C-104/79

JUDGMENT OF II. 3. 1980 — CASE 104/79

In Case 104/79

Reference to the Court under Article 177 of the EEC Treaty by the Pretura [District Court], Bra, for a preliminary ruling in the action pending before that court between

PASQUALE FOGLIA, San Vittoria d'Alba,

and

MARIELLA NOVELLO, Magliano Alfieri,

Facts and Issues

The facts of the case, the course of the I — Facts and procedure procedure and the observations sub- mitted under Article 20 of the Protocol The Foglia undertaking (hereinafter on the Statute of the Court of Justice of referred to as "Foglia") trades in wines the EEC may be summarized as follows: and alcoholic beverages.

FOGLIA v NOVELLO

On 1 February 1979 Mrs Novello she refused payment, relying on the requested Foglia to send certain cases of express stipulation in the contract. Italian liqueur wine as a gift to a person living in France. In giving her order Mrs Novello paid only the amount for the By an initial writ served on 7 April 1979 bottles of wine to be sent to France at Foglia summoned Mrs Novello to appear the prices charged by Foglia for sale on before the Pretura di Bra. That court its premises. found that there was a specific agreement restricting Mrs Novello's liability to those taxes authorized by the Community provisions in force Since Foglia does not directly undertake guaranteeing the free movement of the dispatch and transport of goods it goods. It considered that both the had recourse to a specialist undertaking, existence of a liability to reimburse the Danzas S.p.A. charge paid by the defendant and the appropriateness of extending the scope of the case to include the joinder of The costs of dispatch and transport were Danzas depended upon an examination to have been paid on the basis of the bill of the lawfulness or otherwise of the made out by the consignor after delivery duties imposed in this matter by the of the goods to the consignee. French authorities.

JUDGMENT OF 11. 3. 1980 — CASE 104/79

imported from Member States of the wines as defined in paragraph 12 of EEC; Annex II to Council Regulation (EEC) No 337/79 of 5 February 1979 on the common organization of the market in Even certain liqueur wines imported wine since the said natural sweet wines, from non-member countries in fact like very many others, are distinguished benefit in France from lower taxation only by particular methods of prep- than that applied to liqueur wines of aration and by their production in a Community origin. specified region. It must further be observed that the wines dispatched by the defendant should be classified under the above-mentioned Community defi- 2. Are such reductions in duty covered nition of liqueur wines, the more so since by Article 92 of the Treaty, and if certain of them'are also distinguished by so, subject to what limitations and specific areas and production charac- conditions? teristics under that definition.

FOGLIA v N O V E L L O

Furthermore liqueur wines imported enacted amending it: At the present time from Italy are subject to heavier taxation following recent amendments enacted than is applied to certain well-known under Article 24 of the Finance Law No wines, equivalent to the Italian wines, 78-1239 approved on 29 December 1978 with specific territorial origins, such as (Journal Officiel de la République Greek and Portuguese wines which, Française No 304 of 30 December 1978) although they come within the same tax the rates applied — on the basis of the system as liqueur wines, qualify for pure spirit used in the manufacture of special reductions granted under bilateral such wines — are as follows : international agreements as is provided for in Article 406 of the French Code des Impôts [Tax Code]." Production Consumption Tax Tax

JUDGMENT OF II. 3. 1980 — CASE 104/79

FOGLIA v NOVELLO

of the market in wine which replaced disregards the criterion concerning the Regulation No 816/70. quality or designation of origin and is based on the characteristic feature of liqueur wines, namely the addition of That definition classifies as liqueur wines pure spirit to a natural wine. products having a natural alcoholic content of not less than 12%. The processing takes place by adding pure According to the Commission the spirit of vinous origin and/or con- conclusion must thus be that, as regards centrated grape must or by concentration Community law, the products known as through cooling. natural sweet wines are none other than liqueur wines — even though they are produced in France — and correspond to the definition set out in the Liqueur wines are classified under tariff abovementioned Community provisions. heading 22.05 C of the Common Customs Tariff. Additional Note 4 (c) inserted into Chapter 22 of the Common Customs Tariff (Official Journal 1978 The foregoing considerations leave no L 335, p. 105) contains a definition of doubt as to the similarity of French and liqueur wines which is almost identical to Italian liqueur wines. In this matter there that contained in Regulation No 337/79. is a "similarity ex lege" confirmed by Regulation No 337/79.

JUDGMENT OF II. 3. 1980 — CASE 104/79

create distinctions in tax treatment system of duties applied to them thus (judgment of 10 October 1978 in Case may not be discriminatory; 148/77 Hansen [1978] ECR 1787).

— the reply to be given to the second From as early as 1968 the Commission question should be in the negative has been vainly endeavouring to since the discrimination described persuade the French authorities to comes within the scope of Article 95 extend the more favourable tax treatment (cf. in this matter paragraph 14 of the reserved for domestic liquer wines to above mentioned judgment in Case similar products imported from other 148/77 Hansen; Member States. In 1975 it instituted proceedings under Article 169 of the — the third question may be answered in Treaty for failure to fulfil an obligation. the sense that it is for the national That procedure was subsequently court to apply the decision given by brought up to date in 1978. When the the Court of Justice under Article Commission found that liqueur wines 177 in such a way as to ensure imported into France from other complete protection for the rights of Member States continued to suffer individuals in particular with regard discrimination in matters of taxation it to the reimbursement of taxes issued to the French Republic on 14 wrongly paid (because such taxes are August 1979 the reasoned opinion contrary to the Community rules) provided for in Article 169. in accordance with the general principles in force in the national legal system (cf. the judgments of 16 The Commission states that it has good December 1976 in Cases 33/76 Rewę reason to believe that the French law in and 45/76 Comet [1976] ECR 1989 question will soon have the amendments and 2043); called for incorporated into it.

it to claim repayment of the duty from not more than 18 % (for example, the French financial authorities and, if Sauternes) and the non-liqueur Italian they refused, to take proceedings for quality wines produced in specified recovery of the amount wrongly paid. regions which are naturally sweet and have an identical degree of alcoholic strength and are produced by similar methods (for example, moscato di Pan- With regard to the first question it telleria). observes that Regulation No 337/79 does not make any distinction between the various liqueur wines. On the other hand the relevant French legislation The former are liable only to the excise applies different treatment in the form of duty on wine of FF 22.50 per hectolitre tax discrimination. of the finished product (this is fur- thermore the general excise duty on wines) whilst the latter are required to pay the consumption tax of FF 4 270 and First, the "natural sweet wines" are the production tax of FF 710 per covered by the tax provisions applicable hectolitre. The same difference recurs to wines (consumption tax of FF 1 790 finally in the treatment of French per hectolitre and excise duty of FF unsweetened table wines having an 22.50 per hectolitre) whilst liqueur or actual alcoholic strength of between 15 indeed non-liqueur wines, "quality wines and 17% and Italian liqueur wines of produced in specified regions" (quality almost identical composition. wines p.s.r.) with a total alcoholic strength of not less than 15% imported from other Member States, are subject to the more burdensome provisions Article 95 of the Treaty consists of three applicable to spirits (consumption tax of distinct paragraphs of which only the FF 4 270 and production tax of FF 710 first two are relevant to this case. The per hectolitre). first prohibits Member States from imposing "directly or indirectly", on the products of other Member States any "internal taxation of any kind in excess of that imposed directly or indirectly on Secondly, special treatment is reserved similar domestic products". The second for Pineau des Charentes (a liqueur wine paragraph extends the prohibition to with a registered designation of origin "any internal taxation of such a nature which nevertheless is not one of the as to afford indirect protection to other natural sweet wines) and for the wines of products". two non-member countries, Portugal and Greece, namely port, madeira and Samos muscat. The above-mentioned products are in fact exempted from the production The subject-matter of the first paragraph tax of FF 710 per hectolitre of spirit. of Article 95 is more restricted (it relates exclusively to "similar" products) but lays down a very stringent prohibition, whilst the second paragraph affects a A third case of different tax treatment wider group of products but, for that exists with regard to the French non- very reason, may be applied only where liqueur quality wines produced in specific conditions are fulfilled. Such specified regions which are naturally conditions can only be the "protectionist sweet and have a total actual alcoholic aim" of the taxation and the actual and strength of not less than 15% and particular competitive or substitutable

character of the products. This is so treatment appears inadmissible above all because, since the situations in question when it results in an advantage for the call in principle for less stringent domestic products having a particular protection than that provided for designation of origin or quality and in a "similar" products, it is necessary to penalty on imported products which establish in each case whether, by reason likewise have specified designations of of their objectives and of the charac- origin or quality. teristics of the products in question, the contested taxation actually and significantly affects the free movement of However if the tax system in question goods. results in an arrangement the objective whereof is the resolute support and promotion of almost all of the national production it in fact displays the charac- In this case the similarity of the products teristics of a protectionist measure in question is in fact indicated by the against competition from imported provisions of Regulation No 337/79. products. Furthermore, from the point of view of the consumer, all such wines are similar because the actual composition is With regard to the second question identical and uniform. Foglia observes that any loss of revenue resulting from exemption from taxes must be considered from the point of However, if there were adopted as a view of the public finances as criterion not the similarity but simply the expenditure since that concept frequently competitive nature of the products in coincides with the concept of support. question, the difference in treatment set out above benefiting French wines must be based at least on reasons which Under Article 59 of Regulation No exclude any protectionist intent. That 337/79, Articles 92, 93 and 94 of the does not appear to follow from a system Treaty apply to the production of and which on the contrary has as its fixed trade in the products in question "save as objective the protection of national otherwise provided in this regulation". products. Accordingly a sufficient reply to the question asked consists in recalling the judgment of 13 March 1979 and the relevant opinion in Case 91/78 Hansen Accordingly, the difference in the [1979] ECR 935. treatment reserved for French products (or indeed that for products of non- member countries) in relation to those of With regard to the third question Foglia other Member States appears difficult to observes that the case-law of the Court explain other than by an intention, in of Justice shows that financial charges this case too, to favour specified imposed in Member States in breach of domestic products at the expense of the Community provisions constitute an products of other countries which have unlawful charge and entitle private wholly similar characteristics. persons to claim reimbursement in full.

Member State of the Community are at She maintains that "natural sweet wines" issue in proceedings between Italian are liqueur wines fortified by spirit. That parties before an Italian court. argument is confirmed by French case- law. It is a feature of the French tax system that a privileged position is Viewed in that light it is clear that the reserved for national products by means question can only be answered within the of varied exemptions from, or reductions framework of Article 177 of the EEC in the consumption tax and the Treaty and in accordance with the production tax. settled case-law as to the effect of judgments of the Court of Justice given pursuant to that provision. The criterion of the designation of origin and of the high quality accorded to products coming exclusively from a Regardless of the nationality and nature clearly-defined zone must be considered of the national court making the from the outset as discrimination for the reference and of the parties to the purposes of taxation. proceedings before it the judgment delivered by the Court of Justice under Article 177, and accordingly within the limits of its jurisdiction laid down by that In fact only on the basis of purely formal provision, is fully binding in its effect for characteristics can it be claimed that the the purposes of settling in the main French tax system attributes to French action the question asked. liqueur wines their own distinct charac- ter. The formally different character makes it possible to bring the wines in The last question envisages a ruling to question under a special sub-category of the effect that aid in the form of a the tax classification and to rule out the reduction of, or exemption from, "similarity" or identity of the products taxation is incompatible with Community which constitutes the condition for the law according to the procedures pres- application of the uniform treatment cribed in the said Articles 92, 93 and 94. required by the Community provisions in force. Mrs Novello refers in this connexion to Case 148/77 (Hansen Foglia, referring to Case 78/76 Steinike [1978] ECR 1787, at p. 1808) and to (judgment of 22 March 1977 [1977] Case 91/78 (Hansen [1979] ECR 935). ECR 595), maintains that a private person may challenge the compatibility of an aid with Community law before Furthermore the measures in dispute national courts where the provisions show clearly the existence of a State aid referred to in Article 92 have been properly so-called in the form of an applied by the acts of a general nature incentive exclusively for specified French provided for in Article 94 or by specific products. However the abovementioned decisions under Article 93 (2). judgment in Case 148/77 shows that the protection granted by a Member State for products through the very precise Mrs Novello, the defendant in the main definition of their place of origin and by action, makes the same analysis of the conferring upon them a purely formal discrimination alleged by the plaintiff in identity may not be intended to prevent the main action. the similar products of other Member

States obtaining a share of the market in on the equal treatment of French and question on equal terms. foreign liqueur wines, it is correct that no Community liqueur wine has hitherto met the requirements of the system The French Government observes that the devised for liqueur wines having a Italian wines, which attain a high registered designation of origin, the alcoholic strength without the addition French Government has always declared of alcohol, ,do not correspond either to its readiness to bring within that system the Community definition of wine or to the liqueur wines of Member States the French definition since they have a which establish comparable conditions of total alcoholic strength in excess of 15%. production with regard to the varieties of They accordingly cannot be considered vines, limits of the areas of production as wines and since they compete directly and the yield per hectare, together with with other spirits to which alcohol has equivalent methods of supervision and been added they must necessarily, come which can thus claim to be treated as under the same tax system for such equivalent to French wines. products, which applies inter alia to liqueur wines. The French Government remarks that the Finance Law of 1979 abolished the In France the consumption tax and the reduced rate of the consumption tax production tax are imposed on liqueur introduced by the Finance Law of 1977 wines. Nevertheless French liqueur wines in favour of liqueur wines having a having a registered designation of origin registered designation of origin. and certain foreign liqueur wines which are treated as their equivalent under the provisions of agreements (port, madeira It is clear from the foregoing obser- and Samos muscat) only bear the vations that the taxation applied in consumption tax. France to liqueur wines having a registered designation of origin is not This relief is justified by the desire to contrary to Article 95 of the Treaty. maintain fair conditions of competition between products without particular With regard to natural sweet wines the characteristics and subject to very few French Government recalls the attitude rules and other products having a of the Commission. The Commission has specified origin and subject to strict stated that the particular tax system requirements as to production which applicable to natural sweet wines consti- ensures high quality but at a higher cost tutes an aid and that it is accordingly not price. covered by the provisions of Article 95. The Commission considers that it The very general definition of liqueur therefore falls under Article 93 (1) of the wines contained in the Community Treaty. (Answer by the Commission to system, which applies to products whose Written Question No 78/69 by Mr qualities, conditions of production and Vredeling, Journal Officiel 1969 C 102, tastes are very different, precludes by its p. 2). very generality the satisfactory attain- ment of that fairness in matters of In this connexion the French Govern- taxation. ment observes that the provisions of the Treaty concerning aids do not create for In this connexion although in the private persons rights which the national absence of any international agreements courts are bound to uphold.

Decision

1 By an o r d e r of 6 J u n e 1979 which was received at the C o u r t on 29 J u n e 1979 the P r e t u r a die Bra referred to the C o u r t p u r s u a n t to Article 177 of the E E C T r e a t y five questions on the interpretation of Articles 92, 95 and 177 of the Treaty.

JUDGMENT OF II. 3. 1980 — CASE 104/79

2 The proceedings before the Pretura di Bra concern the costs incurred by the plaintiff, Mr Foglia a wine-dealer having his place of business at Santa Vittoria d'Alba, in the province of Cuneo, Piedmont, Italy in the dispatch to Menton, France of some cases of Italian liqueur wines which he sold to the defendant, Mrs Novello.

3 The file on the case shows that the contract of sale between Foglia and Novello stipulated that Novello should not be liable for any duties which were claimed by the Italian or French authorities contrary to the provisions on the free movement of goods between the two countries or which were at least not due. Foglia adopted a similar clause in his contract with the Danzas undertaking to which he entrusted the transport of the cases of liqueur wine to Menton; that clause provided that Foglia schould not be liable for such unlawful charges or charges which were not due.

4 The order making the reference finds that the subject-matter of the dispute is restricted exclusively to the sum paid as a consumption tax when the liqueur wines were imported into French territory. The file and the oral argument before the Court of Justice have established that that tax was paid by Danzas to the French authorities, without protest or complaint; that the bill for transport which Danzas submitted to Foglia and which was settled included the amount of that tax and that Mrs Novello refused to reimburse the latter amount to Foglia in reliance on the clause on unlawful charges or charges which were not due expressly included in the contract of sale.

9 In their written observations submitted to the Court of Justice the two parties to the main action have provided an essentially identical description of the tax discrimination which is a feature Of the French legislation concerning the taxation of liqueur wines; the two parties consider that that legislation is incompatible with Community law. In the course of the oral procedure before the Court Foglia stated that he was participating in the procedure before the Court in view of the interest of his undertaking as such and as an undertaking belonging to a certain category of Italian traders in the outcome of the legal issues involved in the dispute.

io It thus appears that the parties to the main action are concerned to obtain a ruling that the French tax system is invalid for liqueur wines by the expedient of proceedings before an Italian court between two private individuals who are in agreement as to the result to be attained and who have inserted a clause in their contract in order to induce the Italian court to give a ruling

JUDGMENT OF II. 3. 1980 — CASE 104/79

on the point. The artificial nature of this expedient is underlined by the fact that Danzas did not exercise its rights under French law to institute proceedings over the consumption tax although it undoubtedly had an interest in doing so in view of the clause in the contract by which it was also bound and moreover of the fact that Foglia paid without protest that under- taking's bill which included a sum paid in respect of that tax.

n The duty of the Court of Justice under Article 177 of the EEC Treaty is to supply all courts in the Community with the information on the interpret- ation of Community law which is necessary to enable them to settle genuine disputes which are brought before them. A situation in which the Court was obliged by the expedient of arrangements like those described above to give rulings would jeopardize the whole system of legal remedies available to private individuals to enable them to protect themselves against tax provisions which are contrary to the Treaty.

THE COURT

in answer to the questions submitted to it by the Pretura di Bra, by an order of 6 June 1979, hereby rules:

The Court of Justice has no jurisdiction to give a ruling on the questions asked by the national court.

Kutscher O'Keeffe Touffait Mertens de Wilmars Pescatore

Mackenzie Stuart Bosco Kpopmans Due

Delivered in open court in Luxembourg on 11 March 1980.