No compensation for full legal costs in AMBI cases

Case no. 18/2022
Judgment delivered on 24 November 2023

Lady & Kid A/S
Direct Nyt ApS
Harald Nyborg A/S
and
KID-Holding A/S
vs.
The Danish Ministry of Taxation

In 1988-1991, a labour market contribution (“AMBI”), which replaced a number of previous employers’ levies, was levied on Danish undertakings. In 1992, the EU Court of Justice ruled that the AMBI was contrary to EU law, leading the Danish Parliament, Folketinget, to adopt an act on repayment of the AMBI.

Four companies objected against the Danish authorities’ practice in the repayment of the AMBI and instituted court proceedings against the Ministry of Taxation. During the proceedings before the High Court, questions were referred for a preliminary ruling to the EU Court of Justice which ruled that the Danish repayment practice was incompatible with EU law. The Ministry of Taxation reached a settlement with the undertakings according to which the Ministry was to repay the AMBI to the undertakings.

In its decision of 10 January 2013, the High Court awarded DKK 3.2 million in legal costs to cover the undertakings’ lawyer’s fees. However, according to the undertakings’ calculations, their lawyer’s and auditor’s costs amounted to approx. DKK 10 million, for which reason they instituted new proceedings against the Ministry of Taxation claiming compensation for their full legal costs.

For that claim to be successful, liability had to be established. The question then followed whether the Ministry of Taxation had incurred liability by having introduced and collected the AMBI in contravention of EU law and then having used a repayment practice that was also contrary to EU law.

One of the conditions for a Member State to be considered liable under EU law is that the infringement of EU law is sufficiently serious.

The Supreme Court held that there was no basis for establishing that the choices made by the legislator in the introduction and collection of the AMBI amounted to a sufficiently serious infringement of EU law. It also considered that the Danish repayment practice was not a sufficiently serious infringement of EU law. In addition, the Danish Courts did not incur liability when they refused on several occasions during the proceedings to refer questions for a preliminary ruling to the EU Court of Justice.

Accordingly, the Supreme Court held that the Danish State’s infringement of EU law did not render it liable in damages.

The Supreme Court also ruled that Article 47 of the EU Charter of Fundamental Rights or the principle of effectiveness in EU law had not been breached.

The High Court had reached the same conclusion.