Provisional text

OPINION OF ADVOCATE GENERAL

SZPUNAR

delivered on 7 April 2022 (1)

Case C‑294/21

État du Grand-Duché de Luxembourg,

Administration de l’enregistrement, des domaines et de la TVA

v

Navitours Sàrl

(Request for a preliminary ruling from the Cour de cassation du Grand-Duché de Luxembourg (Court of Cassation, of the Grand Duchy of Luxembourg, Luxembourg))

(Reference for a preliminary ruling – Taxation – Value added tax – Sixth Council Directive 77/388/EEC – Article 2(1) and Article 9(2)(b) – Scope – Taxable transactions – Place of supply of transport services – Moselle cruises – River with condominium status)

 Introduction

1.        However improbable it may seem, the genesis of the present case goes back over 200 years, namely, to the 1815 Congress of Vienna. In fact, Article 25 of the Final Act of this Congress, (2) concerning the ‘Prussian possessions on the left bank of the Rhine’, stipulated that the Moselle, Sûre and Our rivers, in so far as they constituted the boundary of these possessions, would belong jointly to the border powers. This was affirmed and specified in Article 27 of the Border Treaty between the Kingdom of the Netherlands and the Kingdom of Prussia concluded at Aachen on 26 June 1816.

2.        Although the Kingdom of Prussia, the Kingdom of the Netherlands, as it then existed, and the order established by the Congress of Vienna itself have long since ceased to exist, the aforementioned provision remains in force, currently in the form of Article 1(1) of the Treaty between the Grand Duchy of Luxembourg and the Federal Republic of Germany on the demarcation of the common border between the two States (3) (‘the 1984 Border Treaty’). The Treaty states that the territory subject to joint sovereignty is the visible expression of the spirit of European integration, but, paradoxically, in practice that joint sovereignty gives rise to difficulties for both Member States in discharging their obligations under EU law and, more specifically, as regards the present case, under the law on value added tax (‘VAT’).

3.        However, as Advocate General Dutheillet de Lamothe (4) has already had occasion to state, the arrangements of the Congress of Vienna and the provisions of the international agreements resulting therefrom should not preclude the full application and effectiveness of EU law throughout its territory, including that which, by virtue of those provisions, is subject to the joint sovereignty of two Member States. Accordingly, I propose that the present case be determined on the basis of the relevant provisions of EU law, without making their application dependent on the provisions of international agreements between individual Member States and the conclusion of the agreements envisaged therein.

 Legal framework

 International law

4.        Article 1(1) of the 1984 Border Treaty establishes the joint sovereignty (condominium) of Germany and Luxembourg over the border rivers:

‘Wherever the Moselle, the Sûre or the Our form a boundary in accordance with the Treaty of 26 June 1816 [ (5)], they constitute common territory subject to the joint sovereignty of the two Contracting States.’

5.        Article 5(1) of the treaty states:

‘The Contracting States shall settle matters concerning the law applicable in the joint territory under joint sovereignty by means of an additional agreement.’

To date, no such additional agreement has been concluded.

 European Union law

6.        Article 2(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: The uniform basis of assessment, (6) as amended by Council Directive 91/680/EEC of 16 December 1991 (7) (‘Directive 77/388’), states:

‘The following shall be subject to [VAT]:

1.      the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

…’

7.        Pursuant to Article 3(2) of that directive:

‘For the purposes of this Directive, the “territory of the country” shall be the area of application of the Treaty establishing the European Economic Community as defined in respect of each Member State in Article 227.’

8.        Finally, Article 9(1) and (2)(b) of that directive states:

‘1.      The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.

2.      However:

…

(b)      the place where transport services are supplied shall be the place where transport takes place, having regard to the distances covered;

…’

 Facts, procedure and questions referred

9.        Navitours Sàrl, a company incorporated under Luxembourg law, is engaged in the business of organising tourist cruises on a stretch of the Moselle River subject to joint sovereignty under the 1984 Border Treaty. By reason of this special status of the river, Navitours’ activities were considered by the tax authorities to be carried out outside the national territory for the purposes of the VAT legislation, so that the authorities did not claim payment of that tax on the price of those cruises.

10.      In 2004, Navitours acquired a passenger ship in the Netherlands for the purposes of its business. The tax authorities considered the vessel to be covered by intra-Community acquisition rules, that is, the transaction was exempted in the Netherlands and taxed in Luxembourg. (8) However, the tax authorities denied Navitours the right to deduct the VAT paid on the purchase of the vessel in question on the grounds that since the company’s activities in the waters of the condominium were not subject to taxation, that vessel had not been acquired for the purposes of taxable activities, which is a prerequisite for the right to make a deduction.

11.      As a result of an action brought by Navitours, the denial of the right to make a deduction referred to above was finally challenged in the judgment of the Cour d’appel (Court of Appeal, Luxembourg) of 10 July 2014, in which it was held that the activities of the company could be taxed either in Luxembourg or in Germany and that that company was therefore entitled to make a deduction.

12.      As a result of the abovementioned judgment, the tax authorities, by decision of 5 August 2015, demanded that Navitours pay VAT on its activities for the tax years 2004 and 2005. However, following an action brought by Navitours, the tribunal d’arrondissement de Luxembourg (District Court, Luxembourg), in its judgment of 23 May 2018, annulled the decision. In particular, it held that, in the absence of an agreement between the Grand Duchy of Luxembourg and the Federal Republic of Germany on the application of VAT to the territory of the condominium, the Luxembourg tax authorities were not authorised to levy that tax on activities carried out within that territory. That judgment was upheld by a judgment of the Cour d’appel (Court of Appeal) of 11 December 2019.

13.      The État du Grand-Duché de Luxembourg (State of the Grand Duchy of Luxembourg) and the Administration de l’enregistrement, des domaines et de la TVA (Registration Duties, Estates and VAT Authority, Luxembourg) have lodged an appeal in cassation against the latter judgment before the referring court. In those circumstances, the Cour de cassation (Court of Cassation) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘Does Article 2(1) of Directive [77/388], which provides that “the following shall be subject to value added tax: 1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such[”]

and/or Article 9(2)(b) of Directive [77/388], which provides that “the place where transport services are supplied shall be the place where the transport takes place, having regard to the distances covered[”]

apply and entail taxation [VAT] in Luxembourg on the passenger transport services carried out by a service provider established in Luxembourg, where those services are performed within a condominium, being defined under [the 1984 Border Treaty], as constituting a joint territory subject to the joint sovereignty of the Grand Duchy of Luxembourg and the Federal Republic of Germany and in relation to which no agreement has been concluded on the collection of VAT on supplies of transport services between those two States, such as provided for in Article 5(1) of [the 1984 Border Treaty], pursuant to which “the Contracting States shall settle matters concerning the law applicable in the joint territory under joint sovereignty by means of an additional agreement”?’.

14.      The reference for a preliminary ruling was received by the Court on 10 May 2021. Navitours, the Luxembourg and German Governments and the European Commission lodged written submissions. The Court decided to proceed without a hearing. The parties responded in writing to the Court’s questions.

 Analysis

15.      By its question referred for a preliminary ruling in the present case, the referring court asks, in essence, two questions, namely first, whether in the absence of an agreement between Luxembourg and Germany on the application of the VAT rules within the territory of the condominium, those rules apply to transport services supplied in that territory and, second, whether their application leads, or is likely to lead, to the taxation of those services in Luxembourg.

16.      Those issues, although closely connected, are nevertheless separate and must be dealt with in turn. Before doing so, however, it is first necessary to resolve the issue as to whether the services provided by Navitours are transport services within the meaning of Article 9(2)(b) of Directive 77/388.

 Tourist cruises as transport services for VAT purposes

17.      In the judgment in Trijber and Harmsen, (9) following a detailed analysis, the Court held (10) that, subject to review by the referring court, an activity which consists in providing, for payment, a service of carrying passengers on a boat for a waterway tour of a city for event-related purposes, does not constitute a service in the ‘field of transport’ within the meaning of Article 2(2)(d) of Directive 2006/123/EC. (11)

18.      It must therefore be considered whether, in the light of that judgment, the services provided by Navitours constitute ‘transport services’ at all within the meaning of Article 9(2)(b) of Directive 77/388. If that question were answered in the negative, the question referred for a preliminary ruling in the present case, which expressly concerns the interpretation of that provision, would be redundant. That is why, in the present case, the Court has questioned the parties on that point. (12)

19.      However, I do not consider that it would be permissible to interpret the concept of ‘transport services’ in Article 9(2)(b) of Directive 77/388 in the same way as the concept of ‘services in the field of transport’ under Directive 2006/123. I concur here with the view expressed in the replies to the Court’s question provided by Navitours, the Luxembourg Government and the Commission. (13)

20.      I wish to note at the outset that the abovementioned case-law of the Court is based largely on the very specific nature of the services at issue in the main proceedings in one of the cases which gave rise to the judgment in Trijber and Harmsen, in which transport itself was of secondary importance. (14) There is nothing to suggest that the Navitours services at issue in the main proceedings are of a similar nature in the present case. The services consist in the organisation of cruises on inland waterways, an activity in which the movement of persons is an essential element. (15)

21.      However, notwithstanding such factual differences, the different interpretation of the concepts of ‘transport services’ within the meaning of Article 9(2)(b) of Directive 77/388 and ‘services in the field of transport’ within the meaning of Article 2(2)(d) of Directive 2006/123 is, in my view, supported by the wholly different purpose of those two regulations. The same point is made by Navitours, the Luxembourg Government and the Commission in their replies to the Court’s question.

22.      Directive 2006/123 gives concrete expression to the freedom to provide services and the freedom of establishment of service providers in the single market. Article 2(2)(d) of that directive seeks to exclude from its scope services which are covered by specific provisions of the (current) Title VI of Part Three of the FEU Treaty and provisions of secondary legislation based on those provisions and to which the general principle of freedom to provide services does not apply pursuant to Article 58(1) TFEU. Therefore, the provision must be interpreted strictly as applying only to those services in respect of which exclusion from the application of the freedom to provide services is justified and provided for by the Treaty. In the judgment in Trijber and Harmsen, the Court held that such exclusion of services which are the subject of one of the main proceedings is not justified.

23.      Article 9(2)(b) of Directive 77/388 is of a completely different nature. It does not aim to specifically regulate transport services in general as compared with other categories of services, but only to regulate those services specifically in one aspect, namely the place of their supply. In that regard, it must be borne in mind that the basic sense underlying the detailed regulation of the place where VAT-taxable transactions are carried out is that such place determines the tax jurisdiction with respect to those transactions. Thus, where a transaction involves, in any way whatsoever, more than one Member State (for example, transport from one Member State to another), the rules for determining the place of performance of that transaction are important for the allocation of tax jurisdiction between those Member States. The general rule is that goods or services are taxable at the place where they are actually consumed.

24.      According to the provision in question, the place of supply of transport services is the place where (in fact) the transport takes place, ‘having regard to the distances covered’. The EU legislature thus considered the most realistic solution to be one in which the place of supply of the transport service is deemed to be the location of the means of transport during the provision of the service in so far as the means of transport is in motion. (16) The powers to tax such a service are therefore determined by the distance covered by the means of transport within the territory of a particular Member State and not, for example, by the place of loading or the time of supply of the service. (17)

25.      Thus, from that perspective, a ‘transport service’, within the meaning of Article 9(2)(b) of Directive 77/388 must, in my view, be any service the sole or main component of which consists in moving persons or goods over non-negligeable distances, (18) regardless of the purpose (commercial, tourism, leisure, etc.) for which that movement takes place or whether the service begins and ends in the same place or in different places. In any such situation, tax jurisdiction may be split between several Member States and such a split must be carried out in accordance with that provision, that is to say, taking account of the distances involved.

26.      Such distinction with regard to the meaning of the concepts in question under Directives 77/388 and 2006/123 is not, in my opinion, precluded by the principle that similar terms used in different acts of EU law should be interpreted similarly. (19)

27.      First, the different nature and purpose of the two directives, as indicated above, justifies the different understanding of the concepts of ‘transport services’ and ‘services in the field of transport’ in those directives. Similar services may therefore be classified differently for the purposes of the application of those directives.

28.      Second, complete consistency in the interpretation of those concepts is not possible in any event.

29.      On the one hand, Article 2(2)(d) of Directive 2006/123 expressly includes port services among services in the field of transport. Similarly, the Court considers that vehicle roadworthiness tests are covered by that provision. (20) In my view, there is no doubt that neither port services nor vehicle roadworthiness tests can constitute transport services within the meaning of Article 9(2)(b) of Directive 77/388. Above all, it would be impossible to apply to them the criterion of the distance travelled adopted in that provision.

30.      On the other hand, the Court explicitly considered cruises to be subject to Regulation (EEC) No 3577/92 (21) and thus also to Title VI of the TFEU relating to transport, on the basis of which that regulation was adopted. (22) It would be difficult to treat cruises on inland waters differently, even though they are subject to the provisions of another regulation adopted on the basis of the same provisions of the Treaty. (23)

31.      What is evident from this is that it is difficult to arrive at a uniform understanding of the concept of ‘transport’ and of derived terms under different pieces of EU law governing different areas of transport. Nor do I consider, as I have already indicated above, that such a uniform understanding is necessary, given how different the purposes of those regulations are. (24)

32.      In view of the above, I propose that services consisting in the organisation of cruises by riverboat to be considered transport services within the meaning of Article 9(2)(b) of Directive 77/388.

 Application of VAT rules within the territory of the condominium

33.      Pursuant to Article 9(2)(b) of Directive 77/388, the place of supply of inland waterway transport services on the waters of the Moselle where it forms the border between Luxembourg and Germany is the area of those waters and therefore, in accordance with the 1984 Border Treaty, the territory subject to the joint sovereignty of the two Member States, that is the condominium. It is therefore necessary to consider whether the conditions for the application of the directive are met in that territory, that is to say, first, whether that territory constitutes the national territory of a Member State within the meaning of Article 3(2) of the directive and, second, whether and under what conditions those Member States may apply in that territory their legislation adopted for the purpose of transposing the directive.

 Condominium territory as national territory for the purposes of VAT rules

34.      As I have already mentioned, the cruise activities of Navitours on the Moselle were not subject to VAT because the Luxembourg (and, apparently, also the German) tax authorities did not consider those activities, carried out on the territory of the condominium, to be activities conducted ‘on national territory’ within the meaning of the VAT legislation. That was due to the special status of the territory as subject to the joint sovereignty of the two Member States. Although the position of the Luxembourg tax authorities changed as a result of the need to grant Navitours the right to deduct VAT on the cost of acquiring a vessel for the purposes of such activities, the view that the condominium territory has a special tax status appears to be shared by the courts of first and second instance in the main proceedings.

35.      However, I do not consider that view to be correct.

36.      Article 3(2) of Directive 77/388 defines the national territory by reference to the territorial scope of the Treaty establishing the European Community as defined in Article 299 thereof. (25) According to the latter provision, the Treaty, and consequently Directive 77/388, applies in particular to the Federal Republic of Germany and the Grand Duchy of Luxembourg. Although that provision contains a number of exceptions and special rules, none of them apply to the territory of the condominium. (26) Similarly, that territory is not excluded from the concept of ‘national territory’ pursuant to Article 3(3) of Directive 77/388.

37.      Therefore, it can only be concluded that the territory of the condominium is part of national territory within the meaning of Article 3(2) of Directive 77/388. It would otherwise have to be concluded that EU law is not applicable at all in that territory, which would be an absurd conclusion.

38.      The specificities of the present case, however, consist in the fact that it is simultaneously the national territory of two Member States, a situation which is exceptional and was not envisaged by the authors of Directive 77/388. Thus, the question that must be answered is on what basis can the directive be applicable to that territory.

 Conditions for the application of VAT rules on condominium territory

39.      The German Government, as well as Navitours, in their submissions in the present case, put forward the argument that, according to the principles of public international law, the exercise of sovereignty by one of the States concerned on the territory of a condominium requires the consent of the other State, so that the exercise by the Grand Duchy of Luxembourg or the Federal Republic of Germany of their powers in relation to VAT in the territory under their joint sovereignty is impossible without an agreement based on Article 5 of the 1984 Border Treaty. (27) Furthermore, according to the German Government, Directive 77/388 does not preclude the two Member States concerned from temporarily refraining from taxing transactions carried out in that territory in accordance with international law and in the interests of good neighbourly relations.

40.      In the light of EU law, however, this thesis is, in my view, entirely unfounded.

41.      As far as Directive 77/388 is concerned, it does not contain any provision that would grant the Grand Duchy of Luxembourg and the Federal Republic of Germany the authority to refrain from taxing transactions carried out on condominium territory. Pursuant to Article 2 of the directive, any supply of services for consideration is taxable and any exceptions to this rule must be clearly and strictly defined. (28) There is no provision in the directive exempting transactions carried out on condominium territory.

42.      As regards the 1984 Border Treaty, it should first be noted that EU law respects international law in so far as it determines the territorial scope of Member State sovereignty. The territorial scope of EU law is precisely defined by reference to the area of that sovereignty and which is delimited by international law and national law adopted in implementation thereof. That is guaranteed by the specific provisions of Article 299 EC (29) and, in the field of VAT, by Article 3(2) of Directive 77/388. (30) That issue is also addressed by the case-law relied on by the German Government. (31)

43.      Consequently, it is on the basis of Article 1 of the 1984 Border Treaty that both the Grand Duchy of Luxembourg and the Federal Republic of Germany can (and should) exercise their fiscal competence for VAT within the territory of the condominium and have the right to agree on the rules for its exercise.

44.      By contrast, as the Court has had occasion to rule numerous times, the provisions of an agreement between two Member States may not be applied in relations between them if they run counter to the provisions of the Treaty. (32) The same must, in my view, apply to the incompatibility of such an agreement with acts of EU secondary legislation, for otherwise Member States could agree among themselves to derogate from EU law, thereby undermining its effectiveness. Consequently, the absence of an agreement such as that provided for in Article 5 of the 1984 Border Treaty cannot justify maintaining a state of affairs incompatible with EU law, namely the failure to tax transactions carried out within the territory of the condominium. It is further worth noting that the 1984 Border Treaty is subsequent to Directive 77/388, so that, at the time of the conclusion of that treaty, both Member States concerned were aware of their obligations under that directive.

45.      Finally, as regards the argument of the German Government that the non-taxation of transactions carried out within the territory of the condominium is temporary, since the Member States concerned are in the process of negotiating an appropriate agreement, it suffices to note that that ‘temporary’ period has lasted for almost 45 years. (33) Furthermore, Directive 77/388 does not provide for either permanent or temporary derogations in relation to the condominium territory.

46.      Nor are those conclusions called into question by the fact that the Council issued Implementing Decision 2010/579/EU. (34) That decision concerned the designation of the border bridge over the Moselle between Luxembourg and Germany as being entirely on Luxembourg territory for the purposes of taxation of supplies of goods, services and intra-Community supplies of goods made in connection with the renovation of that bridge.

47.      Contrary to what Navitours suggests in its observations, that decision was not based on the inapplicability of the VAT rules to transactions carried out in the context of the bridge renovation, but only on the need to simplify their application by designating the territory of a single Member State as the place where those transactions were carried out. (35) It concerned not only transactions concluded within the territory of the condominium, but also transactions for which the place of performance would be, in accordance with the provisions of Directive 2006/112, the exclusive territory of a Member State. In any case, the very title of that decision makes it clear that it allows for derogations from the provisions of that directive and not from the measures necessary for their application.

48.      Furthermore, one of the conditions for the adoption of that decision was that it had no adverse effect on the European Union’s own resources accruing from VAT. (36) However, the non-taxation since 1978 of transactions carried out on the territory of the condominium undoubtedly has such a negative impact.

49.      It should also be added, as the present case and the main proceedings perfectly illustrate, that the non-taxation of the transactions in question gives rise to further irregularities in the application of VAT to earlier transaction stages. Those transactions, such as the acquisition of a cruise ship for activities within the territory of the condominium, which was at the origin of the dispute in the main proceedings, either do not get taxed (according to the original Navitours (37) stance), or are taxed without the right to deduct (according to the original position of the tax authorities), (38) or give rise to the right to deduct, even though the later stage transactions are not actually taxed (according to the decisions of the courts of first and second instance in the main proceedings). (39) None of those situations complies with the provisions of Directive 77/388. (40)

50.      In the light of the foregoing, it should be considered that, by failing to subject transactions carried out within the territory of the condominium to VAT, both the Grand Duchy of Luxembourg and the Federal Republic of Germany have failed to fulfil their obligations under the provisions of Directive 77/388 (now Directive 2006/112). (41) That is because those transactions are taxable under those rules and the absence of an agreement as referred to in Article 5 of the 1984 Border Treaty does not exempt both Member States from their implementation.

51.      Therefore, it remains to be determined whether the provisions contained in Directive 77/388 preclude the unilateral taxation of services supplied within the territory of the condominium by one of the Member States concerned.

 Taxation of transactions carried out within the territory of the condominium by one of the Member States concerned

52.      As is clear from the seventh recital of Directive 77/388, the purpose of the rules governing the determination of the place where transactions liable to VAT are carried out is, in particular, to avoid conflicts of jurisdiction between Member States which might give rise to double taxation or to the non-taxation of such transactions. (42) However, the EU legislature did not foresee and regulate the exceptional situation of a condominium, where transactions carried out within its territory fall under the fiscal competence of two Member States.

53.      Pursuant to Article 5 of the 1984 Border Treaty, this situation should be resolved by means of an agreement between the Grand Duchy of Luxembourg and the Federal Republic of Germany concluded on the basis of that provision. However, the Member States in question have not concluded such an agreement. Its absence and the consequent non-taxation of transactions carried out within the territory of the condominium not only leads to an infringement of the rules on VAT but may also be regarded as an infringement of the principle of sincere cooperation laid down in Article 4(3) TEU. (43) It is therefore necessary to consider how the fiscal competence of the Member States concerned should be determined with regard to the taxation of those transactions in the absence of an agreement between them.

 The Commission’s proposal

54.      In its observations, the Commission proposes that, in an exceptional situation of this kind, the place of performance of the transport service should be deemed to be the place of departure, that is to say, in the facts of the main proceedings, the river port from which the cruise ship on which the transport service is provided departs. This proposal undoubtedly has the merit of clearly resolving the question of fiscal competence since, unlike the waters of the Moselle River, its banks are situated on the exclusive territory of the Member States concerned; in the circumstances of the main proceedings, on the territory of Luxembourg. This proposal is also consonant with the general principle of taxation at the place of consumption. In fact, it can be assumed that the place of consumption of a passenger transport service is the place from which those passengers depart.

55.      However, I am not in favour of the Court adopting this proposal for three reasons.

56.      First, this proposal has no basis in the provisions contained in Directive 77/388. As regards supplies of services, the Directive only establishes the general rule of taxation at the place of establishment of the supplier (Article 9(1)) and a number of exceptions, one of which concerns transport services and prescribes that the place of supply of a service is to be deemed to be the place where the transport takes place (Article 9(2)(b)). On the other hand, it lacks any provision which would make it possible, even by analogy, to establish a link between the place of supply of a transport service and the place from which it originates.

57.      To supplement this, I would add that current legislation does indeed define the place of supply of transport services as the place of departure, but only for the intra-Community transport of goods to non-taxable persons. (44) With regard to passenger transport services, the same principle applies as that contained in Article 9(2)(b) of Directive 77/388 which states that the place of supply of such service is the place where the transport takes place, having regard to the distances covered. (45) Thus, even a dynamic interpretation of the provision does not make it possible to establish a link between the place of the supply of a passenger transport service and the place from which it originates.

58.      Moreover, if the Commission proposal were to be accepted, a doubt would arise as to whether the rule it proposes should apply only to the territory of the condominium or also to other situations involving passenger transport between different Member States. I see no reason why the condominium territory should be subject to rules that are different from those applicable to other situations of a similar nature. The difficulty in applying the VAT rules within the territory of the condominium is technical in character and must be resolved on the basis of the rules in force, rather than creating, by way of interpretation, separate legal rules. Applying the Commission proposal to all passenger transport services between different Member States would amount to a de facto modification of the provisions of Directive 77/388.

59.      Second, the Commission proposal finds no basis in the facts of the present case. As provided in Article 1(3) of the 1984 Border Treaty, the limit of the territory subject to joint sovereignty is defined by the line of confluence of the surface of the water with the surface of the land. In other words, the water surface of the Moselle is condominium territory in its entirety. According to Article 9(2)(b) of Directive 77/388, the place of supply of a service is the place where the transport takes place, taking into account the distances covered, that is to say, as soon as the means of transport, in this case the vessel, departs.

60.      It means that, although passengers board the ship from a port which may be situated in the exclusive territory of one of the Member States (46) concerned, the provision of the transport service takes place entirely on the surface of the water and thus on the territory of the condominium. Therefore, it cannot be concluded, as the Commission claims, that the supply begins within the exclusive territory of one Member State and is then merely continued within the territory of the condominium. Therefore, no analogy can be drawn, in the present case, with the case that gave rise to the judgment in Trans Tirreno Express, (47) in which the Court, in its judgment, allowed the taxation of a maritime transport service beginning and ending in the territorial waters of a Member State also to the extent that the transport took place in international waters. Transport on the Moselle, on the stretch of the border between Luxembourg and Germany, takes place entirely within the territory that is subject to the joint sovereignty of those two Member States.

61.      Third and finally, it is of course possible to take a very critical view of the fact that, to date, the Grand Duchy of Luxembourg and the Federal Republic of Germany have not concluded the agreement provided for in Article 5 of the 1984 Border Treaty and have therefore failed to tax transport services provided on the territory of the condominium. However, this does not alter the fact that the territory is subject to their joint sovereignty and that, therefore, both Member States exercise in principle fiscal competence over it and have the right to determine, in accordance with EU law, the manner in which such competence is exercised.

62.      On the other hand, accepting the Commission proposal would deprive the Federal Republic of Germany of its fiscal competence in the condominium territory to the extent that transport services within that territory would be carried out from a marina located in Luxembourg’s exclusive territory (and vice versa). There are no provisions in Directive 77/388 that would justify depriving them of such competence.

63.      Nor is that necessary, since, in my view, a much simpler solution can be found under EU law to the situation that this case concerns.

 My proposal for a solution

64.      EU law requires that transactions carried out within the territory of the condominium be taxed in a manner that is consistent with the provisions contained in Directive 77/388. From this perspective, whether and how the Grand Duchy of Luxembourg and the Federal Republic of Germany agree on the application of the VAT rules in the territory is not the key issue. Both unilateral taxation by one of the Member States concerned and taxation in a manner agreed upon by those Member States satisfy that condition. Accordingly, the unilateral taxation of the transactions in question by one of these Member States would meet the requirements of EU law. Further possible arrangements between the Member States concerned are a matter of their bilateral relations based on the rules of international law, including the 1984 Border Treaty. This is not, however, a matter of interest for EU law.

65.      That can be compared to the well-known institution of joint and several liability in civil law, where several debtors are responsible for the fulfilment of a certain performance, but the fulfilment by one of them satisfies a claim on the part of a creditor, who does not have to intervene in further settlements between the co-debtors.

66.      EU law does not therefore prevent transport services carried out within the territory of the condominium from being subject to VAT in Luxembourg. If, on the other hand, such division of fiscal competence is not satisfactory to the Federal Republic of Germany, it may arrive at an appropriate agreement with the Grand Duchy of Luxembourg on the basis of Article 5 of the 1984 Border Treaty.

67.      Contrary to the concerns expressed by the German Government, that solution does not entail a double taxation risk for those services.

68.      As the German Government itself notes in its observations, the double taxation of the same transactions is contrary to the fundamental principle of the common VAT system, namely the principle of its neutrality. (48) The rules contained in Directive 77/388 governing the place where taxable transactions are carried out serve, amongst other things, to prevent the double taxation of the same transactions in different Member States.

69.      Consequently, if a particular transaction has been taxed in one Member State, in accordance with the rules laid down in Directive 77/388, that means that it may not be taxed again in the other Member States. Such levying of tax a second time would constitute a tax levied in contravention of EU law and would have to be refunded. (49) If necessary, the tax authorities of one of the Member States concerned should request relevant information from the authorities of the other Member State under administrative cooperation arrangements. (50) The double taxation prohibition is subject to review by the national courts which, in the event of doubt, have the option and sometimes the obligation, to ask the Court to perform an appropriate interpretation of the provisions of EU law. (51)

70.      Moreover, in the event of a dispute between the Member States concerned regarding the application of VAT rules in the territory of the condominium, they may, by way of a compromise, submit that dispute to the jurisdiction of the Court in accordance with Article 273 TFEU.

 Summary

71.      As is clear from the foregoing, the provisions of Directive 77/388 are fully applicable to transactions carried out in the territory of the condominium, regardless of whether or not an agreement provided for in Article 5 of the 1984 Border Treaty has been concluded. The detailed rules for application of those provisions within the territory of the condominium may be determined by that agreement. However, in the absence of such agreement, EU law does not preclude the unilateral taxation of the transactions in question by one of the Member States concerned. Such unilateral taxation means that the same transactions cannot be taxed by the other Member State concerned.

 Conclusions

72.      In view of all the above considerations, I propose providing the following answer to the question referred by the Cour de cassation (Court of Cassation, Luxembourg):

Article 2(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: The uniform basis of assessment, as amended by Council Directive 91/680/EEC of 16 December 1991, read together with Article 3(2) thereof,

must be interpreted as applying to passenger transport services provided within the territory subject, by virtue of international agreements, to the joint sovereignty of the Grand Duchy of Luxembourg and the Federal Republic of Germany, irrespective of whether those Member States have concluded an agreement on the detailed rules for the application of that provision within that territory.

Article 9(2)(b) of Directive 77/388

must be interpreted as meaning that it does not preclude the taxation of those services by the two Member States, either in agreement or unilaterally by one of them. In the latter case, the other Member State loses the power to tax the transactions in question.

1      Original language: Polish.

2      Of 9 June 1815.

3      Approved by the Grand Duchy of Luxembourg pursuant to the loi du 27 mai 1988 portant approbation du traité entre le Grand-Duché de Luxembourg et la République fédérale d’Allemagne sur le tracé de la frontière commune entre les deux États et de l‘échange de lettres, signés à Luxembourg, le 19 décembre 1984 (Law of 27 May 1988 approving the Treaty between the Grand Duchy of Luxembourg and the Federal Republic of Germany on the demarcation of the common border between the two States and the exchange of letters, signed in Luxembourg on 19 December 1984) (Mémorial No A-26 of 7 June 1988, p. 538).

4      Opinion of Advocate General Dutheillet de Lamothe in Muller and Hein (10/71, EU:C:1971:76, pp. 735-736). That case concerned the application of Article 90 of the EEC Treaty (now Article 106 TFEU) in the territory covered by the Treaty of 1816. (see point 1 of this Opinion).

5      See point 1 of this Opinion.

6      OJ 1977 L 145, p. 1.

7      OJ 1991 L 376, p. 1.

8      The intra-Community acquisition of goods is governed by Title XVIa of Directive 77/388. In the proceedings before the national courts, Navitours challenged this classification of the transaction in question since, in its view, due to the special status of the Moselle, the vessel which was the subject to the transaction never entered the tax territory of Luxembourg. That position was not devoid of logic, given the treatment of the condominium territory by the tax authorities. However, it was rejected by the national courts and, at present, the classification of the acquisition of the vessel by Navitours as the ‘intra-Community acquisition of goods’ is not at issue in the main proceedings.

9      Judgment of 1 October 2015 (C‑340/14 and C‑341/14, EU:C:2015:641, paragraphs 43 to 59 and point 1 of the operative part).

10      In keeping with what I have proposed, see my Opinion in Joined cases Trijber and Harmsen (C‑340/14 and C‑341/14, EU:C:2015:505, points 26 to 43).

11      Directive of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376, p. 36).

12      As Navitours points out in its reply to that question, if the services it provides are not transport services within the meaning of Article 9(2)(b) of Directive 77/388, they should be classified as ‘entertainment services’ within the meaning of the first indent of Article 9(2)(c) of that directive. Such services, on the other hand, are taxed at the place ‘where those services are physically carried out’, which, according to the company, would again mean the territory of the condominium. However, I am not convinced that, without additional information from the referring court, the Court of Justice would be able to make this classification of the services in question on its own and thereby ‘save’ the reference for a preliminary ruling in the present case.

13      The German Government gave a more nuanced answer, according to which the classification of the services in question as ‘transport services’ was within the jurisdiction of the referring court.

14      See judgment of 1 October 2015 (C‑340/14 and C‑341/14, EU:C:2015:641, paragraph 56).

15      The situation is, of course, different if the ship remains moored to the quay and is used for a purpose other than navigation, to sign an international agreement (as was the case with the Schengen Agreement), for example. There is then, in my view, no question of a transport service being involved (see points 24 and 25 of this Opinion).

16      See, to that effect, judgment of 6 November 1997, Reisebüro Binder (C‑116/96, EU:C:1997:520, paragraphs 12 to 14).

17      That principle was expressly confirmed by the Court in its judgment of 6 November 1997, Reisebüro Binder (C‑116/96, EU:C:1997:520, paragraphs 15 and 16).

18      This latter objection excludes from the concept of ‘transport services’ such services as, for example, moving objects by crane.

19      See, to that effect, in relation to the concept of ‘insurance’, the judgment of 8 October 2020, United Biscuits (Pension Trustees) and United Biscuits Pension Investments (C‑235/19, EU:C:2020:801, paragraph 36).

20      Judgment of 15 October 2015, Grupo Itevelesa and Others (C‑168/14, EU:C:2015:685, point 1 of the operative part).

21      Council Regulation of 7 December 1992 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage) (OJ 1992 L 364, p. 7).

22      Judgment of 27 March 2014, Alpina River Cruises and Nicko Tours (C‑17/13, EU:C:2014:191).

23      More specifically, Council Regulation (EEC) No 3921/91 of 16 December 1991 laying down the conditions under which non-resident carriers may transport goods or passengers by inland waterway within a Member State (OJ 1991 L 373, p. 1).

24      See, to that effect, Opinion of Advocate General Pikamäe in United Biscuits (Pension Trustees) and United Biscuits Pension Investments (C‑235/19, EU:C:2020:380, point 73)

25      Formerly Article 227 TEC.

26      It will be recalled that a condominium existed even before the conclusion of the 1984 Border Treaty (see point 2 of this Opinion).

27      As far as we know, no such agreement has yet been reached.

28      See, to that effect, most recently, judgment of 21 October 2021, Dubrovin & Tröger – Aquatics (C‑373/19, EU:C:2021:873, paragraph 22).

29      Now Article 52 TEU and Article 355 TFEU. See also Article 77(4) TFEU.

30      Now Article 5(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), which replaced Directive 77/388.

31      That government cites in particular the judgments of 29 March 2007, Aktiebolaget NN (C‑111/05, EU:C:2007:195, paragraph 57 et seq.), and of 27 February 2018, Western Sahara Campaign UK (C‑266/16, EU:C:2018:118, paragraph 47 and the case-law cited).

32      See, in particular, judgment of 20 May 2003, Ravil (C‑469/00, EU:C:2003:295, paragraph 37). The judgment of 6 March 2018, Achmea (C‑284/16, EU:C:2018:158) was also based on that premiss.

33      Pursuant to Article 1 of Directive 77/388, the Member States were required to introduce a common system of VAT no later than 1 January 1978. Although the 1984 Border Treaty is subsequent, there is nothing to suggest that the tax situation in the territory of the condominium was any different before that treaty than it is today.

34      Council Implementing Decision of 27 September 2010 authorising the Federal Republic of Germany and the Grand Duchy of Luxembourg to apply a measure derogating from Article 5 of Directive [2006/112] on the common system of value added tax (OJ 2010 L 256, p. 20).

35      Recitals 4 and 5 of Decision 2010/579.

36      Recital 6 of Decision 2010/579.

37      See footnote 8 to point 10 of this Opinion.

38      See point 10 of this Opinion.

39      See point 11 of this Opinion.

40      Transactions concluded at earlier stages are not the subject of the present case, which is why I will not develop that thread. I will explain only briefly that the first and third situations result in infringement breach of the principle of the taxation of all transactions which fall within the scope of Directive 77/388 and which are not subject to exemption and that the second situation results in a breach of the principle of fiscal neutrality.

41      See judgment of 23 May 1996, Commission v Greece (C‑331/94, EU:C:1996:211).

42      See judgment of 6 November 1997, Reisebüro Binder (C‑116/96, EU:C:1997:520, paragraph 12) and, more recently, judgment of 17 December 2015, WebMindLicenses (C‑419/14, EU:C:2015:832, paragraph 41).

43      See judgment of 17 December 2015, WebMindLicenses (C‑419/14, EU:C:2015:832, paragraph 41).

44      Article 50 of Directive 2006/112.

45      Article 48 of Directive 2006/112.

46      However, this is not self-evident, since pursuant to Article 1(2) of the 1984 Border Treaty, the joint territory also includes installations on and above water.

47      Judgment of 23 January 1986 (283/84, EU:C:1986:31).

48      See, in particular, judgment of 23 November 2017, CHEZ Elektro Bulgaria and FrontEx International (C‑427/16 and C‑428/16, EU:C:2017:890, paragraph 66 and the case-law cited).

49      See, in particular, judgments of 23 November 2017, CHEZ Elektro Bulgaria and FrontEx International (C‑427/16 and C‑428/16, EU:C:2017:890, paragraph 67), as well as of 18 June 2020, KrakVet Marek Batko (C‑276/18, EU:C:2020:485, paragraph 52).

50      Judgment of 17 December 2015, WebMindLicenses (C‑419/14, EU:C:2015:832, point 3 of the operative part).

51      Judgment of 18 June 2020, KrakVet Marek Batko (C‑276/18, EU:C:2020:485, paragraph 51).