Court of Justice 10-11-1992 ECLI:EU:C:1992:426

The claim that the application is inadmissible

Spain's action for annulment concerns a specific part of the implementing regulation, namely the second subparagraph of Article 7b(3).

In order to understand the background to the problem that arose regarding the definition of the form of order sought and is the background to the Commission's claim that the application is inadmissible, it is necessary to cite Article 7b in its entirety. It provides:

Pursuant to Article 6(1), second indent, of Regulation (EEC) No 1576/89, the use of a generic term in a compound term shall be prohibited in the presentation of a spirit drink unless the alcohol in that drink originates exclusively from the spirit drink cited.

However, in line with the situation at the time of entry into force of this Regulation only the following compound terms may be used in the presentation of liqueurs produced in the Community:

• prune brandy,

• orange brandy,

• apricot brandy,

• cherry brandy,

• solbaerrom, also called blackcurrant rum.

As regards the labelling and presentation of the liqueurs indicated in paragraph 2, the compound term must appear on the labelling in one line in type of a single fount and colour and the word “liqueur” must appear in immediate proximity in characters no smaller than this fount.

If the alcohol does not come from the spirit drink indicated its origin must be shown on the labelling in the same visual field as the compound term and “liqueur” either by stating the type of agricultural alcohol or as by the words “agricultural alcohol” preceded on each occasion by “made from” or “made using”.’

The provision thus concerns the use for spirit drinks of compound names, in which one of the generic terms referred to in Article 1(4) of the basic regulation is used together with another term. Article 7b(l) lays down the primary rule which is merely the natural consequence of the abovementioned rule in the basic regulation that the names referred to in Article 1(4) of the basic regulation may be used only if the criteria set out in the definition are met for that type of spirit drink. The terms ‘whisky-cola’ and ‘gin-tonic’ may thus be used only if those goods are produced in accordance with the definition of the spirit drink referred to in the compound term, that is to say whisky or gin respectively. Article 7b(2) lays down certain special rules regarding liqueurs that are described using compound terms such as ‘orange-brandy’ and ‘apricot-brandy’. Article 7b(3) contains a series ofrequirements regarding the labelling and presentation of the liqueurs indicated in paragraph 2. The last part of the second subparagraph of Article 7b(3) contains a special rule regarding a labelling requirement if those forms of spirit drink are produced on the basis of ethyl alcohol of agricultural origin.

As mentioned above, it is the second subparagraph of Article 7b(3) that the Spanish Government is seeking to have annulled. The Spanish Government considers that only Article 7b in the implementing regulation is unlawful in so far as it provides that in the production of spirit drinks indicated by a compound term including the name brandy, ethyl alcohol of agricultural origin may be used, that is to say spirit that may not be used in the production of brandy. In its view that legal effect of Article 7b stems only from the second subparagraph of paragraph 3.

The Commission contends that the derogation under Article 7b from the general rules in the basic regulation, which the Spanish Government considers unlawful, already results from Article 7b(2).

There can be no doubt that what the Commission says is correct. Although paragraph 2 could have been more clearly formulated, the interpretation advocated by the Commission is sufficiently clear from both the structure of the article and the wording used in paragraph 2. Article 7b(l) sets out the basic rule, which corresponds to the Spanish Government's primary view, namely that the use of a compound term which includes one of the names listed in Article 1(4) of the basic regulation is lawful only if the alcohol in that product originates exclusively from the spirit drink mentioned in the compound term. Paragraph 2 is formulated as a derogation from that basic rule. That is shown by the use of the words ‘however’ and ‘may’ and is also apparent from the fact that the provision covers ‘the presentation of liqueurs’, since it follows explicitly from the definition in Article l(4)(r) of the basic regulation that liqueurs may be produced on the basis of spirits other than brandy. Having regard to its wording, paragraph 3 does not contain an independent derogation from the rules of the basic regulation. It lays down conditions for the liqueurs referred to in paragraph 2 to be sold bearing the names listed. That interpretation of Article 7b is also borne out by the preamble to the implementing regulation. It is there stated:

‘in order to take account of long-established practices existing when [the basic regulation] entered into force, it should be permitted that certain composite names of liqueurs may be maintained even though the alcohol is not obtained or is not obtained exclusively from the spirit drink indicated’.

The premise underlying the Commission's claim regarding inadmissibility is to that extent correct. The clearly expounded background to Spain's claims and the legal submissions the Spanish Government has put forward in support of that claim show that the result sought by the Spanish Government can be achieved not by annulling the second subparagraph of Article 7b(3) but by annulling Article 7b(2) which authorizes the use of compound terms for liqueurs including the name brandy even if the liqueurs are produced on the basis of ethyl alcohol of agricultural origin.

The Commission contends that the application ‘reveals inconsistencies in its substantive elements — subject-matter, pleas in law or grounds and the form of order sought — and therefore is not in conformity with Article 19 of the Statute of the Court of Justice of the EEC and with Article 38(1 )(c) and (d) of the Rules of Procedure of the Court’ and that it must therefore be dismissed as inadmissible.

There may be instances in which the lack of consistency between the form of order sought and the submissions made in support thereof is such that no purpose would be served by ruling on the substance of the case. But that is not the case here. The Spanish Government has brought an action for annulment and set out the reasons on which it is relying. It has misinterpreted the relevant provisions and has therefore sought the annulment of a provision which, on the basis of its arguments, is not the appropriate provision to be annulled. However the problems that thus ensue cannot lead to the case being dismissed as inadmissible. The requirements laid down in the Rules of Procedure regarding the content of the application are met. Another point is that the inconsistency between the form of order sought and the subject-matter of the case may be significant when a decision is taken on the substance of the case. However I do not consider that those problems assume any importance in this instance. There can be no doubt as to the real thrust of the Spanish Government's claims, namely that it is incompatible with the basic regulation to allow liqueurs produced on the basis of ethyl alcohol of agricultural origin to be described by compound terms containing the generic term brandy. In determining that question it is immaterial whether that rule is contained in Article 7b(2) or in the second subparagraph of Article 7b(3). In its pleadings and at the hearing the Commission has shown that it has fully understood the background to the application for annulment and its object. Consideration of the substance of the case will in no way be prejudicial to the rights of the defence. I therefore find that there is nothing to prevent the Court of Justice from ruling on the substance of the case.

The misinterpretation which underlies the formulation of the claim might, however, be significant if the Court were to find that the derogation from the basic regulation contained in Article 7b is incompatible with the basic regulation as the Spanish Government maintains. The Court would then have to decide whether, in the particular circumstances of the present case, it is possible to alter the form of order sought, in such a way that its substance is reflected in the operative part of the judgment, that is to say by a finding that Article 7b(2) is unlawful. The Commission is right in saying that annulment of the second subparagraph of Article 7b(3) would serve no rational purpose. It would lead to the paradoxical situation that one of the conditions that is intended to prevent consumers from being misled by the use of compound terms would be removed while the rule which the Spanish Government in fact considers unlawful would — directly, at any event — not be affected by the operative part of the judgment. However there is no cause to take a position on that question before considering whether the Spanish Government's view that the derogation from the basic regulation contained in Article 7b is unlawful can be accepted.

The merits

The Spanish Government's main submission is that the derogation under Article 7b from the general rules in the basic regulation is unlawful on the ground that there is no authority for it in the basic regulation.

The Commission's implementing regulation, Regulation No 1781/91, was adopted pursuant to Article 6 of the basic regulation. In so far as it is relevant here, Article 6 of the basic regulation provides:

Special provisions may govern indications used in addition to the sales description, i. e.:

• the use of terms, acronyms or signs,

• the use of compound terms including any of the generic terms defined in Article 1(2) and (4).

...

The provisions referred to in paragraphs 1 and 2 shall be adopted in accordance with the procedure laid down in Article 15. They shall be designed in particular to prevent the creation of confusion by the names referred to in those paragraphs, especially regarding products in existence when this Regulation enters into force’.

It is plain that the implementing regulation does contain an actual derogation from one of the main principles of the basic regulation, namely that laid down in Article 5, and the question is, therefore, whether Article 6 affords authority for such a derogation. The answer is not obvious. The wording of Article 6 cannot be taken as an unequivocal indication that the provision affords such authority. It merely refers to special provisions governing the use of compound terms including any of the generic terms under the basic regulation. It might reasonably be contended that the provision merely gives authority to adopt the supplementary rules that may prove necessary in order to regulate particular problems in conjunction with compound terms, but without thereby derogating from the rules of the basic regulation. Moreover, no reference is made to the possibility of derogations in the preamble to the Regulation, the penultimate recital of which merely states that ‘the Commission should be entrusted with adopting implementing measures of a technical nature’. Against that background it is necessary to examine whether elsewhere in the Regulation and in the light of its object there are sufficiently clear indications that the enabling clause in Article 6 can be relied on by the Commission in laying down derogations from Article 5.^(*)

I consider that that question should be answered in the affirmative.

Article 5 of the basic regulation lays down the Regulation's general rule on the use of the names for the categories of spirit drinks defined in Article 1(4). The opening words of Article 5 are: ‘Without prejudice to measures adopted pursuant to Article 6 ...’. That reservation shows that the Council must have had the intention of making it possible for the Commission to lay down derogations from Article 5 by means of rules adopted on the basis of the power under Article 6. It is also significant in this respect that Article 6(3) provides that the rules adopted by the Commission

‘shall be designed in particular to prevent the creation of confusion by the names referred to in those paragraphs, especially regarding products in existence when this Regulation enters into force’.

The Commission claims — rightly in my view — that that provision shows inter alia that the legal acts adopted in implementation of Article 6 are also, perhaps in particular, intended to resolve the problems arising for products that have traditionally been sold under descriptions which could no longer be used if the general rules of the basic regulation applied. The rules on derogations are thus to serve inter alia to maintain the possibility of using traditional descriptions for products even if those descriptions do not fit in the general scheme of the Regulation. The rules adopted by the Commission are also intended to ensure, by means of general labelling and presentation requirements, that consumers are not misled by the use of those traditional descriptions.

The Commission's application of Article 6 which was approved by the Implementation Committee for Spirit Drinks in accordance with the procedure under Article 15 of the basic regulation also appears to me to be well founded. The derogation applies only for a limited number of compound terms. The authorized terms have traditionally been understood in the way in which they have been applied for many years and have been widely used. The rules cover spirit drinks that meet the criteria to be described as liqueurs and which have traditionally been produced on the basis of ethyl alcohol of agricultural origin; see in this respect the wording in the preamble to the implementing regulation:

‘it should be permitted that certain composite names of liqueurs may be maintained even though the alcohol is not obtained or is not obtained exclusively from the spirit drink indicated’.

The labelling and presentation requirements in Article 7b(3) ensure that consumers will not be misled by the use of the compound terms.

Furthermore that interpretation of Article 6 is borne out by the information produced by the Danish Government concerning the proceedings in the Council prior to the adoption of Article 6. The Danish Government's observations are reproduced in the last section of the Report for the Hearing and have not been contested by the Spanish Government at the hearing.

The Spanish Government is not just claiming that the implementing regulation is unlawful on the grounds that it contains a derogation from the rules in Article 5 of the basic regulation for which there is no authority. It also vigorously asserts that the implementing regulation is unlawful on the grounds that it is incompatible with Article 9 of the basic regulation. Article 9(1) provides that a number of specified spirit drinks, including rum and brandy,

‘may not bear in any form whatsoever in their presentation the generic name reserved for the above drinks if they contain added ethyl alcohol of agricultural origin’.

In the Spanish Government's view, therefore, that provision contains inter alia an absolute prohibition on a product described as brandy being produced with the addition of ethyl alcohol of agricultural origin.

As the Commission has pointed out, that argument may be rejected on a number of grounds. On the one hand, the provision merely specifies what must already be regarded as being the consequence of the other rules in the Regulation. The types of spirit drink covered by the provision are all such as, according to the definition contained in Article 1(4), are produced on the basis of other types of spirit than ethyl alcohol of agricultural origin. It would, therefore, already constitute a breach of Article 5 if the types of spirit drink listed in Article 9 were described with the term that corresponds to their definition if they were made from ethyl alcohol of agricultural origin. Against that background the view that the prohibition in Article 9 implies a restriction of the possibility existing in Article 6 to derogate from the prohibition in Article 5 is untenable. Furthermore, the implementing regulation's derogation from the general rules of the Regulation concerns liqueurs, that is to say goods that meet the criteria for being described as liqueurs under Article l(4)(r). The derogation in the implementing regulation applies to goods which according to their very definition may be made using ethyl alcohol of agricultural origin and it thus does not apply to goods covered by Article 9. On those grounds I do not consider that Article 9 is relevant to an appraisal of the lawfulness of the implementing regulation.

The Spanish Government has made three further submissions.

It contends first that inadequate reasons were given for the derogation and that the rules therefore fail to comply with the requirements in Article 190 of the EEC Treaty.

The Spanish Government, which must already have been acquainted with the reasons for the Regulation as a result of its membership of the Implementation Committee for Spirit Drinks, cannot properly claim that the statement of grounds in the preamble is inadequate. It is stated in the preamble that the derogations are necessary to take account of practices in existence long before the basic regulation came into force and that the special rules on labelling and presentation are essential to avoid any risk of confusion with other spirit drinks.^(*)

The statement of reasons is therefore adequate to enable those concerned to comprehend fully the background to the measures

adopted and for the Court to exercise its review of the legality of the measures.^(*)

Secondly, the Spanish Government claims that the implementing regulation fails to protect the interests of consumers and in fact is prejudicial to those interests. It further points out that the rules in the implementing regulation disregard Article 2(1 )(a) of Council Directive 79/112/EEC,^(*) under which the labelling of goods must not be such as to mislead the purchaser.

It seems clear to me that the presentation and labelling requirements in Article 7b(3) of the implementing regulation are appropriate means for preventing consumers from being misled. I also consider that the further rules laid down in the implementing regulation are such as in any event to ensure that consumers are given at least as good information as could be required under Council Directive 79/112/EEC.

Thirdly, the Spanish Government claims that the derogations infringe the general Community law principle of equal treatment in so far as brandy producers are treated differently in three respects. First, the effect of the implementing regulation is that the name brandy can be used in the presentation of spirit drinks produced on the basis of other alcohol while other composite types of spirit drink must comply with the general rules of the basic regulation. In addition the reputation of brandy is impaired whilst that of other types of spirit drink is protected since their generic terms cannot be used for spirit drinks made using ethyl alcohol of agricultural origin. The result of the rule is that producers of ethyl alcohol of agricultural origin are favoured at the expense of producers of other types of spirit. Finally producers of ‘authentic’ apricot-brandy, that is to say apricot-brandy made on the basis of brandy, are placed in a less favourable competitive position than producers who may make apricot-brandy on the basis of ethyl alcohol of agricultural origin.

That submission must be rejected. The derogations do not constitute a breach of the principle of equal treatment. The Spanish Government has failed to demonstrate that the same situations are being treated in different ways. According to the information available, the products listed in Article 7b(2) are products for which, having regard to traditional production methods and the traditional descriptions used, there is objective reason for adopting special rules regarding existing composite names.

Conclusion

For those reasons I propose that the Court dismiss the action against the Commission and order the Kingdom of Spain to bear the costs of the case while the Kingdom of Denmark should bear its own costs.