Memorandum on applying Article 171 of the EC treaty (96/C 242/07)

1. Article 171 of the EC Treaty as amended by the Treaty on European Union stipulates that penalties may be imposed on a Member State which has not complied with a judgment finding that it has failed to fulfil an obligation under the Treaty.

It is for the Court of Justice to take the final decision on the penalties to be imposed. The Commission, however, as the guardian of the Treaties, has a decisive part to play at an earlier stage in the proceedings in that it is responsible for initiating the Article 171 procedure and, where appropriate, bringing a case before the Court of Justice. It also gives its view on the actual amount of the lump sum or penalty payment.

2. As this is a new mechanism which supplements the existing procedure for failure to comply, the Commission, in a spirit of openness, believes that it must publicly state the criteria it means to apply in asking the Court to impose monetary penalties. In so doing, the Commission would stress that both the criteria selected and the way they are applied will be dictated by the need to ensure that Community law is effectively enforced. Once the general criteria set out below have been applied in individual cases and the Court of Justice itself has begun to hand down decisions on the matter, the Commission will be able to gradually refine its views, this Memorandum being only an initial approach to the question.

3. Under Article 171, if a Member State has failed to take the necessary measures to comply with a judgment of the Court of Justice within the time limit laid down in the reasoned opinion addressed to it by the Commission, the latter may bring the case before the Court of Justice. In so doing, the Commission specifies 'the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances`.

Within this procedure, the Commission has a discretion in deciding whether to refer the case to the Court but, if it does decide to do so, it is required to give its view as to the penalty and the amount thereof when lodging its application.

This does not, however, in the Commission's view, mean that it must ask for a penalty to be imposed in every case. Where circumstances warrant (e.g. where the infringement is minor or there is no risk of the offence being repeated), the Commission may refrain from asking for a penalty to be imposed; it must nevertheless state its reasons.

4. Article 171 offers a choice between two types of pecuniary sanction, a lump sum or a penalty payment. The basic object of the whole infringement procedure is to secure compliance as rapidly as possible, and the Commission considers that a penalty payment is the most appropriate instrument for achieving it.

This does not, however, mean that it will never ask for a lump sum to be imposed.

5. Decisions as to the amount of the penalty must be taken with an eye to its actual purpose, which is to ensure that Community law is effectively enforced. The Commission considers that the amount must be calculated on the basis of three fundamental criteria:

- the seriousness of the infringement,

- its duration,

- the need to ensure that the penalty itself is a deterrent to further infringements.

6. As regards seriousness, an infringement in the form of failure to comply with a judgment is always quite clearly serious. However, for the specific purpose of fixing the amount of the penalty, the Commission will also take account of two parameters closely linked to the underlying infringement which gave rise to the original judgment, viz the importance of the Community rules which have been infringed and the effects of the infringement on general and particular interests.

6.1. In assessing the importance of the Community provisions which have been infringed, the Commission will have regard to their nature and scope rather than to their standing in the hierarchy of norms. Thus, for example, an infringement of the principle of non-discrimination must always be regarded as very serious, regardless of whether it has come about through a breach of the principle laid down by the EC Treaty itself or of the principle as set out in a regulation or directive. Generally speaking, for example, attacks on fundamental rights and on the four fundamental freedoms enshrined in the Treaty should be regarded as serious and a penalty appropriate to that degree of seriousness should be imposed in such cases.

6.2. The effects of the infringement on general or particular interests will have to be gauged on a case-by-case basis. Examples of such effects would be a loss of own resources resulting from an infringement or the particularly damaging effects of pollution arising from an action in breach of Community law. Where the effects of an infringement on the general interest are concerned, its impact on the functioning of the Community must be taken into account. Clearly, an unwarranted prohibition on the marketing in one Member State of goods manufactured in another has an immediate and obvious effect on the functioning of the common market, but other, less drastic measures, or even in some cases a failure by a Member State to act, may have just as much effect on the functioning of the Community.

6.3. More specifically, when taking the interests of individuals into account for the purpose of calculating the amount of a penalty, the Commission does not set out to obtain redress for the damage and loss suffered as a result of an infringement, since such redress may be obtained by commencing proceedings before the national courts. The Commission's purpose is rather to take into consideration the effects of an infringement from the point of view of the individual and the economic operators concerned; thus, for example, consequences are not the same where the breach concerns, either an individual case of misapplication (non-recognition of a diploma), or the failure to implement a directive on the mutual recognition of diplomas, which would prejudice the interests of an entire profession.

7. The Commission will also take account of the duration of an infringement in deciding the amount of a penalty. In proceedings whose object is to establish that a judgment of the Court of Justice has not been complied with, the duration will, as a rule, be considerable.

8. From the point of view of the effectiveness of the penalty, it is important to set amounts such that the penalty has a deterrent effect. To impose purely symbolic penalties would negate the whole purpose of this addition to the infringement procedure and run counter to the ultimate objective of the procedure, which is to ensure that Community law is fully enforced.

A decision as to whether to ask for a penalty to be imposed will depend on the circumstances of the case, as stated at point 3. But, once it has been found that a penalty should be imposed, for it to have a deterrent effect it must be set at a higher figure if there is any risk of a repetition (or where there has been a repetition) of the failure to comply, in order to cancel out any economic advantage which the Member State responsible for the infringement might derive in the case in point.