C-162/96

3. According to Article 1 of the Cooperation Agreement its object was to promote overall cooperation between the contracting parties * Original language: English. 1 — Council Regulation (EEC) No 3300/91, OJ 1991 L 315, p. 1. 2 — Akos Toth, The doctrine of rebus sic stantibus in interna­ tional law', Juridical Review 1974, pp. 56, 147 and 263. 3 — OJ 1983 L 41, p. 1.

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with a view to contributing to the economic subheadings 22.05 C I or C II of the Com­ and social development of the Socialist Fed­ mon Customs Tariff, originating in Yugosla­ eral Republic of Yugoslavia (hereafter via, shall be dismantled in accordance with 'SFRY') and helping to strengthen relations the rules laid down in Article 2(1) and (2) of between the parties. To that end provisions the Additional Protocol establishing new and measures were to be adopted and imple­ trade arrangements. This provision shall mented in the field of economic, technical apply within the limits of an annual Com­ and financial cooperation, and in the trade munity tariff quota of 545 000 hectolitres. and social fields. The Community shall apply the duties of the Common Customs Tariff to imports in excess of the quota.'

4. Title I of the Cooperation Agreement dealt with economic, technical and financial cooperation, Title II with trade, Title III 6. Of relevance among the general and final with provisions relating to the Free Zone provisions of the Cooperation Agreement is established by the agreements signed at Article 60, which provided: Osimo, and Title IV with cooperation in the field of labour. Title V consisted of general and final provisions.

7. During the course of 1991 war broke out in Yugoslavia. The Community and its 9. The preamble further states that: 6

Member States attempted to play an active role in putting an end to the conflict. In November that led to Decision (91/586/ECSC, EEC) of the Council and the Representatives of the Governments of the Member States, meeting within the Council, 'the pursuit of hostilities and their conse­ of 11 November 1991 suspending the appli­ quences on economic and trade relations, cation of the Agreements between the Euro­ both between the Republics of Yugoslavia pean Community, its Member States and the and with the Community, constitute a radi­ Socialist Federal Republic of Yugoslavia 5 cal change in the conditions under which the (hereafter 'the Suspension Decision'). Cooperation Agreement between the Euro­ pean Economic Community and the Socialist Federal Republic of Yugoslavia and its Pro­ tocols, as well as the Agreement concerning the European Coal and Steel Community, were concluded; ... they call into question the application of such Agreements and Pro­ tocols'. 8. The preamble to the Suspension Decision refers to declarations of the European Com­ munity and its Member States, meeting within the framework of European Political Cooperation, taking note of the crisis in Yugoslavia. The preamble also refers to Resolution 713 (1991) of the United Nations 10. Paragraph 1 of the Suspension Decision Security Council, which expressed concern provides: that the prolongation of the crisis constituted a threat to international peace and security. The preamble further states that the appeal launched by the European Community and its Member States on 6 October 1991, calling for compliance with the cease-fire 'The application of the abovementioned agreement reached in The Hague on 4 Octo­ Agreements is hereby suspended with imme­ ber 1991, was not heeded. That declaration diate effect.'

13. Article 1 of the Suspension Regulation 16. On 25 November 1991 the Council provides: adopted Decision 91/602/EEC denouncing the Cooperation Agreement between the European Economic Community and the 8 Socialist Federal Republic of Yugoslavia. The preamble refers to the provisions of 'The trade concessions granted by, or pursu­ Article 60 of the Cooperation Agreement, ant to, the Cooperation Agreement between and states that the situation prevailing in

7 — Cited in note 1. 8 — OJ 1991 L 325, p. 23.

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19. On 1 June 1992 the Council adopted Regulation (EEC) No 1432/92 prohibiting trade between the European Economic Community and the Republics of Serbia and 12 Montenegro. 18. Similar arrangements were made in 1992, through the adoption of Council Regulation

10 — OJ 1992 L 63, p. 1. 11 — OJ 1992 L 63, p. 41. 9 — OJ 1991 L 342, p. 1. 12 — OJ 1992 L 151, p. 4.

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The Vienna Convention on the Law of Trea- 21. Instruments of ratification of or acces­ ties sion to the Vienna Convention have been deposited by all the Member States of the Community except France, Ireland, Luxem­ bourg and Portugal. Of those four Member States only Luxembourg has signed the Con­ vention (but has not yet ratified it).

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24. Article 61(1) provides: (b) the effect of the change is radically to transform the extent of obligations still to be performed under the treaty.

'A party may invoke the impossibility of performing a treaty as a ground for terminat­ ing or withdrawing from it if the impossibil­ ity results from the permanent disappearance or destruction of an object indispensable for the execution of the treaty. If the impossibil­ 2. A fundamental change of circumstances ity is temporary, it may be invoked only as a may not be invoked as a ground for termi­ ground for suspending the operation of the nating or withdrawing from a treaty: treaty.'

25. Article 62 provides: (a) if the treaty establishes a boundary; or

'Fundamental change of circumstances

26. Article 65 contains the 'Procedure to be arise in regard to a treaty from a succession followed with respect to invalidity, termina­ of States or from the international responsi­ tion, withdrawal from or suspension of the bility of a State or from the outbreak of hos­ operation of a treaty'. Article 65(1) provides tilities between States.' that a party invoking a ground for terminat­ ing, withdrawing from, or suspending the operation of a treaty, must notify the other parties of its claim. The notification shall indicate the measure proposed to be taken with respect to the treaty and the reasons therefor. Article 65(2) provides for a waiting period of not less than three months (except 29. It is generally agreed that many provi­ in cases of special urgency), after which the sions of the Vienna Convention codify rules notifying party may, if no party has raised of customary international law. There is any objection, carry out the proposed meas­ however also agreement that to some extent ure. If objection is raised, the parties shall the Convention constitutes a progressive seek a solution through the means indicated development going beyond established cus­ in Article 33 of the Charter of the United tom. And there appears to be no agreement Nations (Article 65(3)). on precisely which provisions are customary 16 international law and which are not . Both the principle of pacta sunt servanda and the doctrine of rebus sic stantibus (which makes allowance for a fundamental change of cir­ cumstances) are however universally recogn­ ised as forming part of customary interna­ tional law. In the Fisheries Jurisdiction 27. Article 66 contains further rules on 'Pro­ 17 cases the International Court of Justice, cedures for judicial settlement, arbitration referring to the principle of termination of a and conciliation'. Article 67(1) lays down treaty by reason of a fundamental change in that the notification provided for under circumstances, stated: Article 65(1) must be made in writing.

31. Racke then appealed against the judg­ ment of the Finanzgericht, on a point of law, to the Bundesfinanzhof. It contested the 30. Racke imported wines from the Kosovo validity of the Suspension Regulation and wine-growing region in the period from 6 asked that the provisions of the Cooperation November 1990 to 27 April 1992. It had Agreement be applied until 27 May 1992, the those imports cleared for warehousing in its day on which the denunciation of the Coop­ private customs warehouse and on 7 May eration Agreement became effective. 1992 declared the consignments released into free circulation. On that occasion Racke cal­ culated the customs duty at the preferential rate provided under the Cooperation Agree­ ment, which in the meantime had been sus­ pended. The Hauptzollamt (Principal Cus­ 32. In the order for reference the Bundesfi­ toms Office) Mainz then raised a nanzhof sets out its doubts about the validity supplementary assessment consisting of the of the Suspension Regulation. It points out difference between the third-country rate of that that regulation constituted, at the mate­ customs duties and the preferential rate, rial time, the legal basis for the supplemen­ since the wine had been imported from Ser­ tary assessment by the Hauptzollamt, since bia (tax amendment decision of 27 May 1992, the denunciation of the Cooperation Agree­ confirmed by decision of 27 August 1993 on ment was not yet effective and trade with the complaint by Racke). Racke disputed Serbia and Montenegro not yet prohibited. It that decision before the Finanzgericht admits that it inclines to the view that the (Finance Court) Rheinland-Pfalz. Its action binding character of the Suspension Regu­ succeeded as regards the supplementary lation cannot be called into question on assessment for the wines exported from grounds of international law. However, the Yugoslavia before 15 November 1991, but doubts which exist in that respect, in particu­ was dismissed as to the remainder. The lar on the lawfulness under international law Finanzgericht based its dismissal of the of the unilateral suspension of the Coopera­ action on the Suspension Regulation and tion Agreement, cannot be brushed aside. stated that the suspension by that regulation of the agreed trade concessions, even before the denunciation of the Cooperation Agree­ ment, gave rise to no legal doubt. On the contrary, the unilateral suspension was law­ ful since a fundamental change of the mate­ 33. The Bundesfinanzhof further reasons as rial circumstances in the former Yugoslavia follows. Under the Court's case-law, the

34. The Bundesfinanzhof considers the first condition to be satisfied, but has doubts about the second condition. It is not obvious '1 . Is Council Regulation (EEC) No that the change which occurred through the 3300/91 of 11 November 1991 suspending dismembering of Yugoslavia and the out­ the trade concessions provided for by the break of hostilities could radically change the Cooperation Agreement between the Euro­ extent of the obligations under an agreement pean Economic Community and the Socialist which is essentially economic. Moreover, Federal Republic of Yugoslavia ... valid? international law also prescribes procedural formalities, including notification and the observance of a waiting period, except in case of special urgency. It may therefore be 18 — Cited above in notes 10 and 11 respectively.

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2. If not, what are the consequences of rebus sic stantibus exception. It is clear from invalidity ... for the charging of customs duty the Suspension Regulation, which refers to a in early May 1992 on wines originating in radical change in conditions, that the Coun­ Serbia which were imported in the period cil sought to have recourse to that exception. from mid-November 1991 to April 1992 and The rebus sic stantibus doctrine is expressed cleared for warehousing in a customs ware­ in Article 62 of the Vienna Convention, house? which imposes strict limits and has to be interpreted restrictively and objectively. The burden of proof rests on the contracting party invoking the exception. The Vienna Convention further contains procedural pro­ visions.

was no case of 'special urgency', as required 44. The regulation does refer to 'the pursuit by Article 65(2) of the Convention for an of hostilities' in Yugoslavia, but that cannot, immediate suspension. The Security Council according to Racke, constitute a fundamental of the United Nations had not yet imposed a change of circumstances. There are many trade embargo, and there were no other rea­ States in which hostilities occur, including sons of special urgency. One can assume Member States of the Community. The that, if the Community had notified its absence of such hostilities did not constitute intention to suspend the Cooperation Agree­ 'an essential basis of the consent of the par­ ment, the SFRY would have resisted that. ties' (Article 62(1)(a) of the Vienna Conven­ Further, it is difficult to see why the Council tion). There was no war with Yugoslavia, and the Member States did not confine indeed there was not even a war inside Yugo­ themselves to denouncing the Cooperation slavia, but only conflicts between ethnic Agreement (and thus further applying the groups claiming self-determination. Cooperation Agreement until the end of the six months' notice). Racke stresses that the procedural provisions of the Vienna Conven­ tion are essential rules of international law, whose violation is sufficient to invalidate the Suspension Regulation.

45. The Suspension Regulation refers to the consequences of the pursuit of hostilities on economic and trade relations between the Republics of Yugoslavia. For the Commu­ nity, however, those consequences could not constitute a fundamental change of circum­ stances. 42. Also at the substantive level Racke main­ tains that there was no justification for recourse to rebus sic stantibus.

47. In Racke's submission the Cooperation concessions. Rather, it is that of an interna­ Agreement was suspended for political rea­ tional agreement whose operation was sus­ sons: it was a means of exercising pressure pended at international level; its provisions on the parties to the conflict to observe had therefore ceased to create rights for indi­ ceasefire agreements. Although understand­ viduals when the Suspension Regulation was able from a political point of view, the sus­ adopted. pension does not thereby meet the condi­ tions of rebus sic stantibus. The latter also requires that 'the effect of the change is radi­ cally to transform the extent of obligations still to be performed under the treaty'. Racke claims that no such change occurred. The Cooperation Agreement was in the first place a trade agreement, serving the interests of economic factors, and trade with Yugosla­ via continued at the time. 50. The Council contends that Racke and the Bundesfinanzhof err in their conception of the relationship between international law and Community law. Even if the Suspension Decision were invalid under international law, it would not follow that the Coopera­ tion Agreement continued to operate. Inter­ 48. Racke thus concludes that none of the national law does not impose a specific form procedural and substantive requirements for of reparation; it does not, in particular, recourse to rebus sic stantibus were satisfied. impose resumption of the agreement in ques­ tion. An alleged violation of international law may set in motion a procedure between the parties which may result in a resumption of the agreement, but it may also result in compensation for the injured party, or retor­ sion by the injured party in the form of 49. The Council argues that the Suspension retaliatory measures. In the present case, no Regulation is valid. It first recalls the relevant such procedure was started and, even if it legal framework. The Suspension Regulation had been, the re-application of the Coopera­ was accompanied by the Suspension tion Agreement would have been an unlikely Decision, adopted by the Council and the outcome. Where there is a serious deteriora­ Representatives of the Governments of the tion in the relations between the parties to a Member States. That decision precedes the treaty, those parties have a measure of legiti­ regulation from both a logical and a juridical mate political choice between the various point of view. The adoption of the Suspen­ solutions offered by international law. It is sion Regulation was required because the therefore not necessary for the Court, when tariff concessions provided for in the Coop­ reviewing the validity of the Suspension eration Agreement had been implemented by Regulation, to consider the question whether way of regulations. Thus, the legal frame­ the suspension of the operation of the Coop­ work is not that of an international agree­ eration Agreement was in conformity with ment still in operation and a Community international law: the Agreement ceased to regulation unilaterally suspending the tariff apply in any event.

51. In the alternative, the Council argues obligations still to be performed under the that the Suspension Decision was lawful treaty' (Article 62(1)(b) of the Vienna Con­ under international law. It considers that the vention), the Council refers to the de facto requirements of rebus sic stantibus, as dissolution of Yugoslavia, with the birth of expressed in Article 62 of the Vienna Con­ new political entities with effective control vention, were satisfied. There was a funda­ over their territories. Because of that situa­ mental change in the circumstances whose tion many provisions of the Cooperation existence constituted an essential basis for Agreement (on trade and on financial assis­ the consent of the parties. It is clear from the tance) could no longer be applied. As an preamble to and Article 1 of the Coopera­ example the Council refers to the contro­ tion Agreement that the existence of the versy between Slovenia and the federal SFRY as a federal, sovereign and peaceful authorities on the receipt of customs duties. State was an essential condition for initiating A potential adaptation of the Cooperation and pursuing the cooperation envisaged by Agreement to the new situation could only the Cooperation Agreement. It is therefore be based on negotiation between the parties. obvious that the events at the time — the The Community sought such a solution, seriousness of the situation in Yugoslavia but it could not be achieved. The Council consisting of the breaking-up of the internal concludes that the Suspension Regulation is order and organisation through the use of valid. armed forces, which the Security Council had characterised as a threat to international peace and security — constituted a change of circumstances affecting the very basis of the cooperation with the Community and its Member States. It is wrong to say that the Cooperation Agreement was a mere trade agreement. The Cooperation Agreement was comparable to other agreements with Medi­ terranean countries ('association' or 'coop­ eration' agreements based on Article 238 of the Treaty). It was concluded both by the 53. The Commission first expresses doubts Community and by the Member States. It as to the admissibility of the reference. The contained essential provisions on financial Bundesfinanzhof questions the validity of assistance. It contained important social pro­ the Suspension Regulation on the basis of visions. And it was situated in a broader the Vienna Convention and rules of custom­ political framework expressed in the Final ary international law. But the Community is Act of the Conference on security and coop­ not a party to the Vienna Convention and eration in Europe, thus instituting privileged there is nothing in the Treaty which suggests political relations between the Community that general principles of international law and the Member States, of the one part, and are part of the Community legal order. It is 19 Yugoslavia, of the other. true that in Poulsen and Diva Corp. the Court stated that the Community must exer­ cise its competences in conformity with international law, but for the Commission it is not certain that that statement covers the

56. The Commission then addresses the question whether it is possible for Racke to rely on rules of general international law. It favours a negative reply to that question. The Commission recalls that the Community is not a party to either of the Vienna Conven­ 54. Next, the Commission doubts whether tions. Those conventions are therefore not an the answer to the first question is relevant to act of the institutions in the sense of Article the second question, which concerns the 177of the Treaty. Even if one takes the view practical consequences of the alleged invalid­ that the Community is bound by certain ity of the Suspension Regulation. The Com­ principles of the Vienna Convention, inas­ mission takes the view that such invalidity much as they express rules of customary cannot affect the answer to be given to the international law, it is questionable whether, second question. The Suspension Regulation and to what extent, that is the case for spe­ concerned the tariff concessions for 1991, cific provisions of the Convention. and Racke released the goods in issue into free circulation only on 7 May 1992. In 1992, however, there was no tariff quota for wines originating in Serbia. A declaration of inval­ idity of the Suspension Regulation cannot have the effect of extending the 1992 tariff quota applying to imports from other Republics of the former Yugoslavia to 57. If that problem were to be overcome, imports from Serbia. The Commission fur­ there would remain the fact that, by its ther emphasises that the Bundesfinanzhof nature, the Vienna Convention is not apt to does not raise the issue whether Racke could create rights in favour of individuals ques­ claim a right to the preferences in issue tioning the validity of a Community act. The directly on the basis of the Cooperation Commission derives that from the spirit, Agreement. The Court cannot therefore scheme and provisions of the Convention. address the latter issue. The principal objective of the Convention is to regulate contractual relations between subjects of international law. The Conven­ tion is further subsidiary in that States can always agree to depart from its rules and in that State practice may create new rules of customary international law superseding those of the Convention. Lastly, the Con­ 55. On the substance, the Commission first vention is not exhaustive as questions expresses its views on the direct effect of the arising from State succession, State responsi­ Cooperation Agreement, and in particular of bility and the outbreak of hostilities are

not covered (Article 73 of the Convention) the event that the Court were to consider and as the Convention is without prejudice that the legality of the regulation should be to rules of customary international law in reviewed on the basis of rules of general fields not covered by it (such as the right to international law. The Commission argues retorsion). that the Council did not rely on rebus sic stantibus alone when adopting the Suspen­ sion Regulation, but also on the impossibil­ ity of continuing the performance of the treaty and to the right to retorsion. Taking into account the delicate political assessment 58. In that context, Articles 61 and 62 of the which needs to be undertaken where an Convention regulate the matter only partly. international agreement is suspended, the It emerges for example from the preparatory Commission contends that the Court should documents to the Convention that the disap­ confine itself to examining whether the pearance of a subject of international law Community institutions abused their pow­ was considered as an essential reason for the ers. Given that the Community is not bound impossibility of performing a treaty (Article by the Vienna Convention under Article 61), but that it was decided not to address 228(7) of the Treaty, and given that certain that issue in Article 61 in order not to pre­ rules of customary international law are judge further negotiations on State succes­ decidedly more flexible than the provisions 20 sion. of the Convention, the Community is not obliged to respect each specific provision of the Convention. That also applies to the pro­ cedural provisions, whose violation does not under international law render the disputed act void or invalid but only engages the 59. The Commission thus concludes that the international responsibility of the interna­ Vienna Convention is not an instrument tional law subject involved. such as to create rights in favour of individu­ als disputing the validity of an act of the institutions. In support, the Commission 2 refers to Faust v Commission 1and Ger- 2 many v Council, 2 where the Court also refused to examine arguments based on legal relations between the Community and third countries. 61. The Commission points out that a state of war is not required for reliance on rebus sic stantibus, the impossibility of perfor­ mance or the right to retorsion. In line with 23 60. The Commission subsequently defends the UN Security Council, the Community the validity of the Suspension Regulation, in took into account the existence of an armed conflict giving rise to bloodshed and destruc­ tion. The Security Council considered the conflict a threat to international peace and 20 — The Commission refers to Wetzel/Rauning, Die Wiener Vertragsrechtskonvention —Materialien zur Entstehung der einzelnen Vorschriften, 1978, at p. 419. 21 — Case 52/81 [1982] ECR 3745. 22 — Case C-280/93 [1994] ECR I-4973. 23 — See Resolution 713 (1991), adopted on 25 September 1991.

65. Lastly, there is the right to retorsion, which the Commission defines as the right to take action, in itself contrary to interna­ tional law, but justified by previous illegal 63. At the time it was impossible to continue action by the other party and intended to to perform the Cooperation Agreement, not incite that other party to revoke its action. necessarily because of 'the permanent disap­ Retorsion is limited by the following prin­ pearance or destruction of an object indis­ ciples: it shall be announced, it shall observe pensable for the execution of the treaty' the principle of proportionality and it shall (Article 61(1) of the Vienna Convention), be such as to permit the return to the pre­ but because of the disappearance of the existing situation. Applying those principles SFRY itself. In that respect the Commission to the suspension of the Cooperation Agree­ notes that the declarations of independence ment, the Commission maintains that the of Croatia and Slovenia took effect on 8 Community was in a position to consider October 1991. the following acts, on the part of the SFRY, as violations of international law. First, there was the coup in October 1991 by the four pro-Serb members of the collective presi­ dency of the SFRY. Secondly, the Yugoslav federal army had abandoned neutrality by 64. The Commission further submits that at participating in attacking Croat towns the procedural level also the spirit of the (including Dubrovnik). Thirdly, even at that Vienna Convention was respected. As early as 28 August 1991 the Community announced that it would take measures 24 — See EC Bulletin 7/8-1991, paragraph 1.4.25. against the parties to the conflict not partici­ 25 — See EC Bulletin 10-1991, paragraphs 1.4.6, 1.4.7 and 1.4.16.

67. The Commission's doubts as to whether it is possible for an individual to dispute the validity of a Community act on grounds of general international law may have some jus­ tification, but it is plainly wrong to suggest that the reference is inadmissible on that 68. The second limb of the Commission's basis. Article 177 of the Treaty permits doubts on the admissibility of the reference national courts to refer questions concerning concerns the relevance of the question on the the validity of acts of the institutions of the validity of the Suspension Regulation for the Community. It is not disputed that the 29 proceedings before the Bundesfinanzhof. Suspension Regulation is such an act and It is true that in exceptional circumstances that the Bundesfinanzhof has genuine doubts the Court can declare a reference inadmis- on its validity. No other requirements are

27 — Case 11/70 [1970] ECR 1125, paragraph 3 of the judgment. 26 — See Article 1 of the Statute of the International Tribunal, adopted by UN Security Council Resolution 827 (1993) of 28 — Joined Cases 21/72 to 24/72 [1972] ECR 1219. 25 May 1993. 29 — See paragraph 54 above.

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72. Second, in the present case no such manifest violation has been demonstrated. It has not in my view been shown that the Community made an improper use of the 69. For the reasons set out below, I con­ 31 rebus sic stantibus doctrine, and it has not sider that the invalidity of the Suspension been shown that there were no other inter­ Regulation would affect Racke's claim. I national law grounds on which the Commu­ therefore now turn to examine the validity of nity could base the decision to suspend the the Suspension Regulation. Cooperation Agreement. Also, I do not think that the Suspension Regulation is invalid on procedural grounds that Racke could rely upon (i. e. the alleged lack of prior 30 — See most recently, Case C-304/96 Hera v USL [1997] ECR I-5685, judgment of 16 October 1997, paragraph 11. notification to the SFRY and the suspension 31 — See paragraphs 102 to 104. with immediate effect).

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The status of the Vienna Convention and confirmed by several judgments of the rules of customary international law International Court of Justice. The interpretation given to the regulation in issue was substantially affected by those rules of general international law.

32 — Cited in note 19. 34 — At paragraph 10. 33 — At paragraph 9 of the judgment. 35 — Case T-115/94 [1997] ECR II-39.

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RACKE v HAUPTZOLLAMT MAINZ

Community legal order. The Court con­ than interpreting a Community regulation in cluded that: the light of rules of customary international law, and in Opel Austria the international law principle of good faith was married to the Community law principle of protection of legitimate expectations. Those are two specific types of effect, but the sort of effect which is sought in the present case is much 'In a situation where the Communities have stronger. Racke is seeking to have a Commu­ deposited their instruments of approval of an nity regulation declared invalid on the sole international agreement and the date of entry basis of an alleged violation of rules of cus­ into force of that agreement is known, trad­ tomary international law. It is difficult to ers may rely on the principle of protection of envisage any stronger type of effect. legitimate expectations in order to challenge the adoption by the institutions, during the period preceding the entry into force of that agreement, of any measure contrary to the provisions of that agreement which will have direct effect on them after it has entered into force.'

77. In its landmark judgment in Interna- tional Fruit Company the Court held that there are two preconditions for review of the validity of an act of the institutions on the basis of a provision of international law: the The Court went on to examine whether the Community must be bound by the provi­ Council regulation in issue was adopted in sion, and the provision must be capable of 38 breach of the EEA Agreement, and found conferring rights on citizens. The second that that was the case. The regulation was condition is crucial for the present case. Are consequently annulled. the rules of customary international law such as to create rights in favour of individuals? Are they such as to permit an individual to challenge a political decision by the Commu­ nity {and the Member States) to suspend the operation of an international agreement?

One is, for obvious reasons, the Court's own 80. As to the status of customary interna­ case-law on direct effect of international tional law generally in the legal systems of agreements concluded by the Community. the Member States, the picture is rather com­ 41 The second is the approach in the legal sys­ plex and the results diverse. Nearly all tems of the Member States towards the effect Member States appear to regard customary of customary international law. It seems to international law as a source of law. In some me that, if there were some common ground Member States that is based on constitu­ in national legal systems on this question, the tional provisions. In others it is accepted in Court should take that into account. case-law and legal writing. As to the effects which customary international law may pro­ duce, some Member States, for example the Federal Republic of Germany, appear to have a doctrine under which rules of cus­ tomary international law may override domestic legislation. Article 25 of the Ger­ man Basic Law states that the general rules of public international law shall be an inte­ gral part of federal law, and that they shall take precedence over the laws and shall 79. Turning first to the legal systems of the directly create rights and duties for the Member States, it appears that there is little inhabitants of the federal territory. However, guidance in the case-law of national courts there are few if any court decisions in those applying provisions of the Vienna Conven­ Member States giving that sort of effect to tion. There are some decisions applying the customary international law. A recurring provisions of the Convention to questions of objection is that most rules of customary interpretation of treaties, but there appear to international law do not create rights for be no decisions directly applying the provi­ individuals and therefore do not have direct sions on termination and suspension. In effect. In other Member States, for example France, which is not a party to the Conven­ the United Kingdom, it is accepted that cus­ tion, there is a decision on the doctrine of tomary international law cannot override rebus sic stantibus in relation to the suspen­ domestic legislation. Thus in England a lead­ sion of an agreement with Morocco concern­ ing decision states: 'The courts acknowledge ing visa requirements. According to that the existence of a body of rules which decision the act of suspending an agreement nations accept among themselves. On any is an act of government which is not subject judicial issue they seek to ascertain what the 39 to review by the courts. The latter can relevant rule is, and, having found it, they only check whether the decision to suspend was taken by the competent authority, whether there is such a genuine decision and whether it was published in the Journal offi- 4 ciel. 0

81. At the expense perhaps of over­ simplifying, one could say that national legal systems do attempt to give some effect to rules of customary international law but that they are cautious as to the effect of such 83. I do not think that the above case-law rules on the validity of domestic legislation. should be directly transposed to the Vienna There is no case, so far as can be seen, in any Convention. Again it has to be emphasised national court where an effect similar to that that that Convention is relevant only in so claimed by Racke has been recognised. far as it codifies customary international law. — which it does only partly. It would there­ fore be inappropriate to analyse the purpose, the spirit, the general scheme and the terms of that convention as such. However, the above case-law does make it clear that there are limits to the direct effect of international 82. Turning now to this Court's approach to agreements, and that an obstacle may lie in the direct effect of international agreements, the overall purpose and nature of interna­ it is settled case-law that a provision in an tional law provisions. It is also clear that the agreement concluded by the Community provisions in issue must contain a clear and with non-member countries must be precise obligation. regarded as having direct effect when, regard being had to its wording and the purpose and nature of the agreement itself, the provi­ sion contains a clear and precise obligation which is not subject, in its implementation or effects, to the adoption of any subsequent 43 measure. In general the Court has been 84. In the light of those principles, there ready to acknowledge the direct effect of must also be limits to the effect of rules of specific provisions of agreements concluded customary international law relating to trea­ by the Community, but there are exceptions, ties. The overall nature and purpose of the the most notable one being the GATT. With law of treaties is to lay down rules applying respect to that agreement the Court has con­ in the relations between States (and interna­ sistently held, on the basis of an analysis of tional organisations). The law of treaties is clearly not intended to create rights for indi­ viduals. It is true that its application may 42 — Chung Chi Cheung v The King [1939] AC 160 at p. 168 have the effect of creating such rights, (Privy Council); see further F. A. Mann, Foreign Affairs in English Courts (1986), p. 120 et seq.; H. Fox, P. Gardner ana C. Wickremasinghe, in Eisemann (op. cit.) at p. 517 et seq. 43 — Case 12/86 Demirel v Stadt Schwäbisch Gmünd [1987] 44 — International Fruit Company, cited in note 28, paragraphs ECR 3719, paragraph 14 of the judgment. 20 to 27 of the judgment.

85. In addition, the particular rules in issue must contain clear and precise obligations. In 87. A number of agreements concluded by the circumstances of the present case, it is the Community have direct effect, thus cre­ not obvious that that condition is satisfied. ating rights for individuals. Where that is the The notion of rebus sic stantibus is notori­ case, the beneficiaries of such rights may ously difficult and contested; indeed it has have legitimate expectations as to the correct often been described as the enfant terrible of and proper implementation of the agreement international law. 45 Its scope has perhaps in issue, as was recognised by the Court of 47 been formulated more clearly in Article 62 of First Instance in Opel Austria. To some the Vienna Convention, but even that provi­ extent those expectations will extend to the sion contains concepts which easily lend life itself of the agreement. Where, as in this themselves to widely diverging interpreta­ case, an agreement is concluded for an tions. What is a 'fundamental change' of indefinite period, subject to denunciation circumstances? What are circumstances with six months' notice, it might be legiti­ which 'constituted an essential basis of the mate for an individual to expect that the consent of the parties'? And when does the agreement will not suddenly be suspended change in circumstances 'radically ... trans­ without due cause. Or, to take the facts of form the extent of obligations still to be

46 — See'further Vamvoukos, op. cit., and Oliver J. Lissitzyn, Treaties and changed circumstances (rebus sicstantibus)', 45 — A. Vamvoukos, Termination of Treaties in International American Journal of International Law, 1967, p. 895, at Law: the Doctrines of Rebus Sic Stantibus and Desuetude, p. 915. Oxford, 1985, p. ix. 47 — Cited in note 35.

88. The individual's entitlement to some measure of protection of legitimate expecta­ tion is further supported by the strength of the principle of pacta sunt servanda, the fun­ damental tenet of the law of treaties. As the 48 Court has stated: 'According to the general rules of international law there must be bona 90. I consider that by allowing such limited fide performance of every agreement'. Under review an appropriate balance is struck international law, exceptions to that prin­ between the rights of the individual and the ciple, such as rebus sic stantibus, are in any decision-making powers of the Community event, as Racke has correctly emphasised, to institutions. There must be a relatively wide be narrowly construed. That is confirmed by margin of discretion for those institutions to the very recent judgment of the International take decisions concerning the life of an Court of Justice of 25 September 1997 in the agreement, in accordance with their powers Hungary/Slovakia case, which makes it clear under the Treaty. It is only logical that the that, both under customary law and under life of an international agreement should be Article 62 of the Vienna Convention on the primarily in the hands of the contracting par­ Law of Treaties, the stability of treaty rela­ ties. There is moreover an important political tions requires that the plea of fundamental dimension to the conclusion and termination change of circumstances be applied only in of international agreements which does not 49 exceptional cases. lend itself readily to judicial review. 50

No manifest violation continued to grant tariff concessions. How­ ever, rebus sic stantibus does not require an impossibility to perform obligations. Again, it seems to me that there was no point in continuing to grant preferences, with a view to stimulating trade, in circumstances where Yugoslavia was breaking up in a way which 92. It seems to me that the Council's and the was strongly disapproved by the interna­ Commission's arguments in defence of the tional community. decision to suspend the operation of the agreement are convincing. At the time there was clearly a prima fade case for having recourse to the rebus sic stantibus doctrine. As the Council points out, the existence of the SFRY as a federal, sovereign and peaceful State was an essential condition for develop­ ing the cooperation envisaged by the Coop­ eration Agreement. In the light of that, the 94. Moreover, in those circumstances, I do events of 1991 would indeed seem a funda­ not consider that traders based in the Com­ mental change of circumstances affecting the munity could reasonably expect, in Novem­ very basis for the cooperation between the ber 1991, that the Community would con­ Community and the SFRY. I am further sat­ tinue to grant tariff preferences for imports isfied that the Community institutions could from Serbia and Montenegro. Indeed, only reasonably consider that the effect of that half a year later, all trade with Serbia and change of circumstances was such as radi­ 51 Montenegro was prohibited, in implemen­ cally to transform the extent of obligations tation of a decision by the UN Security still to be performed by the Community and Council and thus in full compliance with its Member States. In view of the political international law. position adopted towards the breaking-up of Yugoslavia — a position confirmed and sup­ ported by the international community through the resolutions of the UN Security Council — there was clearly no point in continuing the economic, financial and trade cooperation provided for in the Cooperation Agreement.

limited by some overriding public interest, 98. Article 65(2) of the Vienna Convention which was undeniably present. lays down a minimum waiting period of three months but provides for a dispensation from that requirement in cases of special urgency. In my view it was not unreasonable for the Community institutions to consider that there was such urgency. It must be emphasised that the circumstances were very exceptional, since the SFRY was in effect 96. As to the procedural elements of the sus­ breaking up and the Community was — not pension of the Cooperation Agreement, unreasonably — unwilling to accept that the including in particular the alleged lack of so-called rump Yugoslavia lawfully repre­ prior notification to the SFRY, I do not con­ sented all of the Yugoslav republics. Further, sider that any violation of those require­ the Community was aiming to put pressure ments of international law, if established, on the parties to the Yugoslavia conflict so as could be of assistance to Racke's claim. to prevent further bloodshed and destruc­ Article 65 of the Vienna Convention lays tion, an objective surely of manifest urgency. down the relevant procedural requirements but those requirements do not seem pre­ cisely to reflect the requirements of custom­ ary international law. It seems that, as might be expected, the provisions of the Vienna Convention concerning procedural require­ ments are more specific and more concrete than the rules of customary international law. 53

99. It is thus unnecessary to consider the Commission's arguments concerning other international law grounds for suspending the Cooperation Agreement, such as the impos­ sibility of continuing to perform the agree­ 97. However, even on the assumption that ment and the right to retorsion. I will merely the Community was under an obligation note that those arguments, too, have some under international law to notify the other force. party of its intention to suspend the opera­ tion of the Agreement, I do not see how any infringement of that obligation could be relied upon by Racke. A procedural illegality of that kind, committed by a party to a treaty, could be invoked only by another party.

101. By its second question the Bundesfi­ nanzhof inquires about the consequences of the alleged invalidity of the Suspension Regulation for the charging of customs duties in early May 1992. Since I take the view that the Suspension Regulation has not been shown to be invalid, that question need not be answered. I will however briefly con­ sider the reply to be given if the view were 104. There is to my mind no doubt that to be taken that the Regulation was invalid. those provisions could have direct effect. The Cooperation Agreement is comparable to many other agreements which have already 54 been recognised as having direct effect. And the provisions on preferential tariff treatment in issue in the present case were sufficiently precise and unconditional. The fact that there were no regulations, laying 102. If the Suspension Regulation was down rules for the implementation of the invalid for breach of rules of customary tariff quota for imports of wine, cannot in international law that would entail that there my view bar Racke's rights under the Coop­ was no lawful decision in November 1991 to eration Agreement. suspend the operation of the Cooperation Agreement. Consequently, the agreement remained in force until 27 May 1992, the day on which its denunciation by the Commu­ nity became effective. I do not see what other consequences could be drawn.

105. However, for the reasons given above, I do not consider that the second question 103. However, there were no Community calls for a reply. regulations in 1992 implementing the tariff concessions provided for in the Cooperation Agreement, at least not in so far as imports from Serbia and Montenegro were con­ 54 — See, for example, Case 87/75 Bresciani v Amministrazione Italiane delle Finanze [1976] ECR 129 and Case C-18/90 cerned. The question thus arises whether Kziber [1991] ECR I-199.