C-203/80

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

Advocate General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts of the case, the course of I — Facts and written procedure the procedure and the observations submitted under Article 20 of the 1. The accused in the main pro- Protocol on the Statute of the Court of ceedings, Mr Casati, an Italian national Justice of the EEC may be summarized residing in the Federal Republic of as follows: Germany, was arraigned before the

Tribunale, Bolzano, on a charge of a term of imprisonment of one to six having attempted to export from Italy, years and a fine of between two and four without the authorization prescribed by times the value involved (Article 1 of Italian exchange control legislation, the Decreto Legge [Decree-Law] No 31 of 4 sums of LIT 650 000 and DM 24 000 March 1976, Gazzetta Ufficiale No 60 which were found in his possession at the of 5 March 1976 enacted, with frontier between Italy and Austria. Mr amendments, as Law No 159 of 30 April Casati sought to justify himself by and successively amended, most recently explaining before the national court that by Article 2 of Law No 863 of 23 he had intended to purchase during his December 1976, Gazzetta Ufficiale No holidays in Italy certain equipment 348 of 31 December 1976). Before 1976, "intended for his business in Germany". such infringements were classified as To that end, he had imported the sum of administrative infringements and not as DM 30 000 without declaring it. Since offences and were punsihable only by the factory at which he wished to buy administrative penalties consisting of a the equipment was closed, he was fine of up to five times the value of the obliged to take most of the money back effects exported (Article 15 of Decreto with him. Legge No 476 of 6 June 1956, Gazzetta Ufficiale No 137 of 6 June 1956 which refers back to the Decree of the Minister 2. Article 13 of Decreto Ministeriale for Finance referred to in Regio Decreto [Ministerial Decree] of 7 August 1978 Legge [Royal Decree-Law] No 1928 of 5 (Gazzetto Ufficiale No 220 of 8 August December 1938, Gazzetta Ufficiale No 1978) provides that the exportation by 297 of 29 December 1938, enacted as non-residents, inter alia, of foreign bank Law No 739 of 2 June 1939). notes is permitted up to the amount pre- viously imported or legally acquired in Italy, which must be proved in 4. Article 67 (1) of the EEC Treaty lays accordance with the procedures laid down: down by the Minister for Foreign Trade. "During the transitional period and to Those procedures were laid down in the extent necessary to ensure the proper particular by Circular No A/300 of 3 functioning of the Common Market, May 1974 of the Ufficio Italiano dei Member States shall progressively abolish Cambi [Italian Foreign Exchange between themselves all restrictions on Department], Article 11 of which the movement of capital belonging provides that non-residents may export to persons resident in Member States the amounts which they declared on and any discrimination based on the "Form V 2" on entry into Italy. nationality or on the place of residence of the parties or on the place where such capital is invested." 3. The exportation, without prior auth- orization, of currency, shares or bonds, letters of credit or other means of According to Article 69 of the EEC payment is punishable by administrative Treaty: penalties if the value involved is less than LIT 500 000, by a fine of between one- half and one-third of the value of the "The Council shall, on a proposal from effects exported if their value is between the Commission, which for this purpose LIT 500 000 and LIT 5 000 000 and, if shall consult the Monetary Committee the value is in excess of that amount, by provided for in Article 105, issue the

The Council has adopted two directives Finally, in the case of the transaction to give effect to Article 67 of the EEC referred to in List D, namely highly Treaty. The first was adopted on 11 May mobile capital movements such as, for 1960 (Official Journal, English Special example, the placing of funds on current Edition 1959-1962, p. 49) and the accounts and deposit accounts with second, which adds to and amends the credit institutions abroad, investments in first, on 18 December 1962 (Official Treasury bills and the importation and Journal, English Special Edition 1963- exportation of sums of money, Article 7 1964, p. 5). of the directive merely requires the Member States to inform the The two directives contain, in Annex I, a Commission of any amendment of the complete list of the capital movements provisions governing such movements. covered by Article 67. There is a detailed description of those movements in Annex The relevant safeguard clauses in the II. Annex I divides capital movements Treaty are contained in Article 73 into four categories, referred to as Lists (movements of capital leading to disturb- A, B, C and D. ances in the functioning of the capital market), Article 108 (difficulties or According to Article 1 of the first serious threat of difficulties as regards directive, the Member States are to grant the balance of payments) and Article 109 all foreign exchange authorizations (sudden crisis in the balance of required for the performance of the payments). Several Member States have transactions set out in List A, for resorted to those clauses. example, in respect of direct investments, investments in real estate and personal Under the Council Directive of 21 capital movements such as inheritances March 1972 on regulating international etc. capital flows and neutralizing their undesirable effects on domestic liquidity Article 2 of the directive provides that (72/156/EEC, Official Journal, English the Member States are to grant general Special Edition, 1972 (I), p. 296), the permission for the transactions referred Member States may, in addition, take the to in List B, namely operations in steps necessary for effective regulation of securities dealt in on a stock exchange. international capital flows and for the

neutralization of the undesirable effects still" requirements set out in Articles produced by those flows on domestic 71 and 106 (3) domestic legislation liquidity. which increases penalties prescribed by other, previous legislation as, for 5. By order of 6 Octobre 1980, the example, when infringements which Tribunale, Bolzano, referred the follow- were previously punishable by ing questions to the Court of Justice for administrative penalties are made a preliminary ruling: punishable by imprisonment and fines, thereby rendering them (1) After the end of the transitional criminal offences? period must the restrictions on the movement of capital referred to in Article 67 of the EEC Treaty be (7) Does the principle in accordance deemed to be abolished regardless of with which dissimilar situations may the provisions of Article 69 thereof? not be treated in the same way (which is encompassed by the (2) Does the fact that the Italian prohibition of discrimination referred Government omitted the consultative to inter alia in Article 7 of the procedure laid down in Article 73 of Treaty) permit the same penalties the Treaty in relation to Decreto imposed by a Member State in Legge No 31 of 4 March 1976, respect of the unlawful exportation which was enacted as Law No 159 of currency or of failure to comply of 30 April 1976, constitute an with the formalities in relation to infringement of that Treaty? currency to be applied without distinction both to residents of that (3) Does any principle or provision of State and to non-residents? the Treaty guarantee non-residents the right to re-export currency pre- viously imported and not used, even (8) After the end of the transitional if it has been converted into Italian period is it possible to consider lire? compatible with Articles 67, 71 and 106 (3) of the Treaty domestic (4) If so, may any failure to comply with provisions which prescribe specified the formalities prescribed by the formalities in connection with the currency legislation of the State from exercise of the right, which is which the sums are subsequently re- however recognized, to re-export exported in the above-mentioned previously imported capital, requir- circumstances be punished by ing the fulfilment of such formalities penalties including the confiscation as sole proof of prior importation, of the currency, a fine of up to five thereby creating in substance a times the amount of that currency penalty under criminal law in respect and deprivation of personal liberty of non-fulfilment thereof? for a period of up to five years (subject to heavier penalties where a number of persons are involved)? 6. The order making the reference to the Court was received at the Court (5) If the preceding question is answered Registry on 16 October 1980. in the affirmative, may any failure to comply with the above-mentioned In accordance with Article 20 of the formalities carry penalties on the Protocol on the Statute of the Court same scale as those imposed for the of Justice, written observations were unlawful exportation of currency? submitted by: (6) After the end of the transitional period is it possible to consider as — G. Casati, represented by H. being compatible with the "stand- Rungger, of the Bolzano Bar, and by

— The Government of the Federal The Danish, Irish, French, Italian and Republic of Germany, represented by United Kingdom Governments contend M. Seidel, adviser to the Federal that Article 67 of the EEC Treaty is not Ministry for Economic Affairs, acting directly applicable. That article requires as Agent; the Member States to abolish all restrictions on movements of capital only — The Italian Government represented "to the extent necessary to ensure the by A. Squillante, Head of the proper functioning of the Common Department for Diplomatic Legal Market". The imprecise nature of that Affairs, Treaties and Legislative reservation precludes the application of Matters, acting as Agent, assisted by the Court's case-law on direct applica- M. Conti, State Advocate; bility inasmuch as that case-law relates only to the provisions of the Treaty which contain a precise obligation as to — The Government of the United the result to be achieved. Kingdom, represented by R. D. Munrow, Treasury Solicitor, acting Since the assessment of the degree of as Agent; liberalization "necessary to ensure the proper functioning of the Common Market" is political in nature, and in — The Danish Government, represented view of the fact that the adaptation of by its Legal Adviser, L. Mikaelsen of the system governing capital movements the Ministry for Foreign Affairs, acting as Agent; to such degree of liberalization constitutes an instrument of continuous intervention, the necessary assessment — The Irish Government, represented cannot be carried out by the national by L. Dockery, Chief State Solicitor, courts but solely by the Council, by the acting as Agent; adoption of directives pursuant to Article 69 of the EEC Treaty. The provisions of the Treaty relating to capital movements — The Commission, represented by its and to the balance of payments reflect a Legal Adviser, A. Abate, acting as carefully balanced system of powers Agent. divided between the Commission, the Council and the Member States. 7. On hearing the report of the Judge- That interpretation is also supported by Rapporteur and the views of the the wording of the so-called "standstill" Advocate General, the Court decided to provision set out in the first paragraph of open the oral procedure without any Article 71 of the EEC Treaty according preparatory inquiry. However, the Court to which "the Member States shall requested the parties to the proceedings endeavour to avoid introducing within

The adoption of rules to govern capital The French Government adds that Article movements is moreover closely linked to "VIII of the Articles of Agreement of the other measures of economic policy, such International Monetary Fund restricts as those relating to monetary and the capital movements which may be investment policy, which are within the liberalized to current transactions. More scope of the Member State's powers. To positively, Article VI, Section 3, of those enable those other measures to operate Articles of Agreement authorizes the properly, it is essential that the Member members to exercise control over capital States should be able to restrict certain movements. Section 1 of that article even capital movements. permits the International Monetary Fund to bar one of its members from access to its loans where they are intended to The close relationship between the "meet a large or sustained outflow of adoption of rules to govern capital capital" if the member fails to exercise movements and the adoption of rules to appropriate controls. govern the balance of payments is also evidenced by the second paragraph of Article 71 which lays down that the The Commission recalls that the co-ordi- Member States "declare their readiness nation of national economic policies to go beyond the degree of liberalization provided for by Articles 6, 104, 105 and of capital movements provided for in the 145 of the EEC Treaty has not yet been preceding articles in so far as their achieved. In view of existing links economic situation, in particular the between capital movements and the situation of their balance of payments, so aforesaid policies, the Commission does permits". not consider that Article 67 satisfies the requirements for direct applicability. In the circumstances it takes the view that The Danish Government recalls that the even after the end of the transitional terms of Articles 52 and 59 of the EEC period, the Member States are free to Treaty, as analysed in the case-law of maintain restrictions on the movements the Court, define the procedures for of capital included in List D and some of giving effect to the obligation to those in List C, both annexed to the First liberalize capital movements during the Council Directive adopted pursuant to transitional period. On the other hand, Article 69 of the EEC Treaty, without the limits referred to in Article 67 define being obliged to resort to the safeguard the extent to which liberalization must be clauses. introduced. The Government of the Federal Republic The Danish Government also observes of Germany emphasizes, to begin with, that in Articles 52 to 66 of the EEC that its observations on the scope of Treaty, the Council is normally called Article 67 of the EEC Treaty concern upon to adopt only directives relating to only exchange restrictions although the a particular sector. As regards capital question raised by the national court also

relates to other restrictions on Treaty is directly applicable even though movements of capital. that article is drafted in terms which are less clear than, for example, the other The Federal Government is of the standstill provisions in the EEC Treaty. opinion that the effect of Article 67 of Article 71 is designed to achieve the the Treaty is to prohibit, as from the end same political objective of integration as of the transitional period, subject to those provisions, namely that of certain exceptions, exchange restrictions preventing the Member States from affecting capital movements and that introducing new restrictions.

liberalized. It is possible to identify those period of fresh restrictions on entry into exceptions with precision which is why national territory, the Court has none the Council included them in List D the less held that Article 48 of the EEC annexed to the directives adopted by it Treaty has direct effect. pursuant to Article 69 of the EEC Treaty. Any substantive peculiarities which may exist in the field of capital movements, The Court has established that the compared with other matters governed prohibitions laid down by the Treaty by the EEC Treaty, may be taken into automatically came into force on the account to the extent required by virtue expiry of the transitional period with the of the safeguard clauses, in particular, result that individuals may rely upon those contained in Articles 73 and 108 them without its being necessary to (3) of the EEC Treaty which were to adopt any directives. remain in force after the expiry of the transitional period. The free movement of capital is subject In that connection, the Federal to the same rules as the other

JUDGMENT OF U. 11. 1981 — CASE 203/80

EEC Treaty, that Article 67 of the EEC Casati is subject to a restriction Treaty is directly applicable. prohibited since the end of the transitional period. Thus, if the Italian State is no longer empowered, as from that date, to impose on non-resident The only difference between the wording nationals certain restrictions on the of Article 67 and that of Articles 52 and importation and re-exportation of the 59 is that Article 67 provides for the same sum of money, equally it is not abolition of restrictions on movements of entitled, after the end of that period by capital only "to the extent necessary to authorizing only the use of Form V2 to ensure the proper functioning of the introduce a restriction limiting evidence Common Market". of such importation. In the latter case, the restriction is more than a mere formality inasmuch as it affects the subjective right of non-residents to It is clear from Article 67, interpreted in import and re-export the same sum of conjunction with Article 69 of the EEC money. Treaty, that the only way to determine precisely the extent to which the abolition of restrictions is considered "necessary to ensure the proper Against that interpretation of Article 67, functioning of the Common Market" is it is impossible to contend that Article 71 by the adoption of Community does not contain a strict standstill directives. In the directives which it had provision on the introduction of new adopted in that connexion, the Council restrictions since Article 71 refers to has made its opinion quite clear as to restrictions in existence on the date of which capital movements are to be the entry into force of the Treaty and it liberalized and which restrictions are to may not be interpreted in such a way as be abolished to ensure "the proper to reduce the scope of the provisions of functioning of the Common Market". Article 67 and of the general principles of the Treaty which took effect at the end of the transitional period.

Article 73 of the EEC Treaty, is financial assets" in List D of the Council inoperative in the present case since it directives on movements of capital. applies only to restrictions on liberalized Those directives do not impose on the capital movements. Member States any express obligations to liberalize the capital movements included Furthermore, the French Government, in List D. whose opinion is shared by the Commission, recalls that Article 73 of the According to the Italian Government, EEC Treaty applies only to "protective there is no Community rule or principle measures" against "movements of dealing with the physical exportation of capital" [which] lead to disturbances in means of payment not intended for the functioning of the capital market in specific purposes. any Member State" and not therefore to an increase of the penalties. The Government of the Federal Republic of Gennany takes the view that the trans- The Government of the Federal Republic portation of currency from one country of Germany observes that individuals may to another is permissible to the extent to not rely upon the obligation relating to which it is regarded as a movement of consultation since it was not laid down capital liberalized under Article 67 of the for their benefit. EEC Treaty.

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Fourth and fifth questioni (proportionality the case of non-residents only illegal of penalties) exportation is punishable. Furthermore, the different cases specified by the aforesaid decreto legge are carefully graduated, precisely in order to ensure The French and Italian Governments that the penalties, which are quite maintain that the question of the reasonable in relation to their objective observance of the principles of Com- characteristics, are proportionate. With munity law does not arise in the case of regard to more serious cases, the movements of capital which have not discretionary powers retained by the been liberalized. In countries which have court are sufficiently wide to enable it to retained exchange control mechanism, take account of the circumstances of penalties .are traditionally as heavy as each individual case and to impose a those imposed in Italy. penalty consonant with the seriousness of each criminal offence.

The French and United Kingdom Governments also refer to Article 5 (1) The Irish Government is of the opinion of the ¡First Council Directive on that the penalties imposed by a Member movements of capital which lays down State for breach of its legislation that: (assuming the legislation itself to be compatible with the Treaty) are a matter for that Member State alone to decide, "The provisions of this directive shall not even in the case of liberalized capital restrict the right of Member States to movements. Only in extraordinary verify the nature and genuineness of circumstances, which are not easy to transactions or transfers, or to take all envisage in practical terms, could the requisite measures to prevent infringe- penalties be subject to review under the ments of their laws and regulations". Treaty.

may, under the Council directives on measures the necessary publicity, for capital movements, impose an obligation example by failing to publish them in its to complete forms and other declarations official gazette, or where it fails to enabling them to supervise the volume of recognize fully the right of a non- capital movements and to monitor the resident guilty of an omission to provide lawfulness of transactions. Thus, in the evidence. event of legislation introducing such controls being infringed, the Member States are also entitled to impose suitable The Commission goes on to say that penalties. there is a conflict between the above- mentioned principles and the excessively heavy penalties provided for by Articles 1 The Government of the Federal Republic and 2 of Italian Laws Nos 159 and 863 of Germany observes, in connection with of 1976.

of the offence. The Court has applied view of the fact that in Italy, again that principle in a consistent line of according to the aforesaid order decisions. “evidence of lawful prior importation of currency is restricted by law to cases where there has been a failure to comply The Federal Government observes, in with administrative formalities”. Finally, connection with the fifth question, that it the Commission wonders whether, in the is generally indavisable to have recourse present case, the principle of the right of to the same penalties to punish breaches defence enshrined in Article 6 (3) (d) of of both procedural and substantive the European Convention on Human

liberalized. Where national law provides for administrative controls in respect of According to Mr Casati, the principle of certain capital movements, the penalties proportionality must be observed by introduced to ensure observance of the national law where, as in the present rules in the matter should be in keeping case, that law is capable of interfering with the principle of proportionality as with Community law in such a way as to laid down in the case-law of the Court. exert an adverse influence on the That principle is applicable where a achievement of the objectives and on the Member State omits to give .control functioning of the Common Market.

The French and Italian Governments Applying his first interpretation of the observe, referring back to their answers principle of proportionality to the to the first question, that Article 7 f of present case, Mr Casati observes that the the EEC Traty does not preclude the objectives of the contested measure introduction of new restrictions on adopted by Italy are to obtain certian capital movements even after the end of information and to facilitate its retrieval the transitional period since that article both because such information concerns provides that "the Member States shall in general the balance of payments and, endeavour to avoid introducing . . . any more particularly, because it makes it new exchange restrictions ...". possible to ensure that an individual who entered Italian territory with a specific sum of money, does not leave the country with a greater sum. Those In their opinion, which is shared by the objectives are not contrary to Danish, German, Irish and United Community law but the severity of the Kingdom Governments and by the penalties should be proportionate to the Commission, Articles 71 and 106 of the objectives pursued. EEC Treaty call on the Member States not to strengthen existing exchange rules and restrictions, whereas the national court refers only to increasing the Applying his second interpretation of the penalties prescribed by the Italian rules, principle of proportionality, Mr Casati the substance of which remains observes that a resident who leaves Italy, unchanged. without authorization, in possession of a certain amount of money belonging to that State, is punishable in the same manner as a non-resident who leaves Italy with the sum previously imported Mr Casati emphasizes that even though by him without completing Form V 2. they may not be governed by express According to Mr Casati, the treatment standstill provisions, any restrictions on reserved to the latter is not proportionate the free movement of goods, services or to that reserved to the former. capital, or any strengthening of existing measures are prohibited on the ground that they are incompatible with the objectives of the EEC Treaty and with Mr Casati goes on to compare the expor- the process of progressive integration set tation of capital to Member States with in motion by it. That opinion is also

Italy observes, moreover, that the sub- stantive rules imposing specific obli- gations or responsibilities on residents and non-residents may be different but In the opinion of the Government of the that where a breach occurs involving the Federal Republic of Germany, the exportation of currency which has not principle of equality of treatment creates been authorized in accordance with the in favour of individuals a right to specific prescribed procedures, discrimination in treatment according to whether or not relation to penalties cannot be justified. they reside in a State in view of the fact that in addition to residence abroad other circumstances make special treatment necessary. Mr Casati considers the problem raised by the seventh question from the point of view of the principle of proportionality. In his opinion, it is inadmissible for a non-resident to be subject to the same According to Ireland, France and Italy, penalties as a resident on the grounds the principle of equality of treatment is that a non-resident has an opportunity to inapplicable in the present case. France appreciate the need to complete forms and Italy observe in this regard that such as From V 2 only in exceptional Italian exchange control legislation cases and that a large proportion of the classifies persons according to their place Italian provisions in question do not of residence and not according to their require the same publicity as laws since nationality. they constitute administrative measures.

JUDGMENT OF 11. U. 1981 — CASE 203/80

CASATI

Decision

1 By order of 6 October 1980, received at the Court Registry on 16 October 1980, the Tribunale [District Court], Bolzano, referred to the Court for a preliminary ruling, pursuant to Article 177 of the EEC Treaty, several questions on the interpretation of Articles 67, 69, 71, 73 and 106 of the EEC Treaty and on the existence of various principles of Community law, to enable it to adjudicate on the compatibility of certain provisions of Italian exchange control legislation with those articles and principles.

2 The questions have been raised in connection with criminal proceedings brought against an Italian national, residing in the Federal Republic of Germany, who is charged with attempting to export from Italy, without the authorization prescribed by Italian exchange control legislation, inter alia, the sum of 24 000 DM, which was found in his possession on 16 July 1979 at the frontier between Italy and Austria. The accused in the main proceedings stated that he had previously imported that sum of money into Italy, without declaring it, with a view to purchasing equipment which he needed for his business in Germany and was obliged to re-export the currency because the factory at which he intended to buy the equipment was closed for the holidays.

3 Article 14 of the Italian Decreto Ministeriale [Ministerial Decree] of 7 August 1978 (Gazzetta Ufficiale No 220 of 8 August 1978) provides that foreign bank notes may be freely imported. Article 13 of the same decreto ministeriale provides that the exportation of foreign banknotes by a non- resident is permitted up to the amount previously imported or the amount lawfully acquired in Italy, which must be proved in accordance with the procedures laid down by the Minister for Foreign Trade. Those procedures were laid down in particular by Circular No A/300 of 3 May 1974 of the Ufficio Italiano dei Cambi [Italian Foreign Exchange Department], Article 11 of which provides that non-residents may export the amount of money which they declared on Form V 2 on entry into Italy.

(2) Does the fact that the Italian Government omitted the consultative procedure laid down in Article 73 of the Treaty in relation to Decreto Legge No 31 of 4 March 1976, which was enacted as Law No 159 of 30 April 1976, constitute an infringement of that Treaty?

(3) Does any principle or provision of the Treaty guarantee nonresidents the right to re-export currency previously imported and not used, even if it has been converted into Italian lire?

(4) If so, may any failure to comply with the formalities prescribed by the currency legislation of the State from which the sums are subsequently re-exported in the above-mentioned circumstances be punished by penalties including confiscation of the currency, a fine of up to five times the amount of that currency and deprivation of personal liberty for a period of up to five years (subject to heavier penalties where a number of persons are involved)?

(5) If the preceding question is answered in the affirmative, may any failure to comply with the above-mentioned formalities carry penalties on the same scale as those imposed for the unlawful exportation of currency?

CASATI

(6) After the end of the transitional period is it possible to consider as being compatible with the "standstill" requirements set out in Articles 71 and 106 (3) domestic legislation which increases penalties prescribed by other, previous legislation, as, for example, when infringements which were previously punishable by administrative penalties are made punishable by imprisonment and fines, thereby rendering them criminal offences?

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in keeping with the list, set out in Article 3 of the EEC Treaty, of the methods provided for the attainment of the Community's objectives. Those methods include, according to Article 3 (c) "the abolition, as between Member States, of obstacles to freedom of movement for persons, services and capital". Thus the free movement of capital constitutes, alongside that of persons and services, one of the fundamental freedoms of the Community. Furthermore, freedom to move certain types of capital is, in practice, a pre- condition for the effective exercise of other freedoms guaranteed by the Treaty, in particular the right of establishment.

9 However, capital movements are also closely connected with the economic and monetary policy of the Member States. At present, it cannot be denied that complete freedom of movement of capital may undermine the economic policy of one of the Member States or create an imbalance in its balance of payments, thereby impairing the proper functionimg of the Common Market.

10 For those reasons, Article 67 (1) differs from the provisions on the free movement of goods, persons and services in the sense that there is an obligation to liberalize capital movements only "to the extent necessary to ensure the proper functioning of the Common Market". The scope of that restriction, which remained in force after the expiry of the transitional period, varies in time and depends on an assessment of the requirements of the Common Market and on an appraisal of both the advantages and risks which liberalization might entail for the latter, having regard to the stage it has reached and, in particular, to the level of integration attained in matters in respect of which capital movements are particularly significant.

13 The answer to the first question should therefore be that Article 67 (1) must be interpreted as meaning that restrictions on the exportation of bank notes may not be regarded as abolished as from the expiry of the transitional period, irrespective of the provisions of Article 69.

1 4 The second question put by the national court concerns the safeguard clause contained in Article 73. The purpose of that article is to enable a Member State to introduce, subject to certain conditions and in accordance with certain procedures, restrictions which that State would otherwise be obliged to refrain from imposing under the general rules governing movements of capital. It is inapplicable in the case of restrictions the introduction of which is already permitted under those rules.

15 In view of the answer to the first question, it is sufficient to state in reply to the second question that failure to have recourse to the procedures provided for by Article 73 in regard to restrictions imposed on capital movements which the Member State concerned is not obliged to liberalize under the rules of Community law does not constitute an infringement of the EEC Treaty.

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16 In its third question, the national court asks essentially whether a principle of Community law or any provision of the Treaty guarantees the right of non- residents to re-export currency previously imported and not used.

20 Capital movements account for only a part of the transactions involving transfers of currency. With good reason, therefore, the national court draws attention to Article 106 which is designed to ensure that the necessary transfers of currency may be made both for the liberalization of capital movements and for the free movement of goods, services and persons and which, moreover, does not contain the same restrictions as those expressly provided for by the provisions already considered.

CASATI

21 More specifically, in its sixth question, the national court refers to the standstill obligation contained in the first sub-paragraph of Article 106 (3). According to that provision, the Member States undertake not to introduce between themselves any new restrictions on transfers connected with the so- called "invisible" transactions listed in Annex III to the Treaty.

22 In that regard, it is necessary to recall that the defendant in the main proceedings has stated that he intended to re-export a sum of money pre- viously imported with a view to making purchases of a commercial nature, not an amount corresponding to a transaction actually listed in Annex III.

23 The answer to the questions relating to Article 106 (3) should therefore be that the latter provision is inapplicable to the re-exportation of a sum of money previously imported with a view to making purchases of a commercial nature if such purchases have not in fact been effected.

Possible limits set by Community law to national rules of criminal law and procedure

26 In its fourth, fifth and sixth questions, the national court asks in substance whether penalties of the kind provided for by Italian exchange control legislation are incompatible with the principles of proportionality and non- discrimination which form part of Community law. The eighth question raises the problem of the freedom to provide evidence in criminal proceedings.

27 In principle, criminal legislation and the rules of criminal procedure are matters for which the Member States are still responsible. However, it is clear from a consistent line of cases decided by the Court, that Community law also sets certain limits in that area as regards the control measures which it permits the Member States to maintain in connection with the free movement of goods and persons. The administrative measures or penalties must not go beyond what is strictly necessary, the control procedures must not be conceived in such a way as to restrict the freedom required by the Treaty and they must not be accompanied by a penalty which is so dispro- portionate to the gravity of the infringement that it becomes an obstacle to the exercise of that freedom.

28 Certain situations which are comparable to those considered in that case-law may arise, in connection with capital movements and transfers of currency, in relation to control measures maintained by the Member States for example under Article 5 of the First Directive for the implementation of Article 67 of the Treaty, but only in connection with transactions liberalized under Community law. The limits set by that case-law are designed to prevent the freedoms guaranteed by Community law from being eroded by the control measures which Community law permits the Member States to maintain. That is not the case in these proceedings. It is apparent from the replies to the other questions referred to the Court for a preliminary ruling that the transaction in question has not been liberalized either by the provisions of

T H E COURT

in answer to the questions referred to it by the Tribunale, Bolzano, by order of 6 October 1980, hereby rules:

1. Article 67 (1) must be interpreted as meaning that restrictions on the exportation of bank notes may not be regarded as abolished as from the expiry of the transitional period, irrespective of the provisions of Article 69.

2. Failure to have recourse to the procedures provided for by Article 73 in regard to restrictions imposed on capital movements which the Member State concerned is not obliged to liberalize under the rules of Community law does not constitute an infringement of the EEC Treaty.

3. The first paragraph of Article 71 does not impose on the Member States an unconditional obligation capable of being relied upon by individuals.

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A. Van Houtte J. Mertens de Wilmars Registrar President