Is Altmark not applicable to ambulance services? Or is San Lorenzo & Croce Verde not very clear? (C-113/13)

In view of the Judgment in San Lorenzo and Croce Verde Cogema, C-113/13, EU:C:2014:2440, the rules applicable to the provision of emergency ambulance services is definitely clear as mud. In the case at hand, the applicants challenged an Italian law whereby emergency ambulance services must be awarded on a preferential basis and by direct award, without any advertising, to certain voluntary bodies (such as the Red Cross). This rule has, ultimately, constitutional protection in Italy, as 'the Italian Republic has incorporated into its constitution the principle of voluntary action by its citizens. Thus, the last paragraph of Article 118 thereof provides that citizens, acting individually or in an association, may participate in activities of public interest with the support of the public authorities, on the basis of the principle of subsidiarity' (para 9).

The applicants' argument was not necessarily of a constitutional level, but rather that freedom of establishment is unduly restricted by a preferential scheme that excludes the tendering out of those ambulance services. They brought forward arguments based on general free movement provisions, public procurement rules and competition rules. The latter are not examined because the CJEU considered that the public procurement analysis makes it unnecessary (para 64).

In my view, if read paragraph by paragraph, the reasoning of the CJEU is accurate and technically precise, but the overall Judgment is too timid in spelling out the conditions for the application of the 'public service exception' under art 106(2) TFEU (or otherwise) tot he direct award of emergency ambulance services to voluntary action associations. I will try to summarise my criticism and doubts as succinctly as possible. This is an area where more considered research is definitely needed.

On the bright side, I think that some positions of the CJEU can be clearly spelled out. 

(1) When fully applicable, both Dir 2004/18 and Dir 2014/24, preclude legislation such as that at issue in the main proceedings which provides that the local authorities are to entrust the provision of urgent and emergency ambulance services on a preferential basis and by direct award, without any advertising, to the voluntary bodies mentioned in the agreement (para 44). However, Dir 2004/18 does not automatically apply to ambulance services (see 2 below) and art 10(h) Dir 2014/24 clearly excludes these contracts from its scope of application (para 8). Hence, this clear position is not that useful in practice.

(2) Where the Directives are not fully applicable (ie where contracts can be tendered under part B services rules under dir 2004/18, or under the special regime for social services under arts 74-77 dir 2014/24), the general principles of transparency and equal treatment flowing from articles 49 TFEU and 56 TFEU would be applicable (para 45) if the contract is of cross-border interest (paras 46-50). In that case, it is also clear that such a preferential scheme would run contrary to the Directives, which are: 'intended to ensure the free movement of services and the opening-up to competition in the Member States which is undistorted and as wide as possible' (para 51). 

(3) Implicitly, then, where the Directives do not apply at all but the contract is still of cross-border interest (ie the new likely situation under art 10(h) dir 2014/24), the award of the contract is 'merely' subjected to the (residual/general) requirements of articles 49 TFEU and 56 TFEU. In that case (not expressly assessed in the San Lorenzo & Croce Verde Judgment), the contracting authority still would need to go through the applicable assessment under the market access test generally applicable to restrictions of freedom of establishment [for two thought provoking attempts to rationalise this test, see E Christodoulidis, 'The European Court of Justice and Total Market Thinking' (2013) 14 German Law Journal 2005; and MS Jansson & H Kalimo, 'De minimis meets “market access”: Transformations in the substance – and the syntax – of EU free movement law?' (2014) 51(2) Common Market Law Review 523].

Hence, there are always concerns and constraints derived from EU law (either general, or the specific rules of public procurement) if the contract is of cross-border interest. Nonetheless, they are of varying degrees of intensity and it looks as if upon the entry into force of Directive 2014/24, the award of service contracts for emergency ambulance services  (either exclusively, or for most of their value if the contracts include other sorts of ambulance services) will exclusively be governed by the general rules on freedom of establishment.

On the shady side, though, once the potential incompatibility with EU public procurement or general free movement law is established (and, really, there seems to be no escape to 1-3 above except if the contract has no cross-border interest whatsoever--and, on that, see the  Ancona issue here), the CJEU will apply a Sodemare-like test because the provision of ambulance services falls within the (very broad) remit of the organisation of healthcare and social security systems (paras 55-59). In that case, then, it will particularly important that "EU law does not detract from the power of the Member States to organise their public health and social security systems" (para 55), but that "it is for the Member States, which have a discretion in the matter, to decide on the degree of protection which they wish to afford to public health and on the way in which that degree of protection is to be achieved" (para 56). So far, so good.

On the dark side, however, and significantly departing from the more developed approach in Altmark for SGEIs (is the CJEU implicitly recognising--without analysis--that ambulance services are per se SSGIs?), the CJEU has created an economically oriented safeguard that leaves too much room for maneuver by ruling that
Having regard to the general principle of EU law on the prohibition of abuse of rights (see, by analogy, judgment in 3M Italia, C‑417/10, EU:C:2012:184, paragraph 33), the application of that legislation cannot be extended to cover the wrongful practices of voluntary associations or their members. Thus, the activities of voluntary associations may be carried out by the workforce only within the limits necessary for their proper functioning. As regards the reimbursement of costs, it must be ensured that profit making, even indirect, cannot be pursued under the cover of a voluntary activity and that volunteers may be reimbursed only for expenditure actually incurred for the activity performed, within the limits laid down in advance by the associations themselves (C-113/13, para 62, emphasis added).
In my view, this is way too timid. Indeed, the CJEU constructs a rather weak safeguard by not focussing at all in the economic efficiency of the voluntary activities (which, even on a non-profit, reimbursement basis can be extremely inefficient) and imposes a sort of 'anti-fraud' test that, in my view, misses the point. In order to ensure compatibility with State aid provisions (which should not have been set aside so quickly in para 64), an efficiency based test like the one existing in the fourth condition of Altmark should have been imposed [for discussion, see A Sanchez Graells, “The Commission’s Modernization Agenda for Procurement and SGEI”, in E Szyszczak & J van de Gronden (eds) Financing SGEIs: State Aid. Reform and Modernisation, Legal Issues of Services of General Interest Series (The Hague, TMC Asser Press / Springer, 2012) 161-181]. 

Indeed, the analysis of the applicability of Art 106(2) TFEU to the case is totally missing and this is strange. It looks like the difference between SGEIs and SSGIs will haunt all of us also under the 2014 Directives and revised guidance from the European Commission is becoming urgently needed, given the implicit vacuum that can exist if Member States maximise the possibilities of direct award under art 10(h) dir 2014/24, but equally under its arts 74-77 (and particularly, the latter).

As briefly mentioned, this is an area where more research is needed. I hope I can convince some colleagues to put together a research project on this soon. Interested contributors, please feel free to contact me at

#CJEU pushes for EU single fiscal territory in ban of Spanish 'cross-border' tax on unrealised capital gains (C-64/11 Commission v Spain)

In its Judgment of 25 April 2013 in case C-64/11 Commission v Spain (press release), the Court of Justice of the EU has pushed for the further consolidation of the EU single fiscal territory by preventing any discriminatory tax treatment between companies that transfer their place of residence inside a Member State (domestic transfer) and those that transfer it to another EU Member State (EU transfer).

In the case at hand, Spanish corporate taxation law makes unrealised capital gains form part of the basis of assessment for the tax year, where the place of residence or the assets of a company established in Spain are transferred to another Member State. This rule has been challenged by the Commission as a restriction of freedom of establishment in that it puts the companies which have exercised that freedom at a cash-flow disadvantage.

The CJEU has indeed found that the immediate taxation of unrealised capital gains on the transfer of the place of residence or of the assets of a company established in Spain to another Member State amounts to a restriction on the freedom of establishment since, in such cases, a company is penalised financially as compared with a similar company which carries out such transfers in Spanish territory--in respect of which capital gains generated as a result of such transactions do not form part of the basis of assessment for corporate taxation until the transactions are actually carried out.

The CJEU has struck down such restriction as disproportionate in considering that Spain could preserve its powers in taxation matters by means of measures which are less harmful to the freedom of establishment. The CJEU considers it possible, for example, to request payment of the tax debt following the transfer, at the point at which the capital gains would have been taxed if the company had not made that transfer outside of Spanish territory. Moreover, the mechanisms of mutual assistance which exist between the authorities of the Member States are sufficient to enable the Member State of origin to assess the veracity of declarations made by companies which opt to defer payment of the tax. Thus, the Court clearly finds that the right to the freedom of establishment does not preclude capital gains generated in a territory from being taxed, even if they have not yet been realised, but it does preclude a requirement that that tax be paid immediately.

In this Judgment, the CJEU is clearly pushing for a suppression of tax borders within the EU and for an effective treatment of corporate changes of residence within the single market as domestic transfers. The CJEU strongly relies on the effectiveness of the current mechanisms of administrative cooperation in the field of taxation (as sufficient to enable Member States to exercise effective monitoring of transferred companies). These cooperation mechanisms (timidly created in 1977 by Council Directive 77/799/EEC) were revamped in 2011 by means of Council Directive 2011/16/EU and its Implementing Regulation 1156/2012

Directive 2011/16 had to be transposed into national laws by 1 January 2013 but, as of today, several Member States have not yet communicated any implementing measures to the Commission--including Belgium, Czech Republic, Germany, Greece, Italy, Hungary, Poland and Portugal. This means that Member States need to get up to speed and effectively implement measures of administrative cooperation in tax matters if they want to keep (or improve) the effectiveness of their tax systems in the (growing) EU single fiscal territory.

As indicated in Directive 2011/16, Member States need to use their  'power to efficiently cooperate at international level to overcome the negative effects of an ever-increasing globalisation on the internal market'. Surely, developments and best practices generated in this inter-institutional cooperation setting will be relevant in the (likely?) future creation of a single EU tax authority.

CJEU puts a stop to the 'kidnapping' of investors in public undertakings: a broader reading of C-244/11

In its Judgment of 8 November 2012 in case C-244/11 Commission v Greece, the CJEU assessed the compatibility with EU Law of a Greek scheme that required prior authorization for the acquisition of voting rights representing 20% or more of the share capital in certain strategic public limited companies in the utilities sectors which operate national infrastructure networks within a monopoly context. 

Most remarkably, the supervision scheme included a provision for ex post control in regard to the adoption of certain decisions. More specifically, under Article 11 of Law 3631/2008 on the creation of a national fund for social cohesion:
The decisions of those strategic undertakings relating to the [following (?)] subjects shall be subject to authorization by the Minister for Finance for purposes of general interest:
(a) dissolution of the undertaking, its placing in liquidation and the designation of liquidators;
(b) restructuring the abovementioned undertakings: conversion, merger with another company, merger with the creation of a new public limited company, break-up in any form whatsoever or break-up of one or more divisions liable to place in jeopardy the supply of services in the sectors of strategic importance;
(c) transfer, transformation or conversion, disposal, supply as a guarantee, as well as transformation or alteration of the allocation of strategic elements of the assets of the abovementioned undertakings and of the basic networks and infrastructure necessary for the economic and social life of the country as well as its security.
The CJEU assessed the compatibility of such ex post veto scheme controlling the adoption of certain (strategic) decisions of those public limited companies (whose shares are quoted on the stock exchange and may be purchased freely on the market) under the Treaty provisions on the free movement of capital and the freedom of establishment and (not surprisingly) found that it was not compatible with EU Law.

According to the CJEU, 
80 As regards […] the arrangements for ex post control of certain decisions taken by the strategic public limited companies at issue, such as provided for in Article 11(3) of Law 3631/2008, the Hellenic Republic maintains that it must be accepted, as it is similar to the scheme at issue in Case C-503/99 Commission v Belgium, in respect of which the Court held that it was justified by the objective of guaranteeing the security of energy supply in the event of a crisis.
81 The Court has held that it results from paragraphs 49 to 52 of the Judgment in Case C-503/99 Commission v Belgium that the national scheme at issue was characterized by the fact that it specifically listed the strategic assets concerned and the management decisions which could be challenged in any given case. Finally, the intervention by the administrative authorities was strictly limited to cases in which the objectives of the energy policy were jeopardized  Any decision taken in that context had to be supported by a formal statement of reasons and was subject to an effective review by the courts (Judgment in Case C‑463/00 Commission v Spain, paragraph 78). 
82 However, following the example of the schemes examined by the Court in its Judgments in Case C-463/00 Commission v Spain and in Case C‑326/07 Italy v Commission, the scheme at issue in the present case, even it if it is of an ex post nature and is therefore less restrictive than an ex ante scheme, cannot be justified in the light of the criteria stemming from the Judgment in Case C-503/99 Commission v Belgium. 
83 First, as for the decisions listed in Article 11(3)(a) and (b) of Law 3631/2008, the Court has already held that such decisions do not constitute, contrary to the decisions which formed the background to Case C-503/99 Commission v Belgium (paragraph 50), specific management decisions but decisions fundamental to the life of an undertaking (Judgment in Case C-463/00 Commission v Spain, paragraph 79). 
84 Next, the specification in Article 11(3)(b) and (c), according to which it applies to decisions in so far as they are ‘capable of jeopardizing the supply of services in sectors of strategic importance’ or they concern the ‘allocation of strategic elements of the assets of the abovementioned undertakings and of the basic networks and infrastructure necessary for the economic and social life of the country as well as its security’, may hardly be considered to be a specific list of the strategic assets concerned
85 Finally, even if, as the Hellenic Republic claims, Article 11(3) of Law 3631/2008 must be understood as meaning that the right to object which it provides may be exercised only to guarantee the continuity of services supplied and the operation of networks, the fact remains that, with no details of the actual circumstances in which the right to object may be exercised, the investors are not able to know when it may be applicable
86 Accordingly, as the Commission maintains, the circumstances in which the right to object may be exercised are potentially numerous, undetermined and indeterminable and leave the national authorities too much discretion
87 Consequently, it must be stated that […] the Hellenic Republic has failed to fulfill its obligations under Article 43 EC on the freedom of establishment. (CJEU in C-244/11, at paras 80 to 87, emphasis added).
In my view, this new Judgment clearly indicates that the CJEU is ready to prevent any type of ex post intervention by Member States in the adoption of decisions that can be seen as fundamental to the life of an undertaking, and that any intervention schemes based on public interests need to be predefined, specific enough and amenable to effective judicial review.

This should be taken into consideration in the redesign of regulatory schemes in some Member States (such as Spain, where some ex post intervention competences are planned to be transferred back to the sectorial Ministry and out of the current independent regulators' hands), since most generic ex post decisions may fall short of meeting the stringent criteria set by the CJEU in C-244/11 Commission v Greece

This would should also generate trust on the side of investors in 'strategic' companies (generally in the utilities sector) and may contribute to keep their ability to undertake long term investments (in infrastructure, R&D, etc) without fearing undue governmental intervention. In general, preservation of investors' freedom in these sectors seems to be the clear bet made by the CJEU, and this shall prevent a new wave of public intervention (which could easily result from the structural reforms that the economic crisis is triggering).

A further step towards effective free movement of corporations

In its Judgement of 12 July 2012 in case C-378/10 VALE Építési Kft. (, the Court of Justice of the EU has extended its doctrine on the applicability (and limits) of the freedom of establishment (and movement) of corporations in cases of conversion (ie the changing of the seat of a company, together with the national law applicable to it). 

In my view, VALE goes further than the prior string of case law in Centros (Case C-212/97, 9 March 1999), Überseering (Case C-208/00, 5 November 2002), and Inspire Art (Case C-167/01; 30 September 2003) but follows the same logic of dismantling domestic corporate law systems based on connection points closely linked to the "real seat theory"; and pushes strongly in favour of mutual recognition of corporate forms (and, potentially, for harmonisation of the regulation of a true 'standard' EU corporation or partnership).

In VALE, the CJEU notes that, in the absence of a uniform definition of companies in EU law, companies exist only by virtue of the national legislation which determines their incorporation and functioning. Thus, in the context of cross-border company conversions, the host Member State may determine the national law applicable to such operations and apply the provisions of its national law on the conversion of national companies that govern the incorporation and functioning of companies. However, national legislation in this area cannot escape the principle of the freedom of establishment from the outset and, as a result, national provisions which prohibit companies from another Member State from converting, while authorising national companies to do so, must be examined in light of that principle (paras. 27 to 33).

In conducting that analysis, the CJEU has found that "in so far as the national legislation at issue in the case in the main proceedings provides only for conversion of companies which already have their seat in the Member State concerned, that legislation treats companies differently according to whether the conversion is domestic or of a cross‑border nature, which is likely to deter companies which have their seat in another Member State from exercising the freedom of establishment laid down by the Treaty and, therefore, amounts to a restriction with the meaning of Articles 49 TFEU and 54 TFEU" (para. 36, emphasis added). Moreover, "differences in treatment depending on whether a domestic or cross‑border conversion is at issue cannot be justified by the absence of rules laid down in secondary European Union law. Even though such rules are indeed useful for facilitating cross-border conversions, their existence cannot be made a precondition for the implementation of the freedom of establishment" (para. 38, emphasis added). 

Therefore, it seems cleat that the CJEU once again uses the principle of non-discrimination on the basis of nationality as a lever to push for new developments in EU company law (even in cases where there is limited cross-border effect because only one small company is concerned, and a matter of principle).

In the remainder of the VALE Judgment, the CJEU finds, firstly, that the application to the foreign converted company of the provisions of a national law on domestic conversions governing the incorporation and functioning of companies, such as the requirements to draw up lists of assets and liabilities and property inventories, cannot be called into question. Further than that, where a Member State requires, in the context of a domestic conversion, strict legal and economic continuity between the predecessor company which applied to be converted and the converted successor company, such a requirement may also be imposed in the context of a cross-border conversion (paras. 42 to 55).

However, the CJEU finds that EU law precludes the authorities of a Member State from refusing to record in its commercial register, in the case of cross-border conversions, the company of the Member State of origin as the predecessor in law of the converted company, if such a record is made of the predecessor company in the case of domestic conversions (paras. 55 and 56). And, finally, the CJEU finds that, when examining a company’s application for registration, the authorities of the host Member State are required to take due account of documents obtained from the authorities of the Member State of origin certifying that, when it ceased to operate, that company did in fact comply with the national legislation of that Member State
(paras. 57 to 61). Therefore, the CJEU further pushes for mutual recognition of documents and mutual reliance on domestic laws concerning conversion of companies.

I think that, overall, VALE is an important Judgment in the general area of EU company law and goes further than the specifics of corporate conversion, as it seems clear that the Court remains strongly committed to spur change and harmonisation of domestic rules.