C-110/99

First, between April and June 1987 the plaintiff exported several consignments of a product based on potato starch under the description 'Ernes E' (CN code 3906 90 2300) to Switzerland. The recipients of the goods were declared to be the undertakings FUGA AG and ŁUKOWA AG, both estab­ lished at the same address in Lucerne, and both managed and represented by the same group of persons. Invoices were in all cases made out to ŁUKOWA AG. 2. The parties to the main proceedings are Emsland-Stärke GmbH (hereinafter: 'the plaintiff') and the Hauptzollamt Hamburg- Jonas (hereinafter: 'the HZA'), and the dispute concerns the claim by the plaintiff for payment of export refunds in respect of the export of starch products to Switzerland between April and June 1987. The export refunds granted were reclaimed Immediately after their release for home because the consignments were brought use in Switzerland, the export consign­ back into the Federal Republic of Germany ments designated as 'Ernes E' were trans­ in one instance and sent on to Italy in the ported back into Germany unaltered and other, in both cases unaltered and by the by the same means of transport under an same means of transport. external Community transit procedure recently set up by ŁUKOWA AG. On * arrival in Germany they were cleared by Original language: German. 1 — See Part I I point 4 below for the full designation of the the recipient for home use on payment of Regulation. the relevant import duty.

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— in the cases specified in Article 5, reached its destination unaltered, or The administrative complaints made against the decisions to recover the refunds 2 — Commission Regulation of 29 November 1979 (OJ 1979 were unsuccessful, as was the subsequent L 317, p. 1) as amended by Commission Regulation (EEC) No 568/85 of 4 March 1985 amending for the 10th time action brought before the Finanzgericht Regulation (EEC) No 2730/79 laying down common (Finance Court). An appeal on a point of detailed rules on the system of export refunds on agricul­ tural products (OJ 1985 L 65, p. 5); unless otherwise stated law is now pending in the case. articles cited are articles of this Regulation.

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— in other cases, left the geographical In the cases referred to in the preceding territory of the Community unaltered.' subparagraph, the provisions of Art- icle 20(2), (3), (4), (5) and (6) shall apply.

6. Article 10(1) provides: In addition, the competent authorities of the Member States may require that addi- tional proof be provided which shows, to their satisfaction, that the product has actually been placed on the market in the 'In the following circumstances payment of non-member country of import in the the differentiated or non-differentiated unaltered state.' refund shall be conditional not only on the product having left the geographical territory of the Community but also — save where it has perished in transit as a result of force majeure — on its having 7. Article 20(2), (3), (4), (5) and (6) pro- been imported into a non-member country vides: and where appropriate into a specific non- member country within the time limits referred to in Article 31:

6. ...'

(c) any other document endorsed by the 8. The provisions governing payment of the customs authorities of the non-member export refund distinguish between differ- country concerned on which the pro- entiated and non-differentiated rates of ducts are identified and which proves refund.3 Where an export refund paid is that they have been released for home under non-differentiated rates, unless use in that country. doubts exist as to whether the product concerned has reached its destination, pay- ment of the refund depends only on proof that the product in respect of which export customs formalities have been completed has, within 60 days from the day of completion of such formalities, left the geographical territory of the Community unaltered (Article 9(1), second indent). For payment of export refunds at differentiated 4. If, however, owing to circumstances rates, however, proof must always be beyond the control of the exporter, furnished that the product has been none of the documents specified in imported into the non-member country or paragraph 3 can be produced, or they one of the non-member countries for which are considered inadequate, proof that the refund is prescribed (Article 20(1)). customs entry formalities for home use have been completed may be furnished by production of one or more of the following documents:

9. The rules regarding how proof of import- ation of the product into a non-member

3 — A differentiated refund is at rates which differ according to the destination of the products (cf. Article 20(1)). In contrast, there is no distinction on the basis of the destination of the products in the case of a non-differen- tiated refund. The present proceedings relate to non- (a) to (g)... differentiated refunds.

13. In the present case, the goods did not remain in Switzerland solely as a result of a subjective decision by the purchaser. The question therefore arose whether the con- III — The reference for a preliminary dition that goods must be imported into the ruling non-member country can for that reason alone be regarded as unfulfilled. There is some doubt in that regard, since Article 20 only refers to the completion of customs entry formalities for home use. Proof of release for home use may only be furnished 11. The Bundesfinanzhof found that a by other documents if that fact cannot be customs entry certificate existed for each substantiated by the official documents consignment. The transport documents, prescribed for the purpose and listed in which were also before the court, showed Article 20(2) of the Regulation. that in both instances the products had been physically taken to the non-member country in question (Switzerland), although 4 — CASE 89/83 Hauptzollamt Hamburg-Jonas v Dimex [1984] they were then immediately forwarded ECR 2815 at para g raph 11, and Case C-27/92 Mattinami- Hasch v Hauptzollamt Hamburg-Janas [1993] LCR onwards. I-1701.

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15. If importation of the goods and, as proof of this, the objective criterion of their actual release for home use, were to be considered insufficient to justify payment of export refunds, this would result in considerable legal uncertainty for those 17. Finally, in the view of the referring entitled to such refunds. The lack of court, it should be borne in mind that re- specific criteria would make it very diffi- importation into the Community does not cult, if not impossible, for an exporter to of itself lead to loss of the export refund. stipulate the terms a purchaser would have to fulfil in order not to forfeit his claim to an export refund.

18. Should in a case such as the present, proof of the product's release for home use in the non-member country not be regarded as sufficient proof of its importation, it would need to be decided what further 16. If the difference between the export proofs might be required. If, for example, it refund granted and the import duty to be were possible to prove that the goods levied on importation into the Community reached the market of the non-member

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country by demonstrating that they were import duty, without any infringement sold on in that country, clarification would being established? be necessary regarding the circumstances under which such a sale should be granted recognition. In respect of three consign- ments in the present case, the question could arise whether the close commercial and personal connection between the 2. Would the answer be different if, undertakings which were party to the sale before the product was re-imported in the non-member country should pre- into the Community, the purchaser in clude recognition of such a transaction as the non-member country sold it to an proof of importation into the non-member undertaking with which he was per- country. sonally and commercially connected, which was also established in that non- member country?

entiated rate, for which importation into a tion (EEC) No 2730/79 is to be construed non-member country pursuant to Art- to the effect that an exporter does not lose icle 20(1) of the Regulation must be his right to payment of an export refund at proved. a non-differentiated rate for all non-mem- ber countries, if the product sold to a purchaser established in a non-member country and in respect of which the export refund was paid, is, without any infringe- ment being established, transported back into the Community under the external 22. The plaintiff also points out that under Community transit procedure immediately Article 20(2) of Regulation No 2730/79, after its release for home use in the non- goods are deemed to have been imported member country in question, and released 'when the customs formalities for home use there for home use on payment of import in the non-member country in question duty.' have been completed.' The objective criter- ion of release of the goods for home use must be regarded as sufficient, since other- wise, significant legal uncertainty would arise for those entitled to refunds.

25. The plaintiff submits that the second question need only be answered if the first question is answered in the affirmative, to 23. Re-importation into the Community of the effect that an exporter would in fact goods exported from the Community to a lose his right to an export refund if the non-member country is permissible, even if criteria set out in the first question were an export refund has been paid in respect of met. such goods. The plaintiff argues that if import duty is levied, there cannot be a presumption that the export refund is recoverable.

28. As regards the observations by the Commission regarding abuse of rights and the consequences thereof, the plaintiff raised the following objections in the oral proceedings: The Hauptzollamt

29. The HZA, whose position is summar- Firstly, the recovery of export refunds is ised in the order for reference, argued contrary to the 'constitutional requirement before the referring court, inter alia, that of a specific enactment', which is a compo- even in non-differentiated rate cases, export nent of the fundamental principle of law- refunds could only be granted where the fulness of administration in a State gov- goods participated in the non-member erned by the rule of law and as such should market in question and had been subject be observed in Community law. The recov- to the commercial law of that country. ery of export refunds is a punitive admin- Article 10 in conjunction with Article 20 of istrative act requiring a clear legal basis, just as penalties may only be imposed if they are founded on a clear and unambig- 5 — Cf. Case 117/83 Koneke |1984| ECR 3291.

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31. In the oral proceedings the Commis- (3) In exceptional cases, the requirements sion's representative made further observa- under Article 10(1) of the Regulation tions regarding the commercial background may be tightened by the competent to the transactions which are the subject of the case. He pointed out that the 1986/1987 trading year had been a transi- 6 — The subsidy levels for the products in question for the tion year as regards the starch regime, with period from April to June 1987 amounted to: 289.90 ecus/t (OJ 1987 L 58, p. 9), 226.53 ecus/t (OJ 1987 L 85, p. 30) production subsidies at that time reduced and 235.58 ecus/t (OJ 1987 L 121, p. 41).

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authorities in the Member States. An 35. The Commission finds that in the entitlement to a non-differentiated present case, the HZA only became aware export refund would then only arise that the goods had been re-imported into once the product had actually been the Community after payment of the export placed on the market of the non- refund, following the customs investiga- member country of import (Art- tion. The demand for additional proof icle 10(1) of the Regulation). beyond that of release for home use in Switzerland was not made until after payment of the refund.

36. In addition, the action taken by the 33. 'Exceptional cases' are understood by HZA in resorting to the third condition for the Commission as cases where no refund is the export refund is problematic, regardless specified for a particular country, for of the timing of the demand for proof. instance because of an embargo, which does not affect the non-differentiated char- acter of the refund specified for other non- member countries, but there remains a danger of the embargo being circumvented. 37. However, if there is no doubt that the export transaction met the requirements for the application of the second condition, then its constituent requirements were also fulfilled.

40. Here, the Commission expressly cites Article 4(3) of Regulation (EC, Euratom) (1) an objective element, that is to say, No 2988/95 of the Council on the protec- evidence that the conditions for the tion of the European Communities' finan- grant of a benefit were created artifi- cial interests. 8 cially, that is to say that a commercial operation was not carried out for an economic purpose but solely to obtain from the Community budget the finan- cial aid which accompanies that opera- 41. Although this Regulation was not yet in tion. This requires analysis on a case- force at the material time, its provisions by-case basis both of the meaning and relating to the refusal or withdrawal of an the purpose of the Community rules at advantage obtained in breach of Commun- issue, and of the conduct of a prudent ity law by the artificial creation of the trader who manages his affairs in required conditions was simply the codifi- accordance with the applicable rules cation of a legal principle already generally of law and with current commercial applicable within Community law. This and economic practices of the sector in legal principle exists in almost all Member question; States and has already been applied in appropriate circumstances in the case-law of the Court. The Commission refers in this connection to Case 125/76 Cremer v BALM, 9Case 250/80 Anklagemyndighe- den v Hans Ulrich Schumacher, Peter Hans Gerth, Johannes Heinrich Gothmann and (2) a subjective element, namely the fact Alfred C. Töpfer, 10 Case C-8/92 General that the operation in question was Milk Products v Hauptzollamt Hamburg- carried out essentially to obtain a fonas, 1 1 and the Opinion of Advocate financial advantage incompatible with General Tesauro in Case C-441/93 Panagis the objective of Community rules; Pafitis and Others v Trapeza Kentrikis Ellados A.E. and Others. 12

47. However, it points out that there is a difference between the proof to be adduced for the second and third conditions. 'Cus- 45. The Commission therefore proposes toms documents' have to be furnished for that the following rider be added to the the second condition, while for the third answer to the first question: condition 'commercial documents' have to be produced as well. The term 'commercial documents' here is to be regarded as including contracts for the onward sale of the products in question; however, the weight of such documents would be con- siderably reduced if the products in ques- 'Under the legal principle in Community tion, before re-importation into the Com- law of abuse of rights, financial advantages munity, were sold by a purchaser estab- are not granted, and can be withdrawn lished in a non-member country to an subsequently, if the relevant commercial undertaking with which he was personally operation is proved to have had as its aim and commercially connected, also estab- the obtaining of an advantage contrary to lished in the non-member country.

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V — Assessment that the product may be re-introduced into the Community due to the difference between the rate of refund and the import duty applicable to the same product (Art- icle 10(1)(b)).

The first question

48. Although the referring court asks expressly for an interpretation of Article 10 of the Regulation, the Commission cor- rectly points out that it must first be determined whether the rule applies to a case such as the present.

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52. The amount of the difference between vide any basis for recovering export refunds the export refunds and the import duty is already paid. ultimately a matter of fact to be decided by the court in the Member State. None the less, an essential pre-condition for the application of Article 10(1)(b) is that the theoretical danger of re-importation due to the difference between the rates of export 55. There is also a possibility that the third refund and import duty, should have subparagraph in Article 10(1) might be existed when the goods were exported. considered applicable. Under this, 'the Article 10(1)(b) of the Regulation only competent authorities of the Member States applies if this condition is met. may require that additional proof be pro- vided which shows, to their satisfaction, that the product has actually been placed on the market in the non-member country of import in the unaltered state'. From the account of the facts by the referring court it is clear that the national court held this 53. If, on the basis of the objective facts, provision to be applicable at first instance doubts exist within the meaning of Art- in the present case. In the judgment at first icle 10(1)(a) and Article 10(1)(b) as to the instance it found that the goods, with their purpose for which the goods were brief sojourn in Switzerland and their exported, proof of importation of the immediate re-importation by the same goods into a non-member country must means of transport, had not been placed be provided in instances where non-differ- on the market in order to be marketed entiated export refund rates apply. there.

'Whereas certain export transactions can lead to abuses; whereas, in order to prevent such abuses, payment of the refund should be subject to the condition that the product 'Paragraph 1 shall apply before the refund has not only left the geographical territory has been paid'. 19 of the Community but has also been imported into a non-member country and, where applicable, actually marketed there;'.

60. In the main proceedings, the export refunds have already been paid. Further- more, all the formal requirements for a refund claim have been met. Article 10(1) 58. Both the grounds for suspicion and the of the Regulation accordingly does not consequent obligation to provide proof provide any legal basis for the right of must exist before payment of the refunds, recovery claimed by the Hauptzollamt. however. That is clear from Article 10(1) of the Regulation, which reads... 'payment of the... refund shall be conditional upon ...'. This approach was confirmed by the Boterlux 16 decision, where the Court held that 'Member States may also require such proof before granting a non-differentiated refund if there is suspicion or proof that 61. In contrast, Regulations subsequent to abuses have been committed'. 17 Regulation No 2730/79, namely both Regulation No 3666/87 20 as amended by

15 — Cf. the Opinion of the Advocate General in Case C-114/99 Roquette Frères [2000] ECR I-8823, I-8825, point 58. 18 —Commission Regulation of 15 April 1999 (OJ 1999 16 — Case C-347/93 (cited in footnote 7). L 102, p. 11). 17 — Cf. Boterlux (cited in footnote 7, at paragraph 30, and 19 — Emphasis added. point 1 of the operative part of the judgment; emphasis 20 — Commission Regulation of 27 November 1987 (OJ 1987 added). L 351, p. 1).

66. In the context of fundamental freedoms the Court has held on more than one occasion that the circumvention of a Mem­ ber State's rules by an abusive exercise of rights under Community law is inadmis­ 63. The Commission refers in this connec­ sible. 2 5The Court has also had to deal tion to Article 4(3) of Regulation No 2988/95 concerning the protection of 24 — Council Regulation of 18 December 1995 (cited in foot­ the European Communities financial inter­ note 8). 25 — Cf. Case 229/83 Leclerc and Others v SARL, 'Au blé veľ and Others [1985] ECR 1 at paragraph 27 on the free movement of goods; Case 39/86 Lair v Universität 21 — Commission Regulation of 20 February 1997 (01 1997 Hannover [1988] ECR 3161 at paragraph 43 on the free movement of workers; Case 33/74 van Btnsbergen v L 51, p. 31). Bestuur van de Bedrijfsvereniging voor de Metaabiuver- 22 — Cited in footnote 18. beta [1974] ECR I-1299 at paragraph 13 and Case 23 — Cf. Article 15(2) of Regulation No 3665/87 as amended C-23/92 TV10 v Commissariaat voor de Media [1994] by Regulation No 313/97, and Article 20(4)(c) and (d) of ECR I-4795 at paragraph 21 on the freedom to provide Regulation No 800/1999. services.

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with the phenomenon of abuse of rights in field. The phenomena of 'roundabouts' 31 other contexts. For example, it has held an and imports 'diverted' via another Member assignment of a claim to be invalid under State 32 or non-member country seem to be Community law where the assignor and a latent danger of financial compensatory assignee were acting together to the dis- schemes. advantage of other creditors. 26 On the other hand, the Court has also held that a blanket clause 27 in a Member State in- tended to prevent abuses of law was invalid in instances where its application would detract from 'the full effect and uniform application of Community law in Member States'. 28

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commercial transactions but only in order agricultural policy. This effect is described wrongfully to benefit from the grant of in the second recital in the preamble to monetary compensatory amounts'. 38 Regulation No 800/1999 as those products having left the Community market.

69. The yardstick for judging the lawful- 71. That purpose could be frustrated by a ness of individual import and export trans- re-importation of the goods into the Com- actions is therefore the purpose of the rules munity immediately after export. However, in question. In a previous judgement, 39 the a blanket condemnation of this would be Court withheld payment of compensatory inappropriate. First, the granting of export amounts from a trader because the objec- refunds is not a subsidy intended to give the tive of offsetting prices had not been exporter a commercial advantage, but, as attained in the transactions in question has already been stated, an instrument to and an essential condition for the applica- render Community products competitive tion of compensatory amounts had not on the world market, and, second, the re- therefore been fulfilled. 40 importation of such goods is subject to its own rules. The objective fact that re- importation has taken place is thus not a sufficient ground for presuming that the purpose has not been achieved.

However, the refund shall be deemed to be unwarranted and shall be reimbursed if the competent authorities find, even after the refund has been paid:

74. However, the subjective element, that is (a) ... to say the intention of the benefiting exporter, i.e. the plaintiff, to claim export refunds for a purpose for which they were not intended, must also be taken into account here. The order for reference (b) ... mentions the good faith of the plaintiff, and states that the goods were re-imported purely as a result of a commercial decision by their purchaser. In order for the advan- tage to be withdrawn from the plaintiff, there would have to have been collusion (c) that the product exported is re- between the plaintiff and the purchaser of imported into the Community without the goods, a 'bogus transaction' for the having undergone any substantial pro- purposes of wrongfully benefiting from cessing or working within the meaning Community refund rules. of Article 24 of Regulation (EEC) No 2913/92, that the non-preferential duty on import is less than the refund granted, and that export was not carried out as a normal commercial transaction; 42

...'. 75. This view is confirmed by the legal basis now in force for a right of recovery which takes the form of a blanket provision 42 — Emphasis added.

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76. The last provision expressly makes '... according to the case-law of the irregularities a constituent element of the Court ... the principle of legal certainty right of recovery by the authorities. requires that rules imposing charges on the taxpayer be clear and precise so that he may know without ambiguity what are his rights and obligations and may take steps accordingly.' 44

80. The position in relation to a right of recovery due to a possible abuse of rights is completely different; the presumption here is that the abuse of rights as such does not merit protection. The abuse of rights causes the protection guaranteed by the legal 78. The concerns raised in the proceedings system to a trader acting in good faith to by the representatives of the plaintiff in be forfeited. The subjective element of an relation to a possible right of recovery are intention to abuse rights is thus an essential relevant in this connection. In classic cases condition for any right of recovery having of administrative action restricting free- the character of a blanket provision or doms or rights, the principle, in a State based on general legal principles. Art- governed by the rule of law, of the con- icle 4(3) of Regulation No 2988/95, which stitutional requirement of a specific enact- concerns the protection of the European ment demands the existence of an enabling Communities' financial interests and as measure for any onerous administrative such does not create a new legal principle act. The Court formulated this requirement but merely codifies a general legal principle in its judgment of 22 February 1989 in already existing in Community law — for Joined Cases 92/87 and 93/87 43 as follows:

44 — Joined Cases 92/87 and 93/87 (cited in footnote 30, at 43 — Cited in footnote 30. paragraph 22).

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which reason application of that principle show and prove the required facts. How- does not depend on the subsequent entry ever, a relaxation of the burden of proof is into force of the Regulation — therefore conceivable in the sense that prima facie only deals with the artificial creation of evidence of irregular conduct would suffice compliance with the conditions for obtain- initially, and the indicted trader would then ing an advantage, and Article 20(4)(c) of have to show that he was not at fault. Regulation No 800/1999 makes it a condi- tion 'that export was not carried out as a normal commercial transaction'.

82. In the present proceedings, the plaintiff would have to have acted in collusion with the purchaser of the goods for the advant- age obtained to be capable of being with- 85. The answer to the first question is drawn. Recovery, under general legal prin- therefore that an exporter only loses his ciples common to the legal systems of the right to payment of an export refund Member States, of the advantage obtained determined at a non-differentiated rate for would be entirely consistent with the rule all non-member countries pursuant to Art- of law if 'an intention to commit an abuse icle 10(1) in conjunction with Art- of rights' were proved. icle 20(2), (3), (4), (5) and (6) of Regula- tion (EEC) No 2730/79 if he, in collusion with a purchaser established in a non- member country of the products sold and in respect of which export refunds have been paid, causes the goods to be re-imported back into the Community under an exter- 83. The actual determination whether the nal Community transit procedure immedi- subjective element of the intention to ately after their release for home use in the commit an abuse of rights is established is non-member country concerned. a matter for the court of the Member State. The basic presumption as regards the burden of proof is that when asserting a 45 — Cf. Case 117/83 Könecke (cited in footnote 5, at para- right of recovery, it is for the authority to graph 11).

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The second question partner can therefore certainly be regarded as proof of the marketing of the products.

88. It has been shown in the discussion on the answer to the first question that this rule relates to a particular condition, the 90. In the case cited above concerning an requirements for which are not met in the abusive exercise of the right of assignment present case. The following remarks on this of a claim, where there was a comparable question are thus of a purely hypothetical commercial connection between the nature. Under the conditions of the third assignor and assignee, the Court held that subparagraph of Article 10(1), the addi- the assignee could not rely on good faith tional proof required may consist of com- worthy of being protected. 46 mercial documents. A contract of sale for the imported goods between the importer in the non-member country and a trading 46 — Cf. DEKA v EEC (cited in footnote 26, at paragraph 18).

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91. The answer to the second question is undertaking does not in principle alter the therefore that the sale of the products to a answer to the first question. personally and commercially connected

VI — Conclusion

92. In conclusion, I suggest the following reply to the request for a preliminary ruling: