CELEX: 62005CJ0054
Language: en
Date: 2007-03-15 00:00:00
Title: Judgment of the Court (Second Chamber) of 15 March 2007. # Commission of the European Communities v Republic of Finland. # Failure of a Member State to fulfil obligations - Articles 28 EC and 30 EC - Importation of a vehicle registered in another Member State - Obligation to obtain a transfer licence. # Case C-54/05.

Case C-54/05
      Commission of the European Communities
      v
      Republic of Finland
      (Failure of a Member State to fulfil obligations – Articles 28 EC and 30 EC – Importation of a vehicle registered in another Member State – Obligation to obtain a transfer licence)
      Opinion of Advocate General Mengozzi delivered on 11 January 2007 
      Judgment of the Court (Second Chamber), 15 March 2007 
      Summary of the Judgment
      Free movement of goods – Quantitative restrictions – Measures having equivalent effect
      (Arts 28 EC and 30 EC)
      A Member State which requires a person resident in that State and wishing to import a vehicle lawfully registered and used
         in another Member State to apply for the issue of a transfer licence for the purpose of putting that vehicle into circulation
         before its registration and before the payment of vehicle taxes fails to fulfil its obligations under Articles 28 EC and 30
         EC.
      
      Such a transfer licence system, having regard to the formalities which it imposes, is capable of hindering intra‑Community
         trade in motor vehicles and impeding access to the market for goods which are lawfully produced and/or sold in other Member
         States, particularly since steps must be taken by the holder of a motor vehicle that comes from another Member State before
         it may be lawfully used, since the issue of a transfer licence is not subject to a time‑limit from the lodging of the application
         for its grant and is not obligatory for the competent authorities, and since it is valid only for a short period.
      
      Pursuit of the objective of road safety, allowing vehicles to be precisely identified, is not such as to justify a transfer
         licence procedure, since, in any event, pending the final registration of the vehicles in the Member State concerned, their
         technical characteristics may be identified, whatever the Member State in which they are registered, because all Member States
         have a vehicle registration system.
      
      Moreover, even if the Member State concerned may legitimately introduce supervision procedures enabling it to identify vehicles
         which can be temporarily exempted from vehicle taxes, neither can the need to ensure effective fiscal supervision justify
         such a system, since it has not been shown that less restrictive measures, such as the establishment of a compulsory system
         for declaring the fact of a vehicle’s having been put into circulation, accompanied by appropriate penalties, could not bring
         about a similar result.
      
      (see paras 29, 32-34, 37, 40, 42-44, 46-47, operative part)
JUDGMENT OF THE COURT (Second Chamber)
      15 March 2007 (*)
      
      (Failure of a Member State to fulfil obligations – Articles 28 EC and 30 EC – Importation of a vehicle registered in another Member State – Obligation to obtain a transfer licence)
      In Case C-54/05,
      ACTION under Article 226 EC for failure to fulfil obligations, brought on 4 February 2005,
      Commission of the European Communities, represented by M. van Beek and M. Huttunen, acting as Agents, with an address for service in Luxembourg,
      
      applicant,
      v
      Republic of Finland, represented by T. Pynnä and A. Guimaraes‑Purokoski, acting as Agents, with an address for service in Luxembourg,
      
      defendant,
      THE COURT (Second Chamber),
      composed of C.W.A. Timmermans, President of the Chamber, P. Kūris, J. Makarczyk (Rapporteur), L. Bay Larsen and J.‑C. Bonichot,
         Judges,
      
      Advocate General: P. Mengozzi,
      Registrar: H. von Holstein, Deputy Registrar,
      having regard to the written procedure and further to the hearing on 9 November 2006,
      after hearing the Opinion of the Advocate General at the sitting on 11 January 2007,
      gives the following
      Judgment
      1       By its application, the Commission of the European Communities requests the Court to declare that, by requiring a transfer
         licence for vehicles lawfully registered and used in another Member State, the Republic of Finland has failed to fulfil its
         obligations under Articles 28 EC and 30 EC.
      
       Legal context
      2       Article 1 of Law No 1482/1994 on vehicle tax (autoverolaki (1482/1994)) of 29 December 1994 provides that that tax (‘autovero’)
         (‘the single‑payment tax’) is payable to the State before the registration or putting into service in Finland of private vehicles.
      
      3       Under Article 2 of that Law, ‘putting into service in Finland means putting the vehicle into circulation on Finnish territory
         even if it is not registered in Finland’.
      
      4       Article 35 of that Law lays down the exemptions from the single‑payment tax, particularly for vehicles covered by a transfer
         licence.
      
      5       According to Article 8 of Law No 1090/2002 on vehicles (ajoneuvolaki (1090/2002)) of 11 December 2002, ‘all motor vehicles
         and their trailers … must be registered and undergo a roadworthiness test except in those cases laid down by or pursuant to
         this Law. Motor vehicles and their trailers … which have not been duly registered or have not duly undergone a roadworthiness
         test cannot be put into circulation.’
      
      6       According to Article 64 of that Law, exceptions from registration may be laid down by decree. Thus, Article 8 of Decree No 1598/1995
         on vehicle registration (asetus ajoneuvojen rekisteröinnistä (1598/1995)) of 18 December 1995 (‘the registration decree’)
         sets out the exceptions.
      
      7       Under Article 8(2) of the registration decree:
      ‘A vehicle registered abroad or a vehicle fitted with temporary number plates may be put into circulation in Finland without
         a declaration of registration under the conditions laid down in Articles 46 to 48, 48a, 49 to 51, 51a, 51b and 52 to 56. The
         same applies to the putting into circulation of a vehicle for which a transfer licence has been issued.’
      
      8       Article 48 of the registration decree provides:
      ‘1.      The registration authority and the customs administration may, in order for a roadworthiness test to be carried out, for the
         purposes of the transfer, exhibition, participation in a competition or demonstration in Finland of a vehicle which is not
         registered in this country, or for another specific reason with a view to the transfer of a vehicle, issue upon application
         a written transfer licence with a view to the vehicle being put into circulation. Transfer numbers (self‑adhesive labels)
         shall be provided when the transfer licence is issued.
      
      2.      For that transfer licence to be issued, the vehicle must be covered by a valid motor insurance policy for third‑party liability
         and the annual taxes on diesel‑driven vehicles (“moottoriajoneuvovero”) or petrol‑driven vehicles (“ajoneuvovero”) must have
         been paid.
      
      3.      The transfer licence shall be issued for the period necessary for the circulation of the vehicle. It may not, without very
         good reason, be issued for a period longer than seven days. Participation in a competition may not be considered to be such
         a reason.
      
      4.      A vehicle may not be used pursuant to a transfer licence if it is not fit to be driven owing to its condition, dimensions
         or weight.’
      
      9       The annual taxes referred to in Article 48(2) of the registration decree were replaced by a new annual tax (‘ajoneuvovero’),
         introduced by Law No 1281/2003 on annual vehicle tax (ajoneuvoverolaki (1281/2003)) of 30 December 2003. Vehicles in respect
         of which a transfer licence has been issued are exempt from that annual tax pursuant to Article 12(10) of that Law.
      
      10     Article 21(2) of Decree No 1116/2003 on the information held on the Register of Vehicles (valtioneuvoston asetus ajoneuvoliikennerekisterin
         tiedoista (1116/2003)) of 18 December 2003, lays down the information entered on the transfer licence that is to be recorded
         on the Register of Vehicles:
      
      ‘The following information from the transfer licence shall be entered on the register: the name, the address and the identification
         number of the person, undertaking or association holding the licence, the make of the vehicle, the model, the factory serial
         number, the registration number, the third‑party motor vehicle insurance, the date of issue of the licence, the authority
         issuing it, its validity period, its purpose and the payments relating to it, and, where applicable, the travel itinerary.’
      
       Pre‑litigation procedure
      11     The Commission, after receiving a number of complaints regarding the Finnish legislation and the practice of the competent
         authorities regarding issue of the transfer licence required upon the importation of a vehicle registered in another Member
         State, sent a letter to the Republic of Finland on 17 May 2002 asking for clarification of the legislation and the practices
         at issue.
      
      12     Having regard to the responses provided by the Republic of Finland, which it found to be unsatisfactory, the Commission initiated
         the pre‑litigation procedure by letter of formal notice of 9 April 2003 in which it stated that the requirement imposed upon
         persons resident in Finland to apply for a transfer licence immediately upon crossing the Finnish border restricted the free
         movement of goods and, consequently, infringed Article 28 EC. The Commission also stated that the seven‑day validity period
         for the transfer licence was too short and, as such, contrary to that provision.
      
      13     By a reasoned opinion of 16 December 2003, the Commission invited the Republic of Finland to take the necessary measures to
         comply with that opinion within a period of two months from receiving it.
      
      14     As the Republic of Finland reiterated its initial observations and failed to comply with the opinion within the prescribed
         time‑limit, the Commission, pursuant to the second paragraph of Article 226 EC, has brought the present action.
      
       The action
       Arguments of the parties
      15     The Commission contends that Articles 28 EC and 30 EC preclude the transfer licence system laid down by the registration decree.
         Alternatively, if the Court does not find such a failure to fulfil obligations, it asserts that the validity period (seven
         days) of the licence is in itself contrary to those articles, in view of its shortness.
      
      16     The Commission regards the transfer licence procedure as a regulatory administrative stage which precedes the vehicle registration
         procedure proper when a person residing in Finland wants to import a vehicle lawfully registered in another Member State.
      
      17     It contends that the establishment of such a licence exhibits the characteristics of a quantitative restriction on imports
         or a measure having equivalent effect within the meaning of Article 28 EC, since a person residing in Finland does not have
         any statutory guarantee that he can put into circulation a vehicle lawfully registered in another Member State which he imports
         into Finland.
      
      18     According to the Commission, it is apparent in particular from Article 48 of the registration decree that the issue of the
         transfer licence is left to the discretion of the competent authorities, and there is consequently no guarantee for the applicant
         that he will obtain one.
      
      19     It points out that the holder of the vehicle must stop in general at the Finnish border in order to apply for the transfer
         licence and that, in any event, the request for the licence, even if submitted in advance of crossing the border, requires
         visits – to the customs office – by the person wishing to import the vehicle. In addition, the issue of the transfer licence
         leads to costs.
      
      20     Finally, the Commission considers that the issue of a transfer licence is not justified by any of the overriding requirements
         relating to the public interest for the purposes of Article 30 EC. In particular, it meets neither the requirements of effective
         fiscal supervision nor the objective of road safety.
      
      21     The Republic of Finland maintains that the transfer licence system, which is separate from the vehicle registration procedure
         proper, does not constitute a restriction on imports within the meaning of Article 28 EC.
      
      22     In support of its assessment, it asserts that the system applies as much to the temporary use in Finland of unregistered and
         untaxed vehicles as to the situation where a person habitually resident in Finland imports a vehicle from abroad which has
         not been registered in Finland. It states that the issue of the licence has no direct link with crossing the border, since
         it is exclusively linked to putting the vehicle into circulation – the requirement of a transfer licence thus applies without
         distinction to all vehicles yet to be registered in Finland.
      
      23     Besides the low cost of the transfer licence, the Republic of Finland points out the speed and simplicity of the procedure
         for obtaining one, as it is issued without a prior roadworthiness test and the applicant is moreover not required to be in
         possession of the vehicle when he applies for the transfer licence.
      
      24     In addition, it states that conditions are laid down for the issue of a transfer licence and that, consequently, the decision
         of the competent bodies cannot be based upon an arbitrary assessment.
      
      25     Alternatively, the Republic of Finland considers that the transfer licence procedure is, in any event, justified, as it represents
         the simplest means of ensuring that the objectives of effective fiscal supervision and road safety are met.
      
      26     In that respect it asserts, first, that when a vehicle which is not registered in Finland is driven on Finnish territory,
         it must be possible to check, without risk of error, whether it is a vehicle exempted from the single‑payment tax or one in
         respect of which that tax must be paid. The existence of transfer licences provides a reliable means of establishing, for
         vehicles belonging to people who are ordinarily resident in Finland, the date on which the vehicle was put into circulation
         – the starting point for calculating how long it has been used tax‑free – and avoids the need to resort to the large‑scale
         road checks targeting vehicles with foreign number plates which would otherwise be necessary.
      
      27     The Republic of Finland asserts, secondly, that the transfer licence system ensures that information regarding the vehicles
         used and licence holders is entered on the Register of Vehicles. The updating of that register is necessary for checking that
         the annual tax is levied. Moreover, the information is indispensable for the purpose of road safety, particularly in the case
         of breaches of traffic regulations or accidents.
      
      28     The Republic of Finland considers that the duration of the licence conforms to the principle of proportionality and therefore
         is not contrary to Articles 28 EC and 30 EC. It states that the validity period may be prolonged upon request.
      
       Findings of the Court
      29     The Commission alleges that the Republic of Finland has failed to fulfil its obligations under Articles 28 EC and 30 EC by
         requiring persons resident in Finland and wishing to import a vehicle lawfully registered in another Member State to apply
         for the issue of a transfer licence for the purpose of putting that vehicle into circulation before its registration in Finland
         and before the payment of vehicle taxes.
      
      30     According to settled case‑law, the prohibition of measures having equivalent effect to restrictions which is set out in Article 28 EC
         covers all rules enacted by the Member States which are capable of hindering, directly or indirectly, actually or potentially,
         intra‑Community trade (see, inter alia, Case C‑420/01 Commission v Italy [2003] ECR I‑6445, paragraph 25; Case C‑192/01 Commission v Denmark [2003] ECR I‑9693, paragraph 39; Case C-41/02 Commission v Netherlands [2004] ECR I-11375, paragraph 39 and the case‑law cited; and Case C‑147/04 De Groot en Slot Allium and Bejo Zaden [2006] ECR I‑245, paragraph 71).
      
      31     In addition, the Court of Justice has already ruled that Article 28 EC precludes the application in intra‑Community trade
         of national provisions which require, even as a pure formality, import licences or any other similar procedure (see, to that
         effect, Case 124/81 Commission v United Kingdom (‘UHT milk’) [1983] ECR 203, paragraph 9; Case C‑304/88 Commission v Belgium [1990] ECR I‑2801, paragraph 9; and Case C‑434/04 Ahokainen and Leppik [2006] ECR I‑0000, paragraph 20).
      
      32     It is undisputed that the transfer licence system, which makes the putting into circulation in Finland of a vehicle lawfully
         registered in another Member State subject to procedural requirements, is capable of hindering intra‑Community trade in motor
         vehicles and impeding access to the market for goods which are lawfully produced and/or sold in other Member States.
      
      33     The hindrance is characterised, in particular, by the steps which must be taken by the holder of a motor vehicle that comes
         from another Member State before it may be lawfully used on Finnish territory, steps which may sometimes require the party
         concerned to stop at the border crossing in order to obtain the transfer licence and which, in any event, lead to a cost,
         as the licence is not free. Furthermore, in the absence of such a licence upon crossing the border, the vehicle cannot, in
         principle, be put into circulation.
      
      34     Moreover, the issue of a transfer licence is not subject to a time‑limit from the lodging of the application for its grant
         and, in accordance with the very wording of Article 48(1) of the registration decree, is not obligatory for the competent
         authorities, a fact which the Republic of Finland moreover confirmed at the hearing. 
      
      35     In the light of the discretion which the competent authorities enjoy, there is therefore no guarantee for the applicant that
         he will receive the transfer licence within a reasonable time – a licence which is, none the less, indispensable for putting
         his vehicle into circulation in accordance with the law. The possibility of bringing an action against an administrative decision
         rejecting an application for the issue of the licence is in that respect immaterial.
      
      36     Freedom of movement is a right whose exercise may not be dependent upon a discretionary power or upon a concession granted
         by the national authorities (see UHT milk, paragraph 10).
      
      37     Finally, there can be no dispute that the document at issue is valid only for a short period and that there is a risk of immobilisation
         of the vehicle, on expiry of the seven‑day period laid down by the Finnish legislation, even before the final registration
         can be effected and the tax paid.
      
      38     Although the transfer licence at issue falls within the scope of Article 28 EC, it is clear from settled case‑law that national
         legislation which constitutes a measure having equivalent effect to quantitative restrictions can be justified by one of the
         reasons of public interest laid down in Article 30 EC or by imperative requirements (see, to that effect, Case C‑420/01 Commission v Italy, paragraph 29, and Case C‑270/02 Commission v Italy [2004] ECR I‑1559, paragraph 21). In either case, the national provision must be appropriate for securing the attainment
         of the objective pursued and not go beyond what is necessary in order to attain it (see, in particular, Joined Cases C‑388/00
         and C‑429/00 Radiosistemi [2002] ECR I-5845, paragraphs 40 to 42, and Case C‑14/02 ATRAL [2003] ECR I‑4431, paragraph 64).
      
      39     It is for the competent national authorities to show, first, that their legislation is necessary in order to attain one or
         more objectives mentioned in Article 30 EC or meet imperative requirements and, secondly, that the legislation is in conformity
         with the principle of proportionality (see, to that effect, ATRAL, paragraph 67; Case C‑420/01 Commission v Italy, paragraphs 30 and 31; and Case C‑270/02 Commission v Italy, paragraph 22).
      
      40     First, regarding the argument put forward by the Republic of Finland that the transfer licence is indispensable in order to
         attain the objective of road safety because, in particular, it allows the vehicles at issue to be identified precisely through
         the updating of information included on the Register of Vehicles, it is not in dispute that road safety does constitute an
         overriding reason in the public interest capable of justifying a hindrance to the free movement of goods (see, in particular,
         Case C‑55/93 Van Schaik [1994] ECR I‑4837, paragraph 19; Case C‑314/98 Snellers [2000] ECR I‑8633, paragraph 55; and Case C‑451/99 Cura Anlagen [2002] ECR I‑3193, paragraph 59).
      
      41     However, it has not been established that issuing a transfer licence, in combination with the placing of self‑adhesive transfer
         labels on the vehicles in substitution for the original number plates, and the recording on the Register of Vehicles of information
         regarding that licence are actually designed to attain the objective of road safety, especially as the licence requirement
         does not apply to all vehicles registered in another Member State put into circulation in Finland.
      
      42     In any event, it must be pointed out, as the Advocate General has done at point 72 of his Opinion, that pending the final
         registration of the vehicles in Finland, their technical characteristics may be identified, whatever the Member State in which
         they are registered, because all Member States have a vehicle registration system (see, to that effect, the judgment of 23
         February 2006 in Case C‑232/03 Commission v Finland, not published in the ECR, paragraph 51).
      
      43     It follows from the foregoing that the Republic of Finland has not established that the objective of road safety is such as
         to justify the transfer licence procedure.
      
      44     Secondly, regarding the argument based upon the need to ensure effective fiscal supervision by means of transfer licences,
         such an objective being, according to settled case‑law, an imperative requirement capable of justifying a measure of equivalent
         effect prohibited by Article 28 EC (see, in particular, Case 176/84 Commission v Greece [1987] ECR 1193, paragraph 25), it is not disputed that the Republic of Finland is entitled to introduce supervision procedures
         enabling it to check which are the vehicles that, despite having to be registered in Finland, can temporarily be exempted
         from vehicle taxes.
      
      45     It must be stated, however, with regard to the assessment to be made of the proportionality of the legislation at issue and
         of whether the objective sought can be attained by restrictions affecting intra‑Community trade to a lesser extent that the
         Republic of Finland has not specifically established that the restriction on the free movement of goods at issue is proportionate
         in relation to the objective pursued.
      
      46     Less restrictive measures could in fact bring about a similar result, making it possible to determine the date upon which
         the use of the vehicle began without vehicle taxes having been levied. It follows in particular from the written pleadings
         and the oral argument at the hearing, as well as from point 83 of the Advocate General’s Opinion, that one of those measures
         is the establishment of a compulsory system for declaration, on the initiative of the owner or holder, of the putting into
         circulation of a vehicle, accompanied by appropriate penalties for non‑compliance with this administrative requirement. That
         declaration could be accompanied by the setting of a reasonable period running from the declaration of putting into circulation,
         during which use of the vehicle would be permitted without the person liable having paid vehicle taxes.
      
      47     Having regard to the foregoing, it must be found that by requiring a transfer licence for the putting into circulation of
         vehicles lawfully registered and used in another Member State, as provided for by the registration decree, the Republic of
         Finland has failed to fulfil its obligations under Articles 28 EC and 30 EC.
      
       Costs
      48     Under Article 69(2) of the Rules of Procedure, 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 applied for costs and the Republic of Finland has been
         unsuccessful, the latter must be ordered to pay the costs.
      
      On those grounds, the Court (Second Chamber) hereby:
      1.      Declares that, by requiring a transfer licence for the putting into circulation of vehicles lawfully registered and used in
            another Member State, as provided for by Decree No 1598/1995 on vehicle registration (asetus ajoneuvojen rekisteröinnistä
            (1598/1995)) of 18 December 1995, the Republic of Finland has failed to fulfil its obligations under Articles 28 EC and 30 EC;
      2.      Orders the Republic of Finland to pay the costs.
      [Signatures]
      * Language of the case: Finnish.