JUDGMENT OF 25. 5. 1978 — CASE 136/77 RACKE v HAUPTZOLLAMT MAINZ

In Case 136/77 REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht Rheinland-Pfalz for a preliminary ruling in the action pending before that court between

THE COURT, composed of: H. Kutscher, President, M. Sørensen and G. Bosco (Presidents of Chambers), A. M. Dormer, J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe and A. Touffait, Judges, Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

I — Facts and procedure

II — Written observations submitted to the Court

III — Oral procedure

Decision

Costs

I —. Facts and procedure

1. Regulation (EEC) No 974/71 of the Council of 12 May 1971 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 (Official Journal, English Special Edition 1971 (I), p. 257) provides for a system of monetary compensatory amounts. Article 1 (1) thereof in the version in force at the date of the facts in question (Regulation No 509/73 of the Council of 22 February 1973, Official Journal 1973 L 50 of 23 February 1973, p. 1), provides that:

2. Regulation (EEC) No 539/75 of the Commission of 28 February 1975 fixing the monetary compensatory amounts and certain rates for their application (Official Journal 1975 L 75 of 3 March 1975) fixed the monetary compensatory amounts to be charged or granted in trade between the nine Member States and in trade between the Community and third countries for the following wines:

3. During the period from 1 to 30 September 1975, the plaintiff in the main action imported into Germany red wine in particular but also some white wines coming within tariff heading 2.05 CI b from Yugoslavia and Hungary.

4. By order of 4 October 1977, that court stayed the proceedings and requested the Court of Justice under Article 177 of the EEC Treaty to give a preliminary ruling on the following questions:

5. The order reference was entered in the Court Register on 8 November 1977.

II —. Written observations submitted to the Court

A —. 1. The plaintiff in the main action observes that, as regards the market in wine, German production of red wine in 1975 amounted to 1144000 hectolitres, 49000 hectolitres of which was unfermented red table wine (red table wine did not appear as such in the statistics). That market of 49000 hectolitres in no way justifies making imports of red wine 40 times larger in quantity, in other words 1943000 hectolitres, subject to monetary compensatory amounts. The 99145000 hectolitres of wine produced in Italy and in France may be set against those figures. In those two countries the production of red table wine amounts to 71931000 hectolitres. The plaintiff in the main action strongly suspects that the Community wished to exempt France and Italy from the monetary compensatory amounts which lead to distortions in competition, while the levying of those amounts was retained for imports into Germany so as to satisfy that country politically and to obtain revenue for the Community. 2. In its opinion, the levying of monetary compensatory amounts on the wine from Yugoslavia is illegal because it infringes Article 1 (3) of Regulation No 974/71. Under that provision, the compensatory amounts should only be applied if application of the monetary measures referred to in Article 1 (1) would lead to disturbances in trade in agricultural products. According to the field of application of Regulation No 974/71 and its objectives, those disturbances should originate exclusively from the monetary measures adopted by the Member States. As shown by the sixth recital of the preamble to Regulation No 974/71 the disturbance as such lies the incidence of the monetary measures on the prices of basic products. Compensatory amounts should only be applied in cases where this incidence would lead to difficulties: end of the sixth recital to the preamble to Regulation No 974/71. For that reason the monetary compensatory amounts are therefore necessarily of an exceptional nature: judgment of the Court of 14 May 1975 in Case 74/74, CNTA S.A. v Commission of the European Communities, paragraph 20 of the decision ([1975] ECR 547). It follows that the Commission should have abolished them as soon as their application proved to be no longer necessary in order to prevent disturbances in trade: judgment of the Court of 17 March 1976 in Joined Cases 67 to 85/75 Lesieur Cotelle et Associés SA. and Others v Commission of the European Communities, paragraph 27 of the decision ([1976] ECR 409). The importation of wine into the Federal Republic of Germany does not have disturbing effects on the domestic market in wine. On the contrary, the burdens imposed by the application of monetary compensatory amounts caused the proportion of German wine on the domestic market to increase from 67 % in 1973 to 72 % in 1974 and 75 % in 1975. In contrast, the proportion of foreign wine sold on that market fell accordingly from 33 % in 1973 to 28 % in 1974 and finally to 25 % in 1975. In its judgment of 22 January 1976 in Case 55/75, Balkan-Import Export GmbH v Hauptzollamt Berlin-Packhof [1976] ECR 19, the Court granted the Commission a wide discretion as regards the solution of the problem whether a risk of disturbance exists or not. The Court stated the reasons for that discretion in the light of the evaluation of a complex economic situation and of the practicability of the system of compensatory amounts also enabling groups of products to be taken into consideration. The plaintiff in the main action considers that these two considerations do not apply in this case: because special rules are involved the Commission no longer has a discretion, merely in view of the third paragraph of Article 40 of the Treaty; in addition very concrete and demonstrable facts must exist showing that it was impossible according to the objectives pursued by Regulation No 974/71 and the objectives of a common market in wine also to justify the discontinuance of the monetary compensatory amounts on imports of wine into Germany. Even if the Court should in law grant the Commission a discretion there are however considerable doubts as to whether the Commission was also able to and did in fact use that discretion within the context of Regulation No 722/75 from the political point of view. The Commission was subjected to strong political pressure from the Federal Republic of Germany in connexion with the discontinuance of the monetary compensatory amounts on wine. It seems unreasonable to grant it a discretion if it is an established fact from the beginning that it can only use that discretion to a very limited extent. Finally, the discretion granted to the Commission by the Court of Justice can however only relate to the evaluation of the facts but not to the determination and establishment of those facts. On the basis of those considerations the plaintiff in the main action takes the view that the compensatory amount levied at the frontier on wine from Yugoslavia is unlawful. 3. The plaintiff in the main action claims in addition that the levying of monetary compensatory amounts on wine from Yugoslavia is also unlawful because it infringes the prohibition on discrimination contained in the EEC Treaty, in particular in the second subparagraph of Article 40 (3) thereof. The objective of the system of monetary compensatory amounts, as follows from Regulation No 974/71 and from the case-law of the Court of Justice, is to maintain uniform prices, prevent the collapse of the intervention price system and preserve the normal flow of trade in agricultural products both within the Community and with third countries (see the judgment of the Court of Justice of 24 October 1973 in Case 10/73, Rewe-Zentral AG v Hauptzollamt Kehl [1973] ECR 1190, paragraph 14 of the decision). The defendant in the main action has claimed in the proceedings before the court making the reference that the discontinuance of the monetary compensatory amounts on wine has had the effect in Germany of encouraging imports. The measure is therefore justified by means of an objective not pursued by Regulation No 974/71. This situation already gives rise to a breach of the second subparagraph of Article 40 (3) of the EEC Treaty in conjunction with Regulation No 974/71. Since the plaintiff in the main action is an undertaking trading in wine in the Common Market it is also a consumer within the meaning of the above-mentioned provision. It clearly suffers discrimination as against similar undertakings in other Member States of the European Communities through the imposition of a monetary compensatory amount. The plaintiff in the main action is unaware of any facts which might justify different treatment within the context of the system of monetary compensatory amounts. In particular it refers to the fact that the market in wine in Germany is insignificant compared to Italy and France. If the Commission considered that it was no longer necessary to protect by means of compensatory amounts the Italian and French markets in wine from disturbances caused by the monetary situation this applied a fortiori to the German market and in particular to imports from third countries. The accuracy of this view was confirmed by Regulation No 2448/75 and by the fact that Regulation No 3071/76 introduced a compensatory amount levied at the frontier only on imports of Italian and French wines but not on imports of wine from third countries. 4. Under the third subparagraph of Article 40 (3) of the EEC Treaty any common price policy must be based on common criteria and uniform methods of calculation. The principles of uniform prices and of uniform rules for foreign trade with third countries apply inter alia within the context of Regulation No 816/70 of the Council of 28 April 1970 laying down additional provisions for the common organization of the market in wine (Official Journal, English Special Edition 1970 (I), p. 234). The plaintiff in the main action considers that the Commission has infringed these principles by adopting Regulation No 722/75 because that regulation retained monetary compensatory amounts on imports of wine into the Federal Republic of Germany whilst it declared with regard to the far more important markets in wine in Italy and France that there were no disturbances on the market caused by the monetary situation. That infringement makes the monetary compensatory amounts charged on imports of wine into the Federal Republic of Germany unlawful. 5. Article 12 (2) of Regulation No 816/70 also prohibits the levying of charges having an effect equivalent to a customs duty in trade with third countries. The Court of Justice has already, in its judgment of 24 October 1973(Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof [1973] ECR 1091), dealt with the question whether monetary compensatory amounts are unlawful because they infringe the prohibition on charges having an effect equivalent to a customs duty. With the adoption of Regulation No 722/75 the reasons which might, according to that judgment, justify a monetary compensatory levy on imports of wine into the Federal Republic of Germany have disappeared: the monetary compensatory amounts no longer have a corrective influence on the variations in fluctuating exchange rates but, in the view of the defendant in the main action, should protect the German market in wine from any imports. The objectives the pursuit of which the Court of Justice justified in the abovementioned judgment have now transformed themselves into the opposite. Instead of maintaining the patterns of trade and the common market the monetary compensatory amounts are at present acting as disturbing factors which distort competition. 6. The plaintiff in the main action finally claims that Regulation No 722/75 is also invalid for infringement of Article 190 of the EEC Treaty, at least in so far as the annex thereto states: other than Germany. The result thereof is that the wines imported into the Federal Republic of Germany were also exempted from the monetary compensatory amounts. In the field of the system of monetary compensatory amounts it is unnecessary to state with regard to each product or group of products individually the reasons why the Commission considers that a disturbance in the market caused by the monetary situation persists. The same principle applies if a certain group of products is generally exempted from the monetary compensatory amounts. If however the monetary compensatory amount is discontinued on all imports except those into the Federal Republic of Germany special rules are created requiring a very precise statement of the reasons upon which they are based from both a factual and a legal point of view. For that reason the Finanzgericht Rheinland-Pfalz, the court making the reference, expressed considerable doubts as to whether the duty to give a statement of reasons had been complied with. The Commission only stated the reasons for the exemption from the monetary compensatory amounts but not for the retention thereof in the case of one country. However, in the light of Article 190 of the EEC Treaty, that was precisely the decisive point which should have appeared in the recitals of the preamble to Regulation No 722/75. Moreover, in view of Article 190 of the EEC Treaty it is insufficient to state, as the reason upon which the contents of the regulation is based, that the risk of disturbance persists in the case of imports of wine into the Federal Republic of Germany. If the Commission declared that there was no risk of disturbance in the case of the other Member States, it should at least have stated what facts led it to take the view that a different evaluation was applicable in the case of the Federal Republic of Germany.

B —. The Commission does not reply to the questions as to the validity and scope of Regulation No 722/75 submitted by the Finanzgericht Rheinland-Pfalz for a preliminary ruling. The main action concerns solely the levying of monetary compensatory amounts on imports of Yugoslavian wine into Germany after 1 September 1975. In this respect only the compensatory amounts fixed in Regulation No 2021/75 applied. If Regulation No 722/75 is invalid the original compensatory amounts should continue to be applied in the remaining Member States without making any change in the situation concerning the retention of the German amounts. The question essential for the purposes of the decision in the main action is whether, when Regulation No 2021/75 was adopted, the conditions applicable to the levying of such amounts under Regulation No 974/71 were complied with in respect of the compensatory amounts on table wine. The statements of the Commission relate merely to this question.

III —. Oral procedure

1. At the hearing on 12 April 1978 the plaintiff in the main action, represented by Dietrich Ehle, and the Commission, represented by its Legal Adviser, Peter Kalbe, acting as Agent, delivered oral argument. They put forward inter alia the views summarized as follows.

2. The plaintiff in the main action observed that for two reasons it does not share the Commission's view that in the present case only Regulation No 2021/75 is applicable: first, Regulation No 722/75 discontinued for the first time the monetary compensatory amounts on wine coming under tariff subheadings 22.05 CI and II, except in Germany. Regulation No 2021/75 was adopted in implementation of Regulation No 722/75 and did not therefore annul the latter. Secondly, the Finanzgericht took the compensatory amounts to be applied from Regulation No 2021/75. That regulation is therefore also the subject-matter of the reference for a preliminary ruling.

3. The Commission produced at the hearing a list of regulations to prove that in the market in wine compensatory amounts were fixed for all Member States only from 1973 to 1975. The decision adopted in Regulations Nos 722/75 and 2021/75 to retain the amounts only in the case of Germany is therefore not extraordinary.

4. The Advocate General delivered his opinion at the hearing on 3 May 1978.

1. By order of 4 October 1977, which was received at the Court of Justice on 8 November 1977, the Finanzgericht Rheinland-Pfalz referred to the Court under Article 177 of the EEC Treaty two questions on the validity of Regulation (EEC) No 722/75 of the Commission of 19 March 1975 amending Regulation (EEC) No 539/75 fixing the monetary compensatory amounts and certain rates for their application (Official Journal 1975, L 71, p. 24) in so far as it excepts from the discontinuance of the monetary compensatory amounts imports into the Federal Republic of Germany of wine coming under tariff subheading 22.05 CI of the Common Customs Tariff. These questions were raised within the context of a dispute between a German undertaking and the German customs authorities over the levying of monetary compensatory amounts on the importation of certain quantities of table wine from Yugoslavia and Hungary in September 1975.

2. Regulation (EEC) No 722/75 amending Regulation No 539/75 discontinued the monetary compensatory amounts on wine coming within tariff subheadings 22.05 CI and II in all the Member States other than the Federal Republic of Germany as from 24 March 1975.

3. The principal question raised before the national court and in the procedure before the Court of Justice was whether the condition laid down in Article 1 (3) of the basic regulation on monetary compensatory amounts, in other words Regulation (EEC) No 974/71 of the Council of 12 May 1971 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 (Official Journal, English Special Edition 1971 (I), p. 257), as subsequently amended, still applied in September 1975 to imports of wine into the Federal Republic of Germany. That article provides that the grant or levying of monetary compensatory amounts does not apply where application of the monetary measures referred to in paragraph 1 of that article would lead to disturbances in trade in agricultural products. Under Article 6 of the regulation it is for the Commission, acting according to the procedure known as the Management Committee procedure, to decide as to the existence of a risk of disturbance.

4. As the Court has stated in several judgments, since the evaluation of a complex economic situation is involved, the Commission and the Management Committee enjoy, in this respect, a wide measure of discretion. In reviewing the legality of the exercise of such discretion, the Court must confine itself to examining whether it contains a manifest error or constitutes a misuse of power or whether the authority did not clearly exceed the bounds of its discretion.

5. During both the written and the oral procedure, the Commission explained the circumstances which, in its view, justified the retention in the market in wine, of monetary compensatory amounts charged on imports in the case of the Federal Republic of Germany while monetary compensatory amounts in that sector did not apply to other Member States. In particular it showed that that decision was based on an analysis of the general developments in the market in wine in the Community during a period in which the situation recorded in certain Member States might well have caused disturbances in imports into Germany. It does not seem therefore that the Commission exceeded the bounds of its discretion by adopting the provisions of Regulations (EEC) Nos 722/75 and 2021/75 in question.

6. Moreover, the question has been raised as to whether the principle of nondiscrimination laid down in the second subparagraph of Article 40 (3) of the Treaty has been infringed by the retention in the market in wine of the monetary compensatory amounts in the case of the Federal Republic of Germany alone. It is necessary however to reply to that question in the negative. In fact, the Federal Republic of Germany was the only Member State the currency of which has been revalued and which produces wine nationally, so that the difference between the solution adopted in the case of the Federal Republic of Germany, on the one hand, and in the case of the Member States the currency of which has been devalued and the Member States the currency of which has been revalued but which are not wine producers, on the other, could therefore be considered as objectively justified.

7. In addition, the question was raised as to whether the levying of compensatory amounts on imports of wine from third countries was contrary to the prohibition against charges having an effect equivalent to customs duties laid down in Article 12 (2) of Regulation (EEC) No 816/70 of the Council of 28 April 1970 laying down additional provisions for the common organization of the market in wine (Official Journal, English Special Edition 1970 (I), p. 234). In this connexion it is sufficient to state that the monetary compensatory amounts are not levies introduced by some Member States unilaterally but Community measures adopted to deal with the difficulties resulting for the common agricultural policy from monetary instability. The monetary compensatory amounts are not therefore covered by the prohibitions on levying charges having an effect equivalent to customs duties.

8. Finally, the national court asked whether the duty to give a statement of reasons for a regulation laid down in Article 190 of the Treaty has been infringed because the reasons upon which the retention of the monetary compensatory amounts in the case of Germany was based were not expressly stated. The second recital of the preamble to Regulation (EEC) No 722/75 provides that:

9. Although those recitals do not mention the factors justifying the making of an exception in the case of Germany, that absence, in the particular circumstances of the case, does not result in the invalidity of the provisions in question. In fact, in the case of Germany it was merely the retention in substance of the rules which had already been in force for several years, whilst the amendment introduced by Regulation (EEC) No 722/75 and retained in Regulation (EEC) No 2021/75 only concerned certain other Member States. Although in similar circumstances the discontinuance of the monetary compensatory amounts in the case of certain Member States is the result of the fact that the conditions for their introduction are no longer fulfilled, their retention with regard to another Member State is the normal result of the continuing existence of the necessary conditions as far as that other State is concerned. In the absence of an express indication it may be accepted that the retention of the previous rules is based on the same grounds.

10. It is therefore necessary to reply that consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Regulations (EEC) Nos 722/75 and 2021/75 of the Commission in so far as the importation into Germany of wine falling within tariff subheading 22.05 C I is excepted from the discontinuance of the monetary compensatory amounts.

11. The costs incurred by the Commission of the European Communities, which submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds, THE COURT, in answer to the questions referred to it by the Finanzgericht Rheinland-Pfalz by order of 4 October 1977, hereby rules: