C-102/97

COMMISSION V GERMANY

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 11 February 1999 *

I — Introduction II— Legal and factual context

1. This infringement action concerns Ger- 2. Articles 1 to 6 of the original text of the many's alleged non-transposition of Arti- Directive were entirely replaced by the new cle 3(1) of Council Directive 75/439/EEC provisions inserted by Article 1 of the of 16 June 1975 on the disposal of waste amending Directive. The Directive formerly oils, 1 as amended by Council Directive required Member States to ensure that, as 87/101/EEC of 22 December 1986, 2which far as possible, the disposal of waste oils be requires Member States to give priority to carried out by recycling (regeneration and/ the processing of waste oils by regenera- or combustion). 3 The second recital in the tion, in preference to their disposal by preamble to the amending Directive reads: combustion or other means. The parties' arguments centre on whether the qualifica- tion of that requirement in Article 3(1) by reference to technical, economic and orga- nisational constraints should be understood as a derogation, to be strictly construed, or as a necessary precondition to the obliga- tion to grant priority, to be given its ordinary, broad meaning. It is my view, however, that the provision requires Mem- ber States to give priority to regeneration of 'Whereas regeneration is generally the most waste oils, but recognises that, in deciding rational way of re-using waste oils in view on the nature and scope of the measures of the energy savings which can be adopted, they may take account of certain achieved; whereas therefore, priority practical constraints. should be given to the processing of waste oils by regeneration, where technical, eco- nomic and organisational constraints allow * Original language: English. it.' 1 — OJ 1975 L 194, p. 23, hereinafter referred to as 'the Directive'. Unless otherwise indicated, I will use this term to refer to Directive 75/439 as amended. 2 — OJ 1987 L 42, p. 43, hereinafter 'the amending Directive'. 3 — Article 3 of the Directive, in its original version.

— "waste oils" means: any process whereby base oils can be produced by refining waste oils, in parti- cular by removing the contaminants, oxi- dation products and additives contained in such oils;

any mineral-based lubrication or industrial oils which have become unfit for the use for which they were originally intended, and in particular used combustion engine oils and … .' gearbox oils, and also mineral lubricating oils, oils for turbines and hydraulic oils;

3. Article 2 of the Directive states:

— "disposal" means: 'Without prejudice to the provisions of Directive 78/319/EEC, 4 Member States shall take the necessary measures to ensure that waste oils are collected and disposed of without causing any avoidable damage to man and the environment.' the processing or destruction of waste oils as well as their storage and tipping above 4 — Council Directive 78/319/EEC of 20 March 1978 on toxic or under ground; and dangerous waste, OJ 1978 L 84, p. 43.

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COMMISSION V GERMANY

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OPINION OF MR FENNELLY — CASE C-102/97

The amount of these indemnities must be obtained through the application of such as not to cause any significant distor- measures taken pursuant to this Direc- tion of competition or to give rise to tive. artificial patterns of trade in the products.'

'15.The indemnities may be financed, among other methods, by a charge imposed on products which after use The Commission shall send an overall are transformed into waste oils, or on summary of such information to the Mem- waste oils. ber States'.

The financing of indemnities must be in accordance with the "polluter pays" prin- ciple.' '18. Every three years, Member States shall draw up a situation report on the disposal of waste oils in their respective countries and shall send it to the Commission.' 7. Articles 17 and 18 of the Directive 6 provide, respectively, as follows:

'17. Each Member State shall periodically convey to the Commission information 8. Article 2 of the amending Directive concerning its technical expertise and required the Member States to take the the experience gained and results measures necessary to comply with the new provisions of the Directive, including Arti- cle 3(1), by 1 January 1990 and forthwith 6 — Formerly Articles 15 and 16 of the Directive, before the to inform the Commission thereof. Arti- coming into force of the amending Directive. cle 4 of the amending Directive also

10. Paragraph 5b of the AbfG itself required that undertakings which sold combustion-motor oils, which are particu- larly suitable for regeneration, to end-users should also collect waste oils from their customers without charge. The AbfG was replaced, as of 7 October 1996, by the Kreislaufwirtschafts- und Abfallgesetz (Law on Recycling and Waste). 10 Para- graph 6 of the Krw/AbfG grants priority to the method of waste disposal which is the 9. In Germany, the Abfallgesetz (Law on most respectful of the environment and Waste) 7provided, until 7 October 1996, permits regulations to be adopted granting the basis for the adoption of detailed priority in specific cases either to regenera- measures on waste disposal, including the tion or to combustion, depending on the Altölverordnung (Regulation on Waste circumstances. Paragraph 5(2) provides Oils). 8 Paragraphs 2 and 3 of the AltölV that the method of disposal most in keeping permit the recycling of certain specified with the type and character of the waste waste oils into base oils or other products, should be chosen. while subjecting the recycling of other waste oils to conditions regarding their pollutant content. Paragraph 4(1) of the AltölV requires the separate disposal of waste oils with a high PCB 9or halogen content, and prohibits their mixing with other waste oils. Paragraph 4(2) prohibits the mixing of certain of the waste oils specified in Paragraph 2 with other waste III — Arguments of the Parties oils. Paragraph 4(3) of the AltölV permits the mixing of such waste oils, by way of exception to the two foregoing subpara- graphs, in certain authorised recycling, combustion or disposal plants. Other mea- sures adopted under the AbfG provide that 11. Germany raised an objection of inad- waste oils may only be disposed of by missibility against the Commission's action, combustion in plants which are capable of based on the alleged breach of the principle of collegiality by the Commission's decision to issue a reasoned opinion in the present 7 — BGBl. 1986 I, p. 1410, hereinafter 'the AbfG'. 8 — BGBl. 1987 I, p. 2335, hereinafter 'the AltölV'. 9 — Polychlorinated biphenyl. 10 — BGBl. 1994 I, p. 2705, hereinafter 'the Krw/AbfG'.

13. Germany takes the view that a Member State is not obliged to transpose the literal terms of Article 3(1) of the Directive, provided that, in the context of the con­ 12. The Commission alleges in its letter of crete situation in its territory, and subject to formal notice of 10 August 1992, in its the constraints mentioned in that Article, reasoned opinion of 14 March 1995 and in the conditions for regeneration of waste oil the present action that Germany is in are laid down. 13 Article 3(1) of the Direc­ breach of its obligations under Article 3(1) tive presumes that certain constraints are of the Directive because it has not accorded likely to exist, and the obligation to grant priority to regeneration of waste oils over priority to regeneration of waste oils is not, their disposal through combustion, without therefore, unconditional; it is subject to the being able to justify this failure by reference precondition that such constraints have to technical, economic or organisational been overcome. The reference to undefined constraints. It submits that the reference to technical, economic and organisational such constraints in Article 3(1) is a deroga­ constraints is not, therefore, to be con­ tion from the requirement that priority be strued strictly; rather, it gives to Member granted to regeneration, which should, States a large margin of appreciation therefore, be strictly construed in the light regarding the existence of such constraints, of the overall objectives of the Directive. 12 which may apply cumulatively; their At the oral hearing, the agent for the assessments are subject to review only in Commission stated that this derogation the case of a manifest error of appreciation was limited to situations where the con­ on their part. This is confirmed by compar­ straints set out in Article 3(1) made it ison with the much more restrictive text of 14 the original Commission proposal. The agent for Germany summarised the attitude 11 — [1998] ECR I-5449. 12 — The Commission referred to Case 47/79 Nehlsen ν Bremen [1979] ECR 3639, paragraph 4; Case 90/83 Paterson/ Weddel [1984] ECR 1567, paragraph 16; Case 133/83 Regina ν Scott [1984] ECR 2863, paragraph 15; Case 13 — Case C-131/88 Commission ν Germany [1991] C-116/91 British Gas [1992] ECR I-4081, paragraphs 12 ECR I-825, paragraph 6. and 20; Case C-116/92 Charlton and Others [1993] 14 — O J 1985 C 58, p. 3: 'Member States shall take the ECR I-6755, paragraph 20; Case C-39/95 Goupil [1996] necessary measures to ensure that, as far as possible, the ECR I-1601, paragraph 8; and Case C-335/94 Mrozek disposal of waste oils is carried out by means of and Jäger [1996] ECR I-1573, paragraph 8. regeneration'.

14. In the circumstances, the requirements of Article 3 are sufficiently complied with, in Germany's view, in the German legal provisions already summarised. Germany 15. Germany submits that, in any event, also claims that the prohibition by the any incentive providing for the expansion AltolV of the mixing of waste oils suitable of waste-oils regeneration capacity could for recycling with other waste oils ensures mislead undertakings, would amount to that all suitable waste oils are available to unlawful State aid, would unfairly disad- the recycling industry. This is reinforced by vantage other market actors, such as recy- the collection of waste oils by sellers cling enterprises producing products other pursuant to Paragraph 5b of the AbfG. In than base oils and cement- and steel-works fact, more than 50% of waste oils pro- and specialised incinerators which derive duced every year in Germany is recycled. 15 thermal energy from combustion of waste In the light of economic and technical oils, and could lead to the development of a constraints, Germany states that it is under monopoly for the two remaining regenera- no obligation to take further measures to tion plants. 18Granting regeneration plants give greater priority to regeneration. The a right of first refusal of waste oils held by recent closure of a regeneration plant has collection undertakings, at an acceptable reduced capacity to produce base oils from price, would also result in an unacceptable waste oils by about a third. 16 Even though disadvantage to the latter undertakings, regenerated base oils are perfectly accepta- which would still have to pay the normal ble to major automobile companies, they price for waste oils collected. Furthermore, are not favoured by consumers. In addition, agreements between undertakings estab- Germany argues that the absence of lishing such a system could raise competi- demand for regenerated oils and declining tion-law problems. In addition, transport of waste oils from all parts of Germany to

the two existing regeneration plants would a priori precedence to regeneration on be costly and would pose environmental grounds of energy efficiency. The prohibi- risks, contrary to Article 2 of the Directive. tion by the AltölV of the mixing of different There being no duty on lubricants in types of waste oils is a necessary condition Germany, no fiscal advantages can be for regeneration of the most suitable oils, offered to waste-oil regeneration plants. In but does not guarantee priority. any event, as the highest excise duty that could be imposed on waste oils under Article 2(2) of Council Directive 92/81/ EEC of 19 October 1992 on the harmoni- sation of the structures of excise duties on mineral oils 19 would be DEM 30 per tonne, exoneration of regeneration plants from payment of this duty (if it were imposed) would not give them a sufficient competitive advantage over undertakings which purchase waste oils for combustion purposes; the duty would simply constitute an additional burden for waste-oils collec- tion enterprises, thereby endangering the efficacy and equilibrium of the system of collection.

15, that measures be taken to counteract unlikely to lead to a monopoly for existing market forces. The Commission states that plants, because of possible competition it cannot judge the different compliance from undertakings elsewhere in the Com- possibilities open to Member States but munity and because other undertakings favours greater marketing efforts, and suffering from over-capacity in respect of observes that, in lieu of subsidies, favour- production of new oils would be attracted able fiscal treatment of regeneration rela- into the regeneration sector if it were made tive to combustion of waste oils would economically attractive. have a positive effect. The agent for the Commission referred at the oral hearing to a 1997 report by Coopers and Lybrand indicating that there was a difference of only DEM 20 between the prices paid for waste oils by regeneration undertakings and by those purchasing them for combus- tion, a gap which could be bridged by fiscal advantages. In this regard, Germany is not obliged to avail of the possibility of exon- IV — Analysis erating combustion oil from excise duty granted by Article 8 of Directive 92/81/ EEC and extended by Council Decision 97/425/EC. 20 The agent for the Commis- sion also stated at the oral hearing that the grant of State aid to regeneration plants 18. It should be recalled at the outset that was not necessarily excluded. Furthermore, the obligation of a Member State to take all measures to ensure affordable supplies of the measures necessary to achieve the result waste oils to regeneration plants, such as prescribed by a directive is a binding the grant of a right of first refusal, were obligation imposed by the third paragra- envisaged by Article 5(2) of the Directive. ph of Article 189 of the EC Treaty and by In that regard, the Commission submits the Directive itself. 21 that waste oils are already transported over long distances for disposal by combustion. The adoption of measures giving priority to waste-oil regeneration necessarily presup- poses concomitant disadvantages for eco- nomic operators who use waste oils for other purposes. Such priority would be 19. Article 3(1) of the Directive creates a binding obligation, subject only to the expressed qualifications, to 'take the mea- sures necessary to give priority to the

processing of waste oils by regeneration'. It ther the Commission nor the Court can is clear, in my view, that this provision calls prescribe the precise measures which Mem­ for more than the legislative enactment of ber States should adopt. Where the Mem­ an 'empty formula'. The priority to be ber States are entrusted with such a discre­ given to regeneration has a practical envir­ tion, the Court may, however, establish, at onmental purpose, as well as the realisation the instigation of the Commission, whether of energy savings. 22 If the objectives a Member State has manifestly taken no defined in, inter alia, Article 3 cannot appropriate measures, or insufficient mea­ otherwise be achieved, Article 5(2) sets sures, to fulfil its obligations. For example, out the further steps to be taken by in Case C-265/95 Commission ν France 23 Member States to ensure the disposal the Court referred to the margin of discre­ (including regeneration) of waste oils by tion enjoyed by Member States regarding designated undertakings. The existence of public-order measures to eliminate barriers such a concrete obligation of last resort to imports in a given situation and noted reinforces the impression that Articles 2, 3 that the Community institutions could not and 4 of the Directive create obligations of prescribe the measures to be adopted, 24 but a similarly concrete character. In practical found, none the less, that, having regard to terms, the giving of priority to regeneration the facts, 'the measures adopted by the of waste oils must entail tangible steps to favour this method of disposal over com­ French Government were manifestly inade­ bustion, destruction, storage or tipping. quate'. 25 In Case C-3/96 Commission ν Netherlands, 26 the Court held that a Member State could be found to have failed to fulfil its obligation under Arti­ cle 4(1) of Council Directive 79/409/EEC on the conservation of wild birds 27 to classify special protection areas (SPAs) for the conservation of certain bird species if the number and total area of the sites so classified were 'manifestly less' than the number and total area of the most suitable sites. 28

21. It seems manifest in the present case observations about the text of the qualifi- that Germany has taken no steps to give cation contained in Article 3(1) of the priority to the regeneration of waste oils. It Directive. First, I do not agree with the is not necessary, in this context, to consider Commission that the qualification con- the terms of the Krw/AbfG, which came tained in Article 3(1) should be understood into force only after the issue of the as a derogation and, therefore, read restric- reasoned opinion which preceded the pre- tively. Even if its scope were to be deter- sent proceedings. In any event, and irre- mined with regard to the objectives of the spective of the formal parity accorded by Directive, as the case-law on derogations that measure to regeneration and combus- cited by the Commission requires, this tion, it simply provides for the adoption of would not greatly assist matters, as the specific concrete measures, no example of statement of the objective of the grant of which has been cited to the Court other priority to regeneration contained in the than those carried over from the period of second recital in the preamble itself con- application of the AbfG. I agree with the tains the same qualification by reference to Commission that neither the obligation technical, economic and organisational imposed by Paragraph 5 b of the AbfG on constraints. Furthermore, although priority sellers of certain oils to end-users to collect is to be given to regeneration, the Directive waste oils from their customers, nor the makes provision, in paragraphs 2 and 3 of prohibition imposed by the AltölV on the Article 3, for alternatives to regeneration mixing of waste oils suitable for regenera- where waste oils are not regenerated on tion, is sufficient to amount to a grant of account of these constraints. These con- priority to regeneration, although both straints also influence whether waste oils measures may be necessary for the achieve- are dealt with in such circumstances by ment of that objective. Neither measure combustion or by other means. The role of appears to accord any concrete advantage technical, economic and organisational to regeneration over, for example, disposal constraints in determining the measures of waste oils by combustion. adopted by Member States should not, therefore, be seen as a derogation, but rather as a central element of the scheme of alternatives set out in order of preference in Article 3.

Directive. The Danish, Finnish and Swedish from taking such measures only where this versions require measures to be taken is actually prevented by technical, eco- where this is possible in the light of the nomic and organisational constraints. Con- technical, economic and organisational fronted with such divergences, an interpre- restrictions. 2 9 The Spanish, English, tation of a provision is found 'by reference French, Italian and Portuguese versions to the purpose and general scheme of the require the necessary measures granting rules of which it forms part'. 3 2 In the priority to be taken where, or in so far as, present case, the scheme of Article 3, with technical, economic and organisational its considered sequence of alternative meth- constraints so allow or permit; 30 the Ger- ods of disposal of waste oils, combined man, Greek and Dutch versions, on the with the linkage of regeneration with the other hand, are couched in negative terms, practical objective of achieving energy requiring the taking of such measures in so savings, seems to me to preclude accep- far as, or whenever, such constraints do not tance of the Commission's argument that oppose this or do not exist. 31 The verbs or Member States may be relieved of the adjectives used in the German, Greek and obligation to give priority to regeneration Dutch versions might be understood, in only in cases of absolute impossibility on literal terms, as permitting the invocation technical, economic or organisational of such constraints whenever they merely grounds.

combustible material may have to be countered by national measures of an economic character, that efforts may have to be taken to surmount technical obsta- cles, and that organisational structures may have to be put in place which did not 29 — '[N]ár dette er muligt ud fra tekniske, økonomiske og organisatoriske hensyn' (Danish); 'Jos se on teknisesti, previously exist. taloudellisesti ja järjestelyjen kannalta mahdollista' (Fin- nish); '[0]m en sadan behandling är möjlig mot bakgrund av tekniska, ekonomiska och organisatoriska begränsnin-

31 — 'Sofern keine technischen, wirtschaftlichen und organisa- torischen Sachzwänge entgegenstehen' (German); 'Εφόσον 32 — Case C-449/93 Rockfon ν Specialarbejderforbundet i δεν υπάρχουν εμπόδια τεχνικής, οικονομικής και Danmark [1995] ECR I - 4291, paragraph 28; see also οργανωτικής φύσης' (Greek); 'Wanneer beperkingen van Joined Cases C-267/95 and C-268/95 Merck and Others technische, economische en organisatorische aard zich ν Primecrown and Beecham and Others ν Europharm daar niet tegen verzetten' (Dutch). [1996] ECR I - 6285, paragraph 22.

24. The simple fact is that German law 25. None the less, the obligation to grant contains no provision giving priority to priority to regeneration remains the central waste-oil regeneration. This situation could requirement of Article 3(1). I have already be justified only if Article 3(1) made the stated that Germany has manifestly failed absence of 'technical, economic and orga- to take any measures with a view to giving nisational constraints' a condition of the effective priority to the regeneration of obligation to take measures. That result waste oils. It has not, for example, was clearly not intended. It would contra- addressed the Commission's suggestion of dict the recited declaration that 'regenera- a marketing campaign for regenerated base tion is generally the most rational way of oils, which it is acknowledged are an re-using waste oils'. Such constraints will acceptable alternative to ordinary motor always exist. The relationship between the lubricant oils. Regarding possible fiscal obligation and the constraints recognises incentives, the payment of indemnities or that the priority is not absolute but must measures to give regenerating plants pre- take account of obvious practical obstacles. ferential access to supplies of waste oils, or such other alternative options for granting This may properly be regarded as a parti- priority as may exist, it is not sufficient for cular expression of the principle of propor- Germany simply to exclude options which tionality or of the balance to be struck involve certain budgetary costs or which, between the end to be achieved, i.e. regen- inevitably, will cause disadvantages to eration, and the means to achieve it, i.e. the undertakings which dispose of waste oils measures to be adopted. Thus, Member by means other than regeneration. Nor can States are required, in my view, to give a Member State simply invoke the possible priority to the regeneration of waste oils unlawfulness of particular measures by through practical measures, to the extent reference to Community rules on competi- that this will be effective and that they are tion and State aids, when there is no not thereby subjected to disproportionate evidence that it has consulted the Commis- technical, economic or organisational bur- sion in that regard. 34 dens, having regard· to the objective of achieving energy savings and to the exis- tence of the alternative methods of disposal referred to in paragraphs 2 and 3 of Article 3 of the Directive. 33

it impossible, or, in the light of the quali­ tion of measures required by Community fication in Article 3(1) of the Directive, law constitutes a breach of that duty of disproportionately difficult, due to techni­ cooperation. 3 8I think that its reasoning cal, economic or organisational constraints, applies equally to cases, such as the present to respect the obligation contained in that case, where a Member State claims to face provision, it should, in my view, in the light difficulties in adopting implementing mea­ of its obligations under Article 5 of the EC sures in respect of which it has a wide Treaty, submit its problems to the Commis­ margin of discretion, and where it justifies sion and seek appropriate solutions. The its failure on grounds of relative rather than Court observed in Case C-217/88 Commis­ absolute impossibility. 39 I raise this issue in sion ν Germany, 35 in which it addressed the present case, not in order to establish a the question whether it was absolutely distinct breach of Article 5 of the EC impossible for Germany to comply with Treaty (which has not been invoked by its obligations under a regulation, that the the Commission), but rather to illustrate Commission and the Member State are the point that Germany has not exhausted obliged, by virtue of the reciprocal duties of all possible avenues in pursuit of a means of genuine cooperation imposed on them in addressing the constraints which applied particular by Article 5 of the EC Treaty, to and of complying with its obligations under work together in good faith in order to Article 3(1) of the Directive. In such cir­ overcome those difficulties. 36 That case cumstances, Germany's manifest failure to involved a unilateral decision by Germany take any measures to give priority to the not to enforce notices requiring the distilla­ processing of waste oils by regeneration tion of certain quantities of wine, in constitutes a clear breach of that provision. circumstances where the Community legi­ slator had determined exhaustively the conditions for exemption, so that no mar­ gin of discretion remained for the Member States. 37 The Court stated that a unilateral decision not to continue with implementa­

(1) Declare that, by failing to take the measures necessary to give priority to the processing of waste oils by regeneration, the Federal Republic of Germany has failed to fulfil its obligations under Article 3(1) of Council Directive 75/439/EEC of 16 June 1975 on the disposal of waste oils, as amended ,by Council Directive 87/101/EEC of 22 December 1986;

(2) Order the Federal Republic of Germany to pay the costs.

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