C-4/79

OFFICE NATIONAL INTERPROFESSIONNEL DES CÉRÉALES ( O N I C )

on the validity of Regulation (EEC) N o 2 7 4 4 / 7 5 of the Council of 29 O c t o b e r 1975 on the import and export system for products processed from cereals and from rice (Official Journal 1975, L 2 8 1 , p. 65) and of Commission Regulations (EEC) N o s 1910/76 of 30 July 1976 (Official Journal 1976, L 208, p. 1) and 2 4 6 6 / 7 6 of 8 October 1976 (Official Journal 1976, L 280, p. 1) altering the monetary compensatory amounts,

JUDGMENT OF 15. 10. 1980 — CASE 4/79

T H E COURT

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

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

These figures are arrived at by applying (Official Journal 1975, L 281, p. 65) and the coefficient 1.80 to the monetary employed in calculating the levy on the compensatory amounts provided for importation into the Community of maize (tariff heading 10.05 B) in each of maize groats and maize meal from non- the annexes in question. member countries. In both cases the selection of that coefficient is based on the fact that 1.8 tonnes of maize are required to produce 1 tonne of maize meal. In fixing the coefficient 1.80 for maize/maize groats and maize meal for 3. The application of the coefficient the calculation of levies, Regulation thus selected constitutes implementation No 2744/75 seeks to implement Regu- of Regulation (EEC) No 974/71 of the lation (EEC) No 2727/75 of the Council Council of 12 May 1971 (Official of 29 October 1975 (Official Journal Journal, English Special Edition 1971 (I), 1975, L 281, p. 1) on the common p. 257) on certain measures of organization of the market in cereals. conjunctural policy to be taken in agri- After introducing levies payable on culture following the temporary imports into the Community of not only widening of the margins of fluctuation basic agricultural products but also for the currencies of certain Member certain products processed from basic States. Article 1 of that regulation agricultural products, that regulation introduces monetary compensatory provides, in Article 14, thereof, that the amounts (to be charged or granted as the levy to be charged on processed products case may be) not only in respect of agri- should consist of a fixed component and cultural products (a) covered by a variable component, the latter "corresponding, in respect of products intervention arrangements under the processed from basic products listed in common organization of agricultural Article 1 (a), to the incidence on their markets but also in respect of agri- prime cost of the levies on those basic cultural products whose price depends products". on the price of the products referred to under (a). Article 2 (2) provides that for that second category of product the monetary compensatory amounts "shall be equal to the incidence, on the prices of the product concerned, of the application of the compensatory amount 5. Regulation No 2744/75 of the to the prices of the product referred to in Council adopts the coefficient 1.80 for paragraph.(1), on which they depend". the incidence of the levy on the price of For that incidence the Commission maize groats and maize meal. The adopted the coefficient 1.80. Commission chose to adopt the same coefficient for calculating monetary compensatory amounts on maize groats and maize meal from the monetary compensatory amounts charged on the exportation from France of maize itself. 4. The coefficient 1.80 is taken by the Commission from the identical coefficient prescribed by Annex I to Regulation (EEC) No 2744/75 of the Council of 29 October 1975 on the import and export system for products 6. The crux of the main action is processed from cereals and from rice whether the coefficient 1.80 may be

validly applied in the calculation of from rice unlawful as being in monetary compensatory amounts to be breach of the principle of free charged on exports from France of competition and the principle of maize groats and maize meal. According equality of treatment between under- to the plaintiff in the main action that takings within the Community? coefficient overvalues the incidence on the price of maize groats and maize meal of the monetary compensatory amount applied to maize so that the resultant 2. By fixing the rate of the monetary monetary compensatory amount for such compensatory amounts applied by processed products over-compensates for the Office National Inter- the effect of the fall of the French franc professionnel des Céréales by use of against the "green" franc. That the coefficient 1.80 laid down in constitutes a breach of the basic principle Regulation (EEC) No 2744/75 as of the relevant provisions which is set out regards levies and refunds, did not in the sixth recital in the preamble to Commission Regulations Nos Regulation No 974/71 where it is stated 1910/76 of 30 July 1976, 2466/76 of that "the compensatory amounts should 8 October 1976 and subsequent be limited to the amounts strictly regulations conflict with the sixth necessary to compensate the incidence of recital in the preamble to, and the monetary measures on the prices of Article 2 (2) of, Regulation No the basic products". By doing so the 974/71 of the Council as well as the regulations in question also infringe the principle of non-discrimination second subparagraph of Article 40 (3) of between producers laid down in the Treaty by creating discrimination Article 40 (3) of the Treaty of between traders in the various Member Rome? At all events, did not these States. latter provisions impose an obligation to calculate the monetary compensatory amount for meal in terms of the equation 1.8 tonnes of maize = 1 tonne of meal + 0.27 tonnes of high-quality flour + 0.27 7. Since the Tribunal Administratif, tonnes of flour for fodder + 0.242 Châlons-sur-Marne, considered that the tonnes of germ + 0.018 tonnes of action gave rise to issues concerning the waste, and not according to the validity of Regulation No 2744/75 of the equation MCA meal = MCA maize Council (levies) and Regulations Nos x 1.80?" 1910/76 and 2466/76 of the Commission (monetary compensatory amounts), by a judgment of 12 December 1978, which was amended and supplemented by a judgment of 2 May 1979, it referred the 8. The judgments making the reference following questions to the Court of were lodged at the Court Registry on Justice for a preliminary ruling: 2 January and 15 May 1979.

by M. Veroone, of the Lille Bar, and by coefficient (1.80) which is applicable to the Government of the French Republic, levies on products processed from maize represented in this matter by Marc for calculating the monetary com- Dandelot, acting for the Secretary- pensatory amounts on the same products General of the Comité Interministériel and the fact that the result of that pour les Questions de Coopération application has been to create discrimi- Economique Européenne [Inter- nation between producers in the various departmental Committee on Matters of countries of the Community. European Economic Co-operation], by the Council of the European Com- munities, represented in this matter by B. Second question Schloh, an adviser in its legal depart- ment, acting as Agent, and by the Com- mission of the European Communities, Infringement of Regulation No 974/71 represented in this matter by P. Gilsdorf, one of its legal advisers, acting as In accordance with the principle upon Agent, assisted by J. Delmoly, a member which Regulation No 974/71 is based of its legal department. and which is set out in the sixth recital in the preamble thereto the compensatory amounts must be limited to the amounts Upon hearing the report of the Judge- strictly necessary to compensate for the Rapporteur and the views of the incidence of the monetary measures on Advocate General the Court decided to the prices of basic products covered by open the oral procedure without any intervention arrangements. In applying preparatory inquiry. that principle to the charging or granting of monetary compensatory amounts on derived products Article 2 (2) of the said regulation states that the monetary II — Written observations sub- compensatory amounts shall be equal to mitted pursuant to Article the incidence, on the prices of the 20 of the protocol on the products concerned, of the application of Statute of the Court of the compensatory amount to the prices Justice of the EEC of the product on which they depend. The decisions of the Court, in stressing the restrictive nature of the application A — Observations of the plaintiff in the of monetary compensatory amounts main action (Providence Agricole de (judgment of 24 October 1973 in Case la Champagne) 43/72 Merkur [1973] ECR 1055) and ruling that exporters of derived products shall not bear a charge unrelated to First question monetary fluctuations (judgment of 12 November 1974 in Case 34/74 The plaintiff in the main action Roquette [1974] ECR 1217), emphasize maintains that Regulation No 2744/75 and apply that principle. on the import and export system for products processed from cereals and On the other hand the Commission from rice is not directly at issue because breached that principle by adopting the it determines the calculation of levies and coefficient 1.80. Simply multiplying the not that of monetary compensatory compensatory amount applicable to the amounts. Nevertheless it is indirectly basic product (maize) by the technical relevant because of the fact that the processing coefficient for maize/maize Commission has employed the processing meal or maize groats in order to

calculate the compensatory amount on Infringement of Article 40 (3) of the derived products places the entire EEC Treaty compensatory amount affecting the basic product on one of the products derived The Commission's method of calculation from maize and thereby disregards the also entails distortion of competition existence of other derived products between producers in the various which are also subject to monetary Member States and thereby infringes compensatory amounts. The result is that Article 40 (3) of the EEC Treaty. In products derived from maize are subject support of that argument the plaintiff in to monetary compensatory amounts the main action produces an excerpt which, when added together, exceed the from an expert opinion drawn up in the monetary compensation applied to the course of a dispute raising the same basic product. 1.80 tonnes of maize are issues as those concerned in the main indeed required to produce 1 tonne of action, which has resulted in questions at maize meal but 1.80 tonnes of maize also present before the Court of Justice for provide 0.27 tonnes of high-quality flour, the purpose of a preliminary ruling. 0.27 tonnes of flour for fodder, 0.242 tonnes of germ and 0.018 tonnes of By modifying the coefficient in question waste. The plaintiff maintains that in on various occasions the Commission has order to comply with the requirements of recognized that the method of calcu- Regulation No 974/71 the monetary lation at issue in the main action causes compensatory amount on 1 tonne of distortion of competition and discrimi- maize groats or maize meal should be nation between producers in the various calculated as follows: Member States. The processing coefficient was fixed at 1.60 for maize groats with effect from 3 October 1977 Monetary compensatory amounts on (Regulation No 1771/77 of 29 July meal 1977, Official Journal 1977, L 193, p. 1) and thereafter at 1.50 pursuant to Regu- equals lation No 746/79 of 11 April 1979 (Official Journal 1979, L 95, p. 3) for Monetary compensatory amounts for meal coming under tariff heading 11.02. maize x 1.80 The plaintiff in the main action minus concludes that: monetary compensatory amounts for "In calculating the monetary com- high-quality flour x 0.27 pensatory amounts applicable to derived products it is necessary to have regard to monetary compensatory amounts for the incidence which the monetary flour for fodder x 0.27 compensatory amount for the basic product has on all products and monetary compensatory amounts for secondary products, in particular in such germ X 0.242. manner that the monetary compensatory amount applied to the principal derived product takes account of monetary Whilst this method of calculation compensatory amounts applied to the observes the coefficients arrived at on the other products either basis of purely technical data it also takes into consideration the fact that the flour (a) by deducting the compensatory industry manufactures a number of amounts for the secondary products products and secondary products from a from the compensatory amounts for given quantity of raw material. the principal derived product; or

(b) by applying to all the derived Commissionnaires Réunis [1978] ECR products a coefficient corresponding 927, that monetary compensatory to the ratio between the quantity of amounts do not constitute unlawful the basic product actually used and obstacles to intra-Community trade only that deemed to have been used". in so far as they are justified by the need to correct the effects of variations in unstable rates of exchange which, in a system of common organization of the B — Observations of the French market in agricultural products based on Government common prices, would otherwise be liable to cause disturbances in trade in such products. If on the other hand the amounts are fixed at an excessively high Bearing in mind that the Court of Justice level they introduce distortion into intra- is prepared, where questions submitted Community trade and thereby constitute to it are imperfectly framed, to reply in a a charge having an effect equivalent to manner which assists the court dealing customs duties. with the merits to apply Community law in deciding the action before it, the French Government considers that the complaint of the plaintiff in the main Whilst the Commission enjoys a wide action is concerned less with the discretionary power in fixing monetary compensatory amounts it is nevertheless existence of the processing coefficient in Regulation No 2744/75 than with the clear from the main action that the application of that coefficient in the method of calculation adopted for fixing calculation of the monetary com- the monetary compensatory amounts for pensatory amounts on maize meal in maize meal disregards the requirement Regulation No 1910/76. laid down in the case-law of the Court that patterns of trade shall not be affected. That observation is justified by two considerations concerning The question submitted thus turns on respectively: (1) the use of coefficients in whether the application of that calculating the monetary compensatory coefficient to the calculation of the amounts on processed products, and (2), monetary compensatory amounts on maize the incidence of production refunds. meal does not breach the principles of free competition and of the equal treatment of undertakings within the Community. (1) It is clear from Article 2 (2) of Regulation No 974/71 of the Council that monetary compensatory amounts on processed products must have as their Condition for the validity of the sole objective the compensation of the monetary compensatory amounts incidence on the prices of such products of monetary compensatory amounts affecting the basic products on which Examining first the requirements laid they depend and that they may not down by the Court of Justice as exceed that limit. conditions for the legality of monetary compensatory amounts, the French Government observes that it is clear, in Although the employment in the calcu- particular from the judgement of 20 lation of the monetary compensatory April 1978 in Joined Cases 80 and 81/77 amounts to be charged on maize groats

(2) With regard to the incidence of production refunds in appraising the In order to observe the principle that validity of the coefficient of 1.80, the monetary compensatory amounts should French Government considers that that not affect patterns of trade, monetary incidence must be taken into con- compensatory amounts imposed on the sideration in order to re-establish various secondary products must be fixed equality in conditions of competition in such a way that their sum is equal to between producers in the various the monetary compensatory amount on Member States of the Community. The the basic product. The compensatory fact that production refunds are granted amounts for other derived products in "green currency" creates distortion in should accordingly be deducted from the favour of producers in Member States monetary compensatory amount on with a "hard" currency at the expense of meal. Moreover in the said Regulation those in Member States having a "soft" No 1771/77 of 29 July 1977, the currency. Where a producer established Commission has itself altered its method in a Member State with a "hard" of calculation by reducing the coefficient currency obtains basic products (maize) for meal from 1.80 to 1.60 but, in a Member State with a "soft" according to the French Government, currency in order to process them in his that alteration is not sufficient to correct factories for re-export to a Member

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C — Observations of the Council "(1) The principle that measures to compensate for monetary fluc- tuations shall be neutral requires that the sum of the monetary According to the Council, a reply to the compensatory amounts on pro- first question concerning the validity of cessed products taken individually Regulation No 2744/75 is not required must not exceed the monetary to permit the national court to decide the compensatory amount applicable case pending before it and a reply should to the quantity of the basic not be given. Quoad ultra, since it is the product required to obtain such Commission which fixes the monetary processed products. compensatory amount by regulation, the Council adopts the arguments advanced by the Commission. Where a basic product provides several secondary products any method of calculating monetary compensatory amounts on such D — Observations of the Commission secondary products which imposes on one such secondary product the entire monetary compensatory Although it considers that only the amount on the basic product second question is relevant to the without regard to the true incidence resolution of the dispute, the of that monetary compensatory Commission gives its views, in the light amount is incompatible with of the general situation which it required Community law where the other to take into consideration, on both the secondary products are also subject infringement of Regulation No 974/71 to their own monetary com- of the Council and the infringement of pensatory amounts. Article 40 (3) of the EEC Treaty.

Infringement of Regulation No 974/71 regulations, No 1771/77 of 29 July 1977 of the Council of 12 May 1971 (over- and No 746/79 of 11 April 1979 (cited compensation at the expense of meal) above), altering the processing coefficient for the calculation of monetary compensatory amounts applicable to maize meal by reducing it In response to the arguments put from 1.80 to 1.60 and subsequently from forward by the plaintiff in the main 1.60 to 1.50. Those alterations were action to the effect that the employment decided upon in particular in view of the of the coefficient 1.80 in calculating the steady increase in exports of maize meal monetary compensatory amount from Germany and the Benelux countries applicable to maize meal over- to France. compensates, at the expense of meal alone, for the incidence on the price of maize of the fall of the French franc against the green franc, the Commission The Commission is aware that each time remarks that it is common ground that in flat-rate measures are adopted it is technical terms 1.80 tonnes of maize impossible to have complete regard to produces 1 tonne of meal. On the other the particular circumstances of all under- hand it maintains that "opinion is takings affected. It nevertheless considers divided . . . regarding the secondary that the discretionary power which the products which are in fact produced in Court has held that the Commission the manufacture of maize meal". possesses with regard to the system of According to the Commission's infor- monetary compensatory amounts, in mation, flour is obtained from maize particular in the judgment of 24 October only in France and Great Britain and not 1973 in Case 5/73 Balkan [1973] ECR in Germany or the Benelux countries. 1091, extends to the right to opt for a On the other hand, germ is not marketed flat-rate system. as such but is processed into oil which provides oilcake as a secondary product. Monetary compensatory amounts are not applicable to those two products. In Infringement of Article 40 (3) of the addition marketing opportunities for EEC Treaty secondary products other than maize meal are poor because such secondary products encounter competition from The complaint of infringement of Article animal feedingstuffs made from maize 40 (3) of the EEC Treaty is unfounded. gluten and kibbled maize which are Regard must in fact be had to the fact imported from non-member countries that the French processing industry can without the application of monetary obtain supplies of French-produced compensatory amounts. maize whose price is lower than that of maize imported from non-member countries. If the complaints of the Faced with that unclear position, the plaintiff were well founded there should Commission had to adopt a standard and have been a fall in French exports of practical solution, the processing maize meal after 1976 which is not the coefficient 1.80. In 1976 the Commission case. had in fact no information on the basis of which it could depart from the methods of conversion generally applied In conclusion the Commission suggests at the time. However; in the light of that the Court should reply that more recent information it adopted two consideration of the questions submitted

By an order of 26 March 1980 the Court, having heard the opinion of the Advocate General, ordered the re- opening of the oral procedure and requested the plaintiff in the main action, With regard to the principle of the the Italian Government, the French "ceiling", that is to say the requirement Government, the Council and the that the sum of the monetary Commission to supplement their obser- compensatory amounts on all the derived vations by replying in writing to certain products of a basic product should not questions. In the replies which they gave, exceed the monetary compensatory tne plaintiff in the main action and the amounts on that basic product, the French Government confirmed their Commission considers that if it is desired previous observations whilst the to fix a ceiling, it is necessary to Commission clarified its position on determine clearly the principal processed certain points. product and its processing coefficient

JUDGMENT OF 15. 10. 1980 — CASE 4/79

1 By judgment of 12 December 1978, which was received at the Court on 2 January 1979 and was amended and supplemented by a judgment of 2 May 1979, received at the Court on 15 May 1979, the Tribunal Administratif [Administratif Court], Châlons-sur-Marne, requested the Court to deliver a preliminary ruling under Article 177 of the EEC Treaty on the validity of Regulation (EEC) No 2744/75 of the Council of 29 October 1975 on the import and export system for products processed from cereals and from rice (Official Journal 1975, L 281, p. 65), of Commission Regulations (EEC) Nos 1910/76 of 30 July 1976 (Official Journal 1976, L 208, p. 1) and 2466/76 of 8 October 1976 (Official Journal 1976, L 280, p. 1) altering the monetary compensatory amounts to be charged or granted, as the case may be, on the import or export of certain cereal products and of those regulations which subsequently altered the said amounts in the circumstances hereinafter considered.

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2 The question is raised, first, whether Regulation No 2744/75 of the Council is not invalid in that it is in breach of "the principle of free competition and the principle of equality of treatment between undertakings within the Community". The question put thereafter is whether, by employing the coefficient 1.8, which is laid down in Regulation No 2744/75 of the Council in connexion with levies and refunds, in order to fix the rate of the monetary compensatory amounts for maize groats and maize meal, the Commission regulations referred to did not contravene Regulation No 974/71 of the Council, in particular Article 2 (2) thereof, as well as the principle of non- discrimination between producers which is laid down in Article 40 (3) of the Treaty of Rome.

5 The fixing of the monetary compensatory amount on one tonne of maize meal at an amount equal to the monetary compensatory amount on one tonne of maize multiplied by the coefficient 1.8 is in implementation of Articles 1 and 2 of Regulation (EEC) No 974/71 of the Council of 12 May 1971 (Official Journal, English Special Edition, 1971 (I), p. 257) in the version in force at the time.

— According to Article 1 (2) of that regulation, where the conditions specified in Article 1 (1) and (la) are fulfilled compensatory amounts are to be applied: (a) to producís covered by intervention arrangements under the common organization of agricultural markets and (b) to products whose price depends on the price of the products referred to under (a) and which furthermore are either themselves governed by the common organization of the markets or are the subject of a specific arrangement under Article 235 of the Treaty. Maize falls under heading (a) and groats and meal fall under heading (b).

— Paragraph (1) of Article 2 of the regulation prescribes the method of calculating the monetary compensatory amounts on products covered by intervention arrangements (hereinafter referred to as "basic products"). Paragraph (2) provides that in the case of products whose price depends on the price of basic products "the compensatory amounts shall be equal to the incidence, on the prices of the product concerned, of the application of the compensatory amount to the prices of the product referred to in paragraph (1), on which they depend".

6 It is the incidence of the application of the monetary compensatory amount on maize (the basic product) on the price of meal (the dependent product) which the coefficient 1.8 is intended to represent in the regulations in question. That is on the view that 1.8 tonnes of maize are required in order to produce 1 tonne of meal and that accordingly, in order to avoid distortion of competition and deflection of trade both in trade between Member States and with non-member countries, a monetary compensatory amount equal to

9 That transposition is criticized by the plaintiff in the main action. The plaintiff's argument is that, whilst it is true that if maize is processed into groats or meal (the principal derived products) 1.8 tonnes of maize are required in order to obtain 1 tonne of meal, other secondary derived products, on which monetary compensatory amounts are charged or granted as the case may be, are also obtained from that quantity of maize. Since, by reason of the fact that it represents a purely quantitative relationship, the coefficient 1.8 imposes on a single product dependent on maize, in this case

JUDGMENT OF 15. 10. 1980 — CASE 4/79

1 1 According to the plaintiff in the main action, the amount of the monetary compensatory amounts which it has been charged should be reduced in such a way that the total of the various compensatory amounts fixed for the various products derived from a given quantity of maize does not exceed the compensatory amounts on that same quantity óf maize.

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In that connexion it puts forward the following argument: 1. 1.8 tonnes of maize produces: 1.00 tonne of meal and groats 0.27 tonne of high-quality flour [farine première] 0.242 tonne of germ 0.27 tonne of flour for fodder and the remainder constitutes waste.

2. The Commission regulations at issue fix monetary compensatory amounts on: (a) maize (Common Customs Tariff heading 10.05 B) (b) maize groats and meal (Common Customs Tariff heading 11.02 A V (a) (1) and (2)) (c) high-quality flour (Common Customs Tariff heading 11.01 E II) (d) maize germ (Common Customs Tariff heading 11.02 G II) (e) flour for fodder (Common Customs Tariff heading 23.02 A I (a) and (b))· 3. The monetary compensatory amount which the plaintiff was charged for 1 tonne of groats and meal ought to be reduced by the monetary compensatory amounts paid on the quantities of the other three products obtained from 1.8 tonnes of maize.

The plaintiff finally states its position in the following equation:

Monetary compensatory amount on 1 tonne of groats and meal equals Monetary compensatory amount on 1.8 tonnes of maize reduced by: monetary compensatory amount on 0.27 tonne of high-quality flour monetary compensatory amount on 0.242 tonne of germ monetary compensatory amount on 0.27 tonne of flour for fodder.

(a) The inquiry in this case and an analysis of the annexes to Regulation No 2744/75 reveal that the processing coefficients adopted in that regulation for calculating the levies on processed products ~ are not all of a quantitative nature as is the case with the coefficient 1.8 for the relation between maize and maize meal. In its reply to the questions asked by the Court on the re-opening of the oral procedure the Commission explained that the choice of a processing coefficient may equally well be based either on qualitative differences between the various processed products or on the relation between the price of the processed product and that of products competing with the latter. In general, so the Commission states, a coefficient was initially chosen "not on a quantitative basis but by taking account of the economic protection necessary to stabilize the price of such products" and even, in certain cases, in order "to provide maximum protection". Subsequently, account was even taken "of factors peculiar to certain secondary products" in fixing the processing coefficients. It is self-evident that that diversity in the choice of processing coefficients recurs with similar effects when these coefficients are transposed as they stand into the sphere of monetary compensatory amounts.

(b) The Commission has not maintained in all circumstances the parallel between the processing coefficient which it applied in the calculation of the levies and the coefficient which it applied in the calculation of the monetary compensatory amounts. From 3 October 1977 the latter coefficient was reduced from 1.8 (maize/meal) to 1.6 by Regulation No 1881/77 of 29 July 1977 (Official Journal 1977, L 193, p. 1) and from 28 May 1979 it was reduced to 1.5 by Regulation No 746/79 of 11 April 1979 (Official Journal 1979, L 95, p. 3) whilst the processing coefficients remained unaltered so far as levies are concerned. The same applies in the case of the other secondary products of maize with which this dispute is concerned (high-quality flour, germ and flour for fodder).

15 Although, within the framework of the distribution of tasks between the national courts and the Court of Justice for the implementation of Article 177 of the Treaty, it is for the national courts to decide the relevance of the questions which are referred to the Court of Justice, it is however reserved to the Court of Justice to extract from all the information provided by the national court those points of Community law which, having regard to the subject-matter of the dispute, require interpretation, or whose validity requires appraisal.

16 The foregoing considerations show that the questions as a whole concern the validity of the application of the processing coefficient 1.8 in the calculation of the monetary compensatory amount on meal and groats and that consequently no specific reply to the first question is required.

JUDGMENT OF 15. 10. 1980 — CASE 4/79

Second question: The validity of Regulations Nos 1910/76, 2466/76 and 938/77 of the Commission in so far as they fix the monetary compensatory amounts on maize meal by applying the processing coefficient 1.8

A — General considerations

17 The reply to the questions submitted must be considered in the light of the objectives which prompted the introduction, by Regulation No 974/71, of monetary compensatory amounts within the framework of the common agri- cultural policy and of the provisions of the Treaty on that policy, in particular Articles 39, 40 and 43.

20 These provisions show that in relation both to basic products and to dependent products, the introduction of monetary compensatory amounts is intended to correct the effects of unstable variations in the rates of exchange which, within a system of organization of the markets in agricultural products based on common prices, are capable of causing disturbances in trade and in particular of jeopardizing the system of intervention laid down in respect of such products. The introduction of monetary compensatory amounts is thus essentially intended to maintain the system of single prices within the common organization of agricultural markets, since that system of single prices, having regard to the objectives of such organizations, that is, to maintain the standard of living of agricultural producers and to stabilize the markets, constitutes the foundation of the free movement of agricultural products within the Community. Its objective is not and cannot be to provide additional protection for the markets in respect of the level of agricultural prices of one particular State in relation to the others, which would be incompatible with the uniformity sought.

21 With regard in particular to dependent products it must be observed that, as the Court found in its judgment of 12 November 1974 in Case 34/74 Roquette [1974] ECR 1217, although in pursuance of Article 2 of Regulation No 974/71 monetary fluctuations should be entirely compensated for basic products, this does not apply to dependent products. In the case of the latter products the word "incidence" in Article 2 (2) merely permits the Commission to take into account, in fixing the monetary compensatory amounts, the effect on the price of the dependent product of the monetary compensatory amounts applied to the basic product.

24 It is to that difference between the system of levies and refunds on the one hand and the system of monetary compensatory amounts on the other that the requirement of the strict neutrality of monetary compensatory amounts corresponds. That requirement is emphasized, first, in the sixth consideration of the preamble to Regulation No 974/71 which states that such amounts "should be limited to the amounts strictly necessary to compensate the incidence of the monetary measures on the prices of basic products covered by intervention arrangements and . . . it is appropriate to apply them only in cases where this incidence would lead to difficulties". It is further emphasized by the restrictive nature of Article (la) and Article 3 and by the wording of Article 2 (2), which applies to dependent products and which states that the monetary compensatory amounts on the said products "shall be equal to the incidence, on the prices of the product concerned, of the application of the compensatory amount to the prices of the product referred to in paragraph (1), on which they depend".

Finally, the requirement of strict neutrality is in accordance with the basic requirement of the free movement of agricultural products which monetary compensatory amounts are intended to promote despite the effects of short- term variations in exchange rates resulting from the floating of the currencies of Member States.

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26 This applies with even greater force as the continued maintenance of monetary compensatory amounts must be appraised having regard to the changes which have taken place in the monetary conditions which gave rise to their introduction. T o a considerable extent, earlier variations in the currencies of the Member States have become consolidated in the meantime and their effects have mostly been absorbed by the national economies. That circumstance, together with the decision of a number of Member States to contain fluctuations between their own currencies at any given moment within a band of 2.25%, and having regard to the power conferred upon the Council by Regulation N o 129, as amended by Regulation N o 2543/73 of the Council (Official Journal 1973, L 263, p. 1) to fix the representative rates of exchange (green rates) of the national currencies, renders the requirement of neutrality described above even more imperative.

27 T h e Court accepts that the calculation of the incidence on the prices of dependent products of the monetary compensatory amount fixed for a basic product causes difficult technical and economic problems with regard to a large number of products whose manufacturing process and composition may vary in the various regions of the Community. It is for the Commission to resolve these problems whilst maintaining a degree of consistency and clarity in the system of monetary compensatory amounts which it is required to establish in that sector. For this purpose it must have a wide margin of

JUDGMENT OF 15. 10. 1980 — CASE 4/79

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31 It follows that during the period in which the exports in question took place the incidence of the monetary compensatory amount fixed for the basic product on the price of the derived products was over-compensated. For reasons inherent in the system of monetary compensatory amounts that incidence may not in fact exceed the compensatory amount on the basic product.

32 Undoubtedly it is difficult in certain cases to determine the precise incidence which the monetary compensatory amount fixed on the basic product has on the price of each of the derived products whose price depends on that of the basic product and in this respect, as has been stated, the Commission enjoys a wide discretion. One of the limits to that discretion, however, is the ceiling which prevents the sum of the monetary compensatory amounts on the products derived from a certain quantity of a basic product from exceeding the monetary compensatory amount of the quantity of the basic product from which they are obtained.

35 The Commission has claimed that the purely mathematical approach, which is required by the above-mentioned ceiling, fails to take account of economic reality. The Commission relies in particular upon the fact that the quantity of various processed products which may be obtained from a given quantity (1.8 tonnes) of maize differs from Member State to Member State and the adoption of a ceiling "with reference to one Member State", that is to say on the basis of the quantities of derived products obtained by the industry in that State, where such quantities differ from those obtained by the industry in another Member State, "confers an undue advantage" on the industry in one of those Member States.

36 That argument must be rejected. It is true, as the Commission maintains, that the Commission may not be constrained to adopt the purely quantitative method proposed by the plaintiff in the main 'action in view of the fact that recourse may be had to processing coefficients based on non-quantitative criteria as well as processing coefficients based on quantitative criteria (1.8 tonnes of maize: 1 tonne of meal). It is also true that the Commission must be able to take account of differences between the conditions of production in the various Member States. In this connexion, as the Court has recognized, it enjoys a discretion which may entail general appraisals. Nevertheless, that circumstance does not stand in the way of either its duty or its ability to keep within the above-mentioned ceiling, which constitutes one of the limits to the Commission's discretion.

40 This line of argument cannot be upheld. By eschewing the maximum possible neutrality of monetary compensatory amounts in intra-Community trade — which is a fundamental objective of the system — in favour of the objective of protection which in certain trading relations with non-member countries it is sought to ascribe to the same monetary compensatory amounts, the Commission has exceeded the discretion which it is recognized to enjoy in this field and has disregarded not only the principles which form the basis of Regulation No 974/71 but also the rule set out in Article 43 (3) of the Treaty, according to which the common organization of the markets must ensure conditions for trade within the Community similar to those existing in a national market.

JUDGMENT OF 15. 10. 1980 — CASE 4/79

41 T h e reply to the question submitted should therefore be that by adopting in various successive implementing regulations, in particular Regulations N o s 1910/76, 2466/76 and 938/77, a system for the calculation of the monetary compensatory amounts on products processed from maize and whose price depends on that of maize, which results in establishing for the various products obtained by processing a given quantity of maize in a specific manufacturing process monetary compensatory amounts the sum of which amounts to a figure clearly in excess of that of the monetary compensatory amount fixed for that given quantity of maize, the Commission has infringed the basic regulation, Regulation N o 974/71 of the Council of 12 M a y 1971, and Article 43 (3) of the Treaty.

PROVIDENCE AGRICOLE DE LA CHAMPAGNE v ONIC

these proceedings, of the effects of the invalidity of the system of calculation adopted by the Commission.

44 Although the Treaty does not expressly lay down the consequences which flow from a declaration of invalidity within the framework of a reference to the Court for a preliminary ruling, Articles 174 and 176 contain clear rules as to the effects of the annulment of a regulation within the framework of a direct action. Thus Article 176 provides that the institution whose act has been declared void shall be required to take the necessary measures to comply with the judgment of the Court of Justice. In its judgments of 19 October 1977 in Joined Cases 117/76 and 16/77 (Ruckdeschel and Hansa- Lagerbaus Ströh (Quellmehl) [1977] ECR 1753) and in Joined Cases 124/76 and 20/77 (Moulins et Huileries de Pont-à-Mousson and Providence Agricole de la Champagne (Maize groats and meal) [1977] ECR 1975) the Court has already referred to that rule within the context of a reference to it for a preliminary ruling.

Costs

47 The costs incurred by the Government of the French Republic, the Government of the Italian Republic, the Council of the European Communities and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions referred to it by the Tribunal Administratif, Châlons-sur-Marne, by judgment of 12 December 1978, which was received at the Court on 2 January 1979 and was amended and supplemented by a judgment of 2 May 1979, received at the Court on 15 May 1979, hereby rules :

1. By adopting in various successive implementing regulations, in particular Regulations No 1910/76 of 30 July 1976, No 2466/76 of 8 October 1976 and No 938/77 of 29 April 1977, a system for the calculation of the monetary compensatory amounts on products processed from maize whose price depends on that of maize which results in establishing for the various products obtained by processing a given quantity of maize in a specific manufacturing process monetary compensatory amounts the sum of which amounts to a figure clearly in excess of that of the monetary compensatory amount fixed for that given quantity of maize the Commission has infringed the basic regulation, Regulation No 974/71 of the Council of 12 May 1971, and Article 43 (3) of the Treaty.

OPINION OF MR ADVOCATE GENERAL MAYRAS DELIVERED O N 11 MARCH 1980 1

Mr President, basic agricultural products (products of Members of the Court, the milling industry, maize and wheat, on the one hand, and starch products on I — The requests for preliminary the other). rulings submitted to the Court by the Tribunal Administratif [Administrative Court], Châlons-sur-Mame, the The first two cases directly challenge the Tribunal Administratif, Orléans, and the validity of Regulation No 2744/75 of the Tribunal d'Instance [District Court], Council of 29 October 1975 on the Lille, all concern the methods of calcu- import and export system for products lating the monetary compensatory processed from cereals and from rice and amounts charged on the exportation above all that of Commission Regu- from France of products derived from lations Nos 1910/76 of 30 July 1976 and 1 — Translated from the French.