EFTA Court applies the State aid concept to tax reductions, and strikes the Liechtenstein tax paradise

The EFTA Surveillance Authority attacked Liechtenstein for its tax policy that had previewed capital tax from 0,1 to 0,05 % for captive insurance companies, while the normal rate had been 0,2 %.

The tax reduction condition was subjected to the capacity to provide the minimum guarantee fund of € 2.3 million, for captive insurance undertakings, and € 3.2 million for captive reinsurance undertakings with the possibility of reduction to an amount of at least € 1.1 million (if the relevant supervisory authority permits). According to the EFTA Court (Liechtenstein, REASSUR AG, Swisscom RE AG v EFTA SA, E-4/6/7-10), this means that the option of forming a captive insurance company was not open to any undertaking (§§ 78-79). And, therefore, this was a State aid.

ECHR introduces common standards for parliamentary immunity, Onorato v Italy, 26218/06

ECHR de facto waived immunity of Marcello Dell’Utri, Member of Italian Parliament from political party “The People of Liberty”, and senior adviser to Prime Minister Silvio Berlusconi. The Italian Court of Cassation condemned him for fiscal fraud. The judge-reporter Pierluigi Onorato was a former Member of Parliament from the Communist Party. Therefore, Dell’Utri declared in the press that it was a political judgment. The judge-ex-communist started a civil action for defamation.

The Italian Parliament did not waive the immunity of Dell’Utri, so the issue (right to court) was forwarded to Strasbourg. ECHR 7 judge chamber, with one dissident opinion, provided the following reasons for the waiver of immunity:

1) After the refusal to waive parliamentary immunity, judge Onorato lost any possibility of effective access to court on this issue (§§ 45, 54).
2) It is correct that parliamentary immunity is a long practice having the aim to protect the freedom of expression of Members of Parliament from political persecution (§ 48), however the words of Dell’Utri did not have an “obvious” link with the legislative process (§§ 50, 52).
3) The accusation made by Dell’Utri did not concern the relations between the legislative and judicial branches of power (§ 51).
4) Therefore, the denial of the right to court is disproportional (§ 52).
5) Therefore, it violates the “fair balance” between the “imperative of fundamental rights” (right to court) and the general interest of the community (freedom of expression of the people’s representative) (§ 53).

An interesting point of this legal strategy was that judge Onorato did not stop after the refusal of the Italian Parliament to waive immunity but continued the legal proceedings.

Access to the profession of notary for foreign EU nationals, Commission v 11 States, C-47/08, etc.

Starting from now, any EU citizen can work as a notary anywhere in the EU regardless her nationality. As it was foreseeable for political reasons, the European Commission supported by the UK won its actions against Belgium, France, Austria, Germany, Greece, and Portugal supported by Czech Republic, Latvia, Lithuania, Hungary and Slovakia (11 resisting States in total) before the Grand Chamber of the ECJ.

The ECJ constructed two main reasoning chains:

1) The freedom of establishment is a fundamental provision (§ 77), it must be interpreted very broadly (§ 78), and it embraces the notary activity as an activity of self-employment (§ 79).
2) Contrary to the vision of 11 States, the ECJ did not recognize the notary activity as “exercise of official authority”, since a prohibition to establishment is an exception to be interpreted narrowly. A notary may not work without a prior consensus of the parties (§ 90), she cannot unilaterally alter this consensus (§ 91), and her decision is a subject to judicial supervision (§ 107). The companies acquire legal personality only following the filing of the constituent act with the respective company registry (§ 114). Therefore, there is no “direct and specific connection” with the exercise of official authority.

The exciting legal strategy of the interested parties consisted in filing a complaint against 11 States to the European Commission, and requesting to sue all of them, instead of taking a direct domestic action.

Autonomous concept of enterprise in EU competition law, Elf Aquitaine SA, T-299/08

The EU General Court made further precisions on the concept of enterprise in EU competition law. Elf Aquitaine SA controlling 97 % of shares of Arkema SA got a fine of € 15 890 000 for the participation of the latter company in an agreement on quantity and prices at the EEA chlorate of sodium market.

The EU General Court repeated Akzo Nobel, C‑97/08 P, § 55, in saying that several distinct moral persons, and even physical persons, may be considered as a sole “enterprise” if they form an economic unit (§ 46). It must be the case when those different persons do not determine autonomously their market behavior (Akzo Nobel, § 58; Elf Aquitaine, § 49). In such cases the controlling enterprise will be sanctioned even without a direct participation (Akzo Nobel, § 59; Elf Aquitaine, § 50), unless it proves contrary.

The General Court interpreted that the legal autonomy principle is not applicable to cases when one company controls quasi-totality of the other’s shares (§ 70).

Elf Aquitaine SA wondered why it had been the only mother company that had been subjected to an individual fine. The Court replied that it is not an individual fine but 70 % of the common fine for Elf Aquitaine SA and Arkema SA. The 3 judges further interpreted that such a division had to be made because Elf Aquitaine SA had the highest general profit among the participants of the violation, and thus could easier find the money (§ 318). This point is a very interesting development of case law.

The ECHR starts introducing common European standards for the compensation of moral damages, Ganea v Moldova, 2474/06

ECHR starts to re-consider the proportionality of the domestic compensation for moral damages. Mr Mihai Ganea was illegally arrested for 3 days. The Soroca Tribunal awarded him € 946 of compensation, however the Bălţi Court of Appeal and the Supreme Court of Justice reduced the compensation to € 63. It is remarkable that Moldova is one of the poorest European States with a GDP per capita of 3 261.42 international dollars (for comparison: 16 840.80 in Russia, 34 858.09 in France).

In § 30 of the judgment, the ECHR de facto stated that its standards for compensations must be applicable in all Council of Europe States. It declared € 63 “obvious and unreasonable disproportion”, and increased the sum to € 6 000 (§ 35). This is quite interesting, since the ECHR compensation policy has always been considered as chaotic. The 7-judges chamber also introduced two quite unpredictable criteria for proportionality of a compensation (§ 22):

1) the compensation must be fair;
2) the compensation must allow to delete the consequences of a violation.

Congratulations to Mr. Ganea.

Participant of a sadomasochistic Nazi orgy lost his case, Mosley v UK, 48009/08

News of the World made public a video where Max Mosley, former head of Formula 1, participates in a sadomasochistic “Nazi” orgy with 5 prostitutes. The orgy client got £ 60 000 from the journalists as damages but continued in Strasbourg.

The 7 judges chamber of the ECtHR recognized him a “victim”, since the £ 60 000 did not cover the absence of pre-notification before publishing the video seen 1.4 million times in 2 days (§§ 11, 67, 72, 73).

However the ECtHR did not accept that the absence of pre-notification violates the right to private life (Article 8 of the Convention), since:

1) A pre-notification requirement would not stop the journalists. Such a requirement would unavoidably have a public interest exception, and the fact of feeling yourself good in performing a Nazi (in an SM orgy) raises a public concern (§ 127).
2) A pre-notification requirement would violate the freedom of expression of journalists under Article 10 of the Convention (§ 129).

11 media companies and NGOs filed their observations.

ECJ changes its case law on writing foreign names, Runevič-Vardyn & Wardyn, C‑391/09

5 judges of the ECJ adopted a completely unexpected (at least for me) judgment on writing of foreign names. Lithuanian citizen of Polish origin Malgožata Runevič-Vardyn wanted her name to be written "Małgorzata Runiewicz Wardyn" as it is required by Polish spelling rules, and her husband (citizen of Poland) Łukasz Paweł Wardyn was not satisfied with the decision of Lithuanian authorities to write his name "Lukasz Pawel" without Polish "Ł".

I was pretty sure that the ECJ would support this ethnic minority but they lost the proceedings. Previously in case Konstantinidis, C-168/91, a Greek national wanted to write his surname "Konstantinidis", but Germans insisted on writing "Konstantinides". So in that case the ECJ supported the Greeks against Germans. However now, for some unknown reasons, this Court decided to change its case law. The judges ignored completely the very existence of Konstantinidis, and dismissed the Polish desire for the following reasons:

1) the principle of ethnic non-discrimination is applicable to provision of services, and spelling of a name in a document is not a "service" under Directive 2000/43 (§ 45).
2) While adopting the latter Directive, the European Parliament wanted to specify that the principle of ethnic non-discrimination is applicable to "the exercise by any public body <...> of its functions", but the EU Council worded it differently: the principle of ethnic non-discrimination is applicable "as regards both public and private sectors, including public bodies" (§ 46). Hey, is it really that different?
3) Yes, Lithuanians will not write your name as you want, but you can still live in that country (§§ 70 and 74).
4) Diacritical marks (Ą, Ę, Ł, Ć, Ń, Ó, Ś, Ź, Ż) are anyway not supported by certain computer systems (§ 81).
5) Anyway Lithuanians will not understand the meaning of diacritical marks (Ą, Ę, Ł, Ć, Ń, Ó, Ś, Ź, Ż), and will not notice them (§ 81).
6) Respect for national identity of the host State and for its official language must be given priority over cultural and linguistic diversity.

Another interesting point that I cannot explain: the ECJ wrote that the Government of Poland decided not to support the Polish ethnic minority in this dispute in § 37 of the judgment.

Ban for national authorities on declaring that a company does not infringe competition law, Tele2 Polska, C-375/09

The ECJ prohibited national authorities to declare that a company accused of violating competition law (abuse of dominant position) does not breach it in case Tele2 Polska sp.z o.o., C-375/09. The only option that national competition authorities have if everything is fine according to them is to conclude that there are “no grounds for action”, since:

1) Article 5 of the Council Regulation 1/2003 on the implementation of competition rules does not preview an option of acquittal by national authorities (§§ 21-22);
2) such a step of national authorities would violate the general principle of sincere cooperation with the European Commission (§§ 26-27).

The judgment is related to the dispute between telecommunication companies Tele2 Polska sp.z o.o. and Telekomunikacja Polska SA was produced by 11 judges chamber. Poland, the Czech Republic, the European Commission and the EFTA Surveillance Authority submitted their observations.

Towards a client-friendly judicial deadline policy, and fair trial in corporate law, TATRY Poprad, 7261/06

7 judges chamber of the European Court of Human Rights unanimously decided to correct the deadline policy of the Slovak Constitutional Court in case TATRY Poprad s.r.o. v Slovakia, 7261/06. The mistake of that Constitutional Court was that:

* first, it held that the company had to appeal to the Appeals on Points of Law Chamber of the Supreme Court before coming to the Constitutional Court with a complaint against the Appellate Chamber of the Supreme Court;
* second, after the declaration of inadmissibility by the Appeals on Points of Law Chamber, the Constitutional Court refused to accept the action, since the company had missed the judicial deadline to be calculated from the first judgment of the Supreme Court (§ 44).

However what is interesting even more for me is the fact that Strasbourg declared applicability of the right to court to the proceedings before the Constitutional Court (§ 37). For instance, in impeachment judgment Paksas v Lithuania of 06/01/2011 the interpretation was contrary.

The essence of the TATRY Poprad s.r.o. was that this company completed its construction works about 2 months after the date agreed in the contract, and according to the terms of contract lost 20 % of the agreed price. The construction company argued that its director K didn't have the standing to sign the contract:

- on 26/04/1996 the Supervisory Board approved him as a director;
- on 12/04/1996 the General Meeting took an unknown decision on his appointment (positive according to the Supreme Court, and negative according to the company;
- on 22/04/1996 he signed the contract as a "director";
- on 28/05/1996 his name as the name of "director" was communicated to the Register of Comapanies.

"No" to imprisonment of illegal immigrants, El Dridi, C-61/11 PPU

In case El Dridi, C-61/11 PPU, given the status of urgency, the ECJ declared the imprisonment of an illegal immigrant for 1 year due to failure to leave the Italian territory, a measure ordered by the national authorities, contrary to the principle of compliance with the Union law (Article 4(3) TEU, § 56), since the Directive 2008/115 subjects coercive measures to the principles of proportionality and effectiveness (§ 57).

An extremely interesting part of the judgment is § 61 where the CEJ says two things:

1) The national Courts must refuse to apply the national law contrary to the Union law.
2) A retroactive application of a more lenient penalty is a part of the constitutional traditions common to the Member States.

Fall of property price by 62,5 % due to an administrative measure is not protected by the right to property, Antunes v Portugal, 18070/08

5 of 7 judges majority interpreted that the right of property does not guarantee any right to a compensation when the value of property falls by 62,5 % (from € 200 000 to 75 000) due to an administrative measure. Fernando Antunes Rodrigues got an authorization to build a commercial building at the national highway, but later absolutely the same Portuguese administration decided to reconstruct the highway in such a manner that this commercial building lost the access to the highway.

Antunes Rodrigues argued that the right to access to the highway was a real right covered by the right to property, that the authorization to construct the commercial building had created legitimate expectations that he would be able to exploit this building, that he hadn’t receive any compensation from the State, that he had suffered from a special and excessive costs (fall of 62,5 % of property price), that he could not continue his business anymore. The ECHR replied:

1)The State has a large margin of appraisal in the field of territory arrangement, such as modernization of roads, since a large margin was already recognized for a destruction of a private house on a public territory, for the domain of forests, and for the protection of archeology (§ 32).
2) 62,5 % of price fall and the end of business are not a “special and abnormal” damage, but a normal commercial risk (§ 34).
3) Due to the balance of interests, Antunes Rodrigues could not expect to get an automatic compensation (§ 35).
4) Nothing proves that the judgment of the Supreme Administrative Court of Portugal was “arbitrary or obviously unreasonable” (§ 36).
5) The fall of market value of property is not sufficient as such, in the absence of other elements, for arguing an intervention into the right of property (§ 37).

The Portuguese judge voted against Antunes Rodrigues.