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European Union: European Court of Justice Rules on German Highway Toll for Passenger Vehicles

(July 11, 2019) On June 18, 2019, the European Court of Justice (ECJ) held that the German highway toll for passenger vehicles is incompatible with European Union (EU) law, in particular with the principles of the free movement of goods and the freedom to provide services. It stated that the toll in combination with the relief from the motor vehicle tax for owners of vehicles registered in Germany constituted indirect discrimination on grounds of nationality, because the toll is de facto paid only by owners of vehicles registered in other EU Member States. ( Case C‑591/17 , Republic of Austria v. Federal Republic of Germany, ECLI:EU:C:2019:504, InfoCuria website; Consolidated Version of the Treaty on the Functioning of the European Union (TFEU) arts. 26, 28–37, 56–62, 2016 O.J. (C 202) 1, EUR-Lex website.)
Applicable Law
The Eurovignette Directive applies to vehicle taxes, tolls, and user charges imposed on vehicles. ( Consolidated Version of Directive 1999/62/EC of the European Parliament and of the Council of 17 June 1999 on the Charging of Heavy Goods Vehicles for the Use of Certain Infrastructures  (Eurovignette Directive), O.J. 1999 (L 187) 42), EUR-Lex website.) It provides that Member States may maintain or introduce tolls and/or user charges on the trans-European road network or on certain sections of that network, and on any other additional sections of their network of motorways. ( Id . art. 7, para. 1.) Such tolls and user charges must be nondiscriminatory. ( Id. art. 7, para. 3.) In addition, it provides that Member States may provide appropriate compensation for those charges. ( Id . art. 7k.)
The German Infrastructure Use Charge Act provides that all passenger vehicles that use federal roads, including highways, must pay an “infrastructure use charge.” ( Gesetz über die Erhebung einer zeitbezogenen Infrastrukturabgabe für die Benutzung von Bundesfernstraßen [Infrastrukturabgabengesetz] [InfrAG] [Act on the Levying of a Time-Limited Infrastructure Use Charge for the Use of Federal Roads] [Infrastructure Use Charge Act], June 8, 2015, BUNDESGESETZBLATT [BGBl.] [FEDERAL LAW GAZETTE] I at 904, as amended, § 1, German Laws Online website; Bundesfernstraßengesetz [FStrG] [Federal Roads Act], June 28, 2007, BGBl. I at 1206, as amended, § 1, German Laws Online website.) Owners of vehicles registered in Germany must purchase an annual vignette for €130 (about US$148). Owners of vehicles registered outside of Germany may choose between a 10-day vignette (€2.50–€25 (about US$2.84–US$28)), a 2-month vignette (€7–€50 (about US$8–US$57)), and an annual vignette (maximum of €130). (Infrastructure Use Charge Act § 8 in conjunction with annex.)
The German Motor Vehicle Tax Act provides that vehicles registered in Germany receive relief from the annual tax on motor vehicles corresponding to at least the amount of the infrastructure use charge if they comply with certain emission standards. ( Kraftfahrzeugsteuergesetz [KraftStG 2002] [Motor Vehicle Tax Act], Sept. 26, 2002, BGBl. I at 3818, as amended by the Zweites Verkehrsteueränderungsgesetz [Second Act Amending the Road Traffic Tax Act] and the Gesetz zur Änderung des Zweiten Verkehrsteueränderungsgesetzes [Act Amending the Second Act Amending the Road Traffic Tax Act] § 9, para. 6.)
Facts of the Case
In 2015, Germany passed the Infrastructure Use Charge Act, which introduced a road infrastructure charge on passenger vehicles using federal roads, including highways. The proceeds from the charge would be wholly used for the improvement of the federal transport infrastructure. The German government has said it intends to move from financing the federal road infrastructure by means of taxation to financing by users. (Case C‑591/17, para. 18.) The charge would be calculated on the basis of cylinder capacity, the type of engine (positive ignition or compression ignition), and emission standards. ( Id . para. 8.) According to the Second Act Amending the Road Traffic Tax Act, the relief from the motor vehicle tax for vehicles registered in Germany would enter into force once collection of the infrastructure use charge had started. (Second Act Amending the Road Traffic Tax Act, art. 3, para. 2.) That date has not yet been determined.
On June 18, 2015, the European Commission initiated infringement proceedings against Germany and eventually referred the case to the European Court of Justice (ECJ). (Case C-591/17, para. 14.) However, after Germany amended the Infrastructure Use Charge Act, the European Commission terminated the infringement proceedings on May 17, 2017. ( Id . at 15.) In July 2017, Austria informed the European Commission that it considered the combined effects of the infrastructure use charge and the relief for owners of vehicles registered in Germany an infringement of EU law. As the European Commission did not issue a reasoned opinion within the three-month period provided for in article 259 of the TFEU, Austria brought infringement proceedings against Germany before the ECJ. ( Id . paras. 16–21.)
Ruling
The ECJ held that the combined effects of the infrastructure use charge and the relief from the motor vehicle tax for vehicles registered in Germany constituted indirect discrimination on the grounds of nationality contrary to article 18 of the TFEU. ( Id . para. 78.) The Court recalled that the principle of nondiscrimination prohibits both direct discrimination and indirect discrimination that leads to the same result. ( Id . para. 42.) It stated that even though all users of German federal roads are subject to the infrastructure use charge, only owners of vehicles registered in Germany qualify for the relief. Therefore, the infrastructure use charge is de facto paid only by owners of vehicles registered in other Member States. The Court added that, in general, owners of vehicles registered in Germany are German nationals, so that the difference in treatment has the same effect as a difference in treatment based on nationality. ( Id . paras. 48–51.)
The ECJ also held that Germany has not provided evidence that the purpose of the infrastructure use charge is to move from a system of financing the federal road infrastructure by means of taxation to financing by users. ( Id . para. 69.) Owners of vehicles registered in Germany may buy only an annual vignette irrespective of their actual use of federal roads. Furthermore, they receive relief from the infrastructure use charge in an amount at least equivalent to the charge. ( Id . para. 68.) The Court concluded that the “user pays” principle therefore applies only to owners of vehicles registered in other EU Member States, whereas the financing by means of taxation continues to apply to owners of vehicles registered in Germany. ( Id . para. 69.) The ECJ also found no evidence that the indirect discrimination was justified by environmental or other considerations. ( Id . paras. 75–77.)
However, the Court rejected the claim that the rules for the structuring and application of the infrastructure use charge are discriminatory. It held that the possibility of requiring offenders using a vehicle registered in a Member State other than Germany to pay a sum as security in order to ensure payment of the fine imposed is proportionate to the objective pursued. The Court stated that there is a risk that the fine imposed may not be collected or may be collected only with great difficulty. ( Id . paras. 107 & 109.)
With regard to the principle of the free movement of goods, the ECJ ruled that the national measures restrict the access to the German market of goods from other Member States. ( Id . para. 134.) It recalled that “the free movement of goods between Member States is a fundamental principle of the FEU Treaty which is expressed in the prohibition, set out in Article 34 TFEU, of quantitative restrictions on imports between Member States and all measures having equivalent effect.” ( Id . para. 119.) According to its settled case-law on the issue, measures having equivalent effect to quantitative restrictions include any measure “that is capable of hindering, directly or indirectly, actually or potentially, intra-Union trade” or a measure that “hinders access to the market of a Member State of products originating in other Member States.” ( Id . paras. 120 & 121.) The Court concluded that, as only owners of vehicles registered in other EU Member States are de facto subject to the infrastructure use charge, the charge will increase the costs of transport and the price of those goods and affect their competitiveness. ( Id. para. 127.)
In addition, the ECJ also found an infringement of the principle of freedom to provide services. ( Id . paras. 144 & 149.) It reiterated its case-law that “[a]rticle 56 TFEU precludes the application of any national rules which have the effect of making the provision of services between Member States more difficult than the provision of services purely within one Member State” and that “[n]ational measures which prohibit, impede or render less attractive the exercise of the freedom to provide services are restrictions on that freedom.” ( Id . paras. 135 & 136.) On the other hand, freedom to provide services does not cover “measures the only effect of which is to create additional costs in respect of the service in question and which affect in the same way the provision of services between Member States and that within one Member State.” ( Id . para. 137.) As already stated with regard to the free movement of goods, the Court held that the combined effects of the national measures at issue will either increase the cost of services supplied in Germany by service providers from outside of Germany, or increase the cost for service recipients travelling into Germany. ( Id . para. 144.)

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