TRATA DE PERSONAS

It is crucial for a proper understanding of the theory of principles that norms should be divided into rules and principles. In respect of rules, Hart has made a distinction between primary rules and secondary rules.162 _{Primary rules are rules of obligation (“drive on}

the right side of the road”). Secondary rules specify how to identify a rule as being part of the system (rules of recognition), how to change a rule (rules of change) and how to apply a rule (rules of adjudication).163 _{Thus, law is mainly understood as a system of rules.}

Law, however, does not only consist of rules but also of principles. Hart’s legal positivism has been criticized in this respect by Dworkin, who has emphasized the importance of principles in the law.164 _{Dworkin has made a distinction between rules on the one hand}

and principles and policies on the other. A policy is a “kind of standard that sets out a goal to be reached, generally an improvement in some economic, political or social feature of the community (though some goals are negative, in that they stipulate that some present feature is to be protected from adverse change).” A principle is “a standard that is to be observed, not because it will advance or secure an economic, political or social situation deemed desirable, but because it is a requirement of justice or fairness or some other dimension of morality.”165 _{Principles include, for instance, the right to free speech or the}

right not to be discriminated against. According to Dworkin, the difference between legal principles (and policies) and legal rules is a logical distinction: “Both sets of standards point to particular decisions about legal obligation in particular circumstances, but they differ in the character of the direction they give. Rules are applicable in an all-or-nothing fashion. If the facts a rule stipulates are given, then either the rule is valid, in which case the answer it supplies must be accepted, or it is not, in which case it contributes nothing to the decision.”166 _{Contrary to a rule, a principle does not set out conditions that make its}

application necessary. “Rather, it states a reason that argues in one direction, but does not necessitate a particular decision.”167 _{Rules do, but Dworkin acknowledges that a rule may}

have exceptions. An accurate statement of the law would take this exception into account. Without the appropriate exceptions – even if there are theoretically many – a rule would, strictly speaking, be incomplete. In theory, all exceptions to a rule could be listed; the more

162 _{Hart 1994, p 91-99.} 163 _{Summary by Taekema 2000, p 10.} 164 _{Gribnau 1998, p 49 et seq.} 165 _{Dworkin 1977, p 22.} 166 _{Dworkin 1977, p 24.} 167 _{Dworkin 1977, p 26.}

of them there are, the more accurate is the statement of the rule.168 _{A complete statement}

of a principle, however, would not be possible. The situations in which the application of a principle would be limited by ‘counter-instances’ could not be enumerated.169 _Thus,

Dworkin’s distinction between rules and principles is essentially based on the argument that rules apply in an all-or-nothing fashion, whereas principles do not because they have a dimension of weight. The ‘closed’ character of rules as opposed to the ‘open’ character of principles becomes apparent in the case of competing principles and conflicts of rules. According to Dworkin, one who must resolve the conflict between intersecting principles has to take into account the relative weight of each. If two rules conflict, one of them cannot be a valid rule. “The decision as to which is valid, and which must be abandoned or recast, must be made by appealing to considerations beyond the rules themselves. A legal system might regulate such conflicts by other rules, which prefer the rule enacted by a higher authority, or the rule enacted later, or the more specific rule, or something of that sort. A legal system may also prefer the rule supported by the more important principles.”170

Alexy, who does not distinguish between principles and policies,171 _{makes a similar}

point when he states that a conflict between two rules can only be resolved in that either an appropriate exception is read into one of the rules, or at least one of the rules is declared invalid. The question of which rule should be declared invalid or into which rule an exception should be read can be solved by maxims such as ‘lex posterior derogat legi priori’ or ‘lex specialis derogat legi generali’, but it is also possible to proceed according to the substantive importance of the conflicting rules. Competing principles should be resolved in a fundamentally different way. If two principles compete, one of them must be outweighed. This neither means that the outweighed principle is invalid nor that it has to have an exception built into it. The principle continues to exist and may itself outweigh the other principle in other circumstances. If two rules conflict, one of them has to be declared invalid. As a consequence, conflicts of rules are played out at the level of validity and competitions between principles are played out in the dimension of weight.172

Thus, Alexy basically agrees with Dworkin’s distinction between rules and principles. The grounds which underlie this distinction are, however, fundamentally criticized by Alexy. He states that Dworkin’s all-or-nothing criterion for the identification of rules is inextricably linked to the theoretical possibility of listing all exceptions to a rule, which theoretical possibility would be absent in case of principles. Alexy challenges this position by pointing out that a principle may be a reason for a court for adding an exception to a rule (assuming that the court would be competent to do so under the constitution concerned).

168 _{Dworkin 1977, p 25.} 169 _{Dworkin 1977, p 25-26.} 170 _{Dworkin 1977, p 26-27.}

171 _{This is important, because in Dworkin’s theory individual rights – which he calls ‘principles’ -}

are clearly more important than ‘policies’, because a right of an individual can only be limited by competing rights of other individuals and not by policies. This is problematic for the present study, because the rights which individuals derive from the EU free movement provisions should not automatically trump the policies which Member States pursue through their tax systems (chapter 3).

If the counter-instances of a principle are numberless, then likewise the instances of its own application are also numberless.173 _{If that is true, then the number of exceptions to a rule}

can also not be listed, not even theoretically. As a consequence, Dworkin’s all-or-nothing criterion for the identification of rules cannot be upheld, because principles cannot be applied in this fashion. Thus, both rules and principles may appear only prima facie. Their prima facie character, however, may be fundamentally different due to ‘formal principles’. The setting aside of a rule raises a host of issues that do not arise when a principle is set aside, due to the fact that the institution that has legislated the rule has already made a judgment on how the relevant background principles apply to the regulatory context specified by the rule.174 _{A principle can be outweighed by another principle. By contrast,}

a rule is not automatically trumped when the competing principle is of greater weight than its own underlying principle on the facts of the case. Here, Alexy explains, there are other – formal – principles which also need trumping, such as the one that rules passed by an authority acting within its jurisdiction are to be followed, and the principle that one should not depart from established practice without good reason. Only if these formal principles would not apply in a particular jurisdiction do rules and principles have the same prima facie character.175 _{Since these formal principles do not apply if a tax measure}

is tested against the EU free movement provisions, therefore national tax rules – which are an emanation of the principle of sovereignty – and EU principles have the same prima facie character. This fact that both rules and principles may appear only prima facie – here Alexy disagrees with Dworkin – does not mean that no meaningful distinction between rules and principles can be made. According to Alexy, the doctrine of collision, already briefly touched upon, is a meaningful criterion.176 _{This can be explained by giving two}

examples. These examples are derived from Dutch case law and not from ECJ case law, because the analysis in Part II of the present study should, in principle, not be influenced by ECJ case law. After all, Part III of the present study will discuss this case law in the light of the model developed in Part II.

In 1993 the Dutch Supreme Court (Hoge Raad) decided the case of a Dutch BV (a limited liability company) which was effectively managed in Ireland and which had suffered a loss.177 _{According to Dutch internal law, this loss should be available to carry}

forward in future taxable years in the Netherlands (under the Dutch corporate income tax act, a BV incorporated under Netherlands law is deemed to be a tax resident of the Netherlands). Under the Ireland-Netherlands tax treaty, however, BV was regarded as a tax resident of Ireland. As a consequence, its results were taxable only in Ireland. The Hoge Raad resolved the conflict between the tax treaty and the corporate income tax by disapplying the latter: the loss could not be taken into account in the Netherlands. This case is a typical example of a contradiction of rules. One rule permits something which the other rule prohibits. This conflict is resolved by declaring one of the rules as not valid and thus removing it from the legal order.

173 _{Alexy 1985a, p 16.} 174 _{Kumm 2004, p 578.} 175 _{Alexy 2002, p 58.}

176 _{Compare Huerta 2009, p 190-191.}

The Hoge Raad took a totally different approach in 1979 in a case concerning a disabled person who wanted to deduct costs which related to his transportation by car (a certain amount per kilometre).178 _{The taxpayer claimed that he suffered extraordinary}

costs because he had no other means of transportation due to his disability. The Court of Appeal refused this deduction on the ground that similar taxpayers without the disability suffered similar car transportation costs. Hence, the costs suffered by the taxpayer could not be attributed to his disability. The Court of Appeal rejected the taxpayer’s argument that some statements made by the tax inspector over the phone had given rise to legitimate expectations that the costs would be deductible. Before the Hoge Raad the taxpayer argued that the Court of Appeal made an error in law by holding that the principle of legitimate expectations does not set aside the strict application of the law in this case. The Hoge Raad’s reply to this argument is extremely interesting, because it reveals that this case is not about a contradiction of rules but rather about an area of tension between colliding norms. It first stated that the case at issue concerns the question of whether the principle that the law should be applied conflicts with the principle of legitimate expectations to such a degree that the law should not be applied. This question should be answered by balancing the principle of legality against the principle of legitimate expectations. The Hoge Raad subsequently formulated detailed rules which the lower courts should follow when performing this balancing exercise in concrete situations.

The example of the loss-making dual resident BV concerned a conflict between two rules which was solved by placing one of the rules outside the legal order. The example of the disabled taxpayer concerned a tension between two principles which was not resolved by disapplying one of the principles, but by giving precedence to one of them under particular circumstances. Accordingly, the conflict between rules is an inside-outside problem, whereas a collision between principles takes place within the legal order.179 _This

is what Alexy means with the doctrine of collision: a conflict between two rules can only be resolved in that either an appropriate exception is read into one of the rules, or at least one of the rules is declared invalid – for example by maxims such as ‘lex posterior derogat legi priori’ or ‘lex specialis derogat legi generali’ – whereas a conflict between principles is resolved in a weighing process. This neither means that the outweighed principle is invalid nor that it has to have an exception built into it. The principle continues to exist and may itself outweigh the other principle in other circumstances. A comparison with the conflict between tax sovereignty and EU free movement shows that this conflict is not played out at the level of validity but at the level of weight. As stated earlier, tax measures enacted as a result of the exercise of a State’s tax sovereignty thus appear only prima facie in the context of EU free movement.

The question arises as to why principles collide in the manner just described. According to Alexy, this has to do with a deeper distinction between principles and rules. Principles are norms which require that something is realized to the greatest extent factually and legally possible. They prescribe the highest degree of realization of an ideal or value under certain legal and factual conditions.180 _{Principles are thus optimization requirements} 178 _{HR 26 September 1979, No. 19250, BNB 1979/311.}

179 _{Alexy 1985a, p 19.} 180 _{Taekema 2000, p 12.}

which are characterized by the fact that they can be fulfilled in various degrees and that their fulfilment depends on factual and legal possibilities. Their extent is therefore in concrete cases determined by competing rules and principles.181 _{Typically, the principle}

itself is not capable of determining its own extent in the light of competing principles and what is factually possible.182 _{This means, for instance, that budgetary reasons can never}

justify an infringement which a tax measure imposes on a competing principle.183 _{If it}

were otherwise, the extent of tax sovereignty would be unlimited and absolute. In contrast to a principle, a rule is a closed norm, the scope of which has already been determined by the authority which has passed it. Rules are norms which are always either fulfilled or not. If a rule has been adopted by the competent authority, then the requirement is to do exactly what it says. In such a case, rules contain fixed points in the field of the factually and legally possible.184 _{They cannot be fulfilled in various degrees. An example may clarify}

this. In the Netherlands, the tax inspector can only impose an additional tax assessment if a ‘new fact’ has become known after the original tax assessment was imposed or the taxpayer has acted in bad faith.185 _{This rule is the result of a weighing process performed}

by the legislator of various principles: the principles of legitimate expectations, legality, careful public administrative procedure and equality. This process has resulted in a rule. As a result, there is no room for the court to come to another appraisal. Canaris has taken a similar stance in this respect. He states that principles, unlike rules, have an explicit axiological content. They lack rules in order to be realized. Therefore, principles receive their meaning only by means of a dialectic process of complementation and limitation.186

Alexy explains that the observation that principles are optimization requirements explains their characteristics.187 _{First, this observation explains why principles collide in}

the manner just described. Second, it clarifies the different prima facie character of rules and principles. Principles are always prima facie reasons and rules are definitive reasons, as long as no exception has been read into them. If the court takes the position that such an exception should be added to the rule, it has to have a very strong argument because the rule has been adopted by the competent authority. In such a case, the reason for adding an exception to the rule should also be able to outweigh the principle that rules passed by an authority acting within its jurisdiction are to be followed. Thus, the prima facie character of rules and principles differs. Principles are the starting point of a balancing exercise, whereas rules are rather the result of balancing the relevant competing interests. Principles represent reasons which can be displaced by other reasons. The circumstances under which one principle takes precedence over another constitute the conditions of

181 _{Alexy 1985a, p 19-20. See also Alexy 2002a, p 70, and Alexy 2009, p 2.}

182 _{Sieckmann defines the notion of a principle slightly differently. He sees principles as normative}

arguments which form at the same time the object of a balancing exercise and the reasons for that exercise; Sieckmann 2007, p 37.

183 _{See, for instance, HR 14 June 1995, No. 29254, BNB 1995/252, § 3.4.4, where the Dutch Supreme}

Court stated that budgetary reasons cannot justify a breach of the principle of equality enshrined in Article 26 of the International Covenant on Civil and Political Rights (ICCPR).

184 _{Alexy 2002, p 47-48.}

185 _{Article 16 of the Algemene wet inzake rijksbelastingen (General Tax Act).} 186 _{Canaris 1983, p 50, 53 and 55, summarized by Ávila 2007, p 9.}

a rule which has the same legal consequences as the principle taking precedence: the result of the balancing act is enshrined in the rule. Alexy calls this the Law of Competing Principles.188 _{The balancing activity of the courts and scholars may over time result in}

rules with a relatively high degree of precision stating which principle takes precedence in which situation. The content of the rules thus formulated will differ depending on the competing principles involved.189 _{This goes back to the idea of categorization, briefly}

discussed in chapter 3. 190