Case C-424/15, Ormaetxea Garai – dismissed so unfairly as to query the independence of regulators

Many of Spain’s national regulators have been merged into one mega regulator. People formerly running those regulators have been made redundant even with retroactive effect. Is retroactive dismissal contrary to the general principles of EU law? And since people have been removed from their jobs prior to the end of their fixed-term contracts, is this not contrary to EU law’s requirement that national regulators be completely independent, as per the EU’s ‘communications networks’ Directive 2002/21/EC?

Spain’s telecoms sector was regulated by the ‘CMT’ [the Comisión Nacional del Mercado de Telecomunicaciones]. Set up in 1996, it was designed to ensure the liberalisation of the Spanish telecommunications sector and to promote competition in that sector.

In 2011, a new person was appointed to run the CMT. He was appointed on a six-year fixed term contract. A further appointment was also made in respect of person who joined the board.

In September 2013, Spain decided to create a new mega-regulator, the Spanish ‘Competition and Markets Authority’ [the ‘Comisión Nacional de los Mercados y la Competencia’]. The Authority aggregated functions that were previously performed by: the Spanish Energy Commission, the Spanish Telecoms Commission, the Spanish Competition Commission, the Spanish Railways Regulator, the Spanish Postal Regulator, the Spanish Aviation Regulator, and the Spanish Audiovisual Regulator.

The rise of the Spanish Authority signalled the demise of the Spanish telecoms regulator, the CMT. Indeed, its fate was sealed by delegated legislation dated 11 October 2013 and published in Spain’s Official Journal of 15 October.

Consequently, the chairman of the CMT and the board member were made redundant. However, they were made redundant with effect not from 15 October when the measures were published, but from 7 October – even prior to the regulator’s official demise.

Litigation ensued. The claimants pointed out that the redundancies had been made with retroactive effect, and thus contrary to a general principle of law. Besides breaching the ban on retroactive effect, the claimants also claimed that the redundancy decision lacked any proper reasoning and that, they say, was clearly contrary to EU law. In that context, they cite the obligations laid down in the EU’s telecoms communications networks Directive, when read together with the EU’s data processing Directive, plus the CJEU’s latest case law on the latter Directive.

At the Spanish Supreme Court
The Spanish Supreme Court looked at the issues of independence and the duty to give reasons as they are set out in the EU’s telecoms communications network Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services [OJ [2002] L108/33).

The key core provision is Article 3, as subsequently amended. That is to say, Article 3 provides:

Article 3
National regulatory authorities
1. Member States shall ensure that each of the tasks assigned to national regulatory authorities in this Directive and the Specific Directives is undertaken by a competent body.
2. Member States shall guarantee the independence of national regulatory authorities by ensuring that they are legally distinct from and functionally independent of all organisations providing electronic communications networks, equipment or services. Member States that retain ownership or control of undertakings providing electronic communications networks and/or services shall ensure effective structural separation of the regulatory function from activities associated with ownership or control.
3. Member States shall ensure that national regulatory authorities exercise their powers impartially and transparently.

Article 3 of this Directive was subsequently amended in 2009 – and the claimants are emphasising the importance of the obligation on the Spanish State as set down in 3a from the second sentence onwards. The relevant provision provides:

3) Article 3 shall be amended as follows:
(a) paragraph 3 shall be replaced by the following:
“3. Member States shall ensure that national regulatory authorities exercise their powers impartially, transparently and in a timely manner. Member States shall ensure that national regulatory authorities have adequate financial and human resources to carry out the task assigned to them.”;

(b) the following paragraphs shall be inserted:
“3a. Without prejudice to the provisions of paragraphs 4 and 5, national regulatory authorities responsible for ex-ante market regulation or for the resolution of disputes between undertakings in accordance with Article 20 or 21 of this Directive shall act independently and shall not seek or take instructions from any other body in relation to the exercise of these tasks assigned to them under national law implementing Community law. This shall not prevent supervision in accordance with national constitutional law. Only appeal bodies set up in accordance with Article 4 shall have the power to suspend or overturn decisions by the national regulatory authorities. Member States shall ensure that the head of a national regulatory authority, or where applicable, members of the collegiate body fulfilling that function within a national regulatory authority referred to in the first subparagraph or their replacements may be dismissed only if they no longer fulfil the conditions required for the performance of their duties which are laid down in advance in national law. The decision to dismiss the head of the national regulatory authority concerned, or where applicable members of the collegiate body fulfilling that function shall be made public at the time of dismissal. The dismissed head of the national regulatory authority, or where applicable, members of the collegiate body fulfilling that function shall receive a statement of reasons and shall have the right to request its publication, where this would not otherwise take place, in which case it shall be published.
Member States shall ensure that national regulatory authorities referred to in the first subparagraph have separate annual budgets. The budgets shall be made public. Member States shall also ensure that national regulatory authorities have adequate financial and human resources to enable them to actively participate in and contribute to the Body of European Regulators for Electronic Communications (BEREC) [].

In that context, the Spanish Supreme Court was also aware of a recent judgment of the CJEU in the area of data processing law. That is to say, Case C-288/12, European Commission v Hungary, concerned the obligations on a Member State to ensure that the data processing regulator acted independently, a duty which is enshrined in Article 28(1) of Directive 95/46/EC (OJ [1995] L281/31).

In the Hungarian case, the issue of the independence obligation had arisen when Hungarian legislation prematurely brought to an end, the term that was to be served by the head of Hungarian Data Processing Agency. The Hungarian State simply decided to enact legislation that set up a new authority – a new authority that was then headed by a different person.

The Spanish Supreme Court recalled the passages of the CJEU’s judgment in the Hungarian case, which read as follows:

50. In order to determine whether the present action is well founded, it is necessary to examine whether — as the Commission maintains — the requirement, set out in the second subparagraph of Article 28(1) of Directive 95/46, to ensure that each supervisory authority is able to carry out the tasks entrusted to it in complete independence entails an obligation for the Member State concerned to allow that authority to serve its full term of office.

54. If it were permissible for every Member State to compel a supervisory authority to vacate office before serving its full term, in contravention of the rules and safeguards established in that regard by the legislation applicable, the threat of such premature termination to which that authority would be exposed throughout its term of office could lead it to enter into a form of prior compliance with the political authority, which is incompatible with the requirement of independence (see, to that effect, Commission v Austria EU:C:2012:631, paragraph 51). That is true even where the premature termination of the term served comes about as a result of the restructuring or changing of the institutional model, which must be organised in such a way as to meet the requirement of independence laid down in the applicable legislation.

55. Moreover, in such a situation, the supervisory authority cannot be regarded as being able, in all circumstances, to operate above all suspicion of partiality. Accordingly, the independence requirement laid down in the second subparagraph of Article 28(1) of Directive 95/46 must necessarily be construed as covering the obligation to allow supervisory authorities to serve their full term of office and to have them vacate office before expiry of the full term only in accordance with the rules and safeguards established by the applicable legislation.

In light of this EU law, the Spanish Supreme Court really want know from the CJEU just three things. First, is the decision of the national legislature to merge of all these very specialised regulators into just one generic regulator compatible with Directive 2002/21? Second, is the independence requirement in Articles 3(2) and (3a) of that Directive to be interpreted in light of the independence requirement that is enshrined in Article 28 of the EU’s data processing Directive? And if so, whether the CJEU’s case law interpreting Article 28 of the data processing Directive also applies to a situation in which the term of the head of the Spanish telecoms regulator was prematurely ended solely as a result of the implementation of national law that merged the various regulatory authorities, and whether Spanish legislation is compatible with Article 3(3a) of the telecoms communications Directive?

Questions Referred
The Curia website has not yet published the official translation of the questions asked by the Spanish Supreme Court.

The ‘independence obligation’ in Article 3 of the EU’s ‘communications networks’ Directive 2002/21/EC has also been raised in a preliminary reference involving the Italian telecoms regulator, AGCOM.

Update – 4 November 2015
According to the EU’s Official Journal (OJ C363/18), the questions asked read:

1. Is Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 […] on a common regulatory framework for electronic communications networks and services to be interpreted to the effect that, from the perspective of the effective protection of the public interest for which the relevant national regulatory body is responsible, the creation by the national legislature of a regulatory and supervisory body of an unspecialised institutional model, which merges into a single body the pre-existing supervisory bodies in the energy, telecommunications and competition fields, may be considered compatible with the directive?

2. Must the conditions of ‘independence’ of national regulatory authorities for electronic communications networks and services, referred to in Article 3(2) and (3a) of Directive 2002/21/EC, as amended by Directive 2009/140/EC […], be the same as those required for national supervisory authorities for data protection under Article 28 of Directive 95/46/EC […]?

3. Is the decision in the judgment in Commission v Hungary, C-288/12 […], applicable to a situation in which the officers of a national telecommunications regulatory authority are dismissed before their term of office has expired owing to the requirements of the new legal framework which creates a supervisory body grouping together various national regulatory authorities for regulated sectors? May that early dismissal, due only to the entry into force of a new national law and not to an unforeseen change in the circumstances of the office-holders as previously established in national law, be considered compatible with the provisions of Article 3 (3a) of Directive 2002/21/EC?

Update – 3 June 2016
The Opinion of Advocate General Bot is due to be given to the Second Chamber on 30 June 2016. There does not appear to have been an oral hearing of the parties.

Update – 25 September 2016
The judgment of the Second Chamber is due on 19 October 2016.