Implementation of Union law by Member States: when does the Charter of Fundamental Rights apply?

The scope of EU fundamental rights protection and the influence of the Charter of Fundamental Rights on this scope is a much discussed topic among EU  constitutional lawyers. As is well-known, the recognition of fundamental rights as part of the general principles of EU law by the Court is not new. Already in the cases of Stauder and Internationale Handelsgesellschaft, handed down in 1969 and 1974 respectively, the Court recognized fundamental rights as part of the general principles of EU law. It did so to anticipate challenges to the primacy of EU law by national constitutional courts and the Court therefore took great care in stressing the autonomous nature of EU fundamental rights protection. This means that the Court has maintained authority in determining the content of EU fundamental rights protection and thus remained the ultimate interpreter of EU law. However, before the coming into force of the Treaty of Lisbon, there was no EU catalogue of rights formally binding on the EU as such. Rather, the Court drew inspiration from international treaties and national constitutions, whilst at the same time maintaining the autonomy of the EU rights standard. With the coming into force of the Lisbon Treaty the Charter of Fundamental Rights has also become formally binding on the EU. This means there now is a binding catalogue of rights at the EU level.

 A contentious issue is whether the Charter of Fundamental Rights alters the scope of the EU fundamental rights standard laid down in previous case-law of the Court. In its case law, the Court has held that fundamental rights recognized as general principles of EU law apply not only to the acts of the EU institutions but also to the acts of Member States in certain circumstances. Generally, Member States have to act in accordance with fundamental rights recognized at the EU level ‘whenever they act within the scope of EU law’. In the case-law of the Court this includes at least two situations. First, Member States are bound by the EU rights standard where the implement and enforce EU law. Second, the Member States are also bound by the EU rights standard where they derogate from EU law provisions (see cases such as Schmidberger, and ERT). However, when precisely a Member State acts within the ‘scope of EU law’ is not entirely clear. The dividing line between situations within the scope and those outside the scope of EU law often appears arbitrary, as was pointed by AG Sharpston in the case of Zambrano.

A difficult issue is whether the Charter of Fundamental Rights will lead to an alteration of the scope of the EU fundamental rights standard. The source of this discussion is Article 51 of the Charter, which was the object of much disagreement among the drafters of the Charter. Its wording reflects the desire of Member States to limit the scope of the Charter. Article 51 states that the Charter only applies to acts of the Member States ‘when they are implementing Union law’. It thus leaves out the broader category of ‘the scope of EU law’. However, the Explanatory Note on Article 51 seems to contradict the idea that the Charter would lead to a restriction of the previous case-law of the Court on fundamental rights. In any case, what actually consist implementation and what does not is also not clear.

The crucial issue is thus: when are Member States implementing Union law? This was the issue underlying the elaborate and thorough Opinion of Advocate General Cruz Villalón in Case C-617/10 Fransson. The case concerned the accumulation of administrative and criminal penalties imposed on Mr Fransson for not paying VAT taxes due because of his fishing activities in the River Kalix in Sweden. Mr Fransson claimed that such an accumulation was contrary to the ne bis in idem principle enshrined in article 50 of the Charter. The national court made a reference for a preliminary ruling as to the interpretation of that principle as well as its consequences for national law, the latter being a rather straightforward question relating to primacy of EU law.

Anyway, before such questions can be answered it is necessary to determine whether the Court has jurisdiction in the first place. It is here that the question arises whether national rules for penalties applicable to infringements of VAT legislation (that VAT legislation being an implementation of directive 2006/112/EC) can be considered implementation of Union law. Advocate General Cruz Villalón argues that this is not the case.

Cruz Villalón first discusses the general question of when the Charter applies and explains this issue in terms of a transfer of competences between the Member States and the EU:

 35.      To my mind, on a proper interpretation of the basic constitutional structure of the compound comprising the Union and the Member States, which has been described as the ‘European Verfassungsverbund’, (11) it is, as a rule, for the Member States themselves, in the context of their own constitutional order and the international obligations which they have entered into, to review acts of their public authorities.

 36.      However, that rule is accompanied by an exception which has acquired undeniable scope and applies to cases where national public authorities are implementing Union law, to use the wording of the Charter. In my opinion, the perception of the dialectical relationship between the two scenarios in terms of rule and exception continues to be justified today.

 37.      The effect is that the assumption by the Union of responsibility for guaranteeing fundamental rights when Member States exercise public authority in those cases must be examined in terms of a transfer, in the sense that the original responsibility of the Member States is passed to the Union as far as that guarantee is concerned.

 He then proposes a test based ‘on the specific interest on the part of the Union’:

 40.      In my view, the competence of the Union to assume responsibility for guaranteeing the fundamental rights vis-à-vis the exercise of public authority by the Member States when they are implementing Union law must be explained by reference to a specific interest of the Union in ensuring that that exercise of public authority accords with the interpretation of the fundamental rights by the Union. The mere fact that such an exercise of public authority has its ultimate origin in Union law is not of itself sufficient for a finding that there is a situation involving the implementation of Union law.

 41.      I believe that, ultimately, on occasions which it is difficult to stipulate in advance, it is legitimate that the Union’s interest in leaving its mark – its conception of the fundamental right – should take priority over that of each of the Member States, as I have been indicating. That interest of the Union is principally founded on the presence, or even the leading role, of Union law in national law in each particular case. In short, the cases concerned are ones in which the lawfulness of public authority in the Union may be at stake and there must be an adequate response to that situation.

 This analysis should subsequently be determined on a case-by-case basis:

 I believe that a traditionally open provision of the kind laid down in Article 51(1) of the Charter calls for a basic determination of its meaning. That must be effected, first of all, by means of a determination of the different situations in which the transfer from the Member States to the Union of responsibility for guaranteeing fundamental rights is primarily likely to be justified. Second, I believe that an appraisal of the specific circumstances of each case must allow a final, definitive adjudication regarding the allocation of responsibility for guaranteeing fundamental rights to either the Union or the Member States.

 After these general remarks the Advocate General continues with an analysis of the case at hand. Although the imposition of the penalties on Mr Fransson is based on the VAT directive, he does not consider this ‘sufficient for the purposes of transferring the review of any constitutional guarantees applicable to the exercise of that power from the sphere of responsibility of the Member States to that of the Union.’ (para. 54) This is because the connection between EU law (the VAT directive) and the exercise of the public authority of the State ‘is extremely weak and is not, in any event, a sufficient basis for a clearly identifiable interest on the part of the Union in assuming responsibility for guaranteeing that specific fundamental right vis-à-vis the Union.’ (para. 57)

What matters is

‘whether a State legislative activity based directly on Union law is equivalent to the situation in this case, where national law is used to secure objectives laid down in Union law. In other words, the question is whether the two situations are equivalent from the perspective of the qualified interest of the Union in assuming direct, centralised responsibility for guaranteeing the fundamental right concerned.’ (para. 60)

 In that sense, the Advocate General thinks this the system of penalties in Sweden is completely independent from VAT collection, and thus should not be considered implementation of Union law:

 61.      I believe that, in the analysis of this difficult subject, it must be possible to perceive the difference between the causa, whether or not immediate, and the simple occasio. The difficulty, in so far as it exists, with the conception of the scope of the ne bis in idem principle in Swedish law is a general difficulty regarding the structure of the Swedish law on penalties which is, as such, completely independent from the collection of VAT, where punishment of the conduct in the present case, involving the falsification of information, is treated as a mere occasio.

 62.      That being so, the question is whether, as a result of this occasio, the Union judicature must interpret, with inevitably general consequences, the scope of the ne bis in idem principle in Swedish law, an interpretation which must take priority over the one which is derived from Sweden’s constitutional structure and international obligations.

 63.      My view is that it would be disproportionate to infer from this occasio a shift in the division of responsibility for guaranteeing the fundamental rights between the Union and the Member States. Similarly, it seems to me that it would be disproportionate if the questions referred to the Court had been ones concerning the right to an adequate defence, the sufficiency of the evidence or other matters included in Title VI of the Charter. In short, it appears to be risky to assert that, by means of a provision such as Article 273 of Directive 2006/112, the legislature was anticipating the transfer of all the constitutional guarantees governing the exercise of the Member States’ power to impose penalties – including the collection of VAT – from the Member States to the Union.

 I think this is a bit of a cautious approach by the Advocate General as there seems to be a clear link between ensuring the effectiveness of the VAT directive and the national rules that relate to the imposition of fines. It appears that he does not consider the catagory ‘implementing EU law’ to have the same scope as the catogory ‘the scope of EU law’. Personally, I would prefer the catagory ‘implementing EU law’ to have the same broad scope as the latter catagory. This is because I am not too happy with the implications of the reasoning of the Advocate General. It implies that if the EU adopts legislation which forces me to do something (but not how authorities should enforce that), which is then enforced by a Member State in a particular way, I could only rely on fundamental rights as protected by that Member State for the way the Member State is enforcing EU law. The EU would basically be pointing the finger to the Member State instead of assuming responsibility for the way in which EU law is being enforced. Although the Court can, or even should, give substantial room to manouvre by Member States in this respect, I think it should always be in a position to guarantee that EU legislation is not being enforced in a way that is contrary to fundamental rights as enshrined in the Charter.