Court of Justice 31-03-1977 ECLI:EU:C:1977:61

The applicant takes the view that where particular rules expressly or by implication assign rights to individuals the individuals have vested rights which cannot be called in question again. When no right is given to individuals but where the circumstances are such that they may believe with objective foundation that the existing rules on the basis of which they enter into certain business ventures will remain unchanged until the end of the transactions undertaken, there exists the legitimate expectation which is granted protection by Community law, save where there exists an overriding public interest.

In the light of this the plaintiff examines the certifying of traders holding export licences certifying the refund fixed under the awards provided for by Regulation No 2101/75 issued before 15 March 1976 and not yet used on 1 July 1976.

Regulation No 557/76 of the Council assigned to these traders the right to apply for the licences to be cancelled if, by virtue of an alteration of the rates of exchange the refund fixed in advance had to be amended. This right was made subject to the sole condition that any changes occurring in the rates of exchange is disadvantageous for the persons concerned.

The possible disadvantage could have been recognized as early as 15 March 1976, since on that date the Commission laid down and published the compensatory amounts and the coefficients applicable to the refunds. In deciding that, for products for which a compensatory amount is fixed it was only possible to apply for cancellation ‘for export licences issued in Germany, Belgium, Luxembourg and the Netherlands’, the Commission has impliedly recognized that, by virtue of the change in the exchange rates, the exporters concerned suffered a disadvantage. Therefore from 15 March 1976 those traders had acquired the right to obtain at the appropriate moment cancellation of the licences in question in the full knowledge that the condition to which this right was subject was satisfied.

Then in Article 2 (1) of Regulation No 571/76 the Commission provided that the provisions of the last subparagraph of Article 4 (1) of Regulation (EEC) No 1134/68 (right of cancellation) only apply with effect from the dates set out in Article 2 (2) of Regulation (EEC) No 557/76 (the beginning of the 1976/77 marketing year) which could support the argument that the right of cancellation could only arise for sugar exporters on 1 July 1976. However all the provisions of Regulation No 1134/68 were made applicable as from 15 March 1976 by Regulation No 557/76 and the Commission had no power to derogate from the decisions of the Council by altering the date of application of that provision. Furthermore, it is clear from the preamble to Regulation No 571/76 that the Commission in no way wished to affect the right of cancellation but solely to specify the time at which it could be exercised (second recital). In practice in the sugar sector applications for the annulment of licences certifying refunds fixed in advance could only be submitted to the competent body from 1 July 1976. It may be concluded that the right of cancellation was acquired by the parties concerned as from 15 March 1976 and that it was only the opportunity to exercise it which was set back to 1 July. Even on the argument that the right was only acquired on 1 July 1976 it is certain that from 15 March 1976 the persons concerned could rely on the possibility of seeking and obtaining cancellation of the licences at the appropriate time. Therefore, it must be admitted that there did at least exist a legitimate expectation.

In view of the compensation provided for, it is true that the disadvantage ceased to exist but the compensation is not capable of resolving the problems of those persons who, in reliance on the possibility of cancelling the licences are no longer able to carry out the exportation. Indeed, some traders could have taken other steps with regard to the goods concerned, for example, they could have taken part in other invitations to tender and have obtained other licences relating to refunds calculated on the basis of the new rates of exchange. The objection cannot be raised that the replacement of the right of cancellation by the right to compensation was envisaged by Council Regulation No 1451/76 of 22 June 1976, and that consequently prudent traders should have avoided taking any risks.

The Council regulation solely made provision for one possibility but gave no certitude as to the actual application of a compensatory measure, and in addition did not fix any date for the introduction of such a measure.

The reason given in order to justify the abolition of the right of cancellation, namely the need to avoid widespread recourse to the right of cancellation in order not to hinder the good administration of the sugar sector, is not sufficient to reveal an overriding public interest. Indeed, reliance on the right of cancellation could have been provided for as from 15 March 1976 and in that case it would have been necessary to provide for compensation as from that date.

The legality of Council Regulation No 1451/76 is not questioned by the plaintiff. As the regulation only contains the provision that the disadvantage can be compensated for by a suitable measure, it in no way obliged the Commission to implement such a provision. Moreover, it is doubtful whether that regulation provided that in the event of the adoption of a compensatory measure the right of cancellation could no longer be exercised. The replacement of the right of cancellation by compensation appears to be an alternative and not an obligation. Thus, in order to attain its object the Commission could have made provision for a simple power for the persons concerned to waive the right of cancellation by accepting the proposed compensation.

Furthermore, most of the traders used the licences before 1 July 1976, which means that the fear of wide recourse to the right of cancellation was not well founded. Applications for cancellation lodged on 1 July were to the plaintiff's knowledge in respect of barely 15 000 tonnes while licences issued before 15 March which were still valid related to a quantity of 120 000 tonnes.

Finally although Official Journal No L 172 bore the date 1 July 1976, it only appeared on 2 July 1976. Therefore, Regulation No 1579/76 was not published on the date specified for its entry into force. As publication in the Official Journal is an essential pre-condition for regulations to take effect, the date of their entry into force cannot be prior to that of their publication. In the present case, it is undeniable that on 1 July the right of cancellation was a definitively vested right. The abolition of such a right by a measure published one day later has, without any doubt, retroactive effect which, no longer has to be shown to be incompatible with the requirement of legal certainty. Therefore a declaration that the regulation in question is void is inevitable on this head alone.

In any case precisely because of its belated publication Regulation No 1579/76 could not prevent the application for cancellation submitted on 1 July from being accepted.

The defendant argues that the admissibility of the argument based on legitimate expectation is not self-evident in an application for the annulment of a measure of general application. In this respect it refers to remarks made by the Advocate-General in his opinion in Case 47/75, Federal Republic of Germany v Commission ([1976] ECR 582).

Nevertheless, it examines the following points:

In Regulation No 571/76 the Commission adopted the reasoning of the Council which was given as the grounds for Article 2 (2) and Article 5 (2) of Regulation No 557/76 (cf. in particular the third recital in fine and the fifth recital in fine of the Council regulation).

In providing that the provisions of the last subparagraph of Article 4 (1) of Regulation No 1134/68 are applicable with effect from the dates set out in Article 2 (2) of Council Regulation No 557/76, Commission Regulation No 571/76 only established the right of cancellation in the present circumstances from 1 July 1976 for the sugar sector.

In so doing the Commission had in no way acted ultra vires. Indeed the Council had given it wide powers in that respect: Article 3 (1) of Council Regulation No 557/76 provided that detailed rules for the application of that regulation are to be adopted in accordance with the procedure of the Management Committee, if necessary by derogation from the rules governing the fixing of prices laid down in the relevant regulations.

To summarize the position therefore, on 15 March 1976 traders holding licences fixed in advance certainly possessed no ‘vested right’, but were merely able to expect the possibility of obtaining their release on 1 July 1976 from their export operations if monetary events were such as to cause them at that moment, and only at that moment, a disadvantage. In the alternative, the defendant maintains that the infringement of vested rights, at least if it does not relate to the essential nature of the property, cannot as such constitute a reason for annulling Regulation No 1579/76. At most the present case might be examined from the point of view of possible compensation.

Finally, having chosen this form of action it may be asked whether the applicant should not have contested Council Regulation No 1451/76 which forms the legal basis of Regulation No 1579/76.

First the defendant points out that the delay in the distribution of an Official Journal is not as such comparable to the formal retroactive effect of the measure published.

Secondly advance notice of the regulation in question was in any event given by Council Regulation No 1451/76 of 22 June 1976. Consequently, the traders had notice that the measure was imminent and therefore the possibility of formal retroactive effects could have been foreseen. Finally, the abolition of the right of cancellation was the logical, necessary and foreseeable consequence of the Council regulation referred to above and, as such, this measure cannot be regarded as having true retroactive effects. In this respect the defendant relies on the judgment of the Court of 7 July 1976 in Case 7/76 (IRCA v Amministrazione delle Finanze dello Stato [1976] ECR 1213).

The applicant takes the view that the fifth recital of the preamble to Regulation No 557/76 refers to a specific disadvantage resulting from the fixing of the new representative rates. Since the exchange rates applicable from 1 July 1976 had been fixed on 15 March, the traders could have known from that date whether they were going to suffer a loss. The Commission itself drew these conclusions in deciding on 15 March that export licences issued inter alia in Belgium could be cancelled (Regulation No 571/76). In addition in stating that the relevant cancellations should only be permitted ‘when’ and not ‘if’ the amounts fixed in advance have actually suffered as a result thereof (Regulation No 571/76), the Commission in no way made the acquisition of the right subject to a condition but solely postponed exercise of this right to the time when the disadvantage which had been foreseen in fact occurred.

In any event if the Commission had intended to fix the time at which the right of cancellation would genuinely arise, it would have acted ultra vires: Article 3 (1) of Regulation No 557/76 only permits derogation from the rules governing the fixing of prices and the right of cancellation has no connexion with those rules.

With regard to the infringement of vested rights as a ground for the annulment of the regulation in question, the applicant recalls that Article 173 of the EEC Treaty mentions as one of the grounds for an action for annulment the infringement of ‘any rule of law relating to’ the application of the Treaty. Regard for vested rights is necessary for legal certainty, which constitutes a superior rule of law by which the Community institutions must abide in adopting measures provided for by the Treaty.

In respect of the admissibility of this submission the applicant observes that if the contested measure was of general application then it is not merely this submission but the whole application which is inadmissible. The defendant did not however raise that objection.

As to the substance the applicant first denies that a trader had to wait until 1 July 1976 to assess the whole position. If, in reliance on the rules in force from 15 March 1976, a trader decided that the licences in question could be cancelled on 1 July, he could at any moment after 15 March have made an economic calculation in order to know whether or not his interests would be served by having the licences cancelled. A trader concluding a contract before 1 July would merely have taken into account the information available at the time when he took those decisions and would as it were have taken his cue from the situation in force at that time. Such a trader would not have acted in anticipation of the use of his rights as he did not rely on future and uncertain rules but rules which were already established and known.

Finally the plaintiff denies that an export refund fixed in advance under Regulations No 766/68 and No 2101/75 can only relate to a specific transaction. Indeed the refund referred to on the licences concerns a specific quantity which the trader undertakes to export during the period of validity of the licence.