In this preliminary reference case, the question was whether a Spanish tax on retail sales of certain hydrocarbons (“Impuesto sobre las Ventas Minoristas de Deteminados Hidrocarburos” or the “IVMDH”) was in compliance with Article 3(2) of Directive 92/12.

Readers interested in the facts and the tax aspects of this case may have a look at the press release by the Court here. For those not interested, the CoJ found, in a nutshell, that a tax on the retail sale of mineral oils such as the IVMDH is not in compliance with Article 3(2) of the Directive as it cannot be regarded as pursuing a specific purpose, i.e. it is not itself directed at protecting health and the environment.

We consider more interesting the second part of the CoJ judgment regarding the possibility and the conditions for limiting its temporal effects.

So, the Generalitat de Catalunya and the Spanish Government had requested that the CoJ limits the temporal effects of the judgment in case it found that the IVMDH was in breach of the Directive. Their two arguments in this respect were, first, the serious financial consequences of such a ruling as it would lead to an obligation for the Autonomous Communities to refund approximately EUR 13 billion and would jeopardise the financing of public health; and second, that they had acted in good faith, in the sense that they were convinced that the IVMDH complied with EU law. The CoJ examined this request on paragraphs 40 to 50 of the judgment. Let’s have a look at its reasoning and finding:

The CoJ started by reiterating the general rule established in the case-law: the interpretation which the Court gives to a rule of European law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force, i.e. also to legal relationships which arose and were established before before the ruling on the request for interpretation.

Then, it referred to the exception: in application of the general principle of legal certainty, the Court may restrict for any person concerned the opportunity to rely on a provision with a view to calling into question legal relationships established in good faith. However, two cumulative conditions need to be satisfied: first, those concerned should have acted in good faith; second, there should be a risk of serious difficulties, eg. serious economic repercussions due to the large number of legal relationships entered into in good faith.

The CoJ went on to examine whether the first condition is fulfilled in that case. Had the Generalitat de Catalunya and the Spanish Government acted in good faith in maintaining in force the IVMDH? The answer given by the CoJ was “no”: first of all, the Court had already in Case C-437/97 EKW and Wein & Co ruled on a tax with analogous features to those of the IVMDH; second of all, it was not proved that the Commission had at any point indicated to the Generalitat de Catalunya and the Spanish Government that the IVMDH was in line with the Directive, as these authorities had argued. Quite the contrary actually: the Commission staff had explained the terms under which such a tax could be designed in order to be compatible with the Directive, which was apparently never done. Also, in 2003 the Commission had initiated an infringement procedure against the Kingdom of Spain concerning that tax.

Since the first criterion for the exception was not fulfilled, the CoJ did not go on to examine the second one regarding the risk of serious difficulties. It limited itself in stating that the financial consequences for a Member State do not in themselves justify limiting the temporal effects of the ruling:

 If it were otherwise, the most serious infringements would receive more lenient treatment inasmuch as it is those infringements that are liable to have the most significant financial implications for Member States. Furthermore, to limit the temporal effects of a judgment solely on the basis of such considerations would considerably diminish the judicial protection of the rights which taxpayers have under the fiscal legislation of the European Union […] (see paragraph 49 of the judgment).