C-6/69

Application:

(1) In Case 6/69

For a declaration that the French Republic has failed in the obligations im­ posed on it under the Treaty establishing the European Economic Community by maintaining in relation to the preferential rediscount rate for export claims beyond 1 November 1968 an advantage in excess of 1.5 points over the general rate and in infringement of Article 2(l)(b) of the Decision of the Commission No 68/301/EEC of 23 July 1968;

(2) In Case 11/69

(a) For the annulment of the decision of the Commission of 18 December 1968, taken under Article 88 of the ECSC Treaty relating to the main­ tenance by the French Republic beyond 1 November 1968 of a prefer-

JUDGMENT OF 10. 12. 1969 — JOINED CASES 6 AND 11/69

JUDGMENT

Issues off fact and off law

I — Summary of facts serious social crisis which France had just experienced and with the object of The Banque de France has been granting assisting its exporters, the French for some years for export claims, in­ Government informed the Commission cluding those for steel products, a more that it expected it to accept that the favourable rediscount rate than the rate rate for the liquidation of claims arising provided for domestic claims. from exports, which was at the time Since 1964 the Commission has been 3% whereas the domestic discount rate asking for the abolition of this advantage was 3.5%, should be reduced by one in respect of claims arising in Member point. States of the European Communities On 24 June 1968 the Permanent Repre­ since, according to the Commission, the sentative of France informed the Com­ disparity in the rates constitutes an aid mission that his government had been which is incompatible with the Common led, as a protective measure, to take as Market. from 1 July 1968 and for a period ex­ Without admitting that the benefit gran­ tending until 31 January 1969, various ted to exporters was incompatible with measures of a 'compensatory and tem­ the treaties, the French Republic stated porary nature' and in particular a new in a letter dated 13 May 1968 that it reduction in the discount rate on exports was studying the conditions under which reducing this from 3% to 2%. this advantage could be abolished as In a communication dated 26 June 1968 from 1 July 1968. the Permanent Representative of France On 12 June 1968, as a result of the stated that the measures issued were

ECSC sphere authorizing the French dertakings it had not been possible to Republic to grant certain measures of raise the rate as requested by the Com­ aid to the steel industry and providing mission at the prescribed date, but the inter alia in Article 1(1)(b): French Government was considering raising the rediscount rate on export to '(a) . . . 4% as from 31 December 1968.

(b) the possibility for export undertak­ Since these observations did not satisfy it and the difference between the two ings to benefit from a preferential rediscount rate in respect of export rates due to the increase of the general credits; this rate shall not be less rate from 5% to 6%, was increased than 2% and the advantage granted meanwhile to 4 points, the Commission to exporters shall not be more than on 18 December delivered a reasoned

ures to conform with this opinion within preferential rediscount rate of 2% 21 days. in respect of export claims where­ When the French Republic allowed this as the general rate was originally period to pass without amending the 5% before being increased to 6% measures objected to, the Commission on 12 November 1968, brought the application in Case 6/69 — and by bringing into operation as on 31 January 1969. from 1 January 1969 a preferential At the same time it took under Article rediscount rate of 3% in respect 88 of the ECSC Treaty a decision which of the same claims whereas the found that: general rate was at that date and still remains fixed at 6%, 'by maintaining a preferential rediscount rate of 2% for export credits beyond 1 is granting to its exporters in the November 1968 whereas the general rate sphere of intra-Community relations was 5% at this date and was subse­ a preferential rediscount rate for their quently increased to 6%, the French claims arising from export transac­ tions for them a benefit in excess of Republic is granting to steel undertak­ ings an advantage in excess of 1.5 points 1.5 points, and has thereby failed and is thus failing to fulfil its obligation to fulfil one of its obligations under under Article 1(1)(b) of the Decision No Article 2(l)(b) of Decision No 68/ 914/68/ECSC of the Commission of 6 301/EEC of the Commission of 23 July 1968.' July 1968 taken under Article 108(3) of the EEC Treaty; Article 2 of this decision granted the French Republic a period of 21 days (b) order the defendant to pay the costs. to comply with the obligation contained The defendant contends that the Court in Decision No 914/68/ECSC. should: This decision was notified to the Per­ (a) dismiss the Commission's applica­ menent Representative of France at the tion; European Communities on 23 December (b) order the Commission to bear the 1968 and on 28 February 1969 the costs.

1968 and to abolish it on 31 January The defendant contends that the Court 1969; should: 3. the Commission could not in conse­ (a) dismiss the application brought by quence properly take the contested the Government of the French Re­ decision since it was based on an public dated 28 February 1969; illegal provision of a previous de­ (b) order the applicant to bear the costs. cision; 4. if this system had been such as to provoke a serious disequilibrium or III — Submissions and argu­ if it had harmful effects on the coal ments of the parties or steel undertakings within the juris­ diction of other Member States which The Commission alleges that the pref­ effects the Commission wished to be erential export rate is an aid prohibited remedied, the Commission could only by the treaties and it has done its ut­ make a recommendation to the most since 1964 to have it abolished. French Government as provided for According to the Commission variations under the third paragraph of Article in competition within the Communities 67(2) of the ECSC Treaty instead result from the application of this rate. of the contested decision; following the difficulties consequent on the events of May and June 1968 it had B — alternatively find that the Commis­ by decisions dated 6 and 23 July 1968 sion had vitiated its decision of 18 authorized the maintenance of a tem­ December 1968: porary and decreasing preferential export rate on the conditions and within the 1. by a formal defect in not taking into account the new circumstances in­ limits which it specified. volving the retraction of the French At the time when according to the terms of these decisions the difference between Government's agreement on the dura­ tion of the measure which was the the preferential discount rate and general rate should have been reduced to 1.5 subject of the authorization; 2. by a mistake of law m imposing on points, the French Government refused to make this reduction and thus in­ the French Government the require­ fringed the said decisions. ment to take action likely to create distortion of competition penalizing The trench Republic replies that it was entitled to maintain the difference be­ French exporters in relation to their tween the two rates and indeed to in­ counterparts in several Member States and contrary to the spirit of crease it for the following reasons: the ECSC Treaty and in particular A — The decisions of 6 and 23 July, the Articles 2 and the fourth paragraph reasoned opinion and the decision of Article 5 thereof, of 18 December 1968 are illegal because the Commission acted ultra C — annul the decision of the Commis­ vires. sion of 18 December 1968; B — Even supposing that the Commis­ D — Declare that the Government of sion possesses the powers which it the French Republic may maintain with­ claims, the decisions challenged are out contravening its obligations under no less illegal in that they indirectly the ECSC Treaty a preferential redis­ require France to impose on its count rate for bilk issued for the liquid­ exporters a discriminatory redis­ ation of claims arising abroad; count rate in relation to that which

D—As regards more particularly the illegality of the decisions of 6 and 23 ECSC decision of 6 July 1968 it July 1968 it is inadmissible, for it seeks could not under the terms of the to question out of .time a decision which has not been contested within the time- second subparagraph of Article 67 (2) of the Treaty be taken except limit laid down in the Treaties (Article with the agreement of the French 44, ECSC Treaty and Article 173, EEC Government. This agreement which Treaty). Neither the decision of 6 July had been given by implication in 1968 nor that of 23 July 1968 constitu­ July 1968 was subsequently with­ tes a legislative act of a general scope so drawn and the decision contested that the objection of illegality (Article 33, by the application in Case 11/69 ECSC Treaty and Article 184, EEC Treaty ) is likewise inadmissible. was taken without regard to the new circumstances of which the The Court so decided in its judgment of French Government had informed 8 March 1960 (Federal Republic of Ger­ the Commission. many v High Authority, Case 3/59, Rec. 1960, p. 133) thus showing its desire to The French Republic deduces from this prevent the legality of administrative that neither the reasoned opinion nor decisions from being questioned in­ the decision taken under Article 88 of definitely. the ECSC Treaty could prevent the T he reasoned opinion moreover is not maintenance of the difference in question an administrative act, which is subject and that therefore the application in to examination as to its legality by the Case 6/69 must be dismissed and the Court and according to the case-law of decision of 18 December 1968 which the Court it does not have binding force is contested in Case 11/69 must be on its own. annulled. The trench Republic answers that tne

petent to take those of 18 December Lastly, the measures of 18 December 1968. With these four decisions it 1968 do not constitute new decisions or intervened in the sphere reserved to ones separable from those of July 1968. the states. This is why, although the No new obligation was laid on the Mem­ admissibility of an objection of il­ ber State by these measures but the legality properly so called may be State was only called upon to conform questioned, the French Government to the original decision. Neither can they considers that the Commission was be interpreted as rejecting an alleged not competent to take the decisions application by the French Republic as of 18 December 1968. inadmissible, since no such application has ever been made. (2) Since subsequent to the decisions of 6 and 23 July 1968 new circum­ (b) Whether the submission is well stances, arising from the monetary founded crisis in October and November 1968, introduced a new factor which 1. The fixing of the discount rate as was brought to the knowledge of part of monetary policy the Commission on 5 November 1968, the decisions of 18 December The French Republic alleges that the therefore appear as new decisions fixing of the discount rate comes directly which rejected the application of 5 under the monetary policy of the States, November 1968 as inadmissible and since these remain responsible for the obliged the French Government to balance of payments and maintenance of reduce the difference between the confidence in the currency. Article 105 rates in spite of the new circum­ of the EEC Treaty neither prescribes stances constituted by the monetary nor authorizes the taking of decisions in crisis which had meanwhile inter­ this sphere.

JUDGMENT OF 10. 12. 1969 — JOINED CASES 6 AND 11/69

the conditions which Article 92 of the tries of the Common Market, the exist EEC Treaty prescribes as characterizing ence of a specific rediscount rate on prohibited aid: export makes it possible to prevent — A general system of aid for exports French undertakings, which effect sales can nevertheless come within the in another Member country, from being ambit of Article 92 when by its penalized in relation to producers in this nature, as in the present case, it latter country, when the special economic favours in reality only 'certain under and monetary conditions in France force takings or the production of certain it separately and substantially to raise goods', that is to say, those of whose its general discount rate. products quite a substantial propor The Commission in answer says that it tion have been sold on the market of is not doubted that the variation of the Member States. general discount rate belongs to the — By definition, the free advantage sphere of powers reserved to the states, granted to certain undertakings or the that it is correct that under Articles 26 production of certain goods alters the and 71 of the Treaty of Paris in the conditions of competition which, in ECSC sphere the states remain respons its absence, would prevail on the ible for the general policy of their coun

Treaty. 2. The fact that the Commission's intervention was not limited to the The decision of 6 July 1968, in classify ing as an aid the benefit constituted by ECSC sector and the legality of the decision of 6 July 1968 the preferential rediscount rate for the ex port of steel products, in no way ex As regards the ECSC decision of 6 July ceeded the definition of aid as derived 1968 the French Republic more par from the case-law of the Court in its ticularly alleges that the Commission judgment of 23 February 1961 in Case can, when the conditions laid down in

to the specific nature of its authorization It is the time when the act was issued of 6 July 1968 in relation to the author­ which must be considered so that in any ization of 23 July 1968 since what mat­ event the alleged defect of a failure to ters is whether the measure taken by be specific became fully apparent only the State is of a specific nature and not after the event as a result of circum­ the decision which confirms or annuls it. stances alien to the decision itself. In answer the Commission says that if Even it it had to De admitted that this

JUDGMENT OF 10. 12. 1969 — JOINED CASES 6 AND 11/69

Joined Cases 27 to 29/58, Rec. 1960, p. The authorization referred to in the 505). second subparagraph relates to aid to be A fortiori the same view could be taken given to French undertakings within the with regard to the authorization given ECSC sector which are adversely affec­ in. respect of the steel sector for aid of a ted by the action of their State or by general nature for the reason that it is a change in wages having the same not as such contrary to Article 4(c) and effect. is temporarily justified by Article 109 of The recommendation referred to in the

generally executed within a very short 23 July 1968 were taken the rate was period. 3.5%, which was comparable to that in The Commission in answer says that the force in the other Member States and it power of the Commission to make a was understandable that in these condi­ recommendation under the third sub­ tions a progressive alignment could have paragraph of Article 67(2), which relates been envisaged. to the case where the action of the State When the French Government, however, in the exercise of its reserved powers is found itself obliged to fix the general harmful to the ECSC undertakings of rate at 6%, the abolition or reduction other States, does not rule out the power of the difference could be effected only of the Commission to take a decision by an appreciable increase in the rate granting, under the second subparagraph for exports. of Article 67(2), conditional authoriza­ A comparison between the benefits which tion relating to aid which the State could the producers and exporters of other not unilaterally grant under its reserved Member countries would have from the powers. action of their public authorities or even

COMMISSION v FRANCE

distortion damaging to the interests of the establishment of normal competitive French exporters and contrary to the conditions which it is the responsibility letter and spirit of the Treaty of Rome, of the Community to ensure under the in particular Articles 2, 3(f) and 6(2) third indent of the second paragraph of thereof, and to the Treaty of Paris, in Article 5 of the Treaty. particular the second paragraph of It would still be the same if, as the Article 2 and the fourth paragraph of Commission thinks, Article 67(2) has a Article 5. wider scope and allows measures of aid In answer the Commission says that the which are not specific to the ECSC second submission appears also to be an sector. In this case since the aid is objection of illegality directed against the general and the problem lies within the decisions of 6 and 23 July 1968 and in­ sphere of the EEC Treaty the result admissible for the reasons already given. would be the same in view of the fact As regards the validity of the submission that the abolition of a distortion which it states that the existence of a privil­ has been temporarily authorized is never eged rediscount rate for export credits itself such as to create a distortion in constitutes an aid without there being competition. any necessity to subject it to a prior The reference made by the French comparison of the cost factors of all the Government to the second paragraph of different production factors which vary Article 2 of the ECSC Treaty, which from one country to the other. obliges the Community to take care in In the Commission 's opinion, the French its action not to provoke fundamental Government accepted this point of view and persistent disturbances in the econ­ when it agreed in principle to the aboli­ omies of Member States, is irrelevant. tion of the preferential rate and finally The abolition of aid could, as the French when it asked for its maintenance as a Government itself admits, have only a temporary aid. relatively small effect and could not More particularly as regards the EEC therefore continue to provoke these dis­ sphere, the Commission repeats its con­ turbances. tention that it cannot be admitted that the reduction or abolition of an advant­ C — The maintenance of the difference between the two rates as a protec­ age granted by way of an aid and which tive measure by its nature creates a distortion of com­ petition can penalize those who benefit The French Republic claims alternatively from it and lead to a situation of dis­ that if the Court were to consider that torted competition (Article 3(f), EEC the difference between the two rates

should amend, suspend or abolish the payments. In its opinion this was not protective measure in question and the so, because, while it was such as to Commission could not of its own motion improve the equilibrium of the bal­ deliver either the reasoned opinion of ance of external trade, the alleged 18 December 1968 or take the decision remedy authorized in return possibili­ of 18 December 1968 in this respect. ties of use for speculative purposes In answer the Commission says that the prejudicial to the equilibrium of the argument based on the existence of a general balance of payments. new protective measure was advanced The Commission concludes that, faced for the first time in Case 6/69 and only with a serious disequilibrium in the bal­ in the reply in Case 11/69. The previous ance of payments, the means used to communications from the French improve the equilibrium in the trade Government made no such claim. More­ balance is one of doubtful efficacity and over Article 109(2) requires that the even prejudicial to the equilibrium of the Commission shall be informed of such general balance of payments and that the a measure not later than when it enters remedy claimed under Article 109 was into force and the fact that there was not strictly indispensable. no notification shows that the French D — The illegality of the ECSC decision authorities did not think they could dis­ of 18 December 1968 on the cover in Article 109 sufficient justifica­ ground that account was not taken tion for the maintenance beyond 1 of the new circumstances which in­ November 1968 of the preferential re­ discount. volved the withdrawal of the con­ sent which the French Government The Council could not have used its had given to the decision of 6 July powers under Article 109(3) in respect 1968 of a measure which before the filing of the statement of defence had never been The French Government alleges alterna­ described as a protective measure. tively that the decision of 18 December The powers vested in the Council would 1968 (ECSC) was taken by the Com­ not appear to the Commission to be able mission without regard to the new cir­ to negate those which the Commission cumstances of which the French has under Article 169 of the Treaty. Government had made the Commission The Commission was therefore com­ aware.

authorized by the Commission shall be ment developed by the French Govern determined by the State in agreement ment could not be accepted as to the with the Commission. consequent lapsing of the conditions of If the French Government could be the authorization granted on 6 July thought to have consented to the con 1968. ditions of the decision of 6 July 1968, Although it is true that Article 67 of there was nevertheless a new fact in the the ECSC Treaty does not expressly form of the international monetary crisis prescribe the form in which authoriza in October 1968. tion must be given, the Commission The French Government announced in was certainly within its rights to have its communications of 5 November and recourse to a formal decision. 13 December 1968 what the new cir

of 1 November 1968. according to the case-law of the Court The decision of 18 December 1968 was the Community rules prohibit Member States from taking the law into their therefore contrary to the provisions of own hands. the second subparagraph of Article 67(2) Finally, the decision taken on 18 of the Treaty which provides that agree December 1968 was only a declaration ment is necessary on the amount, con of the existence of a failure as from 1 ditions and duration of aid and which November 1968, that is, before any new moreover does not prescribe precisely circumstances arose.

The proceedings took the normal course. isted of such gravity that they could After hearing the report of the Judge- make it difficult for the French author Rapporteur and the opinion of the Ad ities to fulfil their obligation, the argu- vocate-General, the Court decided to

4 These decisions state that the difference between the preferential rate, the retention of which they authorize temporarily, and the general rate may not exceed 1.5 points as from 1 November 1968 and has to be abolished at the latest on 31 January 1969.

5 It is not disputed that a difference in excess of 1.5 points has been retained after 1 November 1968.

6 The Commission, taking the view that the Government of the French Republic had thus failed to comply with its obligations under the Treaties, took on 18 December 1968 under Article 88 of the ECSC Treaty a decision requiring that Government to conform to the decision of 6 July 1968 and, as regards the failure to comply with the decision of 23 July 1968, delivered the reasoned opinion provided for by Article 169 of the EEC Treaty.

7 Subsequently it brought the application in Case 6/69 before the Court under the same Article 169.

8 For its part by the application in Case 11/68 the Government of the French Republic has requested the Court under Article 88 of the ECSC Treaty to annul the decision of 18 December 1968 and to rule that it could without

COMMISSION v FRANCE

13 If this allegation were valid, the abovementioned decision would lack all legal basis in the Community legal system and in proceedings where the Com­ mission in the interest of the Community is taking action for failure by a State to fulfil its obligations, it is a fundamental requirement of the legal system that the Court should investigate whether this is the case.

14 Although under Article 104 of the Treaty Member States are responsible for ensuring the equilibrium of their total balance of payments and for maintain­ ing confidence in their currency, their obligation under Articles 105 and 107 is no less to coordinate their economic policies for this purpose and to treat their policies on exchange as a matter of common concern.

15 Articles 108(3) and 109(3) confer powers of authorization or intervention on the Community institutions which would be otiose if the Member States were free, on the pretext that their action related only to monetary policy, unilaterally to derogate from their obligations under the provisions of the Treaty and without being subject to control by the institutions.

JUDGMENT OF 10. 12. 1969 — JOINED CASES 6 AND 11/69

16 The solidarity which is at the basis of these obligations as of the whole of the Community system in accordance with the undertaking provided for in Article 5 of the Treaty, is continued for the benefit of the States in the pro­ cedure for mutual assistance provided for in Article 108 where a Member State is seriously threatened with difficulties as regards its balance of pay­ ments.

17 The exercise of reserved powers cannot therefore permit the unilateral adop­ tion of measures prohibited by the Treaty.

24 In view of the definitive nature of the decision in question it is not necessary to consider the other submissions which the French Government has put forward outside the procedures and time-limits laid down in the Treaty and

COMMISSION v FRANCE

the observance of which is required in the interest both of the States them­ selves and of the Community.

25 The Government of the French Republic further pleads that the retention beyond 1 November 1968 of the difference between the preferential redis­ count rate and the general rate constitutes a new protective measure within the meaning of Article 109 of the Treaty justified by the fresh monetary crisis which occurred during the autumn of 1968.

26 It says that the Commission could not interrupt the effects of this measure by pursuing proceedings for failure by a State to fulfil its obligations which related to a situation overtaken by events and that by delivering the reasoned opinion of 18 December without having regard to the new circumstances, it infringed Article 109 of the Treaty.

27 This submission is admissible since it is based on new factors subsequent to the decision of 23 July 1968.

JUDGMENT OF 10. 12. 1969 — JOINED CASES 6 AND 11/69

December 1968 justifies the retention of the difference in question only on the ground of the necessity of avoiding disruption of the forward planning of French undertakings and the consideration that the increase in the general rediscount rate from 5% to 6% which occurred after 12 November 1968 raised in a different way the question of fixing the rediscount rate for exports.

34 The submission based on Article 109 is therefore unfounded.

35 The Government of the French Republic then argues that its challenge to the legality of the reasoned opinion of 18 December 1968 is in any case admissible and well founded.

36 This opinion constitutes only the pre-litigious stage of a procedure which may lead to an action before the Court of Justice and the assessment of the validity of this opinion merges with that of the validity of the action itself which the Commission has brought before the Court of Justice under Article 169.

37 The submission that the reasoned opinion is illegal must therefore be dis­ missed.

42 Article 4, in particular, declares subsidies or aids granted by States, or special charges imposed by States, 'in any form whatsoever', to be incompatible with the common market for coal and steel.

43 The second subparagraph of Article 67(2) of the ECSC Treaty in providing for situations enabling the Commission to authorize Member States, in de­ rogation from Article 4, to grant aid, does not distinguish between aid specific to the coal and steel sector and aid which applies to it as the result of a general measure.

44 A preferential rediscount rate for exports therefore constitutes aid which, within the meaning of Article 67, must be authorized by the Commission in so far as it concerns the coal and steel sector.

45 The present case concerns the case provided for in the second subparagraph and not in the third subparagraph of Article 67(2) so that the Commission had to take action by way of a decision and not a recommendation.

46 By making representations to the Government of the French Republic for the purpose of asking it to conform to the provisions of the Treaty and by making its decision of 6 July 1968 subject to appropriate conditions, the Commission did not therefore encroach on the sphere reserved to the States.

47 In view of the definitive nature of that decision it is not necessary to con­ sider the other submissions of illegality raised against it.

52 The complaints made against the decision of 18 December 1968 are identical in every respect with those made against the decision of 6 July 1968, the sole object of the later decision being to ensure the execution of the earlier one.

53 These submissions must therefore be dismissed as inadmissible.

54 The French Government goes on to argue alternatively that under the second subparagraph of Article 67(2) of the Treaty the amount, conditions and dura­ tion of any aid authorized by the Commission must be determined by the Commission in agreement with the State concerned and that even if it had given its agreement to the decision of 6 July 1968, a new factor had occurred in October 1968 in the form of a new monetary crisis.

55 It says that on 5 November and 13 December 1968 it made it known that these new circumstances were leading it not to reduce the difference between the rediscount rates and that it therefore withdrew the agreement which it had previously given.

56 Independently of the question of the degree of seriousness of these circum­ stances, it does not follow from their occurrence that the conditions of the authorization granted on 6 July 1968 therefore lapsed or that the State con­ cerned could unilaterally loose itself from the obligations which it had accepted.

57 Under the ECSC Treaty alone these circumstances could justify the French Government only in asking for a review of the decision of 6 July 1968.

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, 5,6,92, 104,105,107,108,109, 169 and 171; Having regard to the Treaty establishing the European Coal and Steel Com­ munity, especially Articles 4, 33, 67 and 86; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Protocol on the Statute of the Court of Jusctice of the European Coal and Steel Community; Having regard to the Rules of Procedure of the Court of Justice of the Euro­ pean Communities;

THE COURT

hereby:

I. Declares that in maintaining after I November 1968, contrary to the decision of the Commission of 23 July 1968, a difference in excess of 1.5 points between the rediscount rate for claims for exports to other Member States and the general rate, the French Republic has failed to fulfil one of its obligations under the Treaty establishing the European Economic Community;

2. Dismisses as unfounded the application of the Government of the French Republic against the decision taken by the Commission on 18 December 1968 under the Treaty establishing the European Coal and Steel Community;