C-92/87

2 2. Council Directive 69 / 73 / EEC provides for 'inward processing' arrangements under

'" Original language Duich. 1 — Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post-clearance recovery of impon duties or expon 3 duties which have been not required of the person liable for Commission Directive 75/349, which lays payment on goods entered for a customs procedure down a set of further rules concerning equi- involving the obligation to pav such duties (Oj 1979. 1 197, p I) 2 — Council Directive 69/73/EEC of 4 March 1969 on the 3 — Commission Directive 75/349/EEC of 26 May 1975 on harmonization of provisions laid down by law, regulation detailed rules concerning equivalent compensation and or administrative action in respect of inward processing prior exponation under inward processing arrangements (OJ, English Special Edition 1969, I, p 65) (OJ 1975; L 156, p 25)

OPINION OF MR VAN GERVEN — JOINED CASES 92 AND 93/87

In view of the novelty of 'triangular traffic', the United Kingdom and French customs 'The competent authorities shall refuse the authorities raised the matter with the benefit of equivalent compensation or prior Commission. On 12 June 1981 a meeting exportation when the use of these would was held in Brussels between the lead to an unjustified advantage in regard to Commission, on the one hand, and France, relief from customs duties, charges having the United Kingdom and the Netherlands, equivalent effect, agricultural levies and on the other. According to the documents other charges laid down within the before the Court, the Netherlands was framework of the common agricultural represented at the meeting because a policy, or of a specific system applicable Netherlands undertaking and a French under Article 235 of the Treaty to certain undertaking wished to engage in a similar goods which result from processing of agri­ triangular operation involving the import cultural products.' and export of petroleum products. There is a difference of opinion between the parties as to whether, at the meeting, only the general principles of Directives 69/73 and 75/349 were discussed (the Commission's 3. Since the territory of the Community view) or whether the details of the trans­ constitutes a customs union in relation to actions actually proposed were considered non-member countries, it is self-evident that (the defendants' view). At all events it is import and export transactions can be clear that at that meeting the Commission carried out in different countries. At the explained the procedure to be followed in beginning of 1981 the United Kingdom and the case of import and export transactions French authorities were approached by involving equivalent compensation where Rank Hovis Ltd (a company incorporated such transactions were not carried out by

the same undertaking and / or in the same the first subparagraph of Article 2 (1) of country. The Commission's guidelines were Regulation No 1697/79. In response to a set out in Document SUD / 833 / 81 , which request from France and the United was drawn up by the Commission in Kingdom to specify what amounts the June/July 1981 and forwarded to the Commission wished them to recover, the French and the United Kingdom customs Commission explained by letter of 19 authorities. The document states that, where December 1984 that they were to take the exporter and the importer are two action for the post-clearance recovery of the different persons, the connection between monetary compensatory amounts payable the two required by Article 11 of Directive on the exportation of the flour from France 75/349 may be established by setting up a to non-member countries and on the temporary association which then becomes importation of wheat from Canada into the the holder of the authorization to set up an United Kingdom. After an exchange of inward processing system. views between the Member States concerned and the Commission had failed to yield any results, the Commission instituted these proceedings before the Court under Article 169 of the EEC Treaty. In its application of 23 March 1987 the

actions. The authorization was valid for one recovery of the monetary compensatory year. On the basis of that authorization, amounts which would have been payable on between February and September 1982 the transactions in question if those trans Rank Hovis imponed into the United actions had taken place without any auth Kingdom on account of Minoran a number orizations being granted. of consignments of common wheat from Canada. The flour was exported by CFCF, also on account of Minoran, from France to non-member countries over the same period.

September 1982. By letter of 12 July 1984 4 — Article 2 (1) of Council Regulation No 1697/79 provides the Commission informed France and the as follows: United Kingdom that, in its view, the trans 'Where the competent authorities find that all or pan of the amount of impon duties or expon duties legally due on actions gave rise to an 'unjustified goods entered for a customs procedure involving the obli advantage' within the meaning of Article 4 gation to pay such duties has not been required of the person liable for payment, they shall take action to recover of Directive 75/349. In that letter, the the duties not collected However, such action mav not be taken after the expiry of a period of three vcars from the Commission requested France and the date of entry in the accounts of the amount originally United Kingdom to recover the 'sums required of the person liable for payment or, where there is no entry in the accounts, from the date on which the avoided' in accordance with Article 4 and customs debt relating to the said goods was incurred.'

6. The Court must decide whether the French Republic and the United Kingdom were required, on the basis of Regulation The alleged 'unjustified advantage' No 1697/79 and Directive 75/349/EEC, to take action for the post-clearance recovery of monetary compensatory amounts which, according to the Commission, were payable by Rank Hovis and CFCF and, in the absence of such recovery, whether they are 7. Let us first consider what the 'advantage' required pursuant to Regulation No in the contested transaction consisted of, 1697/79 to make a corresponding amount before ascertaining whether that advantage available to the Communities as own must be regarded as unjustified. Monetary resources. compensatory amounts are, amongst other things, intended to prevent artificial deflections of trade which could arise from differences between the exchange rates of The Commission contends that since the the various 'green currencies' in the authorizations granted to Minoran Community. Since the Common Customs permitted the latter to avoid paying Tariff is expressed in ecus, but levies and monetary compensatory amounts altogether refunds are payable in national currency, on both the imported common wheat and undertakings may wish to import goods the exported flour, those authorizations from non-member countries into Member gave rise to an 'unjustified advantage', States whose currency has increased in value within the meaning of Article 4 of Directive or, conversely, to export goods to 75/349/EEC, and are consequently invalid, non-member countries from Member States as stated in paragraph 4 above. It therefore whose currency has depreciated in value claims that the Member States are under an since the establishment of the Common obligation, on the basis of Article 2(1) of Customs Tariff. Moreover, so far as intra- Regulation No 1697/79, to take action for Community trade is concerned, they may the post-clearance recovery of the uncol­ prefer to offer products for sale to inter­ lected charges. vention agencies in a Member State with a

According to the Commission, the fact that the contested authorizations led to the avoidance of both positive monetary It is apparent from certain figures produced compensatory amounts (on the importation by the Commission that throughout the of common wheat from Canada into the period under consideration monetary United Kingdom) and negative monetary compensatory amounts were levied in the compensatory amounts (on the exportation United Kingdom on imports of common of the flour from France to non-member wheat ('positive' monetary compensatory countries), constituted an 'unjustified amounts). It is also apparent from those advantage'. Initially, the Commission figures that since April 1982 refunds on argued that that unjustified advantage arose exports of flour have in France been from the application of Article 5 of reduced by the levying of monetary Directive 74/349/EEC (set out in paragraph compensatory amounts ('negative' monetary 2, supra), according to which the compen­ compensatory amounts). sation goods take, for customs purposes, the same status as import goods, and import goods take, for customs purposes, the same status as compensation goods. In the Commission's view, it is possible to comply As a result of the 'triangular system' set up with that rule only where the import goods by Rank Hovis and CFCF, Canadian and the compensation goods are imported common wheat was imported into the into, and exported from, the same Member United Kingdom free of import charges State. 6In its view, therefore, the unjustified (defined as the duties payable under the advantage consisted in avoiding the Common Customs Tariff plus positive exportation of the Canadian wheat from monetary compensatory amounts) and at France to the United Kingdom and conse­ the same time flour was exported from quently avoiding payment of intra- France without any claim being made for Community monetary compensatory export refunds (defined as the duties amounts. The amount of those levies payable under the Common Customs Tariff should, according to the Commission, be less negative monetary compensatory the subject of post-clearance recovery (even amounts). Since no transactions took place though no intra-Community trade had between France and the United Kingdom, taken place between France and the United no intra-Community monetary compensa­ Kingdom). tory amounts were levied either. 5

that the expression 'unjustified advantage' Commission and contends that the fact that relates to an advantage not resulting from the authorization enables payment of the 'normal application of the (inward monetary compensatory amounts to be processing) arrangements or other permitted avoided is a normal consequence of the transactions'. A 'normal' application of the existence of the customs union and the rules inward processing system means, according on equivalent compensation as applied at to the Commission, that the import and the time of the contested transactions. The export transactions (in this case the import United Kingdom also points out that the of wheat and the export of flour) have been rules applicable at the time of the contested carried out within the same Member State transactions provided either for the grant of (namely France), so that triangular traffic authorization (with relief from import and should not offer the possibility of avoiding export duties and monetary compensatory payment of intra-Community monetary amounts) or for the refusal to grant authori­ 8 compensatory amounts. 'Abnormal zation. Hence the grant of authorization applications of that system, as in this case, subject to payment of monetary give rise to an unjustified advantage and compensatory amounts was not one of the 9 entail, the Commission maintains, the inva­ possibilities envisaged. The United lidity of the authorizations granted and Kingdom also disagrees with the consequently of the relief from import and Commission's contention that the existence export duties, including extra-Community of an 'unjustified advantage' must be monetary compensatory amounts. On inferred from the fact that monetary grounds of fairness, however, the compensatory amounts were applicable Commission seeks only the post-clearance during the period of validity of an authori­ recovery of the extra-Community monetary zation. Finally, the United Kingdom compensatory amounts. contends that the Commission's interpre­ tation is unacceptable inasmuch as it would lead to the levying of charges without there being a clear legal basis for their impo­ I0 sition.

whether a given transaction follows 'from 11. It cannot be disputed that in 1981 it was the normal application of the system'. unclear whether 'triangular traffic' could be brought within the scope of Directive 75/349/EEC. Anicie 11 (1) of that directive provides that 'importation of import goods may be carried out only by the holder of the Does the failure to establish the existence of authorization of prior exportation or on his an 'unjustified advantage' constitute a failure behalf." It was precisely for that reason by the Member States concerned to fulfil that a meeting was convened on 12 June

gations under Community law. In answering the importer are two different persons, that question, account must be taken of the whether located in a single Member State or fact that both the Commission and the in different Member States, such a link can Member States enjoy a wide discretion 2 be formed ' by setting up a temporary asso when it comes to determining the scope of ciation (a company constituted under civil such an 'open' concept. That applies law) to act as holder of the inward particularly where, as in this case, during processing relief authorization.' the period in respect of which the authori zations were granted no decided cases or practical precedents were available in which the concept of an 'unjustified advantage'

My opinion is based on the customs office. following circumstances: 12 — The French text reads ' . ce hen pourrait se réaliser

cations for the levying of monetary the Commission's indications. Leaving aside compensatory amounts of the use of a the question whether the Commission's temporary association by undertakings in error really was so obvious, I do not different countries. However, the legal consider that argument to be relevant. device involved has special characteristics Instead, it must be stated that the Member which vary from one Member State to States concerned exercised due care in another and is characterized by a low level submitting (at least the structure of) the of legal personality (if any) and a high level proposed transactions to the Commission, of transparency towards the shareholders. and that in those circumstances they were The use of that device has led to a entitled to rely upon the interpretation substantial extension in the scope of Article suggested by the Commission. 11 of Directive 75/349/EEC. It permits the inward processing system to be opened up in the case of two completely independent undertakings which are established in The possibility of post-clearance recovery different Member States. If one of the objectives of Directive 75/349 lay, as the Commission contends, in the exclusion of triangular traffic in cases in which the payment of monetary compensatory 13. Even if the Court should decide that, by amounts on intra-Community trade in failing to regard the contested transactions goods was avoided, the Commission's as the cause of an unjustified advantage the conduct has undeniably detracted from the defendants failed to fulfil an obligation 13 achievement of that objective. under Community law — which would imply that they overstepped the bounds of a reasonable and prudent assessment, which is not the case — it is still necessary to ascertain whether it is possible to take 12. It must therefore be stated that, at the action for the post-clearance recovery of the meeting held in Brussels on 12 June 1981 sums in question, as required by the and in the aforesaid document, the Commission. Commission suggested an interpretation of Directive 75/349 of which it did not itself foresee the consequences. It is therefore difficult to comprehend its allegation that The Commission requests the defendants to the defendants did not treat the advantage take action for the post-clearance recovery resulting from the contested authori­ 4 of those sums on the basis of Article 2 (1) of zations 1 as an 'unjustified advantage'. Regulation No 1697/79. In that connection, Indeed, at the hearing, the Commission account must at the same time be taken of submitted that its own error was 'so serious' Article 5 (2) of that regulation, which and 'so obvious' that the Member States provides as follows: concerned should have noticed it and should have placed no further reliance on

14. In its judgment in Foto-Frost, 15 the The second condition which must be fulfilled Court decided that where the three for Article 5 (2) of Regulation No 1697/79 conditions laid down by Article 5 (2) of to apply, namely that the person liable could Regulation No 1697/79 are fulfilled, the not reasonably have detected the error made competent authorities may no longer take by the customs authorities, is also fulfilled in action for the post-clearance recovery of the this case. In Foto-Frost, the Court laid sums in question and the person liable is emphasis on the fact that even the specialist entitled to the waiver of the recovery of judges of the German court had expressed those sums. In such a case, the Member the view that it was doubtful whether or not State concerned may not be reproached for the duties in question were payable, and refusing to take action for the post- that in those circumstances an undertaking clearance recovery of those sums. Nor, in could not be reproached for failing to detect those circumstances, is the Member State the error made by the customs authorities. required to make the corresponding own In this case as well, I consider that the resources available to the Community. undertakings concerned, whilst they may be Indeed, Article 9 of Regulation (EEC) No large undertakings, could not have detected 1697/79 provides as follows: the error made by the French and United Kingdom authorities, even on the assumption that such an error was made. 'Until the implementation of Community Since both undertakings raised the question provisions specifying the conditions under whether the proposed transactions were which Member States shall establish the permissible with their respective customs own resources accruing from the imposition authorities — which in their turn consulted of import duties or export duties, Member the Commission thereon — and took States are not obliged, where, pursuant to account of the fact that at the time of the this regulation, they have taken no action contested transactions the Commission was for the post-clearance recovery of such also far from clear as to the meaning of the duties, to establish the corresponding own concept of 'unjustified advantage', the resources within the meaning of Regulation undertakings concerned could not (EEC, Euratom, ECSC) No 2891/77.' reasonably have been expected to detect the (Emphasis added.) error made by the competent authorities.

Costs 'asked for' in an application made on that 16. According to Article 69 (2) of the occasion. Court's Rules of Procedure, the unsuc­ In my view, that question must be answered cessful party is to be ordered to pay the in the negative. In principle, it must be costs 'if they have been asked for in the stated that a party may 'ask for' costs only successful party's pleading' (the French text during the written procedure (that is to say, reads: 's'il est conclu en ce sens'). On that in the case of France, in its defence or point, a problem arises in Case 92/87 as rejoinder). It is no longer appropriate to ask regards the French Republic. During the for costs in observations made after the written procedure, the French Republic did hearing in a document which is intended to not ask for the Commission to be ordered comment on a document submitted by the to pay the costs. But it did apply for an Commission. Therefore the French Republic order to that effect during the oral has not asked for costs (in due time) and procedure, namely in its written comments must bear its own costs (see the judgments on a document submitted by the of 29 October 1980 in Case 139/79 Maizena Commission in response to a request made v Council [1980] ECR 3393, paragraph 39 by the Court at the hearing. The question of the decision, and of 6 October 1982 in which arises, therefore, is whether it is Case 59/81 Commission v Council [1982] possible to consider the costs as having been ECR 3329, paragraph 41 of the decision).

Conclusion

17. In the light of the foregoing analysis, I propose that the Court should: