C-178/73

JUDGMENT OF THE COURT

OF 4 APRIL 1974 1

Belgian State and Grand Duchy of Luxembourg

v Mertens and others

(preliminary ruling requested by the Tribunal de Premiere Instance de Bruxelles)

' 'Joinder as "parties civiles"

6 of the Decision of 21 April 1970 that it authorities which are parties to the legal continues to be the task of Member proceedings in relation to the

States to undertake prosecutions and reimbursement Community revenue of

proceedings for the purpose of the evaded on sums improperly paid, has system of levies and refunds and to not been affected by the consequences of

continue to take steps to this end the attribution to the Community of its

vis-à-vis the parties involved. own resources.

In Joined Cases 178, 179 and 180/73

necessary — of Finance,

as 'parties civiles' 2

1 — Language of the Case: Dutch.

2 — Translator's note: party claiming damages in criminal proceedings.

judgment of 4. 4. 1974 — joined cases 178, 179 and 180/73

and

of 21 April 1970, on the replacement of financial contributions from Communities' Member States by the own resources (OJ L 94, 28. 4. 1970, p. 19),

THE COURT

composed of: R. Lecourt, President, A. M. Donner (Rapporteur) and M. Sørensen, Presidents of Chamber, R. Monaco, J. Mertens de Wilmars, P. Pescatore, H. Kutscher, C. Ó Dálaigh and Lord Mackenzie Stuart, Judges,

Advocate-General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

given on 29 June 1970 in Cases joined judgment set aside, (in Case 179/73), the for reasons of close connection, Hof van Beroep of Brussels, saving convicted a number of persons as certain exceptions, did not find the facts principals or accomplices on counts of relating to the importations following fraudulent exports and imports. The from these shuttlecock operations

exported products, which in Cases 178 proved against the accused.

and 179/73 fell under the common

organization of the market in On 28 February 1973 the Hof Beroep of cereals, were, under cover of third country Brussels confirmed the judgment of 5

certificates and upon payment of third October 1972 given by the Correctionele fact transported from Rechtbank Antwerp, country refunds, in the of as regards

Belgium to another Member State of the criminal aspects (Case 183/73).

Foreign Agriculture Hof van Beroep by the same judgments Trade, of and of

Finance (joined stayed the proceedings in regard to the as 'parties civiles') under 'parties civiles'

claim on the part of the the provisions of Article 3 of the Code and referred some questions for a d'instruction criminelle (Rules of

Criminal preliminary ruling. Procedure) ordered the parties

involved and the bodies who are Subsequently, some of the parties in responsible in civil law, to repay the Cases 178 and 180/73 appealed in export refunds illegally obtained and to cassation against the aforementioned

the European Agriculture Guidance the coming into effect of the said

and Guarantee Fund defined by provisions:

Article 7 of the said Regulation, (a) all the sovereign powers relating whereby a portion of these to their own revenue and contributions arises from charges expenditure concerning the levied by Member States upon common agricultural policy of imports from third countries, to be the Community were transferred interpreted as meaning that as from from the Member States to the the coming into effect of Regulation Community, so that (1) the No 25, the Community, if necessary Community alone is henceforth jointly with the Member State competent to take legal action in concerned: relation to the said revenue and

interested expenditure (2) any authority of (a) was the party directly Member States to assist the and, if applicable, directly injured in connexion with the Community in the collection or

payment thereof can no longer payment of expenditure incurred be considered as the Member and the collection of revenue States'

from the common own (possibly authority arising shared with the Community) but agricultural policy; as an authority exercised for and

possessed a certain at Gerven) the Government of the right, any Kingdom Belgium (represented by R. right, to the levies rate a partial of

imposed by Member States. Bϋtzler and P. Goemans in Cases 178 and 179/73 and by de Bruyn and P. Van 2. Are the provisions of Regulation No Eeckhout in180/73) Case the

729/70 of the Council of 21 April Government of Duchy of the Grand 1970 and the Decision of the Council Luxembourg, (represented by R. Bϋtzler) of 21 April 1970 to the and the Commission of the European relating replacement of financial contri­ Communities submitted their written

butions on the part of Member observations.

States from the Community's own The Court, upon hearing the report or

resources and the provisions for the Judge-Rapporteur and the opinion of

the Judge-Rapporteur and the opinion of 'the rate of refund in the Member lowest'

decided State whose average refund is the of the Advocate-General, to Net'

open oral procedure without and 'The quantities of exports, any that is to the difference between preparatory inquiry. say third country exports and imports for a

particular product (Article 3 (1) (a) of

Regulation No 25).

II — Written observations Restricted as the financing of refunds by Arti­ submitted under the Fund thus is, it is further restricted to cle 20 of the Statute a part of the eligible expenditure, i.e. one-

(a) First stage contributions that follows the general

scale diminishes (100 % for 1962/1963, During the period from 1 July 1962 to 90% for 80% for 1963/1964, and 30 June 1965, it was Regulation No 25 1964/1965) and the proportion of of the Council of 4 April 1962 (OJ contributions based upon the special 991/62) which governed the financing. scale increases (0 % in 1962/1963, 10 % For the from 1 July 1965 to 30 period for 1963/1964 and 20 % for 1964/1965). June 1967, this Regulations was replaced From the middle of 1965 to the middle by Articles 2 to 6 of Regulation No 1967 the contributions Member of of the 130/66 of the Council of 26 July 1966 States are calculated on the basis of an (OJ No 2965/66). ad hoc global scale.

During this first stage only part of the

expenditure of Member States was (b) Second stage, from 1 July 1967 to 31 December 1970 eligible for the European Agricultural Guidance and Guarantee Fund During this period the expenses of

(hereinafter called 'the Fund'). Regu­ Member States eligible for the Fund lation No 25 supplies a limitative were calculated on the basis of the gross enumeration. Secondly, their eligibility exports to 'third countries'

for individual is subject to strict conditions. Thus, products (Article 8 (1) of Regulation No

Article 7 of Regulation No 25 already (c) Third stage, commencing 1 January envisages for the first stage the partial

1970 transfer to the Community of levies raised, since the variable contributions The system now in force involves the tied the the levies are to amounts of direct financing of the agricultural policy raised.

by the Community itself (Regulation of Accordingly one might express the the Council of 21 April 1970, (OJ L first question as follows: Was the 94/13) and Council Decision of 21 April financial Community during the first stage 1970 on the replacement of the directly interested in the collection of the contributions from Member States by Communities' levies to an extent where it was a party the own resources (OJ No directly affected in the event of the L 94/19). The Community makes the charges being evaded? If it is difficult to necessary resources available to Member be quite definite on this point, ought one States a priori and no longer a then to consider the Community as a posteriori, as was the case during the party directly affected to the extent that two preceding stages. Besides, the imports to the Member States the net revenue of the Fund is no longer made concerned effectively determined the up by the financial contributions of Communities' variable proportion of the contributions Member States but by the to the Fund and hence the transfer of the own resources arising from inter alia levies to the Community? agricultural levies. These are collected by Member behalf According to the parties Van Den the States on of the Avenne and Joosen this question ought Community, in accordance with national to be answered in the affirmative. They provisions imposed by law, regulations or administration action. (Article 6 of develop their argument as follows: the Council Decision of 21 April 1970). (a) It is clear both from the wording and from the position of Article 2 of 2. Observations on the first question Regulation No 25 that the Council

Fund; Article 2 of Regulation No 25, referred to in the first question of the reference, (b) Such an interpretation is the only already explicitly refers to the definitive one compatible with the agricultural

stage in these terms: 'Revenues from policy as it is envisaged in the levies on imports from third countries Treaty. Even during the transitional shall accrue to the Community and shall period one cannot dissociate the

BELGIUM AND LUXEMBOURG v MERTENS

financing of the common agricultur­ that Regulation No 25, and in particular al policy from the aims pursued by its Articles 2 and 7, do not confer upon means of this policy. Completely to the Community any legal interest in dissociate the system of refunds and regard to the collection of levies during levies — financed during the first the transitional period. The proportion

stage by the Member States from — of levies that is paid by the Member the agricultural policy would have State to the Community is in the nature endangered the Community solution of a simple contribution — the Member intended to surmount the sharp State's own obligation towards the

contrast between the Community Community. This characteristic was

transitional period could in case during the transitional period was so any

obvious that in reports to the have been transformed into the Communities'

European Parliament doubts were own resources —

expressed as to the of assuming that this transformation gives validity Regulation No rise to a right to claim on the part of the 130/66, on the

grounds that these charges Community only if the conditions already constituted the Communities' own provided by Article 201 (3) of the resources within the meaning of Treaty had first been complied with: i.e. Article 201 of the Treaty, without a proposal by the Council, acting the procedure laid down having unanimously, consultation of the

been followed. Assembly, adoption by the Member States. The parties Van Den Avenne and Joosen The Government of the French suggest that the following reply be given to the first question: Republic, maintains that the question of division of authority as between the 'The provisions of Regulation No 25 of Community and the Member States in the Council of 4 April 1962 on the regard to the recovery of amounts which financing of the common agricultural are the subject of fraud in the field of

the scale laid down in Article 200 of the resources of 21 April 1970. Treaty and for the second part in To the enable one to reply to question

proportion to net imports from third whether frauds in relation to levies had countries effected by each Member consequences upon the Member States'

State'. different contributions to the Fund, the

accounting periods involved in the During this period the charges ought be distin­ national proceedings must therefore, notwithstanding the fact that

fixed guished. It is obvious that the collection their amount was at Community be of levies had no consequences upon the level, to considered as national

the is taken functioning of the Fund when a fixed revenue, amount of which

cannot therefore, either from the legal butions calculated on the basis of the nature of the revenue or from any amount of the net imports. Under the provision that, in relation to the problem regulations in force during the first stage, before the Court, affected the sovereign the third country levies further differed powers of Member States, conclude that depending on the Member State only the Community was responsible for to that concerned, such an extent any putting into operation the procedures for comparison between contributions due the recovery of amounts that were the from the different Member States is subject of fraud in the field of levies. useless.

The Commission concludes, from its levies Accordingly, the avoided could description functioning of the of the be interest only of during the second

system of financing of the common stage, a period when the contributions of agricultural policy during the period Member States were calculated as to one from 1962 to 1967, that the 'third part in proportion to the levies collected levies' country collected by each by each Member State upon imports Member State constituted during the from third countries, and if necessary, as period in question the financial resources to another to a fixed part, according of Member States. Article 2 of scale.

Regulation No 25 ought to be inter­ As regards the refunds improperly paid preted as referring solely to the 'single during the first period, the Commission market stage'. points out that in the event the Fund did The principle enshrined in this Article not suffer any damage, since Belgium had to be put into operation in and the Grand Duchy of Luxembourg accordance with a procedure laid down had no net export in the sectors in by Article 201 Treaty and this of the question. As this expenditure of the

consequences that were disadvantageous answer to the first question ought to be for the other Member States whose as follows: contributions were fixed at too high a Even in the case where under the level, since the determination of the net provisions of Regulations No 25 and quantities imported by Belgium and 130/66 on the financing of the common Luxembourg — a partial basis for the agricultural policy the levies evaded and calculation of contributions to the Fund the refunds wrongly granted may have — was not correct. financial consequences to the prejudice

The same conclusion applies to the of the Community, the recovery of the second stage: the frauds committed at levies evaded and the repayment of the

the time of collection of the levies or of refunds paid are matters for the wrongly the payment of the refunds did not as a Member States. consequence involve any damage to the Fund itself, but rather the Member States 3. On the second question the contributions of which had to be reduced in proportion to the levies (a) The parties Van Den Avenne and

be Joosen point out that as from 1 January subsequently to claimed by the

Member States involved. 1971 the total revenue from agricultural levies is entered in the budget of the Nevertheless these inaccuracies are Communities. It follows from Article covered by the balancing of accounts of 3 (1), third paragraph, of the Council the Fund, brought about by the Decision of 21 April 1970 that these Commission's Decisions as to the levies are from the time of their participation of the Fund during the

'authority to is shown by Articles pay'

and the Member States. as

As regards the legal relationship between 4 (2) and 5 (2). Member States and the parties involved, One must therefore answer the question

the above-mentioned provision contains on the transfer on 1 January 1971 of

JUDGMENT OF 4. 4. 1974 — JOINED CASES 178, 179 AND 180/73

sovereign powers in the affirmative, on obviously obliged to call upon national

1971, the agricultural levies are entered recovery of sums paid in wrongly in the budget of the Communities, connection with the financing of the instead of those of 'the Member States common agricultural as well as policy and the credits necessary for paying the the of an information system setting up Communities' refunds are levied on the in this field (OJ L 36/1). This Regulation own resources and put at the disposal of was made under the provisions of Article Member States. 8 of Regulation No 729/70. Under this

The power of its own provision the Member States must take obtaining in resources and of financing by means of the necessary steps order to prevent

these its own expenditure is one of the and deal with irregularities in connexion with the grant of refunds oldest prerogatives of a sovereign state.

The act of this power in and must recover sums lost as a result of renouncing favour irregularities or negligence. of the Community, albeit within certain limits, amounts to a real and Under Articles 5 (1) and 6 (3) of

important transfer of sovereign powers. Regulation No 283/72 the institution of The possibility for Member States of judicial or administrative procedures to

transferring their sovereign powers to establish formally that there have been the Community has been repeatedly irregularities or is a matter negligence, confirmed by the Court of Justice, for the Member States. It is thus clear

constitutes a power held in their own to take proceedings is of a kind, special

right but an authority exercised on since it is no longer exercised by virtue behalf of the Community. In the event, it of a sovereign power belonging to the amounts to a delegation of authority, Member States, but by virtue of a purely rendered necessary by the fact that the administrative power, conferred upon

Community has at its disposal only an national administrations as executive

'initiating administration'

and not an organs of the Community. The parties

'enforcement administration', so that it is Van Den Avenne and Joosen ask that

power to obtain the respective legal powers of Member conferred Member States by the States in on and of the Community Council Decision of 21 April 1970. questions of recovery.

According to the parties Van Den Finally, one ought not to attach much

Avenne and Joosen the said transfer of importance to the apparent derogation sovereign powers and the change in legal from the abovementioned principle in basis on which Member States are able Judgment 22/70. This derogation only to institute judicial proceedings in refers to negotiations with third

connexion with refunds wrongly paid or countries: when these third countries

of levies evaded, took effect on 1 with good reason upon the rules of rely January 1971, even in relation to competence in force, one cannot then

proceedings pending at that date and confront them with a new system

Community. Thus the right to collect judgment, to be guaranteed. (levies) and the right to grant aids foregoing,'

taxes Having regard to the the (refunds) are powers which since 1 parties Van Den Avenne and Joosen January 1971 belong to the Community, suggest that the following reply be given insofar as the recovery of levies due and to the second question: the recovery of refunds wrongly paid

prior thereto are concerned. The transfer (a) The provisions of the Council of sovereign powers, resulting in a Decision of 21 April 1970 and those

complete break with the past, means in of Regulation No 729/70, as well as the present case that the legal the provisions for carrying these into proceedings instituted by Member States effect, must be interpreted as

before 1 January 1971 in connexion meaning that as from the coming with levies or refunds must be amended into effect of the said Decision and

or alternatively, if this is provided by the said Regulation, that is to say as national law, that they must henceforth from 1 January 1971, all sovereign be pursued by the Community even if powers in the matter of collection of the latter acts through the agency of the agricultural levies and the financing same Member States. The latter would of agricultural refunds were

of the Community. practical measures would have to be enacted for carrying it into effect. (b) By reason of the immediate and Nothing has been done in this respect. absolute effect of the transfer of Nor do the legal provisions provide for a sovereign powers, this transfer and legal transfer, either generally or ad hoc, the legal consequences enumerated of an existing creditor's right. The power above which flow from it, also affect of enforcement against individuals still legal proceedings instituted by belongs entirely to the Member States, Member States before the transfer of even though the latter are bound to sovereign powers that are still account in this respect to the pending at the moment of this Community. Moreover, if there was a transfer. It is a matter for the delegation, the legal protection of the national court to draw therefrom all individual would no longer be appropriate conclusions for resolv­

BELGIUM AND LUXEMBOURG v MERTENS

Regulation No 729/70 creates a direct individual, just like the exercise of the

legal link between Community and the power of enforcement, continue to be the nationals of the Member States, these governed by the legislation of the

provisions have no retrospective effect in Member States. regard to an existing legal situation

which arises exclusively from facts that As a subsidiary point occurred well before the coming into Assuming that Regulation No 729/70 force of the new legislative provisions. and the Council Decision of 21 April Actions arising from an unjustified 1970 involve a transfer of sovereign payment of refunds and from default in powers to the Community that creates a payment of levies evaded during the first direct legal link between the Community two stages, when the Fund was financed and importers or exporters insofar as the by purely state contributions, must not levies recovery of and the payment of be pursued in accordance with the rules refunds are concerned, this transfer does applicable to the final stage. The not apply to the exercise subsequent —

201

The Belgian and Luxembourg Govern­ of the Council Decision of 21 April 1970 ments suggest the following answer to and of Regulation No 2/71 that actions

the second question: relating to the imposition upon

Regulation No 729/70 Council individuals of the aforementioned taxes and the Decision of the date compulsorily and levies must be decided, applying same

lay down the nature of the steps to the Community law, by the national

Member authorities and in manner provided by taken by States, which the law of the Member States. however, even at the final stage of the financing of the common agricultural In the case of frauds involving policy, are carried out by means of acts agricultural levies, the judicial proce­

on the part of the Member States that dures for the purpose of effecting a new 'determination' are of a kind not creating any direct of these resources and to

of the State at fault (Article 8 (2) of Community the duty taking legal of

Regulation No 729/70) and on the other proceedings against individuals for the hand by the procedure provided under purpose of recovering Community Article 169 of the EEC Treaty. resources and amounts improperly paid. For one thing, the staff at present The Commission is of the opinion that available to the Community is too equally under the own-resources system, limited to shoulder so complicated and i.e. after 1 January 1971, it is in the first extensive and administrative task and place a matter for the Member States besides, Member States are in this themselves to take legal steps for the respect in a better position to take steps recovery of the amounts involved. againts individuals. In support of its theory, the Commission relies upon the system instituted by the Furthermore, this solution also

Council Decision of 21 April 1970 and corresponds to the way in which within

the wording of the provisions relating the Community framework the tasks have been generally divided up to now, the thereto. Generally speaking, the

collection does not Community institutions acting as of own resources 'initiating administrations'

direct legal links between the and the give rise to

into operation need for making distinction when, as a general principle was put in the present case, financial obligations by Regulation No 2/71 and in particular Articles 1 and 2 (1) thereof. Besides, the of individuals are involved.

Court has already confirmed it by its The Commission considers that the judgment of 25 October 1972, institutional by the problems raised Haegeman v Commission, Case 96/71, questions of the Court of Appeal do not Rec. 1972, p. 1005. require a specific answer to enable the

what applies to resources, applies national proceedings to be resolved:

equally to expenditure of the whether one finds in favour of the thesis Community, such as refunds within the of delegation rather than that of division framework of the agricultural policy. of powers, in favour of joint action

The Member States designate the rather than in favour of intervention on

BELGIUM AND LUXEMBOURG v MERTENS

Grounds of judgment

1 By orders of 26 October 1973 (Cases 178/73 and 179/73) and 31 October

1973 (Case 180/73), respectively filed with the Registry on 30 October and 6 November 1973, the Hof van Beroep of Brussels referred under Article 177 of the Treaty two identical questions to the Court, concerning the interpretation of the provisions of Regulation No 25 of the Council of 4 April 1962 on the financing of the common agricultural policy (OJ No 30/62, p.

991) and the provisions of Regulation No EEC 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (OJ L 94/13) and the Council Decision of the same date, on the replacement of the financial Communities' contributions of Member States by the own resources (OJ L 94/19);

2 It is clear from the Court record that the questions are submitted in the

context of criminal proceedings based on fraud in connection with the

financing, it is no longer the Member States but the European Economic Community which is involved in the collection of the levies and the grant of refunds, the national court considered a decision on this point to be necessary to enable it to give judgment.

4 The three series of questions being identical it is appropriate to reply thereto

by a single judgment;

5 Since the purpose of these questions is to clarify the possible procedural

consequences of the attribution to the Community of its own resources the —

first one relating to the position of Community law during the transitional

7 In the event of an affirmative answer being given to this question, it is further asked whether such a reply equally applies, by reason of the direct effect of the transfer of sovereign powers, as regards proceedings instituted after the

coming into force of the aforementioned provisions or pending at that date in relation to facts that occurred or rights that originated prior thereto;

8 Article 2 of Regulation No 25/62 provides that at the final stage of the single

market the revenue arising from levies collected on imports of agricultural

products from third countries 'shall accrue to the Community and shall be used for Community expenditure', the Council being obliged at the

appropriate time to initiate the procedure laid down in Article 201 of the

12 Article 4 of Regulation No 729/70 provides that Member States shall

designate the authorities and bodies which they shall empower to effect the

expenditure in question and shall communicate to the Commission

particularly 'the administrative and accounting conditions in accordance with which payments are made relating to the implementation of Community rules within the framework of the common organization of agricultural

markets'.

13 This Article further provides that the Commission shall make available to

that 'in the absence of total recovery, the financial consequences ... shall be borne by the Community, with the exception of the consequences of

irregularities or negligence attributable to administrative authorities or other

bodies of the Member States'.

JUDGMENT OF 4. 4. 1974 — JOINED CASES 178, 179 AND 180/73

15 For its part, the Decision of 21 April 1970 provides by Article 6 thereof that the Community resources in question shall be collected by the Member States 'in accordance with national provisions imposed by law, regulation or

administrative action, which shall, where necessary, be amended for that

18 Part (b) of the question, having been asked only in the event of an affirmative answer to part (a), has therefore become pointless.

19 The first question has likewise become pointless since a negative answer given to the second question necessarily involves a similar answer being given to the first.

Costs

20 The costs incurred by the Commission of the European Communities and by the French Government, which have submitted observations to the Court, are not recoverable and as these proceedings are, insofar as the parties to the

main action are concerned, a step in the action pending before the Hof van Beroep of Brussels, the decision as to costs is a matter for that Court.

On those grounds,

resources.

Lecourt Donner Sørensen Monaco Mertens de Wilmars

Pescatore Kutscher Ó Dálaigh Mackenzie Stuart

Delivered in open court in Luxembourg on 4 April 1974.

A. Van Houtte R. Lecourt

Registrar President

crucial legal point and which were The Belgian and Luxembourg States as

therefore rightly joined. part of the criminal proceedings made

Several persons were accused in the claims for the repayment of export

refunds and for the payment of levies, proceedings of having understated

levies to the Administration of Taxes due to them as a result of the conduct

of having alleged against the accused; this they are and obtained export refunds