Case C-244/03: Action brought on 10 June 2003 by the French Republic against the European Parliament and the Council of the European Union
Date: 2003-07-19
Institutions: Court of Justice
Subjects: Council of the European Union, European Parliament, France, action for annulment (EU), animal experimentation, approximation of laws, cosmetic product, marketing restriction

C 171/20

EN

Official Journal of the European Union

19.7.2003

The Commission of the European Communities claims that
the Court should:

Action brought on 10 June 2003 by the French Republic
against the European Parliament and the Council of the
European Union

1.

declare that by introducing a special rule limiting the
deductibility of VAT on the purchase of capital goods on
the ground that they were financed by subsidies, the
French Republic has failed to fulfil its obligations under
Community law, and in particular Articles 17 and 19 of
the Sixth Council Directive of May 1977, as amended, on
the harmonisation of the laws of the Member States
relating to turnover taxes — Common system of value
added tax: uniform basis of assessment (1);

2.

order the French Republic to pay the costs.

Pleas in law and main arguments

Articles 17 to 20 of the Sixth Directive establish the scheme
for the right of taxable persons to deduct VAT. Taxable persons
who carry out transactions giving rise to the right to deduct
and at the same time transactions not giving rise to that right
may deduct from the amount of the tax payable by them on
taxed transactions the amount of the tax which they have paid
on purchases of goods or supplies of services used, within the
limit of a proportion calculated according to the procedures
defined in Article 19.

The French legislation provides for a limit on the deduction of
VAT payable on assets financed by subsidies in certain
conditions not provided for in the Sixth Directive. The system
established by the French legislation for mixed taxable persons
precludes entitlement to deduct the VAT paid on the purchase
of capital goods to the extent of the proportion of that
purchase financed by a subsidy, if the proportion thus financed
is not reflected in the price of the taxable transactions. This
exclusion, which concerns purchases of goods assigned to
activities coming within the scope of the directive, takes affect
before any application of the proportion of deduction and
reduces the amount of VAT to which that proportion is
applied, where appropriate, for the purpose of calculating the
deductible VAT. However, derogations from the right
to
deduct are permitted only in the cases expressly provided for
by the Sixth Directive. The French Government cannot rely on
Article 2 of First Council Directive 67/227/EEC of 11 April
1967 on the harmonisation of legislation of Member States
concerning turnover taxes, which provides that VAT is charge-
able after deduction of the amount of VAT borne directly by
the various costs components, to justify such limitation of the
right to deduct.

It also appears that the French authorities apply the same
limitation of deduction to taxable persons who carry out only
transactions giving rise to the right to deduct.

( 1) OJ 1977 L 145, p. 1.

(Case C-244/03)

(2003/C 171/30)

An action against the European Parliament and the Council of
the European Union was brought before the Court of Justice
of the European Communities on 10 June 2003 by the French
Republic, represented by F. Alabrune, G. de Bergues and
Ch. Lemaire, of acting as Agents, with an address for service in
Luxembourg.

The applicant claims that the Court should:

— Article 1(2) of Directive 2003/15/EC of the European
Parliament and of the Council of 27 February 2003 (1) in
so far as it introduces a new Article 4a into Council
Directive 76/768/EEC (2) on the approximation of the
laws of the Member States relating to cosmetic products;

— order the European Parliament and the Council to pay

the costs.

Pleas in law and main arguments

Article 4a of Directive 76/768/EEC, introduced by Article 1(2)
of Directive 2003/15/EC, prohibits the marketing of cosmetic
products where the final
formulation, or which contain
ingredients or combinations of ingredients which have been
the subject of animal testing and prohibits the performance on
their territory of animal testing of finished cosmetic products
ingredients. That
and of
prohibition is more severe than the prohibition which preceded
it and is incompatible with the rules of the World Trade
Organisation.

ingredients or combinations of

The French Government
seeking the annulment of
is
Article 1(2) of the directive in so far as it infringes the principle
of legal certainty. The Community legislature has disregarded
the requirement of legal certainty, since it has failed to define
clearly and precisely the scope of Article 4a and has used in
several places the imprecise expression ‘in order to meet the
requirements of this Directive’. Article 4a gives rise to sensitive
questions of interpretation and, consequently, the Member
States are likely to transpose the amending directive into their
domestic legal systems in divergent ways. Secondly,
the
requirement of legal certainty is even more important where it
is sought to impose obligations on individuals. In the present
case, the lack of precision and the unclear nature of Article 4a
do not enable undertakings to determine what circumstances
and legal relationships fall within the scope of that article.

19.7.2003

EN

Official Journal of the European Union

C 171/21

That uncertainty is particularly to the detriment of
the
undertakings concerned since in order to maintain their
presence on the international markets and avoid falling behind
in introducing innovations, an essential element of
their
competitiveness, European industries should be in a position
to determine exactly what legal situations fall within the scope
of Article 4a of the directive.
In the alternative, the French Government takes the view that
that article should be annulled inasmuch as it infringes the
following principles:
— freedom to pursue a professional activity: Article 4a
introduces restrictions to the right to pursue freely a
professional activity despite not being consonant with an
objective of general interest pursued by the Community,
namely the welfare of animals and, in any event, such
restrictions constitute, in view of their intention, excessive
and intolerable interference.

— proportionality:

caused by the
implementation of Article 4a are excessive by comparison

inconvenience

the

with the intended aim — the improvement to animal
welfare is extremely small. Moreover, the implementation
of that article is likely to result in the circulation of
products presenting significant risks to human health as
a result of the mismatch between the object of Article 4a
and the envisaged state of scientific knowledge.

— precaution:

the Community legislature has allowed

human health to be exposed to unacceptable risks.

— non-discrimination: Article 4a is likely to upset the level
of equality among undertakings in the cosmetics industry
for no objective reason.

(1) OJ 2003 L 66, p. 26.
(2) OJ 1976 L 262, p. 169.