Flashback on ECJ Cases – C-262/08 (CopyGene) – Stem Cell Bank Services Not Eligible for VAT Exemptions

On June 10, 2010, the ECJ issued its decision in the case C-262/08 (CopyGene).

Context: Sixth VAT Directive – Exemptions – Article 13A(1)(b) – Hospital and medical care – Closely related activities – Duly recognised establishments of a nature similar to hospitals or centres for medical treatment or diagnosis – Private stem cell bank – Services of collection, transportation, analysis and storage of umbilical cord blood of newborn children – Possible autologous or allogeneic use of stem cells

Article in the EU VAT Directive

Article 13A(1)(b) and 13A(1)(c) of the Sixth VAT Directive (Article 132(1)(b) and 132(1)(c)of the EU VAT Directive 2006/112/EC).

Article 132 (Exemptions for certain activities in the public interest)
1. Member States shall exempt the following transactions:
(b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable with those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature;
(c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned;

Facts

The Østre Landsret (Eastern Regional Court) explains that stem cells are immature cells capable of reproducing themselves and of renewing other specialised cells in the body. They can be extracted from embryos, cord blood, bone marrow or peripheral blood, and are used to treat diseases in which special cells are absent or have been destroyed. That court states that stem cells from cord blood (‘cord stem cells’) have been used since 1988.
In the long term, according to the referring court, it should be possible to use stem cells in treatments for diabetes, rheumatism, cancer, Parkinson’s and Alzheimer’s diseases and cystic fibrosis. It adds that research is being carried out worldwide into further development of their possible therapeutic uses. However, the decision for reference states that not all kinds of stem cell can be used to treat all types of disease. In some cases, cord stem cells are preferable.
CopyGene is described in the decision for reference as being ‘Scandinavia’s largest privately owned biobank’. It offers to prospective parents the collection, transportation, analysis and storage of cord blood of newborn children with a view to using the cord stem cells contained in it to treat the child in the event of serious disease. Those services are not covered or reimbursed by the Danish public health insurance scheme.
First, the future parents sign a contract with CopyGene for the blood to be collected, transported and analysed. The blood is drawn off immediately after birth by authorised medical personnel who are also contractually bound to CopyGene. It is next transported to CopyGene’s laboratory and then analysed to establish whether there are sufficient live stem cells to justify their storage. If there are, the parents can conclude a further renewable contract with CopyGene for the cryopreservation (freezing) and storage of the cells.
The stem cells in question can be used only for hospital care. The blood is the property of the child, represented by its mother. CopyGene does not own the stem cells and has no right to use them for research, transplantation or other purposes.
In accordance with the Law on the requirement for quality and safety in handling human tissues and cells, CopyGene is authorised to handle cord stem cells for ‘autologous’ use. Following the purchase of another Danish biobank, which is authorised to handle stem cells for both autologous and allogeneic use, CopyGene entered into negotiations with the Danish authorities about unifying the systems of the two stem cell banks so that all the stem cell samples, both previously frozen and new, would undergo the same process of analysis and could be used both autologously and allogeneicly. CopyGene stated in its written observations that it expected to obtain an authorisation to do so in the course of 2009.
By decision of 1 July 2004, the Told- og Skattestyrelsen (Customs and Tax Directorate) rejected an application for exemption from VAT for the services at issue in the main proceedings. CopyGene’s complaint against that decision was dismissed on 21 October 2005 by the Landsskatteretten (National Tax Tribunal).
CopyGene appealed to the referring court against the refusal to grant the exemption applied for, arguing that its supplies of services should be regarded as being ‘closely related’ to hospital and medical care and, consequently, should be exempted from VAT under Article 13A(1)(b) of the Sixth Directive.

Questions

Is the term activity ‘closely related’ to hospital care in Article 13A(1)(b) of the Sixth Directive ¹ to be interpreted as implying a temporal requirement so that the hospital care to which the service is closely related must exist or be specifically performed, commenced or envisaged, or is it sufficient that the service will potentially be closely related to possible, but as yet non-existent or undetermined future hospital care, so that the services supplied by a stem cell bank, consisting in the collection, transportation, analysis and storage of umbilical cord blood from newborns for autologous use, are covered by it? In that connection, is it relevant that the services described cannot be performed at a later time than the time of delivery?
Is Article 13A(1)(b) of the Sixth Directive to be interpreted as covering general preventative services where the services are supplied before the hospital or medical care takes place and before the hospital or medical care is required in both temporal and health terms
Is the term ‘other duly recognised establishments of a similar nature’ in Article 13A(1)(b) of the Sixth Directive to be interpreted as covering private stem cell banks where the services – which are performed and supplied by professional health personnel in the form of nurses, midwives and bioanalysts – consists in the collection, transportation, analysis and storage of umbilical cord blood from newborns with a view to autologous use in connection with possible future hospital care where the stem cell banks concerned do not receive support from the public heath insurance scheme and where the expenditure on the services provided by these stem cell banks is not covered by the public health insurance scheme? In that connection, is it relevant whether or not a private stem cell bank has obtained authorisation from a Member State’s competent health authorities to handle tissue and cells – in the form of processing, preserving and storing stem cells from umbilical cord blood for autologous use – pursuant to national legislation which implements Directive 2004/23/EC of the European Parliament and of the Council of 31 March 2004 on setting standards of quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells?
Is the answer to Questions 1 to 3 affected by whether the above services are supplied with a view to possible allogeneic use or provided by a private stem cell bank which has obtained authorisation from a Member State’s competent health authorities to handle tissue and cells – in the form of processing, preserving and storing stem cells from umbilical cord blood for autologous use – pursuant to national legislation which implements Directive 2004/23/EC of the European Parliament and of the Council of 31 March 2004 on setting standards of quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells?

AG Opinion

(1) A service such as the collection, transportation, analysis and storage of umbilical cord blood is to be regarded as closely related to hospital or medical care within the meaning of Article 13A(1)(b) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment if the blood collected can be used for the purpose of such care, is collected for that purpose and cannot be used for any other purpose. It is irrelevant in that regard whether such care is specifically envisaged at the time the service is provided.

(2) A service which does not seek to avert, avoid or prevent the occurrence of a health disorder, or to detect such a disorder in a latent or incipient state, is not a preventive medical service covered by Article 13A(1)(b) of the Sixth Directive.

(3) In order to qualify for the exemption provided for in Article 13A(1)(b) of the Sixth Directive, a body not governed by public law must

– provide its services under social conditions comparable to those applicable to bodies governed by public law;

– be of a similar nature to a hospital or centre for medical treatment or diagnosis; and

– be duly recognised for that purpose.

A decision of the national authorities not to grant such recognition is not precluded by

– the fact that services, such as the collection, transportation, analysis and storage of umbilical cord blood, are performed by professional health personnel or

– the fact that the establishment in question has obtained authorisation to handle stem cells from such blood pursuant to national legislation which implements Directive 2004/23/EC of the European Parliament and of the Council of 31 March 2004 on setting standards of quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissues and cells,

but is supported by the fact that the establishment’s activities are not covered by the public heath insurance scheme.

(4) The answers to questions 1 to 3 are not affected by whether the services are supplied with a view to autologous or allogeneic use.

Decision

1. The concept of activities ‘closely related’ to ‘hospital and medical care’ within the meaning of Article 13A(1)(b) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment is to be interpreted as meaning that it does not cover activities such as those at issue in the main proceedings consisting in the collection, transportation and analysis of umbilical cord blood and the storage of stem cells contained in it, where the medical care provided in a hospital environment to which those activities are merely potentially related has not been performed, commenced or yet envisaged.

2. If the services of stem cell banks such as those at issue in the main proceedings are performed by professional medical personnel, where such stem cell banks, although authorised by the competent health authorities of a Member State, within the framework of Directive 2004/23/EC of the European Parliament and of the Council of 31 March 2004 on setting standards of quality and safety for the donation, procurement, testing, processing, preservation, storage and distribution of human tissue and cells, to handle human tissue and cells, do not receive any support from the public social security scheme and where the payment for those services is not covered by that scheme, Article 13A(1)(b) of Sixth Directive 77/388 does not preclude the national authorities from deciding that taxable persons such as CopyGene A/S are not ‘other duly recognised establishments of a similar nature’ to ‘hospitals [and] centres for medical care or diagnosis’ within the meaning of Article 13A(1)(b) of Sixth Directive 77/388. However, neither can that provision be interpreted as requiring, as such, the competent authorities to refuse to treat a private stem cell bank as an establishment ‘duly recognised’ for the purposes of the exemption in question. To the extent that it is necessary, it is for the referring court to determine whether the refusal of recognition for the purposes of the exemption provided for in Article 13A(1)(b) of Sixth Directive 77/388 complies with European Union law and, in particular, with the principle of fiscal neutrality.

Summary

1. The concept of transactions closely related to hospital and medical care within the meaning of Article 13A(1)(b) of the Sixth Directive must be interpreted as meaning that activities such as those at issue in the main proceedings, consisting of collection, transport , analysis of umbilical cord blood and storage of umbilical cord stem cells are not covered by this concept when the medical care provided in a hospital, with which these activities are only possibly related, has not been provided, is not in progress or is being considered.

2) In the event that the services of stem cell banks such as those at issue in the main proceedings are provided by authorized health personnel, even though these stem cell banks are not authorized by the competent health authorities of a Member State pursuant to Directive 2004/23/EC of the European Parliament and of the Council of 31 March 2004 establishing standards of quality and safety for the donation, procurement, testing, processing, storage and distribution of human tissues and cells authorized the manipulation of human tissues and cells, received no support from the statutory health insurance and this insurance does not represent the compensation paid to them is contrary to Article 13A(1)(b) of the Sixth Directive does not object to the national authorities not classifying a taxable person such as CopyGene A/S as another duly approved establishment of the same nature as a hospital and a medical care and diagnosis center within the meaning of Article 13(A)(1), point (b) of the Sixth Directive . Nor, however, can that provision be interpreted as requiring the competent authorities as such to refuse to equate a private stem cell bank with a duly approved establishment for the purpose of the exemption in question. To the extent necessary, the referring court must verify whether the refusal of recognition for the exemption provided for in Article 13A(1)(b) of the Sixth Directive complies with Union law, in particular with the principle of fiscal neutrality.