Opinion of Mr Advocate General Sir Gordon Slynn delivered on 29 September 1987. - SA Les Fils de Jules Bianco and J. Girard Fils SA v Directeur Général des douanes et droits indirects. - References for a preliminary ruling: Cour de cassation - France. - Recovery of undue payment - Evidence that charges on the price of goods have not been passed on to other persons. - Joined cases 331/85, 376/85 and 378/85.



European Court reports 1988 Page 01099

Swedish special edition Page 00387

Finnish special edition Page 00393



Opinion of the Advocate-General

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My Lords,

French Decree No 78-903 of 30 August 1978 imposed a "parafiscal charge" on regular and super petrol marketed in France with effect from 2 September 1978 to 31 December 1978, and French Decree No 78-1043 of 2 November 1978 imposed a similar charge on domestic heating oil marketed in France with effect from 3 November 1978 to 31 December 1978 . The French companies Les Fils de Jules Bianco and J . Girard Fils are engaged in the sale, importation and distribution of oil and petrol . They paid monies to the French tax authorities by way of such parafiscal charges, but subsequently brought three separate actions before the French courts challenging the validity of the charges and seeking reimbursement of the monies paid . Both at first instance and on appeal their claims ( without there being any discussion of the merits ) were held inadmissible . This was on the basis that they had not shown that the parafiscal charges had not been passed on to purchasers from them pursuant to Article 13 ( V ) of the Finance Law for 1981 ( Law No 80-1094 of 30 December 1980 ) which provides :

"Where a person has unduly paid indirect taxes governed by the General Tax Code or national duties and charges collected according to the procedures of the Customs Code, he may, except in cases of substantive error, only obtain repayment if he can demonstrate that the duties were not passed on to the buyer .

This provision applies to claims submitted in accordance with Article 1931 of the General Tax Code and Article 352 of the Customs Code, including claims submitted before the date on which this law enters into force ."

The companies appealed further to the Cour de cassation which, by judgments of 9 October 1985 received at the Court Registry on 8, 27 and 28 November 1985, requested a preliminary ruling in each case on the following question :

"Must the Treaty establishing the European Economic Community be interpreted as meaning that the French Republic cannot make the repayment of national charges levied contrary to Community law conditional upon the production of proof that those charges have not been passed on to the purchasers of the products that were subject to the charges and place the burden of adducing such negative proof entirely upon natural or legal persons claiming repayment?

Does the answer depend upon whether the Law of 30 December 1980 has retroactive effect, the nature of the charge at issue and whether the market is free, regulated or monopolistic, either wholly or in part?"

The three cases were joined by order of the Court of 15 January 1986 .

No question is raised as to whether this charge was contrary to Community law and the reference must proceed on the assumption that the charge was imposed in breach of the Treaty .

The Commission, the United Kingdom and Italy have intervened, though with different emphasis, to support the companies in saying that Article 13 ( V ) in that it imposes a negative burden of proof on the claimant and in that it requires documentary evidence is contrary to Community law; France alone contends that the article is compatible with Community law .

The Court was told at the hearing that changes had been made to French law, apparently by the Corrective Finance Law of 1986 ( No 86-1318 of 30 December 1986 ) Article 24 of which provides that Article 1965A of the General Tax Code shall read : "Where a person has unduly paid indirect duties governed by the present Code, he may obtain repayment unless the duties were passed on to the buyer", and that Article 352 bis of the Customs Code shall read similarly . The reference, however, is concerned only with Article 13 ( V ) of the Finance Law for 1981 and any amendments introduced in 1986 do not fall for consideration .

It is said by the parties and the Commission, and not contested, that Article 13 ( V ) of the Finance Law for 1981 was introduced following the Court' s judgment in Case 168/78 Commission v France (( 1980 )) ECR 347 in which the Court held that tax imposed on certain imported spirits was contrary to Article 95 of the EEC Treaty . To avoid automatic refunds in a large number of cases in which repayment of the tax unlawfully levied was or was likely to be demanded ( with a consequent loss of revenue ), it is said, the onus was placed on the taxpayer to prove that he had not passed the duties on to purchasers from him . This contention is borne out by statements on behalf of the French Government ( National Assembly, first sitting of 17 October 1980, Official Journal of the French Republic p . 2826; Senate, sitting of 22 November 1980, ibid . p . 5129 ). The provisions of Article 13 ( V ) have, however, been held by the courts which have already given judgments not to be limited to spirits but to cover, inter alia, petroleum products such as those in question here .

If a charge is imposed in breach of Community law it is plainly important that a citizen should be able in his national courts not only to obtain a ruling that the charge is unlawful, but also to obtain an order for repayment of charges which he has wrongly been required to pay . In principle, rules as to repayment should be the same for all Member States . Although the Council has adopted Regulation No 1430/79 of 2 July 1979 on the repayment or remission of import or export duties imposed by the Community itself and collected by Member States ( Official Journal 1979, L 175, p . 1 ), nothing has been done by regulation to harmonize national rules and procedures relating to charges imposed by Member States in breach of Community law - this despite the fact that since 1976 the Court has stressed that powers exist to make such rules and that their absence is to be regretted ( Case 33/76 Rewe Zentralfinanz eG v Saarland (( 1976 )) ECR 1989; Case 130/79 Express Dairy Foods Ltd . v Intervention Board for Agricultural Produce (( 1980 )) ECR 1887 ).

Accordingly, the courts have been obliged to deal with specific cases involving claims for repayment in the absence of such harmonizing rules .

The starting point is that national courts are "entrusted with ensuring the legal protection which citizens derive from the direct effect of the provisions of Community law" ( Rewe, supra para . 5 ). In other words a remedy against unlawful charges must be available .

Because there is no harmonization, the Court has accepted that national courts must apply their own rules and procedures . Thus national rules as to limitation periods, the appropriate forum and the awarding of interest may be observed even if they differ from Member State to Member State ( Rewe, supra ).

Those national rules must, however, be such ( a ) that the conditions applied to actions for the enforcement of Community law "cannot be less favourable than those relating to domestic actions of a similar nature", and ( b ) that those conditions must not make it "impossible in practice to exercise the rights which national courts are obliged to protect ". These general principles, first stated in Rewe have been confirmed in a series of subsequent judgments ( Case 45/76 Comet v Produktschap voor Siergewassen (( 1976 )) ECR 2043; Case 68/79 Just v Danish Ministry for Fiscal Affairs (( 1980 )) ECR 501; Case 61/79 Amministrazione delle Finanze dello Stato v Denkavit Italiana (( 1980 )) ECR 1205; Case 811/79 Amministrazione delle Finanze dello Stato v Ariete (( 1980 )) ECR 2545; Case 826/79 Amministrazione delle Finanze dello Stato v MIRECO (( 1980 )) ECR 2559; and Case 199/82 Amministrazione delle Finanze dello Stato v San Giorgio (( 1983 )) ECR 3595 ). Two of these cases call for comment .

In Just it seems to me that the Court was essentially concerned to see whether two aspects of Danish law or practice were compatible with Community law - namely ( a ) that Danish courts take into account the fact that the charges which were paid, but not owed, were incorporated in the price of the goods and passed on to subsequent purchasers; and ( b ) that Danish courts may take into account in deciding the amounts to be refunded any damage which may have been suffered by the taxpayer as a result of the incidence of unlawful taxation on his turnover, such as low profits due to diminished sales arising from the higher price incorporating the tax . Both these factors were held compatible with Community law . There is in the context of the general principles laid down by the Court a link between them . Even if credit had to be given for the unlawful taxes passed on, damages for loss of sales due to the higher price resulting from the inclusion of the tax could be, as they were in the Just case, claimed . The Court did not, however, hold that the fact that charges had been passed on must as a matter of Community law, e.g . pursuant to a general principle forbidding unjust enrichment, mean that the charges wrongly demanded and paid could never be recovered .

In San Giorgio the Court repeated the two general principles to which I have referred and the ruling in Just that refusing reimbursement "cannot be regarded as contrary to Community law where it is established that the person required to pay such charges has actually passed them on to other persons" ( emphasis added ). "Establishing" a fact in a national court depends on evidence . It may be helped by rebuttable or irrebuttable presumptions . In this regard the Court added an important qualification in paragraph 14 : "any requirement of proof which has the effect of making it virtually impossible or excessively difficult to secure the repayment of charges levied contrary to Community law would be incompatible with Community law . That is so particularly in the case of presumptions or rules of evidence intended to place upon the taxpayer the burden of establishing that the charges unduly paid have not been passed on to other persons or of special limitations concerning the form of the evidence to be adduced, such as the exclusion of any kind of evidence other than documentary evidence . Once it is established that the levying of the charge is incompatible with Community law, the court must be free to decide whether or not the burden of the charge has been passed on, wholly or in part, to other persons ". Further ( paragraph 15 ): "In a market economy based on freedom of competition, the question whether, and if so to what extent, a fiscal charge imposed on an importer has actually been passed on in subsequent transactions involves a degree of uncertainty for which the person obliged to pay a charge contrary to Community law cannot be systematically held responsible" ( underlining added ).

In that case, where a provision of Italian law gave entitlement to repayment of sums unlawfully demanded, if the taxpayer produced documentary evidence that the charge was not passed on, the Court held that : "A Member State cannot make the repayment of national charges levied contrary to the requirements of Community law conditional upon the production of proof that those charges have not been passed on to other persons if the repayment is subject to rules of evidence which render the exercise of that right virtually impossible, even where the repayment of other taxes, charges or duties levied in breach of national law is subject to the same restrictive conditions ".

The companies rely principally on the decision in that case; they contend that it is extremely difficult for companies in their position to prove that the charge had not been passed on to the buyer . The French Government replies that it is entitled to prevent unjust enrichment, that the provision is not discriminatory against imports and that the evidential rules which are laid down do not make it virtually impossible or excessively difficult to obtain repayment of the charges wrongfully levied . In regard to the last contention it is said that although negative in form the requirement really is positive in that the claimant must show that he bore the tax, that this kind of indirect tax is by its nature normally passed on to the consumer so that it is right to place the burden on the claimant to show that he bore it himself, and that no particular form of evidence is required, unlike the provision in issue in the San Giorgio case .

In deciding in this context what provisions are and what are not compatible with Community law, it seems to me that the primary consideration is that : "Entitlement to the repayment of charges levied by a Member State contrary to the rules of Community law is a consequence of, and an adjunct to, the rights conferred on individuals by the Community provisions prohibiting charges having an effect equivalent to customs duties, or, as the case may be, the discriminatory application of internal taxes" ( San Giorgio, paragraph 12 ).

Essentially the applicant has to prove that the charge was unlawful and that he paid it, and in the first place he should not have to prove more . To require him to do more and to prove that he has not passed the burden on, as a condition of the admissibility of his action, is capable of making it "virtually impossible" or "excessively difficult" to secure the repayment . This was specifically recognized in San Giorgio ( paragraph 14 ) where "presumptions or rules of evidence intended to place upon the taxpayer the burden of establishing that the charges unduly paid have not been passed on" was said to be a particular example of a requirement of proof which has the effect of making it virtually impossible or extremely difficult to secure repayment .

To qualify this by saying that the burden may only be placed on the applicant if he cannot show that it would be virtually impossible or excessively difficult to prove that he had not passed on the tax would introduce complication and great difficulties into legal proceedings . The rules should be kept simple as indicated in the second sentence of paragraph 14 of the San Giorgio judgment .

Article 13 ( V ) is a clear example of such a requirement of proof as is condemned in San Giorgio . It is not saved by the fact that the article did not specify any particular form of evidence, since the Court' s ruling in the passage cited is in general terms . To require a specific form of evidence is an additional restriction . Nor in my view is it saved by the French Government' s submission that it can be expressed in positive terms . In essence the proof required is the same . Nor is a clear-cut distinction to be drawn, on the basis of the San Giorgio judgment between a market economy based on freedom of competition ( as in that case ) and a regulated market where prices are fixed by the State ( as in the present case ). The Court merely drew attention to the particularly difficult questions which can arise in a free market economy without excluding other forms of trade from the general principle stated . It is possible in such a regulated market economy, as the applicants contend, that it can still be difficult to show that the specific tax has been passed on in the fixed price of resale . Even if indirect taxes are normally passed on, it does not seem to me that in seeking repayment the claimant is required to prove that they were not passed on in specific cases . The amount of tax, the size of the sale involved, the number of transactions, the commercial decision whether to absorb the tax rather than to pass it on, will vary from case to case and it seems to me that legal certainty can only be satisfied by accepting that a case is admissible if the essential elements of payment of an unlawful charge are alleged and established .

A clear-cut rule, as in the second sentence of paragraph 14 of the San Giorgio judgment, does not nullify the Court' s recognition of the fact that Member States may refuse repayment where it is established that the charge has been passed on and that there would be unjust enrichment if repayment was ordered . Although great care has to be taken where it seems that a provision as to refusing repayment of unlawful charges which have been passed on is introduced in order to avoid the effects of Community law, it is still open to the national court to find that there has been unjust enrichment if the charge has been passed on and there has been no loss of profits ( because business has been lost simply because the tax was added to or included in the price ).

Moreover, it seems to me that in enforcing Community rights a national court is entitled to have regard to such loss of profits in deciding whether unlawful charges should be reimbursed . The fact that a separate action for damages for loss of profits may be available is a factor to be taken into account but it is not decisive, since to bring such an additional claim clearly may put an extra burden on the applicant, with considerable expense and delay .

If the burden is not on the applicant to show that the charge has not been passed on, does it lie on the administration to show that it has been passed on and that there has been unjust enrichment? It seems to me to follow that, if the burden is not initially on the applicant, it is for the administration to raise this issue and, if it can, to prove it . It may, however, produce evidence which points to there being a passing-on or unjust enrichment sufficient to call for rebuttal by the claimant . The evidentiary burden may thus, as is commonplace, shift during the case . The question at the end of the day is whether on the evidence as a whole the charge has been passed on so that, in the light of any profits which it is alleged may have been lost, repayment in whole or in part would result in unjust enrichment .

In the second paragraph of its questions, the referring court asks whether the answer is affected by three factors which it mentions : retroactive effect, the nature of the charge and the nature of the market . If a provision such as the one in question is contrary to Community law, the breach of Community law can in my view only be aggravated if the provision is also retroactive . The national court' s reference to the nature of the charge at issue may be an allusion to a distinction drawn between direct and indirect taxes . In a Member State whose courts are allowed to take into account the passing on of a charge by a trader to purchasers of the product concerned, it may well be easier to establish the passing on of a charge where the charge is levied on goods than where it is levied on the trader; but that is a matter of fact for the national court dealing with the case, and does not affect the issues with which this Court is concerned . If the referring court in this case is suggesting that it may be presumed that charges levied on goods are necessarily passed on to purchasers, any such presumption would in my view plainly be contrary to Community law ( San Giorgio, paragraph 14 ). Otherwise, I do not see on the arguments adduced any respect in which the "nature of the charge at issue" is relevant for present purposes . The Court' s case-law to date provides no grounds for distinguishing between direct and indirect taxes in the present context .

The question whether the market concerned is free, regulated or monopolistic, either wholly or in part, does not in my view affect the answer to the question referred in the present case for the reasons already given . In a regulated market ( like the present where prices are fixed by the State ) the trader has no choice about the price at which he sells on his products . In such circumstances it is, if anything, easier than in a free market to establish whether a charge has been passed on to purchasers . These are matters of evidence for the tribunal of fact . They do not in my view impinge on the question with which this Court has to deal in the present proceedings as to whether a Member State may introduce a provision about passing on and whether it may do so by imposing a negative burden of proof on the trader . It is not suggested that the present case concerns a monopolistic market . I consider that it is irrelevant for present purposes whether the market concerned is free, regulated or monopolistic .

Accordingly, I am of the view that the question referred by the French Cour de cassation should be answered along the following lines :

Member States may not adopt provisions which make the repayment of national charges levied contrary to Community law conditional upon the production of proof that those charges have not been passed on to the purchasers of the products that were subject to the charges and place the burden of adducing such negative proof entirely upon natural or legal persons claiming repayment .

If such a provision is retroactive, the breach of Community law is aggravated; but the nature of the charge at issue is irrelevant for this purpose, as is the question whether the market is free, regulated or monopolistic .

The costs of the parties to the main proceedings are a matter for the national court . The costs of the British, French and Italian Governments and the Commission are not recoverable .