Court of Justice 22-01-1976 ECLI:EU:C:1976:9

Observations submitted by Mr Russo

Mr Russo explains the Community rules relating to the cereals sector, recalling that their main function is to regulate prices, and then gives an account of the position on the world market in cereals during 1973 and 1974. He emphasizes that the common organization of the market in cereals permits Italy to have recourse to Community measures to counter shortages and to intervene to temper the rise in prices.

However, the Italian Government adopted unilateral national measures; the CIPE decided, by orders of 7 September 1973, 29 March 1974 and 7 December 1974, to carry out an operation untended to obtain durum wheat for the Italian pasta-producing industry at predetermined prices. In implementation of those decrees the AIMA acquired large quantities of durum wheat on the world market in the course of 1974 at a price of approximately Lit. 20 000 per quintal, which it subsequently passed on to pasta producers at a price of Lit. 13 000 per quintal, that is to say, below the Community intervention price. The operations carried out by the AIMA had an appreciable effect on the formation of market prices for durum wheat in Italy.

With regard to the first question Mr Russo maintains that in accordance with the established case-law of the Court, the transfer of powers in connexion with a common policy implies that all future decisions are to be taken by the Community institutions and he recalls in this connexion that in the judgment delivered on 23 January 1975 in Case 31/74 (Galli [1975] ECR 47) the Court stated that “Member States can no longer take action, through national provisions taken unilaterally, affecting the machinery of price formation as established under the common organization”.

Mr Russo consequently suggests that the Court should reply to the first question as follows:

“Any act or course of action by a Member State carried out either directly or through public bodies or authorities, which is capable of modifying the machinery of price formation for which provision is made by the common organization or which brings about such modification, is incompatible with the common organization of the market in cereals. In particular there is a prohibition on any sale or purchase by the intervention authority other than in the context of the strict and punctual fulfilment of the duties entrusted to it by Regulation No 120/67 and the implementing provisions thereof.”

With regard to the second question Mr Russo maintains that the system of trade with third countries established by Regulation No 120/67 prohibits all forms of import subsidies even if prices on the world market exceed the Community threshold price. It is clear that a Member State which buys at a certain price on the world market and subsequently sells on its own domestic market at a price below the purchase price, rendering the public purse liable for the financial loss incurred, is granting an import subsidy. Mr Russo considers that there is no doubt as to the illegality of this operation. No Community provision, and certainly not Article 19 of Regulation No 120/67, can be invoked to justify the operations of the AIMA.

With regard to the third question Mr Russo considers that it relates to the same problems as those already raised by other Italian courts (Cases 13/68, Salgoil, [1968] ECR 453 and 93/71, Leonesio, Rec. 1972, p. 287).

Although it is clear that the question reflects the distinction between individual rights and legitimate interests which is peculiar to the Italian legal system and that this distinction may not be taken into consideration before the Court of Justice, it is none the less true that, since individual situations are involved which originate exclusively in Community law, it is for the Court to provide the national court with the factors necessary to define with regard to the domestic legal system the type of individual situation corresponding to the sort of protection which the Community system intended to provide for individuals.

The first factor which must consequently be established is whether the Community provisions expressly guarantee, in relation to the intervention agencies, the interest of farmers in having prices freely based on supply and demand or whether on the contrary such provisions refer only indirectly to the position of private operators and accord to the national authorities an independent power of action which involves a certain discretionary power.

In this respect Mr Russo observes first of all that in this case there exist regulations, that is to say, measures which as such are capable of creating individual rights which the national courts must protect, but he concedes that this fact does not of itself suffice to allow final conclusions to be drawn as to the actual effects of such regulations within the national legal systems. It should be considered whether, in appropriate cases, the legal effects for individuals do not rather depend on any discretionary powers which the national authorities may possess.

After considering the role of the national authorities Mr Russo concludes that the Community provisions prescribe for the intervention authorities a clear, precise and unconditional prohibition on behaviour which tends to modify the machinery of price formation. He considers that this conclusion is substantiated by recent decisions of the Court and in particular by the aforesaid judgment in the Galli case.

To deny the existence of an individual right in relation to a course of action adopted by a State would contradict the objectives of the general interest of the Community and would in the opinion of the plaintiff abandon the operation of the market to the whim of national authorities and to the considerations of a political nature which, according to the circumstances, prompt the Commission to institute proceedings for failure to fulfil an obligation under the Treaty.

For these reasons Mr Russo suggests that the Court should reply to the third question as follows:

“The provisions of Regulation No 120/67 of the Council and the implementing provisions issued subsequently are directly applicable within the legal systems of the Member States. In particular those provisions impose upon the national authorities a clear, precise and unconditional obligation to refrain from any act or course of action which would result in or entail a modification of the machinery of price formation; there is an individual right corresponding to that obligation which is protected directly and in its entirety by Community law and as such must be afforded direct protection by the national courts.”

With regard to the fourth question Mr Russo asserts that the reply can only be the logical outcome of the replies to the three foregoing questions.

With regard to the fifth question Mr Russo considers that although a new and difficult problem is raised it merely constitutes a development of the foregoing questions, in particular, of the third question. The relevant question remains that of determining the status, the limits and the content of the individual right conferred upon private persons.

In this connexion the plaintiff maintains in particular that although, in developing the concept of direct applicability, the Court has come to recognize the concept of an “individual right” stemming from Community law which the national courts must protect, it has done so for reasons of uniformity, that is to say, in order to guarantee everywhere the same effects and the same degree of effectiveness for Community provisions. This regard for uniformity must lead the Court to define in outline the guarantees provided by Community law for situations arising within that law. If not, there would be little point in proclaiming the existence of interests protected by Community provisions if it had subsequently to be admitted that the consequences of any infringement of them varied from one Member State to another. Article 7 of the EEC Treaty can provide the necessary basis for this. The prohibition on discrimination would thus acquire a more substantive meaning if it were backed by the principle of the obligation to make good “Community” legal situations which have been adversely affected by a course of action which is illegal under Community law.

It is self-evident that only the principle of the obligation to make reparation is established in this case. The rules for effecting reparation must continue to fall within the competence of the national court.

Mr Russo consequently suggests that the Court should reply to the fifth question as follows:

“The infringement of individual rights originating in directly applicable Community law and governed by the latter in any event requires the national courts to provide for compensation — having recourse to the means open to them under the respective national legal systems — of the adverse financial consequences suffered by the holders of those rights owing to infringement of the law.”

Observations of the Commission

The Commission considers that the first two questions raise the problem of whether the course of action of a Member State in acquiring durum wheat on the world market and reselling it at prices below the purchase price is compatible with the common organization of the market in cereals. This problem must be considered under three heads.

First, it must be considered whether such course of action does not conflict with the machinery of prices and interventions on the Community market which are intended to maintain prices on that market. In this connexion the Commission maintains that if the level of the market price exceeds the target price the measure adopted by the Member State would be incompatible with the machinery in question only if the resale price were lower than the target price, since in this case it would tend to bring the market price below the target price which might oblige the Community machinery to come into operation again. If on the other hand the market price were below the target price the action of the Member State would undoubtedly be incompatible with the existence of the common organization.

Secondly, the Commission wonders whether the activity in question does not conflict with the machinery prescribed for cases where prices on the world market reach the level of Community prices in order to avoid a resultant excessive increase in market prices and in order to ensure supplies.

The Commission examines the legal foundation of the machinery laid down in Articles 19 and 20 of Regulation No 120/67 and the general provisions in implementation thereof (Regulations Nos 1968/73, OJ L 201, p. 10, and 2591/69, L 324, p. 1); it then explains that for the period during which the operations of the AIMA were carried out it prohibited the export of durum wheat from 4 August 1973 until 9 April 1975, by way of a protective measure.

In the opinion of the Commission the operations of the AIMA are incompatible with that machinery. The Community provisions do not confer any independent power on the Member States in this matter. Those provisions describe a system which is complete in itself, and since they fix the powers of the Community institutions they expressly exclude the right of Member States to adopt contrary or even supplementary measures.

Thirdly, the Commission raises the question whether the activity of the AIMA does not conflict with the system for the formation of market prices arising from the common organization as a whole. It follows from the judgment in Galli that the very existence of a common organization of the market presupposes that apart from the machinery for which provision is expressly made market prices must depend solely on the forces of free competition.

In the opinion of the Commission the incompatibility of the activity of the AIMA with the common organization therefore seems incontestable and following the Galli judgment it did not fail to point this out to the Italian Government.

With regard to the third and fourth questions the Commission asserts that the Pretura is justified in asking whether the Community provisions must be interpreted as conferring on individuals a right whereby the Member States must refrain from adopting measures incompatible with those provisions. This problem does not in fact concern the direct applicability of Community provisions, which is incontestable since they are provisions in the form of regulations, but rather their interpretation.

According to the case-law of the Court a Community provision gives rise to individual rights to the extent to which that provision is intended to protect the particular interests of individuals. It is true that the Court has laid down this condition and justified it with reference to the Communities' non-contractual liability. This is the first occasion on which the question has been raised with regard to the liability of the Member States. Nevertheless, since a matter of interpretation of Community law is at issue, the Commission does not consider that the solution can differ in the two cases. Furthermore, any other solution would involve a serious risk of differences in the application and scope of Community law depending on the legal system within which it is invoked.

Consequently, the Commission considers whether the relevant Community rules have as their objective the protection of the interests of individuals.

It is already clear from what has just been said regarding the system of price formation resulting from the common organization as a whole that the rule which may be derived therefrom by definition protects all operators whether supplying or obtaining cereals on the market. From this it must be concluded that the rules regarding the common organization of the market confer upon individuals a right that Member States shall abstain from adopting measures of the kind applied by the AIMA.

The fifth question is whether there is a Community principle whereby, if an infringement by the Member States adversely affects the rights of individuals, the latter must be able to obtain complete compensation for the financial loss suffered.

The Commission recalls that the Court has already stated that Community law ‘does not restrict the powers of the competent national courts to apply, from among the various procedures available under national law, those which are appropriate for the purpose of protecting the individual rights conferred by Community law’ (Judgment of 4 April 1968 in Case 34/67, Luck, [1968] ECR 245). This presupposes that national law must provide procedures for the protection of rights arising from Community rules. The obligation devolving upon Member States on this ground is already in existence owing to the fact that the rule in question has given the protected interest the status of a ‘right’.

The existence of such an obligation was confirmed by the Court when, in its judgment of 19 December 1968 in Case 13/68 (Salgoil, [1968] ECR 453), it ruled that such rules ‘require the authorities, and in particular the relevant courts of the Member States, to protect the interests of those persons subject to their jurisdiction who may be affected by any possible infringement of the said provisions’.

Thus it does not even appear necessary to trace back to Article 5 of the EEC Treaty the obligation on the Member States to provide a system for the protection of individual rights created by Community rules. With regard to the extent of the protection, the principles of efficiency and of the uniform application of Community law require that this protection should be appropriate and effective, without prejudice to the neutral stance of Community law with regard to the procedure chosen.

Mr Russo, represented by Mr Cappelli and Mr Caterini, the Italian Government, represented by Mr Marzano, and the Commission, represented by Mr Marenco, presented oral argument at the public hearing on 18 November 1975.

In the course of this hearing the interveners submitted the additional evidence summarized below:

According to the Italian Government the third question is the essential one, since in the event of a negative reply to it the Court may refrain from replying to the other questions.

The problem raised by this question is whether the Community provisions confer upon individuals the right to obtain a certain price level.

It is impossible to accept that durum wheat producers enjoy so extensive a right. If it is conceded that the Community provisions on the common organization of the market confer such a right upon individuals this reasoning must be followed to its most extreme conclusions. This implies first of all that the producer can supervise by judical means the exercise of the powers conferred upon the Commission; but since the Community rules also protect the consumer the latter must be granted the same right. Consumers who consider that a right analogous to that enjoyed by producers (that is to say, the right to pay a fair price) has been infringed could initiate proceedings against the Community institutions.

The Italian Government maintains that the only right enjoyed by producers which gains complete protection under the Community provisions in question is the right to sell products to the intervention agency at the intervention price. Apart from this right, either it must be accepted that any producer or consumer can supervise the exercise of the powers conferred upon the Commission or one must consider which of the directly applicable provisions in question can give rise to an individual right.

The Italian Government considers that the consequences of an affirmative reply to the question are so unacceptable as to render a negative reply mandatory.

With regard to the fifth question the Italian Government recalls that Article 215 of the EEC Treaty only governs the liability of the Community. In relation to citizens the liability of the State must of necessity still be governed by the national legal systems. It is not enough for the Court to assert that States are liable to individuals as it may make this assertion concerning the Community. The uniformity envisaged by such a judgment does not exist. The objective of attaining a uniform system of rules is in reality jeopardized by the systems both of evidence and of estoppel prevailing in each State.

With regard to the questions of substance the Italian Government considers that it is necessary to consider what the powers of the Community are in the relevant sphere, particularly in cases of disturbance of the market, that is to say, particular attention must be given to Articles 19 and 20 of Regulation No 120/67. In its opinion it is clear from such consideration that those powers relate exclusively to disturbances which affect the common market and the territory of the Community and which arise as a result of imports and exports. Account must also be taken of the fact that disturbances may also consist for example in a shortage in a particular country or region.

In this connexion the Italian Government adds that there can be no measure which does not ultimately influence prices, whether it is an increase in the wages of civil servants, the adoption of different criteria for taxes, and so on. However, if the Member States no longer exercise powers within the framework of a common organization of the market it must be concluded from this that the Member States may no longer take measures in any of the spheres governed by that organization, and this holds good even with regard to short-term economic policy.

The Italian Government considers that a ruling must be given that national measures which affect neither the movement of goods nor the formation of prices on the European market (and the measures of the AIMA have not affected either, as the Commission found in Case 40/75 (Bertrand) cannot be contrary to Community rules. Otherwise the competent national authority would have to apply to the Community authorities in every case in which a product subject to an organization of the market was in short supply in a country, a region or indeed a town, even if the shortage did not arise for the reasons laid down in Articles 19 and 20 of Regulation No 120/67. Such an outcome would be illogical since it would prevent, for example, any remedial action: the acquisition of stocks and their distribution to those in a weak economic position, which also affect prices.

The Italian Government recalls that the Commission decided to prohibit exports of durum wheat, which by no means resolved the Italian problem. It wonders whether the Commission could have reduced the price to consumers. In this connexion the Government asserts that Article 103 of the EEC Treaty retains its validity so long as there is no common economic policy in a sphere in which short-term economic measures operate at a different level from that of the production or marketing of wheat. It is inconceivable that short-term economic measures should be limited to industrial products, ignoring the market in agricultural products.

The Italian Government concludes that the Commission has no power to adopt regulations or to intervene in disturbances other than those for which provision is made by the Community rules.

In the course of the hearing the Commission emphasized in particular that in the judgment delivered in Galli the Court based itself on the existence of a common organization of the market and that therefore it cannot be accepted that this judgment was exclusively based on the fact that the fixing of minimum prices could constitute an obstacle to trade.

The Advocate-General delivered his opinion at the hearing on 9 December 1975.