C-27/96

DANISCO SUGAR v ALLMÄNNA OMBUDET

OPINION OF ADVOCATE GENERAL LA PERGOLA delivered on 17 June 1997 *

I — The questions referred for a preliminary out in the Swedish Sugar Law, as ruling and their legislative background amended, to be regarded as unlawful transitional measures?';

1. By this reference for a preliminary ruling, the Länsrätt i Jönköpings Län (Jönköping County Administrative Court) is asking the and, secondarily, in the event of a nega- Court to provide such guidance to interpre- tive answer: tation as is necessary in order to decide whether it is compatible with Community law for Member States to introduce domestic taxes similar in object and purpose to the levy on sugar and rice stocks introduced by the Kingdom of Sweden on the eve of the entry into force of the Treaty of Accession to the European Union (hereinafter 'the EU'). '(2) O n a true construction of the European Community organization of the market in sugar, in particular of Articles 39 and 40 of the EEC Treaty, Council Regu- lation (EEC) N o 1785/81 and Commis- sion Regulation (EC) N o 3300/94, are decisions taken at national level con- To be precise, the national court asks, prima- cerning levies on normal transitional rily: stocks of sugar as set out in the Swedish Sugar Law, as amended, to be regarded as unlawful interference in the organiza- tion of the market?'

'(1) O n a true construction of the Act of Accession of Sweden, Finland and Aus- tria, in particular of Articles 137(2), 145(2) and 149(1), are decisions taken at national level concerning levies on nor- 2. As will become clear in the course of this mal transitional stocks of sugar as set Opinion, these questions touch on the deli- cate matter of the residual role retained by Member States in sectors covered by the * Original language: Italian. common organization of the markets •where,

2 — See the Act concerning the conditions of accession of the Kingdom of Denmark, Ireland and the United Kingdom of Great Britain and Northern Ireland to the European Com- munities and the adjustments to the Treaties (OJ 1972 L 73, 3. The Treaty on the accession of Austria, p. 14), Article 52(1) and (4). Finland and Sweden to the EU entered into 3 — See the Act concerning the conditions of accession of the force on 1 January 1995; it was signed on 24 Hellenic Republic to the European Communities and the adjustments to the Treaties (OJ 1979 L 291, p. 17), Article 59. June 1994 and ratified by Sweden on 15 4 — See the final Act concerning the conditions of accession of December 1994, in keeping with the results the Kingdom of Spain and the Portuguese Republic to the European Communities and the adjustments to the Treaties of the national referendum on accession, (OJ 1985 L 302, p. 23), Articles 67(3), 70(2) and (3), and 131 et seq. (Spain); Articles 233(3) and 234 et seq. (Portugal). which had been held on 13 November 1994. 5 — OJ 1994 C 241, p. 21. 6 — Introduced by Article 38 of Regulation N o 136/66/EEC of the Council of 22 September 1966 on the establishment of a common organization of the market in oils and fats (OJ, English Special Edition (1965-66), p. 221); and specifically 1 — A quotation from G. Olmi, 'Politique agrìcole commune', in provided for, in relation to the common organization of the J. Megret, M. Waelbroeck, J.-V. Louis, D. Vignes and J.-L. sugar markets, by Articles 38 to 42 of Council Regulation Dewost, Le droit de la Communauté économique europ- (EEC) N o 1785/81 of 30 June 1981 on the common organi- éenne: Commentaire du traité et des textes pris pour son zation of the markets in the sugar sector (OJ 1981 L 177, application. Vol. 2, Brussels, 2nd Edition, 1991, p. 292. P-t).

The precautions therefore adopted are easily understandable. Whenever the Community intervention guarantees (including the com­

7 — Pursuant to Article 149(1) of the Act of Accession, such measures may be adopted until 30 December 1997 and their application is limited to that date. 6. In accordance with that provision, in 8 — See Council Regulation (EEC) N o 1009/67 of IS December December 1994 the Commission introduced 1967 on the common organization of the market in sugar, the new Article 33a introduced by the Act on the conditions of legislation to give effect to the remedial mea­ accession to the European Communities of the Kingdom of Denmark, Ireland ana the United Kingdom of Great Britain sures already provided for in the Act of and Northern Ireland and the adjustments to the Treaties (cited in footnote 2, above), p. 67; Council Regulation (EEC) Accession, inter alia with respect to the risk N o 9/81 of 1 January 1981 concerning stocks of agricultural of excess stocks on the 'enlarged' internal products in Greece on 1 January 1981 (OJ 1981 L 1, p. 15); Council Regulation (EEC) N o 3770/85 of 20 December 1985 market in sugar. on stocks of agricultural products in Spain and Council Regulation (EEC) N o 3771/85 of 20 December 1985 on stocks of agricultural products in Portugal (OJ 1985 L 362, pp. 18 and 21 respectively). 9 — Pursuant to Article 145(2), the concept of normal carry-over 10 — See A. Tilgenkamp, 'Agriculture (Réglementation relative stock was to be defined for each product 'on the basis of cri­ aux adhésions)', in Gide-Loyrette-Nouel (Ed-X Dic­ teria and objectives particular to each common market orga- tionnaire du Marché commun, Paris, 1968 (loose-leaf edi­ nizaūon'. tion, 1992 N o 3), p. 35.

With specific reference to Sweden, there stock for Sweden in respect of sugar was appeared to be a very real and imminent fixed at 304 792 tonnes. danger that Swedish traders would engage in the wide-scale importation of sugar for speculative purposes, with the intention of hoarding it, then re-selling it on the Com- munity market after accession. N o t surpris- ingly, in the months preceding the Treaty's entry into force, this attracted the attention of both the Commission and the Swedish Austria, Finland and Sweden were thus Government. required to undertake a survey of sugar (and isoglucose) stocks in free circulation in their respective territories at midnight on 1 Janu- ary 1995. By the same token, any person holding, in whatever capacity, stocks of sugar (or isoglucose) of at least three tonnes was under a duty to declare it to the competent national authorities. It is common ground that the sugar reference price fixed by the Swedish Government before accession was approximately 3 5 % lower than the Community intervention price. Market prices in Sweden differed from market prices in the Community by approxi- mately the same amount — the latter being higher, as we know, than the Official' prices. 8. Since the Community sugar market was characterized by overall surplus production, any excess quantities — whether of sugar in the natural state or in the form of processed products — had to be disposed of by being exported from the Community without Community intervention. Accordingly, Regulation N o 3300/94 required the new 7. In order to determine the quantities of Member States to take all measures necessary sugar (and isoglucose) to be eliminated from by 1 January 1996 to discharge that obliga- the market, Commission Regulation N o tion (see Article 11). 3300/94 of 21 December 1994 » defined, for each new Member State and in respect of each product, the normal carry-over stock considered necessary, allowing for consump- tion, production, traditional exports and operating stocks for refineries. Under Article 5 thereof, the normal carry-over O n the other hand, in the case of quantities which were not exported — to be regarded 11 — Commission Regulation (EC) No 3300/94 of 21 December as disposed of on the internal market — 1994 laying down transitional measures in the sugar sector Austria, Finland and Sweden were to have following tne accession of Austria, Finland and Sweden (OJ 1994 L 341, p. 39). paid an amount equal to the import levy in

According to the order for reference, the tax in question was introduced by Law N o 1704 of 1994 (hereinafter 'the Sugar Law'), which was passed by the Swedish Parliament on 20 December 1994 and which entered into force on 31 December 1994, that is to say, only 11. One last detail completes this sketch of one day before Sweden's accession to the the legislative background to the questions EU. referred for a preliminary ruling. The Sugar Law was amended by Law N o 329 of 1995, which entered into force on 1 April 1995, reducing the amount payable by sugar pro- ducers who had also paid the storage levy pursuant to Article 8 of Council Regulation (EEC) N o 1785/81. 1 2 The purpose of that levy was to fund the common compensation system for storage costs, which was in turn 10. According to statements made by the designed to ensure a constant supply of Swedish Government in the course of these sugar on the Community market throughout proceedings, the amount made payable by the year. way of sugar tax (different rates being fixed for refined and raw sugar, respectively) exactly matched the expected increase in the market price following Sweden's accession to 12 — Council Regulation (EEC) No 1785/81 of 30 June 1981 (cited in footnote 6 above), 25 later supplemented and the EU. amended.

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II — Purpose of the main action date of accession , 3 and the reference price for sugar applicable in Sweden during previ- ous marketing years.

12. Danisco Sugar AB (hereinafter 'Danisco'), the applicant in the main action, 13. Following Danisco's declaration that, as is apparently Sweden's only sugar producer at 31 December 1994, it held 267 134 tonnes and its largest importer of sugar. of sugar in stock, the Swedish agricultural board determined, by decision of 28 June 1995, that Danisco was liable to pay approxi- mately SKR 435 million by way of sugar tax.

13 — It was Danisco which referred in its observations to the 'minimum' price applicable to sugar for the marketing year If I understand Danisco's observations cor- 1994/95 (which began on 1 July 1994 and expired on 30 rectly, that agreement entitled growers June 1995, in accordance with Article 2 of Regulation N o 1785/81), but without clarifying whether by that term it belonging to the SBC — ostensibly so as to meant the target price under Article 2 of Regulation N o 1785/81, or the intervention price under Article 3 thereof. comply with the Community legislation For the 1994/95 marketing year, Council Regulation (EC) applicable as from the date of accession and N o 1873/94 of 27 July 1994 (OJ 1994 L 197, p. 11) fixed the target price and the intervendon price for white sugar, and only if accession took place — to more than the basic price for beet; Council Regulation (EC) N o 1874/94 of 27 July 1994 (OJ 1994 L 197, p. 12) fixed the one-half of the difference between the 'mini- derived intervention prices for white sugar, the intervention price for raw sugar, the minimum prices for A and B beet, mum' Community price for sugar applicable the threshold prices and the amount of compensation for during the marketing year under way on the storage costs.

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14. Danisco brought proceedings before the be adopted only by the Community institu- Länsrätt i Jönköpings Län for annulment of tions. the Sugar Law, arguing that, in two respects, its unilateral adoption by Sweden was ultra vires.

According to Danisco, that description fits the Sugar Law, which disturbed the common organization of the market in sugar through In other words, according to Danisco, in partial confiscation of the intervention price, view of its object or at least because of its to the detriment of both sugar producers and effects, the Sugar Tax constitutes a transi- (as a 'knock-on effect') beet growers. That tional measure which, pursuant to Article conclusion is inescapable even though, tech- 149 of the Act of Accession, could properly nically speaking, the measure in question was

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adopted and brought into force before Swe- normal carry-over quantity, since the sugar den's accession, and the tax was levied o n tax had been levied across the board on all stocks of sugar which had been produced individual stocks in excess of three tonnes and stored in accordance with the national being held in Sweden on 31 December 1994. arrangements for organization of the market.

Danisco maintains that there was a close causal link between the adoption of the Accordingly, it should be held that the Sugar Sugar Law in December 1994 and Sweden's Law — even if described as a measure 'nec- forthcoming accession to the EU. What is essary for the application of this Regulation', more, by virtue of Article 18 of the 1969 within the meaning of Article 11 of Regu- Vienna Convention on the Law of Treaties lation N o 3300/94 15 — runs counter to that (hereinafter 'the Vienna Convention'), , 4 regulation's declared aim of providing for Sweden was under a duty — even before the the disposal solely of quantities in excess of entry into force of the Treaty of Accession, the normal carry-over stocks. which it had already signed and ratified — to refrain from acts which would defeat that Treaty's object and purpose.

14 — The Vienna Convention on the law of treaties, concluded on 23 May 1969 (United Nations Treaties, Vol. 788, p. 354). 18. The Court is being called on to interpret The Vienna Convention, drafted by the International Lav/ Commission of the United Nations, codified the rules of the Act of Accession and, where appropriate customary international law regarding the procedure for drawing up international treaties and the conditions for — as a secondary consideration — the com- their validity and effectiveness, and entered into force on 27 mon organization of the sugar market and, in January 1980. Article 18 of the Vienna Convention, entitled Obligation not to defeat the object and purpose of a treaty particular, Articles 39 and 40 of the EC prior to its entry into force' provides: 'A State is obliged t o refrain from acts which would defeat the object and pur- Treaty (hereinafter 'the Treaty') and the rel- pose of a treaty when: (a) it has signed the treaty or has exchanged instruments constituting the treaty subject t o evant provisions of Regulations Nos 1785/81 ratification, acceptance or approval, until it shall have made its intention clear not to become a party to the treaty; or (b) it has expressed its consent to be bound by the treaty, pend- ing the entry into force of the treaty and provided that such entry into force is not unduly delayed'. 15 — See footnote 8 above.

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and 3300/94. In order to enable the Länsrätt of Accession, may well constitute an to assess whether the Sugar Law is compat- infringement of the customary international ible with Community law, due consideration law on treaties, as consolidated by Article 18 must be given to two temporal factors to of the Vienna Convention. ' 6 which the Swedish Government and the Commission have called attention in their observations.

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not refer, but which appear relevant for the to whom an institution has given justified purposes of the decision in the main hopes may rely ...'. 19 action. , 7

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refrain from consideration of the merits. 20 24. That does not mean, however, that as Nevertheless, I must admit that I agree with from 1 January 1995 Sweden, as one of the the approach taken by the Swedish Govern- Member States, was not required — by vir- ment and the Commission. tue of the general obligation laid down by Article 5, as lent substantive content by other, more specific, provisions of the Ώ 23 Treaty, such as Article 40 — to act sin­ cerely and in good faith to further the aims of the Treaty and fulfil its obligations there­ under. That obligation in turn gave rise to Let us suppose that the principle of good further obligations, which Sweden was called faith forms part of the body of Community on to discharge in practice, namely: (a) to law to which reference must be made in revoke any domestic measure which was order to reach a decision in the main pro- contrary to the Act of Accession, the Treaty ceedings, its counterparts in the Community provisions or secondary legislation on the legal order being the principles of legal cer- common organization of the sugar markets, tainty and protection of legitimate expecta- even if adopted before accession; and (b) to tions. Even so, however, the Court would eliminate any unlawful consequences ensuing still be precluded from providing the from such a measure 2 4 after accession. national court with the necessary assistance by way of interpretation in deciding whether a domestic fiscal measure adopted by a non- member State (that being Sweden's status until 1 January 1995) was compatible with Community law.

IV — Question 1

28. Let us suppose for the sake of argument that the Sugar Law genuinely constitutes a transitional measure, adopted for the sole purpose of facilitating the transition from the existing national regime to that resulting 26. Although two distinct questions have from application of the common organiza- been referred for a preliminary ruling, they tion of the markets, within the meaning and raise only one issue, as I shall now seek to for the purposes of Article 149 of the Act of demonstrate. By both questions the Court is Accession. For the adoption of such mea- asked to define the limits within which sures, that provision refers — admittedly — Member States (including those which have to the management committee procedure, as recently acceded to the EU) may legitimately noted above. exercise their own competence in sectors which, at Community level, are covered by the common organization of the markets.

tive of the Commission. M Thus the Member Sweden was not designed, purely and simply, States participate in the decision-making to prevent the product in question from procedure for measures which are then being imported into the country for specula- definitively adopted, as appropriate, either tive purposes; nor was it solely concerned by the Commission in accordance with an with raising the resources necessary to fund opinion from the management committee for the disposal on the internal market of any sugar, or the Council: 26 all of which goes to quantities of sugar in excess of the normal show that the Member States have not con- carry-over stock. Now, only if those had sented to the complete surrender of their been the sole purposes underlying the Sugar own powers. 27 Law, could that legislation have been described as designed to facilitate the transi- tion from the national regime to that result- ing from application of the common organi- zation of the markets. That is not the position, however. In other words, the procedure referred to in Article 149 of the Act of Accession reflects the division of powers between the Commis- sion and the Council, rather than between the Community and the Member States. That being so, the question before the Court is none other than the more general question concerning the residual role for Member States in the sectors covered by the common organization of the markets. Instead, the Sugar Law had a different and quite separate purpose, to do with the exer- cise of fiscal powers. It introduced a tax on the profits made by the traders concerned as a result of the transition from national pric- ing to Community pricing. That tax was lev- 29. Should doubts persist, I would add that ied on all stocks of sugar held by the traders there is another and decisive reason for concerned in Sweden on 31 December 1994, which the first question cannot be answered not only on those in excess of the normal in the affirmative. The Sugar Law was not, in carry-over stock fixed for Sweden by Regu- reality, a transitional measure within the lation N o 3300/94. meaning of Article 149 of the Act of Acces- sion. It is clear from the related travaux pré- paratoires that the legislation adopted by

34. It seems appropriate here to recall one judgment which is of authority on this point. 32. The Community rules setting up the In Irish Creamery Milk, 31 the Court inter- common organization of the markets are preted the Community rules setting up the autonomous and must not be encroached common organization of the markets in cer- upon by national legislation. 29 For example, tain agricultural products and thus provided the national court with the information nec- essary to determine whether an indirect tax

on the value of certain agricultural products, 35. However, in Irish Creamery Milk the applied at a low rate by the Irish Govern­ Court laid down another test — in addition ment solely for a few months, was permis­ to that referred to above — which must also sible. That tax was levied on the product at be mentioned. Regardless of their impact on the moment of delivery for processing, ware­ the income of national agricultural produc­ housing or export. ers, methods used to implement a national incomes policy which includes agricultural producers cannot always be regarded as law­ ful: they are, in fact, incompatible with Community law if ever they have the effect of interfering with the functioning of the machinery employed by individual common What points, precisely, did the Court make organizations of the markets in order to in Irish Creamery Milki The contested tax achieve their ends. The essential aim of that formed part of an incomes policy designed machinery, the Court stated, is 'to achieve to divide the tax burden between the various price levels at the production and wholesale sectors of Ireland's working population, and stages which take into account both the the common organizations of the markets do interests of Community production as a not in principle preclude a national policy of whole in the relevant sector and those of that nature. Furthermore, the fixing of com­ consumers, and which guarantee market sup­ mon prices — target, intervention or mini­ plies without encouraging over-production'. mum — in a sector covered by such organi­ zations was not intended to guarantee agricultural producers a net price indepen­ dently of any taxation imposed by the national authorities. 3 2

In the examination which it is required to influence, even temporarily, on the level of undertake, the national court is called on to prices or supplies on the sugar market. 35 take into account not only the rate and dura- tion of the tax, but also the market situation in question and the number of agricultural products on which the tax is levied. In effect, according to Irish Creamery Milk, '[while] a short-term duty on a large number of prod- ucts may be neutral in the sense that it does not alter the structure of agricultural produc- 37. It cannot even be said that the Sugar Tax tion, [...] if the duty encourages producers to neutralized the effects of the Act of Acces- replace some of the production of the goods sion and the common organization of the subject to the duty by production of other sugar market, as Danisco alleges. The pre- goods not subject thereto, the duty is liable dicted rise in the 'official' prices and the mar- to create distortion on a number of mar- ket price as a result of Sweden's accession to kets'. 34 the EU duly took place.

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39. That increase remained in force solely changes to the structure of agricultural for the year 1980. It had been introduced by undertakings — the nature and quantity of the Danish Government following devalua- supplies on the market. 37 tion of the Danish krone (one of the steps decided upon as part of a general economic policy plan) and, consequently, of the repre- sentative conversion rate vis-à-vis the ecu, the currency used for implementing the common agricultural policy. By adjusting that representative conversion rate, the Dan- ish Government intended to avoid the intro- duction of compensatory monetary imports. 40. That test can properly be applied to the present case. The Sugar Law was in force for a very short time, and did not even form part of a more general national incomes policy — levied as it was simply, on a single occasion only, on certain gains: those which Danisco and the Swedish beet growers made 'in their sleep' as a result of accession, that is to say, those earned by the agricultural population in a sector where there was a considerable Specifically, the taxable amount for the con- difference between 'official' prices and the tested property tax was the value of the land, national or Community market prices. It was determined on the basis of a general estimate no accident that the amount made payable of its commercial value, irrespective of the by way of Sugar Tax was set so as to match volume or nature of actual agricultural pro- exactly the increase in the market price duction. The tax was designed to compensate expected as a consequence of Sweden's for the increase in agricultural prices, accession to the EU. expressed in Danish krones, and the resulting considerable increase in the income of national agricultural production as a whole, brought about by the change in the represen- tative conversion rate.

VI — Conclusion

I n t h e light of t h e foregoing considerations, I p r o p o s e that the C o u r t give t h e fol- l o w i n g answer t o the q u e s t i o n s referred by the Länsrätt for a preliminary ruling:

T h e A c t of Accession of A u s t r i a , Finland a n d Sweden and, in particular, Articles 137(2), 145(2) and 149 thereof are to b e interpreted as meaning t h a t the levying b y

38 — See, ex multis, ibid., paragraph 17. 39 — See Case 222/82 Apple and Pear Development Coimai v Lewis [1983] ECR 4083, paragraph 31, in which the Court stated that 'although it is for the national court to consider whether, and if so, to what extent, the charge which it is called upon to consider has actually produced such effects, it should nevertheless be noted that as a general ride a charge of which the proceeds are essentially used for pub- licity measures which would otherwise have to be financed by the producers themselves cannot have such effects' (emphasis added).

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