Commission of the European Communities v Ireland.
Date: 2009-07-16
21. In that regard, the Court has consistently held that the letter of formal notice sent by the Commission to a Member State, and the reasoned opinion issued by the Commission, delimit the subject-matter of the dispute, so that it cannot thereafter be extended. The opportunity for the Member State concerned to submit its observations, even if it chooses not to avail itself thereof, constitutes an essential guarantee intended by the EC Treaty, adherence to which is an essential formal requirement of the procedure for finding that a Member State has failed to fulfil its obligations (see, in particular, Case C‑365/97 Commission  v Italy  [1999] ECR I‑7773, paragraph 23, and Case C‑441/02 Commission  v Germany  [2006] ECR I‑3449, paragraph 59).
22. Consequently, the reasoned opinion and the proceedings brought by the Commission must be based on the same complaints as those set out in the letter of formal notice initiating the pre-litigation procedure. The reasoned opinion and the application must be based on the same grounds and pleas, with the result that the Court cannot examine a ground of complaint which was not formulated in the reasoned opinion, which for its part must contain a cogent and detailed exposition of the reasons which led the Commission to the conclusion that the Member State concerned had failed to fulfil one of its obligations under the Treaty ( Commission  v Germany , paragraph 60 and the case-law cited).
23. However, that requirement cannot be carried so far as to mean that in every case the statement of complaints in the letter of formal notice, the operative part of the reasoned opinion and the form of order sought in the application must be exactly the same, provided that the subject-matter of the proceedings has not been extended or altered (judgment of 22 January 2009 in Case C-150/07 Commission  v Portugal , not yet published in the ECR, paragraph 21 and the case-law cited).
39. It is clear from the scheme and purpose of Directive 2006/112, as well as from the place of Article 13 thereof in the common system of VAT established by the Sixth Directive, that any activity of an economic nature is, in principle, to be taxable. As a general rule and in accordance with Article 2(1) of Directive 2006/112, the supply of services for consideration, including those supplied by bodies governed by public law, is to be subject to VAT. Articles 9 and 13 of Directive 2006/112 thus give a very wide scope to VAT (see, to that effect, the judgment of 16 September 2008 in Case C‑288/07 Isle of Wight Council and Others , not yet published in the ECR, paragraphs 25 to 28 and 38).
40. Since only activities of an economic nature are covered by Article 13 of Directive 2006/112 ( Isle of Wight Council and Others , paragraph 29 and the case-law cited), it cannot be considered, as Ireland claims, that that article lays down a regime under which the notion of economic activity plays no express and certainly no predominant role.
41. Thus, it is only by way of derogation from the general rule referred to in paragraph 39 of the present judgment that certain activities of an economic nature are not to be subjected to VAT. Such derogation is laid down by the first subparagraph of Article 13(1) of Directive 2006/112, under which activities engaged in by a body governed by public law acting as a public authority are not to be subject to VAT (see, to that effect, Isle of Wight Council and Others , paragraph 30). As the Court has held on numerous occasions, two conditions must be cumulatively fulfilled in order for that provision to apply: the activities must be carried out by a body governed by public law and they must be carried out by that body acting as a public authority ( Isle of Wight Council and Others , paragraph 19 and the case-law cited).
44. It should, in that regard, be recalled that the transposition of Community legislation into national law does not necessarily require the relevant provisions to be enacted in precisely the same words in a specific express legal provision; a general legal context may be sufficient if it does ensure the full application of the directive in a sufficiently clear and precise manner (Case C‑360/87 Commission  v Italy  [1991] ECR I‑791, paragraph 7 and the case-law cited).
45. Further, Member States must, in order to secure the full implementation of directives in law and not only in fact, establish a specific legal framework in the area in question (Case C‑429/01 Commission  v France  [2003] ECR I‑14355, paragraph 40 and the case-law cited).
49. That conclusion is not affected by Ireland’s argument that, in so far as they engage in economic activities, local authorities in Ireland do so uniquely pursuant to powers conferred upon them under the specific legal regime applicable to them by statute. Apart from the fact that such argument concerns only activities engaged in by local authorities and not those engaged in by the State, it is to be noted that bodies governed by public law act as public authorities when they engage in activities which, while fully economic in nature, are closely linked to the exercise of rights and powers of public authority ( Isle of Wight Council and Others , paragraph 31). Moreover, the mere fact that a body governed by public law acts within the framework of a special legal regime and in accordance with powers conferred upon it by statute does not mean that engaging in its activities necessarily involves the exercise of rights and powers of public authority.
56. By providing, with regard to bodies governed by public law, for an exception to the non-application of VAT in respect of the activities and transactions in which they engage as public authorities, the second subparagraph of Article 13(1) of Directive 2006/112 is intended to restore the general rule stated in Articles 2(1) and 9 of that directive, under which any activity of an economic nature is, in principle, to be subject to VAT (see, to that effect, Isle of Wight Council and Others , paragraph 38, and the judgment of 4 June 2009 in Case C‑102/08 SALIX Grundstücks-Vermietungsgesellschaft , not yet published in the ECR, paragraph 67).
57. Consequently, the second subparagraph of Article 13(1) of Directive 2006/112 cannot be construed narrowly (see, to that effect, Isle of Wight Council and Others , paragraph 60, and SALIX Grundstücks-Vermietungsgesellschaft , paragraph 68).
58. A body governed by public law acting in its capacity as a public authority must be regarded as a taxable person where its treatment as a non-taxable person gives rise to significant distortions of competition. The situation is thus envisaged in which bodies governed by public law engage in activities which may also be engaged in, competitively, by private traders. The objective is to ensure that the latter are not put at a disadvantage because they are taxed while the former are not (see, to that effect, Comune di Carpaneto Piacentino and Others , paragraph 22).
59. In that regard, Member States are free to choose, from the various methods of achieving the results defined by the second and third subparagraphs of Article 13(1) of Directive 2006/112, that of entrusting an administrative body, such as the Minister for Finance, with the task of specifying the situations in which an activity carried on by a body governed by public law may be regarded as bringing about significant distortions of competition or as being negligible and of applying those criteria to individual cases, provided that its decisions on application may be reviewed by the national courts (see, to that effect, Fazenda Pública , paragraph 32).
60. It is particularly important, so as to conform with the requirement of legal certainty, that, where that directive is intended to create rights for individuals, the persons concerned can ascertain the full extent of their rights and rely on them, if necessary, before the national courts (see Case C‑49/00 Commission  v Italy  [2001] ECR I‑8575, paragraph 49, and SALIX Grundstücks-Vermietungsgesellschaft , paragraph 41).
61. Each Member State is bound to implement the provisions of directives in a manner that fully meets the requirements of clarity and certainty in legal situations imposed by the Community legislature, in the interests of the persons concerned established in the Member States. To that end, the provisions of a directive must be implemented with unquestionable legal certainty and with the requisite specificity, precision and clarity (Case C‑354/99 Commission  v Ireland  [2001] ECR I‑7657, paragraph 27 and the case -law cited, and SALIX Grundstücks-Vermietungsgesellschaft , paragraph 42).
66. Such an interpretation cannot ensure compliance with the principle of legal certainty by virtue of which Community legislation must be certain and its application foreseeable by those subject to it (see, in particular, Isle of Wight Council and Others , paragraphs 47 and 48).
67. In the absence of any binding provision laying down criteria on the basis of which the powers of the Minister for Finance must be exercised, neither bodies governed by public law nor private operators are in a position to provide, with the required certainty, for the conduct of their affairs if the provision by bodies governed by public law of an economic activity will or will not be subject to VAT. That situation is therefore likely to jeopardise the principle of legal certainty (see, to that effect, Isle of Wight Council and Others , paragraphs 51 and 52).
72. The third subparagraph of Article 13(1) of Directive 2006/112 provides that bodies governed by public law are, in any event, to be regarded as taxable persons in respect of the activities listed in Annex I thereto, unless those activities are carried out on such a small scale as to be negligible. There is, in effect, a presumption that, since those activities may be carried on, under national laws, by either public or private operators, omitting to tax those activities would entail distortion of competition (see, to that effect, Isle of Wight Council and Others , paragraph 35).
73. As the Court has already stated in paragraph 34 of the judgment in Isle of Wight Council and Others , it is that undesirable result, namely distortion of competition, that the Community legislature sought to avoid by providing, in the third subparagraph of Article 13(1) of Directive 2006/112, that the activities specifically listed in Annex I thereto (such as telecommunications, the supply of water, gas, electricity and thermal energy, the transport of goods, port and airport services and passenger transport) are, ‘in any event’, unless they are negligible, to be subject to VAT, even when they are carried on by bodies governed by public law acting as public authorities.
74. Since it is clear from the wording of that provision that the treatment of those bodies as taxable persons for VAT purposes results from the performance, as such, of the activities listed in Annex I to Directive 2006/112 (see, to that effect, Isle of Wight Council and Others , paragraph 35), the correct transposition of that provision requires that Irish VAT law contain a requirement that bodies governed by public law engaged in activities listed in Annex I to that directive are to be treated as taxable persons, provided that those activities are not carried out on such a small scale as to be negligible.