C-109/79

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) and 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.l) altering the monetary compensatory amounts,

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

gives the following

JUDGMENT OF 15. 10. 1980 — CASE 109/79

I — Facts and p r o c e d u r e These figures are arrived at by applying the coefficient 1.80 to the monetary compensatory amounts provided for 1. On 27 April 1978 Sàrl Maïseries de maize (tariff heading 10.05 B) in each of Beauce, the plaintiff in the main action, the annexes in question. brought an action before the Tribunal Administratif, Orléans, seeking reim- bursement by the Office National Inter- professionnel des Céréales [The National 3. The application of the coefficient Cereal Trade Board], the defendant thus selected constitutes implementation in the main action, of the sum of of Regulation (EEC) No 974/71 of the FF 32 131.44, representing the portion of Council of 12 May 1971 (Official monetary compensatory amounts said to Journal, English Special Edition 1971 have been unduly paid in respect of (I), p. 257) on certain measures of maize groats and maize meal exported conjunctural policy to be taken in agri- between 11 and 28 May 1977. culture following the temporary widening of the margins of fluctuation for the currencies of certain Member 2. Provision for the compensatory States. Article 1 of that regulation amounts claimed from the plaintiff is introduces monetary compensatory made in Commission Regulations Nos amounts (to be charged or granted as the 1910/76 of 30 July 1976, 2466/76 of 8 case may be) not only in respect of agri- October 1976 and, it appears, 938/77 cultural products (a) covered by (Official Journal 1977, L 110, p. 6). intervention arrangements under the Annex I to each regulation sets out — common organization of agricultural with regard to heading 11.02 A V (a) of markets but also in respect of agri- the Common Customs Tariff (maize cultural products whose price depends groats and maize meal of a fat content on the price of the products referred to not exceeding 1.5% by weight: (1) for under (a). Article 2 (2) provides that for the brewing industry, (2) other — the that second category of product the amount of the monetary compensatory monetary compensatory amounts "shall amounts, to be granted or charged as the be equal to the incidence, on the prices case may be, as being respectively: of the product concerned, of the application of the compensatory amount — Regulation No 1910/76: FF 71.67/t to the prices of the product referred to in (that is, 39.82 x 1.80) paragraph (1), on which they depend".

4. The coefficient 1.80 is taken by the Commission from the identical 6. The crux of the main action is coefficient prescribed by Annex I to whether the coefficient 1.80 may be Regulation (EEC) No 2744/75 of the validly applied in the calculation of Council of 29 October 1975 on the monetary compensatory amounts to be import and export system for products charged on exports from France of processed from cereals and from rice maize groats and maize meal. According (Official Journal 1975, L 281, p. 65) and to the plaintiff in the main action that employed in calculating the levy on the coefficient overvalues the incidence on importation into the Community of the price of maize groats and maize meal maize groats and maize meal from non- of the monetary compensatory amount member countries. In both cases the applied to maize so that the resultant selection of that coefficient is based on monetary compensatory amount for such the fact that 1.8 tonnes of maize are processed products over-compensates for required to produce 1 tonne of maize the effect of the fall of the French franc meal. In fixing the coefficient 1.80 for against the green franc. That constitutes maize/maize groats and maize meal for a breach of the basic principle of the the calculation of levies, Regulation No relevant provisions which is set out in the 2744/75 seeks to implement Regulation sixth recital in the preamble to Regu- (EEC) No 2727/75 of the Council of 29 lation No 974/71 where it is stated that October 1975 (Official Journal 1975, L "the compensatory amounts should be 281, p. 1) on the common organization limited to the amounts strictly necessary of the market in cereals. After intro- to compensate the incidence of the ducing levies payable on imports into the monetary measures on the prices of the Community of not only basic agricultural basic products". By doing so the regu- products but also certain products lations in question also infringe the processed from basic agricultural second subparagraph of Article 40 (3) of products, that regulation provides, in the Treaty by creating discrimination Article 14 thereof, that the levy to be between traders in the various Member charged on processed products should States. consist of a fixed component and a variable component, the latter "cor- responding, in respect of products processed from basic products listed in Article 1 (a), to the incidence on their 7. Since the Tribunal Administratif, prime cost of the levies on those basic Orléans, considered that the action gave products". rise to issues concerning the validity of three Community regulations, by a judgment of 22 June 1979 it referred the following questions to the Court of Justice for a preliminary ruling: 5. Regulation No 2744/75 of the Council adopts the coefficient 1.80 for the incidence of the levy on the price of maize groats and maize meal. The "1. Is Regulation (EEC) No 2744/75 of Commission chose to adopt the same the Council of 29 October 1975 on

the import and export system for Upon hearing the report of the Judge- products processed from cereals and Rapporteur and the views of the from rice unlawful as being in Advocate General the Court decided to breach of the principle of free open the oral procedure without any competition and the principle of preparatory inquiry. equality of treatment between under- takings within the Community as laid down in Article 40 (3) of the Treaty of Rome? II — Written observations sub- mitted pursuant to Article 20 of the Protocol on the 2. By fixing the rate of monetary Statute of the Court of compensatory amounts by use of the Justice of the EEC coefficient laid down by the above- mentioned Regulation (EEC) No 2744/75 as regards levies and A — Observations of the plaintiff in the refunds, did not Commission Regu- main action (Maïseries de Beauce) lations (EEC) Nos 1910/76 of 30 July 1976 and 2466/76 of 8 October 1976 infringe the provisions of Regu- First question lation No 974/71 of the Council and the above-mentioned principle of non-discrimination between pro- The plaintiff in the main action ducers?" maintains that Regulation No 2744/75 on the import and export system for products processed from cereals and from rice is not directly at issue because 8. The judgment making the reference it determines the calculation of levies and was lodged at the Court Registry on not that of monetary compensatory 9 July 1979. amounts. Nevertheless it is indirectly relevant because of the fact that the Commission has employed the processing coefficient (1.80) which is applicable In accordance with Article 20 of the to levies' on products processed from Protocol on the Statute of the Court of maize for calculating the monetary Justice of the EEC written observations compensatory amounts on the same were submitted by the plaintiff in -the products and the fact that the result of main action, represented in this matter that application has been to create by M. Veroone, of the Lille Bar, and by discrimination between producers in the the Government of the French Republic, various countries of the Community. represented in this matter by Y. Cousin, by the Council of the European Communities, represented in this matter Second question by B. Schloh, an adviser in its legal department, acting as Agent, and by the Commission of the European Infringement of Regulation No 974/71 Communities, represented in this matter by Mr P. Gilsdorf, its Legal Adviser, acting as Agent, assisted by Mr J. In accordance with the principle upon Delmoly, a member of its legal which Regulation No 974/71 is based department. and which is set out in the sixth recital in

On the other hand the Commission has Whilst this method of calculation violated that principle by adopting the observes the coefficients arrived at on the coefficient 1.80. Simply multiplying the basis of purely technical data it also takes compensatory amount applicable to the into consideration the fact that the flour basic product (maize) by the technical industry manufactures a number of processing coefficient for maize/maize products and by-products from a given meal or maize groats in order to quantity of raw material. calculate the compensatory amount on derived products places the entire compensatory amount affecting the basic Infringement of Article 40 (3) of the product on one of the products derived EEC Treaty from maize and thereby disregards the existence of other derived products The Commission's method of calculation which are also subject to monetary also entails distortion of competition compensatory amounts. The result is that between producers of the various products derived from maize are subject Member States and thereby violates to monetary compensatory amounts Article 40 (3) of the EEC Treaty. In which, when added together, exceed the support of that argument the plaintiff in monetary compensation applied to the the main action produces an excerpt basic product. 1.80 tonnes of maize are from an expert opinion drawn up in the indeed required to produce 1 tonne of course of a dispute raising the same maize meal but 1.80 tonnes of maize also issues as those concerned in the main provide 0.27 tonne of high-quality flour, action which resulted in questions at 0.27 tonne of flour for fodder, 0.242 present before the Court of Justice for tonne of germ and 0.018 tonne of waste. the purpose of a preliminary ruling.

By modifying the coefficient in question B — Observations of the French on various occasions the Commission has Government recognized that the method of calcu- lation at issue in the main action causes distortion of competition and discrim- Bearing in mind that the Court of Justice ination between producers in the various is prepared, where questions submitted Member States. The processing to it are imperfectly framed, to reply in a coefficient was fixed at 1.60 for maize manner which assists the court dealing groats and meal with effect from 3 with the merits to apply Community law October 1977 (Regulation No 1771/77 in deciding the action before it, the of 29 July 1977, Official Journal 1977, L French Government considers that the 193, p. 1) and subsequently at 1.50 complaint of the plaintiff in the main pursuant to Regulation No 746/79 of 11 action is concerned less with the April 1979 (Official Journal 1979, L 95, existence of the processing coefficient in p. 3) for meal coming under tariff Regulation No 2744/75 than with the heading 11.02. application of that coefficient in the calculation of the* monetary com- pensatory amounts on maize meal in Regulation No 1910/76. The question submitted thus turns on the point The plaintiff in the main action whether the application of that concludes that: coefficient to the calculation of the monetary compensatory amounts on maize meal does not breach the principles of free competition and of the equal "In calculating the monetary compensa- treatment of undertakings within the tory amounts applicable to derived Community. products it is necessary to have regard to the incidence which the monetary compensatory amount for the basic Condition for the validity of the product has on all products and monetary compensatory amounts secondary products, in particular in such manner that the monetary compensatory amount applied to the principal derived Examining first the requirements laid product takes account of monetary down by the Court of Justice as compensatory amounts applied to the conditions for the legality of monetary other products, either: compensatory amounts, the French Government observes that it is clear, in particular from the judgment of 20 April 1978 in Joined Cases 80 and 81/77 Commissionnaires Réunis [1978] ECR (a) by deducting the compensatory 927, that monetary compensatory amounts for the secondary products amounts do not constitute unlawful from the compensatory amounts for obstacles to intra-Community trade only the principal derived product, or 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) by applying to all the derived market in agricultural products based on products a coefficient corresponding common prices, would otherwise be to the ratio between the quantity of liable to cause disturbances in the trade the basic product actually used and in such products. If on the other hand that deemed to have been used." the amounts are fixed at an excessively

In order to observe the principle that monetary compensatory amounts should not affect patterns of trade, monetary (1) It is clear from Article 2 (2) of compensatory amounts imposed on the Regulation No 974/71 of the Council various secondary products must be fixed that monetary compensatory amounts on in such a way that their sum is equal to processed products must have as their the monetary compensatory amount on sole objective the compensation of the the basic product. The compensatory incidence on the prices of such products amounts for other derived products of monetary compensatory amounts should accordingly be deducted from the affecting the basic products on which monetary compensatory amount on they depend and that they may not meal. Moreover in the said Regulation exceed that limit. No 1771/77 of 29 July 1977, the Commission has itself altered its method of calculation by reducing the coefficient for meal from 1.80 to 1.60 but, according to the French Government, Although the employment in the calcu- that alteration is not sufficient to correct lation of the monetary compensatory the distortion resulting from the amounts to be charged on maize groats imposition on meal alone of the entire and maize meal of the coefficient of 1.80 monetary compensatory amount for the laid down in Regulation No 2744/75 for basic product. The French Government the calculation of the levies on the same draws particular attention to the processed products appears to be advantages which the method employed justified by the fact that, according to by the Commission gives German that regulation, the variable component producers of meal over French producers in the levy must correspond to the and the grave distortion of competition incidence of the levies fixed for basic which is thereby created.

The observations concerning the instead of the price of that basic raw arbitrary nature of the application of the material alone. processing coefficient based on Regu- lation No 2744/75 are confirmed by the fact that in certain cases the coefficients adopted by the Commission for calcu- In sum the French Government considers lating monetary compensatory amounts that: differ from those in Regulation No 2744/75 precisely because they fail accurately to represent the incidence on "(1) The principle that measures to the processed products of the amounts compensate for monetary fluc- affecting the basic product. tuations shall be neutral requires that the sum of the monetary compensatory amounts on pro- cessed products taken individually (2) With regard to the incidence of must not exceed the monetary production refunds in appraising the compensatory amount applicable to validity of the coefficient of 1.80, the the quantity of the basic product French Government considers that that required to obtain such processed incidence must be taken into products. consideration in order to re-establish equality in conditions of competition between producers in the various Member States of the Community. The Where a basic product provides fact that the production refunds are several secondary products any granted in "green currency" creates a method of calculating monetary distortion in favour of producers in compensatory amounts on such Member States with a "hard" currency secondary products which imposes at the expense of those in Member States on one such secondary product the having a "soft" currency. Where a entire monetary compensatory producer established in a Member State amount on the basic product with a "hard" currency obtains basic without regard to the true incidence products (maize) in a Member State with of that monetary compensatory a "soft" currency in order to process amount is incompatible with them in his factories for re-export to a Community law where the other Member State with a "soft" currency, secondary products are also subject the present system of calculating the to their own monetary com- monetary compensatory amounts pensatory amounts. ultimately over-compensates for the difference between currencies. In the present state of the "green" parities the production refund paid in green German In particular, the employment of currency in higher than the same refund the coefficient 1.80, which is paid in green French currency. In order provided for in Regulation No to rectify that difference in the supply 2744/74, for calculating monetary costs of German and French meal- compensatory amounts on maize producers it is sufficient to take as the meal in Regulation No 1910/76 is basis of the monetary compensatory incompatible with Community law. amount to be applied to processed products the price of the corresponding basic raw material under deduction of (2) A method of calculating the the production refund previously paid monetary compensatory amounts

on processed products which fails 100 of the German Grundgesetz [Basic to take account of the incidence of Law] provides that "if a court considers production refunds paid on the a law, upon whose validity its decision basic products also imposes on depends, to be contrary to the traders a charge which is not constitution it must stay the proceedings directly related to monetary fluc- and refer the matter to the Federal tuations and is accordingly Constitutional Court". Article 80 of the incompatible with Community Gesetz über das Bundesverfassungs- law." gericht [Law on the Federal Consti- tutional Court] defines the scope of that requirement as follows: C — Observations of the Council "1. Where the conditions laid down in Article 100 (1) of the Basic Law are First question fulfilled the courts shall immediately request the Federal Constitutional According to the Council, a reply to the Court to give a ruling. first question concerning the validity of Regulation No 2744/75 is not required 2. In the statement of its grounds the to permit the national court to decide the order making the reference shall case pending before it and a reply should indicate the extent to which the not be given. The Council nevertheless decision of the court depends upon considers, having regard to the decisions the validity of the provision and also of the Court in Tedeschi (judgment of 5 the superior rule of law with which October 1977 in Case 5/77 [1977] ECR that provision is incompatible . . . 1555), Cayrol (judgment of 30 November 1977 in Case 52/77 [1977] ECR 2261) and Pigs Marketing Board 3. . . . " (judgment of 29 November 1978 in Case 83/78 [1978] ECR 2347) and the The Council observes that in the absence opinion of the Advocate General in Viola of any provision to that effect in the (opinion of 5 October 1978 in Case Treaty, the national courts cannot be 26/78 [1978] ECR 1781), that this action required to set out the reasons for the gives the Court an opportunity to relevance of the decision making the consider afresh the problem of the reference. If the national courts were relevance of questions submitted under voluntarily to follow that or a similar Article 177 of the EEC Treaty. The procedure the position would be Council considers that the Court of improved for all concerned in the Justice should request the national proceedings in that Article 177 of the courts, with a view to improving the Treaty would be used in the actions for conditions of cooperation between the which it was really intended. Court of Justice and the national courts, to have greater regard for the criterion of "necessity" embodied in the second paragraph of Article 177 of the Treaty Second question by indicating such necessity as clearly as possible in requests for preliminary The Council considers that the judgment rulings. The Council draws the attention of the Court of 11 October 1977 in Case of the Court of Justice to the solution 125/76 Cremer [1977] ECR 1593 and adopted in the constitutional law of the the judgment of the Court of 9 March Federal Republic of Germany. Article 1976 in Case 95/75 EFFEM [1976] ECR

Although it considers that only the second question is relevant to the Faced with that unclear position, the resolution of the dispute, the Com- Commission had to adopt a standard and mission gives its views, in the light of the practical solution, the processing general situation which it required to coefficient 1.80. In 1976 the Commission take into consideration, on both the had in fact no information on the basis infringement of Regulation No 974/71 of which it could depart from the of the Council and the infringement of methods of conversion generally applied Article 40 (3) of the EEC Treaty. at the time. However in the light of more recent information it adopted two regu- lations, No 1771/77 of 29 July 1977 and Infringement of Regulation No 974/71 No 746/79 of 11 April 1979 (cited of the Council of 12 May 1971 (over- above), altering the processing coef- compensation at the expense of meal) ficient for the calculation of monetary compensatory amounts applicable to maize meal by reducing it from 1.80 to In response to the arguments put 1.60 and subsequently from 1.60 to 1.50. forward by the plaintiff in the main Those modifications were decided in action to the effect that the employment particular in view of the steady increase of the coefficient 1.80 in calculating in exports of maize meal from Germany the monetary compensatory amount and the Benelux countries to France. applicable to maize meal over- compensates, at the expense of meal alone, for the incidence on the price of maize of the fall of the French franc The Commission is aware that each time against the green franc, the Commission flat-rate measures are adopted it is remarks that it is common ground that in impossible to have complete regard for technical terms 1.80 tonnes of maize the particular circumstances of all under- produces 1 tonne of meal. On the other takings effected. It nevertheless considers hand it maintains that "opinion is that the power of appraisal which the divided . . . regarding the secondary Court has held that the Commission

The complaint of infringement of Article 40 (3) of the EEC Treaty is unfounded. By an order of 26 March 1980 the Regard must in fact be had to the fact Court, having heard the opinion of the that the French processing industry can Advocate General, ordered the obtain supplies of French produced reopening of the oral procedure and maize whose price is lower than that of requested the plaintiff in the main action, maize imported from non-member the Italian Government, the French countries. If the complaints of the Government, the Council and the plaintiff were well founded there should Commission to supplement their obser- have been a fall in French exports of vations by replying in writing to certain maize meal after 1976 which is not the questions. In the replies which they gave, case. the plaintiff in the main action and the French Government confirmed their previous observations whilst the In conclusion the Commission suggests Commission clarified its position on that the Court should reply that certain points. consideration of the questions submitted by the Tribunal Administratif, Châlons- sur-Mame, has disclosed no factor of In so far as concerns the ratio underlying such a kind as to affect the validity of the processing coefficients of the other Commission Regulations Nos 1910/76 products which, in addition to groats and 2466/76. and meal, are obtained from maize, the Commission recalls that, from the outset the coefficients for calculating the levies applicable to those secondary products were established not on a quantitative III — Oral procedure basis but by taking account of the economic protection necessary to stabilize the prices of such products. Having regard to the links between At the hearing on 15 January 1980 the monetary compensatory amounts and plaintiff in the main action, represented levies, the neutrality which is desirable by Mr Veroone, of the Lille Bar, the for monetary compensatory amounts Government of the Italian Republic, must be reconciled with the requirements represented by its Agent, M. Favara, the of protection arising from those links. In Council of the European Communities, other words, the protection desired at represented by its Agent, B. Schloh, and the external frontiers would be the Commission of the European jeopardized if the processing coefficients Communities, represented by its Agent, used in calculating compensatory

Decision

1 By judgment of 22 June 1979, which was received at the Court on 9 July 1979, the Tribunal Administratif [Administrative Court], Orléans, 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 systems for products processed from cereals and from rice and of Commission Regulations No 1910/76 of

MAÏSERIES DE BEAUCE v ÓNIC

30 July 1976 (Official Journal 1976, L 208, p. 1) and No 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.

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 is then raised whether, in employing for the rate of the monetary compensatory amounts for maize groats and maize meal the processing coefficient prescribed by the above-mentioned Regulation No 2744/75 of the Council (in this case 1.8), the Commission regulations referred to did not contravene the provisions of Regulation No 974/71 of the Council as well as the above-mentioned principle of non-discrimination between producers.

3 These questions have been submitted in the context of a dispute between the plaintiff in the main action and the Office National Interprofessionnel des Céréales, the French institution entrusted with implementing Community provisions on the common organization of the market in cereals. Between 11 and 28 May 1977 the plaintiff exported quantities of maize groats and maize meal and the Office National Interprofessionnel des Céréales thereupon claimed payment from it of the monetary compensatory amounts fixed, in implementation of Regulation No 974/71 of the Council, by various Commission regulations.

— 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 that charged or granted on 1.8 tonnes of maize must be charged or granted, as the case may be, on one tonne of meal.

7 The coefficient 1.8 — the so-called "processing coefficient" — was taken by the Commission from the identical coefficient prescribed by 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

MAÏSERIES DE BEAUCE v ONIC

Journal 1975, L 281, p. 65). That regulation implements in its turn Regu- lation (EEC) No 2727/75 of the Council of the same date on the common organization of the market in cereals (Official Journal 1975, L 281, p. 1), Article 14 of which provides that a levy may be charged not only on imports from third countries of the cereals listed in Article 1 (a) of that regulation (so-called basic products) but also on imports of products processed from basic products. Article 14 also provides that although the variable component in that levy may be fixed on a flat-rate basis, it must nevertheless correspond, "in respect of products processed from basic products listed in Article 1 (a), to the incidence on their prime cost of the levies on those basic products."

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 the principal derived product, it necessarily follows that the sum of the monetary compensatory amounts charged or granted on the various products derived from the basic product is greater than the monetary compensatory amount on that basic product. According to the plaintiff, that result is incompatible both with the sixth recital in the preamble to Regulation No 974/71, which states that the compensatory amounts to be applied "should be limited to the amounts strictly necessary to compensate the incidence of the monetary measures on the prices of basic products covered

JUDGMENT OF 15. 10. 1980 — CASE 109/79

by intervention arrangements and . . . it is appropriate to apply them only in cases where this incidence would lead to difficulties", and with the rule set out in particular in Article 2 (2) of the same regulation which states that "for the other products referred to in Article 1 [that is to say, products whose price depends on that of a basic 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 to the prices of the product referred to in paragraph (1), on which they depend".

3. The monetary compensatory amount which the plaintiff was charged for 1 tonne of groats and meal ought to be reduced by 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.

12 The foregoing considerations show that the point with which the questions submitted are essentially concerned is whether the sum of the monetary compensatory amounts applied to the various products or secondary- products processed from a given quantity of a basic product may exceed the monetary compensatory amount applicable to that basic product.

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 reopening 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 109/79

Second question: The validity of Commission Regulation No 938/77 in so far as it fixes 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 the Council of 12 May 1971, of monetary compensatory amounts within the framework of the common agricultural 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 (1a) 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.

n 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 109/79

MAlSERIES DE BEAUCE v ONIC

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 on 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 N o 974/71 but also the rule set out in Article 43 (3) of the

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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.

41 The reply to the question submitted should therefore be that by adopting in various successive implementing regulations, in particular Regulation No 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 No 974/71 of the Council of 12 May 1971, and Article 43 (3) of the Treaty.

C — Consequences of the invalidity

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- Lagerhaus Stroh (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 1795 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 sumitted 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, Orléans, by judgment of 22 June 1979, which was received at the Court on 9 July 1979, hereby rules:

1. By adopting in various successive implementing regulations, in particular Regulation 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

(see Case 4/79, p. 2855)

OPINION OF MR ADVOCATE GENERAL MAYRAS (after the re-opening of the oral procedure)

(see Case 4/79, p. 2876)