C-338/01

1. In the present application for annulment the Commission challenges the Council's action in basing Directive 2001/44 2 ('Direc- tive 2001/44') not — as the Commission had proposed — on Article 95 EC but rather on Articles 93 EC and 94 EC. The directive in issue regulates mutual assis- I I— Facts and legal framework tance between Member States in the recov- ery of public-law claims, in particular tax claims. The question central to this dispute is whether the rules set out in Directive 2001/44, which relate solely to official assistance in the recovery of taxes but do not concern their calculation or imposition, are 'fiscal provisions', to which, under the 2. On the basis of Article 100 of the EEC exception set out in Article 95(2) EC, Treaty (now Article 94 EC), the Council Article 95 EC does not apply. Whereas adopted Directive 76/308/EEC, which initi- under Article 95 EC the joint decision- ally dealt only with mutual assistance as making procedure laid down in Article between Member States in regard to the 251 EC is applicable, the Council takes recovery of claims arising in connection decisions under Article 93 EC (harmonisa- with operations forming part of the system tion of indirect taxation) and Article 94 EC for financing the European Agricultural Guidance and Guarantee Fund, and of agricultural levies and customs duties. 3 1 — Original language: German. 2 — Council Directive 2001/44/EC of 15 June 2001 amending Directive 76/308/EEC on mutual assistance for the recovery of claims resulting from operations forming part of the 3 — Council Directive 76/308/EEC of 15 March 1976 on mutual system of financing the European Agricultural Guidance and assistance for the recovery of claims resulting from opera- Guarantee Fund, and of agricultural levies and customs tions forming part of the system of financing the European duties and in respect of value added tax and certain excise Agricultural Guidance and Guarantee Fund, and of the duties (OJ 2001 L 175, p. 17). agricultural levies and customs duties (OJ 1976 L 73, p. 18).

4 — Council Directive 79/1071/EEC of 6 December 1979 amending Directive 76/308/EEC on mutual assistance for (2) In the context of the internal market, the recovery of claims resulting from operations forming part of the system of financing of the European Agricultural Community and national financial Guidance and Guarantee Fund, and of agricultural levies and customs duties (OJ 1979 L 331, p. 10). interests, which are increasingly threa- 5 — Council Directive 92/12/EEC of 25 February 1992 on the tened by fraud, must be protected so as general arrangements for products subject to excise duty and to safeguard better the competitiveness on the holding, movement and monitoring of such products (OJ 1992 1. 76, p. 1), as amended by Directive 92/108/EEC and fiscal neutrality of the internal (OJ 1992 L 390, p. 124). market. 6 — COM(1998) 364 final — 98/0206(COD) (OJ 1998 C 269, p. 16). Following the first reading in the European Parliament the Commission amended its proposal i n order to take account of the changes made by the Parliament (COM(1999) 183 final, OJ 1999 C 179, p. 6) but did not alter the legal basis. 7 — Decision of 16 May 2001 (OJ 2002 C 34 E, p. 207).

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8 — The term 'taxes ... on capital' presumably refers to the duty 2. Notwithstanding the first paragraph, the better known in German tax-law terminology as Vermögen¬ instrument permitting enforcement of the steuer (cf. the French ('impôts sur la fortune') and Dutch versions ('belastingen op vermogen')). claim may, where appropriate and in I - 4834

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accordance with the provisions in force in 2. The requested authority may, where the the Member State in which the requested laws, regulations or administrative provi- authority is situated, be accepted as, recog- sions in force in the Member State in which nised as, supplemented with, or replaced by it is situated so permit, and after consulta- an instrument authorising enforcement in tions with the applicant authority, allow the the territory of that Member State. debtor time to pay or authorise payment by instalment. Any interest charged by the requested authority in respect of such extra time to pay shall also be remitted to the Member State in which the applicant authority is situated.

— declare Directive 2001/44 to be void; 14. No hearing was held in this case.

— maintain the effects of the directive until the entry into force of a new directive adopted on the correct legal basis; IV — Submissions of the parties

— order the Council to pay the costs of the proceedings. 15. Even though the parties have differing views on the question whether the Council used the correct legal basis for Directive 2001/44, they do agree that, if the Court sets that directive aside, it should order that its effects be maintained in force until such 12. The Council claims that the Court time as a new directive has been adopted. should:

— dismiss the application; 16. The Commission first points out that, in view of the separate legislative proce- dures, the only possible legal basis is either Articles 93 EC and 94 EC (unanimous decision of the Council and consultation of the European Parliament) or Article 95 EC — order the Commission to pay the costs (joint decision-making procedure), but not of the proceedings. a combination of Articles 93 EC and 95 EC.

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20. The Parliament shares the view taken by the Commission. It also refers to the Court's case-law to the effect that the choice of the legal basis for a measure must rest on objective factors amenable to judicial review, including in particular the 18. Directive 2001/44, however, deals only aim and content of the measure. 1 1Asthe with mutual assistance in the recovery of procedure under Articles 93 EC and 94 EC, tax claims and the removal of barriers to on the one hand, and that under Article cross-border enforcement within the single 95 EC, on the other, are incompatible, 12 market; it does not deal with national the centre of gravity of the measure is provisions on taxable persons, the basis of decisive. In the case of Directive 2001/44, taxation or rates of tax. As the directive this lies in its contribution to the establish- does not affect the amount of tax payable ment and functioning of the internal mar- or the structure of national taxation sys- ket. tems, it does not concern 'fiscal provisions' within the meaning of Article 95(2) EC. 9 — Council Regulation (EEC) No 218/92 of 27 January 1992 on administrative cooperation in the field of indirect taxation (VAT) (OJ 1992 L 24, p. 1). 10 — Decision No 888/98/EC of the European Parliament and of the Council of 30 March 1998 establishing a programme of Community action to ameliorate the indirect taxation systems of the internal market (Fiscalis Programme) (OJ 1998 L 126, p. 1); Council Regulation (EEC) No 718/91 of 21 March 1991 amending Regulation (EEC) No 3/84 introducing arrangements for movement within the Com- munity of goods sent from one Member State for temporary use in one or more other Member States (OJ 1991 L 78, p. 4); Council Regulation (EEC) No 2726/90 of 17 September 1990 on Community transit (OJ 1990 L 262, p. 1). 19. There have already, it is true, been 11 — Case C-269/97 Commission v Council[2000] ECR I-2257, cases in which the Council adopted, on the paragraph 43. basis of Article 99 of the EC Treaty, a legal 12 — The Parliament refers in this connection to Case C-42/97 Parliament v Council [1999] ECR I-869, paragraphs 42 measure which the Commission, in its and 43.

24. The Council shares the view of the Commission and Parliament that the direc- tive focuses on the establishment and functioning of the internal market. This finding, however, does not advance matters as the connection with the internal market/ common market is as much a precondition 22. The Council takes issue with the for the application of Article 95 EC as it is Commission's view that the principal issue for that of Articles 93 EC and 94 EC. is to construe the derogating rule in Article 95(2) EC. Rather, it argues, it is necessary to identify the correct legal basis. Joint application of Articles 93 EC and 94 EC is not the only possibility in this regard. Articles 93 EC and 95 EC may also be combined, although Article 93 EC 25. The new rules set out in the directive requires unanimity and Article 95 EC may be divided into two groups. In the first requires a qualified majority within the place, the scope of the directive is extended Council. 13 In Article 151(5) EC the joint to cover claims relating to taxes on income and capital and taxes on insurance premiums. Second, the directive provides for various simplifications or changes in the 13 — The Council refers in this connection to Case 165/87 Commission v Council [1988] ECR 5545. enforcement of all claims which it covers.

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26. In so far as the directive concerns discrimination under Article 90 EC indirect taxation, the Council considers applies. 15 In response, the Commission Article 93 EC to be the correct legal contends that the judgments relating to basis. Article 95 EC does not, it argues, Article 90 EC concerned payment periods under any circumstances constitute the and rules on penalties, which were precisely general legal basis from which derogations not the subject of approximation by Direc- may be made only in the exceptional cases tive 2001/44. covered by paragraph (2) thereof. Even if a case is not exceptional within the meaning of Article 95(2) EC, this cannot lead to exclusion of the application of the more specific provision of Article 93 EC, which features in a different chapter of the Treaty. 14

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provisions. Article 95(2) EC must be con- 32. The directive, so the Council submits, strued accordingly and for that reason not only has a subordinate connection with Directive 2001/44, which contains rules taxation but also consolidates national on mutual assistance in the recovery of provisions on cross-border recovery of tax taxes, cannot be based on Article 95 EC. claims.

33. The Council points out that, in its previous practice, it has always applied Article 93 EC and/or Article 94 EC where legal measures were intended to approx- imate tax provisions — even if only for mutual assistance in matters of taxation. 16

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35. In the view of the United Kingdom and claims — even where there is a cross-border Irish Governments, Article 93 EC, within element — are part of tax law. The distinc- the area of indirect taxation, constitutes a tion which the Commission draws between, lex specialis in relation to Article 95 EC, as on the one hand, the rules on taxable the latter only applies 'save where otherwise persons, rates of taxation and basis of provided in this Treaty'. For the approx- assessment and, on the other, the rules on imation of laws on direct taxation, Article the administration and collection of taxes 94 EC alone, and not Article 95 EC, can is, they argue, misplaced. 18 come into question, because in that case the exception contained in Article 95(2) will come into play.

38. The Luxembourg Government does, admittedly, concede that the Court has 36. If the Court should not treat Article repeatedly ruled that concepts of Commu- 95 EC as being inapplicable by virtue of its nity law must be given an autonomous paragraph (2), that provision may not in interpretation. However, it is not possible any case, in the Irish Government's view, be to give a legal concept in Community law a used because Article 95 EC cannot be meaning that is completely different to that applied jointly with Article 93 EC, as the in national law if the legal systems pursue Commission itself has stressed. Conse- the same objectives. quently, apart from Article 93 EC, there remains only the recourse to Article 94 EC in so far as direct taxation is concerned.

40. The Luxembourg Government takes 42. The Member States provide examples the view that it is inconsistent for the from practice in which the Commission Commission, on the one hand, to argue based similar measures, not on Article that Directive 2001/44 is not at all intended 95 EC, but on Article 93 EC (or on the to harmonise national tax laws but, on the previous Article 99 of the EC Treaty). 19 other, to seek to base the directive on Article 95 EC, that is to say, the legal basis for the approximation of laws within the internal market. The Member States must in fact adjust their tax legislation in order to implement, for example, Article 8 of Directive 76/308, as amended by Directive 43. The Irish Government, finally, also 2001/44, which prescribes automatic recog- points out that, with the introduction of nition or acceptance of foreign instruments Article 95 EC, the Member States relin- within three months. quished a significant portion of their sovereign rights. In order to preserve the institutional balance between the Commu- nity and the Member States, however, an exception was made for the entire area of taxation, which is of particular significance for State sovereignty. The Commission places this balance in question if it limits the exception in Article 95(2) EC to selected areas of taxation only.

46. None of the parties questions the relationship between the provisions of the directive and the internal/common market. It should, however, be noted in this connection that, according to Article 3 (1)(c) EC, the internal market is charac- terised by the abolition, as between the Member States, of obstacles to the free movement of goods, persons, services and capital. The fact that tax claims can be recovered on a cross-border basis does not, 49. In its established case-law, the Court however, facilitate Community citizens and has laid down the following general criteria undertakings in exercising their basic free- governing the choice of the correct legal doms. basis: 'in the context of the organisation of the powers of the Community the choice of the legal basis for a measure must be founded on objective factors which are amenable to judicial review. Those factors include in particular the aim and the content of the measure'. Before the objectives and content of the contested directive are examined in greater detail, it is first necessary to comment on the 47. It would, however, amount to an relationship of Article 95 EC to Articles excessive restriction on the concept of the 93 EC and 94 EC and on how the concept internal market if this were to be under- of fiscal provisions is to be construed. stood as meaning only an untrammelled entitlement to exercise the basic freedoms. Measures to approximate laws may rather also be designed to overcome problems 20 — Case C-155/91 (cited in footnote 17); Case C-271/94 arising from the exercise of basic freedoms Parliament v Council (1996) I-1689, paragraph 14; Case C-300/89 Commission v Council [1991) ECR I-2867, and in this way to contribute to the paragraph 10; Case C-426/93 Germany v Council [1995] ECR I-3723, paragraph 29; Case C-42/97 Parliament v functioning of the internal market. Council (1999) ECR I-869, paragraph 36.

51. Article 95 EC constitutes a general legal basis for the approximation of the 53. The Treaty does not contain any provisions laid down by law, regulation or special basis for the approximation of administrative action which have as their provisions on direct taxation. If the estab- object the establishment and functioning of lishment and functioning of the internal the internal market, 'save where otherwise market/common market none the less make provided in this Treaty'. This subsidiary the approximation of laws in this area status is of significance for the relationship necessary, all that remains is recourse to the with Article 93 EC. Both provisions — general provisions of Articles 94 EC and Article 93 EC and Article 95 EC — apply 95 EC. In so far as a directive is directed at only if approximation of laws is necessary the realisation of the internal market, that is for the establishment and functioning of the to say, in particular at the creation of an internal market. In comparison with Article area without internal frontiers within the 95 EC, however, Article 93 EC is the more meaning of Article 14 EC, Article 95 EC specific legal basis for the harmonisation of takes precedence over Article 94 EC as legislation concerning turnover taxes, being a specific provision for the approx- excise duties and other forms of indirect imation of laws 2 unless the measure comes taxation. 21 within one of the excepted areas covered by Article 95(2) EC.

21 — Compare the similarly structured relationship between Articles 118a and 100a of the EC Treaty in Case C-84/94 22 — See Case C-350/92 Spain v Council [1995] ECR I-1985, United Kingdom v Council (cited in footnote 14, para- paragraph 29 et seq., in particular paragraph 41, in which graph 12) and that between Articles 129c and 100a of the the Court declared Article 100 or the EC Treaty to be EC Treaty in Case 68/86 United Kingdom v Council inapplicable where the conditions governing the applica- [1988] ECR 855, paragraph 24. tion of Article 100a of the EC Treaty were satisfied.

54. If the rule relates to fiscal provisions, measure. This finding still does not, how- application of Article 95 EC is excluded; a ever, resolve the question whether, in view legal measure designed to bring about the of this connection with matters relating to approximation of national rules on direct tax law, the exception in Article 95(2) EC taxation can therefore be based only on becomes applicable. It is, however, clear Article 94 EC. that Article 95 EC is either inapplicable in its entirety, on the ground that rules on the recognition and recovery of direct and indirect taxes are matters of tax law, or applicable to both areas on the ground that the directive does not provide for harmoni- sation of tax provisions in the narrower 55. The parties also discuss the question sense. whether Article 93 EC, possibly in conjunc- tion with Article 95 EC, may be applicable. Under Article 95 EC the Council adopts measures by qualified majority under the joint d e c i s i o n - m a k i n g procedure. In contrast, measures adopted under Articles 93 EC and 94 EC require a unanimous decision of the Council follow- ing consultation with the Parliament. As I set out in detail in my Opinion in Case C-211/01 Commission v Council, 11 an article providing for the joint decision- making procedure under Article 251 EC cannot be used as a legal basis in conjunc- tion with a provision under which the Council must take a unanimous decision after consulting the Parliament. 57. The concept of legislation concerning indirect taxation under Article 93 EC and that of fiscal provisions within the meaning of Article 95(2) EC must be read in conjunction, with the result that, if Article 93 EC is relevant, Article 95 EC will be inapplicable not only because of its sub- 56. It is, however, unnecessary in the sidiary status but also at the same time by present case to address this question in reason of the exception ratione materiae in greater detail, as the directive extends the Article 95(2) EC. It would be inappropriate system of mutual assistance in the recovery in the present case for the term 'fiscal of claims to taxes on insurance, that is to provisions' to be given any different mean- say, indirect taxes, on the one hand, and, on ing with regard to direct taxation. Even if the other, to direct taxes. It affects rules on one wished to draw a corresponding direct and indirect taxation in equal distinction, Article 95 EC could not, for direct taxation, be applied alongside Article 93 EC because of the incompatibilities in the procedures governing the adoption of 23 — Opinion or 13 March 2003 in Case C-211/01 Commission v Council, points 71 to 83. legislation.

B — The term 'fiscal provisions' 61. The wording of Article 93 EC and Article 95(2) EC does not provide any direct indication as to which interpretation is preferable. National tax laws, however, also include provisions on the procedure for 59. One of the central questions in this determining and enforcing tax claims, as dispute is how the concept of fiscal provi- the Council and the Member States have sions within the meaning of Article 95 submitted without challenge. It is, admit- (2) EC and that of legislation concerning tedly, true that Community-law terms must indirect taxation in Article 93 EC are to be be construed autonomously having regard construed. While the Commission and to the objectives of the Treaty and the Parliament take the view that the term legislative context. That said, however, the 'fiscal provisions' for this purpose covers meaning of a legal term having essentially only those substantive provisions that relate the same import in all Member States may to taxable persons, the rate of tax and basis be construed in Community law in a of assessment, the Council and the Member manner departing from that understanding States are of the opinion that the term also only if the Treaty objective being pursued covers rules governing the administration so demands. and recovery of tax claims.

60. In support of their interpretation, the Council and the Member States adduce examples of legal measures which did not relate to substantive tax rules but which 62. The Commission submits in this con- none the less were based, not on Article nection that Article 95 EC forms the general 95 EC, but on Article 93 EC and/or Article 94 EC. The Court has, however, ruled in its established case-law that 'a mere practice ... 24 — Case 68/86 (cited in footnote 21), paragraph 24.

66. It follows from the case-law on Article 90 EC cited by the Council and certain Member States that the prohibition of discriminatory domestic duties is also applicable to national rules on the collec- 64. Nor is there any identifiable Treaty tion or deferment of indirect taxes 25 as well objective which might call for the narrow as to rules on sanctions for infringements of interpretation of the concept of fiscal provisions on value added tax. 2 6 In the provisions advocated by the Commission. same way as Article 93 EC, Article 90 EC In particular, there is also no justification on teleological grounds for not bringing provisions on the recovery of tax claims within the scope of tax law for the purposes 25 — Case 55/79 Commission v Ireland, cited in footnote 15. 26 — Drexl (cited in footnote 15) and Case C-276/91 Commis- of Article 95(2) EC. sion v France [1993] ECR I-4413.

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72. Article 7 of Directive 76/308, as State of the requesting authority as to the amended by Directive 2001/44, regulates procedure to be followed in the event of in greater detail the information which enforcement in another Member State, r e q u e s t s for e n f o r c e m e n t must particularly with regard to the information contain. These requirements are supple- which the request for enforcement must mented by the Commission's implementing contain. Second, the tax provisions to be directive based on Article 22 of Directive applied by the authority of the requested 76/308, as amended,27which makes provi- State must provide that instruments from sion for, inter alia, the introduction of a another Member State are also to be form to be used for such requests. enforced in the same way as corresponding domestic instruments. In so far as a Member State reserves to itself the right to recognise, confirm or replace a foreign instrument, it also requires for that purpose corresponding provisions of national law.

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manner of enforcement, that is to say, any even beyond its own borders by addressing possible deferment or enforcement of con- a request to the authority of another tested claims (Articles 9(2) and 12(2) of Member State. The possibility of enforce- Directive 76/308, as amended by Directive ment abroad has a bearing on the level of 2001/44), are not matters that have been tax revenue in the State of the requesting harmonised. Rather, the Member States authority. will to that extent simply apply their existing rules to instruments from another Member State.

79. At the same time, the State to which the 77. Thus, not all of the rules in Directive request is addressed is obliged to add to the 2001/44 lead to harmonisation of national tax claims that are enforceable under its tax provisions. Further, they certainly do national provisions those claims that are to not affect the central aspects of tax law in be enforced pursuant to a request made by the Member States. On the other hand, the authority of another Member State. In however, they also have — as has already view of this influence which the directive been stated 28 — what is really no more that exerts on the form of national fiscal quite an indirect link to the establishment provisions, Article 95 EC cannot, by virtue and functioning of the internal market of paragraph (2) thereof, serve as a legal inasmuch as they merely counter the basis. undesirable side effects rising from the exercise of basic freedoms.

78. It may, by way of conclusion, be stated 80. The Council therefore acted correctly that the directive affects national tax-law in basing Directive 2001/44 on Article provisions in two ways. It makes it possible 93 EC in so far as it affects provisions on for the requesting State to enforce its claims indirect taxation — in casu, taxes on insurance premiums — and on Article 94 EC in so far as it relates to the recovery of claims involving taxes on income and 28 — See points 46 to 48 above. capital. I - 4850

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