C-95/81

JUDGMENT OF 9. 6. 1982 — CASE 95/81

the expression "payment in advance" Community transactions, constitute a referring not only to payments for measure having an effect equivalent to speculative purposes but also to a quantitative restriction within the normal and current payments in intra- meaning of Article 30 of the Treaty.

In Case 95/81

COMMISSION OF THE EUROPEAN COMMUNITIES, represented by Rolf Wägenbaur, its Legal Adviser, acting as Agent, assisted by Giuliano Marenco, a member of its Legal Department, with an address for service in Luxembourg at the office of Oreste Montako, a member of its Legal Department, Jean Monnet Building, Kirchberg, applicant, v

ITALIAN REPUBLIC, in the person of its Agent, Arnaldo Squillante, represented and assisted by Ennio Viola, Avvocato dello Stato, with an address for service in Luxembourg at the Italian Embassy, defendant,

supported by GOVERNMENT OF THE FRENCH REPUBLIC, represented by G. Guillaume, Director of Legal Affaires at the Ministry of Foreign Affairs, acting as Agent, assisted by A. Carnelutti, Secretary for Foreign Affairs, acting as Deputy Agent, with an address for service in Luxembourg at the French Embassy, intervener,

JUDGMENT

Facts and Issues

I — Facts and written procedure not bear interest, opened in the name of the importer; the account is blocked and payments may be made only with the 1. The Italian provisions in question consent of the Ufficio dei Cambi. A bank guarantee may be substituted for the security. Article 1 of Law No 1126 of 20 July 1952 laying down supplementary provisions concerning currency matters Article 3 of the Decreto Ministeriale and foreign trade (Gazzetta Ufficiale (Ministerial Order) of 7 August 1978 [Iulian Official Journal] No 206 of 5 (Gazzetta Ufficiale No 220 of 8 August September 1952), as amended by Law 1978) shows that the security (or the No 162 of 2 April 1962 (Gazzetta substitute bank guarantee) amounts to Ufficiale No 111 of 30 April 1962) 5% of the exchange value in lire of the provides that: advance payment to be made and is at present required for imports having a value in excess of LIT 10 000 000. "Advance payments for goods intended to be imported shall be subject to the lodging by the importer of a security in In addition Article 4 of the above- favour of the Ufficio Italiano dei Cambi mentioned Law of 20 July 1952 lays [Iulian Foreign Exchange Office]." down the following provisions concern- ing forfeiture of the security: According to Circular No V/206600/ 104 published on 25 June 1976 by the "If proof that the importation has been Ministry of Foreign Trade the bank effected within the period prescribed by dealing with the operation must place the the provisions in force is not furnished amount of the security lodged by the the security shall be forfeit in its entirety trader to a current account, which does to the Treasury.

The total or partial forfeiture shall be The Iulian authorities did not reply effected by means of an order of the either to the letter or to the reasoned Minister for Foreign Trade." opinion. By "importation" the Italian authorities Nevertheless, the Commission knows the understand not the physical arrival of the views of these authorities in particular goods on Italian territory but "the through the observations submitted by release for consumption of products in the Government of the Italian Republic free circulation in another Member in the references for preliminary rulings State". Consequently all payments made pending before the Court in Cases 206, before the completion of the formalities 207, 208 and 210/80 in which the for release for consumption are subject Tribunale Civile [Civil Distria Court], to the provision of a security or of a Rome, requested the Court to deliver a bank guarantee. preliminary ruling on the compatibility with Community law of rules such as the Article 1 of the Ministerial Order of 28 Italian provisions in question. September 1980 (Gazzetta Ufficiale No 267 of 29 September 1980) shows that This application, dated 23 April 1981, the period within which the importation was received at the Court Registry on 24 must be effected on pain of forfeiture of the security or of the bank guarantee is April 1981. At the request of the Court fixed at 120 days (or four solar months) the Commission refrained from sub- from the date on which the advance mitting a reply. payment was made. By application lodged on 19 August 1981 the French Government requested 2. The procedure prior to court permission to intervene in partial support proceedings of the conclusions of the defendant in the case. The intervention was allowed As a result of complaints lodged by by an order of 16 September 1981. private persons regarding the rules de- scribed above the Commission concluded Upon hearing the report of the Judge- that the said rules constituted an Rapporteur and the views of the infringement of the EEC Treaty in two Advocate General the Court decided to respects : open the oral procedure without any preparatory inquiry. Infringement of Article 30, Nevertheless it requested the Com- Infringement of the directives adopted by mission to reply in writing before 15 the Council in implementation of Article January 1981 to the following question: 67 concerning the free movement of capital. "What other methods are available to Italy to counter speculation in this In accordance with the provisions of particular case of advance payment for Article 169 the Commission accordingly goods?"

The Commission does not dispute the A — Infringement of Article 30 monetary nature of the Italian rules but nevertheless remarks that Article 104 1. The Commission maintains that the does not authorize any derogation from Italian provisions must on analysis be Article 30 since only the grounds laid considered as a measure having an effect down in Article 36 or protective equivalent to a quantitative restriction. In measures within the meaning of Article fact since advance payments are normal 108 (3) permit derogations from in international trade the Commission Article 30. considers that the system, established by the said rules, of providing security With regard to Article 108 (3) the fact through the bank, imposes upon traders that it makes provision for taking resident in Italy special burdens, both as protective measures in the case of to administrative formalities and finance; difficulties or the threat of serious the financial burdens are furthermore difficulties as regards the balance of very considerable in the case of payments confirms that Article 104 does

JUDGMENT OF 9. 6. 1982 — CASE 95/81

possible justifications. According to the prices hinders the attainment of the aims Italian Government the rules in question of the European Economic Community. are indeed justified under Article 36 of the Treaty in so far as that article provides that public policy may be a justification. However, the Commission recalls in this connection that in According to the Italian Government, accordance with the case-law of the since Article 104 is included in Chapter Court Article 36 constitutes an 2, entitled "Balance of Payments", of exceptional provision which must be Title II of Part Three of the Treaty interpreted restrictively. Furthermore theit appears to constitute a relatively Court has emphasized that Article 36 is exceptional provision. According to it the directed to eventualities of a non- provision in question represents a general economic kind (judgment of 19 rule with regard to the specific subject- December 1961, Commission v Italy, matter which it governs whilst consti Case 7/61 [1961] ECR 317). tuting an exceptional rule in relation to the rules prohibiting quantitative restrictions and measures having equivalent effect.

the State". Nevertheless, the Commission provision is in the nature of "a relatively maintains that there is no analogy exceptional rule" it also constitutes "an between the circumstances considered in alternative subsidiary rule". That article, Case 7/78 and this case. which governs matters other than those

Thus the Italian rules in question are In conclusion, although the Italian justified under Article 36 on the ground Government concedes that all monetary of public policy. The Court has in fact measures produce an effect on the free emphasized in a judgment of 27 October movement of goods it maintains that 1977 (Regina v Bouchereau, Case 30/77 such measures are contrary to [1977] ECR 1999) that recourse to the Community law only in a situation concept of public policy presupposes the where the relation between the means existence "of a genuine and sufficiently and the end (inappropriate inasmuch as serious threat affecting one of the the measures are excessive) is dispro- fundamental interests of society". These portionate. The protective measure in were the concepts forming the back- question cannot be considered as ground to the reference by the Italian disproportionate in relation to the Government to the judgment in the objective laid down. Regina v Thompson case (cited above) in the course of its observations in the cases referred to the Court for a preliminary With regard to Anicie 36 the Italian ruling concerning the same subject- Government disputes the submissions of matter. The Italian rules in question — the Commission and claims that even in concerning the protection of the that context the contested provisions are monopoly of the Iulian State in dealing justified from the Community point of in foreign currencies, the balance of view. payments and the maintenance of confidence in its own currency — appear to constitute a measure intended to protect the fundamental interest of the In fact, according to the Italian State. Since that fundamental interest Government, the exceptional nature of would be jeopardized by the absence of

rules like those at issue and rendering On the other hand, the rules in question the grant of currency to the importer are not contrary to Article 30 in so far as subject to the lodging of security is not the advance payments are merely alleged disproportionate in relation to the to be such and in fact constitute unlawful objective pursued, these rules are exports of currency for speculative justified on the basis of Article 36 of the purposes. Treaty. The French Government concurs in the opinion of the Italian Government to the The French Government, intervening in effect that a Member State must be able support of certain of the arguments of to combat the practices mentioned above the Italian Government, considers that not only by means of Article 108 — the latter has failed in its obligations only which corresponds only to a manifest in so far as the legislation complained of and present crisis and which thus does renders subject to the lodging of security not apply in the present case — but also advance payment for goods which is not by means of Articles 104 and 36. of a speculative nature and which According to the French Government in constitutes a normal payment in intra- so far as the rules in question were Community trade. conceived in such a way as to remain strictly in accordance with the lawful objective which they pursued, that is to According to the French Government the say in so far as their objective is to views of the Commission appear partially prohibit expon of funds in the guise of justified but, in the way in which they advance payments for goods, they have been set out in the application, they cannot be judged to be contrary to the appear excessive as a Member State must Treaty for three basic reasons: be able to ensure the equilibrium of its balance of payments, the stability of iti currency and that its public policy in the First because they contribute to the economic field is upheld, apart from the harmonious pursuit of the objectives set situations of crisis referred to in Article out in Article 2 of the Treaty; 108. Further because Italy was justified under Article 104 of the Treaty in setting up The Italian rules do indeed constitute a the system of securities criticized by the hindrance to the free movement of goods Commission; but are contrary to Article 30 only in so far as the payments in question constitute "normal" payments or payments Finally, because the objectives pursued "connected to the normal conduct of by the Italian Government are covered business" and their characteristics are in by the protection of its public policy and accordance with usage in the economic constitute a general interest of such a field in which they occur — in this nature as to take precedence over the connection the French Government free movement of goods within the considers it essential not to adopt an Community. abstract and uniform definition applicable to all the Member States and all products as usage is variable, and With regard to Articles 104 and 36 of contrary to what is stated by the the EEC Treaty the French Government Commission, even the practice of concurs in the approach adopted by the advance payments is not the rule in the Italian Republic but, with regard to field of international trade. Article 36, it nevertheless adds that the

Italian rules in question are permissible "shall not restrict the right of Member in Community law only if they are States to verify the nature and strictly appropriate to the objective genuineness of transactions or transfers, which they are intended to pursue. It or to take all requisite measures to does not appear that they meet this prevent infringements of their laws and requirement because of the fact that they regulations." apply to all kinds of advance payments for goods and that they extend the Nevertheless that right does not imply concept of "advance payment" to cus- that the Member States may maintain or

In fact, according to the Italian 1. The Commission recalls that for the Government, the advance payment of the purposes of the implementation of sale or purchase price of goods in the Article 67 of the Treaty on the free currency of the Member Sute in which movement of capiul the Council adopted the creditor resides does not come within on 11 May 1960 a First Directive the scope of Article 1 of the directive in (Official Journal, English Special Edition question because, first of all, payment of 1959-62, p. 49), as subsequently the price before delivery of the goods amended by a Second Directive, dated does not constitute the grant of credit in 18 December 1962 (Official Journal, the technical sense, and, secondly, the English Special Edition 1963-64, p. 5). fact that commercial transactions alone Article 1 of the First Directive liberalized are not provided for in List A of Annex I the capital movements referred to in List implies that payments relating to such A of Annex I in which it is stated in transactions already form the subject- particular: matter of a directly-applicable Com- munity provision, Article 106 (1) of the "The granting and repaying of short- EEC Treaty. term and medium-term credits in respect of commercial transactions or provision However, even if it were necessary to of services in which a resident is par- consider that the advance payment of the ticipating." purchase or selling price of goods fell within the scope of Article 1 of the Since payments effected prior to delivery directive in question the Iulian of goods form part of such transactions Government mainuins nevertheless that the Italian rules which render them more there would be no contradiction between difficult are incompatible with the the rules challenged by the Commission requirement of liberalization. and Article 1 of the directive.

JUDGMENT OF ·). 6. 1982 — CASE 95/81

commercial transaction for which the 3. According to the French Government grant of currency was obtained should international purchases of goods are be effected. It is true that the settled by means of payments either Commission in fact disputes that this is before delivery, in which case they are indispensable, maintaining that the always on account, or in cash or on Member States have at their disposal delivery, which are simply payments, or other means of supervising and due after delivery, which are payments preventing the improper exportation of linked to commercial credits. capiul but the Commission does not indicate what such "other means" are.

According to the French Government where payment takes place before delivery and outside the usual practices Consequently the Italian Government relating to payment on account it considers that a measure indispensable constitutes an abnormal transaction. It for preventing infringements of laws and cannot be considered either as an regulations is capable of attaining its advance refund of credit or as a objectives in so far as it can be put into commercial credit. A credit can only be effect and the only means of obtaining a financial and in that sense it does not general guarantee that such a measure come within Annex I to the First will be put into effect necessarily Directive of the Council for the coincides with a supplementary means of implementation of the Treaty. In fact the providing a material or personal connection with the commercial trans- guarantee for the general liability of the action provided for by that provision possible debtor. must consist in permitting payment for

COMMISSION v ITALY

Decision

1 By application lodged at the Court Registry on 24 April 1981 the Commission of the European Communities brought an action before the Court under Article 169 of the EEC Treaty for a declaration that, by making

JUDGMENT OF 9. 6. 1982 — CASE 95/81

advance payment for goods intended for import subject to the provision of a security or of a bank guarantee, the Italian Republic has failed to fulfil its obligations under the EEC Treaty.

; The Commission considers that the Italian rules concerning advance payments for imported goods constitute an infringement of Article 30 of the Treaty and of the two directives adopted by the Council for the implementation of Article 67 of the Treaty: the First Directive of 11 May 1960 (Official Journal, English Special Edition, 1959-62, p. 49) as supplemented and amended by the Second Directive of 19 December 1962 (Official Journal, English Special Edition 1963-64, p. 5).

3 The rules at issue are based on Article 1 of Italian Law N o 1126 of 20 July 1952 on supplementary provisions concerning currency matters and foreign trade (Gazzetta Ufficiale [Italian Official Journal] N o 206 of 5 September 1952) which provides that:

COMMISSION v ITALY

5 Circular No V/206600/104 of the Minister for Foreign Trade of 25 June 1976 states that the bank entrusted with the transaction is required to pay the amount of the security into an interest-free account in the name of the importer. That account is blocked and may only be released by the Ufficio Italiano dei Cambi.

6 According to Article 3 of the Ministerial Order of 7 August 1978 (Gazzetta Ufficiale No 220 of 8 August 1978) on the rules concerning settlement of foreign exchange transactions and financial relations with foreign countries that security or bank guarantee is fixed at 5% of the exchange value in lire of the advance payment to be made and is required for imports having a value in excess of LIT 10 000 000.

7 Finally, in accordance with Article 4 of the above-mentioned Law of 20 July 1952 where proof has not been provided that the importation has been effected within the period prescribed — fixed at 30 days after the advance payment by the Ministerial Order of 20 January 1973 (Gazzetta Ufficiale No 19 of 23 January 1973) and extended to 120 days by the Ministerial Order of 28 September 1980 (Gazzetta Ufficiale No 267 of 29 September 1980) — the Minister for Foreign Trade declares the security to be wholly or partially forfeit or enforces the bank guarantee in favour of the Treasury.

8 By the expression "importation" the Italian authorities understand not the physical arrival of the goods on Italian territory but the release for consumption of the products imported after the completion of the customs formalities necessary for that transaction and any payment is considered as "advance" for the purposes of the Italian exchange rules if it is made before the purchaser has the goods at his disposal and is able to put them to their intended use in Italy.

ii The Commission furthermore recalls that its Directive 70/50/EEC of 22 December 1969 based on the provisions of Article 33 (7) on the abolition of measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty (English Special Edition 1970 (I), p. 17) classifies as measures having an effect equivalent to quantitative restrictions those which make importation more difficult or costly than the disposal of domestic production and ir: particular those which "require, for imports only, the giving of guarantees or making of payments on account" (Article 2 (3) (i)).

12 With regard to the complaint of infringement of the directives on the free movement of capital the Commission claims that Article 1 of the First Directive has liberalized the movements referred to in List A of Annex I. In that list, as amended by the Second Directive, appears:

COMMISSION v ITALY

"The granting and repayment of short-term and medium-term credits in respect of commercial transactions or provision of services in which a resident is participating."

1 3 Payments effected' before delivery of the goods are included in such transactions and are unconditionally liberalized; the Italian rules which make them more difficult are thus incompatible with the requirement of liber- alization.

14 The Italian Government puts forward a number of arguments against these complaints. It contends first of all that the rules in question do not come under Anicie 30 but under the provisions of Article 104 and Article 106 (2). It then claims that, even if it were necessary to consider that these rules came under Article 30, they would nevertheless be justified on the basis of Article 36.

is It is clear from the foregoing that the Italian Government's argument to the effect that Article 104 of itself permits derogations from the provisions of Article 30 of the Treaty must be rejected.

is During the oral procedure the Italian Government put forward a second argument, contending that the Italian measures in question could only come under Anieles 30 and 36 "by analogy" on the ground that, according to it, the measures constitute detailed rules for the implementation of an economic transaction related to imports and do not constitute quantitative restrictions but restrictions on payments coming under Article 106 (2) which provides:

"In so far as movements of goods, services, and capital are limited only by restrictions on payments connected therewith, these restrictions shall be progressively abolished by applying, mutatis mutandis, the provisions of the chapters relating to the abolition of quantitative restrictions, to the liber- alization of services and to the free movement of capital."

2î. The Italian Government deduces from the wording of that article and in particular from the words "applying mutatis mutandis" that the interpretation of Article 36 must not be restrictive, in accordance with the normal case-law of the Court in this field, but should be taken beyond the wording, regard being had to the specific interest of the State in the protection of its currency and the equilibrium of its balance of payments — objectives which remain within the powers of the Member Sutes pursuant to Article 104 of the Treaty.

2i The arguments of the Italian Government do not correspond to the purpose of Anicie 106 within the system of the Treaty. According to the first two paragraphs of that aniele the Member States undenake to authorize, at the

25 It must be stated that, although the measures in question were enacted for the purpose of preventing currency speculation, they do not constitute specific rules for the attainment of that objective but general rules dealing with intra-Community transactions as a whole where payment is made in advance. In fact, in so far as the Italian Government extends its rules to cover payments made by letters of credit and similar documents, the financial method usually employed for imports of goods in certain commercial sectors, it is dealing with a means of payment normally employed in international trade. The measures in question thus affect not only speculative operations but normal commercial transactions and, since their effect is to render imports more difficult or burdensome than internal transactions, they produce restrictive effects on the free movement of goods. For these reasons, and in so far as they produce these effects, the measures at issue are contrary to Anicie 30.

JUDGMENT OF 9. 6. 1982 — CASE 95/81

'26 The Italian Government further contends that, even if the rules in question were contrary to Article 30, they would nevertheless be justified under Article 36 on grounds of public policy. In fact, they claim, the measures adopted have as their objective the safeguarding of a fundamental interest of the State, the defence of its currency, which would be jeopardized but for the rules at issue.

27 It must be recalled that in accordance with the settled case-law of the Court, Article 36 must be strictly interpreted and the exceptions which it lists may not be extended to cases other than those which have been exhaustively laid down and, furthermore, that Article 36 refers to matters of a non-economic nature.

COMMISSION v ITALY

On those grounds,

THE COURT

hereby:

1. Declares that, by requiring all importers of goods coming from other Member States to provide a security or a bank guarantee amounting to 5% of the value of the goods when payment is in advance, the words "payment in advance" referring not only to payments for specu- lative purposes but also to normal and current payments in intra- Community transactions, the Italian Republic has failed to fulfil its obligations under Articles 30 and 36 of the Treaty;

2. Orders the Italian Government to pay the costs with the exception of those arising from the intervention;