C-35/78

JUDGMENT OF THE COURT OF 14 DECEMBER 1978 1

N. G. J. Schouten B.V. v Hoofdproduktschap voor Akkerbouwprodukten (preliminary ruling requested by the College van Beroep voor het Bedrijfsleven)

Case 35/78

1. Agriculture — Common organization of the markets — Monetary compensatory amounts — Determination — Condition — Alteration of the difference between exchange rates — Exchange rate to be taken into account — Representative rates — Discretionary powers of the Commission (Regulation No 974/71 of the Council, Art. 2 (1) and Art. 3)

2. Agriculture — Common organization of the markets — Cereals — Management Committee — Procedure — Opinion of the Committee — Absence — Measures adopted by the Commission — Communication to the Council — Obligation — None

(Regulation No 2727/75 of the Council, Art. 26)

and

Hoofdproduktschap voor AKKERBOUWPRODUKTEN (Central Board for Agri­ cultural Products),

on the validity of Commission Regulation (EEC) No 1356/76 of 11 June 1976 on the monetary compensatory amounts and the differential amounts applicable in respect of movements in the Irish pound and the pound sterling (Official Journal L 153, p. 39),

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

(a) in respect of those Member States Article 2a of Regulation (EEC) No the currencies of which are main­ 974/71 shall run from a Wednesday to tained among themselves within a the following Tuesday". spread at any given moment of Article 3 of Regulation No 1380/75 2.25%, the percentage difference provides that: between: "The spot market rates against each of — the conversion rate used under the currencies of the Member States the common agricultural policy, which keep their exchange rates within a and spread at any given moment of 2.25% shall be: — the conversion rates resulting from the central rate; (b) in respect of Member Slates other (c) for the Irish pound and the pound than those referred to in (a), the sterling: the average rates recorded average of the percentage differences each working day at noon on the between: foreign exchange markets of the two Member States concerned." — the relationship between the conversion rate used under the common agricultural policy for During the period from 2 to 8 June 1976 the currency of the Member State inclusive, the Irish pound and the pound concerned and the official parity, sterling were subject to speculative movements. The Commission took the or, where this parity is not observed, the central rate of each view that, for that reason, the rates of the currencies of the Member recorded during that period could not be States referred to in (a), and considered as representative. Since moreover those rates subsequently — the spot market rate for the recovered, thus eliminating the disparity currency of the Member State in recorded in the said period, the question in relation to each of Commission considered it appropriate to the currencies of the Member take no account of their past movements States referred to in (a), as and to make no amendment to the level recorded over a period to be of the monetary compensatory amounts determined". fixed up to that time. Accordingly, the Commission adopted Regulation No Article 3 of Regulation No 974/71 1356/76, Article 1 of which is in the provides that: following terms: "If the difference referred to in Article 2 "By way of derogation from Article 3 of (1) changes by at least 1 point from the Regulation (EEC) No 2300/73 and from percentage taken as a basis for the Article 2 of Regulation (EEC) No preceding determination, the com­ 1380/75, the components used to pensatory amount shall be altered by the calculate the differential amounts and the Commission in line with the change in monetary compensatory amounts relating the difference". to movements in the Irish pound and the In application of Regulation No 974/71, pound sterling and applicable with effect Article 2 of Regulation (EEC) No from 7 June 1976 shall continue to apply 1380/75 of the Commission of 29 May during the period commencing 14 June 1975 (Official Journal 1975, L 139, p. 1976". 37) provides that: A draft of Regulation No 1356/76 had "The period referred to in the second been submitted to the Management subparagraph of Article 1 (la), the Committees for the agricultural products second indent of Article 2 (1) (b) and concerned for their opinion in

In application of Regulation No amendment related solely to the Irish 1356/76, the Hoofdproduktschap voor pound and the pound sterling? Akkerbouwprodukten (Central Board for If so is the regulation therefore invalid? Agricultural Products) by a circular of 10 3. Must it be said that in adopting Regu­ June 1976 informed interested parties, lation (EEC) No 1356/76 the including Schouten B.V. which carries on Commission acted arbitrarily or at trade in cereal exports, that the least that it exposed trade and compensatory amounts to be paid by it industry to arbitrary decisions and for trade with the United Kingdom as thus abused its powers? from 14 June 1976 would not be altered on the basis of the average of the spot If so is the regulation therefore invalid? market rates recorded on the foreign 4. Properly interpreted do the provisions exchange markets during the period of Article 26 of Regulation (EEC) No from 2 to 8 June 1976 inclusive but for 2727/75 of the Council mean that if the time being would remain unaltered. the Management Committee has not decided on a draft measure submitted Schouten B.V. appealed to the College van Beroep voor het Bedrijfsleven to it by a majority of 41 votes the (administrative court of last instance in Commission is not obliged to notify the measure to the Council? matters of trade and industry) against the decision of the Hoofdproduktschap, If that question is answered in the and by an order of 10 March 1978 that negative is Regulation (EEC) No court decided to stay the proceedings 1356/76, which was not submitted to and refer the following questions to the the Council, consequently invalid? Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty: The order of the College van Beroep was received at the Court on 14 March 1978. 1. Are the provisions of Commission Regulation (EEC) No 1356/76 Upon hearing the report of the Judge- incompatible with Articles 1, 2, 2a, 3, Rapporteur and the views of the 6 or 7 of Regulation (EEC) No Advocate General, the Court decided to 974/71 of the Council and/or with open the oral procedure without any the provisions of Regulation (EEC) preparatory inquiry. No 1380/75 of the Commission or else with any other binding provision of Community law? II — Summary of the written If so is the said regulation therefore observations submitted under invalid? Article 20 of the Protocol on the Statute of the Court of 2. Is the amendment made by Regu­ Justice of the EEC lation (EEC) No 1356/76 to the rules for the granting of monetary A — Observations submitted by Schouten compensatory amounts incompatible B.V. with the principle of legal certainty which is fundamental to the Treaty or Regulation No 1356/76 derogates not with the principle of equality before only from the provisions of Regulation

No 1380/75 but also and principally results in a violation of the principle of from those of Regulation No 974/71, in equality before the law. particular Article 2 (1) (period to be The existence of speculative movements determined) and Article 3; it is, however, can be established only after the event, difficult to find any foundation for such so that as a result of the way in which derogation in Regulation No 974/71. the compensatory amounts system works Since the latter is a Council regulation, merchants are always affected after the the Commission cannot derogate from it event. If it were possible to adopt by an act which it adopts itself.

market might be threatened. van Beroep intends to ask whether Regulation No 1356/76 breaches the Article 26 of Regulation No 2727/75 principle of legal certainty. The system must be taken to mean that if the of compensatory amounts exempts grain Management Comittee has not decided merchants from the obligation to take for or against a measure by a majority of precautions against any risk of specu 41 votes there is an adverse opinion, and lative movements.

transactions on that value. It is in this to the Court for a preliminary ruling must be answered in the negative, and context that the principle of legal that consequently Regulation No certainty comes into play. Furthermore, 1356/767 is invalid or alternatively must Regulation No 1356/76 is contrary to be declared inapplicable. the system embodied in Regulations Nos 974/71 and 1380/75 in that it relates B — Observations submitted by the only to the pound sterling and the Irish Commission pound and not to the other currencies. Therefore grain merchants exporting to Regulation No 1356/76 derogates from Italy of France are not affected, and this the normal method of calculating

which the rates must be recorded. Therefore the Commission considers that Therefore there is no derogation from there are no grounds for concluding that that provision. As for Regulation No Regulation No 1356/76 is invalid, either 1380/75, it lays down rules for the for incompatibility with the measures recording of those rates. Since Regu­ mentioned or for incompatibility with lation No 1356/76 maintains in force the any other binding provision of monetary compensatory amounts of the Community law. preceding week — which in their turn As regards violation of the principle of were calculated on the basis of an earlier the protection of legitimate expectations, reference period — it does constitute a the Commission considers that this derogation from Regulation No principle can undoubtedly play a pan in 1380/75. However the Commission must an action based on Articles 178 and 215 be regarded as being entitled to derogate of the Treaty claiming compensation for from Regulation No 1380/75 as regards damage suffered as a result of an both substance and form. As to form, unlawful act by the Community, but that since it is empowered to fix the detailed it cannot be taken into consideration rules for the application of Regulation where it is a question of establishing No 974/71, it is also authorized to whether a particular Community depart from such rules fixed by itself measure is void or invalid. The earlier and according to the same Commission adopts the point of view procedure. As to substance, it has the expressed on this matter by Mr Advocate power and even the duty to derogate General Trabucchi in his opinion in Case from that regulation in order as far as 47/75 (Germany v Commission [1976] possible to achieve the objectives of Regu­ ECR 569, at p. 589) ". .. it is doubtful lation No 974/71, that is to say to whether the disappointment of mere ensure that situations of monetary expectations is capable, in itself, of instability in which the real exchange resulting in an annulment or in a declaration that a measure is invalid". rate differs from the official parity should not result in upsetting the The fact that Regulation No 1356/76 intervention system and should not lead deals exclusively with the Irish pound to disturbances in trade. Regulation No and the pound sterling in no way 1356/76 should precisely be regarded as constitutes an argument which allows it a necessary derogation of this kind. to be inferred that there is a violation of Application of the exchange rates the principle of equality before the law. recored on the Irish and English foreign Regulation No 1356/76 dealt only with exchange markets during the period those two currencies because they were from 7 to 14 June 1976 would have put the only ones subject to speculation. If the monetary compensatory amounts at a identical treatment had been applied to level bearing no relation to the real value currencies other than the Irish pound of the Irish pound and the pound and the pound sterling, which were in a sterling, and by that very fact would different objective situation, that would have resulted in discrimination. have influenced the level of prices by departing from the level of the The Commission in no way acted arbi­ intervention prices. Moreover, in the trarily in adopting Regulation No

Decision

1 By an order of 10 March 1978, which was received at the Court on 14 March 1978, the College van Beroep voor het Bedrijfsleven referred to the Court under Article 177 of the EEC Treaty several questions on the validity of Commission Regulation (EEC) No 1356/76 of 11 June 1976 on the monetary compensatory amounts and the differential amounts applicable in respect of movements in the Irish pound and the pound sterling (Official Journal 1976, L 153, p. 39).

2 These questions have been raised in the context of an action by a Netherlands exporter, the appellant in the main action (hereinafter referred to as the appellant), against a decision of the Hoofdproduktschap voor Akkerbouwprodukten (Central Board for Agricultural Products), the respondent in the main action (hereinafter referred to as the respondent), which was notified to the appellant by a circular of 10 June 1976 and which provided that the monetary compensatory amounts to be paid by the respondent for trade with the United Kingdom with effect from 14 June 1976 would not be altered on the basis of the average of the spot market rates recorded on the foreign exchange markets during the period from 2 to 8 June 1976 inclusive but for the time being would remain unchanged.

JUDGMENT OF 14. 12. 1978 — CASE 35/78

3 Article 1 (1) of Regulation (EEC) No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (Official Journal, English Special Edition 1971 (I), p. 257), as amended by subsequent regulations, in particular Regulation (EEC) No 2746/72 of the Council of 19 December 1972 (Official Journal, English Special Edition 1972 (28-30 December), p. 64), Regulation (EEC) No 509/73 of the Council of 22 February 1973 (Official Journal 1973, L 50, p. 1) and Regulation (EEC) No 1112/73 of the Council of 30 April 1973 (Official Journal 1973, L 114, p. 4), provides that:

"(1) The compensatory amounts for the products covered by intervention arrangements shall be equal to the amounts obtained by applying to the prices:

(a) in respect of those Member States the currencies of which are main­ tained among themselves within a spread at any given moment of 2.25%, the percentage difference between:

— the conversion rates used under the common agricultural policy,

and

SCHOUTEN v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN

— the conversion rates resulting from the central rate;

8 Article 3 of Regulation No 1380/75 provides that:

"The spot market rates against each of the currencies of the Member States which keep their exchange rates within a spread at any given moment of 2.25% shall be:

(c) For the Irish pound and the pound sterling: the average rates recorded each working day at noon on the foreign exchange markets of the two Member States concerned".

JUDGMENT OF 14. 12. 1978 — CASE 35/78

9 During the period from 2 to 8 June 1976 inclusive, the Irish pound and the pound sterling were subject to speculative movements, so that the difference for that week changed by 2.69 points from the percentage taken as a basis for the preceding determination.

to Since the situation rapidly recovered towards the end of that period, the Commission considered it appropriate to take no account of the recent movements in the two currencies in question and to make no amendment to the level of the monetary compensatory amounts fixed up to that time.

or because of the abrupt nature of the amendment;

SCHOUTEN v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN

or because of the fact that the amendment related solely to the Irish pound and the pound sterling? If so is the regulation therefore invalid?

3. Must it be said that in adopting Regulation (EEC) No 1356/76 the Commission acted arbitrarily or at least that it exposed trade and industry to arbitrary decisions and thus abused its powers?

If so is the regulation therefore invalid?

4. Properly interpreted do the provisions of Article 26 of Regulation (EEC) No 2727/75 of the Council mean that if the Management Committee has not decided on a draft measure submitted to it by a majority of 41 votes the Commission is not obliged to notify the measure to the Council?

JUDGMENT OF 14. 12. 1978 — CASE 35/78

974/71, in particular Article 2 (1) (period to be determined) and Article 3 of that regulation.

18 It is submitted that since the latter is a Council regulation, the Commission cannot derogate from it.

19 Furthermore, Regulation No 1356/76 is said to violate the principle of legal certainty.

20 According to the appellant, by relying on the system embodied in Regulation No 974/7 1 exporters should have been able on the basis of the percentage fluctuation during the reference period from 2 to 8 June 1976 inclusive themselves to calculate the value of the monetary compensatory amounts which ought to have applied to trade with the United Kindgom with effect from 14 June 1976 and to base their transactions on that value.

21 Furthermore, Regulation No 1356/76 is said to be contrary to the system embodied in Regulations Nos 974/71 and 1380/75 in that it relates only to the pound sterling and the Irish pound and not to the other currencies, so that merchants exporting to Italy or France are not affected, and this is said to result in a violation of the principle of equality before the law.

26 Consequently, the Commission was able to state in the third recital in the preamble to the said regulation that "those rates have since improved, thus eliminating the disparity recorded in the above-mentioned period".

27 In these circumstances, the Commission considered it "appropriate to take no account" of the rates recorded during the period commencing on 2 June 1976 "and to make no amendment for the present to the monetary compensatory amounts . . . relating to the currencies in question".

28 However, Article 3 of Regulation No 974/71 of the Council provides that if the difference referred to changes by at least 1 point from the percentage taken as a basis for the preceding determination, the compensatory amounts shall be altered by the Commission in line with the change in the difference.

29 The average adjusted difference which was to be recorded for the reference period from 2 June 1976 to 8 June 1976 was — 23.59% and diverged by 2.69 points form the percentage taken as a basis for the preceding determination.

30 Therefore it appears that by omitting to fix new compensatory amounts the Commission departed from the provisions of the said article, and it should be examined whether it could legally do so.

JUDGMENT OF 14. 12. 1978 — CASE 35/78

35 It emerges from the preamble to Regulation No 974/71 of the Council that such a result would be contrary to the purpose and the structure of the compensatory amounts system introduced by that regulation.

36 Accordingly, Article 3 of the regulation may be interpreted as meaning that the exchange rates taken into account in order to establish the difference referred to must be assessed on the basis of economically justified criteria, and that consequently it was open to the Commission to leave out of account rates which it considered to be unrepresentative.

37 It follows that by so doing it did not exceed the margin of discretion conferred upon it in relation to the fixing of compensatory amounts.

SCHOUTEN v. HOOFDPRODUKTSCHAP VOOR AKKERBOUVPRODUKTEN

38 The foregoing also answers the appellant's argument to the effect that by adopting the regulation at issue the Commission failed to comply with the provisions of its Regulation No 1380/75 which fixes the reference period.

39 As regards the alleged breach of the principle of legal certainty, although an exporter is entitled to try to guard against any changes in the exchange rates in the manner described by the appellant, it should be observed that the monetary compensatory amounts system has the objectives stated above and was not intended to give traders an exchange guarantee or to indemnify them against any loss.

JUDGMENT OF 14. 12. 1978 — CASE 35/78

2. The representative of the Commission shall submit a draft of the measures to be adopted. The Committee shall deliver its Opinion on the draft within a time-limit set by the Chairman according to the urgency of the matter. An Opinion shall be delivered by a majority of 41 votes.

3. The Commission shall adopt measures which shall apply immediately. However, if these measures are not in accordance with the Opinion of the Committee, they shall forthwith be communicated by the Commission to the Council. In that event the Commission may defer application of the measures which it has adopted for not more than one month from the date of such communication.

The Council, acting by a qualified majority, may take a different decision within one month."

44 It appears from the last recital in the preamble to Regulation No 1356/76 that the Management Committee did not deliver an opinion within the time- limit set by its chairman.

45 According to the provisions of Article 26 of Regulation No 2727/75, it is only if the Commission adopts measures which are not in accordance with the opinion of the Committee that those measures must be communicated to the Council.

On those grounds,

THE COURT

in answer to the questions referred to it by the College van Beroep voor het Bedrijfsleven by an order of 10 March 1978, hereby rules:

Consideration of Commission Regulation No 1356/76 has disclosed no factor of such a kind as to affect its validity.

Kutscher Mertens de Wilmars Mackenzie Stuart Donner Pescatore

Sørensen O'Keeffe Bosco Touffait

1 — Translated from the French.