C-78/77

1. If the adoption of a strict for the purpose of converting the tax Community measure is to be on exports into national currency, of foreseen by a prudent and discrim­ the two exchange rates specified inating trader, he cannot plead respectively in Regulation No legitimate expectation in the event of that measure's being adopted. 950/68 of the Council and in Regu­ lation No 475/75 of the Council, the 2. Regulations Nos 348/76 and 890/76 are valid. one should be applied which at the 3. In view of the uncertainties inherent material time was the less onerous

in Council Regulation No 348/76, for the tax payer concerned.

In Case 78/77

REFERENCE to the Court under Article 177 of the EEC Treaty by the Finanzgericht (Finance Court) Hamburg for a preliminary ruling in the proceedings before that court between

FIRMA JOHANN LÜHRS, Twielenfleth,

and

Advocate General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts óf the case, the course of the After certain Member States had

procedure and the observations spontaneously adopted protective submitted under Article 20 of the measures, the Community itself Protocol on the Statute of the Court of introduced measures concerning Justice of the EEC may be summarized potatoes. Thus at the end of January as follows: and the beginning of February 1976, the Council suspended impon duties on potatoes. In order to prevent excessive quantities of potatoes, for which there I — Facts and procedure was a pressing need within the Community, from being exported to third countries, the Council adopted 1. Owing to a decrease in the areas under cultivation and unfavourable Regulation No 348/76 of 17 February 1976 (OJ 1976, L 43, p. 14), which weather conditions in 1975 production entered into force on 19 February 1976, of potatoes fell sharply in the on measures to be taken owing to the Community and in other European difficulties affecting potato supplies. As countries. Considerable supply diffi­ from 20 February 1976, that regulation culties and price increases resulted from introduced a tax on exports of potatoes this in the autumn of 1975 and of 25 units of account per 100 kg. especially at the beginning of 1976. Commission Regulation No 890/76 of

In the first instance the Hauptzollamt which is illegal, because it affects applied for the purposes of conversion contracts for delivery already concluded an exchange rate of DM 3.57873 per before its entry into force. unit of account, that is to say, DM The defendant in the main action on the 89.47 per 100 kg. By an assessment of 8 other hand takes the view that the tax June 1976, the Hauptzollamt amended on exports has been lawfully raised. The the assessments in question and made an introduction of a tax on the export of additional claim for tax on exports potatoes was due to supply difficulties amounting in all to DM 2 456.30. It and high potato prices in the gave as its grounds for this increase that Community. To be effective, the it had previously applied an incorrect necessary measures had to be brought exchange rate for the unit of account. It into force swiftly and the rate of tax on alleged that the correa exchange rate the exports had to be at an appropriate was DM 3.66 per unit of account and level. Although the regulation did enter that accordingly the amount of the into force at short notice, it did not export tax of 25 units of account per have retroactive effect. If the regulation 100 kg under Regulation No 348/76 did affect contracts for delivery which came to DM 91.50 per 100 kg. had not yet been performed, the After administrative proceedings had plaintiff in the main action must accept that effect as a normal commercial risk. proved unsuccessful, Lührs commenced proceedings before the Finanzgericht However, the regulation has in no wise (Finance Court) Hamburg on 28 interfered with legitimate expectation, September 1976. It made the following because — apart from any other submission in substantiation of its claim: consideration — the plaintiff was not On 10 and 16 February 1976 it sold taken by surprise but had already 'learnt by hearsay of the possible introduction potatoes at fixed prices to Sweden. The agreed delivery date was 21 February of a tax on exports before Regulation No 348/76 entered into force. 1976. When the contraa was entered into nothing was known about the intro­ On the question of the level of the duction of a tax on the export of exchange rate, the defendant in the potatoes. Since it had learnt by hearsay main action submitted that Regulation of the possible introduction of a tax on No 348/76 was not a measure relating

to agricultural policy in respect of the Council is taken, infringe the which the representative exchange rate prohibition on discrimination laid specified in Regulation (EEC) No down in Article 7 of the EEC 475/75 was to be applied. On the Treaty in so far as in this matter, contrary it was a regulation dealing the currency situation in the with commercial and conjunctural exporting country compared to policy. The tax on exports is an that in the other Member States economic customs duty charged by the has not been offset or has been Community. Therefore the exchange insufficiently offset? rate of DM 3.66 applicable to customs duty under Regulation No 950/68 is to The order making the reference was be applied in calculating the tax. entered at the Court Registry on 4 July 1977. By an order of 16 June 1977, the Finanz­ gericht Hamburg decided to stay the In accordance with Article 20 of the proceedings and refer the following Protocol on the Statute of the Court of questions to the Court of Justice of the Justice of the EEC, written observations European Communities for a pre­ were submitted by the Council of the liminary ruling pursuant to Article 177 European Communities, represented by of the EEC Treaty: Bernhard Schloh, Adviser in the Legal Department of the Council, and by the 1. Does Council Regulation (EEC) No 348/76 in conjunction with Commission of the European Commission Regulation (EEC) No Communities, represented by Peter Kalbe, Legal Adviser to the 890/76, with special reference to the Commission, acting as Agent, assisted rate of tax levied on the export of by Bjarne Hoff-Nielsen, of the Legal potatoes, infringe the principle of the Service of the Commission. protection of legitimate expectation, in that it does not provide for any Upon hearing the repon of the Judge- general rule exempting from the said Rapporteur and the views of the tax exports of potatoes delivered Advocate General the Court decided to under contracts concluded before 17 open the oral procedure without any February 1976? preparatory enquiry. 2. If the answer to Question 1 is in the negative: II — Summary of the written (a) For the purpose of converting observations submitted to the tax on exports expressed in the Court units of account provided for in Council Regulation (EEC) No 1. Question 1 (protection of legitimate 348/76 is the exchange rate expectation) applicable to customs duty in Part I, Tide 1, C. 3 of Regu­ The Council observes first of all that the lation (EEC) No 950/68 or the first question refers to the legal situation exchange rate specified in Regu­ resulting from the combined application lation (EEC) No 475/75 of the of Council Regulation No 348/76 and Council to be applied? Commission Regulation No 890/76. It (b) Does a tax on the expon of cannot be maintained that the Council potatoes fixed at 25 units of regulation itself is not in order, because account per 100 kg, whether the in Article 1 (2) of its regulation the exchange rate specified in Regu­ Council authorized and directed the lation (EEC) No 950/68 or in Commission to take any interim Regulation (EEC) No 475/75 of measures necessary. Consequently, if it

was necessary at all, it was for the adopted without warning and with Commission to take further account of immediate effect and could not have the need to observe the principle of the been foreseen even by a prudent trader protection of legitimate expectation, by (paragraphs 5 and 9 of the decision of laying down more detailed interim the Court of 8 June 1977 in Case measures than those contained in Regu 97/76, Merkur 1977 ECR 1063 at pp. lation No 890/76. 1077-1080 and paragraphs 41 to 43 of In the alternative, the Council considers the decision of the Court of 15 June whether the arrangements for 1975 in Case 74/74, CNTA [1975] application of and exemption from the ECR 533, at pp. 549-550). tax which are contained in Regulation In view of the measures adopted by No 890/76 adopted by the Commission certain Member States and the in conjunction with the basic regulation suspensions of import duties for of the Council, infringe the principle of potatoes enacted by Community the protection of legitimate expectation. measures in January and early February To argue that the application of the 1976, the Council takes the view that a Council regulation to exports agreed potara dealer in the Community could upon before its adoption but performed undoubtedly have foreseen, in early subsequently amounts to retroactivity of February 1976 at the latest, that the legal rules is unreasonable. It emerges Community would adopt short-term from the different judgments of the measures to limit the exporting to non- Court of Justice (paragraphs 8 and 9 of Member countries of Community the decision of the Court in Case

German national daily newspapers It follows that the issue is not whether published this information in their provision had to be made by means of a editions of 19 February 1976. general system of exemption for old The level of the tax is not dispropor contracts already concluded but not yet tionately high nor was it unforeseeable performed, but only whether on intro for traders in the market. It had to be ducing the export tax the Community such as to deprive exports of any legislature had occasion to adopt special attraction resulting from the granting of interim rules designed to protect the high import subsidies introduced by legitimate expectation of the traders certain neighbouring countries of the

JUDGMENT OF 1. 2. 1978 — CASE 78/77

The Commission takes the view that a In comparison with the prohibitions on general system of exemption was exports in force in the Member States, established by Commission Regulation that tax has the advantage of permitting No 890/76 adopted pursuant to Article exports in principle once again. Fur­ 1 (2) of Council Regulation No 348/76. thermore, the Community institutions That article expressly provided for the have always taken the view that it is not possibility of adopting such measures. incumbent upon them to encourage by The system of exemption laid down by particular exceptions exports carried out the Commission is intended to make it through exporters in one Member Sute possible 'to maintain certain traditional because of the restrictions in force in trade flows', and it was assumed that another Member Sute. the quantities involved would not exceed the quantities usually disposed of The plaintiff is also precluded from in the course of those flows (Regulation pleading protection of legitimate No 890/76, first recital). expectation in relation to the per­ formance of the contracts which it had

LÜHRS v HAUPTZOLLAMT HAMBURG-JONAS

The exchange rates have great advantages Council bases this submission upon inter and above all that of enabling traders to alia the fact that potatoes are agri calculate in advance the economic cultural products, the fact that measures circumstances concerning them. can be regarded as dictated by Therefore inequalities which may arise considerations both of agricultural as a result of differing patterns of policy and of conjunctural or development of the currencies of commercial policy, and finally the tenor Member States are not due to discrimi of Commission Regulation No 485/76 natory treatment. of 3 March 1976 (OJ 1976, No L 56,

of potatoes. For these reasons the the formation of prices within the Council inclines to the view that the Community. exchange rates laid down by Regulation The Commission submits that there was No 475/75 should be applied to the no risk of deflection of trade, of the arti export tax. ficial deflection of trade flows due to Since Regulation No 348/76 is legally monetary factors justifying the intro based upon Articles 103 and 113 of the duction of a system of monetary EEC Treaty, the Commission considers compensatory amounts. that from a strictly formal legal point of view there is nothing to prevent the German customs authorities from III — Oral procedure refusing to apply the exchange rates laid down in Regulation No 475/75. Firma Johann Lührs, the plaintiff in the However, the Common Agricultural main action, represented by Siegfried Policy and the commercial and Stossno acting as Agent, the Council of conjunctural policy are not mutually the European Communities, represented exclusive. by Bernhard Schloh, Adviser in the

2 These questions have been raised in the context of a dispute between the Hauptzollamt Hamburg-Jonas and a haulier who after exporting 121 000 kg of potatoes to Sweden on 20 February 1976 was assessed to tax under Regulation No 348/76, to the amount of DM 108 256.60 which was subse­ quently increased by DM 2 456.30.

3 The first question asks whether Regulation No 348/76 in conjunction with Regulation No 890/76, with special reference to the rate of tax levied on the export of potatoes, infringes the principle of the protection of legitimate

LÜHRS v HAUPTZOLLAMT HAMBURG-JONAS

expectation, in that it does not provide for any general rule exempting from the said tax exports of potatoes delivered under contracts concluded before 17 February 1976.

4 It appears from the case file that on 10 and 16 February 1976 the plaintiff in the main action sold at fixed prices in Sweden potatoes which it had bought in the Netherlands.

Having leant that Community prohibition or taxation on exports of potatoes was imminent, the plaintiff tried between 16 and 20 February 1976 to obtain definite information, but not having been able to obtain it, it exported the consignments at issue on 20 February 1976.

Indeed, the proper functioning of the common market required a measure to restrain a development whereby rising prices and abnormal exports to non-member countries were stimulating each other.

JUDGMENT OF 1. 2. 1978 — CASE 78/77

Moreover that measure could not surprise trade circles which, even if they had not yet been aware of the abnormal situation, had at all events been warned by earlier Community measures (suspension of customs duties on imports) and by measures already adopted by the Member States which were traditional exporters of potatoes.

Consequently the adoption of stricter measures was to be foreseen by prudent and discriminating traders so that in the present case they cannot plead legitimate expectation.

7 Nor could the level of the export tax surprise informed circles, since at the time when Regulation No 348/76 was adopted import subsidies were already being granted by several non-member countries, such as Sweden which appears to have granted subsidies up to the equivalent of 18 units of account per 100 kg.

In order to neutralize the effect of such measures, the Community tax had to be fixed at an even higher level, so that a rate of 25 units of account per 100 kg cannot be regarded as excessive.

11 Question 2 (a) asks whether, for the purpose of converting the tax on exports expressed in units of account, the exchange rate applicable to customs duty in Part I, Title 1, C. 3 of Regulation No 950/68 of the Council of 28 June 1968 on the Common Customs Tariff, (JO, L 172) or the exchange rate specified in Regulation No 475/75 of the Council of 27 February 1975 on the exchange rates to be applied in agriculture (OJ L 52, p. 28) is to be applied.

The reason for the question is that at the material time the exchange rate applicable under Regulation No 950/68 was slightly higher than the exchange rate applicable under Regulation No 475/75 for instruments relating to the Common Agricultural Policy.

12 Regulation No 348/76 does not contain any express provision as to the exchange rate to be applied for the purpose of converting into national currency the tax of 25 units of account which it laid down.

On the one hand, the fact that it was adopted pursuant to Articles 103 and 113 of the Treaty marks it out as a measure coming under the conjunctural policy and the economic policy rather than under the Common Agricultural Policy.

On the other hand, potatoes are an agricultural product within the meaning of the Treaty, and the export tax was devised by the Commission's Direc­ torate General for Agriculture and adopted by the Council composed of the Ministers of Agriculture in order to keep prices within the Community at a reasonable level and to ensure supplies; these are the objectives mentioned in Article 39 (1) (d) and (e) of the Treaty as objectives of the Common Agricultural Policy.

It follows that the question is purely theoretical and that in fact the application of Regulation No 348/76 has not infringed any prohibition on discrimination.

16 Thus consideration of this question has also disclosed no factor of such a kind as to affect the validity of Regulation No 348/76.

17 In view of the foregoing, it does not appear feasible within the framework of the existing rules to statisfy the requirements of natural justice in possibly a few special cases, since provision can be made for such requirements only by the Community legislature through appropriate hardship clauses (Härte­ klauseln) of the kind found in German revenue law and in that of other Member States.

Costs

18 The costs incurred by the Council and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable.

LÜHRS v HAUPTZOLLAMT HAMBURG-JONAS

Kutscher Sørensen Bosco

Donner Pescatore Mackenzie Stuart O'Keeffe

Delivered in open court in Luxembourg on 1 February 1978.

A. Van Houtte H. Kutscher

Registrar President