Case C-229/16, Ministério da Saúde – not just any old debtor but a public health debtor

There is a rule in the EU’s ‘late payment’ Directive 2000/35 that an invoice should be paid within 30 days. The question is: does the Directive apply to the Portuguese Ministry of Health in respect of the money it owes to the people who run Portugal’s pharmacies?

A decade ago, the owner of a pharmacy in Portugal was happy to dispense prescription drugs to local patients who were being treated by the Portuguese national health service. In accordance with Portuguese law, the owner of the pharmacy knew he was entitled to a partial refund from the Portuguese State for the cost of the drugs he had dispensed. Indeed, under the 2003 refund-rules, he would get his payment within 30 days.

However, when the owner of the pharmacy did not receive his refund within the allotted time, he gradually set about suing on the debt. He hauled the regional health authority and  the Portuguese Ministry of Health before the local judge. His action was successful. The judge ordered the State to reimburse the owner of the pharmacy the refund it owed, and condemned it to pay interest on that amount too. It was a judgment that would spark nine more years of litigation.

At the Portuguese Supremo Tribunal Administrativo
The litigation arrived at Portugal’s highest court for administrative law, the Supremo Tribunal Administrativo. The issue fuelling the conflict was whether the judge at first instance had been right to decide this case on the basis that this debt arose from a normal commercial transaction.

According to the Portuguese State, the judge had erred in law. This debt did not arise from just any old commercial relationship – this debt arose in the context of a special relationship which existed between the Portuguese State and pharmacies in Portugal. This special relationship flowed from the fact that the pharmacy-refund rules were laid down in administrative law, and those rules formed a part of Portugal’s health policy and its ability to ensure that pharmaceutical services could be provided to its citizens.

The owner of the pharmacy could see no force in the legal argument raised by the State. It was a fact that Portugal had implemented the EU’s ‘late payment in commercial transactions’ Directive 2000/35 (OJ [2000] L200/35). Under the Directive, the rule was payment within 30 days of an invoice being presented to the debtor. Thus, even if Portuguese administrative law rules subsequently were drafted in a way that created different time-frames for payment, then that did not matter because any such national rules would be incompatible with the EU Directive and would thus be invalid.

Furthermore, the owner of the pharmacy thought it quite wrong of the State to try and wriggle out of the Directive’s 30-day rule by relying on an exception tucked away in Article 3(2) of the Directive. This was because Article 3 only governed ‘Interest in case of late payment’, and subsection 2 stated:

For certain categories of contracts to be defined by national law, Member States may fix the period after which interest becomes payable to a maximum of 60 days provided that they either restrain the parties to the contract from exceeding this period or fix a mandatory interest rate that substantially exceeds the statutory rate.

The owner of the pharmacy pointed out that the State simply had not complied with any of the requirements in that provision and so should not be entitled to rely upon it.

On hearing these arguments from the parties, Judge Soares Leite Martins Portela and two other judges sitting on the bench decided to make a preliminary to the CJEU.

Questions Referred
According to the Curia website, the Portuguese Supremo Tribunal Administrativo has asked:

A. Does Directive 2000/35/EC […] … of 29 June 2000 apply, in the light of recital 13 of that directive, to the system for the payment of the State’s contributions to the cost of medicinal products dispensed to members of the SNS, established by Decree-Law No 242-B/2006 and implemented by Order No 3- B/2007?

B. In the event that it does apply, is it possible to conclude from Articles 5 and 6 of Decree-Law No 242-B/2006 the existence of an adhesion contract capable of falling within the scope of Article 3(1)(b) of the abovementioned directive in view of the fact that it is possible to adhere to or be released from that contract, depending on whether or not medicinal products are dispensed?

C. Are Article 8 of Decree-Law No 242-B/2006 and Articles 8 and 10 of Order No 3-B/2007, in making provision for monthly invoicing, compatible with Directive 2000/35 … (Article 3(1)(b)(i))?

D. Is it possible to regard Article 10 of Order No 3-B/2007 as falling within the scope of [Article 3(2)] of the abovementioned directive, where it provides that the deadline for payment is to be the 10th day of the month following the one in which the invoice was received?

This case could interest both public lawyers and health lawyers alike.

For public lawyers, a point of interest might lie in the fact that Question 1 refers to Recital 13. For ease, this Recital says:

This Directive should be limited to payments made as remuneration for commercial transactions and does not regulate transactions with consumers, interest in connection with other payments, e.g. payments under the laws on cheques and bills of exchange, payments made as compensation for damages including payments from insurance companies.

Unfortunately, the point was not discussed further in the order of reference. Nevertheless, if the Portuguese State is indeed asserting that the Recital in some way creates an exception to the Directive, then that would raise an issue which is already at stake in other preliminary rulings currently pending before the CJEU; see further, Case C-293/16, Sharda Europe – Deadline missed? Schade! and Case C-31/16, Visser Vastgoed – planning on EU services law and not a purely internal situation.

For health lawyers, there is an aspect of this case which might also be of interest. The Portuguese judges explain that the purpose of the Directive is to encourage prompt payment in order to reduce the risk of insolvency to SMEs in a free market system. However, on page 14 of the Portuguese referring order, they also quote a document indicating that Portuguese pharmacies are not exposed to competition because Portuguese rules prevent new pharmacies from being created. It might be worth pausing to consider that point. National non-competition rules in respect of traditional pharmacies have been challenged successfully in cases like Case C-367/12, Corinna Prinz-Stremitzer. Furthermore, technological advances would now seem to expose even traditional pharmacies in one Member State to competition from pharmacies in other Member States; see for example, the facts giving rise to Case C-148/15, Deutsche Parkinson Vereinigung – bonuses for buying Dutch mail order medicines. Perhaps such case law will exert an influence on Portugal’s ability to claim that its pharmacy-refund rules form part of its national health policy?