CJEC, 3rd chamber, September 28, 2006, No C-434/04

THE COURT (Third Chamber)

1 This reference for a preliminary ruling concerns the interpretation of Articles 28 EC and 30 EC. That question was raised in the course of criminal proceedings brought against Mr Ahokainen and Mr Leppik for having smuggled ethyl alcohol into Finland.

Legal context

2 The objective of Law No 1143-1994 on alcohol (Alkoholilaki (1143-1994); 'the Law on alcohol'), according to Paragraph 1 thereof, is to control the consumption of alcohol so as to prevent the harmful effects caused to health and society by alcoholic substances.

3 According to Paragraph 3(2) of the Law on alcohol, as amended by Law No 1-2001, 'alcoholic drink' means a drink intended for consumption which contains up to 80% by volume of ethyl alcohol.

4 According to the Law on alcohol, spirits, which are not considered to be alcoholic drinks suitable for consumption, are defined as undenatured ethyl alcohol or an aqueous solution thereof that contains more than 80% of undenatured alcohol.

5 This Law requires, in particular, that the use, production and importation of spirits be limited to those who have a licence for that purpose.

6 Paragraph 8 of the Law on alcohol regulates the commercial importation of alcoholic drinks and ethyl alcohol, as well as import licences for ethyl alcohol. Pursuant to Paragraph 8(1), alcoholic drinks may be imported without a special import licence for personal use or for commercial uses. Pursuant to the first subparagraph of Paragraph 8(2), economic operators can import spirits if they have obtained a licence from the Tuotevalvontakeskus (Product Supervision Agency). Pursuant to the second subparagraph of Paragraph 8(2), spirits may be imported for personal use by an individual if he has obtained a licence from that agency, in accordance with Paragraph 17 of the same Law, after having submitted to the agency a declaration testifying to his status as an importer.

7 To be granted a licence to use spirits, the applicant must demonstrate a justifiable need (Paragraph 17(3) of the Law on alcohol).

8 In accordance with Paragraph 82 of Law on alcohol No 459-1968 - replaced by the Law on alcohol, except as regards the provisions on sanctions - anyone who unlawfully imports or exports alcoholic drinks or ethyl alcohol, or attempts to do so, is criminally liable for smuggling an alcoholic substance.

The main proceedings and the questions referred for a preliminary ruling

9 During the course of a customs check on 1 August 2002, 9 492 litres of spirits (ethyl alcohol with an alcohol content of between 96.4 and 96.5%) in one-litre bottles was discovered in a lorry arriving from Germany. Given the way in which it was packaged and the explanations given, the product was in all likelihood destined to be consumed as a diluted alcoholic drink. According to the consignment documents, the lorry's load should have been 32 pallets of sesame oil.

10 Mr Ahokainen and Mr Leppik were sentenced to prison by the Raaseporin käräjäoikeus (Raasepori District Court) for the smuggling of an alcoholic substance. That court also ordered that the ethyl alcohol be forfeited to the State.

11 The Helsingin hovioikeus (Helsinki Court of Appeal) upheld that judgment.

12 Mr Ahokainen and Mr Leppik having appealed against the judgment of the appeal court, the Korkein oikeus (Supreme Court) considered, in particular, the issue of whether the Finnish licensing system for spirits should be considered as being effectively equivalent to quantitative restrictions within the meaning of Article 28 EC and, if so, whether it could be considered to be lawful, taking account of its objective, under Article 30 EC.

13 As an interpretation of the relevant provisions of the EC Treaty appeared necessary, the Korkein oikeus decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

'(1) Is Article 28 EC to be interpreted as precluding legislation of a Member State under which undenatured ethyl alcohol of an alcoholic strength of more than 80% may be imported only by a person who has obtained a licence to do so?

(2) If the above question is answered in the affirmative, is the licensing system to be regarded as permitted under Article 30 EC?'

The questions

14 By its questions, which should be considered together, the referring court asks in substance whether the Treaty provisions on the free movement of goods preclude a requirement of prior authorisation for the importation of spirits, such as that laid down in the Law on alcohol.

15 In order to give a useful answer to the referring court, it must be borne in mind that Council Directive 92-12-EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products (OJ 1992 L 76, p. 1), which seeks to define the customs and tax rules applicable to those products, of which alcohol is one, does not seek to govern specifically the protection of the public policy interest requirements referred to in Article 30 EC, with the result that the Member States, in accordance with the Treaty, retain their competence to adopt the measures necessary to protect those requirements (see, by analogy, Case C-394-97 Heinonen [1999] ECR I-3599, paragraph 29).

16 It is therefore appropriate to examine, first, whether there is a restriction within the meaning of Article 28 EC, and, second, whether there may be justification under Article 30 EC.

Restriction within the meaning of Article 28 EC

Arguments of the parties

17 According to the Virallinen syyttäjä (Public Prosecutor) and the Finnish and Portuguese Governments, legislation of a Member State requiring authorisation for the importation of spirits does not infringe Article 28 EC. By contrast, the Swedish Government and the Commission of the European Communities contend that the obligation to request a licence from the State of importation prior to importing the goods in question is a measure prohibited by Article 28 EC, even if that licence is a mere formality and is issued automatically.

Findings of the Court

18 All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade must be considered to be measures having an effect equivalent to quantitative restrictions and are thus prohibited by Article 28 EC (see, in particular, Case 8-74 Dassonville [1974] ECR 837, paragraph 5; Case C-420-01 Commission v Italy [2003] ECR I-6445, paragraph 25; and Case C-20-03 Burmanjer and Others [2005] ECR I-4133, paragraph 23). Even rules applied without distinction to domestic and imported products, the application of which to imported products is likely to reduce their sales volume, constitute in principle measures having equivalent effect prohibited by Article 28 EC (see, in particular, Case 120-78 Rewe-Zentral('Cassis de Dijon') [1979] ECR 649).

19 The Court of Justice has nonetheless made clear that national provisions restricting or prohibiting certain selling arrangements that, first, apply to all relevant traders operating within the national territory, and, second, affect in the same manner, in law and in fact, the marketing of domestic products and those from other Member States are not liable to hinder, directly or indirectly, actually or potentially, trade between Member States within the meaning of the case-law initiated by Dassonville (see, to that effect, Joined Cases C-267-91 and C-268-91 Keck and Mithouard [1993] ECR I-6097, paragraph 16).

20 With regard, more particularly, to the characterisation of a prior import authorisation under the provisions of the Treaty, the Court of Justice has ruled that such a system is in principle contrary to Article 28 EC, which precludes the application in intra-Community trade of national provisions which require, even as a pure formality, import licences or any other similar procedure (Case 124-81 Commission v United Kingdom('UHT milk') [1983] ECR 203, paragraph 9, and Case C-304-88 Commission v Belgium [1990] ECR I-2801, paragraph 9; see also Case C-212-03 Commission v France [2005] ECR I-4213, paragraph 16, and Case E-1-94 Restamark [1994-1995] EFTA Court Report 15, paragraphs 49 and 50.

21 Imposing formalities for import, as is the case with the provisions establishing a system of prior authorisation which are in issue in the main proceedings, is in fact capable of hindering intra-Community trade and impeding access to the market for goods which are lawfully produced and marketed in other Member States. The restriction is even greater if the system adds to the costs of those goods (see, in particular, Case C-189-95 Franzén [1997] ECR I-5909, paragraph 71). In that case, there is more than a 'mere' restriction or prohibition of certain selling arrangements.

22 A requirement of prior authorisation such as the one at issue in the main proceedings must therefore be regarded as a restriction on trade between Member States falling within the scope of Article 28 EC.

Justification under Article 30 EC

23 Such a restriction is nonetheless capable of being justified on the grounds provided for in Article 30 EC.

Arguments of the parties

24 The Virallinen syyttäjä and the Finnish Government submit that the consumption of alcohol, particularly among young people, represents not only the principal risk to public health in Finland, but is also the cause of harm to public order and public security, as it is closely linked to criminality as well as to the occurrence of accidents.

25 As regards proportionality, they submit that the legislation in issue is appropriate and necessary to achieve its desired objectives, given that the prohibition on alcohol of an alcoholic strength of more than 80% is restricted to private use, and that the system of prior authorisation aims to avoid the risks of such use, which is particularly harmful for young people, for whom particularly strong but very cheap alcoholic preparations, such as spirits, constitute an attractive product. In any event, this system does not prevent a person who has been given a licence from importing spirits produced in other Member States which are intended for one of the uses set out in the Law on alcohol.

26 For its part, the Commission considers the measures in issue to be disproportionate to the objective pursued. In particular, it points out that import licences are, as a general rule, sufficient to attain the legitimate objectives of the Member State.

27 Given that spirits are excluded from the Finnish market for private consumption, the Commission also asks to what extent a system of prior authorisation for their use and importation for commercial purposes can fulfil the objective of protection of public health and public order.

Findings of the Court

28 It is not disputed that legislation such as that in issue in the present case, which has as its objective the control of the consumption of alcohol so as to prevent the harmful effects caused to health and society by alcoholic substances, and thus seeks to combat alcohol abuse, reflects health and public policy concerns recognised by Article 30 EC.

29 However, in order for health and public policy concerns to justify a restriction such as that resulting from the system of prior authorisation of importation at issue in the main proceedings, it is necessary that the measure in question be proportionate to the objective to be achieved and not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

30 As regards the risks of discrimination and of restriction, nothing in the documents before the Court could lead one to think that the grounds of health and public policy relied on by the Finnish authorities have been diverted from their proper purpose and used in such a way as to create discrimination in respect of goods originating in other Member States, or indirectly to protect certain national products (Case 34-79 Henn and Darby [1979] ECR 3795, paragraph 21, as well as Joined Cases C-1-90 and C-176-90 Aragonesa de Publicidad Exterior and Publivía [1991] ECR I-4151, paragraph 20).

31 As to whether the measure is proportionate, since it concerns an exception to the principle of the free movement of goods, it is for the national authorities to demonstrate that their rules are consistent with the principle of proportionality, that is to say, that they are necessary in order to achieve the declared objective, which in the present case is the protection of public health and public order, and that this objective could not be achieved by less extensive prohibitions or restrictions, or by prohibitions or restrictions having less effect on intra-Community trade (see, to that effect, Case C-17-93 Van der Veldt [1994] ECR I-3537, paragraph 15, as well as Franzén, paragraphs 75 and 76).

32 However, as the Virallinen syyttäjä and the Finnish Government have pointed out, Member States enjoy a margin of discretion in determining, having regard to the particular social circumstances and to the importance attached by those States to objectives which are legitimate under Community law, such as the prevention of alcohol abuse and the campaign against the various forms of criminality linked to its consumption, the measures which are likely to achieve concrete results (see, in particular, Heinonen, paragraph 43).

33 As the Swedish Government has pointed out, the health and life of humans rank foremost among the property or interests protected by Article 30 EC. It is for the Member States, in compliance with Community law and, in particular, with the principle of proportionality, to decide what degree of protection they wish to ensure, and the manner in which that degree can be achieved (Case C-320-93 Ortscheit [1994] ECR I-5243, paragraph 16; see also, to that effect, Heinonen, paragraph 45).

34 Ruling on the compatibility with Community law of Belgian rules on the importation of live animals and British rules on the importation of UHT milk, the Court of Justice has held that a system requiring prior import authorisations constitutes a measure which is disproportionate in relation to the objective of protecting the health and life of humans and animals. It stated that a Member State may adopt less restrictive measures in order to protect those interests, by confining itself to obtaining the information which is of use to it, for example, by means of declarations signed by the importers, accompanied if necessary by the appropriate certificates issued by the exporting Member State ('UHT milk', paragraph 17, and Commission v Belgium, paragraph 14).

35 The Court of Justice has also held that Articles 30 and 36 of the EC Treaty (now, after amendment, Articles 28 EC and 30 EC) preclude domestic provisions allowing only traders holding a production licence or a wholesale licence to import alcoholic beverages when, first, the licensing system constitutes an obstacle to the importation of alcoholic beverages from other Member States in that it adds to the costs of such beverages, and, second, it has not been established that the licensing system set up by the national provisions in question, in particular as regards the conditions relating to storage capacity and the high fees and charges which licence-holders are required to pay, is proportionate to the public health objective pursued or that this objective could not be attained by measures less restrictive of intra-Community trade (Franzén, paragraphs 71, 76 and 77).

36 On the other hand, in Heinonen, the Court of Justice stated, at paragraphs 40 to 44, that Finnish legislation, based on the Law on alcohol, which introduced restrictions on imports of alcoholic drinks by travellers arriving from third countries on the basis of the duration of the journey, was not contrary to Community law. The Court held that the measure was appropriate and necessary because it contributed to an improvement in the social and health situation and because it was limited and related only to journeys satisfying precise criteria, whereas the alternative measures proposed by the Commission did not appear to be effective enough to attain the objective pursued.

37 However, the Court of Justice held that the decision as to the proportionality of a Swedish law - motivated by public health concerns analogous to those on which the Finnish legislation cited in the preceding paragraph was based - prohibiting advertising for alcoholic drinks in periodicals, and, in particular, the decision as to whether the objective sought, namely to combat alcohol abuse, might be achieved by less extensive restrictions or by restrictions having less effect on intra-Community trade, called for an analysis of the circumstances of law and of fact which characterised the situation in the Member State concerned, which the national court was in a better position than the Court of Justice to carry out (Case C-405-98 Gourmet International Products [2001] ECR I-1795, paragraph 33).

38 In the present case, for the reasons given in the preceding paragraph, it is appropriate to leave it to the national court to decide, on the basis of all the matters of law and fact before it, whether the measures adopted by the Republic of Finland are such as effectively to combat abuse arising from the consumption of spirits as a drink, or whether less restrictive measures could ensure a similar result. The review of proportionality and of the effectiveness of the measures taken relies on findings of fact which the referring court is in a better position than the Court of Justice to carry out.

39 It is thus for the referring court to examine the plausibility of the allegations of the Virallinen syyttäjä and the Finnish Government regarding the risks resulting from the consumption of spirits and the effectiveness of the system of prior authorisation. It is also the responsibility of the referring court to examine the results of the restrictive measures, that is to say, whether those measures have been able, even if only partially, to put a halt to the disruptions of public order and damage to public health cited by the Virallinen syyttäjä and the Finnish Government. Finally, while not forgetting that the use and the sale of spirits are subject to a licensing system, it also falls to the referring court to examine whether the objective of the legislation in issue could not also be met by means of declarations signed by the importers, accompanied if necessary by the appropriate certificates issued by the exporting Member State, which enable the competent authorities to obtain the information necessary for checks on the destination of imported spirits and to prevent abuse.

40 The answer must therefore be that Articles 28 EC and 30 EC do not preclude a system, such as that laid down by the Law on alcohol, which makes the importation of undenatured ethyl alcohol of an alcoholic strength of more than 80% subject to obtaining prior authorisation, unless it appears that, in the circumstances of law and of fact which characterise the situation in the Member State concerned, the protection of public health and public order against the harm caused by alcohol can be secured by measures having less effect on intra-Community trade.

Costs

41 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Third Chamber) hereby rules:

Articles 28 EC and 30 EC do not preclude a system, such as that laid down by Law No 1143-1994 on alcohol (Alkoholilaki (1143-1994)), which makes the importation of undenatured ethyl alcohol of an alcoholic strength of more than 80% subject to obtaining prior authorisation, unless it appears that, in the circumstances of law and of fact which characterise the situation in the Member State concerned, the protection of public health and public order against the harm caused by alcohol can be secured by measures having less effect on intra-Community trade.