C-13/78

THE COURT

composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), A. M. Donner, P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco and A. Touffait, Judges,

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

gives the following

JUDGMENT

Facts and Issues

from wine (inländischer Branntwein aus had been extracted in the Federal Wein), that is to say spirits from wine Republic, and that the wine distillate which have been manufactured on the had not been stored at the factory in territory of the Federal Republic of Germany where the wine distillate was Germany, may be designated as extracted. "Qualitätsbranntwein aus Wein" (high The plaintiff in the main action has quality spirits made from wine) or as commenced proceedings against this "Weinbrand" (Brandy) only if: decision in which it claims that subpara­ (1) At least 85% of the alcoholic graphs 1 and 4 of Article 40 (1) of the content is derived from wine Weingetetz are incompatible with distillate home-produced (im Community law because the article in Inland) by distillation; question is, in its view, an obstacle to the free movement of wine distillates (2) ... which is not justified by Article 36 of (3) ... the Treaty and discriminates between German manufacturers of "Weinbrand" (4) The whole of the wine distillate used has been kept for at least six according to whether they have their own distilleries or not. months in oaken casks at the factory in Germany (inländischer Since the Verwaltungsgericht of the Betrieb) where the home-produced City of Bremen took the view that the wine distillate (inländisches action gave rise to questions of interpre­ Weindestillat) was extracted by tation of Community law it asked the distillation; Court of Justice in its order of 18 January 1978 to give a preliminary ruling on the following questions: (8) The spirits have been given a certi­ 1. Are Articles 30 and 31 of the EEC fication number (Prüfungsnummer) Treaty as well as the prohibition of which is assigned by the competent discrimination under Community law authority only if the conditions laid to be interpreted as meaning that the down in subparagraphs 1 to 7 of rules laid down in subparagraphs 1 Article 40 (1) have been fulfilled. and 4 of Article 40 (1) of the Weingesetz of 14 July 1971 (Bun­ At the beginning of 1976 the under­ desgesetzblatt: Pan I, page 893 et taking Joh. Eggers Sohn & Co., the seq. at 908) according to which plaintiff in the main anion, imported a home-produced spirits from wine small quantity of French wine distillate. may be designated as "Qualitats­ Since it does not have a distillery of its brannrwein aus Wein" (high quality own it kept the distillate for six months spirits made from wine) or as in bond in oaken casks at its own "Weinbrand" (Brandy) only if: factory and then processed it into spirits — At least 85% of the alcoholic made from wine. In order to obtain the content is derived from wine designation "Qualitatsbranntwein and Wein" or "Weinbrand" it applied to the distillate home-produced by distillation; municipality of Bremen, the defendant in the main action, for a certification — The whole of the wine distillate number to enable it to use those used has been kept for at least six designations The certification number months in oaken casks at the at first assigned to it was withdrawn factory in Germany (inländischer when it had become clear that the Betrieb) where the home- product in question had not been manu­ produced wine distillate was factured from distillate, 85 % of which extracted by distillation,

«re incompatible with the prohibition nereien (the Association of German of measures having an effect Distilleries). The effect of the equivalent to quantitative restrictions application of Article 40 of the and also with the prohibition of Weingesetz is that, if it wants those of discrimination? its products which are classified as 2. If the answer to Question 1 is in the home-produced spirits to be given the affirmative, is Article 36 of the EEC high quality designations "Qualitäts branntwein aus Wem" or 'Weinbrand", Treaty to be interpreted as meaning that the rules laid down in subpara it can neither buy vine distillates in graphs 1 and 4 of Article 40 (1) of France nor choose its brandy distillers the Weingesetz are not justified? and must obtain its supplies from German distillers whose prices are

February 1978. Pursuant to Article 20 Destillate) which French exporters of the Protocol on the Statute of the classify as crude distillates for the sole Court of justice of the EEC the plaintiff purpose of formally complying with in the main action, the Government of German legislation. This question is the Federal Republic of Germany and concerned with two problems. First, the the Commission submitted written obser vations. prohibition of measures having an effect equivalent to quantitative restrictions Having heard the repon of the Judge- and, secondly, the prohibition of Rapporteur and the views of the discrimination. Advocate General the Court decided to open the oral procedure without any The first question preparatory inquiry. The plaintiff in the main action, as far as concerns the prohibition of measures having an effect equivalent to II — Observations pursuant to Article 20 of the Protocol quantitative restrictions, states that it on the Statute of the Court relies on the interpretation of this concept contained in the case-law of the of Justice of the EEC Court and in particular in the judgment A — Observations submitted by the of 20 May 1976 in Case 104/75 (De plaintiff in the main action Peijper [1976] ECR 635).

The article providing

The plaintiff in the main action also The plaintiff in the main action, starting relies on Commission Directive No from the principie that the exception 70/50/EEC of 22 December 1969 provided by Anide 36 of the EEC Treaty must be interpreted strictly, takes (Official Journal, English Special Edition 1970 (I), p. 17) on the abolition the view that a purely technical of measures which have an effect production process such as the equivalent to quantitative restrictions on distillation of fortified wines may be carried out at least as well in other imports. The fact that it is able to obtain Member States as in the Federal wine distillate only through German distilleries forms such an obstacle to the Republic of Germany. The provisions of free movement of that product as is Article 40 of the Weingesetz are mentioned in Article 2 (3) (g) and (k) of therefore a typical example of arbitrary the said directive. discrimination and a disguised restriction on trade between Member The fact that the plaintiff in the main States within the meaning of the second action has to buy the wine distillate sentence of Article 36 of the EEC from German distilleries increases the Treaty. pnce of the goods and, in comparison with German distilleries, is a disad­ Moreover, Article 40 of the Weingesetz vantage from the point of view of cannot be justified on grounds of public competition which in turn amounts to a policy within the meaning of Article 36 measure having an effect equivalent to a of the EEC Treaty. Since the defendant quantitative restriction. in the main action has not specified the grounds of public policy upon which As far as concerns the prohibition of it relies, it thereby acknowledges that discrimination the plaintiff in the main in France, the country where action points out that it applies in "Weinbrande" originated, distilling is particular as between manufacturers of carried out carefully and correctly. the same product. In a common market Furthermore, the reference made by the where the plaintiff in the main action defendant in the main anion to Article and German distilleries are in 44 of the Weingesetz concerning foreign competition the fact that French spirits is irrelevant, because Anide 44 of distilleries are unable to supply it with a the Weingesetz itself conflicts with distillate originating in France and in no Articles 30 and 31 of the EEC Treaty.

The third question produced in specified regions, Official Since this question has been referred Journal, English Special Edition 1970 only in case the Court should hold that (I), p. 252). The aim of Article 40, subparagraphs 1 and 4 of Article 40(1) namely to establish a designation of of the Weingesetz are compatible with quality, which is moreover optional, Articles 30, 31 and 36 of the EEC achieves this objective, owing to the conditions to which the use of that Treaty and also with the prohibition of discrimination the plaintiff in the main designation is made subject. action submits only a few, short obser As for the condition laid down in vations on this point. subparagraph 4 of Article 40 (1) When the Federal Republic of Germany (storage of the whole of the distillate for six months in oaken casks at the adopted the rules at issue it infringed Article 86 of the EEC Treaty, because factory in Germany), the draft law of German brandy distillers occupy, in the 1967 had first of all provided for the Federal Republic of Germany, that is to entire production to be concentrated at say in a substantial part of the common a single undertaking, since quality is market, a dominant position as far as better guaranteed if one undertaking is concerns the manufacture of wine alone responsible. In order to avoid distillate for high quality spirits made special difficulties for the traditional from wine and because trade between structure of what are for the most part Member States is clearly affected by medium-sized undertakings, the that dominant position. legislature made this requirement less The rules amount to an abuse because stringent while at the same time remaining as close as possible to the they create a monopoly of the manu objective envisaged: the harmonization facture and storage of wine distillate intended to be sold later as of distillation and storage has a decisive effect on the most important "Qualitatsbranntwein aus Wein" or as constituents of Weinbrand and is one of "Weinbrand". This restriction moreover the prerequisites for the quality of the penalizes the ultimate consumer or

That provision Community legislators (see the second is based on the fan that German recital of the preamble to Regulation Weinbrand has without question a (EEC) No 817/70 of the Council of 28 particular une which suits the April 1970 laying down special traditional habits of consumen. It is provisions relating to quality wines therefore in the interests of consumen

that the designation of quality given to the meaning of item No 21 of Annex Il domestic products should depend on the to Regulation (EEC) No 816/70 should crucial manufacturing processes which have no meaning from the economic determine quality being carried out on point of view. the national territory. To this must be In the second place, the assertion that added the fact that to permit crude distillate can be used without designations of quality to be given to further treatment as a ready-prepared blended products and coupages of a distillate is incorrect. On the contrary, different origin would be a breach of all what is known as crude distillate is the the normal rules. result of the first distilation which For these reasons the legislature made yields an alcoholic content of about the right to use the designation of 60% so that, in order to obtain the quality for spirits from home-produced requisite alcoholic content of approxi wine subject to the requirement that the mately 80 to 85% for the subsequent vital distillation process should take production, diere mun be a second place in Germany. The fixing of 85% of distillation. Next, the assertion that the minimum proportion deemed to under the provisions of the Weingesetz determine the origin was prompted by imponed wine distillate can only be the first subparagraph of Article 30 (3) processed into high quality spirits made of Regulation (EEC) No 816/70 of 28 from wine by distilleries and not by April 1970 (Official Journal, English undertakings such as that of the plaintiff Special Edition 1970 (I), p. 234). in the main anion is also incorrect.

products. From now on foreign produn is a ready-prepared distillate products can also use the designation no-one can process it into home- Weinbrand in accordance with the produced spirits. judgment of the Court of 20 February 1975 in Case 12/74, Commission of the 3. The German Government then European Communities v Federal proceeds to examine the questions Republic of Germany [1975] ECR 181. referred and submits the following obser

that from wine are imported from other States it is not understood why the use — At least 85% of the alcoholic of wine fortified for distillation within content is derived from wine

distillate home-produced by according to whether they have a distillation; distillery or not, and not to discrimi — The whole of the wine nation on grounds of nationality. distillate used is kept for at It must therefore be accepted that when least six months in oaken casks the national court referred to the at the factory in Germany concept of "discrimination" it had in where the home-produced mind that "arbitrary discrimination" wine distillate was extracted by which consisa in setting different distillation, quality standards for goods according are incompatible with the said to whether they are intended for provisions of Community law if domestic consumption or to be corresponding rules relating to exported, within the meaning which the quality apply to imported Court gave that concept in its judgment

of 22 December 1969 on the abolition above are justified by that Article? of measures which have an effect (3) If the answer to Question 1 is in equivalent to quantitative restrictions on the affirmative and the answer to imports (Official journal, English Question 2 is in the negative, are Special Edition 1970 (I), p. 17) is Articles 90 (1) and 86 (b) of the directed against and forbids. EEC Treaty to be interpreted as Since the discrimination thus described meaning that national provisions as to quality of the kind mentioned is bound up with a measure having an above are incompatible with the effen equivalent to a quantitative restriction the German Government said provisions of Community law?" proposes to deal with these two aspects of the interpretation of the scope of The first question Article 30 of the Treaty jointly. This question is concerned not only The German Government analyses the with the interpretation of Article 30 of case-law of the Court relating to quality the Treaty (prohibition of measures standards controls which apply only to having an effect equivalent to products intended for expon and points quantitative restrictions) but also with out that, while the judgment of 26 the prohibition of discrimination, it February 1975 in Case 63/74 (Cadsky being understood, however, that to this [1975] ECR 290) left open the extent it cannot refer either to the possibility of regarding such measures as second subparagraph of Article 40 (3) being compatible with the Treaty, the of the Treaty, since the products in Court in its judgment of 3 February question do not fall within Annex II to 1977 in Case 53/76 (Bouhelier [1977] the Treaty and are not therefore ECR 197) held that the discriminatory covered by a common organization of nature of quality standards — due to the market, or to Article 7 of the the fan that they were only required for Treaty, since Article 40 (1) of the products which were to be exported — Weingsetz amounts — if there is any determines their classification as discrimination — to discrimination measures having an effen equivalent to between German undertakings quantitative restrictions.

EGGERS v FREIE HANSESTADT BREMEN

quality standards upon which impor case as far as Article 40 of the tation or exportation depend, nor is Weingesetz is concerned. The objective, there any question of any unequal which is legally unchallengeable, of treatment of domestic products encouraging quality is in fact pursued compared with foreign products. Nor by means which meet the relevant can any argument be based on the wide objective requirements, since the interpretation adopted by the Court in principle of "undivided responsibility" its judgments of 15 December 1976 in during the stages of distilation and Case 35/76 (Simmenthal [1976] /ECR storage on the national territory, which

p 2147). Although this is in fan a (also quoted above). Its proposed necessary condition it is not, however, answer to the first question is that rules sufficient to establish an infringement of adopted by Member States which make Article 30, because otherwise all the use of optional designations of domestic technical or quality standards quality for home-produced spirits made would be prohibited since they may all from wine subject to the condition mat: affect trade between Member States. — at least 85% of the alcoholic content The first paragraph of Article 100 of the

JUDGMENT OF 12. 10. 1978 — CASE 13/78

should be in the affirmative and the answer to the second question in the C — Observations submitted by the Commission negative — that is to say, if Article 40 of the Weingesetz is found to be The Commission first of all describes justified by Article 36 of the Treaty — the German wine-growing legislation and its purpose is to ascertain whether, and draws attention to the fact that the in that case, Articles 90 and 86 of the Law of 25 July 1930 (RGBl. 1, p. 356), Treaty do not prohibit measures such as which applied until the entry into force those laid down by the disputed article. of the Weingesetz of 1971, did not This question is connected with the provide for specific designations complaint made by the plaintiff in the depending on the quality of the main action relating to the allegation product. that there is a monopoly of imported The Weingesetz of 1971, on the other distillate which benefits German hand, introduces a distinction based on

EGGERS v FREIE HANSESTADT BREMEN

produced wine distillates if they intend requirements connected with those to manufacture "Weinbrand". designations various factors must, in the According to the Commission, the view of the Commission, be requirement contained in Article 40 of distinguished. the Weingesetz that 85% of the ready- Registered designations of origin, which prepared distillate must be derived from are also protected and recognized by domestic distilleries, as the German auth Community law, indicate that a product orities have acknowledged (Repon of has a certain number of special features. the Bundestag Public Health Those conditions are fulfilled in the Committee, BT Drucksache 1969, case of "cognac" but not in that of V/4072), is intended to "afford under "Weinbrand" (judgment of the Court of takings which have acquired or set up 20 February 1975 in Case 12/74, cited distilleries abroad the added oppor

producing country: According to the Commission it cannot be inferred from the fact that it has not — they may both sute that the goods so far criticized Article 40 of the have particular features or a special Weingesetz that it fully endorses its quality and, accordingly, endeavour content. As soon as the departments of to add to the statement of the the Commission had taken note of the country of origin an indication that facts of this case they considered this is a guaranteed registered whether there were any grounds for designation of origin; if that is recommending that the Commission combined with the prohibition on should initiate a procedure against the using the generic term for Member Sute concerned for failure to designating the product in the case fulfil an obligation within the meaning of foreign products one is

JUDGMENT OF 12. 10. 1978 — CASE 13/78

conclusions: December 1969 (Official Journal, — since "Weinbrand" is not a English Special Edition 1970 (I), p. 18). registered designation of origin, this The fact that the Weingesetz contains word may also be used in the case of corresponding provisions for foreign foreign high quality spirits made Weinbrand aggravates the infringement from wine (judgment in Case 12/74, of Article 30 of the EEC Treaty, rather cited above); than legitimizing it, because the effect — since the designation "German" can of the rules in question might be а restriction of the free movement of be linked only with a manufacturing process carried out in Germany, it goods between Member States. does not in particular afford any jus tification for the requirement that The third question the wine distillate used be manu

Article 1 (c) of Commission Directive Federal Republic of Germany laid down No 66/683 of 7 November 1966 the disputed rules it may have created a (Journal Officiel, n. 3748). The situation which conflicts with the rules exception provided for in the said on competition contained in the Treaty directive concerning designations and and may thereby have contravened the marks of origin does not apply here combined provisions of Articles 5, 85 whereas, on the other hand, a jus

EGGERS v FREIE HANSESTADT BREMEN

EEC Treaty and not in connexion with At the hearing on 5 July 1978 the a reference under Article 177 of the plaintiff in the main action, represented Treaty. by D. Ehle of the Cologne Bar, the Considerations similar to those Government of the Federal Republic of mentioned in relation to Article 90 Germany, represented by J. Sedemund, apply, according to the Commission, to also of the Cologne Bar, and the the prohibition of discrimination. Commission of the European Moreover, in so far as the complaint is Communities, represented by its Agent, directed against discrimination between producers, the second subparagraph of H. Matthies, answered certain questions Article 40 (3) of the Treaty is not put by the Court and submitted oral applicable because high quality spirits observations. made from wine are not an agricultural product included on the list contained The Advocate General delivered his in Annex II to the EEC Treaty. opinion at the hearing on 13 July 1978.

Decision

1 By order of 18 January 1978 which was received at the Court Registry on 9 February 1978 the Verwaltungsgericht of the Freie Hansestadt Bremen referred to the Court, pursuant to Article 177 of the EEC Treaty, three questions on the interpretation of Articles 30, 31 and 36 (the first two questions), 86 (b) and 90 (1) (the third question) of the said Treaty.

2 Those questions have been raised in an action brought by a German manu­ facturer of spirits against the competent authority of the City of Bremen relating to the former's right to use the designations "Qualitatsbranntwein" and "Weinbrand" in connexion with its products made from wine distillates imponed from another Member Sute.

5 According to the plaintiff in the main action, if the initial distillation, which yields the "Rohbrand", is carried out by the still distillation process, it produces spirits distilled from wine having an alcoholic strength of between 24 and 25° which must in fact be distilled а second time in order to fulfil the requirements of Articles 35 and 36 relating to alcoholic strength.

However, if the initial distillation is carried out using the column apparatus it produces — again according to the plaintiff in the main action — а distillate with an alcoholic strength of 70°, which makes a second distillation unnecessary.

6 On the other hand, according to the Government of the Federal Republic of Germany, the product derived from the initial distillation — whatever its alcoholic strength — is a product which has not been purified and is for this reason called crude distillate which, before it can be used for the manu­ facture of spirits, must undergo а second distillation which transforms it into a ready-prepared distillate (fertiges Destillat).

7 The Weingesetz draws a distinction in Section II of Part 2 (Articles 35 to 44) between spirits made from wine which are home-produced on the national territory (inländische Branntweine aus Wein) and are dealt with in Articles 36 to 41, and those which are manufactured abroad (ausländische Branntweine aus Wein) and are dealt with in Articles 42 to 44.

That distinction is arrived at by applying different criteria and its effects differ depending on whether the spirits in question are ordinary spirits or

(b) the whole of the wine distillate used for the manufacture of spirits, that is to say both the distillate obtained on the national territory and any that may have been purchased — up to a maximum of 15% of the whole of the said distillate — abroad, has been kept for at least six months in oaken casks at the same factory (Betrieb) where the distillate produced on the national territory was manufactured.

Under Article 44 of the Weingesetz the designation "Quaiitätsbranntwein aus Wein" together with the name of the producing country or the adjective derived from that name may also be used in the case of foreign spirits in respect of which the document which has to accompany them when they are imported into the Federal Republic of Germany has certified that they comply with conditions which are almost the same as those laid down in Article 40 for home-produced high quality spirits, and in particular with the two conditions that at least 85% of the alcoholic content of the distillate is derived from distillate obtained in the producing country (subparagraph 2 of

JUGDMENT OF 12. 10. 1978 — CASE 13/78

Article 44 (1)) and that the whole of the wine distillate used has been kept for at least six months in oaken casks at the factory abroad where that 85% was distilled (subparagraph 3 of Article 44 (1)).

10 Although the 1971 version of the said Article 44 allowed only the designation "Qualitätsbranntwein aus Wein" to be used for high quality spirits from abroad, while reserving the better known designation "Weinbrand" for high quality spirits produced in Germany, it is clear from the judgment of the Court of Justice of 20 February 1975 (Case 12/74, Commission of the European Communities v Federal Republic of Germany [1975] ECR 181) that high quality spirits from the other Member States which fulfil the conditions laid down in Article 44 of the Weingesetz must also be permitted to benefit in Germany from the use of the designation "Weinbrand", because otherwise there would be an infringement of Article 30 of the Treaty.

EGGERS v FREIE HANSESTADT BREMEN

Accordingly that provision is said to be a restriction on trade which is prohibited by Article 30 of the Treaty and cannot fall within the scope of Article 36 thereof, since, according to the plaintiff in the main action, its real objective is to protect German distillers by reserving, in the case of spirits manufactured in the Federal Republic, the designations "Quaiitätsbranntwein aus Wein" and "Weinbrand" for those spirits in respect of which the final distillation at least has been carried out in the Federal Republic of Germany.

Furthermore, that measure forces manufacturers of German spirits made from wine, who are not distillers, to buy the distillates with which they make spirits exclusively from German distillers, who are moreover their competitors, otherwise they would be unable to use the above-mentioned designations in connexion with their products, and this is a form of discrim­ ination between those manufacturers of spirits who are distillers and those who are not which is forbidden by the Treaty.

13 The Government of the Federal Republic of Germany submits that the provision at issue is not in any respect a measure having an effect equivalent to a quantitative restriction.

The Weingesetz, by making it obligatory that at the very least the final distillation and the six months' storage in oaken casks should take place in the same factory (Betrieb), aims at guaranteeing the quality of the spirits in question, which justifies the designations reserved for them because of that quality.

That guarantee of quality can be achieved only if there is "undivided responsibility", that is to say if at the very least the final distillation and storage are undertaken in the same factory, since such "undivided responsibility" offers "the best possible guarantee that quality will be main­ tained and at the same time ensures effective supervision" and thus permits "the quality and individuality of the product" to be secured; (statement of reasons for the law, Bundestagsdrucksache V/1636, p. 61).

16 Finally, it should also be noted that the designations "Qualitätsbranntwein aus Wein" and "Weinbrand" are not, either within the meaning of the domestic laws of the Member States or that of Article 2 (3) (s) of Commission Directive No 70/50/EEC of 22 December 1969 (Official Journal, English Special Edition 1970 (I), p. 17), indicative of origin or source but must be regarded as designations of quality formulated by the legislation of a Member Sute.

Moreover, in the beforementioned judgment of 20 February 1975 the Court held that the designation "Weinbrand" was not an indication of origin (Herkunftsangabe) and the Federal Republic of Germany, drawing the relevant conclusions from that judgment, states that the designation "Weinbrand", together with the addition of the name of the Member Sute of origin or an adjective derived from that name, may be used in marketing spirits made from wine coming from other Member States which satisfy the conditions prescribed by Article 44 of the Weingesetz in order to take advantage of the designations reserved for high quality spirits.

17 It is after taking into account the various factors to which attention has been drawn above that the questions referred to the Court are to be answered.

EGGERS v FREIE HANSESTADT BREMEN

The questions referred to the Court

18 The first question asks whether Articles 30 and 31 of the EEC Treaty as well as the prohibition of discrimination under Community law are to be interpreted as meaning that the rules laid down in subparagraphs 1 and 4 of Article 40 (1) of the Weingesetz of 14 July 1971 (Bundesgesetzblatt: Part I, page 893 et seq. at 908) according to which home-produced spirits from wine may be designated as "Qualitätsbranntwein aus Wein" (high quality spirits made from wine) or as "Weinbrand" (Brandy), only if:

21 If the answer to that question is in the affirmative the next question is whether a measure of that kind is not justified by Article 36 of the Treaty.

JUGDMENT OF 12. 10. 1978 — CASE 13/78

22 It is appropriate to answer both those questions together and to do this in the first instance with reference to the interpretation of Articles 30 and 36 of the Treaty.

23 As for the prohibition of measures having an effect equivalent to quantitative restrictions, Article 30 of the Treaty prohibits all such measures in trade between Member States.

For the purpose of this prohibition it is sufficient that the measures in question are likely to hinder, directly or indirectly, actually or potentially, imports between Member States.

According to the sixth recital of the preamble to Commission Directive No 70/50/EEC of 22 December 1969 on the abolition of measures which have an effect equivalent to quantitative restrictions, measures "which, at any marketing suge, grant to domestic products a preference, other than an aid, to which conditions may or may not be attached, and where such measures totally or partially preclude the disposal of imported products", must be considered to be included among such measures and are consequently prohibited.

Consequently, the Member States are empowered to lay down quality standards for products marketed on their territory and may make the use of designations of quality subject to compliance with such standards, but only on the condition that such standards and designations — unlike the position in the case of registered desginations of origin and indications of origin — are not linked to a requirement that the production process for the products in question be carried on within the country but are dependent solely on the existence of the intrinsic objective characteristics which give the products the quality required by law.

A presumption of quality which is linked to a requirement that the whole or part of the production process should take place on national territory, thereby restricting or treating unfavourably a process some or all of the phases whereof are carried out in other Member States is, always excepting the rules relating to registered designations of .origin and indications of origin, incompatible with the common market.

This is more particularly the case where the requirement that the whole or part of the production process should take place on national territory is, in substance, justified only by a rule which, by introducing the principle of "undivided responsibility", is intended to facilitate quality controls whereas such controls may be carried out just as effectively by means which are less restrictive of trade between Member States.

26 It follows from all the foregoing considerations that a national measure which makes the right to use a designation of quality for a domestic product subject to the condition that the semi-finished product from which it was manufactured was either produced or treated on national territory, and refuses to allow the use of that designation simply because the semi-finished product was imponed from another Member State, is a measure having an effect equivalent to a quantitative restriction.

The extension of that restriction both to finished products coming from the other Member States and to those from the Member Sute concerned, far from excusing the restriction on trade in semi-finished products, merely consolidates the partitioning of the markets.

29 However, it should further be considered whether measures such as those which have given rise to the questions referred to the Court are not permissible by virtue of Article 36 of the Treaty, even though they are measures having an effect equivalent to quantitative restrictions.

30 Article 36 is an exception to the fundamenul principle of the free movement of goods and must, therefore, be interpreted in such a way that its scope is not extended any further than is necessary for the protection of those interests which it is intended to secure.

EGGERS v FREIE HANSESTADT BREMEN

31 Article 36 of the Treaty does not cover a restriction imposed on trade which is linked to the right to use a national designation of quality, even where it is optional, which distinguishes a particular home-produced alcohol from similar home-produced alcohols, which may, even if they do not fulfil the condition on which the right to the designation of quality depends, and which restricts intra-Community trade, nevertheless be marketed on the territory of the Member Sute concerned without any restriction and in particular without any risk to the health of consumers.

32 Therefore the answer to the first two questions must be that measures adopted by a Member Sute which make the use in connexion with a home­ produced product of a designation of quality — even where such designation is optional — which is indicative neither of origin nor of source within the meaning of Article 2 (3) (s) of Commission Directive No 70/50/EEC of 22 December 1969 subject to the requirement that one or more stages of the production process prior to the preparation of the finished product have been carried out on national territory are measures having an effect equivalent to a quantitative restriction which are prohibited by Article 30 of the Treaty and not justified by Article 36 thereof.

THE COURT

in answer to the questions submitted to it by the Verwaltungsgericht of the Free Hanseatic City of Bremen by order of 18 January 1978, hereby rules:

Measures adopted by a Member State which make the use in connexion with a home-produced product of a designation of quality — even where such designation is optional — which is indicative neither of origin nor of source within the meaning of Article 2 (3) (s) of Commission Directive No 70/50/EEC of 22 December 1969 subject to the requirement that one or more stages of the production process prior to the preparation of the finished product have been carried out on national territory are measures having an effect equivalent to a quantitative restriction which are prohibited by Article 30 of the Treaty and not justified by Article 36 thereof.

Kutscher Mertens de Wilmars Mackenzie Stuart Donner Pescatore

Sørensen O'Keeffe Bosco Touffait

Delivered in open court in Luxembourg on 12 October 1978.