C-166/78

JUDGMENT OF 12. 7. 1979 — CASE 166/78

measures taken by the institutions. A amending Regulation No 2742/75 on Specific statement of reasons in production refunds in the cereals and support of all the details which might rice sectors is to maintain the prof­ be contained in such a measure itability of the potato starch industry cannot be required, provided such and thus indirectly to ensure an outlet details fall within the general scheme for an agricultural product, the of the measures as a whole. importance of which for the agri­ cultural economy in certain regions of 3. When certain constituent elements of the Community is evident. There is a complex situation are difficult to therefore no doubt whatever that apprehend with any accuracy the these regulations are within the ambit discretion which the Council has of the objectives of the Common when it assesses that complex Agricultural Policy as such objectives economic situation is not only are defined in Article 39 of the exercisable in relation to the nature Treaty. and scope of the provisions which are to be adopted but also, to a certain 5. The granting of a production pre­ extent, to the findings as to the basic mium to one branch of industry to the facts, especially in this sense that the exclusion of a competing branch does not amount to discrimination within Council is free to base its assessment, if necessary, on findings of a general the meaning of the second sub­ nature. paragraph of Article 40 (3) of the Treaty if the premium has been intro­ 4. The purpose of the premium payable duced for the purpose of obviating to producers of potato starch, the special difficulties found to exist provided for in Council Regulation in the sector in question following the No 1123/78 amending Regulation No trend, unfavourable to that sector, of 2727/75 on the common organization economic factors, such as the value of of the market in cereals and in the by-products of both of the Council Regulation No 1127/78 principal products.

APPLICATION for the annulment of Council Regulation (EEC) No 1125/78 of 22 May 1978 amending Regulation (EEC) No 2727/75 of the Council on the common organization of the market in cereals and of Council Regulation (EEC) No 1127/78 of 22 May 1978 amending Regulation (EEC) No 2742/75 of the Council on production refunds in the cereals and rice sectors (Official Journal L 142 of 30 May 1978, pp. 21 and 24),

THE COURT

composed of: H. Kutscher, President, J. Mertens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco, A. Touffait and T. Koopmans, Judges,

Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

JUDGMENT

"Whereas taking into account the "The price to be charged by the connexions which occur between producer at the delivered-to-factory production prices of raw materials used stage, for the quantity of potatoes in the manufacture of cereals and non- required to manufacture 100 kilograms cereal starches and the possibility of of starch should be equal to the amount these two products being substituted to of the production refund laid down in one another, it is appropriate to maintain Article 1 (2), increased by an amount a balanced relationship between the equal to at least 8.18 units of account." prices of the latter; whereas for that purpose it is appropriate to fix at the same level the refund granted in both 2. The system introduced in this way cases; whereas, however, the refund paid has been maintained by later regulations. to potato starch producers should enable Nevertheless the amount of the pro­ a definite assurance to be given to potato duction refund and the minimum free-at- producers in the Community of a price factory price payable to the potato allowing them a fair income, while the grower have been altered on several conditions of the market in cereals used occasions. for the manufacture of starch and quellmehl and the common organization of the markets governing them, are 3. The rules at issue were introduced sufficient to ensure that their price shall by Council Regulation No 1125/78 of definitely be placed at the level of the 22 May 1978 amending Regulation No threshold price; whereas, therefore, it is 2727/75 on the common organization of appropriate to lay down provisions to the market in cereals and Council Regu­ ensure that potato producers should lation No 1127/78 of 22 May 1978 definitely benefit from the refund made amending Regulation No 2742/75 on to potato starch manufacturers." production refunds in the cereals and

Article 2 of Regulation No 1125/78 The second and third recitals in the reads as follows: preamble to Regulation No 1127/78 read as follows: "Article 11 (3) of Regulation (EEC) No 2727/75 shall be replaced by the "Whereas, in view of the situation which following paragraphs: will exist as from the beginning of the 3. A premium may be paid to potato 1978/79 marketing year, particularly as a starch manufacturers. result of the increase in Community farm prices for that marketing year, the 4. The Council, acting by a qualified minimum price paid to the producer of majority on a proposal from the potatoes intended for starch manufacture Commission, shall adopt rules for the should be adjusted; application of this article and fix the amount of the production refund and Whereas the aforesaid regulation the amount of the premium." provides that a balanced relationship should be maintained between potato whilst Article 3 of Regulation No starch and maize starch prices and that 1127/78 provides that: the production refund should be the same for both products; whereas, "The following Article 3a shall be added however, in order to maintain this to Regulation (EEC) No 2742/75: balanced relationship and taking into account the increasing advantage Article 3a enjoyed by the maize starch industry, particularly because of the by-products For the duration of the 1978/79 cereals obtained from such manufacture, a marketing year, Member States shall premium should be paid to potato starch grant a premium of 10 units of account producers." per tonne of potato starch payable to the starch manufacturer." 4. The parties agree that in order to In addition Article 2 of Regulation No maintain a balanced relationship between 1127/78 increased the minimum price the prices of the two products in payable to potato growers from 175 to question account must be taken when the 178.50 units of account. production refund and the minimum price of potatoes are fixed, on the one The present application for annulment hand, of the cost of the raw materials brought by the applicant on the basis of and, on the other hand, of the cost of Article 173 of the Treaty challenges the processing. In order to arrive at the cost legality of Article 2 of Regulation No price of either one or the other product 1125/78 and of Article 3 of Regulation No 1127/78. the value of the by-products must be deducted from the sum of those two

1. The Council stresses that the rep­ The Commission by an application resentative of the Italian Government lodged on 5 December 1978 requested stated within the Council that he was in the Court to allow it to intervene in the favour of the acts which have been case in support of the submissions of the Council. The Court allowed the challenged. intervention by an order of 6 December According to the Council in these 1978. circumstances the application for annul­ ment raises a question of principle, especially as the act in question is an act 6. After hearing the report of the of economic policy based on an Judge-Rapporteur and the views of the evaluation of a specific economic Advocate General the Court decided to situation. The Council leaves it to the open the oral procedure without any Court to determine whether the said preparatory inquiry. circumstances are not such as to involve certain legal consequences, especially with reference to the success with which the action of the Member State II — Conclusions of the parties concerned may meet. The Council takes the view that arguments based on legal 1. The Italian Government claims that certainty may be put forward in support the Court should: of the view that the Italian Government can neither in general have any right to — annul Regulations No 1125/78 bring an action for the annulment of acts and No 1127/78 in relation to in favour of which it has voted nor the provisions concerning the specifically challenge those acts by possibility and the amount pleading such legal grounds as the respectively of a premium of complaint of disproportionality in so far 10 units of account per tonne as such grounds are directly connected payable to potato starch manu­ with the economic assessment which that facturers (Article 2 of Regulation State has helped to arrive at.

The Council goes on to say that, if the authority coming under the jurisdiction applicant's complaints based on of the same public body. The application infringement of the Treaty or of any cannot in fact in such a case be based on rules of law relating to its application the interest of the public body. were taken into consideration, the result would be that not only the advisability of 2. The Italian Government submits that the measure adopted but also its character as an institutional measure the Council is not the organ of the would be called in question again.

This position of complaints relating to infringement of independence is confirmed by the fact the Treaty as those pleaded by the that the Council adopts most of its Italian Government, the principal aim of decisions by a simple majority. Thus the which is to show that the interests of the vote of the representative of the Member Member State in question, which the States does not have any independent latter has not succeeded in getting significance but is one aspect of the acknowledged during the political collegiate will of the Council. discussion in which it participated, have

JUDGMENT OF 12. 7. 1979 — CASE 166/78

consequently the measure adopted by B — Substance vote was willed by the Council and not by the Member State. The latter is 1. Introductory remarks on the rela­ therefore entitled to challenge it as an tionship between the cost of the raw act originated by a third party but not by material, maize, and the cost of raw itself. material, potatoes

The Italian Government quotes in (a) The Italian Government first of all support of these above-mentioned obser­ examining, by way of a preliminary vations of Italian and German writers in statement of the situation on which the particular. In this context it emphasizes disputed regulations have exerted an in conclusion that the Member States do influence, the history of the rules and not, within the context of the first regulations on production refunds for paragraph of Article 173 of the Treaty, maize starch and potato starch. nave to furnish proof of any special In this connexion it has produced to the circumstances in particular with refer­ Court a working paper of the Com­ ence to the interest they have in mission which contains inter alia the instituting proceedings. following figures:

11 000 tonnes

Producti on

1967 1968 1973 1974 1975 1976

— Potatoes 119.84 126.78 140.29 142.33 178.10 194.54 202.37 205.87

Production refund:

— Maize starch 23.63 27.94 36.33 23.50 10.00 14.00 17.00 17.00

— Potato starch 38.04 44.98 58.49 37.83 16.10 22.54 27.37 27.37

Industrial costs:

— Maize starch 109.48 109.48 109.48 147.73 197.77 207.35 213.90 217.59 — "Actual delta" 27.68 27.68 27.68 43.23 32.77 35.35 38.90 39.05

The Italian Government then calls attention to the fact that the Council, for The Italian Government then submits the 1975/76 marketing year, without that from the 1974/75 marketing year basing its decision on any check of an onwards, whereas the price of maize economic and technical nature, reduced continued to rise year by year, the the above-mentioned gap by lowering production refunds for maize starch the figure from 43 to 32 and that at the began to fall with the result that the same time the minimum price of potatoes industrial costs of maize starch increased was increased from 104.50 to 162 units more than those of potato starch.

(in u.a. per tonne)

Cost of obtaining supplies

Mai ze starch Potato starch Income of the potato grower

1973/74 109.48 81.80 140.29

1977/78 213.90 175.00 202.34

The Council then mentions certain (b) The Council points out that, changes and constraints peculiar to although in 1967 the selling price of the potato starch; the manufacturer thereof, finished product manufactured from in addition to having to pay the potato starch and from maize starch was minimum price, is usually bound by approximately the same and although the purchase contracts entered into before processing costs of each of these two the harvest and even by long term finished products were also very similar, contracts; since the crop year is short he the cost of the raw material for potato must cover the cost of his plant and starch was on the other hand less than machinery in a shorter time than the that for maize starch, whereas the manufacturer of maize starch; there are proceeds of sale of maize starch by- also charges for storing the manu­ products were on the contrary much factured product; since the potato starch higher than those of potato starch by- industry is regarded as very pollutant it products. has had to carry out a large amount of work from the standpoint of ecology. According to the Council the difficulties The Council goes on to say that when, peculiar to potato starch are to be seen between 1974 and 1976 prices doubled as in the closing of several potato starch a result of the inflation caused by the oil factories and also in other undertakings crisis, the system proved to be indequate, making an ever increasing loss. especially as the prices of by-products diverged. This caused a crisis in the The Council points out that it has potato starch sector and that is why the Council has adopted a premium of 10 founded its argument on the following units of account payable to producers of calculations, the figures disputed by the potato starch. Italian Government being underlined:

Value of by-products — 40.00 — 79.16 — 5.00 — 22.30

Cost price of 1 tonne of the finished product 108.48 187.46 116.80 207.20

The Council, for the purpose of The Council stresses that the Italian justifying the introduction of the Government's criticism is not just aimed premium at issue, points out that in 1978 at the premium but rather at the entire the value of the by-products increased system stemming from an assessment of a considerably with the result that the complicated economic situation. The processor of maize starch, but not the Council draws attention to the fact that grower of maize, made an additional in its case-law the Court has repeatedly profit; since the system had thus become held that in assessing such a situation unbalanced in such a way that maize Community institutions may exercise a starch benefited it was necessary to wider discretion. restore the balance in favour of potato starch, although it was not the potato grower who was to profit by this increase in the cost of the by-products of maize and maize starch; understandably (c) The Italian Government replies that it was the manufacturer of potato starch the figures produced by the Council who benefited from the payment of the must be corrected, the figures disputed premium. by the Council being underlined: (in u.a. per tonne)

Maize starch Potato starch

1967 1978 1967 1978

Cost of raw materials 109.48 217.59 81.80 178.50

industry must, for guidance, be fixed on of the products in question undertaken average at 77 units of account. by the Institute of Agricultural Econ­ omics of the University of Göttingen, which reaches the conclusion that, in the In the view of the Italian Government circumstances prevailing during the the figures calculated in that way show 1978/79 marketing year and taking into that the payment in 1978 of a premium account the cost of the two raw of 10 units of account to the producers materials, the respective processing costs of potato starch meant that in the end and finally, the return from the the production costs of maize starch respective by-products, maize starch we're heavier than those of potato starch, by more than 18.23 units of account manufacture was less expensive than potato starch manufacture. According to (215.43 — 207.20 + 10 = 18.23), this expert opinion the difference was leaving the by-products out of account. 12.66 units of account per tonne.

ITALY \ COUNCIL

act. Furthermore the Council submits that when this recital refers to the fact The Council emphasizes that the that the balance between the two constraints mentioned in the last recital products at issue has been disturbed in the preamble to Regulation No 1125/78 are the difficulties inherent in because of the increasing value of the by- products of maize starch, it implies that the potato starch industry. As these latter other factors forming part of their difficulties have from the outset justified relationship have not undergone any potato starch being given different substantial change. The Council calls treatment from maize starch, they do not attention to the fact that one way of therefore, in the opinion of the Council, need to be stated in detail, since the remedying this imbalance has been mentioned, namely the premium.

In the second and last recitals in the order to justify the adoption for the first

time of a measure there must moreover proper way, the complaint is in substance be a new statement of the reasons on in line with the specific submissions that which it is based. there have been breaches of the principle of non-discrimination and of the prin­ ciple of proportionality. According to the Italian Government the lack of reasoning in Regulation No 1125/78 cannot be remedied by using 4. The alleged breach of the principle of that in Regulation No 1127/78, because non-discrimination laid down in the that reasoning is itself inadequate; on the second subparagraph of Article 40 (3) other hand the statement of the reasons of the Treaty upon which the latter regulation is based deals with the amount of the premium, whilst that in Regulation No 1125/78 is (a) The Italian Government submits, as concerned with its advisability; Regu­ lation No 1127/78 does not mention far as concerns Regulation No 1125/78, that the premium alters in an unexpected this, since it presupposes that it has manner the usual relationship between already been established. the two branches of industry in question by encouraging one to the detriment of The Italian Government admits that the the other and it accordingly discrimi­ nates between them. second and sixth recitals in the preamble to Regulation No 1125/78 refer to different products but takes the view that The Italian Government, as far as that does not prevent the principle laid concerns Regulation No 1127/78, goes down by the Court for quellmehl from on to submit that the regulations in force being incompatible with the one laid before the introduction of the premium down for starch products. at issue have not established a balance of competition between the products in question but that they could be accepted, 3. The alleged infringements of the because they enabled the industries concerned to survive. Now when combined provisions of the first paragraph of Article 40 (3) and of intervention goes so far, as it has in the Article 39 of the Treaty case of the premium in question, that it renders production extremely difficult or brings it to a halt such intervention may, according to the Italian Government, be (a) The Italian Government is of the classed as discriminatory and invalidate opinion that if two different products are the underlying measure. applied for a specific use, but one of them is bound to be dearer than the other, it would be inconsistent with the (b) The Council replies that this obligation to increase agricultural complaint presupposes that two similar productivity laid down by Article 39 (1) situations have been dealt with in a of the Treaty artificially to equalize the different manner or that dissimilar costs by way of aid. situations have been dealt with in the same way. Now, in the present case, there are, in its opinion, two different (b) The Council submits that, in so far situations which have been dealt with as the Italian Government complains that differently so as to maintain a balanced the measures in question do not seek to relationship between two different attain the objectives of Article 39 in the products.

According to the Italian Government there are no objective reasons of such a kind as to justify the discrimination. In its view the increase in the value of maize starch by-products cannot be relied on in this context; there was no (e) The Commission expresses its such increase from 1977 to 1978; during opinion on this submission and also on the preceding years, when there was an the alleged breach of the principle of increase, the Council's answer to such an proportionality. As far as concerns the other submissions it refers to the increase was to increase the "actual Council's defence. delta". In order to justify a measure, which was entirely different and in addition to the increase of the "actual delta", there ought to have been a reason other than the alleged increase in the value of the by-products which had been According to the Commission the made good. following factors show clearly how precarious the economic situation of potato starch is compared with maize starch: the increase in the value of maize starch by-products which have several outlets; the derived products of potato (d) The Council in its rejoinder refers starch on the contrary have a very low to the following objective reasons which value and are used mainly for feeding­ would justify different treatment of the stuffs or as fertilizers; about 80% of the products in question: the different value production of potato starch is intended of the by-products; the different circum­ for the technological industrial sector stances in which supplies of raw and this makes it especially vulnerable materials are procured and the finished vis-à-vis synthetic products; as far as product is marketed; the differing maize starch is concerned this percentage conditions of production due not only to is about 40% whilst 60% of its technical reasons but also to the environ­ production goes to the food sectors mental laws in force. According to the where there is no competition from Council the objection cannot be raised in chemical products; unlike the maize this connexion that a measure which is starch industry the potato starch industry absolutely different from the one which only operates for three months each year had been adopted until then and is in and is in the main forced to enter into all

(c) The Italian Government's reply is to concede that the industries concerned The Commission adds that having regard form part of the agricultural sector. It in particular to the increase in the value goes on to argue that, although in the of the by-products of maize starch the absence of special objective reasons the production refund is no longer able to costs of the two competing products may fulfil its function; that is why a premium not be equalized artificially, granting aid has had to be paid to producers of to one of them not only infringes Article potato starch by means of which it was 39 of the Treaty but — in so far as it is expressly sought to re-establish the not aimed at dealing with the crisis balance between two dissimilar situ­ which has arisen in the sphere of basic ations. agricultural products but at increasing the profitability of the associated processing industry — also amounts to a misuse of powers. 5. The alleged misuse of powers

(d) The Council points out in its (a) The Italian Government argues in rejoinder that the preceding argument of the context of this claim that through the the applicant is likely to create some granting of the premium at issue the confusion in the statement of the agricultural policy is being used for the grounds of its case: if it is accepted that purpose of pursuing an industrial policy. the processing industries in question form pan of the agricultural sector the Council does not easily understand what In its view reliance cannot be placed on other complaints may be made against it the fact that the premium is a means of except those which relate to infringement assisting the potato grower: either the of the Treaty or of essential procedural crisis in the potato starch manufacturing requirements.

Finally the Italian Government points out that the value of the by-products, on which Regulation No 1127/78 is based, 7. The alleged breach of the principle of has been calculated without taking into proportionality by Regulation No account the costs which the industry had 1127/78

to bear in the case of these products.

(a) The Italian Government stresses, in (b) According to the Council the the context of this submission, that the figures, given under 1 (a) above, indicate objective of the regulation in question that maize starch stood up better than was to assist the potato grower. It takes potato starch to the effects of the general the view that, in order to attain this economic crisis, even if account is taken objective, it was unnecessary to alter the of the poor potato crops during the last balance between the maize starch and few years, and this proves that the more the potato starch industries. The potato productive manufacturing process in the grower has been able to profit from the case of maize starch to a great extent increase in the minimum price of enabled the producers thereof to potatoes, from the increase in the

JUDGMENT OF 12. 7 1979 — CASE 166/78

To say that increasing the refund has no effect on the competitive position of the products in question is, according to the Italian Government, tantamount to (b) The Council replies that if it is forgetting that an increase in the subsidy asserted, as it must be, that the premium to potato growers results from the in fact maintains the balance between increase in the refund. To say that a maize starch and potato starch the premium paid to the latter would not Italian Government's submission comes remove the difficulties of the potato up against this premise. The Council starch industry amounts to forgetting goes on to argue that if it is accepted that the objective in relation to which the that the aim is to ensure that there is a proportionality of the means adopted has large outlet for certain categories of to be determined, is aid to potato agricultural producers, for whom it is growers. Finally to say that the measures desired to ensure at the same time a fair proposed by the Government would not income, the solutions advocated by the make good the lower return from potato Italian Government do not merit starch by-products is to forget that this consideration. disadvantage, as the Italian Government has shown, does not exist. In fact granting a larger refund for potato starch together with a corres­ ponding increase in the refund for maize starch would not have any effect at all on the relationship of the one product to the other in the field of competition; (d) The Council points out in its paying a premium only to potato rejoinder, that, as the apportionment of growers would not solve the financial the financial burdens is not discrimi­ difficulties of potato starch manufac­ natory, one of the elements of a breach turers and would not improve their of the principle of proportionality is unfavourable position compared with absent in this case. Furthermore the maize starch manufacturers caused by arguments in the Council's defence are the smaller returns from potato starch of such a kind as to prove that the by-products. introduction of a premium payable to

producers of potato starch was the only introduced for the current marketing appropriate measure for achieving the year. objective sought to be attained. The second constituent element, according to The Commission point out on the the case-law of the Court, of a breach of question of production costs that even if the said principle is missing. the figures put forward by the Italian Government are acknowledged to be justified, it is unlikely that the increase As far as concerns the alleged concealed only affects maize starch and does not tax on the production of maize starch affect potato starch to the same extent. represented by the increase in the cost of According to the Commission, once this obtaining supplies the Council submits that its observations make it clear that proposition is accepted, the whole of the argument formulated by the Italian the percentage increase in the cost of Government inevitably falls to the obtaining supplies of potato starch was

Intervention Board for Agricultural feel the effects of a premium the amount Produce [1978] ECR 2037 and the whereof is in any case limited, and which increase in the production costs of maize only partially covers the element of cost starch are very similar. which one tonne of potato starch has to bear compared with a corresponding quantity of maize starch: ± 20 units of (b) In its rejoinder the Council points account. Finally the Commission recalls out on this aspect of the matter that it that the premium has only been does not appear that the principles which

the Court has laid down in relation to a knew perfectly well that the regu­ production levy specifically introduced as lations forming the legal foundation such, can be invoked with a view to thereof were open to contention and applying this case-law to a completely that therefore they might possibly be different economic situation, the obliged to refund the amounts which particular feature of which is a difference they had received; in the costs of obtaining supplies resulting from Council decisions fixing agricultural prices. — such a recovery of an amount paid but not owed might very well be carried out by means of a set-off, which could be effected at the time of the next marketing year against IV — Oral Procedure the debit balance of the potato starch manufacturer, of this credit which the latter holds by way of production 1. The Italian Government, represented refunds relating to potato starch. by M. Cevaro, the Council represented by D. Vignes, assisted by A. Sacchettini and the Commission, represented by C. The Council emphasizes in this Maestripieri presented oral argument at connexion that if the Court were simply the hearing on 15 May 1979. to annul Regulation No 1125/78, potato starch manufacturers ought to repay the premium and, when they did so, their established rights would have to be taken 2. The Court had invited the parties into consideration. But in the Council's during the hearing to give their views on view it would then be necessary for the the question whether, and, if so, to what Council to adopt a decision to enable extent, the application of the second these sums to be recovered. If the Court paragraph of Article 174 of the Treaty is should confine itself to ruling that the to be considered if the Court grants the premium should only cease to be paid main application of the Italian Govern­ ment. from the date of judgment, the view could be taken, according to the Council, that the maize starch manufac­ The Italian Government replied that turers, after the judgment, would be there was nothing to prevent the sums entitled to receive compensation for referable to the payments which had having suffered discrimination, provided been made being refunded. The principle always that the Court acknowledges that factum infectum fieri nequit cannot, these maize starch manufacturers may according to the Italian Government, be take advantage of Article 215 of the invoked to advantage for three reasons: Treaty; especially as for as the existence of damage is concerned.

The Council, the defendant in this action, supported by the Commission as intervener, contends that this application should be rejected.

3 The last recital in the preamble to Regulation No 1125/78 draws attention to "the constraints imposed on the potato starch industry" which "could lead to a disturbance of the balance between the different starch industries" and Article 2 thereof provides for the insertion in the basic regulation for the market in cereals (Regulation No 2727/75) of a provision authorizing the payment of a premium to potato starch manufacturers. Pursuant to this provision Article 3 of Regulation No 1127/78 provides that "Member States shall grant a premium of 10 units of account per tonne of potato starch payable to the starch manufacturer".

4 The provisions at issue form pan of the general pattern of Community rules relating to starch products the main purpose of which is to enable products based on raw materials of agricultural origin to stand up to competition from

JUDGMENT OF 12. 7. 1979 — CASE 166/78

synthetic products. One of the ways of attaining that end is the granting of production refunds. The rate of these refunds is fixed in such a way that the" balance between competing products such as maize starch and potato starch is not disturbed. The balance which has existed traditionally between these two products primarily due to the fact that, although the raw material of maize starch is more expensive than that of potato starch, and although the respective production costs are comparable, the value of maize starch by- products is greater than that of potato starch by-products with the result that the cost price of the two products does not differ appreciably. The cause of action is the introduction by the disputed regulations of a premium payable only in respect of potato starch whilst the system of comparable refunds is retained for the benefit of both products.

ITALY v COUNCIL

reasons. As far as concerns Regulation No 1125/78 that Government submits, in the first place, that the statement of reasons upon which it is based is inadequate because it is impossible to find out from it what kind of difficulties the potato starch industry is experiencing and, in the second place, it is inconsistent in that it shows, on the one hand, that the system of refunds must be applied equally to competing products whilst, on the other hand, it states that preferential treatment of potato starch by the granting of a premium is necessary. As far as concerns Regulation No 1127/78 the Government submits that the recitals in the preamble thereto merely refers to the value of the by-products obtained from the manufacture of maize starch without giving particulars either of their value or of their production costs which, however, have not remained the same.

8 On this point, as the Court has repeatedly held in its decided cases, it should be stressed that, as far as concerns general acts, especially regulations, the requirements of Article 190 of the Treaty are satisfied if the statement of reasons given explains in essence the measures taken by the institutions and that a specific statement of reasons in support of all the details which might be contained in such a measure cannot be required, provided such details fall within the general scheme of the measures as a whole.

The evaluation of the economic facts

11 Another complaint, which relates in particular to Regulation No 1127/78, is based on the manifest error which the Council is said to have made when it evaluated certain economic factors upon which its introduction of the premium at issue was founded.

12 The applicant Government submits in this connexion that the balance between the cost price of maize starch and potato starch when production refunds were introduced in 1967 no longer existed in 1978, the special reason for this being the increase in the cost of processing maize into starch. Thus that Government maintains that the costs of this Italian maize starch manufacturing industry put at 58 units of account per tonne in 1967 had gone up in 1978 to 86 units of account and estimates that they are 77 units of account per tonne on average throughout the Community. The Council maintains for its part that maize starch manufacturing costs were only 39 units of account per tonne in 1967 and that they went up in 1978 to 49 units of account per tonne.

13 The Italian Government also submits that, when the Council took into consideration the value of the maize starch by-products and calculated that value for 1978 at 79 units of account per tonne, it only took account of the proceeds of sale of the by-products without deducting the production costs attributable to the latter, and in so doing overestimated the difference between their value and that of potato starch by-products, evaluated at 22 units of account. The Council's answer to this objection is that, although the production costs attributable to the by-products have not been expressly

15 To prove that the Council has made a serious mistake in the exercise of the discretion given to it would require evidence more definite and less disputable than that adduced by the Italian Government during the proceedings. In this particular case the burden of proof lies all the more on the applicant Government as it had the opportunity through its represen­ tatives taking pan in the work of the Council of panicipating in the assessment of the economic situation which is the underlying reason why the disputed regulations were adopted.

16 It should be added that the amount of the premium, compared with all the factors which make up the cost price of the products at issue, does not seem likely to lead to a fundamental change in conditions of competition between maize starch and potato starch. In this connexion it must be pointed out that the applicant Government, which forecast serious and irreparable damage to the maize starch industry at the time when, at the commencement of the

JUDGMENT OF 12. 7. 1979 — CASE 166/78

proceedings, it requested the Court to suspend the operation of the measure at issue (see Order of 28 August 1978 [1978] ECR 1945) has not since been able to furnish any proof whatever in support of its allegations.

17 For these reasons it must be concluded that the complaint based on a manifest error in assessing the economic factors cannot be upheld.

Compliance with Articles 39 and 40 of the Treaty

ITALY v COUNCIL

21 It follows from the foregoing that the complaints based on failure to comply with Articles 39 and 40 of the Treaty cannot be upheld.

The principle ofproportionality

22 Finally the Italian Government complains that Regulation No 1127/78 is in breach of the principle of proportionality which requires the imposition of a burden to be proportionate to the objective to be attained. It submits on this point that the objective sought to be attained by the introduction of the premium at issue has been to give preference to potato growers. This objective, it claims, could have been attained by means other than the payment of a premium to the producers of potato starch which has in fact imposed on the maize starch industry an additional burden because the two industries are in competition.

23 On this issue it must be borne in mind that the aim of the premium payable to producers of potato starch was not to ensure that the growers received a better income but to maintain the profitability of the potato starch industry and in this way to protect the traditional opportunities for marketing potato products in so far as these products do not find any other outlets. The intro­ duction of the premium at issue cannot in the prevailing economic conditions be regarded as disproportionate to the objective sought to be attained and the complaint cannot therefore be upheld.

24 As none of the complaints made by the applicant Government has been upheld the application must be dismissed.

1. Dismisses the application

2. Orders the applicant to pay the costs.

Kutscher Mertens de Wilmars Mackenzie Stuart Pescatore Sørensen

O'Keeffe Bosco Touffait Koopmans

Delivered in open court in Luxembourg, on 12 July 1979.

A. Van Houtte H. Kutscher