Spanish property regime is contrary to EU law, according to the CJEU

State liability for damage caused to individuals by infringement of EU law: Spain has failed to fulfil its obligations under the principle of effectiveness.

On the other hand, the Court considers that the system of the State’s liability to pay damages in the event of infringement of EU law does not infringe the principle of equivalence.

In 2014, the Court of Justice of the European Union declared the Tax on the Retail Sale of Certain Hydrocarbons (IVMDH), known as “céntimo sanitario”, to be contrary to EU law. Faced with the number of claims filed by injured parties to recover what was unduly paid, the Spanish legislature reformed the regime of State liability to avoid this type of claim, thus violating European Union law and making it almost impossible or excessively difficult to compensate citizens and companies for damages suffered as a result of the misapplication of European Union law.

The principle of State liability for damage caused to individuals for breaches of EU law attributable to it is inherent in the Treaty system. This principle applies irrespective of the organ of the Member State to whose action or inaction the infringement is attributable.

Injured individuals are entitled to compensation as soon as the three conditions for State liability are met:

• the rule of European Union law infringed must be intended to confer rights on individuals;
• the infringement of that rule must be sufficiently serious; and
• there must be a direct causal link between that infringement and the damage suffered by individuals.

However, it is incumbent on the State, within the framework of national law on liability, to make good the consequences of the damage caused, it being understood that the requirements laid down by national legislation on compensation for damage may not be less favourable than those which apply to similar claims of a domestic nature (principle of equivalence) and may not be so framed as to make it impossible or excessively difficult in practice to obtain compensation (principle of effectiveness).

The European Commission brought an action for failure to fulfil obligations against Spain on the grounds of infringement of these principles. Following a series of complaints from individuals, the Commission initiated an EU Pilot procedure against Spain in relation to Articles 32 and 34 of the Public Sector Legal Regime Law 40/2015.  This was unsuccessful, it was concluded and the Commission initiated infringement proceedings against Spain, requesting the Court of Justice to declare that the Member State had failed to fulfil its obligations under the principles of effectiveness and equivalence.

By its judgment of 28 June, the Court, sitting as a Grand Chamber, upholds in part the Commission’s action and declares that Spain has failed to fulfil its obligations under the principle of effectiveness by adopting and maintaining in force the contested provisions, in so far as they make compensation for damage caused to individuals by the Spanish legislature as a result of an infringement of European Union law.

Conditions laid down by the Spanish legislature in order for individuals to be able to claim liability for damage caused:

• The existence of a judgment of the Court of Justice which has declared that the rule having the status of law applied is contrary to Union law.
• The injured individual has obtained, at any instance, a final judgment rejecting an appeal against the administrative action that caused the damage, without establishing any exception for cases in which the damage derives directly from an act or omission of the legislator, contrary to EU law, when there is no contestable administrative action.
• The right to request compensation within a limitation period of one year from the publication in the Official Journal of the European Union of the judgment of the Court of Justice declaring that the rule with the status of law applied is contrary to EU law, without covering those cases in which there is no such judgment.
• Compensation is payable only for damage occurring in the five years prior to the date of such publication, unless the judgment provides otherwise.

The Court declares that:

1. Compensation for damage caused by a Member State as a result of an infringement of European Union law may not, without infringing the principle of effectiveness, in any event be made conditional upon the Court having previously given a judgment finding that the Member State concerned has failed to comply with European Union law or that the act or omission which gave rise to the damage is incompatible with European Union law.
2. Although EU law does not preclude the application of a national rule which provides that an individual cannot obtain compensation for damage which he has not avoided by bringing legal proceedings, this is possible only if the bringing of such proceedings would not cause undue hardship to the injured party or if the bringing of such proceedings could reasonably be required of him.
3. The publication of such a judgment in the Official Journal cannot constitute the only possible starting point for the limitation period for bringing an action seeking to establish the liability of the national legislature for infringements of European Union law attributable to it.
4. As regards the requirement that only damage occurring in the five years preceding the date of publication of a judgment of the Court of Justice is eligible for compensation, it is for the domestic legal system of each Member State to determine the amount of compensation and the rules relating to the assessment of damage caused by an infringement of EU law, compensation for damage caused to individuals by infringements of EU law must be appropriate to the loss suffered.

Unofficial document for media use, not binding on the Court of Justice.

Comunicado de prensa: Nº 113/2022 : 28 de junio de 2022