Court of Justice 19-06-1973 ECLI:EU:C:1973:65

1 and 2. First and second questions: On the interpretation of Article 92

The Commission submits that a negative reply should be given to the question relating to the direct effect of Article 92. The conditions of application (paragraph (1)), the reservations (paragraph (1)), and the established exceptions (paragraph (2)), or those capable of being so (paragraph (3)), which this Article lays down, involve a complex and highly technical examination of each individual case, leading, according to the case in question, either to the abolition or to the modification of the system of aid in question.

On the other hand, one cannot object that the aid must be considered as incompatible with the Treaty as long as a reservation has not been granted, because even independently of the granting of such reservation, a preliminary examination as to the existence of the conditions set forth in Article 92 is always necessary to determine whether a national measure is dependent on this provision.

A systematic interpretation of Articles 92, 93 and 94 leads to an identical conclusion. Article 92 forumulates a general principle, the detailed rules for the application of which are laid down in Articles 93 and 94 and imply that examination of the merits of the case falls to the Commission or, as in the case provided for by Article 93 (2), to the Council. Further, the control of systems of aid provides for cooperation between Member States and the parties concerned (Art 93).

Thus the conditions on which the direct effect of a provision depends and which have been defined by the Court in Case 6/64 (Judgment of 15 July 1964, Costa v Enel, Rec. 1964, p. 1147) as well as by Mr Advocate-General Gand in Case 57/65 (Judgment of 16 June 1966, Lütticke v Hauptzollamt Sarrelouis, Rec. 1966, p. 311) are not satisfied.

The case law of the Court on Article 93 leads to the same conclusion. If the judgment of 15 July 1964 (Case 6/64, Costa v Enel, cited above) refused to recognize that this provision has any direct offer — except for the last sentence of paragraph (3) — then one cannot admit to the existence of such effect in regard to Article 92 which is merely implemented by Article 93.

In addition, it is, in the circumstances, a question of aid existing at the time of the entry into force of the Treaty, whereas efforts to recognize a direct effect in Article 92 are only aimed at new aid, i.e. that notified but implemented in infringement of Article 93, well before the Commission has made any decision with regard to it.

Therefore, the Commission submits that a negative reply should be given to the first question.

Even though the second question is only posed in the event of an affirmative reply to the first question, the Commission points out that the reference to the end of the transitional period is totally irrelevant to the sphere of aid. Possible individual subjective rights can only arise:

• for existing aid, from the date fixed by the decision of the Commission under Article 93 (2), first paragraph;

• for new aid, from the moment of its application, in violation of the obligation to notify, or before a final decision has been taken.

3. Third question: On the interpretation of Article 13 (2)

From the manner in which it is formulated, the third question should, in the Commission's opinion, receive an affirmative reply. However, to give it its true scope it should be completed as follows: does the imposition of an ad valorem charge, identical in terms of the percentage, basis or detailed rules of levy on domestic products and imported products, constitute an infringement of Article 13 (2) or of any other rule which prohibits the application of a special taxation on imports coming from other Member States? When the question is formulated in this way, a negative reply must be given.

In theory, one could speculate whether, in the case where aid granted to a national industry compensates, in whole or in part the charge of the tax, this would constitute a ‘camouflaged’ infringement of Article 13 (2) (in the case of total compensation) or of Article 95 (in the case of partial compensation). But the impossibility of determining the incidence of aid for every national product which is considered does not allow one to make such a comparison.

A possible infringement of Article 95 can likewise be exposed if the imported product was taxed on its value as a finished product, when the corresponding Italian product would only have borne the charge on the value of the raw material. Although it is a question of different, discrimination cannot be production, discrimination cannot be ruled out.

4 and 5. Fourth and fifth questions; On the interpretation of Articles 30 and 86

As to the fourth question, the Commission is of the opinion that both Article 30 and Article 86 have direct effect. One must reject the possibility that the taxation in question infringes these two Articles (fifth question). There is no infringement of Article 30 because the duty in dispute applies in the same way to domestic and imported products.

Infringement of Article 86 is excluded because the imposition of the tax is not attributable to the undertaking involved (ENCC) but constitutes a factum principis. Even Article 90 (1) cannot be invoked, for it does not prohibit the grant of special rights to certain undertakings.

The import activity of the Ente Nazionale and the exclusion of aid for raw material and products directly imported by consumers does not fall under the scope of Article 86 either; direct importation is not rendered impossible and the discrimination comes within the sphere of aid and must therefore be considered in the light of Article 92.

1. On the interpretation of Article 13 (2)

The Italian Government submits that a negative reply should be given to the question concerning the interpretation of Article 13 (2).

The ENCC duty which applies without distinction to both domestic and imported products arises under the general system of domestic taxes and cannot be considered as a charge having an effect equivalent to a customs duty.

The Italian Government invokes in this respect two judgments of 1 July 1969 (Case 24/68 Commission v Italian Republic, Rec. 1969, 193; Joined Cases 2 and 3/69, Sociaal Fonds voor Diamantarbeiders, Rec. 1969, 211), and also the judgment of 14 December 1972 in Case 29/72 (Marimex v Administration des Finances de l'État italien, not yet published).

2. On the interpretation of Article 30

The same considerations apply mutatis mutandis to the interpretation of Article 30 of the Treaty, prohibiting quantitative restrictions and measures having equivalent effect. When the charge imposed on imported goods arises from a more general system of taxation applying in the same way to domestic goods, it is no longer a question of distorting importation or of restricting the free movement of goods.

3. On the interpretation of Article 92

The question of the interpretation of Article 92 is inadmissible to the extent that it concerns the compatibility of the system of aid in question, because it is concerned with bringing about a decision by the Court on the compatibility of the aid in question with the Treaty before the preliminary administrative phase provided for by Article 93 of the Treaty has run its course.

In any event, the aid granted by the ENCC is not incompatible with Article 92, for it permits a reduction in the price of press publications and therefore corresponds to aid having a social character granted to consumers, as provided for by Article 92 (2). This aid also allows for the development of the newspaper industry without affecting trading conditions to an extent contrary to the common interest; it therefore falls under the exemption contained in Article 92 (3).

4. On the interpretation of Article 86

With regard to the interpretation of Article 86, the structure of the ENCC, a body serving the State, and the objectives of public interest which it pursues, make it apparent that a duty intended to finance its activities, cannot be contrary in any respect to the provisions of Article 86 of the Treaty.

1. On the interpretation of Article 13 (2) (third question)

According to the plaintiff in the main action, the duty in dispute constitutes a charge having an effect equivalent to a customs duty, prohibited by Article 13 (2), and not internal taxation within the meaning of Article 95 of the Treaty.

Despite the words ‘internal taxation of any kind’, this provision only concerns the financial obligations imposed on individuals by public authorities without any reciprocal benefit.

Therein lies an essential feature of taxation properly so called and referred to only by Article 95 (Judgment of the Court of 4 April 1968, Case 31/67, Stier v Hauptzollamt Hamburg, Rec. 1968, p. 356).

It follows from this that Article 95 has no application to ‘parafiscal’ taxation introduced to cover payments for the benefit of persons belonging to definite groups, distinguished by reference to a professional occupation, a particular economic and social situation, or to the use of a particular service.

Moreover, by its judgment of 1 July 1969 (Joined Cases 2 and 3/69, Sociaal Fonds voor Diamantarbeiders, Rec. 1969, p. 211) the Court has impliedly rejected the application of Article 95 to parafiscal taxes. The ENCC duty belongs precisely to this category.

In the second place, Article 95 is only concerned with socalled ‘refundable’ taxation, i.e. repayable in the case of export. But if Article 2 of the Ministerial Decree of 3 July 1940 concerning the ENCC provides that the duty does not apply to products destined for export, then this exemption only operates at the stage of the first transfer abroad of national paper manufacturing. There is no integral refund on subsequent export by an Italian consumer.

The application of Article 95 also implies that the taxation of domestic and imported products must be comparable for the existence of any possible discrimination to be proved. This is not so in this case, since both the chargeable act and basis of the taxation and its results differ. While the collection of the duty in dispute in respect of domestic products is made at the time of the transfer of property from the producer to the consumer, imported goods are taxed on crossing the border, whether transfer of property takes place or not.

Furthermore, the chargeable basis for domestic products is constituted by the price indicated on the invoice (Art. 1 of the Ministerial Decree of 3 July 1940). Whereas for imported products, the tax is based on the normal price of the product (Art. 7 of the same Decree), even if that price does not correspond to the invoice price. The last factor of comparison, the result of collection of the tax, differs for domestic and foreign producers. For the former, the charge is compensated by the support given by the ENCC, i.e. by a specific service. On the other hand, foreign operators not only receive no benefit as a set-off against the duty paid by them, but such duty is used specifically to increase the competitive strength of Italian undertakings at their expense.

The negative effect of the ENCC duty is not even compensated by passing the charge on to the consumer. Such as transfer is not total, nor has it much effect.

From this the plaintiff in the main action concludes that the illegality of the taxation in dispute ‘does not result from its discriminatory rates but from its fundamental nature which places it in conflict with the principle laid down by Article 95’.

Thus the duty constitutes a charge having an equivalent effect to a customs duty: it is levied on crossing the border, it increases the price of the products concerned and is not collected in the exclusive interests of the importer.

There is no exception to the prohibition on similar charges having equivalent effect, despite the fact that the duty is classed as an aid, and is even legal.

Therefore, the plaintiff in the main action submits that the following reply be given to the third question: ‘Article 12 applies equally to customs charges resembling duties, even when such duties are intended to finance aid compatible with Article 92 of the Treaty’.

2. On the interpretation of Article 30 (first part of questions 4 and 5)

To the extent that it does not come under the prohibition of Article 13, the ENCC duty must be considered as a measure having an effect equivalent to a quantitative restriction, prohibited by Article 30.

The system adopted by the Italian legislation provides for two different duties: one on cellulose, collected by the quintal, the other on products of the paper trade and levied by reference to the normal price. To avoid fraud, technical measures have been enacted as 10 the size and marking of cellulose sheets in such a way as to avoid the direct consumption of imported sheets. Furthermore, the exemption of paper intended for newspapers and periodicals is subject to the adoption for that product of special sizes and packaging constituting as great an obstacle to free movement.

In addition, the activities of the ENCC in the sector of newsprint has tended, as appears from a number of its annual reports, to regulate this market by controlling imports, with a view to ensuring the regular supply of newsprint. As to the direct of Article 30, that Article, in spite of its general wording, fulfils all the conditions necessary for a provision of the Treaty to be considered as having direct effect. The only problem is that relating to determining the date of entry into force of this direct effect.

According to a decision of the Council of 26 July 1966 accelerating the timetable (Decision No 66/532, OJ 1966, 21. 9.1966, p. 2971), all quantitative restrictions must be abolished from 1 July 1968. That is also the case with measures having equivalent effect. If one does not adopt this solution, the direct effect of Article 30 must, in any event, apply from the end of the transitional period, since by Article 32, measures having a direct effect on quotas must be abolished by the end of this period at the latest. A fortiori, the same timelimit must apply for products in free circulation.

The plaintiff in the main action prefers the first solution.

He therefore proposes that the Court should find that the direct effect of Article 30 of the Treaty operates from 1 July 1968, or alternatively from 1 January 1970 and to interpret this Article as prohibiting measures introduced by a State involving, either directly or indirectly, the packaging of the product without any objective justification, as well as the activities of a public agency which, by the preserving of quotas, prevents or renders more difficult the inflow of products from other Member States.

3. On the interpretation of Article 92 (first and second questions)

The plaintiff examines first the various types of intervention carried out by the ENCC.

While the objectives laid down in Article 2 of Law No 1453 of 13 June 1935 creating the ENCC indicated clearly that it was to be an instrument of a policy of self-sufficiency, subsequent documents show what various types of aid have been granted by the ENCC. This institution has concentrated its activities particularly on aid to paper producers, on aid to the newspaper industry by intervention in the purchase of raw materials and by exemption from the duty for paper destined for the press, on aid to small and medium-sized undertakings by direct import at reduced prices of the paper necessary to satisfy their requirements, and on aid to the paper industry in general by guaranteeing it markets.

In addition, the ENCC finances several research programmes appertaining both to the agriculture and forestry sector and to the paper industry.

These various aids are clearly prohibited by Article 92. As the ENCC is a public agency, the aids which it grants must be considered as State aids, or, in any event, as granted ‘by means of State resources’. The aids tend to favour certain products and certain undertakings, namely the Italian agricultural undertakings producing cellulose, the Italian paper industry and the Italian publishing houses.

They allow domestic producers to reduce their production costs, the paper industry to gain markets at prices lower than the world market prices, and the editors of newspapers and periodicals to reduce the costs of the Italian language publications and to improve the competitive position of their non-Italian publications on world markets.

These aids affect commerce between Member States not only by their anti-competitive effect, but also by the method of their financing. This method of financing by duty has already been examined by the Court in Case 47/69 (Judgment of 25 June 1970, Government of the French Republic v Commission, Rec. 1970, p. 487) in which it recognized the protectionist effect brought about, in that particular case, by the payment of duties by non-Italian undertakings which consequently suffered damage. Moreover, such protectionist effect has been noted on several occasions by the Italian legislature itself.

As to the direct effect of Article 92 (1), the plaintiff in the main action refers to the case of Costa v Enel, in which the Court has already admitted that the last part of Article 93 (3) has direct effect. The fact that this provision only applies to new aid, i.e. aid introduced after the entry into force of the Treaty, does not prevent the Court from recognizing a direct effect in Article 92 with regard to aid in existence at the time of such entry into force.

Article 92 fulfils all the conditions necessary to give it direct effect. The prohibition expressed therein is not addressed to the Member States. It is formulated in terms of particular severity and with sufficient clarity and precision.

The only obstacle to the direct effect of Article 92 lies in the fact that, for the abolition of aid existing at the time of the entry into force of the Treaty, a decision of the Commission is provided for by the Treaty.

The relevance of this objection must however be appraised with regard to all the consequences which a total denial of the direct effect of this provision involves.

Taking that assumption, the types of aid incompatible with the provisions of the Treaty could exist sine die. Such is the case when, as in the present case, when the aid has not been notified to the Commission, contrary to Article 93, so that the Commission was not in a position to discover its existence. Such a situation cannot be justified in the light of Article 93 (1) of the Treaty.

In addition, Article 93 (1) involves the obligation to notify the Commission of ‘existing’ aid, in the same way as does Article 93 (3) in respect of new aid.

Once this obligation to notify has been established, it follows automatically that, once there has been notification, aid must be considered lawful as long as the Commission does not prohibit it but, on the other hand, where there is a failure to notify, the immediate and unconditional prohibition of Article 92 operates.

Finally, it may be inferred from Article 8 (7) of the Treaty, according to which ‘the expiry of the transitional period shall constitute the latest date at which all the rules laid down must enter into force and all the measures required for establishing the common market must be implemented’, that at the end of the transitional period the provisions of Article 92 are to apply immediately.

The time-limit of twelve years laid down in Article 8 (1) in effect constitutes the latest date for the entry into force of the rules of Article 92 abolishing aid.

This is confirmed by an analysis of Article 92 (3) (c) according to which certain aids are to be progressively reduced under the same conditions as apply to the elimination of customs duties, i. e. at the latest by the end of the transitional period.

Finally, on the ending of this period, the powers which the Commission derives from Article 93 will come to an end, except for those under Article 93 (3).

Thus Article 92 will become immediately applicable from that moment, there being no exceptions to the generality of the principle which it establishes. In the examination of aids, the Commission can only determine their compatibility with the Treaty, but cannot recognize as lawful those which are not so compatible.

Finally, this solution results implicitly from the overall scheme of the Treaty. It is for the Court of Justice to see that the implementation of the rules on competition, an integral feature of the organization of the common market, is not delayed sine die.

Applied to the matter in dispute, the principles outlined above lead to the following conclusions.

The Italian State never notified to the Commission the system of aid to the ENCC. Because of this, the Commission could only begin a procedure of its own motion in 1972.

The infringement by the Italian State and the ENCC of the provisions of the Treaty also violates the subjective right of the plaintiff and all Italian importers to be free from liability to a charge contrary to the provisions of the Treaty. This subjective right exists from the end of the transitional period on 31 December 1969. To subordinate the direct effect to the intervention of a procedure applying Article 93, emanating from the Commission (September 1972) or from the date of the Commission's decision, which is still to come, is to sanction the ‘anti-juridical’ behaviour of the Italian State and the ENCC.

If the Italian State and the ENCC had informed the Commission in time, the levy of the ENCC duty would have already been abolished, at least for imports. Recognition by the Court of the direct effect of Article 92 from 31 December 1969 would permit importers to demand the reimbursement of payments made after that date, expecially if the Commission came to consider the aid in dispute as incompatible with Article 92 and an appeal by the Italian Government against such a decision was rejected by the Court.

If the Commission had not instituted any procedure, it would fall to the national court to examine the compatibility of the aid with the provisions of the Treaty. The situation is no different for new aids, the prohibition of which has direct effect from the date of their introduction (after 31 December 1969), except in the case of notification in accordance with Article 93 (3). In such a case, the direct effect depends on the initiation of the procedure by the Commission, as was stated by the Court in the case of Costa v Enel.

The plaintiff's submission is that Article 92 must be declared directly applicable from 31 December 1969 for those incompatible aids in existence or new which have not been notified, and for new aids which have been notified, from the implementation of the procedure under Article 93 (3).

4. On the interpretation of Article 86 (second part of questions 4 and 5)

With regard to the interpretation of Article 86, the plaintiff observes that the holding of a dominant position in the common market does not in itself constitute an abuse prohibited by Article 86. There would be an abuse if such a dominant position was maintained or reinforced with the aid of a duty.