European Commission v United Kingdom of Great Britain and Northern Ireland.
Date: 2014-12-18
22. First of all, in relation to the principle of effectiveness, the Commission notes that, in the judgment in Marks & Spencer (C‑62/00, EU:C:2002:435, paragraph 38), the Court held, in essence, that the principle precludes national legislation reducing the period for seeking repayment of sums collected in breach of EU law where the new time-limit is not reasonable and where the legislation does not contain any transitional arrangements giving individuals adequate time, after the legislation has been adopted, to lodge claims for repayment which they were entitled to submit under the previous legislation.
30. In that regard, in making a finding on the infringement complained of, it should first be borne in mind that the right to a refund of taxes levied in a Member State in breach of EU law is the consequence and complement of the rights conferred on individuals by the provisions of EU law. A Member State is thus in principle required to repay taxes levied in breach of EU law (see judgment in Test Claimants in the Franked Investment Income Group Litigation , C‑362/12, EU:C:2013:834, paragraph 30 and the case-law cited).
31. In the first place, with respect to the infringement of the principle of effectiveness, it should be recalled that, in the absence of EU rules on the recovery of national taxes unduly levied, it is for the domestic legal system of each Member State, in accordance with the principle of the procedural autonomy of the Member States, to lay down the detailed procedural rules governing actions at law for safeguarding the rights which taxpayers derive from EU law (see, to that effect, judgments in Agrokonsulting-04 , C‑93/12, EU:C:2013:432, paragraph 35, and Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraph 31).
32. In that context, in accordance with the principle of sincere cooperation enshrined in Article 4(3) TEU, the principle of effectiveness requires such procedural rules not to render in practice impossible or excessively difficult the exercise of rights conferred by EU law (see, to that effect, judgments in Agrokonsulting-04 , EU:C:2013:432, paragraph 36, and Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraph 32).
33. With respect to the present infringement proceedings, it must be borne in mind that, according to the settled case-law of the Court, that principle prohibits the retroactive application of a new, shorter, and, as the case may be, more restrictive limitation period than that previously applicable, where its application concerns actions for the recovery of domestic taxes contrary to EU law which have already been commenced at the time the new period comes into force (see, to that effect, judgment in Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraph 35 and the case-law cited).
34. Moreover, that principle precludes national legislation which curtails, retroactively and without any transitional arrangements, the period within which repayment of the sums collected in breach of EU law could be sought (see judgment in Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraph 38).
36. The fact that taxpayers have, under national law, another remedy enabling them to seek the repayment of taxes levied in breach of EU law, in the form of the Woolwich  cause of action, cannot call into question that finding (see, to that effect, judgment in Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraph 39).
37. Section 107 of the Finance Act 2007, de facto, denies taxpayers the possibility of relying on the Kleinwort Benson  cause of action, in relation to which a longer limitation period applies than that relating to the Woolwich  cause of action, namely six years from the date of discovery of the mistake on which the payment was based, rather than from the date the undue taxes were paid. That section makes it impossible in practice for taxpayers to exercise the right to a refund of taxes levied in breach of EU law which was available to them prior to the adoption of that section and which they had already asserted by that date (see, to that effect, judgment in Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraph 43).
38. In the second place, with respect to the principle of the protection of legitimate expectations, the Court has held that that principle also precludes national legislation which retroactively deprives a taxpayer of the right enjoyed prior to the adoption of that legislation to obtain the repayment of taxes levied in breach of EU law (see judgment in Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraph 45 and the case-law cited). As noted by the Commission in its application, in accordance with that principle, a taxpayer who has brought, by the time the new legislation is adopted, an action seeking such a refund is entitled to expect that his action will not be declared inadmissible as a result of the retroactive application of that legislation and that the courts before which proceedings were brought will decide on the substance of that action.
39. In the present case, it is not disputed that, by retroactively curtailing the limitation period, section 107 of the Finance Act 2007 adversely affected the situation of taxpayers who had already brought proceedings in the form of the Kleinwort Benson  cause of action for the repayment of the taxes levied in breach of EU law. Those taxpayers were entitled to expect that the question as to whether or not their actions were well founded would be decided by the national courts before which proceedings were brought (see, to that effect, judgment in Test Claimants in the Franked Investment Income Group Litigation , EU:C:2013:834, paragraphs 46 and 47).
42. In that regard, it is sufficient to note that the question whether a Member State has failed to fulfil 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 and the Court cannot take account of any subsequent changes (see judgment in Commission  v Greece , C‑351/13, EU:C:2014:2150, paragraph 20 and the case-law cited).