Insights

Earlier this year, in January 2021, the Court of Justice of the European Union (CJEU) delivered a judgement relating to two German citizens who sought to pay a radio and television licence fee, due to Hessischer Rundfunk (the broadcasting body), in cash. However, the same authority refused the payment in cash due to its regulations on the procedure for payment of radio and television licence fees, precluding any possibility of paying the licence fee in cash.

The German plaintiffs argued before the Bundesverwaltungsgericht (the German Federal Administrative Court) for their right to pay the broadcasting fee in cash, on the basis that such refusal to accept cash violated the status of euro banknotes and coins as legal tender. The Bundesverwaltungsgericht noted that, as per Paragraph 14(1) of the the federal law of the German Central Bank, euro banknotes are to be considered as unrestricted legal tender – hence, it was held that Hessischer Rundfunk’s regulations on the payment procedure of radio and television licence fees, infringe a higher-ranking provision of federal law. The Federal Administrative Court held that:

‘The exclusion of the possibility of paying broadcasting fees with euro banknotes violates the federal law and German public authorities are obliged to accept euro banknotes.’

The same Court proceeded to defer the ruling, pending the receipt of a preliminary ruling from the the CJEU on the following queries:

1. Irrespective of any exercise by the European Union of its exclusive competence in the area of monetary policy for Member States whose currency is the euro; does the Treaty on the Functioning of the European Union (TFEU) preclude legislation of a Member State that obliges public authorities to accept euro banknotes in the fulfilment of statutorily imposed payment obligations?
2. Can Member States’ public authorities refuse a statutorily imposed payment obligation from being paid in cash? Or must they accept euro banknotes as a discharge of obligatory payments?

In the ‘Opinion of the Advocate General (Giovanni) Pitruzella’, published by the CJEU back in September 2020, the status of banknotes and coins as legal tender as defined in Article 128(1) TFEU had been confirmed. It was also held that Member States may adopt measures that limit the use of cash for the payment of obligations of a private or public nature; given that such measures keep in mind the social inclusion of vulnerable people.

‘For those vulnerable individuals, cash is the only form of accessible money and thus the only means of exercising their fundamental rights linked to the use of money. Measures restricting the use of cash as a means of payment should, therefore, take into account the social inclusion element of cash as a means of payment for those vulnerable people and should ensure the effective existence of other lawful means for the settlement of monetary debts.’

In January this year, the Grand Chamber delivered a judgement and held that although euro banknotes and coins are legal tender, and their acceptance as a means of payment in EU Member States is mandatory; in the context of the organisation of its public administration, a Member State whose currency is the euro may adopt a measure obliging an administration to accept payment in cash or inversely allow (for a reason of public interest and under certain conditions) payment to be made through non-cash means.

‘[T]he status of legal tender of those notes and coins implies, in principle, an obligation to accept those notes and coins and, on the other hand, that obligation may, in principle, be restricted by the Member States for reasons of public interest.’

In interpreting the concept of monetary policy, the court held that the concept is not limited to its operational implementation but also entails a regulatory dimension intended to guarantee the status of the euro as the single currency. It further clarified that the primary objective of the European Union’s monetary policy is to maintain price stability and the attribution of the status of ‘legal tender’ is only applicable to euro banknotes issued by the European Central Bank (ECB) and the national central banks.

The CJEU proceeded to confirm the common definition of ‘legal tender’, whereby as per Recommendation 2010/191/EU, where a payment obligation exists, the legal tender of euro banknotes and coins should imply mandatory acceptance of those banknotes and coins at full face value, thus confirming that the concept of ‘legal tender’ as a means of payment possesses the obligation to accept banknotes and coins denominated in euro for payment purposes. Although, the CJEU then clarified that:

 ‘[I]t cannot be considered necessary for the use of the euro as the single currency […] and, more specifically, for the establishment of the status of legal tender of banknotes denominated in euro […] to impose an absolute obligation to accept those banknotes as a means of payment’.

Therefore, it noted that despite there being an obligation to accept banknotes and coins denominated in euro for payment purposes, it is not necessary to impose an absolute obligation to accept those banknotes as a means of payment. The CJEU also clarified that such obligation may be derogated from by Member States for reasons of public interest – provided that other lawful means for the settlement of monetary debts must be available in order to ascertain that those restrictions are proportionate to the public interest objective pursued. The term ‘public interest’ is interpreted to mean by the CJEU as anything from ‘public policy relating to security’, ‘the fight against crime’ and ‘ensuring the efficient organisation of payments in society’. Although, ultimately, the ‘reasons of public interest’ lies with Member States:

‘Limitations on payments in notes and coins, established by Member States for public reasons, are not incompatible with the status of legal tender of euro banknotes and coins, provided that other lawful means for the settlement of monetary debts are available’.

The CJEU held that it is a reason of public interest that monetary debts due to public authorities are paid through means which allow such authority to provide their services through cost-effective manners. Therefore, in such a case, given that Hessische Rundfunk has 46 million licence fee payers in Germany; the limitation of cash payments is appropriate in order to ensure ‘the effective recovery of the licence fee and to avoid substantial additional costs.’ The CJEU then referred the ascertainment of proportionality back to the Bundesverwaltungsgericht.

Consequently, the CJEU concluded that the Member States whose currency is the euro have the competence to regulate the procedures for settling pecuniary obligations; given that such member state gives the possibility to pay the debt in cash, denominated in euro.

The author would like to thank Andrea Grima, an intern at Ganado Advocates, for his assistance during the drafting of this law report.