Opinion of Mr Advocate General Van Gerven
Mr President,
Members of the Court,
1. The Commission has brought an action before the Court on the basis of Article 169 of the EEC Treaty since it considers that the French Republic and the United Kingdom have failed to fulfil their obligations under the EEC Treaty by failing to take action for the post-clearance recovery of a specified amount by way of levies, in accordance with Regulation (EEC) No 1697/79, and, in the absence of such recovery, by failing to make the amount in question available to the European Communities as own resources.
Background
2. Council Directive 69/73/EEC provides for inward processing arrangements under which an importer of goods is not required to pay any import charges on condition that the imported goods are intended for export in the form of compensating products. The inward processing system therefore grants relief from impon charges subject to the exportation of the processed products (compensating products) without expon refunds.
3. Since the territory of the Community constitutes a customs union in relation to non-member countries, it is self-evident that import and export transactions can be carried out in different countries. At the beginning of 1981 the United Kingdom and French authorities were approached by Rank Hovis Ltd (a company incorporated under United Kingdom law) and Compagnie française commerciale et financière (a company incorporated under French law, hereinafter referred to as CFCF), respectively, which expressed the wish to engage in certain import and export transactions together on the basis of inward processing arrangements involving equivalent compensation. Rank Hovis was to import into the United Kingdom common wheat from Canada free of import duty whereas CFCF was to export flour from France to non-member countries as a compensating product without claiming export refunds. However, Article 11 of Directive 75/349 provides that the importation of import goods may be carried out only by the holder of the prior export authorization or on his behalf.
4. Accordingly, a groupement d'intérêt économique known as Minoran was set up under French law by Rank Hovis and CFCF. On 21 October 1981 Minoran was authorized by the French authorities (with the agreement of the United Kingdom authorities) to carry out the proposed transactions. The authorization was valid for one year. On the basis of that authorization, between February and September 1982 Rank Hovis imponed into the United Kingdom on account of Minoran a number of consignments of common wheat from Canada. The flour was exported by CFCF, also on account of Minoran, from France to non-member countries over the same period. All the transactions were carried out without the imposition of import levies or the grant of export refunds. On 9 August 1982 a second authorization of the same kind was granted to Minoran but was suspended following receipt of a telex message from the Commission on 22 September 1982. By letter of 12 July 1984 the Commission informed France and the United Kingdom that, in its view, the transactions gave rise to an unjustified advantage within the meaning of Article 4 of Directive 75/349. In that letter, the Commission requested France and the United Kingdom to recover the sums avoided in accordance with Article 4 and the first subparagraph of Article 2 (1) of Regulation No 1697/79. In response to a request from France and the United Kingdom to specify what amounts the Commission wished them to recover, the Commission explained by letter of 19 December 1984 that they were to take action for the post-clearance recovery of the monetary compensatory amounts payable on the exportation of the flour from France to non-member countries and on the importation of wheat from Canada into the United Kingdom. After an exchange of views between the Member States concerned and the Commission had failed to yield any results, the Commission instituted these proceedings before the Court under Article 169 of the EEC Treaty. In its application of 23 March 1987 the Commission claims that, as a result of the existence of an unjustified advantage, the authorizations granted are not valid, in accordance with Article 4 of Directive 75/349, and that the defendants should, pursuant to Article 2 (1) of Regulation No 1697/79, take action for the post-clearance recovery of the monetary compensatory amounts which would have been payable on the transactions in question if those transactions had taken place without any authorizations being granted.
5. It must be pointed out that the applicable legislation has been amended since the material events took place. The problem before the Court no longer arises under the law as it now stands. Article 37 of Council Regulation (EEC) No 3677/86 of 24 November 1986 laying down provisions for the implementation of Regulation (EEC) No 1999/85 on inward processing relief arrangements (Official Journal 1986, L 351, p. 1), which is set out in full in the Report for the Hearing, provides that, under the triangular traffic system, monetary compensatory amounts are to be levied in the same way as if the import goods had been sent by the exporter of the compensating products to the importing Member State.
The legal issue
6. The Court must decide whether the French Republic and the United Kingdom were required, on the basis of Regulation No 1697/79 and Directive 75/349/EEC, to take action for the post-clearance recovery of monetary compensatory amounts which, according to the Commission, were payable by Rank Hovis and CFCF and, in the absence of such recovery, whether they are required pursuant to Regulation No 1697/79 to make a corresponding amount available to the Communities as own resources.
The alleged unjustified advantage
7. Let us first consider what the advantage in the contested transaction consisted of, before ascertaining whether that advantage must be regarded as unjustified. Monetary compensatory amounts are, amongst other things, intended to prevent artificial deflections of trade which could arise from differences between the exchange rates of the various green currencies in the Community. Since the Common Customs Tariff is expressed in ecus, but levies and refunds are payable in national currency, undertakings may wish to import goods from non-member countries into Member States whose currency has increased in value or, conversely, to export goods to non-member countries from Member States whose currency has depreciated in value since the establishment of the Common Customs Tariff. Moreover, so far as intra-Community trade is concerned, they may prefer to offer products for sale to intervention agencies in a Member State with a strong currency on the ground that guaranteed prices are also paid in national currency. The levying of monetary compensatory amounts is aimed at neutralizing those differences as far as possible.
8. I now turn to the allegation that the advantage described above is unjustified. In that regard, there is a serious difference of opinion between the parties.
9. The United Kingdom rejects the aforesaid definitions given by the Commission and contends that the fact that the authorization enables payment of monetary compensatory amounts to be avoided is a normal consequence of the existence of the customs union and the rules on equivalent compensation as applied at the time of the contested transactions. The United Kingdom also points out that the rules applicable at the time of the contested transactions provided either for the grant of authorization (with relief from import and export duties and monetary compensatory amounts) or for the refusal to grant authorization. Hence the grant of authorization subject to payment of monetary compensatory amounts was not one of the possibilities envisaged. The United Kingdom also disagrees with the Commission's contention that the existence of an unjustified advantage must be inferred from the fact that monetary compensatory amounts were applicable during the period of validity of an authorization. Finally, the United Kingdom contends that the Commission's interpretation is unacceptable inasmuch as it would lead to the levying of charges without there being a clear legal basis for their imposition.
Does the failure to establish the existence of an unjustified advantage constitute a failure by the Member States concerned to fulfil their obligations?
10. In the light of the substantial difference of opinion between the parties, referred to earlier, concerning the definition, the existence and the legal basis of an unjustified advantage, it is necessary to consider whether, by failing to detect an unjustified advantage within the meaning of Article 4 of Directive 75/349/EEC, the defendants failed in practice to fulfil one of their obligations under Community law. In answering that question, account must be taken of the fact that both the Commission and the Member States enjoy a wide discretion when it comes to determining the scope of such an open concept. That applies particularly where, as in this case, during the period in respect of which the authorizations were granted no decided cases or practical precedents were available in which the concept of an unjustified advantage had been interpreted.
11. It cannot be disputed that in 1981 it was unclear whether triangular traffic could be brought within the scope of Directive 75/349/EEC. Article 11 (1) of that directive provides that importation of import goods may be carried out only by the holder of the authorization of prior exportation or on his behalf. It was precisely for that reason that a meeting was convened on 12 June 1981, as a result of which the Commission forwarded Document SUD/833/81 to the French and the United Kingdom authorities. That document indicated how the requirements of Article 11 could be satisfied :
12. It must therefore be stated that, at the meeting held in Brussels on 12 June 1981 and in the aforesaid document, the Commission suggested an interpretation of Directive 75/349 of which it did not itself foresee the consequences. It is therefore difficult to comprehend its allegation that the defendants did not treat the advantage resulting from the contested authorizations as an unjustified advantage. Indeed, at the hearing, the Commission submitted that its own error was so serious and so obvious that the Member States concerned should have noticed it and should have placed no further reliance on the Commission's indications. Leaving aside the question whether the Commission's error really was so obvious, I do not consider that argument to be relevant. Instead, it must be stated that the Member States concerned exercised due care in submitting (at least the structure of) the proposed transactions to the Commission, and that in those circumstances they were entitled to rely upon the interpretation suggested by the Commission.
The possibility of post-clearance recovery
13. Even if the Court should decide that, by failing to regard the contested transactions as the cause of an unjustified advantage the defendants failed to fulfil an obligation under Community law — which would imply that they overstepped the bounds of a reasonable and prudent assessment, which is not the case — it is still necessary to ascertain whether it is possible to take action for the post-clearance recovery of the sums in question, as required by the Commission.
14. In its judgment in Foto-Frost the Court decided that where the three conditions laid down by Article 5 (2) of Regulation No 1697/79 are fulfilled, the competent authorities may no longer take action for the post-clearance recovery of the sums in question and the person liable is entitled to the waiver of the recovery of those sums. In such a case, the Member State concerned may not be reproached for refusing to take action for the post-clearance recovery of those sums. Nor, in those circumstances, is the Member State required to make the corresponding own resources available to the Community. Indeed, Article 9 of Regulation (EEC) No 1697/79 provides as follows:
15. I consider that, in this case, the three conditions referred to in Foto-Frost are fulfilled, at least if we proceed, as I now do, on the (in my view incorrect) assumption that the defendants' assessment was erroneous.
Costs
16. According to Article 69 (2) of the Court's Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party's pleading (the French text reads: s'il est conclu en ce sens). On that point, a problem arises in Case 92/87 as regards the French Republic. During the written procedure, the French Republic did not ask for the Commission to be ordered to pay the costs. But it did apply for an order to that effect during the oral procedure, namely in its written comments on a document submitted by the Commission in response to a request made by the Court at the hearing. The question which arises, therefore, is whether it is possible to consider the costs as having been asked for in an application made on that occasion.
Conclusion
17. In the light of the foregoing analysis, I propose that the Court should:
1 Original language Duich.
2 Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post-clearance recovery of impon duties or expon duties which have been not required of the person liable for payment on goods entered for a customs procedure involving the obligation to pav such duties (Oj 1979. 1 197, p 1)
3 Council Directive 69/73/EEC of 4 March 1969 on the harmonization of provisions laid down by law, regulation or administrative action in respect of inward processing (OJ, English Special Edition 1969, I, p 65)
4 Commission Directive 75/349/EEC of 26 May 1975 on detailed rules concerning equivalent compensation and prior exponation under inward processing arrangements (OJ 1975; L 156, p 25)
5 Article 2 (1) of Council Regulation No 1697/79 provides as follows: Where the competent authorities find that all or pan of the amount of impon duties or expon duties legally due on goods entered for a customs procedure involving the obligation to pay such duties has not been required of the person liable for payment, they shall take action to recover the duties not collected However, such action mav not be taken after the expiry of a period of three vcars from the date of entry in the accounts of the amount originally required of the person liable for payment or, where there is no entry in the accounts, from the date on which the customs debt relating to the said goods was incurred.
6 The United Kingdom contends that the advantage in fact sought by Rank Hovis originated in a growing disparity between, on the one hand, import duties levied on common wheat which tended to increase in the spring of 1981 and, on the other, export refunds on flour whicn were falling over the same period According to the United Kingdom, Rank Hovis sought refuge in operations involving equivalent compensation in order to limit the loss of revenue that threatened to result from that trend, and the avoidance of monetary compensatory amounts was only a secondary consideration. I do not propose to deal with this advantage in my analysis since neither of the parties has alleged it to be unjustified
7 See the Commission's letters of 12 July 1984 addressed to the Permanent Representations of France and the United Kingdom.
8 Written reply of 27 April 1988 to the Court's question of 2 March 1988.
9 See the Commission's application, pp. 5 and 9.
10 The existing rules, the United Kingdom points out, do provide for that possibility, particularly in Article 37 of Regulation No 3677/86 (supra, paragraph 5).
11 With reference to the Court's judgment of 9 July 1981 in Case 169/80 Gondrand fiérei [1981] ECR 1931.
12 That provision docs not rule out the possibility of engaging in triangular traffic as such for a company established in two different Member Slates; however, Article 11(2) of that directive also provides that the competent authorities may prescribe in the authorization that the export and impon transactions must be carried out at tne same customs office.
13 The French text reads. ce hen pourrait se réaliser
14 The Commission stated at the hearing that it was possible that byintroducing the possibility of granting triangular traffic authorizations to entities with such a degree of transparency it had paved the way for possible abuses. See the transcript of the hearing, French version, pp. 33 to 35.
15 To the extent to which there was one. As stated above (paragraph 7), at the time of the grant of the authorization no monetary compensatory amounts were applicable on transactions involving exports from and imports into the French Republic.
16 Judgment of 22 October 1987 in Case 314/85 Foto-Frost v Heiiptiollaml Ltibeck-Oit [1987] ECR 4199