The Court of Justice has given judgment in the first reference from Finland for a preliminary ruling, concerning excise duty on electricity imported from Sweden by the Finnish company Outokumpu.

In Finland, the duty on electrical energy of domestic origin depends on the method of producing electricity. The Finnish legislation, which is based on environmental considerations, accordingly provides for differential rates of duty based on the source of the energy produced. However, another tax system applies to imported electricity, under which the rate of duty is not determined by the method of production but is a flat rate corresponding to the average rate imposed on electricity produced in Finland.

Outokumpu instituted proceedings before the national court for annulment of the decision of the Helsinki District Customs Office fixing the rate of duty in accordance with the scale for imported electricity. The national court decided to stay proceedings in order to seek a ruling from the Court of Justice on the question whether the method of calculating the duty on imported electricity was contrary to Community law, either as a charge having equivalent effect to a customs duty or as a charge that discriminates against products from other Member States.

The Court has come to the conclusion that an excise duty of the kind at issue constitutes not a charge having equivalent effect to a customs duty but internal taxation within the meaning of Article 95 of the Treaty.

With regard to internal taxation, Community law does not restrict the freedom of each Member State to establish a tax system which differentiates between certain products on the basis of objective criteria, such as the nature of the raw materials used. The Court has stated, however, that such differentiation - where it pursues objectives compatible with the requirements of the Treaty - must be such as to avoid any form of discrimination, direct or indirect, against imports from other Member States or any form of protection of competing domestic products.

Imported electricity is subject, whatever its method of production, to a flat-rate duty which is higher than the lowest duty charged on electricity of domestic origin.

The Court accordingly considers the Finnish legislation at issue to be discriminatory; it does not even give the importer the opportunity of demonstrating that the electricity imported by him has been produced by a particular method which would enable him to qualify for the rate, which may be better, applicable to electricity of domestic origin produced by the same method.

In other words, a variable rate of duty on electricity which is based on environmental considerations is in conformity with the Treaty only if it is imposed on electricity of domestic origin or imported electricity in the same way. On that point, the Court has already held that the abolition of differences which are objectively justified may be the only way of avoiding direct or indirect discrimination against imported products.

Unofficial document for the use of the media, not binding on the Court of Justice.

This press release is available in English, Finnish, French and Swedish. For the full text of the judgment, please consult our Internet page http://curia.eu.int at about 15.00 today.

For further information please contact Tom Kennedy tel. (352) 4303 3355 or fax: (352) 43 03 2500.