Court of Justice of the European Communities (including Court of First Instance Decisions)

JUDGMENT OF THE COURT (Sixth Chamber)

16 October 2001 (1)

(Failure by a Member State to fulfil its obligations - Directives 90/388/EEC and 96/2/EC - Market for telecommunications services - Mobile and personal communications)

In Joined Cases C-396/99 and C-397/99,

Commission of the European Communities, represented by B. Doherty and D. Triantafyllou, acting as Agents, with an address for service in Luxembourg,

applicant,

v

Hellenic Republic, represented by N. Dafniou and S. Chala, acting as Agents, with an address for service in Luxembourg,

defendant,

APPLICATION for a declaration that, by failing to take within the prescribed period, all the measures necessary to comply with Article 2(1) (Case C-396/99) and Article 2(2) (Case C-397/99) of Commission Directive 96/2/EC of 16 January 1996 amending Directive 90/388/EEC with regard to mobile and personal communications (OJ 1996 L 20, p. 59), in conjunction with the second and third paragraphs of Article 3a of Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services (OJ 1990 L 192, p. 10) as amended by Directive 96/2, the Hellenic Republic failed to fulfil its obligations under the EC Treaty and those directives,

THE COURT (Sixth Chamber),

composed of: N. Colneric, President of the Second Chamber, acting for the President of the Sixth Chamber, C. Gulmann (Rapporteur), R. Schintgen, V. Skouris, and J.N. Cunha Rodrigues, Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

Registrar: R. Grass,

having regard to the report of the Judge-Rapporteur,

after hearing the Opinion of the Advocate General at the sitting on 31 May 2001,

gives the following

Judgment

1. By applications lodged at the Court Registry on 13 October 1999, the Commission of the European Communities brought two actions under Article 226 EC for a declaration that, by failing to take all the measures necessary to comply with Article 2(1) (Case C-396/99) and Article 2(2) (Case C-397/99) of Commission Directive 96/2/EC of 16 January 1996 amending Directive 90/388/EEC with regard to mobile and personal communications (OJ 1996 L 20, p. 59), in conjunction with the second and third paragraphs of Article 3a of Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services (OJ 1990 L 192, p. 10) as amended by Directive 96/2, the Hellenic Republic failed to fulfil its obligations under the EC Treaty and those directives.

   Legislation

2. Directive 96/2, which is intended to establish free competition in the mobile and personal communications market, provides, in Article 2(1), that Member States are to refrain from refusing to allocate licences for operating mobile systems according to the DCS 1800 standard from 1 January 1998 at the latest.

3. Under Article 2(2) of Directive 96/2, Member States are not to refuse to allocate licences for public access/Telepoint applications, including systems operating on the basis of the DECT standard, as from the entry into force of the directive. Under Article 5 of the directive, the date of entry into force was the 20th day following its publication in the Official Journal of the European Communities, namely 15 February 1996.

4. In accordance with Article 2(4) of Directive 96/2, Member States are to adopt, where required, measures to ensure the implementation of that Article, taking account of the requirement to ensure effective competition between operators competing in the relevant markets.

5. Pursuant to the second paragraph of Article 2 of Directive 90/388, Member States which make the supply of telecommunications services other than voice telephony subject to a licensing or declaration procedure aimed at compliance with the essential requirements are to ensure, without prejudice to Article 3, that the conditions for the grant of licences are objective, non-discriminatory and transparent. Reasons must be given for any refusal and there has to be a procedure for appealing against any such refusal.

6. Article 3a of Directive 90/388 provides:

   In addition to the requirements set out in the second paragraph of Article 2, Member States shall, in attaching conditions to licences or general authorisations for mobile and personal communications systems, ensure the following:

   (i) licensing conditions must not contain conditions other than those justified on the grounds of the essential requirements and, in the case of systems for use by the general public, public service requirements in the form of trade regulation within the meaning of Article 3;

   (ii) licensing conditions for mobile network operators must ensure transparent and non-discriminatory behaviour between fixed and mobile network operators in common ownership;

   (iii) licensing conditions should not include unjustified technical restrictions. Member States may not, in particular, prevent combination of licences or restrict the offer of different technologies making use of distinct frequencies, where multistandard equipment is available.

   As far as frequencies are available, Member States shall award licences according to open, non-discriminatory, and transparent procedures.

   Member States may limit the number of licences for mobile and personal communications systems to be issued only on the basis of essential requirements and only where related to the lack of availability of frequency spectrum and justified under the principle of proportionality.

   Licence award procedures may consider public service requirements in the form of trade regulation within the meaning of Article 3, provided the solution which least restricts competition is chosen. The relevant conditions related to trade regulations may be attached to the licences granted.

   ...

   Pre-litigation procedure

7. On 5 December 1995, a licence for the provision of numeric mobile radiotelecommunications services according to the DCS 1800 standard and a general licence for the provision of public access/Telepoint services using CT2 and DECT technology were granted in Greece under Presidential Decree No 437/1995 to Organismos Tilepikoinonion Ellados A.E. (the national telecommunications organisation, OTE).

8. Since those licences were awarded without any announcements or prior calls for tenders, no other company had an opportunity to put in an application for those licences or a similar licence. The DCS 1800 licence was later assigned to CosmOTE, a subsidiary of OTE.

9. On 29 July 1997, the Commission received two complaints regarding the conditions in which OTE had been awarded both the DCS 1800 licence and the licence for operating the combined DECT technologies. The Commission forwarded those complaints to the Greek authorities on 5 September 1997, asking them to submit observations on the allegations contained therein.

10. By letter of 28 November 1997, the Greek Government informed the Commission that, so far as the DCS 1800 licence was concerned, only one third of the frequency spectrum DCS 1800 had been allocated to OTE and that 2x50 MHz remained available in that spectrum for use by two other DCS 1800 operators. It submitted that, before it allocated new DCS 1800 licences, it had to ensure that doing so would not impede free competition in the mobile telephony market, since, if such licences were granted in the near future, there was a risk that the dominant position of the two existing GSM operators would be strengthened and that the substantial investment made by CosmOTE would be jeopardised.

11. As regards the alleged refusal to allocate DECT licences, the Greek Government informed the Commission that it had not refused to grant a licence to the complainant and that it was in the course of processing the application submitted to it.

12. After receiving those replies, the Commission sent the Greek Government two letters of formal notice, on 28 April and 12 May 1998, dealing with the failure to grant DCS 1800 licences and DECT licences.

13. In its reply of 31 July 1998, the Greek Government informed the Commission that Article 2(1) and (2) of Directive 96/2 had been transposed into Greek law by Presidential Decree No 124/1998 of 26 May 1998 (FEK A' 103, Decree 124/1998), Articles 3 and 7 of which permitted the number of licences granted for mobile and personal telecommunications to be limited where the limitation was related to a lack of frequency availability and was justified under the principle of proportionality, account being taken of the need to avoid harmful interference, to promote investment and to safeguard competition. Furthermore, in the same letter, the Greek authorities informed the Commission that they were in the process of drafting regulations concerning the procedure for, and the conditions under which, DCS 1800 and DECT licences would be awarded and that the regulations would be enacted within a short period of time.

14. In a letter of 29 September 1998, the Greek Government informed the Commission that it was not in a position to publish a call for tenders for other DCS 1800 and DECT mobile telephony licences, since, although frequencies were available, they could not be allocated because there was no proper system for monitoring possible illegal use thereof.

15. The Commission took the view that that situation could be attributed to the Greek Government's delay in creating a frequency monitoring system and, on 17 December 1998, it sent the Greek authorities two reasoned opinions, asking them to comply with them within two months of notification.

16. The Greek Government replied by letters dated 23 February 1999. Concerning the failure to grant DCS 1800 licences, it told the Commission that negotiations were under way with the three mobile telephony organisations regarding the amendment, extension or harmonisation of their existing licences and the operation of the spectrum available for the GSM-900 and DCS 1800 systems, while it was proceeding to draft the necessary legislative provisions. It again stated that a prerequisite for the implementation of its policy was availability of a spectrum with quality characteristics and that it was promoting the establishment of a management system for the radio frequency spectrum. So far as the failure to grant DECT licences was concerned, it repeated its argument that the spectrum was not available because of the lack of a proper monitoring system capable of enabling the system to be effectively operated for all the users concerned.

17. Having received those replies, the Commission decided to bring the present actions.

18. By order of the President of the Court of Justice of 1 December 1999, Cases C-396/99 and C-397/99 were joined for the purposes of the written procedure and judgment, pursuant to Article 43 of the Rules of Procedure.

    Arguments of the parties

19. In its application, the Commission maintains that the Hellenic Republic's default consists in failing to specify the conditions, rules and procedures for awarding licences to suppliers of DCS 1800 and DECT mobile telephony services, even though an available spectrum actually exists, and thereby obstructing the exercise of the rights arising under Directive 96/2, since the persons concerned, having no knowledge of either the operating conditions or the selection criteria, are not in a position to make an application or put in a tender. Such an obstacle is contrary to Directive 96/2, which allows limitations on the allocation of the licences in question only if the essential requirements that the directive sets out are met, in particular if the limitations are related to the lack of availability of frequencies and are justified under the principle of proportionality. Decree 124/1998 is not adequate to bring about a proper implementation of Directive 96/2, since it does not lay down the conditions or the procedure for allocating licences.

20. In its defence, the Greek Government contends that the Commission's actions have become devoid of purpose since the enactment of Ministerial Order No 78574 of 24 November 1999 (FEK B' 2117, Order No 78574), which regulates the procedure for awarding special licences - a procedure provided for in paragraph IA of Article 3(4) of Law No 2246/94 of 30 January 1997 relating to the organisation and operation of the telecommunications industry (FEK A' 172) - and which formally, clearly and thoroughly completes the legislative framework governing the grant of specific licences established by Decree No 124/1998.

21. Furthermore, the Greek Government argues that Directive 96/2 was adopted to meet a situation characterised by a lack of competition and thus to put in place conditions for effective competition. It was based on the premiss that competition did not exist in the mobile telephony market. Seen from that angle, the first measure needed was the abolition of obstacles and exclusive or special rights which limited opportunities for entering the market concerned and, consequently, the grant of specific licences in that area, in so far as those specific licences could be justified on the grounds of essential requirements.

22. However, the reference situation was not applicable to the Greek market, inasmuch as it was based on the assumption that the holders of special and exclusive rights in the fixed telephony sector, or their subsidiaries, had been the first to break into the market for the supply of mobile and personal telecommunications services. In the Greek market, special and exclusive rights had been granted to companies having no connection with OTE. That explains why conditions were significantly different. According to the Greek Government, it is appropriate to interpret the methods and obligations created by Directive 96/2, and the Government's implementation thereof, in the light of those conditions.

23. In its reply, the Commission maintains that, despite the existence of competition on the Greek market and the enactment of Order No 78574, there is nevertheless a breach of Directive 96/2.

24. In its rejoinder, the Greek Government contends that, even supposing that the conditions for competition are not met because a particular organisation has been granted certain privileges, that would not necessarily mean that other applicants are prevented from entering the market, since such privileges do not necessarily lead to a restriction of the market. With that in mind, it is necessary to examine the question on a case by case basis. The Commission was wrong and premature to conclude that the projected grant of an additional spectrum would be made arbitrarily.

    Findings of the Court

25. It is appropriate to bear in mind that Directive 96/2 is intended to establish a legislative framework enabling the potential of mobile and personal communications to be exploited by abolishing, as early as possible, exclusive and special rights by removing, for operators of mobile networks, (i) restrictions on the freedom to operate and develop their networks for the purpose of carrying out the activities authorised by their licences or authorisations and (ii) distortions of competition and by allowing those operators control over their cost base.

26. In accordance with that objective, Article 2(1) of Directive 96/2 requires Member States, from 1 January 1998, to refrain from refusing to allocate licences for operating mobile systems according to the DCS 1800 standard and Article 2(2) imposes the same requirement in relation to DECT licences from 15 February 1996.

27. For there to be free competition in the mobile and personal communications market, access to that market may be limited only on the basis of essential requirements and only where related to the lack of availability of frequency spectrum. Where access is made conditional upon obtaining authorisation, there is a presumption that the persons concerned will know the procedure that must be followed and the criteria governing the grant of that authorisation. That is why the second paragraph of Article 2, and Article 3a, of Directive 90/388 require Member States to ensure that procedures for the grant of licences are transparent and public, are conducted in accordance with objective criteria and are non-discriminatory.

28. In that regard, it must first be pointed out that Decree No 124/1998 merely provides for the possibility of limiting the number of licences for mobile and personal communications systems where the frequency spectrum is exhausted, prohibits the imposition of unjustified technical restrictions where frequencies are available and lays down certain general criteria by way of guidance, by reference to which licences for the DCS 1800 and DECT systems are to be granted, but it in no way fixes the rules and procedures necessary for that purpose.

29. Further, the structure of the market in mobile and personal telecommunications in Greece at the time when Directive 96/2 entered into force and on the dates with effect from which the Member States could no longer refuse DCS 1800 and DECT licences is irrelevant for the purposes of giving judgment in these proceedings in which the Commission is seeking a declaration that the Hellenic Republic failed to take the measures necessary for the grant of new licences in accordance with the rules laid down by the directive.

30. It is true that the obligation to grant new authorisations falls if there is no frequency availability but that was not the case in this instance. The Greek Government acknowledges that a spectrum was available for both mobile telephony systems at issue.

31. Finally, as regards Order No 78574, relied upon by the Greek Government, the Court must reiterate that the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation in the Member State as it stood at the end of the period laid down in the reasoned opinion, and that the Court cannot take account of any subsequent changes (see, inter alia, Case C-69/99 Commission v United Kingdom [2000] ECR I-10979, paragraph 22; and Case C-266/99 Commission v France [2001] ECR I-1981, paragraph 38).

32. It is not in dispute that Order No 78574, which is dated 24 November 1999, entered into force after the expiry of the two-month period laid down in the reasoned opinions referred to in paragraph 15 of this judgment. Accordingly, that order cannot be taken into consideration in these actions in order to assess the merits thereof.

33. It follows from the foregoing that, on the expiry of the period laid down in the abovementioned reasoned opinions, the Hellenic Republic had not adopted the rules and procedures for allocating licences to suppliers of DCS 1800 and DECT mobile telephony services, as it was required to do by Directive 96/2.

34. Therefore, the Court must hold that, by failing to adopt, within the prescribed period, all the laws, regulations and administrative provisions necessary to comply with Article 2(1) and (2) of Directive 96/2, in conjunction with the second and third paragraphs of Article 3a of Directive 90/388, the Hellenic Republic failed to fulfil its obligations under those directives.

    Costs

35. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission applied for costs and the Hellenic Republic has been unsuccessful, the latter must be ordered to pay the costs.

On those grounds,

THE COURT (Sixth Chamber)

hereby:

1. Declares that by failing to adopt, within the prescribed period, all the laws, regulations and administrative provisions necessary to comply with Article 2(1) and (2) of Commission Directive 96/2/EC of 16 January 1996 amending Directive 90/388/EEC with regard to mobile and personal communications, in conjunction with the second and third paragraphs of Article 3a of Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services, the Hellenic Republic failed to fulfil its obligations under those directives;

2. Orders the Hellenic Republic to pay the costs.

ColnericGulmann Schintgen SkourisCunha Rodrigues

Delivered in open court in Luxembourg on 16 October 2001.

R. Grass F. Macken

Registrar President of the Sixth Chamber

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1: Language of the case: Greek.