June 21, 2019

The Court of Justice of the European Union this week ruled that Germany’s plans for instituting a nationwide motor vehicle “infrastructure use charge” while exempting its own citizens from the charge violates EU rules which prohibit discrimination on the grounds of nationality and inhibit the free movement of goods and services.

Germany has long had a system of nationwide truck tolls, first levied on all trucks (regardless of nationality) over 12 tons weight and later reduced to all vehicles over 7.5 tons. Those tolls are collected electronically (photo enforcement) and are mileage-based.

Since 2015, the German government has been trying to extend a user charge system to passenger cars as well, charging all vehicles €130 per year for access to German roads, but giving Germans an equivalent break on their annual auto registration fees. The original plan drew objections from the European Commission (the executive branch of the EU government), which threatened to take Germany to court unless a system of short-term registration passes for non-German registrants was established.

A short-term visitor pass system was then established, which satisfied the Commission, but Austria took Germany to court anyway. (EU member nations suing each other in the Court of Justice is rare – it has only happened six times before, with another case currently pending.)

On June 18, the Court of Justice ruled in Austria’s favor. Its decision (official English translation here). With regards to the heart of the matter (equal treatment), the Court held:

The Republic of Austria claims in essence, in its first ground of complaint, that the infrastructure use charge and the relief from motor vehicle tax for vehicles registered in Germany, although not formally based on a distinction on grounds of nationality, result, through their combined effect, in German nationals being accorded more favourable treatment than that accorded to nationals of other Member States, and are, therefore, in breach of the first paragraph of Article 18 [of the Treaty of Lisbon]…

…In that regard, it is undisputed that, pursuant to those measures, all the users of German motorways are subject to the infrastructure use charge, irrespective of where their vehicles are registered. However, the owners of vehicles registered in Germany qualify for the relief from motor vehicle tax in an amount that is at least equivalent to the amount of the charge that they have had to pay, so that the economic burden of that charge rests, de facto, only on the owners and drivers of vehicles registered in a Member State other than Germany.

It is accordingly apparent that, because of the combination of the national measures at issue, the treatment of owners and drivers of vehicles registered in a Member State other than Germany, who make use of German motorways, is less favourable than that of the owners of vehicles registered in Germany, with regard to the use of those motorways, notwithstanding that they are in comparable situations with respect to that use.

Such unequal treatment is particularly plain with respect to Euro 6 emissions standard vehicles. Whereas the owners of that type of vehicle registered in Germany receive overcompensation for the infrastructure use charge, the owners and drivers of Euro 6 emissions standard vehicles registered in a Member State other than Germany, who make use of German motorways, must, in any event, bear that charge. Accordingly, the latter are treated less favourably not only in comparison with the owners of Euro 6 emissions standard vehicles registered in Germany but also in comparison with the owners of vehicles registered in Germany that are more polluting.

Last, while the difference in treatment that has been identified is not directly based on nationality, the fact remains that the vast majority of owners and drivers of vehicles registered in Member States other than Germany are not German nationals, whereas the vast majority of owners of vehicles registered in Germany are German nationals, so that such a difference has in fact the same outcome as a difference in treatment based on nationality.

The Court also held that “although the infrastructure use charge is formally applicable both with respect to goods delivered using vehicles registered in Germany and with respect to goods delivered using vehicles registered in a Member State other than Germany, it turns out that, because of the relief from motor vehicle tax, applicable with respect to the former category of goods, that charge is capable of affecting, in fact, only the latter category of goods. Consequently, because of the combined application of the national measures at issue, the latter goods are treated less favourably than goods delivered using vehicles registered in Germany…Consequently, the national measures at issue constitute a restriction on the free movement of goods, contrary to Article 34 [of the Treaty of Lisbon].”

And: “It is therefore clear that, by offsetting in its entirety the new tax burden constituted by the infrastructure use charge, payable by all carriers, by means of a relief from motor vehicle tax in an amount at least equivalent to the charge paid, a relief to the benefit of the German carriers from which the foreign carriers are excluded, the effect of the national measures at issue is to alter, unfavourably, the situation of the foreign carriers in relation to that of the German carriers…it must be declared that the Federal Republic of Germany, by introducing the infrastructure use charge and by providing, simultaneously, a relief from motor vehicle tax in an amount at least equivalent to that of the charge paid, to the benefit of the owners of vehicles registered in Germany, failed to fulfil its obligations [for non-discrimination against carriers] under Article 92 [of the Treaty of Lisbon].”

(Not only is the German law held invalid, but Germany has to pay three-fourths of Austria’s legal fees.)