C-464/98

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OPINION OF ADVOCATE GENERAL LÉGER delivered on 13 July 2000 1

1. In the case before the Landesgericht für 3. The Republic of Austria was not yet a Zivilrechtssachen (Regional Civil Court), member of the European Communities at Vienna, Austria, redress is sought from Mr the date of registration of the charge. On Stefan, 2 an Austrian notary public, for the other hand, it was a member by the registering a charge denominated in Ger- time of commencement of the insolvency man marks in favour of a German bank, proceedings relating to the debtor. the Westdeutsche Landesbank Girozen- trale, 3 when at the date of that act Austrian law prohibited registration of mortgages or charges in a foreign currency. 4. The Austrian court consequently found it necessary to ascertain the temporal scope of application of Article 73 b of the Treaty, as interpreted by the Court of Justice in the judgment in Trummer and Mayer. In the Court's ruling, the national court seeks the criteria that will allow it to determine 2. The charge in question was over two the validity of its national rules, on which properties situated in Austria, to secure a the validity of the charge in question and loan in German marks granted by the the liability of Mr Stefan depend. plaintiff in the main proceedings to Grund- stücks- und Bauprojektentwicklungs GmbH. 4Insolvency proceedings relating to this company having been commenced, the validity of the charge was examined not only under national law but also under Community law. Article 73b of the EC I — The relevant rules Treaty (now Article 56 EC) precludes rules which require a charge guaranteeing a debt payable in the currency of another Member State to be registered in the national currency. 5 A — Community law 1 — Original language: French. 2 — Otherwise referred to as 'the defendant in the main proceedings'. 3 — Otherwise referred to as 'the plaintiff in the main proceed- 5. Articles 67 to 73 of the EEC Treaty, ings'. 4 — Otherwise referred to as 'the debtor'. which provided for a gradual liberalisation 5 — Case C-222/97 Trummer and Mayer [1999] ECR I-1661. of capital movements, were replaced, as

7. In the absence of transitional measures provided for in the Treaty of Accession 6 or in the Act relating to the conditions of 'Within the scope of application of the accession of the Republic of Austria, the Grundbuchsgesetz (Land Register Law), charges on real property may, following the entry into force of this Decree, be 6 — Treaty between the Kingdom of Belgium, the Kingdom of created in currencies other than schillings Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, only if the amount of money to be paid for Ireland, the Italian Republic, the Grand Duchy of Luxem- bourg, the Kingdom of the Netherlands, the Portuguese the immoveable property is determined by Republic, the United Kingdom of Great Britain and North- reference to the price of fine gold.' ern Ireland (Member States of the European Union) and the Kingdom of Norway, the Republic of Austria, the Republic of Finland, the Kingdom of Sweden, concerning the accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the Kingdom of Sweden to the European Union (OJ 1994 C 241, p. 9, 7 — OJ 1994 C 241, p. 21 and OJ 1995 L 1, p. 1. hereinafter 'the Treaty of Accession'). 8 — StGBl. 1945, n° 231.

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I I — The facts and the main proceedings The plaintiff states that it would have agreed to registration of the charge in Austrian schillings.

9. The loan granted on 16 December 1991 by the Westdeutsche Landesbank Girozen- trale to Grundstücks- und Bauprojektent- 12. The defendant in the main proceedings wicklungs GmbH amounted to DEM 20 disputes the invalid nature of the charge, million. Mr Stefan registered the charge in deriving argument from Article 73b of the question, in the same currency in an Treaty. enforceable notarised deed, over the two properties, both situated at Vienna, and the property of the debtor.

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Verordnung über wertbeständige Rechte of I I I— The national court's questions 16 November 1940 could only be inferred from the prohibition on restrictions on movement of capital and payments set out 17. Accordingly, the Landesgericht für in Article 73 b of the Treaty. In accordance Zivilrechtssachen, Vienna, has referred the with the primacy of Community law over following questions to the Court of Justice the law of the Member States, this principle for a preliminary ruling: had to be applied as a matter of priority over the Austrian law then in force.

'(1) Does a refusal to allow a charge to be created to cover an existing debt denominated in a foreign currency (in this case in German marks (DEM)) constitute a restriction on the move- 16. The national court proceeds from the ment of capital and payments compa- assumption that Article 73b of the Treaty tible with Article 73b of the EC would prohibit obstacles to the creation of Treaty? a mortgage or charge in a foreign currency.

(2) Does Article 73b of the EC Treaty apply retroactively to charges which were registered in German marks In its opinion, if this provision should apply before the accession of Austria to the retroactively from the date of accession of European Community, and thus incur- the Republic of Austria to the European ably void at the time of registration, in Union to a mortgage or charge which is such a way as to cure them? void under national law, although still registered in the land register at this date, the charge in question would be effective and, consequently would be a valid security for the plaintiff in the main proceedings. or

18. By this question, the national court asks whether Article 73 b of the Treaty 22. First, the Court held that 'The effect of precludes national rules requiring a charge national rules such as those at issue in the securing a debt payable in the currency of another Member State to be registered in main proceedings is to weaken the link the national currency. between the debt to be secured, payable in the currency of another Member State, and the mortgage, whose value may, as a result of subsequent currency exchange fluctua- tions, come to be lower than that of the debt to be secured. This can only reduce the 19. In its recent judgment in Trummer and effectiveness of such a charge, and thus its Mayer, the Court clearly replied to this attractiveness.' 12 According to the Court, question in the affirmative. As in the 'Consequently, those rules are liable to present case, that case related to a mort- dissuade the parties concerned from gage that the competent Austrian autho- denominating a debt in the currency of rities had refused to register in the land another Member State, and may thus register on the ground that it was denomi- deprive them of a right which constitutes nated in German marks. a component element of the free movement of capital and payments'. 13

20. The Court so ruled after having found that 'A mortgage of the kind at issue in the 23. Secondly, the Court added that the main proceedings is inextricably linked to a rules at issue might well 'cause the con- capital movement — in the present case, tracting parties to incur additional costs, by the liquidation of an investment in real requiring them, purely for the purposes of property. In addition, it is included within registering the mortgage, to value the debt point IX of the nomenclature of capital in the national currency and, as the case movements annexed to Directive 88/361. may be, formally to record that currency Consequently it is covered by Article 73b conversion.' 14 of the Treaty.' 11

25. It submits that the Court founds its judgment on an incorrect premiss. 28. Further, it should be pointed out that the Landesgericht für Zivilrechtssachen (Regional Civil Court), Vienna, cited Para- graph 3(1) of the Verordnung über wert- beständige Rechte of 16 November 1940, without stating that the right to specify the price of a property by reference to the price 26. Having considered the national rules in of fine gold had disappeared from the the light of Article 73b of the Treaty, the Austrian legal system at the time of regis- Court acknowledged that Member States tration of the charge in question. are 'entitled to take the necessary measures to ensure that the mortgage system clearly and transparently prescribes the respective rights of mortgagees inter se, as well as the rights of mortgagees as a whole vis-à-vis other creditors.' 15 29. In addition, in the absence of indispu- table information on the applicability of this provision, 19 the ruling in Trummer and Mayer should be adhered to. The Court stated that, even if the Commission had declared at the hearing that, according to the information available to it, this Nonetheless, the Court observed that the provision of the rules had fallen into disuse, national rules 'contain an element of it had not been formally withdrawn. 20 uncertainty which may compromise the attainment of [this] objective'. 16 Reference was also made to the right reserved by the law for 'the value of the mortgage to be expressed by reference to the price of fine gold', 17 the price of which 'is currently subject to fluctuations in the same way as 30. The plaintiff in the main proceedings the value of a foreign currency'. 18 adds that the retention of current case-law would imply that all foreign currencies

34. The arguments advanced by the plain- tiff in the main proceedings do not there- 32. The answer given by the Court in its fore appear to be such as to call in question judgment in Trummer and Mayer, in the case-law of the Court. response to an argument relating to the lack of openness resulting from a creditor's right to have a charge registered in a 21 — Ibidem, at paragraph 31.

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V — The temporal scope of Article 73b of A — The applicability of Article 73b of the the Treaty [questions under (2)] Treaty before the accession of the Republic of Austria to the European Union [second question under (2)]

35. By these questions, the national court 39. Even accepting that Community law is asks whether Article 73 b of the Treaty applicable before the accession of a State to applies to a charge that, although registered the European Union, in order for the at a date before the accession of the Community provision relied on to apply, Republic of Austria to the European Union, the provision must also exist and have was still registered at the time of this actually entered into force at the date at accession. which the dispute in question is assumed to be subject to it.

36. The second question under (2) is direc- 40. As the Commission pointed out, the ted at assessing whether Article 73b of the charge in question was registered on Treaty could apply in Austria even before 16 December 1991, whilst Article 73b of the latter's accession to the European the Treaty came into force only on 1 Jan- Union, in particular at the date at which uary 1994, in accordance with Article 73a its application for accession had been of the EC Treaty (repealed by the Treaty of submitted or the date at which the Com- Amsterdam). 22 mission had issued a favourable opinion.

B — Rectification of the charge in question 45. The process followed by a State joining after its registration [first question under the European Union is formalised by the (2)] conclusion of a treaty between the Member States and the States which are candidates, by which the latter 'become members of the European Union and Parties to the Treaties 43. A subsequent rectification may take on which the Union is founded as amended two different forms. Either it operates by or supplemented'. 2 3Consequently, for the way of retroactivity, which assumes that most recent Member States, there are new Article 73 b of the Treaty affects the charge rights and obligations 24 from the entry into in question, although at the date of regis- force of the Treaty, namely from 1 January tration this provision did not exist. Alter- 1995. 25 natively, rectification is the result of immediate application of Article 73 b of the Treaty, that is to say it is brought about by the entry into force of the provision during the existence of the security. 46. Under Article 2 of the Act of Accession included in the Treaty of Accession, the provisions of which form an integral part of 1. Retroactivity of Article 73b of the the latter, 26 'From the date of accession, Treaty the provisions of the original Treaties and the acts adopted by the institutions before accession shall be binding on the new Member States and shall apply in those States under the conditions laid down in those Treaties and in this Act'. 44. It is hard to see how the Treaty could give rise to the same rights and obligations as those of Member States in relation to a non-member country, if it were a candidate for accession to the European Union, before that country's accession. In my opinion, this is particularly true where the 47. Therefore, a treaty of accession creates provision relied on does not exist at the obligations binding new Member States time of the legal act under consideration. It is no different where the legal situations in question are in existence at a time when the 23 — Article 1(1) of the Treaty of Accession. 24 —Ibidem, Article 1(3). new legal system is put in place. In this 25 — Ibidem, Article 2(2). case, it is difficult to imagine that the law 26 — Ibidem, Article 1(2).

2 7 — Case C-122/96 Saldanha and MTS v Hiross [1997] E C R I-5325, at paragraph 14. In the same way, Member States 52. It is therefore appropriate to consider are subject to the provisions of a new treaty only in relation to acts after the entry into force of the latter. See the applicability of this provision to the further Case C-35/98 Staatssecretaris van Financiën v Verkooijen [2000] ECR I-4071 at paragraph 42, in which charge in question, in order to contribute to the Court stated that 'since the facts of the m a i n resolution of the main proceedings. proceedings antedate the entry into force of the Treaty on European Union, it is necessary to consider the compatibility of a legislative provision of the kind at issue in the main proceedings solely with reference to the provisions of the EEC Treaty and Directive 88/361'. 28 — See in particular Joined Cases 212/80 to 217/80 Amminis- trazione delle Finanze dello Stato v Salumi [1981] ECR 2735 from paragraph 8; Case 21/81 Openbaar Ministerie v Bout [1982] ECR 3 8 1 , at paragraphs 13 and 14; Case C-368/89 Crispoltoni [1991] ECR I-3695, at paragraphs 17 and 20, and Case C-34/92 GruSa Fleisch v Hauptzol- 53. However, one preliminary point must lamt Hamburg-Jonas [1993] ECR I-4147, at paragraph 2 2 . be raised, which is that this question is

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relevant only if the charge has not been applicable, a registration of that nature rendered definitively void under Austrian would be wholly void from the outset. Such law. National law determines whether a registration could not therefore be subject continued registration at the time of acces- to subsequent rectification, such as would sion of the Republic of Austria, in the follow from, for example, the entry into absence of any effect resulting in unques- force of Article 73 b of the Treaty. tionable legal validity of the charge, leaves open at least the possibility of rectification. My earlier arguments on the non-retro- activity of Article 73 b of the Treaty, mak- ing national law the only point of reference before the accession of the Republic of Austria, support this view.

57. Assuming that the registration of the charge denominated in a foreign currency was invalid in 1991, it was still in existence at the date of entry into force in Austria of Article 73b of the Treaty, which justifies consideration of the effects of this connect- ing factor with Community law. In any event, the response I suggest be given to the Austrian court is based on the assumption 59. The Court has already ruled on the that the disputed security was still in question of the scope of temporal applica- existence at the time of accession of the tion of certain provisions of a treaty Republic of Austria to the European Union. following the accession of a Member State.

It sheds the main proceedings, on the assumption that retroactivity little light on the interest inherent in the question asked in of the article would be shown. When these proceedings deciding an action for liability. In the final analysis, were brought before the Austrian court, the charge had however, these doubts, which I put to the Court in the already been struck off the register. It has not been shown interest of completeness, are not enough to justify inad- that the legal validity of the registration, if this were t o be missibility of the question. They arise from assumptions made possible by retroactivity of Community law, allows concerning the way in which the national court perceives reactivation of the effects of that registration to the actions for liability, which cannot direct the opinion of the creditor's advantage. In any event, the national court does Court without exceeding its powers. I realise that it is only not examine this possibility at any time. This finding is for the national court, which has the case before it and confirmed, moreover, by the fact that the subject-matter of which must assume responsibility for its forthcoming the main proceedings does not consist at all in a claim for judicial decision, to determine in the light of the particular rectification of the charge or one seeking to revive a n y of circumstances of the case, both the necessity for a

force. If one considers the context described by the questions asked. This does not appear to be the situation in national court in this question, based on retroactivity of the present case, since, as in the judgment in Trummer and Article 73b of the Treaty and its not existing at the time of Mayer showed, the link between the free movement of registration of the charge, this provision did not apply at capital and the type of national rules involved here is clear. the date of registration. It is hard to see how retroactivity In addition, subject to the relevant rules of national law, of a provision, occurring by definition after the a c t in the relevance and significance of which only the national dispute, could help in assessing whether the notary had court can determine with a view to resolution of the main failed in his duties. In the absence of factors capable of proceedings, it does not appear clear that the question characterising a genuine link between the retroactive asked is of a hypothetical nature.

61. That case involved Austrian legislation obliging foreign nationals acting as plain- tiffs in proceedings brought before the 65. A mortgage or charge is a guarantee Austrian courts to deposit, at the request that a debtor obtains for his creditor by of the defendant, a sum intended to guar- subjecting an immoveable property to antee the legal costs (security for the costs enforcement of an obligation. Besides the of proceedings). fact that this security is ancillary to a principal contract, it must be considered that the choice of this guarantee, like that of the property which is its subject, is the result of an agreement between the parties. Its contractual nature is therefore beyond 62. Having established that the Act of doubt. Accession does not lay down specific con- ditions relating to the application of Arti- cle 6 of the Treaty, the Court held that 'the latter provision must be regarded as being immediately applicable and binding on the Republic of Austria from the date of its accession, with the result that it applies to the future effects of situations arising prior 66. Consequently, amendments to the to that new Member State's accession to the applicable legislation are liable to disrupt Communities'. 32 predefined contractual relationships. In my opinion, the consequences which follow for the contracting parties must be scrupu- lously examined in order to avoid threaten- ing the legal certainty to which they are entitled. These consequences are deter- mined on the basis of a certain state of 63. It is important to establish to what positive law, so that the application of a extent the rule laid down by the Court in new legal regime to the contract would in Saldanha and MTS v Hiross may be used in effect alter the basis on which the parties order to respond to the question now under have built their agreement. consideration.

In the context of procedure, in particular, a new rule 'does not actually apply to the facts and documents, which are the subject of the proceedings, but to the proceedings 70. The Court itself made a distinction themselves and only governs future proce- similar in part to the subject of questions dural steps without, in principle, adversely relating to the temporal application of affecting procedure already completed and Community acts of secondary legislation. 36 a fortiori judgments already delivered on the substance.' 34 35 — In this regard, some authors refer to 'material retroactiv- ity', 'indirect retroactivity' and 'quasi-retroactivity' (Hubeau F., 'Le principe de la protection de la confiance légitime dans la jurisprudence de la Cour de justice des 34 — Terré F., Introduction générale au droit 4 th edition, Dalloz, Communautés européenes', Cahiers de droit européen, at paragraph 442. The reservation regarding the lack of a 1983, nos 2 and 3, p. 143); 'improper retroactivity' challenge to procedure already completed is explained in (Gilsdorf P., 'Confiance légitime, droits acquis et rétro- Saldanha and MTS v Hiross, where the deposit of security activité en droit communautaire', Actes du séminaire sur la for costs had been ordered by the court of first instance, jurisprudence de la CJCE dans le domaine de la PAC, before being set aside by the appeal court on the basis of Brussels, 1981, p. 97); even 'pseudo-retroactiviry' (Puisso- the first subparagaph of Article 6 of the Treaty, prompting chet J.-P., 'Vous avez dit confiance légitime?', L'Etat de the introduction of an appeal for 'Revision' before the droit, Mélanges en l'honneur de Guy Braibant, 1996, Oberster Gerichtshof (Supreme Court), the court which p. 581, II, B). made the reference to the Court of Justice. The ruling of the Court of Justice, interpreting the first subparagaph of 36 — See the judgments cited in footnote 28. The judgment in Article 6 of the Treaty as applying to the future effects of Amministrazione delle Finanze dello Stato v Salumi, in situations arising before the accession of the Republic of particular, distinguishes clearly between substantive rules Austria, probably led the Oberster Gerichtshof to confirm and procedural rules (paragraph 9). Most other judgments the position of the appeal court, according to which the refer to rules categorised as rules of substantive law. plaintiff in the main proceedings was relieved of the Although, in the judgment in Crispoltoni, no particular obligation to provide security for costs, the provision of categorisation was given, one can nonetheless observe that which had been ordered before the accession of the this judgment was given with regard to a rule falling in that Republic of Austria. category.

76. The Court found that the 'framework contracts at issue in the main proceedings [had been] entered into in 1984, that is to say even before adoption of the direc- 73. An Austrian social charge institution tive'. 3 8The Court then ruled that Com- had concluded with various entities frame- munity law did not require an alteration to work contracts for the transport of sick existing legal situations, 'where those situa- persons. A third party, not having been tions [had come] into being before expiry authorised to carry out this activity accord- of the period for transposition of the ing to the conditions set out in the frame- directive'. 39 work contracts, applied to the competent Austrian court for a finding that the contract in question should have been subject to a public tender procedure. 77. The judgment in Tögel v Niederöster- reichische Gebietskrankenkasse tells us that the legal regime applicable to contracts, where there is a change in the rules, is that 74. One of the questions asked by the which is in force at the time of their national court related to the issue whether conclusion. The Court here appears to Community law requires an awarding confirm the existence of a boundary authority in a Member State to intervene between new rules capable of amending

37 — Case C-76/97 Tögel v Niederösterreichische Gebietskran- 38 — Ibidem, at paragraph 53. kenkasse [1998] ECR I-53S7, paragraph 48 et seq. 39 — Ibidem, at paragraph 54.

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contracts during their performance and are automatically threatened by every new those which take effect in contexts where legal rule potentially applicable to the legal the requirements of preservation of legal relationship binding them. certainty and legitimate expectations are less threatened, such as that of procedural rules.

82. As for the Community interest in question, it need merely be pointed out that the free movement of capital is a central principle of Community law. As such, it is binding on Member States, owing 78. At this stage, I am not sure whether the to the primacy of Community law over boundary is unquestionable. national law, and particularly on new Member States from their accession. It would not be acceptable for freedom of contract to contribute to the perpetuation of legal situations which are inequitable or maladjusted to the development of the law and legal thinking where, in the case of 79. In order for it to be so, it must be contracts of indefinite duration, that free- shown that the grounds prompting the new dom produces definitive effects. That rules are not such as would justify calling in would form a rigidity of existing law and question private interests relations which delay the reforming effects of Community they aim to govern, mainly on account of law. the underlying Community interest.

83. Such disadvantages can only be justi- fied by the imperative requirements of legal 80. It must also be accepted that the legal certainty and legitimate expectations. In certainty and legitimate expectations of any my opinion, the date of entry into force of a party to a contract during its performance new Community rule must be adapted to

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take into consideration respect for these 87. Accordingly, in the main proceedings, other principles of Community law. the charge denominated in German marks should acquire new validity, at least from the time of accession of the Republic of Austria to the European Union.

86. The legal regime following from Arti- cle 73b of the Treaty does not dictate the use of any specified currency, since it presupposes freedom of choice on this 90. The entry into force of Article 73 b of matter. Consequently, whether the security the Treaty, in place of national rules such as is registered in the national currency, in those at issue in the main proceedings, does accordance with the national rules applic- not therefore appear liable to prejudice the able before the accession of the State in principles of legal certainty and legitimate question, or whether it is denominated in a expectations here. foreign currency, in breach of those rules, the security in question is valid under Community law. The application of Arti- cle 73 b of the Treaty during the existence of the charge may not at any time therefore call in question its validity on the ground that one currency should have been pre- 91. Consequently, Article 73b of the Treaty ferred to another. is to be interpreted as being of immediate

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application to a situation such as that at European Union, has been subject to a issue in the main proceedings, where a redemption procedure after that date, with- charge, although registered before the out prejudice to the principles of legal accession of the Republic of Austria to the certainty and legitimate expectations.

Conclusion

92. In the light of those considerations, I propose that the Court answer the questions referred by the Landesgericht für Zivilrechtssachen, Vienna as follows: