C-271/81

HENRI SAPHORE, and

SOCIÉTÉ AGRI-SEM, Idron,

on the interpretation of Article 37 of the EEC Treaty,

THE COURT

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

Advocate General : Sir Gordon Slynn Registrar: P. Heim

Mr Mialocq and Mr Saphore, who are Article 5 of the Law provides that both inseminators, carried out artificial insemination centres, irrespective of insemination on behalf of the Société whether they are engaged in the Agri-Sem [hereinafter referred to as production of semen or in the carrying "Agri-Sem"] within the area assigned to out of insemination or both, may operate the Société Coopérative. The Société only if prior authorization has been Coopérative, the plaintiff in the main granted by the Minister for Agriculture. proceedings, summoned the two inseminators and Agri-Sem before the Article 5 also provides that: Tribunal Correctionnel [Criminal Court] for committing the offence of carrying "Each insemination centre shall have an out artificial inseminations in an area not exclusive concession in respect of a assigned to them for that purpose and specific area. The authorization granted sought to have them made jointly and to it shall define that area.

JUDGMENT OF 28. 6. 1983 — CASE 271/81

Insemination centres may be auth- Those contracts shall contain an under- orized to maintain stocks of approved taking by the insemination centre to take

AMÉLIORATION DE L'ÉLEVAGE v MIALOCQ

Officiel de la République Française of 19 "Insemination centres shall normally February 1970, p. 1766) provides as procure breeding animals or semen from follows : the production centre or centres with which they have concluded a contract. "Doses of animal semen from the species They may obtain supplies from other referred to in Article 1 of the Law of 28 centres pursuant to a request in writing December 1966 which are submitted to by individual breeders in their area, in the customs authorities for importation accordance with the provisions of Article or exportation shall be accompanied by a 5 (5) of the above-mentioned Law of certificate of origin issued by the official 28 December 1966. authorities of the exporting country and shall come from a breeding animal which Semen stored in the depot or depots has successfully undergone a test to maintained by an insemination centre determine its pedigree in accordance shall normally be used for insemination with a programme approved by the of animals in the area assigned to it. Minister for Agriculture, in the case of exports, or recognized by the minister as An insemination centre may resell semen equivalent to an approved programme in only to the production centre from the case of imports." which it takes supplies."

Breeders are which seeks to import free of customs obliged to deal with the centre for their

area in order to obtain the semen of their of the requisite authorization is within choice, produced by an approved centre. the discretion of the monopoly leads to Those centres are not exposed to discrimination within the meaning of competition by virtue of the fact that all Article 37 of the Treaty. imports of foreign semen must be accompanied by a licence issued by the Minister for Agriculture and granted In its judgment of 22 April 1981, the exclusively to approved centres which national court stayed the proceedings benefit from the monopoly. and referred to the Court of Justice, pursuant to Article 177 of the Treaty, the following questions for a preliminary The national court points out, however, ruling: that the case-law in France is inconsistent on the question whether the " 1 . Does the provision of services have a State monopoly is of a commercial commercial character within the character within the meaning of Article meaning of Article 37 of the Treaty 37 of the EEC Treaty. Certain decisions of Rome if, because it is the subject given by the courts in similar cases were of a national monopoly, the State is based on the fact that the restriction enabled to direct a branch of the imposed on breeders and the exclusive national economy? rights conferred by the legislation in question were concerned not with procurement of a product (semen) but 2. If that question is answered in the with the provision of a service affirmative, can a system under (insemination) and thus fell outside the which authorizations are issued by scope of Article 37 öf the EEC Treaty. the State for the provision of such In that regard, the national court finds services involve discrimination within that the legislation in question is the meaning of the same article? concerned with the provision of two separate services, namely the 3. More particularly still, can the insemination and the transaction discrimination referred to apply concluded at the breeder's request for exclusively to persons and not to the purchase of semen, sometimes from products?" another centre. According to a consistent line of French cases, undertakings which provide services are commercial in character. 4. The judgment making the reference was received at the Court Registry on 7 October 1981. Having found that a State monopoly over artificial insemination may affect In accordance with Article 20 of the trade in semen between the Member Protocol on the Statute of the Court of States, the national court decided to Justice of the EEC, written observations refer the matter to the Court of Justice. were submitted by the following: the Société Coopérative, the plaintiff in the main proceedings, represented by Claude If the provision of the above-mentioned Paulmier, Advocate at the Cour d'Appel, services is of a commercial character, the Paris; Mr Mialocq, Mr Saphore and further question arises whether, as Agri-Sem, the defendants in the main regards the right of foreign breeders to proceedings, represented by François set up insemination or semen production Cathala, of the Paris Bar; the French centres, a system under which the grant Government, represented by Maryse

Aulagnon, Legal Adviser at the Sec- to the Court of Justice for a preliminary retariat General of the Inter-ministerial ruling were not the subject of adversary Committee for Questions of European proceedings before that court since the Economic Cooperation, acting as Agent; defendants failed to enter an appearance. and the Commission of the European In the light of certain decisions of the Communities, represented by its Legal French supreme courts holding, on the Adviser, René-Christian Béraud, acting basis of the decisions of the Court of as Agent. Justice, that Article 37 of the Treaty is inapplicable to the French arrangements governing artificial insemination, the Upon hearing the report of the Judge- national court would not have been Rapporteur and the views of the moved to refer the matter to the Court Advocate General, the Court decided of Justice if adversary proceedings had to open the oral procedure without taken place. any preparatory inquiry. However, it requested the Commission to reply to the following question: As regards the first question raised by the national court, the plaintiff in the main proceedings argues in the first place "As regards the importation of bovine that Article 37 of the Treaty is not semen into France, the defendants concerned with the provision of services observe in their statement of defence that even if they are of a commercial foreign producers of bovine semen have character. made . several complaints to the Commission to the effect that they had According to the Court's judgment of 30 been — in the terms used by the April 1974 in Case 155/73 (Sacchi [1974] defendants — systematically obstructed ECR 409), Article 37 refers only to by the French authorities. Is the transactions involving trade in goods and Commission able to confirm this infor- cannot relate to a monopoly over the mation and, if so, state what action it has provision of services. The fact that taken in relation to those complaints?" services are of a commercial character in no way alters the fact that they are services. In fact, Article 60 of the Treaty Furthermore, the Court invited the provides that services are to include, in parties to put forward their views at the particular, activities of a commercial hearing on the observations submitted character. by the Commission in its statement regarding the application of Article 59 of the EEC Treaty. However, that is not the case with regard to artificial insemination \vhich is an activitiy of an agricultural character. In that respect, the court making the reference has regrettably confused the II — S u m m a r y of t h e written concept of "the provision of services of a o b s e r v a t i o n s s u b m i t t e d to commercial character" with the concept the C o u r t of "goods or products".

Finally, the plaintiff relies on the Court's jugdments of 15 July 1964 in Case 6/64 The plaintiff's second argument is that (Costa v ENEL [1964] ECR 585) and of there can be no question in the present 5 February 1976 in Case 58/75 (Pubblico case of a State monopoly, within the Ministero v Manghera [1976] ECR 91) in meaning of Article 37 of the Treaty, support of its contention that Article 37 enabling the State to direct a branch of of the Treaty does not prohibit State the national economy. It disagrees with monopolies of a commercial character the national court's observations to that such as, for example, the French tobacco effect. The Minister for Agriculture and match monopoly (SEITA), but issues the requisite authorization and merely prohibits discrimination between does not thereafter interfere with the nationals of the State in ' question and functioning of artificial insemination nationals of other Member States. centres. The State does not dictate policy to them ad they are entirely free to arrange their financing arrangements as they see fit, their sole obligation being to As regards the second and third comply with the legislation governing the questions, the plaintiff reiterates that in type of association in which they are its opinion the French arrangements legally constituted, in this case an agri- governing artificial insemination do not cultural cooperative. lead to any discrimination as regards either the right of nationals of other Member States to carry on the activities in question or the procurement of products from other Member States. Furthermore, the sole purpose of the system of import licences for semen, referred to by the national court, is to ensure compliance with the legislation on Mr Mialocq, Mr Saphore and Agri-Sem, health safeguards contained in Decree the defendants in the main proceedings, No 70-137 of 16 December 1970 on point out in the first place that, as far as imports and exports of live animals and artificial insemination is concerned, the the semen of breeding animals. Semen French Law of 28 December 1966 on which satisfies the conditions prescribed animal rearing is based on two principles.

First, regional insemination centres for may discourage the breeder from bovine semen possess a territorial importing the product. monopoly over the provision of the service in question, namely insemination, and, secondly, those centres have the As far as the first question is concerned, exclusive right to distribute and to the defendants consider that the inten- market the product used, whether it be tion of the French legislature in 1966 as of French or of foreign origin. In that regards the artificial insemination of regard, the defendants point out that the cattle was undoubtedly to take over insemination centres obtain the semen responsibility for directing that branch of either from the production centres with economic activity. In the defendants'

insemination centre. In practice, appli- cations for import licences are processed Accordingly, all the insemination centres centrally by the Union Nationale des fall within the category of State Coopératives d'Elevage et d'Insémination monopolies referred to in Article 37 (1) Artificielle (UNCEIA) [National Union of the EEC Treaty. Those centres, as is of Breeding and Artificial Insemination moreover the case with production Cooperatives, hereinafter referred to as centres, are authorized and controlled by "the National Union of Cooperatives"], the State.

to say of the production and insemination centres which possess A monopoly of a commercial character exclusive marketing rights and a may come into being not only as a result monopoly over insemination. of the organization of insemination centres but also as a result of their activities. Those activities consist in the In those circumstances, the importation procurement of semen from production of semen is such a lengthy process that it centres or from abroad in order to resell

The Court held in its judgment of 3 In conclusion, the defendants in the main February 1976 in Case 59/75 (Pubblico proceedings propose that the answer to Ministero v Manghera [1976] ECR 91) the first question should be that the that, as from the expiry of the provision of services which cannot be transitional period, every State monopoly dissociated from the supply of a product of a commercial character should have is of a commercial character, within the been adjusted so as to eliminate the meaning of Article 37 of the Treaty, if it exclusive right to import from other is subject to a State monopoly over the Member States. provision and distribution of that product and thus enables the State to direct a branch of the national economy The defendants in the main proceedings both domestically and in connection with therefore propose that the answer to the intra-Community trade. second question should be that a system under which authorizations are issued by a Member State for the provision of services which are subject to a State As regards the second question, the monopoly is incompatible with Article 37 defendants submit that, even if nationals of the Treaty in so far as the conditions of other Member States of the governing the exercise of the activity in Community may, by law, be granted question create discrimination within the authorization to set up insemination meaning of the Treaty, in particular with centres, the right to take up that activity regard to imports. is meaningless in practice since all the available areas have long been allocated to existing centres. However, the It follows, as regards the third question defendants consider that the prohibition raised, that such discrimination cannot

be directed exclusively against persons. any kind of monopoly in that regard. On the contrary, it inevitably affects the Thus, by virtue of their designation products in question solely by virtue of and their powers, artificial insemination the fact that the service is linked to the centres enjoy a monopoly over the exclusive right to import and market the provision of services, that is to say a product which forms the subject-matter monopoly of the kind which the Court of the service. clearly excluded from the scope of Article 37 of the Treaty in its aforesaid judgment of 30 April 1974 in Case 155/73 (Sacchi). The defendants in the main proceedings contend, further, that under Article 37 State monopolies should have been adjusted even in the agricultural products As regards the operation of artificial sector either under a common organ- insemination centres, the French ization of the market or under a national Government points out that every system complying with the provisions of breeder is free to obtain the semen of the the Treaty, in particular those relating to breed of his choice, provided that it the free movement of goods (see the meets the standards prescribed for the judgment of 10 December 1974 in Case breed in question, that it comes from an 48/74, Cbarmasson v Minister for approved production centre or that it has Economic Affairs and Finance, [1974] been imported for use at an approved ECR 1383). In addition, Article 37 (4) centre. Semen produced in France is concerning monopolies which have rules obtained by the insemination centre on relating to agricultural products does not behalf of the breeder. Any additional derogate from the other provisions of costs incurred as a result of individual that article (see the judgment of 17 requirements are borne by the breeders February 1976 in Case 91/75, Hanpt- concerned, which shows that the insemi- zollamt Göttingen v Miritz, [1976] ECR nation centre acts not as a trader but as a 217). provider of services. Moreover, the obligation incumbent on a breeder belonging to a cooperative authorized to carry out insemination to avail himself of the services provided by his centre Finally, as regards the contention that derives not from the law on animal Article 36 of the Treaty precludes the rearing but from the undertaking to application of Article 37, the defendants cooperate which he has given of his own argue that the restrictions in imports of free will. Community semen are not based on grounds of the protection of health and life of animals but have as their purpose merely to maintain the genetic quality of As regards imported semen, the issuing cattle at a specific level. of import licences is not restricted to insemination centres. In order to comply with the legislation on insemination, the authorities must simply ensure that the The French Government observes first of imported semen is actually used by auth- all that the monopoly enjoyed by arti- orized centres. ficial insemination centres relates only to the carrying out of insemination. The service is provided with semen which is imported under licence or comes from The reason for the important role played production centres which do not possess by the National Union of Cooperatives is

that the organization of insemination The French Government maintains in the centres in the form of cooperatives has alternative that the licensing system does led to the establishment of a pyramidal not lead to any discrimination. Any structure. The undertaking given by Community national may be authorized those centres to procure their semen to become an inseminator and to carry from the National Union of Coop- out artificial insemination. Furthermore, eratives, to which they all belong, is every artificial insemination cooperative merely the consideration for the benefits to which an insemination area has been conferred upon the agricultural cooper- allocated is under an obligation to atives. However, the role played by the extend its facilities to all breeders, cooperative movement does not give rise including non-members, on pain of to a de facto monopoly since there are having its authorization revoked if it other approved bodies carrying out arti- refuses to provide the service in question. ficial insemination which are not organized in the form of cooperatives. Finally, the issue of import licences is Thus, artifical insemination centres are automatic and is not subject to any not, as regards the exclusive rights quantitative limit, provided that the conferred upon them by the Ministry of technical standards prescribed for semen Agriculture, the services which they of the breed in question are complied provide or their structure, of a with. Those standards are applicable commercial character within the meaning without distinction to semen from of Article 37 of the EEC Treaty. breeding animals stocked in French production centres and to semen imported from abroad. Furthermore, the The French Government considers that French Government points out that, the monopoly delegated to insemination although Article 2 of Council Directive centres as an adjunct to the licensing 77/504/EEC of 25 July 1977 on pure- system enables the State to provide a bred breeding animals of the bovine public service aimed at protecting and species (Official Journal 1977, L 206, p. improving the health of cattle. However, 8) provides that intra-Community trade the choice of suitable breeds and in semen and embryos must not be breeding animals, which in practice restricted "on zootechnical grounds", determines the breeding policy to be Article 3 provides that the relevant pursued, is ultimately a matter for the national laws are to remain applicable breeders themselves. Although the until the entry into force of Community monopoly in question makes it possible provisions. Since no such provisions have to pursue a policy of health protection, it been adopted, France cannot be re- cannot enable the State to direct a proached for continuing to apply its own branch of the national economy. national rules.

(Case 155/73, Sacchi), the exclusive right French authorities on imports of bovine to carry out insemination constitutes a semen. The Commission has considered monopoly over the provision of that those complaints and come to the service and comes within Article 59 et conclusion that France has failed to fulfil seq. of the Treaty rather than within its obligations under Article 37 of the Article 37. Treaty and under Directive 77/504. That opinion is based on the consideration that in practice import licences are issued It considers, also in the light of that exclusively to traders who are able to use judgment, that the granting by Member the semen in a manner which accords States of special or exclusive rights to with the French legislation or who act on public or private undertakings is not in behalf of a body which satisfies that itself incompatible with Article 86 of the requirement. Furthermore, the fact that Treaty. However, there would be an the product may be imported and abuse of a dominant position, within the marketed only by bodies which produce meaning of that article, if the under- and market their own semen constitutes takings in which an exclusive right is a fortiori discrimination within the vested, in this case the cooperatives meaning of Article 37. In those circum- belonging to the National Union of stances, the Commission has initiated the Cooperatives, were to impose inequitable procedure for failure to fulfil an or discriminatory conditions on those obligation provided for in Article 169 of who availed themselves of their services. the Treaty. The Commission has in fact received a complaint against the National Union of Cooperatives based on Articles 85 and 86 However, the Commission takes the view of the Treaty. The internal rules of that that those considerations do not call in body, which are binding on all its question the monopoly over the members, include restrictions on the provisions of the insemination services as importation and testing of semen orig- such. It therefore proposes that the inating abroad and involve the fixing of answer to the first question should be prohibitive prices for the processing of that the exclusive right to carry out applications to import semen. insemination does not fall within Article 37 of the Treaty.

As far as freedom to provide services is concerned, an administrative practice Ill — Oral procedure which precludes the provision of services by inseminators established in other At the sitting on 26 April 1983, oral Member States who offer the same pro- argument was presented by the follow- fessional guarantees as those required by ing: Claude Paulmier, Avocat at the national legislation is incompatible with Cour d'Appel, Paris, for the Société Article 59 of the Treaty. However, a Coopérative, the plaintiff in the main system involving the grant of exclusive proceedings; François Cathala, Avocat at authorization, such as the monopoly the Paris Bar, for Mr Mialocq, Mr over insemination with bovine semen, is Saphore and Agri-Sem, the defendants in compatible with Article 59 in so far as it the main proceedings; Gilbert Guillaume, is justified on grounds of the existence of Director of Legal Affairs at the Ministry a general interest which merits protection of Foreign Relations, assisted by such as, in the present case, the Alexandre Carnelutti, Secretary for improvement of the quality of cattle and Foreign Affairs, acting as Agents, for the of the conditions in which they are bred. French Government; and René-Christian Béraud, acting as Agent, for the Com- mission of the European Communities. As far as the third question is concerned, the Commission adds that measures The Advocate General delivered his which are incompatible with provisions Opinion at the sitting on 1 June 1983.

Decision

1 By j u g d m e n t of 22 April 1981, which was received at the C o u r t on 7 O c t o b e r 1981, the T r i b u n a l de G r a n d e Instance, P a u , referred to the C o u r t of Justice for a preliminary ruling u n d e r Article 177 of the E E C T r e a t y three questions o n the interpretation of Article 37 of the E E C T r e a t y .

s The judgment making the reference finds, on the basis of that legislation, that there is at present a territorial monopoly in France in favour of centres tor the insemination of cattle. According to that judgment, the grant to a cooperative of an exclusive concession in respect of a specific area may be contrary to the provisions of Article 37 of the EEC Treaty relating to State monopolies of a commercial character.

JUDGMENT OF 28. 6. 1983 — CASE 271/81

6 In that regard, the national court considers it to be undeniable that the insemination centres in question are in the nature of monopolies which have a national character inasmuch as the centres as a whole are not exposed to competition since breeders are compelled to deal with the centre for their area in order to have their cattle artificially inseminated and even in order to obtain the semen of their choice. The national court, however, wishes to ascertain whether those centres are of a commercial character.

7 In order to seek guidance on that point, the national court requested the Court of Justice to give a preliminary ruling on three questions, the first of which is as follows:

"Does the provision of services have a commercial character within the meaning of Article 37 of the Treaty of Rome if, because it is the subject of a national monopoly, the State is enabled to direct a branch of the national economy?"

8 In the first place, it must be remembered that, as the Court has already held in its judgment of 30 April 1974 in Case 155/73 (Sacchi [1974] ECR 409), it follows both from the place occupied by Article 37 in the chapter of the EEC Treaty on the elimination of quantitative restrictions and from the wording used in that provision that it refers to trade in goods and cannot relate to a monopoly over the provision of services.

1 3 The answer to the first question must therefore be that Article 37, properly construed, does not apply to a monopoly over the provision of services, even if such a monopoly enables the Member States concerned to direct a branch of the national economy, provided that it does not contravene the principle of the free movement of goods by discriminating against imported products to the advantage of products of domestic origin.

H In the light of that answer, the second and third questions, which concern only the effects of a monopoly over the provision of services, are devoid of purpose.

Costs

is The costs incurred by the French Government and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

OPINION OF SIR GORDON SLYNN — CASE 271/81

On those grounds,

O P I N I O N OF ADVOCATE GENERAL SIR G O R D O N SLYNN DELIVERED O N 1 JUNE 1983

My Lords, Saphore are apparently qualified artificial inseminators. They are charged by the The Société Coopérative d'Amélioration Société Coopérative with the criminal de l'Élevage et d'Insémination Artificielle offence of carrying out artificial du Béarn conducts an artificial insemination in an area not allotted to insemination centre approved by the them for that purpose, namely the area French Minister for Agriculture with an allotted to the Société Coopérative. A exclusive right to operate in the zone claim is also made that they and their allotted to it. Mr Mialocq and Mr employers, the Société Agri-Sem are