SA Roquette Frères v French State - Administration des douanes (29/77)

II —Summary of the written observations submitted to the Court under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC

The plaintiff in the main action first points out that Regulation No 652/76 does not contain any express reference to the existence of disturbances in trade in agricultural products, whereas Article 1 (3) of Regulation No 974/71 provides that the option of charging or granting compensatory amounts shall be exercised only where the application of national monetary measures would lead to such disturbances. Moreover, the Court has re-stated that principle in Cases 43/72 (Merkur v Commission [1973] II ECR 1055) and 74/74 (CNTA v Commission [19751 ECR 533).The intervention system has never been applied in the maize sector: since it is a cereal of which there is a deficit at the European level, the normal market price is markedly higher than the intervention price.The changes in exchange rates for the French franc have not led to any disturbance in trade in the products at issue in the main action. On the contrary, the Commission itself has acknowledged that permanently to maintain compensatory amounts causes disturbing effects (cf. Proposal for a Regulation, OJ C 274, 1976, p. 3).The institution of compensatory amounts by Regulation No 652/76 conflicts with Article 39 (1) (b) of the Treaty in so far as it prevents French farmers, whose production costs increase in inverse proportion to the loss in value of the franc, from passing on that increase by way of the selling price of their product, in this case maize.Finally, it is obvious that fluctuations in exchange rates for the French franc have no effect on transactions with countries in the franc area.The plaintiff in the main action illustrates the ‘aberrant’ consequences of such a system by showing, with the help of a table of figures, that maize, from a third country bought in Germany costs less than the same maize bought in the Netherlands, and much less than in France.The Commission points out first that in fact the concept of ‘disturbance’ underlies the entire philosophy of the scheme of monetary compensatory amounts. The first part of the first question amounts to asking whether the risk of disturbances can be presumed by the Commission, to the extent to which Article 1 of Regulation No 974/71 does not oblige it expressly to refer to a disturbance in trade in agricultural products when it fixes compensatory amounts. In this connexion, the Court has held that the Commission and the Management Committee enjoy a ‘wide measure of discretion’ in assessing a complex economic situation justifying ‘general’ and ‘standard’ evaluations (cf. Cases 43/72 and 74/74, cited above, and Case 55/75, Balkan-Import-Export v Hauptzollamt Berlin Packhof [1976] ECR 19); it has also been held by the Court that it is not possible to require that the statement of the reasons for a regulation should set out the various facts, which are often very numerous and complex, on the basis of which that regulation was adopted, or a fortiori that it should provide a more or less complete evaluation of those facts (cf. Case 5/67, Beus v Hauptzollamt München [1968] ECR 83).For reasons pertaining both to the need to adapt quickly to currency fluctuations and to the practicability of the scheme of compensatory amounts, the Commission need consider only disturbances in relation to groups of products, and not in relation to individual products or making distinctions according to the exporting country (cf. opinion of Mr Advocate-General Reischl in Case 55/75, cited above).The risk of disturbances in trade in agricultural products, referred to in Article 1 (3) of Regulation No 974/71, consists essentially in deflections of trade. The only motives for such deflections are speculative monetary considerations, and their effect is, among other things, to drive prices down in the market of the Member State whose currency has increased in value, and, in consequence, to upset the intervention arrangements on that market. As far as trade outside the Community is concerned, imports are deflected through the Member State in which levies are lowest, namely that having the lowest-valued currency, whereas exports are made from the Member State in which refunds are highest, namely that whose currency has increased in value. Thus in assessing the risk of disturbances, the Commission has to take into account the market conditions for those agricultural products which are subject to intervention as well as the monetary factors resulting from the value of the currencies of the Member States.When there is a risk of disturbances in relation to the basic product, there is a presumption that the same risk can arise by extension in relation to derived products, and in the case in point in the main action the risk even had to be assessed with regard to potential substitute products (other feed-grain, and in particular barley, exports of which from France and third countries to Germany had been at a disadvantage in the absence of compensatory amounts on maize). Thus the Commission is obliged to assess the risks of disturbances in a general perspective, in relation both to geography and to groups of potential substitute products.In drawing up Regulation No 652/76, the Commission strictly applied Article 2 (2) of Regulation No 974/71, under which compensatory amounts applicable to derived products are fixed by reference to the effect which the monetary measures have on basic products.Regulation No 652/76 comes within a system which the Court has already held to be compatible with Article 39 of the Treaty, namely the system of Regulation No 974/71 (cf. Case 5/73). The Proposal for a Council Regulation relating to the fixing of representative exchange rates in the agricultural sector, submitted by the Commission on 5 November 1976, is directed towards a situation entirely different to that in the main action: its aim is to prevent the system of compensatory amounts from resulting in the guarantee of excessively large price differences in the Member States when the representative rates of the national currencies depart widely from their value on the foreign exchange market. Thus the application of compensatory amounts can cause the distortions of competition mentioned in the third recital of the preamble to the said Proposal for a Regulation only in quite exceptional circumstances.At the hearing on 29 June 1977 the plaintiff in the main action, represented by Mr Veroone, and the Commission of the European Communities, represented by its Legal Adviser, Mr Gilsdorf, acting as Agent, assisted by Mr Delmoly, presented oral argument.The Advocate General delivered his opinion at the hearing on 27 September 1977.