European Commission v Portuguese Republic.
Date: 2011-04-07
17. It is settled case-law that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under Community law and, on the other, to avail itself of its right to defend itself against the objections formulated by the Commission (see, in particular, Case C-152/98 Commission  v Netherlands  [2001] ECR I-3463, paragraph 23; Case C‑476/98 Commission  v Germany  [2002] ECR I-9855, paragraph 46; Case C‑337/05 Commission  v Italy  [2008] ECR I‑2173, paragraph 19).
18. The proper conduct of that procedure constitutes an essential guarantee required by the FEU Treaty not only in order to protect the rights of the Member State concerned, but also to ensure that any contentious procedure will have a clearly defined dispute as its subject-matter ( Commission  v Germany , paragraph 46; Case C‑442/06 Commission  v Italy  [2008] ECR I‑2413, paragraph 22).
19. It follows from that function that the purpose of the letter of formal notice is, first, to delimit the subject-matter of the dispute and to indicate to the Member State, which is invited to submit its observations, the factors enabling it to prepare its defence and, secondly, to enable the Member State to comply before proceedings are brought before the Court ( Commission  v Germany , paragraph 47; Case C‑442/06 Commission  v Italy , paragraph 22).
20. It should also be recalled that, although the reasoned opinion must contain a coherent and detailed statement of the reasons which led the Commission to conclude that the State in question has failed to fulfil one of its obligations under the Treaty, the letter of formal notice cannot be subject to such strict requirements of precision, since it cannot, of necessity, contain anything more than an initial brief summary of the complaints. There is therefore nothing to prevent the Commission from setting out in detail in the reasoned opinion the complaints which it has already made more generally in the letter of formal notice (see, for example, Case 74/82 Commission  v Ireland  [1984] ECR 317, paragraph 20; Case 274/83 Commission  v Italy  [1985] ECR 1077, paragraph 21; Case C‑358/01 Commission  v Spain  [2003] ECR I‑13145, paragraph 29).
22. Thus, in the reasoned opinion, the Commission did no more than give further particulars of the objections set out in the letter of formal notice. By so doing, it circumscribed the subject-matter of the dispute to the different treatment of public debt securities of the Portuguese State as compared with public debt securities issued by other Member States and other States party to the EEA Agreement, without extending that subject-matter (see, in that respect, Case C‑365/97 Commission  v Italy  [1999] ECR I‑7773, paragraph 25, and, by analogy, Case C‑221/04 Commission  v Spain  [2006] ECR I‑4515, paragraph 33).
31. At the outset, it should be recalled that, in accordance with settled case-law, the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion (see, for example, Case C‑525/03 Commission  v Italy  [2005] ECR I‑9405, paragraph 14; Case C‑456/05 Commission  v Germany  [2007] ECR I‑10517, paragraph 15).
33. It therefore needs to be verified whether, at that date, the scheme in question continued to produce effects (see, to that effect, Case C‑525/03 Commission  v Italy , paragraph 16; Case C‑221/04 Commission  v Spain , paragraph 25; Case C‑456/05 Commission  v Germany , paragraph 16).
41. Moreover, it should be recalled that the Commission’s function is to ensure, of its own motion and in the general interest, that the Member States give effect to EU law and to obtain a declaration of any failure to fulfil the obligations deriving therefrom with a view to bringing them to an end (see Case C‑333/99 Commission  v France  [2001] ECR I‑1025, paragraph 23; Case C‑394/02 Commission  v Greece  [2005] ECR I‑4713, paragraph 15). In this case, the Commission rightly confines itself to asking the Court to declare the existence of the alleged failure and request the Portuguese Republic to bring it to an end, without requiring it, contrary to what that Member State argues, to adopt a particular conduct in order to re-establish the equality of treatment allegedly infringed.
54. It should be recalled that measures imposed by a Member State which are likely to deter its residents from contracting loans or making investments in other Member States constitute restrictions on the free movement of capital, within the meaning of Article 56 EC (see, to that effect, Case C‑484/93 Svensson and Gustavsson  [1995] ECR I‑3955, paragraph 10; Case C‑222/97 Trummer and Mayer  [1999] ECR I‑1661, paragraph 26; Case C‑439/97 Sandoz  [1999] ECR I‑7041, paragraph 19).
59. As the Court of Justice has repeatedly held, the free movement of capital may be limited by national legislation only if it is justified by one of the reasons mentioned in Article 58 EC or by overriding reasons in the public interest within the meaning of the case-law of the Court (see, to that effect, Case C‑367/98 Commission  v Portugal  [2002] ECR I‑4731, paragraph 49; judgment of 14 February 2008 in Case C‑274/06 Commission  v Spain , paragraph 35).
60. It is undisputed that the objectives of combating tax evasion and tax avoidance, invoked by the Republic of Portugal, may justify a restriction on the free movement of capital (see to that effect, concerning the fight against tax avoidance, Case C‑478/98 Commission  v Belgium  [2000] ECR I‑7587, paragraph 39; and, concerning the fight against tax evasion, Case C‑540/07 Commission  v Italy  [2009] ECR I‑10983, paragraph 55).
61. It is, however, also necessary that the restriction on the free movement of capital be appropriate for attaining those objectives and not go beyond what is necessary to attaining them (see to that effect, for example, Case C‑540/07 Commission  v Italy , paragraph 57).
65. In that respect, it is sufficient to note that, in accordance with consistent case-law, an objective of a purely economic nature cannot justify a restriction on a fundamental freedom guaranteed by the Treaty (see, to that effect, Case C‑120/95 Decker  [1998] ECR I‑1831, paragraph 39; Verkooijen , paragraph 48; Case C‑171/08 Commission  v Portugal  [2010] ECR I‑0000, paragraph 71).
68. In so far as the provisions of Article 40 of the EEA Agreement have the same legal scope as the essentially identical provisions of Article 56 EC (see Case C‑521/07 Commission  v Netherlands  [2009] ECR I‑4873, paragraph 33; Case C‑562/07 Commission  v Spain  [2009] ECR I‑9553, paragraph 67), all the above considerations are, in circumstances such as those of the present action, transposable mutatis mutandis  to Article 40 of the EEA Agreement.