Simmenthal SpA v Amministrazione delle finanze (70/77)

A —Observations of the plaintiff in the main action

The plaintiff in the main action observes first of all that the six questions asked by the referring court in fact amount to two, more fundamental, questions:(1) The Court is asked, first, to elucidate its earlier decisions concerning the application of the concept of charges having an effect equivalent to customs duties to charges in respect of health inspections carried out upon importation of fresh beef or veal from a third country (Questions 1 and 2).(2) It is then asked whether Directive No 72/462/EEC restricted the prohibition on levying such charges in respect of inspections carried out upon importation of beef or veal from third countries.On the national court's first question, the plaintiff in the main action points out that the charges at issue are levied at the frontier in respect of a health inspection affecting only imported goods, that they do not relate to a general system of internal taxation applied in accordance with the same criteria to domestic products and imported products alike, and finally that they are not the consideration for a service provided for the importer. Consequently, according to established case-law, they constitute charges having an effect equivalent to customs duties, and according to the judgment of 9 July 1975 (Case 21/75 Schroeder [1975] ECR 905) that concept must be given the same meaning irrespective of whether the imports concerned are from Member States or from third countries.The plaintiff in the main action adds that although the ‘intra-Community’ health Directives No 64/432 (Article 11) and No 64/433 (Article 9) contain a provision to the effect that pending the application of Community provisions relating to imports from third countries national health provisions applicable to goods from third countries shall not be more favourable than those governing intra-Community trade, such a provision does not suffice to provide exemption from the prohibition laid down in Article 12 of Regulation No 14/64 and Article 20 (2) of Regulation No 805/68 on the levying of charges having equivalent effect in trade with third countries save where derogation therefrom is decided by the Council acting by a qualified majority. The mention of third countries does not of itself amount to an implied derogation by the Council from the prohibition contained in Regulations No 14/64 and No 805/68.Directives No 64/432 and No 64/433 do not concern the health arrangements applicable to trade with third countries (except to recommend that more favourable, discriminatory treatment should not be granted to extra-Community imports), and consequently they cannot be interpreted as derogating from the prohibition contained in Regulations No 14/64 and No 805/68 on the levying of charges having equivalent effect.On the first question the plaintiff in the main action concludes that — in view of the state of the law during the period between the entry into force of Regulations No 14/64 and No 805/68 and the implementation of Directive No 72/462/EEC — the prohibition on the levying of charges having equivalent effect must rightly be regarded as being absolute and allowing of no restriction of any kind, and that the answer to the second question must, according to the judgment of 7 March 1972 (Case 84/71 Marimex [1972] ECR 89), be that Article 12 (1) and (2) of Regulation No 14/64 took effect on 1 November 1964 and Articles 20 (2) and 22 (1) of Regulation No 805/68 on 29 July 1968.In relation to the third question, which concerns the interpretation and date of applicability of Directive No 72/462, in particular the question whether it allows charges having equivalent effect to be levied in respect of health inspections or on the contrary prohibits them and allows only the actual expenditure incurred in each individual case in connexion with inspection at the external frontier to be taken into account, the plaintiff observes that Articles 12 (8), 23 (4) and 26 are unclear, particularly as regards the expression according to which the inspection costs are chargeable to traders ‘without repayment by the State’. On a literal interpretation of the provisions concerned it may be stated that the intention was to charge to certain traders only the actual cost of the inspection operations.Moreover, this point of view was adopted by the Commission in its first proposal for a directive submitted to the Council on 15 September 1965 (Journal Officiel of 26 March 1966, p. 807), and it was only because of the insistence of certain Member States upon the insertion into the directive of a provision enabling or requiring a charge to be levied that, in a spirit of compromise, payment of the cost of inspection without repayment by the State was authorized, which leads back to the concept of the actual cost of a service provided. Thus in neither case can it be suggested that the charge is by its nature necessarily a flat-rate charge, as the Advocate General pointed out in Case 89/76 (Commission v Netherlands).The plaintiff in the main action also stresses what it considers to be the seriousness of a measure introducing a charge and thus altering the effect of the Common Customs Tariff. The plaintiff in the main action considers that the date on which the authorization for Member States to reintroduce health inspection charges took effect is the date of the adoption of the national measures for the implementation of the health inspection measures provided for in the directive. In the case of health inspection charges which already exist, they can be levied only after being restructured in accordance with the new criteria defined in the directive.With regard to the fourth question, concerning the validity of Directive No 72/462/EEC, the plaintiff in the main action analyses the relationship between the provisions of Directive No 72/462 which make the cost of inspection chargeable to traders, and the first sentence of Article 20 (2) of Regulation No 805/68 which provides the possibility to make derogations from the prohibition on the levying of charges having equivalent effect in trade with third countries.According to the plaintiff, in the aforesaid Schroeder case the Commission argued that the above-mentioned provisions of Directive No 72/462 can derogate from the prohibition on charges having equivalent effect, because that directive was adopted in accordance with the procedure laid down in Article 43 of the Treaty. The plaintiff in the main action challenges that argument. It is not true that the Community legislature is absolutely free to decide to make derogations from the prohibition on charges having equivalent effect on condition that it observes the procedural rules. The legislature must also observe the substantive limits which it laid down itself when it provided the possibility to make derogations.Article 20 (2) of Regulation No 805/68 draws a distinction between current derogations already contained in the regulation and potential derogations which the Council may decide to make. The latter must be absolutely compatible with the common commercial policy system which underlies the trading arrangements introduced by the regulation on the common organization of the markets. Therefore it must be a matter of genuine measures of commercial policy. This is indicated in the twelfth recital in the preamble to Regulation No 805/68: ‘whereas … the machinery of common prices, customs duties and levies may, in exceptional circumstances, prove defective; whereas, in such cases, so as not to leave the Community market without defence against disturbances which may arise therefrom after the import barriers which existed previously have been removed, the Community should be enabled to take all necessary measures without delay’.Furthermore, a true derogation is by nature an exception and must therefore be express and precise and state the grounds on which it is based, and this is not the case in this instance, which concerns elements scattered throughout the directive which have no logical connexion with its other provisions. The vagueness of the alleged derogation justifies the question asked by the national court concerning the directive's invalidity for lack of a statement of grounds. Possible derogations must be derogations justified by the needs of the common commercial policy, which excludes derogations relating to health measures entirely alien to the commercial policy.The other parts of the fourth question refer to the lack of uniformity of the supposed charge, to a possible delegation to the Member States of the power to derogate from the prohibition on charges having equivalent effect and to the fact that the proceeds of the charge are not entered in the budget of the Community.The questions spring from the consideration that the charges reintroduced by the directive can only be Community charges, since the introduction of new national charges on goods imported from third countries is clearly prohibited (judgment of 13 December 1973, Joined ).Cases 37 and 38/73 Diamantarbeiders [1973] ECR 1609Since they are charges which the Community has the power to introduce, they must be uniform and standard both as regards the amount and as regards the procedure and conditions for their imposition, otherwise they jeopardize the proper functioning of the common external tariff.If the charge in question is indeed a Community charge, it must be governed by a Community instrument laying down the precise criteria and detailed rules therefor.If the instrument authorizing Member States to reintroduce the charge does not lay down precise criteria and detailed rules it results in a delegation, and thus the reservation of competence to the Council prescribed in Article 20 (2) of Regulation No 805/68 is evaded. If it is indeed a question of a delegation to the Member States, its illegality is all the more patent since it amounts to giving the national authorities a free hand (judgment of the Court of Justice of 30 October 1975, Case 23/75 Rey Soda [1975] ECR 1279).Finally, there is an additional ground for invalidity in the fact that the charge is levied and kept by the Member States, whereas if it were really a Community charge the proceeds of the charge should be entered in the budget of the Community.In addition to these objections raised by the national court, the plaintiff in the main action also submits that the levying of the charges at issue violates the principle of non-discrimination and the principle of proportionality. There is prohibited discrimination because the provisions at issue make the cost of the health inspections chargeable to ‘the consignor, the consignee or their agents’, that is to say persons whose only connexion is that they are parties to the contract for the transport of the goods which are subjected to the inspection. Those persons were clearly chosen with the sole aim of guaranteeing payment upon the crossing of the frontier as effectively as possible. Insisting on the fact that the inspections are organized in the public interest, the plaintiff in the main action points out that Article 27 (6) of Directive No 72/462 provides that all the expenditure involved in checking the equipment at the frontier and inspection posts and in checking that the inspections are properly carried out ‘shall be borne by the Community’. As to the observance of the principle of proportionality, the introduction of a health inspection charge is unjustified and alien to the health inspection system, and thus exceeds what is necessary in order to satisfy the public interest.The fifth and sixth questions are asked in order to obtain a ruling from the Court that the health inspection arrangements introduced by the directive cannot be applied and have not been applied either at Community level or at national level, and in order to obtain an authoritative ruling as to the consequences of those facts.The answer to both parts of the fifth question should be in the affirmative because of the uniformity and foreseeability required of a health inspection charge which is imposed by the Community and hence is not prohibited (ludgment of 25 January 1977, Case 46/76 Bauhuis [1977] ECR 5).If Article 32 of Directive No 72/462, laying down the time-table for the gradual implementation of the provisions of the directive, is to be interpreted in a manner compatible with the kind of health inspection arrangements which it was intended to introduce, each stage of the implementation of the Community system thus established must be preceded by the formulation of the various provisions necessary for its operation. It appears that none of these implementation measures has been adopted.It follows that even if they wanted to, the Member States do not have the power or the right lawfully to compel traders to pay the charges relating to the health inspections.On the sixth question the plaintiff considers that, first, by virtue of the prohibition on the levying of charges having equivalent effect which is contained in the regulations on the common organization of the markets, individual traders have a subjective right, which is directly conferred by the Community rules, not to pay the charge, and that, secondly, the Member States must refrain from levying charges having equivalent effect and hence health inspection charges. A measure having the same legal effect as a regulation is required in order to put an end to this legal situation. Such a measure could undoubtedly be contained in a provision of a directive, provided that it was directly applicable, otherwise it would be necessary to wait for the directive to be transposed into the national legal order.In the present case neither of these two possibilities has occurred. Therefore the breach still exists, and this state of affairs justifies the trader's refusal to pay the charge at issue.

B —Observations of the Italian Government

After repeating its reservations as to the admissibility of a reference for a preliminary ruling made by an Italian court ex parte in the context of an application for a court order, the Italian Government observes that the first question, as formulated, must be answered in the negative. It emerges from the case-law of the Court that there are two cases in which pecuniary charges imposed in respect of health inspections of goods imported from third countries do not constitute charges having an effect equivalent to customs duties, namely where they are the considerauon for a service provided for the trader and where they are imposed within the framework of a general system of internal taxation.In order to answer the second question, which in fact becomes devoid of purpose if the first question is answered in the negative, it suffices to state that the prohibitions laid down in Article 12 of Regulation No 14/64 and Article 20 (2) of Regulation No 805/68 took effect when the respective regulations entered into force.The Italian Government considers that the four following questions may be answered together. Directive No 72/462 provides, in the common interest and by means of Community measures, for the compulsory and systematic inspection of bovine animals and swine and fresh meat from third countries, and also lays down as a uniform criterion that the expenditure incurred in respect of health inspections shall be chargeable to the various traders concerned. In no wise does it constitute an authorization to levy charges having an effect equivalent to customs duties, and its legality cannot be called in question.The obligation on Member States to charge the expenditure resulting from health inspection to the traders concerned must be uniformly observed, in order to avoid any distortions of trade which might result from the existence of discrepancies between the legislation of Member States.As it was intended to ‘harmonize’ divergent national provisions, Directive No 72/462 regulated and did not ‘introduce’ the financial charges resulting from health inspections. The judgment of the Court of Justice of 12 July 1977 in Case 89/76, Commission v Netherlands [1977] ECR 1355, confirms this point of view.As to the need contemplated in the fifth question for additional Community measures concerning the determination of the amount of the charges and the procedure for payment thereof, it should be observed that the expenditure incurred in connexion with health inspections cannot be calculated as a single amount. All that could be established at Community level is that it is a matter of financing a service provided, which is the criterion adopted in the directive at issue for the purpose of determining the expenditure to be charged to traders. As the limits of traders' liability for the cost of the compulsory and systematic health inspection of goods imported from third countries are laid down at Community level, the determination of the charges to be paid is necessarily effected at national level.The sixth question is relevant only where, at the time when the directive was adopted, national legislation did not already charge the expenditure incurred in connexion with health inspections to the traders concerned. On the other hand, by reason of the very objective of the Community directive, the question does not arise where national legislation already charges the cost of those inspections to individuals.

C —Observations of the Commission

The Commission observes, first, that pursuant to the time-limits laid down in Article 32 of Directive No 72/462, that directive is not applicable to the imports in question.The Court of Justice has held that, in answering the question as to the application of charges having an effect equivalent to customs duties in trade with third countries, account must be taken both of the requirements resulting from the establishment of the Common Customs Tariff and of those resulting from a common commercial policy, and it is for the Commission or the Council to evaluate these requirements in each case (judgment of 13 December 1973, Joined Cases 37 and 38/73 Diamant-arbeiders [1973] ECR 1609).Making use of that power, in Article 12 (2) of Regulation No 14/64 the Council prohibited the levying of any customs duty or charge having equivalent effect, other than as provided in the regulation itself, in respect of imports of beef and veal and bovine animals from third countries. That provision took effect on 1 November 1964 (judgment of 7 March 1972, Case 84/71 Marimex v Italian Ministery for Finance [1972] ECR 89, at p. 98). Article 20 (2) of Regulation No 805/68 repeated that prohibition whilst reserving power to the Council derogate therefrom.After stating the definition of charges having an effect equivalent to customs duties as it emerges from the case-law of the Court, the Commission points out that according to recent judgments charges imposed in respect of health controls in intra-Community trade do not constitute charges having an effect equivalent to customs duties if they are imposed by a Community provision and have the effect of encouraging trade between Member States and if they do not exceed the actual cost of the inspection (judgment of 25 January 1977, Case 46/76 Bauhuis [1977] ECR 5; judgment of 12 July 1977, Case 89/76 Commission v Netherlands [1977] ECR 1355). As regards health controls on imports of beef and veal from third countries for the period prior to the entry into force of the measures laid down in Directive No 72/462, the relevant provision is Article 9 of Directive No 64/433 of 26 June 1964 (Official Journal, English Special Edition 1963-1964, p. 185) on health problems affecting intra-Community trade in fresh meat, according to which, pending the application of Community provisions relating to imports of fresh meat from third countries, national provisions relating to imports from third countries shall not be more favourable than those governing intra-Community trade.The Commission's view is that the inspections of imports from third countries implied by that provision fulfil the conditions whereby, pursuant to the decision in Bauhuis, charges imposed in respect of health controls may be regarded as falling outside the definition of a charge having an effect equivalent to a customs duty. They are imposed by Community rules and have the effect of encouraging trade between Member States by protecting it from the harm which could be caused by the existence of health controls on intra-Community trade if similar measures were not also provided for goods imported from third countries.Therefore charges imposed by a Member State in respect of expenditure on inspections organized in order to implement Article 9 of Directive No 64/433 do not constitute charges having an effect equivalent to customs duties.Going on to analyse Directive No 72/462, in particular Articles 12 (8), 23 (4) and 26 whereby expenditure incurred in connexion with the health controls imposed by those provisions are chargeable to the consignor, the consignee or their agents, the Commission concludes that as the inspections are made compulsory and uniform by a Community directive in the general interest of the Community, the said charges cannot be regarded as charges having an effect equivalent to customs duties since they are merely compensation, which is financially and economically justified, for the obligations imposed on all the Member States equally by Community law (judgment of 25 January 1977, Case 46/76 Bauhuis [1977] ECR 5).The Commission adds that the imposition and levying of those charges would still be legal even if they did not fulfil the conditions laid down by the Court in the aforementioned judgment, since they were introduced by the Council in accordance with the procedure laid down in Article 43 (2) of the Treaty, as is permissible under Article 20 of Regulation No 805/68.Therefore the answer to the first two questions is that, although as from 1 November 1964 pecuniary charges unilaterally imposed by a Member State in respect of the health inspection of imports of beef or veal or bovine animals are in principle to be regarded as charges having an effect equivalent to customs duties on imports unless such charges relate to a general system of internal taxation applied systematically in accordance with the same criteria to domestic products and imported products alike, that is not true of charges imposed in respect of inspections organized pursuant to Article 9 of Directive No 64/433, provided that the amount thereof does not exceed the amount of the actual expenditure incurred in connexion with such inspections.The answer to the third question should be that Directive No 72/462, in particular Articles 23 (4) and 26 thereof, does not authorize the Member States to reintroduce health inspection charges on goods imported from third countries, but obliges them to charge to the consignor, the consignee or their agents the actual expenditure incurred in connexion with the inspections provided for in Article 23 (1) and Article 24 of the directive respectively. However, as regards the inspections referred to in Article 23 (1) and (3), the national measures ensuring the implementation of the obligation referred to in Article 23 (4) should be brought into force not later than 1 January 1976.As to the fourth and fifth questions concerning the validity of Directive No 72/462 and the question whether Article 23 thereof on the recovery of inspection costs ought to be supplemented by Community or national implementing provisions, although the Commission considers that that directive does not apply to the imports at issue, it observes that the directive gives a sufficient statement of the grounds on which it is based; that the directive does not have to harmonize the pecuniary inspection charges, since the rule that those charges must not exceed the cost is sufficient in that connexion; that the directive does not comprise any prohibited delegation; that the directive does not contravene the Council decision of 21 April 1970 concerning the Community's own resources; and, finally, that the directive does not have to be supplemented by implementing measures.The Commission suggests that the sixth question may be interpreted in two ways. It may be intended to ascertain whether traders are obliged to pay the cost of health inspections to a Member State if other Member States are not yet applying Articles 12 (8), 23 (4) and 26 of the directive, or to ascertain, whether traders are obliged to pay the cost of health inspections carried out pursuant to the directive if the Member State which purports to levy them is not applying other provisions of the directive.In either case, the answer can only be in the affirmative. In no case do the situations envisaged involve the illegality of national provisions and national measures validly adopted in partial application of the directive, with which traders are therefore obliged to comply.

D —Observations of the Council

After recalling and describing the steps taken by the Council and the Commission with regard to preventive health matters in trade in meat and animals, and having analysed the case-law of the Court, the Council observes that in its judgment of 9 July 1975 (Case 21/75 Schroeder [1975] ECR 905, at p. 914) the Court held that charges imposed in respect of a veterinary inspection of beef or veal from a third country constituted a charge having an effect equivalent to a customs duty incompatible with the prohibition on levying such charges laid down in Article 20 of Regulation No 805/68 on the common organization of the market in beef and veal.However, the rule laid down in that judgment is not applicable in the case of charges imposed in respect of an inspection organized on a Community basis, which was not true of the Schroeder case, since although beef and veal preserves are covered by the organization of the market, they do not come within the ambit of Directive No 72/462/EEC, which concerns only fresh meat.The Council considers that the Court should extend to health inspections on imports from third countries carried out on goods covered by Directive No 72/462/EEC those of its decisions which already accept, in the case of intra-Community trade, that charges for health inspections imposed (and organized) at Community level do not constitute charges having equivalent effect, provided that the amount thereof is limited to the expenditure incurred in connexion with the inspection.Suggesting answers to the questions referred by the Italian court, the Council considers the third question first. It is of the opinion that Directive No 72/462/EEC authorizes the Member States to introduce charges levied under the new Community system or to retain under that Community system charges already existing on a national basis. Although the Member States are allowed a period up to 1 October 1973 or 1 January 1976, depending on the provisions which apply, within which to adopt the measures in view, it may be considered that the Member States were entitled to implement the directive as from the day when they received notice of it — 20 December 1972. The charges were rendered lawful from that date.The first indent of the fourth question concerns the invalidity of the provisions of the directive which oblige the Member States to charge the cost of the inspections to the traders concerned, for lack of a statement of grounds for the derogation from Regulation No 805/68. The Council proposes that it should be answered that the inspection charge is different in kind from charges having equivalent effect, so that it was not necessary to ‘derogate’ from that regulation, and hence to provide a statement of grounds for a derogation which did not exist. The fifth question asks whether Directive No 72/462/EEC must be supplemented by national or Community provisions relating to the procedure and conditions for payment of the charges. The Council considers that under the third paragraph of Article 189 of the Treaty, Directive No 72/462/EEC is exempt from the obligation to provide for everything in detail and may be executed by national implementing measures.However, the judgments of the Court of Justice of 25 January 1977 and 12 July 1977 in Cases 46/76, Bauhuis, and 89/76, Commission v Netherlands, do not exclude the possibility that additional Community measures may be necessary if the Member States diverge overmuch in their application of the directive.The answer to the fifth question also allows the reply to be made that the other factors which are mentioned in the fourth question cannot result in the invalidity of Articles 12 (8), 23 (4) and 26 of the directive, as well as allowing the sixth question to be answered in the affirmative.The answer to the question concerning ‘own resources’(fourth indent of the fourth question) should be that the fact that Directive No 72/462/EEC leaves it to the Member States to decide on the means of fulfilling their obligations thereunder means that the proceeds of the charges to be introduced do not necessarily have to be entered in the budget of the Community and may remain within the national framework.Finally, there remains the problem, raised in the second question, of the status of charges for inspections carried out on imports of beef and veal prior to the implementation of Directive No 72/462 — which is what occurred in relation to the first of the importations at issue. Could a Community inspection which did not yet exist justify the imposition of charges in respect of those inspections? In support of a solution different from that adopted in the judgment of 9 July 1975(Schroeder), the Council argues: (a) that veterinary inspection charges cannot be treated in the same way as charges having equivalent effect, as they are of a completely different nature; (b) that the Member States are prohibited from applying in their trade with third countries provisions more favourable than those governing their intra-Community trade (Article 9 of Directive No 64/433/EEC); and (c) that according to the case-law of the Court (paragraphs 43 to 46 of the Decision in the judgment of 25 January 1977 in Case 46/76 Bauhuis [1977] ECR 5, at pp. 19-20), for the period prior to the introduction of a Community inspection system, inspections could lawfully be carried out on the basis of Article 36 of the Treaty.At the hearing on 16 November 1977, oral argument was presented by the plaintiff in the main action, represented by E. Cappelli, the Italian Government, represented by A. Marzano, the Commission of the European Communities, represented by its Agent, G. Campogrande, and the Council of the European Communities, represented by its Agent, C. Giorgi.The Advocate General delivered his opinion at the hearing on 21 February 1978.

Substance

Costs