C-94/02

IV — The appeal I - 10572

A — Incorrect interpretation of Article 300(7) EC I - 10572

1. Effectiveness of Article 300(7) EC I -10572

2. Recognition of direct effect of WTO agreements I -10574

B — Incorrect interpretation of Article 48 of the Rules of Procedure of the Court of

First Instance I -10575

(a) Incorrect interpretation of Article 300(7) EC I -10580

(b) Exceptions I-10582 (c) The direct applicability of WTO law resulting from DSB recommen- dations I - 10586

(i) The Understanding on Rules and Procedures Governing the Settle- ment of Disputes I - 10587

1 — Original language: German.

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I — Introduction expressly claims that the judgment should be set aside. As to fact, it alleges that it has suffered damage as a result of a Commu- nity prohibition on the importation of beef, which the DSB has found to be inconsistent 1. The appeal — against the judgment dis- with the W T O agreements. missing an action for damages — turns essentially on the question whether the case-law of the Court, pursuant to which individuals cannot rely on W T O rules to challenge the legality of acts of Community II — Law and facts law, also applies where those rules are embodied in a specific ruling handed down by the W T O Dispute Settlement Body (hereinafter 'DSB'). 2 The appellant 2. Reference is made to paragraphs 1 to 18 of the contested judgment 3 for an account 2 — Name given in the Agreement establishing the World Trade Organisation (WTO) (hereinafter 'the WTO Agreement'), see Article IV(3) of the WTO Agreement (OJ 1994 L 336, 3 —Judgment in Case T-210/00 Etablissements Biret et Cie v p. 3). Council [2002] ECR 11-17.

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6 — Council Decision 94/800/EC of 22 December 1994 concern- 5. On 15 April 1994, the Community ing the conclusion on behalf of lhe European Community, signed the Final Act concluding the Uru- as regards matters within its competence, of the agreements readied in the Uruguay Round multilateral negotiations guay Round, the Agreement establishing (1986-1994) (OJ 1994 L 3 3 6 , p. 1). 7 — OJ 1994 L 3.16, p. 40. 8 — OJ 1994 L 336, p. 234. 9 — Name given in the WTO Agreement (cited m footnote 2), 4 — O J 1981 L 222, p. 32. see Article III(3) of the Agreement. 5 — OJ 1988 L 70, p. 16. 10 — OJ 1996 L 125, p. 3.

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9. In respect of the period before 10 August 1995, the Court of First Instance dismissed the action as inadmissible on the ground that it was time-barred. 1 1In respect of the subsequent period, it should be noted that 72 The purpose of the W T O agreements is by judgment of 7 December 1995 the to govern relations between States or T r i b u n a l de c o m m e r c e ( C o m m e r c i a l regional organisations for economic Court), Paris, opened judicial liquidation integration and not to protect individ- proceedings in respect of Biret International uals. As the Court of Justice stated in SA and provisionally set the date for Portugal v Council [Case C-149/96 cessation of payments at 28 February 1995. Portugal v Council [1999] E C R However, according to the Court of First I - 8 3 9 5 ] , the a g r e e m e n t s are still Instance, that did not necessarily imply that founded on the principle of negoti- Biret International SA was no longer able ations with a view to entering into to engage in any commercial activities reciprocal and mutually advantageous during the period from 28 June 1995 to arrangements and thus differ from the 7 December 1995. agreements concluded between the Community and non-member coun- tries whereby the obligations are not 11 — Paragraphs 40 to 46 of the contested judgment. necessarily reciprocal. To have the task

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of ensuring that Community law is in 75 In the circumstances, therefore, the conformity with those rules fall directly applicant cannot rely on an infringe- to the Community judicature would be ment of the SPS Agreement. to deprive the legislative or executive bodies of the Community of the dis- cretion enjoyed by similar bodies of the Community's trading partners.

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80 In its reply, however, the applicant EC and incorrect interpretation of requests the Court of First Instance, in Article 48 of the Rules of Procedure of the alternative, to "develop its case- the Court of First Instance. law" in the direction of a system of no-fault liability for the Community in respect of its normative acts. In support of that request, it relies in particular on the "defence of the rule of law", the autonomous nature of an action for damages, the general principles com- mon to the laws of the Member States and considerations of natural justice A — Incorrect interpretation of linked to application of the "pre- Article 300(7) EC cautionary principle".

81 That submission, which changes the 1. Effectiveness of Article 300(7) EC 12 very basis on which the Community could be held liable, must be regarded as constituting a new plea in law which cannot be introduced in the course of proceedings, as Article 48 of the Rules of Procedure of the Court of First 12. The appellant considers that the con- Instance provides... tested judgment is mistaken about the effect of Article 300(7) EC. In its view, it is inconsistent to maintain that the WTO agreements are an integral part of Com- munity law but not to admit them as a criterion for determining the legality of acts of Community secondary legislation. 82 It is clear from all the foregoing that in so far as the action is not inadmissible it is in any event unfounded.'

13. In the judgment in NV Nederlandse Spoorwegen, the Court held that since, so far as fulfilment of the commitments pro- vided for by GATT is concerned, the IV — The appeal Community has replaced the Member States, the mandatory effect, in law, of

17. Biret et Cie claims that Article 300(7) 15. Biret et Cie also cites Advocate General EC should be interpreted as meaning that Saggio's Opinion in Portugal v Council, in the obligation of the Community institu- which he objected that it would reduce the tions to comply with an international rule scope of Article 300(7) EC. The application depends only on whether that rule forms an of rules of an international agreement integral part of the Community legal order. cannot, he said, depend on prior incor- That is undoubtedly so in the case of the poration of the agreement in the Commu- W T O agreements. nity legal order by means of a transposing or enabling act. In any case, internal review of the rules of agreements by the Commu- nity institutions and the Member States cannot fail to offer a stronger guarantee of the fulfilment of the obligations undertaken at international level and is therefore in 18. It also claims that the contested judg- keeping with the objectives of the N T O ment does not address the argument that, in Agreement. 15 acceding to the W T O dispute settlement system, the Community undertook to recognise the DSB's decisions. In so doing, 13 — Judgment in Case 38/75 NV Nederlandse Spoorwegen the Community intended to implement a [1975] ECR 1439, paragraph 16. particular obligation assumed in the con- 14 — In the case of GATT, the appellant refers to the judgments text of the W T O . in Case 38/75 NV Nederlandse Spoorwegen, cited in footnote 13, and Case 112/80 Dürbeck [1981] ECR 1095. 15 — Biret et Cie refers to the statements contained in points 18 and 24 [properly 23] of Advocate General Saggio's Opinion in Case C-149/96 Portugal v Council [1999] 16 — Judgment i n Case C-104/97 P Atlanta and Others v ECR I-8395, I-8397. Commission and Council [1999] ECR I - 6 9 8 3 .

23. The fact remains, according to the appellant, that a legal rule that forms an integral part of Community law has been infringed. The Community Courts are therefore required to punish that infringe- ment. Even if damages and other compen- sation might be payable under the WTO 20. Moreover, automatic reliance on the system in the event of an infringement of discretion accorded to the legislative and the agreements, the fact that under Com- executive bodies would suggest that the munity law Article 228 EC provides for WTO dispute settlement mechanism was more tolerant of persistent infringements than other systems. But that is not the case. 17 —Judgments in Case 104/81 Kupferberg [1982] ECR 3641, On the contrary, the WTO agreements are paragraph 20, and Case C-162/96 Racke [1998] ECR much more developed than other com- I-3655, paragraph 6. 18 — Biret et Cie refers to paragraph 21 of the judgment in Case parable international agreements. C-104/97 P Atlanta, cited in footnote 16.

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payment of a lump sum or penalty payment B — Incorrect interpretation of Article 48 does not alter the fact that the infringement of the Rules of Procedure of the Court of may persist. First Instance 19

27. Biret et Cie considers that the contested judgment was wrong to reject its sub- mission regarding a system of no-fault 24. An argument for admitting the direct liability on the ground that it was out of applicability of the WTO agreements is time. In the first place, the reference to the that more and more provisions of the judgment in Atlanta was inappropriate agreements affect the relations between because that case concerned responsibility citizens and the States parties to those for a lawful act. But the present case agreements. Biret et Cie cites, in particular, concerns liability for illegal acts of Com- the provisions on public contracts, protec- munity law on the ground that the Direc- tion of intellectual property and food safety tives at issue infringe WTO law, which is regulations. an integral part of Community law.

26. Lastly, Biret et Cie raises the question 19 — Article 48 of the Rules of Procedure of the Court of First of consistency in Community law. It fol- Instance reads as follows: lows from Article 300(7) EC that the WTO §1 In reply or rejoinder a party may offer further evidence. agreements form an integral part of Com- The party must, however, give reasons for the delay in offering it. munity law. The Court has frequently ruled §2 that citizens as well as States are subject to No new plea in law may be introduced in the course of the proceedings unless it is based on matters of law or of fact Community law. Citizens must therefore be which come to light in the course of the procedure.' 20 — The appellant is referring to points 33 to 36 of the able to rely on provisions, such as the WTO application. agreements, that form an integral part of 21 — The appellant is referring to points 37 to 39 of the application. It refers in particular to the relevant French Community law. and Belgian case-law.

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31. It contends that the purpose of the V — The Council's position WTO agreements is not to establish rights for individuals but merely to govern relations between States and regional econ- omic organisations on the basis of negoti- ations based on the principle of reciprocity. Consequently, it claims that the Court of First Instance described the SPS Agreement and applied Article 300(7) correctly in the 29. The Council points out that the Court contested judgment. of First Instance had not ruled on the admissibility of the application with respect to the period between 28 June and 7 December 1995. Should the Court of Justice uphold the appeal, it would there- fore have to refer the case back to the Court of First Instance for further examination. It 32. As regards the effect of the DSB's further argues that the Court must also decision, the Council considers that it was examine to what extent Biret et Cie has reasonable for the Court of First Instance to demonstrated an interest in bringing pro- cite the judgment in Atlanta to show that ceedings. the existence of such a decision could not

22 — The appellant is referring to point 58 et seq. of the 24 — The Council is referring to point 127 of Advocate General application. Gulmann's Opinion in Case C-280/93 Germany v Council 23 — Biret et Cie cites the judgment in Case 2/57 Hauts [1994] ECR I-4973, I-4980. Fourneaux de Chasse v High Authority [1957-1958] 25 — The Council cites the judgment in Case 12/86 Demirel ECR 199. [1987] ECR 3719, paragraph 12 [properly paragraph 14].

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26 — Judgment in Joined Cases C-27/00 and C-122/00 Omega — uphold the form of order sought by it- Air 12002] ECR I-2569. at first instance, and

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— order the Council to pay the costs. the measure giving rise to the illegal con- duct on the part of the Community must be intended to protect the injured party. 28

37. The Council claims that the Court should:

— dismiss the appeal, and

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question of the effects of DSB recommen- the hearing that a claim for damages in dations in the Community legal order is respect of measures adopted during the expressly raised. 1980s is inadmissible because the SPS Agreement did not enter into force until 1995 must therefore be dismissed.

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damages. This decision was based on 46. Biret et Cie's claim for damages pre- settled case-law to the effect that, having supposes that it can rely on provisions of regard to their nature and structure, the WTO law. In that case, the provisions WTO Agreement and the agreements and would have to be directly applicable and be understandings annexed to it, including the intended to protect individuals. SPS Agreement, are not in principle among the rules in the light of which the Court is to review the legality of measures adopted by the Community institutions. 3 4How- ever, where the Community intended to implement a particular obligation assumed in the context of the WTO, or where the Community measure refers expressly to the 1. The direct applicability of WTO law precise provisions of the agreements and understandings contained in the annexes to the WTO Agreement, it is for the Court to review the legality of the Community measure in question in the light of the WTO rules. 35 (a) I n c o r r e c t i n t e r p r e t a t i o n of Article 300(7) EC

47. The appellant alleges that there is a contradiction between the assertion that the WTO agreements form part of Com- munity law and the contention that indi- viduals cannot rely on them to challenge the legality in Community law of acts of secondary legislation that are contrary to WTO law. 45. The appellant contends that the case- law cited is mistaken about the effect of Article 300(7) EC. It also considers that the DSB's decision establishes the conditions for the first exception recognised by the Court to the principle that WTO rules are 48. It must first be pointed out that the not directly applicable. In the alternative, it Court holds that international agreements suggests that the case-law should be devel- concluded by the Community form 'part of oped. Community law'. 36 Contrary to the view of Biret et Cie, it is unnecessary to decide

whether the relationship between Commu- nity law. Until the Treaty of Nice entered nity law and international law is to be into force, even an action for annulment understood in a monist sense. On the brought by the European Parliament was contrary, the mere fact that international admissible only if the purpose of the action treaty law is classified as Community law is was to protect its prerogatives and not sufficient to establish the Court's jurisdic- 'merely' to challenge an infringement of a tion to interpret and apply the provisions of Treaty provision; see the third paragraph of international agreements. 3 7 Article 230 EC in the version contained in the Treaty of Amsterdam. The Parliament could not, for example, bring an action for annulment on the ground that an act of the Commission or of the Council was in breach of the prohibition on discrimination contained in Article 12 EC, although that 49. A distinction must however be made provision undoubtedly forms part of Com- between the question whether a provision munity law. forms part of Community law and the question whether individuals may challenge an infringement of that provision. The possibility of bringing an action for infringement depends on two conditions. As to formal scope, the action must be admissible and as to material scope, the provision at issue must be directly appli- cable. 51. In addition to this requirement as to admissibility, there is a further requirement as to material scope: the provision on which an individual relies must be directly applicable. The Court has recognised that some provisions of the EC Treaty are directly a p p l i c a b l e . For e x a m p l e 50. In the case of many Treaty provisions, Articles 25, 38 49, 3 9 90 40 and 141 EC. 41 individuals or institutions may not chal- But many others are not, for example lenge possible infringements by the Com- Article 293 E C . 4 2 All these provisions munity legislature. Under the fourth para- indubitably form part of Community pri- graph of Article 230 EC, a natural or legal mary law. Nevertheless, natural or legal person may institute proceedings only if the persons may bring an action for infringe- contested act is of direct and individual ment of those provisions only in the context concern to it. An individual cannot, for of questions raised in an incidental manner example, bring an action in the abstract for under Article 241 EC. infringement of the limits set in a provision defining powers such as Article 95 EC, even though that provision is part of Commu- 38 — Judgment in Case 26/62 Van Gernd & Loos [1963] LCR 1, 16. 39 — Judgment in Case C-224/97 Ciola [1999] LCR I-2517, paragraph 27. 37 — Judgments in Case 181/73 Haegeman, cited in footnote 36, 40 — Judgment m Case C-159/89 Commission v Greece [1991] paragraphs 2 to 6, Case C-53/96 Hermes International LCR I-691, paragraph 6. [1998] LCR I-3603, paragraph 29, Joined Cases C-300/98 41 — Judgment in Case 43/75 Defrenne II [1976] LCR 455, and C-392/98 Parfums Christian Dior [2000] LCR paragraphs 21 to 24. I-11307, paragraph 40, and Case C-439/01 Libor Cipra, 42 — Judgment in Case C-136/96 Gilly [1998] LCR I-2793, cited in footnote 36, paragraph 26. paragraph 17.

57. The Commission maintained that the application was inadmissible on the ground

54. The Court has admitted two exceptions to the rule that WTO agreements are not 43 — Judgment in Case C-149/96 Portugal v Council, cited in footnote 29, paragraph 49. directly applicable. The Court may review 44 — Council Regulation (EEC) No 2641/84 of 17 September the legality of Community measures in the 1984 on the strengthening of the common commercial policy with regard in particular to protection against illicit light of the WTO rules where the Commu- commercial practices, OJ 1984 L 252, p. 1.

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provisions in the GATT Anti-Dumping Community law as far as possible the new Code. The Council considered that claim and detailed rules contained in the WTO to be inadmissible because, as is the case Anti-Dumping Code. It followed that the with the General Agreement, the Anti- Community adopted those regulations and Dumping Code does not confer on individ- in particular Article 2(11) in order to uals rights which may be relied on before satisfy its obligations arising from the Anti- the Court, its provisions being not directly Dumping Code and in particular from applicable. 50 Article 2.4.2 of that code. It was therefore for the Court to review the legality of the contested regulation imposing anti-dump- ing duties in the light of Article 2.4.2 of the Anti-Dumping Code. 53 This too is an example of the first type of exception (intention to implement a particular obli- 60. The Court rejected that view. It pointed gation assumed in the context of the out, first, that Nakajima was not relying on WTO). the direct effect of the provisions of the GATT Anti-Dumping Code. It was in fact questioning, in an incidental manner under Article 241 EC, the applicability of Regu- lation No 2423/88. Citing the judgment in Kupferberg, 51 the Court added that Regu- lation No 2423/88 had been adopted in order to comply with the international obligations of the Community under the General Agreement and the Anti-Dumping 62. The question is whether in the present Code. It was therefore incumbent on the case there was an intention to implement a Community to ensure compliance with the particular obligation assumed in the con- obligations arising from such agree- text of the WTO or an express reference to ments. 52 the precise provisions of the WTO agree- ments.

logically possible for them either to give will stand re-examination. The Court of rise to a specific obligation entered into First Instance pointed out in paragraph 14 under that agreement or to refer expressly of the contested judgment that the Com- to some of its provisions. 5 4 munity had informed the WTO that it intended to comply with its WTO obli- gations but that it needed a reasonable time to do so. It was then granted a period of 15 months, expiring on 13 May 1999, to comply with its obligations under the SPS 64. The Court of First Instance also found Agreement. in the contested judgment, with reference to the judgment in Atlanta, 55 that the decision of the DSB of 13 February 1998 did not mean that Biret could rely on an infringement of the SPS Agreement. It held that there is an inescapable and direct link 67. It remains to be seen how far that between the decision and the plea alleging statement by the Community, in this infringement of the SPS Agreement, and the instance the Commission, can be regarded decision could therefore only be taken into as a Community measure intended to consideration if the Court had found that implement a particular obligation assumed agreement to have direct effect in the in the context of the W T O (the first type of context of a plea alleging the invalidity of exception). the directives in question. 5 6

68. The first objection to such an inter- 65. The point about the respective dates on pretation is that the statement in question which Directives 81/602 and 88/146 and was made in the context of international the SPS Agreement were adopted must be law. It was made to the WTO. A statement accepted. The Court of First Instance held to the W T O cannot produce legal effects that Directive 96/22 had no bearing on the within the Community that are comparable case as, in its view, a claim for damages with the regulations at issue in Nakajima could in any case only be considered for the and Petrotub, transposing the Anti-Dump- period prior to 7 December 1995. ing Code into Community law.

(c) The direct applicability of WTO law resulting from DSB recommendations 72. For the sake of clarity, it must be observed once again that the Court has not so far ruled on this point of law. In Portugal v Commission there was no DSB recommendation or decision to be taken into account. In Atlanta, the appellant 70. Biret et Cie argues that, in acceding to referred for the first time in its reply to a the WTO dispute settlement system, the DSB decision delivered in the interim. Its Community undertook to recognise the submission was consequently out of time DSB's decisions and recommendations. In and was held by the Court to be inadmiss- this connection, the Court of First Instance ible. found in the contested judgment that the decision of the DSB of 13 February 1998 did not mean that Biret et Cie could rely on an infringement of the SPS Agreement. It held that there is an inescapable and direct link between the decision and the plea alleging infringement of the SPS Agree- 73. The judgment in Atlanta is of interest ment, and the decision could therefore only inasmuch as the Court stated in that judg- be taken into consideration if the Court had ment that the appellant could have main- found that agreement to have direct effect tained its plea alleging the illegality of the Community regulation 'and adduced in particular the dispute settlement mech- 57 — Proposal for a directive of the European Parliament and anism set up within the WTO in 1995 in the Council amending Council Directive 96/22/EC con- cerning the prohibition on the use in stockfarming of certain substances having a hormonal or thyrostatic action and of ß-agonists, COM(2000)320 final of 24 May 2000, in particular the second paragraph on p. 2 and the last 58 — Paragraph 76 et seq. of the contested judgment cited in paragraph on p. 3. footnote 3.

(i) The Understanding on Rules and Pro- cedures Governing the Settlement of Dis- 75. It is true that, under the new mech- putes anism, a solution that is mutually accept- able to the parties to a dispute is clearly to be preferred (see the first sentence of Article 3(7) of the DSU), as the Court has already pointed out in Portugal v Coun- cil. 62 However, that applies only while the procedure before the panel or the Appellate 74. As the Court has already noted in the Body is still going on (see Article 5(5) of the judgment in Portugal v Council, the new DSU). An example of such an agreed W T O dispute settlement mechanism differs solution under Article 3(6) of the DSU significantly from the provisions of GATT being reached by the parties to a dispute 1947. 60 In the context of GATT 1947, after the commencement but before the panel decisions could be accepted only by conclusion of the dispute settlement pro- consensus of the parties to the agreement. cedure is the agreement between the EC The DSU agreed in 1994 reversed that rule and New Zealand on the importation of and now provides that decisions of the DSB butter. 63 The panel procedure was sus- must be accepted unless they are rejected by pended, the parties reached agreement, the consensus of the parties to the agreement EC amended its legislation and the dispute (see Article 17(14) of the DSU). The con- settlement procedure was concluded with- sensus required under GATT 1947 was out a DSB recommendation or ruling. replaced by the introduction of an interim However, once a DSB recommendation or review by the panel (Article 15 of the DSU) ruling has been adopted, it must be 'uncon- and the establishment of a standing Appel- late Body comprising independent persons 61 — Ernst-Ulrich Petersmann, The GATT/WTO Dispute Settle- ment System. International Law, International Orgam- sations and Dtsjntte Settlement, London — The I lagne — 59 — Judgment in Case C-104/76 P Atlanta, cited in footnote Boston 1997, p. 188. 16, paragraph 21. 62 —Judgment in Case C-149/96 Portugal v Counial, cited in 60 — Judgment in Case C-149/96 Portugal v Council, cited m footnote 29, paragraph 36. footnote 29, paragraph 36. 63 — WT/DS72/7 of 18 November 1999.

76. According to the DSU, 'prompt' com- pliance with recommendations or rulings of the DSB is 'essential' to ensure effective resolution of disputes (Article 21(1) of the DSU). If it is impracticable to comply 'immediately', 64 the Member concerned must have a 'reasonable period of time' in which to do so (Article 21(3) of the DSU). 78. As already mentioned, DSB recommen- The period is to be proposed by the dations and rulings must be 'uncondition- Member in question and approved by the ally' accepted by the parties (Article 17(14) DSB. Or it may where appropriate be of the DSU). Should they fail to do so mutually agreed by the parties to the within the 'reasonable period of time', dispute. If neither course produces a result, compensation and the suspension of con- the period is to be determined through cessions are available. These are described 'binding' arbitration (Article 21(3) of the in the DSU as 'temporary measures' DSU). (Article 22(1) of the DSU). They are to be resorted to only as a temporary measure pending the withdrawal of the measure which is inconsistent with WTO law (Article 3(7) of the DSU). Neither com- pensation nor suspension of concessions, described as a 'last resort' (see the fifth sentence of Article 3(7) of the DSU), is preferred to full implementation of a rec- 77. In the DSB procedure at issue in the ommendation to bring a measure into present case, the period for compliance was conformity with WTO law (Article 22(1) of the DSU). 64 — The German version of OJ 1994 L 336 contains a translation error. The term 'impracticable' in the English version should have been rendered as 'nicht möglich', not 65 — See report of arbitration judge Julio Lacarte-Muró of 'möglich'. 29 May 1998, WT/DS26/15 and WT/DS48/13, point 2.

80. In any event, the DSB must continue to — Power to agree a waiver keep under surveillance the implementation of adopted recommendations or rulings (Article 22(8) of the DSU). This means that, even where compensation has been paid or concessions have been suspended, there is still a duty to comply with the DSB recommendations or rulings. Payment of 82. One argument against recognising the compensation or acceptance of the suspen- direct applicability of WTO provisions is sion of concessions do not therefore con- that WTO Members are accorded some stitute a waiver, conferring exemption from discretion in complying with DSB recom- the duty to fulfil the obligations assumed mendations and rulings. In particular, it is under the WTO agreements. suggested that they may pay compensation or accept the suspension of concessions ('penalties', as it were, imposed by the other Members) instead of withdrawing a measure adopted for the purpose of health and consumer protection. To recognise the direct applicability of WTO rules would reduce the discretion enjoyed by the Com- munity's legislative and executive bodies. 67 The Council expressly referred during the 81. In the light of the foregoing findings as hearing to the possibility of negotiating a to the structure of the dispute settlement waiver. procedure, it must be concluded that there

67 —Judgment in Case C-149/96 Portugal v Council cited in 66 — Petersmann, cited in footnote 6 1 , p. 182. footnote 29, paragraphs 39 to 4 1 .

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above account of the DSU that it is not a Treaty entered into force. Only with the lawful option. Consequently, under W T O introduction of Article 228(2) EC did it- law and in particular the Understanding on become possible for the first time to require Rules and Procedures Governing the Settle- Member States to make lump sum or ment of Disputes (DSU), the legislative and penalty payments for failure to comply executive bodies no longer have any dis- with decisions. The fact that DSB recom- cretion that could be reduced by recognis- mendations and rulings are unenforceable ing W T O law to be directly applicable. is consequently no reason for the Court to disregard them.

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the provisions of any of the agreements ruling establishing the illegality of the covered by the DSU. According to the DSB Community legislation, with the result that ruling, Directive 96/22 should therefore WTO law will be deemed to be directly have been repealed. Directives 81/602 and applicable and the way will be opened for 88/146 had already been repealed by Biret et Cie to bring an action for damages. Directive 96/22. This is in line with Com- mission proposal COM(2000)320 of May 2000 for a directive amending Directive 96/22.

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its obligations under the SPS Agreement is basis for a possible claim for monetary and remains a matter for the competent damages against the Community or the Community bodies. Thus, on the basis of competent Community bodies which have new scientific information or in the form of failed to implement the DSB recommen- temporary protective measures, the Com- dation or ruling within the period of time munity could well impose an import ban prescribed by the WTO. Recognition of the again, this time in conformity with the SPS direct applicability of WTO law embodied Agreement. The way opened by proposal in DSB recommendations or rulings does COM(2000)320 remains open even if the not therefore mean that meat treated with SPS Agreement is held to be directly hormones can be imported into the Com- applicable on the basis of the DSB recom- munity. mendation of 13 February 1998. Recogni- tion of the direct applicability of WTO law embodied in a DSB ruling does not mean that an individual has a right to require the Community bodies to take a particular course of action. Biret et Cie is merely entitled to seek monetary compensation from the Community provided that the other conditions are met.

95. It must consequently be concluded that the Court will not reduce the discretion enjoyed by the legislative and executive bodies of the Community in implementing DSB recommendations if, in the case at issue, it holds that WTO law should apply after the expiry of the period of time allowed to comply with the DSB recom- mendations of 13 February 1998.

(iii) The principle of reciprocity 99. Such unilateral restrictions on the legal effects of an international agreement are effective only within the limits of inter- national law. They are governed, in par- ticular, by the rules of international cus- tomary law on reservations laid down in Articles 19 to 23 of the Vienna Convention on the Law of Treaties (hereinafter the 97. Another argument against recognising 'VCLT'). As the reservation contained in the direct applicability of WTO law is that Decision 94/800 has not been formulated in it would be contrary to the principle of writing by the Community and communi- reciprocity, which is a strong feature of cated to its WTO trading partners, the first WTO relations. It is argued that the WTO condition required by international law for rules would acquire an effect not accorded this restriction to be effective (Article 23(1) to them in the legal orders of the Commu- of the VCLT) has not been met. 75 nity's trading partners. This would con- siderably weaken the Community's negoti- ating position in the WTO. 73

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observed that these agreements are based agree as to the continued existence of rules on the principle of reciprocity. 76 However, that are contrary to W T O law. How- it ruled in its judgment in Kupferberg that ever — as already explained — that is the fact that the courts of one of the parties not the case. consider that certain of the stipulations in the agreement are directly applicable is not of itself such as to constitute a lack of reciprocity between the parties. 77 Advocate General Gulmann expressed the same view in Case C-280/93 Germany v Council. 78

103. The Court applies the principle of legality only in so far as it recognises that the DSB recommendation of 13 February 1998 has legal effect within the Commu- nity after the period of time allowed for implementation expired on 13 May 1999 inasmuch as citizens of the Community may rely on the Community's conduct in breach of W T O law as a basis for a claim for damages.

— Actions for infringement of the Treaty Community in the event of failure to implement directives serves to ensure that Member States comply with Community law and implement directives within the prescribed time-limit. Attention is drawn to 105. In the context of penalising conduct the judgments in Francovich 81 and Dillen- contrary to the Treaty on the part of kofer 82 in this connection. A Member State Member States, the Court regards recogni- ought not to profit from the fact that it is in tion of a citizen's claim for damages against default and the citizen ought not to be the defaulting Member State as an appro- obliged to suffer as a result of the unlawful priate means of applying the principle of conduct of the Member State. Here too, legality. Thus the Court found France to be establishing the basis of the Member State's in breach of the Treaty when it continued liability serves to exert pressure on the to prohibit the importation of certain beef defaulting Member State to bring the products from the United Kingdom after situation into line with the Treaty. the expiry of the Community export ban on British beef imposed to protect against BSE and the introduction of a date-based export scheme. 79 It is settled case-law that there is an interest in pursuing actions for infringe- ment of the Treaty in order to establish the basis of liability which a Member State may incur as a result of its default towards other Member States, the Community or private parties. 80 107. In the judgment in Francovich, the Court stated that the full effectiveness of Community rules would be impaired and the protection of the rights which they grant would be weakened if individuals were unable to obtain redress when their rights are infringed by a breach of Com- munity law for which a Member State can — Liability arising from failure to imple- be held responsible. 83 The possibility of ment directives obtaining redress from the Member State is particularly indispensable where the full effectiveness of Community rules is subject to prior action on the part of the State and where, consequently, in the absence of such 106. Similarly, the case-law on Member action, individuals cannot enforce before States' liability towards citizens of the 81 — Judgment in Joined Cases C-6/90 and C-9/90 Francovich and Others v Italy [1991] ECR I-5357. 79—Judgment in Case C-1/00 Commission v France [20011 82 — Judgment in Joined Cases C-178/94, C-179/94, C-188/94, ECR I-9989. C-189/94 and C-190/94 Erich Dillenkofer and Others v 80 — See, for example, judgments in Case C-361/88 Commis- Germany [1996] ECR I-4845. sion v Germany [1991] ECR I-2567, paragraph 31, Case 83 —Judgment in Francovich, cited in footnote 81, paragraph C-365/97 Commission v Italy [1999] ECR I-7773, para- 33. See also the judgment in Joined Cases C-46/93 and graph 45, and Case C-207/00 Commission v Italy [2001] C-48/93 Brasserie du Pêcheur and Factortame [1996] ECR ECR I-4571, paragraph 28 with further references. I-1029, paragraph 20.

111. This appears to be even less accept- able in that, as the contested judgment confirms, the Community has expressly 109. The Court helps to assert the principle assured the WTO that it is prepared to of legality in those cases by recognising the fulfil its obligations. There is thus not only direct applicability of provisions which a binding ruling or recommendation of the usually have no such effect. It is clear from DSB but also an act of a Community body the third paragraph of Article 249 EC that expressly referring to that ruling or recom- the provisions of directives do not in mendation. principle establish rights on which individ- uals may rely. Directives are only binding, as to the result to be achieved, upon the Member States to which they are addressed and do not as a rule establish rights for individuals. Similarly, in the circumstances described in this case, WTO law should be 112. It is true that the assurance in question recognised exceptionally as being directly was given in the context of international applicable and thereby opening the way to law and, as already explained, produces no a claim for damages. direct effects in the Community legal order. It must nevertheless be borne in mind that the Commission makes such statements to 84—Judgment in Francovich, cited in footnote 81, paragraph the WTO after first informing the compet- 34. ent Council committee of the outcome of

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the dispute settlement procedure. Both (vii) Interim conclusion Community bodies therefore acknowledge that Community law is contrary to W T O law and must accordingly be amended to comply with the DSB recommendations. If it is not amended within the prescribed period, that means that the Commission 114. It must consequently be concluded and the Council are going back on their that W T O law is directly applicable where own position. This is another argument for DSB recommendations or rulings have recognising the possibility of claiming found a Community measure to be incon- damages. sistent with W T O law and the Community has failed to implement the recommen- dations or rulings within the prescribed period.

national trade. However, it is clear from engaged in the trade in such goods. Restric- the judgment in Van Gend en Loos that tions on trade therefore affect the citizen's basic provisions on customs duties may be freedom to pursue an economic activity. directly applicable. In that judgment, the Court recognised that Article 12 of the EEC Treaty (now, after amendment, Article 25 EC) was directly applicable. 87 That provi- sion imposes a general prohibition on customs duties on imports and exports 118. Moreover, the fact that a rule is and customs duties of a fiscal nature and intended to protect interests of a general it is addressed only to States, not to nature — in this case the liberalisation of citizens. In that respect it is entirely com- international trade through the WTO parable with the rules of WTO law and in agreements — does not preclude the possi- particular the rules of GATT 1947 and bility that it is also intended to protect GATT 1994. individual interests. In Kampffmeyer, the Court held, with regard to Regulation No 19 of the Council on the progressive establishment of a common organisation of the markets in grain, 88that the regulation was directed to ensuring appropriate sup- port for the agricultural markets of the Member States during the transitional period on the one hand and to allowing the progressive establishment of a single market by making possible the develop- ment of the free movement of goods within 117. Moreover, the WTO agreements also the Community on the other. The fact that guarantee freedom and prohibit discrimi- the interests the regulation was intended to nation. Regulations concerning trade affect protect are of a general nature did not the citizen's freedom to pursue an econ- prevent their including the interests of omic activity. Trade in States organised on individual undertakings which are engaged market economy principles is conducted in intra-Community trade. 89 Similarly, it primarily by private individuals. In par- must also be accepted that the rules on ticular, provisions on sanitary and phyto- liberalisation contained in the WTO agree- sanitary measures such as those contained in ments and the provisions of the SPS Agree- the SPS Agreement are of considerable ment in particular are intended to protect importance to citizens engaged in trade. It individuals. is apparent from the first recital in the preamble to the SPS Agreement and from Article 2(3) that the agreement is intended to prevent a disguised restriction on inter- national trade. Restrictions on trade through the adoption of sanitary and phytosanitary measures are in principle 119. Consequently the second condition likely to result in discrimination between for establishing a claim to damages is also domestic and imported goods and those 88 — OJ 1962 30. p. 933, not available in English. 89 — Judgment in Kampffmeyer, cited i n footnote 28, p. 262 et 87 — Judgment in Van Gend Loos, cited in footnote 38, p. 16. seq.

C — Damage and the causal link

123. Such an argument does not preclude 121. In the contested judgment, the Court actual damage or the existence of a causal of First Instance did not address the factual link. The new scientific information was aspects of a claim of liability, namely actual not yet available in the crucial period when damage and the existence of a causal link the illegality of the Community measure between the damage and the illegal conduct was established in February 1998. It was and also left open the question whether not even available when the period of time Biret et Cie has an interest in bringing granted to comply with the DSB recom- proceedings. 90 The case must therefore be

91 — See preamble to the Commission proposal, cited in foot- 90 — See paragraph 79 of the contested judgment. note 57, p. 2 in fine.

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mendations — which must in principle be D — Incorrect interpretation of Article 48 considered in a claim for damages — of the Rules of Procedure of the Court of expired in May 1999. Scientific infor- First Instance mation produced later to justify such a prohibition cannot diminish illegal conduct on the part of the Community. Otherwise, a claim for damages would always be precluded in cases where non-compliance 126. In the alternative only, the second with WTO law was attributed to a lack of plea remains to be considered briefly in scientific evidence. Scientific information is case the Court does not follow the course constantly increasing. suggested above. Biret et Cie contends that it raised the question of no-fault liability in its application and its submission should therefore not have been rejected as out of time.

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VIII— Costs the Court, the unsuccessful party is to be ordered to pay the costs. Since the Council has been unsuccessful and Biret et Cie has 128. Under Article 118 in conjunction with applied for them, the Council must be Article 69(2) of the Rules of Procedure of ordered to pay the costs.

IX — Conclusion

129. In the light of the foregoing considerations it is proposed that the Court:

(1) Set aside the judgment delivered by the Court of First Instance on 11 January 2002 in Case T-210/00 Etablissements Biret et Cie v Council and refer the dispute back to the Court of First of Instance.