Case T-16/04

Arcelor SA

v

European Parliament and Council of the European Union

(Environment – Directive 2003/87/EC – Scheme for greenhouse gas emission allowance trading – Action for annulment – Lack of direct and individual concern – Action for damages – Admissibility – Sufficiently serious breach of a higher-ranking rule of law conferring rights on individuals – Right to property – Freedom to pursue a trade or profession – Proportionality – Equal treatment – Freedom of establishment – Legal certainty)

Summary of the Judgment

1.      Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them – Legislative measure – Directive

(Arts 230, fourth para., EC and 249, third para., EC)

2.      Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them – Directive 2003/87 – Scheme for greenhouse gas emission allowance trading

(Arts 174 EC, 175(1), EC and 230, fourth para., EC; Directive 2003/87 of the European Parliament and of the Council, Annex I)

3.      Procedure – Application initiating proceedings – Formal requirements – Identification of the subject-matter of the dispute – Brief summary of the pleas in law on which the application is based

(Statute of the Court of Justice, Arts 21, first para., and 53, first para.; Rules of Procedure of the General Court, Art. 44(1)(c))

4.      Non-contractual liability – Conditions – Unlawfulness – Sufficiently serious breach of Community law

(Arts 174 EC, 175 EC and 288, second para., EC; Directive 2003/87 of the European Parliament and of the Council)

5.      Freedom of movement for persons – Freedom of establishment – Provisions of the Treaty

(Arts 3(1)(c), EC, 43 EC, 174 EC, 175 EC and 249, third para., EC; Directive 2003/87 of the European Parliament and of the Council)

6.      Environment – Atmospheric pollution – Directive 2003/87 – Scheme for greenhouse gas emission allowance trading

(Arts 5, second para., EC, 10 EC, 174 EC to 176 EC and 249, third para., EC; Directive 2003/87 of the European Parliament and of the Council, Arts 9(1) and 11(1))

7.      Community law – Principles – Fundamental rights

(Directive 2003/87 of the European Parliament and of the Council, Arts 9(1) and 11(1))

8.      Environment – Atmospheric pollution – Directive 2003/87 – Scheme for greenhouse gas emission allowance trading

(Arts 43 EC and 174 EC; Directive 2003/87 of the European Parliament and of the Council, Arts 3(a) and 12(2) and (3))

9.      Environment – Atmospheric pollution – Directive 2003/87 – Scheme for greenhouse gas emission allowance trading

(Art. 174 EC; Directive 2003/87 of the European Parliament and of the Council, Arts 9(1) and (3), and 11(1), and Annex III; Council Decision 2002/358)

10.    Community law – Principles – Legal certainty

(Arts 2 EC and 3(1)(c) and (g)) EC; Directive 2003/87 of the European Parliament and of the Council, Art. 1)

1.      The mere fact that the fourth paragraph of Article 230 EC does not expressly recognise the admissibility of actions brought by private persons for annulment of a directive within the meaning of the third paragraph of Article 249 EC is not of itself sufficient to render such actions inadmissible. The Community institutions cannot, merely by means of their choice of legal instrument, deprive individuals of the judicial protection which is afforded to them by the Treaty, even if that legal instrument is a directive. Similarly, the mere fact that the contested provisions form part of a measure of general application which constitutes a real directive and not a decision, within the meaning of the fourth paragraph of Article 249 EC, taken in the form of a directive is not of itself sufficient to exclude the possibility that those provisions may be of direct and individual concern to an applicant.

(see para. 94)

2.      Although it is true that, when adopting a measure of general application, the Community institutions are required to respect higher-ranking rules of law, including fundamental rights, the claim that such a measure infringes those rules or rights is not sufficient in itself to establish that the action brought by an individual is admissible, without running the risk of rendering the requirements of the fourth paragraph of Article 230 EC meaningless, as long as that alleged infringement does not distinguish the applicant individually just as in the case of the addressee of a measure.

In that regard, there is no express or specific provision which is either higher-ranking or of secondary legislation which would have required the Community legislature, when adopting Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, to take any particular account of the situation of pig iron and steel producers vis-à-vis the situation of operators in the other industrial sectors referred to in Annex I to that directive. Thus, Article 174 EC and Article 175(1) EC in particular, as legal bases for the regulatory activity of the Community on environmental issues, do not provide for such an obligation.

In addition, a steel producer cannot be regarded as being individually concerned by the provisions of Directive 2003/87.

(see paras 102-103, 105)

3.      An application seeking compensation for damage caused by a Community institution must state the evidence from which the conduct which the applicant alleges against the institution can be identified, the reasons why the applicant considers that there is a causal link between the conduct and the damage it claims to have suffered, and the nature and extent of that damage.

However, although, in the light of the circumstances at the time when the application was lodged for compensation as a result of the alleged unlawful conduct of the Parliament and the Council in adopting Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, that harm could not fail to have a future element since the contested directive was still in the process of being transposed into the national legal systems and although, in the light of the scope of the Member States with regard to the implementation of the allowance trading scheme in their territories by means of their national allocation plans, the applicant was unable to specify the exact extent of that future harm at the time at which it brought its action, it was not essential to specify in the application, as a condition of admissibility, the exact extent of the harm suffered, and even less to specify the amount of compensation sought since that is possible, in any event, up to the reply stage, on the condition that the applicant pleads such circumstances and provides the information which makes it possible to assess the nature and extent of the harm suffered, thereby enabling the defendant to defend itself.

(see paras 132, 135)

4.      As regards the non-contractual liability of the Community as a result of the adoption of Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, a possible sufficiently serious breach of the rules of law which confer rights on individuals must be based on a manifest and serious failure to have regard for the limits of the broad discretion enjoyed by the Community legislature when exercising its powers on environmental issues under Articles 174 EC and 175 EC. Exercise of that discretionary power, on the one hand, implies the need for the Community legislature to anticipate and evaluate ecological, scientific, technical and economic changes of a complex and uncertain nature and, on the other, the balancing and arbitration by that legislature of the various objectives, principles and interests set out in Article 174 EC. In the contested directive, that is reflected in the establishment of a series of objectives and sub-objectives which are in part contradictory.

(see paras 141, 143)

5.      The Community institutions must respect, in the same way as the Member States, the fundamental freedoms, such as the freedom of establishment, which serve to achieve one of the essential objectives of the Community, namely the completion of the internal market provided for in Article 3(1)(c) EC.

However, it does not follow from that general obligation that the Community legislature is required to regulate the area at issue in such a way that the Community legislation, particularly where that legislation takes the form of a directive within the meaning of the third paragraph of Article 249 EC, must provide an exhaustive and definitive solution to certain problems raised from the perspective of completing the internal market or effect a complete harmonisation of national legislation in order to exclude any conceivable barriers to intra-Community trade. Where the Community legislature is called on to restructure or establish a complex scheme, such as the allowance trading scheme, put in place by Directive 2003/87 establishing a scheme for greenhouse gas emission allowance trading within the Community it is entitled to have recourse to a step-by-step approach, and to carry out only a progressive harmonisation of the national legislation at issue, as the implementation of such measures is generally difficult inasmuch as it supposes, on the part of the competent Community institutions, the elaboration, by means of diverse and complex national provisions, of common rules consistent with the objectives defined by the Treaty and receiving the approval of a qualified majority of the members of the Council. That is also the case for Community legislation in the area of the protection of the environment under Articles 174 EC and 175 EC.

(see paras 177-178)

6.      Under the third paragraph of Article 249 EC, a directive is binding upon each Member State to which it is addressed only as to the result to be achieved, but leaves to the national authorities the choice of form and methods, which logically implies that the Member States are left with the necessary discretion to define transposition measures. In addition, pursuant to the principle of subsidiarity laid down in the second paragraph of Article 5 EC to which refers recital 30 of Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, the Community is to take action only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved at Community level. It is apparent from Articles 174 EC to 176 EC that, in the area of protection of the environment, the Community and the Member States have shared competence. Therefore, the Community rules do not seek to effect complete harmonisation in that area and Article 176 EC allows the Member States to introduce more stringent protective measures, subject only to the conditions that they should be compatible with the Treaty and that they should be notified to the Commission.

In accordance with those principles, Directive 2003/87 does not provide for complete harmonisation at Community level of the conditions underlying the establishment and functioning of the allowance trading scheme. Provided that they respect the rules of the Treaty, the Member States enjoy broad discretion regarding the implementation of that scheme, in particular in the context of the elaboration of their national allocation plans and their independent decisions on emission allowance allocation under Article 9(1) and Article 11(1) of that directive. Consequently, the mere fact that the Community legislature left open a particular question falling within the scope of the contested directive and of a fundamental freedom, such as the freedom of establishment, in such a way that it is the task of the Member States to regulate that issue in the exercise of their discretion, albeit in accordance with the higher-ranking rules of Community law, does not in itself justify that omission being classified as being contrary to the rules of the Treaty. That is made all the more evident by the fact that the Member States are required, pursuant to their duty of genuine cooperation under Article 10 EC, to ensure the effectiveness of directives, which also implies that they are required to interpret national law in the light of the objectives and principles underlying the directive at issue.

(see paras 179-180)

7.      Both the Community legislature, when adopting a directive, and the Member States, when transposing that directive into national law, are required to ensure that the general principles of Community law are respected. Thus, it is apparent from settled case‑law that the requirements flowing from the protection of the general principles recognised in the Community legal order, which include fundamental rights, are also binding on Member States when they implement Community rules, and consequently they are bound, as far as possible, to apply the rules in accordance with those requirements. Those principles apply by analogy to the fundamental freedoms of the Treaty.

In that regard, although Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, and in particular Articles 9(1) and 11(1) thereof, grants the Member States discretion and, in principle, that discretion is broad enough to enable them to apply the rules of that directive in conformity with the requirements resulting from the protection of the fundamental rights and fundamental freedoms under the Treaty. In addition, since the implementation of that directive is subject to review by the national courts, it is incumbent upon those courts, if they encounter difficulties relating to the interpretation or validity of the directive, to refer a question to the Court of Justice for a preliminary ruling in the circumstances set out in Article 234 EC. Consequently, the authorities and the courts in the Member States must not only interpret their national law in a manner consistent with the contested directive but also ensure that they do not rely on an interpretation of the latter which would be in conflict with the fundamental rights protected by the Community legal order, with the other general principles of Community law or with the fundamental freedoms of the Treaty, such as the freedom of establishment. The Community legislature cannot be accused of having failed to resolve in an exhaustive and definitive manner, within the framework of a directive, a problem coming within the scope of the freedom of establishment, where that directive grants the Member States a discretion which enables them fully to respect the rules of the Treaty and the general principles of Community law.

(see paras 181-184)

8.      In the absence of the free cross-border transfer of emission allowances for greenhouse gas within the meaning of Article 12(2) and (3), read in conjunction with Article 3(a) of Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, the efficiency and performance of the allowance trading scheme for the purposes of Article 1 of that directive would be seriously disrupted. It is for that reason that Article 12(2) of that directive imposes on the Member States the general obligation to ensure that that freedom is made effective in the relevant national legislation. Conversely, that directive does not provide for any restriction on cross-border transfers of allowances between legal persons within the same group of companies, irrespective of where their registered office and/or principal place of business are located within the internal market. In the light of the aforecited provisions of Directive 2003/87, it cannot therefore be concluded that that directive contains an unlawful restriction on the fundamental freedoms of the Treaty, including the freedom of establishment, or that it encourages the Member States not to respect those freedoms. A fortiori, the Community legislature cannot be held responsible for having failed in that respect, in a manifest and grave manner, to have regard to the limits of its discretion under Article 174 EC in conjunction with Article 43 EC.

(see paras 188, 190)

9.      Directive 2003/87, establishing a scheme for greenhouse gas emission allowance trading within the Community, does not contain any provisions governing the extent of the financial consequences which may result from both a possible insufficiency of allowances allocated to an installation and the price of those allowances, since that price is determined exclusively by the market forces which came into being following the establishment of the allowance trading scheme, which, pursuant to Article 1 of that directive, seeks to promote reductions of greenhouse gas emissions in a cost-effective and economically efficient manner. Regulation at Community level of the prices of allowances might thwart the main objective of that directive, which is to reduce greenhouse gas emissions through an efficient allowance trading scheme in which the cost of emissions and investments made to reduce such emissions is essentially determined by market forces (recital 5 in the preamble to that directive). Consequently, in the event of an insufficiency of allowances, the incentive for operators to reduce, or not to reduce, their greenhouse gas emissions will depend on a complex economic decision taken in the light, first, of the price of emission allowances available on the exchange market and, second, of the costs of possible measures to reduce emissions which may aim either to reduce production or to invest in more efficient methods of production in terms of energy output (recital 20 of the same directive).

In such a scheme, the increase in the cost of emissions and, consequently, in the price of allowances, which depends on a series of economic parameters, cannot be regulated in advance by the Community legislature without reducing, or even completely removing, the economic incentives which constitute its very basis and thereby adversely affecting the effectiveness of the allowance trading scheme. In addition, the establishment of such a scheme, including its economic premises, in order to comply with the obligations resulting from the Kyoto Protocol, comes within the broad discretion granted to the Community legislature under Article 174 EC and constitutes, in itself, a legitimate and appropriate choice. It is on the basis of that legitimate choice that the Community legislature based the allowance trading scheme on the premise that, under Article 9(1) and Article 11(1) of Directive 2003/87, it is the task of the Member States to decide, on the basis of their national allocation plans (NAP) and in the exercise of the discretion granted to them in that regard, on the total quantity of allowances to be allocated and the individual allocation of those allowances to the installations established in their territory. That decision is subject only to a restricted initial review by the Commission, pursuant to Article 9(3) of that same directive, particularly in the light of the criteria set out in Annex III thereto. Therefore, the variations to which the objectives and emission reduction measures of the various Member States will be subject, which are the result of their obligations under the Kyoto Protocol, as reflected in the burden sharing agreement laid down in Decision 2002/358, concerning the approval, on behalf of the European Community, of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and the joint fulfilment of commitments thereunder, and, consequently, the uncertainty regarding the total quantity and the individual quantities of allowances to be allocated to the different industrial sectors and to operators on the basis of the various NAPs, cannot be attributed to the provisions of the directive as such.

(see paras 199-202)

10.    The fact that it is not possible to predict how the exchange market will develop constitutes an element which is inherent and inseparable from the economic mechanism characterising the allowance trading scheme, put in place by Directive 2003/87 establishing a scheme for greenhouse gas emission allowance trading with the Community, which is subject to the classic rules of supply and demand, characteristic of a free and competitive market, in accordance with the principles laid down in Article 1 of, in conjunction with recital 7 in the preamble to, that directive and Articles 2 EC and 3(1)(c) and (g) EC. That aspect cannot therefore be categorised as being contrary to the principle of legal certainty without calling into question the very economic bases of the allowance trading scheme as set out in the contested directive in a manner consistent with the rules of the Treaty.

(see para. 203)