Taxing Times: the UK’s Challenge to the Financial Transaction Tax

KAProf Kenneth Armstrong, University of Cambridge

Ever tried. Ever failed. No matter. Try again. Fail again. Fail better.

Samuel Beckett

Just over a year since the United Kingdom (UK) commenced legal proceedings against the Council of the EU challenging its decision to authorise the use of enhanced cooperation for the adoption of the proposed Financial Transaction Tax (FTT), the Court of Justice has, as anticipated, dismissed the UK’s application (Case C-209/13, United Kingdom v Council). This is another defeat for the UK following on from its unsuccessful challenge to the powers of the European Securities and Markets Authority to control ‘short-selling’. Whether the UK will have more success in the third of its triptych of legal challenges to measures adopted in the wake of the financial crisis – the cap of ‘bankers’ bonuses’ – is yet to be determined. However, in the lead up to the European Parliament elections, with the United Kingdom Independence Party riding high in the polls and the UK prime minister declaring that he will not act as prime minister following the 2015 general election unless there will be a referendum on the UK’s continuing membership of the EU, it is clear that these defeats before the Luxembourg court have both political and legal saliency.

 

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Making Infringement Procedures More Effective: A Comment on Commission v. Hungary, Case C-288/12 (8 April 2014) (Grand Chamber)

scheppele, kimKim Lane Scheppele, Princeton University 

On 8 April, Hungary lost again at the Court of Justice of the European Union (ECJ). The European Commission had alleged that that Hungary violated the independence of its data protection officer and the ECJ agreed. The case broke little new legal ground.   But it is important nonetheless because it signals serious trouble within the EU.   The case exposes Hungary’s ongoing challenge to the EU’s fundamental principles. And it exposes the limitations of ordinary infringement proceedings for bringing a Member State back into line.

 The Commission may have won this particular battle, but it is losing the war to keep Hungary from becoming a state in which all formerly independent institutions are under the control of Fidesz, the governing party.   The Commission clearly sees the danger of one-party domination and it has attempted to challenge the Hungarian government before. But the Commission has so far not picked its battles wisely or framed its challenges well. It could do better. The case of the data protection officer is a case in point.  

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Adieu and Farewell to the Data Retention Directive

Anita PicAnita Davies

The European Union is all too often portrayed as a creature defined by over-regulation – be it the infamous “bendy banana” rules or the great chocolate debate. It is easy (and sometimes politically convenient) to forget that the EU and CJEU can serve to protect individuals from overt (and covert) state regulation. As of a CJEU decision this week to annul the Data Retention Directive (2006/24/EC), it will be very difficult for the Home Secretary, Teresa May, to push through the Communications Data Bill (also known as the “Snooper’s Charter”).

The bill was abandoned in May 2013 following opposition from the Lib Dems, but has shown signs of resurfacing. The bill would give police and security services access, without a warrant, to details of all online communication in the UK – such as the time, duration, originator and recipient, and the location of the device from which it was made. The bill depends however, on operators being obliged to store customers’ details and records. The data retention directive obliged companies to retain data and information of citizens using electronic communications networks – but now that it has been annulled the responsibility of operators to retain data is far more ambiguous.

The CJEU decision resulted from proceedings taking place in Ireland and Austria – where challenges had been mounted regarding the legality of national legislative and administrative measures concerning the retention of data. The Court ruled on Wednesday that the purpose of the Data Retention Directive, i.e. ensuring that communications data was available in order to investigate and fight serious crime, was compatible with the European Rights framework. However, the Directive itself entailed a wide-ranging and particularly serious interference with the fundamental rights to respect for private life and to the protection of personal data (Articles 7 and 8 of the CFREU), without that interference being limited to what was strictly necessary.

The Court noted that the data being retained enabled:

“very precise conclusions to be drawn concerning the private lives of the persons whose data has been retained, such as the habits of everyday life, permanent or temporary places of residence, daily or other movements, the activities carried out, the social relationships of those persons and the social environments frequented by them” [§27].

Given the potential conclusions the Court found that:

“The EU legislation in question must lay down clear and precise rules governing the scope and application of the measure in question and imposing minimum safeguards so that the persons whose data have been retained have sufficient guarantees to effectively protect their personal data against the risk of abuse and against any unlawful access and use of that data” [§54].

The Directive lacked such precise rules and appropriate safeguards.

In particular the Court objected to the fact that the Directive did not discriminate between individuals. The Directive covers all individuals, all means of electronic communication and all traffic data without any differentiation, limitation or exception being made in the light of the objective of fighting against serious crime. The Directive also fails (somewhat surprisingly given its purpose) to define the notion of “serious crime”. The Court found that the data retention period (6 to 24 months) was too generic and that the Directive did not require that the data be retained within the EU itself. Continue reading

Right-Hand, or Wrong-Hand, Drive? Market Access and Proportionality

Angus MacCulloch, Lancaster University Law School

On 20 March 2014 the Court of Justice of the EU (CJEU) handed down two separate, but connected, judgements in Case C-639/11 Commission v Poland and Case C-61/12 Commission v Lithuania. Both cases involve the Commission challenging the Member States’ refusal to register right-hand drive cars within their jurisdiction. Both MSs argued that their refusal to allow the registration of right-hand drive cars was a safety measure as the driver of a right-hand drive car has a field of vision considerably reduced when the traffic is on the right-hand side of the road. It is rather contrary to the usual UK political debate on EU migration, but this issue is essentially a problem caused when former UK residents move to Poland or Lithuania and attempt to register their right-hand drive cars in those States (AG [102]). The owners of right-hand drive vehicles would have to go through the expensive process of moving the vehicle controls to the left in order to properly register their vehicle in either MS. In the rest of this post references will be to Case C-639/11 unless specifically indicated.

The judgment concerns two separate issues. The first, the registration of new vehicles, is of less general interest and I shall deal with it very briefly. The second, the registration of vehicles previously registered in another MS, is of wider application and I shall deal with it more fully.

New Vehicles

The registration process for new vehicles in the EU is comprehensively governed by Type Approval Directives (Directive 70/311/EEC and Directive 2007/46/EC) which are designed to “replace the Member States’ approval systems with a Community approval procedure based on the principle of total harmonisation” (Dir 2007/46, Recital 2). The type approval procedure was amended when the UK and Ireland became members of the, then, Community to make no distinction between left and right-hand drive cars. Both the Directives are internal market measures, but ensure within them a high degree of road safety. Art 2a of Directive 70/311/EC requires MSs not to prohibit the registration of vehicles “on grounds relating to their steering equipment” if the vehicles satisfies the requirements of the Directive. It was therefore not surprising that as the EU harmonising measure had already taken into account the safety issues arising from the differences between the type approval of new left and right-hand drive vehicles it was not possible for an individual MS to require further pre-registration changes through moving the steering equipment from right to left [47].

Vehicles Previously Registered in other MSs

As the Directives only apply to approval of new vehicles they were not relevant to the registration of vehicles which had previously been registered in other MSs. That question was governed by the Treaty principles on the free movement of goods, namely Articles 34 and 36 TFEU. Both Poland and Lithuania argued that the use of a right-hand drive vehicle in situations where traffic circulated on the right hand side of the road presented a risk to road safety such as to necessitate the refusal of registration. The Polish Government argued that there was no indirect discrimination in the measure, as right-hand drive vehicles manufactured in Poland were equally effected. Both the Polish and Lithuanian Governments argued that even if the measure was a quantitative restrict on imports, in the terms of Art 34 TFEU, it was justified on the basis of the protection of road safety. The Commission argued that the measure was contrary to Art 34 TFEU, and that the refusal of registration was not suitable for attaining the road safety objective pursued, and the measure was disproportionate.

The most interesting aspect of the findings of the Court in these cases was not the eventual decision. It was not surprising that, given the EU harmonisation provisions in place, the CJEU was resistant to the MSs attempt to restrict the import of vehicles from other MSs. However, the way in which they approach the question is interesting in two regards. First the test the Court used to decide whether the national measures fell within Art 34 TFEU, and second, the issues it took into account in deciding the proportionality question. Continue reading

Case Comment: CD v ST and Z v A Government Department & Ors (C-167/12 and C-363/12)

Michèle Finck, University of Oxford

Human procreation is not longer what it used to be. While medical research has created a number of mechanisms that allow people to engage in sexual intimacy without a resulting pregnancy, it also allows those wishing to procreate but who are unable to do so biologically to have children. IVF and surrogacy in many ways challenge our conception of human procreation. Naturally, the law needs to adapt to these changes.  Surrogacy in particular however raises a number of value-laden questions, which complicates the law’s response to these medical avenues. It is thus not surprising that no homogenous position exists between Member States on this issue.

In the CD and Z cases, the CJEU had to pronounce itself on how to reconcile surrogacy with an existing legal framework on maternity leave that did not account for motherhood resulting from that mechanism. More precisely, it was faced with the question of whether a mother who did not give birth to her own child, born via a surrogate, has a right to maternity leave under EU law. Family law is not a EU competence. Maternity leave is, however, regulated by the Pregnant Workers Directive (PWD) and some aspects arising out of motherhood and employment are addressed by the Sex Discrimination Directive. In Mayr, the CJEU had already clarified that the Sex Discrimination Directive is applicable to workers undergoing IVF that have not yet been successful.

In CD and Z, the Grand Chamber established that, as a matter of EU law, only women who themselves give birth to the child can benefit from maternity leave. Two Advocates General, Wahl and Kokott, issued opinions and came to opposed conclusions. The Court followed Advocate General Wahl in its judgment. Applying Mayr, it found that the PWD only applies to women who are in fact pregnant. The Sex Discrimination Directive was found not to be applicable either as the commissioning mother of a surrogacy agreement would be in the same position as a commissioning father. Having found that the question fell outside of the ambit of EU law, the CJEU also found the Charter of Fundamental Rights to be inapplicable. In the Z judgment, the CJEU further clarified that the Framework Equality Directive and its provisions on disabilities do not apply to women unable to become or carry out a pregnancy as the directive only targets disabilities that render a worker’s involvement in professional life more burdensome, which is not the case for medical conditions that prevent women from getting pregnant or carrying out a pregnancy. Continue reading

The Commission gets the point – but not necessarily the instruments

european-union-flags-at-t-0021Jan-Werner Müller

This week the European Commission issued a Communication about a new framework for protecting the rule of law within EU Member States.[1]  Is this the long hoped for mechanism that allows the EU to deal with internal threats to liberal democracy (the democratic deficits within Member States, so to speak) effectively?  The clear-cut answer is: yes and no.  The Commission has evidently understood that attempts systematically to undermine rule of law principles require a different response than individual infringement proceedings.  Depending on the circumstances, a structured process of naming and shaming which is now available to the Commission might work.  But if it doesn’t, then the Commission will remain just as helpless as before: no new sanction mechanisms are envisaged (and, to be fair, none might be feasible without treaty change).  In that sense, the new framework formalizes — or, in the words of Commission President Barroso, “consolidates” – the Commission’s de facto approach in recent years.  This is not a trivial achievement; and it’s probably the most the Commission could do on the basis of existing law and with available institutions such as the Fundamental Rights Agency.  It may well deter some governments.  But for illiberal national politicians determined to go head to head with the Commission, there is in the end still only Article 7 TEU – and that remains as difficult to put into effect as before.

The Commission’s initiative comes against the background of threats to liberal democracy in Hungary and Romania since about 2010 — and an acute sense among many observers (and also among political actors) that the Union has been ill-equipped to deal with a challenge one might call “constitutional capture.”  Constitutional capture is different from pervasive corruption (a major problem still in Bulgaria and Romania, for instance); but it is also different from individual rights violations, grave as the latter might be.  Constitutional capture aims at systematically weakening checks and balances and, in the extreme case, making genuine changes in power exceedingly difficult.  Hungarian Prime Minister Victor Orbán actually passed a new constitution for his country (a case of formal constitutional capture); his Romanian counterpart Victor Ponta, in the summer of 2012, blatantly tried to disable checks and balances (the constitutional court in particular) to get rid of his political arch-enemy, the President of Romania (this being a matter of attempting an informal constitutional capture).

In both cases, the Commission got into a direct confrontation with the respective national governments.  While the EU arguably helped to avoid the worst, the experience seemed to point to a significant weakness of the Commission as a guardian of the treaties: it could take governments to court for individual infringements of EU law, but it proved incapable of addressing systematic attempts to undermine the rule of law.  In some cases, it could not “read” certain laws for what they were, but had to reinterpret them in an EU framework such that their real political meaning was officially missed.  When Orbán’s government effectively decapitated the Hungarian judiciary by drastically lowering the retirement age of judges, the EU sued Hungary for age discrimination.  Brussels won its case, but the judges were never re-instated; the political situation remained more or less as Orbán’s government wanted it.       Continue reading

Rights of residence of TCN family members within a Union citizen’s home state: Comment on Cases C-456/12 O and B and C-457/12 S and G, Judgment of the Court (Grand Chamber) 12 March 2014

photoCatherine Taroni

Context

Directive 2004/38 on the right of citizens of the Union and their family members to move and reside freely grants qualifying Union citizens rights of residence in Member States other than their own, and allows family members to derive rights of residence from the Union citizen.  As McCarthy showed, this does not apply within a Union citizen’s home state.  It is possible for family members to derive rights of residence from the Treaty within a Union citizen’s home state, and this is what the Court considered in C-456/12 O and B and C-457/12 S and G.

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‘Exposing a Grave Injustice’: Montreal Exclusivity and the Rights of Disabled Passengers: Stott v Thomas Cook [2014] UKSC 15

Dr Jeremias Prassl

On March 5, 2014 the Supreme Court handed down its judgment in Stott v Thomas Cook (previewed for the UK Supreme Court blog last autumn here). The case had attracted significant interest domestically and internationally, with the claimant supported by the Equality and Human Rights Commission, and the Secretary of State for Transport intervening on his behalf.

Facts

During a journey from Zante, Greece, to East Midlands Airport in the autumn of 2009, the claimant Mr Stott, paralysed and permanently dependent on a wheelchair, suffered from a breach of his rights under the EU’s Disability Regulation (EC) No 1107/2006, as implemented in the United Kingdom by the Civil Aviation (Access to Air Travel for Disabled Persons and Persons with Reduced Mobility) Regulations 2007 (SI 2007/1895). The trial judge assessed compensation at £2,500 but saw himself unable to make such an award due to the exclusive application of the Montreal Convention of 1999 (‘MC’).

Thomas Cook had relied on that international convention’s uniform rules governing liability under the contract of carriage by air, suggesting that their exclusive scope of application was a well-established principle in domestic, European Union and international law and that passengers could therefore not seek redress under domestic law. Article 29 MC stipulates that

In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention […]

The United Kingdom is a contracting party to the Montreal Convention, the provisions of which have also been incorporated into EU law by Regulation (EC) 889/2002. Giving the only substantive judgment for the Court of Appeal, Maurice Kay LJ had found in favour of the airlines on the basis of Article 29 MC:

The real injuries to [the claimants’] feelings […] were sustained at times when the Montreal Convention governed their situations. Its exclusivity both provided and limited their rights and remedies. Accordingly, their claims for compensation for injury to feelings could not succeed. [54]

Judgment

Judgment for the Supreme Court was given by Lord Toulson, with whom Lady Hale and Lords Neuberger, Reed and Hughes agreed. Following a summary of the facts and the relevant provisions in domestic and European Union law, his Lordship turned to a discussion of the Montreal Convention, ‘Article 29 [of which] is the rock on which Mr Stott’s claim for damages foundered’ [32].

Counsel for Mr Stott had suggested that the exclusivity question raised an important point of EU law and that the MC should not be applicable to the present case, which fell outside both its substantive and temporal scope. This could be illustrated by reference to joined Cases C‑581/10 and C‑629/10 Nelson and TUI Travel plc and Case C-344/04 ex parte IATA, where the CJEU had repeatedly found that the provisions of Regulation 261/2004 for compensation and assistance to passengers in case of delayed or cancelled flights were not incompatible with the MC, but rather a complementary regime of passenger protection. In rejecting this point, and the related request for a preliminary reference under Article 267 TFEU, Lord Toulson suggested that EU law as such was not engaged, or in any way manifestly clear, as the CJEU had held in ex parte IATA [at paragraph 42], that claims for damages on an individual basis would be subject to MC exclusivity, and Mr Stott’s claim was so founded.

Counsel for the Secretary of State for Transport, on the other hand, focussed on the temporal dimension of the claim, suggesting that the Regulations had been breached long before Mr and Mrs Stott’s embarkation. This argument, too, was rejected: on the facts, the actual injury had taken place only once aboard the aircraft, and also to avoid ‘encourag[ing] deft pleading in order to circumvent the purpose of the Convention’ [60]. Lord Toulson adopted the reasoning of Sotomayor CJ in King v American Airlines (see discussion below), and held that the quality of the cause of action was irrelevant: the Montreal Convention was designed comprehensively to deal with air carriers’ liability from the moment of embarkation until disembarkation. Continue reading

Destitute asylum seekers – what are member states’ obligations? Case Comment: Federaal Agentschap v Saciri (C-79/13)

Bianca Venkata

refugee

Photograph of a child asylum seeker in the Rixensart asylum seeker centre in Belgium

Facts

On 11 October 2010 the Saciri family applied for asylum in Belgium. The family consists of father Selver, mother Danijela and their three children, Danjel, Denis and Sanela.  At the same time as claiming asylum, the family applied for accommodation to the Belgian agency for asylum seeker reception (Fedasil). Fedasil informed the Saciri family that it did not have any available accommodation and referred it to obtain a financial allowance from the Belgian public centre for social welfare (OCMW). OCMW refused to provide the family with a financial allowance on the grounds that the family was not staying at Fedasil’s asylum reception centre. As a consequence, the family was denied both public asylum seeker accommodation and a financial allowance to rent in the private market.

The family commenced proceedings in the Leuven local labour court (Local Court). On 12 January 2011 the Local Court ordered Fedasil to provide the family with public accommodation. On 21 January 2011 Fedasil finally placed the family in public asylum seeker accommodation. By this time the family had spent more than three months, from the date of claiming asylum, without public accommodation or a sufficient financial allowance to rent privately. On 17 October 2011, the Local Court ordered Fedasil to pay the Saciri family EUR 2,961, representing three months of minimum guaranteed income. Fedasil appealed the judgment to the Brussels higher labour court (Higher Court).

Preliminary Reference

The Higher Labour Court referred three questions to the Court of Justice as preliminary references. The questions were:

  1. When a member state chooses to provide a financial allowance instead of accommodation is it bound by the requirements of articles 13 and 14 of Directive 2003/9/EC of 27 January 2003 (Directive)? In particular, should the financial allowance be sufficient to allow an asylum seeker to provide their own accommodation at all times?
  2. From when does the financial allowance need to be paid?
  3. Does the member state have to ensure compliance with the Directive when its asylum accommodation is full and it refers asylum seekers to other public agencies?

The Law

The Directive lays down minimum standards for the reception of asylum seekers. Recital 5 of the Directive stresses that full respect for human dignity as enshrined in the Charter of Fundamental Rights (Charter) should be ensured. Recital 7 states that the Directive should normally ensure asylum seekers a dignified standard of living and that comparable living conditions should be provided in member states.

Article 13 of the Directive requires member states to ensure:

  • that material reception conditions are available to applicants when they make their application for asylum (article 13(1)); and
  • a standard of living adequate for the health of applicants and capable of ensuring their subsistence. (article 13(2)).

Article 13(5) of the Directive states that:

“…where Member States provide material reception conditions in the form of financial allowances….the amount thereof shall be determined in accordance with the principles set out in this Article.”

Article 14 of the Directive imposes various conditions on member states when they provide accommodation to asylum seekers. This includes ensuring that minors are lodged with their parents (article 14(3)).

Belgium has transposed the Directive into its domestic law. Continue reading

Event: Dual Exits? Debating the Scottish referendum, the UK’s possible exit from the EU, and perspectives for Denmark

The Centre for European Politics at the University of Copenhagen is hosting a debate on Scottish independence, the possibility of a UK referendum on EU membership, and similar secessionist tendencies emerging in other parts of the EU on Thursday 20 March 2014. The event features experts and analysts from Scotland, the UK, and Denmark.

Please see the event flyer for the programme and more information.