C-25/70

JUDGMENT OF 17. 12.1970 — CASE 25/70

In Case 25/70

Reference to the Court under Article 177 of the EEC Treaty by the Hessischer Verwaltungsgerichtshof (Higher Administrative Court of the Land of Hesse), Kassel, for a preliminary ruling in the action pending before that court between

EINFUHR- und Vorratsstelle für Getreide und FUTTERMITTEL, Frankfurt-am- Main, and

Köster, BERODT & Co., having its registered office in Hamburg, on the validity of Regulation No 102/64/EEC of the Commission of 28 July 1964 on import and export licences for cereals and processed cereal products, rice, broken rice and processed rice products,

EINFUHR- UND VORRATSSTELLE v KÖSTER

THE COURT

I — Facts and procedure Verwaltungsgericht Frankfurt-am-Main, found in favour of the undertaking. On 2 June 1964 Köster, Berodt & Co. ob­ The court gave reasons for its decision, tained an export licence in respect of 1200 holding in particular that Regulation No metric tons of maize meal. 102/64 was invalid in that it institutes an In accordance with Article 7 (1) of Regula­ obligation to export, makes the issue of the tion No 102/65/EEC of the Commission of export licence conditional upon the lodging 28 July 1964 on import and export licences of a deposit and provides in principle for for cereals and processed cereal products, forfeiture of the deposit should the obliga­ rice, broken rice, and processed rice tion to export not be carried out ; moreover, products (OJ 1964, p. 2125) the issue of the the Commission did not have the power to licence was conditional on the lodging of a adopt such a regulation as it violated the deposit, amounting to 0.5 units of account principle whereby the administration is per metric ton, guaranteeing that exporta­ obliged to implement only measures pro­ tion would be effected during the period of portionate to the objective to be attained validity of the licence. (principle of proportionality). An exportation was not effected during the On appeal against that judgment by the period of validity of the said licence, the Einfuhr- und Vorratsstelle, the Hessischer Einfuhr- und Vorratsstelle für Getreide und Verwaltungsgerichtshof, by order of 21 Futtermittel, by decision of 25 November April 1970 received at the Court Registry on 1965, declared the deposit of 2 400 DM 28 May 1970, has asked the Court under to be forfeited. Article 177 of the EEC Treaty for a pre­ On the Einfuhr- und Vorratsstelle's refusing liminary ruling on the validity of Regulation to entertain the objections of Köster, No 102/64/EEC of the Commission and, in Berodt & Co., that undertaking on 8 particular, on the question whether Articles October 1966 brought an action in the Ver­ 1 and 7 of that regulation are valid in so far waltungsgericht (Administrative Court) as they relate to the system ofexport licences Frankfurt-am-Main. and deposits. By judgment of 12 December 1966, the In its order the Hessischer Verwaltungs­

gerichtshof"puts the following questions, the invalid by reason of the fact that, even scope of which is decisive for the solution of without the legislature's attempting to the dispute: establish whether or not the failure to carry out the obligation to export is (1) Must the procedure laid down by independent of fault, the only case in Article 26 of Regulation No 19 of the which the deposit is not forfeited is, Council of 4 April 1962 on the progres under Article 8, when exportation

(2), 155, 173 and 177 and the first para the EEC written observations were sub graph of Article 189 of the EEC Treaty? mitted on 5 August by the respondent in the main action, on 6 August by the Council of (2) Is Regulation No 102/64 deprived of the European Communities and on the same any valid basis of authorization in that date by the Commission of the European it lays down in Article 1 thereof the Communities. obligation to export involved by the After hearing the report of the Judge- export licence, in Article 7 (1) thereof Rapporteur and the views of the Advocate- the necessity to lodge a deposit in order General, the Court decided to open the oral to obtain that licence and in Article 7 procedure without any preparatory inquiry. (2) thereof forfeiture of the deposit The respondent in the main action, the should the obligation to export not be Council and the Commission presented

In Köster, Berodt & Co., the respondent in the particular, is this so in the case referred main action, advances the following argu to in Article 7 (1) where the deposit is ments in particular against the validity of lodged for the purpose of obtaining the system of deposits : export licences in respect of which the amount of the refund is not fixed in (a) On the formal level advance? Forfeiture of the deposit constitutes a (4) May it be said that the provision of quasi-penal sanction or a fine imposed on Regulation No 102/64 concerning for

EINFUHR- UND VORRATSSTELLE ν KÖSTER

Moreover, it is also in vision of this nature. effectual in view of the fact that it can The system of deposits is based on the so- neither guarantee that the obligation to called Management Committee voting pro import or export is actually carried out, nor cedure. That procedure is contrary to the enable the competent authorities in good Treaty: it enables the Management Com time to have a sure view of the state of the mittee to participate in the legislative work market, much less future market trends. of the Commission, makes the obligation to Moreover, the intervention agencies and the consult the Assembly illusory and gives the Commission are not technically in a posi Member States the opportunity of obtain tion to exploit the information provided by ing from the Council an 'annulment' of the the system criticized. regulations of the Commission. The regula

margins. ity to extend the system of deposits either to It follows from the foregoing that a sub export licences for cereals or to import and stantial charge is imposed without any export licences for cereal products. necessity on importers and exporters. How ever, any measure constituting a charge, (b) The substance of the system in dispute whether or not it is in itself tolerable, violates the principle of proportionality The respondent in the main action main when it is superfluous, when there is dis tains that the system of deposits must re proportion between the charge and the spect the principle of proportionality, result which it may or must endeavour to enshrined both in the German Basic Law achieve, when that objective cannot be and in Community law. In this respect the attained by the method employed or when, following observations in particular should in order to attain it, there are other methods be made: which may be more conveniently applied. The regulations establishing the common The system of deposits also violates the organization of the agricultural markets are principle of proportionality in that in limited in principle to the formation of respect of exemption from forfeiture of the market policy by means of prices. The deposit it refuses, otherwise than in cases of regulation of prices has an automatic force majeure, to take into consideration sluice-gate effect on quantitative move situations in which the licence to import or ments in the Community market and export has not been utilized for wholly avoids any disturbance to it. Consequently, justifiable commercial reasons, in particular the point of prime importance in the assess when utilization would have been contrary ment of the market and market trends is the to the objectives of the common organ observance and checking, first, of the prices ization of the markets or to commercial on the internal market and, secondly, of the logic (for example, in the event of amend situation on the world market. On the other ment of the applicable legislation between hand, a quantiative check, such as arises the date of the application for the licence from the system of import and export and that of its issue). licences, the utilization of which must be The system criticized does not take into

account the peculiarities of the inward pro subject to the observance of the institutional cessing trade, to which the goods concerned balance of powers created by the Treaty, to in the main action are subject. subject the exercise of the powers conferred The Council of the European Communities on the Commission to specific, detailed restricts its observations to the problem of rules, such as consultation of a subsidiary the compatibility with the EEC Treaty of the body composed of experts or representa so-called Management Committee proce tives of the Member States. dure and, in asserting such compatibility, The detailed rules of the Management Com advances essentially the following argu mittee procedure do not have the effect of

Moreover, adopted in this way only in so far as it itself any measures adopted by the Council, when provided for that possibility in the measure it substitutes fresh provisions for those pre delegating powers. viously adopted by the Commission, cannot By expressly providing for the possibility of in any way be compared with the interven conferring powers of implementation on the tion of a decision of annulment or even of Commission, Article 155 implicitly, but appeal. necessarily, confirms that the Council holds

rules.

(c) The fact that the provisions relaing to different decision. There is nothing against the Management Committee procedure do the Council's reserving such a right and, not expressly mention the forms of measures when it does so, this in no way has an provided for by Article 189 of the Treaty in adverse effect on review by the Court of no way signifies that that article is infringed. Justice. It follows from this solely that the institu The powers conferred on the Commission tions have the opportunity of adopting, within the framework of the Management from among all the legal forms provided for Committee procedure are powers of im by Article 189, that which appears to them plementation; they may thus be exercised the most appropriate. according to rules other than those laid down by the third subparagraph of Article (d) The fact that, on the one hand, only the 43 (2) of the Treaty solely for measures Council and the Commission have a power intended to lay down the principles of the of decision in the application of the Mana common agricultural policy and, in partic gement Committee procedure, and that, on ular, the guidelines of a common organiza the other hand, measures adopted by these tion of the market. The principles governing two institutions are obliged to take one of the institutional balance between Council the forms of executory measure provided for and Commission are respected in this case. by Article 189 of the Treaty enables it to be As to the Council's option, on a qualified stated that the legal guarantees offered by majority, to take a decision different from the Treaty, in particular by Article 173 and that of the Commission, it must be remarked 177, to those concerned by acts of the ad that the Council's powers of amendment in ministration are safeguarded when this the framework of the Management Com procedure is applied. mittee procedure and those provided for by

Commission. The Council does not exceed system is indispensable to the proper func the limits of that power of evaluation to tioning of the common organization of the obtain the opinion of a committee com market in cereals. posed of representatives of the Member The common organization of the market in States before adopting measures of imple cereals involves essentially the regulation of mentation. prices, the object of which is to stabilize the The negative opinion of the Management price of cereals in the Community at a level Committee does not deprive the Commis

JUDGMENT OF 17. 12. 1970 — CASE 25/70

export refunds and denaturing premiums, on the practice of administrative authorities for the exercise by intervention agencies of is only valid in law when that practice shows their right to intervene on the market at any that it is objectively impossible to use the time, particularly by way of purchases, for instrument created by the system of depo fixing the flat-rate amount comprised in the sits; this has not even been maintained. intra-Community levy, for the choice of The complaint that the system of deposits measures intended to avoid deflections of transforms the economy of the market into trade and, generally, for checking the func a planned or directed economy is not justi tioning of the systems set up by Regulation fied. The common organization of the No 19 and its implementing regulations and market into a planned or directed economy for their possible amendment. is not justified.

imports or exports. In fact, there are several The amount of the deposit is in no way reasons for a trader to apply for more excessive, having regard to the objective of licences than he needs. The obligation to the system of deposits, by reason of the fact import or export involves no disadvantage that forfeiture of the deposit is not the rule, for the licensee other than forfeiture of the that it involves only a small percentage of deposit; thus it in no way has a particularly the target price of the least expensive cereals adverse effect on the rights of the individual. and that it is very much less than the normal It is not possible to obtain a valid compre margin of profit for this type of transaction. hensive view of the market by obliging the Limitation solely to force majeure of the licensee to report non-utilization of his cases in which the deposit is not forfeited licence and by penalizing any failure to does not offend either the principle of fulfil that obligation by the imposition of a proportionality or that of legality. fine ; in fact, in order to acquire a prospective In fact, it follows from the case-law of the comprehensive view of the market it is Court that the existence of a case of force necessary that at the time when the licence is majeure must be recognized when the appli issued there should be sufficient certainty cation of strictly objective criteria indicates that the quantity mentioned in the licence that the failure to effect importation or ex will be imported or exported during the portation is not due to negligence and that, period of its validity. Notice of non- in such examination, the principle of pro utilization would merely lead to piecemeal portionality must be respected; further correction of the initially false image of the more, the fact that a trader has to bear an future state of the market. : excessive loss may constitute a case of force A reduction in the duration of the validity of majeure capable of releasing him from the licences is not an adequate solution : it runs obligation to effect the intended trans counter to the objectives of the common action. organization of the market in cereals and is Thus the Commission considers that, with

Grounds of judgment

1 By order of 21 April 1970 received at the Court on 28 May 1970, the Hessischer Verwaltungsgerichtshof, by virtue of Article 177 of the EEC Treaty, has asked the Court to give a ruling on 'the validity of Regulation No 102/64/EEC of the Com­ mission of 28 July 1964, on import and export licences for cereals and processed cereal products, rice, broken rice and processed rice products (OJ 1964, p. 2125) and, in particular, on the question whether Articles 1 and 7 of that regulation are valid in so far as they relate to export licences and deposits lodged for the purpose of obtaining export licences.

2 It appears from the order referring the matter that the question put was raised in the context of an appeal against a judgment of the Verwaltungsgericht Frankfurt- am-Main, annulling a decision of the Einfuhr- und Vorratsstelle für Getreide und Futtermittel which had declared a deposit forfeited on the failure of the respondent to effect within the prescribed period an export covered by a licence issued under Article 7 of Regulation No 102/64. In view of the grounds of the judgment at first instance and of the submissions made by the respondent in the appeal concerning the legality of the system of deposits established by Articles 1 and 7 of Regulation

JUDGMENT OF 17. 12. 1970 — CASE 25/70

No 102/64, the Hessischer Verwaltungsgerichtshof has formulated its question by way of four subordinate questions which it is appropriate to consider separately.

1 — The question relating to the 'Management Committee' procedure

6 Both the legislative scheme of the Treaty, reflected in particular by the last indent of Article 155, and the consistent practice of the Community institutions establish a distinction, according to the legal concepts recognized in all the Member States, between the measures directly based on the Treaty itself and derived law intended to ensure their implementation. It cannot therefore be a requirement that all the details of the regulations concerning the common agricultural policy be drawn up by the Council according to the procedure in Article 43. It is sufficient for the purposes of that provision that the basic elements of the matter to be dealt with have been adopted in accordance with the procedure laid down by that provision. On the other hand, the provisions implementing the basic regulations may be adopted according to a procedure different from that in Article 43, either by the Council itself or by the Commission by virtue of an authorization complying with Article 155.

EINFUHR- UND VORRATSSTELLE ν KÖSTER

7 The measure dealt with by implementing Regulation No 102/64 of the Commission do not go beyond the limits of the implementation of the principles of basic Regulation No 19. The Commission was thus validly authorized by Regulation No 19 to adopt the implementing measures in question, the validity of which cannot therefore be disputed within the context of the requirements of Article 43 (2) of the Treaty.

8 Secondly, the respondent in the main action criticizes the Management Committee procedure in that it constitutes an interference in the Commission's right of decision, to such an extent as to put in issue the independence of that institution. Further, the interposition between the Council and the Commission of a body which is not provided for by the Treaty is alleged to have the effect of distorting the relationships between the institutions and the exercise of the right of decision.

10 The legality of the so-called Management Committee procedure, as established by Articles 25 and 26 of Regulation No 19, cannot therefore be disputed in the context of the institutional structure of the Community.

11 The respondent in the main action has also criticized the Management Committee procedure inasmuch as that machinery has deprived the Court of Justice of certain

JUDGMENT OF 17. 12. 1970 —CASE 25/70

of its functions by instituting 'a right of annulment' reserved to the Council for measures taken by the Commission. :

12 That objection is based on a false analysis of the Council's right to take over the decision. The procedure laid down by Article 26 of Regulation No 19 has the effect of enabling the Council to substitute its own action for that of the Commission where the Management Committee gives a negative opinion. The system is therefore arranged in such a way that the implementing decisions adopted by virtue of the basic regulation are in all cases taken either by the Commission or, exceptionally, by the Council. These measures whatever their author, are capable of giving rise in identical circumstances either to an application for annulment under Article 173 or to a reference for a preliminary ruling under Article 177 of the Treaty. It therefore appears that the exercise by the Council of its right to take over the decision in no way limits the jurisdiction of the Court of Justice.

2 — The question relating to the delegation ofpowers to the Commission

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cereals, adding that 'the issue of a licence shall be conditional on the lodging of a deposit...'. Lastly, paragraph (3) provides that 'the detailed rules for the applica­ tion of this article ... shall be adopted in accordance with the procedure laid down in Article 26', specifying that the provision applies 'in particular' to the fixing of the duration of the validity of the import licence for processed cereal products. The wording of that article has given rise to the question whether, since the system of deposits is only mentioned in Article 16 (2) in relation to import licences for cereals properly so called, the Commission was legitimately able to extend it, through implementing Regulation No 102/64, to exports and processed products.

16 These various provisions must be interpreted in the light of the scheme and objectives both of Article 16 and of Regulation No 19 as a whole. Article 16 (1) reveals the intention to establish a system intended to govern indiscriminately imports and exports of all the products subjected to an organization of the market by Regulation No 19. In the same way, paragraph (3) refers to the procedure laid down in Article 26 for the determination of all detailed rules of application to be adopted in the context of Article 16.

17 Paragraph (2), which is placed between these two provisions of general scope, con­ stitutes a special measure of application intended to implement a part of the provisions envisaged in paragraph (1). An interpretation which restricted the guarantees of effectiveness provided for by the regulation merely to import licences and to a part only of the products subject to the organization of the market would have the effect of disturbing the harmonious functioning of the system.

21 It appears from the grounds of the judgment at first instance that the Verwaltungs­ gericht considered the undertaking attached to the issue of the import or export licences, under Article 1 of Regulation No 102/64, and the deposit provided for by Article 7 (1) of the same regulation guaranteeing the fulfilment of that obligation to be invalid, because it allegedly constitutes an ultra vires measure contrary to the principles of economic freedom and proportionality. According to the court, these principles which are intended to guarantee protection of fundamental rights form an integral part of both international law and the supranational legal order, such that a Community measure contrary to these concepts must be considered null and void.

22 Respect for fundamental rights forms an integral part of the general principles of law protected by the Court of Justice. It is therefore appropriate to inquire, in replying to. the question referred to the Court and in the light of the principles invoked, whether the system of deposits has infringed rights of a fundamental nature, respect for which must be ensured in the Community legal system.

23 The objective of the system of deposits is set out in the sixth recital of the preamble to Regulation No 102/64, according to which 'provision should be made to avoid licences being put into circulation which are not then followed by import or export', in view of the fact that 'such licences would give a mistaken view of the market situation', and to this end the issue of licences conditional on the lodging of a deposit which is to be forfeited if the obligation to import or export is not fulfilled. It follows from these considerations and from the general scheme of Regulations No 19 and 102/64 that the system of deposits is intended to guarantee that the imports and exports for which the licences are requested are actually effected in order to ensure both for the Community and for the Member States precise knowledge of the intended transactions.

27 A system of mere declaration of exports effected and of unused licences, as proposed by the respondent in the main action, would, by reason of its retrospective nature and lack of any guarantee of application, be incapable of providing the competent authorities with sure data on trends in the movement of goods. Likewise, a system of fines imposed a posteriori would involve considerable administrative and legal complications at the stage of decision and of execution.

28 It therefore appears that the requirement of import and export licences involving for the licensees an undertaking to effect the proposed transactions under the guarantee of a deposit constitutes a method which is both necessary and appropri­ ate to enable the competent authorities to determine in the most effective manner their interventions on the market in cereals.

29 The principle of the system of deposits cannot therefore be disputed.

30 However, examination should be made as to whether or not certain detailed rules of the system of deposits might be contested in the light of the principles enounced by the question, especially in view of the allegation of the respondent in the main action that the burden of the deposit is excessive for trade, to the extent of violating fundamental rights.

JUDGMENT OF 17. 12. 1970 —CASE 25/70

31 In order to assess the real burden of the deposit on trade, account should be taken not so much of the amount of the deposit which is repayable—namely 0.5 unit of account per 1000 kg—as of the costs and charges involved in lodging it. In assessing this burden, account cannot be taken of forfeiture of the deposit itself, since traders are adequately protected by the provisions of the regulation relating to circumstances recognized as constituting force majeure. The costs involved in the deposit do not constitute an amount disproportionate to the total value of the goods in question and of the other trading costs.

4 — The question relation to the concept offorce majeure

37 The Court is asked to rule whether the provision of Regulation No 102/64 cpn-

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cerning forfeiture of the deposit (Article 7 (2)) is invalid by reason of the fact that, even without the legislature's attempting to establish whether or not the failure to carry out the obligation to export is independent of fault, the only case in which the deposit is not forfeited is, under Article 8, when exportation cannot be effected during the period of validity of the licence as a result of circumstances which may be considered to be a case of force majeure.

Costs

41 The costs incurred by the Council and the Commission of the European Commun­ ities, which have submitted observations to the Court, are not recoverable. As

JUDGMENT OF 17. 12. 1970 —CASE 25/70

these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the Hessischer Verwaltungs­ gerichtshof, the decision as to costs is a matter for that court. ,

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of the respondent in the main action and the Council and the Commission of the European Communities; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 2, 39, 40, 43, 149, 155, 173, 177 and 189; Having regard to Regulation No 19 of the Council of 4 April 1962 and Regulation No 102/64/EEC of the Commission of 28 July 1964; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community, especially Article 20; Having regard to the Rules of Procedure of the Court of Justice of the European Communities;

they concern export licences and deposits lodged for the purpose of obtaining those licences.

Lecourt Donner Trabucchi

Monaco Mertens de Wilmars Pescatore Kutscher

Delivered in open court in Luxembourg on 17 December 1970.

A. Van Houtte R. Lecourt

Registrar President