Marie-José Garot. Professor. IE Business School
5 January 2007
In a recent ruling that attracted little notice, Spain’s Constitutional Court again demonstrated its often inconsistent interpretation of Community law.
The court upheld an appeal lodged by the regional government of the Canary Islands against the 25 June 2004 ruling by the High Court of Justice in Las Palmas, Gran Canary, on the grounds that the court decision violated the local government’s right to effective legal protection.
The Constitutional Court decision was based on Law 20/1991, which regulates indirect taxation in the Canary Islands. Article 10.1.13 of this law allows in certain circumstances (in particular, those relating to the amount of the fee) tax exemptions for "services provided by public and private entities to parties practicing sports or physical education.”
The article in question is an exact copy of former article 20.1.13 of 1992 on the regulation of Value Added Tax (Law 37/1992). The European Court of Justice declared this article at odds with Community Law, arguing it contravened the Sixth Directive on fiscal harmonisation and on 7 May 1998, declared Spain responsible for a failure to fulfil one of its Community duties.
Basing its decision on the Luxembourg court ruling, the Canary’s High Court of Justice upheld an appeal from the Royal Sailing Club of Gran Canary requesting the reimbursement of tax payments. The Canary Island government appealed the High Court decision, arguing that the breach of Community Law referred to a violation of the VAT Act of 37/1992 and did not apply to the Canary Islands. The Government of the Canary Islands argued that its right to effective protection was violated by the Higher Court of Justice which had failed to apply Law 20/1991.
The Constitutional Court decision is, at best, unusual (even though the court says nothing more than what was already established in its 58/2004 ruling). Despite the Luxembourg Court decision, and the similarity between articles 20.1.13 of Law 37/1992 and 10.1.13 of Law 20/1991, Spain’s Constitutional Court ruled that the Canary High Court of Justice was required to apply exclusively Act 20/1991. If it had doubts over its decision, recalled the Constitutional Court, the Canary’s court had to consider whether it was dealing with a question of constitutionality or a preliminary reference to the European Court of Justice.
At this point, the Constitutional Court clearly contravened EU jurisprudence, in particular, the Simmenthal ruling (1978), in which the European Court of Justice stated the following: " a national court which is called upon, within the limits of its jurisdiction, to apply provisions of Community law is under a duty to give full effect to those provisions, if necessary refusing of its own motion to apply any conflicting provision of national legislation, even if adopted subsequently, and it is not necessary for the court to request or await the prior setting aside of such provision by legislative or other constitutional means. "
It should be noted, however, in an identical case, the High Court of Justice in Santa Cruz de Tenerife did not recognize the illegality of article 10.1.13 of the 1991 act.
The High Court of Justice of Las Palmas could have made a preliminary reference to the ECJ. However, as established by other EU jurisprudence (CILFIT), a national judge is not obliged to refer to the ECJ when “previous decisions of the Court have already dealt with the point of law in question, irrespective of the nature of the proceedings which led to those decisions, even though the questions at issue are not strictly identical”.
Furthermore, the Higher Court of Justice of Las Palmas is not required to rule on a question of constitutionality: the fact that a law violates Community Law does not mean it is unconstitutional, as indicated by the Constitutional Court itself.
The Constitutional Court therefore is revealing a dangerous tendency towards formalism that clearly contravenes Community Law. In particular, it breaches the fundamental principle of the primacy of Community law, which, together with other principles (e.g. direct effect), endows the European Union with its specific nature.
Again, the Spanish Constitutional Court has revealed its troubles with the principle of primacy (as it did, for example, in its December 13 2004 Declaration on the European Constitution) and in fine with Community Law. In an act of humility, the constitutional court should have referred the matter directly to the ECJ in order to clear the doubts concerning article 10.1.13 of Act 20/1991 and its compliance with Community law.”