C-169/02

3. An important aspect of this case is that Directive 97/67/EC of the European Parlia- ment and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal 2. More specifically, these questions con- services and the improvement of quality of cern Article 13A of the Sixth Directive, service (hereinafter 'Postal Directive') 3 which provides for the exemption from contains rules concerning the provision of VAT of certain activities in the public a universal postal service and the definition interest. They include the services provided of the services which may be reserved for by public postal services and the supply of certain undertakings or services. The ques- goods incidental thereto. The Østre Land- tion now is what relevance the provisions sret wants to know if the Sixth Directive of this Directive have to the interpretation of Article 13A of the Sixth Directive.

1 — Original language: Dutch. 2 — OJ 1977 L 145, p. 1. 3 — OJ 1997 L 15, p. 14.

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II — Legislative background service of specified quality at all points in their territory at affordable prices for all users.

A — European law

OPINION OF MR GEELHOED — CASE C-169/02

with this paragraph must be communicated 6. Article 7 provides as follows: to the Commission and to all national regulatory authorities.

' 1 . To the extent necessary to ensure the 4. Each Member State shall adopt the maintenance of universal service, the ser- measures necessary to ensure that the vices which may be reserved by each universal service includes the following Member State for the universal service minimum facilities: provider(s) shall be the clearance, sorting, transport and delivery of items of domestic correspondence, whether by accelerated delivery or not, the price of which is less than five times the public tariff for an item of correspondence in the first weight step of — the clearance, sorting, transport and the fastest standard category where such distribution of postal items up to two category exists, provided that they weigh kilograms, less than 350 grams....

— the clearance, sorting, transport and 2. To the extent necessary to ensure the distribution of postal packages up to maintenance of universal service, cross- 10 kilograms, border mail and direct mail may continue to be reserved within the price and weight limits laid down in paragraph 1.'

— services for registered items and insured items.

7. Article 9 states:

9. Article 3 of this Law reads as follows:

8. Chapter 2 of the Danish Law on postal services 4 lays down rules on the obligation to convey mail and the exclusive right. Article 2 of this Law reads as follows: ' 1 . The State shall have an exclusive right to convey by post letters addressed to locations in Denmark, which is to be understood as meaning:

'The State is required to ensure nationwide conveyance of the following items of mail:

— Addressed items of mail, irrespective of their content, where they are placed in an envelope or similar wrapping.

— Addressed letters... .

— Addressed written communications, including postcards, with an individual content. — Other addressed items of mail with a uniform printed content which are not wrapped, e.g. catalogues and bro- chures.

12. In a partial judgment given by the Østre Landsret on 1 June 2001 in the present case it was ruled that the convey- ance of COD letters and parcels must be 6. The Minister shall lay down rules con- regarded as a combined service under the cerning weight and price limits and the Danish Law on postal services. At the same physical dimensions relating to the items of time it was ruled that Post Danmark was mail referred to subparagraphs 1 and 3. not required to convey such letters and packages. The judgment also ruled that under Danish postal legislation Post Dan- mark did not have an exclusive right to deliver COD letters and parcels since the scope of the exclusive right had to be 7. Courier post shall not be covered by the regarded as limited to services covered by exclusive right.' the obligation to convey mail.

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Ill — Facts of the case and procedural background 14. The notes on the draft law amending inter alia the VAT legislation include the following with respect to COD items of mail: 'By virtue of the amendments made 17. In Denmark the public postal services by administrative action pursuant to the are organised as an independent public postal legislation, as of 1 July 1996 such undertaking under the name of Post Dan- items of mail are to be treated as combined mark. Post Danmark offers inter alia the items of mail which are not covered by the conveyance of COD letters and parcels. It obligation to convey mail. However, the has around 1 100 public post offices across wording of the VAT Law does not afford a the entire country, some of which it oper- sufficient basis on which to subject the ates itself and some of which it operates conveyance of COD letters and parcels to together with local retailers (post office VAT in its entirety. As a result of this shops etc.). In practice a considerable amended wording, conveyance of such proportion of COD items of mail for items of mail will be taxable in its entirety, private individuals are collected from the and at the same time full parallelism post office because the recipient is not at secured between the exemption from VAT home when the item of mail is delivered.

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18. Even though Post Danmark provides ation whose members include a large parcel services and delivers heavy letters number of mail order companies in Den- (over 250 grams) in competition with other mark. The aim of the association is inter postal undertakings, it was for many years, alia to safeguard its members' interests and in practice continues to be, the only vis-à-vis Post Danmark, Tele Danmark, provider offering mass conveyance of COD other joint partners, public authorities, items of mail to private households. organisations and the public. The associ- ation's members use inter alia COD mail when conveying goods that have been ordered to private consumers.

(i) that a Member State has the right to levy VAT on the conveyance by the public postal services of COD letters and parcels to private per- A — Contents of the Sixth Directive and sons where the Member State has especially Article 13A(1)(a) thereof removed such items of mail from the exclusive right and obligation to convey mail under the Member State's national postal legislation, or

25. The basic rule laid down by the Sixth Directive is that VAT is levied on any service effected by a taxable person for consideration (Article 2). Title X, of which (ii) is a Member State required to levy Article 13 forms part, provides above all VAT on such items of mail? for exemptions from VAT for certain cat- egories of activities. One such exemption is a derogation from the basic rule laid down in Article 2 of the Sixth Directive. A derogation of this nature may be deemed consistent with Community law only if it is 2. If neither Question 1(i) nor Question explicitly permitted pursuant to the provi- 1 (ii) can be answered unequivocally in sions of that Directive. the affirmative, what criteria should be used to establish whether a Member State has a right, under the circum- stances set out in Question 1(i), to levy VAT on the conveyance of COD letters and parcels to private individuals or is it required not to levy VAT on such items of mail?' 26. Article 13A(1)(a) permits exemption from VAT for the supply by the public postal services of services other than pas- senger transport and telecommunications services, and the supply of goods incidental 24. In this case written comments have thereto. The article is worded in very broad been submitted to the Court by the appli- terms, and the Directive does not elaborate cant and the defendant in the main action further on the terms 'public postal services' and by the Commission and the Italian and 'supply of services' within the meaning Government. There has been no hearing. of that article.

28. I would begin by pointing out that the exemptions pursuant to Article 13 of the Sixth Directive apply to economic activities geared to certain objectives. These activities 30. With this principle the Community are not, however, always defined in purely legislature seeks to ensure the completely material or functional terms. Most of the neutral fiscal treatment of all economic provisions — including the exception activities, whatever their aim or outcome, referred to in Article 13A(1)(a) — also provided that they are in themselves subject indicate who may undertake the exempted to VAT. The judgment in Gregg is of activities. interest in this context. 8 In this judgment the Court gives a broad interpretation of activities undertaken by establishments or organisations. It bases its judgment inter alia on the principle of fiscal neutrality. Where the levying of VAT is concerned, economic operators carrying on the same activities must not be treated differently on the basis of their legal form.

5 — Judgment in Case C-149/97 Institute of the Motor Industry [1998] ECR I-7053, paragraphs 17 and 18. 29. The terms used to specify the exemp- 6 — Judgment in Case C-287/00 Commission v Germany [2002] tions envisaged by Article 13 must be ECR I-5811, paragraphs 30 to 4 3 . 7 — See my Opinion in Case C-144/00 Hoffmann [2003] ECR interpreted strictly. The case-law gives four I-2921. reasons for this. First, Article 13 does not 8 —Judgment in Case C-216/97 Gregg [1999] ECR I-4947.

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31. The two principles, equality of fiscal 34. I would point out that this judgment treatment and fiscal neutrality, are, more- preceded the adoption of the Postal Direc- over, similar concepts, but they are used in tive and the related changes to conditions different contexts. The first is used in an in the postal sector. The substance of the international context, while the second term 'public postal service' could not there- indicates a domestic matter. fore be assessed by the Court in the light of the provisions of that Directive. I will revert to this aspect in my assessment.

9 — See, in particular, the judgments in Case 348/87 Stichting Uitvoering Financiële Acties [1989] ECR 1737, 36. The Postal Directive includes provi- paragraph 1 1 , Case C-349/96 Card Protection Plan [1999] ECR I-973, paragraph 15, and Case C-240/99 Skandia sions concerning the minimum scale of the [2001] ECR I-1951, paragraph 2 3 . 10 — Judgment in Case 107/84 Commission v Germany [1985] universal service and the maximum scale of ECR 2655, paragraph 17. the reserved sector, conditions governing

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4 0 . Article 7 of the Postal Directive imposes a number of restrictions on the services which may be reserved by the Member States. Only services falling within a given price and weight category may be reserved. Document exchange may not be reserved in any circumstances. 12

38. From the 11th and 12th recitals in the preamble to the Directive it follows that the 11 — Notice from the Commission on the application of the competition rules to the postal sector ana on the assess- universal postal service calls for a minimum ment of certain State measures relating to postal services, range of services of specified quality to be OJ 1998 C 39, pp. 2 to 18. 12 — Document exchange means the provision of means, provided for all users. Even people living in including the supply of ad hoc premises as well as remote areas must be able to send and transportation by a third party, allowing self-delivery by mutual exchange of postal items between users subscribing receive mail at least five days a week. to this service.

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42. Where a service may not be reserved and does not form part of the universal V — Comments of the parties service, the Member State may lay down general rules to guarantee compliance with essential requirements. Essential require- ments are general non-economic reasons which can induce a Member State to 45. The following are the comments of the impose conditions on the supply of postal parties of interest in this context. services. These reasons include the con- fidentiality of correspondence and the security of the network as regards the transport of dangerous goods. Through these rules the Directive provides for partial harmonisation. 46. In its comments the Skatteministeriet states that the heading of Article 13A(1) must be considered to determine what services are exempt from VAT. The Member States are therefore entitled to exercise discretion as to whether the ser- vices supplied by the national postal ser- 43. This partial harmonisation gives the vices are in 'the public interest'. Services Member States a limited power to take passing this test are exempt from VAT measures that may have the effect of under Article 13A(1)(a) of the Sixth Direc- distorting competition. Member States tive. Universal services supplied by the may make a distinction between providers national postal services are in the public

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interest, while services supplied by the services. The provision must be regarded as national postal services on a voluntary having been introduced with regard spe- basis and thus, in principle, in free compe- cifically to the obligatory postal services in tition with other existing or potential the general interest of the citizens of the undertakings cannot, according to the Member States. Skatteministeriet, be regarded as covered by the VAT exemption.

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52. As the Postal Directive prescribes a reserved. As the conveyance of COD letters minimum range of postal services (univer- and parcels in Denmark is not reserved by sal services) to be offered by the Member the Member State, it may not be exempted States to all users, the Commission con- from VAT. cludes that these services are supplied in the public interest. It points out that Member States are entitled to reserve certain ser- vices. This is not an obligation. Where a postal service is not reserved to one pro- vider, but is exempt from VAT, the result is fiscal discrimination between different ser- vice providers. The principle of fiscal neu- trality is threatened where a postal service 55. Dansk Postordreforening disagrees is not reserved, but certain service providers with the Skatteministeriet and the Com- none the less enjoy different fiscal treat- mission. It argues that the heading of ment. The Commission therefore believes Article 13A, 'Exemptions for certain activ- that a service must be exempt only where it ities in the public interest', has no bearing is of a reserved nature. In this way the on the interpretation of Article 13A(1). principle of fiscal neutrality is respected. After all, the heading and the text of the provision can only be construed as meaning that the legislature regards the services of the postal service as being in the public interest. The services offered by the postal service cannot therefore be divided into those which are in the public interest and those which are not. The terms 'public interest' and 'services supplied by public 53. As the Member States are free to take postal services' in Article 13A of the Sixth or introduce measures which are more Directive are concepts of Community law, liberal than those for which the Postal and the individual Member States are not Directive provides, the range of the exemp- free arbitrarily to restrict these terms. tion may differ from one Member State to another. The Commission does not have any problem with this, however, since it is a possibility for which the Directive explicitly allows.

59. Nor, according to Dansk Postordre- forening, can the goal of avoiding the distortion of competition result in its being permissible under the Sixth Directive for VAT to be levied on the services in question in respect of items of mail sent to private 58. Dansk Postordreforening refers to a individuals. The Community legislature has further two specific reasons for not inter- allowed the goal of a better functioning preting Article 13A(1)(a) of the Sixth market for postal services to take preced- Directive restrictively: ence over the goal of preventing the dis- tortion of competition. The fact that com- petition in the postal services market has steadily increased since the Sixth Directive entered into force cannot in itself be seen as a reason for the Court to interpret the provision otherwise. It is for the Council — Article 13A(2) excludes certain services and Parliament to decide whether the Sixth and supplies of goods from exemp- Directive should be amended as a result of tions. It does not, however, refer to the changed circumstances in the market. Article 13A(1)(a). From this Dansk Postordreforening infers a contrario that there are no reasons for interpre- ting Article 13A(1)(a) restrictively.

60. Like Dansk Postordreforening, the Ita- lian Government takes the view that COD — The aim of Article 13A(1)(a) of the items of mail should be exempt from VAT. Sixth Directive is to improve the oper- These services should, however, be exempt ation of the postal service and to make from VAT only in respect of the amount the mailing of items cheaper. Levying that corresponds to the cost price of the VAT on the conveyance of COD letters public postal service. If a provider governed

64. Having decided that the heading as such does not have any significance, I come to the substance of the article itself. 62. Article 13A(2), w h i c h a u t h o r i s e s Article 13A(1)(a) of the Sixth Directive sets Member States to restrict certain exemp- out two criteria, 'the supply of services' and tions, has no bearing on this case since it 'public postal services'. The first term is does not refer to Article 13A(1)(a) of the very broad and covers all services supplied Sixth Directive. The list in Article 13A(2) is by the public postal service. It is therefore of a restrictive nature. restricted by the second criterion, 'public postal services'.

14 — See the judgment in Case 107/84 Commission v Germany, cited in footnote 10, paragraph 17. 15 — See my Opinion of 14 November 2002, cited in footnote 7.

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B — Reserved services

68. The Member States enjoy wide discre- tionary powers in this context. They are 66. The 1985 judgment in Commission v free to determine not only the scale of the Germany, which gave a definition of the services which are reserved — within the term 'public postal services', forms, to my limits set by the Directive — but also to mind, the basis for the substance of this whom the services are reserved, a public term, but this does not yet answer the service or a commercial undertaking. Fur- thermore, the postal services may be reserved to more than one service or 16 — Judgment in Institute of the Motor Industry, cited in undertaking. footnote 5, paragraphs 17 and 18. 17 — Judgment in Case C-287/00, cited in footnote 6, para- graphs 30 to 4 3 . 18 — See my Opinion in the Hoffmann case, cited in footnote 7. 20 — Judgment in Case 107/84 Commission v Germany, cited in 19 — See the judgment in Gregg, cited in footnote 8. footnote 10, paragraph 17.

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69. The substance of the term 'public is not restricted to a public undertaking service' ('service public') can be deduced within the meaning of that provision, but from the judgment in France, Italy and also extends to undertakings to which the United Kingdom v Commission. According State has granted special or exclusive to this judgment, a public service is any rights. These rights are needed for the undertaking over which the public auth- performance of the special public task orities may exercise directly or indirectly a entrusted to such undertakings. dominant influence on the basis of owner- ship, of financial participation or of the appropriate rules. 21 In the context of the postal service, the judgment concerned the traditional (State) postal undertakings, regardless of whether they are governed by public or private law.

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context to the principle of fiscal neutrality, 75. The purpose of the exemption for by virtue of which undertakings carrying which Article 13A(1)(a) provides is to on the same activities must not be treated ensure more favourable treatment of the differently as far as the levying of VAT is said activities in the public interest. It concerned. 22 As a secondary argument, I would be inappropriate to levy VAT on would add that the Member States are free these services. This would act as an to entrust both a public service and a obstacle. An undertaking which provides commercial undertaking with the perform- reserved services takes the place of the ance of all or part of the universal service. classical (State) postal service as it existed There is, then, no question of unequal fiscal before the Postal Directive entered into treatment of either party. force. As a result of the Postal Directive and the related liberalisation of the postal sector the term 'public postal service' in the Sixth Directive gains a different mean- ing.

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public law or a licensed undertaking to universal service. Member States must which a Member State has assigned postal guarantee that such services too are avail- activities, 24 the judgment was, as I have able at an affordable price, as is evident said, delivered before the adoption of the from Article 3 of the Postal Directive. Postal Directive, as a result of which the However, in contrast to reserved services, Court's interpretation of the term 'postal the provision of non-reserved services is not service' cannot be overridden by new ensured through their assignment exclus- developments in the postal sector. ively to one or more undertakings. It is left to market operators to perform this task under normal conditions of competition. One consequence of the Postal Directive is that this part of the postal sector has been liberalised. Member States may issue only individual licences in which certain rights are granted and specific obligations are imposed on the undertaking. As these 78. The view that reserved services are services are not reserved by means of rights, exempt from VAT has also given rise to new undertakings are also able to enter this differences between Member States in the market. New undertakings offer additional area of VAT exemption. These differences services, such as the more rapid conveyance are, however, the inevitable consequence of of the mail. These services are not therefore the fact that the Postal Directive gives the public in nature, but are commercial activ- Member States the option of reserving ities in which there can be competition on certain services, but otherwise leaves it to the basis of price, quality and greater them to decide which services within the diversity within services. given limits qualify for this.

83. Unfair competition would also occur if these services were exempted from VAT. This would be inconsistent with the Postal Directive and the Sixth Directive. The very objective of the Postal Directive, after all, is to liberalise the part of the postal market which is not reserved. In case-law it has been ruled that the Sixth Directive must be interpreted as meaning that the principle of fiscal neutrality may not be infringed, so that completely neutral fiscal treatment of all economic activities is ensured. Econ- 82. Once a public postal service also pro- omic operators carrying on the same activ- vides services other than reserved services, ities must not be treated differently as far as the question that logically arises is whether the levying of VAT is concerned on the these services can also be exempted from basis of their legal form. VAT. The Sixth Directive says that the services provided by the public postal services are exempt. I take the view that an undertaking is in the nature of a public postal service only in respect of the services which it provides as part of its public task. This public task emerges from the exclusive or special rights granted to it. In short, only in the provision of reserved services does the undertaking act as a public postal 84. What does this all mean for the main service. As for the other services provided, action? Post Danmark is a public postal it must be regarded as a normal market service. Under Danish law a number of operator competing under equal conditions services are reserved to Post Danmark; with other market operators. It would be however, the conveyance of COD letters wrong if they, unlike their competitors, and parcels is not one of these services. were exempted from VAT. I would also Under the legislation the reserved services point out, unnecessarily perhaps, that it is are exempt from VAT, which complies not uncommon for postal undertakings with the Postal Directive and the Sixth also to provide services unconnected with Directive. As the conveyance of COD items the delivery and collection of items of mail, of mail is not reserved, it is not exempt such as the sale of office supplies and from VAT.