C-106/81

KIND v EEC

In Case 106/81

JULIUS KIND KG, supply butcher, of 12 Mercatorstraße, 4048 Grevenbroich 1, Federal Republic of Germany, represented by Dietrich Ehle, of Messrs Ehle, Feldmann, Schiller and Eyl, Rechtsanwälte, Cologne, 13 Mehlemer Straße, 5000 Cologne 51, with an address for service in Luxembourg at the Chambers of Ernest Arendt, 34B Rue Philippe-II, applicant, v

EUROPEAN ECONOMIC COMMUNITY, represented by:

Council of the European Communities, represented by Bernard Schloh, Adviser in the Legal Department, and Arthur Bräutigam, Administrator in that department, with an address for service in Luxembourg at the office of H. J. Pabbruwe, Director of Legal Affairs at the European Investment Bank, 100 Boulevard Konrad-Adenauer, and

Commission of the European Communities, represented by Jörn Sack, a member of its Legal Department, with an address for sen-ice in Luxembourg at the office of O. Montako, a Member of its Legal Department, Jean Monnet Building, Kirchberg, defendant,

A d v o c a t e G e n e r a l : F. Capotorti R e g i s t r a r : J. A. P o m p e , D e p u t y R e g i s t r a r

gives t h e following

JUDGMENT

Facts and issues

I — Facts and procedure (1) Before 1973, the date of the Community's first enlargement, the The applicant, who imports fresh mutton sector was dominated by one Member and lamb from the United Kingdom into State, France, where production and the Federal Republic of Germany, claims consumption of mutton and lamb was that it has incurred damage attributable high (production being insufficient to to the establishment of the common meet demand, however, as production organization of the markets in the sector amounted to 122 000 tonnes a year and of mutton and lamb, and in particular to consumption to 163 000 tonnes a year in the way in which prices for mutton and 1972; source: Statistical Office of the lamb of British origin have developed as European Communities). Mutton and a result. lamb, regarded in France as quality or even luxury products, were sold at prices yielding, in relative terms, a very A — The position of the market in considerable profit on a market which mutton and lamb in the Community was protected by national legislation. prior to the entry into effect of Council Regulton (EEC) No 1837/80 of 27 June 1980 on the common organization of the In the other Member Sutes mutton and market in "sheepmeat" and lamb, unlike beef, veal, pigmeat or goaimeai (Official Journal L 183, poultrymeai, were regarded as products PD of minor importance and their markets Production and consumption of mutton were relatively little organized. Since and lamb van.· widely within the production was insignificant (between Community. 200 and 13 800 tonnes a year in 1972)

and consumption low (between 3.5 and returns for producers based on consumer 17 000 tonnes a year in 1972; source: prices which the consumer was prepared Statistical Office), those Member Sutes to pay having regard to the "quality" frequently obtained their supplies from image of mutton and lamb, the United external markets (especially the United Kingdom, which had a large trade deficit Kingdom) and exported their local in spite of high production, had opted production (the Federal Republic of for a liberal policy on imports (from Germany and the Benelux countries, in New Zealand, in particular) and low particular) to the profitable French consumer prices, often fixed by the market. In those Member States the main government, guaranteeing domestic characteristics of the market were thus producers' incomes by means of a system attractive consumer prices (due, in of production subsidies combined with particular, to the fact that supplies were an import levy (known as a "deficiency brought in from external markets) and a payment"). relatively high return on local production (owing to the fact that producer prices were based largely on the prices quoted It thus became essential to introduce at in France). Community level a common organ- ization of the markets in mutton, lamb and goat's meat owing to the differences in the organization of the markets in (2) The accession of the United mutton and lamb in the three main Kingdom, Ireland and Denmark in 1973 Member States concerned, the effects of greatly altered the situation by extending which on the free movement of goods the mutton and lamb markets to include within the Community had been two Member States which were major criticized by the Court in its judgment producers (224 500 tonnes a year in the of 25 September 1979 (Case 232/7S United Kingdom and 45 000 tonnes a Commission of the European Communities year in Ireland in 1972; source: Stat- v French Republic'[1979] ECR 2729). istical Office) and major consumers (527 700 tonnes a year in the United Kingdom and 33 200 tonnes a vear in Ireland in 1972). B — Principal features of the machinery set up by Regulation No 1837/80 Consumer habits in the new Member States differed considerably from those on the French market. Per capita The common organization of the market consumption was higher (7.6 and 7.3 in mutton and lamb was introduced bv kilograms per year per person in the Regulation No 1837/80 of 27 June 1980 United Kingdom and in Ireland, as (Official Journal L 183. p. 1). That against 4.3 kilograms in France), at common organization differs in many prices which were considerably lower, respects from the traditional schemes making mutton and lamb an evervday introduced by the other common organ- consumer product. izations of markets.

(2) Pursuant to Articles 39 and 43 (3) (a) of the EEC Treaty, a system of The main features of the common production aid is established (Article 5 of organization of the market in mutton the regulation) in the form of a premium and lamb may be summarized as follows: payable "per ewe". The premium represents the difference between the regional reference price and the market price recorded in the production region. (1) Each year a basic price valid Although the system applies in all the throughout the Community and a regions, only the United Kingdom and reference price for each of the six Ireland benefited from it during the 1980 regions of the Community are laid down. to 1981 marketing year. In the other The regionalized reference prices are to regions the aid was not put into e ffea be fixed for subsequent years so as to owing to the favourable development of ensure "the achievement of a single prices. Community reference price by the convergence- of national reference prices in equal annual steps over four years" (Article 3 (4) (ii)). After that period has elapsed, therefore, there must be a single (3) Various intervention measures, such Community reference price representing as private storage aid or the purchase of a uniform upper limit for supporting carcases by the national intervention agencies, are provided for in Article 6 ( 1 ) of the regulation. Implementation of such measures is subject to market prices I — (11 l u u . (2t France, ()ł me Beneiui couni/ie«, Denmar*. anj ir.r Federai Repubu." o' Germany, from 15 July to 15 December of the year 14) Ireland. IM the United rúnftűom and Ibi Greece in question being lower than the

In order to prevent the variable slaughter (4) Article 9 (1) of the regulation premium from operating as an expon provides that in those regions where the subsidy when mutton and lamb arc intervention agencies do not make exported outside the region within which purchases, the Member State concerned the premium has been paid, Article 9 (3) may pay a variable slaughter premium provides that an amount equivalent to when the prices recorded on the rep- the premium which has already been resentative market of that Sute are paid is to be charged on meat leaving the below a "guide level" corresponding to territory of the Member State concerned. 85% of the basic price. Article 31 (1) of That amount is generally designated by Regulation No 1837/80 fixed the basic the English term "claw-back". ' price for the 1980 to 1981 marketing year at 345 ECU per 100 kg. The guide level is therefore in principle 293.2 ECU. However, the basic price is seasonally C — The applicant's economic situation adjusted pursuant to Article 32 of the regulation and the guide level may vary as a result. The applicant is a German undertaking which has specialized since 1893 in the The premium is equal to the difference fresh meat trade. Since mid-1965 it has between the guide level and the market systematically built up a market for fresh price recorded in the Member State in lamb from the Federal Republic of question. Germany and from the United Kingdom. Until the entry into force of Regulation No 1837/80 its activities consisted The United Kingdom made use of that essentialy in supplying the markets of provision during the 1980 to 1981 continental Europe with British- marketing year. Because the regionalized slaughtered lamb at prices which it reference price had been fixed for 1980 describes as "favourable" compared with on the basis of market quotations in the average prices prevailing in the 1979 (the reference year) at 293 ECU, continental Member States of the an amount very close to the guide level Community. fixed for the Community (293.2), subject to seasonal adjustments of the latter the smallest fluctuation in quotations for mutton and lamb in the United Kingdom According to the applicant, German enabled the variable slaughter premium consumer habits and the fact that the to come into operation. The influence on economic conditions in the market of the sharp rise in the value of the pound ian I — Translator's noie. Tne English term "da»--back" is meo ienj:im ir irr Frrr.."r. and German lexn or ine increase of 30% from 1980 to 1981) by luopmen:. German be:nc me laneuaee ot' ine caie

The result was a significant reduction in On 5 February 1981 the applicant placed the applicant's turnover because its its difficulties before the Commission customers werde not prepared to and asked it to submit as soon as possible maintain their purchases in view of the to the Council of Ministers a proposal changes in price. A consequence of this that Anicie 9 of Regulation No 1837/80 was that the applicant was forced to be suspended, or at least amended. As an reduce the working hours of its staff interim measure it asked the Commission because it was unable to find other to suspend collection of the amount sources of supply of similar quality and pursuant to Article 33 of Regulation No price, especially in the Federal Republic 1837/80. of Germany where domestic production was not sufficiently high. In a letter dated 3 March 1981 the Commission displayed "some under- standing" of the applicant's situation, but The applicant attributes these develop- declined to act upon its request. ments in its business to the entry into effect of the common organization of the markets in mutton and lamb, and parti- By application lodged at the Court cularly to the incidence on the purchase Registry on 4 May 1981 the applicant price of British carcases of the amount brought an action before the Court of levied on meat exported from the United Justice under Article 178 and the second Kingdom (the claw-back) by vinue of paragraph of Article 215 of the EEC Article 9 (3) of Regulation No 1837/80 Treaty seeking compensation from the in order to compensate for the effect of Community for the loss it claimed to the variable slaughter premium. have incurred.

II — C o n c l u s i o n s of t h e p a r t i e s Order the applicant to pay the costs;

1. Julius Kind KG (a limited partner- As a precaution, in the event of the ship), the applicant, claims that the Court's incidentally declaring Article 9 Coun should: of Council Regulation No 1837/80 to be invalid either in whole or in part, hold at Order the defendant to pay the applicant the same time and in accordance with DM 375 000 together with interest the second paragraph of Article 174 of thereon at the rate of 10°/c calculated the EEC Trears· that that declaration from the date on which the application does not affect payments of the variable was lodged; slaughter premium made prior to the date of the judgment or the charging, on Declare that the defendant is obliged to exponation from British territory, of an make good to the applicant all the amount equal to that premium;

JUDGMENT OF 15. 9. 1982 — CASE 106/81

In addition, having regard io the more advantageous for non-member importance of this case, decide the case countries than for Member Sutes to in plenary session. obtain supplies direct from the United Kingdom and this gave rise to deflections of trade and, in the applicant's case, to the loss of some of its 4. The Government of the French customers, in particular in Switzerland, Republic, intervening, contends that the who had been accustomed to obtaining Court should: supplies of British meat from the applicant rather than directly from the Dismiss the application; United Kingdom market.

It considers that the charging of the 1. First, the applicant considers its amount provided for in Article 9 (3) of action based on the second paragraph of Regulation No 1837/80 (the claw-back) Article 215 of the EEC Treaty to be is the main cause of the deterioration of admissible. It submits that it has incurred its economic situation. Its pernicious and will continue to incur substantial, effects on inira-Community trade have immediate and foreseeable losses as a been compounded, moreover, by two result of the unlawful conduct of the factors: Council and Commission of the European Communities. It points out that it has no legal remedy, however, the rise in the value of the pound apart from an action based on non- compared with the European currency contractual liability, whereby it may unit; and establish the existence of such unlawful conduct. It does not meet the conditions the Commission's suspension under of admissibility for an application for Anicie 33 ot' Regulation No 1837/80 (by annulment, cannot bring an action for the adoption of Regulation (EEC) No failure to act and, lastly, not being itself 3191/80 of 9 i : I9S0 (Official Journal liable to the claw-back (for which the L 332. p Hi »hich was extended bv exporter from the United Kingdom is Regulation (EEC) No 932/SI or 6 4. responsible) it is unable to bring 1981. (Official Journal L 95. p. 14) of proceedings enabling it to have submitted the claw-back in trade with non-member to the Court a question for a preliminary countries The suspension made it much ruling on the validity of the provision

adversely affecting it. Moreover, the Federal Republic of Germany. In the applicant points out that resort to the second place the introduction of the last-mentioned form of proceedings in common organization of the market in order to gain access to the Court would question produced in this case the be artificial and would not enable the opposite effect to that which traders Court to adjudicate upon the damage were entitled to expect: instead of sustained. The applicant therefore greater freedom of movement for goods, considers that the application for financial obstacles were raised at compensation which is provided for in frontiers within the Community and the second paragraph of Article 215 is there was a general deterioration in the the most logical remedy available to it conditions of trading in mutton and because it enables a decision to be given lamb. on both the validity of the Community provisions and compensation for the loss incurred at one and the same time. The applicant considers that when the Community introduced the common organization of the market in mutton Finally, the applicant submits that the and lamb it "had regard exclusively to case-law of the Court, as illustrated in the interesu of French producers and the particular by its judgments of 2 March interests of British producers and 1977 (Case 44/76 Milch-, Fett- und Eier- consumers" to the detriment of other Kontor GmbH v Council and Commission Community nationals. of the European Communities [1977] ECR 393) and 2 June 1976 (Joined Cases 56 to 60/74 Kurt Kampffmeyer The applicant maintains that the truth of Mühlenvereinigung KG and Others v this allegation is illustrated in the way in Commission and Council of the European which Community prices were fixed, for Communities [1976] ECR 711) confirms in defiance of the criteria which were that under the second paragraph of laid down in Article 3 (2) of Regulation Article 215 the Court may establish not No 1837/80 French market prices were only the damage incurred so far but also adopted as the sole standard of reference the future damage should the institutions with regard to the basic price, and in the pursue their unlawful conduct. case of the reference price for the United Kingdom the prices prevailing on that market prior to the 1980 marketing year

The applicant sees as evidence of this trend in the United Kingdom market the fan that the Commission fixed the variable slaughter premium — and thus (a) That damage has been incurred is the amount of the claw-back — at unquestionable. In the first place it 115.027 ECU per 100 kg (Regulation N o cannot be denied, according to the 3108/80 of the Commission of 28 applicant, that the damage incurred far November 198C, Official Journal L 324, surpassed the economic risk ordinarily p. 68) which corresponds to a real attached to trade in fresh lamb in the

The combined effect of these factors was constitutes a superior rule of law for the to cause the applicant substantial protection of individuals. The sense and commercial losses, as evidence of which purpose of the special intervention it gives the number of carcases which it scheme constituted by the variable has marketed weekly and which has slaughter premium coupled with the claw- fallen from about 6 000 to 3 000 lambs back are incomprehensible — in the light on average. of tne other mechanisms provided for in Article 6 of the regulation — and no (b) The action taken by the Council statement of reasons whatever is given to and Commission is unlawful and shows a explain them. The absence of such a manifest disregard of a number of statement is a particularly serious matter superior rules of law for the protection in this instance because the variable of individuals slaughter premium "is, apparently, one As far as the Council's action is of the provisions which are of great concerned, it failed in adopting Article importance in the management of the 9 (3) of Regulation No 1837/8; to fulfil common organization of the markets". the obligation to state reasons which is The provision in question manifestly set out in Article 19; of the Treaty, h is disregards the fundamental principle, laid maintained bv the applicant that down in Articles 9, 12, 13 and 16 of the inasmuch as the latter provision is prin- Treaty, that charges having an effect cipally designed to safeguard the rights equivalent to customs duties are and interests of those to whom the prohibited in trade between Member legislative measures are addressed it Slates. The Council may not derogate

from the provisions of those anieles. In necessarily distorts the conditions of its judgment of 20 April 1978 (Joined competition. That is particularly true in Cases 80 and 81/77 Société Les the present case owing to the fact that Commissionaires Réunis Sari and Sari Les since the variable slaughter premium Fils de Henn Ramel v Receveur des takes the form of a consumer subsidy Douanes [1978] ECR 927) the Court which is paid on production or slaughter held that in the agricultural sector the it prevents the formation of genuine principle applies as a condition for the market prices in the United Kingdom. achievement of a single market within The claw-back, by contrast, is designed the Community. In its judgment of to restrict the advantages of the slaughter 25 September 1979 (Case 232/78 premium to the British market alone: Commission of the European Communities apart from partitioning the market, v French Republic [1979] ECR 2729) the therefore, it has the effect of compelling Court even pointed out expressly that traders in other Member Sutes of the special measures intended to organize Community to participate in financ- the market in mutton and lamb must not ing intervention measures which are be allowed to operate in such a way as to of advantage exclusively to British prevent "the Treaty provisions relating nationals. to the elimination of restrictions on intra-Community trade from having full force and effect" (paragraph 7 of the The provision in question may also be decision). The fact that this charge levied regarded as a measure having an effect at the border takes the legal form of an equivalent to a quantitative restriction on agricultural intervention measure makes trade, which isprohibited by Article 30 it no less unlawful under Community law of the Treaty. The statistics drawn up by because the claw-back has the three the Association of British Abbatoir characteristics of a charge having an Owners Limited (sent to the ABAO effect equivalent to a customs duty, Sheepmeat Exporters in a letter dated 25 namely: August 1981) show clearly that while British exports to non-member countries remained at a satisfactory level trade with Member Sutes fell sharply in June h is collected on lhe crossing of a and July 1981 compared with the same border; period in 1980. The recovery' of the variable slaughter premium is, therefore, certainly capable of "hindering, directly or indirectly, actually or potentially" It has the effect of a tax; intra-Community trade.

Article 9 (3) of Regulation N o 1837/80 As far as the conduct of the Commission infringes Article 43 (3) (b) of the Treaty is concerned the cause of complaint is according to which the creation of a that it did not suspend, as the applicant common organization of the markets requested in its letter of 5 February 1981, must "ensure conditions for trade within the claw-back in intra-Community trade, the Community similar to those existing as it was empowered to do under Article in a national market". In this case the 33 of Regulation No 1837/80, and as it introduction of the claw-back has has done under Regulation No 3191/80 partitioned the market and seriously in the case of trade with non-member disturbed an existing market which countries. functioned perfectly well between the United Kingdom and Germany up to the date of the entry into force of Regu- lation No 1837/80. In the circumstances the Commission had a legal obligation towards the applicant to take such action in accordance with the principles of Community preference, equal treatment Similarly, the Council may be considered and non-distortion of competition. In the to be at fault inasmuch as when it applicant's opinion that obligation meant drafted the common organization it that the Commission was bound to failed to have regard to the provisions of suspend the claw-back in intra- Article 43 (3) (a) of the Treaty by intro- Community trade, or at least to reduce ducing individual schemes which were the amount thereof until such time as the discriminatory on the pretext of fulfilling Court holds Article 9 of Regulation No its obligations to provide "equivalent 1837/80 to be invalid, in order that its safeguards for the employment and effects should be reduced to the standard of living of the producers" laid minimum. down in that provision. The applicant points out that the term "equivalent safe- guards" does not necessarily imply that previous national prices must be permanently maintained and that in any case the safeguards apply only to The applicant submits that the "producers" and not consumers. The Commission's failure to take such action applicant maintains, however, that the amounts to a breach of the principle of system of slaughter premiums is Community preference inasmuch as the "manifestly intended" to ensure that fact that there is no claw-back in the British consumers are able to purchase case of exports to non-member countries lamb cheaply. Article 9 (1) and (2) of encourages, from the point of view of Regulation No 1837/80 does not, both British producers and buyers in therefore, correspond to the meaning of non-member countries, exports outside Article 43 (3) (a) of the Treaty, and the Community instead of encouraging Article 9 (3), concerning the claw-back, the disposal of Community produce infringes that provision since the primarily on the intra-Community objective of ensuring "equivalent safe- market. Apart from disturbing the guards" may certainly not be achieved at pattern of trade, such a situation distorts the expense of an inviolable principle of competition to the detriment of traders law such as the elimination of obstacles in the Community who find themselves to trade in a common organization of a compelled to finance, by means of the market. claw-back, the activities of traders in

non-member countries who are thus (c) The applicant maintains that the transformed from customers into loss it has incurred is almost exclusively competitors. The Commission's argu- the result of the increase in the cost of ment to the effen that suspending the British mutton and lamb in consequence claw-back in the case of non-member of the claw-back upon exportation. It countries is necessary as a temporary concedes that the rise in the value of the measure to create the effect of an export pound compared to the Deutschmark refund does not, in the applicant's affects price formation. Nevertheless, it opinion, make the Commission's conduct considers that such distortion is not lawful. Article 17 (2) of Regulation No liable to reduce the volume of trade to 1837/80 provides, in accordance with any appreciable extent and that, the principle of equal treatment, that the moreover, Community law has the export refund is to be the same for the appropriate means for dealing with such an effect — for instance, a monetary whole Community. Yet the result of the compensatory amount may be Commission's decision not to operate the introduced or parities may be adjusted. claw-back is, both in law and in fact, the For that reason the applicant considers creation of an expon refund which that its losses are essentially attributable benefits exclusively British producers and to the claw-back and that the situation encourages them to sell their produce on may be remedied bv repealing Article 9 markets in non-member countries in (3) of Regulation No 1837/80, or by defiance of the principle of Community suspending the claw-back pursuant to preference. Article 33 of the same regulation or, finally, by altering the conditions under which the charge may be levied by amending Article 9 (1) and (2) (the provisions governing payment of the In the long term, therefore, such dis- variable slaughter premium). crimination between traders in the Community, and hence between consumers, is liable to lead to a decrease in Community consumption resulting in over-production, for the disposal of which intervention measures will be required, thus increasing the drain on the It adds that in general terms it may be Community's budgetary resources. said that the whole machinery set up by the Community has been thrown out of balance by fixing at too high a level prices which have been determined, as described above, in order to satisfy the The applicant concludes that it must interests of certain categories of "necessarily" be inferred from the producers (the French, in particular) to principle of Community preference that the detriment of other traders. the Commission was under a duty under Article 33 of Regulation No 1837/80 to place traders in other Member States in a similar position io that acquired on the markets of non-member countries by traders in the United Kingdom and, in order to do so, to suspend the claw-back id) The applicant submits that the in the case of exports between Member manifest and serious infringement of States. superior rules of Community law by the

Community institutions — the existence The drop in turnover; of which it considers it has demonstrated — is in itself sufficient to amount to a The reduction of the profit margin; and fault for which the Community is liable. It adds that awareness of the wrongful The reduction of the company's conduct of the Community institutions utilization of its production capacity with emerges clearly from the fact that the the consequenes of that reduction on Commission "states in various parts (of running costs. its defence) that it did not propose the adoption of the provisions contained in The applicant concludes from the fore- Article 9 of the regulation". going that its losses amount to DM 375 000, after it has deducted half of the (e) In order to meet the fifth actual losses incurred in order to exclude requirement, namely that the damage two causes of damage which the must be quantifiable, the applicant applicant does not intend to impute to submits to the Court a statement of the the Community; commercial risk and losses it has suffered, drawn up by exchange risks attributable to the the Düsseldorfer Treuhand-Gesellschan development of the parity of the pound Altenburg und Tewes AG, which has in relation to the Deutschmark. advised it for 53 years and is therefore particularly well placed to judge the way The applicant submits that on those in which its business has developed. grounds its application for compensation should be allowed. Its report is based on the following factors : As to the Commission's subsidiary claim concerning the Court's power to restrict, Income and expenditure for the years pursuant to the second paragraph of 1976 to 1979, based on the annual Article 174 of the Treaty, the effects of a balances sheets; declaration that Article 9 of Regulation N o 1837/80 is invalid, the applicant A calculation of the extra expense takes the view that the second paragraph incurred between January and March of Article 174 does not apply in actions 1981, compared with that incurred for for damages and that in any case it must the same period in 1980; be assured that its claim for compensation for damage will not be On the basis of those figures, estimates adversely affected. for the period between 20 October 1980 and 30 December 1980 (the first months of operation of the common organiz- B — The Council of the European ation of the market, for which period the Communities reviews the political back- applicant has no "concrete figures"). ground to the adoption of Regulation No 1837/80 before going on to describe A comparison of these figures shows that its provisions and the operation of the during the first three months of 1981 the common organization of the markets quantities which were imponed fell during the first marketing year, 1980 to considerably, »hilst there was a sub- 1981. stantial increase in purchase prices Replying to the argument put forward by The report goes on to calculate the loss the applicant, the Council deals first with incurred during the period in question, the question of admissibility and then on the basis of: with the substance of the case.

1. In so far as admissibility is open to objection and was selected solely concerned the Council has decided not in order to evade the restrictions to raise a preliminary objection under concerning applications for annulment Article 91 of the Rules of Procedure of which prevented it from making use of the Court. However, it points out that the latter remedy. the applicant's choice of remedy is not the right one and that its application for 2. The Council considers that the compensation is an artifice. application is based on complaints which The Council points out first that are unfounded. underlying the action for damages is an attempt by the applicant to have the (a) As far as the alleged lack of a validity of the claw-back measures statement of reasons is concerned the reviewed by the Court, a purpose for Council wishes to point out that it does which the proper procedure is that for not consider that disregard of the obtaining a preliminary ruling under obligation to state reasons constitutes a Article 177 of the Treaty. sufficiently serious breach of a superior rule of law for the protection of the The Council then challenges the individual within the meaning of the applicant's claim that it is unable to make case-law of the Court of Justice. use of the procedure under Article 177.

Bela-Mühle Jose/ Bergmann KG [1977] back is to be found in the closing words ECR 1211). Contrary to the applicant's of the second recital in the preamble to submission, therefore, it was not essential Regulation No 1837/80 as well as in the for the administrative measure pre- general background to the regulation. scribing the claw-back to have been The claw-back is inseparable from the addressed to it directly in order for it to slaughter premium, which is clearly be able to initiate proceedings in the defined as being an alternative to the course of which a question might be other intervention measures provided for referred to the Court for a preliminary by the regulation. The need for intro- ruling. ducing the claw-back is itself explained The Council also emphasizes that the in unambiguous terms.

That aim. and the Council that such an action mav not the wav in which it relates to the other be brought in the form ot proceedings intervention measures provided for in based on the second paragraph of Anicie Regulation No 1837/8C, were clearly set 215 of the Treaty and may be based only out. moreover, in the seventh recital in on an application for annulment. The the preamble to Council Regulation applicant's choice of remedy is therefore (EEC) No 2644/80 of 14 October 1980

The Council considers that the real point of law at issue in the present case is In support of its argument the Council whether or not regional aid may be relies on Article 39 (2) (b) of the Treaty granted in the context of a common which expressly provides that account is organization of the markets. The to be taken of the need to effect the Council takes the view that Community appropriate adjustments by degress. law does allow for such a possibility provided that the machinery is adopted on the basis of objective criteria (which was the case, in view of the peculiarities The Council contends that its approach of the various national markets in is clearly explained in Articles 3 (4) (ii) mutton and lamb prior to the entry into and 34 'of Regulation No 1837/80; the effect of the common organization), and result was to put into effect, at the first provided that the effects produced by the stage, a new combination of rules for system of regional aid are geographically stabilizing the markets combining the confined to the area in receipt of the aid. features of a "classical" intervention As far as those requirements are svstem with those specific to the British concerned the Council points out that system of deficiency payments. Thus under the agricultural law of the regional prices were fixed pursuant to Community there are a number of Article 3 (4) (i) of Regulation No svstems, such as that of the variable 1837/80 on the basis of the market slaughter premium and the claw-back, prices recorded during 1979, the year of under which a financial benefit is reference, (or on the basis of estimates granted which must be repaid in certain for 1980). As far as the special case of cases. That is so, for example, in the the United Kingdom was concerned, at sector of beef and veal where there is a the request of the British representative slaughter premium for adult bovine the Council fixed a reference price for animals (introduced by Council Regu- Region 5 at "a level slighdy higher" than

In view of these considerations it is clear, according to the Council, that notwith- The Council also rejects the complaint standing the special regional provisions, that the svstem at issue is discriminatory. which are destined to disappear, the In the first place, producers in trie scheme introduced by Regulation No Community have a guaranteed minimum 1837/80 bears the same characteristics in income throughout the Community of all the Member States and is inspired by 293 ECU; if there is discrimination, a clear-cut aim to achieve uniformity. It therefore, it must be against consumers. is therefore wrong to maintain, as does In that respect, the Council wishes to the applicant, that the machinen.· point out that a difference in treatment introduced by Anicie 9 of the regulation does not signify discrimination unless it is unlawful vis-a-vis Community law by is based on an arbitrary distinction, reason of the fact that it is geographi- which is not the case here. A common cally restricted to one or more regions in organization of the markets based on a the Community. single market and uniform prices can be

JUDGMENT OF 15. 9. 1982 — CASE 106/81

Lastly, the Council rejects the argument The Council interprets the decision of to the effect that the system in question the Court in its judgment of 4 March infringes Article 43 (3) (b) of the Treaty 198C (Case 49/79 Richard Poolv Council which requires newly-created common of the European Communities [1980] organizations of markets to ensure ECR 569), and in particular paragraph 8 conditions for trade within the of that decision (at p. 580), as requiring Community similar to those existing in a that in any application for compensation national market. the applicant must first provide prima facie evidence that he has in reality suffered the damage he claims to have suffered, in the absence of which the It observes, first, that this obligation is Court will be unable to review the not one designed for the protection of validity of the legal measure which is individuals, and »hilst failure to complv alleged to have been the cause of the *-ith it may affect the validity of the damage. measure in question i tcannot give rise to liability on the pan of the Community. In this regard, the Council considers that neither proof nor prima facie evidence of Secondly, the Council believe* that it is the existence of the alleged damage has lusutied in maintaining that mere is no been supplied, for the applicant has such infringement and that the svstem in merely produced a general estimate question is designed, on the contrary, to based on "hypothetical statements".

KIND v EEC

The Council concludes that the real cause of the loss which the applicant 1. Its analysis shows that the entry into claims to have incurred is not to be effect of the common organization of the found in the implementation of the markets entailed a number of difficulties common organization of the markets in adaptation and yet, against all introduced by Regulation No 1837/80 expectations, was characterized by

JUDGMENT OF 15. 9. 1982 — CASE 106/81

KIND v EEC

In the Commission's view the disparities In the first place, the Commission states, between the situations on different the claw-back may not be regarded as a mutton and lamb markets in the charge having an effect equivalent to Community compelled the Council to customs duties prohibited by the Treaty. authorize certain special systems to The claw-back, which is an economically operate on sections of markets within the neutral measure and has no influence on framework of the new common organ-

JUDGMENT OF 15. 9. 1982 — CASE IOi/81

under the previous national organi- The Commission observes in that regard zations. In view of the constraints that to dispute the economic choice that described above to which the the measure represents is to cast doubt Community legislature is subject the only upon all measures designed to encourage acceptable solution was thus a system exports in agriculture and to challenge composed of diversified regional prices, the validity of the expon refund schemes. adjusted by means of the claw-back in order to maintain the strictly regional nature of the measures which had been

traders. But it emphasizes that the common organization of the market. measures are objectively justified, are The Commission states that the reasons necessary in order to achieve the aims of for this drive for custom remain Article 39 of the Treaty and do not "obscure" as far as it is concerned, but it constitute arbitrary rules. suggests that the explanation is to be found in where the applicant's commercial interests lay during that particular period: when it found that the At the same time the Commission rejects claw-back had been effected in respect of the complaint that suspending the claw- expons to non-member countries from back in respect of exports to non- the date of the entry into effect of the member countries constitutes a breach of common organization (with the result the principle of Community preference. that selling prices for British meat on the The Commission wishes to emphasize Swiss market suddenly rose) the that the suspension is a temporary applicant discovered in this market a measure (as is clearly indicated in Regu- profitable way of disposing of the meat

stocks it had purchased in the weeks effects of the mechanism introduced prior to the entrv into effect of Regu- under Article 9: payment of the variable lation No 1837/80. slaughter premium is objectively justified and the claw-back, which is an economically neutral measure, is necessary for the survival of the whole The Commission maintains that its common organization. description of these commercial phenom- ena serves to show that the Community institutions were well-advised to suspend As far as the fixing of prices is concerned the claw-back in respect of exports to the belief that the regionalized reference non-member countries in order to halt price was fixed solely on the basis of the increase in the price of exported the interests of French producers is British meat and to bring to a stop the erroneous. The Italian and Greek resulting decline in trade. reference prices, for instance, are considerably higher than the French price, and as for the prices for Regions 3 As to the losses for which the applicant and 4 (Northern Europe and Ireland), claims compensation the Commission they were determined on the basis of "protests vigorously" against its method traditional export patterns from those of calculating them and challenges the markets to France. The United Kingdom substance of the applicant's claim to have price is the only one which was fixed incurred substantial losses as a result taking into account another criterion in of the Community's legislative action. addition,to the previous market price, The Commission emphasizes that the namely the trend which would ordinarily applicant was in no way entitled to have have been followed on that market had "a situation characterized by deflections the measures restricting imports on the of trade and national export subsidies" French market not prevented British made permanent and that if British meat from gaining access to that prof- mutton and lamb could not be sold in itable market. Germany at their market price that circumstance was attributable only to the attitude of German consumers and price The Commission generally underlines levels on the British market. the fact that the implementation of a common price policy is possible only if it is based on the upper average of the previous prices, for if it is not, it ceases The Commission points out that the to be realistic for the producers. The applicant's argument concerning the increase in the British prices was there- supposed causal link between the intro- fore inevitable, although the Council duction of the common organization and sought to moderate its effects by fixing the loss said to have been incurred different prices which could be gradually contains inconsistencies. The applicant aligned with each other over four years, blames first the intervention mechanism with the result that other regional prices, in .Article 9 of Regulation No 1S37/SC including those in Region 3, ' rose in (in the application) and then the method relation thereto. It would have been whereby regionalized prices are fixed (in unrealistic not to realize that the business the reply). oi some traders might be affected by that, especially as some of them, like the

applicant, had enjoyed unusually advan- that in any case the application must be tageous trading conditions in the past dismissed as unfounded. owing to the disparity between the previous national systems. The 1. The French Government observes, Commission emphasizes, on the one first, that although the applicant's hand, that the applicant had no right to conclusions are in the form of an have the previous situation maintained application for compensation, their true and, on the other hand, that without the purpose is to obtain from the Court a implementation of the measures provided review of the validity of the claw-back for in Article 9 of Regulation No system introduced by the Council.

4. Lastly, the Commission submits ex Treaty. abundan ti canteh observations on what the consequences might be if in the Nevertheless, it should be noted that the Court's decision in the case, Article 9 of French Government does not maintain Regulation N o 1837/80 were considered that the application is inadmissible. to be invalid. 2. As far as the substance of the case is The Commission takes the view that concerned the French Government states such a decision would, by virtue of that the application in question is based Article 176 of the Treaty, produce on non-contractual liability and is binding effects for the Community brought in order to challenge a institutions beyond the scope of the legislative measure involving choices of present dispute. economic policy.

KIND v EEC

States. The common organization of the market in mutton and lamb introduced by Regu- lation No 1837/80 was the result of a (a) The duty to state reasons which is compromise achieved in the face of laid down in Article 190 of the Treaty widely differing market situations which was entirely satisfied in this instance. The were characterized by opposite choices second recital in the preamble to Regu- of economic policy made by the Member lation No 1837/80 shows clearly that States prior to the entry into effect of the the variable slaughter premium must, common system. in order to avoid "disturbance in competition" liable to affect the stability of markets in other production regions in In the light of the situation the Council the Community, be offset by the was compelled to be selective in order to charging of an amount equivalent to that reconcile the vital interests of producers premium when mutton and lamb are and consumers and this led the exponed outside the territory of the legislature to give temporary priority to Member State concerned. some of the aims ascribed by Anicie 39 of the Treaty to common policies in the

luügments of 5 July 1977 (Case 114/76 Bcta-Muhie Jose) Bergmann KG [1977] (b) As to the infringements or the ECR 1211 h 2 July 1974 (Case 153/73 Treaty which the applicant claims to Holtz 6 \X"il/emsen GmbH v Council and detect in connection with the Council's Commission oj the European Communities adoption of Anicie 9 (3) of Regulation [1974] ECR 675) and 21 February 1979

The French Government points out in this connection that the two stabilization In short, the claw-back makes it poss- mechanisms which were provided for by ible to ensure equal conditions of Regulation No 1837/80 (intervention on competition for producers in the the one hand and the slaughter premium different regions in the Community by on the other) are, because of the bringing the prices of products for which existence of such objective differences, the variable slaughter premium has been mutually exclusive and have opposite paid back to a level at least equal to that effects in the way in which they operate. of the guide level, or 85% of the Intervention has a tendency to "draw" uniform basic price. market prices upwards whilst the slaughter premium has the effect of bringing down consumer prices. It was therefore essential, in order to avoid The French Government considers, mutual disturbances between the various therefore, that the claw-back which is an regional markets, for the two systems of essential feature of the newly-established stabilization to be insulated from each common organization, is in any event other by means of the claw-back in compatible with the provisions of the respect of the expon of mutton and lamb Treaty and, moreover, with all the from one production region to another. provisions of the common organization, If payment of the slaughter premium which :

KIND » EEC

Guarantee a fair income for producers admittedly, British exports have fluc- by means of either intervention measures tuated somewhat; nevertheless, it should (Article 6) or the variable slaughter be observed that exports to non-member premium (Article 9); countries show a drop (39%) which is greater than that for exports to the other Member States (36%) and that the fluc- tuation is attributable to two features of the current economic situation: the decrease in British production, on the Stabilize the markets and eliminate any one hand, and the reduction in imports discrimination between producers by from New Zealand on the other (a drop means of the claw-back; of at least 40 000 tonnes for the 1980 to 1981 marketing year), a reduction which led to an increase in the consumption of local mutton and lamb.

JUDGMENT OF 15. 9. 1982 — CASE 10t/il

3. As to the loss which the applicant effects on their economic interests as a claims to have incurred the French result of Community regulations, even if Government considers that the latter has the latter are invalid, and are therefore failed to prove, or even to supply prima disproportionate, or proof that the facie evidence of, either the existence of disproportion affects the general interest the losses which it claims to have and not merely its individual interests incurred or the existence of a causal link (see the judgment of 5 December 1979 in between the conduct of the institutions Joined Cases 116 and 124/77 G. R. which is the target of its criticism and the Amylum NV and Tunnel Refineries alleged damage. As a result, and in Limited v Council and Commission of the accordance with a consistent line of European Communities [1979] ECR decisions of the Court, the latter is not 3497, and 25 May 1978, Joined Cases 83 required to review the legality of the and 94/76, 4, 15, and 40/77 Bayerische measures at issue and the application HNL Vermehrungsbetriebe GmbH & Co. must be dismissed as unfounded. KG and Others v Council and Commission of the European Communities [1978] ECR 1209, and Joined Cases 63 to 69/72, cited above).

KIND v EEC

Decision

1 By application lodged at the Court Registry on 4 May 1981 Julius Kind KG, a supply butcher established in Grevenbroich in the Federal Republic of Germany, brought an action under Article 178 and the second paragraph of Article 215 of the EEC Treaty for compensation for the loss suffered by its business as a result of riie provisions of Article 9 (3) of Council Regulation (EEC) N o 1837/80 of 27 June 1980 on the common organization of the markets in "sheepmeat" and goatmeat (Official Journal L 183, p. 1) in the case of lamb imported from the United Kingdom and as a result of the provisions contained in Article 1 of Commission Regulation (EEC) No 3191/80 of 9 December 1980 on transitional measures concerning non- recovery of the variable slaughter premium for "sheepmeat" and goatmeat products exported from the Community (Official Journal L 332, p. 14) in the case of its exports or opportunities for exports to non-member countries.

2 The applicant seeks compensation amounting to DM 375 000, the loss which it considers it incurred between 20 October 1980, the date of the entry into effect of the common organization of the markets in mutton and lamb and goal's meat, and 31 March 1981, together with interest at 10% to run from the date on which its application was lodged. Finally, it requests from the Court a declaration that it is also entitled to compensation for losses incurred by it after 31 March 1981.

j The action based on non-contractual liability brought by Julius Kind KG is founded upon the alleged unlawfulness of Article 9 of Council Regulation No 1837/80 and Commission Regulation No 3191/80.

7 Finally, subject to certain conditions Article 17 of the regulation empowers the Council to draw up general rules for granting expon refunds which are to be the same for the whole Community.

8 Within the general context of those regulation the provisions challenged by Julius Kind KG may be described as follows:

« Anicie 9 (I) of Regulation No 1837/80 provides that in the regions where there are no purchases by intervention agencies "the Member State or Member States concerned may pay a variable slaughter premium for sheep when the prices recorded on the representative market or markets of the Member State or Member States concerned are below a 'guide level' corresponding to 83c/c of the basic price. The guide level shall be seasonally adiusted in the same way as the basic price". According to Anicie 9 (2) the amount of that premium is to be equal to the difference between the guide

KIND v EEC

level and the market price recorded in the Member State or Member States concerned. Article 9 (3), to which Julius Kind KG takes particular objection, provides that the necessary measures are to be taken to ensure, in the event of payment of the premium referred to in paragraph (1), that an amount equivalent to that premium is charged for the mutton and lamb products referred to in Article 1 (a) when those products leave the territory of the Member State concerned. The amount equivalent to the slaughter premium, which is charged on expons, is commonly known as the "claw-back". Lastly, by virtue of Anicie 9 (5) expenditure incurred under those arrangements is to be deemed to form pan of intervention for the purpose of regularizing agri- cultural markets.

JUDGMENT OF 15. ». 1982 — CASE 106/81

caused to individuals by legislative measures, the Court has declared that in the case of Community legislative measures characterized by the exercise of a wide discretion which is essential for the implementation of the common agricultural policy, the Community does not incur liability otherwise than, exceptionally, where the institution has manifestly and gravely disregarded the limits on the exercise of its powers.

T h e c o n c l u s i o n s in the application based on the a l l e g e d u n l a w - f u l n e s s of the C o u n c i l regulation

The statement of the reasons on which the regulation in based

n Julius Kind KG claims that the Council failed to provide an adequate statement of the reasons upon which its decision to introduce the intervention system described in Article 9 of Regulation N o 1837/80 and, in particular, the claw-back system, was based.

u That submission must be rejected. As far as the system of legal remedies is concerned the requirement of a statement of the reasons upon which measures adopted by the institutions are based is designed to enable the Court to exercise its powers of review of the legality of such measures in the context of Article 173 for the benefit of individuals to whom that remedy is made available by the Treaty. Nevertheless, any inadequacy in the statement of the reasons upon which a measure contained in a regulation is based is not sufficient to make the Community liable.

and, finally, are in breach of the rule set out in Article 43 (3) (b) of the Treaty which requires the common organization to ensure conditions for trade similar to those existing in a national market.

i7 While those criticisms are expressed in various ways and are based on different provisions of the Treat)' they all challenge, on similar grounds, the machinery of the common organization of the market in mutton, lamb and goat's meat established by Council Regulation No 1837/80. A few general observations serve to illustrate the extent of the alleged breaches of law rehed upon by the applicant, and hence the replies to be given to its criticisms.

IB The Council's intention of "attaining the objectives of Article 39 of the Treaty and, in particular, . .. stabilizing the markets and ensunng a fair standard of living for the agricultural Community concerned", and to achieve "a single market based on a common price system", which is set out in the recitals in the preamble to Regulation No 1837/80, is expressed in the fixing of a uniform basic price for fresh or chilled sheep carcases. The intervention price which was adopted for purchases by the intervention agencies, and the guide level used in calculating the variable slaughter premium, each correspond to 85% of the basic price. Consequently, although, in order to take into account the different market situations in the Member States prior to the entrv into force of the regulation, intervention methods may differ, the price level which causes them to come into operation remains the same.

2i First, within the framework of a regulation, namely Regulation No 1837/80, the provisions of which, according to Article 34 thereof, are to be reviewed before 1 April 1984, the charge on exports provided for by Article 9 (3) of that regulation is inseparable in principle from the intervention system which is made up of payment of the variable slaughter premium in Community regions where buying-in is not practised by the intervention agencies. Therefore, the charge does not constitute, as the applicant maintains, a charge having an effect equivalent to a customs duty but is in reality intended to offset exactly the effects of the slaughter premium, thereby enabling products from the Member States or regions in which the premium is paid to be exponed to other Member States without disturbing their markets. If there were no claw-back, offers emanating from a Member State which applies the slaughter premium might be made on markets in other Member States at prices appreciably lower than those obtaining in the latter and might bring, through a fall in prices, the intervention measures which the Community would thus in fact be called upon to finance for a second time, albeit perhaps in another form.

KIND v EEC

22 Secondly, as regards the submission alleging discrimination it should be recalled that different treatment may not, as pointed out in the judgment of the Court of 13 June 1978 (Case 139/77 Denkavit [1978] ECR 1317), be regarded as discrimination prohibited by Article 40 (3) of the Treaty unless it appears to be arbitrary', or in other words, as stated in other judgments, devoid of adequate justification and not based on objective criteria.

JUDGMENT OF 15. 9. 1982 — CASE 106/81

as the Court has already stated in its judgment of 13 November 1973 (Joined Cases 63 to 69/72 Wilhelm Werhahn Hansamühle and Others [1974] ECR 1229).

26 In its last submission Julius Kind KG raises the objection that Anicie 9 of Regulation No 1837/80 fails to meet the requirement, set out in Article 43 (3) (b) of the Treaty, that the common organization of agricultural markets must ensure conditions for trade within the Community similar to those existing in a national market.

KIND v EEC

30 It is stated in the recitals in the preamble to Commission Regulation No 3191/80 that it has been found that the charging of an amount equivalent to the variable slaughter premium for sheep on exports from the territory of the Member State concerned "gives rise to appreciable difficulties for export of the products in question from the Community". Pursuant to Article 33 of Council Regulation No 1837/80* which provides that "the Commission may adopt appropriate measures to facilitate the transition from the system in force in each Member State before the application of this regulation to the svstem established by this regulation", Article 1 of Regulation No 3191/80 provides as has been stated, that notwithstanding Article 9 (3) of Regulation (EEC) No 1837/80, the amount referred to therein is not to be charged on export of the products in question from the Community.

3i Inasmuch as Julius Kind KG complains that a similar suspensory measure has not been adopted for expons from one Member State to another, its application is unfounded. There is no provision in the Treaty and no general principle of Community law which requires measures based on the needs of exports to non-member countries to be extended to trade between Member States. On the contrary, for the reasons already indicated suspension of the claw-back in respect of exports from a Member State in which producers are paid the variable slaughter premium to another Member State where that premium is not paid could disturb the Community markets in mutton, lamb and goat's meat which Regulation No 1837/80 is designed to stabilize.

3« An examination of both the file on the case and the statements made by the applicant at the hearing show that it had not built up any firmly established market in the countries which were not members of the Community. In the case of the Swiss market, in particular, which is the sole concrete example given of the expansion of its business outside the Community, the applicant has acknowledged that it did not seek to penetrate the Swiss market until September 1980. N o r has it been established, or even, in fact, maintained, that the applicant had acquired regular customers there before the intro- duction of Regulation N o 3191/80. As a result it must be held that the applicant has failed to furnish even the beginnings of proof in support of its allegations that the Commission's conduct caused it to incur a loss and that it is not necessary to determine whether the other conditions governing liability on the part of the Community are met.

35 As a result of the foregoing the application for compensation for damage made by Julius Kind KG must be dismissed.

Costs

36 Article 69 (2) of the Rules of Procedure provides that the unsuccessful party is to be ordered to pay the costs. Since the applicant has failed in its submissions, it must be ordered to pay the costs, including those of the intervener in support of the defendant.

On those grounds,

THE COURT

For the Registrar H. A. Rühi J. Mertens de Wilmars Principal Administrator President

OPINION OF MR ADVOCATE GENERAL CAPOTORTI DELIVERED ON 9 JUNE 1982 »

Mr President, of the Commission to suspend that Members of the Court, measure.

It will be remembered that the regulation 1. This action has been brought against established the common organization of the Council and the Commission by the markets in mutton, lamb and goat's a German undertaking, Kind, which meat, the organization being based prin- imports and markets fresh meat from the cipally on the rules governing prices (a Federal Republic of Germany and the Community basic price, regionalized United Kingdom. That undertaking reference prices and prices recorded seeks compensation for the loss it claims on representative markets in the to have incurred as a result of the intro- Community), on the granting of a duction bv Council Regulation No premium to producers to offset a loss of 1837/82 of 27 June 1980 of a special earnings resulting from the introduction expon levy, and the failure on the part of the common organization of the

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