Otto Scheer v Einfuhr- und Vorratsstelle für Getreide und Futtermittel (30/70)

I —Facts and procedure

On 13 March 1963 the Otto Scheer undertaking obtained from the Einfuhr- und Vorratsstelle für Getreide und Futtermittel an import licence in respect of 150 metric tons of oats.In accordance with Paragraph 7 (1) of the German Law of 26 July 1962 implementing Regulation No 19 (Bundesgesetzblatt 1962, I. p. 455) the issue of the licence was conditional on the lodging of a deposit, amounting to 10 % of the free-at-frontier price, the cif price or the offer price of the products, guaranteeing that the obligation to import during the period of validity of the licence would be fulfilled.As no import transaction was effected during the period of validity of the licence, the Einfuhr- und Vorratsstelle für Getreide und Futtermittel by decision of 24 July 1963 declared DM 3682.20 of the deposit forfeited.When on 9 September 1963 the Einfuhr- und Vorratsstelle rejected Otto Scheer's objection, that undertaking brought an action on 19 September 1963 before the Verwaltungsgericht (Administrative Court) Frankfurt-am-Main.It maintained that the second paragraph of Article 7 of Regulation No 87 of the Commission of 25 July 1962, on the establishment of detailed rules of application in respect of import and export licences for cereals and cereal products (OJ 1962, p. 1895), on which paragraph 7 of the German Law implementing Regulation No 19 is based, is illegal, in particular because it involves a sub-delegation to the Member States of the power to lay down the detailed rules for the lodging, amount and forfeiture of the deposit.By judgment of 15 June 1966 the Verwaltungsgericht Frankfurt-am-Main dismissed the action. It held in particular that the German Law implementing Regulation No 19 was not based on a sub-delegation of powers, as on the contrary Member States have an original power to legislate on a matter relating to the powers of the Community so long as it has not itself made use of its legislative power and that the Commission was not obliged itself to lay down immediately the detailed rules on the lodging, amount and forfeiture of the deposit.On Otto Scheer's appeal against that judgment to the Hessischer Verwaltungsgerichtshof, that court, by order of 15 May 1970 received at the Court Registry on 17 June 1970, requested the Court of Justice under Article 177 of the EEC Treaty for a preliminary ruling on the interpretation of Article 16 (2) and (3) of Regulation No 19 of the Council of 4 April 1962 on the progressive establishment of a common organization of the market in cereals (OJ 1962, p. 933) and, more particularly, to rule whether the second paragraph of Article 7 of Regulation No 87 of the Commission of 25 July 1962, on the establishment of detailed rules of application in respect of import and export licences for cereals and cereal products, and Paragraph 7 of the German Law of 26 July 1962 implementing Regulation No 19 are compatible with Article 16 (3) of Regulation No 19.In its order the Hessischer Verwaltungsgerichtshof puts the following questions, the scope of which may be decisive in settling the main action:1(a) Must the combined provisions of Article 16 (2) and (3) of Regulation No 19 be understood to mean that from the entry into force of that regulation the grant of an import licence could be conditional on the lodging of a deposit and that a deposit could be forfeited if importation was not effected during the period of validity of the licence?(b) Or could such provisions concerning the lodging and forfeiture of a deposit in respect of an import licence only be adopted after the entry into force of the detailed rules of application referred to in Article 16 (3) of Regulation No 19?2(a) Must Article 16 (3) of Regulation No 19 be understood to mean that from the date of the entry into force of that regulation only the Commission had the power to lay down rules as to the lodging, forfeiture and amount of deposits in respect of import licences?(b) Or were the Member States authorized, until the entry into force of the detailed rules of application to be adopted under Article 16 (3) of Regulation No 19, to lay down rules as to the lodging, forfeiture and amount of the deposits in respect of import licences, with the result that the Federal Republic of Germany was entitled to adopt in Paragraph 7 of the Law implementing Regulation No 19 rules relating to deposits in respect of import licences?3(a) In adopting the detailed rules of application referred to in Article 16 (3) of Regulation No 19, should the Commission have itself laid down all the requirements relating to the lodging, forfeiture and amount of the deposits in respect of import licences?(b) Or was the Commission entitled, as it did by the second paragraph of Article 7 of Regulation No 87, to leave to the Member States the task of laying down those requirements relating to the lodging, forfeiture and amount of the deposits in respect of import licences until their harmonization in accordance with Article 26 of Regulation No 19 and merely to require the Member States to notify it of the measures taken?4 Is the procedure of Article 26 of Regulation No 19, in accordance with which the Commission adopted Regulation No 87, compatible with Community law of a higher rank?In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC written observations were submitted on 5 August 1970 by the plaintiff in the main action and on 21 August by the Commission of the European Communities.After hearing the report of the Judge-Rapporteur and the views of the Advocate-General, the Court decided to open the oral procedure without any preparatory inquiry.The plaintiff in the main action and the Commission presented their oral observations at the hearing on 11 November 1970.The Advocate-General delivered his opinion at the hearing on 2 December 1970.For the procedure before the Court Fritz Modest, Advocate, of Hamburg, appeared for the plaintiff in the main action, and Claus-Dieter Ehlermann, the Commission's Legal Adviser, for the Commission of the European Communities.

II —Observations submitted to the Court

Otto Scheer, the plaintiff in the main action, advances the following arguments in particular against the validity of the system of deposits:(a) On the formal level— Forfeiture of the deposit constitutes a quasi-penal sanction or a fine imposed on the importer or exporter on failure to carry out the obligation of public law imposed upon him. The institutions of the Community do not have the power to impose fines or sanctions of a penal nature except in cases where they are expressly authorized by the Treaty to do so. However, Article 39 et seq. relating to the organization of the agricultural markets contain no enabling provision of this nature.— The system of deposits is based on the socalled Management Committee voting procedure. That procedure is contrary to the Treaty: it enables the Management Committee to participate in the legislative work of the Commission, makes the obligation to consult the Assembly illusory and gives the Member States the opportunity of obtaining from the Council an ‘annulment’ of the regulations of the Commission. The regulations of the Commission adopted in implementation of this illegal procedure are therefore invalid.(b) The substance of the system in disputeThe plaintiff in the main action maintains that the system of deposits must respect the principle of proportionality, enshrined both in the German Basic Law and in Community law. In this respect the followingobservations in particular should be made:— The regulations establishing the common organization of the agricultural markets are limited in principle to the formation of market policy by means of prices. The regulation of prices has an automatic sluice-gate effect on quantitative movements in the Community market and avoids any disturbance to it. Consequently, the point of prime importance in the assessment of the market and market trends is the observance and checking, first, of the prices on the internal market and, secondly, of the situation on the world market. On the other hand, a quantitative check, such as arises from the system of import and export licences, the utilization of which must be guaranteed by means of a deposit, is only of secondary importance.It appears therefore that the system of deposits is ineffectual in attaining the objective sought by the agricultural regulations and is even contrary to the scheme of those regulations. Moreover, it is also ineffectual in view of the fact that it can neither guarantee that the obligation to import or export is actually carried out, nor enable the competent authorities in good time to have a sure view of the state of the market, much less future market trends.— Moreover, the intervention agencies and the Commission are not technically in a position to exploit the formation provided by the system criticized.— Finally, the obligation to lodge a deposit places a heavy burden on the liquidity of undertakings, in particular small and medium-sized undertakings and the amount of the deposit, especially in the case of advance fixing of the levy or refund, is excessive in relation to normal trade profit margins.— It follows from the foregoing that a substantial charge is imposed without any necessity on importers and exporters. However, any measure constituting a charge, whether or not it is in itself tolerable, violates the principle of proportionality when it is superfluous, when there is disproportion between the charge and the result which it may or must endeavour to achieve, when that objective cannot be attained by the method employed or when, in order to attain it, there are other methods which may be more conveniently applied.— The system of deposits also violates the principle of proportionality in that in respect of exemption from forfeiture of the deposit it refuses, otherwise than in cases of force majeure, to take into consideration situations in which the licence to import or export has not been utilized for wholly justifiable commercial reasons, in particular when utilization would have been contrary to the objectives of the common organization of the markets or to commercial logic (for example, in the event of amendment of the applicable legislation between the date of the application for the licence and that of its issue).(c) With regard to the specific questions put by the Hessischer Verwaltungsgerihtshof, the plaintiff in the main action submits the following observations in particular :— The German Law implementing the system of deposits, and in particular Paragraph 7 thereof, was adopted and published at a time (26 and 28 July 1962 respectively) when the second paragraph of Article 7 of Regulation No 87, which authorizes the Member States to decide on the detailed rules for the lodging, forfeiture and amount of the deposit, was not yet in force (Regulation No 87, which was dated 25 July 1962 and published in the Official Journal of the Communities on 28 July 1962, did not, under the terms of Article 10 thereof, enter into force until 30 July). Article 16 (2) and (3) of Regulation No 19 did not, however, by itself constitute an authorization directly enabling the German legislature to adopt Paragraph 7 of, the implementing German Law.— Only the Commission may be authorized by the Council to adopt legal rules for the implementation of the common organization of the agricultural markets and it can only do so within the framework of the authorization conferred on it by the Council. Article 16 of Regulation No 19, however, contains no authorization for the Commission to delegate to the Member States the power to adopt the detailed rules of application with regard to the lodging, forfeiture and amount of the deposit and the second paragraph of Article 7 of Regulation No 87 is consequently null and void. Moreover, by omitting to lay down the maximum amount capable of being forfeited, the Commission introduced into the system of deposits disparities causing distortion of competition.— The Management Committee procedure infringes the Treaty in that it confers on that Committee a right of collaboration wider than a mere right of consultation and thus adversely affects both the legislative powers of the Council and the jurisdiction of the Court of Justice.The Commission of the European Commun ities submits substantially the following observations :(a) Article 16 (3) of Regulation No 19 in no way obliged the Commission itself to lay down immediately all the requirements for the lodging, forfeiture and amount of the deposits in respect of import licences. On the contrary, it permitted it to leave provisionally to the Member States — as has been done by the second paragraph of Article 7 of Regulation No 87 — the task of doing this.It follows from Regulation No 19 that the Commission was only obliged to adopt before 30 July 1962 such detailed rules for the application of the system of import licences as, in view of all the circumstances, it deemed necessary in each case. The obligation for it to adopt all those edtailed rules of application constituted a well-nigh impossible task, overlooked the experimental and evolving nature of Regulation No 19 and was contrary to the wording and structure of the EEC Treaty, which is governed by the principle of the gradual and progressive establishment of the common agricultural policy.To the extent to which the Community did not make use of the legislative power which by Article 43 of the EEC Treaty the Member States conferred on it in the sphere of the common agricultural policy, the Member States remained competent, subject to the limits imposed by the Treaty itself, to adopt sets of rules. The Community did not establish a complete and definitive set of rules for products covered by Regulation No 19 and the matters not governed by the Community implementing provisions remain within the sphere of competence of the Member States.The second paragraph of Article 7 of Regulation No 87 does not therefore involve a delegation of powers; it obliges the Member States to lay down provisionally detailed rales for the lodging, amount and forfeiture of the deposit and thus to continue to exercise their legislative powers so long as the Community does not take it upon itself to do so.Even if Article 16 of Regulation No 19 is interpreted as meaning that the Community made complete use of its powers in the sphere of licences when adopting that regulation, it should be noted that the second paragraph of Article 7 of Regulation No 87 reconveys powers to the Member States in a perfectly legal manner.(b) The so-called Management Committee procedure is in conformity with the Treaty.The power to make laws for the Community obviously cannot be conferred on bodies other than the Council and the Commission; the collaboration of a committee in the legislative work of the Commission is, however, perfectly legal.The fourth indent of Article 155 of the EEC Treaty enables the Council to entrust the Commission with the implementation of the rules laid down by it and to evaluate to what extent and under what conditions it intends to confer powers of implementation on the Commission. The Council does not exceed the limits of that power of evaluation by subjecting the attribution of powers to the Commission to the obligation to obtain the opinion of a committee composed of representatives of the Member States before adopting measures of implementation.The negative opinion of the Management •Committee does not deprive the Commission of its powers; it merely obliges it to communicate the measure adopted to the Council and enables the Council to take a different decision. There is nothing against the Council's reserving such a right and, when it does so, this in no way has an adverse effect on review by the Court of Justice.The powers conferred on the Commission within the framework of the Management Committee procedure are powers of implementation; they may thus be exercised according to rules other than those ladi down by the third subparagraph of Article 43 (2) of the Treaty solely for measures intended to lay down the principles of the common organization of the market. The principles governing the institutional balance between Council and Commission are respected in this case.As to the Council's option, on a qualified majoritiy, to take a decision different from that of the Commission, it must be remarked that the Council's powers of amendment in the framework of the Management Committee procedure and those provided for by the first paragraph of Article 149 of the EEC Treaty are not comparable.

The questions relating to the system of the first period of application of Regulation No 19

The question relating to the compatibility of the Management Committee procedure with Community law of a higher rank