C-125/77

Mr President, and a split-up of the group is apparently Members of the Court, under way. Isoglucose is also manu­ The cases which concern us today are factured by the Belgian company G. R. about a product known as "isoglucose" Amylum N.V., the applicant in one of which we have already encountered in the actions for damages (Case 116/77) Case 101/76 (Koninklijke Scholten- with which I have to deal in my opinion Honig N.V. v Council and Commission which follows this one. This company of the European Communities, judgment also commenced production early on, in of 5 May 1977 [1977] ECR 797). February 1972, and likewise enlarged its plant. In addition Royal Scholten- Isoglucose is a new sweetener in liquid Honig (Holdings) Limited, a subsidiary form which originated in the United of Koninklijke Scholten-Honig N.V., States at the beginning of the seventies, decided in 1973 to build a plant for 100 kilograms of which are approxi­ manufacturing isoglucose with an mately equivalent to 71 kilograms of annual capacity of 85 000 tonnes and white sugar. It is manufactured from commenced building at Tilbury in starch which has been obtained from October 1974. Lastly the English maize or wheat or potatoes. In the company Tunnel Refineries has in Community the relevant raw material is recent years invested a considerable principally maize and to a lesser extent amount of capiul in the manufacture of other cereals and the recorded isoglucose in connexion with an existing processing figures vary between 70 % starch factory. Part of the capacity thus and 85 % in the case of maize and created has apparently been in use since 15% to 30% in the case of other January 1976. cereals. However from the autumn 1977 In the case of the manufacture of onwards — as we were assured — only maize was used as the raw material isoglucose two groups of Community 50 % of which had to be imported provisions are material and their validity because Community production falls has to be examined in the present short of requirements. Isoglucose is proceedings. One deals with the used in the industrial production of granting of production refunds in connexion with the manufacture of foodstuffs where it can replace liquid starch products, the other with taking sugar. isoglucose out of the organization of In the Community isoglucose is manu­ the market in sugar and laying down factured on the one hand by the special common provisions for this Netherlands company Koninklijke product, in particular the imposition of Scholten-Honig which, after obtaining a a production levy on its manufacture. licence in 1972 and building an experimental plant, commenced On this point — it was in pan the issue production in September 1973 and in Case 101/76 — the following increased it in September 1975 after detailed information is necessary: enlarging its factory. However in the Article 11 of Regulation (EEC) No meantime the Scholten group, as we 2727/75 of the Council of 29 October heard during the oral procedure, has 1975 (Official Journal 1975, L 281, p. become insolvent as from 7 March 1978 1) on the common organization of the

Article 11 (3) provides that the Council, The organization of the market in sugar acting by a qualified majority on a contains rules relating to quotas which proposal from the Commission, shall apply unul the end of June 1980. As adopt rules for the application of this provided for in these rules each article and fix the amount of the Member State has a basic quota which production refund. The Council did so has to be allotted to the producers. A by means of Regulation (EEC) No sales and price guarantee applies up to 2742/75 of 29 October 1975 (Official the amount of the basic quota (A Journal 1975, L 281, p. 57) on sugar): national intervention agencies production refunds in the cereals and buy the sugar at the intervention price, rice sectors which was amended by which is usually above the world price. Council Regulation (EEC) No 1862/76 There is also a maximum quota (B of 27 July 1976 (Official Journal 1976, sugar) which has to be fixed every year L 206, p. 3) which entered into force on and is expressed as a percentage of the 1 August 1976. The latter regulation basic quota. There is also a price provided for an increase of production guarantee for it — in the 1976/77 and levies for the 1976/77 marketing year 1977/78 marketing years the maximum because the threshold price for maize quota amounted to 135 % and it was had been increased. However in the reduced to 127.5% for the 1978/79 case of starch products intended for the marketing year. However producers are manufacture of isoglucose — and this is required to make a contribution to the one of the issues in the present cases — the rates of the refund for the 1975/76 costs of intervention and expon — A and B sugar can be exponed with a marketing year were maintained and refund — and the total losses incurred refunds were no longer granted with effect from 1 August 1977. This was by bringing on to the market sugar which exceeds consumption are divided done in such a way that the refund paid by the competent authorities of the by the quantities of B sugar produced. Member States to all starch manufac­ However the total contribution may not turers was recovered to the extent to amount to more than 30 % of the

Isoglucose was taken out of the organi consequently cannot be implemented by zation of the market in sugar because the national Intervention Board. Several special provisions were laid down for it reasons based on Community law were by Council Regulation (EEC) 1110/77 put forward in support which must be of 17 May 1977 (Official Journal 1977, considered later in detail. The plaintiffs L 134, p.1). Common provisions for relied in particular on an infringement isoglucose, which amounted virtually to of the prohibition of discrimination in a mini-market organization, were laid Article 40 and violation of the objectives down in Council Regulation (EEC) No of Article 39 of the EEC Treaty and 1111/77 of 17 May 1977 (Official also of the principle of proportionality. Journal 1977, L 134, p.4) which was In the Netherlands case the defendant adopted on the same day. It contains in the main action served on the provisions on trade with third countries, plaintiff, the Koninklijke Scholten- import levies and export refunds. But its Honig N.V_, in December 1976 a most important provisions, which have statement of account of the production special relevance in the present cases, refunds for processing maize into starch introduced a production levy for during the period from 1 August to 31

It Council has in the meantime extended this limitation to five units of account takes the view that the provisions of Community law upon which the until the expiry of the rules relating to statement of account is founded are quotas, that is until 1980. Implementing invalid because of failure to give a rules for applying the production levy statement of reasons and infringement were laid down in Commission Regu of the prohibition of discrimination. It lation (EEC) No 1468/77 of 30 June also submits that there has been misuse 1977 (Official Journal 1977, L 162, p. of powers and a breach of the principle

KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN

lation (EEC) No 2742/75 a valid change in the system of production regulation? refunds with the aim of helping the 2. Is Council Regulation (EEC) No sugar industry which aim was not 1111/77 a valid regulation? and is notproper to Regulation (EEC) No 2727/75 on the common 3. Is Regulation (EEC) No 1110/77 a organization of the market in valid regulation?" cereals?

OPINION OF MR REISCHL — CASE 125/77

Case 145/77. The Council doubts 1862/76 which was adopted for the whether this reference for a preliminary purpose of amending Regulation No ruling is admissible, because the court 2742/75, whereby the production refund for products intended for the making the reference has simply reiterated the plaintiff's complaints, that manufacture of isoglucose was left for is to say, it has not made any selection the 1976/77 marketing year at the from them having regard to the previous year's level, and was not therefore increased as it was in the case arguments put forward by the parties, and also has not stated clearly which of other products, and which provided facts in this case may be assumed to that as from the 1977/78 marketing have been established. year a refund would no longer be

lation No 2158/76. that a request for a preliminary ruling should deal thoroughly with the circum stances of the case and the position 1. As far first of all as validity reached in the dispute and if possible concerned there is thus in essence only give the reasons why the questions are one matter to consider since — on the referred to the Court. But there is no whole — in the case of Regulation No express provision for this anywhere and 2158/76 no specific reasons have been the present case is not the first in which advanced for its invalidity.

The absence of any analysis of the parties' submissions (a) The formal validity of the regu should not therefore give us cause for lation is called in question on the declaring the reference for a preliminary grounds that the statement of the ruling in Case 145/77 — and perhaps reasons upon which it is based is inad the reference framed in the same way in equate, that it makes no reference to the Case 103/77 — to be inadmissible. opinion of the European Parliament

which is required under Article 43 (2) of GmbH B.J. Stolp v Einfuhr- und the EEC Treaty and that isoglucose Vorratsstelle für Getreide und Futtermittel manufacturers were not properly [1975] ECR 421, at p. 435 — that in consulted before its adoption. The the case of legislative measures the following are my detailed observations requirements for carrying out the duty on this argument: to give a statement of reasons are less stringent if part of an entire system is (aa) The plaintiff in the main action, under consideration.

Fur expected than an indication of the thermore it must not be forgotten — general situation and of the general and this refers to the argument that the objectives which it seeks to attain. It Community has abruptly altered its cannot also be said in the present case consistent refund policy — that that the objectives are to be inferred isoglucose is a new product, which only from the rules relating to the refund, appeared on the market in appreciable contained in Regulation No 2742/75, quantities in 1976, and that since 1974 since Regulation No 1862/75 does not there have been indications of efforts to refer to the said regulation but is abolish the refunds or at least to reduce intended to amend it. Furthermore it is them considerably. important to note that the refund policy With reference to this argument it must has since 1967 applied indiscriminately first of all be conceded that the recitals to all starch manufacturers and that it in the preamble to Regulation No can be inferred neither from the recitals 1862/76 are not in fact drawn up in in the preamble to Regulation No 2727/75 — reference is made in this great detail; they actually contain the

On the production levy was deemed to be right. other hand I take the view that the In answer to this the Council and the reference to the objectives of the rules Commission call attention to the fact — relating to the refund is sufficient if one inter alia by referring to the opinion in follows the arguments in the Advocate Case 78/74 Deuka, Deutsche Kraftfutter General's opinion in Case 78/74 and

the relevant case-law to date (judgment market, can be found to be the principal of 13 March 1968 in Case 5/67 W. Bern justification for the rules relating to GmbH & Co. v Hauptzollamt München refunds, it must accordingly follow that [1968] ECR 83; judgment of 20 June refunds for isoglucose, which is not 1973 in Case 80/72 N.V_ Koninklijke exposed, or not yet exposed, to a large Lassiefabrieken v Hoofdproduktschap extent to such competition, were not voor Akkerbouwprodukten, [1973] ECR included in the system established by the 635; judgment of 18 March 1975 in rules. Case 78/74 Deuka, Deutsche Kraftfutter In these circumstances the exclusion of GmbH B.J. Stolp v Einfuhr- und isoglucose from the rules relating to Vorratsstelle für Getreide und Futtermittel refunds did not in fact call for any [1975] ECR 421 and judgment of 23 special justification and the validity of February 1978 in Case 92/77 An Bord Regulation No 1862/76 can therefore Bainne Co-operative Limited v The scarcely be called in question with Minister for Agriculture, not yet reference to the requirements of Article

It considers that such an the one relevant in these proceedings. opinion is necessary because the said The preamble to Regulation No regulation is not to be regarded as a 2727/75 refers to the special market rule for the application of Article 11 of situation for starch, which might make Regulation No 2727/75 within the the production refund appear to be meaning of that Article. In fact it has exceeded the limits of the authorization appropriate. It can no doubt be inferred from this that refunds for the manu granted in that article, since Article 11 facture of isoglucose have not been mentions production refunds for specific included in the objectives of the rules, products quite generally, and does not since isoglucose, even if it is obtained provide that the Council may adopt from starch, being a sweetener in the different rules according to the use for which the starch was intended. proper sense of that word, does not form, part of the starch market. The It is however scarcely possible to accept preamble to Regulation No 2742/75 is this line of thought either.

This between maize starch, riсе starch, cannot — if a too narrow definition of potato starch and substitute chemical the concept of "implementing rules" is products However if the creation of the to be avoided and in this connexion I capacity to compete with the products refer inter alia to the judgment of 30 of the chemical industry, especially the October 1975 in Case 23/75 Rey Soda v petrochemical industry, which can buy Caisa Conguaglio Zucchero [1975] ECR raw materials cheaply on the world 1279 — be regarded as a fundamental

change of policy in the field of refunds made of a visit by officials to an on which the other Community isoglucose factory. This thereby ensured institutions had to be consulted. Further that some effect at least was given to more reference can be made to what has the interests of the parties concerned already been stated about the meaning before the new rules relating to the and purpose of the rules relating to refund were settled. refunds. Thus it emerges from the recitals in the preamble to Regulation (b) In addition the validity of Regu No 2727/75 that the rules relating to lation No 1862/76 is also challenged refunds have been laid down with due upon grounds relating to substantive

No 2727/75. turers, who continue to benefit from the Since no provision has been made for production refund, they have been consulting Parliament on the discriminated against, and in this implementing rules within the meaning connexion they also have in mind the of Article 11 of Regulation No 2727/75 effects of the new rules relating to the and of Article 9 of Regulation No refund on by-products such as feeding 1418/76 — these provisions laid the stuffs and corn oil.

measures are being taken. Furthermore starch are the same undertakings and contact was definitely maintained with that there cannot therefore be said to be the interested parties. It was stated discrimination against different during the proceedings, without being producen, because our considerations challenged, that since June 1976 there must at least be based on economic has been an exchange of views with the units. I will examine this problem in starch manufacturers and mention was another connexion, that is to say, the

to be any discrimination against starch compensatory measures were adopted. manufacturers because isoglucose and There were grounds for doing so, starch are not products which compete namely that there had been production with each other. In this connexion refunds since 1967, that there had been no announcement that the refund in naturally the main products are taken respect of the manufacture of products and not for instance the by-products which are also obtained in the manufac­ competing with non-chemical products might be discontinued and also that no turing process and consequently benefit indication could have been inferred indirectly from the rules relating to the from Regulation No 2727/75 of any levy. change in the refund policy. Moreover as far as concerns the However the Community institutions reference to the fact that rules relating answer this with good reason by to the refund continue to apply in their pointing out that a certain form of unamended form to glucose manufac­ transitional rules was adopted in that turers, it is also important to bear in the refund for the 1976/77 marketing mind in this connexion that isoglucose year contined at the old rate. Having and glucose are not normally in regard to current agreements and competition with each other. In any commitments to deliver which had been case it seems to me to be convincing entered into this could in fan appear to that owing to the considerable be sufficient. There were scarcely any difference in the sweetening properties grounds for measures of adjustment or each product must be assumed to have compensatory measures going beyond its separate field of application and that this.

Indeed if attention is focussed on the competitive with synthetic substitute refund rules which originaly applied — products. As I have already mentioned according to Article 11 of Regulation this prerequisite did not apply to No 120/67 they were not optional — it isoglucose. No one could therefore rely is of primary importance that according on the optinal rules relating to refunds to the recitals in the preamble to the being maintained in force just for a regulation they were adopted because of product of that kind. the special situation on the market in From the standpoint also of legal cereal and potato starches and of the certainty the existence of a defect which need to keep prices for those products might make Regulation No 1862/76 competitive with prices for substitute appear to be invalid can therefore

But in fact — as can be beginning to be prudent when making inferred from Regulation No 1111 /77 — capital investments. They could not in it was support measures for the sugar fact assume that a set of rules laid down industry that were involved. mainly for other purposes would remain Considerations which apply to unamended in a sector which might competition between isoglucose and create difficulties for the sugar market sugar must be regarded as having no and there was even less justification for relevance to rules laid down for the this assumption as the refund policy had implentation of the common organi any way undergone substantial change zation of the market in cereals.

Since such from Regulation No 665/75, were only considerations concern the very essence optional at that time. Moreover it was of the rules relating to the refund they quite clear that for this period the in fact fall within the scope of the refund was intended — this emerges common organization of the market in from the recitals in the preambles to cereals. However in addition to this the Regulation No 1955/75 and Regulation view also seems to me to be tenable that No 2742/75 — to make starch products when adopting agricultural measures —

and implementing rules laid down No 2158/76 production refunds for pursuant to Anide 11 of Regulation isoglucose, which were granted during No 2727/75, which in the final analysis the period from 1 August to 3 has its origin in Article 43 of the Treaty, September 1976, are also to be are such measures — it must be recovered. considered lawful to take into account the effect on sectors other than those It is in any case dear that there are no directly considered, and in the present legal misgivings due to this regulation cases even the fact that the retention of having retroactive effect which militate the production refund in the case of against the administrative rules of Regu isoglucose would have amounted to lation No 2158/76 being applied in this discrimination against sugar manufac

7). In that case it was held in connexion which entered into force on 1 August with the concept "misuse of powers" 1976 and that the direction to the that where a decision pursues more than Member States to the effect that the one aim, even if an unjustified ground is amounts of the refund, as far as they included among the valid ones, this concern isoglucose and exceed the would not make it invalid for misuse of permissible limit, are to be recovered powers, provided that it does not can also certainly be inferred from this abandon attainment of the main aim.

invalid. Nos 1110/77 and 1111/77. These regu lations took isoglucose out of the organi 2. After that for the purpose of inter zation of the market in sugar and preting Regulation No 2158/76 — part introduced a production levy on it. In of the examination of its validity must this connexion it is important to note no doubt also be carried out Írom a that the levy fixed in the first instance particular angle — the following brief for a period of one year for isoglucose observations must be made at the end of at a lower level than for B sugar — this first section of my investigations: namely five units of account per 100 Article 4 of the regulation expressly kg —, pursuant to a recently adopted states that it shall enter into force on 3 decision of the Council, shall apply until September 1976, but shall apply from I the expiry of the rules relating to quotas August 1976 It follows quite clearly of the organization of the market in from this that pursuant to Regulation sugar, that is until 1980.

Firn of all as far as concerns the even 1 000 000 tonnes in by 1980, Community sugar market, following answer to which the plaintiffs express several years when sugar was scarce on the opinion that the expansion of it and also on the world market, its own production capacities is already slowing production, to which are added imports down because of the lapse of the at guaranteed prices from African, production levy. In fact from the middle of 1976 to the middle of 1977 75 000 to Caribbean and Pacific countries amounting to about 1.3 million tonnes 88 000 tonnes of isoglucose were in fulfilment of obligations under the produced — calculated on the basis of Lomé Convention which remains in the dry matter — which corresponds to force until 1980, has been large in about 2 to 3 % of the entire production recent marketing years. The sugar of starch. One plaintiff gave as its actual sales 112 000 tonnes for 1977 and market is confronted with stagnant or 154 000 tonnes for 1978. even falling sugar consumption which at about 9.3 million tonnes per year is in Isoglucose arrives on the market in the region of the basic quota. liquid form. This can be seen as a disad­ Consequently the 1976/77 marketing vantage because it has to be kept at a year produced surpluses of 1.7 million particular temperature and is more tonnes in spite of small yields per difficult and expensive to transpon than hectare attributable to the drought. In sugar. The advantages enjoyed by the 1977/78 marketing year, with the isoglucose were stated to be inter alia production of white sugar reaching that it is rich in natural fructose and 11.086 million tonnes — not counting C colourless, that it has a neutral taste sugar — and taking account of ACP which brings out the flavour of fruits sugar imported into the Community, a and has a high degree of solubility and surplus of 2.6 to 2.7 million tonnes is to that when it is stored it is not exposed be expected. In such circumstances and to the risk of infection from microbes. in view of the fall in world prices The price of isoglucose is clearly considerable sums of money are needed dependent upon the price of sugar but to finance exports: thus in the 1977/78 appears to be a few per cent below the marketing year the cost was first price of liquid sugar; figures of 5 to calculated at 240 to 250 units of 7 % or even 10 to 13 % have been account per tonne and recently at 220 mentioned. In this connexion the disad­ units of account per tonne. The effect vantages which have been mentioned of the surplus is also that market prices and the fact that isoglucose is a new are approximately the same as the product are relevant. Furthermore in intervention prices or only slightly this context attention was drawn to the above them. somewhat lower sweetening properties, As far as isoglucose is concerned the which are however disputed, and to the production capacities, expressed in fact that two materials have to be stored white sugar equivalents, at the end of simultaneously by the manufacturers, 1976 have been estimated by one the specific reasons being that plaintiff at 70 000 tonnes, by the isoglucose is regularly mixed with sugar

and that inter alia the sweetening prop Finally mention must also be made in erties are greater if there is a mixture this connexion of the fact that than would be arithmetically expected. according to the statements of the It is not disputed that isoglucose can Community institutions isoglucose is only replace sugar in the industrial field manufactured in the Community by five which accounts for about half of or six modem undertakings of the most consumption. To what extent isoglucose convenient size and in the ben possible is expected to oust sugar from this field locations. On the other hand sugar remained of course a controversial issue. manufacturing in the 1976/77 The isoglucose manufacturers adhere to marketing year was spread over 100 the view that at the present time there is undertakings with more than 200

The Community isoglucose affects the manufacturers institutions on the other hand submit concerned at all. There are grounds for that the liquid sugar market is not the doubting whether it does in view of the only criterion since pan of the sugar assertion of some of the plaintiffs that bought by the industry is solid sugar the lapse of the production levy itself is which it liquifies itself. They point out making the manufacture of isoglucose that the use of liquid sugar is on the unprofitable and forcing them to stop increase — in the United Kingdom it production. If this were the case, if already accounts for 16 % of isoglucose therefore were no longer consumption — and that it is certainly being manufactured because of the lapse not essential, especially in the drinks of the production refund, the rules industry, to mix isoglucose with liquid relating to the levies would in fact not

The and a forecast by a sugar manufacturer plaintiff Amylum has not adduced any of an isoglucose market of 1.5 million evidence to this effen and the plaintiff tonnes. Tunnel Refineries only mentions a

European Parliament (Official Journal correspondence from June 1976 to May 1977, C 93, p. 14) which shows that 1977 between the Community Parliament thought it advisable to institutions and the undertakings extend to isoglucose the treatment concerned and also a visit by officials of applicable to sugar. In the view of this the Commission to an isoglucose plaintiff the Community legislature is factory. On the other hand it is obliged according to Article 190 of the important to bear in mind in this connexion that the Economic and Social EEC Treaty to give a statement of the reasons why it has not acted upon the Committee which has the specific opinion. There is no such statement of function of taking due account in the reasons in the present cases. legislative process of the interests of the business circles involved was in any case In my view we cannot accept this consulted. (Official Journal 1977, C 77, argument. The predominant reason for p. 18). this is not so much the fact that the Regulations Nos 1110/77 and 1111/77 Council has not completely disregarded cannot therefore be said to be vitiated the opinion of the European Par­ liament; the decisive factor on the by any formal and procedural defects. contrary is that, although the duty to 4. The examination of the substantive consult is laid down by Article 43 of the arguments submitted concerning the Treaty, it certainly does not follow that validity of the two said regulations is the opinion given must be considered or more difficult and covers a wider area. that if it is disregarded specific reasons for this must be stated. This point was (a) In this connexion I turn first of all settled early on by the case-law of the to the question whether the Council Court in similar circumstances in the could adopt Regulation No 1111/77, context of the Treaty establishing the which is expressly based on Articles 42

and 43 of the Treaty and refers to the processed product is a material factor. objectives of Articles 39, as a measure However since in the case of isoglucose, relating to agricultural policy or as we have heard, the costs of the raw whether it can be said against this that materials account for 50 % of the entire isoglucose is not an agricultural product costs there can indeed be scarcely any within the meaning of the Treaty. doubt that within the meaning of the In this connexion one of the plaintiffs Treaty isoglucose is an agricultural relies on the opinion of the European product of first-stage processing and Parliament which has already been that the Community institutions are mentioned and which describes accordingly empowered to lay down isoglucose as an industrial product.

In any case into industrial products. the Council's contention that it must be possible to introduce a charge under When considering this question it is in Anide 43 if there is already a charge of my view important to bear in mind that this kind on competing products seems isoglucose falls within tariff headings to me to be tenable in this connexion. 17.02 and 17.05 of the Common Customs Tariff. No problems arise on (b) It was then also submitted that the this account in the case of the first tariff revenue from the production levy on heading because from the very isoglucose could not be treated as "own beginning it was set out in Annex II. resources" within the meaning of As far as concerns tarif f heading 17.05 Council Council Decision of 21 April it is true that it was not inserted in the 1970 (Official Journal, English Special list in Annex II until the adoption of Edition 1970 (I), p. 224), since neither Regulation No 7a of the Council of 18 the requisite conditions, of subpara December 1959 (Official Journal, graphs (a) or (b) nor of the last English Special Edition 1959-1962, p. paragraph of Article 2 are fulfilled.

It must, I admit, be 185/73 Hauptzollamt Bielefeld v Offene conceded that in the present cases Handelsgesellschaft in Firma H. C. König Article 2 (b) of the said Council (1974] ECR 607) that the number of decision, which only applies to customs operations is not the criterion for duties, and the last paragraph of that determining the concept "first-stage article, which makes compliance with processing" and that the ratio between the procedure prescribed by Article 201 the cost of the basic product and the of the Treaty a prerequisite, do not

originally in the organization of the It is in my view advisable at the market in sugar and taken out of it beginning of the examination of this because a special set of rules was complaint to recall that the decided adopted for it. Furthermore the levy on cases of the Court have repeatedly isoglucose, as can be inferred from the stressed that all the objectives of Article recitals in the preamble to Regulation 39 cannot be pursued at the same time No 1111 /77, is specifically designed to and with equal effect and it is therefore finance exports of surpluses which come permissible to give one or other of them onto the sugar market. Accordingly the priority (cf. for example judgment of 13 levy on isoglucose should be treated as March 1968 in Case 5/67 W. Bern "own resources" within the meaning of GmbH & Co. v Hauptzollamt München the Council decision, and it is therefore [1968] ECR 83; judgment of 24 plain that its use for the said purpose October 1973 in Case 5/73 Balkan- certainly does not come up against any Import-Export GmbH v Hauptzollamt legal obstacles arising out of the Berlin-Packof [1973] ECR 1091; financial system. judgment of 2 July 1974 in Case 153/73 Holtz & Willemsen GmbH v Council (c) In the third place the argument and Commission of the European that the rules relating to the levies on Communities [1974] ECR 675). The isoglucose are incompatible with the Community institutions have a wide objectives of Article 39 of the Treaty discretion in this matter. They exercise must be examined. it according to the economic circum­ stances. On the other hand the case-law The plaintiffs' main submission in of the Court nowhere indicates that support of this argument is that because the levy leads to the production of giving preference to one objective isoglucose being stopped, technical requires evidence that in the interest of progress within the meaning of Article that objective it is essential to disregard 39 (a) of the Treaty is impeded, and by other objectives. no means the least of the consequences As far then as the individual objectives of this is that the effect both on the referred to by the plaintiffs are work force in isoglucose factories and concerned the following are my obser­ on that part of the agricultural vations on the alleged disregard of Community which produces the them. necessary raw materials for the manu­ facture of isoglucose has not been taken With reference to Article 39 (a) it is into consideration. The measure also certainly of importance that it uses the runs counter to the obiective in Article expressions "agricultural productivity" 39 (d) of the Treaty since isoglucose and "rational development of agri­ can help to assure the availability of cultural productivity" and "rational

development of agricultural pro maize which alone is used the decisive duction". This provision can scarcely be factor however is that in spite of invoked if the effects of a rule on new considerable expansion the production methods in the processing industry are of maize in the Community presents no at issue. problems at all since it does not yet To this must be added that it has not so meet Community demand by a long far been established that the rules way. In addition Community maize is clearly less suitable for the manufacture relating to the levies for the time being in force make it impossible to manu of starch and isoglucose than it is for facture isoglucose. In support of this the use as fodder.

has to a great extent been eliminated (d) — the assurance of the availability from the market and that the plaintiff of supplies — cannot in my opinion Tunnel Refineries nevertheless began to stand because, as has been explained to produce isoglucose in 1978 even if the us, the rules relating to quotas of the scale of production was smaller than organization of the market in sugar originally planned. have provided for a sufficiently large The plaintiffs' reference in this safety margin. Furthermore for some connexion to the situation of the years there has been a surplus in the workers in isoglucose factories is Community — which amounted to 2.7 undoubtedly inadmissible. In my view million tonnes for the marketing year such considerations have no place in the 1977/78 — and this situation is context of Article 39 (a).

The point to production of isoglucose also seem to bear in mind about the sugar price is me to carry little conviction. It is true that owing to the existing intervention that it is technically possible to manu system and the present surplus its facture isoglucose not only from maize movements are in any case close to the but also from potatoes and other lower Community price limit, namely the intervention price. It does not drop cereals. But the possibility of so using the two last-mentioned products in the below that price if an additional Community as the Council with sweetener appears on the market. reference to processing costs has Conversely the submissions of the convincingly shown by means of Community institutions on the pursuit figures, is ruled out. With regard to of the objectives of Article 39 in

connexion with the production levy on (d) The question whether the rules isoglucose seem to me to be convincing. adopted discriminate against manufac turers of isoglucose, which is the According to these submissions its main unanimous view of the applicants, now purpose is to stabilize the sugar market, has to be considered. that is to say, to counteract any increase Their view is that since isoglucose of the surpluses. In this connexion it competes with sugar it should not be must be borne in mind that there are subjected to a higher charge than sugar. already surpluses on the sugar market That is however the position since the and that in view of the obligations whole of the production of isoglucose is under the ACP-EEC Convention of charged whereas in the case of sugar a Lomé and also the rules relating to levy for financing exports is only quotas which remain in force until 1980 imposed on B sugar. If this charge is and have established rights in a definite expressed in terms of the entire way, there are scarcely any other production of sugar, and at the same possible ways of reducing the surpluses. time it is assumed that the B quota is not usually exhausted, and if account is In addition to the main purpose must be taken of the lower sugar beet price in so mentioned the concern to ensure sugar far as B sugar is concerned, that is to beet growers, for whom the applicable say, of the fan that part of this charge organization of the market in sugar has is passed on to the farmers, then in the created certain rights, "a fair standard case of sugar an average charge of one of living" within the meaning of Article unit of account or less per 100 kg is 39 (b).

A treat it in the same way as surplus sugar changeover by these agricultural and therefore to charge it in the same communities to products of which there way as B sugar. They also take the view is not also now a surplus might however that the only object of the production not be practicable in the medium term, levy on isoglucose is to offset the quite apart from the fact that the culti vation of maize — this must be the competitive advantage which isoglucose derives from the organization of the primary consideration — is not possible market in sugar and its rules for quotas everywhere for climatic reasons and that to which isoglucose is not subject.

Here it considerations such as the fact that it is must be borne in mind that sugar manu in the interest of consumers for the facturers only produce one product and budget not to have to bear too great a are entirely dependent upon one basic burden are disregarded. product. On the other hand starch

manufacturers, who also produce down until 1980, that in a certain sense isoglucose, have a wide range of therefore acquired rights had to be products and can have recourse to a considered. It is therefore quite under large number of basic materials. Since standable that this problem was kept they are all large undertakings which back for consideration in connexion are capiul rather than labour intensive with the future definitive rules which and since the proportion of isoglucose are to apply from 1980 onwards.

lines. One only has to think of the this aspea of the matter. applicable restrictions on sugar In my opinion the reference to the mini production, the rules relating to quotas, market organization for isoglucose with and the obligation to keep stocks as its import and expon system and the well as the guarantee to purchase sugar observation made in connexion which do not exist in the case of therewith that isoglucose derives certain isoglucose. benefits from these rules which stabilize On the other hand the difficulties would the market are therefore irrelevant.

KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN

Furhermore I consider it to be sweetening property there was no inadmissible when making the necessary competition. comparison to focus on the position of When considering the question what are the manufacturers and to conclude from the criteria in accordance with which a it that large starch factories which also somewhat better balanced set of rules — manufacture isoglucose could within the in view of the complexity of the framework of their overall programme relationship more cannot be required — which allows a certain flexibility cope can be found for isoglucose and sugar, with production levies more easily than one might first consider treating the labour intensive sugar manufacturers levy on isoglucose as simply many of which are only small. In this compensation for a 15 °/o price respect the picture outlined by the advantage which isoglucose derives Community institutions requires some from the organization of the market in correction because in factories where sugar. This appraisal stems from the isoglucose is manufactured it represents history of the establishment of the

OPINION OF MR REISCHL — CASE 125/77

For this reason I system. However, if this had been done prefer to centre the examination on a prices would have had to be at approxi comparison of the charges applicable, mately their low level in France with the on the one hand, to isoglucose and, on result that beet growing in regions at a the other hand, to sugar. disadvantage would no longer have In doing so there certainly seems to me been possible. In order to rule out this to be no justification for proceeding as possibility a higher price level — at the applicants have suggested, that is to approximately the Italian and German say, ascertaining the average charge of prices — was chosen. However, in view the entire sugar industry by means of of the existing production capacities, which — allowing for the lower price of which allow 14 million tonnes of sugar sugar beet in the case of B and C sugar to be produced, such a price-level made — with the B quotas being completely restrictions on production necessary, if used up one then arrives at a charge of inordinate surpluses were not to arise. about one unit of account per 100 kg, The Community institutions argue that, and what is more, if account is taken of had it not been for these rules relating the fan that in the years 1971 to 1976 to quotas, the Community price level production of B sugar only amounted to would have been lower, namely by between 11 and 19 % of the production about 15 %. Since isoglucose benefits of A sugar, that is taking as a basis the from the rules on prices applicable to anual average production of B sugar, a sugar without being subjected to any charge of only one half of a unit of restrictions on its production it can be account is arrived at. In my view this said that the rules relating to quotas method of calculation fails to appreciate give isoglucose a competitive advantage two essential aspens.

quotas. The price advantages however be produced. From this angle the idea also apply to the sugar manufacturers suggests itself of forming a group of and in their case — and this is sugar producers for whom first and important — the rules relating to quotas foremost B quota sugar is meant. On have very different effects; favourably the other hand it is of importance that located modern factories can readily isoglucose manufacturers have large produce the full B quota and indeed modern factories which have much

lower labour costs than sugar factories. emerges. According to that picture it It is therefore natural to compare them has to be assumed that sugar manufac­ with corresponding modern sugar manu­ turers bear a charge which is between facturers who are favourably located 3.81 and 13.52 units of account per 100 and also work efficiently. They are kg. However I also consider — and on unquestionably manufacturen who also this point I agree with the applicants — produce C sugar in large quantities and that it is proper as far as concerns this for whom therefore the production calculation to bear in mind that other restrictions of the rules relating to purchase prices apply to sugar beet quotas are in practice of as little intended for the production of B and C importance as they are for isoglucose sugar, namely in the case of B sugar a manufacturers. minimum price reduced by 30 % and in The Commission also took this as a the case of C sugar — as there is no suiting point when it gave us the minimum Community price for it — a example of a modern sugar factory market price which in 1976 apparently which produces a great deal of C sugar only amounted to something more than — in the year 1976/77 87 % of the A half of the minimum price for sugar quota. In the case of this undertaking it beet. There were thereby included in the calculated on the basis of the comparison, not as might be expected production figures of the 1976/77 elements of the production costs which marketing year an average charge on would have been improper but factors sugar of 11 units of account, by relating to the market organization applying the actual production figures which in the common organization of the market are fixed and are calculated for the year 1976/77 which became known later, a charge of 8.71 units of to shift a specific portion of the charge account and for the year 1977/78 a on to sugar beet farmers, in the case of charge of 13.80 units of account per 100 B sugar — as the sugar industry itself kg. However in my view such an admits — about 60 %. If one proceeds example can scarcely be satisfactory, in this way and if appropriate especially as we were told during the corrections are made to the figures hearing that in the factory in question a produced by the Commission — the very large amount of C sugar was applicant Amylum has worked them out produced, that a large increase of its by way of example — then one arrives quota and of its production was at charges which are valued at five units effected, but that it ran at a loss in the of account for six undertakings, at 1976/77 marketing year. On the rather less for four undertakings and at contrary I consider that it is necessary even more than five units of account for to place the examination on a broader four undertakings. However, on that basis and include all similar under­ basis and especially if it is borne in mind takings in the investigation. In this — and the Commission considers it is

manufacturer from lower marginal costs financing of exports of surpluses and and the existence of by-products — thereby slow down the growth of guaranteed purchase of sugar and the isoglucose. They take the view that an sugar manufacturers' obligation to keep appropriate contribution to the stocks) is unsatisfactory. financing of exports of surpluses — In the final analysis this means that the quite apart from the fact that the production levy fixed for isoglucose, surpluses were to be disposed of in which from now until the end of 1980 is another way, namely by reducing the quotas — ought to have been to be five units of account per 100 kg does not in fan discriminate against determined by the market share of isoglucose, which at the present time is isoglucose manufacturers, and accordingly it is unnecessary to go about 3 Vo of sugar consumption.

which is manufactured principally from fan has to be faced that the production imported products. levy does not slow down the growth of (e) Since the complaint of discrimi isoglucose but makes discontinuance of nation, which is probably to be its production unavoidable. regarded as the principal complaint is On this issue the following brief obser thus unfounded, the question whether vations have in my view to be made. objection could be taken to the rules In so far as the applicants mention which have been adopted because they exaggerated fears concerning sugar are in breach of the principle of pro exports — they themselves give a figure portionality must furthermore be of about 500 000 tonnes for the current

of the 1976/77 marketing year to the it can only with difficulty be replaced by following marketing year and deducted less stringent measures. from them the presumed consumption. The applicants take the view that this However, when they did this — apart requirement is not satisfied for various from the fan that it is necessary to reasons by the rules relating to the proceed on the basis of higher levies which have been adopted, the production values — they overlooked in purpose of which according to the particular the quantities in respect of statements of the Community which there are obligations to impon institutions is to fix a contribution to the under the ACP-EEC Convention of

Lomé. If the values of the Community last mentioned point — that the institutions are taken as a basis and if forecasts of the Community institutions, the charge accruing therefrom to the which I mentioned just now when I budget is considered it is hardly possible dealt with the economic dau, were to talk of isoglucose manufacturers pitched too high. On this point being required to make an excessive reference can indeed be made to the contribution. In fact they only bear less fan that the lapse of the production than 3 % of all export costs: in relation refund has a slowing down effen and to the rate of the refund per tonne (220 that in some Member States legal rules units of account) their share (50 units of restrict the use of isoglucose.

However, the production levy could in fan have according to the contentions of the been avoided or reduced by an Community institutions the level of the amendment of the rules relating to production levy has not been fixed on quotas applicable to sugar. Such an the basis of isoglucose's potential share amendment is ruled out with reference of the market. Likewise the production to A quotas because in their case until costs of isoglucose did not serve as a the rules which are at present in force guide-line for determining the levy.

On the would considerably reduce the export contrary it is my impression that the levy or even effectively abolish it. figures which have so far come to light Furthermore with regard to the are insufficient to support such an applicants' argument that when the assumption. Likewise a charge which Community institutions fixed the levy modern sugar factories seem to be able they proceeded on the basis of to bear can also be borne in the same misconceptions as to the production way by the less labour intensive manu costs of isoglucose and its potential to facturers of isoglucose.

OPINION OF MR REISCHL — CASE 125/77

The stances and in such a way as to maintain Community institutions were right to the conditions of competition which stress that the applicants operate in a apply to sugar. field which is technically very closely connected with the sugar market and (f) The applicants also submit that the that they knew all about this market Community institutions have wrongly and the rules governing it, especially failed to provide for any transitional those relating to the problem of the rules and derogations for existing surplus. They therefore had to take into capacities and the argument put forward account the fan that, in such an in the proceedings relating to the economic situation, far-reaching stabi liability of public authorities for lization measures would be adopted and damages that the applicants have been that the system of financing exports frustrated in their legitimate would also be extended to substitute expectations is connected with this. products as soon as they arrived on the The applicants point out that isoglucose market in considerable quantities, and has for some time benefited from that by no means the least reason for production refunds, that is to say, from this was that an amendment of the rules certain measures to promote it. The relating to quotas and the import regu Community institutions were aware of lations for the ACP sugar was not to be the efforts to develop isoglucose in the expected before 1980. Community and also knew about the consequent decisions to invest in it. For that reason and especially because Nevertheless they did not at any time the preparatory work in connexion with the measures has been carried out in draw the attention of the applicants to the fan that in view of a threat to the such good time that existing contracts sugar market caused by isoglucose were scarcely affected by them there production measures might be adopted. was no occasion to adopt special transitional measures which might have As far as the first part of this argument frustrated the effen of the rules.

expectation of further encouragement and preferential treatment. (g) The other argument which has For the rest there can only be said to be now still to be dealt with — it also ori a breach of the principle of the ginates in the proceedings relating to legitimate expectation that a given legal the liability of public authorities — position would continue if, having namely that the rules to which

exception is taken contravene the right cases can be restricted in the public to carry on a business freely, which can interest. On this point it must be borne be numbered among the principles in mind in these proceedings that the which the Community institutions also applicants operate in a field in which have to observe, is in a certain way considerations of agricultural policy are connected with the principle of pro very important and for that reason portionality which has already been freedom of manoeuvre is in any case dealt with.

On this I can first of all only repeat that it has not been proved that this cases may only be adopted under Article economic consequence is inevitable even 40 of the EEC Treaty in connexion with if the calculations produced by the an organization of the market. But there Community institutions have not so far is no real organization of the market for been acknowledged to be conclusive. It isoglucose, because the advantages to accrue to isoglucose under Council also appears to be in principle unlikely Regulation (EEC) No 1111/77 have not — and the conduct of the applicant,

The course of the Community institutions in this which further development is expected connexion is their reminder that to take is entirely in foreign trade according to the case-law of the Court although perhaps not so much with (judgment of 14 May 1974 in Case 4/73 overseas countries as with European J Sold, Kohlen- und Baustoffgroß countries bordering on the Community. handlung v Commission of the European I simply recall that the large French Communities [1974] ECR 491) rights share of isoglucose production has to be such as those w hich arc asserted in these exported because of the prohibition of

I therefore submit that the questions referred for a preliminary ruling be answered as follows:

1. During the proceedings no reasons have become apparent which might justify the assumption that Council Regulation (EEC) No 1862/76 in so far as it has added an Article 5 (a) to Regulation (EEC) No 2742/75 of the Council and Council Regulations (EEC) No 1110/77 and (EEC) No 1111/77 are invalid.

2. Article 4 of Commission Regulation (EEC) No 2158/76 is to be interpreted as meaning that it also applies to the recovery of refunds, which have been granted in respect of the production during the period from 1 August to 3 September 1976 of glucose having a high fructose content.