Op-Ed: “Calculating toll rates for heavy goods vehicles under EU law” by Alejandro García Heredia
In relation to charges on vehicles, one of the few areas that have been harmonised relates to tolls or fees that heavy goods vehicles must pay for the use of motorways. The application of tolls is not mandatory for Member States, but those that wish to levy such charges must follow the rules laid down by Directive 1999/62/EC on the charging of heavy goods vehicles for the use of certain infrastructure. On Wednesday 28 October 2020, the Court of Justice of the European Union (CJEU) rendered its judgment in BY, CZ v Bundesrepublik Deutschland (C-321/19), concerning the determination of toll rates applied to heavy goods vehicles for the use of German motorways. This case gives the CJEU the opportunity to rule on the determination of toll rates under Directive 1999/62 and it is therefore particularly important for all carriers using the trans-European road network.
The applicants (BY, CZ) are operators of a Polish haulage company that carried out trips, especially in Germany, over the period from 1 January 2010 to 18 July 2011. They claimed that excessively high costs were used as a basis for calculating the toll rate applied, contrary to EU law. The main provision is Article 7(9) of Directive 1999/62 (as amended by Directive 2006/38, the applicable version in the main proceedings), which contains detailed criteria regarding the toll-relevant costs and provides for a cost overrun prohibition:
‘Tolls shall be based on the principle of the recovery of infrastructure costs only. Specifically, the weighted average tolls shall be related to the construction costs and the costs of operating, maintaining and developing the infrastructure network concerned. The weighted average tolls may also include a return on capital or profit margin based on market conditions.’
The CJEU discusses three issues on the interpretation of this provision. Firstly, the calculation of toll rates under the Directive is dealt with. This issue involves two main sub-questions: (i) whether traffic police costs fall within the concept of ‘costs of operating’ (as a kind of infrastructure cost), and (ii) whether a minor overrun of infrastructure costs infringes the cost overrun prohibition. Secondly, the CJEU rules on the direct effect of Article 7(9) of the Directive, namely whether an individual may rely on this provision before national courts, against a Member State for its failure to comply with that provision or if it has failed to transpose it correctly. Thirdly, the CJEU discusses whether an excessive toll rate may be justified ex post by a new calculation of the infrastructure costs that is produced in the context of (national) judicial proceedings.
Traffic police costs and the overrun prohibition
The main issue of the case is whether the toll rates applied for the use of German motorways are excessive and, therefore, whether they are in breach of the cost overrun prohibition in Article 7(9) of the Directive. In this respect, the applicants invoke a calculation defect concerning the inclusion of traffic police costs within the toll rate applied. The issue arises as to whether traffic police costs may be regarded as costs of operating the infrastructure network within the meaning of Article 7(9) of the Directive. Furthermore, it is also discussed whether a minor overrun of the infrastructure costs, which results from an error in calculating the land acquisition interest, may also be considered as an infringement of the cost overrun prohibition. Due to these calculation errors, the toll rate is 6% higher (3.8% is due to the consideration of traffic police costs and 2.2% to an overrun of the infrastructure costs).
First, the CJEU confirms that traffic police costs cannot be included when calculating tolls for heavy good vehicles since these costs are not linked to infrastructure costs. The CJEU, following the Advocate General, points out that police activities are the responsibility of the State acting in the exercise of its public powers, and not as operator of the road infrastructure. Therefore, costs related to traffic police do not fall within the concept of ‘costs of operating’ within the meaning of Article 7(9) of the Directive and cannot be taken into account when calculating toll rates.
Second, with regard to the calculation of the infrastructure costs, the CJEU clarifies that even a minor cost overrun is sufficient to infringe the overrun prohibition of Article 7(9) of the Directive. The CJEU stresses again that tolls are to be based on the principle of the recovery of infrastructure costs only and therefore weighted average tolls must take into account only the ‘infrastructure costs’ as expressly set out in that article. This means that toll rates must be set at a level which does not exceed the recovery of infrastructure costs.
The CJEU clarifies that Article 7(9) of Directive 1999/62 has direct effect. The CJEU concludes that Article 7(9) imposes on Member States which introduce or maintain tolls a precise and unconditional obligation to determine the level of tolls taking into account ‘infrastructure costs’ only. As already pointed out on EU Law Live, the CJEU applied the usual direct effect test criteria in this case, and found that the Member State’s discretion did not pose an obstacle to this conclusion. Therefore, individuals may commence legal proceedings based directly on Article 7(9) of the Directive.
Ex post calculation proceedings
In this case, the CJEU also analyses whether an excessive toll rate may be justified ex post by a new calculation of the infrastructure costs that is produced in the context of judicial proceedings. The issue is whether national authorities can make an ex post calculation of toll rates to be based on the actual costs incurred and the toll revenue actually collected (not on the assumptions made in this regard in the original predictive calculation). The impact of this new accounting is uncertain, since Directive 1999/62 contains hardly any clarifications in this respect. It must be stressed that an ex post calculation of infrastructure costs may give rise to higher costs and therefore to higher tolls.
According to German law an ex post calculation is permitted in certain circumstances, but it could result in the amounts claimed by the appellants not being reimbursed. Under this approach, national courts might deny the reimbursement of tolls collected contrary to the EU law when an ex post calculation results in higher toll rates. This would somehow lead to an offsetting of tolls. For this reason, the CJEU concludes that Directive 1999/92 precludes an excessive toll rate from being justified ex post by a new calculation of the infrastructure costs that is produced in the context of judicial proceedings.
In this respect, the CJEU interprets the Directive in the light of Commission v Austria (C-205/98, paragraph 138). In that case the CJEU held that increasing tolls cannot be justified by producing a new method of calculating the costs, since, first, it had not explained how that method was more appropriate and, second, the adjustment of toll rates should be made after the calculation justifying it. The CJEU holds that these considerations are also applicable to this case, since the justification for toll rates that are considered excessive results not from the ex post application of a new calculation methodology but from the updating, in the context of judicial proceedings, of the infrastructure costs originally taken into account.
Pursuant to this case, carriers using the trans-European road network may claim the reimbursement of toll amounts considered to be excessive under Article 7(9) of Directive 1999/62. This provision has direct effect and prohibits inclusion of traffic police costs when calculating toll rates. Therefore, it is expected that this ruling could lead to several toll reimbursement actions brought by carriers using German motorways, since the CJEU has refused Germany’s request for the temporal effects of its judgment to be limited. Similarly, this ruling is likely to lead to a review of the tolls levied in other Member States, to the extent that if such tolls are deemed to be excessive carriers may claim the reimbursement.
Furthermore, with this judgment, the CJEU also prevents excessive toll rates from being justified, in the context of judicial proceedings, by way of an ex post calculation of infrastructure costs. However, it must be noted that this judgment does not prevent a Member State from making ex post calculations of tolls in any case, but only when such calculations are made to justify tolls that have been collected in breach of the Directive.
Therefore, in other circumstances we could understand that the Directive allows for ex-post calculations as long as the criteria of the CJEU case law are respected (Commission v Austria, C-205/98, paragraph 138). In this sense, it would be appropriate to consider the effects of these new ex-post calculations in a future amendment of the Directive.
Finally, it must be noted that under the new version of this Directive (as amended by Directive 2011/76), tolls may comprise not only an infrastructure charge but also an external-cost charge (the cost of air pollution and of noise pollution). External costs have its origin in the ‘Greening Transport Package’ adopted by the European Commission in 2008 and aim to cover the polluter-pays principle. The ‘external-cost charge’ is levied for the purpose of recovering the costs incurred in a Member State related to traffic-based air pollution and/or traffic-based noise pollution. With this new version of the Directive, toll rates can take into account, in addition to infrastructure costs, the so-called external costs.
Alejandro García Heredia is a Professor of Tax Law at the University of Cádiz, Spain.