EU Law Blog

EDPS Opinion on the Combating Terrorism Initiative

A short while ago, fifteen member States took an initiative with a view to adopting a Council Decision on stepping up cross-border cooperation, particularly in combating terrorism and cross-border crime.

The European Data Protection Supervisor has now issued an interesting and detailed opinion on that initiative. He does not appear opposed to the idea of cooperation between member States in combating terrorism and takes note of the "unique nature" of the initiative. Nevertheless, he makes a certain number of criticisms of the text and proposes some changes to reinforce the protection of personal data.

Worth reading.

SWIFT, the US Department of the Treasury, the Terrorist Finance Tracking Program and Privacy

As a follow-up to our post of February 5th, 2007 on the SWIFT issue, the US Department of the Treasury and the European Union have exchanged letters about the practical safeguard and controls on the use of personal data under the Treasury Departments's Terrorist Finance Tracking Program.

The Treasury Department letter is available here. It makes clear that the Treasury Department will allow an "eminent European" to oversee that EU-originating data is properly protected.

The working of the Terrorist Finance Tracking Program and the actual safeguards and controls of data are described in this document here.

The EU response is available here.

Interestingly, the French Government issued a statement on the matter authorizing the Council Presidency to sign the draft response above.

The Council issued a handy press release on the matter, available here.

Abuse of dominant position, commitments and proportionality: Case T-170/06

If the Commission intends to take a decision requiring an infringement of the antitrust rules by one or several undertakings be brought to an end, it may, under Article 9 of Regulation 1/2003, accept commitments offered by that or those undertakings concerned to meet the Commission's concerns. Article 9 of Regulation 1/2003 requires that the Commission make a preliminary assessment of the infringement and that it adopts a decision rendering those commitments binding.

In its judgment in Case T-170/06 Alrosa Co. Ltd. v. Commission the Court of First Instance confirms that the Commission must ensure that the commitments offered are proportionate to remedy the breach of the rules it alleges and that the Commission must hear all the undertakings affected directly by the commitments in question. If the commitments are disproportionate and if the Commission fails to hear the interested parties properly, the Court of First Instance will annul the decision taken pursuant to Article 9. And that is what the Court of First Instance did in this case.

What happened? The Commission launched an investigation into the number one producer and supplier of diamonds, De Beers. That undertaking had an agreement with Alrosa, a Russian company and the number two producer and supplier of diamonds. De Beers and Alrosa notified their agreement to the Commission (in 2002, before Regulation 1/2003 came into force).

The Commission then opened two sets of proceedings. The first was based on Article 81 EC, investigating both De Beers and Alrosa. The second investigated a possible abuse of a dominant position contrary to Article 82 EC and concerned De Beers alone.

De Beers and Alrosa proposed joint commitments in 2004 to the Commission which entailed a reduction in the sales of rough diamonds by Alrosa to De Beers.

In early 2006, De Beers on its own offered new commitments to the Commission in the context of the Article 82 EC investigation directed against it. Those fresh commitments involved a gradual reduction of quantities it would purchase from Alrosa until 2009 and the definitive end to all purchases from Alrosa from then on. The Commission invited Alrosa to comment on the commitments proposed by De Beers. Then the Commission adopted its decision 2006/520 of February 22nd 2006 making binding the individual commitments proposed by De Beers. Thus, Alrosa would be effectively cut off from De Beers from 2009.

Alrosa then challenged decision 2006/520 before the Court of First Instance. It won.

The Court of First Instance held that decision 2006/520 was disproportionate. It held that in the circumstances of the case, the complete and total end to all commercial relations between De Beers and Alrosa was manifestly disproportionate. It was only in exceptional circumstances, such as the existence of a possible collective dominant position, that an end to the contractual freedom of the parties could be justified. In this case, the Commission did not allege or find that there was collective dominance: Only De Beers held a dominant position. The Court held that the Commission could not simply accept the commitment offered by De Beers at face value but was required to examine it and see if alternative solutions more respectful of contractual freedom existed.

The judgment clarifies one point about the extent to which the Commission must set out its concerns regarding the antitrust infringement in a decision based on Article 9 of Regulation 1/2003. The Court states that the Commission need not formally establish the existence of the infringement. But it must establish the reality of the antitrust concerns in such a way that the proportionality of the commitments offered can be evaluated and reviewed by the Court.

The Court of First Instance also held that the Commission had committed a procedural irregularity by not giving Alrosa a full and proper opportunity to be heard on the individual commitments proposed by De Beers alone.

Draft Reform Treaty available

The draft Reform Treaty has been made available by the Portuguese Presidency of the Council.

You can find it here, in French for now. Presumably, other languages will be made available as and when translations are completed.

A collection of preparatory documents is available here.

For a previous post on the Reform Treaty, look here.

UPDATE: The drafts are now avalaible in English. Here is the English draft of the Reform Treaty itself.
Here is the draft preamble.
The draft Protocols are here including Protocol n° 6 on the internal market and competition.
Finally, you can find the draft declarations here.

Regulating the Internal Market and EC Powers

Professor Derrick Wyatt of the Faculty of Law, Oxford University has written a very stimulating article on the competence of the EC to regulate the internal market. In fact the article is a rigorous critique of the case law of the Court of Justice and in particular of its judgment in Case C-376/98 Germany v. European Parliament and Council on the power of the EC to regulate tobacco advertising.

This is what the abstract states:

"The claim of the Court of Justice in the Tobacco Advertising case that the Community institutions lack a general competence to regulate the internal market does not withstand critical examination. The Tobacco Advertising case contained both competence restricting and competence enhancing elements. The principal competence restricting elements were
(a) that obstacles to trade could be addressed by removal of the obstacles, but not by a ban on the subject matter of the trade;
(b) that harmonisation could only be justified by distortions of competition if those distortions were appreciable;
(c) that in principle all provisions of a contested internal market measure must contribute to the internal market aims of the measure in question.
The principal competence enhancing element was the proposition that a measure which makes some contribution to the internal market may be adopted as an internal market measure even if its main aim is public health protection; despite the fact that harmonisation of public health requirements is in principle ruled out by the Treaty. A further competence enhancing element was that the Court adopted an impressionistic approach to assessment of the requirement that distortions of competition must be appreciable if they were to justify harmonisation, leaving open the possibility that this requirement might be relaxed or sidestepped by the lawmaking institutions. The competence restricting elements of the Tobacco Advertising case have been contradicted or eroded by subsequent case law, such as the British American Tobacco case, and the Swedish Match case. After the latter case, obstacles to trade can be addressed by simply banning the trade. After the British American Tobacco case, it seems that hypothetical obstacles to trade, resulting from disparities between national labelling rules, can be addressed by eliminating the disparities in question, even if this makes no contribution to cross border trade in the products in question. In the Leitner case, the Court confirms that its approach to the requirement adopted in Tobacco Advertising, that distortions of competition must be appreciable in order to justify harmonisation, will be an impressionistic one. And in Rundfunk the Court considers that as long as a measure makes a contribution to the internal market, it is legitimate for that measure to regulate situations which have no link at all with freedom of movement - something of a retreat from the Tobacco Advertising case, but in line with case law dating from the 1960s which gives wide reading to competence to coordinate national social security rules in order to provide freedom of movement for workers. More broadly, it is noted that Community competence has not in practice been confined to removing obstacles to trade and distortions of competition, but extended to harmonising national rules which facilitate freedom of movement and to removing differences between national rules which create uncertainty for those contemplating cross border transactions. This aspect of Community competence to regulate the internal market is potentially far reaching, and could lead to the use of such measures as instruments of general governance. This does not seem consistent with a scheme of attributed competences, nor with a system in which decisions are to be taken “as closely as possible to the citizen,” in accordance with the principle of subsidiarity."

You should read the whole article. Download it from here.

Commission ordered to compensate Schneider after merger prohibited: Case T-351/03

Here's a real blockbuster of a judgment. Shame it is not yet available in English.

The Commission has been found liable by the Court of First Instance to compensate a company after it had illegally prohibited a merger with another undertaking. That is the consequence of its judgment in Case T-351/03 Schneider Electric SA v. Commission.

What happened was this. Schneider, a large French electrical company wanted to acquire control of Legrand, another large French electrical company, by means of a public exchange offer for shares (the offer) on the Paris Bourse. They notified the Commission of their proposed merger in February 2001, to get clearance for the merger. Schneider then acquired 98% of the capital of Legrand on close of the offer in August 2001 (the Paris Bourse not permitting conditional offers at the time). Then the Commission, by decision of October 10th, 2001, declared the merger to be incompatible with the common market.

Schneider had actually implemented the merger which was subsequently declared incompatible with the common market, on January 30th, 2002, and so the Commission adopted a second decision ordering Schneider to divest itself of Legrand.

Schneider lodged an action for annulment of each of those two decisions before the Court of First Instance. In anticipation of the possible dismissal of those two actions, Schneider prepared its divestiture of Legrand and on July 26th, 2002, concluded a contract of divestiture with the consortium Wendel/KKR which had to be executed by December 10th 2002 at the latest.

But Schneider did not lose its cases before the Court of First Instance. In fact it won ! By its judgments of October 22nd, 2002, the Court of First Instance annulled the prohibition decision (in Case T-310/01 Schneider v. Commission and, consequently, also the divestiture decision in Case T-77/02 Schneider v. Commission, which was a measure in implementation of the prohibition decision.

The merger control procedure, which was resumed by the Commission the day after the Court annulled its decisions, was closed by the Commission on December 13th, 2002, after the persistent doubts which it expressed as to whether Schneider’s corrective measures were adequate to render the merger compatible with the common market had led Schneider to abandon the operation and to execute the contract of divestiture with Wendel/KKR on December 10th, 2002.

Schneider then brought an action for damages under Article 288 EC before the Court of First Instance seeking compensation for the loss suffered as a result of the illegality of the prohibition decision, as found by the Court on October 22nd 2002.

In substance, the Court of First Instance in its judgment in Case T-351/03 accepts most of the claims made by Schneider.

First, the Court points out that for the Community to be liable to compensate for the loss and damage suffered its institutions must have engaged in unlawful conduct in grave and manifest disregard of the limits of their powers of assessment. The purpose of defining the threshold at which the Community may incur non contractual liability is to protect the latitude and discretion which, in the public interest, the Community competition regulator must enjoy, both in its policy decisions and in its appraisal and application of relevant provisions of Community law. But, the Court states, the cost of the consequences of flagrant and inexcusable failings must not fall on others.

The Court held that the Commission had seriously infringed Schneider's right to be heard before adoption of the prohibition decision which deprived Schneider at the time of any possibility of knowing that there was no prospect of obtaining a declaration that the merger was compatible. The Court held that there was no justification for such an infringement by the Commission on the basis of its margin of discretion. As a consequence, the Commission must compensate Schneider for the loss and damage caused.

The Court held that the illegality vitiating the decision of incompatibility requires the Commission to compensate Schneider for two categories of financial losses suffered by it.
The first comprises the expenses incurred by Schneider relating to its participation in the resumed merger control procedure which was undertaken by the Commission following the annulments pronounced by the Court on October 22nd 2002.
The second represents the reduction in the divestiture price which Schneider had to concede to Wendel/KKR to obtain a postponement of the execution of that divestiture. Only two-thirds of the latter loss is to be compensated: The Court considers that Schneider had itself contributed to its own loss by assuming the real risk that the merger would subsequently be declared incompatible and that resale of the shareholding in Legrand would be the inevitable consequence.

The Court of First Instance did not quantify the loss and damage. Instead it orders the parties to agree and inform the Court of the amount of the first category of loss within three months of the judgment. The second category of loss will be quantified by a Court appointed expert.

Schneider will probably receive less than the €1,663,734,716.76 (US$ 2,290,463,583.40) claimed initially.

A similar, but not identical, case is still pending before the Court of First Instance in Case T-212/03 MyTravel v. Commission.

The Reform Treaty and the Inter-Governmental Conference

Further to the Council Presidency Conclusions of June 23rd, 2007 that we noted here, the Commission has issued two short texts as a short of explanation and follow-up.

The first text sets out the procedure to be followed by the Inter-Governmental Conference tasked with drafting the new Reform Treaty. You can find it here.

The second is a short memo that outlines the substantive issues to be discussed at the Inter-Governmental Conference. That memo is available here.

Both are very handy little documents.

And for what it is worth, the Commission has published its own opinion on the Inter-Governmental Conference.

UPDATE: Links have been corrected and updated.

Charges equivalent to a customs duty: Case C-173/05

This kind of case is pretty rare. You don't find many charges equivalent to a customs duty these days.

But in its judgment in Case C-173/05 Commission v. Italy, the Court of Justice held that a tax imposed by the Sicilian authorities on gas pipelines was a charge having equivalent effect to a customs duty prohibited by Articles 23 and 25 EC.

The local authorities in Sicily instituted a tax on the ownership of gas pipelines that carried gas from Algeria up into mainland Italy. The tax was ostensibly an "environmental tax". The catch in this case was that the tax was payable only when gas actually present in the pipeline. Consequently, the Court held that the Sicilian tax is a charge levied on goods (the gas) imported from a non-member country (Algeria) for distribution and consumption in Italy or in transit to other member States.

The Court also held that the Sicilian tax was contrary to Article 133 EC and to Article 9 of the Cooperation Agreement between Algeria and the EC.

Mobile phone roaming charges: Regulation 717/2007

Anyone using a cell phone in Europe will rapidly become aware of the poor quality of service and the extraordinarily high cost of making (or receiving) a call from one member State to another.

So, to "remedy" the situation, the European Parliament and the Council have adopted Regulation 717/2007 to regulate the cost of roaming calls, that is calls made from one member State to another. It sets up what is known as the "Eurotariff" which is a sort of maximum charge.

We'll see if this old fashioned piece of price regulation does any good. Or perhaps the quality of service will plummet still further.

New Practical Arrangements for the Codecision Procedure

The European Parliament, the Council and the Commission have agreed and made public a new "Joint Declaration on Practical Arrangements for the Codecision Procedure".

The Codecision procedure is complicated for sure. And Article 251 EC does not lay down all the details of how the procedure should work. Consequently, these arrangements between the institutions are both needed and interesting to read if one wants to see how the procedure actually works.

Although this new Joint Declaration does not say so, it would seem to replace the earlier 1999 Joint Declaration. It complements the 2003 Interinstitutional agreement on better law-making which remains current.