Court of Justice 01-02-1978 ECLI:EU:C:1978:20

1. Question 1 (protection of legitimate expectation)

The Council observes first of all that the first question refers to the legal situation resulting from the combined application of Council Regulation No 348/76 and Commission Regulation No 890/76. It cannot be maintained that the Council regulation itself is not in order, because in Article 1 (2) of its regulation the Council authorized and directed the Commission to take any interim measures necessary. Consequently, if it was necessary at all, it was for the Commission to take further account of the need to observe the principle of the protection of legitimate expectation, by laying down more detailed interim measures than those contained in Regulation No 890/76.

In the alternative, the Council considers whether the arrangements for application of and exemption from the tax which are contained in Regulation No 890/76 adopted by the Commission in conjunction with the basic regulation of the Council, infringe the principle of the protection of legitimate expectation.

To argue that the application of the Council regulation to exports agreed upon before its adoption but performed subsequently amounts to retroactivity of legal rules is unreasonable. It emerges from the different judgments of the Court of Justice (paragraphs 8 and 9 of the decision of the Court in Case 143/73, SOPAD v FORMA and FIRS [1973] ECR 1433, at p. 1441, and paragraph 4 of the decision of the Court in Case 2/75, Einfuhr- und Vorratsstelle für Getreide v Mackprang [1975] ECR 607, at p. 616) that in principle no difficulty is presented by the immediate application of a legal measure to situations which in view of market trends arose before the adoption of that measure but which took final shape only subsequently.

It follows that the issue is not whether provision had to be made by means of a general system of exemption for old contracts already concluded but not yet performed, but only whether on introducing the export tax the Community legislature had occasion to adopt special interim rules designed to protect the legitimate expectation of the traders concerned.

According to the case-law of the Court of Justice, the expectations of traders who have undertaken economic obligations are justified only if the rules introducing charges to tax have been adopted without warning and with immediate effect and could not have been foreseen even by a prudent trader (paragraphs 5 and 9 of the decision of the Court of 8 June 1977 in Case 97/76, Merkur 1977 ECR 1063 at pp. 1077-1080 and paragraphs 41 to 43 of the decision of the Court of 15 June 1975 in Case 74/74, CNTA [1975] ECR 533, at pp. 549-550).

In view of the measures adopted by certain Member States and the suspensions of import duties for potatoes enacted by Community measures in January and early February 1976, the Council takes the view that a potara dealer in the Community could undoubtedly have foreseen, in early February 1976 at the latest, that the Community would adopt short-term measures to limit the exporting to non-Member countries of Community production which was already too small to meet demand in the internal market.

In answer to the allegation of the plaintiff in the main action that on 20 February 1976 it had still not been able to obtain information of the entry into force of the tax on exports it could be argued that the Council had publicized the scope of the new regulation by communications to the press on 17 and 18 February 1976 and that several German national daily newspapers published this information in their editions of 19 February 1976.

The level of the tax is not disproportionately high nor was it unforeseeable for traders in the market. It had to be such as to deprive exports of any attraction resulting from the granting of high import subsidies introduced by certain neighbouring countries of the Community. According to the information which the Community authorities had at the time, the level of those subsidies might be considerable, such as 18 units of account per 100 kg in Sweden in the case in point.

The Commission takes the view that a general system of exemption was established by Commission Regulation No 890/76 adopted pursuant to Article 1 (2) of Council Regulation No 348/76. That article expressly provided for the possibility of adopting such measures. The system of exemption laid down by the Commission is intended to make it possible ‘to maintain certain traditional trade flows’, and it was assumed that the quantities involved would not exceed the quantities usually disposed of in the course of those flows (Regulation No 890/76, first recital).

Thus the first question is solely concerned with the absence of particular exemptions in favour of exports to other European countries and in particular to Sweden.

Tha tax at issue does not have retroactive effect and is applicable only to exports carried out after its entry into force. The fact that old contracts were performed in circumstances which were less favourable for those concerned does not suffice to invalidate the provisions which introduced such taxes.

As regards protection of legitimate expectation, the Community may be bound to adopt particular interim measures if in the absence of any overriding public interest the existence of a legal relationship between traders or the performance of obligations arising from such relationship is affected with immediate effect and without warning (Case 97/76 Merkur v Commission, mentioned above).

The Council and the Commission need not have adopted particular interim rules. Only the Netherlands and France usually export an appreciable part of their potara production. Those two countries had already prohibited exports even before the tax at issue was introduced.

In comparison with the prohibitions on exports in force in the Member States, that tax has the advantage of permitting exports in principle once again. Furthermore, the Community institutions have always taken the view that it is not incumbent upon them to encourage by particular exceptions exports carried out through exporters in one Member Sute because of the restrictions in force in another Member Sute.

The plaintiff is also precluded from pleading protection of legitimate expectation in relation to the performance of the contracts which it had concluded. The alleged efforts of the plaintiff and of its supplier, the company Engh of Straelen, to obtain information as quickly as possible on the detailed rules for the Community tax on exports show that the tax did not catch them suddenly or unexpectedly, and also show that at the time of the conclusion of the contraa they took into account the possibility of restrictions on exports and of the tax at issue.

When it objects that a tax of 25 units of account per 100 kg deprives it of almost the whole of the selling price, a tax which it alleges to amount virtually to ‘expropriation’, the plaintiff is coming on to the legal question of the proportionality of the means employed. That allegation is incorrect. The tax on exports has above all to neutralize the subsidies on imports of potatoes granted by Sweden. Those subsidies especially were encouraging many Community exporters to pay excessive prices for domestic potatoes, which only aggravates the rise in Community prices.

In view of there being a subsidy of 18 units of account per 100 kg for imports into Sweden, the tax of 25 units of account per 100 kg corresponds to a real charge of 7 units of account per 100 kg, which cannot be considered as disproportionate.

2. Question 2 (a) (the exchange rate)

The Council examines the question whether the ‘green’ exchange rate, as defined in Regulation No 475/75, can be applied only when the measure in question is directly or indirectly based on an article of the Treaty concerning the Common Agricultural Policy. The wording of the regulation seems to confirm such an interpretation. However, the Council submits that it can be argued that Regulation No 475/75 applies, at least by analogy, to the tax on exports of potatoes which is based on Articles 103 and 113. The Council bases this submission upon inter alia the fact that potatoes are agricultural products, the fact that measures can be regarded as dictated by considerations both of agricultural policy and of conjunctural or commercial policy, and finally the tenor of Commission Regulation No 485/76 of 3 March 1976 (OJ 1976, No L 56, p. 23), laying down detailed rules for the application of Regulation No 348/76.

The said Regulation No 485/76 made the provisions of Regulation No 645/75 (OJ 1975, No L 76, p. 16), which concern the levying of taxes on exports of products within the market organizations, applicable to the tax on exports of potatoes. For these reasons the Council inclines to the view that the exchange rates laid down by Regulation No 475/75 should be applied to the export tax.

Since Regulation No 348/76 is legally based upon Articles 103 and 113 of the EEC Treaty, the Commission considers that from a strictly formal legal point of view there is nothing to prevent the German customs authorities from refusing to apply the exchange rates laid down in Regulation No 475/75. However, the Common Agricultural Policy and the commercial and conjunctural policy are not mutually exclusive.

The Commission considers that although by reason of its legal basis the tax comes under the commercial and conjunctural policy, it is not impossible for it to be regarded as a measure resulting from an ‘instrument relating to the Common Agricultural Policy’ and for the exchange rates laid down in Regulation No 475/75 to be applied.

3. Question 2 (b) (discrimination resulting from the application of a fixed exchange rate)

The Council makes the point that fixed exchange rates have great advantages and above all that of enabling traders to calculate in advance the economic circumstances concerning them. Therefore inequalities which may arise as a result of differing patterns of development of the currencies of Member States are not due to discriminatory treatment.

The system of compensatory amounts was implemented in order to prevent artificial variations of price levels within the Community owing to the monetary situation of the Member States and not in order to eliminate alleged discrimination. Such a measure is not necessary for the export transactions at issue in the present case, since the exports were not such as to bring about differences in the formation of prices within the Community.

The Commission submits that there was no risk of deflection of trade, of the artificial deflection of trade flows due to monetary factors justifying the introduction of a system of monetary compensatory amounts.