Provisional text

OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 28 March 2019( )

Case C‑569/17

European Commission

v

Kingdom of Spain

(Failure of a Member State to fulfil obligations — Article 258 TFEU — Directive 2014/17/EU — Mortgage credit — Article 260(3) TFEU — Failure to notify measures transposing a directive adopted under a legislative procedure — Financial penalties — Penalty payment)





I. Introduction

1. In the present case, the Commission has brought infringement proceedings against the Kingdom of Spain under Article 258 TFEU for failing to adopt the necessary measures to transpose, by 21 March 2016, Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (the so-called Mortgage Credit Directive) ( ) or, in any event, failing to notify the Commission of those measures. The Commission also asks the Court to impose, in accordance with Article 260(3) TFEU, a daily penalty payment of EUR 105 991.60 on the Kingdom of Spain, starting on the date of delivery of the Court’s judgment establishing the infringement, for failing to fulfil its obligation to notify measures transposing Directive 2014/17.

2. Consequently, this case provides the Court with the opportunity to give a ruling, for the first time, on the interpretation and application of Article 260(3) TFEU. ( ) That provision, introduced by the Lisbon Treaty, allows the Commission to bring infringement proceedings before the Court pursuant to Article 258 TFEU on the grounds that a Member State has ‘failed to fulfil its obligations to notify measures transposing a directive adopted under a legislative procedure’ and ask the Court to impose financial penalties on that Member State at the same time. ( )

3. The key issues that arise for resolution are essentially, first, does Article 260(3) TFEU apply to a Member State’s notification of incomplete or incorrect transposition measures; second, by reference to which rules is any financial penalty imposed under that provision to be assessed; and third, is the penalty payment at issue proportionate.

II. Legal framework

4. Article 260(3) TFEU provides:

‘When the Commission brings a case before the Court pursuant to Article 258 on the grounds that the Member State concerned has failed to fulfil its obligation to notify measures transposing a directive adopted under a legislative procedure, it may, when it deems appropriate, specify the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances.

If the Court finds that there is an infringement it may impose a lump sum or penalty payment on the Member State concerned not exceeding the amount specified by the Commission. The payment obligation shall take effect on the date set by the Court in its judgment.’

5. Article 42(1) of Directive 2014/17 provides:

‘Member States shall adopt and publish, by 21 March 2016, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those measures.’

III. Pre-litigation procedure

6. Not having received by the transposition deadline of 21 March 2016 any notification from the Kingdom of Spain of the measures transposing Directive 2014/17 into Spanish law, the Commission sent the Kingdom of Spain a letter of formal notice dated 26 May 2016, inviting it to do so.

7. In its response by letter dated 28 July 2016, the Kingdom of Spain indicated that it had not been able to transpose Directive 2014/17 on account of unusual circumstances relating to the interim nature of the Government, but that preparatory work on the draft bill transposing that directive had begun.

8. By reasoned opinion dated 17 November 2016, the Commission stated that the Kingdom of Spain had still not adopted measures transposing Directive 2014/17, nor notified it of those measures. The Commission invited it to adopt the necessary measures within a period of two months from receipt of that reasoned opinion.

9. In its response to that reasoned opinion by letter dated 19 January 2017, the Kingdom of Spain informed the Commission of the progress made with the preliminary draft law transposing Directive 2014/17.

10. Taking the view that the Kingdom of Spain had still not transposed Directive 2014/17 or given notification of any transposition measures, the Commission decided on 27 April 2017 to bring infringement proceedings before the Court.

IV. Procedure before the Court

11. By its application lodged on 27 September 2017, the Commission bought the present action before the Court on the basis of Articles 258 and 260(3) TFEU. It claims that the Court should:

– first, declare that, by failing to adopt before 21 March 2016 the laws, regulations and administrative provisions necessary to comply with Directive 2014/17 or, in any event, by failing to notify the Commission of those provisions, the Kingdom of Spain has failed to fulfil its obligation under Article 42(1) of that directive;

– second, order the Kingdom of Spain, in accordance with Article 260(3) TFEU, to pay a daily penalty payment of EUR 105 991.60, with effect from the date of delivery of the judgment establishing its failure to fulfil its obligation to adopt or, in any event, to notify the Commission of the provisions necessary to comply with Directive 2014/17; and

– third, order the Kingdom of Spain to pay the costs of the proceedings.

12. In its defence lodged on 15 December 2017, the Kingdom of Spain contends that the Court should:

– first, dismiss the present action in its entirety or, in the alternative, reduce the penalty payment; and

– second, order the Commission to pay the costs of the proceedings.

13. The Commission and the Kingdom of Spain also lodged a reply and a rejoinder on 26 January and 12 March 2018, respectively.

14. By its application lodged on 26 December 2017, the French Republic applied for leave to intervene in the proceedings in support of the Kingdom of Spain. Leave to intervene was granted by decision of 30 January 2018, following which the French Republic lodged its statement in intervention on 7 March 2018. The Commission and the Kingdom of Spain submitted observations on the French Republic’s statement in intervention on 14 May 2018.

15. A hearing was held on 21 January 2019 at which the Commission, the Kingdom of Spain and the French Republic presented oral argument.

V. Arguments of the parties

A. The failure to fulfil obligations under Article 258 TFEU

16. The Commission submits that the Kingdom of Spain failed to adopt by the deadline of 21 March 2016 set out in Article 42(1) of Directive 2014/17 the necessary measures to transpose that directive or to notify the Commission of those measures.

17. The Kingdom of Spain does not dispute having failed to notify any measures transposing Directive 2014/17. The Kingdom of Spain stated at the hearing that the national transposition law was expected to be adopted on 14 February 2019.

B. The application of Article 260(3) TFEU

18. The Commission, first, makes some preliminary observations based on its 2011 Communication on the implementation of Article 260(3) TFEU (‘2011 Communication’). ( ) In particular, the Commission stresses that the purpose of Article 260(3) TFEU is to give a stronger incentive to the Member States to transpose directives within the deadlines fixed by the Union legislator and thus to ensure that EU legislation is genuinely effective. ( ) Moreover, in response to the French Republic’s arguments, the Commission underlines that Article 260(3) TFEU penalises a Member State’s failure to fulfil not only the ‘procedural’ obligation to notify transposition measures, but also the ‘substantive’ obligation to transpose itself, that is, that the Member State did not adapt its internal legal order to the directive in question. Further, the Commission argues that Article 260(3) TFEU applies to a Member State’s total failure to notify any transposition measures, as in this case, as well as partial failure to notify transposition measures, such as where those measures do not cover the whole territory of the Member State or do not correspond to all provisions of the directive in question. ( )

19. With regard to the determination of financial penalties, the Commission contends that the penalties proposed under Article 260(3) TFEU should be calculated according to the same method as those under Article 260(2) TFEU. ( )In response to arguments advanced by the French Republic, the Commission stresses, inter alia, that with the introduction of Article 260(3) TFEU, the Treaties provide that a Member State’s failure to adopt and notify transposition measures constitutes an infringement of EU law, no less important than the infringements sanctioned under Article 260(2) TFEU, and stems from the third paragraph of Article 288 TFEU and Article 4(3) TEU.

20. On that basis, the Commission proposes a daily penalty payment of EUR 105 991.60 imposed against the Kingdom of Spain, calculated by multiplying the standard flat-rate amount (680) by coefficients for seriousness (10) and duration (1.3) and by the ‘n’ factor (11.99), ( ) which should take effect on the date of delivery of the Court’s judgment. ( ) The Commission also asks the Court not to specify in its judgment the ‘European Union own resources’ account into which the penalty payment should be paid, so that it can specify the account in the debit note issued to the Kingdom of Spain under the applicable EU rules.

21. As regards the seriousness of the infringement, the Commission proposes a coefficient of 10 on a scale of 1 to 20, taking account of the established parameters of, first, the importance of the provisions of EU law that are the subject of the infringement and, second, the effects of the infringement on general and particular interests. ( )

22. First, as regards the importance of Directive 2014/17, the Commission submits that, inter alia, that directive aims to establish a more transparent, efficient and competitive internal market in credit agreements relating to residential immovable property while ensuring a high level of consumer protection. The Commission points out that Directive 2014/17 requires lenders to provide consumers with certain information and to evaluate consumer creditworthiness according to common EU standards, and it guarantees consumers a series of specific rights. The Commission further stresses that Directive 2014/17 introduces quality standards and rules of conduct for all lenders in the EU and establishes a passport system so that credit intermediaries authorised to practice in a Member State can offer their services throughout the EU, thereby promoting financial stability.

23. Second, as regards the effects of the failure to transpose Directive 2014/17 into Spanish law, the Commission contends that consumers in Spain are unable to rely on the rights afforded to them under that directive, and credit intermediaries are not able to use the passport system to carry out their business activities. According to the Commission, this could have adverse effects for competition in the mortgage credit markets, especially in Spain, and result in a narrower range of services and higher prices. The Commission also submits that, from a broader perspective, the Spanish legal order does not meet the strict standards of Directive 2014/17 which aim to ensure that lenders and credit intermediaries adopt responsible behaviour on the market.

24. In that regard, the Commission disputes the Kingdom of Spain’s arguments that it wrongly assessed the seriousness coefficient. In particular, the Commission refutes the relevance of certain Bank of Spain data and United Kingdom studies advanced by the Kingdom of Spain. The Commission further stressed at the hearing that the seriousness assessment is objective and that it is not required to take account of certain national measures, invoked by the Kingdom of Spain for the first time in its defence, which were not notified to it and are not sufficient to guarantee the transposition of Directive 2014/17.

25. As regards the duration of the infringement, the Commission proposes a coefficient of 1.3, comprising 13 months multiplied by a factor of 0.1. It considers that this period starts from the day following the expiry of the transposition deadline in Directive 2014/17 (22 March 2016) and ends on the date when the Commission decides to bring infringement proceedings (27 April 2017). ( ) In that regard, the Commission disputes the Kingdom of Spain’s argument that the period between 20 December 2015 and 29 October 2016, during which there were difficulties in forming a government, should be excluded from the duration coefficient, as that situation constitutes internal circumstances which should be rejected in line with the Court’s case-law.

26. The Kingdom of Spain, first, submits that although this case can be decided by the Court without it being necessary to rule on the precise scope of Article 260(3) TFEU, it disputes the Commission’s interpretation of Article 260(3) TFEU, and takes the view that Article 260(3) TFEU does not apply to cases involving a Member State’s notification of incomplete or incorrect transposition measures.

27. Moreover, the Kingdom of Spain considers that the Court’s case-law on the determination of penalty payments under Article 260(2) TFEU can be applied by analogy to Article 260(3) TFEU, and it does not object to the Commission’s request that the Court not specify the account in which the penalty payment, if imposed, will be paid.

28. In the present case, however, the Kingdom of Spain argues that the proposed daily penalty payment is disproportionate for two reasons.

29. First, the Kingdom of Spain asserts that the period between 20 December 2015 and 29 October 2016, during which there was an unusual situation relating to difficulties in forming a government, should be excluded from the duration coefficient and, in any event, justifies a moderation of the penalty payment. The Kingdom of Spain emphasised at the hearing that this situation was unforeseeable during the time for transposing Directive 2014/17.

30. Second, the Kingdom of Spain contends that the Commission wrongly assessed the seriousness coefficient and, in particular, the effects of the failure to transpose Directive 2014/17. In that regard, the Kingdom of Spain disputes the Commission’s statement that the lack of transposition may have adverse effects for competition in the mortgage credit markets, especially in Spain, and result in a narrower range of services and higher prices (see point 23 of this Opinion) on the grounds that Bank of Spain data show that mortgage prices in Spain are, in the majority of cases, below the euro area average and, moreover, certain studies carried out in the United Kingdom indicate that the effects of transposing Directive 2014/17 do not go beyond a possible improvement of consumer protection.

31. The Kingdom of Spain further contests the Commission’s statement that the Spanish legal order does not meet the strict standards of Directive 2014/17 (see point 23 of this Opinion) and asserts that, since 2011, there are certain national measures which regulate aspects related to Directive 2014/17. ( ) The Kingdom of Spain stressed at the hearing that these measures are relevant for the proportionality assessment because, inter alia, they carry out the aims of Directive 2014/17 while resolving problems in the mortgage sector beyond the scope of that directive, and the Court’s decision in Gavieiro Gavieiro and Iglesias Torres, ( ) recognising that measures not containing a reference to a directive are not necessarily excluded as valid transposition measures, should be extended to Article 260(3) TFEU.

32. In support of the Kingdom of Spain, the French Republic submits that Article 260(3) TFEU is applicable only to a Member State’s failure to notify any national transposition measures, whereas its failure to notify measures constituting an incomplete or incorrect transposition is governed by Articles 258 and 260(2) TFEU. The French Republic also considers that Article 260(3) TFEU applies if it is obvious from a prima facie examination of the national transposition measures notified to the Commission that those measures do not transpose the entire directive.

33. As regards the assessment of financial penalties, the French Republic contends, in particular, that Article 260(3) TFEU pursues a different objective from Article 260(2) TFEU. The latter provision sanctions the ‘double infringement’ of EU law and the Member State’s non-compliance with the Court’s first judgment, whereas Article 260(3) TFEU sanctions a Member State’s failure to fulfil an obligation following from secondary Union law. On this basis, the French Republic argues that a lower scale of seriousness coefficients should be applied for penalty payments under Article 260(3) TFEU and the seriousness coefficient of 10 is not justified in this case.

VI. Analysis

A. The failure to fulfil obligations under Article 258 TFEU

1. Pertinent case-law of the Court

34. It should be recalled that the provisions of a directive must be implemented with unquestionable binding force and with the specificity, precision and clarity required in order to satisfy the requirements of legal certainty, under which, in the case of a directive intended to confer rights on individuals, persons concerned must be able to ascertain the full extent of their rights. ( )

35. Moreover, in an action based on Article 258 TFEU, the question whether a Member State has failed to fulfil its obligations is determined by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion. ( )

36. As the Court has also repeatedly held, an action based on Article 258 TFEU rests on the objective finding of whether or not the Member State has failed to fulfil its obligations under EU law. ( ) Thus, a Member State cannot plead provisions, practices or situations existing in its internal legal system, such as the holding of legislative elections ( ) or the interim nature of the government, ( ) in order to justify its failure to comply with its obligations under EU law, including the time limits laid down in a directive. ( )

2. Application to the present proceedings

37. In the present case, the Kingdom of Spain does not contest that it failed to fulfil its obligations under Article 42(1) of Directive 2014/17 to adopt the necessary measures to transpose that directive into its internal law and to notify those measures to the Commission by the expiration of the period prescribed in the reasoned opinion, namely 18 January 2017. ( )

38. I therefore propose that the Court rule that the Commission’s first head of claim under Article 258 TFEU that the Kingdom of Spain failed to fulfil its obligations to transpose Directive 2014/17 or to notify such measures to the Commission is well founded.

B. The application of Article 260(3) TFEU

39. The central issue in this case concerns the proportionality of the proposed daily penalty payment. This raises some general questions about the assessment of financial penalties under Article 260(3) TFEU and in particular whether the Commission is entitled to use the same method for calculating financial penalties under Article 260(2) and (3) TFEU, whether the Court’s case-law on the determination of financial penalties under Article 260(2) TFEU is applicable to Article 260(3) TFEU and the extent of the Court’s discretion under Article 260(3) TFEU.

40. Moreover, although it is common ground that Article 260(3) TFEU is applicable to these proceedings, ( ) this still raises the issue of the meaning of ‘failure to notify’ under that provision which I will address first.

1. Material scope of Article 260(3) TFEU: the failure to notify

41. According to Article 260(3) TFEU, its material scope is delimited to infringement proceedings brought under Article 258 TFEU which concern a Member State’s failure to fulfil its obligation to notify measures transposing a directive adopted under a legislative procedure. ( ) The answer to the question how a Member State’s ‘failure to notify’ transposition measures should be interpreted within the meaning of Article 260(3) TEU is notably complex. The doctrine is divided on this issue, with some jurists taking a restrictive approach, ( ) whereas others favour an intermediate ( ) or broad approach. ( )

42. It involves in particular two key interrelated questions. A first question is whether Article 260(3) TFEU is limited to a Member State’s failure to fulfil a so-called ‘procedural’ obligation to notify any transposition measures, as argued by the Kingdom of Spain and the French Republic, or whether Article 260(3) TFEU encompasses a Member State’s failure to fulfil a so-called ‘substantive’ obligation to transpose itself, as submitted by the Commission. A second question is whether Article 260(3) TFEU applies to cases where a Member State notifies measures which constitute an incomplete (partial) transposition, as the Commission contends, as well as an incorrect transposition, which is the position taken by Advocate General Wathelet in his Opinion in Commission v Poland. ( )

43. Under settled case-law, the interpretation of a provision of EU law requires that account be taken not only of its wording and the objectives it pursues, but also of its context and the provisions of EU law as a whole. The origins of a provision of EU law may also provide information relevant to its interpretation. ( )

44. On this basis, I propose that Article 260(3) TFEU should be interpreted as a Member State’s failure to fulfil a ‘substantive’ obligation to transpose, and thus includes a Member State’s total failure to notify any transposition measures, as is the case in these proceedings, as well as a Member State’s notification of measures which constitute an incomplete or incorrect transposition of the directive in question. While there are some compelling arguments to support each of the possible interpretative approaches, a broad interpretation of Article 260(3) TFEU in this regard accords with the wording of Article 260(3) TFEU and furthers as much as possible the objectives and scheme of Article 260(3) TFEU, with a view to ensuring that Article 260(3) TFEU constitutes a genuinely effective means of securing the Member States’ timely transposition of directives.

(a) Wording

45. Article 260(3) TFEU refers to a Member State’s failure ‘to fulfil its obligation to notify’ measures transposing a legislative directive. Although a literal interpretation of that wording may imply merely the failure to notify, it is not clear whether the failure to transpose and in turn an incomplete or incorrect transposition may be covered.

46. Support for a restrictive interpretation of Article 260(3) TFEU cannot, in my view, be drawn from the fact that a definite article would have been used if the failure to notify all transposition measures, thus covering incomplete transposition, had been envisaged by the Treaty framers (for example, Dutch: ‘tot mededeling van maatregelen’ and not ‘tot mededeling van de maatregelen’; French: ‘communiquer des mesures de transposition’ and not ‘communiquer les mesures de transposition’; German: ‘Verpflichtung verstoßen hat, Maßnahmen zur Umsetzung’ and not ‘Verpflichtung verstoßen hat, die Maßnahmen zur Umsetzung’). Not only may certain language versions be interpreted in a qualified sense of ‘the measures’ (for example, Bulgarian: ‘да съобщи за мерките’; Italian: ‘comunicare le misure di attuazione’; Spanish: ‘informar sobre las medidas de transposición’), but also the fact that the language versions mentioned above refer to ‘measures’ in the general sense (see also, for example, English: ‘notify measures’; Maltese: ‘jinnotifika miżuri’) lends support for a broad interpretation of Article 260(3) TFEU.

47. According to the Court’s case-law, the information concerning the transposition of a directive which a Member State is obliged to notify (communicate) to the Commission, flowing from the principle of sincere cooperation in Article 4(3) TEU, must be clear and precise and unequivocally indicate the legislative, regulatory and administrative measures by which the Member State considers that it has fulfilled the various obligations imposed on it by the directive and thereby allows the Commission to ascertain whether that Member State has genuinely and fully transposed the directive. ( )

48. Following from this, the obligations to notify and transpose are related obligations in the sense that the obligation to notify puts into operation the obligation to transpose, ( ) since as indicated by the Commission the obligation to notify is an essential step in ensuring that the obligation to transpose is complied with. A Member State’s obligation to take all of the necessary measures to transpose a directive in accordance with the Court’s case-law (see point 34 of this Opinion) ( ) goes hand in hand with its obligation to notify the Commission that it has done so. ( ) Thus, the Court’s case-law ( ) supports interpreting Article 260(3) TFEU as including a ‘procedural’ obligation to notify as well as a ‘substantive’ obligation to transpose.

49. The fact that Article 260(3) TFEU mentions a failure to notify, instead of a failure to transpose, appears to be a logical, indeed ingenious, means of ensuring that the Member States comply with both obligations. It also seems nonsensical that a Member State would have complied with its obligation to transpose without notifying the transposition measures to the Commission at any stage in the proceedings under Articles 258 and 260(3) TFEU.

(b) Origins

50. Article 260(3) TFEU finds its immediate origins in the discussion circle on the Court of Justice in the context of the European Convention. One of the issues on that discussion circle’s agenda was the system of penalties in the infringement procedure. In early discussions, the members were generally receptive to establishing a ‘fast track procedure’ in then Article 228 EC (now Article 260 TFEU), eliminating the formal notice and reasoned opinion requirements and ‘in cases such as “failure to communicate”, for example, the Commission could even be authorised to ask the Court, where it saw fit, both to find the failure and to impose the penalty as part of the same procedure’. ( )

51. The discussion circle’s final report ( ) contained suggestions on these aspects which were taken up by the Convention Praesidium. ( ) As the Praesidium document underlined, the system was not efficient enough, as it might be years before a pecuniary sanction was imposed on a Member State, and thus ‘means should be found to bring about great effectiveness and simplicity in the machinery for sanctions for failure to comply with a judgment of the Court’. ( ) To that end, alongside the proposal to abolish the reasoned opinion in the procedure for the second judgment, came the following proposal:

‘Paragraph 3 (new) is the result of a suggestion submitted to the discussion circle by the Commission. It grants the Commission the possibility of initiating before the Court both (in the same procedure) proceedings for failure to fulfil an obligation pursuant to Article 226 EC [now Article 258 TFEU] and an application to impose a sanction. If, at the Commission’s request, the Court imposes the sanction in the same judgment, the sanction would apply after a certain period had elapsed from the date the judgment was delivered, if the defending State did not comply with the Court’s ruling. … This would enable the procedure for sanctions in the case of “non-communication” of a national transposition measure to be considerably simplified and speeded up.’ ( )

52. An accompanying footnote indicated: ‘A distinction is made in practice between cases of “non-communication” (when the Member State has not taken any transposition measure) and cases of incorrect transposition (when the transposition measures taken by the Member State do not, in the Commission’s view, comply with the directive (or framework law ( ))). The proposed arrangements would not apply in the second case.’ ( )

53. This proposal found its way into the 2003 version of the draft Constitutional Treaty (numbered Article III-267(3)) ( ) as follows:

‘When the Commission brings a case before the Court of Justice pursuant to Article III-265 on the grounds that the State concerned has failed to fulfil its obligations to notify measures transposing a European framework law, it may, when it deems appropriate, request that, in the course of the same proceedings, the Court of Justice impose the payment of a lump sum or penalty if the Court finds that there has been such a failure. If the Court complies with the Commission’s request, the payment in question shall take effect within the time limit laid down by the Court of Justice in its judgment.’

54. In the 2004 version of the draft Constitutional Treaty, the provision (numbered Article III-362(3)) ( ) was split into two paragraphs and modified (my emphasis) as follows:

‘When the Commission brings a case before the Court of Justice of the European Union pursuant to Article III-360 on the grounds that the Member State concerned has failed to fulfil its obligation to notify measures transposing a European framework law, it may, when it deems appropriate, specify the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances.

If the Court finds that there is an infringement it may impose a lump sum or penalty payment on the Member State concerned not exceeding the amount specified by the Commission. The payment obligation shall take effect on the date set by the Court in its judgment.’

55. The foregoing travaux préparatoires for Article 260(3) TFEU lead to the following observations.

56. First, it may be inferred from the footnote in the European Convention documents mentioned above (see point 52 of this Opinion) that Article 260(3) TFEU, at least in its original framing, is intended to be limited to cases where the Member State fails to take and notify any transposition measure, and excludes cases of incorrect transposition. Yet, that footnote assimilates notification and transposition and fails to mention incomplete transposition which presumably may be included in light of Commission practice to which that footnote apparently refers. ( )

57. Second, it may be inferred from certain changes made to the wording of the provision in the 2004 version of the draft Constitutional Treaty, which is nearly identical to Article 260(3) TFEU, as compared to the previous versions of the text, that the Treaty framers intended to align the wording of the second and third paragraphs of Article 260 TFEU to a great extent. This is subject to the ceiling placed on the Court’s imposition of financial penalties ‘not exceeding the amount specified by the Commission’ and that the payment obligation must ‘take effect on the date set by the Court in its judgment’ in the second subparagraph of Article 260(3) TFEU. I will come back to this later in my analysis (see points 76 to 79 of this Opinion).

58. Third, it is useful to point out that there were some critical comments and proposals to delete the provision during the European Convention which stemmed in part from concerns that, first, if that provision was limited to a procedural obligation to notify, this would render it useless and, moreover, it would be inappropriate to impose financial penalties solely on that basis, and second, it invited complexities in determining whether a Member State had transposed a directive and distinguishing between late, incomplete and incorrect transposition. ( )

59. I am thus inclined to consider that while the travaux préparatoires for Article 260(3) TFEU may lend some support for a restrictive interpretation, they do not provide a conclusive answer.

(c) Objectives

60. Article 260(3) TFEU establishes a so-called fast track procedure for imposing financial penalties against Member States which is intended to be more speedy and efficient than the traditional procedure of Article 260(2) TFEU. The imposition of financial penalties no longer depends on a lengthier procedure involving a first judgment of the Court declaring the infringement under Article 258 TFEU and then a second judgment of the Court under Article 260(2) TFEU following the Member State’s non-compliance with the first judgment. Article 260(3) TFEU also aims to give stronger incentive to the Member States to transpose directives on time, so as to ensure the effectiveness and uniform application of EU law and thus Union citizens can enjoy rights derived from those directives.

61. In view of these objectives, it may be considered, first, in line with the position taken by Advocate General Wathelet in his Opinion in Commission v Poland, ( ) that if it were sufficient for a Member State to notify any document as a transposition measure, this would deprive Article 260(3) TFEU of its substance.

62. Second, the procedure under Article 260(3) TFEU should not be ‘held hostage’ to the Commission practice of bringing separate proceedings for complete or partial failure to transpose and for incorrect transposition. ( ) This goes against the aim of Article 260(3) TFEU to make the procedure more speedy and effective by combining the infringement and sanctions in one proceeding.

63. No clear line can be drawn between cases involving incomplete and incorrect transposition, and attempts to do so are likely to invite complexities into the procedure under Article 260(3) TFEU which would detract from its objectives. This may be illustrated by examples drawn from the Court’s case-law in which a complaint of a failure to transpose, in all or in part, entails inquiry into pre-existing provisions of national law and as a result the correctness of the transposition. ( ) This complexity is borne out by point 19 of the 2011 Communication in which the Commission indicates that disputes regarding the rules existing in national law are to be dealt with under the normal procedure on the correct transposition of the directive under Article 258 TFEU.

64. Such a distinction also runs up against the Court’s case-law and in particular its judgments in Commission v Italy ( ) and Commission v Luxembourg ( ) in which the Court held that it is permissible in infringement proceedings for the Commission to convert a complaint of total failure to transpose into a complaint of incomplete or incorrect transposition where the Member State notifies its existing transposition measures belatedly and thus makes it difficult for the Commission to complain about defects of transposition at an early stage; in such circumstances, a complaint of incomplete or incorrect transposition is included in a complaint alleging a complete failure to transpose and subsidiary to that complaint.

65. Admittedly, examples may be found in the Court’s case-law where a Member State’s failure to transpose is assessed separately from the quality (incomplete or incorrect) of the transposition measures. ( ) Yet, to my mind, those examples attest to the difficulties in doing so, and do not address the problems for the functioning of Article 260(3) TFEU resulting from such a distinction.

66. Moreover, reliance on a prima facie examination is problematic. My understanding is that the Commission is given considerable discretion by virtue of a prima facie examination of the transposition measures notified to determine whether the Member State has carried out a complete transposition. This is liable, in particular, to privilege the Commission’s view as to what constitutes an (in)complete transposition and deprives the Member State of its discretion under EU law to choose the form and methods to transpose directives as recognised in the third paragraph of Article 288 TFEU. ( )

(d) Context

67. Article 260(3) TFEU is situated in the context of the infringement procedure laid down in Articles 258 to 260 TFEU, more specifically the system of financial penalties in Article 260 TFEU. Article 260(3) TFEU was established alongside reforms made to Article 260(2) TFEU and thus as a complement to Article 260(2) TFEU. Consequently, arguments that Article 260(3) TFEU is an exception to Article 260(2) TFEU and should be interpreted restrictively fail to convince.

68. This is substantiated by the fact that, according to Article 260(3) TFEU, the Commission is afforded a discretion (‘it may, when it deems appropriate’) to decide whether to ask for financial penalties upfront pursuant to that provision. There is no obligation placed on the Commission under Article 260(3) TFEU to do so. ( ) The Commission may rely on Article 258 TFEU and Article 260(2) TFEU instead. ( ) Thus, the traditional route of Article 260(2) TFEU and the fast track route of Article 260(3) TFEU are not watertight.

69. From a broader perspective, it should be noted that the original EEC Treaty (unlike the ECSC Treaty) did not contain any provisions on sanctions for infringements of EU law by the Member States. It took 36 years, with the entry into force of the Maastricht Treaty (1957-1993), to establish Article 260(2) TFEU. ( ) Subsequent efforts to improve the speed and efficiency of the infringement and sanctions regime by way of proposed Treaty amendments in the context of the Amsterdam and Nice Treaties failed. ( ) With the Lisbon Treaty, it has taken nearly two more decades (1993-2009) for the introduction of Article 260(3) TFEU.

70. On this basis, although a restrictive interpretation of Article 260(3) TFEU with a view to delimiting that provision to quick, simple cases of a Member State’s failure to notify any transposition measures and relegating everything else to the traditional route of Articles 258 and 260(2) TFEU may be appealing, the consequence of such an interpretation would be to condone a lengthier procedure in the majority of cases, and attempting to draw a line between notification of incomplete versus incorrect transposition measures similarly detracts from the operation of Article 260(3) TFEU.

71. The foregoing literal, historical, purposive and contextual analyses of Article 260(3) TFEU therefore lead me to conclude that the interpretation of Article 260(3) TFEU which I propose, as including a Member State’s failure to notify measures constituting an incomplete or incorrect transposition, is the interpretation which best effectuates the objectives of Article 260(3) TFEU and genuinely strengthens the sanctions machinery in the EU.

2. Assessment of financial penalties under Article 260(3) TFEU

72. On the basis that Article 260(3) TFEU is applicable, I turn to the assessment of financial penalties under that provision.

73. First, I find persuasive the line of argument developed by Advocate General Wathelet in Commission v Poland ( ) that the Commission should be entitled to use the same method to calculate the financial penalties that it proposes under Article 260(2) and (3) TFEU. In particular, this is on the grounds that such penalties are the same, the objectives pursued by those two provisions are similar and the Commission’s criteria for penalty payments correspond to those used by the Court in its case-law ( ) which promotes a coherent approach and provides foreseeability for the Member States. The fact that Article 260(2) TFEU sanctions the ‘double infringement’ of EU law and non-compliance with the Court’s first judgment whereas Article 260(3) TFEU sanctions a single infringement of EU law does not, to my mind, detract from the fact that both provisions are concerned with infringements rooted in primary Union law.

74. It should be stressed that the Commission’s calculation method does not prejudice the Member States in the procedure under Article 260(3) TFEU, since just as the Court has ruled in respect of Article 260(2) TFEU, it is for the Court to assess in each case the financial penalties to be imposed. The Commission’s suggestions and guidelines in its communications are not binding on the Court, but merely constitute a useful point of reference and ensure that the Commission’s actions are transparent, foreseeable and consistent with legal certainty. ( ) Thus, the Court’s case-law on penalty payments under Article 260(2) TFEU should guide, in the relevant circumstances, the Court’s determination of penalty payments under Article 260(3) TFEU.

75. Further, in the Court’s case-law on Article 260(2) TFEU and in particular its landmark judgment in Commission v France, ( ) the Court held that it may impose both financial penalties provided for in Article 260(2) TFEU, ( ) and that it may impose a financial penalty not suggested by the Commission on the grounds that ‘the appropriateness of imposing a financial penalty and the choice of the penalty most suited to the circumstances of the case can be appraised only in the light of the findings made by the Court in the judgment to be delivered under Article [260(2) TFEU] and therefore fall outside the political sphere’. ( )

76. There are strong grounds for finding that these considerations are applicable to Article 260(3) TFEU and thus the Court may impose both a lump sum and a penalty payment or a financial penalty not suggested by the Commission, subject to the ceiling placed on the amount of the financial penalty under Article 260(3) TFEU. This is based on the identical wording of Article 260(2) and (3) TFEU in reference to ‘lump sum or penalty payment’. This also better serves the objectives of Article 260(3) TFEU to combat the late transposition of directives by the Member States, taking account of the purpose of having different financial penalties in the Treaties. ( )

77. Contrary to arguments advanced by the Commission at the hearing, ( ) the fact that Article 260(3) TFEU, and not Article 260(2) TFEU, provides that the Court ‘may impose a lump sum or penalty payment on the Member State concerned not exceeding the amount specified by the Commission’ does not invalidate this analysis. Article 260(3) TFEU mentions only the amount, and not the choice, of the financial penalty to be imposed. It may be inferred from this that the Court may not impose a financial penalty of a higher amount than that suggested by the Commission. Yet, this does not, in my view, restrict the Court’s discretion as to the type of financial penalty to be imposed. Thus, the Court may impose a financial penalty not suggested by the Commission, or both financial penalties, at the same as or a lower amount than that specified by the Commission.

78. This issue may have seminal importance for the Court’s case-law on Article 260(3) TFEU. In the 2011 Communication, the Commission stated that it would seek in principle only a penalty payment in proceedings under Article 260(3) TFEU, and would withdraw its action if the Member State notified the transposition measures required to put an end to the infringement. ( ) Recently, the Commission revised its approach and in principle requests both penalties. ( ) This helps to explain why so many cases were withdrawn by the Commission before the Court could deliver judgment on Article 260(3) TFEU. ( ) Although perhaps not applicable to the present case, ( ) it should not be overlooked that the Court may impose a lump sum, even if the Commission has only requested a penalty payment, in cases where a Member State notifies the necessary transposition measures after proceedings were lodged before the Court but before the Court delivers its judgment.

79. It should also be pointed out that, unlike Article 260(2) TFEU, Article 260(3) TFEU states: ‘The payment obligation shall take effect on the date set by the Court in its judgment.’ The Court is entitled under Article 260(2) TFEU to set the date of effect of the financial penalty imposed. ( ) Still, it may be inferred from the express mention in Article 260(3) TFEU that this may serve as a useful tool for the Court in its discretion to modulate the imposition of financial penalties in particular circumstances. ( )

3. The penalty payment in the present proceedings

80. Following from the Court’s case-law on Article 260(2) TFEU, the penalty payment under Article 260(3) TFEU must be decided upon according to the degree of persuasion needed in order for the Member State to alter its conduct and bring to an end the infringement established. ( ) In exercising its discretion, it is for the Court to set the penalty payment so that it is both appropriate to the circumstances and proportionate to the infringement established and the ability to pay of the Member State concerned. For determining the amount of a penalty payment, the basic criteria which must be taken into account are, in principle, the seriousness of the infringement, its duration and the ability to pay of the Member State in question. In applying those criteria, regard must be had, in particular, to the effects on public and private interests of the failure to comply and to how urgent it is for that Member State to be induced to fulfil its obligations. ( )

81. In the present case, it should be considered that the imposition of a penalty payment is appropriate as a persuasive measure. The duration of the infringement could be increased if the Court accepts my proposal that it should be assessed from a different starting date than that proposed by the Commission. Also, the flat rate amount could be increased from 680 to 690 and the ‘n’ factor reduced from 11.99 to 11.93 if the Commission’s updated figures are taken into account. ( ) This would give a daily penalty payment (690 x 10 x 2.4 x 11.93 = EUR 197 560.80) which is higher than that specified by the Commission (680 x 10 x 1.3 x 11.99 = EUR 105 991.60: see point 20 of this Opinion). In light of the ceiling set down in Article 260(3) TFEU, I propose that the Court should impose a daily penalty payment up to the full amount specified by the Commission.

82. First, as regards the seriousness of the infringement, I am unconvinced that certain national measures invoked by the Kingdom of Spain are relevant for the proportionality assessment of the penalty payment. In Commission v Sweden, ( ) the Court rejected similar arguments on the basis that it was common ground that such measures did not meet the requirements of the directive concerned; otherwise, the Member State would not have been found in breach of its obligation to transpose. As those measures do not constitute transposition measures, the Court’s judgment in Gavieiro Gavieiro and Iglesias Torres ( ) is also not relevant in this regard.

83. Contrary to the Kingdom of Spain’s arguments, the Commission’s assessment of seriousness does not appear to be the result of any error, taking account of the importance of the directive in question and the effects of the infringement on public and private interests, elements which are assessed objectively by the Court. ( )

84. As indicated by the Commission, Directive 2014/17 aims to establish a common framework for certain aspects of the Member States’ rules concerning credit agreements for consumers secured by a mortgage or otherwise relating to residential immovable property. ( ) Directive 2014/17 was situated against the backdrop of the global financial crisis and thus aims to create an internal market for mortgage credit and to promote financial stability by ensuring that mortgage credit markets operate in a responsible manner. ( )

85. Similar to what the Court has held in the State aid context, the rules set down in Directive 2014/17 give expression to one of the essential tasks with which the EU is entrusted under Article 3(3) TEU, namely the establishment of an internal market, and under Protocol No 27 on the internal market and competition which pursuant to Article 51 TEU forms an integral part of the Treaties and under which the internal market is to include a system ensuring that competition is not distorted. ( )

86. The effects of the failure to transpose Directive 2014/17 on public and private interests may also be considered significant in the Spanish context especially in light of problems in the Spanish mortgage sector. This is illustrated, for example, by the European Parliament resolution of 8 October 2015 on mortgage legislation and risky financial instruments in Spain ( ) which drew attention to hundreds of thousands of evictions and the lack of protection for borrowers which had been aggravated by the financial crisis. To address this situation, the Parliament, inter alia, requested the Commission to monitor closely the transposition of Directive 2014/17 in all Member States. ( ) As also indicated in that resolution and the Kingdom of Spain’s submissions, abusive clauses and practices in the Spanish mortgage sector have been the subject of numerous references for preliminary rulings before the Court. ( ) Thus, the impact of the non-transposition at issue is serious, as the Commission indicates, since it deprives consumers as well as economic operators throughout Spain of the rights afforded to them under that directive and, moreover, undermines the system of rules applicable to lenders and credit intermediaries seeking to ensure the stability of the EU financial system.

87. Second, as regards the duration of the infringement, the Commission takes the view that the penalty payment should be calculated starting from the day after the expiration of the transposition deadline for Directive 2014/17, which is 22 March 2016, and ending on the date on which the Commission decided to bring infringement proceedings, which is 27 April 2017 (see point 25 of this Opinion).

88. Yet, in its case-law on penalty payments under Article 260(2) TFEU, the Court assesses the duration of the infringement starting from the delivery of the first judgment until the Court assesses the facts in the second proceedings and not the time when the case is brought before it by the Commission. ( ) For proceedings under Article 260(3) TFEU, I therefore propose that the Court use as the starting date for the duration of the infringement the reference date set out in the reasoned opinion, since that is the date on which the infringement is established under the Court’s case-law (see point 35 of this Opinion).

89. In the present case, starting from the date on which the period set out in the reasoned opinion expired (18 January 2017) to the date of the hearing (21 January 2019), the duration of the infringement is about 24 months (2.4) which may be considered a significant period of time. ( )

90. The Kingdom of Spain’s argument to exclude the period between 20 December 2015 and 29 October 2016, during which there was an unusual situation relating to difficulties in forming a government, from the duration of the infringement, or at least to moderate the penalty payment, should be rejected. In its case-law concerning Article 260(2) TFEU, as well as Article 258 TFEU, ( ) the Court has repeatedly held that a Member State cannot plead difficulties in its domestic legal order to justify a failure to observe obligations arising under EU law. ( ) In fact, the Court recently rejected similar arguments to those advanced by the Kingdom of Spain in these proceedings in a case involving the imposition of a lump sum under Article 260(2) TFEU. ( ) The same considerations should apply to the procedure under Article 260(3) TFEU. Moreover, if the duration of the infringement is assessed from the expiry of the date in the reasoned opinion, which is 18 January 2017, then that period (20 December 2015 to 29 October 2016) should not matter in any case.

91. Third, the Kingdom of Spain has not submitted to the Court any evidence relating to its ability to pay.

92. Further, the Court typically resorts to a daily penalty payment in cases involving the adoption of legislative amendments especially in respect of transposition. ( ) No arguments have been raised before the Court requesting it to depart from that in these proceedings, nor to modulate the date on which the payment obligation should take effect. I am thus inclined to agree with the Commission’s request that the daily penalty payment should take effect on the date of the Court’s judgment. Also in light of the Commission’s request, I propose that the Court should not specify in its judgment the ‘European Union own resources’ account.

VII. Costs

93. Under Article 138(1) of the Rules of Procedure of the Court, 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 Kingdom of Spain has been unsuccessful, the Kingdom of Spain should be ordered to pay the costs. In accordance with Article 140(1) of those Rules of Procedure, under which Member States which have intervened in the proceedings are to bear their own costs, the French Republic should be ordered to bear its own costs.

VIII. Conclusion

94. In the light of the foregoing considerations, I propose that the Court should:

(1) declare that, by failing to adopt before 21 March 2016 the laws, regulations and administrative provisions necessary to comply with Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 or, in any event, by failing to notify the Commission of those provisions, the Kingdom of Spain has failed to fulfil its obligation under Article 42(1) of that directive;

(2) order the Kingdom of Spain, in accordance with Article 260(3) TFEU, to pay a daily penalty payment of EUR 105 991.60, with effect from the date of delivery of the judgment in the present case until the date that it notifies the Commission of the provisions necessary to comply with Directive 2014/17;

(3) order the Kingdom of Spain to pay the costs of the proceedings;

(4) order the French Republic to bear its own costs.