CJEC, June 9, 1982, No 95-81

THE COURT

1 By application lodged at the court registry on 24 april 1981 the Commission of the European Communities brought an action before the court under article 169 of the eec treaty for a declaration that, by making advance payment for goods intended for import subject to the provision of a security or of a bank guarantee, the Italian Republic has failed to fulfil its obligations under the eec treaty.

2 The commission considers that the italian rules concerning advance payments for imported goods constitute an infringement of article 30 of the treaty and of the two directives adopted by the council for the implementation of article 67 of the treaty: the first directive of 11 may 1960 (official journal, english special edition, 1959-62, p. 49) as supplemented and amended by the second directive of 19 december 1962 (official journal, english special edition 1963-64, p. 5).

3 The rules at issue are based on article 1 of italian law no 1126 of 20 july 1952 on supplementary provisions concerning currency matters and foreign trade (gazzetta ufficiale (italian official journal) no 206 of 5 september 1952) which provides that:

' ' Advance payments for goods intended to be imported shall be subject to the lodging by the importer of a security in favour of the ufficio italiano dei cambi (italian foreign exchange office).

If a security has not been provided in accordance with the foregoing paragraph a security must also be provided in cases in which the bank of Italy, or a bank authorized to act as its agent, transmits to the importer documents of such a nature as to allow him to dispose of the goods to be imported.

The amount of the security shall be fixed by order of the minister for foreign trade.

A bank guarantee may be substituted for the security. ' '

4 These provisions were supplemented by the sole article of law no 162 of 2 april 1962 (gazzetta ufficiale no 111 of 30 april 1962) which provides that:

' ' The minister for foreign trade may by order determine the maximum limit of the value of the goods to be imported below which the security or guarantee referred to in the foregoing paragraphs is unnecessary. ' '

5 Circular no v-206600-104 of the minister for foreign trade of 25 june 1976 states that the bank entrusted with the transaction is required to pay the amount of the security into an interest-free account in the name of the importer. That account is blocked and may only be released by the ufficio italiano dei cambi.

6 According to article 3 of the ministerial order of 7 august 1978 (gazzetta ufficiale no 220 of 8 august 1978) on the rules concerning settlement of foreign exchange transactions and financial relations with foreign countries that security or bank guarantee is fixed at 5% of the exchange value in lire of the advance payment to be made and is required for imports having a value in excess of lit 10 000 000.

7 Finally, in accordance with article 4 of the above-mentioned law of 20 july 1952 where proof has not been provided that the importation has been effected within the period prescribed - fixed at 30 days after the advance payment by the ministerial order of 20 january 1973 (gazzetta ufficiale no 19 of 23 january 1973) and extended to 120 days by the ministerial order of 28 september 1980 (gazzetta ufficiale no 267 of 29 september 1980) - the minister for foreign trade declares the security to be wholly or partially forfeit or enforces the bank guarantee in favour of the treasury.

8 By the expression ' ' importation ' ' the italian authorities understand not the physical arrival of the goods on italian territory but the release for consumption of the products imported after the completion of the customs formalities necessary for that transaction and any payment is considered as ' ' advance ' ' for the purposes of the italian exchange rules if it is made before the purchaser has the goods at his disposal and is able to put them to their intended use in Italy .

9 The commission took the view that the rules as a whole constituted an infringement of article 30 of the treaty and of the directives adopted by the council for the implementation of article 67 on the free movement of capital and consequently addressed a letter to the italian government on 17 july 1980 initiating the procedure laid down in the first paragraph of article 169 of the eec treaty. The italian government failed to reply to the letter and the commission then addressed to it on 28 january 1981 a reasoned opinion. That opinion requested the Italian Republic to take the measures needed to comply with it within a period of one month. The italian government failed to comply and the commission brought this action on 23 april 1981. By an order of 16 september 1981 the french government was allowed to intervene in partial support of the italian government.

10 The commission takes the view that the italian rules constitute a measure having an effect equivalent to a quantitative restriction, which is prohibited by article 30 of the treaty. According to it having regard to the fact that advance payments are the rule in international trade the requirement of lodging a security in an account which does not bear interest or of furnishing a bank guarantee where the price of the goods imported into Italy is paid before their release for consumption, in conjunction with the requirement that the goods be imported within a period fixed by ministerial order and the forfeiture of that security if the period is exceeded impose upon the importer special burdens which do not affect domestic transactions and which thus constitute a disincentive and encourage traders to engage in domestic trade.

11 The commission furthermore recalls that its directive 70-50-eec of 22 december 1969 based on the provisions of article 33 (7) on the abolition of measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions adopted in pursuance of the eec treaty (english special edition 1970 (i), p. 17) classifies as measures having an effect equivalent to quantitative restrictions those which make importation more difficult or costly than the disposal of domestic production and in particular those which ' ' require, for imports only, the giving of guarantees or making of payments on account ' ' (article 2 (3) (i)).

12 With regard to the complaint of infringement of the directives on the free movement of capital the commission claims that article 1 of the first directive has liberalized the movements referred to in list a of annex i. In that list, as amended by the second directive, appears:

' ' The granting and repayment of short-term and medium-term credits in respect of commercial transactions or provision of services in which a resident is participating. ' '

13 Payments effected before delivery of the goods are included in such transactions and are unconditionally liberalized; the italian rules which make them more difficult are thus incompatible with the requirement of liberalization.

14 The italian government puts forward a number of arguments against these complaints. It contends first of all that the rules in question do not come under article 30 but under the provisions of article 104 and article 106 (2). It then claims that, even if it were necessary to consider that these rules came under article 30, they would nevertheless be justified on the basis of article 36.

15 First, according to the italian government, the rules in question come exclusively within the monetary field. The period laid down and the security or bank guarantee prescribed by these rules have no aim other than that of avoiding speculative transactions against the national currency and the disequilibrium of the balance of payments. These measures thus do not come within the prohibition of article 30 and are covered by article 104 of the treaty in accordance with which ' ' each member state shall pursue the economic policy needed to ensure the equilibrium of its overall balance of payments and to maintain confidence in its currency... ' '.

16 The scope of the provision relied upon by the italian government must be appraised in the light of the system as a whole of the chapter on the balance of payments. Within the framework of that chapter article 104 merely sets out the general objectives of the economic policy which the member states must pursue, regard being had to their membership of the community. It accordingly may not be invoked in order to derogate from the other provisions of the treaty.

17 It should be remarked in addition that articles 108 and 109 of the treaty provide specific procedures for cooperation, mutual assistance, and if necessary, protective measures to counter difficulties in the balance of payments. In that case however they constitute community procedures which rule out unilateral measures by the member states otherwise than as precautionary measures and on conditions which are not alleged to have been fulfilled in this case. Nevertheless the member states remain free to employ all means of ensuring that payments made abroad relate exclusively to genuine transactions, subject always to the condition that such means do not hinder the freedom of intra-community trade as defined in the treaty.

18 It is clear from the foregoing that the italian government ' s argument to the effect that article 104 of itself permits derogations from the provisions of article 30 of the treaty must be rejected.

19 During the oral procedure the italian government put forward a second argument, contending that the italian measures in question could only come under articles 30 and 36 ' ' by analogy ' ' on the ground that, according to it, the measures constitute detailed rules for the implementation of an economic transaction related to imports and do not constitute quantitative restrictions but restrictions on payments coming under article 106 (2) which provides:

' ' In so far as movements of goods, services, and capital are limited only by restrictions on payments connected therewith, these restrictions shall be progressively abolished by applying, mutatis mutandis, the provisions of the chapters relating to the abolition of quantitative restrictions, to the liberalization of services and to the free movement of capital. ' '

20 The italian government deduces from the wording of that article and in particular from the words ' ' applying mutatis mutandis ' ' that the interpretation of article 36 must not be restrictive, in accordance with the normal case-law of the court in this field, but should be taken beyond the wording, regard being had to the specific interest of the state in the protection of its currency and the equilibrium of its balance of payments - objectives which remain within the powers of the member states pursuant to article 104 of the treaty.

21 The arguments of the italian government do not correspond to the purpose of article 106 within the system of the treaty. According to the first two paragraphs of that article the member states undertake to authorize, at the latest by the expiry of the transitional period, any payments connected with the movement of goods; the provisions are thus intended to ensure that all necessary transfers of money are authorized so that goods may in fact move freely. The second paragraph, which is chiefly concerned with the transitional period, provides that the liberalization of payments must proceed in the same stages as the liberalization of movements of goods and subject to parallel conditions. Since that provision has no objective other than to transpose into the field of payments, inter alia, the principles concerning the elimination of quantitative restrictions in so far as movements of goods are limited only by restrictions on payments connected therewith it does not permit the imposition of restrictive conditions on payments liberalized on the basis of the first paragraph.

22 It is clear from the foregoing that the italian rules at issue in this case do not come under the provisions of article 106 (2).

23 In those circumstances it is necessary to consider whether the measures brought into force by the rules in dispute are contrary to article 30.

24 As the court has held on many occasions, it is sufficient for the purposes of the prohibition of all measures having an effect equivalent to quantitative restrictions on imports laid down by article 30 that the measures in question should be likely to hinder, directly or indirectly, actually or potentially, imports between member states.

25 It must be stated that, although the measures in question were enacted for the purpose of preventing currency speculation, they do not constitute specific rules for the attainment of that objective but general rules dealing with intra-community transactions as a whole where payment is made in advance. In fact, in so far as the italian government extends its rules to cover payments made by letters of credit and similar documents, the financial method usually employed for imports of goods in certain commercial sectors, it is dealing with a means of payment normally employed in international trade. The measures in question thus affect not only speculative operations but normal commercial transactions and, since their effect is to render imports more difficult or burdensome than internal transactions, they produce restrictive effects on the free movement of goods. For these reasons, and in so far as they produce these effects, the measures at issue are contrary to article 30.

26 The italian government further contends that, even if the rules in question were contrary to article 30, they would nevertheless be justified under article 36 on grounds of public policy. In fact, they claim, the measures adopted have as their objective the safeguarding of a fundamental interest of the state, the defence of its currency, which would be jeopardized but for the rules at issue.

27 It must be recalled that in accordance with the settled case-law of the court, article 36 must be strictly interpreted and the exceptions which it lists may not be extended to cases other than those which have been exhaustively laid down and, furthermore, that article 36 refers to matters of a non-economic nature.

28 The italian rules in question thus constitute a measure having equivalent effect within the meaning of article 30 of the treaty inasmuch as they require all importers of goods coming from other member states to provide a security or a bank guarantee amounting to 5% of the value of the goods when payment is in advance, the expression ' ' payment in advance ' ', referring not only to payments for speculative purposes but also to normal and current payments in intra-community transactions.

29 The Italian Republic has consequently failed to fulfil its obligations under the said article.

30 Since the italian rules at issue are contrary to article 30 of the treaty it does not appear necessary to consider whether they may be in accordance with the two directives adopted by the council for the implementation of article 67 of the treaty on the free movement of capital.

Costs

31 Under the terms of article 69 (2) of the rules of procedure the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party ' s pleading.

32 In this case since the italian government has failed in its principal submissions it must be ordered to pay the costs with the exception of those arising from the intervention, which must be borne by the french government.

On those grounds,

The court

Hereby:

1. Declares that, by requiring all importers of goods coming from other member states to provide a security or a bank guarantee amounting to 5% of the value of the goods when payment is in advance, the words ' ' payment in advance ' ' referring not only to payments for speculative purposes but also to normal and current payments in intra-community transactions, the Italian Republic has failed to fulfil its obligations under articles 30 and 36 of the treaty;

2. Orders the italian government to pay the costs with the exception of those arising from the intervention;

3. Orders the french government to pay its own costs.