CJEC, June 9, 1992, No C-47/90

THE COURT

1 By order of 15 February 1990, received at the Court Registry on 2 March 1990, the Tribunal de Commerce, (Commercial Court) Brussels, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the interpretation of Article 34 of the EEC Treaty.

2 The questions were raised in proceedings between Établissements Delhaize Frères et Compagnie Le Lion SA ("Delhaize"), established in Belgium, and Promalvin SA ("Promalvin") and AGE Bodegas Unidas SA ("Bodegas Unidas"), established in Belgium and Spain respectively, concerning the satisfaction of an order for wine placed with Promalvin by Delhaize.

3 In July 1989, following an offer from Promalvin, Delhaize placed an order with the latter for 3 000 hectolitres of Rioja wine. The order was accepted without reservation by Promalvin, which then ordered the same quantity of wine from Bodegas Unidas.

4 On receipt of that order, Bodegas Unidas informed Promalvin that the Spanish rules in force prevented it from selling to Promalvin the 3 000 hectolitres of wine ordered. It referred to Spanish Royal Decree No 157-88 of 22 February 1988 laying down the rules governing designations of origin and their respective regulations ("Decree No 157-88") and to a decision of the Rioja Governing Council concerning discontinuance of the bulk marketing of wine.

5 Article 86 of Law No 25-70 of 2 December 1970 laying down the basic rules concerning vines, wines and spirits authorizes the Minister of Agriculture, on a proposal from a Governing Council, to grant the designation "calificada" to wine products already granted a "denominación de origen" if certain conditions are fulfilled.

6 Those conditions include the requirement laid down by Decree No 157-88 that the wine be bottled in cellars at the place of origin, that is to say in cellars in the production region, which satisfy the conditions as to quality laid down by the Spanish rules. That requirement becomes applicable to wines intended for export only after the expiry of a period of five years from the date of publication of the decree, which was 24 February 1988.

7 Following publication of Decree No 157-88, the Rioja Governing Council ° a body whose composition, terms of reference and powers are defined by Spanish legislation which is responsible in particular for providing guidance for and overseeing the production of Rioja wine ° applied for and was granted the designation "denominación de origen calificada" for Rioja wine. Pursuant to Decree No 157-88, the Governing Council then adopted the measures needed gradually to extend to wine intended for export the requirement that it be bottled in cellars at the place of origin. Those measures consisted in the allocation to each undertaking exporting wine in bulk of decreasing annual export quotas fixed according to the country of destination.

8 In its reply to Promalvin, Bodegas Unidas indicated that, in view of the restrictions laid down by the Spanish legislation, it could deliver to Promalvin only 600 hectolitres of Rioja wine. On being informed that the order placed with and accepted by Promalvin would not be satisfied in its entirety, Delhaize commenced proceedings against Promalvin before the Tribunal de Commerce, Brussels, for a judgment requiring Promalvin to satisfy the order. Promalvin then joined Bodegas Unidas to the proceedings as a third party under an obligation to indemnify it.

9 Considering that the decision to be given depended on the validity of the Spanish rules under Community law, the national court stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

"1. Does national legislation such as Spanish Royal Decree No 157-88 of 24 February 1988 and the regulation of the Governing Council of the 'Rioja' designation of origin adopted in implementation of that decree constitute a measure having an effect equivalent to a restriction on exports within the meaning of Article 34 of the EEC Treaty?

2. If so, may an individual rely on an infringement of Article 34 as against another individual?"

10 Reference is made to the Report for the Hearing for a fuller account of the facts, the relevant domestic and Community legislation, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

Question 1

11 By virtue of Article 34(1) of the Treaty, "quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States".

12 As the Court held in Case 237-83 Jongeneel Kaas v Netherlands [1984] ECR 483, Article 34 concerns national measures which have as their specific object or effect the restriction of patterns of exports and thereby the establishment of a difference in treatment between the domestic trade of a Member State and its export trade, in such a way as to provide a special advantage for national production or for the domestic market of the State in question.

13 National rules which limit the quantity of wine available for export in bulk to other Member States but impose no quantitative restriction on sales of wine in bulk between undertakings situated within the region of production fall precisely within that category.

14 Such rules have the specific effect of restricting exports of wine in bulk and, in particular, of procuring a special advantage for bottling undertakings situated in the region of production.

15 The Spanish Government states that, since the obligation to bottle the wine in the region of production is a condition for the grant of the designation of "denominación de origen calificada" to that wine, that requirement falls within the scope of protection of industrial and commercial property within the meaning of Article 36 of the Treaty.

16 As Community law stands at present, it is for each Member State to define, within the terms of Council Regulation (EEC) No 823-87 of 16 March 1987 laying down special provisions relating to quality wines produced in specified regions (OJ 1987 L 84, p. 59), as amended, the conditions applicable to the use of a name of a geographical area within its territory as a registered designation of origin for a wine from that area. However, in so far as those conditions constitute one of the measures referred to by Article 36 of the Treaty, they are not justified on grounds of the protection of industrial and commercial property within the meaning of Article 36 of the Treaty unless they are needed in order to ensure that the registered designation of origin fulfils its specific function.

17 In that connection, it must be observed that the specific function of a registered designation of origin is to guarantee that the product bearing it comes from a specified geographical area and displays certain particular characteristics.

18 Consequently, the requirement that the wine be bottled in the region of production, in so far as it constitutes a condition for the use of the name of that region as a registered designation of origin, would be justified by the concern to ensure that that designation of origin fulfilled its specific function if bottling in the region of production endowed the wine originating in that region with particular characteristics, of such a kind as to give it individual character, or if bottling in the region of production were essential in order to preserve essential characteristics acquired by that wine.

19 However, it has not been shown that the bottling of the wine in question in the region of production was an operation which endowed it with particular characteristics or was essential in order to maintain the specific characteristics acquired by it.

20 Furthermore, the Spanish Government has emphasized that the supervisory powers vested in the Governing Council were limited to the region of production. Consequently, it is necessary, in its view, for wine bearing the words "denominación de origen calificada" to be bottled in the region of production.

21 That argument cannot be accepted. Commission Regulation (EEC) No 986-89 of 10 April 1989 on the accompanying documents for carriage of wine products and the relevant records to be kept (OJ 1989 L 106, p. 1) establishes an adequate system for verifying that the authenticity of the wine is not affected during transport. Article 9 of that regulation lays down rules specifically relating to the bulk transport of the wines covered by Regulation No 823-87, such as wines bearing the registered designation "denominación de origen calificada".

22 At the hearing, the Spanish Government contended that rules like the national rules at issue formed part of a policy designed to improve the quality of wine.

23 That justification is not acceptable. It has not been established that the confinement of bottling to a specified area was, in itself, capable of affecting the quality of the wine.

24 Nor can rules like the national rules at issue be justified on the basis of Article 18 of Regulation No 823-87.

25 It is true that under Article 18 of Regulation No 823-87 the Member States may, taking into account fair and traditional practices, lay down additional or more stringent conditions of movement than those laid down in Regulation No 823-87 for quality wines produced in specified regions in their territory, such as wines bearing the designation "denominación de origen calificada".

26 However, Article 18 of Regulation No 823-87 cannot be interpreted as authorizing the Member States to impose conditions contrary to the Treaty rules on the movement of goods.

27 Accordingly, the reply to the first question should be that national provisions applicable to wine of designated origin which limit the quantity of wine that may be exported in bulk but otherwise permit sales of wine in bulk within the region of production constitute measures having equivalent effect to a quantitative restriction on exports which are prohibited by Article 34 of the EEC Treaty.

Question 2

28 As the Court held in Case 83-78 Pigs Marketing Board v Redmond [1978] ECR 2347, paragraph 66, Article 34 of the Treaty is directly applicable and as such confers on individuals rights which the courts of Member States must protect.

29 Consequently, the reply to the second question should be that Article 34 of the Treaty may be relied on by individuals before the courts of the Member State in disputes against other individuals.

The costs incurred by the Spanish Government, the Belgian Government, the Netherlands Government, the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. 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

30 The costs incurred by the Spanish Government, the Belgian Government, the Netherlands Government, the United Kingdom and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court

On those grounds,

THE COURT,

in answer to the questions referred to it by the Tribunal de Commerce, Brussels, by order of 15 February 1990, hereby rules:

1. National provisions applicable to wine of designated origin which limit the quantity of wine that may be exported in bulk but otherwise permit sales of wine in bulk within the region of production constitute measures having equivalent effect to a quantitative restriction on exports which are prohibited by Article 34 of the EEC Treaty.

2. Article 34 of the EEC Treaty may be relied on by individuals before the courts of the Member State in disputes against other individuals.