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Decision no. 2012-251 QPC of 8 JUNE 2012

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COPACEL and others - [Tax on sewage sludge]

On 26 March 2012, the Constitutional Council, pursuant to Article 61-1 of the Constitution, received an application for a priority preliminary ruling on the issue of constitutionality from the Conseil d'État (decision no. 351252 of 26 March 2012) raised by the Confédération des producteurs de papiers, cartons et celluloses (COPACEL) [Confederation of the manufacturers of paper, cardboard and cellulose] as well as the companies ARJOWIGGINS, EMIN LEYDIER, GREENFIELD, INTERNATIONAL PAPER FRANCE and NORSKE SKOG GOLBEY, regarding the compatibility of Article L. 425-1 of the Insurance Code with the rights and freedoms guaranteed by the Constitution.

THE CONSTITUTIONAL COUNCIL,

Having regard to the Constitution;

Having regard to Ordinance no. 58-1067 of 7 November 1958 as amended, concerning the basic law on the Constitutional Council;

Having regard to the Insurance Code;

Having regard to Law no. 2006-1772 of 30 December 2006 on water and acquatic environments;

Having regard to the Regulation of 4 February 2010 on the procedure applicable before the Constitutional Council with respect to applications for priority preliminary rulings on the issue of constitutionality;

Having regard to the observations on behalf of the applicants by SELARL Huglo Lepage and Partners, Attorneys at the Paris Bar, registered on 17 April and 2 May 2012;

Having regard to the observations of the Prime Minister, registered on 17 April 2012;

Having regard to the documents produced and appended to the case files;

Having heard François Braud Esq. on behalf of the applicants and Mr Xavier Pottier, appointed by the Prime Minister, at the public hearing on 15 May 2012;

Having heard the Rapporteur;

1. Considering that pursuant to Article L. 425-1 of that Code: " I. – A risk guarantee fund associated with the agricultural spreading of urban or industrial sewage sludge shall be charged with paying compensation for damage suffered by agricultural users and the owners of agricultural land and forests in the event that, after being subjected to the spreading of urban or industrial sewage sludge, such land has become entirely or partially unfit for cultivation due to the creation of a health risk or to the emergence of ecological damage associated with the spreading given that, according to the state of scientific and technical knowledge, this risk or this damage could not have been known at the time of the spreading and insofar as this risk or this damage is not insurable under insurance policies covering the third party liability of contractors for collective treatment systems for waste domestic water or, as the case may be, its appointees, the sewage company or the contractor for collective treatment systems for industrial waste water, hereafter referred to as: the "sludge producers", or under under insurance contracts relating to the production and disposal of sludge.

"The list of industrial sectors covered by this Article shall be determined by decree of the Conseil d'État"

"The fund shall pay compensation for certified damage up to a maximum threshold, provided that the spreading occurred in accordance with applicable regulations.

"The level of compensation shall be determined in accordance with the damage suffered and that payable to the owner of the land may not exceed the value of the land.

"The accounting and financial management of the fund shall be assured by the central reinsurance fund within an account which is separate from those relating to the other transactions which it concludes. The costs which it incurs for this management shall be charged to the fund.

"The central fund shall be informed of all disputes associated with the agricultural spreading of sewage sludge for which the insurers have accepted responsibility.

" II. – The fund referred to in paragraph I shall be financed by an annual tax levied on all producers of sewage sludge which shall be calculated on the quantity of sludge dry matter produced. Moreover, the fund may receive advance payments from the State where the damage which has occurred temporarily exceeds its capacity to pay compensation.

"The amount of the tax shall be set by decree of the Conseil d'État up to a maximum threshold of EUR 0.5 per ton of sludge dry matter produced produced.

"Those liable to pay the tax shall settle the amount due for the previous year when filing their value added tax return for March or for the first quarter of the calendar year.

"The tax shall be collected and controlled according to the same procedures and subject to the same penalties, guarantees, sureties and privileges as value added tax. Challenges shall be filed, examined and ruled upon in accordance with the rules applicable to that tax.

" III. – A decree of the Conseil d'État shall specify the conditions governing the application of this Article, including in particular the maximum amount which the fund's resources may reach";

2. Considering that, according to the applicants, in deciding to calculate the tax earmarked for the financing of guarantee funds on the basis of the quantity of sewage sludge produced and not on the quantity of sludge spread, these provisions define the basis for this tax according to criteria which are not appropriate having regard to its object; that they argue in support of this challenge in the first place that certain industries are legally and technically incapable of eliminating through spreading all of the sludge which they produce; that they assert secondly that, having regard to the environmental protection objective, there is no justification for an incentive to spread sludge instead of its incineration; that accordingly these provisions violate the principle of equality before charges levied by the State;

3. Considering that Article 13 of the 1789 Declaration provides: “A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means”; that, in particular, to ensure the principle of equality is upheld, the legislator must base his judgment on objective and rational criteria according to the proposed objectives; that this judgment must however not jeopardize equality before the charges levied by the State;

4. Considering that by introducing Article L. 425-1 into the Insurance Code, the Law of 30 December 2006 established a guarantee fund for the risks associated with the agricultural spreading of urban and industrial sewage sludge; that, in establishing these funds, the legislature intended to promote the disposal of sewage sludge through agricultural spreading by guaranteeing agricultural operators and property owners compensation for ecological damage associated with the spreading which was not foreseeable and which is not covered under insurance policies covering the third party liability of the producer of the sludge spread; that paragraph II of Article L. 425-1 provides that this compensation fund "shall be financed by an annual tax levied on all producers of sewage sludge which shall be calculated on the quantity of sludge dry matter produced";

5. Considering in the first place that the Constitutional Council does not dispose of a power of appreciation of the same nature as that of Parliament; that it is not for it to call into question the choice of the legislature to promote the disposal of sewage sludge through spreading;

6. Considering secondly that according to the travaux preparatoires for the aforementioned Law of 30 December 2006, by calculating the tax on the basis of the quantity of sludge produced and not the quantity of sludge spread, the legislature intended to ensure that the tax did not dissuade the producers of sludge from engaging in spreading, whilst assuring these compensation funds sufficient resources; that accordingly, the difference established between sludge suitable for spreading which the producer is authorised to spread and the other waste which it produces which can only be eliminated through landfill or incineration is directly related to the objective of the tax; that the same does not apply for sludge suitable for spreading which the producer is not authorised to spread; that if the tax established under paragraph II of Article L. 425-1 of the Insurance Code were also levied on the sewage sludge which the producer is not authorised to spread, it would result in a different in treatment which was not directly related to its objective, which would accordingly run contrary to the principle of equality before charges levied by the State; that accordingly, this tax should only be levied on the sewage sludge which the producer is authorised to spread;

7. Considering that, without prejudice to the preceding recital, the contested provisions are not contrary to the principle of equality before charges levied by the State or to any other right or freedom guaranteed by the Constitution;

HELD :

Article 1. – Subject to the reservation set out in recital 6, Article L. 425-1 of the Insurance Code is constitutional.

Article 2. – This decision shall be published in the Journal officiel of the French Republic and notified in the conditions provided for in Section 23-11 of the Ordinance of 7 November 1958 referred to hereinabove.

Deliberated by the Constitutional Council in its session of 7 June 2012, sat on by: Mr. Jean-Louis DEBRÉ, President, Mr Jacques BARROT, Mrs Claire BAZY MALAURIE, Mr Guy CANIVET, Mr Renaud DENOIX de SAINT MARC, Mrs Jacqueline de GUILLENCHMIDT, Mr Hubert HAENEL and Mr Pierre STEINMETZ.

Announced on 8 June 2012.