Judgment of the Court of 4 March 1980.

I — Facts

Regulation No 129 of the Council of 23 October 1962 on the value of the unit of account and the exchange rates to be applied for the purposes of the common agricultural policy (Official Journal, English Special Edition 1959-1962, page 274) stated on the one hand that sums should be expressed in a standard unit of account in a number of instruments on the common agricultural policy and on the other hand that it was necessary to fix the rate of exchange to be used for measures taken in pursuance of the common agricultural policy which required sums given in one currency to be expressed in another currency. Article 1 of the Regulation therefore fixed the value of the unit of account at 0.88867088 grams of fine gold; under Article 2 (1) the exchange rate to be applied was to be that which corresponded to the par value communicated to and recognized by the International Monetary Fund.

In pursuance of Article 3 (1) of Regulation No 129, which permits derogations from the principle of using the par value for converting one currency into another, the Council by Regulation No 222/73 of 31 January 1973 on the exchange rates to be applied in agriculture for the currencies of the new Member States (Official Journal L 27, p. 4) fixed the rate of exchange to be applied for the conversion of prices and other amounts, in derogation from Article 2 (1) of Regulation No 129, for Ireland and the United Kingdom at the rate corresponding to the representative rate for the currencies of those two Member States, the representative rates being: £1 sterling = £1 Irish = 2.3499 United States dollars = 2.1644 units of account.

In Regulation No 2498/74 of 2 October 1974 fixing representative conversion rates to be applied in agriculture for the currencies of the new Member States (Official Journal L 268, p. 6) the Council stated that the conversion rates to be applied in agriculture had been fixed with the aim of reflecting economic realities as closely as possible but that at that time the aim was no longer being achieved in the case of the United Kingdom and Irish currencies as the conversion rates actually recorded for those two currencies on exchange markets had since shown a significant depreciation. Consequently Article 1 (1) of Regulation No 2498/74 provided that “where transactions to be carried out in pursuance of instruments relating to the common agricultural policy or specific rules laid down under Article 235 of the Treaty require the currencies of the new Member States to be expressed in another currency or in units of account, the rate of exchange to be applied for the conversion of prices and other amounts shall, in derogation from Article 2 (1) of Regulation No 129, be that which corresponds to the representative rates for the currencies of those Member States”; Article 1 (2) fixed the following representative rates:

1. for the Irish pound: £1 Irish = 1.9485 units of account;

2. for the pound sterling: £1 sterling = 2.0053 units of account.

By Regulation No 475/75 of the Council of 27 February 1975 on the exchange rates to be applied in agriculture (Official Journal L 52, p. 28), the representative rate was fixed, for the Irish pound at 1.86151 units of account and for the pound sterling at 1.96178 units of account.

Richard Pool, farmer, of Higher Trayne, Ilfracombe, Devonshire, England, fattens calves for sale as adult bovine animals.

He takes the view that when the Council as from 7 October 1974 fixed the representative rates of the British and Irish currencies applicable for the purposes of the common agricultural policy at different rates for the pound sterling and the Irish pound, it breached the prohibition on discrimination set out in Article 40 (3) of the EEC Treaty and caused him damage for which compensation is due to him.

II — Written procedure

On 28 March 1979 Richard Pool lodged an application under the second paragraph of Article 215 of the EEC Treaty for compensation against the Council of the European Communities.

In its defence the Council has dealt solely with the question whether in this case, the first condition for the Community to incur liability arising from a legislative act involving choices of economic policy is fulfilled, namely whether there has been a sufficiently serious breach of a superior rule of law for the protection of the individual; it has suggested that the existence of the other conditions for an action for damages should only be discussed, if necessary, later in a separate phase of the proceedings.

In these circumstances the applicant has not lodged a reply.

On 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. It did however invite the applicant to identify more precisely the provisions of Regulation No 2498/74 which he regards as illegal and to explain the considerations on which his application is based, in particular the reasons leading him to belive that the representative rate for the pound sterling was in itself fixed in a manner incompatible with the Treaty; the applicant complied with this request within the prescribed period. At the request of the Court the Council commented in writing on the applicant's replies.

III — Conclusions of the parties

The applicant claims that the Court should:

1. award him damages of £9 504 against the European Economic Community in the person of the Council of the European Communities;

2. order the Council to pay the costs.

The Council contends that the Court should:

1. dismiss the application;

2. order the applicant to pay the costs.

IV — Submissions and arguments of the parties during the written procedure

The applicant recalls that Regulation No 805/68 of the Council of 27 June 1968 on the common organization of the market in beef and veal (Official Journal, English Special Edition 1968 (I), p. 187) laid down a single price system for beef and veal within the Community.

1. Under the second subparagraph of Article 40 (3) of the EEC Treaty, a common organization of the market is to exclude any discrimination between producers or consumers within the Community and a common price policy must, under the third subparagraph of the same provision, be based on common criteria and uniform methods of calculation.

   Conversion rates for all the Member States should therefore be objective and, where possible, reflect monetary reality. If the Irish pound and the pound sterling are convertible they must have the same rate of conversion vis-à-vis other currencies and themselves.

   The present arrangements, which enable the United Kingdom Government, for short-term political reasons, to favour the consumer and the Irish Government to favour the producer are illegal.

   The present system of pricing is arbitrary because it results in purely national pricing and is clearly unlawful; the clearest demonstration of this is that the United Kingdom and Ireland, which used to enjoy free trade, no longer do so, despite the fact that they continue to share a common currency.

   Article 3 of Regulation No 129 does not permit the Council to abandon any attempt to fix a rate of exchange which bears a relationship to a currency market and still less to start from the opposite end and decide what a farmer should receive in national currency and what a consumer should pay in national currency. Where a monetary practice of an exceptional nature is in all respects identical in the case of two currencies there is no warrant in Article 3 of Regulation No 129 for treating them differently.

   In particular it does not give the Community a discretion to fix, on a nation by nation basis, the price which it considers a farmer should receive on a particular market. Regulation No 129 provides for the neutral conversion into national currency of the sums expressed as units of account. The regulation does not confer on the Council the absolute discretion to lay down any exchange rates it considers appropriate; the unit of account was intended to produce an objective and politically neutral instrument for expressing common prices.

2. It follows from the case-law of the Court that the liability of the Community arises in the case of legislative provisions if the Community has committed a sufficiently serious breach of a superior rule of law for the protection of the individual. The rules laid down in Article 40 (3) of the EEC Treaty are clearly designed to protect the interests of the individual farmer and consumer. They impose on the Council a clear and precise obligation not to manipulate prices State by State. Article 40 (3) contains a fundamental constitutional guarantee: it is the counterpart to conferring on the Community the power to regulate the agricultural markets.

   The fundamental constitutional guarantee of Article 40 (3) has been flagrantly infringed by the Council by Regulation No 2498/74 and subsequent regulations in so far as they have not complied with uniform methods of calculation and common criteria and at least in so far as different conversion rates have been laid down for the pound sterling and the Irish pound.

   Article 40 (3) places limits on any discretionary power of the Community. The wide discretion undoubtedly enjoyed by the Community legislature is limited by the requirement of employing, in the differentiation of the facts, objective criteria and objectively justified criteria. If they do not exist the differentation is discriminatory.

   Article 39 of the EEC Treaty, which lays down the objectives of the common agricultural policy, whilst it enables the Community to take into account various considerations, nowhere enables the Community to differentiate because of national territory.

3. Regulation No 2498/74 does not contain a single word of justification for the differentiation between the representative rates of the Irish pound and the pound sterling. The Council has no discretion to treat two identical monetary situations in a different way. The reasons advanced by the Council for explaining the different treatment of the two currencies in question do not justify the differentiation: the differences between Ireland and the United Kingdom have always existed and will continue to exist.

   It is hardly consistent with the guarantees of the common agricultural policy for a United Kingdom farmer, in every respect comparable to a farmer in Ireland, to be treated differently merely because he farms in England rather than in Ireland.

   Rates of exchange should be as neutral as possible, the political element being found in the deliberations leading to the fixing of the common price in units of account.

   In any event, if the differentiation brought about between the Irish pound and the pound sterling by Regulation No 2498/74 was not illegal at the time when that regulation was adopted it became so when differentiation was maintained and indeed increased in the subsequent regulations.

4. The Council does not even argue that the so-called representative rates were representative of anything; in this situation the applicant can hardly argue that the rate of exchange fixed for the pound sterling was in itself incorrectly fixed save that it was not representative of any real monetary relationship with the currency of any other country, the clearest proof of which is the absence of any similarity with the Irish pound. The applicant has chosen the Irish pound for comparison merely because the discrimination is there most obvious.

5. It is evident from the case-law of the Court that a person who, in the event of a breach of Community law by a Member State, relies on a provision relating to nondiscrimination must be placed by the national court in such a position that in his individual case the breach of Community law by the Member State has been nullified. The Treaty should not be interpreted as laying down a greater level of protection for private individuals against breach of Community law by a Member State than against the Community in the case of breach of Community law by the Community itself. The only court in a position to uphold Community rights in this situation is the European Court. An annulment action, even if it were available, would not be suitable for this purpose; the appropriate procedure is the action for damages. The Court can, by awarding the applicant compensation, ensure that the rights which he derives from the Treaty are safeguarded.

6. It is true that the applicant has never sold in Ireland or into intervention in Ireland; the decisive point is that in terms of intervention prices or market prices expressed in pounds the applicant would at all times have received more if he had been selling in Ireland. He has thus suffered damage because of the discriminatory conduct of the Council which flagrantly infringes the Treaty.

The correct measure of the damage suffered is compensation to put the applicant in the position he would have been in had the Community performed its obligation. The appropriate level of compensation to the applicant is that which would put him in the same position as if he had been selling in the Republic of Ireland. The damage is the difference between the price received on sale of bovine animals and the price which he would have received if the representative rate for the Irish pound had applied in place of the representative rate for the pound sterling. For the period from 11 October 1976, the date from which the difference in the rate between the pound sterling and the Irish pound exceeded 10 %, until the end of February 1979, the damage suffered by the applicant may thus be evaluated at 9 504 pounds sterling.

The Council recalls that, under the consistent case-law of the Court of Justice, the Community does not incur liability for damage caused through the effects of a legislative measure involving choices of economic policy unless a sufficiently serious breach of a superior rule of law for the protection of the individual has occurred.

It is true that the prohibition on discrimination laid down in the second subparagraph of Article 40 (3) of the EEC Treaty is designed for the protection of the individual. However, in order to justify an action for damages, damage must have occurred and there must be a causal connexion between the damages being claimed and the breach of the rule of law.

In this case the Council did not breach the prohibition on discrimination and in any event did not do so in a sufficiently serious way; it did not unjustifiably treat two factual situations differently when identical circumstances obtained: sufficient reasons justify the differentiated treatment complained of.

1. In pursuance of Regulation No 805/68 the Council fixes for each marketing year a guide price and an intervention price for adult bovine animals; that price, laid down in units of account, is the common price within the common agricultural policy. It was fixed in pursuance of the third subparagraph of Article 40 (3) of the Treaty. As European farmers are not paid for their products in units of account but in their national currencies, it is necessary to lay down an exchange ratio between the unit of account and national currencies. This was the point of Regulation No 129 which determined the value of the unit of account on the basis of its fine gold content. Subsequently the international monetary system set up by the Bretton Woods Agreements and the values of the various national currencies underwent major changes: there is no longer any firm exchange ratio between national currencies and gold; for the conversion of the unit of account into national currencies, the specific amount of fine gold has been replaced by the representative rate or “green rate” for each national currency and, since 1971, monetary compensatory amounts have been introduced for trade between the majority of the Member States.

2. As regards more particularly the representative rates of the pound sterling and the Irish pound, these were fixed at the same value in the early days of the application of the common agricultural policy to the new Member States. As from 7 October 1974, Regulation No 2498/74 fixed the Irish pound at 1.9485 units of account and the pound sterling at 2.0053 units of account. This trend has continued: thus, under Council Regulation No 643/79 of 29 March 1979 (Official Journal L 83, p. 1), the rates at present applicable are, for the pound sterling, 1.49794 units of account and for the Irish pound 1.26702 units of account. The representative rates for the various national currencies are fixed on the basis of a proposal from the Commission, which is itself preceded by a suggestion from one or more Member States concerned. In this way the Council respects the prohibition on discrimination.

   The fact that the rate for the Irish pound and that for the pound sterling were identical for the nonagricultural sector plays no role in this case, which concerns conversion for the purposes of the common agricultural policy.

3. There were objective reasons for setting different representative rates for the pound sterling and the Irish pound.

   The Community has incontestably, in the field of the common agricultural policy, the power to fix representative rates for the various national currencies.

   The prohibition of discrimination contained in the second subparagraph of Article 40 (3) of the EEC Treaty is one of the principles of Community law; however, in the pursuit of the objectives of the common agricultural policy attention should be paid also to ensuring a fair standard of living for the agricultural community (Article 39 (1) (b)) and reasonable prices for supplies to consumers (subparagraph (e)). It is possible to give some objectives temporary precedence over others. It is also necessary to take account of the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole (Article 39 (2) (c))

   The Council is thus required to weigh the merits of various reasons one against the other. This involves judging situations on the basis of economically justified criteria, that is to say, fixing the amounts in question at an economically justified level.

   It is well known that the place of agriculture in the economy of Ireland differs from that in the United Kingdom; this is particularly the case with beef and veal.

   Ireland is an agricultural exporting country whereas the United Kingdom is a consumer country. “Devaluation” of the representative rates means that the farmer receives a higher income in his own currency and that consumers have to pay higher prices for agricultural products. The interests of consumers and the whole of the economy have to be taken into consideration when shaping agricultural policy. In the case of the United Kingdom, the State concerned, then, the Commission in its proposal and the Council when adopting its decision decided on a lower “devaluation” of the representative rate than that for the Irish pound and consequently for a smaller increase in the price of food to consumers than in the case of Ireland.

   In setting representative rates under Regulations Nos 129 and 2543/73 of the Council of 19 September 1973 amending Regulation No 129 on the value of the unit of account and the rates of exchange to be applied in the common agricultural policy (Official Journal L 263, p. 1) the Council has a wide discretion, which it has not abused but exercised in a reasonable manner. The measure disputed by the applicant is a measure of economic policy “in which one of the chief features is the exercise of a wide discretion essential for the implementation of the common agricultural policy”. The slower reduction of the representative rates in the United Kingdom where consumer prices are of much greater importance than in Ireland, was intended to produce a slower rise in those prices. This was an economically justified criterion so that there has been no discrimination. The part played by agriculture in the economy of the United Kingdom is different from that which it plays in Ireland; it is thus permissible for the representative rates also to be different.

4. Thus the adoption of different representative rates for the pound sterling and the Irish pound was a decision within the Council's discretion, taken on the basis of economically justified criteria, and it in no way infringed the prohibition on discrimination. The claim for damages made by the applicant is thus without foundation. At all events the Council did not “manifestly and gravely” disregard the limits on the exercise of its powers.

5. Damages cannot be claimed in the absence of an infringing act. In any event it should be noted that the market price for beef and veal in Ireland was lower than that in the United Kingdom during the entire period in question. Thus, if the applicant had sold his produce in Ireland he would have received less than in the United Kingdom; he has therefore not incurred any loss in selling his produce in the latter Member State.

V — Oral procedure

The applicant, Richard Pool, represented by Andrew Durand, and the Council, represented by Bernhard Schloh, presented oral argument and their answers to questions put by the Court at the sitting on 4 December 1979. The Advocate General delivered his opinion at the sitting on 17 January 1980.

Costs

13 Under Article 69 (2) of the Rules of Procedure of the Court of Justice the unsuccessful party must be ordered to pay the costs.

14 Since the applicant has failed in his submissions, he must be ordered to pay the costs.