Leiden Law Blog

Euroseaneamientos: the latest waltz from the ECJ on public interests in EU substantive law.

Posted on by Maarten Aalbers in
Euroseaneamientos: the latest waltz from the ECJ on public interests in EU substantive law.

On December 8 2016 the ECJ’s judgment Euroseaneamientos (joined cases C-532/15 and C-538/15) was published.  This preliminary ruling has certainly a lot of music in it. The ECJ had to answer eight preliminary questions from national courts in Spain (the provincial court of Zaragoza and the court of first instance of Olot). These questions concerned the application of EU competition law, the free movement of services and the right to a fair trial. The Euroseaneamientos judgment provides several high notes, but basically does not change the ECJ’s tune where it concerns the scope of article 101 TFEU, article 56 TFEU and the Services Directive 2006/123/EC (hereafter: the services directive).

To use a musical analogy: the ECJ’s judgment has more features of a straightforward waltz than a “lead-and-follow” tango. The ECJ’s judgment purely repeats a heavily rehearsed dance, disregarding intuition or a close embrace of the substance at hand.  The rhythm of the ECJ’s reasoning raises nevertheless some interesting points, considering both legal theory and legal practice. These points will be explained in the next paragraphs.

Facts and preliminary questions

The facts of the case are straightforward. After providing legal services, Mr. de Bolos, a procurator (prucorador) under Spanish law, brought an action for payment for rendered legal services against his former clients: Arcelor Mittal and Urbaser. These clients claim that the remuneration fee was excessive ad disproportionate considering the workload. In Spain the minimum fees for legal services rendered by procurators are determined by royal decree 1373/2003 (hereafter: the decree). Moreover, Spanish law does not allow for a derogation of this decree. As a result, the minimum fees for legal services provided by procurators are fixed under national law.

Before the national courts Urbaser claims that national courts ought to be able to set the fees for procurators in proportion to the work carried out. Otherwise, according to Urbaser, there would be a violation of the principle of free competition, the Services Directive and the principle of loyal cooperation. Urbaser claims that the decree violates these principles and the directive.

To that end the Spanish courts referred to the ECJ the following (overlapping) questions:

  1. Is a measure, such as the royal decree, compatible with article 101 TFEU and the principle of sincere cooperation article 4 (3) TEU given the fact that national courts may not depart from the minimum fees?
  2. Are national courts allowed to disregard national law, setting fixed minimum tariffs fees for remuneration of procurators, on account of an overriding reason relating to the public interest: based on the principle of proportionality and necessity in article 4 and 15 of the Services Directive 2006/123?
  3. Is a measure, such as the royal decree, compatible with article 56 TFEU?
  4. Can the fixed minimum legal fees be considered disproportionate when there are exceptional circumstances?
  5. Does a measure, such as the royal decree, infringe article 47 of the Charter of fundamental rights (hereafter: the Charter)?
  6. Do fixed minimum legal fees create an obstacle for the right to a fair trial and therefore infringe article 6 of the European Convention of Human Rights (ECHR)?

National legislation may not incite undertakings to conduct anti-competitive behavior

On substance the ECJ distinguishes three legal questions. Firstly, the ECJ deals with the question whether a measure, essentially the royal decree, infringes competition law under article 101 TFEU in conjunction with the principle of loyal cooperation under article 4(3) TFEU. Article 101 and 102 TFEU regulate the conduct of undertakings and not the laws of the Member States. However article 4(3) TEU prohibits Member States from introducing or maintaining measures, legislative or regulatory, which render the competition rules ineffective. Since the decree is likely to affect trade between Member States, the ECJ stipulates that the measure can reinforce conduct  prohibited under article 101 TFEU: such as agreements and decisions amongst undertakings and concerted practices The ECJ rules that the decree does not preclude the effectiveness of articles 101 and 102 TFEU and article 4(3) TEU, provided that the Spanish courts “read in” a discretion for the judiciary to derogate from the fixed tariffs when facing. As such, the ECJ rules that the Spanish courts, to avoid an infringement with the completion law provisions of the TFEU, may derogate from fixed minimum legal fees, but only when the national courts determine that there are exceptional circumstances.

The ECJ aligns the scope of the Services Directive with the scope of article 56 TFEU
The second legal question the ECJ deals with concerns whether a measure, such as the decree, infringes the free movement of services under the scope of article 56 TFEU or the scope of the articles 4 and 15 of the Services Directive. The ECJ waltzes over this question by immediately declaring no scope. In the recent Ullens de Schooten case (C-268/15) the ECJ instructed a national court on the concept of internal situations, stipulating that these situations clearly fall outside of the scope of the article 56 TFEU. The ECJ considers that the decree, for that same reason, falls outside the scope of article 56 TFFEU and the services directive. As a result the ECJ does not touch upon the question of whether an overriding public interest may be invoked before the national courts.

The Charter does not apply since EU law is not applicable

Lastly, the ECJ deals  with the question whether a measure, such as the decree, obstructs clients from effectively contesting disproportionately high legal fees. Referring to its Akerberg Fransson judgment (C-670/10), the ECJ considers that the Charter only applies in situations when EU law is applicable. Since the decree is not intended to implement EU law and “EU law does not contain any specific rule on the administration of justice” the ECJ rules that it is not apparent from the facts in the case that the decree falls within the scope of EU law, and therefore the decree does not fall under the scope of the Charter.

Waltzing over the opportunity to further explain the relationship between competition law and free movement law?

The Euroseaneamientos judgment is firstly interesting from the point of legal theory. First of all the ECJ basically considers that the Services Directive and article 56 TFEU have the same scope. As such the ECJ does not explain the residual function of article 56 TFEU compared to the Services Directive. In this judgment the ECJ does not take into consideration that first of all a fixed minimum tariff for procurators might deter other legal practitioners outside Spain from becoming a procurador. Moreover the Court did not consider, as it did in Trijber (C-340/14 and C-341/14), that national regulation may hinder the access to the market for foreign service providers. This lack of motivation has most likely to do with the drafting of the preliminary questions by the Spanish courts, since they referred to the incorrect provisions of the Services Directive (article 15 is applicable to the freedom  of establishment) and did not provide a contextual analysis of the decree and its relationship with the free movement of services. In the end it is the duty of the national courts to establish a clear link with EU law, and not the task of the ECJ (Ullens de Schooten, C-268/15). The preliminary procedure of article 267 TFEU takes two to tango.
Secondly the ECJ fails to explain in depth why the decree did not fall under the scope of the Charter. The instruction given to the national courts, stipulating that under the decree a proportionality assessment of exceptional circumstances can be called for to preclude an infringement of EU competition law,  shows that the provisions 101, 102 in conjunction with article 4(3) TFEU are applicable. Therefore EU substantive law is indeed applicable in this case. The fact that the ECJ ruled that the measure falls outside the scope of the free movement of services does not change this. Moreover the ECJ failed to see that the administration of justice has been described by the ECJ in the Wouters case (C - 309/99, par. 97) as an overriding public interest. From the point of legal theory a comment from the ECJ on differences between the concepts of a potential effect on trade and a potential obstruction of market access would have contributed to understand how overriding public interests can be invoked in both branches of EU substantive law.
Lastly the case is interesting from a point of legal practice. The Spanish courts have asked the ECJ whether an overriding public interest can be applied to allow for a derogation from a potential infringement of EU internal market law. Under the standing case law of the ECJ overriding public interests can be invoked to justify a measure that infringes EU law, on condition that this measure does not discriminate and is proportional. For instance, in Wouters prohibited conduct under article 101 TFEU was considered to be justified by an overriding public interest, due to the fact that this conduct promoted the administration of justice. Given the instructions of the ECJ in Euroseaneamientos the Spanish courts may conduct a balancing test to determine the existence of exceptional circumstances. That exercise may include balancing anti-competitive legislation against the overriding interest of a sound administration of justice. Such an outcome of the ECJ’s judgment might very well sound like music to the ears of the clients of legal practitioners, regardless whether that sound resembles a waltz or a tango.

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