C-62/00

OPINION OF MR GEELHOED — CASE C-62/00

OPINION OF ADVOCATE GENERAL GEELHOED delivered on 24 January 2002 1

I — Introduction monisation of the laws of the Member States relating to turnover taxes — Com- mon system of value added tax: uniform basis of assessment2 (the Sixth Directive) provides as follows: 1. In this reference for a preliminary ruling the Court is called upon to reply to the question whether the removal with retro- spective effect of a right under national law to reclaim sums paid, by way of VAT, more than three years before the claim is made is 'A. Within the territory of the country compatible with Community law. In this case the question is raised in respect of a period during which a Member State failed to implement properly in its domestic legislation a directly effective provision of a directive. 1. The taxable amount shall be:

(a) in respect of supplies of goods and services other than those referred to in I I — The legal framework (b), (c) and (d) below, everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the cus- tomer or a third party for such supplies including subsidies directly linked to the price of such supplies; Community law

2. Article 11 of Sixth Council Directive ...'. 77/388/EEC of 17 May 1977 on the har-

1 — Original language: Dutch. 2 — OJ 1977 L 145, p. 1.

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made at any time before the expiry of 6 erroneously by way of tax, it was the years from the date on which the Government's intention to introduce a claimant discovered the mistake or three-year limitation period for retrospec- could with reasonable diligence have tive refund claims, applying to VAT and to discovered it. other indirect taxes, with effect from 18 July 1996.The proposed change in the law was intended to take effect from the date of the announcement so as to prevent the change from being deprived of its effect by the passage of time before the parlia- mentary process could be concluded.

(7) Except as provided by this section, the Commissioners shall not be liable to repay an amount paid to them by way of value added tax by virtue of the fact 8. On 4 December 1996, the House of that it was not tax due to them. Commons voted in favour of the govern- ment's budget proposals (including the proposal announced on 18 July 1996, which was included in the Finance Bill as section 47). s

6. Section 24 of the Finance Act 1989 was 9. The Finance Act 1997 was enacted on repealed and replaced by section 80 of the 19 March 1997. Section 47(1) of the Act 1994 Act with effect from 1 September amended section 80 of the 1994 Act. 1994. The material parts of section 80 are Section 80(5) was repealed in its entirety. worded in the same way as section 24 save Section 80(4) was amended so as to provide only that, in the 1994 Act, 'VAT' appears where the words 'tax' and 'value added tax' as follows: are used in the Finance Act 1989.

14. At all material times, M&S sold gift vouchers to corporate purchasers at a price that was less than the face value of the 11. Sections 47(2) to (5) of the Finance Act vouchers. The gift vouchers would then be 1997 also contained transitional provi- sold or given away to third parties who sions. Under those provisions, the three- could redeem them by returning them to year limitation period does not apply to M&S and receiving, in return, goods any claim made after 18 July 1996 that was equivalent in price to the face value of the consequential upon a (successful) challenge voucher. In December 1990, M&S sought to a decision of the Commissioners, as long to persuade the Commissioners that it as the legal proceedings in which the should account to the Commissioners for decision was challenged had been brought VAT on the sums received by M&S when it before 18 July 1996. In that event, the sold the vouchers, and not on their face claim would be limited only to amounts value. In January 1991, the Commissioners paid (by mistake) to the Commissioners less ruled that M&S should account for VAT than three years before the commencement on the face value of the vouchers. M&S of those proceedings. proceeded to do so until the Court of Justice gave judgment in the Argos Dis- tributors 3 case. In that case, the Court held that Article 11A(1)(a) of the Sixth Directive must be interpreted as meaning that, when a supplier has sold a voucher to a buyer at a discount and promised subsequently to accept that voucher at its face value in full III — Facts of the main proceedings or part payment of the price of goods purchased by a customer who was not the buyer of the voucher, and who does not normally know the actual price at which

17. From April 1973 to October 1994 M&S had also paid too much VAT in respect of teacakes as a result of the wrongful application to the sale thereof of 20. M&S requested a review of the Com- the standard rate of VAT instead of the rate missioners' decision to apply the three-year of zero per cent which was in fact appli- limitation period to both its claims. How- cable. This error was acknowledged by the ever, the Commissioners maintained their Commissioners in a letter of 30 September previous position.

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21. On 15 April 1997 M&S challenged under domestic law of a right to reclaim that decision before the VAT and Duties payments which should not have been Tribunal. On 22 April 1998 that tribunal made, of that right. dismissed M&S's application. M&S appealed to the High Court, which also dismissed its application by decision of 21 December 1998. M&S then appealed to the Court of Appeal.

24. That consideration prompted the Court of Appeal to submit the preliminary ques- tion.

22. By judgment of 14 December 1999, the Court of Appeal dismissed M&S's appeal relating to the claim for repayment in respect of the teacakes and to the gift IV — The preliminary question vouchers claim for the period August 1992 to August 1996 inclusive.

Preliminary observations: scope of the question

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30. The order for reference does not men- requested that consideration be given to tion the claim for repayment of VAT this matter of principle, whether by means erroneously paid in respect of teacakes. of an obiter dictum or by interpreting the None the less, a similar problem arises in scope of the preliminary question more the case of teacakes. In that connection, widely. too, the question arises as to whether individuals have rights under Community law where a directive has in itself been correctly transposed into national law but that law is applied in a manner clearly inconsistent with the scope of the directive.

many occasions. See also, more recently, Cases C-412/96 Commission and M&S also cite the Kamuun Liikenne and Pohtolan Lukenne [1998] ECR 1-5141, paragraphs 23 and 24; C-235/95 Dunton Opinion of Advocate General Jacobs in and Froment [1998] ECR I-4531, paragraphs 25 and 26 and Commission v Germany 5 where he stated, C-77/97 Unilever (1999] ECR I-431, paragraph 22. 7 — In the judgment of the Court of Appeal the following at paragraph 14 of his Opinion, that it was passage is cited from the High Court's judgment: 'It is, to not sufficient for the Member States simply use the argot [sic] of the European Court of Justice, settled case law that an individual may assert an enforceable right to incorporate the terms of a directive into on the basis of a Directive only where: 1.

'. . . If what [the submission made by M&S] is intended to referring court's reasoning is that a convey is that an individua! can continue to assert his rights in the national courts under the Directive during such time Member State could evade obligations as the Directive has been properly transposed I would reject under a directive by implementing it cor- it. So far as the teacakes and late vouchers claims are concerned, M&S, because they cannot rely on any right rectly but then proceeding to misapply it. given to them by the Treaty or regulations made thereunder, lack any basis upon which to found a complaint that there Both the Commission and M&S have has been an infringement of the general principles of Community law. I therefore conclude that, save as to the early voucher claim, there is in the present case no right in play upon which the general principles of Community law could bite. So far as the teacakes claims and the latter 5 — Opinion in Case C-237/90 Commission v Germany 119921 vouchers claims are concerned, I would like to dismiss the ECR I-5973. appeals.

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33. Two issues of principle arise here. The Community legislature is and continues to first is the question as to when a directive be the decisive factor in determining the may be deemed to have been correctly question whether the Member State has or implemented, and the second is whether has not correctly implemented the direc- individuals may continue to rely on rights tive. conferred on them by a directive after the directive has been implemented in national legislation.

8 — Council Directive 91/676ÆEC of 12 December 1991 con- cerning the protection of waters against pollution caused by 10 — Save where the directive no longer needs to be transposed nitrates from agricultural sources (OJ 1991 L 375, p. 1). because the matters covered therein are already provided for in the legislation in force in a Member State. 9 — Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and 11 — See also in that connection Opinion of Advocate General flora (OJ 1992 L 206, p. 7). Jacobs, already cited at footnote 5.

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38. Accordingly, the question arises were able to rely on a directive in cases whether individuals may continue to where the national legislature has acted invoke rights under a directive after it has incorrectly, that is to say inconsistently been transposed into national law. with the directive, but not in cases where the administrative authority of a State acts in a manner which is inconsistent with the directive in applying the transposed national legislation.

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to ensure that the result contemplated by courts are acting in breach of Community the directive is secured. law. Thus, the United Kingdom is failing correctly to implement the relevant part of the Sixth Directive.

43. More specifically, it appears from the documents before the Court that Article 11A of the Sixth Directive 1 2was Assessment of the preliminary question in fact correctly transposed by section 10 of the Finance (No 2) Act 1992, but that those legislative provisions were construed and applied in such a way as to produce a result inconsistent with the directive. The obli- 45. The referring court seeks a reply to the gations imposed by directives on Member question whether the retrospective effect States do not concern only their legislative which the United Kingdom legislature gave competence but extend also to their admin- to its legislation in order to limit the period istrative and judicial competences. It is in respect of which claims for repayment of therefore in principle a matter for the unduly paid VAT may be made is com- United Kingdom tax authorities to reim- patible with the principles of effectiveness burse amounts received otherwise than in and the protection of legitimate expec- accordance with the directive and it is for tations. the national courts to ensure that individ- uals can vindicate rights conferred on them by Community law.

48. In the present case it is established that between May 1991 and July 1992 M&S overpaid VAT on the basis of national legislation in which Article 11A of the Sixth 50. In its written observations and at the Directive was incorrectly transposed. hearing the United Kingdom Government contended that, since the directive contains no provisions applicable to requests for repayment of VAT paid in breach of Community law by taxable persons, the United Kingdom's obligation to repay can stem only from the applicable national legislation. Under the applicable national 49. It is likewise established, in my view, legislation the right to repayment, it is that under the Court's settled case-law contended, arises only upon a claim in that M&S is entitled to repayment of VAT paid connection being made within the period in breach of provisions of Community law. prescribed and after verification by the In that connection it must be stated that the Commissioners as the competent authority. right to repayment of amounts charged by a Only after these procedural requirements Member State in breach of the rules of had been satisfied, could M&S have a Community law is the consequence and claim for repayment, thus giving rise to a complement of the rights conferred on corresponding obligation on the part of the individuals by the Community provisions United Kingdom. In the United Kingdom prohibiting charges having an effect equiv- Government's view the following inference alent to customs duties and the application may be drawn therefrom. At the time of national charges in a discriminatory when, on 18 July 1996, the proposed fashion as interpreted by the Court (judg- legislative amendment to shorten with ments in Cases 199/82 San Giorgio [1983] retroactive effect the limitation period ECR 3595, paragraph 12, 309/85 Barra applicable to claims for repayment was [1988] ECR 355, paragraph 17 and presented to Parliament, M&S merely had C-62/93 BP Supergas [1995] ECR I-1883, a procedural right to make a claim in paragraph 40). The Member State is there- respect of sums mistakenly paid by it to the fore as a matter of principle required to Commissioners by way of VAT. Since repay charges levied in breach of Commu- M&S, as at that time, had made no request nity law (Joined Cases C-192/95 to C-218/95 Comateb and Others v Directeur Général des Douanes et Droits Indirects 13 — Case C-343/96 Difc.v/rørt 11999| ECR I-579, paragraph 23.

54. The principal rule, recently reaffirmed in the judgment in Roquette Frères,14 is that 51. In light of the Court's case-law repro- duced above I consider the view of the matter taken by the United Kingdom Gov- ernment to be untenable. A deliberate distinction is drawn, in the Court's case- law, between the right, or claim, to repay- ment of amounts paid to national auth- 'in the absence of Community rules con- orities in breach of Community law and the cerning the refunding of domestic taxes national provisions giving effect to that which have been wrongly levied, it is for right or claim. Those provisions may apply the domestic legal system of each Member to the procedure to be followed, desig- State to designate the courts having juris- nation of the authority charged with repay- diction and to determine the procedural ment, the period within which the claims conditions governing legal proceedings must be made and verification thereof. seeking to safeguard the rights which citizens derive from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature, and may not make it impossible in practice to exercise rights which the national courts have a duty to protect (Case 33/76 Rewe v Landwirts- chaftskammer für das Saarland [1976] 52. The referring court's question does not ECR 1989, paragraph 5; Case 45/76 Comet therefore concern the existence of M&S's v Produktschap voor Siergewassen [1976] claim to repayment of VAT unduly paid in ECR 2043, paragraphs 13 and 16; Case respect of the gift vouchers but the con- 61/79 Amministrazione delle Finanze dello ditions imposed by national legislation Stato v Denkavit Italiana [1980] ECR 1205, subject to which effect is given to that paragraphs 25 and 29; and Case 240/87 right. More specifically, it concerns the Deville v Administration des Impôts [1988] issue whether the limitation with retro- ECR 3513, paragraph 12).' active effect of the period in respect of which claims may be made is compatible with the principle of effectiveness, as laid 14 _ C a s e C-88/99 Roquette Frères [2000] ECR I-10465, down in the Court's case-law. paragraph 20.

55. The latter condition, namely that the charges to be contrary to Community law, exercise of the rights which the national of provisions which render the conditions courts have to uphold may not be rendered for repayment applicable to those duties impossible in practice, is the embodiment and charges less favourable than those in Community law of the principle of which would otherwise have been applied, effectiveness. provided that the duties and charges in question are not specifically targeted by that amendment and the new provisions do not make it impossible or excessively difficult to exercise the right to repay- ment.' 16 56. At paragraph 30 of his Opinion in the Roquette judgment cited above Advocate General Ruiz-Jarabo Colomer reviewed the cases in which the Court has acknowl- edged, in the interests of legal certainty which protects both the taxpayer and the national authority concerned, that the set- ting of reasonable limitation periods for 58. However, the facts underlying this bringing proceedings is compatible with preliminary-reference procedure differ Community law. In this connection, the from those in the judgments cited above Court has decided that such periods cannot by virtue of the fact that the United be regarded as rendering impossible in Kingdom legislature retroactively short- practice or excessively difficult the exercise ened the limitation period from six to three of rights conferred by Community law, years. That affected not only taxable per- even if the expiry of those periods necess- sons who expected under the existing rules arily entails the dismissal, in whole or in to have ample time to make their claims but part, of the action brought. even taxable persons who before the date on which the announcement of a change in the law was made (18 July 1996) or prior to the date on which it was enacted (19 March 1997) had made claims for repayment of unduly levied tax. 57. More particularly, in its judgment in Aprile II, the Court ruled that shortening the limitation period for claims for repay- ment of taxes paid in breach of the provisions of Community law was not as such incompatible with the principle of effectiveness. 1 5That judgment was re- affirmed in Dilexport in the following 59. The facts underlying the present case terms: 'Community law does not preclude reveal an unmistakable analogy with those the adoption by a Member State, following in the Barra case. 17 In that case the Belgian judgments of the Court declaring duties or legislature retroactively limited the period

60. In the Deville 19 judgment the Court reaffirmed its judgment in Barra. That case concerned a special fixed tax on motor vehicles which the Court had previously held to be contrary to Article 95 of the EC Treaty (now Article 90 EC). Following that 62. In my view the principle of effective- judgment, the relevant national legislation ness does not merely preclude the retro- concerning claims for repayment of the active limitation of claims for recovery in unduly levied tax was amended. On this the case of persons who under the currency point the Court ruled in paragraph 13 of of the previously applicable rules had the judgment that 'a national legislature already made a claim for repayment, as in may not, subsequent to a judgment of the the case of M&S, but also of claims which Court from which it follows that certain could still validly have been made under the legislation is incompatible with the Treaty, terms of the previously applicable rules. adopt a procedural rule which specifically The claims which it had been open to them reduces the possibilities of bringing pro- to assert by diligent use of the possibilities ceedings for recovery of taxes which were of the 'old' rules are rendered ineffective in wrongly levied under that legislation'. In advance under the more restrictive rules such a case the exercise of the rights which introduced with retroactive effect. In its judgment in Barra the Court expressly protected the rights of persons who until then had not made any claim for repayment 18 — Case 293/83 Gravier [1985] ECR 593. 19 — Cited in paragraph 54. of amounts unduly paid. In the present

case, as well, there is every reason for doing afforded to individuals by the principles of so on the same grounds. equivalence and effectiveness. As a matter of Community law M&S could legitimately expect only that its claim would be dealt with under domestic law in accordance with those principles. Since it is not dis- puted that M&S's claim was dealt with in 63. The reasoning here followed applies accordance with the applicable English mutatis mutandis also to claims by individ- law, it would be sufficient for it to rely on uals to repayment of VAT levied in breach the principles of effectiveness and equival- of directly effective provisions of Commu- ence. As a matter of English law, the United nity law, where those provisions have Kingdom Government further argues, indeed been transposed correctly into M&S had no legitimate expectation that national law but are applied in a manner its claim for repayment would be dealt with inconsistent with the scope of the directive. on the basis of the law in force at the time when the payments in question were made to the tax authorities. On this point the United Kingdom Government refers to its view set out above according to which the Commissioners as the competent tax auth- 64. The referring court also asks whether ority could incur liability for repayment the retroactive limitation of the period in only after a claim in that connection had respect of which individuals may make been made and subjected to verification. their claims for repayment of amounts Under English law the applicable legis- unduly paid is in breach of the principle lation may be amended even retroactively of the protection of legitimate expectations. between the time when amounts are unduly paid and a decision on a claim for repay- ment. Accordingly, M&S cannot, it is contended, rely on the principle of pro- tection of legitimate expectations. In this connection the United Kingdom Govern- 65. M&S and the Commission consider ment recalls that the announcement of the that this question should be answered legislative amendment was made on affirmatively. They rely in that connection 18 July 1996, whilst M&S made its request on the judgment in Meiko-Konseivenfab- for repayment only on 31 October 1996. It rik.20 could not therefore expect to be immune from application of the new limitation period for the lodging of claims, which had been halved to three years.

69. It follows from the foregoing that, contrary to the United Kingdom Govern- ment's contentions, the principle of the — first of all, the Court has held in a series protection of legitimate expectations does of judgments that that principle, which indeed constitute a supplementary factor in stems from the principle of legal cer- relation to the facts underlying the main tainty, forms part of the Community proceedings. For these have to do with the legal order. 22 The principle requires way in which the national authorities have legal rules to be precise and legal situations and relationships governed 23 — See for example Case 245/81 Edeka [1982] ECR 2745, by Community law to be foreseeable; Case C-63/93 Duff and Others [1996] ECR 1-569 and Case C-22/94 Irish Farmers Association and Others [1997] ECR 1-1809. 24 — The prohibition of retroactive effect was laid down in Case 21—Joined Cases 201/85 and 202/85 Klensch and Others 98/78 Racke [1979] ECR 69. To the same effect was the [1986] ECR 3477, paragraphs 8 to 10; Case 5/88 Wachauf judgment in Meiko-Konservenfabrik (cited at footnote 20, [1989] ECR 2609, paragraph 19 and Case C-381/97 paragraph 12). Belgacodex [1998] ECR 1-8153, paragraph 26. 25 — See, for example, Joined Cases C-143/88 and C-92/89 22 — See, for example, Case 74/74 CNTA v Commission [1975] Zuckerfabrik Siiderdithmarschen and Zuckerfabrik Soest ECR 533 and Case 112/77 Töpfer v Commission [1978] [1991] ECR 1-415 and Case C-183/95 Affisch [1997] ECR 1019. ECR I-4315.

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71. To give retroactive effect to such a limitation is inconsistent with that principle unless there is a compelling justification relating to the public interest. The justifi- catory grounds adduced by the United 74. The Commission submits that the right Kingdom Government in support of its of access to the courts enshrined in measure are inadequate. It is true that Article 6(1) of the ECHR precludes the under the 'old' rules applicable prior to retroactive shortening — in order to limit 18 July 1996 there were certain risks to the the repayment liabilities of the tax auth- United Kingdom Exchequer but the extent orities — of the period for claiming repay- of those risks could logically be no greater ment. In that connection it cites certain than the amount of the unjustified enrich- judgments of the European Court of ment on the part of the Exchequer by Human Rights which show that that court means of VAT levied in breach of the rules accepts certain restrictions on access to the of Community law. The desire to retain for courts as being compatible with the normal the Exchequer amounts paid unduly by the operation of the judicial system but that

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from would add little to the case. Since the raised in that regard, I would suggest that referring court makes no request in this the Court should not deal with the supple- connection and there is no reason, from the mentary arguments adduced by the Com- standpoint of the protection of human mission and M&S based on the ECHR and rights, to deal with the additional matters Protocol No 1 thereto.

VI — Conclusion

78. In light of the foregoing I suggest that the Court should reply as follows to the Court of Appeal:

Where a Member State has received overpayment of tax as a result of the incorrect transposition and/or application of directly effective provisions of the Sixth 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, such as Article 11A(1), the retrospective shortening of the limitation period laid down for recovery of such overpayment is incompatible with the principle of effectiveness and with the principle of the protection of legitimate expectations.