20 February, 2017
Mr. Tom Sheridan
Clerk to the Joint Committee
Joint Committee on the Future Funding of Domestic Water Services
Leinster House
Dublin 2
Re: European Court of Justice (ECJ) Fines
Dear Mr. Sheridan,
I refer to the Department’s appearance before the Joint Committee on the Future Funding of
Domestic Water Services on 7 February during which the Department committed to providing an
outline in respect of European Court of Justice (ECJ) Fines.
Where the Commission considers that a Member State has not taken the necessary measures to
comply with the first judgment of the ECJ in which the original infringement was established, it can
bring the case back to the ECJ, to request that it (the ECJ) impose a fine on the Member State to
force compliance with the original ruling. The Commission can request the Court to impose a lump
sum penalty and/or a daily penalty payment on the Member State concerned.
ECJ Imposition of Lump Sum Penalty and/or a Daily Penalty Payment on a Member State
The Commission is required to specify the amount of the lump sum and/or penalty payment to be
paid by the Member State. In calculating the amount of the fine, the Commission is guided by the
following principles:
1. That the penalty should be based on (i) the seriousness of the infringement; (ii) duration of the
infringement; and (iii) the need to ensure that the penalty is a deterrent to future
infringements.
2. That the penalty must be consistent with the principles of proportionality and equal treatment
among Member States.
3. That, in terms of the effectiveness of the penalty, its deterrent effect must be ensured (i.e. that
purely symbolic penalties cannot be sought).
Normally, the fine is composed of a daily penalty payment, which is imposed for every day of the
continuance of the infringement after the judgment imposing the fine, and a lump sum payment
which takes into account the infringement itself.
I. The Daily Penalty Payment
The amount of the daily penalty is calculated by multiplying a standard flat-rate amount by
coefficients for seriousness and duration, and then by the “n” factor for the country, which takes
account of the Member State´s capacity to pay. For purposes of the coefficient of seriousness, the
Commission considers the importance of the rules of EU law breached and the impact of the
infringement on general and particular interests.
For the factor “duration”, the period taken into account is the duration of the infringement from the
date of the first ECJ judgment up to the date the Commission decides to refer the matter to the
ECJ, thus the time the Member State was already granted to correct the wrongs, but within which
the infringement was not brought to an end voluntarily. The sanction should be proportionate and
dissuasive in order to ensure that the Member State decides to rectify its position and bring the
infringement to an end and does not repeat the same offence. The amount must therefore be
higher than the benefit that the Member State gains from the infringement. The daily penalty
payment will then apply for every day after its imposition on which the Member State in question
fails to comply.
II. The Lump Sum Payment
For the lump sum payment, the Commission proposes to the ECJ a method which comprises of the
setting of a minimum fixed lump sum, and a method of calculation based on a daily amount
multiplied by the number of days that the infringement persists.
The daily amount for determining the lump sum is calculated by multiplying a standard flat-rate
amount by a coefficient for seriousness and multiplying of the result by the “n” factor (as per the
daily penalty payment).
For the coefficient of seriousness, the same rules apply for fixing a lump sum but duration is not
taken into account in this case, as it is already covered in the daily penalty payment. The penalty
and lump sum can apply cumulatively for the same infringement.
Recent relevant ECJ fines
To give some indication on the practical application of the rules on fines, recent examples of the
scale of fines imposed are outlined below:
 In November 2013, the Commission referred Greece back to the ECJ for poor treatment of
urban waste water (C119/02). The ECJ had previously ruled in October 2007 that Greece
was failing in its obligation to treat and dispose of urban waste water. The lack of treatment in
23 agglomerations across the country means that the health of residents is being put at risk.
In October 2015, the ECJ imposed a lump sum fine of €20m and a daily penalty payment
of €20,000 until the obligations are fulfilled.
 In another case (C196/13), the ECJ instructed Italy in December 2014 to pay €40m for failing
to tackle the dumping of illegal waste.
A fine in the range of €20m would deliver a medium to large water treatment plant or 4-5 small
plants (5,000 population equivalent). Such a fine could also deliver 7-8 small wastewater treatment
plants for untreated agglomerations or it would replace in the order of 100km of distribution main.
So far, €20M has delivered over 6,000 customer repairs in the first fix programme plus
investigations resulting in householder repair of a further 15,000 leaks, which combined has saved
70 million litres/day in the ‘First Fix’ programme.
Stricter Enforcement by the European Commission on the Application of EU Law
The European Commission issued a Communication “EU law: Better results through better
application” (COM C 2016/8600) on 21 December 2016, which signals stricter enforcement on the
application of EU law, including greater possibility of fines and lump sums being sought in
infringement proceedings. The Communication also sets out new tools for strengthening
compliance assessment and the new enforcement approach will apply from the date of its
publication in the Official Journal (19 January 2017).
The Commission enjoys discretionary power in deciding whether or not, and when, to start an
infringement procedure or to refer a case to the European Court of Justice. The Communication
affirms the Commission’s priorities in enforcing EU law as focusing on infringements which obstruct
the implementation of important EU policy objectives or which risk undermining the four
fundamental freedoms1.
Specifically, the Commission will prioritise cases:
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Of failure to communicate transposition measures, or of incorrect transposition;
Where Member States have failed to comply with a judgment of the CJEU;
Where the infringement has caused serious damage to EU financial interests or violated
EU exclusive powers;
Which reveal systemic weaknesses in a Member State, particularly in relation to the
capacity of national judicial systems to ensure the enforcement of EU law;
Where national law provides no effective redress for breaches of EU law; or
Which show a persistent failure to apply EU law correctly.
The Communication updates the Commission’s enforcement policy. In line with the Commission’s
commitment to be “bigger and more ambitious on big things, and smaller and more modest on
small things”, the Commission intends to take a more strategic approach to the handling of
infringements. This is likely to result in earlier opening and more systematic follow through of
infringement proceedings against Member States.
There are two major developments signalled in the Communication;
i). Reduced reliance on the EU Pilot as an informal pre-infringement resolution mechanism
The Communication states that infringements should be dealt with promptly and that the
Commission and MS need to proceed expeditiously in investigating breaches of the law. The
EU Pilot system was set up to quickly resolve potential breaches of EU law at an early stage
1
Free Movement of Goods; Freedom of movement for workers; Right of establishment and freedom to provide
services; Free movement of capital
in appropriate cases and was not intended to add a lengthy step to the infringement process
which, in itself, is intended to entail a problem-solving dialogue with Member States. On foot
of this Communication, the Commission will now “launch infringement procedures without
relying on the EU Pilot …unless recourse to EU Pilot is seen as useful in a given case.”
ii). Intention to seek both a lump sum and periodic penalty payments in infringement proceedings
brought under Article 260(3) TFEU for failure to transpose a directive
The Commission attaches high importance to the timely transposition of directives and, in that
context, has set itself a target of 12 months to refer infringement cases to the ECJ if the failure
to transpose a directive persists.
While Article 260(3) of the Treaty on the Functioning of the European Union (TFEU) provides
for financial sanctions in cases of failure to transpose directives, the Commission has, until
now, only ever sought the imposition of a periodic penalty payment in such cases. The
Commission now, however (possibly due to an increase in the number of infringement
proceedings opened against Member States for failure to transpose), intends to seek both
penalty payments and a lump sum in such cases. The Commission will also no longer
withdraw an infringement action simply because a Member State has completed transposition
during the course of the court proceedings.
The implementation of this approach by the Commission will, therefore, significantly increase
the potential sanctions to be faced by Member States as a result of non-transposition of
directives.
Yours sincerely,
________________________
Maria Graham,
Assistant Secretary
Water Division