ࡱ>  @ ~bjbj5*5* 7W@W@Rx+ :"""8"#d>$>$>$>$>$%%%bbbbbbb$fR3icF>%%F>F>c>$>$cdBBBF>>$>$bBF>bBBlQR>$2$ &A!"ARalKdd&RjAj,RRXjHTD %-B2g7%%%cc"B^"FIDE XXIII CONGRESS, Linz, 2008 NATIONAL REPORT FOR CROATIA National Rapporteurs Prof. Sinia Rodin* & Dr. Iris Goldner Lang** Topic 3: The New Services Directive of the European Union Hopes and Expectations from the Angle of a (Further) Completion of the Internal Market I. Introduction Croatia is not an EU Member State, but has started the process of alignment of its legislation with the acquis communautaire with the aim of future integration into the European Union. Croatia signed a Stabilisation and Association Agreement on 29 October 2001 and the Agreement is in force as of 1 February 2005. Additionally, an Interim Agreement, covering trade and trade-related measures, was concluded parallel with the Stabilisation and Association Agreement and was in force from 1 March 2002 until entering into force of the Stabilisation and Association Agreement. Croatia applied for EU membership on 21 February 2002 and accession negotiations were opened on 4 October 2005. For the purposes of accession negotiations, the acquis has been divided into 35 chapters. Chapter 3 is entitled Right of Establishment and Freedom to Provide Services. On 20 June 2007 The European Union issued its Common Position (EUCP) on Chapter 3 and the Chapter was formally opened for accession negotiations at the Intergovernmental Conference held in Brussels on 26 June 2007. Six benchmarks have been set for this Chapter. Due to the fact that Croatia is not a Member State, some questions could not be applied to Croatian position and were, for that reason, difficult if not impossible to answer. Nevertheless, Croatian national rapporteurs tried to approach such questions from a different angle the one of an associated state on its way to EU accession. II. National Debates and Expectations Formally, Croatian Government and the Parliament have taken no official position vis--vis the Services Directive or its 2004 and 2006 drafts. However, Croatian national rapporteurs have interviewed Professor Siniaa Petrovi, Member of the Negotiating Team responsible for Chapter 3 (Right of Establishment and Freedom to Provide Services), Chapter 6 (Company Law) and Chapter 7 (Intellectual Property Law). He expressed preference for the Draft Services Directive when compared to the final version of the Services Directive, for two reasons. First, Professor Petrovi supports any means that promotes and enhances the functioning of the internal market. Second, he believes that the new Services Directive has left a number of issues unresolved and that the text of the Draft Services Directive was much clearer in its intentions. Social partners and influential non-governmental organisations have, so far, taken no official position vis--vis the Services Directive. As regards the academic debate on the Services Directive, on 18 June 2007 the Jean Monnet Chair at the Faculty of Law, University of Zagreb organised a symposium on the Recent Development of EC Law What Awaits Croatia?. It included a discussion on the Services Directive, especially on the issues of prohibited restrictions and allowed derogations to the free movement of services. III. The Position of Services in Croatian Economy The position and representation of the tertiary sector (services) in Croatian economy are illustrated by the three graphs below. They show that Croatia closely resembles developed EU economies in terms of dominance of services in economy. Services make 2/3 of total gross value added of Croatian economy and over 70% of total employment. The share of services, both in employment and economic activity is increasing, supporting the proposition that services constitute the main "engine of growth" in Croatian economy as well. Share of services in employment and economic activity in Croatia  * Employment in "legal persons". ** Measured using Gross Value Added Source: Bureau of statistics Employment in services in Central and Eastern European Countries (CEECs)  Source: The Vienna Institute for International Economic Studies. Employment in legal persons in Croatia, by sector, 2005  Source: Bureau of statistics Vuj i and Lang show that Croatia's employment shares of primary, secondary and tertiary sector and overall economic structure differed substantially from other CEECs already at the beginning of the transition process. Share of employment in agriculture was low, while share of employment in services was higher than 50 percent. According to the authors, such a structure was due to two main reasons: 1) different economic system in ex-Yugoslavia, which did not force industrialisation to the extent that was the case in other communist countries; and 2) greater importance of services, particularly transport, catering and hotel and tourism industries in Croatia. Accordingly, the development of tertiary sector in Croatia was actually faster during the 1970s and 1980s than it was in the developed countries in the 1960s and 1970s, at the time of de-industrialisation. The process of tertiarisation continued further during the transition. Vuj i shows that, in comparison to other transition economies, the change in the employment structure in Croatia was efficient (in terms of moving towards the sectoral structure of employment in the EU), and had happened relatively fast between 1989 and 1996. Most of the structural change, however, happened due to the job destruction in the sectors with too much employment, rather than job creation in sectors with low employment share. IV. The Process of Harmonisation with the Acquis Even though Croatia is not a Member State, it has committed itself to harmonise its legislation with the acquis and it is, therefore, obliged to transpose the Services Directive into its national legal order. This obligation derives from Croatian Stabilisation and Association Agreement and its commitments under the accession negotiations. The process of harmonisation is being enacted by state administrative bodies, in the phase of the preparation of legislative proposals and the Croatian Parliament in the phase of the adoption of laws. For the purpose of harmonisation, the Croatian Parliament established a European Integrations Committee in 2001, whose task is to follow up the harmonisation process. State administrative bodies have to submit to the Parliament a Statement of Compatibility and an accompanying Table of Concordance of Legislative Provisions of the Republic of Croatia with the Relevant EU Provisions together with the draft texts of new Croatian laws. Based on the Conclusion adopted by the Croatian Parliament on 9 October 2002, only draft acts accompanied by a Statement of Compatibility and the Table of Concordance are forwarded to the Parliament. In December 2001 the Croatian Parliament amended its Standing Orders articles 136 and 161 to set detailed procedures concerning draft legislation to be harmonised with the EU acquis. In article 136 distinction was made between draft legislation that should be harmonised and other ordinary draft legislation. Legislative proposals to be harmonised with the EU acquis carry the mark P.Z.E. Article 161 stipulates that legislative proposals being harmonised with the EU legislation of the European Union shall be enacted under summary procedure if so sought by the sponsor, unless the competent working body (which is either the Committee on the Constitution, Standing Orders and Political System or the Legislation Committee) propose that such legislation be discussed and debated in the first reading due to its failure to comply with the Constitution or the legal system. In terms of procedure, the provision of article 161 basically represents a regular application of summary procedure for legislation that is being harmonized with EU acquis. Unlike the case of other draft legislation, voting on enabling the use of summary procedure for P.Z.E. legislation is not required. V. Transposition of the Services Directive Possible Problems on the Way Transposition of directives into Croatian legal order is a relatively well established procedure nowadays. However, there are a number of problems that public authorities are not fully aware of, which may seriously affect their implementation. Most of these problems are not specific for the Services Directive. First, once a directive is transposed, it is fully made part of national legislation and, except for its explanatory memoranda which are not published in the Official Gazette, there is usually no trace left about its EU source and context. There are no interpretative guidelines as to the object and purpose of the directive. Accordingly, in its application, national legislation is subject to traditional interpretative techniques, which, in Croatian case, is extremely formalistic. Second, in Croatian legal system, it is difficult to provide for the applicability of horizontal measures, such as the Services Directive. As the Directive cuts across wide areas of the national legal system, it will be necessary either to intervene into a large number of acts, applicable in different areas, or to implement a directive by an act of a higher rank. The same problem was encountered in the process of drafting of the Gender Equality Act  which was not adopted as an organic law, but as ordinary legislation. The effect of that legislative choice was that the subsequent Labour Law regulated concepts of direct and indirect discrimination differently, the consequence being different standards of protection under the two acts, both allegedly implementing the same directives. In the area of services, the rapporteurs believe that it is highly desirable to enact the Services Directive in a way which will ensure its uniform and effective applicability in all areas of regulation. Croatian authorities have still not decided which national legal form the Services Directive will be transformed to. On this point, Croatia has been in consultation with several Member States. At this point, it is likely that the Directive will be transformed into several national laws, possibly with an additional specific law dealing with general issues such as restrictions, consumer protection, etc. However, implementation of Art. 16 of the Directive will, ideally, require adoption of horizontal measures, as application of the proportionality test (Gebhard test) requires amendment of procedural rules applicable to concrete constitutional review. The third problem concerns national litigation under the Directive. It is commonplace that the Member States must provide a precise legal framework in the field in question which allows individuals to know their rights and rely on them before the national courts. This obligation makes national courts EU courts and creates a mandate for them to protect individual rights under Community law. The typical forum will most likely be the Administrative Court. However, litigation may also take place before ordinary courts, to the extent that the Directive is creating individual rights. Constitutional litigation before the Constitutional Court can also be expected, having in mind that at least two constitutional provisions, namely Art. 49 and Art. 50 of the Constitution guarantee entrepreneurial rights. VI. Justifications for Restricting the Provision of Services and Proportionality Analysis The common problem for the all three branches of jurisdiction, constitutional, administrative and ordinary, is the applicability of proportionality analysis. Namely, Art. 16 of the Directive, as well as the well-established case law of the ECJ require all national measures to be scrutinized against the test the essential part of which is proportionality analysis. National measure has to be justified by important public interest considerations and has to be non-discriminatory, necessary and proportionate. At the present time, the only Croatian court that entertains some kind of proportionality analysis is the Constitutional Court. However, the problem is that the Constitutional Court is concerned only with infringements of constitutional law. More precisely, proportionality requirement is made part of the Chapter on fundamental rights, meaning that it is not applicable to cases of infringement of market freedoms such as the free movement of services, to the extent that those cannot be defined as a part of fundamental freedoms under the Constitution. The Constitution defines proportionality in Art. 16, specifying that every restriction of fundamental rights is constitutional only if justified by rights and freedoms of others, legal order, public morality and health. Each restriction "has to be proportionate to the nature of need for restriction". Article 50 of the Constitution defines "entrepreneurial freedom" as a fundamental right. It can be restricted only exceptionally, by law, for purpose of protection of interests and security of the Republic, protection of nature and environment, and health of humans. In other words, restrictions of entrepreneurial freedom qua fundamental right is subject to general justifications under Art. 16 and specific justifications under Art. 50 of the Constitution. As far as freedom to provide services is concerned, in absence of any guidance in constitutional practice of the Constitutional Court, one has to assume that services make part of entrepreneurial freedom protected by Art. 50 of the Constitution and are covered by the constitutional umbrella, as being a fundamental Constitutional right. If so, the described Constitutional framework raises two questions. First, the scope of permissible justifications for restricting the provision of services in national and the EU context and, second, the locus and intensity of judicial scrutiny, which includes the proportionality analysis. a. Scope of justifications under national and Community law In an ideal case, national and EU justifications of national measures restricting the market freedoms would be identical. That is not the case in Croatian legal order. Justifications for national measures restricting freedom to provide services Constitution Art. 16Constitution Art. 50EC Treaty, Art. 55&46 / ECJ Case LawServices Directive Art. 16Rights and freedoms of othersInterest and security of the RepublicPublic policyPublic policyLegal orderProtection of nature and environmentPublic securityPublic securityPublic moralityHealth of humansPublic healthPublic healthPublic healthHas to be non-economic interestHas to be non-economic interestProtection of the environment (Art. 16(1)(b) of the Directive) As one can see from the Table, justifications under Croatian Constitutional law and Community Law are different, with the exception of public health the protection of the environment. While public morality is covered by public policy proviso of the EC Treaty and the Services Directive, additional justifications in Croatia include protection of rights and freedoms of others and of the legal order. Also, Croatian Constitution speaks about "state interest", which is, of necessity, narrower than "public interest", as defined in Community law. Another difference is that in Croatian legal order, economic interest is not excluded as a possible justification. Apparently, if a restriction is in the "interest of the Republic" and promotes certain economic interest, it can still be justified. The "State interest" will typically be defined by the legislative or executive branch, not by the judiciary. Apparently, the concept of "State interest" includes also public policy. b. Locus of judicial review National judicial scrutiny of restrictive measures can take place before either Administrative court, or courts of ordinary jurisdiction, or before the Constitutional Court. Administrative Court will review acts enacted by public administration and the review will typically be applicable in vertical legal relationships, i.e. in relationships involving individuals and legal persons on the one side and state authorities on the other. In the administrative review procedure, proportionality analysis is not common. Namely, as a general rule the Administrative Court cannot review discretion, but only legality (in other words it does not have recours de plaine pouvoir) and cannot decide cases on the merits. The result of this is that, generally speaking, proportionality analysis is not possible within the review of administrative discretion. Exceptionally, the Administrative Court can decide cases on the merits in a limited number of situations when it has enough data to do so. First, when the Court decides to annul an administrative act due to its illegality, it can decide the case by reaching a judgement which replaces the annulled act. Second, in case the administrative body does not adopt the act within the time prescribed by law (the so called silence of administration), the Administrative Court can decide the case on its own, thus replacing the administrative act which was not adopted on time by its own judgement. Similarly, in case the act has not been adopted on time and the Court resolves not to decide the case on its own but gives an order to the administrative body to act accordingly, and the administrative body does not act (this situation can be viewed as a repeated silence of administration), the Administrative Court can decide the case on its own. Finally, the Court can decide the case on the merits as regards compensation for damages for the claimant whose plea for annulment of the administrative act has been accepted. Although the situations presented above show that, in certain cases, the Administrative Court can decide the case on the merits, in reality the Court rarely, if ever, decides to avail itself to this right, even in situations when it has enough data to decide the case on its own. One of the reasons might be the usually proclaimed argument of the lack of judges at the Court. However, the rapporteurs believe that this argument should not stand on the way to fair and speedy proceeding. The rapporteurs have been informed the new Law on General Administrative Procedure and the new Law on Administrative Disputes is in preparation, but they have not had a chance to read it yet since the draft is still not accessible to the public. The ordinary jurisdiction has not confronted the issue of proportionality yet. However, recourse to ordinary jurisdiction will anyway be possible only in horizontal cases, involving non-governmental actors, such as trade unions, in situations comparable to those that emerged in Walrave und Koch,  and more recently in cases Laval  and Viking.  In other words, litigants will include an individual or legal person on the one side and another entity of private law, such as an NGO or professional association on the other. If, in such situations an EU service provider is hindered in the provision of services by such a private actor, it will be protected by Community free movement rules. On the other hand, Member States will have an obligation to "bring into force the laws, regulations and administrative provisions" necessary to comply with the Services Directive, and certainly with the EC Treaty. Within the scope of private law, Art. 10 of the Civil Law (Zakon o obveznim odnosima), restricts the freedom of contract where it is contrary to the Constitution, strict legal norms or public morality. While this definition is circular and adds nothing to the Constitutional restrictions, it is worth noting that, typically, civil law judges will question these issues only exceptionally, and only against black letter law or decisions of the Constitutional Court. It is not likely that they will engage in any balancing or proportionality analysis in cases where e.g. "State interest" is clearly defined by law. Definition of possible restrictions is, in Croatian legal culture, reserved for the legislator, be it the Parliament or the Government. This means that ordinary courts will, as a rule, defer to the legislature and follow its legislative choice. In cases of doubt, courts have recourse to the Constitutional Court which can decide on constitutionality of a law or secondary legislation. This is, of course, contrary to the Community doctrine of supremacy, as defined in the Simmenthal II case. Ideally, to ensure compliance with Community law, ordinary courts, confronted with application of national law which is claimed to have restricted the freedom to provide services, should be in position to apply the full proportionality analysis (Gebhard test) on its own, and "it is not necessary for the court to request or await the prior setting aside of such provision by legislative or other constitutional means" However, within the present Croatian legal framework, this would be possible only in respect of secondary legislation which is typically adopted by the Government or its agencies. Here, ordinary courts can ignore secondary legislation and directly apply the law to the case before them, while at the same time referring the issue of legality of the secondary legislation to the Constitutional Court without staying the proceedings. In case of laws, ordinary courts have to stay the proceedings and refer the issue to the Constitutional Court. As far as present practice is concerned, courts are extremely shy in this respect as there have been only few references so far. The third and the most likely locus of review is the Constitutional Court. It has jurisdiction for concrete constitutional review instituted by the courts and for abstract constitutional review of legislation. It also decides constitutional complaints. However, due to the reasons described above, it is to expect that the Constitutional Court will typically deal with proportionality analysis in abstract review, and possibly in constitutional complaint proceedings. While protection before the Constitutional Court can be effective to set aside services-restrictive legislation, due to the Simmenthal II principle it is inappropriate for purposes of concrete protection of Community based rights. c. Scope and intensity of judicial review Scope and intensity of judicial review depend on how seriously the courts scrutinize state action directed against certain individual right, freedom or interest. The scope of judicial review refers to the regulatory playground that remains at disposal of a regulator. However, there seems to be a discrepancy between the EC Treaty and the Services Directive, having in mind that Art. 46 of the Treaty seemingly  allows even distinctly applicable measures to be justified by the closed list of justifications, notably, public policy, public security and public health. On the other hand, the Services Directive leaves an impression that only indistinctly applicable measures can be justified. Since the Directive has to comply with the Treaty, a reasonable interpretation would be that, distinctly applicable measures can be justified only by the justifications under Art. 46, and indistinctly applicable measures by a broader and opened list of mandatory requirements. In either case, justifications have to be narrowly construed. In brief, the scope of judicial scrutiny of distinctly applicable national measures is wider, and that of indistinctly applicable measures, narrower. Intensity of judicial review, on the other hand, tells us how closely is regulatory playground scrutinized by the judiciary. The more closely judicial review looks into regulatory purposes and justifications the more intensive it is. While there is no guidance in Croatian law as to how intensive the scrutiny should be, it is clear that in Community legal order justifications of national measures restricting market freedoms are construed narrowly in case of distinctly applicable measures, and less narrowly in case of indistinctly applicable measures. In the standing practice of the ECJ, for a national measure to be justified, there must be a genuine and serious threat to a fundamental interest of society and the burden of proof is on a Member State. Apart from the general interpretative canon that exceptions need to be narrowly construed, there is no legal basis for differential intensity of judicial scrutiny in Croatian legal order. This is the place where Croatian courts will have to learn from the ECJ, and it is not reasonable to hope for a quick adjustment. For the time being, since the ordinary courts, almost without exception, defer to the legislature, almost any expressed state interest will be taken for granted and given priority over individual rights, freedoms or interests. Situation is to certain extent different before the Constitutional Court which occasionally performs some kind of rationality review. Typically, the Constitutional Court would look whether certain legal provision is rationally directed at achieving the declared legislative purpose, whatever the purpose may be. However, the reasoning of the Constitutional Court is often cryptic, and the full proportionality test entailing review of legitimacy, appropriateness and necessity of legislation is rarely visible in the reasoning. VII. Constitutional Aspects of the Directive Croatian Constitution, on its own right, does not impose any obstacles for the free movement of services. However, obstacles are inherent in the legal system and methodology of work and reasoning of public authorities and the judiciary. One of the palpable obstacles is a widespread, possibly cultural, understanding that everything has to be prescribed by law, and that only actions of individuals and legal persons which are authorised by law are legal. For example, the original version of the Science and High Education Act (2003) explicitly allowed Universities to translate Croatian pre-Bologna tertiary education qualifications into European Qualifications Framework. Approximately one year later a legislative amendment deleted this provision and the Government established a practice according to which pre-bologna 4-year bachelor degrees as Bologna Master degrees equal to level 7 of the European Qualifications framework. At the same time that practice denied Universities a say in determining equivalence of pre- and post- Bologna qualifications. In other words, government practice encroached upon the constitutional guarantee of university autonomy, not by regulation but by de-regulation. In the absence of an explicit empowering provision autonomous actions of Universities are understood as impermissible. This enables the executive to adopt, with a little legislative restraint, potentially restrictive measures that annul results of liberalization and are essentially similar to measures of equivalent effect in the area of free movement of goods. VIII. Previous Deviations from the Services Directive Croatian legislation is mostly in compliance with the requirements of the Services Directive and the Community free movement rules in general. Certain inadmissible restrictions were stipulated by its previous legislation on aliens, such as the requirement of a work permit or a business permit for any person who is not Croatian national and wants to become employed/self-employed in Croatia. However, such requirements for EC nationals will have been abolished from the date of Croatian accession to the EU, as regulated by the newly adopted Aliens Act. Furthermore, previously Croatian Companies Act obliged the service provider to establish a branch office in Croatia for the purpose of providing service on its territory. However, the adopted amendments to Croatian Companies Act have aligned Croatian legislation to the acquis in this respect by allowing cross-border provision of services on a temporary basis without the obligation for the service provider to establish a branch office. IX. Points of Single Contact and Liaison Points Art. 6 of the Services Directive obliges Member States to establish one or more points of single contact that would function like one-stop shops for providers from other Member States. According to the data available to Croatian national rapporteurs, Croatian authorities have not yet made there mind on the functioning of points of single contact in Croatia. However, it is most likely that there will be more points of single contact, each covering a certain service sector (e.g. ministry in charge of construction for construction services). Rapporteurs do not anticipate any administrative problems as far as points of single contact are concerned. On the other hand, it is expected that the Ministry of Economy, Labour and Entrepreneurship will be the liaison point for the purpose of mutual assistance stipulated by Art. 28 of the Services Directive. X. Conclusion To summarise, despite its possible shortcomings, Croatian national rapporteurs maintain that the Services Directive will have a positive impact on the enforcement of EC free movement of services rules in Croatia. The above analysis has shown that Croatian judiciary is, at this point, not equipped or ready to embrace the intensity of judicial scrutiny typical for the ECJ (e.g. Gebhard test). For this reason, when it comes to the application of Community law, the emphasis should be on the regulatory and not judicial power, while the Constitutional Court should play an important role here. The fact that the Services Directive has, to a major extent, codified the ECJs jurisprudence helps a lot in Croatian case. It forces Croatian regulatory authorities to implement the Directive the best they can, which is much more concrete and easier than following ECJs case-law. It can therefore be ascertained that the Services Directive is expected to enhance enforcement at national level in Croatia. As stated previously, Croatian national rapporteurs believe that, in addition to amendments to sectoral acts, it would be advantageous to have a horizontal measure that would amend the existing procedural rules. Here, the expected amendments to the Law on Administrative Disputes and the Law on General Administrative Procedure are welcome. Finally, the fact that one has to assume that the freedom to provide services, as a fundamental right, is part of entrepreneurial freedom protected by Art. 50 of Croatian Constitution and that, thus, its restrictions can be justified by reasons listed in Art. 16 and Art. 50, does not answer the question as to the applicability of these justifications to only indistinctly or also distinctly applicable measures. It would be contrary to Community law for the Constitutional Court to claim that the protection of the environment (listed in Art. 50 of the Constitution) could justify distinctly applicable measures. * Professor of EU Law, Jean Monnet Chair, Faculty of Law, University of Zagreb, Croatia. ** Assistant Professor of EU Law, Department of European Public Law, Faculty of Law, University of Zagreb, Croatia.  Stabilisation and Association Agreement between the European Communities and their Member States, of the one part, and the Republic of Croatia, of the other part, signed at Brussels, 29 October 2001, COM(2001) 371 final, 9 July 2001.  B. Vuj i, M. Lang,  Croatia  GDN Project Country Study , 3rd Annual Global Development Conference: Blending Local and Global Knowledge (2001), http://www.gdnet.org/pdf/vujcic.pdf  B. Vuj i,  Structural Changes in Employment in Croatia , Zagreb International Review of Economics & Business, Vol. I (2) (1998) 107-125.  Overemployment, especially in industry, was present in Croatia before the transition, similarly as in other socialist countries.  See Article 69 of Croatian SAA.  On the so called voluntary harmonisation, i.e. a third states adaptation of its national laws to the Community legal system, see Evans, A., Voluntary Harmonisation in Integration between the European Community and Eastern Europe, 22 European Law Review, 1997, p. 201-220. See also Hillion, C.,  Cases C-63/99 Secretary of State for the Home Department ex parte WiesBaw GBoszczuk and Elzbieta GBoszczuk; C-235/99 Secretary of State for the Home Department ex parte Eleanora Ivanova Kondova; C-257/99 Secretary of State for the Home Department ex parte Julius Barkoci and Marcel Malik; judgments of the Full Court of 27 September 2001; Case C-268/99 Aldona MaBgorzata Jany e.a v. Staatssecretaris van Justitie, judgment of the Full Court of 20 November 2001; Case C-162/00 Land Nordrhein-Westfalen v. Beata Pokrzeptowicz-Meyer, judgment of the Full Court of 29 January 2002, 40 Common Market Law Review, 2003, p. 486.  Zakon o ravnopravnosti spolova  For the discussion of this issue see below.  Case C-162/99Commission v Italy,; Case C-220/94Commission v Luxembourg,; Case C-361/88 Commission v Germany,.  For the purpose of this Report commercial courts are considered to be courts of ordinary jurisdiction, as opposed to administrative and constitutional jurisdiction  See e.g. Case C-55/94, Reinhard Gebhard v. Consiglio dell'Ordine degli Avvocati e Procuratori di Milano  Otherwise the State interest would invade the entire public sphere. Distinction between State interest and public interest is not clearly defined and the two are often confused.  It is worth noting that in Croatian law and practice a formalist understanding of the "State" is accepted. According to Croatian practice, "State bodies" are only those bodies which are designated as such by law. E.g. according to the decision of the County Court in Zagreb, (}S Bj G~ 1435/2000) municipality is not a  State body . This is in contrast with substantive understanding of the ECJ expressed e.g. in Case C-188/89 Foster v. British Gas.  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Art. 42(3) of the Law on Administrative Disputes.  Case 35/74, B.N.O. Walrave and L.J.N. Koch v Association Union cycliste internationale  C-341/05, Laval un Partneri.  Case C-438/05, The International Transport Workers' Federation 2) The Finnish Seamen's Union v 1) Viking Line ABP.  Art. 49 of the Civil Code declares inadmissible contracts the object of which is contrary to the Constitution, strict legal rules or morality. See also Art. 51 thereof for the legality of basis of the Contract, and art. 103 for grounds for nullity of a contract. All these provisions specify the same grounds.  Subject to Art. 37 of the Constitutional Law on Constitutional Court, any ordinary court may institute constitutional review of law which is to be applied in the case at hand. In case of secondary legislation, ordinary courts have the power to set the act aside themselves (exceptio illegalitatis). Ustavni zakon o Ustavnom sudu, Narodne novine (Official Gazette) No. 49/2002  Case 106/77 Amministrazione delle Finanze dello Stato v Simmenthal SpA.  Id. at p. 24 of the judgment.  Based on the data in Juri Kne~evic, D.,  Uloga suda u poticanju apstraktne kontrole propisa ( The Role of the Court in Inciting the Abstract Control of Rules), 3 Hrvatska javna uprava, 2007, p. 529, the Administrative Court has had two references for constitutional review of laws (one of them was dropped later on) and six references for legal review of secondary legislation. One reference for constitutional review of a law has been registered by High Commercial Court, two by the County Court in Bjelovar, one by the Commercial Court in Zagreb and two by the Commercial Court in Split.  Wyatt, D. and Dashwood A., European Union Law (Sweet and Maxwell. 2006).  Id. at p. 801.  See e.g. Case C-36/02 Omega, Case C-54/99, glise de Scientologie, at pt. 17, Case C-257/05, Commission v Austria, Case, at pt. 25.  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