European Union

The Court of Justice has handed down a very significant Opinion in Case Opinion 1/09 on the compatibility with EU law of a draft agreement which aims to set up a new European Patent Court system. We’ve written about that before.

The Opinion is significant because of the manner in which the Court examines the roles of national courts and of the EU courts in safeguarding the proper application of EU law.

The Court concluded that the system as envisaged would be incompatible with EU law because it ousts the jurisdiction of national courts to apply EU law. The envisaged agreement, by conferring on an international court which is outside the institutional and judicial framework of the EU an exclusive jurisdiction to hear a significant number of actions brought by individuals in the field of the Community patent and to interpret and apply EU law in that field, would deprive courts of member States of their powers in relation to the interpretation and application of EU law and the Court of its powers to reply, by preliminary ruling, to questions referred by those courts and, consequently, would alter the essential character of the powers which the Treaties confer on the institutions of the EU and on the member States and which are indispensable to the preservation of the very nature of EU law.

The Council drew up a draft international agreement, to be concluded between the member States, the EU and non-member countries which are parties to the European Patent Convention to create a court with jurisdiction to hear cases related to the European patent and the future Community patent. The new court system forms part of a new integrated system for the European and Community patent to be issued by the European Patents Office. Currently, although the procedure for granting that right is unitary, the European patent breaks down into a bundle of national patents, each governed by the domestic law of the States which the holder of the right has designated. By contrast, the distinguishing feature of the future Community patent is that it would be unitary and autonomous and would have equal effect throughout the European Union. It could be granted, transferred, declared invalid or lapse only in respect of that territorial area.

The draft international agreement aims to establish a European and Community Patent Court composed of a court of first instance - comprising a central division and local and regional divisions – a court of appeal and a joint registry.

The Council requested the Court to give an opinion on the compatibility of this new court system with EU law pursuant to Article 218 § 11 TFEU. 21 member States, the European Parliament and the Commission intervened. The Court dealt first with the basic question whether the TFEU prevented the creation of a new court system outside the one it already sets up.

It held that Article 262 TFEU does not preclude the creation of the patent court system envisaged. While it is true that under that provision there can be conferred on the Court of Justice some of the powers which it is proposed to grant to the Patent Court, the procedure described in that article is not the only conceivable way of creating a unified patent court. Article 262 TFEU provides for the option of extending the jurisdiction of the European Union courts to disputes relating to the application of acts of the EU which create European intellectual property rights. Consequently, that article does not establish a monopoly for the Court of Justice in the field concerned and does not predetermine the choice of judicial structure which may be established for disputes between individuals relating to intellectual property rights.

The Court also held that the creation of the patent court system was not in conflict with Article 344 TFEU: That article merely prohibits member States from submitting a dispute concerning the interpretation or application of the Treaties to any method of settlement other than those provided for in the Treaties. The jurisdiction which the draft agreement intends to grant to the patent court system relates only to disputes between individuals in the field of patents.

Then the Court of Justice went on to examine the envisaged court structure n the light of the fundamental elements of the legal order and judicial system of the EU, as designed by the founding Treaties and developed by the case-law of the Court.

And that is where the problem lay.....

The Court recalled that the founding treaties of the EU, unlike ordinary international treaties, established a new legal order, possessing its own institutions, for the benefit of which the States have limited their sovereign rights, in ever wider fields, and the subjects of which comprise not only member States but also their nationals (see, inter alia, Case 26/62 van Gend & Loos [1963] ECR 1, 12 and Case 6/64 Costa v ENEL [1964] ECR 585, 593). The essential characteristics of the EU legal order thus constituted are in particular its primacy over the laws of the member States and the direct effect of a whole series of provisions which are applicable to their nationals and to the member States themselves (see Opinion 1/91 [1991] ECR I‑6079, paragraph 21).

Article 19(1) TEU provides that the guardians of that legal order and the judicial system of the EU are the Court of Justice and the courts and tribunals of the member States.

The Court recalled that its role is to ensure respect for the autonomy of the EU legal order thus created by the Treaties (see Opinion 1/91, paragraph 35).

Member States are obliged, by reason, inter alia, of the principle of sincere cooperation, set out in the first subparagraph of Article 4(3) TEU, to ensure, in their respective territories, the application of and respect for EU law (Case C‑298/96 Oelmühle and Schmidt Söhne [1998] ECR I‑4767, paragraph 23). Further, pursuant to the second subparagraph of Article 4(3) TEU, the member States are to take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the EU. In that context, it is for the national courts and tribunals and for the Court of Justice to ensure the full application of EU law in all member States and to ensure judicial protection of an individual’s rights under that law (Case C‑432/05 Unibet [2007] ECR I‑2271, paragraph 38).

The national courts, in collaboration with the Court of Justice, fulfill a duty entrusted to them both of ensuring that in the interpretation and application of the Treaties the law is observed (Case 244/80 Foglia [1981] ECR 3045, paragraph 16, and Joined Cases C‑422/93 to C‑424/93 Zabala Erasun and Others [1995] ECR I‑1567, paragraph 15).

The judicial system of the EU is a complete system of legal remedies and procedures designed to ensure review of the legality of acts of the institutions (Case C‑50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I‑6677, paragraph 40).

The Court of Justice examined the basic characteristics of the new system. It held that the international court envisaged in the draft agreement is to be called upon to interpret and apply not only the provisions of that agreement but also the future regulation on the Community patent and other instruments of EU law and rules of the FEU Treaty concerning the internal market and competition law. Likewise, the new patent court system may be called upon to determine a dispute pending before it in the light of the fundamental rights and general principles of EU law, and even to examine the validity of an act of the EU.

Thus, the new patent court system as envisaged:

–        takes the place of national courts and tribunals, in the field of its exclusive jurisdiction described in Article 15 of that draft agreement,
–        deprives, therefore, those courts and tribunals of the power to request preliminary rulings from the Court in that field,
–        becomes, in the field of its exclusive jurisdiction, the sole court able to communicate with the Court by means of a reference for a preliminary ruling concerning the interpretation and application of European Union law and
–        has the duty, within that jurisdiction, in accordance with Article 14a of that draft agreement, to interpret and apply EU law.

The Court of Justice held that while it has no jurisdiction to rule on direct actions between individuals in the field of patents, since that jurisdiction is held by the courts of the member States, nonetheless the member States cannot confer the jurisdiction to resolve such disputes on a court created by an international agreement which would deprive those courts of their task, as ‘ordinary’ courts within the EU legal order, to implement EU law and, thereby, of the power provided for in Article 267 TFEU or the obligation to refer questions for a preliminary ruling in the field concerned.

The Court recalled the vital role of the national courts in the EU legal order. Article 267 TFEU aims to ensure that, in all circumstances, that law has the same effect in all member States. The preliminary ruling mechanism thus established aims to avoid divergences in the interpretation of EU law which the national courts have to apply and tends to ensure this application by making available to national judges a means of eliminating difficulties which may be occasioned by the requirement of giving EU law its full effect within the framework of the judicial systems of the Member States. Further, the national courts have the most extensive power, or even the obligation, to make a reference to the Court if they consider that a case pending before them raises issues involving an interpretation or assessment of the validity of the provisions of EU law and requiring a decision by them (Case 166/73 Rheinmühlen‑Düsseldorf [1974] ECR 33, paragraphs 2 and 3, and Case C‑458/06 Gourmet Classic [2008] ECR I‑4207, paragraph 20). The system set up by Article 267 TFEU therefore establishes between the Court of Justice and the national courts direct cooperation as part of which the latter are closely involved in the correct application and uniform interpretation of EU law and also in the protection of individual rights conferred by that legal order.

So, because the new system had the effect of ousting the jurisdiction of national courts in the application of EU law, the Court found it incompatible with the EU Treaty.

That is all well and good. But our searching minds thought about BIT arbitration..... Has the Court of Justice inadvertently affected that ?

The Court of Justice, the General Court and the Civil Service Tribunal have published a summary of their case statistics for 2010.

There's good news and bad news. The good news first: The average time for dealing with cases before the Court of Justice has decreased (preliminary references now take 16.1 months on average).

The bad news: the volume of cases is increasing. The number of new cases before the Court of Justice jumped significantly from 562 in 2009 to 631 in 2010 (that's the highest number brought in the Court's history). Likewise, the number of cases brought before the General Court has increased from 568 in 2009 to 636 in 2010. Cases are dealt with more speedily there. Finally, the number of staff cases in the Civil Service Tribunal has increased too which perhaps shows what a difficult employer the Commission is. Cases in the Civil Service Tribunal seem to take ages (18.1 months in 2010 compared with 15.1 months in 2009).

For last year's statistics, see here.

The Court of Justice has handed down an intriguing judgment in Case C-137/09 Marc Michel Josemans v. Burgemeester van Maastricht about the right to restrict the access of non-residents to places called "coffee shops" which sell dope legally in the Netherlands. The Court held it is possible to restrict entry to such places to residents and ban non-residents from them in order to combat drug tourism and what it calls the accompanying public nuisance.

Here's the story. In principle, the Netherlands bans the possession of and dealing in all manner of narcotic drugs. Yet, it has a policy of tolerance with regard to cannabis and in particular allows the establishment of coffee-shops. Don't be mistaken, you don't go to such coffee shops to sip a latte because their main activities are the sale and consumption of weed. Local authorities may authorize such establishments in compliance with certain criteria. In a number of coffee-shops, non-alcoholic beverages and food are also sold.

Maastricht is a pleasant town on the banks of the Meuse close to the German and Belgian borders. To try to prevent drug tourism the Municipal Council of Maastricht banned any coffee-shop owner from admitting to his establishment persons who do not have their actual place of residence in the Netherlands. So, if you lived over the border, you could not go and smoke up in a Maastricht coffee shop with your Dutch friends.

The plaintiff in the main case, Mr Josemans, runs the ‘Easy Going’ coffee-shop in Maastricht. He was denounced for allowing foreign residents to his coffee shop and so the local Mayor closed his place down. Mr Josemans challenged that decision, claiming the Municipal ban on foreign residents constitutes unjustified unequal treatment of citizens of the European Union and that, more specifically, people who are not resident in the Netherlands are denied the possibility of buying non-alcoholic beverages and food in coffee-shops, which is contrary to European Union law. The case reached the Dutch Council of State, which then referred a number of questions to the Court of Justice.

The first question referred to the Court of Justice was what provisions of EU law applied to the sale of cannabis and what provisions applied to the sale of non-alcoholic beverages.

The Court held that narcotic drugs which are not distributed through channels which are strictly controlled by the competent authorities to be used for medical and scientific purposes are, because of their very nature, subject to a prohibition on importation and offering for sale in all the member States (Case 221/81 Wolf [1982] ECR 3681, paragraph 10; Case 240/81 Einberger [1982] ECR 3699, paragraph 10; Case 294/82 Einberger [1984] ECR 1177, paragraph 15; Case 269/86 Mol [1988] ECR 3627, paragraphs 15 and 18; Case 289/86 Vereniging Happy Family Rustenburgerstraat [1988] ECR 3655 paragraphs 17 and 20 and Case C-158/98 Coffeeshop‘Siberië’ [1999] ECR I-3971 paragraph 14). As narcotic drugs which are not distributed through such strictly controlled channels are prohibited from being released into the economic and commercial channels of the EU, a coffee-shop proprietor cannot rely on the freedoms of movement or the principle of non-discrimination, in so far as concerns the marketing of cannabis, to object to municipal rules such as those at issue in the main proceedings.

As for the marketing of non-alcoholic drinks is concerned, the Court held that it appears to constitute a catering activity characterized by an array of features and acts in which services predominate as opposed to the supply of the product itself (Case C-491/03 Hermann [2005] ECR I-2025, paragraph 27). Consequently, the free movement of goods aspect is entirely secondary to that of the freedom to provide services. As a result the Court examined the rules at issue in the main proceedings only in the light of the freedom to provide services (Case C-275/92 Schindler [1994] ECR I‑1039, paragraph 22; Case C-71/02 Karner [2004] ECR I-3025, paragraph 46; Case C-36/02 Omega [2004] ECR I-9609, paragraph 26; Case C‑452/04 Fidium Finanz [2006] ECR I-9521, paragraph 34; and Case C‑233/09 Dijkman and Dijkman-Laveleije [2010] ECR I-0000, paragraph 33).

The Court also held Article 12 EC (now Article 18 TFEU), which lays down a general prohibition of all discrimination on grounds of nationality, does not apply in this case as it applies independently only to situations governed by EU law for which the EC Treaty lays down no specific rules of non-discrimination and the principle of non-discrimination has been implemented, in the area of the freedom to provide services, by Article 49 EC (now Article 56 TFEU) (Case 305/87 Commission v Greece [1989] ECR 1461, paragraphs 12 and 13; Case C-443/06 Hollmann [2007] ECR I-8491, paragraph 28; and Case C‑269/07 Commission v Germany [2009] ECR I-7811, paragraph 98). Similarly, Article 18 EC (now Article 21 TFEU), which lays down generally the right for every citizen of the Union to move and reside freely within the territory of the member States, finds specific expression in the provisions guaranteeing the freedom to provide services (Case C-92/01 Stylianakis [2003] ECR I-1291, paragraph 18; Case C-76/05 Schwarz and Gootjes-Schwarz [2007] ECR I-6849, paragraph 34; and Case C-56/09 Zanotti [2010] ECR I-0000, paragraph 24). As citizens of the EU who do not reside in the Netherlands and wish to go into coffee-shops in the municipality of Maastricht to consume lawful goods there are to be regarded as ‘persons for whom’ services ‘are intended’ within the meaning of Article 49 EC, it is not necessary for the Court to rule on the interpretation of Article 18 EC.

The Court had then to deal with the second question posed by the referring national court, whether the rules on the freedom to provide services precluded the restriction of selling non-alcoholic beverages to non residents and whether such a restriction was justified on grounds of public policy.

The Court affirmed is consistent case law according to which the principle of equal treatment, of which Article 49 EC embodies a specific instance, prohibits not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result (Case C-3/88 Commission v Italy [1989] ECR 4035, paragraph 8; Case C-388/01 Commission v Italy [2003] ECR I-721, paragraph 13; Case C‑28/04 Tod’s and Tod’s France [2005] ECR I-5781, paragraph 19; and Case C-147/03 Commission v Austria [2005] ECR I-5969, paragraph 41). Article 49 EC also precluded a measure which distinguished residents from non-residents, because it is liable to operate mainly to the detriment of nationals of other member States, since non-residents are in the majority of cases foreigners (Case C-224/97 Ciola [1999] ECR I‑2517, paragraph 14; Case C‑388/01 Commission v Italy, paragraph 14; Case C‑103/08 Gottwald [2009] ECR I-9117, paragraph 28; and Case C-73/08 Bressol and Others [2010] ECR I-0000, paragraph 45 - see our post about that case here).

The Court went on to examine the tricky issue whether such a restriction may be justified.

It held that the discriminatory rule was justified.

The Court accepted the finding of fact that the rules at issue in the main proceedings intend to put an end to the public nuisance caused by the large number of tourists wanting to purchase or consume cannabis in the coffee-shops in the municipality of Maastricht. According to the information provided by the Mayor of Maastricht at the hearing, the 14 coffee-shops in the municipality attract around 10 000 visitors per day and a little more than 3.9 million visitors per year, 70% of which are not resident in the Netherlands.

The Court also found that given the commitments entered into by the EU and its member Sates, there is no doubt that the objectives of combatting drug tourism constitute a legitimate interest which, in principle, justifies a restriction of the obligations imposed by EU law, even under a fundamental freedom such as the freedom to provide services. It also found that a prohibition on admitting non-residents to coffee-shops, such as that which is the subject-matter of the dispute in the main proceedings, constitutes a measure capable of substantially limiting drug tourism and, consequently, of reducing the problems it causes.

But there was the precedent of Joined Cases 115/81 and 116/81 Adoui and Cornuaille [1982] ECR 1665, concerning the right of residence or establishment of prostitutes. In that case, the Belgian authorities had adopted measures which were more repressive towards prostitutes from other member States working in Belgium than they had taken against the local ladies. The Court had held in that case that a member State cannot validly rely on grounds of public policy with regard to the behavior of a non-national inasmuch as it does not adopt repressive measures or other genuine and effective measures with respect to the same conduct on the part of its own nationals. The Court distinguished that case by pointing out that under international law and European Union law, a prohibition in all the Member States on marketing narcotic drugs, with the exception of strictly controlled trade for use for medical and scientific purposes. By contrast, prostitution, the behavior referred to in Adoui and Cornuaille, aside from trafficking in human beings, is tolerated or regulated in a number of member States (Case C-268/99 Jany and Others [2001] ECR I‑8615, paragraph 57). It cannot be held to be inconsistent for a member State to adopt appropriate measures to deal with a large influx of residents from other member States who wish to benefit from the marketing – tolerated in that member State – of products which are, by their very nature, prohibited in all member States from being offered for sale.

As regards the scope of rules such as those at issue in the main proceedings, the Court held that they apply only to establishments the main activity of which is the marketing of cannabis. They do not preclude a person who is not resident in the Netherlands from going into other catering establishments in Maastricht to consume non-alcoholic beverages and food. According to the Netherlands Government, there are more than 500 such places.

Finally, the Court accepted as a fact that other less restrictive measures such as a restriction on the number of coffee-shops or their opening hours, the implementation of a card system which allows customers access to them or even a reduction in the amount of cannabis per person which may be bought had proved insufficient and ineffective in the light of the objective pursued.

Is this the beginning of a trend of allowing member States to introduce measures discriminating against foreigners? Let us hope it is confined to reefers.

In the meantime, there is some confusion as to whether the "Easy Going" is actually shut down or not.

Season's greetings, Dear Readers !

To help you in those end of year trivia quizzes, you'll be pleased to know that the Council has once again amended its Rules of Procedure to quantify the 62% population threshold set out in the rules on qualified majority voting.

You may recall that Article 3(3), fourth subparagraph, of the Protocol (No 36) on transitional provisions annexed to the Treaties provides that, until October 31 2014, when an act is to be adopted by the Council by a qualified majority, and if a member of the Council so requests, it shall be verified that the member States constituting the qualified majority represent at least 62 % of the total population of the Union calculated according to the population figures set out in Article 1 of Annex III to the Council’s Rules of Procedure.

The Council must adapt the population figures for the coming calendar year. The Council has now done that in its Decision of December 14th 2010 for the year 2011 published here.

The total population of the EU is now 501,090,400. The 62% threshold is now 310,676,100 (up from 309,792,400 last year).