C-86/78

JUDGMENT OF THE COURT OF 13 MARCH 1979 <apnote>1</apnote>

S.A. des Grandes Distilleries Peureux v Directeur des Services Fiscaux de la Haute-Saône et du Territoire de Belfort (preliminary ruling requested by the Tribunal de Grande Instance, Lure)

"French alcohol monopoly"

Case 86/78

1. References for a preliminary ruling — Interpretation of Community law — Relevance to the proceedings before the national court — Assessment — Jurisdiction of national court

(EEC Treaty, Art. 177)

and

DIRECTEUR DES SERVICES FISCAUX DE LA HAUTE-SAÔNE ET DU TERRITOIRE DE BELFORT, Vesoul,

on the interpretation of Articles 7, 12, 34, 37 and 95 of the EEC Treaty,

THE COURT

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

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

which it buys and markets itself (Article 358 in conjunction with Article 370 of 3. The Peureux distillery, the plaintiff the Code Général des Impôts). Until in the main action, contends that the 1974 it further reserved to itself the "cash adjustment" payable by the import of alcohol from abroad including distiller on being allowed freely to that from other Member States (Article dispose of the alcohol which it produced 385 of the Code Général des Impôts in in the period prior to the amendment of the pre-1974 version). the aforesaid Article 269 by Decree No 77/842 of 25 July 1977 is incompatible There are two exceptions to the with Community law; the ground alleged monopoly in the property of ethyl is that the requirement of such "cash alcohol so produced: adjustment" constitutes discrimination (a) Certain potable spirits listed in against "freed" French alcohol in Article 358 of the Code Général des relation to alcohol originating from Impôts are not subject to the other Member States which did not pay monoply; the cash adjustment before 1977. (b) Article 269 of Annex II to the Code Général des Impôts (Decree No 4. The system for potable alcohol imponed from other Member States in 74/91 of 6 February 1974), which relation to that for national alcohol entered into force on 1 April 1974, provides: "If so requested the Service "freed" and chargeable on this account with the cash adjustment has varied des Alcools may allow producers during the course of time and it seems freely to dispose of certain alcohol possible to distinguish three periods: reserved to the State upon payment of a cash adjustment the rate of I. Before 1 April 1974 (the date of which may not exceed the difference entry into force of Decree No between the highest sale price of 74/91) State alcohol and the lowest Products with an alcoholic base both purchase price of alcohol of agri­ from other Member States and third cultural origin produced within the countries were subject, when in dero­ quotas during the previous marketing gation from the monopoly their year." import was authorized, to a surcharge on the alcohol which they This cash adjustment is intended to contained (Article 386 of the Code compensate for the loss suffered by the Général des Impôts). State in foregoing its right to the II. After the entry into force of Decree monopoly. No 74/91 (1 April 1974) and before Article 269 was amended with effect the amendment by Decree No from 29 July 1977 by Article 1 of Decree 77/842 (29 July 1977) No 77/842 of 25 July 1977 which on the one hand substituted "freely to dispose

— Alcohol "freed" under Article the sale price in France for 269 of Annex II to the Code the same use" to a Général des Impôts paid the cash compensatory charge equal to adjustment provided for there­ the difference between the under. two prices (second paragraph of Article 275). — The system for imported ethyl alcohol is governed by Articles (d) Potable wine-spirits of other 273 and 275 of the same Annex Member States made by the II. distillation of wine orig­ inating in the Community is (a) The import monopoly is not liable to the maintained in respect of ethyl alcohol not usable or compensatory charge but to consumable without further the cash adjustment provided for in Article 269 (third processing (first paragraph of paragraph of Article 275). Article 273). III. After the amendment of Annex II by (b) Ethyl alcohol usable or consumable without further Decree No 77/842 (29 July 1977) processing may be imported The position of national alcohol freely but its import whether which the monopoly allows to be from third countries or other freely disposed of by the producer Member States is subject to remains unchanged; it is subject to the payment of a the cash adjustment provided for in Article 269 of Annex II. "compensatory surcharge" on the pure alcohol contained in The position of imports from third the product equal "to the countries remains unchanged. The difference between the lowest State retains the monopoly of import purchase price paid by the of ethyl alcohol not usable or Service des Alcools at the consumable without further end of the previous processing. The import of usable or marketing year and the sale consumable products is free but price of alcohol intended for subject to the compensatory surcharge. the corresponding use" It seems that the monopoly is also (second and third paragraphs abolished in respect of crude alcohol of Article 273). This wording (products not usable or consumable is similar to that of Article without further processing) from 269 of Annex II in respect of other Member States so that the the calculation of the cash import both of crude alcohol and adjustment. products usable and consumable (c) Products intended for without further processing and drinking containing ethyl products containing potable ethyl alcohol" coming from other alcohol is free and exempt from the Member States are exempt from the compensatory surcharge "until the entry into force of a Community organization of the market in alcohol" but subject "when the minimum sale price of neutral potable alcohol in the country of origin is less than

compensatory surcharge whilst the prior to 1 January 1975, the wording of compensatory charge is abolished. the question referred to the Court and On the other hand imported alcohol the date of the last payment at issue that from other Member States pays the the legal position to be taken into same cash adjustment as the account in order to reply to the question equivalent French product when it is raised is solely that resulting from the "free". national law at issue as amended by Decree No 74/91 of 6 February 1974 5. Having regard to the above rules and before its amendment by Decree No which it considers incompatible with 77/842 of 25 July 1977. In spite of this it Article 37 (adjustment of monopolies) is apparent from certain recitals in the and alternatively with Articles 5 and 7 of judgment making the reference that the the Treaty the plaintiff in the main national court is seeking elucidation on action has brought proceedings against the position after the entry into force of the French administrative authority the decree of 25 July 1977. concerned before the Tribunal de Grande Instance, Lure, with a view to 7. The judgment making the reference obtaining an order for the repayment of to the Court was registered at the Court on 28 March 1978. The French the "cash adjustments" which it has paid Government and the Commission of the amounting to FF 399 435 between 6 February 1970 and 6 October 1976 on European Communities submitted written observations in accordance with potable spirits made by it from Williams Article 20 of the Protocol on the Statute pears and in respect of which it had sought and obtained the right of free of the Court of Justice of the EEC. disposal. The national court before which the II — Observations under Article matter was brought found that under the 20 of the Protocol on the French law the claim was barred in Statute of the Court of respect of payments made before Justice of the EEC 31 December 1974; before deciding on the remainder of the claim it stayed the A — Observations of the French proceedings and referred to the Court of Government Justice for a preliminary ruling the The French Government observes in the question whether the existence of the French State monopoly for the first place that in questioning the so­ production of certain potable spirits called resale adjustment the court involving the levy by the State of a resale making the reference is questioning the adjustment [soulte de rétrocession] very existence of the monopoly for where the sale of such spirits is entrusted alcohol in France. The adjustment is the to the producer is compatible since 1 consideration for renunciation by the January 1975 or subsequently with the State of its right to the alcohol. If it were provisions of Article 37 of the Treaty of possible for a French producer to dispose Rome prohibiting any discrimination freely of his alcohol without paying the between nationals of Member States of the European Economic Community in respect of imports and exports.

adjustment, the very principle of reser­ Before 1977 vation of the alcohol to the State would On the home market manufacturers of become devoid of substance. In products containing freed alcohol paid providing that State monopolies of a the adjustment but from the point of commercial character shall be adjusted view of competition it was compensated Article 37 of the Treaty does not require for by the compensatory charge (Article their abolition but simply that they shall 275 of Annex II to the Code Général des be adjusted in such a way so as to ensure Impôts inserted by Decree No 74/91) to that when the transitional period has which alcoholic products imported from ended no discrimination regarding the other Member States were liable. Further conditions under which goods are in the event of export of alcoholic procured and marketed exists between products the adjustment payable on the nationals of Member States. freed home-produced alcohol which the In the present case the question amounts products contained was also refunded. to whether the actual system of the cash There was therefore no discrimination. adjustments as a result of the adjustments which have been made to After 1977 the monopoly in alcohol by France in To honour its Community obligations performance of its Community the French Government proceeded in obligations has a discriminatory character or not. July 1977 to adjust the French economic system for alcohol. The compensator)' Turning to consideration of this question charge on the alcohol contained in the French Government distinguishes the spirituous beverages from the Common system for crude alcohol from that from Market was abolished, while the products containing ethyl alcohol. possibility enjoyed by home producers of alcohol reserved to the State of obtaining (a) Crude alcohol the right freely to dispose of their The French Government considers that products on payment of the adjustment the levy provided for involves no discrim­ was extended to everybody. All ination either on export to other Community crude alcohol may Member States or on the home market. henceforth enter France freely subject In the event of export of freed alcohol only to payment of the said adjustment. the adjustment is not in fact levied. The system which has been implemented On the home market the French henceforth concerns only pure alcohol producer of crude alcohol reserved to with the result that exemption from the the State pays an adjustment in order to adjustment is no longer possible save in dispose of his product. Since the reform the event of export of crude alcohol. of 1977 the importer of alcohol from other Member States pays the same adjustment so that there is no discrim­ ination between the nationals of Member States.

It follows however from this reform that from other Member States to the home manufacturers of products payment of the same cash adjustment as containing ethyl alcohol are ostensibly freed national alcohol, the position is henceforth treated differently from their different regarding the previous period competitors in other Member States from the entry into force of Decree No since only crude alcohol and not alcohol 74/91 of 6 February 1974 to that of usable or consumable without further Decree No 77/842 of 25 July 1977. processing is subject to the adjustment During this period from 1 April 1974 to on import into France under Article 269 29 July 1977 the system of "freed (1) of Annex II as amended in 1977. This alcohol subject to payment of a cash advantage however is more apparent adjustment" is a State monopoly within than real since in the absence of a the meaning of Article 37 of the Treaty. Community organization of the market By reason of the obligation on national in alcohol the national system (of which producers to deliver their alcohol, the the adjustment is an essential part) of monopoly in alcohol influenced or was reserving ethyl alcohol to the State liable to influence trade between provides guarantees not only to the Member States even in the absence of producers but also to the users of alcohol exclusive rights to import and to export. in so far as the latter enjoy security of supply and the charge imposed on the The monopoly however in providing for manufacturers is the consideration for the adjustment in question did not this guarantee. ensure, as required by Article 37, that no discrimination regarding the conditions The French Government concludes that under which goods are procured and this system and in particular the cash marketed shall exist between nationals of adjustment should not be regarded as Member States. Further if the cash having a discriminatory character. adjustment is compatible with Article 37 it is incompatible with Articles 5 and 7 of B — Observations of the plaintiff in the the Treaty. main action The French market After referring in the first place to the The discrimination arises from the fact facts of the case the plaintiff in the main action stresses that the discrimination of that "freed" national alcohol pays the which it complains is that which cash adjustment and national spiritous penalizes the home product in relation to beverages containing freed alcohol pay the products of other Member States. their due proportion thereof whereas alcohol usable or consumable without Article 37 (monopolies) and Articles 5 and 7 of the Treaty are aimed as much further processing (including potable against this discrimination in reverse as alcohol) coming from other Member against that which is to the disadvantage States enters freely into France without of the products of other Member States. The plaintiff in the main action is at one with the French Government in thinking that a distinction must be made between the system before and after Decree No 77/842 of 25 July 1977. Although in its view there is no longer discrimination since the decree in supplementing Article 269 of Annex II to the Code Général des Impôts has subjected the impon of (crude) alcohol

paying the "cash adjustment". It is not C — Observations of the Commission possible to counter this argument by The Commission sets out what it has saying that during the same period and under Decree No 74/91 alcohol usable done regarding adjustment, within the or consumable without further meaning of Article 37 of the Treaty, of the French monopoly in alcohol and processing and coming from other states that, applying inter alia the Member States was subject the to principles laid down in the judgment of compensatory surcharge (Article 273) or the Court of 17 February 1976 in Case the compensatory charge (Article 275), 91/75 which has already been cited, it as the case may be, because it is apparent prevailed upon the French Government from the case-law of the Court of Justice to abolish, as the French Government and in particular the judgments in Cases has done by Decree No 77/842 of 25 44/75 Reive (German monopoly in July 1977, the compensatory surcharge alcohol) [1976]1 ECR 181 (judgment of imposed by Article 273 and the 19 February 1976); 59/75 Manghera compensatory charge imposed by Article (Italian monopoly in tobacco) [1976]1 275 of Annex II to the Code Général des ECR 91 (judgment of 3 February 1976); Impôts, as amended by Decree No 91/75 Miritz (German monopoly in 74/91 of 6 February 1974, on alcohol alcohol) [1976]1 ECR 217 (judgment of coming from other Member States. In 17 February 1976) that the compensatory the view of the Commission the case in surcharges and charges are incompatible the main action has its origin in the fact with the prohibition on discrimination (resulting from Decree No 77/842 of 25 contained in Articles 37, 5, 7 and with July 1977) that "pure alcohol (raw Article 95 of the Treaty. Since the material) contained in imponed prohibitions contained in these provisions spirituous beverages" is not subject to have direct effect, the charges on alcohol the cash adjustment " whereas alcohol imported from other Member States contained in spirituous beverages made were unlawful and not payable. It in France is so subject." follows that since the import of alcohol Turning then to consideration of the from other Member States is not liable to question raised, the Commission such compensatory surcharge or charge, considers that it should be so re-worded there would be discrimination if home­ as to ask whether it is compatible with produced alcohol "freed" from the the Treaty for a charge such as the resale monopoly had nevertheless to pay the adjustment referred to above to be cash adjustment. Accordingly the imposed on certain traders carrying on adjustment is incompatible with the their business in the Member State prohibition of discrimination contained concerned whereas it is not imposed on in Article 37 or that arising from impon on traders carrying on their Article 7. business in other Member States and making similar products. The market of other Member States

In the opinion of the Commission the Since the cash adjustment is imposed on answer necessitates consideration of the the national production, then whether charge in question from the point of the latter is for the home market or for view of Articles 37, 34, 95 and 7 of the export, the adjustment cannot constitute Treaty in turn. a charge having an effect equivalent to a customs duty on exports nor a measure (a) Article 37 of the Treaty (commercial having an effect equivalent to a monopolies) quantitative restriction on exports. In the Commission's view this provision is no longer relevant to the present case (c) The first paragraph of Article 95 of because, if the French system for alcohol the Treaty (internal taxation) does still constitute a production Article 95 does not prevent the monopoly, it is no longer a commercial imposition on national products of monopoly within the meaning of Article taxation in excess of that on similar 37 of the Treaty. imported products so that the "cash — By virtue of Article 222 of the Treaty adjustment" in question is not the exclusive right to the alcohol incompatible with Article 95. produced on French territory and which the State claims for itself is (d) Article 7 of the Treaty (discrim­ compatible with Article 37, whilst the ination on grounds of nationality) State's exclusive right to market "its Although Article 7 is aimed at discrim­ own property", that is to say, ination on grounds of nationality, it is products whose ownership it reserves open to question whether interpreted to itself, does not depend on Article broadly it ought not to apply to discrim­ 37. No doubt by means of its sale ination on grounds of the geographical policy for alcohol, the property in situation of the production whatever the which it reserves to itself, the State is nationality of the producer. able to influence trade between The following arguments could be Member States, but if so, this would advanced in favour of the applicability of be' a matter falling within Article 86 Article 7 in such case: of the Treaty. — The principle of non-discrimination is — On the other hand the Service des one of the fundamental principles of Alcools no longer has exclusive rights the Treaty the various provisions of to import, export and market alcohol which are only an expression of that reserved to the State and since such principle; therefore its wording may exclusive rights are the very essence be read as meaning that the of the monopoly their disappearance prohibition of discrimination covers will necessarily involve the disap­ the nationals of a Member State, or pearance of the latter. It follows in the view of the Commission that after the end of the transitional period it is no longer possible to have recourse to Article 37 (1) to prohibit discrim­ ination introduced or maintained by a Member State to the detriment of certain of its nationals.

The Commission however inclines in In conclusion the Commission suggests favour of regarding Article 7 as applying that the Court should rule that a charge to the case in question. It puts forward such as that referred to in Article 269 of the following considerations in this Annex II to the Code General des respect: Impôts of the French Republic applying — The general structure of the Treaty is to national products and not affecting based on the implementation of similar products originating in or coming from other Member States is not provisions intended to require Member States not to discriminate incompatible with the EEC Treaty. against the nationals of other The plaintiff in the main action, Member States leaving to each of represented by J. Imbach of the them the responsibility for protecting Strasbourg Bar and P. Didier of the its own nationals. Measures causing Brussels Bar, the Government of the discrimination in reverse usually have French Republic, represented by its an aim which is of indirect benefit to the nationals of the Member State concerned as a whole.

— The interpretation which the Commission gives to Article 37 would prevent this provision from prohibiting "discrimination in reserve". Otherwise in the case of products falling within the ambit of that article the Treaty would make it possible to go beyond what is pre­ scribed in Articles 30 and 34.

— The wide nature of the prohibition contained in Article 48 regarding

PEUREUX v SERVICES FISCAUX DE LA HAUTE-SAÔNE ET DU TERRITOIRE DE BELFORT

adviser, Mr Bessou, the Commission of The Advocate General delivered his the European Communities, represented opinion at the hearing on 14 December by its Agent, Mr Béraud, made oral 1978. observation.

JUDGMENT OF 13. 3. 1979 — CASE 86/78

5 In this respect the national court distinguishes two successive periods, the first concerning the system for alcohol in force after its amendment by Decree No 74/91 of 6 February 1974 (Journal Officiel de la République Française of 8 February 1974, p. 1476) until its amendment by Decree No 77/842 of 25 July 1977 (Journal Officiel de la République Française of 27 July 1977, p. 3928), the second concerning the same system in force after amendment by the second of these decrees.

6 Although it appears that the only question concerning the national court is the "cash adjustments" paid prior to the entry into force of the Decree of 25 July 1977, it is for the national court pursuant to the separation of jurisdiction on which Article 177 of the Treaty is based to decide how far the interpretation of Community law is necessary for it to give its judgment so that the question will be answered having regard to the situations arising during the two above-mentioned periods.

(a) The period between the entry into force of Decree No 74/91 of 6 February 1974 and of Decree No 77/842 of 25 July 1977

7 During the period in question the State monopoly in ethyl alcohol was basically governed by the provisions of Book 1, Part 1, Title III (Indirect Taxation and Fiscal Monopolies) Chapter I, Section 1, Letter B (Economic System) of the Code Général des Impôts and Annex II to the said code.

8 According to Article 358 et seq. of the Code Général des Impôts the effect of the monopoly is that producers of ethyl alcohol established in France or at least in metropolitan France must reserve to the State their production of ethyl alcohol save certain alcohol expressly mentioned in the article.

14 Under Article 385 of the Code Général des Impôts the import of alcohol from abroad is reserved to the State.

15 Nevertheless as regards ethyl alcohol usable or consumable without further processing and spirits and spirituous beverages coming from other Member States Decree No 74/91 of 6 February 1974 in particular, adopted in the context of adjusting the monopoly in implementation of Article 37 of the Treaty, terminated the import monopoly so that since entry into force of the decree such alcohol, spirits and spirituous beverages may be imported from other Member States and marketed in France.

16 Imported alcohol usable or consumable without further processing was under Article 273 of Annex II subject to a "compensatory surcharge" the method of calculation for which resembled the method for calculating the "cash adjustment" levied on freed national alcohol.

JUDGMENT OF 13. 3. 1979 — CASE 86/78

17 Article 275 of the same annex however provides that "products intended for drinking containing ethyl alcohol" coming from other Member States are exempt from the compensatory surcharge but subject to a "compensatory charge" when the minimum sale price of neutral potable alcohol in the country of origin is less than the sale price obtaining in France for the same use.

18 The same Article 275 nevertheless provides that ethyl alcohol imported from other Member States is exempt from this "compensatory charge" when such alcohol is identical to the alcohol of the national production which is not subject to the monopoly (free alcohol).

22 After an exchange of views between the Commission and the French Government the latter adopted Decree No 77/842 of 25 July 1977 which took effect on 29 July 1977.

23 Article 3 of this decree repeals Article 275 of Annex II to the Code Général des Impôts on the levying of the "compensatory charge" on certain alcohol coming from other Member States.

24 Article 2 of the decree provides that products usable or consumable without further processing and containing ethyl alcohol imported from other Member States are also exempt from the "compensatory surcharge" provided for by Article 273 of Annex II.

25 On the other hand under Article 1 of the decree ethyl alcohol imported from other Member States and identical to the ethyl alcohol of the national production which has to be delivered to the monopoly is subject on impon to the same "cash adjustment" to which national ethyl alcohol freed from the obligation to be delivered to the monopoly is subject.

26 It is against the background of these details of the national law that the national court must be answered.

27 The plaintiff in the main action complains before the national court:

28 In view of the above considerations the question is basically:

(a) Whether Article 37 (1) so far as it requires Member States to adjust their commercial monopolies so as to ensure that when the transitional period has ended there is no discrimination between the nationals of Member States prevents national products coming under the monopoly from being subject to charges to which similar products imported from other Member States are not so subject or are subject to a lesser extent;

(b) Whether Article 37 (1) prevents the imposition on national products coming under the monopoly of charges greater than those on the similar product in the other Member State when the national product is intended for export to such other Member State.

The first part of the question

29 The relationship between internal taxation on national products and that on products imported from other Member States is governed by Article 95 of the Treaty which provides that no Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

30 Article 37 (1) in prohibiting when the transitional period has ended all discrimination between nationals of Member States regarding the conditions

35 The rules contained in Article 37 concern only activities intrinsically connected with the specific business of the monopoly and are irrelevant to national provisions which have no connexion with such specific business.

36 The fact that products are or are not subject to internal taxation according to whether they are subject or not to the monopoly or whether or not they

JUDGMENT OF 13. 3. 1979 — CASE 86/78

can be freed from the obligation of delivery is not a factor which determines how the specific business of the monopoly is conducted.

37 The connexion between such taxation and that on similar imported products also not subject to the monopoly is accordingly governed by Article 95 and not by Article 37 (1) of the Treaty whatever the scope of the latter.

38 The appropriate answer to the first part of the question is therefore that whether or not a domestic product — in particular certain potable spirits — is subject to a commercial monopoly, neither Article 95 nor Article 37 of the EEC Treaty prohibits a Member State from imposing on that domestic product internal taxation in excess of that imposed on similar products imported from other Member States.

On those grounds,

THE COURT,

in answer to the question referred to it by the Tribunal de Grande Instance, Lure, by a judgment of 6 January 1978, hereby rules:

Whether or not a domestic product — in particular certain potable spirits — is subject to a commercial monopoly, neither Article 37 nor Article 95 of the EEC Treaty prohibits a Member State from imposing on that domestic product internal taxation in excess of that imposed on similar products imported from other Member States.

Kutscher Mertens de Wilmars Mackenzie Stuart

Sørensen O'Keeffe Bosco Touffait