Analysis: “Under Article 258 TFEU the burden of proof rests with the Commission, which may not rely on any presumption” by Małgorzata Cyndecka
On 14 January 2021, the Court of Justice handed down an interesting and, in terms of the result, rather rare judgment under Article 258 TFEU. In Commission v Italy (C-63/19), the Court followed the Opinion of Advocate General Richard de la Tour and dismissed the Commission’s action that Italy failed to fulfil its obligations under Articles 4 and 19 of the Energy Products and Electricity Taxation Directive (2003/96/EC) by applying a reduction in the rates of excise duty on petrol and diesel used as motor fuel, as provided for in the regional legislation adopted by the Autonomous Region of Friuli Venezia Giulia, when those products are sold to residents of that Region. As the Court concluded, the Commission had not discharged the burden of proof which it bears in the context of an action for failure to fulfil obligations.
As guardian of the Treaties, the Commission has the duty to ensure the effective application of EU law (Article 17 TEU). In this respect, the general infringement procedure is provided for in Articles 258 and 260 TFEU. Under Article 258 TFEU, which was at issue in the present case, the Commission may obtain a declaration that a Member State is in breach of EU law. Interestingly, only a fraction of cases being subject to the infringement proceedings results in referrals to the Court. Most of them are closed at the pre-litigation stage. As provided in the Commission’s Annual Report on Monitoring the Application of the European Law for 2019, there were 1564 infringement cases open at the end of 2019, while only 31 cases were referred to the Court under Article 258 TFEU. One of those cases was Commission v Italy. Unlike in most Article 258 TFEU cases, the Court ruled in the Member State’s favour.
The above mentioned Directive 2003/96 establishes minimum excise rates for energy products which Member States must apply in order to ensure the proper functioning of the internal market. Any possible exceptions are provided for by that Directive. Importantly, when a Member State intends to apply a reduced level of taxation at regional level, it must request an authorisation from the Council as stipulated in Article 19 of that Directive.
As the Commission recalled by referring to Commission v Ireland (C‑55/12), one of the forms in which the Member States may give effect to exemptions or reductions in the level of taxation is by ‘refunding all or part of the amount of taxation’, as provided in Article 6(c) of Directive 2003/96. In the Commission’s view, the Italian scheme fell within that provision while Italy did not request its authorisation. The dispute before the Court concerned the question whether the Commission proved to the requisite legal standard that this was the case.
As the Court clarified, the present scheme could be regarded as a ‘refund’ if the amount paid under that scheme derived from the amounts of excise duty levied by Italy or, at least, that the amount paid had a real link with the excise duties levied by the state and, therefore, that the contribution scheme was intended to neutralise or reduce excise duties on fuel.
Yet, the scheme was financed by the general budget of the Region and not by the share of excise duties on fuel transferred by the state to that budget. The sums paid by way of that transfer were integrated in the general budget of the Region and lost all individualisation. Moreover, the Commission neither claimed nor established the existence of an objective interference between the financial source of the contribution scheme and the revenue from the collection, by the state, of excise duties on fuel, part of which is then transferred into the general budget of the Region. Furthermore, the existence of a link between the amount paid under that contribution and the amounts of excise duty levied was questioned by the fact that the contribution benefited the Region’s residents also when they bought fuel in other regions of Italy.
As for establishing that the contribution scheme constituted a neutralisation or a reduction in excise duty on fuel, the Commission merely relied on a presumption. As the Advocate General noted, having considered the arguments provided by Italy supported by Spain, it was impossible to conclude with certainty that the reduction in fuel prices amounted to a reduction in the excise duty.
Lastly, the Commission’s references to a previously authorised Italian scheme and other national schemes that had certain similarities with the contribution scheme at issue approved by the Council on the basis of Article 19 of Directive 2003/96 could not prejudge the assessment in the present case.
The judgment reiterates that the Commission must provide sufficient evidence and may not rely on presumptions if it intends to demonstrate failure to fulfil obligations under Article 258 TFEU. In this case, however, it was the Member State that provided detailed arguments that successfully questioned the Commission’s findings.
Dr Małgorzata Cyndecka is an Associate Professor in the Faculty of Law at the University of Bergen. She is also Associate Editor of European State Aid Law Quarterly.