Commission of the European Communities v Portuguese Republic.
Date: 2008-06-12
12. In Case C‑276/98, the Court upheld the Commission’s action in so far as it concerned the goods but dismissed it in so far as it concerned the tolls. The grounds of that judgment are as follows:
‘22 The Commission accuses the Portuguese Republic of infringing Articles 12(3) and 28(2) of the Sixth Directive by taxing tolls for crossing the toll bridge over the Tagus in Lisbon at a reduced VAT rate of 5% rather than the normal rate in Portugal of 17%.
23 However, the Commission has not brought before the Court sufficient evidence for it to establish the existence of the alleged failure to fulfil obligations. Indeed, it has not been established that the service in question was subject to VAT.
24 In that respect, it should be noted that, under Article 2, point 1, of the Sixth Directive, only supplies of services by a taxable person acting as such are subject to VAT.
25 Under Article 4(5) of the same directive, bodies governed by public law are not to be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they are acting for consideration. As the Court has held on numerous occasions, it is clear from that provision, when examined in the light of the aims of the directive, that two conditions must be cumulatively fulfilled in order for the exemption 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 (see, in particular, Case C‑260/98 Commission  v Greece  [2000] ECR I‑6537, paragraph 34; C‑276/97 Commission  v France  [2000] ECR I‑6251, paragraph 39; Case C‑358/97 Commission  v Ireland  [2000] ECR I‑6301, paragraph 37; Case C‑359/97 Commission  v United Kingdom  [2000] ECR I‑6355, paragraph 49; and Case C‑408/97 Commission  v Netherlands  [2000] ECR I‑6417, paragraph 34 …).
26 Here, the Commission has not challenged the fact that, as the Portuguese Government stated at the hearing, it is a body governed by public law, acting as a public authority, that places the toll bridge over the Tagus in Lisbon at the disposal of its users.
27 It must therefore be held that, since the conditions laid down in the first subparagraph of Article 4(5) of the Sixth Directive have been met in this case, the services supplied by the body governed by public law are not taxable. In this context, the Commission is wrong to claim that that provision offers only an option to derogate from the general principle laid down by Article 2, point 1, of the Sixth Directive. It is clear from the wording of Article 4(5) of the Sixth Directive that Member States are not entitled to regard bodies governed by public law as taxable persons in respect of an activity performed in the capacity of a public authority not appearing, as in this case, in Annex D to the Sixth Directive and not fulfilling the conditions specified in the second subparagraph of Article 4(5). Therefore, they may not, by virtue of Article 2, point 1, of the Sixth Directive, tax the transactions carried out by those bodies (see, to that effect, Joined Cases 231/87 and 129/88 Ufficio Distrettuale delle Imposte Dirette di Fiorenzuola d’Arda  v Comune di Carpaneto Piacentino and Others  [1989] ECR 3233, paragraph 33).
28 It is true that, if exemption of the activity in question from VAT would lead to significant distortions of competition within the meaning of the second subparagraph of Article 4(5) of the Sixth Directive, the provision of access to that bridge on payment of a toll would be taxable by virtue of that same provision. In this case, however, the Commission has not argued the existence of such distortions at any time during the pre-litigation procedure.
29 Therefore, contrary to what the Commission claims, the Portuguese Republic has not, by introducing or maintaining in force the reduced rate of VAT on tolls paid for crossing the bridge over the Tagus, infringed Articles 12(3) and 28(2) of the Sixth Directive. In the context of the present action, it is not necessary to reply to the question whether Portugal has infringed other provisions of that directive. During the pre-litigation procedure, the Commission did not make any complaint based on the infringement of provisions other than those of Articles 12(3) and 28(2) of the Sixth Directive, so that such an infringement does not constitute the subject-matter of the dispute.
30 The Commission’s action must therefore be dismissed in so far as it concerns tolls for crossing the bridge over the Tagus in Lisbon.’
The pre-litigation stage in the present proceedings
23. It is clear from settled case-law that the principle of res judicata  extends only to the matters of fact and law actually or necessarily settled by the judicial decision in question (Case C‑281/89 Italy  v Commission  [1991] I‑347, paragraph 14; Order in Case C‑277/95 P Lenz  v Commission  [1996] I‑6109, paragraph 50, and Joined Cases C‑238/99 P, C‑244/99 P, C‑245/99 P, C‑247/99 P, C‑250/99 P to C‑252/99 P and C‑254/99 P Limburgse Vinyl Maatschappij and Others  v Commission  [2002] I‑8375, paragraph 44).
24. In the present case, although the failure alleged is, as in Case C‑276/98, an infringement of Articles 12 and 28 of the Sixth Directive, it should be noted that in that case the Portuguese Republic made no mention, either at the pre-litigation stage or during the written procedure before the Court, of the operator of the services concerned being a concession holder. The only mention of the operator’s legal status was at the hearing, when the representative of that Member State simply referred to the operator in question as a body governed by public law, acting as a public authority (see in that connection Case C‑276/98, paragraph 26).
26. It is clear from the Court’s settled case-law that, even though in proceedings for failure to fulfil obligations under Article 226 EC it is incumbent on the Commission to establish the existence of the failure it has alleged, Member States are nevertheless required, under Article 10 EC, to facilitate the achievement of the Commission’s tasks, which consist in particular, according to Article 211 EC, in ensuring that the provisions of the EC Treaty and the measures taken by the institutions pursuant thereto are applied. When it is a question of checking whether the national provisions intended to ensure effective implementation of a directive are correctly applied in practice, the Commission is largely reliant on the information provided by the Member State concerned, and so that State cannot plead that there is a lack of specific information as to national law and practice put forward by the Commission and, therefore, the action is inadmissible (see Case C‑408/97 Commission  v Netherlands , paragraphs 15 to 17, and case-law cited therein, and Case C‑248/05 Commission  v Ireland  [2007] ECR I‑00000, paragraphs 67 and 68, and case-law cited therein).
34. It should be noted first of all that the Court has already ruled that the provision of access to roads on payment of a toll constitutes a supply of services for consideration within the meaning of Article 2(1) of the Sixth Directive ( Commission  v France , paragraph 36; Case C‑358/97 Commission  v Ireland , paragraph 34; Commission  v United Kingdom , paragraph 46; Case C‑408/97 Commission  v Netherlands , paragraph 30; Commission  v Greece , paragraph 31; and Case C-83/99 Commission  v Spain [2001] ECR I‑445, paragraph 11).
35. Also, as the Court has held on numerous occasions, it is clear from Article 4(5), first subparagraph, of the Sixth Directive, when examined in the light of the aims of that directive, that two conditions must be fulfilled in order for there to be no liability for VAT: 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 (Case 235/85 Commission  v Netherlands  [1987] 1471, paragraph 21; Comune di Carpaneto Piacentino and Others , paragraph 12; Case C‑202/90 Ayuntamiento de Sevilla  [1991] ECR I‑4247, paragraph 18. See also Commission  v France , paragraph 39; Case C‑358/97 Commission  v Ireland , paragraph 37; Commission  v United Kingdom , paragraph 49; Case C‑408/97 Commission  v Netherlands , paragraph 34; Commission  v Greece , paragraph 34; Case C-83/99 Commission  v Spain , paragraph 11, and Case C‑408/06 Götz  [2007] ECR I‑00000, paragraph 41).
38. As regards the first of the conditions contained in Article 4(5), first subparagraph, of the Sixth Directive, namely that the operator must be a body governed by public law, the Court has held that an activity carried on by a private individual is not excluded from the scope of VAT merely because it consists in the performance of acts falling within the prerogatives of the public authority (Case 235/85 Commission  v Netherlands , paragraph 21, and Ayuntamiento de Sevilla , paragraph 19).
39. If an activity involving acts falling within the prerogatives of the public authority is entrusted to an independent third party or is carried out by bodies which are not part of the public service, in the form of an independent economic activity, the exclusion from VAT provided for by Article 4(5), first subparagraph, of the Sixth Directive is not applicable (see, to that effect, Case 235/85 Commission  v Netherlands , paragraph 22, and Ayuntamiento de Sevilla , paragraph 20).
51. It must be borne in mind that the Community system of VAT is the result of a gradual harmonisation of national legislation pursuant to Articles 93 EC and 94 EC. The Court has consistently held that this harmonisation, as brought about by successive directives and in particular by the Sixth Directive, is still only partial (Case C‑165/88 ORO Amsterdam Beheer and Concerto  [1989] ECR I‑4081, paragraph 21, and Case C‑240/05 Eurodental  [2006] ECR I‑11479, paragraph 50).
52. Thus, the harmonisation envisaged has not yet been achieved in so far as Article 28 of the Sixth Directive authorised the Member States to retain or adopt certain provisions which would, without that authorisation, be incompatible with the directive (see, to that effect, Case C‑36/99 Idéal tourisme  [2000] ECR I‑6049, paragraph 38 and Eurodental , paragraph 51).
54. As it is a case of derogating and transitional arrangements, Article 28 of the Sixth Directive must be strictly interpreted (see, to that effect, Case C‑169/00 Commission  v Finland [2002] ECR I‑2433, paragraph 34, and Eurodental , paragraph 54) and in accordance with its objective.
55. In the present case, since it is common ground that the standard rate of VAT was applied to the services at issue from 24 March 1992 to 31 December 1994, the Portuguese Republic cannot be authorised to reintroduce a reduced rate in respect of those services (see, to that effect, Case C‑35/90 Commission  v Spain  [1991] ECR I‑5073, paragraph 7; Case C‑74/91 Commission  v Germany  [1992] ECR I‑5437, paragraph 15; Case C‑414/97 Commission  v Spain  [1999] I‑5585, paragraph 29, and Eurodental , paragraph 55).