C-72/72

JUDGMENT OF 22. 3. 1973 — CASE 72/72

In Case 72/72

Reference for a preliminary ruling made to the Court of Justice under Article 177 of the EEC Treaty by the Bundesverwaltungsgericht, Berlin, in the case pending before the said Court between

EINFUHR- UND VORRATSSTELLE FÜR GETREIDE UND FUTTERMITTEL, Frankfurt- on-Main,

and

BAER-GETREIDE GMBH, having its registered office at Künzelsau (Württem­ berg), on the validity and interpretation of the Decision of the Commission of 8 May 1969 (OJ No 112/1) authorizing the Federal Republic of Germany to limit intervention purchases of certain cereals.

I — Facts and procedure agencies in order to profit from the exchange premium arising, on the one The facts and procedure may be hand, from the difference between the summarized as follows: official parity of the French franc and that used on the futures market in When a devaluation of the French franc cereals, and on the other hand, from the appeared probable in 1969, speculators preferential discount rate for exports which was then in force in France. offered increasingly substantial quanti­ ties of cereals harvested in France to The Commission considered that this German, Belgian or Dutch intervention influx of offers to certain Member States

EINFUHR- UND VORRATSSTELLE GETREIDE v BAER-GETREIDE

On 22 May 1969, the company of hearing of 8 February 1973. Baer-Getreide (hereinafter referred to as Baer-Getreide was represented by Mr Baer-Getreide), requested the EVSt to Modest, of the Hamburg Bar and the make an intervention purchase of a Commission by its legal adviser, Mr Kalbe. certain quantity of common wheat of French origin. This request was rejected The Advocate-General presented his by the EVSt. Baer-Getreide took the case opinion at the hearing of 1 March 1973. before the administrative tribunal to establish the illegality of the decision of rejection. In the second instance, before the Hessisches Verwaltungsgericht, II — Observations submitted by Baer-Getreide won their case, in essence. virtue of Article 20 of the According to the judgment of that court, Statute paragraph 3 of the decree of 17 June 1969, which provided that the measures The observations submitted by virtue of should be retrospective, was illegal, as Article 20 the Statute may be the German legislature had not enabled summarised as follows:

JUDGMENT OF 22. 3. 1973 — CASE 72/72

By Article 226 (i), this Article is only 1. French cereals came into Germany at applicable during the transitional period provided for in Article 8 of the EEC a price well below the intervention Treaty. Although Article 8 (1) provides price, which situation engendered an that the Common Market shall be abnormal increase in the cereal trade; progressively established during a 2. homegrown cereals disappeared transitional period of twelve years, it is almost entirely from the distributive clear from Article 8 (5) and (7) that this networks in Germany; period might be curtailed in certain

The reservations set forth in Articles 28 and second argument is not founded in fact. 32 of Regulation No 120/67 relate only Lastly, the third argument is not to some points of procedure and are not justified. On the basis of data supplied of such a nature as to conflict with the to them by the EVSt, Baer-Getreide thesis developed above. submitted that the reserves of storage available to the intervention agency at Article 226, then, can no longer form a the beginning of May 1969 amounted to sufficient legal foundation for adopting a 1 500 000 metric tons. decision authorizing a Member State to take protective measures in the economic Total storage capacity at the sector in question. beginning of May 1969: 7 000 000 t Baer-Getreide also emphasizes that as Quantity stored towards the the disturbances in the cereals market end of April 1969: 5 500 000 t stemmed from the economic difficulties Reserves of storage 15 000 000 t in France, the sole efficacious remedy is recourse to the procedures provided for The Commission must submit data to in Article 105 of the EEC Treaty. Per the Court to prove that homegrown contra, since Article 226 is not the cereals had in fact disappeared from appropriate instrument to remedy the normal distribution networks in causes of the disturbances, it was Germany. To this end, a valid criterion inapplicable in the present case. was the information on the quantity of

Baer-Getreide maintains that the reserves The progress of tenders for intervention of storage available at the end of May during the season 1969/70 and the rapid 1969, according to its calculations, were fall in the quantity in store clearly shows fully adequate, to cope with the quantity that the Commission had wrongly evaluated the situation on the cereal likely to be tendered for intervention in the near future. From a comparison of market in Germany. According to Regulations Nos 120/67, 444/68 of the Baer-Getreide, in the period from 31 Council of 9 April 1968 (OJ No L 91/1) July 1969 to 31 January 1970, prescribing the monthly price increases intervention purchases amounted to a for cereals and flour, groats and meal of total of about 520 000 t, while the wheat or rye for the season 1969/70, it quantity in storage was reduced from emerges that tenders for intervention of 5 500 000 t to 4 100 000 t. It emerges common wheat and barley from the from this that the Decision of 8 May season 1968/69 would have ceased after 1969 did not correspond with the 31 May 1969, because from 1 June 1969 conditions set out in Article 226 (1), viz. the intervention price for the season the presence of 'difficulties which are 1969/70, which was at a lower level than serious and liable to persist.' the increased intervention price for the (c) The Decision of 8 May 1969 was not year 1968/69, (9-50 units of account as of such a nature as to eliminate the opposed to 10-45 units of account) had alleged difficulties in the cereal to be applied to intervention purchases. market in Germany Since the profits from the variations in the rate of exchange of the French franc By Article 226 (1), the protective were not such as to compensate for the measures therein referred to should reduction of the intervention price, the make it possible 'to rectify the situation'. influx of French cereals would inevitably The measures provided for by the have come to a halt after 31 May 1969. Decision would only have been Consequently, it could not be expected appropriate to achieve this aim if that the reserves of storage in existence imports of common wheat and barley of when the Decision was adopted would French origin to Germany had been the be exhausted by the tenders for cause of the difficulties. According to intervention of French cereals from the Baer-Getreide, the scarcity of reserves of season 1968/69. storage was caused in the first place by Regarding the season 1969/70, Baer- the plentiful harvest in Germany during Getreide maintains that the Commission the season 1968/1969 and in the second should have taken account of place by the neglect of the competent authorities to reduce their stocks in time (a) the increase in reserves of storage of by denaturing or sale on the world 480 000 t during the year 1969, market. (b) the foreseeable result of intervention The rules relating to the monthly B, established by Commission increases in the intervention prices,

provided for by Regulations Nos 120/67 until 31 May 1969, that the protective and 444/68, meant that, at the end of measures were unnecessary for the year May 1969, almost all the excess French 1968/69. cereals had already been tendered for The same conclusion is valid for the intervention. The Decision in question season 1969/70, if account is taken of could therefore only have had a very the fact that the Decision was not of slight effect and was not of such a such a nature as to eliminate the causes nature as to eliminate the alleged of the difficulties in the cereals market. difficulties. Finally, Baer-Getreide claims that the Even supposing that a considerable Commission took a false step in quantity of French cereals remained on suspending the intervention purchase of the market, the Decision in question was French cereals. Such a measure was a inefficacious. As they remained free to direct infringement of the intervention, import French cereals to Germany after mechanism, the foundation of the 8 May 1969, buyers were always able to common organization of the cereals supply themselves with French products market, and caused a discrimination and replace the homegrown cereals against French cereals. On the other already in stock with French cereals, hand, Regulation No 120/67 has tendering the former for intervention. A provided instruments suited to eliminat­ diminution in the quantities tendered for ing these difficulties while leaving the intervention appeared improbable while organization of the market intact, viz this means of avoidance was available. grants of denaturing premiums and the increase of refunds for exports to third In this respect, Baer-Getreide criticises countries. A third instrument, corres­ the provisions of Article 2 of the ponding to the principles of the disputed Decision since, they claim, these organisation of the market, was recourse provisions encouraged German flour to intervention B, referred to in Article 8 mills to use only French cereals imported of Regulation No 120/67, which could after 8 May 1969. On the assumption encourage those concerned to put excess that German flour mills had French cereals in store on their own account. It cereals in stock when the Decision was is clear that from 1 August 1969 these adopted, it was to be expected that these three methods have been put in stores would remain intact. It was operation, and not without effect. unrealistic to think that traders would It emerges from these findings that the replace cereals for which they received Commission ought to have availed itself on 31 July 1969 the whole carryover of these methods, which disturb the payment provided for by Article 9 of functioning of the common market in Regulation No 120/67, by quantities of cereals less than a suspension of new cereals for which this payment was intervention purchases. The Decision is only partial. It must be concluded, then, thus invalid due to infringement of that the Decision was in any case inefficacious. Article 226 (3).

specialis replacing on this matter the lex disclosed that in comparison with the generalis of Article 226, is wrong, since preceding season the import of French it fails to recognize the principle cereals had tripled during the year whereby a rule of secondary Community 1968/69; imports of common wheat had law cannot suspend a provision of increased to 1 292 789 t as against primary Community law. 326 112 t during the year 1967/68, and The Commission further points out that of barley to 953 466 t as against 598 092 t. the Decision was adopted at the request of the German Government during the As the German market was only transitional period, and it was revoked partially able to absorb these exorbitant prior to the end of that period, so that quantities, most of the imported cereals the formal requirements of Article 226 would have had to be purchased by had been satisfied. intervention, which would have led to The Commission claims in the first place the rapid exhaustion of the reserves of that it possesses a wide power of storage, which were already considerably appraisal with regard to the substantive reduced. requirements for the application of The Commission emphasized also that Article 226. The fact that the application due to the difference in price between of this Article is based on an appraisal of German cereals and imported cereals, economic factors, on the one hand, and the former had been almost entirely the necessities of economic policy on the replaced in the usual distribution other, lead to this conclusion; moreover, networks, subjecting the reserves of this is borne out by Article 226 (2), storage to additional stress. which provides that the Commission (b) The disputed decision was founded shall 'determine ... the protective measures which it considers necessary'. on a correct appraisal of the facts The Court's supervision of the legality of As tender for intervention was the sole the disputed Decision should thus be way by which German farmers could restricted to a peripheral examination of dispose of their products, which were the Commission's appraisal of the dearer than French cereals, due to factors concentrating in particular on the fluctuations in the real parity of the three following points: French franc, it was most important to keep this route open. Due to exceptional (a) Was the Commission's appraisal tenders of French cereals for intervention founded on facts which were the reserves of storage at the disposal of substantially correct? German intervention agencies had been (b) Was the appraisal of the factors in danger of exhaustion, at the latest by correct? the end of the season 1969/70. In support of this thesis the Commission (c) Was the adoption of a measure referred to the figures made available to manifestly less at variance with the it by the German Government: rules of the Common Market excluded? Total storage capacity during the year 1969/70 5 600 000 t According to the Commission, an Quantity expected to be in examination of these three points storage on 31 July 1969 4 600 000 t established that its Decision of 8 May 1969 was well-founded. Anticipated intervention purchase during the year (a) The facts on which the disputed 1969/70 2 300 000 t decision was founded were correct Deficit of reserves 1 300 000 t

deficit of reserves of storage, it was 4. The effects of intervention B would essential to ensure that these last reserves have been insufficient to remedy the were not used up by an unusual influx lack of storage capacity. Furthermore of French cereals. the use of this method is extremely onerous (the costs of intervention B (c) The measures taken occasioned the in Germany amounted to approxi­ least possible disturbance to the mately 132 000 000 DM). functioning of the common market In these circumstances the only reasonable solution was to check the At the time of the adoption of the influx of French cereals for intervention. decision there was no prospect of disposing of the cereals in storage on the To this end two possibilities presented world market in the near future. For that themselves, viz to reduce French exports to a tolerable level or to restrict reason it was necessary to choose between the two following options: a intervention measures in Germany to the considerable extension of storage existing storage capacity. capacity or else a freeze of the influx of Since the first possibility involved French cereals for intervention. At first, measures limiting the freedom of efforts were made to increase the storage intra-Community trade, such as the capacity, but it became rapidly apparent prohibition or quota restriction of that the measures were inefficacious and imports to Germany or the operation of too expensive. a system of compensatory levies, the The following measures would have Commission chose the second solution, been necessary: which scarcely effected the functioning of the common market in cereals. Thus 1. Removal of a quantity of 1 330 000 t only the deflection of trade, caused by in order to make the most efficient the fluctuation in the parity of the use of the existing reserves of storage. French franc, were eliminated. The The costs of such an operation Commission submits that its Decision of amounted to a figure of 21 000 000 8 May 1969 satisfied both the formal DM. and the substantive requirements of 2. The preservation of supplementary Article 226.

Grounds of judgment

1 By an order of 18 August 1972, lodged with the Registry of the Court on 3 October 1972, the Bundesverwaltungsgericht, by virtue of Article 177 of the EEC Treaty, referred for preliminary rulings two questions on the validity and interpretation of the Decision of the Commission of 8 May 1969 (OJ No L 122/1) authorizing the Federal Republic of Germany to limit intervention purchases of certain cereals.

2 The fall of the French franc in Spring 1969, gave speculators the chance to re-sell French cereals in Germany at a considerable profit on the exchange. This caused the cereals to be tendered on a vast scale at prices below the intervention price expressed in German marks with the effect that homegrown cereals were largly excluded from the German market and tendered for intervention purchase on a vast scale.

In the course of April and May significant quantities of French cereals were even directly tendered to the German authorities for intervention purchase in order to profit from the difference in the intervention prices expressed respectively in French francs and German marks.

Amongst other measures, by the disputed decision, the Commission authorized the Federal Republic of Germany to take protective measures on the basis of Article 226 of the Treaty, then still in force, in particular to limit intervention purchases of common wheat and barley to cereals harvested in that State.

The German intervention agency then refused to admit a lot of French common wheat which the plaintiff in the main action had presented for intervention, and the latter submitted the legality of this refusal to the national administrative judge

5 By Article 226 of the Treaty, during the transitional period provided for by Article 8 thereof, protective measures may be taken where there are serious difficulties which are liable to persist in any sector of the economy.

By Article 38 (2) of the Treaty, the provisions of Article 226 shall apply to agricultural products.

The fact that Regulation No 120/67 EEC completed the common organisation of the market in the cereals sector is not of such a nature as to restrict the application of a general provision of the Treaty, such as Article 226.

Even if, as is wrongly alleged, this Regulation provided measures for situations such as that which led the Commission to apply Article 226 of the Treaty, the latter would not thereby be deprived of the power to authorise the protective measures necessary to remedy the economic difficulties caused by an exceptional influx of French cereals into Germany.

Since Article 226 remained applicable until the end of the transitional period provided for in Article 8 of the Treaty, the fact that Regulation No. 120/67/EEC terminated the transitional arrangements provided for the cereals sector by other regulations, was not of such a nature as to limit the period of application of Article 226.

6 The validity of the decision in question is not impaired by the fact that after Regulation No 120/67/EEC came into force, it was founded in Article 226.

8 The plaintiff in the main action understands that the decision was principally caused by the German intervention agency's lack of means of storage, which lack at that time constituted the difficulty which was serious and liable to persist, and which the Decision was intended to remedy.

9 However, this is not the proper way of looking at the matter.

In fact, the decision was directed chiefly towards the situation described in its first two recitals, viz. the abnormal increase in the trade in cereals in the Community in the course of 1968/69, caused by the tender of French cereals on the German market at prices below the intervention price on that market, and resulting in 'homegrown cereals being almost entirely replaced in the usual distribution network; and a considerable increase in interventions.'

If insufficient means of storage, had, as the third recital relates, caused the request for authorization by the Government of the Federal Republic of Germany and the adoption of the disputed decision, it had been presented

JUDGMENT OF 22. 3. 1973 — CASE 72/72

and taken into account purely as a consequence of the abnormal development of the market.

In that respect the organisation of the cereals market, as established by Regulation No 120/67 EEC corresponded with these objectives, since the sixth recital of that Regulation declares that 'free movement of cereals within the Community should enable surpluses in production areas to be offset against requirements in deficit areas', and states that the mechanism of the intervention prices had been fixed 'so as not to impede such offsetting'.

A situation which could have caused the German intervention agency to purchase French cereals to send hack to France for storage, contradicted these objectives.

EINFUHR- UND VORRATSSTELLE GETREIDE v BAER-GETREIDE

12 In these conditions it was open to the Commission to judge that there were difficulties sufficiently serious and liable to persist to justify recourse to Article 226.

Even if the means of storage available to the German intervention agency sufficed for the quantities of the season 1968/69, the increase partly due to artificial causes in tenders for intervention purchase was none the less such as to justify the fears of the Commission regarding the prospects for the season 1969/70, which would have begun under abnormal conditions, if the monetary situation persisted.

13 The disputed Decision, therefore, cannot be impugned on this ground.

Since it could not control the monetary situation the Commission considered that it was important to preserve the organization of the Common Market in

JUDGMENT OF 22. 3. 1973 — CASE 72/72

the cereals sector against the consequences of such a situation by authorizing measures capable of restraining the influx of French cereals into the other Member States.

16 The argument that German speculators would thenceforth have obtained supplies of French cereals exclusively, and tendered their stocks of German cereals for intervention, disregards the fact that such operations require French cereals, which were excluded from intervention, to be available at a price sufficiently low to ensure that such transactions continue to be profitable.

There is therefore reason to consider that the exclusion of the said cereals from intervention had consequences of sufficient importance to cause the trade to restrict its operations.

17 It follows that the validity of the disputed decision cannot be impugned on this ground;

In these circumstances, it was open to the Commission to consider that the measures authorized occasioned least disturbance to the functioning of the common market, so that the validity of its Decision cannot be impugned on this ground;

20 There is no factor amongst the preceding grounds of such a nature as to impugn the validity of the Decision of 8 May 1969.

II — On the interpretation of the Decision of 8 May 1969

21 It emerges from the order that the second question is whether, in authorizing the Federal Republic of Germany to limit her obligations arising from Article 7 (1) of Regulation No 120/67/EEC, the Decision directly released the administrative authorities from their obligation to purchase French cereals;

22 By Article 226 a Member State may apply for authorization to take protective measures, and the Commission shall then determine according to the requirements of the situation those which it considers necessary, specifying the circumstances and the manner in which they are to be put into effect.

It follows that the Commission's Decision only constitutes an authorization addressed to the Member State in question, permitting it to adopt the measures sanctioned therein;

Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the oral observations of Baer-Getreide 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, 177 and 226; Having regard to Regulation No 120/67 of the Council of 13 June 1967 on the common organization of the market in cereals; Having regard to 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;

THE COURT

in reply to the questions referred to it by the Bundesverwaltungsgericht, by its order of 18 August 1972, hereby rules

1. The examination of the first question has revealed no factors of such a nature as to impugn the validity of the Decision of the Commission No 138/69 af 8 May 1969;

2. The sole effect of that Decision was to authorize the Member State to whom it was addressed to require the measures sanctioned therein to be adopted by its competent authorities.

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