JUDGMENT OF 9. 7. 1970 — CASE 26/69 COMMISSION v FRANCE

In Case 26/69

THE COURT composed of: R. Lecourt, President, R. Monaco and P. Pescatore (Rapporteur), Presidents of Chambers, A. M. Donner, A. Trabucchi, W. Strauß and J. Mertens de Wilmars, Judges, Advocate-General: K. Roemer 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 — The alleged failure

B — The applicability of Protocol I.7 annexed to the EEC Treaty to the levies under Regulation No 136/66/EEC

C — The effects of exemption granted by the French Republic

Grounds of judgment

I — The legal interest in taking proceedings

II — The substance

III — Costs

I —. Summary of the facts

II —. Procedure

III —. Conclusions of the parties

IV —. Submissions and arguments of the parties

A —. The alleged failure

B —. The applicability of Protocol I.7 annexed to the EEC Treaty to the levies under Regulation No 136/66/EEC

(a). Any exempting provision must be strictly interpreted and applied; a restrictive interpretation of the Protocol is particularly called for where there exists a single market, which is the case with olive oil ;

(b). The definition given by the Customs Cooperation Council to the concept of customs treatment has no mandatory effect; it has moreover been further developed and permits of no definite conclusion.

(c). Any measure adopted by the Community for putting into operation the common agricultural policy must be looked at in the light of its function and of its specific purpose within the framework of that policy. The levies fit into it as elements of a common price system in the common agricultural policy and thus become essential instruments thereof :

(d). It is by reason of this specific function of the system of levies — which is moreover established by the Court's case-law — that during the transitional period the application of levies becomes necessary even in trade between Member States notwithstanding the reduction of customs duties provided for by the Treaty for as long as price differences remain. There is thus all the more reason to apply them to third countries which do not participate in the common agricultural policy, whatever the tariff treatment which they enjoy.

(e). The levies, which are essential elements of the common agricultural policy, require a non-discriminatory application. Any unjustified derogation from the system of levies can only hinder the realization of the common agricultural policy. That is why only the Community is in a position to judge whether and under what conditions exemptions may be granted.

(f). The existence of this very clear principle is moreover confirmed by the attitude of the Community and of the Member States on previous occasions, in particular within the framework of the Association Agreements with the African and Malagasy States and with Greece. This attitude establishes in an eloquent manner the Community doctrine in the field of levies: by reason of their specific function within the framework of the common agricultural policy they cannot be equated with other tariff measures nor, a fortiori, can they be brought within the term customs treatment.

(a). The authors of the Treaty and of the Protocol desired to safeguard a continuity between the already existing bilateral advantages and the Association Agreements which would one day be concluded. They certainly did not intend to allow Tunisia to benefit from a preferential system so long as the common organization of the markets, with the system of levies, had not been set up for the product in question, then, as soon as it had been, to take away all preference and then after the conclusion of the Association Agreement again to confer upon it advantages equivalent to those from which it had benefited on a bilateral basis.

(b). To exclude the levies from Protocol I.7 would, as regards olive oil, and more generally all the agricultural products falling within a common organization of the market, have the result of depriving the Protocol of any substance, since the levies would have taken the place of all the protective devices previously in operation.

(c). Without claiming that the levies can immediately be assimilated to customs duties it is right to place on record that the collection of the levies has the effect of modifying the customs treatment within the meaning of the Protocol.

(d). As regards the criticism of excessively wide interpretation of the Protocol, the French Republic points out that, since the Protocol does not confer any right on third countries and since it does not impose any obligation on Member States, it provides in itself the possibility of a restrictive application of those exceptions which it authorizes and leaves discretion in this respect to the Member States. Besides France has always kept within limits in the application of the Protocol, seeking to maintain a certain equilibrium between the essential interests of the third States in question and the requirements for the construction of Europe.

(e). International terminology and practice in no way assimilate customs treatment and tariff treatment; the terminolgies used in particular by the Customs Cooperation Council and by GATT allow the term customs treatment to include various measures .which, at, the frontiers, may obstruct trade by the levy thereon of sums calculated according to varying rules but which all have the effect of influencing the consumers' choice by a deliberate increase in the price of products ultimately imported.

(f). It would be inaccurate to claim that only the Community is in a position to assess whether and on what condition exemptions from levy may be granted.

C —. The effects of exemption granted by the French Republic

(a). The quota of 20000 metric tonnes opened by the French Republic for the importation of olive oil from Tunisia free of customs duty and of Community levy represents approximately 20 % of the total Community imports; the exemption from levy on Tunisian olive oil therefore jeopardize the implementation of the objectives of the common organization of the market for olive oil.

(b). The exemption without any justification results in Tunisia and the other countries referred to in Protocol I.7 being more favourably treated than the countries and overseas territories more closely linked to the mother countries which already under the EEC Treaty benefit from a full association.

(c). It is no doubt true that the Community intended by the Association Agreement to favour olive oil from Tunisia; but it must be placed on record that the preferential rate granted by the Community is lower than both that stablished by the legal system of Protocol I.7 and that illegally applied to the French Republic.

(d). The inapplicability of the Protocol to the levies does not result in the exclusion of agricultural products from the scope of this Protocol.

(e). Contrary to the view held by the French Republic, the whole problem of the economic relationship between France and Tunisia is not finally resolved by the implementation of the association between the EEC and Tunisia; Protocol I.7 remains applicable, to products not included in the Association Agreement and in respect of other products the Protocol is merely suspended. It is therefore not without interest for the Community and particularly for the full attainment of the Common Market that the Court should interpret the Protocol in question.

1. By application of 14 June 1969 the Commission has brought before the Court under Article 169 of the EEC Treaty an action with a view to establishing a failure on the part of the French Republic to fulfil its obligations under Regulation No 136/66/EEC of the Council of 22 September 1966 (OJ 1966, p. 3025; OJ 1965-1966, (English Special Edition November 1972) p. 221) on the establishment of a common organization of the market in oils and fats, by excluding from the application of the levy within the limits of a quota fixed annually imports of olive oil originating in and coming from Tunisia.

I —. The legal interest in taking proceedings

2. Prior to the entry into force of Regulation No 136/66, imports into France of Tunisian olive oil enjoyed an exemption from customs duties under the provisions of the Protocol on goods originating in and coming from certain countries and enjoying special treatment when imported into a Member State, annexed to the Treaty establishing the European Economic Community (known as Protocol I.7).

3. After the establishment of a common organization of the market in oils and fats under the provisions of the said regulation the French Government, relying on Protocol I.7 excluded such imports from the application of the levy.

4. As a result of the first measures published to this effect in the Journal Officiel of the French Republic the Commission by letter of 1 August 1967 addressed to the French Minister for Foreign Affairs raised objections and gave the defendant an opportunity to submit its observations under Article 169 of the Treaty.

5. The treatment in question having been extended by a notice published in the Journal Officiel of the French Republic, the Commission on 3 May 1968 delivered a reasoned opinion in which it found that there had been a failure to comply with the Treaty and required that the matter be rectified within a period of one month.

6. This act on the part of the Commission was followed by the publication of a new notice in the Journal Officiel of the French Republic continuing the same treatment in respect of the year 1969.

7. An Association Agreement between the Community and the Tunisian Republic signed in Tunis on 28 March 1969 came into force on 1 September 1969 (OJ L 198, p. 1).

8. With a view to carrying this agreement into effect Regulation No 1471/69/CEE of the Council (OJ L 198, p. 93) was adopted on 23 July 1969 on imports of olive oil from Tunisia.

9. It thus appears that the action was brought by the Commission just at a time when the failure alleged against the defendant had virtually ceased through the substitution for the treatment on importation in force in the French Republic of the treatment provided for under Article 5 of Annex I to the Association Agreement.

10. In these circumstances the Court, although not in a position to determine how far it was expedient for the Commission to bring the action under Article 169, must consider whether the Commission still has a sufficient legal interest.

11. Even before the action was brought the Commission's attitude was set out in the letter of 1 August 1967 and the reasoned opinion of 3 May 1968 and the time-limit laid down by this opinion expired at a time when the failure complained of was still continuing.

12. In an exchange of letters contemporaneous with the signing of the Association Agreement it is on the other hand expressly provided that as regards the products listed in Annexes I and II to the Agreement — which include olive oil — the application of Protocol I.7 is only suspended for the duration of the Agreement, which was entered into for a period of five years and shall again take effect when the latter is no longer in force.

13. Finally, in view of the importance of the problems raised by the application of Protocol I.7 from the point of view both of the common organization of agricultural markets and of the common commercial policy, there can be no doubt as to the legal interest in the action brought by the Commission.

II —. The substance

14. In the Commission's view the introduction by means of Regulation No 136/66 of a common organization of the market in oils and fats, characterized in particular by the collection of levies, put an end to the customs treatment applicable under Protocol I.7 to imports into France of olive oil originating in Tunisia.

15. The defendant relies on the same Protocol, having regard to its purpose, in order to justify the continuation of a system of exemption in favour of such imports nothwithstanding the introduction of a levy by Regulation 136/66, until the entry into force of the provisions of the Association Agreement between the Community and the Tunisian Republic.

16. Protocol I.7 has the purpose of preserving existing patterns of trade between on the one hand certain Member States and on the other hand various third countries with which these States maintain traditional links.

17. As regards more particularly the independent countries belonging to the Franc Area — including the Tunisian Republic — a Declaration of Intent annexed to the Treaty establishing the European Economic Community, after expressing the anxiety to maintain and intensify the traditional trade flows between the Member States of the European Economic Community and these independent countries and to contribute to the economic and social development of the latter, offers these countries negotiations with a view to concluding conventions for economic association with the Community.

18. It therefore seems that the intention evinced by the French Government of avoiding any measure which might have led to a deterioration of commercial relations with Tunisia in the sector in question in the present action, is based on the objectives of both Protocol I.7 and the aforementioned Declaration of Intent.

19. Nevertheless, after the entry into force of Regulation No 136/66 this objective could only be achieved by means which are in conformity with the new situation created by that regulation.

20. Regulation No 136/66 implementing Article 40 of the Treaty, established a common organization of the market in oils and fats based on a price policy which is determined in accordance with a number of objectives concerning the level of agricultural income, the putting into effect of a coherent production policy, competitive conditions of trade in the different oils and fats, the stabilization of the markets and the fixing of an appropriate price level to consumers.

21. This policy is put into effect by means of a complex system of steps involving purchases, storage and sales by intervention agencies, a set of regulations on imports and exports by means of a system of levies and refunds, as well as measures for restoring the balance and protective measures in case of disturbances affecting the market in question.

22. Under the provisions of Article 3 (2) of Regulation No 136/66, save in case of express derogation, the levying of any customs duty is incompatible with the provisions of that regulation.

23. It therefore seems that the intervention and protection technique under Regulation No 136/66 is different from the systems of customs treatment under Protocol I.7 both in its aim and in the means which it employs.

24. This innovation which results from the extension of the common agricultural policy to the sector in question no longer allows the mere application of duty-free import, conceived for the purpose of a system of protection based exclusively on the application of customs duties, without regard to any organization of the market.

25. In these circumstances, the purpose of Protocol I.7 had to be achieved, as from the entry into force of Regulation No 136/66 by means of provisions compatible with the principles forming the basis of the common organization of the market in oils and fats.

26. Consequently the exercise of rights reserved to the French Republic by Protocol I.7 had to be adapted to the new organizational technique introduced by Regulation No 136/66.

27. Whilst not excluding any steps taken by the Member State holding the rights reserved by Protocol I.7, such an adaptation could only be the task of the Community institutions competent to implement the common agricultural policy and to regulate the Community's relationship with third countries, taking into account the common nature of the organization for the sector of the market in question and the consequences, both commercial and financial, which affect the whole Community by any derogation from the principles of the regulation.

28. it would therefore have been the Commission's task to suggest and the Council's to enact, at the time when Regulation No 136/66 was adopted, express provisions for the purpose of regulating the problem resulting from the effect upon the preference under Protocol I.7 of the new legal situation created by the organization of the market in oils and fats.

29. Such provisions appear all the more necessary since the authors of Regulation No 136/66 must have known that an Association Agreement with the Tunisian Republic was envisaged by which the preference in favour of imports of olive oil would in some measure be continued.

30. In these circumstances it would have been advisable to adopt certain derogations from Regulation No 136/66 in respect of the interim period between the introduction of the organization of the market in oils and fats and the entry into force of the Association Agreement.

31. The fact that Regulation No 136/66 is silent on the point may have given rise to the question whether the unchanged exercise of the rights deriving from Protocol I.7 was, at any rate provisionally, compatible with the provisions of that regulation.

32. Bearing in mind the equivocal nature of the situation thus brought about, the French Republic cannot be accused of any failure to fulfil its obligations.

33. The application brought by the Commission must therefore be rejected as not sufficiently well founded.

III —. Costs

34. Under Article 69 (2) of the Rules of Procedure, the unsuccessful party shall be ordered to pay the costs.

35. The Commission has failed in its submissions.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties ; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 23, 38 to 47 and 169 as well as the Protocol on goods originating in and coming from certain countries and enjoying special treatment when imported into a Member State, annexed to the said Treaty; 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, THE COURT, hereby:

1 Dismisses the application;

2 Orders the Commission of the European Communities to pay the costs.