The action for annulment (Article 267 TFEU) is a means of legal protection by which taxpayers can assert that Union law is contrary to Union law. We explain the conditions attached to the action for annulment and the cases in which an action for annulment can be considered.

Principle 1: No individual rights protection

In the question of individual rights protection in European tax law, a distinction must be made according to the object against which the taxpayer is directed. On the one hand, it can be directed against national law, which should be contrary to EU law. On the other hand, it may be directed against EU law, which in turn is contrary to EU law.

A conceivable case of infringement of EU law of national law comes into consideration, for example, in the case of the exit tax. However, only the preliminary ruling procedure and the infringement procedure can reprimand the infringement of EU law. On the other hand, individual rights protection of citizens against tax laws contrary to EU law is not provided for. Therefore, the taxpayer who is complained of a national tax norm contrary to EU law has no opportunity to bring the matter before the ECJ.

The infringement procedure can only be initiated by the Commission or another Member State at its discretion. In the preliminary ruling procedure, too, it is for the national court to decide whether or not to refer the matter to the ECJ. However, if a submission is made, the taxable person is also a party to the ECJ procedure and has the opportunity to submit an opinion.

In practice, it can help the taxpayer to encourage the Commission or the national court to submit to the ECJ. This applies in particular if the Commission or the national court is only informed comprehensively about the EU law problems of the subject matter by means of this notice. The Commission has a political obligation to investigate individual written complaints and to comply with certain formalities. The Commission also holds public hearings on specific topics from time to time. Taxpayers can also identify possible breaches of Union law.

2. individual rights protection against EU law contrary to EU law possible with action for annulment

2.1 Possible infringement of Union law

In the hierarchy of standards of EU law, primary law has the highest rank. Secondary law must therefore be interpreted in accordance with primary law. Secondary law that violates primary law is therefore unlawful. In this respect, Union law is therefore considered to be contrary to Union law.

2.2 Legal protection by action for annulment

This priority of primary law over secondary law is enforceable by the courts. Proceedings are, on the one hand, the preliminary ruling procedure under Article 267 TFEU. However, due to the subject matter of the examination, there are some deviations from the case that the subject matter of the examination is national law. Secondly, an action for annulment is available under Article 263 TFEU.

3. Action for annulment

3.1 Eligibility for action for annulment

Member States, the European Parliament, the Council, the Commission, the Court of Auditors, the European Central Bank and the Committee of the Regions are eligible for deposit. In addition, natural and legal persons are also entitled to apply. The action for annulment therefore ensures individual legal protection.

The period for bringing an action shall be two months (Article 263(6) TFEU).

3.2 Subject of action for annulment

The action for annulment is eligible under Article 263 TFEU in order to have the legality of secondary law verified against primary law. In this procedure, unlike the preliminary ruling procedure, direct individual rights protection of the taxable person is possible.

The subject matter of the action for annulment is governed by the first sentence of Article 261(1) TFEU. The action for annulment is therefore an instrument for monitoring the legality of legislative acts and of certain acts of Union institutions. Acts of the Union institutions are acts of the Council of the Commission, the European Parliament, the European Council and the European Central Bank (except recommendations and opinions). The action for annulment shall be based on a declaration of invalidity of the contested act. It also has legal effect vis-à-vis third parties.

3.3 Right to bring an action for annulment

3.3.1. Differentiation after the plaintiff

The right to bring an action is determined by the plaintiff. Depending on who brings an action, different requirements must be imposed on the right to bring an action. The reason for the different admission requirements is the graduated institutional positions. The Member States, the European Parliament, the Council and the Commission may, by virtue of their eminent position, subject acts contrary to the Union to an abstract review of standards.

Natural and legal persons are non-privileged claimants under Article 263(4) TFEU. They may bring proceedings only against acts addressed to them or directly affecting them individually and against acts of a regulatory nature which directly affect them and do not entail implementing measures.

By contrast, the Court of Auditors, the European Central Bank and the Committee of the Regions are partially privileged claimants. They may bring actions in accordance with Article 263 TFEU aimed at safeguarding their (Union) rights.

The Member States, the European Parliament, the Council and the Commission are privileged claimants. They may, in accordance with Article 263(3) TFEU, bring an action without individual concern.

3.3.2. standing of natural and legal persons

In the context of standing in action for annulment of natural and legal persons, it must be examined whether the action is addressed to the applicant. This is the case if he is the addressee, Article 263(4), first option, TFEU.

If the plaintiff is not the addressee of the act at issue, he may still be entitled to bring an action. Then, in accordance with Article 263(4)(2) TFEU, it depends on whether the act directly and individually affects the applicant. Concern in this sense exists when legally relevant interests of the plaintiff are concerned. Immediate concern arises if the contested measure itself interferes with the protected interests of the plaintiff without requiring any further implementing measure. If actions act directly against the individual, he is also unproblematically directly affected.

Concern for the plaintiff is problematic, however, when acts of the Union are addressed to Member States. Then the immediate concern must be particularly stated. Different criteria have emerged in jurisprudence. The Member State must have virtually no discretionary powers when implementing it. In addition, the Member State must have committed itself to a specific approach from the outset. However, even if these two conditions are met, the applicant must still be affected individually according to the above-mentioned principle. This is again problematic, since the plaintiff is not the addressee of the act. In such cases, according to the ECJ, there is direct concern if the provision affects the applicant because of certain personal characteristics or special circumstances that distinguish him from all other persons and therefore individualizes him in a similar way as the addressee of a decision. Jurisdiction on this has been in flux for a long time.

3.4 Interest in legal protection

In addition, natural or legal persons must have the interest of legal protection if they wish to sue. This is when there is a legally protective interest in bringing an action. If the plaintiff is entitled to bring an action, he usually also has legal protection interests. This can only be questionable if the measure to be challenged is already revoked with retroactive effect at the time the action is brought.

3.5 Jurisdiction for actions for annulment

The European Court of First Instance shall have jurisdiction in actions brought by natural or legal persons pursuant to the first sentence of Article 256(1) TFEU. In accordance with the third sentence of Article 256(1) TFEU, an appeal may be lodged before the ECJ against its decision.

A large part of the actions of privileged or partially privileged claimants, on the other hand, is assigned to the ECJ by Article 51 of the Statute of the Court of Justice. An exception to this is, inter alia, actions brought by the Member States against acts of the Commission. Here, the ECJ remains competent at first instance.

4. Grounds for action for annulment

An action for annulment shall be well founded where one of the grounds for annulment referred to in Article 263 TFEU exists. The grounds for invalidity referred to therein are lack of competence, infringement of essential procedural requirements, infringement of contracts or of a rule of law applicable in their implementation and non-use of discretion. The criterion of infringement of the Treaties includes the other criteria mentioned above and is a catch-all. This includes not only violations of written primary law, but of the entire Union law.

If the action for annulment is well founded, the contested act shall be annulled in accordance with Article 264 TFEU. The action for annulment shall abolish the validity of the unlawful act pending its annulment.

5. Examples of actions for annulment

As an example of actions for annulment with a tax reference, the procedure for the incompatibility of §8c(1a) KStG with European State aid law comes into consideration. The Commission had found that this derogation was incompatible with European State aid law. Subsequently, some German taxpayers who benefited from §8c(1a) KStG brought an action for annulment. After the Court of First Instance maintained the Commission’s decision and accepted unlawful aid, the Court of Justice has now established that the German provision does not constitute unlawful aid.

Another recent example of an action for tax annulment by a privileged applicant is the action brought by Ireland on 09.11.2016 against the Commission decision of 30 August 2016 in the Apple case. In this Decision, the Commission had ruled that Ireland’s tax treatment of the Apple group was unlawful aid within the meaning of Article 107 et seq. TFEU classified. Therefore, the Commission had obliged Ireland to pay a corresponding tax claim of up to 13 billion against Apple. the euro.