Spanish Constitutional Court takes control of lower courts’ application of Cilfit – in a dubious way

On 26 March 2019, the Spanish Constitutional Court (SCC) handed down its judgment STC 37/2019, reversing a Supreme Court’s decision that had set aside (without making a preliminary reference to the Court of Justice of the EU, or CJEU) a national law for breaching Article 3(2) of Directive 2009/72/EC on the internal market in electricity.

The SCC explained that setting aside a Spanish legislative act for breach of Union law is subject to strict constitutional scrutiny, because national laws “express the popular will.” Therefore, the SCC reasoned, an act of Parliament may only be set aside if the requirements of the acte clair or éclairé doctrine (established in the Cilfit judgment of the CJEU) are strictly adhered to. The SCC noted, however, that its constitutional standard of review would have been less demanding if the national court had found that the Spanish law did not breach EU law, as it would have applied merely a reasonableness standard of review. In other words, the SCC applies a double standard, depending on whether or not the national court intends to set aside a national law for being incompatible with Union law.

In the instant case, the Supreme Court had considered that there was no need to make a preliminary reference because there were two previous CJEU rulings addressing the underlying legal issue. However, the SCC noted that these precedents had applied an equivalent provision from the gas market directive (2009/73/EC), and not from the electricity market directive, and gave less importance to the fact that both provisions had the same content. In addition, the SCC considered that the facts of the cases were not analogous. Thus, the matter could not be considered “clarified” within the meaning of the Cilfit doctrine.

The SCC remanded the case to the Supreme Court, which has now referred the case to the CJEU.

As I explain below, while the SCC’s doctrine might at first glance appear to promote judicial cooperation, a closer look reveals that it might put the effective application of Union law at risk.

1. Background to the SCC decision

Under Article 3(2) of Directive 2009/72/EC, Member States may impose public service obligations on electricity undertakings if such obligations are clearly defined, transparent, non-discriminatory, verifiable and guarantee equality of access to consumers.

In Spain, the law regarding the electricity sector has created one such obligation in the so-called bono social (or “social voucher”). Under the bono social, suppliers of last resort must discount a part of the electricity bill of certain vulnerable consumers. However, these suppliers do not bear the cost of the measure; instead, the law provides that this cost shall be passed-on to the parent companies of vertically integrated groups (which the suppliers of last resort are normally a part of). This burden is distributed among them according to the number of connections of the distribution companies (DSOs) in the same group or the number of retail customers of the supply companies in the group.

These parent companies challenged the legality of this law before the Supreme Court, claiming that the measure was discriminatory and non-transparent, given that the selection criteria used were not applied in a coherent and proportional manner. The obligation to fund the supply to the vulnerable customers was applied to some companies with a limited presence in the market but left out some much larger companies. Moreover, the obligation had no time limit and provided for no compensation of any kind.

In October 2015, the Supreme Court agreed, declaring the relevant legal provision incompatible with Union law and setting aside the obligation of the companies in question to bear the financial burden of the measure. The court, however, explained that it did not consider it necessary to refer the case to the CJEU under the acte éclairé doctrine. The court pointed to two well-known precedents from the CJEU (the Anode and Federutility cases) interpreting an equivalent provision in the gas market directive (2009/73/EC).

The government then filed a constitutional challenge before the SCC, claiming that the Supreme Court had violated its fundamental right to an effective judicial remedy (Article 24 of the Spanish Constitution) by depriving the government of a procedural guarantee.

2. The SCC’s decision: strict review of inapplication of Spanish laws for breach of EU law

The SCC agreed with the government, vacated the Supreme Court’s decision and remanded the case for further action.

The SCC’s explained its decision in two successive steps:

• First, the SCC explained that the level of constitutional scrutiny of judicial decisions applying Union law differs depending on the outcome. Ordinarily, the application of Union law in a case is only subject to a “reasonableness” review by the SCC. To meet this standard, a judicial decision simply must provide reasons and not be arbitrary.

If, however, the court finds that the national law is incompatible with Union law and must be set aside, the decision is subject to a stricter constitutional control. According to the SCC, this is so to protect “the basic principles of the democratic system, represented by the dignity of the laws approved by Parliaments, state or regional, that express the popular will of the people.”

Thus, when the court of last instance finds a Spanish law in breach of Union law, it must refer the case to the CJEU before disapplying the national provision, unless the requirements of the acte clair or éclairé doctrine are clearly met.

The SCC considered itself to be competent to verify the correct application of the Cilfit doctrine. If it finds that a national law has been displaced in a case where the matter should have been referred to the CJEU, the SCC considers it a breach of the procedural guarantees under the right to an effective judicial remedy.

• Second, the SCC considered that the requirements of the Cilfit doctrine had not been met in this case. While the Supreme Court had explained that the interpretive doubt had been clarified by two previous CJEU’s rulings, these referred to an equivalent provision in the gas market directive. The SCC argued that, under Cilfit, a legal question can only be considered clarified if “the CJEU has clarified an identical question in an analogous case,” and neither Anode nor Federutility could be “considered identical or analogous to the current one,” because they involved “different directives applicable to the internal markets of two different energy markets (gas and [electricity]).” In addition, the SCC considered that the facts of the underlying cases did not refer to national measures equivalent to the one at hand (e.g. in Anode, the case revolved around regulated prices).

Thus, the SCC found that the matter could not be considered “clarified” in the meaning of the acte éclairé doctrine, quashed the Supreme Court’s decision and remanded the case ordering the Supreme Court to resolve the case in manner that is consistent with the SCC’s ruling.

By order of 9 July 2019, the Supreme Court referred the case to the CJEU indicating it does so only because it is “bound by the Constitutional Court’s ruling.” This preliminary reference is now pending before the CJEU (C-683/19, Viesgo Infraestructuras Energéticas).

The SCC judgment includes a dissenting vote from Justice Andrés Ollero Tassara. Justice Ollero notes that applying different standards of constitutional control is inconsistent with previous case law, creates a “logically inconsistent” standard of review, and is intended “to favour the application of national law to the detriment of European Union law.” Justice Ollero also points out that, ironically, by descending into the detailed analysis of the requirements of the acte éclaire doctrine, the SCC itself was applying Union law as the court of last instance, meaning that if it assumes such functions, then it was the SCC itself that ought to have referred the case to the CJEU, and not the Supreme Court.

3. Comment

The SCC’s decision gives rise to various doubts as to its compatibility with Union law.

First, subjecting the Supreme Court’s decision not to request a preliminary ruling to different standards of review (strict scrutiny versus mere reasonableness) depending on (i) whether the national measure at hand is an act of parliament or another type of measure and (ii) whether the measure is found incompatible with Union law and must be set aside or compatible with Union law, has the effect of favouring the application of national law. This creates an obvious incentive for lower courts to avoid finding an infringement of Union law, since a finding of incompatibility would make their ruling subject to strict scrutiny by the SCC. In my view, such a doctrine runs afoul of the principles of primacy, (interpretive) autonomy, effectiveness and equivalence of Union law.

Although the SCC’s decision is still quite recent, it has already faced strong criticism from the academia and legal commentators. For instance, Professor Daniel Sarmiento notes that the SCC seems to be unhappy with the progressive erosion of its monopoly of constitutional control of statutes, which ordinary courts (including the Supreme Court) cannot set aside unless it is in application of Union law. In this sense, the SCC appears to be trying to rein lower courts in by requiring them to, at least, go to the CJEU. However, Sarmiento considers that designing double standards of review crafted to “discriminate between remedies on the basis of the outcome” may “have a subtle but perverse effect of nudging national courts of last instance into ruling in favour of statutes, even when there are doubts as to their conformity with EU law.”

Second, while the SCC professes to be merely applying the Cilfit doctrine, it is de facto following a much more stringent version than the one followed by the CJEU in its case law. Indeed, there is no support in this case law for holding, as the SCC does, that the acte éclairé doctrine only applies when “the CJEU has clarified an identical question in an analogous case.”

In fact, the Cilfit ruling itself notes (para 14) that there is no need for the precedents to be identical or analogous: a legal question is deemed clarified “where previous decisions of the Court have 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 are not strictly identical.”

Furthermore, while in Cilfit the CJEU urges national courts to consider the complexities of EU law when deciding whether to refer a case (e.g., its autonomous terminology, context and meaning, or that all language versions are authentic), it has never held that national courts cannot, when interpreting a provision of Union law, seek guidance in the CJEU’s case law developed in interpretation of another EU provision with a materially identical content.

Indeed, the CJEU, like all courts, regularly uses its own case law regarding a certain provision to interpret the meaning of different but equivalent provisions. A well-known example is the case law on internal market freedoms, where precedents issued for one freedom are later cited in cases involving other freedoms (for example, in Liga Portuguesa, involving the freedom to provide services, the CJEU cited [para 61] the proportionality analysis in Hartlauer, that dealt with the freedom of establishment).

In the specific realm of the directives on the gas and electricity markets, the CJEU has indeed used its case law interchangeably: in Enel Produzione, on the interpretation of Directive 2009/72/EC, the CJEU quoted Federutility, on Directive 2009/73/EC.

Therefore, by requiring the Supreme Court to refer the case, the SCC has arguably gone further than what is required under the acte éclairé doctrine. And this would breach Union law, because, as the CJEU has established, provisions of national law (including judicial practices) cannot withhold the power of the competent court to set aside national legislative provisions by requiring it to refer the case to the CJEU, if the referral  is not compulsory under EU law (see Kücükdeveci, para 44-54, and Melki and Abdeli, para 44).

And, thirdly, the SCC has arguably flouted its own obligation under Article 267 TFEU to refer the case to the CJEU or, at the very least, explain why the interpretation of the Cilfit doctrine was clear enough not to warrant a reference. As noted in the dissenting opinion of Justice Ollero, by descending into the details of the Cilfit doctrine, the SCC took it upon itself to act as the national court of last instance in a matter involving the application of Union law and, therefore, should have at least considered the possibility of referring the matter to Luxembourg. It is ironic that the SCC may have breached this obligation in a case whether it was faulting the Supreme Court for not referring a preliminary question.

All in all, it is unclear if the CJEU can do anything about this SCC case law. On the one hand, this national doctrine runs the risk of flooding Luxembourg with unnecessary references from Spain. On the other, Spanish ordinary courts are unlikely to openly challenge the constitutional authority of the SCC by submitting a preliminary reference questioning this constitutional doctrine (as, indeed, the Supreme Court has refrained from doing in its referral in this case), because under Spanish law they are bound by it. And the SCC itself avoids subjecting its peculiar doctrine to the CJEU’s scrutiny by refusing to make a referral. As explained in a previous entry of this blog, this is not the first time –and most likely not the last– that the SCC decides a constitutional case on the basis of Union law without submitting a preliminary reference to the CJEU.

This case is further evidence that, in the context of an ever-increasing scope of Union law, national constitutional courts may feel the need to protect their unique institutional position and powers under national constitutions from being encroached by other courts.