Report for the Hearing in Case C-266/91
I — Facts and procedure
1. The national legislation at issue
Under Decree-Law No 75-C/86 of 23 April 1986, all sales of chemical pulp were subject in Portugal, at the material time, to a charge equal to 0.45% of the total value of the transaction in the case of both domestic and imported products.
That charge was one of those received by the Instituto dos Produtos Florestais (Forestry Products Institute) (hereinafter the IPF ), a body of economic coordination with its own legal persona and enjoying financial autonomy, established by Decree-Law No 428/72 of 31 October 1972. The duties allocated to the IPF were set out as follows in Article 2 of that Decree-Law:
In order to perform those tasks, the IPF was required, inter alia, to collaborate in the promotion and expansion of trade on foreign markets in the products of the coordinated activities, to defend their good reputation and proper value (Article 3(1 )(i)), as well as to grant credit and other forms of financial aid (Article 3(1 )(j)).
The IPF was abolished by Decree Law No 466/88 of 15 December 1988, which transferred its powers to the Ministry of Agriculture, Fisheries and Food and to the Ministry of Industry and Energy. DecreeLaw No 466/88 also abolished the charge on the sale of chemical pulp.
2. Background to the dispute
In May 1987, the company Celulose Beira Industrial (hereinafter Celbi ) sold an amount of chemical pulp. In view of the fact that it did not pay the contested charge, the IPF instituted enforcement proceedings against Celbi for recovery of ESC 6060398, a sum corresponding to the outstanding amount due. Celbi opposed enforcement, but both the Tribunal Tributario de Primeira Instância (Fiscal Court of First Instance) in Coimbra and, on appeal, the Supremo Tribunal Administrativo (Supreme Administrative Court) found against it. Celbi thereupon brought the matter at final instance before the Secção de Contencioso Tributário (Appeals Chamber) of the Supremo Tribunal Administrativo, sitting as a full court.
3. The questions submitted for a preliminary ruling
By order of 10 July 1991, the Secção de Contencioso Tributário of the Supremo Tribunal Administrativo decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
4. Procedure
The order from the Supremo Tribunal Administrativo was lodged at the Registry of the Court of Justice on 16 October 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 Celbi, represented by Manuel Castelo Branco, of the Lisbon Bar; by the Portuguese Ministry of Finance, represented by Manuela Roseiro, representative of the Fazenda Pública; by the Portuguese Government, represented by Luis Máximo dos Santos, Assistant in the Law Faculty of the University of Lisbon, and Luis Inez Fernandes, Director of Legal Services in the European Communities General Directorate, acting as Agents; by the French Government, represented by Philippe Pouzoulet, Deputy Director in the Legal Affairs Directorate of the Ministry of Foreign Affairs, acting as Agent, and Géraud de Β ergues, Principal Assistant Secretary in the Ministry of Foreign Affairs, acting as Deputy Agent; and by the Commission of the European Communities, represented by Antonio Caeiro and Thomas F. Cusack, Legal Advisers to the Commission, acting as Agents.
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 30 September 1992, adopted pursuant to Article 95(1) and (2) of its Rules of Procedure, the Court assigned the case to the Sixth Chamber.
II — Summary of the written observations submitted to the Court
5. Interpretation of Article 9 et seq. and Article 95 of the Treaty (the first three questions submitted for a preliminary ruling)
Celbi takes the view that the charge levied by the IPF on sales of chemical pulp constitutes a charge having equivalent effect to a customs duty on imports prohibited under both Article 9 et seq. of the Treaty and Article 193 of the Act of Accession of Portugal to the Community.
Celbi points out in this regard that the concept of charges having equivalent effect to customs duties, a concept lacking clear parameters, has been the subject of extensive case-law on the part of the Court. Since its first judgment on the matter (Joined Cases 2/62 and 3/62 Commission v Luxembourg and Belgium [1962] ECR 425 (gingerbread )), in which a charge having an effect equivalent to a customs duly was defined as being a duty imposed unilaterally either at the time of importation or subsequently, and which, if imposed specifically upon a product imported from a Member State to the exclusion of a similar domestic product, had, by altering its price, the same effect upon the free movement of products as a customs duty, the Court gradually refined its case-law in order also to bring within that concept a charge affecting both imported products and domestic products, subject to the three-fold condition that it has the sole purpose of financing activities for the specific advantage of the taxed domestic product, that the taxed product and the domestic product benefiting from it are the same, and that the charges imposed on the domestic product are made good in full (Case 77/76 Cucchi v Avez [1977] ECR 987).
It argues that the IPF, which the contested charge is designed to finance, is involved in providing aid for the national cellulose industry (technical aid and aid for the promotion of national production by means of technical and economic studies, information, technology, certificates of product origin, quality and weight), which thus benefits from compensation for expenditure incurred at the time of sale. In contrast, such compensation does not apply to imported chemical pulp, the volume of which is very extensive.
According to Celbi, the condition that the charges imposed on domestic products must be made good in full cannot be expressed solely in financial terms, since such a criterion is not appropriate for determining the value of aid activities within the area of research, information and technology. The requirement of full compensation results less from the amount or the cost of the services provided in favour of national production than from the type, significance and indispensable nature of those services.
The Portuguese Ministry of Finance argues that the contested charge cannot be regarded as a charge having an effect equivalent to a customs duty on imports since it was not levied at the time of or by reason of the crossing of a border, but was levied on all sales of chemical pulp, whether imported or produced in Portugal, thereby coming within the category of internal taxation covered by Article 95 of the Treaty. That classification cannot be called in question by the use to which the proceeds of that charge arc put, since the receipts were not intended solely to finance activities of specific benefit to the domestic product taxed, given that those activities extend well beyond the sector of chemical pulp and the cellulose industry to cover operations relating to wood, cork, resin, as well as their derivatives and by-products, and the product benefiting from the activities financed by the charge was not the same as the product on which the charge had been levied. Furthermore, the charges imposed on the domestic product were not made good in full by the advantages deriving from the services of the IPF in view of the fact that the receipts were intended to finance a range of activities relating to a variety of products, and that there was no grant whatever of aid or of any other types of advantage capable of being quantified and individually identified.
The Portuguese Government examines the Court's extensive case-law in this area and forms the view that the contested charge does not meet the criteria deriving from that case-law for designation as a charge having equivalent effect to a customs duty. It follows from that case-law that Article 9 et seq. of the Treaty applies only in the case of a charge applying specifically to a product imported from another Member State, in contrast to the similar domestic product, on the occasion when or by reason of the fact that it crosses the border. In contrast, since they are pecuniary charges forming part of a general system of domestic charges applying systematically to domestic and imported products in accordance with identical criteria (that is to say, an identical charge applicable at the same marketing stage and attributable to the same factors), the charges in question come under Article 95 of the Treaty. It is common ground that the contested charge is imposed, without distinction, on both imported and domestic products and that the event giving rise to it is not the fact of crossing the border but rather the sale of those products.
The Portuguese Government does, however, accept that the Court's case-law requires that, in order that a charge can be described as a pecuniary charge, account must also be taken of its purpose. From this perspective, a charge forming part of a general system of domestic taxation must none the less be treated as a charge having equivalent effect if: (a) it is exclusively intended to finance activities which benefit specifically the taxed domestic product; (b) the taxed product and the domestic product benefiting from it are the same; (c) the charges imposed on the domestic product are made good in full. With regard to the first condition, the Portuguese Government submits that since the activities of the IPF relate to many sectors other than chemical pulp (such as wood, cork and resin), it cannot be argued that the charge was intended exclusively to finance activities specifically benefiting the taxed domestic product. Moreover, the taxed domestic product and the product that benefits are not one and the same. So far as concerns the requirement that the charges levied on the domestic product be made good in full, the Portuguese Government takes the view that, on pain of infringing the principle of legal certainty, this requirement refers to monetary equivalence. Compensation entails the establishment of a balance between two facts using a criterion which measures the facts to be compared. If one of these (the charge) is expressed in financial terms, the other must also be so expressed, a fortiori in view of the need to determine whether the compensation is in full. Moreover, this requirement also presupposes that the profits derived from the activities of the body being financed by the charge will be quantifiable and obtained individually by traders, something which is not the position in the present case.
In the light of the Court's case-law, the French Government takes the view that the prohibition of charges having equivalent effect to customs duties applies to every charge, levied at the time or by reason of importation, which applies specifically to an imported product and not to the similar domestic product. That, it argues, is not the position in the present case, since the contested charges apply in like manner to domestic products and to products imported from other Member States and for that reason come within the concept of internal taxation under Article 95. However, the French Government notes that the Court's case-law also takes account, for the purpose of the legal designation of a charge, of the purpose to which it is put, in the sense that such a charge, even though systematically applying to domestic and imported products according to the same criteria, must none the less be treated as a charge having equivalent effect if it was intended mainly or exclusively to finance aid benefiting solely the domestic products and if the charges imposed on those domestic products were made good in full. So far as the requirement of full reimbursement is concerned, the French Government takes the view, first, that evaluation of such a requirement amounts to an assessment of facts devolving on the national court and, second, that the national court must not confine itself to finding a strict monetary equivalence between the amount of the charge levied on national traders and the advantages from which they benefit. Instead, it is necessary to take account of all relevant factual and legal aspects, in particular the more or less general nature of the activities financed by the contested charge, the proportion of the tax receipts generated by imported goods and whether the parties benefiting from the activities financed by the charge in question are the same as those that are subject to it.
The Commission takes the view that the tax system here in question is completely neutral in so far as the levying of the charge is concerned, since it applies without distinction to domestic and imported products alike. In accordance with the Court's case-law, therefore, it is necessary to consider the use to which the finances generated by that charge are put in order to determine how it should be classified. The Commission points out in this regard that a charge forming part of a general system of internal taxation covering both domestic and imported products according to the same criteria will none the less constitute a charge having an effect equivalent to a customs duty if: (a) it has the sole purpose of financing activities for the specific advantage of the taxed domestic product; (b) the taxed product and the domestic product benefiting from it are the same, and; (c) the charges imposed on the domestic product are made good in full. It is the task of the national court to determine whether those conditions have been met. If they have not been met, the national court is required to examine the charge in the light of Article 95, which docs not require its abolition but docs require that all forms of discrimination, whether direct or indirect, must be removed in the treatment of domestic products and products imported from other Member States. In the present case, the Commission lakes the view that this examination ought to lead to the conclusion that the contested charge is contrary to Article 95 in so far as it constitutes an unequal charge as between domestic products, which benefit from its levying, and imported products, which bear the burden of the charge without deriving any advantages from it.
In conclusion, the Commission is of the opinion that it is not necessary to give a point-by-point reply to the third question in the reference for a preliminary ruling regarding the concept of compensation. In its view, either the examination of the national legislation will allow the conclusion to be drawn that this is a charge having an effect equivalent to a customs duty, or, if this is not the case, that there is a breach of Article 95. It would in that event be unnecessary to quantify the financial impact of the discrimination or of the protective effect giving rise to a breach of Article 95.
6. Interpretation of Article 92 of the Treaty
After pointing out that, according to the case-law of the Court (Case 74/76 Iannelli & Volpi ν Meroni [1977] ECR 557), Article 92 does not directly confer rights on individuals which may be relied on before national courts, Celbi argues that every system of State aid, regardless of the form which it takes, is protective in its purpose. Where the restrictive effects on intra-Community trade go beyond what is objectively necessary for the aid to attain its desired objective, the levying of a charge which finances the national system of aid may also be classified as a measure having an effect equivalent to a quantitative restriction on imports prohibited under Article 30 of the Treaty.
According to the Portuguese Ministry of Finance, the activity of the IPF did not amount to State aid within the meaning of Article 92 of the Treaty in so far as that activity was exercised without traders deriving any specific advantage from it. Even if one were to assume that it was indeed aid, it would not to that extent have been unlawful. Furthermore, national courts have no jurisdiction to declare aid to be incompatible with the common market, since such power is vested in the Commission.
The Portuguese Government also takes the view that the national court lacks jurisdiction to determine whether a particular aid is or is not compatible with the common market: a question to that end in a reference for a preliminary ruling would thus be lacking in scope and would serve no purpose. In any event, the activity of the IPF was, in the Portuguese Government's opinion, in no way capable of constituting a State aid, since the IPF, inter alia, was not involved in any way in setting product prices, did not grant any form of subsidy or tax advantage and had not implemented any credit mechanism.
The French Government points out that, according to the Court's case-law (in particular, Case 78/76 Steinike und Weinlig ν Germany [1977] ECR 595), while a national court may be called on to interpret and apply the concept of aid under Article 92 of the Treaty in order to determine whether a measure introduced by a State without taking into account the prior control procedure under Article 93, ought or ought not to be subject to it, it does not, on the other hand, have jurisdiction itself to determine, where relevant after submitting a reference for a preliminary ruling, whether aid is compatible with the Treaty unless the decisions referred to in Article 93(2) or the measures of general scope covered by Article 94 have been adopted by the competent Community institution. If, however, the Court should wish, in favour of the question submitted by the national court, to give its views on the very principle of the compatibility with Article 92 of the Treaty of an activity financed by the proceeds of a charge, the French Government proposes that the reply should be that aid financed by a charge levied without distinction on domestic and imported products according to the same criteria cannot be regarded as incompatible with Article 92 solely on the ground that the charge is applied to goods from other Member States.
The Commission takes the same position as the French Government, adding that it cannot be ruled out that a fiscal measure coming under Article 95 of the Treaty may also at the same time fall within the scope of Article 92. The consequence of this would be that, if the Commission were to criticize a Member State for practices amounting to a breach of Article 95 and were to bring proceedings in this regard under Article 169, those proceedings would not lose their purpose merely because the Commission, taking the view that the same practices also form part of a system of aid which is incompatible with the common market, initiates the procedure provided for in Article 93 (Case 73/79 Commission ν Italy [1980] ECR 1533 is cited in this connection).
7. Interpretation of Article 30 of the Treaty
Referring to its arguments on State aid, Celbi contends that the contested charge should be classified as a charge having an equivalent effect to a quantitative restriction on imports prohibited under both Article 30 of the Treaty and Article 202 of Portugal's Accession Treaty in so far as its substantively discriminatory objectives went beyond the normal effects of a national system of aid for domestic production, since that system was financed in part by a charge levied on imported chemical pulp.
The Portuguese Ministry of Finance, on the other hand, takes the view that the contested charge was not a measure having an effect equivalent to a quantitative restriction on imports, since, being a charge applying systematically to domestic and imported products alike, it did not adversely affect the free movement of goods by hindering trade and did not give rise to any substantive discrimination between domestic and imported products in so far as the IPF's activity was not capable of benefiting domestic producers individually.
The Portuguese Government points out that the Court docs not have jurisdiction, in preliminary-ruling proceedings, to decide whether a national measure is compatible with Community law, and slates that it has been unable to find, in the Court's extensive case-law on measures having equivalent effect, any case with facts analogous to those of the present. Since, in its view, the charge at issue cannot be classified as a charge having an effect to a customs duty, it cannot a fortiori be classified as a measure having an effect equivalent to a quantitative restriction since, under this second hypothesis, the consequences for international trade are much more serious than under the first (barrier in the first case, blockage pure and simple in the second). Furthermore, it appears possible to infer from the Court's case-law that measures which apply without distinction are prohibited only if their restrictive effects on the free movement of goods go beyond the limits of the normal effects of commercial rules or amount to substantive discrimination. In view of the actual nature of the IPF's activities and the fact that no trader derived any individual advantage from that activities, the unavoidable conclusion is that there was no substantive discrimination whatever and that it is therefore impossible to classify the contested charge as a measure having an effect equivalent to a quantitative restriction.
The French Government notes that since, in its view, the contested charge forms part of a general system of internal taxation applying systematically to domestic and imported products according to the same criteria, and is therefore covered by Article 95 of the Treaty, it has been consistently held that Article 30 of the Treaty does not apply to the taxation of products originating in other Member States, the compatibility of which with the Treaty falls under Article 95 thereof (Joined Cases 317/86, 48/87, 49/87, 287/87 and 363/87 to 367/87, 65/88 and 78/88 to 80/88 Lambert and Others ν Directeur des Services Fiscaux de l'Orne and Others [1989] ECR 787).
The French Government also notes that, in its judgment in Case C-47/88 Commission ν Denmark [1990] ECR I-4509, the Court accepted that a measure of internal taxation which is not contrary to Article 95 may also be assessed with reference to Article 30. That particular case, however, concerned only the very specific situation in which there was no domestic production.
The Commission asks whether it is absolutely necessary to reply to the last question posed by the national court. In effect, it notes, the conclusion that the contested charge falls under either Article 9 et seq. or Article 95 of the Treaty appears clearly to exclude any application of Article 30. In its judgment in Iannelli & Volpi ν Meroni, cited above, the Court confirmed that barriers of a fiscal nature or having an equivalent effect referred to in Articles 9 to 16 and 95 of the Treaty do not come within the prohibition under Article 30.
The Commission concludes its observations on all of the questions submitted for a preliminary ruling by the Supremo Tribunal Administrativo by proposing that those questions should be answered as follows:
1 Language of the case: Portuguese.