Court of Justice 11-02-1999 ECLI:EU:C:1999:67

Introduction

This infringement action concerns Germany's alleged non-transposition of Article 3(1) of Council Directive 75/439/EEC of 16 June 1975 on the disposal of waste oils,^(*) as amended by Council Directive 87/101/EEC of 22 December 1986,^(*) which requires Member States to give priority to the processing of waste oils by regeneration, in preference to their disposal by combustion or other means. The parties' arguments centre on whether the qualification of that requirement in Article 3(1) by reference to technical, economic and organisational constraints should be understood as a derogation, to be strictly construed, or as a necessary precondition to the obligation to grant priority, to be given its ordinary, broad meaning. It is my view, however, that the provision requires Member States to give priority to regeneration of waste oils, but recognises that, in deciding on the nature and scope of the measures adopted, they may take account of certain practical constraints.

Legal and factual context

Articles 1 to 6 of the original text of the Directive were entirely replaced by the new provisions inserted by Article 1 of the amending Directive. The Directive formerly required Member States to ensure that, as far as possible, the disposal of waste oils be carried out by recycling (regeneration and/or combustion).^(*) The second recital in the preamble to the amending Directive reads:

‘Whereas regeneration is generally the most rational way of re-using waste oils in view of the energy savings which can be achieved; whereas therefore, priority should be given to the processing of waste oils by regeneration, where technical, economic and organisational constraints allow it.’

Article 1 of the Directive defines a number of relevant terms:

‘For the purposes of this Directive:

• “waste oils” means:

  any mineral-based lubrication or industrial oils which have become unfit for the use for which they were originally intended, and in particular used combustion engine oils and gearbox oils, and also mineral lubricating oils, oils for turbines and hydraulic oils;

• “disposal” means:

  the processing or destruction of waste oils as well as their storage and tipping above or under ground;

• “processing” means:

  operations designed to permit the re-use of waste oils, that is to say, regeneration and combustion;

• “regeneration” means:

  any process whereby base oils can be produced by refining waste oils, in particular by removing the contaminants, oxidation products and additives contained in such oils;

... .’

Article 2 of the Directive states:

‘Without prejudice to the provisions of Directive 78/319/EEC,^(*) Member States shall take the necessary measures to ensure that waste oils are collected and disposed of without causing any avoidable damage to man and the environment.’

Article 3 of the Directive provides:

‘(1)

Where technical, economic and organisational constraints so allow, Member States shall take the measures necessary to give priority to the processing of waste oils by regeneration.

(2)

Where waste oils are not regenerated, on account of the constraints mentioned in paragraph 1 above, Member States shall take the measures necessary to ensure that any combustion of waste oils is carried out under environmentally acceptable conditions, in accordance with the provisions of this Directive, provided that such combustion is technically, economically and organisationally feasible.

(3)

Where waste oils are neither regenerated nor burned, on account of the constraints mentioned in paragraphs 1 and 2, Member States shall take the measures necessary to ensure their safe destruction or their controlled storage or tipping.’

Article 5(2) of the Directive provides:

‘Where the objectives defined in Articles 2, 3 and 4 cannot otherwise be achieved, Member States shall take the necessary measures to ensure that one or more undertakings carry out the collection and/or disposal of waste oils offered to them by holders, where appropriate in the area assigned to them by the competent authorities.’

Articles 14 and 15 of the Directive^(*) state, respectively:

As a reciprocal concession for the obligations imposed on them by the Member States pursuant to Article 5, indemnities may be granted to collection and/or disposal undertakings for the service rendered. Such indemnities must not exceed annual uncovered costs actually recorded by the undertaking taking into account a reasonable profit.

The amount of these indemnities must be such as not to cause any significant distortion of competition or to give rise to artificial patterns of trade in the products.’

The indemnities may be financed, among other methods, by a charge imposed on products which after use are transformed into waste oils, or on waste oils.

The financing of indemnities must be in accordance with the “polluter pays” principle.’

Articles 17 and 18 of the Directive^(*) provide, respectively, as follows:

Each Member State shall periodically convey to the Commission information concerning its technical expertise and the experience gained and results obtained through the application of measures taken pursuant to this Directive.

The Commission shall send an overall summary of such information to the Member States’.

Every three years, Member States shall draw up a situation report on the disposal of waste oils in their respective countries and shall send it to the Commission.’

Article 2 of the amending Directive required the Member States to take the measures necessary to comply with the new provisions of the Directive, including Article 3(1), by 1 January 1990 and forthwith to inform the Commission thereof. Article 4 of the amending Directive also requires Member States to communicate to the Commission the texts of the main provisions of national law which they adopt in the field covered by the Directive.

In Germany, the Abfallgesetz (Law on Waste)^(*) provided, until 7 October 1996, the basis for the adoption of detailed measures on waste disposal, including the Altölverordnung (Regulation on Waste Oils).^(*) Paragraphs 2 and 3 of the AltölV permit the recycling of certain specified waste oils into base oils or other products, while subjecting the recycling of other waste oils to conditions regarding their pollutant content. Paragraph 4(1) of the AltölV requires the separate disposal of waste oils with a high PCB^(*) or halogen content, and prohibits their mixing with other waste oils. Paragraph 4(2) prohibits the mixing of certain of the waste oils specified in Paragraph 2 with other waste oils. Paragraph 4(3) of the AltölV permits the mixing of such waste oils, by way of exception to the two foregoing subparagraphs, in certain authorised recycling, combustion or disposal plants. Other measures adopted under the AbfG provide that waste oils may only be disposed of by combustion in plants which are capable of maximising the energy recovered therefrom.

Paragraph 5b of the AbfG itself required that undertakings which sold combustion-motor oils, which are particularly suitable for regeneration, to end-users should also collect waste oils from their customers without charge. The AbfG was replaced, as of 7 October 1996, by the Kreislaufwirtschafts- und Abfallgesetz (Law on Recycling and Waste).^(*) Paragraph 6 of the Krw/AbfG grants priority to the method of waste disposal which is the most respectful of the environment and permits regulations to be adopted granting priority in specific cases either to regeneration or to combustion, depending on the circumstances. Paragraph 5(2) provides that the method of disposal most in keeping with the type and character of the waste should be chosen.

Arguments of the Parties

Germany raised an objection of inadmissibility against the Commission's action, based on the alleged breach of the principle of collegiality by the Commission's decision to issue a reasoned opinion in the present case before a detailed text had been prepared for its approval. However, it withdrew this objection at the oral hearing, in the light of the judgment of the Court in Case C-191/95 Commission ν Germany.^(*)

The Commission alleges in its letter of formal notice of 10 August 1992, in its reasoned opinion of 14 March 1995 and in the present action that Germany is in breach of its obligations under Article 3(1) of the Directive because it has not accorded priority to regeneration of waste oils over their disposal through combustion, without being able to justify this failure by reference to technical, economic or organisational constraints. It submits that the reference to such constraints in Article 3(1) is a derogation from the requirement that priority be granted to regeneration, which should, therefore, be strictly construed in the light of the overall objectives of the Directive.^(*) At the oral hearing, the agent for the Commission stated that this derogation was limited to situations where the constraints set out in Article 3(1) made it impossible to accord priority to regeneration; however, he was unable to give the Court an example of constraints which might satisfy this standard.

Germany takes the view that a Member State is not obliged to transpose the literal terms of Article 3(1) of the Directive, provided that, in the context of the concrete situation in its territory, and subject to the constraints mentioned in that Article, the conditions for regeneration of waste oil are laid down.^(*) Article 3(1) of the Directive presumes that certain constraints are likely to exist, and the obligation to grant priority to regeneration of waste oils is not, therefore, unconditional; it is subject to the precondition that such constraints have been overcome. The reference to undefined technical, economic and organisational constraints is not, therefore, to be construed strictly; rather, it gives to Member States a large margin of appreciation regarding the existence of such constraints, which may apply cumulatively; their assessments are subject to review only in the case of a manifest error of appreciation on their part. This is confirmed by comparison with the much more restrictive text of the original Commission proposal.^(*) The agent for Germany summarised the attitude of the Commission at the oral hearing, as requiring either the adoption of an empty legislative formula, which would be pointless, or State intervention in the market, which is not required by Article 3(1).

In the circumstances, the requirements of Article 3 are sufficiently complied with, in Germany's view, in the German legal provisions already summarised. Germany also claims that the prohibition by the AltolV of the mixing of waste oils suitable for recycling with other waste oils ensures that all suitable waste oils are available to the recycling industry. This is reinforced by the collection of waste oils by sellers pursuant to Paragraph 5b of the AbfG. In fact, more than 50% of waste oils produced every year in Germany is recycled.^(*) In the light of economic and technical constraints, Germany states that it is under no obligation to take further measures to give greater priority to regeneration. The recent closure of a regeneration plant has reduced capacity to produce base oils from waste oils by about a third.^(*) Even though regenerated base oils are perfectly acceptable to major automobile companies, they are not favoured by consumers. In addition, Germany argues that the absence of demand for regenerated oils and declining requirements for motor oils in general, over-capacity in European base-oils production^(*) and the low cost of new oils constitute an economic constraint. The former indemnity for recycling under Paragraph 30 of the AbfG was recently phased out pursuant to the ‘polluter pays’ principle.

Germany submits that, in any event, any incentive providing for the expansion of waste-oils regeneration capacity could mislead undertakings, would amount to unlawful State aid, would unfairly disadvantage other market actors, such as recycling enterprises producing products other than base oils and cement- and steel-works and specialised incinerators which derive thermal energy from combustion of waste oils, and could lead to the development of a monopoly for the two remaining regeneration plants.^(*) Granting regeneration plants a right of first refusal of waste oils held by collection undertakings, at an acceptable price, would also result in an unacceptable disadvantage to the latter undertakings, which would still have to pay the normal price for waste oils collected. Furthermore, agreements between undertakings establishing such a system could raise competition-law problems. In addition, transport of waste oils from all parts of Germany to the two existing regeneration plants would be costly and would pose environmental risks, contrary to Article 2 of the Directive. There being no duty on lubricants in Germany, no fiscal advantages can be offered to waste-oil regeneration plants. In any event, as the highest excise duty that could be imposed on waste oils under Article 2(2) of Council Directive 92/81/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on mineral oils^(*) would be DEM 30 per tonne, exoneration of regeneration plants from payment of this duty (if it were imposed) would not give them a sufficient competitive advantage over undertakings which purchase waste oils for combustion purposes; the duty would simply constitute an additional burden for waste-oils collection enterprises, thereby endangering the efficacy and equilibrium of the system of collection.

The Commission submits that priority has not been granted, either formally or materially, to the regeneration of waste oils in Germany. The requirement in Article 6 of the Krw/AbfG that the disposal method be used which is the most respectful of the environment does not implement Article 3(1) of the Directive, because the latter, as indicated by the second recital, gives a priori precedence to regeneration on grounds of energy efficiency. The prohibition by the AltölV of the mixing of different types of waste oils is a necessary condition for regeneration of the most suitable oils, but does not guarantee priority.

The Commission contends that the constraints invoked by Germany are too general in nature to satisfy a strict interpretation of the derogation provision in Article 3(1). Over-capacity in the regeneration industry, evidenced by the closure of one plant, demonstrates the absence of technical constraints on the grant of priority. Economic constraints can only be invoked where regeneration undertakings do not exist in the Member States or are unable to achieve the necessary volumes of activity, or where it is shown that there are no further possibilities of marketing regenerated base oils. Germany's arguments about the non-profitability of waste-oils regeneration all relate to present market conditions rather than to the likely situation following the adoption of measures to grant priority to such regeneration; the Directive envisages, for example in the indemnity provisions of Articles 14 and 15, that measures be taken to counteract market forces. The Commission states that it cannot judge the different compliance possibilities open to Member States but favours greater marketing efforts, and observes that, in lieu of subsidies, favourable fiscal treatment of regeneration relative to combustion of waste oils would have a positive effect. The agent for the Commission referred at the oral hearing to a 1997 report by Coopers and Lybrand indicating that there was a difference of only DEM 20 between the prices paid for waste oils by regeneration undertakings and by those purchasing them for combustion, a gap which could be bridged by fiscal advantages. In this regard, Germany is not obliged to avail of the possibility of exonerating combustion oil from excise duty granted by Article 8 of Directive 92/81/EEC and extended by Council Decision 97/425/EC.^(*) The agent for the Commission also stated at the oral hearing that the grant of State aid to regeneration plants was not necessarily excluded. Furthermore, measures to ensure affordable supplies of waste oils to regeneration plants, such as the grant of a right of first refusal, were envisaged by Article 5(2) of the Directive. In that regard, the Commission submits that waste oils are already transported over long distances for disposal by combustion. The adoption of measures giving priority to waste-oil regeneration necessarily presupposes concomitant disadvantages for economic operators who use waste oils for other purposes. Such priority would be unlikely to lead to a monopoly for existing plants, because of possible competition from undertakings elsewhere in the Community and because other undertakings suffering from over-capacity in respect of production of new oils would be attracted into the regeneration sector if it were made economically attractive.

Analysis

It should be recalled at the outset that the obligation of a Member State to take all the measures necessary to achieve the result prescribed by a directive is a binding obligation imposed by the third paragraph of Article 189 of the EC Treaty and by the Directive itself.^(*)

Article 3(1) of the Directive creates a binding obligation, subject only to the expressed qualifications, to ‘take the measures necessary to give priority to the processing of waste oils by regeneration’. It is clear, in my view, that this provision calls for more than the legislative enactment of an ‘empty formula’. The priority to be given to regeneration has a practical environmental purpose, as well as the realisation of energy savings.^(*) If the objectives defined in, inter alia, Article 3 cannot otherwise be achieved, Article 5(2) sets out the further steps to be taken by Member States to ensure the disposal (including regeneration) of waste oils by designated undertakings. The existence of such a concrete obligation of last resort reinforces the impression that Articles 2, 3 and 4 of the Directive create obligations of a similarly concrete character. In practical terms, the giving of priority to regeneration of waste oils must entail tangible steps to favour this method of disposal over combustion, destruction, storage or tipping.

The Member States, equally clearly, have a very large discretion as to how to achieve the result prescribed by Article 3(1) of the Directive, as is witnessed by the very general terms in which the obligation is expressed and by the range of possible tangible measures discussed by the parties in their pleadings. These include marketing campaigns, fiscal incentives and compulsory measures. In such circumstances, neither the Commission nor the Court can prescribe the precise measures which Member States should adopt. Where the Member States are entrusted with such a discretion, the Court may, however, establish, at the instigation of the Commission, whether a Member State has manifestly taken no appropriate measures, or insufficient measures, to fulfil its obligations. For example, in Case C-265/95 Commission ν France^(*) the Court referred to the margin of discretion enjoyed by Member States regarding public-order measures to eliminate barriers to imports in a given situation and noted that the Community institutions could not prescribe the measures to be adopted,^(*) but found, none the less, that, having regard to the facts, ‘the measures adopted by the French Government were manifestly inadequate’.^(*) In Case C-3/96 Commission ν Netherlands,^(*) the Court held that a Member State could be found to have failed to fulfil its obligation under Article 4(1) of Council Directive 79/409/EEC on the conservation of wild birds^(*) to classify special protection areas (SPAs) for the conservation of certain bird species if the number and total area of the sites so classified were ‘manifestly less’ than the number and total area of the most suitable sites.^(*)

It seems manifest in the present case that Germany has taken no steps to give priority to the regeneration of waste oils. It is not necessary, in this context, to consider the terms of the Krw/AbfG, which came into force only after the issue of the reasoned opinion which preceded the present proceedings. In any event, and irrespective of the formal parity accorded by that measure to regeneration and combustion, it simply provides for the adoption of specific concrete measures, no example of which has been cited to the Court other than those carried over from the period of application of the AbfG. I agree with the Commission that neither the obligation imposed by Paragraph 5 b of the AbfG on sellers of certain oils to end-users to collect waste oils from their customers, nor the prohibition imposed by the AltölV on the mixing of waste oils suitable for regeneration, is sufficient to amount to a grant of priority to regeneration, although both measures may be necessary for the achievement of that objective. Neither measure appears to accord any concrete advantage to regeneration over, for example, disposal of waste oils by combustion.

It is necessary, therefore, to examine whether Germany was prevented as claimed by constraints of a technical, economic or organisational character from giving priority to the regeneration of waste oils. I would like to make two initial observations about the text of the qualification contained in Article 3(1) of the Directive. First, I do not agree with the Commission that the qualification contained in Article 3(1) should be understood as a derogation and, therefore, read restrictively. Even if its scope were to be determined with regard to the objectives of the Directive, as the case-law on derogations cited by the Commission requires, this would not greatly assist matters, as the statement of the objective of the grant of priority to regeneration contained in the second recital in the preamble itself contains the same qualification by reference to technical, economic and organisational constraints. Furthermore, although priority is to be given to regeneration, the Directive makes provision, in paragraphs 2 and 3 of Article 3, for alternatives to regeneration where waste oils are not regenerated on account of these constraints. These constraints also influence whether waste oils are dealt with in such circumstances by combustion or by other means. The role of technical, economic and organisational constraints in determining the measures adopted by Member States should not, therefore, be seen as a derogation, but rather as a central element of the scheme of alternatives set out in order of preference in Article 3.

Secondly, reference should be made to the differences in the structure of the clause referring to such constraints in the different language versions of Article 3(1) of the Directive. The Danish, Finnish and Swedish versions require measures to be taken where this is possible in the light of the technical, economic and organisational restrictions.^(*) The Spanish, English, French, Italian and Portuguese versions require the necessary measures granting priority to be taken where, or in so far as, technical, economic and organisational constraints so allow or permit;^(*) the German, Greek and Dutch versions, on the other hand, are couched in negative terms, requiring the taking of such measures in so far as, or whenever, such constraints do not oppose this or do not exist.^(*) The verbs or adjectives used in the German, Greek and Dutch versions might be understood, in literal terms, as permitting the invocation of such constraints whenever they merely present an obstacle, however insignificant, to national measures, in contrast to the other language versions, which, in literal terms, appear to excuse the Member States from taking such measures only where this is actually prevented by technical, economic and organisational constraints. Confronted with such divergences, an interpretation of a provision is found ‘by reference to the purpose and general scheme of the rules of which it forms part’.^(*) In the present case, the scheme of Article 3, with its considered sequence of alternative methods of disposal of waste oils, combined with the linkage of regeneration with the practical objective of achieving energy savings, seems to me to preclude acceptance of the Commission's argument that Member States may be relieved of the obligation to give priority to regeneration only in cases of absolute impossibility on technical, economic or organisational grounds. On the other hand, it would empty Article 3(1) of all useful content and negate the obligation contained therein if the mere existence of technical, economic or organisational obstacles were sufficient to permit Member States not to take the necessary measures. It is implicit in the requirement that ‘the measures necessary to give priority to the processing of waste oils by regeneration’ that the normal tendency on the related markets for oils and lubricants, waste oils, regenerated base oils and combustible material may have to be countered by national measures of an economic character, that efforts may have to be taken to surmount technical obstacles, and that organisational structures may have to be put in place which did not previously exist.

The simple fact is that German law contains no provision giving priority to waste-oil regeneration. This situation could be justified only if Article 3(1) made the absence of ‘technical, economic and organisational constraints’ a condition of the obligation to take measures. That result was clearly not intended. It would contradict the recited declaration that ‘regeneration is generally the most rational way of re-using waste oils’. Such constraints will always exist. The relationship between the obligation and the constraints recognises that the priority is not absolute but must take account of obvious practical obstacles. This may properly be regarded as a particular expression of the principle of proportionality or of the balance to be struck between the end to be achieved, i.e. regeneration, and the means to achieve it, i.e. the measures to be adopted. Thus, Member States are required, in my view, to give priority to the regeneration of waste oils through practical measures, to the extent that this will be effective and that they are not thereby subjected to disproportionate technical, economic or organisational burdens, having regard to the objective of achieving energy savings and to the existence of the alternative methods of disposal referred to in paragraphs 2 and 3 of Article 3 of the Directive.^(*)

None the less, the obligation to grant priority to regeneration remains the central requirement of Article 3(1). I have already stated that Germany has manifestly failed to take any measures with a view to giving effective priority to the regeneration of waste oils. It has not, for example, addressed the Commission's suggestion of a marketing campaign for regenerated base oils, which it is acknowledged are an acceptable alternative to ordinary motor lubricant oils. Regarding possible fiscal incentives, the payment of indemnities or measures to give regenerating plants preferential access to supplies of waste oils, or such other alternative options for granting priority as may exist, it is not sufficient for Germany simply to exclude options which involve certain budgetary costs or which, inevitably, will cause disadvantages to undertakings which dispose of waste oils by means other than regeneration. Nor can a Member State simply invoke the possible unlawfulness of particular measures by reference to Community rules on competition and State aids, when there is no evidence that it has consulted the Commission in that regard.^(*)

Moreover, where a Member State encounters difficulties which it claims make it impossible, or, in the light of the qualification in Article 3(1) of the Directive, disproportionately difficult, due to technical, economic or organisational constraints, to respect the obligation contained in that provision, it should, in my view, in the light of its obligations under Article 5 of the EC Treaty, submit its problems to the Commission and seek appropriate solutions. The Court observed in Case C-217/88 Commission ν Germany,^(*) in which it addressed the question whether it was absolutely impossible for Germany to comply with its obligations under a regulation, that the Commission and the Member State are obliged, by virtue of the reciprocal duties of genuine cooperation imposed on them in particular by Article 5 of the EC Treaty, to work together in good faith in order to overcome those difficulties.^(*) That case involved a unilateral decision by Germany not to enforce notices requiring the distillation of certain quantities of wine, in circumstances where the Community legislator had determined exhaustively the conditions for exemption, so that no margin of discretion remained for the Member States.^(*) The Court stated that a unilateral decision not to continue with implementation of measures required by Community law constitutes a breach of that duty of cooperation.^(*) I think that its reasoning applies equally to cases, such as the present case, where a Member State claims to face difficulties in adopting implementing measures in respect of which it has a wide margin of discretion, and where it justifies its failure on grounds of relative rather than absolute impossibility.^(*) I raise this issue in the present case, not in order to establish a distinct breach of Article 5 of the EC Treaty (which has not been invoked by the Commission), but rather to illustrate the point that Germany has not exhausted all possible avenues in pursuit of a means of addressing the constraints which applied and of complying with its obligations under Article 3(1) of the Directive. In such circumstances, Germany's manifest failure to take any measures to give priority to the processing of waste oils by regeneration constitutes a clear breach of that provision.

Consequently, the Court should find Germany to have failed properly to respect its obligations under Article 3(1) of the Directive. It should also order Germany to pay the costs.

Conclusion

In the light of the foregoing, I recommend that the Court:

1. Declare that, by failing to take the measures necessary to give priority to the processing of waste oils by regeneration, the Federal Republic of Germany has failed to fulfil its obligations under Article 3(1) of Council Directive 75/439/EEC of 16 June 1975 on the disposal of waste oils, as amended ,by Council Directive 87/101/EEC of 22 December 1986;

2. Order the Federal Republic of Germany to pay the costs.