JUDGMENT OF 14. 12. 1978 — CASE 35/78 SCHOUTEN v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN

In Case 35/78 REFERENCE to the Court under Article 177 of the EEC Treaty by the College van Beroep voor het Bedrijfsleven (administrative court of last instance in matters of trade and industry) for a preliminary ruling in the proceedings 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 written procedure

II — Summary of the written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

A — Observations submitted by Schouten B.V.

B — Observations submitted by the Commission

Decision

Costs

I —. Facts and written procedure

(a). in respect of those Member States the currencies of which are maintained among themselves within a spread at any given moment of 2.25 %, the percentage difference between:

(b). in respect of Member Slates other than those referred to in (a), the average of the percentage differences between:

(c). for the Irish pound and the pound sterling: the average rates recorded each working day at noon on the foreign exchange markets of the two Member States concerned.

1. Are the provisions of Commission Regulation (EEC) No 1356/76 incompatible with Articles 1, 2, 2a, 3, 6 or 7 of Regulation (EEC) No 974/71 of the Council and/or with the provisions of Regulation (EEC) No 1380/75 of the Commission or else with any other binding provision of Community law?

2. Is the amendment made by Regulation (EEC) No 1356/76 to the rules for the granting of monetary compensatory amounts incompatible with the principle of legal certainty which is fundamental to the Treaty or with the principle of equality before the law which is also fundamental to the Treaty:

3. Must it be said that in adopting Regulation (EEC) No 1356/76 the Commission acted arbitrarily or at least that it exposed trade and industry to arbitrary decisions and thus abused its powers?

4. Properly interpreted do the provisions of Article 26 of Regulation (EEC) No 2727/75 of the Council mean that if the Management Committee has not decided on a draft measure submitted to it by a majority of 41 votes the Commission is not obliged to notify the measure to the Council?

II —. Summary of the written observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

A —. Observations submitted by Schouten B.V.

B —. Observations submitted by the Commission

1. By an order of 10 March 1978, which was received at the Court on 14 March 1978, the College van Beroep voor het Bedrijfsleven referred to the Court under Article 177 of the EEC Treaty several questions on the validity of Commission Regulation (EEC) No 1356/76 of 11 June 1976 on the monetary compensatory amounts and the differential amounts applicable in respect of movements in the Irish pound and the pound sterling (Official Journal 1976, L 153, p. 39).

2. These questions have been raised in the context of an action by a Netherlands exporter, the appellant in the main action (hereinafter referred to as the appellant), against a decision of the Hoofdproduktschap voor Akkerbouwprodukten (Central Board for Agricultural Products), the respondent in the main action (hereinafter referred to as the respondent), which was notified to the appellant by a circular of 10 June 1976 and which provided that the monetary compensatory amounts to be paid by the respondent for trade with the United Kingdom with effect from 14 June 1976 would not be altered on the basis of the average of the spot market rates recorded on the foreign exchange markets during the period from 2 to 8 June 1976 inclusive but for the time being would remain unchanged.

3. Article 1 (1) of 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 amended by subsequent regulations, in particular Regulation (EEC) No 2746/72 of the Council of 19 December 1972 (Official Journal, English Special Edition 1972 (28-30 December), p. 64), Regulation (EEC) No 509/73 of the Council of 22 February 1973 (Official Journal 1973, L 50, p. 1) and Regulation (EEC) No 1112/73 of the Council of 30 April 1973 (Official Journal 1973, L 114, p. 4), provides that:

4. Among the products referred to in Article 1 (2) of the same regulation are to be found products covered by intervention arrangements under the common organization of agricultural markets.

5. Article 2 (1) of the regulation provides that:

6. Article 3 of Regulation No 974/71 provides that:

7. In application of Regulation No 974/71, Article 2 of Regulation No 1380/75 of the Commission of 29 May 1975 (Official Journal 1975 L 139, p. 37) provides that the references period referred to in the second indent of Article 2 (1) (b) of Regulation No 974/71 shall run from a Wednesday to the following Tuesday.

8. Article 3 of Regulation No 1380/75 provides that:

9. During the period from 2 to 8 June 1976 inclusive, the Irish pound and the pound sterling were subject to speculative movements, so that the difference for that week changed by 2.69 points from the percentage taken as a basis for the preceding determination.

10. Since the situation rapidly recovered towards the end of that period, the Commission considered it appropriate to take no account of the recent movements in the two currencies in question and to make no amendment to the level of the monetary compensatory amounts fixed up to that time.

11. Accordingly, on 11 June 1976 the Commission adopted Regulation No 1356/76, Article 1 of which provides:

12. The appellant brought an action before the College van Beroep voor het Bedrijfsleven against the respondent's decision not to alter the monetary compensatory amounts with effect from 14 June 1976, and that court referred the following questions to the Court of Justice for a preliminary ruling:

13. The appellant exports cereals from the Netherlands to the United Kingdom, and payment is made in pounds sterling.

14. According to the appellant, payment is very often made a short time after the date of importation upon presentation of documentary evidence.

15. During the reference period defined in Article 2 of Regulation No 1380/75 of the Commission, the exporter seeks to sell an amount in pounds sterling equivalent to that pan of the selling price which corresponds to the intervention price.

16. By acting in this way a prudent exporter manages to guard against any falls in the exchange rate of the pound sterling between the reference period and the export period.

17. The appellant submits that by omitting to fix new monetary compensatory amounts for the period commencing 14 June 1976, Regulation No 1356/76 involvles not only a derogation from the provisions of Regulation No 1380/75, but also and principally a derogation from those of Regulation No 974/71, in particular Article 2 (1) (period to be determined) and Article 3 of that regulation.

18. It is submitted that since the latter is a Council regulation, the Commission cannot derogate from it.

19. Furthermore, Regulation No 1356/76 is said to violate the principle of legal certainty.

20. According to the appellant, by relying on the system embodied in Regulation No 974/71 exporters should have been able on the basis of the percentage fluctuation during the reference period from 2 to 8 June 1976 inclusive themselves to calculate the value of the monetary compensatory amounts which ought to have applied to trade with the United Kindgom with effect from 14 June 1976 and to base their transactions on that value.

21. Furthermore, Regulation No 1356/76 is said to be contrary to the system embodied in Regulations Nos 974/71 and 1380/75 in that it relates only to the pound sterling and the Irish pound and not to the other currencies, so that merchants exporting to Italy or France are not affected, and this is said to result in a violation of the principle of equality before the law.

22. For the reference period from 26 May 1976 to 1 June 1976 the average exchange rates of the pound sterling showed a real difference of — 22.37 %, that is to say a difference of — 20.87 % for the purposes of the second indent of Article 2 (1) (b) of Regulation No 974/71.

23. Since the difference taken as the basis for the preceding determination was — 19.2 %, the change in the difference prompted the Commission to fix the monetary compensatory amounts for the period commencing on 7 June 1976 on the basis of an adjusted difference of — 20.9 % in its Regulation No 1312/76 of 3 June 1976 altering the monetary compensatory amounts (Official Journal 1976, L 148, p. 1).

24. The movements in the real difference during the period from 1 June to 8 June 1976 were the following:

25. On the last of those dates, the difference was less than that on 1 June 1976, and in the days preceding the adoption of Regulation No 1356/76 of 11 June 1976, the difference never reached a level approaching that of 4 June 1976.

26. Consequently, the Commission was able to state in the third recital in the preamble to the said regulation that those rates have since improved, thus eliminating the disparity recorded in the above-mentioned period.

27. In these circumstances, the Commission considered it appropriate to take no account of the rates recorded during the period commencing on 2 June 1976and to make no amendment for the present to the monetary compensatory amounts … relating to the currencies in question.

28. However, Article 3 of Regulation No 974/71 of the Council provides that if the difference referred to changes by at least 1 point from the percentage taken as a basis for the preceding determination, the compensatory amounts shall be altered by the Commission in line with the change in the difference.

29. The average adjusted difference which was to be recorded for the reference period from 2 June 1976 to 8 June 1976 was — 23.59 % and diverged by 2.69 points form the percentage taken as a basis for the preceding determination.

30. Therefore it appears that by omitting to fix new compensatory amounts the Commission departed from the provisions of the said article, and it should be examined whether it could legally do so.

31. It appears from the preamble to Regulation No 974/71 that the system of monetary compensatory amounts was introduced in order to obviate the risk of disruption for the intervention system and abnormal movements of prices jeopardizing a normal trend of business in argriculture.

32. According to the last recital in the preamble to the said regulation the compensatory amounts should be limited to the amounts strictly necessary to compensate the incidence of the monetary measures on the prices of basic products covered by intervention arrangements and … it is appropriate to apply them only in cases where this incidence would lead to difficulties.

33. Consequently it must be considered whether, where a difference in the exchange rate is recorded over a short period and where before the date laid down for the determination of the compensatory amounts in respect of that difference the exchange rate improves to such an extent that there is no longer any reason to fear risks to the intervention system or abnormal movements of prices, the structure of the compensatory amounts system requires that notwithstanding that improvement the compensatory amounts must be altered in line with the difference recorded during that period.

34. As regards trade with the country whose currency had depreciated for a few days during the reference period, the effect of such an alteration would be that imports carried out during the period of application of the new compensatory amounts would enjoy monetary compensatory amounts at a level which was not justified by the exchange rates applicable on the day of importation, and that equally unjustified monetary compensatory amounts would be imposed on exports.

35. It emerges from the preamble to Regulation No 974/71 of the Council that such a result would be contrary to the purpose and the structure of the compensatory amounts system introduced by that regulation.

36. Accordingly, Article 3 of the regulation may be interpreted as meaning that the exchange rates taken into account in order to establish the difference referred to must be assessed on the basis of economically justified criteria, and that consequently it was open to the Commission to leave out of account rates which it considered to be unrepresentative.

37. It follows that by so doing it did not exceed the margin of discretion conferred upon it in relation to the fixing of compensatory amounts.

38. The foregoing also answers the appellant's argument to the effect that by adopting the regulation at issue the Commission failed to comply with the provisions of its Regulation No 1380/75 which fixes the reference period.

39. As regards the alleged breach of the principle of legal certainty, although an exporter is entitled to try to guard against any changes in the exchange rates in the manner described by the appellant, it should be observed that the monetary compensatory amounts system has the objectives stated above and was not intended to give traders an exchange guarantee or to indemnify them against any loss.

40. As regards the alleged breach of the principle of equality before the law, it suffices to observe that in a case such as the present, in which it appears that alteration of the compensatory amounts on the basis of statistics applying to one Member State would not be economically justified, there is nothing in that principle to prevent the application to other Member States of the rate of compensatory amounts which is economically justified.

41. The fourth question asks whether Commission Regulation No. 1356/76 is invalid because the Management Committee did not decide in favour of the measure adopted by the Commission and the Commission did not communicate the measure adopted to the Council in accordance with the provisions of Article 26 of Regulation No 2727/75 of the Council of 29 October 1975 (Official Journal 1975, L 281, p. 1).

42. Article 6 of Regulation No 974/71 provides that detailed rules for the application of that regulation shall be adopted in accordance with the procedure laid down in Article 26 of Council Regulation No 120/67 on the common organization of the market in cereals, as last amended by Regulation No 2434/70, or, if appropriate, the corresponding article of the other regulations on the common organization of agricultural markets.

43. Regulation No 120/67 was repealed and replaced by Regualtion No 2727/75, Article 26 of which corresponds to Article 26 of Regulation No 120/67 and provides as follows:

44. It appears from the last recital in the preamble to Regulation No 1356/76 that the Management Committee did not deliver an opinion within the time-limit set by its chairman.

45. According to the provisions of Article 26 of Regulation No 2727/75, it is only if the Commission adopts measures which are not in accordance with the opinion of the Committee that those measures must be communicated to the Council.

46. Accordingly the absence of an opinion by the Committee in no way affects the validity of the measures adopted by the Commission.

47. Therefore the answer to all the questions raised should be that consideration of Commission Regulation No 1356/76 has disclosed no factor of such a kind as to affect its validity.

48. The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable.

49. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of 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 College van Beroep voor het Bedrijfsleven by an order of 10 March 1978, hereby rules: