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The principle of legal certainty as a principle of economic efficiency

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Abstract

Legal certainty, a feature of the rule of law, constitutes a requirement for the operational necessities of market interactions. But, the compatibility of the principle of legal certainty with ideals such as liberalism and free market economy must not lead to the hastened conclusion that therefore the principle of legal certainty would be compatible and tantamount to the principle of economic efficiency. We intend to analyse the efficiency rationale of an important general principle of EU law—the principle of legal certainty. In this paper, we shall assert that not only does the EU legal certainty principle encapsulate an efficiency rationale, but most importantly, it has been interpreted by the ECJ as such. The economic perspective of the principle of legal certainty in the European context has, so far, never been adopted. Hence, we intend to fill in this gap and propose the representation of the principle of legal certainty as a principle of economic efficiency. After having deciphered the principle of legal certainty from a law and economics perspective (1), we shall delve into the jurisprudence of the ECJ so that the judicial reasoning of the Court as this reasoning proves the relevance of the proposed representation (2). Finally, we conclude in light of the findings of this paper (3).

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Notes

  1. See Raitio (2003: 128).

  2. C-13/61 (1962) 13/61, De Geus en Uitdenbogerd/Bosch.

  3. C-323/88 (1990) Sermes, I-3027; C-234/89 (1991) Delimitis v. Henninger Brau, I-935.

  4. See Schwarz (1994: 202).

  5. C-18/89 (1991) Tagaras c/Cour de justice.

  6. Recognised explicitly by the ECJ in C-91/92 (1994) Faccini Dori, I-3325.

  7. Salviejo (2003: 225).

  8. Raitio (2003: 125).

  9. Schermers and Waelbroeck (2001: 64).

  10. Joined cases C-42 and 49/59 (1961) SNUPAT v. High Authority, 103.

  11. The different illustrations of the EU principle of legal certainty will be discussed in detail below, but as for the Res Judicata intertwine with legal certainty.

  12. See recently, Regulation 211/2011 (2011) On the Citizens Initiative, of 16 February 2011, L 65/1; See also Regulation 1259/2010 (2010) Implementing enhanced cooperation in the area of the law applicable to divorce and legal separation, of 20 December 2010, L 343/10.

  13. C-81/72 (1973) Commission v. Council, 575.

  14. C-112/77 (1978) Firma August Toepfer, 1019.

  15. C-112/80 (1981) Firma Anton Durbeck v. Hauptzollamt Frankfurt am Main-Flughafen, 1095.

  16. C-107/97 (2000) Criminal Proceedings against Mac Rombi and Arkopharma SA, I-3367.

  17. T-123/89 (1990) Jean-Louis Chomel v. Commission, II-131; C-120/86 (1988) J. Mulder v. Minister of Agriculture, 2321. The Article 297 TFEU affirms, as a default rule, that the EU regulations and directives enter into force the 20th day following their publication. Hence, all EU regulations and directives are presumed to have only prospective effects but also delayed (of 20 days) applicability from the adoption of the act. The ECJ ruled that the date of actual publication rather than the date of publication appearing in the Official Journal mattered for determining the effects of the legal consequences. See C337/88 (1990) Societa agricola fattoria alimentare, I-1, at $12.

  18. C-74/74 CNTA, 533.

  19. C-63/93 (1996) Fintan Duff v. Minister for Agriculture and Food, Ireland, I-569, at $20. See also more recently C-358/08 (2009) Aventis Pasteur SA v. OB, I-11305 (‘It should be recalled in that regard that, according to settled case-law, the principle of legal certainty, the corollary of which is the principle of the protection of legitimate expectations […]’ at §47).

  20. C-110/74 (1975) C.A.M., 1393 at $30.

  21. But not necessarily the reverse: some expectations arise with rights created. See Opinion of Advocate General Trabucchi in C-5/75 (1975) Deuka, 759.

  22. See e.g. C-63/93 (1996) Duff, I-569.

  23. C-70/83 (1984) Kloppenberg v. Commission, 1075 at $11. In this given case, the retroactive effects of the contested Directive on a harmonization of the turnover tax laws have been put set aside by the Court because of the potential risk of “undermining that principle”.

  24. See e.g. C-C-15/85 (1987) Consorzio Cooperative d’Abruzzo, 1005; C-244/95 (1997) Moskof, I-6441. However, the illegality of an act leads to its annulment both retrospectively and prospectively. But, in exceptional cases, due to unreasonable time-limit in the withdrawal of the act, the expectations of the private litigants may be deemed to be legitimate and thus compensation be awarded with respect to legal certainty. See C-248/89 (1991) Cargill, I-2987; C-159/82 (1983) Verli-Wallace, 2718.

  25. C-7/56 and 3-7/57 (1957) Algera, 39; C-14/81 (1982) Alpha Steel v. Commission, 749; C-365/89 (1991) Cargill v. Produktschap voor Margarine, Vetten en Olien, I-3045. See also Hohfeld (1913).

  26. For instance, legal coherence requires the withdrawal of a meaningless act or of an act in contradiction with other provisions, see C-T-115/94 at $125.

  27. Indeed, Advocate General Trabuchi declared that ‘the existence of legitimate expectations worthy of protection can be established only on the merits of each case […]’, in C-5/75 (1975) Deuka v. Einfuhrund Vorratsstelle fur Getreide, 773; C-310/97 P (1999) Commission v. AssiDoman Kraft Products aB and others, I-5363. Tridimas (2006: 250) thinks indeed that ‘AssiDoman favours finality and legal certainty at the expense of substantive legality […].’ ‘Finality’ is to be understood from the consequentialist perspective as the underlying consideration for efficiency concerns.

  28. C-205-215/82 (1983) Deutsche Milchkontor, 2633, at $30.

  29. Article 455 of the French Code of Civil Procedure.

  30. See Troper and Grzegorczyk (1997).

  31. Puissochet and Legal (2001).

  32. C-325/85 (1987) Ireland v. Commission, 05041.

  33. C-99/78 (1979) Weingut Gustav Decker KG v. Hauptozollamt Landau, 101.

  34. C-461/03 (2005) Gaston Schul Douane-expediteur BV v. Minister van Landbouw, Natuur en Voedselkwaliteit, I-10513.

  35. See Tisdale (1959: 104) arguing that ‘from its very nature case law is full of uncertainty. The first and most obvious reason for this uncertainty lies in the fact that a court cannot declare the law except in relation to the facts of the case before it.’

  36. Therefore, B after  − C after  > B now  − C now and not merely B after  > C now .

    MacHugh (1988: 124) affirms that courts should not, due to the reluctance of adopting rules that are retrospective hence creating legal uncertainty, “maintain and apply an unjust or inefficient rule”.

  37. Van Alstine (2002: 795) incorporates in ‘legal transition costs’ a large array of costs, such as the learning costs of new laws, the uncertainty costs of lost legal knowledge, the private adjustment costs, and the errors costs of interpretation.

  38. See Kaplow (1986) in particular who points out that when a legal rule must be applied repeatedly and uniformly, then rules over standards are more optimal.

  39. By opposition of the deontological perspective of contract law which views performance of legal commitments as morally embedded in social interactions. See Zamir and Medina (2010: 292–311).

  40. This argument is analogized from efficient breach of contract as introduced by Polinsky (2003: 33–36).

  41. C-63/93 (1996) Duff and others v. Minister of Agriculture and Food, Ireland and the Attorney General, I-569 at $20.

  42. C-377/98; C-354/95.

  43. C-55/69 (1972) Cassella Farbwerke Mainkur AG v. Commission, 887 at §22.

  44. C-143/83 (1985) Commission v. Denmark, 427.

  45. C-537/08 (2010) Kahla Thuringen Porzellan GmbH v. European Commission, at §63. See also C-506/03 (2005) Germany v. Commission, at §58; C-47/07 (2008) Masdar (UK) v. Commission, I-9761 at §34 and 81; C-143/93 (1996) van Es Douane Agenten, I-431 at §27; C-110/03 (2005) Belgium v. Commission, I-2801 at §30.

  46. C-550/07 (2010) Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v. European Commission. See also C-63/93 (1996) Duff and others, I-569 at §20; C-226/08 (2010) Stadt Papenburg, at §45; C-76/06 (2007) Britannia Alloys & Chemicals Ltd v. Commission of the European Communities, I-04405 at §75.

  47. More generally, an EU legal act for being directly applicable is required to be clear and unconditional and not contingent on any discretionary implementing measure, according to the famous Van Gend & Loos: C-26/62 (1963) Van Gend & Loos, 1; C-44/84 (1986) Hurd, 29.

  48. Salviejo (2003: 238) argues that transitional measures are of fundamental nature in the legal relationships for the sake of legal certainty.

  49. C-152/88 (1990) Sofrimport SARL v. Commission, I-2477.

  50. C-152/88 (1990) Sofrimport SARL v. Commission, I-2477 at $16.

  51. C-152/88 (1990) Sofrimport SARL v. Commission, I-2477 at $26.

  52. C-152/88 (1990) Sofrimport SARL v. Commission, I-2477 at $28–29.

  53. C-246/87 (1989) Continentale Produkten-Gesellschaft Erhardt-Renken GmbH & co. v Hauptzollamt Munchen-West, 1151.

  54. C-246/87 (1989) Continentale Produkten-Gesellschaft Erhardt-Renken GmbH & co. v Hauptzollamt Munchen-West, 1151 at $16.

  55. C-246/87 (1989) Continentale Produkten-Gesellschaft Erhardt-Renken GmbH & co. v Hauptzollamt Munchen-West, 1151 at $17. See also: Joined cases 211 and 260/80 (1989) Advernier v. Commission, 137; C-26/81 (1982) SA Oleifici Mediterranei v. EEC, 3057; C-127/78 (1979) Spitta and Co v. Hauptzollamt Frankfurt/Main-Ost, 171.

  56. C-17/67 (1967) Neumann, 441.

  57. C-248/89 (1991) Cargill, I-2987; C-159/82 (1983) Verli-Wallace, 2718.

  58. C-74/74 (1975) CNTA, 533.

  59. T-472/93 (1995) Campo Ebro and others v. Council, II-421 at $52.

  60. See C-74/74 (1975) CNTA, 533 at $47.

  61. C-74/74 (1975) CNTA, 533 at $47 where the Court précises that “the amount of compensation [is fixed] either by agreement between the parties or by the court in the absence of such agreement”.

  62. Retrospectivity in laws participates to undermine the very essence of the rule of law. In the same vein, Hayek defines the rule of law very much by the legal certainty that generates the necessary knowledge in the law (Hayek 1944: 72).

  63. See Brand-Ballard (2010: 118). However, in the famous argument developed by Dan-Cohen (1984), legal uncertainty in criminal law had be defended on the basis of its reasonableness. But, as a matter of fact, EU law has unfortunately almost no competence over criminal laws of the Member States.

  64. Driedger (1978: 271) is required since he draws a distinction between retroactive law—“operates as of a time prior to its enactment”—and retrospective law—“operates for the future only. It is prospective but imposes new results in respect of a past event”.

  65. Raitio (2003: 194) argues that true retroactivity is normally accepted by the ECJ only for a short period of retroactivity. He enumerates the different cases concerned with, for instance from the 5 days of retroactivity in the ‘Cassis de Dijon’ case (C-37/70 (1971) Rewe-Zentrale, 23), to the maximum of 25 days with the Staple Dairy Products case (C-84/91 (1982) Staple Dairy Products, 1763).

  66. Joined Cases C-387, 391 and 403/02 (2005) Berlusconi, I-3565; C-63/83 (1984) Kirk, 2718.

  67. T-290/97 (2000) Mehibas Dordtselaan, II-15.

  68. See Defrenne II.

  69. C-309/85 (1988) Bruno Barra v. Belgian State and City of Liege, 355 at §11.

  70. C-309/85 (1988) Bruno Barra v. Belgian State and City of Liege, 355 at §12–13. See also C-43/75 (1976) Defrenne v. Sabena, 455.

  71. See for instance C-52/69 (1972) J.R. Geigy AG v. Commission, 787 at §21 where the ECJ precisely envisaged such optimal implementation of by saying the time-delay is required for the imposition of fines, but at the same time, ‘the fundamental requirement of legal certainty has the effect of preventing the Commission from indefinitely delaying the exercise of its power to impose fines […]’.

  72. C-225/09 (2010) Edyta Joanna Jakubowska v. Alessandro Maneggia, at § 42.

  73. C-98/78 (1979) Racke, 69 at §20; Joined Cases 212/80 to 217/80 (1981) Meridionale Industria Salumi and others, 2735 at §10; T-191/07 (2009) Anheuser-Busch, Inc. v. Office Harmonisation in the Internal Market, II-00703, at §75.

  74. C-368/89 (1991) Crispoltoni I, I-3691.

  75. C-224/82 (1983) Meiko-Konservenfabrik v. Germany, 2539.

  76. See for instances C-368/89 (1991) Cripoltoni, I-3695 §17; Joined cases (2004) Gemeente Leusden and Holin Groep, I-5337 §59.

  77. C-260 and 261/91 (1993) Diversinte and Iberlacta, I-1885.

  78. C-98/78 (1979) Racke, 69 at $20.

  79. C-63/83 (1984) Kirk.

  80. See for instance C-108/81 (1982) Amylym v. Council, 3107 at $6–8. The notion of general interest introduced in the Nold case allows the EU institutions to pursue the general interest even if doing so would hamper individual rights—here, pursuing the general interest at the expense of legitimate expectations derived from acquired rights. See C-4/73 (1974) Nold, 491.

  81. The fact that the possibility of retroactivity is expressly enshrined is the measure is irrelevant for the Court who scrutinizes the desirability of such retroactivity rather than its mere provision, see C-368/89 (1991) Crispoltoni, I-3691.

  82. C-101/83 (1984) Brusse, 2223, $23; C-90/95 (1997) de Compte v. Parliament, I-1999; C-365/89 (1991) Cargill v. Produktschap voor Margarine, Vetten en Olien, I-3045; C-15/85 (1987) Consorzio Cooperative d’Abruzzo v. Commission, 1005; C-78/77; T-7/99 (2000) Medici Grimm v. Council, II-2671.

  83. C-258/80 (1982) Rumi, 487 at $11–12.

  84. See conclusions of Advocate General Trabucchi for the case C-5/75 (1975) Deuka, 759.

  85. C-83/99 (2001) Commission v. Spain, I-00445 at §24; C-44/81 (1982) Germany v. Commission, 1855.

  86. C-152/88 (1990) Sofrimport v. Commission, I-2477.

  87. Correspondingly, the unforeseeable benefits fall outside the ambit of the protection of legitimate expectations. See C-2/75 (1975) EVGF v. Mackprang, 607.

  88. C-265/85 (1987) Van den Bergh BV and Van Djik Food Products (Lopik) BV v. Commission, 1155 at §44; C-78/77 (1978) Luehrs v. Hauptzollamt Hamburg-Jonas, 169.

  89. C-120/86 (1988) Mulder v. Minister van Landbouw en Visserij, 2321.

  90. Ibid.

  91. Ibid.

  92. C-224/82 (1983) Meiko-Konservenfabrik v. Federal Republic of Germany, 2539.

  93. C-224/82 (1983) Meiko-Konservenfabrik v. Federal Republic of Germany, 2539 at §14.

  94. C-152/88 (1990) Sofrimport SARL v. Commission of the European Communities, I-02477.

  95. C-152/88 (1990) Sofrimport SARL v. Commission of the European Communities, I-02477 at §26–28.

  96. C-152/88 (1990) Sofrimport SARL v. Commission of the European Communities, I-02477 at §29–32.

  97. C-289/81 (1983) Vassilis Mavridis v. European Parliament, 1731, at $21.

  98. C-265/85 (1987) Van der Bergh en jurgens, 1169 at $44; See also C-350/88 (1990) Delacre and others v. Commission, I-395; C-78/77 (1978) Luehrs v. Hauptzollamt Hamburg-Jonas, 169 at $6.

  99. «Il faut que la confiance repose sur la bonne fois subjective et la diligence objective», in Calmes (2001: 379).

  100. Joined cases T-34 and 67/89 (1990) Costacurta v. Commission, 106 at $40.

  101. C-67/84 (1985) Sideradria, 3983 at $21.

  102. C-38/06 (2010) European Commission v. Portuguese Republic.

  103. Joined cases C-189/02 P, 202/02 P, 205/02 P, 208/02 P and 213/02 P (2005) Dansk Roindustri and others v. Commission of the European Communities, I-05245; See also C-315/96 (1998) Lopex Export GmbH v. Hauptzollamt Hamburg-Jonas, I-00317 at §27–31.

  104. C-239/06 (2009) European Commission v. Italian Republic.

  105. C-15/85 (1987) Consorzio Cooperative d’Abruzzo c/Commission.

  106. C-83/99 (2001) Commission v. Spain, I-445 at $24; C-316/86 (1988) Krucken, 2213 at $23.

  107. Opinion of Advocate General Trabucchi in C-5/75 (1975) Deuka, 759.

  108. In that regard, see conclusions of the Advocate General Cosmas for the case C-89/98 (2000) France v. Ladbroke Racing Ltd and Commission of the European Communities, I-3271 §89.

  109. This was the case in the CNTA case: C-74/74 (1975) CNTA, 533.

  110. Une forme d’imprevisibilite ou plutot par une sorte de desordre ‘logique’.

  111. “Aleatoire”.

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Authors and Affiliations

  1. University of Westminster, London, UK

    Aurelien Portuese

  2. Department of Finance and Business Law, University of Westminster, London, UK

    Orla Gough

  3. Westminster School of Law, University of Westminster, London, UK

    Joseph Tanega

  4. King Abdulaziz University, Jidda, Saudi Arabia

    Joseph Tanega

  5. Alma Graduate School, University of Bologna, Bologna, Italy

    Joseph Tanega

  6. Grenoble Graduate School of Business, Grenoble, France

    Joseph Tanega

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Portuese, A., Gough, O. & Tanega, J. The principle of legal certainty as a principle of economic efficiency. Eur J Law Econ 44, 131–156 (2017). https://doi.org/10.1007/s10657-014-9435-2

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