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The new EU General Court Rules of Procedure were published in the Official Journal on 23 April 2015. The new Rules had previously been approved by the General Affairs Council on 10 February 2015.

According to the Preamble:

Full revision of the text is necessary in order to give this set of rules a new coherence, to promote consistency in the procedural provisions governing proceedings brought before the Courts of the European Union, to preserve the capacity of the General Court to rule on cases within a reasonable time, to clarify parties’ rights, to specify the General Court’s expectations regarding the parties’ representatives and to adjust a certain number of provisions to take account of certain changes, including technological changes, in relation to the lodging and service of procedural documents, and of difficulties encountered in their implementation.

In particular, key changes to the Rules are summarised as follows:

• In addition to the procedural provisions applicable to direct actions, intellectual property actions and appeals lodged against EU Civil Service Tribunal decisions have been made subject to particular procedural rules set out in special titles. For the benefit of litigants, the rules that apply to each procedure have been specified. Intellectual property proceedings have been streamlined with a view to reducing their duration.
• For clarity, requests and applications relating to judgments and orders, as well as procedures following referral by the Court of Justice have been gathered in two respective single titles.
• The adversarial principle governing proceedings has been expressly articulated in Article 64. Moreover, Article 103 sets out circumstances where the court may, exceptionally, keep certain information provided by a party confidential from the other party, where such information is necessary for the court to rule in the case.
• Provisions previously contained in practice directions to parties (for instance relating to the length of pleadings) or in instructions to the General Court registrar (for example the provision concerning anonymity and that specifying the circumstances in which a third party may be given access to thefile in the case) are intended to be elevated to the status of rules of procedure.
• At a general level across the Rules, those which are outdated or not applied have been removed, every paragraph of the articles has been numbered, a specific heading for each article has been added, and terminology has been harmonised.

Rules of Procedure of the General Court OJ L 105/1, 23 April 2015

A typical problem area encountered in EU VAT practice is how transactions consisting of separately identifiable goods or services should be treated, particularly where those elements have different VAT liabilities. The Court of Justice has once more ruled on this issue.

In the case of Minister Finansów v Wojskowa Agencja Mieszkowania w Warszawie the referring court had asked (1) whether the VAT Directive must be interpreted as meaning that the supply of electricity, heating and water and refuse collection provided by third parties for a tenant directly using those goods and services must be regarded as being supplied by the landlord where he has concluded agreements for such provisions and where he simply passes on the costs to the tenant and (2) if so, whether the costs of those supplies increased the taxable amount (rent) or were supplies separate from the letting of immovable property.

The Court answered the first question in the affirmative. On the second question, the Court recalled the relevant basic principles in its case-law. For VAT purposes every supply must normally be regarded as distinct and independent but, in certain circumstances, several formally distinct services which could be supplied separately must be considered to be a single transaction when they are not independent. This is also the case where one or several services constitute the principal service, and where the other service or services constitute one or several ancillary services which share the tax treatment of the principal service.

In order to determine whether services supplied constitute independent services or a single service it is necessary to examine the characteristic elements of the transaction.

Factors pointing towards a separate supply in principle would include a tenant’s right to choose his suppliers and/or the terms of use of the relevant goods or services, a tenant’s ability to determine his own consumption of water, electricity or heating that is verifiable by the installation of individual meters and billed according to consumption and, in all cases, itemisation of the supply separately from the rent. Services such as the cleaning of common parts of a building under joint ownership should be regarded as separate from the letting if they can be organised by each tenant individually or by tenants collectively. The fact that the tenant has the right to obtain services from the provider of his choice is not, however, in itself decisive, nor does the landlord’s ability to terminate the rental agreement for non-payment of rental charges prevent the services to which those charges relate from constituting services separate from the letting.

However, if the letting of immovable property appears objectively, from an economic point of view, to form a whole with the supplies that accompany it, that can be considered a single supply that it would be artificial to split. The Court thought this might apply to the letting of turnkey offices ready for use with the provision of utilities and certain other supplies or short lettings, in particular, for holidays and professional reasons. Where the landlord is unable to choose freely and independently the suppliers and terms of use of the goods or services provided with the letting, those supplies are generally inseparable from it.

Accordingly, the Court held that the various services in question must be regarded as distinct and to be assessed separately for VAT purposes, unless, objectively speaking, the elements of the transaction, which would include those indicating the economic reason for the contract, were so closely linked that there was a single indivisible economic supply which it would be artificial to split. It was, however, a matter for the national court to assess taking into account all the circumstances of the letting.

Minister Finansów v Wojskowa Agencja Mieszkowania w Warszawie (Case C-42/14), 16 April 2015

The Supreme Court has held that the illegality defence did not bar a claim by the liquidators of a company used for VAT fraud against its former directors.

The respondent company was alleged to have been the vehicle for VAT carousel fraud in the context of transactions involving EU emissions allowances. After the company went into liquidation, the liquidators brought proceedings against its former directors and the appellant company, contending that the directors had breached their fiduciary duties and that the appellant had dishonestly assisted them. The appellant argued that the claim was precluded by an illegality defence, and that s. 213 of the Insolvency Act 1986 (under which the liquidators sought contributions from the directors and the appellant) did not apply extra-territorially.

The Supreme Court held as follows:

• Lords Neuberger, Clarke, Carnwath, Mance, Toulson and Hodge: the proper approach to the defence of illegality required timely examination by the Supreme Court. However, the present case was not the opportunity to do this since the nature of the defence was not determinative of the outcome here.
• Lords Toulson and Hodge: the doctrine of illegality had been developed by the courts on the ground of public policy. There was a public interest underlying the fiduciary duties owed by the directors of an insolvent company to its creditors. To allow the directors to escape liability (i.e. to be “let off the hook on the ground that their illegality tainted the liquidators’ claim”) because they were in control of the company would undermine those duties.
• Contrast with Lord Sumption, disagreeing with the statutory policy approach above: “the illegality defence is based on a rule of law on which the court is required to act, if necessary of its own motion, in every case to which it applies. It is not a discretionary power on which the court is merely entitled to act, nor is it dependent upon a judicial value judgment about the balance of the equities in each case”
• A company had separate legal personality, though it acted through its directors and agents. Whether their actions could be attributed to the company depended on the particular context. Here, in the context of an alleged breach of directors’ duties (namely using the company to commit fraud and thereby allegedly causing loss to the company), it was inappropriate to attribute to the company the fraud to which the alleged breach of duty related. “[A]s between the company and the defrauded third party, the company should be treated as a perpetrator of the fraud; but … in the different context of a claim between the company and the directors, the defaulting directors should not be able to rely on their own breach of duty to defeat the operation of the provisions of the Companies Act in cases where those provisions were intended to protect the company”.
• S. 213 of the Insolvency Act 1986 had extra-territorial effect. Its context was the winding up of a British company, where the effect of such an order was worldwide. S. 213 provided a remedy against any person who had knowingly become a party to the carrying on of that company’s business with a fraudulent purpose. The persons against whom the provision was directed were (a) parties to a fraud and (b) involved in the carrying on of the (insolvent) company’s business. “It would seriously handicap the efficient winding up of a British company in an increasingly globalised economy if the jurisdiction of the court responsible for the winding up of an insolvent company did not extend to people and corporate bodies resident overseas who had been involved in the carrying on of the company’s business”.

Jetivia SA and anor v Bilta (UK) Ltd (in liquidation) and ors [2015] UKSC 23, 22 April 2015

The CJEU has confirmed the sanctions imposed on a number of Zimbabwean officials, including the Attorney-General, rejecting an application for annulment of their listing.

The Council had imposed sanctions (freezing of funds and ban on entry into or transit through EU territory) on Zimbabwean individuals and corporations in view of the alleged human rights infringements of the country’s government. Mr Tomana (the Attorney-General of Zimbabwe), 109 other individuals and 11 companies applied for annulment of their listing. The reasons for the listings generally ran along the lines of allegedly undermining democracy, respect for human rights and the rule of law.

The CJEU held as follows:

• As to the absence of an adequate legal basis for the listing, the measures were imposed because of alleged conduct which was part of a strategy of intimidation and systematic violation of the fundamental rights of the Zimbabwean people, responsibility for which the Council assigned to the leaders of that country. Moreover, the majority of the applicants occupied positions which characterised them as leaders of Zimbabwe or associates of those leaders. That ground alone justified their listing.
• As to the infringement of the obligation to state reasons, with respect to the majority of the applicants the reference to the posts which they were occupying when the contested acts were adopted (or which they had occupied in the past) was in itself sufficient to justify their listing. With respect to the others, a reference to specific conduct imputed to them was required, and this had been provided here.
• As to a manifest error of assessment, it was not correct to state that the measures could be imposed only on individuals or companies whose activities seriously undermined human rights in Zimbabwe. The measures were also directed against “members of the Government of Zimbabwe” and “any natural or legal persons, entities or bodies associated with them”. Such a status was therefore in itself sufficient to justify the listing.

Case T‑190/12 Tomana v Council and Commission, 22 April 2015

On 16 April 2015 the CJEU ruled in favour of the Commission in Case C-591/13 Commission v Germany.

Under the German tax rules, tax on capital gains realised upon the sale of certain capital assets (“the replaced assets”, which include mostly land and buildings) can be deferred by transferring those capital gains to newly acquired or produced capital assets (“the replacement assets”) until the sale of those replacement assets, provided certain conditions are fulfilled. The replacement assets must be acquired within a certain time period and must be held as a fixed asset of a domestic permanent establishment. The European Commission brought the present case against Germany asking the CJEU to rule that the latter condition restricts the freedom of establishment as it discourages German businesses from carrying out activities through permanent establishments located in other Member States.

Germany disputed the admissibility of the proceedings on two grounds, first that there was a delay in bringing the action, and secondly, that the subject-matter of the action has been altered. With regard to the first ground, the CJEU held that the Commission is not obliged to act within a specific period. The considerations which determine the Commission’s choice of time cannot affect the admissibility of the action, subject to situations in which the excessive duration of the pre-litigation procedure can make it more difficult for the Member State concerned to refute the Commission’s argument and thus infringe the rights of defence of that Member State. The CJEU also found that the subject-matter of the action has not been altered.

Germany also argued that the legislation is justifiable on the basis of the balanced allocation of the power to impose taxes, coherence of the tax system and that it provides for a tax benefit for natural or legal persons.

The CJEU rejected all the justification grounds that were raised and found that immediate taxation on gain reinvested in a Member State other than Germany is discriminatory in comparison to the roll-over relief available on reinvestment in Germany and is a restriction on the freedom of establishment.

Case C-591/13 Commission v Germany, 16 April 2015

The Master of the Rolls, Lord Dyson, announced on 17 April 2015 that there would be no changes to the Guideline Hourly Rates (GHRs) for litigation costs, and that the existing rates would remain in force for the foreseeable future.

The GHRs had originally been set in 2010. According to Lord Dyson, these rates will remain a component in the assessment of costs, along with the application by the judiciary of proportionality and costs management.

Lord Dyson stated that there was no funding available for undertaking the requisite in-depth survey which could act as an adequate evidence base for amending the GHRs. Moreover, even if such funding were available, it was doubtful whether sufficient firms would be willing to participate and provide the level of detailed data required to produce accurate and reasonable GHRs.

On 31 March 2015 the VAT Expert Group adopted an Opinion on the Cross-Border Rulings, welcoming the extension of the EU pilot project until September 2018.

The VAT Cross Border Rulings (CBR) is a project to allow taxable persons to obtain advance rulings on the VAT treatment of complex cross-border transactions. 15 EU Member States have agreed to participate in a test case for private VAT ruling requests relating to such transactions. The relevant tax authorities will then consult each other with a view to delivering a common view of how the VAT rules apply to the transaction. The current list of cross-border rulings is available here.

The initiative is regarded as a first step towards better cooperation and discussion between Member States at tax administration level on real life cross-border VAT technical issues. The aim is to improve the coordination of the application and interpretation of the common EU VAT System, so that situations of double taxation can be eliminated.

The High Court has held that it has no discretion to extend the time for appealing the registration of a Cypriot judgment for enforcement in England.

Cypriot proceedings against the appellant had been compromised by a consent order made by the Cypriot Court holding that the appellant should pay certain sums to the respondent bank. The appellant claimed that she first learned of the proceedings when she was served with notice of registration of the order for enforcement in England. She appealled the registration of the order, contending that the English court should not have recognised it pursuant to Article 34(2) of the Judgments Regulation (44/2001). She served the appeal 22 days outside the two-month limit in Article 43(5) of the Judgments Regulation and CPR 74.8(4)(a)(ii).

Andrews J held as follows:

• The court could not extend the two-month limit for appealing, which, according to the language of the Judgments Regulation, was intended to be mandatory. The Regulation “established an autonomous and complete system for the recognition and enforcement of judgments, including for appeals, which excludes the possibility of any separate challenges to an enforcement order under domestic law”. For defendants domiciled in an EU state outside the state of enforcement (as the appellant was) the time limit was two months (as opposed to one month for those domiciled in the state of enforcement). Moreover, time did not start to run until there had been actual service of the order for enforcement. The extended time limit and the service rule struck the balance between giving the appellant fair opportunity to prepare the appeal and the need for uniformity and expeditious enforcement.
• Whether CPR 74.8 gave the court power to extend time otherwise than on account of distance did not have to be decided here, as that rule only applied to persons domiciled in a non-EU state. Citibank v Rafidian Bank and another [2003] EWHC 1950 (QB) was not authority for the proposition that the time limits for EU defendants in the Regulation were not mandatory, as this question did not have to be decided in the case.
• Even if the court had power to extend the two-month limit, it would not have exercised it here. The delay was serious, and there was no good excuse for it. The justice of the case did not require an extension. Guidance given in cases concerning the normal rules pertaining to appeals in English law could not be applied in the context of a complex international treaty or directly effective EU regulation, which involved policy considerations going beyond case management.

Christofi v National Bank of Greece (Cyprus) Ltd [2015] EWHC 986 (QB), 14 April 2015

The Commission has announced that it has opened a formal investigation against Google regarding its Android mobile operating system, and that it has sent Google a statement of objections on comparison shopping services.

First, the Commission intends to investigate whether Google’s conduct in relation to its Android mobile operating system and applications and services for smartphones and tablets has breached EU competition rules, namely Articles 101 (anticompetitive agreements) and 102 (abuse of a dominant position) TFEU. In particular, the investigation will examine the following allegations:
Second, the Commission has sent a statement of objections to Google alleging that in its general search results pages Google treats more favourably its own comparison shopping service (“Google Shopping”) and its predecessor service (“Google Product Search”) compared to rival comparison shopping services. Google’s conduct may therefore artificially divert traffic from rival comparison shopping services and hinder their ability to compete, to the detriment of consumers, as well as stifling innovation. The Commission’s key preliminary conclusions are as follows:

• whether Google has illegally hindered the development and market access of rival mobile applications or services by requiring or incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services;
• whether Google has prevented smartphone and tablet manufacturers wishing to install Google’s applications and services on some of their Android devices from developing and marketing modified and potentially competing versions of Android on other devices, thereby illegally hindering the development and market access of rival mobile operating systems and mobile applications or services;
• whether Google has illegally hindered the development and market access of rival applications and services by tying or bundling certain Google applications and services distributed on Android devices with other Google applications, services and/or application programming interfaces of Google.

• Google systematically positions and prominently displays its comparison shopping service in its general search results pages, irrespective of its merits.
• Google does not apply to its own comparison shopping service the system of penalties, which it applies to other comparison shopping services on the basis of defined parameters, and which can lead to the lowering of the rank in which they appear in Google’s general search results pages.
• As a result of Google’s systematic favouring of its subsequent comparison shopping services (“Google Product Search” and “Google Shopping”), both experienced higher rates of growth, to the detriment of rival comparison shopping services.
• Google’s conduct has a negative impact on consumers and innovation. Users do not necessarily see the most relevant comparison shopping results in response to their queries. Rivals’ incentives to innovate are lowered as they know that however good their product, they will not benefit from the same prominence as Google’s product.

The Organisation for Economic Co-operation and Development (OECD) has published a discussion draft on mandatory disclosure rules in instances of tax avoidance.

In particular, the draft deals with Action 12 (Mandatory Disclosure Rules) of the Base Erosion and Profit Shifting (BEPS) Action Plan. Action 12 of the BEPS Action Plan recognises the benefits of tools designed to increase the information flow on tax risks to tax policy makers and tax administrations and identifies three key outputs:
The OECD draft addresses the first two of the outputs. The design of enhanced models of information sharing will need to take into account other elements of the Action Plan that also involve the sharing of information between tax authorities.

• recommendations for the modular design of mandatory disclosure rules to provide flexibility for country specific needs;
• a focus on international tax schemes and consideration of a wide definition of tax benefit to capture relevant transactions; and
• designing and putting in place enhanced models of information sharing for international tax schemes.

The draft provides an overview of the key features of a mandatory disclosure regime and considers the effectiveness based on available data from those countries with such regimes (Chapter II). It sets out a modular framework and options for the design of a mandatory disclosure regime (Chapter III) and considers how international transactions could best be captured by a mandatory disclosure regime (Chapter IV).

The Action Plan calls for the OECD’s project to be completed by September 2015. Comments on the draft should be submitted to the OECD by 30 April 2015.