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June 30, 2022
CJEU rules that Spanish rules on compensation for damages by the State are against EU law
On 28 June 2022, the Court of Justice of the European Union (CJEU) declared that certain Spanish provisions regulating the compensation for damages caused by legislative acts that are in breach of European Union (EU) law are themselves in breach of the principle of effectiveness. These principles limit the procedural and substantive autonomy of the Member States when they set the conditions for State liability for breaches of EU law.1
The CJEU has determined that Spain has failed to fulfil its obligations under the principle of effectiveness, since the Spanish rules on State liability make compensation for the loss or harm caused to individuals by the Spanish legislature as a result of an infringement of EU law excessively difficult, as they are subject to the following conditions and limitation:
While some of these conditions were already rejected by the Spanish Supreme Court in the past, this judgment confirms infringement of EU Law. Accordingly, these Spanish provisions may be amended in the future. Notwithstanding such amendments, the above requirements no longer limit the State liability procedure in respect of claims for compensation for the loss or harm caused to individuals by the Spanish legislature as a result of an infringement of EU law.
There have been a number of cases in recent years where the Spanish Supreme Court has assessed that Spanish rules infringe EU law (among others, Spanish provisions affecting dividend withholding tax reclaims by non-EU funds comparable to EU UCITS2 funds, Spanish pension funds or Spanish sovereign funds3).
Claims can now be brought in action for State liability in cases where the limitations that the CJEU has now declared contrary to EU law had precluded that possibility and were statute barred.
The CJEU judgment only refers to the State liability in respect of compensation due to infringement of EU law and not to a case where the compensation is sought for a Spanish provision that has been declared unconstitutional. Nonetheless, it may not be ignored that this judgment may potentially impact the Spanish rules governing State liability in the latter case. However, this would generally require a different litigation procedure and/ or an amendment of these rules.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Abogados, Madrid
Ernst & Young LLP (United States), Spanish Tax Desk, New York