EU LAW: The European Court of Justice has just ruled that setting a shorter limitation period for requesting reimbursement of illegally levied tax for environmental labels upon registration of a motor vehicle was in conflict with the EU law principle of equivalence. A limitation period must not put a taxable person in a worse position than in national areas.
Read lawyer Hans Sønderby Christensen’s article published on Saturday, December 26 on Jyllands-Posten’s website here or download it as a PDF here.
On August 25, 2014, the Romanian company SC Valoris SRL (hereinafter Valoris) paid a fee equivalent to EUR 510 for an environmental label for motor vehicles. The fee was levied as part of Romanian legislation for the first-time registration in Romania of a used motor vehicle. After payment of the fee, the European Court of Justice ruled that this fee was incompatible with EU law, and reimbursement should therefore be made. On August 7, 2017, new Romanian legislation came into force, which aimed to set the framework for the reimbursement of the fee, which had been levied in violation of EU law. The Romanian legislation stated that the request for reimbursement should be submitted no later than August 31, 2018, as the right to reimbursement would otherwise lapse. The deadline was therefore 1 year.
Valoris submitted a request for reimbursement to the public finance authority in Vâlcea on December 6, 2018. The regional directorate-general for public finances rejected the request. The Romanian government stated as justification that the adoption of this special deadline was intended to avoid Romania’s budget being burdened by interest payments. The Romanian government believed that there was a risk that the interest payment would become far too high if the request for reimbursement of the environmental label fee was not subject to a special deadline. Valoris filed a lawsuit on January 30, 2019, with Tri-bunal Vâlcea (the court of first instance in Vâlcea in Romania). Valoris believed that the Romanian authorities were obliged to reimburse the company for the disputed fee plus interest, even though the company had not met the deadline. In support of Valoris’ claim, the company argued that the 1-year deadline disregarded EU law, as it limited Valoris’ opportunity to obtain reimbursement. Tribunal Vâlcea then submitted 2 preliminary questions to the European Court of Justice.
Tribunal Vâlcea wished to be informed by the European Court of Justice whether the set deadline for requesting reimbursement of the illegally levied fee was compatible with the EU law principles of effectiveness and equivalence. In addition, Tribunal Vâlcea informed the European Court of Justice that the general limitation period was 5 years under current Romanian legislation regarding the reimbursement of tax and duty claims. The Romanian government contested this comparison as unfounded.
Regarding the first question, Tribunal Vâlcea wished to be informed whether the principle of effectiveness, taken together with the principle of loyal cooperation, precluded Romania from setting a limitation period of 1 year. The European Court of Justice noted in this regard that the preliminary question concerned not only the reimbursement of fees paid for the environmental label, but generally the reimbursement of fees that have been levied in violation of EU law.
The European Court of Justice then ruled that the principle of effectiveness entails that Member States must not make it impossible or excessively difficult to exercise the rights conferred under the Union’s legal order. It follows from established case law that Member States retain the right to apply the procedural provisions laid down in their national legal order, including the setting of limitation periods. However, it is a requirement that these procedural provisions are not in conflict with EU law. Specifically regarding limitation periods, the European Court of Justice has ruled that the setting of reasonable limitation periods meets the requirement of effectiveness when these protect the legal certainty of the person concerned. The European Court of Justice then stated that a deadline of 1 year for submitting a request for reimbursement of a fee levied in violation of EU law is not in itself unreasonable and therefore not in conflict with the principle of effectiveness. The European Court of Justice therefore concluded that the Romanian legislation was laid down in such a way that it was practically possible for Valoris to obtain the rights that Valoris is granted by EU law.
With the second question, Tribunal Vâlcea wished to be informed whether the principle of equivalence should be interpreted in such a way that it precludes the setting of a limitation period of 1 year when Romanian legislation has not set such a deadline for similar reimbursements. The European Court of Justice stated that the principle of equivalence implies that Member States must not lay down procedural rules for requesting reimbursement of a fee that are less advantageous than those that apply to corresponding lawsuits. According to EU law, it is solely up to the national court, which has direct knowledge of the national procedural rules, to verify whether these rules are in accordance with the principle of equivalence. However, the European Court of Justice can give the national court guidelines for the interpretation of EU law.
The European Court of Justice examined, as the first thing, whether the procedural rules for cases brought after illegal levying of the environmental fee were less favorable than the remedies that are solely based on the disregard of national legal rules. Initially, it was noted that the limitation period of 1 year was already significantly shorter than the general period of 5 years for reimbursement of taxes and duty claims. Thus, it could be established that there was a less favorable rule for reimbursement of the fee for the environmental label. With this finding, the European Court of Justice could not rightly be doubted by the arguments that the Romanian government had previously put forward about the burden on the government’s budget due to interest payments. The European Court of Justice found it undisputed that the adoption of a limitation period of 1 year resulted in a shortened application deadline. Such a procedural provision, such as the one in the main case, thus had the less favorable effect of shortening the reimbursement period that applied to other taxable persons who have lost the full right to the period of five years. The general period of five years for the collection of taxes and duty claims, on the other hand, applied in full in this area.
In conclusion, the European Court of Justice stated that the principle of equivalence precludes a Member State’s legislation from setting a shortened limitation period of 1 year when the same period is longer for reimbursement of tax and duty claims for disregard of national law.
The European Court of Justice’s judgment is particularly interesting for the individual’s rights when procedural provisions are created. The setting of procedural provisions must be in accordance with the EU law principles. The EU law principles are precisely helping to ensure that the individual’s legal position is not impaired. Economic considerations can therefore not justify that procedural provisions are arranged in such a way that the individual’s legal position is impaired.
