Judgment — ECLI:EU:C:1998:222
Date: 1998-05-12
Language of the case: Greek
Court formation: Full Court
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment
Concepts: Coordination of company law - European Economic Interest Grouping;General
Procedure: Reference for a preliminary ruling
Origin: Greece

summary of the facts, the Efetio
went on to examine the evidence submitted
by the Greek State with regard to the con­
tended abuse of the right conferred on the
shareholders by Article 25 of the Second
Directive and, on this basis, reached the con­
clusion that the conditions laid down in
Article 281 of the Civil Code had under the
circumstances been met. The referring court
held that the appellant shareholders had
exercised the right abusively in so far as the
exercise thereof manifestly exceeded the
bounds of good faith, morality and the
socio-economic purpose of the right in ques­
tion.
This was stated to be demonstrated by a
series of extremely revealing evidence, some
of them objective, others subjective. In par­
ticular, the national court refers to the com­
pany's catastrophic financial situation, which
made bankruptcy certain;13 to the evident
advantages that the appellants themselves
had drawn from the government's reorgani­
sation measures;14 as well as to the fact that
the appellants did not exercise their pre­
emptive rights in respect of the shares issued
after the company was reorganised.
10. The same court questions, however,
whether such an approach is consistent with
Community law. In its view, the indications
provided by the Court in Pafitis leave the
issue open, in the sense that it is not clear
who (the national court or the Community
court), and under the rules and/or principles
of which legal order (national law or Com­
munity law), is to decide whether or not a
right conferred by a rule of Community law
has been exercised abusively.
13 — The order for reference states in this respect that "... at the
time when it fell under the special régime of Law
1386/[1986]/1983 (...), Athinaiki Khartopiia AE had due
bills to banks and various other creditors of approximately
DR 17203 894 160 in total, it had an acute liquidity prob­
lem because of its heavy loan burden, it was lacking its own
capital and its assets were not sufficient to satisfy its debts.
The shortfall on the basis of its existing assets was of the
order of at least DR 3 500 million. Accordingly, even if
those assets were liquidated at the best possible market
prices, liabilities of that order would have remained unsatis­
fied'.
14 — The referring court notes in the order for reference that:
'Share value at that time was essentially negative, whilst
with the increase in the capital in the amount of
DR 940 000 000 on the part of the OAE and the conse­
quent conversion of liabilities into shares, there was a
recovery in the progress of works and the undertaking
might be sold to third parties under advantageous terms
which would enable liabilities to be discharged as well as a
financial guarantee to be given to the former shareholders,
on the basis of the number of shares which they continue to
hold'.
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OPINION OF MR TESAURO — CASE C-367/96
Following this line of reasoning, the national
court consequently considered it necessary,
in order to rule on the proceedings pending
before it, to ask the Court to clarify whether,
to what extent and under which conditions,
it is possible to apply the concept of abuse of
rights also in cases where the right relied
upon is conferred by Community law. More
precisely, it referred to the Court the follow­
ing two questions for a preliminary ruling:
'1 . Can the national court apply a provi­
sion of national law (in this case Article
281 of the Greek Civil Code) in order
to assess whether a right granted by the
Community provisions at issue is being
exercised by the party possessing it or
are there other Community law prin­
ciples, and if so which, to be found in
legislation or settled case-law, on which
the national court may, if need be, base
itself?
2. If the reply to Question 1 is in the nega­
tive, if, that is, the Court of Justice
reserves such competence for itself, for
reasons relating, for instance, to the uni­
form application of Community provi­
sions, may the specific circumstances as
formulated by the defendant-
respondent State as an objection, which
constituted the issue of proof in judg­
ment No 5943/1994 of this court, and
which were set out succinctly in the
previous paragraph of this judgment, or
certain of them and if so which, prevent
an action founded on infringement of
Article 25(1) of the Second Council
Directive 77/91/EEC from succeeding?'
The first question
11. By its first question, the referring court
therefore asks the Court to clarify whether
the possible abusive exercise of a right con­
ferred by a provision of Community law
may be assessed by the referring court on the
basis of the relevant provisions of its own
national law, or whether, precisely because
the right relied upon in the proceedings has
its origin in Community rules, the abuse of
rights should be examined with reference to
the general principles laid down in Commu­
nity law.
Clearly, the question of abuse of rights is
posed by the national court in general terms,
independently, that is, of the Community
provision relied on in the proceedings and of
the national provision governing abuse of
rights under the domestic legal order con­
cerned. The question being asked is in effect
whether it is for the national court to decide
whether there has been an abuse of rights
and whether it may, for this purpose, apply
provisions of its own law or whether it must
apply the general principles of Community
law which may be relevant in the matter and
the definition of which is a matter for the
Court of Justice.
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KEFALAS AND OTHERS v GREEK STATE AND OAE
12. First of all, a clarification is necessary. It
is indisputable, in proceedings for a prelimi­
nary ruling, that the decision as to whether
or not there has been an abuse of rights lies
in any case with the national court: and this
regardless of whether the abuse of rights is
determined on the basis of national rules or
on the basis of Community criteria. It goes
without saying, however, that in all cases the
Court has the power of interpretation, albeit
from different angles, in order to ensure that
the provision of Community law relied upon
is correctly construed and applied.
Therefore, the question referred to the Court
should be properly understood as seeking to
ascertain on the basis of the provisions of
which legal order, national or Community,
an abuse of rights should be ascertained. For
this purpose it is however necessary first of
all to determine whether it is permissible
under Community law for the application of
Community provisions to be subordinated
to, and in some cases paralysed by, an abuse
of rights.
13. That being said, the starting point for
such an analysis can only be the judgment in
Pafitis, 15 in which the Court had occasion to
consider facts very similar to those in the
present case. While explaining that the appli­
cation of a national rule on abuse of rights
must not detract from the full effect and uni­
form application of Community law, the
Court in effect confined itself to ascertaining
whether in that case the conditions for
regarding the right conferred by Article
25(1) of the Second Directive as having been
exercised abusively were fulfilled. Basing
itself on the interpretation of the rule of
Community law at issue, the Court
answered this question in the negative.
As already pointed out, on that occasion the
Court expressly stated that it did not con­
sider it necessary to determine whether or
not it was permissible under the Community
legal order to apply a national rule in order
to assess whether a right conferred by provi­
sions of Community law has been exercised
abusively. In substance, therefore, while leav­
ing open the question of principle, the Court
ruled out that the shareholders' action, seek­
ing annulment of the capital increase decided
on in breach of Article 25(1) of the Second
Directive, could be treated as abusive. It did
so on the ground that the application of such
a national rule, even if permissible, would
undermine the full effect and uniform appli­
cation of Community law.
14. Applying such a solution to the present
case, it is clear that the answer can be no dif­
ferent, in the sense that now, just as then, it
would have to be ruled out that the share­
holders exercised the right conferred by
15 — I would point out that in Syndesmos Melon tis Eleftheras
Evangelikis Ekklissias (cited in footnote 2), the Court did
not consider the issue because, although it had been raised
by the parties in the main proceedings, no question on it
was referred for a preliminary ruling (paragraph 18). In this
connection, see also my Opinion concerning this case
([1992] ECR I-2126, at paragraph 8).
I-2851
OPINION OF MR TESAURO — CASE C-367/96
Article 25(1) of the Second Directive abu­
sively. Such a reply was without doubt suffi­
cient in the earlier case, but could well seem
too summary here, given that the referring
court asks the Court to resolve the issue left
open in Pafitis, in other words to clarify
whether or not it is permissible under Com­
munity law to apply a national rule on abuse
of rights — obviously where rights conferred
by provisions of Community law are
involved — or whether only Community
criteria may be used to determine whether
such a right has been exercised abusively.
15. That being so, I would first point out
that to allow a domestic rule relating, in this
case, to the abuse of rights, to consolidate a
breach of Community law, in this case the
rule that alterations of capital are to be
decided by the general meeting, would go
against the fundamental principle that Com­
munity law has primacy over national law. 16
It stands to reason that the provision of
Community law concerned would thus be
rendered inoperative by virtue of a conflict­
ing principle of substantive domestic law,
which would inevitably undermine the full
effect and uniform application of Commu­
nity law. A conflict of this kind — and there
is indeed a conflict here — would therefore
have to be resolved according to the prin­
ciple of primacy of Community law.
16. This conclusion is confirmed by the pos­
ition taken by the Court in a case where the
national court asked whether it could apply a
'principle of objective unfairness', which
would have resulted in the non-application
of a Community provision. The Court did
not fail to point out that it would be con­
trary to the division of powers between the
Community and the Member States if it
were to be accepted that 'a national authority
were entitled, or even obliged, not to apply a
provision of Community law in a case in
which it considered that its application
would lead to a result which the legislature
would clearly have sought to avoid if it had
envisaged such an eventuality when enacting
the provision in question. If such a general
principle were recognised, it might prevent
the provisions of Community law from hav­
ing full effect in the Member States and
would be prejudicial to the fundamental
principle that Community law must be
applied uniformly throughout the Commu­
nity'. 17
Moreover, the Court had already given a rul­
ing to the same effect in a previous judgment
in which, asked to decide whether it was
possible to grant an exemption, for reasons
of natural justice, from charges due under
Community law, it stated that the applica­
tion of a rule of natural justice for which
provision is made under national legislation
16 — On this point see also my observations in the Opinion in
Pafitis ([1996] ECR 1-1349, at paragraph 27).
17 Case 299/84 Firma Karl-Heinz Neumann v Bundesanstalt
für Landwirtschaftliche Marktordnung [1985] ECR 3663, at
paragraph 25. In the same judgment, the Court added how­
ever that 'Community law provides all courts of the Mem­
ber States with a solution which is wholly in accordance
with the division of powers between the Community and
the Member States: (...) a court (...) may ask the Court of
Justice under Article 177 of the EEC Treaty for an interpre­
tation of the Community provision in question or for a
declaration that it is invalid, if necessary, thus avoiding what
it regards as an injustice' (at paragraph 26).
I - 2852
KEFALAS AND OTHERS v GREEK STATE AND OAE
may possibly be justified in connection with
the formalities applicable to the imposition
of a charge introduced by Community law;
on the other hand, 'such a rule may not be
applied in so far as its effect would be to
modify the scope of the provisions of Com­
munity law concerning the basis of assess­
ment, the manner of imposition or the
amount of a charge introduced by that
law'. 18
17. The case-law just cited therefore shows
that a provision of domestic law cannot be
applied if it modifies the scope of the Com­
munity rule in question, that is to say if it
detracts from its full effect and uniform
application: in short, if it would defeat the
principle of the primacy of Community law.
All things considered, the Court followed
the reasoning in Pafitis. Declaring that
Article 25(1) applies without distinction to
all shareholders regardless of the outcome of
any reorganisation procedure, and that con­
sequently 'to treat an action based on Article
25(1) as abusive for such reasons would be
tantamount to altering the scope of that pro­
vision', 19 the Court again underscored that a
provision or principle of national law can in
no case be applied in such manner as to
cause the Community legal order to give its
'blessing' to an infringement of its provi­
sions.
18. The foregoing leads to the following first
conclusion: it is not permissible under Com­
munity law for a national court to apply a
domestic rule where that rule would entail a
solution inconsistent with Community law.
This would certainly be the case in this
instance, given that, as it emerges from
settled case-law and as the national court
itself recognises in its order for reference, the
domestic rule which the abuse of rights pro­
vision is meant to safeguard manifestly con­
flicts with Article 25(1) of the Second Direc­
tive, which is the provision relied upon by
the applicant shareholders for the precise
purpose of challenging the violation in ques­
tion.
This conclusion, however, does not fully
answer the question referred, since the
national court also asks whether there arc
principles of Community law which are
capable of sanctioning cases of abuse of
rights. Certainly, it seems difficult even to
envisage the existence of a general rule of
Community law capable of negating a right
conferred by a Community provision, espe­
cially in a harmonised field such as the com­
pany law field involved here, in confronta­
tion with a domestic provision infringing
that right. None the less, given the terms and
18 — Case 118/76 Balkan-Import-ExportGmbH v Hauptzollamt
Berlin-Packhof [1977] ECR 1177, at paragraph 5.
19 — See Pafitis (cited in footnote 2), at paragraph 70.
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OPINION OF MR TESAURO— CASE C-367/96
the scope of the question submitted, I believe
a few remarks on this matter are due.
19. Firstly, I would recall that in Commu­
nity practice the elaboration and application
of unwritten principles have assumed an
importance which is not insignificant, despite
the lack of any express provision to this
effect. Besides being used as interpretation
criteria, these principles essentially serve to
identify the limits on the powers exercised
by the administration over subjects and,
more generally, to determine the legality of
an act or of the conduct of a Community
institution or of a Member State.
It should be pointed out that these principles
are simply created by the Court, as occurs in
the national sphere, and they accordingly
constitute principles specific to Community
law, in the sense that they are not borrowed
in individual cases from other legal systems.
Therefore, while the Court is certainly
inspired by national legal practice in elabo­
rating and defining general principles, it nev­
ertheless always adapts the specific principle
concerned to the needs, functioning and
objectives of the Community.
20. It would not be superfluous to add here
that the fact that the only Community provi­
sion which refers to 'the general principles
common to the laws of the Member States',
namely Article 215 of the Treaty, is confined
to the field of the non-contractual liability of
the Community and to defining the ensuing
obligation to make good damage is certainly
not to be understood as meaning that the
Court is precluded from making reference to
the practice of national courts in elaborating
and applying unwritten principles in the
Community legal order. In fact, the reference
to generally accepted principles is a constant
in Community case-law in which general
unwritten principles are affirmed. Indeed, the
Court has expressly pointed out that it is for
it, 'in pursuance of the task conferred on it
by Article 164 of the Treaty (...), to rule on
such a question in accordance with generally
accepted methods of interpretation, in par­
ticular by reference to the fundamental prin­
ciples of the Community legal system and,
where necessary, general principles common
to the legal systems of the Member States'. 20
However, that affirmation should not be
understood as meaning that there are two
different categories of general principles:
those specific to the Community legal order
and those derived from national practice. It
is indeed true that certain principles have
their foundation in the actual provisions of
the Treaty itself, or can at least be traced
back to them (I refer here, for example, to
the principle of proportionality), whereas
20 — Joined Cases C-46/93 and C-48/93 Brasseńe du Pêcheur SA
v Bundesrepublik Deutschhnd and The Queen v Seaetary
of State for Transport, ex parte: Factortame Ltd and Others
[1996] ECR I-1029, at paragraph 27. See also paragraph 41
of the same judgment, where the Court stated that, in the
absence of written rules, it referred to the general principles
common to the laws of the Member States in areas other
than the non-contractual liability of the Community.
I - 2854
KEFALAS AND OTHERS v GREEK STATE AND OAE
others have been illumined and determined
by reference to the practice of national
courts (for example, the principle of legiti­
mate expectations). None the less, in both
cases, the principles concerned are principles
which the Community legal order has made
its own, that is to say principles which, once
enucleated, become an integral part of it.
21. It is in the light of these general observa­
tions, therefore, that it should now be deter­
mined whether, under Community law, the
conditions are fulfilled for elaborating and/
or defining a general principle of law relative
to abuse of rights. Even legal writers have
recently expressed the wish to see this hap­
pen. 21
In the Opinion I delivered in Pafitis, while
noting that the abusive exercise of rights by a
person on whom a right is conferred may be
contested in nearly all Member States, albeit
in different manners and under different con­
ditions, I promptly added that no such rule
was then to be found in Community law. 22 I
have not changed my point of view, in the
sense that I do not believe that in the mean­
time the conditions have been fulfilled for
'consecrating' in the Community legal order
a general principle pursuant to which one
could refuse to recognise as abusive the exer­
cise of a right conferred by a Community
provision.
22. More than one reason leads me to this
conclusion. Firstly, I believe that under
present circumstances a common definition,
drawn from national legal practice, of abuse
of rights is not possible. A survey, even
approximate, of the way in which this prin­
ciple is laid down and works in the various
Member States only serves to confirm this
point.
Although it is true that the majority of the
Member States recognises the concept of
abuse of rights, 23 it is also true that in cer­
tain States this legal concept, far from having
the value of a general principle of law, is
21 — See L. Neville Brown, Is there a General Principle of Abuse
of Rights in European Community Law? in Institutional
Dynamics of European Integration, Essays in Honour of
Henry G. Schermers, vol. II, Dordrecht/Boston/London
1994, page 511 et seq.
22 — It was precisely for this reason that I came to the conclu­
sion that it is under its own legal order that a national court
may, in principle, ascertain whether a right conferred by a
provision of Community law has been exercised abusively
(see the Opinion in Pafitis, cited in footnote 16, at para­
graph 28). As explained in that Opinion, such an assessment
can under no circumstances detract from the objectives of
the provision at issue and, consequently, from its uniform
application in all Member States: such a result would clearly
have occurred in that case (see paragraphs 30 to 33).
23 — However, the concept docs not exist at all, at least not as
such, in the law of the United Kingdom, of Ireland or of
Denmark.
I-2855
OPINION OF MR TESAURO — CASE C-367/96
confined to regulating very specific cases
provided for by law.24 Furthermore, the
tenor and application of such a 'principle'
vary significantly from one State to
another. 25
23. Certainly, I am aware that these circum­
stances are hardly decisive. In this respect, I
need only recall, besides what I have already
stated, that the elaboration of a general prin­
ciple at Community level does not necessar­
ily require that the principle exist in all the
national legal systems or that it be subject to
the same conditions and application criteria.
These are principles which must be incorpo­
rated in the Community order and which,
therefore, acquire their own autonomy in
function of the structure and the objectives
of that order.
The fact that it is not possible to arrive at a
common, but precise and detailed, definition
of abuse of rights by drawing on the general
principles common to Member States is
significant but it is not the only reason
which leads me to deny the existence of such
a principle in the Community legal order. I
consider that the very characteristics and rai­
son d'être of a principle relative to abuse of
rights demonstrate that it is a legal concept
which certainly has a home, or at least a
foundation, in well-established legal systems,
but much less so in a legal order like that of
the Community, whose evolution towards
integration is far from being capable of being
considered to be complete. More generally, I
consider that the risk of there being a gap in
the system — which is, after all, what the
abuse of rights principle, like all other
so-called catch-all provisions, seeks to avoid
— is minor, or non-existent, in a legal order
like that of the Community which, through
judicial interpretation and case-law in gen­
eral, is more promptly amenable to adapta­
tion to the needs of society.
24. That said, it is none the less true that any
legal order which aspires to achieve a mini­
mum level of completion must contain self-
protection measures, so to speak, to ensure
that the rights it confers are not exercised in
a manner which is abusive, excessive or dis­
torted. This requirement is not at all alien to
Community law; on the contrary, it has been
repeatedly recognised in the Court's case-
law.
I refer, above all, to the established case-law
according to which 'the facilities created by
the Treaty cannot have the effect of allowing
24 — This is the case, for example, in Italian law, in which the
concept of abuse of rights relates solely to property rights
(Article 833 of the Civil Code). Similarly, even if one were
to categorise the cases where United Kingdom, Danish and
Irish law sanctions certain conduct as entailing application
of a concept of abuse of rights, the fact remains that these
cases are still confined to certain specific areas.
25 — Although this is in any case a simplification, in certain legal
systems abuse of rights covers conduct that goes beyond
the limits of the exercise of the right involved (Belgium,
Spain, Luxembourg and Portugal), while in others it relates
to conduct which is contrary to good faith and accepted
principles of morality (Germany, Greece, Portugal). More­
over, while in certain legal systems the determination of an
abusive exercise of rights is based solely on objective ele­
ments (Germany, Belgium, Luxembourg, the Netherlands,
Greece, Spain and Portugal), in others certain subjective
elements are required, in particular the intent to harm oth­
ers (Italy and, according to some writers, France).
I-2856
KEFALAS AND OTHERS v GREEK STATE AND OAE
the persons who benefit from them to evade
the application of national legislation and of
prohibiting Member States from taking the
measures necessary to prevent such abuse'. 26
Similarly, the Court has had occasion to
explain that it is permissible for national
legal orders to deny the right to rely upon
Community law where the conduct of the
person relying upon a right conferred by a
provision of Community law can be demon­
strated to be a fraudulent evasion of statu­
tory law. 27
25. More generally, it is appropriate to recall
the statement of the Court whereby
'although the national courts may, therefore,
take account, on the basis of objective evi­
dence, of abuse or fraudulent conduct on the
part of the worker concerned in order, where
appropriate, to deny him the benefit of the
provisions of Community law on which he
seeks to rely, they must nevertheless assess
such conduct in the light of the objectives
pursued by those provisions'. 28
So, essentially, the Court recognises that a
national court may sanction an excessive or
distorted use of Community law only where
this is not prejudicial to the objectives pur­
sued by the relevant provision, in particular
in cases where the provision relied upon is
only 'apparently' the one governing the cir­
cumstances concerned, or when the situation
of the person relying upon the right con­
cerned only 'apparently' meets what is laid
down by the provision at issue. This really
means that the Court reserves itself the right,
as is appropriate, to define the substantive
scope of the Community right at issue, that
is to say, to define the intrinsic limits of the
subjective legal position concerned. So, reli­
ance on a right may be refused only where it
is proved that those limits have been
exceeded. From that angle, where a legal
position is one conferred by Community
law, the question of any abuse of rights
26 — Case C-370/90 The Queen v Immigration Appeal Tribunal
and Surinder Singh [1992] ECR I-4265, at paragraph 24. To
the same effect, see, inter alia. Case 33/74 van Binsbergen v
Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid
[1974] ECR 1299, at paragraph 13; Case 115/78 v
Secretary of State for Foreign Affairs [1979] ECR 399; Case
205/84 Commission v Germany [1986] ECR 3755, at para­
graph 22; Case C-148/91 Vereniging Veronica Omroep
Organisatie v Commissariaat voor de Media [1993] ECR
1-487, at paragraph 12; and finally Case C-23/93 TVIO v
Commissariaat voor de Media [1994] ECR I-4795, at para­
graph 21.
27 — This was the case in Case C-8/92 General Milk Products
GmbH v Hauptzollamt Hamburg-Jonas [1993] ECR I-779,
in which the Court stated that 'the position would be dif­
ferent only if it could be shown that the importation and
re-exportation of that cheese were not realised as bona fide
commercial transactions but only in order wrongfully to
benefit from the grant of monetary compensatory amounts.
The bona fide nature of those transactions is a question of
facttobc decided by the national court' (at paragraph 21,
the italics arc mine). It was also the case in Case 130/88 van
de Bijl v Staatssecretaris van Economische Zaken [1989]
ECR 3039, at paragraph 26, in which the Court held that
the host Member State was not bound by a certificate con­
firming that the holder had exercised a period of profes­
sional activity in the Member State from which he came
when 'it is clear that during that same period the person in
question has pursued his activities in the territory of the
host Member State' (at paragraph 27). The judgment in
Case C-206/94 Brennen v Paletta [1996] ECR 1-2357 took
the same line. At paragraph 27 thereof, the Court stated
that the Community provision relied upon 'docs not pre­
clude employers from adducing evidence to support, where
appropriate, a finding by the national court of abuse or
fraudulent conduct on the part of the worker concerned, in
tht, although he may claim to have become incapacitated
for work, such incapacity having been certified in accord­
ance with Article 18 of Regulation No 574/72, he was not
sick at all' (the italics arc mine).
28 — Paletta II (cited in the preceding footnote), at paragraph 25.
The Court thus stateci in the case before it that the pre­
sumption of abusive conduct on the part of the person rely­
ing upon & legal position conferred by Community law
could not in any case be such as to require that the worker
prove, by other means different from those required by the
applicable provision of Community law, that he was actu­
ally sick. This was precisely because the objective of the
provision, designed specifically to allow workers who fall
tillin another Member State to provide a simple medical cer­
tificate drawn up by the competent authorities of that State,
would thereby have been defeated. On a proper view,
therefore, that case did not involve abuse of rights in the
true sense of the term but fraud.
I - 2857
OPINION OF MR TESAURO — CASE C-367/96
which may be raised under provisions of
national law ultimately turns into a question
of interpretation of the Community provi­
sion at issue.
26. This interpretation of the case-law to
which I have referred is, in my view, con­
firmed by a recent judgment in which the
Court explicitly ruled on an abusive exercise
of rights. The case involved a Turkish
worker who, despite the fact that he had
expressly declared he would return to Tur­
key after a period of vocational training and
had obtained, on the basis of such declara­
tion, a temporary residence permit from the
competent authorities in Germany, intended
to extend his stay in Germany and sought to
rely upon the relevant 'Community' provi­
sion for this purpose. 29 The Court's answer
was clear and to the point: 'The fact that a
Turkish worker wishes to extend his stay in
the host Member State, although he
expressly accepted its restriction, does not
constitute an abuse of rights'. The Court
then added that the fact that the worker had
declared his intention of returning to Turkey
after having been employed in the Member
State for the purpose of perfecting his voca­
tional skills was not liable to deprive him of
the rights deriving from Article 6(1) of
Decision No 1/80 of the EEC-Turkey Asso-
cation Council of 19 September 1980 'unless
it is established by the national court that
that declaration was made with the sole
intention of improperly obtaining work and
residence permits for the host Member
State'.30
Once again, therefore, the Court began by
defining the aim of the provision at issue and
determining its intrinsic limits and then left
it to the national court to rule out its invo-
cability only where those limits were
exceeded, that is to say where in the specific
case the worker's conduct was shown to be
fraudulent.
27. So, the Court has essentially allowed
each national legal system to apply its own
rules of ordinary law (whether sanctioning
'fraudulent evasion of statutory law', 'false
representation', or, why not, even 'abuse of
rights') to withdraw the right to rely upon
rules of Community law in well-defined
cases, in which, in the final analysis, such
rules were not meant to apply, and where
there can therefore be no adverse effect on
the uniform application of Community law.
In such cases, I repeat, the Court's interpre­
tation may still be necessary in order to
define the objectives and the limits of the29 — See Case C-36/96 Faik Giinaydin and Others v Freistaat
Bayern [1997] ECR I-5143. More specifically, the Court
was asked: 'Can a claim under Article 6(1) of Decision No
1/80 be opposed as an abuse of law if the Turkish worker
has expressly declared his intention of returning to Turkey
after preparation for the work there and the competent
authority has authorised him to reside in the country tem­
porarily only in view of that declaration?' 30 — As above, at paragraph 61; the italics are mine.
I-2858
KEFALAS AND OTHERS v GREEK STATE AND OAE
provision at issue, thereby ensuring that the
needs which Community law seeks to safe­
guard are respected, needs which in this case
relate to harmonisation in relation to compa­
nies.
To sum up, I conclude that at present Com­
munity law has no general principle sanc­
tioning the abusive exercise of a right con­
ferred by Community law and that, even if
one were to exist, it could not in any event
be applied so as to 'endorse' a breach of
Community law, which would otherwise be
the result in this case. Given the wording of
the question submitted, I would add, finally,
that it is also not possible in this case to refer
to established principles of Community law,
such as the principles of proportionality,
legal certainty and legitimate expectations.
Nor do I consider it possible to envisage the
use of those principles to render inoperative
the protection afforded to individuals by
Community law, much less to 'endorse' an
established breach of Article 25(1) of the
Second Directive.
The second question
28. By its second question, the referring
court asks whether — in the event that it is
precluded from assessing whether there has
been an abuse of rights on the basis of provi­
sions of its own national law, which would
mean that any abuse of rights could only be
sanctioned by the Court of Justice on the
basis of Community law — the conditions
are fulfilled in this case for considering that
the right conferred on shareholders by
Article 25(1) of the Second Directive has
been exercised abusively.
In view of the conclusion I reached on the
first question, I consider it unnecessary to
rule on this point. Moreover, in Pafitis, 31the
issue of the application of the Greek provi­
sion on abuse of rights for the purpose of
preventing Article 25(1) of the Second Direc­
tive from being relied upon has already been
considered and resolved by the Court. I shall
therefore confine myself to a few brief obser­
vations.
29. I would recall that, according to the
Greek court, the shareholders' attempt to
oppose an increase in share capital would
constitute an abuse of rights, in that, first,
the shareholders themselves derive evident
economic benefits from this, and second, the
appellants have not exercised their preferen­
tial rights to take up the new shares issued as
a result of the increase in share capital.
31 — Judgment cited in footnote 2, at paragraph 70.
I - 2859
OPINION OF MR TESAURO — CASE C-367/96
30. In so far as the abuse of rights is con­
nected with the company's serious financial
difficulties, it seems to me that the objective
of the respondents in the main proceedings is
not so much to challenge the exercise of the
right by the shareholders, but to challenge
the provision of the Directive itself, which,
as the Court has repeatedly stated, does not
permit any capital increase decided on out­
side the general meeting, even in the case of
companies subject to special arrangements.
The evidence submitted by the Greek Gov­
ernment, which is entirely concerned with
the company's critical situation, is clearly not
such as to allow the conduct of the share­
holders affected by the capital increase to be
characterised in one sense or the other.
Moreover, as further confirmation of the
foregoing conclusion, the fact that the out­
come of reorganisation measures is not fore­
seeable from the outset and that it would
therefore be arbitrary to judge the share­
holders' intentions after the fact, particularly
in view of the positive results achieved
through government intervention, should
not be underestimated. In any case, it would
be odd to make the abusive character of the
exercise of a right dependent on the fact that
the capital increase led to an improvement in
the company's asset position, that is to say to
the very achievement of the main objective
pursued by an increase in share capital.
31. Nor do I believe that the appellants can
be held to have exercised abusively the right
conferred by the Community provision on
the grounds that they did not exercise their
option on the new shares issued pursuant to
the contested capital increase.
On this point, it is sufficient to note that, had
they exercised their option on the new
shares, the shareholders would have thereby
endorsed the decision to increase capital
taken without the general meeting's consent,
a decision which they challenged precisely
on the ground that it infringed Article 25(1)
of the Second Directive. Under the circum­
stances, it would be odd, not to say para­
doxical, to characterise as abusive the exer­
cise of the right conferred on the
shareholders by that provision, when the
shareholders themselves wanted to oppose
the infringement of this right, brought about,
without their consent, through an increase of
capital by means of administrative act. Oth­
erwise, the scope of the rule of Community
law at issue would be modified: and one
would arrive at a result inconsistent with the
result pursued by Community law through
harmonisation of the company law rules in
question.
I - 2860
KEFALAS AND OTHERS v GREEK STATE AND OAE
Conclusion
32. In the light of the foregoing, I propose that the Court answer the questions
referred by the Efetio-Athinon as follows:
(1) Community law precludes the application of a national rule which would
allow a national court to determine whether a right derived from a provision
of Community law has been exercised abusively by the holder of the right, if
this would impair its full effect and uniform application. Neither may the
national court rely on general principles of Community law for the purpose of
making such a determination.
(2) The exercise of the right conferred on shareholders by Article 25(1) of the Sec­
ond Directive, which provides that increases in share capital must be decided
on by the general meeting, cannot be characterised as abusive simply on the
ground that the shareholders concerned have taken benefit from the capital
increase, decided on in violation of that provision, or have not exercised an
option to take up new shares.
I-2861