Cases C-89/08 P and C-272/12 P Commission v Ireland and Others: The EU law principles in the Eurallumina saga – Part 2

For an introduction and the facts of these case, pls have a look at Part 1.

The second time round, the General Court again annulled the contested Commission decision as infringing the principles of sound administration, legal certainty and the presumption of legality attaching to European Union measures. It also found that, in view of the Council authorisations, the exemptions could not be attributed to the Member States themselves and, thus, the Commission erred in classifying them as State aid within the meaning of Article 87(1) EC (see General Court’s judgment here).

The Commission appealed once again arguing that the General Court had raised of its own motion a plea of infringement of Article 87(1) or in reclassifying the actual subject-matter of the action.

In the judgment in Case C-272/12 P Commission v Ireland and Others, the CoJ began its reasoning by stating that the European Courts cannot rule ultra petita with the exception of certain pleas that the Courts could raise of their own motion involving public policy issues (such as the lack of statement of reasons which constitutes an essential procedural requirement). However, pleas relating to the substantive legality of a measure cannot be examined the the European judicature unless raised by the parties.

In the present case, the CoJ continues, the General Court annulled the contested decision after raising of its own motion (in the form of a question to the parties) the plea of the non-attributability of the exemptions at issue to the Member States, and finding, thus, that these exemptions could not be classified as State aid. However, this plea related to the substantive legality of the decision and, therefore, it could not be raised by the General Court of its own motion. Thus, in this respect the General Court erred, the CoJ stated.

What about the other elements of the grounds of the General Court’s judgment?

In short, part of the reasoning of the General Court in its second judgment was that the rules governing the harmonisation of national fiscal legislation and the rules on State aid had a shared objective, i.e. to promote the proper functioning of the internal market and to combat distortions of competition. Thus, the concept of distortion of competition had to be regarded as having the same scope and the same meaning for the purposes of both sets of these rules. What Ireland, France and Italy actually did was to comply with the authorisations of the exemptions granted by the Council. The contested decision directly called into question the validity of the exemptions at issue and also, indirectly but necessarily, the validity of the authorisation decisions. This constituted an infringement of the principles of sound administration and legal certainty as well as the presumption of legality attaching to European Union measures.

The CoJ was not convinced by that reasoning:

In so ruling, the General Court disregarded, however, the respective powers of the Council and the Commission in the area of harmonisation of legislation relating to excise duties, on the one hand, and in the area of State aid, on the other. (see para. 45 of the judgment)

It stressed that the purpose and scope of the procedure for granting such authorisations of exemptions differ from those of the State aid rules. In the latter set of rules, the Commission has a central role for determining whether aid is compatible. The authorisation decisions had no effect on the division of powers between the Council and the Commission and they could not deprive the Commission of the right to exercise its powers.

Consequently, a Council decision authorising a Member State, in accordance with Article 8(4) of Directive 92/81, to introduce an exemption of excise duties could not have the effect of preventing the Commission from exercising the powers conferred on it by the Treaty and, consequently, setting in motion the procedure laid down in Article 88 EC in order to review whether that exemption constituted State aid and on the conclusion of that procedure, if appropriate, to adopt a decision such as the contested decision. (see para. 49 of the judgment)

Admittedly, the Commission had made the proposal to the Council for such authorisations considering at the time that they would not give rise to a distortion of competition. Apparently, it had changed its mind later on. Never mind, said the CoJ: European institutions may change their conduct or statements as long as the principles of protection of legitimate expectations and legal certainty are respected. That was the case with the contested decision not requiring recovery of the aid for the period before publication in the OJ of the decisions to initiate the procedure of Article 88(2) EC.

All in all, once again the General Court’s judgment was set aside and the case was referred back to it. Let’s see what happens the third time round at the General Court…

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