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