In a judgment delivered last week by the Court of Justice of the European Union in Joined Cases C‑508/21 P and C‑509/21 P, Commission and Interessengemeinschaft der Grenzhändler v Dansk Erhverv, sided with the Commission and a trade association representing German border shops.
The result of the judgment of the Court is that the non-charging of deposit on drinks sold in German border shops is lawful for residents in the Nordic states if they sign an export declaration at the point of purchase, if the stores offer such.
Some Member States have forms of deposit charges for drinks sold to the public. Such deposit charges – known as the ‘pant’ system (at least in Denmark and Sweden) – are charges added to the cost of drinks, but are then refundable if the drinks packaging is thereafter returned to a designated depot in that Member State.
In Germany, the power to impose such deposit charges is done by the regions. Two regions in northern Germany, Schleswig-Holstein and Mecklenburg-Vorpommern, that are the closest to the Nordic states, were of the view that they did not have to levy such deposit charges on customers if customers purchasing drinks sign an ‘export declaration’, in that they will consume and dispose of the drinks packaging outside Denmark. The city of Flensburg in northern Denmark is well-known for having stores catering for persons residing in the Nordic states.
Naturally, business owners in Denmark were unhappy about this because they argued that many consumers were avoiding Danish ‘pant’ charges by purchasing drinks in Germany without having to paying German ‘pant’ charges. Thus, the Danish business lobby wanted to ensure that all consumers in northern Germany paid German ‘pant’ charge.
The case was first litigated at the General Court, before finally, the Court of Justice having the final say.
Initially, before the General Court, a Danish business lobby (Dansk Erhverv) argued that Germany allowing retailers that run border shops to exempt non-residents of Germany from paying deposit charges on drinks was unlawful state aid. The industry body took the case at the General Court because it was taking an action for annulment against the Commission’s 2018 decision which find that no state aid was granted by Germany to German border shops, in light of its investigation under Article 107(1) TFEU examining whether state aid was present involving three measures: the non-charging of the deposit itself, the non-collection of the VAT relating to the deposit, and the non-imposition of a fine on undertakings which do not charge the deposit.
The Commission was of the view there was no state aid was present because, ‘that it appeared reasonable not to require the deposit to be charged when the consumer signed an export declaration’, and that the non-payment of deposit charges non-residents ‘constituted an appropriate reconciliation of the objective of protecting the environment pursued by Directive 94/62 and the free movement of goods’.
In seeking the annulment of the Commission’s decision, Dansk Erhverv argued that the Commission had carried out an insufficient examination of the compatibility of the exemption from the deposit with the principle of sincere cooperation, Directive 94/62, the ‘polluter pays principle’ and certain provisions of German law.
At first instance, the General Court in its judgment in Case T-47/19, Dansk Erhverv v Commission delivered in June 2021 agreed with Dansk Erhverv, and stated the decision had to be annulled because it was vitiated by errors and that other evidence supported the conclusion that the Commission had encountered serious difficulties when examining the contested measure, consisting in the non-imposition of a fine on undertakings which do not charge the deposit
An appeal was taken against this judgment of the General Court that had sided with the Danish industry group’s interests by 1) the Commission, and 2) Interessengemeinschaft der Grenzhändler (IGG), an association of border shops who had intervened in the General Court case in favour of the Commission.
In hearing the appeal, the Court of Justice in Joined Cases C‑508/21 P and C‑509/21 P, Commission and Interessengemeinschaft der Grenzhändler v Dansk Erhverv found that, even if there were difficulties of interpretation of the relevant legislative provisions of national law, such findings would not be sufficient to conclude that the condition relating to state resources was satisfied. Furthermore, it stated that Article 7(1) of Directive 94/62 does not oblige a Member State to require a deposit to be charged to retail purchasers of drinks packaging for the consumption outside a Member State. It thus found that Article 7(1) of Directive 94/62,
‘does not require a deposit to be collected…where the sale of…beverages in border shops to consumers[,] who sign an export declaration[,] is analogous to the sale of goods to traders for export in respect of which the vendor is under no obligation to collect a deposit.’
para. 96.
Accordingly, the Court of Justice had found that the General Court erred in its judgment at first instance, when it had found that the Commission had carried out an insufficient and incomplete examination of the non-imposition of fines on the border shops. It thus set aside the General Court’s judgment, and gave final judgment itself, thus upholding the Commission’s decision that no state aid is being given to German border shops
A point to note: Denmark, as a Member State, did not intervene in the cases.
The result, nevertheless, is that the non-charging of deposit on drinks sold in German border shops is lawful for residents in the Nordic states if they sign an export declaration at the point of purchase, if the stores offer such.
The judgment of the Court in Joined Cases C‑508/21 P and C‑509/21 P, Commission and Interessengemeinschaft der Grenzhändler v Dansk Erhverv, delivered by the Fifth Chamber on 14 September 2023, can be read here.