Case C-620/16 (OTIF) – Why EU-external relation debates should remain EU-internal

By Liesbeth A Campo*

Introduction

The external relations of the EU are often subject to debate amongst the EU institutions. In particular the division of competences between the Union and the Member States can give rise to difficult discussions, not only in the various stages of the procedure for the negotiation and conclusion of an international agreement, but also in the stage of the fulfilment of the commitments entered into. Does the EU have competence with regard to a position to be taken in an international organisation? How should this position be determined? Who may present a position and on behalf of whom? Who should exercise the right to vote? These and other “mixity[1]”-related questions often lead to lengthy – sometimes heated –discussions, which are occasionally relocated from the Council Premises to the plateau de Kirchberg. People who are confronted with EU external representation issues for the first time, soon discover that the primary focus is actually often the “cuisine interne” of the EU. While these discussions usually remain “EU-internal”, they sometimes do become – painfully – visible to the outside world.  This is also happened during the events that have led to the judgment of the CJEU in Case C-620/16 Commission v. Germany (OTIF). In this case, the CJEU was called upon to give its judgment on the compatibility with Union law of the conduct of Germany at the 25^th session of the OTIF Revision Committee.

A judgment which shows the importance of the principle of sincere cooperation in the context of the EU’s external relations, and sheds more light on the admissibility of infringement actions launched by the European Commission where the alleged improper conduct lies in the past.

2. Context

The Intergovernmental Organisation for International Carriage by Rail (OTIF) is an intergovernmental organisation that governs international rail transport. OTIF consists of the parties to the Convention concerning International Carriage by Rail (COTIF). 50 countries are party to COTIF, including 26 Member States of the EU having a railway network[2]. In July 2011, the Union also acceded to the Convention by virtue of Council Decision 2013/103/EU. Thus COTIF is a so-called “mixed”-agreement[3].

Article 17(1)(a) and b of the COTIF empowers the OTIF Revision Committee to decide to modify certain parts of the COTIF and its Appendices and/or submit amendments for approval at the General Assembly of OTIF. The Revision Committee is in principle composed of all parties to the COTIF.

At its 25^th session, which took place on the 25^th and 26^th of June 2014, the Revision Committee decided upon certain amendments to the COTIF and some of its  appendices. One day prior to this meeting, on the 24^th of June 2014, the Council of the European Union adopted Decision 2014/699/EU establishing the position to be adopted on behalf of the EU at the 25^th session of the OTIF Revision Committee. This decision also established the division of competence between the EU and its Member states regarding the exercise of voting rights at the said session.  It was adopted on the basis of article 91(1) in conjunction with article 218(9) TFEU, which requires qualified majority voting in the Council. Germany, which disagreed with the adoption of the Council decision, made a unilateral statement, taking the view that the EU lacked competence to adopt the decision in regard to certain amendments.

At the 25th session of the OTIF Revision Committee, the European Commission put forward the position of the EU as set out in the annex to this decision. Germany, however, expressed a separate point of view and voted against the position of the EU. In addition, Germany publicly expressed its disagreement with the European Union exercising the right to vote.

On the 24^th of December 2014 Germany brought proceedings under Article 263 TFEU against the Council asking the CJEU to partially annul Council Decision 2014/699/EU on the grounds that the EU lacked competence to adopt that decision in so far as it concerned amendments which fall in an area of shared competence which the Union had not yet exercised internally by adopting rules of secondary law. The CJEU however, rejected the appeal of Germany in its judgment of 5 December 2017, clarifying that the exercise of the external competence by the Union is not limited to cases in which the Union (under article 3(2) TFEU) has an exclusive competence to act[4] (see also for an earlier post on this particular judgment here).

The saga continues with the case at hand: the European Commission has brought infringement proceedings under Article 258 TFEU against Germany, claiming that with its conduct at the 25^th meeting of the OTIF Revision Committee, Germany failed to fulfil its obligations under Decision 2014/699 and the principle of sincere cooperation.

3. Summary of the judgment

Admissibility             

In its judgment, the CJEU first of all addresses the objection of inadmissibility of the action raised by Germany. Germany argued that the action was inadmissible since the conduct at issue lied in the past and had ceased to produce any legal effects before the time limit laid down in the reasoned opinion of the Commission had expired. In addition, Germany pointed out that its exercise of the right to vote at the 25^th session of the OTIF Revision Committee did not have any bearing on the outcome of the decisions taken.

The CJEU however, shares the Opinion of Advocate General Szpunar that this argument cannot be accepted, stressing that an infringement of a Council decision adopted on the basis of Article 218(9) TEFU, manifests its effects not only at domestic level, but also at international level on the unity and consistency of the external action of the EU[5]. The detrimental effects of an infringement of a Council decision adopted under Article 218(9) TEFU are not confined to the decision-making process of the body of the international organisation concerned, but also manifest themselves, more generally, in the international action of the EU within that international organisation. The CJEU adds that Member States might take advantage of their own misconduct, if they could evade infringement proceedings on the grounds that an infringement of a decision adopted under Article 218(9) TFEU has already exhausted its effects. In such a situation, the Commission would be unable to bring proceedings against the Member State concerned and to perform fully its role as guardian of the Treaties, conferred on it by Article 17 TEU.

Moreover, to uphold the inadmissibility of an action for failure to fulfil obligations would be detrimental both to the binding nature of  decision adopted under Article 218(9) TFEU, and to the respect of the values on which the EU, in accordance with Article 2 TEU is founded, such as the rule of law.

Violation of Decision 2014/699

It is undisputed that Germany expressed a separate point of view from the position adopted by the Union at the 25^th session of the OTIF Revision Committee, voted against that position and expressed its disagreement with the EU exercising a right to vote. The CJEU therefore holds that Germany violated Decision 2014/699, pointing out that this measure produces binding legal effects, in that it establishes the European Union position at the 25^th session of the OTIF Revision Committee for the Commission, and on the other hand for the Member States inasmuch as it obliges them to defend that position[6].

The CJEU continues by stating that the fact that Germany disputed the lawfulness of Decision 2014/699 under Article 263 TFEU, in no way alters the binding nature of that decision. The CJEU therefore rejects Germany’s argument that the Decision is unlawful, on the ground that Germany was not able to obtain judicial protection against that decision before the opening of the 25^th session of the OTIF Revision Committee. Germany failed to seek either the suspension of the implementation of that decision or the adoption of interim measure by the Court, so that the action for annulment had no suspensive effect[7].

Furthermore, the CJEU recalls that the TFEU makes a distinction between actions against a Member State for failure to fulfil obligations under Article 258 and 259 TFEU, and actions which seek review of the lawfulness of acts or failures to act of EU institutions under Articles 263 and 265 TFEU. Pursuant to the CJEU, those remedies have different objectives and are subject to different rules. Therefore, a Member State cannot properly plead the unlawfulness of a decision or a directives addressed to it as a defence in an action for a declaration that it has failed to fulfil its obligations arising out of its failure to implement that decision or directive[8].

 

Violation of the principle of sincere cooperation

Lastly, the CJEU shares the vision of the Commission that Germany has violated the principle of sincere cooperation as laid down in article 4(3) TFEU. The CJEU holds that a Council Decision adopted on the basis of Article 218(9)TFEU is a specific expression of the requirement of unity of representation of the EU, arising from the obligation of sincere cooperation. By its conduct at the 25^th session of the OTIF Revision Committee, Germany allowed doubts to exist as to the EU’s ability to express a position and represent its Member States on the international stage. According to the CJEU, the fact that Germany distanced itself at that session from the position of the EU, runs the risk of undermining the EU’s power of negotiation within the OTIF. It follows that, by its conduct, Germany harmed the effectiveness of the international action of the EU, as well as the latter’s credibility and reputation on the international stage.

4. Comment

The judgment of the CJEU is first of all interesting in light of the admissibility of infringement actions launched by the European Commission where the alleged improper conduct lies in the past. At the same time, the CJEU’s rejection of the objection of inadmissibility raised by Germany was to be expected. After all, it does seem quite illogical, if Member States could simply escape infringement proceedings for failure to observe an EU-position established by a Council Decision on the basis of Article 218(9) TFEU on the grounds that the infringement has already exhausted its effects and by relying upon a fait accompli caused by their own misconduct[9].

In its inadmissibility plea, Germany relied upon settled case-law from the CJEU in the area of public procurement, from which it follows that an infringement action by the Commission is inadmissible when, on the expiry of the period laid down in the reasoned opinion of the Commission, the disputed procurement notice or the contracts at issue had already exhausted all their effects[10]. In his opinion, AG Szpunar submitted that the aspect crucial to the Court’s reasoning in this line of case-law was the fact that the Commission neither acted when it could have done so in those cases, nor provided an appropriate justification for such an inaction. In such circumstances, the Commission should not be able to institute infringement proceedings against a Member State at a later stage if the alleged infringement had ceased to exist. The AG suggested that a two-part (cumulative) test can be derived from the case-law of the CJEU: 1) an infringement must have ceased to exist on the expiry of the deadline set forth in the reasoned opinion; and 2) the Commission must have been able to act in order to prevent the alleged infringement from producing effects. If either of these stages is not fulfilled, the action cannot be inadmissible, according to the AG[11].

In its judgment, however, the CJEU does not confirm or apply this test suggested by the AG. Instead, the CJEU dismisses Germany’s reliance on the CJEU’s case-law in the area of public procurement “bearing in mind the particular context to which the disputed conduct relates”, pointing out that this case-law was “delivered in contexts that are purely internal to the European Union”[12]. Thus, the determining factor for the admissibility of the Commission’s infringement-action in this case is the unity and consistency of the EU’s external action.

As mentioned above, the CJEU’s judgment in this cases is preceded by the judgment rendered in respect of the action of annulment sought by Germany in Case C-600/14. In that case, the CJEU rejected Germany’s plea that the EU lacked competence to adopt Council Decision 2014/669/EU in so far as it concerned amendments which fall in an area in which the EU has not taken internal action by adopting rules of secondary law. With this judgment the CJEU confirmed the existence of “facultative mixity”[13]. The fact that that this sometimes requires a politically difficult choice to be made, is illustrated by the recent legislative acts which the EU has adopted as part of the contingency preparations for a “no-deal” Brexit scenario in the field of transport[14].

However, this choice was made by the Council when adopting Decision 2014/699 on aspects concerning shared competences on which the EU had not yet taken internal action. This case illustrates that individual member states may be outvoted when such a decision is taken. Nevertheless, all Member States are obliged to comply with a decision adopted by the Council under Article 218(9) TFEU and individual Member States are not allowed to unilaterally adopt, on their own authority, corrective or protective measures designed to cure any (alleged) breach by an institution[15].

The CJEU also rejects Germany’s claim that Decision 2014/699 is unlawful, on the ground that the Germany was not able to obtain judicial protection against that decision before the opening of the 25^th session of the OTIF Revision Committee. The CJEU notes that the disputed conduct occurred at a date prior to that on which Germany brought its action in Case C-600/14 seeking annulment of Decision 2014/699 and adds to this that Germany failed to seek either the suspension of the implementation of that decision or the adoption of interim measures by the Court. This may seem strict, considering the fact that Council Decision 2014/699 was adopted by the Council only one day prior to the 25^th session of the OTIF Revision Committee. Then again, as the CJEU observes in para. 90 of its judgment, Germany is a member of the Council, which was the author of that decision, and therefore necessarily had knowledge of it.[16] It therefore does not seem impossible for Germany to have taken the necessary preparatory measures in order to bring its action for annulment and seeking the suspension of the implementation of that decision/adoption of interim measures by the Court, on the day of the adoption of the Council Decision.

In any case, it becomes clear that the CJEU does not appreciate the approach taken by Germany to take matters into its own hands and deviate from the Union position laid down in Decision 2014/699. The judgment of the CJEU makes clear that, with this conduct, Germany not only violated Decision 2014/699, but also the principle of sincere cooperation. As the CJEU finds in para. 75 of its judgment, it follows from a reading of the minutes[17] of the 25^th session of the OTIF Revision Committee that Germany indeed expressed a separate point of view from the position by the EU, voted against that position and expressed its disagreement with the EU exercising a right to vote.

The discussion on the division of competences between the Member States and the EU has even led the Secretary-General of OTIF to express his concerns with regard to the situation and to note that “it was not up to OTIF to deal with the EU’s internal decision-making problems”. It is therefore hard to deny that the events that have led to this case did not affect the unity of the external representation of the EU.

The CJEU’s finding that, by its conduct, Germany harmed the effectiveness of the international action of the Union, as well as the latter’s credibility and reputation on the international stage is therefore not surprising. The case also perfectly illustrates why external relation discussions should remain internal to the EU.

*The views expressed are exclusively those of the author.

[1] International agreements are “mixed”  if they are concluded by both the Union and the Members states on the one hand, and one or more third countries or an international organization on the other hand.

[2] All Member States are party to COTIF, except Cyprus and Malta

[3] Annex I to Decision 2013/103/EU contains a Declaration by the EU concerning the exercise by the European Union of the shared competence with the Member states in the rail sector  and Annex III sets out the internal arrangements for the Council, the Member States and the Commission in proceedings under OTIF.

[4] See case C-600/14 Germany v. Council of the European Union (OTIF)

[5] Case C-600/14, para. 45

[6] Case C-620/14, para. 82

[7] Case C-620/14, para. 87

[8] Unless the act in question contained such particularly serious and manifest defects that it could be categorised as a non-existent act, see Case C-620/14, para. 89

[9] Case C-620/14, paras. 48 and 57.

[10] See: Case C-525/03 Commission v. Italy and Case C-237/05, Commission v. Greece

[11] See the Opinion of AG Szpunar, paras. 58-59

[12] See Case C-620/16, para. 53

[13] See also: https://europeanlawblog.eu/2017/12/11/case-c-60014-germany-v-council-otif-more-clarity-over-facultative-mixity/).

[14] See in particular the disclaimers made in respect of the necessary exercise of shared competences by the Union in order to adopt these contingency measures in recital 10 of the Regulation with regard to the common rules ensuring basic road freight and road passenger connectivity with regard to the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the Union;  and in recital 10 and article 2 of the Regulation on common rules ensuring basic air connectivity and the  statements made in respect of that act. It is clarified that in view of the exceptional and unique circumstances that necessitate the adoption of these Regulations, it is appropriate for the Union to exercise temporarily the relevant shared competence conferred upon it by the Treaties. The exercise by the Union of the shared competence is limited to the period of application of these Regulations. Accordingly, the shared competence will cease to be exercised by the Union as soon as these Regulations ceases to apply. In addition, it is noted that the exercise of Union competence pursuant to these Regulations shall be without prejudice to the competence of the Member States concerning traffic rights in any ongoing or future negotiations, signature, or conclusion of international agreements related to air services with any third country, and with the United Kingdom with respect to the period after this Regulation has ceased to apply.

[15] Case C-620/16, para. 88

[16] Indeed, as follows from the note sent by the General Secretariat of the Council to Coreper and Council in preparation of the adoption of the act: the proposal for the Council Decision has been examined by the responsible Council Working Party on three occasions before it was sent to the Council (via Coreper) with a view to adoption. At the last meeting, on 16 June 2014, it was quite clear that there was not much support for Germany’s position and that the text of the Decision would be submitted to the Coreper and the Council as an I/A Item (meaning that there was sufficient support for the Decision to be adopted by the Council)

[17] See pages 13-16 of the minutes