Commission of the European Communities v Grand Duchy of Luxemburg (C-33/04)

Contents

Judgment of the Court (Second Chamber)8 December 2005^noteIn Case C-33/04,ACTION under Article 226 EC for failure to fulfil obligations, brought on 29 January 2004,Commission of the European Communities, represented by W. Wils and M. Shotter, acting as Agents, with an address for service in Luxembourg,vGrand Duchy of Luxembourg, represented by M. Thill and S. Schreiner, acting as Agents, assisted by A. Verheyden and F. Bimont, avocats,THE COURT (Second Chamber),composed of C.W.A. Timmermans, President of the Chamber, R. Silva de Lapuerta, P. Kùris, G. Arestis (Rapporteur) and J. Klučka, Judges,Advocate General: F.G. Jacobs,Registrar: H. von Holstein, Deputy Registrar,having regard to the written procedure and further to the hearing on 3 March 2005,after hearing the Opinion of the Advocate General at the sitting on 2 June 2005,gives the following

Judgment

1By its application the Commission of the European Communities seeks a declaration from the Court that:— by failing to comply with the obligations to verify the compliance of cost accounting systems by a competent independent body and to publish a statement of compliance for 1998 and 1999, in accordance with Article 7(5) of Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (ONP) (OJ 1997 L 199, p. 32), and— by failing to apply correctly in practice the measures adopted for the implementation of the provisions of Article 18(1) and (2) of Directive 98/10/EC of the European Parliament and of the Council of 26 February 1998 on the application of open network provision (ONP) to voice telephony and on universal service for telecommunications in a competitive environment (OJ 1998 L 101, p. 24) as regards verification of the compliance of the cost accounting system by the national regulatory authority or another competent body, independent of the telecommunications organisation and approved by that regulatory authority, and as regards annual publication of a statement of compliance,the Grand Duchy of Luxembourg has failed to fulfil its obligations under those provisions of those directives.

Legal framework

Community legislation

The former regulatory framework

—Directive 97/33

2Article 1 of Directive 97/33 states that that directive establishes a regulatory framework for securing in the European Community the interconnection of telecommunications networks and, in particular, the interoperability of services and the provision of universal service in an environment of open and competitive markets. According to Article 2 of that directive, ‘interconnection’ means the physical and logical linking of telecommunications networks used by the same or a different organisation in order to allow the users of one organisation to communicate with users of the same or another organisation or to access services provided by another organisation.

3Article 7 of Directive 97/33, entitled ‘Principles for interconnection charges and cost accounting systems’, provides as follows:1. Member States shall ensure that the provisions of paragraphs 2 to 6 apply to organisations operating the public telecommunications networks and/or publicly available telecommunications services ... which have been notified by national regulatory authorities as having significant market power.2. Charges for interconnection shall follow the principles of transparency and cost orientation. The burden of proof that charges are derived from actual costs including a reasonable rate of return on investment shall lie with the organisation providing interconnection to its facilities. National regulatory authorities may request an organisation to provide full justification for its interconnection charges, and where appropriate shall require charges to be adjusted. ...3. National regulatory authorities shall ensure the publication ... of a reference interconnection offer. The reference interconnection offer shall include a description of the interconnection offerings broken down into components according to market needs, and the associated terms and conditions including tariffs.Different tariffs, terms and conditions for interconnection may be set for different categories of organisations which are authorised to provide networks and services, where such differences can be objectively justified on the basis of the type of interconnection provided and/or the relevant national licensing conditions. National regulatory authorities shall ensure that such differences do not result in distortion of competition, and in particular that the organisation applies the appropriate interconnection tariffs, terms and conditions when providing interconnection for its own services or those of its subsidiaries or partnersThe national regulatory authority shall have the ability to impose changes in the reference interconnection offer, where justified.5. The Commission shall ... draw up recommendations on cost accounting systems and accounting separation in relation to interconnection. National regulatory authorities shall ensure that the cost accounting systems used by the organisations concerned are suitable for implementation of the requirements of this Article, and are documented to a sufficient level of detail, as indicated in Annex V.National regulatory authorities shall ensure that a description of the cost accounting system, showing the main categories under which costs are grouped and the rules used for the allocation of costs to interconnection, is made available on request. Compliance with the cost accounting system shall be verified by the national regulatory authority or another competent body, independent of the telecommunications organisation and approved by the national regulatory authority. A statement concerning compliance shall be published annually....’

4Annex V to Directive 97/33 gives, by way of example, some elements which may be included in the abovementioned accounting system, namely the cost standard used, the cost elements included in the interconnection tariff, the degrees and methods of cost allocation, in particular the treatment of joint and common costs, and the accounting conventions.

5According to the first subparagraph of Article 23(1) of Directive 97/33, Member States were required to bring into force the laws, regulations and administrative provisions necessary to comply therewith by 31 December 1997 and immediately inform the Commission thereof.

6On 8 April 1998, the Commission adopted, pursuant to Article 7(5) of Directive 97/33, Recommendation 98/322/EC of 8 April 1998 on interconnection in a liberalised telecommunications market (Part 2 — Accounting separation and cost accounting) (OJ 1998 L 141, p. 6).

—Directive 98/10

7According to Article 1 thereof, Directive 98/10 is intended to ensure the harmonisation of conditions for open and efficient access to and use of fixed public telephone networks and fixed public telephone services in an environment of open and competitive markets, in accordance with the principles of open network provision.

8Article 17 of that directive, entitled ‘Tariff principles’, provides:1. Without prejudice to the specific provisions of Article 3 in relation to affordability or to paragraph 6, national regulatory authorities shall ensure that organisations providing voice telephony services which either have significant market power or have been designated in accordance with Article 5 and have significant market power comply with the provisions of this article.2. Tariffs for use of the fixed public telephone network and fixed public telephone services shall follow the basic principles of cost orientation3. Without prejudice to Article 7(3) of Directive 97/33/EC on interconnection, tariffs for access to and use of the fixed public telephone network shall be independent of the type of application which the users implement, except to the extent that they require different services or facilities.4. Tariffs for facilities additional to the provision of connection to the fixed public telephone network and fixed public telephone services shall, in accordance with Community law, be sufficiently unbundled so that the user is not required to pay for facilities which are not necessary for the service requested.5. Tariff changes shall be implemented only after an appropriate public notice period, set by the national regulatory authority, has been observed.6. Without prejudice to Article 3 in relation to affordability, a Member State may authorise its national regulatory authority not to apply paragraphs 1, 2, 3, 4 or 5 of this Article in a specific geographical area where it is satisfied that there is effective competition in the fixed public telephone services market.’

9Paragraphs (1) and (2) of Article 18 of Directive 98/10, entitled ‘Cost accounting principles’, provide:1. Member States shall ensure that, where an organisation has an obligation for its tariffs to follow the principle of cost orientation in accordance with Article 17, the cost accounting systems operated by such organisations are suitable for the implementation of Article 17 and that compliance with such systems [is] verified by a competent body which is independent of those organisations. National regulatory authorities shall ensure that a statement concerning compliance is published annually.2. National regulatory authorities shall ensure that a description of the cost accounting systems referred to in paragraph 1, showing the main categories under which costs are compiled and the rules used for the allocation of costs to voice telephony services, is made available to them on request. National regulatory authorities shall submit to the Commission, on request, information on the cost accounting systems applied by the organisations concerned.’

10According to the first subparagraph of Article 32(1) of Directive 98/10, Member States were required to take the measures necessary to comply therewith by 30 June 1998 and immediately inform the Commission thereof.

The new regulatory framework applicable to communications

11On 7 March 2002, the European Parliament and the Council of the European Union adopted four directives concerning the new regulatory framework applicable to communications (‘NRF’): Directive 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities (‘the Access Directive’) (OJ 2002 L 108, p. 7); Directive 2002/20/EC on the authorisation of electronic communications networks and services (‘the Authorisation Directive’) (OJ 2002 L 108, p. 21); Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services (‘the Framework Directive’) (OJ 2002 L 108, p. 33); and Directive 2002/22/EC on universal service and users' rights relating to electronic communications networks and services (‘the Universal Service Directive’) (OJ 2002 L 108, p. 51).

12Articles 26 and the second subparagraph of Article 28(1) of Directive 2002/21 repeal, inter alia, Directives 97/33 and 98/10, with effect from 25 July 2003.

13By way of transitional measures, the first paragraph of Article 27 of Directive 2002/21 requires Member States to maintain all obligations under national law referred to in Article 7 of Directive 2002/19 and Article 16 of Directive 2002/22 until such time as a determination is made in respect of those obligations by a national regulatory authority.

14The first subparagraph of Article 18(1) of Directive 2002/19, the first subparagraph of Article 28(1) of Directive 2002/21 and the first subparagraph of Article 38(1) of Directive 2002/22 provide that Member States are to adopt and publish the laws, regulations and administrative provisions necessary to comply with those directives by 24 July 2003 at the latest and forthwith inform the Commission thereof.

15According to Article 19 of Directive 2002/19, Article 29 of Directive 2002/21 and Article 39 of Directive 2002/22, those directives are to enter into force on the day of their publication in the Official Journal of the European Communities, in this case 24 April 2002.

—Directive 2002/19

16Article 7 of Directive 2002/19, entitled ‘Review of former obligations for access and interconnection’, provides:1. Member States shall maintain all obligations on undertakings providing public communications networks and/or services concerning access and interconnection that were in force prior to the date of entry into force of this Directive under Articles 4, 6, 7, 8, 11, 12, and 14 of Directive 97/33/EC, Article 16 of Directive 98/10/EC, and Articles 7 and 8 of Council Directive 92/44/EEC of 5 June 1992 on the application of open network provision to leased lines (OJ 1992 L 165, p. 27), until such time as these obligations have been reviewed and a determination made in accordance with paragraph 3....3. Member States shall ensure that, as soon as possible after the entry into force of this Directive, and periodically thereafter, national regulatory authorities undertake a market analysis, in accordance with Article 16 of Directive 2002/21/EC to determine whether to maintain, amend or withdraw these obligations. An appropriate period of notice shall be given to parties affected by such amendment or withdrawal of obligations.’

—Directive 2002/22

17Article 16 of Directive 2002/22, entitled ‘Review of obligations’, provides:1. Member States shall maintain all obligations relating to:(a) retail tariffs for the provision of access to and use of the public telephone network, imposed under Article 17 of Directive 98/10/EC ...;(b) carrier selection or pre-selection, imposed under Directive 97/33/EC ...;...until a review has been carried out and a determination made in accordance with the procedure in paragraph 3 of this Article....3. Member States shall ensure that, as soon as possible after the entry into force of this Directive, and periodically thereafter, national regulatory authorities undertake a market analysis ... to determine whether to maintain, amend or withdraw the obligations relating to retail markets. ...’

National legislation

18Article 16(4) of the Règlement grand-ducal du 22 décembre 1997 fixant les conditions du cahier des charges pour l'établissement et l'exploitation de réseaux fixes de télécommunications (Grand-Ducal Regulation of 22 December 1997 laying down the requirements for specifications for the establishment and operation of fixed telecommunications networks) (Mém. A 1997, p. 3308), Article 22(5) of the Règlement grand-ducal du 22 décembre 1997 fixant les conditions du cahier des charges pour l'établissement et l'exploitation de réseaux fixes de télécommunications et de services de téléphonie (Grand-Ducal Regulation of 22 December 1997 laying down the requirements for specifications for the establishment and operation of fixed telecommunications networks and telephony services) (Mém. A 1997, p. 3313) and Article 16(3) of the Reglement grand-ducal du 2 juillet 1998 fixant les conditions du cahier des charges pour l'exploitation de services de téléphonie (Grand-Ducal Regulation of 2 July 1998 laying down the requirements for specifications for the operation of telephony services) (Mém. A 1998, p. 976), all as amended by the Règlement grand-ducal du 18 avril 2001 (Grand-Ducal Regulation of 18 April 2001) (Mém. A 2001, p. 1114) (‘the Grand-Ducal Regulation of 18 April 2001’), include an identical provision which reads as follows:‘Compliance of the systems shall be verified and certified by a competent body independent of the operator. The certificate of compliance shall be published annually in the operator's activity report.’

Pre-litigation procedure

19After providing the Commission with a copy of the Loi du 21 mars 1997 sur les télécommunications (Law of 21 March 1997 concerning telecommunications) (Mém. A 1997, p. 761) which, inter alia, established, with effect from 2 June 1997, a télécommunications regulatory authority called the ‘Institut luxembourgeois des télécommunications’ (‘the ILT’), which subsequently became the ‘Institut luxembourgeois de régulation’ (‘the ILR’), the Luxembourg authorities, by letters of 23 January and 10 July 1998, notified the three aforementioned Grand-Ducal regulations of 22 December 1997 and 2 July 1998. According to the Luxembourg authorities, those regulations were intended inter alia to transpose Directives 97/33 and 98/10 into Luxembourg law.

20By letter of 9 March 2000, the Commission drew the attention of the Luxembourg authorities to the requirements of the applicable Community regulatory framework governing telecommunications and, in particular, to the principles of cost orientation and transparency in telecommunications tariffs. In that connection, it requested, inter alia, information on the cost accounting system, required by Article 7(5) of Directive 97/33 and by Article 18(2) of Directive 98/10, the identity, if any, of the competent body referred to in Article 7(5) of Directive 97/33 and Article 18(1) of Directive 98/10, and also a copy of the annual statement of compliance published for the 1998 accounts and, if available, for the 1999 accounts.

21By letter of 8 June 2000, the Luxembourg authorities replied to the aforementioned letter.

Directive 97/33

22On 30 April 2001, the Commission sent the Luxembourg Government a letter of formal notice in which it stated that the Grand Duchy of Luxembourg had failed to fulfil its obligations under Article 7(5) of Directive 97/33 in respect of the verification of the compliance of the cost accounting system by the national regulatory authority or another competent independent body. The Commission further stated that the measures notified lacked clarity as to the annual publication of a statement of compliance and that, in any event, there had been no publication of such a statement.

23In their response of 13 July 2001, the Luxembourg authorities notified the Grand-Ducal Regulation of 18 April 2001 and stated that since the provisions of that regulation pertaining to the statement and the publication of the compliance of the cost accounting system had been introduced with effect from 6 May 2001, the first statements concerning compliance would be published with the annual reports of the notified operators for the 2000 fiscal year at the earliest and for the 2001 fiscal year at the latest.

24After examining that regulation, on 21 March 2002 the Commission issued a reasoned opinion (‘the reasoned opinion of 21 March 2002’) in which it found that the Grand Duchy of Luxembourg had failed to fulfil its obligations under Article 7 (5) of Directive 97/33 in respect of, first, the verification of the compliance of the cost accounting system by the national regulatory authority or another competent independent body and, second, the annual publication of a statement of compliance for 1998 and 1999. The Commission also called on the Grand Duchy of Luxembourg to take the measures necessary to comply with that reasoned opinion within two months of the date of receipt thereof.

25In their response of 17 May 2002, the Luxembourg authorities maintained their position that the obligation relating to the statement and publication referred to in Article 7(5) of Directive 97/33 is henceforth fulfilled by the Grand-Ducal Regulation of 18 April 2001. In the same letter, they pointed out that the provisions of that regulation did not have retroactive effect.

Directive 98/10

26On 21 March 2002, the Commission sent the Luxembourg Government a letter of formal notice in which it stated that the Grand Duchy of Luxembourg had failed to fulfil its obligations under Article 7(5) of Directive 97/33 and Article 18(1) of Directive 98/10. In its view, no verification of the compliance of the cost accounting system had yet taken place and no declaration or statement of compliance had yet been published for the accounts for the fiscal year 2000.

27In their letter of response of 28 May 2002, the Luxembourg authorities reiterated that the Grand-Ducal Regulation of 18 April 2001 henceforth provides for verification of the compliance of the cost accounting system by a national regulatory authority or a competent independent body and the annual publication of the statement of compliance.

28As that information did not satisfy the Commission, on 11 July 2003 it issued a reasoned opinion (‘the reasoned opinion of 11 July 2003’) in which it criticised the Grand Duchy of Luxembourg for having failed in practice to apply correctly the measures adopted for the purpose of implementing the provisions of Article 18(1) and (2) of Directive 98/10 in respect of, first, the verification of the compliance of the cost accounting system by the national regulatory authority or another competent body, independent of the telecommunications organisation and approved by the national regulatory authority and, second, the annual publication of a statement of compliance. The Commission also called on the Grand Duchy of Luxembourg to take the measures necessary to comply with that reasoned opinion within two months of the date of receipt thereof.

29The Luxembourg authorities replied on 1 October 2003, insisting that the Grand-Ducal Regulation of 18 April 2001 transposes the provisions of Article 7(5) of Directive 97/33 and Article 18(1) and (2) of Directive 98/10. They also attached a copy of the ILR's report on the guidelines for separate accounting, published on 6 May 2002. They concluded their response as follows:‘Upon reading the recent report of the Entreprise des Postes et Télécommunications (EPT), the regulator has just found that there has been no statement as required by the legislation. The [ILR] has therefore just issued a letter of formal notice to EPT and will, if necessary, apply administrative sanctions for noncompliance with the relevant statutory obligations.’

30Not being satisfied with that response or with that contained in the letter of 17 May 2002, the Commission decided to bring the present action.

31In its judgment of 10 March 2005 in Case C-236/04 Commission v Luxembourg, not published in the ECR, the Court found that, by failing to adopt the laws, regulations and administrative provisions necessary to comply with Directives 2002/19 to 2002/22, the Grand Duchy of Luxembourg had failed to fulfil its obligations under those directives.

Forms of order sought

32The Commission seeks a declaration by the Court that:— by failing to comply with the obligation to verify the compliance of cost accounting systems by an independent competent body and to publish a statement of compliance for 1998 and 1999, in accordance with Article 7(5) of Directive 97/33, the Grand Duchy of Luxembourg has failed to fulfil its obligations under that directive; and that— by failing to apply correctly in practice the measures relating to verification of the compliance of the cost accounting system by the national regulatory authority or another competent body, independent of the telecommunications organisation and approved by the national regulatory authority, in accordance with the provisions of Article 18(1) and (2) of Directive 98/10, the Grand Duchy of Luxembourg has failed to fulfil its obligations under that directive.

33The Luxembourg Government contends that the Court should:— principally, dismiss the action as inadmissible;— in the alternative, dismiss the action as unfounded;— order the Commission to pay the costs.

The action

Admissibility

34The Luxembourg Government puts forward two pleas of inadmissibility in its statement in defence. The first alleges that the Commission has no interest in bringing proceedings and the second alleges a violation of the rights of the defence in the pre-litigation procedure.

35Before ruling on those pleas of inadmissibility, it is appropriate to rule, as a preliminary point, on the subject-matter of the present action.

36In accordance with settled case-law, the subject-matter of an action under Article 226 EC for failure to fulfil obligations is delimited by the pre-litigation procedure provided for by that provision, so that the application must be based on the same grounds and pleas as the reasoned opinion (see Case C-456/03 Commission v Italy [2005] ECR I-5335, paragraph 35 and case-law cited).

37However, the requirement by which the subject-matter of an action brought under Article 226 EC is delimited by the pre-litigation procedure provided for by that provision cannot be stretched so far as to mean that in every case the statement of the complaints set out in the letter of formal notice, the operative part of the reasoned opinion and the form of order sought in the application must be exactly the same, provided that the subject-matter of the proceedings has not been extended or altered (see Case C-456/03 Commission v Italy, cited above, paragraph 39, and Case C-433/03 Commission v Germany [2005] ECR I-6985, paragraph 28).

38As regards Directive 97/33, in the reasoned opinion of 21 March 2002, the Commission complains that the Grand Duchy of Luxembourg failed to fulfil its obligations under Article 7(5) of that directive for 1998 and 1999. That complaint is identical to the first complaint in the application initiating the proceedings.

39Accordingly, the Court finds that the failure to fulfil obligations under Directive 97/33 concerns the Grand Duchy of Luxembourg's failure to fulfil obligations under Article 7(5) of that directive for 1998 and 1999.

40As regards Directive 98/10, in the reasoned opinion of 11 July 2003, the Commission complains that the Grand Duchy of Luxembourg failed to fulfil its obligations under Article 18(1) and (2) of that directive, without specifying the reference period. In that reasoned opinion, it was stated inter alia that ‘to date, no verification of compliance has taken place’. In its application, the Commission mentions the same complaint, again without referring to the period for which it criticises Luxembourg for having failed to fulfil its obligations under the provisions of that article.

41It should nevertheless be noted that the statement of complaints in the Commission's reasoned opinion and application does not lead to the conclusion that the alleged failure to fulfil obligations covers the entire period from 1998 — the year in which Directive 98/10 entered into force — to 2002 — the last year before the reasoned opinion was issued. It is in fact clear from the pre-litigation procedure and particularly from the letter of formal notice of 21 March 2002 that the failure to fulfil obligations complained of concerns essentially the year 2000. In those circumstances, and in the absence of other relevant indicia, the subject-matter of the action concerning Directive 98/10 cannot go beyond the scope of what was stated in the letter of formal notice.

The lack of interest in bringing proceedings

42The Luxembourg Government contends, first, that the present action is inadmissible because, at the expiry of the period fixed in the reasoned opinion of 11 July 2003, the alleged failure to fulfil obligations had ended because Directive 98/10 was no longer in force. As to Directive 97/33, the Community legislature had already adopted the NRF applicable to communications before sending the reasoned opinion of 21 March 2002. Moreover, on the day on which the present action was commenced, the alleged failure to fulfil obligations had already ended because, on that date, the period fixed for transposition of the NRF had expired. As for the line of case-law in which it has been held that, where Community law is amended during the course of the pre-litigation procedure, the Commission has standing to seek a declaration that a Member State has failed to fulfil obligations which were created in the initial version of a Community measure, subsequently amended or repealed, and which were maintained in force under the new provisions (Case C-363/00 Commission v Italy [2003] ECR I-5767, paragraph 22), the Luxembourg Government contends that it is not applicable to the present case.

43In that connection, the Court has held that, in the context of proceedings under Article 226 EC, the existence of a failure to fulfil obligations must be assessed in the light of the Community legislation in force at the close of the period prescribed by the Commission for the Member State concerned to comply with its reasoned opinion (see Case C-61/94 Commission v Germany [1996] ECR I-3989, paragraph 42; Case C-365/97 Commission v Italy [1999] ECR I-7773, paragraph 32; and Case C-363/00 Commission v Italy, cited above, paragraph 21).

44As regards Directive 97/33, in the reasoned opinion of 21 March 2002, the Commission called on the Grand Duchy of Luxembourg to comply, within two months of receipt of that opinion, with its obligations under Article 7(5) of that directive and, in particular, those relating to the verification of the compliance of the cost accounting system by the national regulatory authority or another competent independent body and the annual publication of a statement of compliance for 1998 and 1999.

45Since Directive 97/33 was repealed by Directive 2002/21 with effect from 25 July 2003, it is clear that the complaints put forward by the Commission in the context of the present proceedings relate to Community legislation which was still in force at the expiry of the period fixed in the reasoned opinion of 21 March 2002.

46Accordingly, the arguments put forward in this case by the defendant cannot serve to have the present action declared inadmissible in so far as it concerns the failure to fulfil the obligations under Article 7(5) of Directive 97/33 which had not been transposed by the Grand Duchy of Luxembourg at the expiry of the period fixed in that reasoned opinion.

47As regards Directive 98/10, in the reasoned opinion of 11 July 2003, the Commission called on the Grand Duchy of Luxembourg to comply, within two months of receipt ofthat opinion, with its obligations under Article 18(1) and (2) ofthat directive and, in particular, those relating to, first, the verification of the compliance of the cost accounting system by the national regulatory authority or another competent body, independent of the telecommunications organisation and approved by the national regulatory authority and, second, the annual publication of a statement of compliance. As stated in paragraph 41 of this judgment, the alleged failure to fulfil obligations concerns the year 2000.

48It is clear that the failure to fulfil obligations under Directive 98/10 does not concern the provisions in force at the expiry of the period fixed in the reasoned opinion of 11 July 2003. That directive was repealed by Directive 2002/21 with effect from 25 July 2003, that is, 14 days after the Commission issued that reasoned opinion. That repeal thus occurred within the two-month period granted to the Grand Duchy of Luxembourg to comply with its obligations under Article 18(1) and (2) of that directive.

49The Court notes, however, that, according to the case-law, although the claims as stated in the application cannot in principle be extended beyond the failures to fulfil obligations alleged in the letter of formal notice and in the operative part of the reasoned opinion, it is none the less the case that, where Community law is amended during the course of the pre-litigation procedure, the Commission has standing to seek a declaration that a Member State has failed to fulfil obligations which were created in the initial version of a Community act, subsequently amended or repealed, and which were maintained in force under the new provisions. Conversely, the subject-matter of the dispute cannot be extended to obligations arising under new provisions which do not correspond to those arising under the initial version of the act in question, as otherwise it would constitute a breach of the essential formal requirements of the infringement procedure (see Case 363/00 Commission v Italy, cited above, paragraph 22).

50As the NRF was adopted during the pre-litigation procedure, it is necessary to consider whether the obligations relating to the compliance of the cost accounting system and the annual publication of a statement of compliance in Article 18(1) and (2) of Directive 98/10, which has been repealed, have been maintained by the relevant provisions of the NRF.

51It should be borne in mind that, under Article 26 and the second subparagraph of Article 28(1) of Directive 2002/21, Directive 98/10 is repealed with effect from 25 July 2003. However, under Article 27 of Directive 2002/21, Member States are required to maintain all obligations under national law referred to in Article 7 of Directive 2002/19 and Article 16 of Directive 2002/22 until such time as a determination is made in respect of those obligations by a national regulatory authority.

52Article 7(1) of Directive 2002/19 provides that the Member States are to maintain in force all obligations that were previously applicable, inter alia, under Article 16 of Directive 98/10 concerning special network access.

53Article 16(1) of Directive 2002/22 provides that Member States are to maintain all obligations relating to, inter alia, retail tariffs for the provision of access to and use of the public telephone network, referred to in Article 17 of Directive 98/10. The latter article concerns the principle of cost orientation for tariffs.

54It follows that Article 18(1) and (2) of Directive 98/10, relating to the principles of cost accounting, the subject-matter of the second head of claim in the present action, is not explicitly referred to by the aforementioned provisions of the NRF.

55The fact remains, however, that the lack of reference in the present case to Article 18 of Directive 98/10 in Article 16 of Directive 2002/22 is not such as to exempt the Member States from their obligations under Article 18.

56The Court notes that it is not apparent from Directive 2002/22 that the Community legislature wished, by way of transitional measures, to maintain in force only those obligations under Article 17 of Directive 98/10 relating to cost orientation for tariffs and not those relating to the cost accounting system.

57On the contrary, as evidenced by the explicit references to Article 17 of Directive 98/10 contained in Article 18 therof, the obligations under those two articles must be taken into account together, as the principle of cost orientation for tariffs is closely linked to the accounting system for those same costs.

58It follows that the Member States' obligations under Article 18(1) and (2) of Directive 98/10 must be regarded as having been maintained in force by the relevant provisions of the NRF.

59The Grand Duchy of Luxembourg stated in this regard at the hearing that the transitional scheme provided for by the NRF concerns the obligations resulting from national legislation and not the disputed provisions of Directive 98/10. In those circumstances, the Grand Duchy of Luxembourg takes the view that, if there are no national measures transposing the obligations under Article 18(1) and (2) of Directive 98/10 for the year in question, that is, the year 2000, the transitional measures provided for by the NRF are not relevant for assessing the admissibility of the second head of claim in the present action.

60That argument cannot be accepted. In acknowledging essentially that it has not transposed Article 18(1) and (2) of Directive 98/10 for the year 2000, the Grand Duchy of Luxembourg cannot rely on its own failure to fulfil its obligations under the former regulatory framework governing telecommunications in order to evade those same obligations under the transitional measures provided for by the NRF.

61In those circumstances, the Court finds that the complaint concerning the provisions of Article 18(1) and (2) of Directive 98/10 in the reasoned opinion and in the second head of claim in the forms of order sought in the present action cannot be regarded as seeking to expand the subject-matter of the dispute to include obligations under the provisions of that directive which have not been maintained in force by the NRF.

62Accordingly, as regards the provisions of the aforementioned directive, the subject-matter of the dispute has not been expanded to such an extent as to affect the proper conduct of the present action for failure to fulfil obligations.

63It follows that the action must also be declared admissible in so far as it concerns the Grand Duchy of Luxembourg's failure to fulfil obligations under Article 18(1) and (2) of Directive 98/10.

64Second, the Grand Duchy of Luxembourg contends that the action for failure to fulfil obligations brought against it is essentially only a purely formal infringement proceeding aimed at obtaining a judgment in principle against it. Moreover, the commencement of the action in Commission v Luxembourg, referred to above, makes the continuation of the present action all the more pointless and demonstrates that the Commission's action in bringing the present proceedings is motivated solely by its wish to obtain a judgment in principle from the Court for an infringement which has virtually come to an end.

65Those arguments cannot be accepted. It is settled case-law that, when exercising its powers under Article 226 EC, the Commission does not have to show that there is a specific interest in bringing an action. The Commission's function is to ensure, of its own motion and in the general interest, that the Member States give effect to Community law and to obtain a declaration of any failure to fulfil the obligations deriving therefrom with a view to bringing it to an end (see Case C-333/99 Commission v France [2001] ECR I-1025, paragraph 23, and Case C-394/02 Commission v Greece [2005] ECR I-4713, paragraphs 14 and 15 and case-law cited).

66Furthermore, it is for the Commission to determine whether it is expedient to take action against a Member State, what provisions the Member State has infringed, and to choose the time at which it will bring an action for failure to fulfil obligations; the considerations which determine that choice cannot affect the admissibility of the action (Case C-317/92 Commission v Germany [1994] ECR I-2039, paragraph 4; Case C-35/96 Commission v Italy [1998] ECR I-3851, paragraph 27; and Commission v France, cited above, paragraph 24).

67Lastly, it should be borne in mind that the bringing and continuation of an infringement action is a matter for the Commission in its entire discretion and that the Court must consider whether or not there has been a failure to fulfil obligations as alleged, without its being part of its role to take a view on the Commissions exercise of its discretion (see Case C-474/99 Commission v Spain [2002] ECR I-5293, paragraph 25).

68It accordingly follows that the first plea of inadmissibility alleging the Commission's lack of interest in bringing an action must be dismissed.

Infringement of the rights of the defence in the pre-litigation procedure

69The Luxembourg Government contends, first, that the first reference by the Commission to the transitional provisions of the NRF was in the application initiating the present proceedings and that those provisions constitute a new legal basis for the alleged failures. First, there are substantial differences between the former regulatory framework and the NRF and, second, the transitional provisions are not drawn from the former regulatory framework and cannot, in any event, be used to impose new obligations, other than the existing ones, on carriers. Accordingly, the provisions in question should have been relied on during the pre-litigation phase in order to enable the Luxembourg Government to submit its observations in the time periods and forms prescribed by the letters of formal notice and reasoned opinions. In not complying with those minimal requirements, the Commission unlawfully expanded the subject-matter of the present dispute to include new matters of law, in violation of the rights of the defence; accordingly, the action should be declared inadmissible in its entirety.

70It should be borne in mind that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity to comply with its obligations under Community law or to avail itself of its right to defend itself against the complaints made by the Commission. The proper conduct of that procedure thus constitutes an essential guarantee required by the EC Treaty in order to protect the rights of the Member State concerned. It is only when that guarantee is observed that the contentious procedure before the Court can enable it to judge whether that State has in fact failed to fulfil the obligations which the Commission alleges it has breached (see Case C-145/01 Commission v Italy [2003] ECR I-5581, paragraph 17 and case-law cited).

71For the arguments put forward by the Luxembourg Government to be pertinent to the issue of upholding the rights of the defence, the failures to fulfil obligations alleged by the Commission must be drawn from the provisions of the NRF which impose new obligations on the Member States. This is clearly not the case here.

72The Court finds that, as regards the provisions of Article 7(5) of Directive 97/33, the alleged failure to fulfil obligations relates to the years 1998 and 1999, that is, prior to the adoption of the NRF.

73As to the provisions of Article 18(1) and (2) of Directive 98/10, it should be borne in mind that the repeal of that directive with effect from 25 July 2003 does not release the Grand Duchy of Luxembourg from its obligations under those provisions of that directive, as noted in paragraphs 55 to 61 of this judgment.

74Second, the Luxembourg Government contends that the Commission did not act promptly to secure a declaration that the Grand Duchy of Luxembourg had failed to fulfil its obligation to transpose Directive 97/33 and Directive 98/10 before the provisions thereof had been repealed by the NRF and that it did not mention any circumstances preventing it from completing the pre-litigation procedure in due time.

75The Luxembourg Government therefore essentially criticises the Commission for having conducted an excessively lengthy pre-litigation procedure which affected its rights of defence.

76Although it is true that the excessive duration of the pre-litigation procedure is capable of constituting a defect rendering an action for failure to fulfil obligations inadmissible, it is clear from the case-law that such a conclusion is inevitable only where the conduct of the Commission has made it difficult to refute its arguments, thus infringing the rights of the defence, and that it is for the Member State concerned to provide evidence of such a difficulty (see Case C-287/03 Commission v Belgium [2005] ECR I-3761, paragraph 14 and case-law cited).

77The Court finds in the present case that the Grand Duchy of Luxembourg has not put forward any specific argument demonstrating that the excessive duration of the pre-litigation procedure and, in particular, the length of time between its responses to the reasoned opinions and the lodging of the application with the Court, affected its ability to exercise its rights of defence. In its statement in defence, the Luxembourg Government merely contests the Commission's discretion on whether and when to initiate and continue infringement proceedings.

78In the light of the foregoing, it is appropriate also to reject the second plea of inadmissibility alleging infringement of the rights of the defence during the pre-litigation procedure and, accordingly, to declare the Commission's action admissible.

Substance

79The Commission complains that the Grand Duchy of Luxembourg has failed to fulfil its obligations under Article 7(5) of Directive 97/33 and Article 18(1) and (2) of Directive 98/10.

80The Luxembourg Government contends, first, that the application of Case C-129/96 Inter-Environnement Wallonie [1997] ECR I-7411 to the present case leads to rejection of the Commission's arguments. The transposition of the obligations under Directive 97/33 and Directive 98/10 is such as to compromise seriously the application of the NRF, given the considerable differences between those directives, on the one hand, and the NRF, on the other.

81That argument is based on an incorrect assumption. The complaints put forward by the Commission in the context of the present case relate to a period prior to, not subsequent to, the date of adoption of the NRF, namely 24 April 2002. The Commission is criticising the Grand Duchy of Luxembourg for having failed to fulfil its obligations under, first, Article 7(5) of Directive 97/33 for the years 1998 and 1999 and, second, Article 18(1) and (2) of Directive 98/10 for the year 2000.

82In those circumstances, compliance by the Grand Duchy of Luxembourg with its obligations under the aforementioned provisions is unrelated to the transposition of the NRF, as the latter clearly relates to a much later period than that at issue in the present proceedings. Accordingly, the case-law referred to above cannot be relied on to counter the Commission's heads of complaint in the present case.

83Second, the Luxembourg Government submits that the Commission cannot validly rely on the transitional provisions of the NRF to establish that, on the date when the periods fixed in the reasoned opinions expired, the Grand Duchy of Luxembourg was required to comply with the obligations imposed by Directive 97/33 and Directive 98/10.

84That argument cannot be accepted. As regards Directive 97/33, it should be borne in mind that the basis of an alleged failure to fulfil obligations is not to be found in the transitional provisions of the NRF, but in the provisions of that directive relating to a period prior to the adoption of the NRF.

85As to the failure to fulfil obligations under Directive 98/10, it should be borne in mind that this is based on the provisions of that directive which, as noted in paragraphs 55 to 61 of this judgment, were maintained in force by the relevant provisions of the NRF.

86In those circumstances, no argument can be drawn from the transitional provisions of the NRF to contest, in the circumstances of this case, the soundness of the present action.

87Lastly, the Luxembourg Government contends that the Commission has not established that the Grand Duchy of Luxembourg disregarded its obligations of verification of the compliance of the cost accounting system and the publication of statements of compliance, as provided for by Directive 97/33 and Directive 98/10. In fact, the ILT and the ILR have approved the EPT's reference interconnection offers for each year since 1998. That approval comprises, inter alia, verification by the ILR and the ILT of the EPT's compliance with its obligation of cost orientation for tariffs. Accordingly, it follows that since the EPT's reference interconnection offers have always been the subject of regular approvals and publications, including in 1998 and 1999, the Commission cannot criticise the Luxembourg authorities for having failed to fulfil their obligations under Article 7(5) of Directive 97/33 and Article 18(1) and (2) of Directive 98/10.

88That argument must also be rejected. The Court notes that compliance with the principles of transparency and cost orientation for tariffs does not automatically entail compliance with the cost accounting system and accounting separation in relation to interconnection. Accordingly, the Luxembourg Government's assertion, even if it were well founded, cannot lead to the conclusion that the obligations of verification and publication as required by the abovementioned provisions of those directives have been complied with in this case.

89It follows that, in the context of the present case, the Luxembourg Government has not put forward any argument which refutes the Commission's finding that it did not comply with its obligations under, first, Article 7(5) of Directive 97/33 for the years 1998 and 1999 and, second, Article 18(1) and (2) of Directive 98/10 for the year 2000.

90Moreover, even if it were accepted that the Grand-Ducal Regulation of 18 April 2001 does transpose those directives into Luxembourg law, the Court notes that the letters sent to the Commission concerning that regulation state expressly that it did not have retroactive effect, whereas the Commission's complaints related to periods prior to the date on which it was adopted.

91In the light of all of the aforementioned considerations, the present action must be upheld.

92The Court accordingly finds that, by failing to comply with the obligations to verify the compliance of cost accounting systems by a competent independent body and to publish a statement of compliance for the years 1998 and 1999, in accordance with Article 7(5) of Directive 97/33/EC and, by failing to apply correctly in practice the measures relating to verification of the compliance of the cost accounting system by the national regulatory authority or another competent body, independent of the telecommunications organisation and approved by that regulatory authority, for the year 2000, in accordance with the provisions of Article 18(1) and (2) of Directive 98/10, as maintained by Article 27 of Directive 2002/21, read in conjunction with Article 16 of Directive 2002/22, the Grand Duchy of Luxembourg has failed to fulfil its obligations under those provisions.

Costs

93Under 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. In this case the Grand Duchy of Luxembourg has been unsuccessful. However, the Commission has not applied for costs. In those circumstances, the Court finds it appropriate to order each party to bear its own costs.

Operative part

On those grounds, the Court (Second Chamber) hereby:

1.Declares that, by failing to comply with the obligations to verify the compliance of cost accounting systems by a competent independent body and to publish a statement of compliance for the years 1998 and 1999, in accordance with Article 7(5) of Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (ONP) and by failing to apply correctly in practice the measures relating to the verification of the compliance of the cost accounting system by the national regulatory authority or another competent body, independent of the telecommunications organisation and approved by that regulatory authority, for the year 2000, in accordance with the provisions of Article 18(1) and (2) of Directive 98/10/EC of the European Parliament and of the Council of 26 February 1998 on the application of open network provision (ONP) to voice telephony and on universal service for telecommunications in a competitive environment, as maintained by Article 27 of Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (‘the Framework Directive'), read in conjunction with Article 16 of Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users' rights relating to electronic communications networks and services (’the Universal Service Directive'), the Grand Duchy of Luxembourg has failed to fulfil its obligations under those provisions;

2.Orders the Commission of the European Communities and the Grand Duchy of Luxembourg to bear their own costs.