Case C-2/08 Fallimento Olimiclub Srl [2009] ECR I-7501

Key point

  • The principle of res judicata is not always precluded by EU law where the final decision is contrary to EU law

Facts

  • O was found by the Italian Finance Administration to have evaded VAT by relying on a fraudulent contract, and therefore adjusted its tax bill
  • O challenged the adjustment notices before national courts, which held in favour of O
  • Finance Administration brought the case again before Italian courts
  • O sought to rely on the principle of res judicata in the Italian Civil Code, which prohibits reopening a settled case, to assert the binding nature of earlier judgments
  • However, application of the res judicata principle would prevent the Italian court from considering Community legislation and case law

Held (Grand Chamber)

  • The principle of res judicata is precluded from application

Judgment

On res judicata rules

  • *’…Community law does not require a national court to disapply domestic rules of procedure conferring finality on a decision, even if to do so would make it possible to remedy an infringement of Community law on the part of the decision in question’: [23]
  • The res judicata rule falls within the scope of national procedural autonomy, unless the principles of equivalence and effectiveness are not satisfied
  • The above analysis cannot be called into question by Lucchini; the judgment concerned a highly specific situation on the division of powers between the EU and member states in the area of state aid, the EU having exclusive competence to assess the compatibility with the common market of the state aid measure

Current case

  • In this context, if the res judicata rule results in a judicial decision with a wrong interpretation of Community law on VAT becoming final, ‘those rules would continue to be misapplied for each new tax year, without it being possible to rectify the interpretation.’: [30]
  • ‘In those circumstances, it must be held that such extensive obstacles to the effective application of the Community rules on VAT cannot reasonably be regarded as justified in the interests of legal certainty and must therefore be considered to be contrary to the principle of effectiveness’: [31]