C-263/97

Intervention Board for Agricultural Produce,

ex parte First City Trading Ltd and Others,

on the interpretation of Articles 23 and 33 of Commission Regulation (EEC) N o 3665/87 of 27 November 1987 laying down common detailed rules for the application of the system of export refunds on agricultural products (OJ 1987 L 351, p . 1) and on the validity of Commission Decision 96/239/EC of 27 March 1996 on emergency measures to protect against bovine spongiform encephalopathy (OJ 1996 L 78, p . 47) and of Commission Regulation (EC) N o 773/96 of 26 April 1996 laying down special measures derogating from Regulations (EEC) N o 3665/87, (EEC) N o 3719/88 and (EEC) N o 1964/82 in the beef and veal sector (OJ 1996 L 104, p. 19),

* Language of the case: English.

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS T H E C O U R T (First Chamber),

after hearing the oral observations of First City Trading Ltd and Others, repre- sented by Nicholas Green, Barrister, of the United Kingdom Government, repre- sented by David Anderson, and of the Commission, represented by James Macdonald Flett, at the hearing on 26 March 1998,

after hearing the Opinion of the Advocate General at the sitting on 14 May 1998,

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JUDGMENT OF 29. 9. 1998 — CASE C-263/97

gives the following

Judgment

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS 3 Article 13(9) of Regulation N o 805/68, as amended by Regulation N o 3290/94, pro- vides as follows:

'The refund shall be paid upon proof that:

— the products have been exported from the Community, and

— in the case of a differentiated refund the products have reached the destina- tion indicated on the licence or another destination for which the refund was fixed ...'

4 Article 5 of Council Regulation (EEC) N o 565/80 of 4 March 1980 on the advance payment of export refunds in respect of agricultural products (OJ 1980 L 62, p. 5) provides: 'An amount equal to the export refund shall, at the request of the party concerned, be paid as soon as the products or goods have been brought under the customs warehousing or free zone procedure with a view to their being exported within a set time limit.' Under Article 6 of that regulation, security is to be lodged in a sum equal to the amount paid, plus an additional amount. Without prejudice to cases of force majeure, that security is to be wholly or partially forfeited in cases where reimbursement has not been made when export has not taken place within the period prescribed or if there proves to be no right to the export refund or if there was a right to a smaller refund.

'Where the amount advanced is greater than the amount actually due in respect of the relevant export operation or an equivalent export operation, the exporter shall repay the difference between the two amounts plus 15% of such difference.

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS Where, however, by reason of force majeure:

— the proof to be furnished under this Regulation in order to qualify for the refund cannot be produced, or

— the product reaches a destination other than that for which the advance was calculated,

the additional 15% shall not be charged.'

'Whereas Commission Decision 96/239/EC of 27 March 1996 on emergency mea- sures to protect against bovine spongiform encephalopathy, inter alia, prohibits exports of meat of bovine animals to third countries from the United Kingdom; whereas, furthermore, the health measures adopted by the authorities of certain third countries against Community exports of meat of bovine animals are having serious economic effects on Community exporters; whereas the resulting situation has seriously affected the possibilities of exporting under the conditions laid down by Regulations (EEC) N o 565/80, (EEC) N o 3665/87, (EEC) N o 3719/88 and (EEC) N o 1964/82;

Whereas, therefore, these negative consequences should be limited by adopting spe- cial measures and extending certain of the deadlines laid down by the rules on refunds in order to permit the régularisation of export operations which have not been completed because of the circumstances described'.

13 Article 3 of Regulation N o 773/96, as amended by Regulation N o 1349/96, provides inter alia that the increases of 15% and 20% referred to in Article 23(1) and the second subparagraph of Article 33(1) respectively of Regulation N o 3665/87 are not applicable to exports carried out under licences issued by 31 March 1996, provided that the customs formalities for release for consumption in the third country con- cerned were carried out after 20 March 1996.

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS 4 Article 4(1) and (2) of Regulation N o 773/96, in the version thereof resulting from Regulation N o 1349/96, provides:

JUDGMENT OF 29. 9.1998 — CASE C-263/97

2. At the request of the exporter, for products placed under one of the arrange- ments referred to in Articles 4 and 5 of Regulation (EEC) N o 565/80 in the United Kingdom by 31 March 1996 but which are not covered by an export declaration, the export licence shall be cancelled, the exporter shall repay the refund paid in advance and the securities lodged shall be released.'

15 According t o the order for reference, First City Trading Ltd ('FCTL') and Meatal Supplies Ltd ('Meatal'), two of the applicants in the main proceedings, are engaged in the export of beef from the United Kingdom. O n 27 March 1996, when the ban imposed by the Commission came into effect, FCTL and Meatal were in the pro- cess of exporting 648 200 kg of beef, of which 615 200 kg was in the name of FCTL and 33 000 kg was in the name of Meatal. Approximately 70% of the FCTL beef (432 921 kg) and all of the Meatal beef left the territory of the United Kingdom shortly before 27 March 1996 and was in transit on that date. That beef was sub- sequently repatriated to the United Kingdom. The remaining 30% of the FCTL beef (182 279 kg) never left the territory of the United Kingdom and was not per- mitted to do so after 27 March 1996. The applicants in the main proceedings returned the majority of the beef in question and were repaid by their suppliers or received credit notes for it, following payment of aid to those suppliers under the Beef Stocks Transfer Scheme, a United Kingdom scheme designed to mitigate some of the effects which the ban had on slaughterers and cutters.

19 It is common ground that the Intervention Board is not seeking payment of the penalties provided for in Articles 23 and 33 of Regulation N o 3665/87.

20 O n an application made on 27 August 1996, the High Court of Justice granted the applicants leave to apply for judicial review of the Intervention Board's decision t o approach the guarantors with a view to obtaining payment of the securities in the amount of the refunds paid in advance. At the same time, the High Court granted an interlocutory injunction restraining the Intervention Board from enforcing or seeking to enforce the guarantees. By notice of motion dated 22 October 1996 the Intervention Board applied to have the leave to move for judicial review set aside and to have the injunction discharged. In the context of those proceedings, the High Court decided to refer the following questions to the Court of Justice for a pre- liminary ruling:

'(1) D o Articles 23 and 33 of Commission Regulation N o 3665/87/EEC as amended apply to the case where by reason of force majeure goods in transit in the course of export to third countries are repatriated to the Member State of export, or are they limited to those cases where the goods were imported into a different third country from that which was originally declared by the exporter to the competent authority?

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JUDGMENT OF 29. 9. 1998 — CASE C-263/97

(2) In circumstances where:

are the exporters entitled to retain all or part of the export refund by reason of the general principles of Community law and in particular force majeure, legiti- mate expectations, proportionality or equity?

(3) If [the] answer to Question 2 is that the exporter is entitled to retain in prin- ciple some or all of the export refund in question, are the exporters bound to give credit for any revenues derived from the disposal of the beef in the United

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS Kingdom (for example where the original vendor of the beef to the exporter was bound to repossess the beef under a retention of title clause in the original contract of sale and where the vendor repaid all or a portion of the original purchase price)?

(4) Are either or both of Commission Decision 96/239/EC or [Commission Regu- lation] N o 773/96/EC unlawful to the extent that they do not provide for exporters in the circumstances referred to in Question 2 above being entitled to retain export refunds applicable to the exports in question or any portion thereof?'

Question 1

25 In the Commission's view, Regulation N o 3665/87 clearly requires the export refunds to be repaid.

26 It should be noted in that regard that, according to Regulation N o 805/68, the grant of refunds on beef and veal exports, equal to the difference between world market prices and prices within the Community, serves to safeguard Community participa- tion in international trade in beef and veal.

27 According to the provisions of Regulation N o 3665/87, payment of refunds is con- ditional, on the one hand, on the production of proof that the product has left the customs territory of the Community and, in the case of differentiated refunds, on its having been imported into a third country and, on the other hand, on comple- tion of the formalities for its release for consumption.

28 Where the rate of refund varies according to the country of destination, the fact that, for reasons of force majeure in particular, the product does not reach its intended country of destination but is imported into another third country attracting a lower rate of refund, means that the exporter is obliged to repay the difference between the refund in respect of the country to which the product was to have been exported and that relating to the country to which it was in fact exported.

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS 29 Since actual access to the market of destination is in principle conditional o n completion of the formalities for release for consumption in the country of destina- tion, the fact that the product did not reach that destination and, owing to force majeure, had to be exported to other countries rules out the possibility of its being regarded, for the purposes of payment of the differentiated refund, as having been imported within the meaning of Article 5(1) of Regulation N o 3665/87 (see para- graph 23 of the judgment in Anglo Irish Beef Processors International, cited above).

(a) exports of beef from the United Kingdom to third countries have been pro- hibited by Decision 96/239,

(b) bans on the importation of beef from the United Kingdom have also been imposed by a number of third countries,

(c) exporters of beef were in the process of carrying goods to third countries at the time when Decision 96/239 was adopted,

(d) those exporters were forced to repatriate the beef to the United Kingdom,

(e) the exporters had received, in accordance with Regulations N o s 565/80 and 3665/87, advance payments of export refunds in respect of the export transac- tions in issue, and

(f) the exporters suffered loss as a result of their inability to sell their beef on the export markets in question.

35 The United Kingdom Government submits that none of the principles referred to by the national court justifies the retention by the exporters of all or part of the export refunds. It contends that the effects of force majeure are provided for b y Regulation N o 3665/87 and are limited to exemption from the obligation to pay the penalties. The principle of the protection of legitimate expectations is not appli- cable either, since there was no basis for any expectation that the position would be any different from that which was specified in the legislation and confirmed b y the case-law of the Court. Moreover, having regard to the proper function of the export refund system, the obligation to repay such refunds, even in the event of force majeure, is not contrary to the principle of proportionality. Lastly, the obliga- tion to repay refunds paid in advance is not contrary to the principle of equity. O n the contrary, if the applicants were allowed to retain the refunds, they would enjoy an unfair advantage by comparison with traders who chose to sell their beef on the United Kingdom market or who wished to export their beef but did not apply for advance payment of refunds.

36 The Commission submits that Regulation N o 3665/87 is clear and that neither force majeure nor equity is capable of altering in any way the obligation to repay export refunds. As to the principles of the protection of legitimate expectations and of proportionality, it points out that the Court has already expressed its view in that regard in its judgment in Anglo Irish Beef Processors International.

41 As to the provisions of Regulation N o 3665/87 concerning force majeure, it is settled case-law that, since the concept oí force majeure does not have the same scope in various spheres of application of Community law, its meaning must be determined by reference to the legal context in which it is to operate (see, in par- ticular, Case C-12/92 Huygen and Others [1993] ECR I-6381, paragraph 30). Therefore, Regulation N o 3665/87 is not contrary to the general principles of Com-

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS munity law inasmuch as it specifies and limits the effects of force majeure in the field of export refunds.

42 As regards breach of the principle of proportionality, the Court held in paragraph 29 of its judgment in Anglo Irish Beef Processors International that where, as a result of force majeure, goods fail to reach their country of destination but are exported to other third countries attracting a lower rate of refund or no refund at all, forfeiture of a part of the security equal to the difference between the amount of the refund paid in advance and the amount of the refund actually due, without any penalty being imposed, is commensurate with the objective pursued by the legislature.

43 There is no essential difference between a case in which goods are exported to other third countries attracting no export refund and a case in which the goods are repa- triated to the Member State of export. In both cases, the subsidised goods fail to reach their intended market and cannot be sold there.

48 As to the argument that it would be inequitable to require exporters to repay export refunds paid in advance, the principle of equity cannot be regarded as allowing any derogation from the application of provisions of Community law, save as provided for by the legislation or where the legislation is itself declared invalid.

49 It must be added that it is precisely if exporters were authorised to retain refunds paid in advance that they would have an unfair advantage over exporters who had not applied for an advance payment and who therefore received no export refund.

50 The answer to the second question must therefore be that Regulation N o 3665/87 does not contravene the general principles of Community law, in particular the principles of force majeure, the protection of legitimate expectations, proportion- ality or equity, by prohibiting exporters of beef from the United Kingdom from retaining all or part of any export refunds paid in advance in circumstances where

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS (a) exports of beef from the United Kingdom to third countries have been p r o - hibited by Decision 96/239,

(b) bans on the importation of beef from the United Kingdom have also been imposed by a number of third countries,

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JUDGMENT OF 29. 9. 1998 — CASE C-263/97

52 In view of the answers given to the first two questions, there is no need to answer the third question.

Question 4

53 By its fourth question, the national court enquires as to the validity of Decision 96/239 and Regulation N o 773/96, inasmuch as they do not allow exporters, in the circumstances described in the second question, to retain all or part of the export refund.

Decision 96/239

Regulation No 773/96

59 In the United Kingdom's view, there are no grounds for suggesting that Regulation N o 773/96 is unlawful. To permit exporters to retain refunds would be contrary t o the objective of the refund scheme. It considers, moreover, that it was open to the Commission, in the exercise of its discretion, to omit such a measure when adopting the regulation in question.

60 The Commission is unable to see any basis on which Regulation N o 773/96 could be regarded as inconsistent with the principles of the protection of legitimate expec- tations or of proportionality. It further submits that to provide for compensation in relation to beef which never reached its destination would be inconsistent with the export refund scheme, the objectives of Regulation N o 3665/87, the case-law of the Court and the general principle of non-discrimination.

61 It should be noted in that regard that, although Regulation N o 773/96 lays down special measures derogating from Regulation N o 3665/87, it does not exempt exporters from the obligation to repay export refunds paid in advance where the goods have not been imported into, and marketed in, the third country of destina- tion.

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JUDGMENT OF 29. 9. 1998 — CASE C-263/97

in answer to the questions referred to it by the High Court of Justice, Queen's Bench Division, by order of 26 March 1997, hereby rules:

1. Articles 23 and 33 of Commission Regulation (EEC) N o 3665/87 of 27 Novem- ber 1987 laying down common detailed rules for the application of the system

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THE QUEEN v INTERVENTION BOARD FOR AGRICULTURAL PRODUCE, EX PARTE FIRST CITY TRADING AND OTHERS of export refunds on agricultural products, in the version thereof resulting from Commission Regulation (EEC) N o 1615/90 of 15 June 1990, must be interpreted as meaning that where, as a result of, in particular, force majeure, goods do not reach their country of destination but are repatriated to the Member State of export, the exporter is obliged to repay any export refunds paid in advance.

2. Regulation N o 3665/87 does not contravene the general principles of C o m - munity law, in particular the principles of force majeure, the protection of legitimate expectations, proportionality or equity, by prohibiting exporters of beef from the United Kingdom from retaining all or part of any export refunds paid in advance in circumstances where

(a) exports of beef from the United Kingdom to third countries have been prohibited by Commission Decision 96/239/EC of 27 March 1996 o n emergency measures to protect against bovine spongiform encephal- opathy,

respect of agricultural products and Commission Regulation (EEC) N o 3665/87, advance payments of export refunds in respect of the export transactions at issue, and

(f) the exporters suffered loss as a result of their inability to sell their beef on the export markets in question.

3. Consideration of question 4 has not disclosed any factor of such a kind as to affect the validity of Decision 96/239.

Commission Regulation (EC) N o 773/96 of 26 April 1996 laying down spe- cial measures derogating from Regulations (EEC) N o 3665/87, (EEC) N o 3719/88 and (EEC) N o 1964/82 in the beef and veal sector is not ren- dered invalid by the fact that it prohibits exporters, in the circumstances described in the answer to the second question, from retaining all or part of any export refunds paid in advance.

Wathelet Jann Sevón

Delivered in open court in Luxembourg on 29 September 1998.