C-4/69

defendant,

Application for damages under the second paragraph of Article 215 of the EEC Treaty,

THE COURT,

composed of: R. Lecourt, President, A. M. Donner and A. Trabucchi, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore (Rapporteur) and H. Kutscher, Judges,

Advocate-General: A. Dutheillet de Lamothe Registrar: A. Van Houtte

gives the following

3% for tariff heading 04.02 as from of the market in milk and milk pro 1 April 1965 by the 16th Law amend ducts; ing the law on turnover tax of 26 — that the imposition or the tax at issue March 1965 (Bundesgesetzblatt I, p. does not constitute an infringement 156) and was raised to 6% for tariff of Article 95 of the Treaty and there heading 18.06 on 1 June 1963 by the is no reason to require its complete 12th Law amending the law on turnover abolition. tax of 16 May 1963 (Bundesgesetzblatt An action brought before the Court on I, p. 321). 12 July 1965 by Lütticke seeking, prin Taking into account certain corrections cipally, the annulment of the said letter made to the notices of assessment for of the Commission of 14 May 1965 and, customs purposes by the German cus alternatively, a finding of failure to act toms authorities and of refunds pre

Justice, in accordance with Article 177 graph of Article 95 thereof. of the EEC Treaty, a number of ques In reply to a formal notice under the tions of interpretation relating to Article second paragraph of Article 175 of the 95 to which the Court gave replies by Treaty, the Commission, on 14 May judgment of 16 June 1966 (Case 57/65, 1965, informed Lütticke, in particular, [1966] ECR 205). — that by lowering from 4% to 3% the In 1968, on Lütticke's being unable to rate of the tax at issue relating to obtain from the Commission compensa heading 04.02, the Federal Republic tion for the damage which it claimed to had ceased to infringe the first para have suffered by reason of the letter's graph of Article 95 since that rate failure to take action against the Federal henceforth corresponded to the in Republic, it instituted the present act direct taxes on milk powder from ion for damages on 22 January 1969.

open the oral procedure without any lishment of a common organization preparatory inquiry.

At the Court's request, the defendant A— Admissibility lodged several documents on 1 August and 11 November 1969. 1. Irregularity of the application as to form The opening of the oral procedure, which had been fixed for 7 October The defendant contends that the origina­ 1969, was postponed at the request of ting application does not satisfy the the applicant so as to enable it to lodge conditions required by Article 38 (1) of an expert's report. the Rules of Procedure by reason of the This report was lodged on 24 Septem­ fact that it: ber 1970. (a) refers to submissions and arguments The oral observations of the parties put forward in other cases and does were heard on 16 December 1970. not itself prove that the rate of the At that hearing they filed further docu­ tax at issue is excessive; for this ments and replied to questions put by reason, it is impossible for the Court the Judge-Rapporteur. or the Commission to appreciate, on The Advocate-General delivered his the basis of the application alone, the opinion at the hearing on 17 February precise content and scope of the 1971. submissions put forward; (b) does not justify the claim relating to interest at 8% and consequently does III — Conclusions of the par­ not state, with regard to this point, ties the grounds on which it is based. The applicant replies in the following The applicant claims that the Court manner to these two submissions: should (a) The reasons for which it considers (a) order the Commission to pay it the the present cumulative tax of 3% on sum of DM 124 396.04, plus interest milk powder and on other dried at 8% as from 20 April 1968; milk products made in Germany to be excessive were set out in detail (b) declare that the Commission should for the Court in previous cases; there compensate it for all damage which seemed to it to be no need to repeat it has caused it by neglecting to ensure that the turnover equaliza­ the same arguments. During the pro­ cedure the applicant added a sche­ tion tax imposed in the Federal dule to its reply and produced an Republic of Germany in respect of milk powder was abolished with expert's report designed to show that the tax at issue was too high. effect from 1 January 1962; (b) The claim for the payment or (c) order the Commission to pay the interest at 8% is based on the fact costs of the proceedings. that since 1962 the applicant has The defendant contends that the Court made use of bank credit, the annual should rate of which has been at least as (a) declare the action inadmissible; high as the interest claimed. (b) alternatively, dismiss it as unfound­ 2. Disregard of the second parapragh of ed; Article 97 and Article 169 of the (c) order the applicant to pay the costs. EEC Treaty

of the action is to force the Com obtain damages from the Commission, mission to take the measures prescribed payment of which would eliminate the in the second paragraph of Article 97 distortion of competition of which the and in Article 169 not only in respect applicant complains. There would no of certain imports of milk powder but, longer be any point in the Commission's more generally, in all cases in which bringing an action against the Federal Article 155 of the Treaty confers on it Republic of Germany. a task of supervision.

The only thing which second paragraph of Article 97, address is capable of being disputed is the appropriate directives or decisions to the refusal to take compulsory measures State concerned. If the Member State which, moreover, must be addressed to does not comply with these within the the applicant. Neither of these two con period laid down, the general provisions ditions is fulfilled when the importer of Article 169 apply as to subsequent complains that the Commission has procedure. failed to take action against a Member The action is designed in fact to force State in relation to the rate of certain the Commission, if it wishes to avoid internal taxation. The limitation, intend an infinite number of applications for ed by the Treaty, in respect of the legal compensation, to initiate first the pro protection of individuals under Article cedure under the second paragraph of 175 would be of no effect if the same Article 97 and then, if necessary that result could be obtained, without having under Article 169. to respect the very strict conditions of In the subsequent stages of procedure Article 175, by means of an action for applying where a Member State fails to damages under the second paragraph of fulfil an obligation under the Treaty in Article 215.

The conditions constrain the Commission to bring an of the latter, despite what the defendant action against a Member State. maintains, are indeed less strict than The sole object of the action is to those of an action for damages, which

must be supported by proof not only of ticular importance in cases where there the existence of an objectively illegal is no legal rule which is directly applic action but also of the existence of a able and where, in consequence, the per culpable act on the part of the Com son concerned has no recourse other than mission. The effect of Article 215 is to bring an action for damages, since an solely to ensure a posteriori, by the pay application for annulment is not open

4. Disregard of the case-law of the Statute of the Court, proceedings against Court relating to 'direct effect' the Community in matters arising from The defendant observes that the Court non-contractual liability are barred after has held that Article 97 is not one of the a period of five years from the occur provisions of the Treaty which have rence of the event giving rise thereto; direct effect and confer on individuals all the rights invoked by the applicant, rights which national courts must pro which arose five years before the bring tect. ing of the action, are therefore barred. Although it does not disregard the dif The applicant is wrong in thinking that ference between a case where a person the period of limitation does not com concerned may invoke the nullity of mence as long as the Commission is en provisions of national law before his titled to take action against the Federal national courts by relying on a directly Republic on the basis of the second applicable provision of the Treaty and paragraph of Article 97 of the Treaty. a case where he may sue the Commission Since this provision, as well as Article for damages, alleging a wrongful act or 169, lays down no time-limit for action omission in the application of the same by the Commission against a Member provision of the Treaty, the defendant State, the effect of the applicant's argu observes that, by reason of the close ment would be that actions for damages connexion between the obligations de arising from unlawful failure to act are volving, on the one hand, on the Com

way coincide with those which are neces to which time-limits are not expressly sary before a provision of the Treaty attached are extinguished by efflux of has direct effect and confers rights on time; this is the case with rights arising individuals. from infringement of the second para On the contrary, Article 215 is of par- graph of Article 97.

B — The substance of the case tend also to protect the interests of importers. 1. Is the rule which has allegedly been The conditions of competition do not infringed intended to protect the in allow the imposition on the consumer terests of the applicant? , of the burden of the tax at issue. It is therefore impossible for all consumers The defendant observes that, according in the Common Market to put forward to the case-law of the Court, the prin claims for damages; they are not, more ciple, whereby the legal rule whose in over, the addressees of the disputed fringement is relied on by an applicant notices of assessment. must be intended to protect the interests of that person or the category to which 2. The culpable act (Verschulden) he belongs, forms part of the general In the written procedure, the applicant principles referred to in the second para contended that the total cumulative tax, graph of Article 215 of the Treaty. under the heading of turnover tax, im The fiscal provisions of the Treaty con

that it is borne by the ultimate con Greiffenhagen, a Diplomkaufmann, and sumer of the article. added to the documents of the case by If the tax provisions of the Treaty were the applicant before the opening of the recognized as being rules intended to oral procedure, it emerges that this tax protect the interests of individuals and was instead between 1.31 % and 1.74% were capable of giving rise to the appli and therefore, according to the Commis cation of Article 215, it would follow sion directive, must be reduced to 1.5% that any slight error in the application for the two customs headings 04.02 and of these provisions could confer a right 18.06. However, this expert's report in of compensation on all consumers in the particular adopted certain factors which Common Market. should not have been taken into account If thе applicant's argument were accep in assessing the tax and based the cal ted, the Community would be open to culation on figures which were too high. actions for damages based on an alleged The total tax imposed on German milk disregard, on the part of the Commis powder products is, in fact, less than the sion, of the obligations imposed on it rate of 1.5% adopted by the expert. by Article 155 in relation to almost all It is, in any case, indisputable that the the provisions of the second and the tax of 3% (or even 6%) which is im third parts of the Treaty. posed, under the heading of turnover According to the applicant, the case-law equalization tax, on the products im of the Court establishes, on the con ported by the applicant from other trary, that Article 97 is in the nature Member States of the EEC is much too of a protective rule. high and does not observe the principles The free movement of goods between laid down in Article 95 of the Treaty. Member States cannot be ensured with The expert's report provided by the out the participation of importers; a rule Brunswick-Völkenrode Research Insti designed to promote this must therefore tute, on which the Commission bases its

calculation, uses inadequate methods of Republic, the applicant maintains that analysis and data and is vitiated by the Commission did not act with the numerous errors. required energy and despatch. It recalls Despite the many times Lütticke has that four years and four months elapsed insisted on the Commission's taking before the tax at issue was reduced from action, the latter has refused to address 4% to 3% and then with effect only a directive on a decision to the Federal from 1 April 1965. Republic, even though it was obliged The Commission did not contact the to do so by the second paragraph of organs of the Federal Republic com Article 97 and by Article 169 of the petent to amend the domestic legisla

This is not the case here. mission the discretionary power which In general terms, the defendant is of the it claims, for this would confer on it the opinion that, although the third para right to determine the moment when graph of Article 95 imposes specific ob these provisions become effective. ligations on Member States, the Com This alleged discretionary power is re mission possesses, within the framework futed by the basic provision of Article of Articles 155 and 169 and the second 155 of the Treaty.

of action. Since 1959 the Commission has under The Commission has no discretionary taken to ensure the observance of power either to decide whether, in the Article 97 by Member States. event of infringement of Articles 95 and As regards more particularly the Federal 97, such infringement must be brought Republic of Germany, the problem of to an end retroactively. Likewise, there the rate of turnover equalization tax is no discretionary power with regard to imposed on milk powder was tackled the amount of the tax at issue; this fol in 1961, before any claim was made lows from Article 95 and the first para

De-

spite the pressure which it brought to 3. The damage bear on the competent German author As damages, the applicant claims to be ities, the Commission succeeded only indemnified for, on the one hand, the in 1965, owing to certain delays in the sums of disputed tax which it was un domestic legislative procedure, in getting lawfully constrained to pay and, on the the rate of the turnover equalization tax other hand, the costs, at present still in dispute reduced to 3%. impossible to assess, occasioned by the The delays occurring in the legislative proceedings which it was obliged to procedure are not attributable to it; bring in the Federal Republic against the Commission was not in a position the notices of assessment addressed to it. to reduce the delays since it could only The rate of 3 % does not comply with approach the government. Articles 95 and 97 of the Treaty. As regards the problem or retroactivity, The defendant's assertion that the nature the defendant considers that, although of turnover tax implies that it should Article 171 obliges Member States to be borne by purchasers is widely dis comply with the judgment of the Court puted by legal writers. In practice, the establishing their failure to fulfil their market conditions of milk powder pro obligations and to redress the situation ducts have ruled out this possibility; so as to conform to the Treaty, it does by reason of the advantages which simi not follow that they are bound, or even lar domestic products enjoy, importers in a position, to do so with retroactive have been obliged to pay the turnover effect. equalization tax out of their gross profit.

The ful act or omission, nor did it cause the Federal Republic would have followed applicant any damage. this course if the Commission had in As regards the compatibility of the rate due course taken measures under the of 3% with Articles 95 and 97 of the second paragraph of Article 97 and Treaty, the defendant emphasizes that Article 169 of the Treaty. this rate was based on a scientific ex The applicant cannot be reproached for pert's report made by the Institut für no having, since the end of the 1962, Betriebswirtschaft of the research centre contested all the notices of assessment of Brunswick-Völkenrode and establish within the prescribed period. ing that the general burden of turnover The Federal Republic did not take the tax borne, at the earlier stages, by milk turnover equalization tax into account, is in the order of 2.9%. The results of in 1961, in fixing the countervailing this expert's report are largely con charge on milk powder products.

JUDGMENT OF 28. 4. 1971 — CASE 4/69

remained too high. An illegal measure the Federal Republic levied a turnover cannot be compensated for by a measure equalization tax of 4%. The system of which is legally superfluous. levies introduced after the entry into In any case it is arithmetically and tech force of Regulation No 13/64 by Regu nically impossible in respect of numerous lation No 158/64 of 28 October 1964 importations that a levy which is sup relating to the flat-rate calculation of posedly too low could have a real com internal taxation levied on the importa pensatory effect since Regulation No 13/ tion of certain milk products (OJ 1964, 64 does not provide for any refund. p. 2726) fixed the amount of the levy at The applicant does not deny the Com the threshold price level of the importer mission a right of recourse against the Member State minus in particular an Federal Republic for the damages which amount representing the effect of internal it may have to pay. taxation levied on importation and cal The defendant denies that the applicant culated, where appropriate, on a flat-rate has suffered the damage which it alleges. basis. The countervailing charges or

complies with Articles 95 and 97. Furthermore, the advantages granted in The payment of the tax at the rate of the field of turnover tax in relation to the 4% has caused the applicant no damage sale of powdered milk products benefited since the total burden of the turnover not the producers of those products but tax imposed on an article falls entirely on the producers of milk; importers were the ultimate purchaser. not therefore placed in a competitively Even if the applicant could prove that it disadvantageous position. did not pass on to its purchasers the The applicant disregards the fact that a turnover equalization tax, it must assume reduction in the turnover equalization liability for a part at least of the damage tax would have caused an increase in the which it claims to have suffered, since it basic price of the article and, conse did not avail itself of the legal remedies quently, of the countervailing charge on open to it to oppose the notices of pay

LÜTTICKE v COMMISSION

action for damages were upheld there The defendant is of the opinion that its would have to be contribution between conduct cannot have been the cause of the Federal Republic of Germany and the damage alleged by the applicant. the Community, in accordance with the In fact, even if in compliance with the general principles of law. second paragraph of Article 97 it had addressed a directive or a decision to the 4. The causal link Federal Republic, this would not have directly changed in any way the legal The applicant contends that the failure position of which the applicant com­ to act on the part of the Comimssion is plains; a law would have had to be the sole cause of the damage which it passed in accordance with the legislative alleges. procedure in force. If the defendant had not failed to fulfil It had no means of obtaining an earlier its obligations, the legislative organs of amendment of German law. the Federal Republic would have had to In any case, it appears from the circular comply with a decision or directive of of 20 September 1968 from the Federal the Commission or with the judgment of Ministry for Finance that the Federal the Court, by amending legislation with Administration is to repay the sums effect from 1 January 1962. unlawfully collected.

Grounds of judgment

1 The applicant requests the Court, on the basis of Article 178 and the second paragraph of Article 215 of the EEC Treaty, to order the Community to make good the damage caused to the applicant by the Commission's failure to address to the Federal Republic of Germany a directive or a decision under the second paragraph of Article 97 ordering it to abolish with effect from 1 January 1962 the turnover equalization tax on milk powder or, at least, to reduce it to a level compatible with the provisions of Article 95 and the first paragraph of Article 97.

5 Secondly, the defendant contests the admissibility of the action by reason of the fact that, although introduced on the basis of Article 178 and the second paragraph of Article 215, it seeks in reality to establish a failure to act on the part of the Commission and to constrain it indirectly to initiate against the Federal Republic of Germany the procedure under the second paragraph of Article 97 and, possibly, that under Article 169. It is claimed that this manner of proceeding has the effect of distorting the conditions to which Article 175 has subjected actions for failure to act.

6 The action for damages provided for by Article 178 and the second para­ graph of Article 215 was established by tie Treaty as an independent form of action with a particular purpose to fulfil within the system of actions and subject to conditions for its use, conceived with a view to its specific purpose. It would be contrary to the independent nature of this action as well as to the efficacy of the general system of forms of action created by the Treaty to regard as a ground of inadmissibility the fact that, in certain circumstances, an action for damages might lead to a result similar to that of an action for failure to act under Article 175.

7 This objection of inadmissibility must therefore be dismissed.

8 Since the defendant asserts also that the right to damages claimed by the applicant is, for the most part, time-barred, it must be observed that this objection concerns, in reality, not the admissibility of the application but the extent of reparation and it must therefore be dismissed.

13 The object of Article 97 with regard to imports is to ensure that equalization taxes imposed within the framework of a cumulative multi-stage tax system are in conformity with the principles of Article 95. Having regard to the special characteristics of this system of taxation, the economic effect of which may very often only be calculated approximately, the Treaty allows Member States to take certain measures of a flat-rate nature consisting in the deter­ mination of average rates of tax on the importation of specific products or groups of products. Such a system necessarily implies, on the part of States which apply it, the exercise of a discretion in regard to the assessment of the burden of tax on the domestic product which determines the level of the average rates and the tax procedure which is connected with the general system of the legislation in question.

14 For the purpose of safeguarding the requirements of Article 95 and the first paragraph of Article 97, a special power of supervision the exercise of which presupposes, in turn, a discretion to appraise the factors which the State has taken into consideration, is conferred upon the Commission in pursuance of the second paragraph of Article 97.

15 This task has been allotted to the Commission for the purpose of ensuring that the national tax systems conform to the requirements of free movement

JUDGMENT OF 28. 4. 1971 — CASE 4/69

and non-discrimination which constitute the object of Articles 95 and 97. For this purpose, the second paragraph of Article 97 gives the Commission the power to define, through directives or decisions addressed to States, the requirements arising from the Treaty with regard to national tax laws.

17 It is established that as early as 1962 the Commission began, with experts from the Member States, an examination of the average rates provided for by national laws with a view to checking their conformity with the requirements of Article 95 and the first paragraph of Article 97. During this examination it discussed with the German authorities and with those of the other Member States concerned in the powdered milk trade the rate applicable to this pro­ duct. Having studied the arguments put forward by the German Government it informed it that the average rate of 4% in force for imports of milk powder into the Federal Republic seemed to it to be too high. Since the Federal Republic, following this intervention, reduced the rate of the tax at issue from 4% to 3% with effect from 1 April 1965—a date subsequently brought forward to 1 January 1962—the Commission considered that there was no longer any need to adopt a directive or a decision under Article 97 in order to obtain an even greater reduction. Furthermore, there were no complaints of any sort made by Member States whose exports could have been adversely affected by the tax system criticized by the applicant. It follows from the above that in the circumstances the Commission has not failed to perform its task of supervision.

18 In addition, although the expert's report produced by the applicant in support of its argument reaches the conclusion that for powdered milk the average rate should be lower, it is capable of confirming that the calculation of the indirect taxes imposed on this product includes a whole series of uncertain factors which may give rise to very different assessments, with the result that it is in general possible only to establish certain minimum and maximum limits between which several solutions appear equally justifiable.

THE COURT

hereby:

(1) Dismisses the application;

(2) Orders the applicant to bear the costs.

Lecourt Dormer Trabucchi

Monaco Mertens de Wilmars Pescatore Kutscher