C-43/72

Commission of the European Communities represented by its legal adviser, Dr Peter Gilsdorf, acting as agent, address for service: Emil Reuter, legal adviser of the Commission, Luxembourg, 4, boulevard Royal,

defendant,

Application for damages

THE COURT

composed of: R. Lecourt, President, A. M. Donner and M. Sørensen, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore,

MERKUR v COMMISSION

I — Facts and procedure (b) to products whose price depends on the price of the products referred to under (a) and which are governed 1. A — On 12 May 1971, the Council, by the common organization of on the basis, in particular, of Article 103 market or are the subject of a EEC Treaty, issued Regulation (EEC) specific arrangement under Article No 974/71 (OJ L 106, p. 1). This 235 of the Treaty'. Regulation was amended on certain Moreover it is stated in the last sentence points by Regulation No 2746/72 of the of this paragraph: 'This option shall be Council of 19 December 1972 (OJ L exercised only where application of the 291, p. 148) with effect from 1 July monetary measures referred to in 1972. Since the events material to the paragraph 1 would lead to disturbances case all took place before this date, the in trade in agricultural products'. following is based solely on the original Article 2 governs the calculation of the version of Regulation No 974/71. compensatory amounts; paragraphs 1 Article 1 (1) of Regulation No 974/71 and 2 thereof provide: authorizes Member States in accordance '1. The compensatory amounts for the with the conditions referred to in the products covered by intervention further provisions of the Regulation 'to arrangements shall be equal to the charge on imports from Member States amounts obtained by applying to the and third countries' and 'to grant on prices the percentage difference exports to Member States and third between: countries compensatory amounts' if 'for — the parity of the currency of the the purposes of commercial transactions, Member State concerned declared a Member State allows the exchange rate to and recognized by the of its currency to fluctuate by a margin International Monetary fund, on wider than the one permitted by the one hand, and international rules'. Under paragraph 2 — the arithmetic mean of the spot of the same Article this authorization market rates of this currency applies against the US dollar during a '(a) to products covered by intervention period to be determined. arrangements under the common 2. For the other products referred to in organization of agricultural mar­ Article 1, the compensatory amounts kets; shall be equal to the incidence, on

the prices of the product concerned, — 'serious difficulties may arise' as a of the application of the result of such measures 'as regards compensatory amount to the prices the proper functioning of the of the product referred to in common market' because 'trade to paragraph 1, on which they depend'. which the current rate of exchange Article 4 reads: applies may then be effected at a price, in national currency, lower '1. No compensatory amount shall be than the intervention or buying-in fixed where, in any Member State, prices laid down by Community the percentage referred to in Article 2 rules on the basis of the official (1) does not exceed 2-5 %. parity' which in turn 'may entail a

12 May 1971. In the Annexes to this the compensatory amounts. Regulation the compensatory amounts Article 7 reads: 'Partial or temporary use provided for in Article 1 of Regulation may not be made of the authorization No 974/71 were fixed for a number of provided for in this Regulation'. products, inter alia for products Under Article 8 the Regulation was processed from cereals (Annex 1, B); the applicable with effect from 12 May list however contained no products 1971; it remains valid until the Member processed from barley.

issue 'certain foreign exchange markets within the Community have C — By its Regulation No 1687/71 of been disturbed by speculative 30 July 1971 (OJ L 173, p. 1) which movements involving an abnormal came into force on 2 August 1971, the influx of short-term capital' which Commission replaced the Annexes of was such as 'to provoke . . . Regulation No 1014/71 with fresh dangerous economic effects for Annexes. The rubric 'Products processed economic development'; from cereals' (Annex I, B) now includes — the Council 'in order to put an end also 'barley groats and meal' (No 11.02 to abnormal movements of capital, A III of the Common Customs Tariff). was prepared to envisage that in certain circumstances Member States D — The applicant is concerned may, for a limited period, widen the principally with the export of barley margins of fluctuation for the groats, barley meal and barley flakes. exchange rates of their currencies in Between 12 May and 27 July 1971 the relation to their present parities'; applicant delivered many products of

this kind to customers in third countries 50 000 and to pay the costs of the and asked the competent German Head proceedings. Customs Office on each occasion to grant it compensatory allowances for The Commission asks, these products. The Head Customs Office rejected these claims on the — that the claim should be rejected as grounds that products processed from unfounded and that the applicant barley were not mentioned in Regulation should be ordered to bear the costs; No 1014/71 and there was thus no — as a subsidiary plea: that the provision for compensatory allowances applicant be directed by an interim on export of products of this kind. The judgment to exhaust the administrat­ applicant raised an objection to this; the ive and legal means open to it in the Head Customs Office has postponed a Federal Republic of Germany in decision on this matter until the present relation to the refund of proceedings are concluded. compensatory allowances; Between 13 July and 21 September 1971 — as a subsidiary plea: that by an there was an exchange of correspon­ interim judgment the decision on the dence between the applicant and the amount of damages be reserved. Commission. The applicant threatened the Commission with a claim for damages unless by formulating more precisely or amending Regulation No II — Pleas and arguments 1687/71 it included products processed of the parties from barley in the scheme of compensatory allowance — as it was 1. Admissibility legally obliged to do — with retrospective effect, and gave directions A — Evasion of the plea of nullity in the proper quarters for the sum of The Commission explains that it is DM 198 448-18 to be paid to the aware that the Court has repeatedly applicant, this sum being due to the deemed admissible, claims for damages applicant in respect of exports made founded on the alleged defectiveness of between 12 May and 27 July 1971. The Regulations (Judgment of 2 December Commission refused to comply with this 1971, Aktien-Zuckerfabrik Schoppen­ request. stedt v Council, Case 5/71, Rec. 1971; 2. The present action was started on 10 Judgment of 13 June 1972, Compagnie July 1972. The written proceedings took d'Approvisionnement and Others v Com­ their normal course. The Court has mission, Cases 9 and 11/71, Rec. 1972). decided, on the report of the The Commission declines formally to Judge-Rapporteur, having heard the name an objection on grounds of inadmis­ Advocate-General, to proceed without sibility but doubts whether the above­ mentioned decisions are to be taken to any preparatory inquiry. mean that pleas of this kind are always The parties presented oral arguments at admissible. the hearing on 6 February 1973. Apart from this, these decisions raise The Advocate-General presented his certain doubts as the present case shows. opinion at the hearing on 27 June 1973. The applicant claims as damages exactly the total of the compensatory amounts to which it would have been entitled had I — Submissions of the par­ ties Regulation No 1687/71 been sup­ plemented as the applicant desired. A The applicant asks that the Commission judgment admitting the claim would be ordered to pay the applicant DM have similar results to a judgment setting

aside Regulation No 1014/71 or the applicant are sufficiently protected Regulation No 1687/71, which the by its ability to pursue its pending applicant could not have secured objection with the German Authorities. directly, since no such claim would have It must not of course be overlooked that been admissible. That judgment would these Authorities could then reject the in practice have effect erga omnes, objection in reliance on the Regulations because all enterprises which found of the Commission; but the applicant themselves in a similar situation could can then bring any such decision before claim damages on the same footing; the German courts who for their part moreover it would follow that the could refer to the Court under Article Commission would have been obliged to 177 EEC Treaty the question of the include products processed from barley validit of those Regulations. in the compensatory scheme in the first For further observations which the

Such a according to the applicant's view would procedure is necessary in order that the only incidentally contain a declaration raising of claims for damages should be that compensatory allowances ought to reserved for important cases. Grounds have been fixed from the outset for for such a limitation are to be found in products processed from barley; it the Judgment of the Court already would have legal force only as between mentioned in Case 5/71 and in the the parties and in relation to the claim Judgment of 25 October 1972 (Firma R. for payment made in the proceedings. & V. Haegeman v Commission, Case The Commission could leave other 96/71, Rec. 1972). undertakings which made claims on the same grounds to pursue their remedy at B — Alleged illegality of the contested

MERKUR v COMMISSION

The Regulation gave the Commission trade, that is to say, not every power to limit the products mentioned reduction in the exporters' opportunities to sell. in Article 1 which could be included in the compensatory system and to that The Commission in issuing Regulation extent allowed it a wide area of No 1014/71 considered it inappropriate discretion. This is clear from Article 4 to fix compensatory amounts for the and above all from Article 1 (2), last majority of processed products. Since a sentence. Disregarding its wording and compensatory amount — as the its unfortunate place from a systematic Commission undertakes to show on the point of view, within the Regulation, this basis of an evaluation made for barley provision is not addressed to the and barley groats — has a smaller Member States but to the Commission, incidence on the prices of products of with an indication not to fix this kind than on those of the basic

JUDGMENT OF 24. 10.1973 — CASE 43/72

The barley. But the basic concept of the variations in the spot market rates of the provision, that the smaller the effect of German mark and the guilder from the the compensatory amounts on prices, the official parity had risen in the period in less the danger of a disturbance in trade, question from 3 % to 6 %; moreover must be taken into account in the account had to be taken of the fact that application of Article 1 (2), last sentence the broadening of the margins of of the Regulation. fluctuation and consequently the The Commission started from the compensation system would persist for premise that products processed from some considerable time. barley were imported into Germany and The applicant's reply is that the the Netherlands only on a very limited Commission interprets Regulation No scale so that a 'disturbance in trade' was 974/71 incorrectly. Article 1 gives power

The fact be harmed to any extent by the relatively that the expression 'give power to' is small compensatory amounts not being used only in Articles 1 and 7 does not granted, because this industry has very conflict with this interpretation, because largely dominated the market in various Article 6 in substance gives a similar third countries, Denmark among them. power, namely to the Commission. Significantly the applicant makes no If the Commission, as it claims, had been claim for damages on account of lost given power to apply the system of business. compensation only to individual It can be admitted that in individual products i.e. in part the result would cases German exporters have suffered have been that Member States would

agricultural market. Moreover the individual Member States and it has only

been possible to accept it so far as this of import but disregarded those of export was indispensable in the interest of the and especially disregarded the fact that Common Market. The Council was thus interference with the export of products willing to give Member States the power processed from barley must make it to grant compensatory amounts from the difficult for the home market to dispose outset only in the case where the said of the basic product. In this connexion measures affecting currency would lead it is irrelevant that the applicant and to the disadvantages indicated in that other undertakings in a similar position order. had, to a considerable degree, processed The area of discretion of the imported barley 'for even barley Commission was not broad but limited: produced in third countries, which was the Commission had in particular to imported in spite of the burdens on restrain itself from any encroachment on import, exercised pressure on the market the basic principles of Regulation No within the Community'.

If this EEC Treaty. On the contrary limit was exceeded in the case of a 'authorization' is always used when particular product, as the Commission Member States are to be permitted to itself admitted it was in the case of the deviate from general rules and make product in question, then the special regulations. The Commission's Commission was obliged to fix interpretation of Regulation No 974/71 compensatory amounts for this product. is based on the fact that Article 6 (2) The Commission would however have thereof laid upon the Commission 'the infringed Regulation No 974/71 even if obligation to fix the compensatory Article 7 thereof, contrary to the view of amounts', that is a measure which of the applicant, binds only to the Member necessity precedes the 'exercise' of the

pure arithmetic'. It is clear that the discretion at a higher figure than 1 %. Council did not intend this because the On its own showing it did not do this Commission was even entitled to and so bound itself and was obliged to determine 'other derogations from the fix compensatory amounts for all Regulations on the common agricultural products for which the incidence policy' (Article 6 (1)) and the fixing of exceeded 1 %. compensatory amounts was to be done Moreover the Commission, as its in accordance with the management statements showed, allowed itself to be committee procedure — which as the guided by irrelevant considerations. In Commission shows in the light of the first place it took account of aspects examples is only provided for if the

mean that it should make it possible 'by 2. The applicant claims that the insertion of a selective criterion' to limit non-inclusion of products processed the range of products coming into the from barley in the compensatory system compensatory system. put the German exporters at a As regards the alleged 'self-restriction' disadvantage in relation to those from on the part of the Commission the fixing other Member States which did not float of the upper limit of negligible incidence their exchange rates. The German at 1 % was a purely internal criterion exporters had to demand a higher price which moreover was not applied too for their goods than their foreign rigidly. In view of the shortness of the competitors and thus became uncompeti­ time in question (May to August 1971) tive. Such discrimination inevitably leads this internal practice could not acquire — contrary to the spirit of Regulation any binding force. There was no No 974/71 — to disturbances and question of this because the system dislocations of trade. objected to was already justified on the The Commission's reply is that the basis of Article 1 (2), last sentence of disadvantage to which objection is taken Regulation No 974/71. affected all German exporters and in the That the import side took first place final analysis arose from the currency with the Commission agrees with the policy measures taken by the Federal general tendency of the cereal market Republic of Germany, for which the regulation which provides for compul­ Community had no responsibility. sory levies but as against this merely Apart from this the failure to grant the permits reimbursement on export. compensatory amounts can be justified b) Discrimination on the grounds that the competitive position of the German export trade 1. The applicant claims that the involved was considerably more

favourable than that of the export trade The same applies to the scheme for raw of the other Member States. barley and products processed from The applicant is of opinion that this barley as the Commission sets out in consideration of the Commission is detail. As the compensatory amount has irrelevant and so discriminatory. only an insignificant incidence it cannot be assured that the competitiveness of 3. In the view of the applicant the processed products has appreciably scheme originally adopted by the deteriorated in relation to raw barley. Commission contains a further discrimination vis-à-vis other German The view that products processed from exporters.

Since to the 'relatively high' incidence of the Regulation No 1014/71 provides for compensatory amounts in the case of the compensatory amounts for the export of processed products favoured from the raw barley it has become possible to start is too indefinite. Apart from this, offer this product relatively more the Commission, in fixing the upper cheaply than processed products limit of negligible incidence at 1 %, manufactured from it, whence arose bound itself and so became obliged to distortions of the normal price include products processed from barley relationship between the two groups of in the compensatory system with effect merchandise. This disadvantage was from May 1971. Finally, to consider the further increased because Regulation No effects of the compensatory amounts 974/71 imposed compensatory amounts only on a relative basis is to disregard on the import of raw barley. economic reality.

The applicant are not comparable inter se first Regulation that was made had because this merchandise is intended for factual grounds to support it. The different markets and different purposes. legislator in granting benefits has a wider

area of discretion than in imposing D — Damages charges. Further it must be indirectly inferred from the precedents of the The applicant claims that the Regulation Court on the law relating to breaches of objected to did great harm to its official duty that only a flagrant breach business. Taking the conversion rate of of the principle of equality gives rise to 100: 180 fixed in Regulation No 1052/68 of the Council dated 23 July claims for compensation. 1968 'on the import and export system In the case of bran and other residues for products processed from cereals and from cereals the incidence of the from rice' (OJ L 179, p. 8), the compensatory amounts is 'relatively compensatory amount for the processed high' because it is fundamentally the products in question would have been same as in the case of the original DM 15-12 per metric ton. Only if the

On The applicant is of opinion that the 31 July 1970 the applicant had orders highest standards of care must be set for for the export of products processed the Commission: therefore an objectively from barley to a total 10 000 metric tons wrong attitude on the part of this for delivery up to January 1971. In July institution gives grounds for supposing it 1971 on the other hand its total of acted improperly. The Commission corresponding long-term contracts had should have recognized that it could not fallen to nothing. rely on Article 1 (2), last sentence, of In its plea the applicant evaluates its Regulation No 974/71 for what it did losses arising, of which it claims only and that it was not permissible for it, part, at DM 198 448-18. This, as the except for very compelling reasons, to calculation attached to the pleading decide from the practice which it shows, is the total of the compensatory otherwise followed in the application of amounts which it lost on its exports Article 4 (2) of the Regulation. made in the period from 12 May to 2 In the view of the Commission there August 1971. could be no question of culpability even The applicant can in all probability if, contrary to its interpretation, the establish its claim for damages only by Regulation objected to was defective. It the present plea, because it is to be feared that the German authorities was compelled to issue the first implementation provisions in the shortest would dismiss the complaint lodged with time and in the process to review an them by stating that they were bound by extraordinarily large number of products the Regulations of the Commission. to see whether there was any danger of a The Commission replies that it has no disturbance in trade. objections in principle to this method of

calculating the damages, with the had won the day because these amounts reservation that the contracts mentioned were not payable by the Community. and their execution be examined. The applicant's reply is that it could The applicant could however have have discharged old contracts only at a loss and could have concluded new ones avoided a loss at least in part so far as it could have fallen back or actually did only by incurring losses. It sets out a fall back on processing barley imported 'total calculation' for the export of 9 583 from third countries. In this case it could metric tons of barley groats and assesses have claimed the benefit of the rules the loss on the deal at DM 142 000.

The domestic raw barley. The Commission applicant is hardly in a position to get reserves its detailed position on these the compensatory amounts, which are questions. being contested, positively fixed in this way with effect from 12 May 1971 Having regard to the principles laid because the Commission would object down in the Judgment of the Court on that such a request evades the conditions 14 July 1967 (Kampffmeyer and Others of admissibility contravened in Articles v Commission, Cases 5, 7 and 13 to 173 and 175 EEC Treaty. 24/66, Rec. 1967) it must be considered The Commission's reply is that it is that it was incumbent on the applicant contrary to commercial notions that the to exhaust the legal steps it had already applicant worked at a loss.

JUDGMENT OF 24. 10. 1973 — CASE 43/72

declining to do so. In any case a precise is to be expected that they would refer examination of the facts would be the matter to the Court under Article necessary in this connexion should the 177 EEC Treaty. If the applicant in such occasion arise. proceedings received a favourable The Court has already declared in its decision, the Commission would not judgments mentioned above in Cases 5, hesitate to draw the necessary inferences 7 and 13 to 24/66 and in Case 96/71 and to see that the applicant received the that a claim for damages cannot be compensatory amounts asked for (not by made against the Community when the way of damages, but) 'in natura'. This damages consist of a levy payable to the solution would be preferable because the State authorities and the legality of this Community, in the event of its being levy can be contested before a national ordered to pay damages, would have to court. The basic principle of this pay amounts to the applicant which decision can be applied to the present under present rules normally have to be case. If the applicant takes legal borne by the Member States; this result proceedings before the German courts it would be unsatisfactory.

Grounds of judgment

1 In this action, filed on 10 July 1972, the applicant seeks payment from the Commission of 50 000 DM by way of compensation for the damage suffered by the applicant owing to the Commission's failure to fix compensatory amounts, as envisaged by Article 1 of Regulation No 974/71 of the Council of 12 May 1971 (OJ L 106, p. 1), for exports of products processed from barley for the period from 12 May to 2 August 1971.

4 However, the action for damages provided for in Articles 178 and 215 of the Treaty was included as an autonomous form of action, with a particular purpose to fulfil within the system of actions, and subject to conditions on its use by its specific nature.

Such an action differs from an application for annulment in that its end is not the cancellation of a particular measure but compensation for damage caused by an institution in the performance of its duties.

The action for damages seeks only recognition that a right to compensation exists and, therefore, satisfaction solely for the benefit of the applicant.

5 The Commission then maintains that the applicant should be sent back to pursue its claim before the administrative and judicial authorities in the Federal Republic of Germany, on the grounds that the event giving rise to the present dispute was the refusal by the competent customs office in that Member State to grant the applicant compensatory amounts on the exports it had made to third countries.

If such a procedure were followed it would result in a reference to the Court under Article 177 of the Treaty from the German courts of the question of the validity of Regulations Nos 1014/71 and 1687/71.

6 But the Court already has the case before it and within its jurisdiction, and is therefore bound to see whether or not these regulations are tainted with the alleged irregularities.

9 Regulation No 974/71 was amended by Council Regulation (EEC) No 2746/72 of 19 December, 1972 (OJ L 291, p. 248), which came into force as from 1 July 1972.

However, since the events forming the subject matter of the dispute took place before that date, the action will be decided on the basis of the original text of Regulation No 974/71, which will accordingly be the only one referred to in what follows.

The first submission

to 1. The applicant maintains that the Commission was under a duty in principle to fix compensatory amounts for all the products listed in Article 1 (2) of Regulation No 974/71; this was by virtue of Article 7 of the same Regulation which states 'partial ... use may not be made of the authorization provided for in this Regulation'.

The above provision, it is maintained, is addressed to the Commission, as well as to Member States.

11 According to Article 1 (1) of Regulation No 974/71, any Member State which adopts particular monetary measures is 'authorized' to 'grant on exports to Member States and third countries compensatory amounts'.

Furthermore, Regulation No 974/71 was introduced on the basis of point four of the Council Resolution of 9 May 1971 on the monetary situation (OJ C 58, p. 1), which states: 'being anxious to forestall recourse to unilateral measures to deal with possible disturbances in trade in agricultural products, the Council shall, immediately and in accordance with Article 103 of the Treaty, draw up appropriate measures'.

Since the object of the Regulation was therefore to preclude recourse to 'unilateral measures', it is hardly conceivable that it would leave to the exclusive discretion of the Member States concerned the question whether, for a specified product, it is or is not necessary, to grant these amounts in order to avoid disturbances.

14 For those reasons it follows that the Commission is under no duty to fix compensatory amounts for every product listed in Regulation No 974/71.

15 2. The argument that the Commission was under a duty to fix ab initio compensatory amounts for exports of the products concerned is also supported, in the applicant's view, by the practice followed by that institution in applying Article 4 (2) of the Regulation, whereby 'no compensatory amount shall be fixed for products for which the amount calculated in accordance with Article 2 is negligible in relation to their average value'.

JUDGMENT OF 24. 10. 1973 — CASE 43/72

According to the applicant the Commission itself omitted to fix compensatory amounts only when those would come to less than 1 % of the average value of the product.

19 1. As regards the comparison made with exporters from other Member States the adoption of Regulation No 974/71, introduced by virtue of Article 103 of the EEC Treaty and forming the basis of Regulations Nos 1014/71

MERKUR v COMMISSION

and 1687/71, was prompted by the fact that some of the Member States, including the Federal Republic of Germany, had widened the margins of fluctuation for the exchange rates of their currencies in relation to their official parities.

20 If this widening makes the situation of importers and exporters in the country concerned different from that of their counterparts in other Member States, the disparity is to be attributed not to Community intervention but to the decision taken by this Member State.

21 While the powers conferred on Community institutions by the Treaty, and by Article 103 (2) in particular, include the option of mitigating some of the effects of such national measures, as a matter of the 'common concern' referred to in Article 103 (1), it does not follow that these institutions are bound to compensate for all the effects insofar as these are disadvantageous to importers and exporters in the Member States concerned.

In fact, by enabling the Council, without obliging it, to 'adopt ... measures appropriate to the situation', Article 103 conferred on that body wide powers of appraisal, to be exercised as a matter of 'common concern', and not in the private interests of a particular group of participants in the market.

Since the assessment which the Commission had to make was perforce an overall one, the possibility that some of the decisions it made might subsequently appear to be debatable on economic grounds or subject to modification would not in itself be sufficient to prove the existence of a violation of the principle of non-discrimination, once it was established that the considerations adopted by it for guidance were not manifestly erroneous.

It is clear from the documents that this was established in the case of the evaluation made of situation of the products in dispute in relation both to that of other products processed from cereals, and to that of barley.

25 Accordingly the submission based on an alleged discrimination is not well-founded.

26 The net result of the above considerations is that Regulations Nos 1014/71 and 1687/71 are not tainted with the illegality alleged.

Consequently, the claim must be dismissed, and there is no need to examine the other conditions for non-contractual liability contained in the second paragraph of Article 215 of the Treaty.

Costs

hereby:

1. Dismisses the action as unfounded.

2. Orders the applicant to pay the costs.

Lecourt Donner Sørensen Monaco Mertens de Wilmars

Pescatore Kutscher Ó Dálaigh Mackenzie Stuart

Delivered in open court in Luxembourg on 24 October 1973.