Cyprus, April 2011 Direct effect of EU (VAT) Directives

The EU Legal system The Founding Treaties (as amended) as the primary source of Law. The EU Legal instruments as secondary source (Art. 288 TFEU): Regulations: Directly applicable, they confer rights and impose obligations as national law (no need for transposition). Directives: Binding on the Member States as regards the objective to be achieved, it leaves to the national authority the form and method to achieve it. Decisions: Order to take a specific measure, it is binding for its addressees. Directly applicable. Unwritten Law: The General Principles

The direct effect of Directives Despite the fact that Directives are solely addressed to Member States, they may confer rights to EU citizens; they may have direct effect where: They confer rights with sufficient clarity and precision. The exercise of the rights is not conditional. The national legislative authorities may not be given any margin regarding the content of the rules to be enacted. The time allowed for implementation of the Directive has elapsed.

The direct effect of Directives In these cases, if transposition into the national Law is not correct (or the Directive has not been transposed), the Directive may be invoked before the Courts. As addressed to Member States, these cannot invoke Directives against citizens in case of incorrect (or no) transposition: No inverse direct effect allowed. Marshall, case C-152/84. Horizontal effect (effects between citizens): Not allowed (see, however, the interpretation in the light of EU Law) AG Lenz supported its application (on the basis of non-discrimination, competition… and EU citizenship) in Faccini Dori case (C-91/92). The Court has stated that it is the responsibility of the national court, hearing a dispute involving the principle of non-discrimination (…), to provide the legal protection which individuals derive from the rules of Community law and to ensure that those rules are fully effective, setting aside any provision of national law which may conflict with that law (Werner Mangold C-144/04).

EU Law vs. National Law In case of conflict between national legislation and EU Law, the latter must prevail. The Member States have limited their sovereign rights and they cannot apply unilateral and subsequent measures over a legal system accepted by them. The "principle" of primacy of EU Law has been developed by the ECJ (e.g. van Gend en Loos, C-26/62; Costa-ENEL, C-6/64). Although not expressly included in the Treaties, it is now stated in a Declaration attached to the Treaty of Lisbon.

EU Law vs. National Law The Community loyalty (art. 4 TUE): Member States co- operation to facilitate the achievement of EU objectives. The principle of reconciliatory interpretation: national administrations and courts must apply national law in the light of EU Law. Wider scope than direct effect (even if there is no direct effect of EU provisions) May be applied against individuals or horizontally. “The national court that has to interpret that law must do so, as far as possible, in the light of the wording and the purpose of the directive so as to achieve the result” (Faccini Dori C-91/92).

Jurisprudence (Case Law). Protection of EU Law The ECJ ensures that in the interpretation and application of the Treaties, the Law is observed (Art TUE). Basically through: Infringement procedures (Art. 258 TFEU). Preliminary rulings (Art. 267 TFEU): The national courts interpret EU Law (as national law) but may refer questions on interpretation of EU Law to the ECJ. Referral is compulsory for the last instance unless the issue is “clear” (so that the same interpretation would be given by any other EU court or the ECJ) or the has been already solved by the ECJ.

The general principles Developed in the search for consistency in the EU legal system. They provide assistance in the interpretation of EU Law (and national transposition). Some are “constitutional” in nature (subsidiarity, proportionality); Others derive from EU Law (effectiveness, equivalence), Others refer to fundamental rights (equality), and Others refer to governance and administrative justice (legal certainty, protection of legitimate expectations, non- retroactivity).

State Liability Corollary of the direct effect of EU provisions whose breach causes a damage where: The EU provisions grants rights to individuals There is a serious infringement of EU Law Direct casual link between the infringement and the harm caused. The infringement may be caused by any of the three central powers.

EU Law in (some) Member States: The UK (*) Parliamentary supremacy. International treaties must be incorporated by an Act of Parliament so as to have domestic effects. It is the case of Founding (and amending) Treaties. The European Communities Act (1972) provides for the application of EU Law and Case Law by British Courts and incorporates EU Law into domestic Law by delegated legislation (not, amongst others, when taxation is imposed). EU Law = National Law. Primacy (and reconciliatory interpretation) acknowledged by UK Courts. (*) Margot Horspool & Mathew Humphreys. European Union Law. Oxford University Press. 6th Edition.

EU Law in (some) Member States: France (*) Two different jurisdictional systems (administrative, judicial). The judicial system (Cour de cassation) tends to accept primacy of EU Law. The administrative (Conseil d’Etat) “not that much”. Primacy may be accepted unless there is a conflict with the Constitution. (*) Margot Horspool & Mathew Humphreys. European Union Law. Oxford University Press. 6th Edition.

EU Law in (some) Member States: Germany (*) Five independent court systems each headed by a Supreme court, all of them subject, as concerns constitutional matters, to the Federal Constitutional Court. Autonomy of EU Law as a separate (independent) law sphere. The FCC considered that EU Law could be set aside if against fundamental rights contained in the Basic Law; later on, the EU legal system was considered comparable as regards these rights. It retains its scrutiny role but does not apply it in practice. (*) Margot Horspool & Mathew Humphreys. European Union Law. Oxford University Press. 6th Edition.

EU Law in (some) Member States: Italy (*) At first, EU Law treated as an ordinary law (subordinated to subsequent national legislation). Later, the Constitutional Court has expressed reservations as to the primacy of EU Law (subject to the ultimate scrutiny of protection of constitutional rights by national courts). As an example, it has questioned the application of a principle of Community Law as set out by the ECJ if it infringed fundamental rights. (*) Margot Horspool & Mathew Humphreys. European Union Law. Oxford University Press. 6th Edition.

EU Law in (some) Member States: Spain The Spanish Constitution foresees the transfer of sovereign powers to international organisations. The Constitutional Court has recognised both the autonomy and primacy of EU Law in several judgments and opinions (the latest opinion re the Constitutional Treaty). It has also recognised that if a court does not make a reference to the ECJ is a breach of the right to a fair trial. The position of the courts (at least when dealing with VAT matters) is far from that, although the Supreme Court is recently changing its approach.