Month: July 2020

Summaries of judgments

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Summaries of judgments made in collaboration with the Portuguese judge and référendaires of the CJEU (Nuno Piçarra, Mariana Tavares and Sophie Perez)
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Judgment of the Court (Fourth Chamber) of 11 June 2020, LE v Transportes Aéreos Portugueses SA, Case C-74/19, EU:C:2020:460

Reference for a preliminary ruling — Air transport — Regulation (EC) No 261/2004 — Article 5(3) — Article 7(1) — Compensation to passengers in the event of denied boarding and of cancellation or long delay of flights — Exemption — Concept of ‘extraordinary circumstances’ — Unruly passengers — Possibility of relying on the occurrence of an extraordinary circumstance in respect of a flight not affected by that circumstance — Concept of ‘reasonable measures’

Facts

The dispute in the main proceedings is between a passenger and the air carrier Transportes Aéreos Portugueses (TAP) concerning its refusal to compensate that passenger whose connecting flight was subject to a long delay in arrival at its final destination. The passenger in question had made a reservation with TAP for a flight from Fortaleza (Brazil) to Oslo (Norway) with a stopover in Lisbon (Portugal).  The flight was operated on 21 and 22 August 2017 with a delay in arrival in Oslo of almost 24 hours. The delay was due to the fact that the passenger in question was unable to board the second leg of the connecting flight from Lisbon to Oslo because of a delay in the arrival of the first flight from Fortaleza to Lisbon. This delay was due to the fact that the aircraft which operated that flight, on its previous flight from Lisbon to Fortaleza, had had to be diverted to Las Palmas de Gran Canaria (Spain) in order to disembark an unruly passenger who had bitten a passenger and assaulted other passengers and members of the cabin crew. The passenger in question was therefore flown to Oslo on the next flight operated by TAP the following day.
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The poor relation of tax harmonisation in the European Union – Direct Taxation

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 by Irene Isabel das Neves, Associate Judge, President of the Administrative and Fiscal Courts of the Northern Area (Portugal)

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In the field of direct taxation, European law lacks concrete regulation, which leads to a lack of tax harmonisation, as opposed to indirect taxation, namely with the Value Added Tax (VAT) and Excise Duties (ED). However, several directives and the case law of the Court of Justice of the European Union (CJEU) itself are establishing a set of “harmonising” dynamics enforced at the level of direct taxation on the income of companies and individuals. In parallel, measures have been implemented to prevent and eliminate tax evasion and double taxation.

The proper functioning of a European internal market assumes a level playing field, i.e., it depends on tax neutrality arising from the standardisation of corporate taxes. The internal market is in fact the meeting point for European demand and supply: in this market, tax disparities disrupt trade and commerce, because even when similar products are involved, the most heavily taxed goods are less competitive and less attractive to consumers (distortion by demand); similarly, in the absence of uniformity of taxes, the choice of location of businesses within the Union may be linked to tax considerations (distortion by supply).
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Summaries of judgments

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Summaries of judgments made in collaboration with the Portuguese judges and référendaire of the General Court (Maria José Costeira, Ricardo Silva Passos and Esperança Mealha)
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Judgment of the General Court (First Chamber, Extended Composition) of 28 May 2020, T-399/16, CK Telecoms UK Investments/Commission

The facts

On 11 May 2016,[i] the Commission adopted a decision in which it blocked, under the Merger Regulation,[ii] the proposed acquisition of Telefónica UK (‘O2’) by Hutchison 3G UK3 (‘Three’).

According to the Commission, that acquisition would have removed an important competitor on the United Kingdom mobile telephony market and the merged entity would have faced competition only from two mobile network operators, Everything Everywhere (EE), belonging to British Telecom, and Vodafone. The Commission considered that the reduction from four to three competitors would probably have led to an increase in prices for mobile telephony services in the UK and a restriction of choice for consumers. The acquisition would also have been likely to have a negative influence on the quality of services for consumers, hindering the development of mobile network infrastructure in the UK. Lastly, it would have reduced the number of mobile network operators wishing to host other mobile operators on their networks.

Three brought an action before the General Court seeking annulment of the Commission’s Decision.

The Judgment

The General Court annuls the Commission’s decision to block the proposed acquisition of Telefónica UK by Hutchison 3G UK in the sector of the mobile telephony market.

A. The effects of the operation on prices and on the quality of services for consumers have not been proved to the requisite legal standard.

The Commission’s assessment was based on the consideration that the acquisition would have eliminated competition between two powerful players on the UK mobile telephony market, one of which, Three, is allegedly an important competitive force on the UK mobile telephony market and the other of which, O2, allegedly holds a strong position: together, the two would have been the market leader, with a share of approximately 40%. In particular, it seemed likely to the Commission that the merged entity would have been a less aggressive competitor, that it would have increased prices and that, moreover, the concentration would have been likely to have a negative impact on the ability of the other operators to compete on price and by means of other parameters (innovation, network quality).

After clarifying the scope of the change made by the Merger Regulation, as well as the burden of proof and the standard of proof in relation to concentrations, the General Court finds that the Commission’s application of the assessment criteria of the so-called ‘unilateral’ (or ‘noncoordinated’) effects – namely, the concept of ‘important competitive force’, the closeness of competition between Three and O2 and the quantitative analysis of the effects of the  concentration on prices – is vitiated by several errors of law and of assessment.

The Court acknowledges that the Merger Regulation allows the Commission to prohibit, in certain circumstances, on oligopolistic markets concentrations which, although not giving rise to the creation or strengthening of an individual or collective dominant position, are liable to affect the competitive conditions on the market to an extent equivalent to that attributable to such positions, by conferring on the merged entity the power to enable it to determine, by itself, the parameters of competition and, in particular, to become a price maker instead of remaining a price taker. However, the mere effect of reducing competitive pressure on the remaining competitors is not, in principle, sufficient in itself to demonstrate a significant impediment to effective competition in the context of a theory of harm based on non-coordinated effects.

As regards the classification of Three as an ‘important competitive force’, the Court finds that the Commission erred in considering that an ‘important competitive force’ need not necessarily stand out from its competitors in terms of its impact on competition. If that were the case, that position would allow it to treat as an ‘important competitive force’ any undertaking in an oligopolistic market exerting competitive pressure.

In addition, as regards the assessment of the closeness of competition, the Court finds that, although the Commission established that Three and O2 are relatively close competitors in some of the segments of a market, that factor alone is not sufficient to prove the elimination of the important competitive constraints which the parties to the concentration exerted upon each other and therefore to establish a significant impediment to effective competition.

The Court also finds that the Commission’s quantitative analysis of the effects of the concentration on prices does not establish, with a sufficiently high degree of probability, that prices would increase significantly.

B. The Commission failed to show that the effects of the concentration on the network-sharing agreements and on the mobile network infrastructure in the UK would constitute a significant impediment to effective competition

The current four mobile network operators in the UK are parties to two network-sharing agreements: on the one hand, EE and Three have brought together their networks under the ‘Mobile Broadband Network Limited’ – MBNL joint venture; on the other hand, Vodafone and O2 have brought together their networks to create ‘Beacon’. That enables them to share the costs of rolling out their networks while continuing to compete at the retail level.

According to the Commission, the future development of the mobile network infrastructure in the UK would have been hindered to the extent that the merged entity would have been party to both network-sharing agreements, MBNL and Beacon. That entity would have been afforded an overview of the network plans of the two remaining competitors, Vodafone and EE, and the possibility of weakening them, thereby hindering the future development of the mobile network infrastructure in the country. In particular, according to the Commission, one of the ways of weakening the competitive position of one or other of the partners in the network-sharing agreements would be to degrade the network quality of that agreement. For the Commission, that seems particularly relevant for the partner in the network-sharing agreement that would not become the basis of the merged entity’s consolidated network.

The Court finds that a possible misalignment of the interests of the partners in a network-sharing agreement, a disruption of the pre-existing network-sharing agreements, or even the termination of those agreements do not constitute, as such, a significant impediment to effective competition in the context of a theory of harm based on non-coordinated effects.

In that regard, the Court notes, first, that the effects of the concentration in relation to a possible exercise of market power, in the form of a degradation of the services offered by the merged entity or of the quality of its own network, were not analysed in the contested decision, even though the assessment of a possible elimination of important competitive constraints between the parties to the concentration and a possible reduction of competitive pressure on the remaining competitors should lie at the heart of the assessment of the non-coordinated effects arising from a concentration.

The Court notes, second, that, even if the merged entity had favoured one of the two networksharing agreements and was induced in particular to reduce the costs associated with the other network, that could not have a disproportionate effect on the position of the other partner in the network-sharing agreement or constitute a significant impediment to effective competition, since the Commission has failed to make the case that the other party would have neither the ability nor the incentive to react following an increase in its costs and would simply cease to invest in the network.

C. The effects of the concentration on the wholesale market were not found to be sufficient to establish the existence of a significant impediment to effective competition

In addition to the four mobile network operators, there are also several ‘virtual’ operators on the UK mobile telephony retail market, such as Virgin Media, Talk Talk and Dixons Carphone which use the infrastructure of the ‘host’ mobile network operators to provide their services to consumers in the UK.

According to the Commission, the loss of Three as an ‘important competitive force’ and the ensuing reduction in the number of host mobile networks would have placed the virtual operators in a weaker negotiating position to obtain favourable wholesale access conditions.

The Court finds that neither Three’s wholesale market shares nor their recent increase justify its classification as an ‘important competitive force’. The mere fact that Three had more of an influence on competition than its market share would suggest is not sufficient to establish the existence of a significant impediment to effective competition, particularly as it was not disputed that Three’s market share was small.

[i] Commission Decision C(2016) 2796 of 11 May 2016 declaring the operation incompatible with the internal market (Case COMP/M.7612 — Hutchison 3G UK/Telefónica UK).

[ii] Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (OJ 2004 L 24, p. 1), as implemented by Commission Regulation (EC) No 802/2004 of 7 April 2004 (OJ 2004 L 133, p. 1).

[iii] Hutchison 3G UK Investments Ltd, an indirect subsidiary of CK Hutchison Holdings Ltd, became the applicant, CK Telecoms UK Investments Ltd.

Judgments of the General Court (4th Chamber) of 12 March 2020, Cases T-732/16, Valencia Club de Fútbol v Commission and T-901/16 Elche Club de Fútbol v Commission

State aid — Aid granted by Spain to certain professional football clubs — Guarantee — Decision declaring the aid to be incompatible with the internal market — Advantage — Firm in difficulty — Private investor test — Guidelines on State aid for rescuing and restructuring firms in difficulty — Amount of the aid — Recipient of the aid — Principle of non-discrimination — Duty to state reasons

Facts

Between 2009 and 2010, the Instituto Valenciano de Finanzas (‘the IVF’) — the financial establishment of the Generalitat Valenciana (Regional Government of Valencia, Spain) — granted a number of guarantees to associations linked to three Spanish professional football clubs from the Autonomous Community of Valencia, Valencia CF, Hércules CF and Elche CF. Those guarantees were intended to cover the bank loans taken out by those associations in order to participate in the increase in the capital of the three clubs to which they were linked. In Valencia CF’s case, the guarantee granted was increased in 2010 in order to cover the increase of the underlying bank loan.

By decision of 4 July 2016, the Commission found that those measures constituted unlawful State aid incompatible with the internal market in favour of the three football clubs, and consequently it ordered their recovery.

The three clubs each brought an action before the General Court with a view to annulling the Commission’s decision.

By judgment of 20 March 2019, the Court annulled the Commission’s decision in relation to Hércules CF.

By judgments of 12 March 2020, the Court annuls the Commission’s decision in relation to Valencia CF and Elche CF.

Judgment T-732/16 Valencia Club de Fútbol v Commission

First of all, the Court examines the assessments relating to the guarantee given by the IVF to cover the bank loan granted to the association linked to Valencia CF, the Fundación Valencia. It considers that the Commission made a manifest error of assessment in that respect by finding that no equivalent guarantee premium could be found on the market. After correctly classifying Valencia CF as a ‘firm in difficulty’, the Commission wrongly assumed that no financial establishment would act as a guarantor for a firm in such a situation and, consequently, that no corresponding guarantee premium benchmark could be found on the market. Furthermore, it did not carry out an overall assessment taking into account all relevant evidence enabling it to determine whether Valencia CF would manifestly not have obtained comparable facilities from a private investor.

The Court also considers that the Commission did not sufficiently support the finding that there was no market price for a similar non-guaranteed loan ‘due to the limited number of observations of similar transactions on the market’.

Next, the Court examines the assessments relating to the increase in the guarantee decided in 2010. The Commission had, inter alia, concluded that the shares in Valencia CF acquired by the Fundación Valencia and pledged to the IVF as a counter-guarantee had a value ‘close to zero’ on the date that increase was granted, since Valencia CF, in particular, was in difficulty and was operating at a loss. The Court finds that the evidence on which the Commission’s conclusions on that point are based are partly incorrect, in that the financial year preceding that grant closed with a profit. It also considers that the Commission made a manifest error of assessment in that respect, because it did not take into account relevant factors, such as the existence of the club’s significant own equity and the generation of a profit before taxes in the fiscal year preceding the grant of the increase. Those errors vitiate the Commission’s assessment of the value of the counter-guarantees provided by the Fundación Valencia and, consequently, its calculation of the amount of the aid arising from the increase of the guarantee.

Judgment T-901/16 Elche Club de Fútbol v Commission

The Court finds that the Commission’s assessment of the existence of an advantage from which Elche CF benefits is vitiated by manifest errors of assessment.

In the first place, the Commission made a manifest error of assessment by not taking into account the economic and financial situation of the borrowing association linked to Elche CF, the Fundación Elche. The Court states that this is a relevant factor for the purposes of evaluating the risk taken by the State guarantor and, thereby, the guarantee premium which a private operator would claim in those circumstances. Although the Fundación Elche is not identified by the Commission as being the actual beneficiary of the loan, it did benefit from the guarantee at issue under the contract concluded with the IVF and was accountable to the IVF for the consequences, as the case may be, of activating the guarantee.

In the second place, the Court states that the Commission made a further manifest error of assessment by also failing to take into account, for the purposes of examining the existence of an advantage, the relevant fact of the mortgage on land which the Fundación Elche had granted to the IVF as a counter-guarantee.

In the third place, the Court considers that the Commission was wrong not to take into account the recapitalisation of Elche FC for the purposes of assessing the value of the shares in Elche FC, pledged to the IVF as a counter-guarantee, which the Commission found to be ‘close to zero’.

In the fourth place, the Court states, as it did in relation to Valencia CF, that the Commission, after finding that Elche CF was a firm in difficulty, wrongly assumed that no financial establishment would act as a guarantor for such a firm and therefore that that no corresponding guarantee premium benchmark could be found on the market. Similarly, the Court criticises the Commission for not sufficiently substantiating its conclusion relating to the lack of comparable transactions to establish the market price of a similar non-guaranteed loan.

Summaries of judgments

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Summaries of judgments made in collaboration with the Portuguese judge and référendaires of the CJEU (Nuno Piçarra, Mariana Tavares and Sophie Perez)
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Judgment of the Court (Grand Chamber) of 23 April 2020,Associazione Avvocatura per i diritti LGBTI, Case C-507/18, EU:C:2020:289

Reference for a preliminary ruling – Equal treatment in employment and occupation –Directive 2000/78/EC – Article 3(1)(a), Article 8(1) and Article 9(2) – Prohibition of discrimination based on sexual orientation – Conditions for access to employment or to occupation – Concept – Public statements ruling out recruitment of homosexual persons – Article 11(1), Article 15(1) and Article 21(1) of the Charter of Fundamental Rights of the European Union – Defence of rights – Sanctions – Legal entity representing a collective interest – Standing to bring proceedings without acting in the name of a specific complainant or in the absence of an injured party – Right to damages

Facts

In the case, a lawyer had stated, in an interview given during a radio programme, that he would not wish to recruit homosexual persons to his firm nor to use the services of such persons in his firm. Having taken the view that that lawyer had made remarks constituting discrimination on the ground of the sexual orientation of workers, an association of lawyers that defends the rights of lesbian, gay, bisexual, transgender or intersex (LGBTI) persons in court proceedings brought proceedings against him for damages. The action having been successful at first instance and that ruling having been upheld on appeal, the lawyer appealed in cassation, against the judgment delivered in the appeal, before the Corte suprema di cassazione (Supreme Court of Cassation, Italy), which then sought a preliminary ruling from the Court of Justice on, inter alia, the interpretation of the concept of “conditions for access to employment … and to occupation”, within the meaning of Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (OJ 2000 L 303, p. 16).

Decision

After recalling that that concept must be given an autonomous and uniform interpretation throughout the EU and cannot be interpreted restrictively, the Court interpreted that concept by reference to its judgment of 25 April 2013, Asociația Accept, C‑81/12, EU:C:2013:275. The Court held that statements made by a person during an audiovisual programme, according to which that person would never recruit persons of a certain sexual orientation to that person’s undertaking or wish to use the services of such persons, fall within the material scope of Directive 2000/78 and, more particularly, within the concept of “conditions for access to employment …or to occupation” within the meaning of Article 3(1)(a) of that directive, even if no recruitment procedure had been opened, nor was planned, at the time when those statements were made, provided, however, that the link between those statements and the conditions for access to employment or to occupation within the undertaking is not hypothetical.

Whether such a link exists must be assessed by the national courts on the basis of all the circumstances characterising those statements. Relevant criteria in that regard are the status of the person making the statements and the capacity in which he or she made them, which must establish either that he or she is a potential employer or is, in law or in fact, capable of exerting a decisive influence on the recruitment policy or a recruitment decision of a potential employer, or, at the very least, may be perceived by the public or the social groups concerned as being capable of exerting such influence. The national courts must also take into account the nature and content of the statements concerned, that must relate to the conditions for access to employment or to occupation with the employer concerned and establish the employer’s intention to discriminate on the basis of one of the criteria laid down by Directive 2000/78, and the context in which they were made, in particular their public or private character.

According to the Court, the fact that that interpretation of “conditions for access to employment … or to occupation” may entail a possible limitation to the exercise of freedom of expression does not call that interpretation into question. Indeed, the limitations result directly from Directive 2000/78 and are applied only for the purpose of attaining its objectives, namely to safeguard the principle of equal treatment in employment and occupation and the attainment of a high level of employment and social protection. In addition, the limitations arising from Directive 2000/78 to the exercise of freedom of expression are necessary to guarantee the rights in matters of employment and occupation of the persons covered by that directive, and do not go beyond what is necessary to attain the objectives of that directive, in that only statements that constitute discrimination in employment and occupation are prohibited.

Last, the Court ruled that Directive 2000/78 does not preclude national legislation under which an association of lawyers whose objective, according to its statutes, is the judicial protection of persons having in particular a certain sexual orientation and the promotion of the culture and respect for the rights of that category of persons, automatically, on account of that objective and irrespective of whether it is a for-profit association, has standing to bring legal proceedings for the enforcement of obligations under that directive and, where appropriate, to obtain damages, in circumstances that are capable of constituting discrimination, within the meaning of that directive, against that category of persons and it is not possible to identify an injured party. The Court made clear in that regard that although the directive does not require an association such as that at issue in the main proceedings to be given such standing where no injured party can be identified, it does give the Member States the option of introducing or maintaining provisions which are more favourable to the protection of the principle of equal treatment. It is therefore for the Member States which have chosen that option to decide under which conditions an association may bring legal proceedings for a finding of discrimination prohibited by Directive 2000/78 and for a sanction to be imposed in respect of such discrimination. It is in particular for the Member State to determine whether the for-profit or non-profit status of the association is to have a bearing on the assessment of its standing to bring such proceedings, and to specify the scope of such an action, in particular the sanctions that may be imposed, such sanctions being required, in accordance with Article 17 of Directive 2000/78, to be effective, proportionate and dissuasive, regardless of whether there is any identifiable injured party.

 

Editorial of July 2020

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 by Joana Abreu, Editor and Jean Monnet Module eUjust Coordinator

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e-Justice in times of COVID-19 – someone pushed fast-forward?
Follow-up on the eUjust Jean Monnet Module “EU Procedure and credits’ claims: approaching electronic solutions under e-Justice paradigm”

We have already stressed the impact new information and communication technologies (ICT) are able to have on justice administration throughout Europe.

In fact, when Digital Single Market was developed, and interoperability was the method adopted, the EU established the need to pursue the paramount of e-Justice.

Insofar, as derived from the Council’s 2019-2023 Strategy on e-Justice, e-Justice paradigm “aims at improving access to justice in a pan-European context and is developing and integrating information and communication technologies into access to legal information and the working of judicial systems” since “[p]rocedures carried out in a digitised manner and electronic communication between those involved in judicial proceedings have become an essential component in the efficient functioning of the judiciary in the Member States” (paragraph 1).

In order to achieve this, the elected method was the one of interoperability, which was firstly recognised in the implementation of e-Government. However, as the time went by, it was elevated to a general principle of EU law, not only relevant on e-Government but also on e-Justice fields (see, on the matter, paragraphs 8 to 11 and 24 of the mentioned e-Justice Strategy), as it was perceived to be the less expensive and the most capable mean to put national digital solutions communicating among each other and to interconnect them to equivalent systems running before EU institutions, bodies and agencies.
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