The road from the national courts to the European Court of Justice

Luisiana Dobrinescu in  whichlawyer.ro

I had the privilege as few other Romanian lawyers not only to have contributed to the submission of four preliminary rulings to the European Court of Justice, but also to actually blend in a pleading team on the occasion of a public hearing in one of the cases. The complete difference in the handling of a case by these European judges astounded me: from the initial colloquial meeting with the judges in their own backroom before the audience, to their sharp questions addressed throughout the pleading session. It is impressive when a foreign judge simply quotes by heart the Romanian fiscal code and it is challenging, to say the least, when he compares the case to previous case-law. I wish upon a star that sometime in Romania, the fiscal lawyers would have the same overwhelming feeling in front of a Romanian judge, whose insights on the case and the relevant jurisprudence are sharper then the lawyer’s input itself.

In 2011 Romania started its career as defendant in front of the European Court of Justice, with its first fiscal preliminary ruling (in case C-257/11 Grand Via Moinești). Soon after this ice-break moment in the fiscal law, other submissions followed. For just so long after joining the EU, the national courts had been reluctant in filing with ECJ for preliminary rulings, mostly because they had not got used to accept the limitations on their own reasoning under the priority of the EU law. The mentality was, to quote from the confession of a judiciary source, that the filing for preliminary rulings by national judges showed weakness and… could injure the Romanian state!

In small steps, more and more fiscal cases required submissions to ECJ and generated useful preliminary rulings. Nevertheless, as of 2016, Romania still has the lowest number of filings for preliminary rulings with the Luxembourg court. Mainly, the Bucharest courts requested such rulings, but they are followed closely by Timiș and Cluj courts.

According to art. 267 of the Treaty for the Functioning of the European Union, a national court of last resort is compelled to refer a requested preliminary ruling to the European Court, whereas such referral is also possible – but not mandatory – even in the first court.

The ECJ rulings have influenced not only the cases which generated the ruling and all the other similar cases, but have also changed for the better the mindset and the behavior of the national judges. Through the eyes of the European court, one may receive useful clues and clearer insights into how a fiscal case based on EU legislation should actually be approached at all levels, administrative as well as judicial.

It is no secret that in Romania, our blind goddess of justice leans the balance mostly in the favor of the state, as the judges usually assume the role of defender of the state, particularly so whenever the fiscal administration chooses to litigate in absentia. For lack of better expertise of their own, or for lack of useful input from the plaintiff’s attorneys, the judges usually rely on the official viewpoint and prefer to rule comfortably in favor of ANAF. More often than not, the interpretation of unclear or ambiguous fiscal provisions has been made in favor of the fiscal creditor, and against the taxpayer, in spite of the ECHR-sanctioned principle (39766/05 Serkov vs. Ukraine), in dubio contra fiscum, now also appearing under art. 13 from the 2016 Fiscal Procedure Code.

To exemplify this perspective, look no further than the European reimbursements of the VAT, requested from Romania by taxable persons established in other Member States. For more than six years, the majority of the VAT reimbursements have been rejected by the Romanian state only because the nonresident apparently failed to submit the proof that the respective VAT was actually paid in Romania, although the obligation to collect and pay the VAT belonged to the supplier – by definition, a Romanian taxpayer under ANAF administration. Such proof used to be required by the Romanian authorities from the non-resident applicants, based solely on their own interpretation of the fiscal code, while completely disregarding the European Directive which never imposed, nor allowed, such unreasonable conditions on foreign VAT reclaims.

There were hundreds of non-residents’ VAT reclaims rejected on Romanian soil because of this formal condition, invented only by our fiscal authorities. In 2016, to kill the controversy, the Supreme Court of Romania filed for a preliminary ruling in this respect. On this occasion (Case C-55/16), the ECJ gave answers to even more questions then the ones addressed: According to art. 99 of the Procedural regulation of the court, when an answer to a preliminary ruling can be clearly deducted from the previous jurisprudence and when this answer cannot be subject to any reasonable doubt, the Court may decide to answer through the way of ordinance (that is, the simplest procedure of the Court). Consequently, the Court considers that art. 6 of the VAT European directive precludes a procedure such as in the main proceedings, which obliges the taxable person, for the purpose of reimbursement of the VAT, to make the proof of payment of the VAT requested. Such an interpretation is confirmed by the objective of the Eight Directive, which, for the purpose of harmonizing the VAT reimbursement systems, does not allow for the taxable persons to be treated differently by various member states.

The answer of the European Court not only shows how far from the truth the EU law had been applied by our fiscal authorities, but also how easy it is to find the correct interpretation of the law, once the real spirit of the legislation permeates the conscience of the interpreter of the law, be it a fiscal inspector or a judge.

We can only hope that ECJ rulings such as this would reset our senses in better grasping the principles of the fiscal law, applicable just as much to the taxpayer as to the states, notwithstanding the minutiae of the fiscal creditor in rejecting any unwarranted VAT reclaims.