of 29 May 2013 in Case C-132/12 P Stichting Woonpunt

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