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European Court of Justice rules that decision of EC Commission to file civil actions against U.S. tobacco companies in U.S. federal court did not alter legal rights of companies and thus was not subject to their action to annul under Article 230EC
The American Plaintiffs before the EC Court of First Instance (CFI) were R. J. Reynolds Tobacco Holdings, Inc., RJR Acquisition Corp., R. J. Reynolds Tobacco Company, and R. J. Reynolds Tobacco International, Inc., Philip Morris International Inc. was also a party. The principal Defendants were the Commission of the European Communities, supported by the Council of the European Union. Principal Interveners were Spain, France, Italy, Portugal, Finland and the European Parliament.
By their appeal, the appellants ask the Court to set aside the judgment of the CFI of January 15, 2003 in Joined Cases T 377/00, T 379/00, T 380/00, T 260/01 and T272/01, Philip Morris and Others v Commission, 2003 ECR II 1. In these cases, the CFI had dismissed as inadmissible their applications for annulment of the decisions of the Commission of the European Communities of July 19, 2000 adopting the principle of a U.S. civil action against certain American cigarette manufacturers.
On November 3, 2000, the EC Commission filed a federal civil action (A 1) in the Eastern District of New York on behalf of the European Community (EC) against several U.S. manufacturers. In A 1, the Community alleged that the present Plaintiffs were actively smuggling cigarettes into EC territory and distributing them there. Specifically, the EC sought compensation for lost customs duties and value added tax (VAT) as well as injunctions to stop the alleged activities.
The Community relied on the Racketeer Influenced and Corrupt Organizations Act 1970 (RICO) as well as on common law fraud, public nuisance and unjust enrichment. Originally aimed at combating organized crime, RICO provides for treble damages. On July 16, 2001, the District Court dismissed the EC’s claims.
On July 25, 2001, the Commission approved the principle of a second civil action in the U.S. federal courts, jointly by the Community and at least one Member State, against the A 1 defendants. On August 6, 2001, the Commission filed a second action in the District Court (A 2) against Philip Morris and Reynolds on behalf of the European Community and numerous Member States. In A 2, the Commission itself relied solely on the above common law doctrines. The Member States, however, also rested their claims on RICO plus on principles of public nuisance and unjust enrichment. The federal court also dismissed this suit.
The Commission and the above Member States filed a third action with the District Court against Japan Tobacco and other associated tobacco companies (A 3) in January 2002. On February 19, 2002, the District Court dismissed A 2 and A 3 based on the common law Revenue Rule. Under it, the U.S. Courts decline to enforce the fiscal legislation of other nations. On March 25, 2002, the Community and the 10 Member States noted an appeal before the Second Circuit.
On October 15, 2001, the above tobacco companies (Plaintiffs) filed actions in the CFI against the Commission’s decision to bring the U.S. actions. The Commission raised an objection of inadmissibility on the ground that the contested decisions are not acts which may be the subject of an action such as that provided for in the fourth paragraph of Article 230 EC.
In the judgment under appeal, the CFI upheld the objections of inadmissibility raised by the Commission and dismissed the actions. The CFI pointed to consistent EC case law. It has two relevant aspects. Firstly, to find out whether a measure whose annulment is sought is open to challenge, it is necessary to look to its substance since the form in which it is cast is, in principle, immaterial. Secondly, annulment applies only to measures the legal effects of which are binding on, and capable of affecting the interests of, the Plaintiff. The measure must do so by bringing about a distinct change in his legal position. The CFI cited, inter alia, Case 60/81, IBM v. Commission, 1981 ECR 2639.
The CFI found that the Commission’s decision to file legal proceedings did not, in itself, alter the legal position of Plaintiffs. Therefore, it cannot be a decision which is open to annulment. The Plaintiffs countered that those decisions did produce binding legal effects with regard to the Commission’s powers and the EC’s institutional balance.
On that point, the CFI found that, like any act of a Community institution, the contested decisions do imply that the institution in question has adopted a position as to its competence to adopt them. But this cannot give rise to a binding legal effect for the purposes of Article 230 EC because, even if it is wrong, it has no meaning independent of the act adopted. The CFI rejected the argument that the contested decisions subjected the Plaintiffs to another legal order or brought about a change in their legal position at the substantive or procedural level.
According to the CFI, all courts are required to apply the procedural rules of their own legal order and the substantive rules determined in accordance with their own rules governing conflict of laws. Regardless of which rules apply, the CFI cannot attribute the resulting legal effects, whether they arise by operation of law or from the decisions of the court seized, to the party who brought the proceedings. The mere filing of an action before a U.S. court does not, therefore, impose new obligations on the Plaintiffs; nor does it create a duty for them to modify their activities.
Plaintiffs’ also contended that the proceedings before the U.S. Court differ significantly from those which the Commission might have instituted before the courts in the Member States in one important respect: there is no mechanism for a reference for a preliminary ruling pursuant to Article 234 EC. The CFI replied that it is well accepted in cases with international elements that the foreign court seized must apply its own substantive doctrines within the context of its own rules of procedure.
According to the CFI, the lodging of legal proceedings before any court necessarily entails that forum’s application of its own procedural rules; this does not amount to a legal effect under Article 230 EC. The Court further noted that, while Article 234 EC does give Member State courts the power, and sometimes the duty, to refer questions to the ECJ for a preliminary ruling on EC law, it does not confer any right of referral on the litigants before those courts.
Furthermore, the CFI conceded that a U.S. federal court can, by virtue of its procedural law, adopt decisions having binding effects on the parties to the case before it, e.g., obliging them to disclose facts and documents. Those effects result, however, from the independent exercise of the powers with which U.S. law invests those courts; they cannot, therefore, be imputed to the Commission. The contested U.S. decisions, of course, may have had the effect of letting the Plaintiffs know that they were running a real risk of having the U.S. Court impose penalties on them; this, however, is a mere consequence of fact and not a legal effect within Article 230EC.
While it may seem desirable that individuals should have, in addition to the possibility of an action for damages, a remedy to prevent or terminate actions of the Community institutions liable to prejudice their interests but which do not amount to decisions, it is clear that the Treaty does not provide a remedy of that nature. This would necessarily involve the Community judicature in issuing directions to the other Branches. It is not for the judicature to usurp the function of the founding authority of the Community in order to change the system of legal remedies and procedures laid down by the Treaty.
On the appeal to the ECJ, a Grand Chamber of the Court considers the various contentions, but ends up dismissing the appeal.
The ECJ first holds that the first plea is admissible. “As regards the first part of that plea in law, as the [CFI] rightly pointed out, … it is settled case law that only measures the legal effects of which are binding on, and capable of affecting the interests of, the [Plaintiff] by bringing about a distinct change in his legal position are acts or decisions which may be the subject of an action for annulment (see, IBM v. Commission , above, ¶ 9.” [¶ 54]
“Accordingly, the [CFI] did not err in law by inferring from the fact that the contested decisions did not produce binding legal effect for the purposes of Article 230 EC that they could not be the subject of an action without restricting the scope of that approach to preparatory acts.” [¶ 56].
The ECJ also rejects the second part of the first plea. “[I]t must be stated that the [CFI] rightly found … that, although the commencement of proceedings constitutes an indispensable step for the purpose of obtaining a binding judgment, it does not per se determine definitively the obligations of the parties to the case, so that, a fortiori , the decision to bring legal proceedings does not in itself alter the legal position in question.” [¶ 58].
As to the third part of the plea: “the [CFI] was also right in finding, … that the commencement of legal proceedings before any court necessarily entails the application by the court of its own procedural rules, which cannot therefore be viewed as a legal effect, for the purposes of Article 230 EC, of the decision to bring an action.”
“… [W]hether the Commission’s contested decisions can be categorised as legal acts which are open to challenge … cannot be dependent on the fact that, if the Commission had commenced legal proceedings before a court in a Member State, a reference for a preliminary ruling under Article 234 EC would have been possible in the context of those proceedings.” [¶¶ 61 62]. The ECJ declines to uphold that part of the first plea in law.
“As regards the fourth part of the plea, the CFI correctly [read the precedents] that a decision to initiate the procedure for examining State aid produces legal effects as referred to in Article 230 EC. Specific legal consequences flow from the assessment and classification of the aid mentioned and from the choice of procedure which follows from that. By contrast, the mere fact that, by the contested decisions, the Commission made a choice as to the procedure to be undertaken against the [Plaintiffs] and thus excluded other procedures cannot, in itself, be a legal effect for the purposes of that article.” [¶ 64].
“As regards the fifth branch of the plea, as the [CFI] rightly found, if, like any act of a Community institution, the contested decisions carry an incidental implication that the institution in question has adopted a position as to its competence to adopt them, that adoption of a position cannot itself be viewed as a binding legal effect for the purposes of Article 230 EC, as interpreted in the case law.” [¶ 66].
“The issue of whether the competent United States court applied the Act of State doctrine or not is irrelevant in the light of the concept of challengeable act for the purposes of Article 230 EC.” [¶ 73].
“It is true that, as the [CFI] observed …, by means of Articles 230 EC and 241 EC, on the one hand, and Article 234 EC, on the other, the Treaty establishes a complete system of legal remedies and procedures designed to ensure review of the legality of acts of the institutions and has entrusted such review to the Community courts.”
“However, the fact remains that, although the requirement as to legal effects which are binding on, and capable of affecting the interests of, the [Plaintiff] by bringing about a distinct change in his legal position must be interpreted in the light of the principle of effective judicial protection, such an interpretation cannot have the effect of setting aside that condition without going beyond the jurisdiction conferred by the Treaty on the Community courts.”
“The [CFI] was also right to hold, …, that even though individuals are unable to bring an action for annulment of those measures, they are not denied access to justice since an action for non contractual liability [tort] under Article 235 EC and … Article 288 EC is available if the conduct in question is of such a nature as to entail [civil] liability on the part of the Community.” [ ¶¶ 80 82].
The fourth plea alleges misapplication of [this] Court’s case law on whether clearly illegal measures may be challenged. “Secondly, without it being necessary to rule on whether it follows from the judgment in IBM v. Commission that, in exceptional circumstances, actions for annulment of measures that lack even the appearance of legality must be declared admissible, it must be stated that, in any event, that is obviously not the case here.”
“It is sufficient to point out in that regard that Article 211 EC provides that the Commission is to ensure that the provisions of the Treaty and the measures taken pursuant thereto are applied, that under Article 281 EC the Community has legal personality and that Article 282 EC, although restricted to Member States on its wording, is the expression of a general principle and states that the Community has legal capacity and is, to that end, to be represented by the Commission.” [¶¶ 93 94].
In their Fifth plea, the Plaintiffs express concern that the Commission’s choice of a foreign court might produce a judgment binding as an internal EC matter. The ECJ disagrees. “It must be found that, … a decision by a United States court as to the Commission’s power to bring legal proceedings before it is not capable of binding the Community and its institutions to a particular interpretation of the rules of Community law in the exercise of their internal powers. … [S]uch a decision would be binding only in relation to the specific [ U. S.] proceedings. The fifth plea in law must therefore be dismissed as unfounded.”
“Since none of the pleas in law put forward by the appellants in support of their appeal is well founded, the appeal must be dismissed.” [¶¶ 102 104].
Citation: R. J. Reynolds Tobacco Holdings, Inc. & Others v. Commission of the European Communities, Case C 131/03 P; 2006 E. C. J. Celex Lexis 442 (Eur. Ct. Just. [Gr. Ch.], (2006).
Filed in: 2007 International Law Update, Issue1
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European Court of Justice annuls airplane passenger data agreement with U.S. for lack of an appropriate legal basis
On May 30, 2006, the European Court of Justice (ECJ) issued a decision that annuls the agreement that the European Union (EU) had reached regarding the transfer of airplane passenger data.
After September 11, 2001, the U.S. has required air carriers operating in the U.S. to provide U.S. authorities with data from their reservation and departure control systems (“Passenger Name Records, PNR). In 2004, the EU Commission found adequate safeguards for the passenger data on part of the United States Bureau of Customs and Border Protection (CBP), and the Council subsequently adopted “Decision 2004/496/EC on the conclusion of an Agreement between the European Community and the United States on the processing and transfer of PNR data by Air Carriers to the United States Department of Homeland Security, Bureau of Customs and Border Protection” (2004 O.J. (L 183) 83). The European Parliament then applied to the ECJ for annulment of the Council Decision and the Commission’s decision an data protection adequacy.
The ECJ agrees with the European Parliament and annuls both decisions. First, the ECJ reviews whether the Commission could validly find data protection adequacy based on Directive 95/46/EC on the protection of individuals with regard to the processing of personal data. Article 3(2) of the Directive provides that the Directive shall not apply to the processing of personal data in the course of an activity that falls outside the scope of EU law, such as public security, defense, State security, and State activities in the area of criminal law. In essence, the ECJ disagrees with the Commission’s and Council’s reliance on the Directive. The transfer of PNR data to CBP constitutes processing operations concerning public security and criminal law. This transfer falls with the public framework for public security. Yet, the data is collected by private entities.
“57 While the view may rightly be taken that PNR data are initially collected by airlines in the course of an activity which falls within the scope of Community law, namely sale of an aeroplane ticket which provides entitlement to a supply of services, the data processing which is taken into account in the decision on adequacy is, however, quite different in nature. As pointed out in paragraph 55 of the present judgment, that decision concerns not data processing necessary for a supply of services, but data processing regarded as necessary for safeguarding public security and for law-enforcement purposes.”
“58 The Court held in … Lindqvist, which was relied upon by the Commission in its defence, that the activities mentioned by way of example in the first indent of Article 3(2) of the Directive are … activities of the State or of State authorities and unrelated to the fields of activity of individuals. However, this does not mean that, because the PNR data have been collected by private operators for commercial purposes and it is they who arrange for their transfer to a third country, the transfer in question is not covered by that provision. The transfer falls within a framework established by the public authorities that relates to public security.”
“59 It follows from the foregoing considerations that the decision on adequacy concerns processing of personal data as referred to in the first indent of Article 3(2) of the Directive. That decision therefore does not fall within the scope of the Directive.”
“60 Accordingly, the first limb of the first plea, alleging that the first indent of Article 3(2) of the Directive was infringed, is well founded.”
Therefore, the Commission decision on adequacy does not fall within the scope of Directive 95/46/EC because it concerns the processing of personal data that is excluded from the scope of the Directive.
Second, as for the Council Decision, the ECJ finds that Article 95 EC on the harmonization of the internal market, read in conjunction with Article 25 of the Directive (transfer of personal data to non-member states) does not give the EU competence to conclude such an agreement. The data processing at issue is outside the scope of the Directive.
The ECJ leaves the agreement in effect until September 30, 2006, so that the EU may find a suitable legal basis.
Citation: European Court of Justice, Judgment of the Court (Grand Chamber), 30 May 2006, in Joined Cases C-317/04 and C-318-04; available on the court’s website at “curia.eu.int”; European Court of Justice Press Release No 46/06 (30 May 2006); BBC News report of 30 May 2006, 12.53 GMT.
Filed in: 2006 International Law Update, Issue6
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European Court of Justice rules that agreement between the EC Commission and United States officials known as Guidelines on Regulatory Cooperation and Transparency was valid in that it did not intend to create any binding international obligations without conforming to Article 300 EC
In an application filed at the European Court of Justice on June 21, 2002, the French Republic, supported by the United Kingdom, brought an action against the EC Commission under Article 230 EC to have the decision by which the Commission of the European Communities entered into an agreement with the United States annulled. The challenged arrangement is entitled Guidelines on Regulatory Cooperation and Transparency (the “contested decision” and “the Guidelines”, respectively).
At the London summit in May 1998, the EU and the U.S. (“the partners”) approved a joint declaration on the Transatlantic Economic Partnership. In essence, the partners announced that they will focus their efforts on taking down any barriers that seriously restrain transatlantic trade and investment.
This specifically included regulatory roadblocks that tend to thwart market opportunities for goods or services. It pledged to set up as soon as possible a plan that identifies areas for common actions, both bilaterally and multilaterally, with a schedule for reaching specific goals. It also entailed the securing of any necessary authority to start negotiations. A footnote to the joint statement declares that “nothing in the above text constitutes a negotiating mandate for the European Union.”
The partners then adopted an “Action Plan for the Transatlantic Economic Partnership.” It was forwarded to the Council of the European Union on November 9, 1998 (“the Action Plan”). Within that framework, the Council authorized the Commission to negotiate with a view to entering into bilateral agreements with the U.S., inter alia, in the field of technical barriers to trade.
In July 1999, the relevant directorates of the Commission and their counterparts in the offices of the U.S. Trade Representative and the Department of Commerce started discussions on the Guidelines. During the meetings, the Commission officials often pointed out that the Guidelines would not create any rights or duties at the international level between the EU and the U.S. The two sides come up with a set of unsigned Guidelines in February 2002. The conferees notified them to the Commission but they did not appear in the EU’s Official Journal.
A Commission memorandum of April 2002 also stressed two points. First, it noted that the partners will apply the Guidelines on a voluntary basis, in line with the rules and policies followed by each partner. Secondly, it affirmed that the Guidelines do not amount to an international agreement; instead, they state a result agreed to by the relevant administrative agencies of the partners. The plan was then to go before the next EU/USA summit.
Section II of the Guidelines declares a need to improve cooperation between the partners’ regulatory authorities and to champion transparency before the public. For example, the partners would strive to draw up legislation to minimize and work out potential trade conflicts between the partners and to promote trade in goods. With respect to transparency, the Guidelines aim to improve the public’s role in the regulatory process by informing them of the supporting materials and by giving them the chance to make timely comments on both pending proposals and final versions.
Under Section III, the Guidelines apply to the technical regulations referred to in the WTO’s Agreement on Technical Barriers to Trade. The officials of both sides are to apply the Guidelines on a voluntary basis as widely as possible.
On the merits, France argued two main points. The first is that the Commission lacks the competence to adopt the contested measure because the Guidelines constitute a binding international agreement. Under the separation of powers required by Article 300 EC, only the Council is competent to enter into such arrangements. See Case C 327/91 France v Commission [1994] ECR I 3641.
Secondly, the French Government pleaded that the Guidelines breach the EC Treaty because they limit the exercise of the Commission’s right to initiate measures under the Community’s legislative process and thereby adversely affect that process as a whole. Unpersuaded, the Full Court of the European Court of Justice dismisses the application.
First it notes that Article 300(1) declares in part that: “Where this Treaty provides for the conclusion of agreements between the Community and one or more States or international organisations, the Commission shall make recommendations to the Council, which shall authorise the Commission to open the necessary negotiations. …”
Article 300(2) further provides that: “Subject to the powers vested in the Commission in this field, … the conclusion of the agreements shall be decided on by the Council, acting by a qualified majority on a proposal from the Commission. The Council shall act unanimously when the agreement covers a field for which unanimity is required for the adoption of internal rules and for the agreements referred to in Article 310.”
With respect to the first plea, the Court concludes that the text of the Guidelines makes clear the intention of the agencies not to be legally bound. “The statement in paragraph 7 of the Guidelines that they will be applied on a voluntary basis and the fact that the actions which the parties propose to adopt voluntarily as a result are described by use of the English terms ‘should’ and ‘will’ rather than ‘shall’ are decisive in that regard. That intention also emerges from certain aspects of the Guidelines’ structure, such as the absence of final clauses relating to signature, entry into force, possible amendment, termination or dispute settlement.” [¶ ¶ 33-34]
“Finally, that intention is apparent from the context in which the Guidelines were concluded, the Commission maintaining in this regard that neither the Transatlantic Economic Partnership nor its Action Plan constitutes a framework for the adoption of treaties or other legally binding instruments, while the history of the negotiations in turn demonstrates that the two sides in no way intended to create rights and obligations. It is for that reason that the Guidelines were never notified to the United States Congress, as would be required in the case of a binding international agreement.” [¶ 35] The bottom line is that the arrangement did not come within Article 300 EC.
In the Court’s view, the determination of the first plea disposes of the second one also. “[I]t must first be pointed out that it was determined in the examination of the first plea that the Guidelines are devoid of binding effect. It follows that, contrary to what the French Government claims, the Guidelines cannot impose obligations on the Commission in carrying out its role of initiating legislation.”
“Secondly, as the Commission and the Government of the United Kingdom have rightly pointed out, the power to initiate legislation includes the possibility of engaging in prior consultation and gathering all necessary information before submitting appropriate proposals. Therefore, the mere fact that a measure such as the Guidelines provides for such possibilities cannot be alleged to undermine the Commission’s power of initiative.” [¶¶ 50-51]
Citation: Republic of France v. EC Commission, EU: Case C-233/02, Celex No. 602J0233 (E.C.J., Full Court, March 23, 2004).
Filed in: 2004 International Law Update, Issue5
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EU Court of First Instance dismisses action by U.S. and Japanese tobacco companies that had brought “action for annulment” to challenge Commission’s U.S. court action against them; Court notes that an “action for annulment” may only be brought to challenge acts that produce binding legal effects for the parties by bringing about a change in their legal position
In July 2001, the U.S. District Court for the Eastern District of New York dismissed an action brought by the European Community against RJR Nabisco, Inc., and other tobacco-related companies, seeking recovery for lost revenue and Value-Added Tax (VAT) as a result of cigarette smuggling. It was consolidated with an action brought by the government institutions of the Republic of Colombia (the “Amazonas Case”) against major tobacco product manufacturers for conspiracy to smuggle cigarettes in circumvention of revenue laws. Both actions were premised on the Federal Racketeer Influenced and Corrupt Organizations Act (RICO) (18 U.S.C. Section 1961).
The District Court then granted the defendants’ motion to dismiss the European Community’s case based Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. On March 25, 2002, the European Community filed an appeal before the U.S. Court of Appeals for the Second Circuit.
Subsequently, several of the cigarette companies, including Philipp Morris, Reynolds and Japan Tobacco, brought an action against the Commission of the European Communities before the Court of First Instance of the European Court of Justice. They challenged the Commission’s decisions to bring action in the U.S. against the cigarette companies.
The Commission, in turn, argued that the effect of the contested decisions is not open to challenge as contemplated in the fourth paragraph of Article 230 EC, which provides “[a]ny natural or legal person may … institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former.”
The Court of First Instance held that a decision by the Commission to bring legal proceedings is not an act which may be challenged by an “action for annulment.” Only measures that have binding effects or are capable of affecting the interests of a party can be the subject of such a proceeding. Thus, an “action for annulment” may only be brought to challenge acts that produce binding legal effects for the parties by bringing about a change in their legal position.
Here, the Commission decisions to bring legal action in the U.S. does not by itself alter the legal position at issue. The parties’ obligations can be conclusively established by means of a U.S. court judgment in the action brought by the Commission. Thus, the Commission’s decisions to bring action before U.S. courts are not decisions that can be challenged with an action for annulment. If a U.S. court were to decide the case brought by the European Community, the decision would have a binding effect for the parties to the case. These effects result from the independent exercise of the U.S. courts. Thus, the Commission’s decisions to initiate legal action in the U.S. per se have not produced any binding legal effect.
The Court also notes that this dismissal does not undermine the judicial protections afforded by the European Union (EU) because the cigarette companies are not denied access to European courts. Actions of the European Union that cannot be challenged with an “action for annulment” can nevertheless entail non-contractual liability. Thus, the cigarette companies may be able to bring court action seeking damages in EU courts.
Therefore, the Court of First Instances dismisses the cigarette companies’ action as inadmissible.
Citation: Judgment of the Court of First Instance in Joined Cases T-377/00, T-379/00, T-380/00, T-260/01 and T-272/01 (15 January 2003). The judgment is available on the website of the European Court of Justice at “europa.eu.int/cj/”; European Court of Justice, Press and Information Division, Press Release No. 02/03 (15 January 2003); The European Community v. RJR Nabisco, Inc., 150 F.Supp. 2d 456 (E.D.N.Y. 2001).
Filed in: 2003 International Law Update, Issue4
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European Court of Justice annuls Council Decision authorizing conclusion of “Energy Star Agreement” between U.S. and EC to coordinate energy efficient labeling programs for office equipment because based on wrong provision of EC Treaty
In 1992, the U.S. Environmental Protection Agency (EPA) developed a voluntary labeling program applicable to office equipment. Dubbed the “EnergyStarProgram” (ESP), it persuaded most U.S. manufacturers to adopt energy-saving features for office equipment and educated consumers as to the waste of energy that takes place while electrical gear is in stand-by mode.
The EPA later expanded the ESP to apply, inter alia, to household appliances, heating and cooling equipment, consumer electronics, home office equipment, water coolers, house construction and lighting. It also introduced a star logo with which the maker could label its equipment to signal its conformity to the ESP’s energy-saving principles.
The EC Commission noted that the American market and many others worldwide (including within the EC) had adopted the ESP as their energy-saving standard. Rather than trying to come up with a separate conservation program, the Commission decided that it made more sense to adopt the U.S. program for the entire EC. Thus, on December 19, 2000, the U.S. and the EC signed “the Energy Star Agreement” (ESA) in Washington.
Under Article III of the ESA, the parties appointed the EC Commission and the EPA the responsible agencies for carrying out the ESA. Article IV makes each agency responsible for registering voluntary participants in the labeling program, for enforcing the conditions for using the star logo and for educating consumers on its significance.
The ESA provides that the EPA and the Commission shall each recognize each other’s registrations. Moreover, they are to work together to make sure that all products featuring the logo do in fact meet the energy-saving specifications set forth in ESA, Annex C.
To authorize the EC’s entry into the ESA, the Commission had proposed to the Council, in July 1999, a Decision based on Article 133 EC [ex Article 113] (common commercial policy) in conjunction with Article 300(2) EC [ex Article 228] (Commission role in negotiating foreign agreements). In December of that year, the Council unanimously passed Council Decision 2001/469/EC that would authorize the EC to enter into the ESA.
The Council’s final version of the Decision had rested, however, on Article 175(1) EC [ex Article 130s] (EC role in environmental regulation) along with Article 300(2) EC. The European Parliament in May 2001 had approved entry into the ESA essentially based on the grounds stated by the Council. On June 7, 2001, the ESA went into effect.
The Commission, however, applied to the European Court of Justice to annul the Decision as enacted. The five Judges of the ECJ’s Fifth Chamber rule in favor of the Commission and annul the Decision.
The Court first points out the importance of establishing the correct legal basis for a Community measure and of showing that the choice of this basis rests on objective factors which a court is capable of resolving.
“If examination of a Community measure reveals that it pursues a twofold purpose or that it has a twofold component and if one is identifiable as the main or predominant purpose or component, whereas the other is merely incidental, the measure must be founded on a single legal basis, namely that required by the main or predominant purpose or component.”
“By way of exception, if it is established that the measure simultaneously pursues several objectives which are inseparably linked without one being secondary and indirect in relation to the other, the measure must be founded on the corresponding legal bases.” [¶¶ 34, 35]
The Court then points to the dual nature of the ESA. “In the present case, it is not in dispute that, as is clear from its title, the Energy Star Agreement is designed to coordinate energy efficient labeling programmes for office equipment. As the Commission points out, such coordination necessarily facilitates trade inasmuch as manufacturers henceforth need to refer to just one standard as regards labeling and to comply with just one registration procedure with a single management entity in order to sell equipment bearing the Energy Star logo on the European and American markets. That coordination, therefore, undoubtedly constitutes a commercial policy measure.”
“However, it is also clear, on reading the preamble to the Energy Star Agreement and Article I thereof, that, by stimulating the supply of, and demand for, energy efficient products, the labeling programme in question is intended to promote energy savings and therefore in itself constitutes an environmental policy measure.” [¶¶ 36-38]
The Court then focuses on determining whether either goal dominates the ESA or whether its dual objectives are inseparably intertwined. “It is clear from the terms in which the Energy Star Agreement is couched, … that the Energy Star labeling program is essentially intended to enable manufacturers to use, in accordance with a procedure for the mutual recognition of registrations, a common logo to identify for consumers certain products complying with a common set of energy efficiency specifications which they intend to sell on the American and Community markets. An instrument having a direct impact on trade in office equipment is therefore involved.”
“It is true that, in the long term, depending on how manufacturers and consumers in fact behave, the programme should have a positive environmental effect as a result of the reduction in energy consumption which it should achieve. However, that is merely an indirect and distant effect, in contrast to the effect on trade in office equipment which is direct and immediate.” [¶¶ 40, 41]
“The commercial policy objective pursued by the Energy Star Agreement must therefore be regarded as predominant, so that the decision approving the Agreement should have been based on Article 133 EC, in conjunction with Article 300(3) EC.”
“The fact that participation in the Energy Star labeling program is not mandatory cannot affect that conclusion. The Agreement is none the less designed to have a direct impact on trade in office equipment by facilitating such trade for manufacturers and enabling consumers to choose the products which use the least energy.”
“In addition, … it is clear from the Agreement on Technical Barriers to Trade which is annexed to the Agreement establishing the World Trade Organisation, approved on behalf of the European Community, as regards matters within its competence, by Council Decision 94/800/EC of 22 December 1994 (OJ 1994 L 336, p. 1), that non binding labeling provisions may constitute an obstacle to international trade.” [¶¶ 43-45]
“It follows from the foregoing considerations that the Council should have chosen Article 133 EC, in conjunction with Article 300(3) EC, as the legal basis for the decision concluding the Energy Star Agreement on behalf of the Community. Since Article 175(1) EC, in conjunction with the first sentence of the first subparagraph of Article 300(2), the first subparagraph of Article 300(3) and Article 300(4) EC, is the only legal basis referred to in that measure, Decision 2001/469 must be annulled.”[¶¶ 48, 49]
Citation: Commission v. Council, Case C-281/01; Celex No. 601J0281 (E.C.J., 5th Ch. December 12, 2002).
Filed in: 2003 International Law Update, Issue 1
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In case referred by Greek Supreme Court of Cassation, European Court of Justice holds that Greek statute requiring an automatic lifetime expulsion from Greece of any foreign national convicted for drug offenses is incompatible with basic freedoms to travel guaranteed by EU law as applied to EU citizen and was not justified by public policy
The Haraklion Criminal Court in Greece charged Donatella Calfa, an Italian citizen, with possessing and using banned drugs. After a trial, the Court convicted and sentenced her to three months in prison and to a lifetime expulsion from Greece.
In the absence of compelling (e.g., family) reasons, Greek law requires expulsion of foreign nationals upon conviction for drug offenses. The Minister of Justice, after no less than three years, has discretion to annul the exile. The law does not permit a permanent and total expulsion of Greek citizens but, in the case of a serious drug offense, the court may bar him or her from living in certain areas of Greece for not more than five years.
Ms. Calfa appealed her conviction to the Arios Pagos (Supreme Court of Cassation). This Court, in turn, referred a question of EU law to the European Court of Justice (ECJ). The Greek court was concerned with the compatibility of its law with the provisions of the EC Treaty relating to freedom to provide services.
In its response, the ECJ first notes that the principle of freedom to furnish services includes the unrestricted right of an EU tourist to visit other Member States to benefit from its services. Although the Court seldom interferes with matters of local criminal jurisdiction, domestic criminal statutes must not restrict the basic freedoms assured by Community law. Expelling all foreign nationals for drug convictions sets up a barrier to the exercise of these freedoms by EU citizens.
On the other hand, the Court notes, Member States may deem that the use of drugs amounts to such a danger to its society as to warrant special measures against foreign nationals. To qualify under a public policy exception, however, there must be “a genuine and sufficiently serious threat to the requirements of public policy affecting one of the fundamental interests of society.”
Being a derogation from a fundamental Treaty principle, the ECJ must interpret the public policy exception narrowly. EC law deals with special measures relating to the movement and residence of foreign citizens and explicitly limits the right of Member States to exile them on public policy grounds. For example, such a measure must rest exclusively on a showing that the personal conduct of the individual constitutes a genuine threat to the demands of public policy. The mere fact of a criminal conviction is not enough.
The Greek drug law, however, imposes expulsion automatically upon a drug conviction. It takes no account of the personal conduct of the particular individual or of the existence of a threat to Greek public policy.
The ECJ therefore concludes that the Greek sentencing law puts up such a barrier to the freedom to provide services, to the freedom of movement of workers and to the freedom of establishment under EU law as to fail any justification based on public policy.
Citation: Criminal Proceedings against Donatella Calfa, Judgment of Court in Case C-348/96 [1999].
Filed in: 1999 International Law Update, Issue 12
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For first time in history of European Union, entire slate of twenty-member European Commission resigns in wake of highly critical report of European Parliament’s committee of experts
On March 16, 1999, all twenty members of the European Commission announced their resignations. It was an unprecedented move.
Though the EU now has fifteen Member States, the five largest countries have two slots and the remaining ten have one each on the Commission. Under Article 158 of the Treaty of Rome, the Member States appoint Commission members by common accord to serve five-year terms. The Council requires a proposal from the Commission before it can begin the legislative process. Loosely speaking, the Commission serves as the “executive branch” of the EU government.
The European Parliament (EP), the only branch of the EU government elected by the peoples of Europe, has long criticized the way the Commission has been mishandling internal discipline and budgetary matters. The EP finally appointed a panel of independent experts to study the inner workings of the Commission bureaucracy.
On the afternoon of Monday, March 16, the panel issued a scathing report. While the Report did single out several commissioners by name, the main problem identified was that the Commissioners have lost control of their huge staff and have ignored widespread fraud, nepotism and cronyism taking place within their Directorates.
As the Committee pointed out, European commissioners often admitted that they could not keep track of what was happening within their Directorates. The Committee also concluded that the sense of accountability became diluted the further up the management echelons one inquires. It even declared at one point, “[i]t is becoming difficult to find anyone [in the Commission] who has even the slightest sense of responsibility.”
A substantial number of MEPs had reportedly indicated that they would support a motion of censure if the present membership did not step down voluntarily. Under Article 144 of the Treaty “[i]f the motion of censure is carried by a two-third majority of the European Parliament, the members of the Commission shall resign as a body. They shall continue to deal with current business until they are replaced in accordance with Article 158.”
According to press reports, Commission President Jacques Santer said that, “in the light of the report of the committee of independent experts, the members of the commission decided unanimously to collectively present their resignations.”
Presumably, a majority of the resigned Commissioners will be able, by reappointment, to serve out their terms. Article 144 provides that upon mass resignation or removal by censure, “the term of office of the members of the Commission appointed to replace them shall expire on the date on which the term of office of the members of the Commission obliged to resign as a body would have expired.” Since the present terms expire in January 2000, there may be a number of short-term “caretaker” appointees.
Many MEPs have been striving for years to find out what is going on behind the Commission’s wall of secrecy and lack of accountability. As a result of the mass resignations, the press quotes one MEP as declaring that, “A real system of checks and balances has finally come to Europe.”
Citations: The Guardian (London) 3/17/99; Wall Street Journal (3/17/99, p. A20), Wall Street Journal Europe (3/16/99, p 1; 3/17/99, p.10) and Agence France-Presse (3/16/99).
EXTRADITION
In habeas corpus challenge to certified extradition to Northern Ireland, Tenth Circuit sides with majority of courts by holding that flight to U.S. in anticipation of arrest or prosecution tolls statute of limitations
In 1976, George Finbar Ross, a citizen of the Republic of Ireland, established an offshore investment company in Gibraltar called International Investment Ltd. (“International Investment”). He solicited most of his investors from Northern Ireland, who expected significant, tax-free returns. As it turned out, Ross used the funds to make unsecured loans to himself and to related companies, as well to buy a home and some artwork. In 1983, when International Investment had already become insolvent, Ross moved from Ireland to the U.S. The investors lost approximately $7,750,000 in the company’s later liquidation.
Northern Ireland officials soon began to look into Ross’ activities. In March 1998, authorities arrested Ross in the U.S. and Northern Ireland immediately requested his extradition based on the Extradition Treaty between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland of 1976 [28 U.S.T. 227].
A U.S. magistrate certified Ross as extraditable under the Treaty and ordered him held in custody until his actual delivery. Ross then filed a petition for habeas corpus pursuant to 28 U.S.C. Section 2241. Ross unsuccessfully claimed that (1) the charges were time-barred, and (2) the charges of “false accounting” fail to meet the dual criminality requirement. The U.S. Court of Appeals for the Tenth Circuit affirms.
Under Article V of the Extradition Treaty, the prosecution must not be time-barred under either party’s laws. Northern Ireland does not have a statute of limitations that would apply to Ross’ charges. In the U.S., 18 U.S.C. § 3282 provides for a five-year statute of limitations that stops running during a period in which the subject is a fugitive “fleeing from justice” (see 18 U.S.C. Section 3290). While Northern Ireland is seeking extradition for alleged crimes that took place about 12 years before, Ross probably had the intent to avoid prosecution or arrest when he took off to the U.S.
“A small minority of circuits have held mere absence from the jurisdiction in which the crime was committed is enough to toll the statute. … The district court, on the other hand, adopted the majority view, which requires the prosecution to prove the accused had an intent to avoid arrest or prosecution. … The Supreme Court has not squarely addressed the issue. However, in considering the predecessor to 18 U.S.C. § 3290, the Court in Streep v. United States … implicitly recognized intent as an element of fleeing from justice … Consistent with Streep, we conclude ‘fleeing from justice’ requires the government to prove, by a preponderance of the evidence, the accused acted with the intent to avoid arrest or prosecution.” [Slip op. 7-9].
Northern Ireland had not yet begun its investigation of International Investment when Ross moved to the U.S. Ross, however, knew that the company was insolvent and that a financial audit would take place in Gibraltar to renew the banking license. Fugitivity with intent to avoid an anticipated arrest or prosecution is enough to toll the statute.
Finally, the Court rejects Ross’ dual criminality argument. U.S. mail and wire fraud laws, unlike the Northern Ireland Theft Act, require proof that the defendant carried out the fraud by use of the mail or interstate wire transmissions. All of those laws, however, prohibit the same conduct — use of false representations. The U.S. requirement of use of the mails or wire transmissions is merely a jurisdictional element to make the crime “federal” in nature.
Citation: Ross v. U.S. Marshal for the Eastern District of Oklahoma, No. 98-7083 (10th Cir. February 17, 1999).
Filed in: 1999 International Law Update, Issue 3
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EU adopts Treaty of Amsterdam to revamp institutional system and include former Eastern Bloc countries as additional members
On October 2, 1997, the foreign ministers of the 15 EU Member States, meeting in Amsterdam, signed a treaty for institutional reform and expansion. The Treaty of Amsterdam will, for example,
- Limit the Commission to 20 Commissioners (even though it does not determine how the Commissioners will be chosen once additional countries join the EU).
- Put a ceiling on membership in the European Parliament at 700.
- Establish social progress, environmental protection, and the elimination of discrimination as policy goals.
- Develop closer defense cooperation within the framework of the Western European Union (WEU) defense system.
- Redefine how the various EU institutions must interact (for example, the Secretary-General of the Council acts as the High Representative for the common foreign and security policy, who must coordinate with the Presidency who, in turn, must consult the European Parliament in such matters. See Article 1).
- Revise numerous technical provisions for the EU institutions and renumber the articles of the EU Treaty.
The Treaty does not, however, reassign financial burdens among the Members. According to some critics, these remain unevenly distributed.
Along with the Treaty, the Council issued various protocols and declarations, for example, on asylum, coherence between the EU and the Western European defense union. It also stressed such policy principles as subsidiarity and proportionality
The effective date of the Treaty depends on ratification by the Member States. It enters into force the first day of the second month following the month of deposit with the Italian Government of the last of the 15 instruments of ratification.
Citation: Treaty of Amsterdam amending the Treaty on European Union, the Treaties Establishing the European Communities and certain related Acts. The Treaty of Amsterdam is available at the internet site of the EU Council, http://ue.eu.int. [The competent body is the General Secretariat of the Council, Rue de la Loi 175, B-1048 Brussels, Belgium, Phone: (32)(2) 285-8446, FAX: (32)(2) 285-6361.]
Filed in: 1997 International Law Update, Issue 11
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European Court of Justice specifies law on EU Member State liability to individuals for breach of EU law
In two decisions published on March 5, 1996, the European Court of Justice (ECJ) has clarified European Union (EU) law on Member State liability to individuals for breach of EU law. As a result, it appears that the basic EU law on Member State liability has been settled.
The ECJ had first elaborated on the EU law principle of Member State liability in the Francovich and Bonifaci cases [1991 ECR I-5357], which involved a Member State’s failure to implement a “directive” into national law. The first of the recent cases, Brasserie du Pêcheur, was an action brought by a French brewer who had suffered damages as a result of the German beer purity law, which had excluded the brewer from the German beer market for several years. In 1987, the ECJ held the German beer purity law incompatible with the EC Treaty (Article 30). Since German law did not provide an individual a remedy for its legislative activity, the brewer resorted to EU law.
In the second recent case, Factortame, several parties sought damages for the restrictions imposed by the United Kingdom Merchant Shipping Act of 1988 that the ECJ struck down in 1991. Here also national law did not provide a remedy, and the plaintiffs relied on EU law to recover damages.
The ECJ focusses on whether Francovich was applicable to types of breach of EU law other than a Member State’s failure to implement a “directive.” The Court holds that the principle of Member State liability “applies in all cases of breach of Community law by a Member State, regardless of the organ of the Member State whose act or omission resulted in the infringement.” Therefore, a Member State cannot escape liability for harm suffered by individuals by relying on its constitutional structure. Member State liability also sets in where the harm results from acts or omissions of the legislature. It is an instrument for ensuring the protection of individuals and for the proper implementation of EU law in the Member States.
The ECJ has subsequently applied the principle of Member State liability in The Queen v. H.M. Treasury ex parte British Telecommunications plc (Case C-392/93) and R. v. Ministry of Agriculture, Fisheries and Food, ex part Hedley Thomas (Ireland) Ltd. (Case C-5/94).
Citation: Cases C-46/93 Brasserie du Pêcheur v. Federal Republic of Germany, and C-48/93 The Queen v. Secretary of Transport ex parte: Factortame Ltd. and Others (March 5, 1996). These decisions will be published in the European Court Reports (ECR).
Filed in: 1996 International Law Update, Issue 7