C-91/78

JUDGMENT OF 13. 3. 1979 — CASE 91/78

exercise by a State monopoly of its financial consequences of discrimi­ exclusive right to purchase, process nation resulting from an abnormal and sell, the application of Article 37 reduction of the resale price charged cannot be excluded. by a public monopoly through the use of State funds. 2. Article 37 of the EEC Treaty constitutes in relation to Articles 92 5. The sphere of application of Article and 93 of that Treaty a lex specialis in 37 of the Treaty does not extend to the sense that State measures, State measures which affect the inherent in the exercise by a State importation of goods from third monopoly of a commercial character countries, since the arrangements for of its exclusive right must, even where the importation of such products are they are linked to the grant of an aid subject not to the provisions to producers subject to the monopoly, governing the internal market but to be considered in the light of the those relating to commercial policy. requirements of Article 37. 6. Council Decision No 70/549 of 29 3. Any practice by a State monopoly September 1970 on the Association of which consists in marketing a product the Overseas Countries and with the aid of public funds at an Territories with the European abnormally low resale price compared Economic Community is intended to to the price, before tax, of a product place goods originating in the of comparable quantity imported from countries and territories concerned on another Member State is incompatible an equal footing with Community with Article 37 (1) of the Treaty. products so far as concerns any 4. Article 37 of the Treaty confers discriminatory practices on the part of rights, which the national courts must a State monopoly of a commercial protect, on traders who suffer the character.

on the interpretation of Articles 37, 92 and 93 of the EEC Treaty and of Article 2 (1) of Council Decision No 70/549/EEC of 29 September 1970 on the Association of the Overseas Countries and Territories with the European Economic Community in relation to the application of the German Gesetz über das Branntweinmonopol [Law on the Monopoly in Spirits] of 8 April 1922 as amended by the Laws of 2 May and of 5 July 1976.

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: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Under the German Law on the berries or gentian roots. According to Monopoly in Spirits, spirits are subject to Article 151 (1) the higher rate of the a tax on consumption imposed in three reduction also applies to imported spirits different forms: a tax on spirits (Brannt distilled from fruit originating from a weinsteuer) payable in accordance with distillery having an annual production Article 84 (1) on spirits marketed by the not exceeding 4 hectolitres of wine-spirit. Bundesmonopolverwaltung; a spirits By the Law of 5 July 1976 (Bun surcharge (Branntweinaufschlag) payable desgesetzblatt I, p. 1770) the tax on under Article 78 on spirits which are spirits and, consequently, the amount of exempt from the obligation of delivery to the spirits surcharge and of the the Federal Monopoly Administration or monopoly equalization duty were which, in breach of that obligation, are increased as from 1 January 1977 from not so delivered; and a monopoly DM 1 650 to DM 1 950 per hectolitre of equalization duty (Monopolausgleich) wine-spirit.

That law increased the tax on spirits sold by the By letter of 23 February 1977 Hansen Federal Monopoly Administration from notified the Hauptzollamt that, contrary to what it had stated in its declaration of DM 1 500 to DM 1 650 per hectolitre of wine-spirit; in addition it fixed the spirits 7 February, it had not abandoned its surcharge and the monopoly right to initiate proceedings against the equalization duty at the same level as the fixing of the amount of the tax. tax on spirits.

with an annual production not exceeding 4 hectolitres of wine-spirit or in a co operative fruit farm distillery within the limits of its distilling right. That reduction in the spirits surcharge amounts to 21 % but is increased to 30.5 % in the case of spirits manu factured exclusively from stone fruit,

and arrak exceeds that imposed on a part from which is credited to the of the spirits manufactured on the general budget and is indirectly territory of the Federal Republic of intended to compensate for the Germany is contrary to Articles 37 and losses of a State monopoly of a 95 of the EEC Treaty. Furthermore, the commercial character which are increase in the tax on spirits prescribed incurred because certain pro­ by the Law of 2 May 1976 infringes ducers are paid an excessive Article 37 (1) and (2) of the Treaty in price which does not accord with that it has created discrimination market conditions within the between nationals of the Member States Community and because at the regarding the conditions under which same time the selling prices for goods are procured and marketed. the products purchased at the Finally, the Federal Republic of excessive prices have been reduced? Germany, by notifying the Commission of the increase in the tax on spirits only (b) Is Article 37 (2) of the EEC after it had taken effect, has infringed Treaty prohibiting the intro­ Article 93 (3) of the Treaty. duction of measures which The IVth Senate of the Finanzgericht restrict the scope of the articles Hamburg decided by order of 22 March dealing with the abolition of 1978 pursuant to Article 177 of the EEC customs duties to be interpreted Treaty to stay the proceedings until the as also including measures of the Court of Justice had delivered a pre­ kind referred to in Question 2 liminary ruling on the following (a)? questions: (c) Does Article 37 of the EEC "1. Is Article 37 of the EEC Treaty a lex Treaty also confer direct rights specialis in relation to Articles 92 and which must be protected by the 93 of the EEC Treaty in the sense national courts upon those who that State measures which affect the are subject to an increase in the movement of goods between tax on consumption which Member States and, where affects imported and domestic applicable, between Member States goods equally if, although viewed in isolation the increase and third countries must be judged in the light of Article 37 of the EEC in the tax is compatible with the Treaty even if the State measures EEC Treaty, in conjunction with contain inter alia an aid? other measures it is incompatible with the Treaty? 2. If Question 1 is answered in the affir­ mative: (d) Does the sphere of application of Article 37 of the EEC Treaty (a) Is Article 37 (2) in conjunction extend to measures which affect with the first subparagraph of the importation of goods from Article 37 (1) of the EEC Treaty third countries, and if so, subject on the prohibition of discrimi­ to what conditions? nation between nationals of Member States regarding the conditions under which goods are procured and marketed to be interpreted as also covering State measures which entail an identical increase in the tax on consumption on imported and domestic goods, the income

3. If the imposition of the tax on spirits surcharge, which is imposed on consumption is a charge having an domestic spirits, in appearance only: that effect equivalent to a customs duty alignment relates only to spirits distilled and if the sphere of application of from fruit products by distilleries whose Article 37 of the EEC Treaty does annual production does not exceed four not extend to imports from third hectolitres of wine-spirit. The only countries: does Article 2 (1) of the distilleries affected are in fact "bonded" Decision of the Council of distilleries, a traditional feature of the 29 September 1970 on the German monopoly system which does Association of the Overseas not occur in other Member States; there Countries and Territories with the was a deliberate failure to align the European Economic Community charges imposed on imported spirits with (Official Journal, English Special those payable on spirits produced in Edition, Second Series I, External distilleries whose production is estimated Relations (2), p. 164) create direct at a standard level and in co-operative rights which must be protected by fruit-farm distilleries. the national courts?" The increase in the tax on spirits was, moreover, stated to have a double The order of the Finanzgericht Hamburg objective: on the one hand, to provide was received at the Court Registry on protection against an increase in imports 12 April 1978. and, on the other, to increase revenue In accordance with Article 20 of the with a view to replacing the protection Protocol on the Statute of the Court of of the German distilling industry, which Justice of the EEC written observations was previously provided by a monopoly were lodged on 26 June 1978 by the of imports and by taxes on imports, by Government of the French Republic, on an increase, financed by means of an 27 June by Hansen GmbH & Co., the increase in the tax on spirits, in the plaintiff in the main action, on 3 July by purchase prices paid by the monopoly. the Government of the Federal Republic of Germany and on 4 July 1978 by (a) Question 1 the Commission of the European The Finanzgericht Hamburg rightly Communities. considers that the German spirits The Court, upon hearing the report of monopoly continues to exist as a State the Judge-Rapporteur and the views of monopoly of a commercial character the Advocate General, decided to open within the meaning of Article 37 (1) of the oral procedure without any the EEC Treaty. That finding follows in preparatory inquiry. However, it particular from the maintenance, albeit requested the Commission to submit a purely as a matter of form, of the written reply to two questions. That prohibition on imports (Article 3 of the request was complied with within the Law on the Monopoly in Spirits), from prescribed time-limit. the obligation to deliver and sell production to the Monopoly Administration (Articles 58 and 61 of the II — Written observations sub­ Law) and from the monopolistic effects mitted to the Court following from the fixing of the purchase and selling prices of spirits which must or Hansen GmbH & Co., the plaintiff in the may be delivered. main action, maintains that the basis of assessment of the monopoly equalization duty charged on imported spirits is aligned on the basis of assessment of the

The prohibition on discrimination The tax on consumption which, contained in Article 37 forms a lex increased by DM 150 per hectolitre, specialis in relation to all other pro applies to imported products and hibitory provisions in the EEC Treaty in domestic products merely presents an that the discrimination originates in the appearance of uniform taxation. In fact rôle played by the monopoly and in the the rate of taxation on domestic spirits is way in which it operates. The objectives reduced either because no tax is levied of the monopoly could be attained by a (Article 79 (a) of the Law on the great variety of measures: customs duties Monopoly in Spirits) or because the and similar charges, quantitative increase in the tax is in fact entirely restrictions and measures having compensated for by measures of the equivalent effect, various arrangements Monopoly Administration.

The discrimination itself may reaching "compensation effect" in relation to taxation arises from the arise from a variety of measures, in particular from the fixing of prices made payment by the Monopoly Admi possible by aids. nistration of a high purchase price. The latter not only brings the price to the Article 37 of the Treaty is a lex specialis level of the production costs of foreign in relation to Articles 92 and 93, even if competitors but also confers upon the the discriminatory State measure entails distiller aids which increase his income. in particular an aid. Whilst imported spirits bear the entire tax on spirits of DM 1 950 per hectolitre (b) Question 2 (a) of wine-spirit, domestic spirits subject to This is the decisive question in the main the obligation to deliver and resold by

Fur thermore, the revenue from the increase in the tax on consumption entered in the general budget is directly intended to finance the losses of the Monopoly Administration arising from the difference between the high purchase prices and low selling prices.

This constitutes discrimination regarding in part for the fiscal charge imposed the conditions under which goods are upon them. Those principles also apply marketed, since the increase in the tax to taxes on consumption and to an on spirits means that the imported increase in an existing tax where only the product is subject to more onerous amount of the increase is intended to taxation than the similar domestic provide resources the purpose of which is product; furhter, the measures in to reduce the taxation imposed on question are related to the existence of similar domestic products. the monopoly and produce an effect on It is clear from the preparatory stages of specific products; finally, the provisions the Law of 2 May 1976 and from its in question constitute new measures context that the increase in the tax on within the meaning of Article 37 (2) of spirits was intended to compensate for the Treaty. the deficit arising from the difference between the purchase price of domestic (c) Question 2 (b) spirits and the prices at which the By the reference in Article 37 (2) to the Monopoly Administration sells such "scope of the articles dealing with the spirits; there is thus a direct connexion. abolition of customs duties" is intended It is not "broken" by the fact that the Article 12 et seq. and Article 18 et seq. of tax on spirits is initially inserted in the the Treaty and accordingly also the budget and subsequently re-assigned to prohibition on measures having an effect the Monopoly Administration. equivalent to customs duties on imports. The fact that the increase of DM 150 is employed to finance purchase prices The duty on spirits imposed on domestic means that, since those prices are paid by and imported products cannot be the Monopoly Administration, spirits considered as forming part of a general which must or may be delivered to the system of internal taxation, applying Administration obtain relief to the extent systematically to domestic and imported of that amount at least. The increase is products according to the same criteria. thus in the nature of a customs duty. In fact domestic spirits and imported spirits are not taxed systematically (d) Question 2 (c) according to the same criteria. There are The Court has ruled on a number of three duties on spirits, each with a different name, which have rates occasions that Article 37 (1) and (2) has calculated according to different bases of direct effect and may be relied upon by individuals before the national courts. calculation and which are applied There is no reason to restrict the scope systematically to domestic and imported of that case-law. products in accordance with different characteristics.

(e) Question 2 (d) The Government of the Federal Republic According to its wording Article 37 of of Germany maintains that the monopoly in spirits was adjusted in accordance the Treaty relates exclusively to intra- with Article 37 of the EEC Treaty by the Community trade in goods. In fact the Law of 2 May 1976; that law inter alia prohibition set out in paragraphs (1) and abolished the import monopoly and (2) goes beyond the free movement of abolished the compensation of prices, so goods between the Member States. that at present the sole function of the The scope of Article 37 is extended by monopoly is to assist in the organization Article 227 (2) of the Treaty to Algeria of the market. There are thus grounds and the French overseas departments; it for doubt as to whether the increase in has also been extended by various the tax on spirits and the methods of conventions of association and also by price-formation which are at issue in the Council Decision No 70/549/EEC of 29 main action constitute, for" the purposes September 1970 on the Association of of Article 37, measures related to the the Overseas Countries and Territories existence of the monopoly. with the European Economic Community (Official Journal, English (a) Question 1 Special Edition, Second Series I, Article 37 contains a general prohibition External Relations (2), p. 164). on all discrimination against imported Furthermore, the prohibition on charges products in relation to domestic having an effect equivalent to customs products; on the other hand, under Article 92 certain forms of aid to duties applies, pursuant to Regulation (EEC) No 950/68 of the Council of 28 domestic undertakings or production June 1968 on the Common Customs may be authorized provided that they Tariff (Journal Officiel 1968, L 172, satisfy certain criteria of economic p. 1) in conjunction with Article 18 et policy. Article 92 et seq. provide no seq. of the Treaty, to all imports from guidance as to the forms and means third countries following the entry into which may be employed in granting aids; force of the Common Customs Tariff on the forms of open subsidies, in particular so-called financial aids and the non- 1 July 1968. imposition of charges and taxes, must The prohibitions laid down by Article 37 thus in principle be permitted regardless also apply to products coming from third of the adverse effects which they may countries which are in free circulation in have indirectly on sales of competing the Member States pursuant to Article 9 imported products. In this connexion (2) and Article 10 (1) of the Treaty. Article 92 must be considered as a lex specialis if its subject-matter overlaps that (f) Question 3 of Article 37. Such overlapping follows Article 2 (1) of Decision No 70/549/­ from the attribution of a wide sphere of application to Article 37. EEC, by reason of the legal nature of that decision, has direct effect, it is directly applicable also by reason of the Common Customs Tariff and the common agricultural policy of the Community, which were given concrete form by that decision, albeit unnecessarily, having regard to the judgment of the Court of 13 December 1973 in Joined Cases 37 and 38/73 (Diamantarbeiders [1973] 2 ECR 1609).

It is necessary to appraise the The increase in the tax on the relationship between Articles 37 and 92 consumption of spirits laid down by the differently where, in order to promote Law of 2 May 1976 is in accordance the national production, the oppor­ with the obligation contained in Article tunities for using competing imported 37 to accord the same treatment in products are restricted or such products matters of taxation to imported products are subjected to higher taxation. In that and domestic products. The aid granted case the fact that the aid corresponds to to domestic producers of spirits manu­ the criteria of economic policy laid down factured from agricultural products by in Article 92 is not enough to justify the way of the payment of purchase prices method chosen, as that would render covering the production costs is not nugatory the prohibition in Article 37. contrary either to the principle of non­ discrimination in matters of taxation or In order to distinguish between the types of subsidy permitted under Article 92 to the prohibition on charges having an effect equivalent to customs duties under and the arrangements prohibited by Article 37 it is necessary to establish Article 37 (2). In so far as that aid may be considered to be an indirect obstacle whether the measure in question merely modifies the conditions of competition to the movement of goods it must be recalled that it constitutes an aid and has only an indirect effect on the introduced in accordance with the movement of goods. Financial aids, relief from taxation and even a system Treaty, under the first subparagraph of reducing the prices of domestic products Article 42, for ethyl alcohol obtained to the general level of prices, which is from agricultural products and auth­ itself influenced by imports, in essence orized by the Commission in pursuance affect the conditions of production and of the provisions of Article 93 (3) of the do not directly concern the movement of Treaty and of Article 4 of Regulation goods. It is of little significance with No 26 of the Council of 4 April 1962 regard to that last method whether prices applying certain rules of competition to are subsidized directly or through a production of and trade in agricultural system of purchase by the State at higher products (Official Journal, English prices covering production costs and of Special Edition 1959-1962, p. 129). The resale at the lower market price. type of aid chosen by the Government of the Federal Republic of Germany is The reply to the first question should be lawful on the basis of Article 92 of the that Article 92 constitutes, in the Treaty. The Court of Justice has held conditions of economic policy for which that the legislation applicable to aids of it provides, a lex specialis in relation to this type is not the provisions of Article certain forms of aids, in particular all 37 but other specific provisions of the measures which in essence influence the Treaty which limit the scope of Article conditions of production and have only 37. an indirect effect on the movement of goods.

According to the case-law of the Court commercial character as described in the the imposition of a tax in conjunction question. with an aid may constitute an unlawful infringement of the prohibition on (c) Question 2 (c) charges having an effect equivalent to a Since the conditions mentioned in that customs duty or of the principle of non­ question are not present an answer is discrimination in matters of taxation unnecessary. where the revenue from the tax is intended solely to support activities (d) Question 2 (d) which exclusively benefit the taxed In trade with third countries the general domestic product. The German tax on rules apply to goods covered by a spirits, however, does not satisfy the monopoly within a State. Article 37 conditions for the application of that case-law. It constitutes a tax on applies only in so far as it contains a prohibition on charges having an effect consumption imposed solely in accordance with criteria of a fiscal equivalent to customs duties; nevertheless, regard must also be had for nature and the revenue is appropriated to the external customs tariff. The Court the general budget of the State; it is not has confirmed that in the sphere of collected by a fund or similar agency but external trade there is a prohibition on by the finance administration for the the introduction of new charges or an benefit of the general treasury; the aids increase in the rates of existing taxes are not financed by methods similar to since, without such a standstill clause, taxation but by the budget of the State; there is a danger that the Common accordingly, there is no connexion, as Customs Tariff would be disregarded. prescribed in the case-law of the Court, between the collection of the tax and the (e) Question 3 conditions for payment of the subsidy. Since the conditions with a view to The tax on the consumption of spirits is which this question was submitted do not independent of the monopoly and is not obtain an answer is unnecessary. specifically appropriated. The Government of the French Republic The increase in the tax on the observes with regard to Question 2 (a) consumption of spirits undertaken in the that at the request of the Commission it Federal Republic in the course of the is at present turning to a solution in line adjustment of the monopoly in spirits with that adopted in the Federal and the guarantee that purchase prices Republic of Germany in 1976. will cover the production costs of The point at issue being to determine to producers of spirits from agricultural what extent the present system of products are in accordance with taxation of spirits in Germany is in Community law. accordance with the requirements of the Accordingly the following reply should Treaty, in particular Article 37, it should be given to the question submitted: be noted that the solution to that

situation after the expiry of the In those cicumstances the problems transitional period those questions give raised by the main action should be ap­ rise to the preliminary point as to proached in the following manner: whether Article 37, paragraph (1) of which provides that when the transitional — The first point to be established is period has ended no discrimination whether Article 95 of the Treaty must be regarding the conditions under which interpreted as meaning that, when taxes goods are procured and marketed is to are levied on products coming from exist between nationals of Member other Member States, it prohibits any States, may be relied upon before the lesser variation of rates according to the national courts after the end of that categories of producers than occurs transitional period in proceedings calling within the national territory. in question national taxation applied in a According to the case-law of the Court different manner to an imported product. Article 95 prohibits the taxation of Article 37 (1) is, with regard to the imported products in accordance with a Member States, in the nature of a duty basis of calculation or with rules to act which had to be performed during differing from those for taxation applied the transitional period; its purpose was to similar domestic products and leading to ensure that at the end of the to a heavier charge on imported transitional period products coming products, even if that disparity occurs in under a State monopoly of a commercial only a small number of cases; the Member States nevertheless remain free character were subject to the conditions created for trade in freely-marketed products not covered by a monopoly by eliminating customs duties, quantitative restrictions, charges, charges and measures having equivalent effect and by the prohibition of discrimination in taxation. As from 31 December 1969 State monopolies of a commercial

to establish the system of taxation which prohibition on charges having an effect they consider the most appropriate for equivalent to a customs duty on imports each product but they are not released or the prohibition on discrimination in from the duty to ensure that imponed matters of taxation. products are not ultimately subjected to The judgments of the Court cited in this higher taxation. If it proves impossible to connexion refer to so-called "para- obtain equal taxation for domestic fiscal" charges, the revenue from which products and imported products all that is paid not to the State itself but to auto­ can be done is to apply the same nomous public agencies. According to standard-rate or fixed tax to the two those judgments, for the charges to be products. considered contrary to the Treaty they must be intended exclusively to support — The second point is whether those activities which specifically benefit the differences in taxation may constitute, taxed national product; State taxation, for a part of the national production, a the revenue from which is paid into the State aid which must be assessed in the general budget, is thus excludes. light of Articles 92 to 94 of the Treaty. The principles enshrined in those The consequence of the mutual and judgments cannot be applied by analogy general relationship between Articles 95 to charges levied by the State, such as and 92 is that only Article 92 et seq. are taxes on consumption. With regard to applicable to tax reductions coming the fixing of the level of taxation appro­ under Article 92 because their objective priated to the national budget Member is to confer an advantage on certain States retain full discretion within the undertakings or areas of production. framework of their economic in­ Under those conditions it is certainly dependence, subject to any obligations possible that differences in taxation which may be incumbent on them under whereby, as in the present case, certain Community law. domestic producers obtain an advantage In the present case there is no "clearly must be assessed in the light of Article 92 established connexion" between, on the et seq. one hand, the collection of a fiscal duty levied without distinction on the — The third point is whether the products in question, whether domestic provisions prohibiting charges having an or imported and, on the other hand, the effect equivalent to customs duties and advantage which enures only for the those prohibiting all discrimination in the benefit of the domestic products by taxation of imports preclude a uniform reason of the proceeds of that same duty. increase, affecting both imported products and domestic products, in a tax (b) Question 3 on consumption, the revenue from which is appropriated to the general budget and The levying of the tax on the intended to offset the losses of a public consumption of spirits does not agency which arise both from the payment to certain producers of a price which is excessive in relation to market conditions within the Community and from a simultaneous reduction in the selling prices of the products purchased at excessive prices. In this connexion it should be noted that the German system for the taxation of imported spirits does not infringe the

Decision

1 By an order of 22 March 1978 which was received at the Court on 12 April 1978 the Finanzgericht Hamburg referred, pursuant to Article 177 of the EEC Treaty, a number of questions on the interpretation of Article 37 of the Treaty concerning State monopolies of a commercial character in relation to Articles 92 and 93 concerning the system of aids and of Article 2 (1) of Council Decision No 70/549/EEC of 29 September 1970 on the Association of the Overseas Countries and Territories with the European Economic Community (Official Journal, English Special Edition, Second Series I, External Relations (2), p. 164) in order to establish whether the treatment in matters of taxation accorded by the Federal Republic of Germany to imported spirits following the entry into force of the Gesetz zur Änderung des Gesetzes über das Branntweinmonopol [Law for the Amendment of the Law on the Monopoly in Spirits] of 2 May 1976 (Bundesgesetzblatt I No 50 of 7 May 1976, p. 1145) is compatible with Community law.

HANSEN v HAUPTZOLLAMT FLENSBURG

2 The plaintiff in the main action is an undertaking which manufactures and distributes spirits and which marketed in the Federal Republic of Germany at the time in question imported spirits coming from various sources, of both Community and non-Community origin, either unprocessed or in the form of coupages.

After the entry into force of the Law of 2 May 1976 such spirits became liable to the tax on spirits of DM 1 650 per hectolitre of wine-spirit which is applicable uniformly, albeit under various designations, both to domestic spirits and to imported spirits.

JUDGMENT OF 13.-3. 1979 — CASE 91/78

4 The German tax administration, the defendant in the main action, claims for its part that the monopoly in spirits was adjusted in such a way that its only function at present is that of a national organization of the market and that it no longer supervises or directs the importation of spirits.

It contends that the indirect connexion existing between the levying of the charge on importation and the financing of a national economic activity does not suffice to give that charge the character of an unlawful tax or aid.

5 In order to settle the points at issue the Finanzgericht submitted the following questions:

"1. Is Article 37 of the EEC Treaty a lex specialis in relation to Articles 92 and 93 of the EEC Treaty in the sense that State measures which affect the movement of goods between Member States and, where applicable, between Member States and third countries must be judged in the light of Article 37 of the EEC Treaty even if the State measures contain inter alia an aid?

2. If Question 1 is answered in the affirmative:

3. If the imposition of the tax on consumption is a charge having an effect equivalent to a customs duty and if the sphere of application of Article 37 of the EEC Treaty does not extend to imports from third countries: does Article 2 (1) of the Decision of the Council of 29 September 1970 on the Association of the Overseas Countries and Territories with the European Economic Community (Official Journal, English Special Edition, Second Series I, External Relations (2), p. 164) create direct rights which must be protected by the national courts?"

Question 1

6 The first question asks in essence whether a State measure which is related to the operation of a State monopoly of a commercial character and affects the free movement of goods may be exempted from the prohibition on discrimi­ nation contained in Article 37 of the Treaty because it comprises inter alia an aid within the meaning of Articles 92 and 93.

7 Both the Government of the Federal Republic of Germany and the Commission have called in question the applicability of Article 37 in the context of the dispute brought before the Finanzgericht.

According to the German Government the Law of 2 May 1976 was intended to adjust the German monopoly in spirits in accordance with Article 37 of the Treaty.

JUDGMENT OF 13. 3. 1979 — CASE 91/78

It thus appears that the national court was justified in requesting clarification of the relationship between Article 37 and the provisions of the Treaty concerning official aids since the operations of the monopoly are closely linked with the support of certain categories of producer by means of purchase prices guaranteed by law.

HANSEN v HAUPTZOLLAMT FLENSBURG

9 A comparison between Article 37 on the one hand and Articles 92 and 93 on the other shows that those provisions pursue the same objective, which is to ensure that the two categories of intervention on the part of a Member State, namely action by a State monopoly and the granting of aids, do not distort the conditions of competition within the common market or create discrimi­ nation against the products or trade of other Member States.

However, the application of those provisions presupposes distinct conditions peculiar to the two kinds of State measure which they are intended to govern and they differ furthermore as to their legal consequences, above all in that the intervention of the Commission plays a large part in the implementation of Articles 92 and 93 whilst Article 37 is intended to be directly applicable.

A measure effected through the intermediary of a public monopoly which may also be considered as an aid within the meaning of Article 93 is consequently governed both by the provisions of Article 37 and by those applicable to State aids.

It follows that the operations of a State monopoly are not exempted from the application of Article 37 by reason of the fact that they may at the same time be classified as an aid within the meaning of the Treaty.

13 That question is in fact intended to establish whether a system of aid in conjunction with the operations of a State monopoly which together constitute a guarantee to producers of a purchase price which is higher than the selling price prevailing on the market may constitute an infringement of the provisions of Article 37.

It should be noted in this context that, in a case like the present, there is no causal connexion between the amount of the aid, which is granted in the form of a purchase price guaranteed to the producer, and the selling price, since by virtue of the intervention of the monopoly the producer, who benefits from the aid, does not have access to the market, the selling price to the consumer being determined independently by the monopoly for reasons inherent in its sales policy, without reference to the destination and the amount of aid.

Accordingly, unlike Articles 92 and 93 of the Treaty, pursuant to which the actual economic effect of an aid granted by a State may be assessed, Article 37 is intended to render the sales policy of a State monopoly subject to the requirements of the free movement of goods and of the equal opportunities which must be accorded to products imported from other Member States.

Such equality of opportunity would be jeopardized if the selling price charged for domestically-produced spirits by the monopoly appeared to be lower not only than the purchase price guaranteed to the producer but also

HANSEN v HAUPTZOLLAMT FLENSBURG

than the price, before tax, of spirits of comparable quality imponed from another Member State.

JUDGMENT OF 13. 3. 1979 — CASE 91/78

17 The answer to Question 2 (c) must therefore be that Article 37 of the Treaty confers rights, which the national courts must protect, on persons who suffer the financial consequences of discrimination resulting from an abnormal reduction of the resale price charged by a public monopoly through the use of State funds.

18 Question 2 (d) asks whether the sphere of application of Article 37 of the Treaty extends to measures which affect the importation of goods from third countries.

19 Article 37 forms part of Chapter 2 of Title I of the Treaty, relating to the "elimination of quantitative restrictions between Member States".

It is clear both from the wording of that provision and from its place in the framework of the Treaty that Article 37 is intended to promote the free movement of goods within the Community and to maintain normal conditions of competition between the economies of Member States where in one or other of those States a specific product is subject to a State monopoly of a commercial character.

Accordingly the provisions of that article cannot be applied to products imported from third countries since the arrangements for the importation of such products are subject not to the provisions governing the internal market but to those relating to commercial policy.

Regard should also be had for Article 5 (1) of that decision, according to which "Member States shall refrain from any internal fiscal measure or practice that directly or indirectly leads to discrimination between their own products and like products originating in the countries and territories".

Those provisions may be juxtaposed with, on the one hand, Article 37 (2) of the EEC Treaty and, on the other, Article 95 concerning the application without discrimination of systems of internal taxation to domestic products and to imported products.

It is therefore clear that spirits originating in the countries and territories covered by Decision No 70/549/EEC must receive the same treatment on importation as that which has been set out above with regard to products of Community origin.

23 The answer to Question 3 must therefore be that Council Decision No 70/549/EEC of 29 September 1970 on the Association of the Overseas Countries and Territories with the European Economic Community — subject to the reservation that its applicability to the facts of the case is verified by the national court — is intended to place goods originating in the countries and territories concerned on an equal footing with Community products so far as concerns any discriminatory practices on the part of a State monopoly of a commercial character.

JUDGMENT OF 13. 3. 1979 — CASE 91/78

Costs

2. Any practice by a State monopoly which consists in marketing a product such as spirits with the aid of public funds at an abnormally low resale price compared to the price, before tax, of spirits of comparable quality imported from another Member State is incompatible with Article 37 (1) of the EEC Treaty.

3. Article 37 of the EEC Treaty confers rights, which the national courts must protect, on persons who surfer the financial consequences of discrimination resulting from an abnormal reduction of the resale price charged by a public monopoly through the use of State funds.

4. The sphere of application of Article 37 of the EEC Treaty does not extend to measures which affect the importation of goods from third countries.

HANSEN v HAUPTZOLLAMT FLENSBURG

5. Council Decision No 70/549/EEC of 29 September 1970 on the Association of the Overseas Countries and Territories with the European Economic Community — subject to the reservation that its applicability to the facts of the case is verified by the national court — is intended to place goods originating in the countries and territories concerned on an equal footing with Community products so far as concerns any discriminatory practices on the part of a State monopoly of a commercial character.

Kutscher Mertens de Wilmars Mackenzie Stuart Donner Pescatore

1 — Translated from the Italian.