Marks & Spencer plc v Commissioners of Customs & Excise.
Date: 2002-07-11
22 As a preliminary remark, it is important to note that it is clear from the order for reference that the Court of Appeal considers that Article 11A(1) of the Sixth Directive is unconditional and sufficiently precise and that it therefore gives Marks & Spencer rights on which it may rely before a national court, albeit only as regards the period during which that provision had not yet been correctly implemented in the domestic law of the United Kingdom, that is to say, before 1 August 1992.  That is why the Court of Appeal limited its question to the case where a Member State has not properly implemented Article 11A of the Sixth Directive.
23 The referring court proceeded on the premiss that if a Member State has correctly implemented the provisions of a directive, such as Article 11A(1) of the Sixth Directive, in domestic law, individuals are thereby deprived of the possibility of relying before the courts of that Member State on the rights which they may derive from those provisions.
24 In that regard, it should be remembered, first, that the Member States' obligation under a directive to achieve the result envisaged by the directive and their duty under Article 5 of the EC Treaty (now Article 10 EC) to take all appropriate measures, whether general or particular, to ensure fulfilment of that obligation are binding on all the authorities of the Member States, including, for matters within their jurisdiction, the courts (see, inter alia, Case C-168/95 Arcaro [1996] ECR I-4705, paragraph 41).  It follows that in applying domestic law the national court called upon to interpret that law is required to do so, as far as possible, in the light of the wording and purpose of the directive, in order to achieve the purpose of the directive and thereby comply with the third paragraph of Article 189 of the EC Treaty (now the third paragraph of Article 249 EC) (see, in particular, Case C-106/89 Marleasing [1990] ECR I-4135, paragraph 8, and Case C-334/92 Wagner Miret [1993] ECR I-6911, paragraph 20).
25 Second, as the Court has consistently held, whenever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, they may be relied upon before the national courts by individuals against the State where the latter has failed to implement the directive in domestic law by the end of the period prescribed or where it has failed to implement the directive correctly (see, inter alia, Case 8/81 Becker [1982] ECR 53, paragraph 25; Case 103/88 Fratelli Costanzo [1989] ECR 1839, paragraph 29; and Case C-319/97 Kortas [1999] ECR I-3143, paragraph 21).
26 Third, it has been consistently held that implementation of a directive must be such as to ensure its application in full (see to that effect, in particular, Case C-217/97 Commission v Germany [1999] ECR I-5087, paragraph 31, and Case C-214/98 Commission v Greece [2000] ECR I-9601, paragraph 49).
27 Consequently, the adoption of national measures correctly implementing a directive does not exhaust the effects of the directive.  Member States remain bound actually to ensure full application of the directive even after the adoption of those measures.  Individuals are therefore entitled to rely before national courts, against the State, on the provisions of a directive which appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise whenever the full application of the directive is not in fact secured, that is to say, not only where the directive has not been implemented or has been implemented incorrectly, but also where the national measures correctly implementing the directive are not being applied in such a way as to achieve the result sought by it.
28 As the Advocate General noted in point 40 of his Opinion, it would be inconsistent with the Community legal order for individuals to be able to rely on a directive where it has been implemented incorrectly but not to be able to do so where the national authorities apply the national measures implementing the directive in a manner incompatible with it.
29 As regards the provisions of Article 11A(1) of the Sixth Directive, the Court has held that they confer on individuals rights on which they may rely before the national courts (Case C-62/93 BP Supergas [1995] ECR I-1883, paragraph 35).
30 According to well-established case-law, the right to obtain a refund of charges levied in a Member State in breach of rules of Community law is the consequence and the complement of the rights conferred on individuals by Community provisions as interpreted by the Court (see, inter alia, Case 309/85 Barra [1988] ECR 355, paragraph 17; BP Supergas, paragraph 40; Case C-343/96 Dilexport [1999] ECR I-579, paragraph 23; and Joined Cases C-397/98 and C-410/98 Metallgesellschaft and Others [2001] ECR I-1727, paragraph 84).
31 It follows from all those considerations that the fact that a Member State has correctly implemented the provisions of Article 11A(1) of the Sixth Directive in domestic law does not deprive individuals of the possibility of relying, before the courts of that State, on the rights which they derive from those provisions and, in particular, the right to recover amounts collected by a Member State in breach of them.
32 As the Court has consistently held, in the procedure laid down by Article 234 EC for cooperation between national courts and the Court of Justice, it is for the latter to provide the referring court with an answer which will be of use to it and enable it to determine the case before it (see, inter alia, Case C-334/95 Krüger [1997] ECR I-4517, paragraph 22, and Case C-88/99 Roquette Frères [2000] ECR I-10465, paragraph 18).  To that end, the Court may have to reformulate the question referred to it (Krüger, paragraph 23, and Roquette Frères, paragraph 18).
33 Accordingly, the question must be construed as asking essentially whether national legislation retroactively curtailing the period within which repayment may be sought of sums paid by way of VAT collected in breach of provisions of the Sixth Directive with direct effect, such as those contained in Article 11A(1) of that directive, is compatible with the principles of effectiveness and of the protection of legitimate expectations.
The principle of effectiveness
34 It should be recalled at the outset that in the absence of Community rules on the repayment of national charges wrongly levied it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from Community law, provided, first, that such rules are not less favourable than those governing similar domestic actions (the principle of equivalence) and, second, that they do not render virtually impossible or excessively difficult the exercise of rights conferred by Community law (the principle of effectiveness) (see, inter alia, Case C-228/96 Aprile [1998] ECR I-7141, paragraph 18, and the judgments cited above in Dilexport, paragraph 25, and Metallgesellschaft, paragraph 85).
35 As regards the latter principle, the Court has held that in the interests of legal certainty, which protects both the taxpayer and the administration, it is compatible with Community law to lay down reasonable time-limits for bringing proceedings (Aprile, paragraph 19, and the case-law cited therein).  Such time-limits are not liable to render virtually impossible or excessively difficult the exercise of the rights conferred by Community law.  In that context, a national limitation period of three years which runs from the date of the contested payment appears to be reasonable (see, in particular, Aprile, paragraph 19, and Dilexport, paragraph 26).
36 Moreover, it is clear from the judgments in Aprile (paragraph 28) and Dilexport (paragraphs 41 and 42) that national legislation curtailing the period within which recovery may be sought of sums charged in breach of Community law is, subject to certain conditions, compatible with Community law.  First, it must not be intended specifically to limit the consequences of a judgment of the Court to the effect that national legislation concerning a specific tax is incompatible with Community law.  Secondly, the time set for its application must be sufficient to ensure that the right to repayment is effective.  In that connection, the Court has held that legislation which is not in fact retrospective in scope complies with that condition.
37 It is plain, however, that that condition is not satisfied by national legislation such as that at issue in the main proceedings which reduces from six to three years the period within which repayment may be sought of VAT wrongly paid, by providing that the new time-limit is to apply immediately to all claims made after the date of enactment of that legislation and to claims made between that date and an earlier date, being that of the entry into force of the legislation, as well as to claims for repayment made before the date of entry into force which are still pending on that date.
38 Whilst national legislation reducing the period within which repayment of sums collected in breach of Community law may be sought is not incompatible with the principle of effectiveness, it is subject to the condition not only that the new limitation period is reasonable but also that the new legislation includes transitional arrangements allowing an adequate period after the enactment of the legislation for lodging the claims for repayment which persons were entitled to submit under the original legislation.  Such transitional arrangements are necessary where the immediate application to those claims of a limitation period shorter than that which was previously in force would have the effect of retroactively depriving some individuals of their right to repayment, or of allowing them too short a period for asserting that right.
39 In that connection it should be noted that Member States are required as a matter of principle to repay taxes collected in breach of Community law (Joined Cases C-192/95 to C-218/95 Comateb and Others [1997] ECR I-165, paragraph 20, and Dilexport, paragraph 23), and whilst the Court has acknowledged that, by way of exception to that principle, fixing a reasonable period for claiming repayment is compatible with Community law, that is in the interests of legal certainty, as was noted in paragraph 35 hereof. However, in order to serve their purpose of ensuring legal certainty limitation periods must be fixed in advance (Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 19).
40 Accordingly, legislation such as that at issue in the main proceedings, the retroactive effect of which deprives individuals of any possibility of exercising a right which they previously enjoyed with regard to repayment of VAT collected in breach of provisions of the Sixth Directive with direct effect must be held to be incompatible with the principle of effectiveness.
41 That applies notwithstanding the argument of the United Kingdom Government to the effect that the enactment of the legislation at issue in the main proceedings was motivated by the legitimate purpose of striking a due balance between the individual and the collective interest and of enabling the State to plan income and expenditure without the disruption caused by major unforeseen liabilities.
42 Whilst such a purpose may serve to justify fixing reasonable limitation periods for bringing claims, as was noted in paragraph 35, it cannot permit them to be so applied that rights conferred on individuals by Community law are no longer safeguarded.
The principle of the protection of legitimate expectations
43 The United Kingdom Government maintains that the principle of the protection of legitimate expectations is not relevant in a dispute such as that in the main proceedings.  It submits that determination of the procedural rules governing claims for the recovery of overpayments of VAT is entirely a matter of domestic law, subject only to observance of the Community-law principles of equivalence and effectiveness.  If the principle of the protection of legitimate expectations were applicable in the dispute in the main proceedings, the only expectation would be that individuals are entitled to have their claims dealt with in accordance with the procedural rules of national law, which happened in the present case.
44 In that connection, the Court has consistently held that the principle of the protection of legitimate expectations forms part of the Community legal order and must be observed by the Member States when they exercise the powers conferred on them by Community directives (see, to that effect, Case 316/86 Krücken [1988] ECR 2213, paragraph 22, Joined Cases C-31/91 to C-44/91 Lageder and Others [1993] ECR I-1761, paragraph 33, Case C-381/97 Belgocodex [1998] ECR I-8153, paragraph 26, and Case C-396/98 Schlossstrasse [2000] ECR I-4279, paragraph 44).
45 The Court has held, in particular, that a legislative amendment retroactively depriving a taxable person of a right to deduction he has derived from the Sixth Directive is incompatible with the principle of the protection of legitimate expectations (Schlossstrasse, cited above, paragraph 47).
46 Likewise, in a situation such as that in the main proceedings, the principle of the protection of legitimate expectations applies so as to preclude a national legislative amendment which retroactively deprives a taxable person of the right enjoyed prior to that amendment to obtain repayment of taxes collected in breach of provisions of the Sixth Directive with direct effect.
47 In the light of all those considerations, the reply to the question referred must be that national legislation retroactively curtailing the period within which repayment may be sought of sums paid by way of VAT collected in breach of provisions of the Sixth Directive with direct effect, such as those in Article 11A(1), is incompatible with the principles of effectiveness and of protection of legitimate expectations.