• In the case of Case C-255/00 Grundig Italiana [2002] ECR I-8003, the principle of effectiveness of Community law was considered in the context of a retroactive time limit on taxation claims without the presence of an adequate transitional period to bring in such claims.

Facts of Case C-255/00 Grundig Italiana [2002] ECR I-8003

  • Grundig Italiana were the subject of unlawful tax consumption by the Italian government
  • This tax levy was in breach of EC law, however the government claimed that” in respect of the time limit under domestic law, Grundig Italiana could not claim for reimbursement as they had missed the limitation period
  • The limitation period on retrospective claims in the present case had been reduced from 5 years to 3 years by the Italian government
  • There was a 90 day transitional period by which repayment claims could still be brought for the 5-year limitation period
  • A preliminary reference was made to the European Court of Justice regarding the limitation period, whether it was compatible with the effectiveness principle

Issues in Case C-255/00 Grundig Italiana [2002] ECR I-8003

  • Was the reduction in the limitation period on retrospective claims compatible with the principle of effectiveness?

Held by European Court of Justice

  • Whilst previous European Court of Justice case law has held that that limitation periods of 3 years, even 1 year, are compatible with the principle of effectiveness, such was not the case here due to the inadequate transition period given.

Findings of the Court

The reasoning for an adequate transition period for reduction from 5 years, as in the present, or more was provided by the court

  • “Where a period of ten or five years for initiating proceedings is reduced to three years, the minimum transitional period required to ensure that rights conferred by Community law can be effectively exercised and that normally diligent taxpayers can familiarise themselves with the new regime and prepare and commence proceedings in circumstances which do not compromise their chances of success” [40]

To be compatible with the principle of effectiveness, an adequate transitional period must be provided. Instead of a 90-day transitional period (as provided in the present case) there should have been 6 months given for claims under the 5-year limitation period:

  • “The principle of effectiveness merely requires that such retroactive application should not go beyond what is necessary in order to ensure observance of that principle. It must, therefore, be permissible to apply the new period for initiating proceedings to actions brought after expiry of an adequate transitional period, assessed at six months in a case such as the present, even where those actions concern the recovery of sums paid before the entry into force of the legislation laying down the new period.” [41]
  • “Where a limitation period of five years is replaced by a time-limit of three years, a transitional period of 90 days must be regarded as insufficient and six months must be regarded as the minimum period required to ensure that the exercise of rights of recovery is not rendered excessively difficult.” [42]