Report for the Hearing delivered in Case C-111/89

I — Facts and procedure

1. Legal background to the dispute

Article 6a of the Plantenziektenwet (Netherlands Law of 5 April 1951 on plant diseases) provides that a fee may be charged to cover the cost of analyses or inspections carried out by the Plantenziektenkundige Dienst (Plant Health Authority) pursuant to that law, in accordance with a tariff fixed by the competent minister.

The tariff of the Plantenziektenkundige Dienst was fixed, pursuant to that provision, by a decision of 23 June 1967. In accordance with Article 1(1) of that decision, the fees charged for plant health inspections are calculated according to the weight of the plant parts presented for exportation or the net invoice value.

Where field inspections are involved, only 75% of the expenses incurred are charged to exporters, because only 75% of the production is intended for export. The remaining 25% of the expenses are charged neither to exporters nor to businesses who sell their products on the national market.

Since 1982 there has been a system, set up by a law on the inspection of agricultural products, which gives responsibility for field inspections to a private foundation to which all producers contribute irrespective of the intended market of their products.

With regard to flower bulbs, corms and tubers, a regulation of 11 December 1987 provides that fees are no longer to be charged to cover the cost of inspections within the meaning of the decision of 23 June 1967.

2. Circumstances of the dispute

Between 1974 and 1977, the Plantenziektenkundige Dienst carried out numerous inspections of plants intended for exportation, particularly flower bulbs, on the land of the defendant in the main proceedings (hereinafter referred to as Bakker). Pursuant to the decision of 23 June 1967, the State charged Bakker a total of HFL 317400.09 in fees for those inspections. That amount includes the expenses of both field inspections and inspections on Bakker's premises.

Bakker considered that those fees were incompatible with Community law, and refused to pay them. The State then initiated proceedings in the civil courts to recover the fees. By a final judgment of 19 September 1984, the Rechtbank (District Court) allowed the State's claim in the amount of HFL 277513.37 plus interest at the statutory rate from 2 February 1978. That amount corresponds to the expenses of the inspections on Bakker's premises, but does not include those of the field inspections.

The Rechtbank held that a system in which the total revenue from export inspections does not exceed the total amount of all the costs directly or indirectly connected with those inspections — including a share of the administrative and other general staff and equipment costs of the inspecting authority — and in which the cost of each individual inspection depends on the quantity of goods inspected or the invoice value, remains within the limits laid down in the case-law of the Court of Justice, which has held that the amount of the fees charged may not exceed the actual cost of the operations in respect of which they are charged.

However, the Rechtbank did not include the cost of the field inspections in its final judgment because it considered that they were not measures designed to promote the free movement of goods inasmuch as they affected not only bulbs and corms intended for export but also those intended for the Netherlands market, and that no fees were charged for field inspections affecting bulbs and corms not intended for export.

The State appealed against those judgments to the Gerechtshof (Regional Court of Appeal), The Hague, and Bakker lodged a cross appeal. By a judgment of 20 February 1987, the Gerechtshof upheld the Rechtbank's judgment, with the exception of the order relating to costs. Both parties appealed to the Hoge Raad against the judgment of the Gerechtshof.

3. Questions referred to the Court

The Hoge Raad considered that the dispute raised a question of interpretation of Community law, and by a judgment of 31 March 1989 it stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling in accordance with Article 177 of the EEC Treaty:

The national court's judgment states that the parties to the main proceedings are in agreement that the inspections involved are of the kind referred to in the judgment of the Court of Justice of 12 July 1977 in Case 89/76 Commission v The Netherlands [1977] ECR 1355. That judgment concerned plant health inspections on exportation provided for by an international convention intended to encourage the free importation of plants into the countries of destination by establishing a system of inspections in the exporting State, recognized and organized on a reciprocal basis.

4. Procedure before the Court of Justice

The national court's judgment was registered at the Court on 6 April 1989.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities, written observations were submitted

On 6 December 1989 the Court decided pursuant to Article 95(1) and (2) of the Rules of Procedure to assign the case to the First Chamber.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preliminary inquiry.

II — Summary of the written observations submitted to the Court

5. The first question

Bakker, the defendant in the main proceedings, refers to the Court's previous decisions, in particular its judgment of 25 January 1977 in Case 46/76 Bauhuis v The Netherlands [1977] ECR 5, where it held that fees charged for health inspections on exportation are in principle prohibited unless they constitute payment for a benefit in fact provided for the exporter. Bakker points out in that regard that it always presents very large batches for inspection in the Netherlands and that consequently the real cost of the operations carried out for its benefit represents only a fraction of the average cost calculated on the basis of all the operations carried out by the Plantenziektenkundige Dienst in respect of export inspections for all Netherlands producers.

Bakker claims that the total cost of inspections should not be shared out on the basis of the weight or invoice value of the consignments presented for exportation, without taking into consideration the question whether a single large consignment is declared for expon at one point or whether the inspection involves small consignments belonging to different small exporters at different places. It argues that such a system for calculating the fee to be paid by the exporter penalizes exporters who operate rationally and who ensure that the number of inspections and the work of the inspector responsible are kept to a minimum by, inter alia, grouping their exports together, in so far as possible, on a single occasion.

The Netherlands Government claims that, in accordance with the Court's judgment of 31 January 1984 in Case 1/83 IFG v Freistadt Bayern [1984] ECR 349, the only limitation imposed by Community law with regard to inspection costs is that there must be a sufficiently close connection between those costs and the amount of the charge levied. That is a question of fact to be decided by the national court.

The Netherlands Government concludes that a fixed-rate assessment of inspection costs, differentiated according to the specific inspections required for each category of products, as practised by the Netherlands authorities, is not contrary to Community law. It is sufficient that the total amount of the sums charged in respect of the inspections should not exceed the total amount of the costs incurred thereby. Furthermore, it would be impossible in practice to apply a system of fees strictly identical to the costs of the actual inspections in respect of which they were charged.

The Commission considers that there is a direct link between the costs of the inspections and the fees charged only if those fees are calculated on the basis of the duration of the inspections, the number of persons required, the cost of materials, overheads or other similar factors, but that a fixed-rate assessment of inspection costs, such as a fixed hourly rate, is not thereby excluded. It is, however, of the opinion that fees calculated according to the weight or invoice value of the products exported have, by their very nature, the character of a fixed-rate charge on exports and are consequently incompatible with the requirement expressed by the Court that there must be a direct link between the costs and the fees.

6. The second question

Bakker claims that when the Netherlands State inspects flower bulbs grown for the Netherlands market in the same manner as bulbs and plants intended for export, but only the latter are charged a fee on exportation, it is practising discrimination contrary to Community law.

The Netherlands Government, on the other hand, considers that it is not contrary to Community law for a share of the cost of field inspections which corresponds to the proportion of the bulbs intended for export to be charged to exporters even if no such fee is charged in respect of bulbs not intended for export. Since certain diseases can be detected only while the plants are still in the ground, charging exporters a proportional share of the inspection costs incurred is justified by their interest in having export formalities settled rapidly, while traders who can sell their goods on the Netherlands market without a plant health certificate have no such interest.

In the Commission's view, the basis for the fees charged in respect of field inspections, which by definition affect all plants, is that their purpose is to cover the costs; consequently, such fees must be charged, if at all, in a manner which avoids discrimination. It follows that if such fees are not charged in respect of the home market, they become charges having an effect equivalent to customs duties on exportation, prohibited by Community law. However, fees charged both to dealers who sell on the national market and to exporters constitute internal taxation within the meaning of Article 95 of the Treaty.

1 Language of the case: Dutch.