JUDGMENT OF 28. 4. 1971 — CASE 4/69 LÜTTICKE v COMMISSION
In Case 4/69
THE COURT, composed of: R. Lecourt, President, A. M. Donner and A. Trabucchi, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore (Rapporteur) and H. Kutscher, Judges, Advocate-General: A. Dutheillet de Lamothe Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Summary of the facts
II — Procedure
III — Conclusions of the parties
IV — Submissions and arguments of the parties
A— Admissibility
1. Irregularity of the application as to form
2. Disregard of the second parapragh of Article 97 and Article 169 of the EEC Treaty
3. Disregard of Article 175 of the Treaty
4. Disregard of the case-law of the Court relating to direct effect
5. Period of limitation
B — The substance of the case
1. Is the rule which has allegedly been infringed intended to protect the interests of the applicant? ,
2. The culpable act (Verschulden)
3. The damage
4. The causal link
Grounds of judgment
Admissibility
The substance of the case
Costs
I —. Summary of the facts
II —. Procedure
III —. Conclusions of the parties
(a). order the Commission to pay it the sum of DM 124396.04, plus interest at 8 % as from 20 April 1968;
(b). declare that the Commission should compensate it for all damage which it has caused it by neglecting to ensure that the turnover equalization tax imposed in the Federal Republic of Germany in respect of milk powder was abolished with effect from 1 January 1962;
(c). order the Commission to pay the costs of the proceedings.
IV —. Submissions and arguments of the parties
A—. Admissibility
1. Irregularity of the application as to form
(a). refers to submissions and arguments put forward in other cases and does not itself prove that the rate of the tax at issue is excessive; for this reason, it is impossible for the Court or the Commission to appreciate, on the basis of the application alone, the precise content and scope of the submissions put forward;
(b). does not justify the claim relating to interest at 8 % and consequently does not state, with regard to this point, the grounds on which it is based.
(a). The reasons for which it considers the present cumulative tax of 3 % on milk powder and on other dried milk products made in Germany to be excessive were set out in detail for the Court in previous cases; there seemed to it to be no need to repeat the same arguments. During the procedure the applicant added a schedule to its reply and produced an expert's report designed to show that the tax at issue was too high.
(b). The claim for the payment or interest at 8 % is based on the fact that since 1962 the applicant has made use of bank credit, the annual rate of which has been at least as high as the interest claimed.
2. Disregard of the second parapragh of Article 97 and Article 169 of the EEC Treaty
3. Disregard of Article 175 of the Treaty
4. Disregard of the case-law of the Court relating to direct effect
5. Period of limitation
B —. The substance of the case
1. Is the rule which has allegedly been infringed intended to protect the interests of the applicant? ,
2. The culpable act (Verschulden)
3. The damage
4. The causal link
1. The applicant requests the Court, on the basis of Article 178 and the second paragraph of Article 215 of the EEC Treaty, to order the Community to make good the damage caused to the applicant by the Commission's failure to address to the Federal Republic of Germany a directive or a decision under the second paragraph of Article 97 ordering it to abolish with effect from 1 January 1962 the turnover equalization tax on milk powder or, at least, to reduce it to a level compatible with the provisions of Article 95 and the first paragraph of Article 97.
2. The defendant maintains that the application does not satisfy the requirements of Article 38 (1) of the Rules of Procedure by reason of the fact that, first, it refers, in respect of certain aspects of the dispute, to arguments put forward in other cases brought before the Court and, secondly, it does not give grounds for the claim of 8 % interest in addition to the principal sum claimed.
4. Consequently, the objection based on Article 38 (1) of the Rules of Procedure must be dismissed.
5. Secondly, the defendant contests the admissibility of the action by reason of the fact that, although introduced on the basis of Article 178 and the second paragraph of Article 215, it seeks in reality to establish a failure to act on the part of the Commission and to constrain it indirectly to initiate against the Federal Republic of Germany the procedure under the second paragraph of Article 97 and, possibly, that under Article 169. It is claimed that this manner of proceeding has the effect of distorting the conditions to which Article 175 has subjected actions for failure to act.
6. The action for damages provided for by Article 178 and the second paragraph of Article 215 was established by tie Treaty as an independent form of action with a particular purpose to fulfil within the system of actions and subject to conditions for its use, conceived with a view to its specific purpose. It would be contrary to the independent nature of this action as well as to the efficacy of the general system of forms of action created by the Treaty to regard as a ground of inadmissibility the fact that, in certain circumstances, an action for damages might lead to a result similar to that of an action for failure to act under Article 175.
7. This objection of inadmissibility must therefore be dismissed.
8. Since the defendant asserts also that the right to damages claimed by the applicant is, for the most part, time-barred, it must be observed that this objection concerns, in reality, not the admissibility of the application but the extent of reparation and it must therefore be dismissed.
9. The applicant, having been compelled to pay under German tax law the turnover equalization tax on certain products, bases its application on the fact that the Commission has refused to use the powers conferred on it by the second paragraph of Article 97 and by Articles 155 and 169 to obtain the complete abolition of the tax in dispute or, at least, its reduction to the level of taxation fixed by Article 95 and the first paragraph of Article 97 with, in either case, retroactive effect to 1 January 1962.
10. By virtue of the second paragraph of Article 215 and the general principles to which this provision refers, the liability of the Community presupposes the existence of a set of circumstances comprising actual damage, a causal link between the damage claimed and the conduct alleged against the institution, and the illegality of such conduct.
11. In this case, it is appropriate to examine first the question whether the Commission, acting as it did, failed to fulfil the obligations imposed on it by the second paragraph of Article 97.
12. Under the terms of Article 95, no Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products. According to Article 97, invoked by the applicant as the basis of its action, Member States which levy a turnover tax calculated on a cumulative multi-stage tax system may, in the case of internal taxation imposed by them on imported products, establish average rates for products or groups of products, provided that there is no infringement of the principles laid down in Article 95. Under the terms of the second paragraph of this article, where the average rates established by a Member State do not conform to these principles the Commission shall address appropriate directives or decisions to the State concerned.
13. The object of Article 97 with regard to imports is to ensure that equalization taxes imposed within the framework of a cumulative multi-stage tax system are in conformity with the principles of Article 95. Having regard to the special characteristics of this system of taxation, the economic effect of which may very often only be calculated approximately, the Treaty allows Member States to take certain measures of a flat-rate nature consisting in the determination of average rates of tax on the importation of specific products or groups of products. Such a system necessarily implies, on the part of States which apply it, the exercise of a discretion in regard to the assessment of the burden of tax on the domestic product which determines the level of the average rates and the tax procedure which is connected with the general system of the legislation in question.
14. For the purpose of safeguarding the requirements of Article 95 and the first paragraph of Article 97, a special power of supervision the exercise of which presupposes, in turn, a discretion to appraise the factors which the State has taken into consideration, is conferred upon the Commission in pursuance of the second paragraph of Article 97.
15. This task has been allotted to the Commission for the purpose of ensuring that the national tax systems conform to the requirements of free movement and non-discrimination which constitute the object of Articles 95 and 97. For this purpose, the second paragraph of Article 97 gives the Commission the power to define, through directives or decisions addressed to States, the requirements arising from the Treaty with regard to national tax laws.
16. Consequently, having regard both to the power of estimation implied in the conversion into average rates of the complex elements relating to cumulative multi-stage taxes and to the nature of the steps provided for by the second paragraph of Article 97, the exercise of the task of supervision prescribed by this provision implies that account should be taken of the margin of discretion left to the Member States concerned by the first paragraph.
17. It is established that as early as 1962 the Commission began, with experts from the Member States, an examination of the average rates provided for by national laws with a view to checking their conformity with the requirements of Article 95 and the first paragraph of Article 97. During this examination it discussed with the German authorities and with those of the other Member States concerned in the powdered milk trade the rate applicable to this product. Having studied the arguments put forward by the German Government it informed it that the average rate of 4 % in force for imports of milk powder into the Federal Republic seemed to it to be too high. Since the Federal Republic, following this intervention, reduced the rate of the tax at issue from 4 % to 3 % with effect from 1 April 1965—a date subsequently brought forward to 1 January 1962—the Commission considered that there was no longer any need to adopt a directive or a decision under Article 97 in order to obtain an even greater reduction. Furthermore, there were no complaints of any sort made by Member States whose exports could have been adversely affected by the tax system criticized by the applicant. It follows from the above that in the circumstances the Commission has not failed to perform its task of supervision.
18. In addition, although the expert's report produced by the applicant in support of its argument reaches the conclusion that for powdered milk the average rate should be lower, it is capable of confirming that the calculation of the indirect taxes imposed on this product includes a whole series of uncertain factors which may give rise to very different assessments, with the result that it is in general possible only to establish certain minimum and maximum limits between which several solutions appear equally justifiable.
19. The applicant has not proved that for the product in question an average rate of 3 % exceeds the limits authorized by Articles 95 and 97 the observance of which the Commission must ensure. Consequently, the application must be dismissed.
20. Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs and since the applicant has failed in its submissions it must therefore bear the costs of the action.
On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles, 95, 97, 155, 169, 171, 173, 176, 178 and 215; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, especially Articles 38 and 69; THE COURT hereby:
(1) Dismisses the application;
(2) Orders the applicant to bear the costs.