C-29/75

JUDGMENT OF THE COURT 8 APRIL 1976 <apnote>1</apnote>

Kaufhof AG

v Commission of the European Communities

Case 29/75

Summary

Commercial policy — Derogations within the meaning of Article 115 of the EEC Treaty — Strict interpretation — Duties of the Commission

1 — Language of the Case: German.

JUDGMENT OF 8. 4. 1976 - CASE 29/75

Luxembourg at the office of its Legal Adviser, Pierre Lamoureux, 4 boulevard Royal,

defendant,

Application for the annulment of the decision of the Commission of 20 January 1975 (75/71/EEC),

THE COURT

On 14 January 1975 the Federal I — Facts and written procedure Republic of Germany, relying on Article 115 of the EEC Treaty, requested The applicant runs department stores in authorization not to apply Community the Federal Republic of Germany where treatment to the abovementioned goods it offers for sale food specialities which it originating in the People's Republic of obtains partly by importing them itself. China and put into free circulation in the other Member States, in respect of which On 2 January 1975, it applied to the applications for import authorizations Bundesamt für Ernährung und were made later than 1 January 1974 Forstwirtschaft (Federal Office for Food (?1975). It was claimed that three and Forestry) (hereinafter referred to as applications had been made to the 'the Bundesamt') for the grant of an Bundesamt (the first two dated 2 January import licence for 5 000 boxes of 1974 (?1975) concerning sums of DM

KAUFHOF v COMMISSION

86 982 and DM 39 803 corresponding to The defendant contends that the Court products put into free circulation in the should:

concern to the applicant. In fact it It then commenced the present appears from the facts that the proceedings by an application of 13 authorization was requested precisely March 1975 entered in the Court because of the applications for import Registry on 17 March 1975. licences pending at that time. When the The written procedure followed the decision of 20 January 1975 entered into normal course. force the applicant — possibly just like other importers — was distinguished The Court, after hearing the report of the individually in the same way as if it had Judge-Rapporteur and the views of the been the addressee of the decision. Advocate-General decided to open the oral procedure without any preparatory The Commission replies that an inquiry. application lodged by an individual against a decision authorizing a Member State, in accordance with Article 115 II — Conclusions of the parties EEC, not to apply Community treatment to goods is, in principle, inadmissible The applicant claims that the Court under the second paragraph of Article should: 173 of the Treaty. 1. Annul the Decision of the Commission of 20 January 1975 A decision addressed to another person is (75/71/EEC); neither of direct concern to a natural or 2. Order the defendant to pay the costs. legal person involved in an import

JUDGMENT OF 8. 4. 1976 - CASE 29/75

amended by the Commission Decision of 9 March 1973 (JO L 80 of 28. 3. 1973, The contested decision refers only to the p. 22). first case. The Federal Republic of Germany bases its decision rejecting the B — The substance of the case application and its decision on appeal The applicant claims that the provisions essentially on the alleged difficulties for of Article 115 of the EEC Treaty do not national production caused by the import apply within a sphere in which there is of preserves of beans from the People's already a common commercial policy, Republic of China. Nevertheless the total and in which it is impossible to envisage quantity of preserves of beans imported deflections of trade caused by certain into the Federal Republic amounted in measures of commercial policy of the 1972 and 1973 to approximately 108 000 Member States. It is true that the metric tons, 96 300 metric tons of which

clear in the present case (approximately submission of the application by the 0·8 % of all imports made in 1973; the party concerned and the Member State applicant does not know the quantity concerned must take a decision whether permitted to be imported in 1974) which or not to issue an authorization as soon did not justify suspension of the as it receives notification of the decision principle of the free movement of goods. of the Commission concerning the Further, the import of preserves of beans implementation of Article 115, and in into the Federal Republic of Germany any event not later than twelve working from the People's Republic of China days following submission of the does not affect measures of commercial application. The Commission could policy adopted by the Federal Republic therefore not extend its decision of 20 with regard to the People's Republic of January 1975 to applications made after China, far less obstruct them. Article 115 2 January 1975. of the EEC Treaty must enable national commercial policy to be carried out but Lastly, Article 190 EEC has been must not make available protection infringed. It is not enough for the against deflections of trade. Such Commission merely to reproduce the protection could only be obtained by wording of that provision in the case of means of this procedure if the Federal decisions taken on the basis of Article Republic was conducting a restrictive 115. Because of the special nature of policy in respect of the product in Article 115, in the present case the question for reasons of commercial measures of commercial policy adopted policy. An agreement on trade and by the Federal Republic of Germany in financial transactions has existed between respect of the People's Republic of the two countries since 5 July 1973. China, the execution of which was obstructed by deflection of imports, The application of the first paragraph of should have been indicated. Article 115 is subject to the limits laid down in the third paragraph, according The defendant replies that Article 115 is to which priority must be given to certainly based upon commercial policy, measures which cause the least but that its field of application comes disturbance to the functioning of the within the free movement of goods common market. The consequence of which is capable of being restricted, if this as that there are limits to the power necessary, by the Member States under to grant the Member States an an authorization from the Commission. authorization having retroactive effect. In It follows from the Treaty that there may accordance with its powers in matters of be national measures requiring commercial policy, the Commission application of the first paragraph of must ensure that the autorization granted Article 115 even after the end of the can be used only when the quantity transitional period, asthe long as imported is continually increasing 'uniform principles' within the meaning whereas in the present case it has not of Article 113 have not been achieved

longer or no longer entirely able to fulfil relied upon this aspect. The present its function. According to the judgment proceedings are concerned exclusively in Case 62/70, it is the 'significance' of a with that decision and the statement of deflection of trade in relation to the reasons on which it is based and not with 'effectiveness of the measure of the proving of economic difficulties by commercial policy proposed by the the Federal Republic or the decision of Member State concerned' which the rejection by the Bundesamt. Court regards as important when

The fact that a in trade with third countries, only the sphere of duties and charges was State in general conducts an active standardized, but not that of quantitative commercial policy does not in any way restrictions; furthermore, since it was imply that it cannot consider taking special restrictive measures or that these impossible to comply with the date measures cannot be measures of mentioned in Article 7 because of the complexity of the matter, the national commercial policy. The statement made provisions remain in force). The by the applicant that in the summer of jurisdiction of the Community is not 1974 the Federal Republic of Germany sufficient by itself to achieve a common authorized indirect imports of the goods system with regard to commercial policy, in question cannot assist in settling the but must nevertheless be exercised. In present proceedings. The fact that at a previous time the execution of a this respect such a system is not to be achieved automatically. The contents of commercial policy may have been less this system must first of all be fixed by strictly protected against deflections of trade is not decisive for the evaluation of the Community institutions and as long as no Community measure has been the situation existing when the contested adopted, the Member States must be decision was taken, that is to say, at the empowered to retain national measures. beginning of 1975. That is what the Court held in its In the present case there can remain no judgment of 13 December 1973 (Sociaal doubt as to the existence of a deflection Fonds voor de Diamantarbeiders v NV

expected. The defendant based its decision solely on deflections of trade; in its application The import prohibition applied by the the Federal Republic of Germany also Federal Republic of Germany to the

which is undoubtedly threatening (even measures of commercial policy if, by by making a comparison with imports determining to that effect the period of from other third countries — DM application of its decisions, it had 3 488 000 for the same period — it is obliged the Federal Republic to import impossible to find a lack of proportion). each year 'a regularly increasing quantity' or even merely 'a constant quantity'. For Article 115 to be able to fulfil its function as a safeguard clause with the The calculation of the periods laid down necessary effectiveness, it must in in the decision of 12 May 1971 is based principle also be capable of application on Regulation No 1182/71 of the to transactions already begun. This Council of 3 June 1971 determining the follows from the procedure for applying rules applicable to periods, dates and the safeguard clause as laid down in the time-limits, according to which 'working decision of 12 March 1971, Article 1 of days' means all days other than public which authorizes the Member States to holidays, Sundays and Saturdays and make the import of the products in since a period expressed in days is to be question in free circulation in other calculated from the moment at which an

Member States subject to the issue of a action takes place, the day during which licence; the latter need not be granted that action takes place shall not be automatically or immediately, since the considered as falling within the period in Member State may commence the question. The terminological distinction procedure under Article 115 within the drawn in the German version between

statement of the reasons upon which it is when it referred to the judgment in the based, consideration should be given to Diamantarbeiders Case, mentioned its legal character, that is, the context above), the common commercial policy within which it was adopted, and account must therefore be implemented should be taken of the participation of automatically (Judgment of the Court of the addressee in its formulation. The 10 December 1974, Mr Charmasson v Federal Republic, which set the Minister for Economic Affairs and procedure in motion, participated in the Finance (Paris), Case 48/74, [1974] ECR formulation thereof, so that it received all 1383). the legal guarantees provided for in Article 190. The defendant was therefore With regard to the application of Article able merely to mention briefly the 115, it is not sufficient for the applicant essential factors upon which the Member State to rely on the fact that authorization decision was based. commercial policy is being restricted. After the transfer to the Community of The applicant in its reply claims first of powers in that respect, it must give all that after lodging its application it reasons for retaining its measure. This is obtained authorization to import the all the more necessary in the present case consignment in question, that the since the Federal Republic subsequently Federal Republic of Germany granted a granted a quota for direct imports of an direct quota of preserves of beans for the amount far exceeding the value of the People's Republic of China and that a applications made at the beginning of new import application dated 1 April January 1975. As for the Commission, 1975 was rejected by the Bundesamt in under Article 38 et seq. and Article 110 view of a further authorization granted to of the EEC Treaty it must also conduct the Federal Republic on 17 April 1975 an active commercial policy when it under Article 115. grants authorizations under Article 115: it should have taken account in the The decisive question is whether since 1 present case of the fact that the other January 1975, after the end of the Member States have liberalized the transitional period and in accordance importation of the products in question with the general use which the and ensured that differences in policy Community institutions make of their between the Member States steadily powers in commercial matters, the diminish.

115 does not permit the adoption of preventive measures and the validity of The reference to the judgment in Case the decision of the Commission of 12 48/74 is irrelevant, as Article 115 can May 1971 must be questioned. constitute an exception to the principle of free movement of goods and is stated The measures of commercial policy expressly in the Treaty to be applicable which were hindered by deflection of beyond the transitional period and also imports, the reason why the to be applicable unconditionally to authorization was extended to import agricultural products in accordance with applications which had already been Article 38 (2) of the Treaty. made and the reason — in comparison with previous years — why Community The commercial situation of the Federal treatment was generally not applied to the goods in question should have Republic of Germany with regard to the appeared from the statement of reasons. products in question is in no way characterized only by the absence of commercial provisions of a contractual In its rejoinder, the Commission replies nature but essentially by a fundamental first of all that as regards the sequence of prohibition on importation which is events after the application to the Court lifted from time to time by had been lodged, the application for an authorizations under a discretionary import licence made on 1 April 1975 was power. As long as a Member State is made after the contested decision had authorized to retain a national ceased to be valid, and that the validity of quantitative restriction, it is in no way the decision of the Commission of 17 required — within the framework of April 1975, on the basis of which the Article 115 — to explain 'the grounds on Bundesamt rejected the said application, which it retains the commercial measure is not in question in the present case. in question' and why it does so in that particular form. Commercial measures The partial introduction of a common adopted by Member States are, however, commercial policy for certain goods (for subject in certain circumstances to example the introduction of safeguard consultation within the meaning of the measures) does not in the least imply the decision of the Council of 19 December standardization of systems of trade and 1972, laying down certain transitional does not preclude the existence of a measures for the progressive certain number of lacunae with regard to standardization of import systems with which national measures may continue regard to third countries (OJ English to exist in conformity with the Treaty. Special Edition 1972 (30-31 December), p. 101). The application of Article 115 depends on the commercial situation. As long as The defendant must not at the time commercial policy is not wholly when the safeguard clause is applied governed by uniform principles, it is 'conduct an active commercial policy'

which would be contrary to the safeguard is an authorization based on the first function of Article 115. paragraph of the said article permitting the Member States to introduce into Furthermore, in order to know whether a intra-Community trade specific measures measure of commercial policy is of control with regard to specific hindered, it is necessary to consider the products from specific countries. In order actual measure, and any comparison with to achieve the objective pursued by other goods, countries or periods is in Article 115, it must be possible to adopt principle prohibited. Article 115 is the safeguard measure before the intended to protect a current measure of deflections of trade have occurred; for commercial policy. It cannot be inferred this purpose it is essential to observe from the prohibition on imposing indirect patterns of trade. charges having an effect equivalent to customs duties (Judgment in Joined The duty to obtain an import licence and Cases 37 and 38/73) that there is an short periods enabling an examination to analagous prohibition on quantitative be carried out by the Member States and restrictions, which have quite different the Commission are such as to cause the effects on external trade. least disturbance to the functioning of the common market. Furthermore the The abovementioned decision of 19 result of the fact that the application may December 1972 is based on the principle be considered by the competent that the Member States may authorities of the Member State is that independently amend their import terms. the latter is not tempted automatically to initiate the procedure under Article 115. There has not been any 'increase in severity' since the end of March 1975 a The decision of 12 May 1971 the large quantity was again the subject of an objective of which was to create the import authorization. provision of Community law necessary to As regards the 'retroactivity' of the restrict the free movement of goods to contested decision, an import prohibition the extent necessary but no further, is must, in order to have the required one of the 'exceptions for which effectiveness, be capable of applying to provision is made by Community law all imports, direct or indirect, and of itself as stated in the judgment of 15 December 1971 (International Fruit covering applications lodged immediately before the decision is Company NV and others v adopted, the lodging of which renders Produktschap voor Groenten en Fruit, Joined Cases 51 to 54/71, [1971] ECR specific the danger of a deflection of trade. 1107).

which a temporary total prohibition on proceedings. importation is based is, by definition, that it is necessary also to protect imports The applicant, represented by Mr Ehle, for which applications have already been Advocate at the Cologne Bar, and the made. Lastly, there is no need to explain Commission of the European why the exclusion was used in a manner Communities represented by Mr different from that of previous years, Albrecht, its Legal Adviser, acting as since the safeguard measure is Agent, presented oral argument at the determined in each case by the manner hearing on 17 February 1976. in which imports are treated with regard to the country of origin during the The Advocate-General delivered his period in question. opinion at the hearing on 9 March 1976.

Law

1 By an application lodged at the Court Registry on 17 March 1975, the proceedings relating to which were stayed temporarily at the request of the parties, the applicant sought the annulment of the decision of the Commission of 20 January 1975 (75/71/EEC) authorizing the Federal Republic of Germany not to apply Community treatment to preparations and preserves of beans in pod coming under subheading 20.02 ex G of the Common Customs Tariff, originating in the People's Republic of China and put into free circulation in the other Member States, in respect of which applications for import authorizations were made after 1 January 1975.

2 On 2 January 1975 the applicant made a request to the Bundesamt für Ernährung und Forstwirtschaft (Federal Office for Food and Forestry) for an import authorization in respect of 5 000 boxes of the said preserves, which had been put into free circulation in the Netherlands.

4 The latter complains that the defendant has exceeded its powers under Article 115 of the EEC Treaty and thus violated the principle of the proportionality of administrative measures.

In view of the insignificance of the quantities of preserved beans in pod which the applicant applied to import, it was not, according to the applicant, necessary to extend the authorization in question to licence applications pending when the matter was referred to the Commission.

5 As from 1 July 1968, the date of the entry into force of Regulation (EEC) No 865/68 of the Council (OJ English Special Edition 1968 (I), p. 225), any quantitative restriction or measure having equivalent effect relating to the products in question is prohibited in the internal trade of the Community.

Under the first paragraph of Article 115 of the Treaty: 'In order to ensure that the execution of measures of commercial policy taken … by any Member State is not obstructed by deflection of trade, or where differences between such measures lead to economic difficulties in one or more of the Member

States', the Commission may, inter alia, 'authorize Member States to take the

KAUFHOF v COMMISSION

By failing to review the reasons put forward by the Member State concerned in order to justify the measures of commercial policy which it wishes to introduce, the Commission was in breach of its duty under Article 115 to examine whether the measures have been 'taken in accordance with this

Treaty' and whether the protective measures sought are necessary , within the meaning of the same provision.

By extending the authorization to applications already received, without taking account of the size or insignificance of the quantity in question in these applications, the Commission has also exceeded the limits of its discretion.

Consequently, the contested decision must be annulled without its being necessary to consider the other submissions put forward in the application.

JUDGMENT OF 8. 4. 1976 - CASE 29/75

Costs

1. The decision of the Commission of 20 January 1975 authorizing the Federal Republic of Germany not to apply Community treatment to certain products originating in the People's Republic of China and put into free circulation in the Netherlands, is annulled to the extent to which it concerns products in respect of which applications for licences were pending before the German administration when the application for authorization was lodged.

2. The defendant is ordered to bear the costs.

Lecourt Kutscher O'Keeffe

Donner Mertens de Wilmars Sørensen Mackenzie Stuart

Delivered in open court in Luxembourg on 8 April 1976.

A. Van Houtte R. Lecourt