Source: http://martinned.blogspot.co.uk/2012/09/
Timestamp: 2017-06-27 08:49:48+00:00

Document:
Martinned: September 2012
AG Bot has
another Ruiz Zambrano Case. (I blogged about the three previous ones here.)
This time, we have an applicant who lives with his legally resident 3rd
national spouse and her EU-citizen child from a previous relationship. AG Bot
argues that the applicant can be removed if he does not have sufficient means
to support himself. In other words, again the precedent is distinguished in
order to keep the rule as narrow as possible. Joined Cases O and S v.
Maahanmuuttovirasto and Maahanmuuttovirasto v. L. (NL,
category nuisance litigation, we have J. v. Parliament (DE,
where the applicant is asking the General Court (Judge Soldevila Fragoso) to
annul a decision by the European Parliament declaring his petition under art.
227 TFEU inadmissible on the grounds that it was insufficiently motivated
in violation of art.
296 TFEU. This would have been a legitimate complaint, except for the fact
that the decision was in fact motivated to the extent that this was possible
given the vagueness of the petition. The applicant also tries to get the Court
to apply the Charter of Fundamental Rights to the Austrian problem that was the
subject of his petition, but no dice, of course. While this is marginally less
stupid than asking the Court to review the Parliament’s decision on the merits,
I still have to ask: How was this suit not manifestly inadmissible for the
purposes of legal aid? (DE,
there were a lot of cartel cases courtesy of Judge Soldevila Fragoso acting as
rapporteur. A quick roundup:
Glass cartel: Guardian
Industries lost and still has to pay € 148 million.
(NL) cartel: Shell
has a partial win, with the fine being reduced from € 108 million to € 81
million. The Commission failed to prove the alleged aggravating circumstance
that Shell was an instigator and leader of the cartel. Nynäs
lost and keeps its € 13,5 million fine. Koninklijke Volker Wessels Stevin (NL)
and its subsidiary Koninklijke Wegenbouw Stevin (NL,
lost and keep their € 27,36 million fine. Kuwait
Petroleum lost and keeps its fine at € 16,632 million. Total (FR)
Nederland lost and keep their € 20,25 million fine. The Dura Vermeer Group
Dura Vermeer Infra (NL)
and Vermeer Infrastructuur (NL)
all lost and stay at € 5,4 million. Likewise, Koninklijke BAM lost twice (NL
1, NL
2) and stays at € 13,5 million and Heijmans lost twice (NL
2) and stays at € 17,1 million. Ballast Nedam (NL,
lost and keeps its € 4,65 million fine. Its subsidiary Ballast Nedam Infra (NL,
however, scored a partial win on the grounds that it only became incorporated
into the group as of 2000, resulting in a reduction of the share for which it
is jointly and severally liable to € 3,45 million. (I.e. of the total for the
group of € 4,65 million.)
other words, following 17 cartel judgements authored by Judge Soldevila
Fragroso, only the lawyers and Shell achieved a tangible win.
47. Or, eu égard à la situation financière générale extrêmement difficile décrite ci-dessus et à la réaction susmentionnée de la confédération panhellénique des unions de coopératives agricoles, il est hautement prévisible qu’une proportion significative des centaines de milliers de bénéficiaires refuserait de s’acquitter des sommes réclamées, ce qui nécessiterait l’intervention massive des agents de l’administration fiscale, dont le nombre n’a pourtant pas augmenté. Il est évident qu’une telle collecte forcée en masse empêcherait, dans une mesure appréciable, l’administration fiscale de se consacrer à une de ses tâches prioritaires consistant à lutter contre l’évasion fiscale et à collecter des sommes soustraites à l’impôt près de cinquante fois supérieures aux paiements litigieux.
48. S’agissant du risque d’une perturbation de l’ordre public en cas de récupération immédiate des paiements litigieux auprès du secteur agricole grec, il est constant que le climat social en Grèce est actuellement marqué par une détérioration de la confiance à l’égard des pouvoirs publics, par un mécontentement généralisé et par un sentiment d’injustice. En particulier, ainsi que la République hellénique l’a exposé sans être contredite par la Commission, les manifestations violentes contre les mesures d’austérité draconiennes prises par les pouvoirs publics grecs sont en constante augmentation. À l’audition, la République hellénique a encore rappelé la nette progression de certains partis d’extrême droite et d’extrême gauche lors des dernières élections législatives en Grèce.
49. Dans ces conditions, le risque, invoqué par la République hellénique, que la récupération immédiate des paiements litigieux dans le secteur agricole puisse déclencher des manifestations susceptibles de dégénérer en violences n’apparaît ni purement hypothétique ni théorique ou incertain. En effet, il ne saurait être fait fi de la possibilité que l’opération de récupération des paiements litigieux soit publiquement utilisée, par certains milieux, comme exemple de l’injustice exercée contre la classe agricole et que, dans la situation actuelle chargée d’émotions intenses, un tel discours public déclenche l’une ou l’autre manifestation violente, alors qu’il est indifférent de déterminer quelle catégorie de la population pourrait être à l’origine des violences nécessitant un déploiement toujours plus important des forces de l’ordre. Or, il est évident que la perturbation de l’ordre public provoquée par de telles manifestations et par les débordements auxquels les événements dramatiques récents ont montré qu’elles pouvaient donner lieu causerait un préjudice grave et irréparable, que la République hellénique peut légitimement invoquer.
50. Compte tenu des éléments exposés au point 48 ci-dessus, la présente affaire doit être distinguée de celle qui était à l’origine de l’ordonnance du président de la Cour du 12 octobre 2000, Grèce/Commission (C‑278/00 R, Rec. p. I‑8787, points 8, 16 et 18), dans laquelle l’invocation de « troubles sociaux très graves » a été écartée au motif que l’État membre concerné s’était borné à émettre des considérations générales dépourvues d’élément concret et n’avait fourni aucune indication quelconque quant à l’éventualité des graves événements allégués. En effet, contrairement au contexte de l’affaire C‑278/00 R, il est notoire que, en l’espèce, des perturbations de l’ordre public, telles que celles invoquées par la République hellénique comme conséquences prévisibles de la récupération imposée, se sont déjà produites dans des situations semblables, à savoir dans le contexte de mouvements contestataires dirigés contre les mesures d’austérité prises par les pouvoirs publics grecs depuis la crise économique.
51. Force est donc de constater que le cas d’espèce est caractérisé par des particularités établissant l’existence d’une urgence.
Order of the President of the General Court in Greece v. Commission, Case T-52/12.
judgements this week, only AG opinions and General Court judgements:
AG Mazák
proposed some guidance for the Greek Council of State in another gambling case.
The AG’s discussion of the proportionality analysis that the national court is
to undertake seems to reflect a certain skepticism about the likelihood that
the state will prevail. Regarding the possibility of a transition period,
should the existing system be found wanting, the AG is quite clear. That is a
no go. Stanleybet
et al. v. Ypourgos Oikonomias kai Oikonomikon
AG Bot shot down a blatantly discriminatory Polish rule for service of
court documents. Cf. Regulation
1393/2007. Alder
and Alder v. Orlowska and Orlowski
Sharpston had some issues with the question of whether the Greek Court of
Auditors is a court in the sense of art.
267 TFEU for the purposes of the case at bar, but ultimately she concluded
that it was. On the merits, she argued that you can’t let one category of
(state) worker do union work “on the clock”, while counting the union work of
another category as unpaid leave. Commissioner
of the Elegktiko Sinedrio with responsibility for the Ministry of Culture and Tourism
v. Audit Service of the Ministry of Culture and Tourism and Konstantinos
AG Kokott
had a similar admissibility problem with regard to the Bulgarian Commission for
Protection against Discrimination. Kokott, too, ended up concluding that the
case was admissible. On the merits, she argued that a Bulgarian law which
implemented Directive
2000/43 only with respect to legally recognized rights was too narrow. Any
unjustified disparate treatment that negatively affects an ethnic group is
discrimination. And, as it turns out, putting Roma electricity meters at 7 m.
above the street instead of 1.70 m. has a negative impact on them. Belov Cf. Recent Developments in European Consumer Law Blog and the UK Human Rights Blog
Court (Judge Wahl) agreed with the Commission that La Poste (FR)’s status as an
EPIC (Établissement
public à caractère industriel et commercial) and the manner said EPIC was
governed created an implied unlimited guarantee of the state for the benefit of
La Poste, which in turn meant that La Poste was receiving unlawful state aid.
The Commission ordered
that La Poste should be converted into a standard plc, and the General Court
upheld that decision. France
v. Commission (This is a topic that interests me greatly. I've blogged about it in the past, and I hope to do so again soon.)
important is the General Court’s decision in DEI
v. Commission. The Commission had found an infringement of art.
106 TFEU, because the Greek government had given special and near-exclusive
rights to DEI for the exploration and exploitation of lignite deposits. Cf. Commission
Decision C(2008) 824. The General Court (Judge Kanninen) now held, however,
that the Commission should have shown actual abuse of dominance, and that its
failure to do so meant that the decision had to be annulled. Last week,
finally, there was another interesting competition case in the General Court –
one that is still not available via Eur-Lex or in any other language than French
– about the Commission’s discretion about which cases to pursue. In the end,
the Court (Judge Kancheva) held that the Commission could have reasonably
concluded that a sufficient Community Interest in enforcement was lacking. Protégé International v. Commission Cf. European Law Blog and Chillin’ CompetitionUPDATE: Also interesting is this order of the President of the General Court, whereby he suspends the effect of a Commission decision requiring Greece to reclaim illegal state aid because if Greece tried to reclaim that aid people would riot. Cf. Verfassungsblog
Chamber (per Judge Bay Larsen) dealt with some issues regarding the effect of
Directives that have not yet entered into force in the environment law case of Nomarchiaki
Aftodioikisi Aitoloakarnanias et al. v. Ipourgos Perivallontos, Khorotaxias kai
Dimosion Ergon et al. The actual dispute concerned a partial diversion of
the river Acheloos in
upper Thessaly, which allegedly conflicted with Directive
2001/42 and Directive
92/43. Cf. European Law Blog
Trstenjak applied Directive
93/13 on unfair terms in consumer contracts to the energy sector.
Interpreting the term “mandatory statutory or regulatory provisions” from art.
1(2) of the directive, she argues that this should also apply to provisions
that the parties to a contract can opt out of. Combining that directive with
art. 3(3) of Directive
2003/55, the AG finds that RWE’s practice of announcing price increases and
then going ahead with them if no one complains is contrary to EU law. RWE v.
Verbraucherzentrale Nordrhein Westfalen (NL,
Cf. Recent
Developments in European Consumer Law blog
Jääskinen considered the appeal in Switzerland
v. Commission this week. While the
General Court had bypassed the question of admissibility, relying on Council
v. Boehringer and France
v. Commission to reject the action on the easier merits aspect instead, the
AG treats it head-on. He argues that Switzerland does not have the right to sue
as a privileged applicant against an alleged violation of an EU-CH treaty, but
that Switzerland’s action is nonetheless admissible because it is directly and
individually concerned. On the merits he sides with the General Court. (The
case was about Zürich airport, of course.)
opined that in exceptional circumstances a Member State may decline to explain
to someone why they’re being kicked out of the country despite the explicit
rule of art. 30(2) of the Free
Movement Directive. The problem is, of course, that if someone really is a
serious threat to public security, the Member State will often prefer not to
explain how they know this. The AG thinks the special advocate
procedure is a good alternative. ZZ v. Secretary of State for the Home
Department (NL,
Sharpston said: “Article 45 TFEU must be interpreted as meaning that a
residence requirement such as that included in the skuldsaneringslagen
(2006:548) (Law on debt relief) as a condition for obtaining debt relief
constitutes a restriction on the freedom of movement of workers because it is
liable to prevent or deter a worker from leaving Sweden to take up employment
in another Member State.” Radziejewski
v. Kronofogdemyndigheten i Stockholm
Court (per Judge Van der Woude) annulled the
Commission’s state aid decision in Société nationale maritime
Corse-Méditerranée. The Commission had found the bailout in question
consistent with the Common Market, and now the General Court disagrees. Simply
put, the Commission – and, by extension, France – were too generous in giving
SNCM money to keep it upright rather than simply liquidating it and starting
over. Corsica Ferries v. Commission (FR)
Cf. Europolitics
everyone’s disappointment, the ECtHR did not follow its precedent of Guzzardi
v. Italy in Nada
v. Switzerland. Instead of finding that being stuck in a 1,6 sq km exclave
was a deprivation of liberty, the Court only held that it resulted in a
violation of art. 8. Moreover, the whole UN Taliban sanctions list business was
held to be a violation of art. 13, the right to an effective remedy. In case
anyone was wondering, Guzzardi was “exiled” to Asinara, which is 56 sq km. Cf. EJIL: Talk!, the ECHR Blog and this blog post by Thobias Thienel
The ECJ is
back with a vengeance. In Parliament
v. Council (Schengen Borders Code), the Grand Chamber (Judge Von Danwitz)
held that Council
Decision 2010/252 was ultra vires, because it didn’t so much
“implement” the
SBC as legislate on essential elements of the subject-matter. The Court
emphasized that in doing so the Council made political choices that potentially
affected people’s fundamental rights, two factors that led it to conclude that
this was a matter for the EU legislator instead. Cf. European Law Blog and my
whopper has the Grand Chamber (Judge Bay Larsen) get involved in the debate
about what to do about refugees who are persecuted for their actions, when
those actions involve fundamental rights. Interpreting Directive
2004/83, the Court steers a middle course: not all interference with the
freedom of religion is persecution, but a refugee cannot reasonably be expected
to abstain from his religious practices. Germany
v. Y and Z Cf. Verfassungsblog
bit of legal interpretation, the Grand Chamber (Judge Ilešič) held that art.
3(2) of the free
movement directive does not create an automatic right of entry or residence
for the people who qualify under that article, like dependants and non-spouse
partners. They are entitled, however, to a careful examination of their case. Secretary
of State for the Home Department v. Rahman et al. Cf. European Law Blog
the Grand Chamber (Judge Ó Caoimh) handed down a sequel to the 2009 Wolzenburg
case. This time, the subject of the European Arrest Warrant is a Portuguese man
living in France with his French wife. France, however, has only used the
possibility of exception created by art. 4(6) Framework
Decision for French nationals. The Court now holds that this is a violation
of art. 18 TFEU and instructs the French court to evaluate the applicant’s
connections with France. Lopes
in Deutsches
Weintor v. Land Rheinland-Pfalz is still just as dumb as the entire rest of
this litigation. The questions, because they are too narrow, force the Court
(Judge Malenovský) to accept the premise that “easily digestible” is a health
claim under Regulation
1924/2006. The “hail Mary” attempt to bring the Charter into it also fails,
although I do wonder why that argument didn’t mention free speech. In Trade
Agency Ltd v. Seramico Investments, the Court (Judge Tizzano) stood up for
the rights of the defendant when it comes to the enforcement of in absentia
judgements under Regulation
44/2000. The court that is asked to enforce such a judgement has
jurisdiction to check whether the defendant had actually been served properly,
and it may refuse to enforce an in absentia judgement where the original
judgement is so obviously faulty that the defendant’s art. 47 Charter
right to an effective appeal has been breached. Cf. UK Human Rights Blog
617/2010 concerning the notification to the Commission of investment projects
in energy infrastructure was enacted based on art.
337 TFEU (gathering information in general) and art.
187 Euratom (gathering information), but, according to the Court (Judge Ó
Caoimh), the correct legal basis would have been art.
194 TFEU (energy). Somehow the latter is more “lex specialis” than
the former. Parliament
wants to know how to define “pharmacological action”, which is part of the
definition of “Medicinal product” in Directive
2001/83, the (lengthy and technical) answer (per Judge Borg Barthet) is in Chemische
Frabrik Kreussler v. Sunstar Deutschland.
Fortis litigation, the Court (Judge Ilešič) held that the Dutch courts were
allowed to summon the board members of Fortis to the Netherlands to testify. Regulation
1206/2001 simply means that the Dutch court was entitled, but not
obligated, to have them heard in a (francophone) Belgian court instead. Lippens
et al. v. Kortekaas et al.
15(1)(c) of Regulation
No 44/2001 (…) must be interpreted as not requiring the contract between
the consumer and the trader to be concluded at a distance.” That provision
deals with consumer contracts specifically. Mühlleitner
v. Yusufi and Yusufi Cf. Recent Developments in European Consumer Law Blog
Regulation law, AG Jääskinen published a whole series of opinions in
infringement cases regarding Directive
91/440. He recommended that Spain (DE,
should lose, that Hungary (DE,
should lose partially and that Germany and Austria should win. Once I’ve had the
chance to look at these opinions more carefully, I’ll be able to say how the
Commission managed to achieve only a 50% score.
to AG Mengozzi, the Parliament’s most recent attempt to reduce the number of
times it has to travel to Strasbourg is as flawed as the
previous one. France v. Parliament (FR) Cf. EUObserver
does semantics and competition law: We know what it means for an agreement that
restricts competition “by effect” to have an “appreciable” effect on
competition, but what about a restriction “by object”? The AG explains that the
Commission’s de
minimis notice is not binding
law, but that it is a guide for interpreting art. 101 TFEU. Discussing some
case law, she gets no further than that such an effect must be shown somehow,
but not (necessarily) by reference to market share thresholds. Expedia
Inc. Cf. Kartellblog
AG Bot had
an opinion on a judgement declining jurisdiction, which – he says – qualifies
as a judgement in the sense of Regulation
44/2000. More interestingly, he says this judgement has res judicata
for a 2nd court seized of the case, regardless of whether national
law says so or not, with the exception of art. 35 of Regulation
44/2000. Gothaer
Allgemeine Versicherung AG et al. v. Samskip
Jääskinen also has a procedural law mess concerning the appointment of experts
in civil suits. Even though it is about a railway accident, I don’t think I
want to know any more than that. ProRail
v. Xpedys et al.
AG Trstenjak
argued that a blanket ban on holding a sale without permission from the
authorities is in violation of Directive
2005/29 on unfair b2c commercial practices, unless the authorities are
allowed and indeed required to assess on a case to case basis whether there is
actually anything unfair going on. Köck v. Schutzverband gegen unlauteren
Wettbewerb (NL,
I was unexpectedly fascinated by what the European Court of Justice had to say in today's Schengen Border Code case. As others have also argued, the whole field of delegated acts/implementing powers is an oft-overlooked but vitally important area, with great potential for mischief. In January, I posted an introduction to the post-Lisbon state of affairs here. At the time, however, I was mostly concerned with the political wrangling between the European Parliament and the Council about where to draw the line between delegated lawmaking under art. 290 TFEU (which involves more power for the European Parliament) and implementing legislation under art. 291 TFEU (which favours the Commission and the Council). Today's case, however, is about an implementing decision that was taken under the old, pre-Lisbon comitology procedures, specifically the Regulatory Procedure with Scrutiny. (Cf. art. 5a of the Comitology Decision.) The question for the Court to answer was whether this was a valid exercise of the power delegated in art. 12 of the Schengen Border Code, or whether it was ultra vires.
Based on this last paragraph, the Commission proposed, and the Council ultimately adopted, Decision 2010/252. (Technically, what happened is that the Commission couldn't get the relevant Regulatory Committee to go along with its proposal, so it ended up on the plate of the Council. Parliament didn't object, and the Council ended up adopting it.)
According to its title, the purpose of the Decision is to "[supplement] the Schengen Borders Code as regards the surveillance of the sea external borders in the context of operational cooperation coordinated by the European Agency for the Management of Operational Cooperation at the External Borders of the Member States of the European Union". Specifically, the Decision "supplemented" the SBC with a number of rules and guidelines for sea border operations, such as what to do with people discovered at sea trying to make it to shore in vessels of varying levels of seaworthiness. (Think Libyan sea refugees.) Question: Is the Council entitled to do this in the exercise of its implementing powers under art. 12(5) SBC, or is this something that should have been done by the EU legislator, i.e. by Council and Parliament in collaboration?
When the Advocate-General's opinion came out, I was mostly amused by the argument that the Parliament's action was inadmissible because they didn't vote to block the adoption of this measure even though they could have. On the substance, I didn't look too closely, because I assumed it was a simple matter of tracking down the correct interpretation of art. 12(5) SBC. If the legislature, in enacting that provision, intended for this kind of implementing act to be enacted under comitology, it should generally be allowed. However, even at the time I already should have read more carefully. The AG, in recommending that the Decision should be annulled, relied heavily on the idea that the "essential elements" of a given subject-matter can only be enacted by the legislator, i.e. that implementing legislation cannot touch on such elements. This is an interesting idea, and one that apparently goes back to the 1970 case of Köster, but in the AG's opinion it came off a bit ill-defined. Apart from the question of whether the provision affects fundamental rights, no real definition was offered of what makes an element "essential".
Speaking with the mouth of the German judge Von Danwitz today, the Court gives much clearer guidance. To begin with, he reiterates the importance of fundamental rights as a factor in deciding whether something is an essential element of the subject-matter at hand:
77 [I]t is important to point out that provisions on conferring powers of public authority on border guards – such as the powers conferred in the contested decision, which include stopping persons apprehended, seizing vessels and conducting persons apprehended to a specific location – mean that the fundamental rights of the persons concerned may be interfered with to such an extent that the involvement of the European Union legislature is required.
More interestingly, he crafts something of a political question doctrine, except an entirely different one than the one most courts are used to. He tries to draw a line between decisions that are "political" and decisions that are "technocratic", leaving the former to the EU legislator.
76 [T]he adoption of rules on the conferral of enforcement powers on border guards, referred to in paragraphs 74 and 75 above, entails political choices falling within the responsibilities of the European Union legislature, in that it requires the conflicting interests at issue to be weighed up on the basis of a number of assessments. Depending on the political choices on the basis of which those rules are adopted, the powers of the border guards may vary significantly, and the exercise of those powers require authorisation, be an obligation or be prohibited, for example, in relation to applying enforcement measures, using force or conducting the persons apprehended to a specific location. In addition, where those powers concern the taking of measures against ships, their exercise is liable, depending on the scope of the powers, to interfere with the sovereign rights of third countries according to the flag flown by the ships concerned. Thus, the adoption of such rules constitutes a major development in the SBC system.
I think this is very interesting. Assuming it isn't taken too far, this is potentially a clear rule that can guide the political branches of the EU government in their quarrels over art. 290 and 291, at least when it comes to be boundary between those two articles and the general lawmaking power. Moreover, I think it is an excellent piece of judging. This paragraph does not attempt to craft constitutional principles wholesale. (Given that the EU legal order has always had, in practice, a very common law style, its judges sometimes forget the rule of art. 5 CC: "Il est défendu aux juges de prononcer par voie de disposition générale et réglementaire sur les causes qui leur sont soumises.") Instead, it sticks strictly to the case at bar, developing the existing case law (which is cited in par. 64 and discussed in the AG's opinion in par. 26-29, in particular) only as much as is necessary in order to resolve the dispute.
Yet, at the same time, this paragraph gives clear guidance to future judges. A matter is political to the extent that a) it requires a significant - and complex - weighing of interests, and b) there is a significant range of possible ways in which this can be done, i.e. a great number of policy options to choose from. As an additional factor, he offers the involvement of 3rd countries, which is sensible in this case but will probably not come up in most future cases.
Whenever I complain about the paucity of explanation given by judges (like here, in Dutch), this is roughly how I would like to see it. It is still not an academic treatise. Nor is it an attempt to use too much verbiage to hide the fact that the judge is not in the business of applying rules mechanically, but rather making a judgement call as he is paid to do. Instead, it cites case law and explains in brief and clear language which considerations led the Court to decide as it did. Hopefully this case will help make the post-Lisbon Comitology 2.0 a little less scary.
Under art. 2:140(2) Civil Code, final sentence, the Supervisory Board promotes "the interest of the corporation and its enterprise". (For the non-lawyers, the corporation is the legal person, and the enterprise is the organisation. Not all corporations run an enterprise, and not all enterprises are incorporated, hence the distinction. Sometimes corporations even sell their enterprise to another corporation or individual. No problem. That simply means that the corporation is left with a board and a bag of money, and no further activities.)
Now, the interests of the corporation and its enterprise are not defined in the law, but they are assuredly distinct from the interest of the shareholder or shareholders. At least on paper, Dutch corporate law is an ode to the Rhineland model. The shareholders do not "own" the corporation, since a corporation is not something that can be owned. Instead, the shareholders have a claim, but so do the corporation's creditors, suppliers and employees. Without engaging in any detailed discussion of the jurisprudence and the literature we can say that the interests of the corporation can be equated with a reasonable balance between its continued healthy existence and the interests of the stakeholders, including the shareholders, of the company.
Under art. 2:158 Civil Code, and more generally Part 6 of Title 4 of Book 2 Civil Code, the Supervisory Board of a "large" corporation is largely insulated from the reach of the shareholders. (Large is defined as having outstanding equity exceeding € 13 million in 2000-euros combined with having more than 100 employees.) Instead of having the Supervisory Board appointed at the General Meeting of Shareholders, as is the case for smaller corporations under art. 2:142 Civil Code, the Supervisory Board of a large corporation is essentially based on cooptation. The General Meeting has the option of rejecting a candidate for an open seat, a candidate chosen by the Supervisory Board, but only if it can marshal 50% of the votes representing at least a third of the company's equity against him/her. And even then, the worst that can happen is that the Supervisory Board has to propose another candidate. Absent litigation before the Corporation Chamber of the Court of Appeals in Amsterdam, no Supervisory Board of a large corporation can be forced to accept a member that it does not want.
It follows that, for a company like NS which has - in the legally relevant definition - € 1 billion in equity and has about 23.000 employees, not even the company's only shareholder gets to say what the company's goals should be. Nor does the State get to argue, as I just did, that avoiding Dutch taxation by financing its rolling stock through an Irish subsidiary hurts the shareholder without benefiting either the company or any other stakeholder.
The benefit of making such ad hoc rules is that, for every organisation that is placed at arm's length from the government, parliament and the crown can decide exactly how long that arm should be. In the case of NS, there are some unique provisions in its Articles of Incorporation, but the relevant corporate law provisions only allow so much creativity there. To my knowledge, there is nothing in the railway-specific legislation that overrules the general provisions of Book 2 Civil Code. And as a result, the Dutch government is stuck with a company that is disciplined by neither market nor hierarchy. The worst of both worlds.
And so we all continue to do the same dance that we already did in 1999. The board of NS plays at being a private company, which it is not, the Minister for Finance loses out on several million euros each year, parliament is outraged at the "immoral behaviour" of NS while conveniently ignoring the fact that they are the ones that made the law this way, and the Irish get a little bit of extra bailout each year. Any number of people can do something about this, but nobody is going to.
OK, so that was quite a way to come back after my summer vacation. From this blog post here about tax evasion by the Dutch state railway company NS came this GeenStijl story, which in turn led to a ginormous article in De Volkskrant last Saturday, the short version of which is here. Result: all politicians scream bloody murder while simultaneously managing to mostly miss the point. More on that later. For now, I'd just like to bask in my glory a little longer and quote an English-language summary of the story:
State-owned railway group NS uses Ireland to dodge Dutch taxes
The state-owned Dutch railway company NS has managed to cut its Dutch tax bill by at least €250m since 1999 by routing the cost of new trains through Ireland, the Volkskrant reported at the weekend.
The tax dodge means the treasury has lost out on income generated by a company it owns, the paper points out. The finance ministry, meanwhile, is said to be ‘unhappy’ about the arrangement, which it has been aware of from the beginning.
In effect, NS’s Irish subsidiary, NS Financial Services, has spent €1.7bn on new trains which it then rents to the NS in the Netherlands. None of the trains has ever been used on the Irish railways, the paper said.
This allows the Dutch operation to avoid tax. In Ireland, railway companies have paid an average 9% tax on their profits in recent years. In the Netherlands, NS would have to pay 25% profit tax on the train rental. Some of the ‘missing’ cash does end up with the treasury in the form of dividends.
In a statement, the NS said the tax route had been developed to allow it to ‘better compete in the market’. Other large transport firms also use Ireland to reduce their tax liabilities and there is nothing illegal about this, the NS said.
The Volkskrant points out that there is effectively no competition on the Dutch railways and NS operates all intercity and most local train services.
Political party leaders were quick to react to the news. CDA leader Sybrand Buma told a Tros radio programme it showed a ‘lack of morals’. Labour leader Diederik Samsom said the NS had used a ‘bizarre construction which just is not right’, and an SP spokesman said the situation is ‘unacceptable’.
Caretaker tax minister Frans Weekers told the paper through a spokesman: 'Of course, we would rather have seen these activities take place in the Netherlands.'
Economist Martin Holterman, who is an expert on the Dutch railways, told the Volkskrant the NS is busy 'playing at being a company'. But the NS is not a company but a government service, he said. Just a few remarks, based on this version. (I haven't seen the original Volkskrant article yet myself.)
The tax rates are a bit iffy. The corporate documents we used did not allow us to calculate the effective rate of tax paid in Ireland. It is important to realise that the difference between Ireland and the Netherlands isn't just one of lower tax rates, but also of faster depreciation, which reduces the effective Irish tax rate for NS still further.
It is incorrect to say that there is no competition on the Dutch railways. NS has been given - without competition - the concession to operate trains on the "core network" until the mid-2020s, but there very much is competition for regional lines, where NS does not seem to be interested, and for the High-Speed connection between Amsterdam and Rotterdam. In the latter case, NS was so keen to win the tender that they increased their bid well above anything any expert deemed realistic, with the predictable result that they lost massive amounts of money and the concession had to be restructured. But that does not take away that there was competition for the award of this Fyra concession.
It is also incorrect to blame NS. They do their job as instructed: maximise profits. It is first and foremost the fault of the Finance Ministry that NS was not instructed and incentivised properly. More on this point in a later separate post.
As for my quote, I am not happy with the translation "government service". The key point is that NS is government-owned. So I would have written "a government entity" or something along these lines.
P.S. This article in the Irish Times this morning is better. However, they claim that I said that NS is "state-run", which is still not an ideal translation. The company is run independently, at arm's length from the state. That's exactly the problem, in this case.

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