AG’s opinion on the late payment directive
Advocate General Bobek delivered on 28 July 2016 its opinion in case C 256/15, Drago Nemec v Republika Slovenija, which is about the first late payment Directive (Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions).
He considered that Article 2(1) of the Directive should be interpreted as providing an autonomous definition of the notion of ‘undertaking’ encompassing persons who engage in structured and ongoing independent economic or professional activity. Whether an individual instance of such an activity, such as an individual contract, was covered by the precise scope of the national registration or authorisation regime is not conclusive for the purpose of that autonomous definition. However, the fact that such a person acted within the scope of the national registration or authorisation generates a presumption in favour of concluding that that person was acting within its economic or professional activity. The existence of an invoice also constitutes an element indicating that such a person was acting in the course of a structured and ongoing economic activity.
He also considered that Directive 2000/35 does not preclude a rule of national law which caps the maximum amount of payable interest for late payment at the amount of the principal debt”.
(Altalex, 5 December 2016. Article by Emmanuel Guinchard)
OPINION OF ADVOCATE GENERAL
delivered on 28 July 2016 (1)
(Request for a preliminary ruling from Vrhovno sodišče Republike Slovenije (Supreme Court of the Republic of Slovenia))
(EU law — Applicability ratione temporis — Directive 2000/35 — Late payment in commercial transactions — Notion of commercial transaction — Notion of undertaking — National rule limiting maximum amount of interest for late payment)
I – Introduction
1. In June 1993, Mr Nemec signed a contract with the Association of Volunteer Firemen of Murska Sobota for the leasing of a tanker lorry to transport water during periods of drought (‘the lease contract’). Since 1996, Mr Nemec has been involved in ongoing litigation in Slovenian courts in order to obtain payment under that lease contract and interest for the payment being late. The interest accrued over time but was eventually capped by the national legislation at issue.
2. The crux of the legal issue presented to the Court in this case is whether a national rule that caps the amount of interest for late payment at the amount of the principal debt (referred to as the rule ne ultra alterum tantum) is contrary to Directive 2000/35/EC on combating late payment in commercial transactions. (2)
3. In addition, connected to this key question are two ancillary issues. First, the applicability of EU law ratione temporis to the present case has to be verified. Second, for the purposes of the present case, can Mr Nemec be classified as an ‘undertaking’ and the leasing contract as a ‘commercial transaction’ within the meaning of Directive 2000/35?
II – Legal Framework
A – EU law
4. Pursuant to Article 1, Directive 2000/35 ‘… shall apply to all payments made as remuneration for commercial transactions’.
5. The first subparagraph of Article 2(1) of Directive 2000/35, defines the notion of ‘commercial transactions’ as ‘transactions between undertakings or between undertakings and public authorities which lead to the delivery of goods or the provision of services for remuneration’.
6. The second subparagraph of Article 2(1) of the directive defines the term ‘public authority’ as ‘any contracting authority or entity, as defined by the Public Procurement Directives ...’.
7. Under the third subparagraph of Article 2(1) ‘“undertaking” means any organisation acting in the course of its independent economic or professional activity, even where it is carried on by a single person’.
8. Article 3(1)(c) of Directive 2000/35 provides that ‘[Member States shall ensure that] the creditor shall be entitled to interest for late payment to the extent that: (i) he has fulfilled his contractual and legal obligations; and (ii) he has not received the amount due on time, unless the debtor is not responsible for the delay’.
9. Pursuant to its Article 6(3), in transposing Directive 2000/35, ‘… Member States may exclude: … (b) contracts that have been concluded prior to 8 August 2002’.
B – National law
10. Since 1 January 2002, the consequences of late payments have been regulated by the Obligacijski zakonik (Code of Obligations, ‘the OZ’). Article 376 of the OZ laid down the rule referred to as ne ultra alterum tantum. That rule which did not exist under previous legislation capped the maximum amount of interest for late payment at the amount of the principal debt.
11. When the lease contract was concluded, the conditions for the exercise of economic activity by natural persons were governed by the Obrtni zakon (Law on craft activities, ‘the ObrZ/88’). Natural persons could engage in an independent economic activity only if they were granted authorisation for the activity mentioned in the authorisation.
12. The ObrZ/88 was amended by subsequent legislation under which the possibility to engage in an independent entrepreneurial activity was conditioned by notification of the respective activity to the competent body and registration on the register of entrepreneurs.
III – Facts, national proceedings and question referred
13. In June 1993, Mr Drago Nemec (the applicant), acting as the lessor, and the Gasilsko društvo Murska Sobota (Association of Volunteer Firemen of Murska Sobota) (‘the Association of Volunteer Firemen’), acting as the lessee, concluded the lease contract for a water tanker lorry. At the time of the conclusion of the lease contract, the applicant held a licence for entrepreneurial activity under Slovenian law, specifically for ‘turning mechanical parts and welding’.
14. The Association of Volunteer Firemen failed to pay the consideration due under the lease contract. In 1996, the applicant filed a claim requesting payment amounting to EUR 17 669.51. After protracted litigation, the Višje sodišče Maribor (Court of Appeal, Maribor) held on 17 February 2010 that the Association of Volunteer Firemen had to pay the applicant EUR 15 061.44 plus statutory interest for late payment for the period from 25 March 1996 to 31 December 2001. However, the Višje sodišče Maribor (Court of Appeal, Maribor) rejected the applicant’s claim for payment of statutory interest for late payment for the period from 1 January 2002 until payment of the amount due (which occurred subsequently on 18 May 2010). The reason for rejecting the latter claim was that on 1 January 2002, the OZ laying down the rule of ne ultra alterum tantum came into force. Thus, as of 31 December 2001, the accrued interest for late payment had already equalled the amount of the principal debt and could therefore not continue accruing.
15. In reaction to the judgment of the Višje sodišče Maribor (Court of Appeal, Maribor), the applicant introduced a claim against the Republic of Slovenia (the respondent) for damages totalling EUR 84 614.02 as well as statutory interest for late payment and the costs of proceedings. The applicant argued that the rule of ne ultra alterum tantum was not compatible with Directive 2000/35 and that he should be compensated for the damage suffered as a consequence of the allegedly wrongful implementation of that directive into Slovenian law.
16. By judgment of 18 May 2011, the court of first instance dismissed the applicant’s claim. The applicant’s appeal against that decision was rejected by the appellate court by judgment of 24 January 2012. Both instances based their decisions on the finding that the lease contract did not fall within the scope of the applicant’s registered business activity. He was therefore not acting as an ‘undertaking’ within the meaning of Directive 2000/35 which, as a result, was not applicable to the applicant’s case.
17. The applicant now challenges the findings of the Višje sodišče Maribor (Court of Appeal, Maribor) before the Vrhovno sodišče Republike Slovenije (Supreme Court of the Republic of Slovenia). In his view, the lease contract did not relate solely to the lease of the water tanker lorry. He maintains that the lease contract was a ‘complex legal transaction’ to guarantee the supply of drinking water to the local population during periods of drought. Furthermore, he argues that an invoice was issued by him indicating that he was acting as an ‘undertaking’ within the meaning of Directive 2000/35.
18. The respondent contends that Directive 2000/35 is inapplicable to the present case because when that directive was transposed into Slovenian law, its application to contracts concluded prior to Slovenia’s accession to the Union was excluded. Furthermore, the respondent submits that the lease contract is not a ‘commercial transaction’ within the meaning of Directive 2000/35. The applicant concluded the lease contract outside the scope of his commercial activity and was thus not acting as an ‘undertaking’ for the purposes of that directive.
19. In these circumstances, the Vrhovno sodišče Republike Slovenije (Supreme Court of the Republic of Slovenia) stayed proceedings and referred the following questions to the Court of Justice:
‘(1) Is the third subparagraph of Article 2(1) of Directive 2000/35 to be interpreted as meaning that, in a system in which, for the purposes of engaging in an economic activity, a natural person is granted authorisation stating the activity for which authorisation is granted, there is no undertaking, nor, therefore, any commercial transaction within the meaning of the abovementioned provision of the Directive, when the legal transaction giving rise to late payment relates to an activity not covered by the authorisation?
If the reply to the above question is in the negative:
(2) Is the third subparagraph of Article 2(1) of Directive 2000/35 to be interpreted as meaning that a natural person is deemed to be an undertaking and the legal transaction giving rise to late payment constitutes a commercial transaction within the meaning of that provision, when the legal transaction does not fall within the activity registered by the said natural person but stems from an activity which, by its nature, may be an economic activity, and an invoice has been issued for that transaction?
(3) Does the rule that interest on late payment ceases to run when the amount of accrued and unpaid interest equals the principal amount owed (the rule ne ultra alterum tantum) run counter to the provisions of Directive 2000/35?’
20. Written observations were submitted by the Slovenian and Latvian Governments as well as by the Commission. The Slovenian Government and the Commission presented oral arguments at a hearing held on 4 May 2016.
IV – Assessment
21. Since the facts of this case precede Slovenia’s accession to the European Union, I will first address the issue of whether EU law in general and Directive 2000/35 in particular apply ratione temporis to this case (A).
22. As regards the substantive assessment of the questions referred, I am of the opinion that the rule ne ultra alterum tantum is not per se contrary to Directive 2000/35. I therefore find it more appropriate to address the third preliminary question first (B). If the Court were to agree with my assessment on this question, then there is in fact no need to answer the first two questions posed by the national court. However, for the sake of completeness, and in order to fully assist the Court, I will also examine whether the relationship arising out of the lease contract may fall within the material scope of Directive 2000/35 (C).
A – The temporal application of EU law
23. The assessment of the temporal applicability of EU law consists of two layers. The first layer concerns the general applicability of EU law ratione temporis, determined by primary law. The answer to this question is also decisive for the jurisdiction of the Court. The second layer focuses on the specific legislative instrument which is to be applied to the case: once it has been ascertained that EU law may be generally applicable to the case, the next question is whether the specific secondary law measure nuances the general rule in any way?
24. This approach is constitutionally important because any provision of secondary legislation (including Directive 2000/35) can only be considered once it has been established that EU law may be generally applied to the facts of a case. There must be a general approach, which can be nuanced in the light of the relevant secondary law instrument, if the latter so states.
1. Jurisdiction of the Court
25. Slovenia acceded to the EU on 1 May 2004. According to Article 2 and Article 54 of the Act of Accession (‘the Act of Accession’), (3) EU law became immediately binding in Slovenia on the date of accession, unless another time limit was provided for in the Act of Accession or its Annexes. Thus, it is clear that the general, constitutional rule is immediate binding force or immediate effect of EU law, unless the Act of Accession provides otherwise.
26. In the present case, the lease contract was concluded in 1993. It was partly performed (4) in the mid-1990s. Mr Nemec then sued the Association of Volunteer Firemen in 1996 for failing to perform its obligations under the contract by paying for the lease. All of these events occurred prior to 1 May 2004. So the question is: is EU law capable of applying ratione temporis to the legal situation at hand?
27. Admittedly, the case-law of this Court on the temporal application of EU law to accession States is not entirely easy to navigate.
28. In the Grand Chamber case of Ynos (5) the Court declined its jurisdiction to respond to the preliminary ruling on the basis that the facts of that case had predated Hungary’s accession to the EU. Applying Ynos and the line of case-law that follows it to the present case leads to the conclusion that EU law does not apply ratione temporis.
29. However, apart from the somewhat categorical approach taken by the Court in Ynos, there is also a significant amount of case-law both predating and post-dating Ynos that takes a more nuanced approach to the temporal application of EU law. These cases can be said to distinguish between pre-accession facts and their post-accession ongoing legal effects. My suggestion would be to read Ynos in this broader jurisprudential context. If that approach is embraced by the Court, then the present case may be considered to be admissible ratione temporis.
30. Ynos concerned the application of Directive 93/13/EEC on unfair terms in consumer contracts (6) to an agency contract. The dispute was over the performance of that contract and the fairness of the contractual term providing for the agent’s commission. Without considering the details relating to the performance of the contract, the Court noted that the facts of the main proceedings occurred before Hungary’s accession to the EU and thus it did not have jurisdiction to interpret the directive. (7)
31. If the test developed in Ynos were applied at face value, then the questions submitted by the national court should be declared as falling outside the competence of the Court ratione temporis, as suggested by the Slovenian Government at the hearing. As in Ynos, the conclusion of the lease contract predates Slovenia’s accession to the Union. The fact that the national judicial proceedings for breach of that contract were still pending after Slovenia’s accession would not be relevant because in Ynos, the national proceedings relating to the performance of contract were also pending after Hungary’s accession. (8)
32. However, I would suggest to the Court to look at Ynos through a wider lens and to consider the body of case-law that preceded and followed that judgment, as well as the particular factual and legal background of Ynos itself. Rather than focusing on a binary distinction between pre- and post-accession facts, this more nuanced body of case-law considers whether a pre-accession legal relation continued to produce ongoing legal effects after the date of accession.
b) Ynos in its broader jurisprudential context
33. In its case-law preceding Ynos, the Court displayed a greater openness to answering preliminary references where relevant facts occurred prior to accession.
34. For example, the preliminary questions referred in Data Delecta (9) and Saldanha (10) concerned the compatibility of a provision of national law requiring that foreign plaintiffs provide security for costs of judicial proceedings. In both cases court orders requiring security of costs were issued prior to Sweden and Austria’s accession to the EU. However, appeals against those orders were pending after accession. In Data Delecta the Court proceeded directly to rule on the substance thus implying that EU law was applicable ratione temporis. In Saldanha it held that Article 6 EC (now Article 18 TFEU) was binding immediately from the date of accession and precluded the national rule at issue. The Court stated that EU law was applicable ratione temporis to ‘the future effects of situations arising prior to … accession’. (11)
35. What these two cases (12) demonstrate is that even though the disputes between the parties crystallised before the respective accessions to the EU, the Court considered it appropriate to subject the ongoing legal effects of the pre-accession situations to EU law and therefore to its jurisdiction. That result was admittedly contingent on the post-accession continuation of the legal proceedings in those cases. (13)
36. The case-law post-dating Ynos is more complex. Arguably, however, the approach of the Court became more nuanced again, with the focus being put on whether or not the legal situation had been exhausted at the time of accession.
37. In Telefónica O2 the Court confirmed its jurisdiction even though the factual background of that case predated the Czech accession to the Union. This was because the decision being challenged was adopted anew with prospective effects by the regulatory authority after the accession of the Czech Republic to the EU. (14)
38. Similarly in the case of CIBA the Court acknowledged that the dispute in the main proceedings concerned the tax years 2003 and 2004 whereas Hungary only acceded to the EU on 1 May 2004. However, it went on to say that ‘as the facts in the main proceedings occurred in part after that date, the Court has jurisdiction to reply to the question referred’. (15)
39. Kuso concerned an Austrian employee who concluded her employment contract in 1980. She later challenged the date of her forced retirement, based on the mandatory retirement age of 60, arguing that it constituted sex discrimination under Directive 76/207/EEC. (16) The Court held that it did have jurisdiction to rule on the substance of the reference stating that ‘… legitimate expectations cannot be extended to the point of generally preventing new rules from applying to the future effects of situations which have arisen under earlier rules’. (17)
40. Thus, if Ynos is read in its broader jurisprudential context, the general approach to the applicability of EU law ratione temporis appears to be one of ongoing legal effects. Legal relationships that are unexhausted at the time of a Member State’s accession must adapt to the new legal framework. Naturally, that adaptation should only have prospective effects: the immediate effect of EU law means that ongoing legal relationships whose effects have not been exhausted at the moment of accession, may be prospectively modified. Conversely, truly retrospective modification, in terms of effective re-evaluation of past facts or events, is prohibited.
41. Taking the example of a contract concluded prior to the accession of a Member State to the EU, the key question is whether or not the contract and the legal relationship created thereunder continues to produce any legal effects after accession. If that is the case (for example, as with contracts of an indeterminate duration and/or with repetitive consideration) then EU law becomes applicable to the contract at the moment of accession, even if all the (formative) facts preceded the date of accession. The future substance of the legal relationship will be prospectively altered by EU law.
42. Moreover, it is generally accepted that as far as procedural rules are concerned, the general rule is that they are immediately applicable upon their entry into force, even to pending cases and disputes unless the specific measure in question provides otherwise. (18)
43. In any case, the overreaching principles of the protection of acquired rights and legitimate expectations, as well as the prohibition on true retroactivity, will act as correctives to the immediate effect of EU law in all individual cases.
44. When viewed from this perspective, the outcome the Court reached in Ynos is not surprising as to its results: Ynos was about the fairness of a contractual term negotiated and concluded prior to Hungary’s accession to the Union. The question referred to the Court, if answered, would have led to a truly retroactive reassessment of a contractual term concluded and agreed upon long before accession.
c) Application of the broader approach to the present case
45. I consider that at the moment of Slovenia’s accession, the lease contract had not exhausted all of its legal effects in two dimensions.
46. First, the lease contract was concluded in June 1993. It can be understood from the order for reference that the applicant performed his obligations prior to Slovenia’s accession to the Union but the Association of Volunteer Firemen only fulfilled its obligations by paying consideration for the lease contract in May 2010, which was well after Slovenia’s accession. Therefore, upon Slovenia’s accession the lease contract continued to produce some legal effects and the rights and obligations of the parties arising thereunder still had to be fulfilled.
47. Second, and perhaps more importantly, in contrast to Ynos, the present case is not concerned with the reassessment of contractual clauses concluded in the past. The content of the contract and validity of contractual terms is not being touched upon. This case is concerned with the enforcement of a contract and, in particular, the interest that has accrued for late performance (that is, payment) under that contract. This situation arose prior to Slovenia’s accession to the EU and still waits for a final resolution after accession.
48. Thus, the fact that new legislation relating to interest for late payment will be applied prospectively to pending cases from the moment of a Member State’s accession to the EU is in line with the immediate effect of EU law in accession States.
2. Applicability of Directive 2000/35 to the lease contract
49. Having established that the Court does have jurisdiction in general, the next issue in the present case is to analyse whether Directive 2000/35 in particular can apply to the lease contract, in the light of its specific provisions relating to its temporal application.
50. Pursuant to Article 6(3)(b), Directive 2000/35 applies in principle to contracts concluded prior to the expiry of its transposition period unless a Member State excludes its application to such contracts. In other words, failing any explicit action by the Member State, the directive extends to existing contracts.
51. The relevant accession documents, as acknowledged by the representative of Slovenia at the hearing, do not contain any such exclusion of the applicability of Directive 2000/35. (19) Thus, by virtue of Articles 2 and 54 of the Act of Accession, with regard to Slovenia, the end of the transposition period of Directive 2000/35 was 1 May 2004, and no derogation was applicable in relation to that directive.
52. The rule of Article 6(3)(b) is also relevant for drawing a distinction with the secondary law at issue in Ynos. Directive 93/13 at issue in Ynos provided in Article 10(1) that it only applied prospectively to contracts concluded after the expiry of the transposition period (which was for a new Member State, the date of its accession (that is, 1 May 2004)). That is, in fact, the opposite of Article 6(3)(b) of Directive 2000/35 because the latter applies to contracts concluded prior to the expiry of the directive’s transposition period. (20)
53. Thus, on a combined reading of Article 6(1) and Article 6(3)(b) of Directive 2000/35 and the Act of Accession, upon Slovenia’s accession to the Union, Directive 2000/35 became immediately applicable to existing contracts concluded prior to that date, including the lease contract at issue in the present case. I therefore conclude that as from 1 May 2004, Directive 2000/35 became applicable ratione temporis to the present case.
54. In conclusion, I am of the opinion that the Court is competent to answer the questions referred to it by the national court.
B – Third preliminary question
55. By the third question, the referring court asks, in substance, whether the rule ne ultra alterum tantum is compatible with Directive 2000/35. Similar to the position taken by the Slovenian and Latvian Governments in their written submissions as well as by the Slovenian Government and the Commission at the hearing, I suggest that the rule is compatible with Directive 2000/35.
56. As the Court has already noted in the past (21) and as the Commission expressly acknowledged at the hearing in the present case, Directive 2000/35 is an instrument of minimum harmonisation.
57. Thus, the directive covers only selected and thereby limited elements relating to late payments in commercial transactions, notably aspects of (i) interest for late payments, (ii) the retention of title and (iii) recovery procedures for unchallenged claims.
58. As regards the rules on interest for late payments, Article 3(1)(d) of Directive 2000/35 is a rather detailed provision concerning the minimum level of such interest and the way in which it is to be calculated. However, Directive 2000/35 does not contain any rules that would prohibit imposing a ceiling on the accumulation of interest.
59. Thus, in my view, the decision whether or not to establish such a ceiling remains within the power of Member States, provided that they respect the dual requirements of equivalence and effectiveness. (22)
60. The principle of equivalence prohibits, in essence, discrimination between national law-based claims and similar claims based on EU law. In order words, the treatment of rights stemming from EU law shall not be less favourable than the treatment of corresponding rights arising under national law.
61. The facts of this case do not raise any questions with regard to the compliance of the rule ne ultra alterum tantum with that principle. None of the parties raised any concerns in this regard.
62. The requirement of effectiveness prevents the Member States from making the exercise of rights conferred by Union law practically impossible or excessively difficult.
63. It could certainly be argued that the overall objective of effectiveness of combating late payment in commercial transactions would be increased if the accrual of interest for late payment was not capped. Once the ceiling has been reached, it is clear that the debtor has little additional incentive to pay. The amount of interest simply stops increasing.
64. However, applying this logic, any national rule whatsoever could be called into question or the creation of a new rule demanded. To provide an example, would the effet utile of a directive seeking to combat late payments not be also strengthened if debtors’ prisons (23) were reintroduced, with the debtor being automatically incarcerated upon payment becoming late? That would be rather effective in forcing that person and/or his or her relatives to pay in a speedy manner.
65. Absurd examples help sharpen one’s understanding of the need to set reasonable limits on the potentially boundless requirement of effectiveness. In my view, the requirement of effectiveness ought to be limited to two instances: impossibility or genuine excessive difficulty. To my mind, neither of those standards are reached by the rule of ne ultra alterum tantum. Two points are of particular relevance with regard to the latter statement.
66. First, within the national regulatory space untouched by the minimum harmonisation under Directive 2000/35, the rule of ne ultra alterum tantum expresses a certain legislative choice as regards dividing the costs of late payments between creditors and debtors. The rule reflects a social vision of the distribution of burdens when it comes to debt enforcement. In itself, such a choice does not appear to be arbitrary or unheard of. In fact, certain forms of capping interest at the level of the principal debt can be traced back already to Roman law. (24)
67. In addition, the rule of ne ultra alterum tantum might be seen as providing a certain type of balance between ensuring payments are made swiftly and other interests or values. Late payment usually results in principle always from impossibility or unwillingness on the part of the debtor to pay. However, inaction on the part of the creditor may exacerbate the size of the accumulated debt. Therefore, a rule such as ne ultra alterum tantum encourages the creditor to promptly assert his or her rights. Indeed a similar rule can also be found in different contexts in other national legal systems. For example, the Austrian and the Czech Civil Codes limit the possibility for the creditor to obtain interest for late payment in excess of the principal debt as regards the period preceding litigation if the creditor did not seek the enforcement of the debt in a timely manner. (25)
68. Second, as the Slovenian Government suggested, a national rule such as ne ultra alterum tantum should not be assessed in isolation, but rather in the context of other relevant instruments of national law within which the capping rule operates.
69. Among those instruments is the possibility to claim for compensation for the loss actually suffered (if that loss exceeds the amount of interest payable for late payment) against the debtor. Indeed, while the claim for interest for late payment has been generally ‘taken to be a convenient way of allowing the creditor to recover the damages he had typically suffered, without the need specifically to prove them’, (26) this does not necessarily mean that the creditor is prevented from claiming the damage suffered in excess of accrued interest. Whether such a possibility exists depends on the applicable national law and is for the national court to assess. However, as the Slovenian Government explained at the hearing, under Slovenian law it is indeed possible for the creditor to claim the full and actual compensation of the loss suffered.
70. Further, should the loss suffered by the creditor be attributable to flaws in the operation of the judicial system, including undue delays and excessive length of proceedings, a damages action against the State may constitute another possible form of redress. (27)
71. For these reasons, I suggest that the Court answer the third question posed by the referring court by holding that Directive 2000/35 does not preclude a rule of national law which caps the maximum amount of payable interest for late payment at the amount of the principal debt.
C – First and second preliminary questions
72. As I noted above, if the Court were to answer the third question posed by the national court in the negative, then the answer to the first and second questions becomes unnecessary. Because Directive 2000/35 does not oppose the rule ne ultra alterum tantum, the applicant’s claim cannot succeed even if it is established that the legal relationship arising under the lease agreement falls within the scope of Directive 2000/35. However, should the Court conclude that Directive 2000/35 precludes the rule at issue, the first two preliminary questions will be of relevance.
73. In this section, the first and the second questions are analysed together. They both aim at ascertaining whether the applicant, when concluding the lease contract, acted as an ‘undertaking’ within the meaning of Directive 2000/35, given that the object of the lease contract falls outside of the scope of his national licence. In this context, the referring court specifically invites the Court in answering the second preliminary question to take into account the fact that the transaction in question was of an economic nature and that the applicant issued an invoice for it.
74. Pursuant to Article 1, Directive 2000/35 applies to ‘all payments made as remuneration for commercial transactions’. The response to the question of whether the transaction in the lease contract falls under the scope of Directive 2000/35 therefore requires clarification of the notion of ‘commercial transaction’ which in turn uses the notion of ‘undertaking’.
75. Both of these notions will be explored (Sections (a) and (b) respectively), before examining whether a national licence for a particular activity is relevant to the definition of undertaking (Section (c)). Finally, several concluding remarks on the legal nature of the other party to the lease contract, namely the Association of Volunteer Firemen, will be made (Section (d)).
a) Notion of ‘commercial transaction’
76. Article 2(1), first indent, of Directive 2000/35 defines ‘commercial transaction’ as a transaction ‘between undertakings or between undertakings and public authorities which lead[s] to the delivery of goods or the provision of services for remuneration’.
77. That definition appears to be composed of the following elements: (i) the parties to the transaction must be undertakings or an undertaking and a public authority, (ii) there must be provision of goods or services, and (iii) there must be remuneration for those goods or services.
78. There is no doubt that the lease contract satisfies conditions (ii) and (iii). A service has been provided: the lease of the water tanker lorry. Remuneration for that service was agreed upon and eventually paid. The question remaining open is therefore whether condition (i) is satisfied as well. The applicant is clearly not a public authority. Can he be classified as an ‘undertaking’?
b) Notion of ‘undertaking’
79. The notion of ‘undertaking’ is defined in Article 2(1), third indent, of Directive 2000/35 as ‘any organisation acting in the course of its independent economic or professional activity, even where it is carried on by a single person’. (28)
80. For there to be an ‘undertaking’ within the meaning of Directive 2000/35, (i) the person in question must be classified as an organisation and (ii), the activity must be independent economic or professional in nature.
81. I note that Article 2(1), third indent, of Directive 2000/35 expressly refers to ‘any organisation’, including one that consists of a single person, acting in the course of its independent economic or professional activity.
82. The text of that provision thus indicates that, the notion of ‘organisation’ should not be understood as referring to any specific legal form, but rather to the carrying out of a structured and ongoing activity. In this sense, the person in question must organise itself to carry out business on a repetitive, long-term basis.
83. Similar to what the Court stated in another context, the structure of such an organisation can be quite basic because, in certain sectors, an ‘activity [can be] essentially based on manpower’. (29)
84. The fact that the applicant issued an invoice for the service provided under the lease contract constitutes, in my view, an important element indicating that he acted in the course of an organised economic activity.
85. As regards the nature of the transaction under the lease contract, it was clearly economic because the water tanker lorry was provided by the applicant to the Association of Volunteer Firemen for remuneration. Money was, or was supposed to, change hands.
86. Thus, on its face, the definition of ‘commercial transaction’ in Article 2(1), third indent, of Directive 2000/35 appears to be fulfilled.
c) Relevance of national licence
87. The referring court is nevertheless concerned about the fact that the object of the lease contract fell outside of the scope of the applicant’s national licence. The Slovenian Government and the Commission infer from that fact that the applicant cannot be classified as an ‘undertaking’ under Directive 2000/35. They suggest, in essence, that the precise scope of the national licence issued should be determinative for the definition of ‘undertaking’ for the purposes of Directive 2000/35.
88. I disagree for two principal reasons.
89. First, the definition of ‘undertaking’ outlined above does not in any way refer to the laws of Member States. Thus, that notion is an autonomous notion of EU law. It must be articulated independently of national systems of authorisation or registration. (30)
90. Second, the autonomous EU law definition in the present case serves an additional, rather important purpose: the predictability of commercial transactions falling within the scope of that directive. If the scope of the notion of ‘undertaking’ under the directive were to be tied to the scope of authorisation for certain business activities issued under national law, that would effectively oblige parties to contracts to start checking each time whether the other party is in fact signing the contract within the scope of its activity under national law or not. The ensuing legal fragmentation is not only undesirable per se. It would be also extremely cumbersome in business practice, especially in cross-border transactions.
91. For these reasons, I am of the view that the scope of the national licence is not dispositive for the definition of ‘undertaking’ under Directive 2000/35. That nevertheless does not mean that the existence of a national system of registration or authorisation is entirely irrelevant. It can, however, only generate a presumption that the party was acting within its economic or professional activity.
92. In other words, had the lease contract fallen within the scope of the applicant’s national licence, it would have constituted a presumption that the applicant acted in the course of an independent economic activity. Conversely, however, the fact that the object of the lease contract fell outside the scope of the applicant’s licence does not exclude the applicant from being classified as an undertaking, provided that the above-outlined autonomous conditions of Article 2(1) of Directive 2000/35 are fulfilled.
93. For the sake of completeness, I would add that the scenarios that are not covered, in my view, by the notion of ‘undertaking’ within the meaning of Directive 2000/35 are situations of persons performing isolated instances of an activity which might be classified as ‘economic’. Although economic in nature, those instances cannot be viewed as a structured or ongoing business activity.
94. Turning to the present case, leasing a water tanker lorry may be seen as forming part of the applicant’s overall and ongoing business activities. In contrast, for example, the applicant selling children’s cakes at a Sunday market held at the annual school festival could hardly be viewed in the same light. Similarly, gardening help provided by an otherwise established businessman to his neighbour in exchange for an invitation for a cup of tea and perhaps even a cake could be hardly considered as falling within the former’s structured and ongoing business activity.
95. In other words, people engage in multiple forms of activity of an economic nature but only some of those activities will be part of a person’s structured and ongoing business activities. When assessing whether the activity concerned is part of that structure and ongoing business, the referring court must take into account all relevant evidence that support or hinder that conclusion.
96. To apply this general guidance to the facts of this case is a matter for the national court. However, on the facts presented to this Court, namely, that the transaction at issue might be reasonably seen as a part of a broader, structured and ongoing independent economic activity carried out by the applicant, for which an invoice was issued, lead me to conclude that when entering into the lease contract, the applicant could be considered as acting as an ‘undertaking’ within the meaning of Directive 2000/35.
97. In the light of the above, I am of the view that the autonomous definition of ‘undertaking’ in Article 2(1) of Directive 2000/35 encompasses persons who engage in structured and ongoing independent economic or professional activity. Whether an individual instance of such an activity, such as an individual contract, was covered by the precise scope of the national registration or authorisation regime is not conclusive for the purpose of that definition. However, the fact that such a person acted within the scope of the national registration or authorisation generates a presumption in favour of concluding that that person was acting within its economic or professional activity. The existence of an invoice also constitutes an element indicating that such a person was acting in the course of a structured and ongoing economic activity.
d) The nature of the Association of Volunteer Firemen
98. By way of a post scriptum, I note that the first and second preliminary questions focus on the definition of ‘undertaking’ within the meaning of Directive 2000/35 only in respect of the applicant. However, whether the relationship arising out of the lease contract can be classified as a ‘commercial transaction’ under that directive will also ultimately depend on the status of the other contracting party, namely the Association of Volunteer Firemen.
99. As noted above, a ‘commercial transaction’ is, under Directive 2000/35, a transaction ‘between undertakings or between undertakings and public authorities’. As regards the definition of the latter notion, Directive 2000/35 cross-refers to ‘contracting authority or entity, as defined by the Public Procurement Directives’.
100. The Public Procurement Directives referred to define the ‘contracting authority or entity’ as the State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities governed by public law. ‘A body governed by public law’ is in turn defined to mean, under the applicable directives, any body ‘established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and having legal personality and financed, for the most part, by the State, or regional or local authorities, or other bodies governed by public law; or subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities or by other bodies governed by public law’. (31)
101. In view of these criteria, it remains for the referring court to verify what was the precise legal nature of the Association of Volunteer Firemen under the national law at the material time in order to conclude whether or not there was a ‘commercial transaction’ within the meaning of Article 2(1) of Directive 2000/35.
V – Conclusion
102. In the light of the foregoing considerations, I propose that the Court answer the questions referred by Vrhovno sodišče Republike Slovenije (Supreme Court of the Republic of Slovenia) as follows:
Questions 1 and 2:
Article 2(1) of Directive 2000/35/EC of the European Parliament and of the Council of 29 June 2000 on combating late payment in commercial transactions should be interpreted as providing an autonomous definition of the notion of ‘undertaking’ encompassing persons who engage in structured and ongoing independent economic or professional activity. Whether an individual instance of such an activity, such as an individual contract, was covered by the precise scope of the national registration or authorisation regime is not conclusive for the purpose of that autonomous definition. However, the fact that such a person acted within the scope of the national registration or authorisation generates a presumption in favour of concluding that that person was acting within its economic or professional activity. The existence of an invoice also constitutes an element indicating that such a person was acting in the course of a structured and ongoing economic activity.
Directive 2000/35 should be interpreted as meaning that it does not preclude a rule of national law which caps the maximum amount of payable interest for late payment at the amount of the principal debt.
1 – Original language: English.
2 – Directive of the European Parliament and of the Council of 29 June 2000 (OJ 2000 L 200, p. 35). That directive has been repealed, with effect from 16 March 2013, and replaced by its recast: Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 (OJ 2011 L 48, p. 1).
3 — (OJ 2003 L 236).
4 – When I say, partly performed, I am referring to the fact that the applicant appears to have performed his side of the contract by providing the water tanker lorry to the Association of Volunteer Firemen whereas the association had not performed its side of the bargain by paying for the lease of the lorry.
5 – Judgment of 10 January 2006 in Ynos (C–302/04, EU:C:2006:9).
6 – Council Directive of 5 April 1993 on unfair terms in consumer contracts (OJ 1993 L 95, p. 29).
7 – Judgment of 10 January 2006 in Ynos (C–302/04, EU:C:2006:9, paragraphs 36 to 38).
8 – See also orders of 5 November 2014 in VG Vodoopskrba (C–254/14, EU:C:2014:2354, paragraphs 10 to 11); 3 April 2014 in Pohotovosť s (C–153/13, EU:C:2014:1854, paragraphs 23 to 25); 8 November 2012 in SKP (C–433/11, EU:C:2012:702, paragraphs 35 to 37); 6 March 2007 in Ceramika Paradyż (C‑168/06, EU:C:2007:139, paragraphs 20 to 25); 9 February 2006 in Lakép and Others (C–261/05, EU:C:2006:98, paragraphs 17 to 20).
9 – Judgment of 26 September 1996 in Data Delecta and Forsberg (C–43/95, EU:C:1996:357).
10 – Judgment of 2 October 1997 in Saldanha and MTS v Hiross (C–122/96, EU:C:1997:458).
11 – Judgment of 2 October 1997 in Saldanha and MTS v Hiross (C–122/96, EU:C:1997:458, paragraph 14). See also judgment of 13 September 2001 in Schieving-Nijstad and (C–89/99, EU:C:2001:438, paragraphs 49 to 50). See also Opinion of Advocate General Cosmas in Andersson and Wåkerås-Andersson (C‑321/97, EU:C:1999:9, especially point 61 et seq.) discussing the temporal applicability of EU law according to whether the situation under review became permanently fixed prior to the accession.
12 – See also the following cases not discussed at length in this Opinion: judgments of 30 November 2000 in Österreichischer Gewerkschaftsbund (C–195/98, EU:C:2000:655, paragraph 55); 7 February 2002 in Kauer (C–28/00, EU:C:2002:82, paragraphs 42 to 59); and 18 April 2002 in Duchon (C–290/00, EU:C:2002:234, paragraphs 44 to 46). See also judgment of 29 January 2002 in Pokrzeptowicz-Meyer (C–162/00, EU:C:2002:57, paragraphs 50 to 57 and the case-law cited).
13 – Further see Kaleda, S.L., ‘Immediate Effect of Community Law in the New Member States: Is there a Place for a Consistent Doctrine?’ (2004) 10 ELJ 102 or Półtorak, N., ‘Ratione Temporis Application of the Preliminary Rulings Procedure’ 2008, vol. 45, CMLRev., p. 1357.
14 – Judgment of 14 June 2007 in Telefónica O2 Czech (C–64/06, EU:C:2007:348). See also Opinion of Advocate General Ruiz-Jarabo Colomer in that case, point 32 and judgment of 22 December 2010 in Bezpečnostní softwarová asociace (C–393/09, EU:C:2010:816, paragraphs 22 to 27).
15 – Judgment of 15 April 2010 in CIBA (C–96/08, EU:C:2010:185, paragraphs 13 to 15). See also judgment of 24 November 2011 in Circul Globus Bucureşti (C–283/10, EU:C:2011:772, paragraph 29).
16 – Council Directive of 9 February 1976 on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions (OJ 1976 L 39, p. 40).
17 – Judgment of 12 September 2013 in Kuso (C–614/11, EU:C:2013:544, paragraph 30). See also judgment of 3 September 2014 in X (C–318/13, EU:C:2014:2133, paragraphs 21 to 24).
18 – See for example judgment of 14 February 2012 in Toshiba Corporation and Others (C‑17/10, EU:C:2012:72, paragraph 47). See also judgment of 12 November 1981 in Meridionale Industria Salumi and Others (Joined Cases 212/80 to 217/80, EU:C:1981:270, paragraph 9).
19 – The statement made to the contrary by the respondent in the main proceedings seems thus unsubstantiated (see point 18 above).
20 – This diversity in rules governing temporal applicability of specific instruments of secondary law confirms the importance of differentiating clearly between the general approach governing temporal applicability of EU law and the specific rules that might be contained in a concrete secondary law instrument, as outlined above in points 23 and 24 of this Opinion.
21 – Judgment of 11 September 2008 in Caffaro (C‑265/07, EU:C:2008:496, paragraphs 14 to 16). See also judgments of 26 October 2006 in Commission v Italy (C‑302/05, EU:C:2006:683, paragraph 23) and 3 April 2008 in 01051 Telecom (C‑306/06, EU:C:2008:187, paragraph 21) and Opinion of Advocate General Sharpston in IOS Finance EFC (C‑555/14, EU:C:2016:341, point 36).
22 – See, by analogy, judgment of 19 July 2012 in Littlewoods Retail Ltd and Others (C‑591/10, EU:C:2012:478, paragraph 31 and the case-law cited). See also order of 17 July 2014 in Delphi Hungary Autóalkatrész Gyártó (C–654/13, EU:C:2014:2127, paragraph 35) and judgment of 18 April 2013 in Irimie (C–565/11, EU:C:2013:250, paragraph 23).
23 – Since providing a mere illustrative argumentum ad absurdum, the potential human rights implications of the re-introduction of ‘Marshalsea(s)’, particularly in view of Article 1 of the Fourth Additional Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms, may be left unexplored. For the literary parallel, see Charles Dickens, Little Dorrit, Penguin Classics, 2004.
24 – The Code of Justinian CJ.184.108.40.206 provided that ‘If any of the things mentioned are omitted, the creditor and purchaser shall lose the property, the debt and the price paid; and he who made an exchange shall lose both what he gave and what he received; whoever received any property by emphyteusis (long lease) for his life or by gift or alienation, shall return what he received and an additional amount equal to what was given’ [‘reddit quod accepit et alterum tantum eius, quanti est quod datum fuerit.’]. Translation available in Blume, The Annotated Justinian Code, Ed. by Kearley (Second Edition), available at the online http://www.uwyo.edu/lawlib/blume-justinian/ajc-edition-/books/book1/inde.... An older expression of a similar idea can be found in Ulpianus, Ulp. D. 12, 6, 26, 1. ‘Supra duplum autem usurae et usurarum usurae nec in stipulatum deduci, nec exigi possunt, et solutae repetuntur’ in Zimmerman, The Law of Obligations: Roman Foundations of the Civilian Tradition (Oxford University Press, 1996), p. 169. For a discussion of this rule, including its medieval continuation, see for example, Jörs, P., RömischesRecht: Römisches Privatrecht. Abriss des Römisches Zivilprozessrechts, Springer-Verlag, 2013, p. 183 or Honsell, H., Römisches Recht, Springer-Verlag, 2010, p. 95.
25 – See Article 1335 of the ABGB (Austrian Civil Code): ‘Hat der Gläubiger die Zinsen ohne gerichtliche Einmahnung bis auf den Betrag der Hauptschuld steigen lassen, so erlischt das Recht, vom Kapital weitere Zinsen zu fordern. Vom Tag der Streitanhängigkeit an können jedoch neuerdings Zinsen verlangt werden.’ See also Article 1805(2) of the Občanský zákoník, Act No. 89/2012 Sb. (Czech Civil Code) providing that the creditor who fails to enforce his rights without undue delay will not be entitled to interests for late payment in excess of the principal debt, as regards the period preceding litigation.
26 – Zimmermann, R. ‘Interest for Delay in Payment for Money’ in Gullifer, Vogenauer (eds), English and European Perspectives on Contract and Commercial law: Essays in Honour of Hugh Beale, Hart Publishing, Oxford and Portland, 2014, p. 329.
27 – Seen within this broader context of other available remedies and the operation of a legal system as such, it would appear that the capping of interest could also pursue another objective: not protecting the debtor against the inaction of the creditor, but rather the debtor against ‘judicial inaction’ of the Member State in terms of structural problems in the judicial system leading to excessive length of proceedings. The correlating question of how far it is fair to shift part of these ‘costs’ indirectly onto the creditors is an intriguing one, but certainly outside the scope of the present request for a preliminary ruling.
28 – It should be noted that the definitions of ‘commercial transaction’ and ‘undertaking’ have remained the same under the recast Directive 2011/7, the latter having only further specified that ‘undertaking’ is distinct from ‘public authority’.
29 – See, by analogy, judgment of 10 December 1998 in Hernández Vidal and Others (C‑127/96, C‑229/96 and C‑74/97, EU:C:1998:594, paragraph 27); see also judgment of 6 September 2011 in Scattolon (C‑108/10, EU:C:2011:542, paragraph 49 and the case-law cited).
30 – See, in this sense, judgments of 3 December 2015 in Pfotenhilfe-Ungarn (C–301/14, EU:C:2015:793, paragraph 24 and the case-law cited) and 5 December 2013 in Vapenik (C–508/12, EU:C:2013:790, paragraph 23 and the case-law cited).
31 – Article 1(b) of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1); Article 1(b) of Council Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts (OJ 1993 L 199, p. 1); Article 1(b) of Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54); Article 1(1) of Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ 1993 L 199, p. 84). These directives have been repealed by Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (OJ 2004 L 134, p. 1) and by Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114). See Articles 2(1)(a) and 1(9) of those directives respectively. They have since been repealed by Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ 2014 L 94, p. 65) and by Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ 2014 L 94, p. 243)