The ECN+ directive was to be transposed in national laws by the 4th of February 2021. Only five member states (Germany, Hungary Lithuania, Sweden and the Netherlands) had their national implementing measure adopted in time. On the date of this blog-post, Estonia remains as the only Member State that has not yet transposed the ECN+ Directive (see European Commission’s status report).
By its decision of 23 January 2025 the ECJ fined Estonia 400,000 EUR for the non-transposition and obliged it to pay a penalty payment of 3,000 EUR per day from the date of the judgement until the infringement is brought to an end. It would be a good idea to ask: what brought us here? What is the decision and what happens next? Previous is more than a legal or theoretical debate. Pablo Ibanez Colomo demonstrates in his book, “The Shape of EU Competition Law“, (see page 328 and others) that the enforcement model and substance of competition laws are closely linked. Institutional features drive and shape the substantive law. A link that unfortunately does not always get the limelight when flashier substantive law debates take the centre-stage.
Reasons behind the non-transposition
In short, the transposition of the ECN+ Directive in Estonia necessitates a change in the current set-up of regulatory enforcement. In the Estonian Competition Authority’s toolbox, there are currently two separate proceedings. In the supervisory proceedings, the Authority can identify a violation, impose remedies, and oblige to put an end to the infringement. Financing is done under penal law. Infractions of Article 101 TFEU and its national equivalent are punished in criminal proceedings. Infractions of Article 102 TFEU and its national equivalent are punished in misdemeanour cases. Prior to the implementation of the ECN+ Directive, the Estonian Competition Authority focused more on resolving possible infractions of competition law than fining the perpetrator. This article is not the place to discuss whether the lack of enforcement of competition law was due to the institution or the choices of the enforcers. It was inevitable that the ECN+ Directive would be delayed due to the necessary material changes. The length of the (ongoing) delays was unexpected. The delay is partly due to disagreements over the legal form for future proceedings of competition law violations. The question of whether misdemeanour or administrative fines should be used. The Estonian legal system, as explained, has not recognized administrative penalties for nearly 25 years. If it were to now adopt the administrative fining route the legal framework would need to be rebuilt from the ground up. Misdemeanour procedures, on the other hand, are a working institution with a comprehensive Code
as well as extensive case-law that the local legal system knows. To transpose ECN+ Directive to misdemeanour procedures, only minor amendments are required. This is also a reason why the authors of this blog-post proposed a transposition via modifications to the misdemeanour code already back in 2021. The developments since then have not altered this assessment. Also, during the EU legislative process of the directive, Estonia’s positions were based on the assumption that it would be transposed in misdemeanour cases (previously was made clear in the Explanatory letter to Estonia’s positions on ECN+ Directive
). The Estonian Ministry of Justice, however, believed that the transposition would occur within the administrative law framework and submitted a concept document on the law of administrative penalties in 2020 for coordination. This was a controversial and unexpected step, as the Ministry had previously commissioned a research paper by the University of Tartu to investigate the feasibility of imposing sanctions in Estonia. The research concluded that the relevant EU Directives (incl. The ECN+ directive should be transposed in Estonian law through misdemeanour procedures, rather than establishing a new administrative penalty procedure. The conclusion was that, although different EU directives (including ECN+ Directive) can be transposed by both types of proceedings in Estonian law, misdemeanour procedures would be easier. The creation of a comprehensive code of procedural rules was necessary to establish administrative fines. This was necessary to avoid fragmentation in the administrative sanctions system. Misdemeanour proceedings, on the other hand, would only require a simple revision of existing rules that should be done regardless of directives. The research paper also argued that administrative fines are not preferable, since procedural rights should be protected equally in both procedures. The fining procedure for violations of competition law was one of the first administrative penalties to be introduced in the national law. It was anticipated that this approach would be used for fines related to data protection, financial sector, and other areas. The concept paper was then followed by a draft code of administrative fine proceedings. The draft code was abandoned after public consultations. The primary reason for abandoning this document was, it is believed, the overwhelmingly negative feedback received in the public discussion. The criticism was largely based on a potential conflict between different constitutional provisions and procedural protections. The main criticism was that the administrative process (as used in Estonian national law), is not intended to sanction individuals or businesses. The process itself would require material updates and changes. Instead of changing direction and drafting a misdemeanour based solution, an administrative fine concept was developed in competition cases. The Ministry worked on several iterations of a law amending the Competition Act as well as other laws between 2021 and 2024. The new plan was for a procedure (the competition supervisory procedure) to be created just for the transposition into Estonian law of the ECN+ Directive. The main argument for administrative fines is a (mis-)perception that Estonian misdemeanour procedures could be equated to “criminal legal proceedings” that were excluded by the directive. This was because misdemeanours, in their formal form, are penal offenses. The criminal law includes misdemeanours. Some commentators, however, argued that misdemeanours were not criminal proceedings within the context of ECN+ Directive as the Competition Authority has the power to initiate proceedings and not the Prosecutor’s Office. The EU Commission has also argued (though not directly applicable in this case) that Estonian misdemeanour procedures are not criminal law. (As explained by the Estonian Justice Minister in January 2025). The Ministry of Justice has historically preferred administrative fine procedures because misdemeanour cases can be formalistic due to the level of procedural protections, while administrative fines were seen as a way to facilitate sanctioning. This position was not in line with the ECtHR jurisprudence. in Engel, clarifying that some procedural guarantees (e.g.
nemo Tenetur Se Ipsum Accusare) applies to administrative sanctions laws as well if they have a quasi-criminal nature. The argument that misdemeanour procedures are too formalistic is also debatable. Misdemeanour procedures were designed from a practical perspective to be used under a variety of circumstances (from minor traffic violations to large-scale business regulations that are broken by large companies). As such the norms themselves allow for considerable flexibility, which just has to be effectively utilized both when designing sector-specific norms and when applying such norms in various circumstances. In the beginning of 2024, the respective
draft law was submitted to the Estonian Parliament. The law has not yet been passed by Parliament, and legislative proceedings have been suspended. This delay was due to further comments and feedback as with the predecessor draft. The decision of the ECJ Estonia was found in violation of Article 258 TFEU for failing to implement ECN+ Directive on time. In its action, European Commission asked the ECJ for the calculation of the fine based upon the following formula: Fine per day (600 EUR), 1000 (base amount), x 10 (coefficient infringement gravity), x 0,06 (0,06 is the coefficient for Estonia). Estonia asked to reduce the amount of the fine by half. Finally on 23 January 2025 the ECJ determined that because the competition law regulation in Estonia was partially in compliance with ECN+ Directive the coefficient of infringement severity corresponding to a full non-transposition could not be automatically applied without assessing the impact on private and public interest of the current infringement. The ECJ reduced the coefficient of infringement severity accordingly and set a fine amount of 400,000 EUR. The Court’s decision did not include any detailed calculations of the fine. For the penalty payment, the European Commission asked the ECJ calculate it based upon the following formula: Similar to the fine, Estonia requested that the penalty payment be reduced by half. The ECJ reduced the penalty payment to 2610 EUR using its discretionary power. The ECJ used its discretionary powers to reduce the penalty payment from 3000 EUR per daily without mentioning the details of the calculation. What is the next step? As a result, even years after the transposition, policy discussions are still ongoing on the fundamental issue: whether to harmonize ECN+ Directive in Estonian law through administrative fine proceedings. Continue with the current draft law in the Parliament or submit a brand new draft law that uses the framework of misdemeanour procedures to the Parliament. (Such a draft has been prepared by Ministry of Justice). In the Estonian context, it seems that the Government leans towards the second alternative. The date is not set in stone. The time required to draft such amendments shouldn’t be too long. Despite the pressure to move forward in the wake the ECJ’s decision, progress appears to have stalled again. The final draft law, despite an existing first draft at the time of this article, has not yet reached the parliament for debate and adoption. The ECJ fine continues to accrue. The remedies would be applied in the supervisory proceedings in a new format, namely the competition supervision proceedings where the Competition Authority receives investigatory powers to comply with the ECN+ Directive. Fines for undertakings will be applied in misdemeanour cases. In contrast to Estonian misdemeanour cases, the Competition Authority will not apply fines on its own, but rather the court would do so (similar to the current model used in some Member States such as the Nordic countries). The Estonian case of not transposing the ECN+ Directive shows that harmonizing substantive law is much easier than harmonizing procedural laws. The legal systems of different EU member states are very diverse, and harmonizing procedural law may require significant changes to their legal system. It is even harder when harmonization occurs in criminal procedural laws and changes to national procedures are required in a relatively narrow area of law. The fact that only 5 Member States have transposed the ECN+ Directive within the correct timeframe is a clear indication of how complex the situation is. This highlights the need for the Union to take special care before enacting legislation containing specific requirements for procedures within a member state. The Estonian Directive ECN+
saga shows that procedural harmonization is still a daunting task, regardless of the previous harmonization in substantive competition rules.
Story originally seen here
