C-7/76

on the interpretation of and the validity of Regulation No 648/73 of the Commission of 1 March 1973 laying down detailed rules for the application of 'monetary' compensatory amounts (OJ L 64 of 9. 3. 1973, p. 1) and of Regulation No 905/73 of the Commission of 23 March 1973 fixing the amount by which the 'monetary' compensatory amounts are to be adjusted (OJ L 92 of 7.4. 1973, p. 1).

THE COURT

composed of: R. Lecourt, President, H. Kutscher and A. O'Keeffe, Presidents of Chambers, A. M. Donner, J. Mertens de Wilmars, P. Pescatore, M. S0rensen, A. J. Mackenzie Stuart, F. Capotorti, Judges,

Advocate-General: J.-P. Warner Registrar: A. Van Houtte

gives the following

IRCA v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

The facts of the case, the course of the (b) charged on exports shall be procedure and the observations deducted from the export refund. submitted under Article 20 of the 2. In trade between the Member States Protocol on the Statute of the Court of and third countries, the Justice of the EEC may be summarized compensatory amounts applicable as follows: due to the decrease in value of the currency concerned may not be higher than the charge on products I — Facts and procedure imported from third countries. However, the Council, acting on a A — Regulation No 805/68 of the proposal from the Commission and Council of 27 June 1968 (OJ, English in accordance with the voting Special Edition 1968, p. 187) established procedure provided for in Article 43 the common organization of the market (2) of the Treaty, may decide, in in beef and veal. certain exceptional cases, that the first subparagraph shall not be Regulation (EEC) No 974/71 of the applicable.' Council of 12 May 1971 on certain measures of conjunctural policy to be Under Article 6 'detailed rules for the taken in agriculture following the application of this regulation, which may temporary widening of the margins of include other derogations from the fluctuation for the currencies of certain regulations on the common agricultural Member States (OJ, English Special policy, shall be adopted in accordance Edition 1971, p. 257) introduced a system with the procedure laid down in Article of compensatory amounts in trade with 26 of Council Regulation 120/67/EEC of Member States and third countries, 13 June 1967 on the common applying to products covered by organization of the market in cereals (OJ, intervention arrangements as part of the English Special Edition 1967, p. 33), as common organization of agricultural last amended by Regulation (EEC) No markets. This regulation, as modified by 2434/70 or, if appropriate, the Regulation No 509/73 of the Council of corresponding article of the other 22 February 1973 (OJ L 50 of 23. 2. regulations on the common organization 1973, p. 1), provides that a Member State of agricultural markets'. of which the currency depreciates below the fluctuation limit shall charge on Article 6 of Regulation No 648/73 of the imports and grant on exports Commission of 1 March 1973 laying compensatory amounts in trade with down detailed rules for the application of Member States and third countries. 'monetary' compensatory amounts (OJ L (Article 1 (1)). 64 of 9. 3. 1973, p. 1) provides: '1. For the purposes of applying Article 4 Article 4 (a) of this regulation provides: (a) (2) of Regulation (EEC) No 974/71 '1. In trade with third countries, the Commission shall fix the compensatory amounts amounts by which the "monetary" (a) granted on imports shall be compensatory amounts are to be deducted from the import charge, "adjusted".

and Article 17 of that regulation The customs authorities, it is said, provides: applied the prescribed customs duty, '1. This regulation shall enter into force 10 % of the value (Lit. 1 563 570) and on the third day following its accorded the company a credit of Lit. publication in the Official Journal of 1 506 780 by way of compensatory the European Communities. amounts. After subtracting this credit 2. However, the amounts resulting from from the import duty, by virtue of Article its application shall apply from 26 4 (a) (1) of Regulation (EEC) No 974/71, February 1973. they then claimed payment of the By way of derogation from the difference, namely Lit. 56 790. preceding paragraph these amounts shall, at the request of the party IRCA took the view that it had wrongly concerned, apply from 13 February paid this sum, the compensatory 1973 if application of this regulation amounts being higher than the customs duties and the reduction in these leads to (a) the granting of: amounts made on the basis of Regulation — compensatory amounts which No 905/73 of the Commission being are higher than those illegal. applicable until this regulation On 10 January 1976, it commenced enters into force; proceedings before the Ufficio di or Conciliazione of Rome, claiming that it — newly introduced compen­ should order the revenue authorities to satory amounts; repay the sum levied, reduced to Lit. (b) the levying of import charges 50 000. which are lower than the "mon­ etary" compensatory amounts By order of 22 January 1976, the Giudice applicable until this regulation Conciliatore decided to stay the enters into force.' proceedings and to refer to the Court of Justice of the European Communities The compensatory amounts valid with under Article 177 of the EEC Treaty the effect from 26 February 1973 were fixed following questions for a preliminary by Regulation (EEC) No 649/73 of the ruling: Commission of 1 March 1973 (OJ of '1. Was Regulation No 905/73 of 23 9. 3. 1973 L 64, p. 7). March 1973, published in the Official Journal of the European Com­ The Commission, in its Regulation (EEC) munities L 92 of 7 April 1973, 905/73 of 23.3.1973 (OJ L 92 of applicable to a transaction which 7. 4. 1973, p. 1) fixed the amounts by took place on 22 March 1973 and if which the 'monetary' compensatory so, does there exist under the amounts are to be adjusted, in Community legal system a principle accordance with Article 6 of Regulation or a ruling allowing the Community (EEC) No 648/73, the 'monetary' authorities to adopt retroactive compensatory amounts appearing in legislation? Regulation (EEC) No 649/73. (Annex I: 2. Was Regulation (EEC) No 648/73 amounts valid with effect from and was Regulation (EEC) No 905/73, 26. 2. 1973; Annex II: amounts valid with which implements it, adopted in effect from 5. 3. 1973). accordance with Article 4 (a) inserted

in Regulation (EEC) No 974/71 by EEC written observations were lodged by Regulation (EEC) No 509/73, or, if IRCA, represented and assisted by that is not the case, did the strict Augusto Pino and Pier Luigi Bonifazi interpretation of Article 4 (a) con­ and by Vincenzo Boccieri, a customs stitute one of the derogations from expert, and by the Commission of the the regulations on the agricultural European Communities, represented by policy referred to in Article 6 of its Legal Adviser, Cesare Maestripieri, Regulation (EEC) No 974/71? Does acting as Agent. the latter come under the inherent power of the Commission to adopt Upon hearing the report of the regulations? Judge-Rapporteur, and upon hearing the 3. Are Regulations (EEC) Nos 648/73 views of the Advocate-General, the Court and 905/73 valid although their decided to commence the oral procedure implementation puts Italian without any preparatory inquiry. importers in a different situation in comparison with importers belonging to countries with a strong currency, II — Summary of the written and although they always involve a observations lodged with divergence unfavourable to Italian the Court importers between the value calculated as a lump sum by the IRCA argues that the reduction of the Community for the "monetary" compensatory amounts is based on two compensatory amounts and the value regulations of the Commission which are determined by the Italian customs invalid: authorities upon importation? (a) Regulation No 905/73, because it 4. Are Regulations (EEC) Nos 905/73 contains a provision with retroactive and 648/73 valid although they effect thus infringing an acquired introduce a difference in the personal right. application of monetary measures (b) Regulation No 648/73, because it between trade in the meat of bovine infringes Article 155 of the EEC animals and that in other products Treaty, the rules of the Council, and coming under the agricultural equality as between traders. regulations since in Italy it is not impossible, as has been maintained, (a) After describing the background of to determine the value for tax regulations in the present case, the purposes of an imported product undertaking IRCA argues that Regulation because, pursuant to Article 3 of the No 905/73, which itself says that it shall Decreto del Presidente della enter into force on the day of its Repubblica No 633 of 26 October publication in the Official Journal, 1972, the Italian customs authorities namely on 7 April 1973, obviously are always bound without exception cannot validly provide that the to determine for the purposes of adjustments set out therein shall apply value-added tax the value for tax with effect from 26 February 1973. purposes of the imported product whether it is a domestic product or It is alleged that notwithstanding the comes from third countries or silence of the Treaty on the retroactive Member States? effect of Community rules, such retroactive effect is unacceptable because C — The reference was entered at the it is contrary to general principles Court Registry on 26 January 1976. common to all the Member States. To accept the retroactive effect of the Pursuant to Article 20 on the Protocol on adjustments would result in an the Statute of the Court of Justice of the infringement of an acquired personal

the importation and the re-sale has taken The reduction of the compensatory place is to impose a serious and amounts has led to a system of a flat-rate unjustified financial burden. charge on imports. The necessity of resorting to this flat-rate system is the The retroactive nature of the adjusting consequence of upsetting the system amounts is not in line with the criteria adopted by the Council. If that necessity which the Commission usually takes into had already arisen it would have account, and more particularly has taken constituted grounds for a new regulation into account in the regulations making of the Council. The problem only arises provision for derogations from the because the problem of comparing the application of the compensatory amounts compensatory amounts with the charge (examples, p. 18). on imports has been converted into a problem of the equality of the But the invalidity of Regulation No compensatory amounts. The latter 905/73 also results from the fact that the question, however, is foreign to the rule setting the adjusting amounts is void intentions of Article 4 (a) (2) of by reason of the invalidity of its legal Regulation No 974/71. basis, that is to say, Article 6 of Regulation No 648/73. Moreover, at the practical level, the method adopted by the Commission has (b) The latter provision infringes Article created a difference between the charge 155 of the Treaty, and the rules laid levied on imports and the theoretical down by the Council, especially Articles flat-rate charge. This difference is such 4 (a) and (6) of Regulation No 974/71, that the compensatory amounts are often and the principle of non-discrimination. lower than the import charge, whereas Article 4 (a) (2) only says that they shall The Commission, with its system of not be higher. adjusting amounts, has profoundly altered a regulation made by the Council. In Regulations Nos 905/73 and 648/73 Instead of deducting compensatory the Commission has exceeded the limits amounts from the import charge (Article to the power conferred on it by Article 6 4 (a) (1) of Regulation No 974/71) and of of Regulation No 974/71. Clearly, in leaving any excess out of account introducing a system of a flat-rate (paragraph (2)), the Commission has reduction of the compensatory amounts provided for the reduction of the in the beef and veal sector, the

Commission has not applied Article 4 (a). Council on the harmonization of the The Commission has itself admitted that laws of the Member States relating to the said article does not require the taxes on turnover (No 227/67 of flat-rate system as regards trade with 11. 4. 1967, OJ, English Special Edition third countries (see Case 46/75, IBC v 1967, p. 14; No 228/67 of 14.4.1967, Commission, Judgment of the Court of OJ, English Special Edition 1967, p. 16) 27 January 1976, [1976] ECR 65) and and to the implementing rules adopted that the method adopted was necessary by the Member States on assessing the for the purposes of applying Article 4 (a) value of goods (pp. 27 to 32). to intra-Community trade, the reason for this being the absence of any charge on IRCA observes that the assessment of the imports and the fact that the customs value of goods for the purposes of offices are not equipped for assessing the applying VAT does not require a method value of the goods. of assessment different from the one adopted for the purposes of calculating Yet that provision did not intend any the import charge on goods coming from comparison with the compensatory third countries, and for calculating the amounts in intra-Community trade difference compared with the price where no import charge exists. In applied on the world market for goods mentioning trade between the Member crossing intra-Community frontiers. States this rule obviously refers to goods Article 2 of the abovementioned in free circulation, and for such goods Directive No 227/67 makes it clear that the import charge can generally be the calculation is to be made according obtained on the basis of the documents to the same criterion as the one with mentioned in Article 11 of Regulation which the import charge on beef and No 648/73. veal is determined, and more generally, on the basis of the difference in value The rule laid down by the Council ought between the Community market and the to be interpreted as meaning that the world market, given that it is always a compensatory amounts granted to percentage of the price that is involved. importers belonging to Member States whose currency has devalued must not be The system of adjusting amounts has higher than the difference in value on infringed the principle of non- the two markets. For beef and veal this discrimination.

Admittedly, the disadvantages suffered by the regulation in question was adopted some traders corresponds to the and entered into force. advantages obtained by others, but it is precisely this distinction between traders Regulation No 648/73 of the that the common market is intended to Commission of 1 March 1973 had prevent. This distinction is not limited to already unequivocally announced that traders in one and the same Member the amounts by which the monetary State but is aggravated as between traders compensatory amounts to be adjusted belonging to a Member State with a weak were being introduced (preamble and currency and those in a Member State Article 6). Merely on reading those with a strong currency. So far as the latter provisions and those of Regulation No are concerned, the fact that there is no 649/73 of the same date and published difference between the flat-rate charge in the same Official Journal as the and the actual charge means that beef regulation already mentioned 'it ought and veal are cheaper for them than for on those dates at least to have been clear importers belonging to a Member State to an experienced trader that the with a currency that has depreciated. introduction of a new method of calculation was imminent' (Judgment of The Commission first of all makes a 10 December 1975 in Joined Cases 95 to reference to the observations put forward 98/74, 15 and 100/75, Union nationale in Case 46/75 (IBC v Commission; des coopératives agricoles de céréales et Judgment of the Court of 27 January autres v Commission and Council, [1975] 1976) and describes the circumstances in ECR 1615). It is argued in addition that which the regulations in question were Article 1 of Regulation No 649/73 adopted. introduced an express reservation concerning the application of Article 4 As to the first question (a) (2) of Regulation No 974/71. The question therefore arises whether it According to the Commission, the remains possible in the present case to principle that laws shall not have say that the Community provision was retroactive effect applies with all its force retroactive. in criminal law (cf. Article 25 of the Italian Constitution). However, in other As to the second question branches of the law retroactive provisions can exist, even on fiscal matters, when The Commission refers to Article 6 of this is required by imperative Regulation No 974/71 which consists of considerations of the public interest. The a particularly wide delegation of powers Commission makes references to Italian given by the Council to the Commission. and German textbooks and case-law on The limits to that delegation are to be this point (p. 5 (1) and (2)). found in the very purposes of the system of compensatory amounts. In addition, Where Community law is primarily the regulation lays down a series of concerned with economic relationships, criteria which the Commission should

take into account. Amongst the detailed compensatory amounts (Judgment of 12 rules of application which the November 1974 in Case 34/74, Roquette Commission is required to adopt, the v France [1974] ECR 147) and fixing of compensatory amounts is recognizing the difficulties which would particularly mentioned (Article 6 (2)). arise from having varying compensatory This fixing, which is not a purely amounts, which might have tended to automatic calculation, therefore calls for provoke deflections of trade (Judgment an evaluation which must take into of 24 October 1973 in Case 5/73, account currency fluctuations and Balkan-Import-Export v Hauptzollamt changes in the levels of the prices of the Berlin Packhof, [1973] ECR 1091). products. Admittedly, the Commission should also take into account the Finally, the Commission refers to the interests of individual traders, but its opinion of the Advocate-General in Case major concern ought to be to avoid 46/75 concerning the problem at issue. 'abnormal price movements disturbing the normal development of the As to the third question conjunctural situation in the agricultural area' and 'disturbances in trade in Nor can the validity of the regulations agricultural products'. Finally, in setting concerned be called in question on the compensatory amounts, it is the ground that they introduce necessary to take into account Article 4 discriminations as regards Italian (a) (2), first paragraph, of Regulation No importers. 974/71, introduced by Regulation No When the stability of agricultural prices 509/73. The Commission took this is threatened, the monetary compen­ complex situation into account and satory amounts become necessary in performed the duty which had been order to compensate for the effects of placed upon it as part of the powers monetary measures on the prices of the conferred on it by the Council. basic products for which intervention prices are fixed. As regards the situation The fact of reducing the compensatory of importers of beef and veal in the amount by an adjusting amount does not different Member States, it is precisely run counter to the purposes of the absence of compensatory amounts compensatory amounts. On this point, which would bring about discrimi­ the Commission stresses the importance nations. These amounts do not introduce of Article 4 (a) (2) of Regulation No any discrimination because the 974/71 in this system. The purpose of application of them is based on objective that provision is to prevent imports from criteria, which are more particularly third countries below the world market defined in Articles 2, 3 and 4 of price. A further fact, however, is that the Regulation No 974/71. said provision presupposes that the import charge which, in the case of beef The Commission submits calculations and veal subject to 'ad valorem' duty, relating to an importation of meat into varies for each consignment of goods Italy and into the Federal Republic from imported, is calculated so as to determine third countries carried out on 22 March the level of the compensatory amounts in 1973 (Annex). intra-Community trade. As to the fourth question The Commission cites the case-law of

The Commission admits that the The particular application of the rounding-off rule to the beef and veal application of the criticised system can sector arises because of the existence of cause difficulties which it had already ad valorem duty on imports from third pointed out in the telex message of 7 countries on the value of the goods in December 1973 sent by the Director- fact imported. General for Agriculture to the Italian Permanent Representation. The flat-rate The existence of ad valorem duty would determination of the import charge is not present particular problems for the essentially, as are all evaluations of this application of Article 4 (a) if the kind, the taking of an average and it is compensatory amounts were only applied inevitable that the application of this to imports from third countries. method brings advantages to some and However, trade between Member States imposes sacrifices on others. must be taken into account and the

Law

1 By order of 22 January 1976, which reached the Court Registry on 26 January 1976, the Giudice Conciliatore has referred to the Court of Justice for a preliminary ruling four questions on the interpretation and validity of Regulation No 648/73 of the Commission of 1 March 1973 laying down detailed rules for the application of 'monetary' compensatory amounts (OJ L 64, of 9. 3. 1973, p. 1) and Regulation No 905/73 of the Commission of 23 March 1973 fixing the amount by which the 'monetary' compensatory amounts are to be adjusted (OJ L 92, of 7.4.1973, p. 1).

2 The questions have been referred to the Court in relation to an action between IRCA, the plaintiff in the main action, and the Italian revenue authorities. IRCA has claimed that the revenue authorities should be ordered

to repay a sum wrongly assessed for payment by reason of the fact that certain compensatory amounts with which IRCA ought to have been credited had been wrongly calculated.

3 The undertaking argued that when, on 22 March 1973, it imported 563 parcels of frozen meat and offals of bovine animals, the customs authorities applied the prescribed customs duty, namely Lit. 1 563 570, credited the undertaking with Lit. 1 506 780 by way of monetary compensatory amounts and, after subtracting this credit from the import charge, which in this case corresponded to the customs duty, claimed payment of the difference, namely Lit. 56 790.

4 The questions referred to the Court seek enlightenment first on whether the Community regulation on which the revenue authorities based their

Thus the two factors necessary for calculating the monetary compensatory amounts are fixed by the Commission so as to ensure that the system set up is applied in a prompt and uniform manner.

8 Next, Regulation No 649/73 of the Commission of 1 March 1973 fixing the 'monetary' compensatory amounts (OJ L 64, p. 7) in the form adopted and published, provides in Article 1:

'Without prejudice to the provisions of Article 4a (2) of Regulation (EEC) No 974/71 'monetary' compensatory amounts shall be arrived at as follows:

1. The basic amounts shown in Annex I for the Member State concerned

shall be multiplied by the coefficient shown in Annex II …'

IRCA v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

13 The reason why the importers and exporters of the different Member States are put in different situations is to be found not in the application of the system of compensatory amounts but in the circumstances which led to its introduction, namely the movements of national currencies beyond the limits of fluctuation authorized by international rules.

The very purpose of the system of compensatory amounts is to prevent these currency movements from disturbing the functioning of the common agricultural policy.

JUDGMENT OF 7. 7. 1976 – CASE 7/76

However it would be expecting too much to require the system of compensatory amounts to eliminate completely the differences in situation of importers or exporters in the Member States and to shelter them from all the consequences of the variations in the rates of exchange of the national currencies.

Moreover, although the system chosen may in certain cases place Italian importers in an unfavourable situation compared with importers of other Member States, the said system may, for the same reasons, have the reverse effect as regards exporters.

14 Therefore the validity of the regulations in question cannot be affected by the facts set out in the third question.

under Article 4a of Regulation No 974/71. These amounts do not reflect the value of specific goods.

Therefore, in the case of an importation of beef and veal of a value higher than the average of world-wide prices which determines the basic amount and the adjusting amounts, a difference would arise involving a requirement for the importer to pay a portion of the customs duties notwithstanding the fact that the true value of the goods ought, it is argued, to entitle him to a more favourable calculation of the compensatory amounts.

19 The whole system of monetary compenstory amounts is founded on the principle that these amounts are not based on the prices in fact paid for the goods, but on basic amounts fixed by the Commission from week to week.

Although this principle may bring about disadvantages in individual cases not only in the beef and veal sector, but as regards all the agricultural products concerned, it is nevertheless unavoidable because of the necessity of maintaining uniformity in its application and of ensuring that it is administered with the utmost possible despatch.

20 Moreover this principle is the one most in line with the purpose of the system, which is not to indemnify the parties concerned against the consequences of disturbances on the world currency markets, but to render the functioning of the common organizations of agricultural markets possible notwithstanding the fluctuations of the currencies of the Member States.

21 Furthermore an exception such as the one suggested by the plaintiff would meet with grave difficulties, since as regards intra-Community trade goods are valued according to criteria which are not uniform.

Moreover the previous rules on the same subject-matter confirm the foregoing and make it clear that the interested parties must for a long time have been aware of the needs of the machinery introduced.

25 It should be noted that the system of compensatory amounts was not introduced but only amended by Regulations Nos 509/73 and 648/73.

The last application of the previous system, namely Regulation No 450/73 of the Commission of 6 February 1973, fixing the monetary compensatory amounts for certain cereals, must have ceased to be effective by reason of the entry into force, on 26 February 1973, of the amendment to Regualtion No 974/71 made by Regulation No 509/73.

26 It was therefore necessary, in order that there be no discontinuity in the application of a system which had become essential to the functioning of the common agricultural policy, to adopt rules and to fix amounts for the period subsequent to that date.

In these circumstances Regulations Nos 648/73 and 649/73 could only provide that they were to apply with effect from 26 February 1973.

Moreover, as has just been stated, such a fixing of the compensatory amounts after the event was inherent in the nature of the system.

30 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable.

As these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT

in answer to the questions referred to it by the Ufficio di Conciliazione, Rome, by order of 22 January 1976, hereby rules:

1. With regard to monetary compensatory amounts, the fact that the factors necessary for their calculation are only determined after the period during which the said amounts have become

A. Van Houtte R. Lecourt

Registrar President

OPINION OF MR ADVOCATE-GENERAL WARNER

DELIVERED ON 22 JUNE 1976

My Lords, under Article 177 by the Guidice Conciliatore of Rome. In IBC v This case is concerned with the validity Commission, the Court held the action of a Regulation of the Commission dated inadmissible and did not need to deal 23 March 1973 fixing, or purporting to with the substantive arguments. Here fix, certain reductions to be made in the there is no question of the reference monetary compensatory amounts being inadmissible. Another difference is applicable in particular to trade in beef that, in IBC v Commission, a question as and veal. The case is in large part a to the possible invalidity of the replay of Case 46/75 IBC v Commission Regulation in so far as it was retroactive, (not yet reported) in which I delivered was raised too late to be considered at all, my opinion on 17 December 1975 and whereas here that question is expressly the Court delivered judgment on 27 referred to the Court by the Guidice January 1976. There is however this Conciliatore. important difference that, whereas IBC v Commission was an action for damages Your Lordships will remember that purportedly brought under Article 178 of monetary compensatory amounts (which the Treaty, the present case comes to the I will call for short 'm.c.a.'s') were Court by way of a reference ordered introduced by Council Regulation (EEC)