Danish authorities' decision
ECJ decision


When an EU member state has levied a tax in breach of EU law, the consequences of the tax's incompatibility with EU law must be offset by reimbursement.

In previous cases, the position of the Court of Justice of the European Union (ECJ) concerning the ability to bring a claim against the state in such cases regarding consumption taxes (eg, excise duties or value added tax) has been as follows:

  • The taxable person which has paid the tax to the state is entitled to reimbursement from the state, unless the state shows that the taxable person has passed on the tax to its customer and that reimbursement would entail unjust enrichment. If the tax has been passed on, the taxable person is still entitled to reimbursement if the purchaser can recover the amount from the taxable person.
  • The taxable person can also put forward a claim for damages against the state if:
    • the infringed EU law is intended to confer rights on the taxable person;
    • the member state's breach of that law is sufficiently serious; and
    • there is a direct causal link between the breach and the taxable person's loss. (A reimbursement claim is governed by the law on undue payment, whereas a claim for damages is governed by compensation law.)
  • It has been unclear whether the purchaser onto which the tax has been passed can claim either reimbursement or damages directly from the member state.

The ECJ recently ruled on this issue in Danfoss (C-94/10).


The Danish state had levied an excise duty on lubricant and hydraulic oils payable by oil companies as taxable persons. The oil companies had passed on the tax to their customers, including Danfoss. However, the tax was later found to violate the EU Circulation Directive and the EU Mineral Oil Directive, and was thus unlawful.

Danfoss claimed reimbursement from the state of the tax that the oil companies had passed on. In the alternative, it claimed recovery in the form of compensation for damages.

Danish authorities' decision

With reference to Danish case law, the Danish authorities denied the claim for reimbursement on the grounds that Danfoss was not a taxable person and thus had not paid any amount to the state that the company could reclaim.

The Danish authorities also denied the claim for damages, saying that Danfoss was not the directly injured party and that there was no causal link between the loss and the conduct giving rise to liability.

ECJ decision

Regarding reimbursement, the ECJ based its judgment on the 'principle of effectiveness' – that is, the principle that the member states, under their procedural autonomy, must fix the conditions for recovery of unduly paid sums in such a way that recovery does not become impossible or excessively difficult. This led the ECJ to conclude that a member state may oppose a reimbursement claim from the purchaser, onto whom the tax has been passed, if:

  • the purchaser can bring a civil action under national law against the taxable person for recovery; and
  • reimbursement by the taxable person is not virtually impossible or excessively difficult.

Compensation for damages
In connection with compensation for damages, the ECJ similarly drew the conclusion based upon the principle of effectiveness that the member state may reject a claim for damages from the purchaser if:

  • the purchaser can bring that claim against the taxable person under national law; and
  • compensation by the taxable person is not virtually impossible or excessively difficult.


After the ECJ's judgment, the main question when deciding whether a purchaser has a claim against the state is whether the purchaser has a legal claim against the taxable person, which merely followed national law when passing on the unlawful duty.

To this effect, in her opinion to the ECJ in Danfoss, the advocate general cited the Danish government for being unclear whether the purchaser under national law has such a claim, and found it would be excessively difficult for Danfoss to exercise its rights, should the company be referred to bring an uncertain claim against the taxable person.

The Danish Western High Court has not yet ruled in the main proceedings.

For further information on this topic please contact Tom Kári Kristjánsson or Thomas Gønge at Plesner by telephone (+45 33 12 11 33), fax (+45 33 12 00 14) or email ([email protected] or [email protected]).