C-27/74

JUDGMENT OF 22.10. 1974 — CASE 27/74

In Case 27/74

Reference to the Court under Article 177 of the EEC Treaty by the Finanz- gericht Düsseldorf for a preliminary ruling in the action pending before that court between

Demag AG, Duisburg v

Finanzamt Duisburg-Süd

on the interpretation of Articles 12, 96, 107 and 109 of the EEC Treaty,

The order of refererence and the written accompanied by a large balance of observations submitted under Article 20 payments surplus. In view of the strong of the Protocol on the Statute of the competitiveness of the German economy Court of Justice of the European and the greater rise in prices in the main Economic Community may be summa­ purchasing countries, this surplus in rized as follows: balance of payments risked increasing with undesirable consequences, namely: a disturbance in the internal equilibrium manifesting itself in a rise in prices on I — Facts and procedure the national market and speculative transactions in view of a possible In 1967 and 1968 the German economy revaluation of the German mark. In experienced a considerable boom these circumstances the German

DEMAG v FINANZAMT DUISBURG-SÜD

According trade) of 29 November 1968 (BGBl. I. to the main arguments of this opinion, 125;) (hereinafter called 'AbsichG'), since AbsichG constituted a charge which entered into force on 1 December 1968. which was unilaterally levied and applied to goods by reason of the fact Under AbsichG exports of goods that they crossed the frontier, thus between 29 November 1968 and 31 burdening the free movement of goods March 1970 were liable to a special within the Community, it infringed turnover tax (Article 2). Article 3 set out Article 12 of the EEC Treaty.

The question of transitional scheme for 'existing the alternative of Articles 12 and 95 of contracts'. Under Article 11 AbsichG the EEC Treaty can arise only with was originally to cease to apply after 31 regard to a tax on imports intended to March 1970. AbsichG was prematurely place all categories of products whatever repealed by order dated 28 October 1969 their origin in a comparable position. (BGBl. I. 2045). It appears both from the The present case is concerned with a tax observations of the Government of the on export, which, by placing the Federal Republic of Germany and from German products exported in a more those of the Commission that the unfavourable tax position than German authorities duly informed the comparable foreign products, distorts Commission of the proposed law. placed competition to the detriment of German before the Bundestag on 22 November producers. As a result, neither the 1968, by a Note Verbale from the systematic relationship between AbsichG Permanent Representative on 25 and the turnover tax law, nor the November 1968. conditions for levying the tax in question The Finanzamt Duisburg-Süd, the can disguise the fact that AbsichG was a defendant in the main action, issued measure of external economic policy not notices demanding prepayment from the referred to in Articles 95 to 97.

order dated 8 March 1974 to stay the (1) of the EEC Treaty are not present, proceedings and to submit the following can the introduction of a charge questions to the Court, in accordance having an effect equivalent to with Article 177 of the EEC Treaty, for a customs duty and taking the place of preliminary ruling: a revaluation be justified by the argument that the tasks of the 1. Does the prohibition against the Community under Article 2 of the introduction of charges having an Treaty include an increase in stability effect equivalent to customs duties and thus also the maintenance of the under Article 12 of the EEC Treaty external value of currency and under include the introduction of a charge Article 3 (g) of the Treaty the remedy of disequilibria in the balances of (a) which subjects industrial exports to other Member States of the payments of Member States? Community to a financial charge The order of reference was registered at of 4 %, alternatively 2 %; the Court on 19 April 1974.

(b) which is disguised by the national The Federal Republic of Germany, represented by Martin Seidel, and the legislator as a 'Sonderumsatz- steuer' (special turnover tax): Commission of the European Communi­ ties, represented by its legal adviser, Rolf (c) which refers back to concepts of Wagenbaur, submitted their written national law on turnover tax; observations in accordance with Article 20 of the Protocol on the Statute of the (d) which has the purpose of subjecting domestic exports to a Court of Justice of the EEC. special charge not otherwise After hearing the report of the existing in this form within the Judge-Rapporteur and the opinion of the territory of the EEC in order to Advocate-General, the Court decided to prejudice their ability to compete proceed without a preparatory inquiry.

II — Observations submit are allowed which, although not ted under Article 20 formally constituting an alteration in the of the Protocol on the exchange rate, have basically the same Statute of the Court effect. Since AbsichG produces the same of Justice effect as a selective alteration in the exchange rate — the tax on the 1. First Question exportation of goods and the corresponding exoneration from tax The Government of the Federal Republic of imported goods had the effect of a of Germany, referring to the legal revaluation of the exchange rate as opinion of Professor Zuleeg attached to regards the movements of goods — it its written observations, observes that answers this condition.

The Accordingly AbsichG should be looked concept of customs duty and charge at from the point of view of Community having an effect equivalent to a customs law on the basis of Articles 103 to 109 duty on imports or exports is limited so and in particular Article 108 (1) of the as to exclude charges levied within the EEC Treaty. This provision allows that framework of national turnover taxes. where a Member State in in difficulties The rules provided for by AbsichG, as regards its balance of payments it may which subjects exports to a levy of 4 % have recourse to autonomous measures or, according to the case, 2 % and in the internal economy or the external provides a simultaneous exoneration of monetary policy and in particular alter imports 'of a corresponding amount', the rate of exchange of its currency. As constitute a part of the general system of regards the autonomous measures turnover tax. From the economic aspect regarding the economic and monetary AbsichG had partly put an end to the policy the Commission has only an repayment of turnover tax from which advisory capacity. Only measures which exports benefited under the law relating are contrary to the rules of liberalization to turnover tax. Moreover, AbsichG had in the Treaty need prior authority from expressly retained the fundamental bases the Commission. of liability and concepts provided for by Article 107 of the EEC Treaty contains the turnover tax law.

JUDGMENT OF 22. 10. 1974 — CASE 27/74

munity trade, is limited to the Treaty provides here also for different prohibition of the grant of excessive rules so that in the same way as regards repayments on export. This provision the relationship between Articles 9, 12 does not create an obligation to make a and 96 it must be admitted that the two repayment of indirect taxes payable rules are, by definition, mutually within the country. The legal position exclusive. The same principles are was changed by Directives No decisive as regards the relationship

It is which was subsequently postponed to 1 thus obvious that an internal rule which January 1972. It follows from the above leads to an excessive tax on imports that at the time AbsichG infringed contrary to the principles of Directive neither Articles 95-97 nor the Directives No 67/228/EEC must be regarded as on the harmonization of legislation of infringing this Directive and not the Member States concerning turnover taxes. prohibition against charges having an The German Government proposes the effect equivalent to customs duties. following reply to the first question: It is therefore obvious that 'internal taxation', even if it is excessive, cannot The terms of Article 12 of the EEC be classified as 'a charge having an Treaty must not be interpreted as equivalent effect'. meaning, that they apply to rules issued The Commission is of the same opinion by a Member State for the purpose of as the German Government with regard re-establishing equilibrium in its external to the nature of the measures provided trade and which temporarily make the for by AbsichG:

Accordingly duties unless it avoids such classification. AbsichG does not infringe Article 96 of It follow from the case law of the Court the EEC Treaty. in the judgments in Case 57/65 Lütticke It is true that Article 10 (1) of Directive v Hauptzollamt Saarlouis Rec. 1966, p. No 67/228/EEC provides that the supply 293 and in Case 25/67 Milch, Fett und of goods consigned or transported to Eierkontor v Hauptzollamt Saarbrücken places outside the territory in which the Rec. 1968, p. 305 that the same tax State concerned applies VAT shall be cannot constitute both a charge having exempted from VAT, but since this an equivalent effect referred to in provision was not yet binding at the time

that AbsichG-was in force, it cannot be accordance with Article 108 (2). AbsichG used as an argument against AbsichG. satisfies these two conditions. On the one hand there was a sudden crisis in the The fact that AbsichG is not inspired by fiscal considerations is irrelevant as balance of payments, abruptly unleashed regards its classification within the by a wave of speculation, and on the other hand the mutual assistance sphere of Articles 95 to 97. No contrary

'A tax which has the characteristics expressed by the Commission immedi listed by the Finanzgericht Dusseldorf ately before AbsichG entered into force. must not be regarded as a "charge Articles 2 and 3 (g) of the EEC Treaty having an effect equivalent to a customs are not enabling rules; therefore they do duty" but on the contrary is "internal not confer on Member States the power taxation". As such it is compatible with of introducing charges having an effect the Treaty and in particular with Article equivalent to customs duties intended to 96 of the EEC Treaty. Such a tax would avoid revaluation. have infringed the second Directive on The Commission explains that Articles VAT if the latter had already been 108 and 109 of the EEC Treaty provide binding at that time'. a system of safeguard clauses in the event of difficulties in the balance of

policy on the rates of exchange of their could arise only when a Member State currency. It is not necessary to answer introduced a measure — e.g. a charge the question whether the introduction of having an effect equivalent to customs a charge having an effect equivalent to a duties — intended to avoid a customs duty comes within this power as revaluation. Articles 108 and 109 of the a measure of external economic policy; EEC Treaty contain safeguard clauses under Articles 108 and 109 of the EEC even for the cases where difficulties in Treaty such a measure is in any event balance of payments cannot be resolved open to Member States, subject to the by an alteration in the rate of exchange. conditions provided for by these provisions.

JUDGMENT OF 22. 10. 1974 — CASE 27/74

to Article 109 (1) of the EEC Treaty in Member States must be informed of the following conditions: the measures adopted at the latest on their entry into force. (a) There must be a sudden crisis in the balance of payments: difficulties or As regards the interpretation of Articles threatening circumstances in exter­ 2 and 3 (g) of the EEC Treaty, the nal economic policy do not suffice Commission is completely in agreement for the application of this provision; with the observations of the German Government. (b) A decision is not immediately taken in accordance with Article 108 (2); The plaintiff in the main action, represented by P. Wendt of the (c) The safeguard measures must be Hamburg Bar, the Government of the limited to strictly necessary Federal Republic of Germany and the interventions and disturb the Commission made oral observations at functioning of the Common Market the hearing on 17 September 1974. as little as possible; The Advocate-General delivered his (d) The Commission and the other opinion on 2 October 1974.

Law

1 By order dated 8 March 1974, filed at the Registry on 19 April 1974, the Finanzgericht Düsseldorf, pursuant to Article 177 of the EEC Treaty, referred two question on the interpretation of Articles 12 and 107 to 109 of the said Treaty.

These questions are intended to enable the national court to assess the compatibility with Community law of certain provisions of a German law (Gesetz über Maßnahmen zur außenwirtschaftlichen Absicherung gemäß Par. 4 des Gesetzes zur Förderung der Stabilität und des Wachstums der Wirtschaft (AbsichG) of 29 November 1968 (BGBl I, p. 1255).

(a) subjects industrial exports to other Member States of the Community to a financial charge of 4 %, alternatively 2 %;

(b) which is disguised by the national legislator as a 'Sonderumsatzsteuer' (special turnover tax);

(c) which refers back to the concepts of national law on turnover tax;

(d) which has the purpose of subjecting exports to a special charge not otherwise existing in this form within the territory of the EEC in order to prejudice their ability to compete with the products of the other Member States, and

(e) which has as a consequence that the products exported are subject to taxation by both the country of origin and that of destination.

5 It appears from the file that the question seeks to know whether a tax such as is mentioned comes within the category of charges having equivalent effect referred to in Article 12 of the Treaty or whether it may be regarded as coming under internal taxation referred to in Article 95 from the fact that it is integrated into the national system of turnover tax.

8 In the procedure for a preliminary ruling under Article 177 of the Treaty, the Court cannot classify a specific national tax for the purpose of applying Articles 12 und 95, since the interpretation of legislative and other acts of a national nature remains within the jurisdiction of the national court and this Court is competent only to interpret and assess the validity of the Community acts referred to in the said Article.

However, the Court is competent to interpret the aforementioned provisions of the Treaty in order to enable the national court to apply the rule of Community law correctly to the tax in question.

9 In these circumstances it is right to observe that a national measure described as a 'special turnover tax' and which 'refers back to concepts of national law on turnover tax' can subject commercial exports to other Member States to a financial charge.

Such is in particular the case when it is a question of a general measure which applies to all exported products without distinction and when practically the sole effect of the charge in question is to reduce the exoneration of the exported products from turnover tax.

DEMAG v FINANZAMT DUISBURG-SÜD

A charge which subjects without distinction industrial exports to other Member States to a financial charge by partially abolishing the exoneration from internal taxation and which is closely integrated into the national system of turnover tax, comes under internal taxation within the meaning of Article 95 et seq. of the Treaty, and cannot therefore constitute a charge having an effect equivalent to a customs duty within the meaning of Article 12 of the Treaty.

15 This question has been asked in the event of the first question receiving an affirmative reply.

JUDGMENT OF 22. 10. 1974 — CASE 27

Since such is not the case the question does not arise.

Costs

16 The costs incurred by the Commission of the European Communities. and the Federal Republic of Germany, which have submitted observations to the Court, are not recoverable, and as these proceedings are, in so far as the parties to the amin action are concerned, a step in the action pending before a national court, the decision on costs is a matter for that court.

On those grounds,

A. Van Houtte R. Lecourt

Registrar President