Report for the Hearing In Joined Cases C-149/91 and C-150/91

I — Facts and procedure

1. The relevant national rules

The parafiscal storage charge on cereals (hereinafter the charge) levied for the benefit of Office National Interprofessionnel des Céréales (National Cereals Trades Board) (hereinafter ONIC) was introduced by Decree No 53-975 of 30 September 1953 on the organization of the market in cereals and the Office National Interprofessionnel des Céréales (Journal Offiáel de la République Française of 1 October 1953, p. 8635) and subsequently extended and amended on a number of occasions. In its current version, that charge is governed by Decree No 87-676 of 17 August 1987 on the parafiscal storage charge in the cereals sector (Journal Officiel de L République Française of 19 August 1987, p. 9520), the terms of which are similar to those of Decree No 82-732 of 23 August 1982, which governed the charge until the 1986/87 marketing year. Articles 1 to 4 of that measure are worded as follows:

The implementing rules for that decree were laid down by the Order of 14 March 1988 on the storage charge and the charge on imports and exports of cereals and products derived from cereals intended for the supplementary budget for agricultural social security benefits (Journal Officiel de L République Française of 10 April 1988, p. 4750). For the years subsequent to 1987, the levying of the charge has been authorized each year by the Finance Law. The rate of the charge, initially fixed at FF 3 per tonne of barley, wheat or maize, was subsequently reduced to FF 1.50 per tonne for the 1989/90 marketing year and to FF 0 for 1990/91.

The charges in relation to the imports and exports of cereals and cereal products were laid down for the 1986/87 marketing year by a ministerial order of 28 November 1986 (Journal Officiel de L République Française of 27 February 1987, p. 951) and for the 1987/88 marketing year by the aforementioned ministerial order of 14 March 1988.

2. Background to the action

The companies Sanders Adour SNC (Sanders) and Guyomarc'h Orthez Nutrition Animale SA (Guyomarch) manufacture animal feed for which they use, inter alia, cereals. They were required to pay the charge on the purchase of cereals whereupon they challenged the validity of the charge and requested its refund for the period from 1 July 1986 to 31 March 1988 in a complaint made to the Directeur des Services Fiscaux des Pyrénées-Atlantiques. Having received no reply within the prescribed period, they brought an action before the Tribunal de Grande Instance, Pau, in order to challenge the tacit decision of rejection and to obtain a refund of the amounts levied by way of the charge.

3. The questions referred for a preliminary ruling

By judgments of 28 May 1991 the Tribunal de Grande Instance, Pau, stayed the proceedings and referred the following questions to the Court of Justice for a preliminary ruling:

4. Procedure

The judgments of the Tribunal de Grande Instance, Pau, were received at the Court Registry on 3 June 1991.

Pursuant to the second paragraph of Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by Sanders and Guyomarc'h represented by the Brin-Denis SCPA, Avocats of Pau, and Patrick Dibout, of the Paris Bar, by the French Government, represented by Edwige Belliard, Deputy Director in the Legal Affairs Directorate of the Ministry for Foreign Affairs, acting as Agent, and by Géraud de Bergues, Deputy Principal Secretary in the same Ministry, acting as Deputy Agent, and by the Commission of the European Communities, represented by Johannes Føns Buhl, Legal Adviser, acting as Agent.

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.

By decision of 22 January 1991, pursuant to Article 95(1) and (2) of the Rules of Procedure, the Court assigned the cases to the Sixth Chamber.

II — Summary of the written observations submitted to the Court

1. The prohibition of charges having an effect equivalent to customs duties (Article 9 et seq. of the Treaty)

Sanders and Guyomarc'h observe that Article 9 et seq. of the Treaty prohibit charges having an effect equivalent to customs duties on imports and that prohibition is expressly referred to in the second paragraph of Article 18 of Council Regulation (EEC) No 2727/75 of 29 October 1975 on the common organization of the market in cereals (OJ 1975 L 281, p. 1, the basic regulation).

According to the case-law of the Court, whatever its designation and mode of application, a pecuniary charge which is imposed unilaterally on goods imported from another Member State when they cross a frontier constitutes a charge having an effect equivalent to a customs duty (Case 87/75 Bresciani v Amministrazione Italiana delle Finanze [1976] ECR 129). Even if the charge is imposed both on products crossing the frontier and domestic products, it can escape being classified as a charge of equivalent effect only if it systematically affects domestic products and imported products according to the same criteria. It is therefore necessary to compare not only the rates of tax applied but also the basis of assessment and the manner in which the charge is levied (Joined Cases 51 to 54/71 International Fruit Company and Others v Produktschap voor Groenten en Fruit [1971] ECR 1107). The utilization of the revenue may also be taken into account. A charge levied on both domestic products and similar imported products may constitute a charge having equivalent effect if it has the sole purpose of financing activities for the specific advantage of the taxed domestic products so that the fiscal burden on the latter is either wholly or partially offset (Case 78/76 Steinike und Weinlig v Federal Republic of Germany [1977] ECR 595 and Case 77/76 Fratelli Cucchi v Avez [1977] ECR 987).

As regards the charge in question, Sanders and Guyomarc'h consider that neither its parafiscal nature nor the fact that it is levied for the benefit of a body other than the State should be taken into account. It is established that the prohibition of charges having equivalent effect is not directed solely against strictly fiscal measures but also more generally includes all charges which in any way impose a greater burden on products crossing the frontier than on domestic products; furthermore, charges levied for the benefit of a public law body other than the State are also prohibited.

Accordingly, Sanders and Guyomarc'h maintain that the storage charge constitutes a charge having an effect equivalent to a customs duty on imports both from the point of view of its scope and its mechanism and the utilization of the revenue therefrom. Moreover it is not justified in any way under Community law.

From the point of view of the scope of the storage charge, imported and domestic products are treated differently since, in the case of imports, the charge is also levied at a flat-rate on derived and processed products, which are exempt from the charge if they are from domestic production. Even assuming that derived products of domestic origin have previously been indirectly taxed when the cereals were utilized, there can be no certainty that the fiscal burden is exactly the same as that resulting from the charge on imported products.

As regards the mechanism of taxation, the criteria are not the same for domestic products as for imported products. For the former the operative event is the sale or use of the cereals whereas for the latter it is simply the crossing of the frontier so that in practice the taxation of imported cereals takes place before that of domestic products.

As for the utilization of the revenue of the storage charge, namely to meet the national expenditure for storage and intervention in the cereal market, the object of such expenditure is to encourage the sale of the stocks of domestic production since the importation of cereals is justified only if those stocks are deficient so that such expenditure is of no concern to imported products.

Finally, the charge does not satisfy the conditions laid down by the case-law of the Court to qualify for exemption from the prohibition of charges having equivalent effect. It does not correspond to a service rendered to cereal importers, it is not the counterpart of a charge levied on domestic products, nor does it have any basis in Community law.

The Commission considers that as regards common wheat, durum wheat, barley and maize, the charge does not infringe the prohibition of customs duties on imports and exports or charges having equivalent effect. It is common ground that the charge is imposed according to the same criteria on domestic products and imported products. Furthermore its revenue serves to cover the national storage expenses from which not only domestic products but also the products imported from other Member States benefit since intervention agencies are required to buy in cereals harvested in the Community which are offered to them. On the other hand the levying of the charge on the importation of derived cereal products infringes the prohibition of charges having equivalent effect in so far as such products do not seem to benefit from any service rendered by ONIC in connection with intervention in the cereals market.

The French Government, which refers to its observations in Case C-235/90 Morvan v Directeur des Services Fiscaux du Finistère [1991] ECR I-5419, makes no comment on the question of charges having equivalent effect.

2. The prohibition of discriminatory internal taxation (Article 95 of the Treaty)

Sanders and Guyomarc'h observe as a preliminary that the distinction between charges having an effect equivalent to customs duties and discriminatory internal taxation referred to in Article 95 of the EEC Treaty is not easy. It is clear from the Court's case-law that the prohibition in Article 95 is a specific provision in relation to the prohibition of charges having equivalent effect (Case 57/65 Liitticke v Hauptzollamt Saarlouis [1965] ECR 205) and that in consequence a fiscal charge cannot fall simultaneously within the two categories (Case 94/74 IGAV v ENCC [1975] ECR 699 and the aforementioned Case 78/76 Steinicke und Weinlig v Federal Republic of Germany).

As regards cereals, assuming that the charge is part of a general system of internal charges, it is contrary to Article 95 of the Treaty both because of its mechanism and utilization. As to the first aspect, the Court held in Case 132/78 Denkavit Loire v French State [1979] ECR 1923 that to comply with the requirements of that article the chargeable event giving rise to the charge must be identical for domestic and imported products and must arise at the same marketing stage. Specifically the Court held that an internal charge paid by importers on the crossing of the frontier and with a time-limit for payment differing from that provided for domestic products was contrary to Article 95 (Case 55/79 Commission v Ireland [1980] ECR 481). The examination which was made in connection with charges having equivalent effect has shown that the charge is not levied at the same marketing stage since imported products are liable to the charge on crossing the frontier, irrespective of when they are resold by the authorized collector who receives them, whereas domestic products are hable to the charge only on resale or use by the producer.

As regards derived products, the charge is contrary to both paragraph 1 and paragraph 2 of Article 95. The infringement of paragraph 1 arises from the fact that imported products are charged at a flat-rate which precludes exact offsetting of the charge indirectly borne by products of national origin. The infringement of paragraph 2 arises from the fact that many cereal products are charged on importation whereas domestic products which do not include cereals but constitute possible alternatives for consumers do not pay the charge.

Furthermore there is no legitimate ground to justify the existence of such discriminatory internal taxation. The judgment in Case 196/85 Commission v France [1987] ECR 1597 shows that although Member States are free to lay down tax arrangements which differentiate between certain products on the basis of objective criteria, such differentiation is compatible with Community law only if it pursues objectives of economic policy which are themselves compatible with the requirements of the Treaty and secondary legislation and if the detailed rules are such as to avoid any form of discrimination, direct or indirect, against imports from other Member States or any form of protection of competing domestic products. In the present case the system of differentiated taxation of domestic cereal production and imported cereals is not based on any objective criterion since the same products are involved in all cases. In addition, the differentiation does not correspond to any objective of national economic policy compatible with the requirements of the Treaty and in particular with the Common Agricultural Policy, which is based on free movement of agricultural products within the Community.

The French Government considers that Article 95 does not prohibit the contested charge. It is not disputed that the charge is imposed on domestic and imported products in the same way. As to the utilization of the revenue from the charge, imported cereals may also be offered to intervention in French territory and thus benefit from the storage facilities which the contested charge is intended partially to finance.

The Commission States that in Case 73/79 Commission v Italy [1980] ECR 1533 and Case 212/87 UNILEC v Larroche Frères [1988] ECR 5075 the Court held that internal taxation is likely indirectly to impose a heavier burden on products from other Member States than on domestic products if it serves exclusively or principally to finance aids for the benefit of domestic products. In the present case the intervention financed by the revenue from the charge benefits not only domestic but also imported products. Accordingly, the charge does not infringe the provisions of Article 95 as interpreted by the Court.

The Commission further refers to its observations on the question of charges having equivalent effect and proposes that the first question should be answered as follows:

A fiscal charge imposed according to the same criteria on domestic and imported products is contrary to Article 9 et seq. or Article 95 of the EEC Treaty in so far as it serves to finance advantages of greater benefit to domestic products than to products imported from another Member State.

3. The compatibility of the charge with the rules of the Common Agricultural Policy

Sanders and Guyomarc'h claim that there is abundant case-law for the proposition that once the Community has, pursuant to Article 40 of the Treaty, legislated for the establishment of the common organization of the market in a given sector, Member States are under an obligation to refrain from taking any measure which might undermine it or create exceptions from it (Case 83/78 Pig Marketing Board v Redmond [1978] ECR 2347, and Case 177/78 Pig and Bacon Commission v McCarren [1979] ECR 2161). The Court has held in particular that the aim pursued by common organizations of the market could be compromised by national fiscal measures which had an appreciable even if unintended effect on the market price and thereby on the structure of agricultural production (Joined Cases 36/80 and 71/80 Irish Creamery Milk Suppliers Association and Others v Government of Irehnd and Others [1981] ECR 735 and Case 297/82 De Samvirkende Danske Landboforeninger v Ministry of Fiscal Affairs [1983] ECR 3299).

The application of those principles in the present case leads to the conclusion that the storage charge is likely to have an appreciable effect upon the level of market prices and to induce producers, especially of animal feed, to switch from products subject to the charge to substitute products which are not. The low rate of the charge does not mean that its influence is not appreciable within the meaning of the case-law. The French Government itself recognized its effect by deciding to reduce the charge by half in 1989 and to zero in 1990. The appreciable effect of the charge is also shown by the activity of cereal users such as manufacturers of compound feed. Since it is a volume industry rather than one of margins, raw materials represent a very high percentage of costs and because of the charge producers had to turn to substitute products other than cereals. During the period in question the charge contributed to disruption in the common agricultural market.

As a preliminary, the French Government states that the charge serves to cover a portion of the financial costs which the ONIC incurs by reason of the intervention procedure and which are not chargeable to the EAGGF. The refunds paid by the EAGGF are not sufficient to offset the actual cost of intervention in so far as the EAGGF allows an average rate of interest which penalizes countries such as France where interest rates are high. Although it is not disputed that the revenue from the charge cannot always correspond precisely to the actual costs of the ONIC, a reserve has been set up under the ONIC's storage budget and enables adjustments to be made over several years.

It is apparent from the case-law of the Court on contributions payable by agricultural producers, which is applicable, mutatis mutandis, to all relevant charges, that the obligation imposed on nonaffiliated producers to contribute to the financing of funds established by a producers' organization is unlawful in so far as it serves to finance activities which are themselves held to be contrary to Community law (Case 218/85 Association Comité Économique Agricole Régional Fruits et Légumes de Bretagne v A. Le Campion [1986] ECR 3513 and Case 212/87 UNILEC v Larroche Frères [1988] ECR 5075). That is not so in the present case since the obligation to purchase and the intervention agency's consequent need to store the cereals is the direct result of the Community rules on the common organization of the markets in cereals.

Furthermore the charge does not constitute a measure likely to disturb the functioning of the mechanism provided for by the common organization of the markets within the meaning of the judgments in Case 55/83 Italian Republic v Commission [1985] ECR 683 and Case 56/83 Italian Republic v Commission [1985] ECR 703 or to interfere with the machinery of price formation as established under the common organization (Case 154/77 Procureur du Roi v Dechmann [1978] ECR 1573). The fact that the storage charge covers the financial costs of the ONIC does not afford any advantage to farmers benefiting from intervention. The French Government has elected to make users bear the charge but it could have opted to finance it directly out of the State budget. The charge has no effect on market supply or prices because it is very low and there are other parafiscal charges on competing agricultural products which precludes the possibility of cereals being ousted from the market.

The Commission states that as secondary Community law stands at present there is no provision of the EAGGF rules expressly authorizing national authorities to pass on to operators the residual intervention costs not covered by the EAGGF or prohibiting them from doing so.

It considers that the levying of a parafiscal charge is not as such contrary to the Treaty. However, such a charge could be open to challenge if the rate, duration and basis of the charge showed that it constituted the instrument by which a Member State was deliberately obstructing the Community objective of ensuring a particular income for a category of farmers by the price guarantee mechanism. The charge in question, levied on all cereals marketed in France but wholly borne by users of those products, does not affect farmers' incomes and is therefore not open to objection on the basis of the criteria established by the Court's case-law. In addition, it is common ground that the activities pursued by the ONIC cannot be regarded as incompatible with the Community agricultural rules.

According to the Commission, the second question should be answered as follows:

4. The question whether the storage charge constitutes public aid prohibited by Article 92 of the Treaty

Sanders and Guyomarc'h state that Article 22 of the basic regulation expressly provides that Articles 92, 93 and 94 of the Treaty are to apply to the production and marketing of cereals. Furthermore, according to the case-law of the Court: the first paragraph of Article 92 has direct effect; it may apply to national fiscal measures; and it is not necessarily and exclusively concerned with funding out of State resources but may also apply to aid granted and managed by public or private bodies appointed for that purpose.

Sanders and Guyomarc'h point out that in the present case the storage charge is refunded (third paragraph of Article 2 of Decree No 87-676) on cereals used for the manufacture of products qualifying for the production refunds provided for in Article 11 of the basic regulation, in particular starch products, but no refund is provided for imported starch products. That unjustified refund mechanism necessarily amounts to operating aid for the French starch industry. The Commission took the same view when it initiated the procedure under Article 93 of the Treaty against France by a decision of 7 March 1990.

Furthermore, there is an infringement of Article 96 of the Treaty in view of the fact that for a certain number of products, such as common wheat and durum wheat groats and meal and common wheat and durum wheat flour, the export refunds are more than the charge levied. That kind of refund is to be regarded as public aid for the export of the products in question which was not notified to the Commission and is therefore unlawful.

According to the French Government the reply to the third question should be that the Court has consistently held that individuals may not rely before national courts on the provisions of Article 92 which do not have direct effect unless they have been given concrete form by measures of general application provided for by Article 94 or by decisions under Article 93(2), which has not been done in this instance (Case 77/72 Capolongo v Azienda Agrìcola Maya [1973] ECR 611).

The Commission confirms that it adopted a position on the refund of the charge on cereals utilized in the manufacture of certain products when France gave notification of a proposed decree amending the third paragraph of Article 2 of Decree No 87-676 with a view to providing for the refund of the charge for cereals utilized in the starch industry and in the maize industry in relation to maize meal for brewing. The Commission considered that such a measure constituted unlawful operating aid and initiated the procedure under Article 93(2).

The Commission considers that the exemption from the charge for cereals which are exported and its refund on the export of certain derived cereal products also constitute operating aid incompatible with the common market.

Such measures may undermine the operation of the common organization of the market in the products concerned; in addition they can have no permanent effect on structural improvements in the sectors in question.

The Commission therefore proposes that the third question should be answered as follows:

1 Language of the case: French.