C-70/83 Kloppenburg

not have retroactive effect in relation had refrained from passing the tax on to transactions carried out by to persons following him in the chain economic operators prior to its entry of supply. Directive 78/583 of, 26 into force.

June 1978, extending the period for implementing Directive 77/388, does

In Case 70/83

R E F E R E N CE to the Court under Article 177 of the EEC Treaty by the Niedersächsisches Finanzgericht [Finance Court, Lower Saxony], for a preliminary ruling in the proceedings pending before that court between

G E R DA K L O P P E N B U RG

and

FINANZAMT [Tax Officel] LEER,

on the interpretation of Article 13 Β (d) 1 of the Sixth Council Directive of 17 M ay 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment (Official Journal 1977, L 145, p. 1) and of Article 1 of the Ninth Council Directive, 78/583/EEC, of 26 June 1978 on the harmonization of the laws of the Member States relating to turnover taxes (Official Journal 1978, L 194, p. 16),

T HE C O U RT

composed of: J. Mertens de Wilmars, President, T. Koopmans, K. Bahlmann and Y. Galmot (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco, O. Due, U. Everling and C. Kakouris, Judges,

Advocate General : P. VerLoren van Themaat Registrar: H. A. Rühl, Principal Administrator

gives the following JUDGMENT

Facts and Issues The facts of the case, the course of the procedure and the observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and written p r o c e d u re

Legal context and the dispute

1 In the Federal Republic of Germany turnover tax is charged on any supplies or other services effected for consideration within the territory of the country by a person acting in the course of his business.

Paragraph 4 (8) of the Law on turnover tax [Umsatzsteuergesetz] of 16 November 1973 (Bundesgesetzblatt 1973, I, p. 1682) exempted from turnover tax inter alia the granting of credit, the negotiation of transactions involving securities and legal tender, and the management of credit; it did not grant exemption in respect of credit negotiation. The latter transaction was exempted from the charge to turnover tax from 1 January 1980 by the insertion of a new Paragraph 4 (8) (a) by the Law on the new version of the Law on turnover tax and on the amendment of other laws (Gesetz zur Neufassung des Umsatzsteuergesetzes und zur Änderung anderer Gesetze) (Bundesgesetzblatt 1979, I, p. 1953).

2 The plaintiff in the main action, Gerda Kloppenburg, who resides in Uplengen, carries on a credit and mortgage business. Her turnover from credit negotiation transactions for the first six months of 1978 amounted to DM 48 897. She did not charge her clients separately for turnover tax. In her tax return she claimed exemption from turnover tax for turnover from credit negotiations transactions in accordance with Paragraph 4 (8) of the Law on turnover tax, 1980, in conjunction with Articles 1 and 13 Β (d) 1 of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment (Official Journal 1977, L 145, p. 1).

3 Article 1 of that directive (hereinafter referred to as "the Sixth Directive") provides as follows:

"Member States shall modify their present value-added tax systems in accordance with the following Articles.

They shall adopt the necessary laws, regulations and administrative provisions so that the systems as modified enter into force at the earliest opportunity and by 1 January 1978 at the latest."

Furthermore Articles 13 B (d) 1, which falls under Title X of the directive, dealing with exemptions, provides as follows:

"Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay clown for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse . . .

(d) . ..

1. the granting and the negotiation of credit and the management of credit by the person granting it

4 The plaintiff lodged a claim for exemption from tax with the Finanzamt [Tax Office] Leer, which was, however, rejected. Consequently, by notice of assessment to turnover tax of 3 July 1980, the Finanzamt assessed the plaintiff's transactions at the normal rate, in accordance with the provisions of the Law on turnover tax of 1973.

5 The plaintiff then lodged an appeal against that decision before the Niedersächsisches Finanzgericht [Finance Court, Lower Saxony], relying essentially upon the judgments of the Court of Justice of 19 January 1982 in Case 8/81, Becker ν Finanzamt Münster-Innenstadt, [1982] ECR 53, and of 10 June 1982 in Case 255/81, Grendel ν Finanzamt für Körperschaften, [1982] ECR 2301. In those two references for a preliminary ruling, the Court gave the following ruling:

"As from 1 January 1979 it was possible for the provision concerning the exemption from turnover tax of transactions consisting of the negotiation of credit contained in Article 13 B (d) 1 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating, to turnover taxes — Common system of value-added tax: uniform basis of assessment to be relied upon, in the absence of the implementation of that directive, by a credit negotiator where he had refrained from passing that tax on to persons following him in the chain of supply, and the State could not claim, as against him, that it had failed to implement the directive."

1078 The plaintiff takes the view that a credit negotiator in the Federal Republic of Germany who has not passed on turnover tax to his clients is entitled to claim the exemption from turnover tax provided for in the Sixth Directive even for the first six months of 1978, because the postponement of the date for the implementation of the provisions of that directive, provided for in Article 1 of the Ninth Council Directive, 78/583/EEC, of 26 June 1978 on the harmonization of the laws of the Member States relating to turnover taxes (Official Journal 1978, L 194, p. 16, hereinafter referred to as "the Ninth Directive") cannot have retroactive effect, since otherwise there would be a breach of fundamental principles of law (laws may not have retroactive effect if individuals are adversely affected thereby).

6 Article 1 of the Ninth Directive provides that:

"By way of derogation from Article 1 of Directive 77/388/EEC, Denmark, Germany, France, Ireland, Italy, Luxembourg and the Netherlands are hereby authorized to implement the said Directive by 1 January 1979 at the latest." The Ninth Directive was notified to the States to which it was addressed on 30 June 1978.

7 The Finanzamt claimed that the action should be dismissed.

8 The Finanzgericht stayed the proceedings and referred to the Court for a preliminary ruling the following question:

"In the period from 1 January 1978 to 30 June 1978, was it possible for the provision concerning the exemption from turnover tax of transactions consisting of the negotiation of credit contained in Article 13 B (d) 1 of the Sixh Council Directive, 77/388/EEC of 17 May 1977, on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment, to be relied upon, in the absence of the implementation of that directive, by a credit negotiator where he had refrained from passing that tax on to persons following him in the chain of supply, even though under Article 1 of the Ninth Council Directive, 78/583/EEC, of 26 June 1978 on the harmonization of the laws of. the Member States relating to turnover taxes, the Member States referred to in that article were authorized to implement Directive 77/388/EEC by 1 January 1979 at the latest?"

9 In the grounds of its order for reference, the Finanzgericht observes that in its opinion a credit negotiator could rely, as from 1 January 1979, on the exemption from turnover taxes provided for in the Sixth Directive, if, like the plaintiff, he had not shown the turnover tax separately in his invoices and therefore had not passed it on to his clients. On the other hand, it seems to the Finanzgericht to be questionable whether a credit negotiator could rely on the exemption under the Sixth Directive in the first six months of 1978, in view of the fact that Article 1 of the Ninth Directive authorized the seven Member States cited therein to implement the Sixth Directive by 1 January 1979 at the latest. The Finanzgericht draws attention to the fact that the Commission of the European Communities, apparently taking into consideration the prohibition of laws having retroactive effect, agreed to the postponement of the date for the incorporation of the Sixth Directive into national law only on the express condition that the effects of the provisions of the Sixth Directive which did not require national implementing measures and which had been produced before the date of notification of the Ninth Directive, should remain fully effective. That reservation concerning rights acquired since 1 January 1978 was, however, not adopted by the Council of the European Communities. From that it might be conluded that the Council wished to allow the Member States to incorporate the Sixth Directive into national law by 1 January 1979 at the latest, without conferring upon private individuals in the Member States a right, enforceable before the national courts, to rely upon the effects of the provisions of the Sixth Directive which had already been produced. It should be borne in mind that according to the case-law of the Court of Justice the Sixth Directive does not constitute national law, with the result that the prohibition of the adoption of laws imposing charges with retroactive effect is in any case not directly relevant. The direct effect of the Sixth Directive lies rather in the fact that the Member States may not plead, as against private individuals who rely upon the directly applicable provisions of the Sixth Directive that, in breach of their obligations under the EEC Treaty, they have not incorporated the Sixth Directive into national law within the prescribed period, thus showing bad faith towards the contracting States. However, it might be that there was no infringement of the Treaty in relation to the year at issue, 1978, because under Article 1 of the Ninth Directive the date for the incorporation of the Sixth Directive into national law was postponed until 1 January 1979.

10 Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the European Economic Community, written observations were submitted by the plaintiff in the main action, represented by Joachim Hup-penkothen, tax adviser, by the Italian Government, represented by its Agent, Marcello Conti, Avvocato dello Stato, and by the Commission, represented by Erich Zimmermann, its Legal Adviser, assisted by Wolf-Dietrich Krause-Ablass, Rechtsanwalt of Düsseldorf.

11 Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

II — "Written observations submitted to the C o u rt

1. Mrs Kloppenburg, the plaintiff in the main action, maintains that there can be no doubt that the Ninth Directive cannot deprive the individual taxpayer in the Community of the subjective rights which were acquired during the first six months of 1978 by virtue of the original Sixth Directive. She stresses that when the Commission decided to propose that the period for implementation should be extended by one year for the benefit of the Member States which had not incorporated the Sixth Directive into national law within the period initially prescribed, it did so only on the express condition that that derogation should not prejudice the effects of the provisions of the Sixth Directive which did not require the adoption of national implementing measures, if those effects had been produced before the date of notification of the Ninth Directive. Moreover, the Council expressly recognized in a "declaration" annexed to the Protocol of 26 June 1978 (on the Ninth Directive) that persons liable to the tax had acquired rights between 1 January and 26 June 1978.

The plaintiff concludes that the question submitted by the Finanzgericht should be answered in the affirmative.

1080 2. The Government of the Italian Republic takes the view that the question submitted to the Court by the Finanzgericht must be answered in the negative.

It observes that the so-called reservation of the Commission, contained in its proposal to extend by one year the period prescribed for the implementation of the Sixth Directive, was not adopted by the Council. There is no trace of such a reservation either in the provisions or in the statement of reasons of the Ninth Directive, even though a directive can be interpreted and its effects determined only on the basis of the actual text of the directive and not of unpublished declarations which are not taken up in the specific clauses of the measure adopted. According to the Italian Government, that clearly means that the derogation from Article 1 of the Sixth Directive granted to seven Member States must be regarded as covering all the possible legal effects of all the provisions of the Sixth Directive. The Council plainly wished to prevent a hybrid and uncoordinated system from being introduced, albeit temporarily, in the Member States which had not completed the procedures needed to adapt their legislation to the directive within the prescribed period, such a system consisting partly of the old national provisions and partly of the provisions of the Sixth Directive which complied with the conditions as to form and, as regards their content, as to the necessary degree of precision.

Moreover, the effectiveness of the extension granted would obviously have disappeared if before the end of the prescribed period, as extended, the persons concerned had been able to rely wholly or in part before their national courts on the provisions of the Sixth Directive. It would be wholly contrary to the spirit and wording of the Ninth Directive to assume that it was intended to eliminate the effects already produced by the Sixth Directive only in respect of the six months following its adoption, whilst leaving the same effects intact in respect of the previous six months.

In addition, a reading of the well-established case-law of the Court shows that in its judgments in Cases 8/81 and 255/81, cited above, the Court repeated that the secondary and indirect effects of a directive in relation to individuals arise and end at the same time as the primary and direct effects of that directive in relation to the State to which it is addressed. In so far as those primary effects are not produced before the expiry of the prescribed period, the indirect effects for individuals cannot be produced either. Again, if the primary effects of the directive in relation to the State to which it is addressed are temporarily extinguished as a result of prescribing a new period, even if this happens after the expiry of the period initially prescribed, any indirect effects which might have arisen if a new period had not been fixed could not avoid the same fate either.

The Italian Government does not accept that that interpretation of the Ninth Directive involves a solution which is contrary to the fundamental principle that laws adversely affecting individuals should not have retroactive effect and that according to that interpretation the directive is therefore illegal. First, in order to adjudicate upon the legality of a directive, it is necessary to have regard to its primary direct effects in relation to the States to which it is addressed. Secondly, the fundamental principle of non-retroactivity is generally recognized only in relation to rules of criminal law and, possibly, some other rules providing for penalties of a similar nature and scope. Finally, it is inaccurate to describe a provision which suspends exemption · from value-added tax simply as a rule "adversely affecting individuals", for although the exemption may be advantageous to a particular person, yet for someone else, operating under different conditions, the same rule may prove to entail heavier charges.

On the basis of the considerations set out above, the Italian Government takes the view that the reply to the question put by the Finanzgericht should be that the provision on the exemption from value-added tax for the negotiation of credit contained in Article 13 B (d) 1 of the Sixth Directive may not be relied upon by individuals in relation to periods prior to 1 January 1979.

3. The Commission stresses that in this case the tax exemption was provided for in a directive not yet incorporated into national law. Where an individual may, exceptionally, rely upon a provision of a directive before its incorporation into national law, this is only the counterpart of the obligation imposed on the Member State under Community law. That is not sufficient to establish a directly-protected legal position for the benefit of the individual but suffices at most to establish a certain expectation. If the competent Community institution decides to extend without restriction the period initially prescribed for the incorporation of the directive into national law, it is necessary in case of doubt to start from the principle that such a postponement also involves the postponement without restriction — that is to say even in relation to periods which have already elapsed — of the obligation imposed on the Member States in question and therefore the suspension with retroactive effect of the individual's right to rely upon the directive, a right which is linked to the Member States' obligation. If on the other hand in an individual case the right to rely upon the directive is to be maintained, that should be expressly stated in some way by the competent Community institution. In the Commission's opinion, that is in fact what happened in the case of the Ninth Directive. That directive provided that an individual could rely upon it in relation to the period between 1 January 1978 and the date of its notification to the Member States concerned.

The Commission contends that, for a proper understanding of the Ninth Directive, it is necessary first to examine its origin. On 1 January 1978, the date laid down for the expiry of the period prescribed in Article 1 of the Sixth Directive, only Belgium and the United Kingdom had incorporated the directive into national law. At .the beginning of 1978, the other Member States were therefore exposed to a twofold risk:'ón the one hand, they had to expect the Commission to initiate proceedings for infringement of the Treaty and on the other hand, they ran the risk that certain professions which were exempt from value-added tax under the Sixth Directive would invoke the case-law of the Court in relation to the right of individuals relying on directives in order to refuse payment of value-added tax with effect from 1 January 1978. For that reason as from February 1978 the Commission was subjected to increasing pressure to submit as quickly as possible a proposal that the date for -im plementation laid down in the Sixth Directive should be postponed. Since, once the period initially prescribed had expired, a postponement of the date for incorporation of the directives into national law would necessarily give rise to a conflict in relation to the rights

1082 which certain professions might have acquired on 1 January 1978, the Commission hesitated for a long time before acceding to the wishes of the Member States. When it finally decided to propose to the Council that the prescribed period should be extended, it did so only on the express condition contained in the second sentence of Article 1 of the proposal for the Ninth Directive submitted by the Commission to the Council on 25 July 1978 (Official Journal 1978, C 141, p. 3):

"This derogation shall not prejudice the effects of the provisions of Directive 77/388/EEC which do not require the adoption of national implementing measures, if those effects have been produced before the date of notification,"

Notwithstanding - the Commission's >. • proposal, which was also supported by the European Parliament when it was consulted, the Council was not prepared to include in the Ninth Directive a reservation concerning rights already acquired as from 1 January 1978. Thus an annex to the minutes of the meeting of the Council on 26 June 1978 contains the following declaration:

"The Council declares that this directive may not affect rights acquired by taxpayers between 1 January 1978 and the entry into force of this directive."

But the Commission adds that those minutes of the Council meeting also contain a declaration by the Commission in which it deplores the fact that the second sentence of Article 1 of its proposal was omitted and at the same time states that, by adopting the directive accompanied by a declaration on the maintenance of acquired rights, the Council was adopting the Commission's point of view in relation to the inviolability of those rights and interpreting Article 1 in that sense.

KLOPPENBURG ν FINANZAMT LĽER The Commission claims that there is no doubt that the Council declaration cited above related to the right to rely on certain provisions of the Sixth Directive, which implies that the extension of the prescribed period by the Ninth Directive did not affect the right to rely on those provisions of the Sixth Directive which was already available in the first six months of 1978. The fact that, contrary to the Commission's proposal, the reservation concerning the maintenance of the right for individuals to rely upon certain provisions was included not in the Ninth Directive itself but in the minutes of the meeting may be explained by the fact that at the time when the Ninth Directive was adopted there had not yet been a decision of the Court of Justice on the question whether any, and if so, which, provisions of the Sixth Directive qualified as provisions which might be relied upon by an individual, so that the Council did not wish to express an opinion on that point. As the Court established in its judgments in Cases 8/81 and 255/81, cited above, that in relation to the exemption from tax of transactions consisting of the negotiation of credit provided for in Article 13 B (d) 1 of the Sixth Directive the conditions enabling private persons to rely upon that provision were fulfilled, the same must also apply, in view of the declaration contained in the minutes of the Council meeting, as regards the first six months of 1978.

Consequently the Commission proposes that the questions submitted to the Court by the Finanzgericht should be answered as follows:

"In the period from 1 January 1978 to 30 June 1978, it was possible for the provision concerning the exemption from turnover tax of transactions consisting of the negotiation of credit contained in Article 13 B (d) 1 of the Sixth Council Directive 77/388/EEC of 17 May 1977, on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment to be relied upon, in the absence of the implementation of that directive, by a credit negotiator where he had refrained from passing that tax on to persons following him in the chain of supply, and the State could not claim, as against him, that it had failed to implement the directive."

IIΙ — Oral procedure

At the sitting on 9 November 1983 oral argument was presented by the following: J. Huppenkothen, for the plaintiff in the main action; Mr Eilers, for the Finanzamt Leer; M. Conti, for the Italian Government; and W.-D. Krause-Ablass, for the Commission of the European Communities.

The Advocate General delivered his opinion at the sitting on 13 December 1983.

Decision

Grounds

1By order of 3 March 1983, which was received at the Court on 28 April 1983, the Niedersächsisches Finanzgericht [Finance Court, Lower Saxony] referred to the Court for a preliminary Treaty a question on the interpretation ruling under Article 177 of the EEC of Article 13 B (d) 1 of the Sixth Council Directive, 77/388/EEC, of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax; uniform basis of assessment (Official Journal 1977 L 145, p. 1) and of Article 1 of the Ninth Council Directive, 78/583/EEC, of 26 June 1978 on the harmonization of the laws of the Member States relating to turnover taxes (Official Journal 1978 L 194, p. 16) in order to ascertain whether the above-mentioned provision of the Sixth Directive could be relied upon by a credit negotiator in the first six months of 1978.

2It must be remembered that, under Article 1 of the Sixth Directive of 17 May 1977, the Member States were to adopt by 1 January 1978 at the latest the necessary laws, regulations and administrative provisions in order to bring their value-added tax systems into line with the requirements of the directive. A number of Member States, including the Federal Republic of Germany, were unable to make the necessary adjustments within the prescribed period and therefore on 26 June 1978 the Council adopted the Ninth Directive which was addressed to those Member States and authorized them to implement the Sixth Directive on 1 January 1979 at the latest. The Ninth Directive was notified to its addressees on 30 June 1978.

3It was not until the adoption of the Law of 26 November 1979 (Bundesgesetzblatt I, p. 1953), and with effect from 1 January 1980, that the Federal Republic of Germany implemented the Sixth Directive. In its judgments of 19 January 1982 in Case 8/81 Becker [1982] ECR 53 and of 10 June 1982 in Case 255/81 Grendel [1982] ECR 2301, the Court ruled that as from 1 January 1979 it was possible for the provision concerning the exemption from turnover tax of transactions consisting of the negotiation of credit contained in Article 13 B (d) 1 of the Sixth Directive to be relied upon, in the absence of the implementation of that directive, by a credit negotiator where he had refrained from passing that tax on to persons following him in the chain of supply, and the State could not claim, as against him, that it had failed to implement the directive.

4It is apparent from the documents before the Court that the plaintiff in the main action, Mrs Gerda Kloppenburg, carries on a credit and mortgage business in the Federal Republic of Germany. For the first six months of 1978 she claimed exemption from turnover tax on the basis of Articles 1 and

13 B (d) 1. of the Sixth Directive.

5The Finanzamt Leer rejected that claim and assessed the plaintiffs transactions at the normal rate, in accordance with the national legislation which had not yet been amended at the time.

6Relying upon the above-mentioned judgments, the plaintiff lodged an appeal against that decision with the Finanzgericht which stayed the proceedings and referred to the Court of Justice the following question for a preliminary ruling:

"In the period from 1 January 1978 to 30 June 1978, was it possible for the provision concerning the exemption from turnover tax of transactions consisting of the negotiation of credit contained in Article 13 Β (d) 1 of the Sixth Council Directive, 77/388/EEC, of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes Common system of value-added tax: uniform basis of assessment to be relied upon, in the absence of the implementation of that directive, by a credit negotiator where he had refrained from passing that tax on to persons following him in the chain of supply, even though under Article 1 of the Ninth Council Directive, 78/583/EEC, of 26 June 1978 on the harmonization of the laws of the Member States relating to turnover taxes, the Member States referred to in that article were authorized to implement Directive 77/388/EEC by 1 January 1979 at the latest?"

7In order to answer that question it is appropriate in the first place to consider the legal position of economic operators in the first six months of 1978, that is to say before the Ninth Directive took effect following its notification to the Member States to which it was addressed.

8During that period, economic operators established in one of the Member States which had failed to comply with the obligation to bring their legislation into line with the provisions of the Sixth Directive before 1 January 1978 were confronted with a failure to implement the directive with the probable result that the tax authorities would not apply the exemptions provided for by the directive for the benefit of certain of those operators. The situation was identical to that which gave rise to the abovementioned judgments of 19 January 1982 and 10 June 1982.

9It follows that, during the said period, a credit negotiator who had not passed on the tax to persons following him in the chain of supply was justified in relying on the exception provided for by Article 13 B (d) 1 of the Sixth Directive and a Member State which had failed to fulfil its obligations could not claim, as against that person, that it had not implemented the directive.

10Accordingly, the only new problem which arises in the present case is whether the legal position of such an economic operator has been altered, with retroactive effect, by the Ninth Directive. It is therefore appropriate, in the second place, to examine that directive in order to establish whether it is intended to produce such an effect and, if so, whether it was able to do so lawfully.

11In that regard, it is necessary to emphasize, as the Court has already done on several occasions, that Community legislation must be unequivocal and its application must be predictable for those who are subject to it. Postponement of the date of entry into force of a measure of general application, although the date initially specified has already passed, is in itself liable to undermine that principle. If the purpose of an extension is to deprive individuals of the legal remedies which the first measure has already conferred upon them, such an effect in practice raises the question of the validity of the amending measure.

12However, such a question of validity could arise only if the intention to produce the above-mentioned effect were expressly stated in the amending measure. That is not so in the case of the Ninth Directive. The text of that directive merely extends the period for transposing the Sixth Directive into national law in favour of those Member States which were unable to complete, within the period initially prescribed, the legislative procedure required for amending their legislation on value-added tax. It contains nothing to indicate that the extension alters the position of economic operators in relation to transactions carried out by them prior to the entry into force of the measure altering the period allowed for implementation.

13It follows that the Ninth Directive must be interpreted as not having retroactive effect in that regard.

14The answer to the question raised should therefore be that in the absence of the implementation of the Sixth Council Directive, 77/388/EEC, of 17 May 1977, on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax; uniform basis of assessment, it was possible for the provision concerning the exemption of the negotiation of credit contained in Article 13 Β (d) 1 of that directive to be relied upon by a credit negotiator in relation to transactions carried out between 1 January and 30 June 1978 where he had refrained from passing the tax on to persons following him in the chain of supply.

Costs

Costs

15The costs incurred by the Italian Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT

hereby rules :

In the absence of the implementation of the Sixth Council Directive, 77/388/EEC, of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover tax — Common system of value-added tax: uniform basis of assessment, it was possible for the provision concerning the exemption of the negotiation of credit contained in Article 13 B (d) 1 of that directive to be relied upon by a credit negotiator in relation to transactions carried out between 1 January and 30 June 1978 where he had refrained from passing that tax on to persons following him in the chain of supply.

Mertens de "Wilmars Koopmans Bahlmann

Galmot Pescatore Mackenzie Stuart O'Keeffe

B o s c o Due Everling Kakouris

Delivered in open court in Luxembourg on 22 February 1984.

P. Heim J. Mertens de Wilmars Registrar President

OPINION OF MR ADVOCATE GENERAL

VERLOREN VAN THEMAAT

DELIVERED ON 13 DECEMBER 1983 ¹

Mr President,

Members of the Court,

1. Introduction

The plaintiff in the main action, Mrs Kloppenburg, who carries on a credit and mortgage business, claimed exemption from turnover tax for the first half of 1978 on the basis of Articles 1 and 13 B (d) 1 of the Sixth Council Directive of 17 May 1977 (Official Journal 1977, L 145, p. 1).

The Finanzamt [Tax Office] rejected the claim and, in accordance with the provisions of the Umsatzsteuergesetz [Law on Turnover Tax] 1973, which were in force until 31 December 1979, assessed the plaintiff's transactions to turnover tax at the general rate, as is clear from the order making the reference to this Court.

The plaintiff relied on the judgments of the Court in Case 8/81 Becker [1982] ECR 53 and in Case 255/81 Grendel [1982] ECR 2301. In those judgments the Court ruled that as from 1 January 1979 it was possible for a credit negotiator to rely upon the relevant article of the Sixth Directive, in the absence of the implementation of that directive, provided that he had not passed on the tax. Moreover, it was expressly stated that in those circumstances the State could not claim as against the individual that the directive had not been implemented.

The difficulty in the present case does not therefore lie in the question whether the relevant article may be relied upon before the national court since the Court of Justice has already answered that question in the affirmative. This time the question is whether the plaintiff could, in contrast to the position in the Becker and Grendel cases, rely on that article in the first half of 1978.

The relevance of that difference in time between this case and those earlier judgments lies in the adoption of the so-called Ninth Council Directive of 26 June 1978. According to the Sixth Council Directive of 17 May 1977, the period within which the directive was to be implemented by the Member States was to expire on 1 January 1978. However, none of the Member States, with the exception of the United Kingdom and Belgium, was able to implement the directive within the prescribed period. Accordingly, pressure was exerted on the Commission to submit a proposal setting a new date for implementation. The Commission finally submitted a proposal to that effect. (Official Journal 1978, C 141, p. 3).

On 26 June 1978 the Council subsequently adopted the Ninth Directive, 78/583/EEC, (Official Journal 1978, L 194, p. 16) authorizing Denmark, France, Germany, Ireland, Italy, Luxembourg and the Netherlands to implement the Sixth Directive by 1 January 1979 at the latest.

It is clear from the documents before the Court that the directive was notified to the Member States concerned on 30 June 1978.

In the cases mentioned earlier, the Court was expressly requested to answer the question submitted by reference to the legal position after 1 January 1979, on the assumption that the Member State concerned had not implemented the directive by that date.

In the present case the question submitted by the national court is whether the plaintiff in the main action was able, in the absence of the implementation of the directive, to rely on the relevant provision between 1 January 1978 and 30 June 1978“even though under Article 1 of the Ninth Council Directive... of 26 June 1978... the Member States referred to in that article were authorized to implement Directive 77/388/EEC by 1 January 1979 at the latest.”

2. Submissions of the parties

It is clear from all the observations submitted to the Court that decisive importance is attached to the question whether the extension of the period for implementation also covers the period prior to the adoption of the Ninth Directive or only the period following its adoption. That is considered important because a credit negotiator is permitted to rely on Article 13 Β (d) 1 of the Sixth Directive only in so far as the Member State has not complied with its obligation to implement the directive within the prescribed period. An extension of the period for implementation, however, would preclude reliance on that provision.

The plaintiff in the main action contends that her position during the period in question cannot be adversely affected by the Ninth Directive since the retroactive effect of the directive would prejudice her rights, contrary to certain fundamental legal principles.

The Italian Government, like the defendant in the main action, contends that, as a result of the requirement that the Ninth Directive must be effective, the extension also applies to the period prior to the adoption of the directive. Moreover, it follows from such an interpretation that a citizen cannot rely on the directive during the relevant period, except in so far as that is specifically provided for by special rules. That is not the case here.

The argument developed by the Commission is striking. The Commission too contends that a meaningful interpretation of the Ninth Directive leads to the conclusion that the latter is also applicable to the period prior to its adoption.

The possibility of relying on a directive where a Member State fails to implement it within the prescribed period does not, in the Commission's view, give rise to a subjective right but merely to a legal expectation or a so-called indirect right. The extension of the period for implementation automatically nullifies an individual's right to rely on the directive. Accordingly, the Commission maintains that such an extension in principle retroactively nullifies individual rights, such as those at issue in the present case, unless such rights are expressly reserved. In its view, that is the case here since at the time of the adoption of the directive the Council included in the minutes a declaration which it interprets in that sense. At the hearing, the Commission once again expressly reaffirmed its view that the question submitted for a preliminary ruling can be answered in the affirmative only on the basis of the declaration contained in the minutes. I cannot share the Commission's opinion for reasons which will become apparent. In my view, the Commission has wrongly applied the case-law of the Court concerning the permissibility of retroactive effect in Community law. Moreover, in an appraisal of the question whether the Ninth Directive is to be regarded as having retroactive effect, it is necessary to proceed on the basis of the text of the directive itself. Declarations contained in the minutes of a Council meeting are in principle confidential and for that reason should not be taken into account for purposes of interpretation. On that point I would refer to the Opinion of Advocate General Sir Gordon Slynn in Case 255/81 Grendel [1982] ECR 2315 which was referred to several times at the hearing.

3. Assessment of the question submitted for a preliminary ruling

As far as my own opinion regarding the question is concerned, I would observe that the practice followed by the Council in extending the period for implementation by the adoption of a new directive where the Member States were clearly unable to complete the process of implementation within the period initially prescribed is permissible according to the case-law of the Court (see Case 52/75 Commission ν Italy [1976] ECR 277).

The Ninth Directive was adopted on 26 June 1978 and on 30 June 1978 it was notified, as I have stated, to the Member States to which it was addressed.

According to the second paragraph of Article 191 of the EEC Treaty, directives are to take effect upon notification. The Ninth Directive accordingly took effect on 30 June 1978. If the purpose of the directive is that its content, that is to say the extension of the period for implementation, should also be applicable to the first half of 1978, then it may be said to take effect before its entry into force, in other words retroactively.

According to the case-law of the Court, the principle of legal certainty as a rule militates against the view that a Community measure takes effect even before it is published. However, it is possible to derogate from that principle in exceptional cases if such an effect is necessary for the achievement of the objective in view and the proper account is taken of legitimate expectations of those concerned. In that connection I would refer, inter alia, to Cases 98/78 Racke [1979] ECR 80, Case 99/78 Decker [1979] ECR 108, Joined Cases 212 to 217/80 Salumi [1981] ECR 2748, Case 108/81 Amylum [1982] ECR 3129, Case 110/81 Roquette [1982] ECR 3177 and Case 114/81 Tunnel Refineries [1982] ECR 3205.

In the light of that case-law it is necessary to ascertain first of all whether the directive is clearly intended to take effect even before it enters into force and, secondly, whether such an effect harms legitimate expectations in the sense referred to by the Court in the Isoglucose cases, namely that it “frustrates a legitimate expectation” on the part of those concerned, in this case their expectation that after 1 January 1978 there would be exemption from turnover tax.

4. Effect of the directive in time

It is clear from the principles laid down in that case-law concerning retroactive effect that the Court regards such an effect as an exception to the rule, and one in relation to which a number of other conditions are of importance. Such an exception must be strictly interpreted and, as a rule, clearly established. Thus in the Salumi cases, to which reference has been made, the Court held in paragraph 12 of the decision that provisions may not be accorded retroactive effect in the absence of sufficiently clear indications to the contrary.

In the first place therefore it is necessary to examine the text of the Ninth Directive which consists of the following two articles.

By way of derogation from Article 1 of Directive 77/388/EEC, Denmark, Germany, France, Ireland, Italy, Luxembourg and the Netherlands are hereby authorized to implement the said directive by 1 January 1979 at the latest.

This directive is addressed to Denmark, Germany, France, Ireland, Italy, Luxembourg and the Netherlands.

Done at Luxembourg, 26 June 1978.”

It is not apparent from that wording that the directive was intended to produce effects before it entered into force. Notis it at all apparent from the statement of the reasons on which the directive is based that such was the intention. A prudent legislator would have made express provision to that effect. Since there are no clear points of reference in the directive itself, the opinion was expressed by various parties during the proceedings that the requirement that the directive must be effective none the less entails such retroactive effect. The extension of the period for implementation was intended to follow on from the expiry of the period initially prescribed. Although in practical terms that view is not devoid of merit, I still do not think that it can be accepted. In that connection I would refer once again to the case-law of the Court mentioned earlier according to which there must be clear indications of such exceptional retroactive effect, in order to ensure respect for the principles of legal certainty and the protection of legitimate expectations, “by virtue of which the effect of Community legislation must be clear and predictable for those who are subject to it”(Saltimi). Against that background it is then necessary to consider, in the light of the principles laid down by the Court, whether, where reliance is placed on a provision of a directive which has not been implemented by a Member State within the prescribed period, there can be said to be a legal position which merits protection.

5. Legitimate expectation

In its judgment in Case 8/81 Becker, the Court set out the legal position regarding Article 13 Β (d) 1 of the Sixth Directive where a Member State fails to implement the directive within the prescribed period. The Court held that in those circumstances an individual was entitled to rely directly on that article.

The reason for this, as the Court explained at length, is that a Member State cannot hide behind its infringement of the Treaty. The Court expressly stated, inter alia, that “this minimum guarantee for persons adversely affected by the failure to implement the directive is a consequence of the binding nature of the obligation imposed on the Member States by the third paragraph of Article 189 of the Treaty...” (paragraph 29 of the decision).

It follows from this that the legal position of the individual is that he is entitled, upon the expiry of the period prescribed for implementation, to rely upon the intended effect of the directive, either on the basis of national law where the directive is implemented within the prescribed period, or on the basis of the directive itself where the latter is not implemented within that period.

The legal position in my opinion unquestionably falls within the scope of the principle of legitimate expectation which is recognized by the Court and of which proper account must be taken if a provision is to be accorded retroactive effect.

That interpretation of Article 13 B, which is consistent with the judgment of the Court in the Becker case, applies not only to the time after the expiry on 1 January 1979 of the second period for implementation, but indisputably also to the period between the expiry on 1 January 1978 of the period initially prescribed for implementation and the establishment on 30 June 1978 of the second period for implementation.

Moreover, practical considerations concerning the effectiveness of the directive extending the period for implementation cannot in my opinion justify a different conclusion.

In the first place, the representative of the Finanzamt made it clear, in reply to a question from the Court, that the number of cases in which taxpayers relied on the directive during the relevant period was extremely small.

Secondly, serious consideration must in my opinion be given to the fact that a different conclusion would adversely affect taxpayers who relied on the directive in good faith and refrained from passing on any tax to their customers and who are of course unable to pass the tax on to them now.

Thirdly, the Member States concerned should certainly have been able to foresee earlier that it would not be possible for them to implement the directive in question within the period prescribed therein. Had they urged the Commission sooner to extend the period for implementation, they could have spared themselves the problems which have now arisen and which, as I have said, appear to be very minor in scope.

Finally, it must be borne in mind that should any Member State need a second extension of the period for implementing the directive, a second directive to that effect could in circumstances such as those of the present case, combined with the Becker judgment, give rise to a state of legal chaos for which there would be scarcely any solution. Repeated extensions of that kind have regularly occurred in the past precisely in the case of the directives on turnover tax.

6. Conclusion

On the basis of the foregoing considerations I have come to the conclusion that, in the first place, the Ninth Directive cannot be regarded as producing effects before it entered into force since there is no clear provision or objective showing an intention to endow it with retroactive effect.

Secondly, the possibility of relying on the directive where a Member State fails to implement it within the prescribed period constitutes a legal position on which an individual must be able to rely and which, according to the principle of legitimate expectation, is worthy of protection.

Conclusion

For those reasons I propose that the Court answer the question submitted by the national court in the affirmative.

Before I conclude my opinion, I would like to raise a question which did not arise in the proceedings, namely how long could an individual rely on the contested provision of the directive. Could he do so until the date of notification of the Ninth Directive to the Member States (30 June 1978) or until the date on which he was able to make himself acquainted with it as a result of its publication in the Official Journal (19 July 1978)?

I am of course aware that under the second paragraph of Article 191 of the EEC Treaty a directive takes effect upon notification to those to whom it is addressed and publication is not a precondition for its entry into force, in contrast to the position with regard to regulations. Therefore the question which I would like to put before the Court for the sake of completeness is not when did the Ninth Directive enter into force, but rather when can a Member State, following the period in which it infringed the Treaty by failing to implement the directive within the prescribed period, rely on the extension of the period for implementation and, accordingly, on the cessation of the infringement, as against an individual.

After all, “a fundamental principle in the Community legal order requires that a measure adopted by the public authorities shall not be applicable to those concerned before they have the opportunity to make themselves acquainted with it”, as the Court held in the Racke and Decker judgments, referred to earlier. In that connection I would also refer to Case 76/79 Könecke [1980] ECR 676.

It follows, in my opinion, that an individual was, as a general rule, entitled to rely on the relevant provision of the Sixth Directive until the Ninth Directive was published.

Since the question referred to this Court by the national court is expressly concerned with the period between 1 January 1978 and 30 June 1978 and the problem which I have just considered was not on the whole dealt with in the proceedings, I would, however, propose that the question be answered as follows:

“In the case of transactions carried out between 1 January 1978 and 30 June 1978 it was possible for the provision concerning the exemption from turnover tax of the negotiation of credit contained in Article 13 B (d) 1 of the Sixth Council Directive to be relied upon by a credit negotiator, in the absence of the implementation of the directive by the Member State, where he had refrained from passing that tax on to persons following him in the chain of supply”.

¹ Translated from the Dutch.