C-52/81

APPLICATION for damages under the second paragraph of Article 215 of the EEC Treaty,

THE COURT (First Chamber)

composed of: A. O'Keeffe, President of Chamber, G. Bosco and T. Koopmans, Judges,

Advocate General: Sir Gordon Slynn Registrar: P. Heim

gives the following

FAUST v COMMISSION

I — Facts and written procedure expressly excluded from that reference system imports from non-member countries which stated their willingness The Offene Handelsgesellschaft in Firma to give certain guarantees, in particular Werner Faust [commercial partnership, that they would observe a certain trading as Werner Faust] (hereinafter minimum level of prices and that they referred to as "Faust") is an undertaking would prevent any deflection of trade. which carries on business in the Federal Republic of Germany as an import Towards the end of 1976, the agency on cif terms. A substantial part of Commission, considering that the its business consists in importing pressure from imports had eased, preserved mushrooms from Taiwan for adopted Regulation (EEC) No 3096/76 the account of principals. of 17 December 1976 (Official Journal 1976, L 348, p. 26) relaxing those protective measures. Preserved mushrooms come within the common organization of the market in products processed from fruit and On 14 March 1977 the Council adopted vegetables established by Regulation Regulation (EEC) No 516/77 which (EEC) No 865/68 of the Council codified and supplemented the basic (Official Journal, English Special Edition provisions on the common organization 1968 (I), p. 225). That regulation auth­ of the market in products processed from orized the Commission to adopt, inter fruit and vegetables (Official Journal alia, protective measures where imports 1977, L 73, p. 1). Article 14 (2) of that of products from non-member countries regulation authorizes the Commission to threatened to disrupt the Community adopt, inter alia, the necessary measures market. in a case where the market is threatened by serious disturbances. The detailed rules for the application of those Such measures were adopted for the first measures were adopted by Council time in 1974 by means of Regulation No Regulation (EEC) No 521/77 of 14 2107/74 of the Commission of 8 August March 1977 (Official Journal 1977, L 1974 (Official Journal, 1974, L 218, p. 73, p. 28) Article 2 whereof enumerates 54) which made all imports of preserved the protective measures applicable with mushrooms from non-member countries regard to imports from non-member subject to the submission of an import countries, providing in particular that licence. That licence was issued to the those measures may "be restricted to party applying therefor for a quantity products imported from or originating in which was calcul.ued by reference to the particular countries, to exports to quantity ot products which th.it part v particular countries or to particular liad imported in the corresponding qualities or types of presentation". month of the preceding v ear or In Article 3 of that regulation provides that reference to the .ner.ige qu.intm its application is to respect the imported during the three preceding Community's obligations under inter­ years. Article 1 (4) of tliat regulation national agreements.

Pursuant to Regulation No 516/77, the Similarly, in 1980, the protective Commission adopted on 25 May 1978, measures remained applicable to all non- by means of Regulation (EEC) No member countries with the exception of 1102/78 (Official Journal 1978, L 139, p. the People's Republic of China and 26), fresh protective measures consisting South Korea, until 4 March 1980, when, in the immediate suspension of the issue by the adoption of Regulation (EEC) No of import licences for mushrooms. Under 547/80 of that date (Official Journal the terms of Article 2 (1) of that regu 1980, L 60, p. 16) the Commission lation the import ban was not to apply to relaxed those protective measures and, in "preserved mushrooms originating in respect of countries which in 1977 and third countries which the Commission 1978 had exported small tonnages to the accepts as being able to ensure that their Community, authorized the issue of exports to the Community do not exceed import licences up to a limit of 10% of a level agreed by the Commission". the total quantities imported in 1977 and Article 3 stated that the People's 1978. That scheme was not however Republic of China was to benefit under applied to Taiwan.

that country. mushrooms, imported none in 1979. The quantity of imports in 1980 is not stated but it may be supposed that the same situation occurred in that year. In 1979, import certificates were issued solely to the People's Republic of China, which had undertaken to restrict its exports to the Common Market to It claims to have suffered substantial 20 000 tonnes and, towards the end of damage (which it specifies in its the year, to South Korea which had conclusions) and to have been unable to agreed to restrict its exports to the mitigate that damage by participating in Community to 1 500 tonnes. Taiwan, the new patterns of trade established which had refused to accept a quota of with the People's Republic of China 1 000 tonnes, was only able to place on since that country deals exclusively with the common market 400 tonnes which two or three large importers and, were already in German customs auth moreover, refuses for political reasons to orities' warehouses. enter into business relations with under-

Faust is of the opinion that the losses Order the applicant to pay the costs. which it suffered in 1979 and 1980 are the result of Community regulations on the importation of mushrooms, in particular Commission Regulation (EEC) III — Submissions and argu­ No 3096/76 of 17 December 1976, ments of the parties Commission Regulation (EEC) No 1102/78 of 25 May 1978 and Commission Regulation (EEC) No Faust, in assessing the damages which it 1449/78 of 28 June 1978. is claiming, argues that if the trend of imports had continued normally, and in Since those regulations are in its view particular if the reference system had unlawful it considered that it was entitled been maintained in force, it might have to bring an action for damages against expected its share of imports of the Community under the second preserved mushrooms from Taiwan to paragraph of Article 215 of the EEC reach 19.12%. For each of the two years Treaty and it did so by application 1979 and 1980 that would have lodged at the Court Registry on 10 amounted to 292 380 cartons, that is to March 1980. say 2 600 tonnes, for which it would have received in each year commission On hearing the report of the Judge- amounting to USD 57 465, making at Rapporteur and the views of the total of USD 114 930. Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. However, it Faust then sets out the reasons for its requested Faust to produce certain telex view that the new regulations relating to messages which Faust had mentioned in the grant of import certificates are its reply. illegal. It observes that, in adopting Regulation No 3096/76, the Commission abandoned the former reference system By order of 26 October 1981 the Court which had applied until then without decided, pursuant to Article 95 (1) and exception and was based on Article 3 of (2) of the Rules of Procedure, to assign Regulation (EEC) No 2107/74. Faust the case to the First Chamber. says that the abandonment of the reference system contravenes the legal principles embodied in Community law II — Conclusions of the parties requiring equality of treatment and the prohibition of discrimination. The area covered by the prohibition of discrimi­ Faust claims that the Court should : nation, which stems from the general principle of equality, likewise extends to Order the defendant to pay to the the various industrial and commercial applicant the sum of USD 114 930 plus sectors and thus also to the applicant interest at the rate of 4 % from the date import agency. of lodging of the application;

treatment. A substantial proportion of Faust points out further that in 1979 the the total imports of mushrooms came People's Republic of China emerged as from the People's Republic of China the sole supplier of preserved mushrooms during the years 1974, 1975 and 1976 and that in 1980, of a total of 29 000 and therefore an adequate basis of tonnes of mushrooms to be imported reference existed, which could also be into the Community, merely 1 000 used in the future, in order to enable all tonnes from Taiwan were allowed, that the traditional supplier countries to have is to say about 3 % of the total, whilst in a reasonable and equitable share in the the years 1975 to 1978 exports from remaining imports into the European Taiwan had reached an average level of Economic Community. However, instead almost 13 000 tonnes per annum. Under of bringing about a proportionate those circumstances, the quantities reduction in imports from the various allocated to Taiwan in 1979 and 1980 non-member countries, the Commission amount very clearly to discrimination entirely excluded Taiwan from the issue against Community traders marketing of export certificates. The overriding Taiwanese preserved mushrooms. reason for the change in the regulations, which favoured imports from the People's Republic of China, was to establish commercial relations on a larger scale with that country. Faust considers nevertheless that such a reason cannot Whilst recognizing that Community law justify regulations which are incompat­ does not necessarily protect all ible with superior rules of Community commercial relationships, all "know- law such as the prohibition of discrimi­ how" or in general terms all the goodwill nation. It adds that the nullity of Regu­ of an undertaking, Faust considers lation No 3096/76 necessarily entails the nevertheless that it does protect the nullity of all the successive measures assets of an established undertaking which refer to that regulation. which have been built up over the years. Amongst those assets must also be included commercial relationships of long standing such as those entered into by Faust with Taiwan.

The Commission of the European Nor are the protective measures adopted Communities states that, using the by the Commission in breach of superior powers delegated to it by the Council, it rules of Community law. The Council has sought, as the development of regulations, which constitute the legal Community law between 1974 and 1980 foundation for those measures, permit clearly shows, to tackle the problem them to be applied selectively provided posed by the pressure exerted on the that the Community's international market by constantly fluctuating imports commitments are respected.

policy. The applicant is certainly justified in taking the view that the best reference system is one which distorts competition As far as principles of international law the least but it should not be forgotten are concerned, it is hard to see which that the Treaty gives the institutions the rule of law could have been broken. No margin of discretion which they need to treaty exists between the Community and adapt decisions of commercial agri Taiwan. Taiwan is not a party to GATT cultural policy to the changing circum and could thus not rely on any

JUDGMENT OF 28. 10. 1982 — CASE 52/81

In adopting protective measures, which For the same reasons, it is not possible to do not concern merely Taiwan, the see how a breach of the principle of Commission contravened neither the proportionality can be made out. Any prohibition of discrimination laid down change in Community policy in the by Community law which rests on the sphere of external trade inevitably has principle of equality, nor the principle of repercussions on the trade prospects of the protection of legitimate expectation traders in the sector affected. nor the principle of proportionality.

As regards finally the question whether Nor is there a breach of the principle of the applicant has suffered injury in the the protection of legitimate expectation. legal sense of the term, the Commission The contested protective measures would observes that: only frustrate the performance of contracts already entered into if those measures were in contradiction with an Interference with long-standing trade attitude on the part of the Commission relations does not necessarily found a which led the applicant to infer what the right to compensation for the damage future policy of the Community would suffered; be in the sphere of external trade·. However, the applicant, as a prudent and informed import agent, ought not to Even if it is acknowledged that there is have ignored a trend in Community an obligation to protect importers when policies the signs of which had been a protective measure is adopted, that apparent for some time. Every trader obligation is at least reduced when the operating in the market must constantly persons concerned, such as import expect sudden repercussions from agents, are engaged only indirectly in the decisions of commercial policy taken by trade in question; the Community. Traders may not in principle place reliance upon the main­ tenance of commercial opportunities The extent of the damage suffered which their participation in external cannot be calculated by reference to the trade has made available to them. The commission which the trader concerned Community institutions have no received in the past, in view of the uncer­ obligation to ensure the maintenance of tainties and particular characteristics those opportunities. which are inherent in external trade.

As regards the increase in the applications for import certificates which led the Commission to reinstate on 28 In Faust's view, the Commission thus June 1978 the protective measure pre­ knowingly used for a purpose other than viously adopted against Taiwan, Faust that for which it was intended a political emphasizes that under the system for the instrument of market organization which issue of certificates applicable in 1978, it had created for itself by combining a the quantities shown in the certificates reference system and agreements on issued in respect of a given non-member voluntary restraint and, although pur­ country provided no guarantee that porting to adopt a measure for the organ­ those quantities would actually be ization of the market, it operated an imported from that country since the external trade policy. Its conduct clearly supplier country could subsequently be demonstrates that it has abused its altered. discretionary power. From that point of view also, the measures adopted by it with the declared intention of Finally, it points out that the eliminating alleged disturbances of the Commission resorted to protective market are thus unlawful. measures in May 1978 after promising South Korea import certificates for quantities which exceeded by 350% In its rejoinder, the Commission seeks to imports originating in that country in the show that, contrary to the applicant's three preceding years and after auth­ assertion, the protective measure of 25 orizing the People's Republic of China May 1978 was adopted on the basis of a

Official statistics from the Federal the trend of market prices of Community German Office for Statistics, produced products; by the applicant, show on the other hand for 1978 an average sale price of DM the price of products coming from non- 3.916 per kg for all the quantities member countries. imported into the Federal Republic of Germany from non-member countries and an average sale price of DM 3.423 As regards the volume of imports the per kg for quantities coming from other Commission foresaw, from the Member States. applications for import certificates which had been lodged by 23 May 1978, that Challenging those figures, the imports of mushrooms coming from Commission states that: non-member countries would reach, by the end of July, a total of 40 941 tonnes, that is to say, a quantity greatly in excess The prices recorded in 1978 result from of the total for the preceding year. the massive and constant pressure which Official statistics drawn up after the end goods produced in the Community have of 1978, which give a figure of 45 951, suffered since 1977 following an increase prove that the Commission's estimate of imports from non-member countries; was correct. Moreover, there is no doubt that that figure would have been greatly The cost price of French mushrooms, exceeded if no protective measures had calculated by the Commission on the been adopted. basis of information in its possession, was approximately DM 1.90 to 2.0 per half kilogram for goods of top quality, That finding is in no way altered by the whereas the offer price for mushrooms fact that during 1978, in relation to total from outside the Community was from imports, slight differences appeared DM 1.40 to 1.60 per half kilogram box between the figures relating to import for goods of top quality; certificates issued and the figures relating to quantities actually imported. Annual statistics take into account all the products for the whole of the year As far as the level of stocks is concerned, whereas the Commission based its figures the Commission observes that there is no solely on the prices of a significant part

As regards the argument that the infor­ mation relating to the market in question IV — Oral procedure is not reliable owing to the system of import certificates in force in 1978, the Commission considers that the decisive Faust, represented by D. Mańkowski, fact is that even if the uncertainties as to and the Commission of the European the volume of imports could be resolved Communities, represented by M. Hilf, a completely in favour of the applicant that member of its Legal Department, acting would not alter the position in such a as Agent, presented oral argument at the way that the Commission could be sitting on 14 January 1982. criticized for having taken a decision which was not justified by the situation on the market. The parties expressed differing opinions inter alia on the question whether negotiations leading to an agreement on As to the argument relating to the voluntary restraint took place between different treatment which was accorded the Community and Taiwan in 1978. to the People's Republic of China on the one hand and Taiwan on the other, the In addition, the Commission raised Commission considers that it was in no certain questions as to the admissibility way bound to offer every non-member of the application inasmuch as it was not country, within the framework of the certain whether Faust could have negotiations leading to voluntary brought the matter before a national restraint, a quota calculated by reference court in the first instance. to the imports from that country in the preceding years. On the contrary it was obliged to respect the international The Advocate General delivered his commitments entered into by the opinion at the sitting on 27 May 1982.

4 The protective measures were relaxed with effect from 1 January 1977 by Commission Regulation (EEC) No 3096/76 of 17 December 1976 (Official Journal 1976, L 34.8, p. 26). Following the relaxation of those measures, Taiwan was able to export to the Community in 1977 10 353.9 tonnes of preserved mushrooms.

5 On 25 May 1978 the Commission, using the powers delegated to it by Council Regulation (EEC) No 516/77 of 14 March 1977 on the common organization of the market in products processed from fruit and vegetables (Official Journal 1977, L 73, p. 1), adopted Regulation (EEC) No 1102/78 (Official Journal 1978, L 139, p. 26) laying down fresh protective measures consisting in the immediate suspension of the issue of import licences for

FAUST v COMMISSION

preserved mushrooms. Article 2 (1) of Regulation No 1102/78 provided that the prohibition of imports was not to apply to "preserved mushrooms orig­ inating in third countries which the Commission accepts as being able to ensure that their exports to the Community do not exceed a level agreed by the Commission". Commission Regulation (EEC) No 1213/78 of 5 June 1978 (Official Journal 1978, L 150, p. 5), by which the Commission acknowledged that ' Taiwan satisfied the aforementioned condition, was repealed almost immediately by Commission Regulation (EEC) No 1449/78 of 28 June 1978 (Official Journal 1978, L 173, p. 25). During 1978 Taiwan was able to export to the Community 14 727.2 tonnes of preserved mushrooms.

6 In 1979, in the absence of a agreement on voluntary restraint between the Commission and Taiwan, imports of mushrooms from that country were much reduced (to 55.3 tonnes), since the protective measures continued to apply to non-member countries which were not prepared voluntarily to restrict their exports to the Community. In 1980, after finding that the Commission did not intend to allow it to export to the Community more than 1 000 tonnes of preserved mushrooms, Taiwan agreed to restrict its exports to the Community to that quantity.

10 Faust then disputes the validity of Regulation No 1102/78, which laid, down protective measures with effect from 25 May 1978, and Regulation No 1449/78, which re-instated those measures with regard to Taiwan only three weeks after the Commission, by adopting Regulation No 1213/78, had acknowledged that Taiwan might be excluded from the application of those measures by virtue of Article 2 (1) of Regulation No 1102/78.

11 As far as Regulation No 1449/78 is concerned, it should first be observed that the effects of that regulation are restricted to 1978, since it repeals Regulation No 1213/78, which had been adopted pursuant to an'under- taking given by Taiwan not to effect any more exports in 1978 and referred therefore solely to 1978. Since Faust seeks compensation merely for the damage which it claims to have suffered in 1979 and 1980, an examination of the validity of that regulation is unnecessary.

12 In those circumstances, there merely remains to be examined Regulation No 1102/78, whose validity is contested by Faust primarily on the ground that the information at the Commission's disposal at the end of May 1978 did not justify the adoption of protective measures.

13 In disputing the accuracy of the reasons set forth by the Commission in the preamble to that regulation, Faust claims in particular that:

FAUST v COMMISSION

The applications for import certificates which, on 23 May 1978, covered a quantity of 40 914 tonnes, could not give any reliable indication of the quantity which would actually be imported and the Commission was therefore wrong to conclude from those applications that imports in 1978 would be greatly in excess of those in 1977, which amounted to 32 900 tonnes;

15 As far as the price levels are concerned, it should be borne in mind that the Commission compared the free-at-frontier offer prices of products from non- member countries with French cost prices (France being the largest producer of preserved mushrooms within the Community), whereas Faust compares the sale prices (including duty) of products from non-member countries with the sale price of Community products. The method adopted by the Commission appears to be justified inter alia by the fact that the comparison between sale prices made by Faust does not take into account the fall in sale prices suffered by Community products as an inevitable result of massive and prolonged pressure from cheaper imports. A somewhat high price for a Community product may in fact indicate the presence, rather than the absence, of a disturbance of the market. Moreover, it should be observed that the statistical information relied upon by Faust relates to a whole year, whereas the Commission was obliged to have regard to the situation of the market at the time when it contemplated adopting protective measures and at that time the sale prices of products from non-member countries were lower than the sale prices of Community products.

JUDGMENT OF 28. 10. 1982 — CASE 52/81

16 As far as the stocks are concerned, the Commission's statement that at the end of May 1978 the level of stocks of preserved mushrooms produced within the Community was 40 to 50% higher than the level in 1977 has not been conclusively challenged by Faust and must therefore be regarded as correct.

FAUST v COMMISSION

1977, L 73, p. 28) according to which the application of protective measures must "respect the Community's obligations under international agreements".

21 As regards the complaint alleging a breach of the principle of pro­ portionality, Faust maintains that the Commission could have achieved the objective pursued, that is to say avoidance of disturbances of the market, simply by means of quantitative restrictions, by retaining the reference system without the imposition of any limits, and that there was no reason for abandoning that system and excluding developing patterns of trade from the import quotas in an arbitrary and general manner.

22 In that respect it should be stated that the Commission could not in any event have " retained " the reference system since Regulation No 3096 / 76 had relaxed with effect from 1 January 1977 the protective measures on the basis of which that system was operated . The applicant's complaint must therefore be construed to the effect that the Commission ought to have pursued its objectives by proportionate means, for example by applying at the same time as the fresh protective measures adopted in 1978 a system of references to the imports effected in the preceding years from each of the non-member countries concerned .

23 In view of the fact that the Commission sought by means of the contested measures to achieve two equally legitimate objectives, namely stabilization of the market and implementation of a Community policy relating to external trade, the measures adopted cannot be considered to be disproportionate to the objectives pursued. It is an unavoidable fact that changes in Community policies relating to external trade have repercussions on the prospects of traders in the sector concerned.

25 Although Taiwan certainly appears to have been treated by the Commission less favourably than certain non-member countries, it should be remembered that there exists in the Treaty no general principle obliging the Community, in its external relations, to accord to non-member countries equal treatment in all respects. It is thus not necessary to examine on what basis Faust might seek to rely upon the prohibition of discrimination between producers or consumers within the Community contained in Article 40 of the Treaty. It need merely be observed that, if different treatment of non-member countries is compatible with Community law, different treatment accorded to traders within the Community must also be regarded as compatible with Community law, where that different treatment is merely an automatic consequence of the different treatment accorded to non-member countries with which such traders have entered into commercial relations.

26 The applicant finally claims that the almost total prohibition of imports from Taiwan contravened the principle of the protection of legitimate expectation which requires in the present case that traditional trading relations be main­ tained.

27 That complaint must also be rejected. Since Community institutions enjoy a margin of discretion in the choice of the means needed to achieve their policies, traders are unable to claim that they have a legitimate expectation that an existing situation which is capable of being altered by decisions taken by those institutions within the limits of their discretionary power will be maintained. In the present case, there can be no question of a breach of the principle of the protection of legitimate expectation, particularly since the commercial agreement entered into on 3 April 1978 between the Community and the People's Republic of China, published in the Official Journal of 11 May 1978 (Official Journal 1978, L 123, p. 2) was of such a nature as to alert traders to an imminent change of direction in the Community's

THE COURT (First Chamber)

hereby:

1. Dismisses the application.

2. Orders the applicant to pay the costs.

O'Keeffe Bosco Koopmans

Delivered in open court in Luxembourg on 28 October 1982.