Free movement of capital and sustainable forest management. The CJEU in Huijbrechts.

Disclosure I represented the Flemish Region at the Court of Justice. I wrote this post on 11 December 2018. Given that the interpretation of the judgment has a bearing on the proceedings in the national court, I decided to hold back on posting  until those proceedings would have met their national end – which they still have not. Seeing as I thought the case might be of interest I decided to go ahead now anyway.

In C-679/17 Huijbrechts the European Court of Justice held in a fashion which is fairly typical of free movement of capital cases. The Court treads carefully. Positive harmonisation of tax law is difficult for the EU to achieve for this requires unanimity. Tax measures having a direct impact on free movement of capital, too strict an enforcement of the latter may be read as tax harmonisation via the back door.

The case at issue concerns a measure by the Flemish Region of Belgium to exempt sustainable managed forests from death duties (inheritance tax). The exemption is subject to there being a forest management plan, agreed with the relevant agency, and subject to a 30 year follow-up period (should in the interim the forest no longer be sustainably managed, the heirs pay the tax pro rata the remainder of the 30 year period). The heirs concerned did not enjoy the exemption for the forests are located outside the region and suggest this is an infringement of the free movement of capital.

Defence against suggestions of infringement of Article 63 TFEU’s free movement of capital rule typically follow the following sequence: free movement is not impacted; should this fail: the domestic and foreign situation are not objectively comparable; should this fail, per C‑256/06 Jäger, public interest requires an exemption (subject to a suitability and a proportionality test).

A crucial part of free movement judgments entails having to read the judgment with an eye on the factual circumstances: the Court typically employs a formula that reads something like ‘in circumstances such as those at issue in the national proceedings’ or ‘in circumstances such as those at issue in the national law’.

In Huijbrechts, the Court at 25-26 finds that Flemish and foreign forest are objectively comparable (only) where they are transboundary and concern woods that are part of one unit or landscape (lest my geographic knowledge fails me here, this limits the impact of the judgment to French and Dutch estates; Belgium has a land border with Luxembourg and Germany, too, but Flanders does not). Interestingly, at 22 the Court indicates that in making the like forest comparison (GATT, WTO and generally free movement scholars will know where I am heading here), the regulatory goal of sustainable forest management plays a role. (See the like product /service distinction in the WTO).

For that limited group of forest, the public interest exception imposes constraints: a blanket ban on considering sustainable management outside of Flanders fails the Treaty test, for it does not assist with the protection of the forests. Flanders will for that limited group have to allow the heirs (again: only where the forests are transboundary and concern woods that are part of one unit or landscape) to provide proof of sustainable management; should such proof be delivered, the burden of proof will revert to the Flemish tax authorities: they cannot blankly assume that they cannot get the necessary data from the foreign administration during the 30 year period: they have to request such data (typically: on a 30 year basis) and only should they fail to get them, can they still refuse to exempt.

The Court implicitly recognises the specific (dire) circumstances of forests in Flanders (at 31). It does not accept the heirs’ submission that the myriad of international and European policy documents on forest management somehow amount to positive harmonisation.



Neither extraterritoriality questions nor WTO concerns unsettle the CJEU. Animal testing ban applies outside EU.

The last part of this title is a bit of a stretch, apologies: soundbite beats nuance. I reported earlier on the High Court’s referral to the CJEU in the Cosmetics Regulation case, C-592/14 . The Court held last week, 21 September. Much like in C-366/10, the emissions trading /aviation case, the Court was unimpressed with accusations of extraterritoriality (‘territory’ is not discussed in the judgment) and does not even flag WTO concerns (Bobek AG had, and simply suggested this is an issue that solely lies with the WTO itself to resolve).

Referring to the need to interpret the Regulation with a view to its object and purpose, the Court insists that in particular to avoid easy circumvention of the Regulation, data obtained from animal testing carried out outside the EU, cannot be employed for the marketing of cosmetics in the EU, even if those tests had to be performed so as to meet the regulatory requirements of third countries.

Of course in WTO jargon, this recalls the discussion of non-product incorporated production processes and -methods (n-PR PPMs) however the Court is more concerned with regulatory efficiency.


EU Seal product ban upheld by the ECJ – (unsubstantiated) Inuit and traders’ arguments fall on deaf ears

Postscript: the ECJ equally dismissed, on 3 October 2013, the Inuit’s action against the basic Regulation: see case C-583/11P.

Postscript 2, 19 March 2015: Kokott AG suggests the appeal against the judgment in the posting below, be equally dismissed.


The European Court of Justice has dismissed an application by Inuit community group, Inuit Tapiriit Kanatami (ITK), and the Fur Institute of Canada, for the Commission’s Implementing legislation of the EU’s ‘Seal Pups Regulation‘ [seal products Regulation somehow has not made it into mainstream language] to be held illegal. The Regulation effectively bans all seal products from being placed on the EU market, with limited exceptions, and it does so on the basis of animal welfare considerations:

Article 3 - Conditions for placing on the market
1. The placing on the market of seal products shall be allowed only where the seal products result from hunts traditionally conducted by Inuit and other indigenous communities and contribute to their subsistence. These conditions shall apply at the time or point of import for imported products.
2. By way of derogation from paragraph 1:
(a) the import of seal products shall also be allowed where it is of an occasional nature and consists exclusively of goods for the personal use of travellers or their families. The nature and quantity of such goods shall not be such as to indicate that they are being imported for commercial reasons;
(b) the placing on the market of seal products shall also be allowed where the seal products result from by-products of hunting that is regulated by national law and conducted for the sole purpose of the sustainable management of marine resources. Such placing on the market shall be allowed only on a non-profit basis. The nature and quantity of the seal products shall not be such as to indicate that they are being placed on the market for commercial reasons.
The application of this paragraph shall not undermine the achievement of the objective of this Regulation. (...)'

Further detail for the application of the exceptions was provided by the Commission in follow-up regulation . It is the follow-up (implementing) Regulation which was the subject of current action. The applicants in this case argued as follows:

1. The basic Regulation lacks legal basis (i.e. Heads of power), for it was adopted on the basis of the Internal Market article of the EU Treaties, while in fact it was animal welfare considerations which led to the initiative. The Court disagreed: Member States had differing regulations in place with respect to seal products, or were planning them. This threatened a clear EU view on the matter and hence disruption of that internal market, whence justifying Article 114 TFEU (at the time: Article 95 EC). Watertight conclusion under EU law – even if paradoxically in order to safeguard the Internal Market, the EU effectively resorted to scrapping that very market.

2. Failing argument 1, the Regulation at any rate is disproportionate and incompatible with the principle of subsidiarity. The latter was dismissed on similar grounds as the review of the legal basis, referred to above. The former seems to have not been helped by the vagueness of the claims of applicants. In particular, they had put forward the view that the Inuit exemption is dead letter, for the communities concerned have to rely on commercial outlets to market their products, not having any such outlets themselves. The Court rejected this argument as too vague and unsubstantiated. It also rejected labelling (testifying to the killing having been done ‘humanely’) as an alternative, for the feasibility of such an option was examined and rejected in the run-up to the legislation.

3. Human rights. Right to property arguments were rejected by the Court, for viz the Inuit, they could still trade in the products concerned and the Court had already established that the ‘dead letter’ argument was unsubstantiated. Viz the applicants which are commercial operations, the Court referred to its earlier case-law the guarantees accorded by the right to property cannot be extended to protect mere commercial interests or opportunities, the uncertainties of which are part of the very essence of economic activity.

4. Ultra vires. The arguments that the Commission implementing Regulation exceeded what the Commission was entitled to regulate, in particular, that its enforcement measures were such as to make trade in Inuit seal products effectively impossible, even if it was instructed to lay down rules leading to a viable Inuit trade, were swiftly rejected by the Court. Again, it referred to a complete lack of data in the file substantiating the claim that all such trade would effectively be impossible.

The actions at the ECJ cannot of course be seen completely detached from the ongoing litigation against the EU over at the World Trade Organisation, on which Robert Howse has posted near-complete records of the hearings which this week finished in Geneva: that Panel report is one to look forward to (although judging by the sounds coming out of Geneva, the Panel would not exactly seem on top of things).


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