CJEC, April 20, 1978, No 80-77

1 By two judgments of 30 June 1977, registered at the Court of justice on 4 July 1977 under Nos 80-77 (Société les Commissionnaires Reunis v Receveur des douanes) and 81-77 (les fils de Henri Ramel v Receveur des douanes) the tribunal d ' instance, Bourg-en-bresse, referred under article 177 of the EEC treaty in each judgment two questions, one on the validity and the other on the interpretation of article 31 (2) of regulation No 816-70 of the council of 28 April 1970 laying down additional provisions for the common organization of the market in wine (official journal, English special edition 1970 (i), p.234).

2 These questions ask the Court:

' '(1) does (' did ' in case 81-77) article 31 (2) of regulation No 816-70 of the council accord with the EEC treaty, having regard to the fact that that provision authorizes (' authorized ' in case 81-77) measures contrary to the rules of the treaty on the free movement of goods applicable after the end of the transitional period?

(2)if the answer to the foregoing question is in the affirmative, were the provisions of article 31 (2) of the said regulation still applicable on 11 September 1975, having regard to the possibility that all the administrative mechanisms necessary for the management of the market in wine had been set up?' '.

3 They have been raised in proceedings brought against the French customs authorities by wine traders who imported into France between the beginning of September 1975 and march 1976 consignments of wine from Italy which proceedings contest whether a duty of ff 1.13 per degree on each hectolitre introduced with effect from 12 September 1975 by decree No 75-846 of 11 September 1975 of the president of the Republic (journal officiel de la Republique francaise of 12 September 1975) and imposed at the time of the said imports was in accord with the treaty.

4 By order of 26 October 1977 the Court ordered that the two cases be joined for the purposes of the oral procedure and judgment.

General considerations

5 Regulation No 816-70, which entered into force at the end of the transitional period, established a system of organization of the market in wine involving the setting up on the one hand of a prices and intervention system, rules concerning production and for controlling planting, rules concerning oenological processes and conditions for release to the market involving a division of the community into wine-growing zones, aids for storage and distillation and on the other hand a system of trade with third countries involving inter alia the issue of import and export licences, the establishment of reference prices, countervailing charges on import and export refunds and a safeguard clause allowing appropriate measures to be taken in the event of serious disturbances.

6 This organization also involves both by virtue of articles 12 to 15 and 30 to 33 of the EEC treaty and of article 31 (1) of regulation No 816-70 the prohibition on the levying in the internal trade of the community of any charge having an effect equivalent to a customs duty (with the sole exception of the application as regards the grand duchy of Luxembourg of certain provisions of the protocol annexed to the treaty and concerning the agriculture of that member state) and the prohibition of any quantitative restriction or measure having equivalent effect.

7 Article 31 (2) of the said regulation provides:

' ' By way of derogation from the provisions of paragraph 1, so long as all the administrative mechanisms necessary for the management of the market in wine are not in application-with the exception, until 31 December 1971, of the viticultural land register-producer member states shall be authorized in order to avoid disturbances on their markets to take measures that may limit imports from another member state.

These measures shall be communicated to the Commission, which shall decide without delay whether to maintain, amend or abolish such measures.' '

8 The year 1975 saw an exceptional influx of Italian wines especially on to the French market due, inter alia, to the abundant harvest and successive devaluations of the lira.

9 The council considered this situation at its meetings on 15 April, 21 and 22 July and 9 September 1975 and contemplated various measures; after the reintroduction of compensatory amounts had been rejected it was decided that regulation No 816-70 should be amended to take into account the resolution of the council of 21 April 1975 on new guidelines to bring the market in wine into balance.

10 On 11 September 1975 the government of the French Republic in reliance on article 31 (2) of regulation No 816-70 issued a decree imposing the above-mentioned duty on the import of certain wines originating in Italy.

11 In the communication of this measure made in accordance with the second paragraph of article 31 (2) of regulation No 816-70 to the Commission by a telex of 11 September 1975 it is stated:

' ' At the meetings of the council of ministers on 15 April, 21 July and 9 September 1975 the situation of the community market in table wines was analysed at length. It was found that the present inadequacy of the community intervention mechanisms prevented the spontaneous restoration of the balance in this market which has been very disturbed by the depreciation of the green lira during recent years.

' 'The French delegation has set forth the consequences for its producers of this situation and has repeatedly proposed solutions based in the first place on the reform of regulation No 816-70. The council of ministers decided on 15 April last that this reform would be adopted at the latest on 1 august 1975 for application as from the 1975-76 wine-growing year. Discussion of the Commission's proposals was adjourned at the council meetings on 21 and 22 July 1975 and no decision was reached at the meeting on 9 September. As explained by the French minister and French secretary of state for agriculture the situation created in France by the disorder of the wine market accordingly requires protective measures against the imports at very low prices from Italy. The council has deliberated at length. In spite of the proposal by the Commission and by our partners to find a political agreement on this subject and the suggestions made by the French delegation, the council has not been able to reach a unanimous decision. In these circumstances the French government has decided to invoke the provisions of article 31 (2) of community regulation No 816-70. ' '

12 The Commission challenged the conformity of this measure with community law and initiated the procedure provided for in article 169 of the treaty but discontinued this when by decree No 76-287 of the president of the Republic of 31 march 1976 (journal officiel de la Republique francaise of 1 April 1976) the decree of 11 September 1975 was repealed with effect from 1 April 1976.

13 The plaintiffs in the main actions, in reliance on the direct effect of the prohibition on levying after the end of the transitional period charges having an effect equivalent to customs duties in trade between member states challenged the validity and, in any event, the application at the date of the imports in question of article 31 (2) of regulation No 816-70 and brought actions before the national Court claiming refund of the duties previously paid under decree No 75-846.

First question

14 The first question asks in substance whether article 31 (2) of regulation No 816-70 is valid in so far as it authorizes producer member states to prescribe and to levy, after the end of the transitional period and in the circumstances that it specifies, charges having an effect equivalent to customs duties in intra-community trade on a product falling within annex ii of the treaty, in the present case table wine.

15 The answer to this question requires the interpretation of article 38 (2) of the EEC treaty which reads: ''save as otherwise provided in articles 39 to 46, the rules laid down for the establishment of the common market shall apply to agricultural products.' '

16 According to the plaintiffs in the main actions this provision means that as regards trade in agricultural products, whether they are subject to an organization of the market or not, the community institutions cannot after the end of the transitional period derogate, or allow member states to derogate, from the provisions of the treaty on the free movement of goods.

17 On the other hand in the view of the government of the French Republic, having regard to the place of agriculture in the common market, its characteristics and the specific objectives of the common agricultural policy, this provision allows the council to derogate from the rules of the treaty in general and those on the free movement of goods in particular when such derogations are based on articles 39 to 46 of the treaty.

18 Many mechanisms of the organization of the market, such as price fixing and intervention systems, by organizing and regulating trade involve limitations on free movement and such limitations are not therefore of a temporary nature or justified by exceptional circumstances but are characteristic of the common agricultural policy.

19 The objectives of free movement and of the common agricultural policy should not be set one against the other nor in order of precedence but on the contrary combined and the principle of free movement should prevail save when the special requirements of the agricultural sector call for adaptations.

20 In the view of the council article 38 (2) in the context of articles 39 to 46 should be interpreted as allowing a more flexible interpretation of abolition in the agricultural sector by the end of the transitional period of charges or measures having equivalent effect so that restrictions may be maintained as temporary measures accompanying the establishment of a common organization of the market without which its setting up might otherwise not be undertaken.

21 Finally, according to the Commission, article 38 (2) should, in conjunction with the other provisions of title ii, be interpreted as not allowing the community institutions after the transitional period to evade the rules on free movement of goods unless it is a question of measures which exclude any discrimination between producers or consumers within the community as provided by the second subparagraph of article 40 (3) and do not affect the unity of the market; this straight away rules out the establishment of charges having equivalent effect in intra-community trade.

22 Article 2 of the EEC treaty provides that it is by establishing a common market and progressively approximating the economic policies of member states that the community must promote throughout the community development of economic activities, the raising of the standard of living and closer relations between the member states.

23 As is stressed by article 38 (1) of the treaty, placed at the head of the title devoted to the common agricultural policy, the common market shall extend to agriculture and trade in agricultural products.

24 The abolition between member states of customs duties and charges having equivalent effect constitutes a fundamental principle of the common market applicable to all products and goods with the result that, as has been found by the Court in its judgment of 13 November 1964 (joined cases 90 & 91-63 Commission v grand duchy of Luxembourg and kingdom of Belgium (1964) ecr 625, at p.633) ' 'any possible exception, which in any event must be strictly construed, must be clearly laid down' '.

25 Article 38 (2) provides that ''save as otherwise provided in articles 39 to 46, the rules laid down for the establishment of the common market shall apply to agricultural products' '.

26 Therefore in order that the exception provided for in article 38 (2) should apply to the introduction of charges having an effect equivalent to customs duties in intra-community trade at the end of the transitional period, it is necessary to find in articles 39 to 46 a provision which either expressly or by necessary implication provides for or authorizes the introduction of such charges.

27 Articles 39 to 46 contain no provision of this nature.

28 On the contrary the second paragraph of article 40 (3) expressly stipulates that the organization of the market shall exclude any discrimination between producers or consumers within the community.

29 Under article 43 (3) (b) each common organization of the market ' 'ensures conditions for trade within the community similar to those existing in a national market' '.

30 Article 44 expressly mentions the progressive abolition of customs duties and quantitative restrictions during the transitional period and these words in the context of articles 12 to 17 and 30 to 35 of the treaty must be interpreted as also covering charges having an effect equivalent to customs duties and measures having an effect equivalent to quantitative restrictions.

31 The same article creating a provisional system valid only during the transitional period provides that in so far as progressive abolition of customs duties and quantitative restrictions between member states may result in prices likely to jeopardize the attainment of the objectives set out in article 39, member states may, subject to certain conditions, apply a system of minimum prices in a non-discriminatory manner.

32 Thus even during the transitional period obstacles to trade other than minimum prices were expressly prohibited.

33 It would be obviously contrary to the treaty to permit after the end of the transitional period other obstacles to trade as, if not more, restrictive than those which were permitted only during the transitional period.

34 The other provisions of articles 39 to 46 either contain no derogation, express or implied, from the rules of the treaty, such as articles 39 and 41, or refer to a different and clearly specified sphere such as article 42 on the rules of competition, or again expressly concern the case of the provisional maintenance during the transitional period of national organizations of the market pending the substitution of common organizations, such as articles 45 and 46.

35 It is clear from all these provisions and their relationship inter se that the extensive powers, in particular of a sectorial and regional nature, granted to the community institutions in the conduct of the common agricultural policy must, in any event as from the end of the transitional period, be exercised from the perspective of the unity of the market to the exclusion of any measure compromising the abolition between member states of customs duties and quantitative restrictions or charges or measures having equivalent effect.

36 Any prejudice to what the community has achieved in relation to the unity of the market moreover risks opening the way to mechanisms which would lead to disintegration contrary to the objectives of progressive approximation of the economic policies of the member states set out in article 2 of the treaty.

37 It is not possible to claim in support of a different interpretation the introduction of countervailing charges since these are justified in relation to trade between member states only by the necessity to correct the effects of variations in unstable rates of exchange which in a system of organization of markets in agricultural products based on common prices were likely to cause disturbances in trade in the products; such measures thus aim at ensuring so far as possible the maintenance of normal trade in spite of the impact of divergent monetary policies, the co-ordination of which, contrary to the provision in article 105 of the treaty, the member states have not yet achieved.

38 It follows from the above considerations that the answer to the first question put by the national Court should be that article 31 (2) of regulation No 816-70 in so far as it authorizes producer member states to prescribe and levy, in intra-community trade in the products covered by the organization of the market which that regulation sets up, charges having an effect equivalent to customs duties, is incompatible with article 13, in particular paragraph (2) thereof, and with articles 38 to 46 of the treaty and is consequently invalid.

39 The answer given to the first question makes it unnecessary to reply to the second.

Costs

40 The costs incurred by the French government, the council of the European Communities and Commission of the European Communities which submitted observations to the Court are not recoverable.

41 As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national Court, costs are a matter for that Court.

On those grounds,

The Court,

In answer to the questions submitted to it by the tribunal d ' instance, Bourg-en-bresse, by judgments of 30 June 1977, hereby rules: