law://eu/cjeu/1977/c-96-77/hd_1_1_2@2026-11-14Bauche and Delquignies, the plaintiffs in the main action, and Man, the intervener in that action, submit in answer to the first two questions submitted by the national court that the Commission did not have the powers to adopt Regulation No 101/77. That regulation is in fact based on Regulation (EEC) No 974/71 of the Council, Article 1 (1) whereof authorizes a Member State which, for the purposes of commercial transactions, allows the exchange rate of its currency to increase in value by a margin wider than that permitted by international rules to charge on imports or grant on exports monetary compensatory amounts for the products referred to in subparagraph (2) of the same article in trade with other Member States and non-Member States. The products referred to in subparagraph (2) are those covered by intervention arrangements. However, under Article 26 of the basic regulation No 3330/74, intervention measures do not apply to sugar C. Until the Commission adopted Regulation No 101/77 it had never included nonquota sugar in the field of application of the regulations relating to compensatory amounts.If Regulation No 101/77 is analysed it is found to be an official measure calling in question the provisions adopted by the Commission for the organization of the market in sugar and the introduction of the system of compensatory amounts.If Regulation No 101/77 is analysed it is found to be an official measure calling in question the provisions adopted by the Commission for the organization of the market in sugar and the introduction of the system of compensatory amounts.The only possible justification for an adoption by the Commission of appropriate measure pursuant to Article 22 of Regulation No 3330/74 was the risk of serious disturbances in trade which might jeopardize the objectives of Article 39 of the Treaty, provided however that the detailed rules for the application of those measures were laid down beforehand by the Council, which was not in fact done.With regard to the first two questions it may be concluded that the Commission was not entitled to legislate as it did and that only the Council had the power to do so.As to the third question the plaintiffs and the intervener in the main action submit that Regulation No 101/77 is vitiated by a formal defect concerning the statement of the reasons upon which the regulation is based and is in breach of the principle of legal certainty.In the second recital in the preamble to that regulation the Commission in fact treats the substitution operation which is expressly authorized by Regulation No 458/73 (which it does not mention at all) and furthermore offset, as indicated in the recitals in the preamble to that regulation and to Commission Regulation (EEC) No 2365/75 (Official Journal L 243, p. 10), by a standard payment of two u. a. per 100 kg of sugar, as a deflection of trade and an unfair benefit. The Commission has thereby failed to fulfil its duty to provide the necessary information by giving a statement of the reasons upon which the regulation was based.It was also in breach of the principle of legal certainty which must allow traders to complete transactions which have been expressly authorized without finding that they are subsequently treated as being unlawful.The plaintiffs and the intervener submit that the fourth and fifth questions should be answered in the negative. Their argument is that the levying of compensatory amounts on a product such as sugar C (which they define as any sugar to which a C expon licence relates) and which is not included in the common organization of the market in sugar, contravenes the provisions of the basic sugar regulation No 3330/74, and of the basic regulation introducing the system of compensatory amounts and is contrary to the spirit of the system thus established.In fact as regards the calculation of compensatory amounts in the case of those Member States whose currencies have been withdrawn from the ‘snake’ the wording of Article 2 (1)(b) of Regulation No 974/71 as amended by Regulation (EEC) No 1112/73 of the Council makes it clear that the price taken into consideration is the intervention price of a product covered by intervention measures. However, there is no intervention price for sugar outside the quota. One link is therefore missing: the average of the currency/intervention price fluctuations for the calculation of compensatory amounts.The last recital in the preamble to Regulation No 974/71 and various clarifications provided by the case-law of the Court (especially in its judgment of 24 October 1973 in Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof [1973] ECR 1091) show that compensatory amounts can be applied only to agricultural products covered by intervention prices and then only if currency measures cause disturbances in trade in those products (threat to the maintenance of single prices).Regulation No 101/77 deflects compensatory amounts from their proper purpose and does not use them for the purpose of maintaining a single price and keeping in being the organization of the intervention system but for penalizing a transaction which is perfectly lawful, namely the export of sugar from a country other than the one where it was produced.According to the plaintiffs and the intervener in the main action the sixth question is concerned with the retroactive effect of Regulation No 101/77 and the frustration of the legitimate expectation of traders that the rules in force would remain applicable at least during the sugar marketing year.In order to comply with the principle that legitimate expectation must be safeguaded whenever a regulation is modified, transitional measures should be adopted for the protections of traders who have undertaken obligations under contracts which are irrevocable but have not yet been performed when the new regulation is implemented.Producers and traders have based their price calculations for sugar C and disposed of it in reliance on Community rules in force at the beginning of the sugar marketing year. Regulation No 101/77 which entered into force during the marketing year frustrates traders' legitimate expectation that those rules would remain in force.In any event and in compliance with the principle of the protection of legitimate expectation the Commission should have introduced transitional measures for the implementation of Regulation No 101/77.The second paragraph of Article 2 of the said regulation that it is not to apply to exports effected on the basis of licences issued before the date of entry into force of the regulation. But the reason why the C licences had not all been issued on the date when the regulation was adopted is that they remain valid only for a short period.The Commission should at least have extended the exemption specified in the second paragraph of Article 2 of Regulation No 101/77 to traders who were under -a firm and definite obligation before the date of entry into force of the regulation to export sugar C subject to conditions agreed beforehand as to the right of substitution and the exemption from compensatory amounts on the sugar being exported.For the abovementioned reasons the plaintiffs and the intervener in the main action ask the Court for a declaration that Regulation No 101/77 is not valid.The Commission points out when making its preliminary observations that the first seven questions raise the question of the validity of Regulation No 101/77 under three heads, the legality of the measure adopted as such, (Questions 1, 3, 4 and 5) the Commission's power to adopt the measure at issue (Question 2) and thirdly the possibility that the contested regulation may have retroactive effect (Question 6). The eighth question raises the problem of the temporal application of Regulation No 101/77 with special reference to transactions carried out pursuant to obligations undertaken before it entered into force.The Commission then produces a statement of the situation referred to by Regulation No 101/77 — namely the export of sugar C to non-Member countries from a Member State other than the one which issued the expon licence — in order to explain the objective which the measure seeks to attain and accordingly to justify its substantive legality. It lays special emphasis on the fact that in the autumn of 1976 large surpluses of sugar, including sugar C which had to be exponed, had built up in the Community. The standard payment of two u.a. per 100 kg was at that time nothing like enough to offset the benefits which traders could reap from the ‘currency margins’ (to be understood as meaning the difference between the actual rate of exchange and the representative conversion rate used in the common agricultural policy) which had developed between Member States whose currencies had been revalued and those whose currencies had been devalued. According to the Commission the effect of these margins was that differences were created in Community prices so that the substitution of sugar C in a country where the price was high (The Federal Republic of Germany, the Benelux countries) for sugar produced within the limits of the maximum quota in a country where prices were lower (France, the United Kingdom) became a very profitable operation for traders. This was to the prejudice of the Community and diametrically opposed to the objective which the Community legislature sought to attain: for example the sale of sugar C on the German market by way of substitution for the expon of sugar A or B from France benefited from the high intervention price fixed on the German market; this benefit would be greater than the relative loss on the export without any refund of French sugar C from France. The same argument applies in the case of exports with the refund from Germany instead of selling on the home market. The Commission produces as an annex to its observations a table showing with figures the respective advantages obtained by these transactions.Thus it is clear that there was a close link in the situation described between sugar C and the intervention system owing to the substitutions effected. This point is fundamental for an appraisal of the practical implications of Regulations No 101/77.The Commission points out that from both the physical and the economic points of view sugar belonging to categories A, B or C cannot in practice be distinguished and concludes that the application of Article 1 (2) of Regulation No 974/71 concerning compensatory amounts to all sugar covered by the common organization cannot a priori be excluded. Furthermore, in the case in point, it is clear that the basic conditions for the application of compensatory amounts existed, account being taken of the situation described above, namely the differences found to exist between the actual and the agricultural exchange rates, the need to avoid the artificial production of sugar C in Germany, which would have been encouraged had it not been for the contested measure and lastly risks of disturbances in trade within the meaning of Article 1 (3) of Regulation No 974/71 as amended by Regulation (EEC) No 2746/72 of the Council, that is to say deflections of exports for purely artificial reasons.On this point the Commission calls attention to the case-law of the Court concerning the application of Regulation No 974/71 according to which the Commission has a discretion to assess the risk of disturbances in trade together with the contrasted trend of currencies, both with reference to currency factors and to market conditions (judgment of 15 May 1974, paragraph No 22, in Case 74/74, Comptoir National Technique Agricole (CNTA) v Commission of the European Communities [1975] ECR 547) both as against non-Member countries and in Community trade (judgment of 22 January 1976, paragraph No 10, in Case 55/75, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof [1976] ECR 30 and 31).The Commission completes its argument by submitting that the adoption of Regulation No 101/77 at the same time prevented traders from making, by exporting sugar C, profits comparable to those which could be made by substitution as a result of misapplying the system of compensatory amounts (which was made possible by the lack of any intra-Community supervision).The Commission in answer specifically to the third question submits that the scope of the standard payment of two u.a. per 100 kg was — and still is — quite different from that of compensatory amounts: it is aimed primarily at the price advantage as well as the saving effected on transport costs enjoyed by the sugar manufacturer who does not himself do the exporting, whereas when Regulation 458/73 was adopted it had not been possible to take into consideration the situation referred to in Regulation No 101/77, namely the risk of deflections of trade by reason of the existence of currency margins.With reference to the second question the Commission argues that its power to adopt the regulation in dispute is found in Anide 6 of Regulation (EEC) No 974/71 of the Council which provides that detailed rules for the application of the regulation ‘which may include other derogations from the regulations on the common agricultural policy’ shall be adopted in accordance with the so-called Management Committee procedure, that is to say by the Commission. It also quotes the judgment of the Court of 8 July 1977 in Case 97/76, (Merkur Außenhandel GmbH & Co. KG v Commission of the European Communities [1977] ECR 1063) in support of its submission that the regulation in question is in the nature of ‘a legislative measure … of economic policy’ adopted in the higher interest of the proper functioning of the common organization of the market in sugar and of the system of agricultural compensatory amounts.With regard to the sixth question the Commission points out that Regulation No 101/77 has not been applied to exports of sugar C effected pursuant to licences issued before 20 January 1977, the date when the said regulation entered into force. Consequently it is dificult to understand how the applicants can claim it has retroactive effect in the proper sense of the expression as far as they are concerned. Furthermore, even if the transactions carried out on the strength of licences issued before the entry into force of Regulation No 101/77 had not been exempted from payment of compensatory amounts, the Commission takes the view that there could not have been any such retroactive effect as could adversely affect any genuine acquired rights.Finally the Commission refers to the eighth question raised by the Tribunal de Valenciennes as to whether Regulation No 101/77 could lawfully be applied to ‘traders who had concluded firm and definite contracts’ before 20 January 1977‘by which they bound themselves, subject to firm and definite conditions, to purchase C quota sugar or to become assignees of C quota licences’.The Commission doubts whether arrangements between traders such as those mentioned by the court making the reference and which form contractual relations between individuals, may be invoked as against the Community as regards the protection of their legitimate expectation. In any case, by exempting from compensatory amounts exports covered by licences issued up to 20 January 1977, the Community fulfilled any legitimate expectation which it might have aroused on the part of traders by their issue.Furthermore, the overriding interest of the Community upon which Regulation No 101/77 was based must be borne in mind. This interest, as has already been seen, consisted mainly in ensuring that an improper use of the opportunity for substitution afforded by Community rules did not adversely affect the proper functioning of the common organization of the market in sugar and the system of compensatory amounts. Even if it is assumed therefore that there existed a legitimate expectation on the part of individuals, such a situation cannot take precedence over the Community's overriding interest, which has just been invoked and which is opposed thereto.Finally the foreseeable nature of the measure in dispute, at least as regards its objective, together with the prudence which every experienced trader should display make it impossible to allege that there has been a breach of the principle of the protection of legitimate expectation.Finally the Commission submits that the Court should answer the questions referred to it by the Tribunal d'Instance, Valenciennes substantially on the following lines:— Consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Commission Regulation (EEC) No 101/77 of 19 January 1977 amending Regulation (EEC) No 572/76 fixing monetary compensatory amounts inter alia in the sugar sector (Questions 1 to 7).— The aforementioned Commission Regulation (EEC) No 101/77 could lawfully be applied to all export transactions not expressly covered by licences issued before the date of entry into force of the said regulation (Question 8).
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