viernes, 18 de abril de 2014

GC hints at a reduction of the burden of motivation of administrative decisions under EU law (T-319/11)

In its Judgment of 8 April 2014 in case T-319/11 ABN Amro Group v Commission, the General Court has indicated that the context in which an administrative decision is adopted may reduce the burden of motivation imposed on an institution when it deals with undertakings as interested parties, particularly when the alleged failure to provide sufficient motivation concerns a relatively secondary matter.
 
In the context of the judicial review of a State aid Decision adopted by the European Commission in the recapitalisation of ABN Amro by the Dutch State, the challengers of the Decision argued that the Commission had breached its duty of good administration and, more especifically, its obligation to provide reasons for the rejection of certain commitments linked to the restructuring of the bank.
 
Taking a pragmatical approach to the issue of whether the succint explanations provided by the Commission allowed the interested bank to assess its legal position, and whether the general motivation of the Decision was sufficient to discharge the requirements of the duty of good administration, the GC ruled that
138 [...] referring, by analogy, to the case-law according to which the reasons given for a measure adversely affecting a person are sufficient if that measure was adopted in a context which was known to that person and which enables him to understand the scope of the measure concerning him (see Case C‑417/11 P Council v Bamba [2012] ECR, paragraph 54 and case-law cited), it cannot be accepted in this case that the reasons stated in the contested decision do not meet the requisite legal standard because the decision does not discuss the alternative measures proposed by ABN Amro during the investigation procedure and rejected by the Commission (T-319/11 at para 138, emphasis added).
In my view, this Judgment can have interesting and positive implications if it is properly carried through to other areas of EU administrative law where, to date, the CJEU has adopted a much more demanding approach. In particular, I think that this incipient string of case law can be very helpful in the area of public procurement, where the current state of the law imposes what I deem as excessive debriefing obligations on the basis of the duty to provide reasons--which, in turn, result in a very dangerous and detrimental transparency in public procurement settings [for discussion, see "The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives", University of Leicester School of Law Research Paper No. 13-11]. I therefore hope that such pragmatical approach will be further developed and properly adjusted to other areas of EU Economic law, such as public procurement.

CJEU further pushes for a universal application of the 'market economy private investor test' (C-224/12)


In its Judgment of 3 April 2014 in case C-224/12 Commission v Netherlands and ING Groep, the Court of Justice of the European Union (CJEU) has followed its antiformalistic approach to the application of the 'market economy private investor test' (see comment to its precedent in C-124/10 EDF here) and has basically consolidated its role as a universal test in the application of Article 107(1) TFEU [for discussion, see A Sanchez Graells, “Bringing the ‘Market Economy Agent’ Principle to Full Power” (2012) 33 European Competition Law Review 35-39].

In its ING Groep Judgment, the CJEU determined that the Commission could not evade its obligation to assess the economic rationality of an amendment to the repayment terms of the aid granted by the Dutch State to ING in the light of the private investor test solely on the ground that the capital injection subject to repayment itself already constituted State aid--since only after such an assessment would the Commission be in a position to conclude whether an additional advantage within the meaning of Article 107(1) TFEU had been granted.
 
In my view, this general approach insisting on the application of the 'market economy private investor test' regardless of the prior existence of State aid in itself must be praised, and the very rotund terms in which the CJEU has stressed its importance deserve some emphasis.
 
Indeed, the CJEU has built up on the arguments already indicated in C-124/10 EDF and, following the advice of AG Sharpston, has made it clear that:
30 [...] in view of the objectives pursued by Article [107(1) TFEU] and the private investor test, an economic advantage must, even where it has been granted through fiscal means, be assessed in the light of the private investor test if, on conclusion of an overall assessment, it appears that, notwithstanding the fact that the means used were instruments of State power, the Member State concerned has conferred that advantage in its capacity as shareholder of the undertaking belonging to it.
31 It follows that the applicability of the private investor test to a public intervention depends, not on the way in which the advantage was conferred, but on the classification of the intervention as a decision adopted by a shareholder of the undertaking in question.
32 Furthermore, that test is one of the factors which the Commission is required to take into account for the purposes of establishing the existence of aid and is therefore not an exception that applies only if a Member State so requests, where the constituent elements of State aid incompatible with the common market referred to in Article [107(1) TFEU] have been found to be present (see Commission v EDF, paragraph 103).
33 Consequently, where it appears that the private investor test may be applicable, the Commission is under a duty to ask the Member State concerned to provide it with all relevant information enabling it to determine whether the conditions governing the applicability and the application of that test are met (see Commission v EDF, paragraph 104).
34 The application of that case-law cannot be compromised merely because, in this case, what is at issue is the applicability of the private investor test to an amendment to the conditions for the redemption of securities acquired in return for State aid.
35 Indeed, as the Advocate General has stated [...] any holder of securities, in whatever amount and of whatever nature, may wish or agree to renegotiate the conditions of their redemption. It is, consequently, meaningful to compare the behaviour of the State in that regard with that of a hypothetical private investor in a comparable position (C-224/12 at paras 30-35, emphasis added).
In my view, this Judgment must be welcome as a good addition and (further) clarification to C-124/10 EDF in terms of the universal applicability of the  'market economy private investor test' and, as I already indicated, it would be interesting to see this criterion extended to other areas of EU Economic Law and, particularly, public procurement, where the control the (disguised) granting of State aid is crying for further developments of the 'market economy private [buyer] test' [as I stressed in "Public Procurement and State Aid: Reopening the Debate?"(2012) 21(6) Public Procurement Law Review 205-212].

Recent CJEU and GC views on the "economic advantage" element in State aid cases (C-559/12 and T-150/12)


In two recent cases, the Court of Justice of the EU (CJEU) and the General Court (GC) have reassessed the element of "economic advantage" required in the prohibition of State aid in Art 107(1) TFEU in connection with State guarantees in France and Greece. The element of advantage has ranked rather high in the list of issues recently submitted to public consultation by the European Commission as part of the forthcoming new Notice on the concept of State aid. Hence, it seems interesting to have a look at these cases.
Firstly, in its Judgment of 3 April 2014 in case C-559/12 France v Commission (La Poste), the CJEU assessed the Commission's previous findings regarding the existence of an unlimited guarantee granted by the French State to its postal operator (La Poste) as part of its status as an establishment of an industrial and commercial character (établissement public à caractère industriel et commercial, ‘EPIC’)--which entails a number of legal consequences, including the inapplicability of insolvency and bankruptcy procedures under ordinary law--and which ultimately constituted State aid within the meaning of Article 107(1) TFEU. The Commission's assessment had been endorsed by the GC (see comment here). The CJEU concurs with the substantive assessment of both the Commission and the GC in an interesting reasoning (and after having addressed a number of issues concerning the burden of proof that, in the end, remain largely marginal in view of the consolidation of a presumption of advantage in the case of unlimited State guarantees):
94 [...] it must be borne in mind that the concept of aid embraces [...] measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, therefore, without being subsidies in the strict sense of the word, are similar in character and have the same effect [...] Also, State measures which, whatever their form, are likely directly or indirectly to favour certain undertakings or are to be regarded as an economic advantage which the recipient undertaking would not have obtained under normal market conditions, are regarded as aid [...].
95 Since State measures take diverse forms and must be analysed in terms of their effects, it cannot be ruled out that advantages given in the form of a State guarantee can entail an additional burden on the State
[...]
.
96 As the Court has already held, a borrower who has subscribed to a loan guaranteed by the public authorities of a Member State normally obtains an advantage inasmuch as the financial cost that it bears is less than that which it would have borne if it had had to obtain that same financing and that same guarantee at market prices
[...]
.
97 From that point of view, moreover, the Commission Notice on the application of Articles 
[107 and 108 TFEU] to State aid in the form of guarantees specifically provides[...]
that an unlimited State guarantee in favour of an undertaking whose legal form rules out bankruptcy or other insolvency procedures grants an immediate advantage to that undertaking and constitutes State aid, in that it is granted without the recipient thereof paying the appropriate fee for taking the risk supported by the State and also allows better financial terms for a loan to be obtained than those normally available on the financial markets.
98 It is apparent,
[...]
a simple presumption exists that the grant of an implied and unlimited State guarantee in favour of an undertaking which is not subject to the ordinary compulsory administration and winding-up procedures results in an improvement in its financial position through a reduction of charges which would normally encumber its budget.
99 Consequently, in the context of the procedure relating to existing schemes of aid, to prove the advantage obtained by such a guarantee to the recipient undertaking,
it is sufficient for the Commission to establish the mere existence of that guarantee, without having to show the actual effects produced by it from the time that it is granted (C-559/12 at paras 94 to 99, emphasis added).
 
Secondly, in its Judgment of 9 April 2014 in case T-150/12 Greece v Commission (aid to cereal production), the GC has also assessed a Greek guarantee scheme to cereal producers and has upheld the Commission's view whereby the conditions attached to such guarantee--i.e. initially, the acceptance of crops as collateral (although the existence of the guarantee rights and the conditions for their execution were not automatic) and later the potential charge of a 2% premium (again, which charge was not automatic)--did not dissipate the existence of an economic advantage for the beneficiaries of the guarantee scheme. The reasoning of the GC (in French) in paras 82 to 97 is interesting to grasp the unconditionality required of any measures intended to eliminate the (presumed) advantage that State guarantee schemes provide.
 
In my view, both Judgments are in line with the content of the Commission's Draft Notice on the concept of State aid (and, in particular, paras 111 to 117) and it seems now clear that unlimited State guarantees or State guarantees without actual (automatic) conditions (such as collateral and premia to be paid by the beneficiaries) will be ruled as being against Art 107(1) TFEU as a result of the iuris et de iure presumption of their conferral of an advantage.

miércoles, 16 de abril de 2014

AG proposes to reduce safe harbour for directly awarded public contracts subjected to prior transparency (C-19/13)

In his Opinion of 10 April 2014 in case C-19/13 Fastweb, Advocate General Bot has proposed an interpretation of Art 2d(4) of Directive 89/665 (as amended by dir 2007/66) that would seriously erode the safe harbour (apparently) created by that provision for contracts that have been directly awarded by the contracting authority (without competition), provided that the following cummulative conditions are met: 
 
— the contracting authority considers that the award of a contract without prior publication of a contract notice in the Official Journal of the European Union is permissible in accordance with Directive 2004/18/EC,
 — the contracting authority has published in the Official Journal of the European Union a notice (...) expressing its intention to conclude the contract, and,
 — the contract has not been concluded before the expiry of a period of at least 10 calendar days with effect from the day following the date of the publication of this notice (emphasis added).
 
The key element of his Opinion is, in my view, his interpretation of the extent to which the discretion of the contracting authority in 'considering' that it can avail itself from the possibility to award a contract without prior publication of a contract notice is subject to judicial review. A literal reading of the provision seems to indicate that the standard of review is very low (if not inexistent) and that, provided the transparency requirement and standstill period are respected, the directly awarded contract cannot be declared ineffective--leaving the challenging tenderer with the only option of seeking compensation for damages.
 
However, AG Bot argues that this would create a paradox and opposes such a literal interpretation of the provision, subjecting that exercise of discretion to effective (full) judicial review. As AG Bot argues,
74. Indeed, it should be noted that Directive 89/665 is specifically designed to increase the guarantees of transparency and non-discrimination in the context of procedures for the award of public contracts so that the injured economic operator receives complete legal protection. Moreover, it should also be remembered that the European Union legislature opted to strengthen in Directive 2007/ 66 the effectiveness of review procedures to combat the illegal direct award of public contracts and to protect potential tenderers against the arbitrariness of the contracting authority.
 
75 . Secondly, [if the judgment made by the contracting authority was not open to judicial review], in these circumstances, the contracting authority [would be allowed] to directly award a contract in contravention of the requirements laid down in Directive 2004/18, by serving minimum formalities and exposing itself to a minimum punishment, giving rise to potential abuses of the rights thereby recognized (AG Bot in C-19/13, at paras 74-75, own translation from Spanish and references omitted).
 
Further, AG Bot considers that
One must not lose sight of the dact that the maintenance of the effects of the contract provided for in Article 2d paragraph 4 of Directive 89/665 is based on the good faith of the contracting authority and seeks to preserve legal certainty for the contracting parties. The European Union legislature expressly recognized this in the twenty-sixth recital of Directive 2007/66, by insisting on the need to "avoid legal uncertainty which may result from ineffectiveness" of the contract. In addition, the Court has expressly admitted this in the judgment in Commission / Germany [EU:C:2007:432, para 33] (AG Bot in C-19/13, at para 82, own translation from Spanish and emphasis added).
In view of these (and other) considerations, AG Bot proposes that the CJEU interprets that
Article 2d , paragraph 4 of Council Directive 89/665 (...) read in the light of the principle of equal treatment and the right to effective judicial protection, must be interpreted as not precluding that a Member State grants the body responsible for appeal proceedings the freedom to appreciate the extent to which a contract awarded without prior publication of a notice in the Official Journal of the European Union must be declared ineffective when it finds that, despite the publication in the Official Journal of the European Union of a notice stating its intention to conclude the contract and the observance of a minimum standstill period of ten days, the contracting authority has violated in a deliberate and intentional way the advertising standards and the requirements of opening up to competition laid down in Directive 2004/18 (own translation from Spanish, emphasis added).
Basically, AG Bot argues against an automatic exclusion of the possibility to declare contracts ineffective under Art 2d(4) of Directive 89/665 and advocates for an extension of the scope of judicial review in order to assess whether contracting authorities acted in good faith. In my view, this potential development in the interpretation of EU procurement rules is troubling because it points towards a tendency to include subjective assessments in procurement review procedures (see Art 18 Directive 2014/24) and departs from the standards of judicial review: manifest error in law or in fact, and abuse of power/procedure.
 
The same result [ie inapplicability of the safe harbour of art 2d(4) of dir 89/665] could be achieved by simply stating that the first condition (that is, that the contracting authority considers that the award of a contract without prior publication is permissible in accordance with Directive 2004/18) is subject to that 'consideration' not being manifestly incorrect in law or in fact, or that the contracting authority has not abused its powers in the award of the contract.
I would prefer the CJEU to rule in that regard without embarking on analyses related to the good faith or otherwise of the contracting authority. Let's hope that the final judgment in the Fastweb case does not open the door to a myriad of complications in order to determine such type of subjective elements.

martes, 8 de abril de 2014

US GAO publishes report on urgency contracting (GAO-14-304)

The US Government Accountability Office has published an interesting report on the use of urgency contracting by the  Departments of Defense (DOD) and State and the U.S. Agency for International Development (USAID) in the period 2010-2012. The report is interesting in that it shows the relevance of having accurate data in order to carry out oversight efforts such as this one (in their research, they had access to rather poor and incorrect data) and, more importantly, because it clearly points out certain implementation problems that are similar to the ones that can be expected under the EU rules--and, looking at the future, under art 32(2)(c) of Directive 2014/24. It is interesting to read it ahead of its (re)transposition.

lunes, 7 de abril de 2014

CJEU stresses 'consumer interest' test under Art 34 TFEU and finds Spain guilty of "gold-plating" in transport services' regulation (C-428/12)

In its Judgment of 3 April 2014 in case C-428/12 Commission v Spain (new transport trucks) (only available in French and Spanish) the Court of Justice of the European Union (CJEU) has found Spain in breach of Art 34 and Art 36 TFEU due to the imposition of a disproportionate requirement in the system of authorisation of road transport services by companies not primarily engaged in road transport. In my view, the case is interesting because it deals once again with claims of justification based on road safety, in what seems to have become a topic in EU free movement of goods law [see C-110/05 Commission v Italy (mopeds) and, very recently, C-639/11 Commission v Poland (right steering wheel cars), discussed here and here].
 
In the case at hand, Spain had adopted regulations for the authorisation of companies providing ancillary road transport services that required that the age of the first heavy (ie above 3,500 kg) vehicle in the fleet of a (newly authorised) company did not exceed five months from its first registration. The Commission considered that this requirement infringed Art 34 TFEU and was not justified under Art 36 TFEU. One can wonder why the case was brought under this legal basis instead of the seemingly more appropriate of Art 49 TFEU (given that the system was concerned with a 'first' or new authorisation and, consequently, seemed to affect newly established transport companies particularly) or of Art 56 TFEU (on the provision of services, as the effect of the restriction surely would limit the offer of road transport services), although the (greater?) difficulty in justifying the existence of a cross-border impact and the exclusion of transport from the 2006 Services Directive may have played a role in the 'strategic' choice of legal basis by the Commission.
 
Taking the (uneasy?) approach of the restriction of the free movement of goods under Art 34 TFEU, the Commission considered that i) the Spanish rule constituted a measure having equivalent effect to a quantitative restriction on imports, ii) that such provision had the effect of restricting imports of heavy goods vehicles more than five months old from other Member States, and iii) that it violated the principle of mutual recognition and impeded access to the Spanish market, which had the effect of severely restricting the use of the vehicles concerned. The Commission also considered that neither road safety or environmental protection justifications could exempt the controverted rule. The CJEU rather keenly accepts the approach taken by the Commission and makes some interesting findings, not least consolidating the 'market access' test approach to the enforcement of Art 34 TFEU:
29 [...] it is clear from the case law that a measure, even if it does not have the purpose or effect of treating less favorably products from other Member States, is included in the concept of a measure equivalent to a quantitative restriction within the meaning of Article 34 TFEU if it hinders access to the market of a Member State of goods originating in other Member States (see, to that effect, Commission / Italy, C-110/05, EU: C: 2009:66, paragraph 37).
30 In this regard, the Court observes that the prohibition of use as the first vehicle in the fleet of vehicle with a maximum authorized mass exceeding 3.5 tonnes and more than five months old from the date of its first registration may have a considerable influence on the behavior of firms wishing to use a vehicle of this nature for complementary private transport, behavior which in turn can affect access of that product to the market of the Member State in question (C-428/12 at paras 29-30, own translation from Spanish).
The CJEU also consolidates the 'consumer interest' test in order to assess restrictions to market access:
31 [...] businesses, knowing that the use authorized [...] of a vehicle with a maximum authorized mass exceeding 3.5 tonnes and more than five months old from the date of first registration is restricted, will only have a limited interest in buying a truck like this for their complementary private transportation activities (see, to that effect, Commission / Italy EU: C: 2009:66, paragraph 57, and Mickelsson and Roos, EU: C: 2009:336, paragraph 27) (C-428/12 at para 31, emphasis added, own translation from Spanish).
The CJEU dismisses the claims for justification made by Spain, indicating that road safety could be protected by less intrusive measures (such as technical inspections, already in place) and also interestingly dismisses arguments based on the solvency of companies:
40 As regards [...] the other explanations given by the Kingdom of Spain [... such as] the proof of greater solvency of the company or even fostering better exploitation of vehicles for private complementary transport do not constitute reasons of public interest within the meaning of Article 36 TFEU or mandatory requirements within the meaning of the Court of Justice's case law (C-428/12 at para 40, own translation from Spanish).
In my opinion, the case is interesting because it consolidates the 'new' approach to the enforcement of Art 34 TFEU under a 'market access' test applied thorugh a 'consumer interest' (sub)test. It is also interesting because it continues to perpetuate the 'supremacy' of free movement of goods rules as the main analytical framework for the protection of the fundamental freedoms impinging the internal market.

jueves, 27 de marzo de 2014

CJEU 'consolidates' market access test in the enforcement of Art 34 TFEU (C-639/11 & C-61/12)

In its Judgments of 20 March 2014 in cases C-639/11 Commission v Poland and C-61/12 Commission v Lithuania, the Court of Justice of the European Union (CJEU) has found that both countries infringed their obligations under Art 34 TFEU by making registration in their territory of passenger vehicles having their steering equipment on the right-hand side, whether they are new or previously registered in other Member States, dependent on the repositioning of the steering wheel to the left-hand side. In my view, this case is interesting for at least two reasons.
 
Firstly, the CJEU has 'consolidated' the so-called 'market access test' in the enforcement of Art 34 TFEU by recasting the traditional 'Dassonville' formula and focussing the assessment on hindrances to market access. Indeed, in the 'new' (re)formulation of the test, the CJEU considers that
In view of the Court’s settled case-law, the contested legislation constitutes a measure having equivalent effect to quantitative restrictions on imports within the meaning of Article 34 TFEU, in so far as its effect is to hinder access to the Polish [sic, Lithuanian (oh, the joys of copy and paste!)] market for vehicles with steering equipment on the right, which are lawfully constructed and registered in Member States other than the Republic of Lithuania (see, concerning the origins of that case-law, Case 8/74 Dassonville [1974] ECR 837, paragraph 5; Case 120/78 Rewe Zentral, ‘Cassis de Dijon’ [1979] ECR 649, paragraph 14; and, more recently, Case C‑110/05 Commission v Italy [2009] ECR I‑519, paragraph 58) (C-61/12 at para 57 emphasis added and, equally, C-639/11 at para 52, correction needed in the English version of the C-61/12 Judgment but not in other linguistic versions].
This may be seen as a relatively welcome development, as it continues in the line of clarification already initiated in C-110/05 Commission v Italy (mopeds) and consolidates a more encompassing test that allows for the harmonious assessment of potential restrictions to free movement of goods under a single, unified (and probably more functional) test.
 
Secondly, the case is important in that the CJEU deviates significantly from C-110/95 in applying a much more stringent test of (strict) proportionality to the measures adopted by Poland and Lithuania (basically, requiring a repositioning of the steering wheel prior to registration of the motor vehicles) than it did to the measures adopted by Italy (an outright ban of a specific type of trailers to be towed by motorbikes and other vehicles) on the grounds of road safety [see C-61/12 paras 63-69 and C-639/11 paras 58-65].
 
In my view, the application of such a stringent proportionality test (with which the CJEU seems to revitalise the pro-integrationist agenda in the enforcement of Art 34 TFEU) will create frictions with Member States for two main reasons.
 
Firstly, the 'consolidation' of the new (re)formulation around hindrance of market access indicates an effective substitution of the underlying rationale in internal market rules (art 34 TFEU particularly) from a producers’ freedom (push market) to a consumers’ right (pull market). This will be problematic unless free movement rules further converge with (effective) consumer protection and safety and similar concerns receive a common treatment throughout the EU (ultimately, the goal of the CJEU, particularly when it uses the argument that in 22 of the 28 Member States registration would not have required changing the wheel location).
 
And, secondly, because the new (re)formulation of the case law creates a dangerous test leading to a (very, too broad) Dassonville-like formula limited only by (subjective) proportionality analysis carried out by the CJEU, which can result in an encroachment of domestic regulatory powers if the CJEU adopts a tough stance, as it has done against Poland and Lithuania (and differently from its previous, more timid approach in the case against Italy).
 
In the future, it will be interesting to see if the CJEU does not find itself under the same amount of criticism as when it first adopted the Dassonville fomula and, consequently, whether the next round of evolution of the law on free movement of goods does not initiate a new restriction of the rules under a new version of Cassis de Dijon. All in all, the development of the law in this area of the internal market seems to evolve in cycles.

martes, 11 de marzo de 2014

Keep amassing your brand or it will be eaten up (C-409/12)


In its Judgment of 6 March 2014 in case C-409/12 Backaldrin Österreich The Kornspitz Company (Kornspitz), the Court of Justice of the EU (CJEU) has declared that a trademark is liable to revocation if, as a consequence of acts or inactivity of the proprietor, it has become the common name for the product from the point of view solely of end users of the product. The case interprets Article 12(2)(a) of Directive 2008/95 on the approximation of the laws of the Member States relating to trade marks (Codified version), which indicates that a trade mark is liable to revocation if "in consequence of acts or inactivity of the proprietor, it has become the common name in the trade for a product or service in respect of which it is registered". The contentious part of the provision concerned the interpretation of the term "trade".
 
In the case at hand, the professionals (intermediaries) in the Austrian baking sector are aware that 'Kornspitz' referred to a specific trademark for ‘flour and preparations made from cereals; bakery goods; baking agents, pastry confectionery, also prepared for baking; pre-formed dough … for the manufacture of pastry confectionery’. However, given that the owner of the brand (Backaldrin) produces a baking mix which it supplies primarily to bakers and then allows bakers and foodstuffs distributors to use the term 'kornspitz' in the sale of the bread rolls made with the trade marked mix, it was argued that consumers appreciate no distinctive character in the term 'kornspitz', which has become the standard name for a given mix of flours and seeds. Hence, one of Backaldrin's competitors challenged the 'Kornspitz' trade mark and applied for its revocation.
 
The CJEU accepted the argument and clarified that:
19 […] Article 12(2)(a) of Directive 2008/95 addresses the situation where the trade mark is no longer capable of fulfilling its function as an indication of origin (see, to that effect, Case C‑371/02 Björnekulla Fruktindustrier [2004] ECR I‑5791, paragraph 22).

20 Among the various functions of a trade mark, that function as an indication of origin is an essential one (see, inter alia, Joined Cases C‑236/08 to C‑238/08 Google France and Google [2010] ECR I‑2417, paragraph 77, and Case C‑482/09 Budějovický Budvar [2011] ECR I‑8701, paragraph 71). It serves to identify the goods or services covered by the mark as originating from a particular undertaking, and thus to distinguish those goods or services from those of other undertakings (see, to that effect, Case C‑12/12 Colloseum Holding [2013] ECR, paragraph 26 and the case-law cited). That undertaking is, as the Advocate General stated at point 27 of his Opinion, that under the control of which the goods or services are marketed.
[… 22] […]
Article 12(2)(a) of the directive relates to the situation where the trade mark has become the common name and has therefore lost its distinctive character, with the result that it no longer fulfils that function (see, to that effect, Björnekulla Fruktindustrier, paragraph 22). The rights conferred on the proprietor of that mark under Article 5 of Directive 2008/95 may then be revoked (see, to that effect, Case C‑145/05 Levi Strauss [2006] ECR I‑3703, paragraph 33).

23 In the case described by the referring court
[...] the end users of the  [...]
bread rolls known as ‘KORNSPITZ’, perceive that word sign as the common name for that product and are not, therefore, aware of the fact that some of those bread rolls have been made using a baking mix supplied under the trade mark KORNSPITZ by a particular undertaking.

24 
[...]
that perception on the part of end users is due, in particular, to the fact that the sellers of the bread rolls made using that mix do not generally inform their customers that the sign ‘KORNSPITZ’ has been registered as a trade mark.

25
[...]
the sellers of that finished product do not generally, at the time of sale, offer their customers assistance which includes an indication of the origin of the various goods for sale.

26 Clearly
[...] the trade mark KORNSPITZ does not, in the trade in respect of the bread rolls known as ‘KORNSPITZ’, fulfil its essential function as an indication of origin and, consequently, it is liable to revocation in so far as it is registered for that finished product if the loss of its distinctive character in respect of that product is attributable to acts or inactivity of the proprietor of that trade mark (C-409/12 at paras 19-26, emphasis added).
 
The CJEU then goes on to assess whether the loss of distinctive character is attributable to the owner of the brand and finds that an insufficient insistence on the use of the term 'kornspitz' as a trade mark by bakers and foodstuffs distributors would be sufficient to trigger the revocation of the trade mark (paras 31-36). Indeed, the CJEU cleary stressed that
in a case [...] in which the sellers of the product made using the material supplied by the proprietor of the trade mark do not generally inform their customers that the sign used to designate the product in question has been registered as a trade mark and thus contribute to the transformation of that trade mark into the common name, that proprietor’s failure to take any initiative which may encourage those sellers to make more use of that mark may be classified as inactivity within the meaning of Article 12(2)(a) of Directive 2008/95 (C-409/12 at para 34, emphasis added).
Therefore, the standards of 'duty of care' or 'vigilance' applicable to trade mark owners are high and they will always be required to take (appropriate) positive steps to protect the distinctive character of the signs that they use to brand their products [for a law and economics discussion on the requirement of distinctiveness and the ensuing 'trade mark policying' obligations imposed on their owners, see Landes & Posner, 'Trademark Law: An Economic Perspective' (1987) 30 J.L. & Econ. 265, 287-288].

lunes, 10 de marzo de 2014

US GAO reports on test commercial items program for #publicprocurement


In a recently published report, the US Government Accountability Office (GAO) assessed the status of a test program for the acquisition of commercial items and services--i.e. are those that generally available in the commercial marketplace in contrast with items developed to meet specific governmental requirements.
 
The report is interesting, and it highlights that US federal agencies are conducting around 2% of their procurement through this program and that, overall, the "test program reduced contracting lead time and administrative burdens and generally did not incur additional risks above those on other federal acquisition efforts for those contracts GAO reviewed." Therefore, there seems to be scope for further use of the commercial items acquisition program.
 
Importantly too, GAO warns that, however, a significant number of these contracts were "awarded noncompetitively [and that, w]hile these awards were justified and approved in accordance with federal regulations when required, GAO and others have found that noncompetitive contracting poses risks of not getting the best value because these awards lack a direct market mechanism to help establish pricing." Consequently, GAO has recommended the interested federal agencies to look in more detail into the use of the program and to take measures to ensure that thorough market research is conducted before a commercial items contract is awarded noncompetitively.
 
In my view, the emphasis that GAO places on the collection and analysis of data in order to determine the benefits and success of the commercial items program offers valuable insights to procurement regulators in other jurisdictions--and, particularly, in the EU, where Member States should start considering procurement reform in view of the imminent publication of the new Directives in the Official Journal.

viernes, 7 de marzo de 2014

CJEU clearly indicates total lack of will to effectively become EU's constitutional court (C-206/13)

In its Judgment of 6 March 2014 in case C-206/13 Siragusa, the Court of Justice of the EU has continued developing its case law on the lack of applicability / jurisdiction to interpret the Charter of Fundamental Rights of the EU (CFREU) in purely domestic situations (which it had, amongst other instances, already indicated in Romeo).
In my view, the approach adopted by the CJEU is prone to create potential situations of reverse discrimination and may end up creating multiple (and possibly conflicting) standards of protection of fundamental rights in the EU with significant constitutional implications.
 
In the case at hand, the CJEU was presented with a question on the interpretation of the right to property recognised in article 17 CFREU and, more specifically, on whether it could be constructed as a limit against certain landscape protection rules applicable in Italy. The issue was raised by an Italian court hearing a dispute between an Italian citizen and an Italian public authority. Despite the efforts in trying to connect the situation with the (indirect) application of EU environmental law, the CJEU was not persuaded that there was a sufficient connection and, therefore, rejected to provide a substantive interpretation. The main argument of the CJEU was indeed that
30 [...] there is nothing to suggest that the provisions of Legislative Decree [...] fall within the scope of EU law. Those provisions do not implement rules of EU law [...].

31 It is also important to consider the objective of protecting fundamental rights in EU law, which is to ensure that those rights are not infringed in areas of EU activity, whether through action at EU level or through the implementation of EU law by the Member States.

32 The reason for pursuing that objective is the need to avoid a situation in which the level of protection of fundamental rights varies according to the national law involved in such a way as to undermine the unity, primacy and effectiveness of EU law (see, to that effect, Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125, paragraph 3, and Case C‑399/11 Melloni [2013] ECR, paragraph 60). However, there is nothing in the order for reference to suggest that any such risk is involved in the case before the referring court.

33 It follows from all the foregoing that it has not been established that the Court has jurisdiction to interpret Article 17 of the Charter (see, to that effect, Case C‑245/09 Omalet [2010] ECR I‑13771, paragraph 18; see also the Orders in Case C‑457/09 Chartry [2011] ECR I‑819, paragraphs 25 and 26; Case C‑134/12 Corpul Naţional al Poliţiştilor [2012] ECR, paragraph 15; Case C‑498/12 Pedone [2013] ECR, paragraph 15; and Case C‑371/13 SC Schuster & Co Ecologic [2013] ECR, paragraph 18)
(C-206/13 at paras 30-33, emphasis added).
In my view, this line of reasoning (acknowledgedly, rather in line with art 51 CFREU and art 6 TEU) is clearly problematic. To begin with, because it clearly disconnects (implicitly, at least) the protection of the CFREU rights from EU citizenship (art 20 TFEU, coupled with the general prohibition of discrimination on the grounds of nationality in art 18 TFEU). The CJEU has clearly considered it insufficient that EU citizens can be granted different levels of protection of their CFREU rights at domestic level as a result of the application of the domestic laws as sufficient justification for intervention (i.e. to assume jurisdiction and provide legal interpretation). By restricting the goal of a common level of protection of CFREU rights to cases in which 'the unity, primacy and effectiveness of EU law' is affected and excluding its competence, the CJEU seems to forget that the CFREU is in itself EU law and, consequently, that it should be afforded the same treatment as the other Treaty provisions.
 
Secondly, the CJEU is laying down too strong foundations for unresolved problems of reverse discrimination. If the claimant in Siragusa had not been Italian and, consequently, a (very loose) connection to free movement rights could be established, the CJEU may have been willing to assess the intervention by the Italian State on the property of a (moving) EU citizen under a different light (worse still, that challenge could be easier for corporate claimants than for individuals, at least if they do not engage in an economic activity, since 'corporate citizens' could also be potentially protected by freedom of establishment).
 
In such a case, the trigger for the application of the CFREU would be equally unrelated to the content of the rights of the CFREU themselves and, sometimes, the trigger for CJEU intervention may simply result from the fact that the EU citizen affected exercised or not free movement rights--which, in my view, continues to create an unjustifiable discrimination between moving (proper) EU citizens and non-moving (unaware) EU citizens that can only continue to erode the potential development of the EU.
 
 
Finally, this line of reasoning may end up creating a situation where the (constitutional) courts of the Member States may be obliged to enforce at the same time conflicting standards of substantive protection for a given fundamental right, depending on the 'sorce of law' that controls it in a given situation. And that will surely be difficult to understand. How could 'my' right to private property be different under 'my' domestic constitutional law protection or under 'my' CFREU protection, depending on factors unrelated to me, my property, or the rules (primarily) applicable? Surely the compatibility between the CFREU and competing (superior) standards of protection (those derived from the European Convention on Human Rights) have (somehow) been ironed out in art 52(3) CFREU. However, the situation is not the same with (lower-ranking?) domestic standards of protection [art 52(4) CFREU is clearly insufficient for that task] and, in my view, the CJEU approach is not helpful in that regard either.
 
Therefore, the continued rejection of its role as a constitutional court of the EU and the increasing restriction of the scope of application of the CFREU in which the CJEU is engaged are, in my view, undesirable developments in EU law.

martes, 11 de febrero de 2014

A first reaction to AG Kokott's KONE Opinion (C-557/12)

AG Kokott's Opinion of 30 January 2014 in case C-557/12 KONE is generating significant debate (see the very interesting criticism in EUTopia) as it deals with a very complicated and controversial issue that could either spur or restrict the scope of damages actions following on from cartel violations (and, more generally, competition law infringements).
 
The case is concerned with the possibility to claim so called "umbrella damages"--that is, as per the description provided by the referring Austrian Supreme Court, whether "any person may claim from members of a cartel damages also for the loss which he has been caused by a person not party to the cartel who, benefiting from the protection of the increased market prices, raises his own prices for his products more than he would have done without the cartel (umbrella pricing)". In my view, the Opinion of AG Kokott deserves some criticism in its support for such claims.
 
As a preliminary point, I think that it is interesting to see how AG Kokott redrafted the issue, and considered that the case concerns "umbrella pricing [which takes place] when undertakings that are not themselves party to a cartel, benefiting from the protection of the cartel’s practices (operating ‘under the cartel’s umbrella’, so to speak), knowingly or unknowingly set their own prices higher than they would otherwise have been able to under competitive conditions. Does European Union law require that customers of undertakings not party to the cartel should be able to claim compensation for the inflated prices charged by those undertakings from the members of the cartel before the national courts? Or, conversely, may such an obligation to award compensation be excluded in national civil law on the ground that the loss suffered is indirect and too remote?" (emphasis added).
 
Already at this stage, I would submit that the framework for analysis is flawed. If the "outsider" to the cartel is fully innocent (i.e. is not aware of the existence of the cartel), its behaviour is indeed reflective of competitive conditions (distorted, but still competitive) and therefore that specific increase in prices should not be taken into account for the purposes of the design of competition law rules and their enforcement.
 
On the contrary, if the "outsider" is not innocent (i.e. knows about the cartel), then the increase in prices makes it guilty of at least a (unilateral?) concerted practice by adhering to the cartelised mechanics of the market and, consequently, the damages derived from the raise in prices should be borne by such "outsider" as the infringer of competition rules--and only by the "insiders" in the cartel if they then incorporate the "outsider's" behaviour as part of the distorted market mechanism.
 
In my view, any extension of this general framework would probably be too remote in terms of causality and the allowance for "umbrella damages" claims would create a system of excessive private antitrust enforcement which net contribution to aggregate welfare would be doubtful [more generally, on the doubtful desirability of an overgrowth of damages claims based on indirect or disperse competition damages, see Marcos and Sánchez Graells, "Towards a European Tort Law? Damages Actions for Breach of the EC Antitrust Rules: Harmonising Tort Law Through the Back Door?": http://ssrn.com/abstract=1028963].
 
For these reasons, I generally disagree with her Opinion on its substance. However, more detailed criticism will require some further thoughts.

martes, 4 de febrero de 2014

Coauthored paper with @pacomarcos: “Human Rights” Protection for Corporate Antitrust Defendants: Are We Not Going Overboard?

There seems to be a clear trend of increased protection of ‘corporate human rights’ and, more specifically, due process rights (or procedural fairness) in the field of enforcement of competition law. To a large extent, that trend is based on the uncritical extension of human rights protection to corporate defendants by a process of simple assimilation of corporate and individual defendants.
 
This new coauthored paper briefly explores the rationale behind the creation of due process rights when the individual is the beneficiary of such protection. It then goes on to critically assess if the same need exists for the extension of those protections to corporate defendants, particularly in the field of competition law or antitrust enforcement. It concludes with some warnings concerning the diminishing effectiveness of competition law prohibitions and of human law protection that can result from an overstretched conception of due process protection in this area of EU economic law.

From a substantive perspective, this paper submits that the extension of human rights to corporations cannot be uncritical and should not be completely symmetrical to that for human beings; but that it rather needs to be necessarily adapted to their circumstances. To put it more bluntly, it is suggested that in the field of the enforcement of economic law, administrative law procedures should be sound and there should clearly be a strong system of judicial review in place, but corporations should not have access to broader constitutional or human rights protections and any perceived shortcomings in the design and application of those procedures should remain within the sphere of regulatory reform.
 
Sánchez Graells, Albert and Marcos, Francisco, “Human Rights” Protection for Corporate Antitrust Defendants: Are We Not Going Overboard? (February 2, 2014). University of Leicester School of Law Research Paper No. 14-04. Available at SSRN: http://ssrn.com/abstract=2389715.

New Paper: A critical assessment of the new health care procurement rules in the UK

The recently adopted UK National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 include an interesting (and somehow unsettling) provision authorising anti-competitive behaviour in the commissioning of health care services by the National Health Service (NHS), if that is in the (best) interest of health care users.
As briefly discussed here, generally, it seems that under the new public procurement and competition rules applicable to the NHS, whatever is considered in the “interest of patients” could trump pro-competitive requirements and allow the commissioning entity to engage in distortions of competition (either directly, or by facilitating anti-competitive behaviour by tenderers and service providers)—as long as a sort of qualitative cost-benefit analysis shows that net advantages derived from the anti-competitive procurement activity. The apparent oddity of such general “authorisation” for public buyers to engage in anti-competitive procurement of health care services deserves some careful analysis, which this new paper carries out.

The
paper assesses Regulation 10 of the NHS Procurement, Patient Choice and Competition Regulations 2013 and the substantive guidance published by the UK's health care sector regulator (Monitor) from the perspective of EU economic law (and, more specifically, in connection to public procurement and competition rules). The paper claims that there is a prima facie potential incompatibility between Regulation 10 of the 2013 NHS Procurement, Patient Choice and Competition Regulations and both EU competition law and public procurement law—which are, in principle, opposed to any anti-competitive or competition restrictive behaviour in the conduct of public procurement activities. Consequently, there is a need for an EU law compliant, restrictive interpretation and enforcement of the provision—at least where there is a cross border effect on competition and/or a cross border interest in tendering for the health care contracts, which triggers the application of both EU competition law and public procurement law.
 
Sánchez Graells, Albert, New Rules For Health Care Procurement in the UK. A Critical Assessment from the Perspective of EU Economic Law (February 2, 2014). University of Leicester School of Law Research Paper No. 14-03. Available at SSRN: http://ssrn.com/abstract=2389719.

martes, 28 de enero de 2014

AG Mengozzi on extension of "in-house" to "public house" procurement exception (C-15/13)

In his Opinion of 23 January 2014 in case C-15/13 Datenlotsen Informationssysteme (not available in English), Advocate General Mengozzi advocated for an extension of the "in-house" public procurement exception beyond its current boundaries under the so-called Teckal doctrine.
 
The AG proposed that the CJEU declares that
A contract concerned with the provision of services which beneficiary, being a contracting authority within the meaning of Directive 2004/18, does not exercise over the entity that provides the services a control similar to that exercised over its own services, but where both entities are subject to the control of an institution that can be classified as a contracting entity within the meaning of that directive, and where both the recipient of the services and the provider thereof conduct the essential part of their activities for the institution that controls them, is a public contract to the extent that it is a written contract between the contractor and the recipient of the services, always provided that such contract has an object which would qualify as the provision of services within the meaning of the directive.
Such a contract is not entitled to an exception to the application of procurement procedures under the EU rules on public procurement unless the controlling entity exercises in an exclusive manner a control similar to that exercised over its own departments both on the beneficiary of the services and on the providing entity, and where both of those entities carry out the essential part of their activities for that controlling entity, or in the case where that contract meets all the requirements for the the exception for public-public cooperation (own translation from Spanish and French).
Therefore, AG Mengozzi suggests a test whereby, if all of the entities involved in the contract would independently qualify for the "in-house" exception in case they were engaged in a vertical contract with the ultimate controlling entity, they can then also benefit from the "public house" exception in their horizontal contractual relationships.
 
If the CJEU follows the approach suggested by AG Mengozzi, it will be extending the "in-house" exception beyond its current limits (where a direct control is required on the part of the contracting entity over the awardee of the contract) and creating a "public house" exception in public procurement--which was anticipated and discussed by Dario Casalini, 'Beyond EU Law: the New "Public House"', in Risvig Hansen et al (eds), EU Procurement Directives--modernisation, growth & innovation (Copenhagen, DJOF, 2012) 151-178.
 
It is also interesting to stress that such "public house" exception has also been created for the future by the new Public Procurement Directive (bound to be transposed by early 2016), which article 12(2) frames it in slightly different terms, indicating that the "in-house" exception:
also applies where a controlled legal person which is a contracting authority awards a contract to its controlling contracting authority, or to another legal person controlled by the same contracting authority, provided that there is no direct private capital participation in the legal person being awarded the public contract with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person (emphasis added).
It is important to stress that the requirements concerning private capital participation deviate from the standard "in-house" exception and (if adopted) from the "public house" exception, which may create some interpretative difficulties in the future. For now, I guess we need to wait and first see if the CJEU supports the "public house" exception as a first step, before worrying about the confines of a (private)-public house exception...

lunes, 27 de enero de 2014

CJEU consolidates functional approach to customs nomenclature interpretation (C-380/12)

In its Judgment of 23 January 2014 in case C-380/12 X, the Court of Justice of the European Union (CJEU) was presented with a request for a preliminary reference on the proper interpretation of certain headings of the applicable customs nomenclature.
 
The case is riddled with technical (biochemical) complications but, in my best understanding of it, the key issues focussed on whether certain washing processes altered or not the molecular structure of a specific type of earth used to decolour edible oils. In the end, the dispute was concerned with a reclassification of that type of (washed) decolourising earth from a heading applicable to natural clays [which included those that had been washed (even with chemical substances eliminating the impurities, without changing the structure of the product)] to a heading applicable to activated natural mineral products (such as activated carbons, which structure has been altered). The impact of such a reclassification based on the alteration of the natural molecular structure of the product was the application of a higher tariff of 5.7% in customs duties. And, consequently, it was litigated.
 
In its Judgment, the CJEU follows its standard approach to this type of (fiendish) issue and makes it clear that it is for domestic courts to reach the final decision on nomenclature classification, but it aims to provide some general criteria to guide their decision.
 
In my view, the indication towards the need for a functional approach, based on the intended use of the products (rather than simply following a strict consideration of the production or treatment processes) seems worth highlighting. Indeed, in its Judgment, the CJEU indicated that:
39 [...] the intended use of a product may also constitute an objective criterion for classification if it is inherent to the product, and that inherent character must be capable of being assessed on the basis of the product’s objective characteristics and properties (see [Case C-183/06 RUMA [2007] ECR I‑1559], paragraph 36; Case C‑123/09 Roeckl Sporthandschuhe [2010] ECR I‑4065, paragraph 28; and [C-568/11 Agroferm [2013] ECR I-0000], paragraph 41).
40 It is apparent from the order for reference that the treatment applied to the products at issue in the main proceedings, batches of decolourising earth, consists in effecting a structural replacement of calcium ions with hydrogen ions in order to increase their adsorption capacity, which makes them suitable for purifying and decolourising edible oils. It is, furthermore, apparent from the observations put forward by the Commission at the hearing – without being contradicted on the point – that that treatment rules out the possibility of decolourising earth for purposes other than the purification and decolouration of edible oils (C-380/12, paras 39-40, emphasis added).
That does not mean that the issue of the actual change of the molecular structure of the product becomes irrelevant. As the CJEU also indicated:
46 [...] the treatment at issue in the main proceedings involves the use of chemical substances, more specifically sulphuric acid, which it is nevertheless for the referring court to verify. Accordingly, assuming that treatment does entail the elimination of impurities, which it is also for the national court to verify in the light of the answer to the first question referred, the decisive criterion for determining whether, under Note 1 to Chapter 25 of the CN, the products at issue must remain classified under CN tariff heading 2508, is whether their structure is changed.
48 The [International Convention on the Harmonised Commodity Description and Coding System, concluded at Brussels on 14 June 1983] Explanatory Notes, [...] despite their lack of binding force, are an important means of ensuring the uniform application of the Common Customs Tariff and, as such, may be regarded as useful aids to its interpretation (Case C‑173/08 Kloosterboer Services [2009] ECR I-5347, paragraph 25, and Agroferm, paragraph 28).
49 In that regard, the HS Explanatory Notes relating to heading 3802 state that ‘[c]arbon and mineral substances are said to be activated when their superficial structure has been modified by appropriate treatment (with heat, chemicals, etc.) in order to make them suitable for certain purposes, such as decolourising, gas or moisture adsorption, catalysis, ion-exchange or filtering’. Those same notes state that heading 3802 does not cover ‘[n]aturally active mineral products (e.g., fuller’s earth), which have not undergone any treatment modifying their superficial structure (Chapter 25)’.
50 Consequently, as rightly pointed out by the Commission, Note 1 to Chapter 25 of the CN, interpreted in the light of the HS Explanatory Notes relating to heading 3802, rules out the possibility that products which have undergone treatment modifying their superficial structure may be classified under CN tariff heading 2508, with the result that they must be classified under CN tariff heading 3802 (C-380/12, paras 46-50, emphasis added).
 
In my view, and if I understood the (technical) reasoning properly, the emphasis on the functional (i.e. intended-use) approach can help overcome truly difficult technical considerations (such as to what extent has the structure actually been modified or not), because the ultimate objective of the treatment given to the decolourising earths was to increase their decolourising properties and made them useless otherwise. Consequently, the CJEU seems to be advocating (in rather convoluted and implicit terms) for an application of the same nomenclature classification to products which are aimed at the same use (i.e., truly competing products).
 
If that is correct, this seems the right approach in order to minimise competitive distortions resulting from the interpretation and application of customs rules. Hence, I think that the functional approach that the CJEU has continued to consolidate in its Judgment in X (decolourising earths) should be welcome, unless I have gotten lost at molecular level disquisitions...