Opinion of Mr advocate general Mayras

Mr President,

Members of the Court,

I —. Allow me to deliver a single opinion in these two cases: the questions involved are put by the same court, arise from cases between the same parties, have been discussed at the same oral procedure and, finally, relate to the same national system.

II —. The two cases which have given rise to the present reference for a preliminary ruling by the Tribunal de Grande Instance, Lure, have arisen as follows: the Société Anonyme Distilleries Peureux is not a bouilleur de cru [distiller for personal consumption]: at Fougerolles it has a large industry mainly concerned with the production of fruit alcohol. It comes under the special system of industrial distilleries of stone fruit and of steeping of stone fruit. For this purpose it uses raw material of national origin or fruits steeped in alcohol and coming from countries of the Community or other countries.

2. Let me now deal with the question whether Article 37 still applies.

III —. Before considering the effect of Article 37 of the EEC Treaty on the French rules giving rise to an obligation to transfer production to the monopoly, the consideration for the release of such obligation constituted by the cash adjustment and the prohibition on distilling any imponed raw material save fresh fruit other than apples, pears and grapes, it is fitting to inquire whether this provision of the Treaty prohibits what is called discrimination in reverse, since the plaintiff in the main action complains in the first case that it is the victim of such discrimination and also questions whether Article 37 still applies in regard to situations such as that with which the national court is concerned in the two cases.

1. Within the scope of the Treaty, and without prejudice to any special provisions contained therein, Article 7 prohibits any discrimination on grounds of nationality.

2. Let me now deal with the question whether Article 37 still applies.

In its written observations the Commission argues, as it has already done in the Hansen case ([1978] ECR 1787), on which you gave a ruling in your judgment of 10 October 1978, and as it is doing in Case 91/78, another Hansen case, on which you will be ruling shortly, that since the end of the EEC transitional period it is no longer Article 37 which applies as regards all the measures not relative to the exclusive rights of monopolies but Articles 12, 30 to 34, 95 and if necessary 92. Alternatively it maintains that Article 37 no longer applies because the French system, if still constituting a production monopoly, must be regarded as adjusted and no longer constitutes a commercial monopoly within the meaning of that article as a result of Decree No 77/842 of 25 July 1977. Only the right to produce alcohol remains subject to the monopoly as long as it is compatibile with the principle of the free movement of goods between Member States.

In its oral observations, however, it states, if I am not mistaken, that if in disregard of Article 37 (1) exclusive rights to import, export and market continue to be exercised by a State monopoly after the end of the transitional period, this special provision applies in respect of measures which in the absence of such a body would normally come under Articles 12, 30 or 95.

This question has been examined by Mr Advocate General Capotorti in his opinion of 4 July 1978, at p. 1814 in the aforementioned Hansen Case (judgment of 10 October 1978).

It seems to me that the Court has not yet expressly ruled on the issue although in that judgment it was held (paragraph 14): Accordingly, it appears preferable to examine the problem raised by the national court primarily from the point of view of the rule on taxation laid down in Article 95, because it is of a general nature, and not from the point of view of Article 37, which is specific to arrangements for State monopolies. This approach is further justified by the fact that Article 37 is based on the same principle as Article 95, that is the elimination of all discrimination in trade between Member States.

However according to the judgment of 17 February 1976 in the Miritz case ([1976] ECR 217, at p. 229, paragraph 8) Article 37 (1) is not concerned exclusively with quantitative restrictions but prohibits any discrimination, when the transitional period has ended, regarding the conditions under which goods are procured and marketed between nationals of Member States. It follows that if application is not limited to imports or exports which are directly subject to the monopoly but covers ail measures which are connected with its existence and affect trade between Member States in certain products, whether or not subject to the monopoly, and thus covers charges which result in discrimination against imported products as compared with national products coming under the monopoly.

The decisive criterion in this respect is the fact that certain measures arising from the existence of the monopoly have an effect on trade between Member States. The measures whose effect upon trade the plaintiff in the main action criticizes are directly connected with the existence of the monopoly. I must accordingly express great reservations on the Commission's views. If the abolition of discrimination arising directly from the provisions applicable to the products subject to the monopoly could be achieved by the provisions of the Treaty which prohibit charges or measures having an effect equivalent to quantitative restrictions (Articles 30 to 34) or discrimination in taxation (Article 95), Article 37 would be unnecessary. Accordingly the scope of this article is not confined to the pursuit and achievement of this single objective: this provision is intended to adjust monopolies, it being necessary according to Article 37 (3) that the adjustment itself shall be harmonized with the abolition of quantitative restrictions on the same products provided for in Articles 30 to 34.

The Commission itself is somewhat vague as to the date from which this transformation took place: logically it should have been 1 January 1970. According to the Commission however it was at best not until July 1977 that it took place. It appears from a reply which it gave on 13 December 1977 to a written question that the adjustment of the French economic system for alcohol was not final at that date and that the examination by the Commission was not finished.

In so far as they involve rules having an effect equivalent to a national organization of the market, I very much doubt whether all national monopolies of a commercial character — the French monopoly in alcohol in particular, as moreover the German monopoly, if I may be allowed to say so — have been adjusted in the way mentioned in Article 37 (1) even in July 1977 and that with the abolition of the exclusive rights to import, export and market the monopolies have ceased to exist as such.

Replying on 21 May 1976 to a written question the Commission stated: As France has not yet taken steps to bring its alcohol monopoly into line with the requirements of Article 37 of the EEC Treaty in accordance with the judgments 45/76 (Rewe-Zentrale) and 91/75 (Miritz)the Commission opened infringement proceedings against it on 12 April 1976 under Article 169 of the Treaty. There is nothing in the file to show what stage these proceedings have reached.

It accordingly appears to me extremely dangerous to relegate Article 37 to the museum of provisions which have no further use. In this case however the article must remain applicable in its entirety.

4. In this respect we must not lose sight of a fundamental aspect: apart from its revenue rôle to which I shall return it is clear that the French monopoly in alcohol has rules which are designed to make it easier to dispose of agricultural products within the meaning of Article 37 (4). Within the limits of certain quotas it continues to be obliged to buy agricultural ethyl alcohol, to ensure its disposal and price in order to guarantee a certain standard of living to the producers. On 22 December 1969 the Commission considered that it would be impossible to separate the final adjustment of the monopoly from the establishment of the common organization provided for ethyl alcohol of agricultural origin. In reply to a written parliamentary question the Commission stated again on 28 April 1971 that the final adjustment of the French and German monopolies in alcohol depends on the establishment of a common organization of the markets in ethyl alcohol of agricultural origin. I entirely share this point of view.

IV —. Assuming that at the time of the matters with which the national court is concerned the prohibition of any discrimination, even in reverse, as laid down by Article 37 were directly applicable, it will still be necessary for similar products to be involved in view of the rules on registered designations of origin. It is necessary to know whether the product made by the plaintiff is similar to the products originating in or coming from the other Member States (Italy) in relation to which it claims that it suffers discrimination.

V —. It will however perhaps not be necessary to decide all these delicate issues for the following reasons:

1. In the plaintiff's view, as from 1 January 1970 the producers of the other Member States should have been free to export and market their products in the monopoly State, whereas the nationals of such State were deprived of their right freely to market their products, either in their own State or in others. It alleges that since the levying of the compensatory charge (or surcharge) was unlawful importers of foreign products ought not to have paid it and if this had happened, the levying of the cash adjustment on French producers was discriminatory.

2. Even after 1 April 1974 and until 29 July 1977 the import of ethyl alcohol was subject to the payment of a compensatory surcharge equal as regards the pure alcohol contained in the product to the difference between the lowest purchase price paid by the Service des Alcools at the end of the previous marketing year and the same price of alcohol intended for a corresponding use, words similar to those subsequently used in Article 269 of Annex II as regards the cash adjustment. The import of products intended for drinking and containing ethyl alcohol from Member States was when the minimum sale price of neutral potable alcohol in the country of origin is lower than the sale price payable in France for the same use subject to a compensatory charge equal to the difference between the two prices.

3. The national court however is also asking about the discriminatory nature of the situation in which after 29 July 1977 pure alcohol (raw material) contained in imported spirituous beverages is not subject to the cash adjustment whereas such alcohol when it is contained in spirituous averages made in France is so subject. Although the answer to this question appears to me quite unnecessary for the purpose of judgment in the case with which the national court is concerned and that it might be more appropriate for it to be the subject of an application for failure to fulfil an obligation I shall make the following observation :

VI. 1. Whereas the plaintiff alleges that it was discriminated against in relation to national importers of Williams Pear Distillates (Case 86/78), it complains in Case 119/78 of being put at a disadvantage in relation to national manufacturers of liqueur who produce a genuine Cointreau. It seems, and I say this guardedly in the absence of any other particulars in the file, that it intended to refine the alcohol, an operation which is not a simple modification, for the refinement of alcoholic liquids involves a redistillation leading to the manufacture of different products within the meaning of the French rules or redistillation of raw material to produce or manufacture a new alcohol rectified to a high proof. The production of rectified alcohol of high proof is reserved to the State under Article 358 of the Code Général des Impôts which I have previously mentioned. The case with which the national court is concerned is thus not without similarity to the Miritz case. That case was concerned with a quantity of citrus peel distillates or concentrated extract of various aromatic substances in a solution of alcohol, classified under tariff heading 33.04, which is used as a raw material in the preparation of beverages falling within heading 22.06. There was a prohibition on import into the Federal Republic of Germany before the passing of the Law of 23 December 1970 and the German monopoly had the exclusive right of importing ethyl alcohol and products containing it. Before that Law the function of the German compensatory charge was guaranteed by this exclusive right which in practice involved a prohibition on import except as regards certain products. Nevertheless as against the present case, the question was not the prohibition on the use of this product but the recovery of the amount of the compensatory charge introduced by the German law on the basis of the alcoholic content of the goods. In the view of the plaintiff in the main action the goods in question were not raw material (infusions) for the production of alcohol but alcoholic raw material (infusions) intended for the production of alcohol or spirits. Fruit, the fermentation of which has been suspended by its immersion in high strength alcohol is not raw material for the production of alcohol but an alcoholic infusion. In this event however the product is one to which non-denatured ethyl alcohol of less than 80o and of agricultural origin has been added and such produce falls within heading 22.09 Bcompound alcoholic preparations (known as concentrated extracts) which it is intended to make subject to the future common organization of the markets. There thus arises, as in the previous case, a preliminary question of classification. There is no Community concept yet of alcoholic or alcohol-producing raw materials. On the other hand it was held in the Hansen case of 10 October 1978 that: At the present stage of its development and in the absence of any unification or harmonization of the relevant provisions, Community law does not prohibit Member States from granting tax advantages, in the form of exemption from or reduction of duties, to certain types of spirits or to certain classes of producers. Indeed, tax advantages of this kind may serve legitimate economic or social purposes, such as the use of certain raw materials by the distilling industry, the continued production of particular spirits of high quality, or the continuance of certain classes of undertakings such as agricultural distilleries (paragraph 16). Difficult problems regarding similar treatment can arise in this context in view of the elements to which the legislation of the different Member States has linked the granting of the tax advantages concerned, such as the nature of the raw materials, the technical characteristics of the equipment, the distilling processes, the taxation procedure and the methods of fiscal control (paragraph 18). The national court has ruled that in so far as they are intended for distillation the oranges steeped in alcohol in question are raw material within the meaning of Article 268 of Annex II and it seems that it is because the fruit has been enriched with alcohol other than agricultural alcohol of national origin that the administration is refusing the authorization requested by the plaintiff: it is alcohol originating from a non-member country or alcohol made in a Member State from raw material originating from such Member State or a non-member country, but we do not know with certainty its nature and origin. 2. Let us remember that in France under Article 268 of Annex II to the Code Général des Impôts: (1) Imported fresh fruit other than apples, pears and grapes may be distilled. (2) Imported fresh apples, pears and grapes may not be distilled. (3) Other imported raw material may not be distilled. First I must voice certain doubts on the compatibility of the prohibition on distilling fresh fruit, at least as regards pears, with the standing calls for tender issued by the Italian Intervention Agency (A.I.M.A.) for the transfer of pears withdrawn from the market to the distillation industry, such as that which is the subject of the notice published in the Official Journal of 10 June 1978, since Regulation No 1562/70 of the Commission of 31 July 1970, on the basis of which such a tender was arranged, provides for equal treatment for all interested parties in the Community and for the opportunity for any industrial undertaking to submit a tender provided that the product allocated is processed into alcohol of a strength of more than 80o. 3. The national court however has found that since the oranges steeped in alcohol are imponed, the fact that they cannot be distilled brings into question the free movement of goods within the Common Market and the prohibition of any discrimination between nationals of Member States (Article 37). As a result even if the plaintiff were allowed to impon the product in question (and the administration admits theoretically it is so entitled) it cannot use it as it intends. The wording of the question put to the Court is somewhat obscure. Article 10 is concerned with products coming from non-member countries and in free circulation in a Member State and I do not very well see the relevance of this article to the case before the national court unless there is a deflection of trade by Italy, for example if the oranges in fact came from Spain and alcohol had been added either in Spain or in Italy whether such alcohol originates from Italian or foreign raw material. The question must therefore be reformulated as follows: Do Articles 10 and 37 or any other provision of the Treaty bar a national measure prohibiting the distillation in a Member State of raw material originating in another Member State or in free circulation in such State after importation from third countries? The plaintiff in the main action infers from the case-law in Miritz that the prohibition on distilling (alcoholic) raw material in conjunction with the existence of the monopoly prevents the import of such raw materials from other Member States and thus constitutes discrimination in so far as the same raw material may be freely distilled when it is of French origin. Put into free circulation after import from non-member countries such raw material has been subjected to the duties or levies provided for under heading 20.06 B I and the plaintiff would like to be able freely to distil what it calls compound spirits without avoiding payment of the duty on consumption. Here we come back to the same question: would not the abolition of this prohibition involve in the end, at least partially, the disappearance of the monopoly whereas Article 37 requires only its adjustment in the circumstances provided for in paragraph (4)? I can only repeat the doubts which I have mentioned previously. In addition let me say that since it is a question of alcohol not requiring further processing or contained in other products imported from countries which are not members of the European Communities, the provisions of Council Directive No 69/74 of 4 March 1969 on the harmonization of provisions laid down by law, regulation or administrative action relating to customs warehousing procedure and of Council Directive No 71/235 of 21 June 1971 on harmonization of the provisions laid down by law, regulation or administrative action relating to the usual forms of handling which may be carried out in customs warehouses and in free zones apply. Although, as the Commission proposes, the matter must be viewed in the light of the general scheme of Article 30 et seq. of the Treaty, nevertheless for the prohibition to be unjustified it would not have to apply to similar national products and it would have to be possible for these to be freely marketed. It is for the national court to check whether this is so. In this case and in the event of the raw material in question not being compound alcoholic preparations falling within heading 22.09 the prohibition on distilling oranges steeped in alcohol coming from Italy or from non-member countries after having been put into free circulation in Italy appears to be contrary to Community law. 4. Originally fruits prepared or preserved with alcohol did not come under the common organization of the markets in fruits and vegetables. In the same way fruit prepared or preserved otherwise, with or without the addition of alcohol and with sugar added, were not covered by Commission Directive No 66/683 of 7 November 1966 abolishing all difference of treatment between domestic products and products which, pursuant to Articles 9 and 10 of the Treaty, should be allowed free circulation. In any event by reason of Article 3 thereof this directive was not applicable to provisions made under Article 37 (1) of the Treaty or forming part of a national organization of the agricultural market. Article 5 of Commission Directive No 70/50 of 22 December 1969 is to the same effect. Oranges steeped in alcohol however are covered by Council Regulation No 516/77 of 14 March 1977 on the common organization of the market in products processed from fruit and vegetables and, save as otherwise provided or where derogation therefrom is decided on by the Council on a proposal from the Commission, the prohibition on distilling in question has been contrary to Article 13 (2) of this regulation since 1 April 1977.

My opinion is that the question should be answered as follows:

In March 1977 the concept of discrimination regarding the conditions under which goods are procured and marketed between nationals of Member States within the meaning of Article 37 of the EEC Treaty did not cover the levying, for the benefit of a State monopoly, on certain alcoholic raw materials of a cash adjustment on transfer when the producers are free to dispose of them, to which cash adjustment similar products originating in other Member States have also been subject nor did it cover the prohibition on distilling applicable without distinction in a Member State to raw materials coming from a non-member country after being put into free circulation in another Member State and to the same national raw materials.

1 Translated from the French.