Opinion of Mr Advocate-General Roemer

Mr President,

Members of the Court,

By Order dated 19 January 1973 the Finanzgericht at Berlin submitted to the Court a series of questions bearing upon the validity of some Community Regulations (insofar as they have as their subject matter compensatory amounts on imports of milk products from Bulgaria). I shall not now read out the rather extensive list of questions; in this respect I would refer you to the Report for the hearing.

It will aid an understanding of the proceedings if I preface my opinion by the following preliminary remarks: — During the months of April and May 1971 some foreign currency markets within the Community had been disturbed by speculative movements and by the abnormal influx of short-term capital. Having regard to the resultant increase in the volume of money, which could have had dangerous inflationary effects, the Federal Republic of Germany and the Kingdom of the Netherlands on 9 May 1971 freed the rates of exchange of their currencies, i.e. they widened the fluctuational margins of these rates of exchange in relation to the official parity. Once the actual rate of exchange deviated beyond certain limits from the official parity, these measures were bound to cause difficulties for the functioning of the common market organizations, which are based upon units of account and official parities, for transactions might then take place according to the actual rate of exchange in the national currency at a price below the intervention prices or buying prices laid down by Community Regulations on the basis of official parities or buying-in prices.

For that reason the Council, showing understanding for the German and Dutch measure (e.g. Decision of 9 May 1971, OJ C 58, 1971, p. 1), on 12 May 1971 issued Regulation No 974/71 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (OJ L 106, 1971, p. 1).

Pursuant thereto, a Member State, which for the purposes of commercial transactions allows the exchange rate of its currency to fluctuate by a margin wider than that permitted by international rules, shall be authorized to charge on imports from Member States and third countries compensatory amounts for certain products and subject to certain conditions. Pursuant to Article 1 (2) of Regulation No 974/71 this applies to products covered by intervention arrangements under the common organization of agricultural markets and in respect of products the price of which depends on the price of the products above referred to, which are governed by the common organization of the market or which are the subject of a specific provision under Article 235 of the Treaty. In Article 2 — we shall have occasion to return to this point — it is provided how compensatory amounts shall be computed. Finally, Article 6 states that detailed rules for the application of this Regulation which may include other derogations from the Regulations on the common agricultural policy, may be promulgated by the so-called Management Committee procedure.

In the first instance this happened by means of Regulations No 1013/71 (OJ L 110, 1971) and No 1014/71 (OJ L 110, 1971) of the Commission, both dated 17 May 1971. The first mentioned Regulation contains some technical directions, especially in relation to the calculation of the spot market rates of exchange as against the dollar. The Regulation of the Commission No 1014/71, in its annexes, enumerated the compensatory amounts in relation to the various relevant products. This Regulation was repeatedly amended inter alia by Regulation No 548/72 of the Commission of 16 March 1972 (OJ L 66, 1972). The last mentioned Regulation provided in Annex V, Part A under tariff No ex 04.04, that in respect of Cheese and curd, except Grano Padano and Parmigiano Reggiano, that is to say in respect of products which come under the common organization of the market for milk and milk products contained in Regulation No 804/68 (OJ L 148, 1968) of the Council, there shall be levied a basic amount per 100 kg net weight of DM 45.50 on imports from third countries. Here we thus come closer to the facts of the national proceedings.

This compensatory amount (apart from the levy payable and the import turnover tax) was in fact imposed when the firm Balkan-Import-Export, the plaintiffs in the national proceedings, on 24 March 1972 cleared through the customs Bulgarian cheese of sheep's milk which was being delivered on the basis of a contract, expressed in DM, concluded with the state trading organization Rodopaimpex on 3 November 1971.

Since Balkan-Import-Export did not consider this permissible, they filed a claim with the Finanzgericht Berlin and thus started the proceedings resulting in the present reference to this Court. As the basis of their claim they relied (apart from infringements against German law which are of no interest for the present purpose) on the fact that Regulation No 974/71 of the Council had wrongly been based upon Article 103 of the EEC Treaty, that is the provision concerning measures of conjunctural policy. In the plaintiff's view the Regulation could at the most have been promulgated within the framework of the special provisions in the agricultural field and in this connexion the European Parliament should have been heard — which was not the case. The plaintiffs go on to say that if one considers Article 103 of the EEC Treaty to be applicable, then one has to have regard to the fact that Article 103 does not authorize the promulgation of Regulations. Likewise, it only authorizes measures of common concern, which is not the case with Regulation No 974 since it only provided an equalization measure in respect of certain agricultural products. It was further argued that Regulation No 974 disregards the principle of proportionality, since it only has regard to the revaluation effect in relation to the dollar but not in relation to the currencies of third countries and thus — on imports from Bulgaria — enabled excessive compensatory amounts to be assessed. Finally, the plaintiffs also took the point that — if one disregards the plaintiff's critical remark that it was not clear how the rate, applied to their imports, had come about — compensatory amounts were, at any rate as from 24 March 1972, no longer permissible since the Washington Monetary Conference of 18 December 1971 had decided upon the introduction of indicative rates and new margins of fluctuation.

Having regard to these criticisms, which the Finanzgericht regarded as not devoid of substance, the national proceedings were stayed and the aforementioned questions in relation to the validity of Regulation No 974 as well as its implementing regulations were submitted for a preliminary ruling.

We shall now consider what replies might be given to these questions.

1. Let us start with the problem whether the Council had the power to make Regulation No 974/71 on the basis of Article 103 (2) of the EEC Treaty.

(a). Dealing first with the permissibility of the freeing of exchange rates, the decisive point of reference of Regulation No 974, which accepts this freeing and which is designed to absorb its effects in the agricultural field. In this respect there is in my view no need for long discourses. If the plaintiffs in this context point out that Article 107 of the EEC Treaty presupposes a relationship of fixed currency parities of the Member States and that it also excludes a floating in relation to third countries, then we shall see quite soon that it is no easier to follow this thesis than that which claims that the freeing of exchange rates is directed against the common interest and against the aims of Article 104. Above all, it is in the present context necessary to recognize that monetary policy and accordingly the whole apparatus in that field have remained within the sphere of competence of Member States themselves. Looked at in this way, it certainly does seem approriate to excise one part, that is the freeing of rates of exchange, whilst leaving Member States with the political responsibility in this field. — As regards Article 107 of the EEC Treaty, that only contains an obligation on the part of Member States to regard policy with regard to rates of exchange as a matter of common concern; however as regards its contents this policy has not been laid down; certainly nothing has been said about excluding the freeing of rates of exchange. Whilst in Article 107 (2) there is only the question of an alteration of rates of exchange, one cannot point to this as a provision for achieving a limitation of the competence of Member States in the field of monetary policy. — If furthermore one bears in mind the nature of Article 104, then one cannot easily see how a freeing of rates of exchange could offend against the objects set out in this provision. — Likewise, as has been shown by the Commission, it would be difficult to say that fixed rates of exchange were laid down by the common agricultural policy created by Article 43 of the Treaty. Admittedly, on the promulgation of Regulation No. 129 on the value of the unit of account and the rates of exchange to be applied in the context of the common agricultural policy (OJ 1962, p. 2553) one proceeded from a system of fixed rates of exchange. That it was not the object of this system to bind the Community to such a system is shown not only by the fact that otherwise one would have adopted rather more comprehensive measures of monetary policy, but also from Regulation 129 itself, since Article 3 thereof provides that in the event of exceptional monetary practices (permitting variations in currency values within wider limits, fluctuating or multiple rates of exchange), measures deviating from this Regulation may be adopted. — Finally, the Commission has convincingly shown that the clinging to fixed rates of exchange cannot be accepted in the face of international agreements (that is to say the complicated rules of the agreement concerning the International Monetary Fund) and Article 234 of the EEC Treaty. It has also clearly shown that the theory that there had been a lack of common interest in favour of a freeing of rates of exchange, was not tenable. Indeed, in relation to this last mentioned point one only has to bear in mind the state of integration in order to recognize that the disturbance of the balance of payments and of price stability in one Member State as a result of unimpeded influx of foreign currency, can also have negative effects on other Member States. Appropriate measures of defence accordingly are very much in the common interest of Member States.

(b). We now come to the crucial legal basis of the Regulation criticised before us, i.e. Article 103 of the EEC Treaty, and let us see whether it has rightly been adduced.

(c). That does not, however, as yet conclude the examination of Article 103 in the light of the plaintiffs' criticism thereof. We still have to examine whether — as is required by Article 103 — one is entitled to say that Council Regulation No 974 had been promulgated in the common concern. One will further have to consider whether in this way one is entitled to deviate from the general Treaty provisions, whether Article 103 can be used as a substitute protective clause and one will have to ascertain whether it envisages the promulgation of Community Regulations.

On these problems one will, in my opinion, have to comment as follows.

As regards the common concern, I think I have made it clear in the course of previous remarks of mine, that I consider such common concern to apply in relation to the promulgation of Regulation No 974. Admittedly it is a fact that this Regulation created a levy system in favour of agricultural products, and not even in respect of all agricultural products at that. Apart from the fact that a common concern within the meaning of Article 103 exists not only where the whole economy is concerned, one must not disregard the effects on other sectors of the economy at which this measure aims. Besides — and this is of equal importance in the current context — there was assuredly an interest on the part of Member States other than those immediately concerned, in having the measures promulgated and in preventing the harmful effects resulting from the freeing of rates of exchange upon their economy. To this extent one only has to consider that without the compensation provisions we would have had an increased outflow of goods — I am thinking of France and Italy — which these would have led to a corresponding, undesirable increase in prices.

Coming then to the plaintiffs' theory that the compensatory charges upon imports from third countries had to be regarded as charges having an effect equivalent to customs duties and as such prohibited, pursuant to Article 19 of Regulation No 804/68, it probably suffices to go along with the Commission in pointing out, that this Regulation constituted secondary Community law, based on Article 43 of the Treaty. After what has been said as regards the relationship between Article 103 and the agriculture regulations of the Treaty, it seems clear, that one cannot attribute to such a provision greater force than to measures of conjunctural policy of a similar secondary level, based upon Article 103. Besides, there is also the general realization that the promulgation of measures of conjunctural policy may indeed, having regard to their objectives, necessitate certain deviations from the provisions of Community law, such as — admittedly these are not immediately in point having regard to the general context of the measures but nevertheless of some importance — certain adverse effects upon and reductions in the trade in agricultural products within the Community. (This point will have to be dealt with later on in greater detail.)

As regards the connexion between Article 103 and Article 226 of the EEC Treaty (the general protective clause which since the end of the transitional period is no longer in force), one must furthermore observe that it is certainly out of the question to use Article 103 as a substitute for Article 226. There can be no question of this in the present case since clearly the special conditions of application provided for in Article 103 and different from Article 226 (measures of common concern arising from conjunctural policy) have been observed. Accordingly, even if in respect of certain economic circles there results some protective effect, one cannot regard this as an impermissible transformation of Article 103 into a protective clause replacing Article 226.

Thus there remains only one objection still to be dealt with in the present context, i.e. that Article 103 of the EEC Treaty provides in relation to conjunctural policy at Community level only a coordination; that on the other hand it was not under any circumstances possible to promulgate a Community Regulation on the basis of this provision.

In relation to these arguments on must first of all concede that under Article 103 (1) conjunctural policy is doubtless a matter for the Member States, precisely because it imposes certain duties of coordination on Member States. Just as clearly does it follow from Article 103 (2) that apart from this, there exists besides a legislative competence of the Community.

As regards the method of exercising this Community competence, one must admittedly not overlook the fact that the German text uses the words entscheiden and Entscheidungen. However, as has already been shown by the examples of Article 28, this term need not necessarily be understood in the technical sense of Article 189 of the EEC Treaty. That this is likewise so in the case of Article 103 is proved not only by the terminology used in the other languages, which generally talk of measures (misure, maatregelen, measures) and thus include all kinds of legal acts under Community law. In this connexion, one might also point at the comprehensive aims of Article 103 and the necessity of giving an interpretation which is attuned to the current state of integration and which ensures efficiency. Finally, — and contrary to the views of the plaintiffs — one cannot in this context extract a valid argument from Article 103 (3), i.e. from the fact that there is here only talk of directives for carrying into effect the decisions arrived at pursuant to paragraph 2. One must not in fact overlook that for the issuing of these directives there applies a simplified form of decision-making (the qualified majority). Surely, this must be understood in such a way, that, apart from this, it does not exclude regulations, unanimously decided upon. Furthermore one must draw attention to the words where required from which the Federal Government rightly concludes that the issue of directives is only indicated under certain circumstances but that in addition in case of necessity, and providing the requirements of paragraph 2 are observed, the making of implementing regulations is not excluded. — Accordingly one cannot really object to the fact that the Council as regards the measures now before the Court, chose to act by way of Regulation. Since besides — as has been demonstrated — it could also have promulgated implementing regulations, one cannot criticize it on account of the fact that on the basis of the general Treaty provision of Article 155, within the framework of the levy system created by it, it authorized the Commission to promulgate implementing regulations.

All this permits the conclusion in regard to the first series of problems raised by the reference, that the validity of Regulation No 974/71 and of the Commission's Regulations implementing them, cannot be attacked on the grounds that the Community bodies were wrong in bringing Article 103 of the Treaty into play.

2. Let us now turn to the question whether the validity of the system might be doubted on account of it being of general application, i.e. independent of the country of origin of the product and of the basis of the contract and accordingly even in the case of imports from Bulgaria based upon the relationship between the DM and the dollar.

3. A further question by the Finanzgericht Berlin asks whether it is permissible in Community law that compensatory levies upon imports from third countries were still levied on 24 March 1972, i.e. at a point of time when the imports took place, that are dealt with in the national proceedings.

4. The next question to which we shall then turn, deals as we know in its first part with the question as to what are the factors on the basis of which the compensatory amounts to be levied on importation of cheese of sheep's milk under Article 2 (2) of Regulation No 974, are to be calculated.

5. The second part of the third question to which we shall now turn, aims at clarifying the problem whether Article 2 of Regulation No 974 constitutes a sufficiently defined basis of calculation. Once again it is therefore a question of validity.

6. Finally we come to the last part of the third question of the Finanzgericht Berlin. As we know, this deals with the question whether a rate of DM 45.50 per 100 kg of Bulgarian cheese of sheep's milk complied on 24 March 1972 with the principles which were relevant for the calculation of compensatory amounts. In reality — as the Commission has shown in reference to the criticism put forward in the national proceedings — there lurk behind this some other problems which also require to be considered.

(a). First of all one must in this context recall on what basis the Commission made its calculations.

(b). As regards the method of the calculation, I have stressed already that the formulation of Article 2 of Regulation No 974 leaves some technical room for discretion. The question which arises immediately is whether this discretion was correctly exercised by the Commission. That question can hardly be denied after what we have heard in the course of the proceedings, not least having regard to the fact that the Council, who are in possession of the details, raised no objections.

(c). Two further problems which in this contect play a role were admittedly not expressly raised before the Finanzgericht. But since the plaintiffs in the national proceedings consider them of importance and since the Commission in the interest of completeness of examination of the facts has dealt with them, we ought also to deal with them.

(aa). Dealing first with the disturbance clause contained in Article 1 of Regulation No 974. In the plaintiffs' view there are two relevant points to be considered in this context: on the one hand, the fact that no revaluation effect worth mentioning had occurred in the relationship DM/Bulgarian Lewa and on the other hand, the realization that in the absence of a competitive situation, there was no danger for Community-produced cheese from Bulgarian sheep's cheese.

(bb). The reproach of discrimination finally, which has been raised in relation to the freeing of some kinds of Italian cheese, can be dealt with quite quickly. Indeed to deal with this point, it is sufficient to bear in mind that there is no real comparison. Evidently the cheeses referred to have a special kind of use and are exceptionally expensive. To exempt them from the compensatory provisions constitutes no danger whatever for the local production. Added to this, there is the concept of Community preference which will if necessary justify the granting of relief to products of a Member State in preference to products from third countries even within the framework of a compensatory scheme.

7. Summarizing my views, I would therefore suggest replying as follows to the questions of the Finanzgericht Berlin:

1 Translated from the German.