C-89/96

PORTUGAL V COMMISSION

OPINION OF ADVOCATE GENERAL SAGGIO delivered on 25 February 1999 *

1. By application for annulment under is to apply to the products expressly listed Article 173 of the EC Treaty, lodged at in Annex I (Article 1). Pursuant to that the Court Registry on 21 March 1996, the regulation, the system of quantitative limits Portuguese Republic asks the Court to does not apply to handloom and folklore annul Annex V to Commission Regulation products. Accordingly, Article 3(1) pro- (EC) No 3053/95 of 20 December 1995 vides that: 'the quantitative limits referred amending Annexes I, II, III, V, VI, VII, VIII, to in Annex V shall not apply to the cottage IX and XI of Council Regulation (EEC) industry and folklore products specified in No 3030/93 on common rules for imports Annexes VI and Via which are accompa- of certain textile products from third coun- nied on importation by a certificate issued tries (hereafter referred to as 'Regulation by the competent authorities of the country No 3053/95'). 1The Portuguese Republic is of origin in accordance with the provisions thus challenging the instrument by which of Annexes VI and Via and which fulfil the the Commission has exempted Indian cot- other conditions laid down therein'. tage industry and folklore products from the quantitative restrictions placed on the import of such products pursuant to the aforesaid Council Regulation No 3030/93.

The relevant legal framework

That memorandum provides that the Indian Government 'will bind its tariffs on As regards the powers of the Commission, the textiles and clothing items listed [in the Article 19 of Regulation 3030/93 provides attachment to the memorandum] at the that: 'Amendments to the annexes to this rates and according to the timetable indi- regulation which may be necessary to take cated therein' (paragraph 2 of the memor- into account the conclusion, amendment or andum) and that, with effect from 1 Jan- expiry of agreements, protocols or arrange- uary 1995, the European Community will ments with third countries or amendments remove all restrictions applicable to exports made to Community rules on statistics, of handloom products and cottage industry customs arrangements or common rules for products referred to in Article 5 of the imports shall be adopted in accordance EC — India Agreement (paragraph 5 of the with the procedure laid down in Arti- memorandum). 4 The Community also cle 17'. That article provides for a textile agreed to give favourable consideration to 'committee' composed of representatives of requests 'which the Government of India the Member States and chaired by a might introduce for exceptional flexibil- Commission representative and lays down ities, in addition to the flexibilities applic- a series of rules of procedure under which able under the bilateral textiles agreement' the Commission may 'adopt the measures up to certain amounts specified in the proposed' by the chairman of the textile Memorandum of Understanding. Lastly, committee where they are in conformity the memorandum allows the Indian Gov- with the committee's opinion (Arti- ernment to invoke such exceptional flex- cle 17(4), second subparagraph). ibilities in the order of carry over, inter- category transfer and carry-forward, to the extent of the possibilities existing on the

6. On 21 March 1996, the Portuguese Republic lodged an application at the 4. On 26 February 1996, the Council Court Registry challenging Regulation adopted the decision concerning the con- No 3053/95. clusion of Memoranda of Understanding between the European Community and the Islamic Republic of Pakistan and between the European Community and the Republic 7. During the written procedure, on of India on arrangements in the area of 19 July 1996 to be precise, the Commission market access for textile products. 6 withdrew the contested instrument: it adopted Regulation (EC) No 1410/96 con- cerning the partial withdrawal of Regula- tion (EC) No 3053/95 amending Annex- es I, II, III, V, VI, VII, VIII, IX and XI to Council Regulation (EEC) No 3030/93 on common rules for imports of certain textile products from third countries (hereafter Facts and procedure referred to as 'Regulation 1410/96'). 7 Arti- cle 1(1) of that regulation provides that 'Regulation (EC) No 3053/95 shall be repealed with retroactive effect from 1 Jan- uary 1995 inasmuch as the fifth and sixth 5. By t h e c o n t e s t e d R e g u l a t i o n indents of Article 1 thereof amend and/or No 3053/95, the Commission amended repeal Annexes VI and Via to Regulation Annex VI to Regulation No 3030/93 and (EEC) No 3030/93'. Article 1(2) provides repealed Annex Via to that regulation that: 'the partial withdrawal of Regulation (Article 1, fifth and sixth indents), thereby (EC) No 3053/95 referred to in paragraph excluding Indian cottage industry and folk- 1 shall not affect the rights that its adoption lore products from the quotas applicable to may have engendered among its intended textile products imported into the Commu- beneficiaries in the period from 1 January nity. The fourteenth recital to that regula- 1995 and the date of entry into force of this tion refers explicitly to the arrangement regulation'. with the Republic of India, emphasising that that arrangement 'foresees the removal of quantitative restrictions on the importa- tion of certain handloom and folklore In the first recital of the preamble to the products originating in the Republic of withdrawal regulation, the Commission India'. Lastly, the second paragraph of concedes that Regulation No 3053/95 was Article 2, provides for the retroactive effect adopted at a time when 'by virtue of A r t i c l e 19 of R e g u l a t i o n (EEC) No 3030/93, the Commission was not yet 5 — Flexibilities means the possibility of granting licences to import products in quantities exceeding the import quotas set for textile products under Regulation 3030/93. 6— OJ L 153, p. 47. 7 — OJ 1996 L 181, p. 15.

entitled to do so, the Council not yet having Regulation No 1410/96, there is no longer decided to conclude or apply provisionally any case to answer. Contrary to what the the market access arrangements negoti- Portuguese Republic maintains, the case- ated... with India' and that 'Regulation law of the Court shows that withdrawal is (EC) No 3053/95 therefore contains a tantamount to annulment and that, with procedural defect that warrants at least its the withdrawal of the contested instrument, withdrawal or partial annulment'. the applicant obtained 'the only result that its application could have secured for it' (Order of the Court in Case C-123/92 Lezzi Pietro v Commission [1993] ECR I-809). As regards possible claims for damages, the Commission points out that it expressly acknowledged the irregularity of the con- tested decision in the preamble to the Admissibility withdrawal regulation. Lastly, as regards the comments concerning the effects of the regulation that had been withdrawn, the Commission observes that, since Regula- tion No 3053/95 removes the quantitative 8. The Portuguese Republic claims that it restrictions on Indian cottage industry and still has a legal interest in bringing pro- folklore products, it would be inconceiva- ceedings, notwithstanding the withdrawal ble at this stage to remove the effects of the contested instrument. In its view, the already produced by that regulation. In withdrawal of the regulation is not tanta- any event, those effects are now definitive, mount to its annulment and consequently since the products released into free circu- does not diminish the interest in the action lation in the common market under Reg- in question. In this case, in particular, the ulation 3053/95 can no longer be traced. In Portuguese Republic still has an interest in any case, the Commission concedes that, obtaining a declaration that the instrument when the withdrawal regulation was is unlawful and in seeing certain conduct adopted, not even the Commission itself on the part of the Commission censured. could identify the practical effects of Reg- Moreover, the applicant points out that ulation No 3053/95 that would be pre- such a declaration would allow the traders served under Regulation No 1410/96. In affected and the Portuguese Republic itself limiting the effects of withdrawal, the to claim compensation for any damage Commission had merely sought to prevent incurred. Lastly, the Portuguese Republic the emergence of any factors that might observes that, since the instrument of with- disrupt the market. drawal preserves the effects of Regulation No 3053/95 up to the date of withdrawal, namely from 1 January 1995 to 21 July 1996, the contested regulation still pro- duces its effects today.

In the case we are considering, however, there are indications that Regulation No 1410/96, concerning the partial with- Substance drawal of Regulation No 3053/95, has not removed the interest in an action for annulment of Regulation No 3053/95. These proceedings are distinctive in that the regulation withdrawing the contested instrument preserves all the effects pro- duced by that instrument up to the date of 11. The Portuguese Republic claims that its withdrawal, that is to say from 1 Jan- the contested regulation is unlawful on two uary 1995 to 21 July 1996. There can, grounds: lack of competence of the Com- therefore, be no doubt that the applicant mission and unlawfulness of the retroactive also has an interest in the removal of those effect of the second paragraph of Article 2 effects in order both to extinguish outright of Regulation No 3053/95. all the effects of the regulation and to establish the right to damages arising from that regulation during the period in ques- tion.

12. In support of its first claim, the Portu- One may well wonder if it is not in fact the guese Republic argues that Article 19 of lawfulness of Regulation No 1410/96 that Regulation No 3030/93 authorises the is at issue here since the Court will actually Commission to amend that regulation only be ruling on the effects of the contested in the event of the conclusion of 'agree- regulation which are preserved under Reg- ments, protocols or arrangements'. The ulation No 1410/96. In essence, one could power to conclude such international ask whether it is legitimate to give judg- agreements, on the other hand, is vested ment on an instrument which must be in the Council pursuant to Article 228 of deemed definitive since it has not been the Treaty. Since, in this case, the Council challenged. While that point is not entirely did not conclude the agreement with India

until February 1996, the Commission was ground to annul the contested regulation not entitled to amend Regulation since, first, the defect at issue is purely No 3030/93 in December 1995. The Com- procedural and, second, the irregularity mission was not even entitled to implement alleged by the Portuguese Republic was the Memorandum of Understanding on a remedied by the Council Decision of provisional basis, since that power lies 26 February 1996 finalising the agreement exclusively with the Council, the sole body with the Republic of India referred to in the having the power to conclude, even provi- Memorandum of Understanding of Decem- sionally, international agreements within ber 1994. the meaning of Article 228 of the Treaty. In fact, the question of the agreement's provi- sional effect had been on the agenda for the meeting of the textile committee (set up u n d e r A r t i c l e 17 of R e g u l a t i o n No 3030/93) on 13 December 1995, but the Commission adopted the contested 14. Apart from the fact that the Commis- regulation on 20 December 1995. sion has acknowledged that the objection concerning its powers to adopt the con- tested regulation is well-founded, it must be observed that Article 19 of Regulation 3030/93, concerning the delegation of powers at issue, provides that: 'Amend- ments to the annexes to this regulation which may be necessary to take into account the conclusion, amendment or expiry of agreements, protocols or arrange- ments with third countries or amendments made to Community rules on statistics, 13. In that regard, the Commission main- customs arrangements or common rules for tains in its defence that, on the date the imports shall be adopted in accordance contested regulation was adopted, it with the procedure laid down in Arti- already had the power to adopt the provi- cle 17'. Article 17 lays down a series of sions in question for the partial withdrawal rules of procedure allowing the Commis- of Regulation 3030/93. It argues that, sion to 'adopt the measures proposed' by interpreted broadly, Article 19 of Regula- the chairman of the textile committee (a tion No 3030/93 confers on it the power to Commission representative) where such amend that regulation as necessary to take measures are in conformity with the com- into account the Community's interna- mittee's opinion (Article 17(4), second tional obligations. In the cited 14th recital paragraph). in the preamble to Regulation No 1410/96 concerning the partial withdrawal of the contested regulation, the Commission con- cedes however that, in December 1995, it was not entitled to adopt the measures implementing the 1994 Memorandum of Understanding. The Commission maintains It seems clear to me that, taken together, that, even assuming that the applicant's Articles 17 and 19 of Regulation 3030/93 objections were well-founded, there is no do not confer on the Commission the

In view of the foregoing, I believe that Commission Regulation 3030/93 must be declared null and void, so far as concerns the provisions on the abolition of restric- tions on Indian cottage industry and folk- lore products, on the grounds that it was adopted by a body lacking the competence 17. I believe that that claim must be to do so. dismissed inasmuch as there no longer seem to be any possible rights or other subjective positions which are liable to be jeopardised by the outright annulment of the contested regulation. Such products as were already imported into the Community on the basis of the contested regulation are in free circulation within the Common Market 15. Having established the merits of the and can no longer be traced. Such import first plea in law, it is no longer necessary to rights as have not yet been exercised, if any, consider the second. originate in an unlawful instrument the annulment of which does not produce effects warranting the application of the 8 — Regarding the scope of the powers delegated by the Council second paragraph of Article 174 of the to the Commission under Regulation No 3030/93, please refer to my Opinion in case C-159/96 Portugal v. Commis- Treaty. The risk of an import regime sion, in particular points 50 to 60, and to the judgment in modification must be considered as inher- that same case, paragraphs 33 to 50 (not yet published in the ECR). In that judgment, the Court upheld the claim ent to the activity of economic operators concerning the application of the second paragraph of Article 174 of the Treaty, relying — so it would appear — who, just as they reap the benefits of such on a different interpretation of the facts. activities, must also assume the correspond-

— dismiss the Commission's claim that the effects of the contested regulation should be declared definitive within the meaning of the second paragraph of Article 174 of the EC Treaty;

— order the Commission to pay the costs.

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