Commission of the European Communities v Council of the European Communities (218/82)

III —Submissions and arguments of the parties

The Commission submits that Article 2 (2) of Regulation No 1699/82 is contrary to Articles 30 and 34 of the EEC Treaty and consequently contrary to Article 9 of the Treaty. The purpose of Article 4 (2) is to require the United Kingdom to prevent the movement of spirits from its territory. The Commission draws the Court's attention to the French version of the provision which reads:“Le Royaume-Uni prend les mesures nécessaires pour que les quantités importées des États ACP dans les conditions fixées aux articles 1 et 2 soient réservées aux besoins de sa consommation intérieure.”This wording, the Commission contends, leaves no doubt that the object of the provision is to prevent the re-export to other Member States of the Community of the spirits in the United Kingdom instalment. It is therefore contrary to Article 34 of the Treaty.The regulation, by restricting exports from the United Kingdom, excludes the possibility of other Member States importing any of the spirits from the United Kingdom. It is therefore contrary to Article 30 of the Treaty.The disputed provision is also contrary to Article 9 of the Treaty as the products in question are in free circulation in the Community.The Commission does not accept that Article 4 (2) can be interpreted as requiring the United Kingdom to restrict the import of quantities of the spirits within the instalment of the quota intended for the United Kingdom because:(i) the basis of the instalment is that it is for United Kingdom consumption (Article 2) and it is calculated on the basis of the largest quantity imported annually into the United Kingdom during the three previous years and taking account of the growth rate of 40% on the market of the United Kingdom;(ii) it is not therefore intended to represent a figure other than one of actual imports for consumption;(iii) for the United Kingdom to refuse to accept its instalment, even if it could, would be contrary to the principal object of the regulation and to the commitment in Protocol No 5 annexed to the Second ACP-EEC Convention, which is to grant the right of entry of the whole quota;(iv) it would be unlawful for the United Kingdom to refuse to accept its instalment as the opening of the quota including that instalment is an act of the common commercial policy of the Community, which the United Kingdom is not competent to modify.Although the object of the regulation is to give effect to the Community's commitments in the Second ACP—EEC Convention, this does not justify a breach of the fundamental principle of the free movement of goods.The Community institutions must, in the exercise of their powers, respect the unity of the market. In order to introduce measures which run counter to that principle it is necessary to find in the Treaty a provision which either expressly or by necessary implication provides for or authorizes the introduction of such measures (Joined Cases 80 and 81/77 Ramel v Receveur des Douanes [1978] ECR 927).The Commission is of the opinion that the Community's obligations under the Second ACP—EEC Convention could be met in a manner consistent with maintaining the free movement of goods within the Community, which it sets out in its proposals to the Council. These proposals envisage a Community reserve, arrangements for its sharing and for returning unused parts of the quotas to the reserve.The Commission argues that any threat to the legitimate interests of a Member State which might arise could be adequately protected by an exercise by the Commission of its powers under Article 115 of the Treaty.The Commission does not deny that the Council has a duty to enact a regulation to give effect to the Community's commitments. It therefore submits that the Court in the exercise of its powers under Article 174 of the Treaty should state that the right to import duty free into the Community from 1 July 1982 to 30 June 1983 the quantities of goods set out in Article 1 of the regulation should be considered definitive.The Council in its defence rejects the Commission's submission that Article 4 (2) of Regulation No 1699/82 constitutes an obstacle to the free movement of goods within the Community. The true meaning of Article 4 (2), it claims, may only be ascertained by examining the background to Regulation No 1699/82.Regulation No 1699/82 is designed to implement Protocol No 5 to the Second ACP—EEC Convention. The Council considers that the system of calculating the quotas to be imported into the Community is compatible with the terms of the Protocol. Similar arrangements involving the total distribution of a tariff quota have been before the Court in Case 131/72 Grosoli [1973] ECR 1555, Case 35/79 Grosoli [1980] ECR 177 and Case 124/79 van Walsum [1980] ECR 813, in which it has not been suggested that these arrangements are contrary to Community law. Provision for a reserve as suggested by the Commission would make the entire system more flexible but, according to the Council, would have been undesirable given the sensitivity of the products in question on the Community markets.The existence of a reserve would have made it possible for the Member States to draw on the reserve, thus leading to their share of the quota and the annual growth rate being exceeded.Given the circumstances in which Regulation No 1699/82 was adopted, the Council argues that Article 4 (2) is not to be interpreted as prohibiting the reexport of rum from the United Kingdom but rather as imposing an obligation on the United Kingdom to limit the quantities imported to those intended for domestic consumption.This interpretation of Article 4 (2) is based on the English version of the text. The Council admits that the French version of the text is susceptible of being interpreted as a prohibition on re-export. However, the Council submits that in the present case particular weight should be given to the English text because it is the language of that Member State and because is results in a less onerous obligation for the Member State concerned.The Council draws the Court's attention to the measures taken by the United Kingdom to fulfil its obligation under the regulation. Provision for the administration of the United Kingdom's share of the tariff quota is made by the Customs Duties (Quota Relief) Order 1982, Statutory Instrument 1982, No 884. According to this Order goods shall be treated as forming part of the relevant United Kingdom quota on acceptance of an entry for home use accompanied by the relevant documents. The Council understands that the practical effect of the Order is that the goods will not be admitted to the tariff quota unless excise duty is paid when the entry for home use is accepted. There is no prohibition on re-export, but home status is irreversible and repayment of excise duty is not obtainable. The Council points out that the re-export would not be economically profitable due to non-repayment of the excise duty. If re-export does not in fact take place this might be due to economic considerations or to the fact that the amounts imported under the quota for domestic use are limited to those required for home consumption and there is, therefore, no surplus available for export.The Council acknowledges that the provisions of the Treaty relating to the free movement of goods are also applicable to the Community institutions, including the Council. However, the Council submits that, when adopting secondary legislation, the Community legislature may make provisions which would be contrary to the Treaty if made by a national legislature. The Council recalls the recognition by the Court of the existence of a power to institute charges for veterinary controls (Case 46/76 Banhtiis v The Netherlands State [1977] ECR 15) and that the Court in several judgments has acknowledged the legality of monetary compensatory amounts.The Council argues that the Court should, in determining what constitutes a measure having equivalent effect, weigh the purpose and advantage of the measure against any potentially restrictive effect the measure might have, particularly where the object of the measure is the fulfilment of the Community's international obligations.The method of calculating the annual quota of rum for the United Kingdom and the provision inserted in Article 4 (2) to ensure that imports charged against the United Kingdom instalment are in fact intended for consumption in the United Kingdom, give effect to Protocol No 5, whilst at the same time taking account of the sensitivity of the product on Community markets and in particular of the need not to jeopardize the traditional outlets for rum produced in the French Overseas Departments.The Council rejects the argument of the Commission that if its proposal had been adopted, the legitimate interests of one or more Member States could be protected by virtue of Article 115. Article 115, the Council states, applies only where national measures of commercial policy exist in the absence of any common commercial policy; in the present case a Community regulation based on Article 113 exists and its subject-matter forms part of the common commercial policy.Finally, the Council points out that it has, since 1975, adopted nine regulations with essentially the same provisions. Until the present case the validity of these regulations has never been questioned either by the Commission or by any other interested party.The Commission, in its reply, states that it has expressed doubts as to the compatibility of certain provisions of the Council regulations with the provisions of the Treaty relating to free movement of goods. In the face of the persistent refusal by the Council to take account of these observations, the Commission made the following declaration which was recorded in the minutes of the Council meeting which adopted Regulation No 1699/82:(a) The Commission notes that certain provisions adopted by the Council in the regulation opening the Community tariff quota for the import of the products falling within subheading 22.09 C I of the CCT originating in the African, Caribbean and Pacific States are incompatible with the rules of the EEC Treaty.As it had informed the Council in COM(82) 243 final, the Commission firmly intends to have recourse to the provisions of Article 173 of the Treaty.(b) Abolition of the Community reserveThe Commission regrets the fact that the Council's draft regulation adopted by the Working Party excludes the constitution, proposed by the Commission, of a Community reserve.”Turning to the method of calculating the rate of increase of the quantities of rum to be imported, the Commission argues that to allow the United Kingdom a higher growth rate than that of the other Member States does not imply that the quantities as progessively increased are to be restricted to consumption within the United Kingdom.As to the procedure adopted by the United Kingdom to implement Regulation No 1699/82, the Commission says that it limits the free movement of goods from the United Kingdom in that it imposes a financial burden on any proposed export from the United Kingdom to any other Member State of the Community of goods covered by the Protocol. If the Council accepts that such a measure complies with Article 4 (2) of the regulation, it is admitting that the regulation is illegal in that it creates barriers to the movement of goods from the United Kingdom.The Commission does not accept that the Council has power to impose restrictions on the free movement of goods in order to give effect to its international agreements. The enactment of a regulation which requires the compartmentalization of the Community, not to protect the lawful interests of a Member State but to prevent a Member State from exporting to all other Member States, is not within the competence of the Council.The Council, in its rejoinder, argues that Article 2 (a) of the Protocol which provides for a method of calculation of the annual quantities increased by a yearly growth rate of 40% on the market of the United Kingdom and 18% on the other markets of the Community clearly implies that it cannot have been intended to grant the ACP States a right to duty-free importation of the whole of the Community's annual quota into the United Kingdom, regardless of whether the imports were intended for consumption in the United Kingdom or in the other Member States. It was intended that separate instalments should be fixed for the United Kingdom and the other Member States. It follows that the Community is entitled to take steps to ensure that amounts charged against the United Kingdom instalment at the time of importation are intended for United Kingdom consumption.The Council feels that there would be no purpose in the export from ACP countries of rum duty free to the United Kingdom unless there was a market for it there. If there was no market in the United Kingdom the quantities in question could be exported directly to the other Member States as opposed to being imported into the United Kingdom and exported from there to other Member States.The French Government, in its intervention, points out that the French and English versions of Article 4 (2) of Regulation No 1699/82 have two different meanings. Whilst the French version may be interpreted as being intended to have a restrictive effect on trade within the common market, the English version must be interpreted as providing for “voluntary restraint” in respect of United Kingdom imports, taking effect at the external frontiers of the Community. In the opinion of the French Government, the English version of Article 4 (2) should prevail as the provisions relate to the United Kingdom alone.Article 4 (2) does not lay down and is not intended to bring about any quantitative restrictions on imports by other Member States. It is not, therefore, contrary to Article 30 of the Treaty.Article 4 (2) imposes three obligations on the United Kingdom:

The United Kingdom authorities must ensure that these conditions are observed. There are no further obligations imposed on the United Kingdom Government. Since there is no provision prohibiting the re-export of rum, Regulation No 1699/82 docs not infringe Article 34 of the Treaty.In order to ascertain the true meaning of Article 4 (2), proper regard must be had to the context in which it was adopted.The purpose of the Protocol on rum is to ensure the development of existing traditional trade flows between certain ACP States and the United Kingdom on the one hand and between the Overseas French Departments and other Member States on the other hand. It is clear from Article 1 of the Protocol that the development of one trade flow must not inhibit the development of the other traditional trade flows. The French Government considers that the system chosen by the Council is the best method of ensuring the achievement of this objective. The division of the whole of a quota amongst the Member States has been used for other products in the Community (Council Regulation No 3378/82 of 8 December 1982 applying generalized preferences for 1983 in respect of certain industrial products originating in developing countries (Official Journal 1982, L 363, p. 92) and Council Regulation No 2787/79 of 10 December 1979 opening, allocating and providing for the administration of Community tariff quotas for certain products originating in developing countries (Official Journal 1979, L 328, p. 1)). The system is not contrary to the Protocol and furthermore it does not seem to infringe the Treaty (Case 131/73 Grosoli [1973] ECR 1555, Case 35/79 Grosoli [1980] ECR 177, Case 124/79 van Walsum [1980] ECR 813).Article 4 (2) reflects the objectives of the Protocol. It obliges the United Kingdom to ensure that exports to the United Kingdom market correspond to its consumption requirements and not to any desire to circumvent the growth rates fixed by the Protocol for the calculation of the tariff quota.The French Government considers that the system adopted is sufficiently flexible. The quota is divided among the Member States on an annual basis which enables it to be adapted to demand. Article 2 (c) of the Protocol enables the Council to review the annual percentage increases fixed by the Protocol should the consumption of rum increase significantly in the Member States.