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.

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

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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).

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

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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).

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).

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.

Realist views in dissenting opinions of Lithuanian justices on the impeachment of President Paksas, 8/2012

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The purpose of this blog is not only making advertising for my private legal practice, but also a development of a critical scholarship empirically analyzing judicial reasoning (that I call judicial shamanism). Therefore, it is sometimes interesting to take look at how the critical legal scholarship develops in dissenting opinions of Lithuanian justices, for instance, in the impeachment case of Lithuanian President Rolandas Paksas.

The story could be summarized as follows. Twice former Prime Minister Paksas got 55 % of votes and became a President of Lithuania in 2003. On 31/03/2004 the Constitutional Court found him guilty of corruption, disclosure of State secret, and abusing his office for the benefit of a friend. He was impeached, but then stood for election, and it became obvious he would be re-elected. Therefore, on 25/05/2004 the Constitutional Court interpreted that “the Spirit of the Constitution” forbids him to stand for parliamentary and presidential election for life, and then the lifelong prohibition was extended even to the office of Prime Minister or Minister. On 06/01/2011 we partially won the case: the European Court of Human Rights found that the lifelong prohibition to stand for parliamentary elections was breaching the right to free elections. On 22/03/2012 the Lithuanian Parliament amended the Law on Parliamentary Elections, and allowed the impeached President to stand. However on 05/09/2012 the Constitutional Court declared that amendment unconstitutional, since the execution of the ECtHR judgment would alter the "value system of the Lithuanian Constitution" in a too extreme manner. In June 2011 we started an action against Lithuania before the UN Human Rights Committee, and it is currently pending.

As with politicians, you may never be sure what the judges think when they get alone. Nonetheless, from time to time dissenting opinions make a contribution to the development of critical legal scholarship.

I really smiled when I saw that justice Egidijus Šileikis, PhD, and justice Gediminas Mesonis, PhD, attempt to calm down the majority of justices in their dissenting opinions (respectively § 2.7 and § 7.1). They try to convince the colleagues that executing the Strasbourg judgment will not deny the supremacy of the Lithuanian Constitutional Court. However the majority of justices are not that naïve.

Justice Šileikis pointed out that the Constitutional Court had amended its case law on application of the ECtHR judgments. Previously those judgments were considered as a binding source for Lithuania, but in the Paksas case the Constitutional Court decided to re-establish its independence. Justice Sileikis qualifies this decision as “case Although”, since the case law amendment was introduced with the word “although” (§ 3.9). Dr Šileikis also uses the concept of “magic words” from the heritage of legal realism in order to express his critical approach (§ 3.2).

Justice Šileikis describes the refusal of the Constitutional Court to apply the Strasbourg judgment as “excessive ambition vis-à-vis the European Court of Human Rights and excessive activism vis-à-vis the Lithuanian Parliament” (§ 2.1).

In general, I do not like the concept of “activism”, since it is difficult to define it in operational term. I remember the course of constitutional law that I had many years ago. Prof Egidijus Kuris, President of the Lithuanian Constitutional Court, explains that “activism” and “passivism” have certain positive and negative aspects. As far as the Lithuanian Constitutional Court is concerned, it stands “in between”. This is a bullshit that has no practical meaning.

Therefore, I prefer using the conception of “judicial shamanism”, since it embraces both, activism and passivism, and moves towards an empirical description of judicial practice in recognising that possibly all the spirits (principles, articles, rules, etc.) are alive, and possibly they really live in certain amulets (case law, Constitution, legal acts, etc.). However the variety of different techniques of entering into a contact with those spirits in order to see their interaction makes it impossible, in most cases, to establish an objective or in some way “reasonable” judicial practice.

Will your lawyer accuse you of money laundering behind your back? Michaud, 12323/11

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The EU legislated three directives (nos. 91/308/CEE, 2001/97/CE, 2005/60/CE) requiring attorneys to accuse their clients on a suspicion of money laundering without informing them about this (§§ 9-10). The French law requires your attorney to observe you permanently and denounce every suspicion (§ 13). On 06/12/2012 the European Court of Human Rights found this compatible with the right to private correspondence with an attorney (Article 8 of the European Convention of Human Rights).

French tax attorney Patrick Michaud tried to prove contrary. He argued that the notion of “suspect” was not defined clearly (§ 59). The Court replied that it is impossible to arrive to “absolute certainty”, since this would produce “excessive rigidity”, and that the concepts must be “more or less vagues” (§ 96). The ECtHR continued that it had already been recognised in case law that sometimes the attorney’s freedom of expression is more important than professional secret (§ 123).

The attorney argued that the function of counselling in business transaction and defending before tribunals could not be easily divided (§§ 59, 117.2), but it didn’t work. The ECtHR replied that the duty to accuse is strictly limited to business transactions that are clearly defined (§ 127), and that there is a filter of the Bar (§ 129).

In 2010, French attorneys 20 252 times accused their clients but only in 404 cases the clients became prisoners at the bar. Mr Michaud says that this means that the system is not efficient, and waists time that could be invested in fighting crime (§ 65). The Court replies that according to the intergovernmental body Financial Action Task Force it is good that the French attorneys were among the best in the World in accusing their clients behind the back (§ 125).

Mr Michaud presented an analysis of the situation in Italy, Estonia, Belgium, Netherlands, Ireland, the USA and Canada (§ 68). Do not choose France.

ECJ gives the green light for the European Stability Mechanism, Pringle, C-370/12

The European Council took Decision 2011/199/EU of 25/03/2011 amending Article 136 of the Treaty on the Functioning of the European Union (TFEU) with § 3 providing that the Eurozone Member States may establish a stability mechanism (§ 6). The Decision is accompanied with the European Stability Mechanism (ESM) Treaty that establishes the respective mechanism with a maximum lending capacity fixed at € 500 billion in order to help Member States threatened by severe financing problems (§ 11).

Thomas Pringle, left-wing independent Member of Irish Parliament, sued Ireland for implementing this initiative before the Irish Supreme court that made a reference to the EU Court of Justice (§ 2). The latter decided to judge in full Court of 27 judges, and on 27/11/2012 dismissed the action.

Mr Pringle claimed that Article 136 TFEU might not be amended pursuant to the simplified revision procedure provided by Article 48(6) TEU, since this amendment would directly encroach on the exclusive competence of the Union in relation to monetary policy (§ 25). Article 3(1)(c) TFEU states that the Union is to have exclusive competence in the area of monetary policy for the Eurozone. Thus, according to Pringle, the amendment would give Member States back the respective competence (§ 52).

The 27 judges replied in 2 steps. First, the TFEU contains no definition of monetary policy, and refers to the objectives, not to the instruments (§ 53). Second, under Articles 127(1) and 282(2) TFEU, the primary objective of the EU monetary policy is to maintain price stability, which is pretty different from safeguarding the stability of the euro (§§ 54 and 56). Thus the grant of financial assistance does not fall within monetary policy.

Mr Pringle argues that Article 48(6) TEU provides that the European Council can act in monetary area only after consulting the European Central Bank. In this case the European Central Bank gave its opinion on 17/03/2011, and this means that this is a monetary policy procedure. The ECJ replied that the Bank was consulted on the European Council’s own initiative, and not due to any legal obligation (§ 61).

Mr Pringle continues that the competence of establishing this kind of mechanism has been transferred to the Union level by Article 352 TFEU, and cannot be forwarded to a new institution called European Stability Mechanism by the simplified revision procedure. The full Court replies that the Union has not used powers under that Article and that, in any event, that provision does not impose on the Union any obligation to act (§ 67). I like this point because this is a bright case of indeterminacy in the EU case law. In this case, the Court followed Commission v Council, 22/70, § 95, but there are other cases (such as UK v Ireland) where this kind of reasoning was unambiguously dismissed.

The final point makes us smile. Mr Pringle says that the ESM Treaty may not be signed or ratified before the entry into force of Decision 2011/199 amending Article 136 TFEU (§ 183). The ECJ replies that this amendment is a simple confirmation of the legal order that has existed before (§ 184). In other words, the Court makes the completed amendment procedure senseless because anyway it always was like this.

ECtHR: 7 days of police detention without window and a proper toilet cost € 3 000, Kasperovicius, 54872/08

On 20/11/2012 the European Court of Human Rights awarded non-pecuniary damages of € 3 000 to Mr Aleksandras Kasperovicius who spent 7 days in Anyksciai Police Detention Facility (§§ 6, 7, 47), since the cell did not have a window, neither a toilet and a sink. During the day he had to knock the cell door to ask a police officer to let him to toilet, and in the night he had a bucket (§ 10).

The Lithuanian Government argued that 4 days over 7 he was alone in the cell (§ 32), the artificial light and the cell microclimate met the legislative requirements, and the police detention did not cause any adverse health effect (§ 33). However the judges pointed that these facts have no influence on the access to toilet and the absence of a window, which was also confirmed by the Lithuanian Ombudsman and the UN Committee for the Prevention of Trture and Inhuman or Degrading Treatment (§§ 23, 42).

Broken seal leads to a fine of € 38 million for E.ON Energie AG, C-89/11 P

The European Commission suspecting E.ON Energie AG in an anti-competitive agreement sent them an inspection in Munchen, which sealed a door at the end of the day in order to continue in the morning. The seal was measuring 90 mm by 60 mm. In the morning, the white adhesive, by means of which the seal had been fixed to the substrate, remained on the latter in the form of “VOID” message about 5 mm high, distributed over the whole surface of the adhesive label. The seal became transparent, so that the “VOID” message was visible on the seal (§ 8). Thus, the European Commission presumed that the company people broke the seal in order to enter the room and destroy proofs.

However the shelf life of the seal itself had been expired, and there was no damage to the very letters of the seal. Therefore, E.ON Energie asked for a measure of inquiry to that matter, but the EU General Court denied the motion (§§ 109-110). The EU Court of Justice replies that this denial is not a subject to appeal (§ 115).

The ECJ held that the fine of € 38 million representing 0.14 % of E.ON Energie’s annual turnover could not be considered as disproportional due to the need to ensure deterrent effect. The maximum fine in the case of broking the seal could go up to 1 % of annual turnover. 

As I already wrote in previous posts, it is sad that the deterrent effect principle is never applied when the European Commission of the European Parliament themselves breach EU law and fundamental human rights.

ESRC forbids reduction of social rights during economic crisis, GENOP-DEI v Greece, 65/2011

Due to the economic crisis, Greece issued new law allowing dismissal of a person with indefinite contract during a probation period of 12 months without notice (§§ 8, 14). The European Social Rights Committee reminded the Greek Government that in the general introduction to its Conclusions XIX-2 (2009) the Committee dismissed any possibility of reducing social rights during an economic crisis, since it is the time when the beneficiaries need the protection most (§ 16).

The Greek Government tried to maintain that the trial nature of the period justifies the initial instability of employment (§§ 23-24), but the Committee replied that the concept of trial period may not be interpreted so broadly that the notice and severance pay guarantee would become ineffective (§ 26).

Thus, Greece violated Article 4(4) on the right to reasonable dismissal notice of the European Social Charter.

Covering legal costs before the EFTA Court, Konkurrenten.no v ESA, E-14/10 COSTS

Previously I already wrote about the case Konkurrenten.no. Now the matter of legal costs to be covered by the EFTA Surveillance Authority came back to Luxembourg. The parties finally agreed on hourly rate of € 340 (§ 29) but disagreed on the number of hours. We have the following picture:

Task	Konkurrenten.no appraisal (§§ 5, 10)	EFTA Surveillance Authority appraisal (§ 18)	EFTA Court decision
Drafting the application for annulment	137.50 h	56 h	105 h
Drafting reply to the defense	84.25 h	40 h	55 h
Application for measures of organization leading to the calling of the first witness	29 h	14 h	18 h
Observations on intervention from KTP/Unibuss	4.25 h	4.25 h	4.25 h
Preparation and attendance of oral hearing	31 h	12 h	26 h
Application for the taxation of costs	5 h	0 h	5 h
Total hours:	291 h	126.25 h	189 h
Total lawyers fee:	€ 102 130	€ 42 925	€ 69 360

The EFTA Court explained its deduction with the statement that the case does not raise new points of EEA law (§ 31). Moreover, the Konkurrenten.no lawyer did not represent it in the administrative procedure, and thus needed more time (§ 32).

It is interesting that the EFTA Court decided that the EEA law does not forbid disclosing of a letter headed “without prejudice” in the proceedings for the taxation of recoverable costs (§ 25).