CJEC, March 20, 1990, No C-21/88

THE COURT

1 By order of 1 April 1987, which was received at the Court on 20 January 1988, the tribunale amministrativo regionale della Toscana (Regional Administrative Tribunal for Tuscany) referred three questions to the Court pursuant to Article 177 of the EEC Treaty for a preliminary ruling on the interpretation of Articles 30, 92 and 93 of the EEC Treaty in order to determine the compatibility with those provisions of Italian rules reserving to undertakings established in the Mezzogiorno (Southern Italy) a proportion of public supply contracts.

2 Those questions were raised in a dispute between Du Pont de Nemours Italiana SpA, supported by Du Pont de Nemours Deutschland GmbH, and Unità sanitaria locale No 2 di Carrara (Local Health Authority No 2, Carrara, hereinafter referred to as "the local health authority "), supported by 3M Italia SpA, concerning the conditions governing the award of contracts for the supply of radiological films and liquids.

3 Under Article 17(16) and (17) of Law No 64 of 1 March 1986 (Disciplina organica dell' intervento straordinario nel Mezzogiorno - system of rules governing special aid for Southern Italy), the Italian State extended to all public bodies and authorities, as well as to bodies and companies in which the State has a shareholding, and including local health authorities situated throughout Italy, the obligation to obtain at least 30% of their supplies from industrial and agricultural undertakings and small businesses established in Southern Italy in which the products concerned undergo processing.

4 In accordance with the provisions of that national legislation, the local health authority laid down by decision of 3 June 1986 the conditions governing a restricted tendering procedure for the supply of radiological films and liquids. According to the special terms and conditions set out in the annex, it divided the contract into two lots, one, equal to 30% of the total amount, being reserved to undertakings established in Southern Italy. Du Pont de Nemours Italiana challenged that decision before the tribunale amministrativo regionale della Toscana, on the ground that it had been excluded from the tendering procedure for that lot because it did not have an establishment in Southern Italy. By decision of 15 July 1986, the local health authority proceeded to award the contract for the lot corresponding to 70% of the total amount in question. Du Pont de Nemours Italiana also challenged that decision before the same court.

5 In the course of its consideration of the two actions the national court decided to request the Court to give a preliminary ruling on the following questions:

(1) Must Article 30 of the EEC Treaty, in so far as it imposes a prohibition on quantitative restrictions on imports and all measures having equivalent effect, be interpreted as precluding the national legislation in question?

(2) Is the reserved quota which is provided for by Article 17 of Law No 64 of 1 March 1986 in the nature of "aid" within the meaning of Article 92 inasmuch as it is intended "to promote the economic development" of a region "where the standard of living is abnormally low" by leading to the establishment of undertakings so as to contribute to the socio-economic development of such areas?

(3) Does Article 93 of the EEC Treaty confer exclusively on the Commission the power to determine whether aid within the meaning of Article 92 of the EEC Treaty is permissible, or is that power also vested in the national court to be exercised in connection with the examination of any conflicts arising between national law and Community law?

6 Reference is made to the Report for the Hearing for a fuller account of the facts, the applicable legislation 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.

A - First question

7 In its first question, the national court seeks to ascertain whether national rules reserving to undertakings established in certain regions of the national territory a proportion of public supply contracts are contrary to Article 30, which prohibits quantitative restrictions on imports and all measures having equivalent effect.

8 It must be stated in limine that, as the Court has consistently held since the judgment in Dassonville (judgment of 11 July 1974 in Case 8-74 Procureur du Roi v Dassonville ((1974)) ECR 837, paragraph 5), Article 30, by prohibiting as between Member States measures having an effect equivalent to quantitative restrictions on imports, applies to all trading rules which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade.

9 It must be pointed out, moreover, that according to the first recital in the preamble to Council Directive 77-62-EEC of 21 December 1976 coordinating procedures for the award of public supply contracts (Official Journal 1977, L 13, p. 1), which was in force at the material time, "restrictions on the free movement of goods in respect of public supplies are prohibited by the terms of Articles 30 et seq. of the Treaty ".

10 Accordingly, it is necessary to determine the effect which a preferential system of the kind at issue in this case is likely to have on the free movement of goods.

11 It must be pointed out in that regard that such a system, which favours goods processed in a particular region of a Member State, prevents the authorities and public bodies concerned from procuring some of the supplies they need from undertakings situated in other Member States. Accordingly, it must be held that products originating in other Member States suffer discrimination in comparison with products manufactured in the Member State in question, with the result that the normal course of intra-Community trade is hindered.

12 That conclusion is not affected by the fact that the restrictive effects of a preferential system of the kind at issue are borne in the same measure both by products manufactured by undertakings from the Member State in question which are not situated in the region covered by the preferential system and by products manufactured by undertakings established in other Member States.

13 It must be emphasized in the first place that, although not all the products of the Member State in question benefit by comparison with products from abroad, the fact remains that all the products benefiting by the preferential system are domestic products; secondly, the fact that the restrictive effect exercised by a State measure on imports does not benefit all domestic products but only some cannot exempt the measure in question from the prohibition set out in Article 30.

14 Furthermore, it must be observed that, on account of its discriminatory character, a system such as the one at issue cannot be justified in the light of the imperative requirements recognized by the Court in its case-law; such requirements may be taken into consideration only in relation to measures which are applicable to domestic products and to imported products without distinction (judgment of 17 June 1981 in Case 113-80 Commission v Ireland ((1981)) ECR 1625).

15 It must be added that neither does such a system fall within the scope of the exceptions exhaustively listed in Article 36 of the Treaty.

16 However, the Italian Government has invoked Article 26 of Directive 77-62 (cited above), which provides that "this directive shall not prevent the implementation of provisions contained in Italian Law No 835 of 6 October 1950 (Official Gazette No 245, of 24.10.1950, of the Italian Republic) and in modifications thereto in force on the date on which this directive is adopted; this is without prejudice to the compatibility of these provisions with the Treaty ".

17 It should be pointed out in that regard, first, that the content of the national legislation to which the national court refers (Law No 64-86) is in some respects different and more extensive than it was at the time of the adoption of the directive (Law No 835-50) and, secondly, that Article 26 specifies that the directive is to apply "without prejudice to the compatibility of these provisions with the Treaty ". In any event, the directive cannot be interpreted as authorizing the application of national legislation whose provisions are contrary to those of the Treaty and, consequently, as impeding the application of Article 30 in a case such as this.

18 It must therefore be stated in answer to the national court' s first question that Article 30 must be interpreted as precluding national rules which reserve to undertakings established in particular regions of the national territory a proportion of public supply contracts.

B - Second question

19 In its second question, the national court seeks to establish whether in the event that the rules in question might be regarded as aid within the meaning of Article 92 that might exempt them from the prohibition set out in Article 30.

20 In that regard, it is sufficient to recall that, as the Court has consistently held (see, in particular, the judgment of 5 June 1986 in Case 103-84 Commission v Italy ((1986)) ECR 1759), Article 92 may in no case be used to frustrate the rules of the Treaty on the free movement of goods. It is clear from the relevant case-law that those rules and the Treaty provisions relating to State aid have a common purpose, namely to ensure the free movement of goods between Member States under normal conditions of competition. As the Court made clear in the judgment cited above, the fact that a national measure might be regarded as aid within the meaning of Article 92 is therefore not a sufficient reason to exempt it from the prohibition contained in Article 30.

21 In the light of that case-law - there being no need to consider whether the rules in question are in the nature of aid - it must be stated in answer to the national court' s second question that the fact that national rules might be regarded as aid within the meaning of Article 92 cannot exempt them from the prohibition set out in Article 30.

C - Third question

22 It follows from the answers given to the preceding questions that, in a case such as this, the national court must ensure the full application of Article 30. Accordingly, the third question, which is concerned with the role of the national court in assessing the compatibility of aid with Article 92, has become otiose.

Costs

23 The costs incurred by the Italian Government, the French Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions submitted to it by the tribunale amministrativo regionale della Toscana, by order of 1 April 1987, hereby rules:

(1) Article 30 of the EEC Treaty must be interpreted as precluding national rules which reserve to undertakings established in particular regions of the national territory a proportion of public supply contracts.

(2) The fact that national rules might be regarded as aid within the meaning of Article 92 of the Treaty cannot exempt them from the prohibition set out in Article 30 of the Treaty.