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Retroactivity of ECJ Judgments EATLP 2010. Peter J. Wattel University of Amsterdam Hoge Raad der Nederlanden. Propositon for debate:. “The ECJ should more often limit the retroactive effect of its judgements in the field of direct tax law.”. Trois actes clairs préliminaires:.

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retroactivity of ecj judgments eatlp 2010

Retroactivity of ECJ Judgments EATLP 2010

Peter J. Wattel

University of Amsterdam

Hoge Raad der Nederlanden

propositon for debate
Propositon for debate:

“The ECJ should more often limit the retroactive effect of its judgements in the field of direct tax law.”

trois actes clairs pr liminaires
Trois actes clairs préliminaires:
  • Member States should apply sensible time limits;
  • and Courts should act more reasonably than tornadoes (Vording and Lubbers, BTR 2006/1, p. 111);
  • the ECJ case law on the temporal effect of its judgments is entirely of its own making; it is political rather than legal; it is neither inevitable nor imperative; it is a (political) choice;
legal certainty
Legal Certainty
  • Is a principle of EU law;
  • The ECJ must respect that principle;
  • Unfortunately, ECJ case law in direct tax matters is sometimes ultra vires (e.g.De Groot, Bosal, Marks & Spencer, Renneberg), inconsistent and contradictory (e.g. Bachmann/Commission v Denmark and De Groot/Amurta), self-contradictory within the same judgment (e.g.Schumacker, Marks&Spencer, X Holding BV), erroneous (e.g. FII GLO, De Groot, Renneberg) or manifestly ill-reasoned (e.g.X Holding);
legal certainty cntd
Legal Certainty (cntd)
  • The ECJ introduces intolerably vague concepts, like fiscal coherence and (balanced?) allocation of taxing power; nobody knows what they mean in a concrete technical international tax case;
  • The ECJ has been shifting from discrimination to justification to just proportionality; it is essentially judging, in a an unsystematic, case-by-case manner and without Treaty guidance, the reasonableness of national tax measures, which is both unpredictable and outside its competence;
legal certainty cntd1
Legal Certainty (cntd)


  • ECJ judgments in direct tax matters are often not declaratory, but constitutive, or at least quite a surprise;
  • Therefore, the ECJ itself is a source of legal uncertainty;
  • Therefore, the very reason for retroactivity of judgments (their declaratory nature) is often absent.
economic inefficiency
Economic inefficiency
  • Retroactive effect of judgments is economically irrational if the judgments are unpredictable. If accurate anticipation (adaptation of behaviour) is not possible, there is no learning effect and no economic efficiency;
  • Without predictability, unlimited retroactivity of judgments produces the same results as gambling: arbitrary windfall profits for the lucky and arbitrary budgetary shifts and losses for the unlucky.
criteria for limitation good faith
Criteria for limitation: good faith
  • Limitation of retroactivity is justified if the position that the national measure is EU law compatible, was objectively tenable;
  • This means that the Member State involved should not have known better; that is the case if there were no consistent and concrete indications to the contrary; if there was no case law or only contradictory or enigmatic case law;
  • The Member State should have known better if the issue was clair or éclairé.
  • If the judiciary has to refer the question and therefore does not know the answer now, then how should the legislature have known then?
limits to the limitation ius vigilantibus est
Limits to the limitation: ius vigilantibus est
  • in good faith cases, the ECJ should limit the effect of its direct tax case law to the future;
  • except for taxpayers who brought claims before the date of referral by the national court on the same point of EU law;
  • There is no reason to protect free riders and windfall profiteers (but Member States should apply sensible time limits)
rewarding the bad
Rewarding the bad?
  • Does limitation of retroactivity on grounds of serious budgetary difficulties protect the bad guys/the larger infringements?
  • No: they always have to pass the good faith test;
  • rather, it protects the other taxpayers against arbitrary tax increases which are necessary to remedy the budgetary deficit caused by ECJ judgments involving huge tax revenue if retroactivity is not limited;
  • the larger the amount, or the group of taxpayers taking a positive interest in an ECJ finding of incompatibility, the larger also the group of totally innocent taxpayers having a positive interest in an opposite finding or temporal limitation;
  • No retroactivity without predictability;
  • ECJ case law in direct tax matters is too inconsistent to merit unlimited retroactivity;
  • Unlimited retroactivity produces too much windfall effect and too little learning effect;
  • Where the Member State involved acted in good faith, the effects of a finding of incompatibility should be limited to the future, except for taxpayers who brought claims - on the basis of the same point of EU law - before the date of referral.