C-7/68

JUDGMENT OF 10. 12. 1968 — CASE 7/68

trade in the goods in question is hindered 5. The prohibitions and restrictions re­ by the pecuniary burden which it im­ ferred to in Article 36 of the EEC Treaty poses on the price of the exported artic­ cannot justify the retention of measures, les. such as customs duties or charges having 4. The prohibitions or restrictions on im­ equivalent effect, which fall outside the ports and exports referred to in Article 36 scope of the prohibitions referred to in of the EEC Treaty are by nature clearly the chapter relating to the elimination of distinguished from customs duties and quantitative restrictions between Mem­ assimilated charges whereby the econ­ ber States. omic conditions of importation or ex­ In order to avail themselves of Article 36, portation are affected without restrict­ Member States must observe the limita­ ing the freedom of decision of those tions imposed by that provision both as involved in commercial transactions. regards the objective to be obtained and Because such measures constitute an as regards the nature of the means used exception to the fundamental, principle to attain it. The levy of a tax on the of the elimination of all obstacles to the exportation of goods possessing artistic free movement of goods between Mem­ or historic value is incompatible with the ber States, they must be strictly con­ provisions of the Treaty. strued.

In Case 7/68

Commission of the European Communities , represented by its Legal Adviser, Armando Toledano, acting as Agent, with an address for service in Luxembourg at the offices of its Legal Adviser, Émile Reuter, 4 boulevard Royal,

composed of: R. Lecourt, President, A. Trabucchi and J. Mertens de Wilmars,

COMMISSION v ITALY

Presidents of Chambers, A. M. Donner, W. Strauß, R. Monaco and P. Pescatore (Rapporteur), Judges,

Advocate-General: J. Gand

Registrar: A.Van Houtte

gives the following

I — Facts failed to fulfil the obligations imposed on it by Article 16, and gave it a time-limit of Italian Law No 1089 of 1 June 1939 on the two months in which to abolish the disputed protection of articles of artistic or historic tax on transactions with other Member interest (published in the Gazzetta Ufficiale, States. This time-limit was extended to 31 8 August 1939, No 184) contains several December 1965 after the Commission had provisions relating to the exportation of been informed by the Italian Government such articles; in particular, it provides, that a parliamentary committee had been according to the circumstances, for an set up with the task of studying a system of absolute prohibition on exportation (Art­ protection which would take account of the icle 35), the requirement of a licence (Article Commission's observations. 36), a right of pre-emption vested in the On 16 May 1966, the Commission, in reply State (Article 39) and the imposition on to a fresh request for an extension, informed exportation of a progressive tax on the the Italian Government that it had already value of the article ranging by successive granted an extension sufficient to allow for stages from 8 % to 30% (Articles 37). the abolition of the tax in question, having In January 1960, the Commission asked the regard to the necessary parliamentary pro­ Italian Republic to abolish the tax as cedures, and that it reserved the right to regards the other Member States by the end bring the matter before the Court of Justice of the first stage of the transitional period, at the appropriate time. that is to say, before 1 January 1962, since A draft law by the Government to exempt it considered that the tax had an effect exports to Member States of the Com­ equivalent to a customs duty on exportation munities from payment of the tax was ap­ and so was contrary to Article 16 of the proved by the Italian Senate on 26 July 1967 EEC Treaty. After a prolonged exchange of and passed to the Chamber of Deputies. correspondence, the Commission by letter The draft law lapsed on dissolution of the of 25 February 1964 set in motion the pro­ Italian Parliament on 11 March 1968. cedure laid down by Article 169 of the EEC Meanwhile, the Commission had brought Treaty and called on the Italian Govern­ proceedings before the Court of Justice by ment to submit its observations on the an application lodged on 7 March 1968. alleged violation of the Treaty by the Italian Republic. The observations did not II — Conclusions of the parties satisfy the Commission, which then by letter of 24 July 1964 delivered the reasoned The applicant claims that the Court should: opinion provided for by the first paragraph of Article 169 of the Treaty. — declare that the Italian Republic has The Commission stated its reasons for failed to fulfil the obligations imposed on declaring that the Italian Republic had it by Article 16 of the Treaty establishing

the EEC by continuing to levy against disregarding the practical difficulties facing other Member States after 1 January the Italian Republic in the present case. 1962 the progressive tax provided for by The applicant points out that the Italian Article 37 of Law No 1089 of 1 June Government does not deny that Article 169 1939: of the Treaty allows the applicant to decide — order the defendent to pay costs. when to commence proceedings in the Court after the State concerned has not The defendant contends that the Court responded to the Commission's reasoned should: opinion within the period laid down; in the present instance the application was made — dismiss the application by the Commis nearly four years after communication of sion; the reasoned opinion, and more than eight — order it to pay the costs. years after the first approaches had been made to the defendant.

to have to bring the matter before the Court quiry. at the time when it did so. The oral submissions of the parties were made at the hearing on 3 October 1968. B — The substance of the case During the hearing the defendant replied to certain questions put to it by the Judge- 1. Scope of the disputed tax Rapporteur. The Advocate-General delivered his opin The defendant observes that the Law of 1 ion at the hearing on 23 October 1968. June 1939 applies only to a specific category of goods which cannot be equated with con IV — Submissions and arguments sumer goods or articles of general use, and of the parties which are not therefore subject to the pro visions of the Treaty applicable to ordinary The submissions and arguments of the merchandise. parties may be summarized as follows: The applicant replies that, whilst the goods which are taxed are works of art, they are A — Admissibility the subject of commercial transactions and are, therefore, subject to the provisions of The defendant complains that the Commis

As such it ought to have been abol doing so, it failed to comply with Article 2 ished, as far as other Member States were of the Treaty, prohibiting any measure concerned, under Article 16 of the Treaty, capable of giving rise to an imbalance which as from 1 January 1962. might prejudice the harmonious develop Relying on the case-law of the Court, the ment of the activities of Member States, by applicant claims that in considering the

1939 did not, therefore, create a charge The Commission is wrong in adopting a having an effect equivalent to customs purely formalistic interpretation of the duties, but a measure which, by making the Treaty and its action is particularly inap­ export of articles of special interest more propriate as applied to a legislative provi­ difficult, pursued the legitimate end of safe­ sion made long before the Treaty came into guarding the national heritage of which they existence. The Treaty authorizes restrictive are part. measures designed to protect the artistic The applicant replies that in the first place heritage of Member States; this must be customs duties and equivalent charges on borne in mind in examining the 1939 Law export are prohibited by Article 16 in any and deciding that it does not conflict with form, and in the second place protection of the objectives of the Treaty. the national heritage can be ensured—under The applicant replies that the Treaty im­ the 1939 Law itself—by other and more poses separate and distinct rules on customs effective means than a progressive tax. and charges having equivalent effect, on the Lastly, the defendant observes that the dis­ one hand, and on quantitative restrictions puted charge has a limited effect and cannot and measures having equivalent effect, on be said to be a complete obstacle to export­ the other. Article 36, which appears in the ation. In any case a number of the Treaty Chapter dealing with quantitative restric­ provisions reveal a preference for this kind tions, is a saving provision and should be of measure, which is least disturbing to the interpreted strictly; it cannot apply by operation of the Common Market. analogy in the sphere of charges having an The applicant considers that it need only effect equivalent to a customs duty on confine its comments to stating that in the exports.

It is for the Commission, under Article 169 of the Treaty, to judge at what time it shall bring an action before the Court; the considerations which determine its choice of time cannot affect the admissibility of the action, which follows only objective rules.

In the present case, the action of the Commission was in any case preceded by a prolonged exchange of views with the Italian Government, begun before the expiry of the second stage of the transitional period, to try to persuade the competent authorities in the Republic to do what was necessary to amend the provisions criticized by the Commission.

The action is therefore admissible.

B — The substance of the case

1. The scope of the disputed tax

By basing its action on Article 16 of the Treaty, the Commission considers that articles of an artistic, historic, archaeological or ethnographic nature, which are the subject of the the Italian Law of 1 June 1939, No 1089, fall under the provisions relating to the customs union. This point of view is disputed by the defendant, which considers that the articles in question cannot be assimilated to 'consumer goods or articles of general use' and are not therefore subject to the provisions of the Treaty which apply to 'ordinary merchandise'; for that reason they are excluded from the application of Article 16 of the Treaty.

Article 16 of the Treaty prohibits the collection in dealings between Member States of any customs duty on exports and of any charge having an equivalent effect, that is to say, any charge which, by altering the price of an article exported, has the same restrictive effect on the free circulation of that article as a customs

duty. This provision makes no distinction based on the purpose of the duties and charges the abolition of which it requires.

It is not necessary to analyse the concept of the nature of fiscal systems on which the defendant bases its argument upon this point, for the provisions of the section of the Treaty concerning the elimination of customs duties between the Member States exclude the retention of customs duties and charges having equivalent effect without distinguishing in that respect between those which are and those which are not of a fiscal nature.

The disputed tax falls within Article 16 by reason of the fact that export trade in the goods in question is hindered by the pecuniary burden which it imposes on the price of the exported articles.

3. The classification of the disputed tax having regard to Article 36 of the Treaty

The defendant relies on Article 36 of the Treaty as authorizing export restrictions which, as in this case, are claimed to be justified on grounds of the protection of national treasures possessing artistic, historic or archaeological value. By reason of

Article 36 of the Treaty provides that: 'The provisions of Articles 30 and 34 shall not preclude prohibitions or restrictions on ... exports ... justified on grounds of ... the protection of national treasures possessing artistic, historic or archaeological value'. This provision, both by its position and by an express reference to Articles 30 to 34, forms part of the chapter relating to the elimination of quantitative restrictions between Member States. The subject of that chapter is State inter­ vention in intra-Community trade by measures in the nature of prohibitions, total or partial, on import, export or transit, according to circumstances. It is to such measures that Article 36 refers clearly and solely, as follows from the use of the words 'prohibitions or restrictions'. The prohibitions and restrictions in question are by nature clearly distinguished from customs duties and assimilated charges whereby the economic conditions of importation or exportation are affected without restricting the freedom of decision of those involved in commercial trans­ actions.

The provisions of Title I of Part Two of the Treaty introduced the fundamental principle of the elimination of all obstacles to the free movements of goods between Member States by the abolition of, on the one hand, customs duties and charges having equivalent effect and, on the other hand, quantitative restrictions and meas­ ures having equivalent effect. Exceptions to this fundamental rule must be strictly construed.

Consequently, in view of the difference between the measures referred to in Article 16 and Article 36, it is not possible to apply the exception laid down in the latter provision to measures which fall outside the scope of the prohibitions referred to in the chapter relating to the elimination of quantitative restrictions between Member States.

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties ; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 2, 3(a), 5, 9, 16, 36, 169 and 171; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities ;

THE COURT

hereby:

1. Declares that the application is admissible;

2. Declares that the Italian Republic, by continuing to levy after 1 January 1962 the progressive tax laid down by Article 37 of the Law of 1 June 1939 No 1089 on the export to other Member States of the Community of articles of an artistic, historic, archaeological or ethnographic interest, has failed to fulfil its obligations under Article 16 of the Treaty establishing the European Economic Community;