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: Evolution

The original EEC and Euratom Treaties, unlike the ECSC Treaty,[1] did not provide for any system of penalties in the framework of infringement proceedings. For that reason, from the 1970s onwards, the then Community institutions voiced concerns about the lack of mechanisms of enforcement, and suggested that the Treaties be amended in order to give the Court and/or the Commission more effective powers in that regard.

The Member States eventually agreed to tackle this issue at the 1990-1991 Intergovernmental Conference. After intense discussions, it was decided that the Treaty of Maastricht would add a new second paragraph to then Article 171 EEC, allowing the Commission to initiate proceedings against a Member State which has not complied with a previous judgment, requesting the Court to impose financial penalties upon it. The newly devised procedure was the same as the ordinary infringement procedure, with a pre-judicial phase (letter of formal notice followed by a reasoned opinion) and a judicial phase. Subsequent attempts, in the context of the Amsterdam and Nice Treaties, to amend the Treaty provisions in order to improve the efficiency of the infringement and sanctions procedures did not succeed.

However, with the Treaty of Lisbon, two important changes were eventually introduced with a view to simplifying and accelerating the procedure for the imposition of financial penalties upon recalcitrant Member States. Those changes had already been envisaged in the (failed) Treaty establishing a Constitution for Europe, which in turn reflected certain proposals put forward in the Final Report issued by the Discussion Circle on the Court of Justice set up within the Convention on the Future of Europe. First, the requirement to issue a reasoned opinion prior to bringing the case before the Court under Article 260(2) TFEU was eliminated. Second, pursuant to a new paragraph 3 of Article 260 TFEU, where an infringement concerns a failure to notify the Commission of measures transposing a directive adopted under ordinary legislative procedure, the Commission may request the imposition of financial penalties in the context of the original infringement proceedings, avoiding proceedings under Article 260(2) TFEU altogether.

A proper understanding of the functioning of the sanctioning procedures, and appreciation of their limitations and future prospects, requires a more in-depth examination of the case-law.

Article 260(2) TFEU: nihil sub sole novum?

As AG Jarabo Colomer noted in the first case brought pursuant to Article 260(2) TFEU, the concise nature of the provision, and the inherent complexity of the subject-matter, raised a large number of interpretative issues.[2] However, subsequent case-law has, by and large, progressively clarified those issues. In particular, the Court made clear that the procedure provided for in Article 260(2) TFEU is a special judicial procedure for the enforcement of judgments. The sanctions provided for in Article 260(2) TFEU - lump sum and penalty payments - are both intended to induce a defaulting Member State to comply with an adverse ruling. However, those sanctions pursue this objective in a complementary manner: while the imposition of a penalty payment seeks to induce a Member State to put an end as soon as possible to a breach of obligations which, in the absence of such a penalty, would tend to persist, the imposition of a lump sum aims at preventing similar infringements in the future. For that reason, simultaneous recourse to both types of sanction is not precluded, in particular where the breach of obligations both has continued for a long period and is inclined to persist.

According to settled case-law, the imposition of a penalty payment is, in principle, justified only in so far as the failure to comply with an earlier judgment continues up to the time of the Court’s examination of the facts.3 The imposition of a lump sum is not automatic, but depends on all the relevant factors pertaining to both the nature of the established infringement and the conduct of the Member State in question. In exercising its discretion in this matter, the Court sets the sanctions in a way which is appropriate to the circumstances, and proportionate to the established infringement and the Member State’s ability to pay.[3] The Commission’s proposals in that respect cannot bind the Court, being merely a useful point of reference. For the purposes of determining the amount of the sanctions, the basic criteria taken into consideration by the Court are, in principle, the seriousness of the infringement, its duration and the Member State’s ability to pay. In applying those criteria, the Court gives due regard, in particular, to the effects on public and private interests of the failure to comply, and the urgency of the matter. The final amount is determined in the light of all the circumstances of each case and, in particular, of mitigating and aggravating factors. The Court also enjoys discretion with regard to the periodicity of the penalty payment, and how, if at all, the Member State’s progress towards full compliance may be taken into account in order to gradually decrease the amount of the penalty payment.

Having clarified these key issues over the past years, the latest case-law of the Court has not given rise to any major innovation. Recent developments, in the Commission’s practice or in the Court’s case-law, concerned less significant aspects of the procedure, such as one of the criteria used to determine the amount of the penalties.

  • [1] Article 88 of the ECSC Treaty. The penalties provided therein, however, have never been applied: see G. Tesauro, ‘La sanction des infractions au droit communautaire’, FIDE Report, 1992, p. 152. 2 See, in particular, Court of Justice, Suggestions of the Court of Justice on European Union (Bull. EC Supp. 9/75, p. 17); European Parliament, Resolution on the Responsibility of Member States for the Application of and Compliance with Community, Law of 9 February 1983 (OJ 1983 C 68, p. 32) (the ‘Sieglerschmidt Resolution’), and European Parliament, Draft Treaty Establishing the European Union (OJ 1984 C 77, p. 33) (the ‘Spinelli Project’). 3 See, generally, I. Kilbey, ‘Financial Penalties under Article 228(2)EC: Excessive complexity?’ (2007) Common Market Law Review 744, and I. Kilbey, ‘The Interpretation of Article 260 TFEU (ex 228 EC) (2010) European Law Review 371. 4 See e.g. Report from the Working Party on the Future of the European Communities’ Court System (the ‘Due Report’), January 2000, Section ILB. See also J. Tallberg, European Governance and Supranational Institutions: Making States Comply (Routledge, 2003) 82-91. 5 See especially Documents CONV 636/03 and CONV 734/03. More generally, see R. Passos,
  • [2] 2 15 See Case C-95/12, Commission v. Germany, EU:C:2013:676, para. 23 and the case-law cited. 3 See Case C-576/11, Commission v. Luxembourg, EU:C:2013:773, para. 43 and the case-law cited. 4 See Case C-304/02, Commission v. France, EU:C:2004:274, paras 80-86. 5 See Case C-121/07, Commission v. France, EU:C:2008:695, paras 62-63.
  • [3] !'See, to that effect, Cases C-576/11, Commission v. Luxembourg, EU:C:2013:773, para. 46; and C-653/13, Commission v. Italy, EU:C:2015:478, para. 89. 2 ,sSee e.g. case C-251/17, Commission v. Italy, EU:C:2018:358, paras 70-71. 3 See, with further references, L. Prete, supra note 2, 262-265. 4 See Cases C-278/01, Commission v. Spain, EU:C:2003:635, paras 47 seq.; C-496/09, Commission v. Italy, EU:C:2011:740, paras 48-52; and C-533/11, Commission v. Belgium, EU:C:2013:659, paras 70 seq. 5 See Case C-93/17, Commission v. Greece, EU:C:2018:903, paras 132-142; and European Commission, Communication on modification of the calculation method for lump sum payments and daily penalty (OJ 2019 C 70, p. 1).
 
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