Netherlands / Supreme Court / 10/02777 Custom duties

Key facts of the case:

The interested party had to pay custom duties based on an (additional) tax demand of 28 April 2005 for the import of among other things, party tents. The Inland Revenue Service confirmed the demand, after the interested party had asked for a review. The District Court in Haarlem dismissed the request for a judicial review. The interested party appealed to the Court of Appeal. The Court of Appeal confirmed the judgement of the District Court. The Court of Appeal held that the Inland Revenue Service, in view of a judgement of the Court of Justice of the European Communities (hereinafter: ECJ) of 18 December 2008 in case C-349/07 (Sopropé) that the principle of respect for the rights of defence was violated, when the) interested party addressed was not placed in a position in which he could effectively make known his views about the elements on which the administration based its decision prior to the time that the tax demand was issued. However, he was not adversely affected, partly because he could still lodge a request for a review and a further request for judicial review at the District Court. The question is whether the principle of respect for the rights of the defence is a principle of EU law that has direct effect. If so, the question is whether this right has been violated, now that the interested party was not heard before the issue of the (additional) tax demand. The principle of respect for the right of defence is regarded, on the basis of the case law of the ECJ, as a principle of European law. See article 41 of the Charter on Fundamental rights of the EU, but this article is only addressed to the institutions, bodies, offices and agencies of the Union. Moreover, this right is not absolute. If the Inland Revenue Service violated the respect for the right of defence, laid down in EU law, the question is which legal consequences this should have. Should they be determined by national law? If not: which circumstances should the national court take into account when it determines the legal consequences, more in particular may it take into account that the procedure, without the violation by the administration of the principle of respect for the rights of defence, laid down in European law, would have had another outcome?

Paragraphs referring to EU Charter: 

 

3.4.2. Neither the Community Customs Code (hereinafter: the CCC), nor Dutch law, provide procedural stipulations which oblige the customs authorities, before they issue an announcement in the sense of Article 221, subsection 1 of the CCC, to make it possible for the customs debtor to make clear his point of view as to the factors on which the claim of customs duties is based. Due to this, the question arises whether the principle, based on European law, applied by the Court, about the respect of the right of defence by the administration can be applied directly by the national court in sofar as this principles implies a duty of the administration to give the person addressed by a decision to his disadvantage which the administration intends to take against him, the opportunity, prior to this decision, to give his point of view about the factors on which the decision is based. This question must be answered before the allegations in claim II in this case can be judged. Consideration 38 of the Sopropé case refers for one of the conditions for the execution of this principle, i.e. the period of time, the conditions which have to be met in national law, if they have not been determined by the law of the Union, as in the present case. On the basis of this consideration it has been argued in legal literature that the principle of defence, laid down in European law, depends, before it is applied, as to a national administration, on the conditions which have been determined in national law. This principle, it is argued, cannot be applied by the national court directly. The question whether the national court can impose this obllgation, based on European law, on the administration, also if the CCC or national law does not lay down any stipulations in this respect, has not been explicitly answered by the case law of the European Court of Justice, so that the Supreme Court will ask a prejudicial decision in this respect.

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3.5.1. If the answer to the question referred to in 3.4.2. leads to the conclusion that the principle of respect of the rights of defence by the administration, laid down in European law, can be directly applied, the question is whether the Court rightly judged that there has been a violation of the rights of the defence in the sense of prevailing case law of the Court of Justice (cf. among others the Sopropé case, considerations 36 and 37 and ECJ 17 June 2013, Commission/Italy, C-243/08, considerations 44 and 45) due to the fact that the Inspector did not give the interested party prior to the announcements in the sense of Article 221. subsection 1, of the CCC, the opportunity to express his views about the factors on which those announcements were based.

3.5.2. The case law of the European Court of Justice shows that the principle of the right of defence is regarded as a fundamental principle of European law. In that sense it is now also expressed in article 41, subsection 2, opening sentence and under a, of the Charter on Fundamental Rights of the European Union, which, pursuant to article 6, subsection 1, of the Treaty on European Union has the same legal value as the Treaties, but the Charter on Fundamental Rights of the European Union, according to its wordings, is only addressed to institutions, bodies, offices and agencies of the Union. Furthermore, case law of the Court of Justice shows that this right is not absolute (see in this sense ECJ 15 June 2006, Dokter and others, C-28/05, Jurisprudence p. I-5431, point 75, and ECJ 3 September 2008, Kadi, C-402/05P, Jurisprudence p. I-6351, point 342, compare furthermore ECJ 29 January 2013, Ciprian Vasile Radu, C-396/11). This gives rise to the question, in this case, when this principle is violated.

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3.5.5. The Sopropé case cannot without any reasonable doubt give rise to the conclusion that there is a violation of the principle of respect of the rights of the defence by the administration in the present case, as the judgement in the Sopropé case was pronounced on the basis of a situation in which the facts showed that the interested party had not been heard at all in the period before the case was brought before a court. In this respect the present case differs from the case which gave rise to the Sopropé case. The Supreme court draws attention to the fact that primary decisions, in this case announcements in the sense of Article 221, subsection 1 of the CCC, and the decision after a complaint had been filed are all part of one administrative procedure and that this procedure therefore differs in this respect from the one which gave rise to the judgement of the Court of Justice of 22 November 2012 in case C-277/11 (M against Minister of Justice, Equality and Law Reform, Ireland, Attorney General). The Supreme Court will therefore ask the Court of Justice for a prejudicial decision.

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3.6.1. If the answer of the Court of Justice to the prejudicial question referred to in 3.5.2. leads to the conclusion that the Inspector, making his announcements referred to in Article 221, subsection 1 of the CCC violated the principle of respect by the administration of the rights of the defence, laid down in European law, the question arises which legal consequences this should have.

3.6.2. The Sopropé cae does not say whether the consequences that the national court should draw on the basis of the violation of the principle of defence, when there is no procedure in European law and relying on the principle of procedural autonmy, are determined or not by national law. As the levying and collection of customs duties is covered by the CCC, the Supreme Court will ask for a prejudicial decision.

3.6.3. If the legal consequences of the violation by the administration of the principle are fully determined by European law, the question arises whether, if there has been a violation of the principle of defence, the national court is obliged, for this reason only, to annul the decision. Or can the court, as the Court has done in this case, also consider the consequences of the violation of this principle?

3.6.4. For a confirmative answer to the first question described in 3.6.3. it may be argued that the duty to hear the person addressed by a decision to his disadvantage prior to taking the decision, is a duty of a formal nature in the sense that it applies irrespective of what the person addressed could put forward. For an affirmative answer to the second question described in 3.6.3. it may be argued that an efficient rule of law is hindered if the national court would have to annul a decision, when it is clear that what the interested party would have been able to put forward would not have led to another decision. There are clues in the case law of the Court of Justice for the latter interpretation of the principle of defence (in this sense see ECJ 11 November 1987, France/Commissioin, 259/85, Jurisprudence p. 4393, considerations 12-13; ECJ 21 March 1990, Commission/Belgium, C-142/87, Jurisprudence, p. I-959, consideration 48, ECJ 11 January 2007, Technische Glaswerke Ilmen au/Commission, C-404/04P, Jurisprudence p. I-1, consideration 131). These judgements were pronounced on the basis of disputes which referred to compliance by the Institutions of the European Union with the principle and they therefore also referred to the supervision of the Court of Justice. The present case refers to compliance of the administrative organ of a Member State and therefore the supervision by a court of this Member State. On this basis the Supreme Court will ask for a prejudicial decision with reference to the obligations iimplied by the principle of defence, laid down in European law, for the national court in the case that the national administration violated this principle.

Deciding body (original language): 
Hoge Raad
Language: 
Dutch