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: The judicial review of EU sanctions

Before considering the main features of the judicial scrutiny of EU direct sanctions, it is worth making some general comments on the proportionality review of the acts of the Union’s institutions and bodies.

In this regard, the Court traditionally acknowledges that EU institutions and bodies enjoy broad discretion in matters regarding the exercise of the political responsibilities given to them by the Treaties. Therefore, if the evaluation of a complex situation is at issue and the Union has a broad measure of discretion, the check on the legality of its activity “must confine itself to examining whether that exercise discloses manifest error or constitutes a misuse of powers or a clear disregard of the limits of its discretion”. The “manifestly inappropriate test” means that, in principle, only macroscopic violations of the limits inherent to the use of political discretionary powers are ruled out on grounds of proportionality. This light proportionality review is cross-sectional to many fields of EU competence, and applies to a varied set of legal schemes and measures adopted by Union institutions and bodies, ranging from the general governance of a CAP market organisation to the adoption of protective measures in trade with third States.

At first sight, such an approach appears to be a mild version of the (potentially) intense proportionality scrutiny over domestic measures derogating from EU law or implementing it. As we have seen, the open-textured nature of the proportionality review allows the EU (and the national) courts to develop an in-depth analysis of the form and substance of domestic measures, even when the latter represents the outcome of important political choices. On the contrary, a more cautious approach seems to apply to EU law, in comparable situations.

This differentiated test has two main explanations, both stemming from the nature and rationale of the judicial reviews under consideration. Firstly, the scrutiny over EU provisions involving discretionary choices reflects the balance of powers between EU institutions and the necessary restraint that a judicial body must self-impose when dealing with primarily political decisions. It is not for the Court to second guess the merits of such choices, at least in terms of suitability for the objectives they pursue, necessity and proportionality in the strict sense. Secondly, the empowerment of the Court when reviewing national laws or practices is mainly justified on grounds of effectiveness and uniformity of EU law across the Union. Even though the structure of the test is the same, the multi-level context in which it is performed models its intensity and requires the Court of Justice to act as a guardian of its correct interpretation and application throughout the EU.[1]

The key question is then whether or not these considerations justify a diversified attitude also in relation to the validity of EU direct sanctions and to those provisions which orient the actions of the Member States when they are faced with the Greek Maize duty to adopt effective, proportionate and dissuasive sanctions.

Since the 1970s, the Court has held that European institutions are endowed with sanctioning powers and that the exercise of this competence is not immune from the general principles governing ius puniendi. Therefore, both EU rules orienting national sanctions and ‘purely’ European ones can be challenged before the EU judiciary to check if they comply with the principle of proportionality. The Court accordingly and consistently states that, as a general rule, the acts of EU institutions and bodies undergo a comprehensive judicial review, including a fully-fledged proportionality test over direct Union sanctions.

At the same time, the Court often adopts a tolerant stance when carrying out its proportionality assessment, paying due regard to the broad discretion of EU institutions when implementing EU policies. This happens, in particular, in Greek Maize

situations, namely when the Court is called upon to review EU provisions establishing common rules on the extent and amount of sanctions to be applied at domestic level.[2] The exercise of EU indirect ius puniendi is basically confined to the adoption of minimum shared standards and leaves a broad margin of manoeuvre to the Member States. Moreover, the penalty scales imposed at Union level do not prevent national legislatures from imposing stricter measures and can, in any event, be modified de facto pursuant to further domestic procedural or substantive provisions influencing the determination of the amount of a sanction. At the same time, as already discussed above, the more recent normative trend of the Union testifies to an attempt to boost the EU’s indirect sanctioning powers, by means of increasingly specific rules, such as carefully diversified types and scales of penalties for different actions or behaviours with a different degree of seriousness. This developing approach could trigger stricter judicial scrutiny in future.

When it comes to the EU’s direct sanctioning powers, the recurring “manifestly inappropriate” formula conceals a more varied scenario. Although the Court very often formally builds on this premise, a closer look at its legal arguments demonstrates that it does not exclude the possibility of performing a robust proportionality assessment. In particular, the Court, on some occasions, declassifies the due respect for EU policy choices from a justification for a lighter review to a criterion of assessment, along with other considerations. This means that the breadth of the EU institutions and bodies’ discretion influences the intensity of the proportionality review, just as other elements do. From this point of view, case law unveils three main lines of reasoning that often intertwine.

Firstly, the Court often focuses on the aims pursued by the sanction in question. Even though the practice is fragmented, judicial scrutiny through the teleological lens is usually tenuous and allows the sanction at stake to pass the necessity test. More specifically, the Court mainly considers whether or not a measure, in principle, guarantees the achievement of the objectives of the legal framework to which it is related and is usually sympathetic to the decisions made by the Union institutions and bodies, particularly with regard to the extent of the sanctions. For instance, case law on EU restrictive measures relies on the objectives that the freezing of funds, properties and assets pursues, such as international peace and security, the promotion of democracy and the fight against terrorism, to point out that only clearly inappropriate measures would be deemed illegitimate. Moreover, these objectives allow the Council to enjoy broad discretion in determining the categories of recipients of restrictive measures and the main features of these sanctions.

Secondly, the Court attaches particular importance to the rule whose breach determines the imposition of a sanction. More specifically, it makes a distinction between primary and secondary obligations. In relation to the former category, the Court has usually been cautious in ruling out even harsh sanctions covering obligations deemed to be essential for the functioning of a given policy or mechanism." Conversely, in the event of violations of rules of lesser importance, the intensity of judicial scrutiny increases.

Thirdly, the Court does not dismiss the individual dimension and states that the exercise of EU institutions and bodies’ discretion cannot lead to excessive disadvantages for the recipients of a sanction. The requirement of necessity plays a prominent role here,[3] as it means that if a choice between various measures can be made, the least restrictive sanction available should be imposed. In addition, just as it does for national sanctions, the Court has used the necessity criterion to invalidate EU direct sanctions, whose quality and amount were not tailored to the wrongfulness of an action, as they applied indistinctly to a range of breaches of clearly different severity, thereby imposing disproportionate burdens.

Finally, the EU Courts take a path of their own in some areas of EU law in terms of sanctions. The analysis briefly considers competition fines pursuant to Arts 101 and 102 TFEU and the penalties and lump sums that the Court may impose by virtue of Article 260 TFEU, both discussed above from a normative perspective.

As already argued, the Commission is endowed with a significant margin of manoeuvre when determining antitrust sanctions, to such an extent that it can even derogate from the Fining Guidelines to secure the deterrent effect of the relevant measures. The main institutional consequence of this power is that Regulation 1/2003 grants unlimited jurisdiction to the General Court over competition fines. The General Court can conduct an in-depth assessment of the merits of the case and of the Commission’s evaluation concerning the seriousness of the violation that occurred and the quantification of the sanction.[4] It can even replace the Commission’s assessment with its own.84 On the other hand, the Court of Justice’s power of review is limited to the broad check on whether or not the General Court considered all the main factors in assessing the seriousness of the infringement and issuing an appropriate fine, which could then be re-calculated to guarantee its fairness.

Moving on to infringement proceedings, it should be noted that, under Article 260 TFEU, the Court of Justice does not conduct a formal judicial review of an action of another EU institution or body; rather, it is itself tasked with the power directly to impose a penalty and/or a lump sum on a Member State. Despite the Commission’s proposal, it is only for the Court to determine the nature and amount of the sanction. Case law has clarified the basic criteria which must be considered for this purpose, namely “the seriousness of the infringement, its duration and the ability to pay of the Member State in question”.1 Both the penalty payment and the lump sum must be tailored to the circumstances of a case and should avoid excessive burdens to the Member State involved. The Court is particularly attentive in assessing the Member State’s ability to pay, especially in the event of budgetary difficulties, which have been taken into account to re-calculate the n factor. or, more generally, as a mitigating element. Alleviating circumstances constitute a recurring concern and cover a wide range of situations, such as the lack of a previous similar infringement or - conversely - the existence of several negative precedents against the same Member State, the cooperation in good faith and the efforts made by the national authorities, partial compliance and how difficult and lengthy it would be to achieve full compliance. In particular, case law consistently holds that a penalty payment might not be proportionate if it does not take into due account the progress made by the Member State, such that, for instance, gradually decreasing sums could better fit the situation,[5] In addition, the Court has sometimes imposed a lump sum significantly more lenient than the amounts indicated in the Commission’s Guidelines.

Overall, case law demonstrates that the Court takes proportionality concerns seriously when determining the lump sum and/or penalty payment imposed on a Member State. Interestingly, the recent reform of the Statute of the Court strengthened its control over respect of the proportionality requirement. As outlined in Section 2.1, it is the Commission’s task to enforce the sanctions at issue and this institution has leeway to verify the (degree of) persistence of the infringement. The Member State involved could then have an interest in challenging the Commission’s decisions in the enforcement phase. In the past, the jurisdiction for dealing with these actions for annulment was granted to the General Court, which was - so to speak - “quite uncomfortable” about carrying out this review. The amended wording of Article 51 of the Statute includes a new letter c), expressly giving to the Court of Justice the competence to adjudicate on this matter.

: Conclusions

Over the decades, sanctions have become an increasingly important instrument in the Union’s toolbox. The gradual strengthening of the EU ius puniendi is telling evidence of the progress made by the integration process, not only in relation to the acquisition of new competences, but primarily in terms of the establishment of institutional settings and of legal remedies securing the appropriate use of such powers.

The analysis developed in this Chapter highlights the efforts made by the Union to shape the whole sanctioning cycle - from the normative determination of the features of a sanction to its imposition and the judicial scrutiny of its effects on the recipient - after the requirements of suitability, necessity and proportionality, in the strict sense, which make up the proportionality test.

Crucially, due to its inherent elusiveness and to the many facets of EU sanctioning power, proportionality and its monitoring follow very different trajectories, depending on the domain at issue and the tasks of the European and national institutions involved. However, some recurring features can be identified, which provide an illustration of the current magnitude of and constraints on EU sanctioning powers.

Firstly, the substantive and flexible approach to the notion of sanction maximises the scope of the principle of proportionality. The Court of Justice consistently holds that it is the EU legislature alone which must determine the most appropriate measures to secure compliance with EU law and the achievement of the objectives pursued by Union policies. Thus, the enforcement of EU law is equipped with a remarkably wide set of instruments facilitating the imposition of a - pecuniary', operational, organisational, personal - burden on an individual or an entity. Regardless of their formal qualification, the Court has always conditioned the legality of these measures on a proportionality test, so that the Union’s coercive powers are subject to due constraints, regardless of the form they take.

Secondly, this approach also strengthens the judicial scrutiny of a measure, adding substance to the review that the Court may conduct. Proportionality requires a sanction to be in abstracto tailor-made to the conduct it addresses and to be appropriately pre-determined in all its main features. At the same time, this principle entails an individualised assessment of the criteria available to the competent authority in order to determine and impose a sanction, as well as the effects of a measure, in order to avoid unnecessary burdens. Although a normative measure of general nature cannot take into account any possible individual situation, the relevant legal framework and its actual application must not lead to a disproportionate use of coercive powers.

Of course, the more a sanction reflects wide policy choices, the fewer the possibilities there are to challenge it successfully, due to the light proportionality test to which the Court traditionally resorts when confronted with an act of the EU. However, case law demonstrates that this lenient review is not a blanket rule and leaves room for a detailed assessment of EU sanctions. Beyond general policy objectives underpinning a sanction, its imposition involves the assessment of factual elements and the use of factors and calculation methods that are generally suitable for a strict judicial review. In this respect, in the complementary area of indirect sanctioning powers, the current trend towards the adoption of increasingly specific rules concerning the type and level of sanctions that the Member States must implement in their legal orders to deal with breaches of EU law pave the way for further future advances of the Court of Justice case law, both in terms of the review of EU acts and of stricter guidance to national courts regarding the constraints on domestic ius puniendi stemming from the principle of proportionality.

  • [1] '° A similar imparity can be detected in federal systems, between the review developed by central courts on state laws and on federal ones. F. Jacobs, ‘Recent Developments in the Principle of Proportionality in European Community Law’, in E. Ellis (ed.) The Principle of Proportionality in the Laws of Europe (Edward Elgar, 1999) 3. 2 11/70, Internationale Handelsgesellschaft and 122/78, Buitoni, cit. 3 56/86, Société pour l’exportation du sucre, ECLI:EU:C: 1987:146. 4 ,sC-7/95, Deere, ECLI:EU:C: 1998:256, para. 34. 5 ,4C-331/88, Fedesa, cit., and C-180/96, Schrader, ECLI:EU:C:1998:192.
  • [2] See supra, Section 2.2. 2 See, inter alia, C-348/12 P, Kala Naft, ECLI:EU:C:2013:776, para 120; C-630/13, Issam Anbouba v. Council, ECLI:EU:C:2015:247, para 42.
  • [3] C-345/95, National farmers’ Union, cit.; C-8/89, Zardi, ECLI:EU:C: 1990:260. 2 Tridimas holds that “necessity is more important because, in applying the principle of proportionality, the Court does not act as an appellate body exercising review of the merits but is concerned primarily with the restrictive effects of the measure on the freedom of the individual”. T. Tridimas, The General Principles, cit., 143. 3 181/84, Man Sugar, ECLI:EU:C:1985:359; 15/83, Denkavit, ECLI:EU:C: 1984:183. At the same time, even harsh sanctions have been accepted, considering that - even though they were not the most lenient available - more severe ones could have been chosen: C-354/95, National Farmers’ Union, cit. 4 “See, for instance, C-356/97, Molkereigenossenschaft Wiedergeltingen, ECLI:EU:C:2000:364, on a penalty imposed for delayed statement of quantities of milk, regardless of any consideration concerning the length of the delay and its impact on the system of milk quotas. 5 See supra, Section 2.1. 6 Guidelines on the method of setting fines, cit., para. 37.
  • [4] 84The General Court can therefore “cancel, reduce or increase the fine or periodic penalty payment imposed”: C-617/13 P, Repsol, ECLI:EU:C:2016:416, para. 84. 85 Ex multis, C-251/17, Commission v. Italy, ECLI:EU:C:2018:358, para. 71. The Court further adds that “regard must be had, in particular, to the effects on public and private interests of the failure to comply and to how urgent it is for the Member State concerned to be induced to fulfil its obligations”. 2 The tailor-made nature of the penalty payment is also reflected by the frequency for calculating the amount to be paid, which the Court can establish on a case-by-case basis. See, for instance, inter alia, C-533/11, Commission v. Belgium, ECLI:EU:C:2013:659, for a six-month frequency. 3 C-70/06, Commission v. Portugal, ECLI:EU:C:2008:3. 4 C-407/09, Commission v. Greece, ECLI:EU:C:2011:196; C-279/11, Commission v. Ireland, ECLI:EU:C:2012:834. 5 C-653/13, Commission v. Italy, ECLI:EU:C:2015:478, para. 92. 6 '"'C-576/11, Commission v. Luxembourg, ECLI:EU:C:2013:773, para. 62.
  • [5] C-496/09, Commission v. Italy, ECLI:EU:C:2011:740. paras 48-52. At the same time, the Court dismisses the good faith cooperation and progress arguments when the action taken by the Member State has not brought about an actual improvement of the situation (and, therefore, to a lesser degree of seriousness of the infringement): C-557/14, Commission v. Portugal, ECLI:EU:C:2016:471, paras 79-80. 2 C-241/11, Commission v. Czech Republic, ECLI:EU:C:2013:773. 3 9iT-139/06, France v. Commission, ECLI:EU:T:2011:605; T-70/06, Portugal v. Commission, ECLI:EU:T:2008:266. 4 L. Prete, Infringement Proceedings in EU Law (Wolters Kluwer, 2017) 395.
 
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