Slovenia / Constitutional Court of the Republic of Slovenia / Up-1133/18

Commercial company FMC, d. o. o., Ljubljana v. The Supreme Court, Republic of Slovenia
Policy area
Taxation
Deciding body type
National Court/Tribunal
Deciding body
Constitutional Court of the Republic of Slovenia
Type
Decision
Decision date
31/03/2022
ECLI (European case law identifier)
ECLI:SI:USRS:2022:Up.1133.18
  • Slovenia / Constitutional Court of the Republic of Slovenia / Up-1133/18

    Key facts of the case:

     

    The plaintiff filed a constitutional complaint to the Constitutional Court of the Republic of Slovenia after a first-instance court and Higher Court dismissed its claim for partial annulment of the contract and its claim for the payment of EUR 178 586,23 as reimbursement of the amount of value added tax ('VAT') paid and ultimately borne by the appellant in respect of the goods and services supplied for the purposes of a project. The case concerned an economic dispute between the plaintiff and an unnamed counterparty, in which the plaintiff claimed that the project it was implementing was largely funded by the European Social Fund. It explains that the financing of the European Structural Funds has followed the principle of tax neutrality, according to which the VAT expenditure is not charged to the VAT taxable person, in such a way that the taxable person is entitled to a refund of the tax and the difference between the refundable VAT and the non-refundable VAT. The distinction between refundable and non-refundable VAT is consistently established by EU law. The Ministry's Instruction, which was applicable to the call for applications for the relevant project, did not distinguish between refundable and non-refundable VAT and is therefore contrary to EU law.  

    Neither the first-instance court nor the Higher Court referred the matter for a preliminary ruling to the Court of Justice of the European Union ('the Court of Justice'), as the appellant had already requested in the proceedings before the first-instance court. The Supreme Court dismissed the plaintiff’s application for review and did not rule on its request to refer the matter for a preliminary ruling to the Court of Justice. In its constitutional complaint, the plaintiff argued that the Supreme Court infringed the right to a lawful judge by failing to follow the request and to rule on it at all. The plaintiff criticises the two lower courts for failing to rule on the request in an appropriate manner. 

    The plaintiff alleges violations of Articles 3a (transfer the exercise of part of Slovenia's sovereign rights to international organisations), 22 (Equal Protection of Rights) and 23 (Right to Judicial Protection) of the Constitution of the Republic of Slovenia and Article 6 (Right to a fair trial) of the European Convention on Human Rights. 

    Key legal question raised by the Court:

    The Constitutional Court first examined whether the VAT refund case at hand raises questions of application and interpretation of EU law, including the case-law of the Court of Justice and the obligation to refer the case to the Court of Justice for a preliminary ruling. 

    The second was the question regarding the assessment of the application of EU law and the criteria which the domestic courts should respect when the parties request preliminary ruling under Article 267 TFEU.  

    Outcome of the case:

    The Constitutional Court found that the area in question is (also) within the scope of EU law, which means that the courts must interpret national rules in the light of EU law and in accordance with its purpose (the principle of consistent interpretation). When the area of application of EU law is at stake, it also means that the rules of the Charter must be complied with, in accordance with Article 51(1) of the Charter of Fundamental Rights of the European Union. 

    Regarding the preliminary ruling under Article 267 TFEU, the Constitutional Court  stated that the Court of Justice has exclusive jurisdiction to give preliminary rulings on questions concerning the interpretation of the Treaties and the validity and interpretation of acts of the EU institutions, bodies, offices or agencies (Article 267 TFEU). When a national court is confronted, in the course of proceedings which it is conducting, with a question which falls within the exclusive jurisdiction of the Court of Justice, it must not give a ruling on that question unless the Court of Justice has already given an answer to the question or unless the other conditions for a national court to give a ruling are satisfied. If a national court adopts positions which are not in accordance with the above, there is a breach of the right to a fair trial under Article 23(1) of the Constitution. 

    The Constitutional Court has emphasised the importance of the statement of reasons in proceedings in which a question of the application of EU law is raised, including the statement of reasons for refusing a party's request to refer a question to the Court for a preliminary ruling. The failure to reply to a party's request for a preliminary ruling constitutes an infringement of the rights laid down in Article 22 in conjunction with Article 23(1) of the Constitution. The Constitutional Court stated that it is already clear from constitutional case-law that a reasoned judicial decision is an essential part of fair proceedings, protected by the right to equal protection of rights under Article 22 of the Constitution, and that the court must set out in the judicial decision, in a concrete manner and with sufficient clarity, the reasons on the basis of which it has reached its decision. 

    The Constitutional Court stated that the right to a reasoned decision is also of paramount importance in EU law. It is enshrined in Article 296 TFEU (for EU institutions and bodies) and in Article 47 of the Charter as a fundamental right corresponding to Articles 6 and 13 ECHR.  It is also clear from the Court's case-law that Article 47 of the Charter, which establishes the right to a fair procedure, is sufficient in itself and does not need to be clarified by provisions of EU or national law in order to confer on individuals a right which they may invoke. 

    In the present case, the plaintiff has made a reasoned submission that the Supreme Court should refer the case to the Court for a preliminary ruling. It even suggested how the question to the Court should be phrased. The question was also not manifestly unfounded.  

    The Constitutional Court therefore found that the Supreme Court failed to state reasons in accordance with the requirements of the right to equal protection of rights and the right to a fair trial in its decision rejecting the request for a preliminary ruling. In so doing, it infringed Article 22 in conjunction with Article 23(1) of the Constitution. The Constitutional Court therefore annulled the contested order of the Supreme Court and referred the case back to the Supreme Court for a new decision. In that decision, the Court should take into account the views of the Constitutional Court set out in the present decision.

  • Paragraphs referring to EU Charter

    7. In the present case, the area in question is therefore (also) within the scope of EU law, which means that the courts must interpret national rules in the light of EU law and in accordance with its purpose (the principle of consistent interpretation). When the area of application of EU law is at stake, it also means that the rules of the Charter must be complied with, in accordance with Article 51(1) of the Charter of Fundamental Rights of the European Union (OJ C 202, 7.6.2016 - hereinafter "the Charter"). According to Article 51(1) of the Charter, EU Member States apply the provisions of the Charter when implementing EU law. As explained above, the area of funding from cohesion policy funds is governed by the rules of EU law and is therefore an implementation of EU law within the meaning of that provision of the Charter. Therefore, when assessing the contested decision of the Supreme Court, the Constitutional Court must take into account primary EU law, i.e., in addition to the Treaty on European Union (consolidated version, OJ C 202, 7.6.2016 - hereinafter referred to as the TEU) and the TFEU, the Charter and the case-law of the Court of Justice, in determining the content of human rights and fundamental freedoms. In such cases, the Constitutional Court may only apply the national standards of protection of fundamental rights if such application does not undermine the level of protection provided for in the Charter as interpreted by the Court of Justice, nor does such application prejudice the primacy, uniformity and effectiveness of EU law.

    ...

    17. The right to a reasoned decision is also of paramount importance in EU law. It is enshrined in Article 296 TFEU (for EU institutions and bodies) and in Article 47 of the Charter as a fundamental right corresponding to Articles 6 and 13 ECHR. It follows that the decision-maker must take into account the submissions of the parties by carefully and impartially examining all the relevant elements of the case and by giving detailed reasons for its decision, with the obligation to provide the person concerned with a sufficiently specific and concrete statement of the reasons for the decision to enable him or her to be informed of the reasons for refusing his or her application. In this context, the scope of the duty to state reasons may vary according to the characteristics of the judicial decision in question and must be examined in the light of the entire procedure and all the relevant circumstances, taking into account the procedural requirements relevant to the decision in question, in order to ensure that the persons concerned are afforded the opportunity to challenge that decision in a useful and effective manner. It is also clear from the Court's case-law that Article 47 of the Charter, which establishes the right to a fair procedure, is sufficient in itself and does not need to be clarified by provisions of EU or national law in order to confer on individuals a right which they may invoke.

    ...

    19. The criteria for assessing the obligation to refer a case to the Court of Justice are governed directly by the third paragraph of Article 267 TFEU (duty to refer). The waiver of that duty must be consistent with the case-law of the Court of Justice established in relation to the third paragraph of Article 267 TFEU (Article 3a(3) of the Constitution). According to the latter, when a question of interpretation of EU law is referred to them, the courts must comply with their duty to refer the question to the Court unless it is established that: (1) the question is not relevant, it being for the national court to determine whether the question is relevant; (2) the relevant provision of EU law has already been interpreted by the Court of Justice; or (3) the correct application of EU law is so obvious as to leave no room for reasonable doubt. Before a national court concludes that such is the case, it must be satisfied that it is equally obvious to the courts of other Member States and to the Court of Justice. Only if these criteria are met may the national court refrain from referring the question to the Court of Justice and decide on it on its own. In doing so, it must take into account the characteristics of EU law and the particular difficulties that its interpretation entails, including the comparison of all linguistic versions of the text, respect for the specific terminology of EU law and the placing of the interpretation in the context of that law. In this context, it should also be borne in mind that Article 267 TFEU, read in conjunction with Article 47(2) TFEU, stipulates that, where a national court, against whose decisions there is no judicial remedy under national law, considers that there are no grounds for referring the case back to the Court of Justice for a preliminary ruling, the reasoning of its decision must show either that the question of EU law raised is not relevant to the resolution of the dispute, or that the interpretation of the provision of EU law in question is based on EU case-law, or, in the absence of such case-law, that the interpretation of EU law is so obvious to the national court of last instance as to leave no reasonable doubt.

    ...

    27. It follows from the principle of national procedural autonomy that, in the absence of rules of EU law, the legal order of each Member State must determine the competent courts and regulate in more detail the procedural rules for legal remedies aimed at protecting the rights of individuals under EU law. The authorities and courts of the Member States must apply the procedural law of their own Member State, which they may formulate or adopt autonomously, in proceedings designed to implement EU law, unless there are procedural rules of EU law in the particular field in question. Even in the absence of such procedural rules of EU law, national procedural autonomy is not absolute, but is limited by the principle of effectiveness and the principle of equality of treatment or the principle of equivalence between national and EU law. Both principles apply cumulatively. The principle of effective protection of EU law is complementary to the principle of equal treatment. It has already been explained in paragraph 19 of the reasoning of this decision that the case-law of the Court of Justice has already clarified the position that the third paragraph of Article 267 TFEU, read in conjunction with Article 47 of the Charter, requires that a national court, against whose decisions there is no judicial remedy under national law, to give reasons for its decision if it considers that there are no grounds for referring the case back to the Court of Justice for a preliminary ruling. The statement of reasons must not be general, but rather specific in nature. The statement of reasons must show that either the question of EU law raised is not relevant to the resolution of the dispute, or the interpretation of the provision of EU law in question is based on EU case-law, or, in the absence of such case-law, the interpretation of EU law is so obvious to the national court of last instance as to leave no reasonable doubt. It follows from all the foregoing that, in a case such as the present, the national procedural autonomy as to the reasoning of the Supreme Court as to why it will not refer the case to the Court of Justice is limited by the rules of EU law as established by the case-law of the Court of Justice.

  • Paragraphs referring to EU Charter (original language)

    7. In the present case, the area in question is therefore (also) within the scope of EU law, which means that the courts must interpret national rules in the light of EU law and in accordance with its purpose (the principle of consistent interpretation). When the area of application of EU law is at stake, it also means that the rules of the Charter must be complied with, in accordance with Article 51(1) of the Charter of Fundamental Rights of the European Union (OJ C 202, 7.6.2016 - hereinafter "the Charter"). According to Article 51(1) of the Charter, EU Member States apply the provisions of the Charter when implementing EU law. As explained above, the area of funding from cohesion policy funds is governed by the rules of EU law and is therefore an implementation of EU law within the meaning of that provision of the Charter. Therefore, when assessing the contested decision of the Supreme Court, the Constitutional Court must take into account primary EU law, i.e., in addition to the Treaty on European Union (consolidated version, OJ C 202, 7.6.2016 - hereinafter referred to as the TEU) and the TFEU, the Charter and the case-law of the Court of Justice, in determining the content of human rights and fundamental freedoms. In such cases, the Constitutional Court may only apply the national standards of protection of fundamental rights if such application does not undermine the level of protection provided for in the Charter as interpreted by the Court of Justice, nor does such application prejudice the primacy, uniformity and effectiveness of EU law.

    ...

    17. The right to a reasoned decision is also of paramount importance in EU law. It is enshrined in Article 296 TFEU (for EU institutions and bodies) and in Article 47 of the Charter as a fundamental right corresponding to Articles 6 and 13 ECHR. It follows that the decision-maker must take into account the submissions of the parties by carefully and impartially examining all the relevant elements of the case and by giving detailed reasons for its decision, with the obligation to provide the person concerned with a sufficiently specific and concrete statement of the reasons for the decision to enable him or her to be informed of the reasons for refusing his or her application. In this context, the scope of the duty to state reasons may vary according to the characteristics of the judicial decision in question and must be examined in the light of the entire procedure and all the relevant circumstances, taking into account the procedural requirements relevant to the decision in question, in order to ensure that the persons concerned are afforded the opportunity to challenge that decision in a useful and effective manner. It is also clear from the Court's case-law that Article 47 of the Charter, which establishes the right to a fair procedure, is sufficient in itself and does not need to be clarified by provisions of EU or national law in order to confer on individuals a right which they may invoke.

    ...

    19. The criteria for assessing the obligation to refer a case to the Court of Justice are governed directly by the third paragraph of Article 267 TFEU (duty to refer). The waiver of that duty must be consistent with the case-law of the Court of Justice established in relation to the third paragraph of Article 267 TFEU (Article 3a(3) of the Constitution). According to the latter, when a question of interpretation of EU law is referred to them, the courts must comply with their duty to refer the question to the Court unless it is established that: (1) the question is not relevant, it being for the national court to determine whether the question is relevant; (2) the relevant provision of EU law has already been interpreted by the Court of Justice; or (3) the correct application of EU law is so obvious as to leave no room for reasonable doubt. Before a national court concludes that such is the case, it must be satisfied that it is equally obvious to the courts of other Member States and to the Court of Justice. Only if these criteria are met may the national court refrain from referring the question to the Court of Justice and decide on it on its own. In doing so, it must take into account the characteristics of EU law and the particular difficulties that its interpretation entails, including the comparison of all linguistic versions of the text, respect for the specific terminology of EU law and the placing of the interpretation in the context of that law. In this context, it should also be borne in mind that Article 267 TFEU, read in conjunction with Article 47(2) TFEU, stipulates that, where a national court, against whose decisions there is no judicial remedy under national law, considers that there are no grounds for referring the case back to the Court of Justice for a preliminary ruling, the reasoning of its decision must show either that the question of EU law raised is not relevant to the resolution of the dispute, or that the interpretation of the provision of EU law in question is based on EU case-law, or, in the absence of such case-law, that the interpretation of EU law is so obvious to the national court of last instance as to leave no reasonable doubt. 

    ...

    27. It follows from the principle of national procedural autonomy that, in the absence of rules of EU law, the legal order of each Member State must determine the competent courts and regulate in more detail the procedural rules for legal remedies aimed at protecting the rights of individuals under EU law. The authorities and courts of the Member States must apply the procedural law of their own Member State, which they may formulate or adopt autonomously, in proceedings designed to implement EU law, unless there are procedural rules of EU law in the particular field in question. Even in the absence of such procedural rules of EU law, national procedural autonomy is not absolute, but is limited by the principle of effectiveness and the principle of equality of treatment or the principle of equivalence between national and EU law. Both principles apply cumulatively. The principle of effective protection of EU law is complementary to the principle of equal treatment. It has already been explained in paragraph 19 of the reasoning of this decision that the case-law of the Court of Justice has already clarified the position that the third paragraph of Article 267 TFEU, read in conjunction with Article 47 of the Charter, requires that a national court, against whose decisions there is no judicial remedy under national law, to give reasons for its decision if it considers that there are no grounds for referring the case back to the Court of Justice for a preliminary ruling. The statement of reasons must not be general, but rather specific in nature. The statement of reasons must show that either the question of EU law raised is not relevant to the resolution of the dispute, or the interpretation of the provision of EU law in question is based on EU case-law, or, in the absence of such case-law, the interpretation of EU law is so obvious to the national court of last instance as to leave no reasonable doubt. It follows from all the foregoing that, in a case such as the present, the national procedural autonomy as to the reasoning of the Supreme Court as to why it will not refer the case to the Court of Justice is limited by the rules of EU law as established by the case-law of the Court of Justice.