Last week the ECJ delivered an interesting judgment on the authortiy of The European Commission to submit written comments during domestic proceedings when competition law is involved. The ECJ found that the European Commission is allowed to intervene in a Dutch tax proceeding as Amicus Curiae.
The background of this case are the penalties imposed by the Commission in the Plasterboard cartel case on several companies. One of the companies (X KG) concerned, passed on part of the fine to one of its Netherlands subsidiaries. The Dutch subsidiary (X BV) tried to receive a corporation tax deduction for the amount of the – passed-on – fine. The Netherlands tax authority dismissed this deduction and X BV subsequently brought an action before the Haarlem District Court. By judgment of 22 May 2006, that court held that the fine was partially deductible (for the part of the penalty that was meant to retrieve advantages the company had received). The tax authority appealed to the Amsterdam Court of Appeal.
After having been informed about the proceedings by the press and the Dutch competition authority, the Commission notified the Court of Appeal that it wished to intervene as amicus curiae pursuant to Article 15(3) of Regulation No 1/2003 and Article 89h of the Dutch Competition Act. The Court of Appeal decided to stay proceedings and refer to the Court for a preliminary ruling.
The Amsterdam Court of Appeal had questions about the scope of art. 15 Regulation 1/2003. From the text of the provision it follows that for the authority of the Commission to act as Amicus Curiae is sufficient that the case which is pending before the national court contains issues relating to the application of Article 81 or Article 82 of the Treaty. However, the court of appeal also noted that it seems to follow from the preamble of Regulation 1/2003 and the Commission Notice on the co-operation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC, that article 15 is only applicable in the situation where articles 81 and 82 EC are directly applied by the national court (i.e. in real competition cases).
The ECJ found that the option for the Commission, acting on its own initiative, to submit written observations to courts of the Member States is subject to the sole condition that the coherent application of Articles 81 EC or 82 EC so requires. According to the ECJ that condition may be fulfilled even if the proceedings concerned do not pertain to issues relating to the application of Article 81 or Article 82 of the Treaty. In this respect the ECJ makes clear that Community law has established a comprehensive system for monitoring cartels and abuses of dominant positions and sanctions. Those articles must be understood as forming part of a comprehensive set of provisions designed to prohibit and punish anti-competitive practices.
The purpose of Article 83 EC – on which basis the Commission can impose fines – is therefore inter alia to ensure the effective supervision of cartels and abuses of dominant positions. The ECJ in this respect also refers to the Advocate General who stated in his Opinion that there is an intrinsic link between the fines and the application of Articles 81 and 82 EC. The effectiveness of the penalties imposed by the national or Community competition authorities on the basis of Article 83(2)(a) EC is therefore a condition for the coherent application of Articles 81 EC and 82 EC.
In the circumstances of the action in the main proceedings, it is according to the ECJ quite clear that the outcome of the dispute relating to the tax deductibility of part of a fine imposed by the Commission is capable of impairing the effectiveness of the penalty imposed by the Community competition authority. The ECJ states that:
"The effectiveness of the Commission’s decision by which it imposed a fine on a company might be significantly reduced if the company concerned, or at least a company linked to that company, were allowed to deduct fully or in part the amount of that fine from the amount of its taxable profits, since such a possibility would have the effect of offsetting the burden of that fine with a reduction of the tax burden."
From this last statement it follows that the ECJ is not in favour of a tax deductibility of cartel fines and although the preliminary referral was only focussing on the Amicus Curiae issue it is clear how the judgment of the Amsterdam Court of Appeal must be in order not to infringe community law. In this way it seems to me that there is no real need anymore for the Commission to intervene as Amicus Curiae in the pending tax proceedings.
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