C-8/78

JUDGMENT OF THE COURT OF 13 JULY 1978

Milac GmbH, Groß- und Außenhandel v Hauptzollamt Freiburg (preliminary ruling requested by the Finanzgericht Baden-Württemberg)

"Monetary compensatory amounts"

Case 8/78

1. Agriculture — Common organization of the market — Principle of non-discrimi­ nation between producers or consumers (EEC Treaty, Art. 40 (3))

2. Agriculture — Common organization of the market — Milk powder — Monetary compensatory amounts — Alterations — Regulation No 725/74 of the Commission — Validity

on the validity of Regulation (EEC) No 725/74 of the Commission of 29 March 1974 altering the monetary compensatory amounts (Official

1 — Language of the case: German.

JUDGMENT OF 13. 7. 1978 — CASE 8/78

Journal 1974, L 89, p. 1), and on the interpretation of the second subpara­ graph of Article 40 (3) of the EEC Treaty and of the judgment given by the Court of Justice on 23 November 1976 in Case 28/76,

THE COURT

composed of: H. Kutscher, President, M. Sørensen (President of Chamber), A. M. Donner, P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe and A. Touffait, Judges,

trade in the product in question. Milac Milac now argues before the national considered that the refusal to reduce the court that: monetary compensatory amounts was unlawful: it claimed that the — The Court of Justice did not deal Commission had applied Regulation No with the question of discrimination 663/74 wrongly; it alleged that failure and distortions of competition; to apply the corrective amount was — The judgment is not binding because incompatible with the principle of non­ its operative pan is not supported by discrimination; it also alleged that for the statement of the reasons on Regulation No 725/74 to fix monetary which it is based; compensatory amounts for the product in question without reduction was — The judgment deprives Milac of contrary to the principles of Reguladon legal protection, and is thus an No 974/71 of the Council, the basic infringement of Article 19 (4) of the regulation. German Grundgesetz (Basic Law). The Finanzgericht Baden-Württemberg, before which the case had been By an order of 29 September 1977, the brought, asked the Court to give a pre­ Finanzgericht Baden-Württemberg de­ liminary ruling as to whether Regu­ cided to refer the matter to the Court of lation No 725/74 should be interpreted Justice again, and submit the following as meaning that the compensatory question to it for a preliminary ruling amounts were to be reduced by the under Article 177 of the EEC Treaty: corrective amount and whether the said regulation was incompatible with Regu­ "1. Did the judgment of the Court lation No 974/71, the basic regulation, of Justice of the European Communities of 23 November 1976 by virtue of the level at which the in Case 28/76 determine authori­ compensatory amounts had been fixed. tatively the validity of Regulation By a judgment given on 23 November (EEC) No 725/74 for the purposes 1976, the Court ruled: of the further conduct of the main action so that it may no longer be "1. The combined provisions of Article questioned whether that regulation 1 of Regulation (EEC) No 974/71, infringes the prohibition on discrimi­ Anide 1 of Regulation (EEC) No nation contained in the second 218/74 and Part 5 of Annex I to subparagraph of Article 40 (3) of that regulation in the version the EEC Treaty? contained in Regulation (EEC) No 725/74 and applicable to powdered If the first question is answered in milk under tariff subheading the negative: 04.02 A II b 2 of the Common 2. Does the second subparagraph of Customs Tariff must be interpreted Article 40 (3) of the EEC Treaty as meaning that they do not allow create individual rights which the the reduction of the monetary national courts must respect? compensatory amounts by 2 units of account or less where the fat If the first question is answered in content by weight is in excess of the negative and the second in the 3%. affirmative:

The order of the Finanzgericht Baden- deal with the question of breach of the Württemberg was received at the Court prohibition on discrimination, the on 25 January 1978. question referred for a preliminary ruling has not been bindingly decided. Upon hearing the repon of the Judge- Rapporteur and the views of the In the judgment in Joined Cases 124/76 Advocate General the Court decided to and 20/77 ("maize groats and meal" open the oral procedure without [1977] ECR 1795), the Court declared holding a preparatory inquiry. that the prohibition on discrimination laid down in Article 40 (3) of the Treaty is "a specific enunciation of the general II — Written observations sub­ principle of equality which is one of the mitted pursuant to Article fundamental principles of Community 20 of the Protocol on the law". It is not disputed that the Statute of the Court of principle of equality, which has the Justice of the EEC status of a constitutional rule, is directly applicable. A — Observations submitted by Milac In view of the guarantee of legal Milac concurs with the opinion of the protection provided by Article 19 (4) of Finanzgericht that in the context of the the Grundgesetz, national courts should fixing of monetary compensation Regu­ where necessary rule on the discrimi­ lation No 725/74 must take the natory effects of a regulation if, without corrective amount into consideration for giving any grounds, the Court of Justice milk powder having a fat content in has omitted to make such a ruling in excess of 3 % by weight, the nature and relation to the main point in an action. extent of the reduction being As regards the facts constituting the determined in accordance with Regu­ discrimination, Milac points out that lations Nos 663/74 and 712/74. there is no specific use, and hence no It points out that a preliminary ruling by market, for whole-milk powder in the Court is binding only if its operative which it cannot be replaced by pan is supported by the statement of the skimmed-milk powder and butterfat. reasons on which it is based. Paragraph Owing to the fact that the corrective 12 of the decision of 23 November 1976 amount was not applied to whole-milk contains a mere finding of fact and no powder, the chocolate and ice-cream reasons. It does not give the reason why industries, which were Milac's it was possible for the monetary customers, have changed over to pur­ compensation to be reduced by DM chasing skimmed-milk powder and 5.50 in the case of milk powder having butter-fat. For a customer processing a fat content not exceeding 3 % by some 4 000 tonnes of milk powder weight, whereas that was not the case per annum, the costs of the basic for milk powder having a fat content in ingredients have thereby been reduced excess of 3 % by weight. by some DM 220 000 per annum.

the other. In Part 5 in the annex to Costa and Others [1963] ECR 31, at Regulation No 725/74, special p. 44): "Once again, better for a court monetary compensation is fixed for the to interpret the law (the purpose for non-fatty portion of milk powder which it is set up) than to interpret its contained in contained in whole-milk own decisions". On the other hand, in powder. The Commission took yet favour of an interpretation according to another step in the field of monetary Article 40 of the Protocol on the Statute compensation by imposing a com

products". The compensatory amount such a case to admit a fresh reference of for whole-milk powder is derived at the the same question. level of the non-fatty portion of the At all events, the Council considers that milk powder, that is, exactly from the intervention product skimmed-milk the Court dealt with the question of the powder. Milac absolutely fails to prohibition on discrimination laid down understand why such an exact deri in the second subparagraph of Article vation is not also carried out where by 40 (3) of the Treaty, in paragraph 12 different arrangement of the of the decision in its judgment of

The latter the judgment of 23 November 1976 or should not be allowed on its own whether it is a fresh reference to the initiative to carry out a fresh exam Court of Justice of a question which has ination of the question whether any already been submitted to it. The Court individual rights have been infringed for has not so far ruled on the question the purposes of the second subpara whether an application for the interpret graph of Article 40 (3) of the Treaty. ation of a judgment given on a Therefore the Court should refuse to reference for a preliminary ruling is answer the second question and answer admissible. the third in the negative. The Council considers that in favour of Finally the Council considers that, as the possibility of a fresh reference, one emerges from the settled case-law of the may cite the remark of Mr Advocate Court as well as from the joint General Lagrange in his opinion in declaration by the three institutions Joined Cases 28, 29 and 30/62 (Da other than the Court, dated 5 April

of the Community" within the meaning court making the reference. The of subparagraph (b) of Article 177 of problem raised would not be resolved the Treaty, which means that an inter­ by mere logical analysis of what the pretation of it could be sought by way Court expressed or may have intended of a fresh reference for a preliminary to express in its judgment of 23 ruling. The Finanzgericht Hamburg November 1976. Moreover, the risk sought to follow this course in Case which such a limited question might 135/77 (Bosch), in which judgment was present would become particularly clear given on 13 March 1978, but the in the event of the Court's answering question was left undecided. Such a the first question in the negative, that is view gives rise to certain reservations. to say in the event of the Court's First, its consequence would be that finding that it did not dispose of the each national court would be entitled at question of discrimination in its any time to make a reference under judgment of 23 November 1976. It Article 177 in relation to any previous would be most unsatisfactory if the preliminary ruling. Secondly, it could Court had to content itself with making even lead to the paradoxical such a finding without being able at the consequence that the Court might have same time to rule on the consequences to give a ruling on the validity of its resulting from it. own preliminary rulings. The First question In fact, application of Article 40 by analogy is neither apposite nor The Court of Justice dealt with the necessary to attain the desired aim. question of discrimination in paragraph

12 of the decision, albeit indirectly. It proper way of eliminating the uncer­ found that the system of monetary tainties is to complete the judgment compensatory amounts applicable to given in Case 28/76 by adding to it any "other products derived from milk" — findings relating to discrimination which in this case milk powder having a fat may appear appropriate. content in excess of 3% by weight — did not necessarily also have to be The second question amended "in order to avoid any possibility of placing other products The Commission emphasizes, purely derived from milk in a less favourable incidentally, that at all events the position". That should suffice to provisions of the second subparagraph establish that the operative part of the of Article 40 (3) of the Treaty create judgment is also supported by the individual rights where a directly reasons on which the decision is based. applicable provision of secondary Strictly speaking, the question of Community law is contrary to them and discrimination should have been is consequently void or invalid. This considered in the context of the first would be the case in the main action if it were to be found that the failure to question submitted for a preliminary ruling, especially by considering apply the corrective amount to the whether the principle of equality of product in question breached the treatment is observed by Regulation No principle of non-discrimination. 663/74, in particular in the Court's interpretation of it (cf. inter alia The third question paragraph 10 of the decision). However, by citing the plaintiffs The Commission emphasizes, also submission (paragraph 11 of the incidentally, that the Finanzgericht decision), the Court of Justice did referred the question of discrimination to the Court in the first reference for a advert to the argument that the Commission and the Council acted in a preliminary ruling: consequently it no discriminatory fashion. For that reason, longer has any power to decide that it must be permissible to give a more question of law arbitrarily. Otherwise, general import to the observations made there would be a risk that, after by the Court in paragraph 12 of the referring a case to the Court for a pre­ decision, and not to limit them to the liminary ruling and after the preliminary mere fixing of monetary compensatory ruling had been given, a national court amounts. might not follow the ruling in its judgment. At all events, the first question is formulated too narrowly, and should At Milac's request, the file of the also deal with the question whether it aforesaid Case 28/76 was joined to the was discriminatory for Regulation No file of the present case. 663/74 of the Council to restrict the application of the corrective amount to At the hearing on 25 May 1978, Mr certain milk products. Ehle, Rechtsanwalt of Cologne, appeared for Milac, B. Schloh, acting as In this situation, mere interpretation of Agent, for the Council and P. Gilsdorf, the judgment cannot but run the risk of acting as Agent, for the Commission. giving rise to further difficulties as to both substance and form. Therefore it The Advocate General delivered his seems to the Commission that the opinion at the hearing on 14 June 1978.

"1. Are the monetary compensatory amounts under Article 1 of Regulation (EEC) No 974/71 in conjunction with Article 1 of Regulation (EEC) No 218/74, Annex I, Part 5 as amended by Regulation (EEC) No 725/74, for milk powder under subheading 04.02 A II b 2 of the Common Customs Tariff, to be reduced by the amount of 2 or less units of account even where the fat content is in excess of 3% by weight and the remaining conditions of Regulation (EEC) No 712/74 are fulfilled?

2. Were the rates of the monetary compensatory amounts under Regu­ lation (EEC) No 725/74 referred to in Question 1 compatible with the basic enabling provision between 25 June and 15 August 1974?"

MILAC v Hauptzollamt FREIBURG

4 On the grounds stated in its judgment of 23 November 1976 (Case 28/76 [1976] ECR 1639), the Court gave the following answer to the first question:

'The combined provisions of Article 1 of Regulation (EEC) No 974/71, Article 1 of Regulation (EEC) No 218/74 and Part 5 of Annex I to that regulation in the version contained in Regulation (EEC) No 725/74 and applicable to powdered milk under tariff subheading 04.02 A II b 2 of the Common Customs Tariff must be interpreted as meaning that they do not allow the reduction of the monetary compensatory amounts by 2 units of account or less where the fat content by weight is in excess of 3%."

5 In its order for reference the Finanzgericht explained the scope of the second question by stating that it might be asked whether the monetary compensatory amounts charged on the imports of milk powder pursuant to Regulation (EEC) No 725/74 of the Commission were within the scope of the authorization contained in Regulation (EEC) No 974/71 of the Council (Official Journal, English Special Edition 1971 (I), p. 257) and were compatible with the aims of that regulation, but did not ask whether the provisions of the regulation constituted discrimination within the meaning of Article 40 (3) of the Treaty.

If the first question is answered in the negative:

2. Does the second subparagraph of Article 40 (3) of the EEC Treaty create individual rights which the national courts must respect? If the first question is answered in the negative and the second in the affirmative:

3. May the national court decide upon the discriminatory effect and reduce the amount of the charge accordingly?

9 The three questions should be dealt with together.

10 Regulation No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (Official Journal, English Special Edition 1968 (I), p. 176) provides that each year there shall be fixed a target price for milk and intervention prices — designed to assist in achieving the target price of milk — for certain products processed from milk: butter, skimmed-milk powder and certain cheeses.

11 Article 1 (2) of Regulation No 974/71 of the Council provides that the products for which compensatory amounts may be charged on imports from Member States and third countries or granted on exports to Member States and third countries shall be:

13 Regulation No. 663/74 of the Council of 28 March 1974 fixing the prices for the 1974/75 milk year (Official Journal 1974, L 85, p. 52) again increased the target price for milk, maintained the intervention price for butter in the original Member States (which had been reduced for the 1973/74 milk year) and increased the intervention price for skimmed-milk powder.

14 The fifth recital of that regulation states:" ... the particular situation obtaining in certain Member States at present does not permit the application of a uniform intervention price for skimmed-milk powder; ... it is therefore necessary to apply a corrective factor to the aforesaid price". The sixth recital states: "... in order to ensure that this corrective factor affects market prices in the said Member States without leading to distortions of competition it is necessary to compensate for price differences occurring in trade in skimmed-milk powder".

15 Article 40 (3) of the Treaty provides that any common price policy shall be based on common criteria and uniform methods of calculation.

16 In its order of 3 December 1975, the Finanzgericht had expressed doubts as to whether the intervention price for skimmed-milk powder actually applied in Germany was compatible with the objectives of the organization of the milk market, and had drawn the attention of the Court to the preamble to Regulation No 663/74 of the Council which, according to the Finanz­ gericht, gives no legal justification for the difference in treatment resulting

JUDGMENT OF 13. 7. 1978 — CASE 8/78

17 However, it should be noted that owing to the revaluation of certain national currencies, in particular that of the Federal Republic of Germany, and to the devaluation of other national currencies, the unity of the intervention price expressed in units of account had been broken since March 1971, and subsequently has been only formal or notional in the Community. Although the statement of the reasons on which the Council's regulation was based was elliptical, it expressed sufficiently the Council's intention to fix a fresh intervention price for skimmed-milk powder which in real terms would be as uniform as possible. The provisions of Article 3 of Regulation No 663/74, which were adopted in order that intervention prices might be fixed at a uniform level in real terms, are not incompatible either with the provisions of Regulation No 805/68 of the Council or with the provisions of Article 40 (3) of the Treaty.

18 As the Court has already ruled in its judgment of 2 July 1974 (Case 153/73 Holtz & Willemsen [1974] ECR 675), the objectives referred to in Article 40 of the Treaty, that is, the establishment of a common agricultural policy and a common organization of agricultural markets, presuppose the adoption of common rules and criteria for producers and consumers of agricultural products and the consequent exclusion of any discrimination based on nationality or locality.

In this light the various factors in the common organization of the markets, protective measures, aids, subsidies, and the like may be distinguished according to the areas and other conditions of production or consumption only in terms of criteria of an objective nature which ensure a proportionate distribution of advantages and disadvantages for those concerned without distinguishing between the territory of Member States. Therefore the principle of non-discrimination between producers or consumers within the Community is one of the fundamental principles of the Treaty which must

21 In its judgment of 23 November 1976 the Court dismissed that interpre­ tation of the regulation at issue.

22 As regards the questions submitted in this case, the plaintiff in the main action claims that Regulation No 725/74, and possibly Regulations No 663/74 of the Council and No 712/74 of the Commission, are unlawful for breach of the principle of non-discrimination laid down in Article 40 (3) of the Treaty. In support of this argument it alleges that the failure to apply a corrective amount to whole-milk powder causes distortions of competition in the milk market. It claims that purchasers of whole-milk powder were able to obtain that product in Belgium, the Netherlands and in Germany at a price 2 units of account per 100 kg lower than the price prevailing in France and that there is no appreciable difference between the market for whole-milk powder and the market for skimmed-milk powder. It states further that at the time in question the chocolate and ice-cream industry

JUDGMENT OF 13. 7. 1978 — CASE 8/78

changed over from using whole-milk powder to using skimmed-milk powder supplemented by butter-fat.

25 The plaintiff has not shown what constitutes the discrimination alleged to result from the provisions at issue, either as regards producers or as regards consumers within the Community. As to the allegation by the plaintiff in the main action to the effect that purchasers of whole-milk powder were able to obtain that product in Belgium, the Netherlands or Germany at a price 2 units of account per 100 kg lower than the price prevailing in France, that allegation is not based on any comparison of actual market prices in the light of actual rates of exchange, and corresponds only to a purely theoretical deduction from the provisions of the regulations themselves. The statistics supplied by the Commission show that even in the Federal Republic of Germany, where the corrective amount was not applied to whole-milk powder, production of that product declined sharply at the time in question. Consequently, it cannot be concluded that the level of imports into the Federal Republic of Germany of whole-milk powder from France was appreciably affected by the failure to apply the corrective amount.

26 As to the complaint of the plaintiff in the main action concerning the sub­ stitution of skimmed-milk powder supplemented by butter-fat for whole­ milk powder, it is to be noted that the argument concerning "substitution"

MILAC v HAUPTZOLLAMT FREIBURG

confirms the Commission's statement that they are two different products which are not usually in competition with one another. Even if it were established that the provisions at issue were the cause of that substitution, that fact cannot be considered in itself as constituting discrimination either between producers or between consumers within the Community within the meaning of Article 40 of the Treaty.

Consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Regulation No 725/74, having regard to the provisions of Article 40 (3) of the EEC Treaty.

Kutscher Serensen Donner

Pescatore Mackenzie Stuart O'Keeffe Touffait

Delivered in open court in Luxembourg on 13 July 1978.

A. Van Houtte H. Kutscher

Registrar President