C-36/80

JUDGMENT OF 10. 3. 1981 — JOINED CASES 36 AND 71/80

the national court in deciding at what Such incompatibility would, however, stage in the proceedings pending exist if and in so far as the duty had before it a question should be referred the effects of impeding the proper to the Court for a preliminary ruling. functioning of the machinery estab- lished as part of the relevant common 2. A temporary national duty intended organizations for the formation of to be borne by agricultural producers common prices and to regulate as part of an incomes policy dividing market supplies. tax burdens among the various sectors of the working population, but It is for the national court to decide applied in the form of an indirect tax whether, and if so to what extent, the on the value of certain agricultural duty which it is called upon to products subject to common organiz- consider in fact has such effects. ations of the markets at the time of their delivery for processing, storage 3. Even if it is applied to livestock ex- or export and payable either by the ported on the hoof when they are exporter or by the processing or delivered for export, a national duty storage undertaking, who are entitled does not fall within the prohibition of to recover the amount of the duty charges having an effect equivalent to from the producers, is not, in customs duties on exports if it is also principle, incompatible with the applied, systematically and in ac- provisions of the EEC Treaty on agri- cordance with the same criteria, to cultural policy, or with Community livestock which are not being rules on the common organization of exported, at the time of their delivery the markets. for slaughter.

MARTIN DOYLE AND OTHERS

IRISH CREAMERY MILK SUPPLIERS ASSOCIATION v IRELAND

and

A N TAOISEACH AND OTHERS

on the interpretation of the EEC Treaty, in particular of Articles 9, 11, 12, 16, 17 and 38 to 46 and of Article 177 thereof and of the Council regulations on the common organization of the markets in cereals, milk products, beef and veal and sugar,

T H E COURT,

JUDGMENT OF 10. 3. 1981 — JOINED CASES 36 AND 71/80

If the exporter or the owner of the processing undertaking had bought the "For historic reasons the level of pros- product he might in principle either perity and the stage of development of deduct from the price payable to the agriculture in Ireland has until recently seller a sum equal to the amount of the lagged behind that of other sectors of the duty or recover that amount as a con- economy. This was reflected in a tractual debt. If the person accountable relatively favourable tax regime for agri- for the duty did not become the owner culture particularly as regards income of the product, for example because he tax. Since 1972 the prosperity of agri- was merely rendering a service, he might culture has made rapid progress largely

IRISH CREAMERY MILK SUPPLIERS ASSOCIATION v IRELAND

3. The applicants in the main action in Case 36/80 requested Professor Denis Lucey of the University College of Cork to consider the effects of the duty in Having regard to the fact that the question. In his preliminary conclusions Government of Ireland undertook, in the in paragraph 42 of his report Professor event of the Court's finding the duty to Lucey states that all or the vast bulk of be invalid, to refund any duty paid, the the incidence of levy is shifted to farmers national court did not deal with the in the form of a reduction of the net question of the grant of an injunction price for the items concerned. He but stayed the proceedings and ordered concludes more precisely that as regards that the following questions should be cereals, sugar beet and milk, the duty of referred to the Court of Justice for a 2 % is borne in the last resort by farmers preliminary ruling:

JUDGMENT OF 10. 3. 1981 — JOINED CASES 36 AND 71/80

On hearing the report of the Judge- "(a) The time at which a national court Rapporteur and the views of the ought to refer a question to the Advocate General the Court decided to Court of Justice of the European open the oral procedure without any Communities for a preliminary preparatory inquiry. ruling under Article 177 of the EEC Treaty is a matter solely for that By an order of 16 September 1980 the court, subject to any right of appeal Court decided to join Cases 36/80 and to a higher national court which 71/80 for the purposes of the oral may exist under national law procedure and judgment. against the exercise or non-exercise

IRISH CREAMERY MILK SUPPLIERS ASSOCIATION v IRELAND

The Commission takes the view that in the absence of exceptional circumstances, (ii) the preliminary ruling, while for example because the legal situation not sufficient per se to enable has yet to be defined or because of the artificial character of the national judgment to be given, is proceedings, the exercise on the part of necessary therefor and the the national court of its discretion to balance of convenience (includ- refer a matter to the Court of Justice ing the desirability of avoiding is not to be questioned in these more than one reference in the proceedings. same case) requires that the preliminary ruling be obtained before the determination of the matter or matters (whether of fact or of national law) which, B — Second question in conjunction with the pre- liminary ruling, will enable judgment to be given." (a) After an analysis in depth of the case-law of the Court of Justice and of the price mechanism in the four sectors, the plaintiffs in the main action in Case The defendants emphasize that they do 36/80 claim that the imposition of the not wish at this stage to bring about a duty infringes in the first place Articles withdrawal or a postponement of the 38 to 46 of the Treaty and the above- reference for a preliminary ruling by the mentioned Council regulations because it Court of Justice on the second question, constitutes an unlawful interference with but that they consider that, if the Court the common organizations of the market of Justice were to answer the first for the four products in question. Once question in the manner suggested above, rules have been adopted in a given sector it would give national courts in general Member States are under an obligation valuable guidance in the practical to refrain from taking any measure operation of Article 177 of the Treaty. which might undermine or create

exceptions to it. According to the mean that such a duty will never be plaintiffs, the duty has altered the reintroduced at some future time for a machinery for the formation of prices by longer or shorter period or at a higher lowering the upper limit represented by rate than 2 % , which would have severe the target or guide price, together with consequences for the agricultural the lower limit represented by the community. intervention price and, for sugar beet, the minimum price. If the market price for the products in question were equal They suggest that the answer to the to the target price producers would have second question should be as follows: received that price less 2 % and, in certain cases, that is to say when the intervention price came into operation, the duty would have exposed producers " 1 . In sectors covered by a common to the risk of obtaining less than that organization of the market, and price, contrary to the intention of the especially when this organization is Council. Like target or guide prices based on a common price system, intervention and threshold prices and Member States can no longer take export refunds or levies are linked one to unilateral action affecting the another and as prices for derived machinery of price formation as products depend on the prices of the established under the common basic product, whilst the minimum price organizations; for sugar beet depends on the intervention price for white sugar, the charge adversely affected price formation 2. A national levy, such as the one in in general and was of such a nature as to issue, which by levying an amount of affect the operation of the common 2 % on cereals, cattle, milk and organization of the market, namely the sugar beet at the production and free movement of the products in export stages has the effect of question and the availability of supplies modifying price formation as as well as the standard of living of agri- provided for within the framework cultural producers. of the common organization of the markets referred to, is incompatible The duty thus constitutes an infringe- with Regulation N o 2727/75 on the ment of Articles 9, 11, 12 and 16 of the common organization of the market Treaty as, in its effects, it has the nature in cereals, with Regulation N o not of an internal charge but of a 805/68 on the common organization customs duty on exports or a charge of the market in cattle, with Regu- having equivalent effect inasmuch as it lation No 804/68 on the common was not applicable to the whole of agri- organization of the market in milk, cultural production or to all producers and with Regulation N o 3330/74 on and inasmuch as it drew a distinction the common organization of the between processing and storage under- market in sugar; takings on the one hand and exporters on the other. For the same reasons the imposition of the duty was a breach in 3. A national levy, such as the one in addition of the principle of non-dis- issue, discriminates, by the manner crimination set out in Article 40 (3) of of its application, against producers the Treaty. and exporters vis-à-vis persons producing and competing at similar The applicants also emphasize that the levels, by its treatment of similar temporary nature of the duty does not situations dissimilarly and is

therefore incompatible with the and an increase in imports above all second subparagraph of Article 40 from Northern Ireland since cattle (3) of the EEC Treaty." were exempted from the duty if they were slaughtered within the first fortnight following importation. The very fact that the duty was of limited duration prevented the operation of These arguments are supported by the the normal market machinery, just as plaintiffs in Case 71/80 who state in it was favourable to undertakings of addition that the charge is a customs some size inasmuch as they were duty or a measure having equivalent able to choose between keeping the effect. cattle until 31 December 1979 and selling it on the domestic market for fattening or breeding which, in the latter case, would not involve the (b) As regards the export of cattle the need to pay the duty. plaintiffs in Case 36/80 support the arguments of one of the plaintiffs in the main action in Case 71/80, namely that (2) The Revenue Commissioners, in by reason of the particular situation on collecting the amount of the duty, the market the duty constituted a used the machinery laid down for restriction on the freedom of movement the payment of export levies and of goods and caused a distortion of the thus recognized the true nature of market. Maintaining that the effects of the duty. the duty were those of a charge having an effect equivalent to a customs duty on exports or, in the alternative, a measure equivalent to a quantitative restriction on exports, this plaintiff, who is himself an (c) The defendants in the main action exporter of cattle, describes the actual emphasize in their observations the effects of the duty on the export of cattle object of the duty. It was an internal tax on the hoof as follows : on national production borne by the agricultural producers themselves. It affected neither the formation or stability of prices nor the availability of supplies or agricultural productivity. The (1) Since the imposition of the duty no Community regulations were not seller of cattle has been willing to sell intended to ensure for producers a to exporters if the amount of the certain net income for their product and duty was deducted from the price, the imposition of the duty did not which has had the effect of require that the products in question confronting exporters with the alter- should be sold at prices below native either of paying the duty intervention prices. themselves or passing it on to their purchasers. Exporters have made their purchases in competition with purchasers on the domestic market. With regard to the arguments put In the case of sales within the forward by the cattle exporter in Case country the duty was imposed only 71/80, the defendants in the main action on sales of cattle intended for contend in particular that the imposition slaughter and was due only at the of the duty brought about a reduction in moment when slaughter took place. the prices obtained by Irish producers The result was a reduction in exports either in sales intended for slaughter or

According to the Commission what is at In conclusion the defendants submit that issue here is not a customs duty on the Court should declare in answer to imports or a measure having equivalent the second question that a national tax effect because the charge does not apply such as that for which Statutory In- to imported produce apart from live struments Nos 152, 153, 160, 250 and bovine animals which have been in 266 of 1979 provide is not contrary to Ireland for more than 14 days. The the Treaty establishing the European Commission takes the view that the only Community or to any of the Council function of the provision regarding regulations made thereunder. imported cattle is to determine which animals belong to the Irish herd and were therefore subject to the duty if subsequently sent for slaughter. More- over, the duty was levied at the time of the delivery of the live animal to the (d) The Commission remarks that slaughterhouse and not at the time of or Member States are not deprived of their by reason of the import. powers to impose internal taxes, whether direct or indirect. Their Community obligations, however, do imply that the exercise of such powers is subject to various limits and constraints. In the first Nor is the duty a customs duty on place, the Treaty prohibits Member exports since it is applied to all the States from imposing on products from products concerned, both those intended other Member States discriminatory for home consumption and those internal taxes or from repaying internal intended for export. taxes in such a way as to amount to a subsidy on exports. Moreover, an internal tax may be prohibited in so far as it constitutes a charge having an effect equivalent to a customs duty, for As to the relationship between the duty example where it serves exclusively to and the common agricultural policy the finance activities which specifically Commission takes the view that in the benefit domestic products or where it is absence of express prohibitions in the imposed on sales for export at a higher basic regulations or appropriate harmon- rate than on sales within the country. ization there is no legal basis to prevent Finally it is not possible to exclude the Member States from imposing duties on possibility that an internal tax may be agricultural products even if they are prohibited as being, on a detailed covered by a common organization of analysis, incompatible with the common the market. Nevertheless it is possible agricultural policy, for example where that an internal tax like that introduced

(3) The duty in question does not in fact interfere with the formation of prices The Advocate General delivered his since it does not restrict production opinion on 17 December 1980. or the right to sell freely on to the market. Nor does it amount to a price freeze or render it impossible for the producer to obtain the price IV — R e q u e s t by t h e G o v e r n - intended by the common organi- zation of the market and it does not m e n t of I r e l a n d t h a t t h e have the object or effect of forcing o r a l p r o c e d u r e be r e o p e n e d down prices or of limiting the effects of an alteration in the level of Community prices since it is in 1. In a letter of 23 January 1981 lodged principle borne by the producer who at the Court Registry on 28 January the

JUDGMENT OF 10. 3. 1981 — JOINED CASES 36 AND 71/80

2 According to the case-files the duty in question was imposed from 1 May to 31 December 1979 on fresh milk and live bovine animals, and from 1 August to 31 December 1979 on certain cereals, namely wheat, oats and barley, as

IRISH CREAMERY MILK SUPPLIERS ASSOCIATION v IRELAND

well as on sugar beet. Subject to certain exceptions, mainly of a social nature, the duty was applicable to such products at the time of delivery for processing, storage or export. It did not apply to imported products except for imported bovine animals which had been in Ireland for more than 14 days, which were regarded as Irish cattle. The duty, paid to the Revenue Commissioners, was payable either by the exporter or by the processing or storage undertaking. As it was intended to be borne by producers, the government orders which introduced the duty provided that exporters and undertakings were entitled to recover the amount of the duty from the producers.

3 Two associations of Irish agricultural producers, together with a number of processing undertakings and a cattle exporter, brought actions against the Government of Ireland before the High Court for a declaration that the duty was incompatible with Community law. Considering that the principal issue in the actions concerned the interpretation of Community provisions, the national court decided to refer a question to the Court of Justice for a pre- liminary ruling without first examining the parties' differences on matters of fact, in particular as regards the way in which the duty operated and its effects. As the Government of Ireland argued that a reference to the Court was premature at that stage in the procedure, the High Court included in its orders of reference to the Court an initial question concerning the interpret- ation of Article 177 of the Treaty.

7 However, those considerations do not in any way restrict the discretion of the national court, which alone has a direct knowledge of the facts of the case and of the arguments of the parties, which will have to take responsibility for giving judgment in the case and which is therefore in the best position to appreciate at what stage in the proceedings it requires a pre- liminary ruling from the Court of Justice.

8 Hence it is clear that the national court's decision when to make a reference under Article 177 must be dictated by considerations of procedural organ- ization and efficiency to be weighed by that court.

9 The reply to the first question which has been raised should therefore be that under Article 177 the decision at what stage in proceedings before it a national court should refer a question to the Court of Justice for a pre- liminary ruling is a matter for the discretion of the national court.

Second question

10 The second question reads as follows :

"Is a national tax, such as that in issue in the present case, contrary to the Treaty establishing the European Economic Community and, in particular, to Articles 9, 11, 12, 16 and 17 or 38 to 46 of the said Treaty, or to any of them, or to Council Regulations Nos 804/68, 805/68, 3330/74 and 2727/75, or to any of them?"

12 In the observations which they submitted to the Court the associations of agricultural producers, the plaintiffs in the main action in Case 36/80, main- tained, first, that the duty constitutes an unlawful interference with the common organization of the markets in question in so far as the latter attempt to guarantee a certain price for producers. If the amount of the duty is to be borne, as intended by the Government of Ireland, by agricultural producers, the latter will receive a net price lower than the price envisaged by the Community authorities when they fixed the target or guide price, the intervention price or the minimum price for the product in question. Such a result would be contrary to one of the objectives of the common agricultural policy which, according to Article 39 (1) (b) of the Treaty, aims to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture.

13 Whilst the parties to the main action express differing views on the precise reasons which led the Government of Ireland to introduce the duty, they agree that it forms part of an incomes policy which is designed to divide up the tax burden between the various sectors of the working population. As the Government of Ireland and the Commission correctly argue, nothing in the common organization of markets is opposed, in principle, to such a national policy. According to Article 39 (2) (c) of the Treaty, in working out the common agricultural policy account shall be taken of "the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole". The common agricultural policy is not intended, therefore, to shield those engaged in agriculture from the effects of a

16 On that point the plaintiffs in the main action in Case 36/80 contend that according to the consistent case-law of the Court even the potential effects of a national measure may render it incompatible with the Treaty. As far as the duty in question is concerned they place special emphasis on its potential effects on the formation of market prices and on market supply. They also support the arguments put forward by the cattle exporter who is the plaintiff in Case 71/80, that such effects have in fact appeared on the market in cattle. Owing to what the plaintiff describes as the special situation of the market in cattle in Ireland, exporters have not been able to pass the duty on to producers. Moreover, a very considerable number of cattle were sold and

IRISH CREAMERY MILK SUPPLIERS ASSOCIATION v IRELAND

slaughtered just prior to the introduction of the duty, whereas' market supplies decreased subsequently, and the result was an increase in imports from Northern Ireland of cattle which were exempt from the duty if sold to a processing undertaking within 14 days of their importation. The abolition of the duty produced the opposite effects. According to the plaintiffs in the . two main actions the duty thus affected the machinery for the formation of market prices, market supply and intra-Community trade, at least in the cattle sector.

17 The duty in question came into force on 1 May 1979 for milk and bovine animals and on 1 August 1979 for the other products subject to it. It was abolished for all products on 31 December of that year. Consideration must therefore be given to the trends which became apparent on the markets in question during the period for which the duty was in force and, if necessary, to the question whether such trends are to be imputed, at least in part, to the effects of the duty disregarding, however, the temporary effects produced immediately before and after the introduction and abolition of the duty in so far as those effects may be considered as the consequence of transactions effected in order to evade the duty.

into account both the interests of Community production as a whole in the relevant sector and those of consumers, and which guarantee market supplies without encouraging over-production. Those aims might be jeopardized by national measures adopted unilaterally, which have an appreciable influence, even if unintentionally, on price levels on the national market at the same stages, or on supplies on that market. In the case of a duty such as the one in this case, the risk of such influence depends not only on its rate and the period for which it is in force, but equally on the situation on the market in question and, as regards supplies, above all on how general its effect is, that is to say, the number of agricultural products to which it applies. A short- term duty on a large number of products may be neutral in the sense that it does not alter the structure of agricultural production. On the other hand, if the duty encourages producers to replace some of the production of the goods subject to the duty by production of other goods not subject thereto, the duty is liable to create distortion on a number of markets.

21 The question which has been referred to the Court also concerns the provisions prohibiting charges having an effect equivalent to customs duties. The doubts which have been expressed by the national court in that part of the question are due to the fact that the duty, although not applied to products by reason of their importation, was charged on the occasion of their delivery, not merely for processing or storage, but also for exportation. According to the files on the cases that problem arises in practice solely in the case of animals. It is therefore from that aspect that the Court is replying to that part of the second question.

— Such incompatibility would, however, exist if and in so far as the duty had the effect of impeding the proper funtioning of the machinery established as part of the relevant common organizations for the formation of common prices and to regulate market supplies.

— It is for the national court to decide whether, and if so to what extent, the duty which it is called upon to consider has in fact had such effects.

— A duty such as that described above, even if it is applied to bovine animals exported on the hoof when they are delivered for export, does not fall within the prohibition of charges having an effect equivalent to customs duties on exports if it is also applied, systematically and in accordance with the same criteria, to bovine animals which are not being exported, at the time of their delivery for slaughter.

JUDGMENT OF 10. 3. 1981 — JOINED CASES 36 AND 71/80

Costs

25 The costs incurred by the Commission of the European Communities, which has 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.

IRISH CREAMERY MILK SUPPLIERS ASSOCIATION v IRELAND

4. It is for the national court to decide whether, and if so to what extent, the duty which it is called upon to consider has in fact had such effects.

5. A duty such as that described above, even if it is applied to bovine animals exported on the hoof when they are delivered for export, does not fall within the prohibition of charges having an effect equivalent to customs duties on exports if it is also applied, systematically and in accordance with the same criteria, to bovine animals which are not being exported, at the time of their delivery for slaughter.

Pescatore Mackenzie Stuart Koopmans

O'Keeffe Bosco Touffait Due

Delivered in open court in Luxembourg on 10 March 1981.