C-106/83

C O N Z O R Z I O NAZIONALE BIETICOLTORI and

ASSOCIAZIONE NAZIONALE BIETICOLTORI,

and by M. BIANCHINI AND C. MERCIAI,

and

CASSA CONGUAGLIO ZUCCHERO,

MINISTERO DELLE FINANZE [Ministry of Finance,] MINISTERO DEL TESORO [Ministry of the Treasury],

JUDGMENT

Facts and Issues

The facts of the case, the course of quota but below the maximum quota the procedure and the observations and which may be exported with the submitted pursuant to Article 20 of the benefit of an export aid; Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows: (c) the C quota, which covers sugar produced in excess of the A and B quotas and which may be marketed only in non-member countries but I — Legal b a c k g r o u n d to the without the benefit of an export aid. dispute

intervention price and the world sugar (b) a fixed amount per unit of price. The refunds are financed by the weight to compensate losses levies fixed by the Commission for each incurred in disposing of that marketing year. The system hitherto sugar. This amount shall cor- applicable was amended by Regulation respond to the weighted average No 1785/81 in several respects; in of losses incurred in disposing particular the levy, which under Regu- of sugar during the period lation N o 3330/74 was charged only on 1 October of the relevant B quota sugar, was extended to A quota marketing year to 30 September sugar. of the following year, less the export levy charged during the As regards the calculation of the levies, same period." Article 7 of Regulation (EEC) No 700/73 of the Commission of 12 March 1973 laying down certain detailed rules for the application of the quota system Article 9 of Regulation N o 700/73 for sugar (Official Journal 1973, L 67, repealed Regulation (EEC) No 142/69 p. 12), which was recognized as appli- of the Commission of 25 January 1969 cable by Article 44 (4) of Regulation No (Official Journal, English Special Edition 3330/74 and was amended by Article 1969 (I), p. 18), which in Article 6(2) 1(3) of Commission Regulation (EEC) provided as follows: N o 1573/76 of 30 June 1976 (Official Journal 1976, L 172, p. 52), now provides as follows : "2. Overall losses incurred in disposing " 1 . The amount of the production levy of the quantity produced in the valid for a given marketing year shall Community in excess of the be fixed before 1 December of the guaranteed quantity shall be cal- following marketing year. culated on the basis of:

(b) a standard amount per unit of "management committee" procedure nor- weight to compensate losses mally applied in the agricultural sector. incurred in disposing of that sugar. This standard amount Article 2 (1) of the same regulation shall be calculated on the basis provides that the sugar marketing year is of a weighted average of losses to begin on 1 July and to expire on 30 incurred in disposing of sugar June of the following year for all the during that marketing year; products listed in Article 1 of the regu- losses incurred in disposing, lation. Article 28, which, in accordance under the most favourable con- with Article 23(1), is applicable in ditions, of a quantity equal to respect of the marketing years 1981/82 the difference between the to 1985/86, provides that the sugar guaranteed quantity and the production levy is, for any marketing quantity disposed of for human year, to be equal to the average loss pel- consumption within the Com- tonne of sugar for export obligations to munity during the same mar- be fulfilled during the current marketing keting year shall be excluded." year.

Regulation No 1785/81 replaced Regu- Article 1 (1) of Commission Regulation lation No 3330/74, which provided in (EEC) No 3358/81 is worded as follows: Article 27 (2) that the production levy was to be calculated, for the marketing years in question, including the 1980/81 " 1 . The amount of the sugar production marketing year, on the basis of the levy for the 1980/81 sugar mar- quantity of sugar actually disposed of keting year is hereby fixed at 3.407 outside the Community. ECU per 100 kg of white sugar."

of the basic quota between 1 October losses resulting from the disposal 1980 and 30 September 1981. of sugar during the period from 1 October of the relevant sugar Sermide challenged the payment order marketing year to 30 September of before the Tribunale di Genova on the the following year — unlawful on ground that the two aforesaid provisions the ground that it is contrary to (a) were unlawful inasmuch as they were the prohibition of discrimination laid contrary to certain articles of the EEC down in the first paragraph of Treaty and to certain other provisions Article 7 of the EEC Treaty, (b) the contained in various Community regu- prohibition of discrimination laid lations. The measures which it alleged down in Article 40 (3) of the EEC were unlawful had led to an abnormal Treaty, (c) Article 2 of Council increase in the production levy for the Regulation No 1785/81, which 1980/81 marketing year which was provides that the sugar marketing beneficial only to exporters who year is to begin on 1 July and is to qualified for export refunds, namely end on 30 June of the following French and German producers, but year, or (d) Article 28 of Council detrimental to Italian producers. Regulation No 1785/81, which provides that the levy on the sugar produced in each marketing year is The Consorzio Nazionale Bieticoltori to be based, inter alia, on the and the Associazione Nazionale Bieti- average loss resulting from export coltori, in addition to Mr Bianchini and obligations to be fulfilled during the Mr Merciai, all of whom intervened in same marketing year? the main proceedings in support of the plaintiff, claimed that the provisions in question should be declared unlawful, in 2. If the first question is answered in so far as they burdened the sugar pro- the affirmative, does it follow that cessors with 40% of the contested levy Article 1 of Commission Regulation and the sugar-beet growers with 60% No 3358/81 — which fixes the thereof. amount of the sugar production levy for the 1980/81 marketing year at During a preliminary inquiry the 3.407 ECU per 100 kg of white defendant Ministries "expressly agreed sugar — is also unlawful? with the plaintiff's arguments regarding the adjustment of the reference period 3. Even if the first two questions are and the calculation of the levy on the both answered in the negative, is basis of export obligations". Article 1 of Commission Regulation No 3358/81 — which fixes the By order of 28 March 1983 the amount of the sugar production levy Tribunale di Genova stayed the pro- for the 1980/81 sugar marketing ceedings and referred the following year at 3.407 ECU per 100 kg of questions to the Court of Justice for a white sugar — unlawful on the preliminary ruling: ground that it is contrary to (a) Article 27 (2) of Regulation No " 1 . Is Article 7(2) of Regulation N o 3330/74 of the Council, which 700/73 of the Commission — which provides that the production levy for provides that the total losses the 1980/81 marketing year is to be resulting from the disposal of the calculated on the basis of the quantity of sugar produced in the quantity of sugar actually exported Community are to be calculated on to non-member countries, or (b) the basis of a weighted average of Article 28 of Council Regulation No

1785/81, which provides that only as In accordance with Article 20 of the from the 1981/82 marketing year is Protocol on the Statute of the Court of the production levy on sugar to be Justice of the EEC, written observations calculated on the basis of the were submitted by the plaintiff in the quantity of sugar which is merely the main proceedings, represented by Mauro subject of an export obligation?" De André, Avvocato, by the Italian Government, represented by Sergio Laporta, acting as Agent, and by the The request for a preliminary ruling was Commission of the European Com­ lodged at the Court Registry on 6 June munities, represented by J.-C. Sćchó and 1983 G. Campogrande, Legal Advisers in the Commission's Legal Department, acting as Agents. In the statement of reasons ac­ companying its order the Tribunale di Genova observes that the postponement by three months of the period to be By an order dated 14 December 1983 the taken into account for the calculation of Court assigned the case to the Fourth the losses resulting from the disposal of Chamber. sugar occasioned "serious and unjus­ tifiable losses" to Italian producers, at least as regards the 1980/81 marketing year. On 1 July 1981 the Community Upon hearing the report of the Judge- intervention price rose, whereas the Rapporteur and the views of the world sugar price fell, with the result Advocate General, the Court decided to that, on the one hand, a substantial open the oral procedure without any increase occurred in the amount paid out preparatory inquiry. However, the Court for export refunds granted in the period asked the Commission to reply to the from 1 July to 30 September 1981 and, question "whether, and if so why, in on the other hand, there was an adopting Regulation No 3358/81, abnormal increase in the production levy which, on its own admission, was a for the 1980/81 marketing year in 'transitional measure' designed to faci­ relation to prices for the next marketing litate the transition to the system year. There was therefore a discrim­ provided for by Regulation No 1785/81, inatory measure which was exclusively in the Commission failed to take account of the interests of export undertakings, or the fact that by virtue of the application undertakings engaged predominantly in of Article 7 (2) of Regulation No 700/73 the export trade, and not in the interests to the 1980/81 marketing year and of of Italian undertakings. Article 28 of Regulation No 1785/81 to the 1981/82 marketing year the losses resulting from exports during July, As regards the alleged unlawfulness of August and September were taken into Regulation No 3358/81, the Tribunale account twice: once in the determination de Genova observes that Regulation No of the levy for the 1980/81 marketing 1785/81, which provides that account year and once in the determination of must be taken of the losses resulting the levy for the 1981/82 marketing from export obligations, did not become year". applicable until 30 June 1982 and that Regulation No 3330/74, which was formally applicable, provided that ac­ count was to be taken of the losses resulting from actual disposal. The Commission submitted its reply to that question on 6 February 1984.

III — Written observations As from 1 July 1981 the Community intervention price was increased from 43.27 ECU to 46.95 ECU, whereas the world sugar price fell during the period 1. Observations of the plaintiff in the between June 1980 and September 1981. main'proceedings Thus, undertakings which exported during the period between 1 July and 30. The plaintiff in the main proceedings September 1981 sugar produced in the observes, as regards the first question, 1980/81 marketing year received an that, in its view, Article 7 (2) of Regu- export aid equal to the difference lation No 700/73 is unlawful for two between the increased intervention price reasons : and the price on the world market, which was lower than in the previous marketing year. In the first place, it is contrary to the prohibition of discrimination laid down by both Article 7 and Article 40 (3) of Accordingly, the export undertakings the EEC Treaty; gained the difference between the new and the old intervention prices, with the result that the relative financial burden Secondly, it is contrary to Articles 2 and (the production levy) borne by all the 28 of Regulation No 1785/81. undertakings became much greater, to the detriment of non-exporting under- takings or undertakings exporting (a) As regards the first point, the proportionately smaller quantities. Such plaintiff contends that until the adoption discrimination is unlawful since it is of Regulation No 700/73 the losses contrary both to the prohibition of resulting from disposal which were used discrimination on grounds of nationality to calculate the levy on B sugar were, laid down by the first paragraph of under Article 6 of Regulation No Article 7 of the EEC Treaty and to the 142/69, those incurred during the prohibition of discrimination between marketing year to which the levy related, Community producers laid down by namely the period from 1 July to 30 June Article 40 (3) of the EEC Teaty. of the following year. However, under Article 7 (2) of Regulation No 700/73, the commencement of the reference (b) Article 7(2) of Regulation No period for the calculation of the losses 700/73 is also contrary to Regulation resulting from exports to non-member No 1785/81 inasmuch as the latter is a countries was postponed by three rule of law superior to the Commission months, namely from 1 July to 1 regulation. Article 2 of Regulation No October. That postponement was det- 1785/81 provides that the sugar mar- rimental to non-exporting producers or keting year is to begin on 1 July and to undertakings exporting proportionately expire on 30 June of the following year. smaller quantities and was beneficial to Article 28 of that regulation provides export undertakings or undertakings that, as from the 1980/81 marketing engaged predominantly in the export year, the production levy is to be trade, such as German and French calculated on the basis of the losses undertakings. resulting from export obligations fulfilled during the marketing year to which the Furthermore, 1 July is the date of the levy relates, that is to say the period entry into force each year of the new between 1 July 1981 and 30 June 1982. Community intervention price for sugar. Accordingly, losses resulting from ex-

As regards the second question, the 2. Observations of the Italian Govern- plaintiff is of the opinion that Ar- ment ticle 1 (1) Commission Regulation No 3358/81, which fixes the amount of the levy for the 1980/81 marketing year by The Italian Government considers that reference to the losses resulting from there are a number of divergences export obligations, is also invalid on the between the provisions of Regulation ground that it is ultra vires. It would in No 3330/74 (the validity of which was fact have the effect of repealing Article extended by Regulation No 1592/80) 28 of Council Regulation No 1785/81, and those of Regulation No 1785/81 as which was adopted at an earlier date. regards the rules applicable to the levy. Those divergences are likely to intensify doubts as to the legality of the provisions in question. Regulation No 1785/81 As regards the third question, the introduced, as from the 1981/82 mar- plaintiff considers that Article 1(1) of keting year, certain drastic innovations Regulation No 3358/81 is unlawful also by replacing the criterion that losses on the ground that it is incompatible resulting from the disposal of sugar with Article 27(2) of Regulation surpluses are to be borne partially by the No 3330/74 and with Article 28 of producers with the principle that under- Regulation No 1785/81. According to takings are fully responsible for the costs Article 27 (2) of Regulation No 3330/74, relating to the disposal on export the levy was to be calculated on the basis markets of quantities of sugar (quotas of actual exports during the sugar A and B) qualifying for refunds. The marketing year. However, Article 28 of essential features of the system es- Regulation No 1785/81 lays down that tablished by Regulation No 1785/81 are as from the 1981/82 marketing year, the as follows: levy is to be determined on the basis of the losses resulting not only from actual exports but also from export obligations to be fulfilled during the same marketing The basic quota (A) is also subject to the year as that to which the levy relates. levy. That is all the more significant in view of the fact that the system of levies displays different characteristics as from the The levy applicable to the B quota may 1981/82 marketing year; for example, be as high as 37.5% of the intervention the levy is charged not only on B sugar price.

The loss to be divided amongst the As regards the amount of the production producers is no longer represented, as it levy for the 1980/81 marketing year, was in the past, by the costs incurred in which was fixed at 3.407 ECU per 100 relation to actual disposal during the kg by Article 1 of Regulation N o marketing year but by the costs relating 3358/81, the Italian Government takes to export obligations to be fulfilled the view that it was calculated in during the current marketing year. accordance with a combination of principles which is not authorized by any provision of Regulation N o 1785/81. The new rule whereby the losses incurred in the disposal of sugar are to Losses not covered by the yield of the be calculated by reference to the export levy in the marketing year in which they obligations to be fulfilled during the were incurred are recoverable during the marketing year in question, instead of following marketing year. the export actually carried out during the marketing year, seems inadequate for the 1980/81 marketing year for three reasons: The rules introduced by Article 28 of Regulation No 1785/81 in fact over- turned the system applicable until 30 June 1981, under which each under- Certain fundamental amendments of the taking enjoyed a guarantee that it would quota system came into force on 1 July be able to dispose of its entire A quota at 1981 (full responsibility of producers). a particular price, in view of the fact that only B quota was subject to the levy. Also, there is no longer the strict corre- lation between the quota system and the . actual costs incurred by undertakings The quota system established by Regu- which existed under the former system, lation No 3330/74 remained applicable since the new system provides for the to the 1980/81 marketing year in the carrying forward of any net loss from absence of any exception under Article 1 one marketing year to the next and for of Regulation No 1592/80. an entirely new method of calculating the production surplus, the exportation of which is to be financed by the producers. Under Regulation No 1785/81 the costs to be borne by the producers are calculated on the basis of According to Article 4 (2) of Regulation the difference between the quantity No 1592/80, the determination of the produced and that consumed within the losses for the 1980/81 marketing year is Community in a given marketing year, to be distinguished from the determi- with the result that the producers are nation of that part of the losses not required to bear the cost of exporting the covered by the yield of the levy. unexported surplus which is placed in storage pending marketing. However, under the rules formerly applicable, the guaranteed quantity exempt from the levy was not determined on the basis of From that, the Italian Government infers the quantity consumed but was equal to that for the period from 1 July 1980 to the sum of the A quotas of Community 30 June 1981 the financing of the losses producers. resulting from the disposal of sugar

The Italian Government also questions 3. Observations of the Commission the legality of Article 7 (2) of Regulation No 700/73, which extended the period for the compensation of losses resulting from disposal by three months after the date of the expiry of the crop year The Commission points out, as regards (1 July to 30 June of the following year), the rules applicable, that in the 1980/81 since there was a risk that the application marketing year the common organ- of that provision might appreciably affect ization of the market in sugar was — at least for the 1980/81 marketing governed by Regulation No 3330/74, year — the equilibrium maintained in the which was repealed on 30 June 1981 in system of quotas. Compensation of the accordance with Article 49 (3) of Regu- losses to be financed leads to different lation No 1785/81. However, contrary results if the reference period varies since to the opinion expressed by Seimide, the the losses depend on factors which vary new basic regulation, No 1785/81, does in time and include, in particular, the not apply to the 1980/81 marketing year market price of the product and the but refers expressly to the marketing intervention price. Losses rise in direct years from 1981/82 to 1985/86. The proportion to the fall in the world price Commission was, however, obliged to and they rise particularly steeply where fix, before 1 December 1981 (according the drop in that price is accompanied by to Article 7(1) of Regulation No an increase in the intervention price, as 700/73) but after the expiry of the was precisely the case after 1 July 1981. 1980/81 marketing year, the amounts of the production levy in respect of sugar produced during that marketing year. Since the rules laid down by the new basic regulation, No 1785/81, were Although the extension of the period for inapplicable to the 1980/81 marketing the compensation of losses might have year, Regulation No 3358/81 fixing the been justifiable if the rules had remained amounts of the levy for the 1980/81 year unchanged, it cannot be justified as was based not on Article 28 of Regu- regards the 1980/81 marketing year, lation No 1785/81 but on Article 48 upon the expiry of which a new system thereof, which authorizes the Com- was introduced. That extension led to mission to adopt transitional measures.

In the first place, the commencement of Furthermore, the legality of Regulation the sugar marketing year has been set, No 700/73 must be considered in the since the inception of the common light of Regulation No 3330/74, the organization, of the market, at 1 July basic regulation, which makes reference each year, on account of the early beet to the former regulation in Article 44 (4) harvest in Italy. That enables Italian and in Annex II. sugar producers to take advantage of the new intervention prices for new sugar and thus enables beet growers to obtain new minimum prices. As regards the concept of disposal of the product, the Commission contends that the basic regulations do not define it and Secondly, since the sugar produced do not impose any specific system for during a particular marketing year is not calculating the amount disposed of. The disposed of in its entirety before the end Commission chose to take account of of that marketing year, the basic regu- "export obligations", that is to say lations did not determine the period to quantities in respect of which, following be taken into consideration for the calcu- invitations to tender, export licences have lation of the total costs of disposal but been issued entitling the holder to left it to the Commission, assisted by the refunds, in the light of the following relevant management committee, to fix practical considerations : the period, as is clear moreover from Article 27 of Regulation N o 3330/74.

Under the general licensing system, The Commission has always — that is to undertakings are required to provide, say not only since the entry into force of within six months of the date of expor- Regulation N o 700/73 but even under tation, evidence that the goods have

actually been exported. Six months must reproach is devoid of substance since therefore elapse after the expiry of the Italian producers are entirely at liberty, reference period before an approach is regardless of the level of the intervention made to the national administrative auth- price and of the world price, to sell their orities in order to ascertain whether all sugar at any time, within the limits of the exports subject to an "obligation" have maximum quota, on the domestic market been effected. Calculation of the levy for or on the world market and to receive in a given marketing year is thus delayed by the latter case the refunds provided for, six months plus the time needed for the as is the case with producers in other checks to be carried out by the national countries, and they can thus contribute authorities. in the same way to the formation of the total losses resulting from disposal. They may also obtain the domestic market price, but once again on the same basis The national authorities do not — and as producers in other Member States, cannot — bring into account actual with the result that it is impossible to exports of sugar on the basis of the speak of a restricted "Italian market". reference period (or, if need be, the sugar crop year). Determination of the total quantity actually exported during a reference period (or a crop year) would require a major reform of supervisory Finally, the Commission emphasizes that and accounting structures in most of the only disposal to non-member countries Member States. The Member States have makes it possible to maintain, through- on numerous occasions expressly stated out the Community, a balance between that they are unable to introduce such supply and demand, which in turn reforms. enables all producers to sell at a price which comes close to the target price. Accordingly, the fact that all producers are obliged to contribute to the financing of export refunds which are needed to In normal circumstances, the risk that an support the domestic price does not export obligation might not be dis- constitute discrimination. charged is small since the amount of the security which undertakings are required to provide discourages any inclination to repudiate the obligation. It is important to deal with the matter by reference to factors enabling a reasonable approx- The Commission therefore considers that imation to be arrived at. Regulation the answer to the questions submitted should be as follows: No 1785/81, in referring in Article 28 to "export obligations", merely con- solidated and supplemented the interpret- ation followed since the creation of the common organization of the market. In adopting Regulation No 3358/81 the "Consideration of the questions raised Commission adhered to that principle. has disclosed no factor of such a kind as to affect the validity of either Article 7 (2) of Regulation (EEC) No 700/73 of the Commission of 12 March 1973 or Article 1 of Commission Regulation As regards the alleged discrimination, the (EEC) No 3358/81 of 25 November Commission considers that any such 1981."

IV — T h e C o m m i s s i o n ' s reply to resulting from exports in the other a q u e s t i o n from t h e C o u r t marketing year. It follows that the quantitative factor was not taken into account twice. The Commission gave the following reply to a question put to it by the The financial factor consists of the Court: average loss resulting from the expor- tation of a given quantity of sugar. That 1. The application of Regulation No average loss, multiplied by the 3358/81 and of Article 7(2) of Regu- quantitative factor, constitutes the total lation No 700/73 to the 1980/81 loss resulting from exports which is to be marketing year and of Article 28 of covered by the production levy. Regulation N o 1785/81 to the 1981/82 marketing year did not have the result that losses from exports in July, August 3. The average loss is calculated on the and September 1981 were taken into basis of the refunds granted under the account twice, except as regards a two systems provided for by the negligible proportion of those losses. applicable rules, namely the system whereby refunds are fixed "by tender" and the system whereby they are fixed 2. Under the system established by "at regular intervals". Regulations No 3330/74 and No 1785/81 (and by their implementing The first system covers most exports (as regulations, N o 700/73 and N o 1433/ is clear from the table attached to the 82), the production levy is to be Commission's reply). The quantities of calculated by reference to two factors, sugar qualifying for this type of refund namely a quantitative factor and a were always, under the system financial factor. established by Regulation No 3330/74 and applied until 30 September 1981 for As regards the 1980/81 marketing year, the calculation of the levies, dis- the quantitative factor consists of the tinguished in the third quarter (July to total quantity of sugar produced between September) of each ,year by reference to 1 July 1980 and 30 June 1981, in the relevant crop year. accordance with Article 7 (2) (a) of Regulation No 700/73, less the guaranteed quantity for the same period For those purposes, export licences provided for by Article 27 (2) of Regu- granted during the third quarter of 1981 lation No 3330/74. contained a date of expiry (end of September 1981) in respect of quantities of sugar produced during the 1980/81 As regards the 1981/82 marketing year, marketing year and a date of com- the quantitative factor was determined mencement (end of September 1981) in by the total quantity of sugar produced repect of quantities produced during the between 1 July 1981 and 30 June 1982, 1981/82 marketing year. in accordance with Article 28 (1) (a) of Regulation No 1785/81, less the quantity consumed within the same Hece it was possible to distinguish period (see Article 28 (1) (b)). during the quarter in question, as regards that type of refund, the average loss Thus none of the sugar produced during incurred in respect of sugar produced one marketing year was taken into during the 1980/81 marketing year from account for the calculation of the losses the average loss incurred in respect of

sugar produced in the following the 1981/82 marketing year in ac- marketing year. It follows that that part cordance with the producers' wishes. As of the financial factor was not taken into a result of the reversal of the trend on consideration twice. the world market, producers had to bear As regards the refunds granted during a very heavy burden in levies in the the third quarter (July to September) 1981/82 marketing year. under the system whereby they are fixed The fact that the quarter in question was at regular intervals, the Commission, once again taken into account made it having regard to the wholly negligible possible to reduce the average loss impact of such refunds on the calculation incurred during the marketing year and, of the levy, never established, under the under the cumulative system provided arrangements introduced by Regulations for by Article 28 (2) of Regulation No No 3330/74 and No 700/73, a system 1785/81, to attempt to reduce the for distinguishing licences by reference burden borne by the producers during to the relevant crop year. the period from July 1981 to June 1985. All the refunds of that type granted That second operation clearly did not during the quarter in question were affect the calculation of the levy for the charged in their entirety to the previous 1980/81 marketing year, which formed marketing year, solely for the purposes the basis for the adoption of Regulation of the calculation of the financial factor, No 3358/81. and that was also the case as regards the third quarter (July t o September) 1981. The margin of error which the ap- V — Oral Procedure plication of that method involves is so small that it does not justify the At the sitting on 14 March 1984 oral establishment of a relatively complex argument was presented by the administrative system for distinguishing following: M. De André of the Rome between licences. Bar, for the plaintiff in the main proceedings; I. M. Braguglia, Avvocato 4. The Commission subsequently de- dello Stato, for the Italian Government; cided to take account once again of the and G. L. Campogrande, Legal Adviser refunds granted during the third quarter in the Commission's Legal Department, (July to September) 1981 under the acting as Agent, for the Commission. system of fixing refunds at regular intervals (solely for the purposes of the The Advocate General delivered his calculation of the average loss) also for Opinion at the sitting on 16 May 1984.

4 The levy had been calculated in accordance with Commission Regulation N o 3358/81, which was adopted on the basis of Article 48 of Council Regu- lation (EEC) N o 1758/81 of 30 June 1981 on the common organization of the markets in the sugar sector (Official Journal 1981, L 177, p. 4), and in accordance with Article 7 of Regulation N o 700/73 of the Commission, as amended by Article 1 (2) of Commission Regulation (EEC) N o 1573/76 of 30 June 1976 (Official Journal 1976, L 172, p. 52).

5 In the proceedings before the national court Sermide contended that the two aforesaid provisions were unlawful inasmuch as they discriminated against it and were therefore contrary to the EEC Treaty and to certain other provisions of Community law.

SERMIDE / CASSA CONGUAGLIO ZUCCHERO

6 Taking the view that the doubts expressed by Sermide as regards the validity of the provisions in question were legitimate, the Tribunale di Genova referred the following questions to the Court for a preliminary ruling:

The relevant provisions

7 In order to answer the questions submitted by the Tribunale di Genova, it is appropriate to recall in the first place those features of the system of

JUDGMENT OF 13. 12. 1984 — CASE 106/83

production quotas and of the method of calculating the sugar production levy which are relevant to this case.

8 The basic regulation — Regulation (EEC) N o 3330/74 of the Council of 19 December 1974 on the common organization of the market in sugar (Official Journal 1974, L 359, p. 1) — maintained the system of production quotas established by the former basic regulation — Regulation N o 1009/ 67/EEC of the Council of 18 December 1967 (Official Journal, English Special Edition 1967, p. 304). That system distinguishes between three cat- egories of white sugar produced during a given sugar marketing year, that is to say between 1 July and 30 June of the following year:

(a) The quantity which may be freely marketed within the common market and the disposal of which is guaranteed by the intervention price. This is known as the A quota.

1 1 The production levy which the Member States collect from sugar manufac- turers in respect of B quota sugar is to be calculated, in accordance with Article 27 (2) of the basic regulation, by dividing total losses incurred in marketing the quantity produced in the Community outside the guaranteed quantity (corresponding at least to the A quota) by the sum of the quantities produced outside the A quota by Community undertakings but not in excess of the maximum quota. The levy may not, however, exceed 30% of the intervention price.

12 The detailed rules for implementing the system of production quotas were established by Regulation No 700/73 of the Commission, which was adopted on the basis of Regulation No 1009/67 and remained in force, with cer- tain amendments, in particular those effected by Commission Regulation No 1573/76, until it was repealed by Commission Regulation (EEC) N o 1443/82 of 8 June 1982 (Official Journal 1982, L 158, p. 17), which entered into force on 10 June 1982.

1 3 It is clear from Article 7 (2) of Regulation No 700/73, as amended by Article 1 (2) of Regulation No 1573/76, that the total losses referred to in Article 27 (2) of Regulation No 3330/74 are to be calculated by reference to two factors, known as the quantitative factor and the financial factor. The quantitative factor consists of the total white sugar produced during the marketing year in question, less the guaranteed quantity valid for that marketing year, any quantities produced in excess of the maximum quota and any quantities produced within the maximum quota and carried forward by undertakings to the following sugar marketing year. The financial factor consists of the weighted average of the losses incurred in disposing of sugar during the period from 1 October of the relevant marketing year to 30 September of the following year (less the export levies charged during the same period).

18 Accordingly, Article 28 (3) of Regulation No 1785/81 provides that the basic levy is to be calculated by dividing the estimated total loss by the estimated production of A and B sugar attributable to the current marketing year. According to Article 28 (1) (d), the estimated total loss is to be calculated by

SERMIDE / CASSA CONGUAGLIO ZUCCHERO

reference to the estimated average loss for export obligations to be fulfilled during the current marketing year.

19 The rate of the sugar production levy for the 1980/81 marketing year was fixed at 3.407 ECU per hundred kg of white sugar by Article 1 (1) of Commission Regulation (EEC) No 3358/81 of 25 November 1981 (Official Journal 1981, L 339, p. 17). That regulation was adopted pursuant to Article 48 of Regulation No 1785/81, which authorized the Commission to adopt transitional measures where necessary to facilitate the transition to the system established thereby, in particular if the introduction of the new system on the date provided for gave rise to substantial difficulties. Such measures were to be applicable only until 30 June 1982 at the latest.

20 In fixing the rate of the production levy for the 1980/81 marketing year, the Commission applied, in accordance with the preamble to Regulation No 3358/81, the criteria established by Article 7(2) of Regulation No 700/73 and took account, when calculating the financial factor, of the weighted average of the losses incurred in disposing of sugar during the period from 1 October 1980 to 30 September 1981.

First question

24 Sermide and the Italian Government contend that it is discriminatory not to calculate the production levy exclusively on the basis of the actual losses incurred in disposing of sugar during the marketing year in which the sugar which is subject to the levy is produced. They point out that the new Community intervention price comes into force each year at the beginning of that period, which coincides precisely with the natural crop cycle for sugar beet in southern Europe. However, at the end of the sugar marketing year, only North European undertakings have at their disposal, as a result of the crop cycle for sugar beet in the North, sufficient quantities of sugar produced before that date to enable them to benefit from the higher export refunds.

25 Furthermore, Sermide and the Italian Government contend that, when the production levy was calculated for both the 1980/81 and 1981/82 marketing years, the refunds for sugar produced in the 1980/81 marketing year and exported in the third quarter of 1981 were taken into consideration twice, thus leading to considerable and unjustified costs for producers.

26 The Commission, however, denies all charges of discrimination and emphasizes that, in choosing the period from 1 October to 30 September (instead of the sugar marketing year) as the reference period for the calcu- lation of the losses incurred in disposing of sugar, it took account only of the natural crop cycles and of economic realities, that is to say common

SERMIDE / CASSA CONGUAGLIO ZUCCHERO

commercial practices and traditional patterns of trade. The commencement of the sugar marketing year was fixed as 1 July precisely in order to enable Italian producers to take advantage of the new intervention prices for new sugar. Furthermore, part of the sugar produced in northern Eurpe during a particular sugar marketing year is traditionally not exported until the period between 1 July and the expiry of the reference period.

28 It is appropriate in the first place to point out that under the principle of non-discrimination between Community producers or consumers, which is enshrined in the second subparagraph of Article 40 (3) of the EEC Treaty and which includes the prohibition of discrimination on grounds of national- ity laid down in the first paragraph of Article 7 of the EEC Treaty, comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified. It follows that the various elements in the common organization of the markets, such as protective measures, subsidies, aid and so on, may not be differentiated according to region or according to other factors affecting production or consumption except by reference to objective criteria which ensure a proportionate division of the advantages and disadvantages for those concerned without distinction between the territories of the Member States.

29 The Court's finding, in that regard, is that the rules set out in Article 7 (2) of Regulation No 700/73 concerning the calculation of the production levy are objectively justified notwithstanding their use of different reference periods, namely the sugar marketing year, which is used to establish the relevant quantity of white sugar produced (known as the quantitative factor), and the period from 1 October of the relevant marketing year to 30 September of the following year, which is used to establish the average losses incurred in disposing of sugar (known as the financial factor).

31 The Court is unable to take into consideration the fact that, owing to the natural crop cycle for sugar beet, South European producers, unlike North European producers, no longer have at their disposal, after the end of the sugar marketing year, any sugar produced before that date and cannot therefore take advantage of the new intervention price applied as from the commencement of the new marketing year, whereas the levy imposed on the sugar produced by them during the previous marketing year takes account of total losses incurred during that part of the reference period which extends beyond the marketing year. That line of reasoning calls in question the Council's choice of dates for the commencement of the sugar marketing year and for the entry into force of the new intervention price, a choice which may be challenged only by contending that it constitutes a misuse of powers. However, no such contention has been advanced in the present case.

32 Moreover, as regards the argument to the effect that the failure to synchronize the reference periods produced arbitrary effects in relation to the amount of the refunds, and hence in relation to the amount of the levy, at least for the 1980/81 sugar marketing year, having regard to the parti- cularly high intervention price which came into force on 1 July 1981, it must be pointed out that the refunds are intended, as is clear from the fifth recital in the preamble to Regulation No 3330/74, to stabilize the Community market by preventing price fluctuations on the world market from affecting prices within the Community. It follows that adjustments in the amount of the refunds are an inherent feature of the rules on external trade which form part of the common organization of the market in sugar.

34 As regards the argument that certain refunds were taken into consideration twice — once in the calculation of the levy for 1980/81 and again in the calculation of the levy for the 1981/82 - the Court notes that, in taking into consideration for the calculation of the average loss for the 1980/81 marketing year the losses resulting from the refunds fixed at regular intervals for sugar produced during the 1980/81 marketing year and disposed of during the third quarter of 1981, the Commission merely applied the legislation hitherto in force. In view of the reasons put forward by it in particular the considerable administrative difficulties involved, the Com- mission was under no obligation to set up, solely for the 1980/81 reference period, a system for charging those losses to one or other of the sugar marketing years concerned. The fact that the Commission adhered, even in respect of the transitional period in question, to the legislation which had been in torce tor a number of years, namely Regulation No 700/73, is not contrary to the prohibition of discrimination laid down in the second subpar- agraph of Article 40 (3) of the EEC Treaty.

35 However, as regards the fact that the Commission also took the same losses into consideration when calculating the average loss for the 1981/82 marketing year, it must be pointed out that to impose a burden twice on the basis of the same facts would be contrary to the principle of proportionality In that regard, the Commission maintains that in this case the taking into consideration of those losses a second time had no unfavourable consequences for producers in the sugar marketing year in question, since in reality it served only to reduce the average loss and therefore to reduce, albeit to a very limited extent, the amount of the levy for that period Sermide, however, observes that such "generosity" on the part of the Commission in its calculations cost Italian producers "approximately LIT 7 000 million for the 1980/81 marketing year alone and probably the same

39 In that respect, it must be noted that the provisions of Regulation N o 1785/81 concerning the calculation of the production levy were to apply, according to Article 23 of that regulation, only as from the commencement of the 1981/82 marketing year and were therefore not applicable to the production levy charged on sugar produced during the 1980/81 marketing year. Since the levy could not be fixed until some time after the expiry of the marketing year, that is to say after the entry into force of the new basic regulation, the Council authorized the Commission in Article 48 of Regu- lation, the Council authorized the Commission in Article 48 of Regulation N o 1785/81 to adopt the necessary transitional measures on the basis of Regulation N o 700/73, which remained in force even after the repeal of Regulation N o 3330/74.

40 It follows that Article 7 (2) of Regulation N o 700/73 is not contrary to Articles 2 and 28 of Regulation N o 1785/81.

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Second question

41 The second question, which was submitted only in the event of the first question's being answered in the affirmative, has become devoid of purpose.

Third question

JUDGMENT OF 13. 12. 1984 — CASE 106/83

The Court considers that the very purpose of Article 48 of Regulation No 1785/81, authorizing the adoption of the transitional measures needed to facilitate the transition to the new system governing the market in sugar, was to resolve problems of the kind which has arisen in this case.

46 As far as the concept of disposal is concerned, it is true that Article 27 (2) of Regulation N o 3330/74 refers, with regard to the calculation of the production levy, to the losses resulting from disposal without mentioning export obligations, whilst Article 28 of Regulation N o 1785/81 refers expressly to the losses resulting from export obligations to be fulfilled during the current marketing year. However, neither Regulation N o 3330/74 of the Council nor Regulation N o 700/73 of the Commission defines the concept of disposal. Those regulations therefore leave to the Commission the task of interpreting that concept according to the objective pursued and by reference to the context in which the provision in question is set.

47 As the Court has recognized on a number of occasions, the Commission may, in order to quantify the volume of imports and exports, use and rely on information derived from import and export licences, which impose an obligation on the licensees to carry out operations subject to the provision of security.

48 In this case, the Commission's interpretation of the concept of disposal as encompassing export obligations was justified in view of the fact that, in the first place, the Member States do not bring into account actual exports of sugar by reference either to the sugar marketing year or to the reference period for the calculation of the average loss and, secondly, sugar exported under a standing invitation to tender is subject to the provision of security.

T H E C O U R T (Fourth Chamber),

in answer to the questions referred to it by the Tribunale di Genova by order of 28 March 1983, hereby rules:

Consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Article 7 of Regulation (EEC) No 700/73 of the Commission of 12 March 1973 or of Article 1 of Commission Regulation (EEC) No 3358/81 of 25 November 1981.

Bosco Pescatore

O'Keeffe Koopmans Bahlmann

Delivered in open court in Luxembourg on 13 December 1984.