C-104/81

JUDGMENT OF 26. 10. 1982 — CASE 104/81

Agreement. As such this provision Republic where a Member State may be applied by a court and thus does not apply to products orig­ produce direct effects throughout inating in Portugal a tax reduction the Community. provided for certain classes of 8. Although Article 21 of the producers or kinds of products if Agreement between the EEC and the there is no like product on the Portuguese Republic on Free Trade market of the Member State and Article 95 of the EEC Treaty concerned which has in fact have the same object inasmuch as benefited from such reduction. they aim at the elimination of tax 10. For the purposes of its application in discrimination, both provisions, the Community the concept of which are moreover worded differ­ similarity contained in the first ently, must however be considere 1 paragraph of Article 21 of the and interpreted in their own context. Agreement between the EEC and Since the EEC Treaty and the Portugal is one of Community law Agreement on Free Trade pursue which must be interpreted uniformly different objectives, it follows that and it is for the Court to ensure that the interpretation given to Article 95 this is the case. of the Treaty cannot be applied by way of simple analogy to the In view of the purpose of that Agreement on Free Trade. provision products which differ inter se both as regards the method of The first paragraph of Article 11 their manufacture and their charac­ must therefore be interpreted teristics may not be regarded as like according to its terms and in the products within the meaning of the light of the objective which it said provision. It follows that liqueur pursues in the system of free trade wines fortified with spirits on the established by the Agreement. one hand and wines resulting from 9. There is no discrimination within the natural fermentation on the other meaning of the first paragraph of may not be regarded as like products Article 21 of the Agreement between within the meaning of the provision the Community and the Portuguese at issue.

on the interpretation of the first paragraph of Article 21 of the Agreement made on 22 July 1972 between the EEC and the Portuguese Republic (Official Journal, English Special Edition (31 December) L 301, p. 166) and Article 95 of the EEC Treaty,

THE COURT,

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

Advocate General: S. Rozès Registrar: P. Heim

gives the following

JUDGMENT

Certain spirits including those made The Finanzgericht founded itself on the from wine are exempt from the duty to provisions of the Branntweinmonopol­ deliver to the administration. Under gesetz and Articles 37 and 95 of the paragraph 7 of the Branntweinmonopol­ EEC Treaty in conjunction with Article gesetz they are subject to a spirits 21 of the Agreement of 22 July between surcharge (Branntweinaufschlag) which the EEC and the Portuguese Republic is equivalent to the duty on spirits. (hereinafter referred to as the "EEC- Portugal Agreement"). It found that Under paragraph 79 (2) of the Article 21 of the EEC-Portugal Branntweinmonopolgesetz in the version Agreement was essentially the same as applicable during the period at issue in Articles 37 and 95 of the Treaty and that the main action the spirits surcharge was it had direct effect. It then compared the reduced by 21 % provided that amount of duty on port wines and on distillation took place in a distillery similar national products. In its opinion subject to a flat-rate duty (Abfindungs­ imported port wines are comparable, as brennerei) or by a proprietor of the raw dessert wines, with national liqueur material (Stoffbesitzer) within the wines. In the opinion of the Finanz­ production limits allowed by the gericht the monopoly equalization duty monopoly or in a bonded distillery on the wine-spirit content of the (Verschlußbrennerei) whose annual imported port wines must relate to the production did not exceed four monopoly duty on domestic spirits from hectolitres of wine-spirit or in a fruit cooperative fruit farm distilleries. farm cooperative distillery within the limits of its right to distil, namely a According to the Finanzgericht the maximum of three hectolitres per annum monopoly equalization duty should be for each of its members from fruit of reduced by 21 %, that is from DM 1 650 their own harvest. to DM 1 303.50 per hectolitre of wine- spirit (DM 1 650 less DM 346.50 = DM By virtue of paragraph 151' (1) of 1 303.50 per hectolitre). the Branntweinmonopolgesetz imported spirits are subject to monopoly equal­ The question whether at the time of ization duty the amount of which is importation domestic cooperative fruit equal to that of the duty on spirits. farm distilleries were actually producing spirits from wine was irrelevant for, in Paragraph 151 (2) of the Brannt­ the view of the Finanzgericht, there was weinmonopolgesetz provides that liqueur an infringement of Article 37 of the EEC wines are to be regarded as spirits. Treaty within the relevant provision even if there was only a possibility of discrimi­ Under paragraph 152 thereof the nation. monopoly equalization duty on liqueur wines is calculated on the quantity of alcohol in excess of 14 % by volume. 4. The first paragraph of Article 21 of the EEC-Portugal Agreement is worded as follows: 3. Following proceedings instituted by Kupferberg the Finanzgericht Rheinland- "The Contracting Parties shall refrain Pfalz [Finance Court, Rhineland- from any measure or practice of an Palatinate] amended the notice of internal fiscal nature establishing, assessment and reduced the monopoly whether directly or indirectly, discrimi-

nation between the products of one of discrimination contained in Contracting Party and like products orig­ the first paragraph of Article 95 inating in the territory of the other of the EEC Treaty or the first Contracting Party." paragraph of Article 21 of the EEC-Portugal Agreement, if under national tax provisions it The EEC-Portugal Agreement was is possible purely as a matter of annexed to Regulation No 284/72 of the legal theory for similar domestic Council of 19 December 1972. products to be treated more favourably (potential discrimi­ nation), or does discrimination 5. The Hauptzollamt Mainz appealed within the meaning of those on a point of law to the Bundesfinanzhof provisions exist only if in an [Federal Finance Court]. actual tax comparison similar domestic products are in practice The Bundesfinanzhof came to the found to be treated more conclusion that the case before it raised favourably from the point of questions of Community law. It therefore view of tax? decided, pursuant to Article 177 of the EEC Treaty, to stay the proceedings and (b) Does Article 95 of the EEC referred the following question to Court: Treaty or the first paragraph of Article 21 of the EEC-Portugal " 1 . [a] Is the first paragraph of Article Agreement require a product 21 of the Agreement between the from another Member State or European Economic Community Portugal, which on importation and the Portuguese Republic of is taxed at the same rate as a 22 July 1972, adopted and directly similar domestic prod­ published by Regulation (EEC) uct, to be taxed at the lower rate No 2844/72 of the Council of of taxation which national law 19 December 1972, directly imposes on another product applicable law and does it give which is equally to be regarded rights to individual Common as similar, within the meaning of Market citizens? the first paragraph of Article 95 of the EEC Treaty, to the imported product?" [b] If so, does it contain a prohibition of discrimination in like terms to the first paragraph 6. It is apparent from the order making of Article 95 of the EEC Treaty? the reference that the Bundesfinanzhof is of the opinion that it is not possible to answer Question (1) (a) on the basis ot' and the judgments in which the Court has stated that certain provisions oi [c] Does it also apply to the import­ agreements of association are directiv ation of port wines? applicable (judgments of 12 December" 1972 in Joined Cases 21 to 24/72 Inter­ national Fruit Company ami Others 2. If Question (1) is answered in the [1972] ECR 1219, 30 April 1974 in Cā^· affirmative: 181/73 Haegcman [1974] ECR 449. 5 February 1976 in Case S7/75 Bresciani (a) Is there discrimination, within [1976] EĆR 129 and 15 Match 1979 in the meaning of the prohibition Case 91/78 Hansen [1979] ECR 935V

According to the Bundesfinanzhof, The Bundesfinanzhof considers that uestion 2 (a) must be answered to the association agreements are not to be compared with free-trade agreements S feet that if in practice there are absolutely no such tax advantages, the like that between the EEC and Portugal, so far as the extent of the ties between legal possibility, arising only in theory, the parties to the agreement are that the situation might be otherwise, concerned. cannot constitute discrimination.

With not being among them) and products regard to Question 2 (b) the Bundes "specified in Protocols Nos 2 and 8, finanzhof points out: with due regard to the arrangements provided for in those protocols". In Protocol No 8 express mention is also "The national legislature draws a made of port inter alia under tariff distinction between the taxation of heading 22.05 in connection with fortified wine on the one hand (to which arrangements by which "duties on liqueur wines and port wines belong) and imports into the Community .

EEC Treaty. The Senate considers that to be unacceptable. "The question to be asked is whether, in the context of the tax comparison which has to be carried out, discrimination The question of similarity within the within the meaning of the first paragraph meaning of the first paragraph of Article of Article 95 of the EEC Treaty already 95 of the EEC Treaty is inseparably exists if, from a purely legal viewpoint, bound up with the question whether and there is a chance of discrimination but it to what extent the national legislature does not happen in practice because the has power to impose discriminatory home-produced products which are to be taxation on similar products which considered for the purpose of the nevertheless exhibit differences.

HAUPTZOLLAMT MAINZ v KUPFERBERQ

tax distinctions in the case of products II — Written observations sub­ having the same practical application. In mitted to the Court the event of such a wide interpretation of the first paragraph of Article 95 of the EEC Treaty products from other Member States (and where there are A — Question 1 (a) and (b) (The direct agreements in similar terms with the effect and the interpretation of the EEC, products from certain non-member first paragraph of Article 21 of the countries, too) would continually enjoy EEC-Portugal Agreement) the lowest of all the taxes provided for within the range of domestic products which those still to be considered as 1. Observations of Kupferberg similar are legitimately treated differently by the national legislature."

JUDGMENT OF 26. 10. 1982 — CASE 104/81

paragraph 17 the Court refers to "special to the effect that in order to establish economic and political connections" with whether a provision of an agreement certain overseas countries and territories. with a non-member country is directly The ties between the Community and applicable, regard must be had to the Portugal are as close as between the "spirit, the general scheme and the Community and Greece or between the wording" of the provision in question. Community and overseas countries and territories. As regards Question 1 (a) they recall that When the Court considers the question the Court in its judgment in the Bresciani whether certain provisions of an case considered a provision of the agreement are directly applicable it refers Yaounde Convention to be directly to "the spirit, the general scheme and the applicable. wording" of its provisions (paragraph 16 of the judgment in Case 87/75).

The two governments stress that the If that method of interpretation is Court in that judgment attached decisive applied to the present case, the result, importance to the fact that the according to Kupferberg, is that the first Convention in question did not impose paragraph of Article 21 of the EEC- the same obligations on the Community Portugal Agreement is directly as on the associated States. On the applicable. In any event it follows from contrary the EEC-Portugal Agreement is its objective that the provisions on free based on the principle of reciprocity. trade, such as the first paragraph of That is apparent from its preamble and Article 21, and those concerned with from its provisions, including Article 1 ensuring fair terms of competition are which specifies its objectives. directly applicable.

Conmiission [1971] ECR 411, the Court not of decisive importance. Apart from did not recognize the direct effect of the fact that Article 95 has been worded certain provisions of GATT and stressed in more categoric terms a decisive factor the flexibility of that Agreement. The is that the Treaty in comparison with the same flexibility characterizes the EEC- Agreement on free trade has objectives Portugal Agreement. It has no legal which go much further in relation to system, such as that of the Community, economic integration. which can ensure a uniform interpret­ ation and application of its provisions. Articles 30 and 32 to 34 contain more traditional procedures for resolving The Danish and French Governments disputes whereby a "Joint Committee" conclude that the first paragraph of ensures that the Agreement is duly Article 21 of the EEC-Portugal Agree­ implemented. Those procedures could ment does not have direct effect. not function if courts were allowed to determine the content of the obligations under the Agreement. Other provisions of the Agreement, such as Articles 25 (2) (b) The French and Danish and 27 to 29, further allow the Governments observe in relation to Contracting Parties, in the event of Question 1 (b) that the fact that the difficulties, to adopt "appropriate aforesaid provisions are somewhat measures" and to suspend temporarily similar in their wording cannot be relied the application of the other provisions; upon as justification for interpreting assessment of those difficulties is left to them as having the same meaning. Contracting Party relying on them.

[1963] ECR 1 and in the Haegeman, EEC-Portugal Agreement may be traced Bresciani and International Fruit to the Yaounde Conventions and that Company judgments (which have already the signatories thereto sought to create a been cited), would lead to Article 23 of rather flexible provision, independent of the EEC-Portugal Agreement being the interpretation of the EEC Treaty, regarded as not directly applicable. and such as to contain the essence of the first paragraph of Article 95 but not necessarily all the consequences of a 4. Observations of the Commission "dynamic" interpretation in the context of the EEC Treaty.

(a) In relation to Question 1 (b) the Commission observes that the fact that In the view of the Commission it may be the EEC-Portugal Agreement contains assumed that the same considerations no provisions corresponding to the led the Contracting Parties to the second paragraph of Article 95 of the Agreements between the EEC and EFTA EEC Treaty reflects the fact that a to adopt the flexible wording used in the solution was sought which did not go as aforesaid agreements. far as that of the EEC Treaty.

HAUPTZOLLAMT MAINZ v KUPFERBERG

The Commission stresses that Article 95 cation of internal taxation and that the must be interpreted in close conjunction decisive criterion expressed in the intro­ with the objectives of the EEC Treaty ductory paragraph of Article III of contained in Articles 2 and 3 thereof and GATT is whether or not the tax measure in particular with the establishment of in question has a protectionist effect in identical conditions of competition in the regard to imports. That limitation on the common market, as has been stressed by objectives of the provision characterizes the Court in numerous judgments. the practice of GATT.

JUDGMENT OF 26. 10. 1982 — CASE 104/81

results in actual and manifest penal­ the international legal order the ization of imported products and thus Community has no interest in impeding jeopardizes the objective of the that process by an a priori restrictive Agreement, that is to say the elimination attitude. of obstacles to trade."

HAUPTZOLLAMT MAINZ v KUPFERBERG

the uneven implementation of the the courts of the contracting States, but Agreement. The objections, however, are such a possibility seems to the Com­ not in themselves sufficient to exclude mission to be theoretical, at least if the out of hand any direct effect of the discretion of the courts regarding the provisions of the Agreement and in interpretation of the provisions in particular that of the first paragraph of question is restricted. Article 21. Although there is a risk of conflicting legal decisions in respect of the marginal area concerned with the application of the complex provisions of the Agreement it is less clear that such a As regards the direct applicability of the risk exists in respect of the basic first paragraph of Article 21 of the EEC- "kernel" constituted by the provisions Portugal Agreement the Commission establishing the area of free trade. If stresses that the criteria developed by the nevertheless there were conflicting case-law of the Court for evaluating decisions in particular cases it would provisions of independent Community always be open to the political bodies set law do not, however, appear sufficient to up by the Agreement to find a solution. decide the question whether or not a Finally, having regard to international provision of an agreement to which the legal practice it may generally be Community is a party has direct effect. It expected that national courts will as far is necessary, in addition, that the as possible follow the case-law of the provision should not contain any courts of the other contracting States. imprecise factor or legal term allowing wide scope for discretion and thus causing economic and other consider­ ations to be taken into account.

separate parts which may be clearly (i) which fall within Chapters 25 to 99 distinguished, such a division into two of the Brussels Nomenclature, areas with diametrically opposite legal excluding the products listed in consequences, a "central area" of Annex 1; prohibition deemed to have direct effect and a peripheral area, the definition and (ii) which are specified in Protocols Nos implementation of which would have to 2 and 8, with due regard to the be reserved to the responsible political arrangements provided for in those authorities, would, however, involve protocols. serious difficulties in practice. The Commission prefers to leave the question in abeyance. By virtue of that latter paragraph the first paragraph of Article 21 applies to port wines. The phrase "with due regard The Commission concludes its obser­ to the arrangements provided for in vations on Question 1 (a) by stressing those protocols" allows no other in­ that the first paragraph of Article 21 of terpretation. The arrangements concern the EEC-Portugal Agreement has a only import duties and thus establish a lesser and more specific scope than that system derogating from Article 3 of the of the first paragraph of Article 95 of the Agreement. Protocol No 8 does not EEC Treaty. It follows in its opinion that restrict the area of prohibition of fiscal the former provision does not involve a discrimination. In particular it is not wide margin of discretion. Since the possible to infer from Article 2 of the interpretation of the prohibition on fiscal Agreement that port wine is subject only discrimination provided for in the EEC- to the arrangement provided for in Portugal Agreement is thus confined to Protocol No 8. the "central area" there are scarcely any of the aforementioned dangers and risks in holding that it has direct effect so that C — Question 2 (a) (Potential and there is no objection in principle against effective discrimination) it.

Any other interpretation of the first which, in fact and in practice, is not paragraph of Article 95 of the Treaty made use of?" would mean that a party complaining of tax discrimination would always have to The Commission then proposes to adduce evidence that a similar product answer that question as follows: was in fact produced in the national territory during the period in question which would be extremely difficult in "If national tax law provides for more many cases. favourable treatment for certain products made by certain classes of producers by means of tax exemptions the benefit of In the judgments on principle in relation the tax exemption must, pursuant to the to the neutrality, from the point of view first paragraph of Article 95 of the EEC of competition, of duties on spirits, Treaty, be extended to similar imported the Court always takes account of products even if the exemption is not in potentially favourable effects. fact utilized in the country in question."

In the opinion of Kupferberg the first paragraph of Article 95 of the Treaty With regard to Question 2 (a) of the and the first paragraph of Article 21 of Bundesfinanzhof, taken from the point the EEC-Portugal Agreement are of view of the first paragraph of Article therefore to be interpreted as meaning 21 of the EEC-Portugal Agreement, the that imported products are the subject of Commission observes that it must be discrimination in relation to similar determined whether the advantages domestic products when the existing conferred do not in fact penalize the rules allow discrimination. importation of similar products from the other Contracting Party and account must be taken of the actual size of the 2. Observations of the Danish Govern­ national production which benefits from ment the advantages and of the effect upon competition of the advantages conferred.

distilleries when such preferences are in judgment of 27 February 1980 in Case relation to imported products 168/78 Commission v French Republic quantitatively negligible and they do not [1980] ECR 347 may not be again nullify the tax benefits which must be divided into direct and indirect similarity. granted to imported products pursuant The taxation of similar products must be to the Agreement. carried out in a general manner and without discrimination. In the present The Commission further wonders case that means that the taxation whether port wine is a product which is imposed on imported port wine must be similar, for the purposes of Article 21 of compared with the taxation imposed the EEC-Portugal Agreement, to the both on domestic liqueur wines and liqueur wines with which it is compared. spirits distilled from fruit. Even if port wine comes within the definition of liqueur wines the answer to the question concerning the comparable 2. Observations of the Commission character of such products depends on findings which are difficult to make, especially as regards consumer habits. In the view of the Commission only Since the application of the principle of liqueur wine comes into question as a similarity demands recourse to stricter domestic product similar to imported criteria for the purposes of the port wine. aforementioned Article 21 port wine is not in any event directly comparable with domestic liqueur wines. That is also the opinion of the Bun­ desfinanzhof which gives no evidence or As regards Article 21 of the EEC- any example in favour of the possibility Portugal Agreement the Commission's of treating "also" as similar wines answer to Question 2 (a) of the Bun­ "whose alcohol content is the result of desfinanzhof is therefore essentially as natural fermentation". follows : In any event there are no wines in the "If national tax law provides privileged Federal Republic of Germany whose treatment for certain products made by alcohol content is close to that of port certain classes of producers by means of wine. tax exemptions such a system is compatible with the first paragraph of Article 21 of the EEC-Portugal The Commission rejects out of hand any Agreement to the extent to which, by similarity, for the purposes of Article 21 reason of the factual circumstances, there of the EEC-Portugal Agreement, is in practice no unfavourable effect between port wines and wines of late upon the importation of similar products vintage and other German wines which originating from the other Contracting naturally have a strong alcohol content. Party."

2 The main proceedings are between a German importer and the Haupt- zollamt [Principal Customs Office] Mainz on the question of the rate of the duty known as "monopoly equalization duty" (Monopolausgleich) which was applied on the release for free circulation, on 26 August 1976, of a consignment of port wines from Portugal.

3 Monopoly equalization duty is levied under paragraph 151 (1) of the Branntweinmonopolgesetz [Law on the Monopoly in Spirits] on imported spirits and spirituous products.

4 According to paragraph 151 (3) (paragraph 151 (2) at the time when the goods in question were released for free circulation) liqueur wines with an alcohol content of more than 14% by volume are among the products which are to be considered as spirituous products. Paragraph 152, point 2, of that law provides that monopoly equalization duty is to be calculated in respect of such wines according to the quantity of alcohol in excess of the aforesaid amount.

5 The monopoly equalization duty corresponds to the spirits surcharge (Brannt­ weinaufschlag) levied under paragraph 73 of the Branntweinmonopolgesetz

JUDGMENT OF 26. 10. 1982 — CASE 104/81

on national spirits exempt from the obligation of delivery to the monopoly. Paragraph 79 (2) however, providés for a reduction of 21% in the surcharge on spirits produced in limited quantities by certain distilleries. They included, at the material time, fruit farm cooperative distilleries which only produced a maximum of three hectolitres per member from the fruit of their own harvest.

HAUPTZOLLAMT MAINZ v KUPFERBERG

2. If Question (1) is answered in the affirmative:

(a) Is there discrimination, within the meaning of the prohibition of discrimination contained in the first paragraph of Article 95 of the EEC Treaty or the first paragraph of Article 21 of the EEC- Portugal Agreement, if under national tax provisions it is possible purely as a matter of legal theory for similar domestic products to be treated more favourably (potential discrimination), or does discrimi­ nation within the meaning of those provisions exist only if in an actual tax comparison similar domestic products are in practice found to be treated more favourably from the point of view of tax?

(b) Does Article 95 of the EEC Treaty or the first paragraph of Article 21 of the EEC-Portugal Agreement require a product from another Member State or Portugal, which on importation is taxed at the same rate as a directly similar domestic product, to be taxed at the lower rate of taxation which national law imposes on another product which is equally to be regarded as similar, within the meaning of the first paragraph of Article 95 of the EEC Treaty, to the imported product?

First question

8 The first question has three parts the first of which relates to the direct applicability of the first paragraph of Article 21 of the Agreement. In the event of an answer in the affirmative the second part raises the question whether the provision is analogous in scope to the first paragraph of Article 95 of the EEC Treaty and in the third part of the question it is asked whether the provision also applies to the importation of port wines.

12 The measures needed to implement the provisions of an agreement concluded by the Community are to be adopted, according to the state of Community law for the time being in the areas affected by the provisions of the agreement, either by the Community institutions or by the Member States. That is particularly true of agreements such as those concerning free trade where the obligations entered into extend to many areas of a very diverse nature.

1 3 In ensuring respect for commitments arising from an agreement concluded by the Community institutions the Member States fulfil an obligation not only in relation to the non-member country concerned but also and above all in relation to the Community which has assumed responsibility for the due performance of the agreement. That is why the provisions of such an agreement, as the Court has already stated in its judgment of 30 April 1974 in Case 181/73 Haegeman [1974] ECR 449, form an integral part of the Community legal system.

1 4 It follows from the Community nature of such provisions that their effect in the Community may not be allowed to vary according to whether their application is in practice the responsibility of the Community institutions or of the Member States and, in the latter case, according to the effects in the internal legal order of each Member State which the law of that State assigns to international agreements concluded by it. Therefore it is for the Court,

HAUPTZOLLAMT MAINZ v KUPFERBERG

within the framework of its jurisdiction in interpreting the provisions of agreements, to ensure their uniform application throughout the Community.

18 According to the general rules of international law there must be bona fide performance of every agreement. Although each contracting party is responsible for executing fully the commitments which it has undertaken it is

JUDGMENT OF 26. 10. 1982 — CASE 104/81

nevertheless free to determine the legal means appropriate for attaining that end in its legal system unless the agreement, interpreted in the light of its subject-matter and purpose, itself specifies those means. Subject to that reser­ vation the fact that the courts of one of the parties consider that certain of the stipulations in the agreement are of direct application whereas the courts of the other party do not recognize such direct application is not in itself such as to constitute a lack of reciprocity in the implementation of the agreement.

19 As the governments have emphasized, the free-trade agreements provide for joint committees responsible for the administration of the agreements and for their proper implementation. To that end they may make recommendations and, in the cases expressly provided for by the agreement in question, take decisions.

20 The mere fact that the contracting parties have established a special institutional framework for consultations and negotiations inter se in relation to the implementation of the agreement is not in itself sufficient to exclude all judicial application of that agreement. The fact that a court of one of the parties applies to a specific case before it a provision of the agreement involving an unconditional and precise obligation and therefore not requiring any prior intervention on the part of the joint committee does not adversely affect the powers that the agreement confers on that committee.

25 Seen in that context the first paragraph of Article 21 of the Agreement seeks to prevent the liberalization of the trade in goods through the abolition of customs duties and charges having equivalent effect and quantitative restrictions and measures having equivalent effect from being rendered nugatory by fiscal practices of the Contracting Parties. That would be so if the product imported of one party were taxed more heavily than the similar domestic products which it encounters on the market of the other party.

26 It appears from the foregoing that the first paragraph of Article 21 of the Agreement imposes on the Contracting Parties an unconditional rule against discrimination in matters of taxation, which is dependent only on a finding that the products affected by a particular system of taxation are of like nature, and the limits of which are the direct consequence of the purpose of the Agreement. As such this provision may be applied by a court and thus produce direct effects throughout the Community.

JUDGMENT OF 26. 10. 1982 — CASE 104/81

27 The first part of the first question should therefore be answered to the effect that the first paragraph of Article 21 of the Agreement between the Community and Portugal is directly applicable and capable of conferring upon individual traders rights which the courts must protect.

Second part of the question

28 In the event of an answer in the affirmative to the part of the question concerning the direct effect of the provision at issue the Bundesfinanzhof asks further whether that provision contains a prohibit of discrimination analogous to that laid down in the first paragraph of Article 95 of the EEC Treaty.

33 Article 2 of the Agreement provides that it applies to products originating in the Community or in Portugal:

"(i) which fall within Chapters 25 to 99 of the Brussels Nomenclature, excluding the products listed in Annex I;

(ii) which are specified in Protocols Nos 2 and 8, with due regard to the arrangements provided for in those protocols."

34 Port wines are mentioned in Article 4 of Protocol No 8 relating to the rules applicable to certain agricultural products. Article 4 provides that duties on imports into the Community of the products listed therein and originating in Portugal are to be reduced in the proportions and within the limits of the tariff quota indicated for each of them.

35 It is apparent from those provisions that the Agreement applies to port wines subject to certain limitations regarding the abolition of customs duties. On the other hand the arrangements laid down in the Protocol in no way affect the prohibition of tax discrimination contained in the first paragraph of Article 21 of the Agreement.

36 The last part of the first question must therefore be answered to the effect that the first paragraph of Article 21 of the Agreement between the Community and Portugal also applies to the importation of port wines.

41 In those circumstances the fact that the said reduction is not applied to port wines is not such as to have an adverse effect upon the liberalization of trade between the Community and Portugal referred to in the Agreement. Having regard to the object of the Agreement, the purely theoretical hypothesis that had the same product been manufactured in the Federal Republic of Germany in special conditions it would have been entitled to the tax reduction is not sufficient to establish an obligation to grant that reduction to the imported product.

42 Question 2 (a) must therefore be answered to the effect that there is no discrimination within the meaning of the first paragraph of Article 21 of the Agreement between the Community and Portugal where a Member State

HAUPTZOLLAMT MAINZ v KUPFERBERG

does not apply to products originating in Portugal a tax reduction provided for certain classes of producers or kinds of products if there is no like product on the market of the Member State concerned which has in fact benefited from such reduction.

43 Question 2 (b) asks whether the first paragraph of Article 21 of the Agreement between the Community and Portugal must be interpreted as requiring the concept of like products to cover not only products "directly" similar but also other products which are to be considered as "equally similar".

44 It is apparent from the order making the reference that the Bundesfinanzhof has put that question on the assumption that port wines may ressemble not only other liqueur wines but also wines of a special kind of a high alcohol content resulting from natural fermentation which, in the Federal Republic of Germany, are not subject to any tax.

On those grounds,

THE COURT,

in answer to the question referred to it by the Bundesfinanzhof by order of 24 March 1981, hereby rules:

1. The first paragraph of Article 21 of the Agreement between the Community and Portugal is directly applicable and capable of protect.. conferring on individual traders rights which the courts must protect

2. It must be interpreted according to its wording and in the light of the objective which it has in the context of the system of free trade Agreement.. established by the Agreement

wines.. 3. The provision also applies to the importation of port wines

Delivered in open court in Luxembourg on 26 October 1982.

P. Heim J. Mertens de Wilmars

Registrar President

OPINION OF MRS ADVOCATE GENERAL ROZES DELIVERED ON 5 MAY 1982 1

Mr President, The facts are as follows: Members of the Court,

In August 1976 the plaintiff in the main action, C. A. Kupferberg & Cie. KG The origin of the present case is an a. A., a partnership limited by shares, application for a preliminary ruling by Mainz, cleared through customs and the Bundesfinanzhof [Federal Finance released for free circulation in the Court] concerning, as in the Polydor case Federal Republic of Germany port wines which this Court decided very recently from Portugal. (judgment of 9 February 1982), the interpretation of a provision of the Agreement signed on 22 July 1972 in The product is made by stopping fermen­ Brussels between the European Econ­ tation of the basic product which is wine; omic Community and the Portuguese the ultimate alcohol content is obtained Republic and concluded and adopted on by adding products from the distillation behalf of the Community by Regulation of wine. According to the definition in No 2844/72 of the Council of 19 Article 2 of Regulation No 948/70 of the December 1972. Council of 26 May 1970 port wine