JUDGMENT OF 12. 10. 1978 — CASE 13/78 EGGERS v FREIE HANSESTADT BREMEN
In Case 13/78 REFERENCE to the Court under Article 177 of the EEC Treaty by the Vcrwaltungsgericht der Freien Hansestadt Bremen (Administrative Court of the Free Hanseatic City of Bremen) for a preliminary ruling in the action pending before that court between
THE COURT composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), A. M. Donner, P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco and A. Touffait, Judges, Advocate General: H. Mayras Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts and Issues
I — Facts and procedure
II — Observations pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC
A — Observations submitted by the plaintiff in the main action
The first question
The second question
The third question
B — Observations submitted by the Government of the Federal Republic of Germany
The first question
The second question
The third question
C — Observations submitted by the Commission
The first and second questions
The third question
Decision
Preliminary considerations
The questions referred to the Court
Costs
I —. Facts and procedure
(1). At least 85 % of the alcoholic content is derived from wine distillate home-produced (im Inland) by distillation;
(2). …
(3). …
(4). The whole of the wine distillate used has been kept for at least six months in oaken casks at the factory in Germany (inländischer Betrieb) where the home-produced wine distillate (inländisches Weindestillat) was extracted by distillation;
(8). The spirits have been given a certification number (Prüfungsnummer) which is assigned by the competent authority only if the conditions laid down in subparagraphs 1 to 7 of Article 40 (1) have been fulfilled.
1. Are Articles 30 and 31 of the EEC Treaty as well as the prohibition of discrimination under Community law to be interpreted as meaning that the rules laid down in subparagraphs 1 and 4 of Article 40 (1) of the Weingesetz of 14 July 1971 (Bundesgesetzblatt: Pan I, page 893 et seq. at 908) according to which home-produced spirits from wine may be designated as Qualitatsbrannrwein aus Wein (high quality spirits made from wine) or as Weinbrand (Brandy) only if:
2. If the answer to Question 1 is in the affirmative, is Article 36 of the EEC Treaty to be interpreted as meaning that the rules laid down in subparagraphs 1 and 4 of Article 40 (1) of the Weingesetz are not justified?
3. If the answers to the above questions are in the affirmative, are the provisions of Articles 90 (1) and 86 (b) of the EEC Treaty to be interpreted as meaning that the rules laid down in subparagraphs 1 and 4 of Article 40 (1) of the Weingesetz are incompatible with the said provisions of the EEC Treaty?
II —. Observations pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC
A —. Observations submitted by the plaintiff in the main action
B —. Observations submitted by the Government of the Federal Republic of Germany
1. The German Government first of all explains the objectives which the legislature had in mind in Article 40(1) of the Weingesetz, by stating that the aim of the reorganization in 1969 of the legislation relating to the wine sector (the Law of 16 July 1969, BGBl. I, p. 871) was to encourage quality production on a national basis by attaining the objective of the Community legislators (see the second recital of the preamble to Regulation (EEC) No 817/70 of the Council of 28 April 1970 laying down special provisions relating to quality wines produced in specified regions, Official Journal, English Special Edition 1970 (I), p. 252). The aim of Article 40, namely to establish a designation of quality, which is moreover optional, achieves this objective, owing to the conditions to which the use of that designation is made subject.
2. The German Government further purports to refute various assertions by the plaintiff in the main anion.
3. The German Government then proceeds to examine the questions referred and submits the following observations.
C —. Observations submitted by the Commission
1. By order of 18 January 1978 which was received at the Court Registry on 9 February 1978 the Verwaltungsgericht of the Freie Hansestadt Bremen referred to the Court, pursuant to Article 177 of the EEC Treaty, three questions on the interpretation of Articles 30, 31 and 36 (the first two questions), 86 (b) and 90 (1) (the third question) of the said Treaty.
2. Those questions have been raised in an action brought by a German manufacturer of spirits against the competent authority of the City of Bremen relating to the former's right to use the designations Qualitatsbranntwein and Weinbrand in connexion with its products made from wine distillates imponed from another Member Sute.
3. For the purpose of answering the questions referred to the Court attention should be drawn to some of the matters of law and fact with reference to which the national court has raised them.
4. According to Article 35 of the Weingesetzspirits made from wine are the liquid derived from wine distillate which has an alcoholic strength of at least 38o and may be drunk as such or simply diluted with water (preparation).
5. According to the plaintiff in the main action, if the initial distillation, which yields the Rohbrand, is carried out by the still distillation process, it produces spirits distilled from wine having an alcoholic strength of between 24 and 25o which must in fact be distilled a second time in order to fulfil the requirements of Articles 35 and 36 relating to alcoholic strength.
6. On the other hand, according to the Government of the Federal Republic of Germany, the product derived from the initial distillation — whatever its alcoholic strength — is a product which has not been purified and is for this reason called crude distillate which, before it can be used for the manufacture of spirits, must undergo a second distillation which transforms it into a ready-prepared distillate (fertiges Destillat).
7. The Weingesetz draws a distinction in Section II of Part 2 (Articles 35 to 44) between spirits made from wine which are home-produced on the national territory (inländische Branntweine aus Wein) and are dealt with in Articles 36 to 41, and those which are manufactured abroad (ausländische Branntweine aus Wein) and are dealt with in Articles 42 to 44.
8. As for ordinary spirits, Article 39 (1) provides that those produced on the national territory must be marked Branntwein aus Wein, whereas in the case of spirits of foreign origin — and especially those from another Member Sute — the name of the producing country or the adjective derived from that name must, according to Article 44 of the Weingesetz, be added to that marking.
9. On the other hand, spirits which are intended to carry the designations Qualitätsbranntwein aus Wein and Weinbrand are considered to have been produced on the national territory only if they fulfil the requirements set out in Article 40 of the Weingesetz and in particular the two conditions that:
10. Although the 1971 version of the said Article 44 allowed only the designation Qualitätsbranntwein aus Wein to be used for high quality spirits from abroad, while reserving the better known designation Weinbrand for high quality spirits produced in Germany, it is clear from the judgment of the Court of Justice of 20 February 1975 (Case 12/74, Commission of the European Communities v Federal Republic of Germany [1975] ECR 181) that high quality spirits from the other Member States which fulfil the conditions laid down in Article 44 of the Weingesetz must also be permitted to benefit in Germany from the use of the designation Weinbrand, because otherwise there would be an infringement of Article 30 of the Treaty.
11. However, the plaintiff in the main anion asserts that — even if the abovementioned infringement of Article 30 of the Treaty is eliminated — there is another measure having an effect equivalent to a quantitative restriction to be found in Articles 40 and 44 of the Weingesetz which is concerned with imports into the Federal Republic of Germany of ready-prepared distillates (fertiges Destillat). This restriction is to be found in the fact that high quality spirits manufactured in the Federal Republic of Germany must necessarily be manufactured from wine, wine fortified for distillation or crude distillate which, to the extent of at least 85 % of the alcoholic content of the distillate used, has undergone distillation, or at least final distillation, on the territory of the Federal Republic of Germany, transforming it into fertiges Destillat and that this ready-prepared distillate must, moreover, have been kept for at least six months in oaken casks at the factory in Germany which carried out such distillation or final distillation.
12. That provision, to which Article 44 (1) of the Weingesetz corresponds in so far as high quality spirits from the other Member States are concerned, prevents manufacturers of German spirits from buying distillates in other Member States with a view to using them directly, that is to say without any further distillation on German territory, for the preparation of high quality spirits from wine, whereas those distillates, in particular those coming from France and Italy, are of the alcoholic strength required by Article 36 of the Weingesetz (at least 52o and not more than 86o) and offer the same guarantees from the point of view of public health and quality as ready-prepared distillates (fertiges Destillat) manufactured in Germany.
13. The Government of the Federal Republic of Germany submits that the provision at issue is not in any respect a measure having an effect equivalent to a quantitative restriction.
14. From all these considerations it must be recognized that the right to use the designation of quality for home-produced spirits must depend upon the fact that the distillation, which is the determinative process, is actually carried out mainly within the country.
15. Furthermore, it should be pointed out that it is an established fact that German spirits are manufactured not from grapes or wines produced on the territory of the Federal Republic of Germany but from foreign wines imported mainly in the form of wines fortified for distillation (Brennweine) or of crude distillates (Rohbrände).
16. Finally, it should also be noted that the designations Qualitätsbranntwein aus Wein and Weinbrand are not, either within the meaning of the domestic laws of the Member States or that of Article 2 (3) (s) of Commission Directive No 70/50/EEC of 22 December 1969 (Official Journal, English Special Edition 1970 (I), p. 17), indicative of origin or source but must be regarded as designations of quality formulated by the legislation of a Member Sute.
17. It is after taking into account the various factors to which attention has been drawn above that the questions referred to the Court are to be answered.
18. The first question asks whether Articles 30 and 31 of the EEC Treaty as well as the prohibition of discrimination under Community law are to be interpreted as meaning that the rules laid down in subparagraphs 1 and 4 of Article 40 (1) of the Weingesetz of 14 July 1971 (Bundesgesetzblatt: Part I, page 893 et seq. at 908) according to which home-produced spirits from wine may be designated as Qualitätsbranntwein aus Wein (high quality spirits made from wine) or as Weinbrand (Brandy), only if:
19. Although the Court has no jurisdiction within the framework of the application of Article 177 of the Treaty to decide upon the compatibility of a national provision with Community law, it may nevertheless extract from the wording of the question formulated by the national court, having regard to the facts stated by the latter, those elements which come within the interpretation of Community law.
20. The first question amounts in substance to ascertaining whether the prohibition of measures having an effect equivalent to a quantitative restriction (Article 30 of the Treaty) and the general prohibition of discrimination are aimed at measures adopted by a Member Sute which make the use of a designation of quality for a home-produced finished product and, in particular, for an alcoholic product manufactured from raw materials which come either from the Member State concerned or from other Member Sutes, subject to the condition that the whole or pan of the manufacturing process prior to the final stage of the latter takes place in the Member Sute where the final suge of production is carried out and where, therefore, the product is regarded as originating.
21. If the answer to that question is in the affirmative the next question is whether a measure of that kind is not justified by Article 36 of the Treaty.
22. It is appropriate to answer both those questions together and to do this in the first instance with reference to the interpretation of Articles 30 and 36 of the Treaty.
23. As for the prohibition of measures having an effect equivalent to quantitative restrictions, Article 30 of the Treaty prohibits all such measures in trade between Member States.
24. In order to be effective the prohibition on the reserving of certain designations (other than those indicative of origin or source), and in particular designations of quality, for domestic products only must extend to measures which distinguish between domestic products according to whether or not the raw materials or the semi-finished products from which they are manufactured have been produced or treated on national territory and which reserve for goods derived from semi-finished products, treated on national territory, special designations such as to give them an advantage in the opinion of the traders or consumers concerned.
25. However desirable may be the introduction of a policy on quality by a Member State, such a policy can only be developed within the Community by means which are in accordance with the fundamental principles of the Treaty.
26. It follows from all the foregoing considerations that a national measure which makes the right to use a designation of quality for a domestic product subject to the condition that the semi-finished product from which it was manufactured was either produced or treated on national territory, and refuses to allow the use of that designation simply because the semi-finished product was imponed from another Member State, is a measure having an effect equivalent to a quantitative restriction.
27. It is true that, according to Article 2 (1), Commission Directive No 70/50/EEC relates solely to measures, other than those applicable equally to domestic or imported products and that, according to the Federal Republic of Germany, a comparison of Articles 40 and 44 of the Weingesetz shows that home-produced spirits and those coming from the other Member States are subject, in so far as entitlement to the designations of quality Qualitätsbranntwein aus Wein and Weinbrand is concerned, to conditions which are substantially the same.
28. Although it is not necessary in this case to answer the question whether a national measure which is applicable equally to home-produced products and those coming from the other Member States may nevertheless be a measure having an effect equivalent to a quantitative restriction, it is appropriate to record that equal treatment of the product when it is ready for delivery to the consumer is no justification for unequal treatment of the semi-finished products from which the finished product is made, in that in each Member Sute the domestic producer of the finished product is obliged or strongly encouraged to use home-produced semi-finished products wholly or in part.
29. However, it should further be considered whether measures such as those which have given rise to the questions referred to the Court are not permissible by virtue of Article 36 of the Treaty, even though they are measures having an effect equivalent to quantitative restrictions.
30. Article 36 is an exception to the fundamenul principle of the free movement of goods and must, therefore, be interpreted in such a way that its scope is not extended any further than is necessary for the protection of those interests which it is intended to secure.
31. Article 36 of the Treaty does not cover a restriction imposed on trade which is linked to the right to use a national designation of quality, even where it is optional, which distinguishes a particular home-produced alcohol from similar home-produced alcohols, which may, even if they do not fulfil the condition on which the right to the designation of quality depends, and which restricts intra-Community trade, nevertheless be marketed on the territory of the Member Sute concerned without any restriction and in particular without any risk to the health of consumers.
32. Therefore the answer to the first two questions must be that measures adopted by a Member Sute which make the use in connexion with a homeproduced product of a designation of quality — even where such designation is optional — which is indicative neither of origin nor of source within the meaning of Article 2 (3) (s) of Commission Directive No 70/50/EEC of 22 December 1969 subject to the requirement that one or more stages of the production process prior to the preparation of the finished product have been carried out on national territory are measures having an effect equivalent to a quantitative restriction which are prohibited by Article 30 of the Treaty and not justified by Article 36 thereof.
33. In view of the reply given above regarding the interpretation of Articles 30 and 36 of the Treaty the remainder of the first question and the third question need not be answered.
34. The costs incurred by the Government of the Federal Republic of Germany and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable.
On those grounds, THE COURT in answer to the questions submitted to it by the Verwaltungsgericht of the Free Hanseatic City of Bremen by order of 18 January 1978, hereby rules: