# Decision of the European Ombudsman on complaint 341/2003/GG against the European Commission
- Author: European Ombudsman
- Date: null
- [URL](https://www.ombudsman.europa.eu/en/decision/en/1865)
---
Strasbourg, 11 November 2003   

Dear Mr G.,

On 10 February 2003, you lodged a complaint against the European Commission concerning
the latter's handling of a complaint against Germany that you had submitted
to the Commission.

On 21 February 2003, the European Ombudsman forwarded the complaint to the President
of the European Commission.

By letter of 24 February 2003, you sent the Ombudsman further information in
relation to your complaint, which the Ombudsman forwarded to the Commission
on 6 March 2003.

On 7 May 2003, you wrote to me in order to ask for a rapid decision on your complaint
or for the adoption of interim measures. In my reply of 8 May 2003, I
explained that the Commission had been asked to submit its opinion on
the complaint by 31 May 2003 and that this opinion would be forwarded
to you as soon as possible. I also informed you that the Ombudsman did
not have the power to issue binding orders to other institutions or to
adopt interim measures. A copy of your letter of 7 May 2003 and of my
reply thereto were forwarded to the Commission for its information.

The Commission sent its opinion (dated 13 May 2003) on 23 May 2003. I forwarded
it to you on 28 May 2003 with an invitation to make observations.

On 30 May 2003, you sent me a further complaint against Germany which was addressed
to the Commission. I acknowledged receipt of this letter on 5 June 2003,
expressing the view that this letter had been sent to me for my information.
In your reply of 11 June 2003, you asked me to forward your letter of
30 May 2003 to the Commission. I did so on 20 June 2003.

On 30 June 2003, you sent me your observations on the Commission's opinion. On
23 July 2003, you sent additional observations.

I am writing now to let you know the results of the inquiries that have been
made.

THE COMPLAINT
-------------

The complainant, a German citizen, transferred securities he had kept with the
Volksbank Freiburg (a German bank) to a Swiss bank. According to the
complainant, this was a normal transaction that was carried out openly
and in his own name. Still according to the complainant, the transfer
was made because the securities were needed in order to secure loans
from the Swiss bank, because the Swiss bank offered more advantageous
products, better advice regarding securities, a wider range of services
and a faster and more reliable handling of business than the German bank
and because of the security offered by the account with the Swiss bank.

In the course of an investigation into illegal transactions carried out at the
Volksbank Freiburg on the basis of a search warrant issued on 22 April
1998, the tax authority Freiburg-Land also discovered documents concerning
the said transfer. According to the complainant, the tax authority thus
went beyond their mandate that was limited to examining transactions
that had been carried out anonymously. The tax authority Freiburg-Land
subsequently forwarded the information it had discovered to the tax authority
Stuttgart I competent for the complainant. The latter subsequently launched
its own tax investigation against the complainant whose home and office
were searched. As a result of this investigation, the tax authority Stuttgart
I modified the complainant's tax charges for the years 1989 until 1999
and set a higher advance payment on taxes due for 2001. With regard to
these decisions, the complainant applied to the Finanzgericht (financial
court) Baden-Württemberg for a stay of proceedings. In its decisions of 16 April 2002, the Finanzgericht rejected these applications. The complainant's
request to allow an appeal to the Bundesfinanzhof (Federal Supreme Financial
Court) was rejected by the Finanzgericht on 30 July 2002. The relevant
facts also resulted in criminal proceedings being brought against the
complainant.

According to the complainant, the transfer carried out by him was covered by
the free movement of capital. It could not thus be the basis for an initial
suspicion ("Anfangsverdacht") of tax evasion. The complainant submitted
that the German tax authorities suspect any transfers to other countries
as being potentially abusive. Such an approach was likely to deter citizens
from taking advantage of the free movement of capital ("chilling effect").
The complainant took the view that the Community interest in an unimpeded
free movement of capital across borders had to be taken into account
by national authorities. According to the complainant, the tax authorities
and the Finanzgericht had failed to do so in the present case. In the
complainant's view, the Finanzgericht had objected to the transfer of
the securities on the grounds that it had been carried out without any
economic reason. The complainant considered that requiring an economic
reason for such transactions constituted a disguised restriction of the
free movement of capital. He further considered that there was discrimination, given
that no economic reason was required for a transfer to a German bank
and that reasons of a non-economic nature were disregarded. The complainant
finally submitted that the measures taken by the German tax authorities
had been disproportionate, given that the Amtsgericht (local court) Freiburg
that had authorised the search at the Volksbank Freiburg had stressed
that the investigation was to be limited to transactions that had been
carried out anonymously or by using fake names. There was thus an absolute
prohibition on using information on his transfer that had been discovered
on the occasion of this investigation.

On 2 September 2002, the complainant turned to the Commission (complaint reference
2002/5041) in order to complain that the decision of the Finanzgericht
of 30 July 2002 infringed the rules of the EC Treaty on the free movement
of capital. The complainant therefore suggested that Article 226 proceedings
should be commenced by the Commission. In its reply of 19 November 2002,
the Commission pointed out: "In this context it cannot be seen that the
Finanzgericht would have justified a concrete initial suspicion of tax
evasion in your case with the fact that there was no economic reason
for transferring the securities or that it would even have established
a general requirement of such an economic reason in case of transfers
abroad." In the Commission's view, the German court had only held that
such a suspicion was warranted where the relevant transaction appeared
to be uneconomic. The Commission informed the complainant that it therefore
proposed to close the case unless the complainant could put forward new
arguments or evidence.

The complainant considered that in its letter of 19 November 2002, the Commission
had falsified the decision of the Finanzgericht by substituting for the
latter's position an argument that had been put forward during the proceedings
by the tax authority Stuttgart I which the Finanzgericht had not adopted.

The complainant objected to the Commission's view in several further letters.
In its replies of 13 January and 3 February 2003, however, the Commission
confirmed its position.

In his complaint to the Ombudsman, the complainant (1) objects to the Commission's
refusal to open proceedings under Article 226 and (2) alleges that the
Commission has falsified the facts.

THE INQUIRY
-----------

**The Commission's opinion**   

In its opinion, the Commission made the following comments:
*1. Context of the case*   

Under German law, tax investigations can only be based on
a sufficiently substantial initial suspicion of some form of tax evasion
("steuerrechtlicher Anfangsverdacht"). The Bundesfinanzhof (the highest
German fiscal court) decided on 6 February 2001 that any fiscal investigation
based exclusively on the fact that there had been a cross-border transfer
of assets from a national to a foreign bank account infringed the freedom
of capital movements protected by Article 56 of the EC Treaty.

In a previous complaint to the Commission of 3 September 2001 (reference 2001/5037),
the complainant had claimed that the measures taken against both his
bank and himself (i.e. execution of a search warrant and confiscation
of documents) had been illegal. Since there had been no indication of
a breach of Article 56 of the EC Treaty, the case had been closed by
the Commission on 25 January 2002.

The complainant subsequently lodged a further complaint (reference 2002/5041)
in which he objected to the decisions of the Finanzgericht Baden-Württemberg
of 16 April 2002 and in particular to the decision of the Finanzgericht
of 30 July 2002, rejecting his request to overturn the decisions of 16
April 2002. The complainant deduced from the decision of 30 July 2002
that, as a general rule, the court required *economic* reasons for cross-border
transfers of securities, something which represented a disguised restriction
within the meaning of Article 58 (3) of the EC Treaty.
*2. History of the case*   

The complaint (reference 2002/5041) had been lodged by the
complainant on 2 September 2002. On 27 September 2002, the complainant
was asked to provide further information. This information was sent on
8 October 2002. An analysis by the Commission's services showed that
there was no indication of arbitrary discrimination against transfers
to foreign countries within the meaning of Article 58 (3) of the EC Treaty.
On 19 November 2002, and with the approval of the Commission's Legal
Service, the complainant was therefore informed of the Commission's intention
to close the case. After the complainant had made further submissions
on 28 November 2002 and 23 December 2002, the Commission informed him
that it maintained its position that the case should be closed.
*3. The Commission's position regarding the complainant's arguments*   

In his complaint to the Ombudsman, the complainant referred
to grievances regarding the legality of various search warrants. All
these grievances had been subject to court decisions. The search warrant
executed against the complainant's bank in Freiburg had been annulled
by a decision of the Landgericht (regional court) Freiburg of 26 January
2000. Regarding the complainant's claim that this led to an absolute
prohibition on the use of evidence thus gained, it had to be pointed
out that there was no clear-cut provision in German law automatically
excluding consideration of illegally obtained information ('fruit of
the poisonous tree' doctrine), but only specific case-law. The complainant
had filed a complaint with the Landgericht Stuttgart against the tax
investigation measures taken against him by the tax authority in Stuttgart.
The court had rejected this complaint on 19 January 2001. The legality
of the confiscation of the complainant's documents had been confirmed
by a decision of the Amtsgericht (local court) Stuttgart of 23 January 2001.

According to Article 2 (7) of the Statute of the Ombudsman, the complaint was
thus inadmissible as far as the issues covered by these legal proceedings
were concerned.

Regarding the complainant's objection to the Commission's refusal to open proceedings
under Article 226 of the EC Treaty, it had to be pointed out that, in
accordance with the established case-law of the Community courts, the
Commission enjoyed a discretionary power in deciding whether or not to
commence such proceedings.

Regarding the complainant's claim that the Finanzgericht in its decision of 30
July 2002 wrongly upheld a specific initial suspicion of tax evasion
in his case on the basis that there was no economic reason for a transfer
of securities, the court's decision reads as follows:[(1)](#(1)){#Footnote1}
> "It was decisive for the judgement by the senate \[in its decisions of 16 April
> 2002\] that the transfer of the securities to a foreign bank occurred
> without an economic reason. (...) Since the lack of an economic reason
> was decisive for the decision by the senate, it is not relevant that
> only a part of the deposit had been transferred."

This referred to the previous decisions by the Finanzgericht of 16 April 2002
which both read as follows:
> "In addition, in the senate's view it is not usual bank practice in relation
> to foreign countries that an existing deposit is transferred as a whole
> to a foreign bank for no apparent economic reason. This is because debtor
> and creditor remain the same, only the administration of the assets changes.
> On the contrary, in such circumstances the senate upholds the initial
> suspicion of tax evasion."

What "no apparent economic reason" and the "lack of an economic reason" in this
context meant became apparent when looking at section I of the decisions
of 16 April 2002 which reads as follows:
> "\[The Finanzamt Stuttgart I\] claims as justification that the investigation by
> the tax investigators was based on lawful investigative actions: The
> \[complainant\] had transferred a deposit of his consisting of fixed-interest
> securities to a foreign country. There were no economic reasons to do
> so, because the costs of this deposit were higher abroad."

In this context, the facts did not show that the Finanzgericht had based a specific
initial suspicion of tax evasion in the complainant's case on the fact
that there was no economic reason for a transfer of securities or even
stipulated a general requirement for there to be an economic reason for
cross-border transfers. Following a comprehensive analysis of all the
court decisions submitted, it became obvious that the court upholds an
initial suspicion of tax evasion if the cross-border transfer concerned
is economically disadvantageous. The tax authority in the relevant case
had uncontestedly claimed that the costs of the foreign deposit were
higher than those charged by the German bank. Thus, contrary to the complainant's
allegations, investigative action against the complainant was based on
the fact that the transfer was *economically disadvantageous* and not on
the fact that an economic reason was missing.

The complainant claimed that there were economic or non-economic reasons for
the transfer he had carried out. However, such possible reasons had been
unknown at the time the initial suspicion had arisen.

Article 58 (1) of the EC Treaty stipulates that the provisions of Article 56
enshrining the free movement of capital shall be without prejudice to
the right of Member States to take all requisite measures to prevent
infringements of national law and regulations, in particular in the field
of taxation. Based on the information available to the Commission, there
was no indication that the tax authorities or the Finanzgericht had relied
merely on the cross-border nature of the transfer of securities in order
to establish an initial suspicion of tax evasion. The investigations
had on the contrary been based on the fact that the complainant's transfer
seemed economically disadvantageous at the time and that the complainant
had refused to provide further clarification.

The Commission enjoyed a discretionary power in deciding whether or not to commence
infringement proceedings. In the complainant's case, this decision was
not based on a falsification of the facts, but on the interpretation
of information provided by the complainant.
**The complainant's observations**   

In his observations, the complainant maintained his complaint
and made the following further comments:

It followed from the decision of the Bundesfinanzhof of 6 February 2001 that
tax investigations can only be based on a sufficiently substantial initial
suspicion of some form of tax evasion ("steuerrechtlicher Anfangsverdacht").
This meant that such tax investigations could only be based on the fact
that there had been an *anonymous* transfer of assets from a national to
a foreign bank. The question as to whether there had been an economic
reason for the transfer abroad or whether the transfer appeared to be
economically disadvantageous was irrelevant according to the case-law
of the Bundesfinanzhof.

According to a letter from the tax authority Freiburg-Land to the tax authority
in Stuttgart, the tax investigation had been started in the present case
"since the transfer of fixed-interest securities to a deposit in a foreign
country did not make economic sense and since the transfer had been carried
out in close temporal vicinity to the introduction of the deduction on
interest ("Zinsabschlag") \[in Germany\]. The documents \[concerning the
complainant\] had been treated as documents found by chance ("Zufallsfunde")
since they had not been covered by \[the search warrant\]".

On 4 September 1998, the Amtsgericht Freiburg had rejected the request by the
tax authority Freiburg-Land to confirm the seizure of these documents.
The court argued that otherwise the restrictions that had been imposed
on the search warrant issued on 22 April 1998 would be rendered nugatory.
This decision was confirmed by the Landgericht Freiburg on 4 March 1999.
Despite these decisions, the relevant documents were transmitted to the
tax authority Stuttgart I on 9 August 1999. Doing so already constituted
an infringement of the free movement of capital.

After the Landgericht Freiburg had, on 26 January 2000, annulled the decision
authorising the search warrant of 22 April 1998, the relevant documents
had been returned to the Volksbank Freiburg. At that time it was apparently
overlooked that copies of these documents had already been passed on
to the tax authority in Stuttgart. This also constituted an infringement
of the complainant's free movement of capital.

On 14 November 2000, the tax authority in Stuttgart applied for a search and
seizure warrant. The initial suspicion was based on the fact that a transfer
of securities to a Swiss account had taken place.

The question as to whether this transfer had been economically disadvantageous
had not been examined at all at the time when the documents were seized
on 26 June 1998. This issue only became relevant during the proceedings
before the Finanzgericht towards the end of 2001 and in 2002, given that
the tax authority Stuttgart I had relied on the alleged absence of an
economic purpose of the transfer. It was not legitimate to project this
issue back to 1998. The complainant had at first not replied to this
issue in 2001/2002 since according to the case-law of the Bundesfinanzhof
and of the German Constitutional Court it was irrelevant for the purposes
of the initial suspicion.

Requiring an economic reason for a transfer abroad or that such a transfer should
not appear to be economically disadvantageous constituted an arbitrary
discrimination as well as a disguised restriction on the free movement
of capital within the meaning of Article 58 (3) of the EC Treaty.

THE DECISION
------------

**1 Introductory remarks**   

1.1 The complainant, a German citizen, transferred securities
he had kept with the Volksbank Freiburg (a German bank) to a Swiss bank.
According to the complainant, this was a normal transaction that was
carried out openly and in his own name. In the course of an investigation
into illegal transactions carried out at the Volksbank Freiburg on the
basis of a search warrant issued on 22 April 1998, the tax authority
Freiburg-Land also discovered documents concerning the said transfer.
According to the complainant, the tax authority thus went beyond their
mandate that was limited to examining transactions that had been carried
out anonymously. The tax authority Freiburg-Land subsequently forwarded
the information it had discovered to the tax authority Stuttgart I competent
for the complainant. The latter subsequently launched its own tax investigation
against the complainant whose home and office were searched. As a result
of this investigation, the tax authority Stuttgart I modified the complainant's
tax charges for the years 1989 until 1999 and set a higher advance payment on taxes due
for 2001. With regard to these decisions, the complainant applied to
the Finanzgericht (financial court) Baden-Württemberg for a stay of proceedings.
In its decisions of 16 April 2002, the Finanzgericht rejected these applications.
The complainant's request to allow an appeal to the Bundesfinanzhof (Federal
Supreme Financial Court) was rejected by the Finanzgericht on 30 July
2002. On 2 September 2002, the complainant turned to the European Commission.
However, by letter of 19 November 2002 the Commission informed the complainant
that it did not see any reason why it should intervene. The Commission
confirmed this position in further letters of 13 January and 3 February
2003.

1.2 In his complaint to the Ombudsman, the complainant submits that the European
Commission ought to have opened infringement proceedings on the basis
of Article 226 of the EC Treaty. The complainant takes the view that
the German tax authorities and the Finanzgericht infringed the free movement
of capital in his case.

1.3 For the avoidance of any doubt, it should be recalled that Article 195 of
the EC Treaty empowers the European Ombudsman to receive complaints concerning
instances of maladministration in the activities of the Community institutions
and bodies, with the exception of the Court of Justice and the Court
of First Instance acting in their judicial role. The European Ombudsman
thus has no mandate to consider complaints against other institutions
or bodies, such as national tax authorities or courts. The present decision
therefore deals exclusively with the complaint against the European Commission.

1.4 In its opinion, the Commission points out that the grievances regarding the
legality of various search warrants to which the complainant had referred
were subject to court decisions. In the Commission's view, and according
to Article 2 (7) of the Statute of the Ombudsman[(2)](#(2)){#Footnote2}, the complaint is thus
inadmissible as far as the issues covered by these legal proceedings
were concerned.

1.5 It should be noted that it follows from Articles 1 (3) and 2 (7) of the Ombudsman's
Statute that the European Ombudsman may not question the soundness of
a court's ruling and that he has to declare a complaint inadmissible
if the facts that have been put forward by the complainant have already
been dealt with by a court. However, the present complaint concerns the
Commission's decision not to open infringements proceedings against Germany.
Given that this decision does not appear to have been the subject of
court proceedings, the Commission's doubts as to the admissibility are
not founded.

1.6 It should however be noted that the complainant's case is based on the premise
that decisions taken by German tax authorities that appear to have been
the subject of court proceedings and ultimately decisions by a German
court infringed Community law. This fact will be taken into consideration
when the complainant's allegations are examined (see 2.3 below).
**2 Failure to open infringement proceedings**   

2.1 The complainant objects to the Commission's refusal to
open infringement proceedings against Germany on the basis of Article
226 of the EC Treaty. He takes the view that the transfer carried out
by him was covered by the free movement of capital. It could not thus
be the basis for an initial suspicion ("Anfangsverdacht") of tax evasion.
The complainant submits that the tax authorities and the Finanzgericht
failed to take into account the Community interest in an unimpeded free
movement of capital across borders. According to the complainant, the
Finanzgericht objected to the transfer of the securities on the grounds
that it had been carried out without any economic reason. The complainant
considers that such an approach constitutes a disguised restriction of
the free movement of capital. He further submits that there was discrimination,
given that no economic reason was required for a transfer to a German
bank and that reasons of a non-economic nature were disregarded. The
complainant finally takes the view that the measures taken by the German tax authorities were disproportionate,
given that the Amtsgericht (local court) Freiburg that had authorised
the search at the Volksbank Freiburg had stressed that the investigation
was to be limited to transactions that had been carried out anonymously
or by using fake names. In his view, there was thus an absolute prohibition
on using information on his transfer that had been discovered on the
occasion of this investigation.

2.2 In its opinion, the Commission points out that the complainant's grievances
concerning the legality of various search warrants were subject to court
decisions. The search warrant executed against the complainant's bank
in Freiburg was annulled by a decision of the Landgericht (regional court)
Freiburg. However, according to the Commission there was no clear-cut
provision in German law automatically excluding consideration of illegally
obtained information ('fruit of the poisonous tree' doctrine), but only
specific case-law. The Commission further takes the view that the facts
did not show that the Finanzgericht had based a specific initial suspicion
of tax evasion in the complainant's case on the fact that there was no
economic reason for a transfer of securities or even stipulated a general
requirement for there to be an economic reason for cross-border transfers.
Based on the information available to the Commission, there was no indication
that the tax authorities or the Finanzgericht had relied merely on the cross-border nature of the transfer of securities in order to establish
an initial suspicion of tax evasion. The investigations had on the contrary
been based on the fact that the complainant's transfer seemed economically
disadvantageous at the time and that the complainant had refused to provide
further clarification.

2.3 It should be noted at the outset that the European Commission only has the
power to refer a case to the Court of Justice under Article 226 of the
EC Treaty if it considers that there is an infringement of Community
law. The Ombudsman considers that the above-mentioned arguments put forward
by the Commission to support its view that there is no infringement appear
to be reasonable. In particular, the Ombudsman takes the view that the
Commission's interpretation of the decisions rendered by the Finanzgericht
appears to be correct. The Ombudsman notes that in his observations on
the Commission's opinion, the complainant submits that the alleged absence
of an economic purpose of the relevant transfer was first raised in the
proceedings before the Finanzgericht in 2001/2002 and that it was not
legitimate to project this issue back to 1998 when the first investigation
was carried out. By raising this argument, the complainant thus effectively
questions the soundness of the decisions of the Finanzgericht of 16 April 2002 and of 30 July 2002. However, and as mentioned in point 1.5 above,
the Ombudsman may not question the soundness of a court's ruling. It
follows that the complainant has thus not established his allegation
concerning the Commission's refusal to start infringement proceedings.

2.4 In these circumstances, there appears to be no maladministration on the part
of the European Commission in so far as the first allegation is concerned.
**3 Falsification of facts**   

3.1 The complainant alleges that the following remark contained
in the Commission's letter of 19 November 2002 falsified the facts: "In
this context it cannot be seen that the Finanzgericht would have justified
a concrete initial suspicion of tax evasion in your case with the fact
that there was no economic reason for transferring the securities or
that it would even have established a general requirement of such an
economic reason in case of transfers abroad." According to the complainant,
the Commission substituted for the Finanzgericht's position an argument
that had been put forward during the proceedings by the tax authority
Stuttgart I which the Finanzgericht had not adopted.

3.2 The Commission takes the view that its decision not to open infringements
proceedings was not based on a falsification of facts.

3.3 As discussed above (see point 2.3), the Commission's interpretation of the
decisions rendered by the Finanzgericht appears to be correct.

3.4 In these circumstances, there appears to be no maladministration on the part
of the European Commission in so far as the second allegation is concerned.
**4 Conclusion**   

On the basis of the Ombudsman's inquiries into this complaint,
there appears to have been no maladministration by the European Commission.
The Ombudsman therefore closes the case.

The President of the European Commission will also be informed of this decision.

Yours sincerely,

P. Nikiforos DIAMANDOUROS

*** ** * ** ***

[(1)](#Footnote1){#(1)} Translation
provided by the Commission.

[(2)](#Footnote2){#(2)} Decision 94/262 of 9 March 1994 of the European Parliament on the Regulations
and General Conditions Governing the Performance of the Ombudsman's Duties,
OJ 1994 L 113, page 15.