C-21/88

OPINION OF MR LENZ —CASE C-2I/88

OPINION OF MR ADVOCATE GENERAL LENZ delivered on 28 November 1989 *

Table of contents

A — Facts 902

B — Opinion 903

1. The competitive relationship between Article 30 and Article 92 of the EEC Treaty .... 903

Mr President, preliminary rulings with similar facts which Members of the Court, are at present pending before the Court. > The reference was made by the tribunale amministrativo regionale della Toscana, which seeks a ruling on the interpretation of Articles 30, 92 and 93 of the EEC Treaty. A — Facts

2. The plaintiff in the main proceedings, Du 1. The case in which I am to give my Pont de Nemours SpA, brought two Opinion today involves an assessment in the separate actions, which were joined by the light of Community law of the preferential national court, against decisions of Unità system established in Italy for the benefit of sanitaria locale No 2 di Carrara ('the the Mezzogiorno (Southern Italy). This case defendant'). is only one of the several references for 1 — Case 310/88 Istituto Behring v USSL N.; Case 311/88 Hoechst Italia v USSL No 56; Case 351/88 Laboratori * Original language: German. Brtmeati v USL R.

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5. The defendant accordingly laid down, by 9. For an account of the facts, the decision of 3 June 1986, the conditions applicable legal provisions and the governing the award of contracts for the submissions of the parties, reference is made supply of radiological films and liquids and, to the Report for the Hearing. according to the terms and conditions set out in the annex, divided the supplies into two lots, one of which — equal to 30% of B — Opinion the total amount — was reserved to under­ takings established in Southern Italy. That decision forms the subject of the main 1. The competitive relationship between proceedings, together with a decision Article 30 and Article 92 of the EEC Treaty adopted by the defendant on 15 June 1986 awarding a contract for the lot amounting to 70% of the total amount. The plaintiff was prevented from participating in the 10. It is appropriate to consider the tendering procedure for the remaining lot of competitive relationship between Article 30 30% on the ground that it had no estab­ and Article 92, because the applicability of lishments in Southern Italy. one of those provisions may preclude the applicability of the other. The question arises as to whether a measure adopted by a Member State, which is to be regarded as a measure having an effect equivalent to a 6. The national court has raised a number quantitative restriction on imports, may at of questions on the interpretation of the same time constitute an aid within the Community law with a view to the meaning of Article 92. The question may assessment of the compatibility of Law No also be relevant if put the other way round: 64/86 with Community law. can a measure which is to be regarded as a

15. Those differing procedural conse­ quences constitute in themselves an indi­ 13. However, it is necessary to draw a cation that the provisions in question have distinction on procedural grounds, since in principle different fields of application. Article 30 incontestably has direct effect and The Court of Justice stated as follows with any Community national may rely, in an regard to this question of demarcation in 5 appropriate case, upon that provision before the judgment in Iannelli & Volpi: the courts of the Member States. In 3 — See the judgment in Iannelli & Volpi, cited above in footnote 2, paragraphs 11 and 12. 2 — See the judgment in Case 74/76 iannelli & Volpi v Paolo Meroni delivered as long ago as 22 March 1977 ([1977] 4 — See the judgment of 19 June 1973 in Case 77/72 ECR 557); the judgments of 10 July 1985 in Case 17/84 Capolongo [1973] ECR 611, paragraph 6. Commission v ¡reland [1985] ECR 2375, and of 5 June 5 — See the judgment in Iannelli ¿V Volpi, cited above in 1986 in Case 103/84 Commissioni /fa/y[1986] ECR 1759. footnote 2, paragraphs 9 and 10.

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'however wide the field of application of 17. In the same judgment, the Court Article 30 may be, it nevertheless does not acknowledges the possibility, when include obstacles to trade covered by other analysing a system of aid, of separating provisions of the Treaty' those factors which are not necessary for the attainment of its object.

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financing of that kind, did not mean that Article 30 of the Treaty. The order in which the campaign itself might escape the that assessment is carried out is justified prohibitions laid down in Article 30. inter alia by the possible far-reaching conse­ quences of the direct applicability of 12 Article 30.

21. If that reasoning is applied to this case of a system of regional preference, whose nature as aid is complicated in particular by 2. The compatibility of the reserved quota the question of its financing out of State system with Article 30 of the EEC Treaty resources and of the calculation of the amount of aid, it follows that the reserved quota system must be assessed in the light of Article 30 and cannot a priori be exempted from such an assessment because it may be in the nature of aid. 24. Article 30 of the EEC Treaty imposes an unconditional and absolute prohibition on quantitative restrictions on imports between Member States and on all measures having equivalent effect. Since the judgment 13 22. In the same vein, the Court has stated in Dassonville, which the Court has in another connection that Articles 92 and consistently reaffirmed, 'all trading rules 94 cannot be used to frustrate the rules of enacted by Member States which are the Treaty on the free movement of capable of hindering, directly or indirectly, goods: 10 actually or potentially, intra-Community trade' are to be considered as measures having an effect equivalent to quantitative restrictions on imports.

measure having equivalent effect within the some LIT 210 000 million was spent every meaning of Article 30. year, 85 % of that sum being accounted for by public supply contracts.

14 — Sec Commission Communication COM(89) 400 final, paragraph 38. 31. The fact that approximately 85 % of 15 — COM(89) 400 final radiographical material is purchased by

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health authorities, which are bound to discrimination against foreign goods, but in comply with the reserved quota system, the fact that even Italian manufacturers casts light on the extent of the trade without an establishment in the areas restrictions. covered by the preferential system suffer discrimination, since they are excluded from the supply contracts in the same way as foreign manufacturers. The Court has not had to consider such a situation before.

35. The impact of the reserved quota system — albeit restricted to certain regions — is significantly greater in 33. The preferential system is more than a economic terms, in particular on intra- financial inducement to obtain supplies on Community trade, than many other the domestic market. The reserved quota measures having equivalent effect within the system does not leave economic operators meaning of Article 30 which apply any alternative. Such an alternative existed throughout the territory of a Member State in the examples referred to above, albeit on (for instance, the requirement that certain condition that certain financial sacrifices souvenirs manufactured abroad must bear were accepted. Accordingly the problem lies 21 an indication of their foreign origin or the not in the existence or otherwise of grant of aid to municipal transport under­ takings for the purchase of electric vehicles, '6 — Case 249/81 Commission v helana, cited above in footnote a case in which two applications for aid 8. 22 were pending at the time of the hearing ). 17 — Judgments of 22 March 1977 in Case 78/76 Steinike und Weinlig v Federal Republic of Germany [1977] ECR 595, Even though not all Italian manufacturers and in Commission v Italy, cited above in footnote 2. benefit by the reserved quota system, never- 18 — Judgment of 10 July 1985 in Case 17/84 Commission v Ireland [1985] ECR 2375. 19 — Judgment of 11 December 1985 in Case 192/84 21 — Judgment in Case 113/80 Commission v Ireland, cited Commissionv Hellenic Republic[1985] ECR 3973. above in footnote 20. 20 — Judgment of 17 June 1981 in Case 113/80 Commission v 22 — Judgment in Case 103/84 Commission v Italy, cited above Ireland^ 1981] ECR 1627. in footnote 2.

37. In the written procedure it was argued that the contested statutory system should be regarded as a measure having an effect equivalent to a quantitative restriction on imports, and consequently prohibited, also 40. Nevertheless, some provisions of the on the ground that it falls within Article directive may serve as an aid for interpre­ 2(3)(k) of Directive 70/50. tation for the purpose of assessing whether a national measure is a measure having equivalent effect. According to Article 2(2) of the directive, the latter covers, in particular, measures which favour domestic 38. The first point in that regard is that products or grant them a preference. Article recourse to the directive is unnecessary if 2(3) lists examples of the kind of measures the contested system must be regarded as a covered by this provision. According to measure having equivalent effect within the Article 2(3)(k), those measures must be meaning of Article 30 on the basis of the taken to include measures which 'hinder the criteria set out in the case-law. The purchase by private individuals of imponed directive, which is based on Article 33(7) of products only, or encourage, require or give the EEC Treaty, contains merely a series of preference to the purchase of domestic particularly noteworthy examples of 25 — See lhe Opinion of Mr Advocate General Lenz in Case 23 — See paragraph 26 above. 103/84 Commnium v /ía/>[l986j ECR 1761, at p 1764 24 — Of 22 December 1969, OJ, English Special Edition 1970 26 — Sec the penultimate (15th) recital in the preamble to the (I), p. 17. directive (OJ L 13, 19.1.1979, p 30).

43. (b) Nevertheless, the preferential system might be justified by 'mandatory 41. Consideration of the provisions of the 29 requirements'. Mandatory requirements directive therefore lends weight to the view may relate, for instance, to the effectiveness that the disputed national system is a of fiscal supervision, the fairness of measure having equivalent effect to a quan­ commercial transactions and consumer or titative restriction. Moreover, for the environmental protection. reasons referred to earlier, the fact that not all domestic goods of a specified kind are accorded preferential treatment does not preclude that classification. The preferential system applies only to goods which are at 44. The reserved quota system does not fall least in part domestically produced. within any of those categories. Whether the measure in question may be justified on the ground of some other mandatory requirement depends on its aim and purpose. In so far as it cannot be assumed that the preferential system pursues exclu­ 4. Possible exceptions to the prohibition of sively protectionistic aims, it must be measures having equivalent effect within the regarded as a regional support measure. meaning of Article 30 of the EEC Treaty Regional support is an objective recognized by the Treaty, as may be inferred from Article 92(3)(a) and Article 130(a) of the EEC Treaty.

The scope of the directive is defined in 5. Assessment of the reserved quota system in 10 Article 3(1 )(b) as applying to provisions the context of Directives 77/62/EEC and 31 'which restrict supplies, either wholly or in 70/32/EEC part, to domestic products or give them preference other than by way of aid within the meaning of Article 92 of the Treaty, 46. According to the plaintiff, the reserved whether conditionally or otherwise'. quota system is contrary to Community law also because it infringes Council Directive 77/62 coordinating procedures for the award of public supply contracts. In its view, that directive applies the principles laid down in the EEC Treaty and therefore prohibits all discrimination, irrespective as 48. Directive 77/62 pursues comparable to whether it is based on the origin of the objectives with regard to procedures for the products to be supplied or on the place at award of public supply contracts. As is clear which the supplier is established. from the preamble to the directive, it is also designed to ensure a degree of transparency in the award of public contracts in order to permit supervision to take place of the 47. It is true that restrictions on the free prohibition of restrictions on the free movement of goods within the meaning of movement of goods. Article 30 are also prohibited in the case of supplies of goods to the State and to bodies governed by public law and in the case of the award of public supply contracts. The legislative authorities of the Community have therefore adopted coordination directives with a view to ensuring the free 49. The question arises, however, whether movement of goods also in the case of Article 26, which is included amongst the supply contracts awarded in the public final provisions, provides for an exception sector. The preamble to Commission for the contested preferential system. It Directive 70/32 on provision of goods to reads as follows: the State, to local authorities and other official bodies states as follows:

(GURI No 245 of 24.10.1950 of the Italian 52. The decisive factor, in my view, is that Republic) and in modifications thereto in the phrase 'without prejudice to the compat­ force on the date on which this directive is ibility of these provisions with the Treaty' adopted; this is without prejudice to the was already to be found in the original compatibility of these provisions with the version, and has now been incorporated in Treaty.' an equivalent formula in the new version. Those forms of words make it clear that, notwithstanding possible derogations from the directive, the fundamental principles of the Treaty, particularly those relating to the 50. In support of the view that that free movement of goods, remain valid provision may constitute a derogation from without any limitation. The incompatibility the principles of the free movement of of the reserved quota system established by goods, it is argued that the predecessors of Article 17 of Law No 64/86 with Article 30 the reserved quota system are stated to be cannot therefore be cured by the derogating unaffected by the directive. Although, on provision in the directive. account of its publication date, the amendment of that provision by Directive 32 88/295/EEC of 22 March 1988 cannot be decisive for the purposes of the dispute in the main proceedings, it also supports the view that the provision in question is still a 34 derogating provision. The amended version 53. In Cases 216 / 84 " and 76 / 86 a of Article 26(1) reads as follows: number of similar legal issues had to be resolved. The defendant Member States relied on a derogating provision in a directive in order to justify national legis­ lation which had the effect of hindering intra-Community trade. The Court rejected 'This directive shall not prevent, until 31 that argument put forward in those cases. It December 1992, the application of existing pointed out that the derogating provision national provisions on the award of public justified the maintenance of national supply contracts which have as their provisions only on condition that the objective the reduction of regional general provisions of the EEC Treaty were disparities and promotion of job creation in complied with. the most disadvantaged regions and in declining industrial regions, on condition that the provisions concerned are compatible with the Treaty and with the Community's international obligations.'

55. As ¡s already apparent from the costs incurred by companies operating in discussion of the competitive relationship accordance with the market economy which between Articles 30 and 92, it is not possible are only partly in public ownership are for an infringement of Community law by a borne by the State. national measure on account of its incom­ patibility with the provisions of Article 30 to be cured by the fact that it exhibits aid-like features. 58. In addition, in order for aid within the meaning of Article 92 to be involved, the amount of aid must at least be capable of being determined in each case. That is also untrue in this instance, since in many cases the extra amount paid can be calculated 6. Whether the reserved quota system may he only by making a hypothetical comparison regarded as aid and the consequences resulting between a contract awarded under therefrom conditions in which there is freedom of competition and supply contracts awarded under the reserved quota system. Furthermore, there is no conclusive evidence that any extra amount is actually payable. Nor is the payment of a price supplement 56. The following considerations militate the sole object of the reserved quota system, against the proposition that the contested which is also aimed at the maintenance of system is in the nature of aid. production plant and, consequently, of employment, solely by means of the obli­ gation to purchase goods which have been, at least partially, processed in areas covered by the preferential system. Moreover, a preferential system which has been in force The essential feature of aid is that it is State for a decade may also have had, as its assistance or assistance given through State purpose and effect, the setting-up of new resources. Admittedly, the Italian Govern­ industries, which in no way implies that they ment stated that in the case of supply operate uneconomically; as a result, it is contracts concluded under the reserved possible that goods manufactured in the quota system the prices paid are higher than areas in question come onto the market at the prices which would be paid under an wholly competitive prices. unrestricted tendering procedure. The additional amount is borne by the State, since the contracting authorities are public bodies or at least entities in which the State has a shareholding. 59. Let me add a final remark concerning the nature of the reserved quota system as aid and its relationship with Article 30. According to the case-law, some elements of aid may — as stated earlier — be imper­ missible on account of their incompatibility 57. The plaintiff stated, however, at the with Article 30 where the aim pursued by hearing that the local health authorities are the aid is attainable by less radical means. It autonomous bodies which, as far as their would certainly be possible to promote expenditure is concerned, are not dependent regional development through measures less on the State. Nor can it be assumed that restrictive of the movement of goods within

Costs 61. It is irrelevant to the outcome of the assessment of the legality under Community law of the reserved quota system and especially to the consequences to be drawn 63. The costs incurred by the Italian therefrom by the national court whether or Government and the Commission are not not the measure in question is in the nature recoverable. These proceedings are, in so far of aid. The contested system could at most as the parties to the main proceedings are constitute an unauthorized aid. In view of concerned, in the nature of a step in the the content and aim of the system, it could proceedings before the national court. The decision on costs is a matter for that court. 35 — See, for example, the aid measures provided for in Law No 64/86, which the Commission declared to be compatible with Community law by decision of 2 March 37 — See the Commission decision of 2 March 1988, OJ L 143, 1988, OJ L 143, 10.6.1988, p. 37. 10.6.1988, p. 37, point II.3, and the Commission's earlier 36 — Communication of the Commission on regional aid reservation in its notice on Law No 64/86, OJ C 259, systems, OJ C 31, 3.2.1979, p. 9. 29.9.1987, p. 2.

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C — Conclusion

64. In the light of the foregoing considerations, I suggest that the questions submitted by the national court should be answered as follows:

'(1) The reserved quota system established by Law No 64/86 must be regarded as a measure having equivalent effect to a quantitative restriction within the meaning of Article 30 of the EEC Treaty. The resultant illegality of that system under Community law must be taken into account by the national courts and authorities.