C-34/74

JUDGMENT OF THE COURT OF 12 NOVEMBER 1974 1

Sociéte Roquette Frères v French State

(preliminary ruling requested by the Tribunal d'instance de Lille)

'Compensatory amounts'

Case 34/74

Summary

JUDGMENT OF 12. 11. 1974 — CASE 34/74

ROQUETTE FRÈRES, a limited liability company governed by French law having its Head Office at Lestrem (Pas-de-Calais),

and

FRENCH STATE, Customs Administration,

on the interpretation of certain provisions of Regulation No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States, as amended by Regulation No 509/73 of the Council of 22 February 1973,

THE COURT

The facts and procedure of the case and disturbed by speculative movements the observations submitted pursuant to involving an abnormal influx of short Article 20 of the Protocol on the Statute term capital the Council of the of the Court of Justice of the EEC may Communities, by resolution of 9 May be summarized as follows: 1971 (OJ C 58, p. 1), 'was prepared to envisage' that, in certain circumstances, Member States which had experienced an excessive influx of capital might, for I — Facts and procedure a limited period, widen the margins of fluctuation for the exchange rates of Because certain foreign exchange their currencies in relation to their markets within the Community had been official parities.

ROQUETTE v FRANCE

By means of policy to be taken in agriculture follow Regulation No 509/73 of 22 February ing the temporary widening of the 1973, amending Regulation No 974/71 margins of fluctuation for the currencies (OJ L 50, p. 1), the council therefore of certain Member States (OJ L 106, p. provided for the grant on imports and 1), gave its authority, subject to certain the charge on exports of compensatory conditions, to Member States which, for amounts by those Member States whose the purposes of commercial transactions, currencies had thus decreased in value. allowed the exchange rate of its currency to fluctuate by a margin wider than the Regulation No 509/73 added to one permitted by international rules, to Regulation No 974/71 an Article 4 a, apply compensatory amounts, to be according to which, in trade with third charged on imports of certain countries, compensatory amounts granted agricultural products granted on certain on imports shall be deducted from

on the price of the products mentioned above and which are governed by the By Regulation No 218/74 of 25 January common organization of the market or 1974 fixing the monetary compensatory are the subject of a specific arrangement amounts and certain rates for their under Article 235 of the EEC Treaty. application (OJ L 24, p. 1), the In accordance with the final recital to Commission recorded, in particular, that Regulation No 974/71 the compensatory the currency of France had depreciated amounts should be limited to the by more than the margin of fluctuation amounts strictly necessary to compensate permitted and fixed, for that Member the incidence of the monetary measures State, the monetary compensatory on the prices of basic products covered amounts to be charged on exports and by intervention arrangements and should granted on imports of certain agricul be applied only in cases where this tural products.

JUDGMENT OF 12. 11. 1974 — CASE 34/74

According to the Roquette company, it of maize, being a basic product, is the paid, up to the end of August 1974, the application, at the same time, of sum of FF 6 572 107-23 by way of compensatory amounts of different monetary compensatory amounts. rates to amyloid products whose The company was of the opinion that price depends on that of maize the payment of compensatory amounts consistent could not be justified and filed two (a) with the provisions of Article 2 actions simultaneously: pursuant to (2) of the aforementioned Article 215, second paragraph, of the Regulation No 974/71, clarified EEC Treaty it brought an action for by the fourth and last recitals to non-contractual liability against the the said Regulation, or Commission before the Court of Justice, and it instituted proceedings before the (b) with the principles governing Tribunal d'instance of Lille against the normal competitive conditions as French Customs Administration, rep

1. Must the charge on products by the Commission of the European imported from third countries Communities and on 9 August by the referred to in Article 4 a (2) of Government of the Kingdom of Denmark. Regulation No 974/71, amended in particular by Regulation No 509/73 Having heard the report of the of 22 February 1973, be understood, Judge-Rapporteur and the opinion of the in respect of the products referred to Advocate-General the Court decided to

equality within the Community and, in statements, Articles 2 (2), 3 and 4 of certain cases, by protecting Community Regulation No 974/71 allow the undertakings against undertakings in following method of calculation to be third countries, the avoidance or employed in this case, having regard to limitation of the adverse effects of the objective in view: monetary fluctuations. — calculation of the compensatory Accordingly, the system of compensatory amount for maize; amounts is directed essentially to basic — abatement to obtain the compensa­ products and only in a subsidiary way to tory amount applied to maize; processed products. It is clear, in par­ ticular from the recitals to Regu­ — calculation of the compensatory lation No 974/71, that there is a amount for processed products on close connection between levies on basic the basis of the amount applied to products and the variable component of basic products; the levy on processed products and that — possible abatement for processed monetary compensatory amounts are products: the import charge applicable only in cases where the mentioned at Article 4 a should be incidence of monetary measures leads to understood, as regards processed difficulties with regard to basic products. products, as meaning merely the

JUDGMENT OF 12. 11. 1974 — CASE 34/74

industry. of 13 February 1974 and charging This method reconciles Article 2 (2) with monetary compensatory amounts on Article 4 a and avoids the illogical and exports of amyloid products it merely unjust result to which the method applied Regulation No 218/74. It is advocated by the Commission would however of the opinion that, in lead. conformity with the principle laid down The Commission is alleged to be by Regulation No 974/71, compensatory sufficiently conscious of the abnormality amounts should not be charged on of the present situation to have itself exports of cereal-based processed proposed to the Council an amendment products when, at the same time, no to Article 4 a of Regulation No 974/71. such compensatory amount is charged upon exports of cereals. The rules concerning monetary compensatory amounts are based upon (a) In the realm of principle it should the close connexion between the levy on be stated that the system for monetary basic products and the variable compensatory amounts was inaugurated component of the levy on processed in order that fluctuations of currencies

first or second stage processing, whose Conditions of Accession of 22 January prices should, in any event, bear only a 1972, is intended to avoid the situation compensatory amount equivalent to the whereby, by means of the payment of incidence of the compensatory amount compensatory amounts, the Community applied to basic products. In this case, system is used to maintain prices in one no monetary compensatory amount Member State at a level lower than that, could be applied to maize: the CIF price in each case, of prices in third countries or of prices within the Community. The at Rotterdam for maize coming from expression 'import charge' includes both third countries is higher than the Com the variable component of the levy, munity threshold price, so that the im the imposition of which serves to port levy, and therefore the charge on compensate, within the Community, imports from third countries, insofar as differences between Community prices they relate to this primary product, are and prices in third countries for basic equal to zero.

As regards amyloid products the levy is fixing of compensatory amounts made up, according to Article 14 of the applicable both to basic products, basic Regulation concerning cereals, including maize, and to processed Regulation No 120/67 of the Council products including amyloid products. of 13 June 1967 on the common The progression of world prices meant organization of the market in cereals (OJ that the import charge for maize — the p. 2269), of a variable component, levy — was either reduced to zero or corresponding to the incidence on their became insignificant.

On the component and means that the latter other hand, the import charge for cannot be taken into account for the processed products which, in pursuance, purposes of a calculation which is only of Regulation No 120/67, includes a concerned with the incidence of the variable component, corresponding to fluctuation of prices of raw materials. the levy on the basic products involved, and a fixed component, intended to (b) In the realm of practical protect the processing industry, is in consequences the contrary interpretation put forward by the Commission would any case applicable up to an amount create serious distortions in trade with corresponding to this fixed component. third countries and in the competitive According to the rule for abatement, the situation of French industry in relation compensatory amount for amyloid to that of the other Member States, products cannot exceed the import which would be contrary to the spirit of charge; the French authorities therefore the EEC Treaty and in particular to reduced this compensatory amount to Article 40. the level of the import charge on amyloid products, which in the event It appears, moreover, that the consisted only of the fixed component, Commission has implicitly recognized in view of the reduced incidence of the these unfortunate consequences, since,

It is this Regulation No 974/71 were present at situation which is contested by the the beginning of 1974 and justified the plaintiff in the main action.

The concept 'import charge' in Article 4 a objectives of Regulation No 974/71. The must, however, since it is here a matter external protection referred to in Article of processed products, refer to the full 4 a as an upper limit beyond which the and entire levy applicable to such compensatory amount fixed cannot be products as laid down by Regulation No applied is composed, for pigmeat, of 120/67, that is to say the levy made up several components, of which the levy both of the variable component, on the basic product involved, in this case corresponding to the levy on the basic wheat, forms only one part.

to indicate external protective amounts avoid. as the sum of the components of which they are composed. According to its proposal for the amendment of Article 4 a of Regulation Moreover, the overall scheme of No 974/71, submitted to the Council on Regulation No 974/71 does not allow 25 February 1974 (OJ C 20, p. 7) the the concept 'import charge' to be Commission intended to maintain the restricted to the variable component of rule for abatement unchanged and the import charge on processed wished to be given the possibility of products: by choosing as the upper limit derogating from that rule as necessary all the protective components of the in order to avoid certain of its general system rather than the variable consequences, in particular distortions component or, in more general terms, of competition, in an international the protective component corresponding economic situation which had funda to the import charge on the basic mentally changed. product involved, the Regulation The Commission concludes that the first

main action might appear attractive and, at first sight, logical. It cannot however be accepted as regards its basic principle, B — As regards the second question since it allows the corrective measure — The plaintiff in the main action is of the the rule for abatement — to take opinion that in view of Article 2 (2) of precedence over the system for Regulation No 974/71, according to compensatory amounts itself and would which in respect of products whose price prevent the latter from attaining its depends on the price of basic products,

ROQUETTE v FRANCE

product. A change in exchange rates normally Moreover, it is clear from the recitals to leads to a disturbance of the balance of Regulation No 974/71 that the whole market prices. The initial balanced price system of compensatory amounts is both can however be maintained on the based upon and limited by the likelihood market by means of the application of of disorganization of the intervention compensatory amounts, which neutralize system, that is to say the price system the effects of changes in exchange rates. for basic products. It is difficult to The economic effect of the fixed understand why it should be necessary component is not impaired and to apply a compensatory amount to protection is maintained. A diminution processed products when the Council of the compensatory amount in has not exercised, in relation to the basic pursuance of Article 4 a (2) of product, the option offered by the Regulation No 974/71 leads only to a second paragraph of Article 4 a (2), partial neutralization of currency added to Regulation No 974/71 by fluctuations. Regulation No 509/73, of disregarding The statement by the plaintiff company, the rule for abatement, doubtless because it felt that the situation of the according to which competition is distorted, is false: it could be basic product does not justify this course

Member States. achievement of the objective consisting The Government of the Kingdom of in the stabilizing of markets in the Denmark notes that compensatory agricultural sector. amounts on processed products are fixed The arguments adduced by the plaintiff by the Commission, in pursuance of company to demonstrate that compe Article 2 (2) of Regulation No 974/71, tition has been distorted do not carry on the basis of the compensatory conviction. amounts applicable to the basic products contained in the relevant processed The Commission, is essentially

JUDGMENT OF 12. 11. 1974 — CASE 34/74

processed product. Article 2 (2) contains is more than a mere rule for calculation the rules governing the method of and that it subordinates the legality of calculation of the compensatory amount the compensatory amount on processed for the product when, as in this case, the products to the application of a conditions requiring the fixing of compensatory amount on basic compensatory amounts are present. It products, Article 4 a is no less valid for does not lay down a further condition, that fact. Given that hypothesis, it would

lead to disturbance. The non-application It should, moreover, be realized that the of compensatory amounts on processed disturbances which may be combatted products is also likely to create by means of a compensatory amount on difficulties in intra-Community trade. processed products will not disappear merely because, for reasons falling Moreover, the fact that Article 4 a has outside the system of compensatory adversely affected the competitive amounts, the compensatory amount is position of the plaintiff company and not applied to the basic product. The distorted competition between it and fourth recital to Regulation No 974/71 undertakings in other Member States affirms that the application of a cannot, alone, entail the illegality of compensatory amount to a processed Article 4 a, as the Court found in its product, when by virtue of the rule for judgment of 24 October 1973 (Case abatement a compensatory amount is 43/72, Merkur-Außenhandels-GmbH, not applied to the basic product, is not, [1973] E.C_R_, 1055). in principle, contrary to the system. In Accordingly, the answer to the second effect neither a 'disruption of the question should be that examination of intervention system' nor 'abnormal the question has not disclosed factors movements of prices jeopardizing a capable of affecting the validity of normal trend of business in agriculture' Article 4 a of Regulation No 974/71.

3 In the event of the Court giving an affirmative answer to question 1 (a) the Court is asked to state whether, given that there is no compensatory amount for maize, which is a basic product, the simultaneous application of compensatory amounts of different rates to amyloid products whose price depends on that of maize is consistent

(a) with the provisions of Article 2 (2) of Regulation No 974/71, clarified by the fourth and final recitals to the said regulation, and

(b) with the principles governing normal competitive conditions as between nationals of different Member States.

JUDGMENT OF 12. 11. 1974 — CASE 34/74

4 These questions have arisen in the context of an action brought before the Tribunal d'instance by the plaintiff in the main action against the French Customs Administration for the purpose of obtaining restitution of compensatory amounts which it was obliged to pay on exports of amyloid products derived from maize, at a time when, according to the uncontested statements of the parties to the proceedings before the Court, no compensatory amount was due under the provisions of Regulation No 974/71 on imports of that basic product, following a rise in prices on the world market.

5 The Government of the French Republic stated at the hearing that by charging compensatory amounts on export of the product in question the French authorities merely undertook a precise application of Regulation No 218/74 of the Commission, although, fundamentally, they considered that Regulation to be contrary to the principles of Regulation No 974/71 of the Council.

11 It is clear from information given during the proceedings that, in implementing Article 4 a of Regulation No 974/71, the Commission interpreted the term 'charge on products imported' to refer to the levies laid down by Regulation No 120/67 of 13 June 1967 on the common organization of the market in cereals (OJ p. 2269), Article 13 of which provides that a single levy shall be charged on imports of basic products, fixed by reference to the difference between prices on the world market and prices within the Community, whereas Article 14 provides that a levy shall be charged on the importation of derived products, consisting of two components, that is to say a 'variable component' corresponding to the incidence, on the prime cost of processed products, of the levies on the basic products and a 'fixed com­ ponent', designed to protect the processing industry.

12 As a consequence of this interpretation, in spite of an economic situation in which no levy was imposed on the basic product involved, that is to say maize, Regulation No 218/74 of the Commission nevertheless maintained, on derived products, and in particular amyloid products, a compensatory amount corresponding to the 'fixed component' laid down by Article 14 of Regulation No 120/67.

13 The interpretation of the. concept 'charge on products imported', taken by the Commission as the basis of Regulation No 218/74, is not in conformity with the provisions of Articles 2 (2) and 4 a (2) of Regulation No 974/71, as interpreted in the light of the objective sought by that Regulation.

18 The result of the application of this provision, following the increase in price of cereals on the world market, was the abolition of compensatory amounts in respect of trade in maize from the moment when the cif price reached the threshold price fixed pursuant to Regulation No 120/67.

19 In such a situation, it was contrary to the objective of Regulation No 974/71 to take account, by way of a 'charge on products imported', of the fixed component of the import levy on products derived from cereals, fixed by reference to considerations — the protection of the processing industry — which were totally extraneous to the objective of Regulation No 974/71.

20 The result of taking account of this factor in calculating the rates fixed in Annex I to Regulation No 218/74 was to impose on exporters of derived products a charge which bore no relation to monetary fluctuations and, in consequence, worsened their competitive position.

21 The first question should therefore be answered to the effect that the 'charge on products imported' from third countries, referred to in Article 4 a (2) of Regulation No 974/71, as amended by Regulation No 509/73, must be understood — in respect of the products referred to in Article 1 (2) (b) of the same Regulation, whose price depends on the price of the products covered by intervention arrangements under the common organization of agricultural markets — as consisting solely of the variable component intended to take account of the prices of basic products.

ROQUETTE v FRANCE

22 Since the answer to question 1 (a) referred by the Tribunal d'instance is therefore answered in the negative the second question does not require an answer.

The 'charge on products imported' from third countries, referred to in Article 4 a (2) of Regulation No 974/71 as amended by Regulation No 509/73, must be understood — in respect of the products referred to in Article 1 (2) (b) of the same Regulation, whose price depends on the price of the products covered by intervention arrangements under the common organization of agricultural markets — as consisting solely of the variable component intended to take account of the prices of basic products.

Lecourt Ó Dálaigh Mackenzie Stuart

Donner Mertens de Wilmars Pescatore Kutscher

Delivered in open court in Luxembourg on 12 November 1974.

A. Van Houtte R. Lecourt

Registrar President