Judgment — ECLI:EU:C:2015:403
Date: 2015-06-18
Language of the case: Estonian
Court formation: Second Chamber
Subject matter: Right of establishment
Procedure: Action for annulment - unfounded
Origin: Estonia

Summary — Judgment of the Court (Second Chamber), 18 June 2015 1. Action for annulment — Subject-matter — Partial annulment — Condition —Severable nature of the contested measure — Disputed provisions which are an essential element in attaining the balances sought by Directive 2013/34 — Annulment leading to alteration of the substance of the directive — Condition not met — Inadmissibility (Art. 263 TFEU; European Parliament and Council Directive 2013/34, Arts 4(6) and 8, 6(3) and 16(3)) 2. Freedom of establishment — Companies — Directive 2013/34 — Obligations regarding financial statements of certain types of undertakings — Measures laid down in Articles 4(6) and (8), 6(3) and 16(3) — No infringement of the principle of proportionality (European Parliament and Council Directive 2013/34, Arts 4(6) and (8), 6(3) and 16(3)) 3. Freedom of establishment — Companies — Directive 2013/34 — Obligations regarding financial statements of certain types of undertakings — No infringement of the principle of subsidiarity (Art. 5(3) TEU; European Parliament and Council Directive 2013/34) 4. EU law — Principles — Principle of subsidiarity — Scope — Limitation of the EU’s jurisdiction in relation to the situation of a Member State more advanced than others — Not included (Art. 5(3) TEU) 5. Acts of the institutions — Statement of reasons — Obligation — Scope — Evaluation of the obligation to state reasons in relation to the circumstances of each case — Member State having participated in the legislative procedure — Invalid plea in law (Art. 296 TFEU) 1. Partial annulment of an EU act is possible only if the elements for which annulment is sought may be severed from the remainder of the act. That requirement of severability of the contested act is not satisfied where the partial annulment of that act would have the effect of altering its substance. Therefore, a Member State’s action for partial annulment of Article 4(6) and (8) and for the full annulment of Articles 6(3) and 16(3) of Directive 2013/34/EU on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings must be considered to be inadmissible. It follows from recitals 4, 8 and 10 in the preamble to that directive that the EU legislation harmonising accounting should, on the one hand, strike a fair balance between the competing demands of addressees of financial information and those of the undertakings which produce such financial information, and on the other hand, take into account the special burden of producing that information on the smallest undertakings. Accordingly, the EU legislature, in adopting the directive, sought essentially to strike a twofold balance, both between undertakings and addressees of financial information, and between large and small undertakings, as the small undertakings bear an administrative burden which is higher, in relative terms, compared with large undertakings, since both types of undertakings must comply in all respects with the same requirements. Some of the contested provisions referred to above limit the room for manoeuvre left to Member States to increase that administrative burden and others provide for an exception to harmonisation as regards a general financial reporting principle. These are, therefore, provisions which are an essential element in attaining the balances sought by the EU legislature referred to above. It follows that any annulment of the contested provisions would necessarily affect the substance of the directive and that, therefore, those provisions cannot be regarded as being severable from the legislative framework which the directive establishes. (see paras 11-16) 2. With regard to judicial review of compliance with the principle of proportionality, the EU legislature must be allowed broad discretion in areas which entail political, economic and social choices on its part, and in which it is called upon to undertake complex assessments. Accordingly, the legality of a measure adopted in those spheres can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue. As regards the objective pursued by Directive 2013/14 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, it aims, first, to establish harmonised rules on financial information to be made available to the public in order to improve the comparability of undertakings’ annual financial statements throughout the EU and, second, to prevent the application of those rules from being a burden on small undertakings by providing for some derogations in relation to them. It does not follow from the analysis of the measures laid down in Articles 4(6) and (8), 6(3) and 16(3) of that directive that the EU legislature has, by adopting them, manifestly exceeded the limits of its discretion. First, the provisions referred to above frame the options open to Member States to require small undertakings to include in their balance sheets profit and loss accounts and annexes, additional obligations to those laid down by the directive in a harmonised manner. In that regard, the directive prohibits the Member States from imposing such additional requirements on those undertakings as a matter of principle, and the only derogations from that prohibition place clear limits on the exceptions allowed. Among those limits is the requirement laid down in Article 4(6) that the additional obligations imposed by the Member State should already be contained in the national tax legislation for the strict purposes of tax collection. By setting such a limit, based on objective criteria, the EU legislature intended, in essence, that small undertakings should not be required to provide documents or information of an accounting nature in addition, first, to information obligations under the directive and, second, to the disclosure obligations contained in the national tax legislation. A limit of this nature is obviously appropriate for achieving one of the objectives of the directive, namely that of limiting the increase in the administrative burden on small undertakings. Second, Article 6(3) of the directive allows Member States to exempt undertakings, in drawing up their financial information, from observing the accounting principle of ‘substance over form’. That possibility is explained in particular by the fact that the administrative burden on an accountant is lightened if he is permitted merely to set out the legal form of a transaction rather than its commercial substance. (see paras 29, 30, 32-34, 36, 38) 3. Article 5(3) TEU refers to the principle of subsidiarity which provides that the European Union, in areas which do not fall within its exclusive competence, is to take action only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the European Union. Furthermore, Protocol 2, in Article 5 thereof, lays down guidelines for the purposes of determining whether those conditions are met. As regards an area, such as the improvement of the conditions of freedom of establishment, which is not among those for which the European Union has exclusive competence, it must be considered whether the objective of the proposed action could be better achieved at EU level. In that regard, the objectives of Directive 2013/14 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings are twofold, consisting not only of harmonising financial information of EU undertakings so that addressees of the financial information have comparable data, but also of doing so by taking into account, through a special scheme, itself also largely harmonised, of the particular situation of small undertakings on which the application of accounting requirements laid down for medium and large undertakings would impose an excessive administrative burden. The pursuit of the second objective at the Member State level is likely to consolidate, if not create, situations in which some Member States would reduce the administrative burden on small undertakings to a greater extent than or in a different way from other Member States, thus clearly running counter to the first objective of the directive, which is to establish minimum equivalent legal requirements as regards the accounts of undertakings that are in competition with one another. The interdependence of the two objectives pursued by the directive means that the EU legislature could legitimately take the view that it had to include a special scheme for small undertakings, and that, because of that interdependence, that twofold objective could best be achieved at EU level. The directive has consequently not been adopted in breach of the principle of subsidiarity. (see paras 44-49) 4. The principle of subsidiarity is not intended to limit the EU’s competence on the basis of the situation of any particular Member State taken individually, but requires only that the proposed action can, by reason of its scale or effects, be better achieved at EU level, given its objectives listed in Article 3 TEU and provisions specific to various areas, including to the various freedoms, such as the freedom of establishment, laid down in the Treaties. It follows that the principle of subsidiarity cannot have the effect of rendering an EU measure invalid because of the particular situation of a Member State, even if it is more advanced than others in terms of an objective pursued by the EU legislature, where the legislature has concluded on the basis of detailed evidence and without committing any error of assessment that the general interests of the European Union could be better served by action at that level. (see paras 53, 54) 5. Although the statement of reasons required by Article 296 TFEU must show clearly and unequivocally the reasoning of the EU authority which adopted the contested measure so as to enable the persons concerned to ascertain the reasons for the measure and to enable the Court to exercise its review, it is not required to go into every relevant point of fact and law. More particularly, it is not possible to require that the statement of reasons should set out the various facts, often very numerous and complex, on the basis of which a directive was adopted, or a fortiori that it should provide a more or less complete evaluation of those facts. Consequently, if the contested measure clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for each of the technical choices made by the institution. Moreover, observance of the obligation to state reasons must be evaluated not only according to the wording of the contested act, but also according to its context and the circumstances of each case, in particular the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations. In that regard, a Member State having participated, in accordance with the arrangements laid down in the FEU Treaty, in the legislative procedure which led to the adoption of a directive, which is addressed to it in the same way as to the other Member States represented in the Council under that directive, cannot validly complain that the Parliament and the Council, the authors of the directive, did not place it in a position to know the reasons for the choice of measures which they intended to implement. (see paras 58-62)