METHOD OF CALCULATING THE PENALTY PAYMENTS PROVIDED FOR PURSUANT TO ARTICLE 171 OF THE EC TREATY (97/C 63/02)

1. INTRODUCTION

This document must be read in conjunction with the memorandum on applying Article 171 of the EC Treaty (1) adopted by the Commission on 5 June 1996 (hereinafter 'the memorandum`), which it amplifies and extends.

Member States must be aware of how the financial penalties proposed by the Commission to the Court of Justice of the European Communities are to be calculated, and the method used must comply with the principles of proportionality and equal treatment for all the Member States. It is also important to have a clear and consistent method, since the Commission must explain to the Court how it determined the penalty proposed.

The method described here is confined to the calculation of the penalty payment, which the Commission considers the most appropriate means of securing compliance as rapidly as possible (2). The Commission intends to use the second subparagraph of Article 171 (2) to persuade the Member State concerned to regularize its position. However, this does not mean that it relinquishes the opton of asking for a lump sum to be imposed or, where appropriate, of not asking for a penalty to be imposed (3).

The memorandum was the first outline (4) of the approach which it intends to develop progressively in the application of the second subparagraph of Article 171 (2). Similarly this document represents the first stage in the definition of general criteria to determine the amount of the financial penalty, which will be defined on a case-by-case basis.

The penalty to be paid by the Member State is the sum of the amounts due in respect of each day's delay in implementing a judgment of the Court, beginning from the day on which the Court's second judgment was brought to the attention of the Member State concerned and ending when the latter complies with the judgment.

It constitutes marginal or atypical, additional Community revenue.

The amount of the daily penalty is calculated as follows:

- a uniform flat-rate amount is multiplied by two coefficients, one reflecting the seriousness of the infringement and the other the duration,

- the result is multiplied by a special factor (n) reflecting the ability to pay of the Member State concerned and the number of votes it has in the Council.

2. SETTING THE UNIFORM FLAT-RATE AMOUNT

The uniform flat-rate amount is defined as the basic amount to which weightings will be applied. It is the penalty for violating the principle of legality and the sole jurisdiction of the Court which applies in all cases pursuant to Article 171. It has been determined in such a way that:

- the Commission retains a broad discretion when applying the coefficients,

- the amount is reasonable and tolerable for all the Member States,

- the amount is high enough to maintain pressure on whichever Member State is concerned.

The amount has been set at ECU 500 per day.

3. THE APPLICATION OF THE COEFFICIENTS

There are two main categories of coefficient (5) relating to the seriousness of the infringement (see point 3.1), and its duration (see point 3.2). The need to ensure that the penalty has a deterrent effect by taking into account the ability to pay of the Member State concerned is dealt with at point 4.

3.1. The seriousness of the infringement

From a strictly legal viewpoint, of course, the infringement in such cases is always the same: non-compliance with a judgment of the Court finding that the Member State has failed to fulfil an obligation and breach of Article 171 (1) of the Treaty.

However, for the purpose of fixing the amount of the penalty, the memorandum stated that the Commission should take into account the importance of the Community provisions which were infringed and which gave rise to the original judgment (3.1.1) and the effects of the infringement on general and particular interests (3.1.2).

At this stage, therefore, the assessment of the seriousness of the infringement is not concerned with the failure to comply with that judgment itself, which is 'always quite clearly serious` (6) and has already been taken into account in fixing the flat-rate amount.

3.1.1. The importance of the Community rules which have been infringed

Clearly, to assess the seriousness of the original infringement, the importance of the Community rules which have been infringed must be measured in some way. The memorandum (6) states that 'the Commission will have regard to their nature and scope rather than to their standing in the hierarchy of norms` (7).

Furthermore, if the Court judgment with which the Member State has failed to comply forms part of established case-law (for example, if it is a judgment in infringement proceedings which follows a preliminary ruling to the same effect), this should be taken into account where appropriate. The clarity (or ambiguity) of the rule which has been infringed may be a decisive factor (8).

Finally, in some cases account may have to be taken of the fact that the Member State concerned has taken what it believes to be adequate measures to comply with the judgment, whereas the Commission considers them unsatisfactory. This is a different matter than the Member State failing to take any measures at all. In the latter case, there can be little doubt that the Member State has infringed Article 171 (1) of the EC Treaty.

3.1.2. The effects of the infringement on general or particular interests

These will be assessed on a case-by-case basis (9). Examples of points to be considered are:

- the loss of own resources suffered by the Community,

- the impact of the infringement on the functioning of the Community,

- serious or irreparable damage to human health or the environment,

- economic or other damage suffered by individuals or economic operators, including those of an intangible nature such as human consequences,

- the financial dimension of the infringement,

- any financial advantage the Member State might gain as a result of non-compliance with the Court's judgment,

- the relative importance of the infringement, taking into account the turnover or the added-value of the economic sector concerned in the Member State in question,

- the number of people affected by the infringement (it may be considered less serious if it does not affect the whole population of the Member State concerned),

- the Community's responsibility towards non-member countries,

- whether the infringement is an isolated case or a repeat of an earlier infringement (for example, repeated delays in transposing directives in a particular sector).

Depending on the seriousness of te infringement, the flat-rate amount will be multiplied by a coefficient of at least 1 and no more than 20.

3.2. Duration of the infringement

In assessing the duration of the infringement, the period after the second judgment is not included, since clearly neither the Court nor the Commission is in a position to know how long this will be. This is reflected by the fact that the penalty payment to be made continues to accumulate until the Member State brings the infringement to an end.

For the purposes of calculating the penalty payment, the duration of the infringement runs from the date of the first Court judgment. Article 171 of the EC Treaty provides that a penalty is to be imposed on a Member State which has failed 'to take the necessary measures to comply with the Court's judgment within the time limit laid down by the Commission`.

Between the first Court judgment and the procedure provided for in Article 171 (2) of the EC Treaty, several years may elapse (10). The Commission may take into account the Member State's refusal to respond or its delay in doing so - in other words, the extent to which the Member State has contributed to lengthening the procedure - in the financial penalty which it proposes. This delay will be taken into account by means of a coefficient applied to the flat-rate amount.

Depending on the duration of the infringement, the flat-rate amount will be multiplied by a coefficient of at least 1 and no more than 3.

4. TAKING THE MEMBER STATE'S ABILITY TO PAY INTO ACCOUNT

The amount of the penalty payment should ensure that the penalty is proportionate and, at the same time, has a deterrent effect. This deterrent effect should be sufficient to ensure that:

- the Member State decides to regularize its position and bring the infringement to an end (the penalty must, therefore, outweigh the advantage gained by the Member State from the infringement),

- the Member State will not repeat the infringement.

The need for the penalty to have a deterrent effect precludes any purely symbolic penalty (11). The penalty must exert sufficient pressure on the Member State for it to regularize its position. The penalty must be effective (11).

The deterrent effect is achieved by applying a special factor n which is a geometric mean based on the Member State's gross domestic product (GDP) and the weighting of votes in the Council (12). The factor (n) combines the ability of each Member State to pay, as measured by its GDP, with the number of votes it has in the Council. The resulting formula gives a reasonable degree of variation between Member States (from 1,0 to 26,4).

n is equivalent to:

Belgium: 6,2

Denmark: 3,9

Germany: 26,4

Greece: 4,1

Spain: 11,4

France: 21,1

Ireland: 2,4

Italy: 17,7

Luxembourg: 1,0

Netherlands: 7,6

Austria: 5,1

Portugal: 3,9

Finland: 3,3

Sweden: 5,2

United Kingdom: 17,8.

The amount of the daily penalty is arrived at by multiplying the flat-rate by the coefficients for the seriousness and duration of the infringement and by the special (invariable) factor n for the Member State in question. The Commission reserves the right to adapt this factor if the actual situation or the weighting of votes i Council changes.

The method of calculation can be summarized in the following general formula:

Pd = (Fr × Cs × Cd) × n

where Pd = daily penalty payment; Fr = flat-rate amount; Cs = seriousness coefficient; Cd = duration coefficient; n = factor taking into account the Member State's ability to pay.

(1) OJ No C 242, 21. 8. 1996, p. 6.

(2) Memorandum, point 4.

(3) Memorandum, point 3.

(4) Memorandum, point 2.

(5) Memorandum, point 5.

(6) Memorandum, point 6.

(7) Memorandum, point 6.1.

(8) A Member State which contravenes a clear rule or well established case-law of the Court of Justice is committing a more serious infringement than one which incorrectly applies a vague and complex Community rule which has never been submitted to the Court for interpretation or assessment of its validity. See the Court's case-law on the liability of Member States for infringements of Community law, especially in Case C-392/93, The Queen v. HM Treasury, ex parte British Telecommunications plc, (1996) ECR I-1631.

(9) Memorandum, point 6.2.

(10) Memorandum, point 7.

(11) Memorandum, point 8.

(12) It is calculated as follows: n is the geometric mean obtained by taking the square root of the product of two factors, one based on the GDP of Member States and the other on the weighting of votes in Council. It is calculated using the following formula:

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where:

GDP n = GDP of the Member State concerned, in millions of ecu.

GDP min = The lowest GDP of any of the 15 Member States.

Votes n = Number of votes of the Member State in Council according to the weighting established by Article 148 of the EC Treaty.

Votes min = Number of votes of the smallest of the 15 Member States.