A Very Big Thank You!

Yesterday, Ohio Gov. Ted Strickland commuted the death sentence of Kevin Keith, a possibly innocent man, to life without parole. We have written about Kevin Keith’s case multiple times. We told you about how groups including the Ohio Innocence Project, the National Innocence Network, and a group of leading eyewitness and memory experts (PDF) were petitioning the Ohio Parole Board and Gov. Ted Strickland to grant clemency to Kevin Keith. We were nervous: the Parole Board rejected his claim and recommended the governor deny his clemency request, and earlier this week, the 6th Circuit Court of Appeals denied one of Keiths' final appeals. His September 15 execution date was fast approaching.

But we pressed on and continued our push for commutation, asking you to contact Gov. Strickland urging him to do the right thing. The response was overwhelming, as civil libertarians around the country took action. More than 1,650 of you responded and signed the ACLU's petition to Gov. Strickland. Your signatures contributed to yesterday’s wonderful news that the governor commuted Kevin Keith’s sentence.

Please take the time to thank Gov. Strickland for doing the right thing and commuting Kevin Keith’s death sentence.

The struggle for Kevin Keith’s innocence continues, but now Kevin Keith will have the time he needs to continue his fight for exoneration.

Thank you Governor Strickland!

New copyright lawsuits go after porn on Bittorrent

Three adult media entertainment producers filed suit yesterday in the U.S. District Court for the Northern District of Illinois alleging copyright infringement against hundreds of anonymous defendants accused of trading videos using Bittorrent. This kind of action resembles the much-criticized mass litigation undertaken by the U.S. Copyright Group against hordes of unknown accused Bittorrent users trading movies like Hurt Locker.

In this case, the subject matter promises to be more provocative. Plaintiff Millennium TGA is known for producing content in the “transsexual adult entertainment niche.” Plaintiff Lightspeed Media Corporation is alleging infringement of content including collections relating to its Jordan Capri and Tawnee Stone websites. Plaintiff Hard Drive Productions produces the Amateur Allure website.

Here are the complaints:

Netflix Polls BitTorrent Habits of Leaving Customers

With over 10 million customers, Netflix is a huge player in the online DVD rental business in the United States. Aside from sending out DVDs by mail, customers can also stream movies directly to a wide variety of devices. Despite these services, there are still plenty of people who cancel their accounts. Just for the record, Netflix wants to know through a survey if they are perhaps 'pirates'.

netflixHollywood often blames BitTorrent sites and other file-sharing platform for billions of dollars of annual lost revenue. Perhaps unsurprisingly, this alleged hit is not felt in all sectors of the movie industry. Netflix, the leading online DVD rental company in the United States, is doing very well.

Despite a direct ‘threat’ from piracy, including many BitTorrent sites, Netflix’s revenue has been growing steadily year after year. In 2006 the company acquired a net income of $49.1 million, which more than doubled to $116 million by 2009. And this growth is not slowing down either. During the second quarter of this year Netflix booked a record-breaking income of $43.5 million.

Although business has been going well for the movie rental company, there will always be customers who decide to cancel their accounts. In common with all self respecting companies, Netflix want to find out why people cancel, and this is the reason why they present leaving customers with an interesting survey.

In the survey, Netflix asks for the reasons why the customer has chosen to leave, the likelihood that he or she will return and what their primary sources for TV-shows and movies will be in the future.

“What will be your primary source for movies and TV episodes after canceling Netflix?” the question reads.

Although this question in itself is nothing out of the ordinary, one of the response options is. Apparently Netflix sees BitTorrent sites as direct competition, and it fears that this may cause some customers to leave.

“Peer-to-peer / bit torrent sites such as Torrentz.com, Demonoid.com, Tvlinks.com, ThePirateBay.org, etc,” is one of the answers that customers can check (see below).

If chosen, the option does not trigger any follow-up questions related to BitTorrent, so the information they gather is not very elaborate. It would be interesting, however, to see how canceling subscribers answer the question above. How many would pick the peer-to-peer option? Perhaps more importantly, how is this information going to change Netflix’s business strategy?

Thanks Dylan.

Netflix’s cancellation survey

netflix

Article from: TorrentFreak.

Case C-139/07 P, Technische Glaswerke Ilmenau GmbH

By letter of 27 March 2002, the Commission rejected that application for access stating, in particular, that the documents sought were covered by the exception in Art. 4(2) of Regulation 1049/2001. The Commission also stated that the documents concerning TGI were documents forming part of the current formal investigation procedure C 44/2001.

 On 2 October 2002, at the conclusion of the second formal investigation procedure under reference C 44/2001, the Commission adopted Decision C(2002) 2147 final concluding, in particular, that the bank loan granted to TGI constituted State aid incompatible with the common market. TGI challenged that decision by bringing an action for annulment before the General Court on 17 December 2002 (Case T-378/02), that case having been since removed from the register by an order of 16 might 2007.

By application lodged at the Registry of the General Court on 8 August 2002, TGI brought an action for the annulment of the contested decision, save in so far as the latter refused access to documents directly connected with the procedure currently in progress concerning the review of State aid concerning Schott Glas.

The General Court concluded that the complaint based on the lack of a concrete, individual examination of the documents referred to in the application for access had to be upheld and that the Commission’s pure and simple refusal of access to the applicant was, consequently, vitiated by an error of law. The General Court therefore ruled that the Commission had infringed Art. 4(2) of Regulation 1049/2001 and that the contested decision, in so far as it refused access to documents relating to procedures for reviewing State aid granted to TGI, therefore had to be annulled.  

In support of its appeal, the Commission claimed misinterpretation of Art. 4(2) of Regulation 1049/2001; second, disregard of the intention of the legislature; third, disregard of the wording of Art. 4 of that regulation; fourth, infringement of Art. 255 EC having regard to the provisions and the purpose of the said regulation; and, fifth, the existence of other errors of law in the judgment under appeal.

The Court held that the Commission had refused, precisely, to communicate to TGI documents relating to procedures for reviewing State aid which had been granted to it, invoking the exception to the right of access laid down in Art. 4(2), third indent, of Regulation 1049/2001, based on protection of the purposes of inspections, investigations and audits. As was apparent from  the judgment under appeal, those documents, such as covered by the application for access brought by TGI on the basis of that regulation, did indeed fell within an activity of “investigation’, within the meaning of that provision.

The Court held that it was true that, in order to justify refusal of access to a document the disclosure of which had been requested, it was not sufficient, in principle, for that document to fell within an activity mentioned in Art. 4(2) of Regulation 1049/2001. The institution concerned must also supply explanations as to how access to that document could specifically and effectively undermined the interest protected by an exception laid down in that Article

However, the Court reiterated that it was, in principle, open to the Community institution to based its decisions in that regard on general presumptions which applied to certain categories of documents, as considerations of a generally similar kind were likely to apply to requests for disclosure relating to documents of the same nature (Joined Cases C-39/05 P and C-52/05 P Sweden and Turco v Council [2008]).

The Court held that the procedure for reviewing State aid was, in view of its general scheme, a procedure initiated in respect of the Member State responsible for granting the aid, and the Commission could not, without infringing the rights of the defence, used in its final decision information on which that Member State was not afforded an opportunity to comment (Joined Cases C‑74/00 P and C‑75/00 P Falck and Acciaierie di Bolzano v Commission [2002]).

The Court held that the interested parties, except for the Member State responsible for granting the aid, did not have a right under the procedure for reviewing State aid to consult the documents on the Commission’s administrative file.

It followed that, for the purposes of interpreting the exception laid down in Art. 4(2), third indent, of Regulation 1049/2001, the General Court should, in the judgment under appeal, had taken account of the fact that interested parties other than the Member State concerned in the procedures for reviewing State aid did not have the right to consult the documents in the Commission’s administrative file, and, therefore, had acknowledged the existence of a general presumption that disclosure of documents in the administrative file in principle undermined protection of the objectives of investigation activities.

Consequently, according to the Court, the judgment under appeal must be set aside in so far as it annulled the contested decision, without there being any need  to examine the second part of that plea or the Commission’s other pleas in support of its appeal.


Case C-28/08 P, Bavarian Lager

Commission rightfully refusing Bavaria Lager access to certain EU documents
(Mensing & Stetcher 1879)
By this appeal, the Commission of the European Communities sought the annulment of the judgment of the Court of First Instance of the European Communities (now “the General Court’) of 8 November 2007 in Case T-194/04 Bavarian Lager v Commission [2007], on which I wrote this post,  

By that  judgment, the General Court had annulled the Commission’s decision of 18 March 2004, rejecting the request by Bavarian Lager for access to the full minutes of a meeting of 11 October 1996, held in the context of a procedure for failure to fulfil obligations

According to its Preamble, the purpose of Regulation 1049/2010 was to give the fullest possible effect to the right of public access to documents and to lay down the general principles and limits on such access. In principle, all documents of the institutions should be accessible to the public.

According to Art. 2 of Regulation 1049/2001, “any citizen of the Union, and any natural or legal person residing or having its registered office in a Member State, had a right of access to documents of the institutions, subject to the principles, conditions and limits defined in this Regulation.”

However, certain public and private interests could be protected by way of exceptions. In particular, institutions were entitled to refuse access to a document where disclosure would inter alia undermined the protection of “privacy and the integrity of the individual, in particular in accordance with Community legislation regarding the protection of personal data” or “ the purpose of inspections, investigations and audits”. This was provided there was no overriding public interest in disclosure.

Bavarian Lager was established in 1992 for the importation of German beer for public House and bars in the United Kingdom, situated primarily in the North of England.
However, Bavarian Lager was not able to sell its product, since a large number of publicans in the United Kingdom were tied by exclusive purchasing contracts obliging them to obtain their supplies of beer from certain breweries.

Under the Supply of Beer (Tied Estate) Order 1989 SI 1989/2390, British breweries holding rights in more than 2 000 pubs were required to allow the managers of those establishments the possibility of boughting a beer from another brewery, on condition that it was conditioned in a cask and had an alcohol content exceeding 1.2% by volume. That provision was commonly known as the “Guest Beer Provision” (“the GBP”).

However, most beers produced outside the United Kingdom could not be regarded as “cask-conditioned beers”, within the meaning of the GBP, and thus did not fall within its scope.

Considering that the GBP constituted a measure having equivalent effect to a quantitative restriction on imports, and was thus incompatible with Art. 30 of the EC Treaty (now, after amendment, Art. 28 EC), Bavarian Lager lodged a complaint with the Commission by letter of 3 April 1993, registered under reference P/93/4490/UK.

Following its investigation, the Commission decided, on 12 April 1995, to institute proceedings against the United Great Britain and Northern Ireland under Art. 169 of the EC Treaty (now Art. 226 EC).

On 11 October 1996, the aforementioned meeting was held, which was attended by officers of the Directorate-General (DG) for the Internal Market and Financial Services, officials of the United Kingdom Government Department of Trade and Industry and representatives of the Confederation des Brasseurs du Marche Commun. Bavarian Lager had requested the right to attend the meeting [of 11 October 1996] in a letter dated 27 August 1996, but the Commission refused to grant permission to attend.

On 4 May 1998, Bavarian Lager addressed a request to the Commission under the Code of Conduct for access to all of the submissions made under file reference P/93/4490/UK by 11 named companies and organisations and by three defined categories of person or company. The Commission refused the initial application on the ground that the [said] Code of Conduct applied only to documents of which the Commission was the author. The confirmatory application was rejected on the grounds that the Commission was not the author of the document in question and that any application had to be sent to the author.

On 8 July 1998, Bavarian Lager complained to the European Ombudsman under reference 713/98/IJH, stating, by letter dated 2 February 1999, that it wished to obtain the names of the delegates of the CBMC who had attended the meeting on 11 October 1996 and the names of the companies and any persons who fell into one of the 14 categories identified in the original request for access to documents containing the communications to the Commission under file reference P/93/4490/UK.

 By e-mail of 5 December 2003, Bavarian Lager sent a request to the Commission for access to the documents referred to above, based on Regulation 1049/2001.

The Commission replied to that request by letter of 27 January 2004 stating that certain documents relating to the meeting of 11 October 1996 could be disclosed, but adding that five names had been blanked out from the minutes of the meeting of 11 October 1996, following two express refusals by persons to consent to the disclosure of their identity and the Commission’s failure to contact the remaining three attendees.

By the contested decision, the Commission rejected the confirmatory application of Bavarian Lager. It confirmed that Regulation 45/2001 applied to the request for disclosure of the names of the other participants. As Bavarian Lager had not established an express and legitimate purpose or needed for such a disclosure, the conditions set out by Art. 8 of that regulation had not been met and the exception provided for in Art. 4(1)(b) of Regulation 1049/2001 applied. It added that, even if the rules on the protection of personal data did not apply, it would nevertheless had had to refuse to disclose the other names under Art. 4(2), third indent, of Regulation 1049/2001 so as not to compromise its ability to conduct inquiries.”

By the judgment under appeal, the General Court annulled the contested decision.

Regarding access to the full minutes of the meeting of 11 October 1996, the General Court took the view, that Bavarian Lager’s request was based on Regulation 1049/2001.

Relationship between Regulation 45/2001 and Regulation 1049/2001

The Court of Justice of the European Union stressed that Regulation 45/2001 and 1049/2001 were adopted on dates very close to each other. They did not contain any provisions granting one regulation primacy over the other. In principle, their full application should be ensured.

The Court held that the only express link between those two regulations was established in Art. 4(1)(b) of Regulation 1049/2001, which provided for an exception to access to a document where disclosure would undermined the protection of privacy and the integrity of the individual, in particular in accordance with Community legislation regarding the protection of personal data.

Where a request based on Regulation 1049/2001 sought to obtain access to documents including personal data, the provisions of Regulation 45/2001 become applicable in their entirety, including Arts 8 and 18 thereof by not taking account of the reference in Art. 4(1)(b) of Regulation 1049/2001 to the legislation of the Union concerning the protection of personal data and thus to Regulation 45/2001, the General Court dismissed at the outset, in paragraph 107 of the judgment under appeal, the application of Art. 8(b) of Regulation 45/2001, and, in paragraph 109 of the judgment under appeal, the application of Art. 18 of Regulation 45/2001. And yet those Articles constituted essential provisions of the system of protection established by Regulation 45/2001.

Consequently, in the view of the Court of Justice, the particular and restrictive interpretation which the General Court gave to Art. 4(1)(b) of Regulation 1049/2001 did not correspond to the equilibrium which the Union legislature intended to establish between the two regulations in question.

The Court of Justice held that the General Court was right to conclude that the list of participants in the meeting of 11 October 1996 appearing in the minutes of that meeting thus contained personal data for the purposes of Art. 2(a) of Regulation 45/2001, since the persons who participated in that meeting could be identified.

The Court held that, therefore, the decisive question was whether the Commission could grant access to the document including the five names of the participants in the meeting of 11 October 1996, in compliance with Art. 4(1)(b) of Regulation 1049/2001 and Regulation 45/2001.

First of all, it should be noted that Bavarian Lager was able to have access to all the information concerning the meeting of 11 October 1996, including the opinions which those contributing expressed in their professional capacity.

The Commission, at the time of the first request by Bavarian Lager dated 4 May 1998, sought the agreement of the participants at the meeting of 11 October 1996 to the disclosure of their names. As the Commission indicated in the decision of 18 March 2003, that procedure was in compliance with the requirements of Directive 95/46, in force at that time.

Following a new request by Bavarian Lager to the Commission, dated 5 December 2003, seeking communication of the full minutes of the meeting of 11 October 1996, the Commission informed Bavarian Lager on 27 January 2004 that, having regard to the entry into force of Regulation 45/2001 and 1049/2001, it was henceforward obliged to treat that request under the specific regime of those regulations, particularly Art. 8(b) of Regulation 45/2001.

Whether under the former system of Directive 95/46 or under the system of Regulation 45/2001 and 1049/2001, the Commission was right to verify whether the data subjected had given their consent to the disclosure of personal data concerning them.

The Court of Justice found that, by releasing the expurgated version of the minutes of the meeting of 11 October 1996 with the names of five participants removed therefrom, the Commission did not infringe the provisions of Regulation 1049/2001 and sufficiently complied with its duty of openness.

By requiring that, in respect of the five persons who had not given their express consent, Bavarian Lager establish the necessity for those personal data to be transferred, the Commission complied with the provisions of Art. 8(b) of Regulation 45/2001.

As Bavarian Lager had not provided any express and legitimate justification or any convincing argument in order to demonstrate the necessity for those personal data to be transferred, the Commission had not been able to weigh up the various interests of the parties concerned. Nor was it able to verify whether there was any reason to assume that the data subjected” legitimate interests might be prejudiced, as required by Art. 8(b) of Regulation 45/2001.

It followed from the above that the Commission was right to reject the application for access to the full minutes of the meeting of 11 October 1996.

Therefore, the General Court erred in law in concluding that in this case the Commission had wrongly applied Art. 4(1)(b) of Regulation 1049/2001 and held that Bavarian Lager had not established either an express and legitimate purpose in obtaining, or any needed to obtain, the document at issue in its entirety.

As the contested decision did not infringe the provisions of Regulation 45/2001 and 1049/2001, the action for annulment by Bavarian Lager against that decision must therefore be dismissed.




Joined Cases C-105/09 and C-110/09, Terre wallonne ASBL

Court clarifies scope of Strategic Environmental Assessment Directive  
  
By judgment of 22 September 2005 in Case C-221/03 Commission v Belgium [2005], the Court held that, by failing to adopt within the relevant time-limit the measures needed for the full and correct implementation of Directive 91/676, the Belgium had failed to fulfil its obligations under that directive.

In order to comply with that judgment, the Walloon Government adopted the contested order in pursuance of Art. 5 of Directive 91/676. That order amended Book II of the Environment Code, which formed the Water Code, as regards the sustainable management of nitrogen in agriculture.

Terre wallonne ASBL and Inter-Environnement Wallonie ASBL applied to the Conseil d’État for annulment of that order, claiming in particular that the programme which it contained was not subjected to an environmental assessment in accordance with Directive 2001/42.

The referring court is of the view that the possibility cannot be ruled out that action programmes such as the one referred to by Directive 91/676 are plans or programmes within the meaning of Directive 2001/42.

By its first question, the referring court is, in essence, asking the Court whether a programme for the management of nitrogen in agriculture such as the one at issue in the main proceedings is liable to constitute a plan or programme covered by Art. 3(2)(a) of Directive 2001/42.

The Court held that, as a result both of the characteristics they displayed and of the actual intention of the European Union legislature, action programmes are “plans and programmes” within the meaning of Directive 2001/42.

Furthermore, according to the Court, as regards the content of action programmes, it is apparent from Art. 5 of Directive 91/676, in conjunction with Annex III thereto, that those programmes are to contain specific, mandatory measures that cover, in particular, periods during which the spreading of certain types of fertiliser is prohibited, the capacity of storage vessels for livestock manure, spreading methods and the maximum quantity of livestock manure containing nitrogen which could be spread (see, to that effect, Case C-416/02 Commission v Spain [2005]).

 The Court held that in the context of environmental assessment provided for by Directive 85/337, the national authorities must take into account not only the direct effects of the planned works, but also the environmental impact liable to result from the use and exploitation of the end product of those works (Case C-2/07 Abraham and Others [2008], and Case C‑142/07 Ecologistas en Acción-CODA [2008]).

In particular, in the case of installations for intensive rearing, such an environmental assessment must envisage the impact of the installations on water quality (see, to that effect, Case C-121/03 Commission v Spain [2005]).

The Court therefore concluded was that an action programme adopted pursuant to Art. 5(1) of Directive 91/676 was in principle a plan or programme covered by Art. 3(2)(a) of Directive 2001/42 since it constituted a “plan” or “programme” within the meaning of Art. 2(a) of the latter directive and contained measures compliance with which was a requirement for issue of the consent that might be granted for carrying out projects lists in Annexes I and II to Directive 85/337.


Righthaven’s Brand of Copyright Trolling

Copyright trolls are nothing new, and Righthaven is just the latest group of lawyers to try to turn copyright litigation into a business model. What these lawyers have in common is that they seek to take advantage of copyright's draconian damages in order to bully Internet users into forking over money. To anyone who has watched the file-sharing lawsuits of the last few years or the current BitTorrent cases brought by a DC law firm, the Righthaven saga is developing into a familiar, unfortunate story. It also has some especially troubling twists.

The basic pattern: Righthaven has brought over a hundred lawsuits in Nevada federal court claiming copyright infringement. They find cases by (a) scouring the Internet for parts of newspaper stories posted online by individuals, nonprofits, and others, (b) buying the copyright to that particular newspaper story, and then (c) proceeding to sue the poster for copyright infringement. Like the RIAA and USCG before them, Righthaven is relying on the fact that their victims may face huge legal bills through crippling statutory damages and the prospect of paying Righthaven's legal fees if they lose the case. Consequently, many victims will settle with Righthaven for a few thousand dollars regardless of their innocence, their right to fair use, or other potential legal defenses.

However, Righthaven is unlike other copyright trolls in some key ways:

  • Righthaven is going after bloggers using text news stories for comment or discussion. Many lawsuit targets are using the newspaper articles to augment discussions about current events. Reposting all or part of news stories is part and parcel of digital commentary and discussion and usually the goal of the reposting is to share the uncopyrightable facts included in the article, not the copyrighted expression, like the specific turns of phrase used by the author. By targeting news, Righthaven's lawsuits could have a chilling effect on individuals' attempts to engage their communities in free and open discussion.
  • Righthaven is fighting the basic mode of Internet debate. Other copyright trolls have involved controversy over file-sharing programs and encoded digital media, like music and movies. But Righthaven is taking aim at folks who are using elementary "copy & paste" functionalities. Online discussion survives and thrives on showing others the original text before adding a commentary or response. Accurate quoting is a virtue of Internet discussion that can minimize mischarcterization and support progress in a debate.
  • Righthaven lawsuits are demanding that courts freeze and transfer the defendants' domain names. Imagine if a single copyright infringement on Huffingtonpost.com or Redstate.com could result in forfeiture of the entire domain. Effectively asking for control of all of a website's existing and future content -- instead of only targeting the allegedly infringing material -- is an overreaching remedy for a single copyright infringement not validated by copyright law or any legal precedent. This also indicates that the attorneys are willing to make overreaching claims in order to scare defendants into a fast settlement.
  • Righthaven goes straight for litigation. Righthaven isn't sending cease and desist letters or DMCA takedown notices that would allow the targeted bloggers or website operators to remove or amend only the news articles owned by Righthaven. Instead, Righthaven starts with a full-fledged lawsuit in federal court with no warning. It's sue first and ask questions later, which smacks of a strategy designed to churn up legal costs and intimidate defendants into paying up immediately, rather than a strategy aimed at remedying specific copyright infringements.

Righthaven is claiming that its activities are intended to have a "deterrent effect" on the reposting of news stories online, but it's hard to resist viewing Righthaven's actions as purely business-related. In addition to the sharp legal tactics discussed above, Righthaven appears to only buy copyrights that it believes can be used for lawsuits and otherwise has no involvement in the practice of journalism.

Righthaven also appears to be soliciting other newspapers to sign on with it. But newspaper publishers who think that suing bloggers a story at a time will save journalism are sorely mistaken. Newspaper publishers have actually been having meaningful discussions about innovative business models to support real journalism. Sadly, Righthaven -- if it continues to attract clients -- threatens to derail those conversations with a sideshow proven to distract from progress.

But no matter where a newspaper may stand on the debate about journalism's future, we think it is abundantly clear that a "sue the audience" tactic is nowhere near worth considering. Newspapers should resist the temptation to put themselves into the same position as the music industry circa 2004, where futile lawsuits distracted them from the incorporating new technology and creating new ways to market product to fans.

EFF is watching Righthaven and other copyright trolls closely for overbroad tactics that hurt free speech and fair use, and abuse the legal system. We're looking for good cases to defend and will deliver more news and analysis as the issue develops.

Case C-140/09,Fellimento Traghetti del Mediterraneo SpA v Presidenza del Consiglio dei Ministri,

Subsidies granted in 1980's still state aid


This reference for a preliminary ruling  had been made in the context of proceedings between fellimento Traghetti del Mediterraneo SpA (‘TDM’), a maritime transport undertaking in liquidation, and the Presidenza del Consiglio dei Ministri, concerning compensation for the damage which TDM allegedly suffered as a result of an incorrect interpretation by the Corte suprema di cassazione (Supreme Court of Cassation) of the European Union rules on competition and State aid, and because of that court’s refusal to bring the matter before the Court of Justice in accordance with the third paragraph of Art. 234 EC.

TDM and Tirrenia were two maritime transport undertakings which, in the 1970s, ran regular ferry services between mainland Italy and the islands of Sardinia and Sicily. In 1981, TDM brought proceedings against Tirrenia before the Tribunale di Napoli (Naples District Court) seeking compensation for the damage which it claims to have suffered as a result of the low-fare policy operated by Tirrenia between 1976 and 1980.

TDM submitted that there had been unfair competition and alleged infringement of Arts 85, 86, 90 and 92 of the EEC Treaty (subsequently Arts 85, 86, 90 and 92 of the EC Treaty and now Arts 81 EC, 82 EC, 86 EC and, after amendment, 87 EC respectively). In particular, it maintained that Tirrenia had abused its dominant position on the market in question by operating with fares well below cost owing to its having obtained public subsidies, the legality of which was doubtful under European Union law.

However, its action was dismissed by decision of 26 might 1993, upheld on appeal by judgment of the Corte d’appello di Napoli (Naples Court of Appeal) of 13 December 1996.

The appeal brought against that judgment by the administrator of TDM was dismissed by judgment of the Corte suprema di cassazione of 19 April 2000, which, in particular, refused to accede to the administrator’s request to submit questions of interpretation of European Union law to the Court of Justice, on the ground that the approach adopted by the court ruling on the substance complied with the relevant provisions and was consistent with the Court’s case-law.

By writ of summons of 15 April 2002, the administrator of TDM, an undertaking which had in the meantime been put into liquidation, instituted proceedings against the Italian Republic before the Tribunale di Genova (Genoa District Court) for compensation from that Member State for the damage allegedly suffered by that undertaking as a result of the errors of interpretation of the European Union rules on competition and State aid committed by the Corte suprema di cassazione and of the breach of its obligation to make a reference for a preliminary ruling pursuant to the third paragraph of Art. 234 EC.

On 14 April 2003, the Tribunale di Genova made the reference for a preliminary ruling to the Court of Justice. Further to that latter judgment, the Tribunale di Genova found that the “State judiciary [had] acted unlawfully’, and by a separate order directed that the proceedings should continue so that the claim for damages from that unlawful conduct might be heard.

The Court held that question referred must be construed as asking whether under European Union law subsidies paid in circumstances such as those in the main proceedings, pursuant to national legislation providing for payments on account prior to the approval of an agreement, might constitute State aid.

The Court reiterated that classification as aid required all the following conditions to be fulfilled. First, there must be intervention by the State or through State resources. Second, the intervention must be liable to affect trade between Member States. Third, it must confer an advantage on the recipient. Fourth, it must distort or threaten to distort competition (see  Case C-142/87 Belgium v Commission [1990], Case-C-280/00 Altmark Trans GmbH and Regierungspräsidium Magdeburg v. Nahverkehrsgesellschaft Altmark GmbH [2003], Joined Cases C-341/06 P and C-342/06 P Chronopost and La Poste v UFEX and Others [2008]; and C-206/06, Essent Netwerk Noord and Others, [2008], on which I wrote this post).

The Court held that in the present case, the first of those conditions was not the subject of the question referred and was not in dispute, since the subsidies at issue in the main proceedings were paid under Law No 684 and, as was clear in particular from Arts 18 and 19 thereof, borne by the State budget.

The Court found that, in the light of the grounds of the order for reference, the third condition must be examined, first, then the second and fourth conditions together.

The advantage conferred on the recipient undertaking
The Court reiterated – referring to the above mentioned case law - that, measures which, whatever their form, were likely directly or indirectly to favour certain undertakings or were to be regarded as an economic advantage which the recipient undertaking would not have obtained under normal market conditions were regarded as aid.

By contrast, where a State measure must be regarded as compensation for the services provided by the recipient undertakings in order to discharge public service obligations, so that those undertakings did not enjoyed a real financial advantage and the measure thus did not have the effect of putting them in a more favourable competitive position than the undertakings competing with them, such a measure did not constitute State aid under European Union law.

However, for such compensation to escape classification as State aid in a particular case, a number of conditions must be satisfied

- the undertaking receiving such compensation must actually have public service obligations to discharge, and the obligations must be clearly defined.

- the parameters on the basis of which the compensation was calculated must be established in advance in an objective and transparent manner, to avoid it conferring an economic advantage which might favour the recipient undertaking over competing undertakings

- the compensation could not exceed what was necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations.

- the compensation must be determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with the requisite means so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations.

The subsidies at issue in the main proceedings were intended for the provision of services linking the larger and smaller Italian islands, which had to satisfy requirements relating to the economic and social development of the regions concerned. The agreements signed with the undertakings receiving those subsidies had to lay down obligations concerning the routes to be served, the frequency of those services, and the types of vessels allocated to each route. It followed that the recipient undertakings were required to discharge public service obligations.

However, the Court stressed that it was only in July 1991 that the Italian State concluded the agreements of 20 years’ duration with each of the Tirrenia group undertakings, to run from 1 January 1989. For the entire period in question in the main proceedings, that was to say from 1976 to 1980, and until the agreements were approved, the subsidies at issue in the main proceedings were paid on account under Art. 19 of Law No 684.

The Court thus found that, in the absence of those agreements, the subsidies at issue in the main proceedings were paid during the entire period referred to above without the public service obligations imposed on the recipient undertakings being clearly defined, without the parameters on the basis of which the compensation for those obligations was calculated being established in advance in an objective and transparent manner, and without ensuring that that compensation did not exceed what was necessary to cover the costs arising from the discharge of those obligations.

The Court held that since the fourth condition referred to above was not satisfied either, those subsidies did not therefore fulfil any of the conditions for the compensation of public service obligations to escape classification as State aid under European Union law on the basis of no advantage being conferred on the undertaking concerned.

The fact that the subsidies were paid on account, pending approval of the agreements which, moreover, were concluded and took effect only many years later, was, according to the Court, of no consequence.

The Court held that such a fact did not eliminate the advantage conferred on the recipient undertaking or the effects which an advantage of that kind might have on competition since all the conditions referred to have not been fulfilled.

Effect on trade between Member States and risk of distorting competition
The Italian Government had at the hearing stated that no operator from another Member State operated on the domestic routes where Tirrenia was present during the years 1976 to 1980, whereas TDM referred to the presence on those routes of an undertaking formed by the merger of an Italian and a Spanish undertaking.

The fact that the restrictions on the freedom to provide maritime transport services within Member States were abolished after the relevant period in the main proceedings did not, in the view of the Court of Justice, necessarily exclude the possibility that the subsidies at issue in the main proceedings were liable to affect trade between Member States or that they distorted or threatened to distort competition.

The Court concluded that subsidies paid in circumstances such as those in the main proceedings, pursuant to national legislation providing for payments on account prior to the approval of an agreement, constituted State aid if those subsidies were liable to affect trade between Member States and distort or threaten to distort competition, which it was for the national court to determine.


Case C-58/08, Vodafone Ltd et.al

Court uphelds Roaming Directive
Roaming message
In 2002, the Community legislature adopted, on the basis of Art. 95 EC, a regulatory framework for electronic communications networks and services. The purpose of this Directive was inter alia to ensure that all transmission networks and associated services would be subject to the same regulatory framework, which consisted, in particular, of Directive 2002/21 on a common regulatory framework for electronic communications networks and services (‘the Framework Directive’), as well as specific directives. That framework established a mechanism allowing national regulatory authorities (‘NRAs’), where there was no effective competition on a relevant market, to impose ex ante regulatory obligations on undertakings in the electronic communications sector designated as having significant market power following an analysis of the market concerned

Following a public consultation of interested parties, on 12 July 2006 the Commission presented an impact assessment of policy options in relation to a Commission proposal for a Regulation of the European Parliament and of the Council on roaming on public mobile networks within the Community. That assessment provided the basis for a proposal for a regulation of the European Parliament and of the Council on roaming on public mobile networks within the Community and amending Directive 2002/21, presented the same day, which led to the adoption of Regulation 717/2007 (Mobile Roaming ) on the basis of Art. 95 EC.

In short, this regulation capped the wholesale and retail charges terrestrial mobile operators might charge for the provision of roaming services on public mobile networks for voice called between Member States (‘Community-wide roaming services’).

The claimants brought judicial review proceedings before the High Court of Justice of England and Wales, Queen’s Bench Division (Administrative Court), challenging the Mobile Roaming (European Communities) Regulations 2007, which gave effect to certain provisions of Regulation 717/2007 in the United Kingdom.

The claimants sought to challenge the validity of Regulation 717/2007 on three grounds, namely that its legal basis was inadequate, it was disproportionate and it offends against the principle of subsidiarity.

Legal basis
The Court of Justice first of all reiterated that the object of measures adopted on the basis of Art. 95(1) EC must genuinely be to improve the conditions for the establishment and functioning of the internal market (Case C-491/01 British American Tobacco (Investments)and Imperial Tobacco [2002], and Case C-217/04 United Kingdom v Parliament and Council [2006], on which I wrote this post).

The Court held that while a mere founding of disparities between national rules and the abstract risk of infringements of fundamental freedoms or distortion of competition was not sufficient to justify the choice of Art. 95 EC as a legal basis, the Community legislature might have recourse to it in particular where there were differences between national rules which were such as to obstruct the fundamental freedoms and thus had a direct effect on the functioning of the internal market.

The Court reiterated that recourse to that provision was also possible if the aim was to prevent the emergence of such obstacles to trade resulting from the divergent development of national laws. However, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them (Case C-380/03 Germany v Parliament and Council [2006]) or to cause significant distortions of competition (Case C-376/98 Germany v Parliament and Council [2000]).

Where an act based on Art. 95 EC had already removed any obstacle to trade in the area that it harmonises, the Community legislature could not be denied the possibility of adapting that act to any change in circumstances or development of knowledge having regard to its task of safeguarding the general interests recognised by the Treaty.

The Court reiterated that, by using the expression “measures for the approximation” in Art. 95 EC the authors of the Treaty intended to confer on the Community legislature a discretion, depending on the general context and the specific circumstances of the matter to be harmonised, as regards the method of approximation most appropriate for achieving the desired result, in particular in fields with complex technical features.

Moreover, provided that the conditions for recourse to Art. 95 EC as a legal basis were fulfilled, the Community legislature could not be prevented from relying on that legal basis on the ground that consumer protection was a decisive factor in the choices to be made (see, inter alia, Joined Cases C‑154/04 and C-155/04 Alliance for Natural Health and Others [2005])

The Court stressed that Regulation 717/2007 aims to contribute to the smooth functioning of the internal market in order to achieve a high level of consumer protection and maintain competition among operators of mobile telephone networks.

The Court found that the Community legislature was actually confronted with a situation in which it appeared likely that national measures would be adopted aiming to address the problem of the high level of retail charges for Community-wide roaming services through rules fixing the rate of retail charges. As point 1 of the explanatory memorandum to the proposal for a regulation and point 2.4 of the impact assessment indicate, such measures would have been likely to led to a divergent development of national laws.

It followed that the object of Regulation 717/2007 was indeed to improve the conditions for the functioning of the internal market and that it could be adopted on the basis of Art. 95 EC.

The principle of proportionality
The Court furthermore reiterated that the principle of proportionality was one of the general principles of Community law and required that measures implemented through Community law provisions be appropriate for attaining the legitimate objectives pursued by the legislation at issue and must not go beyond what was necessary to achieve them (Joined Cases C‑453/03, C‑11/04, C‑12/04 and C‑194/04 ABNA and Others [2005]).

With regard to judicial review of compliance with those conditions the Court had accepted that in the exercise of the powers conferred on it the Community legislature must be allowed a broad discretion in areas in which its action involved political, economic and social choices and in which it was called upon to undertake complex assessments and evaluations. Thus the criterion to be applied was not whether a measure adopted in such an area was the only or the best possible measure, since its legality could be affected only if the measure was manifestly inappropriate having regard to the objective which the competent institution was seeking to pursue. (see, inter alia, Case C-189/01 Jippes and Others [2001]).

However, the Court stressed that even though it had a broad discretion, the Community legislature must base its choice on objective criteria. Furthermore, in assessing the burdens associated with various possible measures, it must examine whether objectives pursued by the measure chosen were such as to justify even substantial negative economic consequences for certain operators (see Joined Cases C-96/03 and C-97/03 Tempelman and van Schaijk [2005]; Case C-86/03 Greece v Commission [2005]; and Case C-504/04 Agrarproduktion Staebelow [2006]).

The Court held, also in the light of the broad discretion which the Community legislature had in the area at issue, which, according to the Court involved choices to be made of an economic nature, requiring complex assessments and evaluations, it could legitimately take the view that regulation of the wholesale market alone would not achieve the same result as regulation such as that at issue, which covered at the same time the wholesale market and the retail market, and that the latter was therefore necessary.

Finally, in the light of the importance of the objective of consumer protection within the context of Art. 95(3) EC, intervention that was limited in time in a market that was subject to competition, which made it possible, in the immediate future, to protect consumers against excessive prices, such as that at issue, even if it might have negative economic consequences for certain operators, was, according to the Court, proportionate to the aim pursued.

Therefore, by adopting, in Art. 4 of Regulation 717/2007, ceilings for retail charges in addition to ceilings for wholesale charges, the Community legislature did not exceed the limits of the discretion it was recognised as having. The same was true of the obligation to provide information laid down in Art. 6(3) of that same regulation, given that that provision reinforces the effectiveness of the regulation of retail charges and was therefore justified by the objective of consumer protection.

It followed that Arts 4 and 6(3) of Regulation 717/2007 did not infringe the principle of proportionality.

The principle of subsidiarity

The Court furtermore held that the principle of subsidiarity was referred to in the second paragraph of Art. 5 EC – and given actual definition by the Protocol on the application of the principles of subsidiarity and proportionality, annexed to the Treaty –, which provided that the Community, in areas which did not fall within its exclusive competence, was to take action only if and insofar as the objectives of the proposed action could not be sufficiently achieved by the Member States and could therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community.

The Court stressed that, as regards legislative acts, the protocol stated that the Community was to legislate only to the extent necessary and that Community measures should left as much scope for national decision as possible, consistedent however with securing the aim of the measure and observing the requirements of the Treaty. Furthermore, it stated in its paragraph 3 that the principle of subsidiarity did not call into question the powers conferred on the European Community by the Treaty, as interpreted by the Court of Justice.

As regards Art. 95 EC, the Court had held that the principle of subsidiarity applied where the Community legislature usedit as a legal basis, inasmuch as that provision did not give it exclusive competence to regulate economic activity on the internal market (British American Tobacco (Investments) and Imperial Tobacco).

The court found that the interdependence of retail and wholesale charges for roaming services was considerable, so that any measure seeking to reduce retail charges alone without affecting the level of costs for the wholesale supply of Community-wide roaming services would have been liable to disrupt the smooth functioning of the Community-wide roaming market. For that reason, the Community legislature decided that any action would require a joint approach at the level of both wholesale charges and retail charges, in order to contribute to the smooth functioning of the internal market in those services.

That interdependence meant that the Community legislature could legitimately take the view that it had to intervene at the level of retail charges as well. Thus, by reason of the effects of the common approach laid down in Regulation 717/2007, the objective pursued by that regulation could best be achieved at Community level.

Conclusion
The court concluded that Consideration of the questions raised had disclosed no factor of such a kind as to affect the validity of Regulation No 717/2007 of the European Parliament and of the Council of 27 June 2007 on roaming on public mobile telephone networks within the Community and amending Directive 2002/21

Case C-58/08, Vodafone Ltd et.al


In 2002, the Community legislature adopted, on the basis of Article 95 EC, a regulatory framework for electronic communications networks and services ('the Regulatory Framework'). The purpose of this Directive was inter alia to ensure that all transmission networks and associated services would be subject to the same regulatory framework, which consisted, in particular, of Directive 2002/21 on a common regulatory framework for electronic communications networks and services ('the Framework Directive'), as well as specific directives. That framework established a mechanism allowing national regulatory authorities ('NRAs'), where there is no effective competition on a relevant market, to impose ex ante regulatory obligations on undertakings in the electronic communications sector designated as having significant market power following an analysis of the market concerned


Following a public consultation of interested parties, on 12 July 2006 the Commission presented an impact assessment of policy options in relation to a Commission proposal for a Regulation of the European Parliament and of the Council on roaming on public mobile networks within the Community (SEC(2006) 925, 'the impact assessment'). That assessment provided the basis for a proposal for a regulation of the European Parliament and of the Council on roaming on public mobile networks within the Community and amending Directive 2002/21 (COM(2006) 382 final, 'the proposal for a regulation'), presented the same day, which led to the adoption of Regulation No 717/2007 (Mobile Roaming )on the basis of Article 95 EC. 

 In short, this regulation caps the wholesale and retail charges terrestrial mobile operators may charge for the provision of roaming services on public mobile networks for voice calls between Member States ('Community-wide roaming services').
 The claimants brought judicial review proceedings before the High Court of Justice of England and Wales, Queen's Bench Division (Administrative Court), challenging the Mobile Roaming (European Communities) Regulations 2007, which gives effect to certain provisions of Regulation 717/2007 in the United Kingdom. 

As a matter of substance, they sought to challenge the validity of Regulation No 717/2007 on three grounds, namely that its legal basis is inadequate, it is disproportionate and it offends against the principle of subsidiarity.


Legal basis 

The Court of Justice first of all reiterated that the object of measures adopted on the basis of Article 95(1) EC must genuinely be to improve the conditions for the establishment and functioning of the internal market (Case C-491/01 British American Tobacco (Investments)and Imperial Tobacco [2002], and Case C-217/04 United Kingdom v Parliament and Council [2006], on which I wrote this post).


While a mere finding of disparities between national rules and the abstract risk of infringements of fundamental freedoms or distortion of competition is not sufficient to justify the choice of Article 95 EC as a legal basis, the Community legislature may have recourse to it in particular where there are differences between national rules which are such as to obstruct the fundamental freedoms and thus have a direct effect on the functioning of the internal market. 


The Court reiterated that recourse to that provision is also possible if the aim is to prevent the emergence of such obstacles to trade resulting from the divergent development of national laws. However, the emergence of such obstacles must be likely and the measure in question must be designed to prevent them (Case C-380/03 Germany v Parliament and Council [2006]) or to cause significant distortions of competition (Case C-376/98 Germany v Parliament and Council [2000]).


Where an act based on Article 95 EC has already removed any obstacle to trade in the area that it harmonises, the Community legislature cannot be denied the possibility of adapting that act to any change in circumstances or development of knowledge having regard to its task of safeguarding the general interests recognised by the Treaty.


The Court reiterated that, by using the expression 'measures for the approximation' in Article 95 EC the authors of the Treaty intended to confer on the Community legislature a discretion, depending on the general context and the specific circumstances of the matter to be harmonised, as regards the method of approximation most appropriate for achieving the desired result, in particular in fields with complex technical features.


Moreover, provided that the conditions for recourse to Article 95 EC as a legal basis are fulfilled, the Community legislature cannot be prevented from relying on that legal basis on the ground that consumer protection is a decisive factor in the choices to be made (see, inter alia, Joined Cases C154/04 and C-155/04 Alliance for Natural Health and Others [2005])

The Court stressed that Regulation 717/2007 aims to contribute to the smooth functioning of the internal market in order to achieve a high level of consumer protection and maintain competition among operators of mobile telephone networks.


The Court found that the Community legislature was actually confronted with a situation in which it appeared likely that national measures would be adopted aiming to address the problem of the high level of retail charges for Community-wide roaming services through rules fixing the rate of retail charges. As point 1 of the explanatory memorandum to the proposal for a regulation and point 2.4 of the impact assessment indicate, such measures would have been likely to lead to a divergent development of national laws.


It follows that the object of Regulation No 717/2007 is indeed to improve the conditions for the functioning of the internal market and that it could be adopted on the basis of Article 95 EC.


The principle of proportionality

The Court furthermore reiterated that the principle of proportionality is one of the general principles of Community law and requires that measures implemented through Community law provisions be appropriate for attaining the legitimate objectives pursued by the legislation at issue and must not go beyond what is necessary to achieve them (Joined Cases C453/03, C11/04, C12/04 and C194/04 ABNA and Others [2005]).

With regard to judicial review of compliance with those conditions the Court has accepted that in the exercise of the powers conferred on it the Community legislature must be allowed a broad discretion in areas in which its action involves political, economic and social choices and in which it is called upon to undertake complex assessments and evaluations. Thus the criterion to be applied is not whether a measure adopted in such an area was the only or the best possible measure, since its legality can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue. (see, inter alia, Case C-189/01 Jippes and Others [2001]).

 However, even though it has a broad discretion, the Community legislature must base its choice on objective criteria. Furthermore, in assessing the burdens associated with various possible measures, it must examine whether objectives pursued by the measure chosen are such as to justify even substantial negative economic consequences for certain operators 
(see Joined Cases C-96/03 and C-97/03 Tempelman and van Schaijk [2005]; Case C-86/03 Greece v Commission [2005]; and Case C-504/04 Agrarproduktion Staebelow [2006]).


 

The Court held, also in the light of the broad discretion which the Community legislature has in the area at issue, which, according to the Court involves choices to be made of an economic nature, requiring complex assessments and evaluations, it could legitimately take the view that regulation of the wholesale market alone would not achieve the same result as regulation such as that at issue, which covers at the same time the wholesale market and the retail market, and that the latter was therefore necessary.


Finally, in the light of the importance of the objective of consumer protection within the context of Article 95(3) EC, intervention that is limited in time in a market that is subject to competition, which makes it possible, in the immediate future, to protect consumers against excessive prices, such as that at issue, even if it might have negative economic consequences for certain operators, is proportionate to the aim pursued.

 
Therefore, by adopting, in Article 4 of Regulation No 717/2007, ceilings for retail charges in addition to ceilings for wholesale charges, the Community legislature did not exceed the limits of the discretion it is recognised as having. The same is true of the obligation to provide information laid down in Article 6(3) of that same regulation, given that that provision reinforces the effectiveness of the regulation of retail charges and is therefore justified by the objective of consumer protection.
 It follows that Articles 4 and 6(3) of Regulation No 717/2007 do not infringe the principle of proportionality.

 
The principle of subsidiarity
The Court furtermore held that the principle of subsidiarity is referred to in the second paragraph of Article 5 EC – and given actual definition by the Protocol on the application of the principles of subsidiarity and proportionality, annexed to the Treaty –, which provides that the Community, in areas which do not fall within its exclusive competence, is to take action only if and insofar as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community. That protocol, in paragraph 5, also lays down guidelines for the purposes of determining whether those conditions are met.

  
The Court stressed that, as regards legislative acts, the protocol states that the Community is to legislate only to the extent necessary and that Community measures should leave as much scope for national decision as possible, consistent however with securing the aim of the measure and observing the requirements of the Treaty. Furthermore, it states in its paragraph 3 that the principle of subsidiarity does not call into question the powers conferred on the European Community by the Treaty, as interpreted by the Court of Justice.

 As regards Article 95 EC, the Court has held that the principle of subsidiarity applies where the Community legislature uses it as a legal basis, inasmuch as that provision does not give it exclusive competence to regulate economic activity on the internal market (British American Tobacco (Investments) and Imperial Tobacco, paragraph 179).
  
The court, the interdependence of retail and wholesale charges for roaming services is considerable, so that any measure seeking to reduce retail charges alone without affecting the level of costs for the wholesale supply of Community-wide roaming services would have been liable to disrupt the smooth functioning of the Community-wide roaming market. For that reason, the Community legislature decided that any action would require a joint approach at the level of both wholesale charges and retail charges, in order to contribute to the smooth functioning of the internal market in those services.

 That interdependence means that the Community legislature could legitimately take the view that it had to intervene at the level of retail charges as well. Thus, by reason of the effects of the common approach laid down in Regulation No 717/2007, the objective pursued by that regulation could best be achieved at Community level.
 Conclusion
The court concluded that Consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Regulation (EC) No 717/2007 of the European Parliament and of the Council of 27 June 2007 on roaming on public mobile telephone networks within the Community and amending Directive 2002/21/EC.