Communicated on 1 September 2015

FORMER SECOND SECTION

Application no. 70750/14 REPCEVIRÁG SZÖVETKEZET against Hungary lodged on 28 October 2014

STATEMENT OF FACTS

1 . The applicant, Repcevirág Szövetkezet , is a cooperative with its registered seat in Aranyosgadány . It is represented before the Court by Mr P. Metzinger , a lawyer practising in Budapest.

A. The circumstances of the case

2 . The facts of the case, as submitted by the applicant, may be summarised as follows.

3 . The applicant aims to support its members in their agricultural activity, in particular by purchasing expensive machines and lending them to the members free of charge. The members pay a regular “contribution fee” to the cooperative. The applicant considered that the lending of machines constituted the very essence of its economic activities and that the purchased goods were “used for the purposes of his taxable transactions” (see Article 17 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes (“Sixth Directive”), cited below). Therefore, it deducted the value-added tax paid in respect of the machines from the tax which it was liable to pay (see Article 17 (2) a) of the Sixth Directive).

4 . In 2008 the Hungarian Tax Authority fined the applicant because it found that the lending of machines to members free of charge was not a “taxable transaction” or, according to the wording of the Hungarian law which transposed the Sixth Directive (notably Act no. LXXIV of 1992 on the Value-Added Tax), an “economic activity”. As a consequence, the applicant was not entitled to tax deduction in respect of the goods in question.

5 . The applicant challenged the decision of the Tax Authority before the administrative courts, but in vain. On 17 February 2009 the Baranya County Court upheld the administrative decision, and the Supreme Court, in review proceedings, confirmed that judgment on 26 November 2009. The Supreme Court referred to the Aardappelenbewaarplaats case of the Court of Justice of the European Communities (case no. C-154/80, EU:C:1981:38), in which the Luxembourg Court held that “a provision of services for which no definite subjective consideration is received does not constitute a provision of services ‘ against payment ’ and is therefore not taxable within the meaning of the Second Directive”.

6 . On 9 December 2010 the applicant brought an action in damages against the Supreme Court before the Budapest Regional Court, alleging that the Supreme Court ’ s 2009 judgment had violated European Union law on account of the wrongful qualification of the applicant ’ s activity for the purposes of the value-added tax deduction. The applicant argued that the Community law provision analysed in the Aardappelenbewaarplaats case was Article 8 of the Second Council Directive 67/228 (defining the basis of assessment of value-added tax), rather than Article 17 of the Sixth Council Directive 77/388/EEC (concerning tax deduction) – which latter should have been applicable in the case before the Supreme Court. In the applicant ’ s view, the Aardappelenbewaarplaats case was about the question whether turnover tax might be imposed on storage services provided for members of a cooperative association free of charge, whereas the case before the Supreme Court concerned a different question, namely the deductibility of input VAT.

7 . Alleging the Supreme Court ’ s liability for judicial malpractice, the applicant relied on the Köbler judgment (see paragraph 28 below) of the Court of Justice of the European Union (“CJEU”), in particular on its paragraph 55, which expressly mentioned the “non-compliance by [a] court ... with its obligation to make a reference for a preliminary ruling” as a factor to be taken into account for the purposes of assessment of a State ’ s liability for an infringement of Community law. It requested the Budapest Regional Court to obtain a preliminary ruling from the CJEU as to the conformity of the Supreme Court ’ s judgment with European Union law and to the conditions for establishing the Supreme Court ’ s liability for a possibly wrongful judgment.

8 . On 31 May 2011 the Budapest Regional Court rejected the applicant ’ s claim against the Supreme Court. Without requesting a preliminary ruling, it held that the Köbler judgment was not relevant in the case because the applicant had sued the Supreme Court on the basis of the Hungarian Civil Code, rather than the Hungarian State itself under European Union law.

9 . The applicant appealed and requested the second instance court to obtain a preliminary ruling also on the question whether the Köbler principles were applicable if the reparation claim was directed against the Supreme Court and not the State.

10 . On 28 August 2012 the Budapest Court of Appeal upheld the first instance judgment, without requesting a preliminary ruling. It accepted the applicant ’ s argument that the reasoning of the first instance judgment was erroneous with respect to the alleged irrelevance of the Köbler case. Nevertheless, the Court of Appeal did not reverse the first instance judgment. It held that, in any event, the applicant ’ s claim was ill-founded on other grounds. Notably, it pointed to the fact that during the previous proceedings the applicant had failed to refer to European Union law, and considered that this fact in itself had rendered the applicant ’ s claim unfounded.

11 . Arguing that European Union law was to be applied ex officio , even without an explicit reference from the plaintiff, the applicant requested the review of the final judgment by the Kúria . It also reiterated its motion for a preliminary reference and proposed an additional question as to whether the Köbler -type liability of a State may be subjected to such a precondition as requiring an explicit reference to the relevant EU law provisions made by the plaintiff in the main proceedings.

12 . The questions thus proposed by the applicant for the purposes of a preliminary reference read as follows:

“1. Does the reparation claim fall under the scope of European law in civil proceedings, such as those actions in damages based on section 349 of the Hungarian Civil Code, brought by an individual against the supreme court of the Member State concerned, in which the plaintiff claims that the supreme court had violated a right conferred on him by a directly applicable provision of the European law in previous administrative proceedings. If so, to what extent?

2. In the common system of value-added tax, with regard to the specificities thereof, may Council Directive 77/388/EEC, especially its Article 17(2)(a), be interpreted as meaning that a national measure (e.g. a judgment) is incompatible with it if it denies the right of a cooperative, otherwise subject to value-added tax in the Member State concerned, to deduct input VAT paid on machines purchased, and that for the sole reason that the cooperative handed over those machines to its members, as ‘ grouping of growers ’ , without consideration?

3. Is the liability of a Member State ’ s supreme court excluded under the rules of the European law by the sole fact that an individual does not allege explicitly the infringement of a specific provision of the European law in the judicial proceedings for the review of an administrative decision denying him the right of tax deduction; or the domestic court shall enforce ex officio the directly applicable provision of European law (here, Article 17(2 )( a) of the Sixth Directive)?

4. Is the infringement sufficiently serious if the supreme court of a Member State denies, in administrative proceedings, an individual ’ s right to tax deduction without analysing the underlying provision of the European law directly or referring the case for preliminary ruling, in circumstances when the reasoning of the refusal of a preliminary reference is based on the supreme court ’ s reliance on a judgment of the European Court of Justice adopted on a different subject and when this latter court has not yet adopted a ruling concerning the issue at hand?”

13 . On 2 October 2013 the Kúria dismissed the applicant ’ s motion for a preliminary ruling request. Firstly, it noted that it was not in dispute between the parties that the case fell under the scope of European Union law, therefore the referral of the first question would have been futile. Secondly, concerning the second, third and fourth questions, the Kúria held that they could have been considered in the previous, underlying proceedings, but they fell outside the scope of the action in damages brought against the Supreme Court on account of alleged judicial malpractice. It further held that the assessment of the consequences of a plaintiff ’ s failure to put forward explicit allegations as to an infringement of the European Union law ( see question 3 quoted above) was the task of the national courts, and that it did not raise any question of interpretation that would fall under the jurisdiction of the CJEU.

14 . The applicant unsuccessfully attempted to seek a remedy against the refusal to make a preliminary reference; according to the Kúria , no appeal was possible against that kind of decision.

15 . On 11 December 2013, the Kúria confirmed the final judgment of the Budapest Court of Appeal. It reiterated that the applicant could have argued the alleged infringement of European Union law before the Supreme Court in the 2009 proceedings. Since the applicant had failed to do so, the Supreme Court was indeed prevented, by the force of the applicable procedural rules, from examining such arguments as raised in the subsequent proceedings for damages, concerning the compatibility of the 2009 final judgment with Community law. Therefore, the Supreme Court could not bear responsibility for the infringement of European Union law alleged by the applicant. The judgment of the Kúria was served on the applicant on 7 February 2014.

16 . On 13 March 2014 the applicant lodged a constitutional complaint claiming the unfairness of the proceedings before the Kúria on account of the latter ’ s allegedly arbitrary refusal to refer the case for a preliminary ruling. Contending that the Constitutional Court should be considered as a “court or tribunal” for the purposes of Article 267 of the Treaty on the Functioning of the European Union ( see paragraph 21 below ), the applicant also requested the Constitutional Court to turn to the CJEU in order to enquire if an ‘ arbitrary ’ refusal of a last instance jurisdiction to make a preliminary reference may violate the party ’ s right to a fair trial guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union ( see paragraph 22 below ) and, if so, under what conditions such a refusal might be considered arbitrary. The applicant argued in particular that the Kúria had failed to recognise an issue of fundamental importance, namely that the question as to whether a certain legal issue (namely the consequences of a plaintiff ’ s failure to put forward explicit allegations as to an infringement of the European Union law, see paragraph 13 above in fine ) falls within the ambit of the national law or the EU law was itself a question belonging necessarily in the realm of European law. Ignoring this concept, the Kúria had “solved” the problem in an arbitrary fashion, that is, by refusing the reference and barring the applicant ’ s access to its “lawful judge”, the CJEU in the circumstances.

17 . On 19 May 2014 the Constitutional Court declared the constitutional complaint inadmissible, without putting forward a preliminary ruling request. It held that the question whether a request for preliminary reference should be made or not was to be decided by the judges hearing the case in the ordinary courts, and the Constitutional Court lacked jurisdiction to review such decisions. It further noted that the only thing a petitioner might claim in constitutional complaint proceedings initiated under section 27 of the Act no. CLI of 2011 on the Constitutional Court ( see paragraph 19 below ) was the annulment of a judgment. Consequently, no request for a preliminary reference was possible under that law, and the applicant ’ s motion to that effect had to be rejected.

B. Relevant domestic and European Union law

1. Domestic law

18 . Article 24(2 )( d) of the Fundamental Law provides as follows:

“The Constitutional Court shall, on the basis of a constitutional complaint, review the conformity with the Fundamental Law of any judicial decision.”

19 . Section 27 of the Act no. CLI of 2011 on the Constitutional Court (“the Constitutional Court Act”) provides as follows:

“In accordance with Article 24 (2) d) of the Fundamental Law, persons or organisations affected by judicial decisions contrary to the Fundamental Law may submit a constitutional complaint to the Constitutional Court if the decision made regarding the merits of the case or other decision terminating the judicial proceedings

a) violates their rights laid down in the Fundamental Law, and

b) the possibilities for legal remedy have already been exhausted by the petitioner or no possibility for legal remedy is available for him or her.”

20 . Section 155/A of the Code of Civil Procedure provides as follows:

“(1) The court may request the European Court of Justice for a preliminary ruling in accordance with the rules laid down in the Treaty establishing the European Community.

(2) The court shall make a reference for a preliminary ruling by order ( végzés ) and shall [simultaneously] stay the proceedings. In the order, the court shall establish the question for which a preliminary ruling is requested and describe the circumstances of the case and the relevant domestic law inasmuch as it is necessary for answering the question referred to the European Court of Justice. The order shall be notified to the European Court of Justice and, for information, to the Minister in charge of justice at the same time.

(3) No appeal lies against a court decision making a reference for a preliminary ruling or dismissing a request for a reference for a preliminary ruling.”

2. European Union law

21 . Article 267 of the Treaty on the Functioning of the European Union (“TFEU”) [1] provides as follows:

“The Court of Justice shall have jurisdiction to give preliminary rulings concerning:

(a) the interpretation of the Treaties;

(b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union ...;

Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon.

Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall bring the matter before the Court.”

22 . Article 47 of the Charter of Fundamental Rights of the European Union provides, as relevant:

“Right to an effective remedy and to a fair trial

Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article.

Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law. Everyone shall have the possibility of being advised, defended and represented. ... ”

23 . Article 17(2 )( a) of the Sixth Directive ( Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes) , as amended by Article 28f thereof, provides:

“In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

(a) [VAT] due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person; ... ”

3. Relevant case-law of the CJEU

24 . In the case of S.r.l . CILFIT and Lanificio di Gavardo S.p.a . v. Ministry of Health (283/81, EU :C:1982:335 ), the CJEU received a request from the Italian Court of Cassation for a preliminary ruling. This request concerned the question as to whether the third paragraph of Article 177 of the EEC Treaty [2] laid down an obligation to refer a matter, which precluded the national court from determining whether the question raised was justified, or whether it made that obligation conditional on the prior finding of a reasonable interpretative doubt.

25 . In its judgment the CJEU explained, firstly, as follows:

“... 6. The second paragraph of that article [Article 267] provides that any court or tribunal of a Member State may, if it considers that a decision on a question of interpretation is necessary to enable it to give judgment, request the Court of Justice to give a ruling thereon. The third paragraph of that article provides that, where a question of interpretation is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy under national law, that court or tribunal shall, bring the matter before the Court of Justice.

7. That obligation to refer a matter to the Court of Justice is based on cooperation, established with a view to ensuring the proper application and uniform interpretation of Community law in all the Member States, between national courts, in their capacity as courts responsible for the application of Community law, and the Court of Justice. More particularly, the third paragraph of Article [267] seeks to prevent the occurrence within the Community of divergences in judicial decisions on questions of Community law. The scope of that obligation must therefore be assessed, in view of those objectives, by reference to the powers of the national courts, on the one hand, and those of the Court of Justice, on the other, where such a question of interpretation is raised within the meaning of Article [267].

8. In this connection, it is necessary to define the meaning for the purposes of Community law of the expression “where any such question is raised” in order to determine the circumstances in which a national court or tribunal against whose decisions there is no judicial remedy under national law is obliged to bring a matter before the Court of Justice.

9. In this regard, it must in the first place be pointed out that Article [267] does not constitute a means of redress available to the parties to a case pending before a national court or tribunal. Therefore the mere fact that a party contends that the dispute gives rise to a question concerning the interpretation of Community law does not mean that the court or tribunal concerned is compelled to consider that a question has been raised within the meaning of Article [267]. ...”

26 . The CJEU went on to observe that courts or tribunals against whose decisions there was no judicial remedy had the same discretion as any other national court or tribunal to ascertain “whether a decision on a question of Community law [was] necessary to enable them to give judgment”. It concluded that they were not obliged to refer a question of interpretation of Community law raised before them in the following situations: (1) where the question was not relevant, in the sense that the answer to the question, regardless of what it might be, could in no way affect the outcome of the case; (2) where the question was materially identical to a question which had already been the subject of a preliminary ruling in a similar case, or where previous decisions of the Court had already dealt with the point of law in question, irrespective of the nature of the proceedings which led to those decisions, even though the questions at issue were not strictly identical; or (3) where the correct application of Community law was so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised was to be resolved (bearing in mind that before it came to this conclusion the national court or tribunal had to be convinced that the matter was equally obvious to the courts of the other member States and to the Court of Justice, and only if those conditions were satisfied could the national court or tribunal refrain from submitting the question to the Court of Justice and take upon itself the responsibility for resolving it).

27 . The judgment then concluded as follows (point 21):

“... the third paragraph of Article [267] of the [Treaty on the Functioning of the European Union] is to be interpreted as meaning that a court or tribunal against whose decisions there is no judicial remedy under national law is required, where a question of Community law is raised before it, to comply with its obligation to bring the matter before the Court of Justice, unless it has established that the question raised is irrelevant or that the Community provision in question has already been interpreted by the Court or that the correct application of Community law is so obvious as to leave no scope for any reasonable doubt. The existence of such a possibility must be assessed in the light of the specific characteristics of Community law, the particular difficulties to which its interpretation gives rise and the risk of divergences in judicial decisions within the Community.”

28 . In its Köbler judgment (C-224/01, EU :C:2003:513 , point 1 of the operative part), the CJEU ruled as follows:

“The principle that Member States are obliged to make good damage caused to individuals by infringements of Community law for which they are responsible is also applicable where the alleged infringement stems from a decision of a court adjudicating at last instance where the rule of Community law infringed is intended to confer rights on individuals, the breach is sufficiently serious and there is a direct causal link between that breach and the loss or damage sustained by the injured parties. In order to determine whether the infringement is sufficiently serious when the infringement at issue stems from such a decision, the competent national court, taking into account the specific nature of the judicial function, must determine whether that infringement is manifest. It is for the legal system of each Member State to designate the court competent to determine disputes relating to that reparation.”

29 . In the reasoning of that judgment, it further held:

“30. ... [A]s the Court has repeatedly held, the principle of liability on the part of a Member State for damage caused to individuals as a result of breaches of Community law for which the State is responsible is inherent in the system of the Treaty ... .

31. The Court has also held that that principle applies to any case in which a Member State breaches Community law, whichever is the authority of the Member State whose act or omission was responsible for the breach ... .

32. In international law a State which incurs liability for breach of an international commitment is viewed as a single entity, irrespective of whether the breach which gave rise to the damage is attributable to the legislature, the judiciary or the executive. That principle must apply a fortiori in the Community legal order since all State authorities, including the legislature, are bound in performing their tasks to comply with the rules laid down by Community law which directly govern the situation of individuals ... .

33. In the light of the essential role played by the judiciary in the protection of the rights derived by individuals from Community rules, the full effectiveness of those rules would be called in question and the protection of those rights would be weakened if individuals were precluded from being able, under certain conditions, to obtain reparation when their rights are affected by an infringement of Community law attributable to a decision of a court of a Member State adjudicating at last instance.

34. It must be stressed, in that context, that a court adjudicating at last instance is by definition the last judicial body before which individuals may assert the rights conferred on them by Community law. Since an infringement of those rights by a final decision of such a court cannot thereafter normally be corrected, individuals cannot be deprived of the possibility of rendering the State liable in order in that way to obtain legal protection of their rights.

35. Moreover, it is, in particular, in order to prevent rights conferred on individuals by Community law from being infringed that under the third paragraph of Article 234 EC a court against whose decisions there is no judicial remedy under national law is required to make a reference to the Court of Justice.

36. Consequently, it follows from the requirements inherent in the protection of the rights of individuals relying on Community law that they must have the possibility of obtaining redress in the national courts for the damage caused by the infringement of those rights owing to a decision of a court adjudicating at last instance ... .

...

51. As to the conditions to be satisfied for a Member State to be required to make reparation for loss and damage caused to individuals as a result of breaches of Community law for which the State is responsible, the Court has held that these are threefold: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation incumbent on the State and the loss or damage sustained by the injured parties ... .

52. State liability for loss or damage caused by a decision of a national court adjudicating at last instance which infringes a rule of Community law is governed by the same conditions.

53. With regard more particularly to the second of those conditions and its application with a view to establishing possible State liability owing to a decision of a national court adjudicating at last instance, regard must be had to the specific nature of the judicial function and to the legitimate requirements of legal certainty, as the Member States which submitted observations in this case have also contended. State liability for an infringement of Community law by a decision of a national court adjudicating at last instance can be incurred only in the exceptional case where the court has manifestly infringed the applicable law.

54. In order to determine whether that condition is satisfied, the national court hearing a claim for reparation must take account of all the factors which characterise the situation put before it.

55. Those factors include, in particular, the degree of clarity and precision of the rule infringed, whether the infringement was intentional, whether the error of law was excusable or inexcusable, the position taken, where applicable, by a Community institution and non-compliance by the court in question with its obligation to make a reference for a preliminary ruling under the third paragraph of Article 234 EC.

56. In any event, an infringement of Community law will be sufficiently serious where the decision concerned was made in manifest breach of the case-law of the Court in the matter ... .”

COMPLAINT

30 . The applicant complains under Article 6 § 1 of the Convention about the failure of the domestic courts, namely the Kúria and the Constitutional Court, to refer questions raised by its case to the CJEU for a preliminary ruling – and that allegedly in breach of the conditions laid down in the CJEU ’ s Cilfit judgment. The applicant contends that this failure violated its right of access to the court, notably the CJEU, having jurisdiction to give mandatory interpretation on the European Union law provisions at issue.

QUESTIONS TO THE PARTIES

1. Has the complaint been lodged within six months from the final decision?

2. Does Article 6 § 1 of the Convention apply to the proceedings before the Constitutional Court in the present case?

3. Did the refusal of the Kúria to grant the applicant ’ s request for a referral to the CJEU render the proceedings unfair ( see Ullens de Schooten and Rezabek v. Belgium, nos. 3989/07 and 38353/07, judgment of 20 September 2011, in particular §§ 59-62)?

4. Did the refusal of the Constitutional Court to grant the applicant ’ s request for a referral to the CJEU render the proceedings unfair ( see Ullens de Schooten and Rezabek v. Belgium, cited above )?

[1] Formerly, Article 177 of the Treaty establishing the European Economic Community (“EEC Treaty”) and then Article 234 of the Treaty Establishing the European Community (“EC Treaty”).

[2] Now Article 267 of the Treaty on the Functioning of the European Union.