Report for the Hearing in Joined Cases C-38/90 and C-151/90

I — Facts and procedure

A — The Community legislation

1. Council Regulation (EEC) No 1837/80 of 27 June 1980 (Official Journal 1980 L 183, p. 1) established a common organization of the market in sheepmeat and goatmeat comprising a price system and a trading system covering the products listed in Article 1 of the regulation.

2. Detailed rules for applying the variable slaughter premium for sheep were laid down by Commission Regulation (EEC) No 2661/80 (Official Journal 1980 L 276, p. 19).

3. Council Regulation (EEC) No 871/84 of 31 March 1984 (Official Journal 1984 L 90, p. 35) amended Regulation No 1837/80 by, inter alia, abolishing the reference price and defining six regions (1: Italy and Greece; 2: France; 3: Belgium, Denmark, Federal Republic of Germany, Luxembourg, Netherlands; 4: Ireland; 5: Great Britain; 6: Northern Ireland).

4. On 8 June 1984, on the basis of Article 9(4) of Regulation No 1837/80, as amended by Regulation No 871/84, the Commission adopted Regulation (EEC) No 1633/84 laying down detailed rules for applying the variable slaughter premium for sheep and repealing Regulation (EEC) No 2661/80 (Official Journal 1984 L 154, p. 27).

B — The steps taken by the United Kingdom in order to comply with Regulation No 1633/84

In the United Kingdom, the Intervention Board for Agricultural Produce, a body corporate created pursuant to Section 6 of the European Communities Act 1972, is responsible for implementing the system of variable slaughter premium for sheep and the clawback charge. Premiums are paid out by the Board, which is also in charge of collecting the clawback payable by traders on exports of live sheep and sheepmeat.

In order to qualify for the variable premium, sheep must be certified to comply with the conditions laid down in the Community legislation. Certification is granted and the premium is paid not for each individual animal but for batches of sheep taken together.

All products subject to clawback must, prior to export, be declared by the exporter to an officer of Customs and Excise; for that purpose, the exporter completes a form C1220 on which he undertakes to pay any charge payable on exportation and which contains, inter alia, the weight of the exported consignment, with reference to which the amount of clawback is calculated.

C — The disputes in the main proceedings

1. Thomas Edward Lomas, the defendant in the main proceedings in Case C-38/90, was the director of Hedley Lomas Limited which carried on the trade of exporting sheep and sheepmeat from the United Kingdom.

2. The main proceedings concern criminal prosecutions brought by the Crown under Section 167(1) of the Customs and Excise Management Act 1979 against Mr Lomas in the Crown Court at Maidstone and against Mr Fletcher, Mr Pritchard and North Riding Lamb Limited in the Crown Court at Leeds.

3. It appears from the orders for reference that the criminal proceedings brought against the defendants cannot succeed unless the Crown can establish that there was a valid enactment requiring the Commissioners of Customs and Excise to perform certain duties and that it was in pursuance thereof that they required the defendants to deliver the documents in question.

4. Before the national courts, the defendants maintained that the prosecutions were unfounded inasmuch as there was no valid enactment establishing an assigned matter within the meaning of Section 167(1) of the 1979 Act.

5. Considering that the disputes called for a decision on the validity of the Community legislation in question, the Crown Court at Maidstone and the Crown Court at Leeds decided, by orders of 20 December 1989 and 5 April 1990 respectively, pursuant to Article 177 of the EEC Treaty, to stay the proceedings until the Court of Justice had given a preliminary ruling on the following questions :

D — Procedure before the Court

1. The orders of the Crown Court at Maidstone and the Crown Court at Leeds were received at the Court Registry on 12 February 1990 and 15 May 1990 respectively.

2. In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the European Economic Community, written observations were submitted in both cases, on 11 May 1990 and 12 July 1990 respectively by the Commission of the European Communities, represented by Peter Oliver, a member of its Legal Service, acting as Agent; on 17 May 1990 by Mr Lomas, the defendant in Case C-38/90, represented by Conor Quigley and Steven Kay, of Gray's Inn, London; on 16 August 1990 by Mr Fletcher, Mr Pritchard and North Riding Lamb Limited, the defendants in Case C-151/90, represented by Michael Mettyear, of Wilberforce Chambers, Hull, and Conor Quigley; and on 23 May 1990 and 21 August 1990 respectively by the United Kingdom, represented by J. E. Collins, of the Treasury Solicitor's Department, Queen Anne's Chambers, acting as Agent.

3. 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 preparatory inquiry.

4. Pursuant to Article 95(1) and (2) of the Rules of Procedure the Court, by decision of 4 June 1991, assigned Cases C-38/90 and C-151/90 to the Sixth Chamber.

5. By order of the same day, Cases C-38/90 and C-151/90 were joined for the purposes of the oral procedure and the judgment.

II — Written observations submitted to the Court

1. (a) The defendants in the main proceedings claim, with regard to the first question raised in Cases C-38/90 and C-151/90, that Article 4(1) of Regulation No 1633/84 is invalid in that it allows for clawback to be charged on export from Region 5 in an amount which is not equivalent to the amount of premium actually granted within the meaning of Article 9(3) of Regulation No 1837/80, as amended by Regulation No 871/84. The slaughter premium is granted at the rate fixed for the week during which the sheep are first placed on the market with a view to slaughter, whereas sheep for which the premium has been paid are to be exported within 21 days of the date on which they were first placed on the market and the clawback charge is collected at the rate fixed for the week during which exportation takes place; in many cases, moreover, the amount of clawback is substantially greater than the premium actually paid. In support of their claim that Article 4(1) of Regulation No 1633/84 is invalid, the defendants argue first of all that clawback which exceeds the amount of the premium actually granted constitutes a charge having an effect equivalent to a customs duty, contrary to Articles 9, 12 and 16 of the EEC Treaty. In the defendants' submission, it is clear from the purpose of the price support system in the sheepmeat and goatmeat sector and from the Court's case-law (Kind v EEC and United Kingdom v Commission, cited above; judgment of 2 February 1988 in Case 162/86 Livestock Sales Transport v Intervention Board for Agricultural Produce [1988] ECR 489; and judgment of 13 December 1989 in Joined Cases C-181, C-182 and C-218/88 Deschamps and Others v O fival [1989] ECR 4381) that clawback does not constitute a charge having an effect equivalent to a customs duty in so far as it is inseparable from the payment of the variable slaughter premium and is intended to offset exactly the effects of the slaughter premium and thereby to enable products from the region in which the premium was paid to be exported to other Member States without disturbing competition on their markets. The wording of Article 9(32) of Regulation No 1837/80, as amended, confirms the interpretation that the clawback system is a means of recovering, when the products are exported, the exact amount of the aid previously granted. In order, therefore, for the common organization of the market in sheepmeat and goatmeat to ensure conditions for trade within the Community similar to those existing in a national market, the clawback must be the same as the premium actually granted in each individual instance. Article 4(1) of Regulation No 1633/84, however, gives rise to the recovery of an amount different from that of the premium paid, and thus constitutes a charge having an effect equivalent to a customs duty, contrary to the Treaty. In their observations in Case C-151/90, the defendants add that their argument is not invalidated by the fact that in certain cases the amount of clawback charged may be less than that of the premium actually granted, since the prohibition on charges having an effect equivalent to customs duties is a fundamental principle of Community law and does not permit any exceptions. Nor does that fact support the claim that viewed over a period of weeks the clawback system causes no loss to exporters. It must be remembered that the premium is granted to the producer, whereas clawback is charged to the exporter, and it is impossible under the present system to determine exactly what premium has been paid in respect of the products being exported. Finally, the defendants stress that the Court has emphasized the importance of transparency and the possibility of a review by the courts in order to prevent any breach of the fundamental rules of the Treaty (see the judgment of 30 June 1988 in Case 318/86 Commission v France [1988] ECR 3559, paragraph 27; the judgment of 17 October 1989 in Case 109/88 Handels- og Kontorfunktionarnes Forbund i Danmark v Dansk Arbejdsgiverforening, acting on behalf of Danfoss [1989] ECR 3199, paragraph 12; judgment of 17 May 1990 in Case C-262/88 Barber v Guardian Royal Echange [1990] ECR I-1889) and submit that those principles must apply in particular in relation to the prohibition on charges having an effect equivalent to customs duties. The defendants further maintain that by adopting Article 4(1) of Regulation No 1633/84 the Commission went beyond the powers conferred on it by Article 9(3) of Regulation No 1837/80, as amended, in so far as it authorizes the charging on exportation of an amount which is not equivalent to the premium actually granted. The defendants point out that the Commission, which has no separate power of legislating, was required to remain within the powers conferred upon it by the Council, and that the wording of Article 9(3) of Regulation No 1837/80, as amended, did not disclose an intention to confer on the Commission a wide discretion to determine the way in which the clawback system was to be applied. The Commission should therefore have provided, in accordance with Article 9(3), that the amount charged in clawback must be equivalent to the amount of the premium actually granted. With regard to Case C-151/90, the defendants add that the words equal and equivalent mean the same, and that it is proper to use the word equivalent where different persons are involved in the receipt and the repayment. In the defendants' opinion, Article 4(1) of Regulation No 1633/84 is also invalid inasmuch as it contravenes the prohibition of discrimination laid down in the second subparagraph of Article 40(3) of the EEC Treaty. They state that Article 4(1) results in discrimination, on the one hand, as between producers in Region 5 who export sheep or sheepmeat from that region and those who do not and, on the other, as between producers who export from Region 5 and producers in other regions. Producers who export from Region 5 and place their products on the markets of other regions are subject to a penalty equal to the difference between the premium which has been paid and the amount of clawback which has been charged, whereas no such penalty applies to producers who are not liable to the clawback charge. Finally, Article 4(1) of Regulation No 1633/84 is invalid inasmuch as, contrary to Article 43(3) (b) of the EEC Treaty, it does not ensure conditions of trade within the Community similar to those existing in a national market. In Case C-151/90, the defendants point out that the exporter is not able to pass on to his customers the excess charge equal to the difference between the premium actually paid and the amount of clawback charged, but must bear that excess charge himself. Such penalization affects his business activities and distorts conditions of competition in intra-Community trade. The defendants then state that although it is for the Commission to design detailed rules for applying the clawback charge which do not infringe Community law, valid methods for calculating clawback do exist. It would be possible, for instance, to apply a system of colour-coding or tagging of live sheep or carcases whereby the week in which the premium was paid could be easily ascertained. Such a system, based essentially on the exporter's declarations, could be backed up by spot checks by the customs authorities and guaranteed by the lodging of a security. In the defendants' view, there is no more risk of fraud in that type of system than in any other export transaction involving Community funds. Another method might be to determine the average delay between the time when a sheep is placed on the market and the time when it is exported in order more accurately to calculate the amount equivalent to that of the premium actually granted. The defendants conclude, from all the above considerations, that Article 4(1) of Regulation No 1633/84 is invalid in its entirety, since that paragraph is indivisible; Article 4(2) of the regulation is also invalid to the extent that it allows for a security to be lodged to cover the amount which would be due pursuant to Article 4(1). (b) With regard to the second question raised in Cases C-38/90 and C-151/90, the defendants claim that there is no reason to declare that the effects of Article 4(1) and (2) of Regulation No 1633/84 are definitive or temporal effects for the purposes of the present cases. The defendants assert that invalid provisions of Community law cannot be declared definitive or temporal. The clawback system cannot be enforced until the Commission adopts a new Article 4 which is in accordance with the power delegated to it by the Council, and national courts have no power to treat invalid provisions of Community law as valid. Since there is no valid enactment requiring the Commissioners of Customs and Excise to perform certain duties, the prosecutions brought against the defendants in the Crown Court at Maidstone and the Crown Court at Leeds must fail. In the alternative, the defendants consider that even if, in the light of Article 174 of the EEC Treaty as applied by the Court by analogy when dealing with requests for a preliminary ruling (see, for example, the judgment of 15 January 1986 in Case 41/84, Pinna v Caisse d'Allocations Familiales de la Savoie [1986] ECR 1), certain effects of an invalid provision may be treated as definitive in the interests of legal certainty, the provision itself is none the less invalid and may not be relied upon in a criminal prosecution before a national court. According to the defendants, the previous decisions in which the Court has determined the definitive effects of invalid provisions (see, for example, the judgments in Pinna and Barber, both cited above) are not relevant to the present cases, which do not involve past legal effects and in particular do not raise the problem of the recovery of money paid over on the basis of invalid legislation. The present cases are concerned, on the contrary, with whether the United Kingdom is entitled to rely on invalid Community legislation for the purposes of a criminal prosecution where the national provision which the defendants are charged with having infringed requires the existence of a valid enactment. That question should be answered in the negative. In the further alternative, the defendants are of the opinion that although the Court has declared valid certain effects of invalid provisions in cases involving civil law, on the ground that it would be unjust to place at a disadvantage persons who had relied in good faith on the invalid legislation, an invalid Community provision cannot be considered to be valid for the past for the purposes of establishing criminal liability which would not exist in the absence of that provision. In Community law, a penalty cannot be imposed unless it rests on a clear and unambiguous legal basis (see the judgment of 25 September 1984 in Case 117/83 Könecke v BALM [1984] ECR 3291). Moreover, to allow a criminal prosecution on the basis of invalid law is contrary to fundamental rights which take their place among the general principles of law whose observance is ensured by the Court of Justice (see the judgment of 10 July 1984 in Case 63/83 Regina v Kirk [1984] ECR 2689). (c) With regard to the third question raised in Cases C-38/90 and C-151/90, the defendants maintain that Community law neither authorizes nor requires the United Kingdom to require the production of documentation in relation to the exportation of sheep or sheepmeat where the amount of clawback sought to be collected does not equal the amount of the premium actually granted or to prosecute a person for making false statements in such documentation if the national legislation on the basis of which the prosecution is brought presupposes the existence of a valid enactment. The defendants consider that Article 5(1) of Regulation No 1633/84 only empowers the United Kingdom to take the necessary steps to ensure compliance with provisions which are valid. As long as the clawback system is invalid, the United Kingdom may not collect the charges thereunder, ensure compliance with the system, or bring prosecutions for false statements in clawback documentation. Nor is Article 5(2) of Regulation No 1633/84 applicable to the circumstances of the case. In their observations in Case C-151/90, the defendants add that the United Kingdom may not rely either directly on Article 9(3) of Regulation No 1837/80, as amended, which is addressed to the Commission, or on Article 5 of the EEC Treaty, which cannot justify a decision whereby a Member State subjects traders to a charge which is contrary to Community law. (d) In the light of the foregoing considerations, the defendants consider that the questions raised by the national courts should be answered as follows in Cases C-38/90 and C-151/90: 1. Paragraphs 1 and 2 of Article 4 of Commission Regulation No 1633/84 (as amended) are invalid in that they are ultra vires the power conferred on the Commission by Article 9 of Council Regulation No 1837/80 (as amended). 2. There are no definitive or temporal effects of the above invalid provisions of Commission Regulation No 1633/84 for the purposes of the prosecution in the main proceedings. 3. Pending the correct implementation by the Commission of the clawback system as envisaged by Article 9 of Council Regulation No 1837/80 (as amended), the United Kingdom is not authorized or required under Community law to require the production of documentation in relation to export transactions which would be subject to clawback; to prosecute for false statements in such documentation where the national legislation under which the prosecution is brought depends on a valid enactment.

2. (a) As a general consideration, the United Kingdom observes, in Cases C-38/90 and C-151/90, that a clawback system made to suit the defendants' argument, whereby the amount of clawback is exactly identical to the premium granted for each and every individual piece of sheepmeat, would pose so many technical and administrative difficulties that it would be unworkable and unreasonably costly. In the case of live sheep, one lorry might carry animals answering to up to four different rates of premium, so that each sheep would have to be weighed at the port of export and have its certification compared against the export declaration form. Such operations would require increased facilities and staff and would pose animal welfare problems. Even greater difficulties would arise in linking carcases back to the point of slaughter or to the live animal and in tracing each cut back to the date of certification. It would also be necessary to solve the problem arising from consignments made up of cuts of meat from carcases of different certification dates. Finally, marking which would remain legible in frozen meat is technically problematic. In any event, during certification there is no means of knowing whether the sheep or sheepmeat will eventually go to export or not, so the administrative effort referred to above would be unnecessary for all products which remain in the local market. The United Kingdom further states that the clawback system proposed by the defendants would also give rise to considerably increased risks of fraud, since the need to identify products up to the time of exportation presents increased opportunities for tampering with the markings of certification dates. The United Kingdom adds that no administrative system can ensure that clawback exactly reflects the premium granted. In the case of live sheep, the weight on certification is not necessarily the same as that on exportation. For carcases and cuts the factors of uncertainty are even greater, since it is necessary to apply average equivalence factors to take account of the loss from live animal to meat. (b) As regards the first question raised in Cases C-38/90 and C-115/90, the United Kingdom submits that, interpreted in context, Article 4(1) and Article 4(2) of Regulation No 1633/84 are not ultra vires the Commission. In order for the objectives of the clawback system to be achieved, it must be capable of being applied without disproportionate expense and inconvenience to the trader or the administrative authorities, hindrance to trade, hardship to livestock and unnecessary opportunities for fraudulent practices; the system advocated by the defendants satisfies none of those criteria. Furthermore, the method of calculation of clawback contained in Article 4(1) and (2) of Regulation No 1633/84 is in harmony with the notion of equivalence in Article 9(3) of Regulation No 1837/80, and that notion should be interpreted not as requiring exact identity, but as achieving the optimal degree of correspondence, between clawback and premium, having regard to the administrative requirements of the system. That interpretation is further supported by the wording of Article 9(2) and (3) of Regulation No 1837/80, in both its original and its amended forms, and of Article 5(2) of Regulation No 1633/84. Those provisions use the word equal whenever they refer to the premium, whereas the use of equivalent with regard to clawback confirms the impossibility of exactitude in that regard. The United Kingdom adds that the defendants cannot rely on the judgment in Case 61/86 United Kingdom v Commission, cited above, in support of their contention, since it was delivered in a context very different from that in the present cases, and the Court did not rule in that case on the problem of the method of calculating clawback which arises here. In its observations concerning Case C-151/90, the United Kingdom maintains that the remaining grounds on which the defendants rely in order to claim, in the context of the first question, that Article 4(1) and Article 4(2) of Regulation No 1633/84 is invalid, which are based on the claim that those provisions are inconsistent with Article 9 et seq., the second subparagraph of Article 40(3) and Article 43(3)(b) of the EEC Treaty, are likewise unfounded. The argument that the clawback is a charge having an effect equivalent to a customs duty, contrary to Community law, is based on the contention that the premium granted and the clawback charged must be identical in each individual case. That contention is, however, flawed, since such a system would be impossible to apply; it would cause unnecessary hardship to animals, it would have the effect of defeating the objectives of the common organization of the market by creating significant obstacles to the free movement of the products concerned, and it would multiply the opportunities for fraud. The United Kingdom explains that the tagging of animals is unreliable since tags are easily replaceable. Tattooing is impractical because a different tattoo would be needed for each week of the marketing year in order to allow a check of the date of certification and because tattoos would be quickly concealed by dirt; there would also be scope for obliteration and fraudulent alteration. In addition, marking presents possible animal welfare problems through stress and, in some cases, pain. With regard to the claim of infringement of the prohibition on discrimination between producers, the United Kingdom points out first of all that the producer who receives the premium is often not the same person as the exporter who is liable to pay clawback. The meat may have changed ownership several times before it is exported, so there is no question of discrimination between producers and exporters. Exporters, moreover, have no interest in knowing the amount of the premium received by the producer, since what matters to them is the price they pay for the meat and the amount of the clawback. The United Kingdom further submits that even when the producer and exporter are one and the same person, that person may sell also on the home market, and his choice whether to sell on that market or to export depends on the conditions existing at the particular time, so there is no possibility of discrimination. With regard, finally, to the argument that there is discrimination against producers in Great Britain vis-à-vis those in other regions where clawback does not exist, the United Kingdom considers that it could also be argued that the latter producers were the subject of discrimination when the premium has decreased in relation to the premium granted earlier. In fact, such variations cancel each other out over time. As regards the alleged infringement of Article 43(3) (b) of the EEC Treaty, the United Kingdom maintains that clawback, as provided for in Article 4(1) of Regulation No 1633/84, is relatively easy and quick to operate and minimizes the dangers of fraud. It facilitates the free movement of the products in question between Great Britain and the other regions of the Community and is therefore consistent with Article 43(3)(b) of the Treaty. The system advocated by the defendants, however, which presupposes checking both products and documents, would multiply paperwork, cause considerable delays and increase the risk of fraud. It would thus create a significant impediment to trade in sheep and sheepmeat. (c) With regard to the second question raised in Cases C-38/90 and C-151/90, the United Kingdom submits that, even assuming that the Court were to declare Article 4(1) and (2) of Regulation No 1633/84 invalid, that invalidity cannot be retroactive. On the contrary, the effects of the annulled paragraphs should be regarded as definitive in respect of the period prior to the date on which the Court's judgment is delivered, and accordingly the charging of clawback on the basis of those provisions may not be challenged with respect to that period. In previous decisions, the Court has made flexible and pragmatic use of its discretion to determine which of the effects of an invalidated Community measure are to be definitive, having regard in particular to the requirements of legal certainty and the efficacy of Community law, in the light of the individual circumstances of the cases before it. In the present cases there are several reasons for declaring the effects of the invalidated Community provisions definitive. If the invalidity of Article 4(1) and (2) of Regulation No 1633/84 were to have the effect of opening the way to claims from traders who have been liable to clawback in the past, the financial repercussions for the Community would be enormous. Moreover, if traders could seek to recover clawback, the clawback system, whose validity has not been challenged in these cases and has been approved by the Court (see the judgments in Kind and United Kingdom v Commission, cited above), would be completely undermined, with effects quite contrary to the purpose of the scheme, which is to neutralize the effect of the premium, while payment of the premium would be definitive. Recovery of clawback would be an unjustified windfall for exporters, who have passed the charge on to their customers, and would have the effect of subsidizing their exports. All the parties concerned have relied in good faith on the clawback system as it has been in operation for years, and the disputes now pending in the national courts do not arise from the fact that the defendants are challenging the clawback charge, but because they are charged with falsifying the information that was to determine the charge due from them. Finally, it is impossible, in the absence of the necessaiy supporting documentation, to recalculate past clawback charges. Nor is there any way to retrace exported consignments to their original certification dates, so it would also be unfeasible to rule that the invalidity of Article 4(1) of Regulation No 1633/84 affects only clawback amounts which have exceeded the corresponding premiums. (d) With regard to the third question raised in Cases C-38/90 and C-151/90, the United Kingdom claims that, even if the Court were to declare Article 4(1) and (2) of Regulation No 1633/84 invalid, the United Kingdom would remain under an obligation as a matter of Community law to recover a charge in the nature of clawback and to require the documentary information which is the subject of the criminal proceedings in the national courts. The clawback system was imposed by Article 9(3) of Regulation No 1837/80, and the validity of the system itself is not challenged. Articles 5 and 189 of the EEC Treaty impose on the Member State concerned the obligation to charge clawback pursuant to Article 9(3). It would not be possible for the United Kingdom authorities to ensure compliance with the obligations under Articles 1(4) and 5(1) and (3) of Regulation No 1633/84 without requiring exporters to provide information of the kind with which the proceedings in the national courts are concerned. Finally, the decision in the judgment of 13 May 1981 in Case 66/80, International Chemical Corporation v Amministrazione delle Finanze dello Stato [1981] ECR 1191, concerning a claim for the recovery of securities provided for in a Community regulation which had previously been declared invalid, in which the Court rejected the plaintiff's argument that the securities it had provided served only to ensure performance of an obligation which had been unlawfully imposed, should be applied by analogy. (e) In summary, the United Kingdom proposes that the questions raised by the national courts in Cases C-38/90 and C-151/90 should be answered as follows: 1. Paragraphs 1 and 2 of Article 4 of Regulation 1633/84 are not ultra vires the power conferred on the Commission by Article 9 of Regulation 1837/80 as amended by Regulation 871/84. 2. (If the answer to Question 1 is contrary to the United Kingdom's submission, then :) The effects of the invalidated paragraphs of Article 4 of Regulation 1633/84 are to be considered as definitive regarding the period prior to the date in which judgment in this case is delivered; accordingly, the charging of clawback on the basis of these provisions may not be challenged as regards the said period. 3. (If the answer to Question 1 is contrary to the United Kingdom's submission, then:) The invalidation of paragraphs (1) and (2) of Article 4 of Regulation 1633/84 does not detract from the authority conferred, or the requirements placed, upon the United Kingdom by Community law, to require from traders information relating to export transactions subjected to clawback and to prosecute those who submit false information.

3. (a) With regard to the first question raised in Cases C-38/90 and C-151/90, the Commission submits that the defendants' argument, to the effect that clawback is not an amount equivalent to the premium actually granted within the meaning of Article 9(3) of Regulation No 1837/80 since the amount of the premium applicable during the week of exportation of the product is generally greater than that applicable in the week when the animals were first placed on the market with a view to slaughter, must be dismissed. In the first place, the Commission claims that a system such as that advocated by the defendants, whereby the clawback imposed on each animal or carcase is to be identical to the premium granted for the very same animal, would be unworkable and would give rise to widespread and uncontrollable fraud. If the defendants' argument were followed, the United Kingdom authorities, instead of imposing the clawback at a uniform rate throughout each week, would be in the immensely difficult position of having to determine the rate of premium for each animal or carcase in a given consignment. Secondly, the system as currently applied works both ways so that, when viewed over a period of weeks or months, it causes no loss to exporters: an exporter who is disadvantaged at certain times of the year is compensated with equivalent advantages at others. Article 9(3) of Regulation No 1837/80 is not, therefore, to be interpreted in the rigid manner advocated by the defendants, since the word equivalent is to be distinguished from identical. The requirement of equivalence is satisfied when the clawback imposed over a certain period is no greater than the premiums granted. The Commission adds that that view is consistent with the Court's judgment in United Kingdom v Commission, cited above, from which it follows only that that a clawback may not be imposed where no premium has been actually granted at all. That is why the words actually granted were inserted in Article 9(3) of Regulation No 1837/80, as amended by Regulation No 871/84. The present cases, however, are to be distinguished from that hypothesis inasmuch as they relate only to minor variations which may occur between premium and clawback but which cancel each other out over a short period of time. Those variations are, in the Commission's submission, both inevitable and strictly limited to the specific objective of the scheme. In its observations with regard to Case C-151/90, the Commission reiterates its denial of the defendants' argument that Article 4(1) and Article 4(2) of Regulation No 1633/84 both give rise to the levying of clawback which constitutes a charge having an effect equivalent to a customs duty, contrary to Article 9 of the EEC Treaty, and create discrimination contrary to the second subparagraph of Article 40(3) thereof. With regard to the first point, the Commission refers to Paragraph 21 of the Kind judgment to maintain that the levying of the clawback as provided for in Article 4(1) and (2) of Regulation No 1633/84 is inseparable from the slaughter premium regime, since the practical problems involved in levying a clawback identical to the premium granted for each animal or carcase would be insurmountable; the contested provisions are therefore compatible with Article 9 of the EEC Treaty. As regards the second point, the Commission stresses that the Court has already dismissed the same argument in its judgment in Kind, on the ground that the slaughter premium and the clawback were both fixed according to objective criteria, and states that the same considerations apply in the present cases. In conclusion, the Commission considers that it did not act ultra vires in adopting Article 4(1) and (2) of Regulation No 1633/84. (b) The Commission is of the opinion that, in the light of its observations on the first question, the second and third questions raised in Cases C-38/90 and C-151/90 do not require to be answered. In its observations with regard to Case C-151/90, the Commission again stresses the exorbitant and unreasonable nature of the defendants' arguments on the second question in so far as they maintain that Article 4(1) and Article 4(2) of Regulation No 1633/84 should be struck down in their entirety, thus rendering those provisions inoperative even where the clawback was less than the premium granted. (c) In conclusion, the Commission submits that the questions referred by the national courts in Cases C-38/90 and C-151/90 should be answered as follows: Consideration of the first question referred to the Court has disclosed no factor such as to affect the validity of Article 4(1) and (2) of Regulation 1633/84.

1 Language of the case: English.