C-76/99

COMMISSION V FRANCE

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 25 May 2000 1

1. In this infringement action, the Commis- I — The legal and factual context sion contests the distinction drawn by the French fiscal authorities between two dif- ferent forms of cooperation contract invol- ving laboratories carrying out biological analyses of medical samples taken from 2. Article 13(A)(1)(b) of the Sixth Directive patients on the instructions of their doctors. provides: In cases where the laboratory providing the sample is obliged by French law to transmit that sample to a more specialised labora- tory to have it analysed, the fixed fee that the analysing laboratory is obliged to pay to the forwarding laboratory is subject to 'Without prejudice to other Community VAT. However, where the transmission of provisions, Member States shall exempt the the sample arises from a voluntary con- following under conditions which they tractual arrangement, it is exempted from shall lay down for the purpose of ensuring VAT. The Commission considers the dis- the correct and straightforward application tinction to be unjustified. In its view, all of such exemptions and of preventing any such inter-laboratory cooperation arrange- possible evasion, avoidance or abuse: ments should fall to be considered as exempt from VAT pursuant to Arti- cle 13(A)(1)(b) of the Sixth VAT Direc- tive. 2

(b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable to those applic- able to bodies governed by public law, 1 — Original language: English. by hospitals, centres for medical treat- 2 — Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to ment or diagnosis and other duly turnover taxes — Common system of value added tax: recognised establishments of a similar uniform basis of assessment ('the Sixth Directive'), OJ 1977 L 145, p. 1. nature;

4. Article L. 760(5), as amended, of the French Code de la Santé Publique (Public 6. Nevertheless, to ensure countrywide Health Code, hereinafter 'the CSP') pro- coverage, patients requiring specialised vides that the transmission of samples analyses are permitted to go to a laboratory between laboratories for the purposes of or nurse of their choice to have a sample analysis may only occur within the frame- taken for the purpose of having such an work of a 'collaboration contract'. Such analysis carried out. The sample-taking contracts must provide for the nature and laboratory (or nurse) must then arrange to means of the transmission that is to occur. 4 transmit the sample to a specialised labora- It would appear that around nine labora- tory for analysis. In the case of samples tories are authorised to carry out such taken by nurses, it would appear that they analyses and that they may only charge a are usually first lodged with pharmacies or reduced fee ('un tarif minoré') to the chemists before being sent on to a specialist transmitting laboratory for the service laboratory. 5 Compulsory collaboration provided. The latter remains, under Arti- contracts in respect of such analyses shall cle L. 760(8) of the CSP, legally responsible hereinafter be referred to as fixed-amount contracts. 3 — See the Instruction of 6 April 1982, Bulletin Officiel de la Direction Générale des Impôts 3 A-7-82 (hereinafter 'Instruction 3 A-7-82'). 5 — The present case has focused exclusively on laboratories as 4 — The amendment permitting the conclusion of collaboration sample-takers. Since the identity of the person taking the contracts w a s seemingly first introduced in 1993 by sample would not appear to have any relevance for Article 44-IV of Law N o 93-121 of 27 January 1993, which Community VAT-law purposes, I shall, for convenience, was then further amended by Article 36 of Law No 94-43 focus hereinafter on the VAT treatment of inter-laboratory of 18 January 1994. arrangements.

7. Article 36 of Law No 94-43 of 18 Jan- sion of samples regarding fixed-amount uary 1994, which amends the final para- contracts were described as payments for graph of Article L. 760 of the CSP, pro- 'a business-support service' ('un service vides that a laboratory carrying out d'apport d'affaires'). 7 reserved special analyses under such fixed- amount contracts must pay the laboratory which took the sample a fixed amount ('un indemnité forfaitaire') for the transmission of the sample. The level of this fee is determined by ministerial order. The (spe- cialised) analysing laboratory bills the 9. The Commission, considering that to patient directly for the analysis carried out subject the fixed fees payable in fixed- on the sample submitted by the transmit- amount contracts to VAT amounted to an ting laboratory. This service is not subject infringement of Article 13(A)(1)(b) of the to VAT. In so far as the sample-taking Sixth Directive, sent, on 7 July 1997, a laboratory bills the patient for the service letter of formal notice to France. 8 of taking the sample, it is also not subject to VAT. However, in accordance with Instruc- tion 3 A-7-82, VAT is due in the case of fixed-amount contracts on the transmission expenses ('honoraires de transmission') payable by the analysing laboratory to the 10. The Commission decided to send a transmitting laboratory. In other words, reasoned opinion to France on 5 March VAT is payable on the fixed fee paid by the 1998, in which it maintained the view analysing laboratory to the sample-taking explained in the letter of formal notice that laboratory. the distinction drawn by the French autho- rities was artificial, since it effectively amounted to distinction based on the means of remunerating the sample-taking laboratory. 9Thus, in the case of collabora- tion contracts, the sample-taking labora- tory was remunerated through the discount II — Background fee charged by the analysing laboratory because it passed on the full fee to patients, while in fixed-amount contracts its remu- neration was derived from the fee paid to it 8. Following a complaint, the Commission by the analysing laboratory. It noted that wrote to the French authorities on 25 Jan- the amounts payable were fixed publicly uary 1996 seeking an explanation of the and that, according to the information basis upon which the fee payable in respect which it had received from the sector in of fixed-amount contracts was subject to question, the levels of payment which had VAT. 6The French authorities replied by been fixed were not excessive. France was citing, inter alia, a French Conseil d'État consequently requested to take the mea- (Council of State) judgment in which the amounts payable in respect of the transmis- 7 — See its judgment in Syndicat Nationale des Médians Biologistes, No 46.088 of 30 April 1986. 8 — SG(97) D/5213. 6 — DG XXI/01 D(97) 00692. 9 —SG(98) D/1921.

11. France replied by letter on 28 May 1998. In its view the Commission's com- plaint was unfounded; while the coopera- III — Observations tion which occurs in the context of a collaboration contract could be classified as a classic form of subcontracting, the forwarding of samples in the context of 13. The Commission argues that the notion fixed-amount contracts amounted to a of 'closely related activities' in the context form of business-support service to the of 'hospital and medical care' under Arti- analysing laboratory that was autonomous cle 13(A)(1)(b) of the Sixth Directive from the analysis service provided by the includes the dispatch of a sample by the latter to the patient. It referred, inter alia, laboratory which has taken it to another to Skatteministeriet v Henriksen 1 0and laboratory for analysis, since the objective Commission v United Kingdom 11 to sup- of taking the sample is that it can be port its view that two separate operations analysed. No distinction should be drawn were involved in fixed-amount contracts. in respect of the fixed-amount contracts; sending the sample to the laboratory per- mitted to analyse it is ancillary and closely linked to, if not an integral part of, the bio- medical analysis of that sample by the latter 12. The Commission, not sharing this view, and falls to be considered as constituting an brought its present application to the Court activity 'closely related' to 'medical care'. on 3 March 1999. It asks that the Court: The Commission disputes the reliance placed by France, in reply to the reasoned opinion, on the Henriksen and Corrective Spectacles case-law. 12 The latter does not support the proposition that the persons carrying out the various operations suppo- — declare that, by levying VAT on fixed sedly 'closely related' to 'medical care' must allowances for the taking of medical be identical. samples for medical analysis, the French Republic has failed to fulfil its obligations under Article 13(A)(1)(b) of Council Directive 77/388/EEC of 17 May 1977 (the Sixth VAT Direc- tive); 14. While taking no view on French law's reservation of the execution of certain 10 — Case 173/88 [1989] ECR 2763 (hereinafter 'Henriksen'). 11—Case 353/85 [1988] ECR 817 (hereinafter 'Corrective Spectacles'). 12 — Loc. cit., footnotes 10 and 11 above.

16. France contends that a series of trans- 15. France bases its defence primarily on actions may only be classified as a single the well-established principle that the scope transaction for VAT purposes if the trans- of exemptions from liability to VAT is to be actions in question are legally indistinct 17 construed narrowly. 15 As regards colla- and effected between the same persons. 18 boration contracts, the fees agreed between Although it is easier to demonstrate the the transmitting and analysing laboratories distinctiveness of two wholly different are calculated so as to permit the former to transactions, such as the supply of goods make a profit. The responsibility for the and services in Corrective Spectacles, that analysis, however, remains with that does not mean, in its view, that two services which are economically, materially and 13 — Reliance is placed on the Opinion of Advocate General Cosmas in Case C-216/97 Jennifer Gregg and Mervyn Gregg v Commissioners of Customs Sc Excise [1999] 16 — The costs to which France refers are those involved in ECR I-4947 (hereinafter 'Gregg'), paragraph 29, where he preparing the sample for transportation and in forwarding stated that '[w]here ... an activity is exercised under the it, as well as the general administrative expenses thereby essential and institutional conditions provided for in the incurred. provisions of Article 13(A) of the Sixth Directive, it is 17— France refers to Case 73/85 Kerrutt v Finanzamt Mön- properly exempt from the corresponding tax charges, chengladbach-Mitte [19861 ECR I-2219 (hereinafter 'Ker- regardless of ownership and its ostensible legal form'. rutt'), paragraph 15, Corrective Spectacles, paragraph 31, 14 — The Commission cites paragraph 9 of the judgment in paragraphs 58 and 59 of the Opinion of Advocate General Case 203/87 Commission v Italy [1989] ECR 371. Darmon in Case C-63/92 Lubbock Fine v Commissioners 15 — It cites, in particular, Case C-2/95 SDC v Skatteministeriet of Customs & Excise [1993] ECR I-6665 and para- [1997] ECR I-3017 (hereinafter 'SDC) and, as regards graph 43 of my own Opinion in Case C-48/97 Kuwait Article 13(A)(1)(b), Case 348/87 Stichting Uitvoering Petroleum (GB) v Commissioners of Customs & Excise Financiële Aeries v Staatssecretaris van Financiën [1989] [1999] ECR I-2323. ECR 1737 (hereinafter 'SUFA'), paragraph 13. 18 — It refers to Henriksen, paragraphs 15 and 16.

IV — Analysis 18. In its reply, the Commission disputes the relevance of the fact that responsibility for the analysis in the special contracts lies with the analysing laboratory. Referring to Card Protection Plan, the Commission 20. The dispute in the present case turns insists that the crucial factor, from the largely on the scope of the principle that patient's perspective, is that the transmis- VAT exemptions should be narrowly inter- sion of the sample does not constitute an preted. It is agreed between the parties that end in itself but, rather, an essential step in the medical analysis of blood or other the carrying out of an analysis. 20 It cau- bodily fluids taken from patients is exempt tions against drawing analogies for the under the heading of 'closely related activ- purpose of one exemption from other ities' to 'hospital and medical care' under Article 13(A)(1)(b) of the Sixth Directive. It

19 — Loc. cit., footnote 15 above, paragraph 65. 20 — Case C-349/96 Card Protection Plan v Commissioners of 21 — The Commission refers in particular to paragraph 66. Customs & Excise [1999] ECR I-973 (hereinafter 'CPP'). 22 — It refers to paragraph 31.

I-256

COMMISSION V FRANCE

22. In my Opinion in CPP, I had occasion to note that a particularly narrow inter- pretation will not be given to the terms of an exemption which has been unambigu- ously laid down. 26 This may be illustrated by the Muys' 27 and SD C cases, which turned on the scope of some of the exemptions contained in Article 13(B)(d), which, broadly speaking, concerns credit 21. In my opinion, while the principle of transactions. The Court held, notwith- strict interpretation is an important princi- ple when considering the scope application of VAT exemptions, it is far from being the 23 — Loc. cit., footnote 20 above, paragraph 15; see also SWA, only relevant principle. Thus, in CPP, the op. cit., footnote 15 above, paragraph 11. Court observed that 'the exemptions pro- 24 — Case C-453/93 [1995] ECR I-2341, paragraph 18. vided for by Article 13 of the Sixth Direc- 25 — Op. cit., footnote 13 above, paragraphs 15 and 16 in particular. tive constitute independent concepts of 26 — Paragraph 24. Community law whose purpose is to avoid 27 — Case C-281/91 Muys' en De Winter's Bouw-en Aanne- divergences in the application of the VAT mingsbedrijf Staatssecretaris van financiën [19931 ECR I-5405 (hereinafter 'Muys").

I-257

OPINION OF MR FENNELLY — CASE C-76/99

I-258

COMMISSION V FRANCE

diagnosis or treatment of a suspected or purposes of the transitional exemption of diagnosed disease or illness, I do not think supplies of buildings and land under Arti- the exemption should apply. 31 cle 28(3)(b) and point 16 of Annex F to the Sixth Directive. Not surprisingly, the Court held that 'transactions [that are] legally separate from the land transaction which was completed with another contractor, cannot be regarded as forming, together with that transaction, a unity capable of 25. France argues that the view taken by its being classified as a single "supply of fiscal authorities to the effect that the buildings and the land on which they transmission of samples in fixed-amount stand"'. 32 In the present context, however, contracts may be regarded as a business- unlike the multifarious services involved in support service for the analysing labora- the construction of a building, there is tory, because the sample-taking laboratory essentially a single service in the medical effectively generates business for the latter, analysis of a sample. The fact that, for precludes it from being classified for VAT public health reasons, the CSP renders the purposes as merely ancillary to or an analysing laboratory responsible to the integral part of the carrying out of the patient for the analysis cannot suffice to analysis itself. In support of this view, justify viewing the forwarding of the sam- France extrapolates two criteria from the ple to that laboratory by a different case-law of the Court; to wit that the laboratory as a separate transaction. parties to the transactions that are sup- posed to constitute a single whole be the same and that those transactions not be legally and economically distinct.

the accessorium sequitur principale princi- as two or more distinct supplies to be ple and held that, where 'the letting of assessed separately'. It held that 'having premises and sites for parking vehicles ... is regard to the diversity of commercial closely linked to the letting of immovable operations, it [was] not possible to give property ... so that the two lettings consti- exhaustive guidance on how to approach tute a single economic transaction', the the problem correctly in all cases'. 3 5It letting of those sites is exempt. 33 The explained that 'where the transaction in condition enunciated by the Court was question comprises a bundle of features and that the two transactions must be closely acts, regard must first be had to all the linked so that they may be regarded as a circumstances in which that transaction unity. The fact that it proceeded to hold, on takes place'. 36 This is relevant for the the facts of Henriksen, that this condition present case, which concerns the notion of was satisfied, inter alia, because 'both 'closely related' services, because, under properties are let to the tenant by the same Article 13(B)(a), the exemption of 'insur- landlord', does not mean that the parties to ance and reinsurance transactions' includes the transactions at issue must always be the 'related services...'. same. 34 I agree with the Commission that the identity of the parties should merely be viewed as an indication that the link between the transactions may be suffi- ciently close to justify their treatment as a single supply.

and one from the sample-taking laboratory, contracts justifies the discrete fiscal treat- does not suffice to unbundle the nature of ment of such contracts. 39 It is noteworthy, the overall single sample-analysis service as regards the dual billing in the case of provided to the patient. fixed-amount contracts, that it has not been suggested that the overall amount of the two bills would generally exceed that of the single bill received where a collaboration contract was concluded between the laboratories. More generally, I would regard France's reliance on CPP in parti- 30. I am therefore satisfied that the sample- cular to be somewhat misconceived. In taking and transmission services may be both collaboration and fixed-amount con- regarded as 'ancillary services' which tracts there is no bundle of services akin to should 'share the tax treatment of the those considered in CPP which the Com- principal service', to wit that of the bio- mission claims should be treated identically medical analysis. They therefore satisfy the for VAT. On the contrary, the Commission's condition of being 'closely related' to application is based on the simple observa- 'medical care' for the purpose of Arti- tion that the taking and forwarding of cle 13(A)(1)(b) of the Sixth Directive. The secure samples are fundamental and inte- Court stated in CPP that '[A] service must gral steps in the process of providing a be regarded as ancillary to a principal medical analysis service. The role of the service if it does not constitute for custo- sample-taking laboratory is not compar- mers an aim in itself, but a means of better able, as France submits, to that of an agent enjoying the principal service supplied'. 38 who introduces business to the analysing The sterile taking of uncontaminated sam- laboratory. The mere fact that under the ples and their secure shipment to the CSP the sample-taking laboratory is not analysing laboratory clearly constitute two permitted to carry out certain analyses but fundamental and integral steps in the must forward samples in those cases to a conduct of a proper analysis, which is the specialist laboratory does not diminish the principal public interest service at issue. medical-care-related nature of its work.

necessary and sufficiently close link in the contract is not in issue, it is also important chain leading to the actual carrying out of to consider the economic fundamentals the analysis would potentially mean that all underlying the supposed difference in nat- the goods supplied to the sample-taking or ure of the two types of contract at issue. In analysing laboratories, which are later used other words, for the fiscal distinction by them for the purpose of their laboratory drawn by the French fiscal authorities to work, would also be covered by the exemp- be justified, it should be founded upon a tion. 40 I do not accept this 'floodgates' plausible economic distinction. France form of argument. I agree with the Com- maintains that there is such a distinction mission that the general principle that between the fee which the analysing labora- exceptions from liability to VAT be inter- tory must pay to the sample-taking labora- preted narrowly would preclude such a tory in a fixed-amount contract and the broad construction of the exemption. discounted-fee system operating in respect Goods supplied to the laboratories by third of collaboration contracts, whereby the parties who take no direct part in the analysing laboratory charges a reduced fee various steps involved in the taking and to the sample-taking laboratory which then carrying out of a bio-medical analysis of a includes the full analysis fee on the bill it sample would not therefore fall to be later charges to the patient. This distinc- considered within its scope. As the Court tion, if it exists at all, amounts in effect to pointed out in respect of Article 13(A)(1)(c) one that is without a difference. As the of the Sixth Directive in Corrective Specta- Commission's agent pointed out at the cles, 'apart from minor provisions of goods hearing, for economic purposes the two which are strictly necessary at the time methods of payment are identical. In the when the care is provided, the supply of case of fixed-amount contracts, the patient medicines and other goods, such as correc- receives a bill from the sample-taking tive spectacles prescribed by a doctor or by laboratory which will only include a charge other authorised persons, is physically and for the taking of the sample. The Court was economically dissociable from the provi- explicitly informed at the hearing by the sion of the service'. 41 agent for France that the analysing labora- tory is precluded from passing on the financial burden of the fee paid by it to the sample-taking laboratory in the sepa- rate bill that it later presents to the patient for the analysis. Thus, the patient will apparently pay that laboratory fully for the analysis only. 42 Contrariwise, in collabora- tion contracts, the bill received from the sample-taking laboratory by the patient will include both a full analysis fee and a fee for the taking of the sample. Never- 33. Finally, in a VAT case, where the public theless, the purpose in the fixed-amount health distinction made by the CSP contract and the collaboration contract of, between the two types of collaboration

respectively, the fixed amount and the forwarding of the sample to the analysing discounted fee is indistinguishable, to wit laboratory is compulsory and the latter is to remunerate the sample-taking laboratory placed directly in a relationship with the for the role it plays in the analysis process. patient, by being made legally responsible There is consequently no economic ratio- for the analysis and for billing him (at least nale for differentiating between them. for that part of the overall analysis proce- dure which comprises the actual medico- biological analysis), does not justify the view taken by the French fiscal authorities that the transmission of samples in such contracts may be regarded as a discrete 34. I am therefore satisfied that no mean- transaction for VAT purposes, with the ingful distinction, for VAT purposes, may result that the fixed amount payable there- be based on the different structure of fixed- for may be subject to VAT. The order amount and collaboration contracts. The sought by the Commission should therefore fact that in fixed-amount contracts the be granted.

V — Conclusion

35. Accordingly, I recommend that the Court:

(1) Declare that, by levying VAT on fixed allowances for the taking of medical samples for medical analysis, the French Republic has failed to fulfil its obligations under Article 13(A)(1)(b) of Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment;

(2) Order the French Republic to pay the costs.