Brussels Brief - January 26, 2007
January 26, 2007
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KEY DEVELOPMENTS
Competition: Record Fine Imposed On Gas Insulated Switchgear Cartel
Philip Torbøl
The European Commission has fined 11 producers of gas insulated switchgear more than EUR 750 million for having allegedly rigged bids for procurement contracts, fixed prices, allocated projects to each other, shared markets and exchanged commercially important and confidential information. According to the Commission, the cartel operated for more than 16 years, beginning in 1988, and was governed by a formal written agreement. The investigation started with surprise inspections in May 2004, which were triggered by an application for immunity lodged by ABB Swiss Group under the EU leniency regime. The fine is the largest fine ever imposed by the European Commission on a single cartel.
Internal Market: Spain Referred to ECJ Regarding Electricity and Gas Regulator’s Powers to Review E.ON Bid
Juan Gutiérrez
In February 2006, the German energy company E.ON launched a bid to acquire the Spanish energy company Endesa. E.ON’s offer was competing with a previous bid made by the Spanish energy company Gas Natural. A few days later the Spanish Government adopted a Royal Decree-Law empowering the Spanish electricity and gas regulator to review the E.ON bid. This Decree-Law includes provisions that require prior approval for the acquisition of a stake of more than ten per cent (or any other stake that entails significant influence) in a company engaging in regulated activities, such as oil and gas. On 3 May 2006, the Commission opened infringement proceedings against Spain considering that the Decree-Law unduly restricts the free movement of capital and right of establishment. The Commission was not satisfied with Spain’s arguments in defence and has now referred Spain to the European Court of Justice.
Air Transport: Commission Proposes Regulatory Package for Airports
Mélanie Bruneau
The European Commission has adopted an "airport package", designed to promote the competitiveness of the European aviation market. The airport package consists of three initiatives: i) a proposal for a directive on airport charges aiming at ensuring transparency in the relationship between airport operators and airport users, ii) a communication on airport capacity, efficiency and safety in Europe, and iii) a report on the implementation of the Groundhandling Directive and on the initial phase of liberalisation of this sector. Until now, European airports have been facing diverse regulatory, commercial and external challenges. The airport package offers a common set of rules to be applied and enforced uniformly throughout Europe.
Internal Market: Commission Drops Sports Financing Case Against France
Andrea Hamilton
The European Commission has closed infringement proceedings against France after the French Government modified legislation banning sports clubs from raising capital from the public. Prior to amendment on 30 December 2006, French law forbade limited companies active in sports, including football clubs, from being listed on public stock markets, among other things. The Commission initially sent a reasoned opinion to France in December 2005, asserting that the French ban constituted an unjustified obstacle to the free movement of capital, and was thus inconsistent with the EC Treaty. As amended, the French legislation permits limited companies active in sports to raise capital from the public, including on stock markets. Finding the amendments satisfactory, the Commission announced on 24 January 2007 that it had closed its case against France.
Internal Market: Infringement Proceedings Concerning Italian Banks
Maria Scimemi
The European Commission has closed infringement proceedings against Italy concerning prudential supervision of the acquisition of stakes in Italian banks by other EU banks. The decision to close the case follows Italy's amendments to its regulatory framework, in response to the Commission's initiation of the first phase of the infringement proceedings. The Commission was initially concerned that Italy’s regulatory framework would discourage investment from other Member States due to a potential lack of procedural transparency. Obstacles to investment such as these would violate EC Treaty rules on the free movement of capital and the right of establishment.
ECJ: Advocate General Recommends ECJ Powers to Interpret TRIPS with Regard to Patents
Elena Kostadinova
Advocate General (AG) Colomer has made bold suggestions to the European Court of Justice (ECJ) in his opinion on the ECJ’s jurisdiction to interpret international agreements concluded by both the EU and its Member States (“mixed” agreements, such as TRIPS). The ECJ has been reluctant to interpret those parts of “mixed” agreements that do not fall under EU powers and in areas where the EU has not yet legislated, such as patents. The AG, however, recommended that the ECJ abandon its complex assessments of which parts of these agreements fall within EU jurisdiction, and declare that it has jurisdiction to interpret all parts of such agreements. This conclusion should be based on the fact that such agreements are integrated into the EU legal system and therefore should be interpreted uniformly throughout the EU. The AG left open the possibility of World Trade Organisation (WTO) provisions becoming directly applicable to the benefit of individuals. He suggested that direct effect should depend on (i) the provision’s terms, object and nature, and (ii) the existence of a clear, precise and unconditional obligation imposed on the Member States. If the AG’s opinion is embraced by the ECJ, it will open the door to interpretation of various aspects of WTO Agreements, notably the interpretation of the way the TRIPS Agreement applies to patents.
Taxation: Belgian Taxation of Dividends Brought Before Court
Geert Dierickx
The European Commission has referred Belgium to the European Court of Justice for its discriminatory taxation of foreign dividends. Under Belgian tax law, private investors receiving domestic dividends pay a final tax, withheld by the company, of normally 25 per cent. However, dividends paid by a foreign company to Belgian residents are first subject to a withholding tax of up to 15 per cent in the source State, and then, without the application of a foreign tax credit, are further subject to a Belgian income tax at a rate of 25 per cent. As a result, inbound dividends received by individuals are taxed more heavily than domestic dividends. The Commission considers that this difference in treatment is contrary to the principles of freedom of establishment and the free movement of capital.
State Aid: Danish Tonnage Tax – Commission Opens Investigation
Morten Nissen
The European Commission has opened formal investigation proceedings concerning Denmark’s proposal to amend its flat-rate tonnage tax scheme for shipping companies. According to this proposal, shipping companies will no longer be required to supply the authorities with financial information relating to transactions with foreign subsidiaries. The Commission is concerned that this could have a negative effect on the possibility of monitoring the scheme for State aid purposes. Such monitoring is considered essential to ensure that these very favourable taxation measures are not extended to activities other than maritime transport. The Commission has invited comments from all interested third parties.
Agriculture: Reform of the Fruit and Vegetable Sector
Michal Cieplinski
The European Commission has issued a wide-ranging proposal to reform the Common Market Organisation for fruit and vegetables. The Commission’s recommendation encourages growers to join a producer organisation and as a result obtain additional support from Community funds. Also, it is proposed that the fruit and vegetable sector be added to the Single Payment Scheme and thus be eligible for support distributed via this scheme. Finally, the Commission suggests that, pending the results of ongoing trade talks, export subsidies for European fruits and vegetables might also be abolished. The Commission hopes that the Council and Parliament will approve the reform, due to enter into force in 2008.
Internal Market: Cases Opened Against Austria and Belgium for Restricting Free Movement Of Students
Yannis Virvilis
The European Commission has sent letters of formal notice to Austria and Belgium alleging restrictions of access to their higher education systems. The case against Austria is more serious, as it concerns non-compliance with a European Court of Justice (ECJ) ruling in 2005. The ECJ found that Austria discriminated against non-Austrian EU citizens by requiring that the holders of secondary education diplomas from other Member States had to prove that they met the conditions governing access to higher education in their home country. If this case is brought to the ECJ, Austria risks the imposition of fines. The case against Belgium concerns a decree of the French Community reserving for Belgian residents a quota of 70 per cent of the places in certain medical schools. The two countries have now two months to respond to the Commission’s concerns.
Monday 29 January – Friday 2 February 2007
COUNCIL MEETINGS
Agriculture and Fisheries Council (29 January 2007)
ECOFIN (30 January 2007)
COURT OF JUSTICE
Judgments
Environment and consumers
C-199/04 Commission v United Kingdom
Freedom of movement for persons
C-150/04 Commission v Denmark
Law governing the institutions
C-266/05 P Sison v Council
Opinions
State aid
C-260/05 P Sniace v Commission
C-525/04 P Spain v Lenzing
COURT OF FIRST INSTANCE
Judgments
Common foreign and security policy
T-362/04 Minin v Commission
Competition
T-340/03 France Télécom v Commission
