CJEC, June 18, 1975, No 94-74

1-2 By order of 14 November 1974 received at the Court registry on 16 December 1974 the pretore of abbiategrasso, referred several questions under article 177 of the treaty. These questions were raised in the course of proceedings brought by the plaintiff in the main action against ente nazionale per la cellulosa e per la carta, (ENCC), in relation to duties claimed by that institution at the marketing stage of paper products coming from other member states of the community, under the provisions of law No 868 of 13 June 1940 (gazzetta ufficiale No 170 of 22 July 1940) and law No 168 of 28 march 1956 (gazzetta ufficiale No 79 of 3 April 1956).

3 In order to enable it to judge whether the fiscal mechanism instituted by these legislative measures is compatible with the provisions of the treaty, the national Court has asked this Court to define the concept of 'charges having an effect equivalent to customs duties' as defined in the judgment of 19 june 1973 in case 77-72 (capolongo v maya (1973) ecr 611), to state whether article 13 (2), dealing with the abolition of such charges, has direct effect, to indicate the date from which such effect may be invoked and, finally, to determine in certain respects the scope of the rules on competition laid down by article 85 and 86.

4-7 It must be remembered in this context that by notice published in the official journal of 26 September 1972 (c 98, p.1) the Commission initiated a procedure under article 93 (2) of the treaty in relation to the Italian system of aid, administered by the ENCC and financed by a charge of a quasi-fiscal nature on certain types of paper and cardboard as well as on pulp. Following an inquiry which it had undertaken, the Commission required certain modifications in relation to this system of aid, which were accepted by the Italian republic as is shown by a memorandum of 20 November 1974 from the Commission to the government of that member state. In that memorandum the Commission found that 'the modifications made by the Italian authorities to the system in question render it compatible with the provisions of the treaty with regard to aid '. In relation to the foregoing it must be pointed out that the proceedings before the pretore of abbiategrasso relate to the period prior to the modification of the system in question.

The concept of charges having an effect equivalent to customs duties

8 The first question asks for an interpretation of the concept in article 13 (2) of 'charges having an effect equivalent to customs duties' in relation to dues such as the duty levied by the ENCC at the marketing stage of imported paper, cardboard and pulp, taking into account both the manner of collecting these dues and the purpose to which the revenue derived therefrom is applied.

9 In order to interpret this concept the following three factors must be remembered in connexion with the duty in dispute:

(a) the duty is levied by an autonomous institution governed by public law, devoid of any commercial character,

(b) it is applied without distinction to domestic products and to products from other member states,

(c) the proceeds are allocated to certain development and research activities of interest to the cellulose and paper industry, the major part however being reserved for the payment of subsidies to newsprint, which is itself exempt from the duty.

10 As was ruled in the judgment of 19 June 1973 to which the national Court refers, the prohibition contained in article 13 (2) is aimed at any tax demanded at the time of or by reason of importation and which, being imposed specifically on an imported product to the exclusion of a similar domestic product, results in the same restrictive consequences on the free movement of goods as a customs duty by altering the cost price of that product.

11 The fact that a duty is levied by an independent institution governed by public law rather than levied by the state itself and is used by that institution for purposes intended by the relevant legislation involves No difference with regard to the possible definition of that fiscal charge as a charge having an effect equivalent to customs duties, since the prohibition under article 13 (2) attaches solely to the effect of such charges and not to the manner in which they are imposed.

12-13 On the other hand, the fact that a charge applied without distinction to domestic products as well as to products from other member states gives rise to the question whether the taxation at issue falls within the prohibition of article 13 (2) or the rule against discrimination in matters of internal taxation laid down by article 95.

One and the same scheme of taxation cannot, under the system of the treaty, belong simultaneously to both the categories mentioned, having regard to the fact that the charges referred to in article 13 (2) must be purely and simply abolished whilst, for the purpose of applying internal taxation, article 95 provides solely for the elimination of any form of discrimination, direct or indirect, in the treatment of the domestic products of the member states and of products originating in other member states.

14 Financial charges within a general system of internal taxation applying systematically to domestic and imported products according to the same criteria are not to be considered as charges having equivalent effect.

15-17 The situation would be different, however, if such a duty, which is limited to particular products, had the sole purpose of financing activities for the specific advantage of the taxed domestic products, so as to make good, wholly or in part, the fiscal charge imposed upon them. Such a fiscal device would in fact only appear to be a system of internal taxation and accordingly could by reason of its protective character be termed a charge having an effect equivalent to customs duties, so as to bring article 13 (2) into operation. Such a definition would nevertheless imply a clearly established connexion between, on the one hand, the collection of a fiscal duty levied without distinction on the products in question, whether domestic or imported and, on the other hand, the advantage which enures only for the benefit of the domestic products by reason of the proceeds of that same duty.

18 Accordingly the answer to the first question must be that a duty falling within a general system of internal taxation applying systematically to domestic and imported products according to the same criteria can nevertheless constitute a charge having an effect equivalent to a customs duty on imports when such duty is intended exclusively to support activities which specifically benefit the taxed domestic product.

19-20 The second question asks whether article 13 (2) is directly applicable and if it confers on private individuals a subjective right of immunity to charges prohibited by this provision. It further asks whether this subjective right dates from 31 December 1969 (the date when the transitional period came to an end) or from 1 July 1968, the date when customs duties within the community were abolished. These questions have been put in the event that the duty in question be considered as a charge having an effect equivalent to a customs duty.

21 It is a matter for the national Court to define the duty in question, either as a charge having an effect equivalent to a customs duty or, on the basis of the legal criteria outlined above, as internal taxation within the meaning of article 95. Accordingly, in order to provide for the possibility of this being relevant, an answer must be given to the question put.

22-25 As the Court has already indicated in its judgment of 19 June 1973 to which reference has been made, article 13 (2) lends itself, by its very nature, to producing direct effects in the legal relations between member states and their subjects. Subject to any specific provisions, such effect occurred as from the end of the transitional period, namely 1 January 1970. In fact the Council's decision of 26 July 1966 on the abolition of customs duties in line with the implementation of the common customs tariff on 1 July 1968 (oj p.2971) is based on the concept of a selective acceleration of actions which as a whole were to be completed by the end of the transitional period at the latest. In these circumstances that decision only applies to measures to which it specifically refers, that is to say, to customs duties as such and to quantitative restrictions.

26 In principle the reply must therefore be that the direct effect of article 13 (2) can only be invoked as from 1 January 1970.

27-28 The applicant in the main action put forward in addition a wide range of criticisms in relation to the system of importation of paper, cardboard and pulp into Italy. It considers that the fiscal system applied under the Italian legislation is discriminatory with regard to products imported from other member states and that the interposition of the ENCC has so restrictive an effect on trade as practically to eliminate the possibilities of intra-community trade on the Italian market. In particular it points out that the changes made in the Italian legislation following the steps taken by the Commission are a recognition of the fact that, at any rate up to the time of the elimination of the incompatibilities found to have existed, this system was contrary to the provisions of the treaty relating to public aid. From this it draws the conclusion that a duty intended to finance the functioning of such a system must be considered a charge prohibited by the treaty.

29-31 The fact that a due imposed by a member state is utilized for the purpose of financing a system of aid which is recognized as incompatible with the treaty does not attact to such due the character of a charge having an effect equivalent to a customs duty. Moreover, whatever doubts may be felt as regards the compatibility with the treaty of the system in question and as regards the ENCC's intervention in the field of intra-community trade, especially from the point of view of the prohibition of measures having an effect equivalent to quantitative restrictions, the fact remains that the national Court did not ask this Court to rule on these aspects. Despite the reference made by the national Court in its order referring the matter to the principle of the free movement of goods, to the objective of merger of the different national markets into a single market and to the elimination of any form of discrimination by the treaty, there are No questions before the Court of sufficiently precise a nature to enable it to consider the objections raised by the applicant in the main action. Accordingly these arguments must be disregarded in the framework of the present proceedings.

The system of competition

32 The third question asks in substance whether or not the redistribution of charges and benefits between importers of paper cardboard and pulp, on the one hand, and of national producers and consumers of these goods, on the other, as well as the ENCC's intervention within the framework of this redistribution, infringe the rules on competition laid down in articles 85 and 86 of the treaty.

33-34 Apart from the rules on competition applicable to undertakings, including articles 85 and 86, to which the reference was made by the national Court, the treaty includes various provisions relating to infringements of the normal functioning of the competition system by actions on the part of the states. This in particular is the purpose of article 90 to the extent to which it lays down a particular system in favour of undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly, of articles 92 to 94, on the system of public aid, of articles 101 and 102 on distortions resulting from provisions of public law capable of distorting competitive conditions on the common market, as well as article 37 on state monopolies of a commercial character.

35 The activities of an institution of a public nature, even if autonomous, fall under the provisions referred to and not under articles 85 and 86, even if its interventions take place in the public interest and are devoid of a commercial character.

36 It is a matter for the individual and the national Courts to take the appropriate measures in so far as the interventions of the state or of its decentralized agencies might infringe such rules as might be directly invoked in legal proceedings. It is, moreover, for the Commission to see to it that the relevant provisions of the treaty are respected by the authorities of the member states.

37 Accordingly, the answer to the question must be that according to the system of the treaty the provisions of articles 85 and 86 are not applicable to activities of the kind covered by the question.

38 The costs incurred by the government of the Italian republic and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable and as these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the pretore of abbiategrasso, 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 pretore of abbiategrasso by order of that Court of 14 November 1974, hereby rules:

1. A duty falling within a general system of internal taxation applying systematically to domestic and imported products according to the same criteria can nevertheless constitute a charge having an effect equivalent to a customs duty on imports, when such duty is intended exclusively to support activities which specifically benefit the taxed domestic product;

2. As from 1 January 1970 article 13 (2) produces, by its very nature, direct effects in the legal relations between the member states and their subjects;

3. The provisions of articles 85 and 86 do not apply to activities of the kind referred to by the national Court.