C-143/77

JUDGMENT OF 5. 12. 1979 — CASE 143/77

In Case 143/77,

Koninklijke Scholten-Honig N.V., Amsterdam, also acting on behalf of the subsidiaries belonging to its group, in particular Royal Scholten-Honig (Holdings) Limited, assisted and represented by P. C. Van den Hoek and D.J. Gijlstra, both of the Amsterdam Bar, with an address for service in Luxembourg at the Chambers of J. C. Wolter, 2 Rue Goethe,

applicants,

Council of the European Communities, represented by Daniel Vignes, Director of its Legal Department, acting as Agent, assisted by A. Brautigam, a member of the Legal Department, with an address for service in Luxembourg at the office of J. N. van den Houten, Director of the Legal Department of the European Investment Bank, 2 Place de Metz,

and

Registrar: A. Van Houtte

gives the following

KONINKLIJKE SCHOLTEN-HONIG COUNCIL AND COMMISSION

JUDGMENT

Facts and Issues

I — Facts and procedure "... isoglucose is a direct substitute for liquid sugar obtained from sugar-beet or cane" (second recital); 1. The product at issue

By Article 9 the amount of the 2. Community legislation production levy is, per 100 kg of dry matter, equal to the amount of the production levy for sugar provided for in In view of the growing industrial Article 27 of Regulation (EEC) No production of isoglucose in several 3330/74 of the Council of 19 December Member States of the Community, the 1974 (Official Journal 1974, L 359, p. 1), Council decided to lay down common the basic sugar regulation, for the same measures applicable to that product. period to which the latter amount Those measures were adopted by applies. Council Regulation (EEC) No 1111/77 of 17 May 1977 (Official Journal 1977, L 134, p. 4). For the period from 1 July 1977 to 30 June 1978, however, the amount of the The recitals in the preamble to that regu- production levy may not exceed five lation contain amongst other things the units of account per 100 kg of dry following passages: matter. The latter amount is to apply

.3585

JUDGMENT OF 5. 12. 1979 — CASE 143/77

when the amount of the production levy By an application lodged at the Court on provided for in Article 27 of Regulation 16 February 1978, the Syndicat National No 3330/74 exceeds five units of des Fabricants de Sucre de France

account per 100 kg of white sugar for (National Union of Sugar Manufacturers the same period. of France), the Union Syndicale des Producers de Sucre et de Rhum de l'île Article 9 (3) provides that detailed rules de la Réunion (Union of Sugar and Rum for the application of the provisions Producers of the Island of Réunion) and concerning the production levy are to be the Syndicat Général des Producteurs de adopted in accordance with the Sucre et de Rhum des Antilles Francaises Management Committee procedure. (General Union of Sugar and Rum These detailed rules formed the subject Producers of the French West Indies)

purposes of the procedure. costs;

KONINKLIJKE SCHOLTEN-HONIG COUNCIL AND COMMISSION

Alternatively product to be crystallized. It is put on the market at a price 6 to 7% below that before giving judgment: of sugar. The difference in price corresponds approximately to the — Appoint an expert responsible for difference in sweetening power between determining the amount of the sugar and isoglucose. damage suffered by the applicant in collaboration with the Council, the Commission and the applicant itself; The applicant's research department spent many years developing a — Make an order as to costs in that commercially valid method of turning connexion subsequently. dextrose into fructose, with or without the use of enzymes.

far enough advanced to enable the factory, including development costs.

JUDGMENT OF 5. 12. 1979 — CASE 143/77

The applicant considers that the Regulation No 1468/77, the Council and imposition of the production levy on the Commission have violated the

isoglucose causes it damage. It is of the following principles of Community law. opinion that it and other Community manufacturers in a similar situation are

KONINKLIJKE SCHOLTEN-HONIG COUNCIL AND COMMISSION

Common Market is not distorted, and current target prices for sugar beet and the policy is more particularly contrary maize within the EEC, the Commission to the obligation meticulously described stated that at the date of its reply, 1 in the second subparagraph of Article 40 March 1977, it did not possess that (3) of the Treaty. necessary information regarding the isoglucose industry. One wonders therefore how the Commission was able 2. The obligation to take account of the to carry out its calculations and how it objectives set out in Article 39 (1) of arrived at the conclusion that isoglucose the Treaty in laying down rules for could be offered at a lower price than the common organization ofthe agri- cultural market the price applicable to sugar in the Community. For the same reasons as those advanced

JUDGMENT OF 5. 12. 1979 — CASE 143/77

so onerous that the construction of the — nominal value: the amounts derived

factories which are in the course of being from the administration report or the built cannot be completed since no estimate of returns; provision has been made for an exception in such a case. The fact that — consolidated value: the same amounts, the amount of the levy has been fixed but consolidated at 8% as from 31

only for a period of two years and that August 1977. the levy might be increased at the end of that period results in the applicant's The applicant states that it has made being placed in a most insecure situation, since from the economic and investments in research and development in the isoglucose field, that it has management point of view it can no constructed pilot plants and that it has longer find any justification for made investments at Tilbury in the continuing to invest in isoglucose. expectation that they would contribute to the future results of the group. The The applicant states that all investments damage to the applicant covers the in isoglucose and all expenses incurred following factors: on isoglucose must be written off, and that Koninklijke Scholten-Honig's — Development costs: estimated future profits will fall sharply owing to the absence of isoglucose 27 549 (nominal value) production. Therefore the loss of profit 27 103 (consolidated value) from future earnings must be included in the application for damages, since in the — Pilot plants at Foxhol and Koog: circumstances it will be necessary 32 588 (nominal value) fundamentally to modify the structure of 34 273 (consolidated value) the applicant's whole group. — Investments at Tilbury From the economic and management 34 770 (nominal value) point of view, the damage caused to the 34 770 (consolidated value) applicant by the introduction of the production levy on isoglucose results — Future results of Tilbury: from the following factors, and for the 95 561 (nominal value) purpose of calculating the damage the 58 132 (consolidated value) applicant has used the following method:

proportion to the aim sought. in isoglucose production, the cost of which is now being sought from the Community by the applicants, was based If the production levy in its present form in the first instance on a mistaken had not been imposed, the applicant assessment of the trends on the sugar market. could have continued to produce isoglucose and would not have been obliged now to write off all the investments which it has made in Secondly, the decision to produce isoglucose producion. isoglucose seems to have been influenced by the assumption by the starch industries of a firmly-established Therefore there is a direct connexion Community policy in the field of between the damage suffered and the production refunds for starch. If those regulations in dispute. refunds were indispensable to enable isoglucose to be produced on an economic scale and if the producers in question took as certain the permanent B — In its defence the Council first of existence of refunds at a level sufficient all adds to its observations in the defence to allow economic production of lodged in Cases 116 and MA/77, parti- isoglucose, so that they built their cularly as regards the damage and the investment policy on that assumption, causal nexus. It states that its obser- those producers again acted upon a vations in this case also apply mutatis mistaken assessment of the situation mutandis in the context of those cases. concerning isoglucose.

Yet a third consideration was the — Damage and causal nexus absence of a Community charge on the production of isoglucose (unlike B The decision to produce isoglucose was, Quota sugar) and distinctly lower charge in the Council's contention, strongly on isoglucose as compared with sugar in several Member States. influenced by three factors, the first of which appears to be the most important and the other two in a sense adjuncts to the first one. It seems quite clear that if a particular product can be sold profitably only owing to a difference in taxation It appears that the primary consideration between that product and a substitute taken into account at the time of the product, then that difference can never

On the other hand, the Council contends The Council persists in the arguments set that, even if it is shown that isoglucose out in its defence in Cases 116 and can withstand selling conditions similar 124/77, that is in particular that to those for sugar and that the level of isoglucose producers and sugar the disputed levy is "excessive", that producers are not in comparable situation would none the less still be only situations, so that the question of one of the factors giving rise to the discrimination between them cannot damage, taking into account the arise. mistaken assessments made by the isoglucose producers. None the less the Council points out objective circumstances which either go to show that the situations of the two Thus it is to be seen that on any analysis the applicants themselves contributed to categories of producers in question arc the damage which they claim to have not comparable — the Council's suffered. That contribution totally breaks argument — or tend to justify different the chain of causation between the levy treatment of those two categories of and any damage (paragraph 23 of the producers, if it is held that Decision in Case 169/73 Compagnie situations are comparable owing to the Continentale France Council [1975] fact that of the products at issue ECR 117, at p. 135). interchangeable in the preparation foodstuffs.

Even if the Court does not follow this First, isoglucose was introduced line of reasoning and holds that there is market in which production alread damage and that there is a causal nexus outstripped consumption and in and that there is a breach of a superior the rights arising from rule of law, the Council contends that organization of the market had none the less the applicant's contribution been allocated for several years to the damage must be to a considerable beet and cane sugar producers. extent reflected in the portion of the damage to be borne by the applicant in accordance with the general principles Secondly, the difference between the common to the laws of the Member materials used for the production of States. or cane sugar and for the production

2. Disregard of the objectives in Article 39 of the Treaty and of the principle The Council first of all remarks that of proportionality isoglucose production — far from being made impossible for ever — is at worst only temporarily impeded in the aim of The Council points out inter alia that the restoring stability to a market which was aim pursued by Regulation No 1111/77 in danger of being seriously disturbed by was primarily to stabilize the market in the appearence of a new product at a sugar within the Community by time when the shares in the market had depriving isoglucose of the economic already been allocated for a certain advantage which it derived from being, period. unlike sugar, free from any levy, and thus redressing the conditions of competition between the two products. It also points out that even if it is found Temporary restriction is being confused that the constraints temporarily imposed here with absolute prohibition. on that product are too severe, it must also be borne in mind that other

conditions of competition between the So far as relevant, the Council relies here two products have not yet been on the judgment of the Court in Case altogether brought into equilibrium. 4/73, Nold, in which it was held that fundamental rights such as the one In that connexion, it is not to be pleaded in this case can be subject to forgotten that there are appreciable restrictions in accordance with the public interest. differences in national taxes on each of

the products. Thus, even if it were found that isoglucose was — even temporarily — excessively handicapped, none the less that handicap is largely compensated for C — In its defence the Commission by other competitive factors. repeats the exposition of the economic and legislative context of the dispute given in its defence in Case 116/77 (Amylum). 3. Violation oflegal certainty

of starch (and not isoglucose) and on the if the applicant's argument that the other hand the manufacturers of sugar. comparison should not be between starch The situation of these manufacturers is producers and sugar producers but in no way comparable. between isoglucose producers and sugar producers is accepted, it would none the Isoglucose is a recently-developed less have to be found that this in no way product manufactured by the starch proves that there is discrimination industry for which it represents only a between the aforementioned producers. by-product. The manufacture of In fact the total effect of the measures at

isoglucose requires only the addition of a issue on the prices of products in both supplementary technical unit to a sectors has to be examined, and only if modern type of starch factory, and there is found to be a difference can the

isoglucose, like any other product, has to question of discrimination arise. make its marginal contribution to the total costs which have to be borne by the In support of its contention that such is starch manufacturers. At the present not the case, the Commission puts time, isoglucose represents only 3% of forward the same calculations as those

the total production of starch within the set out in its defence in Case 116/77.

Community.

The starch producers manufacture many 2. Violation of the principle of pro- products from different types of raw- portionality materials and sell them to a wide range of consumers. Starch manufacturers are Adopting the argument of Mr Advocate therefore much better able to adapt General Capotorti (Opinion presented in themselves to circumstances than sugar joined Cases 83, 94, 114, 116, 119 and

As regards the competitive position of That objective is not disputed by the isoglucose, the defendants have failed to applicant. The applicant bases itself on take into account the perishability of the the argument that the measure adopted product. Transporting it over long by the Community makes any distances is extremely expensive, because special tankers have to be used in order competition by isoglucose on the sugar to maintain the isoglucose at the correct market impossible. However, the temperature. applicant adduces no evidence to support this allegation. In fact, the measure at issue consists of taxing the production of As to the taxes which, according to the isoglucose at the rate of approximately Council, apply to sugar in the different 14.5% per 100 kg, which corresponds to Member States, the applicant points out the minimum economic advantage that in four Member States sugar is not enjoyed by isoglucose producers owing subject to any taxation and from that to the fact that the prices which they can point of view isoglucose and liquid sugar charge are close to those for sugar. The are in an identical competitive situation Commission thinks it most unlikely that in those Member States. the imposition of such a burden on an industry which, unlike the sugar industry, is very modern and can Furthermore, the applicant has therefore carry out production very constructed its isoglucose factory in the efficiently, would deprive that industry United Kingdom, where sugar is not of its competitiveness. taxed and where the use of glucose and isoglucose is not, as in most Member States, restricted by legal provisions on As regards the assessment of the damage, the composition of products. the Commission calls in question the applicant's statement to the effect that a number of factories and investments As far as the raw materials for isoglucose must be completely written off. It points are concerned, it is in the interest of the out in particular that the factories which applicant and similar undertakings to use have been constructed still have some ever-increasing amounts of Community- value and that the investments in produced maize. The intention is to technical knowledge have not lost all increase in the Community the areas their value. Furthermore, in the where maize is cultivated and to develop Commission's contention, the final strains of maize suitable for use as raw

The applicant submits that the Court of Justice itself takes the view that the The applicant argues that there is no objectives stated in Article 39 (1) of the objective basis for the different treatment Treaty, taken together with the of isoglucose. Moreover, the applicant prohibition on discrimination in Article criticizes the Commission's attempt to 40 (3), supply the criteria for appraising minimize that difference of treatment by the legality of Community measures using an atypical example. adopted in the agricultural sector (Case 116/76, Granaría). Thus there is indeed a rule enacted for the protection of the 3. Violation of the principle of pro- interests of individuals. portionality

could compete with solid sugar only when isoglucose is offered at a distinctly lower price than sugar. In answer After remarking that the applicant in to a question from Mr Martens, Case 143/77 unlike the other two Commissioner Davignon told the applicants had submitted the first piece European Parliament that the market of evidence that there was a causal link share of isoglucose would without doubt between the alleged damage suffered and hardly exceed 5 to 6%, a figure Regulation No 1111/77, the Council comparable to the present market share points out that it seems from the of liquid sugar. application lodged by the same applicant in the action for liability in Case 153/77 that the cause of the alleged damage suffered is to be found further back than As the Commission was obliged to admit Regulation No 1111/77. The application in its answer to Mr Martens' question that it did not have sufficient information contains inter alia the following passage (p. 34):“The production of isoglucose on the isoglucose industry, it cannot but would not have become unprofitable if the be felt that the defendants' policy was a production refund had not been abolished". panic policy and that it was desired to restrain the development of isoglucose in the Community at any price. Furthermore, it now appears from the figures submitted by the applicant in Case 124/77 in Annex I to its reply in that case (in particular from the document dated 12 July 1977 and — The Council's rejoinder relating to headed "Projected Costs of Isoglucose") Joined Cases 116/77, 124/77 and that a loss was made by that applicant as 143/77 well on the manufacture of isoglucose as a result of abolition of the production refund that is as a result of Council In its rejoinder the Council argues that it Regulation No 1862/76 of 27 July 1976. is because they were rash in their business actions that the applicants suffered damage. Their applications Be that as it may, it is the Council's should therefore be rejected for lack of a opinion that the present claims for causal nexus, as the damage suffered, that is the economic obsolescence of their damages should be ruled inadmissible since the grounds adduced by the investments, was the particular result of applicants do not show that Regulation the lack of caution with which they No 1111/77 was. a certain cause, within entered a sector covered by special rules, the meaning of the case-law of the Court hoping to benefit from both the in Joined Cases 56 to 60/74, of the advantages of that sector (high alleged damage. guaranteed price) and those of the raw material used, and without taking into consideration the possibility of additional measures being taken in this sector, as With more specific reference to they were blinded by their belief that Scholten's application, the Council bases there would be a sugar shortage and that its new argument of inadmissibility on a new outlet was assured for processed Article 42 (2) of the Rules of Procedure. maize. The arguments put forward by this

company after the lodging of the in Western Europe by 1980 to the extent Council's defences in the present cases of over two million tonnes and certainly constitute a fresh issue within the at least one million tonnes (W. meaning of the said article. Grosskopf and E. Schmidt, "Saccharose or Isoglucose" pp. 14-17). And the Council emphasizes the turmoil that — Serious breach of a superior rule of would result on the market if even only law one million tonnes of isoglucose were produced. Before replying to a number of remarks made by the applicants concerning the 2. The question of acquired rights to Council's alleged serious breach of such continuance ofregulations a superior rule of law, the Council submits inter alia the following obser- vations on the "potential" production of The Council finds no quarrel with the isoglucose and on the rights acquired by applicants' assertion that there are no virtue of Community regulations. acquired rights to the continued existence of regulations. However it points out that, in the context of regu- 1. Potential production of isoglucose lations clearly laying down the and the extent to which that product conditions which traders are to enjoy may he substitutedfor sugar during a given period, such traders enjoy, if not "acquired rights" stricto sensu, in the said regulations. This is true The Council observes that it is clear that of the interest of the sugar undertakings isoglucose is not fully interchangeable in the system of quotas introduced by with sugar and that the share of the Regulation No 3330/74. market occupied by household consumption cannot be supplied by isoglucose. On the other hand, the scope 3. Infringement of Article 39 of the for substitution in all industrial uses of Treaty sugar is extensive. This leads on to the problem of liquid sugar. There are, The Council defends the wisdom of its however, two types of liquid sugar, one choice of certain objectives in that article marketed in the liquid state and the in preference to others, against various other which, after delivery to the criticisms made by the applicants. processor in the solid state, is added by the latter to an aqueous solution for use (certain manufacturers prepare their 4. The complaints of discrimination, liquid sugar themselves using solid disproportionality and misuse of sugar). powers

attempting to prove that the rate of the 6. Violation of legal certainty by the levy on their product is discriminatory, absence oftransitional measures the isoglucose manufacturers should have considered whether their product is The Council argues inter alia that Article not receiving more than favourable 18 of Regulation No 1111/77 has a treatment in that, thanks to the sugar different purpose from that which the arrangements, it is sold at a price applicants wish to attribute to it. In fact determined not by market forces but by it is a standard provision included in the sugar system. Since they have not every change in agricultural regulations made this comparison and since the two for "current contracts". situations are objectively different, they cannot claim that sugar and isoglucose Here the situation is quite different. are two similar products which are being Regulation No 1111/77 stans out from a treated differently. In following the system legitimately established for sugar applicants' line of argument it is easy to and links any expansion of isoglucose overlook the fact that Regulation No production to the difficulties which such 1110/77 establishes the relationship development will provoke in the sugar between the two levies and justifies the system, from which, moreover, amount of the levy on isoglucose as laid isoglucose benefits. down in Regulation No 1111/77.

F — The Commission's rejoinder relating The applicants will no doubt maintain to the three cases that the relationship established by Regu- lation No 1110/77 represents a misuse of — Facts powers in that an uneconomic product, sugar, is being "propped up" by an economic product, isoglucose, at the In its rejoinder, the Commission deals expense of the latter. The Council has inter alia with the following points: already rejected this argument in its various forms. 1. Extent to which isoglucose may be substitutedfor sugar

In order to refute the applicant's The Commission observes that the assertion that sugar undertakings applicant in Case 143/77 criticizes the producing B and C sugar only constitute Commission for minimizing the a minute minority in comparison with importance of isoglucose for Community the body of sugar producers, the maize growers, but does not query the Commission produces annexed to its present figures produced by the rejoinder a statistical table on the Commission regarding Community number of undertakings producing B and supplies of maize. Moreover, shortages C sugar up to the marketing year 1977/- in production of maize and surpluses in 1978. It may be seen from the table that, production of sugar within the leaving aside the first year 1968/1969, of Community should be weighed against each other. application of the common organization, the number of undertakings producing B sugar varies between 76% and 90% of the total number of sugar undertakings, while between 5% and 44% of the — Law undertakings produced C sugar. These figures show that, contrary to the applicant's argument, the comparison made by the Commission with a sugar The Commission persists in all the undertaking producing the three kinds of arguments as to the admissibility of the sugar has a firm economic basis. The applications put forward in its defences objections put forward by the applicant while developing them in order to (in the supplement to its reply) to the answer the various points made in the calculation carried out by the replies. Commission only go to show that the applicant does not wish to be compared with a sugar-producing competitor On the merits of the applications, the placed in a similar situation, that is to Commission develops its arguments in say recently arrived on the market and reply to the applicants' submissions, in supporting the maximum burden of the particular on the following points: production levy.

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

(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 production levy for isoglucose was 2 000 000 tonnes.

initially proposed by the Commission and subsequently fixed by the Council. The Commissions's answer

(b) The Council and the Commission (a) The Commission states that its are asked to produce the information examination of the rate of the available to them at the material production levy for isoglucose provided times as regards the capacity for in Regulation No 1111/77 was not based isoglucose to be used as a substitute on specific calculations. The Commission for sugar and the future production approached the question in the following possibilities of isoglucose. manner: isoglucose being a product

JUDGMENT OF 5. 12. 1979 — CASE 143/77

which could be substituted for liquid mation in its possession at the time of the sugar, it was appropriate to include it in preparation of Regulation No 1111/77 the management of the sugar market. as regards the capacity for isoglucose to Given the existing forecasts of the be used as a substitute for sugar and the situation of the sugar market in the future production possibilities of Community and of the costs in the form isoglucose. of refunds following from exports, the Commission proposed that the Second question (to the Council and the production of isoglucose should be Commission): subjected to the same levy system as that existing for the production of sugar, which had the object of causing Did the Council and the Commission at

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 During the discussions in the Council the to, was not made by the Council at the question arose whether this complete time of the discussions leading to the parallelism which might result, in adoption of Regulation No 1111/77. particular, in a maximum rate of levy of The Council's Agent also wonders 30% of the intervention price of sugar whether what was at stake here might should not be tempered during a certain have been not so much a problem of transitional period. It was in this context market organization as a question of that the Council finally accepted a harmonization of legislation and possibly maximum amount of five units of a matter of public health. account for the levy on isoglucose, this amount representing the economic advantage gained by this product from a The Commission's answer market price for sugar higher than it would be without the limitation on The Commission states that it did not production deriving from the quota take into consideration the bio-chemical system. and hygienic properties of isoglucose as The Commission intended that the one compared with traditional sugars manu- factured from beet and cane whilst the year transitional period should be extended in accordance with the provisions now in dispute were being drafted. The Commission acted on the Commission's proposals to the Council for 1978/79, providing during this assumption, based on the information in period the same figure of five units of its possession at the time, that isoglucose account for the isoglucose levy. had, from the economic and commercial point of view, characteristics comparable to those of traditional liquid sugar. By (b) In appendices to its answer the way of illustration, the Commission Commission submits the relevant infor- submits in an annex data provided by the

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 listed in Annex II but which in common Moreover, he does not consider that the 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 in that the agricultural systems of the hops (see in particular the third recital in 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 "broadly 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

In conclusion, the Council's Agent (ii) Another example: Regulation No reiterates that the "agricultural 2783/75 of 29 October 1975 on the intervention system" is a coherent whole common system of trade for ovalbumin made up of guarantees offered to and lactalbumin (Official Journal No L producers, but subject to constraints 282 of 1 November 1975) the first five imposed on those selfsame producers. It recitals in the preamble to which show would run entirely counter to the system the absolute necessity of such links and to the general Community interest between products by reason of their to wish to benefit from the guarantees competitive use, that is to say their whilst refusing to accept the constraints. interchangeability. This, however, is the position adopted by the isoglucose producers who wish to benefit from the guarantees offered to the sugar producers, without having to Conversely it is also possible to mention suffer any of the constraints imposed another method tending towards the upon them. same goal, by which an advantage is granted to the agricultural product so that a balance may be re-established with a similar product. In order to guarantee Request for additional information a balance between agricultural products addressed to the Commission (starch from cereals, potato starch etc.) and interchangeable products from the industrial sector, the Council (Regulation 1. In the observations submitted by the No 1132/74) introduced a production Commission in Case 103/77 there is a refund for the former. The Court reference to page 27 (French version) to considered this to be a legitimate a report which is being prepared on the mechanism (end of paragraph 7 and competitive capacity of isoglucose as paragraphs 9 and 12 of the Decision in compared with sugar. If this investigation Case 2/77 Hoffmann's Stärkefabriken v has already been concluded the Court Hauptzollamt Bielefeld). would be obliged if the report could be made available to it.

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

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 12 hypothesis of a production for the firm in question of the same order as that June 1969, p. 15). Article 7 of that regu- obtained during the 1976/77 sugar- lation provides: marketing season since its actual production for 1977/78 was not yet known at the moment of the calculation "Information communicated pursuant to (November 1977). In the light of the the regulation is solely for the internal Court's question, the Commission now use of the Commission. Only those thinks it useful to submit for this firm the persons who, within the Commission, are actual figures for the two most recent responsible for the sugar market may marketing seasons — see Annex I. These have access to information relating to an figures show that the position of the individual factory or undertaking. Such particular firm has not improved in spite information may not be disclosed to of its increased quota. third parties."

Regarding the other firms for which the Supplementary question put to the Court has asked the Commission to do Commission the calculation again, 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 in cases 116, 124 and 143/77 and In its judgment of 25 October 1978 in related events Joined Cases 103 and 145/77 (Royal Scholten-Honig (Holdings) Ltd. v Intervention Board for Agricultural Produce; Tunnel Refineries Ltd. v Intervention Board for Agricultural A — Oral procedure Produce, [1978] ECR 2037) the Court stated that if it were to agree to the above-mentioned request it would be At the hearing on 24 May 1978 necessary for it to do the same in the Koninklijke Scholten-Honig N.V., context of Joined Cases 116, 124 and represented by D.J. Gijlstra, of the 143/77 as well as in Cases 103 and Amsterdam Bar, the Council of the 145/77. Having regard to the reasons European Communities, represented by given in the decision of the above- its Agent, Daniel Vignes, assisted by A. mentioned judgment the Court did not Brautigam and D. G. Lawrence, think it necessary to agree to the above- members of its Legal Department, and mentioned request. the Commission of the European Communities, represented by its Agent J. H. J. Bourgeois, assisted by J. Delmoly, a member of its Legal Department, presented oral argument.

On the same grounds the Court also refused to accede to a request from the Commission, contained in a letter dated The Advocate General delivered his 25 September 1978, under Articles 60 opinion at the hearing on 20 June 1978. and 61 of the Rules of Procedure, that it should be authorized to produce to the Court the second and third parts of the — Requests submitted after the closure comparative study of the production ofthe oral procedure costs of isoglucose on the one hand and sugar, liquid sugar and inven sugar on By letter of 8 August 1978 Tunnel the other, conducted by the private firm Refineries Ltd., the applicant in the main Klynveld-Turquands DTG & Co., and

D — Resumption of the written procedure in Joined Cases 116, 124 The Court, after asking Koninklijke and 143/77 and disjoinder of Case Scholten-Honig N.V. to supply sup- 143/77 plementary information as regards the evaluation of its losses (see under VIII below) and on hearing the report of the By letter of 21 November 1978, the Judge-Rapporteur and the views of the Court invited the applicants in the three Advocate General, decided to re-open above-mentioned cases to supplement the the oral procedure, limited to the written procedure with a statement of question whether, having regard also to observations specifying their losses and the behaviour of the applicant; the the causal connexion between those Community had in principle any non- losses and the actions of the Community contractual liability as regards one or

KONINKLIJKE SCHOLTEN-HONIG COUNCIL AND COMMISSION

more heads of the claim for damages put 1. Must the losses suffered by the forward by the applicant, any question applicant be charged to the concerning the proof and detailed calcu- Community under Article 215 of the lation of the quantum of any damage Treaty? which might be established being if necessary deferred until a later stage in On the basis of the criteria set out by Mr the procedure. Advocate General Capotorti in Joined Cases 83 and 93/76 and 4, 15 and 40/77 (the "Skimmed-Milk Powder" Cases, Bayerische HNL Vermehrungsbetriebe & VI — Conclusions of the parties Co. KG and Others Council and Commission, referred to above), the

The applicant maintains its conclusions, applicant takes the view that in this case formulated in its application and its there is a "sufficiently serious breach of reply. a superior rule of law for the protection of the individual" within the meaning of the settled case-law of the Court (cf. in The Commission contends that the Court should: particular the judgment of 2 December 1971 in Case 5/71, Zuckerfabrik Schöppenstedt Council, [1971] ECR (1) Declare the putting forward of any 975), so that the losses suffered by the grounds other than the adoption of applicant should be charged to the Regulation No 1111/77 in assessing Community under Article 215 of the the liability of the Community to be Treaty. inadmissible;

applicants in this case are fully suffered by the applicant and the distinguished individually by the actions of the Community measures adopted by the Council and the Commission. There is no possible doubt with regard to the undertakings affected The applicant maintains that it has within the Community by the measure in clearly explained in its application and in dispute. its reply that there is a direct connexion between the production levy fixed by In the applicant's opinion the difference Regulation No 1111/77 and the damage resides also in the fact that the which it suffered. It claims that, in their Community institutions manifestly and defence and rejoinder the Council and gravely disregarded the limits of their the Commission did not so much deny powers. In fact in this respect it must be the existence of that causal connexion as emphasized that the production levy of an attempt to lay at the door of the five units of account for the 1977/1978 applicants in these joined cases part of sugar year, referred to in Articles 8 and the responsibility for the damage 9 of Regulation No 1111/77 is only the suffered. consequence of a compromise within the Council. The Commission's proposals were very far-reaching and if it had been Furthermore the applicant contests the possible to put them into force they argument of the Council and the could only have increased the distortion Commission to the effect that it was not to a much greater degree. the imposition of the production levy It is true that the compromise effected which was at the basis of the damage but within the Council of the European the abolition of production refunds by Communities limited the production levy Council Regulation No 1862/76. In this for the first year to five units of account respect it states that the document but at that time the damage was already entitled "Application for Compensation Isomerose No 2" (annexed to its obser- done as regards the applicant. Furth- ermore everything seemed to indicate at vations) shows that it was the levy which that time that the production levy would gave the coup de grâce to the production be drastically increased from the of isoglucose. beginning of the following sugar year. It was only in the course of these In fact the three applicants in these proceedings, at the beginning of 1978, joined cases had all been engaged with that the production levy was definitively fixed at the amount of five units of the development of isoglucose long account, which was still exorbitant. .before there was any question of a shortage of sugar on the world market, The applicant further points out that if that is to say, a long time before 1973/- account is also taken of the fact the 1974. They effected investments in this Council and the Community acted in an sector for research and for the

applicant to plan the construction of a Council and the damage suffered. very large unit for maize grinding: that was the "Tilbury project". Isoglucose was retained as representing one of the 3. The applicant's damage new outlets for this large grinding unit. The fact that, even if the production For the purpose of calculating the refund system were to be modified or damage suffered by the applicant it refers abolished, the existing factories, which to the note entitled "Application for were already at work, would nevertheless Compensation Isomerose No 2" be able to pursue their activities as long (annexed to its observations), dated 20 as they continued to have a variable June 1977, but brought up to date on 18 positive profit margin, played an January 1979. important role in that project. In the introduction to that note it is It was the policy of the Council and the stated that it was drawn up having Commission which led to the decision to regard to the "EEC production levy on discontinue investment in isoglucose. isomerose to be brought into force on 1 July 1977" and that the "application for In fact, the applicant and, a most compensation No 1, drawn up following important fact in this case, the latter's the abolition of the production refund on financiers, saw how the Council and the maize intended for the production of Commission, not burdening themselves isomerose is commented upon from the with any knowledge of the facts, set financial point of view in a separate about imposing a production levy on the note".

must be considered as having been totally written off;

— Owing in particular to this uncer- tainty there is no further economic — Scholten-Honig's expected output will show a considerable deterio- justification in continuing to invest in isomerose. ration since the production of isomerose must be given up;

— This loss of profit on future results — Scholten-Honig's isomerose project is thus a factor in the action for at Tilbury is at the moment half compensation since ita requires completed and the company is thus radical restructuring of the whole of compelled to stop all investment in the group". the field of isomerose.

It is stated in the above-mentioned note

5 Liquidation, Tilbury 34 770 34 770 32 721

6 Scholten-Honig research 2 057 2 385 2 385

7 Cost of managing committee and of management 3 211 3 624 3 624

8 Legal advice and assistance 574 567 567

9 Contracts with ICI and Reynolds 21 707 20 527 15 818

Intermediate total 94 907 96 146 89 388

The Commission then considers the case claims relating to alleged breaches of from the following aspects: other rules of law, the Commission maintains the conclusions contained in

its defence and rejoinder. 1. Admissibility of the applicant's sup- plementary observations On the other hand, the Commission, on the basis of the Court's judgment of 25 The Commission observes that in its May 1978 in the HNL cases, denies that supplementary observations the applicant in this case there has been a sufficiently is attempting first and foremost to prove serious breach of the principle of the Community's liability, not because it equality to involve the Community in results from the adoption of Regulation liability, and points out that, in the No 1111/77, but because it flows from legislative context in question, involving the Commission's behaviour during the a choice of economic policy in a field period prior to that in which it prepared characterized by the exercise of a wide its proposals and submitted them to the margin of discretion which is Council. In relying on such reasoning the indispensable to the implementation of applicant goes beyond the bounds of the the common agricultural policy, the conclusions presented in its application. institutions in question have not In fact those conclusions were limited to manifestly and gravely disregarded the asking for a declaration of the liability of limits on the exercise of their powers. the Community as a result of Regulation No 1111/77 itself (and from Commission Regulation No 1468/78) According to the Commission, so as to and not from other factors. judge whether there has been a manifest and grave disregard of powers, account must be taken, as regards the The applicant's supplementary observations Community measure, of its consequences must therefore be declared inadmissible on on economic policy in the context of this point. which the measure was adopted as well as of the nature of the damage caused.

With regard to the nature of the damage As regards the question of the causal claimed by the applicant, the connexion, the Commission, referring to Commission points out in particular that its observations on point 1 above, points the disregard by the Community of its out that, for the applicant, the illegality powers must be serious, that is to say that of the Community's behaviour does not it must be assessed by reason of its stem from the formulation of the regu- financial consequences for the parties lation itself but above all from the concerned. As regards the seriousness of behaviour of the Community during the the damage which the applicant claims to previous period in which the Commission have suffered, particularly by reason of was preparing its proposals and the effect of the levy on the profitability submitting them to the Council. Such a of the manufacture of isoglucose, the definition of the illegal behaviour of the Commission recalls that such profitability Community contradicts that which the itself depends on the common organi- Court gave in its judgment of 25 zation of the market in sugar. With high October 1978, when it simply ruled that prices for sugar it would be possible to the Council had adopted on 17 May sell isoglucose on that market at prices 1977 a regulation which was invalid to several times higher than those on the the extent to which its provisions world market. imposed a production levy on isoglucose of five units of account per 100 kg of dry The levy charged on isoglucose matter for the period corresponding to consequently represents only a fraction the sugar marketing year 1977/1978. The of that price. On the other hand, it may Court therefore merely held that the levy be noted that, if the situation on the itself was unlawful and not the threat of a world market alone is taken into levy, as the applicant states. consideration and if the levy is compared with the extent of the economic risk It follows from the above considerations involved in operations in the sector concerned, the incidence of the levy on that the applicant has not succeeded in establishing a causal connexion between the selling price represents only a small the invalidity of the levy and the damage percentage of the difference between the world price in sugar in 1973, a year in allegedly suffered. which the decision to undertake

isoglucose manufacture. The applicant — The purchase of ICI and Reynolds itself concedes that the latter factor is at patents; the base of the difficulties concerning its investments for isoglucose production — General management costs; and the profits which its group hoped to obtain therefrom. In fact, in its application in Case 153/77 it declared — General costs of expert assistance that isoglucose production had become and legal costs. unprofitable as a result of the abolition of that production refund system. 2. Future results at Tilbury. According to the Commission the applicant acknowledges in addition, in the same application, that if the As to thefirst point the Commssion refers production refund system had not been to the applicant's statement to the effect that the factors mentioned under this abolished, it would have been in a position to continue its isoglucose point occasioned it high costs in production and would not have been particular by reason of the thorough- obliged to revise its investment policy. going depreciation of the Tilbury investments. According to the Commission, this results in particular The Community's financial liability must from the fact that clearly no opportunity therefore be rejected because the damage can be seen of continuing to produce caused to the applicant must be attributed isoglucose, so that the isoglucose plant to factors other than the unlawful nature of can no longer be used for its initial the levy. purpose. The unlawful levy cannot be the cause of this situation since the levy no 4. The evalutation of the damage longer exists. The depreciation of the allegedly suffered by the applicant investments must be attributed to the fact

inclusive must not appear amongst those creating a production unit specifically claimed here by the applicant. Fur- and solely equipped for isoglucose thermore, as the levy has no longer been production. in force since the judgment of 25 October 1978, the impossibility of The first option is less ambitious and is making future profits can no longer be consequently cheaper and better able to imputed to the existence of the levy but cope with unforeseen market fluctuations to the situation on the sugar market. in the event of isoglucose proving less profitable than expected. The second What is more, the calculations are option is more expensive and carries the effected for such a distant future that it advantages and disadvantages of speciali- is impossible to regard them as realistic. zation.

First the Council remarks that there are On the basis of the Court's judgment two possible methods of production for and for the sake of argument the isoglucose, either by expanding the Council proceeds to make a rough calcu- maize-grinding capacity of a conven- lation of a non-discriminatory levy to be tional starch plant already built and borne by isoglucose producers which adding on the specific plant required for would compare economically with that the production of isoglucose, or else by borne by sugar producers.

JUDGMENT OF 5. 12. 1979 — CASE 143/77

In this respect the Council begins its according to the proportion of B sugar in comparison with isoglucose producers by the maximum quota, an actual levy of taking as a model a sugar producer who 3.98 x 26 % = 1.0348 units of account

has used up both his A and B quota, the per 100 kg. Court having, in paragraph 74 et seq. of the above judgment, accepted the comparison between the charge levied upon modern sugar works which also produce C sugar and that levied upon isoglucose producers. For the purposes If the Court's reasoning is followed, it is of its comparison the Council accepts that latter charge which might be levied that the Court criticized the fact that, per 100 kg of isoglucose for the 1977/- when the officers of the Commission 1978 sugar year without discriminating calculated the average charge for these against isoglucose producers by sugar undertakings running from 3.81 to comparison with sugar producers in 13.52 units of account per quintal, no similar circumstances. allowance was made for the fact that

KONINKLIJKE SCHOLTEN-HONIG v COUNCIL AND COMMISSION

In the present state of affairs it would the features of the measure declared void have been conceivable, according to the by the Court in its judgment of 25 Council, to abolish the 30 % ceiling October 1978 were such that the since the charge to which it gave rise is measure did or did not exceed the

apparently not such as to discourage the bounds of the risks inherent in the production of sugar in excess of the basic economic activities of those concerned

quota in regions less suited to sugar- (HNL judgment, paragraph 5, second making. On that assumption the levy to sentence; paragraph 7, first and fifth be paid by sugar works would have sentences); and (ii) whether in adopting increased as follows: the levy at the amount it did the Council manifestly and gravely disregarded the Levy: 19.50 u.a. limits on the exercise of its powers (paragraph 6). Amount passed on to beet growers: 5.87 u. a.

13.63 u. a. x 26 Vo

= 3.5438 u. a. per 100 kg.

dispute in this case are in particular as Finally the Council remarks that under follows: the rashness with which the the proposal for a regulation amending parties concerned committed their Regulation No 1111/77, which the considerable investments to development Commission sent to the Council on 7 and exploitation of a new sweetener the March 1979, that portion of isoglucose value of which remained unproven: their production which exceeds the basic mistaken belief in the existence of a quota of the producer undertaking market capable of absorbing sweeteners; would be charged a production levy their unjustified expectation that they equal to that portion of the "sugar" levy would be able to continue to enjoy a yet to be paid for the 1979/1980 sugar production refund for maize processed year by sugar producers only. Thus for by them into isoglucose; the fact that the 1979/1980 sugar year, mutatis without a refund they were apparently mutandis, this proposal introduces a unable to sell their product except at a charge equivalent to that first described considerable loss; the fact that their above. product, in view of its cost price and of the fact that no higher selling prices could be expected in the relatively near 2. Manifest and grave disregard of the future, could not bear any levy limits on the exercise of powers whatsoever; and the fact that the Community might have imposed a levy Referring to the HNL judgment, the of about four units of account for the Council proceeds to examine (i) whether said marketing year without infringing

the principle of equality of treatment had isoglucose produced by the applicant it not set the sugar levy a ceiling of 9.85 Amylum (as it emerges from the Klynveld units of account. Turquands report) with the average selling price charged by Amylum (Table Thus, in the light of these consider- 2, Amylum's observations), the Council ations, an assessment should be made of finds on the basis of these figures that the effect of introducing the five units of even before any levy was imposed there account levy on the profitability of the was a clear loss. According to the parties' isoglucose production. In this Council these figures may be taken as connexion it should be recalled that the representative for all the parties applicant totally and permanently gave concerned since Amylum in particular up isoglucose production since it was not had the longest experience of isoglucose. profitable. Furthermore the average selling price indicated by Amylum confirms that the selling price for isoglucose on a glutted As to Point (ii) market is in fact determined by the The Council wonders whether the Court intervention price for sugar so that, as long as the market is glutted, no makes use, in attributing or rejecting appreciable increase in the selling price liability of the Community, of a criterion can be expected in the short or medium linked to the seriousness not merely of term. the damages suffered by the plaintiff but also of the breach of the rule of law in question. Such a criterion appears to be The conclusion is therefore that invest- implicit in the terms of the 6th paragraph ments in isoglucose were economically of the HNL judgment. unjustifiable and that production of isoglucose cannot be expected to show a This conclusion is understandable having return in the foreseeable future. regard to the difficulties with which the Council and the Commission are faced Accordingly introduction of the levy of 5 units of account could not have heen a in the implementation of the common causal factor in the decision to give up agricultural policy and the complexity both of the interests to be taken into isoglucose production since it was unprof- itable even before the decision; it may at account and the objectives to be the very most have influenced the time of attained, bearing in mind the vagaries of the economic situation. giving it up.

Finally the Council examines the non-contractual liability of the arguments put forward in -particular by Community is incurred in principle, to the applicant in this case that, on the one take the arguments expounded above as hand, as long as there was a positive establishing that there is no causal margin between variable unit costs per connexion between the Community's product and the selling price, production action and the losses alleged by the had to continue and, on the other hand, applicant. if the effect of the levy of 5 units of account had been to use up that margin it followed that the invested capital would lose all its value. 4. Specific arguments to the effect that the applicant's claim for damages is In the Council's view there are two unfounded misconceptions in that argument. First, it is founded on calculations taking into account for determining the margin only variable costs and their relation to selling The Council recalls that the applicant, price, whereas the calculation should be unlike Amylum and Tunnel, built a based on all the costs to be borne by the factory specifically and solely equipped producer, which should be compared for the production of isoglucose. The with selling price; indeed, the hypothesis risks inseparable from such a production developed presupposes that the under- unit have already been indicated by the Council. taking is paying the fixed production costs by drawing on another source, which is contrary to sound business mangement. Secondly, the above- By acting in this way the applicant put mentioned argument postulates that any itself in the position of carrying a special levy whatever charged on isoglucose, in risk, that is to say, a risk exceeding the whatever manner, should be prohibited, normal framework of its economic whereas the Court has not condemned context. On the basis joint of the the principle of such levies. responsibility of a person who has suffered damage a special risk must, in On the basis of an examination of these accordance with the general principles two points the Council concludes that common to the Member States, be borne with a levy which complied with the by the party who created it. equality of treatment of sugar producers, the applicant would in any case have to give up isoglucose production and incur the whole of its "losses". In these Moreover, after the applicant had uni- circumstances it is difficult to see why the laterally taken the decision to abandon applicant should now be. compensated for the production of isoglucose its principal damage incurred by closure of its production unit was sold — even before production capacity when such closure was the Court's judgment had been delivered in any case necessary without any blame — to an American undertaking for the whatever being attributable to the derisory price of 7 million Netherlands Institutions. guilders, although the construction of that production unit had cost more than 39 million. It is to be feared that the 3. Causal connexion applicant will dispose in similar fashion of its other production units (Foxhol, the As a subsidiary application the Council trial production unit, and Koog (the requests the Court, if it finds that the same)).

5. Alleged damage At the hearing on 18 September 1979 the applicant represented by D. J. Gijlstra, of Whilst holding to the arguments set out the Amsterdam Bar, the Council, in the defence and the rejoinder, the represented by Daniel Vignes, Director Council reserves the right to advance at in the Legal Department, acting as a later stage — should the Court find Agent, assisted by A. Brautigam, an that the Community is liable under administrator in the said Department, Article 215 and that there is in fact an and the Commission, represented by its unbroken causal connexion between the Legal Adviser, Jacques Bourgeois, acting Community's actions and the alleged as Agent, assisted by Hendrik Bronk- damage — any relevant argument horst, a member of its Legal Department, regarding the constituent elements of the presented oral argument. damage of the parties concerned. The Advocate General delivered his In conclusion the Council asks the Court opinion at the hearing on 23 October to reject the application for damages and 1979.

Decision

The applicant in this case is claiming that the European Economic Community, represented by the Council and the Commission, should be ordered to pay it compensation under the second paragraph of Article 215 of the EEC Treaty for the damage which it claims to have suffered as a result of the imposition of a production levy on isoglucose in pursuance of Council Regulation No 1111/77 of 17 May 1977 laying down common provisions for isoglucose (Official Journal L 134, p. 4).

KONINKLIJKE SCHOLTEN-HONIG COUNCIL AND COMMISSION

5 In its judgment of 25 October 1978 given in answer to a reference for a preliminary ruling from the High Court of Justice, Queen's Bench Division, Commercial Court, in Joined Cases 103 and 145/77, Royal Scholten-Honig (Holdings) Limited v Intervention Board for Agricultural Produce; Tunnel Refineries Limited v Intervention Boardfor Agricultural Produce ([1978] ECR 2037), the Court ruled that Regulation No 1111/77 was invalid to the extent to which Articles 8 and 9 thereof imposed a production levy on isoglucose of

JUDGMENT OF 5. 12. 1979 — CASE 143/77

five units of account per 100 kg of dry matter for the period corresponding to the sugar marketing year 1977/1978. The Court had found that the provisions of that regulation establishing the production levy system for isoglucose offended against the general principle of equality of which the prohibition on discrimination set out in Article 40 (3) of the Treaty was a specific expression. However, it had added that its answer would leave the Council free to take any necessary measures compatible with Community law for ensuring the proper functioning of the market in sweeteners.

6 Following that judgment the Commission, by letter dated 8 January 1979, informed the Member States that, pending measures to be adopted by the Council to ensure the proper functioning of the market in sweeteners, it was appropriate to suspend all collections of the isoglucose production levy and that, similarly, the establishment, accounting and allocation to own resources of the amounts concerned should be provisionally suspended by Member States.

8 In the course of the oral procedure in this case the applicant stated that it had paid the levy in respect of the isoglucose production in a pilot factory and had not yet obtained a refund from the national authorities. The object of these proceedings is not, however, to obtain a refund of the levy but solely to obtain compensation from the Community for losses which the applicant claims to have incurred because the introduction of the production levy compelled it permanently to stop manufacturing isoglucose. It claims that the damage caused to it consists, on the one hand, in the writing-off of investments in isoglucose production in two experimental plants in the Netherlands and a factory being built at Tilbury, in the United Kingdom, which was to be specially equipped for isoglucose production, the costs of administration and research relating to the product, as well as costs of taking legal advice and the financial consequences relating to contracts made with other undertakings for purchasing licences and obtaining enzyme supplies. On the other hand there were losses due to the sale, subsequent to the applicant's bankruptcy but prior to the judgment of the Court of 25 October 1978, of the Tilbury factory at a price well below the construction costs, as well as the loss of estimated future profits.

9 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.

11 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.

12 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.

13 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 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.

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

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

19 The application must be dismissed as unfounded.

Costs

20 Under Article 69 (2) of the Rules of Procedure, the unsuccessful party shall be ordered to pay the costs.

JUDGMENT OF 5. 12. 1979 — CASE 143/77

Kutscher O'Keeffe Touffait

Mertens de Wilmars Mackenzie Stuart Bosco Koopmans

Delivered in open court in Luxemburg on 5 December 1979.

A. Van Houtte H. Kutscher

Registrar President

OPINION OF MR ADVOCATE GENERAL REISCHL