C-235/00

CSC FINANCIAL SERVICES

O P I N I O N OF ADVOCATE GENERAL DÁMASO RUIZ-JARABO C O L O M E R delivered on 12 July 2 0 0 1 1

1. The question which the High Court of consisting in the receiving and processing of Justice of England and Wales, Queen's telephone calls on their behalf, through a Bench Division (Crown Office) — herein- 'call centre'. after 'the High Court' — has referred to the Court of Justice concerns the interpre- tation of one of the exemptions for domes- tic transactions provided for by the Sixth Value Added Tax Directive 2 (hereinafter 'the Sixth Directive').

4. This service is, essentially, as follows: a company advertises its financial products, 2. The issue in the proceedings before the giving the telephone numbers of CSC, United Kingdom court is whether the which, using specialised staff, provides the services provided by CSC Financial Services information requested and, if appropriate, Limited ('CSC') to a financial institution processes investment applications, but are subject to value added tax ('VAT'). In without providing advice 3 or completing particular, the High Court wishes to ascer- the transaction. Up to this point, all tain whether those services qualify for the contacts between the company offering exemption contained in Article 13B(d)(5) the product and the public are channelled of the Sixth Directive. through the call centre.

I — Facts, the main proceedings and the question referred to the Court 5. CSC has provided Sun Alliance Group 4 ('Sun Alliance') with services like those described above in relation to a financial 3. CSC is a company which offers inter- product named 'Daisy Personal Equity mediary services to financial institutions Plan' or 'Daisy PEP' (hereinafter 'Daisy'),

8. The payment for the services provided by CSC to Sun Alliance comprised two components: one was fixed and the other varied according to the volume of sales and 6. Sun Alliance placed advertisements for the number and duration of the telephone Daisy securities in the media, giving the calls. CSC call-centre number. Potential investors who telephoned that number were given information by the operator on behalf of Sun Alliance. 6If callers decided to invest, CSC processed the applications and its staff verified that the forms had been properly 9. CSC appealed against the decision of the filled in, that the applicants satisfied the Commissioners of Customs and Excise of eligibility requirements and that the pay- 21 April 1997 that the services which it ment was enclosed. This same procedure supplied to Sun Alliance were not exempt was followed for cancellations. 7 from VAT. The appeal was upheld by the London Value Added Tax and Duties Tribunal by judgment of 11 February 1998, which interpreted the exemption provided for in Article 13B(d)(5) of the Sixth Directive as applying to the stages required to be completed prior to the issue or transfer of securities.

7. The formalities for issuing and transfer- ring securities, and for cancellations, were

I - 10240

CSC FINANCIAL SERVICES

11. The High Court, entertaining doubts as II — The Community legislation to be to the scope of the exemption in the interpreted abovementioned provision of the Sixth Directive, referred the following questions to the Court of Justice for a preliminary ruling:

12. Title x of the Sixth Directive deals with exemptions. Article 13 is concerned with exemptions within the territory of Member States, distinguishing between those for certain activities in the public interest (part A), those deriving from aspects of economic 'How is the exemption provided by article and financial policy (most of those included 13B(d)(5) in respect of "transactions in in part B) and those which certain writers securities" to be interpreted? In particular, have referred to as 'technical exemptions' 9 (those set out in subparagraphs (c) and (f) of part B and in part C. The second group includes transactions in securities.

(1) does the term "transaction in securi- ties" apply only to a transaction in which the party's legal rights or obliga- 13. The provision of which the High Court tions in respect of the security are seeks an interpretation from the Court of altered? Justice reads as follows:

(2) does the term "transactions, including 'Exemptions within the territory of the country negotiation, in securities" apply to a service of providing information to potential investors and receiving and processing applications from investors for the issue of a security (but not including preparing and dispatching the document of title to the security), where that service is provided to a person who has legal rights or obliga- tions under the security by a person who does not have any legal right or 9 — L.M. Pérez Herrero, La Sexta Directiva Comunitaria del IVA, Cedecs Editorial, S.L., 1st ed., Barcelona, 1997, obligation under the security?' pp. 204 and 211 to 213.

IV — Examination of the question sub- mitted 5. transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associa- tions, debentures and other securities, 16. The points raised by the High Court excluding: concern 'transactions in securities' and, in particular, the question whether that expression must cover only action which affects the substance of the legal relation- ship inherent in the security and whether it extends to services like those provided by — documents establishing title to goods, CSC.

I - 10242

CSC FINANCIAL SERVICES

1. Interpretative criteria seeks an interpretation embodies an eco- nomic incentive with a negative tinge, 14 which is defined exclusively by reference to criteria of an objective nature. It is the transactions which are exempt, not the 17. The answer to be given by the Court of persons who carry them out, even if the Justice must take as its starting point the latter are the beneficiaries. 15 fact that, as a general rule, VAT applies to all supplies of goods and services effected for consideration within the territory of a Member State by a taxable person. 10 Dispensation is the exception 1 1and, like every mitigation of the obligation to pay tax, must be restrictively interpreted. 12 On the contrary, any exclusion from an excep- tion, in so far as it implies a return to the general rule, escapes the principle of strict interpretation. 13

In such cases, where regard is had to the circumstances of the taxable person, the scope of the exemption is subjective tions provided for in Article 13 of the Sixth and does represent a step backwards: it does not run Directive are autonomous concepts of counter to the general rule that tax should be levied but rather concentrates on higher values (a classic example is Community law. 18 the setting of a minimum threshold for exemption from income tax). From this standpoint, the exemption is not an exception to the general rule but rather a specific application of it: it is not an 'exceptional provision' but rather a 'special provision'. In contrast, other exemptions 14 — The taxable person is accorded a fiscal advantage in that exist which do indeed constitute genuine exceptions, being he is not required to pay the tax which would otherwise be inspired by reasons of a lower order, responding to non- payable. fiscal objectives and not conforming with axial principles 15 — In my Opinion in SDC, cited above, I referred to the of the legal order but rather with contingent criteria objective nature of the exemptions contained in Arti- generally forming part of economic policy. This group cle 13B of the Sixth Directive (see point 31 et seq.).

Directive. 17 — An objective which is attained, fundamentally, by recourse 12 — See, by way of typical examples, Case C-2/95 SDC [1997] to the criterion of strict interpretation to which I have ECR I-3017, paragraph 20; Case C-359/97 Commission v referred. United Kingdom [20011 ECR I-6355, paragraph 64; and Case C-240/99 Skandia [2001] ECR I-1951, paragraph 32. 18 — See Case C-349/96 CFP [1999] ECR I-973, paragraph 13. See also SDC (paragraph 21) and Commission v United 13 — See Case C-346/95 Blast [1998] ECR I-481, paragraph 19. Kingdom (paragraph 63), both cited above.

24. If I move away from formal aspect and focus on a more substantive issue, 22 such 22. The romance language versions use a as identification of the aim pursued by the word of rather limited meaning, 20 deriving Community legislature in granting an from the latin verb operari, which means exemption from the tax obligation where 'to act', 'perform' or 'work'. the taxable event is any of the operations referred to in Article 13B(d) of the Sixth Directive, I find that the exemption can have no rationale other than that of liberating from the tax regime transactions which, in view of their frequency23 and 23. For its part, the English text of the habitual nature, are a central component of Sixth Directive uses a word which, though also of Latin origin, is more specific and therefore more expressive. The word used 21 — That is the implication of the general legal principle pacta sunt servanda, embodied in the laws of certain Member is 'transactions' which derives from the States. See, for example, Article 1089 of the Spanish Civil Code and Articles 1101 and 1134 of the French and Latin word transactus, the participle of the Belgian Civil Codes; Article 1134 of the corresponding Luxembourg Code is to the same effect. The Portuguese Civil Code also regards the contract as a source of obligations (Article 405 et seq.). Articles 305 and 248 of the German and Netherlands Civil Codes, respectively, 19 — See point 41 and footnote 13 in that Opinion. The SDC have the same scope. judgment is pivotal to the parties' arguments, to such an extent that the present case largely boils down to applying 22 — In SDC, the Court of Justice said that the terminological the principles expounded in it to the services supplied by differences between the various language versions of the CSC to Sun Alliance. Sixth Directive are such that an exclusively textual 20 — French: opérations; Italian: operazioni; Portuguese: oper- interpretation should be not adopted (paragraph 22). ações and Spanish: operaciones. 23 — See point 42 of my Opinion in SDC, cited above.

the financial systems and, therefore, of the 27. For reasons connected with both the economic activities of the Member States. grammatical sense and the purpose of the The aim pursued is to avoid a burden on provision of which an interpretation is certain services which would be liable to sought from the Court of Justice, I consider hamper the functioning of the market. 24 that the 'transactions in securities' referred to an Article 13B(d)(5) of the Sixth Direc- tive are those transactions which are cap- able of creating, changing or extinguishing rights and obligations of the parties in relation to securities. 25. That being the aim of the provision, in my opinion the only transactions to be exempted must be those whose exclusion is essential in order to attain that result, 25 in other words those which are capable of altering a legal position by the creation, 28. CSC made a valiant effort in its written changing or extinguishment of rights and observations to make the SDC judgment obligations. Neutral operations, having no say what it does not say. It attributes to that impact ad extra, 26 can be taxed, because judgment the idea that, for an element of an taxation of them has no impact on the exempt operation to fall within the exemp- financial system. tion, it must constitute a specific, essential and identifiable action, and it contends that the services which it supplies to Sun Alliance display those characteristics. But the judgment says something different. For the Court of Justice, the exemption applies 26. I pointed out a few lines earlier that to activities which, involving a change in a exemptions from VAT run counter to the legal position, genuinely perform the func- principle of generalised taxation and call in tion of the tax-exempt operation, which question its neutrality, because they remove means that they actually constitute that the obligation of passing on the burden of operation. 27 It is absolutely clear that the taxation. This effect, which negates the services provided by CSC to Sun Alliance central purpose of the common system of do not fall within that category. VAT, must be reduced to a minimum, so as to apply only to transactions in which the imposition of VAT could place an unde- sired burden on economic activity.

security and are capable of having an 3. The services of providing information on impact on the substance thereof, such as, securities and processing investment appli- among others, the issue, transfer, endorse- cations ment, payment and redemption of the security, fall within the scope of the tax exemption under review here. Other opera- tions, although making a contribution, are excluded from the exemption. Clear proof of this is apparent in the fact that the provision at issue indicates that the tax advantage is not to apply to the manage- ment and safekeeping of securities. Both 31. Thus, only actions which create, such operations, safekeeping and manage- change or extinguish rights and obligations ment, are legal operations which relate to of the parties in connection with the securities but cannot affect the legal rela- security are covered by the provision of tionship embodied in them. 2 8 which an interpretation is sought by the High Court. It is now necessary to consider whether services involving the provision of information about a financial product and, in some cases, the receipt and processing of applications to subscribe for the securities in question fall within that classification. 30

I - 10246

CSC FINANCIAL SERVICES

ent in the securities, if that person performs conferred on CSC includes the powers exempt operations. 32 needed to carry out, on behalf of Sun Alliance, any of those legal operations, I have no doubt whatsoever that they will be exempt from VAT. If, on the contrary, that is not the case — if its involvement is 33. Consequently, the limitation included merely ancillary and preparatory to con- clusion of those legal operations — then in by the High Court in the last part of its my opinion the exemption does not extend second question 33 is superfluous. In giving to it. its answer, the Court of Justice must have regard only to the nature of the services, regardless of who carries them out.

37. There must be something else, which is 32 — See paragraphs 32 and 48 et seq. and paragraph 6 of the operative part of the SDC judgment: see also point 33 of to be inferred from the ultimate purpose my Opinion in that case. 33 — '...where that service is provided to a person who has legal rights or obligations under the security by a person who does not have any legal right or obligation under the 34 — See CPP, cited above, paragraph 30. security . 35 — See SDC, cited above, paragraph 65.

I - 10247

OPINION OF MR RUIZ-JARABO — CASE C-235/00

40. In short, I suggest that, in reply to the second question from the High Court, the Court of Justice rule that the term 'transac- tions, including negotiation, in securities' appearing in Article 13B(d)(5) of the Sixth Directive does not extend to services which 38. Services merely involving the provision are limited to the provision of information of information and the processing of appli- about a financial product and, if appro- cations to subscribe for securities do not priate, the receiving and processing of meet the specific preconditions for being applications to subscribe for the securities regarded as serving the actual purpose of concerned, but do not include the issuing of the exempt operations referred to in Arti- such securities. cle 13B(d)(5) of the Sixth Directive. They are ancillary services — and therefore needless to say are not indispensable — 39 — The inclusion of negotiation among exempt operations is which are not in any way substantive and prompted by its very nature. When negotiation is under- taken, on one's own behalf or for a third party, the are not capable of altering the rights and substance of the exempt operation is being shaped. The obligations deriving from the security. In scope of the activity involved in negotiation is coextensive with that of the legal transaction to which it leads and, SDC, to which I have made copious therefore, it has no life of its own and is treated in the same way for tax purposes (see CPP, cited above, paragraph reference, the Court of Justice excluded 30): if the transaction is exempt, so is the negotiation. In this respect, it is immaterial whether the dealings are direct the provision of financial information from or carried out through a representative. Where a repre- the scope of the exemption. 38 In those sentative is used, his activity appears to be that of the principal and consequently, the negotiations which he circumstances, and in view of the foregoing carries out must be treated from a tax point of view as if they were those of the principal. Otherwise, the principle considerations, I take the view that such of fiscal neutrality would be infringed. operations are not exempt from VAT. 40 — It appears from the order for reference that CSC did not represent Sun Alliance — so much so that callers seeking information and potential investors believed that they were contacting Sun Alliance and were unaware that the telephone operator was an employee of the intermediary. 36 — See paragraph 66 of SDC, cited above. Consequently, the latter could not negotiate on behalf of 37 — See point 66 of my Opinion in SDC, cited above Sun Alliance and was not even authorised to give advice to those asking for information. 38 — See point 70.

I - 10249