JUDGMENT OF 3. 2. 1981 — CASE 95/80 DERVIEU-DELAHAIS v DIRECTEUR GÉNÉRAL DES DOUANES ET DROITS INDIRECTS

In Case 95/80 REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal d'Instance [District Court] of the First Arrondissement of Paris for a preliminary ruling in the action pending before that court between

on the interpretation of Regulation 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 and several implementing regulations respecting the levying of monetary compensatory amounts on the export of Roquefort cheese, THE COURT composed of: J. Mertens de Wilmars, President, P. Pescatore, Lord Mackenzie Stuart and T. Koopmans (Presidents of Chambers), A. O'Keeffe, G. Bosco and A. Touffait, Judges, Advocate General: F. Capotorti

Registrar: A. Van Houtte

gives the following

JUDGMENT Facts and Issues

I — Facts and written procedure

II — Written observations submitted to the Court

The special nature of Roquefort cheese

The invalidity of subjecting exports of Roquefort to compensatory amounts having regard to Article 1 (2) (a) and (b) of Regulation No 974/71

The invalidity of subjecting exports of Roquefort to compensatory amounts having regard to the principle of strict necessity

The answer to be given to the question

The relationship of dependence between the price of Roquefort cheese and the price of products manufactured from cow's milk

The risk of disturbances in trade in agricultural products

Conclusion

Ill — Oral procedure

Decision

Costs

I —. Facts and written procedure

II —. Written observations submitted to the Court

(a). Roquefort is stated to be a blue-veined cheese which is manufactured exclusively from sheep's milk produced in the south of France and which is matured in special conditions. Its designation of origin is protected by the French Law of 26 July 1925 and the Decree of 22 October 1979 which contain strict requirements regarding the composition of the product, its manner of manufacture, the place in which it is matured, the source of the sheep's milk and the place of manufacture of the fresh cheeses.

(b). At international level, protection of the designation of origin is afforded by the International Convention on the Use of Registered Designations of Origin and Names of Cheeses, signed at Stresa on-1 June 1951.

(c). Roquefort cheese is an agricultural product within the meaning of the EEC Treaty. It is mentioned in Annex II which is referred to in Article 38 of the Treaty and, as a milk product, comes within Chapter 4 of the Customs Cooperation Council nomenclature. Moreover, cheese is referred to in Article 1 of Regulation No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176).

(a). In regard to the first point, it is indisputable that the common organization of the market in milk and milk products does not provide for intervention arrangements for Roquefort.

(b). In regard to the second point, it must be stated that the price of Roquefort is not dependent on the price of products subject to intervention arrangements.

(a). Specifically, it is appropriate to recall that, so far as Roquefort is concerned, neither an intervention price nor intervention arrangements exist and that Roquefort is not produced from basic products for which intervention arrangements are provided under the common organization. The levying of compensatory amounts is therefore not essential either in order to mitigate difficulties in the implementation of intervention arrangements or to compensate for the incidence of monetary fluctuations on the prices of basic products.

(b). In broad terms, so far as milk and milk products are concerned, examination of statistics confirms the absence of any significant effect of variations in the price of Roquefort on the functioning and the objectives of the common organization of the market in milk and milk products.

(a). Roquefort is a cheese manufactured exclusively from sheep's milk of registered designation of origin. The area of production of the sheep's milk which is used is restricted by law. Having regard to that restriction, the total production of Roquefort cheese cannot exceed 17000 to 18000 tonnes per anum. Hence the prices fetched by Roquefort are much higher than those of other blue-veined cheeses, whether produced in France or originating abroad. Moreover, having regard to the special nature of the product, the Roquefort market is not in significant competition with that of other blue-veined cheeses which have different customers and outlets.

(b). On the other hand, it must be feared that the price variations arising from the application of the system of monetary compensatory amounts when Roquefort is released on to the market in certain countries of the Community are of such a nature as not to regulate trade in Roquefort but to affect other blue-veined cheeses adversely.

(c). It is also appropriate to note the extremely limited volume of the trade in question. Out of an annual production of 17000 tonnes only 559 tonnes, or approximately one-third of the total exports of Roquefort, go to other Member States. The remaining exports involve non-member countries, with the American market largely predominating (USA: 770 tonnes per annum). When sent to the United States of America, Roquefort, which in contrast to other blue cheeses does not benefit from the system of refunds, is, moreover exported ex-quota and cannot therefore compete with other Community blue cheeses which enter that market within the framework of the quota system. The subjecting of Roquefort to the system of monetary compensatory amounts on its export to the United States has the effect of further increasing its sale price to the consumer and of handicapping its establishment on that market.

(d). The limited nature of the production of Roquefort cheese and hence the absence of any real competition between it and other Community blue-veined products because of, in particular, its special characteristics of taste and the price-gap separating it from those other products is such as to preclude the subjection of Roquefort to the system of monetary compensatory amounts. Far from re-establishing normal conditions in trade-flows in that product, that subjection leads, on the contrary, to disturbances of which the casualties are either the other blue-veined cheeses in so far as intra-Community trade is concerned or Roquefort itself in the case of its export to the United States. Such a result is contrary to the requirements of neutrality which the case-law of the Court of Justice demands of the system of monetary compensatory amounts.

(e). This assessment is confirmed by the analysis made by the Commission in Regulation No 777/79 in which it took the view that, because of the insensitivity of this market to the respective monetary positions of the various Member States, Roquefort cheese should not be subject to the system provided for by Regulation No 974/71.

(a). The dependence to which Regulation No 974/71 makes reference is a much broader concept than a mere mathematical relationship between the price of Roquefort cheese and the price of cow's milk. It suffices that the price of a product which is not subject to the intervention system depends on that of another product subject to intervention (and which is governed by the common organization of agricultural markets) but it is not necessary for the latter product to be the raw material from which the former is derived. Products which are competitors inter se may also be involved provided that it may be established that prices of the product which is not subject to the intervention system are formed on the basis of the prices of the other product.

(b). A general relationship exists between the price of cheeses, including those not manufactured from cow's milk, and the intervention prices for butter and milk powder. That dependence is revealed in particular through the fixing of the threshold prices for the calculation of the levies which apply to all cheeses, including Roquefort. Moreover, sales of cheese are indisputably linked, more or less directly, to all the factors governing the market in milk and assimilated products such as cheeses made from goat's milk and sheep's milk. Cheese prices benefit from the stability in the general price level on the market which results from the intervention prices for milk powder and butter. In its judgment of 24 October 1973 in Case 5/73 Balkan-Import-Export GmbH [1973] ECR 1091 the Court recognized a link between the price of cheese on the one hand and butter and skimmed-milk powder on the other.

(c). A special dependence between the price of Roquefort and the price of competing cheeses should also be recognized.

(a). According to Article 1 (3) of Regulation No 974/71, the power to impose compensatory amounts may only be exercised in so far as the adoption of an exchange rate higher than the margin of fluctuation permitted by international rules leads to disturbance in trade in agricultural products.

(b). The case-law of the Court of Justice has recognized that in judging whether a risk of disturbance exists the Commission enjoys a wide discretion involving the assessment of complex economic data. The exercise of that power ceases to be lawful only where the Commission has committed an obvious error or a misuse of power. That is not the case in the present instance.

(c). The exemption, under Regulation No 777/79, of Roquefort cheese from the system of compensatory amounts falls within the framework of the Commission's policy of confining the application of monetary compensatory amounts to a strict minimum, as a move towards their dismantling. The Commission has proceeded by carrying out periodical purges with a view to exempting certain products or simplifying the method of calculating the compensatory amounts. So far as Roquefort cheese is concerned, the Commission was not only guided by the wish to take steps with a view to the progressive dismantling of monetary compensatory amounts but also took account of the specific difficulties of exporting Roquefort, particularly to the American market.

Ill —. Oral procedure

1. By a judgment of 19 February 1980, which was received at the Court on 11 March, the Tribunal d'Instance [District Court] of the First Arrondissement of Paris submitted for a preliminary ruling pursuant to Article 177 of the EEC Treaty a question relating to the validity of provisions in Community regulations which subjected exports of Roquefort cheese from France to the levying of monetary compensatory amounts — in particular Commission Regulation No 652/76 of 24 March 1976 changing the monetary compensatory amounts following changes in exchange rates for the French franc (Official Journal 1976, L 79, p. 4).

2. This question has been put in the context of an action brought before the Tribunal d'Instance by several companies and natural persons who are producers and exporters of Roquefort cheese against the Directeur Général des Douanes et Droits Indirects with a view to obtaining reimbursement of monetary compensatory amounts paid during a period between 1976 and 1979.

3. It should be remembered that following a marked fall in exchange rates for the French franc in the course of the month of March 1976 and the fixing of a new representative rate for that currency the Commission, by Regulation No 652/76, introduced a set of compensatory amounts for France by way of a supplement to Annex I to Regulation No 572/76 of 15 March 1976 fixing the monetary compensatory amounts and certain rates for their application (Official Journal 1976, L 68, p. 5).

4. The list of those amounts includes, inter alia, tariff subheading 04.04 C, blue-veined cheese, which embraces all the blue cheeses. Consequently, exports of Roquefort bore a compensatory amount until the coming into force of Commission Regulation No 777/79 of 20 April 1979 amending certain monetary compensatory amounts in the milk and milk products sector (Official Journal 1979, L 99, p. 9), which, by introducing in regard to tariff subheading 04.04 C the words with the exception of Roquefort, had the effect of granting an exemption for that cheese.

5. The plaintiffs in the main proceedings contend that Roquefort cheese was wrongly included, under Regulation No 652/76, in the system of compensatory amounts. In their view, none of the conditions laid down by Regulation No 974/71 of 12 May 1971 (Official Journal, English Special Edition 1971 (I), p. 257), which introduced the system of compensatory amounts, as amended in particular by Regulation No 2746/72 of the Council of 19 December 1972 (Official Journal, English Special Edition 1972 (28-30 December), p. 64), was satisfied. According to the plaintiffs, Roquefort cheese, which is a product obtained from sheep's milk through special processes unique to its manufacture and which is sold at a price significantly higher than that of other blue cheeses, does not display the relationship of dependence upon other milk products subject to intervention arrangements which is required by Regulation No 974/71 as a condition of the inclusion of a given product in the system of compensatory amounts. Moreover, by reason of the highly special nature of this product it is claimed that there did not exist any disturbance or any risk of disturbance in the sector of the market concerned; all the more so since Roquefort is produced only in a well-defined region so that it is not possible to speak of reciprocal trade, in the proper sense of the term, in this product within the Community. It is therefore the case that Roquefort is and always has been wholly independent of the Community agri-monetary system. In the absence of any relationship of dependence and any risk of disturbance inclusion of Roquefort in the system of compensatory amounts therefore constitutes disregard of the principle of strict necessity for the introduction of those amounts which is laid down in Regulation No 974/71.

6. The plaintiffs' position has been supported by the French Government which draws attention to the very special characteristics of the market for Roquefort cheese, to the strict conditions placed upon its manufacture affecting its price, which is significantly higher than that of other blue cheeses, and also to the extremely limited volume both of the production itself and of exports to other Member States, a significant part of the production finding an outlet on the United States market. According to the French Government, the characteristics of this sector of the market are such as to preclude Roquefort's being subject to the system of monetary compensatory amounts. Far from eliminating any disturbance, the application of those amounts has been the source of difficulty for the sale of this high-quality product on the market in both the Community and non-member countries.

7. Under Article 1 (2) and (3) of Regulation No 974/71 the introduction of monetary compensatory amounts is subject to a threefold condition so far as products which are not directly covered by intervention arrangements are concerned. Those products must be governed by the common organization of the market or be the subject of a specific arrangement under Article 235 of the Treaty; their price must be dependent on that of one or more products which are covered by intervention arrangements and disturbances in trade in the agricultural products concerned must have been discerned or be foreseeable.

8. It is not disputed that Roquefort, like other cheeses coming under tariff heading 04.04, falls within the framework of the common organization of the market in milk. The fact that this product is obtained from sheep's milk does not take it outside that organization, which encompasses all cheeses irrespective of the raw material used for their manufacture — cow's milk, goat's milk or sheep's milk. On this matter.it is sufficient to refer to Article 1 (d) of Regulation No 803/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176) pursuant to which products falling within the aforementioned tariff heading are covered by that organization. The dispute is accordingly only concerned with, on the one hand, the question of the dependence of the price of Roquefort on that of milk products to which intervention arrangements apply and, on the other hand, the question of the existence or the foreseeability of a disturbance affecting the sector of the market concerned, in this case, the market in cheese and, more particularly, that of blue-veined cheeses coming within tariff heading 04.04.

9. The concept of dependence to which Regulation No 974/71 makes reference describes not only the direct derivation of the price of a given product from that of a product subject to intervention arrangements but also the dependence of the price of a product on prices which prevail as a whole on the market concerned and of which the level is sustained by the various intervention arrangements. That dependence may result from, inter alia, a relationship of competition between a given product and other products forming part of the same organization of the market.

10. In this case it must be observed that the majority of cheeses are manufactured from cow's milk and the prices of all of the products falling within that group are, because of the competitive relationship subsisting between them, in a relationship of dependence as regards a product for which intervention arrangements are laid down. That relationship of dependence also exists in the case of Roquefort which, despite its special characteristics and its price, is in competition with all cheeses and, more particularly, with the other blue cheeses. Moreover, it appears from statistics, which have not been disputed, that the prices of all blue cheeses have experienced parallel changes, albeit at different levels, during the period under consideration and this confirms the existence of a bond of dependence between the prices of those cheeses. Therefore, in laying down in 1976 compensatory amounts for French agricultural products the Commission was entitled to accept that for all cheeses, including blue cheeses, and amongst them Roquefort, there existed a relationship of dependence with products subject to intervention.

11. In regard to the assessment of the existence or the risk of disturbances affecting the sector of the market in question, that examination may not be confined to the position of a given product without other competing products' being taken into consideration at the same time, and that throughout the whole of the common market. Since the exclusive function of compensatory amounts is to compensate for the effect of monetary fluctuations without changing the relationships established between competing products, the Commission was legitimately entitled to consider, at least as a starting point, that all cheeses belonging to the same group defined by tariff subheading 04.04 C must be subjected to the same compensatory amount in order to avoid disturbance of the market. From that it follows that even proof of the fact that a given product, such as Roquefort cheese, has very special characteristics from the point of view of its production, price and markets, does not permit the conclusion that the Commission is under an automatic obligation to sever that product from the rest of the group of which it forms part by placing it directly outside the system of monetary compensatory amounts.

12. In this regard the Commission has stated, without being contradicted by the other parties, that at the time when the monetary compensatory amounts were introduced the fact of exempting Roquefort cheese from them would have had the result of bringing the price of that product appreciably closer to that of the other blue cheeses and that consequently there would have been a risk of substitution due to a purely monetary factor and therefore a disturbance detrimental to the other competing products. For that reason the Commission considered itself justified in treating Roquefort in the same way as other blue cheeses.

13. From the foregoing it appears that in examining in a complex economic context the question of a possible disturbance in the sector of the market concerned the Commission did not exceed the limits of the discretion which it exercised at the time of adopting the disputed regulation.

14. It may therefore be concluded, on the one hand, that it was not without justification that the Commission accepted the existence of a relationship of dependence, within the meaning of Regulation No 974/71, between Roquefort cheese and the other products covered by an organization of the market guaranteed by intervention arrangements and, on the other hand, that the Commission did not overstep the margin of discretion which it enjoys by accepting the existence or the prospect of economic disturbances in the sector most directly concerned when it fixed in 1976 a uniform rate of monetary compensatory amounts for all blue-yeined cheeses.

15. The answer should accordingly be given that consideration of the question put by the Tribunal d'Instance has disclosed no factor of such a kind as to affect the validity of Commission Regulation No 652/76 inasmuch as it fixed monetary compensatory amounts applicable without distinction to all cheeses falling within tariff subheading 04.04 C, including Roquefort cheese.

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

On those grounds, THE COURT in answer to the question submitted to it by the Tribunal d'Instance of the First Arrondissement of Paris by a judgment of 19 February 1980, hereby rules: