Commission of the European Communities v Federal Republic of Germany (247/81)

III —Submissions and arguments of the parties

According to the Commission, the provision expressly set out in Paragraph 9 (2) of the AMG, under which medicinal preparations may be placed on the market only by a pharmaceutical undertaking having its headquarters in the area in which that Law is applicable would mean that medicinal preparations may, in principle, be imported without restriction, but cannot be “placed on the market” if that condition is not met. For this reason, the condition imposed on pharmaceutical undertakings is undeniably an import restriction. The restrictions entail a serious interference with the freedom of action of foreign undertakings and a proportional increase in costs.It was for this reason that Directive 70/50/EEC of 22 December 1969 provided that measures which “make access of imported products to the domestic market conditional on having an agent or representative in the territory of the importing Member State” (Article 2 (2) (g)) must be considered as having an effect equivalent to a quantitative restriction.The Commission examines the question whether the disputed provision, which in its view is contrary to Article 30, may be justified by Article 36, in particular because of the protection it affords to the life and health of persons and animals.The Commission concludes that no requirement relating to the protection of health would be affected if a foreign pharmaceutical undertaking marketed in the Federal Republic of Germany, from its headquarters situated in one of the Member States of the EEC, a medicinal preparation manufactured by it. Adequate possibilities also exist for bringing civil or criminal proceedings against undertakings established in other Member States.The Government of the Federal Republic of Germany sets out the reasons which caused the Bundestag to strengthen the Law on medicinal preparations in 1976. In particular, the Law includes a strict system of surveillance, liability without fault on the part of the pharmaceutical undertaking and increases preventive protection by making breaches of the obligations imposed by the Law punishable by penal sanctions or administrative fines. In the opinion of the German Government, it is very important for the purposes of permanent surveillance, and to ensure respect for the provisions of the Law, to have a person responsible for marketing in the geographical area in which the Law is applicable.The German Government sees the necessity for a responsible representative in three respects:1. In the context of continuous surveillance, it was provided that the pharmaceutical undertaking would participate in a system of recording the risks caused by medicinal preparations. In certain cases, it is necessary to withdraw a medicinal preparation from the market immediately and, in that case, it must be possible to identify as quickly as possible all the purchasers and users of defective consignments. Experience has shown that making contact with manufacturers established in certain Member States far from Germany is not easy, leaving aside the problem of language. The only way to ensure effective protection of health is to be able to contact quickly and informally someone responsible for placing the medicinal preparation in question on the market.2. Furthermore, if there is no such person in the Federal Republic of Germany, individuals harmed by medicinal preparations will have much greater difficulty in bringing civil actions for damages. Although there is a European Convention on Jurisdiction and the Enforcement of Judgments, it is applied only by six Member States and in any event requires a complicated procedure. The enforcement of a judgment in a foreign country also gives rise to uncertainty about public policy reservations and an appreciable risk as regards insolvency.3. The German Government also considers that the presence of a representative of the pharmaceutical undertaking is necessary in order to ensure the preventive effect of the provisions of the Law relating to penal and administrative sanctions. At present, there is no adequate means of applying those provisions to pharmaceutical undertakings that place on the market in the Federal Republic of Germany medicinal preparations coming from another Member State.The German Government endorses the opinion of the Bundestag, which rejected the draft amendment to the Law on the ground that the provision in question adversely affected the pattern of trade in medicinal preparations between States only to a slight extent and moreover was justified under Article 36 of the EEC Treaty.The German Government also refers to the case-law of the Court according to which it is in principle for the Member States, in areas not harmonized, to decide on the degree of rigour in the matter of health protection and to set up the corresponding system of supervision, as long as the national measures do not result in a disguised discrimination against imported goods and as long as the restrictive effects upon trade are not disproportionate to the health policy-objective which is sought to be achieved. The German Government refers to the judgment of 17 December 1981 in Case 272/80, Biologische Producten, [1981] ECR 3277 and to the judgment of 15 July 1982 in Case 40/82, Commission ν United Kingdom, [1982] ECR 2793.It is clear that the system of protection provided for in the AMG does not have the hidden objective of excluding from the German market medicinal preparations of foreign origin or of discriminating against them. In the opinion of the Federal Government, the questions whether the restriction on the free movement of goods was disproportionate, having regard to the result to be achieved, and whether the objectives of the rules could be attained in an identical manner by other means having a lesser effect on inter-State trade, must be answered in the negative.The rules in dispute do not require the setting up of additional headquarters, but only that someone — either a subsidiary or a branch of the foreign undertaking, or a third party (other manufacturers of pharmaceutical products, wholesalers or pharmacists) having headquarters in the Federal Republic of Germany — is prepared to undertake responsibility for the distribution of the medicinal preparations. Those conditions do not presuppose any major or costly restructuring of the system of distribution. The Federal Government is unaware of any case in which these questions ever gave rise to problems. In practice, all pharmaceutical undertakings of other Member States either have branches or subsidiaries or close commençai links with German pharmaceutical undertakings, if only for commercial reasons.In its first directive on pharmaceutical products (65/65, Official Journal, English Special Edition 1965-1966, p. 20) the Council considered that the manufacturer of medicinal preparations and the person responsible for the marketing of them should not be one and the same. The Federal Government cites, by way of example, Article 4 (2), Point 1 and Article 9 which expressly mention the civil and criminal liability of the manufacturer and of the person responsible for placing the product on the market. Compared to the minor restriction on trade in medicinal preparations between Member States, the danger to public health that the AMG seeks to prevent is very great. The German Government considers that for the purpose of making possible permanent surveillance, of guaranteeing the rights of the injured consumer in the area of civil liability and of ensuring the general preventive effect of the penalties provided for in the Law there are no means less stringent than the obligation laid down in Paragraph 9 (2) of the AMG.The Commission, in its reply, points out that it is aware that the provision in question does not include a formal obligation to set up an additional headquarters in the Federal Republic of Germany, but claims that it is none the less undeniable that, in practice, the provision has that effect. In any event, anyone who declares his willingness to undertake the responsibility for the distribution of a medicinal preparation throughout the entire territory of the Federal Republic of Germany will be paid accordingly.The Commission considers that the existence of a person responsible for marketing may be a practical advantage in the context of the permanent surveillance of medicinal preparations, but it is not a necessity.The Commission takes the view that the defendant is unnecessarily dramatizing the situation by claiming, when speaking of the need to withdraw certain medicinal preparations, that such withdrawals are not rare. If a medicinal preparation must in fact be withdrawn within a period of a few hours, the only solution is to warn the population through radio, television and the press.The Commission also points out that the need to ensure that a civil action for damages can be brought is not essential to the protection of public health. Since criminal offences in this area are generally offences of negligence, the Commission wonders to what extent the possibility of punishing such offences (most frequently by way of fines) has a general preventive effect.The Commission does not accept the German Government's interpretation of Council Directive 65/65. The Commission reserves the right to pursue its argument to the effect that this provision contains a complete body of rules and that the Member States are therefore in no way entitled to decide that the person responsible for placing a product on the market must have his headquarters within the country.The Government of the Federal Republic of Germany, in its rejoinder, does not dispute that the contested provision could theoretically, in exceptional cases, make the sale of medicinal preparations imported into the Federal Republic of Germany more difficult. None the less, in practice, all respectable pharmaceutical undertakings have at least one representative in the Federal Republic of Germany. The cost of this is not greater than that incurred by a foreign producer who wishes to maintain relations with the German authorities and his customers from a base situated abroad. Accordingly there can be no question of an appreciable adverse effect on trade between Member States.Even if the free movement of goods had been adversely affected, this was justified by the need to protect the health ofthe German population. The German Government gives several examples of the practice followed by the German supervisory authorities. The German Government considers that effective surveillance is possible only if the customs clearance certificates relating to each individual consignment can be examined at any time by the competent authorities. The need to make inquiries at the premises of the manufacturers established in other Member States sometimes involves a loss of precious time. The authorities cannot, every time they suspect a danger, call for the withdrawal of the product through the press and by radio, since this could damage the reputation of the undertaking involved. Furthermore, foreign undertakings are not always prepared to react immediately.In spite of its doubts, the German Government proposed that the Bundestag amend the Law as follows:“In the area in which this Law is applicable, pharmaceutical products may be placed on the market only by a pharmaceutical undertaking having its headquarters in a Member State of the European Community.”However, the competent committee of the Bundestag was unable to decide to recommend the adoption of that version to the plenary assembly of the Bundestag. The German Government refers to that committee's report.The German Government considers that the provision is necessary and that its repeal would once again represent harmonization at the lowest level. Furthermore the repeal would injure and discriminate considerably against manufacturers of pharmaceutical products having their headquarters in the Federal Republic of Germany or who have there, in any event, a subsidiary, an establishment or a duly authorized representative. They would all be subject, as in the past, to strict surveillance by the German public health authorities, while manufacturers not represented in the Federal Republic would be able to avoid such surveillance to a large extent. If manufacturers who are nationals of other Member States cease to have a representative in the Federal Republic, that would work to the detriment of the integration of the Common Market.