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VAT rates are, in principle, not decided upon at EU level. EU Member States do agree, however, which rates would apply to each category of services belonging to which rate level. Within each of these rate levels there is a further range of rates, from which each Member State can choose which one to apply.
The European Council has now agreed to make it possible to reduce VAT rates in certain sectors by enabling Member States to include them in the reduced rate level. VAT Directive 2006/112/EC will be amended so that individual Member States can apply a rate of between 5 and 15 per cent to (i) the housing sector, (ii) restaurants, (iii) books, (iv) labour-intensive sectors, (v) pharmaceutical products and (vi) some categories of medical equipment.
The reduction in VAT rates has long been opposed by Germany for budgetary reasons. Germany has now conceded in view of the current financial crisis and the expected benefits of the rate cut on the economy.
Energy: Commission Extends Investigation into Regulated Electricity Tariffs in France
The European Commission has extended an investigation into what it called France’s artificially low electricity tariffs for companies classed as “large” and “medium-sized” electricity consumers. In 2007, the Commission launched an investigation into these regulated rates due to concerns the tariffs could hinder the overall competitiveness of the European economy. The Commission has already started infringement proceedings against a group of EU Member States, including France, over their regulated tariff schemes for businesses that might have violated the EU Electricity Liberation Directive. The Commission has now stated that it will look at France’s recent prolongation of its “return tariffs” system and its extension to new beneficiaries.
The State-administered “return tariff” system, where tariffs are set below the market price, has been available since 2007 to consumers buying their electricity on the free market. Initially, companies in France could take advantage of the system for two years if they applied before 1 July 2007. In August 2008, France extended the system until 30 June 2010 and opened it up to new beneficiaries.
The Commission fears that the system gives France’s largest electricity consumers an unfair advantage over their competitors. The Commission’s investigation comes at a time when it has sought actively to reform the energy sector, for example by raiding the premises of French electricity giant EDF on 11 March 2009 on suspicion of abusing its dominant market position.
Italy– State Aid: Aid Received by Poste Italiane Declared Unlawful and Incompatible with Common Market
The European Commission has published its decision of 16 July 2008 on the aid scheme established by the 2006 Italian budget law. This decision concerns the remuneration of funds collected from Poste Italiane's customers' accounts and deposited by Poste Italiane with the State Treasury.
The Commission found that the loan rate granted by the State Treasury to Poste Italiane constituted an aid scheme that was incompatible with the Common Market because it was higher than the market rate. In addition, the Commission found that it was the Treasury, not Poste Italiane, which covered the liquidity risk associated with the deposited funds. The money collected and paid into current accounts was then used to finance ordinary budgetary needs. The Italian Government is therefore required to recover the incompatible aid from Poste Italiane.
Media – State Aid: Spanish Rules on Funding of European Cinematographic and Television Do Not Infringe Community Law
The European Court of Justice (ECJ), in UTECA v. Administración General del Estado C-222/07, has reviewed the compatibility of Spanish funding of cinematographic films and European films made for television with the 1989 Television Broadcasting Directive (Council Directive 89/552/EEC).
Spanish legislation requires that 5 per cent of revenue from the previous year be dedicated to European films and of that, 60 per cent must be reserved for the production of films where the original language is one of the official languages of Spain. However, Unión de Television Comerciales Asociadas (UTECA) claimed that this policy contravened the Television Broadcasting Directive and was therefore inapplicable. The Spanish Tribunal Supremo referred the question of compatibility to the ECJ.
The ECJ held that although the policy restricted the fundamental freedom to provide services, freedom of establishment, free movement of capital and the free movement of workers, it was justified on the grounds that the defence of Spanish multilingualism constitutes an overriding reason in the public interest.
The ECJ noted that the measure went no further than was necessary to achieve the desired objective and that the apportionment of revenue in this case does not constitute State aid in favour of the cinematographic industry.
Employment: ECJ Provides Guidance on Allowing for Different Treatment of Workers Based on Age
In its judgment in Case C-388/07/EC, the European Court of Justice (ECJ) has provided guidance to the High Court of England and Wales on the implementation and interpretation of Article 6(1) of Directive 2000/78 allowing for the different treatment of workers on the basis of age.
This case originates from proceedings brought before the High Court challenging the UK legislation implementing Directive 2000/78/EC on the basis that this legislation fails to properly transpose the Directive because it allows employers to dismiss workers aged 65 years or more under certain circumstances. The High Court referred several questions to the ECJ relating to the interpretation of the Directive.
Directive 2000/78/EC lays down a general framework to help ensure equal treatment in employment and to prohibit discrimination on the basis of age. However, Article 6(1) of the Directive provides that Member States may allow for differences in treatment on the basis of age which are justified by legitimate employment policy, labour market and vocational training objectives.
The ECJ ruled that a national implementing measure need not list differences in treatment on the basis of age that are considered justifiable. However, where a national measure fails to give such precise guidance, national courts must be able to identify the underlying aim of that measure in order to determine whether the aim is legitimate and whether the means to achieve that aim are appropriate and necessary. When conducting such a review, the ECJ reminded national courts that Member States enjoy a broad discretion in choosing the means capable of achieving social policy objectives, as long as the use of their discretion does not hinder the implementation of Community legislation.
Air Transport: List of Articles Prohibited on Aeroplanes Cannot be Enforced if Not Published
The European Court of Justice (ECJ) has decided that a Community regulation, which imposes obligations on individuals but has not been published in the Official Journal of the European Union, has no binding force.
This case arose from an incident at Vienna Airport where Gottfried Heinrich was ordered to leave the plane before take-off because his cabin baggage contained tennis racquets.
In 2003, the European Commission adopted Regulation (EC) No 622/2003 implementing Regulation (EC) No 2320/2002 on aviation security. This legislation contained an annex stating the types of product prohibited on board aeroplanes. The amended version of this annex was not published.
The ECJ pointed out that, according to Article 254 EC, a regulation cannot take effect in law unless it has been published in the Official Journal. It must be assumed that the Annex may impose obligations on individuals and thus it cannot be enforced against them before they have learned of its existence. The list of prohibited objects does not fall within any category of measures that are treated as secret, so the Commission could not apply the rules on confidentiality to amendments to the list. The ECJ therefore concluded that the Annex to Regulation (EC) No 622/2003 has no binding force insofar as it purports to impose obligations on individuals.
NEXT WEEK’S EVENTS
Monday 16 March – Friday 20 March 2009
General Affairs and External Relations Council (GAERC) (16 – 17 March 2009)
European Council (19 – 20 March 2009)
COURT OF JUSTICE
C-270/07 Commission v Germany
C-77/08 Dachsberger & Söhne
C-489/06 Commission v Greece
C-510/06 P Archer Daniels Midland v Commission
C-256/07 Mitsui & Co. Deutschland
Own resources of the Communities
C-275/07 Commission v Italy
C-10/08 Commission v Finland
C-569/07 HSBC Holdings and Vidacos Nominees
COURT OF FIRST INSTANCE
T-299/05 Shanghai Excell M&E Enterprise and Shanghai Adeptech Precision v Council
T-171/06 Laytoncrest v OHMI - Erico (TRENTON)