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State Aid: Landmark Court Ruling on Recovery of State Aid
Philip Bentley QC
The European Court of Justice (ECJ) has filled in an important gap in EU State aid law. Under the Boussac line of case law, when a Member State fails to notify the European Commission of new plans to grant aid, the aid cannot be recovered immediately. The Commission has to determine first whether the aid is incompatible with the common market. The ECJ has now ruled that even if the Commission decides that the un-notified aid is compatible with the common market, there is an intervening period of illegality during which: (i) the aid recipient can be required to pay interest on the temporary illegal advantage; and (ii) competitors may sue for loss caused by the temporary illegality. Thus this judgment creates an additional financial risk for companies who receive un-notified aid.
Competition: Dawn Raids of Intel and PC Retailers
The European Commission has announced that it carried out surprise inspections at the premises of a manufacturer of chips for central processing units and at a number of personal computer (PC) retail outlets. The Commission believes that these companies may have violated EC Treaty rules on restrictive business practices and/or abuse of a dominant position. Intel, one of the world’s largest chip manufacturers, confirmed that it was the manufacturer inspected. Europe’s largest PC retailers, Media Markt and DSG International, also confirmed that they had been inspected. While the Commission has declined to comment, it has been reported that the recent dawn raids of Intel and retailers represent an expansion of the Commission’s investigation into Intel’s conduct to exclude rival chip-maker, Advanced Micro Devices.
State Aid: CFI Upholds Irish Health Insurance System
Contact Philip Bentley QC
The European Court of First Instance (CFI) has dismissed a challenge by the private insurance operator, BUPA, to the Irish health insurance system. BUPA claimed that the “risk equalisation system” designed to compensate the Irish incumbent VHI for having an older, more expensive client base, was an illegal subsidy under EU State aid rules. The Commission approved the system in 2003 finding that it was a “service of general economic interest” as it enabled all persons living in Ireland to receive private health care regardless of age, health or gender. The CFI agreed and ruled that the system was necessary to ensure that private insurers shared the burdens associated with providing a universal service that prohibited persons being charged or even rejected according to risk.
VAT: Council Adopts New Rules on the Place of Supply of Services and New Procedure for VAT Refunds
The Council of the European Union has adopted two Directives from the VAT package that was agreed on 4 December 2007. These are: (i) a Directive on the place of supply of services; and (ii) a Directive on procedures for VAT refunds to non-established businesses. The first Directive provides that, from 1 January 2010, business-to-business supplies of services will be taxed in the Member State where the customer is situated, subject to certain exceptions, for example with regard to restaurant services. No changes are provided for business-to-consumer supplies of services. The second Directive introduces a new procedure that will enable businesses to claim VAT refunds electronically from other Member States in which they are not registered but have paid VAT.
State Aid: Italy Referred to ECJ over Mining Aid
The European Commission has decided to bring Italy before the European Court of Justice (ECJ) for failure to comply with a 2007 decision to recover illegal State aid amounting to EUR 98 million. The aid was granted by the Region of Sardinia to a mining company that was fully owned by the Region. In the 2007 decision, the Commission found that the Region of Sardinia had transferred public funds in order to cover the losses of the mining company and that, as no restructuring had taken place, the aid conferred an unfair advantage on the mining company with regard to its competitors.
Telecommunications: Mobile Operators Told to Cut SMS Roaming Charges
The cost of text messaging and mobile internet use abroad must be significantly lowered by 1 July 2008 or the European Union will introduce a mandatory price cap. The European Commission estimates that a text message sent from another EU Member State can cost up to 20 times more than one sent from a person’s home country, and downloading data abroad can cost at least four to six times higher than equivalent domestic rates. To remedy this, the Commission has suggested the "voluntary" introduction of EU-wide roaming packages, which would bring international rates closer to domestic rates. However, mobile phone companies have warned against introducing regulation on data roaming, claiming it could stifle innovation in the sector.
Energy: Commission Approves Regulatory Regime for Austrian Section of Nabucco Gas Pipeline
The European Commission has approved an exemption from the general rules of regulated third party access for the Austrian section of the Nabucco pipeline. Nabucco has requested this exemption for the Austrian, Bulgarian, Hungarian and Romanian section of the pipeline. The exemption, which can be granted for major infrastructure projects, provides Nabucco with more flexibility to determine capacity allocation and transport tariffs. The exemption is provided subject to the Austrian energy regulator’s introduction of certain safeguards to ensure a positive effect on competition. These safeguards include a capacity cap preventing Nabucco from booking more than half of the Nabucco exit capacity in Austria and rules that ensure a transparent and non-discriminatory capacity allocation to third parties. The Nabucco project, which consists of a 3,300 kilometre pipeline, with planned maximum capacity of 31 billion cubic metres per year, will help ensure the provision of gas to Europe from producers in the Middle East and Caspian region.
Customs: First EC—Japan Joint Customs Cooperation Committee
The first European Community—Japan Joint Customs Cooperation Committee was held on 11 February to discuss practical ways of implementing the EU—Japan Agreement on Cooperation and Mutual Administrative Assistance in Customs Matters (CCMAA), which entered into force on 1 February 2008. The Committee discussions focused on three main goals: (i) the facilitation of international trade by mutual recognition of Authorised Economic Operator programmes and effective customs control; (ii) the protection of intellectual property rights through cooperation between the two authorities; and (iii) the fight against customs fraud and irregularities. The parties confirmed that the Committee will meet in principle once a year.
Taxation: Commission Welcomes Recast of Capital Duty Directive
The Council of the European Union has adopted a recast of Directive 69/335 with regard to the taxes imposed on contributions of capital to corporations. In principle, capital duties are levied on contributions of capital to corporations. The modified Directive simplifies the legislation and ensures that corporate restructuring operations, irrespective of whether these operations involve an increase in capital, shall not be subject to capital duties. These exemptions of the Directive apply to: (i) restructuring operations affected by contributions of assets; and (ii) reorganisations implemented through the exchange of shares. Furthermore, the transfer of a company between two EU Member States will also be exempt from capital duties.
Internal Market: Commission Completes Impact Assessment of Online Music Recommendation
As a result of its recent assessment, the European Commission has concluded that Recommendation 2005/737/EC on collective cross-border management of copyright and related rights for legitimate online music services has, indeed, had an impact on the licensing marketplace and is endorsed by a number of right-holders, rights managers and music users. The Recommendation encouraged right-holders to appoint a rights manager of choice for a territorial scope of choice, irrespective of the Member State of residence or nationality. The Commission's assessment has revealed that: (i) the market for EU-wide licensing of music for online services is a nascent market; and (ii) the market is changing, with a variety of licensing initiatives having been announced. EU-wide licensing initiatives have been announced so far by right-holders including EMI Music Publishing, Peermusic, Warner/Chappell Music and Universal Music Publishing Group.
NEXT WEEK’S EVENTS
Monday 18 February – Friday 22 February 2008
Agriculture and Fisheries Council (18 February 2008)
General Affairs and External Relations Council (GAERC) (18 – 19 February 2008)
COURT OF JUSTICE
Approximation of laws
C-211/07 Commission v Ireland
C-412/04 Commission v Italy
Freedom to provide services
C-296/06 Telecom Italia
Free movement of goods
C-201/06 Commission v France
C-426/05 Tele2 Telecommunication
C-498/06 Robledillo Núñez
Social security for migrant workers
C-425/06 Part Service
C-271/06 Netto Supermarkt
Joined Cases C-120/06 P, C-121/06 P FIAMM and FIAMM Technologies v Council and Others
COURT OF FIRST INSTANCE
No judgments scheduled for next week.