JUDGMENT OF 9. 7. 1969 — CASE 1/69 ITALY v COMMISSION

In Case 1/69

THE COURT composed of: R. Lecourt, President, A. Trabucchi and J. Mertens de Wilmars, Presidents of Chambers, A. M. Dormer (Rapporteur), W. Strauß, R. Monaco and P. Pescatore, Judges, Advocate-General: K. Roemer Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts

The facts and procedure may be summarized as follows:

Before the entry into force of the EEC Treaty, the tariffs applicable in Italy to the transport of foodstuffs by the Italian State Railways were as follows:

general tariffs (Tariffs Nos 2 and 103),

reduced tariff (Special Tariff No 201) applying to the transport of foodstuffs from the South of Italy,

export tariffs (Special Tariff No 251 applying to exports by land transport and Special Tariff No 252 applicable to exports by sea), granting reductions which may, in certain cases, apply simultaneously with those provided for by Tariff No 201.

Tariff No 201 was authorized by the Commission as a regional aid measure under Article 80 of the EEC Treaty as from 1 January 1962 and without any limitation as to time (decision of 16 February 1962, Official Journal No 38 of 17 May 1962, p. 1229); this authorization is still valid.

Secondly, the Commission granted a limited authorization of the application of the special export tariff (Tariff No 251 — point A), which only concerned the transport of agricultural products coming from the South of Italy and exported to the other Member States. This authorization, which was granted for the first time by decision of 19 March 1964 (Official Journal No 57 of 6 April 1964, p. 888), was limited as to time but was successively extended, on the last occasion until 31 March 1967.

In September 1967 the Italian Government informed the Commission of draft Ministerial Decree No 12811 which dealt with a general solution to tariff problems; this decree provided, in particular, for:

a) the abolition of Tariff No 251 — point A;

b) the abolition of Tariff No 252 in respect of agricultural products;

c) the reduction, calculated on the basis of distance, in general tariffs No 103 — C (agricultural products) and No 2 (potatoes);

d) an additional reduction in the basic rates of Special Tariff No 201 (series C) in respect of the transport of vegetables and other fresh fruits from the South of Italy.

As it was required to take a decision on this draft Ministerial Decree under Article 80(2) of the EEC Treaty the Commission took on 31 October 1968 the decision which forms the subject of the present application.

By this decision, which refers only to Tariff No 201 (series C), the Commission authorizes its application until 31 December 1969 as provided for in the draft, and ‘during a subsequent period of one year, on condition that the reductions included in that tariff shall be decreased by at least 50 % as from 1 January 1970 and completely abolished on 1 January 1971’. Moreover, the decision provides that it ‘may be amended or revoked if the Commission finds on its own initiative or on application by a Member State that it is no longer justified or that its application is causing distortions of competition between forms of transport’.

The applicant referred the matter to the Court of Justice by application dated 30 December 1968 and lodged at the Court Registry on 10 January 1969. The procedure followed the normal course.

The parties presented oral argument at the hearing on 11 June 1969.

The Advocate-General delivered his opinion at the hearing on 19 June 1969.

II — Conclusions of the parties

The applicant claims that the Court should:

annul the decision of the Commission of the European Communities of 31 October 1968, concerning the ‘draft amendment to the “Condizioni e tariffe per i trasporti delle cose sulle F.S.” concerning Part LI — Chapter VI — table entitled Rates, Title I of Special Tariff No 201 — series C — of the Italian State Railways’, with all the consequences that this entails;

order the Commission to pay the costs.

The defendant contends that the Court should:

dismiss the action brought by the Government of the Italian Republic by application dated 30 December 1968;

order the Italian Republic to pay all the costs.

III — Submissions and arguments of the parties

Admissibility

The defendant puts forward no objections to the admissibility of the action.

Substance

The submissions and arguments of the parties may be summarized as follows:

1. Infringement of both Article 80(2) and Article 2 of the EEC Treaty and infringement of an essential procedural requirement

The applicant observes that the Commission acknowledged that the amendments to be made to Tariff No 201, series C, satisfied the conditions referred to in Article 80(2), in particular as regards the requirements of an appropriate regional economic policy and the needs of underdeveloped areas and that, secondly, they did not affect competition when considered both from the point of view of the modes of transport and on the basis of the objectives defined in Articles 2 and 3 of the Treaty. On the basis of this acknowledgement the Commission ought to have maintained the authorization in force as long as the reasons existed which led to its grant and it could not limit it as to time. In fact, there is no reason to expect that the situation justifying the authorization will change within the time-limits fixed by the Commission; moreover, the Commission has not put forward any argument capable of supporting such a forecast.

In its reply, the defendant considers that as Article 80(2) involves an exception to the general prohibition provided for in paragraph (1), the authorizations provided for therein must be temporary and exceptional in nature.

To support its argument the Commission relies both on the text of Article 80 of the EEC Treaty and on the case-law of the Court of Justice concerning the fourth paragraph of Article 70 of the ECSC Treaty, a provision similar to Article 80 of the EEC Treaty (Joined Cases Nos 27, 28 and 29/58 and Case 28/66).

Finally, it maintains that the contested decision is not an isolated act, but forms part of a series of decisions addressed to the Government of the Italian Republic, concerning the rates and conditions of transport of the Italian railways, which, as the preambles to these decisions clearly show, were intended to abolish progressively the reductions incompatible with the provisions of the EEC Treaty, while authorizing certain support tariffs on a temporary basis. The draft Ministerial Decree No 12811 satisfied this desire inasmuch as it provided for a general solution to the problem of support tariff measures. After examining this draft, the Commission considered that it was not required to define its position either as regards the abolition of Tariffs Nos 251 head A (which regularizes the illegal situation which has existed since 31 March 1967) and 252 (carried out in accordance with the objectives of the joint measures), or as regards the reductions made to Tariffs Nos 103 — C and 2 (that is, tariffs of general application for which there is no evidence that they involve any element of support in the interest of certain undertakings or particular industries). On the other hand, and here it agrees with the Italian Government, the Commission considered that the reductions made in the Special Tariff No 201 — C involved an element of support in favour of the agricultural producers of the South of Italy. It is, thus, this point which formed the subject of the contested decision. The Commission considered that it was obliged to lay down both strict and brief limitation periods, taking into account, first, the warnings which it had given to the Italian Government in the earlier authorization decisions, according to which the elements of tariff support were to be abolished as incompatible with the Common Market system, and, secondly, of the final introduction of the common organization of the markets in fruit and vegetables by means of Regulation No 159/66/EEC.

In its reply, the applicant maintains, first, that the decision which forms the subject of the present application constitutes an independent measure introduced by the Commission on the basis of the finding that the present case is concerned with adjustment of support tariff measures already enforced and authorized by that body. It is therefore superfluous to take the earlier situations into consideration.

The applicant denies that there exists between Article 80(2) of the EEC Treaty and the fourth paragraph of Article 70 of the ECSC Treaty the parallel referred to by the defendant. In fact, the authorization provided for in the fourth paragraph of Article 70 of the ECSC Treaty refers only to an aid intended to enable certain undertakings to overcome temporary difficulties arising from unforeseeable circumstances. The scope of Article 80(2) of the EEC Treaty is different and wider, as it refers less to the position of each undertaking than to complete sectors, in conjunction with the requirements of a regional economic policy and the needs of underdeveloped areas. It follows that the objective of Article 80(2) of the EEC Treaty is not to encourage the beneficiaries of such authorizations to adapt themselves to a new competitive situation, but rather to remedy the objective situation of the regional sector in question, a situation with which the undertakings could not cope on their own initiative. Thus, Article 80(2) constitutes a legal rule intended to authorize measures of a general nature which are even more necessary and justifiable in that they form part of a governmental programme for the development of underdeveloped areas.

The applicant again observes that, in its decision authorizing the existing Special Tariff No 201, the Commission did not lay down any limitation in time, but merely the possibility of an amendment or revocation when it was no longer justified in maintaining the authorization in force. This attitude is in accordance with the applicant's argument that such an authorization must be maintained in force as long as the reasons exist which justified its introduction.

As regards the applicant's allegation that it is unprofitable and irrelevant to take earlier situations into account, the defendant maintains in its rejoinder that it is sufficient to refer to a letter of 11 September 1967, in which the Italian Government itself emphasized the link between the earlier decisions concerning Tariff No 251 — head A and the draft concerning Tariff No 201 — series C.

Moreover, the letter from the Commission of 29 May 1964, referred to by the applicant, clearly reveals the attitude of the Commission, which was settled from the outset; the present decision only constitutes the logical consequence of this attitude. In fact, the decision expressly provides that:

the authorization was to be limited as to time;

the Commission declared that it would consider sympathetically an extension for 1965;

within as short a period as possible the Italian authorities were to find a solution which was compatible with the Common Market and were to take into account the progressive implementation of a common agricultural policy.

As regards the parallel between Article 80(2) of the EEC Treaty and the fourth paragraph of Article 70 of the ECSC Treaty, the defendant considers that this results from an analysis of the two texts. Article 80 of the Treaty contains, first, a prohibition and, secondly, the discretionary power of the Commission to authorize exceptions to this prohibition. In this respect the fourth subparagraph of Article 70 of the ECSC Treaty does not contain an express prohibition, but provides for a prior authorization which is only given after examining whether it is in accordance with the principles of the Treaty. It follows from this that not only is there a parallel between the two texts but that Article 80 of the EEC Treaty is even more strict in that it provides not only for an examination of the conformity with the Treaty but also of the appropriateness of the authorization sought.

In its oral arguments the applicant refers to the provisions of Article 184 of the EEC Treaty in order to conclude a contrario that in Community law every legal measure must be considered independently and that the argument which the Commission seeks to put forward on the basis of previous situations it thus misconceived.

Secondly, the applicant further develops its arguments against the alleged parallel between Article 80(2) of the EEC Treaty and the fourth paragraph of Article 70 of the ECSC Treaty by maintaining, in particular, that, whilst the ECSC provision provides for an exception to a prohibition which is both general and clear, the function of Article 80(2) of the EEC Treaty is rather to enable transport policy to be harmonized with the other aims of the Treaty such as regional development.

The defendant, for its part, adhered to its attitude and the arguments already set out in the course of the written procedure.

2. Further infringement of both Article 80(2) and Article 2 of the EEC Treaty and of an essential procedural requirement

According to the applicant, the fixing of periods as short as those provided for in Article 1 of the contested decision in itself constitutes an infringement of the abovementioned provisions. It observes, on this point, that the decision provides for the possibility of amendment or revocation, but not for an extension.

In its statement of defence, the defendant observes that the possibility of an amendment or revocation was provided for in the earlier authorization decisions, none of which has been contested by the Italian Republic.

The applicant replies by maintaining that it clearly expressed serious objections on this subject when the decision of 19 March 1964 concerning Tariff No 251 — head A was adopted (letter of 29 April 1964). The Commission, however, had then given assurances on the possible extension of the authorization (letter of 29 May 1964), which had led the Government to refrain from bringing an action before the Court.

3. Infringement of another aspect of Articles 80(2) and 2 of the EEC Treaty and infringement of Article 3(d) of that Treaty; infringement of an essential procedural requirement and misuse of powers

In its application, the Government of the Italian Republic claims that when the Commission took account of the recent entry into force of Regulation No 159/66/EEC concerning the organization of the markets in fruit and vegetables, this had nothing to do with the application of Article 80(2) of the EEC Treaty, which must be correctly and independently applied to the situations for which it provides. This was even more so in the present case, since, in the preamble to the contested decision, the Commission acknowledged that the objectives of the common agricultural policy have not yet been achieved and did not even claim that they could be achieved within a short period. This leads to an infringement both of Article 80(2), in that, in applying this provision, the Commission unjustifiably based its action on the provisions concerning the agricultural sector, and of Article 3(d), since this deals with the agricultural sector and not with the transport sector.

In its statement of defence the defendant considers that, although the Council regulations do not limit the applicability of Article 80 of the EEC Treaty, the Commission cannot ignore the effects of these regulations and the new situations to which they give rise, since the introduction of these Regulations has direct repercussions on the position of the undertakings who are benefiting from the tariffs in question.

After setting out the details of the common organization of the markets and the consequences of its implementation as regards the aids and supports granted by the Member States, the defendant draws the conclusion that it is clear that an exception to the prohibition laid down in Article 80(1) of the EEC Treaty in favour of the Italian support tariffs could no longer be justified.

However, in the light of the fact that, first, this measure concerned an adaptation which considerably reduced the earlier support measures and, secondly, that the producers' organizations anticipated within the context of this organization had not yet had the time to become operative and effective, the Commission authorized the measures in question subject to the fixing of the time-limits necessary to bring about a progressive abolition.

In its reply, the applicant maintains that the introduction of a common policy could only be a condition of the application of Article 80(2) of the Treaty to the extent to which its effects have already been produced ‘in concreto’. However, in this instance, the Council's regulations have not yet given rise to a new situation of this type.

In its rejoinder, the defendant recalls the various aspects of the common organization of the markets in fruit and vegetables and maintains that the issue in this instance was no longer one of the progressive introduction of a common policy, but rather concerned a concrete situation.

In its oral observations the applicant stated that although the explanations and arguments put forward by the defendant may, perhaps, appear plausible, they in no way correspond to the preamble to the contested decision, on the basis of which the contested measure must be considered.

The defendant replies that as the statement of reasons for a decision cannot go into every detail, the preamble in question clearly shows the logical sequence of the arguments which form the basis of the decision.

Grounds of judgment

1. On 10 January 1969 the Government of the Italian Republic instituted proceedings under the provisions of the first and third paragraphs of Article 173 of the EEC Treaty for the annulment of the decision of the Commission of the European Communities of 31 October 1968, concerning a draft amendment to certain tariffs applied by the Italian railways. This application is based on the infringement of Article 80(2), Article 2 and Article 3(d) of the EEC Treaty, infringement of an essential procedural requirement and misuse of powers.

2. As from the beginning of the second stage of the transitional period Article 80(1) of the Treaty prohibits the imposition by any Member State, in respect of transport operations carried out within the Community, of rates and conditions involving any element of support or protection in the interest of one or more particular undertakings or industries, unless authorized by the Commission. Under the second paragraph of this Article the Commission is to examine such rates and conditions, taking account in particular of the requirements of an appropriate regional economic policy, the needs of underdeveloped areas and the problem of areas seriously affected by political circumstances on the one hand, and of the effects of such rates and conditions on competition between the different modes of transport on the other.

3. The applicant Government contests in particular the limitations as to time which the Commission attached to the authorization in question and alleges that, once it is established that the tariffs authorized are in accordance with the requirements of Article 80(2), the withdrawal or expiry of the authorization could only be justified by a change in the circumstances on which the authorization itself is based. Thus, to fix in advance excessively short time-limits for the expiry of the authorization would, in the absence of any exceptional circumstances, be contrary to the objectives and the wording of Article 80. In support of its interpretation of this article, the Italian Government also refers to the general objectives of the Treaty, as set out in Article 2.

4. By empowering the Commission to act on its own initiative or on application by a Member State to examine the rates and conditions involving an element of support and by instructing it in this examination to take account in particular of the requirements, needs, problems and effects referred to in Article 80(2), the Treaty has conferred on the Commission a large measure of discretionary power, not only as regards the tariffs to be authorized, but also as regards the details of the authorization to be granted. It is not possible to interpret this provision to mean that the Commission is obliged to grant its authorization once certain circumstances are established, or that it is obliged to maintain such authorization in force as long as the circumstances which gave rise to it do not change.

5. Furthermore, the use of the phrase ‘in particular’ in Article 80(2) shows that the Commission may take account of other factors which may conflict with those expressly mentioned in that article. The reference in Article 80 to the requirements of an appropriate regional economic policy emphasizes the importance which the Treaty attaches to this factor in a Community context. Considered in this context such requirements do not necessarily lead to the confirmation of the proposed measures but oblige the Commission to exercise its discretionary powers in accordance with the objectives of the Community. In applying Article 80(2), therefore, the Commission must reconcile the essential demands of the Common Market with the particular requirements of regional development.

6. In the present case the authorization in dispute concerns a new table entitled ‘Rate’ of Tide I — series C — of Special Tariff No 201, which was introduced at the same time as other special tariffs were abolished and is designed to compensate in part for the effect of their abolition. As the tariffs which were abolished at that time had already been the subject of earlier authorizations which the Commission had refused to extend, it was entitled to regard the further tariff submitted for examination as an adjustment measure intended to mitigate the effects of the reduction in the aid for transport resulting from their abolition.

7. As the Commission considered a progressive modification in the tariff situation to be desirable, it was able to authorize the tariff in question for a brief period of adaptation. Such a measure, designed to mitigate the effects of previous decisions, normally falls within the powers and duties laid down by Article 80, although no conclusions are necessarily to be drawn from the measure.

8. The Italian Government alleges that the statement of reasons for the measure in question does not disclose, with even the necessary minimum of clarity, the reasons which led the Commission to limit its authorization as to time and it again puts forward the submission of infringement of an essential procedural requirement. In addition, it claims that the statement of reasons was also contradictory, as, although the Commission recognized that the measures authorized satisfied the requirements of Article 80(2), it only authorized them for a limited period.

9. A statement of reasons must show clearly and unambiguously the grounds on which the measure is based. Although the statement of reasons in quetsion seems for the most part to set out the reasons which led the Commission to authorize the tariff in dispute, rather than to justify the limited duration of the authorization, nevertheless the wording and, in particular, the reference in the notes to previous decisions of the Commission, were sufficient to inform the Italian Government, to whom these decisions were addressed, of the grounds on which it was based and to show in what light its request for an authorization had been examined and considered.

10. In its second ground of complaint the applicant Government alleges that to fix such short time-limits as those in the present case and to provide for a possible modification or an expected revocation, without referring to the possibility of an extension, is ipso facto to infringe Article 80.

11. It follows from the above that this ground of complaint must be dismissed. In fixing relatively short time-limits the Commission did not exceed its discretionary powers conferred by Article 80. The giving of a warning to the person to whom an authorization is addressed that if the situation changes such authorization might be modified or revoked does not include an obligation to inform him also of the possibility, which always exists, of an extension or a renewal of the authorization.

12. Finally, the applicant Government puts forward submissions based on both the infringement of the Treaty and of an essential procedural requirement and on misuse of powers, inasmuch as the contested measure is based on the entry into force of Regulation No 159/66/EEC concerning the common organization of the markets in fruit and vegetables. It says that the implementation of measures concerning the common agricultural policy has nothing to do with Article 80, which should apply independently to the situations for which it provides.

13. This ground of complaint should also be rejected. As already explained the Commission is under no duty, in assessing the requirements of a regional economic policy, to isolate the transport sector from the other factors of development and in particular from the effect of measures concerning agricultural policy. More specifically, the applicant Government, which does not deny the existence of such an effect, refers to a passage in the statement of reasons which accepted that the change in agricultural structures had not yet been achieved when the authorization in dispute was granted.

14. However, the purpose of this passage in the statement of reasons was merely to permit the conclusion to be drawn that, inasmuch as they are limited as to time, certain temporary aids may still be granted without adversely affecting the proper functioning of the common organization of the markets in fruit and vegetables. The applicant cannot therefore invoke the grounds for a temporary authorization in order to infer the existence of an obligation to grant an authorization of indefinite duration.

15. It follows from the foregoing that the grounds of complaint put forward cannot be accepted and the application must therefore be dismissed.

Costs

16. Under Article 69(2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs. The applicant has failed in its submissions. It must therefore be ordered to pay the costs of the action.

On those grounds, Upon reading the pleadings; Upon hearing the report of the Judge-Rapporteur; Upon hearing the parties; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 2, 3 and 80; Having regard to the Protocol on the Statute of the Court of Justice; Having regard to the Rules of Procedure of the Court of Justice; THE COURT hereby:

1 Dismisses the application;

2 Orders the applicant to pay the costs of the action.