CELEX: 62005CJ0173
Failure of a Member State to fulfil obligations
Articles 23 EC, 25 EC and 133 EC
EEC-Algeria Cooperation Agreement
Environmental protection tax on gas pipelines installed in the Sicilian Region
Charge having equivalent effect to a customs duty

1       By its application, the Commission of the European Communities seeks a declaration from the Court that, by adopting and maintaining
in force the ‘environmental tax’ on gas pipelines provided for in Article 6 of Sicilian Regional Law No 2 laying down programme
and financial provisions for 2002 (legge n. 2, Disposizioni programmatiche e finanziarie per l’anno 2002) of 26 March 2002
(GURS (Official Journal of the Sicilian Region) No 14 of 27 March 2002, Part 1, p. 1) (‘the Sicilian Law’), the Italian Republic
has failed to fulfil its obligations under Articles 23 EC, 25 EC, 26 EC and 133 EC and Articles 4 and 9 of the Cooperation
Agreement between the European Economic Community and the People’s Democratic Republic of Algeria, signed in Algiers on 26
April 1976, and approved on behalf of the Community by Council Regulation (EEC) No 2210/78 of 26 September 1978 (OJ 1978 L 263,
p. 1) (‘the Cooperation Agreement’).

Legal framework

Community legislation
The Cooperation Agreement
2       According to Article 1 of that agreement:
‘The object of this Agreement between the European Economic Community and Algeria is to promote overall cooperation between
the Contracting Parties with a view to contributing to the economic and social development of Algeria and helping to strengthen
relations between the Parties. To this end provisions and measures will be adopted and implemented in the field of economic,
technical and financial cooperation, and in the trade and social fields.’
3       For the purposes of Article 4(1) of that agreement, the purpose of cooperation between the Community and the People’s Democratic
Republic of Algeria is to promote, in particular:
‘…
–       the marketing and sales promotion of products exported by Algeria;
…
–       as regards energy, the participation by Community operators in programmes for the exploration, production and processing of
Algeria’s energy resources and any activities which would develop these resources on the spot, and the proper performance
of long-term contracts for the delivery of oil, gas or petroleum products between their operators;
…’.
4       Article 9(1) of the Cooperation Agreement provides that ‘products originating in Algeria which are not listed in Annex II
to the Treaty establishing the European Economic Community shall be imported into the Community free of quantitative restrictions
and measures having equivalent effect, and of customs duties and charges having equivalent effect’.
5       Methane gas is one of the products listed in Article 9 of the Cooperation Agreement.

National legislation
6       Article 6 of the Sicilian Law provides:
‘…
1.      An environmental tax shall be introduced for the purpose of funding investments to reduce and to prevent environmental risks
arising from the presence of gas pipelines containing methane gas installed in the Sicilian Region’s territory. The revenue
shall be used to fund initiatives for preserving, protecting and improving the quality of the environment, particularly in
the zones those pipelines cross.
…
3.      … The chargeable event shall be ownership of the gas pipelines, containing the gas, which cross the territory of the Sicilian
Region.
4.      Owners of the type 1 gas pipelines referred to in paragraph 3 who carry on at least one of the activities of transportation,
distribution, sales or purchasing shall be liable to pay the tax.
5.      For the purposes of the tax, gas pipeline shall mean all the pipes, bends, joints, valves and other special components which
as a whole serve to transport and distribute natural gas.
6.      The basis of assessment for the tax shall be the volume, measured in cubic meters, of gas pipelines classed as type 1 pipelines
within the meaning of the Ministerial Order of 24 November 1984, which regulates, for safety purposes, installations for the
transportation and distribution of natural gas by pipeline.
7.      The tax shall be determined for the annual tax period according to the basis of assessment referred to in paragraph 6.
…
10.      The tax shall be payable by the taxable persons referred to in paragraph 4 by calendar year, proportionally to the months
of the year in which they were owners;
…’.
7       According to Section 1(1.3) of the annex to the Ministerial Order of 24 November 1984 (ordinary supplement to GURI No 12 of
15 January 1985), type 1 pipelines are pipelines in which the pressure is higher than 24 bars.

Pre-litigation procedure
8       During 2002 and 2003, the Commission asked the Italian authorities for clarifications concerning the detailed rules for the
application of the environmental tax established by the Sicilian Law.
9       By letter of 9 September 2003, the Italian authorities informed the Commission that the tax had not been applied in practice
in the Italian legal system since the Tribunale amministrativo regionale della Lombardia had considered that the Sicilian
law was not compatible with the rules of Community law.
10     The Commission considered that those observations were neither exhaustive in fact nor well founded in law and, on 19 December
2003, sent the Italian Republic a letter of formal notice in which it stated that the tax in question was contrary to Articles
23 EC, 25 EC, 26 EC and 133 EC and also Articles 4 and 9 of the Cooperation Agreement.
11     Having received no response to that letter of formal notice, despite having granted an extension of the reply period, on 9
July 2004 the Commission issued a reasoned opinion, requesting the Italian Republic to take the measures necessary to comply
with that reasoned opinion within two months of its receipt.
12     Since the Italian Republic did not respond to that opinion, the Commission decided to bring this action.

The action

Arguments of the parties
13     The Commission states, first of all, that in the Sicilian Region there is a single infrastructure of gas pipelines transporting
natural gas which meets the taxation conditions laid down by the Italian legislation. That infrastructure, which is linked
to the trans-Mediterranean gas pipelines, transports natural gas from Algeria for the purpose of distribution and consumption
in Italy and also export to other Member States.
14     The Commission claims that, in the light of the wording of the Sicilian Law, the true purpose of the charge in question is
to tax the transported product, namely methane gas, and not the infrastructure itself. Under the Sicilian legislation, the
chargeable event is ownership of the gas pipelines containing the gas, whilst the persons liable to that tax are the owners
of the gas pipelines who carry on at least one of the activities of transportation, sales or purchasing of the gas. The Commission
also observes that the basis of assessment is the volume of the gas pipelines containing the gas.
15     Consequently, the Commission submits, goods originating in a non-member country and placed in free circulation or in transit
in Italy are made subject to a pecuniary charge which amounts to a charge having equivalent effect to a customs duty on imports
(if the gas is imported into the Community) or exports (if that gas is transported to other Member States). It is settled
case-law that the imposition of new taxes or measures having equivalent effect on goods imported directly from non-member
countries is prohibited (Joined Cases 37/73 and 38/73
Indiamex
and De Belder
[1973] ECR 1609, paragraphs 10 to 18, and Case 266/81
SIOT
[1983] ECR 731, paragraph 18).
16     The Commission adds that it follows from the customs union system that customs duties and charges having equivalent effect
applicable to goods moving between Member States are prohibited irrespective of the purpose for which they were introduced.
The concept of a ‘charge having equivalent effect to a customs duty’ is an objective legal concept of Community law (Joined
Cases C-485/93 and C‑486/93
Simitzi
[1995] ECR I‑2655, paragraph 14).
17     The Commission states that the introduction of the environmental tax is in breach of the Common Customs Tariff and, consequently,
Articles 23 EC, 25 EC, 26 EC and 133 EC, since that tax alters the equalisation of customs charges imposed at the Community’s
external borders on goods imported from non-member countries, potentially causing deflections of trade in relations with those
countries and distortions in the free movement of goods or in conditions of competition between Member States (Case C‑109/98
CRT France international
[1999] ECR I-2237, paragraphs 22 to 23, and case-law cited).
18     It states, second, that, where it is provided for in bilateral or multilateral agreements concluded by the Community with
one or more non-member countries with a view to eliminating obstacles to trade, the prohibition of charges having equivalent
effect to customs duties has the same scope as in intra-Community trade (Case C-125/94
Aprile
[1995] ECR I‑2919, paragraphs 38 and 39).
19     It adds that, according to settled case-law, a Member State may not levy transit duties or any other charge relating to the
passage of goods through its territory, as those duties have an equivalent effect to an export duty (
SIOT
, paragraphs 18, 19 and 23, and Case C-389/00
Commission
v
Germany
[2003] ECR I‑2001, paragraphs 50 and 51).
20     The Italian Government contends that the disputed tax cannot be categorised as a charge having equivalent effect to a customs
duty.
21     The Italian Government considers that the Commission has not taken into account the purpose of the environmental tax, which
must be regarded as applying the environmental principles referred to in the EC Treaty, in particular the precautionary principle.
22     The Italian Government adds that the disputed tax has unique, specific features related to compliance with the precautionary
principle.
23     In this regard it observes that the tax at issue must be paid only if the gas is actually present in the infrastructure and
if the owner carries on one of the activities of transportation, distribution, sales or purchasing of the gas. That approach
reflects a wish on the part of the regional legislature to tax only activities carrying a potential risk of damage to the
environment.
24     The Italian Government notes that the revenue generated by the tax in question is to be used to finance investments to reduce
and prevent potential environmental risks arising from the presence of the infrastructures installed in the Sicilian Region.
Thus, environmental protection, which is one of the objectives recognised by Community law as being fundamental, is the sole
purpose of the disputed tax. That inherent link between the tax and its environmental objective is the irrefutable proof that
the disputed tax is not customs-related in nature.
25     The Italian Government further states that the environmental tax is not levied on goods, but only on the transport infrastructure,
the relationship between the amount of the tax and the volume of the gas transported being merely a technical parameter serving
to establish a link with the actual extent of the risk created for the environment. The effect of the tax on the price of
the goods is purely incidental and depends not on the tax itself but on the will of the owner of the gas pipeline.
26     In the light of the foregoing, the Italian Government asks the Court to dismiss the application as unfounded.

Findings of the Court
Preliminary observations
27     Before considering the present case on its merits, the Court notes that, under Article 23(1) EC, the Community is to be based
upon a customs union which is to cover all trade in goods. That union involves the prohibition between Member States of all
customs duties on imports and exports and of all charges having equivalent effect to such duties, and also the adoption of
a common customs tariff in their relations with third countries.
28     Any pecuniary charge, whatever its designation and mode of application, which is imposed unilaterally on goods by reason of
the fact that they cross a border, and which is not a customs duty in the strict sense, constitutes a charge having equivalent
effect within the meaning of Articles 23 EC and 25 EC, even though such pecuniary charge is not levied for the benefit of
the State (see, to that effect, Case C‑293/02
Jersey Produce Marketing Organisation
[2005] ECR I‑9543, paragraph 55, and Case C‑517/04
Koornstra
[2006] ECR I‑5015, paragraph 15).
29     The Common Customs Tariff is intended to achieve an equalisation of customs charges levied at the borders of the Community
on products imported from non-member countries, in order to avoid any distortion of free internal circulation or of competitive
conditions (
Indiamex
and De Belder
, paragraph 9, and Case C-126/94
Cadi Surgelés and Others
[1996] ECR I‑5647, paragraph 14).
30     Both the unicity of the Community customs territory and the uniformity of the common commercial policy would be seriously
undermined if the Member States were authorised unilaterally to impose charges having equivalent effect to customs duties
on imports from non-member countries (see, to that effect,
Aprile
, paragraph 34).
31     Moreover, the customs union necessarily implies that the free movement of goods between Member States should be ensured. That
freedom could not itself be complete if it were possible for the Member States to impede or interfere in any way with the
movement of goods in transit. It is therefore necessary, as a consequence of the customs union and in the mutual interest
of the Member States, to acknowledge the existence of a general principle of freedom of transit of goods within the Community
(
SIOT
, paragraph 16).
32     The Member States would contravene the principle of freedom of transit within the Community if they were to apply to goods
in transit through their territory, including those imported directly from non-member countries, transit duties or other charges
imposed in respect of transit (see, to that effect,
SIOT
, paragraphs 18 and 19).
33     There is, moreover, no reason to interpret the prohibition of charges having an effect equivalent to customs duties differently
depending on whether the trade concerned is conducted within the Community or with non-member countries under agreements such
as the Cooperation Agreement (see
Aprile
, paragraph 39).
34     It is in the light of those principles that the merits of the case fall to be considered.
Substance
35     It is common ground that, in the present case, an environmental tax has been introduced by the Sicilian Law, aimed at financing
investments intended to reduce and prevent the risks for the environment arising from the presence of gas pipelines containing
methane gas in the Sicilian Region. The transport and distribution of the methane gas in question are carried out using gas
pipelines classified as ‘type 1 pipelines’ for the purposes of the Ministerial Order of 24 November 1984, which are connected
to the trans-Mediterranean pipelines which transport such gas from Algeria.
36     Under Article 6(3) of the Sicilian Law, the chargeable event giving rise to the environmental tax is ownership of the gas
pipelines, containing the gas, which cross the Sicilian Region’s territory.
37     On this point, in its observations, the Italian Government asserts that the disputed tax does not target the goods, but only
the transport infrastructure. By the Italian Government’s own admission, however, the disputed tax is payable only if the
gas is actually present in the infrastructure.
38     Nor does the Italian Government deny that the only facilities which fulfil the taxation conditions laid down in the Sicilian
Law are those connected to the trans-Mediterranean gas pipelines which transport natural gas from Algeria.
39     Accordingly, the Court finds that the tax introduced by the Sicilian Law is a fiscal charge levied on goods imported from
a non-member country, namely Algerian methane gas, for the purpose of distribution and consumption of that gas in Italy or
of the transit thereof towards other Member States.
40     As is apparent from the case-law referred to in paragraphs 28 to 33 of this judgment, such a tax on goods imported from a
non-member country, in this case the People’s Democratic Republic of Algeria, is contrary to both Articles 23 EC and 133 EC
and Article 9 of the Cooperation Agreement.
41     The Court further notes that, in so far as the Algerian gas which is taxed under the Sicilian Law is imported into Italy and
subsequently exported to other Member States, the disputed tax is likely to affect intra-Community trade, contrary to Article
25 EC.
42     Lastly, regarding the Italian Government’s argument to the effect that the Commission’s action is unfounded because the disputed
tax was introduced with the sole aim of protecting the environment, in the light of, inter alia, the requirements of the precautionary
principle, the Court notes that charges having equivalent effect to customs duties are prohibited irrespective of the purpose
for which they were introduced and the destination of the revenue from them (see Case C‑72/03
Carbonati Apuani
[2004] ECR I‑8027, paragraph 31).
43     Regarding Article 26 EC and Article 4 of the Cooperation Agreement, the Court finds that those provisions do not per se provide
any legal criterion which is sufficiently specific to enable the Court to make an assessment of the tax introduced under the
Sicilian Law.
44     In the light of the foregoing, the Court finds that, by introducing an environmental tax on methane gas from Algeria, the
Italian Republic has failed to fulfil its obligations under Articles 23 EC, 25 EC and 133 EC and under Article 9 of the Cooperation
Agreement.

Costs
45     Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Italian Republic has been
unsuccessful, the latter must be ordered to pay the costs.
On those grounds, the Court (Second Chamber) hereby:
1.
Declares that, by introducing an environmental tax on methane gas from Algeria, the Italian Republic has failed to fulfil
its obligations under Articles 23 EC, 25 EC and 133 EC and under Article 9 of the Cooperation Agreement between the European
Economic Community and the People’s Democratic Republic of Algeria, signed in Algiers on 26 April 1976, and approved on behalf
of the Community by Council Regulation (EEC) No 2210/78 of 26 September 1978;
2.
Dismisses the remainder of the action;
3.
Orders the Italian Republic to pay the costs.
[Signatures]
*
Language of the case: Italian.