C-2/69

Reference to the Court under Article 177 of the EEC Treaty by the Vre­ derechter, Antwerp (Second Canton), for a preliminary ruling in the action pending before that court between

SOCIAAL FONDS VOOR DE DIAMANTARBEIDERS, Antwerp,

and

SA Ch. Brachfeld & Sons, Antwerp, (Case 2/69)

SOCIAAL FONDS VOOR DE DIAMANTARBEIDERS, Antwerp,

and

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure the framework of the exchange agree­ ment between the diamond industries The facts and procedure may be sum­ of Belgium and the Netherlands.' marized as follows: By virtue of this provision, in December The Law of 12 April 1960 established 1963 the Sociaal Fonds voor de Dia­ in Belgium the Sociaal Fonds voor de mantarbeiders brought actions against Diamantarbeiders (Social Fund for some 200 importers of unworked and Diamond Workers). This Fund is a pub­ industrial diamonds for the payment of lic institution, the purpose of which is contributions, additional charges and in­ 'the financing, award and payment of terest in respect of the period from 1 additional social benefits' to such work­ January 1960 to 30 September 1963. ers. The majority of these cases were heard The Belgian State amended this Law by the Vrederechter of the Second Can­ by the Law of 28 July 1962 by in­ ton of Antwerp. It was agreed before serting therein an Article 2(a) which this court between, first, counsel for the was expressed in the following terms: importers of unworked diamonds and 'All persons importing unworked industrial diamonds and, secondly, coun­ diamonds shall be required to pay a sel for the Social Fund to consider two contribution intended to enable the test cases, those of Sprl Chougol (an Social Fund to fulfil the task con­ importer of industrial diamonds) and of ferred upon it by Article 2. SA Brachfeld (an importer of unworked The amount of the contribution pay­ diamonds). able by such persons is equal to 1/3% By decisions of 24 December 1968 in of the value of the unworked diamond these two cases the abovementioned

they refer must show all the (d) Articles 9 and 12, in comparison features of a charge of a fiscal with Article 37, on the question nature; whether the distinction made in (b) Whether the duties or charges re­ Article 37 between monopolies ferred to are solely those which which do and which do not re­ enrich or diminish the Treasury sult in discrimination between the or whether they are in general all nationals of Member States re­ those which a Member State im­ garding the conditions under poses when imports are made, which goods are procured and without regard to their fiscal, ad­ marketed must also be made as ministrative or social purpose; regards the duties or charges re­ 2. The same articles on the question ferred to in Articles 9 and 12; whether the decisive factor is the (e) Articles 9 and 12, in conjunction nature of the charge or its effect; with Article 95, on the question 3. The same articles on the question whether the prohibition in Articles whether the equivalent effect lies in 9 and 12 is more absolute than the similarity of purpose or rather in that in Article 95, and in par­ the results of the charge; ticular whether it makes no dis­ 4. The same articles on the question tinction according to whether or whether, where appropriate, the re­ not the duties considered are in sults must be considered in the light excess of those imposed on domes­ of the intended purpose of the sums tic products; raised or rather of their effect on the (f) Article 12, in conjunction with free movement of goods; Articles 9 and 13, on the question 5. (a) Articles 9 and 12 on the question whether Article 12 may be con­ whether an obstacle to the free sidered as a first step towards the movement of goods always pre­ achievement of the objective in supposes that the consequences of Articles 9(1) and 13, and must the duty imposed are always dis­ therefore be understood in such criminatory or protective; a wide sense; (b) The same articles on the question 6. Articles 9 and 12 on the question whether it is impossible for such an obstacle to exist if there is no whether, in considering the obstacle to the free movement of goods which competition from domestic pro­ is opposed by the Treaty, the only ducts; factor which may be taken into ac­ (c) Article 12, in conjunction with count is the disadvantage to the other Articles 9 and 18, on the question Member States or to their inhabitants, whether a new charge imposed or whether it involves a disadvantage upon imports from all foreign for all the inhabitants of the Com­ countries is always prohibited as munity, including those of the Mem­ being likely to conflict with the ber State which takes the measure objectives pursued in Articles 9 in question, be it as a result of in­ and 18 of the Treaty, in particular the introduction of a common creased competition on the part of the inhabitants of other Member States; customs tariff in the relations of whether in this case the content of Member States with third coun­ tries and the reduction of duties the prohibition may be interpreted in the light of the reply to this ques­ below the general level, with the tion.' result that the discriminatory or non-discriminatory nature of such Before referring this matter to the Court, a charge is of no importance; the Belgian court considered the ques-

ment was intended to interpret, Articles ted under Article 20 of the Statute of the 9 and 12 do not prohibit only those duties which discriminate between the Court nationals of Member States. Finally, the Vrederechter, Antwerp, ob­ The observations submitted under serves that the Belgian importers of un­ Article 20 of the Statute of the Court worked diamonds are in a position to may be summarized as follows: claim that they are at a disadvantage as The applicant in the main action main­ compared with their competitors in other tains that the aims of the Sociaal Fonds Member States who are not liable to pay voor de Diamantarbeiders are purely the charge in dispute; they may thus social, as is clearly shown by the par­ consider that at their expense the dia­ liamentary studies which preceded the mond merchants of their country have adoption of the Law in question. If, con­ an advantage over the merchants in other trary to the general rule in matters of Member States, as by virtue of the law Fonds de securite d'existence, 1 the Social in dispute those Belgian undertakings Fund is not maintained by contributions which work diamonds are relieved of calculated on the basis of the salaries

1 — Translator's note: Fonds de sécurité d'existence are funds maintained by employers» contributions in respect of certain occupations particularly subject to intermittent periods of unemployment for the payment of additional benefits to those temporarily unemployed.

JUDGMENT OF 1. 7. 1969 — JOINED CASES 2 AND 3/69

main action considers that Belgium will fied by reason of the structure of the comply with this request by extending Belgian diamond industry, which makes the exemption to imports effected within the application of a system of contribu the context of the exchange agreements tions calculated on the basis of salaries between the Belgian diamond industry difficult. Moreover, the appropriateness and that of those Member States. of this choice is a matter to be con It follows from the concept which is the sidered by the Belgian legislature alone. basis of the exemptions provided for by Further, the applicant in the main action the Law in question that unworked maintains that the contribution is only diamonds are not taken into considera calculated on the goods to be worked tion for the imposition of the charge in by the Belgian diamond industry, with question merely by reason of their im the result that goods to be reshipped and portation, as the exemptions are specific goods in transit are never included in ally based on the fact that the diamond the calculation.

the Commission of the European Com ready been included earlier in the basis munities had addressed a letter to the of calculation of the contribution in dis Belgian Minister for Foreign Affairs fol pute. lowed, on 20 January 1969, by a reason The plaintiff in the main action then ed opinion within the meaning of Article refers to the preliminary studies of the 169 of the Treaty, requesting the Bel EEC Treaty in order to support its gian Government to eliminate from the statement that that Treaty does not in legislation in question the contradiction tend to exempt goods put into free cir with Article 7 of the Treaty, which re culation from all taxes or charges, but sults from the fact that only imports only requires such goods to receive the of unworked diamonds from the Nether same treatment, so that trade is not lands were exempt from the abovemen disturbed by protective intervention in tioned contribution. The Commission one or other Member State. proposed an alternative which was either The Treaty does not require all the fac-

tors which influence the cost price of in dispute on the Antwerp market. Ac the goods to be identical in every Mem cording to the statistics drawn up for ber State. When such differences are 1968, imports of unworked diamonds likely to hinder the proper functioning amounted to BF 11 748 000 000, of of the Common Market, the Commis which BF 4 138 000 000 were re-expor sion may implement the procedures ted in the same form.

charge. tion to competition from abroad. On imports of unworked diamonds in The contributions payable to the Social 1968, the tax of 1/3% amounts to BF Fund can in no case be described as 39 160 000. The incidence of the charge charges, and thus cannot be included in on industrial diamonds is put at BF the prohibition contained in Articles 9 8 660 000. The aggregate total amount and 12 of the Treaty which deliberately of the charge imposed on the various used the term 'charges having equivalent sorts of diamonds exported from Bel effect' to replace the formula 'any meas gium to the other countries of the EEC ure having equivalent effect' which was amounts to BF 5 400 000. originally suggested.

Treaty, the authors of this opinion main The defendants submit statistics, the tain that these general provisions must purpose of which is to show, inter alia, not be interpreted in the light of Article the economic importance of this sphere 37, the subject of which is quite specific. of activity and the effect of the charge They do not accept the idea that a

tion of a system ensuring that competi­ sider that the limitations on the free­ tion in that market is not distorted. As dom of action of Member States as a result, it is incorrect to consider that regards the imposition of charges hav­ the effect of a charge payable by reason ing equivalent effect in their relations of importation is not equivalent to that with third countries arise out of Articles of a customs duty by reason of the fact 18 to 28 of the Treaty concerning the that it is not intended to protect domes­ common customs tariff, independently of tic production. the implementation of Articles 110 et As regards the question whether a con­ seq. concerning the common commercial tribution may be considered to be a policy. charge having equivalent effect even However, in this instance these limits when it is not defined as a tax and is do not appear to have been exceeded. not imposed for the benefit of the More generally, this opinion maintains Treasury, the abovementioned opinion that a charge, although without protec­ refers to the judgment of the Court in tive effects, may very well distort con­ Joined Cases 52 and 55/65 (Federal ditions of competition in the Common Republic of Germany v Commission), Market, as does the charge in question. according to which the equivalence of a The procedure provided for in Article charge to a customs duty must be asses­ 101 to eliminate distortions of compe­ sed by considering its effects in the light tition is only a secondary procedure to of the objectives of the Treaty, without be applied in cases in which no other having regard to the purpose for which provision of the Treaty is applicable. In it was introduced by the State, nor the this instance, the abovementioned effects detailed rules laid down for its applica­ must be eliminated by application of the tion. prohibition provided for in Article 12 In order to define the concept of inter­ of the Treaty. nal taxation referred to in Article 95 Moreover, the charge in question is even of the Treaty, it can first be observed protective in effect as regards domestic that by virtue of an internationally ac­ consumers, as it imposes a burden on knowledged principle States do not lay all the consumers of the Community for the burden of such charges on foreign the benefit of certain employers estab­ consumers and that the exporter has the lished in just one country of the EEC. right to a refund of the taxes imposed Finally, the opinion refers to the case- on the goods during earlier transport. law of the Court which shows Articles It follows from the case-law of the Court 12 and 37(2) and the first paragraph of that a compulsory contribution cannot Article 95 to be directly applicable. be put in the same category as the in­ The Commission of the European Com­ ternal taxation referred to in Article 95 munities observes that the charge in where such charge—as is the case of question may be classified as part of the the contribution in dispute—is not in­ very large sector known as quasi-taxa-

tion ('parafiscalite'). Experience shows sideration to taxation of the type con that, in order to assess a charge of this cerned in this instance, which constitu type in the light of Community law, a tes special taxation imposed on a par general consideration of the charge is ticular product. The power of Member insufficient and that each one must be States to impose special internal taxa studied in detail in terms of its own tion cannot be contested on the basis of nature and taking into account all rele the Treaty as Article 95, whilst laying

effect. duction of similar goods in the import As regards the relationship between ing country (Cases 27/67 and 31/67), Articles 9 and 12, on the one hand, and the case-law of the Court concerning Article 95, on the other, the Commission certain taxation on imports does not observes that the prohibitions set out directly refer to Articles 9 and 12 and in the first two articles cannot be re the prohibition contained therein on the garded as more absolute in nature than imposition of charges having equivalent those appearing in Article 95.

JUDGMENT OF 1. 7. 1969 — JOINED CASES 2 AND 3/69

all. On the other hand, a difference ex within the country. Even if a charge ists when a Belgian importer wishes to shows the characteristics of a tax it can resell his goods in another Member not be considered as having an effect State, since he has no right to the refund equivalent to that of a customs duty of the charge which he paid on the im unless it is more unfavourable to the port of the goods into Belgium. How imported product than to the corres ever, the Commission maintains that as pond domestic product. regards exports from a Member State In the absence of a similar domestic pro the principle of equality of treatment duct it is impossible to maintain that within the spirit of the Treaty is not such a charge is protective in nature and so strict that Member States are bound that that charge imposed on imported to refund certain taxation. products cannot lead to a distortion of Finally, as regards the difference in treat competition between Member States. ment which the Law in question in As regards the charge in dispute in par volves to the detriment of Belgian dia ticular, the Belgian Government main mond importers in relation to under tains that it is only intended to lay on takings which work diamonds in Belgium and those in other Member States, the importers of unworked diamonds the Commission observes that in fiscal and burden of financing a fund the purpose of which is to obtain social benefits for social matters the legislation of Mem diamond workers because it is those im ber States still differs greatly and that porters who draw an indirect benefit no conclusion regarding the interpreta tion of Articles 9 and 12 can be drawn from the activity of such workers. from the differences in treatment which This system is also justified by reason result therefrom. of the practical difficulties which the calculation of the contribution on the The Government of the Kingdom of Belgium observes that according to Bel basis of salaries presupposes. gian law customs duties are included Finally, the Belgian Government ob serves that the Commission of the Euro in the concept of taxes.

DIAMANTARBEIDERS v BRACHFELD

Grounds of judgment

1 By judgment of 24 December 1968, received at the Court Registry on 16 January 1969, the Vrederechter of the Second Canton of Antwerp referred to the Court, under Article 177 of the Treaty establishing the EEC, several questions concerning the interpretation of Articles 9, 12, 13, 18 and 95 of the EEC Treaty.

2/4 With the exception of Question No 5(c), the purpose of these questions is essentially to clarify the concept of a charge having an effect equivalent to a customs duty, referred to in Articles 9 and 12 of the EEC Treaty, and the scope of the prohibition laid down therein. The same purpose is present in the references made to Articles 18, 37 and 95 with a view to comparing and distinguishing Articles 9 and 12. These questions must therefore be con­ sidered in their entirety.

5/6 According to Article 9, the Community shall be based upon a customs union founded upon the prohibition between Member States of customs duties and of 'all charges having equivalent effect', and the adoption of a common customs tariff in their relations with third countries. Article 12 prohibits the introduction of 'new customs duties on imports ... or any charges having equivalent effect'.

15/18 The extension of the prohibition of customs duties to charges having equiva­ lent effect is intended to supplement the prohibition against obstacles to trade created by such duties by increasing its efficiency. The use of these two com­ plementary concepts thus tends, in trade between Member States, to avoid the imposition of any pecuniary charge on goods circulating within the Com­ munity by virtue of the fact that they cross a national frontier. Thus, in order to ascribe to a charge an effect equivalent to a customs duty, it is important to consider this effect in the light of the objectives of the Treaty, in the Parts, Titles and Chapters in which Articles 9 and 12 are to be found, particularly in relation to the free movement of goods. Consequently, any pecuniary charge, however small and whatever its designation and mode of application, which is imposed unilaterally on domestic or foreign goods by reason of the fact that they cross a frontier, and which is not a customs duty in the strict sense, constitutes a charge having equivalent effect within the meaning of Articles 9 and 12 of the Treaty, even if it is not imposed for the benefit of the State, is not discriminatory or protective in effect or if the product on which the charge is imposed is not in competition with any domestic product.

27 Question 5(c) submitted by the Vrederechter of the Second Canton of Antwerp asks whether a new charge on imports from all foreign countries is always prohibited as incompatible with the Treaty on the ground that it would form an obstacle to the establishment of the common customs tariff.

28/32 As reg ard s trade with third countries, the Treaty contains no express provisions similar to those which prohibit the imposition of charges having an effect equivalent to customs duties in trade between Member States. The existence of pecuniary charges other than customs duties in the strict sense which, before the establishment of the common customs tariff, were imposed by a Member State at the time of the importation into its territory of goods coming directly from third countries, was not likely to act as an obstacle to the alignment of the customs tariffs of each Member State with the rates of the common customs tariff. It is true that the objectives sought by the uniform application of the common customs tariff by all Member States in the relations with third countries might be hindered by the unilateral adoption or retention of such measures by a Member State, especially where the principle of the free movement of goods in free circulation in a Member State would be insufficient to correct the effects of such national measures. In such circumstances, the question might arise whether the Treaty imposes limits on the freedom of States to adopt or to maintain measures which might adversely affect the operation of the

JUDGMENT OF 1. 7. 1969 — JOINED CASES 2 AND 3/69

in answer to the questions referred to it by the Vrederechter, Antwerp, by judgment of that court dated 24 December 1968, hereby rules:

I. The concept of a charge having equivalent effect referred to in Articles 9 and 12 of the EEC Treaty includes any pecuniary charge, other than a customs duty in the strict sense, imposed on goods circulating within the Community by reason of the fact that they cross a frontier, in so far as such a charge is not permitted by a specific provision of the Treaty;

2. Without prejudice to any limitations which might be imposed in order to attain the objectives of the common customs tariff,

DIAMANTARBEIDERS v BRACHFELD

pecuniary charges other than customs duties in the strict sense applied by a Member State before the introduction of that tariff on goods imported directly from third countries are not, according to the Treaty, incompatible with the requirements concerning the gradual alignment of national customs tariffs on the common external tariff.

Lecourt Trabucchi Mertens de Wilmars

1 — Translated from the French.