The Establishment and Jurisdiction of the Court of First Instance

10. The CFI was set up by the Council in 1988[7] to improve the handling of cases requiring close examination of complex facts and to reduce the caseload of the Court of Justice. Under the Treaties, the judgments of the CFI are subject to appeal to the Court of Justice, but only on points of law. This means that on issues of fact the CFI's judgment is final. There were initial fears that the Court of Justice might be overwhelmed by appeals against rulings of the CFI.[8] The incidence of appeals has been fairly low until recently.[9] The proportion of cases being appealed is currently about 25 per cent.

11. The category of cases in which the CFI has jurisdiction is set out in the Decision of the Council by which the Court was established. That category was initially confined to staff cases, certain proceedings brought by undertakings against the Commission under the ECSC Treaty and competition cases brought by undertakings under the EC Treaty. In addition, the CFI was given jurisdiction where a claim for damages was combined with a claim falling within one of the above categories. The CFI began hearing these cases at the end of October 1989.

12. The cases where the CFI originally had jurisdiction represented a relatively limited number of those which the Council was permitted by the Treaties to transfer to it. However, in 1993 and 1994, the jurisdiction of the CFI was extended to include all direct actions brought by natural and legal persons. The result is that actions for annulment or failure to act brought by a natural or legal person against an institution of the Community under Articles 230 and 232 (ex 173 and 175) respectively of the EC Treaty, as well as actions brought against the Community for damages under the second paragraph of Article 288 (ex 215), now commence in the CFI. The changes made in 1993 included transferring jurisdiction to the CFI in actions based on arbitration clauses brought by private applicants.

13. The extension of the jurisdiction of the CFI made it responsible for dealing with certain categories of case which did not exist when it was originally established. One such category consists of challenges to decisions of the Commission in the field of merger control.[10] Potentially more significant, at least in terms of volume, are challenges to decisions of the Boards of Appeal established under the Community Trade Mark Regulation.[11] That regulation creates a Community trade mark existing alongside national trade marks but having equal effect throughout the Community. Responsibility for implementing the regulation belongs to the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM). Appeal against decisions of the examiners and the various divisions of OHIM lies to independent Boards of Appeal within OHIM. Decisions of the Boards of Appeal are in turn amenable to judicial review before the Community Courts. Challenges to such decisions are at present treated[12] as a form of action for annulment under Article 230 (ex 173) of the EC Treaty and as falling for that reason within the jurisdiction of the CFI.

14. Since the entry into force of the Treaty on European Union, the Council has enjoyed the power to transfer to the CFI actions brought by Member States or by Community institutions. The general power given to the Council by Article 225 (ex 168a) EC to determine the classes of action or proceeding to be heard by the CFI is subject to one limitation. The Council has no power to transfer to the CFI references for a preliminary ruling made under Article 234 (ex 177) EC or its counterparts in the ECSC and Euratom Treaties.

 Parallel actions

15. "Parallel actions" arise where more than one person brings a separate action in respect of the same matter. This may occur in various situations. That primarily addressed by the present proposal is where a natural or legal person brings an action in the CFI and a separate action is commenced by a Member State in the ECJ. Both proceedings relate to the same subject matter. For example, following the Commission's decision under the Merger Control Regulation in the Kali + Salz case, France sought the annulment of the decision in the ECJ while two enterprises affected challenged the decision in the CFI.

16. The Community Courts have rules[13] to deal with such situations. There are three options:

the CFI may stay the action before it; or

the ECJ may stay the action before it; or

where the applicant in each case seeks annulment of the same act, the CFI may decline jurisdiction, leaving the ECJ to rule on both.

The practice of the Community Courts in the handling of parallel actions has varied. As regards such actions falling within the scope of the current proposal, in the majority of cases (11 out of 17 since 1993) the ECJ has stayed the proceedings before it, leaving the CFI to decide the parallel action before it. The CFI has stayed the proceedings in two cases and has declined jurisdiction in four, including the Kali + Salz litigation mentioned above.

The proposal

17. In December 1998, the Court of Justice submitted to the Council a draft decision designed to enlarge the jurisdiction of the CFI by conferring on it jurisdiction to hear and determine, within certain defined fields, actions for annulment brought by Member States. The Treaties require the Council to consult the European Parliament and the Commission before giving effect to the Court's draft. The Council must act unanimously.

18. The proposal would transfer to the CFI certain actions brought by Member States within the following fields of Community law:

COMMISSION DECISIONS RELATING TO THE CLEARANCE OF ACCOUNTS UNDER THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND

The Commission reimburses, out of the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF), eligible expenditure by Member States in the context of the Common Agricultural Policy (CAP). The Commission checks the accounts submitted annually by the relevant bodies in the Member States (in the UK, the Intervention Board for Agricultural Produce). Items not eligible for funding under EAGGF are disallowed. Clearance of account cases typically involve applications by Member States for annulment of Commission decisions determining their entitlement to reimbursement. Such cases are not numerous - there were 36 in the six years 1993-98, of which the UK brought three. They may be factually complex and vary in importance. Some may involve relatively small amounts but may have substantial implications for the system of financing agricultural expenditure or the interpretation of CAP legislation.

COMMON TRANSPORT POLICY

A number of regulations concerning the Common Transport Policy enable the Commission to take implementation decisions. The proposal gives examples in the fields of road, rail, inland waterways, sea and air transport. Such decisions may vary considerably in nature and effect. For example, Commission Decision 92/138 settled a dispute concerning the operation of a special coach service for British military personnel and their families between London and Germany. By contrast, Council Directive 91/440/EEC on the development of the Community's railways gives a wide power to the Commission to take appropriate decisions in its implementation. Very few cases (only three in the six years 1993-98) have been brought by Member States.

COMPETITION RULES APPLICABLE TO UNDERTAKINGS

Under the competition rules in the EC and ECSC Treaties and the Merger Control Regulation the Commission may adopt decisions prohibiting anti-competitive behaviour by firms, imposing fines and daily penalties, granting exemptions and authorising mergers. Such decisions are addressed to the firms concerned. Though decisions may, under Article 86(3) of the EC Treaty, be addressed to Member States, they are not covered by the proposal. Only one case (arising from the Kali + Salz decision under the Merger Control Regulation) has been brought by a Member State in the period 1993-98.

STATE AID

The Commission has powers under the EC and ECSC Treaties to approve or prohibit payments of aid to firms and, where appropriate, require aid to be repaid. Such decisions are addressed to the Member States concerned, though they have implications for the recipients and their competitors. These cases are more numerous. There were thirty-two in the six years 1993-98.

TRADE PROTECTION MEASURES

This category covers decisions of the Council or the Commission to impose anti-dumping or countervailing duties on imports in order to protect Community industry from the effects of dumping or subsidies to exports by third States. It would also cover decisions under Council Regulation (EC) No 3286/94 on the exercise of the Community's rights under international trade rules. Such rules would include those adopted under the auspices of the World Trade Organisation. The Court's statistical table identifies two cases in the period 1993-98. But there is some uncertainty as to whether they would fall within the proposal as they concern decisions under a Regulation (Council Regulation No 519/94) listed as being outside its scope.

DECISIONS RELATING TO FUNDS, FINANCIAL INSTRUMENTS OR ACTION PROGRAMMES PROVIDING FOR THE GRANT OF COMMUNITY FINANCIAL SUPPORT

The last category would include actions brought against decisions implementing the Structural Funds, EAGGF, the European Social Fund, the European Regional Development Fund, as well as other types of Community internal and external financial support such as the PHARE and MEDA programmes. Only three cases were brought in the period 1993-8, of which two[14] (pending before the ECJ) concern the settlement of accounts in respect of projects co-financed by the Netherlands and the European Regional Development Fund.

19. The CFI would also be given jurisdiction over all actions based on arbitration clauses.[15] Such clauses are commonly included in contracts entered into by a Community institution (usually the Commission) with a third party.[16] The governing law is usually the law of a Member State. The CFI already has jurisdiction in respect of such actions brought by natural or legal persons. Sixteen cases were brought before the ECJ in the period 1993-98.

Reasons for proposal

20. The ECJ has justified the proposal on three grounds:

1. the present allocation of jurisdiction can, in certain cases, result in actions for annulment of the same act being brought simultaneously before the ECJ and the CFI ("parallel actions"). This can lead to an individual being deprived of access to justice if the CFI either declines jurisdiction or stays the action before it, or to a risk of differing judgments if both cases are decided;
2. disputes which are essentially concerned with the application of national rules should be dealt with by the CFI (this ground appears to be restricted to actions based on arbitration clauses);
3. the CFI was created to handle certain actions involving the examination of complex factual situations. The range of acts covered by the proposal fall within this category.

Trade mark cases

21. Separate from the proposal the subject of this report, the ECJ and the CFI have brought forward detailed proposals on the handling of "new intellectual property cases". These mainly concern actions against decisions of the Appeal Boards of OHIM against a refusal to register a mark or in cases of conflicts between trade marks. The background is described at paragraph 13 above. It is anticipated that some 100 trade mark cases will be commenced before the CFI in 2000 and between 200-400 each year thereafter. To enable the CFI to rule on such number of cases, two additional chambers, each composed of three judges is considered to be necessary. That would mean an addition of six judges to the current fifteen.[17] The proposals also include the creation of a task force of legal secretaries and the strengthening of the CFI's Registry and the translation service.

The Future of the Judicial System of the European Union

22. The ECJ and the CFI have produced a discussion paper, The Future of the Judicial System of the European Union, drawing attention to the need for changes if the Community Courts are to be able to maintain their current roles. The paper was introduced at the Justice and Home Affairs Council on 27/28 May 1999 and was the subject of an open debate.

23. The Courts' paper presents certain proposals and ideas for reform, divided into three categories by reference to the procedural requirements and timetable for change. The paper describes the present workloads and capacity of the two Courts and developments in the foreseeable future. These developments include the implementation of the Amsterdam Treaty and other instruments and the prospect of enlargement of the European Union. The imminent consequences of the former are especially important in the present context.

24. As regards references for preliminary rulings the ECJ anticipates an increase, in particular concerning:

• Title IV of the EC Treaty (visas, asylum, immigration and other matters relating to the free movement of persons);
• legislation relating to the third stage of EMU, including the introduction of the Euro;
• Title VI of the Treaty on European Union (TEU) (police and judicial co-operation in criminal matters);
• the provisions of a number of Conventions concluded on the basis of the former Article K.3 of the TEU (including the Convention on Jurisdiction and the Recognition of Judgments in Matrimonial Matters ("Brussels II")).

So far as direct actions are concerned, the ECJ expects an increase in the number of cases having regard to the rights now conferred on the Court of Auditors and the European Central Bank (ECB) to bring proceedings themselves, and also to the rights of Member States under Title VI of the TEU.

25. The CFI's caseload is likely to increase, in particular relation to:

• trade marks and plant variety rights;
• access to documents of Community institutions and bodies (Article 255 EC);
• penalties imposed by the ECB on undertakings (Article 34.3 of the Protocol on the Statute of the European System of Central Banks and of the European Central Bank);
• audits carried out by the Court of Auditors on persons in receipt of Community funds (Article 248 EC);
• staff cases brought by officials of the ECB and of Europol.

As mentioned above, the ECJ and the CFI have submitted detailed proposals on dealing with new intellectual property cases (largely appeals from OHIM relating to the Community trade marks).

8   See our 1987 Report, para 88. Back

9   The tables included in the evidence from the Court of First Instance show that the number of appeals rose sharply in 1998, when there were 70. With the exception of 1995 (when there were 48) the number of appeals was substantially lower in earlier years. See the table of cases, Court of Justice, Cases brought - 1.1.90 to 31.12.98 (p 37). Back

10   See Reg 4064/89 on the control of concentrations between undertakings, OJ 1989 L 395/1 (as amended). Back

11   Regulation 40/94, OJ 1994 L 11/1. See also Regulation 2100/94 on Community plant variety rights, OJ 1994 L 227/1. Back

12   Under the present proposal these would become a separate form of action. See Article 3 (2) (d) of the draft Council Decision contained in the proposal. Back

13   Statute of the Court, Art. 47(3) and Rules of Procedure, (ECJ) Art. 82a (1) (a), (CFI) Arts. 78 and 80. Back

14   Cases C-308/95 and C-84/96, Netherlands v. Commission. Back

15   The basis of the Community Courts' jurisdiction in such cases is Art. 238 EC, Art. 42 ECSC and Art. 153 Euratom.  Back

16   In Case C-334/97, Commission v Comune di Montorio al Vomano, judgment of 10 June 1999, the contracts in question included the terms, "the contracting parties agree to refer to the Court of Justice of the European Communities all disputes concerning the validity, interpretation or application of this contract", and "this contract shall be governed by Italian law". Back

17   On 14 June 1999, the ECJ submitted the text of a draft decision amending Decision 88/591 establishing the CFI. Back