C-116/77

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

In Joined Cases 116/77 and 124/77,

G. R. Amylum N.V., Aalst, Belgium, represented by Michel Waelbroeck and Georges Vandersanden, Advocates, 341 Avenue Louise, Brussels, with an address for service in Luxembourg at the Chambers of Ernest Arendt, 34 Rue Philippe II,

and

Tunnel Refineries Limited, London, represented by Francis Jacobs, Barrister, Middle Temple, instructed by Messrs Slaughter and May, Solicitors, 35 Basinghall Street, London EC2V 5DB, with an address for service in Luxembourg at the office of Messrs Elvinger and Huss, 84, Grand Rue,

applicants,

THE COURT,

composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait (Presidents of Chambers), J. Menens de Wilmars, Lord Mackenzie Stuart, G. Bosco and T. Koopmans, Judges,

Advocate General: G. Reischl

Registrar: A. Van Houtte

gives the following

JUDGMENT

third countries; ... there should, therefore, be provision for a suitable 3. The applications production levy on isoglucose to contribute to export costs" (seventh recital). (a) In Cases 116/77 and 143/77

The system for production levies for G. R. Amylum N.V. on 29 September isoglucose is laid down by Articles 8 and 1977 and Koninklijke Scholten-Honig 9 of the regulation and applies to periods N.V. on 21 November 1977 commenced corresponding to the sugar marketing proceedings against the Council and the years 1977/78 and 1978/79. Commission seeking compensation for the damage which they claim to result By Article 9 the amount of the for them from the entry into force of production levy is, per 100 kg of dry Council Regulation No 1111/77 and matter, equal to the amount of the Commission Regulation No 1468/77. production levy for sugar provided for in Article 27 of Regulation (EEC) No 3330/74 of the Council of 19 December (b) In Case 124/77 1974 (Official Journal 1974, L 359, p. 1), the basic sugar regulation, for the same Tunnel Refineries Limited commenced

period to which the latter amount proceedings on 18 October 1977 against applies. the Council and the Commission seeking compensation for the damage which it For the period from 1 July 1977 to claims to result for it from Council 30 June 1978, however, the amount of Regulation No 1111/77. the production levy may not exceed five units of account per 100 kg of dry By an order of 2 December 1977 the matter. The latter amount is to apply Court decided to join these cases for the when the amount of the production levy purposes of the procedure. provided for in Article 27 of Regulation No 3330/74 exceeds five units of By an application lodged at the Court on account per 100 kg white sugar for the 16 February 1978, the Syndicat National same period. des Fabricants de Sucre de France

II — Conclusions of the parties

1. In Case 116/77 III — Submissions and argu- ments of the parties The applicant claims that the Court should:

A — In Case 116/77 — Rule that the Community has incurred liability in respect of the adoption of Council Regulation No In its application the applicant states that 1111/77 and Commission Regulation it began production and distribution of No 1468/77; isoglucose at Aalst, Belgium, in 1972 in a — Award the applicant, as com- pilot factory having a capacity of 20 000 pensation for the damage suffered, a tonnes of isoglucose per annum. In 1975 sum provisionally set at BF 777 the applicant constructed a 100 000 million; tonne isoglucose factory, thus bringing — Order the defendants to bear the its total production capacity up to 120 000 tonnes of isoglucose. This costs; represents 85 000 tonnes sugar Alternatively and before giving judgment equivalent. — Appoint an expert responsible for assessing the amount of the damage The applicant states that isoglucose is suffered by the applicant as a result offered to industry at a price 5 to 7% of the adoption of the afore- lower than that of sugar, which is mentioned regulation; justified inter alia by the disadvantages involved for a manufacturer in the simul- — Reserve the costs in that connexion. taneous use of two raw materials. In fact, in most cases, sugar is only partially The Council and the Commission contend replaced by isoglucose, for various that the Court should dismiss the technical and practical reasons. application as inadmissible and unfounded and order the applicant to Until 1976/77, approximately 70% of bear the costs. the isoglucose manufactured by the applicant was derived from maize and 2. In Case 124/77 approximately 30% from common The applicant claims that the Court wheat. The maize is imported from other should order it to be compensated for Community countries, in particular the damage which it has suffered and France, to the extent to which it is order the defendants to bear the costs. available. The balance is imported from

(73) 400 def/00053 of 6 June 1973) in the amount of BF 86 million. The — The prohibition on any discrimi- applicant obtains the wheat flour from nation between producers within the Belgian flour mills, and quantities of Community (second subparagraph of gluten are returned to the flour mills, Article 40 (3) of the Treaty) ; which can use it to reduce the quantities of North American wheat, of high gluten — The obligation to comply with the content, which they add to the Belgian objectives laid down in Article 39 (1) or French wheat of bread-making quality of the Treaty; used by them. — Observance of fundamental rights, in The applicant challenges the system of particular the right of freedom to production levies on isoglucose which pursue an industrial or commercial was introduced by Articles 8 and 9 of activity; Council Regulation No 1111/77 and which, in the applicant's submission, — Observance of the principle of prop- unjustly penalizes it as an isoglucose ortionality. manufacturer in favour of sugar producers. The consequences of that 1. Violation of the principle of non- legislation are so catastrophic for the discrimination applicant that they will inescapably lead to the closure of its isoglucose The applicant argues that if the levy production unit. system applying to the manufacture of sugar is carefully compared with that laid The applicant acknowledges that the down by Regulation No 1111/77 for contested measures are measures of isoglucose, it is found that, far from economic policy which imply a certain being confined to compensating for amount of discretion on the part of the alleged economic advantage by provid institutions which adopted them. for a contribution by isoglucose Consequently, according to well- export costs, Regulation No 1111 established case-law of the Court of heavily penalizes isoglucose production Justice, it is incumbent upon it to show in comparison with that of sugar, to the that a serious breach of a superior rule of point of making the former complete law for the protection of the individual uneconomic. In fact: has occurred.

maximum quota. As emerges from the table (in an appendix to the application) Therefore it is clear that the levy on taken from the publication "Les isoglucose does not stop at establishing Industries Sucrières de la CEE" (The equilibrium between that product and Sugar Industries of the EEC), DAFSA- sugar as regards contribution to the costs Analyse, from 1971 to 1976 Quota B of exporting sugar but actually penalizes varied between 12.5% and 19.8% of the production of isoglucose. Nor can such basic quota. Thus the real impact of the penalization be justified by an undue sugar levy is not as great as it would advantage allegedly enjoyed by appear to be on the basis of the isoglucose over sugar. Since refunds on maximum amount of Quota B. the production of starch used in the manufacture of isoglucose were abolished by Council Regulation No 1862/76 of 27 July 1976 (Official (b) Under Article 4 (2) of Council Journal 1976, L 206, p. 3), there has no Regulation No 1113/77 of 17 May 1977 longer been any difference in the (Official Journal 1977, L 134, p. 11) the conditions of competition regarding raw minimum price for beet outside the basic materials between the production of quotas was fixed at 70% of the minimum isoglucose and the production of sugar. price for beet. If the value of the beet is expressed in terms of the value of the sugar obtained from it, the result is a 60% reduction in the amount of the 2. The discrimination against isoglucose production levy. producers as compared with sugar producers is contrary to the objectives set out in Article 39 ofthe Treaty (c) Within the limit of the maximum quota, a sugar manufacturer is guaranteed disposal of his goods at the The applicant argues that even if the intervention price. No similar guarantee objective of the contested legislation was, exists for isoglucose. contrary to what appears in the

3. Infringement of the right to the free (a) The effect of such discrimination is exercise ofan industrial activity not to increase the productivity of agri- culture by fostering technical progress. Quite on the contrary, the technological The applicant states that prior to the advance achieved by the isoglucose adoption of Regulation No 1111 /77 it producers risks being lost for ever if had drawn the attention of the those undertakings have to cease their Commission to the impossible situation production of isoglucose. which would confront it if the regulation were adopted. The applicant adds that the Commission's Directorate-General (b) The tax burden imposed does not for Internal Market and Industrial contribute to improving the standard of living of the agricultural population. In Affairs sent two inspectors to the fact, the applicant has always striven to applicant's registered office in order to produce isoglucose from Community ascertain the production cost of cereals to the extent to which they were isoglucose. available. Furthermore, if Regulation No 1111/77 indirectly protects sugar beet The applicant states that the study growers, it is important to point out that carried out by the officials concerned in such protection is afforded at the January 1977 led to the conclusion inter expense of Community producers of alia that the application to isoglucose of wheat and maize. a levy higher than 12% of the intervention price for white sugar (34.87 (c) The discrimination to which units of account per 100 kg) would isoglucose is subject runs counter to the inevitably force it off the market as from objective of stabilization of markets. In 1 August 1977 and that therefore the fact, isoglucose manufacturers contribute application of the production levy to the stabilization of markets as they provided for in Article 27 of Regulation shelter the markets from price fluc- No 3330/74 (amounting to 30%) would tuations which might result from not be economically acceptable. circumstances affecting the production of the raw materials used in the manu- The production levy provided for by facture of sugar, such as a bad harvest or Article 9 of Regulation No 1111/77 is in a natural disaster. principle the same as that provided for in Article 27 of Regulation No 3330/74. (d) The discrimination against iso- Even if account is taken of the fact that

The applicant states that, in addition, a large part of the first-stage plant will 4. Violation of the principle of pro- cease to be of any use under normal portionality conditions of profitability. This head of damage may be assessed at BF 500 million. If the objective of the Council and the Commission in adopting Regulation No 1111 /77 was to put manufacturers of Taking into account the considerable sugar and manufacturers of isoglucose investments made by it, the difficulties on the same footing in relation to the involved in reconvening them to other costs resulting from surpluses, it is clear, activities and the compensation which in the applicant's submission, that the will have to be paid to staff in years to measure adopted is excessive in relation come, the total damage suffered by the to the aim pursued. In fact it would have applicant may be provisionally assessed been sufficient to subject isoglucose at BF 777 million. Although that damage production to a levy the real amount of has not yet actually occurred, it is which was equivalent to that of the levy sufficiently imminent and foreseeable on sugar production. with sufficient certainty to be able to found a claim for compensation (cf. Joined Cases 56 and 60/74, K. Kampff- Even if the objective pursued was meyer and Others v Council and to protect sugar production against Commission ofthe European Communities isoglucose, the threat by isoglucose to [1976] ECR 711; Case 44/76 Milch-, the outlets for sugar did not justify the Fett- und Eier-Kontor GmbH v Council adoption of such a protectionist measure. and Commission of the European In fact, isoglucose can be substituted Communities [1977] ECR 393).

— Causal connexion between the In conclusion, the Commission wrongful legislation and the damage emphasizes inter alia the following points suffered which it considers particularly important for the rest of the discussion: The applicant submits that it is patent that if the contested legislation had not — The potential market for isoglucose is been adopted, it could have continued its not limited to the so-called liquid business normally. sugar market, for the simple reason that that market does not exist as In its defence the Commission makes inter such: in fact many consumers prefer alia the following observations: to buy sugar in the solid state and dissolve it themselves, in view of the Facts difficulties of storing saccharose syrups. Thus the Commission considers that a more accurate Economic context of the dispute estimate of the potential uses for isoglucose is 30% of the sugar According to the most recent data market, that is 3 million tonnes. (November 1977) at the Commission's disposal, the total production of white sugar in the Community for the sugar — Finally, because isoglucose is in direct marketing year 1977/78 amounts to competition with saccharose syrups, 11 086 000 tonnes. The Commission its market price tends to align itself contends that in order to obtain a clear on the market price for sugar, that is view of the supply of sugar on the to say in fact on the intervention Community market it is necessary to price for sugar. deduct from the total production mentioned all amounts of sugar produced in excess of the maximum The legislative context quota (known as "C" sugar, estimated at 600 000 tonnes for 1977/78), which The Commission emphasizes the scope cannot be marketed within the EEC, and and significance of two component parts on the other hand to add thereto the of the common organization of the 1 305 000 tonnes allocated in the same market in sugar, namely the quota year as preferential imports from the system and the production levy. African, Caribbean and Pacific States pursuant to Protocol No 3 to the Lomé Convention. On the assumption that (i) The quota system consists on the one internal consumption will amount to hand of a form of support for sugar 9 310 000 tonnes, there is thus a surplus of producers situated in the regions least more than 2.5 million tonnes available for suited to the cultivation of sugar beet (A export to third countries. Quota) and on the other hand of a means of encouraging regional speciali- As regards isoglucose, the Commission zation through the B Quota which briefly sets out the properties and uses of enables the more competitive Com- the product and states that the estimated munity producers to increase their capacity for isoglucose production within production beyond the basic quota under the Community at the end of 1976 was price conditions less favourable than the approximately 150 000 tonnes dry basic price. If such a system of quotas matter, and according to the projects had not been introduced to limit the

The Commission contends that, as regards the system to be applied to The admissibility of the application isoglucose production, the Community had a choice between three possibilities: The Commission contends that one of

the necessary and essential requirements for any non-contractual liability even to — To do nothing and thus to allow exist on the Community's part under the "wild" competition to develop freely second paragraph of Article 215 of the between a new product springing EEC Treaty is not fulfilled in the present from advanced technology and an case: namely the requirement that the old product subject to the constraints damage alleged must he certain and direct. of a particularly complex market organization; 1. Lack of certainty of the damage alleged — To lay down a scheme identical in every respect to the one existing for sugar; The Commission points out that the applicant invokes only future damage which has not yet taken place and "pro- — Finally, without prejudice to the visionally" assesses the total amount of future, to adopt provisional measures the damage at BF 777 million. Therefore designed to introduce fair conditions the question which arises is whether that of competition for both products. future damage gives rise to a present

JUDGMENT OF 5. 12. 1979 — JOINED C.SES 116 AND 124/77

right to compensation or whether it the only question arising was the cannot be relied upon in the framework quantification of the said damage of an action for non-contractual liability ("dommage"). as it is only potential damage.

The Commission analyses the fun- damental differences which, in its On this point the Commission refers to contention, exist between the situations

sufficient certainty even if the damage damage ("préjudice"). cannot yet be precisely assessed" (paragraph 6 of the Decision in Joined Cases 56 to 60/74; paragraph 8 of the At all events, the alleged damage Decision in Case 44/76); specifying, in ("préjudice") depends in reality (if the Joined Cases 56 to 60/74, that "to applicant's description of it is accepted) prevent even greater damage it may upon a group of factors bound up with a prove necessary to bring the matter whole economic and social situation before the Court as soon as the cause of which is in constant evolution. Therefore damage is certain. This finding is it appears that such damage can only be confirmed by the rules in force in the described in law as hypothetical, that is legal systems of the Member States, the to say potential. majority, if not all, of which recognize an action for declaration of liability based on future damage which is sufficiently certain" (second and third 2. Lack of directness of the damage subparagraphs of paragraph 6 of the Decision). The Commission examines from the

points of view the question of the "immediate connexion between the

Distinguishing betweendamage in the contested regulation and the damage sense of "dommage" and damage in the suffered" which the applicant invokes sense of "préjudice", the Commission argues that when the Court held that an action for compensation for future The Commission argues that from the damage ("préjudice") is admissible "as point of view of the theory of adequate soon as the cause of damage ('préjudice') causation, which in its contention is certain", the Court was referring to amounts to assessing the normal one cases in which the material fact of the ordinary character of the antecedents of damage ("dommage") already existed the damage, it is hard to see how the when the application was examined, if applicant can prove that the "normal riot when it was brought, and therefore consequence" inherent in the imposition

a general economic context, is not matters of economic policy, which of conditioned by any factor other than the those objectives may take precedence contested levy. over the others in the case of partial incompatibility between them. On this point, the Commission concludes that, on any view of causality, the causal In the present case, the Commission connexion pleaded by the applicant merely observes that the common between its alleged damage and the measures adopted for isoglucose are Community legislation at issue is lacking essentially designed to stabilize the any directness. Furthermore, the reasons market in sugar which at the present given to support that ground of time has a large surplus. complaint are insufficient for the purposes of Article 39 (1) (c) of the 2. Violation of the fundamental right Rules of Procedure of the Court, and for of freedom to pursue an economic that reason alone make the application activity inadmissible. At this point in its defence the For all these reasons, the Commission Commission proposes to examine this contends that the application in the question under the heading of the present case should be declared principle of proportionality. inadmissible for lack of any certainty or directness in the damage pleaded. Should 3. Violation of the principle of non- the Court choose to consider the discrimination embodied in the substance of the question, the second subparagraph of Article 40 Commission persists in its arguments and (3) of the Treaty concludes that the application should at least be dismissed as unfounded, for the The Commission contends that the same reasons. complaint of discrimination, taken as meaning treatment of identical or at least The substance ofthe question comparable situations in a different way not justified by objective criteria, requires the terms of the comparison 1. Disregard of the objectives laid themselves to be defined beforehand. In down in Article 39 (1) of the that connexion, the Commission argues Treaty in particular that if the comparison is to The Commission argues that those be made between things which are objectives cannot be described as economically comparable, the general "superior rules of law for the protection and purely quantitative approach of the of the individual". Indeed, Article 39 is a applicant should be abandoned in order rule as to jurisdiction, defining on the one to examine the real situation of the two

To take the example of a sugar under- taking whose production of C sugar As regards the method used to achieve amounted to 87.7% of its production those objectives, the Commission within its basic quota (a case which contends that the present amount of the actually occurred in 1976/77 and which said levy of five units of account per 100 is likely to recur in 1977/78) the average kg represents only 14.45% of the actual return on sugar is as follows: intervention price guaranteed for A sugar. Therefore such an amount is — A Production: 100 not "disproportionate" to the price — B Production: 35 advantage of 15% which isoglucose — C Production: 87.7 producers enjoy owing to the existence Total production: 222.7 of the quota system in the sugar sector. In fact it is not disputed that the price of — Intervention price: 34.60 u.a. per 100 kg isoglucose tends to align itself on the — Production levy (sugar year 1977/78): guaranteed price in the sugar market. 9.85 u.a. per 100 kg — Price of B sugar: 34.60-9.85 = 24.75 Finally, the application of the isoglucose u.a. per 100 kg levy has been limited to two years, and — Price of C sugar: ± 10 u.a. per 100 kg moreover its amount has been

(average forecast for sugar year 1977/1978) transitionally limited to a maximum amount of five units of account per Return on sugar 100 kg. 100 x 34.60 = 3 460 35 x 24.75 = 866.25 87.7 x 10 = 877 B — In Case 124/77 5 203.25

Average price for the producer 5 203.25 = 23.36 u.a. per 100 kg The applicant states in its application that 222.7 it has invested a sum of £8 million in

Firstly, the regulation violated the Fourthly, the regulation infringes the principle of proportionality in that it Treaty in that it embodies a gross form imposed a wholly unfair burden on the of discrimination contrary of Article 40 manufacturers of isoglucose in the (3) of the Treaty. While purporting to interests of manufacture of sugar. give similar treatment to isoglucose and Indeed, the isoglucose levy is wholly sugar by relating the tax to the levy disproportionate and excessive both in payable on B Quota sugar, the regu- relation to the comparative burden on lation in fact discriminates blatantly sugar producers and in relation to the against isoglucose producers in making object of the measure in question. The no allowance for the equivalent of an A object of the levy is stated, in the Quota under which very substantial preamble to the regulation, to be "to quantities of sugar can be sold at contribute to export costs". However, guaranteed prices. Furthermore, the the Community authorities have made no production levy on sugar is payable on attempt, so far as the applicant is aware, only a small proportion of the total to impose any corresponding burden on production, especially if account is taken sugar producers, except in the form of of the fact that the maximum quota is the B Quota levy system which itself rarely filled. embodies a serious discrimination against producers of isoglucose.

Finally, the excessive and dispro- portionate character of the tax on Secondly, the regulation contained no isoglucose is demonstrated by the fact provisions, and no provisions have been that its effect is to render the production adopted in implementation of the regu- of isoglucose uneconomic in relation to lation, to protect the legitimate sugar. expectations of the applicant, who had made investment decisions in reliance

In the first place, the applicant submits The applicant submits that the Council on the one hand that at the time when and the Commission were misled by the Commission submitted to the figures produced on behalf of beet sugar Council the proposal upon which the producers which suggested that one regulation was based the Commission million tonnes of isoglucose would be had no adequate information upon produced in the medium term and which which to base the rate of the levy or also suggested that isoglucose and sugar alternatively that having such infor- were in many respects interchangeable in mation it failed to take proper account practice (see the extract from the of it, and on the other hand that both "Rapport du Conseil d'Administration — the rate proposed by the Commission Exercice 1976" of the Confédération and the rate fixed by the Council were Professionnelle du Sucre et de ses decided entirely arbitrarily and without Dérivés, at Annex 1). regard to the costs of the production of isoglucose. The applicant requests the Court to order the defendants to Even in the principal market, namely the produce the figures and calculations on soft drinks industry, isoglucose is not a which the rate of the levy was initially complete substitute for sugar, since proposed by the Commission and sub- changes in sweetness and flavour would sequently fixed by the Council. be apparent if it were so used. In practice, therefore, users will use up to 50% isoglucose to replace up to 50% of Secondly, the regulation was based on a the sucrose normally used. wholly erroneous assessment of the role of isoglucose and of the potential market for the product, for which again the For inter alia the reasons set out above applicant submits that the Council and the applicant submits that Regulation No the Commission are jointly responsible. 1111/77 unlawfully caused damage to The applicant requests the Court to the applicant and constituted a order the defendants to produce the information available to them in these sufficiently grave infringement of rules for the protection of the individual to respects at the material times. render the defendants liable in damages to the applicant. In support of these submissions the applicant relies on the following: The damages which the applicant seeks to recover are those caused directly to According to the information available to the applicant as a result of the imposition the applicant, the production capacity for of the tax on the production of isoglucose in the EEC was estimated in isoglucose by the above-mentioned regu- November 1976 to be 70 000 tonnes lation, including in particular:

In its defence the Commission puts forward in answer to the applicant's With regard to the damage caused to the submissions (except those relating to applicants, the Council enters an damages) the same arguments as those which it put forward in its written obser- objection of inadmissibility, although not vations submitted in Case 145/77 as a preliminary objection on a pro- cedural issue under Article 91 of the (Tunnel Refineries Limited Intervention Rules of Procedure of the Court, on the Boardfor Agricultural Produce). grounds that the damage is neither present nor certain, nor is it specific. It states that it has grave doubts on the admissibility of the application since there appear to be lacking two essential elements which are necessary before With regard to the causal nexus, that is there can be any question of liability whether damage can be attributed to the under the second paragraph of Article Council's measures, the Council reserves 215 of the Treaty: namely the certainty its position on the point, since it can see of the damage and the directness of the neither cause nor effect. causal link between this damage and the fault alleged.

The Council then deals with a series of taking. Although the undertaking pays the maximum production levy on its B objections to the fixing of the levy on Quota, it will still have the highest isoglucose at 9.85 units of account per returns. Another refinery, on the other 100 kg (5 units of account per 100 kg for hand, may barely succeed in producing the 1977/78 marketing year) all linked to its A Quota. In that case, almost its the idea that isoglucose has been over- entire production will be paid for at the burdened in comparison with sugar. A sugar price, that is to say at a higher price per kilogram manufactured than As regards the first objection (which is the produce of the first refinery, but the common to both applications) that the total income of the latter will be higher. levy thus fixed constitutes discrimination Moreover, if it produces only one-third against isoglucose in favour of sugar, the of its B Quota it will pay a lower levy Council observes that according to some but its total income will still be lower.

AMYLUM COUNCIL AND COMMISSION

one-third of Quota A (35%) and is cultural policy is to "stabilize markets". guaranteed only the intervention price It therefore seems to be perfectly in reduced by the amount of the levy. In conformity with the objectives of the other words, sugar producers are common agricultural policy to consider guaranteed the intervention price isoglucose as additional sugar production reduced by a quarter of the levy (exactly and to make it bear a suitable financial 135 — 100 contribution to cover the export costs of = 26%). On the other hand 135 the excess Community sugar. isoglucose producers pay on all their production the full levy (although reduced by halffor 1977/78). It is in this The charge of discrimination is not then difference of treatment that the discrimi- valid. nation is alleged to lie.

It remains to be determined whether

— Would equality of systems ensure the The Council continues its arguments by same remuneration? asserting on the one hand that the selling price of the two products is virtually the same, the selling price of isoglucose It might on the contrary be claimed that approaching to within 2 or 3% the since the production of isoglucose is intervention price of sugar, and on the complementary to existing sugar other hand that it has by no means been production it is perfectly logical that it should be subject to the constraints of established that the cost price of isoglucose is at as high a level as that of that part of sugar production (B sugar) which is additional to the part judged sugar and thus that the levy which has necessary to cover the normal needs of been fixed cannot be borne by the Community and which, because of isoglucose. In connexion with the latter this, benefits from all Community point, the Council mentions the principle guarantees (A sugar) (cf. the seventh of law that it is for the applicant to bring recital in the preamble to Regulation No forward proof of his claim, which is 1111/77). moreover a principle "common to the laws of the Member States" within the

Article 39 of the Treaty states that one meaning of Article 215 of the EEC of the objectives of the common agri- Treaty.

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

isoglucose was excessive in relation to prohibited any activity. Secondly, even if the aim pursued. According to the they did hinder one by moderating its applicants' submissions, since isoglucose development, that would, in the had a production capacity of 3.5% that premises, have to be regarded as of sugar (namely 350 000 tonnes) in legitimate in the context of the options 1977 and could compete — and even of the common agricultural policy and as

AMYLUM v COUNCIL AND COMMISSION

As regards the complaints of violating If the Court had wished to draw a legal certainty and of lack of any distinction between damage in the sense transitional measures, the Council points of "dommage" and damage in the sense out on the one hand that Regulation No of "préjudice" — French terms which in 1111/77 is being applied by degrees since their ordinary meaning have identical the amount of the levy was halved for and interchangeable import — it would the first marketing year, hence there is a not have referred to the occurrence of transitional measure. On the other hand, "imminent damage ('dommages') fore- the Council adduces the absence of any seeable", as such damage would already acquired rights to regulation, or rather have to have actually occurred if to non-regulation, and the legitimate the Commission's interpretation were caution which should be shown by any correct. Thus this interpretation must be business investor. rejected as being excessively restrictive and as distorting the reasoning of the Court, which used the same formula in two judgments (paragraph No 6 of the Decision in Joined Cases 56 to 60/74, Kampffmeyer and paragraph 8 of the D — The replies in both Cases Decision in Case 44/76, Milch-, Fett- und Eier-Kontor). Moreover, to justify its position, the Court refers to the rules in — Case 116/77 force in the legal systems of the Member States, "the majority, if not all, of which recognize an action for a declaration of Admissibility ofthe application liability based on future damage ('dommage') which is sufficiently certain" (paragraph 6 of the Decision in As regards the admissibility of the Joined Cases 56 to 60/74, Kampffmeyer). application, the applicant argues first that Thus the Court has not seen fit, as the the damage alleged by it is both certain Commission contends, to draw a and direct. Without there being any need distinction between damage in the sense to prove its special character it can be of "dommage" and damage in the sense evaluated forthwith. of "préjudice".

give the least indication of the "factors victim then becomes the only person other than the contested levy" alleged to responsible for the damage he has break the chain of causation. Once the suffered. Such is not the case in this

applicant has established a prima facie instance, as the applicant in no wise causal connexion between Council Regu- contributed to the damage it has lation No 1111/77 and the damage, it is suffered. for the defendants to adduce evidence of the factor alleged to break the chain of causation. The applicant points out in general that if the arguments advanced by the defendants to. the effect that the application is inadmissible were accepted, (c) Special character of the damage they would have the effect of alleged considerably reducing the scope for individuals to bring actions in non-con- tractual liability before the Court of Liability for wrongful act or omission Justice. In this instance, the object of does not, as the Council contends, the action is precisely to obtain require proof of special damage. That compensation for the damage occasioned would be the case only where special and by the application of the disputed regu- abnormally severe damage had been lations to the applicant, namely the suffered by an individual as the result of closure of its isoglucose factory; the an administrative measure not vitiated object is not to obtain, in the form of an by a wrongful act or omission. award of damages, what is in reality only Consequently it is only where liability a reimbursement of the levies paid under without fault is at issue that special and those regulations.

has produced any evidence to show that Since it is a matter of assessing whether any policy was envisaged other than the the system introduced by Regulation No policy which was finally adopted to the 1111/77 penalizes isoglucose producers detriment of the isoglucose producers. as against sugar producers, the applicant submits that the basis should be average In short, the applicant wonders whether values. As the applicant stated in its the Community's intention in sacrificing application, from 1971 to 1976 the actual the isoglucose industry is to leave the B Quota varied between 12.5 and 19.8% present sugar producers with a monopoly of the A Quota. It follows that on in a market which they may perhaps average a sugar producer exhausts his A themselves convert to isoglucose Quota, then uses an amount of his B production. In that connexion, the Quota equivalent to 16% of the A applicant refers to the negotiations Quota. Using the Commission's method between the Netherlands producer of calculation, that gives the following Centrale Suiker Maatschappij and the figures: representative of Koninklijke Scholten- Honig which were reported in the Press. — A Sugar production: 100 — B sugar production: 16 At the present time, there are grounds — C sugar production: 0 for thinking that certain large-scale sugar Total sugar production: 116 producers are showing interest in taking a hand in isoglucose production. — Intervention price: 34.60 u.a. per 100 kg — Production levy: 9.85 u.a. per 100 kg — Price of B sugar: 34.60-9.85 = 24.75 u.a. per 100 kg. 2. Violation of the right of freedom to Return on sugar pursue a business activity 100 x 34.60 = 3 460 16 x 24.75 = 396

In a supplement to its reply, the Isoglucose is not, as the Commission applicant states that it has evidence that states, simply a substitute for sugar, since the example given by the Commission is it can be substituted only for liquid sugar quite exceptional. The figures quoted by and only up to 50%. Accordingly a reasonable estimate of the maximum total the Commission correspond to those which appear in the 1976 annual report market for isoglucose would be 50% of of the Béghin-Say company concerning the Community consumption of liquid its subsidiary Unisuc. On the basis of an sugar, that is 350 000 tonnes out of a analysis of Béghin-Say's reports for 1975 total sugar consumption of 9 million tonnes. and 1976, the applicant submits that the example put forward by the Commission No shred of evidence is produced by the proves exactly the opposite of what the Commission to support its estimate that Commission purports to show. the potential market in the long term for isoglucose might amount to as much as 30% of the total Community sugar 4. Violation of the principle of pro- market. portionality

(b) Production costs of isoglucose The applicant refers to the Commission's statement that one of the objectives of Contrary to various statements by the the contested legislation is to "control Commission and the Council to the

Cost of corn (see Note I) 139.77

Add freight to Greenwich 5.18

144.95

Less contribution from animal feed and other non-starch output 58.15

86.80

Common processes and handling costs 39.05

Selling price 208.00

Profit before interest 9.12

Less interest @ 12 1/2 % on working capital 2.79

Return on investment of £235 per tonne (see Note II) 6.33 <apnote>1</apnote>

1 — Since the investment was planned, the withdrawal of production restitution has reduced expected profit by £ 13.75 per tonne

Notes

£ per tonne

Cost of corn (see Note I) 164.35

Add freight to Greenwich 5.18

169.53

Less contribution from animal feed and other non-starch output 62.27

107.26

Total cost before interest 219.34

Selling price 222.00

Profit before interest 2.66

Less interest @ 121 /2 % on working capital 2.79

Return on investment of £235 per tonne (see Note II) — 0.13<appnote>1</appnote>

1 — Since the investment was planned, the withdrawal of production restitution has reduced expected profit by £13.75 per tonne.

2. Sugar the supposed benefit to isoglucose of the guaranteed price for sugar and to the The applicant accuses the Council and contribution to Community export costs. the Commission of presenting, in their The applicant observes that in any event defences, only a fragmentary picture of the two arguments cannot be used cumu- the Community sugar market and in latively. particular of not giving details of the crucial questions which relate to the B Quota levy, on which the levy on Law isoglucose was based.

Finally, because the A Quota has (as a the levy imposed is manifestly dispro- result of pressure from sugar producers) portionate and exorbitant. been fixed at an artificially and absurdly high figure, the B Quota is not generally filled; thus in 1975/1976 the B Quota 2. Objectives of the common agri- production at 1 069 000 tonnes was only cultural policy one-eighth of A Quota production at 8 529 000 tonnes.

In the applicant's submission it is for the Community sugar system to stabilize the 3. Alleged justification for the levy on sugar market, and the Community auth- the production of isoglucose orities having patently failed to stabilize that market, and having generated large Finally the applicant contests the surpluses at high prices, cannot Commission's two arguments relating to legitimately seek to remedy the situation

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

by penalizing the production of guaranteed price) and those of the raw isoglucose. material used, and without taking into consideration the possibility of additional measures being taken in this sector, as 3. Damages they were blinded by their belief that there would be a sugar shortage and that The sooner the illegality of the regu- a new outlet was assured for processed lation is established and the levy maize. eliminated, the less damage will be done to the applicant. Consequently the applicant has a legal obligation to — Causal nexus introduce proceedings at an early stage in order to mitigate the damage and After remarking that the applicant in would be acting improperly if it waited Case 143/77 unlike the other two for several years' losses to accrue before applicants had submitted the first piece taking action. of evidence that there was a causal link

AMYLUM COUNCIL AND COMMISSION

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

price (in fact the intervention price) No 1111/77 to dispense it from making whereas the levy on isoglucose amounts further justification of having violated to 14.45% of the corresponding price, freedom of trade and industry, or even and that these figures, being in a ratio of basic liberties. 1 to 5.2, are evidence of the discrimi- nation against isoglucose. In that connexion, the Council in repeats 6. Violation of legal certainty by the particular that before attempting to absence oftransitional measures prove that the rate of the levy on their product is discriminatory, the isoglucose The Council argues inter alia that Article manufacturers should have considered 18 of Regulation No 1111/77 has a whether their product is not receiving different purpose from that which the more than favourable treatment in that, applicants wish to attribute to it. In fact thanks to the sugar arrangements, it is it is a standard provision included in sold at a price determined not by market every change in agricultural regulations forces but by the sugar system. Since for "current contracts". they have not made this comparison and since the two situations are objectively Here the situation is quite different. different, they cannot claim that sugar and isoglucose are two similar products Regulation No 1111/77 starts out from a which are being treated differently. In system legitimately established for sugar following the applicants' line of and links any expansion of isoglucose argument it is easy to overlook the fact production to the difficulties which such that Regulation No 1110/77 establishes development will provoke in the sugar the relationship between the two levies system, from which, moreover, and justifies the amount of the levy on isoglucose benefits. isoglucose as laid down in Regulation No 1111/77.

Maize in the Federal Republic of Germany") (p. 83). Concerning Case 116/77, the Com- mission recalls that the production of 2. Production costs isoglucose is only one of a number of activities of the starch industry, which has many outlets for its numerous The Commission confirms that at the products; on the other side there is the time it submitted its proposal it did not sugar industry which is much more have and still does not have figures on specialized in both its production and its the actual and comparative production outlets. An objective comparison costs of isoglucose and liquid sugar. The therefore must be made at the level of figures produced by the applicant in the economic activities and not, in the Case 124/77 are merely estimates (of abstract, at the level of "products". which some are particularly open to discussion) since it appears that its plant has not yet come on stream. In order to refute the applicant's assertion that sugar undertakings producing B and C sugar only constitute 3. Raw materials a minute minority in comparison with the body of sugar producers, the The Commission observes that the Commission produces annexed to its applicant in Case 143/77 criticizes the rejoinder a statistical table on the Commission for minimizing the number of undertakings producing B and importance of isoglucose for Community C sugar up to the marketing year maize growers, but does not query the 1977/78. It may be seen from the table present figures produced by the that, leaving aside the first year, Commission regarding Community 1968/69, of application of the common supplies of maize. Moreover, shortages organization, the number of under- in production of maize and surpluses in takings producing B sugar varies between production of sugar beet within the 76% and 90% of the total number of

applicant's own method and taking the of the Agricultural Markets, 1976 applicant's figures for the production of Report, Part I", submitted to the isoglucose, the Commission calculates Council by the Commission; proposal for that the present share borne by a Council regulation (EEC) laying down isoglucose is only 2.6% of the total common provisions for isoglucose). burden of exporting the surplus of sugar In addition the Council submits to the on the Community market envisaged for Court a document dated 11 January 1977/78. In fact, in the Commission's 1977 produced by the Association view, the proper approach is to compare Générale des Producteurs de Maïs the levy on one tonne of isoglucose with (General Association of Maize the cost of disposing of the tonne of Producers): "Observations sur les Sirops sugar which it displaces from the de Glucose Riches en Fructose" (Obser- Community market. At slightly more vations on High Fructose Glucose than one-fifth of the cost to Community Syrups). The Council contends that this funds, it can hardly be said that the levy document confirms that: is disproportionate from this point of view. — At the end of 1977 the isoglucose production capacity amounted to 400 000 tonnes;

IV — Questions put by the Court — Plans were being studied with a view to attaining a capacity of approx- First question (to the Council and the imately 1 000 000 tonnes by 1980; Commission): and

(a) The Council and the Commission — The extent to which isoglucose might are asked to produce the figures and possibly be substituted for sugar calculations on which the rate of the (potential use) amounted to 2 000 000 tonnes. production levy for isoglucose was initially proposed by the Commission and subsequently fixed by the The Commission's answer Council. (a) The Commission states that its (b) The Council and the Commission examination of the rate of the

two competing products which were The Council's answer interchangeable in certain of their applications. The Council states that a comparative examination, such as this question refers to, was not made by the Council at the During the discussions in the Council the time of the discussions leading to the question arose whether this complete adoption of Regulation No 1111/77. parallelism which might result, in The Council's Agent also wonders particular, in a maximum rate of levy of whether what was at stake here might 30% of the intervention price of sugar have been not so much a problem of should not be tempered during a certain market organization as a question of transitional period. It was in this context harmonization of legislation and possibly that the Council finally accepted a maximum amount of five units of a matter of public health.

account for the levy on isoglucose, this amount representing the economic The Commission's answer

advantage gained by this product from a The Commission states that it did not market price for sugar higher than it would be without the limitation on take into consideration the bio-chemical

production deriving from the quota and hygienic properties of isoglucose as system. compared with traditional sugars manu- factured from beet and cane whilst the

provisions now in dispute were being The Commission intended that the one drafted. The Commission acted on the

year transitional period should be assumption, based on the information in extended in accordance with the its possession at the time, that isoglucose Commission's proposals to the Council had, from the economic and commercial for 1978/79, providing during this point of view, characteristics comparable

between products falling within this agri- The Council's Agent rejects the idea that cultural sector and similar products. Regulation No 1111/77 was designed to Thus, the Community authorities "assist" sugar producers by imposing a imposed constraints on non-agricultural constraint on isoglucose producers. products, that is to say products not Moreover, he does not consider that the listed in Annex II but which in common use of the expression "another sector" is parlance are considered to be of agri- an appropriate way of distinguishing cultural origin, constraints which were isoglucose from sugar. Both products necessary for the smooth functioning of are, in his view, as a pragmatic the common organization in question: consequence of the substitution possibilities and of Regulation No 1110/77 (Article 4), part of one vast sector, that of sweetening agents. (i) Example: Regulation No 1696/71 of 26 July 1971 (Official Journal, English Special Edition 1971 (II), p. 634) on the The Council's Agent makes the point common organization of the market that the agricultural systems of the hops (see in particular the third recital Member States may be integrated by the preamble thereto). In fact, the levying taxes on traders in certain smooth functioning of this market would products in one or all Member States for have been jeopardized if "broade the benefit of traders in other products. speaking interchangeable" products with hops, namely the essence and vegetable extract of hops had not been subject to In this connexion the third question put the common organization in question. In by the Court concerns an extremely order to establish a balance between

(ii) Another example: Regulation No In conclusion, the Council's Agent 2783/75 of 29 October 1975 on the reiterates that the "agricultural inter- common system of trade for ovalbumin vention system" is a coherent whole and lactalbumin (Official Journal L 282 made up of guarantees offered to of 1 November 1975) the first five producers, but subject to constraints recitals in the preamble to which show imposed on those selfsame producers. It the absolute necessity of such links would run entirely counter to the system between products by reason of their and to the general Community interest competitive use, that is to say their to wish to benefit from the guarantees interchangeability. whilst refusing to accept the constraints. This, however, is the position adopted by the isoglucose producers who wish to Conversely it is also possible to mention benefit from the guarantees offered to another method tending towards the the sugar producers, without having to same goal, by which an advantage is suffer any of the constraints imposed granted to the agricultural product so upon them. that a balance may be re-established with a similar product. In order to guarantee a balance between agricultural products Request for additional information (starch from cereals, potato starch etc.) addressed to the Commission and interchangeable products from the industrial sector, the Council (Regulation No 1132/74) introduced a production refund for the former. The Court 1. In the observations submitted by the Commission in Case 103/77 there is a considered this to be a legitimate reference to page 27 (French version) to mechanism (end of paragraph 7 and a report which is being prepared on the paragraphs 9 and 12 of the Decision in Case 2/77 Hoffmann's Stärkefabriken v competitive capacity of isoglucose as compared with sugar. If this investigation Hauptzollamt Bielefeld). has already been concluded the Court would be obliged if the report could be made available to it. As a third point mention might be made of the example of the case where supply difficulties in an agricultural sector led the Community authorities to tax not 2. In the reply in Case 116/77 there is only the export of the agricultural a reference on page 7 (French version) to product, but also certain goods resulting an investigation by the Commission's from the processing of the product, Directorate-General III into the costs of

By agreement with the Commission and the two industries KTD planned to carry 4. The Commission is asked to provide out the first part of tits investigation at detailed information with regard to the Amylum, the report on which was quantities of B and C sugar produced by completed on 23 March 1978 and is in the individual sugar producers during the form attached at Annex I, and to recent sugar marketing years (for pursue the second part of its example from 1974). investigation at Tirlemont, which commenced on 10 April and should be completed during the month of May. It The Commission's answers is further planned that the third part in which KTD gives its conclusions should be ready in mid-June. Thus at the present stage the Commission is only in Points 1 and 3 possession of partial information from this investigation. It will communicate the rest of the information to the Court The comparative investigation into the as soon as it is available. The production costs of isoglucose on the Commission thinks it important to one hand and of sugar, liquid and invert mention to the Court that it has sugar on the other, referred to on page undertaken with regard to the sugar 27 (French version) of the Commission's industry to treat in a confidential manner observations in Case 103/77 is the same the information acquired during the as that referred to at page 27 (French course of the investigation (see Annex version) of the Commission's defence in II). Case 124/77.

This investigation has been entrusted by Point 2

The Commission provides as Annex IV At page 26 of the Commission's defence the information requested by the Court. in Case 116/77 the Commission put The Commission mentions that this forward a calculation, carried out on the information has been acquired under the basis of the prices and levy for the provisions of Regulation (EEC) No 1977/78 marketing season but on the 1087/69 (Official Journal L 140 of hypothesis of a production for the firm 12 June 1969, p. 15). Article 7 of that in question of the same order as that regulation provides: obtained during the 1976/77 sugar- marketing season since its actual production for 1977/78 was not yet "Information communicated pursuant to known at the moment of the calculation the regulation is solely for the internal (November 1977). In the light of the use of the Commission. Only those Court's question, the Commission now persons who, within the Commission, are thinks it useful to submit for this firm the responsible for the sugar market may actual figures for the two most recent have access to information relating to an marketing seasons — see Annex I. These individual factory or undertaking. Such figures show that the position of the information may not be disclosed to particular firm has not improved in spite third parties." of its increased quota.

Regarding the other firms for which the Court has asked the Commission to do

the calculation again, the Commission Supplementary question put to the Commission thinks it necessary to emphasize that an analysis of their average production for the two most recent marketing seasons On page 26 of its defence in Case does not give a correct impression of 116/77 the Commission gave an example their situation. In fact the production of to show that the charge imposed on an C sugar in most Member States has been undertaking manufacturing isoglucose is comparatively small, often non-existent, equivalent to the one imposed, by way of because of the drought which prevailed the production levy, on a modern sugar during the 1976/77 marketing season undertaking manufacturing A, B and C and which seriously affected yields. The sugar. average Community yield was 15 to 20% lower than that for a normal harvest.

V — Further procedure and related events In its judgment of 25 October 1978 in Joined Cases 103 and 145/77 (Royal Scholten-Honig (Holdings) Ltd. v A — Oral procedure Intervention Board for Agricultural Produce, Tunnel Refineries Ltd. v Intervention Board for Agricultural At the hearing on 24 May 1978 G. R. Produce, [1978] ECR 2037) the Court Amylum N. V., represented by Michel stated that if it were to agree to the Waelbroeck, of the Brussels Bar, Tunnel above-mentioned request it would be Refineries Ltd., represented by Francis necessary for it to do the same in the Jacobs, Barrister, Middle Temple, context of Joined Cases 116, 124 and London, the Council of the European 143/77 as well as in Cases 103 and

C — The Court's judgment of 25 Oc- Joined Cases 83 and 94/76 and 4, 15 tober 1978 in Joined Cases 103 and and 40/77 (Bayerische HNL Vermeh- 145/77 rungsbetriebe GmbH & Co KG and Others v Council and Commission [1978] ECR 1209) such observations as they thought appropriate on the question In its judgment of 25 October 1978 the whether any losses were such as to be Court, giving a preliminary ruling on chargeable to the Community in questions submitted to it by the High pursuance of Article 215 of the Treaty. Court of Justice, Queen's Bench Division, Commercial Court, ruled that Council Regulation No 1111/77 of Following that invitation supplementary 17 May 1977 was invalid to the extent to observations were submitted by the which Articles 8 and 9 thereof imposed a applicants. In reply the Council and the production levy on isoglucose of 5 units Commission submitted supplementary of account per 100 kg of dry matter for written observations. the period corresponding to the sugar marketing year 1977/78. The Court had in fact held that the provisions of the Koninklijke Scholten-Honig N. V., the above-mentioned regulation establishing applicant in Case 143/77, asked that the production levy system for isoglucose certain data contained in the evaluation offended against the general principle of of its losses annexed to its supplementary equality of which the prohibition on observations should be treated as discrimination set out in Article 40 (3) of confidential and as a result that case was, the Treaty was a specific expression. It had however added that its answer by order of the Court of 7 March 1979, disjoined from Cases 116 and 124/77. would leave the Council free to take any necessary measures compatible with Community law for ensuring the proper functioning of the market in sweeteners. E — Re-opening ofthe oral procedure

Commission Regulation No 1468/77; 1. The damage

— Award the applicant, as compensation Whilst restricting itself to giving details for the damage suffered by it at the of the amount of the damage suffered by date of lodging the claim the sum of it until the date of its statement arising BF 106 612 456 plus interest at 7% out of the entry into force of Council until the date of actual payment; Regulation No 1111/77, the applicant — Reserve the applicant's right to claim nevertheless states that as long as the defendant institutions have not full reparation for any damage which it may suffer in the event of its being announced their decision with regard to obliged to close its isoglucose factory the consequences to be drawn from the if the defendant institutions omit to judgment of 25 October 1978 regarding draw the consequences of the the systems to be applied to isoglucose, it judgment of the Court of 25 October must reserve its right to claim 1978 as regards the applicability of compensation for the whole of the the provisions set out above to the damage resulting from any obligation sugar years subsequent to the incumbent upon it to close down its 1977/78 sugar year; isoglucose production unit. The loss was evaluated in the application at BF 777 — Order the defendants to pay the million costs.

For the present, it has been possible to The Council and the Commission state the damage suffered arising from contend that the application for damages the entry into force of Regulation No should be dismissed as unfounded and 1111/7 as follows on the basis of the

(e) Securities paid to the Société Générale de Banque BF 182-

(f) Expenses incurred by the applicant in defending its interests against the Belgian authorities BF 100

Total: BF 106 612 4

AMYLUM COUNCIL AND COMMISSION

2. The illegality of the act giving rise to HNL Vermehrungsbetriebe case). The the damage applicant has proved that the Community institutions have failed to observe a

fault involving the Community in (a) The applicant states that it shares liability. the opinion expressed by Mr Advocate General Capotorti according to which "the concept of serious breach is absorbed by that of the breach of a (c) In the HNL judgment, in order to principle of Community law or simply arrive at an appreciation of the manifest becomes a superfluous adjunct since it and serious nature of the manner in

has already been specified that liability which the institution concerned had

presupposes the breach of a superior rule exceeded its powers, the Court considers of law which confers personal rights on the harmful effects suffered by the individuals" (opinion in the Bayerische applicant. Thus it stated that "individuals

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

damage claimed by the applicant. The 5. The damage suffered by the applicant grave nature of the damage is thus (Annex I to its observations) beyond doubt, not only as regards the amount but also because it affects a On this subject the applicant attaches to restricted group of undertakings which its observations a note with the tables may easily be distinguished individually. annexed. Furthermore, contrary to the disputed measure in the HNL case, the effects of which affected the applicants only By way of introduction it states in indirectly, in the present case the particular that during the period from imposition of a discriminatory charge on July 1977 to October 1978 inclusive the isoglucose production had a direct and levy on isoglucose made it necessary to consequently a much more noticeable reduce sales of that product. In fact, incidence on the profitability of the owing to the production levy the direct isoglucose produced by the applicant in profit margin on isoglucose had become view of the fact the charge could not be lower than that on its marginal sales of recovered in the selling prices by reason starch and glucose. The applicant of competition from sugar. accordingly attempted to limit its loss as

AMYLUM v COUNCIL AND COMMISSION

The direct cost is the sum of all the

Even after the applicant had succeeded expenses which are directly proportional in finding alternative outlets it continued to the number of units manufactured. It to suffer a loss in view of the fact that is the total of the amounts paid for the the sales of alternative products, whilst raw material (maize), the ingredients, being more profitable than sales of packing and energy. The following are isoglucose subject to the levy would have not included in the direct cost: wages, been, did not make it possible to realize costs of upkeep and repairs, selling costs,

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

amounts written off and any general The applicant had to abandon during expenses. that period 24 500 tonnes of isoglucose (Tableó).

The direct cost of isoglucose is the direct cost calculated by Klynveld, Turquands, The difference between the margin on DTG & Co. at the request of the Commission according to the report of isoglucose not sold and the margin obtained on the alternative products sold 23 March 1978 (Report on a Cost Price is BF 72 723 229. Interest on this amount Calculation of Isoglucose, issued to from 30 October 1978 has been the European Economic Community, calculated at BF 2 936 798. 'Division III/A/3). This document is part of the file submitted to the Court. The

direct cost and the selling prices of alter- The total loss due to alternative sales native products and the selling prices for isoglucose were calculated on the basis which were less productive is BF 75 660 827 (Table 4). of the applicant's accounting documents.

AMYLUM COUNCIL AND COMMISSION

The applicant gives a detailed calculation of the following total losses due to reduction in grinding:

Isoglucose margin lost: BF 28 482 539

Interest (7 % until 31 October 1978): FB 2 187 182

Total loss: FB 30 669 721

— Commission's observations breach" may not take account of the conduct of the Community, that breach must be blameworthy. In other words In the introduction to its observations on three or, if necessary, four requirements this matter the Commission notes in must be met: a breach of a superior rule particular that it submitted to the of law, the rule in question must have Council on 12 March 1979 a proposal been designed for the protection of for a regulation amending Regulation individuals and finally the breach must No 1111/77 (Annex II). It continues its have been sufficiently serious and, where observations under the following necessary, must amount to a fault. headings:

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

graph 5). Contran' to what is understood First it claims that in that judgment the by the applicant the unlawfulness of the Court did not express its views on the measure complained of does not existence of a serious breach of a

necessarily and automatically constitute superior rule of law but confined itself to blameworthy conduct. establishing the objective invalidity of the regulation. Moreover, as may be seen from the "milk powder" cases (for According to the Commission the example the judgment of 5 July 1977 in requirements on which this situation is Case 114/76 Bela Mühle v Grows Farm based in the law of the Member States [1977] ECR at p. 1221, paragraph 7), the also apply at Community level. The manifestly disproportionate nature of the Court has taken express account of this measure in question does not necessarily by requiring that the breach be serious, constitute a "sufficiently serious breach". which, in the HNL case resulted in the criterion of the manifest and grave disregard by the Community of the limits on the exercise of its powers (paragraph Moreover, as the Court stated in the 6). Since the criterion establishes a "milk powder" judgment (HNL) of 25 balance between the public interest May 1978: "in a legislative field such as pursued by the legislative measure the one in question, in which one of the complained of and the economic chief features is the exercise of a

interests of individuals, the manifest and wide discretion essential for the

grave nature of the disregard must of implementation of the common agri- necessity be determined taking into cultural policy, the Community does not consideration also the effects harmful to therefore incur liability unless the those interests, as may be clearly seen in institution concerned has manifestly and the HNL judgment. gravely disregarded the limits on the exercise of its powers" (paragraph 6).

assess the seriousness of the damage Secondly the other principal factor in the suffered by the applicants Amylum and damage claimed, namely the "loss of Tunnel, and in particular the incidence margin owing to the reduction in of the levy on the profitability of the milling" cannot, for the same reasons, be isoglucose produced by the applicants, considered as the direct result of the one must not lose sight of the fact that imposition of the levy. that profitability itself depends on the common organization of the market in As regards the "abnormal" nature of the sugar. damage alleged, the Commission points out, first, that the incidence of the levy 2. The damage and the causal on production costs of isoglucose can connexion only have been relative from the point of view of the profitability of the under- The Commission disputes the direct and taking. In any event, according to the abnormal nature of the details of the Commission, it is for an expert inquiry to damage put forward by the applicant quantify that incidence in detail. In the Amylum. present state of the action it seems however that since the imposition of a As regards the direct nature of the levy could only, at the most, have aggra- damage claimed, the Commission points vated a situation which was already out that the applicant defines as more unprofitable, that finding should lead to than two-thirds of its damage the "loss excluding the abnormality of the damage of direct margin arising from the failing proof to the contrary to be replacement of sales of isoglucose by adduced by the applicant. Furthermore, alternative sales" and justifies this re- since isoglucose production constitutes orientation of its commercial policy by only part of the applicant's operations, a the fact that "the direct isoglucose consideration of the grave and abnormal margin had become less than the margin nature of any damage resulting from the on the marginal sales of starch and levy should be conducted having regard glucose". According to the Commission to the whole of the applicant's it does not appear that the imposition of operations. the production levy was the direct and sole cause of that situation. In fact, as may be seen from the inquiry carried out Secondly it appears that the economic by the Klynveld Turquands at the risks inherent in the production of applicant's premises, the cost price of isoglucose are much higher than the isoglucose, before any levy, amounts to applicant claims. In fact, at the time at BF 1 672 per 100 kg. (page 8 of the which the applicant undertook the above-mentioned report), whilst the construction of its production unit for average selling price of isoglucose from 100 000 tonnes of isoglucose (1 April July 1977 was BF 1 520 per 100 kg. (as 1975), the prices for sugar on the world

primarily to divert the extra starch being the main season for sale of production to other uses. isoglucose, which was to be supplied principally to soft drinks manufacturers. By reason of the levy it was necessary to The damages which it claims have been reduce production from the planned level the subject of an independent audit, the of about 1 000 tonnes a week to about

certificates in respect of which is set out 250 to 300 tonnes a week. The in Annex I to its observations. Its claim is applicant's customers were informed made on the basis that no further accordingly and made other arrange- unlawful measures will be taken in ments for the supply of sweeteners for respect of isoglucose. Subject to that 1978. As the result of the decision to

qualification, the applicant would accept limit production of isoglucose, Tunnel this claim, which has been updated to was unable to use its full starch capacity

AMYLUM COUNCIL AND COMMISSION

and the plant had to be shut down from incurred continuing storage and handling time to time. The resulting loss of costs. These costs have been evaluated at

factory production has been estimated at £57 376 (cf. Annex III). £320 186. Details of loss of production and the relevant calculations are set out in Annex III. (d) Higher unit cost owing to reduced isoglucose production

(cf. Annex III). (c) Starch stockholding costs

(e) Subsequent alternative investments As a result of being compelled to re- enter the dry starch market, the applicant inevitably encountered initial difficulties The applicant remarks that it had been in selling dry starch at its higher decided in September 1976 to install a production levels, with the result that dextrose spinner to make better use of its warehouse storage and handling costs existing equipment; the starch raw were incurred. Tunnel is confident that it material for dextrose was expected to can sell its stocks in time, but has come from a reduction in traditional

JUDGMENT OF 5. 12. 1979 — JOINED CASES 116 AND 124/77

glucose production. In June 1977, (g) Loss of goodwill however, after the announcement of the levy, it was proposed that the level of The applicant's decision to restrict glucose production should be maintained production was obviously unpopular with and that part of the starch originally customers. It consequently suffered a intended for isoglucose should be used as major loss of goodwill which it is unable raw material for dextrose. In November to quantify at this stage. 1977, it was decided to re-organize the factory's evaporation facilities; although other factors were also present, one of (h) Improved purchasing terms the main reasons for this was that at the

expected reduced levels of isoglucose The applicant also considers that it has throughput it would otherwise be lost the opportunity to negotiate quantity impossible to maintain the quality of discounts and rebates on some materials isoglucose production at the standards and services associated with isoglucose. agreed with customers. In October 1978 Again, at this stage, it is unable to two further capital projects were quantify this loss. approved, for further dextrose production and increased refinery conversion. Further details of these — Summary projects, together with supporting documents, are set out in Annex II. The applicant estimates that its losses up to 30 November 1978 totalling £1 020 150 are made up as follows:

2. The causal connexion between those The applicant states that it had to fund its losses under headings (a) to (e) from losses and the actions of the its normal sources of finance, principally Community bank loans and overdrafts. Based upon its actual borrowing record during 1978, The applicant submits that the losses a reasonable estimate for such interest suffered by it were a direct consequence actually paid in respect of the above of the unlawful actions of the

losses is 12% per annum. The interest Community. Furthermore, the applicant, charges have been calculated down to 30 which could not have been expected to November 1978 and have been included foresee any unlawful Community action, in the total figures given above for each and on whose part there were no contri- of the headings (a) to (e). butory acts, acted throughout with

AMYLUM v COUNCIL AND COMMISSION

Court concluded that the charge was held liable, the amount of the damages "manifestly unequal" (paragraph 82). should then be left over to be agreed Since what is required to establish the between the parties or, in the absence of liability of the Community is a manifest such agreement, to be decided on by the disregard of the limits on the exercise of Court as a separate question after the its powers, it follows, in the applicant's holding, if necessary, of a preparatory submission, that that requirement also is inquiry. satisfied in the present case. The Commission then proceeds to an In the alternative, if the Court should examination of the matter under the not consider that the manifest character following headings: of the infringement is already established by its findings on discrimination, the applicant respectfully invites the Court to 1. Liability consider the further violation of other

rules of law for the protection of the The observations submitted by the individual as alleged in its application. Commission with regard to the

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Community's liability are in essentials "losses claimed" are all in fact "loss of similar to those set out under the profit" with the possible exception of the heading of "Act giving rise to the "cost of alternative investments" which is

The Commission further claims that the The Commission submits, on the basis of root cause of the applicant's difficulties the applicant's own account, that the in obtaining a reasonable return from its strategy adopted aggravated the losses investment in isoglucose was the surplus and should rather be regarded as a of sugar prevailing on the Community "contributary cause" of those losses or and world markets at the time when its even as a "factor breaking the chain of plant came on stream (end of 1977), causation" (cf. the opinion of Mr Advocate General Trabucchi in Case whilst the applicant's basic investment decision was made in October 1974, 169/73 Compagnie Continentale when world prices were extremely high Council [1975] ECR 117 at p. 151). and were bringing about a steep increase in Community prices. In this context it is significant that already by October 1975 That submission is supported by the the applicant was having doubts about following considerations. First, the the wisdom of its investment in

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3. Losses C — Observations of the Council relating to both cases In its observations on the losses the

Commission emphasizes the necessity for additional information in order to 1. Introduction

appreciate properly various aspects of the The Council devotes the introduction to evaluation of the losses claimed by the applicant in Annex III to its observations its observations to a brief summary of (in particular under the headings the facts concerning isoglucose, a "Reduction in factory throughput", description of the actions of the parties "Producing dry starch rather than between the introduction of the levy and isoglucose" and "Stockholding costs of the judgment of the Court of 25 October starch"). 1978, followed by a consideration of the legal consequences of that judgment and The Court has asked the applicant to finally a description of the measures supply such information (see under IV proposed by the Commission in order to below). comply with that judgment.

As regards the losses under the heading First the Council remarks that there

"Capital and interest on alternative are two possible methods of production investments", the Commission states that for isoglucose, either by expanding on any legal or accounting principle this the maize-grinding capacity of a item is inadmissible as a loss for which conventional starch plant already built compensation may be claimed. Further- and adding on the specific plant required more, the Commission takes the view for the production of isoglucose, or else that the losses (unquantified and un- by creating a production unit specifically

In this respect the Council begins its comparison with isoglucose producers by By doing so, Amylum left its isoglucose taking as a model a sugar producer who production unit unused, whereas Tunnel has used up both his A and B quota, the made further investments in order to Court having, in paragraph 74 et seq. of produce on a permanent basis products the above judgment, accepted the as profitable as isoglucose but not subject comparison between the charge levied to a levy (cf. Annex III, p. 5 of the upon modern sugar works which also Tunnel statement). produce C sugar and that levied upon isoglucose producers. For the purposes of its comparison the Council accepts The damage which the applicant Amylum that the Court criticized the fact that, claims to have suffered merely by virtue when the officers of the Commission of the entry into force of Regulation No calculated the average charge for these 1111/77 mainly consists of the difference sugar undertakings running from 3.81 to between the direct margin for isoglucose 13.52 units of account per quintal, no with no levy and the direct margin for allowance was made for the fact that alternative products, the direct margin 60% of the charge was passed on to beet being the difference between selling growers. In these circumstances the prices and variable unit costs per charge actually borne by this model product. In the case of the applicant producer during the 1977/78 sugar year Tunnel in addition to a similar head of may be broken down as follows : damages there is the value of the investments for the substitute products which, according to the applicant, would Since 1 000 kg of beet normally produce not have been necessary had there been 130 kg of sugar (cf. paragraph 4 of no levy. Regulation No 1112/77 (Official Journal L 134, p. 9), the part of the levy charged to beet growers for 100 kg of As regards the judgment of 25 October 100 sugar is of the difference between 1978, the Council takes the view, on the 130 basis of a consideration of the reasons on the minimum price paid to beet growers which the said judgment was based, that per tonne of beet which has produced A the Court did not call in question the sugar and the minimum price also paid actual principle of a production levy to to beet growers per tonne of beet which be paid by isoglucose producers, but has produced B sugar, in other words,

3.5438 u.a. per 100 kg

However, the Council emphasizes that once again it should be remembered, in order to appreciate the economic risks If the validity of such a "full" charge is inherent in present-day sugar production to be admitted without the application of with a structural surplus of sugar, that it the ceiling in the case of the sugar- is not the aim of quotas to create producers, the validity of a similar structural surpluses. In this connexion charge must also be admitted in the case Article 27 (2) of Regulation No 3330/74 of the isoglucose producers since their of the Council lays down that the entire output contributed to the surplus production levy shall be calculated at a of guaranteed sugar, which is not the flat rate in proportion to the total losses case for sugar itself. incurred by the Community in disposing of the surplus of guaranteed sugar on the Finally the Council remarks that under world market. On the basis of that the proposal for a regulation amending principle the maximum levy for the Regulation No 1111/77, which the 1977/78 sugar year was 19.5 units of Commission sent to the Council on 7

account per 100 kg (cf. the 7th and 8th March 1979, that portion of isoglucose Recitals in the Preamble to Commission production which exceeds the basic Regulation No 2889/78 of 8 December quota of the producer undertaking 1978 — Official Journal L 344). would be charged a production levy

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As to Point (i)

The Council thinks that the proper As to Point (ii) interpretation of the HNL judgment implies that each specific feature of the measure in dispute should be assessed on The Council wonders whether the Court its own merits and in its own economic makes use, in attributing or rejecting context. The characteristic features of liability of the Community, of a criterion the economic context of the measure in linked to the seriousness not merely of dispute in this case are in particular as the damages suffered by the plaintiff but follows: the rashness with which the also of the breach of the rule of law in

parties concerned committed their question. Such a criterion appears to be considerable investments to development implicit in the terms of the 6th paragraph and exploitation of a new sweetener the of the HNL judgment. value of which remained unproven; their mistaken belief in the existence of a

market capable of absorbing sweeteners; This conclusion is understandable having their unjustified expectation that they regard to the difficulties with which the would be able to continue to enjoy a Council and the Commission are faced

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in the implementation of the common of the levy of 5 units of account could agricultural policy and the complexity not have been a causal factor in the both of the interests to be taken into decision to give up isoglucose production account and the objectives to be since it was unprofitable even before that attained, bearing in mind the vagaries of decision; it may at the very most have the economic situation. influenced the time ofgiving it up.

market is in fact determined by the misconceptions in that argument. First, it intervention price for sugar so that, as is founded on calculations taking into long as the market is glutted, no account for determining the margin only appreciable increase in the selling price variable costs and their relation to selling can be expected in the short or medium price, whereas the calculation should be term. based on all the costs to be borne by the producer, which should be compared The conclusion is therefore that with selling price; indeed, the hypothesis investments in isoglucose were developed presupposes that the under- economically unjustifiable and that taking is paying the fixed production production of isoglucose cannot be costs by drawing on another source, expected to show a return in the fore- which is contrary to sound business seeable future. Accordingly introduction management. Secondly, the above-

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mentioned argument postulates that any damage — any relevant argument levy whatever charged on isoglucose, in regarding the constituent elements of the whatever manner, should be prohibited, damage to the parties concerned. whereas the Court has not condemned

the principle of such levies. In conclusion the Council asks the Court

3. Causal connexion First question: its sales and production forecasts' for isoglucose expressed by As a subsidiary application the Council both price and quantity. requests the Court, if it finds that the non-contractual liability of the Community is incurred in principle, to Answer take the arguments expounded above as establishing that there is no causal connexion between the Community's action and the losses alleged by the The only relevant forecast providing applicants. detailed figures, before the announce- ment of the levy, was prepared in May and June 1976 as part of Tunnel's annual budget plan for the year beginning in 4. Alleged damage September 1976. It sets out in Annex A to its answer extracts from the budget Whilst holding to the arguments set out plan from which it emerges that the in the defence and the rejoinder, the isoglucose plant was to be used at 100% Council reserves the right to advance at of its effective capacity from the a later stage — should the Court find beginning of production. The extracts that the Community is liable under also show the relative margins of Article 215 and that there is in fact an isoglucose and of dry starch and the unbroken causal connexion between the expected fall in production of dry starch Community's actions and the alleged as isoglucose production increased.

YLUM COUNCIL AND COMMISSION

However, it was not possible to start starch in future and the decision to

Answer

Third question: as regards the heading "producing dry starch rather than The applicant states that in the past it isoglucose", an explanation of its has not considered it necessary to decision to process most of the wet maintain permanent records of the floor starch "in its under-utilized dry starch space and storage occupied by any plant and also to stop the importation specific product. It has not therefore and re-sale of dry starch" (statement of preserved internal records and copies of observations, Annex III, P. 2). Has the invoices in sufficient detail to allow it to

more intensive use of this plant reduced determine the actual storage costs of the unit costs of production? If so, has starch alone. However, on the basis of that been taken into consideration in his personal knowledge and experience, calculating the "margin lost" in Table B2 the applicant's chief storekeeper (i)? Is there a connexion between the estimates that during the period from decision not to import or re-sell dry November 1977 to November 1978

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2 It may be recalled that the following reasons were given in the seventh recital in the preamble to that regulation for the setting up of a production levy system for isoglucose :

"... being a substitute product in direct competition with liquid sugar, which, like all beet or cane sugar, is subject to stringent production constraints, isoglucose therefore enjoys an economic advantage, and since the Community has a sugar surplus, it is necessary to export corresponding quantities of sugar to third countries; ... there should, therefore, be provision for a suitable production levy on isoglucose to contribute to export costs".

AMYLUM v COUNCIL AND COMMISSION

3 According to the ninth recital, the aforesaid levy system is complementary to that established for sugar by Council Regulation No 3330/74 of 19 December 1974 on the common organization of the market in sugar (Official Journal 1974, L 359, p. 1) and the envisaged levy on the production of isoglucose is analogous to that provided for in Article 27 of Regulation No 3330/74, namely to the levy on a percentage of the production of sugar manufactured in excess of the basic quota.

4 The production levy system for isoglucose was established by Articles 8 and 9 of Regulation No 1111/77 and applied to the 1977/78 and 1978/79 sugar years. Article 9 (1) of the regulation provided that Member States were to charge a production levy on manufacturers of isoglucose and the first subparagraph of Article 9 (2) provided that the amount of the levy per 100 kg of dry matter should be equal to the amount of the production levy provided for in Article 27 of Regulation No 3330/74 for the same period to which the latter amount applied. However, under the second subparagraph of Article 9 (2), for the period from 1 July 1977 to 30 June 1978 the amount of the levy referred to in paragraph (1) might not exceed the amount of five units of account per 100 kg of dry matter.

7 On 25 June 1979 the Council adopted Regulation No 1293/79 (Official Journal 1979, L 162, p. 10) amending Regulation No 1111/77 in the light of the judgment of the Court of 25 October 1978. Since the most appropriate means for avoiding inequality of treatment between producers of sugar and producers of isoglucose was to subject isoglucose production to rules analogous to those applying to sugar production until 30 June 1980, Regu- lation No 1293/79 in particular established, on a transitional basis until that date, a temporary system of production quotas for isoglucose. It was also provided that for the quantity of isoglucose produced which exceeded the basic quote without exceeding the maximum quota Member States were to charge a production levy on the isoglucose producer concerned, the amount of which was to be equal to the share of the sugar production levy as fixed for the 1979/80 sugar year by virtue of Article 28 of Regulation No 3330/74, borne by the sugar manufacturers. As regards the production levy established by Regulation No 1111/77 and declared invalid by the above-mentioned judgment, it was abolished by Article 2 (1) of Regulation No 1293/79 with effect from 1 July 1977.

10 According to Amylum the damage caused to it by the entry into force of Regulation No 1111/77 consists, for the most part, on the one hand in the reduction in its profit margin resulting from the replacement of sales of isoglucose by alternative sales of starch and glucose and, on the other hand, in the loss of its profit margin resulting from the reduction in grinding during the early months following the establishment of the levy, a step made necessary by the absence during that period of outlets for the alternative products. Amylum is also claiming the cost of the bank guarantee referred to above and the expenditure in which it claims to have been involved in the defence of its interests before the Belgian authorities.

11 According to Tunnel the damage for which it is claiming compensation and which is attributable to the isoglucose production levy established by Regu- lation No 1111/77 consists in the loss of production of its factory, the loss of profits resulting from the production of dry starch instead of isoglucose, additional costs for storage and handling of starch as well as losses incurred by reason, on the one hand, of higher unit costs in its undertaking due to reduced isoglucose production and, on the other hand, of supplementary investments effected to increase production of substitute products.

12 Since the Court has already established in its judgment of 25 October 1978 that the imposition of an isoglucose production levy of five units of account per 100 kg of dry matter was incompatible with the principle of equality, the first question which arises in these cases is whether that illegality is such as to involve the Community in liability under the second paragraph of Article 215 of the Treaty.

14 This is confirmed in particular by the fact that, even though an action for damages under Articles 178 and 215 of the Treaty constitutes an independent action, it must nevertheless be assessed having regard to the whole of the system of legal protection of individuals set up by the Treaty. If an individual takes the view that he is injured by a Community legislative measure which he regards as illegal he has the opportunity, when the implementation of the measure is entrusted to national authorities, to contest the validity of the measure, at the time of its implementation, before a national court in an action against the national authority. Such a court may, or even must, in pursuance of Article 177, refer to the Court of Justice a question on the validity of the Community measure in question. The existence of such an action is by itself of such a nature as to ensure the efficient protection of the individuals concerned.

15 These considerations are of importance where, as in these cases, the Court, within the framework of a reference for a preliminary ruling, has declared a production levy to be illegal and where the competent institution, following that finding, has abolished the levy concerned with retroactive effect.

16 It is appropriate to inquire in the light of these considerations whether, in the circumstances of these cases, there has been, on the part of the Council and

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the Commission, a grave and manifest disregard of the limits which they are required to observe in exercising their discretion within the framework of the common agricultural policy.

21 It follows from these considerations that the Council and the Commission

did not disregard the limits which they were required to observe in the

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exercise of their discretion in the context of the common agricultural policy in such a serious manner as to incur the non-contractual liability of the Community.

22 The applications must be dismissed as unfounded.

Costs

2. Orders the applicants to pay the costs.

Kutscher O'Keeffe Touffait

Mertens de Wilmars Mackenzie Stuart Bosco Koopmans

Delivered in open court in Luxembourg on 5 December 1979.

A. Van Houtte H. Kutscher

Registrar President