Court of Justice 25-05-1978 ECLI:EU:C:1978:114

Facts and procedure

Regulation (EEC) No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (Official Journal, English Special Edition 1971 (I), p. 257) provides for a system of monetary compensatory amounts. Article 1 (1) thereof in the version in force at the date of the facts in question (Regulation No 509/73 of the Council of 22 February 1973, Official Journal 1973 L 50 of 23 February 1973, p. 1), provides that:

If, for the purposes of commercial transactions, a Member State allows the exchange rate of its currency to fluctuate by a margin wider than that permitted by international rules in force on 12 may 1971,

1. the Member State whose currency increases in value beyond the permitted fluctuation margin shall charge on imports and grant on exports,

2. the Member State whose currency decreases beyond the permitted fluctuation margins shall charge on exports and grant on imports,

compensatory amounts for the products referred to in paragraph 2, in trade with the Member States and third countries.’

Article 1 (3), in the version in force at the date of the facts in question (Regulation No 2746/72 of the Council of 19 December 1972, Official Journal, English Special Edition 1972 (28-30 December), p. 64) provides that:

Paragraph 1 shall not apply where application of the monetary measures referred to in that paragraph would lead to disturbances in trade in agricultural products’.

The third, fourth, fifth and sixth recitals of the preamble to Regulation No 974/71 are worded as follows:

‘Whereas if, in one Member State, the current rate of exchange deviates from the official parity by more than a specific margin, serious difficulties may arise as regards the proper functioning of the Common Market; whereas trade to which the current rate of exchange applies may then be effected at a price, in national currency, lower than the intervention or buying-in prices laid down by Community rules on the basis of the official parity;

Whereas in the Member State concerned this may entail a disruption of the intervention system laid down by Community rules and abnormal movements of prices jeopardizing a normal trend of business in agriculture;

Whereas it would seem justifiable to forestall these difficulties by providing that the Member State concerned may, within the framework of Community rules, apply a system of compensatory amounts in trade with other Member States and third countries;

Whereas the compensatory amounts should be limited to the amounts strictly necessary to compensate the incidence of the monetary measures on the prices of basic products covered by intervention arrangements and whereas it is appropriate to apply them only in cases where this incidence would lead to difficulties.’

Regulation (EEC) No 539/75 of the Commission of 28 February 1975 fixing the monetary compensatory amounts and certain rates for their application (Official Journal 1975 L 75 of 3 March 1975) fixed the monetary compensatory amounts to be charged or granted in trade between the nine Member States and in trade between the Community and third countries for the following wines:

ex 22.05 C I and C II: Table wine with an actual alcoholic strength of not less than 8-5^o and a total alcoholic strength not exceeding 15^o as well as imported red and white wines

ex 22.05 C I: Table wine of the R III type within the meaning of Regulation (EEC) No 945/70 and red wines presented for importation under the name Portugieser

ex 22.05 C I: Table wine of the A II and A III types within the meaning of Regulation (EEC) No 945/70 and white wines presented for importation under the name Riesling or Sylvaner.’

These amounts were discontinued as from 24 March 1975 by Regulation (EEC) No 722/75 of the Commission of 19 March 1975 amending Regulation (EEC) No 539/75 (Official Journal 1975 L 71 of 20 March 1975), except in Germany.

The reasons for the discontinuance of those amounts are stated as follows in the second and fifth recitals of the preamble to Regulation (EEC) No 722/75:

‘Whereas, as regards wine products, compensatory amounts are fixed only in respect of table wines; whereas production and marketing conditions for these wines differ from Member State to Member State; whereas it therefore seems possible to discontinue with immediate effect the compensatory amounts in most of the Member States without thereby disturbing trade;

Whereas, with respect to wine, the measures provided for in this regulation are in accordance with the Opinion of the Management Committee for Wine’.

Fresh monetary compensatory amounts were fixed as from 4 August 1975 by Regulation (EEC) No 2021/75 of the Commission of 31 July 1975 fixing the monetary compensatory amounts and certain rates for their application (Official Journal 1975 L 205 of 4 August 1975). With regard to wine, that regulation also provided for no compensatory amounts for the abovementioned products except in Germany.

The second to last recital of the preamble to Regulation No 2021/75, having recalled the wording of Article 1 (3) of Regulation (EEC) No 974/71, continues as follows:

‘Whereas in the present situation this rule makes it possible not to fix compensatory amounts for France and for Italy, and to fix amounts in the wine sector only for Germany’.

Regulation (EEC) No 2448/75 of the Commission of 25 September 1975 suspending the monetary compensatory amounts for certains wines (Official Journal 1975 L 250 of 26 September 1975) suspended the monetary compensatory amounts in Germany for the first group of wines mentioned above with effect from 29 September 1975. The reasons for that suspension were stated as follows:

‘Whereas compensatory amounts are at present applied to wine only in Germany; whereas a detailed study has shown that it is possible to discontinue the application of the monetary compensatory amounts in that country also in respect of certain wines, without causing disturbance of trade; whereas, however, it is necessary fo proceed with caution; whereas provision should therefore be made for the suspension of those amounts’.

Commission Regulation (EEC) No 3071/76 of 15 December 1976 altering the monetary compensatory amounts applicable in the wine sector (Official Journal 1976 L 346 of 16 December 1976), which entered into force on 16 December 1976, likewise did not provide for monetary compensatory amounts in Germany for the first group of wines mentioned above, but fixed amounts in Italy and in France for all three abovementioned groups.

During the period from 1 to 30 September 1975, the plaintiff in the main action imported into Germany red wine in particular but also some white wines coming within tariff heading 2.05 CI b from Yugoslavia and Hungary.

It lodged an application against the defendant in the main action before the Finanzgericht Rheinland-Pfalz for repayment of the monetary compensatory amounts which it had had to pay on that occasion.

By order of 4 October 1977, that court stayed the proceedings and requested the Court of Justice under Article 177 of the EEC Treaty to give a preliminary ruling on the following questions:

‘(1)

Is Regulation (EEC) No 722/75 of the Commission valid in so far as No 1 of the Annex thereto excepts the import into Germany of wines falling within tariff subheading 22.05 CI of the Common Customs Tariff from the discontinuance of the monetary compensatory amounts?

In particular:

Did the conditions laid down in Article 1 (3) of Regulation (EEC) No 974/71 of the Council still apply in September 1975 to such imports of wine, or was the retention in force of the monetary compensatory amounts for Germany based on considerations which contravened the prohibition on discrimination and the requirement that prices be uniform, within the meaning of Article 40 (3) of the EEC Treaty, and transformed the monetary compensatory amounts into charges having an effect equivalent to customs duties?

(2)

Is the duty to give a statement of reasons for a regulation laid down in Article 190 of the EEC Treaty discharged by the mere reference in Regulation (EEC) No 722/75 to the difference between production and marketing conditions for table wines within the Community, or should the Commission have given a more detailed statement of the reasons for retaining the monetary compensatory amounts in force for Germany?’

The order reference was entered in the Court Register on 8 November 1977.

The plaintiff in the main action and the Commission of the European Communities submitted written observations in accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC.

After hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

Written observations submitted to the Court

1. The plaintiff in the main action observes that, as regards the market in wine, German production of red wine in 1975 amounted to 1 144 000 hectolitres, 49 000 hectolitres of which was unfermented red table wine (red table wine did not appear as such in the statistics). That market of 49 000 hectolitres in no way justifies making imports of red wine 40 times larger in quantity, in other words 1 943 000 hectolitres, subject to monetary compensatory amounts. The 99 145 000 hectolitres of wine produced in Italy and in France may be set against those figures. In those two countries the production of red table wine amounts to 71 931 000 hectolitres.

   The plaintiff in the main action strongly suspects that the Community wished to exempt France and Italy from the monetary compensatory amounts which lead to distortions in competition, while the levying of those amounts was retained for imports into Germany so as to satisfy that country politically and to obtain revenue for the Community.

2. In its opinion, the levying of monetary compensatory amounts on the wine from Yugoslavia is illegal because it infringes Article 1 (3) of Regulation No 974/71.

   Under that provision, the compensatory amounts should only be applied if application of the monetary measures referred to in Article 1 (1) would lead to disturbances in trade in agricultural products. According to the field of application of Regulation No 974/71 and its objectives, those disturbances should originate exclusively from the monetary measures adopted by the Member States. As shown by the sixth recital of the preamble to Regulation No 974/71 the disturbance as such lies ‘the incidence of the monetary measures on the prices of basic products’. Compensatory amounts should only be applied in cases where this incidence would lead to difficulties: end of the sixth recital to the preamble to Regulation No 974/71. For that reason the monetary compensatory amounts are therefore necessarily of an exceptional nature: judgment of the Court of 14 May 1975 in Case 74/74, CNTA S.A. v Commission of the European Communities, paragraph 20 of the decision ([1975] ECR 547).

   It follows that the Commission should have abolished them as soon as their application proved to be no longer necessary in order to prevent disturbances in trade: judgment of the Court of 17 March 1976 in Joined Cases 67 to 85/75 Lesieur Cotelle et Associés SA. and Others v Commission of the European Communities, paragraph 27 of the decision ([1976] ECR 409).

   The importation of wine into the Federal Republic of Germany does not have disturbing effects on the domestic market in wine. On the contrary, the burdens imposed by the application of monetary compensatory amounts caused the proportion of German wine on the domestic market to increase from 67 % in 1973 to 72 % in 1974 and 75 % in 1975. In contrast, the proportion of foreign wine sold on that market fell accordingly from 33 % in 1973 to 28 % in 1974 and finally to 25 % in 1975.

   In its judgment of 22 January 1976 in Case 55/75, Balkan-Import Export GmbH v Hauptzollamt Berlin-Packhof [1976] ECR 19, the Court granted the Commission a wide discretion as regards the solution of the problem whether a risk of disturbance exists or not. The Court stated the reasons for that discretion in the light of the evaluation of a complex economic situation and of the practicability of the system of compensatory amounts also enabling groups of products to be taken into consideration. The plaintiff in the main action considers that these two considerations do not apply in this case: because special rules are involved the Commission no longer has a discretion, merely in view of the third paragraph of Article 40 of the Treaty; in addition very concrete and demonstrable facts must exist showing that it was impossible according to the objectives pursued by Regulation No 974/71 and the objectives of a common market in wine also to justify the discontinuance of the monetary compensatory amounts on imports of wine into Germany.

   Even if the Court should in law grant the Commission a discretion there are however considerable doubts as to whether the Commission was also able to and did in fact use that discretion within the context of Regulation No 722/75 from the political point of view.

   The Commission was subjected to strong political pressure from the Federal Republic of Germany in connexion with the discontinuance of the monetary compensatory amounts on wine. It seems unreasonable to grant it a discretion if it is an established fact from the beginning that it can only use that discretion to a very limited extent. Finally, the discretion granted to the Commission by the Court of Justice can however only relate to the evaluation of the facts but not to the determination and establishment of those facts.

   On the basis of those considerations the plaintiff in the main action takes the view that the compensatory amount levied at the frontier on wine from Yugoslavia is unlawful.

3. The plaintiff in the main action claims in addition that the levying of monetary compensatory amounts on wine from Yugoslavia is also unlawful because it infringes the prohibition on discrimination contained in the EEC Treaty, in particular in the second subparagraph of Article 40 (3) thereof.

   The objective of the system of monetary compensatory amounts, as follows from Regulation No 974/71 and from the case-law of the Court of Justice, is to maintain uniform prices, prevent the collapse of the intervention price system and preserve the normal flow of trade in agricultural products both within the Community and with third countries (see the judgment of the Court of Justice of 24 October 1973 in Case 10/73, Rewe-Zentral AG v Hauptzollamt Kehl [1973] ECR 1190, paragraph 14 of the decision). The defendant in the main action has claimed in the proceedings before the court making the reference that the discontinuance of the monetary compensatory amounts on wine has had the effect in Germany of encouraging imports. The measure is therefore justified by means of an objective not pursued by Regulation No 974/71. This situation already gives rise to a breach of the second subparagraph of Article 40 (3) of the EEC Treaty in conjunction with Regulation No 974/71.

   Since the plaintiff in the main action is an undertaking trading in wine in the Common Market it is also a consumer within the meaning of the above-mentioned provision. It clearly suffers discrimination as against similar undertakings in other Member States of the European Communities through the imposition of a monetary compensatory amount.

   The plaintiff in the main action is unaware of any facts which might justify different treatment within the context of the system of monetary compensatory amounts. In particular it refers to the fact that the market in wine in Germany is insignificant compared to Italy and France. If the Commission considered that it was no longer necessary to protect by means of compensatory amounts the Italian and French markets in wine from disturbances caused by the monetary situation this applied a fortiori to the German market and in particular to imports from third countries. The accuracy of this view was confirmed by Regulation No 2448/75 and by the fact that Regulation No 3071/76 introduced a compensatory amount levied at the frontier only on imports of Italian and French wines but not on imports of wine from third countries.

4. Under the third subparagraph of Article 40 (3) of the EEC Treaty any common price policy must be based on common criteria and uniform methods of calculation. The principles of uniform prices and of uniform rules for foreign trade with third countries apply inter alia within the context of Regulation No 816/70 of the Council of 28 April 1970 laying down additional provisions for the common organization of the market in wine (Official Journal, English Special Edition 1970 (I), p. 234). The plaintiff in the main action considers that the Commission has infringed these principles by adopting Regulation No 722/75 because that regulation retained monetary compensatory amounts on imports of wine into the Federal Republic of Germany whilst it declared with regard to the far more important markets in wine in Italy and France that there were no disturbances on the market caused by the monetary situation. That infringement makes the monetary compensatory amounts charged on imports of wine into the Federal Republic of Germany unlawful.

5. Article 12 (2) of Regulation No 816/70 also prohibits the levying of charges having an effect equivalent to a customs duty in trade with third countries.

   The Court of Justice has already, in its judgment of 24 October 1973(Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof [1973] ECR 1091), dealt with the question whether monetary compensatory amounts are unlawful because they infringe the prohibition on charges having an effect equivalent to a customs duty. With the adoption of Regulation No 722/75 the reasons which might, according to that judgment, justify a monetary compensatory levy on imports of wine into the Federal Republic of Germany have disappeared: the monetary compensatory amounts no longer have a corrective influence on the variations in fluctuating exchange rates but, in the view of the defendant in the main action, should protect the German market in wine from any imports. The objectives the pursuit of which the Court of Justice justified in the abovementioned judgment have now transformed themselves into the opposite. Instead of maintaining the patterns of trade and the common market the monetary compensatory amounts are at present acting as disturbing factors which distort competition.

6. The plaintiff in the main action finally claims that Regulation No 722/75 is also invalid for infringement of Article 190 of the EEC Treaty, at least in so far as the annex thereto states: ‘other than Germany’. The result thereof is that the wines imported into the Federal Republic of Germany were also exempted from the monetary compensatory amounts.

   In the field of the system of monetary compensatory amounts it is unnecessary to state with regard to each product or group of products individually the reasons why the Commission considers that a disturbance in the market caused by the monetary situation persists. The same principle applies if a certain group of products is generally exempted from the monetary compensatory amounts. If however the monetary compensatory amount is discontinued on all imports except those into the Federal Republic of Germany special rules are created requiring a very precise statement of the reasons upon which they are based from both a factual and a legal point of view. For that reason the Finanzgericht Rheinland-Pfalz, the court making the reference, expressed considerable doubts as to whether the duty to give a statement of reasons had been complied with. The Commission only stated the reasons for the exemption from the monetary compensatory amounts but not for the retention thereof in the case of one country. However, in the light of Article 190 of the EEC Treaty, that was precisely the decisive point which should have appeared in the recitals of the preamble to Regulation No 722/75. Moreover, in view of Article 190 of the EEC Treaty it is insufficient to state, as the reason upon which the contents of the regulation is based, that the risk of disturbance persists in the case of imports of wine into the Federal Republic of Germany. If the Commission declared that there was no risk of disturbance in the case of the other Member States, it should at least have stated what facts led it to take the view that a different evaluation was applicable in the case of the Federal Republic of Germany.

The Commission does not reply to the questions as to the validity and scope of Regulation No 722/75 submitted by the Finanzgericht Rheinland-Pfalz for a preliminary ruling. The main action concerns solely the levying of monetary compensatory amounts on imports of Yugoslavian wine into Germany after 1 September 1975. In this respect only the compensatory amounts fixed in Regulation No 2021/75 applied. If Regulation No 722/75 is invalid the original compensatory amounts should continue to be applied in the remaining Member States without making any change in the situation concerning the retention of the German amounts. The question essential for the purposes of the decision in the main action is whether, when Regulation No 2021/75 was adopted, the conditions applicable to the levying of such amounts under Regulation No 974/71 were complied with in respect of the compensatory amounts on table wine. The statements of the Commission relate merely to this question.

The Commission recalls that it possesses a wide measure of discretion in the evaluation of the complex market and monetary conditions in this field and that review of the legality by the Court is confined to a possible declaration that there has been a manifest error, misure of power or a clear abuse of power (see the abovementioned judgment of the Court of Justice in Case 55/75 and the judgment of 20 October 1977 in Case 29/77, SA. Roquette Frères v French State — Customs Authorities [1977] ECR 1835).

In 1975 the abundant harvest of the previous years led to a fall in prices and to an increase in stocks of table wine, especially in Italy and France. The fall in the exchange rate of the Italian lira acted as an incentive to compensate for the loss of profits on the domestic market by increased exports to the other monetary areas of the Community.

This procedure gave rise to difficulties. In the market in wine there is no intervention by means of purchases by the State but payment of an aid when storage contracts are concluded if the market price falls below the activating price. The owner of the products stored must continue to make efforts to sell them. As a result of more favourable production conditions Italian producers were able to sell their table wine at a price enabling them to cover their costs even if they obtained a price lower than the activating price. As long as comparatively high monetary compensatory amounts were levied on exports from Italy there was no particular incentive to sell Italian surplus table wine elsewhere cheaply. This situation changed when the Italian compensatory amounts decreased considerably as a result of the adjustment to the exchange rate of the green lira. In particular there were huge exports to France in 1975 after the monetary compensatory amounts charged in Italy and granted in France at first cancelled one another out until they were completely discontinued by Regulation No 722/75. The French market in wine was as a result so disturbed that the French Government could find no solution but to introduce an import charge. The discontinuance of the monetary compensatory amounts in the case of the Federal Republic of Germany resulted in an additional fall in the price of Italian wine. As a result of the experiences suffered in the meantime in the wine trade between France and Italy similar problems should have been expected in Germany. The Commission did not have in August 1975 sufficiently reliable information about a fundamental change in conditions on the market in wine that it could or should have dismissed these fears as unfounded. In that situation it did not disregard the criteria developed in the case-law of the Court of Justice for the application of the monetary compensatory amounts. Regulation No 2021/75 is therefore valid.

Oral procedure

At the hearing on 12 April 1978 the plaintiff in the main action, represented by Dietrich Ehle, and the Commission, represented by its Legal Adviser, Peter Kalbe, acting as Agent, delivered oral argument. They put forward inter alia the views summarized as follows.

The plaintiff in the main action observed that for two reasons it does not share the Commission's view that in the present case only Regulation No 2021/75 is applicable: first, Regulation No 722/75 discontinued for the first time the monetary compensatory amounts on wine coming under tariff subheadings 22.05 CI and II, except in Germany. Regulation No 2021/75 was adopted in implementation of Regulation No 722/75 and did not therefore annul the latter. Secondly, the Finanzgericht took the compensatory amounts to be applied from Regulation No 2021/75. That regulation is therefore also the subject-matter of the reference for a preliminary ruling.

The plaintiff in the main action then pointed out that the abovementioned regulations are the subject-matter of the reference for a preliminary ruling only in so far as the compensatory amounts were not discontinued in the case of the Federal Republic of Germany. The Commission's argument that the result of the invalidity of Regulation No 722/75 is that the original compensa tory amounts must continue to be applied by the other Member States without affecting the levying of the amounts in Germany is therefore unfounded.

In support of its argument that die Commission was subjected to political pressure by the Federal Republic of Germany the plaintiff in the main action quoted a telex sent by the German Minister for Agriculture on 17 September 1975 to the member of the Commission responsible for agricultural policy. In this telex the German minister objected to the discontinuance of the compensatory amounts on wine in Germany.

The Commission produced at the hearing a list of regulations to prove that in the market in wine compensatory amounts were fixed for all Member States only from 1973 to 1975. The decision adopted in Regulations Nos 722/75 and 2021/75 to retain the amounts only in the case of Germany is therefore not extraordinary.

In addition, the Commission explained that in Italy, France, Ireland and the United Kingdom the compensatory amounts acted as a curb on exports and a subsidy to imports. In addition, the compensatory amounts almost balanced one another out in France and Italy (France: 5,60 % of the intervention price; Italy: 5 %). In Germany the situation is different; there the compensatory amounts acted as a curb on imports and a subsidy to exports.

The Advocate General delivered his opinion at the hearing on 3 May 1978.

Costs

The costs incurred by the Commission of the European Communities, which submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.