C-286/82

LUISI AND CARBONE v MINISTERO DEL TESORO

In Joined Cases 286/82 and 26/83

REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunale di Genova [District Court, Genoa] for a preliminary ruling in the proceedings pending before that court between

GRAZIANA LUISI

and MINISTERO DEL TESORO [Ministry of the Treasury] (Case 286/82),

and between

gives the following

JUDGMENT OF 31. 1. 1984 — JOINED CASES 286/82 AND 26/83

JUDGMENT

Facts and Issues

LUISI AND CARBONE v MINISTERO DEL TESORO

of LIT 500 000 per year at that time Ufficio Italiano dei Cambi any foreign permitted by Italian law, a fine of LIT currency which they hold. 13 301 310 was imposed on Mr Carbone by order of the Minister of the Treasury of 28 November 1981, being equal to the The Bank of Italy and the credit under- amount of currency exported in excess of takings approved as agencies thereof may the permitted maximum. issue foreign currency to residents going abroad for the purposes of tourism, business, education or medical treatment, subject to compliance with the provisions Mr Carbone brought an action before laid down by the Ministro per il the Tribunale di Genova against that Commercio col Estero [Minister for order of the Minister of the Treasury. Foreign Trade] (Article 10 (a) of Decree He stated that he had used the foreign Law No 476). currency for a period of three months spent as a tourist in the Federal Republic of Germany and claimed that the Italian Article 4 (a) of the Ministerial Decree of provisions limiting the means of payment 6 June 1956 (Gazzetta Ufficiale della in foreign currency for the purposes of Repubblica Italiana No 138 of 7. 6. tourism were incompatible with Com- 1956) provides that: munity law and in particular with Articles 3 (c), 5, 67, 68, 71 and 106 of the EEC Treaty. "The export of foreign State and bank notes by residents for the purposes of tourism, business, education and medical treatment is permitted up to the amount The contested Italian legislation fixed by the Minister for Foreign Trade."

The exchange control legislation was· further amended by a Ministerial Decree The Ministerial Decree of 22 December of 12 March 1981 (Supplement to "• 1975 (Gazzetta Ufficiale della Repub- Gazzetta Ufficiale della Repubblica blica Italiana No 343 of 31. 12. 1975) Italiana No 82 of 24. 3. 1981). That contains an identical provision in Article decree raised the limit under the general 13 authorizing the issue of foreign authorization for travel for the purpose currency to travellers going abroad for of tourism and business to the exchange the above-mentioned purposes, up to a value of LIT 1 000 000 per annum; the maximum exchange value of LIT possibility of special authorizations for a 500 000 per annum. higher amount was confined to business travel. In implementation of that decree, as amended by the Ministerial Decree of 14 July 1982 (Supplement to Gazzetta Ufficiale della Repubblica Italiana N o 207 of 29. 7. 1982), Circular No 1/11 By virtue of Article 13 of Decree Law of the Ufficio Italiano dei Cambi of N o 476, special authorizations for the 9 May 1983 (Gazzetta Ufficiale della issue of foreign currency of an amount Repubblica Italiana No 137 of 20. 5. exceeding the exchange value of LIT 1983) then laid down that the maximum 500 000 may be applied for from the annual allowance for residents wishing to Minister for Foreign Trade. The latter go abroad for the purpose of tourism may delegate his powers for that purpose was to be the exchange value of LIT to the Ufficio Italiano dei Cambi. 1 600 000, of which LIT 100 000 might Paragraph 3 of Circular N o A/300 of 3 be in the form of foreign State and bank May 1974 issued by the Ufficio Italiano notes and the remainder in the form of dei Cambi authorized the issue of various other means of payment. For foreign currency of an amount exceeding residents going abroad for the purposes LIT 500 000 only for travel for the of business, medical treatment of purpose of business, education or education, the same circular authorized medical treatment, and subject to prior the issue of foreign currency within the examination of the supporting docu-; limits of the actual and proven needs of ments by the Ufficio Italiano dei Cambi the persons concerned, which were to be in each individual case. verified by the approved banks.

The Community provisions 1963-1964, p. 5). The two directives contain in Annex I a complete list of the capital movements covered by Article 67 3. In the proceedings before the of the Treaty. Annex I divides capital national court the plaintiffs relied on the movements into four categories which one hand upon Articles 67 and 68 of the are set out in Lists A, B, C and D. Treaty relating to the movement of Article 7 of the first Directive imposes capital and, on the other, upon Article upon Member States the obligation to 106 of the Treaty concerning payments notify the Commission of any relating to the movement of goods, amendment of the provisions governing services and capital, and also transfers of the transactions appearing in List D capital and earnings. which includes, ¡titer alia, the physical import and export of financial assets. Article 106 (3) provides as follows: The Council has also adopted two "Member States undertake not to directives in implementation of Article introduce between themselves any new 106 of the Treaty. The first is Directive restrictions on transfers connected with 63/340 of 31 May 1963, which is the invisible transactions listed in Annex based on Articles 63 and 106 (2) and is III to this Treaty. intended to ensure the abolition of all prohibitions on or obstacles to payments for services where the only restrictions The progressive abolition of existing on the exchange of services are those restrictions shall be effected in accord- governing such payments (Official ance with the provisions of Articles 63 to Journal, English Special Edition 1963- 65, in so far as such abolition is not 1964, p. 31). Article 3 of that Directive governed by the provisions contained in provides as follows: paragraphs (1) and (2) or by the Chapter relating to the free movement of capital." "This directive shall apply to the services specified in Articles 59 and 60 of the The following appear among the Treaty. invisible transactions listed in Annex III to the Treaty: It shall not, however, apply to services in connection with transport or to foreign Business travel; exchange allowances for tourists." Tourism; Travel for private reasons (education) ; The second directive is No 63/474 of 30 Travel for private reasons (health); July 1963, which is based on Articles 63 Travel for private reasons (family). and 106 (3) and liberalizes transfers in respect of invisible transactions not connected with the movement of goods, The Council has adopted two directives services, capital or persons (Official for the implementation of Article 67 of Journal, English Special Edition 1963- the Treaty. The first is dated 11 May 1964, p. 45). The invisible transactions 1960 (Official Journal, English Special listed in the annex to that directive do Edition 1959-1962, p. 49) and the not include expenses incurred in second, which supplements and amends connection with travel for the purposes the first, is dated 18 December 1962 of tourism, business, education or (Official Journal, English Special Edition medical treatment.

Procedure graph of Article 106 (3) of the EEC Treaty, regard being had to the fact that the transaction in question is one of the invisible transactions listed in Annex III 4. As is apparent from the order to the said Treaty? making the reference in Case 286/82, the Tribunale di Genoa considers that, in view of the judgment of the Court of 11 November 1981 in Case 203/80 Casati [1981] ECR 2595, the Community Or, by virtue of the reference made in provisions relating to the movement of the second subparagraph of Article 106 capital do not entail compulsory (3) of the Treaty, do the above- abolition of restrictions imposed by mentioned circumstances, which, from Member States regarding the physical an objective point of view, constitute a

In this the Court for a preliminary ruling : case, the foreign currency (German marks) is said to have been used for tourist purposes within the territory of a Member State of the Community and in "In the case of exportation by residents particular for services provided in the travelling abroad for the purpose of hotel sector or in closely related sectors. tourism, business, education or medical Considering that it was therefore treatment of foreign State and bank necessary to interpret the concept of notes and credit instruments in foreign movement of services within the meaning currency, do persons subject to Com- of Article 106 (1), and in particular to munity law have the benefit of rights determine whether transfers of currency which Member States are obliged to relating to the provision of various respect by virtue of the 'standstill' services should be described as "current ' provisions contained in the first subpara- payments" or as "movement of capital",

In Case 26/83 by Giuseppe Carbone, or, if the transaction in question falls the plaintiff in the main proceedings, within the category of invisible represented by Giuseppe Conte and transactions listed in Annex III to the Gualtiero Timossi, of the Genoa Bar, EEC Treaty and, by virtue of the and by the Government of the Kingdom reference made by the second subpara- of the Netherlands, represented by E.F. graph of Article 106 (3), the transaction Jacobs deputizing for the Secretary- constitutes a transfer of cash, does it fall General in the Ministry of Foreign within the category of movements of Affairs, acting as Agent, capital which, under the provisions of Articles 67 and 68 of the Treaty and of the relevant directives adopted by the Council on 11 May 1960 and 18 December 1962, need not necessarily be And in both cases by the Government liberalized, with the result that in that of the Federal Republic of Germany, sphere Member States may impose represented by Martin Seidel, acting as controls and penalties of an admin- Agent, by the Government of the istrative nature?" Kingdom of Belgium, represented by W. Collins (in Case 286/82) and by E. de Beer de Laer (in Case 26/83), acting as Agents, by the Government of the Italian The orders making the references were Republic, represented by the Avvocato received at the Court Registry on dello Stato, Marcello Conti, acting as 27 October 1982 (Case 286/82) and Agent, and by the Commission of the 21 February 1983 (Case 26/83). European Communities, represented by

JUDGMENT OF 31. 1. 1984 — JOINED CASES 286/82 AND 26/83

Preliminary comments Observations supporting the applicability of Article 67

The Italian Government expresses doubts in the first place as to whether the plaintiffs in the main proceedings The French and Italian Governments actually used all the currency to which consider that the exportation of currency these two cases refer for the purposes of for tourist purposes constitutes a tourism in Community countries. It movement of capital falling within

LUISI AND CARBONE v MINISTERO DEL TESORO

specific payment in consideration of a of that kind should be carried into effect particular service; currency is merely by means of the procedure provided for being transferred from one Member in Article 69. State to another. All the conditions necessary for the transaction in question to be classified as movement of capital, as provided for in Article 67, are there- fore satisfied. Moreover, the physical In those circumstances, the applicability export of financial assets appears in List of the provisions of Article 106 (3) to D in Annex 1 to the Directive of 11 May exports of currency for tourist purposes 1960, the first Council directive for the is irrelevant, even though tourism implementation of Article 67 of the appears among the invisible transactions

As may travel for tourist purposes does not indeed be seen from the second sub- appear among the invisible transactions paragraph of paragraph (3) transfers listed in the annex to Council Directive connected with certain invisible 63/474 liberalizing transfers in respect of transactions referred to in Annex III in invisible transactions not connected with fact constitute current payments falling current payments or capital movements. under Article 106 (1) und (2) or capital Apparently, the Council considered that movements as provided for in Article 67 transfers connected with tourist trips fall of the Treaty. The reference to Articles within the category of capital 63 and 65 with regard to progressive movements, at least in so far as they do abolition of the restrictions on transfers not constitute payment for. the provision connected with invisible transactions is of specified services. meaningless except with regard to transfers which are classifiable neither as current payments nor as capital

JUDGMENT OF 31. 1. 1984 — JOINED CASES 286/82 AND 26/83

Article 106 (1) and (2) of the Treaty. However, certain transactions listed in Annex III to the Treaty, such as banking The Italian Government goes on to charges, representation expenses and submit that transfers of foreign currency charges for documentation do not fall connected with tourist travel likewise within the concept of services as cannot be regarded as payments provided for in Articles 59 and 60 of the connected with the provision of services Treaty. In fact, the term "services . . . within the meaning of Article 106 (1) normally provided for remuneration" and (2). It refers to the opinion of Mr necessarily presupposes the existence o r a Advocate General Trabucchi in Case specific relationship between the provider 118/75 Watson [1976] ECR 1201 in of a given service and a person es- support of its view that the essential tablished in another Member State to component of "services" within the whom the service is rendered, whereas meaning of Articles 59 and 60 of the the operations referred to above are Treaty lies in the existence of a specific more concerned with general expenses relationship, which is clearly defined, at not connected with a specific relation- least as regards its essential elements

LUISI AND CARBONE v MINISTERO DEL TESORO

The Italian Government emphasizes in that regard that such a system in no way In that respect, the Italian Government affects the right of residents to go states that even if transfers of currency abroad for tourist purposes. It merely

JUDGMENT OF 31. 1. 1984 — JOINED CASES 286/82 AND 26/83

on Article 106 (1). It adds that if Article person. In the Community, similar 106 (3) did apply to transfers of currency systems of allowances are provided for for the purposes of tourism, the second by means of tax and customs rules. Just subparagraph of that paragraph is not in like national allowances in respect of any case directly applicable, since that capital, those systems reflect on the one provision does not specify any precise hand a concern to facilitate trade and, timing for the progressive abolition of on the other, the need for controls existing restriction. Moreover, to date no

force on 1 January 1958. (business, health or leisure) or to grant special facilities on the basis of sup- The French Government considers that porting documents. Moreover, an tourism falls within the scope of the amount, which rises commensurately services provided for in the Treaty. By with the price of the trip, is normally virtue of Article 106 (1) and (2), the paid without the use of notes, namely by restrictions on payments connected with means of bank transfers from the the tourist trade should therefore have country of origin or by payments to been abolished at the end of the travel agencies in the country of transitional period. However, since residence. exports of State and bank notes constitute capital movements within the meaning of Article 67 of the Treaty, In the view of the French Government, each Member State, in the exercise of since the end of the transitional period, the freedom it retains to impose Article 106 (3) adds nothing to the restrictiQns on capital movements, has provisions of paragraph (1) of that perceived an economic and practical article, except in so far as it extends the need to establish a reasonable threshold obligation as to liberalization so as for the permissibility of the free to include payments connected with movement of notes for tourist purposes. transactions which do not fall within the Movements of notes are thus seen as scope of the free movement of goods, authorized capital movements which are services and capital.

It considers, in conclusion, that the first subparagraph of paragraph (3) is not Member States are free to regulate intended to depart from the principle physical exports of bank notes and that the payments referred to in Article therefore to recognize that such exports 106 (1) are of a subordinate nature. By may, within a specified limit, be intended virtue of the latter provision, the for the payment of tourist expenses. Of freedom in respect of payments must be course, they retain the right to change interpreted as representing part of one that limit and to take measures to ensure of the four principal freedoms. It is that such facilities are not used as a therefore guaranteed only to the extent vehicle for capital movements. to which those principal freedoms are achieved. Consequently, the "standstill" clause in the first subparagraph of paragraph (3) can only relate to transfers connected with invisible transactions Observations supporting the applicability unrelated to the movement of goods, of Article 106 (3) services, capital and persons (cf. Annex I to Directive 63/474). As a result, in the case of payments connected with invisible transactions falling within any of the four principal freedoms, the In the view of the German and Belgian "standstill" clause gives way to other Governments, the restrictions imposed by provisions of the Treaty. Therefore, a a Member State on the export of restriction on payments connected with currency by a resident going abroad for an invisible transaction, which at the the purposes of tourism, business, edu- same time is a movement of capital, must cation and medical treatment are not be considered solely in the light of restrictions on capital movements, but Article 67 et seq. of the Treaty. fall within the field of application of Article 106 (3) of the Treaty. Those activities in fact appear in the list of invisible transactions in Annex III to the Treaty, even though the "standstill" The export of currency by a resident obligation laid down in the first subpara- going abroad for the purposes of graph thereof applies to exports of means tourism, business, education or medical of payment relating thereto. treatment constitutes an economic fact which may be associated in part with the free movement of goods (business trips) and in part with the free provision of services (tourism, educational trips or Both governments share the opinion of medical treatment). By reason of the the Italian Government to the effect that, complete liberalization achieved in these by virtue of the second subparagraph fields since the expiry of the transitional thereof, Article 106 (3) is merely residual period, the question whether the re- in character as regards payments con- strictions are "existing" or "new" will nected with transactions falling within not affect any assessment of the the four fundamental freedoms of the compatibility of any restrictions with the common market. Treaty. Only in so far as the exportation in question is used otherwise than for the declared purposes may it be regarded as a capital movement which must be In that respect, the German Government assessed according to the provisions of states that the "standstill" clause in the Article 67.

The Belgian Government considers that payments for the purposes of tourism and travel for business, educational or health reasons are not connected with Observations supporting the applicability the movement of services but must be of Article 106 (1) liberalized by virtue of Article 106 (3). It recognizes however that it is possible to consider such payments to be connected with invisible transactions falling within the scope of the movement of services which are liberalized by virtue of Article 106 (1). Both interpretations moreover lead to the same conclusion as regards the rights of individuals. In both cases it Mrs Luisi, the plaintiff in the main is no longer possible since the end of the proceedings in Case 286/82, Mr transitional period to impose restrictions, Carbone, the plaintiff in the main even if they existed previously. In fact, proceedings in Case 26/83, the in the event of paragraph (3) being Government of the Kingdom of the applicable, the reference contained in the Netherlands and the Commission take the second subparagraph thereof to Articles view that, by virtue of Article 106 (1) of 63 to 65 is meaningless after the end of the Treaty, transfers of foreign currency the transitional period, at which time the made by residents of a Member State to second subparagraph became directly another Member State intended to cover applicable. expenses incurred in respect of tourism must be regarded as liberalized in the same way as the services to which they relate. In Case 286/82, Mrs Luisi and the Commission adopt a similar position with regard to transfers of currency for The direct effect of Article 106 (3) the purpose of business, education and prevents Member States from limiting medical treatment.

In the third place, a tourist who goes It is apparent in the first place from the from one Member State to another for General Programme for the abolition of the purpose of holidays there is a restrictions on freedom to provide recipient of services which are subject, as services (Journal Officiel 1962, p. 32) such, to the provisions of the Treaty that at that time the Council already held relating to the free provision of services, the view that tourism was classifiable in the same way as the provider of the under the heading of provision of said services. Different treatment must services. In fact, restrictions affecting not be accorded to two cases which are tourism were included among the wholly similar: the case where the restrictions to be abolished. Moreover, provider of the service goes to the Directive 64/221 of 25 February 1964 recipient thereof and the more frequent (Official Journal, English Special Edition case where the recipient of the service 1963-1964, p. 117) and Directive 73/148 goes to the provider of the service. The of 21 May 1973 (Official Journal, L 172, effect of any other view would be to p. 14) refer expressly to nationals of a exclude from the field of application of Member State who reside in or wish to the Treaty an activity of considerable go to' another Member State as the economic significance such as tourism. recipients of services.

camping sites and so on. In that According to the Netherlands Govern- connection, the type of services in ment, an inherent feature of tourism is question may be described as extending the fact that when a tourist crosses the beyond frontiers, involving travel on the frontier into his country of destination, part of the recipient, that is to say the no services have yet been provided. The tourist. If it were considered that only tourist carries money to pay for the the provider of services were covered by services which will actually be rendered the Treaty, numerous people involved in to him in the near future. For that trade would never be able to benefit reason, it is not a mere transfer of from the advantages accruing from money across a frontier but the export, establishment of the common market. for a specific purpose, of the money necessary for the services which will ensure that the tourist has facilities for his holidays.

Mrs Luisi adds that the restrictions on means of payment, in so far as they limit the mobility of tourists, are also incompatible with the second article of the Fourth Additional Protocol to the Against that background, it is clear that European Convention on Human Rights, the transfer of foreign currency to which safeguards the right of persons to another Member State for the purposes leave their country, even for a short of tourism is not governed by Article 67 time, and to move freely within the et seq. of the Treaty or by the directives territory of another State. That right is relating to capital movements, but rather protected by Community law. by Article 106.

LUISI AND CARBONE v MINISTERO DEL TESORO

Mrs Luisi, Mr Carbone, the Government activities appear among the invisible of the Netherlands and the Commission transactions listed in Annex III to the also express the view that payments EEC Treaty. Since that provision is clear relating to the provision of services must in its scope and is mandatory no doubt be liberalized as from the end of the can arise regarding its direct applica- transitional period. Comprising as it does bility. In that connection, Mrs Luisi and transactions connected with the free Mr Carbone allege that the restrictions movement of services, tourist travel has introduced by the Italian Government in the benefit of such liberalization, by 1974 and 1975 with a view to limiting virtue of Article 106 (1) of the Treaty. the amount of foreign currency used Mrs Luisi and the Commission express abroad each year represent a change by the same view regarding travel for the comparison with the previous situation. purposes of business, education and Before 1974 it was permissible to use the medical treatment. exchange value of the maximum auth- orized amount for each trip, regardless of the number of trips made by the resident during the course of a year. Under the Italian legislation now in force, an Italian national who has spent The Commission points out that at the the whole permitted amount during a time of its accession Greece had to apply single tourist trip to a Member State is for an express derogation in order to not allowed to return for a further stay, maintain restrictions, subject to certain at least until the next year. Such a conditions and until 31 December 1985, situation is manifestly incompatible with on transfers connected with tourism. the first subparagraph of Article 106 (3). That derogation, which appears in In its reply to the requests for a prel- Article 54 of the Act of Accession, is iminary ruling, the Court should justified only if it is recognized that such therefore rule that in the first place transfers are actually liberalized in people subject to Community law are relations between the Member States. entitled to go to another Member State for tourist purposes whenever they wish without the exercise of that right being hindered by reason of an annual limit on expenditure.

Article 67, with all the consequences situation arises in particular where the thereof with regard to liberalization. The controls in question allow the reintro- concepts adopted in that respect by the duction of discretionary powers on the Treaty are based on a clear distinction part of the administration which are between capital movements (Article 67) capable of hindering the actual provision and current payments (Article 106). of services. It is a discretionary power of precisely that kind which characterizes the Italian legislation with which these proceedings are concerned. In the light of the foregoing con- siderations, Mr Carbone, Mrs Luisi and the Commission consider that the Finally, the Commission points out that Member States are obliged to give the use of bank notes by tourists is the authority for payments relating to most usual method of payment since tourism and travel for the purposes of it offers virtually total freedom of business, education or medical treatment, movement in the country visited. pursuant to Article 106 (1) and to the Therefore, Member States may not reference contained in the second prevent their nationals from having at subparagraph of Article 106 (3). That their disposal, for tourist travel, such does not mean that all control measures, quantities of bank notes as they may although applied within a completely need. However, they retain the right to liberalized sector, are prohibited. verify the nature and genuineness of Referring to the judgment of the Court transfers of currency. Such verifications in Case 203/80 Casati, cited above, Mrs may take different forms, but the Luisi and Mr Carbone state that those measures adopted must not amount to a measures must not go further than is de facto prohibition of payments or lead strictly necessary, nor must they be to an arbitrary limitation of transactions. designed to restrict the freedom which The Commission adds that it is only with the Treaty seeks to ensure. That regard to the protective measures situation arises however if, as in this provided for in Articles 108 and 109 of case, the controls are carried out on a the Treaty that restrictions concerning discretionary basis and if the national both liberalized capital and current legislation limits the amount of payments payments are permitted. However, the connected with operations or activities Italian Republic has never been auth- which are liberalized under Community orized under those provisions to adopt law. or maintain the restrictive measures referred to in this case.

travel for the purpose of business, orized in accordance with Article education or medical treatment are 108 of the Treaty." forms of payment relating to the provision of services governed by Article 59 of the Treaty. Such Ill — Oral procedure operations fall within the provisions of Article 106 of the Treaty and are At the sitting on 12 July 1983 oral not capital movements within the argument was presented by the plaintiffs meaning of the first Council in both actions before the national court, Directive of 11 May 1960 for the represented by Giuseppe Conte of the implementation of Article 67 of the Genoa Bar, the Government of the Treaty. Italian Republic, represented by Marcello 2. The provisions of Article 106 confer Conti, Avvocato dello Stato, the upon individuals the right to transfer Government of the Federal Republic of currency from the Member State in Germany, represented by Martin Seidel, which they reside to another the Government of the French Republic, Member State for the purpose of represented by Alexandre Carnelutti, tourism, and travel for the purposes and the Commission of the European of business, education and medical Communities, represented by Guido treatment. The Member States are Berardis. under an obligation not to adopt any The Advocate General delivered his measure restricting the exercise of opinion at the sitting on 15 November that right, unless it is duly auth- 1983.

Decision

1 By orders of 12 July and 22 N o v e m b e r 1982, which were received at the C o u r t on 27 O c t o b e r 1982 and 21 February 1983 respectively, the Tribunale di Genova [District C o u r t , G e n o a ] referred to the C o u r t for a preliminary ruling u n d e r Article 177 of the E E C T r e a t y a n u m b e r of questions on the interpretation of Article 106 of the T r e a t y in order to enable it to decide w h e t h e r the Italian legislation relating to transfers of foreign currency is compatible with that article.

3 Before the national court the plaintiffs contested the validity of the provisions of Italian legislation on which the fines were based, on the ground that those provisions were incompatible with Community law. In Case 286/82 the plaintiff in the main proceedings, Mrs Luisi, stated that she had exported the currency in question for the purpose of various visits to France and the Federal Republic of Germany as a tourist and in order to receive medical treatment in the latter country. In Case 26/83 the plaintiff in the main proceedings, Mr Carbone, stated that the foreign currency purchased by him had been used for a stay of three months in the Federal Republic of Germany as a tourist. Both plaintiffs submitted that the restrictions on the export of means of payment in foreign currency for the purpose of tourism or medical treatment were contrary to the provisions of the EEC Treaty relating to current payments and the movement of capital.

4 In its first order, dated 12 July 1982 (Case 286/82), the Tribunale di Genova stated that the transactions for which Italian law imposed a ceiling on transfers of foreign currency, namely tourism and travel for the purposes of business, education and medical treatment, fell within the invisible transactions listed in Annex III to the Treaty. Payments made in connection with such transactions therefore fell within the first subparagraph of Article 106 (3) of the Treaty, which required Member States to refrain from intro- ducing any new restrictions between themselves, notwithstanding which the contested Italian legislation was adopted in 1974. It appeared appropriate, however, to determine the exact scope of that provision in relation to those governing movements of capital, in particular as regards the extent to which the latter provisions apply to physical transfers of bank notes.

7 The Tribunale therefore submitted a further question to the Court:

"In the case of exportation, by resident travellers going abroad for the purpose of tourism, of foreign bank notes, or credit instruments in foreign currency, do Community nationals benefit from rights which the Member States are bound to respect by virtue of the directly applicable provision contained in Article 106 (1) of the EEC Treaty, on the assumption that

JUDGMENT OF 31. 1. 1984 — JOINED CASES 286/82 AND 26/83

tourism is to be regarded as falling within the scope of the movement of services and that transfers of currency to cover tourist expenses are to be treated as current payments which must therefore be deemed to be liberalized in the same way as the services with which they are connected;

or, if the transaction in question falls within the category of invisible transactions listed in Annex III to the EEC Treaty and, by virtue of the reference made by the second subparagraph of Article 106 (3), the transaction constitutes a transfer of cash, does it fall within the category of movements of capital which under the provisions of Articles 67 and 68 of the Treaty and of the relevant directives adopted by the Council on 11 May 1960 and 18 December 1962, need not necessarily be liberalized, with the result that in that sphere Member States may impose controls and penalties of an administrative nature?"

8 It is apparent from the wording of the questions submitted for a preliminary ruling and from the statement of reasons contained.in the two orders for reference that the problems of interpretation of Community law arising in these cases are:

9 According to Article 60 of the Treaty, services are deemed to be "services" within the meaning of the Treaty where they are normally provided for remuneration, in so far as they are not governed by the provisions relating to freedom of movement for goods, capital and persons. Within the context of Title III of Part Two of the Treaty ('Tree movement of persons, services and capital"), the free movement of persons includes the movement of workers within the Community and freedom of establishment within the territory of the Member States.

10 By virtue of Article 59 of the Treaty, restrictions on freedom to provide such services are to be abolished in respect of nationals of Member States who are established in a Member State other than that of the person for whom the service is intended. In order to enable services to be provided, the person providing the service may go to the Member State where the person for whom it is provided, is established or else the latter may go to the State in which the person providing the service is established. Whilst the former case is expressly mentioned in the third paragraph of Article 60, which permits the person providing the service to pursue his activity temporarily in the Member State where the service is provided, the latter case is the necessary corollary thereof, which fulfils the objective of liberalizing all gainful activity not covered by the free movement of goods, persons and capital.

n For the implementation of those provisions, Title II of the General Programme for the Abolition of Restrictions on Freedom to Provide Services (Official Journal, English Special Edition, Second Series IX, p. 3), which was drawn up by the Council pursuant to Article 63 of the Treaty on 18 December 1961, envisages inter alia the repeal of provisions laid down by law, regulation or administrative action which in any Member State govern, for economic purposes, the entiy, exit and residence of nationals of Member States, where such provisions are not justified on grounds of public policy, public security or public health and are liable to hinder the provision of services by such persons.

H Among the restrictions on the freedom to provide services which must be • abolished, the General Programme mentions, in section C of Title III, impediments to payments for services, particularly where, according to section D of Title III and in conformity with Article 106 (2), the provision of such services is limited only by restrictions in respect of the payments therefor. By virtue of section B of Title V of the General Programme, those restrictions were to be abolished before the end of the first stage of the transitional period, subject to a proviso permitting limits on "foreign currency allowances for tourists" to be retained during that period. Those provisions were implementd by Council Directive 63/340/EEC of 31 May 1963 on the abolition of all prohibitions on or obstacles to payments for services where the only restrictions on exchange of services are those governing such payments (Official Journal, English Special Edition 1963- 1964, p. 31). Article 3 of that directive also refers to foreign exchange allowances for tourists.

is However, both the General Programme and the aforesaid directive reserve the right for Member States to verify the nature and genuineness of transfers of funds and of payments and to take all necessary measures in order to prevent contravention of their laws and regulations, "in particular as regards the issue of foreign currency to tourists".

LUISI AND CARBONE v MINISTERO DEL TESORO

i6 It follows that the freedom to provide services includes the freedom, for the recipients of services, to go to another Member State in order to receive a s e r v i c e there, without being obstructed by restrictions, even in relation to payments and that tourists, persons receiving medical treatment and persons travelling for the purpose of education or business are to be regarded as recipients of services.

JUDGMENT OF 31. 1. 1984 — JOINED CASES 286/82 AND 26/83

2i The general scheme of the Treaty shows, and a comparison between Articles 67 and 106 confirms, that current payments are transfers of foreign exchange which constitute the consideration within the context of an underlying transaction, whilst movements of capital are financial operations essentially concerned with the investment of the funds in question rather than remuner- ation for a service. For that reason movements of capital may themselves give rise to current payments, as is implied by Articles 67 (2) and 106 (1).

22 The physical transfer of bank notes may not therefore be classified as a movement of capital where the transfer in question corresponds to an obligation to pay arising from a transaction involving the movement of goods or services.

23 Consequently, payments in connection with tourism or travel for the purposes of business, education or medical treatment cannot be classified as movements of capital, even where they are effected by means of the physical transfer of bank notes.

(c) T h e e x t e n t t o w h i c h t h e p a y m e n t s r e f e r r e d to in A r t i c l e 106 of t h e T r e a t y h a v e b e e n l i b e r a l i z e d

24 As regards the m o v e m e n t of services, Article 106 (1) provides that payments . relating t h e r e t o must be liberalized to the extent to which the m o v e m e n t of services itself has been liberalized between M e m b e r States in a c c o r d a n c e with the T r e a t y . By virtue of Article 59 of the T r e a t y , restrictions on the freedom to provide services within the C o m m u n i t y w e r e t o be abolished during the transitional period. As from the end of t h a t period, any restrictions o n payments relating t o the provision of services must therefore be abolished.

28 In that respect, it should be noted in the first place that the liberalization of payments provided for in Article 106 compels Member States to authorize the payments referred to in that provision in the currency of the Member State in which the creditor or beneficiary resides. Payments made in the currency of a third country are not therefore covered by that provision.

29 It should also be noted that Article 2 of Directive 63/340, cited above, states that the liberalization measures provided for in the directive do not limit the right of Member States to "verify the nature and genuineness of payments". This proviso appears to be inspired by the fact that, at that time, payments relating to the movements of goods and services and movements of capital were not yet fully liberalized.

30 However, even though the transitional period has ended that liberalization has not yet been fully accomplished. The Council directives provided for in Article 69 of the Treaty with a view to attaining the free movement of capital have not yet in fact abolished all the restrictions in that area, whilst Article 67, which provides for that freedom, must, as the Court held in its judgment of 11 November 1981 (Case 203/80 Casati [1981] ECR 2595), be interpreted as meaning that even after the expiry of the transitional period restrictions on the export of foreign currency may not be regarded as having been abolished, irrespective of the terms of the directives adopted pursuant to Article 69.

JUDGMENT OF 31. 1. 1984 — JOINED CASES 286/82 AND 26/83

3i In those circumstances, Member States have retained the power to impose controls on transfers of foreign currency in order to verify that transfers do not in fact constitute movements of capital, which have not been liberalized. That power is particularly important since it is bound up with the responsibility which Member States have in relation to monetary matters under Articles 104 and 107 of the Treaty, a responsibility which implies that appropriate measures may be adopted in order to prevent the flight of capital or other speculation of that kind against their currencies.

LUISI AND CARBONE v MINISTERO DEL TESORO

case of expenditure exceeding those limits, that the amounts transferred have actually been used in connection with the provision of services, provided however that the flat-rate limits so determined are not such as to affect the normal pattern of the provision of services.

36 It is for the national court to determine in each individual case whether the controls on transfers of foreign currency which are at issue in proceedings before it are in conformity with the limits thus defined.

37 On the basis of all the foregoing considerations, it may be stated in reply to the questions submitted for a preliminary ruling that Article 106 of the Treaty must be interpreted as meaning that:

Transfers in connection with tourism or travel for the purposes of business, education or medical treatment constitute payments and not movements of capital, even where they are affected by means of the physical transfer of bank notes;

Any restrictions on such payments are abolished as from the end of the transitional period;

On those grounds,

T H E COURT,

in reply to the questions submitted to it by the Tribunale di Genova by orders of 12 July and 22 November 1982, hereby rules:

Article 106 of the Treaty must be interpreted as meaning that:

Transfers in connection with tourism or travel for the purposes of business, education or medical treatment constitute payments and not movements of capital, even where they are effected by means of the physical transfer of bank notes;

Any restrictions on such payments are abolished as from the end of the transitional period;

J. A. Pompe J. Mertens de Wilmars Deputy Registrar President

O P I N I O N OF MR ADVOCATE GENERAL MANCINI DELIVERED O N 15 NOVEMBER 1983 '

Mr President essence the issue to be decided is Members of the Court, whether and how those matters are governed by Community law. The Court is therefore called upon to interpret the 1. Two cases have been referred to the provisions of the EEC Treaty regarding Court for a preliminary ruling relating to liberalization of current payments for the exportation within the Community of seivices which involve travel by the foreign currency intended to pay for recipient of the service from the country services in connection with tourism, in which he resides to the country in health, education and business travel. In which the service is provided.

1 — Translated from the Italian.