Table of Contents Issue 3, 2024
Issue 3 June 2024
Editorial - Domestic Courts of Last Instance, their Duty to Refer, and the Duty of Cooperation: The Judgment in Commission v UK (C-516/22)
Brexit; Failure to fulfil obligations; References to European Court; Sincere co-operation; United Kingdom
While it left the European Union (EU) on 31 January 2020, the United Kingdom (UK) has not escaped the orbit of the European Court of Justice (ECJ). In accordance with the UK-EU Withdrawal Agreement, EU law was fully applicable until 31 December 2020, domestic courts were bound by art.267 Treaty on the Functioning of the European Union (TFEU) and, for any violations during that period, the Commission has the power until 31 December 2024 to bring enforcement actions before the Court of Justice.1
In Commission v United Kingdom (C-516/22),2 the Court dealt with the Micula judgment3 of the UK Supreme Court (UKSC) which had been handed down on 19 February 2020 and in which the latter had ordered the enforcement of the 2013 Micula v Romania arbitral award (delivered under the ICSID Convention). In its judgment, the Court held that the UKSC had violated EU law: by handing down the Micula judgment, the UKSC had misinterpreted and misapplied art.351 TFEU, violated the duty of cooperation under art.4(3) TEU, failed to refer to the Court of Justice under art.267 TFEU, and infringed the duty laid down in art.108(3) TFEU.
The judgment is important for a number of reasons, not least for extending the scope of EU law at the expense of investor-State dispute settlement rules laid down in international law. In doing so, it draws on and consolidates the principle set out in Achmea4 as developed in subsequent case law.5 This editorial will focus on three other features of the judgment.
The first is about the non-engagement by the British Government. The judgment was given by default, under art.41 of the Court of Justice of the European Union (CJEU)Statute, as the UK refused to participate in the proceedings and did not lodge a defence, even though it was invited twice to do so. This decision of the UK is indicative of a narrow-minded approach to the interactions of the UK with the EU. It also did a disservice to its most senior judges, the judgment of whom it chose not to defend.
The second feature is the strong terms in which the judgment is couched. The Court held that the UKSC had "seriously compromised the EU legal order"6 by misinterpreting and misapplying art.351 TFEU and had "failed to examine in detail"7 the extent to which, by refusing to enforce the Award in an intra-EU context, the UK could incur international liability towards non-EU Member States contracting parties to the ICSID Convention. While the contrasting interpretation of the Convention in the Court's judgment is broad-brush and makes no reference to the principles of interpretation of international treaties as codified in the Vienna Convention on the Law of Treaties, it is also striking that the UKSC did not address properly either the exceptional nature of art.351, para.1 TFEU or the exclusive jurisdiction of the Court of Justice to interpret the scope of this provision. This was all the more so given the specific legal context within which the UKSC handed down the Micula judgment.
This leads us to the third feature of the Court's judgment, that is the convoluted legal context of the UKSC judgment. In a 2015 Decision,8 the Commission had found payment of the Award by Romania to amount to State aid which would be incompatible with arts 107-108 TFEU; the Decision was annulled by the General Court9 in a decision that was under appeal at the time of the UKSC judgment.10 In addition to litigation before the EU Courts, a Swedish District Court had refused to enforce the Award and an action before Belgian courts was pending at the time. In the light of the above, the Court held in Commission v UK (C-516/22) that, while the annulment action against the 2015 Decision had been pending before the Court of Justice, the UKSC should have either stayed its proceedings pending final judgment or referred to the Court of Justice on the validity of the Decision. This conclusion is fully convincing. To argue that the interpretation of the first paragraph of art.351 TFEU in the circumstances in which the Micula judgment was handed down was so obvious as to leave no scope for any reasonable doubt is simply not credible. In fact, these circumstances were paradigmatic of when a court of last instance ought to refer to the Court of Justice. More broadly, it would be difficult to envisage circumstances that would have made compliance with the duty of cooperation under art.4(3) Treaty on European Union (TEU) any more necessary with a view to avoiding conflicting decisions in the EU legal order.
While this enforcement action may well have been brought by the Commission as part of its overall strategy in the Micula litigation, it is difficult to defend the UKSC judgment in the light of the duty of co-operation imposed under art.4(3) TEU and the duty to refer under art.267 TFEU. A decision of a court of last instance not to refer in circumstances as contested as those in Micula would be at odds with their responsibility as EU courts and the objective of the preliminary reference to avoid the real risk of conflicting decisions. This would undermine not only the effectiveness of EU law but also the legal certainty that investors need. Viewed from this angle, the judgment in Commission v UK (C-516/22) sends a message to domestic courts of last instance to take their duty to refer seriously.11
[PK]
1 Articles 86, 87 and 127 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community [2019] OJ C384I/1.
2 EU:C:2024:231.
3 Micula v Romania [2020] UKSC 5; [2020] 3 C.M.L.R. 11.
4 Slovakia v Achmea BV (C-284/16) EU:C:2018:158; [2018] 2 C.M.L.R. 40.
5Moldova v Komstroy LLC (C-741/19) EU:C:2021:655; [2022] 1 C.M.L.R. 34 and Republiken Polen v PL Holdings Sarl
6 Commission v United Kingdom (C-516/22) EU:C:2024:231 at [87].
7Commission v United Kingdom (C-516/22) EU:C:2024:231 at [82].
8Decision 2015/1470 on State aid SA.38517 (2014/C) (ex 2014/NN) implemented by Romania-Arbitral award Micula v Romania [2015] OJ L232/43.
9European Food and others v Commission (T-624/15, T-694/15 and T-704/15) EU:T:2019:423.
10The GC judgment was subsequently set aside in European Commission (C-638/19 P) EU:C:2022:50.
11See also Commission v France (C-416/17) EU:C:2018:811.
Articles
- The Responses of the Court of Justice of the European Union to the 'Rule of Law' Crisis in the EU - Phil Syrpis
This article examines the Court of Justice of the European Union's (CJEU's) response to the 'rule of law' crisis in the European Union (EU). The crisis has exposed unresolved tensions in the EU legal order, which calls for a response from the EU. The reluctance of the political institutions to take action against Poland and Hungary has led to strident calls for the Court to fill the void. Drawing on Joseph Weiler's The Transformation of Europe, this article argues that support from the national level—from both courts and governments—is needed to legitimise changes to the EU's judicial architecture. Absent such support, the Court should tread carefully, in seeking to (re)create the habit of obedience on which the functioning of the EU legal order depends.
- The Constitutional Conundrums of Regulating Skilled Migration into the EU - Tesseltje de Lange and Henri de Waele
While much attention goes out these days to how the European Union (EU) is busying itself with keeping out unwanted migrants, it is in fact simultaneously attempting to persuade high- and medium-skilled third-country nationals (TCNs) to take up work in its Member States. This is done in various ways, inter alia by including relevant provisions in free trade agreements, facilitating intra-corporate transfers, promoting the Blue Card residence permit, providing stimuli for concluding partnerships with countries of origin, as well as setting up Talent Partnerships. This article examines the constitutional conundrums underlying the chosen mix, analysing in particular how the hierarchy of norms and division of competences play out in realising the envisaged mobility. It also investigates a number of parallel approaches adopted at the national level, with a case study on the Netherlands demonstrating how specific difficulties surround the presumed residual prerogatives of the Member States. Finally, it traces how skilled migrants, or their prospective employers, are encountering hindrances in the sphere of rights enforcement. The analysis culminates in a call for stakeholders to step up their game.
- Modalities of Fundamental Rights Balancing in EU Copyright Law: Understanding the Use and Abuse of the EU Charter and the Concept of "Fair Balance" - Daniël Jongsma
This article critically examines the European Court of Justice's (ECJ's) use of fundamental rights and balancing rhetoric in its copyright case law. It distinguishes between its use in two main contexts: the interpretation of European Union (EU) secondary legislation itself and the delineation of the limits of the discretion left to Member States in that legislation. It explains how the ECJ, despite heavy use of balancing rhetoric, applies context-specific techniques to avoid actual substantive balancing of normative arguments and suggests that it has context-specific reasons for doing so. This context-sensitive examination of the case law not only helps us to better understand the problems with the ECJ's reliance on balancing rhetoric, but it also elucidates the relationship between balancing by the ECJ and balancing in individual cases by national courts, as well as between the EU Charter and national fundamental rights.
Analysis and Reflections
- Primacy, Direct Effect and the Effectiveness of the Services Directive: Thelen Technopark Berlin GmbH v MN - Bert Keirsbilck and Lennard Michaux
The horizontal direct effect of directives remains a key issue of European Union (EU) law, closely connected to the democratic guarantee of judicial protection. In its Thelen Technopark judgment (Thelen Technopark Berlin GmbH v MN), the European Court of Justice was offered yet another opportunity to clarify its view on this constitutional debate. Can an undertaking directly rely-against another private undertaking-on the Services Directive to avoid the application of illegal national minimum rates? Whereas at first sight, this might appear as yet another "everyday" horizontal direct effect case, the methodology and substantial rules underlying the Services Directive—as explained by AG Szpunar-might justify an ad hoc approach. This article provides a contextualised reflection on four evergreens of EU (constitutional) law, as applied by the Court in the field of EU internal market law: (i) primacy,(ii) direct effect, (iii) purely internal situations, and (iv) State liability. Although in no wayrevolutionary, the Thelen Technopark judgment provides the clarity and consistency needed to move forward. In our conclusion, we therefore do not argue for a complete overhaul of the Court's case law. We rather suggest certain legislative and enforcement initiatives that can reconcile the current constitutional balancing exercise, with the everyday troubles of private citizens to exercise their rights.
- Unseating the "Supreme Inspector of Taxes" for the European Union: Luxembourg and Engie v European Commission - Christopher McMahon
A pattern of tentative support in the case law of the General Court and the Court of Justice of the European Union (CJEU) for the approach of the Commission to the application of the State aid rules to tax rulings and transfer pricing was substantially reversed by the decision in Fiat. While this went some way towards restraining the Commission's enforcement of the State aid rules in this way, the judgment left open a number of ambiguities and opportunities for that policy. These ambiguities have been further limited by another decision of the Grand Chamber in Luxembourg and Engie v European Commission. The judgment not only reinforces the conclusions of the CJEU in Fiat and applies them outside of the context of transfer pricing, but goes further to require the Commission to defer to Member State interpretations of national law unless it has reliable and consistent evidence to depart from them. While this decision does not preclude the possibility of further enforcement against tax rulings, it represents another important restraint on the Commission's powers in this sphere.
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