Abstract: On 11 May 2022, the regional administrative Court of Lecce referred to the ECJ a question on the interpretation and validity of the directive 2006/123/EC. The (questionable) order is the occasion to reflect on issues related to the beach concessions system: the direct effect of Article 12 of the Directive, the legal nature of the directive, as well as the prospects for reform of the Italian legal system, which remains not compatible with European Union Law.
1. Background of the case
On 11 May, the regional administrative Court of Lecce (“TAR Lecce”) referred a question to the ECJ on the interpretation and – surprisingly – on the validity of the directive 2006/123/EC (the so-called “Bolkestein directive”). For our purposes, the directive had already been the subject of a double referral by TAR Lombardia and TAR Sardinia, whose cases have been joined by the ECJ, which ruled in the well-known Promoimpresa judgement.
TAR Lecce’s order is particularly interesting, given the uncertain legal framework around Italian beach concessions (caused by the repeated introduction of automatic extensions of the concession licenses’ duration).
The appeal was proposed by the Italian Competition Authority to annul various deeds of extension of beach concessions issued by an Apulian municipality on the basis of Article 1(682) and (683) of Law no. 145/2018. The Authority contested the incompatibility of the extensions with provisions of EU Law both of primary nature (i.e. Article 49 TFEU) and secondary nature (i.e. Article 12 of the directive).
The judges, after briefly recalling the articulated regulatory context (for a reconnaissance see C. Burelli), dealt with some interesting legal issues offering both innovative and (prima facie) questionable solutions.
In this context, only some of these issues will be (critically) analysed: the Bolkestein directive’s direct effect and, more specifically, its Article 12 (entitled ‘Selection from among several candidates’), as well as the related assessment of the so-called ‘substitution effect’ and ‘exclusion effect’. Finally, the piece will be focused on the nature of the directive (of harmonization or liberalization).
For all the nine questions referred to (some of which are very complex) please refer to the text of the order.
2. “Hierarchy of sources” and direct effect of Article 12 of directive 2006/123/EC
The judges affirmed, as the “absolute logical priority” of the ruling, that the directives that are not “immediately and directly applicable” in the Member States are placed in a lower-order position with respect to national law. Conversely, “self-executing” directives “despite having the nature and force of ordinary law, […] rank above national law, as an enhanced rule […]”.
On this (unreasonable) premise, the judges reasoned about the direct effect of the directive and, in particular, of its Article 12. This feature was expressly admitted by Advocate general Maciej Szpunar in his opinion in Promoimpresa case (para 119), as well as by the Plenary Session of the Council of State in the “twin” judgments of 9 November 2021 and by some scholars (see e.g., G. Greco). However, the ECJ has never expressly ruled on this specific point.
TAR Lecce, therefore, recalling the absence of an explicit declaration by the EJC on the “self-executing” nature of Article 12, concluded in favour of the lack of direct effect: Article 12 (3), providing that Member States must “establish the rules of the selection procedure” (emphasis added), would lack the requirement of unconditionality.
On closer inspection, a transposed legislation, as acknowledged by the judges themselves, although clearly not applied and, actually, totally disregarded, exists: it is legislative decree no. 59/2010 (lex generalis with respect to the deeds of extension).
Furthermore, the Bolkestein directive does not leave significant margins of discretion to national legislators; discretion which is a key element in the evaluation of unconditionality (without considering that the precision, clarity and unconditionality test does not automatically entail the possibility, for the national judge, to disapply the non-compliant internal rule when this operation causes the imposition of obligations on individuals: see, for example, Thelen Technopark, para 32, on which see B. De Witte).
Bolkestein directive’s direct effect issue could also be framed from a different angle, not taken into consideration by the order.
As it is well known, directives can have a direct effect if their provisions create clearly identifiable rights in favour of individuals (see, ex plurimis,Becker). Moreover, directives can never produce direct effects in malam partem (in such cases the non-application of a clear, precise and unconditional rule is also prevented, see, among others, Berlusconi, para 77). Therefore, it is possible to embrace the doctrinal thesis according to which, on the contrary, a provision cannot be conceived as directly effective if it does not create an advantage or does not produce an interest for the individual (see D. Gallo, Il primato e l’effetto diretto nell’ordinamento dell’Unione europea, in G. Lattanzi, G. Grasso, S. Lembo, M. Condinanzi, C. Amalfitano (eds), I diritti fondamentali fra Carte e Costituzioni europee, SSM, Rome, 2022, forthcoming, p. 85 ff., at 94). Not surprisingly, in this piece, D. Gallo, to support his thesis, mentions the “age-old question of beach concessions”, where it could be admitted that the non-application of the internal legislation involves the worsening of individuals’ subjective legal condition (consider the possibility, for the concessionaire, to be accused of the crime of illegal State property occupation pursuant to Article 1161 of the Italian naval code, as already happened – see, for all, Cassazione Penale n. 7267/2014).
However, one could rightly argue that, in the case of beach concessions, the non-application of the Italian legislation does not lead to real obligations on private individuals, but to “mere adverse repercussions”, as such not problematic (see, amplius, Wells, para 57).
The judges could have taken this path and asked the Court for clarification on the negative effects deriving from the application of the directive. However, the issue was not taken into consideration at all.
However, regardless of Article 12 and its direct effect, it should be recalled that Article 49 TFEU, as well as Article 56, are directly effective (ex multis,Telaustria e Telefonadress, paras 60-62), with the consequence that, concerning concessions of cross-border interest, the extension would be equally incompatible.
Quite bizarre, therefore, is the attempt of the judges to exclude the relevance of Article 49 TFEU on the basis of an alleged difference in its effects regarding Article 12. Article 49 TFEU, according to the judges, would only constitute “a general rule that establishes the obligation […] to respect the values referred to in Article 2 TFEU [!]”.
2.1. ‘Substitution effect’, ‘exclusion effect’ and interpretation in conformity with EU law
As it is well known, if a ‘community’ law provision has direct effect, the national judge, given Van Gend & Loos, must substitute the national rule with the ‘community’ one. This ‘substitution effect’ is excluded if the provision does not have direct effect (see L. S. Rossi). In this case, the judge must apply the national rule ensuring the effectiveness of EU Law. If it is not possible, he is supposed to refer to the Constitutional Court or the Court of Justice (in the latter case to clarify the interpretation – or the validity – of the relevant EU provision).
The Apulian Court, citing the violation of the principle of legal certainty, stated that the interpretation in conformity with EU law was not possible. Indeed, such an operation is limited by the general principles of legal certainty and non-retroactivity (see, e.g., Kolpinghuis Nijmegen, para 13). Nevertheless, it is not clear how interpretation in conformity with EU law, in this case, undermines the principle of legal certainty. The answer must be identified in the alleged impossibility, for the national Court, of “applying a national legislation”.
Therefore, the judges considered merely excluding the application of the non-compliant internal rule (an operation sometimes carried out by the French Conseil d’Etat, which disapplied national rules that conflicted with a directive regardless of its ‘self-executing’ nature, see, for example, Société Metro Holding). The so-called ‘exclusion effect’ “is based on the idea that a Union act that has not direct effect can prevent the application of a national rule without entailing its replacement” (F. Ferraro, at 10).
However, this ‘exclusion effect’, for the Court, was not admissible: compliance with the principle of legal certainty would constitute “a limit not only to the obligation of compliant interpretation, but also an impediment to the effect of mere exclusion, since the non-application of national law […] would determine a vulnus in the national legal system”.
2.2. Harmonization directive or liberalization directive?
TAR Lecce subsequently addressed the issue of the nature of the directive (harmonization directive or liberalization directive), qualifying it as a harmonization directive.
The judges relied on the Court’s statements that Articles 9 to 13 of the directive “provide for exhaustive harmonization concerning the services falling within their scope” (Promoimpresa, para 61) and that the directive aims at harmonizing “with respect to specific aspects of the regulation of service activities” (X, para 106). Then, they affirmed that recital no. 7 states that the directive establishes a legal framework which aims at removing “as a matter of priority, […] barriers which may be dismantled quickly and, for the others, the launching of a process of evaluation, consultation and complementary harmonization of specific issues […]”.
However, when the Court talks about ‘harmonization’ it would seem to talk, on closer inspection, about the harmonization of the liberalization conditions set by the directive. Indeed, in X case, the Court also stated that the directive “lays down general provisions that are intended to remove restrictions on the freedom of establishment for service providers in Member States and on the free movement of services between the Member States, in order to contribute to the completion of a free and competitive internal market” (para 104, emphasis added). The Court also affirmed that “the internal market in services is to be fully achieved, that requires, above all, the elimination of obstacles which are encountered by providers in becoming established in the Member States” (para 105, emphasis added).
Moreover, recital no. 7 clearly imposes the “removal […] of barriers [to freedom of establishment]” and only with regard to “other” barriers the “launching of a process of […] complementary harmonization of specific issues” (emphasis added).
Anyway, on these considerations, TAR Lecce alleged the breach of Article 115 TFEU, which imposes the Council to act unanimously “without prejudice to Article 114” (while the chosen legal basis was Article 251 EC Treaty, current Article 294 TFEU). The reference to article 115 TFEU is misleading. Article 114, as it is well known, regards measures “which have as their object the establishment and functioning of the internal market”, while Article 115 regards measures that “directly affect the establishment or functioning of the internal market” (emphasis added).
It is noticeably clear that Directive 2006/123/EC, aiming at creating a free and competitive internal market for services, concerns the functioning of the internal market. Therefore, for the sake of precision, the Apulian Court would at most have had to refer to Article 114 TFEU and not to Article 115 TFEU (Article 114 which provides for a qualified majority voting system and not unanimity).
3. Some brief concluding remarks.
Referring to the Court is not wrong. Anyway, it would have been preferable to refer the case to the Constitutional Court and obtain the declaration of unconstitutionality of the rules that grant automatic extensions (as is increasingly wished by the doctrine: see, e.g., C. Amalfitano, at 317).
For our purposes, it is worth recalling the first one (already mentioned) on the validity of the directive with respect to Article 115 TFEU and the second one, on the direct effect of the directive.
The ECJ will likely rule only on these two questions, which represent the logical premise of the entire order. However, the Court could also want to rule on the remaining questions, to clarify once and for all some aspects which are not entirely peaceful.
Anyway, the preliminary ruling has not affected the adoption of the ‘Competition Act[ym1] ’ nor the infringement procedure pending against Italy. Indeed, on May 26, a political agreement was reached on the rule contained in the ‘Competition Act’, definitively approved on 2nd August. One might have thought that the political parties would have taken advantage of the referral to the Court to postpone (once again) the adoption of legislation on beach concessions in compliance with EU law.
The Commission, on the other hand, did not suspend the procedure pursuant to Article 258 TFEU (as it usually occurs starting from the communication ‘Better results through better application’). Indeed, the existence of the aforementioned ‘Competition Act’ may have led the Commission to consider the elimination of the breach a priority rather than wait for the ruling of the Court, which would have lengthen the procedure even more.
Now that the ‘Competition Act’ has been approved, maybe the closure of the ‘beach concessions saga’ it is not a mirage anymore.
Posted by Camilla Burelli (Postdoctoral research fellow in EU Law – University of Milan)
Suggested citation: C Burelli, “A new (questionable) chapter of the “beach concessions” saga: TAR Lecce makes a request for a preliminary ruling pursuant to Article 267 TFEU”, REALaw.blog available at https://wp.me/pcQ0x2-rN.