JUDGMENT OF 24. 10. 1973 — CASE 5/73 BALKAN-IMPORT-EXPORT v HAUPTZOLLAMT BERLIN-PACKHOF
In Case 5/73 Reference to the Court under Article 177 of the EEC Treaty by the Finanzgericht (Fiscal Court) of Berlin for a preliminary ruling in the action pending before that court between
THE COURT composed of: R. Lecourt, President, A. M. Donner and M. Sørensen, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars (Rapporteur), P. Pescatore, H. Kutscher, C. Ó Dálaigh, Lord Mackenzie Stuart, Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte
gives the following
JUDGMENT
Issues of fact and of law
I — Facts and procedure
II — Observations submitted under Article 20 of the Statute of the Court of Justice
A — Observations of the plaintiff in the main action
First Question
Second Question
Third Question
B — Observations of the Council
First Question
Second Question
C — Observations of the German Government
First Question
Second Question
D — Observations of the Commission
Economic context
First Question
Second Question
Third Question
Grounds of judgment
Analysis of the compensatory amounts system
I — Question one
(a) The legal basis of Regulation (EEC) No 974/71
(b) The form in which the disputed measure was adopted
(c) The question of proportionality
(d) Contravention of Articles 39 (1) (c), 40 (3) (second paragraph) and 110 of the Treaty
(e) Contravention of Article 19 of Regulation (EEC) No 804/68
II — Question two
III — Question three
Costs
Costs
I —. Facts and procedure
1. Is Regulation (EEC) No 974/71 of the Council of 12 May 1971re certain measures of conjunctural policy to be taken in the agricultural sector as a result of the temporary widening of the fluctuation margins of the currencies of certain Member States (Official Journal of the European Communities, 12 May 1971, L 106, p. 1), or are the Regulations implementing it, viz. Regulations (EEC) No 1013/71, 1014/71 and 548/72 of the Commission, valid, in so far as they provide for the making and computation of compensatory amounts for the import of milk products from Bulgaria?
2. Was the defendant still entitled, on the proper application of Community law, on 24 March 1972, the date of the application for customs clearance, to impose a compensation tax on trade with third countries?
3. (a) What factors should have been taken into account in assessing the compensatory amounts or alignment tax on import of cheese of Tariff No 04.04 (with particular reference to Article 2 (2) of Regulation No 974/71)? (b) Is Article 2 (2) of the said Regulation, having regard to its form and scope, a sufficiently definite basis of assessment for this purpose? (c) Is a rate of 45.50 DM per 100 kg of Bulgarian cheese of sheep's milk on 24 March 1972, in accordance with these principles?
II —. Observations submitted under Article 20 of the Statute of the Court of Justice
A —. Observations of the plaintiff in the main action
(a). The plaintiff in the main action considers that Regulation No 974/71 cannot be founded on Article 103 (2), because it was not made within the framework of conjunctural policy but solely to ensure the application of the intervention system in agricultural markets, that there was no question of Common interest and that it authorized the Council only to make directives or take decisions. Only Articles 40 and 43 taken in conjunction with Article 235 of the Treaty could form a basis for introducing compensatory amounts as the Council itself recognized in basing Regulation No 509/72 of 22 February 1973, modifying Regulation No 974/71 (OJ L 50, 23. 2. 1973, p. 1.) solely on Articles 28, 43 and 235 of the Treaty. Regulation No 974/71 should therefore be declared null and void until it was amended by Regulation No 509/73 of 22 February 1973. Nevertheless a limitation can be placed on the nullity by declaration of the Court under Article 174, second paragraph.
(b). Since Regulation No 974/71 takes account only of the exchange rates between the DM and the dollar, the compensatory amounts had unjustifiably been fixed too high on several occasions, notably in the present case. The Commission had itself admitted in its proposal for amendment of Regulation No 974/71 of 10 May 1972 that the system should have taken account of the exchange rates of the currencies of third countries exporting to the Community.
B —. Observations of the Council
(a). In the Council's view Regulation No 974/71 was indeed a conjunctural measure within the meaning of Article 103 of the Treaty. The concept of conjunctural policy included all the measures taken by public authorities to prevent, as far as possible, all factors on which the internal and external balance of the economy depends from developing differently from long term expectations. Conjunctural measures could thus cover the most varied fields. Indeed the purpose of Regulation No 974/71 was to prevent abnormal deviations in prices and incomes caused by massive imports of agriculture into countries with a floating currency.
(b). Regulation No 974/71 did not violate the principle of proportionality. Only more or less all-embracing wording enabled a compromise to be found between the need for taking account, to the greatest possible extent, of the incidence of monetary measures and for finding a solution which works in practice. If corrency fluctuations in relation to the mean value of all or some currencies of third countries had been taken into account the compensation would have been insufficient for the currency of the principal third country, the United States of America, which played a decisive role in most of the trade in agricultural products. It must not be overlooked that in spite of certain difficulties of implementation, the solution selected does not involve charges which unjustifiably exceed the incidence of alterations in the exchange rates.
C —. Observations of the German Government
(a). The German Government considers that Regulation No 974/71 is an intergral part of conjunctural policy and is quite properly based on Article 103 of the Treaty. In fact a conjunctural policy or a short term economic policy whilst linked to the general aims of long or medium term policy, had as its precise aim the lessening of inflationary and deflationary movements in economic development. Moreover the abnormal prices and incomes following the floating of the exchange rate by certain Member States would have, in the absence of Regulation No 974/71, disorganized the intervention system and caused a collapse of intervention and market prices involving abnormal developments in prices and incomes.
(b). There was no infringement of the principle of proportionality by reason of the all-embracing nature of compensatory amounts from a practical point of view. A system in which the amount of compensatory tax corresponded exactly, for each import, with the incidence of the monetary measure could not be achieved, having regard to the large number of compensatory amounts already in existence in the system in use. Moreover, if the relationship between the floating currency and the currency of a third importing country had been taken into account in fixing the compensatory amounts, it might have caused large scale deflection of trade. On the other hand a system of compensation in terms of an arithmetic mean of the variations of the Deutschmark in relation to the currency of third countries was also of an all-embracing character and this too did not allow sufficient compensation when the parity of the currency of the third country in question in relation to the DM was below the mean parity of the currencies of third countries. Faced with a choice of several solutions the Council, pursuant to its discretionary power, had been able to choose the one it deemed most suitable and most advantageous from the standpoint of efficiency and practicability. (Court of Justice, Judgment of 17. 12. 1970, Case 11/70, Internationale Handelsgesellschaft, Rec. 1970).
D —. Observations of the Commission
(a). According to the Commission, Article 103 of the Treaty must be considered as the correct legal basis for Regulation No 974/71 since the latter effectively constitutes a measure of conjunctural policy.
(b). As regards the use of the dollar as a standard of comparison under Article 2 (1) of Regulation No 974/71, the Commission observes that only an all-in system of compensatory amounts was attainable in practice and in any event it was not possible to limit the collection of compensatory amounts to cases where the imported product enjoyed an advantage due to currency fluctuations because that would have implied supervision for every single import transaction and this would have gone against the principles governing the collection of levies and payment of refunds; the Court of Justice itself had recognized the validity of abstract methods of calculation for this purpose (Judgment of 15. 12. 1970, Case 31/70, Deutsche Getreide und Futtermittel, Rec. 1970).
1. By order dated 19 January 1973, lodged at the Registry on 5 February 1973, the Berlin Finanzgericht referred to the Court for a preliminary ruling the question of the interpretation and validity of various provisions contained in Regulation (EEC) No 974/71 of the Council of 12 May 1971, concerning 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, 12. 5. 1971, p. 1), and, if appropriate, of some of the provisions of Regulations (EEC) Nos 1013/71, 1014/71 of the Commission (OJ L 110, 18. 5. 1971, p. 8 and 10), and 548/72 (OJ L 66, 18. 3. 1972, p. 1) implementing the above Regulation No 974/71.
2. On 24 March 1972, the plaintiff in the main action requested customs clearance for cheese of sheep's milk which it had imported from Bulgaria into the Federal Republic of Germany, and was charged, under Regulation No 974/71, compensatory amounts at the rate of 45.50 DM per 100 kg, a rate calculated, for products under tariff heading 04.04 of the Common Customs Tariff, by reference to the Annexes to Regulation No 548/72 of 16 March 1972 fixing the compensatory amounts applicable at the time of the clearance in question.
3. As a result of the increasing influx of foreign currency and short-term speculative capital in the early months of 1971 and the effects produced by this in some Member States, especially the Federal Republic of Germany and the Netherlands, the Council indicated in a Resolution of 9 May 1971 (OJ C 58, 10. 6. 1971, p. 1) that it was prepared to envisage that, in certain cases, these countries might, for a limited period, widen the margins of fluctuation for the exchange rates of their currencies in relation to their (present) parities.
4. The organization of agricultural markets is designed, inter alia, to ensure a fair standard of living for the agricultural community and to stabilize markets, in particular by means of a stable price system whereby target prices, threshold prices and intervention prices are determined on the basis of fixed parities for the currencies of the various Member States by reference to a single unit of account.
5. As a result, the Council decided that the measures to be taken immediately should consist in the introduction of a system of compensatory amounts which these Member States would be authorized to charge on imports and grant on exports in their trade both with other Member States and with third countries, with a view to offsetting the effects of the monetary measures on the price of basic products for which intervention prices have been imposed, and for agricultural products whose price depends on the price of those products.
6. Under Article 2 of Regulation No 974/71, the compensatory amounts are obtained by applying to the prices of agricultural products covered by intervention arrangements the percentage difference between the official parity and the true parity of the national currency in relation to the U S dollar.
7. Owing to the deterioration of the monetary situation, particularly the suspension of the convertibility of the dollar on 15 August 1971 and the subsequent floating of Belgo-Luxembourg Economic Union currencies from 23 August 1971, the system of compensatory amounts was extended to a wider range of products and to the exports and imports of those Member States.
8. Subsequent to the facts giving rise to the action, the Council, by Regulation No 2746/72 of December 1972, made the compensatory-amounts scheme compulsory and incorporated it into the framework of the common agricultural policy, giving Articles 28, 43 and 235 of the Treaty as its basis.
9. The circumstances outlined above and their continuing development must be borne in mind in considering the intervention made by the Council and the Commission.
I —. Question one
10. The first question asks whether Regulation No 974/71 is valid insofar as it provides for the computation and charging of compensatory amounts on imports of milk products from Bulgaria.
(a). The legal basis of Regulation (EEC) No 974/71
11. This question concerns, first, whether the validity of the above Regulation could be affected by the fact that it is based on Article 103 of the Treaty, which does not touch on the common agricultural policy, the latter being governed by the specific provisions of Articles 38 to 47 of the Treaty, and that in any case, the said Article 103 authorizes only the adoption of conjunctural measures, which the disputed measures are not.
12. Article 40 of the Treaty states that Member States shall bring the common agricultural policy into force by the end of the transitional period at the latest and that, in order to attain the objectives set out in Article 39, a common organization of agricultural markets is to be established.
13. On the other hand, Article 103 refers to Member States' conjunctural policies, which they must regard as a matter of common concern.
14. The floating of the exchange rates for the German and Dutch currencies, deemed essential if the wave of speculative capital into the Federal Republic and the Netherlands was to be checked, imperilled the unity of the common market and made measures designed to safeguard the machinery and objectives of the common agricultural policy imperative.
15. However, owing to the time needed to give effect to the procedures laid down in Articles 40 and 43, a certain amount of trade might then have passed free of the regulations, and this could jeopardise the relevant common organizations of the market.
(b). The form in which the disputed measure was adopted
16. The next question is whether Regulation No 974/71 is invalid on the ground that Article 103 of the Treaty, notably in paragraph 3, authorizes the adoption of measures only in the form of a directive or decision, not in the form of a regulation.
17. Although by Article 103 (1) Member States are bound to regard their conjunctural policies as a matter of common concern, the wording does not preclude Community Institutions from having power to lay down themselves, without prejudice to other procedures set out in the Treaty, conjunctural measures on matters within the spheres of their competence.
18. The phrase measures appropriate to the situation in Article 103 (2) means that as regards form, too, the Council may choose whichever seems best suited to the case in hand.
(c). The question of proportionality
19. The next question asked is whether Regulation No 974/71 conflicts with the principle of proportionality and with Articles 39, 40 and 110 of the Treaty and Article 19 of Regulation No 804/68 of the Council of 27 June 1968 creating a common organization of the market in milk and milk products (OJ L 148, 28. 6. 1968, p. 13), on the grounds that the compensatory amounts are not based on any profit made by the importer on the rate of exchange, but solely on the relationship between the official parity of the DM compared with the dollar and its true parity.
20. According to the final paragraph of the preamble to Regulation No 974/71, the amounts adopted should be limited to those strictly necessary to compensate the incidence of the monetary measures.
21. Faced with the necessity of drawing up measures of immediate effect and applicable to all imports and exports of the products concerned, in a situation developing constantly and more or less unpredictably, the Council contrived to make an overall assessment of the advantages and disadvantages of the system to be introduced.
22. Moreover, a weighted system, because of its flat-rate nature, would bring the same disadvantages as those criticized, yet without supplying the complete protection deemed necessary in relation to the world's leading exporter of agricultural produce.
23. The Court is not satisfied, then, that in weighing up the advantages and disadvantages of the system linking compensatory amounts to the relationship with the dollar of the national currency of each Member State concerned, and in opting for the system in force, the Council imposed burdens on traders which were manifestly out of proportion to the object in view.
(d). Contravention of Articles 39 (1) (c), 40 (3) (second paragraph) and 110 of the Treaty
24. Article 39 of the Treaty sets out various objectives of the common agricultural policy.
25. According to the second paragraph of Article 40 (3) of the Treaty, the common organization of the market shall be limited to pursuit of the objectives set out in Article 39 and shall exclude any discrimination between producers or consumers within the Community.
26. Article 40 refers only to discrimination between producers or between consumers, while the balance to be held between the conflicting interests of these two groups is dealt with in Article 39.
27. Lastly, these measures do not contravene Article 110 either, since it has not been established, nor has there been any offer to do so, that by adopting such measures the Council overstepped the boundaries of the wide powers of assessment conferred on it by this provision in matters of commercial policy.
(e). Contravention of Article 19 of Regulation (EEC) No 804/68
28. Article 19 of Regulation No 804/68 prohibits, in trade with third countries, the levying of any customs duty or charge having equivalent effect on products subject to the common organization of the market in milk and milk products.
29. Although the compensatory amounts do constitute a partitioning of the market, here they have a corrective influence on the variations in fluctuating exchange rates which, in a system of market organization for agricultural products based on uniform prices, might cause disturbances in trade in these products.
30. The Council did not contravene Article 19 of Regulation No 804/68 in adopting them.
II —. Question two
31. The second question asks whether the defendant in the main action was still entitled, on the proper application of Community law, to impose, on 24 March 1972, the date of the application for customs clearance, a countervailing charge on trade with third countries.
32. Article 8 of Regulation No 974/71 provides that it shall cease to be applicable as soon as all the Member States concerned again apply the international rules on margins of exchange-rate fluctuation around official parity.
33. The Agreement of 18 December 1971 did not meer those requirements.
III —. Question three
34. The third question asks whether Article 2 (2) of Regulation No 974/71 forms a sufficiently precise basis of assessment for compensatory amounts and whether the rate of 45.50 DM charged under Regulation No 548/72 of the Commission on the imports in issue results from the application of the principles contained in that Article.
35. Under Article 2 (2) of Regulation No 974/71, compensatory amounts for products whose price depends on that of products covered by intervention arrangements shall be equal to the incidence, on the prices of the product concerned, of the application of the compensatory amount to the prices of the product subject to intervention.
36. The term incidence in Article 2 puts the Commission under a duty to consider the repercussion, on the prices of the product not suspect to intervention, of the application of compensatory amounts to the ingredients common to it and to the product subject to intervention on which it depends.
37. Article 5 of Regulation No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products provides for the annual fixing of an intervention price for butter and for skimmed-milk powder.
38. The plaintiff in the main action also complains that no compensatory amount could be charged on the product in dispute because, contrary to the requirement in Article 1 (2) (b) of Regulation No 974/71, the price of cheese does not depend on the price of a product subject to intervention, but is to a great extent determined by the market.
39. The prices for cheese, on the one hand, and for butter and skimmed-milk powder on the other hand, are linked, notably as regards threshold prices, by Regulations of the Council Nos 804/68 of 27 June 1968 and 823/68 of 28 June 1968 determining the groups of products and the special provisions for calculating levies on milk and milk products.
40. Finally, the plaintiff in the main action claims that to charge compensatory amounts on imports of cheese of sheep's milk from Bulgaria contravenes the last sentence of Article 1 of Regulation No 974/71, since the floating of the German and Dutch currencies did not give rise to any disturbances in the cheese trade.
41. The necessarily general and flate-rate nature of the compensatory amounts system and the need to adapt quickly to constant fluctuations in currency justify the Commission's having considered disturbances only in relation to groups of products, irrespective of origin.
42. Hence, examination of Question 3 has not revealed any elements capable of affecting the validity of Regulations Nos 974/71 and 548/72 of the Commission.
43. The costs incurred by the Government of the Federal Republic of Germany, the Council and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable, and as these proceedings are, insofar as the parties to the main action are concerned, in the nature of a step in the action pending before a national court, the decision on costs is a matter for that court.
On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the observations of the Balkan firm, the Government of the Federal Republic of Germany, the Council and the Commission; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 38 to 47, 103, 110 and 177; Having regard to Regulations of the Council Nos 804/68 of 27 June 1968, 823/68 of 28 June 1968, 974/71 of 12 May 1971 and 2746/72 of 19 December 1972; Having regard to Regulations of the Commission Nos 1013/71 and 1014/71 of 18 May 1971 and 548/72 of 18 March 1972; Having regard to the Resolution of the Council of 9 May 1971; Having regard to the Protocol on the Statue of the Court of Justice of the European Economic Community, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT in answer to the questions referred to it by the Berlin Finanzgericht by order of that court dated 19 January 1973, hereby rules: