European Court Limits Private Parties’ Standing to Challenge EU Regulatory Acts

SUMMARY

In its judgment on 28 April 2015 in T & L Sugars Ltd, Sidul Açúcares, Unipessoal Lda v European Commission (Case C-456/13 P), the Court of Justice of the European Union gave authoritative interpretation of the concept of “implementing measures” for the determination of whether private parties have standing to challenge the legality of EU “regulatory acts” under Article 263 of the Treaty on the Functioning of the European Union. The Court held that EU regulatory acts that require any type of implementing measure (no matter how mechanistic) under national law cannot be challenged under the third limb of Article 263(4) by direct action in the EU General Court by private parties who are not the addressee of the relevant regulatory act. Consequently, private parties’ standing to seek the annulment of such acts by the EU General Court will depend on the claimant meeting the exacting standard of being “directly and individually concerned” by the regulatory act under challenge.

Whilst the judgment provides welcome clarification of the concept of “implementing measures”, it undoubtedly reduces the scope for private parties to seek judicial review under Article 263 of the Treaty on the Functioning of the European Union of EU regulatory acts not specifically addressed to them.

FACTS

1.        Private Parties’ Standing to Challenge EU Legal Acts Under Article 263

Article 263 of the Treaty on the Functioning of the European Union (the full text of which is set out in the Annex) sets out the basic rules on judicial review by the EU General Court (“GC”), and on appeal, the European Court of Justice (“ECJ”), of legal acts of the various EU institutions and bodies.

Article 263 describes the types of legal act that can be reviewed and annulled by the GC and ECJ (Article 263(1)), the substantive grounds on which the GC and ECJ can order annulment (Article 263(2)) and the rules on standing by claimants to bring proceedings under Article 263 (Article 263(4)).

The rules on the standing of private parties (i.e, natural and legal persons) to bring proceedings under Article 263 (set out in Article 263(4)) have frequently been criticised for giving insufficient standing to private parties to challenge EU legal acts that are either addressed to another person, or are of general scope, and therefore, not addressed to any person. Prior to 1 December 2009, private parties could use Article 263 to challenge acts not addressed to them directly before the GC only if they were “directly and individually concerned” by the act in question. In practice, the “direct and individual concern” standard proved difficult to meet, with many claims being ruled inadmissible without any consideration of their substantive merits. There was particular difficulty for claimants to meet the “individual concern” standard because of the narrow test developed by the GC and the ECJ for individual concern.1

In response to this criticism, the Lisbon Treaty sought to relax the conditions for admissibility by adding a new limb to Article 263 describing a new category of EU legal acts challengeable by private parties without the claimant having to prove individual concern. The new limb added by the Lisbon Treaty allows private parties to directly challenge “a regulatory act which is of direct concern to them and does not entail implementing measures”. However, this amendment proved to be controversial because the key concepts of “regulatory act” and “implementing measures” were not already defined in EU law, and, therefore, their precise meaning was subject to uncertainty.

The uncertainty regarding the meaning of “regulatory act” was dispelled by the ECJ in the Inuit judgment.2 The ECJ held that “regulatory acts” are all “general non-legislative acts”. More precisely, this comprises all acts of general application apart from legislative acts. While the ECJ subsequently clarified certain peripheral aspects of the test for “implementing measures”,3 it was not until T&L Sugars that the ECJ ruled on whether the test for such measures requires a case-by-case analysis or is a broad-brush test.

2.        T&L Sugars

Following serious shortages of sugar in the EU and, consequently, increases in sugar prices, the EU Commission adopted a series of Regulations containing detailed emergency measures for the release of out-of-quota sugar and isoglucose in the EU and introducing an import tariff quota for sugar. Tate & Lyle Sugars (“TLS”) and Sidul Açúcares (“SA”), two European refiners of imported cane sugar, sought the annulment of these Regulations under Article 263. They argued that the Regulations were discriminatory and incapable of eliminating the import deficit. TLS and SA argued, to justify the admissibility of their action under the third limb of Article 263(4), that only EU acts that give some measure of discretion to member states  as  to their  implementation would “entail implementing measures”. At first instance, the GC held that TLS’s and SA's action for annulment was inadmissible. It held that TLS and SA could not rely on the third limb of Article 263 because national implementing measures of some type were required to give effect to the Regulations. In the GC’s view, that was sufficient to prevent the admissibility of the claim under the third limb of Article 263(4), regardless of the level of discretion that the national authorities had when taking those measures.

On appeal, the ECJ upheld the GC’s finding that the requirement for any implementing measure, even if automatic or merely ancillary, is enough to exclude admissibility under the third limb of Article 263(4). The ECJ dismissed TLS and SA’s argument that the national authorities had no discretion when implementing the contested Regulations and that their role was “purely mechanical”, namely, that of a mere “mail box”’. Contrary to its usual practice, the ECJ flatly disagreed with its Advocate General, who had opined in TLS and SA’s favour.4

The ECJ reiterated that the purpose of the third limb of 263(4) is to prevent private parties from being obliged to infringe the law in order to have access to a court for judicial review. Where an EU regulatory act directly affects the legal situation of a private person without requiring implementing measures, that person could be denied effective judicial protection if it did not have a direct legal remedy before the EU courts to challenge the legality of the regulatory act. Conversely, where the regulatory act requires implementing measures, a claimant can seek judicial review, in the case of implementing measures by an EU body, by a direct action against those measures under Article 263 coupled with a plea of illegality of the basic act at issue,5 and, in the case of EU regulatory acts that require implementing measures by EU member states, indirectly via the national courts of the relevant states(s), pleading the invalidity of the implementing measures by reason of the illegality of the underlying EU regulatory act, and requesting the national court to seek a preliminary ruling on the issue from the ECJ.6

COMMENT

The T&L Sugars judgment provides clarity on the concept of “implementing measures” in Article 263(4), which is a worthwhile development given the controversy that has dogged the Lisbon Treaty amendments to Article 263. The ECJ's endorsement of the GC's findings that any implementing measure, however minor, and no matter how little discretion it requires from a member state, is enough to deny standing, narrows the scope, and therefore the usefulness to would-be claimants, of the test added to Article 263(4) by the Lisbon Treaty. This arguably excludes a wide variety of regulatory acts from the scope of Article 263(4), contrary to the Lisbon Treaty’s objective of facilitating direct access to the GC for private parties whose interests are affected by non-legislative acts adopted by the European institutions.

That said, with the increase in recent years in the jurisdiction of the EU institutions and in the number of EU bodies adopting legal acts, there are now many more EU legal acts that potentially could be challenged under Article 263.7 Would-be claimants will always face the strategic question of whether their objectives are best fulfilled by making a direct challenge before the GC under Article 263 (often with high uncertainty and a risk of failure through inadmissibility), or to pursue an indirect challenge before the national court, with the aim of the national court requesting a ruling from the ECJ on the legality of the measure at issue. While an indirect challenge may stand a lower risk of failure for inadmissibility, it usually will take much longer for the proceedings to be completed.