C-253/84

My Lords, The Commission and the Council undertook respectively to propose and to adopt a directive modifying the Sixth Directive on VAT so as to permit that to be On 31 March 1984 the Council, having used as an instrument for granting the aid. regard in particular to Articles 42 and 43 of the EEC Treaty, on a proposal from the Commission and after the opinion of the Parliament and the Economic and Social Committee had been obtained, adopted Regulation N o 855/84 on the calculation In May the Federal Republic asked for the and the dismantlement of the monetary aid to be increased to 5 % and to be compensatory amounts applying to certain effective from 1 July 1984. The Commission agricultural products (Official Journal 1984, was not willing to increase the amount, L 90, p. 1). Positive monetary compensa- though sympathetic to the request to change tory amounts (MCAs) which applied in the date. Member States with strong currencies, in particular the Federal Republic of Germany, were to be progressively dismantled. The Federal Republic, however, was to be allowed to grant its farmers aid to offset the On 25 and 26 June 1984 the European loss of income which would result from the Council meeting at Fontainebleau agreed ensuing reduction in prices expressed in that the Commission should be asked to national currencies (the 13th recital to the propose and the Council to adopt measures regulation). to enable the Federal Republic to raise the maximum rate of that relief from 3 to 5 % from 1 July 1984 to 31 December 1988. The Commission took the view that this was a By Article 3 such special aid granted in matter for the Council, since apparently it accordance with the regulation was to be was not prepared to depart from the 3 % deemed to be compatible with the common figure, and on 30 June 1984 the Council market and in paragraph 2 thereof 'the adopted Decision 84/361 (Official Journal Federal Republic of Germany shall be auth- 1984, L 185, p. 41). This recites the auth- orized to grant separately the special aid by orization of aid under Regulation N o payment mentioned in the invoicing and/or 855/84 and the limit to 3 % of the ex-VAT the VAT declaration using the VAT as an price paid by the purchaser for the agri- instrument. The aid may not exceed 3 % of cultural product; it continues: the ex-VAT price paid by the purchaser for the agricultural product'.

'For the period 1 July 1984 to 31 December 2. However, in accordance with Decision 1988 the aid granted by the Federal 84/361/EEC, the percentage referred to in Republic of Germany in the form of VAT paragraph 1 may be increased up to 5 % relief shall be deemed to be compatible with until 31 December 1988.' the common market up to a maximum of 5 % of the ex-VAT price paid by the purchaser for the agricultural product.' By Article 7 the directive is to be applicable 'with effect from 1 July 1984 until 31 December 1991 at the latest'. The decision refers to the EEC Treaty and in particular the third subparagraph of Article 93 (2) thereof as its legal basis, but Thus, although no dates were specified in no mention is made of a proposal by the Article 3 of Regulation N o 855/84, the Commission or of the Parliament having effect of that regulation taken with Decision been consulted; nor is there a specific 84/361 and the 20th VAT Directive is that mention of Articles 42 or 43 of the EEC aid at a maximum rate of 5 % is authorized Treaty. as from 1 July 1984 to 31 December 1988, and at a maximum rate of 3 % from 1 January 1989 to 31 December 1991 at the Despite criticism from the European latest. Parliament on the basis of the report of its Committee on Economic and Monetary Affairs and Industrial Policy, the Council, By an application lodged on 29 October following a proposal from the Commission, 1984 the Groupement agricole d'exploi- on 16 July 1985 adopted the 20th Directive tation en commun de la Ségaude ('GAEC'), on the harmonization of the laws of the a French farming company, brought an Member States relating to turnover action against the European Economic taxes — Common system of value-added Community represented by the Council and tax: derogations in connection with the the Commission. It asked the Court to special aids granted to certain farmers to 'declare that the European Economic compensate for the dismantlement of Community is liable in accordance with monetary compensatory amounts applying Articles 178 and 215 of the EEC Treaty for to certain agricultural products, Directive the damage sustained by the applicant as a 85/361/EEC (Official Journal 1985, L 192, result of the Council's adoption of Decision p. 18). Article 1 of that directive provides 84/361'. It claimed a provisional sum of that, by way of derogation from Directive FF 60 000 with interest and further 77/388/EEC (i. e. the Sixth VAT Directive) damages 'as and when such amounts can be (Official Journal 1977, L 145, p. 1), the calculated'.

According to GAEC's reply, Decision The Commission, whilst contending that the 84/361 is unlawful for three further decision was valid, objects that the claim reasons : against the Commission is inadmissible. Relying on paragraph 7 of the judgment in Joined Cases 63 to 69/72 Werhahn v (1) failure on the part of the Commission to Council [1973] ECR 1229 at p. 1247, it follow the procedure laid down in the submits that the Council is the only proper first subparagraph of Article 93 (2) of defendant in the present case as being the the EEC Treaty in particular by failing institution which alone adopted the measure to give notice to the parties concerned; alleged to be at the origin of the damage claimed and against which alone, if at all, a (2) breach of the principle of propor- claim for damages can arise. In my opinion tionality; this objection should be upheld. On the basis that the Community 'should be repre- (3) failure to protect the Community's own sented before the Court by the institution or resources. institutions against which the matter giving rise to liability is alleged' {Werhahn, supra, paragraph 7) the Council is the only such The Council and the Commission contest institution and the only proper defendant to the admissibility of the last three grounds as the present action which in my view should being fresh issues forbidden by Article be dismissed as inadmissible in so far as it is 42 (2) of the Rules of Procedure. brought against the Commission. In respect of all these matters complex and GAEC's case is that it produces beef, veal, detailed arguments have been advanced, poultry and milk and that sales of its both of law and fact, with which I must products have been adversely affected as a deal, though in the end the case could in my direct result of the aid granted to farmers in opinion be dealt with on one or other of the Federal Republic of Germany auth- two short points. orized by Council Decision 84/361. According to GAEC's application that As regards the alleged wrongful use of decision is unlawful for four reasons: Article 93 (2) of the EEC Treaty as the basis for Decision 84/361, GAEC, supported by FNSEA, alleges that Decision (1) it was adopted in breach of the rules of 84/361 is unlawful for failure to comply procedure laid down in the Treaty of with procedural requirements. It submits Rome in that it was based on Article that the Council chose to use the procedure 93 (2) thereof; laid down in Article 93 (2) of the EEC Treaty, despite the fact that the aid auth- (2) it infringes the principle of non- orized had an effect on agricultural and discrimination laid down in the second VAT provisions which, pursuant respectively subparagraph of Article 40 (3) of the to Articles 42 and 43 and 99 and 100 of the Treaty; EEC Treaty, the Council is not entitled to

adopt or to alter except on a proposal from measure derogating from the provisions on the Commission and after consulting the the common organization of those markets. European Parliament. Moreover, it claims In these circumstances I do not consider that the dismantling of monetary that it is right to say that the step taken in compensatory amounts under Regulation Decision 84/361 had to follow the N o 855/84 did not constitute an 'excep- procedures of and be taken under Articles tional circumstance' within the meaning of 42 and 43 of the EEC Treaty.

exceptional circumstances.' of Article 93 (2) of the EEC Treaty can serve as an adequate basis for the dero- Decision 84/361, by allowing a nationally gation which Decision 84/361 involves from financed aid in the agricultural sector, the VAT provisions. No doubt recognizing which is to operate through the instrument this difficulty the Council agreed at the of VAT, derogates from the normal prin- outset to, and has since adopted, the 20th ciples of the common organization of the VAT Directive, which expressly states that agricultural markets and of the VAT system. the use of value-added tax in order to grant The question therefore arises whether the the special aid permitted in Decision 84/361 third subparagraph of Article 93 (2) can is authorized 'by way of derogation from' constitute an adequate legal basis for that the Sixth VAT Directive.

The third recital Regulation N o 2777/75 (Official Journal to Decision 84/361 refers to an 'exceptional 1975, L 282, p. 77). It seems to me to situation', but the Council has made it clear follow that it is available as a basis for a that the exceptional situation relied on is the

Was that the position here? It is common ground in this case that the dismantling of The question remains whether this illegality positive MCAs did bring about a loss of is of any avail to the applicant in the present income for German farmers, but much case. The Court has consistently stated that argument was devoted to the question of the Community does not incur liability on how great that loss was. According to a account of a legislative measure which Commission estimate, a 1% revaluation of involves choices of economic policy unless a the green rate of the German mark sufficiently serious breach of a superior rule represents an annual loss for German agri- of law for the protection of the individual culture of approximately D M 450 million. has occurred: Joined Cases 83 and 94/76, 4, Since a revaluation of 5 % of the green rate 15 and 40/77 Bayerische HNL v Council and for the German mark was concerned, the Commission [1978] ECR 1209 at p. 1224. I Commission estimated the loss for German do not consider that the third subparagraph agriculture at 5 x 450 million = of Article 93 (2) of the EEC Treaty D M 2 250 million per year. According to constitutes such a superior rule of law for an estimate agreed between the Commission the protection of the individual within the and the German authorities, aid of 1% meaning of the Court's judgment. The of VAT amounted - to approximately applicant on that basis fails in its D M 600 million per year for German agri- submissions on the first ground of illegality.

OPINION OF SIR GORDON SLYNN —CASE 253/84

The amounts because an aid of 5 % considerably Council contends that the figure of 3.75% exceeds the effects of the dismantlement of does not take account of the effects of the MCAs which would only justify an aid first stage in the dismantling of MCAs with between 3 and 4 % , and they adopt a figure effect from 1 April 1984 along with the of 3.75% which they say was initially drop in the ECU support prices for certain suggested by the Commission. Secondly, the important sectors of German agriculture; aid is granted for all products including GAEC's reasoning ignores the corre- those not covered by MCAs. Thirdly, sponding drop in the German monetary GAEC submits that the contested aid begins compensatory amount following the first on 1 July 1984 whereas the dismantling of (—3%) and the second (—5%) stages of the MCAs only begins on 1 January 1985, so dismantling of the German MCAs.

more. Hence in its rejoinder the Council (iii) the complete abolition of the remaining confines itself to asserting that the 3 % aid German MCAs by the beginning of the 1987/88 marketing year at the latest. allowed by Regulation N o 855/84 was clearly not enough to compensate fully for the loss of revenue, so that the Council did not act arbitrarily in authorizing a maximum The first stage was also to comprise the aid of 5 % in Decision 84/361. abolition of negative MCAs by means of devaluing the relevant green currencies.

GAEC v COUNCIL AND COMMISSION

At the unrelated to the dismantling of MCAs, such hearing, the Council indicated that it had as the effect of the imposition of milk provided no machinery to prevent such quotas, which is not only a separate matter overcompensation, and the Federal Republic but one which applied to all the other confirmed that it had paid the full 5 % Member States as well. Even the Council without any machinery or any attempt to admits a figure 'of the order of magnitude prevent overcompensation. In my opinion, of D M 2 200 million' as representing the the mere report by the Commission on the drop in income due to the dismantling of aid mechanism required by Article 4 of the

mechanism, the Commission and the first report on the operation of the aid German authorities were agreed upon an mechanism is unable to provide a definite estimate of D M 3 000 million. Both figures comparison, the probability appears to be are estimates, and the Commission states in that some, if not all, German farmers have the conclusions to its report on the been and are being overcompensated, operation of the aid mechanism in 1984 that contrary to the intention expressed in the it is at present impossible to compare the fourth recital to Decision 84/361.

The fourth recital to Decision 84/361 provides that 'the compensation thus granted should not exceed the effects arising out of the dismantling of monetary compensatory amounts', though there is no article in the The third contention is that there is over- decision to give effect to that intention. compensation in that the special aid was

authorized to begin on 1 July 1984, whereas However, I do not think that it is right to the monetary measures came into effect on judge the matter with hindsight, especially 1 January 1985. as other factors may have influenced what happened — as with beef prices, where the increased slaughter of cows due to the imposition of milk quotas may have been a The principal justification for taking the factor. earlier date is said to be that since the trade knew from 1 April 1984 (the date when Regulation No 855/84 was published) that

For this purpose it is not prepared to buy at lower prices. In either in my view relevant to have regard to the way it is said that prices were likely to fall. effect of prices resulting from the first stage As a matter of market economics this may of dismantling MCAs which did not, as I sound likely, but it does not follow that understand it, affect the green rate of the prices were bound to start falling as early as German mark, or of the lowering by 1% of July and there is really no evidence to show the ECU price for certain products, both that 1 July was taken on the basis of any of which took place on 1 April 1984.

The indicated. Save that it is the beginning of Commission indeed seems to have the marketing year, which may have been a considered that the new trends would be convenient date to take, no real basis for 1 likely to take effect in September or July 1984 has been in my view shown. October. The figures given to the Court do September (the date taken for the new rate not show a consistent fall as from 1 July for sugarbeet and potatoes in Regulation 1984.

for the months from July to September inclusive, but in October the prices rose again (approximately 2%). Unfortunately, On the evidence it seems to me that it has there were no figures for November and not been shown that 1 July 1984 was December for beef. As regards milk, the reasonably justified as a commencement producer price in the Federal Republic in date and that accordingly there was a German marks did not show a fall at all in further breach of the prohibition on the second half of 1984 but a steady rise discrimination set out in Article 40 (3) of (approximately 3%), although it did fall the EEC Treaty by reason of the overcom- thereafter. pensation of German farmers.

The Council submits that that discrimi- mais aussi à l'ensemble du monde agricole nation, even if made out, would not affect a français que représente l'intervenante'. limited and clearly defined group of commercial operators, as is required in order to give rise to liability in damages on the part of the Community: Case 238/78 Ireks-Arkady v Council and Commission [1979] ECR 2955 at p. 2973. The Federal As regards the question whether the damage Republic of Germany adds that GAEC has alleged goes beyond the bounds of the not shown that it has been injured in a economic risks inherent in the activities in particularly serious way by Decision 84/361 the sector concerned, in this case the but has merely alleged a general distortion applicant has been unable to particularize its of competition, and that is not enough. alleged losses on poultry and milk and it estimates its loss on beef and veal in the second half of 1984 at FF 10 894.

The statistics concerned. Although these last two were not for beef show that prices were dropping in that case said to be necessary precon- throughout 1984 on both the German and ditions of entitlement to damages, they have the French markets. There was a been regarded as so being. particularly sharp drop in April and July in the Federal Republic. There was a sharp drop in France in July but prices rose again to some extent in September and October. The German Government has submitted, on the basis of figures which it derives from In the present case, even if GAEC substan- Eurostat, that there is no relation between tiates all the allegations which it makes, it the German market price and the French does not prove, or even allege, that it is part market price for beef. It may be true that

farmers. The FNSEA itself asserts that the exported fell from FF 22.07 per kilo in June measures in question cause substantial 1984 to FF 19.76 per kilo over the damage 'non seulement au r e q u é r a n t . . . , following two months, a fall of 10.5%. The

applicant argues first that this can only be months indicates a loss which 'goes beyond explained by the impact of the special aid the bounds of the economic risks inherent in granted under Decision 84/361; second, the activities of' the beef and veal sector. that it immediately brought about a fall of Accordingly, I do not think that a finding to 3.5% in French market prices for beef in that effect, such as was made in Ireks- July and August 1984.

In 1984 as a whole German exports of beef to France were only 3 % (2 800 tonnes) up on the preceding year. Thus there was an increase in exports from GAEC submits that by using VAT as an the Federal Republic to France, which is instrument to pay the aid in question, consistent with the applicant's arguments Council Decision 84/361 diverts the Sixth about the price trends; but that increase was VAT Directive from its aims, which are to confined to two months of the year; if the ensure competitive neutrality between whole year is taken the volume of exports Member States in order to attain remains little changed. I would myself convergence of the national VAT systems.

GAEC v COUNCIL AND COMMISSION

However, even if there were, as there is not, clear evidence as to the extent to which the aid has been paid The fourth alleged ground of illegality is in respect of exported products, this claim that the special aid granted under Decision fails because in my view Article 96 is not a 84/361 constitutes an aid to exports superior rule of law for the protection of contrary to Article 96 of the EEC Treaty, the individual and, even if infringed, could which provides:

They therefore 96, whether or not it was intended as an constitute 'fresh issues' and under Article export subsidy. 42 (2) of the Rules of Procedure are inad- missible in so far as advanced by the applicant. The sixth ground of illegality (but not the fifth and seventh) is also pleaded by the FNSEA in its observations intervening in The Council contends that this case support of GAEC. The question therefore concerns an income aid intended to make arises whether an intervener may raise an up for a loss of revenue, which is granted at issue which a party has not raised or at least the level of the individual farmer and does not raised in due time.

That receives support from the judgment in Case 30/59 Steenkolenmijnen v High Authority [1961] ECR 1, at p. 18, where the Court held that 'the intervention procedure VAT is clearly internal taxation. The special would be deprived of all meaning if the aid provided for by Council Decision intervener were to be denied the use of any

argument which had not been used by the GAEC, supported by FNSEA, submits that pany which it supported'. Moreover, it is the use of VAT 'as an instrument' for the apparent from the recent transport case payment of the aid in question breaches the (Case 13/83 European Parliament v Council, principle of proportionality because VAT is judgment of 22 May 1985) that the Court is not an appropriate instrument. It is inappro- prepared to entertain arguments in an inter- priate for the following reasons: vention which conflict with those of the party in whose support the intervention is made. (i) aid by means of a reduction in VAT is necessarily of general application and therefore applies to products not I consider therefore that the sixth ground of covered by MCAs or on which MCAs illegality falls to be considered in this case in have only minimal impact; so far as it is advanced by the FNSEA, but that the fifth and seventh grounds of illegality advanced by the applicant are not (ii) aid granted by means of VAT applies admissible. I deal with them lest the Court to each commercial transaction considers that all are admissible. between farmers and not to the value- added, so that the farmer's final production does not reflect the extent The fifth ground of illegality alleged by the of the aid granted; applicant in this case is failure to follow the procedure laid down in Article 93 of the EEC Treaty. (iii) the recipient of the aid may commit frauds by multiplying useless or fictitious transactions between farmers GAEC submits that the Council was not who receive a 5% aid at each stage entitled to adopt its decision without first without any corresponding added following the procedure laid down in the value; first subparagraph of Article 93 (2), in particular by giving notice to the parties concerned to submit their comments. The (iv) the aid as laid down will necessarily Commission should thereupon have opened affect the Community's own resources; the procedure provided for in the second subparagraph of Article 93 (2), which it did not do. (v) the aid in question benefits big farms more than small ones, which accen- tuates the distortion of competition by On this I accept the argument of the making the most efficient farms even Council and the Commission that the more competitive and is contrary to the Council's powers to adopt a decision under spirit of the Treaty which aims to the first sentence of the third subparagraph ensure a fair standard of living for the of Article 93 (2) is independent of the agricultural community by channelling procedures provided for in the first two aid towards small and medium-sized subparagraphs thereof and that GAEC's farms. argument is unfounded.

also benefits products not covered by applicant is still in time to raise the point. MCAs — is of no assistance to it because it The Council also contends that it is is claiming damages in respect of products impossible to see how any drop in the which are covered by MCAs. The second Community's own resources could bring and third points — to the effect that the about arbitrary discrimination against the refunds do not reflect added value and may applicant or cause the applicant the damage facilitate fraud — may be sound in fact but claimed. the rules on VAT in this respect do not exist

resources. In any event, this is again a rule principles governing the own resources of which is not for the protection of the indi- the EEC do not in my opinion constitute vidual. The fifth point — to the effect that rules for the protection of the individual the aid grants a disproportionate benefit to which could be invoked by the applicant to big farms, contrary to the aims of the found a claim in damages, and its common agricultural policy — encounters submission on this point would fail even if it the difficulty that the aims of the common were admissible. agricultural policy are various and it is well established that the Community authorities have a discretion as to how they reconcile

Community. I also consider that Decision The seventh ground of illegality advanced 84/361 is unlawful for breach of the concerns the own resources of the EEC. principle of equality stated in particular in GAEC submits that the 2 % increase in the the second subparagraph of Article 40 (3) of level of the aid brought about by Decision the EEC Treaty. That is unquestionably a 84/361 does not protect the Community's superior rule of law for the protection of own resources. the individual but in my opinion, since the damage alleged in so far as specified is said to have been suffered by a very large The Council contends that the authorization number of farmers and is in any event to use VAT for the payment of the aid in within the limits of the risks inherent in the question was initially granted by Article 3 of applicant's economic activity, it has not Regulation No 855/84, which the applicant been shown that there has been a suffi-

OPINION OF SIR GORDON SLYNN —CASE 253/84

GAEC v COUNCIL AND COMMISSION

In these circumstances I do not Produits Bertrand y Commission [1976] ECR accept that it can invoke the doctrine in 1, at p. 9, as an example of such a paragraph 6 of Kampffineyer. Furthermore, I proceeding. do not consider that the damage alleged in the present case is sufficiently certain to come within the Kampffineyer principle, even if it were future damage. Accordingly, I do not consider the applicant is entitled to the In working out its alleged losses on beef declaration of general liability for damage and veal sales, the applicant in this case does which it seeks. not refer to specific transactions.

second half of 1984. In my view that is not only on the French market but also on the an admissible method for working out losses markets of third countries where they allegedly suffered. The special aid to compete with French products, in particular German farmers appears to me to have its own products. affected beef prices in France at most for only two months out of the six considered. Furthermore, it is far from clear that all of this price decrease can be attributed to the effect of the overcompensation of German farmers under Decision 84/361; other factors may be responsible in whole or in pan for the drop in prices. The matter is The Council contends that the damage very speculative, and I do not consider that alleged by the applicant is not due to the applicant in this case has established the Decision 84/361 but to the German national damage which it alleges with sufficient measures adopted pursuant thereto.

OPINION OF SIR GORDON SLYNN — CASE 253/84

The German Government's main submission For my part I am not satisfied that a causal in this case is that the claim should be link between the unlawfulness alleged and rejected for lack of actual, proven damage the damage has been established. presenting a causal link with the act chal- lenged. It submits that the drop in the prices I said that these two last questions were of beef invoked by the applicant at the important aspects of the case because in my relevant time is attributable to the sudden view they in themselves defeat the increase in the slaughtering of cattle applicant's claim, so that on that basis it consequent upon the Community may not be necessary for the Court to restrictions on the production of milk. It consider the alleged unlawfulness of contends that both the external trade data Decision 84/361, either because the and the trend of beef and veal prices point applicant has failed to prove the existence of against a causal link between the damage damage (as in Case 49/79 Pool v Council alleged and the act challenged, though the [1980] ECR 569) or because it has not made Court has not been given evidence to show out a causal link between the unlawfulness the extent of such slaughtering or what its alleged and the damage (as in Case 40/75 effect on prices might have been. Produits Bertrand [1976] ECR 1 and Case 26/81 Oleifici Mediterranei [1982] ECR 3057).

Accordingly, in my opinion the action should be dismissed as inadmissible in so far as it is brought against the Commission and as unfounded in so far as it is brought against the Council. The applicant should be ordered to pay the costs of the Council and the Federal Republic of Germany, but not of trie Commission which has not asked for them.