C-83/76

JUDGMENT OF 25. 5. 1978 — JOINED CASES 83 AND 94/76, 4, 15 AND 40/77

In Joined Cases 83 and 94/76, 4, 15 and 40/77

The undertaking BAYERISCHE HNL VERMEHRUNGSBETRIEBE GMBH & Co. KG, Gut Heinrichsruh,

BERND ADLEFF , sole trader, Grasslfing, The undertaking F. X. ZOLLNER KG, Regensburg, and CHRISTOF SCHWAB , agricultural engineer, Gut Schwaben,

Counsel: F. Modest, A. Heemann, J. Gundisch, G. Rauschning, K. Landry, W. Röll, B. Festge, H. Heemann, P. Wegemer, of Hamburg, with an address for service in Luxembourg at the Chambers of Felicien Jansen, Huissier de Justice, 21 Rue Aldringen,

and Johann Seidl, Regenstauf, represented by Messrs von Boetticher, Bernet and Partner, Munich, with an address for service in Luxembourg at the Chambers of Ernst Arendt, 34 B Rue Philippe II,

APPLICATION pursuant to the second paragraph of Article 215 of the EEC Treaty for damages in respect of the loss allegedly suffered by the applicants as a result of the effects of Council Regulation (EEC) No 563/76 of 15 March 1976 on the compulsory purchase of skimmed-milk powder held by intervention agencies for use in feeding-stuffs (Official Journal L 67, p. 18),

HNL v COUNCIL AND COMMISSION

THE COURT

composed of: H. Kutscher, President, M. Sørensen and G. Bosco, (Presidents of Chambers), A. M. Donner, P. Pescatore, Lord Mackenzie Stuart and A. Touffait, Judges,

Advocate General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT OF 25. 5. 1978 — JOINED CASES 83 AND 94/76, 4, 15 AND 40/77

8. As a result of those judgments the 3. The applicants are engaged in the Court, continuing the procedure in production and sale of chickens, these cases, sent the parties letters reeding of laying hens and production worded as follows: "The parties are of eggs. They claim that they have requested to supply all appropriate infor suffered damage by reason of the mation with a view to establishing increase in the price of feeding-stuffs as whether there is a direct and necessary a result of Regulation No 563/76. connexion between the provisions of that regulation and the damage claimed

5. The applications were lodged on 19 opinions on the effects of the invalidity August and 30 September 1976, 10 of Regulation No 563/76 and replied to January, 31 January and 6 April 1977 the questions put by the Court. respectively. By documents lodged respectively on 4, By orders of 10 November 1976, 31 22 and 23 November 1977, each of the January and 15 February 1977, the parties then adopted a viewpoint on the Court decided to join Cases 83 and replies given by the other parties. 94/76 and 4 and 15/77 for the purposes of the written and oral procedure. 9. In its reply lodged on 13 October 1977, the applicant in Case 40/77

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By order of 9 January 1978, the Court IV — Submissions and argu­ decided to join Case 40/77 to Joined ments put forward by the Cases 83 and 94/76, 4 and 15/77 for parties as a result of the the purposes of the oral procedure. judgments of the Court of 5 July 1977 declaring 10. After hearing the report of the Regulation No 563/76 to Judge-Rapporteur and the views of the be null and void Adovcate General, the Court then decided to hear at the hearing on 1 1. Serious breach of a rule of law and causal connexion between the breach February 1978 the observations of the parties in these five cases on the effects of that rule and the alleged damage of the invalidity of Regulation No (a) The applicants observe that the 563/76, excluding however the estimate concept of serious breach of a rule of of the damage. law as applied by the Court may be understood from two points of view, that of the provision and that of its II — Conclusions of the parties effects on those concerned.

JUDGMENT OF 25. 5. 1978 - JOINED CASES 83 AND 94/76, 4, 15 AND 40/77

In Case 94/76, the damage means that the Court recognized that corresponds approximately to the there was a particularly heavy burden declared annual profit. In Case 4/77 on the poultry industry for the benefit and Case 15/77, the damage represents of the dairy industry. approximately 20 % of the annual The applicants add, with regard to the profit. problem of "special sacrifice", that the The applicants point out, with regard to determining factor is not the number of the causal connexion, that no additional persons concerned but whether it is obstacles to the lodging of a claim for possible to distinguish them as a group damages should be set up once a regu from the community as a whole. This is lation has been declared null and void. so in the present case. The Court has It is only possible to require that, in explained that the financial effects of application of the general rules on the sale of surplus skimmed-milk causality applicable with regard to the powder had imposed a substantial law on the liability for damages of burden on producers of pig meat and public authorities, abnormal, in other poultry breeders.

breach of a rule of law. The fact that The applicants have drawn up, on the there has been a breach of superior basis of information from their rules of law is not as such sufficient to suppliers, tables according to which the fulfil that criterion. In view of the weak burden resulting from Regulation No basis for the acceptance of a principle of 563/76 is between DM 0.36 and DM law common to the Member States with 2.34 per 100 kilogrammes.

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In the cases which have hitherto been determine the extent of the damage brought before the Court and in which suffered. It is also necessary to examine the Community has been declared liable as a whole the policy pursued by the in principle what was involved was Community institutions in the poultry- either a law covering a special case meat and egg sectors. (Joined Cases 5, 7 & 13 to 24/66, Firma E. Kampffmeyer and Others v Com­ The Commission emphasizes that the mission of the EEC, judgment of 14 July judgments of the Court of 5 July 1977 1967 [1967] ECR 245: Case 30/66, do no more than state quite generally Firma Kurt A. Becher v Commission of that the burdens have been divided the European Communities, judgment of between the various agricultural sectors. 30 November 1967 [1967] ECR 285), Whether the damage alleged by the or a very limited category of persons applicants, which can only have arisen (Case 74/74, CNTA S.A. v Commission at the third or fourth link in the chain of the European Communities, judgment of causation, may be attributed with of 14 May 1975 [1975] ECR 533). certainty to the regulation declared null In the present case an almost incal­ and void is a quite different question. culable number of traders is concerned. Moreover, in applications of the present With regard in particular to the group kind there must be a direct causal of applicants, the Commission connexion, and this is lacking in the emphasizes that all poultry breeders and present case. egg producers are uniformly affected. There has therefore been no specific In order to corroborate its opinion as to damage nor "special sacrifice" but the the seriousness of the damage and the burden has been divided uniformly over causal connexion, the Commission the whole of an economic sector. determines any additional costs which In addition there has been no serious might arise from Regulation No 563/76 damage. In this respect it is necessary to with the aid of examples:

Per kg of chicken 3.5 Pf 2.5 Pf 2 Pf

The Commission concludes by stating no longer possible to ascertain any that any increase in price as far as final damage at the level of the selling prices. products are concerned is less than 1 % This finding is in addition confirmed by of the selling price. In these circum­ the fan that in the case of the products stances it is impossible to state that the in question the increase in price caused applicants have suffered serious damage. by the increase in the price of broken In fact, the effect of the additional soya beans is four times higher than that burden is ultimately so minimal that it is caused by the effect of the costs

JUDGMENT OF 25. 5. 1978 — JOINED CASES 83 AND 94/76, 4, 15 AND 40/77

resulting from the actual incorporation particularly clear infringement and a of skimmed-milk powder. manifestly grave violation of the basic It is in addition difficult to determine a content of a principle. posteriori the respective effects of the The Council considers that the proportion of soya and that of skimmed considerations upon which the milk on the increase in the price of obligation to purchase was based were feeding-stuffs for poultry. The not a priori erroneous from a macro- Commission has the impression that in economic point of view and were not in the Spring of 1976 the feeding-stuffs principle indefensible. Consequently, industry took advantage of the oppor­ there can be no question of serious tunity afforded by the rules relating to breach.

stances the applicants could have kept The Council adds that the adoption of their undertakings in operation. Regulation No 563/76 was an alibi to conceal other increases in price using (c) The Council notes that the the pretext of the obligation to meaning of serious breach has not purchase. It is necessary to exclude hitherto been specified in the case-law these increases from the calculation. To of the Court of Justice. It must be a the extent to which additional burdens breach which is particularly blatant, a result from the loss of the security and

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2. The possibility of the applicants' claim in addition that the system of passing on to their customers the effect levies applicable to the importation of of the charges resulting from Regu poultry-meat and poultry-meat products lation No 563/76 merely makes it possible to prevent imports from third countries from (a) The applicants in Cases 83 & 94/76 exercising pressure on prices. The have produced several sales contracts system has therefore no influence on and invoices from which they claim that imports from other Member States and it follows that before and after the entry in particular from the Netherlands into force of Regulation No 563/76 which are very competitive in the they obtained in principle the same poultry-meat sector. Moreover, the selling price for their pullets. increases in costs caused by the In addition they produced an experts' obligation to purchase were not taken report drawn up by Professor Friedrich into consideration when the levy was Hulsemeyer and Dr Siegfried Graser in fixed since the latter is only adjusted on November 1976 entitled "The Effects of the basis of variations in the difference the European Communities' Regulations between the price of forage on the on Skimmed-Milk Powder on the Community market and on the world Market in Pullets and Eggs in the market but not on the basis of the Federal Republic of Germany". It variations in other factors. follows from this report that in the pullet-breeding sector there is no (b) The applicants in Cases 4 and oligopolistic market structure. In fact, 15/77, who are egg producers, observe the report emphasizes the fact that the that, contrary to the prices of pullets widespread homogeneity of production and day-old chicks, the prices of eggs and the free access of competing foreign undergo great seasonal variations.

That of chicks of laying strains has not question can only be answered on the reacted to the alteration in the price of basis of abstract principles of economics animal feeding-stuffs it is possible to and industrial management. The conclude from this, on the basis of the applicants refer in this connexion to the laws of supply and demand, that the above-mentioned experts' report and to prices of those products could not have a supplementary report of 5 September

1977 on the effects of the Community entered into long-term outline regulations on skimmed-milk powder agreements for the conclusion of on the market in eggs in the Federal individual sales contracts relating to all Republic of Germany, in the present products of their breeding farms, with case, the factors which have determined Franz Zimmerer, a slaughterer, it must the development of the price of eggs in abide by the results of the negotiations 1976. It follows from that report that on prices conducted by the management throughout 1976 the prices of eggs were of that association of producers with higher than those in 1975. That report that slaughterer. Since that situation shows moreover that that increase in existed as early as 1976, the applicant is prices must be attributed to a reduction unable from a legal viewpoint to sell its in supply on the market, a reduction in fattened poultry to slaughter-houses the eggs for hatching laid by laying other than Franz Zimmerer. strains and a reduction in the chicken hatch of laying strains. The experts Quite apart from that, the applicant, summarized their remarks as follows: extremely vulnerable from the economic point of view, actually found it "The results of the analyses of the impossible in 1976 to sell its products to development of supply and prices on the market in eggs in the Federal Republic other slaughter-houses.

1975, which came into consideration within a — the definition of the conduct of reasonable radius of 100 kilometres traders in the market in eggs as that were no higher than those offered by of autonomously adjusting the the slaughter-house Franz Zimmerer quantities of products, and, finally, and since transport would therefore in — the completely inelastic reaction of every case have given rise to harmful the domestic supply of eggs to the additional costs for the applicant. temporary increase in the price of In addition negotiations have been animal feeding-stuffs caused by the conducted in vain with the slaughter Community rules on skimmed-milk house Franz Zimmerer inter alia by the

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In fact it is not known what other factors produced by the applicant in Case have influenced the individual formation 83/76 for the purpose of comparison with the proceeds of sale for the period of prices in the contractual relationship from March to September 1976. The between the applicant and its customers. applicant in Case 94/76 has only The Commission claims that if the produced two invoices from the period various accounts produced by the outside the period of application of applicant are examined the "rise and Regulation No 563/76. fall" of the selling prices, which obviously has nothing to do with the In the field of egg production the market general situation as regards costs, is situation is fundamentally different. In astonishing (see for example the invoice this field there is in fact extraordinarily of 7 May 1976: DM 1.99 per keen competition between egg kilogramme, 3 July 1976: DM 1.93 per producers and their market position in kilogramme and 14 September 1976: relation to their customers is weak.

The selling In fact exports of eggs in shell increased prices of the slaughter-houses increased by 21 % in 1976 in comparison with by 9.3% compared to 1975. These 1975 and accordingly relieved the returns at least suggest that the rise in Community market. The additional the cost of feeding-stuffs affected the amounts fixed in 1976 (see Article 8 of selling price. Regulation No 2771/75, Official The price policy pursued by the Journal L 82 of 1 November 1975, p. Community in the poultry-meat sector 49) in the case of eggs and egg products contributed substantially to those were permanently at a high level in returns and therefore enabled or in any 1976 and in this way had a prohibitive case facilitated the passing on of costs. effect on imports from third countries. The Commission is in a position to

influence present supply by means of feeding-stuffs albeit for only one day, export refunds and the application of egg production falls by 20%; the the import mechanisms provided for in resulting loss to the applicants would the common organization of the market have been substantially higher than and thus indirectly to influence price accepting the price increase charged by formation. These instruments were the manufacturers of feeding-stuffs; to intensively used by the Commission change from the feeding-stuff of one throughout the period of the campaign supplier to that of another might also for the use of skimmed-milk powder. lead to a fall in production; manufac While exports of chickens were stagnant turers of feeding-stuffs which had in 1974 and 1975, there was a rise of increased their prices in fact account for 34 % in 1976. In addition to the levy an approximately 80 to 90 % of the additional amount was fixed for imports production of industrially manufactured from all third countries throughout compound feeding-stuffs in Bavaria; for that reason and because of the 1976 so that in 1976 a total of only approximately 5 000 tonnes of chicken considerable supplies of feeding-stuffs was imported into the Community. required by the applicants it was These imports are minimal in impossible to change from these large comparison with the production of the manufacturers of feeding-stuffs to other Community, which amounts to 2.2 small manufacturers of feeding-stuffs; million tonnes. the applicant in Case 94/76 protested in vain against the increases in the price of (e) The Council states that when it feeding-stuffs. adopted Regulation No 563/76 it The applicants considered that it was assumed that the purchase price of impossible to claim repayment from skimmed-milk powder would be their suppliers of feeding-stuffs of the included as a cost factor in the price of additional costs imposed upon them. feeding-stuffs and would finally be passed on to the consumer. If all traders In a statement of 6 October 1977 the without any distinction had Commission provided for repayment of compulsorily to accept a higher cost the securities only under certain factor for some of their feeding-stuffs it conditions. However, the applicants' is logical to expect these higher costs to suppliers of animal feeding-stuffs did be passed on to the final consumer. not waive the security deposited.

In view of used by them poultry breeders cannot the relatively strong market position of build up large reserves; it would only be the applicant in Case 83/76 the possible to store the feeding-stuffs for a appraisal in this connexion might period longer than two weeks by however be slightly different. The suffering great disadvantages through Commission adds that the question of the segregation of the components the passing-on of costs between under thereof and the decline in quality; if for takings belonging to a group is quite example laying hens are deprived of different.

The Commission and the Council the principle of wrongful act or consider that Case 114/76 shows in omission is abandoned the criterion of addition that there were cases in which serious breach of a rule of law however the other party to a contract was able to acquires particular importance. prevent costs being imposed on it. In addition the Commission observes that (c) The Council takes the view that in those cases in which the security according to the present state of the law deposited is repaid to those concerned it is necessary to assume that an as a result of the fact that Regulation application for damages is only well No 563/76 has since been declared to founded if there has been a wrongful be null and void, subsequent parties to act or omission. In this connexion it contracts can now claim the repayment refers to the grounds of the decision in from their suppliers of costs imposed on the judgment of the Court of 31 March

breach. Community must have been guilty of a wrongful act or omission. According to In case the Court of Justice considers that case-law, it is possible to conclude that the Council has been guilty of a that there has been a wrongful act or wrongful act or omission through omission where a serious breach of a infringement of the principle of pro superior rule of law for the protection portionality, the Council takes the view of individuals has occurred. that since in the present case it is In the present case, however, there are necessary for a sufficiently serious additional features which confirm that breach to have occurred only a serious there has been a wrongful act or wrongful act or omission may be taken into consideration. The fact that in the omission because serious opposition had been shown to the regulation in field of economic policy simple decision question as early as the preliminary in the negative or affirmative are hardly ever involved confirms this view.

If 1977.

The Court of Justice had requested the 2. Following the judgments of the Commission and the Council to supply Court of Justice of 5 July 1977 the necessary explanations on the costs declaring that Regulation No 563/76 of the dehydration of skimmedmilk and was null and void, the applicants in on the costs of denaturing in connexion Joined Cases 83 and 94/76 and 4 and with the compulsory use of skimmed- 15/77, represented by J. Gündisch, the milk powder for animal feeding-stuffs applicant in Case 40/77, represented by and to compare those costs with the J. Kornig, the Council, represented by value of liquid milk as a feeding-stuff. its Legal Adviser, B. Schloh, acting as Agent, and the Commission, The applicants stated with regard to this represented by its Legal Adviser, question that the three items of

poultry. In the first case the selling price Commission. The applicants point out fixed by the Community for this method in addition in this connexion that the of use determines the market price. The protein content of maize is only 7.5 %. selling price during the period in Since the feeding-stuffs only contain question amounted to 52 units of between 40 % and 48 % maize, the account per 100 kilogrammes of protein contained in this cereal skimmed-milk powder. In the second constitutes only a very small proportion case the market price of the product of these feeding-stuffs.

kilogrammes. The price of soya is at was in force had made it possible to present 25 units of account per 100 mitigate the difficulties which had arisen kilogrammes. in the poultry industry as a result of the The Advocate General delivered his obligation to purchase; these difficulties opinion at the hearing on 7 June 1977. were on the contrary intensified by

2 Since the cases have been joined for the purposes of the written and oral procedure, they should continue to be joined for the purposes of the judgment.

3 In three judgments of 5 July 1977 in Case 114/76 (Bela-Mühle), Case 116/76 (Granaria) and Joined Cases 119 and 120/76 (Ölmühle Hamburg AG and Firma Kurt A. Becker) ([1977] ECR 1211 et seq) referred to the Court of Justice for preliminary rulings the Court declared that Regulation No 563/76 was null and void. It reached this conclusion on the ground that the regulation provided for the obligation to purchase at such a dispro­ portionate price that it was equivalent to a discriminatory distribution of the burden of costs between the various agricultural sectors without being justified as a measure in order to obtain the objective in view, namely the disposal of stocks of skimmed-milk powder.

JUDGMENT OF 25. 5. 1978 — JOINED CASES 83 AND 94/76, 4, 15 AND 40/77

4 The finding that a legislative measure such as the regulation in question is null and void is however insufficient by itself for the Community to incur non-contractual liability for damage caused to individuals under the second paragraph of Article 215 of the EEC Treaty. The Court of Justice has consistently stated that the Community does not incur liability on account of a legislative measure which involves choices of economic policy unless a sufficiently serious breach of a superior rule of law for the protection of the individual has occurred.

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7 This is not so in the case of a measure of economic policy such as that in the present case, in view of its special features. In this connexion it is necessary to observe first that this measure affected very wide categories of traders, in other words all buyers of compound feeding-stuffs containing protein, so that its effects on individual undertakings were considerably lessened. Moreover, the effects of the regulation on the price of feeding- stuffs as a factor in the production costs of those buyers were only limited since that price rose by little more than 2 %. This price increase was parti­ cularly small in comparison with the price increases resulting, during the period of application of the regulation, from the variations in the world market prices of feeding-stuffs containing protein, which were three or four times higher than the increase resulting from the obligation to purchase skimmed-milk powder introduced by the regulation. The effects of the regu­ lation on the profit-earning capacity of the undertakings did not ultimately exceed the bounds of the economic risks inherent in the activities of the agri­ cultural sectors concerned.

8 In these circumstances the fact that the regulation is null and void is insufficient for the Community to incur liability under the second paragraph of Article 215 of the Treaty. The application must therefore be dismissed as unfounded.

Costs

9 Under Article 69 (2) of the Rules of Procedure the unsuccessful party must be ordered to bear the costs. Since the applicants have failed in their applications they must be ordered to pay the costs.

Kutscher Sørensen Bosco

Donner Pescatore Mackenzie Stuart Touffait

Delivered in open court in Luxembourg on 25 May 1978.

A. Van Houtte H. Kutscher

Registrar President

OPINION OF MR ADVOCATE GENERAL CAPOTORTI DELIVERED ON 7 JUNE 1977 (see [1977] ECR p 1223)