Hierarchy between national and non-national sources
Law of the European Union/EU Law;
Court of Justice of the European Union;
RULING No. 422/2020
I. Facts and context of the Constitutional Court’s intervention
A commercial company with its registered office in Portugal (hereinafter referred to as “Company X”) exports wine. At a given moment in time, it exported wine to Angola. Given that the market value of wine in Angola is below that of the same product in the European area, Company X applied for an export subsidy in order to cover that difference – i.e. an “export refund”, as regulated by a range of secondary-law instruments, including Commission Regulation (EEC) no. 2220/85 of 22 July 1985 laying down common detailed rules for the application of the system of securities for agricultural products.
European legislation enabled exporters to benefit from payment of the subsidy in advance – i.e. before exporting – subject to the provision of a bank guarantee, which would in particular be forfeited if the exported product failed to present sound, fair and saleable quality.
Company X asked for the advance payment of the subsidy, the request was granted, and it then exported the wine. After entering the Angolan market, the latter was found to be non-compliant with the requisites laid down in European legislation. As such, the Portuguese administrative entity responsible for managing export subsidies triggered the bank guarantee in order to recoup the amount of the subsidy that had been paid in advance.
Company X disagreed with that decision and asked a Portuguese civil court to declare that the bank guarantee had already expired on the date on which it was called upon.
This request was denied at first instance, and Company X appealed to the Court of Appeal. The latter denied the appeal, but before doing so, it submitted two requests for a preliminary ruling to the Court of Justice of the European Union (CJEU), whereupon the latter took the following position: Article 19(1)(a) of Regulation (EEC) no. 2220/85 must be interpreted in the sense that the security which operators asking for advance payment of an export subsidy (refund) are obliged to provide does not lapse upon proof of the effective export (customs clearance in the country of destination), which means that the security must be maintained and can even be drawn down when, following an inspection after the export has taken place and the goods have cleared customs on arrival, one of the other requisites for the grant of the refund – namely the sound, fair and saleable quality of the exported products – is not fulfilled (cases nos. C-128/13 and C-152/15).
Company X appealed again, this time to the Supreme Court of Justice (STJ), which upheld the lower court’s decision and the interpretation of the norms determined by the CJEU.
Finally, the exporter turned to the Constitutional Court, asking it to find the norm contained in Regulation (EEC) no. 2220/85 of 22 July 1985, with the interpretation given to it by the CJEU and adopted by the STJ, unconstitutional due to a violation of the principle of equality enshrined in Article 13 of the Constitution of the Portuguese Republic (CRP).
II. Questions brought before the Constitutional Court
The appellant Company X asked the Constitutional Court to consider whether the European Union secondary-law norm – Article 19(1)(a) of Regulation (EEC) no. 2220/85 – is in conformity with Article 13, CRP.
However, the Court’s first step was to ask itself a preliminary question: whether and to what extent it was able to pronounce on a possible incompatibility between a European Union secondary-law norm and the Portuguese Constitution?
It was the answer to that preliminary question which determined the solution to the case.
III. The Constitutional Court’s solutions to those questions
The Court began by identifying a constitutional precept – Article 8(4), CRP – that was capable of serving as the criterion for resolving the preliminary question, inasmuch as it regulates the relationship between the two related legal orders: that of the European Union, and the internal one. The precept states that: “The provisions of the treaties that govern the European Union and the norms issued by its institutions in the exercise of their respective competences are applicable in Portuguese internal law in accordance with Union law and with respect for the fundamental principles of a democratic state based on the rule of law”.
III.A. In Article 8(4), CRP, the Court found a reflection of the principles of (a) the direct effect of, and (b) the primacy of, European Union law, which it characterised in the light of the CJEU’s caselaw (particularly the judgments in Van Gend en Loos, Costa v. ENEL, Internationale Handelsgesellschaft, and Simmenthal). It was thus able to conclude that the primacy principle projects exclusion effects in the various internal legal orders, and that this corresponds to the prevalence of EU-law norms – an effect which the CJEU has always considered to apply to the whole of each Member State’s national law, regardless of the latter’s nature and internal hierarchical status.
III.B. The Court then weighed up the reaction of the national constitutional jurisdictions to the CJEU’s strict understanding of primacy, particularly that of the German Court in the form of its well-known judgments in Solange I (BVerfG, Beschluss vom 29.Mai 1974 – Az.: 2 BvL 52/71 or BVerfGE 37, 271) and Solange II (BVerfG, Beschluss vom 22.10.1986, Az.: 2 BvR 197/83 or BVerfGE 73, 339). The Portuguese Court highlighted the evolution between the first and second of these cases, and especially pointed to the conclusion of the latter: that the national Constitutional Court should not intervene for as long as the level of protection provided by Union law was equivalent to the internal protection, and that the action of the two jurisdictions should be seen as sharing a common space in such a way as to make the intervention of the national constitutional jurisdiction fundamentally redundant.
III.C. In Article 8(4), CRP, the Constitutional Court identified a generic acceptance of primacy; and, in its final segment – “…with respect for the fundamental principles of a democratic state based on the rule of law” – also found a counter-limit to the prevalence derived from the principle of primacy. As such, the first part limits the application of national law, while the second part limits that limit.
This distinction made it possible to see the preliminary question in the following terms: can the alleged violation of Article 13 of the Constitution be seen as corresponding to the final part of Article 8(4) of the Constitution – i.e. to the “limit on the limit”?
In this respect the Court emphasised a fundamental structural trait of Article 8(4), CRP: the fundamental principles of a democratic state based on the rule of law are a true condition to which the process of constructing and deepening the European Union, and consequently the internal projection of European Union law, in its own terms, are subject. The “limit on the limit” thus expresses a space in which no transfer of sovereign powers to the Union has even occurred. This is of the greatest importance, given that the Union does not enjoy a substantive Kompetenz-Kompetenz, which is to say that it does not possess the power to attribute itself new powers on its own initiative.
However, substantive Kompetenz-Kompetenz is not the same as procedural competence to determine competence. In this regard, the Constitutional Court took the view that the competence to define the “limit on the limit” provided for in Article 8(4), CRP, pertains to it, as does the last word when it comes to delimiting the boundary zone provided for therein.
III.D. Having thus defined the lines along which the case could be solved, it remained for the Court to set out a criterion for determining the autonomous space for a national control that would correspond to the final segment of Article 8(4).
In doing so, it stated that refusal to apply an EU-law norm (the “limit on the limit”) presupposes the latter’s incompatibility with a fundamental principle pertaining to a democratic state based on the rule of law that does not enjoy a sense and a scope in European Union law equivalent to those which it is recognised to possess in the Constitution of the Portuguese Republic.
On the contrary – and this is the most frequent situation – whenever what is at stake is the evaluation of an EU-law norm in the light of a (fundamental) principle of a democratic state based on the rule of law that does enjoy a sense and a scope equivalent to those recognised in the Portuguese Constitution, the Constitutional Court will not consider its compatibility with the latter and should decide not to hear the case.
III.E. Using the interpretative key it had just laid out, the Constitutional Court recalled that the interpretation in the appeal before it in the present case had been affirmed by the CJEU (the entity with the “ultimate competence” to interpret European Union law) in its response to a preliminary question, and that the Constitutional Court is bound by strict requirements derived from the principle of equality. Moreover, it was clear that there was no violation of the principle of equality in this case.
Not only did the earlier referral, which made the act clear, make a new referral unnecessary, but the terms in which the problem was posed by the appellant themselves rendered it evident that the situation at stake here was not even remotely capable of fitting within the framework created by the final segment of Article 8(4), CRP.
In this respect, the Court emphasised that invoking the violation of a fundamental principle, such as that of equality, does not suffice to bring the problem within the scope of the final part of paragraph (4) of Article 8. The Constitutional Court should reject inconsistent claims of this kind and see them as outside its competence in this domain, inasmuch as they would trivialise something the Constitution sought to prevent.
Within this context, equality possesses an equivalent parametric value in both legal orders – the national one and the Union one – which could only lead to a jurisdictional control that would be redundant in both of them. The Constitution of the Portuguese Republic excludes that redundancy, thereby acknowledging the alignment and the interpenetration of fundamental values and the effective guarantee which that identity provides.
III.F. The Court ended by summing up its understanding as follows: in accordance with Article 8(4), CRP, the Constitutional Court can only consider and reject the application of an EU-law norm if it is incompatible with a fundamental principle of a democratic state based on the rule of law which, within the scope of EU law itself – thus including the CJEU’s caselaw – does not enjoy a parametric value that is materially equivalent to that which it is recognised to possess in the Constitution, inasmuch as such principles necessarily impose themselves on the convention on “[…] the joint exercise, in cooperation or by the Union’s institutions, of the powers needed to construct and deepen the European Union” itself. On the other hand, whenever what is at stake is the evaluation of an EU-law norm in the light of a (fundamental) principle of a democratic state based on the rule of law which, within the scope of European Union law, enjoys a parametric value that is materially equivalent to that which it is recognised to possess in the Portuguese Constitution, and is functionally ensured by the CJEU (in accordance with the legal means for contesting such matters, as provided for in EU law), the Constitutional Court will refrain from considering that norm’s compatibility with the Constitution.
As a result, it decided not to hear the appeal.
International case law:
CJEU Judgments of: 2016/04/05, C-404/15 and C-695/15; 2019/10/15, C-128/18; AC 2019/11/19, C-624/18 and C-625/18; 2019/02/26, C- 202/18 and C- 238/18; 1970/12/17, C-11/70; 2015/06/16, C- 62/14; 201/12/05, C- 42/17; 1991/06/27, C-348/89; 2007/07/18, C- 119/05; 1986/04/23, C-294/83; 1987/10/20, 314/85; 2014/12/11, C-128/13; 2000/04/13, C- 292/97; 2013/02/26, C- 617/10; 2014/12/11, C-128/13; 1982/10/06, C-283/81; 1963/02/05, C-26/62; 1964/07/15, C-6/64; 1960/12/16, C-6/60; 1962/02/27, C-10/61; 1970/12/17, C-11/70; 1964/11/13, C-90/63 and C-91/63; 2005/04/26, C-494/01.
Judgment of the Constitutional Court of Italy no. 183/1973; Judgments of the Constitutional Court of Italy and of the CJEU (2015/09/08, C-105/14) with regard to I. Taricco; BVerfGE 37, 271 2 BvL 52/71 Solange I-Beschluß, 1974/05/29; BVerfGE 73, 339 2 BvR 197/83 Solange II, 1986/10/22.