Glencore: access to the file, equality of arms and the end of binding third-party findings

CJEU, judgment of 16 October 2019 — C-189/18, Glencore Agriculture Hungary, ECLI:EU:C:2019:861 · Full text (PDF)

The case

Glencore Agriculture Hungary, a Hungarian wholesaler of grain, oilseeds and animal feed, lost its input VAT deduction following tax audits for 2010 and 2011: roughly EUR 6 million in back tax plus a fine and late-payment surcharge under the first assessment, and a further EUR 400,000 under the second (para. 12). The tax authority’s reasoning: Glencore knew or should have known that its transactions with its suppliers were connected with VAT fraud — with the authority treating the suppliers’ fraud as an established fact, because it had already found it in final assessments issued against those very suppliers (paras 13, 22).

The construction rested on Paragraph 1(3a) of the Hungarian Code of Fiscal Procedure: the authority must classify a legal relationship identically for all parties to it — so it considered itself bound by its own findings from the supplier proceedings, in which Glencore had never been a party (paras 17 et seq.). Glencore never received the files of those related administrative and criminal proceedings; it was given only an extract selected by the authority according to its own criteria, which Glencore had no means of reviewing (paras 15, 19, 26). The Budapest Administrative and Labour Court asked the Court of Justice whether that practice is compatible with the VAT Directive, the rights of the defence and Article 47 of the Charter (paras 21, 25).

The court’s key reasoning

The Court builds its answer in three layers — burden of proof, access to the file, judicial review (para. 32):

First, the burden of proof. Refusing the right to deduct is the exception to a fundamental principle; it is therefore for the tax authorities to establish “to the requisite legal standard” the objective evidence from which it may be concluded that the taxable person knew or should have known that the transaction was connected with fraud (para. 36). A binding rule such as Paragraph 1(3a) of the Hungarian code is, as an instrument of consistency and legal certainty, not in itself contrary to EU law (para. 46) — but it becomes so where it releases the authority from proving the fraud in the proceedings against the taxable person himself and from disclosing the evidence to him (paras 47 et seq.). Such a curtailment of the rights of the defence constitutes, in the Court’s words, a disproportionate and intolerable interference which impairs the very substance of those rights (para. 49).

Secondly, access to the file. The right of access to the file follows logically from the rights of the defence (para. 51) — and it must be granted during the administrative procedure; later access in the course of judicial proceedings does not cure the infringement (para. 52). The taxable person must be able to access all the evidence on which the authority intends to base its decision, including evidence gathered in criminal proceedings and in related administrative proceedings against third parties (para. 53) — and, beyond that, documents which “may be useful for the exercise of the rights of the defence, in particular exculpatory evidence” which the administration may have gathered (para. 54). Restrictions are permissible only to protect weighty public-interest objectives (confidentiality, business secrets, the effectiveness of criminal prosecution), and partial access must always be considered (paras 55 et seq.). The Hungarian practice of indirect, selective summaries “does not satisfy that requirement” (para. 58).

Thirdly, judicial review. Article 47 of the Charter requires that the court be able to review the lawfulness of the obtaining and use of the evidence originating from third-party proceedings — even where that evidence underpinned decisions against other taxable persons which have become final (paras 65, 67). Statements and findings of administrative authorities cannot bind the courts (para. 66). Where the court lacks that power of review, the Court of Justice draws the sharpest consequence: the evidence and findings must be disregarded, and the contested assessment must be annulled if it is left without foundation as a result (para. 68).

Where the decision sits in the case-law

Glencore stands at the junction of two lines of authority. In substantive terms, it presupposes the Kittel doctrine (knowledge or means of knowledge as the ground for refusal, paras 34 et seq.) — and disciplines it procedurally: whoever wishes to refuse must prove, disclose and submit to full judicial review. Procedurally, it draws together WebMindLicenses (CJEU, judgment of 17 December 2015 — C-419/14) and Ispas (CJEU, judgment of 9 November 2017 — C-298/16), and for the first time expressly extends their guarantees to evidence from proceedings in which the taxable person took no part (paras 38, 53).

Subsequent case-law has consolidated the Glencore standard: Global Ink Trade (CJEU, judgment of 11 January 2024 — C-537/22) requires the precise definition of the constituent elements of the evasion and proof of the fraudulent conduct; Adjak (CJEU, judgment of 27 February 2025 — C-277/24) and most recently C-158/25 (CJEU, judgment of 16 July 2026, paras 45-51, 54 et seq.) carry the “very substance” formula across to the personal liability of company directors. Glencore has thus grown from a single case into a load-bearing pillar of an EU law of tax procedure. For German proceedings under section 25f of the VAT Act (UStG), the decision is directly relevant: here too, assessments regularly rest on findings from audits and criminal tax investigations concerning third parties, to which the trader affected has no ready access.

The literature

German commentary confirms the practical force of the burden-of-proof issue which Glencore addresses at para. 36: Heidner points out that sufficiently strong circumstantial evidence of knowledge produces a de facto reversal of the burden of proof — and that it remains unresolved when such evidence reaches that threshold (Heidner, in: Bunjes, UStG, 24th ed. 2025, § 25f para. 9). Spilker likewise speaks of a de facto reversal of the burden of proof, because in practice the taxable person must demonstrate that he “could not have known” (Spilker, UR 2023, 589 [590]). It is precisely against that shift that Glencore erects its procedural guard rails: the circumstantial evidence must be identified, accessible and open to judicial review. On the continuation of the line in Global Ink Trade — the administration’s duty to define the elements of the evasion precisely and to prove the fraudulent acts — see Wäger, UR 2025, 81 (109 et seq.). On the doctrine of refusing input VAT deduction under the CJEU’s fraud case-law, see further Kraeusel, in: Reiß/Kraeusel/Langer, UStG, § 15 note 690 et seq.

Three levels — kept strictly apart

Official ruling: The VAT Directive, the principle of respect for the rights of the defence and Article 47 of the Charter do not, in principle, preclude the tax authority from being bound by findings made in related proceedings against suppliers — but only subject to a threefold proviso: the authority remains obliged to make the evidence known to the taxable person; the taxable person must be able to access all incriminating evidence and any useful exculpatory evidence, unless public-interest objectives justify restricting access; and the court must be able to review the obtaining and use of that evidence and the third-party findings, where they are decisive for the outcome (para. 69 and operative part).

Administrative practice: There is no express administrative provision. Neither the German VAT Application Decree (UStAE) nor any other published administrative instruction expressly implements the Glencore requirements on access to the file and disclosure of evidence in assessment proceedings.

Our conclusion for the defence: In our assessment, Glencore is the procedural counterweight to the substantive expansion of the refusal case-law — and its potential in German section 25f proceedings has not yet been exhausted. Wherever assessments rest on control material, tax investigation reports on third parties or findings from other parties’ criminal files, Glencore supports a three-stage test: disclosure of all decisive evidence together with its provenance, access to exculpatory material, and judicial review of how the evidence was obtained. If any stage is missing, the usability of the third-party findings as a whole is called into question (para. 68). This is our own evaluation — the German courts have not yet conclusively settled the consequences for access to the file in assessment proceedings.

Defence levers

• Demand disclosure of evidential sources: full identification of all evidence on which the assessment is to be based, including its provenance from third-party proceedings (para. 53) — before the assessment is issued, not only in court (para. 52).
• Access to exculpatory material: apply for access to documents which do not support the decision but may serve the defence (para. 54) — the authority does not decide alone what is relevant (para. 58).
• Attack the binding effect: findings in final assessments against suppliers do not replace proof in the taxpayer’s own proceedings (para. 48); administrative findings do not bind the court (para. 66).
• Have the provenance of the evidence reviewed: object where the court does not itself review the lawfulness of how third-party evidence was obtained (paras 65, 67).
• Draw the evidential consequence: where access is refused or review is unavailable, argue that the evidence must be disregarded and the assessment annulled in so far as it has no other foundation (para. 68).

Defence assessment: POSITIVE · Keywords: access to the file, authority’s burden of proof, equality of arms, binding third-party findings, exclusion of evidence, Article 47 of the Charter

FAQ

Source box

Decision: CJEU, judgment of 16 October 2019 — C-189/18, Glencore Agriculture Hungary, ECLI:EU:C:2019:861 (Fifth Chamber; Advocate General Bobek, Opinion of 5 June 2019).

Literature: - Heidner, in: Bunjes, UStG, 24th ed. 2025, § 25f para. 9 (de facto reversal of the burden of proof through circumstantial evidence; threshold unresolved). - Spilker, UR 2023, 589 (590) (de facto reversal of the burden of proof; the trader’s duty to make provision in advance). - Wäger, UR 2025, 81 (109 et seq.) (continuation in Global Ink Trade: the administration’s duties of precision and proof). - Kraeusel, in: Reiß/Kraeusel/Langer, UStG, § 15 note 690 et seq. (refusal of input VAT deduction under the CJEU’s fraud case-law).

Related decisions: CJEU, judgment of 17 December 2015 — C-419/14, WebMindLicenses; CJEU, judgment of 9 November 2017 — C-298/16, Ispas; CJEU, judgment of 11 January 2024 — C-537/22, Global Ink Trade; CJEU, judgment of 27 February 2025 — C-277/24, Adjak; CJEU, judgment of 16 July 2026 — C-158/25 (dossier).