C-4/79

OPINION OF MR ADVOCATE GENERAL MAYRAS (after the re-opening of the oral procedure) DELIVERED ON 17 JUME 1980 ( ) Mr President, Members of the Court, This Court has taken a most unusual step and re-opened the oral procedure in these cases, on which I gave my opinion on 11 March of this year, requesting the plaintiffs in the main actions, the French and Italian Governments, the Council and the Commission to submit written observations on the questions set out as an annex to the Order of this Court of 26 March 1980. The plaintiffs in the main action, the French Government and the Commission have availed themselves of this opportunity to give their views in writing. The Council also participated in the oral procedure. During the hearing the Court was told that certain competitors of the plaintiffs in the main actions have instituted proceedings before the Finanzgericht [Finance Court] Hamburg against the reductions in the compensatory amounts subsequently made by the Commission. I can do no more than take note of the fact that this action has not yet been referred to the Court for a preliminary ruling and state that the German Government, which could have represented the interest shown by the German producers in the solution to the questions submitted, has not considered it appropriate to intervene at this stage of the procedure, although it was notified of the Order of this Court. Since this Court has also given me the opportunity to state my views I shall reply to certain criticisms and make the following additional remarks. I — The Commission wishes to correct a misunderstanding which, it states, appears to have misled me in my opinion. It had stated in its written observations that “the definition of secondary products with a view to their classification in the Common Customs Tariff and their yields are a matter of dispute between the German and French industries” and that “France has always argued that flour for fodder is to be classified exclusively under tariff subheading 23.02 A 1(b)”. Further on, it stated that “the examples given at (a), (b) and (c) show that there are no uniform views as to the definition of the products with a view to their classification in the Common Customs Tariff and their yields (the situation in the other Member States produces still different results)”. The Commission added that “in view of that contradictory situation, the departments of the Commission consider that flour for fodder comes half under tariff subheading 23.02 AI (a) and half under tariff subheading 23.02 A 1(b)”. The plaintiffs in the main actions for their part confirm that flour for fodder is classified under heading 23.02 AI (b) by the French administrative and customs authorities. I thought that it was possible to infer from this that there were “differences of opinion as to the classification” (“divergences dans le classement”) of the secondary products in the Common Customs Tariff and in the introduction to the questions asked by this Court it was stated that “the Commission replies ... that there are, moreover, differences of opinion as to the classification” (“la Commission répond ... qu'en outre il y a des divergences dans le classement”). Unless I have failed to understand the French language I hold to my view that the observations of the Commission were quite unambiguous. The Common Customs Tariff lays down a criterion: if the starch content of a product does not exceed 35% by weight it must be classified under subheading 23.02. AI (a); if it exceeds that percentage it must be classified under subheading 23.02. A 1(b). II — The Commission notes that after a reduction of 6.2% in the compensatory amount applicable to maize starch and of 10% in the compensatory amount applicable to secondary products obtained from starch the ceiling for compensatory amounts on processed products in relation to the compensatory amount on the basic product is “in practice” reached. The following points should be noted: — These reductions were only made on 28 May 1979, even though the regulations whose validity the Court is required to appraise were adopted before that date; — The Commission justifies the exclusion of germ from the “calculation of the incidence” — even though, rightly or wrongly, compensatory amounts are still applicable to these products — by the consideration that “such secondary products are practically not marketed”. Nevertheless it declares itself ready, “if the Court declares the application of processing coefficients to be excessive, to contemplate their abolition in the case of germ”; — Unlike the milling industry, even after such reductions, the “ceiling”, or if preferred, the “principle of neutrality” is only achieved approximately in the meal and starch industries. That finding is based on an appraisal made not in respect of a single Member State but of all Member States with depreciated currencies, in particular the United Kingdom. If, as the Commission states, it is necessary in appraising the incidence of the ceiling to do so in respect of all Member States it is likewise appropriate to bear in mind the fact that (see p. 2861) in that respect or in trade with non-member countries the actual compensation is the result of the sum of the positive and negative amounts; — It is doubtful whether, in calculating the compensatory amounts applicable to products processed from maize, failure to take into account the monthly increases in the intervention price of maize benefits the plaintiffs in the main actions which are established in a country with a depreciated currency. Nor indeed is that factor taken into account in calculating the compensatory amount on the basic product and the dependent relationship between the amount applicable to that product and the amounts applicable to the derived product is such that where that advantage disappears in relation to the derived products producers are at the same time able to obtain supplies of the basic product, even home-produced, at a better price. III — The Court further requested the Commission to give it fuller details of its argument that “the logic of the agri-monetary system implies that the basis for calculating the compensatory amounts applicable to maize starch can never exceed the intervention price of the maize constituting the raw materials”. 1) The Commission confirms first af all that it simply took over the coefficients adopted in the contested regulations from the system of levies laid down in Regulation No 2744/75 of the Council. It also confirms that it had regard, in fixing the coefficients applicable to derived products, to the “economic protection necessary to stabilize the prices of such products”. Thus, although the Council states once more that there is no “necessary” connexion between its regulation and the provisions laid down by the Commission, the latter maintains that there is an “unavoidable” link between the compensatory amounts and the levy. Finally it states that it “refined” the system of conversion coefficients used in calculating the compensatory amounts “on the basis of extremely complex economic and technical factors”. 2) In calculating the compensatory amounts on maize groats and meal the Commission adopted as its basis the intervention price of maize. It explains that it could not take into account the production refund — although that subsidy is “as regards traders in that sector the measure which has the greatest influence on the supply price they must pay for maize” — since that refund was abolished by Regulation No 665/75 of the Council of 4 March 1975. It was only “legally and economically” possible to take that production refund into account after Council Regulations Nos 1125/78 and 1127/78 of 22 May 1978 had re-introduced, from 19 October 1977, production refunds on meal and groats used in the brewing industry (and for the manufacture of pre-gelatinized starch intended for baking): in the judgments of the Court of 19 October 1977 in the Ruckdeschel and Others cases, and in the Moulins et Huileries de Pont-à-Mousson and Others cases ([1977] ECR 1753 and 1795) this Court in fact considered that it was incompatible with the principle of equality to grant a production refund on certain products and not on others with the same marketing outlets. It must nevertheless be added that this Court, in its judgment of 4 October 1979, Dumortier and Others, virtually re-introduced production refunds for the period from 1 August 1975 to 1 October 1975 by ordering the Community to pay to a certain number of maize processors amounts equivalent to production refunds on gritz. At all events, when the Commission deducted the production refund it did not have regard to the fact that refund is paid in green currency (see pp. 2869 and 2870) and it thus failed to apply to it the “monetary coefficient” with which this Court is well acquainted. 3) The Commission recalls that in addition to technical factors there are factors concerning agricultural policy in the system of levies and it produces in support of its explanations a statement of the reasons on which a proposal for a Council regulation dating from 1964 was based. It is stated there that “where several processed products are obtained from the same cereal the variable component of the product considered as the principal product has hitherto been calculated on the basis of the quantity of raw material presumed actually to have been used, whilst the variable component of other products (for example germ and bran) was calculated in terms of the protection considered necessary to stabilize the prices of that product. These arrangements are economically justified since the relationship between the prices of the products obtained from the same cereal depends on commercial policy or the market situation rather than on the incidence of the cost of the raw material of each of the products”. Accordingly, this proposal considered “that it was appropriate to provide for a reduced levy in the case of imported maize and rice bran with a starch content in excess of 35% whose use as animal fodder is ensured by denaturing it”. Although that document certainly shows the function of protecting and stabilizing the Community market performed by the processing coefficients in the levy arrangements, it by no means establishes that the coefficients adopted within the agri-monetary system in order to calculate the compensatory amounts may legitimately constitute an additional measure of protection and stabilization. Above all it is the Council which has power to make the processing coefficients perform that function. 4) The Commission then states that “according to the precepts of the agrimonetary arrangements defended by it and upheld by the Court, the monetary compensatory amounts to be introduced must be limited to the amounts ‘strictly necessary’ to compensate for the incidence of monetary events on the prices of agricultural products covered by intervention arrangements and only where such incidence would cause disturbance in trade in such products within the Community and with non-member countries”. Although in principle the use of the intervention price as the basis for calculating compensatory amounts enables such amounts to be fixed at a minimum level, the Commission recalls that within the organization of the market in cereals the existence of the production refund may, in some cases, cause the market price of starch to be lower than the level resulting from the intervention price of maize. For this reason, for the purpose of calculating the compensatory amounts on the products of the starch industry it took into account not the intervention price “which no longer performs its normal function in determining the market price” but the threshold price which constitutes the most significant price exerting an influence on the market in maize, a product which is in short supply in the Communty. Nevertheless, the case-law quoted by the Commission does not appear to me to support the propositions which it advances. In the Becher case on which this Court delivered judgment on 15 January 1974 ([1974] ECR 19) the Commission argued that it was impossible to transpose automatically the methods applied in calculating the levy to the calculation of the monetary compensatory amount. The seventh paragraph of the decision in the judgment of this Court must be viewed in the light of that argument ([1974] ECR 26). It states as follows: “In fact, by using the concept of ‘prices’ as its starting-point in calculating the compensatory amounts, Article 2 of Regulation No 974/71 does not necessarily oblige the Commission to choose the cif price as a reference price, but leaves it a certain discretion to adopt another price even if the latter differs from the contract prices actually fixed for commercial transactions”. This Court accordingly considered that the Commission was within its powers for the purpose of implementing the first paragraph of Article 2 of Regulation No 974/71, to refer to an average cif price calculated “during a period to be determined” and to refrain from altering that average price unless an appreciable change (generally 10% higher or lower) occurred in relation to the price previously fixed, although the plaintiff in the main action claimed that it was necessary to refer not only to the cif price but also to take account of short-term variations in price. This does not imply, however, that for the purposes of the implementation of the second paragraph of Article 2 the Commission was empowered to choose a price other than that which had been adopted for the purposes of the implementation of Article 2 (1). It is that in the beef and veal sector it is the market price and not the intervention price which is adopted for the purpose of calculating the compensatory amounts. Nevertheless that exception follows from Regulation No 471/75 of the Council of 27 February 1975 which amended Regulation No 974/71 on this point. On being questioned by the Judge-Rapporteurs, the Commission recognized that it exercises its powers under Article 2 (2) in order to increase the protection provided by the levy for producers in countries with hard currencies against non-member countries with the result that this increased protection was accompanied by distortion in intra-Community trade at the expense of countries with depreciated currencies. Such an objective is totally at variance with the third paragraph of Article 1 of Regulation No 974/71 which requires that compensatory amounts shall be fixed only where the monetary fluctuations would lead to disturbances in trade in agricultural products: the method of calculation referred to in Article 2 (2) is not intended to assist in reinforcing the protection against non-member countries provided by the levies and refunds; in any case it may not be accompanied by disturbances in trade between Member States. This Court ruled in its judgment in the Balkan-Import-Export case of 22 January 1976 ([1976] ECR 19) that the Commission must have in mind the effect of the depreciation or the increase in value of currency of a Member State on trade between third countries and that State. This Court laid down that principle in relation to the taking into consideration, within the context of the second paragraph of Article 1 (2), of groups of products coming under the same heading of the Common Customs Tariff; the Court did not lay down any such prinicple in relation to Article 2 (2) of Regulation No 974/71. The Court added that the Commission must also have in mind the effect of that depreciation or increase in value on trade between the different Member States. I hold to the belief that the Commission, by means of “uniformity of treatment”, has made the monetary compensatory amounts perform a function which is not theirs under Article 2 (2) of the basic regulation by claiming that “any provision creating a ceiling requires an economic approach and not a purely arithmetic one”. The calculation of monetary compensatory amounts thereby departs from the function strictly assigned to it in the case-law of this Court. Such an economic objective in the wide sense falls within the powers of the Council alone and not of the Commission. The compensatory amounts must not be a substitute either for the levies or the refunds; if, following their re-adjustment, it proved necessary to review the fixing of the levy on the basic product this would have to be done within the proper framework. 5) The Commission, in a working paper issued by its departments which was submitted to the Council on 26 and 27 March 1979 and produced by it as an annex to its observations in the Société Havraise Dervieu Delahais case, admits that “it is clear that in principle the compensatory amounts applicable to derived products must not exceed those applicable to the basic product”. The result of taking into account the intervention price after deduction of the production refund can never be to overcompensate in relation to the actual situation of the market. If in the actual economic situation that intervention price no longer performs its normal function of guiding the market the solution is to alter or abolish the production refund in accordance with the proper procedure and not to provide compensation by means of compensatory amounts; although the latter form part of the common agricultural policy they are not sacrosanct. Whilst the Commission concedes that although it has brought about by degrees a “prudent and gradual reduction” in the compensatory amounts this has given rise to a “certain inconsistency which is in itself open to criticism”, it adds that “it would be very difficult to increase” the difference between the two kinds of coefficients (affecting the basic product and the processed products) “without giving grounds for serious consideration on its part as to a review of the conversion coefficients employed in calculating the levies and refunds.” The latter consideration appears to me irrelevant. At all events the Council had already referred, on 22 May 1978 in Council Regulation No 1125/78 amending Regulation (EEC) No 2727/75 on the common organization of the market in cereals, to a “general examination of the system of production refunds in the starch sector” and that examination was not concluded by the adoption of Commission Regulation No 783/80 of 31 March 1980 fixing the export refunds on products processed from cereals and rice. Whilst the Commission may and should give serious consideration to a review of the conversion coefficients employed in calculating levies and refunds, of manioc flour into the Community and the situation on the world market in that product, it is ultimately for the Council to fix such coefficients; likewise the discretion in economic matters acknowledged by this Court in its judgment of 12 July 1979, Italy v Council (paragraph 20 of the decision, [1979] ECR 2600) in the starch sector is that of the Council and not of the Commission. The Commission ultimately admits that the reason why it adopted the intervention price alone in calculating the compensatory amounts applicable to maize intended for processing into starch was that the supply price “approach” — theoretically possible — would require the introduction of a customs inspection at the frontiers in order to control the use of the basic product, depending on whether it is used for the manufacture of animal fodder or the manufacture of meal or whether it is intended for the brewing industry; it abandoned the idea of such an inspection because it is inordinate. However, such a system is already in existence for the purpose of checking whether the payment of the production refund is justified, and a similar system has been established for butter used in pastry-cooking: I cannot see why it would be impossible in a sector which is relatively as important. IV — I have two remarks to add with regard to the limitation of the consequences of any declaration of invalidity which may be made. First, the Court is not required, within the framework of the questions submitted to it, to rule directly on the application of Community law to these cases or to other similar cases. Secondly, it is necessary to take account of the judgment of this Court of 12 June 1980 in the Express Dairy Foods case. That is a closely-related matter since it relates to compensatory amounts on powdered whey; in that judgment the Court refused to apply by analogy the second paragraph of Article 174 of the Treaty. So far as the remaining matters are concerned, I refer entirely to my opinion of 11 March 1980. ( ) Translated from the French.