Administrative Disputes: Will the New Law Abolish the Practice of Avoiding European Legal Acquis?

The new Administrative Disputes Act (Official Gazette No. 36/2024), which came into force on July 1, 2024, brings a series of changes to administrative disputes. Its main objectives relate to the modernization of the procedure, the abolition of the subsidiary application of civil procedure rules, better protection of the rights of parties, and the reduction of the burden on the High Administrative Court and the Administrative Court in Zagreb. Additionally, it encourages a more active approach from the courts, strengthens procedural discipline, and shortens administrative disputes. Analyzing the goals intended to be achieved by the new Administrative Disputes Act, we can conclude that it is not merely about cosmetic changes, but that the aim is indeed to improve administrative adjudication.

One of the provisions of the new Administrative Disputes Act, contained in Article 5, emphasizes the obligation of courts to decide in administrative disputes also based on the legal acquis of the European Union. This very topic – the application of EU law in administrative disputes – will be at the center of this analysis.

Application of EU Law

From the day the Republic of Croatia joined the European Union, on July 1, 2013, EU law has become an integral part of our national legal order. To ensure the consistent application of this law, amendments to the Constitution (Official Gazette No. 56/1990, 135/1997, 113/2000, 28/2001, 76/2010) that came into force upon Croatia’s accession to the EU introduced the obligation for all courts, state bodies, bodies of local and regional self-government, as well as legal entities with public authority, to apply EU law.

This means that from the moment of accession to the European Union, Croatian courts (including administrative courts) must apply EU law; if a national provision conflicts with EU law, they are obliged to set aside the national norm and directly apply European law. Furthermore, the Courts Act additionally stipulates that courts adjudicate based on the Constitution, the legal acquis of the European Union, international treaties, laws, and other relevant sources of law.

From this, we can conclude that administrative courts, as an integral part of the judiciary in the Republic of Croatia, have been obliged to apply EU law for a full eleven years. This obligation arises from the Constitution itself and from the Courts Act, which is one of the key regulations for the regulation of the scope and organization of courts.

Primary and Secondary Law

In light of the above, the question arises as to what the actual purpose of the provision in Article 5 of the new Administrative Disputes Act is and how it will be ensured that courts truly adhere to this provision. When we talk about EU law, we must be aware that it is a very broad and complex area, and to be adequately applied in administrative disputes, it is crucial to understand what falls within its scope.

Primary law occupies the highest position in the hierarchy of sources of EU law. It encompasses the founding treaties, treaties on the accession of new members to the European Union, protocols, and supplementary agreements related to these treaties, as well as the Charter of Fundamental Rights. In addition to these written documents, primary law also includes general legal principles developed in practice by the Court of Justice of the European Union. These principles, although unwritten, are key legal standards, such as the principles of legal certainty, proportionality, protection of fundamental human rights, and equal treatment. They serve to fill legal gaps and address issues related to the interpretation of existing legal norms.

Secondary law includes regulations, directives, and decisions, which are binding legal acts, as well as opinions and recommendations, which are not binding in nature. Additionally, secondary law includes the rules of procedure of institutions and inter-institutional agreements. These acts shape the daily practice and functioning of the EU legal system, and their application must be aligned with primary law.

International Agreements

In addition to primary and secondary law, sources of EU law include international agreements that the European Union concludes with third countries or international organizations. These agreements can have direct effect, meaning that their legal force can override secondary EU legislation, which must be aligned with international treaties. However, agreements are separate from primary and secondary law and constitute a unique category.

When discussing the practice of the Court of Justice of the European Union as a source of law, it is crucial to emphasize that the judgments of that court have erga omnes effect. This can be compared to the effect of decisions of constitutional courts in member states, as their legal force extends beyond the specific case in which they were made. Namely, a decision of the Court of Justice of the European Union, due to its erga omnes effect, not only resolves a dispute between the parties in the case but also transforms the relationship between the Court of Justice of the European Union and the national court that referred the preliminary question into a relationship that encompasses all national courts before which the same legal question arises. Thus, the practice of the Court of Justice of the European Union creates legal standards that all courts in member states are obliged to apply, ensuring uniform application and interpretation of EU law across its entire legal space.

Key Point

From all of the above, it is clear that Croatia’s accession to the European Union has significantly expanded the scope of sources of law that courts and other bodies deciding on rights and obligations must take into account when making decisions. EU law encompasses a wide range of sources, and in the event of conflicts among them, it is necessary to respect the hierarchy of legal sources and apply them in accordance with their legal force. Although the application of EU law may not seem particularly complex at first glance, searching for and identifying relevant legal sources is a demanding task that requires significant time and human resources.

If we take into account the broad scope of administrative courts and the range of different legal relationships for which they are competent, it is clear that this is by no means an easy task. As an example of administrative disputes with an international element, we can highlight tax matters. One of the key issues that arises in such cases is the issue of the tax residency of the taxpayer and the impact of tax residency on tax obligations.

The issue of tax residency also plays a key role in determining the applicable law in a specific situation – whether EU law should be directly applied (here the question of the hierarchy of legal sources is also important) or only national regulations (including international treaties concluded between the Republic of Croatia and a third country); in that case, they should be interpreted in accordance with the sources of EU law. Therefore, understanding and applying EU law is crucial in every case, as the decisions of national courts must not deviate from the fundamental principles of EU law.

Questionable Judicial Practice

Recent judicial practice shows significant inconsistency in the application of EU law by administrative courts in the Republic of Croatia. This creates legal uncertainty and complicates the predictability of decisions. Moreover, prior to the entry into force of the new Administrative Disputes Act, decisions of administrative courts or the High Administrative Court often resulted in the remand of cases to the first-instance body for re-proceeding. The new law introduces changes that should encourage a more active approach from administrative courts in resolving cases, and it remains to be seen what their concrete impact will be in practice.

An analysis of recent judicial practice reveals that decisions of first-instance and second-instance bodies in administrative proceedings often contain only blanket statements about the inappropriateness of applying EU law to the specific case, even if this is explicitly pointed out during the administrative proceedings. Following such decisions in administrative proceedings, an administrative dispute typically ensues. It is not uncommon for first-instance judgments to explain in a similarly blanket and generic manner that the applicable EU law is not relevant to the case at hand.

Endlessly Long Disputes

On the other hand, the High Administrative Court of the Republic of Croatia often annuls such first-instance judgments and decisions made in the previous administrative proceedings due to a lack of adequate reasoning regarding the application of EU law. This approach, while instilling confidence in the legal system, also prolongs the time needed to reach a final decision and increases the uncertainty of the final outcome in the re-proceeding, thereby undeniably emphasizing the need for higher quality reasoning in first-instance judgments, and consequently in the decisions made in administrative proceedings.

Given that administrative courts have been obliged to directly apply EU law for the past eleven years, the fact that the issue of (non)application of EU law is still being debated can be somewhat disheartening, but at the same time opens up opportunities for further progress. Whether this progress will result from legislative changes that further emphasize the obligation to apply EU law or from a deeper understanding of European law, its fundamental principles, and greater investment in administrative adjudication and education, will only be revealed in the future.