JUDGMENT OF 21. 2. 1984 — CASE 337/82 ST. NIKOLAUS BRENNEREI ν HAUPTZOLLAMT KREFELD

In Case 337/82

THE COURT composed of: J. Mertens de Wilmars, President, T. Koopmans, K. Bahlmann and Y. Galmot (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco, O. Due, U. Everling and C. Kakouris, Judges, Advocate General: G. Reischl Registrar: P. Heim

gives the following

JUDGMENT

Facts and Issues

I — Facts and procedure

II — Written observations submitted to the Court

III — Question put to the Commission by the Court

IV — Oral procedure

Decision

The first question

The second question

Costs

I —. Facts and procedure

1. Is Commission Regulation (EEC) No 851/76 of 9 April 1976 void in so far as it is based on Article 46 of the EEC Treaty, which is no longer applicable after the expiry of the transitional period.

2. If the answer to Question 1 is in the affirmative, what legal consequences arise from the invalidity of the regulation?

II —. Written observations submitted to the Court

(i). Article 46 is not expressly limited to the transitional period, in which respect it differs from Articles 44 and 45 of the Treaty. Article 46 is closely linked to the existence of national market organizations, which are not required to be totally abolished by the end of the transitional period.

(ii). Article 46 continues to perform an important function where no common organization of the market exists. Until a common organization is established, Member States may grant aid of such a kind as is compatible with the provisions of the Treaty (judgment of 25 September 1979, Case 232/78 Commission v France [1979] ECR 2729). Thus the Treaty provisions on State aids have only limited application pending the establishment of the common organization of the market (Article 42 of the Treaty and Article 4 of Regulation No 26 of the Council (Official Journal, English Special Edition 1959-1962, p. 129)).

(iii). Whilst it is true that the Community may not impose charges having an effect equivalent to customs duties in trade within the Community (judgment of 20 April 1978, Joined Cases 80 and 81/77 Ramel [1978] ECR 927), that is so only if a common organization of the market exists. In that case, Articles 39 to 46 of the Treaty do not contain any exception to the application of the general rule prohibiting charges having an effect equivalent to customs duties. On the other hand, in the present circumstances Articles 38 (2) and 46 of the Treaty authorize the levying of countervailing charges in view of the absence of a common organization of the market.

(iv). Furthermore, there are no grounds for considering that, by implication, Article 46 became spent after the expiry of the transitional period since that provision still performs an independent function.

(v). Article 37 cannot be regarded as a substitute for Article 46 in all cases. Thus Article 46 may be applicable where aid is granted in States in which there is no monopoly of a commercial character. Moreover, even if such a monopoly exists, the measure is not necessarily contrary to Article 37. Finally, it is not inconsistent for the Commission to take immediate protective measures under Article 46, whilst, at the same time, instituting proceedings to establish a breach of Article 37.

(vi). Article 46 enables quick and effective action to be taken, whilst the procedure under Article 169 is time-consuming and may involve complex questions of fact and of law.

(i). The Court has so far only dealt with Article 46 summarily and the reference which it has made to the transitory character of the provision must not be overestimated (judgments of 20 April 1978 in Joined Cases 80 and 81/77 Ramel [1978] ECR 927, and of 29 March 1979 in Case 231/78 Commission v Uni/ed Kingdom [1979] ECR 1460).

(ii). The economic interests of the agricultural producers concerned in certain regions of the Community require imperatively that they should not suffer as a result of the Council's inability to create a common organization of the market with due expedition. Further, Member States may not be prevented from adopting domestic measures granting aid. In those circumstances, Article 46 is the only solution which permits the attainment of maximum free movement of goods, without adversely affecting the economic interests of the producers. It must be permissible to adopt domestic measures granting aid, if the safeguards for the employment and the standard of living of the producers concerned, offered by Article 43 (3), are not to be rendered meaningless. Indeed it is precisely as a result of the unrestricted application of rules relating to the free movement of goods that an increased need for national aid might make itself felt.Moreover, the Court of Justice has acknowledged that even within the framework of a common organization of the market, it is possible in principle to create appropriate mechanisms for the neutralization of trade between Member States, when, as a result of the different agricultural structures, it proves necessary to establish different intervention measures in certain regions of the Community (judgment of 15 September 1982, Case 106/81 Kind v Council and Commission [1982] ECR 2885).

(iii). If the provisions of Articles 92 to 94 were fully applicable to agriculture even in the absence of special provisions, any measure implementing Article 46 would be deprived of its legal basis, inasmuch as it is only reasonable to have recourse to that provision with a view to neutralizing lawful measures adopted by Member States. It would be very dangerous to apply Article 46 in the event of unlawful national measures, because that would help to consolidate such measures.

(iv). In his Opinion in Case 91/78 (Hansen II, [1979] ECR 935, at p. 959) Mr Advocate General Capotorti considered that, after the end of the transitional period, Articles 92 to 94 of the EEC Treaty also apply in their entirety to agricultural products for which a market organization has yet to be introduced. If the rules on the free movement of goods are fully applied to products for which no common organization of the market exists, it is scarcely possible to suggest that Member States should be left complete discretion to grant aids, in view of the fact that such a state of affairs might result in dangerous and reciprocal disturbances of the markets. However, it is only necessary to resolve the problem of the full application of Articles 92 to 94 if it is not possible to have recourse to Article 46.

III —. Question put to the Commission by the Court

IV —. Oral procedure

(a). the question of legality is rarely clear, especially within the context of Article 37;

(b). The legality would have to be assessed by the Commission; the Court might subsequently take a different view and in the meantime the producers would have suffered irreparable damage;

(c). The Commission's fear that it would be dangerous to use Article 46 against unlawful measures is unfounded since the Commission has complete control over the use of Article 46.

(a). The procedure under article 169 serves to mitigate the effects of unlawful situations. Article 46 is of course quicker and more effective, but there is no reason why, when national aids are adopted, a particularly advantageous situation should be created for certain agricultural products in respect of which the Council has not yet established common organizations of the market. For other products only Articles 92 et seq. are applicable. In the past it has been argued that a provision similar to Article 46 should be inserted in the section on aids.

(b). If Article 46 were applicable in a field in which the Council has not fulfilled its obligations, certain Member States would no longer have an incentive to create a common organization of the market.

(c). Where Article 46 has neutralized the effect of certain unlawful measures, the Commission is no longer compelled to obtain a decision of the Court declaring that the Member State in question has failed to fulfil its obligations; that might lead to the prolongation of unlawful national measures.

1. By an order dated 8 September 1982, which was received at the Court on 23 December 1982, the Finanzgericht [Finance Court] Düsseldorf referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the validity of Commission Regulation (EEC) No 851/76 of 9 April 1976 fixing a countervailing charge for imports into Belgium, Germany, Luxembourg and the Netherlands of ethyl alcohol of agricultural origin produced in France (Official Journal 1976, L 96, p. 41).

2. The plaintiff in the main proceedings imported into the Federal Republic of Germany ethyl alcohol of French origin and was required to pay a countervailing charge under Regulation No 851/76. Questioning the compatibility of that regulation with the EEC Treaty, it contested the demand for payment in proceedings before the Finanzgericht.

3. According to the preamble to the regulation, the countervailing charges were intended to mitigate the effects of the disturbance, or the threat of disturbance, of the German and Benelux markets caused by imports from France of agricultural alcohol at prices considerably lower than the prices prevailing on those markets. Those supplies of cheap alcohol were a result, in particular, of the pricing policy applied by the French alcohol monopoly.

4. Regulation No 851/76 is based on Article 46 of the EEC Treaty, according to which:

5. The Finanzgericht Düsseldorf took the view that Article 46 of the Treaty and the regulations based on that provision had become devoid of purpose after the expiry of the transitional period and that the French monopoly ought to have been adjusted pursuant to Article 37 of the Treaty. It therefore referred to the Court the following questions :

6. The first question is intended essentially to establish whether Article 46 of the EEC Treaty is still applicable after the expiry of the transitional period and consequently whether or not Regulation No 851/76. adopted in pursuance of that article, is valid.

7. According to the plaintiff in the main proceedings, Article 46 no longer constituted a valid basis for the adoption of Regulation No 851/76 after the expiry of the transitional period, by which time all the national organizations of the market should have been adjusted to the rules laid down for the establishment of the common market. The plaintiff considers that the only legal remedy which the Commission was entitled to make use of, in order to mitigate the distortions of competition caused in this instance by France, was an action under Article 169 for infringement of the rules laid clown in the Treaty.

8. The Commission considers that Article 46 can now apply only with regard to lawful national measures, in view of the fact that the procedure under Article 169 represents an adequate means of countering national measures which are contrary to the Treaty. The Commission takes the view that the imposition of a countervailing charge may be justified only where it represents the sole means of redressing the balance, since such a charge has the effect of creating a barrier to the free movement of goods, which is one of the fundamental principles of the common market.

9. Finally, the United Kingdom considers that Article 46 retains a fundamental role, even after the expiiy of the transitional period, where there is no common organization of the market, irrespective of whether the national measures in question are lawful or unlawful.

10. In view of the problems raised by the interpretation of Article 46 of the Treaty, it is necessary, in order to determine the scope of that provision, to consider its wording, its context and its aims.

11. Even though the scope of Article 46 is bound to be reduced gradually, as the common organizations of the market are established, there is no mention in that provision of its application being limited to the transitional period. On the contrary, it follows from the working of Article 46 that it applies whenever in a Member State a product is subject to a national market organization or to internal rules having equivalent effect, which is the case here.

12. Moreover, pursuant to Article 42 of the Treaty, the provisions of the chapter relating to rules on competition, and in particular those concerning State aids, do not apply to agricultural products, unless the Council has adopted a specific decision within the framework of the development of common organizations of the market. For products which are not subject to such an organization, Regulation No, 26 of the Council of 4 April 1962 applying certain rules of competition to production of and trade in agricultural products (Official Journal, English Special Edition 1959-1962, p. 129) provides that only Article 93 (1) and the first sentence of Article 93 (3) apply. Under those provisions the Commission has the right to be informed of such. aids. The Commission is therefore deprived of the power to institute proceedings under Article 93 (2) of the Treaty in respect of those aids.

13. On the other hand, Article 37 only partly fills the lacuna resulting from the limited applicability to those products of the rules relating to aids. Only if the particular conditions specified in Article 37 are satisfied may the Commission act against national aids affecting competition within the Community.

14. It follows from the foregoing that, so long as an agricultural product has not been made subject to a common organization of the market, Article 46 constitutes for the Commission a useful instrument which allows it to adopt immediate safeguards against distortions of competition created by a Member State. The introduction of a countervailing charge pursuant to that article thus facilitates the achievement — by the maintenance of normal trade patterns in the exceptional and temporary circumstances which justify the measure — of the aims of Article 39 of the Treaty, which seeks inter alia to stabilize the markets and to ensure a fair standard of living for the agricultural population concerned.

15. Moreover, although such a countervailing charge appears to be an impediment to intra-Community trade, it cannot be compared to a charge having an effect equivalent to a customs duty. It is a charge imposed in the general interest, the amount of which is fixed by the Commission and not unilaterally by a Member State. It enables products from States where aids are granted to be exported to other Member States without disturbing their markets and thus prevents artificial differences between prices in the exporting Member State and those in the importing Member State, resulting from disparities in the national markets before the establishment of a common organization, from creating imbalances in trade. In each case it is for the Commission to ensure that the duration and the amount of the charge remain within the limits circumscribed by the need to re-establish equilibrium.

16. Finally, it follows from the reasons set out above that Article 46 is not deprived of its raison d'être, even if other provisions of the Treaty serve to mitigate the effects of distortions of competition thus created. On the contraiy, in so far as a common organization of the markets creating harmonious conditions of competition has not been established, Article 46 makes it possible to counter, with the utmost alacrity, the imbalances caused by certain national support measures. Such a mechanism is rendered necessary solely by the disturbance of competition caused by a Member State, regardless of the view that may be taken of the legality of the national measures which create that disturbance. It is therefore the task of the Commission, subject to the review of the Court, to assess solely, according to the terms of Article 46, whether the rules of a Member State affect the competitive position of the products of another Member State and therefore justify the imposition of a countervailing charge.

17. It also follows that, contraiy to the Commission's view, it is not necessary to make a distinction according to whether or not the imbalances which it is sought to redress are the consequences of measures which are in conformity with Community law.

18. Moreover, if the Commission considers that the Member State in question has failed to fulfil its obligations under the Treaty, the introduction of a countervailing charge does not relieve it of its duty to exercise the power conferred upon it by Articles 155 and 169 of the Treaty and thus to commence the procedure laid down in the latter provision.

19. In reply to the national court it must therefore be stated that Article 46 of the EEC Treaty may be applied after the expiry of the transitional period to products which have not yet been made subject to a common organization of the market. In consequence the validity of Commission Regulation No 851/76 of 9 April 1976 fixing a countervailing charge for imports into Belgium, Germany, Luxembourg and the Netherlands of ethyl alcohol of agricultural origin produced in France (Official Journal 1976, L 96, p. 41) cannot be called in question on the ground that it is based on Article 46.

20. It is not necessary to reply to the second question since it related solely to the possibility that Regulation No 851/76 might be found to be invalid.

21. The costs incurred by the United Kingdom and by 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 proceedings 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 Finanzgericht Düsseldorf by order of 8 September 1982, hereby rules: