C-56/86

OPINION OF MR MISCHO — CASE 56/86

OPINION OF MR ADVOCATE GENERAL MISCHO delivered on 22 January 1987 *

Mr President, white sugar for UNRWA, as amended by Members of the Court, Commission Regulation No 939/82 of 21 April 1982. 2

The case before the tribunal de première instance [Court of First Instance], Brussels, The penalties provided by the regulation in and the Société pour l'exportation des case any of the terms of the tender are not sucres (hereinafter referred to as 'the satisfied are set out with great clarity at the company' or 'the successful tenderer') and beginning of the Report for the Hearing. I the Office belge de l'économie et de should like to refer to that Report also for l'agriculture (OBEA) concerns the quality of particulars of the facts, the arguments of the a consignment of sugar supplied by the parties and the wording of the three Community as food aid to the United questions put by the tribunal de, première Nations Relief and Works Agency for instance, Brussels. Palestine Refugees (hereinafter referred to as 'UNRWA'). I shall also follow the Report for the Hearing in taking the first two questions Following an invitation to tender issued by together. the OBEA the company was instructed to supply the donee agency with a quantity of 755 tonnes of sugar of quality 2 (or The first two questions standard quality).

quality it shall be rejected at the tenderer's In a judgment of 5 December 1985 3 the risk'. Court confirmed that principle in the following terms: It may be reasonably inferred from those provisions taken together that the control must in principle be effected: 'The supervision exercised in this connection [by the Member States] has neither the aim nor the effect of discharging (i) when the goods to be delivered are the successful tenderer in any way whatever ready for loading; from his responsibilities arising from the tender.' (ii) at such a time that it is still possible for the result of the analyses to be known before the vessel raises anchor so that In the second place it is not the responsi­ the goods may be rejected before its bility of the recipient of the food aid to departure. check or certify observance of the condition relating to the category to which the sugar The regulation makes no provision for a to be supplied must belong. case such as the present one, where the results of the analyses are not known until As has been seen, the regulation expressly after the vessel sets sail or even after the provides that the control must be carried goods are distributed. out at the time of loading. It is logical that it should be the agency charged by the It is nevertheless possible, by way of inter­ Community with the task of the practical pretation, to ascertain the answer in such a implementation of food aid which should case on the basis of the following factors. check that the product complies with the criteria laid down. Article 1 (2) of the regulation provides that 'the sugar must be of standard quality as defined in Article 1 of Regulation (EEC) Moreover, it is not at all certain that all the No 793/72'. developing countries or recipient bodies have laboratories equipped to carry out the necessary analyses. It is on that basis that the successful tenderer is regarded as having submitted his tender and it is on that express condition The certificate to be supplied by the that the contract was awarded to him. recipient of aid under Article 10 (1) cannot therefore relate to that aspect. Its object is The first duty of the tenderer is therefore to solely to certify that the sugar has been make certain himself that the sugar which delivered 'in accordance with the prescribed he is preparing to supply actually meets that conditions' as laid down in Article 9, in requirement. particular in the quantities provided for, on the date agreed and in the bags specified. Quality control at the time of loading cannot relieve him of that responsibility. As It is reasonable that the recipient of aid the Belgian Government and the OBEA should also check whether the goods have point out, the control provided for by the been damaged in the course of transport. It regulation was not established in the interest is in that sense that in my opinion the of the tenderer but in the interest of the donor, the Community, and the consignee, 3 — Case 124/83 Direktoratet for Markediordningeme v UNRWA. Corman & Fils [1985] ECR 3777, paragraph 21.

That limited check carried out on behalf of Even at that stage the competent agency the donor does not have the effect of must therefore still be able to reject the creating legal ties between the successful goods, which would mean in particular tenderer and the third-party recipient of the refusal to pay the agreed price. aid. The latter can in no way be compared with a purchaser who has 'accepted' goods. Like the Commission, I nevertheless consider that such negligence on the part of In the third place it is clear that the quality the competent agency may give rise to a of the goods, especially in the context of a claim for damages on the basis of the law of food-aid operation, is an absolutely essential the country where the award was made. aspect of the contract awarded. It is accordingly inconceivable that the quality That, it seems to me, ought to be the case in should no longer be open to challenge if the particular where the quality is not chal­ result of the analyses is not available until lenged until after the food aid has been after the vessel has set sail or even after distributed to the ultimate beneficiaries, in distribution of the aid. the present case the Palestine refugees.

As the Commission, in my opinion rightly, In that case it is no longer possible 'to reject observes, it would be too easy if the the goods' in the sense of restoring them to successful tenderer could, by negligence or the successful tenderer in order that he may, deliberately, fail to fulfil his obligation to for example, try to sell them in the country inform the competent agency in good time where they have been unloaded. of the date of departure of the vessel and thus escape any challenge as regards the It seems to me that in the present case such quality of the goods supplied by alleging a compensation has taken place amicably so-called 'acceptance' of the goods by the since the OBEA agreed to pay for the sugar donee. on the basis of its actual value.

That is what the Belgian court is asking in its third question.

In the second place definition of the quality of the product is intended also to maintain In that respect I should like first of all to equality between all tenderers. If the make two general observations. competent agencies of the Member States were to start agreeing to pay for goods which did not meet the prescribed The Community has known cases where requirements the price corresponding to products supplied as food aid have proved their actual quality without exacting any to be defective in quality. The Commission penalty for improper performance of the has learned its lesson and has made the contract, the tendering system would be regulations relating to monitoring the distorted. quality of products to be delivered more rigorous.

Such an attitude might encourage suppliers In the present case it is true that the defect to tender from the start at a price lower in the sugar delivered was not such as to than that normally charged for the standard prevent its use by the consumers in complete quality because from the outset they were safety. intending to deliver only a lower quality. They would thus obtain an unfair competitive advantage over tenderers Care however must be taken not to open up intending to observe the condition laid a breach in the system and create the down.

OPINION OF MR MISCHO — CASE 56/86

2. Article 7 (5) provides that 'the security shall be released when final payment is If that is, however, impossible the goods are made'. simply rejected. The security must be forfeited for the contract has not been performed correctly. Where, as in the present case, the goods are not paid for on the basis of the price fixed at the time of the award of the contract but Similarly, if as a result of the need to on the basis of an amicable arrangement, replace the goods or for any other reason there is no 'final payment' within the they cannot be delivered within the meaning of Article 7 (5) and the security prescribed period, Article 15 (2) applies, cannot therefore be released. which provides that 'without prejudice to Article 7 (3)' the price accepted is to be reduced by 0.12 ECU per 100 kg of sugar 3. Finally, Article 7 (3) (as amended by per day. That means that with regard to Regulation No 939/82) provides that 'the quantities which arrive late the whole security for tender shall be forfeited ... in security is forfeited even if the delay is only respect of the quantity of sugar which the minimal. successful tenderer has not delivered to the port of unloading ... in accordance with the prescribed conditions'.

If all the goods arrive late the whole security is forfeited even if the sugar is I have already stated that in my opinion the subsequently consumed by the beneficiaries. term 'in accordance with the prescribed

SOCIÉTÉ POUR L'EXPORTATION DES SUCRES v OBEA

Let me say in the first place that the criteria (a) to (d) inclusive adopted in relation to the standard quality (or quality 2) by Regu­ Inevitably all the principles of classification lation No 793/72 of the Council of 17 April of sugar would be at issue. 1972 fixing the standard quality for white sugar (Official Journal, English Special Edition 1972 (I), p. 299) are the same as the criteria (a) to (d) inclusive defined in Let us now see what lessons we may draw relation to sugar of category 3 by Article 11 in this case from the decisions of the Court of Regulation No 1280/71 of the on the principle of proportionality. Commission of 18 June 1971 laying down detailed rules for the buying-in of sugar by intervention agencies (Official Journal, English Special Edition 1971 (II), p. 381). In its judgment of 23 February 1983 in Fromançais 4the Court held that: 'In order

4 — Case 66/82 [1983] ECR 395, paragraph 8 at p. 404. Sec The difference between the two categories also Case 122/78 Buitoni v Fonds d'orientation et de régu- of sugar is thus based on the four additional larisation des marchés agricoles [1979] ECR 677, paragraph 16 at p. 684. and the judgment of 22 January 1986 in Case criteria in Article 1 (e) of Regulation No 266/84 Denkavit France [1986] ECR 149, paragraph 17.

OPINION OF MR MISCHO — CASE 56/86

to establish whether a provision of that the tendering procedure should be Community law is consonant with the conducted correctly. Only the threat of the principle of proportionality it is necessary to loss of the security can effectively contribute establish, in the first place, whether the to this. means it employs to achieve its aim correspond to the importance of the aim and, in the second place, whether they are necessary for its achievement.' Would the dissuasive effect be ensured as regards the future if for example only half the security, that is equivalent to 3.5% of In the present case the aim pursued is the value of the contract, were forfeited? It important: it is to ensure that the tenderer may be doubted. actually delivers sugar of the prescribed quality.

The regulation laid down several rules for The employment of that means may also be denaturing a product, only one of which regarded as necessary for the achievement of had not been properly complied with. Since the objective since the bare rejection of the the national court found that the denaturing goods (and their return or the payment of departed only very slightly from the their actual value) could not have a suffi­ generally recognized standard it queried ciently dissuasive effect since it would not whether the regulation infringed the involve a real financial loss. It is important principle of proportionality inasmuch as it enabled the same sanction to be applied 5 — See Case 122/78 above; Case 240/78 Atalanta Amsterdam v both where no denaturing at all had taken Produklichap voor Vee en Vlees [1979] ECR 2137; Case 272/81 Société RU-MI vForma [1982] ECR 4167; Case place and where denaturing had been 66/82 above and Case 15/83 Denkavit Nederland BV v carried out but not wholly in the prescribed Hoofdproduktschap voor Akkerbouwproducten [1984] ECR 2171. manner.

SOCIÉTÉ POUR L'EXPORTATION DES SUCRES v OBEA

The Court held that 'the Commission was In another judgment of the same date on a legally justified in adopting provisions which request for a preliminary ruling (Case entail withholding of the aid and loss of the 273/81 Société laitière de Gacé v Forma security for failure to fulfil the principal [1982] ECR 4193) the Court showed similar obligation laid down in the tendering severity. procedure and was not obliged to vary the severity of the measure in question according to the gravity of the tenderer's failure to comply with that obligation. Such a measure In both cases the product had been used for cannot be regarded as out of proportion to its intended purpose and the good faith of the objective pursued'. the traders was not at issue.