Opinion of Mr advocate-general Dutheillet de Lamothe

Mr President,

Members of the Court,

Before beginning to consider the specific questions involved in this case, I think it may perhaps be useful to recall briefly the Community system applying to the denaturing of sugar.

It is a very complicated system which results from numerous, sometimes obscure texts.

It is, however, possible to sift a certain number of facts out of this jungle :

Finally, whatever the system adopted, the successful tenderer is entitled to carry out the denaturing in a State other than that in which the intervention agency effecting the sale is established.

For various reasons which it would take too long to investigate in depth, this original arrangement was gradually modified in two respects.

In certain cases the maximum amount of the premium is fixed by the Community authorities before the tender is invited. In other cases, in accordance with the texts, the maximum is regarded as fixed after the tender is invited on the basis of the tenders submitted and the market situation; this in fact amounts to a system in which the Community authorities are entitled to accept or to refuse the denaturing premium arrived at on the basis of the tender accepted by the national intervention agency, by taking account in particular of the result of the invitations to tender issued in the other countries.

It is a tender of this latter type which forms the basis of the action before the College van Beroep voor het Bedrijfsleven and which has been referred to you.

The German intervention agency had been authorized by the Community authorities to sell white sugar for denaturing and for subsequent use as animal feed.

The selling price had been previously fixed at 21.73 u.a. per 100 kg by Regulation No 820/70 of the Commission.

The maximum denaturing premium had not been fixed in advance.

The Westzucker company submitted various tenders in respect of a total of 3000 metric tons, indicating its readiness to accept denaturing premiums, the amount of which it expressed in Deutschmarks.

Westzucker also indicated that if its tender were accepted the denaturing would be done, not in the Federal Republic of Germany, but in the Kingdom of the Netherlands.

It was this company which proposed the lowest premium in its tender.

This also applied to the Dietz company as regards a different lot of 25000 metric tons.

The Community authorities then intervened in order to fix the maximum denaturing premium, that is, in effect to approve the outcome of the tender procedure.

They fixed the maximum premium at the amount offered by the lowest bidders, who were subsequently declared to be the successful tenderers.

As the sugar was denatured in the Netherlands the companies in question requested the Netherlands intervention agency to issue a certificate establishing their entitlement to the denaturing premium.

The Netherlands agency complied with this request but it fixed the amount of the premium in units of account and indicated in brackets the amount in guilders calculated according to the fixed rate of conversion between the national currency and the unit of account established by Regulation No 129.

The companies in question found this procedure highly unsatisfactory.

In the light of the fluctuations of the foreign exchange market at this time it was in the interest of these companies for the premium to be fixed at the amount in Deutschmarks shown in their tender, and for this amount to be paid in Deutschmarks.

By reselling these marks on the free foreign exchange market they would in fact have obtained more guilders than under the system adopted by the Netherlands agency and this would have been to their advantage, particularly as regards payment of any sums due from them to the Netherlands undertakings which had denatured the sugar.

The companies in question therefore contested the decision of the Netherlands intervention agency, first, with this agency itself and then before the College van Beroep voor het Bedrijfsleven.

In the course of this action the latter referred you the six questions which are before you today.

As the Commission has fully appreciated, the questions referred by the Netherlands court in fact concern three problems which may arise where denaturing takes place in a State other than that in which the tenders are invited.

I will suggest that you consider these questions in the following order:

I

I consider the solution to the first of these problems to follow from the wording itself of the Community regulations applicable in this matter. It is true that Regulation No 1987/69 of the Commission left certain doubts hanging over the question, in that Article 9 thereof merely provided that the Member State in which denaturing is effected shall … issue the denaturing premium certificate and the question could . therefore arise, as it did before the Netherlands court, who was required to settle the debt established by the certificate and whether the creditor was not in some way entitled to choose to which debtor he would apply. However, as regards the period in question here, I consider that the ambiguity is entirely removed by Article 6 of Regulation No 2049/69 of the Council laying down general rules on the denaturing of sugar for animal feed.

This Article lays down a principle and a possible exception.

The principle is as follows : The denaturing premium shall be granted by the Member State on whose territory denaturing takes place. The exception is as follows: during the 1969/1970 marketing year the denaturing premium may be granted by the Member State in which the tender is invited, even if the denaturing takes place on the territory of another Member State.

As the Commission observes, chiefly on the basis of the grounds for the regulation, this latter provision gives an option not to the traders but to the States.

As the Federal Republic of Germany did not believe that it had to exercise this option, it is only the principle laid down by the first paragraph of Article 6 which is applicable in this instance.

Does the phrase the denaturing premium shall be granted imply both the issue of the certificate and payment?

One may of course ask this question, as does the Commission. For my part, however, I am firmly of the opinion that an affirmative answer must be given for the following three reasons:

However, even if you adopt this reply it does not settle all the questions which are raised by the second and third problems to which I have just referred, although it indicates a guideline for the argument of these questions.

II

The second problem is that raised by the first of the questions referred by the Netherlands court: Is the Member State in which denaturing takes place obliged to express the denaturing premium solely in the currency of the State in which the tender was submitted and the award made? It is clear that the Netherlands court has considered, from this point of view, the compatibility with Community rules of a certain Netherlands regulation put before it, which provides for the amount of the premium to be expressed in guilders.

The difficulty here arises from a certain ambiguity in the Community rules concerning the invitation to tender.

In fact, although in invitations to tender the price of the sugar and the amount of the deposit required in connexion with the invitation are expressed in units of account and only secondly in Deutschmarks, it is expressly provided that the amount of the premium shall be expressed in the national currency. This provision presents no problem where denaturing takes place in the State in which the tender is invited.

On the other hand, it is likely to raise problems, first, where denaturing takes place in another Member State and, secondly, where the commercial rates of exchange differ considerably from the parities accepted by the Community authorities for transactions on the agricultural markets.

These difficulties should have been settled by regulation, but the practice has tended to vary.

In fact, the invitations to tender provide:

It is this situation which forms the basis of the main argument of the companies who are the plaintiffs in the main action.

They maintain that as they submitted their tender in marks the sum owed to them should be fixed in this currency and should moreover be paid in it.

I consider that this argument must be set aside for the following three reasons :

III

There remains the final question which concerns the rate of conversion applicable. In this respect the plaintiffs in the main action maintain:

As a result of my explanations on the preceding question I do not need to spend further time on the plaintiffs' principal arguments.

I also consider that for similar reasons it is impossible to accept the alternative arguments and to this I will only add three observations.

It in fact insures them against the fluctuations in the exchange rate which may occur on the money market during the period between the removal of the goods and the payment of the denaturing premium.

It may of course, as is the case in this instance, deprive them of an anticipated profit which could be expected in the light of the tendencies of the foreign exchange market at a particular time. From a Community point of view, however, I do not consider this to be particularly unfortunate, for the following reasons :

However, if the argument put forward by the plaintiff companies were accepted there would be no means of preventing a transaction of the following type:

Taking into account the fluctuations between the mark and the guilder during the period in question, an undertaking purchases sugar in Holland and then, attracted by the high rate for the mark, offers it for intervention buying in Germany.

It subsequently obtains in Germany an invitation to tender for the same tonnage of sugar which it gets denatured in Holland and the second profit on the exchange rate which it obtains on payment of the premium enables it to restart the operation. The sacrifices accepted by the taxpayers of the common market in order to finance the EAGGF are clearly not made in order to enable such transactions to take place. I will therefore suggest that you reply to the fourth, fifth and sixth questions referred by the Netherlands court as follows :

I am therefore of the opinion that you should reply to the questions referred by the Netherlands court on the lines of my observations on each of these questions.

1 Translated from the French.