Case C-205/06

Commission of the European Communities

v

Republic of Austria

(Failure of a Member State to fulfil obligations – Infringement of the second paragraph of Article 307 EC – Failure to adopt appropriate measures to eliminate the incompatibilities with the EC Treaty of the bilateral agreements entered into with third countries prior to accession of the Member State to the European Union – Investment agreements entered into by the Republic of Austria with the Republic of Korea, the Republic of Cape Verde, the People’s Republic of China, Malaysia, the Russian Federation and the Republic of Turkey)

Summary of the Judgment

1.        Procedure – Oral procedure – Reopening

(Art. 222, second para., EC; Rules of Procedure of the Court of Justice, Art. 61)

2.        International agreements – Agreements concluded by the Member States – Agreements predating the EC Treaty

(Arts 57(2) EC, 59 EC, 60(1) EC and 307, second para., EC)

1.        Under the second paragraph of Article 222 EC, it is the Advocate General’s duty, acting with complete impartiality and independence, to make, in open court, reasoned submissions on cases which, in accordance with the Statute of the Court of Justice, require his involvement. Since the Court is not bound either by the Advocate General’s Opinion or by the reasoning on which it is based, it is not absolutely necessary to reopen the oral procedure, under Article 61 of the Rules of Procedure, each time the Advocate General raises a point of law which was not the subject of debate between the parties as long as the judgment is not based on arguments which were not the subject of debate between them.

(see paras 14-15)

2.        A Member State which does not take appropriate steps to eliminate incompatibilities concerning the provisions on transfer of capital contained in an investment agreement it has entered into with a third country fails to fulfil its obligations under the second paragraph of Article 307 EC.

The provisions of Articles 57(2) EC, 59 EC and 60(1) EC confer on the Council the power to restrict, in certain specific circumstances, movements of capital and payments between Member States and third countries. In order to ensure the effectiveness of those provisions, measures restricting the free movement of capital must be capable, where adopted by the Council, of being applied immediately with regard to the States to which they relate, which may include the third countries which have signed an investment agreement. Accordingly, those powers of the Council, which consist in the unilateral adoption of restrictive measures with regard to third countries on a matter which is identical to or connected with that covered by an earlier agreement concluded between a Member State and a third country, reveal an incompatibility with that agreement where, first, the agreement does not contain a provision allowing the Member State concerned to exercise its rights and to fulfil its obligations as a member of the Community and, second, there is also no international-law mechanism which makes that possible.

The periods of time necessarily involved in any international negotiations which would be required in order to reopen discussion of the agreement at issue are inherently incompatible with the practical effectiveness of those measures. The possibility of relying on other mechanisms offered by international law, such as suspension of the agreement, or even denunciation of the agreement at issue or of some of its provisions, is too uncertain in its effects to guarantee that the measures adopted by the Council could be applied effectively.

(see paras 35-37, 39-40, 45)