Contents
REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal Administratif [Administrative Court], Orléans, for a preliminary ruling in the action pending before that court betweenSàrl Maïseries de BeauceandOffice National Interprofessionnel des Céréales (ONIC)THE COURTcomposed of: H. Kutscher, President, P. Pescatore and T. Koopmans (Presidents of Chambers), J. Mertens de Wilmars, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco, A. Touffait and O. Due, Judges,Advocate General: H. MayrasRegistrar: A. Van Houttegives the following
Judgment
Facts and Issues
The judgment making the reference and the observations submitted under Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:
I —Facts and procedure
II —Written observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC
A —Observations of the plaintiff in the main action (Maïseries de Beauce)
First question
The plaintiff in the main action maintains that Regulation No 2744/75 on the import and export system for products processed from cereals and from rice is not directly at issue because it determines the calculation of levies and not that of monetary compensatory amounts. Nevertheless it is indirectly relevant because of the fact that the Commission has employed the processing coefficient (1.80) which is applicable to levies' on products processed from maize for calculating the monetary compensatory amounts on the same products and the fact that the result of that application has been to create discrimination between producers in the various countries of the Community.
Second question
Infringement of Regulation No 974/71
In accordance with the principle upon which Regulation No 974/71 is based and which is set out in the sixth recital in the preamble thereto the compensatory amounts must be limited to the amounts strictly necessary to compensate the incidence of the monetary measures on the prices of basic products covered by intervention arrangements. In applying that principle to the charging or granting of monetary compensatory amounts on derived products Article 2(2) of the said regulation states that the monetary compensatory amounts shall be equal to the incidence, on the prices of the products concerned, of the application of the compensatory amount to the prices of the product on which they depend. The decisions of the Court, in stressing the restrictive nature of the application of monetary compensatory amounts (judgment of 24 October 1973 in Case 43/72 Merkur [1973] ECR 1055) and ruling that exporters of derived products shall not bear a charge unrelated to monetary fluctuations (judgment of 12 November 1974 in Case 34/74 Roquette [1974] ECR 1217), emphasize and apply that principle.On the other hand the Commission has violated that principle by adopting the coefficient 1.80. Simply multiplying the compensatory amount applicable to the basic product (maize) by the technical processing coefficient for maize/maize meal or maize groats in order to calculate the compensatory amount on derived products places the entire compensatory amount affecting the basic product on one of the products derived from maize and thereby disregards the existence of other derived products which are also subject to monetary compensatory amounts. The result is that products derived from maize are subject to monetary compensatory amounts which, when added together, exceed the monetary compensation applied to the basic product. 1.80 tonnes of maize are indeed required to produce 1 tonne of maize meal but 1.80 tonnes of maize also provide 0.27 tonne of high-quality flour, 0.27 tonne of flour for fodder, 0.242 tonne of germ and 0.018 tonne of waste.The plaintiff maintains that in order to comply with the requirements of Regulation No 974/71 the monetary compensatory amount on a tonne of maize groats or maize meal should be calculated as follows:Monetary compensatory amounts on mealequalsMonetary compensatory amounts for maize X 1.80minus— monetary compensatory amounts for high-quality flour x 0.27— monetary compensatory amounts for flour for fodder X 0.27— monetary compensatory amounts for for germ x 0.242Whilst this method of calculation observes the coefficients arrived at on the basis of purely technical data it also takes into consideration the fact that the flour industry manufactures a number of products and by-products from a given quantity of raw material.
Infringement of Article 40 (3) of the EEC Treaty
The Commission's method of calculation also entails distortion of competition between producers of the various Member States and thereby violates Article 40 (3) of the EEC Treaty. In support of that argument the plaintiff in the main action produces an excerpt from an expert opinion drawn up in the course of a dispute raising the same issues as those concerned in the main action which resulted in questions at present before the Court of Justice for the purpose of a preliminary ruling.By modifying the coefficient in question on various occasions the Commission has recognized that the method of calculation at issue in the main action causes distortion of competition and discrimination between producers in the various Member States. The processing coefficient was fixed at 1.60 for maize groats and meal with effect from 3 October 1977 (Regulation No 1771/77 of 29 July 1977, Official Journal 1977, L 193, p. 1) and subsequently at 1.50 pursuant to Regulation No 746/79 of 11 April 1979 (Official Journal 1979, L 95, p. 3) for meal coming under tariff heading 11.02.The plaintiff in the main action concludes that:“In calculating the monetary compensatory amounts applicable to derived products it is necessary to have regard to the incidence which the monetary compensatory amount for the basic product has on all products and secondary products, in particular in such manner that the monetary compensatory amount applied to the principal derived product takes account of monetary compensatory amounts applied to the other products, either:(a) by deducting the compensatory amounts for the secondary products from the compensatory amounts for the principal derived product, or(b) by applying to all the derived products a coefficient corresponding to the ratio between the quantity of the basic product actually used and that deemed to have been used.”
B —Observations of the French Government
Bearing in mind that the Court of Justice is prepared, where questions submitted to it are imperfectly framed, to reply in a manner which assists the court dealing with the merits to apply Community law in deciding the action before it, the French Government considers that the complaint of the plaintiff in the main action is concerned less with the existence of the processing coefficient in Regulation No 2744/75 than with the application of that coefficient in the calculation of the* monetary compensatory amounts on maize meal in Regulation No 1910/76. The question submitted thus turns on the point whether the application of that coefficient to the calculation of the monetary compensatory amounts on maize meal does not breach the principles of free competition and of the equal treatment of undertakings within the Community.Condition for the validity of the monetary compensatory amountsExamining first the requirements laid down by the Court of Justice as conditions for the legality of monetary compensatory amounts, the French Government observes that it is clear, in particular from the judgment of 20 April 1978 in Joined Cases 80 and 81/77 Commissionnaires Réunis [1978] ECR 927, that monetary compensatory amounts do not constitute unlawful obstacles to intra-Community trade only in so far as they are justified by the need to correct the effects of variations in unstable rates of exchange which, in a system of common organization of the market in agricultural products based on common prices, would otherwise be liable to cause disturbances in the trade in such products. If on the other hand the amounts are fixed at an excessively high level they introduce a distortion into intra-Community trade and thereby constitute a charge having an effect equivalent to customs duties.Whilst the Commission enjoys a wide discretionary power in fixing monetary compensatory amounts it is nevertheless clear from the main action that the method of calculation adopted for fixing the monetary compensatory amounts for maize meal disregards the requirement laid down in the case-law of the Court that patterns of trade shall not be affected. That observation is justified by two considerations concerning respectively: (1) the use of coefficients in calculating the monetary compensatory amounts on processed products, and (2), the incidence of production refunds.(1) It is clear from Article 2 (2) of Regulation No 974/71 of the Council that monetary compensatory amounts on processed products must have as their sole objective the compensation of the incidence on the prices of such products of monetary compensatory amounts affecting the basic products on which they depend and that they may not exceed that limit.Although the employment in the calculation of the monetary compensatory amounts to be charged on maize groats and maize meal of the coefficient of 1.80 laid down in Regulation No 2744/75 for the calculation of the levies on the same processed products appears to be justified by the fact that, according to that regulation, the variable component in the levy must correspond to the incidence of the levies fixed for basic products on the prime cost of the processed products, the application of that method to the monetary compensatory amounts in fact means that the monetary compensatory amounts on the processed products are much higher than is necessary to compensate strictly for the incidence as such — prescribed by Article 2 (2) of Regulation No 974/71 — of the monetary compensatory amount applicable to the basic product on the price of the processed product. The Commission in fact fails to take account of the fact that a basic product can provide several processed products and that in this case it is possible to manufacture from 1 tonne of maize: 0.555 tonne of meal, 0.168 tonne of flour, 0.145 tonne of bran and 0.109 tonne of germ.In order to observe the principle that monetary compensatory amounts should not affect patterns of trade, monetary compensatory amounts imposed on the various secondary products must be fixed in such a way that their sum is equal to the monetary compensatory amount on the basic product. The compensatory amounts for other derived products should accordingly be deducted from the monetary compensatory amount on meal. Moreover in the said Regulation No 1771/77 of 29 July 1977, the Commission has itself altered its method of calculation by reducing the coefficient for meal from 1.80 to 1.60 but, according to the French Government, that alteration is not sufficient to correct the distortion resulting from the imposition on meal alone of the entire monetary compensatory amount for the basic product. The French Government draws particular attention to the advantages which the method employed by the Commission gives German producers of meal over French producers and the grave distortion of competition which is thereby created.The observations concerning the arbitrary nature of the application of the processing coefficient based on Regulation No 2744/75 are confirmed by the fact that in certain cases the coefficients adopted by the Commission for calculating monetary compensatory amounts differ from those in Regulation No 2744/75 precisely because they fail accurately to represent the incidence on the processed products of the amounts affecting the basic product.(2) With regard to the incidence of production refunds in appraising the validity of the coefficient of 1.80, the French Government considers that that incidence must be taken into consideration in order to re-establish equality in conditions of competition between producers in the various Member States of the Community. The fact that the production refunds are granted in “green currency” creates a distortion in favour of producers in Member States with a “hard” currency at the expense of those in Member States having a “soft” currency. Where a producer established in a Member State with a “hard” currency obtains basic products (maize) in a Member State with a “soft” currency in order to process them in his factories for re-export to a Member State with a “soft” currency, the present system of calculating the monetary compensatory amounts ultimately over-compensates for the difference between currencies. In the present state of the “green” parities the production refund paid in green German currency in higher than the same refund paid in green French currency. In order to rectify that difference in the supply costs of German and French meal-producers it is sufficient to take as the basis of the monetary compensatory amount to be applied to processed products the price of the corresponding basic raw material under deduction of the production refund previously paid instead of the price of that basic raw material alone.In sum the French Government considers that:(1) The principle that measures to compensate for monetary fluctuations shall be neutral requires that the sum of the monetary compensatory amounts on processed products taken individually must not exceed the monetary compensatory amount applicable to the quantity of the basic product required to obtain such processed products.Where a basic product provides several secondary products any method of calculating monetary compensatory amounts on such secondary products which imposes on one such secondary product the entire monetary compensatory amount on the basic product without regard to the true incidence of that monetary compensatory amount is incompatible with Community law where the other secondary products are also subject to their own monetary compensatory amounts.In particular, the employment of the coefficient 1.80, which is provided for in Regulation No 2744/74, for calculating monetary compensatory amounts on maize meal in Regulation No 1910/76 is incompatible with Community law.(2) A method of calculating the monetary compensatory amounts on processed products which fails to take account of the incidence of production refunds paid on the basic products also imposes on traders a charge which is not directly related to monetary fluctuations and is accordingly incompatible with Community law.”
C —Observations of the Council
First question
According to the Council, a reply to the first question concerning the validity of Regulation No 2744/75 is not required to permit the national court to decide the case pending before it and a reply should not be given. The Council nevertheless considers, having regard to the decisions of the Court in Tedeschi (judgment of 5 October 1977 in Case 5/77 [1977] ECR 1555), Cayrol (judgment of 30 November 1977 in Case 52/77 [1977] ECR 2261) and Pigs Marketing Board (judgment of 29 November 1978 in Case 83/78 [1978] ECR 2347) and the opinion of the Advocate General in Viola (opinion of 5 October 1978 in Case 26/78 [1978] ECR 1781), that this action gives the Court an opportunity to consider afresh the problem of the relevance of questions submitted under Article 177 of the EEC Treaty. The Council considers that the Court of Justice should request the national courts, with a view to improving the conditions of cooperation between the Court of Justice and the national courts, to have greater regard for the criterion of “necessity” embodied in the second paragraph of Article 177 of the Treaty by indicating such necessity as clearly as possible in requests for preliminary rulings. The Council draws the attention of the Court of Justice to the solution adopted in the constitutional law of the Federal Republic of Germany. Article 100 of the German Grundgesetz [Basic Law] provides that “if a court considers a law, upon whose validity its decision depends, to be contrary to the constitution it must stay the proceedings and refer the matter to the Federal Constitutional Court”. Article 80 of the Gesetz über das Bundesverfassungsgericht [Law on the Federal Constitutional Court] defines the scope of that requirement as follows:1. Where the conditions laid down in Article 100 (1) of the Basic Law are fulfilled the courts shall immediately request the Federal Constitutional Court to give a ruling.2. In the statement of its grounds the order making the reference shall indicate the extent to which the decision of the court depends upon the validity of the provision and also the superior rule of law with which that provision is incompatible ...3. ...”The Council observes that in the absence of any provision to that effect in the Treaty, the national courts cannot be required to set out the reasons for the relevance of the decision making the reference. If the national courts were voluntarily to follow that or a similar procedure the position would be improved for all concerned in the proceedings in that Article 177 of the Treaty would be used in the actions for which it was really intended.
Second question
The Council considers that the judgment of the Court of 11 October 1977 in Case 125/76 Cremer [1977] ECR 1593 and the judgment of the Court of 9 March 1976 in Case 95/75 EFFEM [1976] ECR 361 show that flat-rate calculations are admitted with a view to the practical application of rules where such calculations are not applied too indiscriminately and too generally and where a distinction is drawn, for example, based on tariff headings.Nevertheless, since the Council considers that the legal aspect of the second question relates to the validity of the regulations of the Commission, it adopts the arguments advanced by the Commission.
D —Observations of the Commission
Although it considers that only the second question is relevant to the resolution of the dispute, the Commission gives its views, in the light of the general situation which it required to take into consideration, on both the infringement of Regulation No 974/71 of the Council and the infringement of Article 40 (3) of the EEC Treaty.Infringement of Regulation No 974/71 of the Council of 12 May 1971 (overcompensation at the expense of meal)In response to the arguments put forward by the plaintiff in the main action to the effect that the employment of the coefficient 1.80 in calculating the monetary compensatory amount applicable to maize meal over-compensates, at the expense of meal alone, for the incidence on the price of maize of the fall of the French franc against the green franc, the Commission remarks that it is common ground that in technical terms 1.80 tonnes of maize produces 1 tonne of meal. On the other hand it maintains that “opinion is divided ... regarding the secondary products which are in fact produced in the manufacture of maize meal”. According to the Commission's information, flour is obtained from maize only in France and Great Britain and not in Germany or the Benelux countries. On the other hand, germ is not marketed as such but is processed into oil which provides oilcake as a secondary product. Monetary compensatory amounts are not applicable to those two products. In addition marketing opportunities for secondary products other than maize meal are poor because such secondary products encounter competition from animal feeding-stuffs made maize gluten and kibbled maize which are imported from non-member countries without the application of monetary compensatory amounts.Faced with that unclear position, the Commission had to adopt a standard and practical solution, the processing coefficient 1.80. In 1976 the Commission had in fact no information on the basis of which it could depart from the methods of conversion generally applied at the time. However in the light of more recent information it adopted two regulations, No 1771/77 of 29 July 1977 and No 746/79 of 11 April 1979 (cited above), altering the processing coefficient for the calculation of monetary compensatory amounts applicable to maize meal by reducing it from 1.80 to 1.60 and subsequently from 1.60 to 1.50. Those modifications were decided in particular in view of the steady increase in exports of maize meal from Germany and the Benelux countries to France.The Commission is aware that each time flat-rate measures are adopted it is impossible to have complete regard for the particular circumstances of all undertakings effected. It nevertheless considers that the power of appraisal which the Court has held that the Commission possesses with regard to the system of monetary compensatory amounts, in particular in the judgment of 24 October 1973 in Case 5/73 Balkan [1973] ECR 1091, extends to the right to opt for a flat-rate system.Infringement of Article 40 (3) of the EEC TreatyThe complaint of infringement of Article 40 (3) of the EEC Treaty is unfounded. Regard must in fact be had to the fact that the French processing industry can obtain supplies of French produced maize whose price is lower than that of maize imported from non-member countries. If the complaints of the plaintiff were well founded there should have been a fall in French exports of maize meal after 1976 which is not the case.In conclusion the Commission suggests that the Court should reply that consideration of the questions submitted by the Tribunal Administratif, Châlons-sur-Mame, has disclosed no factor of such a kind as to affect the validity of Commission Regulations Nos 1910/76 and 2466/76.
III —Oral procedure
At the hearing on 15 January 1980 the plaintiff in the main action, represented by Mr Veroone, of the Lille Bar, the Government of the Italian Republic, represented by its Agent, M. Favara, the Council of the European Communities, represented by its Agent, B. Schloh, and the Commission of the European Communities, represented by its Agent, J. Delmoly, assisted by Mr Reifenrath in his capacity as an expert, submitted oral argument.The Advocate General delivered his opinion at the sitting on 11 March 1980.
IV —The course of the procedure
By an order of 26 March 1980 the Court, having heard the opinion of the Advocate General, ordered the reopening of the oral procedure and requested the plaintiff in the main action, the Italian Government, the French Government, the Council and the Commission to supplement their observations by replying in writing to certain questions. In the replies which they gave, the plaintiff in the main action and the French Government confirmed their previous observations whilst the Commission clarified its position on certain points.In so far as concerns the ratio underlying the processing coefficients of the other products which, in addition to groats and meal, are obtained from maize, the Commission recalls that, from the outset the coefficients for calculating the levies applicable to those secondary products were established not on a quantitative basis but by taking account of the economic protection necessary to stabilize the prices of such products. Having regard to the links between monetary compensatory amounts and levies, the neutrality which is desirable for monetary compensatory amounts must be reconciled with the requirements of protection arising from those links. In other words, the protection desired at the external frontiers would be jeopardized if the processing coefficients used in calculating compensatory amounts differed excessively from those used in the calculation of levies. That is one of the basic reasons for which the Commission at first adopted as they stood the processing coefficients which applied in the calculation of the levies for the calculation of the monetary compensatory amounts applicable to products processed from cereals. In order to meet so far as possible the criticism made against that method of calculation the Commission reduced the processing coefficients for the calculation of monetary compensatory amounts but it only did so cautiously and gradually.With regard to the principle of the “ceiling”, that is to say the requirement that the sum of the monetary compensatory amounts on all the derived products of a basic product should not exceed the monetary compensatory amounts on that basic product, the Commission considers that if it is desired to fix a ceiling, it is necessary to determine clearly the principal processed product and its processing coefficient together with the quality and the categories of the various secondary products obtained. That calculation is extremely difficult to make because it depends on the quality of the raw material used and on the various markets on which the processed products obtained are sold. The Commission considers nevertheless that it has taken account, so far as possible, of the concept of a ceiling.Should the Court declare that the application of the processing coefficients is excessive the Commission would be prepared to contemplate abolishing compensatory amounts in respect of germ since it considers that at Community level a ceiling would in practice be thereby attained.
V —Oral procedure
At the hearing on 20 May 1980, the plaintiff in the main action, represented by Mr Veroone, of the Lille Bar, the Government of the French Republic, represented by its Agent, H. Marty-Gauquie, the Council of the European Communities, represented by its Agent, B. Schloh, and the Commission of the European Communities, represented by its Agents, P. Gilsdorf and J. Delmoly, assisted by Mr Reifenrath, presented oral argument.The Advocate General delivered a further opinion at the sitting on 17 June 1980.
Decision
First question: The validity of Regulation No 2744/75 of the Council
Second question: The validity of Commission Regulation No 938/77 in so far as it fixes the monetary compensatory amounts on maize meal by applying the processing coefficient 1.8
A —General considerations
B —The contested processing coefficient
C —Consequences of the invalidity
Costs
Operative part
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