25 sept. 2013

EU Court of Justice crashes "Asian despotism" of the EU General Court, Strack, C-579/12 RX-II

When the EU General Court hears the case on appeal from the EU Civil Service Tribunal, sometimes the First Advocate General may propose to the Court of Justice of the EU to review the judgment of the EU General Court. This may happen if the General Court judgment “adversely affects the unity and consistency of EU law”. It is interesting to take a look how the latter concept functions in the case Strack, C-579/12 RX-II, won by applicant on 19/09/2013.

Mr. Guido Strack had the right to 38.5 days of annual leave in 2004 that he was unable to take due to illness, and he wanted to transfer those days to 2005, but the EU institutions established that 12 days only might be taken from one year to another (Article 4 of Annex V to the Staff Regulations, § 10). He won at the Civil Service Tribunal, but the EU General Court set aside the first instance judgment.

According to Schultz-Hoff, C-350/06, §§ 22, 23, 25, 41, 45, 50 and 61, Article 7 of Directive 2003/88 implies that in such cases the leave days shall be transferred to the next year (§§ 15, 31), but the EU General Court held that EU directives are not binding on the EU itself – EU directives are binding on Member States only (§ 19, and § 40 of judgment Strack, T-268/11 P).

Voltaire (1694 – 1778) was calling such an attitude “Asian despotism”. The CJEU held that the measure of transferring the leave days “contributes directly to the improvement of health and safety protection for workers” within the meaning of Article 153 TFEU (§ 44). Taking away those days also breaches the principle of the social law of the EU affirmed by Article 31(2) of the EU Charter of Fundamental Rights (§ 46).

On review, the Court of Justice considered that the Directive 2003/88 should be considered as an “integral part of the Staff Regulations as minimum requirements … and without prejudice to the more favourable provisions” (§ 51).

However, the CJEU did not give EU directives a direct binding force on EU itself. According to the CJEU the Directive 2003/88 is binding on the European Commission as far as it “refers to" the Treaty and to the Charter only. Thus, it is difficult to say whether this kind of Asian despotism will not be continued in other cases (§ 52).

What becomes clear from the Strack, C-579/12 RX-II, case is that, at the level of legal strategy, it is good to use a lot the concept of “adverse effect to the unity and consistency of EU law” in all your writings to the EU General Court. You will not be allowed to submit any paper to the First Advocate General. Thus, the only away to attract his attention is to repeat this mantra before the EU General Court. There are indeed hundreds of cases that breach the Charter to the same extent as it was done in case Strack, but the support of the First Advocate General is a lottery.

30 août 2013

ECtHR re-establishes Khodorkovskiy’s wealth, 11082/06


Mikhail Khodorkovskiy, former Yukos head and current prisoner, achieved a huge victory in Strasbourg. The biggest Russian oil company was convicted in tax and business fraud.

It was liquidated leaving $ 9.2 billion of unsatisfied liabilities (§ 18). Together with Platon Lebeder, former Yukos director, he was ordered to pay the State all remaining tax liabilities of Yukos (§ 227), since they were de facto organisers and beneficiaries of the tax evation scheme (§ 319). The Russian Courts held that there is a subsidiary liability of managers if the corporate taxpayer had no assets (§ 875). Russians considered that owners used the limited liability company as a façade for fraudulent action, and therefore piercing of the corporate veil was an appropriate solution for defending the rights of its creditors, including the State (§ 877).

However the Strasbourg judges considered that, as a matter of principle, the Russian law did not provide for the recovery of unpaid company taxes from the managers guilty of tax evasion (§ 875). Such a practice was not “adequately accessible and sufficiently precise” (§ 876) or “clear” (§ 877).

If unpaid taxes are claimed as “damages”, the ECtHR analyses national expressis verbis law, Article 1068 of the Russian Civil Code must apply, which provides that damage caused by an employee of the company while performing his official duty must be compensated by that company (§ 879).

Article 56 of the Russian Civil Code previews personal liability of owners and managers in cases when they caused insolvency of their company. The Strasbourg judges replied that this Article was not applied in the Khodorkovskiy case, since (§ 880):
1)      The claim of the tax authorities was granted while the corporate taxpayer still existed.
2)    Article 56 provides subsidiary liability of owners and managers, while Khodorkovskiy and Lebedev were ordered to recover the amounts on the solidary basis with the company.
3)      Article 56 was not mentioned in Russian judgments.

In addition, in internal case I and K, 11/01/2001, the Russian Supreme Court interpreted the law as not allowing for the shifting of liability for unpaid company taxes from the company to its executives (§§ 449 & 882).

29 juil. 2013

CJEU transfers patentability competence to the EU level, Daiichi Sankyo, C-414/11


Despite the resistance of Greece, Germany, France, Italy, Netherlands, Portugal, Finland, Sweden, and the UK, on 18/07/2013 the Grand Chamber of the Court of Justice of the European Union interpreted that after the entry into force of the Lisbon Treaty the patentability field is not any more within the primary competence of the Member States.

In 1994 the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPs Agreement) was signed jointly by the European Community and the Member States on the basis of Article 113(1) EC (“[t]he common commercial policy shall be based on uniform principles, particularly in regard to changes in tariff rates, the conclusion of tariff and trade agreements, the achievement of uniformity in measures of liberalisation, export policy and measures to protect trade”). It was generally believed that the action was taken in the field of shared competence keeping primary competence with the Member States.

The latter Article became Article 207(1) TFEU providing: “[t]he common commercial policy shall be based on uniform principles, particularly with regard to changes in tariff rates, the conclusion of tariff and trade agreements relating to trade in goods and services, and the commercial aspects of intellectual property, foreign direct investment, the achievement of uniformity in measures of liberalisation, export policy and measures to protect trade…”

Thus, the concept of “commercial aspects of intellectual property” is now expressly mentioned in the very text of primary law (§ 47).

The respective Governments argued that the TRIPs Agreement’s patentability rules concern international trade only indirectly, and do not therefore fall within the field of the common commercial policy (§ 44). In other words, those rules do not relate to the details, as regards customs or otherwise, of operations of international trade as such (§ 53).

Nevertheless, the Grand Chamber considered that the TRIPs Agreement is an integral part of the WTO system, and therefore has a specific link with international trade (§ 53). In particular, the respective WTO law authorizes the cross-suspension of concessions between that agreement and the other principal multilateral agreements of which the WTO Agreement consists (§ 54).

Moreover, the concept of “commercial aspects of intellectual property” corresponds almost literally to the very title of the TRIPs Agreement (§ 55).

The Governments produced the argument that Part II of the TRIPs Agreement, concerning the availability, scope, and use of intellectual property rights, which includes patentability, fall within the field of the internal market, and not of common commercial policy (§ 56). The Grand Chamber replied that as it follows from its preamble, the primary objective of the TRIPs Agreement is to strengthen and harmonise the protection of intellectual property on a worldwide scale, and Part II contributes to attaining that objective by setting out rules to be applied by every WTO member (§ 58).

30 juin 2013

Slight reduction in compensation of damages for inhuman treatment of prisoners, Yepishin v Russia, 591/07

The European Court of Human Rights slightly reduced the amount of compensation of damages for inhuman treatment of prisoners in case Yepishin v Russia, 591/07. Previously, it was used to calculate the damages as € 6 000 for the first year of imprisonment in inhuman conditions, and € 3 500 for each next year.

This time the imprecise spirit of “equitable satisfaction” told that over 5 years in inhuman conditions shall cost € 19 000 only (§ 83).

In this particular case, the inhuman conditions meant a personal space narrower than 2 m2 (§ 63),  

However, what I like about this case is the conclusion of the ECtHR that infrequent and short periods of raising personal space to over 4 m2 do not alleviate the prisoner’s situation (§ 65).

28 févr. 2013

ECJ: Imposing administrative and criminal sanctions does not breach the ne bis in idem principle, Fransson, C 617/10

Mr. Åkerberg Fransson was accused by Swedish prosecution of non payment of about 83 000 € of taxes (income tax, VAT, social security and employer’s part deductions, § 12). He was subjected to tax penalty (administrative one), and then criminal proceedings started. Tax evasion may lead to 2 years of imprisonment. Mr. Fransson insists that he has already got an administrative sanction, and therefore the criminal one would breach the principle that none may be subjected to a double sanction for the same crime (Article 50 of the EU Charter of Fundamental Rights).

The ECJ Grand Chamber replies that in principle there is no double punishment in imposing both administrative and criminal sanctions, however the sanctions must pass a test in order not to be considered as punishing twice (§§ 34-35):
  1. Classification of the offence under national law;
  2. The very nature of the offence;
  3. The nature and degree of severity of the penalty.

This test gives a slight chance to avoid a sanction in certain cases.