2012/8/20 - 28 Cdo 2927/2010: Production Refunds for Sugar (fulltext)

In the situation where there is no adequate legislation concerning State liability for violation of EU law at the national level, the conditions of State liability resulting from the case law of the Court of Justice must be applied in accordance with the principle of primacy and the national Act No. 82/1998 Coll. must only be applied insofar as European Union law (including the case law of the Court of Justice) does not provide otherwise. In other words, Act No. 82/1998 Coll. must be applied where its provisions are consistent with the provisions of EU law or to matters that are not dealt with by EU law, provided that they do not render impossible or excessively difficult the right of individuals to obtain damages.
Judgment:Production Refunds for Sugar
Court:Supreme Court
Date of Judgment:08/20/2012
Reference Number:28 Cdo 2927/2010
ECLI:ECLI:CZ:NS:2012:28.CDO.2927.2010.1
Judgment Type:JUDGMENT
Keyword:Damages
State liability for damage
Business
Preliminary ruling
Administrative procedure
Relevant Legislation:Article 10a(1) of Constitutional Act No. 1/1993 Coll.
Article 7(3) of Regulation (EC) No 1260/2001
Article 2 of Regulation (EC) No 1265/2001
Article 3(2) of Regulation (EC) No 1265/2001
Article 1 of Regulation (EC) No 60/2004
Section 12 of Government Decree No. 364/2004 Coll.
Section 49(2) of Act No. 71/1967 Coll.
Section 8 of Act No. 82/1998 Coll.
Judgment Category:C EU

28 Cdo 2927/2010



JUDGMENT


The Supreme Court of the Czech Republic, sitting in a panel composed of the presiding judge JUDr. Iva Brožová and judges JUDr. Josef Rakovský and Mgr. Petr Kraus, decided on the case of BorsodChem MCHZ, s.r.o., ID no. 26019388, with its registered office at Chemická 1/2039, Ostrava – Mariánské Hory, Czech Republic (the Plaintiff), represented by Mgr. Roman Hanus, attorney-at-law with his registered office at Národní 6, Prague 1, Czech Republic, versus the Czech Republic – Ministry of Agriculture, with its registered office at Těšnov 17, Prague 1, Czech Republic (the Defendant), concerning damages in the amount of CZK 3,641,235 plus interest, filed with the Prague 1 District Court under ref. no. 30 C 119/2005, concerning the extraordinary appeal lodged by the Plaintiff from the Judgment of the Municipal Court in Prague of November 18, 2009, ref. no. 11 Co 226/2009-116, as follows:
The Judgment of the Municipal Court in Prague of November 18, 2009, ref. no. 11 Co 226/2009-116, as well as the Judgment of the Prague 1 District Court of November 27, 2008, ref. no. 30 C 119/2005-90, are vacated and the case is remanded to the Prague 1 District Court for further proceedings.


R e a s o n i n g:

A. Previous Course of the Proceedings

In the petition filed on May 2, 2005, the Plaintiff sought that the Defendant be ordered to pay to the Plaintiff damages in the amount of CZK 3,641,235 plus interest. In the reasoning of the petition, the Plaintiff stated that as a processor of beet sugar for the production of oxalic acid, the Plaintiff became, as a result of the accession of the Czech Republic to the European Union, entitled, as of July 1, 2004, to production refunds, as defined in the relevant provisions of Council Regulation (EC) No 1260/2001 of 19 June 2001 on the common organisation of the markets in the sugar sector (hereinafter referred to as the Regulation (EC) No 1260/2001) and the implementing Commission Regulation (EC) No 1265/2001 of 27 June 2001 laying down detailed rules for the application of Council Regulation (EC) No 1260/2001 as regards granting the production refund on certain sugar products used in the chemical industry (hereinafter referred to as Regulation (EC) No 1265/2001). The Regulations were implemented at a national level by Government Decree No. 364/2004 Coll. laying down certain conditions for the performance of measures of the common organization of markets in the sugar sector (hereinafter referred to as Government Decree No. 364/2004 Coll.), and the national legislation made it possible for the eligible recipients of production refunds, with effect from June 15, 2004, to submit applications for registration to the State Agricultural Intervention Fund (hereinafter referred to as the SAIF). The registration was a prerequisite for the submission of a request for the provision of the production refunds. The Plaintiff stated that the application for registration was submitted on June 21, 2004, but the SAIF issued the decision on the Plaintiff’s registration as late as July 29, 2004, thereby violating the thirty-day time limit defined in Section 49(2) of Act No. 71/1967 Coll. on administrative procedure (the Rules of Administrative Procedure), as amended by Act No. 226/2002 Coll. (hereinafter referred to as Act No. 71/1967 Coll.). Subsequently, the Plaintiff filed an application for the issue of a production refund certificate, which was issued to the Plaintiff on August 11, 2004. The Plaintiff concluded that on the grounds of late implementation of EU law and due to the SAIF’s failure to observe the statutory time limit, the Plaintiff could not succeed in obtaining the timely payment of the production refunds for July 2004. In the Plaintiff’s opinion, such forfeited refunds were tantamount to damage for which the Defendant was liable under Act No. 82/1998 Coll. on the grounds of maladministration on the part of the SAIF, as well as on the grounds of late implementation of EU law.

The Defendant requested that the court dismiss the petition. The Defendant claimed that the actions of the Government in the field of lawmaking did not fall within the scope of Act No. 82/1998 Coll. As regards the actions of the SAIF, the Defendant stated that the Fund acted correctly, since the approval of the registration of a sugar processor was, as a result of the necessity to carry out laboratory tests, a particularly complicated case, for which a sixty-day time limit was defined in Section 49(2) of Act No. 71/1967 Coll.

As the first-instance court, the Prague 1 District Court dismissed the petition by the Judgment of November 27, 2008, ref. no. 30 C 119/2005-90. In the reasoning of the Judgment, the Court agreed with the Defendant’s opinion that the registration procedure was a particularly complicated case, as defined in Section 49(2) of Act No. 71/1967 Coll., as a result of the necessity to carry out laboratory tests, and therefore the SAIF’s decision on the approval of the Plaintiff’s registration was issued in time within the sixty-day time limit defined in Section 49(2) of Act No. 71/1967 Coll. In addition, the Court held that with regard to Article 14(1)(b) of Regulation (EC) No 1265/2001 and Section 12 of Government Decree No. 364/2004 Coll., the production refund may only be claimed in respect of a product processed after the issue of a production refund certificate. If the production refund certificate was issued to the Plaintiff as late as August 11, 2004, the Plaintiff was not entitled to production refund for July 2004. In this situation, the first-instance court arrived at the conclusion that there had been no maladministration on the part of the SAIF. At the same time, the court held that the purpose of Section 19 of Government Decree No. 364/2004 Coll. was merely to allow the submission of applications for registration before the effective date thereof (July 1, 2004), specifically from the date of the promulgation thereof, i.e. from June 15, 2004. Moreover, the court ruled that an applicant was generally entitled to the payment of the refund after the conditions specified in the EU legislation and in Government Decree No. 364/2004 Coll. have been met. As regards the claim of late implementation of EU law, the first instance court held that under Act No. 82/1998 Coll., it was not possible to claim compensation for damage caused by the lawmaking activities of government authorities.

As regards the appeal filed by the Plaintiff, the Municipal Court in Prague, as the appellate court, affirmed the Judgment of the first-instance court by the Judgment of November 18, 2009, ref. no. 11 Co 226/2009-116. In the reasoning of the Judgment, the appellate court arrived at the conclusion that Government Decree No. 364/2004 Coll. was not contrary to Regulation (EC) No 1260/2001 and to Regulation (EC) No 1265/2001. In addition, the appellate court agreed with the first-instance court that there had been no maladministration on the part of the SAIF, as defined in Act No. 82/1998 Coll., since because of the necessity to carry out laboratory tests, the procedure of approval of the registration of a sugar processor fell under particularly complicated cases, for which a sixty-day time limit was defined in Section 49(2) of Act No. 71/1967 Coll. In that situation, the appellate court concluded that the petition was not justified. Moreover, the appellate court held that the situation would have been different had the Plaintiff claimed in the proceedings that it acted in accordance with directly applicable legislation of the European Union and that the government authorities acted erroneously by not issuing the certificate to the Plaintiff and by not paying to the Plaintiff the production refund directly under that legislation. For the above reason, the appellate court did not deal with the issue of whether or not the government authorities acted erroneously by not applying the legislation of the European Union directly. Hence, the appellate court concluded that the SAIF acted in accordance with Government Decree No. 364/2004 Coll. and that the first-instance court therefore correctly refrained from taking any further evidence in respect of the amount of sugar processed by the Plaintiff or in respect of the amount of the damage.



B. Extraordinary Appeal and Answer

The Plaintiff lodged an extraordinary appeal from the Judgment of the appellate court, believing the appeal to be admissible under Section 237(1)(c) of the Rules of Civil Procedure, since the case was of significant legal importance. As the grounds of the appeal, the Plaintiff stated erroneous determination of the law of the case under Section 241a(2)(b) of the Rules of Civil Procedure. The Plaintiff in particular claimed that:
(a) it did not result from the contested judgments in which administrative proceeding the lower courts examined the actions of the SAIF – whether in a registration proceeding or in a proceeding concerning the issue of a production refund certificate – i.e. in which administrative proceeding the courts found the SAIF’s actions to be correct,
(b) there was a delay in the legislative process of the State, which could be inferred from the method of definition of the effect of Government Decree No. 364/2004 Coll., which was defined in Section 19 thereof, and from the early effect defined in Section 12(1) and (2) thereof as commencing on June 15, 2004; the purpose of this “premature” effect, as defined in Section 12(1) and (2) of Government Decree No. 364/2004 Coll., was to ensure that processors in new Member States that had processed sugar for several years under the national legislation (continual processors) could apply for production refunds from July 1, 2004, in accordance with EU law, i.e. with Regulation (EC) No 1265/2001 in conjunction with Regulation (EC) No 60/2004,
(c) registration by July 1, 2004, was a prerequisite for the submission of an application for the issue of a production refund certificate; since the decision on the registration was issued by the SAIF as late as July 29, 2004, even though the application for registration was submitted on June 21, 2004, and the SAIF concluded on June 30, 2004, that the conditions for registration have been met, the Plaintiff’s chance to apply for the certificate was thwarted, as well as the chance to make preliminary reports on anticipated supplies, which, as a result, absolutely eliminated the entitlement to the production refund under EU law, i.e. under Regulation (EC) No 1260/2001 and Regulation (EC) No 1265/2001 in conjunction with Regulation (EC) No 60/2004, from July 1, 2004,
(d) the SAIF was supposed to carry out the laboratory tests only as part of the proceeding concerning the issue of a production refund certificate and at any time thereafter, as evident from Article 3(1) of Regulation (EC) No 1265/2001,
(e) pursuant to Regulation (EC) No 1260/2001 and Regulation (EC) No 1265/2001, which are, under Regulation (EC) No 60/2004 with effect from July 1, 2004, directly applicable to a full extent in the Czech Republic, processors were entitled to production refunds for beet sugar processed in any period beginning July 1, 2004; if the SAIF did not pay to the Plaintiff the refund for sugar processed in July 2004 with reference to failure to observe the time limit for the submission of a preliminary report, even though it had thwarted the observance of that time limit by its own default, the SAIF was obligated to pay the production refund to the Plaintiff in accordance with the directly effective legislation of the European Union; the SAIF thereby violated a fundamental principle of EU law, the “effet utile”, according to which it is obligated to apply directly effective acts of the European Union as effectively as possible.

The Defendant did not answer the extraordinary appeal.



C. Admissibility

The Supreme Court found the extraordinary appeal to have been lodged in a timely manner and by an authorized and duly represented person, and to contain all the information required under Section 241a(1) of the Rules of Civil Procedure. The Supreme Court then proceeded to deal with the admissibility of the extraordinary appeal.

Pursuant to Article II(12) of Act No. 7/2009 Coll., “Extraordinary appeals from judgments of appellate courts issued prior to the effective date of this Act [i.e. July 1, 2009] shall be heard and determined in accordance with previously adopted legislation.” Since the contested judgment of the appellate court was issued on November 18, 2009, the Supreme Court examined the case in accordance with Act No. 99/1963 Coll., the Rules of Civil Procedure, as amended by Act No. 7/2009 Coll., which entered into effect on July 1, 2009 (hereinafter referred to as the “Rules of Civil Procedure”). A plaintiff’s extraordinary appeal from a judgment of an appellate court by which the appellate court affirmed the judgment of the first-instance court may be found admissible only if the prerequisites defined in Section 237(1)(c) of the Rules of Civil Procedure have been met, i.e. if the contested decision on the merits is of significant legal importance. Pursuant to Section 237(3) of the Rules of Civil Procedure, a judgment of an appellate court is of significant legal importance in particular if it deals with “a legal issue that has not been resolved in the case law of the Supreme Court or that has been determined differently by the courts, or if an issue resolved by the Supreme Court is to be assessed differently; the circumstances claimed by the grounds of appeal under Section 241a(2)(a) and Section 241a(3) shall not be taken into account.”

In the extraordinary appeal filed by the Plaintiff, the Plaintiff raised the following questions believed by the Plaintiff to establish the significant legal importance of the contested judgment, as defined in Section 237(3) of the Rules of Civil Procedure:

(1) Is the performance of laboratory tests a prerequisite for the issue of a decision on registration of a processor of basic products in the sugar sector under Section 12(1) of Government Decree No. 364/2004 Coll.; or is the registration proceeding a complicated case to which a 60-day time limit for determination applies under Section 49(2) of Act No. 71/1967 Coll.?

In its decision-making practice (see the Judgment of the Supreme Court of August 31, 2010, ref. no. 30 Cdo 3024/2010, or that of September 8, 2010, ref. no. 28 Cdo 5014/2009), the Supreme Court has repeatedly inferred that an affirming judgment of an appellate court that has been contested by an extraordinary appeal is not of significant legal importance if the legal question raised is important from the perspective of the decision-making practice of the courts (for their case law), but lacks such importance in respect of the determination of the case to which the extraordinary appeal applies. Therefore, no matter how important the legal question submitted to the Supreme Court in the extraordinary appeal is, it cannot establish the admissibility of the extraordinary appeal if the resolution thereof cannot reflect in the situation of the parties to the case in which the extraordinary appeal has been lodged (cf. Krčmář, Z. in Bureš, J. – Drápal, L. et al. Občanský soudní řád II. § 201-376. Komentář. Prague: C.H. Beck, 2009, p. 1885). As elaborated on below in Part D of this Judgment, the Supreme Court arrived at the conclusion that the national legislation, i.e. Government Decree No. 364/2004 Coll. in conjunction with Section 49(2) of Act No. 71/1967 Coll., should not have been applied at all in relation to the claim raised by the Plaintiff due to the principle of primacy of EU law over national legislation and to the principle of direct applicability of EU Regulations, specifically of Regulation (EC) No. 1260/2001 and Regulation (EC) No 1265/2001 in conjunction with Regulation (EC) No 60/2004, laying down transitional measures in the sugar sector by reason of the accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia (hereinafter referred to as “Regulation (EC) No 60/2004”). In the situation at hand, the interpretation of Government Decree No. 71/1967 Coll., as well as the application of Section 49(2) of Act No. 71/1967 Coll., were irrelevant from the perspective of the situation of the parties to the proceeding, and the question raised could not therefore be of significant legal importance.

(2) Could the Plaintiff act directly according to EU legislation with a view to obtaining the production refunds and if so, with what authority should the Plaintiff have filed its claim?

The Supreme Court arrived at the conclusion that the legal question raised was challenging the conclusion of the appellate court according to which it was up to the Plaintiff to act explicitly in accordance with the directly effective legislation of the European Union instead of acting in accordance with national legislation. Since the opinion of the appellate court concerning the relationship between EU legislation and national legislation, as well as the interpretation of EU law, was the legal basis for the appellate court’s conclusion concerning the correctness of the SAIF’s actions in the course of approving the Plaintiff’s registration as a prerequisite for the provision of production refunds, the Supreme Court arrived at the conclusion that the question raised was relevant to the decision on the merits, as it had not been resolved in the case law of the Supreme Court and simultaneously it should have been assessed differently by the appellate court (Section 237(3) of the Rules of Civil Procedure). The Supreme Court therefore found the Plaintiff’s extraordinary appeal admissible under Section 237(1)(c) of the Rules of Civil Procedure.


D. Justification

The extraordinary appeal was justified.

1. Errors in proceedings, which are taken into account in the case of an admissible extraordinary appeal ex officio (Section 242(3) of the Rules of Civil Procedure), were not claimed in the extraordinary appeal and no such errors were inferred from the file. The Supreme Court therefore dealt with the correctness of the determination of the law of the case by the appellate court.

2. In general, the determination of the law of a case is incorrect (Section 241a(2)(b) of the Rules of Civil Procedure) if the appellate court assessed the case under legislation that does not apply to the ascertained facts of the case or under legislation that was correctly determined but incorrectly interpreted or erroneously applied to the relevant facts of the case.

3. Pursuant to Article 10a(1) of the Constitution of the Czech Republic, “An international treaty may transfer certain powers of authorities of the Czech Republic to an international organization or institution.” In the spirit of that provision, the Czech Republic assumed, by entering into the treaty of accession to the European Union, the obligation to abide by EU law, as well as the fundamental principles it entails. EU law is of a specific nature, as “it determines and specifies itself, in contrast to international law, what its national effects in Member States are” (cf. the Judgment of the Constitutional Court of March 8, 2006, ref. no. Pl. ÚS 50/04). In that Judgment, the Constitutional Court also stated in respect of the nature of EU law that “the transfer of certain powers to the EC [EU] entails the termination of the freedom of the Czech Republic to determine the national effects of Community [Union] law, which are derived, in the areas in which such transfer took place, directly from Community [Union] law. Article 10a of the Constitution therefore actually acts in both directions: it forms the legislative basis for the transfer of powers and simultaneously is the provision of the Constitution which opens national law to the effects of Community [Union] law, including the rules concerning its effects within Czech law” (with reference to Kühn, Z. Kysela, J.: Na základě čeho bude působit komunitární právo v českém právním řádu? Právní rozhledy, Vol. 2004, No. 1, pp. 23–27; or Kühn, Z.: Ještě jednou k ústavnímu základu působení komunitárního práva v českém právním řádu. Právní rozhledy, Vol. 2004, No. 10, pp. 395–397).

4. The specific position of EU law is characterized by the fundamental principles of application primacy and direct effect, or direct applicability, by which the application of EU law is governed. The special position of EU law is also reflected in the case law of the Court of Justice. The Court of Justice held in the Judgment rendered as early as February 5, 1963, in Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration, [1963] ECR 1, that “the Community constitutes a new legal order of international law for the benefit of which the States have limited their sovereign rights, albeit within limited fields, and the subjects of which comprise not only Member States but also their nationals.” Similarly, the Court of Justice ruled in the Judgment of July 15, 1964, in Case 6/64 Costa v E.N.E.L., [1964] ECR 585, that “The law stemming from the Treaty, and independent source of law, could not because of its special and original nature, be overridden by domestic legal provisions, however framed, without being deprived of its character as Community law and without the legal basis of the Community itself being called into question. The transfer by the States from their domestic legal system to the Community legal system of the rights and obligations arising under the Treaty carries with it a permanent limitation of their sovereign rights, against which a subsequent unilateral act incompatible with the concept of the Community cannot prevail.” According to the Court of Justice, the Treaty establishing the European Economic Community (hereinafter also referred to as TEEC, now the Treaty on the Functioning of the European Union, hereinafter also referred to as TFEU) therefore established a new legal order, which became an integral part of the legal system of the Member States and which must be applied by national authorities preferentially in the interest of uniform application of Community law. The principle of application primacy is based on the fundamental argument that the obligations assumed by the States under TEEC were, from the perspective of the Court of Justice, unconditional and could not be called into question by a subsequent legislative act by the signatories thereto. In the Judgment of the Court of Justice of the EC of March 9, 1978, in Case 106/77 Amministrazione delle Finanze dello Stato v Simmenthal SpA, [1978], ECR 629, it was further specified that the principle of application primacy is reflected in the obligation of the national court (or other authority) not to apply any provision of national law that is contrary to Community law. “Accordingly any provision of a national legal system and any legislative, administrative or judicial practice which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to apply such law the power to do everything necessary at the moment of its application to set aside national legislative provisions which might prevent Community rules from having full force and effect are incompatible with those requirements which are the very essence of Community law.”

5. Taking into account the above, the Supreme Court states that from the perspective of the Court of Justice, EU law enjoys, within the limits of its scope, application primacy over national law, which, in other words, means that any inconsistent national legislation remains in force, but it must not be applied to cases falling within the scope of EU law. The principle of application primacy defined in that manner is now reflected also in Declaration 17 (“Declaration concerning primacy”) annexed to the Treaty of Lisbon. The Declaration, despite not being of a legal nature and not having the effects of primary law, is based on the case law of the Court of Justice, recalling “…that, in accordance with well settled case law of the Court of Justice of the European Union, the Treaties and the law adopted by the Union on the basis of the Treaties have primacy over the law of Member States, under the conditions laid down by the said case law.” In addition, the Opinion of the Council Legal Service, published in Document 1197/07 (JUR 260) annexed to the Final Act, provides that: “It results from the case-law of the Court of Justice that primacy of EC law is a cornerstone principle of Community law … [which is] inherent to the specific nature of the European Community [European Union]… The fact that the principle of primacy … [is not] … included in the treaty shall not in any way change the existence of the principle and the existing case-law of the Court of Justice.”

6. The principle of application primacy of EU law is directly related to other interconnected principles, specifically to the principle of direct effect and to the principle of direct applicability of EU law. Direct effect means that the addressees of EU law are not only Member States but also individuals: natural and legal persons. The direct effect of EU law was generally confirmed by the Court of Justice of the EU in the above-mentioned Judgment of February 5, 1963, in Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration [1963] ECR 1, ruling that “Independently of the legislation of Member States, Community law not only imposes obligations on individuals but is also intended to confer upon them rights which become part their legal heritage.” Furthermore, the Court of Justice specified that an individual may invoke their Union rights before national courts provided that they are directly applicable, specific and clear (cf., for example, the Judgment of February 5, 1963, in Case 26/62 Van Gend en Loos, the Judgment of June 21, 1974, in Case 2/74 Reyners [1974] ECR 631, or the Judgment of April 8, 1976, in Case 43/75 Defrenne [1976] ECR 455). The principle of direct applicability focuses on the quality of EU legislation, as no implementation is required for it to be applicable. This is the case of Regulations, in respect of which Article 288 of TFEU explicitly mentions direct applicability, providing: “A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States.” In connection with the above case law of the Court of Justice, EU law presumes both direct effect and direct applicability in the case of Regulations, thereby making them different from other EU acts (for example Directives; similarly cf. also Bobek, M. – Bříza, P. – Komárek, J. Vnitrostátní aplikace práva Evropské unie. Prague: C. H. Beck, 2011. p. 19). EU Regulations therefore automatically become part of the national law of each Member State without the necessity of any further implementation, and the rights established by EU Regulations become part of the set of rights of individuals that are to be applied by national courts, as well as by administrative authorities, when hearing disputes with EU dimension.

7. With regard to the conclusions of the above case law of the Court of Justice (cf. paragraphs 4 and 6 of Part D), the Supreme Court holds that the principle of application primacy of EU law, as well as the principle of its direct effect and the principle of direct applicability, form the fundamental bases that must be respected by all courts of the Member States when hearing cases with EU dimension. The opinion of the appellate court is therefore incorrect, since the appellate court only reviewed the SAIF’s actions in accordance with Government Decree No 364/2004 Coll. without dealing with the question of whether or not the government authorities acted erroneously by not applying legislation of the European Union, specifically, Regulation (EC) No 1260/2001, Regulation (EC) No 1265/2001 and Regulation (EC) No 60/2004, directly. After all, it was ruled in the Judgment of the Court of Justice of June 19, 1990, in Case 213/89 Factortame Ltd and others [1990] ECR I-2433, paragraph 20, that “any provision of a national legal system and any legislative, administrative or judicial practice which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to apply such law the power to do everything necessary at the moment of its application to set aside national legislative provisions which might prevent, even temporarily, Community rules from having full force and effect are incompatible with those requirements, which are the very essence of Community law” (cf. also the Judgment of the Court of Justice of March 9, 1978, in Case 106/77 Amministrazione delle Finanze dello Stato v Simmenthal SpA, [1978] ECR 629, paragraphs 22–23). The appellate court therefore erred in omitting the principles of direct effect, direct applicability and application primacy of EU Regulations that determine the EU legal area, of which uniform and equal application of EU law is characteristic (cf. also Bobek, M. – Bříza, P. – Komárek, J. Vnitrostátní aplikace práva Evropské unie. Prague: C.H. Beck, 2011. pp. 56–58).

8. In connection with the above, the Supreme Court, bound by the grounds of the extraordinary appeal, and with regard to the appellate court’s conclusion concerning the direct non-applicability of EU legislation, subsequently dealt with the examination of the question of whether or not the appellant could seek the payment of production refund for July 2004 under the directly applicable legislation of the European Union, i.e. under Regulation (EC) No 1260/2001 and Regulation (EC) No 1265/2001 in conjunction with Regulation No 60/2004. According to the appellant, the SAIF should have acted in accordance with EU law regardless of national legislation, in such a manner as to allow the appellant, being a registered processor, to apply for the production refund for July 2004, i.e. as to maintain the purpose and intent of those EU Regulations.

9. Since the subject of the review is the violation of rights under Regulation (EC) No. 1260/2001 and Regulation (EC) No 1265/2001 in conjunction with Regulation (EC) No 60/2004, or the interpretation thereof, it is simultaneously necessary to deal with the question of whether or not the Supreme Court, as a court the decisions of which cannot be subject to appeal, has the obligation to refer the case to the Court of Justice of the European Union for a preliminary ruling under Article 267(b) of TFEU.

10. From the perspective of the obligation of a court of a Member State the decisions of which cannot be subject to appeal under national law to refer a case to the Court of Justice of the European Union for a preliminary ruling, the key judgment is the Judgment of the Court of Justice of March 5, 1983, in Case 283/81 CILFIT, [1982] ECR 3415, in which three exceptions to that obligation of national last-instance courts were defined, specifically if:

I. the question of EU law is not relevant to the outcome of the case at hand;

II. there is established case law of the Court of Justice concerning the question at issue or a judgment of the Court of Justice concerning a materially identical question (acte éclairé);

III. the only correct application of Community law is so obvious as to leave no scope of any reasonable doubt (acte clair). In order for a court of a Member State to be able to rule that an interpretation of Community law is obvious, the court must (a) compare several language versions of the text, (b) use the terminology and legal terms of Community law, (c) take account of differences in the interpretation of Community law, and (d) be convinced that its interpretation is equally obvious to the courts of the other Member States and to the Court of Justice of the EU (cf. the Judgment of Supreme Court ref. no. 28 Cdo 2334/2010 of July 20, 2011).

11. For the determination of the case at hand, it is essential to answer the question of whether or not Regulation (EC) No 1260/2001 and Regulation (EC) No 1265/2001 in conjunction with Regulation (EC) No 60/2004 directly established the right of the appellant, as a manufacturer in the chemical industry, to obtain the production refund, and simultaneously to resolve the relationship between the above EU Regulations and the national legislation in the form of Government Decree No. 364/2004 Coll. in conjunction with Act No. 71/1967 Coll. Since this concerns the interpretation of legal provisions that have not been previously addressed by the case law of the Court of Justice, it should only be considered whether or not the conditions of the acte clair doctrine have been met.

12. Pursuant to Article 7(3) of Regulation (EC) No 1260/2001, “It has been decided to grant production refunds on the products listed in Article 1(1)(a) [...], where these fall within one of the situations referred to in Article 23(2) of the Treaty and are used to manufacture certain products of the chemical industry.”

13. Pursuant to Article 2(1) of Regulation (EC) No 1265/2001, “The production refund shall be granted by the Member State in whose territory processing of the basic products takes place.” It is evident that the primary purpose of that provision is the determination of the jurisdiction of the Member State that is obligated to pay the production refunds. It is equally evident that the provision also imposes directly on Member States the obligation to pay the production refunds to the processors specified in the Regulation.

14. Pursuant to Article 2(2) of Regulation (EC) No 1265/2001, “The Member State may grant the refund only if customs control, or administrative inspection affording equivalent guarantees, ensures that the basic products are used for the purpose specified in the application referred to in Article 3.” Although the Czech and Slovak language versions make it possible for Member States to provide the refund after certain conditions have been met (compare the Czech “může […] pouze” and the Slovak “môže […] iba”, or the French version: “ne peut […] que”), it is clear with account taken of other language versions (English: “may […] only”, and in particular German: “darf [...] nur”) that the Member State may (and must) pay the refund after the verification of the use of the basic products in accordance with the purpose specified in the application; in other words, if it has been proven during such verification carried out by the Member State that the basic products are used in accordance with the purpose specified in the application, the payment of the refund is not subject to administrative discretion, but the Member State is obligated under Article 2(1) to pay the refund (cf. paragraph 21 of Part D).

15. Pursuant to Article 3(2) of Regulation (EC) No 1265/2001, “The Member State concerned may make entitlement to the refund subject to prior approval of the processors referred to in paragraph 1.” That article is non-mandatory (cf. “may”, and in particular “kann” in the German version) and makes it possible for Member States to define conditions for the entitlement to the production refund. The method of implementation, the procedure of approval (registration), or the form of decision are not specified by Regulation (EC) No 1265/2001.

16. On the basis of the above comparison, the Supreme Court arrived at the conclusion that the interpretation of Article 2(1) and (2) of Regulation (EC) No 1265/2001 in conjunction with Article 7(3) of Regulation (EC) No 1260/2001 is obvious and does not leave any scope of any reasonable doubt about its content, and that it therefore is the case of obvious interpretation of EU law (acte clair). In that situation, the Supreme Court concluded that Article 2 of Regulation (EC) No 1265/2001 established the right of processors of the basic products, which include beet sugar, to claim the production refund from the relevant Member State provided that the processor has submitted an application and guaranteed the possibility of carrying out customs control or administrative inspection by the Member State with a view to verifying whether or not the basic products (beet sugar in the case at issue) are or have been processed for the purpose specified in the application (cf. paragraph 14 of Part D).

17. As a result of the above conclusions, the Supreme Court therefore proceeded to resolve and answer the question of whether or not the non-mandatory option to implement the conditions specified in Article 3(2) of Regulation (EC) No 1265/2001 weakened the direct effect and direct applicability of Article 7(3) of Regulation (EC) No 1260/2001 and of Article 2 of Regulation (EC) No 1265/2001.

18. As mentioned above (cf. paragraph 6 of Part D), Article 249 of the Treaty establishing the EC (now Article 288 of TFEU) provides that “A regulation shall have general application,” and “shall be binding in its entirety and directly applicable in all Member States.” Hence, the direct applicability and direct effect of Regulations are therefore presumed already in the principal TFEU.

19. In the latter context, the Supreme Court reminds that in a number of judgments, the Court of Justice referred to the direct effect of Regulations within the system of sources of EU law, ruling that as such, Regulations are capable of establishing individual rights (for example the Judgment of the Court of Justice of the EC of February 5, 1963, in Case 26/62 NV Algemene Transport- en Expeditie Onderneming van Gend & Loos v Netherlands Inland Revenue Administration, [1963] ECR 1; or the Judgment of the Court of Justice of the EC of October 6, 1970, in Case 9/70 Franz Grad v Finanzamt Traunstein). In the Judgment of March 9, 1978, in Case 106/77 Amministrazione delle Finanze dello Stato v Simmenthal SpA, [1978] ECR 629, the Court of Justice also added that direct applicability means that the rules of Community law must be fully and uniformly applied in all the Member States from the date of their entry into force and for so long as they continue in force.

20. The Supreme Court expressly states that it is aware of the importance of the question of how provisions allowing optional implementation in national law should be handled, in the case at hand under Article 3(2) of Regulation (EC) No 1265/2001 – i.e. of the importance of assessment of the direct effect and direct applicability of such provisions, as well as of the principle of liability of the relevant Member State if the implementation has been carried out contrary to the purpose and intent of the provision.

21. An exception from the general principle of direct effect of Regulations (cf. paragraph 6 of Part D) is the situation where the Regulation itself anticipates the implementation thereof, i.e. where it requires further implementation into national legislation at the national level. The issue of direct effect in the event of implementation of EU law into national legislation was dealt with by the Court of Justice in the Judgment of December 14, 1971, in Case 43/71 Politi s.a.s. v Ministry for Finance of the Italian Republic, [1971] ECR 1039, paragraph 9, where it ruled that the consequences of the direct of effect of EU Regulations include the obligation of the Member States to prevent the implementation of any national legislation, even if it is enacted subsequently, which is incompatible with the purpose of their provisions. In the Judgment of February 2, 1977, in Case 50/76 Amsterdam Bulb BV v Produktschap voor Siergewassen, [1977] ECR 137, the Court of Justice specified that an implementing measure does not rule out the direct effect of EU Regulations, since the direct effect is maintained even if the anticipated measure has not been adopted. The national legislation must respect the purposes and conditions laid down by Regulations (see also the Judgment of the Court of Justice of the EC of February 18, 1970, in Case 40/69, Hauptzollamt Hamburg-Oberelbe v Bollmann [1970] ECR 69). The extent of the discretionary powers of Member States therefore remains very small. The purpose of national implementing measures is to speed up and simplify the implementation of Regulations. They are therefore only subsidiary instruments and not a form of independent exercise of State power. At the same time, it would be incompatible with EU law if the State’s failure in terms of national adoption of implementing measures, endangered or deprived individuals of the rights conferred on them by Regulations. According to the Judgment of the Court of Justice of the EC of May 17, 1972, in Case 93/71 Leonesio v Ministero dell'agricoltura e foreste, [1972] ECR 287, it is therefore not possible to render the exercise of rights conferred by Regulations subject to implementing provisions other than those which might be required by the Regulation itself. For the purposes of this Judgment, dealing with the direct effect of an EU Regulation, i.e. of secondary law, it also is possible to apply, by analogy, the conclusions of the Judgment of the Court of Justice of July 21, 1974, in Case 2/74 Reyners v Belgian State, [1974] ECR 631, which rejected the claim of the Belgian Government that primary law (in the case in question Article 52 of Treaty establishing the EC, or Article 49 of TFEU) does not have direct effect, since it provides that the implementation thereof is subject to the adoption of another measure. The Court of Justice held in this respect that even though primary law imposes the obligation to attain freedom of establishment, i.e. an obligation to attain a precise result, the fulfillment thereof is to be made easier by the national measure, but not made dependent on other measures.

22. With regard to the above case law of the Court of Justice, which extends direct effect also to Regulations requiring national implementation, including where the State has not implemented the Regulation or implemented it insufficiently, the Supreme Court arrived at the conclusion that EU Regulations that provide for an option to adopt implementing measures have direct effect as well under Article 249 of the Treaty establishing the EC (Article 288 of TFEU) and that they therefore are directly applicable before the Member State’s authorities. Hence, not even the Member State’s failure to take the required measures in due time could prevent the direct effect of the EU Regulation and thereby infringe a fundamental rule requiring the uniform application of the EU Regulation throughout the European Union (see Bebr, G. Development of judicial control of the European Communities, Hague: Martinus Nijhoff Publisher, 1981. p. 584).

23. Hence, if Article 1 of Regulation (EC) No 60/2004 provides that “Articles 2 to 21 and 27 to 31 of Regulation (EC) No 1260/2001 shall not apply from 1 May 2004 to 30 June 2004 to the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia (hereinafter referred to as the new Member States),” this means that Regulation (EC) No 1260/2001, as well as Regulation (EC) No 1265/2001 as the implementing Regulation, enter into effect for the Czech Republic on July 1, 2004. This is why it is necessary to interpret Article 1 in such a manner as establishing, in conjunction with Article 7(3) of Regulation (EC) No 1260/2001 and in conjunction with Article 2(1) and (2) of Regulation (EC) No 1265/2001, entitlement of processors of beet sugar in the Czech Republic to the production refund, since as of that date, common market regulation began to apply to the Czech Republic, including sugar processors. It is obvious that the only purpose of Regulation (EC) No 60/2004 was to create conditions for the full effect of Union law, i.e. of Regulation (EC) No 1260/2001 and of Regulation (EC) No 1265/2001, simultaneously respecting the need of creating a reasonable time framework necessary for the very exercise of the right to claim the refund in the countries newly acceding to the European Union as of May 1, 2004. The entire legislation concerning the production refunds was known to these new Member States, including the Czech Republic, as early as January 14, 2004, when Regulation (EC) No 60/2004 was published. For the above reasons, it is clear that it is necessary to interpret Article 3(2) of Regulation No 1265/2001 providing for the non-mandatory option to make the obtaining of the production refund subject to the meeting of certain conditions in such a manner as making it possible for a Member State to make the entitlement to the production refund subject to previous approval of the processor of beet sugar , but such approval (registration) would have to be, in the case of continual processors that applied for the approval prior to July 1, 2004, completed no later than June 30, 2004. Continual processors need to be deemed to be processors continuing in business activities consisting in the production of sugar in a period preceding July 1, 2004, when the EU Regulations in question entered into effect. The appellant is such a continual processor. Since the Czech Republic is bound by directly effective Regulations, which are directly applicable and enjoy application primacy over national legislation according to the principal treaties (Article 288 of TFEU), Government Decree No. 364/2004 Coll. in conjunction with Act No. 71/1967 Coll., the Rules of Administrative Procedure, could not derogate the time limit ending June 30, 2004, which indirectly results from the EU Regulations. Interpretation to the contrary not only is in conflict with the above principle, but also jeopardizes the stable functioning of the common market, the organization of which excludes “any discrimination between producers or consumers within the Union” (cf. the second sentence of Article 34(2) of the Treaty establishing the European Community, now Article 40(2) of TFEU). If the approval (registration) in the case of continual processors could also be completed after July 1, 2004, this would mean that:

(a) all disapproved continual processors of basic products would not be allowed, from July 1, 2004, to the issue of a decision on approval (registration), to process basic products, and such stoppage would temporarily cause regional destabilization of the semi-product market (in the case at issue the oxalic acid market) and jeopardize the smooth supply of products to consumers, which would be in direct conflict with the objectives defined in Article 33(1)(c) and (d) of the Treaty establishing the EC (now Article 39(1)(c) and (d) of TFEU),

(b) at the regional level, the successive approval of continual processors that submitted their applications for approval prior to July 1, 2004, would cause discrimination, since approved processors would be able to process the basic product (beet sugar) and produce the semi-product (oxalic acid), whereas continual processors that have not yet been approved would not be able to do so, which would be in direct conflict with the second sentence of Article 34(2) of the Treaty establishing the EC (now Article 40(2) of TFEU),

(c) from July 1, 2004, continual processors of basic products (beet sugar) could have different positions within the European Union only as a result of whether or not the Member State has applied Article 3(2) of Regulation (EC) No 1265/2001 and implemented the condition of previous approval within its national legislation; continual processors from Member States that have not implemented the previous approval (registration) within their legislations would therefore have an advantage over processors from Member States that have implemented the approval procedures under Article 3(2) of Regulation (EC) No 1265/2001, which would be in direct conflict with the second sentence of Article 34(2) of the Treaty establishing the EC (now Article 40(2) of TFEU),

(d) the negative impacts specified above in subparagraphs (a) to (c) would eventually prevent harmonious development in the processing of the basic products (beet sugar), which would be in conflict with the very purpose of Regulation (EC) No 1265/2001 expressed in recital 5 to Regulation (EC) No 1265/2001, which presumes such harmonious development.

24. With regard to the above, the Supreme Court states again that in the case of the relevant EU legislation, the interpretation is clear (acte clair) not only as regards Article 7(3) of Regulation (EC) No 1260/2001 and Article 2(1) and (2) of Regulation (EC) No 1265/2001, but also as regards Article 3(2) of the latter Regulation, as Regulation (EC) No 1265/2001 made it possible in its Article 3(2) for Member States to make the process of awarding production refunds subject to previous approval of the processors of the basic products (beet sugar). For that approval (registration), however, Article 1 of Regulation (EC) No 60/2004 indirectly defined a time limit ending June 30, 2004. The above interpretation is the only interpretation that is fully consistent with EU law and therefore possible. In other words, a Member State may, under Article 3(2) of Regulation (EC) No 1265/2001, make the entitlement to the production refund subject to approval (registration), but this discretionary power does not apply to the entitlement to the production refund from a specific date, i.e. from July 1, 2004. In this respect, the Supreme Court states, for the sake of completeness, that the above interpretation respects the recognition of the direct rights of individuals that result from the EU Regulations in question and that are, therefore, part of the rights of individuals of individual Member States. In the case at hand, the point is that the EU law clearly imposed on administrative authorities the obligation to achieve a specific result, or the obligation to act in a certain manner, thereby – as confirmed by the case law of the Court of Justice – reducing their margin of discretion (analogously cf. the Judgment of the Court of Justice of March 5, 1996, in Joined Cases C-46/93 and C-48/93, Brasserie du Pęcheur SA, Factortame Ltd and others, [1996], ECR I-1029 Brasserie, paragraph 46: “Community law may impose upon [a national authority] obligations to achieve a particular result or obligations to act or refrain from acting which reduce its margin of discretion, sometimes to a considerable degree …”). It is therefore possible to conclude that the appellant, as a continual processor of sugar, could act, with a view to obtaining the production refunds, under the directly effective EU legislation, according to which the appellant’s entitlement to the production refund arose as early as July 1, 2004. Under those circumstances, the SAIF therefore should have used the EU Regulations as the basis for the examination of the appellant’s entitlement to the production refund for July 2004.

25. Moreover, the Supreme Court states that it is absolutely irrelevant in the case at hand whether or not it was necessary to carry out laboratory tests prior to the decision on registration, since with regard to the above conclusions, neither national legislation nor administrative practice (no matter how purposeful) could limit the direct effect of the EU Regulation (cf. the Judgment of the EC of March 9, 1978, in Case 106/77 Amministrazione delle Finanze dello Stato v Simmenthal SpA, [1978] ECR 629, paragraphs 22–23).

26. With regard to the described conclusions concerning the violation of EU law consisting in failure to apply it, the Supreme Court reviewed the legal opinion of the appellate court, which applied Act No. 82/1998 Coll. to the resolution of the question of State liability. First of all, the Supreme Court mentions that the system of liability for violation of EU law is an autonomous system that is based on conditions other than those presumed by Act No. 82/1998 Coll., to which the appellant referred as well.

27. The issue of relationship between EU law and State liability for damage under Act No. 82/1998 Coll. was dealt with by the Supreme Court, for example, in the Judgment of February 24, 2010, ref. no. 25 Cdo 3556/2007, in which the Supreme Court concluded that “cases of State liability for violation of Community [Union] legislation are based on facts and law other than cases of State liability for damage to property incurred by an individual under Act No. 82/1998 Coll. State liability for violation of Community [Union] law (…) is not identical to State liability for damage caused by maladministration, as defined in Act No. 82/1998 Coll. (cf. also the Judgment of the Supreme Court of the Czech Republic of January 31, 2007, ref. no. 25 Cdo 1124/2005, published in the Official Journal of Judicial Decisions and Opinions under no. 7,Vol. 2008).” However, as ruled by the Constitutional Court in the Judgment of February 9, 2011, ref. no. IV. ÚS 1521/10, not even that separation of systems of liability for damage may impede the performance of the obligations resulting for the Czech Republic from membership of the European Union. It is “beyond any doubt that Member States are liable for damage caused by violation of EU law, [even though] that matter is not explicitly provided for in the laws of the Czech Republic.” Hence, although liability for damage caused by violation of EU law cannot be confused with liability for damage caused by maladministration, it is not possible to conclude the entire case by such a statement. The Plaintiff therefore “cannot be prejudiced by the fact that it confused those liability systems during the proceedings before the ordinary courts, i.e. that it used liability for damage caused by maladministration to support its claims.” In the above judgment, the Constitutional Court also reminded that “in the situation where the Czech Republic is a democratic State respecting the rule of law and performing obligations under international law (cf. Article 1(2) of the Constitution), it cannot refuse to perform obligations under international (including EU) law only because there is no explicit legislation at the national level making it possible to seek the liability of the Czech Republic for damage caused by violation of obligations which it openly declares to respect.” Moreover, the Constitutional Court held that the ordinary courts, in particular the Supreme Court, were obligated to establish relationship between the system of State liability existing at the level of EU law and Act No. 82/1998 Coll. as the law that is closest thereto in terms of content and purpose.

28. The conditions of application of the principle of State liability for damage caused by violation of EU law result from and were clearly defined in the established case law of the Court of Justice of the European Union. The existence of damages as a concept resulting from EU (then Community) law was inferred by the Court of Justice as early as in the Judgment of November 19, 1991, In Joined Cases C-6/90 and C-9/90 Francovich and Bonifaci v Italian Republic, [1991], ECR I-05357. The Court of Justice reminded that the Treaty establishing the EEC (now TFEU) created its own legal system integrated into the legal systems of the Member States which their courts are bound to apply and the subjects of which are not only the Member States but also their nationals, on whom EU law imposes obligations and grants rights. The Court of Justice also stressed in the Judgment that “the national courts whose task is to apply the provisions of Community [Union] law in areas within their jurisdiction must ensure that those rules take full effect and must protect the rights which they confer on individuals. … The effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Community law for which a Member State can be held responsible. The possibility of obtaining redress from the Member State is particularly indispensable where … the full effectiveness of Community [Union] rules is subject to prior action on the part of the State and where, consequently, in the absence of such action, individuals cannot enforce before the national courts the rights conferred upon them by Community law.” The Court of Justice therefore inferred from the above conclusions that the principle of State liability for damage incurred by an individual as a result of violation of European Union law is inherent in EU law and a further basis therefor is to be found “in Article 5 of the Treaty [now Article 4(3) of the Treaty on European Union], under which the Member States are required to take all appropriate measures, whether general or particular, to ensure fulfilment of their obligations under Community law [in today’s version: arising out of the Treaties or resulting from the acts of the institutions of the Union].”

29. In the Judgment of March 5, 1996, in Joined Cases C-46/93 and C-48/93, Brasserie du Pęcheur SA, Factortame Ltd and others, [1996], ECR I-1029, the Court of Justice elaborated on that, ruling that in the event of infringement of a right directly conferred by a Community (Union) provision, the right to reparation is the corollary of the direct effect of the Union provision whose breach caused the damage sustained. Violation of directly effective rules therefore causes State liability for damage to arise. Since the Treaty establishing the EEC (now TFEU) does not contain any provisions specifying the consequences of violation of a right conferred upon individuals, the State liability must be assessed in the context of the fundamental principles of the legal system of the European Union.

30. The direct and immediate applicability of the principle of State liability for violation of EU law is also inferred in the case law of the national courts of other Member States. The Austrian Supreme Court held in the Judgment no. 1 Ob 146/00b of July 25, 2000, that the entitlement to damages resulting from State liability for violation of EU law is directly applicable and that State liability can therefore be inferred by analogous implementation of certain provisions of the national State Liability Act (Amtshaftunsgesetz) in accordance with the principle of primacy of EU law in the need of replacing or adding missing provisions or provisions that are in conflict with EU law. Also in the Judgment no. 1 Ob 12/00x of October 6, 2000, the Supreme Court explicitly stated the possibility of occurrence of damage leading to liability also as a result of failure to comply with the constant case law of the Court of Justice of the EU that interprets the effectiveness of rights under primary law. In the Judgment no. 1 Ob 80/00xx of January 30, 2001, the liability of a Member State for violation of EU law was identified as a new concept implemented into Austrian law after the accession of Austria to the Union. A similar approach can be seen in German courts, where the case law concerning the application of the EU liability system is based on the Judgment of the Court of Justice in the Dillenkofer Joined Cases (the Judgment of the Court of Justice of October 8, 1994, in Joined Cases C-178/94, C-179/94, C-188/94 and C-190/94, Dillenkofer [1994], reference for a preliminary ruling by Landgericht Bonn no. 1 O 360/93 and subsequent Resolution of Oberlandgericht Köln no. 7 U 23/97 of July 15, 1997). The Federal Republic of Germany does not have its own legislation concerning State liability for violation of EU law, and it therefore infers the principles of such liability from the directly effective case law of the Court of Justice with subsequent application of certain provisions of BGB and the Constitution (cf. the Judgment no. III. ZR 144/05 of June 4, 2009, or the Judgment no. III. ZR 48/01a of January 20, 2005).

31. It results from the above (paragraphs 28–30 of Part D) that the existence of the directly effective principle of State liability for violation of European Union law is evident from the established case law of the Court of Justice, and the Supreme Court has, in this respect, no doubts about the application thereof, not even in the situation where there is no relevant legislation at the national level.

32. The particular conditions under which State liability for violation of EU law gives rise to an individual’s entitlement to damages result from the Judgment of the Court of Justice of November 19, 1991, in Joined Cases C-6/90 and C-9/90 Francovich and Bonifaci [1991], ECR I-05357, from the Judgment of the Court of Justice of March 5, 1996, in Joined Cases C-46/93 and C-48/93 Brasserie, Factortame [1996], ECR I-1029, and from the Judgment of the Court of Justice of September 30, 2003, in Case 224/01 Köbler [2003], ECR I-10239, and they are laid down as follows:

1. the purpose of the violated provision is to confer rights upon individuals: the entitlement to damages therefore arises where a Member State has violated a provision of EU law that establishes a sufficiently specific subjective right for the benefit of such an individual or protects the legal interest of the individual;

2. the violation must be sufficiently serious, and the extent of seriousness is construed at the level of EU law in dependence on the extent of discretion granted by the relevant provision of the national authority. The sufficient seriousness of the violation is defined by the established case law of the Court of Justice as arising under the circumstances where the institution concerned manifestly and gravely disregarded the limits on its discretion (cf. the Judgment of the Court of Justice of July 4, 2000, in Case 352/98 Bergaderm and Goupil [2000], ECR I-05291). In the Brasserie case, the Court of Justice held that “The factors which the competent court may take into consideration include the clarity and precision of the rule breached, the measure of discretion left by that rule to the national or Community [Union] authorities, whether the infringement and the damage caused was intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a Community [Union] institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community [Union] law.” (cf. the Judgment of the Court of Justice of March 5, 1996, in Joined Cases C-46/93 and C-48/93, Brasserie du Pęcheur SA, Factortame Ltd and others, [1996], ECR I-1029, paragraph 56). The basis for the determination of whether or not a violation of EU law committed by a Member State is sufficiently serious therefore is the determination of the measure of discretion available to that Member State, or what powers the Member State had in relation to the interpretation and application of EU law. Where the authority has a broad margin of discretion, the violation is serious if it amounts to a manifest and grave breach of the limits of that discretion, and, on the contrary, where the margin of discretion is narrow or does not exist at all, the seriousness is constituted by the very fact that EU law has been violated (cf. Malíř, Jan: Odpovědnost členských států za škodu v právu Evropské unie. Charles University in Prague, Faculty of Law 2008, p. 107);

3. there must be a causal relation between the violation on the part of a Member State and the damage sustained by the injured party. In assessing the causal relation, it is necessary to use the case law of the Court of Justice to examine whether or not the causal relation has been interfered with by the action or omission of another party or by force majeure (cf. the Judgment of the Court of Justice of June 15, 1999, in Case 140/97 Rechberger, [1999] ECR I-03499), or by the injured party contributing by his action or omission to the occurrence of the damage or by the injured party’s failure to perform the alleviating obligation in relation to the damage. In other words, the subject of review of lower courts, in the case at hand, as part of the assessment of whether or not the condition of causal relation has been met will include the verification of whether or not the appellant met also other conditions for the granting of the production refund under the Regulation (i.e. whether or not the injured appellant would indeed be entitled to the refund). In the event that all the conditions laid down by the Regulation have been met, State liability for the SAIF’s violation of EU law will be established to a full extent. In any other case, the court will limit the extent, i.e. the amount, of the damage on a proportionate basis. In further proceedings, the subject matter will be to determine whether or not the State (SAIF) exclusively thwarted the appellant’s opportunity to obtain the production refund, and if not, to apply the principle of adequate causal relation. At the same time, it will be necessary to take account of the question of whether or not, as part of prevention of the damage incurred, the appellant exhausted all the national procedures of appeal. In the latter respect, the Supreme Court states that the Court of Justice emphasized as early as in the Judgment of March 5, 1996, in the Joined Cases C-46/93 and C-48/93 Brasserie, Factortame [1996], ECR I-1029, that “the national court [may] inquire whether the injured person showed reasonable diligence in order to avoid the loss or damage or limit its extent and whether, in particular, he availed himself in time of all the legal remedies available to him. However, the requirement of exhausting all national and EU means of protection of rights is not absolute and will not apply where it would render the exercise of the rights established for individuals by directly effective provisions of EU law excessively difficult (cf. the Judgment of the Court of Justice of March 8, 2001, in Joined Cases C-39798 and C-410/98 Metallgesellschaft and others, [2001] ECR I-01727, and the Judgment of the Court of Justice of January 18, 2001, in Case 150/99 Stockholm Lindöpark AB, [2001] ECR I-00493).

33. All the three conditions (violation of a provision of EU law granting rights to individuals, sufficiently serious violation, causal relation between the violation of legislation and the damage) must be met cumulatively and apply to any way of violating EU law, and they therefore are necessary and simultaneously sufficient for individuals to be entitled to damages (cf. the Judgment of the Court of Justice of March 5, 1996, in Joined Cases C-46/93 and C-48/93 Brasserie, Factortame [1996], ECR I-1029, paragraph 51, the Judgment of March 19, 1991, in Case 202/88 British Telecommunication [1991], ECR I-01223, paragraph 38, the Judgment of May 23, 1996, in Case 5/94 Hedley Lomas [1996], ECR I-2553, paragraph 24, the Judgment of June 22, 2011, in Case 346/09 Denkavit [2011], the Judgment has not yet been published in the Journal, paragraph 47, the Judgment of January 18, 2001, in Case 150/99 Stockholm Lindöpark [2001], ECR I-493, paragraph 36; the Judgment of January 25, 2007, in Case 278/05 Robins and others [2007], ECR I-1059, paragraph 69, the Judgment of March 24, 2009, in case 445/06 Danske Slagterier [2009], ECR I-2119, paragraph 20, or the most recent Judgment of January 2010, in Case 118/08, Transportes Urbanos [2010], ECR I-00635, paragraph 30 of Part D).

34. If the above conditions have been met, the State must provide compensation for the damage sustained in accordance with the national legislation concerning liability, and the conditions of the compensation set forth by the national legislation must not be less favorable than those governing similar entitlements arising under national law and must not render impossible in practice or excessively difficult the obtaining of the compensation (see also the Judgment of November 9, 1983, in Case 199/82, San Giorgio [1983] ECR, p. 3604).

35. It also is possible to infer the following the above conclusions: in the situation where there is no adequate legislation concerning State liability for violation of EU law at the national level, the conditions of State liability resulting from the case law of the Court of Justice must be applied in accordance with the principle of primacy and the national Act No. 82/1998 Coll. must only be applied insofar as European Union law (including the case law of the Court of Justice) does not provide otherwise. In other words, Act No. 82/1998 Coll. must be applied where its provisions are consistent with the provisions of EU law or to matters that are not dealt with by EU law, provided that they do not render impossible or excessively difficult the right of individuals to obtain damages.

36. Since the contested Judgment of the appellate court consists in erroneous application of EU law and the grounds of appeal defined in Section 241a(2)(b) of the Rules of Procedure has been fulfilled, the Supreme Court has vacated (the sentence following the semicolon in Section 243b(2) of the Rules of Procedure) without a hearing (Section 243a(1) of the Rules of Civil Procedure), including the contingent finding concerning the court costs. Since the grounds on which the Judgment of the appellate court has been vacated also apply to the Judgment of the first-instance court, the Supreme Court has vacated that Judgment as well and remanded the case to the first-instance court for further proceedings (the second sentence of Section 243b(3) of the Rules of Civil Procedure).

37. In the further proceedings, it will be up to the first-instance court to deal with the failure to meet the prerequisites for creation of the Defendant’s liability under EU law.

38. The legal opinion expressed in this Judgment is binding; in the new decision on the merits, the court shall decide not only on the costs of the new proceeding and of the extraordinary appeal proceeding, but also again on the costs of the original proceedings (Section 243d(1) of the Rules of Civil Procedure in relation to Section 226(1) of the Rules of Civil Procedure).



A p p e a l I n s t r u c t i o n s:

No appeal is admissible from this Judgment under the Rules of Civil Procedure.




Brno, August 20, 2012

JUDr. Iva B r o ž o v á, m.p.

presiding judge