C-187/85

1. My Opinion relates to the actions There are some further remarks I wish to brought in Cases 187/85 and 188/85 by the make by way of introduction. The cases EEC Seed Crushers' and Oil Processors' before the Court arise in the context of a Federation (hereinafter referred to as dispute which has pitted Fediol and the 'Fediol') for a declaration that Decisions Commission against one another for more 85/233 and 85/239, adopted by the than a decade. The Court has already given Commission of the European Communities judgment in that dispute once before on 16 and 18 April 1985 respectively, are (judgment of 4 October 1983 in Case void. By means of those decisions — which 191/82 [1983] ECR 2913) and will soon do are based on Council Regulation (EEC) No so again for the third time: an action is 2176/84 of 23 July 1984 on protection pending in which Fediol seeks the against dumped or subsidized imports from annulment of the decision of 22 December countries not members of the European 1986 rejecting its request that the Economic Community (Official Journal Commission initiate a proceeding 1984, L 201, p. 1) — the Commission concerning other allegedly unlawful terminated the anti-subsidy proceedings practices involving the importation of soya which had been initiated as a result of a meal from Argentina (Case 70/87). complaint submitted by Fediol concerning imports into the Community of soya meal originating in Brazil and Argentina (see Official Journal 1985, L 106, p. 19, and L At the root of this long-standing conflict lie 108, p. 28). the economic interests of the European seed crushing and oil producing industry which processes soya beans. Community producers of meal (a solid residue resulting from the Although the two actions are not identical, extraction of the oil contained in the beans they have many points in common. In the and used mainly as animal feed and fodder) first place, the representations which set in have sustained material injury as a result of motion the Commission's investigation imports from Brazil and Argentina which concern imports of the same product. have, in recent years, taken over a share of Secondly, the practices criticized as consti­ the European market approaching 50 %. On tuting subsidies and the grounds relied upon the other hand, the export of soya-based by Fediol overlap to a large extent. These products, and in particular soya meal, yields close links and, in addition, the obvious profits which represent one of the principal interest in rationalizing the proceedings assets in the balance of payments of the two justify dealing with the two cases together. South American countries concerned, The submissions and criticisms relied upon which, as is well known, are in deficit. That in the application concerning imports from explains why the relevant soya producers'

organizations, the Cámara de la industria It is noteworthy that, in contrast to the aceitera de la República argentina and the approach it takes with regard to dumping Associaça o brasileira das industrias de óleos (Article 2 (2)), the regulation does not vegetais (hereinafter referred to as 'Ciara' define the concept of a subsidy in general and 'Abiove' respectively) have intervened in and abstract terms, but merely lays down support of the contested decisions of the the conditions on which duty may be Commission. imposed.

However, That regulation contains a number of they may be offset by countermeasures procedural and substantive provisions within the Community. The Council and the concerning the matter under consideration. Commission have recourse to Article 3 The cornerstone of the system is Article where, instead of aiming to confer a general 3 (1) which states that 'a countervailing advantage on industry and agriculture, duty may be imposed for the purpose of subsidies are sectoral or specific in nature offsetting any subsidy bestowed, directly or and therefore aim to increase the competi indirectly, in the country of origin or tiveness of certain sectors of production. export, upon the manufacture, production, export or transport of any product whose release for free circulation in the Community causes injury'. However, the 3. The Commission has raised an objection principle thus laid down is subject to certain in limine litis against the admissibility of

FEDIOL v COMMISSION

Community law. The Commission's as it is indirectly intended to subsidize soya objection is supported by Ciara in Case meal, and (e) the exemption from taxation 187/85. of profits realized on exports of soya oil.

5. The submission alleging an infringement of Article 3 as regards the Argentinian and On the other hand, with regard to the Brazilian practices referred to under (a) and decision concerning imports from Brazil (b) is based on a detailed criticism of the (Case 188/85), Fediol advances three sets of concept of a subsidy adopted by the submissions. The first set of submissions also Commission. According to Fediol, that relates to the infringement of Article 3 but concept is too narrow, particularly because the practices which the Commission is it is based on whether the subsidy is capable criticized for not treating as subsidies are of constituting an effective 'charge' on the more numerous. In addition to those resources of the State which grants it. referred to under (a) and (b) above, they Instead, according to the applicant, there consist of (c) concessionary financing for are a number of arguments demonstrating storage of soya beans, (d) concessionary that the concept should be defined in broad financing for exports of soya oil inasmuch terms.

OPINION OF MR MANCINI — CASE 187/85

On the other hand, there are a number of That interpretation, moreover, is fully factors militating in support of a broad defi­ consistent with the objectives of Regulation nition of the concept of a subsidy, namely No 2176/84 and with the spirit of the (a) the purpose of the regulation, which was GATT rules which, although they raise adopted precisely in order to defend obstacles in the way of free trade, do not Community producers against competition exceed the limits of what is strictly from imports, however subsidized, from necessary. Nor can that interpretation be non-member countries, (b) international contradicted by referring to the solutions rules, and in particular the second sentence adopted by the Communities' trading of Article VI (3) of GATT and Articles 8, 9 partners and to Article 92 of the EEC and 11 of the Anti-subsidy Code, (c) legis­ Treaty. As is clear from the third recital in lation adopted by the United States (the the preamble to the regulation, United Trade Agreement Act 1979, Section 771) States and Canadian practices constitute and Canada (Special Import Measures Act matters to be taken into account by the 1984), and (d) Article 92 of the EEC Council and the Commission but are not Treaty, as interpreted by the Court and factors which those institutions must applied by the Commission. In that regard, slavishly abide by. With regard to the the severity with which the Commission concept of aid, it is well known that it was penalizes the different kinds of aid without conceived in an intra-Community context requiring such aid to have an impact on the and from the point of view of a single finances of a State is particularly significant. market. It is therefore natural that its inter­ pretation should be governed by criteria stricter than those applicable to the interpre­ 6. The Commission holds the opposite view. tation of the concept of a subsidy. In its opinion, to the limits which the regu­ lation sets to the adoption of countervailing measures (material injury to Community 7. In considering the arguments industry and the existence of a Community summarized above and the applicant's interest) must be added three further criticisms, it is advisable to bear in mind the requirements, that is to say the subsidy must principles on which the Court bases the (a) be granted by the State, (b) constitute a power of review which Community law

confers upon it with regard to subsidies. requirements in addition to the existence of According to the first Fediol judgment, the a Community interest and injury to Court may not intervene in the exercise of Community producers. However, since the discretion reserved to the Community from its point of view the only kind of authorities by the regulation. However, subsidy that exists is the one that may be notwithstanding the existence of that subjected to countervailing measures, the discretion, it is required to review the Commission relates those requirements to legality of the measure terminating the that subsidy. The result is obvious: the

unacceptable. The wording of point (1), on will lead to the realization that the legal which the Commission relies to a large requirements of the existence of a extent, cannot be regarded as being of such Community interest and injury to a kind as to lay down a general criterion for Community producers relate to the second at least two reasons; (a) point (1) forms part problem, whilst the requirements laid down of a list which, according to Article 3 (2) of by the Commission relate to the first the regulation to which it is annexed, is not question. And there is not the slightest exhaustive; (b) the position of point (1) at doubt that in that context those the end of the list, which, far from ascribing requirements are appropriate, inasmuch as decisive importance to that point, makes it they unfailingly correspond to the purely residual in relation to the practices constituent elements of the 'subsidy as such'. set out in the preceding points.

the second. As the Court will remember, the interest, puts himself outside the laws of the Commission lays down three further market. Clearly the term 'sacrifice' must be

The validity of that conclusion is borne out, According to the applicant, the practice moreover, by other — perhaps less relevant referred to under (a) harbours two kinds of but none the less significant — arguments. subsidies. The first is characterized by the The first argument, which is to be found difference in the rates of tax imposed on particularly in legal literature, is a contrario: soya beans, on the one hand, and on unless it is linked to the requirement of a soya-based products (meal and oil), on the charge on the public account, the concept of other. Soya beans are penalized (the rate a subsidy may expand until it encompasses charged being 25 % as against 13 % in any type of State aid to the economy and Argentina, and 13 % as against 11 % and consequently includes policies on pricing or 8% respectively in Brazil), with the result the fixing of environmental parameters that producers are obliged to offer them for (Cunnane and Stanbrook, Dumping and sale on the domestic market. Argentinian Subsidies. The Law and Procedures and Brazilian seed crushers thus receive an Governing the Imposition of Anti-dumping indirect subsidy for the manufacture of soya and Countervailing Duties in the European meal, which consists in the possibility of Communities, London and Brussels, 1983, processing a raw material — soya p. 51 ; Beseler and Williams, Anti-dumping beans — obtainable at prices which are and Anti-subsidy Law. The European particularly low because supply is so great. Community, London, 1986, pp. 123 to 125). The second argument is based on the manner in which the Treaty — which, it must not be forgotten, is an agreement governed by international law — defines the related concept of aid. Aid, according to The second is a direct subsidy. For the State the difference between the two rates means Article 92, also consists of a measure a loss of revenue from exports of soya adopted by the State, which affects public beans, that is to say a loss of profits or, to resources and is intended to promote certain put it another way, a financial charge on undertakings or certain kinds of production. which the Commission makes the application of Article 3 conditional. In the case of Brazil, moreover, that state of affairs is further aggravated by the existence of a tax on the movement of goods (ICM) which 8. Now that the validity of the criteria is in the nature of a real export refund. In which determine the extent to which a fact, the applicable rules provide that the subsidy constitutes a burden for the State difference between the tax charged on the and an advantage for the recipients has been soya beans and the tax payable on the soya established, it is necessary to ascertain meal exports is to be recovered from the whether the Commission has correctly seed crushers.

This submission must be rejected. There is no doubt that the fixing of differential rates As it is based on turnover, the ICM is of tax for goods belonging to the same covered by point (h) of the illustrative list sector (the so-called 'soya complex') gives annexed to the regulation, which authorizes an advantage to traders liable to the lower the remission of charges already levied on rate, and the Commission acknowledges this raw materials used in the manufacture of quite openly in the contested decisions. Can the product intended for export. It was it be said, however, that a measure of that therefore quite legitimate for the kind also satisfies the requirement of a Commission to deny that the practice under sacrifice on the part of the public account? consideration constituted a subsidy. I do not believe so. As I said earlier, Moreover, the fact remains, as the a sacrifice in terms of reduced revenue intervener Abiove has pointed out, that not is clearly conceivable but — as is even the inflexible and suspicious United obvious — only in so far as there is a rule to States authorities have questioned the which that reduced revenue constitutes an correctness of the differential taxation exception and, consequently, only if the imposed by Brazil. goods or the activities liable to a specific charge are all taxed at the same rate. In the case of the Argentinian tax on exports that condition is not satisfied (vegetables and hides, for instance, are taxed at the rate of Nor, finally, is it possible to accept Fediol's 10%), and in the case of the Brazilian tax criticism of the obstacles raised by on the movement of goods (ICM) processed Argentina and Brazil in the way of exports products are as a rule zero-rated. of soya beans. Since the price of that product depends on the degree of elasticity of supply and demand on the world market, the possibility that a number of diverse administrative formalities may affect its As far as that tax is concerned, moreover, it amount by directing production towards the is appropriate to bear in mind that it was domestic market and thus favouring the extended to exports of oil and meal seed crushers is to be ruled out. However precisely as a result of the Commission's the requirement of a charge on the public intervention and that it was defined in the account is not satisfied either. On the one contested decision as a tax not constituting hand, those formalities are prescribed for a charge on the public account because it is statistical purposes, and on the other they levied on the processed product (paragraph are aimed at preventing speculative 12.5). In its defence, however, the manoeuvres.

The foregoing analysis completes the agricultural commodities fixed the rate at assessment of Fediol's complaints, also on 45 %. Fediol therefore alleges that the the basis of Article 7 of the regulation, Commission (a) failed to recognize that against the decision concerning imports of such concessionary financing was clearly soya meal from Argentina and it specific to a given sector and, as such, was undoubtedly entails the dismissal of the liable to duty (supra, section 2, final part), application in Case 187/85. (b) disregarded the fact that, even though the concessionary financing programme was formally withdrawn on 1 January 1984, it remained in existence for some considerable time and was in any event applied during the investigation period, and (c) was guilty

I shall consider each of those matters in turn. The first complaint concerns conces sionary financing for the storage of soya beans. The applicant points out that, during the period under investigation by the Nor can it be said that, amongst those Commission (1983), the normal interest rate goods, soya was treated in an unjustifiably on loans for 180 days was between 100% preferential manner. In addition to being and 150%. By contrast, as regards the very close to one another, the figures financing for the same length of time of the produced on that point by Fediol and the storage of soya beans, a government Commission (31.9 and 31.7%) seem to be programme concerning the storage of 27 wholly proportionate to the importance

which the 'soya complex' has gained in the concluded by seed crushers on foreign Brazilian economy. As is well known, soya, markets. Having recognized that those annual production of which exceeds 15 practices constituted subsidies and million tonnes, has replaced coffee as calculated the amount of those subsidies at Brazil's most important crop. 7.66 and 0.09% respectively of the f.o.b. value, the Commission submitted a proposal to the Council to impose a duty thereon but Clearly, once the argument that the subsidy not to collect it at once (4 January 1985). is specific to a given sector has been Subsequently, however, after establishing rejected, the allegations regarding the length that the Brazilian Government had of time for which it was paid and the misuse abolished the concessionary financing of powers of which the Commission was programme with effect from September supposedly guilty in terminating the relevant 1983, and having regard to the misgivings proceeding cannot be sustained either. which the prospect of imposing a duty had Accordingly, there is no need to deal with raised in the Council, the Commission those allegations. changed its mind. It stated that the interests of the Community did not require the adoption of countervailing measures and the proceeding could be terminated.

If it really did take place, the transfer to which the applicant refers was the result of a Next, Fediol maintains that, because the choice freely made by the exporters by Commission changed its mind, the decision reference to a wide range of factors based is vitiated by a misuse of powers. The on their own convenience. procedure which culminated in the adoption of that decision must, in addition, be regarded as irregular. In its third criticism, 11. The last two practices challenged by the applicant alleges that, once it has Fediol consist in concessionary financing for requested the Council to impose duties, the exports of soya meal and the grant of tax Commission lacks the power to terminate benefits in respect of hedging transactions the proceeding by implicitly withdrawing its

12. A preliminary point. In its reply Fediol Now that this principle has been established waived its complaints concerning hedging (and the existence of which, moreover, the transactions and recognized the limited Court takes for granted — see paragraph 30 impact of such transactions. The following of the first Fediol judgment), it must at once considerations are therefore concerned be added that, for the purposes of that solely with the practice of concessionary assessment, the Council does not enjoy a financing for exports of soya meal. general position of primacy but is empowered only to adopt one of the measures which may constitute the outcome With regard to the first criticism, I would of the proceeding. In the event of the impo remind the Court that, according to Regu sition of provisional duties, for instance, lation No 2176/84, the fact that a subsidy is Article 11 of the regulation expressly capable of causing material injury to a provides that the interests of the Community industry does not in itself Community are to be assessed by the justify the imposition of countervailing Commission. That is also laid down by

As event already been considered in connection I have just said, Articles 9, 11 and 12 of with the determination of injury. The Regulation No 2176/84 make it quite clear interests of the Community can be assessed that the Commission enjoys an independent only by recourse to criteria which are much power of assessment from the date on which wider in scope, such as whether it is appro representations are made to it until the date priate, not only from a commercial but also on which the Council takes the final from a political point of view, to impose decision. Hence, depending on the circum

FEDIOL v COMMISSION

submit a proposal to the Council to impose drawing the proposal which it had definitive duties. submitted to the Council. In the light of the considerations set out in the two preceding paragraphs, that allegation cannot in my Under a system of that kind, it seems clear view be upheld any more than those which to me that the Commission is entitled to preceded it. If, as I have shown, the investi­ adjust the action it takes to the demands of gation is conducted exclusively by the the situation and it is therefore absurd to Commission until definitive action is taken reproach it for acting in a contradictory- by the Council, there is no doubt that the manner if the occurrence of an event — for Commission may decide to terminate the instance the withdrawal of concessionary proceeding even after requesting the financing — induces it to rectify or reverse Council to impose definitive measures. the approach hitherto taken. In this case, moreover, the Commission's change of The only condition is that such action direction was anything but sudden and should take the form of a decision duly unforeseeable. As the Court will recall, the stating the reasons on which it is based. In Commission had suggested suspending the this case, that condition has been fulfilled. validity of the duties at the very time at The decision meets all the requirements laid which it proposed their imposition. down by Regulation No 2176/84 for termi­ nating the proceeding and, in particular, 14. That brings me to the third criticism, takes formal note of the fact that no according to which the Commission objections were raised within the Advisory exceeded its powers by implicitly with­ Committee established by Article 6.