Opinion of Advocate General Tanchev delivered on 28 March 2019.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• Date: 28 March 2019

Provisional text

OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 28 March 2019(1)

Case C‑569/17

European Commission

v

Kingdom of Spain

(Failure of a Member State to fulfil obligations — Article 258 TFEU — Directive 2014/17/EU — Mortgage credit — Article 260(3) TFEU — Failure to notify measures transposing a directive adopted under a legislative procedure — Financial penalties — Penalty payment)

I. Introduction

1. In the present case, the Commission has brought infringement proceedings against the Kingdom of Spain under Article 258 TFEU for failing to adopt the necessary measures to transpose, by 21 March 2016, Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property and amending Directives 2008/48/EC and 2013/36/EU and Regulation (EU) No 1093/2010 (the so-called Mortgage Credit Directive) (2) or, in any event, failing to notify the Commission of those measures. The Commission also asks the Court to impose, in accordance with Article 260(3) TFEU, a daily penalty payment of EUR 105 991.60 on the Kingdom of Spain, starting on the date of delivery of the Court’s judgment establishing the infringement, for failing to fulfil its obligation to notify measures transposing Directive 2014/17.

2. Consequently, this case provides the Court with the opportunity to give a ruling, for the first time, on the interpretation and application of Article 260(3) TFEU. (3) That provision, introduced by the Lisbon Treaty, allows the Commission to bring infringement proceedings before the Court pursuant to Article 258 TFEU on the grounds that a Member State has ‘failed to fulfil its obligations to notify measures transposing a directive adopted under a legislative procedure’ and ask the Court to impose financial penalties on that Member State at the same time. (4)

3. The key issues that arise for resolution are essentially, first, does Article 260(3) TFEU apply to a Member State’s notification of incomplete or incorrect transposition measures; second, by reference to which rules is any financial penalty imposed under that provision to be assessed; and third, is the penalty payment at issue proportionate.

II. Legal framework

4. Article 260(3) TFEU provides:

‘When the Commission brings a case before the Court pursuant to Article 258 on the grounds that the Member State concerned has failed to fulfil its obligation to notify measures transposing a directive adopted under a legislative procedure, it may, when it deems appropriate, specify the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances.

If the Court finds that there is an infringement it may impose a lump sum or penalty payment on the Member State concerned not exceeding the amount specified by the Commission. The payment obligation shall take effect on the date set by the Court in its judgment.’

5.Article 42(1) of Directive 2014/17 provides:

‘Member States shall adopt and publish, by 21 March 2016, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those measures.’

III. Pre-litigation procedure

6. Not having received by the transposition deadline of 21 March 2016 any notification from the Kingdom of Spain of the measures transposing Directive 2014/17 into Spanish law, the Commission sent the Kingdom of Spain a letter of formal notice dated 26 May 2016, inviting it to do so.

7. In its response by letter dated 28 July 2016, the Kingdom of Spain indicated that it had not been able to transpose Directive 2014/17 on account of unusual circumstances relating to the interim nature of the Government, but that preparatory work on the draft bill transposing that directive had begun.

8. By reasoned opinion dated 17 November 2016, the Commission stated that the Kingdom of Spain had still not adopted measures transposing Directive 2014/17, nor notified it of those measures. The Commission invited it to adopt the necessary measures within a period of two months from receipt of that reasoned opinion.

9. In its response to that reasoned opinion by letter dated 19 January 2017, the Kingdom of Spain informed the Commission of the progress made with the preliminary draft law transposing Directive 2014/17.

10. Taking the view that the Kingdom of Spain had still not transposed Directive 2014/17 or given notification of any transposition measures, the Commission decided on 27 April 2017 to bring infringement proceedings before the Court.

IV. Procedure before the Court

11. By its application lodged on 27 September 2017, the Commission bought the present action before the Court on the basis of Articles 258 and 260(3) TFEU. It claims that the Court should:

– first, declare that, by failing to adopt before 21 March 2016 the laws, regulations and administrative provisions necessary to comply with Directive 2014/17 or, in any event, by failing to notify the Commission of those provisions, the Kingdom of Spain has failed to fulfil its obligation under Article 42(1) of that directive;

– second, order the Kingdom of Spain, in accordance with Article 260(3) TFEU, to pay a daily penalty payment of EUR 105 991.60, with effect from the date of delivery of the judgment establishing its failure to fulfil its obligation to adopt or, in any event, to notify the Commission of the provisions necessary to comply with Directive 2014/17; and

– third, order the Kingdom of Spain to pay the costs of the proceedings.

12. In its defence lodged on 15 December 2017, the Kingdom of Spain contends that the Court should:

– first, dismiss the present action in its entirety or, in the alternative, reduce the penalty payment; and

– second, order the Commission to pay the costs of the proceedings.

13. The Commission and the Kingdom of Spain also lodged a reply and a rejoinder on 26 January and 12 March 2018, respectively.

14. By its application lodged on 26 December 2017, the French Republic applied for leave to intervene in the proceedings in support of the Kingdom of Spain. Leave to intervene was granted by decision of 30 January 2018, following which the French Republic lodged its statement in intervention on 7 March 2018. The Commission and the Kingdom of Spain submitted observations on the French Republic’s statement in intervention on 14 May 2018.

15. A hearing was held on 21 January 2019 at which the Commission, the Kingdom of Spain and the French Republic presented oral argument.

V. Arguments of the parties

A. The failure to fulfil obligations under Article 258 TFEU

16. The Commission submits that the Kingdom of Spain failed to adopt by the deadline of 21 March 2016 set out in Article 42(1) of Directive 2014/17 the necessary measures to transpose that directive or to notify the Commission of those measures.

17. The Kingdom of Spain does not dispute having failed to notify any measures transposing Directive 2014/17. The Kingdom of Spain stated at the hearing that the national transposition law was expected to be adopted on 14 February 2019.

B. The application of Article 260(3) TFEU

18. The Commission, first, makes some preliminary observations based on its 2011 Communication on the implementation of Article 260(3) TFEU (‘2011 Communication’). (5) In particular, the Commission stresses that the purpose of Article 260(3) TFEU is to give a stronger incentive to the Member States to transpose directives within the deadlines fixed by the Union legislator and thus to ensure that EU legislation is genuinely effective. (6) Moreover, in response to the French Republic’s arguments, the Commission underlines that Article 260(3) TFEU penalises a Member State’s failure to fulfil not only the ‘procedural’ obligation to notify transposition measures, but also the ‘substantive’ obligation to transpose itself, that is, that the Member State did not adapt its internal legal order to the directive in question. Further, the Commission argues that Article 260(3) TFEU applies to a Member State’s total failure to notify any transposition measures, as in this case, as well as partial failure to notify transposition measures, such as where those measures do not cover the whole territory of the Member State or do not correspond to all provisions of the directive in question. (7)

19. With regard to the determination of financial penalties, the Commission contends that the penalties proposed under Article 260(3) TFEU should be calculated according to the same method as those under Article 260(2) TFEU. (8)In response to arguments advanced by the French Republic, the Commission stresses, inter alia, that with the introduction of Article 260(3) TFEU, the Treaties provide that a Member State’s failure to adopt and notify transposition measures constitutes an infringement of EU law, no less important than the infringements sanctioned under Article 260(2) TFEU, and stems from the third paragraph of Article 288 TFEU and Article 4(3) TEU.

20. On that basis, the Commission proposes a daily penalty payment of EUR 105 991.60 imposed against the Kingdom of Spain, calculated by multiplying the standard flat-rate amount (680) by coefficients for seriousness (10) and duration (1.3) and by the ‘n’ factor (11.99), (9) which should take effect on the date of delivery of the Court’s judgment. (10) The Commission also asks the Court not to specify in its judgment the ‘European Union own resources’ account into which the penalty payment should be paid, so that it can specify the account in the debit note issued to the Kingdom of Spain under the applicable EU rules.

21. As regards the seriousness of the infringement, the Commission proposes a coefficient of 10 on a scale of 1 to 20, taking account of the established parameters of, first, the importance of the provisions of EU law that are the subject of the infringement and, second, the...