C-61/94

Specifically, the Commission alleges that the German Government has thereby infringed, or at any rate disregarded: (a) the obligation laid down in the three Protocols annexed to 3. The IDA, which entered into force on the IDA to cooperate in implementing the 1 January 1980, takes as its objective the minimum prices in respect of imports (Arti- expansion and ever-greater liberalization of cle 6(1 )(a) of Protocol I and Article 6(a) of world trade in dairy products under market Protocols II and III); (b) the obligation conditions as stable as possible, on the basis under Article 3(1) of each of those Protocols of mutual benefit to exporting and importing to comply with the minimum export prices; countries (Article I). It covers milk and (c) Articles 5 to 8 of Council Regulation cream, whether or not concentrated or (EEC) N o 1999/85 of 16 July 1985 on sweetened; butter; cheese and curd; and casein (Article II). Participating States are

* Original language: Italian. 1 — OJ 1980 L 71, p. 1. 2 — OJ 1985 L 188, p. 1.

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placed under general obligations to provide 3(1) of each protocol to observe the mini­ information (Article III) and to cooperate mum prices (Article 7 of each protocol). 3 with one another (Article IV), particularly as regards aid to developing countries (Article V). The functions necessary to implement the IDA are to be carried out by the Interna­ tional Dairy Products Council, established directly by the IDA and comprising repre­ sentatives of all participants (Article VII).

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Under Article 5 of Regulation N o 1999/85, goods, such as surveillance or safeguard meas- the authorization necessary for the use of ures, quantitative limits or restrictions and inward processing relief arrangements is import or export bans (Article 1(12)). granted where they 'may contribute towards creating the most favourable conditions for the export of compensating products, pro- vided that the essential interests of Commu- nity producers are not affected (economic conditions)'. Economic conditions are con- sidered fulfilled where, inter alia, the goods which are intended to be processed 'are pro- Lastly, although not applicable at the mate- duced in the Community but cannot be used rial time for the purposes of this case, it because their price is such as to make the should be noted that Article 114(l)(a) of proposed commercial operation economi- Council Regulation (EEC) N o 2913/92 of cally impracticable' (Article 6(1 )(d)). 12 October 1992 establishing the Commu- nity Customs C o d e 6 (which, moreover, repealed and replaced Regulation N o 1999/85) provides that the inward pro- cessing procedure allows 'non-Community goods intended for re-export from the cus- toms territory of the Community in the form of compensating products' to be used in the customs territory of the Community in one or more processing operations 'with- out such goods being subject to import duties or commercial policy measures'. 7

However, the Commission did not bring the matter before the Committee again. It explained in the course of the procedure that this was because bilateral contacts with the various delegations had led it to conclude N o t satisfied with the German Govern­ that the German Government was 'isolated' ment's explanations, the Commission deliv­ in its position. O n 26 January 1994 the ered a reasoned opinion on 3 February Commission therefore brought these pro­ 1993 in which it re-stated its own position ceedings. and called for the infringement to cease within two months. In response, the German Government argued that, under the Commu­ nity rules on inward processing, commercial policy measures are not to be applied to goods entered for those arrangements, and Admissibility that the Article 113 Committee had not yet examined the issue.

regard to issues on which Member States dis­ Substance agree amongst themselves or with the Com­ mission. Therefore, Germany maintains, it is quite in order to query whether the Com­ mission is entitled, in order to seek a decla­ ration that an international agreement has been infringed, to initiate the Arti­ cle 169 procedure in a case such as this, where the Article 113 Committee, before which the matter has been brought, has not 9. As mentioned above, the Commission yet adopted a position. challenges Germany's practice of authorizing inward processing relief even when the min­ imum prices prescribed by the IDA are not observed in the case of imports. According to the Commission, that amounts to an infringement of the obligation to comply with the minimum export prices fixed by the IDA and of Regulation N o 1999/85, in that the very fact that authorizations were granted in those circumstances entails a fail­ ure to fulfil the economic conditions referred to in Articles 5 to 8. O n this point, suffice it to note that Article 169 confers on the Commission a broad dis­ cretion 9 both as regards initiation of the infringement procedure, for which it is suffi­ cient that the Commission 'considers that a Member State has failed to fulfil an obliga­ tion under [the] Treaty', and as regards com­ mencement of judicial proceedings, given that it 'may bring the matter before the The German Government does not deny Court of Justice'. The exercise of that discre­ authorizing for inward processing the impor­ tion cannot therefore be predicated on con­ tation of dairy products at prices lower than ditions other and more stringent than those the minimum prices prescribed by the IDA. laid down in Article 169 itself, and certainly In its view, however, that is a matter which not on the opinion of the Article 113 Com­ does not even fall within the scope of the mittee. Consequently, so far as is relevant IDA. In support of that contention, the Ger­ here, the Commission's decision to bring man Government argues that: (a) for the pur­ these proceedings without awaiting the poses of the IDA, the terms 'imports' and Committee's opinion — even though it has 'exports' concern products which have been been sought — may undoubtedly be open to released for free circulation within the Com­ question, but has no bearing whatsoever on munity and not products subject to inward the admissibility of the application. processing relief arrangements; (b) the appli­ cation of commercial policy measures — and hence also of the IDA — to goods placed 9 — The Commission's discretionary power has been emphasized under inward processing relief arrangements by the Court on several occasions, albeit in a different con­ is expressly precluded by Article 16 of Regu­ text. Sec, for example, Case 247/87 Star Fruit ν Commission [1989] ECR 291, paragraph 11. lation N o 2228/91 (which reproduces verba-

12. The first point to note is that the aim of market stability pursued by the IDA in order to ensure the expansion and liberaliza­ tion of world trade in dairy products would 11. The parties' arguments as to the way in be jeopardized if Community traders were which the IDA should be construed seem permitted to disregard, even if solely in the inconclusive. Admittedly, as the Commission context of inward processing, the minimum pointed out, Article 3(7) of Protocol I and prices prescribed by the IDA. Bearing in Article 3(6) of Protocols II and III, in stating mind, moreover, that Community prices are that they apply to exports of the products much higher than world prices, it is all too specified, whether 'manufactured' or clear that to exclude goods entered for 'repacked' inside the customs territory of inward processing from the scope of the any of the participating States — including, IDA would inevitably damage the interests therefore, that of the Community — do not of Community producers. provide for any exceptions. The fact remains, however, that products 'manufactured' or 'repacked' inside the customs territory of the Community are not co-extensive, at least not necessarily, with products which have been obtained through the working, processing or repair of goods within the meaning of the legislation on inward processing. In any case, moreover, even if the Commission's inter­ I therefore believe that, unless the IDA pretation were accepted as correct, it would expressly provides otherwise, the Commis­ mean at most that the IDA is also applicable sion's view must be endorsed. That means, to goods exported following inward process­ of course, that the very fact of authorizing ing, but not necessarily to imports of goods inward processing when the customs value is placed under the relief arrangements. lower than the minimum prices prescribed

15. That said, I now turn to the alleged dis­ In the present case, it is quite clear that the crepancy between the IDA and the legisla­ State concerned is in a position to prevent tion on inward processing. As mentioned in the imports: all it has to do is to refuse to passing, the German Government argues that grant the necessary authorization. — pursuant to Article 16 of Regulation N o 2228/91 and, with effect from 1 January 1994, Article 114(l)(a) of the Community Customs Code — as a result of goods being 10 — Sec Article 6(1 )(a) of Protocol I and the corresponding pro­ entered for inward processing relief arrange- visions of the other two protocols. I should also mention that, on the basis of Article 6(l)(c) of Protocol I and the corresponding provisions of the other two protocols, the participating States also undertake 'to consider sympatheti­ cally proposals for appropriate remedial action if imports at prices inconsistent with the minimum prices threaten the 11 — Sec, most recently, Case C-375/90 Commission ν Greece operation of this Protocol'. [1993] ECR I-2055, paragraph 33.

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12 — The effects of that case-law, concerning conduct and/or leg­ islative amendments which have occurred after that date, arc twofold: it serves the Commission's interest in obtain­ ing a declaration that there has been a failure to fulfil obli­ gations, even though it may meanwhile have ceased (sec, for example, Case 283/86 Commission ν Belgium [1988] ECR 3271, paragraph 6, and Case C-433/93 Commission ν Ger­ The Commission recognizes that the force of many [1995] ECR I-2303, paragraph 15), and the Member State's interest in not being confronted with charges which its argument has been diminished by the arc different from those alleged during the prc-litigation procedure, the essential purposes of which would otherwise entry into force of the Customs Code, Arti­ be thwarted, in particular as regards the principle of audi cle 114(l)(a) of which precludes in general alteram partem (see, among many, Case C-347/88 Commis­ sion ν Greece [1990] ECR 1-4747, paragraph 16, and Case terms the application of commercial policy 298/86 Commission ν Belgium [1988] ECR 4343, paragraph 10). The latter statement should not, however, be seen as measures to goods placed under inward pro­ unconditional. The Court has recognized that, in cases where legislation is altered between the prc-litigation stage cessing relief arrangements. While endeav­ and the initiation of proceedings, for new complaints to be ouring nevertheless to explain that that pro­ admissible it is sufficient 'that the system established by the legislation contested in the prc-litigation procedure has as a vision is compatible with the IDA, the whole been maintained by the new measures which were adopted by the Member State after the issue of the reasoned Commission confined itself at the hearing to opinion and have been challenged in the application' (Case stating that, since the Customs Code only C-105/91 Commission ν Greece [1992] E C R 1-5871, para­ graph 13). If the same approach were also adopted with entered into force after the expiry of the rea­ respect to amendments made to Community legislation, it seems to me that the arguments put forward by the German soned opinion, the provision in question is Government on the basis of Article 114(l)(a) of the Cus­ not applicable to the facts of the case. toms Code would merit consideration.

In any case, since Article 114(l)(a) of the Customs Code incorporates and enlarges upon Article 16 of Regulation N o 2228/91, with the result that any discrepancy between that provision and the IDA would entail an The Commission has in fact emphasized in even more glaring discrepancy between Arti- the course of the procedure that the only cle 114(1) (a) of the Customs Code and the reason why the obligation to observe the IDA, it is appropriate to verify first of all minimum prices in respect of imports is not whether or not the IDA may be regarded, unconditional is because it is not always for the purposes of Article 16 of Regulation legally possible for participating States to N o 2228/91, as a specific commercial policy prevent imports at prices lower than those measure to which imports are subject. prescribed. That argument indicates that the IDA, at least so far as concerns its object and as a matter of principle, has laid down rules which apply to both imports and exports; this is confirmed by the aim of the IDA as elucidated above (see points 11 and 12). It is scarcely necessary to add that, being appli- cable to imports and exports, the IDA falls well within the definition of specific

18. The Commission's laconic statement that the measure in question serves in fact to sup- 13 — See Article 6(1)(c) of Protocol I and the corresponding arti- plement the export regime does not seem cles in the other two protocols.

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However that may be, it seems to me quite obvious that, in so far as it is not alleged here that Article 16 of Regulation N o 2228/91 in any way infringes the basic regulation, the The Commission — given that, in accord­ Commission's argument is not only obscure ance with Article 228(7) of the EC Treaty, but also irrelevant. The fact remains that agreements concluded between the Commu­ Article 16 is contrary to the IDA simply nity and one or more non-member countries are binding on the Community institutions and on the Member States — argues that 'if the German authorities scrupulously applied 14 — The non-applicability of commercial policy measures to both the Community inward processing goods entered for inward processing under the suspension system is indirectly confirmed also by Article 51 of that relief arrangements and the GATT arrange­ regulation, on the basis of which the release for free circu­ lation of import goods 'is subject to the application by the ment [the IDA], authorization for inward customs authority of any specific commercial policy meas­ processing would not in any case be grant­ ures in force for the import goods at the time when the entry for release for free circulation was accepted'. ed', and so the issue of discrepancy would

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In short, according to the Commission, if the Community legislation were interpreted in keeping with the IDA, the economic condi- tions laid down by Regulation N o 1999/85 would not be capable of being relied on, even where they are in fact fulfilled, since, under Article 228(7), the IDA prevails over the regulation. That means, however, that the discrepancy between the IDA and the inward processing relief arrangements 21. This argument, as advanced by the Com- goes far beyond the delimitation of their mission, appears to imply that a failure to respective fields of application and that, ulti- fulfil obligations would arise even if there mately, consistent interpretation does not were no IDA, specifically if there were no eliminate that disparity. obligation, as laid down by that agreement, to observe the minimum prices. O n closer scrutiny, however, that is patently not the case. The Commission, in fact, is not con- testing at all the German Government's argument that the authorizations were granted in accordance with Article 6(1 )(d) of Regulation N o 1999/85. 15 O n the contrary, it recognizes that the circumstances envis- 22. But that is not all. The Commission's aged by that provision often arise with reasoning, which is ultimately circular, inev- regard to the products in question and that, itably leads to the conclusion that the com- therefore, strictly speaking, there is no plaint relating to the infringement of the regulation is unfounded. The grant of auth- orizations even when the prices of dairy prod- ucts are lower than the minimum prescribed 15 — On the basis of that provision, the economic conditions are fulfilled when the goods intended to be processed arc pro- by the IDA may imply a failure to comply duced in the Community but cannot be used because their with the latter but certainly not — at least price is such as to make the proposed commercial operation economically impracticable. not as such — disregard for the economic

In those circumstances, the complaint based on the alleged infringement of the regulation must therefore be rejected. The question remains, however, whether the discrepancy noted between the inward processing relief arrangements and the IDA may or must — by virtue of the latter's prevalence over the former — lead to a finding that the Federal Republic of Germany has fallen short of its obligations but only — let us not forget — in failing to observe the minimum prices in respect of imports. That position obviously means that the Court of Justice may verify compliance with an agreement binding on both the Member States and the Community only where an infringement is committed by a Member State and not where it is brought about by the institutions themselves. In the latter case, any infringement of GATT obligations can 23. In my opinion, that question should be be sanctioned only by the means provided answered in the negative. Let me make it for under international law. I take note of the quite clear that I am not in any way ques­ fact that this approach (as to which, I admit, tioning the primacy of the IDA over second­ I have misgivings) has already received the 16 ary legislation. Nevertheless, I have to point Court's seal of approval: obligations out that the Commission's approach appears entered into under the GATT are not to disregard the fact that, pursuant to Article 228(7) of the Treaty, international agreements to which the Community is party are bind­ 16 — I refer, in particular, to Case C-280/93 Germany ν Counal ing not only on the Member States but also [1994] ECR 1-4973, in which the Court stated that, since the GATT rules do not have direct effect, it could not on the institutions, hence also on the Coun­ 'assess the lawfulness of a regulation in an action brought cil and the Commission itself. Clearly, I by a Member State under the first paragraph of Article 173 of the Treaty' (paragraph 109) and that, therefore, 'it is accept the Commission's statement that the only if the Community intended to implement a particular obligation entered into within the framework of GATT, or Member States can neither rely on their own if the Community act expressly refers to specific provisions interpretation of the obligations incumbent of GATT, that the Court can review the lawfulness of the Community act in question from the point of view of the upon them under the GATT and unilaterally GATT rules' (paragraph 111).

24. That case-law, applied here, would pre- clude the Court from assessing Germany's conduct in the light of the alleged discrep- ancy between the inward processing relief arrangements and the IDA, since — let me make this clear — that discrepancy clearly reveals that first the Commission (Article 16 of Regulation N o 2228/91) and then the Council (Article 114(1)(a) of the Community Customs Code) infringed the IDA. How- ever, that would be an unacceptable out- come, in particular if it led the Court to 25. Lastly, I believe it is worth noting that assess Germany's conduct by reference to the Court of Justice has consistently held the IDA alone, that is, without bearing in that 'Community legislation must be mind the fact that the conduct which the unequivocal and its application must be pre- Commission is currently contesting is auth- dictable for those who are subject to it', 18 orized by one of its own regulations, hence by specifically in compliance with the principle a regulation adopted in breach of the IDA. of legal certainty which forms part of the Community legal order. 19

In my view, that assertion by the Court 26. One last point. If the Court finds — on holds true a fortiori in a case such as this, in the same grounds as those which led it to which the ambiguity and confusion gener­ disclaim jurisdiction to review the lawfulness ated by provisions which are manifestly of Community acts — that obligations irreconcilable exacerbate the difficulty faced entered into under the GATT cannot consti­ by the State concerned in finding an internal tute a yardstick against which the lawfulness (Community) solution to the problem, of the conduct of Member States may be which it nevertheless endeavoured to do via tested, the outcome of the present case the Article 113 Committee. would obviously be a foregone conclusion and therefore simpler. The action should be declared manifestly unfounded, at least as regards the alleged infringement of the IDA and without prejudice to the merits; in fact, strictly speaking, it should be dismissed as inadmissible.

27. I n the light of the foregoing, I p r o p o s e that the C o u r t :

— dismiss the application;

— o r d e r the C o m m i s s i o n t o p a y the costs.

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